TD Bank 2003 Annual Report Download - page 88

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Financial Results86
Stock-based compensation
Until October 5, 2002, under the Bank’s stock option plan, option
holders could elect to receive cash for the options equal to their
intrinsic value, being the excess of the market value of the share
over the option exercise price at the date of exercise. In account-
ing for stock options with this feature, U.S. GAAP requires
expensing the annual change in the intrinsic value of the stock
options. For options that have not fully vested, the change in
intrinsic value is amortized over the remaining vesting period.
Under the then current Canadian GAAP, no expenses were
recorded and cash payments to option holders were charged
to retained earnings on a net of tax basis. As a result, income
for U.S. GAAP purposes was increased for 2002 and 2001,
$60 million and $64 million, respectively as a result of decreases
in intrinsic value during the periods. Effective October 6, 2002,
the plan was amended so that new grants of options and all
outstanding options can only be settled for shares. As a result,
for the purposes of U.S. GAAP the accrued liability for stock
options of $39 million after-tax was reclassified to capital as
at October 6, 2002. Beginning in fiscal 2003, the Bank has
expensed stock option awards for both Canadian and U.S. GAAP
purposes using the fair value method of accounting for stock
options. The only continuing Canadian and U.S. GAAP difference
relates to the draw down of the accrued liability reclassified to
capital for exercises and forfeitures of stock options that existed
at October 6, 2002.
Consolidated Statement of Comprehensive Income (Loss)
For the years ended October 31
(millions of dollars) 2003 2002 2001
Net income (loss) based on U.S. GAAP $1,162 $ (95) $1,531
Other comprehensive income (loss), net of income taxes
Net change in unrealized gains and losses on available for sale securities116 (226) 282
Reclassification to earnings in respect of available for sale securities2(78) 75 48
Change in unrealized foreign currency translation gains and losses3,8 (548) (32) 171
Change in gains and losses on derivative instruments designated as
cash flow hedges4126 180 (328)
Reclassification to earnings of gains and losses on cash flow hedges546 21 15
Gains arising from adoption of new accounting standard for
derivative instruments6––20
Minimum pension liability adjustment7114 (114) –
Comprehensive income (loss) $ 838 $(191) $1,739
Net Income (Loss)
For the years ended October 31
(millions of dollars) 2003 2002 2001
Net income (loss) based on Canadian GAAP $1,076 $ (67) $1,392
Stock-based compensation –60 64
Employee future benefits (7) (9) 5
Restructuring costs (18) (101) (50)
Loan securitizations (10) (15) (3)
Non-controlling interest in TD Mortgage Investment Corporation (23) (23) (22)
Future income taxes –17 54
Available for sale securities 81 (73) (48)
Derivative instruments and hedging activities 95 116 142
Guarantees (13) ––
Asset retirement obligations (19) ––
Other –– (3)
Net income (loss) based on U.S. GAAP 1,162 (95) 1,531
Preferred dividends 64 70 70
Net income (loss) applicable to common shares based on U.S. GAAP $1,098 $(165) $1,461
Basic earnings (loss) per common share – U.S. GAAP $1.69 $ (.26) $ 2.32
– Canadian GAAP 1.52 (.25) 2.07
Diluted earnings (loss) per common share – U.S. GAAP $1.68 $ (.26) $ 2.30
– Canadian GAAP 1.51 (.25) 2.05
The accounting principles followed by the Bank including the
accounting requirements of the Superintendent of Financial
Institutions Canada conform with Canadian generally accepted
accounting principles (GAAP).
Significant differences between Canadian GAAP and United
States generally accepted accounting principles (U.S. GAAP) are
described below.
1Net of income taxes (benefit) of $7 million (2002 – $(157) million;
2001 – $171 million).
2Net of income taxes (benefit) of $(45) million (2002 – $48 million;
2001 – $35 million).
3Net of income taxes (benefit) of $481 million (2002 – $65 million;
2001 – $(191) million).
4Net of income taxes (benefit) of $72 million (2002 – $114 million;
2001 – $(235) million).
5Net of income taxes (benefit) of $27 million (2002 – $15 million;
2001 – $11 million).
6Net of income taxes (benefit) of nil (2002 – nil; 2001 – $14 million).
7Net of income taxes (benefit) of $72 million (2002 – $(72) million;
2001 – nil).
8Fiscal 2003 includes $971 million (2002 – $90 million;
2001 – $(278) million) of after-tax gains (losses) arising from hedges
of the Bank’s investment positions in foreign operations.
NOTE 25 Reconciliation of Canadian and United States generally accepted accounting principles