Bank of Montreal 2010 Annual Report Download - page 169

Notes
BMO Financial Group 193rd Annual Report 2010 167
with the same counterparty under a master netting agreement. Under
Canadian GAAP, these amounts are not presented net. Cash collateral
posted is recorded as a loan and cash collateral received is recorded as
a deposit liability. The cash collateral applied against derivative assets
and derivative liabilities was $2,094 million and $1,146 million as at
October 31, 2010, respectively ($1,298 million and $48 million in 2009,
respectively). Also under United States GAAP, derivative assets and
liabilities having valid rights of set-off are reported on a net basis.
Under Canadian GAAP, these derivative assets and liabilities are reported
on a gross basis. As a result of offsetting, the fair value amounts of
derivative instruments that have been netted against derivative assets
and derivative liabilities was $31,537 million at October 31, 2010
($28,998 million in 2009).
(h) Derivatives
Certain of our interest rate swaps designated as cash flow hedges
under Canadian GAAP must be marked to market through income
under United States GAAP as they do not qualify for hedge accounting.
Under Canadian GAAP, they qualify for hedge accounting and are
measured at fair value through other comprehensive income.
(i) Goodwill and Other Assets
Under United States GAAP, our acquisition of Suburban Bancorp, Inc.
in 1994 was accounted for using the pooling of interests method.
(Canadian $ in millions) 2010 2009
Other employee Other employee
Pension future benefits Total Pension future benefits Total
Net actuarial loss 1,445 162 1,607 1,210 130 1,340
Cost (benefit) of plan amendments 86 (25) 61 87 (30) 57
Pre-tax amounts recognized in Accumulated
Other Comprehensive (Income) Loss 1,531 137 1,668 1,297 100 1,397
Since we have reclassified amounts from other assets and other liabilities
to other comprehensive income, the pension and other employee
benefit amounts included in other assets and other liabilities are different
(Canadian $ in millions) 2010 2009
Included in Included in Plan funded Included in Included in Plan funded
Other assets Other liabilities status Other assets Other liabilities status
Pension 373 (27) 346 33 (36) (3)
Other employee future benefits – (908) (908) – (835) (835)
Under Canadian GAAP, we accounted for this acquisition using the
purchase method, which resulted in the recognition and amortization
of fair value increments on buildings, goodwill and intangible assets
associated with the acquisition. Effective November 1, 2001, goodwill
is no longer amortized to income under either United States or
Canadian GAAP. The remaining difference relates to the amortization
of the fair value increments on buildings and intangible assets
under Canadian GAAP.
(j) Pension and Other Employee Future Benefits
United States GAAP requires us to recognize the excess of the fair
value of our pension and other employee future benefit plan assets
over the corresponding benefit obligation as an asset and the shortfall
of the fair value of our plan assets compared to the corresponding
benefit obligation as a liability. This is done on a plan-by-plan basis.
The unamortized actuarial gains (losses) and the cost (benefit) of
plan amendments are recorded in Accumulated Other Comprehensive
(Income) Loss. Under Canadian GAAP, these amounts are recorded
in our Consolidated Balance Sheet in other assets or other liabilities.
There is no change in the calculation of the pension and other
employee future benefits expense. Under United States GAAP, the
pre-tax amounts included in Accumulated Other Comprehensive
(Income) Loss are as follows:
under United States GAAP. Under United States GAAP, amounts related
to our pension benefit plans and other employee future benefit plans
are recognized in our Consolidated Balance Sheet as follows:
The estimated net actuarial loss and cost of plan amendments for
the pension benefit plans that will be amortized from Accumulated Other
Comprehensive Income, on a pre-tax basis, as an increase in pension
expense during fiscal 2011 are $92 million and $15 million, respectively.
The estimated net actuarial loss and benefit of plan amendments for
other employee future benefit plans that will be amortized from Accumu-
lated Other Comprehensive Income, on a pre-tax basis, as an increase
(decrease) in other employee future benefit expense during fiscal 2011
are $6 million and $(8) million, respectively. Under Canadian GAAP,
these amounts are amortized from other assets or other liabilities, on
a pre-tax basis, to pension and other employee future benefit expense.
Effective November 1, 2000, we adopted a new Canadian account-
ing standard on pension and other employee future benefits that
eliminated the then existing differences between Canadian and United
States GAAP. When we adopted this new standard, we accounted for
the change in accounting as a charge to retained earnings. As a result,
there will continue to be an adjustment to our Consolidated Statement
of Income until amounts previously deferred under United States GAAP
have been fully amortized to income.
(k) Stock-based Compensation
Effective November 1, 2005, under United States GAAP, stock-based
compensation granted to employees who are eligible to retire
was expensed at the time of grant. We adopted this new standard
prospectively, beginning with grants issued in fiscal 2006. We retro actively
adopted new Canadian accounting guidance on stock-based compensation
during the year ended October 31, 2006, which conformed with the
United States accounting standard. Due to the differences in the methods
of adoption, there was an adjustment to our Consolidated Statement of
Income in the periods before fiscal 2010, when the stock-based compen-
sation granted prior to November 1, 2005 was fully amortized.
(l) Liabilities and Equity
Under United States GAAP, certain of our capital trust securities that
are ultimately convertible into a variable number of our common shares
at the holder’s option are classified as non-controlling interest, with
payments recognized as minority interest. Under Canadian GAAP, capital
trust securities with this conversion feature are classified as liabilities,
with payments recognized as interest expense.
(m) Income Taxes
In addition to the tax impact of other differences between Canadian
and United States GAAP, under United States GAAP, tax rate changes
do not have any impact on the measurement of our future income tax
balances until they are passed into law. Under Canadian GAAP, tax rate
changes are recorded in income in the period the tax rate change is
substantively enacted.
(n) Non-controlling Interests in Consolidated Financial Statements
Effective November 1, 2009, we adopted the new United States guidance
on non-controlling interests in subsidiaries issued by the Financial