Bank of Montreal 2010 Annual Report Download - page 140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes
138 BMO Financial Group 193rd Annual Report 2010
Note 13: Goodwill and Intangible Assets
Change in Accounting Policy
On November 1, 2008, we adopted the CICA’s new accounting require-
ments for goodwill and intangible assets. We have restated prior period
financial statements to reflect this change. The new standards required
us to reclassify computer application software from premises and
equipment to intangible assets.
The impact of this change in accounting policy on prior periods
is as follows:
(Canadian $ in millions) 2008
Consolidated Statement of Income
(Decrease) in premises and equipment expense (141)
Increase in amortization of intangible assets 141
Integra GRS (“Integra”)
On November 23, 2009, we completed the acquisition of the record-
keeping business of Integra, a wholly-owned subsidiary of Integra
Capital Management Corporation, for cash consideration of $13 million,
plus contingent consideration of $3 million paid in 2010, based on
additional client contracts assigned from the vendor within six months
after the closing date. The acquisition of Integra extends our existing
wealth management offering. As part of this acquisition, we acquired
a customer relationship intangible asset that is being amortized on a
straight-line basis over five years and a computer software intangible
asset that is being amortized on a straight-line basis over three years.
Goodwill related to this acquisition is deductible for tax purposes.
Integra is part of our Private Client Group reporting segment.
Stoker Ostler Wealth Advisors, Inc. (“SOWA”)
On September 9, 2009, we completed the acquisition of all outstanding
voting shares of Stoker Ostler Wealth Advisors, Inc. for cash consideration
of $12 million (US$11 million), plus contingent consideration of up
to $9 million (US$8 million) based on revenue to be generated in the
future. The acquisition of SOWA provides us with the opportunity to
expand our presence in the U.S. wealth advisory market. As part of this
The estimated fair values of the assets acquired and the liabilities assumed at the dates of acquisition are as follows:
(Canadian $ in millions) 2010 2009
BMO Life
AMCORE Diners Club Paloma Integra SOWA Assurance
Cash resources (1) 420 – – – – 352
Securities 10 – – – – 2,638
Loans 1,551 873 – – – 54
Premises and equipment – – – – – 18
Goodwill 86 5 7 7 13 2
Intangible assets 24 63 – 9 8 15
Other assets 494 9 – – – 103
Total assets 2,585 950 7 16 21 3,182
Deposits 2,207 – – – – –
Other liabilities 153 112 – – 9 2,904
Total liabilities 2,360 112 – – 9 2,904
Purchase price 225 838 7 16 12 278
(1) Cash resources acquired through the AMCORE acquisition include cash and cash equivalents and interest bearing deposits.
acqui sition, we acquired a customer relationship intangible asset that is
being amortized using an accelerated amortization method over a period
of five years. Goodwill related to this acquisition is deductible for tax
purposes. SOWA is part of our Private Client Group reporting segment.
AIG Life Insurance Company of Canada
(“BMO Life Assurance”)
On April 1, 2009, we completed the acquisition of all outstanding voting
shares of AIG Life Insurance Company of Canada for cash consideration
of $330 million, subject to a post-closing adjustment based on net
assets. The post-closing adjustment was finalized during 2010 and the
purchase price was reduced to $278 million. The acquisition of BMO
Life Assurance enables us to provide our clients with a wider range of
investment, financial planning and insurance solutions. As part of this
acquisition, we acquired a customer relationship intangible asset that is
being amortized on a straight-line basis over five years, a non-compete
agreement that is being amortized on a straight-line basis over two
years and a computer software intangible asset that is being amortized
on a straight-line basis over five years. Goodwill related to this
acquisition is not deductible for tax purposes. BMO Life Assurance
is part of our Private Client Group reporting segment.
Goodwill
When we acquire a subsidiary, joint venture or securities over which
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 for impairment
at least annually. 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
goodwill, to their fair values. We determine fair value primarily using
discounted cash flows. 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, 2010, 2009 and 2008.