Aeterna Zentaris Inc. | CIK:0001113423 | 3

  • Filed: 3/28/2018
  • Entity registrant name: Aeterna Zentaris Inc. (CIK: 0001113423)
  • Generator: Workiva (WebFilings)
  • SEC filing page: http://www.sec.gov/Archives/edgar/data/1113423/000162828018003635/0001628280-18-003635-index.htm
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    • ifrs-full:DisclosureOfIncomeTaxExplanatory

    20 Income taxes
    Significant components of current and deferred income tax expense are as follows:
     
     
    Years ended December 31,
     
     
    2017
     
    2016
     
    2015
     
     
    $
     
    $
     
    $
    Current tax expense
     
    —

     
    —

     
    —

    Deferred tax:
     
     
     
     
     
     
    Origination and reversal of temporary differences
     
    6,395

     
    9,199

     
    8,581

    Adjustments in respect of prior years
     
    (149
    )
     
    36

     
    —

    Change in unrecognized tax assets
     
    (2,767
    )
     
    (9,235
    )
     
    (8,581
    )
    Income tax recovery
     
    3,479

     
    —

     
    —


    The reconciliation of the combined Canadian federal and provincial income tax rate to the income tax expense is provided below:
     
     
    Years ended December 31,
     
     
    2017
     
    2016
     
    2015
    Combined Canadian federal and provincial statutory income tax rate
     
    26.8
    %
     
    26.9
    %
     
    26.9
    %
     
     
    Years ended December 31,
     
     
    2017
     
    2016
     
    2015
     
     
    $
     
    $
     
    $
    Income tax recovery based on combined statutory income tax rate
     
    5,434

     
    6,714

     
    13,511

    Change in unrecognized tax assets
     
    (2,701
    )
     
    (9,235
    )
     
    (8,581
    )
    Change in unrecognized tax assets related to OCI
     
    (228
    )
     
    436

     
    (269
    )
    Share issuance costs
     
    164

     
    224

     
    —

    Permanent difference attributable to the use of local currency for tax reporting
     
    (71
    )
     
    (30
    )
     
    (1,297
    )
    Change in enacted rates used
     
    (358
    )
     
    (16
    )
     
    —

    Permanent difference attributable to net change in fair value of warrant liability
     
    595

     
    1,194

     
    (3,754
    )
    Share-based compensation costs
     
    (49
    )
     
    (291
    )
     
    (248
    )
    Difference in statutory income tax rate of foreign subsidiaries
     
    768

     
    972

     
    1,135

    Permanent difference attributable to expiring loss carry forward
     
    —

     
    —

     
    (563
    )
    Adjustments in respect of prior years
     
    (149
    )
     
    36

     
    —

    Other
     
    74

     
    (4
    )
     
    66

     
     
    3,479

     
    —

     
    —


    Deferred income tax assets are recognized to the extent that the realization of the related tax benefit through reversal of temporary differences and future taxable profits is probable.
    Loss before income taxes
    Loss before income taxes is attributable to the Company's tax jurisdictions as follows:
     
     
    Years ended December 31,
     
     
    2017
     
    2016
     
    2015
     
     
    $
     
    $
     
    $
    Germany
     
    (13,950
    )
     
    (19,179
    )
     
    (20,500
    )
    Canada
     
    (5,592
    )
     
    (5,659
    )
     
    (29,496
    )
    United States
     
    (733
    )
     
    (121
    )
     
    (232
    )
     
     
    (20,275
    )
     
    (24,959
    )
     
    (50,228
    )

    Significant components of deferred tax assets and liabilities are as follows:
     
     
    December 31,
     
     
    2017
     
    2016
     
     
    $
     
    $
    Deferred tax assets
     
     
     
     
    Current:
     
     
     
     
    Operating losses carried forward
     
    3,479

     
    —

    Non-current:
     
     
     
     
    Operating losses carried forward
     
    696

     
    1,009

    Intangible assets
     
    4,812

     
    5,199

     
     
    8,987

     
    6,208

    Deferred tax liabilities
     
     
     
     
    Current:
     
     
     
     
    Payables and accrued liabilities
     
    —

     
    109

     
     
    —

     
    109

    Non-current:
     
     
     
     
    Property, plant and equipment
     
    5

     
    7

    Deferred revenues
     
    5,316

     
    5,658

    Warrant liability
     
    —

     
    386

    Other
     
    187

     
    48

     
     
    5,508

     
    6,099

     
     
    5,508

     
    6,208

    Deferred tax assets (liabilities), net
     
    3,479

     
    —


    Significant components of unrecognized deferred tax assets are as follows:
     
     
    December 31,
     
     
    2017
     
    2016
     
     
    $
     
    $
    Deferred tax assets
     
     
     
     
    Current:
     
     
     
     
    Deferred revenues and other provisions
     
    584

     
    217

     
     
    584

     
    217

    Non-current:
     
     
     
     
    Deferred Revenues
     
    —

     
    —

    Operating losses carried forward
     
    82,421

     
    71,654

    Research and development costs
     
    9,167

     
    9,195

    Unused tax credits
     
    8,019

     
    8,019

    Employee future benefits
     
    2,296

     
    2,275

    Property, plant and equipment
     
    407

     
    175

    Share issuance expenses
     
    841

     
    941

    Onerous contract provisions
     
    —

     
    26

    Intangible assets
     
    —

     
    189

    Other
     
    335

     
    144

     
     
    103,486

     
    92,618

    Unrecognized deferred tax assets
     
    104,070

     
    92,835


    As at December 31, 2017, amounts and expiry dates of tax attributes to be deferred for which no deferred tax asset was recognized were as follows:
     
     
    Canada
     
     
    Federal
     
     Provincial
     
     
    $
     
    $
    2028
     
    6,429

     
    5,043

    2029
     
    4,791

     
    4,773

    2030
     
    4,104

     
    4,089

    2031
     
    1,753

     
    1,737

    2032
     
    4,250

     
    4,250

    2033
     
    3,721

     
    3,721

    2034
     
    4,153

     
    4,153

    2035
     
    10,418

     
    10,452

    2036
     
    10,592

     
    10,592

    2037
     
    7,610

     
    7,610

     
     
    57,821

     
    56,420


    The Company has estimated non-refundable R&D investment tax credits of approximately $8,019,000 which can be carried forward to reduce Canadian federal income taxes payable and which expire at dates ranging from 2018 to 2037. Furthermore, the Company has unrecognized tax assets in respect of operating losses to be carried forward in Germany and in the United States. The federal tax losses amount to approximately $211,000,000 in Germany, for which there is no expiry date, and to $2,165,000 in the United States, which expire as follows:
     
     
     United States
     
     
    $
    2028
     
    369

    2029
     
    178

    2034
     
    151

    2035
     
    447

    2036
     
    195

    2037
     
    825

     
     
    2,165


    The operating loss carryforwards and the tax credits claimed are subject to review, and potential adjustment, by tax authorities. Other deductible temporary differences for which tax assets have not been booked are not subject to a time limit, except for share issuance expenses which are amortizable over five years.