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10. Income Taxes
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted
in normal effective statutory tax rate of approximately 41% for the years ended March 31, 2009 and 2008.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2009 and 2008 were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2009 2008 2009
Deferred Tax Assets:
Inventory ¥ 7,407 ¥ 8,724 $ 75,581
Accrued bonuses 1,902 2,292 19,408
Accrued expenses 2,385 2,855 24,337
Allowance for doubtful accounts 6,891 7,048 70,316
Warranty reserve 906 1,427 9,245
Employees’ retirement benefits 1,121 1,226 11,439
Write-down of investment securities 3,703 2,368 37,786
Depreciation 4,178 3,498 42,633
Tax loss carryforwards 1,578 1,208 16,102
Other 3,870 3,467 39,490
Less valuation allowance (12,540) (8,615) (127,959)
Total deferred tax assets 21,401 25,498 218,378
Deferred Tax Liabilities:
Securities withdrawn from retirement benefit trust (3,261) (3,262) (33,276)
Prepaid pension cost (4,354) (4,051) (44,429)
Differences between book and tax bases of property, plant and equipment (2,955) (1,871) (30,153)
Undistributed earnings of foreign subsidiaries (2,679) (6,272) (27,337)
Unrealized gain on available-for-securities (247) (724) (2,520)
Deferred gain on derivatives under hedge accounting (2,120) (619) (21,633)
Other (837) (666) (8,541)
Total deferred tax liabilities (16,453) (17,465) (167,889)
Net deferred tax assets ¥ 4,948 ¥ 8,033 $ 50,489
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consoli-
dated statements of income for the year ended March 31, 2009 was as follows:
2009
Normal effective statutory tax rate 40.50%
Expenses not deductible for income tax purposes 4.45
Revenues not recognized for income tax purposes (1.06)
Lower income tax rates applicable to income in certain foreign countries (6.48)
Tax credit for R&D expenses (2.01)
Taxes on dividends from foreign subsidiaries (1.20)
Net change in valuation allowance 19.19
Tax effect not recognized on retained earnings of foreign subsidiaries (16.73)
Other – net 1.03
Actual effective tax rate 37.69%
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consoli-
dated statements of income for the year ended March 31, 2008 was not disclosed because the difference was not material.
33Brother Annual Report 2009