Canon 2015 Annual Report Download - page 73

CANON ANNUAL REPORT 2015 71
STRATEGY BUSINESS SEGMENT CORPORATE STRUCTURE FINANCIAL SECTION CORPORATE DATA
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 ¥6,056 million and
¥6,431 million at December 31, 2015 and 2014, respectively.
Although Canon believes its estimates and assumptions of
unrecognized tax benefits are reasonable, uncertainty regarding
the final determination of tax audit settlements and any related lit-
igation could affect the effective tax rate in a future period. Based
on each of the items of which Canon is aware at December 31,
2015, 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 pen-
alties accrued at December 31, 2015 and 2014, and interest and
penalties included in income taxes for the years ended December
31, 2015, 2014 and 2013 are not significant.
Canon files income tax returns in Japan and various foreign
tax jurisdictions. In Japan, Canon is no longer subject to regu-
lar income tax examinations by the tax authority for years before
2015. Canon is also no longer subject to a transfer pricing exami-
nation by the tax authority for years before 2015. In other major
foreign tax jurisdictions, including the United States and the
Netherlands, Canon is no longer subject to income tax examina-
tions by tax authorities for years before 2007 with few exceptions.
The tax authorities are currently conducting income tax examina-
tions of Canon’s income tax returns for years after 2006 in major
foreign tax jurisdictions.
Years ended December 31 Millions of yen
2015 2014 2013
Balance at beginning of year ¥ 6,431 ¥ 6,201 ¥ 7,711
Additions for tax positions of the current year 2,174 1,649 312
Additions for tax positions of prior years 165 216 388
Reductions for tax positions of prior years (1,180) (114) (3,141)
Settlements with tax authorities (505) (1,808) (347)
Other (1,029) 287 1,278
Balance at end of year ¥ 6,056 ¥ 6,431 ¥ 6,201
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 appropriated 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 appropriations by
resolution of the shareholders. Certain foreign subsidiaries 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 ended December
31, 2015, 2014 and 2013 represent dividends paid out during
those years and the related appropriations to the legal reserve.
Retained earnings at December 31, 2015 did not reflect cur-
rent year-end dividends in the amount of ¥81,905 million
which were approved by the shareholders in March 2016.
The amount available for dividends under the Corporation
Law of Japan is based on the amount recorded in the
Company’s nonconsolidated books of account in accordance
with financial accounting standards of Japan. Such amount
was ¥970,771 million at December 31, 2015.
Retained earnings at December 31, 2015 included
Canon’s equity in undistributed earnings of affiliated compa-
nies accounted for by the equity method in the amount of
¥17,129 million.