Annual Report 2002 [PDF/1.6MB]

7. INCOME TAXESIncome taxes applicable to the Company and its domestic subsidiaries comprise corporation tax, inhabitants’ taxes and enterprisetax which, in the aggregate, resulted in an aggregate statutory tax rate of approximately 42% for the years ended March31, 2002 and 2001.The significant components of deferred tax assets and liabilities at March 31, 2002 and 2001 were summarized as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Deferred tax assets:Tax loss carryforward¥ 8,823¥ 5,271$ 66,214Loss on devaluation of inventories4,85336,420Loss on devaluation of investments in securities3,8033,93628,540Loss on devaluation of property and equipment2,08715,662Allowance for doubtful receivables2,0465,72815,355Unrealized inter-company profit on non-current assets1,7551,87913,171Others5,3283,53939,985Total28,69520,353215,347Less valuation allowance(14,211)(6,131)(106,649)Deferred tax assets¥ 14,484¥ 14,222$ 108,698Deferred tax liabilities:Unrealized holding gain on investments in securities89668Depreciation46Others8326623Total172721,291Net deferred tax assets¥ 14,312¥ 14,150$ 107,4078. CONTINGENT LIABILITIESContingent liabilities as of March 31, 2002 were as follows:Millions of YenThousands ofU.S. DollarsTrade notes discounted with banks and endorsed¥ 8,137$ 61,066Guarantees of loans to affiliates, third parties and employees5,19438,979Total¥ 13,331$ 100,0459. SHAREHOLDERS’ EQUITYThe Commercial Code of Japan provides that an amount equivalent to at least 10% of cash dividends and bonuses paid to directorsand statutory auditors, and exactly 10% of interim cash dividends paid be appropriated to the legal reserve until the sum ofadditional paid-in capital and the legal reserve equals 25% of common stock. The Code also provides that neither additionalpaid-in capital nor the legal reserve is available for dividends but both may be used to reduce or eliminate a deficit by resolutionof the shareholders or may be transferred to common stock by resolution of the Board of Directors. The Company’s legal reserve,which is included in retained earnings, amounted to nil and ¥1,610 million as of March 31, 2002 and 2001, respectively.43