Sony 2005 Annual Report Download - page 120

Sony Corporation 117
21. Income taxes
Income before income taxes and income tax expense comprise the following:
Dollars in
Yen in millions millions
Years ended March 31 2003 2004 2005 2005
Income (loss) before income taxes:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (7,998) ¥ (84,571) ¥005,005 $0,047
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,619 228,638 152,202 1,422
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥247,621 ¥144,067 ¥157,207 $1,469
Income taxes—Current:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥069,311 ¥ 22,286 ¥ 23,497 $ 220
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,536 64,933 62,013 579
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥178,847 ¥ 87,219 ¥ 85,510 $ 799
Income taxes—Deferred:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (90,016) ¥ (32,845) ¥ 0(4,976 $ 47
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,000) (1,600) (74,442) (696)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (98,016) ¥ (34,445) ¥ (69,466) $ (649)
In August 2, 2004, Monex Inc., which provides on-line security
trading services in Japan, and Nikko Beans, Inc. established
Monex Beans Holdings, Inc. by way of share transfer of the
existing shares of Monex Inc. and Nikko Beans, Inc.. At this
establishment, 1 share of Monex Beans Holdings, Inc. was
allotted to each share of Monex Inc. and 3.4 shares of Monex
Beans Holdings, Inc. were allotted to each share of Nikko
Beans, Inc.. As a result of this share transfer, Monex Beans
Holdings, Inc. issued 2,341,287 shares and Sony recorded a
gain of ¥8,951 million ($84 million) and provided deferred taxes
on this gain. This issuance reduced Sony’s ownership interest
from 29.9% to 20.1%.
In September 2004, So-net M3 Inc., which provides medical
services via the Internet in Japan, issued 2,800 shares at
¥850,000 ($7,944) per share with a total value of ¥2,380 million
($22 million) in connection with its initial public offering. SCN, a
parent company of So-net M3 Inc., sold 3,260 shares of So-net
M3 Inc., at ¥790,500 ($7,388) per share with a total value of
¥2,577 million ($24 million). In October 2004, SCN sold 740
shares of So-net M3 Inc., at ¥790,500 ($7,388) per share with a
total value of ¥585 million ($5 million). As a result of these trans-
actions, Sony recorded a ¥1,823 million ($17 million) gain on
issuance of stock by So-net M3 Inc. and provided deferred
taxes on this gain. In addition, Sony recorded a ¥2,876 million
($27 million) gain on the sale of its stock. These transactions
reduced Sony’s ownership interest from 90.0% to 74.8%.
In June 6, 2005, SCN sold 17,935 shares of So-net M3 Inc.,
at ¥694,600 ($6,492) per share with a total value of ¥12,458
million ($116 million). As a result of this sale, Sony records
¥11,979 million ($112 million) gain on the sale of its stock for the
year ending March 31, 2006, and Sony’s ownership interest has
been reduced from 74.8% to 60.8%.
In January 2005, DeNA Co., Ltd., whose field of business is
operation of on-line auction websites in Japan, issued 14,000
shares at ¥204,600 ($1,912) per share with a total value of
¥2,864 million ($27 million) in connection with its initial public
offering. In March 2005, SCN, which had owned 27.7% interest
in DeNA Co., Ltd., sold 2,000 shares of DeNA Co., Ltd. at
¥204,600 ($1,912) per share with a total value of ¥409 million
($4 million). As a result of these transactions, Sony recorded a
¥686 million ($6 million) gain on issuance of stock by DeNA Co.,
Ltd. and provided deferred taxes on this gain. In addition, Sony
recorded a ¥76 million ($1 million) gain on the sale of its stock.
These transactions reduced Sony’s ownership interest from
27.7% to 24.8%.
In addition to the above transactions, for the year ended
March 31, 2005, Sony recognized ¥1,911 million ($18 million) of
other gains on change in interest in subsidiaries and equity
investees resulting in total gains of ¥16,322 million ($153 million).
These transactions were not part of a broader corporate reorgani-
zation and the reacquisition of such shares was not contemplated
at the time of issuance.
Sony is subjected to a number of different income taxes. Due
to changes in Japanese income tax regulations, a consolidated
tax filing system was introduced on April 1, 2002. Sony applied
to file its return under the consolidated tax filing system begin-
ning with the year ended March 31, 2004. Under the Japanese
consolidated tax filing system, a 2% surtax was imposed only
for the year ended March 31, 2004. As a result, the statutory tax
rate was 43.9% for the year ended March 31, 2004.
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