24. Income taxes

  • A. Significant components of deferred tax assets and liabilities

      Recognized in Earnings At December 31
      2012 2011 2012 2011
    Assets        
    Inventories $3,250 $ — $3,250 $ —
    Provision for reclamation 7,152 47,645 166,588 159,455
    Foreign exploration and development (62) 432 9,621 9,683
    Income tax losses 59,174 55,702 126,241 67,072
    Defined benefit plan actuarial losses — — 93,831 71,304
    Other 11,542 7,150 42,552 26,503
    Deferred tax assets 81,056 110,929 422,083 334,017
    Liabilities        
    Property, plant and equipment (16,646) 110,616 226,723 243,345
    Inventories (4,629) (3,301) — 4,629
    Long-term investments and other 15,204 (27,857) 28,020 12,816
    Deferred tax liabilities (6,071) 79,458 254,743 260,790
    Net deferred tax asset $87,127 $31,471 $187,340 $73,227

    Deferred tax allocated as 2012 2011
    Deferred tax assets $193,113 $81,392
    Deferred tax liabilities (5,773) (8,165)
    Net deferred tax asset $187,340 $73,227

    Based on projections of future income, realization of these deferred tax assets is probable and consequently a deferred tax asset has been recorded.

  • B. Movement in net deferred tax assets and liabilities

      2012 2011
    Deferred tax asset (liability) at beginning of year $73,227 $(676)
    Recovery for the year in net earnings 87,127 31,471
    Recovery for the year in other comprehensive income 27,631 38,951
    Foreign exchange adjustments (645) 3,481
    End of year $187,340 $73,227

  • C. Significant components of unrecognized deferred tax assets

      2012 2011
    Income tax losses $73,019 $45,847
    Property, plant and equipment 58,249 27,328
    Long-term investments and other 7,750 2,893
    Total $139,018 $76,068

  • 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:

      2012 2011
    Earnings before income taxes and non-controlling interest $218,207 $461,599
    Combined federal and provincial tax rate 26.9% 28.4%
    Computed income tax expense 58,697 131,094
    Increase (decrease) in taxes resulting from:  
    Difference between Canadian rates and rates applicable to subsidiaries in other countries (173,829) (188,084)
    Change in unrecorded deferred tax assets 52,742 15,961
    Other provincial taxes 3,524 2,935
    Share-based compensation plans 3,828 4,295
    Change in tax provision related to transfer pricing 9,000 27,000
    Change in income tax rates 114 7,582
    Other permanent differences (452) 10,972
    Income tax expense (recovery) $(46,376) $11,755

  • 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 structure and 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 through 2007, which have increased Cameco's income for Canadian income tax purposes by approximately $43,000,000, $108,000,000, $197,000,000, $243,000,000 and $708,000,000 respectively. The 2007 reassessment has resulted in Cameco being required to make a cash payment of approximately $27,000,000 subsequent to year-end. Cameco believes it is likely that CRA will reassess Cameco's tax returns for subsequent years on a similar basis and that these will result in future cash payments on receipt of the reassessments.

    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 and expects to recover any cash paid as a result of the reassessments. 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 2012 in the amount of $63,000,000. No provisions for penalties or interest have been recorded. 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 in the year(s) of resolution. Resolution of this matter as stipulated by CRA would be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution, and other unfavourable outcomes for the years 2003 through 2012 could be material, to Cameco's financial position, results of operations and 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

      2012 2011
    Earnings (loss) before income taxes    
    Canada $(319,865) $(376,952)
    Foreign 538,072 838,551
      $218,207 $461,599
    Current income taxes (recovery)    
    Canada $504 $(7,856)
    Foreign 40,247 51,082
      $40,751 $43,226
    Deferred income taxes (recovery)    
    Canada $(75,051) $(47,427)
    Foreign (12,076) 15,956
      $(87,127) $(31,471)
    Income tax expense (recovery) $(46,376) $11,755

  • G. Income tax losses

    At December 31, 2012, income tax losses carried forward of $702,654,000 (2011 - $402,041,000) are available to reduce taxable income. These losses expire as follows:

    Date of expiry Canada US Other Total
    2018 $ — $1,880 $ — $1,880
    2029 — 8,099 — 8,099
    2030 410 10,549 — 10,959
    2031 143,747 17,437 — 161,184
    2032 268,343 11,951 — 280,294
    No expiry — — 240,238 240,238
      $412,500 $49,916 $240,238 $702,654

    Included in the table above is $243,080,000 (2011 - $152,848,000) 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, 2012
      Before tax Income tax
    recovery
    (expense)    		 Net of tax
    Exchange differences on translation of foreign operations $(23,287) $ — $(23,287)
    Gains on derivatives designated as cash flow hedges 5,309 (1,327) 3,982
    Gains on derivatives designated as cash flow hedges transferred to net earnings (25,934) 6,484 (19,450)
    Unrealized losses on available-for-sale-assets (24) 5 (19)
    Gains on available-for-sale-assets transferred to net earnings (149) 20 (129)
    Defined benefit plan actuarial losses (89,994) 22,449 (67,545)
      $(134,079) $27,631 $(106,448)

    For the year ended December 31, 2011
      Before tax Income tax
    recovery
    (expense)    		 Net of tax
    Exchange differences on translation of foreign operations $34,361 $ — $34,361
    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 losses on available-for-sale-assets 311 (39) 272
    Gains on available-for-sale-assets transferred to net earnings (2,209) 292 (1,917)
    Defined benefit plan actuarial losses (138,692) 34,655 (104,037)
      $(121,018) $38,951 $(82,067)