Rogers 2007 Annual Report Download - page 97

ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In assessing the realizability of future income tax assets,
management considers whether it is more likely than not that
some portion or all of the future income tax assets will be realized.
The ultimate realization of future income tax assets is dependent
upon the generation of future taxable income during the years
in which the temporary differences are deductible. Management
considers the scheduled reversals of future income tax liabilities,
the character of the future income tax assets and available tax
planning strategies in making this assessment.
To the extent that management believes 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 income 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 2006
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 $300 million of the reduction in the
valuation allowance related to future income tax assets arising
from acquisitions. Accordingly in 2006, the benefit related to these
future income tax assets was reflected as a reduction of goodwill
in the amount of $209 million and other intangible assets in the
amount of $91 million.
The valuation allowance at December 31, 2007, includes $65 million of
foreign future income tax assets, $16 million relating to capital loss
carryforwards and $38 million relating to unrealized capital losses
on U.S. dollar denominated debt and certain investments.
In 20 00, the Company received a $241 million payment
(the “Termination Payment”) from Le Group Vidéotron Ltée
(“Vidéotron”) in respect of the termination of a merger agreement
between the Company and Vidéotron. In 2006, the Company received
a Notice of Reassessment from the Canada Revenue Agency (“CRA”)
in respect of the Termination Payment. The Company challenged
the Notice of Reassessment and, in 2006, recorded a future income
tax charge of $25 million based on the expected resolution of this
issue. During the year ended December 31, 2007, the Company was
advised by the CRA that its challenge was successful and, as a result,
a future income tax recovery of $25 million was recorded to reverse
the charge recorded in 2006.
Income tax expense varies from the amounts that would be
computed by applying the statutory income tax rate to income
before income taxes for the following reasons:
2007 2006
Statutory income tax rate 35.2% 35.8%
Computed income tax expense $ 312 $ 243
Increase (decrease) in income taxes resulting from:
Difference between rates applicable to subsidiaries in other jurisdictions (12) (12)
Change in the valuation allowance for future income tax assets (20) (168)
Vidéotron termination payment (25) 25
Adjustments to future income tax assets and liabilities for changes in substantively enacted rates 47 (14)
Stock-based compensation (17) 15
Benefits relating to changes to prior year tax filing positions and other items (36) (33)
Income tax expense $ 249 $ 56
As at December 31, 2007, 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:
2008 $ 184
2009 85
2010 79
2011 –
2012 –
Thereafter 1,653
$ 2,001
As at December 31, 2007, the Company had approximately
$122 million in non-capital income tax losses available in foreign
subsidiaries expiring between 2021 and 2027.
As at December 31, 2007, the Company had approximately
$113 million in capital losses available.