Ubisoft 2016 Annual Report Download - page 161

Financial statements
5
Separate fi nancial statements of Ubisoft EntertainmentSA for the year ended March31, 2016
Depreciation, amortization and value impairment methods
Types of non-current
assets Depreciation method Impairment method
Commercial software
developments
1 to 3 years, straight-line, starting
on the commercial release date At the end of each fi nancial year and for each software program, expected
cash fl ows are calculated (over a maximum period of 2 years).
Whenthese fl ows are below the net accounting value of the software,
impairment is recognized.
External developments According to the sold quantities and
theroyalty rates specifi ed in the contracts
Engines and tools 3 years, straight-line
No impairment test in the absence of any indication of impairment.
Information system
developments 5 years, straight-line
Acquired brands No amortization due to indefi nite useful life
Impairment tests are carried out on brands at the end of each fi nancial
year or more frequently if there are indications of loss in value.
Therecoverable value of brands is defi ned using the royalty method to
forecast revenue associated with the brand tested (taking a fi nal value
into account). Impairment is recognized when this value is below the net
accounting value.
Goodwill No amortization due to indefi nite useful life
At the end of each fi nancial year, expected cash fl ows are calculated using
the 5-year business plan When these fl ows are below the net accounting
value of the software, impairment is recognized.
Offi ce software 1 year, straight-line No impairment test in the absence of any indication of impairment.
According to the regulations on depreciation and impairment of
assets, the Group is requested to periodically revise its depreciation
periods based on the observed useful life.
Provisional data is updated using a rate based on a valuation of the
average cost of capital, which stood at 8.14% at March 31, 2016,
against 8.47% at March 31, 2015.
Property, plant and equipment
Property, plant and equipment are measured at their acquisition
cost (purchase price plus incidental expenses) minus rebates and
discounts.
Given the type of assets held, no component was identifi ed.
The depreciation method used is straight-line and the depreciation
periods used for the various types of non-current assets are as
follows:
Type of asset Period (in years)
Buildings 20
Fixtures and fi ttings 10
Offi ce furniture 10
Equipment 5
Computer hardware 3
Non-current fi nancial assets
Equity investments are valued at their historical cost plus all
related acquisition costs. Any additional payments are recognized in
the acquisition price as soon as they can be measured with suffi cient
reliability.
If the value of the securities exceeds their value of use, depreciation
is recognized for the difference.
The value of use is assessed at the end of each fi nancial year based
on the net assets (or the restated net assets) of the subsidiary in
question at that date, the market capitalization at the statement of
fi nancial position date if the company is listed and/or its medium-
term earnings prospects. If applicable, the provisional data utilized
are updated using a rate based on a valuation of the average cost of
capital, which stood at 8.14% at March 31, 2016.
Own shares are valued at the lower of cost or market value (average
of the last 20 trading sessions).
Deposits and sureties are recognized on the basis of the amounts
paid.
Advances and prepayments made
Advances and prepayments primarily involve distribution and
reproduction rights (licenses) acquired from other software
publishers. License agreements commit Ubisoft to an amount of
guaranteed royalties. This amount is registered in the statement
of fi nancial position under “Advances and prepayments made”,
whether or not it has been paid at the closing date. The guaranteed
amounts are recognized in the income statement on the basis of the
agreements signed with software publishers (either by the unit or
based on gross profi t or on revenue) or amortized on a straight-line
basis for agreements with fi xed royalty payments (fl at fees).
At the end of the fi nancial year, the net accounting value is compared
with sales projections on the basis of the terms and conditions of
the agreement. If they are insuffi cient, depreciation is recognized.
- Registration Document 2016 159