Telus 2010 Annual Report Download - page 171

TELUS 2010 annual report . 167
The Company must make significant estimates in respect of the
composition of its deferred income tax asset and deferred income tax
liability. The operations of the Company are complex, and related tax
interpretations, regulations and legislation are continually changing.
As a result, there are usually some tax matters in question. Temporary
differences comprising the deferred income tax liability are estimated
as follows:
As at December 31 (millions) 2010 2009
Property, plant and equipment and
intangible assets subject to amortization $ (639) $ (583)
Intangible assets with indefinite lives (835) (789)
Partnership income unallocated
for income tax purposes (398) (437)
Net pension and share-based
compensation amounts 22 43
Reserves not currently deductible 70 124
Losses available to be carried forward 35 40
Other (27) (15)
$ß(1,772) $ß(1,617)
Deferred income tax liability
Current $ (348) $ (294)
Non-current (1,424) (1,323)
Deferred income tax asset (liability) $ß(1,772) $ß(1,617)
Effective January 1, 2007, the Company adopted the method of
accounting for uncertain income tax positions prescribed by Financial
Accounting Standards Board Accounting Standards Codification
topic 740, Income Taxes. This topic is intended to standardize accounting
practice for the recognition, derecognition and measurement of tax
benefits to enable consistency and comparability among reporting entities
for the reporting of income tax assets and liabilities. No consequential
adjustments were required in the Company’s financial statements
as a result of that adoption.
The total amount of unrecognized tax benefits, excluding net
capital losses, that, if recognized, would affect the effective tax rate at
December 31, 2010, is $230 million (2009 – $258 million). Unrecognized
tax benefits related to net capital losses, if recognized, amount to $NIL
(2009 – $156 million), none of which would have affected the effective tax
rate for the years ended December 31, 2010 or 2009.
The gross amount of unrecognized tax benefits is calculated as
the undiscounted cumulative impact of such positions on taxable income
before timing-related reversals that have yet to be realized and before
the application of losses carried forward, including taxable income for
partnerships that will be allocated in the next twelve months, multiplied
by the applicable tax rate for the estimated period when such benefit
will be realized.
Estimated aggregate amortization expense for intangible assets
subject to amortization, calculated upon such assets held as at
December 31, 2010, for each of the next five fiscal years is as follows:
Years ending December 31 (millions)
2 011 $ß424
2012 304
2013 139
2014 89
2015 76
(d) Goodwill
Merger of BC TELECOM and TELUS: Under the purchase method
of accounting, TELUS’ assets and liabilities at acquisition (see (a)) have
been recorded at their fair values with the excess purchase price being
allocated to goodwill in the amount of $403 million. Commencing
January 1, 2002, rather than being systematically amortized, the carrying
value of goodwill is periodically tested for impairment.
Additional goodwill on Clearnet purchase: Under U.S. GAAP, shares
issued by the acquirer to effect an acquisition are measured at the date
the acquisition was announced; however, under Canadian GAAP, at the
time the transaction took place, shares issued to effect an acquisition
were measured at the transaction date. This results in the purchase price
under U.S. GAAP being $131 million higher than under Canadian GAAP.
The resulting difference is assigned to goodwill. Commencing January 1,
2002, rather than being systematically amortized, the carrying value of
goodwill is periodically tested for impairment.
(e) Income taxes
Years ended December 31 (millions) 2010 2009
Current $ß115 $ß286
Deferred 187 (112)
302 174
Investment Tax Credits (5) (15)
$ß297 $ß159
The Company’s income tax expense, for U.S. GAAP purposes, differs
from that calculated by applying statutory rates for the following reasons:
Years ended December 31 ($ in millions) 2010 2009
Basic blended federal and
provincial tax at statutory
income tax rates $ß366 29.0% $ß331 30.3%
Revaluation of deferred income
tax liability to reflect future
statutory income tax rates (40) (97)
Tax rate differential on, and
consequential adjustments
from, reassessment of
prior year tax issues (36) (68)
Share option award compensation 10 4
Investment Tax Credits, net of tax (4) (10)
Other 1 (1)
U.S. GAAP income tax expense $ß297 23.6% $ß159 14.7%
FINANCIAL STATEMENTS & NOTES: 23