Ubisoft 2007 Annual Report Download - page 101

CORPORATE FINANCIAL STATEMENTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, 2008
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going-concern assumption,
matching principle,
fair presentation, consistency and accuracy,
conservatism,
and in accordance with the general rules governing the
preparation and presentation of annual financial state-
ments.
The basic method used to measure items in the financial
statements was historical cost.
The accounting methods applied are consistent with indus-
try practice. Ubisoft Entertainment SA’s annual financial
statements comply with the provisions on separate finan-
cial statements in Regulation 99-03, as ratified by the
Decree of June 22, 1999.
Changes in options
In accordance with Ruling 2007-C of June 15, 2007 from the
Emergency Committee of the French National Accounting
Council (CNC), the Company changed the option of recog-
nizing for tax purposes all transfer taxes, fees and commis-
sion and filing fees relating to the acquisition of equity
investments, as defined in Article 39-1-5 of the French
General Tax Code. These costs are now capitalized along
with the acquisition cost of the non-current asset.
On the fiscal year, the Company decided to retain the tax
option, as permitted under Article 236 of the French
General Tax Code, allowing to amortize the expense soft-
ware design costs where design commenced during the
period over one year by the recording of accelerated depre-
ciation. The accelerated depreciation is recorded for the
surplus part the depreciation calculated under the condi-
tions described with the §3.5.5 on the commercial software.
Accounting rules
and methods
Intangible assets
Intangible assets include:
logos,
acquired brands,
office software,
information system costs,
commercial software,
external developments.
Accounting and later evaluation
Brands:
Any brands acquired are recognized at cost.
Commercial software:
Development costs of commercial software, whether pro-
duced in-house or outsourced, are recognized in “intangi-
ble assets in progress” as development progresses. Once
they are released, these costs are transferred to the
"released software" or “external developments” accounts.
Development costs of outsourced commercial software are
recognized in “intangible assets in progress” or “advances
and prepayments,” in line with the rules defined by the
French Conseil d’Etat (CE 62547 of February 12, 1988, and
CE 65009 of November 25, 1989) when these costs do not
answer the definition of an asset.
Development costs subcontracted to Group subsidiaries
are recognized as subcontracting expenses and transferred
to non-current assets via a capitalized production costs
account.
3.5.4
3.5.5
Amortization methods Depreciation methods
Acquired brands Not amortized Impairment tests are carried out on brands at the end of each
fiscal year or more often if there are indications of impairment
losses. The recoverable amount of brands is then estimated on
the basis of the change in sales for the division in question, its
contribution to consolidated Group earnings and its discounted
cash flows. Impairment is recognized when the discounted cash
flows are below the carrying amount
Office software Amortized over 1 year (straight-line) No test of depreciation in the absence of index of loss in value
Information system costs Amortized over 5 years (straight-line) No test of depreciation in the absence of index of loss in value
Commercial software Commercial software are amortized When sales prove lower than projections and expected
over 3 years (straight-line) from profitability, an impairment loss is recognized. Operating
the date of their commercial release profitability is determined on the basis of operating profit
restated to reflect operating amortization
External developments External developments are amortized When sales prove lower than projections and expected
according to the sold quantities and of the profitability, an impairment loss is recognized. Operating
rates of royalties indicated to the contracts profitability is determined on the basis of operating profit
restated to reflect operating amortization
Depreciation and amortization methods