Bank of Montreal 2008 Annual Report Download - page 135

The restructuring charges were recorded in the Corporate Services
operating group. The actions under the restructuring program were
completed in
2007 and 2008.
During the year ended October 31, 2008, we changed our estimate
for restructuring, resulting in an $8 million reduction in the original
accrual ($16 million reduction in 2007). Severance-related charges were
less than originally anticipated due to higher levels of attrition and
redeployment within the Bank.
Severance- Premises-
related related
(Canadian $ in millions) charges charges Other Total
Opening balance $ 117 $ 11 $ 7 $ 135
Paid in the year (46) (10) (7) (63)
Reversal in the year (15) (1) – (16)
Additional charge in the year 40 – – 40
Balance as at October 31, 2007 96 – – 96
Paid in the year (45) – – (45)
Reversal in the year (8) – – (8)
Balance as at October 31, 2008 $ 43 $ – $ – $ 43
Notes
BMO Financial Group 191st Annual Report 2008 | 131
Note 16: Other Liabilities
Included in non-controlling interest in subsidiaries as at October 31, 2008
were capital trust securities including accrued interest totalling
$1,060 million ($1,060 million in 2007) (see Note 19) and 7.375% pre-
ferred shares of US$250 million (US$250 million in 2007) issued by
Harris Preferred Capital Corporation, a U.S. subsidiary, that forms part
of our Tier 1 regulatory capital.
Customer Loyalty Program
During the year ended October 31, 2008, we settled the liability
associated with our customer loyalty rewards program in Personal and
Commercial
Banking Canada’s MasterCard business. We are no longer
required to
estimate and accrue a liability associated with the redemp-
tion of rewards issued to our customers under the new agreement.
The ongoing costs of our credit card customer loyalty program are
recorded as a reduction in non-interest revenue, card fees in our
Consolidated Statement of Income.
Previously, we recorded the liability associated with our credit card
customer loyalty program rewards in the period in which our customers
became entitled to redeem the rewards. We estimated the liability using
the expected future redemption rate and applied the cost of expected
redemptions. Our estimate of the expected redemption rate was based on
statistical analysis of past customer behaviour. The costs of our credit card
customer loyalty program were recorded as a reduction in non-interest
revenue, card fees in our Consolidated Statement of Income. The liability
was included in other liabilities in our Consolidated Balance Sheet.
Change in Accounting Estimate
During the year ended October 31, 2007, we increased the liability
for future customer redemptions related to our loyalty rewards program
in Personal and Commercial Banking Canada’s MasterCard business.
The impact of this change on our Consolidated Statement of Income for
the year ended October 31, 2007 was a reduction in non-interest revenue,
card fees of $185 million, a decrease in the provision for income taxes
of $65 million and a decrease in net income of $120 million.
Note 17: Restructuring Charge
On January 31, 2007, we recorded a restructuring charge of $135 million in
our Consolidated Statement of Income. The objectives of the restructuring
were to enhance customer service by directing spending and resources
to front-line sales and service improvements, creating more efficient
processes and systems and continuing to accelerate the pace of growth.
The charge related to the elimination of approximately 1,000 posi-
tions primarily in non-customer-facing areas across all support functions
and business groups. Of the charge, $117 million related to severance-
related costs, $11 million was associated with premises-related charges
and $7 million related to other costs.
Premises-related charges included lease cancellation payments
for those locations where we legally extinguished our lease obligation,
as well as the carrying value of abandoned assets.
We engaged a professional services firm to provide us with
strategic and organizational advice with respect to the restructuring
initiatives. A charge of $7 million for these services was included in
the restructuring charge.
On October 31, 2007, we recorded an additional restructuring charge
of $40 million in our Consolidated Statement of Income. The additional
charge relates to the elimination of approximately 400 positions across
all support functions and business groups and is all severance-related.
(Canadian $ in millions) 2008 2007
Acceptances $ 9,358 $ 12,389
Securities sold but not yet purchased 18,792 25,039
Securities lent or sold under repurchase agreements 32,492 31,263
$ 60,642 $ 68,691
Acceptances
Acceptances represent a form of negotiable short-term debt that
is issued by our customers and which we guarantee for a fee. We have
an offsetting claim, equal to the amount of the acceptances, against
our customers. The amount due under acceptances is recorded as
a liability and our corresponding claim is recorded as a loan in our
Consolidated Balance Sheet.
Securities Sold but not yet Purchased
Securities sold but not yet purchased represent our obligation to deliver
securities that we do not own at the time of sale. These obligations
are recorded at their market value. Adjustments to the market value
as at the balance sheet date and gains and losses on the settlement
of these obligations are recorded in trading revenues (losses) in
our Consolidated Statement of Income.
Securities Lent or Sold under Repurchase Agreements
Securities lent or sold under repurchase agreements represent short-term
funding transactions where we sell securities that we already own and
simultaneously commit to repurchase the same securities at a specified
price on a specified date in the future. The obligation to repurchase
these securities is recorded at the amount owing. The interest expense
related to these liabilities is recorded on an accrual basis.
(Canadian $ in millions) 2008 2007
Other
Accounts payable, accrued expenses and other items $ 7,265 $ 7,760
Accrued interest payable 1,656 1,893
Non-controlling interest in subsidiaries 1,400 1,329
Liabilities of subsidiaries, other than deposits 2,990 387
Pension liability (Note 24) 47 11
Other employee future benefits liability (Note 24) 713 675
Total $ 14,071 $ 12,055