Canon 2008 Annual Report Download - page 87

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8
5
Millions of
y
e
n
Th
ousa
n
ds
o
f
U
.
S
.
do
ll
a
r
s
W
it
h
in one yea
r
¥ 233 $ 2
,
560
A
fter one
y
ear throu
g
h fi ve
y
ear
s
2,9
45
32,363
A
fter fi ve
y
ears throu
g
h ten
y
ears 1
0
,
293
11
3
,11
0
Inde
fi
nite period 4
,
85
1
53
,
308
Tota
l
¥ 1
8,322
$
201
,
341
Income taxes have not been accrued on undistributed earnin
g
s
o
f
domestic subsidiaries as the tax law provides a means b
y
which
the dividends from a domestic subsidiary can be received tax free
.
Canon has not recognized deferred tax liabilities of ¥37,208
million (
$
408,879 thousand) for a portion of undistributed
earnin
g
s o
f
f
orei
g
n subsidiaries that arose
f
or the
y
ear ended
Decem
b
er 31, 2008 an
d
prior
y
ears
b
ecause Canon current
ly
d
oes not ex
p
ect to
h
ave suc
h
amounts
d
istri
b
ute
d
or
p
ai
d
as
dividends to the Company in the foreseeable future. Deferred
tax liabilities will be reco
g
nized when Canon expects that it will
realize those undistributed earnings in a taxable manner, such as
throu
g
h receipt o
f
dividends or sale o
f
the investments. At
December 31, 2008, such undistributed earnin
g
s o
f
these
subsidiaries were ¥728,410 million ($8,004,505 thousand)
.
Effective January 1, 2007, Canon adopted FASB Interpretation
No. 48, “Accounting
f
or Uncertainty in Income Taxes, an inter
-
pretation o
f
FASB Statement No. 109”. A reconciliation o
f
the
be
g
innin
g
and endin
g
amount of unreco
g
nized tax benefi ts is
as
f
o
ll
o
w
s:
The total amounts of unreco
g
nized tax benefi ts that would
reduce the effective tax rate, if recognized, are ¥4,405 million
(
$48,407 thousand
)
and ¥8,278 million at December 31, 2008
and 2007, respectivel
y.
Althou
g
h Canon believes its estimates and assumptions o
f
unreco
g
nized tax benefi ts are reasonable, uncertaint
y
re
g
ardin
g
the fi nal determination of tax audit settlements and any related
liti
g
ation could a
ff
ect the e
ff
ective tax rate in the
f
uture period.
Based on each o
f
the items o
f
which Canon is aware at
December 31, 2008, no si
g
nifi cant chan
g
es to the unreco
g
nized
tax benefi ts are ex
p
ected within the next twelve months
.
Canon recognizes interest and penalties accrued related to
unreco
g
nized tax bene
fi
ts in income taxes. Both interest and
p
ena
l
ties accrue
d
at Decem
b
er 31, 2008 an
d
2007, an
d
interest
and penalties included in income taxes for the
y
ears ended
December 31
,
2008 and 2007 are not material
.
Canon fi les income tax returns in Japan and various forei
g
n
tax juris
d
ictions. In Japan, Canon is no
l
onger su
b
ject to regu
l
ar
income tax examinations by the tax authority for years before
2006. While there has been no speci
fi
c indication b
y
the tax
authorit
y
that Canon will be sub
j
ect to a trans
f
er pricin
g
examination in the near future, the tax authority could conduct
a transfer pricing examination for years after 2001. In other
ma
j
or
f
orei
g
n tax
j
urisdictions, includin
g
the United States and
Netherlands, Canon is no lon
g
er sub
j
ect to income tax
examinations b
y
tax authorities for
y
ears before 2004 with few
exceptions. T
h
e tax aut
h
orities are current
l
y con
d
ucting income
tax examinations of Canon’s income tax returns for years after
2005 in Japan and
f
or certain
y
ears a
f
ter 2003 in ma
j
or
f
orei
g
n
tax
j
uris
d
ictions
.
Y
ears en
d
e
d
Decem
b
er 3
1
M
illions of
y
e
n
Th
ousa
n
ds
o
f
U
.
S
.
do
ll
a
r
s
2008
2007
2008
Balance at be
g
innin
g
of
y
ear ¥ 15,791 ¥ 1
6
,
087
$ 173,527
A
dditions
f
or tax positions o
f
the current year 8,700 99
4
95,604
A
dditions for tax positions of prior
y
ear
s
1,354 1
,902
14,879
R
eductions for tax positions of prior
y
ear
s
(8,512) (1,340) (93,538)
Lapse o
f
the applicable statute o
f
limitation
s
—
(
1,311
)
—
Sett
l
e
m
e
n
ts
wi
t
h
ta
x
aut
h
o
ri
t
i
es
(1,208)
(
322
)
(13,274)
Ot
h
er
(3,436) (219) (37,758)
Balance at end o
f
yea
r
¥ 12,689 ¥ 15,79
1
$ 139,440
For t
h
e years en
d
e
d
Decem
b
er 31, 2008, 2007 an
d
2006, t
h
e
Company issued 127,254 shares, 190,380 shares and 331,661
shares o
f
common stock, respectivel
y
, in connection with the
conversion o
f
convertible debt. In accordance with the
15. Common Stock
Cor
p
oration Law of Ja
p
an, conversion into common stock of
convertible debt is 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
.