Rogers 2005 Annual Report Download - page 133

129 ROGERS 2005 ANNUAL REPORT . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
that the realization of future income tax assets does not meet the more likely than not realization criterion, a valuation
allowance is recorded against the future tax assets.
In making an assessment of whether future income tax assets are more likely than not to be realized,
management regularly prepares information regarding the expected use of such assets by reference to its internal income
forecasts. Based on management’s estimates of the expected realization of future income tax assets, during 2005 the
Company reduced the valuation allowance to reflect that it is more likely than not that certain future income tax assets
will be realized. Approximately $451.8 million of the future income tax assets recognized in 2005 relate to future income
tax assets arising on the acquisitions of Fido and Sportsnet (note 6(a)). Accordingly, the benefit related to these assets has
been reflected as a reduction of goodwill. Any reduction in the valuation allowance related to the remaining unbenefited
Fido future income tax assets, aggregating $61.4 million at December 31, 2005, will be recorded as a reduction
to purchased goodwill.
As a result of the acquisition of Call-Net, the Company acquired tax assets of approximately $389.9 million
against which a valuation allowance has been recorded. Any reduction in the valuation allowance related to the Call-Net
future income tax assets will first reduce acquired goodwill, then acquired intangible assets and income tax expense.
The valuation allowance at December 31, 2005 includes $516.7 million of income tax assets primarily relating to
non-capital loss carryforwards and $101.1 million of income tax assets relating to losses on capital account.
Total income tax expense (reduction) varies from the amounts that would be computed by applying the statu-
tory income tax rate to income before income taxes for the following reasons:
2005 2004
Statutory income tax rate 36.1% 35.3%
Income tax expense (reduction) on income before income taxes
and non-controlling interest $ (15,344) $ 5,607
Increase (decrease) in income taxes resulting from:
Change in the valuation allowance for future income tax assets 10,880 (13,440)
Adjustments to future income tax assets and liabilities for changes
in substantively enacted rates (23,293) (920)
Non-taxable portion of capital gains (1,750) (2,391)
Non-deductible foreign exchange on debt and other items 2,167 2,491
Non-deductible portion of accreted interest on Convertible Preferred Securities – 7,387
Recovery of prior years’ income taxes – (6,660)
Non-deductible (non-taxable) amounts from investments accounted for
by the equity method (1,140) 3,715
Stock-based compensation 13,862 5,432
Other items 6,907 (7,995)
Large corporations tax 9,866 10,221
Income tax expense $ 2,155 $ 3,447
As at December 31, 2005, the Company has the following non-capital income tax losses available to reduce future years’
income for income tax purposes:
Income tax losses expiring in the year ending December 31:
2006 $ 479,833
2007 659,371
2008 1,116,873
2009
305,033
2010 197,163
2011
–
2012 –
2013 2,794
2014 706,473
2015
364,616
2016 28,791
$ 3,860,947