Ubisoft 2005 Annual Report Download - page 102

Notes to the corporate accounts
3.5
The following notes and tables (shown in thousands of
euros), are an integral part of the annual accounts for the
fiscal year ending March 31, 2006, and constitute an
appendix to the balance sheet. The fiscal year covered a
period of 12 months from April 1, 2005 to March 31, 2006.
Highlights
of the fiscal year
- Disposal of shares
On May 30, 2005, the security interest held in Ubisoft
SPRL (Belgium) was transferred to Ubisoft BV
(Netherlands) for the amount of €2,238 thousand.
Between June 29, 2005 and July 15, 2005, Ubisoft
Entertainment SA sold 5,155,000 shares of Gameloft SA
on the market for an overall amount of €22,697 thousand.
- Share acquisitions
During the fiscal year, investments in the following compa-
nies increased to 100% through the buyback of shares from
other shareholders: Ubisoft Norway AS, Ubisoft Nordic AS,
Ubisoft World Studios SAS, Ubisoft Pictures SARL, Ubisoft
Design SARL, Ubisoft Books and Records SARL, Ubisoft
Simulations SAS, Ubisoft Graphics SAS, Ubisoft World SAS,
Ubisoft France SAS, Ubisoft Productions France SARL, Ludi
Factory SAS, Ubisoft EMEA SAS, Ubisoft Manufacturing &
Administration SARL and Ubisoft Organisation SAS. The
total amount of these acquisitions was €2,000.
On January 1, 2006 Ubisoft Development SARL was created;
it is 100% owned by Ubisoft Entertainment SA.
- Asset purchases
On January 9, 2006, the intellectual property rights
associated with the Far Cry®brand were acquired from
Crytek for €9 million (including €1.5 million during the
fiscal year), as well as a license to use Far Cry®’s
CryEngine technology for €3 million.
- Increases in capital
In December 2005, Ubisoft Entertainment SA increased its
capital holdings in Ubisoft Music Inc through the capitali-
zation of a current account totaling €280 thousand.
- Own shares
On February 28, 2006, Ubisoft Entertainment SA extended
the equity swap contract with Calyon for 24 months.
- Other items
On May 13, 2005, a syndicated loan of €100 million was
signed between Ubisoft Entertainment SA and ten banks. It
replaces the syndicated loan of €130 million signed
August 13, 2001, which was brought down to €97.5 million
on April 22, 2002. This loan, with an initial term of three
years, may be extended for an additional year for 100% of
the initial amount depending on the net debt/EBITDA
ratio, as well as for a second year for 50%.
The bonded debt issued on July 16, 1998 matured on
October 10, 2005, and 2,507 bonds were redeemed.
Comparability of
accounts
In response to the change in tax position with regard to cal-
culating added value in the film industries and the produc-
tion of commercial software, as of April 1 2004,
development costs subcontracted to group subsidiaries are
being recorded as subcontracting charges and carried to
assets in the form of capitalized production costs. These
development costs totaled €132.3 million as of March 31,
2006, €101.5 million as of March 31, 2005 and €78.8 mil-
lion as of March 31, 2004. For the sake of comparison, the
“03.31.04 Pro forma” column incorporates this change.
Since the establishment of the liquidity contract on
December 22, 2005, directly held shares are recorded
under other fixed investments, while they were shown
under investment securities on March 31, 2005.
Accounting principles
General accounting conventions were applied in accor-
dance with the principle of conservatism and the following
fundamental criteria:
- operational continuity,
- the time-period concept,
- fair presentation, regularity and accuracy,
- prudence and
compliance with the general rules governing the drawing
up and presentation of annual financial statements.
The historical cost principle was applied as the basic
method for the valuation of items shown in the accounts.
The accounting methods applied are consistent with indus-
try practice. The annual accounts of Ubisoft Entertainment
SA follow the provisions relating to individual accounts in
Regulation 99-03, approved by the decree of June 22,
1999.
Accounting method
changes
The implementation of regulations CRC 2002-10 and CRC
2004-06 as of January 1, 2005 entailed the changes in
method reflected retrospectively in the financial state-
ments as of March 31, 2006 and described below:
Reporting of trademarks and patents
Registration expenses for trademarks and patents are now
reported under expenses. At the start of the fiscal year,
3.5.1
3.5.2
3.5.3
3.5.4