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Sony In The Red, PlayStation 2 & New Accounting Rules Are Factors

On Wednesday, July 27, 2000, Sony Corp. announced it fell into the red in the first quarter ended June 30, 2000 as one-off charges from a change in U.S. accounting rules eroded profits. The electronics and entertainment company posted a group net loss of ¥88.26 billion (US$808.2 million) in the quarter, versus an ¥18.43 billion ($168.8 million) profit a year prior. Sony had ¥101.65 billion ($930.8 million) in extraordinary losses from film advertising costs and canceled projects development expenses in the first quarter of this year due to new U.S. accounting rules for producers and distributors of films. Under the new accounting rules, companies are required to write off their film promotional expenses three months after a film's release. Previously, companies could spread out the charges over 10 years. The electronics division saw an operating profit of ¥55.2 billion ($505.5 million), almost four times more than a year ago. However, the gaming division witnessed a loss of ¥16 billion ($146.5 million), hinging on PlayStation 2s lack of profitability due to its massive development costs.

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