TD Bank 2003 Annual Report Download - page 77

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Financial Results 75
(millions of dollars) 2003 2002
Carrying Estimated Carrying Estimated
Consolidated Balance Sheet value fair value value fair value
Assets
Securities $ 79,665 $ 80,226 $ 82,197 $ 82,768
Loans 118,058 118,658 122,627 123,591
Liabilities
Deposits 182,880 183,397 189,190 189,860
Subordinated notes and debentures 5,887 6,246 4,343 4,662
Fair values are based on the following methods of valuation and
assumptions:
For assets and liabilities which are short term in nature or
contain variable rate features, fair value is considered to be equal
to carrying value. These items are not listed above.
Details of the estimated fair value of derivative financial instru-
ments are provided in Note 18.
The estimated fair value of securities is determined as the
estimated market values reported in Note 2.
The estimated fair value of loans reflects changes in general
interest rates which have occurred since the loans were originat-
ed and changes in the creditworthiness of individual borrowers.
For fixed rate loans, estimated fair value is determined by dis-
counting the expected future cash flows related to these loans
at market interest rates for loans with similar credit risks.
The estimated fair value of term deposits is determined by
discounting the contractual cash flows using interest rates
currently offered for deposits with similar terms.
The estimated fair value of the subordinated notes and
debentures is determined by reference to quoted market prices.
(millions of dollars) 2003 2002
Future income tax assets
Allowance for credit losses $ 653 $ 1,047
Premises and equipment 248 205
Deferred income 22 67
Securities 185 111
Goodwill 117 –
Employee benefits 149 113
Other 98 70
Total future income tax assets 1,472 1,613
Valuation allowance (41) (15)
Future income tax assets 1,431 1,598
Future income tax liabilities
Intangible assets (840) (1,122)
Employee benefits (122) (100)
Other (83) (64)
Future income tax liabilities (1,045) (1,286)
Net future income tax asset $ 386 $ 312
Earnings of certain international subsidiaries would be taxed only
upon repatriation to Canada. The Bank has not recognized a
future income tax liability for these undistributed earnings since it
does not currently plan to repatriate them. If all the undistributed
earnings of the international operations of these subsidiaries
were repatriated, estimated taxes payable would be $206 million
at October 31, 2003 (2002 – $235 million).
The net future tax asset which is reported in other assets is comprised of:
The provision for (benefit of) income taxes shown in the
Consolidated Statement of Operations differs from that obtained
by applying statutory tax rates to the income (loss) before provi-
sion for (benefit of) income taxes for the following reasons:
(millions of dollars) 2003 2002 2001
Income taxes at Canadian statutory income tax rate $ 542 36.4% $(172) 38.4% $ 520 41.1%
Increase (decrease) resulting from:
Goodwill amortization and impairment 114 7.7 ––554.4
Dividends (179) (12.0) (175) 39.1 (155) (12.3)
Rate differentials on international operations (146) (9.8) (84) 18.8 (240) (19.0)
Future federal and provincial tax rate reductions (3) (.2) (21) 4.7 (215) (17.0)
Federal large corporations tax 13 .9 16 (3.6) 18 1.4
Gains on sale of investment real estate ––(1) .2 (115) (9.1)
Other – net (19) (1.4) (8) 1.7 (74) (5.8)
Provision for (benefit of) income taxes and effective
income tax rate $ 322 21.6% $(445) 99.3% $(206) (16.3)%
NOTE 16 Fair value of financial instruments