Canon 2005 Annual Report Download - page 78

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76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CANON INC. AND SUBSIDIARIES
December 31 Thousands of
Millions of yen U.S. dollars
2005 2004 2005
Deferred tax assets:
Inventories ¥ 13,459 11,364 $ 114,059
Accrued business tax 8,599 10,149 72,873
Accrued pension and severance cost 28,665 34,680 242,924
Minimum pension liability adjustments 5,592 22,778 47,390
Research and development — costs capitalized for tax purposes 23,629 22,499 200,246
Property, plant and equipment 21,839 17,406 185,076
Accrued expenses 20,132 17,976 170,610
Net operating losses carried forward 1,388 1,799 11,763
Other 24,362 24,258 206,457
Total gross deferred tax assets 147,665 162,909 1,251,398
Less valuation allowance (3,345) (3,495) (28,347)
Net deferred tax assets 144,320 159,414 1,223,051
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries (6,806) (5,638) (57,678)
Net unrealized gains on securities (6,480) (6,833) (54,915)
Tax deductible reserve (14,307) (11,975) (121,246)
Financing lease revenue (35,395) (30,196) (299,958)
Other (7,720) (5,329) (65,423)
Total gross deferred tax liabilities (70,708) (59,971) (599,220)
Net deferred tax assets ¥ 73,612 99,443 $ 623,831
The tax effects of temporary differences that give rise to the
deferred tax assets and deferred tax liabilities at December 31,
2005 and 2004 are presented below:
The net changes in the total valuation allowance for the
years ended December 31, 2005, 2004 and 2003 were
decreases of ¥150 million ($1,271 thousand), ¥4,906 million
and ¥1,282 million, respectively.
Based upon the level of historical taxable income and
projections for future taxable income over the periods which
the net deductible temporary differences are expected to
reverse, management believes it is more likely than not that
Canon will realize the benefits of these deferred tax assets, net
of the existing valuation allowance at December 31, 2005.
At December 31, 2005, Canon had net operating losses
which can be carried forward for income tax purposes of
¥4,697 million ($39,805 thousand) to reduce future taxable
income. Periods available to reduce future taxable income vary
in each tax jurisdiction and generally range from one year to
ten years as follows:
Thousands of
Millions of yen U.S. dollars
Within one year ¥1,943 $ 16,466
After one year through five years 2,012 17,051
After five years through ten years 94 797
Indefinite period 648 5,491
Total ¥4,697 $ 39,805