You are an auditor working with the Canada Revenue Agency. You are reviewing the statement and noticed the following facts that you want to understand more. 1. There is no taxable income in the statement but can be calculated easily from the information provided. 2. The income before income tax increased by 47% (2020 over 2019) but income tax expense increased by 30% for the same period. 3. There was no movement on deferred warranty plan (deferred tax liability) in 2020 but there was movement of deferred warranty plan in 2019. 4. Deferred Tax Liability for Property, Plant and Equipment increased in 2020. 5. Deferred Tax Asset for Lease Liability decreased in 2020. You are going to perform the following tasks in a memo format written to your manager.

Calculate Taxable Income for 2019 and 2020 in an Excel spreadsheet. Construct a deferred tax calculation table for Deferred Warranty Plan

onsolidated State ents of Comprehensive Income For the (C$ in thousands) Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 805 135 13 Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss: Gain on debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 4,099 4,917 111,846 168,571 The accompanying notes are an integral part of these consolidated financial statements. 20. Income Tax Expense (a) The major components of income tax expense for the years ended December 31 are as follows: Year ended December 31, 2020 December 31, 2019 For the (C$ in thousands) Consolidated statements of income Current income tax expense: Based on taxable income of the current year Deferred income tax expense: Origination and reversal of temporary differences Income tax expense reported in the consolidated statements of income 54,378 42,808 (7,143) 47,235 (6,691) 36,117 (b) Reconciliation of the effective tax rates are as follows: For the (C$ in thousands, except %) Income before income taxes Income tax expense based on statutory tax rate Year ended December 31, 2020 210,485 55,568 26.40% December 31, 2019 143,046 38,165 26.68% Increase (decrease) in income taxes resulting from non-taxable items or adjustments of prior year taxes: Non-deductible items Remeasurement of deferred income tax asset for rate changes Income exempt from tax Prior year adjustments Other Income tax expense reported in the consolidated statements of income 609 (421) (204) 0.43% (0.29%) (0.14%) 410 (461) (138) (2,307) (5,837) 47,235 0.19% (0.22%) (0.07%) (1.10%) (2.77%) 22.44% (2,032) 36,117 (1.42%) 25.25% (c) Deferred income tax balances and reconciliation are as follows: (i) Deferred income tax relates to the following: As at December 31, 2020 December 31, 2019 (C$ in thousands) Deferred income tax assets (liabilities) Deferred tax income assets Deferred tax income liabilities Total deferred income tax assets (liabilities) 14,993 (75,562) (60,569) 14,779 (82,302) (67,523) C) Deferred warranty plan revenue For the Year ended December 31, 2020 December 31, 2019 142,943 148,306 (C$ in thousands) Opening balance as at January 1 Revenue recognized that was included in the deferred warranty balance at the beginning of the year Recognition of deferred warranty during the year Total (64,736) 66,130 (71,449) 66,086 144,337 142,943 Reported as: Current Non-current Total 55,733 88,604 144,337 57,638 85,305 142,943 18. Expenses by Nature For the Year ended (C$ in thousands) December 31, 2020 December 31, 2019 Salaries and benefits (1) 391,178 388,279 Depreciation of property, plant and equipment and investment properties 108,970 118,775 Amortization of intangible assets 2,319 3,920 Occupancy expenses 87,470 92,745 (1) Salaries and benefits for the year ended December 31, 2020 include Canada Emergency Wage Subsidy ("CEWS") instalments of $31,559 (note 28). 19. Net Finance Costs For the (C$ in thousands) Interest expense on lease obligations Interest expense on term credit facilities and revolving credit facilities Interest expense on convertible debentures Finance income Total Year ended December 31, 2020 December 31, 2019 20,472 21,711 1,787 5,027 154 1,951 (4,526) (3,505) 17,887 25,184 onsolidated State ents of Comprehensive Income For the (C$ in thousands) Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 805 135 13 Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss: Gain on debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 4,099 4,917 111,846 168,571 The accompanying notes are an integral part of these consolidated financial statements. 20. Income Tax Expense (a) The major components of income tax expense for the years ended December 31 are as follows: Year ended December 31, 2020 December 31, 2019 For the (C$ in thousands) Consolidated statements of income Current income tax expense: Based on taxable income of the current year Deferred income tax expense: Origination and reversal of temporary differences Income tax expense reported in the consolidated statements of income 54,378 42,808 (7,143) 47,235 (6,691) 36,117 (b) Reconciliation of the effective tax rates are as follows: For the (C$ in thousands, except %) Income before income taxes Income tax expense based on statutory tax rate Year ended December 31, 2020 210,485 55,568 26.40% December 31, 2019 143,046 38,165 26.68% Increase (decrease) in income taxes resulting from non-taxable items or adjustments of prior year taxes: Non-deductible items Remeasurement of deferred income tax asset for rate changes Income exempt from tax Prior year adjustments Other Income tax expense reported in the consolidated statements of income 609 (421) (204) 0.43% (0.29%) (0.14%) 410 (461) (138) (2,307) (5,837) 47,235 0.19% (0.22%) (0.07%) (1.10%) (2.77%) 22.44% (2,032) 36,117 (1.42%) 25.25% (c) Deferred income tax balances and reconciliation are as follows: (i) Deferred income tax relates to the following: As at December 31, 2020 December 31, 2019 (C$ in thousands) Deferred income tax assets (liabilities) Deferred tax income assets Deferred tax income liabilities Total deferred income tax assets (liabilities) 14,993 (75,562) (60,569) 14,779 (82,302) (67,523) C) Deferred warranty plan revenue For the Year ended December 31, 2020 December 31, 2019 142,943 148,306 (C$ in thousands) Opening balance as at January 1 Revenue recognized that was included in the deferred warranty balance at the beginning of the year Recognition of deferred warranty during the year Total (64,736) 66,130 (71,449) 66,086 144,337 142,943 Reported as: Current Non-current Total 55,733 88,604 144,337 57,638 85,305 142,943 18. Expenses by Nature For the Year ended (C$ in thousands) December 31, 2020 December 31, 2019 Salaries and benefits (1) 391,178 388,279 Depreciation of property, plant and equipment and investment properties 108,970 118,775 Amortization of intangible assets 2,319 3,920 Occupancy expenses 87,470 92,745 (1) Salaries and benefits for the year ended December 31, 2020 include Canada Emergency Wage Subsidy ("CEWS") instalments of $31,559 (note 28). 19. Net Finance Costs For the (C$ in thousands) Interest expense on lease obligations Interest expense on term credit facilities and revolving credit facilities Interest expense on convertible debentures Finance income Total Year ended December 31, 2020 December 31, 2019 20,472 21,711 1,787 5,027 154 1,951 (4,526) (3,505) 17,887 25,184