Ubisoft 2003 Annual Report Download - page 51

FINANCIAL REPORT
2004 51
02
Financial Report for FY ending 3/31/04
Inventory and work-in-progress
Inventory is valued using the FIFO method. The gross value
of goods and supplies includes purchase price and related
expenses. Financial costs are excluded from inventory valuation
in all cases.
A provision for depreciation is made where the probable net
realizable value is less than the book value.
Advances and installments paid
Advances and installments primarily involve distribution and
reproduction rights (licenses) acquired from other publishers.
The signing of licensing contracts entails the payment of
guaranteed amounts, which are posted to Account 409 for
their net value (in accordance with the rules of the Conseil
d’Etat: CE 62547 dated February 12, 1988, and CE 65009
dated November 25, 1989) over the duration of the contract.
These advances and installments 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 using the
straight-line method.
At year-end, the net accounting value is compared with sales
projections in light of the contract conditions. If projected
sales are insufficient, an additional amortization will be made
on the income statement.
Trade receivables
Trade receivables are entered at their face value. Where
applicable, a provision for depreciation may be entered
according to the degree of certainty, as of the account closing
date, that collection will ultimately be made.
Investment securities
Investment securities consist of directly-held shares, interests
in investment funds and short-term investments, which are
booked at their purchase price or at their market value when
it is lower than the purchase price.
Cash
Cash consists of the balances of cash and bank accounts.
Deferred tax
Deferred tax is recorded pursuant to Rule 99-02 regarding
consolidated accounts. It results from any adjustments made,
transactions eliminated and temporary discrepancies found
between the accounting and tax bases. Deferred tax is assessed
on the basis of the corporate tax rates and tax rules in force at
year-end. Any deficits carried forward are entered as soon as
it seems likely that they will be recovered.
In accordance with the liability method of tax allocation, the
effect of any changes in tax rates on deferred taxes recorded
earlier is entered in the income statement for the financial
year in which the changes in rates become known.
Conversion of items expressed in foreign currencies
Conversion into euros of items expressed in foreign currencies
for French companies
Charges and revenue for foreign currency transactions are
entered at their equivalent value on the transaction date.
Assets and liabilities are converted at the closing rate. Any
exchange rate conversion differences that result from this
conversion are recorded in the income statement, minus any
impact from hedges.
Conversion of foreign subsidiaries’ financial statements into euros
The conversion of the accounts of foreign subsidiaries from
their operating currency to the currency of the consolidating
company is carried out in accordance with the closing rate
method. This involves converting the assets and liabilities of
foreign subsidiaries at the exchange rate in force at the close
of the financial year, while the income statement is converted
at the average annual rate. Shareholders' equity is kept at
the historical rate. Conversion rate adjustments are entered
in shareholders' equity.
Special case of Ubisoft Srl (Romania), which is located in a
country with a high inflation rate:
Since this subsidiary is not autonomous (it constitutes an
extension of the foreign activities of the consolidating company
and most of its commercial and financial activities are
conducted with the consolidating company), the conversion
of accounts is carried out in accordance with the historical
rate method: monetary items in its balance sheet are
converted at the closing rate, while the non-monetary items
are converted at the historical rate. The income statement is
converted at the average annual rate. Conversion rate
adjustments are recorded in the income statement.
Provisions for risk and charges
Provisions for risk and charges are made when risk and
charges that relate to a clearly determined objective, but
which are not certain to arise, are made more likely by events
that have occurred or are in progress.
As of March 31, 2004, provisions for risk and charges
covered provisions for:
●Retirement.
●Litigation.
●Tax risk.
●Foreign exchange hedges.
●Destruction of licensed products which distribution rights
have expired.
Fully diluted earnings per share
This figure is obtained by dividing:
●Net earnings before dilution, plus the after-tax amount of
any savings in financial costs resulting from the conversion
of the diluting instruments,
By:
●The weighted average number of ordinary shares in circulation
plus the number of shares that would be created as a result
of the conversion of convertible instruments into shares and
the exercising of rights.