Ubisoft 2006 Annual Report Download - page 73

CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2007
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nature of the fixed assets held, no distinct component of
the main fixed assets was noted.
No borrowing costs are included in the costs of fixed
assets.
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 (straight-line),
office furniture: 10 years (straight-line).
Fixed assets acquired through direct finance
leasing arrangements
Lease contracts that transfer nearly all risks and benefits
inherent to ownership of the asset are considered direct
finance lease arrangements.
Capital assets financed through leasing agreements are
restated in the consolidated financial statements as if the
company had acquired the assets directly using loan finan-
cing.
The amount recorded as an asset is equal to the fair value
of the goods leased or, if this value is less than the present
value of the minimum lease payments, the fair value less
depreciation cost and the sum of the losses in value.
Deferred taxes related to the restatement of finance lease
contracts are activited.
Investments in associates
Investments in associates include the Group share of equity
held in associates, as well as any related goodwill.
Inventory and work-in-progress
Inventory is valued at cost or net realizable value, whiche-
ver is lower.
Cost includes purchase price plus accessory expenses.
Inventory is valued using the FIFO method.
Net realizable value is the estimated selling price in the
normal course of activity less estimated completion costs
and estimated selling costs, which include marketing and
distribution costs.
No borrowing costs are included in the costs of invento-
ries.
A provision for depreciation is recorded when the proba-
ble net realizable value is less than the book value. Write-
backs of inventory depreciation are recognized as a
reduction of the amount of inventory recorded as an
expense during the fiscal year in which the write-back
occurs.
Trade receivables
Trade receivables are measured at fair value when they are
initially recorded. Since receivables are due in less than
one year, they are not discounted. Where applicable, a
provision for depreciation is recorded based on the degree
of certainty that recovery will ultimately be made.
Business assets are therefore not amortized but, like good-
will, are subjected to impairment tests at each year-end
closing.
Brands
Trademarks and patents are recorded at their fair value by
applying IFRS 3 concerning business combinations. They
are not amortized, but annual impairment tests are
conducted. The recoverable value of the brand is then esti-
mated either on the basis of fair value or on the basis of
value in use. The value in use is defined as the present
value relative to the cash-flow generating units with which
the trademark is associated. When the fair value or the
value in use is less than the accounting value, a deprecia-
tion is booked.
Other intangible assets
The other intangible assets that were acquired by the
group are recorded at their cost minus the total of amor-
tization and losses in value (amortization). In accordance
with IAS 38 “Intangible assets”, only elements whose cost
can be determined reliably and for which it is probable that
future benefits exist are recorded as fixed assets.
No borrowing costs are included as costs of fixed assets.
The group companies do not conduct any basic research.
Development costs correspond to the development of
commercial software (video games) and are activated as
described below.
The production costs for commercial software, whether
produced internally or outsourced, are entered in the
accounts under “Intangible assets in progress” as the soft-
ware development advances. Upon the software’s first
commercial release, it is transferred to the “Released soft-
ware programs” or “External developments” accounts.
Other intangible assets are amortized over their expected
useful life:
office software: amortized over 1 year (straight-line),
ERP-related expenditures: amortized over 5 years
(straight-line),
commercial software: amortized over 3 years (straight-
line) with additional amortization to adapt to the pro-
ducts’ life cycles,
external developments: amortized based on the pro-
ducts’ life cycles.
Commercial software and external developments are
amortized starting on the date of the product’s commer-
cial release.
At the close of each fiscal year and for each program,
when there are indicators of a loss of value (basically when
sales are lower than forecast), the present forecast cash
flows are calculated (over a maximum period of three
years). When the latter are below the net book value of the
commercial software, a depreciation is applied.
Tangible assets
The gross value of tangible assets includes the cost of
acquisition, minus cash discounts and any investment
grants allowed. This is then reduced by the sum of the
depreciations and of losses in value (see the accounting
method described in the note on goodwill). Given the