13. Income Taxes 14. Research and Development Expenses The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a  normal effective statutory tax rate of approximately 39.5% for the years ended March 31, 2010 and 2009. Foreign subsidiaries are subject  to income taxes of the countries in which they operate. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at  March 31, 2010 and 2009 are as follows: At March 31, 2010, certain subsidiaries have tax loss carryfor- wards aggregating approximately ¥26,049 million ($279,979 thou- sand) which are available to be offset against taxable income of  such subsidiaries in future years. These tax loss carryforwards, if  not utilized, will expire as follows: A reconciliation between the normal effective statutory tax rate  and the actual effective tax rate reflected in the accompanying  consolidated statement of operations for the year ended March 31,  2010 is as follows: Research and development expenses are included in selling, general and administrative expenses and production cost, and the amounts  are as follows: Millions of Yen Thousands of U.S. Dollars 2010 2009 2010 Deferred tax assets: Liability for retirement benefits ¥ 8,085 ¥ 8,443 $ 86,900 Loss on write-down of investment securities 7,231 6,003 77,724 Allowance for doubtful accounts 6,039 8,204 64,908 Tax loss carryforwards 11,426 7,888 122,805 Accrued bonuses 6,239 5,994 67,057 Other 29,176 23,850 313,583 Subtotal 68,196 60,382 732,977 Less valuation allowance (31,656) (23,879) (340,245) Total 36,540 36,503 392,732 Deferred tax liabilities: Unrealized gain on available-for-sale securities (2,008) (1,318) (21,585) Revaluation of land (10,670) (10,203) (114,672) Prepaid pension expenses (3,094) (3,437) (33,255) Reserve for deferred income tax and others (1,798) (2,229) (19,323) Total (17,570) (17,187) (188,835) Net deferred tax assets ¥ 18,970 ¥ 19,316 $ 203,897 Year Ending March 31 Millions of Yen Thousands of U.S. Dollars 2011 ¥ 1,078 $ 11,587 2012 5,960 64,055 2013 2,353 25,289 2014 2,652 28,509 2015 1,404 15,091 2016 3,279 35,248 2017 6,808 73,170 After 2017 2,515 27,030 Total ¥26,049 $279,979 2010 Normal effective statutory tax rate 39.5% Adjustments: Local inhabitants tax on per capita basis 19.8 Expenses not deductible for tax purposes 21.1 Less valuation allowance 185.9 Lower income tax rates applicable to income in certain foreign countries (15.1) Amortization of negative goodwill 0.3 Equity in earnings of associated company (11.7) Elimination of unrealized profits 3.4 Other—net (1.3) Actual effective tax rate 241.9% Millions of Yen Thousands of U.S. Dollars 2010 2009 2010 Research and development expenses ¥14,756 ¥15,978 $158,594 JS Group Corporation Annual Report 2010 73