XML 111 R17.htm IDEA: XBRL DOCUMENT v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
9.    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:
 
    
2022
     2021  
Canadian statutory income tax rate
   
 
26.5
% 
     26.5 % 
Net effect of losses not benefited
   
 
7.7
 
     1.8  
Tax on repatriation of foreign earnings
   
 
5.3
 
     2.9  
Impairment of investments
[note 2]
   
 
1.0
 
     —    
Foreign rate differentials
   
 
0.6
 
     (3.9 ) 
Reserve for uncertain tax positions
   
 
0.4
 
     (2.5 ) 
Foreign exchange
re-measurement
[i]
   
 
(0.6
) 
     1.2  
Re-measurement
of deferred tax assets [ii]
   
 
(0.8
) 
     1.5  
Earnings of equity accounted investees
   
 
(1.6
) 
     (1.3 ) 
Valuation allowance on deferred tax assets
   
 
(2.2
) 
     (0.7 ) 
Deductible inflationary adjustments
   
 
(3.3
) 
     (1.2 ) 
Research and development tax credits
   
 
(7.1
) 
     (3.4 ) 
Others
   
 
1.1
 
     (0.6 ) 
    
 
 
    
 
 
  
Effective income tax rate
   
 
27.0
% 
     20.3 % 
    
 
 
    
 
 
  
 
[i]
Includes foreign exchange gains reported on U.S. dollar denominated assets for Mexican tax purposes that are not recognized for GAAP purposes and losses 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.
[ii]
Includes the
re-measurement
of deferred tax assets of certain European subsidiaries in 2022 and a Chinese subsidiary in 2021.
 
 
[b]
The details of income before income taxes by jurisdiction are as follows:
 
    
        2022        
              2021          
Canadian
   
$
(57
) 
    $ 220  
Foreign
   
 
935 
 
      1,728  
    
 
 
     
 
 
  
    
$
  878
 
    $   1,948  
    
 
 
     
 
 
  
 
[c]
The details of the income tax provision are as follows:
 
    
        2022        
              2021          
Current
                  
Canadian
   
$
5
 
    $ 63  
Foreign
   
 
452
 
      408  
    
 
 
     
 
 
  
    
 
457
 
      471  
    
 
 
     
 
 
  
Deferred
                  
Canadian
   
 
(25
) 
      (4 ) 
Foreign
   
 
(195
) 
      (72 ) 
    
 
 
     
 
 
  
    
 
(220
) 
      (76 ) 
    
 
 
     
 
 
  
    
$
237
 
    $ 395  
    
 
 
     
 
 
  
 
[d]
Deferred income taxes have been provided on temporary differences, which consist of the following:
 
    
       2022       
              2021          
Liabilities currently not deductible for tax
   
$
17
 
    $ 5  
Net tax losses benefited
   
 
10
 
      (22 ) 
Re-measurement
of deferred tax assets
   
 
(7
) 
      28  
Change in valuation allowance on deferred tax assets
   
 
(19
) 
      (13 ) 
Tax depreciation (less than) in excess of book depreciation
   
 
(21
) 
      (30 ) 
Tax on undistributed foreign earnings
   
 
(34
) 
      43  
Unrealized (loss) gain on remeasurement of investments
   
 
(48
) 
      3  
Book amortization in excess of tax amortization
   
 
(89
) 
      (58 ) 
Others
   
 
(29
) 
      (32 ) 
    
 
 
     
 
 
  
    
$
(220
) 
    $ (76 ) 
    
 
 
     
 
 
  
 
 
[e]
Deferred tax assets and liabilities consist of the following temporary differences:
 
    
2022
      2021  
Assets
                  
Tax benefit of loss carryforwards
   
$
760
 
    $ 766  
Operating lease liabilities
   
 
367
 
      409  
Liabilities currently not deductible for tax
   
 
269
 
      219  
Tax credit carryforwards
   
 
87
 
      84  
Other assets tax value in excess of book values
   
 
87
 
      —    
Unrealized loss on foreign exchange hedges and retirement liabilities
   
 
70
 
      59  
Unrealized losses on remeasurement of investments
   
 
37
 
      —    
Others
   
 
29
 
      30  
    
 
 
     
 
 
  
      
1,706
        1,567  
Valuation allowance against tax benefit of loss carryforwards
   
 
(579
) 
      (586 ) 
Other valuation allowance
   
 
(198
) 
      (125 ) 
    
 
 
     
 
 
  
    
$
929
 
    $ 856  
    
 
 
     
 
 
  
Liabilities
                  
Operating lease
right-of-use
assets
   
 
372
 
      415  
Tax depreciation in excess of book depreciation
   
 
186
 
      228  
Tax on undistributed foreign earnings
   
 
171
 
      206  
Unrealized gain on foreign exchange hedges and retirement liabilities
   
 
21
 
      11  
Unrealized gain on remeasurement of investments
   
 
—  
 
      12  
Other assets book value in excess of tax values
   
 
—  
 
      3  
    
 
 
     
 
 
  
    
 
750
 
      875  
    
 
 
     
 
 
  
Net deferred tax assets (liabilities)
   
$
179
 
    $ (19 ) 
    
 
 
     
 
 
  
The net deferred tax liabilities are presented on the consolidated balance sheet in the following categories:
 
    
2022
      2021  
Long-term deferred tax assets
   
$
491
 
    $ 421  
Long-term deferred tax liabilities
   
 
(312
) 
      (440 ) 
    
 
 
     
 
 
  
    
$
179
 
    $ (19 ) 
    
 
 
     
 
 
  
 
[f]
Deferred income taxes have not been provided on $4.6 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 $560 million for the year ended December 31, 2022 [2021 - $341 million].
 
[h]
As of December 31, 2022, the Company had domestic and foreign operating loss carryforwards of $2.9 billion and tax credit carryforwards of $87 million. Approximately $1.9 billion of the operating losses can be carried forward indefinitely. The remaining operating losses and tax credit carryforwards expire between 2023 and 2042.
 
 
[i]
As at December 31, 2022 and 2021, the Company’s gross unrecognized tax benefits were $142 million, respectively [excluding interest and penalties], of which $
135
 million and $
126
 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:
 
    
2022
      2021  
Balance, beginning of year
   
$
142
 
    $ 182  
Increase based on tax positions related to current year
   
 
52
 
      11  
(Decrease) Increase based on tax positions of prior years
   
 
(17
) 
      2  
Settlements
   
 
(10
) 
      (5 ) 
Foreign currency translation
   
 
(4
) 
      (5 ) 
Statute expirations
   
 
(21
) 
      (43 ) 
    
 
 
     
 
 
  
     $ 142      $ 142  
    
 
 
     
 
 
  
As at December 31, 2022 and 2021, the Company had recorded interest and penalties on the unrecognized tax benefits of $29 million and $26 million, respectively, which reflects an increase of $3 million and a decrease of $17 million in expenses related to changes in its reserves for interest and penalties in 2022 and 2021, respectively.
The Company operates in multiple jurisdictions, 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, or 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 $24 million, which, if recognized, would affect its effective tax rate.
The Company considers its significant tax jurisdictions to include Canada, the United States, Austria, Germany, Mexico and China. With few exceptions, the Company remains subject to income tax examination in Germany for years after 2011, China and Mexico for years after 2016, Canada for years after 2017, and Austria and U.S. federal jurisdictio
n for y
ears after 2018.