TD Bank 2007 Annual Report Download - page 29

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis 25
Results of each business segment reflect revenue, expenses,
assets and liabilities generated by the businesses in that seg-
ment. The Bank measures and evaluates the performance of
each segment based on adjusted results where applicable, and
for those segments, the Bank notes that the measure is
adjusted. Amortization of intangibles expense is included in the
Corporate segment. Accordingly, net income for operating busi-
ness segments is presented before amortization of intangibles,
as well as any other items of note not attributed to the operat-
ing segments, including those items which management does
not consider within the control of the business segments. For
further details see the “How the Bank Reports” section. For
information concerning the Bank’s measures of economic profit
and return on invested capital, which are non-GAAP measures,
see page 16. Segmented information also appears in Note 27 to
the Bank’s Consolidated Financial Statements.
Net interest income within Wholesale Banking is disclosed on
a taxable equivalent basis (TEB), which means the value of non-
taxable or tax-exempt income, including dividends, is adjusted
to its equivalent before-tax value. Using TEB allows the Bank to
measure income from all securities and loans consistently and
makes for a more meaningful comparison of net interest
income with similar institutions. The TEB adjustment reflected in
the Wholesale Banking segment is eliminated in the Corporate
segment. The TEB adjustment for the year was $664 million,
compared with $343 million last year.
As noted in Note 4 to the 2007 Consolidated Financial
Statements, the Bank securitizes retail loans and receivables
held by Canadian Personal and Commercial Banking in transac-
tions that are accounted for as sales. For the purpose of seg-
mented reporting, Canadian Personal and Commercial Banking
accounts for the transactions as though they are financing
arrangements. Accordingly, the interest income earned on the
assets sold net of the funding costs incurred by the purchaser
trusts is recorded in net interest income and the provision for
credit losses related to these assets is charged to provision for
(reversal of) credit losses. This accounting is reversed in the
Corporate segment and the gain recognized on sale which is in
compliance with appropriate accounting standards together
with income earned on the retained interests net of credit
losses incurred are included in other income.
The “Economic Summary and Outlook,” as well as the
“Economic Outlook” and “Business Outlook and Focus for
2008” sections for each segment, provided on the following
pages, are based on the Bank’s views and the actual outcome
may be materially different. For more information, see the
“Caution regarding forward-looking statements” on page 13
and the ”Risk Factors That May Affect Future Results” section.
NET INCOME BY BUSINESS SEGMENT
(as a percent of total net income
1
)
60
70%
40
50
20
10
30
0
05 06 0705 06 0705 06 0705 06 07
Canadian Personal and Commercial Banking
Wealth Management
U.S. Personal and Commercial Banking
Wholesale Banking
1 On an adjusted basis and excluding the Corporate segment.