TD Bank 2011 Annual Report Download - page 19

TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS 17
The Bank’s effective income tax rate, on a reported basis, was
18.4% for 2011, compared with 21.8% in 2010. The year-over-year
decrease was largely due to the reduction in the Canadian statutory
corporate tax rate in the current year and a $121 million charge
related to an agreement with the Canada Revenue Agency last year.
TD reports its investment in TD Ameritrade using the equity method
of accounting. TD Ameritrade’s tax expense of $148 million in the
year, compared to $132 million in 2010, is not part of the Bank’s tax
rate reconciliation.
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes increased by $161 million,
or 8%, from 2010. Income tax expense, on a reported basis, was up
$37 million, or 3%, from 2010. Other taxes were up $124 million,
or 14%, from 2010. Adjusted total income and other taxes were up
$245 million, or 11%, from 2010. Total income tax expense, on an
adjusted basis, was up $121 million, or 9%, from 2010.
(millions of Canadian dollars, except as noted) 2011 2010 2009
Income taxes at Canadian statutory income tax rate $ 1,983 28.1% $ 1,761 30.5% $ 1,006 31.8%
Increase (decrease) resulting from:
Dividends received (214) (3.0) (283) (4.9) (333) (10.5)
Rate differential on international operations (471) (6.7) (359) (6.2) (448) (14.1)
Agreement with Canada Revenue Agency – – 121 2.1 – –
Other 1 – 22 0.3 16 0.4
Provision for income taxes and effective
income tax rate – reported $ 1,299 18.4% $ 1,262 21.8% $ 241 7.6%
TAXES
TABLE 12
The Bank’s adjusted effective income tax rate was 20.0% for 2011,
compared with 21.6% in 2010. The year-over-year decrease this year
was largely due to the reduction in the Canadian statutory corporate
tax rate in the current year.
(millions of Canadian dollars, except as noted) 2011 2010 2009
Provision for income taxes – reported $ 1,299 $ 1,262 $ 241
Adjustments for items of note: Recovery of (provision for) income taxes2
Amortization of intangibles3 187 197 229
Fair value of derivatives hedging the reclassified available-for-sale debt securities portfolio (23) 19 114
Integration and restructuring charges relating to U.S. Personal and Commercial Banking acquisitions 44 38 153
Fair value of credit default swaps hedging the corporate loan book, net of provision for credit losses (6) 5 70
Income taxes due to changes in statutory income tax rates – 11 –
Insurance claims – (8) –
General allowance increase (release) in Canadian Personal and Commercial Banking and Wholesale Banking – (16) 77
Settlement of TD Banknorth shareholder litigation – – 19
FDIC special assessment charge – – 20
Agreement with Canada Revenue Agency – (121) –
Integration charges relating to Chrysler Financial acquisition 7 – –
Total adjustments for items of note 209 125 682
Provision for income taxes – adjusted 1,508 1,387 923
Other taxes
Payroll 367 316 283
Capital and premium 147 207 268
GST, HST and provincial sales 339 222 172
Municipal and business 149 133 126
Total other taxes 1,002 878 849
Total taxes – adjusted $ 2,510 $ 2,265 $ 1,772
Effective income tax rate – adjusted4 20.0% 21.6% 17.2%
NON-GAAP FINANCIAL MEASURES-RECONCILIATION OF REPORTED TO ADJUSTED INCOME TAXES1
TABLE 13
1 For explanations of items of note, see the “Non-GAAP Financial Measures −
Reconciliation of Adjusted to Reported Net Income” table in the “Financial Results
overview” section of this document.
2 The tax effect for each item of note is calculated using the effective statutory
income tax rate of the applicable legal entity.
3 Effective 2011, amortization of software is recorded in amortization of intangibles.
For the purpose of the items of note only, the income tax impact of software
amortization is excluded from the amortization of intangibles.
4 Adjusted effective income tax rate is the adjusted provision for income taxes before
other taxes as a percentage of adjusted net income before taxes.