Brother International 2010 Annual Report Download - page 35

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11. 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, 2010 and 2009.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2010
and 2009 were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2010 2009 2010
Deferred Tax Assets:
Inventory ¥ 7,645 ¥ 7,407 $ 82,205
Accrued bonuses 2,397 1,902 25,774
Accrued expenses 2,206 2,385 23,720
Allowance for doubtful accounts 10,461 6,891 112,484
Warranty reserve 1,553 906 16,699
Employees’ retirement benefits 1,276 1,121 13,720
Write-down of investment securities 4,444 3,703 47,785
Depreciation 6,169 4,178 66,334
Tax loss carryforwards 7,375 1,578 79,301
Other 6,312 3,870 67,871
Less valuation allowance (26,074) (12,540) (280,366)
Total deferred tax assets ¥ 23,764 ¥ 21,401 $ 255,527
Deferred Tax Liabilities:
Securities withdrawn from retirement benefit trust ¥ (3,262) ¥ (3,261) $ (35,075)
Prepaid pension cost (5,446) (4,354) (58,559)
Differences between book and tax bases of property, plant and equipment (3,131) (2,955) (33,667)
Undistributed earnings of foreign subsidiaries (2,912) (2,679) (31,312)
Unrealized gain on available-for-sale securities (1,374) (247) (14,774)
Deferred gain on derivatives under hedge accounting (739) (2,120) (7,946)
Other (710) (837) (7,635)
Total deferred tax liabilities ¥ (17,574) ¥ (16,453) $ (188,968)
Net deferred tax assets ¥ 6,190 ¥ 4,948 $ 66,559
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated
statements of income for the years ended March 31, 2010 and 2009 were as follows:
2010 2009
Normal effective statutory tax rate 40.50% 40.50%
Expenses not deductible for income tax purposes 1.93 4.45
Revenues not recognized for income tax purposes (0.84) (1.06)
Lower income tax rates applicable to income in certain foreign countries (10.30) (6.48)
Tax credit for R&D expenses (0.91) (2.01)
Taxes on dividends from foreign subsidiaries (0.15) (1.20)
Net change in valuation allowance (3.90) 19.19
Tax effect not recognized on retained earnings of foreign subsidiaries —(16.73)
Other – net (0.87) 1.03
Actual effective tax rate 25.46% 37.69%
33Brother Annual Report 2010