Edgar Filing: SONY CORP

Unassociated Document

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of June 2011
Commission File Number: 001-06439

SONY CORPORATION

(Translation of registrant’s name into English)

7-1, KONAN 1-CHOME, MINATO-KU, TOKYO 108-0075, JAPAN
(Address of principal executive offices)

The registrant files annual reports under cover of Form 20-F.

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,

Form 20-F þ Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes o No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-

Consolidated Financial Statements

For the fiscal year ended March 31, 2011

Sony Corporation

TOKYO, JAPAN

Contents

Management’s Annual Report on Internal Control over Financial Reporting		2
Report of Independent Registered Public Accounting Firm		3
Consolidated Balance Sheets		4
Consolidated Statements of Income		6
Consolidated Statements of Cash Flows		8
Consolidated Statements of Changes in Stockholders’ Equity		10
Index to Notes to Consolidated Financial Statements		13
Notes to Consolidated Financial Statements		14

Management’s Annual Report on Internal Control over Financial Reporting

Sony’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Sony’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Sony’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Sony;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Sony are being made only in accordance with authorizations of management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Sony’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Sony’s management evaluated the effectiveness of Sony’s internal control over financial reporting as of March 31, 2011 based on the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management has concluded that Sony maintained effective internal control over financial reporting as of March 31, 2011.

Our independent registered public accounting firm, PricewaterhouseCoopers Aarata, has issued an audit report on our internal control over financial reporting as of March 31, 2011, presented on page 3.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

Sony Corporation (Sony Kabushiki Kaisha)

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and changes in stockholders’ equity present fairly, in all material respects, the financial position of Sony Corporation and its subsidiaries (“Sony”) at March 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Sony maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Sony's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management's Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express opinions on these financial statements and on Sony's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ PricewaterhouseCoopers Aarata

Tokyo, Japan

June 7, 2011

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets

March 31

	Yen in millions
	2010			2011
ASSETS
Current assets:
Cash and cash equivalents		1,191,608			1,014,412
Marketable securities		579,493			646,171
Notes and accounts receivable, trade		996,100			834,221
Allowance for doubtful accounts and sales returns		(104,475	)		(90,531	)
Inventories		645,455			704,043
Deferred income taxes		197,598			133,059
Prepaid expenses and other current assets		627,093			602,671
Total current assets		4,132,872			3,844,046
Film costs		310,065			275,389
Investments and advances:
Affiliated companies		229,051			221,993
Securities investments and other		5,070,342			5,670,662
		5,299,393			5,892,655
Property, plant and equipment:
Land		153,067			145,968
Buildings		897,054			868,615
Machinery and equipment		2,235,032			2,016,956
Construction in progress		71,242			53,219
		3,356,395			3,084,758
Less – Accumulated depreciation		2,348,444			2,159,890
		1,007,951			924,868
Other assets:
Intangibles, net		378,917			391,122
Goodwill		438,869			469,005
Deferred insurance acquisition costs		418,525			428,262
Deferred income taxes		403,537			239,587
Other		475,985			460,054
		2,115,833			1,988,030
Total assets		12,866,114			12,924,988

(Continued on following page.)

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets (Continued)

	Yen in millions
	2010			2011
LIABILITIES
Current liabilities:
Short-term borrowings		48,785			53,737
Current portion of long-term debt		235,822			109,614
Notes and accounts payable, trade		817,118			793,275
Accounts payable, other and accrued expenses		1,003,197			1,013,037
Accrued income and other taxes		69,175			79,076
Deposits from customers in the banking business		1,509,488			1,647,752
Other		376,340			430,488
Total current liabilities		4,059,925			4,126,979
Long-term debt		924,207			812,235
Accrued pension and severance costs		295,526			271,320
Deferred income taxes		236,521			306,227
Future insurance policy benefits and other		3,876,292			4,225,373
Other		188,088			226,952
Total liabilities		9,580,559			9,969,086
Redeemable noncontrolling interest		-			19,323
Commitments and contingent liabilities
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value –
2010– Shares authorized: 3,600,000,000, shares issued: 1,004,571,464		630,822
2011– Shares authorized: 3,600,000,000, shares issued: 1,004,636,664					630,921
Additional paid-in capital		1,157,812			1,159,666
Retained earnings		1,851,004			1,566,274
Accumulated other comprehensive income –
Unrealized gains on securities, net		62,337			50,336
Unrealized losses on derivative instruments, net		(36	)		(1,589	)
Pension liability adjustment		(148,989	)		(152,165	)
Foreign currency translation adjustments		(582,370	)		(700,786	)
		(669,058	)		(804,204	)
Treasury stock, at cost
Common stock
2010– 1,039,656 shares		(4,675	)
2011– 1,051,588 shares					(4,670	)
		2,965,905			2,547,987
Noncontrolling interests		319,650			388,592
Total equity		3,285,555			2,936,579
Total liabilities and equity		12,866,114			12,924,988

The accompanying notes are an integral part of these statements.

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income

Fiscal year ended March 31

	Yen in millions
	2009			2010			2011
Sales and operating revenue:
Net sales		7,110,053			6,293,005			6,304,401
Financial services revenue		523,307			838,300			798,495
Other operating revenue		96,633			82,693			78,377
		7,729,993			7,213,998			7,181,273
Costs and expenses:
Cost of sales		5,660,504			4,892,563			4,831,363
Selling, general and administrative		1,686,030			1,544,890			1,501,813
Financial services expenses		547,825			671,550			675,788
(Gain) loss on sale, disposal or impairment of assets and other, net		38,308			42,988			(13,450	)
		7,932,667			7,151,991			6,995,514
Equity in net income (loss) of affiliated companies		(25,109	)		(30,235	)		14,062
Operating income (loss)		(227,783	)		31,772			199,821
Other income:
Interest and dividends		22,317			13,191			11,783
Gain on sale of securities investments, net		1,281			9,953			14,325
Foreign exchange gain, net		48,568			–			9,297
Other		26,659			20,690			9,561
		98,825			43,834			44,966
Other expenses:
Interest		24,376			22,505			23,909
Loss on devaluation of securities investments		4,427			2,946			7,669
Foreign exchange loss, net		–			10,876			–
Other		17,194			12,367			8,196
		45,997			48,694			39,774
Income (loss) before income taxes		(174,955	)		26,912			205,013
Income taxes:
Current		80,521			48,698			117,918
Deferred		(153,262	)		(34,740	)		307,421
		(72,741	)		13,958			425,339
Net income (loss)		(102,214	)		12,954			(220,326	)
Less - Net income (loss) attributable to noncontrolling interests		(3,276	)		53,756			39,259
Net loss attributable to Sony Corporation’s stockholders		(98,938	)		(40,802	)		(259,585	)

(Continued on following page.)

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income (Continued)

	Yen
	2009			2010			2011
Per share data:
Common stock
Net loss attributable to Sony Corporation’s stockholders
– Basic		(98.59	)		(40.66	)		(258.66	)
– Diluted		(98.59	)		(40.66	)		(258.66	)

Cash dividends		42.50			25.00			25.00

The accompanying notes are an integral part of these statements.

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows

Fiscal year ended March 31

	Yen in millions
	2009			2010			2011
Cash flows from operating activities:
Net income (loss)		(102,214	)		12,954			(220,326	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities –
Depreciation and amortization, including amortization of deferred insurance acquisition costs		405,443			371,004			325,366
Amortization of film costs		255,713			277,665			250,192
Stock-based compensation expense		3,446			2,202			1,952
Accrual for pension and severance costs, less payments		16,654			(9,763	)		(15,229	)
(Gain) loss on sale, disposal or impairment of assets and other, net		38,308			42,988			(13,450	)
(Gain) loss on sale or devaluation of securities investments, net		3,146			(7,007	)		(6,656	)
(Gain) loss on revaluation of marketable securities held in the financial service business for trading purpose, net		77,952			(49,837	)		10,958
(Gain) loss on revaluation or impairment of securities investments held in the financial service business, net		101,114			(53,984	)		5,080
Deferred income taxes		(153,262	)		(34,740	)		307,421
Equity in net (income) losses of affiliated companies, net of dividends		65,470			36,183			(11,479	)
Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivable, trade		218,168			(53,306	)		104,515
(Increase) decrease in inventories		160,432			148,584			(112,089	)
Increase in film costs		(264,412	)		(296,819	)		(244,063	)
Increase (decrease) in notes and accounts payable, trade		(375,842	)		262,032			(18,119	)
Increase (decrease) in accrued income and other taxes		(163,200	)		63,619			(8,020	)
Increase in future insurance policy benefits and other		174,549			284,972			278,897
Increase in deferred insurance acquisition costs		(68,666	)		(71,999	)		(69,196	)
Increase in marketable securities held in the financial service business for trading purpose		(26,088	)		(8,335	)		(30,102	)
(Increase) decrease in other current assets		134,175			(32,405	)		(89,473	)
Increase (decrease) in other current liabilities		(105,155	)		5,321			56,076
Other		11,422			23,578			113,990
Net cash provided by operating activities		407,153			912,907			616,245

(Continued on following page.)

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

	Yen in millions
	2009			2010			2011
Cash flows from investing activities:
Payments for purchases of fixed assets		(496,125	)		(338,050	)		(253,688	)
Proceeds from sales of fixed assets		153,439			15,671			18,743
Payments for investments and advances by financial service business		(2,496,783	)		(1,581,841	)		(1,458,912	)
Payments for investments and advances (other than financial service business)		(178,335	)		(41,838	)		(15,316	)
Proceeds from maturities of marketable securities, sales of securities investments and collections of advances by financial service business		1,923,264			1,128,500			874,031
Proceeds from maturities of marketable securities, sales of securities investments and collections of advances (other than financial service business)		11,569			54,324			30,332
Proceeds from sales of businesses		–			22,084			99,335
Other		1,629			(4,854	)		(8,964	)
Net cash used in investing activities		(1,081,342	)		(746,004	)		(714,439	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		72,188			510,128			1,499
Payments of long-term debt		(264,467	)		(144,105	)		(216,212	)
Increase (decrease) in short-term borrowings, net		244,584			(250,252	)		6,120
Increase in deposits from customers in the financial service business, net		261,619			276,454			229,327
Dividends paid		(42,594	)		(25,085	)		(25,098	)
Other		(3,872	)		(2,126	)		(5,748	)
Net cash provided by (used in) financing activities		267,458			365,014			(10,112	)
Effect of exchange rate changes on cash and cash equivalents		(18,911	)		(1,098	)		(68,890	)
Net increase (decrease) in cash and cash equivalents		(425,642	)		530,819			(177,196	)
Cash and cash equivalents at beginning of the fiscal year		1,086,431			660,789			1,191,608
Cash and cash equivalents at end of the fiscal year		660,789			1,191,608			1,014,412

Supplemental data:
Cash paid during the fiscal year for –
Income taxes		242,528			60,022			116,376
Interest		22,729			19,821			20,583
Non-cash investing and financing activities –
Obtaining assets by entering into capital lease		5,831			2,553			3,738
Collections of deferred proceeds from sales of receivables –		–			–			153,550

The accompanying notes are an integral part of these statements.

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

	Yen in millions
									Accumulated						Sony
			Additional						other			Treasury			Corporation’s
	Common		paid-in			Retained			comprehensive			stock, at			stockholders’			Noncontrolling
	stock		capital			earnings			income			cost			equity			interests			Total equity
Balance at March 31, 2008		630,576		1,151,447			2,059,361			(371,527	)		(4,768	)		3,465,089			276,849			3,741,938
Exercise of stock acquisition rights		189		189												378			18			396
Stock-based compensation				3,423												3,423						3,423

Comprehensive income:
Net loss							(98,938	)								(98,938	)		(3,276	)		(102,214	)
Other comprehensive income, net of tax –
Unrealized losses on securities										(40,859	)					(40,859	)		(15,992	)		(56,851	)
Unrealized gains on derivative instruments										1,787						1,787						1,787
Pension liability adjustment										(74,517	)					(74,517	)		(548	)		(75,065	)
Foreign currency translation adjustments										(247,697	)					(247,697	)		797			(246,900	)
Total comprehensive loss																(460,224	)		(19,019	)		(479,243	)

Stock issue costs, net of tax							(4	)								(4	)					(4	)
Dividends declared							(42,648	)								(42,648	)		(6,056	)		(48,704	)
Purchase of treasury stock													(302	)		(302	)					(302	)
Reissuance of treasury stock				(25	)		(152	)					416			239						239
Transactions with noncontrolling interests shareholders and other																			157			157
Effects of changing the pension plan measurement date							(668	)		(630	)					(1,298	)					(1,298	)
Balance at March 31, 2009		630,765		1,155,034			1,916,951			(733,443	)		(4,654	)		2,964,653			251,949			3,216,602

(Continued on following page.)

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

	Yen in millions
								Accumulated						Sony
			Additional					other			Treasury			Corporation’s
	Common		paid-in		Retained			comprehensive			stock, at			stockholders’			Noncontrolling
	stock		capital		earnings			income			cost			equity			interests			Total equity
Balance at March 31, 2009		630,765		1,155,034		1,916,951			(733,443	)		(4,654	)		2,964,653			251,949			3,216,602
Exercise of stock acquisition rights		57		57											114			6			120
Stock-based compensation				2,174											2,174						2,174

Comprehensive income:
Net income (loss)						(40,802	)								(40,802	)		53,756			12,954
Other comprehensive income, net of tax –
Unrealized gains on securities									32,267						32,267			16,527			48,794
Unrealized gains on derivative instruments									1,548						1,548			2			1,550
Pension liability adjustment									23,720						23,720			(27	)		23,693
Foreign currency translation adjustments									6,850						6,850			(343	)		6,507
Total comprehensive income															23,583			69,915			93,498

Dividends declared						(25,088	)								(25,088	)		(5,399	)		(30,487	)
Purchase of treasury stock												(139	)		(139	)					(139	)
Reissuance of treasury stock						(57	)					118			61						61
Transactions with noncontrolling interests shareholders and other				547											547			3,179			3,726
Balance at March 31, 2010		630,822		1,157,812		1,851,004			(669,058	)		(4,675	)		2,965,905			319,650			3,285,555

(Continued on following page.)

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

	Yen in millions
									Accumulated						Sony
			Additional						other			Treasury			Corporation’s
	Common		paid-in			Retained			comprehensive			stock, at			stockholders’			Noncontrolling
	stock		capital			earnings			income			cost			equity			interests			Total equity
Balance at March 31, 2010		630,822		1,157,812			1,851,004			(669,058	)		(4,675	)		2,965,905			319,650			3,285,555
Exercise of stock acquisition rights		99		99												198			22			220
Stock-based compensation				1,782												1,782						1,782

Comprehensive income:
Net income (loss)							(259,585	)								(259,585	)		39,259			(220,326	)
Other comprehensive income, net of tax –
Unrealized losses on securities										(12,001	)					(12,001	)		(3,516	)		(15,517	)
Unrealized losses on derivative instruments										(1,553	)					(1,553	)					(1,553	)
Pension liability adjustment										(3,176	)					(3,176	)		(123	)		(3,299	)
Foreign currency translation adjustments										(118,416	)					(118,416	)		(616	)		(119,032	)
Total comprehensive income (loss)																(394,731	)		35,004			(359,727	)

Stock issue costs, net of tax							(8	)								(8	)					(8	)
Dividends declared							(25,089	)								(25,089	)		(6,599	)		(31,688	)
Purchase of treasury stock													(111	)		(111	)					(111	)
Reissuance of treasury stock							(48	)					116			68						68
Transactions with noncontrolling interests shareholders and other				(27	)											(27	)		40,515			40,488
Balance at March 31, 2011		630,921		1,159,666			1,566,274			(804,204	)		(4,670	)		2,547,987			388,592			2,936,579

The accompanying notes are an integral part of these statements.

Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

Notes to Consolidated Financial Statements		Page
1.	Nature of operations	14
2.	Summary of significant accounting policies	14
3.	Inventories	24
4.	Film costs	24
5.	Related party transactions	24
6.	Transfer of financial assets	29
7.	Marketable securities and securities investments	30
8.	Leased assets	34
9.	Goodwill and intangible assets	36
10.	Insurance-related accounts	38
11.	Short-term borrowings and long-term debt	39
12.	Housing loans and deposits from customers in the banking business	42
13.	Fair value measurements	43
14.	Derivative instruments and hedging activities	47
15.	Pension and severance plans	52
16.	Stockholders’ equity	61
17.	Stock-based compensation plans	63
18.	Great East Japan Earthquake	66
19.	Restructuring charges and asset impairments	67
20.	Research and development costs, advertising costs and shipping and handling costs	72
21.	Income taxes	73
22.	Reconciliation of the differences between basic and diluted EPS	77
23.	Variable interest entities	78
24.	Acquisitions	81
25.	Divestitures	88
26.	Collaborative arrangements	88
27.	Commitments, contingent liabilities and other	89
28.	Business segment information	91
29.	Subsequent events	96

Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

1. Nature of operations

Sony Corporation and its consolidated subsidiaries (hereinafter collectively referred to as “Sony”) are engaged in the development, design, manufacture, and sale of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets as well as game consoles and software. Sony’s primary manufacturing facilities are located in Asia including Japan. Sony also utilizes third-party contract manufacturers for certain products. Sony’s products are marketed throughout the world by sales subsidiaries and unaffiliated distributors as well as direct sales via the Internet. Sony is engaged in the development, production and acquisition, manufacturing, marketing, distribution and broadcasting of image-based software, including motion picture, home entertainment and television products. Sony is also engaged in the development, production, manufacture, and distribution of recorded music. Further, Sony is also engaged in various financial services businesses, including life and non-life insurance operations through its Japanese insurance subsidiaries and banking operations through a Japanese Internet-based banking subsidiary. In addition to the above, Sony is engaged in a network services business and an advertising agency business in Japan.

2. Summary of significant accounting policies

Sony Corporation and its subsidiaries in Japan maintain their records and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domiciles. The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP. These adjustments were not recorded in the statutory books and records.

(1) Significant accounting policies:

Basis of consolidation and accounting for investments in affiliated companies -

The consolidated financial statements include the accounts of Sony Corporation and its majority-owned subsidiary companies, general partnerships and other entities in which Sony has a controlling interest, and variable interest entities for which Sony is the primary beneficiary. All intercompany transactions and accounts are eliminated. Investments in business entities in which Sony does not have control, but has the ability to exercise significant influence over operating and financial policies, generally through 20-50% ownership, are accounted for under the equity method. In addition, investments in general partnerships in which Sony does not have a controlling interest and limited partnerships are also accounted for under the equity method if more than minor influence over the operation of the investee exists (generally through more than 3-5% ownership). When the interest in the partnership is so minor that Sony has no significant influence over the operation of the investee, the cost method is used. Under the equity method, investments are stated at cost plus/minus Sony’s portion of equity in undistributed earnings or losses. Sony’s equity in current earnings or losses of such entities is reported net of income taxes and is included in operating income (loss) after the elimination of unrealized intercompany profits. If the value of an investment has declined and is judged to be other–than-temporary, the investment is written down to its estimated fair value.

On occasion, a consolidated subsidiary or an affiliated company accounted for by the equity method may issue its shares to third parties in either a public or private offering or upon conversion of convertible debt to common stock at amounts per share in excess of or less than Sony’s average per share carrying value. With respect to such transactions, the resulting gains or losses arising from the change in interest are recorded in earnings for the year the change in interest transaction occurs. However, prior to Sony’s adoption of the new guidance on the accounting for noncontrolling interests and equity method investments on April 1, 2009, where the sale of such shares was part of a broader corporate reorganization, the reacquisition of such shares was contemplated at the time of issuance or realization of such gain was not reasonably assured (i.e., the entity was newly formed, non-operating, a research and development or start-up/development stage entity, or where the entity’s ability to continue in existence was in question), the transaction was accounted for as a capital transaction. In addition, subsequent to Sony’s adoption of the new guidance on the accounting for noncontrolling interests on April 1, 2009, a change in interest of a consolidated subsidiary that does not result in a change in control is accounted for as a capital transaction and no gains or losses are recorded in earnings.

The excess of the cost over the underlying net equity of investments in consolidated subsidiaries and affiliated companies accounted for on an equity basis is allocated to identifiable tangible and intangible assets and liabilities based on fair values at the date of acquisition. The unassigned residual value of the excess of the cost over Sony’s underlying net equity is recognized as goodwill as a component of the investment balance.

Use of estimates -

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Translation of foreign currencies -

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate fiscal year end current exchange rates and all income and expense accounts are translated at exchange rates that approximate those rates prevailing at the time of the transactions. The resulting translation adjustments are accumulated as a component of accumulated other comprehensive income.

Receivables and payables denominated in foreign currencies are translated at appropriate fiscal year end exchange rates and the resulting translation gains or losses are taken into income.

Cash and cash equivalents -

Cash and cash equivalents include all highly liquid investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.

Marketable debt and equity securities -

Debt and equity securities designated as available-for-sale, whose fair values are readily determinable, are carried at fair value with unrealized gains or losses included as a component of accumulated other comprehensive income, net of applicable taxes. Debt and equity securities classified as trading securities are carried at fair value with unrealized gains or losses included in income. Debt securities that are expected to be held-to-maturity are carried at amortized cost. Individual securities classified as either available-for-sale or held-to-maturity are reduced to fair value by a charge to income for other-than-temporary declines in fair value. Realized gains and losses are determined on the average cost method and are reflected in income.

Sony regularly evaluates its investment portfolio to identify other-than-temporary impairments of individual securities. Factors that are considered by Sony in determining whether an other-than-temporary decline in value has occurred include: the length of time and extent to which the market value of the security has been less than its original cost, the financial condition, operating results, business plans and estimated future cash flows of the issuer of the security, other specific factors affecting the market value, deterioration of the credit condition of the issuers, sovereign risk, and whether or not Sony is able to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value.

In evaluating the factors for available-for-sale securities whose fair values are readily determinable, Sony presumes a decline in value to be other-than-temporary if the fair value of the security is 20 percent or more below its original cost for an extended period of time (generally for a period of up to six months). This criterion is employed as a threshold to identify securities which may have a decline in value that is other-than-temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if there is evidence to support that the decline is temporary in nature due to the existence of other factors which overcome the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses are recognized when the decline in the fair value of the security is not more than 20 percent or such decline has not existed for an extended period of time, as a result of considering specific factors which may indicate the decline in the fair value is other-than-temporary.

Sony adopted new accounting guidance for the recognition and presentation of other-than-temporary impairments for debt securities on April 1, 2009. Under this new guidance, when an other-than-temporary impairment of a debt security has occurred, the amount of the other-than-temporary impairment recognized in income depends on whether Sony intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost. If the debt security meets either of these two criteria, the other-than-temporary impairment is recognized in income, measured as the entire difference between the security’s amortized cost and its fair value at the impairment measurement date. For other-than-temporary impairments of debt securities that do not meet these two criteria, the net amount recognized in income is a credit loss equal to the difference between the amortized cost of the debt security and its net present value calculated by discounting Sony’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. Any difference between the fair value and the net present value of the debt security at the impairment measurement date is recorded in accumulated other comprehensive income. Unrealized gains or losses on securities for which an other-than-temporary impairment has been recognized in income are presented as a separate component of accumulated other comprehensive income. Before the adoption of this guidance, an other-than-temporary impairment recognized in income for debt securities was equal to the total difference between amortized cost and fair value at the impairment measurement date.

