• Note 7: Interest Expense
• Note 8: Other Income
• Note 9: Income Taxes
• Note 10: Earnings Per Share
• Note 11: Trade and Other Receivables
• Note 12: Inventory
• Note 13: Property, Plant and Equipment
• Note 14: Intangible Assets

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7 to 14)

We, us, our, BCE and the company mean either BCE Inc. or, collectively, BCE Inc., its subsidiaries, joint ventures and associates; Bell means our Bell Wireline, Bell Wireless and Bell Media segments on an aggregate basis; and Bell Aliant means either Bell Aliant Inc. or, collectively, Bell Aliant Inc. and its subsidiaries.

NOTE 7 | INTEREST EXPENSE 

Included in interest expense on long-term debt is $144 million and $147 million of interest on finance leases for 2011 and 2010, respectively.
Capitalized interest was calculated using an average rate of 5.70% and 7.45% for 2011 and 2010, respectively, which represents the weighted average interest rate on our outstanding long-term debt.

NOTE 8 | OTHER INCOME 

GAINS ON INVESTMENTS

A gain of $89 million was realized in 2011 on our previously held 15% equity interest in CTV at the acquisition date. As a result, we reclassified unrealized gains of $89 million from Accumulated other comprehensive income to Other income.
Gains on investments of $135 million in 2010 resulted from gains of $125 million realized on the sale of certain of our publicly-traded investments, mainly SkyTerra Communications Inc., for proceeds of approximately $118 million. As a result, we reclassified unrealized gains of $125 million from Accumulated other comprehensive income to Other income. We used the average cost method to determine the gain.

IMPAIRMENT OF ASSETS

Impairment charges of $33 million in 2011 consist mainly of:

• a $17 million goodwill impairment of a CGU within Bell Wireline that will cease operations in 2012

• an impairment charge of $14 million relating to our Calgary Westwinds campus that is under a finance lease, resulting from an arrangement to sublease the premises in their entirety. The charge was determined by comparing the carrying value of our leasehold interest to its fair value less costs to sell, based on the expected future discounted cash flows using a discount rate of 3.8% for the period of March 1, 2011 to November 1, 2028. The carrying value of our leasehold interest was $67 million prior to the impairment.

NOTE 9 | INCOME TAXES 

The following table reconciles the amount of reported income taxes in the income statements with income taxes calculated at statutory income tax rates of 28.2% in 2011 and 30.6% in 2010. Our statutory income tax rate is the combined Canadian rates applicable in the jurisdictions in which we do business.

The following tables show aggregate current and deferred taxes relating to items recognized outside the income statements.

The following table shows the significant components of income taxes deducted from net earnings.

The following table shows deferred taxes resulting from temporary differences between the carrying amounts of assets and liabilities recognized in the statements of financial position and their corresponding tax basis, as well as tax loss carryforwards.

The deferred tax asset of $329 million in 2011 and $501 million in 2010 includes $255 million and $480 million, respectively, expected to be recovered in more than one year. The deferred tax liability of $881 million in 2011 and $526 million in 2010 includes $886 million and $438 million, respectively, expected to be reversed in more than one year.
At December 31, 2011, BCE had $965 million of non-capital loss carryforwards. We:

• recognized a deferred tax asset of $234 million, of which $116 million related to Bell Aliant, for approximately $870 million of the non-capital loss carryforwards. These non-capital loss carryforwards expire in varying annual amounts from 2026 to 2031.

• did not recognize a deferred tax asset for approximately $95 million of non-capital loss carryforwards. This balance expires in varying annual amounts from 2016 to 2030.

At December 31, 2011, BCE had $1,278 million of unrecognized capital loss carryforwards which can be carried forward indefinitely.

At December 31, 2010, BCE had $840 million of non-capital loss carryforwards. We:

• recognized a deferred tax asset of $219 million, of which $200 million related to Bell Aliant, for approximately $743 million of the non-capital loss carryforwards. These non-capital loss carryforwards expire in varying annual amounts from 2020 to 2030.

• did not recognize a deferred tax asset for approximately $97 million of non-capital loss carryforwards. This balance expires in varying annual amounts from 2021 to 2030.

At December 31, 2010, BCE had $1,308 million of unrecognized capital loss carryforwards which can be carried forward indefinitely.

NOTE 10 | EARNINGS PER SHARE 

The following table shows the components used in the calculation of basic and diluted earnings per common share for earnings attributable to common shareholders.

NOTE 11 | TRADE AND OTHER RECEIVABLES 

NOTE 12 | INVENTORY 

The total amount of inventories recognized as an expense in cost of revenues was $2,380 million in 2011 and $2,389 million in 2010.

NOTE 13 | PROPERTY, PLANT AND EQUIPMENT 

FINANCE LEASES

BCE’s significant finance leases are for office premises and satellites. The office and campus leases have a typical lease term of 15 years. The leases for satellites, used to provide programming to our Bell TV customers, have lease terms ranging from 12 to 15 years. The satellite leases are non-cancellable.
The following table shows additions to and the net carrying amount of assets under finance leases.

The following table provides a reconciliation of our minimum lease payments to their present value for our finance lease obligations.

NOTE 14 | INTANGIBLE ASSETS