Toyota 2008 Annual Report Download - page 112

110 TOYOTA •Annual Report 2008 •
Financial Section
The provision for income taxes consists of the following:
U.S. dollars
Yen in millions in millions
For the year ended
For the years ended March 31, March 31,
2006 2007 2008 2008
Current income tax expense:
Parent company and domestic subsidiaries ................................................. ¥451,593 ¥591,840 ¥491,185 $4,903
Foreign subsidiaries ........................................................................................ 310,298 174,164 338,852 3,382
Total current................................................................................................. 761,891 766,004 830,037 8,285
Deferred income tax expense (benefit):
Parent company and domestic subsidiaries ................................................. 76,503 51,740 119,333 1,191
Foreign subsidiaries ........................................................................................ (43,241) 80,568 (37,875) (378)
Total deferred.............................................................................................. 33,262 132,308 81,458 813
Total provision............................................................................................. ¥795,153 ¥898,312 ¥911,495 $9,098
For the years ended March 31,
2006 2007 2008
Statutory tax rate ................................................................................................................................. 40.2% 40.2% 40.2%
Increase (reduction) in taxes resulting from:
Non-deductible expenses .............................................................................................................. 0.4 0.5 0.6
Increase in deferred tax liabilities on undistributed earnings of foreign
subsidiaries and affiliates accounted for by the equity method................................................ 2.8 3.1 4.0
Valuation allowance......................................................................................................................... (0.4) 0.1 (0.5)
Tax credits ........................................................................................................................................ (4.1) (3.9) (4.4)
Other................................................................................................................................................. (0.8) (2.3) (2.5)
Effective income tax rate..................................................................................................................... 38.1% 37.7% 37.4%
Significant components of deferred tax assets and liabilities are as follows:
U.S. dollars
Yen in millions in millions
March 31, March 31,
2007 2008 2008
Deferred tax assets
Accrued pension and severance costs ..................................................................................... ¥ 104,470 ¥ 156,924 $ 1,566
Warranty reserves and accrued expenses................................................................................ 218,125 205,564 2,052
Other accrued employees’ compensation............................................................................... 120,004 129,472 1,292
Operating loss carryforwards for tax purposes........................................................................ 35,629 54,368 543
Inventory adjustments................................................................................................................ 57,698 67,904 678
Property, plant and equipment and other assets.................................................................... 168,535 180,922 1,806
Other ........................................................................................................................................... 349,933 332,779 3,321
Gross deferred tax assets ...................................................................................................... 1,054,394 1,127,933 11,258
Less—Valuation allowance ........................................................................................................(95,225) (82,191) (820)
Total deferred tax assets .......................................................................................................959,169 1,045,742 10,438
Deferred tax liabilities
Unrealized gains on securities................................................................................................... (465,280) (279,795) (2,793)
Undistributed earnings of foreign subsidiaries and affiliates accounted
for by the equity method......................................................................................................... (559,591) (607,510) (6,064)
Basis difference of acquired assets........................................................................................... (37,778) (37,919) (378)
Lease transactions ...................................................................................................................... (419,259) (405,028) (4,042)
Gain on securities contribution to employee retirement benefit trust.................................. (66,523) (66,523) (664)
Other ........................................................................................................................................... (80,380) (80,230) (801)
Gross deferred tax liabilities..................................................................................................(1,628,811) (1,477,005) (14,742)
Net deferred tax liability........................................................................................................ ¥ (669,642) ¥ (431,263) $ (4,304)
Toyota is subject to a number of different income taxes
which, in the aggregate, indicate a statutory rate in Japan of
approximately 40.2% for the years ended March 31, 2006, 2007,
and 2008. Such rate was also used to calculate the tax effects of
temporary differences, which are expected to be realized in the
future years. Reconciliation of the differences between the
statutory tax rate and the effective income tax rate is as follows: