Bank of Montreal 2002 Annual Report Download - page 88

84 BMO FINANCIAL GROUP ANNUAL REPORT 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 recorded in our Consolidated Statement of Income:
2002 2001 2000
Combined Canadian federal and provincial income taxes and statutory tax rate $ 727 38.3% $ 848 41.0% $ 1,230 42.2%
Increase (decrease) resulting from:
Tax-exempt income (99) (5.2) (93) (4.5) (128) (4.4)
Foreign operations subject to different tax rates (197) (10.3) (161) (7.8) (151) (5.2)
Non-taxable portion of gain on sale of investment in Bancomer
–– (83) (4.0) ––
Large corporations tax 15 0.8 15 0.7 14 0.5
Financial institutions temporary surcharge –– –– 11 0.4
Change in tax rate for future income taxes 9 0.4 38 1.9 11 0.4
Intangible assets not deductible for tax purposes 16 0.8 11 0.5 4 0.1
Other (47) (2.5) (74) (3.6) (2) (0.1)
Provision for Income Taxes and Effective Tax Rate $ 424 22.3% $ 501 24.2% $ 989 33.9%
In October 1999, we recorded a charge of $141 for exit costs
associated with restructuring initiatives. During the year ended
October 31, 2000, we revised our estimate of the remaining costs
to execute our restructuring plan and reduced the liability by $43.
three years following the year in which the bonus is earned, or in
a lump sum at the end of the three-year period. The bonus may be
paid in cash, common shares or a combination of both.
Employee compensation expense for these plans is recorded in the year the bonus
is earned. Changes in the amount of the bonus payable as a result of dividends
and share price movements are recorded as employee compensation expense in
the period of the change.
Provision for Income Taxes 2002 2001 2000
Consolidated Statement of Income
Provision for income taxes $ 424 $ 501 $ 989
Income tax (benefit) related to
amortization of goodwill
– (6) (5)
Shareholders’ Equity
Income tax expense (benefit) related to
items recognized directly
in retained earnings 77 (350) (153)
Total $ 501 $ 145 $ 831
Components of Total Income Taxes
Canada: Current income taxes
Federal $ 207 $ 95 $ 279
Provincial 46 32 109
253 127 388
Canada: Future income taxes
Federal 132 (108) 43
Provincial 44 (36) 14
176 (144) 57
Total Canadian 429 (17) 445
Foreign: Current income taxes (35) 198 312
Future income taxes 107 (36) 74
Total Foreign 72 162 386
Total $ 501 $ 145 $ 831
We report our provision for income taxes in our Consolidated Statement of Income
based upon transactions recorded in our consolidated financial statements regard -
less of when they are recognized for income tax purposes, with the exception
noted below for repatriation of retained earnings from our foreign subsidiaries.
In addition, we record income tax expense or benefit directly in retained earn-
ings for the tax effects of those items recorded in shareholders’ equity.
The net future income tax asset included in other assets is the cumulative
amount of tax applicable to temporary differences between the accounting and
tax values of our assets and liabilities. Future income tax assets and liabilities are
measured at the tax rates expected to apply when these differences reverse.
Changes in future income tax assets and liabilities related to a change in tax rates
are recorded in income in the period of the tax rate change.
We review the valuation of our future income tax assets on an ongoing basis
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 2002 2001
Future Income Tax Assets
Allowance for credit losses $ 508 $ 572
Future employment benefits 165 165
Deferred compensation benefits 140 80
Other 119 181
932 998
Valuation allowance ––
Total Future Income Tax Assets 932 998
Future Income Tax Liabilities
Premises and equipment (394) (283)
Pension (290) (186)
Amortization of intangibles (81) (63)
Other (58) (74)
Total Future Income Tax Liabilities (823) (606)
Net Future Income Tax Asset $ 109 $ 392
During the years ended October 31, 2002, 2001 and 2000, payments
of $8, $23 and $48, respectively, were made. The restructuring
accrual as at October 31, 2002 was $6 and related to severance
payments to former employees in the form of salary continuance.
We have entered into derivative instruments in order to hedge our
exposure to these plans.
Changes in the fair value of these derivatives are recorded as employee compen-
sation expense in the period in which they arise.
Employee compensation expense related to these plans for the
years ended October 31, 2002, 2001 and 2000 was $18, $25 and $3,
respectively, net of the impact of hedging.
NOTE 17 Restructuring Charge
NOTE 18 Income Taxes