Bank of Montreal 2008 Annual Report Download - page 147

The $159 million of future income tax assets relate to tax loss carry-
forwards that will expire in 2028.
Income that we earn in foreign countries through our branches or
subsidiaries is generally subject to tax in those countries. We are also
subject to Canadian taxation on the income earned in our foreign
branches. Canada allows a credit for foreign taxes paid on this income.
Upon repatriation of earnings from certain foreign subsidiaries, we
Note 26: Earnings Per Share
Diluted Earnings per Share
Diluted earnings per share represents what our earnings per share would
have been if instruments convertible into common shares that had the
impact of reducing our earnings per share had been converted either at
the beginning of the year for instruments that were outstanding all
year or from the date of issue for instruments issued during the year.
Convertible Shares
In determining diluted earnings per share, we increase net income
available to common shareholders by dividends paid on convertible
preferred shares as these dividends would not have been paid if the
shares had been converted at the beginning of the year. These dividends
were less than $1 million for the years ended October 31, 2008, 2007
and 2006. Similarly, we increase the average number of common shares
outstanding by the number of shares that would have been issued had
the conversion taken place at the beginning of the year.
Our Series 6 and 10 Class B Preferred shares, in certain circum-
stances, are convertible into common shares. These conversions are not
included in the calculation of diluted earnings per share as we have the
option to settle the conversion in cash instead of common shares.
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 (recovery of) income taxes that we have recorded in our Consolidated Statement of Income:
(Canadian $ in millions, except as noted) 2008 2007 2006
Combined Canadian federal and provincial income taxes
at the statutory tax rate $ 648 32.7% $ 838 35.0% $ 1,206 34.9%
Increase (decrease) resulting from:
Tax-exempt income (197) (9.9) (116) (4.9) (91) (2.6)
Foreign operations subject to different tax rates (317) (16.0) (428) (17.9) (271) (7.8)
Change in tax rate for future income taxes 5 0.2 2 0.1 (3) (0.1)
Intangible assets not deductible for tax purposes 9 0.4 10 0.4 10 0.2
Other (1) (219) (11.0) (117) (4.8) (134) (3.9)
Provision for (recovery of) income taxes and effective tax rate $ (71) (3.6)% $ 189 7.9% $ 717 20.7%
(1) Includes recovery of prior years’ income taxes in the amount of $160 million in 2008, Certain comparative figures have been reclassified to conform with the current year’s presentation.
$87millionin2007and$102millionin2006.
would be required to pay tax on certain of these earnings. As repatria-
tion of such earnings is not planned in the foreseeable future, we have
not recorded the related future income tax liability. The Canadian and
foreign taxes that would be payable, at existing tax rates, if all of our
foreign subsidiaries’ earnings were repatriated as at October 31, 2008,
2007 and 2006 are estimated to be $711 million, $599 million and
$583 million, respectively.
Provision for (Recovery of) Income Taxes
(Canadian $ in millions) 2008 2007 2006
Consolidated Statement of Income
Provision for (recovery of) income taxes
–Current $ (56) $ 214 $ 872
–Future (15) (25) (155)
(71) 189 717
Shareholders’ Equity
Income tax expense (recovery) related to:
Unrealized gains (losses) on
available-for-sale securities,
net of hedging activities (53) 19 –
Gains (losses) on cash flow hedges 204 (86) –
Hedging of unrealized
(gain) loss on translation
of net foreign operations (881) 575 156
Other (7) (37) –
Total $ (808) $ 660 $ 873
Components of Total Provision for (Recovery of) Income Taxes
(Canadian $ in millions) 2008 2007 2006
Canada: Current income taxes
Federal $ (525) $ 430 $ 494
Provincial (217) 214 266
(742) 644 760
Canada: Future income taxes
Federal (16) (70) (110)
Provincial (27) (34) (51)
(43) (104) (161)
Total Canadian (785) 540 599
Foreign: Current income taxes (21) 133 268
Future income taxes (2) (13) 6
Total foreign (23) 120 274
Total $ (808) $ 660 $ 873
Certain 2007 comparative figures have been reclassified to conform with the current
year’s presentation.
Notes
BMO Financial Group 191st Annual Report 2008 | 143
Basic Earnings per Share
Our basic earnings per 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.
Basic earnings per share
(Canadian $ in millions, except as noted) 2008 2007 2006
Net income $ 1,978 $ 2,131 $ 2,663
Dividends on preferred shares (73) (43) (30)
Net income available to
common shareholders $ 1,905 $ 2,088 $ 2,633
Average number of common shares
outstanding (in thousands) 502,062 499,950 501,257
Basic earnings per share (Canadian $) $ 3.79 $ 4.18 $ 5.25