Ubisoft 2005 Annual Report Download - page 63

2
61
UBISOFT • 2006 ANNUAL REPORT
FINANCIER
Ubisoft group’s consolidated accounts as of March 31, 2006
this is less than the present value of the minimum pay-
ments under the lease, reduced by the depreciation cost
and the sum of the losses in value.
Deferred taxation on the restatement of finance lease
contracts is activated.
Investments in associates
Investments in associates include the Group share of equity
held in associates, as well as any related goodwill.
Inventory and work-in-progress
Inventory is recorded at the lower of the cost and the net
realizable value. The cost includes the purchase price and
the accessory expenses; inventory is valued using the FIFO
method. The net realizable value corresponds to the sales
price estimated in the normal course of activity, minus the
costs estimated for completion and those estimated as
necessary to make the sale, including the costs of marke-
ting and distribution.
No borrowing costs are included in the costs of inventory.
A provision for depreciation is made where the probable
net realizable value is less than the book value. The
amount of any reversal on inventory provision is booked as
a reduction in the amount of stocks entered as expenses in
the fiscal year in which the reversal occurs.
Trade receivables
Trade receivables are assessed at their fair value when they
are initially recorded. As the receivables have a maturity
of less than one year, they are not discounted. Where
applicable, a provision for depreciation may be booked
according to the degree of certainty that recovery will
ultimately be made.
Financial assets and liabilities
Financial assets and liabilities comprise the available for
sale financial assets, loans and receivables, cash and cash
equivalents, derivatives and credit instruments.
• Available for sale financial assets
Non-consolidated investments are classified as “available
for sale financial assets” because they do not meet the
definition of other categories of financial asset. They are
entered on the balance sheet at their fair value and varia-
tions in fair value are booked directly in equity.
• Loans and receivables
These include deposits and guarantees as well as grants
received from the Canadian government. As these grants are
taxable on future taxes, they are discounted on the basis of
their collection period and the actual interest rate (AIR). The
AIR is the rate used to discount the flow expected from future
cash withdrawals up to the due date.
• Cash and cash equivalents
Cash and cash equivalents include cash in hand and depo-
sits held at call with banks, with a maturity of generally less
than three months, that are easily liquidated or saleable in
the short term, convertible into a cash sum, and do not
have a significant risk of losing value. They are assessed
based on the category of assets assessed at market value
based on earnings. Reimbursable bank overdrafts that
and losses in value (amortization). In accordance with IAS
38 “Intangible assets”, only elements whose cost can be
determined reliably and for which it is probable that future
benefits exist are recorded as fixed assets.
No borrowing costs are included as costs of fixed assets.
The group companies do not conduct any basic research.
Development costs correspond to the development of
commercial software (video games) and are activated as
described below.
Intangible assets are amortized over the expected period of
use:
Office software: amortized over 1 year
(straight-line method).
ERP-related expenditures: amortized over 5 years
(straight-line method).
Commercial software: amortized over 3 years
(straight-line method).
The production costs for commercial software, whether pro-
duced internally or outsourced, are entered in the accounts
under “Intangible assets in progress” as the software deve-
lopment advances. Upon the software’s first commercial
release, it is transferred to the “Released software pro-
grams” or “External developments” accounts.
Commercial software is amortized over three years using
the straight-line method, beginning on the date of its com-
mercial release. At the close of each fiscal year and for each
program, when there are indicators of a loss of value (basi-
cally when sales are lower than forecast), the present fore-
cast cash flows are calculated (over a maximum period of
three years). When the latter are below the net book value
of the commercial software, a depreciation is applied.
Tangible assets
The gross value of tangible assets includes the cost of
acquisition, minus cash discounts and any investment
grants allowed. This is then reduced by the sum of the
depreciations and of losses in value (see the accounting
method described in the note on goodwill). Given the
nature of the fixed assets held, no distinct component of
the main fixed assets was noted.
No borrowing costs are included in the costs of fixed
assets.
Depreciation, which is calculated using rates standardized
throughout the group, is determined on the basis of the
methods and periods of use set out below:
Equipment: 5 years (straight-line).
Fixtures and fittings: 5 and 10 years (straight-line).
Computer equipment: 3 years (straight-line).
Office furniture: 10 years (straight-line).
Fixed assets acquired through finance leasing
arrangements
Lease contracts that transfer almost all risks and benefits
intrinsic to ownership of the asset are considered to be
finance lease arrangements. Capital assets that are finan-
ced by finance leasing agreements are restated in the
consolidated accounts as if the company had acquired the
assets directly using loan financing. The amount recorded
as assets is equal to the fair value of the goods leased or, if