Equity securities in non-public companies -

Equity securities in non-public companies are primarily carried at cost if fair value is not readily determinable. If the carrying value of a non-public equity investment is estimated to have declined and such decline is judged to be other-than-temporary, Sony recognizes the impairment of the investment and the carrying value is reduced to its fair value. Determination of impairment is based on the consideration of several factors, including operating results, business plans and estimated future cash flows. Fair value is determined through the use of various methodologies such as discounted cash flows, valuation of recent financings and comparable valuations of similar companies.

Allowance for doubtful accounts -

Sony maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Sony reviews accounts receivable by amounts due by customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, Sony makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations.

Inventories -

Inventories in the Consumer, Professional & Devices, Networked Products & Services and Music segments as well as non-film inventories for the Pictures segment are valued at cost, not in excess of market, cost being determined on the “average cost” basis except for the cost of finished products carried by certain subsidiary companies which is determined on the “first-in, first-out” basis. The market value of inventory is determined as the net realizable value – i.e., estimated selling price in the ordinary course of business less predictable costs of completion and disposal. Sony does not consider a normal profit margin when calculating the net realizable value.

Film costs -

Film costs include direct production costs, production overhead and acquisition costs for both motion picture and television productions and are stated at the lower of unamortized cost or estimated fair value and classified as noncurrent assets. Film costs are amortized and the estimated liabilities for residuals and participations are accrued using an individual-film-forecast method based on the ratio of current period actual revenues to the estimated remaining total lifetime revenues. Film costs also include broadcasting rights which consist of acquired programming to be aired on Sony’s worldwide channel network and are recognized when the license period begins and the program is available for use. Broadcasting rights are stated at the lower of unamortized cost or net realizable value, classified as either current or noncurrent assets based on timing of expected use, and amortized based on estimated usage or on a straight-line basis over the useful life, as appropriate. Estimates used in calculating the fair value of the film costs and the net realizable value of the broadcasting rights are based upon assumptions about future demand and market conditions and are reviewed on a periodic basis.

Property, plant and equipment and depreciation -

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is computed on the declining-balance method for Sony Corporation and its Japanese subsidiaries, except for certain semiconductor manufacturing facilities and buildings whose depreciation is computed on the straight-line method over the estimated useful life of the assets. Depreciation of property, plant and equipment for foreign subsidiaries is also computed on the straight-line method. Useful lives for depreciation range from two to 50 years for buildings and from one to 17 years for machinery and equipment. Significant renewals and additions are capitalized at cost. Maintenance and repairs, and minor renewals and betterments are charged to income as incurred.

Goodwill and other intangible assets -

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.

Software to be sold, leased, or marketed -

Sony accounts for software development costs in accordance with accounting guidance for the costs of software to be sold, leased, or marketed. The costs related to establishing the technological feasibility of a software product are expensed as incurred as a part of research and development in cost of sales. Costs that are incurred to produce the finished product after technological feasibility is established are capitalized and amortized to cost of sales over the estimated economic life, which is generally three years. The technological feasibility of game software is established when the product master is completed. Consideration to capitalize game software development costs before this point is limited to the development costs of games for which technological feasibility can be proven to be at an earlier stage. At each balance sheet date, Sony performs periodic reviews to ensure that unamortized capitalized software costs remain recoverable from future profits of the related software products.

Deferred insurance acquisition costs -

Costs that vary with and are primarily related to acquiring new insurance policies are deferred as long as they are recoverable. The deferred insurance acquisition costs include such items as commissions, medical examination costs and inspection report fees, and are subject to recoverability testing at least annually to ensure that the capitalized amounts do not exceed the present value of anticipated gross profits or premiums less benefits and maintenance expenses, as applicable. The deferred insurance acquisition costs for traditional life insurance contracts are amortized over the premium-paying period of the related insurance policies using assumptions consistent with those used in computing policy reserves. The deferred insurance acquisition costs for non-traditional life insurance contracts are amortized over the expected life in proportion to the estimated gross profits.

Product warranty -

Sony provides for the estimated cost of product warranties at the time revenue is recognized. The product warranty is calculated based upon product sales, estimated probability of failure and estimated cost per claim. The variables used in the calculation of the provision are reviewed on a periodic basis.

Certain subsidiaries in the Consumer, Professional & Devices and Networked Products & Services segments offer extended warranty programs. The consideration received for extended warranty service is deferred and recognized as revenue on a straight-line basis over the term of the extended warranty.

Future insurance policy benefits -

Liabilities for future insurance policy benefits are primarily comprised of the present value of estimated future payments to policyholders. These liabilities are computed by the net level premium method based upon the assumptions, including future investment yield, morbidity, mortality, withdrawals and other factors. These assumptions are reviewed on a periodic basis. Liabilities for future insurance policy benefits also include liabilities for guaranteed benefits related to certain non-traditional long-duration life and annuity contracts.

Impairment of long-lived assets -

Sony reviews the recoverability of the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of, whenever events or changes in circumstances indicate that the individual carrying amount of an asset or asset group may not be recoverable. Long-lived assets to be held and used are reviewed for impairment by comparing the carrying value of the asset or asset group with their estimated undiscounted future cash flows. If the cash flows are determined to be less than the carrying value of the asset or asset group, an impairment loss has occurred and the loss would be recognized during the period for the difference between the carrying value of the asset or asset group and estimated fair value. Long-lived assets that are to be disposed of other than by sale are considered held and used until they are disposed of. Long-lived assets that are to be disposed of by sale are reported at the lower of their carrying value or fair value less cost to sell and are not depreciated. Fair value is determined using the present value of estimated net cash flows or comparable market values. 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 market comparables and the determination of whether a premium or discount should be applied to comparables.

Fair value measurement -

Sony measures fair value as an exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The accounting guidance for fair value measurements specifies a hierarchy of inputs to valuation techniques based on the extent to which inputs used in measuring fair value are observable in the market. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Sony’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Observable market data is used if such data is available without undue cost and effort. Each fair value measurement is reported in one of three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 —

Inputs are unadjusted quoted prices for identical assets and liabilities in active markets.

Level 2 —

Inputs are based on observable inputs other than level 1 prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

Level 3 —

One or more significant inputs are unobservable.

When available, Sony uses unadjusted quoted market prices in active markets to measure fair value and classifies such items within level 1. If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates and option volatilities. Items valued using internally generated models are classified according to the lowest level input that is significant to the valuation. Additionally, Sony considers both counterparty credit risk and Sony’s own creditworthiness in determining fair value. Sony attempts to mitigate credit risk to third parties by entering into netting agreements and actively monitoring the creditworthiness of counterparties and its exposure to credit risk through the use of credit limits and by selecting major international banks and financial institutions as counterparties.

Derivative financial instruments -

All derivatives are recognized as either assets or liabilities in the consolidated balance sheets at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in income or stockholders’ equity (as a component of accumulated other comprehensive income), depending on whether the derivative financial instrument qualifies as a hedge and the derivative is being used to hedge changes in fair value or cash flows.

The accounting guidance for hybrid financial instruments permits an entity to elect fair value remeasurement for any hybrid financial instrument if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under accounting guidance for derivative instruments and hedging activities. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. Certain subsidiaries in the Financial Services segment have hybrid financial instruments, disclosed in Note 7 as debt securities, that contain embedded derivatives where the entire instrument is carried at fair value.

In accordance with accounting guidance for derivative instruments and hedging activities, the various derivative financial instruments held by Sony are classified and accounted for as described below.

Fair value hedges

Changes in the fair value of derivatives designated and effective as fair value hedges for recognized assets or liabilities or unrecognized firm commitments are recognized in earnings as offsets to changes in the fair value of the related hedged assets or liabilities.

Cash flow hedges

Changes in the fair value of derivatives designated and effective as cash flow hedges for forecasted transactions or exposures associated with recognized assets or liabilities are initially recorded in other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Changes in the fair value of the ineffective portion are recognized in current period earnings.

Derivatives not designated as hedges

Changes in the fair value of derivatives that are not designated as hedges are recognized in current period earnings.

Assessment of hedges

When applying hedge accounting, Sony formally documents all hedging relationships between the derivatives designated as hedges and the hedged items, as well as its risk management objectives and strategies for undertaking various hedging activities. Sony links all hedges that are designated as fair value or cash flow hedges to specific assets or liabilities on the consolidated balance sheets or to the specific forecasted transactions. Sony also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are designated as hedges are highly effective in offsetting changes in fair value or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge, Sony discontinues hedge accounting. Hedge ineffectiveness, if any, is included in the current period earnings.

Stock-based compensation -

Sony accounts for stock-based compensation using the fair value based method, measured on the date of grant using the Black-Scholes option-pricing model. The expense is mainly included in selling, general and administrative expenses. Sony recognizes this compensation expense, net of an estimated forfeiture rate, only for the rights expected to vest ratably over the requisite service period of the stock acquisition rights, which is generally a period of three years. The estimated forfeiture rate is based on Sony’s historical experience in the stock acquisition rights plans where the majority of the vesting terms have been satisfied.

Revenue recognition -

Revenues from sales in the Consumer, Professional & Devices, Networked Products & Services and Music segments are recognized when products are delivered or services are rendered. Delivery is considered to have occurred when the customer has taken title to the product and the risks and rewards of ownership have been substantively transferred. If the sales contract contains a customer acceptance provision, then sales are recognized after customer acceptance occurs or the acceptance provisions lapse. Revenues are recognized net of anticipated returns and sales incentives.

Revenue arrangements with customers may include multiple elements, including any combination of products, services and software. An example includes sales of electronics products with rights to receive promotional goods. For Sony’s multiple element arrangements where at least one of the elements is not subject to existing software revenue recognition guidance, elements are separated into more than one unit of accounting when the delivered element(s) have value to the customer on a standalone basis, and delivery of the undelivered element(s) is probable and substantially in the control of Sony. Revenue is then allocated to each unit of accounting based on the relative selling price of each unit of accounting based first on vendor-specific objective evidence of selling price (“VSOE”) if it exists, based next on third-party evidence of selling price (“TPE”) if VSOE does not exist, and, finally, if both VSOE and TPE do not exist, based on estimated selling prices (“ESP”). VSOE is limited to either the price charged for an element when it is sold separately or, for an element not yet being sold separately, the price established by management having the relevant authority; it must be probable that the price, once established, will not change before the separate introduction of the element into the market place. TPE is the price of Sony’s or any competitor’s largely interchangeable products or services in standalone sales to similarly situated customers. ESP is the price at which Sony would transact if the element were sold by Sony regularly on a standalone basis. When determining ESP, Sony considers all relevant inputs, including sales, cost and margin analysis of the product, targeted rate of return of the product, competitors’ and Sony’s pricing practices and customer perspectives.

Certain software products published by Sony provide limited on-line features at no additional cost to the customer. Generally, such features are considered to be incidental to the overall software product and an inconsequential deliverable. Accordingly, revenue related to software products containing these limited on-line features is not deferred. In instances where the software products’ on-line features or additional functionality is considered a substantive deliverable in addition to the software product, revenue and costs of sales are recognized ratably over an estimated service period, which is estimated to be six months.

Revenues from the theatrical exhibition of motion pictures are recognized as the customer exhibits the film. Revenues from the licensing of feature films and television programming are recorded when the material is available for telecast by the licensee and when any restrictions regarding the exhibition or exploitation of the product lapse. Revenues from the sale of DVDs and Blu-ray DiscTM, net of anticipated returns and sales incentives, are recognized upon availability of sale to the public. Revenues from the sale of broadcast advertising are recognized when the advertisement is aired. Revenues from subscription fees received by the television networks are recognized when the service is provided.

Traditional life insurance policies that the life insurance subsidiary underwrites, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health insurance contracts. Premiums from these policies are reported as revenue when due from policyholders.

Amounts received as payment for non-traditional contracts such as interest sensitive whole life contracts, single payment endowment contracts, single payment juvenile contracts and other contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits and other. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services, which are recognized over the period of the contracts, and included in financial services revenue. Property and casualty insurance policies that the non-life insurance subsidiary underwrites are primarily automotive insurance contracts which are categorized as short-duration contracts. Premiums from these policies are reported as revenue over the period of the contract in proportion to the amount of insurance protection provided.

Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

Consideration given to a customer or a reseller -

In accordance with the accounting guidance for consideration given by a vendor to a customer or reseller of the vendor’s products, sales incentives or other cash consideration given to a customer or a reseller including payments for buydowns, slotting fees and cooperative advertising programs, are accounted for as a reduction of revenue unless Sony receives an identifiable benefit (goods or services) in exchange for the consideration, the fair value of the benefit is reasonably estimated and documentation from the reseller is received to support the amounts paid to the reseller. Payments meeting these criteria are recorded as selling, general and administrative expenses. For the fiscal years ended March 31, 2009, 2010 and 2011, consideration given to a reseller, primarily for free promotional shipping and cooperative advertising programs included in selling, general and administrative expenses totaled 29,813 million yen, 23,591 million yen and 23,250 million yen, respectively.

Cost of sales -

Costs classified as cost of sales relate to the producing and manufacturing of products and include items such as material cost, subcontractor cost, depreciation of fixed assets, amortization of intangible assets, personnel expenses, research and development costs, and amortization of film costs related to motion picture and television products.

Research and development costs -

Research and development costs, included in cost of sales, include items such as salaries, personnel expenses and other direct and indirect expenses associated with research and product development. Research and development costs are expensed as incurred.

Selling, general and administrative -

Costs classified as selling expense relate to promoting and selling products and include items such as advertising, promotion, shipping, and warranty expenses. General and administrative expenses include operating items such as officer’s salaries, personnel expenses, depreciation of fixed assets, office rental for sales, marketing and administrative divisions, a provision for doubtful accounts and amortization of intangible assets.

Financial services expenses -

Financial services expenses include a provision for policy reserves and amortization of deferred insurance acquisition costs, and all other operating costs such as personnel expenses, depreciation of fixed assets, and office rental of subsidiaries in the Financial Services segment.

Advertising costs -

Advertising costs are expensed when the advertisement or commercial appears in the selected media.

Shipping and handling costs -

The majority of shipping and handling, warehousing and internal transfer costs for finished goods are included in selling, general and administrative expenses. An exception to this is in the Pictures segment where such costs are charged to cost of sales as they are an integral part of producing and distributing films under accounting guidance for accounting by producers or distributors of films. All other costs related to Sony's distribution network are included in cost of sales, including inbound freight charges, purchasing and receiving costs, inspection costs and warehousing costs for raw materials and in-process inventory. Amounts paid by customers for shipping and handling costs are included in net sales.

Prepaid expenses and other current assets -

Prepaid expenses and other current assets includes receivables which relate to arrangements with certain component manufacturers whereby Sony procures goods and services, including product components, for these component manufacturers and is reimbursed for the related purchases. No revenue is recognized on these transfers. Sony usually will repurchase the inventory at a later date from the component manufacturers as either finished goods inventory or as partially assembled product.

Income taxes -

The provision for income taxes is computed based on the pretax income included in the consolidated statements of income, and the tax liability attributed to undistributed earnings of subsidiaries and affiliated companies accounted for by the equity method expected to be remitted in the foreseeable future. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

Carrying amounts of deferred tax assets require a reduction by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets. Management’s judgments related to this assessment consider, among other matters, the nature, frequency and severity of current and cumulative losses on an individual tax jurisdiction basis, forecasts of future profitability after consideration of uncertain tax positions, excess of appreciated asset value over the tax basis of net assets, the duration of statutory carryforward periods, Sony’s experience with operating loss carryforwards not expiring unused, as well as prudent and feasible tax planning strategies which would be employed by Sony to prevent net operating loss and tax credit carryforwards from expiring unutilized.

Sony records assets and liabilities for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Sony continues to recognize interest and penalties, if any, with respect to unrecognized tax benefits as interest expense and as income tax expense, respectively, in the consolidated statements of income. The amount of income taxes Sony pays is subject to ongoing audits by various taxing authorities, which may result in proposed assessments. In addition, several significant items related to intercompany transfer pricing are currently the subject of negotiations between taxing authorities in different jurisdictions as a result of pending advance pricing agreement applications and competent authority requests. Sony’s estimate for the potential outcome for any uncertain tax issues is judgmental and requires significant estimates. Sony assesses its income tax positions and records tax benefits for all years subject to examinations based upon the evaluation of the facts, circumstances and information available at that reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, Sony records the amount that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. If Sony does not believe that it is more likely than not that a tax benefit will be sustained, no tax benefit is recognized. However, Sony’s future results may include favorable or unfavorable adjustments to Sony’s estimated tax liabilities due to closure of income tax examinations, the outcome of negotiations between taxing authorities in different jurisdictions, new regulatory or judicial pronouncements or other relevant events. As a result, the amount of unrecognized tax benefits, and the effective tax rate, may fluctuate significantly.

Net income (loss) attributable to Sony Corporation’s stockholders per share (“EPS”) -

Basic EPS is computed based on the weighted-average number of shares of common stock outstanding during each period. The computation of diluted EPS reflects the maximum possible dilution from conversion, exercise, or contingent issuance of securities including the conversion of contingently convertible debt instruments regardless of whether the conditions to exercise the conversion rights have been met. All potentially dilutive securities are excluded from the calculation in a situation where there is a net loss attributable to Sony Corporation’s stockholders.

(2) Recently adopted accounting pronouncements:

Multiple element arrangements and software deliverables -

In October 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance for arrangements with multiple deliverables. Specifically, the new standard requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In the absence of vendor-specific objective evidence or third-party evidence of the selling prices, consideration must be allocated to the deliverables based on management’s best estimate of the selling prices. In addition, the guidance eliminates the use of the residual method of allocation. Also in October 2009, the FASB issued accounting guidance which changes revenue recognition for tangible products containing software and hardware elements. Specifically, tangible products containing software and hardware that function together to deliver the tangible products’ essential functionality are scoped out of the existing software revenue recognition guidance and are accounted for under the revenue recognition guidance for multiple element arrangements. Sony adopted the new guidance on April 1, 2010. The adoption of the new guidance did not have a material impact on Sony’s results of operations and financial position.

Transfers of financial assets -

In June 2009, the FASB issued new accounting guidance on accounting for transfers of financial assets. This guidance amends previous guidance by including: the elimination of the qualifying special-purpose entity (“QSPE”) concept; a new participating interest definition that must be met for transfers of portions of financial assets to be eligible for sale accounting; clarifications and changes to the derecognition criteria for a transfer to be accounted for as a sale; and a change to the amount of recognized gain or loss on a transfer of financial assets accounted for as a sale when beneficial interests are received by the transferor. Additionally, the guidance requires new disclosures regarding an entity’s involvement in a transfer of financial assets. Finally, existing QSPEs must be evaluated for consolidation in accordance with the applicable consolidation guidance upon the elimination of this concept. This guidance was effective for Sony as of April 1, 2010. The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Variable interest entities -

In June 2009, the FASB issued new accounting guidance for determining whether to consolidate a variable interest entity (“VIE”). This guidance changes the approach for determining the primary beneficiary of a VIE from a quantitative risk and reward model to a qualitative model based on control, and requires an ongoing reassessment of whether an entity is the primary beneficiary. This guidance was effective for Sony as of April 1, 2010. The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Disclosures about the credit quality of financing receivables and the allowance for credit losses -

In July 2010, the FASB issued new disclosure guidance regarding credit quality of financing receivables and the allowance for credit losses. This guidance expands disclosures for the allowance for credit losses and financing receivables. It also requires disclosure of credit quality indicators, past due information and modifications of financing receivables. The additional disclosures are required for Sony beginning in the fiscal year ended March 31, 2011, with prospective application. Since this guidance impacts disclosures only, its adoption has no impact on Sony’s results of operations and financial position. The additional disclosures are included in Note 12.

(3) Recent accounting pronouncements not yet adopted:

Accounting for costs associated with acquiring or renewing insurance contracts -

In October 2010, the FASB issued new accounting guidance for costs associated with acquiring or renewing insurance contracts. Under the new guidance acquisition costs are to include only those costs that are directly related to the acquisition or renewal of insurance contracts by applying a model similar to the accounting for loan origination costs. An entity may defer incremental direct costs of contract acquisition that are incurred in transactions with independent third parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts. Additionally, an entity may capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. This change is effective for Sony as of April 1, 2012. Sony will apply this guidance prospectively from the date of adoption. Sony is currently evaluating the impact of adopting this guidance.

Goodwill impairment testing for reporting units with zero or negative carrying amounts -

In December 2010, the FASB issued new accounting guidance that modifies the first step of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform the second step of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing authoritative guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance is effective for Sony as of April 1, 2011. The adoption of this guidance is not expected to have a material impact on Sony’s results of operations and financial position.

Disclosure of supplementary pro forma information for business combinations -

In December 2010, the FASB issued new accounting guidance addressing when a business combination should be assumed to have occurred for the purpose of providing pro forma disclosure. The new guidance requires disclosure of revenue and income of the combined entity as though the business combination occurred as of the beginning of the comparable prior reporting period. The guidance also expands the supplemental pro forma disclosure to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The guidance is effective for Sony as of April 1, 2011. Sony will apply the guidance prospectively for any future acquisitions. Since this guidance impacts disclosures only, its adoption will not have a material impact on Sony’s results of operations and financial position.

Amendments to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”) -

In May 2011, the FASB issued new guidance to substantially converge fair value measurement and disclosure requirements under U.S. GAAP and IFRS, including a consistent definition of fair value. The amendments will change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the new guidance to result in a change in the application of the existing guidance for fair value measurements. However, some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The new guidance is required to be applied prospectively and is effective for Sony in the fourth quarter of the fiscal year ending March 31, 2012. Sony is currently evaluating the impact of adopting this guidance.

(4) Reclassifications:

Certain reclassifications of the financial statements and accompanying footnotes for the fiscal years ended March 31, 2009 and 2010 have been made to conform to the presentation for the fiscal year ended March 31, 2011.

3. Inventories

Inventories are comprised of the following:

	Yen in millions
	March 31
	2010		2011

Finished products		456,698		529,666
Work in process		69,757		70,969
Raw materials, purchased components and supplies		119,000		103,408

		645,455		704,043

4. Film costs

Film costs are comprised of the following:

	Yen in millions
	March 31
	2010			2011

Motion picture productions:
Released		114,069			102,415
Completed not released		9,307			14,260
In production and development		135,654			107,811

Television productions:
Released		40,518			40,581
In production and development		2,044			1,688

Broadcasting rights		23,927			24,544

Less: current portion of broadcasting rights included in inventories		(15,454	)		(15,910	)

Film costs		310,065			275,389

Sony estimates that approximately 89% of the unamortized costs of released films at March 31, 2011 will be amortized within the next three years. Approximately 79 billion yen of completed film costs are expected to be amortized during the next twelve months. Approximately 96 billion yen of accrued participation liabilities included in accounts payable, other and accrued expenses are expected to be paid during the next twelve months.

5. Related party transactions

Sony accounts for its investments in affiliated companies over which Sony has significant influence under the equity method. In addition, investments in general partnerships in which Sony does not have a controlling interest and limited partnerships are also accounted for under the equity method if more than minor influence over the operation of the investee exists (generally through more than 3-5% ownership). Significant investments at March 31, 2011 of this nature include, but are not limited to, Sony’s interest in Sony Ericsson Mobile Communications AB (“Sony Ericsson”) (50%) and S-LCD Corporation (“S-LCD”) (50% minus 1 share).

