Olympus 2006 Annual Report Download - page 44

42 OLYMPUS 2006
11. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporate tax, inhabitant tax and enterprise
tax, which in the aggregate resulted in normal statutory rates of approximately 40.7% for the years ended March 31, 2006 and 2005, and
41.8% for the year ended March 31, 2004. Income taxes of foreign consolidated subsidiaries are based generally on tax rates applicable in
their countries of incorporation.
The following table summarizes the significant differences between the statutory tax rate and the Company’s effective tax rate for consoli-
dated financial statement purposes for the years ended March 31, 2006, 2005 and 2004.
2006 2005 2004
Japanese statutory tax rate ....................................................................................... 40.7% 40.7% 41.8%
Effect of foreign tax rate differences......................................................................... (1.0) (37.1) (4.3)
Non-deductible expenses ....................................................................................... 8.3 12.7 2.1
Impact of operating losses generated/(utilized) for certain subsidiaries .......................... —2.1 4.3
Increase of allowance for evaluation ........................................................................ (16.5) 282.7 —
Tax deduction for research and development ............................................................. (3.9) (23.9) —
Amortization of consolidated adjustment accounts ...................................................... 5.3 21.4 —
Other, net............................................................................................................ 1.4 7.9 0.4
Effective tax rate..................................................................................................... 34.3% 306.5% 44.3%
Significant components of deferred income tax assets and liabilities as of March 31, 2006 and 2005 were as follows: Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Deferred income tax assets:
Inventories........................................................................................................... ¥ 7,164 ¥ 8,305 $ 62,296
Depreciation of property, plant and equipment .......................................................... 4,129 4,268 35,904
Depreciation of intangible assets............................................................................. 10,330 4,162 89,826
Severance and retirement allowances....................................................................... 3,460 2,910 30,087
Prepaid expenses ................................................................................................. 6,010 6,127 52,261
Marketable and investment securities ....................................................................... 3,100 4,948 26,957
Deferred assets .................................................................................................... 301 288 2,617
Unrealized intercompany profits.............................................................................. 4,047 6,325 35,191
Accrued bonuses .................................................................................................. 4,960 3,213 43,130
Deficit carried forward .......................................................................................... 14,582 19,272 126,800
Other ................................................................................................................. 9,207 6,908 80,061
Subtotal .............................................................................................................. 67,290 66,726 585,130
Allowance for evaluation ....................................................................................... (23,735) (30,546) (260,391)
Total deferred income tax assets ................................................................................ 43,555 36,180 378,739
Prepaid pension expenses ...................................................................................... (1,401) (1,956) (12,183)
Net unrealized holding gains on securities................................................................ (8,782) (3,316) (76,365)
Other ................................................................................................................. (7,318) (9,230) (63,634)
Total deferred income tax liabilities............................................................................ (17,501) (14,502) (152,182)
Net deferred income tax assets ................................................................................. ¥ 26,054 ¥ 21,678 $ 226,557
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