Bank of Montreal 2004 Annual Report Download - page 125

BMO Financial Group Annual Report 2004 121
Notes
(i) Net of income taxes of $254 million ($601 million in 2003; $81 million in 2002).
(ii) Net of income taxes of $2 million ($37 million in 2003; $30 million in 2002).
(iii) Net of income taxes of $64 million ($14 million in 2003; $59 million in 2002).
(iv) Net of income taxes of $110 million ($19 million in 2003; $14 million in 2002).
(v) Net of income taxes of $209 million ($12 million in 2003; $9 million in 2002).
(vi) Net of income taxes of $3 million ($30 million in 2003).
Condensed Consolidated Balance Sheet
As at October 31 (Canadian $ in millions) 2004 2003
Canadian Increase United States Canadian Increase United States
GAAP (Decrease) GAAP GAAP (Decrease) GAAP
Assets
Cash Resources (a) $ 18,045 $ 28 $ 18,073 $ 19,860 $ – $ 19,860
Securities
Investment and loan substitutes (l) 15,028 (15,028)
– 19,671 (19,671) –
Trading 35,444 – 35,444 35,119 – 35,119
Available for sale (d,j,l)
– 15,873 15,873 – 21,105 21,105
Loans and customers’ liability under acceptances,
net of the allowance for credit losses (a,d) 156,248 20,796 177,044 146,156 (4) 146,152
Derivative financial instruments (a,d) 25,448 327 25,775 21,216 420 21,636
Premises and equipment (f) 2,020 127 2,147 2,045 105 2,150
Goodwill (h) 1,507 (43) 1,464 1,334 (46) 1,288
Intangible assets (h) 480 (26) 454 589 (35) 554
Other assets (a,d,g,l) 10,974 163 11,137 10,504 (288) 10,216
Total Assets $ 265,194 $ 22,217 $ 287,411 $ 256,494 $ 1,586 $ 258,080
Liabilities and Shareholders’ Equity
Deposits (d) $ 175,190 $ 4 $ 175,194 $ 171,551 $ (14) $ 171,537
Derivative financial instruments (a,d) 23,973 (13) 23,960 20,715 174 20,889
Acceptances 5,355
– 5,355 5,611 – 5,611
Securities sold but not yet purchased 10,441
– 10,441 8,255 – 8,255
Securities sold under repurchase agreements 20,865
– 20,865 23,765 – 23,765
Other liabilities (d,j) 13,786 22,029 35,815 11,259 1,058 12,317
Subordinated Debt (d) 2,395 9 2,404 2,856 58 2,914
Shareholders’ Equity (d,k) 13,189 188(1) 13,377 12,482 310(1) 12,792
Total Liabilities and Shareholders’ Equity $ 265,194 $ 22,217 $ 287,411 $ 256,494 $ 1,586 $ 258,080
(1) Includes cumulative adjustment to shareholders’ equity arising from current and prior years’ GAAP differences.
Certain comparative figures have been reclassified to conform with the current year’s presentation.
Consolidated Statement of Comprehensive Income
For the Year Ended October 31 (Canadian $ in millions) 2004 2003 2002
Net income (under United States GAAP) $ 2,241 $ 1,782 $ 1,360
Other Comprehensive Income, net of income taxes:
Unrealized loss on translation of net investments in foreign operations, net of hedging activities (i) (295) (597) (79)
Unrealized holding gains (losses) on available for sale securities, net of hedging activities (ii) (4) 76 (45)
Realized (gains) losses and write-downs on available for sale securities recognized in net income (iii) (114) (25) 94
Unrealized losses on derivatives designated as cash flow hedges (iv) (205) (37) (22)
Net gains on derivatives designated as cash flow hedges recognized in net income (v) 253 21 15
Minimum pension liability (vi) (5) (45) –
Total Other Comprehensive Loss (370) (607) (37)
Comprehensive Income $ 1,871 $ 1,175 $ 1,323
(a) Variable Interest Entities
Under United States GAAP, we adopted a new accounting standard
on the consolidation of variable interest entities (“VIEs”) effective
January 31, 2004. Under this new standard, we consolidate the
financial results of VIEs if the investments we hold in these entities
and/or the relationships we have with them result in us being
exposed to a majority of their expected losses, being able to benefit
from a majority of their expected residual returns, or both, based
on a calculation determined by the standard setters.
When we adopted this new U.S. accounting standard on
January 31, 2004, it resulted in the consolidation of our multi-seller
conduits. We recorded a one-time transition adjustment of
$111 million related to unrealized losses on interest rate swaps
held by our VIEs to hedge their exposure to interest rate risk
in the Consolidated Statement of Income, as the cumulative effect
of an accounting change. These derivative instruments had been
accounted for as hedging derivatives under Canadian GAAP but
did not meet the detailed hedge accounting requirements under
United States GAAP in prior periods. As a result, although they are
effective as economic hedges, they are required to be marked to
market under United States GAAP. The liability associated with
these unrealized losses will reverse, with a corresponding increase
in net income, over the remaining terms of the swaps for United
States GAAP reporting, ranging from 2004 to 2015.
The impact of the new standard on our Consolidated Balance
Sheet as at October 31, 2004 was an increase in cash resources
of $28 million, an increase in loans of $20,805 million, a decrease
in derivative assets of $51 million, an increase in other assets
of $25 million, a decrease in derivative liabilities of $13 million,
an increase in other liabilities of $20,849 million and a decrease
in shareholders’ equity of $29 million.
On November 1, 2004, we will adopt the equivalent Canadian
GAAP rules on the consolidation of VIEs. There will continue to be
an adjustment to our Consolidated Statement of Income until the
transition balance is fully amortized.
(b) Mortgage Prepayment Fees
Under United States GAAP, mortgage prepayment fees are
recognized in income when the related mortgage is prepaid or
renegotiated at market rates. Prior to November 1, 2003 these
fees were deferred and amortized to income over the average
remaining term of the related mortgages under Canadian GAAP.
Effective November 1, 2003, we adopted a new Canadian
account ing standard on sources of GAAP that eliminated this