Bank of Montreal 1997 Annual Report Download - page 82

Bank of Montreal 180th Annual Report 199776
Goodwill and Other Valuation Intangibles
When we purchase a subsidiary or a specific investment in a portfolio of
loans or securities we determine the fair value of the net assets being
acquired and compare this to the amount we pay for the investment. Any
excess of the amount paid compared to the fair value is considered to be
goodwill or other valuation intangibles. This excess amount is deferred and
amortized to income over the period that we believe the investment will
benefit us, up to a maximum of 25 years. The unamortized balance of good-
will and other valuation intangibles is recorded in other assets and is
written down to fair value when the expected cash flows generated by the
acquired subsidiary or asset no longer support the carrying value and the
shortfall is expected to remain for some time.
Changes in Accounting Policies
Effective in 1997, Canadian generally accepted accounting principles
require that unrealized gains and losses on derivative financial instru-
ments be reported on a gross rather than net basis. We have adopted
this new accounting standard in the current year and did not restate
the prior years’ consolidated financial statements. Had we applied the
standard last year, other assets and other liabilities (note 10) as at
October 31, 1996 would have been increased by $6,623.
We conduct our business through operating segments, each
of which has a distinct market, product and geographic mandate.
Information concerning the management of these operating seg-
ments is contained in our Management Analysis of Operations.
1997 1996
Accounts receivable, prepaid expenses and other items $ 1,475 $ 1,707
Accrued interest receivable 1,246 928
Due from clients, dealers and brokers 744 588
Unrealized gains and amounts receivable
on derivative contracts 6,655 86
Deferred income taxes 277 161
Goodwill and other valuation intangibles 837 889
Total $ 11,234 $ 4,359
The components of goodwill and other valuation
intangibles for each major subsidiary are as follows:
Goodwill
The Nesbitt Burns Corporation Limited
and subsidiaries $ 246 $ 275
Harris Bankcorp, Inc. and subsidiaries 201 205
Harris Bankmont, Inc. and subsidiaries 75 77
522 557
Other valuation intangibles
Harris Bankcorp, Inc. and subsidiaries 230 242
Harris Bankmont, Inc. and subsidiaries 74 76
Bank of Montreal Mortgage Corporation 11 14
315 332
Total $ 837 $ 889
Amortization of goodwill and other valuation intangibles is
recorded in our Consolidated Statement of Income as:
1997 1996 1995
Non-interest expense $ 74 $ 54 $ 49
Interest expense 11 12 12
Total $ 85 $ 66 $ 61
We have also included disclosure of net income, average assets,
loans and deposits for each operating segment which is set out in
the tables on pages 30 to 40.
Note 7 Other Assets
Note 8 Operating and Geographic Segmentation
Note 9 Deposits
Demand deposits Payable Payable on
Interest-bearing Non interest-bearing after notice a fixed date Total
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
Deposits by:
Banks $ 186 $ 138 $ 465 $ 469 $ 697 $ 589 $ 29,924 $ 23,544 $ 31,272 $ 24,740
Businesses and governments 2,569 2,053 7,875 7,690 7,132 6,159 37,325 21,572 54,901 37,474
Individuals 2,537 2,450 1,394 1,228 22,658 22,514 31,450 30,856 58,039 57,048
Total $ 5,292 $ 4,641 $ 9,734 $ 9,387 $ 30,487 $ 29,262 $ 98,699 $ 75,972 $ 144,212 $ 119,262
Booked in:
Canada $ 3,765 $ 3,035 $ 5,358 $ 4,491 $ 23,911 $ 23,567 $ 49,381 $ 39,148 $ 82,415 $ 70,241
U.S.A. 1,443 1,529 4,315 4,855 5,896 5,105 24,000 16,064 35,654 27,553
Mexico ––––––––––
Other countries 84 77 61 41 680 590 25,318 20,760 26,143 21,468
Total $ 5,292 $ 4,641 $ 9,734 $ 9,387 $ 30,487 $ 29,262 $ 98,699 $ 75,972 $ 144,212 $ 119,262
Demand deposits are comprised primarily of our customers’
chequing accounts, some of which we pay interest on. Our
customers need not notify us prior to withdrawing money
from their chequing accounts.
Deposits payable after notice are comprised primarily of
our customers’ savings accounts on which we pay interest. Our
customers are required to give us notice prior to withdrawing
money from these accounts.