Bank of Montreal 2013 Annual Report Download - page 145

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asian Wealth Management Business (“AWMB”)
On January 25, 2013, we completed the acquisition of an Asian-based
wealth management business for cash consideration of $33 million.
During the year ended October 31, 2013, the purchase price increased to
$34 million due to a post-closing adjustment based upon working
capital. Acquisition costs of $4 million were expensed in non-interest
expense, other in our Consolidated Statement of Income. The business
provides private banking services to high net worth individuals in the
Asia-Pacific region and provides an important opportunity for us to
expand our offering to high net worth individuals in this region.
Goodwill related to this acquisition is deductible for tax purposes. As
part of this acquisition, we acquired a customer relationship intangible
asset which is being amortized on a straight-line basis over 15 years,
and software intangible assets which are being amortized over their
remaining useful lives. AWMB is part of our Wealth Management
reporting segment.
CTC Consulting, LLC (“CTC”)
On June 11, 2012, we completed the acquisition of United States-based
CTC Consulting, LLC for cash consideration of $20 million. During the year
ended October 31, 2012, we increased the purchase price by $1 million
to $21 million based on a revaluation of equity. Acquisition-related costs
of less than $1 million were expensed in non-interest expense, other in
our Consolidated Statement of Income. The acquisition of CTC helped us
to expand and enhance our manager research and advisory capabilities
and investment offering to ultra-high net worth clients and select multi-
family offices and wealth advisors. This will allow us to further
strengthen and expand our presence in the United States. As part of this
acquisition, we acquired a customer relationship intangible asset which
is being amortized on an accelerated basis over 15 years. Goodwill
related to this acquisition is not deductible for tax purposes. CTC is part
of our Wealth Management reporting segment.
The estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition are as follows:
(Canadian $ in millions) 2013 2012
Aver AWMB CTC
Cash resources – 434 2
Loans 232 310 –
Premises and equipment – 1 1
Goodwill 20 17 7
Intangible assets 16 17 11
Other assets 3 2 2
Total assets 271 781 23
Deposits – 746 –
Other liabilities 1 1 2
Total liabilities 1 747 2
Purchase price 270 34 21
The allocation of the purchase price for Aver and AWMB is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.
COFCO Trust Co. (“COFCO”) at cost and adjust our investment for our proportionate share of any net
On August 1, 2012, we acquired a 19.99% interest in COFCO Trust Co., a income or loss, other comprehensive income or loss and dividends. The
subsidiary of COFCO Group, one of China’s largest state-owned investment provides an important opportunity for us to expand our
enterprises with operations across a variety of sectors, including offering to high net worth and institutional clients in China. COFCO is part
agriculture and financial services. We recorded our investment in COFCO of our Wealth Management reporting segment.
Note 13: Goodwill and Intangible Assets
Goodwill
When we complete an acquisition, we allocate the purchase price paid
to the assets acquired, including identifiable intangible assets and the
liabilities assumed. Any excess of the consideration transferred over the
fair value of those net assets is considered to be goodwill. Goodwill is
not amortized.
Fair value less costs to sell was the measurement we used to
perform the impairment test for goodwill in 2013 and 2012. We
determined the fair value less costs to sell for each cash generating unit
(“CGU”) by discounting cash flow projections. Cash flows were projected
for the first 10 years based on actual operating results, expected future
business performance and past experience. Beyond the first 10 years,
cash flows were assumed to grow at perpetual annual rates of up to
3%, a rate that is consistent with long-term nominal GDP growth. The
discount rates we applied in determining the recoverable amounts
range from 7.8% to 18.1% (8.3% to 15.5% in 2012), and are based on
our estimate of the cost of capital for each CGU. The cost of capital for
each CGU was estimated using the Capital Asset Pricing Model, based on
the historical betas of publicly traded peer companies that are
comparable to the CGU.
There were no write-downs of goodwill due to impairment during
the years ended October 31, 2013 and 2012.
The key assumptions described above may change as market and
economic conditions change. However, we estimate that reasonably
possible changes in these assumptions are not expected to cause
recoverable amounts to decline below carrying amounts.
Notes
156 BMO Financial Group 196th Annual Report 2013