Canon 2014 Annual Report Download - page 72

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70
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December
31, 2014 and 2013 are presented below:
The net changes in the total valuation allowance were an
increase of ¥2,443 million for the year ended December 31,
2014, and an increase of ¥2,888 million for the year ended
December 31, 2013, and a decrease of ¥1,621 million for the
year ended December 31, 2012.
Based upon the level of historical taxable income and pro-
jections 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,
2014. At December 31, 2014, Canon had net operating loss-
es which can be carried forward for income tax purposes of
¥194,572 million to reduce future taxable income.
December 31 Millions of yen
2014 2013
Deferred tax assets:
Inventories ¥ 16,085 ¥ 12,988
Accrued business tax 3,951 4,448
Accrued pension and severance cost 79,392 59,964
Research and development—costs capitalized for tax purposes 8,616 10,978
Property, plant and equipment 29,558 26,626
Accrued expenses 43,706 37,153
Net operating losses carried forward 38,351 38,439
Other 34,673 44,482
254,332 235,078
Less valuation allowance (37,498) (35,055)
Total deferred tax assets 216,834 200,023
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries (10,368) (10,876)
Net unrealized gains on securities (6,801) (5,740)
Tax deductible reserve (5,696) (6,160)
Financing lease revenue (58,958) (50,605)
Prepaid pension and severance cost (1,671) (671)
Other (37,676) (27,280)
Total deferred tax liabilities (121,170) (101,332)
Net deferred tax assets ¥ 95,664 ¥ 98,691
Millions of yen
Within one year ¥ 1,211
After one year through five years 31,393
After five years through ten years 60,913
After ten years through twenty years 63,783
Indefinite period 37,272
Total ¥ 194,572
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
¥28,318 million for a portion of undistributed earnings of
foreign subsidiaries that arose for the year ended December
31, 2014 and prior years because Canon currently does not
expect to have such amounts distributed or paid as divi-
dends 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, 2014, such undistributed
earnings of these subsidiaries were ¥961,917 million.
Periods available to reduce future taxable income vary in each tax jurisdiction and generally range from one year to an
indefinite period as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS