Bank of Montreal 1998 Annual Report Download - page 90

Provision for Income Taxes 1998 1997 199 6
Provision for income taxes reported in
our Consolidated Statement of Income $ 804 $ 840 $ 757
Income tax expense (benefit) related
to foreign currency translation
reported in shareholders’ equity (237) (92) 10
Tot a l $ 567 $ 748 $ 767
Components of Total Income Taxes
Canada:
Current income taxes
Federal $ 243 $ 437 $ 440
Provincial 95 167 144
338 604 584
Future income taxes
Federal 16 (83) 47
Provincial 5(24) 15
21 (107) 62
Total Canadian 359 497 646
Foreign:
Current income taxes 213 260 103
Future income taxes (5) (9) 18
Total Foreign 208 251 121
Tot a l $ 567 $ 748 $ 767
Net future income taxes included in other assets is the cumulative
amount of tax applicable to temporary differences between the carry-
ing amount of our assets and liabilities and their values for tax purposes.
Changes in Accounting Policies
The Canadian Institute of Chartered Accountants has approved new
standards for recording and disclosing income taxes beginning in fiscal
2001. Our practices already comply with these new standards.
Components of Future Income Tax Balances 1998 19 97
Future Income Tax Assets
Allowance for credit losses $ 434 $ 370
Deferred items 84 95
Other 92 100
610 565
Valuation allowance (9) (12)
Future Income Tax Assets 601 553
Future Income Tax Liabilities
Premises and equipment (156) (132)
Deferred pension (148) (125)
Other (36) (19)
Future Income Tax Liabilities (340) (276)
Net Future Income Tax Asset $ 261 $ 277
We review the valuation of our future income tax assets quarterly and
adjust our valuation allowance, as necessary, to reflect the realizable
amount of our future income tax assets. We expect that we will realize
our future income tax assets in the normal course of our operations.
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BANK OF MONTREAL GROUP OF COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our net income applicable to common shares and the average
number of common shares outstanding for the year used to calcu-
late our basic and fully diluted net income per common share are
as follows:
1998 19 97 199 6
Net income attributable to
common shares – basic $ 1,238 $ 1,222 $ 1,099
Average number of common
shares outstanding – basic 262,510,741 260,409,736 261,232,729
Average number of common
shares outstanding
– fully diluted 269,047,747 268,699,928 268,361,643
Cash income per common share is calculated based on the net
income available to common shareholders, excluding amortization
of goodwill and other valuation intangibles after tax, divided by the
daily average number of fully paid common shares outstanding
throughout the year.
Our basic net income per common share is calculated by dividing
our net income, after deducting total preferred share dividends, by
the daily average number of fully paid common shares outstanding
throughout the year.
Our fully diluted net income per common share takes into account
the effects of certain securities that we issue, such as stock options
and redeemable and convertible securities, that could potentially
decrease our net income per common share. In 1998, 1997 and
1996 the fully diluted amount included the potential dilution of
certain convertible securities issued by a subsidiary. Additionally
in 1998 and 1997, we have included the potential issuance of shares
under stock options issued in 1995. The average number of common
shares outstanding throughout the year used to calculate our fully
diluted net income per common share is based on the assumption
that all securities which are convertible or redeemable at the option
of the holder occurred at the beginning of the year or at the date
the security was issued, if later.
Set out below is a reconciliation of our statutory tax rates and income tax that would be payable at these rates to the effective income tax
rates and provision for income taxes that we have reported in our Consolidated Statement of Income:
1998 19 97 199 6
Combined Canadian federal and provincial income taxes and statutory tax rate $ 915 42.0% $ 909 41.9% $ 816 42.0%
Increase (decrease) resulting from:
Tax-exempt income (82) (3.8) (71) (3.3) (67) (3.5)
Foreign operations subject to different tax rates (102) (4.7) (63) (2.9) (60) (3.1)
Goodwill and other valuation intangibles not deductible for tax purposes 21 1.0 21 1.0 21 1.1
Large corporations tax 14 0.6 8 0.4 9 0.4
Financial institutions temporary surcharge 10 0.5 10 0.4 9 0.4
Other 28 1.3 26 1.2 29 1.6
Provision for Income Taxes and Effective Tax Rate $ 804 36.9% $ 840 38.7% $ 757 38.9%
NOTE 16 NET INCOME PER COMMON SHARE
We are subject to Canadian taxation on the income earned in our
foreign branches, and certain earnings of foreign subsidiaries when
repatriated to Canada. Income which we earn in foreign countries
is generally subject to tax in those countries. Upon repatriation of
earnings from foreign subsidiaries, we will be required to pay tax
on certain of these earnings. As repatriation of such earnings is not
currently planned, we have not recognized the future tax liability.
Canadian and foreign taxes that would be payable if all of our foreign
subsidiaries’ earnings were repatriated are $324 as at October 31,
1998 and $262 as at October 31, 1997.