Goodwill and Intangible Assets Accounting Policy
Goodwill and certain other intangible assets that are determined to have an indefinite useful life are not amortized and are tested annually for impairment during the fourth quarter of the fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. Reporting units are Sony's operating segments or one level below the operating segments. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Fair value of reporting units and indefinite lived intangible assets is generally determined using a discounted cash flow analysis. This approach uses significant estimates and assumptions including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, determination of appropriate comparable entities and the determination of whether a premium or discount should be applied to comparables. In addition to the estimates of future cash flows, two of the most significant estimates involved in the determination of fair value of the reporting units are the discount rates and perpetual growth rate applied to terminal values used in the discounted cash flow analysis. The discount rates used in the cash flow models for the goodwill impairment testing consider market and industry data as well as specific risk factors for each reporting unit. The perpetual growth rates for the individual reporting units, for purposes of the terminal value determination, are generally set after an initial three-year forecasted period, although certain reporting units utilized longer forecasted periods, and are based on historical experience, market and industry data.
Intangible assets with finite useful lives mainly consist of patent rights, know-how, license agreements, software to be sold, leased or otherwise marketed, music catalogs, artist contracts and television carriage agreements (broadcasting agreements). Patent rights, know-how, license agreements and software to be sold, leased or otherwise marketed are generally amortized on a straight-line basis, generally, over three to eight years. Music catalogs, artist contracts and television carriage agreements (broadcasting agreements) are amortized on a straight-line basis, generally, over 10 to 40 years.
Source: Sony Corp., Annual Report
Goodwill and Intangible Assets Disclosure
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Sony Corp., Statement of Financial Position, Goodwill and Intangible Assets
USD $ in millions, translated from JPY ￥
Source: Based on data from Sony Corp. Annual Reports
| Item |
Description |
The company |
| Intangible assets |
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. |
Sony Corp.'s intangible assets increased from 2009 to 2010 and from 2010 to 2011.
|
| Goodwill |
Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions. |
Sony Corp.'s goodwill increased from 2009 to 2010 and from 2010 to 2011.
|
| Intangible assets and goodwill |
Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. |
Sony Corp.'s intangible assets and goodwill increased from 2009 to 2010 and from 2010 to 2011.
|
Analyst Adjustments: Removal of Goodwill
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Sony Corp., adjustments to financial data
USD $ in millions, translated from JPY ￥
Adjusted Ratios: Removal of Goodwill (Summary)
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Sony Corp., adjusted ratios
| Ratio |
Description |
The company |
| Adjusted net profit margin |
An indicator of profitability, calculated as adjusted net income divided by revenue. |
Sony Corp.'s adjusted net profit margin improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Sony Corp.'s adjusted total asset turnover deteriorated from 2009 to 2010 and from 2010 to 2011.
|
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Sony Corp.'s adjusted financial leverage increased from 2009 to 2010 and from 2010 to 2011.
|
| Adjusted ROE |
A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. |
Sony Corp.'s adjusted ROE improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
| Adjusted ROA |
A profitability ratio calculated as adjusted net income divided by adjusted total assets. |
Sony Corp.'s adjusted ROA improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
Adjusted Net Profit Margin
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted net profit margin |
An indicator of profitability, calculated as adjusted net income divided by revenue. |
Sony Corp.'s adjusted net profit margin improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
Adjusted Total Asset Turnover
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Sony Corp.'s adjusted total asset turnover deteriorated from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Financial Leverage
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Sony Corp.'s adjusted financial leverage increased from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Return On Equity (ROE)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROE |
A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. |
Sony Corp.'s adjusted ROE improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
Adjusted Return On Assets (ROA)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROA |
A profitability ratio calculated as adjusted net income divided by adjusted total assets. |
Sony Corp.'s adjusted ROA improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
