Notes
- 1. Cameco Corporation
- 2. Significant Accounting Policies
- 3. Explanation of Transition to IFRS
- 4. Accounting Standards
- 5. Determination of Fair Values
- 6. Use of Estimates and Judgments
- 7. Short-Term Investments
- 8. Accounts Receivable
- 9. Inventories
- 10. Property, Plant and Equipment
- 11. Intangible Assets
- 12. Long-Term Receivables, Investments and Other
- 13. Equity-Accounted Investees
- 14. Accounts Payable and Accrued Liabilities
- 15. Short-Term Debt
- 16. Long-Term Debt
- 17. Finance Lease Obligation
- 18. Other Liabilities
- 19. Provisions
- 20. Share Capital
- 21. Employee Benefit Expense
- 22. Finance Costs
- 23. Other Income
- 24. Income Taxes
- 25. Per Share Amounts
- 26. Statements of Cash Flows
- 27. Share-Based Compensation Plans
- 28. Pension and Other Post-Retirement Benefits
- 29. Financial Instruments and Related Risk Management
- 30. Capital Management
- 31. Commitments and Contingencies
- 32. Segmented Information
- 33. Group Entities
- 34. Jointly Controlled Assets
- 35. Jointly Controlled Entities
- 36. Acquisition of Controlling Interest in UFP Investments LLC (“UFP”)
- 37. Related Parties
24. Income Taxes
(a) Significant Components of Deferred Tax Assets and Liabilities
Recognized in Earnings As at December 31 2011 2010 2011 2010 Assets Provision for reclamation $47,645 $4,030 $159,455 $110,261 Foreign exploration and development 432 4,053 9,683 9,251 Income tax losses 55,702 (196,241) 67,072 11,370 Other 7,150 16,294 97,807 51,323 Deferred tax assets $110,929 $(171,864) $334,017 $182,205 Liabilities Property, plant and equipment $110,616 $(186,169) $243,345 $134,278 Inventories (3,301) (1,318) 4,629 7,930 Long-term investments and other (27,857) (7,589) 12,816 40,673 Deferred tax liabilities $79,458 $(195,076) $260,790 $182,881 Net deferred tax asset (liability) $31,471 $23,212 $73,227 $(676) Deferred tax allocated as Deferred tax assets $81,392 $25,594 Deferred tax liabilities (8,165) (26,270) Net deferred tax asset (liability) $73,227 $(676) (b) Movement in Net Deferred Tax Assets and Liabilities
2011 2010 Deferred tax liability at January 1 $(676) $(83,646) Expense for the year in net earnings 31,471 23,212 Expense for the year in other comprehensive income 38,951 62,826 Foreign exchange adjustments 3,481 (3,068) Deferred tax asset (liability) at December 31 $73,227 $(676) (c) Significant Components of Unrecognized Deferred Tax Assets
2011 2010 Income tax losses $45,847 $30,255 Property, plant and equipment 27,328 20,348 Long-term investments and other 2,893 13,240 Unrecognized deferred tax assets at December 31 $76,068 $63,843 (d) Tax Rate Reconciliation
The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial income tax rate to earnings before income taxes. The reasons for these differences are as follows:
2011 2010 Earnings before income taxes and non-controlling interest $450,390 $509,466 Combined federal and provincial tax rate 28.4% 30.2% Computed income tax expense 127,911 153,859 Increase (decrease) in taxes resulting from: Change in income tax rates 7,582 (29,508) Manufacturing and processing deduction – (3,846) Difference between Canadian rate and rates
applicable to subsidiaries in other countries(184,901) (143,347) Change in unrecorded deferred tax assets 15,961 13,499 Other provincial taxes 2,935 1,409 Share-based compensation plans 4,295 2,696 Change in tax provision related to transfer pricing 27,000 3,000 Other permanent differences 10,972 5,665 Income tax expense $11,755 $3,427 (e) Reassessments
In 2008, as part of the ongoing annual audits of Cameco's Canadian tax returns, Canada Revenue Agency (CRA) disputed the transfer pricing methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd. (CEL), in respect of sale and purchase agreements for uranium products. From December 2008 to date, CRA issued notices of reassessment for the taxation years 2003, 2004, 2005 and 2006, which have increased Cameco's income for Canadian income tax purposes by approximately $43,000,000, $108,000,000, $197,000,000 and $243,000,000 respectively. No reassessment received to date has resulted in more than a nominal amount of cash taxes becoming payable due to the availability of elective deductions and tax loss carrybacks. Cameco believes it is likely that CRA will reassess Cameco's tax returns for subsequent years on a similar basis.
