Ubisoft 2014 Annual Report Download - page 167

Financial statements
2014
162
Non-current financial assets
Equity investments are valued at their historical cost plus all related acquisition costs. Any additional
payments are recognized in the acquisition price as soon as they can be measured with sufficient
reliability. If the value of the securities exceeds their value of use, a provision for depreciation is
recognized for the difference.
The value of use is assessed at the end of each financial year based on the net assets or the restated
net assets of the subsidiary in question at that date, the market capitalization at the balance sheet
date if the company is listed and/or its medium-term earnings prospects.
If applicable, the provisional data utilized are updated using a rate based on a valuation of the average
cost of capital, which stood at 8.89% at March 31, 2014.
Own shares are valued at the lower of cost or market value (average of the last 20 trading sessions).
Deposits and sureties are recognized on the basis of the amounts paid.
Advances and prepayments made
Advances and prepayments primarily involve distribution and reproduction rights (licenses) acquired
from other software publishers. License agreements commit Ubisoft to an amount of guaranteed
royalties. This guaranteed amount is registered in the balance sheet under the heading “advances and
prepayments made”, whether or not it has been paid at the year-end date. These guaranteed amounts
are recognized in the income statement on the basis of the agreements signed with software
publishers (either by the unit or based on gross profit or on revenue) or amortized on a straight-line
basis for agreements with fixed royalty payments (flat fees).
At the end of the financial year, the net accounting value is compared with sales projections on the
basis of the terms and conditions of the agreement. If they are insufficient, depreciation is recognized.
Trade receivables
Trade receivables are carried at their nominal amount. Where applicable, a provision for depreciation
is recorded based on the likelihood of their collection at the year-end date.
Investment securities
Investment securities consist of interests in mutual funds and short-term investments and are
measured at the lower of cost or market value.
Conversion of liabilities and receivables denominated in foreign currencies
Liabilities and receivables denominated in foreign currencies are converted at rates prevailing on
March 31, 2014. Any resulting conversion gains or losses are recognized in the balance sheet under a
specific heading. A provision for foreign-exchange risk is booked if conversion reveals the existence of
unrealized losses.
Foreign currency transactions
Foreign currency transactions are recognized based on daily exchange rates, except those that have
been hedged, which are then recognized at the hedging rate.
Receivables, liabilities and cash in foreign currencies are converted at the prevailing exchange rates
at the end of the financial year, except for those subject to hedging, which are converted at the
hedging rate.
Unrealized gains and losses on receivables and long-term debt are recognized in the balance sheet
under conversion rate adjustments. Unrealized losses that have not been hedged are subject to a
provision for foreign exchange losses.
Conversion rate adjustments on cash and current accounts in foreign currencies are immediately
recognized as foreign exchange income/loss.