Ubisoft 2003 Annual Report Download - page 50

FINANCIAL REPORT
2004
50
Goodwill/brands
In accordance with the regulations on consolidated accounts,
goodwill is the difference between the acquisition price and
the fair value of the total assets and liabilities identified on
the acquisition date. Goodwill is entered:
●Where appropriate, to the various balance sheet items of
the companies acquired.
●As "Goodwill" on the asset side of the consolidated balance
sheet for any sum remaining.
This latter sum is amortized over a period of no more than
20 years using the straight-line method. Goodwill relating to
Tiwak SAS alone is amortized over a 10-year period.
Impairment tests are conducted on significant amounts of
goodwill or goodwill that may appear to have fallen in value.
The recoverable amount of goodwill is then estimated on the
basis of the change in sales for the subsidiary or business
division in question, its contribution to the group’s consolidated
operating income and its updated cash flow arising from
operating activities. When this value is less than the accounting
value, exceptional amortization is applied.
Negative goodwill is spread over a 20-year period.
Any brands acquired are entered at their acquisition cost; for
brands that are created, the cost of registering them is
immobilized.
Brands are not amortized. Impairment tests are conducted on
significant brands or brands that may appear to have fallen
in value. The recoverable value of the brands is then
estimated on the basis of the change in sales for the business
division in question, its contribution to the group’s consolidated
operating income and its updated cash flow arising from
operating activities. When this value is less than the accounting
value, exceptional amortization is applied.
Intangible assets
Intangible assets break down as follows:
●Office software: Amortized over 12 months
using the straight-line method
●Software tools: Amortized over 3 years
via the straight-line method
●ERP-related expenditures: Amortized over 5 years
using the straight-line method
●Commercial software: Amortized over 36 months
via the straight-line method
Software tools:
Software tools, which are a set of complex development programs
that may be used for a number of products, are amortized
over a maximum of 36 months using the straight-line
method.
Commercial software:
The production costs for sales software that is produced
internally are entered in the accounts under “Intangible
assets in progress” (Account 232) as software development
advances. Upon the software’s first commercial release, it is
transferred to the "Released parent software programs"
account (Account 208).
Software is amortized over 36 months using the straight-line
method, beginning on the date of its commercial release.
However, if sales are below projections and anticipated operating
profitability, a supplementary amortization is performed.
Operating profitability is determined on the basis of operating
income restated to reflect any operating appropriations for
amortization.
The production costs for outsourced sales software are
entered in the accounts under “Intangible assets in progress”
(Account 232) or under “Advances and installments paid”
(Account 409), in accordance with the rules defined by
France’s Conseil d’Etat (CE 62547 dated February 12, 1988,
and CE 65009 dated November 25, 1989), as software
development advances. Upon initial release on the market,
software entered as "Intangible assets in progress" is
transferred from Account 232 to Account 208; the rest is
classified as prepaid expenses. Software costs are posted to
the income statement as set forth in the contracts signed with
the publishers (either by the unit or based on the gross margin
or sales) or, in the case of flat contracts, amortized over
36 months using the straight-line method.
At year-end, the net accounting value is compared with sales
projections in light of the contract conditions. If the net
accounting value is below projections, a write of is made to
the income statement.
Tangible assets
Fixed assets are shown in the balance sheet at their acquisition
cost.
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 (diminishing balance)
●Office furniture: 10 years (straight-line)
Financial assets
Financial assets consist of equity investments, fixed investments,
and deposits and guarantees.
The gross value of equity holdings corresponds to the acquisition
cost for shares of non-consolidated companies.
A provision for depreciation is made where the intrinsic value
of the shares is less than the net accounting value.
Deposits and guarantees are recorded on the basis of the
amounts paid.
Fixed assets acquired through leasing arrangements
Significant capital assets that are financed by leasing agreements
are restated in the consolidated accounts as if the company
had acquired the assets directly using loan financing.