Bank of Montreal 2008 Annual Report Download - page 133

Notes
BMO Financial Group 191st Annual Report 2008 | 129
(1) Other changes in goodwill include the effects of translating goodwill denominated in
foreign currencies into Canadian dollars and purchase accounting adjustments related to
prior-year purchases.
(2) Relates primarily to Moneris Solutions Corporation and bcpbank Canada.
(3) Relates primarily to New Lenox State Bank, First National Bank of Joliet, Household Bank
branches, Mercantile Bancorp, Inc., Villa Park Trust and Savings Bank, First National Bank
& Trust, Ozaukee Bank and Merchants and Manufacturers Bancorporation, Inc.
A continuity of our goodwill by reporting unit for the years ended October 31, 2008 and 2007 is as follows:
Personal and Private BMO
Commercial Client Capital Corporate
(Canadian $ in millions) Banking Group Markets Services Total
Retail Technology
P&C P&C Client Investment Private and
Canada U.S. Total Investing Products Banking Total Operations
Goodwill as at October 31, 2006 $ 93 $ 582 $ 675 $ 68 $ 187 $ 68 $ 323 $ 98 $ 2 $ 1,098
Acquisitions during the year 13175188––––––188
Other (1) – (129) (129) – – (10) (10) (7) – (146)
Goodwill as at October 31, 2007 106 628 734 68 187 58 313 91 2 1,140
Acquisitions during the year – 220 220 – 20 – 20 8 – 248
Other (1) (1) 222 221 – (1) 17 16 10 – 247
Goodwill as at October 31, 2008 $105(2) $ 1,070(3) $ 1,175 $ 68(4) $ 206(5) $75(6) $ 349 $ 109(7) $ 2 $ 1,635
(4) Relates to BMO Nesbitt Burns Corporation Limited.
(5) Relates to Guardian Group of Funds Ltd. and Pyrford International plc.
(6) Relates primarily to Harris myCFO, Inc.
(7) Relates to Gerard Klauer Mattison & Co., Inc., BMO Nesbitt Burns Corporation Limited and Griffin,
Kubik, Stephens & Thompson, Inc.
Intangible Assets
Intangible assets related to our acquisitions are recorded at their fair value
at the acquisition date. Intangible assets by category are as follows:
(Canadian $ in millions) 2008 2007
Accumulated Carrying Carrying
Cost amortization value value
Customer relationships $ 96 $ 68 $ 28 $ 12
Core deposits 314 171 143 75
Branch distribution networks 178 146 32 34
Other 24 23 1 3
Total $ 612 $ 408 $ 204 $ 124
Intangible assets are amortized to income over the period during
which we believe the assets will benefit us on either a straight-line or
an accelerated basis, depending on the specific asset, over a period not
to exceed 15 years. We have no intangible assets with indefinite lives.
The weighted-average amortization period for customer relationships is
10.6 years, core deposits 10.6 years, branch distribution networks
15.0 years and other 6.4 years.
The aggregate amount of intangible assets that were acquired
during the years ended October 31, 2008, 2007 and 2006 was $80 million,
$42 million and $7 million, respectively.
We test intangible assets for impairment when events or changes
in circumstances indicate that their carrying value may not be recover-
able. We write them down to fair value when the related undiscounted
cash flows are not expected to allow for recovery of the carrying
value. There were no write-downs of intangible assets due to impairment
during the years ended October 31, 2008, 2007 and 2006.
The total estimated amortization expense relating to intangible
assets for each of the next five years is $46 million for 2009,
$34 million for 2010, $29 million for 2011, $19 million for 2012
and $18 million for 2013.
Future Change in Accounting Policy
As discussed in Note 1, we will adopt the CICA’s new accounting
standard relating to intangible assets on November 1, 2008. The new
standard clarifies the recognition and measurement criteria for intangible
assets and, in particular, for intangible assets that are generated
internally. The impact of implementation of this new standard is not
material to our results of operations or financial position.
Goodwill
When we acquire a subsidiary, joint venture or securities where
we exert significant influence and account for the acquisition using
the equity method, we allocate the purchase price paid to the assets
acquired, including identifiable intangible assets, and the liabilities
assumed. Any excess of the amount paid over the fair value of those
net assets is considered to be goodwill.
Goodwill is not amortized; however, it is tested at least annually for
impairment. The impairment test consists of allocating goodwill to our
reporting units (groups of businesses with similar characteristics) and
then comparing the book value of the reporting units, including good-
will, to their fair values. We determine fair value using discounted cash
flows, price-to-earnings ratios, market proxies or other multiples, which-
ever
is most appropriate under the circumstances. The excess of carrying
value of goodwill over fair value of goodwill, if any, is recorded as an
impairment charge in the period in which impairment is determined.
There were no write-downs of goodwill due to impairment during
the years ended October 31, 2008, 2007 and 2006.
Note 13: Goodwill and Intangible Assets
Note 14: Other Assets
(Canadian $ in millions) 2008 2007
Accounts receivable, prepaid expenses
and other items $ 7,031 $ 5,415
Accrued interest receivable 1,198 1,371
Due from clients, dealers and brokers 810 460
Pension asset (Note 24) 1,121 1,094
Total $ 10,160 $ 8,340