The summarized combined financial information that is based on information provided by the equity investees including information for significant equity affiliates and the reconciliation of such information to the consolidated financial statements is shown below:

Balance Sheets

	Yen in millions
	March 31, 2010
	Sony Ericsson			S-LCD			Others			Total
Current assets		322,537			161,571			133,606			617,714
Noncurrent assets		98,375			300,206			127,237			525,818
Total assets		420,912			461,777			260,843			1,143,532
Current liabilities		341,087			102,538			100,829			544,454
Long-term liabilities and noncontrolling interests		23,837			22,443			54,306			100,586
Stockholders’ equity		55,988			336,796			105,708			498,492

Percentage of ownership in equity investees		50	%		50	%		20%-50	%

Equity investment and undistributed earnings of affiliated companies, before consolidating and reconciling adjustments		27,994			168,398
Consolidation and reconciling adjustments:
Other		(1,088	)		61

Investment in and advances to equity investees at cost plus equity in undistributed earnings since acquisition		26,906			168,459			33,686			229,051

	Yen in millions
	March 31, 2011
	Sony Ericsson			S-LCD			Others			Total
Current assets		254,858			188,903			183,597			627,358
Noncurrent assets		92,925			233,988			137,720			464,633
Total assets		347,783			422,891			321,317			1,091,991
Current liabilities		282,857			71,572			166,056			520,485
Long-term liabilities and noncontrolling interests		8,089			29,696			61,036			98,821
Stockholders’ equity		56,837			321,623			94,225			472,685

Percentage of ownership in equity investees		50	%		50	%		20%-50	%

Equity investment and undistributed earnings of affiliated companies, before consolidating and reconciling adjustments		28,419			160,812
Consolidation and reconciling adjustments:
Other		(79	)		-

Investment in and advances to equity investees at cost plus equity in undistributed earnings since acquisition		28,340			160,812			32,841			221,993

Statements of Income

	Yen in millions
	Fiscal year ended March 31, 2009
	Sony Ericsson			S-LCD			Others			Total
Net revenues		1,459,259			670,311			550,691			2,680,261
Operating income (loss)		(92,762	)		1,393			15,475			(75,894	)
Other income (expense), net		12,599			11,191
Income (loss) before income taxes		(80,163	)		12,584
Income tax (expense) benefit		23,888			(626	)
Net income (loss) attributable to noncontrolling interests		(3,434	)		-
Net income (loss) attributable to controlling interests		(59,709	)		11,958			4,898			(42,853	)

Percentage of ownership in equity investees		50	%		50	%		20%-50	%

Equity in net income (loss) of affiliated companies, before consolidating and reconciling adjustments		(29,855	)		5,979

Consolidation and reconciling adjustments:
Other		(400	)		916

Equity in net income (loss) of affiliated companies		(30,255	)		6,895			(1,749	)		(25,109	)

	Yen in millions
	Fiscal year ended March 31, 2010
	Sony Ericsson			S-LCD			Others			Total
Net revenues		837,149			796,575			323,576			1,957,300
Operating income (loss)		(81,385	)		3,825			29,686			(47,874	)
Other income (expense), net		(4,676	)		(4,055	)
Income (loss) before income taxes		(86,061	)		(230	)
Income tax (expense) benefit		20,470			53
Net income (loss) attributable to noncontrolling interests		(3,318	)		-
Net income (loss) attributable to controlling interests		(68,909	)		(177	)		17,064			(52,022	)

Percentage of ownership in equity investees		50	%		50	%		20%-50	%

Equity in net income (loss) of affiliated companies, before consolidating and reconciling adjustments		(34,455	)		(89	)

Consolidation and reconciling adjustments:
Other		(59	)		476

Equity in net income (loss) of affiliated companies		(34,514	)		387			3,892			(30,235	)

	Yen in millions
	Fiscal year ended March 31, 2011
	Sony Ericsson			S-LCD			Others			Total
Net revenues		673,464			807,955			268,604			1,750,023
Operating income (loss)		16,453			12,527			17,630			46,610
Other income (expense), net		(1,572	)		(4,119	)
Income (loss) before income taxes		14,881			8,408
Income tax (expense) benefit		(6,065	)		3,094
Net income (loss) attributable to noncontrolling interests		(520	)		-
Net income (loss) attributable to controlling interests		8,296			11,502			8,895			28,693

Percentage of ownership in equity investees		50	%		50	%		20%-50	%

Equity in net income (loss) of affiliated companies, before consolidating and reconciling adjustments		4,148			5,751

Consolidation and reconciling adjustments:
Other		7			1,463

Equity in net income (loss) of affiliated companies		4,155			7,214			2,693			14,062

Sony Ericsson, a 50/50 joint venture with Telefonaktiebolaget LM Ericsson focused on mobile phone handsets, was established in October 2001 and is included in affiliated companies accounted for under the equity method. Sony Ericsson purchases several key components such as camera modules, memory, batteries and liquid crystal display (“LCD”) panels from Sony. Sony received dividends of 23,363 million yen in September 2008 from Sony Ericsson.

S-LCD, a joint venture with Samsung Electronics Co., Ltd. focused on manufacturing amorphous TFT panels, was established in April 2004 with Sony’s ownership interest of 50% minus 1 share. Sony invested 13,273 million yen in S-LCD during the fiscal year ended March 31, 2009. S-LCD is strategic to Sony’s television business as it provides a source of high quality large screen LCD panels to differentiate Sony’s Bravia LCD televisions.

On October 1, 2008, Sony acquired Bertelsmann AG’s 50% equity interest in SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”). As a result of this acquisition, SONY BMG became a wholly owned subsidiary of Sony and its results are consolidated from the acquisition date. The summarized financial information for SONY BMG for the six months ended September 30, 2008 is included in Others in the table above. SONY BMG was established as a 50/50 joint venture on August 1, 2004 when Sony combined its recorded music business, except for the operations of its recorded music business in Japan, with the recorded music business of Bertelsmann AG. As a result, the operations of SONY BMG were accounted for under the equity method from August 1, 2004 until Sony's acquisition of the remaining 50% equity interest.

There was no significant difference between Sony’s proportionate share in the underlying net assets of the investees and the carrying value of investments in affiliated companies at March 31, 2010 and 2011.

There were no affiliated companies accounted for under the equity method with a market quotation at March 31, 2010 and 2011.

The number of affiliated companies accounted for under the equity method at March 31, 2010 and 2011 were 73 and 82, respectively.

Account balances and transactions with affiliated companies accounted for under the equity method are presented below:

	Yen in millions
	March 31
	2010		2011

Accounts receivable, trade		21,467		18,631

Accounts payable, trade		61,360		45,434

	Yen in millions
	Fiscal year ended March 31
	2009		2010		2011

Sales		204,578		132,937		96,164

Purchases		332,286		309,550		383,922

Dividends from affiliated companies accounted for under the equity method for the fiscal years ended March 31, 2009, 2010 and 2011 were 40,361 million yen, 5,948 million yen and 2,583 million yen, respectively.

6. Transfer of financial assets

The below transactions are accounted for as sales in accordance with the accounting guidance for transfers of financial assets, because Sony has relinquished control of the receivables. In each case, losses from these transactions were insignificant, and although Sony continues servicing the receivables subsequent to being sold or contributed, no servicing liabilities are recorded as the costs of collection of the sold receivables are insignificant. In addition to the cash proceeds from the sales below, net cash flows related to these transactions, including servicing fees, in the fiscal years ended March 31, 2009, 2010 and 2011 were insignificant.

Sony has established several accounts receivable sales programs in Japan whereby Sony can sell up to 47,200 million yen of eligible trade accounts receivable in the aggregate at any one time. Through these programs, Sony can sell receivables to special purpose entities owned and operated by banks. Sony can sell receivables in which the agreed upon original due dates are no more than 190 days after the sales of receivables. Total trade accounts receivable sold during the fiscal years ended March 31, 2009, 2010 and 2011 were 130,847 million yen, 109,271 million yen and 136,232 million yen, respectively.

A subsidiary of the Financial Services segment has established several receivables sales programs whereby the subsidiary can sell up to 24,000 million yen of eligible receivables in the aggregate at any one time. Through these programs, the subsidiary can sell receivables to special purpose entities owned and operated by banks. The subsidiary can sell receivables in which the agreed upon original due dates are no more than 180 days after the sales of receivables. Total receivables sold during the fiscal years ended March 31, 2009, 2010 and 2011 were 166,077 million yen, 183,805 million yen and 166,025 million yen, respectively.

During the fiscal year ended March 31, 2010, Sony established an accounts receivable sales program in the United States. Through this program, a bankruptcy-remote entity, which is consolidated by Sony’s U.S. subsidiary, can sell up to 450 million U.S. dollars of eligible trade accounts receivables in the aggregate at any one time to a commercial bank. Total trade accounts receivables sold during the fiscal year ended March 31, 2010 were 258,085 million yen. Subsequent to its establishment, Sony amended this program. While the transactions continued to qualify as sales under the new accounting guidance for transfers of financial assets, the amended program requires that a portion of the sales proceeds be held back and deferred until collection of the related receivables by the purchaser. The portion of the sales proceeds held back and deferred is initially recorded at estimated fair value, is included in other current assets and is 32,751 million yen at March 31, 2011. Sony includes collections on such receivables as cash flows within operating activities in the consolidated statements of cash flows since the receivables are the result of operating activities and the associated interest rate risk is insignificant due to its short-term nature. Total trade receivables sold, deferred proceeds from those sales and collections of deferred proceeds during the fiscal year ended March 31, 2011 were 414,147 million yen, 185,647 million yen and 153,550 million yen, respectively.

The accounts receivable sales programs in Japan and in the Financial Services segment above involved QSPEs under the accounting guidance effective prior to April 1, 2010 for transfers of financial assets. Since the QSPEs met certain criteria, they were not consolidated by Sony. From April 1, 2010, the entities that formerly met the criteria to be a QSPE are subject to the same consolidation accounting guidance as other variable interest entities (“VIEs”). Refer to Note 23.

7. Marketable securities and securities investments

Marketable securities and securities investments, mainly included in the Financial Services segment, are comprised of debt and equity securities of which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows:

	Yen in millions
	March 31, 2010									March 31, 2011
	Cost		Gross unrealized gains		Gross unrealized losses			Fair value		Cost		Gross unrealized gains		Gross unrealized losses			Fair value

Available-for-sale:
Debt securities:
Japanese national government bonds		1,264,725		29,496		(3,397	)		1,290,824		1,124,704		24,032		(4,971	)		1,143,765

Japanese local government bonds		27,750		1,097		(5	)		28,842		22,845		184		(64	)		22,965

Japanese corporate bonds		360,554		3,773		(106	)		364,221		332,567		1,511		(440	)		333,638

Foreign corporate bonds		281,003		4,818		(6,492	)		279,329		332,616		4,872		(11,368	)		326,120

Other		11,141		83		(123	)		11,101		7,941		109		(117	)		7,933
		1,945,173		39,267		(10,123	)		1,974,317		1,820,673		30,708		(16,960	)		1,834,421

Equity securities		99,753		74,430		(3,437	)		170,746		84,417		69,073		(3,447	)		150,043

Held-to-maturity Securities:
Japanese national government bonds		2,248,230		3,318		(30,740	)		2,220,808		2,902,342		22,420		(48,149	)		2,876,613

Japanese local government bonds		23,617		346		-			23,963		18,912		218		(2	)		19,128

Japanese corporate bonds		32,041		150		(321	)		31,870		32,349		158		(67	)		32,440

Foreign corporate bonds		50,831		18		(7	)		50,842		47,330		13		(3	)		47,340
		2,354,719		3,832		(31,068	)		2,327,483		3,000,933		22,809		(48,221	)		2,975,521

Total		4,399,645		117,529		(44,628	)		4,472,546		4,906,023		122,590		(68,628	)		4,959,985

The following table presents the cost and fair value of debt securities classified as available-for-sale securities and held-to-maturity securities by contractual maturity:

	Yen in millions
	March 31, 2011
	Available-for-sale securities				Held-to-maturity securities
	Cost		Fair Value		Cost		Fair Value

Due in one year or less		260,669		253,678		17,251		17,328
Due after one year through five years		527,179		530,151		39,086		39,359
Due after five year through ten years		232,848		237,851		9,025		9,561
Due after ten years		799,977		812,741		2,935,571		2,909,273
Total		1,820,673		1,834,421		3,000,933		2,975,521

Proceeds from sales of available-for-sale securities were 1,165,451 million yen, 785,698 million yen and 532,619 million yen for the fiscal years ended March 31, 2009, 2010 and 2011, respectively. On these sales, gross realized gains were 41,860 million yen, 39,622 million yen and 38,654 million yen and gross realized losses were 30,554 million yen, 37,537 million yen and 2,014 million yen, respectively.

Marketable securities classified as trading securities at March 31, 2010 and 2011 were 353,353 million yen and 375,802 million yen, respectively, which consist of debt and equity securities.

In the ordinary course of business, Sony maintains long-term investment securities, included in securities investments and other, issued by a number of non-public companies. The aggregate carrying amounts of the investments in non-public companies at March 31, 2010 and 2011, totaled 70,705 million yen and 67,376 million yen, respectively. Non-public equity investments are primarily valued at cost as fair value is not readily determinable.

With respect to trading securities, primarily in the Financial Services segment, Sony recorded net unrealized losses of 79,476 million yen for the fiscal year ended March 31, 2009, net unrealized gains of 50,992 million yen for the fiscal year ended March 31, 2010 and net realized losses of 10,768 million yen for the fiscal year ended March 31, 2011. Changes in the fair value of trading securities are primarily recognized in financial services revenue in the consolidated statements of income.

The following tables present the gross unrealized losses on, and fair value of, Sony’s investment securities with unrealized losses, aggregated by investment category and the length of time that individual investment securities have been in a continuous unrealized loss position, at March 31, 2010 and 2011.

	Yen in millions
	March 31, 2010
	Less than 12 months					12 months or More					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses

Available-for-sale:
Debt securities:
Japanese national government bonds		139,613		(891	)		53,704		(2,506	)		193,317		(3,397	)

Japanese local government bonds		1,887		(5	)		-		-			1,887		(5	)

Japanese corporate bonds		48,151		(84	)		1,965		(22	)		50,116		(106	)

Foreign corporate bonds		46,764		(378	)		88,258		(6,114	)		135,022		(6,492	)

Other		6,441		(123	)		-		-			6,441		(123	)
		242,856		(1,481	)		143,927		(8,642	)		386,783		(10,123	)

Equity securities		10,069		(934	)		11,486		(2,503	)		21,555		(3,437	)

Held-to-maturity Securities:
Japanese national government bonds		1,496,584		(11,066	)		465,416		(19,674	)		1,962,000		(30,740	)

Japanese local government bonds		100		-			-		-			100		-

Japanese corporate bonds		19,828		(314	)		95		(7	)		19,923		(321	)

Foreign corporate bonds		88		(4	)		305		(3	)		393		(7	)
		1,516,600		(11,384	)		465,816		(19,684	)		1,982,416		(31,068	)

Total		1,769,525		(13,799	)		621,229		(30,829	)		2,390,754		(44,628	)

	Yen in millions
	March 31, 2011
	Less than 12 months					12 months or More					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses

Available-for-sale:
Debt securities:
Japanese national government bonds		223,686		(3,230	)		54,477		(1,741	)		278,163		(4,971	)

Japanese local government bonds		12,434		(64	)		-		-			12,434		(64	)

Japanese corporate bonds		130,318		(440	)		-		-			130,318		(440	)

Foreign corporate bonds		126,484		(7,184	)		30,277		(4,184	)		156,761		(11,368	)

Other		2,882		(117	)		-		-			2,882		(117	)
		495,804		(11,035	)		84,754		(5,925	)		580,558		(16,960	)

Equity securities		36,391		(3,353	)		386		(94	)		36,777		(3,447	)

Held-to-maturity Securities:
Japanese national government bonds		1,812,196		(48,149	)		-		-			1,812,196		(48,149	)

Japanese local government bonds		531		(2	)		-		-			531		(2	)

Japanese corporate bonds		20,788		(67	)		-		-			20,788		(67	)

Foreign corporate bonds		194		(3	)		-		-			194		(3	)
		1,833,709		(48,221	)		-		-			1,833,709		(48,221	)

Total		2,365,904		(62,609	)		85,140		(6,019	)		2,451,044		(68,628	)

For the fiscal years ended March 31, 2009, 2010 and 2011, total realized impairment losses were 45,644 million yen, 5,508 million yen and 9,763 million yen, respectively.

At March 31, 2011, Sony determined that the decline in value for securities with unrealized losses shown in the above table is not other-than-temporary in nature.

8. Leased assets

Sony leases certain communication and commercial equipment, plant, office space, warehouses, employees’ residential facilities and other assets. Certain of these leases have renewal and purchase options. Sony has also entered into capital lease arrangements with third parties to finance certain of its motion picture productions.

Leased assets under capital leases are comprised of the following:

	Yen in millions
	March 31
Class of property	2010			2011

Land		62			-
Buildings		1,005			-
Machinery, equipment and others		11,807			9,288
Film costs		21,175			19,208
Accumulated amortization		(7,543	)		(4,634	)
		26,506			23,862

The following is a schedule by year of the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of March 31, 2011:

Fiscal year ending March 31	Yen in millions

2012		4,761
2013		3,706
2014		3,275
2015		2,668
2016		2,330
Later years		14,583
Total minimum lease payments		31,323
Less - Amount representing interest		6,650
Present value of net minimum lease payments		24,673
Less - Current obligations		4,162
Long-term capital lease obligations		20,511

Rental expenses under operating leases for the fiscal years ended March 31, 2009, 2010 and 2011 were 87,360 million yen, 87,077 million yen and 78,538 million yen, respectively. Sublease rentals received under operating leases for the fiscal years ended March 31, 2009, 2010 and 2011 were 1,742 million yen, 1,675 million yen and 1,974 million yen, respectively. The total minimum rentals to be received in the future under noncancelable subleases for operating leases as of March 31, 2011 were 4,614 million yen.

The minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at March 31, 2011 are as follows:

Fiscal year ending March 31	Yen in millions

2012		39,817
2013		31,459
2014		24,652
2015		18,158
2016		12,665
Later years		51,239
Total minimum future rentals		177,990

9. Goodwill and intangible assets

Intangible assets acquired during the fiscal year ended March 31, 2011 totaled 92,249 million yen, of which 83,188 million yen is subject to amortization and are comprised of the following:

	Intangible assets acquired during the year		Weighted-average amortization period
	Yen in millions		Years
Patent rights, know-how and license agreements		8,900		7
Software to be sold, leased or otherwise marketed		22,174		3
Music catalogs		730		8
Television carriage agreements (broadcasting agreements)		33,698		20
Other		17,686		2

Intangible assets subject to amortization are comprised of the following:

	Yen in millions
	March 31, 2010					March 31, 2011
	Gross carrying amount		Accumulated amortization			Gross carrying amount		Accumulated amortization

Patent rights, know-how and license agreements		146,932		(79,403	)		122,444		(69,224	)
Software to be sold, leased or otherwise marketed		71,300		(29,606	)		76,112		(40,447	)
Music catalogs		175,172		(37,591	)		160,325		(40,455	)
Artist contracts		28,958		(16,754	)		27,727		(17,903	)
Television carriage agreements (broadcasting agreements)		1,224		(116	)		35,874		(228	)
Other		87,950		(48,904	)		90,508		(42,642	)
Total		511,536		(212,374	)		512,990		(210,899	)

The aggregate amortization expense for intangible assets for the fiscal years ended March 31, 2009, 2010 and 2011 was 47,101 million yen, 57,069 million yen and 52,763 million yen, respectively. The estimated aggregate amortization expense for intangible assets for the next five years is as follows:

Fiscal year ending March 31	Yen in millions

2012		46,539
2013		37,485
2014		28,821
2015		22,571
2016		18,012

Total carrying amount of intangible assets having an indefinite life are comprised of the following:

	Yen in millions
	March 31
	2010		2011

Trademarks		57,857		66,967
Distribution agreements		18,834		18,834
Other		3,064		3,230
Total		79,755		89,031

The changes in the carrying amount of goodwill by segment for the fiscal years ended March 31, 2010 and 2011 are as follows:

	Yen in millions
	Consumer, Professional & Devices			Networked Products & Services			Pictures			Music			Financial Services			All Other			Total
Balance, March 31, 2009:
Goodwill - gross		73,349			123,432			107,478			112,963			3,020			43,346			463,588
Accumulated impairments		(5,620	)		-			-			(306	)		-			(13,704	)		(19,630	)
Goodwill		67,729			123,432			107,478			112,657			3,020			29,642			443,958
Increase (decrease) due to:
Acquisitions		-			724			6			7,848			-			4,847			13,425
Sales and dispositions		-			(27	)		-			-			-			(202	)		(229	)
Impairments		-			-			-			-			(706	)		(349	)		(1,055	)
Translation adjustments		(71	)		(249	)		(5,427	)		(1,943	)		-			(778	)		(8,468	)
Other 1 2		(470	)		1			424			(8,676	)		-			(41	)		(8,762	)
Balance, March 31, 2010:
Goodwill - gross		72,808			123,881			102,481			110,192			3,020			40,774			453,156
Accumulated impairments		(5,620	)		-			-			(306	)		(706	)		(7,655	)		(14,287	)
Goodwill		67,188			123,881			102,481			109,886			2,314			33,119			438,869
Increase (decrease) due to:
Acquisitions*3		1,085			-			46,504			203			-			55			47,847
Sales and dispositions		-			(257	)		-			-			-			-			(257	)
Impairments		-			-			-			-			-			-			-
Translation adjustments		(133	)		(510	)		(8,401	)		(6,956	)		-			(1,335	)		(17,335	)
Other *1		232			171			-			(445	)		-			(77	)		(119	)
Balance, March 31, 2011:
Goodwill - gross		73,992			123,285			140,584			102,994			3,020			39,417			483,292
Accumulated impairments		(5,620	)		-			-			(306	)		(706	)		(7,655	)		(14,287	)
Goodwill		68,372			123,285			140,584			102,688			2,314			31,762			469,005

Other primarily consists of purchase price adjustments for prior years.

Substantially all of the adjustments in the Music segment relate to a decrease of goodwill recognized from the acquisition of Bertelsmann AG’s 50% interest in the SONY BMG joint venture of 8,649 million yen, primarily to reflect an increase in the deferred tax assets recognized in connection with the acquisition and a decrease in the acquired liabilities as certain restructuring activities that were identified at the time of the acquisition will not be implemented. Refer to Note 19 and 24.

Substantially all of the acquisition amounts in the Pictures segment relate to the Game Show Network acquisition. Refer to Note 24.

As described in Note 2, Sony performs an annual impairment test for goodwill. As a result of the impairment test, there were no impairments for the fiscal year ended March 31, 2011.

10. Insurance-related accounts

Sony’s Financial Services segment subsidiaries in Japan maintain their accounting records as described in Note 2 in accordance with the accounting principles and practices generally accepted in Japan, which vary in some respects from U.S. GAAP.

Those differences are mainly that insurance acquisition costs for life and non-life insurance are charged to income when incurred in Japan whereas in the U.S. those costs are deferred and amortized generally over the premium-paying period of the related insurance policies, and that future policy benefits for life insurance calculated locally under the authorization of the supervisory administrative agencies are comprehensively adjusted to a net level premium method with certain adjustments of actuarial assumptions for U.S. GAAP purposes. For purposes of preparing the consolidated financial statements, appropriate adjustments have been made to reflect the accounting for these items in accordance with U.S. GAAP.

