Telus 2010 Annual Report Download - page 144

140 . TELUS 2010 annual report
The Company expects to be able to utilize its non-capital losses
prior to expiry.
The Company has net capital losses and such losses may only be
applied against realized taxable capital gains. The Company expects to
include a net capital loss carry-forward of $5 million (2009 – $605 million)
in its Canadian income tax returns. Of the net capital losses carried-
forward as at December 31, 2009, $604 million has been denied on audit
by the Canada Revenue Agency and the Company will no longer pursue
such net capital losses. During the year ended December 31, 2010, the
Company recognized the benefit of $1 million (2009 – $1 million) in net
capital losses.
The Company conducts research and development activities,
which are eligible to earn Investment Tax Credits. During the year ended
December 31, 2010, the Company recorded Investment Tax Credits of
$20 million (2009 – $15 million). Of the Investment Tax Credits recorded
by the Company during the year ended December 31, 2010, $15 mil-
lion (2009 – $10 million) of which was recorded as a reduction of capital
and the balance of which was recorded as a reduction of Operations
expense.
Commencing in 2011, Canadian generally accepted accounting
principles for publicly accountable enterprises require the separate dis-
closure of temporary differences arising from the carrying value of the
investment in subsidiaries and partnerships exceeding their tax base and
for which no future income tax liabilities have been recognized. In the
Company’s specific instance this is relevant to its investment in Canadian
subsidiaries and Canadian partnerships. The Company is not required
to recognize such future income tax liabilities as it is in a position to
control the timing and manner of the reversal of the temporary differ-
ences, which would not be expected to be exigible to income tax, and
it is probable that such differences will not reverse in the foreseeable
future. Although the Company is in a position to control the timing and
reversal of temporary differences in respect of its non-Canadian sub-
sidiaries, and it is not probable that such differences will reverse in the
foreseeable future, it does recognize all potential taxes for repatriation
of substantially all unremitted earnings in non-Canadian subsidiaries.
Years ended December 31 (millions) 2010 2009
Current $ß115 $ß286
Future 213 (83)
$ß328 $ß203
The Company’s income tax expense differs from that calculated by
applying statutory rates for the following reasons:
Years ended December 31 ($ in millions) 2010 2009
Basic blended federal and
provincial tax at statutory
income tax rates $ß396 29.0% $ß366 30.3%
Revaluation of future income tax
liability to reflect future
statutory income tax rates (43) (99)
Tax rate differential on, and
consequential adjustments
from, reassessment
of prior year tax issues (36) (68)
Share option award compensation 10 4
Other 1 –
Income tax expense per
Consolidated Statements
of Income and Other
Comprehensive Income $ß328 24.0% $ß203 16.8%
The Company must make significant estimates in respect of the
composition of its future income tax liability. The operations of the
Company are complex and the related tax interpretations, regulations
and legislation are continually changing. As a result, there are usually
some tax matters in question. Temporary differences comprising
the future income tax liability are estimated as follows:
As at December 31 (millions) 2010 2009
Property, plant and equipment and intangible
assets subject to amortization $ (282) $ (209)
Intangible assets with indefinite lives (835) (789)
Partnership income unallocated
for income tax purposes (398) (437)
Net pension and share-based
compensation amounts (408) (327)
Reserves not currently deductible 70 124
Losses available to be carried forward 35 40
Other (28) (15)
$ß(1,846) $ß(1,613)
Presented on the Consolidated Statements
of Financial Position as:
Future income tax liability
Current $ (348) $ (294)
Non-current (1,498) (1,319)
Net future income tax asset (liability) $ß(1,846) $ß(1,613)
9INCOME TAXES
Summary reconciliations of statutory rate income tax expense to provision
for income taxes and analyses of future income tax liability