INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2011

Components of (loss) income before recovery of income taxes

	2011			2010			2009

Domestic	$	(41,374	)	$	(127,269	)	$	(81,978	)
Foreign		23,374			(108,994	)		256,933

	$	(18,000	)	$	(236,263	)	$	174,955

Components of provision for (recovery of) income taxes

		2011			2010			2009

Current:
	Domestic	$	3,554		$	5,860		$	—
	Foreign		36,337			21,473			14,500

			39,891			27,333			14,500

Deferred:
	Domestic		(21,763	)		(49,820	)		—
	Foreign		(195,687	)		(5,583	)		(16,000	)

			(217,450	)		(55,403	)		(16,000	)

		$	(177,559	)	$	(28,070	)	$	(1,500	)

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

		2011			2010

Deferred tax assets:
	Tax loss carryforwards	$	285,003		$	272,172
	Tax credit carryforwards		37,141			36,160
	Scientific Research and Experimental Development pool		63,893			66,577
	Research and development tax credits		62,766			66,201
	Provisions		121,288			100,320
	Plant, equipment and technology		11,440			33,736
	Deferred revenue		22,414			27,888
	Deferred financing and share issue costs		50,097			65,620
	Share-based compensation		17,808			9,783
	Other		15,599			15,694

	Total deferred tax assets		687,449			694,151
	Less valuation allowance		(128,742	)		(186,399	)

	Net deferred tax assets		558,707			507,752

Deferred tax liabilities:
	Intangible assets		1,502,215			1,779,460
	5.375% Convertible Notes⁽¹⁾		2,268			8,171
	Prepaid expenses		441			510
	Other		—			—

	Total deferred tax liabilities		1,504,924			1,788,141

Net deferred income taxes		$	(946,217	)	$	(1,280,389	)

(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, 2011 and 2010, 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.

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

		2011			2010			2009

(Loss) income before recovery of income taxes		$	(18,000	)	$	(236,263	)	$	174,955
Expected Canadian statutory rate			28.3%			30.6%			32.4%

Expected provision for (recovery of) income taxes			(5,085	)		(72,296	)		56,685
Non-deductible amounts:
	Amortization		22,251			18,304			11,962
	Share-based compensation		14,045			8,024			—
	Merger costs		—			7,124			—
	Acquired IPR&D		—			5,661			21,063
	Non-taxable gain on disposal of investments		(15,384	)		(1,679	)		(3,838	)
	Legal settlement costs		—			—			2,944
	Write-down of investments		—			—			1,690
Changes in enacted income tax rates			(18,313	)		880			9,800
Canadian dollar foreign exchange (loss) gain for Canadian tax purposes			40,667			3,358			2,500
Change in valuation allowance related to U.S. operating losses			—			45,483			(26,000	)
Change in valuation allowance on Canadian deferred tax assets and
	tax rate changes		(57,249	)		(46,898	)		(11,000	)
Change in uncertain tax positions			(8,568	)		—			—
Foreign tax rate differences			(180,301	)		(36,649	)		(99,045	)
Loss of U.S. state net operating losses			—			9,783			—
Unrecognized income tax benefit of losses			22,187			22,768			25,496
Withholding taxes on foreign income			5,473			3,177			3,450
Alternative minimum and other taxes			2,513			—			1,877
Other			205			4,890			916

		$	(177,559	)	$	(28,070	)	$	(1,500	)

Reconciliation of the beginning and ending amounts of unrecognized tax benefits

	2011			2010		2009

Balance, beginning of year	$	110,857		$	66,200	$	63,700
Acquisition of Valeant		—			18,916		—
Additions based on tax positions related to the current year		2,701			10,133		1,000
Additions for tax positions of prior years		—			15,608		3,400
Reductions for tax positions of prior years		(11,268	)		—		(1,900	)

Balance, end of year	$	102,290		$	110,857	$	66,200

- 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.

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