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BMO Financial Group 186th Annual Report 200398
Loans
In determining the fair value of our loans, we incorporate the
following assumptions:
▪
For fixed rate performing loans, we discount the remaining
contractual cash flows at market interest rates currently charged
for loans with similar terms and risks.
▪For floating rate performing loans, changes in interest rates have
minimal impact on fair value since loans reprice to market fre-
quently. On that basis, fair value is assumed to equal book value.
The adjusted amount of our loan balances determined based on the
above assumptions is further reduced by the allowance for credit
losses to determine the fair value of our loan portfolio.
Deposits
In determining the fair value of our deposits, we incorporate the
following assumptions:
▪
For fixed rate, fixed maturity deposits, we discount the remaining
contractual cash flows for these deposits at market interest rates
currently offered for deposits with similar terms and risks.
▪
For floating rate, fixed maturity deposits, changes in interest rates
have minimal impact on fair value since deposits reprice to market
frequently. On that basis, fair value is assumed to equal book value.
▪
For deposits with no defined maturities, we consider fair value
to equal book value based on book value being equivalent to the
amount payable on the reporting date.
Subordinated Debt
The fair value of our subordinated debt is determined by referring
to current market prices for similar debt instruments.
Notes to Consolidated Financial Statements
Set out below is a comparison of the amounts which would be reported if all of our financial instrument assets and liabilities were
reported at their fair values (assets and liabilities that are not financial instruments are excluded from this table):
(Canadian $ in millions) 2003 2002
Fair value Fair value Fair value Fair value Fair value Fair value
Book of assets and of hedging over (under) Book of assets and of hedging over (under)
value liabilities derivatives (1) book value value liabilities derivatives (1) book value
Assets
Cash resources $ 19,860 $ 19,860 $
–
$
–
$ 19,305 $ 19,305 $
–
$
–
Securities (Note 3) 54,790 55,102 (170) 142 43,715 44,036 (344) (23)
Loans and customers’ liability under acceptances,
net of the allowance for credit losses 146,156 146,686 9 539 149,596 149,872 48 324
Derivative financial instruments – trading (Note 9) 20,878 20,878
––
21,932 21,932
––
Other assets 10,504 10,504
––
13,780 13,780
––
$ 252,188 $ 253,030 $ (161) $ 681 $ 248,328 $ 248,925 $ (296) $ 301
Liabilities
Deposits $ 171,551 $ 172,431 $ (389) $ 491 $ 161,838 $ 162,628 $ (546) $ 244
Derivative financial instruments – trading (Note 9) 20,375 20,375
––
21,927 21,927
––
Acceptances 5,611 5,611
––
6,901 6,901
––
Securities sold but not yet purchased 8,255 8,255
––
7,654 7,654
––
Securities sold under repurchase agreements 23,765 23,765
––
24,796 24,796
––
Other liabilities 11,259 11,259
––
13,892 13,892
––
Subordinated debt 2,856 3,165 6 315 3,794 4,145 (4) 347
$ 243,672 $ 244,861 $ (383) $ 806 $ 240,802 $ 241,943 $ (550) $ 591
Total $ (125) $ (290)
Condensed Consolidated Balance Sheet
As at October 31 (Canadian $ in millions) 2003 2002
Canadian Increase United States Canadian Increase United States
GAAP (Decrease) GAAP GAAP (Decrease) GAAP
Assets
Cash Resources $ 19,860 $
–
$ 19,860 $ 19,305 $
–
$ 19,305
Securities 54,790 1,558 (5) 56,348 43,715 2,779 (5) 46,494
Loans and customers’ liability under acceptances,
net of the allowance for credit losses 146,156 (4) 146,152 149,596 3 149,599
Other Assets 35,688 32 35,720 40,248 256 40,504
Total Assets $ 256,494 $ 1,586 $ 258,080 $ 252,864 $ 3,038 $ 255,902
Liabilities and Shareholders’ Equity
Deposits $ 171,551 $ (14) $ 171,537 $ 161,838 $ 66 $ 161,904
Other Liabilities 69,605 1,232 (5) 70,837 75,338 2,582 (5) 77,920
Subordinated Debt 2,856 58 2,914 3,794 87 3,881
Shareholders’ Equity (1) 12,482 310 (6) 12,792 11,894 303 (6) 12,197
Total Liabilities and Shareholders’ Equity $ 256,494 $ 1,586 $ 258,080 $ 252,864 $ 3,038 $ 255,902
Certain comparative figures have been reclassified to conform with the current year’s presentation.
We prepare our consolidated financial statements in accordance with
GAAP in Canada, including interpretations of GAAP by our regulator,
the Superintendent of Financial Institutions Canada. Set out below
are the significant differences which would result if United States
GAAP were applied in the preparation of our consolidated financial
statements.
Note 27 Reconciliation of Canadian and United States Generally Accepted Accounting Principles
Certain comparative figures have been reclassified to conform with the current year’s presentation. (1) Refer to Note 9.