TD Bank 2010 Annual Report Download - page 112

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TD BANK GROUP ANNUAL REPORT 2010 FINANCIAL RESULTS110
Certain of the Bank’s derivative contracts are governed by master
derivative agreements having credit support provisions that permit the
Bank’s counterparties to call for collateral depending on the net mark-
to-market exposure position of all derivative contracts governed by
that master derivative agreement. Some of these agreements may
permit the Bank’s counterparties to require, upon the downgrade of
the senior debt ratings of the Bank, to post additional collateral. As
at October 31, 2010 the fair value of all derivative instruments with
credit risk related contingent features in a net liability position was
$11.9 billion (2009 – $7.6 billion). The Bank has posted $8.8 billion
(2009 – $5.2 billion) of collateral for this exposure in the normal
course of business. At October 31, 2010, the impact of a one-notch
downgrade in the Bank’s senior debt ratings would require the Bank
to post an additional $0.6 billion (2009 – $0.5 billion) of collateral to
that posted in the normal course of business. A two-notch down grade
in the Bank’s senior debt ratings would require the Bank to post an
additional $1.7 billion (2009 – 1.5 billion) of collateral to that posted
in the normal course of business.
Certain of the Bank’s derivative contracts are governed by master
derivative agreements having provisions that may permit the Bank’s
counterparties to require, upon the occurrence of a certain contingent
event, (i) the posting of collateral or other acceptable remedy such as
assignment of the affected contracts to an acceptable counterparty,
or (ii) settlement of outstanding derivative contracts. Most often, these
contingent events are in the form of a downgrade of the senior debt
ratings of the Bank, either as counterparty or as guarantor of one of
the Bank’s subsidiaries. At October 31, 2010, the aggregate net liability
position of those contracts would require (i) the posting of collateral or
other acceptable remedy totalling $9.1 million (2009 – $20 million) in
the event of a one-notch or two-notch downgrade in the Bank’s senior
debt ratings and (ii) funding totalling nil following the termination
and settlement of outstanding derivative contracts in the event of a
one-notch or two notch downgrade in the Bank’s senior debt ratings.
Current Replacement Cost of Derivatives
(millions of Canadian dollars) Canada1
United States1
International1
Total
2010 2009 2010 2009 2010 2009 2010 2009
By sector
Financial $ 30,422 $ 30,563 $ 976 $ 128 $ 8,706 $ 9,501 $ 40,104 $ 40,192
Government 5,901 3,600 105 – 571 774 6,577 4,374
Other 2,655 2,810 1,108 717 627 449 4,390 3,976
Current replacement cost $ 38,978 $ 36,973 $ 2,189 $ 845 $ 9,904 $ 10,724 $ 51,071 $ 48,542
Less: impact of master netting agreements and collateral – – – – – – 42,909 40,519
Total $ 38,978 $ 36,973 $ 2,189 $ 845 $ 9,904 $ 10,724 $ 8,162 $ 8,023
2010 2009
2010 2009 % mix % mix
By location of risk2
Canada $ 3,737 $ 4,269 45.8% 53.2%
United States 1,820 1,590 22.3 19.8
International
United Kingdom 332 191 4.1 2.4
Europe – other 1,252 1,373 15.3 17.1
Other 1,021 600 12.5 7.5
Total international 2,605 2,164 31.9 27.0
Total current replacement cost $ 8,162 $ 8,023 100.0% 100.0%
1
Based on geographic location of unit responsible for recording revenue.
2
After impact of master netting agreements and collateral.
GOODWILL AND OTHER INTANGIBLES
NOTE 9
GOODWILL
Goodwill represents the excess purchase price paid on acquisitions over
the fair value assigned to identifiable net assets including identifiable
intangible assets. Goodwill is not amortized but is assessed for impair-
ment at least annually and when an event or change in circumstances
indicates that there may be an impairment. Goodwill is allocated to
reporting units that are either the operating business segment or the
reporting unit below the segment. Goodwill impairment is identified
by comparing the carrying value of the reporting unit with its fair
value.
Impairment in goodwill is charged to the Consolidated State
ment of
Income in the period in which the impairment is identified. No impair-
ment write-downs were required for the years ended October 31,
2010, 2009, and 2008.