Bank of Montreal 2013 Annual Report Download - page 122

debt and $463 million of capital trust securities being reclassified to
deposit liabilities and $640 million of other assets being reclassified as
available-for-sale securities in our Consolidated Balance Sheet as at
November 1, 2012. We expect no other significant impacts on our
consolidated financial statements from the adoption of the new
standard.
Investments in associates and joint ventures
In May 2011, the IASB issued IFRS 11 Joint Arrangements (“IFRS 11”),
which requires that joint ventures be accounted for using the equity
method. IFRS 11 is effective for our fiscal year beginning November 1,
2014. The adoption of IFRS 11 will result in our joint venture being
accounted for using the equity method of accounting. This change will
not have a significant impact on our consolidated financial statements.
Offsetting financial assets and financial liabilities
In December 2011, the IASB issued amendments to IAS 32 Offsetting
Financial Assets and Financial Liabilities (“IAS 32”) and to IFRS 7
Disclosures – Offsetting Financial Assets and Financial Liabilities
(“IFRS 7”). The amendments clarify that an entity has a legally
enforceable right to offset if that right is not contingent on a future
event; and that right is enforceable both in the normal course of
business and in the event of default, insolvency or bankruptcy of the
entity and all counterparties. These amendments also contain new
disclosure requirements for financial assets and financial liabilities that
are offset in the statement of financial position or subject to master
netting agreements or similar agreements. The disclosure amendments
are effective for our fiscal year beginning November 1, 2013 and the
classification amendments are effective for our fiscal year beginning
November 1, 2014. The amendments will result in additional
disclosures. We do not expect this new standard to have a significant
impact on our consolidated financial statements.
Disclosure of interests in other entities
In May 2011, the IASB issued IFRS 12 Disclosure of Interests in Other
Entities (“IFRS 12”), which sets out the disclosure requirements for all
forms of interests in other entities, including subsidiaries, joint
arrangements, associates and unconsolidated structured entities. This
new standard requires disclosure of the nature of, and risks associated
with, an entity’s interests in other entities and the effects of these
interests on its financial position, financial performance and cash flows.
The new standard is effective for our fiscal year beginning November 1,
2013, and will result in additional disclosures.
Financial instruments
In December 2011, the IASB issued IFRS 9 (“IFRS 9”), which sets out
requirements for the classification and measurement of financial assets
and financial liabilities. This is the first phase of a three-phase project to
replace the current standard for accounting for financial instruments. The
new standard specifies that financial assets are to be measured at either
amortized cost or fair value on the basis of the reporting entity’s
business model for managing the financial assets and the contractual
cash flow characteristics of the financial assets. The classification and
measurement of financial liabilities designated at fair value through
profit or loss remain generally unchanged; however, fair value changes
attributable to changes in the credit risk for financial liabilities
designated at fair value through profit or loss are to be recorded in other
comprehensive income unless they offset amounts recorded in income.
In November 2013, the IASB issued an amendment to IFRS 9 which
sets out a new general hedge accounting model. This amendment does
not address portfolio or macro hedging which will be addressed at a
later time. The new model expands the scope of eligible hedged items
and risks eligible for hedge accounting and aligns hedge accounting
more closely with risk management. Under the new IFRS 9 model, it will
be necessary to demonstrate an economic relationship between the
hedged item and hedging instrument, however there will no longer be a
specified quantitative measure and retrospective hedge effectiveness
testing will no longer be required. Increased disclosures will be required
about our risk management strategy, cash flows from hedging activities
and the impact of hedge accounting on financial statements.
The other phase of this project, which is currently under
development, addresses impairment. In July 2013, the IASB tentatively
decided to defer the effective date of IFRS 9 to an unspecified date
pending the finalization of the impairment and hedge accounting phases
of the project. We are currently assessing the impact of this new standard
on our future financial results in conjunction with the completion of the
other phases of the IASB’s financial instruments project.
In June 2013, the IASB issued amendments to IAS 39 Financial
Instruments: Recognition and Measurement. These amendments allow
hedge accounting to continue when derivatives are novated to effect
clearing with a central counterparty as a result of laws or regulations, if
specific conditions are met. The amendments are to be applied
retrospectively and are effective for our fiscal year beginning
November 1, 2014. We do not expect the amendments to have a
significant impact on our consolidated financial statements.
Investment entities
In October 2012, the IASB issued amendments to IFRS 10, IFRS 12 and
IAS 27 Separate Financial Statements, which introduce an exception to
the principle that all subsidiaries are to be consolidated. The
amendments require a parent that is an investment entity to measure
its investments in particular subsidiaries at fair value through profit or
loss instead of consolidating all subsidiaries in its consolidated financial
statements. The amendments are effective for our fiscal year beginning
November 1, 2014. We do not expect these amendments to have a
significant impact on our consolidated financial statements.
Note 2: Cash Resources and Interest Bearing Deposits with Banks
(Canadian $ in millions) 2013 2012 Cash Restrictions
Cash and deposits with banks (1) 24,593 18,347 Some of our foreign operations are required to maintain reserves or
Cheques and other items in transit, net 1,490 1,594 minimum balances with central banks in their respective countries of
Total cash and cash equivalents 26,083 19,941 operation, amounting to $1,211 million as at October 31, 2013
(1) Deposits with banks include deposits with the Bank of Canada, the U.S. Federal Reserve and ($1,059 million in 2012).
other banks. Interest Bearing Deposits with Banks
Cheques and Other Items in Transit, Net Deposits with banks are recorded at amortized cost and include
Cheques and other items in transit are recorded at cost and represent acceptances we have purchased that were issued by other banks.
the net position of the uncleared cheques and other items in transit Interest income earned on these deposits is recorded on an
between us and other banks. accrual basis.
Notes
BMO Financial Group 196th Annual Report 2013 133