Bank of Montreal 1999 Annual Report Download - page 94

Notes to Consolidated Financial Statements
88 Bank of Montreal Group of Companies 1999 Annual Report
Provision for Income Taxes 1999 1998 1997
Consolidated Statement of Income
Provision for income taxes $ 736 $ 810 $ 845
Income tax (benefit) related
to amortization of goodwill (6) (6) (5)
Shareholders’ Equity
Income tax expense (benefit) related
to foreign currency translation and
costs of proposed merger 158 (237) (92)
Total $ 888 $ 567 $ 748
Components of Total Income Taxes
Canada:
Current income taxes
Federal $ 575 $ 243 $ 437
Provincial 186 95 167
761 338 604
Future income taxes
Federal (116) 16 (83)
Provincial (35) 5 (24)
(151) 21 (107)
Total Canadian 610 359 497
Foreign:
Current income taxes 209 213 260
Future income taxes 69 (5) (9)
Total Foreign 278 208 251
Total $ 888 $ 567 $ 748
Net future income taxes included in other assets is the cumulative
amount of tax applicable to temporary differences between the carrying
amount of our assets and liabilities and their values for tax purposes.
We review the valuation of our future income tax assets quarterly and
adjust our valuation allowance, as necessary, to reflect the realizable
amount of our future income tax assets. We expect that we will realize
our future income tax assets in the normal course of our operations.
Components of Future Income Tax Balances 1999 1998
Future Income Tax Assets
Allowance for credit losses $ 522 $ 434
Deferred items 117 84
Other 115 92
754 610
Valuation allowance – (9)
Future Income Tax Assets 754 601
Future Income Tax Liabilities
Premises and equipment (180) (156)
Deferred pension (150) (148)
Other (81) (36)
Future Income Tax Liabilities (411) (340)
Net Future Income Tax Asset $ 343 $ 261
Change in Accounting Policy
The Canadian Institute of Chartered Accountants has approved new
standards for recording and disclosing income taxes beginning in fiscal
2001. Our practices comply with these new standards.
Note 15 Income Taxes
We report our provision for income taxes in our Consolidated Statement
of Income based upon transactions recorded in our consolidated financial
statements regardless of when they are recognized for income tax purposes.
In addition, we record income tax expense or benefit directly in retained
earnings for those items recorded in shareholders’ equity.
Set out below is a reconciliation of our statutory tax rates and income tax that would be payable at these rates to the effective income
tax rates and provision for income taxes that we have reported in our Consolidated Statement of Income:
1999 1998 1997
Combined Canadian federal and provincial income taxes and statutory tax rate $ 919 42.1% $ 936 42.0% $ 929 41.9%
Increase (decrease) resulting from:
Tax-exempt income (91) (4.2) (82) (3.7) (71) (3.2)
Foreign operations subject to different tax rates (133) (6.1) (102) (4.6) (63) (2.9)
Intangible assets not deductible for tax purposes 6 0.3 6 0.3 6 0.3
Large corporations tax 11 0.5 14 0.6 8 0.4
Financial institutions temporary surcharge 11 0.5 10 0.5 10 0.4
Other 13 0.6 28 1.2 26 1.2
Provision for Income Taxes and Effective Tax Rate $ 736 33.7% $ 810 36.3% $ 845 38.1%
We are subject to Canadian taxation on the income earned in our
foreign branches, and certain earnings of foreign subsidiaries
when repatriated to Canada. Income which we earn in foreign
countries is generally subject to tax in those countries. Upon
repatriation of earnings from foreign subsidiaries, we would be
required to pay tax on certain of these earnings. As repatriation
of such earnings is not currently planned, we have not recognized
the future tax liability. Canadian and foreign taxes that would be
payableifallofourforeignsubsidiaries’earningswererepatriated
are estimated to be $387 as at October 31, 1999 and $324 as at
October 31, 1998.
Note 16 Net Income per Common Share
Our basic net income per common share is calculated by dividing
our net income, after deducting total preferred share dividends,
by the daily average number of fully paid common shares out-
standing throughout the year.
In 1999, 1998 and 1997 the fully diluted amount included the
potential dilution of convertible securities issued by a subsidiary
and the potential issuance of shares under stock options issued
in 1995. Additionally, options issued in 1996 were included in the
fully diluted amount in 1999. The average number of common
shares outstanding throughout the year used to calculate our
fully diluted net income per common share is based on the
assumption that the conversion or redemption of all securities
which are convertible or redeemable at the option of the holder
occurred at the beginning of the year or at the date the security
was issued, if later.