Ubisoft 2005 Annual Report Download - page 113

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3
111
UBISOFT • 2006 ANNUAL REPORT
FINANCIER
Corporate accounts of Ubisoft Entertainment SA as of March 31, 2006
03.31.06
Extraordinary income
Extraordinary income from management transactions 294
Extraordinary income from capital transactions 24,939
25,233
Extraordinary expense
Extraordinary expense from capital transactions 6,724
6,724
Extraordinary income/expense 18,509
Note 23 Net financial result
The net financial result breaks down as follows:
Note 24. Extraordinary results
Extraordinary income/expense is the result of operations not related to the normal activities of the company (Art. 14 of
Decree of 11/29/83). It breaks down as follows:
On March 31, 2006, extraordinary income/expense was primarily the result of:
- A capital gain on the sale of Gameloft shares in the amount of €17,858 thousand.
- A capital gain on the sale of Ubisoft SPRL shares in the amount of €616 thousand.
03.31.06 03.31.05
Financial income
Financial income from equity holdings 1,338 81
Income from other securities and claims on fixed assets 16 -
Other interest and related income 2,550 1,348
Write-back of provisions 639 12,024
Positive exchange differences 8,089 8,910
Net proceeds from sales of investment securities 1,192 254
13,824 22,617
Financial expense
Depreciation and provisions 2,906 2,396
Other interest and related expense 7,551 11,026
Negative exchange differences 15,620 7,055
26,077 20,477
Financial result -12,253 2,140
Foreign exchange risk
In order to limit the group’s foreign exchange risk, Ubisoft
Entertainment SA hedges exchange rate fluctuations in
several ways:
- When the parent company makes a loan in a foreign cur-
rency to its subsidiaries, it also takes out a loan in the
same currency. Thus, if the exchange rate rises or falls,
any gain or loss on the loan is offset by a gain or loss on
the parent company’s loan in the opposite direction.
- The distribution subsidiaries pay a royalty to the parent
company as compensation for the development costs
incurred by the latter. Similarly, the Ubisoft company
EMEA SAS centralizes purchases of finished products for
the entire region and subsequently resells them to the
subsidiaries in the local currency. At the same time,
Ubisoft Entertainment SA finances all the production
studios around the world and most of the licensing and
external development agreements. In this way, all of the
exchange rate risk is centralized at Ubisoft EMEA SAS
and Ubisoft Entertainment SA. When exchange rate risk
exists with regard to a single currency in opposite direc-
tions (for example, royalties received and cost of a studio
in the same currency), the group offsets this by using
advances or currency investments to manage the time
lags. Amounts that cannot be offset are hedged by for-
ward sales contracts and option contracts.
As of March 31, 2006, the total hedge amounts resulting
in purchases and sales of currencies stood at €82,238,
thousand (see § 3.5.8.2, Off-balance-sheet commitments).