Wacom 2005 Annual Report Download - page 29

W acom Co., Ltd. Annual Report 2005 28
7. Shareholders’ equity:
The Japanese Commercial Code provides that:
(1) Upon a resolution of the Board of D irectors, appropriations of
interim cash dividends and the related transfer to the legal
earned reserve as described in (3) below, can be made from
unappropriated retained earnings brought forward;
(2) All other appropriations of retained earnings, including year end
dividends and bonuses to directors and statutory corporate
auditors, require approval by the shareholders at the General
Meeting of Shareholders; and
(3) An amount equal to at least 10% of cash dividends and other
cash distributions paid by the Company from retained earnings
must be appropriated from retained earnings as a legal earned
reserve; no further appropriation is required when the
combined amount of capital reserve and the legal earned
reserve pursuant to the Japanese Commercial Code equals
25% of stated capital.
(4) Legal earned reserve and unappropriated retained earnings are
presented in the retained earnings accounts and legal capital
reserve and other capital reserves are presented in “Additional
paid-in capital” accounts.
In accordance with customary practice in Japan, appropriations of
retained earnings are recorded in the accounting period in which
shareholders’ approval is obtained. The fiscal 2005 year-end
appropriation of retained earnings of the Company, which was
approved at the General Meeting of Shareholders held in June
2005, is presented below:
8. Research and development expenditures:
Research and development expenditures, which are charged to
income when incurred, and are included in selling, general and
administrative expenses, amounted to ¥675,775 thousand and
¥735,476 thousand ($6,849 thousand) for the years ended March
31, 2004 and 2005, respectively.
9. Selling, general and administrative expenses:
The major components of “Selling, general and administrative
expenses” are as follows:
10. Income taxes:
Income taxes applicable to the Company include (1) corporation
tax, (2) enterprise tax and (3) inhabitants tax, which, in aggregate,
represent a statutory tax rate of approximately 39.7%, effective
from April 1, 2004.
O n March 31, 2003, the Japanese N ational D iet approved various
changes to the calculation of the statutory local enterprise tax for
companies with capital in excess of ¥100 million, effective April 1,
2004. Under the amended legislation, the enterprise tax is the sum
of three tax components; a) an income based component, b) a
value added component and c) a capital based component. Prior
to the amendment there was only an “income based component .”
Concurrently, the basic tax rate for the “income based component”
was reduced from 9.6% to 7.2%. As a result of this amendment,
the tax rate to be applied to deferred tax assets and liabilities as at
March 31, 2003 for the expected future tax consequences of
temporary differences between the carrying amounts and tax
bases of assets and liabilities, that are expected to reverse in the
year beginning April 1, 2004 or later, decreased from 42.0% to
39.7%.
The significant components of deferred tax assets and liabilities for
the years ended March 31, 2004 and 2005 are as follows:
Appropriation for:
Cash dividends, ¥ 2,000.00 ($18.62) per share
Bonuses to directors
$1,787
130
$1,917
Thousands of
U.S. dollars
¥191,910
14,000
¥205,910
Thousands of
yen
The reconciliation between the statutory tax rate and the income
tax rate in the consolidated statements of income for the years
ended March 31, 2004 and 2005 are as follows:
Statutory effective tax rate
(Reconciliation)
N on deductible expenses for tax purposes
Equalization tax
International tax rate differences
Foreign tax credit
Valuation allowance
Effect on changes of effective tax rate
Tax credit of corporation tax
O thers
Effective income tax rate
39.7%
1.4
0.6
(1.7)
7.9
2.1
–
(5.0)
–
45.0%
42.0%
1.5
0.8
(3.6)
10.1
1.9
1.0
(8.3)
2.4
47.8%
March 31,
2005
March 31,
2004
Advertising expenses
Provision for allowance for doubtful accounts
Salaries
Pension expenses
Provisions for severance indemnities of
directors and statutory corporate auditors
Provisions for bonuses to employees
O thers
Total
¥989,634
3,375
1,579,708
40,877
72,203
267,967
3,929,154
¥6,882,918
¥912,798
6,536
1,638,268
55,507
99,787
248,104
4,124,350
¥7,085,350
$8,500
61
15,255
517
929
2,310
38,406
$65,978
Thousands of
U.S. dollars
Thousands of yen
Year ended March 31
2004 2005 2005
Year ended
March 31
D eferred tax assets:
Foreign tax credit
Accrued expenses
Accrued retirement benefits
Accrued bonuses
Inventory-intercompany profit
Accrued severance indemnities for
directors and statutory corporate auditors
Tax loss carryforwards
W rite - down of investment securities
Enterprise tax
Software development costs
W rite - down of membership
Lump - sum depreciation assets
Allowance for doubtful accounts
Equity in earnings of an affiliate
O thers
Gross deferred tax assets
Less - Valuation allowance
Total deferred tax assets
D eferred tax liabilities:
Undistributed earnings of overseas
subsidiaries
Unrealized gains on other securities
O thers
Total deferred tax liabilities
N et deferred tax assets
¥230,439
141,875
85,638
82,674
69,110
57,722
53,889
51,181
22,986
22,155
19,423
13,902
1,430
–
38,939
891,363
(291,330)
600,033
(87,319)
(4,105)
(–)
(91,424)
¥508,609
¥233,099
19,164
99,877
66,729
97,190
67,062
–
51,181
38,490
21,520
2,586
14,560
1,444
–
16,773
729,675
(233,099)
496,576
(111,636)
(12,480)
(–)
(124,116)
¥372,460
$2,171
179
930
621
905
625
–
477
358
200
24
136
13
–
156
6,795
(2,171)
4,624
(1,040)
(116)
(–)
(1,156)
$3,468
Thousands of
U.S. dollars
Thousands of yen
2004 2005 2005