Sony 2006 Annual Report Download - page 129

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127
21. Income taxes
Income before income taxes and income tax expense comprise the following:
Dollars in
Yen in millions millions
Years ended March 31 2004 2005 2006 2006
Income (loss) before income taxes:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (84,571) ¥ 5,005 ¥243,927 $2,085
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
228,638 152,202 42,402 362
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥144,067 ¥157,207 ¥286,329 $2,447
Income taxes—Current:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 22,286 ¥ 23,497 ¥ 55,154 $ 471
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,933 62,013 41,246 353
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 87,219 ¥ 85,510 ¥ 96,400 $ 824
Income taxes—Deferred:
Sony Corporation and subsidiaries in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (32,845) ¥ 4,976 ¥105,938 $ 905
Foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,600) (74,442) (25,823) (221)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (34,445) ¥ (69,466) ¥ 80,115 $ 684
of stock by SCN and provided deferred taxes on this gain. In
addition, Sony recorded a ¥17,321 million ($148 million) gain
on the sale of its shares of SCN. These transactions reduced
Sony’s ownership interest from 100% to 60.1%.
In addition to the above transactions, for the fiscal year ended
March 31, 2006, Sony recognized ¥80 million ($1 million) of
other gains on change in interest in subsidiaries and equity
investees resulting in total gains of ¥60,834 million ($520 million).
These transactions were not part of a broader corporate
reorganization 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 fiscal year ended March 31, 2004. Under the
Japanese consolidated tax filing system, a 2% surtax was
imposed only for the fiscal year ended March 31, 2004. As a
result, the statutory tax rate was 43.9% for the fiscal year ended
March 31, 2004.
During the fiscal year ended March 31, 2005, a corporation
size-based enterprise tax was introduced in Japan and the
portion of enterprise tax subject to income was reduced. As a
result, the statutory tax rate for the fiscal year ended March 31,
2005 was approximately 41% effective April 1, 2004. The effect
of the change in the tax rate on the balance of deferred tax
assets and liabilities was insignificant.
Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows:
Years ended March 31 2004 2005 2006
Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43.9% 41.0% 41.0%
Increase (reduction) in taxes resulting from:
Income tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2.4) (0.1) (1.3)
Change in valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5 (22.7) 21.6
Increase (decrease) in deferred tax liabilities on undistributed earnings of foreign subsidiaries . . . . . .
(9.2) (4.0) 4.5
Lower tax rate applied to life and non-life insurance business in Japan. . . . . . . . . . . . . . . . . . . . . . .
(2.6) (1.9) (3.2)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4 (2.1) (1.0)
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36.6% 10.2% 61.6%