Bridgestone 2002 Annual Report Download - page 41

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39
The Companies enter into foreign currency forward contracts, cur-
rency swap contracts and currency option contracts to hedge for-
eign exchange risk associated with certain assets and liabilities
denominated in foreign currencies. The Companies enter into inter-
est rate swap contracts to manage their interest rate exposure on
certain liabilities. In addition, the Companies enter into commodity
future contracts to hedge the risk of fluctuation of commodity
prices for raw materials.
All derivative transactions are entered into to hedge foreign cur-
rency, interest and commodity price exposures that arise in the
course of the Companies’ business. Accordingly, the market risk in
these derivatives is basically offset by opposite movements in the
value of hedged assets or liabilities. Because the counterparties to
these derivatives are limited to major international financial insti-
tutions, the Companies do not anticipate any losses arising from
credit risk. Derivative transactions entered into by the Companies
have been made in accordance with internal policies which regulate
the authorization and credit limit amounts.
Foreign currency forward contracts and currency swap contracts
which qualify for hedge accounting for the years ended December
31, 2002 and 2001 are excluded from the disclosure of market
value information.
The contract or notional amounts of derivatives which are shown
in the following table do not represent the amounts exchanged by
the parties and do not measure the Companies’ exposure to credit
or market risk.
NOTE 13—DERIVATIVES
2002 2001 2000
Normal effective statutory tax rate 41.9% (41.9)% 41.9%
Expenses not deductible for income tax purpose 3.3 9.8 7.3
Tax rate differences in unrealized profit ——4.7
Lower income tax rates applicable to income in certain foreign countries —13.1 2.2
Loss on the transfer of subsidiaries’ stock —(117.9) —
Change in valuation allowance for deferred income tax assets 7.2 21.7 —
Other—net 2.7 (0.5) 0.6
Actual effective tax rate 55.1% (115.7)% 56.7%
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the consolidated statements of
income for the years ended December 31, 2002, 2001 and 2000 is as follows: