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corporate operation by reducing fixed costs. The Company request- ed and received approval from certain financial institutions and a company to waive repayment of outstanding liabilities to these enti- ties which consisted of short-term bank loans, notes payable and 

## 12. INCOME TAXES 

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective statutory tax rate of approximately 42% for the years ended March 31, 2003 and 2002. 

long-term debt. The discharge of these liabilities of ¥2,871 million was recorded as a gain in the statement of income for the year ended March 31, 2002. 

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2003 and 2002, are as follows: 

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Reconciliations between the normal effective statutory tax rate and the actual effective tax rates reflected in the accompanying con- solidated statements of income for the years ended March 31, 2003 and 2002, are as follows: 

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On March 31, 2003, a tax reform law concerning enterprise tax was enacted in Japan which changed the normal effective statutory tax rate from 42% to 40%, effective for years beginning on or after April 1, 2004. The effect of this change was to decrease deferred tax assets — non-current by ¥9 million ($75 thousand) and decrease income taxes — deferred by ¥9 million ($75 thousand) in the consol- 

idated financial statements for the year ended March 31, 2003. 

Under the current Japanese tax regulations, a net operating loss can be carried forward for five years and deducted from any future taxable income. The Company and consolidated subsidiaries have a net operating loss carryforward of approximately ¥55,940 million ($466,167 thousand) at March 31, 2003. 

