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86 CANON ANNUAL REPORT 2009
Millions of yen
Thousands of
U.S. dollars
Within one year ¥ 1,534 $ 16,674
After one year through fi ve years 7,209 78,359
After fi ve years through ten years 17,501 190,228
Indefi nite period 8,166 88,761
Total ¥ 34,410 $ 374,022
Income taxes have not been accrued on undistributed earnings
of domestic subsidiaries as the tax law provides a means by which
the dividends from a domestic subsidiary can be received tax free.
Canon has not recognized deferred tax liabilities of ¥28,092
million ($305,348 thousand) for a portion of undistributed
earnings of foreign subsidiaries that arose for the year ended
December 31, 2009 and prior years because Canon currently
does not expect to have such amounts distributed or paid as
dividends to the Company in the foreseeable future. Deferred
tax liabilities will be recognized when Canon expects that it will
realize those undistributed earnings in a taxable manner, such as
through receipt of dividends or sale of the investments. At
December 31, 2009, such undistributed earnings of these
subsidiaries were ¥769,380 million ($8,362,826 thousand).
A reconciliation of the beginning and ending amount of
unrecognized tax benefi ts is as follows:
The total amounts of unrecognized tax benefi ts that would
reduce the effective tax rate, if recognized, are ¥4,746 million
($51,587 thousand) and ¥4,405 million at December 31, 2009
and 2008, respectively.
Although Canon believes its estimates and assumptions of
unrecognized tax benefi ts are reasonable, uncertainty regarding
the fi nal determination of tax audit settlements and any related
litigation could affect the effective tax rate in the future period.
Based on each of the items of which Canon is aware at
December 31, 2009, no signifi cant changes to the unrecognized
tax benefi ts are expected within the next twelve months.
Canon recognizes interest and penalties accrued related to
unrecognized tax benefi ts in income taxes. Both interest and
penalties accrued at December 31, 2009 and 2008, and interest
and penalties included in income taxes for the years ended
December 31, 2009, 2008 and 2007 are not material.
Canon fi les income tax returns in Japan and various foreign
tax jurisdictions. In Japan, Canon is no longer subject to regular
income tax examinations by the tax authority for years before
2006. While there has been no specifi c indication by the tax
authority that Canon will be subject to a transfer pricing
examination in the near future, the tax authority could conduct
a transfer pricing examination for years after 2002. In other
major foreign tax jurisdictions, including the United States and
Netherlands, Canon is no longer subject to income tax
examinations by tax authorities for years before 2004 with few
exceptions. The tax authorities are currently conducting income
tax examinations of Canon’s income tax returns for years after
2005 in Japan and for certain years after 2003 in major foreign
tax jurisdictions.
Years ended December 31
Millions of yen
Thousands of
U.S. dollars
2009 2008 2007 2009
Balance at beginning of year ¥ 12,689 ¥ 15,791 ¥ 16,087 $ 137,924
Additions for tax positions of the current year — 8,700 994 —
Additions for tax positions of prior years 1,442 1,354 1,902 15,674
Reductions for tax positions of prior years (1,106) (8,512) (1,340) (12,022)
Lapse of the applicable statute of limitations — — (1,311) —
Settlements with tax authorities — (1,208) (322) —
Other 210 (3,436) (219) 2,283
Balance at end of year ¥ 13,235 ¥ 12,689 ¥ 15,791 $ 143,859
For the years ended December 31, 2008 and 2007, the
Company issued 127,254 shares and 190,380 shares of com-
mon stock, respectively, in connection with the conversion of
convertible debt. In accordance with the Corporation Law of
13. Common Stock
Japan, 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CANON INC. AND SUBSIDIARIES
Canon AR09_FS_0325_ipc .indd 86 10.3.26 2:47:11 PM