The combined amounts of statutory net equity of the insurance subsidiaries, which is not measured in accordance with U.S. GAAP, as of March 31, 2010 and 2011 were 206,794 million yen and 232,160 million yen, respectively.

(1) Insurance policies:

Life insurance policies that a subsidiary in the Financial Services segment underwrites, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health insurance contracts. The life insurance revenues for the fiscal years ended March 31, 2009, 2010 and 2011 were 526,303 million yen, 554,650 million yen and 600,291 million yen, respectively. Property and casualty insurance policies that a subsidiary in the Financial Services segment underwrites are primarily automotive insurance contracts, which are categorized as short-duration contracts. The non-life insurance revenues for the fiscal years ended March 31, 2009, 2010 and 2011 were 58,576 million yen, 64,987 million yen and 71,037 million yen, respectively.

(2) Deferred insurance acquisition costs:

(3) Future insurance policy benefits:

Liabilities for future policy benefits are established in amounts adequate to meet the estimated future obligations of policies in force. These liabilities, which require significant management judgment and estimates, are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality, withdrawals and other factors. Future policy benefits are computed using interest rates ranging from 1.4% to 4.6% and are based on factors such as market conditions and expected investment returns. Morbidity, mortality and withdrawal assumptions for all policies are based on either the subsidiary’s own experience or various actuarial tables. Generally these assumptions are locked-in throughout the life of the contract upon the issuance of new insurance, although significant changes in experience or assumptions may require Sony to provide for expected future losses. At March 31, 2010 and 2011, future insurance policy benefits amounted to 2,673,357 million yen and 2,918,960 million yen, respectively.

11. Short-term borrowings and long-term debt

Short-term borrowings are comprised of the following:

	Yen in millions
	March 31
	2010		2011

Unsecured loans:
with a weighted-average interest rate of 3.08%		38,785
with a weighted-average interest rate of 4.40%				43,737
Secured call money:
with a weighted-average interest rate of 0.15%		10,000
with a weighted-average interest rate of 0.11%				10,000

		48,785		53,737

At March 31, 2011, securities investments with a book value of 10,651 million yen were pledged as collateral for 10,000 million yen of call money, by subsidiaries in the Financial Services segment. In addition, marketable securities with a book value of 131,932 million yen were pledged as collateral for cash settlements, variation margins of futures markets and certain other purposes at March 31, 2011.

Long-term debt is comprised of the following:

	Yen in millions
	March 31
	2010		2011

Unsecured loans, representing obligations principally to banks:
Due 2010 to 2020, with interest rates ranging from 0.20% to 4.50% per annum		563,465
Due 2011 to 2018, with interest rates ranging from 0.20% to 4.50% per annum				441,976
Unsecured 2.04% bonds, due 2010, net of unamortized discount		49,999
Unsecured 0.80% bonds, due 2010, net of unamortized discount		49,999
Unsecured 1.52% bonds, due 2011, net of unamortized discount		49,999		50,000
Unsecured 1.16% bonds, due 2012, net of unamortized discount		39,993		39,996
Unsecured 1.52% bonds, due 2013, net of unamortized discount		34,999		34,999
Unsecured 1.57% bonds, due 2015, net of unamortized discount		29,988		29,991
Unsecured 1.75% bonds, due 2015, net of unamortized discount		24,996		24,996
Unsecured 2.35% bonds, due 2010		4,900
Unsecured 1.17% bonds, due 2011		10,500		10,500
Unsecured 0.95% bonds, due 2012		60,000		60,000
Unsecured 1.40% bonds, due 2013		10,700		10,700
Unsecured 1.30% bonds, due 2014		110,000		110,000
Unsecured 2.00% bonds, due 2018		16,300		16,300
Unsecured 2.07% bonds, due 2019		50,000		50,000
Capital lease obligations:
Due 2010 to 2021 with interest rates ranging from 0.01% to 7.77% per annum		35,013
Due 2011 to 2021 with interest rates ranging from 0.03% to 9.09% per annum				24,673
Guarantee deposits received		19,178		17,718
		1,160,029		921,849
Less - Portion due within one year		235,822		109,614

		924,207		812,235

In June 2009, Sony entered into unsecured syndicated loans totaling 162,500 million yen having three, five and seven year maturity terms. The proceeds were used for the repayment of a previously entered into syndicated loan of 80,000 million yen which matured in June 2009 and for general business activities, including working capital requirements. In addition, Sony entered into a 1,000 million U.S. dollar unsecured long-term bank loan in July 2009 with a three year term.

There are no significant adverse debt covenants or cross-default provisions related to the above borrowings.

Aggregate amounts of annual maturities of long-term debt are as follows:

Fiscal year ending March 31	Yen in millions

2012		109,614
2013		277,679
2014		117,397
2015		210,052
2016		77,978
Later years		129,129
Total		921,849

At March 31, 2011, Sony had unused committed lines of credit amounting to 782,616 million yen and can generally borrow up to 180 days from the banks with whom Sony has committed line contracts. Furthermore, at March 31, 2011, Sony has commercial paper programs, the size of which was 1,082,050 million yen. Sony can issue commercial paper for a period generally not in excess of 270 days up to the size of the programs.

12. Housing loans and deposits from customers in the banking business

(1) Housing loans in the banking business:

As discussed in Note 2, Sony adopted new disclosure guidance regarding credit quality of financing receivables and the allowance for credit losses.

Sony acquires and holds certain financial receivables in the normal course of business. A majority of financing receivables held by Sony, which are subject to this guidance, consist of housing loans in the banking business and no other significant financial receivables exist.

A subsidiary in the banking business monitors the credit quality of housing loans based on the classification set by the financial conditions and the past due status of individual obligators. Past due status is monitored on a daily basis and the aforementioned classification is reviewed on a quarterly basis.

The allowance for the credit losses is established based on the aforementioned classifications and the evaluation of collateral. The amount of housing loans in the banking business and the corresponding allowance for credit losses at March 31, 2010 were 555,105 million yen and 742 million yen, and at March 31, 2011 were 656,047 million yen and 925 million yen, respectively. During the fiscal year ended March 31, 2011, charge-offs on housing loans in the banking business and changes in the allowance for credit losses, which took into consideration the impact of the Great East Japan Earthquake discussed in Note 18, were not significant.

In addition, the balance of housing loans placed on nonaccrual status or past due status is not significant at March 31, 2011. A subsidiary in the banking business assesses the nonaccrual status based on the aforementioned classification, and may resume the accrual of the interest on the housing loan if the classification of the housing loan is changed.

(2) Deposits from customers in the banking business:

All deposits from customers in the banking business within the Financial Services segment are interest bearing deposits. At March 31, 2010 and 2011, the balances of time deposits issued in amounts of 10 million yen or more were 243,629 million yen and 247,799 million yen, respectively. These amounts have been classified as current liabilities due to the ability of the customers to make withdrawals prior to maturity.

At March 31, 2011, aggregate amounts of annual maturities of time deposits with a remaining term of more than one year are as follows:

Fiscal year ending March 31	Yen in millions

2013		20,864
2014		13,149
2015		1,990
2016		8,788
2017		1,459
Later years		26,818
Total		73,068

13. Fair value measurements

As discussed in Note 2, assets and liabilities subject to the accounting guidance for fair value measurements held by Sony are classified and accounted for as described below.

(1) Assets and liabilities that are measured at fair value on a recurring basis:

The following section describes the valuation techniques used by Sony to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified.

Trading securities, available-for-sale securities and other investments

Where quoted prices are available in an active market, securities are classified in level 1 of the fair value hierarchy. Level 1 securities include exchange-traded equities. If quoted market prices are not available for the specific security or the market is inactive, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and mainly classified in level 2 of the hierarchy. Level 2 securities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, such as the majority of government bonds and corporate bonds. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the fair value hierarchy. Level 3 securities do not have actively traded quotes at the balance sheet date and require the use of unobservable inputs, such as indicative quotes from dealers and qualitative input from investment advisors, to value these securities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow techniques, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation of assumptions that market participants would use in pricing the asset. Level 3 securities primarily include certain private equity investments and certain hybrid financial instruments not classified within level 1 or 2.

Derivatives

Exchange-traded derivatives valued using quoted prices are classified within level 1 of the fair value hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of Sony’s derivative positions are valued using internally developed models that use as their basis readily observable market parameters – i.e., parameters that are actively quoted and can be validated to external sources, including industry pricing services. Depending on the types and contractual terms of derivatives, fair value can be modeled using a series of techniques, such as the Black-Scholes option pricing model, which are consistently applied. Where derivative products have been established for some time, Sony uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit rating of the counterparty. Further, many of these models do not contain a high level of subjectivity as the techniques used in the models do not require significant judgment, and inputs to the model are readily observable from actively quoted markets. Such instruments are generally classified within level 2 of the fair value hierarchy.

In determining the fair value of Sony’s interest rate swap derivatives, Sony uses the present value of expected cash flows based on market observable interest rate yield curves commensurate with the term of each instrument. For foreign currency derivatives, Sony’s approach is to use forward contract and option valuation models employing market observable inputs, such as spot currency rates, time value and option volatilities. These derivatives are classified within level 2 since Sony primarily uses observable inputs in its valuation of its derivative assets and liabilities.

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2010 and 2011 are as follows:

	Yen in millions
	March 31, 2010
	Level 1		Level 2		Level 3		Total

Assets:
Trading securities		180,414		172,939		-		353,353
Available-for-sale securities
Debt securities
Japanese national government bonds		-		1,290,824		-		1,290,824
Japanese local government bonds		-		28,842		-		28,842
Japanese corporate bonds		4,937		358,187		1,097		364,221
Foreign corporate bonds		-		261,896		17,433		279,329
Other		365		10,736		-		11,101
Equity securities		160,128		6,682		3,936		170,746
Other investments *1		5,377		38		69,672		75,087
Derivative assets *2		-		23,796		-		23,796
Total assets		351,221		2,153,940		92,138		2,597,299
Liabilities:
Derivative liabilities *2		-		48,599		-		48,599
Total liabilities		-		48,599		-		48,599

	Yen in millions
	March 31, 2011
	Level 1		Level 2		Level 3		Total

Assets:
Trading securities		189,320		186,482		-		375,802
Available-for-sale securities
Debt securities
Japanese national government bonds		-		1,143,765		-		1,143,765
Japanese local government bonds		-		22,965		-		22,965
Japanese corporate bonds		-		329,057		4,581		333,638
Foreign corporate bonds		-		306,070		20,050		326,120
Other		-		7,933		-		7,933
Equity securities		141,408		4,667		3,968		150,043
Other investments *1		5,459		51		70,058		75,568
Derivative assets *2		-		15,110		-		15,110
Total assets		336,187		2,016,100		98,657		2,450,944
Liabilities:
Derivative liabilities *2		-		33,759		-		33,759
Total liabilities		-		33,759		-		33,759

*1 Other investments include certain private equity investments and certain hybrid financial instruments.

*2 Derivative assets and liabilities are recognized and disclosed on a gross basis.

There were no significant transfers between levels 1 and 2 for the fiscal years ended March 31, 2010 and 2011.

The changes in fair value of level 3 assets and liabilities for the fiscal years ended March 31, 2010 and 2011 are as follows:

	Yen in millions
	Fiscal year ended March 31, 2010
	Assets
	Trading securities			Available-for-sale securities									Other investments		Derivative assets
				Debt securities						Equity securities
				Japanese corporate bonds			Foreign corporate bonds			Equity securities
Beginning balance		3,003			7,630			51,798			3,562			59,781		-
Total realized and unrealized gains (losses):
Included in earnings *1		181			(260	)		(404	)		(2	)		6,288		(69	)
Included in other comprehensive income (loss)		-			-			1,818			374			2,781		-
Purchases, issuances, sales and settlements		(562	)		(5,660	)		(4,247	)		2			822		(186	)
Transfers in and/or out of level 3 23		(2,622	)		(613	)		(31,532	)		-			-		255
Ending balance		-			1,097			17,433			3,936			69,672		-

Changes in unrealized gains (losses) relating to instruments still held at reporting date:
Included in earnings *1		-			-			(40	)		-			6,726		-

	Yen in millions
	Fiscal year ended March 31, 2011
	Assets
	Available-for-sale securities
	Debt securities
	Japanese corporate bonds			Foreign corporate bonds			Equity securities		Other investments
Beginning balance		1,097			17,433			3,936		69,672
Total realized and unrealized gains (losses):
Included in earnings *1		(13	)		(224	)		-		(3,332	)
Included in other comprehensive income (loss)		(18	)		(842	)		32		2,606
Purchases, issuances, sales and settlements		3,515			8,251			-		1,112
Transfers in and/or out of level 3 *2		-			(4,568	)		-		-
Ending balance		4,581			20,050			3,968		70,058

Changes in unrealized gains (losses) relating to instruments still held at reporting date:
Included in earnings *1

*1	Earning effects are included in financial services revenue in the consolidated statements of income.

*2	Transfers into or out of level 3 are reported as the value as of the beginning of the period in which the transfer occurs.

*3	Certain corporate bonds were transferred into level 2 because the ability to corroborate significant inputs with market observable data became possible due to a significant recovery in credit markets.

(2) Assets and liabilities that are measured at fair value on a nonrecurring basis:

Sony also has assets and liabilities that are required to be recorded at fair value on a nonrecurring basis when certain circumstances occur. Disclosures for nonfinancial assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis, are required from April 1, 2009. During the fiscal years ended March 31, 2010 and 2011, such measurements of fair value related primarily to the impairments of long-lived assets and the remeasurement of the previously owned equity interest as part of the Game Show Network acquisition. Refer to Note 24.

Long-lived assets impairments

Long-lived assets are measured at the lesser of carrying value or fair value if such assets are held for sale or when there is a determination that the asset is impaired. During the fiscal years ended March 31, 2010 and 2011, Sony recorded impairment losses of 53,304 million yen and 23,735 million yen related to long-lived assets with carrying values prior to impairment of 58,598 million yen and 27,513 million yen; the fair value of the long-lived assets after impairments was 5,294 million yen and 3,778 million yen, respectively. Sony’s determination of fair value was based on the comparable market values or estimated net cash flows which considered prices and other relevant information generated by market transactions involving comparable assets or cash flow projections based upon the most recent business plan. These measurements are classified as level 3 because significant unobservable inputs, such as the conditions of the assets or projections of future cash flows, were considered in the fair value measurements.

Remeasurement of previously owned equity interest

Regarding the remeasurement to fair value of the previously owned equity interest as part of the Game Show Network acquisition for the fiscal year ended March 31, 2011, which was classified as level 3 because of significant unobservable inputs, such as projections of future cash flows and market comparables of similar transactions and companies.

(3) Financial instruments:

The estimated fair values of Sony’s financial instruments are summarized as follows. The following summary excludes cash and cash equivalents, call loans, time deposits, notes and accounts receivable, trade, call money, short-term borrowings, notes and accounts payable, trade and deposits from customers in the banking business because the carrying values of these financial instruments approximated their fair values due to their short-term nature. The summary also excludes debt and equity securities which are disclosed in Note 7.

	Yen in millions
	March 31, 2010				March 31, 2011
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Long-term debt including the current portion		1,160,029		1,168,354		921,849		928,820
Investment contracts included in policyholders’ account in the life insurance business		306,625		307,656		322,649		320,036
Housing loans in the banking business		555,105		612,830		656,047		714,985

The fair values of long-term debt including the current portion and investment contracts included in policyholders’ account in the life insurance business were estimated based on either the market value or the discounted future cash flows using Sony’s current incremental borrowing rates for similar liabilities. The fair values of housing loans in the banking business, included in securities investments and other in the consolidated balance sheets, were estimated based on the discounted future cash flows using interest rates reflecting London InterBank Offered Rate base yield curve with a certain risk premium.

14. Derivative instruments and hedging activities

Sony has certain financial instruments including financial assets and liabilities acquired in the normal course of business. Such financial instruments are exposed to market risk arising from the changes of foreign currency exchange rates and interest rates. In applying a consistent risk management strategy for the purpose of reducing such risk, Sony uses derivative financial instruments, which include foreign exchange forward contracts, foreign currency option contracts, and interest rate swap agreements (including interest rate and currency swap agreements). Certain other derivative financial instruments are entered into in the Financial Services segment for investment purposes. These instruments are executed with creditworthy financial institutions, and virtually all foreign currency contracts are denominated in U.S. dollars, euros and other currencies of major countries. These derivatives generally mature or expire within six months after the balance sheet date. Other than derivatives utilized in the Financial Services segment for portfolio investments, Sony does not use derivative financial instruments for trading or speculative purposes. These derivative transactions utilized for portfolio investments in the Financial Services segment are executed within a certain limit in accordance with an internal risk management policy.

Derivative financial instruments held by Sony are classified and accounted for as described below.

Fair value hedges

Both the derivatives designated as fair value hedges and the hedged items are reflected at fair value in the consolidated balance sheets. Changes in the fair value of the derivatives designated as fair value hedges as well as offsetting changes in the carrying value of the underlying hedged items are recognized in income. For the fiscal years ended March 31, 2009, 2010 and 2011, these fair value hedges were fully effective. In addition, there were no amounts excluded from the assessment of hedge effectiveness of fair value hedges.

Cash flow hedges

Changes in the fair value of derivatives designated as cash flow hedges are initially recorded in other comprehensive income (“OCI”) and reclassified into earnings when the hedged transaction affects earnings. For the fiscal years ended March 31, 2009, 2010 and 2011, the ineffective portion of the hedging relationship is not significant. In addition, there were no amounts excluded from the assessment of hedge effectiveness for cash flow hedges.

Derivatives not designated as hedges

Changes in the fair value of derivatives not designated as hedges are recognized in income.

A description of the purpose and classification of the derivative financial instruments held by Sony is as follows:

Foreign exchange forward contracts and foreign currency option contracts

Foreign exchange forward contracts and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign currency exchange rates on cash flows generated by anticipated intercompany transactions and intercompany accounts receivable and payable denominated in foreign currencies. The majority of written foreign currency option contracts are a part of range forward contract arrangements and expire in the same month with the corresponding purchased foreign currency option contracts.

Sony also enters into foreign exchange forward contracts, which effectively fix the cash flows from foreign currency denominated debt. Accordingly, these derivatives have been designated as cash flow hedges.

Foreign exchange forward contracts and foreign currency option contracts that do not qualify as hedges are marked-to-market with changes in value recognized in other income and expenses.

Foreign exchange forward contracts, foreign currency option contracts and currency swap agreements held by certain subsidiaries in the Financial Services segment are marked-to-market with changes in value recognized in financial service revenue.

Interest rate swap agreements (including interest rate and currency swap agreements)

Interest rate swap agreements are utilized primarily to lower funding costs, to diversify sources of funding and to limit Sony’s exposure associated with underlying debt instruments and available-for-sale debt securities resulting from adverse fluctuations in interest rates, foreign currency exchange rates and changes in fair values. Interest rate swap agreements entered into in the Financial Services segment are used for reducing the risk arising from the changes in the fair value of fixed rate available-for-sale debt securities. These derivatives are considered to be a hedge against changes in the fair value of available-for-sale debt securities in the Financial Services segment. Accordingly, these derivatives have been designated as fair value hedges.

Sony also enters into certain interest rate swap agreements for the purpose of reducing the risk arising from the changes in anticipated cash flows of variable rate debt and foreign currency denominated debt. These interest rate swap agreements, which effectively swap foreign currency denominated variable rate debt for functional currency denominated fixed rate debt, are considered to be a hedge against changes in the anticipated cash flows of Sony’s foreign denominated variable rate obligations. Accordingly, these derivatives have been designated as cash flow hedges.

Certain subsidiaries in the Financial Services segment have interest rate swap agreements as part of their portfolio investments, which are marked-to-market with changes in value recognized in financial service revenue.

Any other interest rate swap agreements that do not qualify as hedges, which are used for reducing the risk arising from changes of variable rate debt, are marked-to-market with changes in value recognized in other income and expenses.

Other agreements

Certain subsidiaries in the Financial Services segment have credit default swap agreements, equity future contracts, other currency contracts and hybrid financial instruments as part of their portfolio investments, which are marked-to-market with changes in value recognized in financial services revenue. The hybrid financial instruments, disclosed in Note 7 as debt securities, contain embedded derivatives that are not required to be bifurcated because the entire instruments are carried at fair value.

The estimated fair values of Sony’s outstanding derivative instruments are summarized as follows:

Derivatives designated as	Yen in millions
hedging instruments	Balance sheet location	Fair value				Balance sheet location	Fair value
		March 31					March 31
	Asset derivatives	2010		2011		Liability derivatives	2010		2011

Interest rate contracts	Prepaid expenses and other current assets		853		416	Current liabilities other		10,269		9,026
Interest rate contracts			-		-	Liabilities other		1,884		1,663
Foreign exchange contracts	Prepaid expenses and other current assets		52		-	Current liabilities other		-		67
			905		416			12,153		10,756

Derivatives not designated	Yen in millions
as hedging instruments	Balance sheet location	Fair value				Balance sheet location	Fair value
		March 31					March 31
	Asset derivatives	2010		2011		Liability derivatives	2010		2011

Interest rate contracts	Prepaid expenses and other current assets		434		314	Current liabilities other		664		3,630
Interest rate contracts			-		-	Liabilities other		170		-
Foreign exchange contracts	Prepaid expenses and other current assets		22,334		14,353	Current liabilities other		35,585		19,361
Foreign exchange contracts	Assets other		30		9			-		-
Credit contracts	Prepaid expenses and other current assets		93		18	Current liabilities other		27		12
			22,891		14,694			36,446		23,003
Total derivatives			23,796		15,110			48,599		33,759

Presented below are the effects of derivative instruments on the consolidated statements of income for the fiscal years ended March 31, 2009, 2010 and 2011 (yen in millions).

Derivatives under fair value hedging relationships	Location of gain or (loss) recognized in income on derivative	Amount of gain or (loss) recognized in income on derivative
		Fiscal year ended March 31
		2009			2010			2011

Interest rate contracts	Financial services revenue		(2,499	)		(3,475	)		588
Foreign exchange contracts	Foreign exchange gain or (loss), net		(8	)		97			(18	)
Total			(2,507	)		(3,378	)		570

Yen in millions

Fiscal year ended March 31, 2010

Derivatives under cash

Amount of

gain or (loss)

recognized in OCI

on derivative

Gain or (loss) reclassified from

accumulated OCI into income

(effective portion)

Gain or (loss) recognized in

income on derivative

(ineffective portion)

flow hedging relationships

Amount

Location

Amount

Location

Amount

Interest rate contracts

(901

)

Interest expense

418

Interest expense

Foreign exchange contracts

1,814

Foreign exchange gain or (loss), net

(1,516

)

Foreign exchange gain or (loss), net

Total

913

Total

(1,098

)

Total

Yen in millions

Fiscal year ended March 31, 2011

Derivatives under cash

Amount of

gain or (loss)

recognized in OCI

on derivative

Gain or (loss) reclassified from

accumulated OCI into income

(effective portion)

Gain or (loss) recognized in

income on derivative

(ineffective portion)

flow hedging relationships

Amount

Location

Amount

Location

Amount

Interest rate contracts

(108

)

Interest expense

329

Interest expense

Total

(108

)

Total

329

Total

At March 31, 2011, amounts related to derivatives qualifying as cash flow hedges amounted to a net reduction of equity of 1,589 million yen. Within the next twelve months, 603 million yen is expected to be reclassified from equity into earnings as a loss.

Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income on derivative	Amount of gain or (loss) recognized in income on derivative (Yen in millions)
		Fiscal year ended March 31
		2009			2010			2011

Interest rate contracts	Financial services revenue		(1,966	)		(884	)		(3,332	)
Interest rate contracts	Financial services expenses		21			32			32
Foreign exchange contracts	Financial services revenue		11,424			1,468			(1,294	)
Foreign exchange contracts	Foreign exchange gain or (loss), net		(39,542	)		(8,779	)		8,311
Equity contracts	Financial services revenue		8,795			83			-
Bond contracts	Financial services revenue		78			68			44
Credit contracts	Financial services revenue		1,352			(518	)		(101	)
Total			(19,838	)		(8,530	)		3,660

The following table summarizes additional information, including notional amounts, for each type of derivative:

	Yen in millions
	March 31, 2010					March 31, 2011
	Notional amount		Fair value			Notional amount		Fair value
Foreign exchange contracts:
Foreign exchange forward contracts		1,924,697		(16,049	)		1,364,147		(8,825	)
Currency option contracts purchased		3,819		19			5,822		19
Currency option contracts written		407		(11	)		423		(9	)
Currency swap agreements		50,979		2,022			117,028		2,015
Other currency contracts		46,499		850			46,201		1,734
Interest rate contracts:
Interest rate swap agreements		456,213		(11,700	)		448,353		(13,589	)
Credit contracts:
Credit default swap agreements		10,497		66			4,841		6

15. Pension and severance plans

Upon terminating employment, employees of Sony Corporation and its subsidiaries in Japan are entitled, under most circumstances, to lump-sum indemnities or pension payments as described below. In July 2004, Sony Corporation and certain of its subsidiaries amended their pension plans and introduced a point-based plan under which a point is added every year reflecting the individual employee’s performance over that year. Under the point-based plan, the amount of payment is determined based on sum of cumulative points from past services and interest points earned on the cumulative points regardless of whether or not the employee is voluntarily retiring.

Under the plans, in general, the defined benefits cover 65% of the indemnities under existing regulations to employees. The remaining indemnities are covered by severance payments by the companies. The pension benefits are payable at the option of the retiring employee either in a lump-sum amount or monthly pension payments. Contributions to the plans are funded through several financial institutions in accordance with the applicable laws and regulations.

Several of Sony’s foreign subsidiaries have defined benefit pension plans or severance indemnity plans, which substantially cover all of their employees. Under such plans, the related cost of benefits is currently funded or accrued. Benefits awarded under these plans are based primarily on the current rate of pay and length of service.

In September 2006, the FASB issued new accounting guidance for defined benefit pension and other postretirement plans, which requires plan assets and benefit obligations be measured at fiscal year end date. Sony implemented the measurement date provisions of this guidance for the fiscal year ended March 31, 2009 and, accordingly, adjustments of beginning retained earnings totaling 668 million yen and accumulated other comprehensive income totaling 630 million yen were recorded, respectively.

The components of net periodic benefit costs for the fiscal years ended March 31, 2009, 2010 and 2011 were as follows:

Japanese plans:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Service cost		28,652			30,980			29,589
Interest cost		15,208			15,402			16,067
Expected return on plan assets		(18,950	)		(16,969	)		(17,987	)
Recognized actuarial loss		12,440			16,000			11,802
Amortization of prior service costs		(10,358	)		(10,391	)		(10,391	)
Net periodic benefit costs		26,992			35,022			29,080

Foreign plans:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Service cost		10,557			3,645			4,160
Interest cost		11,869			12,083			11,165
Expected return on plan assets		(10,569	)		(8,652	)		(9,135	)
Amortization of net transition asset		212			67			20
Recognized actuarial loss		507			857			2,911
Amortization of prior service costs		(262	)		30			(32	)
Losses (gains) on curtailments and settlements		1,569			1,766			(31	)
Net periodic benefit costs		13,883			9,796			9,058

The estimated net actuarial loss, prior service cost and obligation (asset) existing at transition for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit costs over the next fiscal year are 13,454 million yen, 10,761 million yen and 79 million yen, respectively.

The changes in the benefit obligation and plan assets as well as the funded status and composition of amounts recognized in the consolidated balance sheets were as follows:

	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2010			2011			2010			2011

Change in benefit obligation:
Benefit obligation at beginning of the fiscal year		709,098			709,554			196,750			231,341
Service cost		30,980			29,589			3,645			4,160
Interest cost		15,402			16,067			12,083			11,165
Plan participants’ contributions		-			-			322			764
Amendments		(433	)		-			3,950			(6,677	)
Actuarial (gain) loss		(10,103	)		6,424			36,311			(6,869	)
Foreign currency exchange rate changes		-			-			(5,968	)		(16,994	)
Curtailments and settlements		-			(404	)		(1,441	)		(166	)
Benefits paid		(35,390	)		(25,377	)		(14,311	)		(10,227	)
Benefit obligation at end of the fiscal year		709,554			735,853			231,341			206,497

Change in plan assets:
Fair value of plan assets at beginning of the fiscal year		443,977			515,701			98,739			134,226
Actual return on plan assets		59,654			4,327			31,775			10,930
Foreign currency exchange rate changes		-			-			(1,502	)		(9,121	)
Employer contribution		32,803			34,892			18,387			13,029
Plan participants’ contributions		-			-			322			764
Curtailments and settlements		-			-			(407	)		(217	)
Benefits paid		(20,733	)		(18,272	)		(13,088	)		(9,224	)
Fair value of plan assets at end of the fiscal year		515,701			536,648			134,226			140,387

Funded status at end of the fiscal year		(193,853	)		(199,205	)		(97,115	)		(66,110	)

Amounts recognized in the consolidated balance sheets consist of:

	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2010			2011			2010			2011
Noncurrent assets		1,116			1,454			2,760			3,894
Current liabilities		-			-			(2,778	)		(2,716	)
Noncurrent liabilities		(194,969	)		(200,659	)		(97,097	)		(67,288	)
Ending balance		(193,853	)		(199,205	)		(97,115	)		(66,110	)

Amounts recognized in accumulated other comprehensive income, excluding tax effects, consist of:

	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2010			2011			2010		2011
Prior service cost (credit)		(96,865	)		(86,470	)		2,966		(3,930	)
Net actuarial loss		270,241			278,895			49,209		33,919
Obligation existing at transition		-			-			231		204
Ending balance		173,376			192,425			52,406		30,193

The accumulated benefit obligations for all defined benefit pension plans were as follows:

	Japanese plans				Foreign plans
	Yen in millions				Yen in millions
	March 31				March 31
	2010		2011		2010		2011

Accumulated benefit obligations		705,537		731,666		192,260		183,954

The projected benefit obligations, the accumulated benefit obligations and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were as follows:

	Japanese plans				Foreign plans
	Yen in millions				Yen in millions
	March 31				March 31
	2010		2011		2010		2011

Projected benefit obligations		709,554		735,853		177,131		176,755
Accumulated benefit obligations		705,537		731,666		163,120		167,609
Fair value of plan assets		515,701		536,648		100,526		121,338

Weighted-average assumptions used to determine benefit obligations as of March 31, 2010 and 2011 were as follows:

	Japanese plans						Foreign plans
	March 31						March 31
	2010			2011			2010			2011

Discount rate		2.3	%		2.1	%		5.5	%		5.2	%
Rate of compensation increase		*			*			4.0			3.5

*	As of March 31, 2010 and 2011, substantially all of Sony’s Japanese pension plans were point-based. Point-based plans do not incorporate a measure of compensation rate increases.

Weighted-average assumptions used to determine the net periodic benefit costs for the fiscal years ended March 31, 2009, 2010 and 2011 were as follows:

	Japanese plans									Foreign plans
	Fiscal year ended March 31									Fiscal year ended March 31
	2009			2010			2011			2009			2010			2011

Discount rate		2.3	%		2.2	%		2.3	%		6.0	%		6.5	%		5.5	%
Expected return on plan assets		3.9			3.6			2.9			7.1			6.5			5.9
Rate of compensation increase		2.5			2.7			*			3.4			3.2			4.0

As of March 31, 2011, substantially all of Sony’s Japanese pension plans were point-based. Point-based plans do not incorporate a measure of compensation rate increases.

Sony reviews these assumptions for changes in circumstances.

The weighted-average rate of compensation increase is calculated based only on the pay-related plans. The point-based plans discussed above are excluded from the calculation because payments made under the plan are not based on employee compensation.

To determine the expected long-term rate of return on pension plan assets, Sony considers the current and expected asset allocations, as well as the historical and expected long-term rates of returns on various categories of plan assets. Sony’s pension investment policy recognizes the expected growth and the variability risk associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment policy gives appropriate consideration to recent market performance and historical returns, the investment assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of the corresponding pension liabilities.

The investment objectives of Sony’s plan assets are designed to generate returns that will enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on the current economic environment and other pertinent factors. Sony’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could negatively impact the funding level of the plans, thereby increasing its dependence on contributions from Sony. To mitigate any potential concentration risk, thorough consideration is given to balancing the portfolio among industry sectors and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocations as of March 31, 2011, are, as a result of Sony’s asset liability management, 28% of equity securities, 58% of fixed income securities and 14% of other investments for the pension plans of Sony Corporation and most of its subsidiaries in Japan, and, on a weighted average basis, 54% of equity securities, 34% of fixed income securities and 12% of other investments for the pension plans of foreign subsidiaries.

The fair values of the assets held by Japanese and foreign plans, which are classified in accordance with the fair value hierarchy described in Note 2, are as follows:

	Japanese plans
	Yen in millions
	Fair value at March 31,		Fair value measurements using inputs considered as
Asset class	2010		Level 1		Level 2		Level 3

Cash and cash equivalents		11,665		11,665		-		-
Equity:
Equity securities (a)		136,495		136,495		-		-
Fixed income:
Government bonds (b)		201,240		-		201,240		-
Corporate bonds (c)		22,691		-		22,691		-
Asset-backed securities (d)		4,779		-		4,779		-
Commingled funds (e)		62,703		-		62,703		-
Commodity funds (f)		1,638		-		1,638		-
Private equity (g)		21,337		-		-		21,337
Hedge funds (h)		51,498		-		-		51,498
Real estate		1,655		-		-		1,655
Total		515,701		148,160		293,051		74,490

	Japanese plans
	Yen in millions
	Fair value at March 31,		Fair value measurements using inputs considered as
Asset class	2011		Level 1		Level 2		Level 3

Cash and cash equivalents		25,151		25,151		-		-
Equity:
Equity securities (a)		127,695		125,692		2,003		-
Fixed income:
Government bonds (b)		226,183		-		226,183		-
Corporate bonds (c)		23,375		-		23,375		-
Asset-backed securities (d)		3,451		-		3,451		-
Commingled funds (e)		63,693		-		63,693		-
Commodity funds (f)		1,991		-		1,991		-
Private equity (g)		19,888		-		-		19,888
Hedge funds (h)		43,688		-		-		43,688
Real estate		1,533		-		-		1,533
Total		536,648		150,843		320,696		65,109

(a)	Includes approximately 62 percent and 64 percent of Japanese equity securities, and 38 percent and 36 percent of foreign equity securities for the fiscal years ended March 31, 2010 and 2011, respectively.

(b)	Includes approximately 63 percent and 65 percent of debt securities issued by Japanese national and local governments, and 37 percent and 35 percent of debt securities issued by foreign national and local governments for the fiscal years ended March 31, 2010 and 2011, respectively.

(c)	Includes debt securities issued by Japanese and foreign corporation and government related agencies.

(d)	Includes primarily mortgage-backed securities.

(e)

Commingled funds represent pooled institutional investments, including primarily investment trusts. They include approximately 38 percent and 39 percent of investments in equity, 57 percent and 58 percent of investments in fixed income, and 5 percent and 3 percent of investments in other for the fiscal years ended March 31, 2010 and 2011, respectively.

(f)	Represents commodity futures funds.

(g)	Includes multiple private equity funds of funds that primarily invest in venture, buyout, and distressed markets in the U.S. and Europe.

(h)	Includes primarily funds that invest in a portfolio of a broad range of hedge funds to diversify the risks and reduce the volatilities associated with a single hedge fund.

	Foreign plans
	Yen in millions
	Fair value at March 31,		Fair value measurements using inputs considered as
Asset class	2010		Level 1		Level 2		Level 3

Cash and cash equivalents		1,775		1,775		-		-
Equity:
Equity securities (a)		39,885		33,657		6,228		-
Fixed income:
Government bonds (b)		20,553		-		20,553		-
Corporate bonds (c)		12,584		-		8,013		4,571
Asset-backed securities		3,135		-		3,060		75
Insurance contracts (d)		6,166		-		6,166		-
Commingled funds (e)		45,655		-		45,127		528
Real estate and other (f)		4,473		653		43		3,777
Total		134,226		36,085		89,190		8,951

	Foreign plans
	Yen in millions
	Fair value at March 31,		Fair value measurements using inputs considered as
Asset class	2011		Level 1		Level 2		Level 3

Cash and cash equivalents		860		860		-		-
Equity:
Equity securities (a)		38,512		33,273		5,239		-
Fixed income:
Government bonds (b)		21,405		-		21,405		-
Corporate bonds (c)		14,994		-		10,148		4,846
Asset-backed securities		2,053		-		2,053		-
Insurance contracts (d)		6,718		-		6,718		-
Commingled funds (e)		50,517		-		49,987		530
Real estate and other (f)		5,328		45		1,510		3,773
Total		140,387		34,178		97,060		9,149

(a)	Includes primarily foreign equity securities.

(b)	Includes primarily foreign government debt securities.

(c)	Includes primarily foreign corporate debt securities.

(d)	Represents annuity contracts with or without profit sharing.

(e)	Commingled funds represent pooled institutional investments including mutual funds, common trust funds, and collective investment funds. They are primarily comprised of foreign equities and fixed income investments.

(f)	Includes primarily private real estate investment trusts.

Each level in the fair value hierarchy in which each plan asset is classified is determined based on inputs used to measure the fair values of the asset, and does not necessarily indicate the risks or rating of the asset.

The following is a description of the valuation techniques used to measure Japanese and foreign plan assets at fair value. There were no changes in valuation techniques during the fiscal years ended March 31, 2010 and 2011.

Equity securities are valued at the closing price reported in the active market in which the individual securities are traded. These assets are generally classified as level 1.

The fair value of fixed income securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are generally classified as level 2.

Commingled funds are typically valued using the net asset value provided by the administrator of the fund and reviewed by Sony. The net asset value is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. These assets are classified as level 1, level 2 or level 3 depending on availability of quoted market prices.

Commodity funds are valued using inputs that are derived principally from or corroborated by observable market data. These assets are generally classified as level 2.

Private equity and private real estate investment trust valuations require significant judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. These assets are initially valued at cost and are reviewed periodically utilizing available and relevant market data to determine if the carrying value of these assets should be adjusted. These investments are classified as level 3. The valuation methodology is applied consistently from period to period.

Hedge funds are valued using the net asset value as determined by the administrator or custodian of the fund. These investments are classified as level 3.

The following table sets forth a summary of changes in the fair values of Japanese and foreign plans’ level 3 assets for the fiscal years ended March 31, 2010 and 2011:

	Japanese plans
	Yen in millions
	Fair value measurement using significant unobservable inputs (Level 3)
	Private equity			Hedge funds			Real estate			Total

Beginning balance at April 1, 2009		23,028			40,443			2,606			66,077
Return on assets held at end of year		(1,691	)		79			(951	)		(2,563	)
Return on assets sold during the year		-			-			-			-
Purchases, sales, and settlements, net		-			10,976			-			10,976
Transfers, net		-			-			-			-
Ending balance at March 31, 2010		21,337			51,498			1,655			74,490
Return on assets held at end of year		(1,449	)		2,467			(122	)		896
Return on assets sold during the year		-			(436	)		-			(436	)
Purchases, sales, and settlements, net		-			(9,841	)		-			(9,841	)
Transfers, net		-			-			-			-
Ending balance at March 31, 2011		19,888			43,688			1,533			65,109

	Foreign plans
	Yen in millions
	Fair value measurement using significant unobservable inputs (Level 3)
	Corporate bonds			Asset-backed securities			Commingled funds			Real estate and other			Total

Beginning balance at April 1, 2009		-			74			849			4,085			5,008
Return on assets held at end of year		302			14			5			23			344
Return on assets sold during the year		-			-			-			(89	)		(89	)
Purchases, sales, and settlements, net		4,269			(9	)		(288	)		(95	)		3,877
Transfers, net		-			-			-			-			-
Other *		-			(4	)		(38	)		(147	)		(189	)
Ending balance at March 31, 2010		4,571			75			528			3,777			8,951
Return on assets held at end of year		503			-			9			490			1,002
Return on assets sold during the year		-			5			-			-			5
Purchases, sales, and settlements, net		260			(72	)		-			(159	)		29
Transfers, net		-			-			-			-			-
Other *		(488	)		(8	)		(7	)		(335	)		(838	)
Ending balance at March 31, 2011		4,846			-			530			3,773			9,149

* Primarily consists of translation adjustments.

Sony makes contributions to its defined benefit pension plans as deemed appropriate by management after considering the fair value of plan assets, expected return on plan assets and the present value of benefit obligations. Sony expects to contribute approximately 35 billion yen to the Japanese plans and approximately 11 billion yen to the foreign plans during the fiscal year ending March 31, 2012.

The expected future benefit payments are as follows:

	Japanese plans		Foreign plans
Fiscal year ending March 31	Yen in millions		Yen in millions

2012		24,690		10,620
2013		26,321		9,663
2014		28,653		10,597
2015		31,571		10,348
2016		34,355		10,759
2017 – 2021		199,824		62,305

16. Stockholders’ equity

(1) Common stock:

Changes in the number of shares of common stock issued and outstanding during the fiscal years ended March 31, 2009, 2010 and 2011 have resulted from the following:

	Number of shares
Balance at March 31, 2008		1,004,443,364
Exercise of stock acquisition rights		92,000
Balance at March 31, 2009		1,004,535,364
Exercise of stock acquisition rights		36,100
Balance at March 31, 2010		1,004,571,464
Exercise of stock acquisition rights		65,200
Balance at March 31, 2011		1,004,636,664

At March 31, 2011, 20,480,400 shares of common stock would be issued upon the conversion or exercise of all convertible bonds and stock acquisition rights outstanding.

Conversions of convertible bonds into common stock are accounted for in accordance with the provisions of the Companies Act of Japan (Kaishaho) and related regulations (collectively the “Companies Act”) by crediting approximately one-half of the conversion proceeds to the common stock account and the remainder to the additional paid-in capital account.

Sony Corporation may purchase its own shares at any time by a resolution of the Board of Directors up to the retained earnings available for dividends to shareholders, in accordance with the Companies Act. No common stock had been acquired by the resolution of the Board of Directors during the fiscal years ended March 31, 2009, 2010 and 2011.

(2) Retained earnings:

The amount of statutory retained earnings of Sony Corporation available for dividends to shareholders as of March 31, 2011 was 502,815 million yen. The appropriation of retained earnings for the fiscal year ended March 31, 2011, including cash dividends for the six-month period ended March 31, 2011, has been incorporated in the accompanying consolidated financial statements. This appropriation of retained earnings was approved at the meeting of the Board of Directors of Sony Corporation held on May 26, 2011 and was then recorded in the statutory books of account, in accordance with the Companies Act.

Retained earnings include Sony’s equity in undistributed earnings of affiliated companies accounted for by the equity method in the amount of 16,034 million yen and 30,809 million yen at March 31, 2010 and 2011, respectively.

(3) Other comprehensive income:

Other comprehensive income for the fiscal years ended March 31, 2009, 2010 and 2011 were comprised of the following:

	Yen in millions
	Pre-tax amount			Tax benefit/(expense)			Net-of-tax amount

For the fiscal year ended March 31, 2009:
Unrealized gains (losses) on securities, net -
Unrealized holding losses arising during the period*		(105,145	)		40,198			(48,207	)
Less : Reclassification adjustment included in net income		11,306			(3,958	)		7,348
Unrealized gains (losses) on derivative instruments, net -
Unrealized holding losses arising during the period		(2,988	)		1,059			(1,929	)
Less : Reclassification adjustment included in net income		5,335			(1,619	)		3,716
Pension liability adjustment*		(127,222	)		51,527			(74,517	)
Foreign currency translation adjustments -
Translation adjustments arising during the period		(250,085	)		1,854			(248,231	)
Less : Reclassification adjustment included in net income		534			-			534

Other comprehensive income (loss)		(468,265	)		89,061			(361,286	)

	Yen in millions
	Pre-tax amount			Tax benefit/(expense)			Net-of-tax amount

For the fiscal year ended March 31, 2010:
Unrealized gains (losses) on securities, net -
Unrealized holding gains arising during the period*		74,501			(22,469	)		33,502
Less : Reclassification adjustment included in net income		(1,896	)		661			(1,235	)
Unrealized gains (losses) on derivative instruments, net -
Unrealized holding gains arising during the period		2,040			(415	)		1,625
Less : Reclassification adjustment included in net income		(566	)		489			(77	)
Pension liability adjustment*		45,767			(22,074	)		23,720
Foreign currency translation adjustments -
Translation adjustments arising during the period		4,583			(22	)		4,561
Less : Reclassification adjustment included in net income		2,289			-			2,289

Other comprehensive income		126,718			(43,830	)		64,385

	Yen in millions
	Pre-tax amount			Tax benefit/(expense)			Net-of-tax amount

For the fiscal year ended March 31, 2011:
Unrealized gains (losses) on securities, net -
Unrealized holding losses arising during the period*		(42,311	)		12,996			(25,445	)
Less : Reclassification adjustment included in net income		21,548			(8,104	)		13,444
Unrealized gains (losses) on derivative instruments, net -
Unrealized holding losses arising during the period		(662	)		52			(610	)
Less : Reclassification adjustment included in net income		(785	)		(158	)		(943	)
Pension liability adjustment*		3,164			(6,463	)		(3,176	)
Foreign currency translation adjustments -
Translation adjustments arising during the period		(118,840	)		1,256			(117,584	)
Less : Reclassification adjustment included in net income		(832	)		-			(832	)

Other comprehensive income (loss)		(138,718	)		(421	)		(135,146	)

Amounts allocable to the noncontrolling interests in the equity of a subsidiary and other are deducted from the net-of-tax amount for unrealized holding gains (losses) and pension liability adjustment arising during the period.

During the fiscal years ended March 31, 2009, 2010 and 2011, losses of 534 million yen, 2,289 million yen and gains of 832 million yen, respectively, of foreign currency translation adjustments were transferred from other comprehensive income to net income as a result of the liquidation or sale of certain foreign subsidiaries.

17. Stock-based compensation plans

The stock-based compensation expense for the fiscal years ended March 31, 2009, 2010 and 2011 was 3,446 million yen, 2,202 million yen and 1,952 million yen, respectively. The income tax benefit related to the stock-based compensation expense for the fiscal years ended March 31, 2009, 2010 and 2011 was 543 million yen, 271 million yen and 322 million yen, respectively. The total cash received from exercises under all of the stock-based compensation plans during the fiscal years ended March 31, 2009, 2010 and 2011 was 378 million yen, 114 million yen and 198 million yen, respectively. Sony issued new shares upon exercise of these rights. The actual income tax benefit realized for tax deductions from exercises under all the stock-based compensation plans for the fiscal years ended March 31, 2009, 2010 and 2011 was insignificant.

