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income taxes | 12 Months Ended
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Dec. 31, 2018
income taxes |
income taxes | 10 income taxes (a) Expense composition and rate reconciliation
Years ended December 31 (millions) |  | 2018 |  |  | 2017
|  |  |  |  | (adjusted –
|  |  |  |  | Note 2(c))
Current income tax expense |  |  |  |  |  |
For the current reporting period |  | $ | 483 |  | $ | 205
Adjustments recognized in the current period for income taxes of prior periods |  |  | (5) |  |  | (82)
|  |  | 478 |  |  | 123
Deferred income tax expense (recovery) |  |  |  |  |  |
Arising from the origination and reversal of temporary differences |  |  | 75 |  |  | 361
Revaluation of deferred income tax liability to reflect future income tax rates |  |  | — |  |  | 28
Adjustments recognized in the current period for income taxes of prior periods |  |  | (1) |  |  | 78
|  |  | 74 |  |  | 467
|  | $ | 552 |  | $ | 590
Our income tax expense and effective income tax rate differ from those calculated by applying the applicable statutory rates for the following reasons:
Years ended December 31 ($ in millions) |  | 2018 |  | 2017 |
|  |  |  |  |  |  | (adjusted –Note 2(c)) |
Income taxes computed at applicable statutory rates |  | $ | 586 |  | 27.0 | % | $ | 578 |  | 26.7 | %
Revaluation of deferred income tax liability to reflect future income tax rates |  |  | — |  | — |  |  | 28 |  | 1.3 |
Adjustments recognized in the current period for income taxes of prior periods |  |  | (6) |  | (0.3) |  |  | (4) |  | (0.2) |
Other |  |  | (28) |  | (1.3) |  |  | (12) |  | (0.6) |
Income tax expense per Consolidated statements of income and other comprehensive income |  | $ | 552 |  | 25.4 | % | $ | 590 |  | 27.2 | %
(b) Temporary differences We must make significant estimates in respect of the composition of our deferred income tax liability. Our operations are complex and the related income tax interpretations, regulations, legislation and jurisprudence are continually changing. As a result, there are usually some income tax matters in question. Temporary differences comprising the net deferred income tax liability and the amounts of deferred income taxes recognized in the Consolidated statements of income and other comprehensive income and the Consolidated statements of changes in owners’ equity are estimated as follows:
|  | Property, plant |  |  |  |  |  |  | Net pension |  |  |  |  |  |  |  |  |  |  | Partnership |  |
|  | and equipment |  |  |  |  |  |  | and share- |  |  |  |  | Losses |  |  |  |  | income |  |
|  | and intangible |  | Intangible |  | Contract |  | based |  | Provisions not |  | available to |  |  |  |  | unallocated for |  | Net deferred
|  | assets subject |  | assets with |  | assets with |  | compensation |  | currently |  | be carried |  |  |  |  | income tax |  | income tax
(millions) |  | to amortization |  | indefinite lives |  | liabilities |  | amounts |  | deductible |  | forward 1 |  | Other |  | purposes |  | liability
As at January 1, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As previously reported |  | $ | 870 |  | $ | 1,457 |  | $ | — |  | $ | (48) |  | $ | (148) |  | $ | (6) |  | $ | (18) |  | $ | (5) |  | $ | 2,102
IFRS 15, Revenue from Contracts with Customers transitional amount (Note 2(c)) |  |  | — |  |  | — |  |  | 404 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 404
As adjusted 2 |  |  | 870 |  |  | 1,457 |  |  | 404 |  |  | (48) |  |  | (148) |  |  | (6) |  |  | (18) |  |  | (5) |  |  | 2,506
Deferred income tax expense recognized in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (Note 2(c)) |  |  | 348 |  |  | 84 |  |  | 37 |  |  | (11) |  |  | 8 |  |  | (1) |  |  | (3) |  |  | 5 |  |  | 467
Other comprehensive income |  |  | — |  |  | — |  |  | — |  |  | (61) |  |  | — |  |  | — |  |  | 4 |  |  | — |  |  | (57)
Deferred income taxes charged directly to owners’ equity and other |  |  | 3 |  |  | 20 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3) |  |  | — |  |  | 20
As at December 31, 2017 3 |  |  | 1,221 |  |  | 1,561 |  |  | 441 |  |  | (120) |  |  | (140) |  |  | (7) |  |  | (20) |  |  | — |  |  | 2,936
Deferred income tax expense recognized in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  |  | 14 |  |  | 78 |  |  | 55 |  |  | (20) |  |  | (10) |  |  | 1 |  |  | (44) |  |  | — |  |  | 74
Other comprehensive income |  |  | — |  |  | — |  |  | — |  |  | 119 |  |  | — |  |  | — |  |  | (6) |  |  | — |  |  | 113
Deferred income taxes charged directly to owners’ equity and other |  |  | (2) |  |  | 79 |  |  | — |  |  | — |  |  | (54) |  |  | — |  |  | 1 |  |  | — |  |  | 24
As at December 31, 2018 4 |  | $ | 1,233 |  | $ | 1,718 |  | $ | 496 |  | $ | (21) |  | $ | (204) |  | $ | (6) |  | $ | (69) |  | $ | — |  | $ | 3,147
| 1 |  | We expect to be able to utilize our non-capital losses prior to expiry.
| 2 |  | Deferred tax liability of $2,511, net of deferred tax asset of $5 (included in Other long-term assets).
| 3 |  | Deferred tax liability of $2,941, net of deferred tax asset of $5 (included in Other long-term assets).
| 4 |  | Deferred tax liability of $3,152, net of deferred tax asset of $5 (included in Other long-term assets).
IFRS-IASB requires the separate disclosure of temporary differences arising from the carrying value of investments in subsidiaries and partnerships exceeding their tax base, for which no deferred income tax liabilities have been recognized because the parent is able to control the timing of the reversal of the difference and it is probable that it will not reverse in the foreseeable future. In our specific instance, this is relevant to our investments in Canadian subsidiaries and Canadian partnerships. We are not required to recognize such deferred income tax liabilities, as we are in a position to control the timing and manner of the reversal of the temporary differences, which would not be expected to be exigible to income tax, and it is probable that such differences will not reverse in the foreseeable future. We are in a position to control the timing and manner of the reversal of temporary differences in respect of our non-Canadian subsidiaries, and it is probable that such differences will not reverse in the foreseeable future. (c) Other We have net capital losses, and such losses may only be applied against realized taxable capital gains. We expect to include a net capital loss carry-forward of $NIL (2017 – $NIL) in our Canadian income tax returns. During the year ended December 31, 2018, we recognized the benefit of $NIL (2017 – $4 million) of net capital losses. We conduct research and development activities, which are eligible to earn Investment Tax Credits. During the year ended December 31, 2018, we recorded Investment Tax Credits of $10 million (2017 – $12 million). Of this amount, $6 million (2017 – $7 million) was recorded as a reduction of property, plant and equipment and/or intangible assets and the balance was recorded as a reduction of Goods and services purchased.

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