Olympus 2007 Annual Report Download - page 47

OLYMPUS 2007 45
2007 2006 2005
Japanese statutory tax rate ......................................................................................... 40.7% 40.7% 40.7%
Non-deductible expenses ......................................................................................... 2.1 8.3 12.7
Effect of foreign tax rate differences ........................................................................... (2.5) (1.0) (37.1)
Impact of operating losses generated/(utilized) for certain subsidiaries ............................ — — 2.1
Increase (decrease) of allowance for evaluation ........................................................... (1.0) (16.5) 282.7
Tax deduction for research and development ............................................................... (6.6) (3.9) (23.9)
Amortization of consolidated adjustment accounts ........................................................ — 5.3 21.4
Amortization of goodwill .......................................................................................... 3.6 — —
Other, net.............................................................................................................. (0.9) 1.4 7.9
Effective tax rate ....................................................................................................... 35.4% 34.3% 306.5%
Significant components of deferred income tax assets and liabilities as of March 31, 2007 and 2006 were as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Deferred income tax assets
Inventories ............................................................................................................. ¥ 7,536 ¥ 7,164 $ 62,800
Prepaid expenses .................................................................................................... 7,097 6,010 59,142
Accrued bonuses .................................................................................................... 5,401 4,960 45,008
Unrealized intercompany profits ................................................................................ 7,205 4,047 60,042
Depreciation of property, plant and equipment ............................................................ 4,203 4,129 35,025
Depreciation of intangible assets ............................................................................... 12,631 10,330 105,258
Deferred assets ....................................................................................................... 257 301 2,142
Severance and retirement allowances ......................................................................... 3,126 3,460 26,050
Securities .............................................................................................................. 3,643 3,100 30,358
Deficit carried forward ............................................................................................ 11,499 14,582 95,825
Other .................................................................................................................... 10,835 9,207 90,292
Subtotal ................................................................................................................ 73,433 67,290 611,942
Allowance for evaluation ......................................................................................... (21,475) (23,735) (178,958)
Total deferred income tax assets .................................................................................. 51,958 43,555 432,984
Net unrealized holding gains on available-for-sale securities, net of taxes ........................ (8,787) (8,782) (73,225)
Prepaid pension expenses ........................................................................................ (3,390) (1,401) (28,250)
Other .................................................................................................................... (7,154) (7,318) (59,617)
Total deferred income tax liabilities .............................................................................. (19,331) (17,501) (161,092)
Net deferred income tax assets ................................................................................... ¥ 32,627 ¥ 26,054 $ 271,892
13. NET ASSETS
The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese commercial Code (“the Code”). The Law
is generally applicable to events and transactions occurring after April 30, 2006 and for fiscal years ending after that date.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, a
company may, by a resolution of its board of directors, designate an amount not exceeding one-half of the price of the new shares as addi-
tional paid-in-capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess,
if any, of 25% of common stock over the total of additional paid-in-capital and legal earnings reserve must be set aside as additional paid-in-capi-
tal or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount of cash dividends and other
cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional paid-in-capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in-capital could be used to eliminate or reduce a deficit by a resolution of the
shareholders’ meeting or could be capitalized by a resolution of the board of directors. Under the Law, both of these appropriations generally
require a resolution of the shareholders’ meeting.
Additional paid-in-capital and legal earnings reserve may not be distributed as dividends. Under the Code, however, on condition that the
total amount of legal earnings reserve and additional paid-in-capital remained equal to or exceed 25% of common stock, they were available
for distribution by resolution of the shareholders’ meeting. Under the Law, all additional paid-in-capital and all legal earnings reserve may be
transferred to other capital surplus and other retained earnings, respectively, which are potentially available for dividends.