|
 |
Annual Report 2006
Notes to Consolidated Financial Statements
7. Income Taxes
Income taxes applicable to the Company and its domestic subsidiaries comprise corporation tax, inhabitants’ taxes and enterprise tax which, in the aggregate, resulted in statutory tax rates of 40.5 percent for 2006 and 40.0 percent for 2005. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries of incorporation.
The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2006 and 2005 differ from the statutory tax rates for the following reasons:
| Year ended March 31, |
2006 |
2005 |
| Statutory tax rates |
40.5% |
40.0% |
| Effect of: |
|
|
| Expenses not deductible for income tax purposes |
3.0 |
3.9 |
| Tax credits |
(4.8) |
(1.2) |
| Different tax rates applied to income of foreign subsidiaries |
(2.2) |
(1.5) |
| Changes in valuation allowance |
3.2 |
(6.4) |
| Equity in earnings of affiliated companies |
(3.5) |
(3.5) |
| Other, net |
1.9 |
1.8 |
| Effective tax rates |
38.1% |
33.1% |
The significant components of deferred tax assets and liabilities as of March 31, 2006 and 2005 were as follows:
| Millions of yen |
Thousands of
U.S. dollars |
| As of March 31, |
2006 |
2005 |
2006 |
| Deferred tax assets: |
|
|
|
| Accrued retirement benefits |
¥19,100 |
¥15,687 |
$163,248 |
| Property, plant and equipment |
2,187 |
1,823 |
18,692 |
| Accrual payroll expenses |
3,045 |
2,830 |
26,026 |
| Accrued bonuses |
4,103 |
3,576 |
35,068 |
| Net loss carryforward |
14,368 |
21,279 |
122,803 |
| Inventories |
3,295 |
1,322 |
28,162 |
| Loss on devaluation of investment securities |
621 |
703 |
5,308 |
| Other |
9,371 |
8,892 |
80,094 |
| Valuation allowance |
(25,089) |
(24,029) |
(214,436) |
| Total deferred tax assets |
31,004 |
32,085 |
264,991 |
| Deferred tax liabilities: |
|
|
|
| Depreciation |
(4,205) |
(4,572) |
(35,940) |
| Unrealized holding gain on securities |
(31,238) |
(13,846) |
(266,991) |
| Gain on contribution of securities to employees’ retirement benefit trust |
(14,089) |
(13,818) |
(120,419) |
| Other |
(11,273) |
(5,645) |
(96,350) |
| Total deferred tax liabilities |
(60,806) |
(37,883) |
(519,709) |
| Net deferred tax liabilities |
¥(29,801) |
¥(5,797) |
$(254,709) |
 |
|
