Ubisoft 2004 Annual Report Download - page 55

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UBISOFT > 2005 FINANCIAL REPORT
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FINANCIAL REPORT FOR THE FISCAL YEAR ENDING MARCH 31, 2005 2
2.1.5.2.1. Summary of restatements equity
and earnings as of April 1, 2004
Summary of restated equity as of April 1, 2004:
2.1.5.2.2. Description of the principal
IAS/IFRS restatements
a) Restated goodwill amortization (IFRS 3)
- Positivegoodwill (IFRS 3)
Business combinations are accounted for by applying the
purchasemethod. Under this method, acquired assets and
liabilities and assumed contingent liabilities are recorded
at their fair value.
Goodwill is measured at its cost as of the acquisition date,
i.e., the excess of the cost of the business combination over
the purchaser's interests in the fair value of the identifiable
assets, liabilities and contingent liabilities acquired.
Goodwill is subsequently measured at cost less accumulated
impairment losses. It should be tested for impairment each
year or more frequentlywhere indications of impairment
loss exist. In the event of a loss in value, an impairment loss
is recorded under “Other operating income and expenses”.
As of the acquisition date, goodwill is allocated to each
cash-generating unit likely to benefit from the business
combination.
In the event of acquisition of an additional interest in a
subsidiary, the excess of the acquisition cost over the
carrying amount of minority interests acquired is recognized
as goodwill.
SinceUbisoft has elected to use the option provided in IFRS 1
not to restate business combinations occurring prior to
April 1, 2004, that would not complywith the
requirements of IFRS 3, the first-time adoption of the IFRS
standards does not compromise the accounting methods
usedin the past.
Pursuant to IFRS 3, goodwill is no longer amortized as of
April 1, 2004 but be submittedto annual impairment tests.
-Negative goodwill (IFRS 3)
Under French accounting principles, negative goodwill
must be reported as a provision for risk and charges.
Under IFRS, all negative goodwill is recognized in profit
and loss for the fiscal year in which the acquisition
occurred. Therefore it does not appear on the balance
sheet and consequently is not spread out over several
years, contrary to French accounting principles under
which it may be staggered in this fashion.
The positive impact on opening equity is €37 thousand.
b) Effect of changes in foreign exchange rates
(IAS 21)
French standards offer a choice between conversion at the
historical rate or at the closing rate. The historical cost
principle was applied as the basic method for the valuation
of items shown in the accounts.
IAS 21 requires that new acquisitions of assets be converted
at the closing rate, but allows companies to choose
between either option for earlier assets. Ubisoft has
elected to apply the option set forth in IAS 21, in which all
intangible assets are converted at the closing rate.
The impact of this standard is felt primarily in the
conversion of goodwill and brands. Under French
accounting standards, goodwill and brands could be
converted at either the closing rate or the historic
rate (i.e., the exchange rate as of the date on which
the goodwill or brands were acquired). Ubisoft has
chosen to convert them at the historic rate.Under IAS 21,
new goodwill and new brands must be converted at the
closing date as of the 2005/2006 fiscal year. For any
goodwill and brands acquired previously, IAS 21 provides
the option of choosing between conversion at the closing
rate and conversion at the historic rate. In the interests of
auniform methodology, Ubisoft has chosen to convert
goodwill and brands at the closing rate as of the opening
balancesheet.
This impact has been relatedon the dollar rate fall since
2000 and 2001, acquisition years of the RedStorm
Entertainment Inc. and Blue byte Software Inc. firms.
c) Share-based payments (IFRS 2)
All compensation paid in shares or share options or
indexed to the price of an entity's shares falls under the
provisions of IFRS 2. IFRS 2 is universally applicable; there
are no exceptions for employee shareholder plans or
unlisted companies.
The adoption of IFRS 2 governing share-based payment
entails a change in the methods used to report stock option
plans (share subscription or purchaseoptions that Ubisoft
grants to its employees and thoseof its subsidiaries)
and group savings plans (equity issues reserved for
employees). Ubisoft decided to adopt this standard
beginning in 2004. Only plans issued after November 7,
2002, that were not yet vested as of January 1, 2005, have
been restated. This applies to:
lthe four stock option plans awarded between January 29,
2003, and November 17, 2004;
lthe group savings plans opened to subscription in 2004
and 2005.
Pursuant to IFRS 2, the benefits awarded to employees on
the granting of stock options (basedon the value of the
option at the grant date) and subscription of the group
savings plan (maximum discount of 20%) constitute
additional compensation. This additional compensation is
€K 3.31.04
Equity under French accounting principles 293,649
IAS/IFRS adjustments
a) Restated goodwill (IFRS 3) 37
b) Effects of changes in foreign exchange rates (IAS 21) -14,632
c) Share-based payments (IFRS 2) 0
d) Equity swap (IAS 32-39) 993
e) Convertible bonds, convertible exchangeable bonds 4,548
(OCEANE), bonds with redeemable share subscription
warrants (OBSARs)
f) Other restatements under IAS 32-39 -1,583
g) Other restatements 1,697
Total restatements after tax -8,940
Equity under IFRS 284,709