Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

[a]	The provision for income taxes differs from the expense that would be obtained by applying the Canadian statutory income tax rate as a result of the following:


	2013			2012			2011

Canadian statutory income tax rate		26.5	%		26.5	%		28.3	%
Manufacturing and processing profits deduction		(0.4	)		(0.7	)		(0.8	)
Foreign rate differentials		(1.5	)		(1.5	)		(2.0	)
Losses not benefited		5.3			5.8			11.4
Utilization of losses previously not benefited		(1.0	)		(0.3	)		(10.2	)
Earnings of equity accounted investees		(1.1	)		(1.2	)		(1.6	)
Withholding tax		1.4			0			0
Valuation allowance on deferred tax assets [i]		(1.1	)		(5.0	)		(6.5	)
Mexican flat tax [ii]		(1.9	)		0			0
Research and development tax credits [iii]		(4.3	)		(2.3	)		(1.6	)
Reserve for uncertain tax positions		(2.3	)		(1.0	)		(0.4	)
Re-measurement gains		0			(1.1	)		0
Other		(0.7	)		(0.7	)		0

Effective income tax rate		18.9	%		18.5	%		16.6	%

[i]

GAAP requires that the Company assess whether valuation allowances should be established or maintained against its deferred tax assets, based on consideration of all available evidence, using a “more likely than not” standard. The factors the Company uses to assess the likelihood of realization are its history of losses, forecasts of future pre-tax income and tax planning strategies that could be implemented to realize the deferred tax assets.

[ii]

During the fourth quarter of 2013, the Company recorded a tax benefit of $36 million as a result of the elimination of the Mexican flat tax, which became effective on January 1, 2014. Previously, there were two taxes in Mexico; a flat tax and an income tax and taxpayers were required to pay tax based on the greater of the two. Deferred taxes were also maintained by the Company based on calculations under one or the other of these taxes. The elimination of the flat tax allowed the Company to reverse its net deferred tax liabilities for its entities under that tax and establish a deferred tax asset under the income tax.

[iii]

For the year ended December 31, 2013, the amount includes a tax benefit of $36 million in connection with a settlement with the United States Internal Revenue Service, of claims for research and development tax credits covering years 2008 and 2009 and a resulting change in the Company’s estimate of the amount of similar claims for subsequent periods.

Details of Income before Income Taxes by Jurisdiction

[b]	The details of income before income taxes by jurisdiction are as follows:


	2013		2012		2011

Canadian	$	653	$	944	$	710
Foreign		1,252		806		507

	$	1,905	$	1,750	$	1,217

Details of Income Tax Provision (Recovery)

[c]	The details of the income tax provision (recovery) are as follows:


	2013			2012			2011

Current
Canadian	$	159		$	170		$	115
Foreign		301			200			163

		460			370			278


Deferred
Canadian		(29	)		(6	)		7
Foreign		(71	)		(40	)		(83	)

		(100	)		(46	)		(76	)

	$	360		$	324		$	202

Summary of Deferred Income Taxes Provided on Temporary Differences

[d]	Deferred income taxes have been provided on temporary differences, which consist of the following:


	2013			2012			2011

Tax depreciation greater (less) than book depreciation	$	(23	)	$	13		$	51
Book amortization less than (in excess of) tax amortization		(57	)		16			0
Liabilities currently not deductible for tax		(48	)		(29	)		(28	)
Net tax losses (benefited) utilized		50			(11	)		(37	)
Change in valuation allowance on deferred tax assets		(21	)		(89	)		(78	)
Net tax credits utilized		2			53			24
Other		(3	)		1			(8	)

	$	(100	)	$	(46	)	$	(76	)

Summary of Deferred Tax Assets and Liabilities

[e]	Deferred tax assets and liabilities consist of the following temporary differences:


	2013			2012

Assets
Tax benefit of loss carryforwards	$	610		$	628
Liabilities currently not deductible for tax		337			263
Tax credit carryforwards		34			35
Unrealized loss on cash flow hedges and retirement liabilities		39			48
Other		11			0

		1,031			974
Valuation allowance against tax benefit of loss carryforwards		(528	)		(504	)
Other valuation allowance		(111	)		(45	)

		392			425


Liabilities
Tax depreciation in excess of book depreciation		170			199
Other assets book value in excess of tax value		15			77
Unrealized gain on cash flow hedges and retirement liabilities		21			19
Other		0			30

		206			325


Net deferred tax assets	$	186		$	100

Net Deferred Tax Assets Presented on Consolidated Balance Sheet

The net deferred tax assets are presented on the consolidated balance sheet in the following categories:


	2013			2012

Current deferred tax assets	$	275		$	170
Current deferred tax liabilities		(9	)		(19	)
Long-term deferred tax assets		120			90
Long-term deferred tax liabilities		(200	)		(141	)

	$	186		$	100

Summary of Changes in Gross Unrecognized Tax Benefits

A summary of the changes in gross unrecognized tax benefits is as follows:


	2013			2012			2011

Balance, beginning of year	$	279		$	252		$	257
Additions based on tax positions related to current year		35			68			14
(Reductions)/additions based on tax positions of prior years		(44	)		(31	)		13
Settlements		(24	)		(10	)		(12	)
Statute expirations		(7	)		(5	)		(16	)
Foreign currency translation		(1	)		5			(4	)

	$	238		$	279		$	252