Canon 2014 Annual Report Download - page 73

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71
C
ORPORATE
S
TRUCTUREBU
S
INE
SS
S
EGMEN
T
F
INANCIAL
S
ECTIO
N
CORPORATE DAT
A
STRATEGY
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
The total amounts of unrecognized tax benefits that would
reduce the effective tax rate, if recognized, are ¥6,431 million
and ¥6,201 million at December 31, 2014 and 2013, respectively.
Although Canon believes its estimates and assumptions of
unrecognized tax benefits are reasonable, uncertainty regard-
ing the final determination of tax audit settlements and any
related litigation could affect the effective tax rate in a future
period. Based on each of the items of which Canon is aware at
December 31, 2014, no significant changes to the unrecognized
tax benefits are expected within the next twelve months.
Canon recognizes interest and penalties accrued related to
unrecognized tax benefits in income taxes. Both interest and
penalties accrued at December 31, 2014 and 2013, and inter-
est and penalties included in income taxes for the years ended
December 31, 2014, 2013 and 2012 are not significant.
Canon files income tax returns in Japan and various foreign
tax jurisdictions. In Japan, Canon is no longer subject to reg-
ular income tax examinations by the tax authority for years
before 2012. While there has been no specific indication by the
tax authority that Canon will be subject to a transfer pricing
examination in the near future, the tax authority could con-
duct a transfer pricing examination for years after 2007. In oth-
er major foreign tax jurisdictions, including the United States
and the Netherlands, Canon is no longer subject to income
tax examinations by tax authorities for years before 2006 with
few exceptions. The tax authorities are currently conducting
income tax examinations of Canon’s income tax returns for
years after 2005 in major foreign tax jurisdictions.
Years ended December 31 Millions of yen
2014 2013 2012
Balance at beginning of year ¥ 6,201 ¥ 7,711 ¥ 2,933
Additions for tax positions of the current year 1,649 312 869
Additions for tax positions of prior years 216 388 4,903
Reductions for tax positions of prior years (114) (3,141) (1,546)
Settlements with tax authorities (1,808) (347) (41)
Other 287 1,278 593
Balance at end of year ¥ 6,431 ¥ 6,201 ¥ 7,711
13. LEGAL RESERVE AND RETAINED EARNINGS
The Corporation Law of Japan provides that an amount
equal to 10% of distributions from retained earnings paid
by the Company and its Japanese subsidiaries be appropriat-
ed 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 Corporation Law of Japan also provides that additional
paid-in capital and legal reserve are available for appropria-
tions by resolution of the stockholders. Certain foreign sub-
sidiaries are also required to appropriate their earnings to
legal reserves under the laws of their respective countries.
Cash dividends and appropriations to the legal
reserve charged to retained earnings for the years end-
ed December 31, 2014, 2013 and 2012 represent dividends
paid out during those years and the related appropria-
tions to the legal reserve. Retained earnings at December
31, 2014 did not reflect current year-end dividends in the
amount of ¥92,806 million which were approved by the
stockholders in March 2015.
The amount available for dividends under the
Corporation Law of Japan is based on the amount record-
ed in the Company’s nonconsolidated books of account in
accordance with financial accounting standards of Japan.
Such amount was ¥935,504 million at December 31, 2014.
Retained earnings at December 31, 2014 included
Canon’s equity in undistributed earnings of affiliated com-
panies accounted for by the equity method in the amount
of ¥16,919 million.
14. OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss) for the year ended December 31, 2012 are as follows:
Millions of yen
Foreign
currency translation
adjustments
Unrealized gains
and losses
on securities
Gains and
losses on
derivative instruments
Pension
liability
adjustments Total
Balance at December 31, 2011 ¥ (378,863) ¥ 1,003 ¥ 455 ¥ (104,368) ¥ (481,773)
Adjustments for the year 131,129 3,143 (4,917) (14,831) 114,524
Balance at December 31, 2012 ¥ (247,734) ¥ 4,146 ¥ (4,462) ¥ (119,199) ¥ (367,249)