INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Components of loss before recovery of income taxes

	2012			2011			2010
Domestic	$	(205,612	)	$	(41,374	)	$	(127,269	)
Foreign	(188,616		)	23,374			(108,994		)
	$	(394,228	)	$	(18,000	)	$	(236,263	)

Components of recovery of income taxes

	2012			2011			2010
Current:
Domestic	$	7,189		$	3,554		$	5,860
Foreign	56,337			36,337			21,473
	63,526			39,891			27,333
Deferred:
Domestic	(11,886		)	(21,763		)	(49,820		)
Foreign	(329,843		)	(195,687		)	(5,583		)
	(341,729		)	(217,450		)	(55,403		)
	$	(278,203	)	$	(177,559	)	$	(28,070	)

Reconciliation of reported recovery of income taxes from the expected amount calculated by applying the Canadian statutory rate to income before recovery of income taxes

	2012			2011			2010
Loss before recovery of income taxes	$	(394,228	)	$	(18,000	)	$	(236,263	)
Expected Canadian statutory rate	26.9		%	28.3		%	30.6		%
Expected recovery of income taxes	(106,047		)	(5,085		)	(72,296		)
Non-deductible amounts:
Amortization	6,173			22,251			18,304
Share-based compensation	6,258			14,045			8,024
Merger and acquisition costs	24,210			—			7,124
In-process research and development	3,228			—			5,661
Non-taxable gain on disposal of investments	(3,056		)	(15,384		)	(1,679		)
Changes in enacted income tax rates	(4,459		)	(18,313		)	880
Canadian dollar foreign exchange gain for Canadian tax purposes	9,098			40,667			3,358
Change in valuation allowance related to U.S. operating losses	—			—			45,483
Change in valuation allowance on Canadian deferred tax assets and tax rate changes	(34,245		)	(57,249		)	(46,898		)
Change in uncertain tax positions	15,433			(8,568		)	—
Foreign tax rate differences	(218,547		)	(180,301		)	(36,649		)
Loss of U.S. state net operating losses	—			—			9,783
Unrecognized income tax benefit of losses	32,019			22,187			22,768
Withholding taxes on foreign income	7,954			5,473			3,177
Alternative minimum and other taxes	(4,528		)	2,513			—
Taxable foreign income	10,675			—			—
Deferred intercompany profit	(18,588		)	—			—
Other	(3,781		)	205			4,890
	$	(278,203	)	$	(177,559	)	$	(28,070	)

Schedule of tax effect of major items recorded as deferred tax assets and liabilities

	2012			2011
Deferred tax assets:
Tax loss carryforwards	$	293,547		$	285,003
Tax credit carryforwards	77,426			37,141
Scientific Research and Experimental Development pool	65,718			63,893
Research and development tax credits	67,683			62,766
Provisions	211,486			121,288
Plant, equipment and technology	7,478			11,440
Deferred revenue	60,850			22,414
Deferred financing and share issue costs	118,369			50,097
Share-based compensation	19,828			17,808
Other	23,453			15,599
Total deferred tax assets	945,838			687,449
Less valuation allowance	(124,515		)	(128,742		)
Net deferred tax assets	821,323			558,707
Deferred tax liabilities:
Intangible assets	1,801,515			1,545,807
5.375% Convertible Notes(1)	—			2,268
Prepaid expenses	1,094			441
Other	—			—
Total deferred tax liabilities	1,802,609			1,548,516
Net deferred income taxes	$	(981,286	)	$	(989,809	)

(1) In connection with the issuance of the 5.375% Convertible Notes in June 2009 (as described in note 14), the Company recognized a deferred tax liability of $14.6 million for the original basis difference between the principal amount of the 5.375% Convertible Notes and the value allocated to the liability component, which resulted in a corresponding reduction to the valuation allowance recorded against deferred tax assets. The recognition of the deferred tax liability and the corresponding reduction in the valuation allowance were recorded as offsetting adjustments to additional paid-in capital. In the years ended December 31, 2012 and 2011, the deferred tax benefit recognized in earnings as the debt discount was amortized or extinguished was offset by the deferred tax expense related to the corresponding realization of the deferred tax assets.

Reconciliation of the beginning and ending amounts of unrecognized tax benefits

	2012			2011			2010
Balance, beginning of year	$	102,290		$	110,857		$	66,200
Acquisition of Medicis	6,556			—			—
Acquisition of Valeant	—			—			18,916
Additions based on tax positions related to the current year	3,492			2,701			10,133
Additions for tax positions of prior years	19,036			—			15,608
Reductions for tax positions of prior years	(1,396		)	(11,268		)	—
Lapse of statute of limitations	(2,000		)	—			—
Balance, end of year	$	127,978		$	102,290		$	110,857

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

+ References+ Details