Canon 2004 Annual Report Download - page 75

73
Income taxes have not been accrued on undistributed
earnings of domestic subsidiaries as the tax law provides a
means by which the investment in a domestic subsidiary
can be recovered tax free.
Canon has not recognized deferred tax liabilities of
¥25,316 million ($243,423 thousand) for the portion of
undistributed earnings of foreign subsidiaries that arose for
the year ended December 31, 2004 and prior years because
Canon currently does not expect those unremitted earnings
to reverse and become taxable to the Company in the
foreseeable future. Deferred tax liabilities will be recognized
when Canon expects that it will recover those undistributed
earnings in a taxable manner, such as through receipt of
dividends or sale of the investments. At December 31,
2004, such undistributed earnings of these subsidiaries
were ¥471,301 million ($4,531,740 thousand).
(14) Common Stock
For the years ended December 31, 2004, 2003 and 2002, the
Company issued 6,638,606 shares, 2,202,401 shares and
2,853,912 shares of common stock, respectively. The issuance
of 243,360 shares during the year ended December 31, 2002
was in connection with the acquisition of the outstanding
minority ownership interest of 37% of Canon Components,
Inc. The remaining issuance of the shares of the Company was
in connection with conversion of convertible debt. Conversion
into common stock of convertible debt issued subsequent to
October 1, 1982 has been accounted for by crediting one-half
or more of the conversion price to the common stock account
and the remainder to the additional paid-in capital account.
(15) Legal Reserve and Retained Earnings
The Japanese Commercial Code provides that an amount
equal to at least 10% of cash dividends and other distributions
from retained earnings paid by the Company and its Japanese
subsidiaries be appropriated as a legal reserve. No further
appropriations are required when the total amount of the
additional paid-in capital and the legal reserve equals 25% of
their respective stated capital. The Japanese Commercial Code
also provides that to the extent that the sum of the additional
paid-in capital and the legal reserve exceeds 25% of the
stated capital, the amount of the excess (if any) is available for
appropriations by the resolution of the shareholders. Certain
foreign subsidiaries are also required to appropriate their
earnings to legal reserves under the laws of the respective
countries.
Cash dividends and appropriations to the legal reserve
charged to retained earnings for the years ended December
31, 2004, 2003 and 2002 represent dividends paid out during
those years and the related appropriations to the legal reserve.
Retained earnings at December 31, 2004 do not reflect
current year-end dividends aggregating ¥35,474 million
($341,096 thousand) which will be payable in March 2005
upon stockholder approval.
The amount available for dividends under the Japanese
Commercial Code is based on the amount recorded in the
Company’s nonconsolidated books of account in accordance
with financial accounting standards of Japan. Such amount
was ¥1,141,596 million ($10,976,885 thousand) at December
31, 2004.
Retained earnings at December 31, 2004 included Canon’s
equity in undistributed earnings of affiliated companies
accounted for by the equity method in the amount of ¥7,420
million ($71,346 thousand).