Sony has three types of stock-based compensation plans as incentive plans for selected directors, corporate executive officers and employees.

(1) Stock Acquisition Rights plan:

Sony has an equity-based compensation plan that issues common stock acquisition rights for the purpose of granting stock options to selected directors, corporate executive officers and employees of Sony, pursuant to the Companies Act. The stock acquisition rights generally vest ratably over a period of three years and are exercisable up to ten years from the date of grant.

The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal years ended March 31, 2009, 2010 and 2011 was 398 yen, 813 yen and 1,036 yen, respectively. The fair value of stock acquisition rights granted on the date of grant and used to recognize compensation expense for the fiscal years ended March 31, 2009, 2010 and 2011 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Fiscal year ended March 31
	2009			2010			2011
Weighted-average assumptions
Risk-free interest rate		2.07	%		2.08	%		1.60	%
Expected lives	6.23years			6.49years			6.64years
Expected volatility*		33.35	%		33.70	%		35.74	%
Expected dividends		1.29	%		0.99	%		0.83	%

Expected volatility was based on the historical volatilities of Sony Corporation’s common stock over the expected life of the stock acquisition rights.

A summary of the activities regarding the stock acquisition rights plan during the fiscal year ended March 31, 2011 is as follows:

	Fiscal year ended March 31, 2011
	Number of Shares			Weighted- average exercise price		Weighted- average remaining life		Total Intrinsic Value
				Yen		Years		Yen in millions

Outstanding at beginning of the fiscal year		15,214,400			3,743
Granted		2,334,600			2,985
Exercised		(65,200	)		2,653
Forfeited or expired		(472,400	)		3,540

Outstanding at end of the fiscal year		17,011,400			3,458		6.20		523
Exercisable at end of the fiscal year		12,184,000			3,739		5.10		211

The total intrinsic value of shares exercised under the stock acquisition rights plan during the fiscal years ended March 31, 2009, 2010 and 2011 was 95 million yen, 20 million yen and 26 million yen, respectively.

As of March 31, 2011, there was 2,358 million yen of total unrecognized compensation expense related to nonvested stock acquisition rights. This expense is expected to be recognized over a weighted-average period of 1.99 years. The total fair value of stock acquisition rights vested during the fiscal years ended March 31, 2009, 2010 and 2011 was 3,333 million yen, 2,136 million yen and 1,921 million yen, respectively.

(2) Convertible Bonds plan:

Sony has an equity-based compensation plan for selected executives of Sony’s U.S. subsidiaries using U.S. dollar-denominated non-interest bearing convertible bonds, which have characteristics similar to that of an option plan. Each convertible bond can be converted into 100 shares of the common stock of Sony Corporation at an exercise price based on the prevailing market rate shortly before the date of grant. The convertible bonds vest ratably over a three-year period and are exercisable up to ten years from the date of grant. As the convertible bonds were issued in exchange for a non-interest bearing employee loan and a right of offset exists between the convertible bonds and the employee loans, no accounting recognition was given to either the convertible bonds or the employee loans in Sony’s consolidated balance sheets.

A summary of the activities regarding the convertible bond plan during the fiscal year ended March 31, 2011 is as follows:

	Fiscal year ended March 31, 2011
	Number of Shares			Weighted- average exercise price		Weighted- average remaining life		Total Intrinsic Value
				Yen		Years		Yen in millions

Outstanding at beginning of the fiscal year		1,621,500			9,099
Expired		(1,073,000	)		10,208

Outstanding at end of the fiscal year		548,500			6,931		1.00		-
Exercisable at end of the fiscal year		548,500			6,931		1.00		-

There were no shares granted or exercised under the convertible bond plan during the fiscal years ended March 31, 2009, 2010 and 2011. All shares under the convertible bond plan were exercisable as of March 31, 2011.

(3) Stock Appreciation Rights (“SARs”) plan:

Sony granted SARs in the United States of America for selected employees. Under the terms of these plans, employees upon exercise of such rights receive cash equal to the amount that the market price of Sony Corporation’s common stock exceeds the strike price of the SARs. The SARs generally vest ratably over a period of three years, and are generally exercisable up to ten years from the date of grant.

There were no SARs granted during the fiscal years ended March 31, 2009, 2010 and 2011. As of March 31, 2011, there were 45,425 SARs outstanding and the weighted-average exercise price was 5,120 yen. All SARs were exercisable as of March 31, 2011.

The compensation expense for the SARs is measured as the excess of the quoted market price of Sony Corporation’s common stock over the SARs strike price. SAR compensation expense for the fiscal years ended March 31, 2009, 2010, and 2011 was insignificant.

18. Great East Japan Earthquake

On March 11, 2011, Japan experienced a massive earthquake and tsunami (the “Great East Japan Earthquake”). The disaster caused significant damage to certain fixed assets including buildings, machinery and equipment as well as inventories in manufacturing sites and warehouses located principally in northeastern Japan.

For the fiscal year ended March 31, 2011, Sony has incurred incremental losses and expenses including repair, removal and cleaning costs directly related to the damage caused by the disaster of 10,897 million yen, including the disposal or impairment of fixed assets of 7,668 million yen. These losses and expenses are primarily recorded within (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income and are offset by insurance recoveries as described below. The restoration costs anticipated to occur on or after April 1, 2011 were not recorded in the period ended March 31, 2011 and will be recorded when the services are rendered and liabilities incurred. In addition, Sony also incurred other losses and expenses of 11,821 million yen, which included idle facility costs at manufacturing sites, and an additional provision for life insurance policy reserves. These losses and expenses were mainly recorded in cost of sales and financial services expenses in the consolidated statements of income.

Sony has insurance policies which cover certain damage directly caused by the Great East Japan Earthquake for Sony Corporation and certain of its subsidiaries including manufacturing sites. The insurance policies cover the damage and costs associated with fixed assets and inventories and provide business interruption coverage, including lost profits, of up to 13,000 million yen in total. For the fiscal year ended March 31, 2011, Sony recorded insurance receivables of 10,841 million yen, representing a portion of the insurance claims that were deemed probable of collection up to the extent of the amount of corresponding losses recognized in the same period. The insurance receivables recorded substantially all relate to damaged assets and inventories, and include no amounts for business interruption or lost profits. Sony concluded that the recoveries from insurance claims are probable based on the coverage under valid policies, communications with the insurance carriers, Sony’s past claims history with the insurance carriers, and Sony’s assessment that the insurance carriers have the financial ability to pay the claims. These receivables are primarily recorded within other noncurrent assets in the consolidated balance sheets.

19. Restructuring charges and asset impairments

As part of its effort to improve the performance of the various businesses, Sony has undertaken a number of restructuring initiatives. Sony defines restructuring initiatives as activities initiated by Sony, such as exiting a business or product category or implementing a headcount reduction program, which are designed to generate a positive impact on future profitability. For the fiscal years ended March 31, 2009, 2010 and 2011, Sony recorded total restructuring charges of 75,390 million yen, 116,472 million yen and 62,318 million yen, respectively.

Sony anticipates recording approximately 25 billion yen of restructuring charges for the fiscal year ending March 31, 2012.

The changes in the accrued restructuring charges for the fiscal years ended March 31, 2009, 2010 and 2011 are as follows:

	Yen in millions
	Employee termination benefits			Non-cash write-downs and disposals*			Other associated costs			Total
Balance at March 31, 2008		10,893			-			5,669			16,562
SME acquisition		8,980			-			2,637			11,617
Restructuring costs		56,385			10,182			8,823			75,390
Non-cash charges		-			(10,182	)		-			(10,182	)
Cash payments		(21,900	)		-			(5,160	)		(27,060	)
Adjustments		(545	)		-			(508	)		(1,053	)
Balance at March 31, 2009		53,813			-			11,461			65,274
Restructuring costs		65,133			31,928			19,411			116,472
Non-cash charges		-			(31,928	)		-			(31,928	)
Cash payments		(88,803	)		-			(21,754	)		(110,557	)
Adjustments		(2,925	)		-			(156	)		(3,081	)
Balance at March 31, 2010		27,218			-			8,962			36,180
Restructuring costs		38,264			8,294			15,760			62,318
Non-cash charges		-			(8,294	)		-			(8,294	)
Cash payments		(47,521	)		-			(19,086	)		(66,607	)
Adjustments		(2,376	)		-			(662	)		(3,038	)
Balance at March 31, 2011		15,585			-			4,974			20,559

* Significant asset impairments excluded from restructuring charges are described below.

At March 31, 2011, the accrual for other associated costs in the table above primarily relates to restructuring efforts in the Consumer, Professional & Devices segment.

The total amount of costs incurred in connection with these restructuring programs by segment for the fiscal years ended March 31, 2009, 2010 and 2011 are as follows:

	Yen in millions
	Fiscal year ended March 31
	2009		2010		2011

Consumer, Professional & Devices		53,732		68,640		38,018
Networked Products & Services		3,062		3,682		7,021
Pictures		4,908		5,605		2,722
Music		6,337		5,225		2,662
Financial Services		789		5,078		5,010
All Other and Corporate		6,562		28,242		6,885
Total net charges		75,390		116,472		62,318

In addition to the restructuring charges in the tables above, Sony recorded in cost of sales 7,851 million yen and 4,751 million yen of non-cash charges related to depreciation associated with restructured assets for the fiscal years ended March 31, 2010 and 2011, respectively. Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activity refers to the increase in depreciation expense caused by shortening the useful life or updating the salvage value of depreciable fixed assets to coincide with the end of production under an approved restructuring plan. Any impairment of the asset is recognized immediately in the period.

Consumer, Professional & Devices segment

In an effort to improve the performance of the Consumer, Professional & Devices segment, Sony has undergone a number of restructuring efforts to reduce its operating costs. These efforts included headcount reduction programs, initiatives to advance rationalization of manufacturing operations, shifting and aggregating manufacturing to low-cost areas, and utilizing the services of third-party original equipment and design manufacturers (OEMs and ODMs). The restructuring charges of the Consumer, Professional & Devices segment in the tables above include non-cash inventory and long-lived asset write downs and disposals which represent a substantial majority of Sony’s total such charges. Significant restructuring activities are as follows:

Retirement programs -

In an effort to improve the performance of the Consumer, Professional & Devices segment, Sony has undergone several headcount reduction programs to further reduce operating costs. Through measures including the realignment of its manufacturing sites, a review of its development and design structure, and the streamlining of its sales and administrative functions, Sony has implemented and will continue a company-wide (including headquarters) rationalization. Sony intends to reallocate and optimize its workforce through programs including work reassignments and outplacements. As a result of these measures, Sony recorded in the Consumer, Professional & Devices segment restructuring charges related mainly to employee termination benefits totaling 42,018 million yen, 39,821 million yen and 25,345 million yen for the fiscal years ended March 31, 2009, 2010 and 2011, respectively, in selling, general and administrative expenses in the consolidated statements of income. These staff reductions were achieved worldwide mostly through the implementation of early retirement programs. Sony will continue to implement programs to reduce headcount by streamlining business operations, including closure and consolidation of manufacturing sites, and the consolidation of headquarters and administrative functions.

Realignment of manufacturing operations in Japan -

During the fiscal year ended March 31, 2010, Sony implemented extensive measures to better compete in terms of speed to market and profitability, including the reevaluation of both its domestic and overseas manufacturing operations. As part of this process, manufacturing operations in Japan for certain product categories were consolidated in order to increase the efficiency of these manufacturing operations.

As a result of this realignment of manufacturing operations in Japan, restructuring charges for the closure of production facilities totaling 13,219 million yen consisted mainly of personnel related costs and the disposal or impairment of assets. Of the total restructuring charges, 8,859 million yen for employee termination benefits was recorded in selling, general and administrative expenses and 3,716 million yen for the disposal or impairment of assets was recorded in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income. In addition to the restructuring charges, 5,622 million yen of non-cash charges related to depreciation associated with restructured assets were recorded in cost of sales in the consolidated statements of income as a result of this realignment of manufacturing operations in Japan. At March 31, 2011, there was no material remaining liability.

Sales and transfers of manufacturing operations outside of Japan -

During the fiscal year ended March 31, 2011, Sony sold and transferred certain manufacturing operations outside of Japan to third parties to reduce operating costs. The resulting restructuring charges included expenses of 11,583 million yen related to the transfer of a factory in Barcelona and the impairment of related assets. At March 31, 2011, there was no material remaining liability.

Cash flows from the sales and transfers of manufacturing operations are included in sales of businesses in the consolidated statements of cash flows.

Asset-impairment of TFT LCD related fixed assets -

In an effort to increase efficiency and strengthen operations in the small- and medium-sized TFT LCD business by consolidating manufacturing operations, Sony recorded 7,832 million yen for the impairment of TFT LCD related fixed assets for the fiscal year ended March 31, 2010. These charges were recorded in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income.

Asset-impairment of OLED related equipment -

During the fiscal year ended March 31, 2010, Sony recorded 5,265 million yen for the impairment of OLED related equipment, which was rendered obsolete due to the utilization of an alternative technology in the manufacture of OLED products. These charges were recorded in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income.

Networked Products & Services segment

In an effort to improve the performance of the Networked Products & Services segment, Sony has undergone a number of restructuring efforts to reduce operating costs.

The resulting restructuring charges for these segments, included in the table above, were related mainly to employee termination benefits and included in selling, general and administrative expenses in the consolidated statements of income.

Pictures segment

In an effort to improve the performance of the Pictures segment, Sony has undergone a number of restructuring efforts to reduce operating costs and rationalize certain operations.

The resulting restructuring charges, included in the table above, were related mainly to employee termination benefits and included in selling, general and administrative expenses in the consolidated statements of income.

At March 31, 2011, the remaining liability balance was 2,562 million yen, the majority of which will be paid or settled over the next year.

Music segment

In an effort to improve the performance of the Music segment due to the continued contraction of the physical music market, Sony has undergone a number of restructuring efforts to reduce operating costs.

At March 31, 2011, the remaining liability balance was 4,641 million yen, the majority of which will be paid or settled over the next year.

Restructuring liabilities related to the SONY BMG acquisition -

As a result of the acquisition of Sony Music Entertainment (“SME”), Sony reflected in the consolidated balance sheets 8,884 million yen of restructuring liabilities which related to restructuring activities undertaken by SME prior to Sony’s acquisition of Bertelsmann AG’s 50% ownership interest, but which had not yet been paid or settled by SME. The restructuring liability relates to activities previously accrued by SONY BMG but which were unpaid as of the acquisition date representing severance costs of 6,517 million yen and lease, other contract termination and other exit costs of 2,367 million yen. In connection with the acquisition, Sony also recorded additional restructuring accruals of 2,733 million yen, primarily related to Sony’s plans to consolidate certain SME operations with those of other Sony entities. These restructuring accruals included severance benefits of 2,463 million yen and lease, other contract termination and other exit costs of 270 million yen. During the fiscal year ended March 31, 2010, SME determined that certain of the restructuring activities identified at the time of the acquisition would not be implemented. As a result, 1,557 million yen of this restructuring liability, primarily for severance benefits, was reversed and recorded as a reduction to the goodwill that was recorded in connection with the acquisition of SME.

Financial Services segment

In an effort to improve the performance of the Financial Services segment, Sony has undergone restructuring efforts to reduce operating costs.

During the fiscal year ended March 31, 2010, Sony recorded restructuring charges of 3,718 million yen in financial service expenses and 1,360 million yen in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income. These restructuring charges were related mainly to the realignment of credit financing operations and the disposal or impairment of assets. During the fiscal year ended March 31, 2011, Sony recorded restructuring charges of 3,371 million yen in financial service expenses and 1,639 million yen in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income. These restructuring charges related mainly to the partial sale of a leasing and credit card business.

At March 31, 2011, the remaining liability balance was 1,745 million yen, the majority of which will be paid or settled over the next year.

Cash flows from the partial sale of a leasing and credit card business are included in sales of businesses in the consolidated statements of cash flows.

All Other and Corporate

Realignment of manufacturing operations in Japan -

During the fiscal year ended March 31, 2010, Sony implemented extensive measures to better compete in terms of speed to market and profitability, including the reevaluation of both its domestic and overseas manufacturing operations. As part of this process, mobile phone customer service and manufacturing operations in Japan were consolidated in order to establish an integrated operational structure from manufacturing through to customer service.

As a result of this realignment, restructuring charges for the closure of production facilities totaling 6,041 million yen were recorded, which consisted mainly of personnel related costs and the disposal or impairment of assets. Of the total restructuring charges, 4,900 million yen for employee termination benefits was recorded in selling, general and administrative expenses, and 862 million yen for the disposal or impairment of assets was recorded in (gain) loss on sale, disposal or impairment of assets and other, net in the consolidated statements of income. In addition to the restructuring charges, 553 million yen of non-cash charges related to depreciation associated with restructured assets were recorded in cost of sales in the consolidated statements of income. At March 31, 2011, there was no material remaining liability.

Withdrawal from property lease contract -

During the fiscal year ended March 31, 2010, Sony withdrew from the property management operation of an entertainment complex in Japan and terminated the property lease contract. Sony recorded 6,495 million yen of termination payments in cost of sales in the consolidated statements of income. At March 31, 2011, there was no remaining liability.

Corporate restructuring charges related to headquarters -

During the fiscal year ended March 31, 2010, Sony underwent headquarters restructuring activities. As a result, 5,897 million yen for employee termination benefits were recorded in selling, general and administrative expenses in the consolidated statements of income for the fiscal year ended March 31, 2010. At March 31, 2011, there was no remaining liability.

Other asset impairment information

Sony recorded a 27,100 million yen impairment loss, included within the Consumer, Professional & Devices segment, related to the LCD TV assets group in the fiscal year ended March 31, 2010. The impairment loss primarily reflects a decrease in the estimated fair value of property, plant and equipment and certain intangible assets. During the fourth quarter of the fiscal year ended March 31, 2010, management updated its strategic plans, which resulted in decreases in the assets’ estimated service periods and corresponding estimated future cash flows leading to the impairment loss. Sony excluded this loss on impairment from restructuring charges as it was not directly related to Sony’s ongoing restructuring initiatives.

20. Research and development costs, advertising costs and shipping and handling costs

(1) Research and development costs:

Research and development costs charged to cost of sales for the fiscal years ended March 31, 2009, 2010 and 2011 were 497,297 million yen, 432,001 million yen and 426,814 million yen, respectively.

(2) Advertising costs:

Advertising costs included in selling, general and administrative expenses for the fiscal years ended March 31, 2009, 2010 and 2011 were 436,412 million yen, 383,540 million yen and 396,425 million yen, respectively.

(3) Shipping and handling costs:

Shipping and handling costs for finished goods included in selling, general and administrative expenses for the fiscal years ended March 31, 2009, 2010 and 2011 were 120,175 million yen, 83,622 million yen and 91,926 million yen, respectively, which included the internal transportation costs of finished goods.

21. Income taxes

Domestic and foreign components of income (loss) before income taxes and the provision for current and deferred income taxes attributable to such income are summarized as follows:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Income (loss) before income taxes:
Sony Corporation and all subsidiaries in Japan		(4,453	)		45,290			143,917
Foreign subsidiaries		(170,502	)		(18,378	)		61,096

		(174,955	)		26,912			205,013

Income taxes - Current:
Sony Corporation and all subsidiaries in Japan		34,631			42,723			60,514
Foreign subsidiaries		45,890			5,975			57,404

		80,521			48,698			117,918

Income taxes - Deferred:
Sony Corporation and all subsidiaries in Japan		(105,211	)		(25,589	)		365,665
Foreign subsidiaries		(48,051	)		(9,151	)		(58,244	)

		(153,262	)		(34,740	)		307,421

Total income tax expense (benefit)		(72,741	)		13,958			425,339

A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as follows:

	Fiscal year ended March 31
	2009			2010			2011

Statutory tax rate		(41.0	)%		41.0	%		41.0	%

Non-deductible expenses		1.9			10.3			1.3
Income tax credits		11.4			(18.0	)		(2.0	)
Change in valuation allowances		12.9			4.7			174.5
Change in deferred tax liabilities on undistributed earnings of foreign subsidiaries and corporate joint ventures		(31.8	)		5.8			1.5
Lower tax rate applied to life and non-life insurance business in Japan		0.8			(30.3	)		(2.8	)
Foreign income tax differential		0.5			(17.6	)		(10.5	)
Adjustments to tax accruals and reserves		(7.3	)		16.2			4.5
Effect of equity in net income (loss) of affiliated companies		5.9			46.0			(2.8	)
Other		5.1			(6.2	)		2.8

Effective income tax rate		(41.6	)%		51.9	%		207.5	%

The significant components of deferred tax assets and liabilities are as follows:

	Yen in millions
	March 31
	2010			2011
Deferred tax assets:
Operating loss carryforwards for tax purposes		242,172			316,856
Accrued pension and severance costs		130,508			103,674
Film costs		22,683			16,405
Warranty reserves and accrued expenses		74,528			69,240
Future insurance policy benefits		21,810			26,177
Accrued bonus		22,764			24,825
Inventory		31,608			35,989
Depreciation		37,553			35,128
Tax credit carryforwards		70,737			74,284
Reserve for doubtful accounts		9,243			8,404
Impairment of investments		42,948			33,743
Deferred revenue in the Pictures segment		17,579			19,254
Other		136,363			140,745
Gross deferred tax assets		860,496			904,724
Less: Valuation allowance		(117,486	)		(463,702	)
Total deferred tax assets		743,010			441,022

Deferred tax liabilities:
Insurance acquisition costs		(151,548	)		(155,073	)
Unbilled accounts receivable in the Pictures segment		(42,421	)		(40,469	)
Unrealized gains on securities		(38,792	)		(33,101	)
Intangible assets acquired through stock exchange offerings		(32,456	)		(32,136	)
Undistributed earnings of foreign subsidiaries and corporate joint ventures		(44,717	)		(46,261	)
Other		(96,674	)		(109,903	)
Gross deferred tax liabilities		(406,608	)		(416,943	)

Net deferred tax assets		336,402			24,079

The valuation allowance mainly relates to deferred tax assets of certain consolidated subsidiaries with operating loss carryforwards and tax credit carryforwards for tax purposes that are not more-likely-than-not to be realized. The net changes in the total valuation allowance were increases of 21,197 million yen, 282 million yen and 346,216 million yen for the fiscal years ended March 31, 2009, 2010 and 2011, respectively. The increases during the fiscal years ended March 31, 2009 and 2010 were due to the additional valuation allowances recorded on deferred tax assets for net operating loss carryforwards and tax credit carryforwards at certain subsidiaries. The increase during the fiscal year ended March 31, 2011 was primarily due to the additional valuation allowance recorded on deferred tax assets at Sony Corporation and its national tax filing group in Japan.　

As a result of losses incurred in recent years, Sony Corporation in Japan, Sony Computer Entertainment America Inc. (“SCEA”) in the U.S., and the U.K. entities Sony Computer Entertainment Europe Limited and Sony Europe Limited are each in a three year cumulative pre-tax loss position. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets.Sony Americas Holding Inc., the consolidated group of which SCEA is a member, also has significant deferred tax assets in the form of net operating losses and tax credit carryforwards and has incurred pre-tax losses in recent years.

