Bank of Montreal 2012 Annual Report Download - page 150

Notes
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 2012 2011
November 1,
2010
Within 1
year
1to3
years
3to5
years
5to10
years
Over 10
years
Total
notional
amounts
Total
notional
amounts
Total
notional
amounts
Interest Rate Contracts
Swaps 621,779 598,602 430,220 243,622 70,953 1,965,176 2,012,384 1,464,655
Forward rate agreements, futures and options 616,767 100,087 9,622 4,381 701 731,558 704,510 624,440
Total interest rate contracts 1,238,546 698,689 439,842 248,003 71,654 2,696,734 2,716,894 2,089,095
Foreign Exchange Contracts
Cross-currency swaps 4,801 7,769 9,254 6,554 1,867 30,245 31,428 27,002
Cross-currency interest rate swaps 59,282 72,011 53,524 41,317 12,541 238,675 213,184 179,653
Forward foreign exchange contracts, futures and options 230,804 8,051 2,915 514 7 242,291 310,531 275,147
Total foreign exchange contracts 294,887 87,831 65,693 48,385 14,415 511,211 555,143 481,802
Commodity Contracts
Swaps 8,553 5,738 797 440 – 15,528 14,681 16,400
Futures and options 33,217 19,352 1,426 2,688 – 56,683 52,957 91,254
Total commodity contracts 41,770 25,090 2,223 3,128 – 72,211 67,638 107,654
Equity Contracts 22,246 5,695 3,096 749 466 32,252 47,900 36,445
Credit Contracts 13,570 7,502 13,001 1,735 – 35,808 50,887 56,164
Total notional amount 1,611,019 824,807 523,855 302,000 86,535 3,348,216 3,438,462 2,771,160
Note 11: Premises and Equipment
We record all premises and equipment at cost less accumulated
amortization, except land, which is recorded at cost. Buildings, computer
equipment and operating system 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 as follows:
Buildings 10 to 40 years
Computer equipment and operating system software 15 years
Other equipment 10 years
Leasehold improvements Lease term to a
maximum of 10 years
Gains and losses on disposal are included in other non-interest
expense in our Consolidated Statement of Income.
Amortization methods, useful lives and the residual values of
premises and equipment are reviewed annually for any change in
circumstances and are adjusted if appropriate. At least annually, we
review whether there are any indications that premises and equipment
need to be tested for impairment. If there is an indication that an asset
may be impaired, we test for impairment by comparing the asset’s
carrying value to its recoverable amount. The recoverable amount is
calculated as the higher of the value in use and the fair value less costs
to sell. Value in use is the present value of the future cash flows
expected to be derived from the asset. An impairment charge is
recorded when the recoverable amount is less than the carrying value.
When major components of buildings have different useful lives,
they are accounted for separately and amortized over each component’s
useful life.
Amortization expense for the years ended October 31, 2012 and
2011 amounted to $364 million and $307 million, respectively.
There were no significant write-downs of premises and equipment
due to impairment during the years ended October 31, 2012 and 2011.
Lease Commitments
We have entered into a number of non-cancellable leases for premises
and equipment. Our computer and software leases are typically fixed for
one term and our premises leases have various renewal options and
rights. Our total contractual rental commitments as at October 31, 2012
were $1,802 million. The commitments for each of the next five years
and thereafter are $274 million for 2013, $248 million for 2014,
$221 million for 2015, $194 million for 2016, $165 million for 2017 and
$700 million thereafter. Included in these amounts are the commitments
related to 795 leased branch locations as at October 31, 2012.
Net rent expense for premises and equipment reported in our
Consolidated Statement of Income for the years ended October 31, 2012
and 2011 was $418 million and $380 million, respectively.
BMO Financial Group 195th Annual Report 2012 147