SNE » Topics » Liquidity risk

This excerpt taken from the SNE 20-F filed Jun 23, 2009.
Liquidity risk
 
The liquidity risk is that Sony Ericsson is unable to meet its short term payment obligations due to insufficient or illiquid cash reserves. At year end Sony Ericsson had a very large net cash position invested in liquid funds and very short deposits with banks. Sony Ericsson is aiming to maintain a cash level of 10% of annual turnover. The company’s net cash exceeds this requirement at year end.
 
C28.   Transactions with joint venture
 
Royalty — Sony Ericsson has paid a royalty to UIQ Technology AB for the right to use the UIQ Technology AB software in the mobile phones.
 
Purchases — Sony Ericsson has bought Support & Maintenance and Professional Service Work from UIQ Technology AB.


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Table of Contents

SONY ERICSSON MOBILE COMMUNICATIONS
 
                 
Transactions with joint venture
  2008   2007
 
Sales
          389  
Royalty
    3,172       4,552  
Purchases
    1,830       2,608  
                 
Balances regarding joint venture
               
Assets
          177  
Liabilities
    53       845  
 
Liquidity risk
 
The liquidity risk is that Sony Ericsson is unable to meet its short term payment obligations due to insufficient or illiquid cash reserves. At year end Sony Ericsson had a very large net cash position invested in liquid funds and very short deposits with banks. Sony Ericsson has decided to have a minimum cash level of 12% of annual turnover. The company’s net cash widely exceeds this requirement at year end.
 
C27.   Transactions with joint venture
 
At the beginning of 2007, Sony Ericsson strengthened its platform capabilities through the acquisition of UIQ Technology AB from Symbian Software Ltd. stating its intention for open ownerships with other handset manufacturers. By the end of the year Sony Ericsson announced that it had entered into a series of agreements with Motorola Inc. whereby Motorola acquired 50% of the share capital in UIQ Technology.
 
Royalty — Sony Ericsson pays a royalty to UIQ Technology AB for the right to use the UIQ Technology AB software in the mobile phones.
 
Purchases — Sony Ericsson buys Support & Maintenance and Professional Service Work from UIQ Technology AB.
 
                 
Transactions with joint venture
  2007   2006
 
Sales
    389        
Royalty
    4,552        
Purchases
    2,608        
                 
Balances regarding joint venture
               
Assets
    177        
Liabilities
    845        


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Table of Contents

SONY ERICSSON MOBILE COMMUNICATIONS
 
 
Liquidity risk
 
The liquidity risk is that Sony Ericsson is unable to meet its short term payment obligations due to insufficient or illiquid cash reserves. At year end Sony Ericsson had a very large net cash position invested in liquid funds and very short deposits with banks. Sony Ericsson has decided to have a minimum cash level of 15% of annual turnover. The company’s net cash widely exceeds this requirement at year end.
 
28.   Reconciliation to accounting principles generally accepted in the United States
 
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Sweden for unlisted companies, applying the Swedish Accounting Standards Board’s (Bokföringsnämnden, BFN) recommendations and the Swedish Annual Accounts Act (ÅRL) (the “Swedish GAAP”), which differs in certain significant respects from the generally accepted accounting principles in the United States


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Table of Contents

 
SONY ERICSSON MOBILE COMMUNICATIONS

(“US GAAP”). Sony Ericsson Mobile Communication has reconciled its net income / loss and equity under Swedish GAAP to the accounting principles according to generally accepted principles in the United States.
 
The principle differences between Swedish GAAP and US GAAP that affect our net income, as well as our stockholders equity relate to the treatment of business combinations (negative goodwill) and synthetic option plan.
 

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