Omron 1999 Annual Report Download - page 39

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The effective income tax rates of the Companies differ from the normal Japanese statutory rates as follows
for the years ended March 31, 1999, 1998 and 1997:
1999 1998 1997
Normal Japanese statutory rates.......................................................................... 48.0% 51.0% 51.0%
Increase (decrease) in taxes resulting from:
Permanently nondeductible items..................................................................... 30.2 6.0 9.1
Losses of subsidiaries for which no tax benefit was provided ......................... 10.1 1.0 0.2
Difference in subsidiaries’ tax rates .................................................................. (18.1) (6.0) (3.7)
Change in the beginning of the year balance of
the valuation allowance for deferred tax assets.............................................. (1.7) (0.4) (0.8)
Effects of enacted change in tax rates.............................................................. 28.5 0.6 —
Recognition of tax credit carryforward of an overseas subsidiary.................... (28.5) ——
Other, net .......................................................................................................... 4.8 3.1 2.7
Effective tax rates.......................................................................................... 73.3% 55.3% 58.5%
The Company and its domestic subsidiaries are subject to a number of taxes based on income, which in the
aggregate resulted in a normal tax rate of approximately 48.0% in 1999 and 51.0% in 1998 and 1997.
Amendments to Japanese tax regulations were enacted into law on March 31, 1998 and 1999. As a result of
these amendments, the normal income tax rates were reduced from 51.0% to 48.0% effective April 1, 1998
and from 48.0% to 42.0% effective April 1, 1999, respectively. Deferred income tax assets and liabilities as of
March 31, 1999 and 1998 were measured at the respective newly enacted tax rates.
The approximate effects of temporary differences and tax credit and loss carryforwards that gave rise to
deferred tax balances at March 31, 1999 and 1998 were as follows:
Thousands of
Millions of yen U.S. dollars
1999 1998 1999
Deferred Deferred Deferred Deferred Deferred Deferred
tax tax tax tax tax tax
assets liabilities assets liabilities assets liabilities
Inventory valuation.......................................... ¥ 1,676 ¥ — ¥ 1,476 ¥ — $ 13,851 $ —
Accrued bonuses and vacations .................... 2,152 — 2,188 — 17,785 —
Termination and retirement benefits............... 6,266 — 5,085 — 51,785 —
Enterprise taxes.............................................. 568 — 1,129 — 4,694 —
Intercompany profits....................................... 2,522 — 3,218 — 20,843 —
Marketable securities...................................... — 4,429 — 6,464 — 36,603
Allowance for doubtful receivables................. 407 209 462 467 3,364 1,727
Gain on sale of land........................................ — 1,076 — 1,229 — 8,893
Minimum pension liability adjustment ............ 5,834 — 1,372 — 48,215 —
Other temporary differences........................... 4,709 5,169 3,514 5,004 38,917 42,719
Tax credit carryforwards................................. 5,954 — ——49,207
Subsidiaries’ operating loss carryforwards .... 4,311 — 3,256 — 35,628 —
Subtotal .......................................................... 34,399 10,883 21,700 13,164 284,289 89,942
Valuation allowance........................................ (4,804) — (2,642) — (39,702) —
Total........................................................ ¥29,595 ¥10,883 ¥19,058 ¥13,164 $244,587 $89,942
The total valuation allowance increased by ¥2,162 million ($17,868 thousand) in 1999 and decreased by
¥1,689 million and ¥715 million in 1998 and 1997, respectively.
As of March 31, 1999, certain subsidiaries had operating loss carryforwards approximating ¥10,822 million
($89,438 thousand) available for reduction of future taxable income, most of which expire in various amounts
through 2010.
The Company has not provided for Japanese income taxes on unremitted earnings of subsidiaries to the
extent that they are believed to be indefinitely reinvested. The unremitted earnings of the foreign subsidiaries
that are considered to be indefinitely reinvested and for which Japanese income taxes have not been provided
were ¥37,175 million ($307,231 thousand) and ¥35,315 million at March 31, 1999 and 1998, respectively. It is
not practicable to estimate the amount of unrecognized deferred Japanese income taxes on these unremitted
earnings. Dividends received from domestic subsidiaries are expected to be substantially free of tax.