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CANON ANNUAL REPORT 2015
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December 31,
2015 and 2014 are presented below:
The net changes in the total valuation allowance were a
decrease of ¥4,567 million for the year ended December 31,
2015, and increases of ¥2,443 million and ¥2,888 million for
the years ended December 31, 2014 and 2013, 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, 2015.
December 31 Millions of yen
2015 2014
Deferred tax assets:
Inventories ¥ 15,298 ¥ 16,085
Accrued business tax 3,293 3,951
Accrued pension and severance cost 77,420 79,392
Research and development—costs capitalized for tax purposes 6,906 8,616
Property, plant and equipment 24,281 29,558
Accrued expenses 39,881 43,706
Net operating losses carried forward 33,526 38,351
Other 33,808 34,673
234,413 254,332
Less valuation allowance (32,931) (37,498)
Total deferred tax assets 201,482 216,834
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries (10,400) (10,368)
Net unrealized gains on securities (7,354) (6,801)
Tax deductible reserve (4,974) (5,696)
Financing lease revenue (54,280) (58,958)
Prepaid pension and severance cost (1,104) (1,671)
Intangible assets (21,106) (7,283)
Other (32,394) (30,393)
Total deferred tax liabilities (131,612) (121,170)
Net deferred tax assets ¥ 69,870 ¥ 95,664
Millions of yen
Within one year ¥ 6,138
After one year through five years 36,317
After five years through ten years 58,462
After ten years through twenty years 62,270
Indefinite period 37,807
Total ¥ 200,994
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 ¥28,500
million for a portion of undistributed earnings of foreign sub-
sidiaries that arose for the year ended December 31, 2015 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 recog-
nized when Canon expects that it will realize those undistrib-
uted earnings in a taxable manner, such as through receipt
of dividends or sale of the investments. At December 31,
2015, such undistributed earnings of these subsidiaries were
¥940,931 million.
At December 31, 2015, Canon had net operating losses which can be carried forward for income tax purposes of ¥200,994
million to reduce future taxable income. Periods available to reduce future taxable income vary in each tax jurisdiction and gener-
ally range from one year to an indefinite period as follows: