Canon 2006 Annual Report Download - page 83

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The net changes in the total valuation allowance were an
increase of ¥3,155 million ($26,513 thousand) for the year
ended December 31, 2006, and decreases of ¥150 million and
¥4,906 million for the years ended December 31, 2005 and
2004, respectively.
Based upon the level of historical taxable income and
projections for future taxable income over the periods which
the net deductible temporary differences are expected to
reverse, management believes it is more likely than not that
Canon will realize the benefits of these deferred tax assets, net
of the existing valuation allowance at December 31, 2006.
At December 31, 2006, Canon had net operating losses
which can be carried forward for income tax purposes of
¥5,567 million ($46,782 thousand) to reduce future taxable
income. Periods available to reduce future taxable income vary
in each tax jurisdiction and generally range from one year to
ten years as follows:
Thousands of
Millions of yen U.S. dollars
Within one year ¥ 2,979 $ 25,034
After one year through five years 967 8,126
After five years through ten years 101 849
Indefinite period 1,520 12,773
Total ¥ 5,567 $46,782
Income taxes have not been accrued on undistributed
earnings of domestic subsidiaries as the tax law provides a
means by which the dividends from a domestic subsidiary can
be received tax free.
Canon has not recognized deferred tax liabilities of ¥36,568
million ($307,294 thousand) for a portion of undistributed
earnings of foreign subsidiaries that arose for the year ended
December 31, 2006 and prior years because Canon currently
does not expect to have such amounts distributed or paid as
dividends to the Company in the foreseeable future. Deferred
tax liabilities will be recognized when Canon expects that it will
realize those undistributed earnings in a taxable manner, such
as through receipt of dividends or sale of the investments. At
December 31, 2006, such undistributed earnings of these
subsidiaries were ¥597,969 million ($5,024,950 thousand).
(15) Common Stock
Based on the resolution of Board of Directors on May 11, 2006,
the Company made a three-for-two stock split on July 1, 2006,
for stockholders recorded in the stockholders’ register as of June
30, 2006. All share and per share information has been adjusted
to reflect the implementation of the stock split.
For the years ended December 31, 2006, 2005 and 2004,
the Company issued 331,661 shares, 1,148,292 shares and
9,957,909 shares of common stock, respectively, in connection
with the conversion of convertible debt. In accordance with the
Corporation Law of Japan, conversion into common stock of
convertible debt is accounted for by crediting one-half or more
of the conversion price to the common stock account and the
remainder to the additional paid-in capital account.