Bridgestone 2004 Annual Report Download - page 49

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47
Financial Section
During the year ended December 31, 2002, certain subsidiaries in Europe recognized an impairment loss for property, plant and
equipment for their manufacturing locations due to their inability to cope with the rapid change in the European market.
Loss on voluntary tire replacement
A U.S. subsidiary recorded costs of tire replacement for a U.S. voluntary safety campaign to replace tires, free of any charge to cus-
tomers, which was announced in February 2004.
NOTE 13—INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in
a normal effective statutory tax rate of approximately 41.9% for the years ended December 31, 2004, 2003 and 2002.
On March 31, 2003, a tax reform law concerning enterprise tax was enacted in Japan which changed the normal effective statutory
tax rate from 41.9% to 40.6%, effective for years beginning on or after April 1, 2004. The effect of this change was to decrease deferred
tax assets by ¥624 million, increase income taxes—deferred by ¥2,346 million and increase net unrealized gains on securities by
¥1,722 million in the consolidated financial statements for the year ended December 31, 2003.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at
December 31, 2004 and 2003 are as follows:
Thousands of
Millions of yen U.S. dollars
2004 2003 2004
Deferred tax assets:
Accrued pension and liability for retirement benefits ¥ 89,729 ¥ 83,003 $ 861,040
Accrued expenses 32,672 26,221 313,521
Unrealized intercompany profits 24,291 23,864 233,096
Net operating loss carryforwards for tax purposes 45,177 57,714 433,519
Depreciable assets 17,966 9,454 172,402
Other 47,288 63,767 453,776
Less valuation allowance (48,813) (52,835) (468,410)
Total 208,310 211,188 1,998,944
Deferred tax liabilities:
Reserve for deferred gains related to fixed assets for tax purposes (10,822) (11,243) (103,848)
Unrealized gain on available-for-sale securities (55,916) (53,792) (536,570)
Other (18,104) (17,923) (173,726)
Total (84,842) (82,958) (814,144)
Net deferred tax assets ¥123,468 ¥128,230 $1,184,800
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the consolidated state-
ments of income for the years ended December 31, 2004, 2003 and 2002 is as follows:
2004 2003 2002
Normal effective statutory tax rate 41.9% 41.9% 41.9%
Expenses not deductible for income tax purpose 3.3 3.6 3.3
Lower income tax rates applicable to income in certain foreign countries (2.7) (2.3) (0.3)
Tax credit for research and development costs of domestic companies (3.7) ——
Change in valuation allowance for deferred income tax assets (4.5) 1.6 7.2
Other–net 0.4 (2.4) 3.0
Actual effective tax rate 34.7% 42.4% 55.1%