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TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS 81
ACCOUNTING
POLICY AREA
KEY DIFFERENCES IN ACCOUNTING TREATMENT POTENTIAL KEY IMPACTS
Employee Future
Benefits
Canadian GAAP
Canadian GAAP does not differentiate between accounting for vested and
unvested cost of plan amendments, amortizing both over the expected average
remaining service life of active plan members. In addition, it permits two accounting
policy choices regarding actuarial gains and losses. The Bank’s accounting policy
is to amortize the excess, if any, of the net actuarial gain or loss over 10% of the
greater of a projected benefit obligation and the fair value of plan assets over the
expected average remaining service life of active plan members, as described in
Note 24 of the Bank’s annual Consolidated Financial Statements.
IFRS
Under IFRS, the cost of plan amendments are recognized immediately if they relate
to vested benefits; otherwise, they are recognized over the remaining vesting
period. The Bank’s accounting method for actuarial gains and losses under Canadian
GAAP is one of the accounting policy choices permitted under IFRS.
Analysis
As a result of the difference related to costs of plan amendments, upon transition
to IFRS, the Bank will be required to recognize costs of plan amendments that are
vested when those benefits are granted and recognize the expense for unvested
benefits at a faster rate than under Canadian GAAP. The Bank expects that the
policy for accounting for actuarial gains and losses will not change on transition
to IFRS.
Expected impact to IFRS opening
Consolidated Balance Sheet
In addition to the impact of the IFRS 1
exemption option as discussed above,
the Bank also expects an impact related
to its unamortized prior service costs
as of November 1, 2010. This Canadian
GAAP, IFRS difference is expected to
result in a reduction to retained earnings
with a corresponding adjustment to
assets and liabilities.
Future changes in standard
The IASB is considering changes to
the accounting for employee future
benefits, which are not expected to be
finalized until early 2011. It is likely
that adoption of these changes would
not be mandatory until after the Bank
transitions to IFRS
Business
Combinations
Canadian GAAP
Measurement of share consideration
Shares issued as consideration are measured at the market share price over a
reasonable period before and after the date the terms of the business combination
are agreed to and announced.
Restructuring Costs
Costs of an acquirer’s plan to exit an activity or to involuntarily terminate or
relocate employees are recognized as a liability in the purchase price allocation.
Acquisition-related costs
Direct related to the acquisition (i.e. finders fees, advisory, legal, etc.) are included
in the purchase price allocation.
IFRS
Measurement of purchase price
Shares issued as consideration are measured at their market share price at the
acquisition closing date.
Restructuring Costs
Costs are generally expensed as incurred and not included in the purchase
price allocation.
Acquisition-related costs
Costs are expensed as incurred and not included in the purchase price allocation.
Analysis
IFRS 3, Business Combinations provides guidance on the recognition and measure-
ment of business combinations that differ from the guidance under current
Canadian GAAP. IFRS 3 provides greater emphasis on fair value measurement for
items such as non-controlling interests and contingent consideration payments.
These differences will impact the purchase price allocation, including the
amount of goodwill recorded by the Bank.
Expected impact to IFRS opening
Consolidated Balance Sheet
(including the impact of certain IFRS 1
exemption options; see estimated
impact in First-time Adoption of
IFRS above)