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40
ANNUAL REPORT 2005
To Our Shareholders
and Customers
Review of Operations
(General Information by Business Area)
Technology Corporate Social
Responsibility Environment Financial Section
Total income taxes are allocated as follows:
Thousands of
Millions of Yen U.S. Dollars
2003 2004
2005 2005
Provision for income taxes ¥51,984 ¥ 56,641
¥50,634 $473,215
Shareholders’ investment:
Foreign currency translation adjustments (826) ( 1,334)
3,378 31,570
Unrealized gains ( losses) on securities ( 1,130) (3,617)
407 3,804
Unrealized gains ( losses) on derivatives ( 9) 109
97 906
Minimum pension liability adjustment ( 30,811) 49,733
129 1,206
Cumulative effect of accounting change – 5,722
– –
¥19,208 ¥107,254
¥54,645 $510,701
The Company and its domestic subsidiaries are subject to a National Corporate tax of 30%, an inhabitant tax of approximately 6% and a deductible
Enterprise tax approximately 8%, which in the aggregate resulted in the normal statutory tax rate of approximately 41%. Based on an enacted
change in the Japanese tax laws in March 2003, the normal statutory tax rate was reduced to approximately 41% effective April 1, 2004, and such rate
has been used in calculating the future expected tax effects of temporary differences and carryforwards expected to be settled or realized on or after
April 1, 2004. The normal statutory tax rate differs from the effective tax rate for the years ended March 31, 2003, 2004 and 2005 as a result of the
following:
2003 2004
2005
Normal statutory tax rate 42% 42%
41%
Nondeductible expenses 1 1
1
Tax benefits not recognized on operating losses of certain consolidated subsidiaries 3 2
1
Utilization of net operating loss carryforward not previously recognized ( 4 ) ( 1)
( 2 )
Tax credit for increased research and development expense ( 1 ) ( 3)
( 3 )
Effect of change in enacted tax rate 2 1
–
Other, net ( 1 ) ( 2 )
( 1 )
Effective tax rate 42% 40%
37%
Nondeductible expenses include directors’ bonuses and entertainment expenses.
The tax effects of temporary differences and carryforwards giving rise to the consolidated deferred income tax assets and liabilities as of March 31,
2004 and 2005 are as follows:
Thousands of
Millions of Yen U.S. Dollars
2004
2005 2005
Assets:
Accrued expenses ¥22,165
¥20,717 $193,617
Property, plant and equipment 3,316
3,458 32,318
Accrued pension and severance costs 31,372
33,781 315,710
Net operating loss carryforwards 10,778
5,993 56,009
Other 29,655
27,400 256,075
97,286
91,349 853,729
Less- Valuation allowance ( 9,010)
(7,079) (66,159)
¥88,276
¥84,270 $787,570
Liabilities:
Sales-type leases ¥ ( 6,853)
¥ (6,548) $(61,196)
Undistributed earnings of foreign subsidiaries and affiliates ( 15,602)
(17,092) (159,738)
Net unrealized holding gains on available-for-sale securities ( 4,390)
(4,592) (42,916)
Basis difference of acquired intangible assets ( 2,930)
(11,482) (107,308)
Other ( 7,039)
(13,765) (128,646)
¥( 36,814)
¥(53,479) $(499,804)
Net deferred tax assets ¥ 51,462
¥ 30,791 $287,766