TD Bank 2014 Annual Report Download - page 22

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS20
(millions of Canadian dollars, except as noted) 2014 2013 2012
Provision for income taxes – reported $ 1,512 $ 1,135 $ 1,085
Adjustments for items of note: Recovery of (provision for) incomes taxes1,2
Amortization of intangibles 93 94 96
Integration charges and direct transaction costs relating to the acquisition
of the credit card portfolio of MBNA Canada 44 33 36
Fair value of derivatives hedging the reclassified available-for-sale securities portfolio (6) (14) –
Set-up, conversion and other one-time costs related to affinity relationship with
Aimia and acquisition of Aeroplan Visa credit card accounts 47 7 –
Impact of Alberta flood on the loan portfolio (6) 6 –
Gain on sale of TD Waterhouse Institutional Services (35) – –
Litigation and litigation-related charge/reserve – 26 165
Restructuring charges – 39 –
Impact of Superstorm Sandy – – 25
Integration charges, direct transaction costs, and changes in fair value of contingent
consideration relating to the Chrysler Financial acquisition – – 10
Reduction of allowance for incurred but not identified credit losses – – (42)
Positive impact due to changes in statutory income tax rates – – 18
Fair value of credit default swaps hedging the corporate loan book, net of provision for credit losses – – 2
Integration charges and direct transaction costs relating to U.S. Retail acquisitions – – 2
Total adjustments for items of note 137 191 312
Provision for income taxes – adjusted 1,649 1,326 1,397
Other taxes
Payroll 435 404 383
Capital and premium 157 140 141
GST, HST, and provincial sales3 426 380 352
Municipal and business 172 169 156
Total other taxes 1,190 1,093 1,032
Total taxes – adjusted $ 2,839 $ 2,419 $ 2,429
Effective income tax rate – adjusted4 17.5% 16.3% 17.1%
(millions of Canadian dollars, except as noted) 2014 2013 2012
Income taxes at Canadian statutory income tax rate $ 2,385 26.3% $ 1,970 26.3% $ 1,933 26.4%
Increase (decrease) resulting from:
Dividends received (321) (3.5) (253) (3.4) (262) (3.6)
Rate differentials on international operations (489) (5.4) (487) (6.5) (483) (6.6)
Tax rate changes – – – – (18) (0.2)
Other (63) (0.7) (95) (1.3) (85) (1.2)
Provision for income taxes and effective
income tax rate – reported $ 1,512 16.7% $ 1,135 15.1% $ 1,085 14.8%
NON-GAAP FINANCIAL MEASURES – Reconciliation of Reported to Adjusted Provision for Income Taxes
TABLE 13
INCOME TAXES
TABLE 12
The Bank’s effective income tax rate on a reported basis was 16.7%
for 2014, compared with 15.1% last year. The year-over-year increase
was largely due to business mix, offset by the resolution of certain
audit issues.
The Bank reports its investment in TD Ameritrade using the equity
method of accounting. TD Ameritrade’s tax expense of $198 million
in the year, compared to $168 million last year, was not part of the
Bank’s tax rate.
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes increased by $474 million, or
21%, compared with last year. Income tax expense, on a reported
basis, was up $377 million, or 33%, compared with last year. Other
taxes were up $97 million, or 9%, compared with last year. Adjusted
total income and other taxes were up $420 million from last year.
Total income tax expense, on an adjusted basis, was up $323 million,
or 24%, from last year.
The Bank’s adjusted effective tax rate for the year was 17.5%,
compared with 16.3% last year. The year-over-year increase was largely
due to business mix, offset by the resolution of certain audit issues.
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 Goods and services tax (GST) and Harmonized sales tax (HST).
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.