Financial Statements of - Shoppers Drug Mart

SHOPPERS DRUG MART CORPORATION
Notes to the Consolidated Financial Statements
(unaudited)
(in thousands of Canadian dollars, except per share data)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company capitalizes borrowing costs at the weighted average interest rate on borrowings
outstanding for the period. The Company commences capitalization of borrowing costs as part of the
cost of a qualifying asset when activities are undertaken to prepare the asset for its intended use and
when expenditures, including borrowing costs, are incurred for the asset. Capitalization of borrowing
costs ceases when substantially all of the activities necessary to prepare the asset for its intended use
are complete.
(g) Income Taxes
Income tax expense comprises taxes currently payable on earnings and changes in deferred tax
balances. Income tax expense is recognized in net earnings except to the extent that it relates to items
recognized either in other comprehensive income or directly in equity, in which case it is recognized
in other comprehensive income or in equity, respectively.
Current tax expense comprises the tax payable on the taxable income for the current financial year
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to income
taxes payable in respect of previous years.
Deferred tax is recognized using the balance sheet method in respect of taxable temporary differences
arising from differences between the carrying amount of assets and liabilities for tax purposes and
their carrying amounts in the financial statements. Deferred tax is calculated at the tax rates that are
expected to apply to temporary differences in the year they are expected to reverse and are based on
the tax legislation that has been enacted or substantively enacted by the reporting date. Deferred tax
is not recognized for the following temporary differences: the initial recognition of goodwill and the
initial recognition of assets or liabilities in a transaction that is not a business acquisition and that
affects neither accounting nor taxable earnings; and, differences relating to investments in
subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset the
recognized amounts and the Company intends to settle on a net basis or to realize the asset and settle
the liability simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be
available against which the temporary difference can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that all or part of the
related tax benefit will be realized.
(h) Earnings per Common Share
The Company presents basic and diluted earnings per share (“EPS”) amounts for its common shares.
Basic EPS is calculated by dividing the net earnings attributable to common shareholders of the
Company by the weighted average number of common shares outstanding during the period. Diluted
EPS is determined by dividing the net earnings attributable to common shareholders of the Company
by the weighted average number of common shares outstanding after adjusting for the effects of all
potential dilutive common shares, which are comprised of share options granted to employees. Antidilutive
options are not included in the calculation of diluted EPS.
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