Olympus 2015 Annual Report Download - page 50

Significant components of deferred tax assets and liabilities as of March 31, 2014 and 2015 were as follows:
Millions of yen
Thousands of
U.S. dollars
2014 2015 2015
Deferred tax assets:
Inventories ......................................................................................................................................... ¥ 6,456 ¥ 6,962 $ 58,017
Prepaid expenses .............................................................................................................................. 5,024 5,287 44,058
Accrued bonuses ............................................................................................................................... 5,512 6,033 50,275
Investments in consolidated subsidiaries ............................................................................................ 4,515 5,268 43,900
Unrealized intercompany profits ......................................................................................................... 4,015 6,837 56,975
Depreciation of property, plant and equipment ................................................................................... 7,090 6,438 53,650
Amortization of intangible assets ........................................................................................................ 4,186 4,134 34,450
Liability for retirement benefits ............................................................................................................ 8,393 11,738 97,817
Securities ........................................................................................................................................... 7,134 7,366 61,383
Loss carry forward ............................................................................................................................. 58,617 43,327 361,058
Other ................................................................................................................................................. 38,430 38,355 319,625
Sub-total ............................................................................................................................................ 149,372 141,745 1,181,208
Valuation allowance ............................................................................................................................ (93,098) (78,959) (657,991)
Total deferred tax assets ........................................................................................................................ 56,274 62,786 523,217
Net defined benefit assets .................................................................................................................. (9,597) (10,937) (91,142)
Basis differences in assets acquired and liabilities assumed upon acquisition ..................................... (14,788) (15,956) (132,967)
Other ................................................................................................................................................. (17,871) (26,751) (222,925)
Total deferred tax liabilities ..................................................................................................................... (42,256) (53,644) (447,034)
Net deferred tax assets .......................................................................................................................... ¥ 14,018 ¥ 9,142 $ 76,183
Following the promulgation on March 31, 2015 of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 9 of 2015) and the
“Act for Partial Revision of the Local Tax Act, etc.” (Act No. 2 of 2015), the corporation tax rates were changed for the fiscal years beginning
on or after April 1, 2015. In line with these changes, the effective tax rate used to measure deferred tax assets and liabilities was changed
from 35.6% to 33.1% for temporary differences expected to be eliminated in the fiscal year beginning on April 1, 2015, and to 32.3% for
temporary differences expected to be eliminated in the fiscal years beginning from April 1, 2016. As a result of these tax rate changes,
deferred tax assets (net of deferred tax liabilities) decreased by ¥791 million ($6,592 thousand), income taxes–deferred increased by
¥1,858million ($15,483 thousand), net unrealized holding gains on available-for-sale securities increased by ¥874 million ($7,283 thousand)
and retirement benefits liability adjustments increased by ¥193 million ($1,608 thousand) as of and for the year ended March 31, 2015.
15. Net Assets
Under the Japanese Corporate Law (the “Law”), 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 prices of the new
shares as additional 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 capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated
balance sheets.
The assumptions used to measure the fair value of stock options granted for the years ended March 31, 2014 and 2015 were as follows:
First series of stock subscription rights Second series of stock subscription rights
Estimate method ......................................................................... Black-Scholes option pricing model Black-Scholes option pricing model
Expected volatility (Note 1) ........................................................... 49.39% 48.81%
Expected life (Note 2) ................................................................... 15 years 15 years
Expected dividends (Note 3) ........................................................ ¥0 per share ¥0 per share
Risk-free interest rate (Note 4)...................................................... 1.28% 0.98%
Notes:
1. Expected volatility for First series of stock subscription rights was estimated based on the stock price data of the Company for 15 years from August 1998 to August 2013. Expected
volatility for Second series of stock subscription rights was estimated based on the stock price data of the Company for 15 years from August 1999 to August 2014.
2. Because of the insufficient data and difficulty in making a reasonable estimate, the expected life was based on the assumption that the stock subscription rights would have been
executed at the midpoint of the exercise period.
3. Expected dividend for First series of stock subscription rights was based on the dividend paid during the year ended March 31, 2013. Expected dividend for Second series of stock
subscription rights was based on the dividend paid over the last two terms.
4. Risk-free interest rate was the interest rate of Japanese Government Bonds (JGBs) corresponding to the expected life of the options.
14. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporate tax, inhabitants’ tax and enterprise
tax, which in the aggregate resulted in normal statutory tax rates of approximately 38.0% and 35.6% for the years ended March 31, 2014
and 2015, respectively. Income taxes of foreign consolidated subsidiaries are based generally on tax rates applicable in their countries of
incorporation.
The following table summarizes the reconciliation between the statutory tax rates and the Company’s effective tax rates for consolidated
financial statement purposes for the years ended March 31, 2014 and 2015:
2014 2015
Normal statutory tax rates................................................................................................................................................... 38.0% 35.6%
Non-deductible expenses ............................................................................................................................................... 4.9 247.5
Non-taxable income ........................................................................................................................................................ (14.0) (2.5)
R&D tax credits ............................................................................................................................................................... (4.8) (12.8)
Effect of lower tax rates applied for foreign subsidiaries ................................................................................................... (0.4) (43.9)
Decrease in valuation allowance ...................................................................................................................................... (28.7) (88.7)
Amortization of goodwill .................................................................................................................................................. 21.7 37.5
Effect of reorganization of Group structure ...................................................................................................................... (13.1) —
Decrease in deferred tax assets due to tax rate change .................................................................................................. 12.3 22.5
Other, net ........................................................................................................................................................................ 1.1 4.1
Effective tax rates ............................................................................................................................................................... 17.0% 199.3%
Changes in presentation
Due to its increased materiality, “R&D tax credits,” which was included in “Other, net” for the year ended March 31, 2014, was presented
separately in the year ended March 31, 2015.
As a result, 4.8% corresponding to “R&D tax credits” presented as “Other, net” for the year ended March 31, 2014 was restated as “R&D
tax credits.”
Notes to the Consolidated Financial Statements
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OLYMPUS Annual Report 2015
96 OLYMPUS Annual Report 2015