CRA's Transfer Pricing Review Committee has not imposed a transfer pricing penalty for any year reassessed to date.
Having regard to advice from its external advisors, Cameco's opinion is that CRA's position is incorrect, and Cameco is contesting CRA's position. However, to reflect the uncertainties of CRA's appeals process and litigation, Cameco has recorded a cumulative tax provision related to this matter for the years 2003 through the current period in the amount of $54,000,000. No provisions for penalties or interest have been recorded. Cameco does not expect more than a nominal amount of cash taxes to be payable due to the availability of elective deductions and tax loss carryovers. While the resolution of this matter may result in liabilities that are higher or lower than the reserve, management believes that the ultimate resolution will not be material to Cameco's financial position, results of operations or liquidity over the period. However, an unfavourable outcome for the years 2003 to 2011 could be material to Cameco's financial position, results of operations or cash flows in the year(s) of resolution.
Further to Cameco's decision to contest CRA's reassessments, Cameco is pursuing its appeal rights under the Income Tax Act.
(f) Earnings and Income Taxes by Jurisdiction
2011 2010 Earnings (loss) before income taxes Canada $(376,952) $(63,213) Foreign 827,342 572,679 $450,390 $509,466 Current income taxes (recovery) Canada $(7,856) $(12,280) Foreign 51,082 38,919 $43,226 $26,639 Deferred income taxes (recovery) Canada $(47,427) $(27,339) Foreign 15,956 4,127 $(31,471) $(23,212) Income tax expense $11,755 $3,427 (g) Income Tax Losses
At December 31, 2011, income tax losses carried forward of $402,041,000 (2010 - $136,242,000) are available to reduce taxable income. These losses expire as follows:
Date of expiry Canada US Other Total 2013 – $216 – $216 2019 – – 3,057 3,057 2029 – 8,279 – 8,279 2030 410 10,783 – 11,193 2031 227,159 – – 227,159 No expiry – – 152,137 152,137 $227,569 $19,278 $155,194 $402,041 Included in the table above is $152,848,000 (2010 - $101,000,000) of temporary differences related to loss carry forwards where no future benefit is realized.
(h) Other Comprehensive Loss
Other comprehensive loss included on the consolidated statements of comprehensive income and the consolidated statements of changes in equity is presented net of income taxes. The following income tax amounts are included in each component of other comprehensive loss:
For the year ended December 31, 2011 Before tax Income tax recovery (expense) Net of tax Exchange differences on translation of foreign operations $38,635 $ – $38,635 Gains on derivatives designated as cash flow hedges 10,717 (2,763) 7,954 Gains on derivatives designated as cash flow hedges transferred to net earnings (25,506) 6,806 (18,700) Unrealized gains on assets available-for-sale 311 (39) 272 Gains on assets available-for-sale transferred to net earnings (2,209) 292 (1,917) Defined benefit plan actuarial losses (138,692) 34,655 (104,037) $(116,744) $38,951 $(77,793) For the year ended December 31, 2010 Before tax Income tax recovery (expense) Net of tax Exchange differences on translation of foreign operations $6,435 $ – $6,435 Gains on derivatives designated as cash flow hedges 15,012 (2,977) 12,035 Gains on derivatives designated as cash flow hedges transferred to net earnings (100,586) 29,400 (71,186) Unrealized gains on assets available-for-sale 2,455 (330) 2,125 Gains on assets available-for-sale transferred to net earnings (2,956) 399 (2,557) Defined benefit plan actuarial losses (145,316) 36,334 (108,982) $(224,956) $62,826 $(162,130)