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exchange transactions with financial institu-
tions only for hedging purposes and does not
undertake speculative transactions.
To minimize the adverse effects of foreign
exchange fluctuations on its financial results,
particularly in the Electronics segment, Sony
seeks, when appropriate, to localize material
and parts procurement, design, and manufac-
turing operations in areas outside of Japan.
Changes in the fair value of derivatives des-
ignated as cash flow hedges, including foreign
exchange forward contracts and foreign cur-
rency option contracts, are initially recorded in
other comprehensive income and reclassified
into earnings when the hedged transaction
affects earnings. Foreign exchange forward
contracts, foreign currency option contracts
and other derivatives that do not qualify as
hedges are marked-to-market with changes in
value recognized in Other Income and Expenses.
The notional amounts of foreign exchange
forward contracts, currency option contracts
purchased and currency option contracts writ-
ten as of March 31, 2004 were 1,348.2 billion
yen, 375.6 billion yen and 124.9 billion yen,
respectively.
ASSETS, LIABILITIES AND
STOCKHOLDERS' EQUITY
(Regarding Assets and Liabilities refer also to "In-
crease in Assets and Liabilities as a Result of Con-
solidation of Variable Interest Entities" below.)
ASSETS
Total assets on March 31, 2004 increased by
720.1 billion yen, or 8.6 percent, to 9,090.7
billion yen, compared with the previous fiscal
year-end. Total assets on March 31, 2004 in all
segments excluding the Financial Services seg-
ment increased by 235.0 billion yen, or 4.0
percent, to 6,060.8 billion yen and total assets
on March 31, 2004 in the Financial Services
segment increased by 577.9 billion yen, or
19.9 percent, to 3,475.0 billion yen, compared
with the previous fiscal year-end. Total assets
on March 31, 2004 in all segments excluding
the Financial Services segment would have
increased by approximately 9 percent com-
pared with the previous fiscal year-end if the
value of the yen had remained the same on
March 31, 2004 as it was on March 31, 2003.
CURRENT ASSETS
Current assets on March 31, 2004 increased
by 209.1 billion yen, or 6.6 percent, to 3,363.4
billion yen compared with the previous fiscal
year-end. Current assets on March 31, 2004 in
all segments excluding the Financial Services
segment increased by 188.5 billion yen, or 7.5
percent, to 2,692.4 billion yen.
Cash and cash equivalents in all segments
excluding Financial Services increased 154.4
billion yen, or 35.2 percent, to 592.9 billion yen
compared with the previous fiscal year. This
increase was primarily due to the issuance, in
December 2003, of 250 billion yen in euro yen
convertible bonds. The proceeds from this issu-
ance will be applied towards investments in the
development of, and production equipment for,
key devices, such as the next generation broad-
band processor (for more information on cash
and cash equivalents, refer to "Liquidity Man-
agement and Commitment Lines" below).
Notes and accounts receivable, trade (net of
deductions for doubtful accounts and allow-
ances for returns) increased 3.8 billion yen
compared with the previous fiscal year-end to
1,011.2 billion yen.
Inventories on March 31, 2004 increased by
40.8 billion yen, or 6.5 percent, to 666.5 billion
yen compared with the previous fiscal year-end.
The inventory to cost of sales turnover ratio
(based on the average of inventories at the end
of each fiscal year and previous fiscal year) de-
creased from 1.57 months at the end of the
previous fiscal year to 1.53 months. Sony con-
siders this level of inventory to be appropriate in
the aggregate. During the fiscal year ended
March 31, 2004, Sony did not engage in the
kind of aggressive inventory reduction that it
engaged in during the fourth quarter of the fis-
cal year ended March 31, 2003.
Current assets on March 31, 2004 in the
Financial Services segment increased by 14.8
billion yen, or 2.2 percent, to 699.7 billion yen,
compared with the previous fiscal year-end.
The increase was primarily attributable to an
increase in marketable securities.
INVESTMENTS AND ADVANCES
(Also see "Investments" below.)
Investments and advances on March 31, 2004
increased by 518.8 billion yen, or 26.0 percent,
to 2,513.0 billion yen, compared with the
previous fiscal year-end.
Investments and advances on March 31,
2004 in all segments excluding the Financial
Services segment decreased by 24.4 billion
yen, or 6.4 percent, to 358.6 billion yen. This
decrease was mainly due to the recording of
an impairment loss on securities issued by a
privately held Japanese company, which Sony
accounted for under the cost method, that is
engaged in cable broadcasting and other busi-
nesses and a decrease in the amount recorded
in "investments" due to the consolidation of
an affiliated company that was formerly ac-
counted for under the equity method as a
result of the adoption during the fiscal year
ended March 31, 2004 of Financial Accounting
Standards Board ("FASB") Interpretation
("FIN") 46 (refer to Notes 6 and 7 in the Notes
to the Consolidated Financial Statements).
Investments and advances on March 31,
2004 in the Financial Services segment
increased by 543.1 billion yen, or 31.4 percent,
to 2,274.5 billion yen, compared with the
previous fiscal year-end. This increase was
primarily due to an increase in assets under
management.
PROPERTY, PLANT AND EQUIPMENT (AFTER
DEDUCTION OF ACCUMULATED DEPRECIATION)
Property, plant and equipment on March 31,
2004 increased by 86.7 billion yen, or 6.8 per-
cent, to 1,365.0 billion yen, compared with
the previous fiscal year-end.
Property, plant and equipment on March
31, 2004 in all segments excluding the Finan-
cial Services segment increased by 91.9 billion
yen, or 7.5 percent, to 1,324.2 billion yen,
compared with the previous fiscal year-end.
The increase was mainly due to an increase in
assets resulting from the adoption of FIN 46.
Capital expenditures (part of the increase in
property, plant and equipment) for the fiscal
year ended March 31, 2004 increased by
117.0 billion yen, or 44.8 percent, to 378.3
billion yen compared with the previous fiscal
year. Capital expenditures in the Electronics
segment increased 72.4 billion yen, or 42.5
percent, to 242.7 billion yen and in the Game
segment by 59.4 billion yen, or 144.9 percent,
to 100.4 billion yen. Capital expenditures in
the semiconductor businesses (included in the
capital expenditures of both the Electronics
71
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