Telus 2010 Annual Report Download - page 172

168 . TELUS 2010 annual report
Years ended December 31 2010 2009
Unrecognized tax benefits Unrecognized tax benefits
Component Component
sheltered by Component sheltered by Component
losses carried comprised of losses carried comprised of
(millions) Gross forward capital losses Gross forward capital losses
Balance, beginning of period $ß800 $ß35 $ß156 $ß867 $ß310 $ß156
Tax positions related to prior years
Additions for tax returns filed during the year,
less prior year estimates 16 – – 11 – –
816 35 156 878 310 156
Tax positions related to prior years
Reduction for timing items
deductible in the year (40) – – (47) (47) –
Positions abandoned (156) – (156) – – –
Other changes in estimates 2 – – 7 – –
Tax positions related to current year
Estimated additions 31 – – 35 30 –
Reductions – – – – – –
Settlements (84) – – (67) – –
Current period reduction in losses (4) (7) – (2) (258) –
Lapses in statutes of limitations – – – (1) – –
Adjustments for tax rate changes (3) – – (3) – –
Balance, end of period $ß562 $ß28 $ß – $ß800 $ß 35 $ß156
As at December 31, 2010, it is reasonably possible that the Company’s
net unrecognized tax benefits will significantly increase and decrease in
the next twelve months for the following items:
.It is expected that Notices of Reassessment will be issued and/
or settlements will be reached with various government authorities
over the next twelve months that are expected to effectively settle a
number of uncertain tax positions and result in adjustments to the
effective tax rate and gross unrecognized tax benefits including the
abandonment of any remaining unrecognized tax benefits. Certain
presently unrecognized tax benefits pertain to a number of items
involving uncertainty as to the exact taxation period tax deductions
may be claimed among periods of changing statutory tax rates.
It is estimated the gross amount of the unrecognized tax benefits that
are expected to be resolved ranges from $65 million to $85 million
(2009 – $115 million to $135 million).
.It is anticipated that the Company will commence litigation pro-
ceedings in 2011 with respect to certain unrecognized tax benefits
with gross amounts expected to be resolved or abandoned
ultimately within a range of $60 million to $190 million.
.For those items that are timing in nature, it is reasonably possible
that the gross unrecognized tax benefits will decrease by $15 million
to $25 million (2009 – $15 million to $25 million) as temporary
differences are drawn down.
.During the next twelve months, the Company will file tax returns
covering the period ended December 31, 2010, as required by statute.
The returns are likely to contain unrecognized tax benefits that are
different than what has been quantified above. As the positions will
only be finalized at the time the tax returns are prepared, the amount
of such benefits cannot be estimated with certainty prior to that time.
Included in the balance at December 31, 2010 and 2009, excluding
net capital losses, are tax positions for which the ultimate deductibility is
highly certain but for which there is uncertainty about the timing of such
deductibility. In addition, the Company has losses carried forward that
are available to be applied against unrecognized tax benefits. As a result,
the impact on the annual effective tax rate is significantly less than the
gross amount of gross unrecognized tax benefits noted above.
The gross reserves are adjusted for tax rate changes applicable
to current and future taxation years based on the expected timing of
loss utilization.
In the application of both Canadian GAAP and U.S. GAAP, the
Company accrues for interest charges on current tax liabilities that have
not been funded, which would include interest and penalties arising
from uncertain tax positions. The Company includes such charges as a
component of Financing costs. During the year ended December 31, 2010,
the Company recorded interest income of $2 million (2009 – $46 million)
in respect of income taxes, recorded interest expense of $NIL (2009 –
$NIL) and collected $2 million (2009 – $54 million) of interest receivable.
As at December 31, 2010, the Company had a balance of $5 million
for accrued interest payable (2009 - $5 million) in respect of differences
between when tax-related exposures have been funded compared
to when tax-related exposures may have come into existence.