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)