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TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Financial Results
82
Goodwill by Segment
(millions of Canadian dollars) Canadian Personal U.S. Personal
and Commercial and Commercial Wholesale Wealth
2005 Banking Banking Banking Management Total
Carrying value of goodwill at beginning of year $884 $ – $146 $1,195 $2,225
Goodwill acquired during the year – 4,642 – – 4,642
Foreign currency translation adjustments –(314) – (35) (349)
Carrying value of goodwill at end of year $884 $4,328 $146 $1,160 $6,518
2004
Carrying value of goodwill at beginning of year $841 N/A $146 $1,276 $2,263
Goodwill acquired during the year 43 – – 43
Foreign currency translation adjustments – – (81) (81)
Carrying value of goodwill at end of year $884 $146 $1,195 $2,225
2003
Carrying value of goodwill at beginning of year $841 N/A $526 $1,767 $3,134
Goodwill impairment –(350) (274) (624)
Foreign currency translation adjustments –(30) (217) (247)
Carrying value of goodwill at end of year $841 $146 $1,276 $2,263
During fiscal 2003, the Bank reviewed the value of goodwill
assigned to the international reporting unit of the Wealth
Management segment and determined that an impairment in
value existed in this business. It was determined that the Bank’s
ability to profitably operate a global brokerage business had
been impacted by declining volumes in the discount brokerage
business worldwide. As a result, a goodwill impairment charge
of $274 million was recorded to the Consolidated Statement
of Income.
During 2003, the Bank reviewed the value of goodwill assigned
to the U.S. equity options business in the Wholesale Banking
segment and determined that impairment in value existed in this
component of business. Consequently, a $350 million goodwill
impairment charge was recorded to the Consolidated Statement
of Income and a related future income tax asset of $117 million
was recorded for a net of tax charge of $233 million.
OTHER INTANGIBLES
The table below presents details of the Bank’s other intangible
assets as at October 31:
Other Intangibles1
(millions of Canadian dollars) 2005 2004
Carrying Accumulated Net carrying Net carrying
value amortization value value
Coredeposit intangible assets $2,399 $1,445 $ 954 $777
Other intangible assets 3,959 2,789 1,170 1,367
Total intangible assets $6,358 $4,234 $2,124 $2,144
1Future amortization expense for the carrying amount of intangible assets
is estimated to be as follows for the next five years: 2006 – $475 million,
2007 – $389 million, 2008 – $325 million, 2009 – $251 million, 2010 –
$213 million.
For business acquisitions, the Bank allocates the purchase price
paid to the assets acquired (excluding identifiable intangible
assets) and the liabilities assumed. Goodwill represents any excess
of the purchase price over the fair value of the assets acquired.
Goodwill is not amortized but is subject to impairment tests, on
at least an annual basis. Goodwill is allocated to reporting units
that are either the operating business segment or the business
unit below the segment. Any goodwill impairment is identified by
comparing the carrying value of the reporting unit with its fair
value. Any impairment in goodwill is charged to the Consolidated
Statement of Income in the period in which the impairment
is identified.
Intangible assets are allocated between indefinite and finite
life assets. Intangible assets with a finite life are amortized over
their estimated useful life. Impairment in long-lived assets is
tested whenever the circumstances indicate that the carrying
value of finite life intangibles may not be recoverable and is
measured as the amount by which the asset’s carrying value
exceeds fair value. There were no such circumstances in 2005.
The Bank’s finite life intangible assets consist primarily of core
deposit intangibles that represent the intangible value of deposi-
tor relationships acquired when deposit liabilities are assumed in
an acquisition. Other significant finite life intangible assets
include term deposit, loan and mutual fund intangibles resulting
from acquisitions. The majority of these finite life intangible assets
are amortized to income on a double declining basis over 5 to 18
years, based on their estimated useful lives. The Bank does not hold
any indefinite life intangibles.
GOODWILL
The changes in the Bank’s carrying value of goodwill, by business
segment and in total, are in the table below:
GOODWILL AND OTHER INTANGIBLES
NOTE 5