Ricoh 2006 Annual Report Download - page 43

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ANNUAL REPORT 2006
To Our Shareholders and
Customers
General Information
by Business Area Ricoh's Core Values Solutions Environmental Financial Section
The net changes in the total valuation allowance for the years ended
March 31, 2004 and 2005 were a decrease of ¥183 million and ¥1,931
million respectively, and was increase of ¥1,118 million ( $9,556
thousand) for the year ended March 31, 2006. As a result of recording
of operating losses in the past, certain subsidiaries of Ricoh have had
valuation allowances against deferred tax assets for local taxes.
However, based on both im proved operating results in recent years and a
sound outlook for the future operating perform ance of these
subsidiaries, Ricoh reversed ¥2,959 m illion ( $25,291 thousand) of
valuation allowance, resulting in a reduction of income tax expenses
for the year ended March 31, 2006. The valuation allowance prim arily
relates to deferred tax assets of the consolidated subsidiaries with net
operating loss carryforwards for tax purposes that are not expected to be
realized.
In assessing the realizability of deferred tax assets, Ricoh considers
whether it is more likely than not that som e portion or all of the
deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
incom e during the periods in which those tem porary differences
become deductible and whether loss carryforwards are utilizable. Ricoh
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and
proj ections for future taxable income over the periods in which the
deferred tax assets are deductible, Ricoh believes it is more likely than
not that the benefits of these deductible differences, net of the existing
valuation allowance will be realized. The amount of the deferred tax
asset considered realizable, however, would be reduced if estim ates of
future taxable income during the carryforward period are reduced.
As of March 31, 2006, certain subsidiaries had net operating losses
carried forward for incom e tax purposes of approxim ately ¥15,337
million ( $131,085 thousand) which were available to reduce future
incom e taxes, if any. Approximately ¥543 m illion ( $4,641 thousand) of
the operating losses will expire within 3 years and ¥5,756 million
( $49,197 thousand) will expire within 4 to 7 years. The rem ainder
principally have an indefinite carryforward period.
The Company has not recognized a deferred tax liability for certain
portion of the undistributed earnings of its foreign subsidiaries of
¥189,779 m illion ( $1,622,043 thousand) as of March 31, 2006 because
the Company considers these earnings to be perm anently reinvested.
Calculation of related unrecognized deferred tax liability is not
practicable.
9 . SHORT-TERM BORROWINGS
Short-term borrowings as of March 31, 2005 and 2006 consist of the following:
Weighted average Thousands of
interest rate Millions of Yen U.S. Dollars
2005 2006 2005 2006 2006
Borrowings, principally from banks 3.5% 3 .8 % ¥ 8,641 ¥16,056 $ 137,231
Com mercial paper 2.9 3 .1 30,069 66,464 568,068
¥38,710 ¥82,520 $705,299
These short-term borrowings included borrowings, principally from
banks and com mercial paper denominated in foreign currencies
amounting to ¥ 37,710 million and ¥ 55,212 million ( $471,897
thousand) as of March 31, 2005 and 2006, respectively.
The Company and certain of its subsidiaries enter into the contracts
with financial institutions regarding lines of credit and overdrawing.
Those sam e financial institutions hold the issuing programs of
comm ercial paper and medium -term notes. Ricoh had aggregate lines
of credit of ¥822,103 million and ¥801,630 million ( $6,851,538
thousand) as of March 31, 2005 and 2006, respectively. Unused lines of
credit amounted to ¥689,993 m illion and ¥703,949 m illion ( $6,016,658
thousand) as of March 31, 2005 and 2006, respectively, of which
¥219,291 m illion and ¥252,843 m illion ( $2,161,051 thousand) related
to com mercial paper and ¥128,346 million and ¥154,458 million
( $1,320,154 thousand) related to medium -term notes program s at
prevailing interest rates and the unused portion is available for
imm ediate borrowings.