Sony has concluded that with respect to the U.S. and U.K. entities, there is sufficient positive evidence to overcome this negative evidence when considering future forecasted income, the relatively long carryforward periods in the U.S. and U.K. and the use of tax planning strategies. The tax planning strategies include changes in tax depreciation and amortization methods, legal and operational restructuring in the U.K. and significant portions of Europe and the sales of certain assets that could realize the excess of appreciated value over the tax basis of those assets. Sony believes that the tax planning strategies coupled with future earnings forecasts of the historically profitable entities would produce sufficient taxable income in these entities to fully realize the deferred tax assets. Accordingly, no significant valuation allowance has been recorded for the U.S. or U.K. entities as of March 31, 2011.

Sony Corporation and its national tax filing group in Japan are in a three year cumulative loss position in the fiscal year ended March 31, 2011. In Japan, Sony Corporation files a standalone tax filing for local tax purposes and a consolidated national tax filing with its wholly owned Japanese subsidiaries for national tax purposes. As the national tax filing group only includes wholly owned subsidiaries, certain Japanese subsidiaries are excluded, the most significant of which are Sony Financial Holdings Inc. and its subsidiaries. Due to the three consecutive years of losses, and because the net operating losses in Japan have a relatively short carryforward period of 7 years, a limited number of years of the carryforward period remain. The first year of expiration of the remaining net operating losses in Japan would be 2014 for local tax and 2016 for national tax. Carrying amounts of deferred tax assets require a reduction by a valuation allowance if, based on the available positive and negative evidence, it is more likely than not that such assets will not be realized. While the three year cumulative loss position and the remaining limited years in the carryforward period are significant negative evidence, there is positive evidence in the form of a history of taxable income and a history of utilizing assets before expiration, as well as the availability of tax strategies regarding the utilization of the deferred tax assets. However, based on the near term forecast including the anticipated impact of the Great East Japan Earthquake and the lesser weight provided to longer range forecasts when an entity is in a three year cumulative loss, Sony does not believe that the objectively verifiable positive evidence is sufficient to overcome the significant negative evidence of the three year cumulative loss. As the weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objectively verifiable negative evidence of recent financial reporting losses. Accordingly, Sony, based on the weight of the available positive and negative evidence, established a valuation allowance of 362,316 million yen as of March 31, 2011.

Net deferred tax assets are included in the consolidated balance sheets as follows:

	Yen in millions
	March 31
	2010			2011

Current assets - Deferred income taxes		197,598			133,059
Other assets - Deferred income taxes		403,537			239,587
Current liabilities - Other		(28,212	)		(42,340	)
Long-term liabilities - Deferred income taxes		(236,521	)		(306,227	)

Net deferred tax assets		336,402			24,079

At March 31, 2011, deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries and corporate joint ventures not expected to be remitted in the foreseeable future totaling 1,056,601 million yen, and on the gain of 61,544 million yen on a subsidiary’s sale of stock arising from the issuance of common stock of Sony Music Entertainment (Japan) Inc. (“SMEJ”) in a public offering to third parties in November 1991, as Sony does not anticipate any significant tax consequences on possible future disposition of its investment based on its tax planning strategies. The unrecognized deferred tax liabilities as of March 31, 2011 for such temporary differences can not be determined.

At March 31, 2011, Sony has operating loss carryforwards for tax purposes, the tax effect of which totaled 316,856 million yen, which will be available as an offset against future taxable income on tax returns to be filed in various tax jurisdictions. With the exception of 62,720 million yen with no expiration period, substantially all of the total operating loss carryforwards expire at various periods between the fiscal years ending March 31, 2012 and 2018 and the remaining amounts expire in periods up to 20 years depending on the jurisdiction.

Tax credit carryforwards for tax purposes at March 31, 2011 amounted to 74,284 million yen. With the exception of 12,736 million yen with no expiration period, total available tax credit carryforwards expire at various dates primarily up to 10 years.

A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:

	Yen in millions
	March 31
	2009			2010			2011

Balance at beginning of the fiscal year		282,098			276,627			229,228
Reductions for tax positions of prior years		(23,585	)		(38,450	)		(39,005	)
Additions for tax positions of prior years		11,164			4,816			19,947
Additions based on tax positions related to the current year		68,848			10,873			41,201
Settlements		(13,267	)		(5,921	)		(1,478	)
Lapse in statute of limitations		(921	)		(1,506	)		(7,770	)
Foreign currency translation adjustments		(47,710	)		(17,211	)		(17,003	)
Balance at end of the fiscal year		276,627			229,228			225,120

Total net amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate		72,008			76,125			87,497

The major changes in the total gross amount of unrecognized tax benefit balances relate to the Bilateral Advance Pricing Agreements (“APAs”) filed for certain subsidiaries in the Consumer, Professional & Devices, Networked Products & Services and All Other segments with respect to their intercompany cross-border transactions. These APAs include agreements between Sony and two taxing authorities under the authority of the mutual agreement procedure specified in income tax treaties. Because these are government to government negotiations, it is reasonably possible that the final outcomes of the agreements may differ from Sony’s current assessment of the more-likely-than-not outcomes of such agreements.

During the fiscal year ended March 31, 2009, Sony reversed 1,956 million yen of interest expense and 389 million yen of penalties.

During the fiscal year ended March 31, 2010, Sony recorded 4,707 million yen of interest expense and 1,565 million yen of penalties. At March 31, 2010, Sony had recorded liabilities of 10,911 million yen and 4,668 million yen for the payments of interest and penalties, respectively.

During the fiscal year ended March 31, 2011, Sony recorded 3,612 million yen of interest expense and reversed 261 million yen of penalties. At March 31, 2011, Sony had recorded liabilities of 14,523 million yen and 4,407 million yen for the payments of interest and penalties, respectively.

Sony operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited by Japanese and foreign taxing authorities. As a result of audit settlements, the conclusion of current examinations, the expiration of the statute of limitations in several jurisdictions and other reevaluations of Sony’s tax positions, it is expected that the amount of unrecognized tax benefits will change in the next twelve months; however, Sony does not expect that change to have a significant impact on Sony’s financial position or results of operations.

Sony remains subject to examinations by Japanese taxing authorities for tax years from 2004 through 2010, and by the U.S. and other foreign taxing authorities for tax years from 1998 through 2010.

22. Reconciliation of the differences between basic and diluted EPS

Reconciliation of the differences between basic and diluted EPS for the fiscal years ended March 31, 2009, 2010 and 2011 is as follows:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011
Net loss attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		(98,938	)		(40,802	)		(259,585	)

	Thousands of shares

Weighted-average shares outstanding		1,003,499			1,003,520			1,003,559
Effect of dilutive securities:
Stock acquisition rights		-			-			-
Convertible bonds		-			-			-
Weighted-average shares for diluted EPS computation		1,003,499			1,003,520			1,003,559

	Yen

Basic EPS		(98.59	)		(40.66	)		(258.66	)

Diluted EPS		(98.59	)		(40.66	)		(258.66	)

Potential shares of common stock upon the exercise of stock acquisition rights and convertible bonds, which were excluded from the computation of diluted EPS for the fiscal years ended March 31, 2009, 2010 and 2011 were 13,553 thousand shares, 17,600 thousand shares and 19,383 thousand shares, respectively. All potential shares were excluded as anti-dilutive for those fiscal years ended March 31, 2009, 2010 and 2011 due to Sony incurring a net loss attributable to its stockholders for those fiscal years.

23. Variable interest entities

Sony has, from time to time, entered into various arrangements with VIEs. These arrangements include facilities which provide for the leasing of certain property, several joint ventures in the recorded music business, the U.S. based music publishing business, the financing of film production and the outsourcing of manufacturing operations. In addition, Sony has entered into several accounts receivable sales programs that involve VIEs, which are described in Note 6. For the VIEs that are described below, it has been determined that Sony is the primary beneficiary and, accordingly, these VIEs are consolidated by Sony.

Sony leases the headquarters building of its U.S. subsidiary from a VIE. In December 2008, Sony renewed its option under the lease agreement and extended the term of the lease until December 2015. At the end of the lease term, Sony has agreed to either renew the lease, purchase the building or remarket it to a third party on behalf of the owner. Under the lease, Sony has provided a minimum guarantee to the VIE that if the sales price is less than 255 million U.S. dollars, Sony is obligated to make up the lesser of the shortfall or 214 million U.S. dollars. Based on a qualitative assessment, it was determined that Sony has the power to direct the activities that most significantly impact the VIE’s economic performance, as well as the obligation to absorb the losses of the VIE due to the minimum guarantee. As a result, it has been determined that Sony is the primary beneficiary. Sony has not provided any additional support to the VIE other than its contractually obligated lease payments. Sony has the option to purchase the building at any time during the lease term for 255 million U.S. dollars. The debt held by the VIE is unsecured and there is no recourse to the creditors outside of Sony. The assets of the VIE are not available to settle the obligations of Sony. At March 31, 2011, the VIE had property, plant and equipment of 14,837 million yen and long-term debt of 21,236 million yen which were included in Sony’s consolidated balance sheets.

Sony’s U.S. subsidiary that is engaged in the recorded music business has entered into several joint ventures with companies involved in the production and creation of recorded music. Sony has reviewed these joint ventures and determined that they are VIEs. Based on a qualitative assessment, it was determined that Sony has the power to direct the activities that most significantly impact the VIEs’ economic performance, as well as the obligation to absorb the losses of theses VIEs as Sony is responsible for providing funding to these VIEs, and in most cases absorbs all losses until the VIEs become profitable. As a result, it has been determined that Sony is the primary beneficiary. The assets of these VIEs are not available to settle the obligations of Sony. On an aggregate basis, the total assets and liabilities for these VIEs at March 31, 2011 were 13,738 million yen and 8,719 million yen, respectively.

Sony’s U.S. based music publishing subsidiary is a joint venture with a third party investor and has been determined to be a VIE. The subsidiary owns and acquires rights to musical compositions, exploits and markets these compositions and receives royalties or fees for their use. Under the terms of the joint venture, Sony has the obligation to fund any working capital deficits as well as any acquisition of music publishing rights made by the joint venture. In addition, the third party investor receives a guaranteed annual dividend of up to 17.5 million U.S. dollars through December 31, 2013. Based on a qualitative assessment, it was determined that Sony has the power to direct the activities that most significantly impact the VIE’s economic performance, as well as the obligation to absorb the losses of the VIE due to its obligation to provide funding to the joint venture. As a result, it has been determined that Sony is the primary beneficiary. The assets of the music publishing subsidiary are not available to settle the obligations of Sony. At March 31, 2011, the assets and liabilities of the VIE that were included in Sony’s consolidated balance sheets were as follows:

	Yen in millions
Assets:
Cash and cash equivalents		4,862
Account receivables, net		227
Other current assets		20,603
Property, plant and equipment, net		863
Intangibles, net		57,895
Goodwill		12,689
Other noncurrent assets		7,574
Total assets		104,713

Liabilities:
Accounts payable and accrued expenses		32,034
Other current liabilities		2,619
Other noncurrent liabilities		1,893
Total liabilities		36,546

VIEs in which Sony holds a significant variable interest, but is not the primary beneficiary are described as follows:

In connection with the September 2010 refinancing of the debt obligations of the third party investor in the music publishing subsidiary described above, Sony has issued a guarantee to a creditor of the third party investor in which Sony has agreed to repay the outstanding principal plus accrued interest up to a maximum of 303 million U.S. dollars to the creditor should the third party investor default on its obligation. The obligation of the third party investor is collateralized by its 50% interest in Sony’s music publishing subsidiary. Should Sony have to make a payment under the terms of the guarantee, Sony would assume the creditor’s rights to the underlying collateral. The assets of the third party investor that are being used as collateral were placed in a separate trust which is also a VIE in which Sony has significant variable interests. Based on a qualitative assessment, it was determined that Sony is not the primary beneficiary as Sony does not have the power to direct the activities of the trust. The assets held by the trust consist solely of the third party investor’s 50% ownership interest in the music publishing subsidiary. At March 31, 2011, the fair value of the assets held by the trust exceeded 303 million U.S. dollars.

Sony’s subsidiary in the Pictures segment entered into a joint venture agreement with a VIE to acquire the international distribution rights, as defined, to 12 pictures. The subsidiary is required to distribute these pictures internationally, for contractually defined fees determined as percentages of gross receipts and is responsible for all distribution and marketing expenses, which are recouped from such distribution fees, each as defined. The VIE was capitalized with total financing of 406 million U.S. dollars. Of this amount, 11 million U.S. dollars was contributed by the subsidiary, 95 million U.S. dollars was provided by unrelated third party investors and the remaining funding was provided through a 300 million U.S. dollar bank credit facility. Under the agreement, the subsidiary’s 11 million U.S. dollars equity investment is the last equity to be repaid. Based on the factors above, it was previously determined that the subsidiary was the primary beneficiary as it was projected to absorb the majority of the losses or residual returns. As of March 31, 2009, the bank credit facility had been terminated and the third party investors have been repaid their 95 million U.S. dollar investment. On May 11, 2009, the subsidiary repurchased from the VIE the international distribution rights to the 12 pictures and the VIE received a participation interest in these films on identical financial terms to those described above. As a result of repurchasing the international distribution rights from the VIE, Sony determined that the subsidiary was no longer the primary beneficiary as it was not projected to absorb the majority of the losses or residual returns of the VIE. No gain or loss was recognized by the subsidiary on the deconsolidation of the VIE. As of March 31, 2011, the subsidiary’s balance sheet includes 67 million yen of film costs related to the international distribution rights acquired from the VIE and 1,098 million yen of participation liabilities recorded within accounts payable, other and accrued expenses as well as other noncurrent liabilities due to the VIE.

Sony’s subsidiary in the Pictures segment entered into two separate production/co-financing agreements with VIEs to co-finance 19 films that were released over the 31 months ended July 31, 2008. The subsidiary received 565 million U.S. dollars over the term of the agreements to fund the production or acquisition cost of films (including fees and expenses). Additionally, on January 19, 2007, the subsidiary entered into a third production/co-financing agreement with another VIE to co-finance a majority of the films to be submitted through March 2012. The subsidiary has received a commitment from the third VIE that it will fund up to 525 million U.S. dollars on a revolving basis to fund the production or acquisition cost of films (including fees and expenses). At March 31, 2011, 18 films of the subsidiary have been released and approximately 554 million U.S. dollars collectively have been funded by the third VIE. Under all three agreements, the subsidiary is responsible for the marketing and distribution of the product through its global distribution channels. The VIEs share in the net profits, as defined, of the films after the subsidiary recoups a distribution fee, its marketing and distribution expenses, and third party participation and residual costs, each as defined. As the subsidiary did not have the power to direct the activities of these three VIEs that most significantly impact the VIEs’ economic performance nor issue any guarantees with respect to the VIEs, the subsidiary does not absorb the majority of the losses or residual returns, and therefore does not qualify as the primary beneficiary for any of the VIEs. At March 31, 2011, there were no amounts recorded on the subsidiary’s balance sheet that related to any of the VIEs other than the investors’ earned but unpaid share of the films’ net profits, as defined.

In January 2010, Sony sold 90.0% of its interest in a Mexican subsidiary which primarily manufactured LCD televisions, as well as other assets including machinery and equipment of 4,520 million yen and inventories of 5,619 million yen, to a contract manufacturer. The continuing entity, which would perform this manufacturing going forward, is a VIE as it is thinly capitalized and dependent on funding from the parent entity. Based on a qualitative assessment, it was determined that Sony is not the primary beneficiary as Sony does not have the power to direct the activities that most significantly impact the VIE’s economic performance nor does Sony have the obligation to absorb the losses of the VIE. In connection with the sale of Sony’s controlling interest in the subsidiary, Sony received 11,189 million yen and recorded a loss of 1,664 million yen during the fiscal year ended March 31, 2010. Concurrent with the sale, Sony entered into an agreement with the VIE and its parent company in which Sony agreed to purchase a significant share of the LCD televisions that Sony sells in certain markets, including the U.S. market. As of March 31, 2011, the amounts recorded on Sony’s consolidated balance sheets that relate to the VIE include receivables recorded within prepaid expenses and other current assets of 21,953 million yen and accounts payable, trade of 20,853 million yen. Sony’s maximum exposure to losses is considered insignificant.

As described in Note 6, accounts receivable sales programs in Japan and in the Financial Services segment also involve VIEs that formerly met the criteria to be a QSPE. These VIEs are all special purpose entities of the sponsor banks. In addition, a counterparty of the accounts receivable transactions in the U.S. includes a VIE. Based on a qualitative assessment, Sony is not the primary beneficiary and therefore does not consolidate these entities as Sony does not have the power to direct the activities, an obligation to absorb losses, or the right to receive the residual returns of these VIEs. Sony’s maximum exposure to losses from these VIEs is considered insignificant.

24. Acquisitions

On April 1, 2009, Sony adopted new accounting guidance related to business combinations. The new guidance requires that the acquisition method of accounting be applied to a broader range of business combinations, amends the definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its fair value at the acquisition date, and requires the assets acquired and liabilities assumed in a business combination to be measured and recognized at their fair values as of the acquisition date, with limited exceptions.

(1) SONY BMG acquisition

On October 1, 2008, Sony completed the acquisition of Bertelsmann AG’s 50% equity interest in SONY BMG, a global entertainment company engaged primarily in the development, production and distribution of recorded music, in all commercial formats and musical genres.

SONY BMG was a 50/50 joint venture between Sony and Bertelsmann AG originally created in August 2004. Prior to this acquisition, Sony’s 50% equity interest was accounted for under the equity method of accounting through September 30, 2008. As a result of Sony’s acquisition of Bertelsmann AG’s 50% interest, SONY BMG, which has been renamed Sony Music Entertainment, became a wholly owned subsidiary of Sony and the results of SONY BMG were consolidated by Sony beginning October 1, 2008.

This acquisition allows Sony to achieve a deeper and more robust integration between the wide-ranging global assets of the recorded music company and Sony’s products, operating companies and affiliates. Ultimately, this acquisition is expected to further Sony’s goal of offering a total entertainment experience to consumers.

Bertelsmann AG’s 50% interest in SONY BMG was acquired for 97,424 million yen, consisting of cash consideration of 95,410 million yen and transaction costs of 2,014 million yen. The acquisition was funded through a 63,606 million yen cash payment from Sony and a 31,803 million yen cash payment from SONY BMG, which represented Sony’s share of SONY BMG’s cash balance. Bertelsmann AG received an additional 31,803 million yen in cash from SONY BMG for its share of SONY BMG’s cash balance, resulting in total cash receipts to Bertelsmann AG of 127,213 million yen.

As of October 1, 2008, Sony consolidated all of the assets and liabilities of SONY BMG. Sony’s 50% share of the assets and liabilities of SONY BMG were recorded at their historical carryover basis while the 50% share of the assets and liabilities acquired from Bertelsmann AG were recorded at fair value.

During the finalization of the purchase price adjustments, certain adjustments were made to the allocation of the purchase price for the acquired assets and liabilities of SONY BMG to reflect the changes in the value of certain assets and liabilities. These changes resulted in a 8,649 million yen decrease in the goodwill recognized from the acquisition of Bertelsmann AG’s 50% interest in SONY BMG. These adjustments were primarily reflected as an increase in deferred tax assets as a result of modifications to various pre-merger tax estimates as well as decreases in acquired liabilities as certain restructuring activities that were identified at the time of the acquisition will not be implemented.

The following table summarizes the preliminary values assigned to the assets and liabilities that were recorded for SONY BMG, including net assets at historical carryover basis, as well as the final adjustments described above:

	Yen in millions
	Assets and liabilities recorded at the historical carryover basis			Acquired assets and liabilities recorded at fair value		Total (as of October 1, 2008)		Adjustments			Total (after adjustments)

Notes and accounts receivable, net		28,835			28,835		57,670					57,670
Capitalized artist advances - short-term		11,979			11,979		23,958					23,958
Other current assets		33,711			25,443		59,154		(531	)		58,623
Capitalized artist advances - long-term		8,587			8,587		17,174					17,174
Intangibles, net		12,827			96,258		109,085					109,085
Goodwill		30,319			72,935		103,254		(8,649	)		94,605
Other noncurrent assets		14,418			15,159		29,577		7,716			37,293
Total assets		140,676			259,196		399,872		(1,464	)		398,408

Accrued royalties		66,151			66,044		132,195					132,195
Other current liabilities		60,744			64,879		125,623		(1,464	)		124,159
Accrued pension and severance costs		11,661			11,767		23,428					23,428
Other noncurrent liabilities		8,057			19,082		27,139					27,139
Total liabilities		146,613			161,772		308,385		(1,464	)		306,921
Net assets recorded for SONY BMG		(5,937	)		97,424		91,487		-			91,487

No amounts were allocated to in-process research and development in this acquisition. Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired and is not deductible for tax purposes. The goodwill recorded in connection with this acquisition is included in the Music segment. Prior to the acquisition, both Sony and Bertelsmann AG had provided certain services to SONY BMG including manufacturing and distribution services, the leasing of office space and the licensing of the Sony and Bertelsmann AG brands. It was determined that the acquisition of Bertelsmann AG’s interest did not result in a settlement gain or loss as a result of these pre-existing relationships.

The intangible assets are comprised of the following:

	Yen in millions						Years
	Intangibles recorded at the historical carryover basis		Acquired intangibles recorded at fair value		Total		Weighted-average amortization period
Intangibles subject to amortization, net
Music catalogs		10,283		77,706		87,989		25
Artist contracts		2,014		15,160		17,174		10
Other		530		3,392		3,922		5
Total intangibles		12,827		96,258		109,085		22

The results of operations for SONY BMG are included in the Music segment beginning October 1, 2008. The following unaudited supplemental pro forma financial information presents the combined results of operations of Sony and SONY BMG as though the acquisition had occurred as of the beginning of the fiscal year ended March 31, 2009:

	Yen in millions, except per share data
	Fiscal year ended March 31
	2009
	(Unaudited)

Net sales		7,266,265
Operating loss		(234,724	)
Net loss attributable to Sony Corporation’s stockholders		(104,614	)

Basic EPS		(104.25	)
Diluted EPS		(104.25	)

The unaudited supplemental pro forma financial information is based on estimates and assumptions, which Sony believes are reasonable and is not intended to represent or be indicative of what Sony’s consolidated net loss attributable to Sony Corporation’s stockholders would have been had the acquisition been completed at the beginning of the period and should not be taken as indicative of Sony’s future consolidated net income (loss) attributable to Sony Corporation’s stockholders. The unaudited supplemental pro forma financial information includes incremental intangible asset amortization, interest costs and other charges as a result of the acquisition, net of the related tax effects.

(2) Game Show Network acquisition

In April 2009, Sony sold a portion of its 50% ownership interest in Game Show Network, LLC (“GSN”), which operates a U.S. cable network and online business, to the other investor in GSN, which resulted in cash proceeds of 8,831 million yen and a gain of 8,322 million yen for the fiscal year ended March 31, 2010. The gain was recorded in (gain) loss on sale, disposal or impairment of assets and other, net.

In March 2011, Sony acquired an additional 5% equity interest in GSN from the successor in interest to the other investor (“Current Investor”) for 4,849 million yen, resulting in Sony owning a 40% equity interest in GSN. As part of the acquisition, Sony obtained a controlling interest in GSN, including the ability to appoint the majority of representatives on the GSN management committee, control over approval of the budget for GSN and control over the hiring, terminating, and setting compensation of the senior management of GSN. This acquisition will strengthen Sony’s presence in U.S. cable networks and Sony expects that it will allow GSN to further exploit and benefit from the light entertainment assets in the Pictures segment.

In addition to acquiring the additional 5% equity interest in GSN, Sony granted a put right to the Current Investor and received a call right from the Current Investor for an additional 18% equity interest in GSN. The put right is exercisable during three windows starting on April 1 of 2012, 2013 and 2014 and lasting for 60 business days. The exercise price of the put is calculated using a formula based on an agreed upon multiple of the earnings of GSN with a minimum price of 234 million U.S. dollars and a maximum price of 288 million U.S. dollars. Sony’s call right is exercisable only if the put is not exercised, and may be exercised for 60 business days immediately after the last put window has expired. The exercise price of the call is calculated using the same formula as the put with a minimum price of 234 million U.S. dollars. A buy/sell provision also applies to the equity interests in GSN owned by Sony and the Current Investor and may be exercised annually for a 60 business day window beginning April 1, 2015.

Prior to the March 2011 acquisition, Sony’s interest in GSN was accounted for under the equity method of accounting. As a result of Sony obtaining a controlling interest in GSN, Sony consolidated GSN using the acquisition method of accounting and recorded the fair value of the identifiable assets, liabilities assumed, redeemable noncontrolling interest, noncontrolling interest and residual goodwill of GSN. In accordance with the accounting guidance for business combinations achieved in stages, Sony remeasured the 35% equity interest in GSN that it owned prior to the acquisition at a fair value of 33,940 million yen which resulted in the recognition of a gain of 26,991 million yen recorded in (gain) loss on sale, disposal or impairment of assets and other, net.

The following table summarizes the preliminary fair value assigned to the assets and liabilities of GSN that were recorded in the Pictures segment. Due to the fact that the acquisition closed in March 2011, certain areas of purchase price allocation are not yet finalized including the fair value of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, income taxes and residual goodwill.

	Yen in millions
	Acquired assets and liabilities recorded at fair value

Cash and cash equivalents		4,039
Notes and accounts receivable, trade		3,089
Prepaid expenses and other current assets		395
Film costs		4,178
Property, plant and equipment		220
Intangibles		46,749
Goodwill		46,432
Other noncurrent assets		38
Total assets		105,140

Notes and accounts payable, trade		970
Accounts payable, other and accrued expenses		4,131
Other current liabilities		59
Other noncurrent liabilities		1,683
Total liabilities		6,843

Redeemable noncontrolling interest		18,779
Noncontrolling interest		40,728
Total		38,790

The portion of the noncontrolling interest that can be put to Sony is accounted for as mandatorily redeemable securities because redemption is outside of Sony’s control. As such, the redeemable noncontrolling interest is reported in the mezzanine equity section in the consolidated balance sheets at March 31, 2011. The fair value of the noncontrolling interest was calculated using a combination of a discounted cash flow model and market comparables of similar transactions and companies. A lack of control discount was not applied in determining the fair value of the noncontrolling interest as the cash flows attributable to the noncontrolling interest holder are expected to be proportional to the cash flows attributable to the controlling interest holder.

No amounts have been allocated to in-process research and development in this acquisition. Goodwill represents unidentifiable intangible assets, such as future growth from new revenue streams and synergies with Sony’s existing assets and businesses, and is calculated as the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired and is not deductible for tax purposes. The goodwill recorded in connection with this acquisition is included in the Pictures segment.

The intangible assets are comprised of the following:

	Acquired intangibles recorded at fair value		Weighted-average amortization period
	Yen in millions		Years
Intangibles subject to amortization
Television carriage agreements (broadcasting agreements)		33,698		20
Other		4,162		1
Intangible having an indefinite life
Trademarks		8,889		-
Total intangibles		46,749

The results of operations of GSN are included in the Pictures segment after the acquisition date. The following unaudited supplemental pro forma financial information presents the combined results of operations of Sony and GSN as though the acquisition had occurred as of the beginning of the fiscal years ended March 31, 2010 and 2011:

	Yen in millions, except per share data
	Fiscal year ended March 31
	2010			2011
	(Unaudited)

Net sales		6,313,222			6,325,310
Operating income		60,685			199,445
Net loss attributable to Sony Corporation’s stockholders		(33,655	)		(259,731	)

Basic EPS		(33.54	)		(258.81	)
Diluted EPS		(33.54	)		(258.81	)

The unaudited supplemental pro forma financial information is based on estimates and assumptions, which Sony believes are reasonable and is not intended to represent or be indicative of what Sony’s consolidated net loss attributable to Sony Corporation’s stockholders would have been had the acquisition been completed at the beginning of each of these periods and should not be taken as indicative of Sony’s future consolidated net loss attributable to Sony Corporation’s stockholders. The unaudited supplemental pro forma financial information includes a gain from remeasurement of the previously owned equity interest and incremental intangible asset amortization, net of the related tax effects.

(3) Other acquisitions

During the fiscal year ended March 31, 2009, Sony completed certain other acquisitions for total consideration of 95,458 million yen which was paid primarily in cash and included:

Gracenote, Inc. (“Gracenote”), a global leader in technology and services for digital media identification, enrichment, and recommendation. Sony acquired Gracenote for 27,521 million yen, consisting of a cash payment of 27,108 million yen and transaction costs of 413 million yen; and

2waytraffic N.V. (“2waytraffic”), a Dutch entertainment company engaged primarily in creating, producing, licensing and distributing light entertainment content across television, mobile and digital platforms. Sony acquired 2waytraffic for 38,176 million yen, consisting of a cash payment of 24,369 million yen, assumption of 2waytraffic’s third-party debt of 12,519 million yen and transaction costs of 1,288 million yen.

As a result of Sony’s acquisition of Gracenote, 2waytraffic and other businesses, Sony recorded 61,614 million yen of goodwill and 32,977 million yen of intangible assets.

During the fiscal year ended March 31, 2010, Sony completed acquisitions for total consideration of 17,616 million yen, of which 1,420 million yen was contingent consideration and subject to future change. The remaining consideration was paid primarily in cash. As a result of the acquisitions, Sony recorded 13,425 million yen of goodwill and 3,708 million yen of intangible assets.

During the fiscal year ended March 31, 2011, Sony completed other acquisitions for total consideration of 2,884 million yen which was paid primarily in cash and there was no material contingent consideration subject to future change. As a result of the acquisitions, Sony recorded 1,415 million yen of goodwill and 1,227 million yen of intangible assets.

No significant amounts have been allocated to in-process research and development and all of the entities described above have been consolidated into Sony’s results of operations since their respective acquisition dates. Pro forma results of operations have not been presented because the effects of Gracenote, 2waytraffic and the other acquisitions, individually and in aggregate, were not material.

25. Divestitures

In March 2010, Sony sold a portion of its investment and certain ancillary rights, which was included in the Pictures segment, in its HBO Latin America venture, which owns and operates certain premium pay television businesses in Latin America, to the venture’s majority shareholder (“Majority Shareholder”). Sony accounted for this sale in accordance with the accounting guidance for transfers and servicing. Prior to this transaction, Sony owned approximately 29% of this venture, which was accounted for under the equity method, and, as a result of this transaction, Sony owned approximately 8% of this venture (the “Retained Interest”), which was accounted for under the cost method.

As consideration for the transaction, Sony received cash proceeds of 19,424 million yen and received a put option valued at 1,371 million yen and the sale resulted in a gain of 18,035 million yen for the fiscal year ended March 31, 2010. In November 2010, Sony notified the Majority Shareholder that Sony intended to exercise the put option. The purchase of the Retained Interest by the Majority Shareholder was completed in March 2011 which resulted in cash proceeds of 5,285 million yen and a gain of 3,329 million yen for the fiscal year ended March 31, 2011.

After the closing of the sale in March 2010, the parties submitted a non-suspensory filing to the Brazilian competition authority. On May 6, 2011, Sony received notification from the Brazilian competition authority that the transaction was approved without restriction. In the event the Brazilian competition authority did not approve both the March 2010 and the March 2011 sales, the sale of the Brazil portion of the investments could have been subject to rescission, in which case approximately 40% of the purchase prices, and the corresponding gains, could have been subject to rescission.

In January 2010, in a separate transaction, Sony sold its entire investment, which was included in the Pictures segment, in its HBO Central Europe joint venture, which owns and operates a premium pay television business in Central Europe, to an affiliate of the Majority Shareholder. The sale resulted in cash proceeds of 7,660 million yen and a gain of 3,957 million yen for the fiscal year ended March 31, 2010.

The above mentioned transactions were recorded in (gain) loss on sale, disposal or impairment of assets and other, net due to either the nature of the transaction or in consideration of factors including the relationship to Sony’s core operations.　

26. Collaborative arrangements

Sony has entered into collaborative arrangements, through a subsidiary in the Pictures segment, with one or more active participants to jointly finance, produce and/or distribute motion picture or television product under which both the subsidiary and the other active participants share in the risks and rewards of ownership. These arrangements are referred to as co-production and distribution arrangements.

Sony typically records an asset for only the portion of the motion picture or television product it owns and finances. Sony and the other participants typically distribute the product in different media or markets. Revenues earned and expenses incurred for the media or markets in which Sony distributes the product are typically recorded on a gross basis. Sony typically does not record revenues earned and expenses incurred when the other participants distribute the product. Sony and the other participants typically share in the profits from the distribution of the product in all media or markets. For motion picture product, if Sony is a net receiver of (1) Sony’s share of the profits from the media or markets distributed by the other participants less (2) the other participants’ share of the profits from the media or markets distributed by Sony then the net amount is recorded as net sales. If Sony is a net payer then the net amount is recorded in cost of sales. For television product, Sony records its share of the profits from the media or markets distributed by the other participants as sales, and the other participants’ share of the profits from the media or markets distributed by Sony as cost of sales.

For the years ended March 31, 2009, 2010 and 2011, 4,414 million yen, 4,687 million yen and 4,866 million yen, respectively, were recorded as cost of sales for amounts owed to the other participants and 4,600 million yen, 9,936 million yen and 10,244 million yen, respectively, were recorded as net sales for amounts due from the other participants in these collaborative arrangements.

27. Commitments, contingent liabilities and other

(1) Commitments:

A. Loan commitments

Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts. As of March 31, 2011, the total unused portion of the line of credit extended under these contracts was 18,408 million yen. The aggregate amounts of future year-by-year payments for these loan commitments cannot be determined.

B. Purchase commitments and other

Purchase commitments and other outstanding at March 31, 2011 amounted to 350,015 million yen. The major components of these commitments are as follows:

In the ordinary course of business, Sony makes commitments for the purchase of property, plant and equipment. As of March 31, 2011, such commitments outstanding were 103,465 million yen.

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within 5 years. As of March 31, 2011, these subsidiaries were committed to make payments under such contracts of 111,112 million yen.

Certain subsidiaries in the Music segment have entered into long-term contracts with recording artists and companies for the production and/or distribution of prerecorded music and videos. These contracts cover various periods mainly within 5 years. As of March 31, 2011, these subsidiaries were committed to make payments of 38,354 million yen under such long-term contracts.

The schedule of the aggregate amounts of year-by-year payment of purchase commitments during the next five years and thereafter is as follows:

Fiscal year ending March 31	Yen in millions

2012		207,982
2013		46,707
2014		35,094
2015		25,073
2016		20,338
Later years		14,821
Total		350,015

(2) Contingent liabilities:

Sony had contingent liabilities including guarantees given in the ordinary course of business, which amounted to 103,613 million yen at March 31, 2011. The major components of these contingent liabilities are as follows:

As discussed in Note 23, Sony has agreed to repay the outstanding principal plus accrued interest up to a maximum of 303 million U.S. dollars to the creditor of the third party investor of Sony’s U.S. based music publishing subsidiary should the third party investor default on its obligation. The obligation of the third party investor is collateralized by its 50% interest in Sony’s music publishing subsidiary. Should Sony have to make a payment under the terms of the guarantee, Sony would assume the creditor’s rights to the underlying collateral. At March 31, 2011, the fair value of the collateral exceeded 303 million U.S. dollars.

Sony has agreed to guarantee a portion of Sony Ericsson’s debt and its facilities up to a maximum of 225 million euros. At March 31, 2011, Sony has guaranteed 26,516 million yen (225 million euros) for a portion of Sony Ericsson’s debt under this arrangement. These guarantees expire by March 2012.

Beginning earlier in 2011, the network services of PlayStation®Network, Qriocity™, Sony Online Entertainment LLC and websites of other subsidiaries came under cyber-attack. As of June 7, 2011, Sony has not received any confirmed reports of customer identity theft issues or misuse of credit cards from the cyber-attacks. However, in connection with certain of these matters, Sony has received inquiries from authorities in a number of jurisdictions, including orders for reports issued by the Ministry of Economy, Trade and Industry of Japan as well as the Financial Services Agency of Japan, formal and/or informal requests for information from Attorneys General from a number of states in the United States and the U.S. Federal Trade Commission, various U.S. congressional inquiries and others. Additionally, Sony Corporation and/or certain of its subsidiaries have been named in a number of purported class actions in certain jurisdictions, including the United States. Based on the stage of these inquiries and proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of these matters.

In October 2009, Sony Corporation’s U.S. subsidiary, Sony Optiarc America Inc., received a subpoena from the U.S. Department of Justice (“DOJ”) Antitrust Division seeking information about its optical disk drive business. Sony understands that the DOJ and agencies outside the United States are investigating competition in optical disk drives. Subsequently, a number of purported class action lawsuits were filed in certain jurisdictions, including the United States, in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Based on the stage of these proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of these matters.

In addition, Sony Corporation and certain of its subsidiaries are defendants or otherwise involved in other pending legal and regulatory proceedings. However, based upon the information currently available to Sony and its legal counsel, the management of Sony believes that the outcome from such legal and regulatory proceedings would not have a material effect on Sony’s consolidated financial statements.

(3) Redeemable noncontrolling interest:

As discussed in Note 24, in connection with the GSN transaction, Sony granted a put right to the Current Investor for an additional 18% equity interest in GSN. The put right is exercisable during three windows starting on April 1 of 2012, 2013 and 2014 and lasting for 60 business days. The exercise price of the put is calculated using a formula based on an agreed upon multiple of the earnings of GSN with a minimum price of 234 million U.S. dollars and a maximum price of 288 million U.S. dollars. The portion of the noncontrolling interest that can be put to Sony is accounted for as mandatorily redeemable securities because redemption is outside of Sony’s control and is reported in the mezzanine equity section in the consolidated balance sheets at March 31, 2011.

(4) Product warranty liabilities:

The changes in product warranty liability for the fiscal years ended March 31, 2009, 2010 and 2011 are as follows:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Balance at beginning of the fiscal year		59,748			57,922			50,856
Additional liabilities for warranties		60,845			46,686			48,610
Settlements (in cash or in kind)		(54,498	)		(45,218	)		(36,537	)
Changes in estimate for pre-existing warranty reserve		(2,042	)		(7,649	)		(4,802	)
Translation adjustment		(6,131	)		(885	)		(3,187	)
Balance at end of the fiscal year		57,922			50,856			54,940

28. Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chairman, Chief Executive Officer and President.

Sony realigned its reportable segments from the first quarter of the fiscal year ending March 31, 2011, to reflect modifications to the organizational structure as of April 1, 2010, primarily repositioning the operations of the previously reported B2B & Disc Manufacturing segment. In connection with this realignment, the Consumer Products & Devices segment was renamed the Consumer, Professional & Devices (“CPD”) segment.

The CPD segment includes televisions, digital imaging, audio and video, semiconductors and components as well as professional solutions (the B2B business which was previously incorporated in the B2B & Disc Manufacturing segment). The equity results of S-LCD are also included within the CPD segment. The Networked Products & Services (“NPS”) segment includes Game as well as PC and Other Networked Businesses. The Pictures segment develops, produces and acquires and manufactures image-based software, including motion picture, home entertainment and television products mainly in the U.S., and markets, distributes and broadcasts these products in the worldwide market. The Music segment includes SME, SMEJ and a 50% owned U.S. based joint venture in the music publishing business, Sony/ATV Music Publishing LLC. For the fiscal year ended March 31, 2009, the Music segment’s operating income includes the equity results for SONY BMG through September 30, 2008. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market, a credit financing business and a bank business in Japan. The equity earnings from Sony Ericsson continue to be presented as a separate segment. All Other consists of various operating activities, including a mobile phone OEM business in Japan and So-net Entertainment Corporation, an Internet-related service business subsidiary operating mainly in Japan. The disc manufacturing business previously included in the B2B & Disc Manufacturing segment is now included in All Other. Sony’s products and services are generally unique to a single operating segment. In connection with the realignment, all prior period amounts in the segment disclosures have been restated to conform to the current presentation.

Sales and operating revenue:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Sales and operating revenue:
Consumer, Professional & Devices -
Customers		3,926,386			3,207,546			3,345,048
Intersegment		431,363			310,573			227,696
Total		4,357,749			3,518,119			3,572,744
Networked Products & Services -
Customers		1,684,758			1,511,575			1,493,136
Intersegment		70,885			61,041			86,195
Total		1,755,643			1,572,616			1,579,331
Pictures -
Customers		717,513			705,237			599,654
Intersegment		-			-			312
Total		717,513			705,237			599,966
Music -
Customers		363,074			511,097			457,771
Intersegment		23,979			11,519			12,972
Total		387,053			522,616			470,743
Financial Services -
Customers		523,307			838,300			798,495
Intersegment		14,899			13,096			8,031
Total		538,206			851,396			806,526
All Other -
Customers		453,603			379,862			377,816
Intersegment		76,523			80,904			70,004
Total		530,126			460,766			447,820
Corporate and elimination		(556,297	)		(416,752	)		(295,857	)
Consolidated total		7,729,993			7,213,998			7,181,273

CPD intersegment amounts primarily consist of transactions with the NPS segment.

NPS intersegment amounts primarily consist of transactions with the CPD segment.

All Other intersegment amounts primarily consist of transactions with the Pictures segment, the Music segment and the NPS segment.

Corporate and elimination includes certain brand and patent royalty income.

Segment profit or loss:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Operating income (loss):
Consumer, Professional & Devices		(115,571	)		(53,174	)		2,898
Networked Products & Services		(87,428	)		(83,265	)		35,569
Pictures		29,916			42,814			38,669
Music		27,843			36,513			38,927
Financial Services		(31,157	)		162,492			118,818
Equity in net income (loss) of Sony Ericsson		(30,255	)		(34,514	)		4,155
All Other		3,105			(4,976	)		8,554
Total		(203,547	)		65,890			247,590
Corporate and elimination		(24,236	)		(34,118	)		(47,769	)
Consolidated operating income (loss)		(227,783	)		31,772			199,821
Other income		98,825			43,834			44,966
Other expenses		(45,997	)		(48,694	)		(39,774	)
Consolidated income (loss) before income taxes		(174,955	)		26,912			205,013

Operating income (loss) is Sales and operating revenue less Costs and expenses, and includes Equity in net income (loss) of affiliated companies.

Corporate and elimination includes certain restructuring costs and other corporate expenses, which are attributable principally to headquarters and are not allocated to segments.

Other significant items:

	Yen in millions
	Fiscal year ended March 31
	2009			2010			2011

Equity in net income (loss) of affiliated companies:
Consumer, Professional & Devices		3,746			(647	)		7,084
Networked Products & Services		-			-			-
Pictures		7,991			4,347			2,483
Music		(6,029	)		(80	)		(265	)
Financial Services		(1,796	)		(1,345	)		(1,961	)
Sony Ericsson		(30,255	)		(34,514	)		4,155
All Other		1,234			2,004			2,566
Consolidated total		(25,109	)		(30,235	)		14,062

Depreciation and amortization:
Consumer, Professional & Devices		250,353			219,132			164,478
Networked Products & Services		21,651			23,662			24,483
Pictures		7,904			8,427			7,996
Music		9,756			13,427			12,166
Financial Services, including deferred insurance acquisition costs		67,714			56,531			62,077
All Other		20,561			21,488			20,777
Total		377,939			342,667			291,977

Corporate		27,504			28,337			33,389

Consolidated total		405,443			371,004			325,366

The following table includes a breakdown of sales and operating revenue to external customers by product category in the CPD and NPS segments. The CPD and NPS segments are each managed as a single operating segment by Sony’s management.

	Yen in millions
	Fiscal year ended March 31
Sales and operating revenue:	2009		2010		2011
Consumer, Professional & Devices
Televisions		1,275,692		1,005,773		1,200,491
Digital Imaging		831,820		664,502		642,570
Audio and Video		531,542		449,882		426,594
Semiconductors		310,682		299,715		358,396
Components		613,013		476,097		410,090
Professional Solutions		346,326		295,360		287,394
Other		17,311		16,217		19,513
Total		3,926,386		3,207,546		3,345,048

Networked Products & Services
Game		984,855		840,711		798,405
PC and Other Networked Businesses		699,903		670,864		694,731
Total		1,684,758		1,511,575		1,493,136

Pictures		717,513		705,237		599,654
Music		363,074		511,097		457,771
Financial Services		523,307		838,300		798,495
All Other		453,603		379,862		377,816
Corporate		61,352		60,381		109,353
Consolidated total		7,729,993		7,213,998		7,181,273

Geographic information:

Sales and operating revenue to external customers which are attributed to countries based on location of customers for the fiscal years ended March 31, 2009, 2010 and 2011 and long-lived assets as of March 31, 2010 and 2011 are as follows:

	Yen in millions
	Fiscal year ended March 31
	2009		2010		2011
Sales and operating revenue:
Japan		1,873,219		2,099,297		2,152,552
U.S.A.		1,827,812		1,595,016		1,443,693
Europe		1,987,692		1,644,698		1,539,432
Asia-Pacific		1,285,551		1,193,573		1,288,412
Other areas		755,719		681,414		757,184
Total		7,729,993		7,213,998		7,181,273

	Yen in millions
	March 31
	2010		2011
Long-lived assets:
Japan		1,254,663		1,260,682
U.S.A.		750,436		729,647
Europe		194,717		156,201
Asia-Pacific		113,360		124,383
Other areas		58,545		50,337
Total		2,371,721		2,321,250

Geographic information for the fiscal years ended March 31, 2009 and 2010 in the table above has been restated to reflect the change in geographic classification.

Major areas in each geographic classification excluding Japan and U.S.A. are as follows:

(1) Europe: United Kingdom, France, Germany, Russia and Spain

(2) Asia-Pacific: China, Taiwan, India, South Korea and Oceania

(3) Other areas: The Middle East/Africa, Brazil, Mexico and Canada

There are not any individually material countries with respect to the sales and operating revenue and long-lived assets included in Europe, Asia-Pacific and Other areas.

Transfers between reportable business segments or geographic areas are made at amounts which Sony’s management believes approximate arms-length transactions.

There were no sales and operating revenue with any single major external customer for the fiscal years ended March 31, 2009, 2010 and 2011.

29. Subsequent events

On April 1, 2011, Sony Semiconductor Kyushu Corporation, a wholly owned subsidiary of Sony Corporation, acquired semiconductor fabrication facilities from Toshiba Corporation (“Toshiba”). The fabrication facilities were operated by Nagasaki Semiconductor Manufacturing Corporation (“NSM”), a joint venture among Toshiba, Sony Corporation and Sony Computer Entertainment Inc. (“SCEI”), a wholly owned subsidiary of Sony Corporation. The purchase price for the facilities was 53,000 million yen. NSM was dissolved on March 31, 2011, and accordingly Toshiba, Sony Corporation and SCEI terminated the NSM joint venture relationship.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SONY CORPORATION (Registrant)
	By:	/s/ Masaru Kato
		(Signature) Masaru Kato Executive Vice President and Chief Financial Officer

June 8, 2011