Pioneer 2007 Annual Report Download - page 60

PIONEER CORPORATION59
No provision for income taxes is recognized on undistrib-
uted earnings of foreign subsidiaries that are not expected to
be remitted in the foreseeable future. Undistributed earnings of
foreign subsidiaries (including related foreign currency transla-
tion adjustments) at March 31, 2006 and 2007 amounted to
approximately ¥134,148 million and approximately ¥151,089
million ($1,280,415 thousand), respectively. It is not practical to
estimate the amount of taxes that might be payable on the
eventual remittance of such earnings.
The domestic undistributed earnings would not, under the
present Japanese tax laws, be subject to additional taxation.
14. Shareholders’ equity:
On and after May 1, 2006, Japanese companies are subject to
the new Company Law of Japan, which reformed and replaced
the Commercial Code of Japan (the “Code”) with various
revisions that are, for the most part, applicable to events or
transactions which occur on or after May 1, 2006 and for the
fiscal years ending on or after May 1, 2006. The significant
provisions in the Company Law that affect financial and account-
ing matters are summarized below;
(a) Dividends
Under the Company Law, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend,
upon resolution at the general meeting of shareholders. For
companies that meet certain criteria such as; (1) having the
board of directors, (2) having independent auditors, (3) having
the board of corporate auditors, and (4) the term of service of
the directors is prescribed as one year rather than two years of
normal term by the articles of incorporation, the board of
directors may declare dividends (except for dividends in kind) at
any time during the fiscal year, if such companies have prescribed
so in the articles of incorporation. The parent company,
however, shall not pay such dividends by resolution of the
Board of Directors, since it has not prescribed so in its articles
of incorporation. On the other hand, semiannual interim divi-
dends may be paid once a year upon resolution by the board
of directors if the articles of incorporation so stipulate. See (d)
below for restrictions for dividends.
(b) Increases/decreases and transfer of common stock, capital
surplus and retained earnings
The Company Law requires that an amount equal to 10% of
dividends must be appropriated as additional paid-in capital (a
component of capital surplus) or a legal reserve (a component
of retained earnings) depending on the equity account charged
upon the payment of such dividends until the total of aggre-
gate amount of additional paid-in capital and legal reserve
equals 25% of the common stock. Under the Company Law,
the total amount of additional paid-in capital and legal reserve
may be reversed without restriction. The Company Law also
provides that common stock, additional paid-in capital, legal
reserve, other capital surplus and other retained earnings can
be transferred among the accounts under certain conditions
upon resolution of the shareholders.
(c) Treasury stock
The Company Law also provides for companies to purchase
treasury stock and dispose of such treasury stock by resolution
of the board of directors.
(d) Restrictions for distribution
The Company Law imposes certain restrictions on the amounts
available for distribution including dividends and the purchase
of treasury stock. The restriction is based on other capital
surplus and other retained earnings with certain adjustments,
but the amount of net assets after distribution must be main-
tained at no less than ¥3 million ($25 thousand). Such amount
available for distribution under the Company Law was ¥54,019
million ($457,788 thousand) at March 31, 2007, which is
subject to changes in certain specific accounts of equity
through the effective date of distribution in the following fiscal
year, based on the amount recorded in the parent company’s
general books and records maintained in accordance with
generally accepted Japanese accounting practices. The adjust-
ments included in the accompanying consolidated financial
statements to conform to U.S. GAAP are not recorded in the
books, and have no effect on the determination of the amount
available for distribution under the Company Law.
As permitted by the Code prior to April 1, 1991, the parent
company had made free share distributions which were
accounted for by a transfer from capital surplus to common
stock or without any transfers in the capital accounts. Companies