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In thousands of
In millions of yen U.S. dollars
------------------------------- ------------------
Year ended March 31 1995 1996 1997 1997
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Current........................................ Y62,165 Y108,254 Y22,507 $181,508
Deferred....................................... (10,717) (31,878) 2,393 19,298
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Y51,448 Y 76,376 Y24,900 $200,806
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The company is subject to a number of different income taxes which, in the aggregate, indicate a normal statutory tax rate in Japan of approximately 51 percent for the years ended March 31, 1995, 1996 and 1997. A reconciliation between the reported total income tax expense and the amount computed by multiplying the income before tax by the applicable normal statutory income tax rate is as follows:
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In thousands of
In millions of yen U.S. dollars
--------------------------- ---------------
Year ended March 31 1995 1996 1997 1997
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Current "expected" tax expense........................ Y38,109 Y77,172 Y61,823 $498,573
Increase (decrease) in taxes resulting from:
a) Disposition of an investment in
a consolidated subsidiary......................... - - (49,980) (403,065)
b) Changes in valuation allowance.................... 8,387 (16,068) 8,054 64,952
c) Non-deductible expense for tax purposes........... 4,087 4,126 4,836 39,000
d) Amortization of discount on bonds with warrants... 786 - - -
e) International tax rate differences................ 240 5,096 674 5,435
f) Other............................................. (161) 6,050 (507) (4,089)
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Actual total income tax expenses Y51,448 Y76,376 Y24,900 $200,806
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The significant components of deferred tax assets and liabilities at March 31, 1996 and 1997 are
as follows:
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In thousands of
In millions of yen U.S. dollars
--------------------- ----------------
March 31 1996 1997 1997
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Deferred tax assets:
Intercompany profit on inventories and tangible fixed assets
between consolidated companies............................... Y 42,074 Y 48,720 $ 392,903
Accrued pension and severance costs............................ 50,893 49,373 398,169
Other accruals--Noncurrent..................................... 30,692 28,273 228,008
Loss carryforwards............................................. 78,211 85,643 690,669
Other.......................................................... 78,042 86,145 694,718
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279,912 298,154 2,404,467
Less--Valuation allowance...................................... 97,781 89,008 717,806
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Total........................................................ Y182,131 Y209,146 $1,686,661
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Deferred tax liabilities:
Tax deductible reserve......................................... Y39,428 Y40,563 $327,121
Tax on undistributed earnings ................................. 13,140 12,723 102,605
Marketable securities.......................................... 12,684 14,629 117,976
Other.......................................................... 8,562 28,139 226,927
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Y73,814 Y96,054 $774,629
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The valuation allowance is primarily related to deferred tax assets of certain consolidated subsidiaries with operating loss carryforwards which are not expected to be realized. The net changes in the total valuation allowance for the years ended March 31, 1996 and 1997 were decreases of Y29,460 million and Y8,773 million ($70,750 thousand), respectively. Of the changes in the valuation allowance, the amounts attributable to the release of the beginning-of-the-year balance due to favorable developments in the subsequent year for the years ended March 31, 1996 and 1997 were decreases of Y14,470 million and Y15,560 million ($125,484 thousand), respectively.
At March 31, 1997, for tax return purposes, tax loss carryforwards of consolidated subsidiaries amounted to approximately Y177,626 million ($1,432,468 thousand) and will expire primarily during the period from 1998 through 2002 and in 2007 and 2008. Realization is dependent on the consolidated subsidiaries generating sufficient taxable income prior to expiration of the tax loss carryforwards. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
