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Sony Cites Home Entertainment for $1 Billion Impairment Charge

30 Jan, 2017 By: Erik Gruenwedel

Sony Corp. Jan. 30 announced it will write-down nearly $1 billion (112.1 billion yen) in its Sony Pictures unit for the fiscal third quarter, ended Dec. 31, 2016.

The impairment charge reflects ongoing downward pressure in the movie business, in addition to lowering previous expectations in home entertainment (Sony Pictures Home Entertainment) mainly driven by an acceleration of market decline at the retail level.

Sony’s top-selling discs in 2016 included Hotel Transylvania 2 ($34.7 million in combined DVD/Blu-ray Disc), and Ghostbusters: Answer the Call ($22.9 million), according to The-Numbers.com.

Specifically, Sony bean counters determined that the “fair value” fiscal forecast (potential market price of a good, service, or asset) in production and distribution (which includes Sony Pictures and Sony Pictures Television) was below the “carrying value” (original cost of an asset, less any depreciation or amortization, less the accumulated amount of any asset impairments.)

In addition, in-house analysis of the fair value the studio’s movie library, trade names, license agreements, studio physical property and land was determined to exceed their carrying value — and more importantly, not considered as goodwill write-down, in economic terms.

As a result, Sony said the impairment charge is being recorded as an operating loss and will not be reflected on the balance sheet, and will not be recognized as profit from an accounting perspective.

Sony was quick to say its studio, which includes Columbia Pictures, remains important, and that downsized financial expectations going forward — at the theatrical level — could be offset by new profitability projections for the studio through 2020.

Sony, which earlier this month announced that Michael Lynton would step down as CEO of Sony Pictures, reports financial results Feb. 2.

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