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80
December 31 Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Deferred tax assets:
Inventories ¥ 20,077 13,459 $ 168,714
Accrued business tax 10,654 8,599 89,530
Accrued pension and severance cost 33,633 34,257 282,630
Research and development—costs capitalized for tax purposes 31,068 23,629 261,076
Property, plant and equipment 26,577 21,839 223,336
Accrued expenses 21,277 20,132 178,798
Net operating losses carried forward 1,767 1,388 14,849
Other 28,061 24,362 235,807
Total gross deferred tax assets 173,114 147,665 1,454,740
Less valuation allowance (6,500) (3,345) (54,622)
Net deferred tax assets 166,614 144,320 1,400,118
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries (9,138) (6,806) (76,790)
Net unrealized gains on securities (7,521) (6,480) (63,202)
Tax deductible reserve (11,955) (14,307) (100,462)
Financing lease revenue (35,990) (35,395) (302,437)
Other (11,035) (7,720) (92,731)
Total gross deferred tax liabilities (75,639) (70,708) (635,622)
Net deferred tax assets ¥ 90,975 73,612 $ 764,496
The tax effects of temporary differences that give rise to
the deferred tax assets and deferred tax liabilities at December
31, 2006 and 2005 are presented below:
Net deferred income tax assets and liabilities are included in
the accompanying consolidated balance sheets under the fol-
lowing captions:
December 31 Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Prepaid expenses and other current assets ¥ 66,839 52,116 $ 561,672
Other assets 67,568 61,325 567,798
Other current liabilities (4,133) (3,500) (34,731)
Other noncurrent liabilities (39,299) (36,329) (330,243)
¥ 90,975 73,612 $ 764,496
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CANON INC. AND SUBSIDIARIES