TD Bank 2006 Annual Report Download - page 87

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Financial Results 83
Goodwill by Segment
(millions of Canadian dollars) Canadian Personal U.S. Personal
and Commercial and Commercial Wholesale Wealth
2006 Banking Banking Banking Management Total
Carrying value of goodwill at beginning of year $884 $4,328 $146 $1,160 $6,518
Goodwill acquired during the year 202 1,778 – 56 2,036
Sale of TD Waterhouse U.S.A. – – – (827) (827)
Foreign currency translation adjustments – (301) – (30) (331)
Carrying value of goodwill at end of year $1,086 $5,805 $146 $ 359 $7,396
2005
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
OTHER INTANGIBLES
The Bank’s intangible assets consist primarily of core deposit
intangibles that represent the intangible value of depositor rela-
tionships acquired when deposit liabilities are assumed in an
acquisition and term deposit, loan and mutual fund intangibles
resulting from acquisitions. Intangible assets are amortized over
five to 18 years, proportionate to the expected economic benefit.
All intangible assets are assessed for impairment at least annually
and when an event or change in circumstances indicates that the
assets might be impaired. Therewere no such circumstances in
2006, 2005 and 2004.
The table below presents details of the Bank’s other intangible
assets as at October 31:
Other Intangibles
(millions of Canadian dollars) 2006 2005
Carrying Accumulated Net carrying Net carrying
value amortization value value
Core deposit intangible assets $2,577 $1,675 902 $ 954
Other intangible assets 4,108 3,064 1,044 1,170
Total intangible assets1$6,685 $4,739 1,946 $2,124
Goodwill represents the excess purchase price paid on acquisi-
tions over the fair value assigned to identifiable net assets,
including identifiable intangible assets. Goodwill is not amortized
but is assessed for impairment annually and when an event or
change in circumstances indicates that the assets might be
impaired. 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.
Annual impairment testing on goodwill determined that no
impairment write-downs were required in 2006 and 2005.
GOODWILL AND OTHER INTANGIBLES
NOTE 5
1Future amortization expense for the carrying amount of intangible assets
is estimated to be as follows for the next five years: 2007 – $425 million,
2008 –$338 million, 2009 – $248 million, 2010 – $198 million, 2011 –
$158 million.
A VIE is an entity in which the total equity investment at risk is
not sufficient to permit the entity to finance its activities without
additional subordinate financial support. The Bank identifies VIEs
in which it has an interest, determines whether it is the primary
beneficiary of such entities and if so, consolidates them. The
primary beneficiary is an entity that is exposed to a majority of
the VIE’s expected losses or entitled to a majority of the VIE’s
expected residual returns, or both.
The Bank is considered the primary beneficiary of Lillooet
Limited, which is discussed in Note 25. The Bank has no other
significant VIEs for which it is the primary beneficiary.
The Bank holds significant variable interests in VIEs where it
is not considered the primary beneficiary. The Bank’s variable
interests in these non-consolidated VIEs is discussed below.
MULTI-SELLER CONDUITS
Multi-seller conduits (also referred to as customer securitization
vehicles) provide customers with alternate sources of financing
through the securitization of their assets. The customers sell their
receivables to the conduit and the conduit funds its purchase of
the receivables through issuance of short-term commercial paper
to outside investors. Each seller continues to service its assets and
absorb first losses. The Bank has no rights to the assets as they
are owned by the conduit. The Bank may provide credit enhance-
ments, swap facilities or liquidity facilities to the VIEs as well as
securities distribution services. Liquidity facilities are only avail-
able in the event of a general market disruption and the probabil-
ity of loss is negligible. The Bank does not provide the services of
its employees to the VIEs, nor does it have ownership interests in
these VIEs. The Bank earns fees, which are recognized on the
accrual basis.
As at October 31, 2006, the Bank was the administrator for
multi-seller conduits, which held a total of $11 billion (2005 –
$10 billion) in assets. While the probability of loss is negligible,
the Bank’s maximum potential exposure to loss from these con-
duits through sole provision of liquidity facilities available only in
the event of ageneral market disruption was $11 billion (2005 –
$10 billion).
SINGLE-SELLER CONDUITS
The Bank uses single-seller conduits to enhance its liquidity
position, to diversify its sources of funding and to optimize
management of its balance sheet.
As at October 31, 2006, the Bank held variable interests in
single-seller conduits with $4 billion of assets. While the proba-
bility of loss is negligible, the Bank’s maximum potential exposure
VARIABLE INTEREST ENTITIES
NOTE 6