Bank of Montreal 2004 Annual Report Download - page 106

BMO Financial Group Annual Report 2004102
Notes to Consolidated Financial Statements
Notes
We record all premises and equipment at cost less accumulated
amortization except for land, which is recorded at cost. Buildings,
computer equipment and software, other equipment and leasehold
improvements are amortized on a straight-line basis over their
estimated useful lives. The maximum estimated useful lives we
use to amortize our assets are:
Buildings 40 years
Computer equipment and software 15 years
Other equipment 10 years
Leasehold improvements Lease term plus first renewal period
to a maximum of 10 years
(Canadian $ in millions) 2004 2003
Accumulated Carrying Carrying
Cost amortization value value
Land $ 271 $ – $ 271 $ 251
Buildings 1,270 650 620 642
Computer equipment
and software 2,092 1,416 676 627
Other equipment 802 555 247 296
Leasehold improvements 563 357 206 229
Total $ 4,998 $ 2,978 $ 2,020 $ 2,045
Amortization expense for the years ended October 31, 2004, 2003
and 2002 amounted to $365 million, $375 million and $396 million,
respectively.
Gains and losses on disposal are included in other non-interest
revenue in our Consolidated Statement of Income.
On September 12, 2002, we sold our 25% undivided interest in the
land located at King and Bay Streets in Toronto for cash proceeds of
$122 million. The gain on sale of $112 million ($87 million after tax)
was deferred and will be recorded as a reduction in rental expense
over the term of our leases in the building, which expire between
2013 and 2023. The remaining deferred gain as at October 31, 2004
was $85 million ($99 million in 2003).
We test premises and equipment for impairment when events
or changes in circumstances indicate that their carrying value
may not be recoverable. We write them down to fair value when
the related undiscounted cash flows are not expected to allow
for recovery of the carrying value. There were no write-downs
of premises and equipment due to impairment during the years
ended October 31, 2004, 2003 and 2002.
Transactions are conducted with various counterparties. Set out below is the replacement cost of contracts from customers in the
following industries:
Interest rate Foreign exchange Commodity Equity Credit
(Canadian $ in millions) contracts contracts contracts contracts contracts
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Financial institutions $ 11,213 $ 12,315 $ 3,770 $ 3,463 $ 1,939 $ 463 $ 105 $ 118 $ 73 $ 30
Other 1,541 1,794 3,093 2,393 3,622 948 286 130 2 2
Total $ 12,754 $ 14,109 $ 6,863 $ 5,856 $ 5,561 $ 1,411 $ 391 $ 248 $ 75 $ 32
Term to Maturity
Our derivative contracts have varying maturity dates. The remaining contractual term to maturity for the notional amounts of our derivative
contracts is set out below:
(Canadian $ in millions) Term to maturity 2004 2003
Total Total
Within 1 to 3 3 to 5 5 to 10 Over 10 notional notional
1 year years years years years amount amount
Interest Rate Contracts
Swaps $ 242,484 $ 216,185 $ 122,011 $ 110,090 $ 26,224 $ 716,994 $ 728,105
Forward rate agreements, futures and options 583,189 80,507 18,680 33,511 3,369 719,256 807,488
Total interest rate contracts 825,673 296,692 140,691 143,601 29,593 1,436,250 1,535,593
Foreign Exchange Contracts
Cross-currency swaps 779 2,208 1,653 3,060 1,935 9,635 17,935
Cross-currency interest rate swaps 10,241 11,792 13,717 11,167 2,936 49,853 44,591
Forward foreign exchange contracts, futures and options 106,128 5,417 1,096 48 17 112,706 181,416
Total foreign exchange contracts 117,148 19,417 16,466 14,275 4,888 172,194 243,942
Commodity Contracts
Swaps 16,677 8,056 1,467 255 – 26,455 16,338
Futures and options 32,322 10,352 1,175 9 – 43,858 18,200
Total commodity contracts 48,999 18,408 2,642 264 – 70,313 34,538
Total Equity Contracts 18,704 2,378 922 2,256 466 24,726 25,886
Total Credit Contracts 3,844 6,440 13,554 2,603 6 26,447 11,809
Total $ 1,014,368 $ 343,335 $ 174,275 $ 162,999 $ 34,953 $ 1,729,930 $ 1,851,768
Note 10 Premises and Equipment