XML 46 R19.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
11. | INCOME TAXES
[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:
|  | 2017 |  |  | 2016 |
Canadian statutory income tax rate |  |  | 26.5 | % |  |  | 26.5 | %
Manufacturing and processing profits deduction |  |  | (0.3 | ) |  |  | (0.3 | )
Foreign rate differentials |  |  | (0.4 | ) |  |  | (0.2 | )
Losses not benefited |  |  | 1.6 |  |  |  | 0.8 |
Utilization of losses previously not benefited |  |  | (0.1 | ) |  |  | (0.2 | )
Earnings of equity accounted investees |  |  | (1.4 | ) |  |  | (1.2 | )
Tax on repatriation of foreign earnings |  |  | 1.4 |  |  |  | 0.7 |
Valuation allowance on deferred tax assets [i] |  |  | (0.1 | ) |  |  | (0.4 | )
US tax reform [ii] |  |  | (0.8 | ) |  |  | — |
Research and development tax credits |  |  | (1.2 | ) |  |  | (1.5 | )
Reserve for uncertain tax positions |  |  | (0.2 | ) |  |  | 0.2 |
Non-deductible foreign exchange losses [iii] |  |  | 0.3 |  |  |  | 1.3 |
Others |  |  | (0.5 | ) |  |  | (0.3 | )
Effective income tax rate |  |  | 24.8 | % |  |  | 25.4 | %
[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] | On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act [the “US Tax Reform”], which reduces the US federal corporate tax rate from 35% to 21% beginning in 2018, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign-sourced earnings. At December 31, 2017, in accordance with guidance provided by SEC Staff Accounting Bulletin No. 118 [“SAB 118”], the Company has made a reasonable estimate of its effects and recognized a provisional $23 million net reduction in income tax expense as described below. The ultimate impact of the US Tax Reform may differ from these estimates due to its continued analysis or further implementation guidance that may be issued. Any changes to the provisional amounts will be included as an adjustment to income tax expense or benefit in 2018 in the quarter the amounts are determined in accordance with SAB 118.
Deferred tax assets and liabilities: The Company re-measured certain deferred tax assets and liabilities applying the new tax rate, which resulted in a $61 million reduction to deferred tax expense. One-time transition tax: This tax is based on the Company’s total post-1986 earnings and profits [“E&P”] that were previously deferred from US income taxes and resulted in an increase in current income tax expense of $38 million. The Company has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries or concluded its evaluation of how the US Tax Reform will affect its existing accounting position to indefinitely reinvest any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities. Global Intangible Low-Taxed Income [“GILTI”]: In addition to the changes described above, the US Tax Reform contains a new law that may subject the Company to a tax on GILTI, beginning in 2018. FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years, or treating such taxes as a current-period expense when incurred. The Company is still evaluating the impact of the GILTI provisions and has not yet determined its accounting policy nor recorded any deferred taxes associated with GILTI as at December 31, 2017.
[iii] | Non-deductible foreign exchange losses are related to the re-measurement of financial statement balances of foreign subsidiaries, primarily in Mexico, that are maintained in a currency other than their functional currency.
[b] | The details of income before income taxes by jurisdiction are as follows:
|  | 2017 |  |  | 2016 |
Canadian |  | $ | 592 |  |  | $ | 617 |
Foreign |  |  | 2,407 |  |  |  | 2,163 |
|  | $ | 2,999 |  |  | $ | 2,780 |
[c] | The details of the income tax provision are as follows:
|  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |
Canadian |  | $ | 140 |  |  | $ | 127 |
Foreign |  |  | 607 |  |  |  | 559 |
|  |  | 747 |  |  |  | 686 |
Deferred |  |  |  |  |  |  |  |
Canadian |  |  | (7 | ) |  |  | 16 |
Foreign |  |  | 4 |  |  |  | 4 |
|  |  | (3 | ) |  |  | 20 |
|  | $ | 744 |  |  | $ | 706 |
[d] | Deferred income taxes have been provided on temporary differences, which consist of the following:
|  | 2017 |  |  | 2016 |
Tax depreciation in excess of book depreciation |  | $ | 62 |  |  | $ | 58 |
Tax amortization in excess of book amortization |  |  | 10 |  |  |  | 2 |
Liabilities currently (not deductible) deductible for tax |  |  | (7 | ) |  |  | 5 |
Net tax losses benefited |  |  | (18 | ) |  |  | (31 | )
Change in valuation allowance on deferred tax assets |  |  | (2 | ) |  |  | (12 | )
Tax on undistributed foreign earnings |  |  | 9 |  |  |  | 8 |
US tax reform |  |  | (61 | ) |  |  | — |
Others |  |  | 4 |  |  |  | (10 | )
|  | $ | (3 | ) |  | $ | 20 |
[e] | Deferred tax assets and liabilities consist of the following temporary differences:
