Sony warns of massive $3.1 billion FY2011 loss (PSN outtage $171 million)

[Grooski]

ithis said:

Grooski said:

Guys, it is not a doom and gloom story. Deferred tax assets. 

Sony has essentially prepaid some of their taxes for the next 3-5 years. Given the PSN and earthquake debacles, its probably the best time for them to do so, that and regulatory requirements require them to.

The underlying result is essentially a 100 billion yen operating profit (around US$1billion) although they didn't quite hit expected revenue and profit levels. As a result market will be slightly down.

You mean they think it's better to pay future taxes now? Why would that be? I mean 100 billion yen profit would have sounded much better to the average person.

They are required to do so under GAAP accounting requirements in the US. It only occurs now because they predict a few years of profit and had a few losses previously.

EDIT from here it seems it is a writeoff of previous years DTA's.

• "Companies are allowed to carry forward tax losses [in japan] for up to seven years if they can show future taxable profits are likely. But three consecutive years of net losses is considered evidence under U.S. accounting rules, the global standard, that those credits may not be available to it.

This makes it a non-cash loss and therefore reported as such. If Sony can reach a profit next year, then these credits will be reapplied.