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13. Income Taxes
The effective tax rates reflected in the consolidated statements of income differ from the statutory tax
rate for the following reasons:
2006 2005 2004
For the years ended March 31, 2007 March 31, 2006 March 31, 2005
Statutory tax rate 40.4% 40.4% 40.4%
Equity in net income of unconsolidated subsidiaries
and affiliated companies (2.1) (3.1) (5.5)
Valuation allowances (2.1) 1.0 9.0
Unrealized profits from intercompany transactions –(6.6) (5.7)
Prior year income taxes 2.8 8.7 –
Tax credit (3.8) ––
Other 1.1 1.4 (2.1)
Effective tax rate 36.3% 41.8% 36.1%
Deferred tax assets and liabilities reflect the estimated tax effects of loss carryforwards and accumulated
temporary differences between assets and liabilities for financial accounting purposes and those for
tax purposes. The significant components of deferred tax assets and liabilities at March 31, 2007 and
2006 were as follows:
Thousands of
Millions of yen U.S. dollars
2006 2005 2006
As of March 31, 2007 March 31, 2006 March 31, 2007
Deferred tax assets:
Allowance for doubtful receivables ¥001,721 ¥003,936 $0,014,585
Employees’severance and retirement benefits 44,517 50,389 377,263
Loss on impairment of fixed assets 8,046 9,146 68,186
Accrued bonuses and other reserves 29,893 23,987 253,331
Inventory valuation 5,019 4,504 42,534
Valuation loss on investment securities, etc. 1,438 1,364 12,186
Net operating loss carryforwards 14,126 10,174 119,712
Other 76,037 75,591 644,381
Total gross deferred tax assets 180,797 179,091 1,532,178
Less valuation allowance (23,911) (22,103) (202,636)
Total deferred tax assets 156,886 156,988 1,329,542
Deferred tax liabilities:
Reserves under Special Taxation Measures Law (7,756) (8,198) (65,729)
Other (3,643) (2,955) (30,872)
Total deferred tax liabilities (11,399) (11,153) (96,601)
Net deferred tax assets ¥145,487 ¥145,835 $1,232,941