|  | 2017 |  |  | 2016 |
Assets |  |  |  |  |  |  |  |
Tax benefit of loss carryforwards |  | $ | 747 |  |  | $ | 715 |
Liabilities currently not deductible for tax |  |  | 171 |  |  |  | 188 |
Tax credit carryforwards |  |  | 59 |  |  |  | 22 |
Unrealized loss on cash flow hedges and retirement liabilities |  |  | 75 |  |  |  | 134 |
Others |  |  | 21 |  |  |  | 21 |
|  |  | 1,073 |  |  |  | 1,080 |
Valuation allowance against tax benefit of loss carryforwards |  |  | (629 | ) |  |  | (615 | )
Other valuation allowance |  |  | (129 | ) |  |  | (66 | )
|  |  | 315 |  |  |  | 399 |
Liabilities |  |  |  |  |  |  |  |
Tax depreciation in excess of book depreciation |  |  | 212 |  |  |  | 266 |
Other assets book value in excess of tax values |  |  | 60 |  |  |  | 57 |
Tax on undistributed foreign earnings |  |  | 106 |  |  |  | 98 |
Unrealized gain on cash flow hedges and retirement liabilities |  |  | 24 |  |  |  | 3 |
|  |  | 402 |  |  |  | 424 |
Net deferred tax liabilities |  | $ | (87 | ) |  | $ | (25 | )
The net deferred tax liabilities are presented on the consolidated balance sheet in the following categories:
|  | 2017 |  |  | 2016 |
Long-term deferred tax assets |  | $ | 236 |  |  | $ | 268 |
Long-term deferred tax liabilities |  |  | (323 | ) |  |  | (293 | )
|  | $ | (87 | ) |  | $ | (25 | )
[f] | The Company has provided for deferred income taxes for the estimated tax cost of distributable earnings of its subsidiaries. Deferred income taxes have not been provided on approximately $5.07 billion of undistributed earnings of certain foreign subsidiaries, as the Company has concluded that such earnings should not give rise to additional tax liabilities upon repatriation or are indefinitely reinvested. A determination of the amount of the unrecognized tax liability relating to the remittance of such undistributed earnings is not practicable.
[g] | Income taxes paid in cash [net of refunds] were $782 million for the year ended December 31, 2017 [2016 - $707 million].
[h] | As of December 31, 2017, the Company had domestic and foreign operating loss carryforwards of $2.60 billion and tax credit carryforwards of $59 million. Approximately $1.87 billion of the operating losses can be carried forward indefinitely. The remaining operating losses and tax credit carryforwards expire between 2018 and 2037.
[i] | As at December 31, 2017 and 2016, the Company’s gross unrecognized tax benefits were $243 and $220 million, respectively [excluding interest and penalties], of which $222 and $201 million, respectively, if recognized, would affect the Company’s effective tax rate. The gross unrecognized tax benefits differ from the amount that would affect the Company’s effective tax rate due primarily to the impact of the valuation allowance on deferred tax assets. A summary of the changes in gross unrecognized tax benefits is as follows:
|  | 2017 |  |  | 2016 |
Balance, beginning of year |  | $ | 220 |  |  | $ | 221 |
Increase based on tax positions related to current year |  |  | 21 |  |  |  | 21 |
Increase (decrease) based on tax positions of prior years |  |  | 7 |  |  |  | (52 | )
Increase related to acquisitions |  |  | — |  |  |  | 44 |
Settlements |  |  | (2 | ) |  |  | (2 | )
Statute expirations |  |  | (17 | ) |  |  | (8 | )
Foreign currency translation |  |  | 14 |  |  |  | (4 | )
|  | $ | 243 |  |  | $ | 220 |
The Company recognizes interest and penalties with respect to unrecognized tax benefits as income tax expense. As at December 31, 2017 and 2016, the Company had recorded interest and penalties on the unrecognized tax benefits of $45 and $35 million, respectively, which reflects expenses related to changes in its reserves for interest and penalties of $10 and $14 million, respectively. The Company operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited or subject to review by both domestic and foreign tax authorities. During the next twelve months, it is reasonably possible that, as a result of audit settlements, the conclusion of current examinations and the expiration of the statute of limitations in several jurisdictions, the Company may decrease the amount of its gross unrecognized tax benefits [including interest and penalties] by approximately $88 million, of which $77 million, if recognized, would affect its effective tax rate. The Company considers its significant tax jurisdictions to include Canada, the United States, Austria, Germany and Mexico. With few exceptions, the Company remains subject to income tax examination in Germany for years after 2007, Mexico for years after 2011, in Austria and in Canada for years after 2012, and in the U.S. federal jurisdiction for years after 2013.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration