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).

During fiscal year ended March 31, 2012, Sony Corporation acquired the remaining interests in Sony Ericsson Mobile Communications AB (“Sony Ericsson”) and sold all of its shares of S-LCD Corporation (“S-LCD”), both of which were considered significant equity affiliates. There are no remaining individually significant investments following these transactions.

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
	2012			2013
Current assets		167,786			254,606
Noncurrent assets		168,143			513,104
Current liabilities		93,535			205,749
Noncurrent liabilities and noncontrolling interests		79,513			308,410
Percentage of ownership in equity investees		20%-50	%		20%-50	%

Statements of Income


	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
Consolidating and reconciling adjustments:
Other		7			1,463

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


	Yen in millions
	Fiscal year ended March 31, 2012
	Sony Ericsson			S-LCD			Others			Total
Net revenues		475,898			146,002			123,610			745,510

Operating income (loss)		(44,239	)		(4,644	)		5,247			(43,636	)
Other income (expense), net		4,504			(3,098	)

Income (loss) before income taxes		(39,735	)		(7,742	)
Income tax (expense) benefit		(73,054	)		(374	)
Net income (loss) attributable to noncontrolling interests		(2,729	)		—

Net income (loss) attributable to controlling interests		(115,518	)		(8,116	)		950			(122,684	)
Percentage of ownership in equity investees		50	%		50	%		20%-50	%
Equity in net income (loss) of affiliated companies, before consolidating and reconciling adjustments		(57,759	)		(4,058	)
Consolidating and reconciling adjustments:
Impairment loss including translation adjustments		—			(60,019	)
Other		79			(1	)

Equity in net income (loss) of affiliated companies		(57,680	)		(64,078	)		61			(121,697	)


	Yen in millions
	Fiscal year ended March 31, 2013
Net revenues		193,405
Operating income (loss)		(14,759	)
Net income (loss) attributable to controlling interests		(26,026	)
Percentage of ownership in equity investees		20%-50	%

Sony Ericsson, a 50/50 joint venture with Telefonaktiebolaget LM Ericsson (“Ericsson”) focused on mobile phone handsets, was established in October 2001 and was included in affiliated companies accounted for under the equity method through February 15, 2012. On February 15, 2012, Sony Corporation acquired Ericsson’s 50 percent stake in Sony Ericsson, making the mobile handset business a wholly-owned subsidiary of Sony Corporation. Refer to Note 24.

S-LCD, a joint venture with Samsung Electronics Co., Ltd. (“Samsung”) focused on manufacturing amorphous TFT panels, was established in April 2004 with Sony’s ownership interest of 50% minus 1 share. S-LCD was strategic to Sony’s television business as it provided a source of high quality large screen LCD panels to differentiate Sony’s Bravia LCD televisions. In June 2011, S-LCD decreased its capital stock by 0.6 trillion Korean won and Sony received a cash distribution of 22,100 million yen from S-LCD. However, LCD panel and television market conditions became increasingly challenging and in order to respond to the situation and to strengthen their respective market competitiveness, Sony and Samsung agreed to shift to a new LCD panel business alliance in December 2011. As a result of this agreement, on January 19, 2012, Sony sold to Samsung all of its shares of S-LCD, and received cash consideration of 71,986 million yen (1.07 trillion Korean won) from Samsung. Following the transaction S-LCD was no longer an equity affiliate. During the fiscal year ended March 31, 2012, Sony recorded a 60,019 million yen other-than-temporary impairment loss on its share of S-LCD, including the reclassification to net income of foreign currency translation adjustments and the impact of exchange rate fluctuations between the initial impairment loss and closing of the sale to Samsung. Cash proceeds from the sale of the investment in S-LCD are included in sales of securities investments in the consolidated statements of cash flows.

On June 29, 2012, an investor group which included a wholly owned subsidiary of Sony Corporation completed its acquisition of EMI Music Publishing. To effect the acquisition, the investor group formed DH Publishing, L.P. (“DHP”) which acquired EMI Music Publishing for total consideration of 2.2 billion U.S. dollars. Sony invested 320 million U.S. dollars in DHP, through Nile Acquisition LLC, for a 39.8% equity interest. Nile Acquisition LLC is a joint venture with the third party investor of Sony’s U.S. based music publishing subsidiary in which Sony holds a 74.9% ownership interest. In addition, DHP entered into an agreement with Sony’s U.S. based music publishing subsidiary in which the subsidiary provides administration services to DHP. Sony accounts for its interest in DHP under the equity method. DHP was determined to be a variable interest entity as described in Note 23.

On February 25, 2013, Sony sold 95,000 shares of its 886,908 shares of M3, Inc. (“M3”), a consolidated subsidiary of Sony, to a third party for cash consideration of 14,236 million yen, which is included within other in the investing activities section of the consolidated statements of cash flows. In connection with the sale, Sony recorded a gain of 122,160 million yen in other operating (income) loss, net in the consolidated statements of income for the fiscal year ended March 31, 2013. Of this gain, 117,216 million yen relates to the remeasurement to fair value, using M3’s closing stock price on the date of the sale, of the remaining 791,908 shares of M3 (49.8% of the issued and outstanding shares of M3) that Sony continues to own after the sale in accordance with the accounting guidance for deconsolidation of a subsidiary. Sony will remain a major shareholder of M3 and will continue to pursue opportunities to collaborate with M3 in certain business areas, including medical. Sony accounts for its remaining interest in M3 under the equity method.

The carrying value of Sony’s investment in M3 exceeded its proportionate share in the underlying net assets of M3 by 117,014 million yen at March 31, 2013. The excess is substantially attributable to the remeasurement to fair value of the remaining shares of M3, and allocated to identifiable tangible and intangible assets. The intangible assets relate primarily to M3’s medical web-portal. The unassigned residual value of the excess is recognized as goodwill as a component of the investment balance. The amounts allocated to intangible assets are amortized net of the related tax effects to equity in net income (loss) of affiliated companies over their respective estimated useful lives, principally 10 years, using the straight-line method.

With the exception of M3 as described above, 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, 2012 and 2013.

With the exception of the investment in M3 which is quoted on the Tokyo Stock Exchange and has a carrying and fair value at March 31, 2013 of 128,815 million yen and 144,048 million yen, respectively, there were no affiliated companies accounted for under the equity method with a market quotation at March 31, 2012 and 2013.

The number of affiliated companies accounted for under the equity method at March 31, 2012 and 2013 were 95 and 101, respectively.

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


	Yen in millions
	March 31
	2012		2013
Accounts receivable, trade		4,125		7,294

Accounts payable, trade		508		880
Capital lease obligations		39,080		27,485


	Yen in millions
	Fiscal year ended March 31
	2011		2012		2013
Sales		96,164		79,677		18,565

Purchases		383,922		157,930		1,725
Lease payments		—		24,159		25,523

SFI Leasing Company, Limited (“SFIL”), a leasing company in Japan, is accounted for under the equity method and 34% is owned by Sony after deconsolidation in November 2010. Sony entered into sale and leaseback transactions regarding certain machinery and equipment with SFIL in the fiscal years ended March 31, 2012 and 2013. Refer to Notes 8 and 24.

Dividends from affiliated companies accounted for under the equity method for the fiscal years ended March 31, 2011, 2012 and 2013 were 2,583 million yen, 1,964 million yen and 2,360 million yen, respectively.

During the fiscal year ended March 31, 2012 and prior to the sale of its shares of S-LCD, Sony paid additional LCD panel related expenses of 22,759 million yen (292 million U.S. dollars) resulting from low capacity utilization of S-LCD.