TD Bank 2006 Annual Report Download - page 88

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Financial Results
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Asset Depreciation rate and method
Buildings 5% or 10%, declining balance
Computer equipment 30%, declining balance
Computer software 3 to 7 years, straight-line
Furniture, fixtures and other equipment 20%, declining balance
Leasehold improvements lesser of lease term or
useful life, straight-line
Buildings, equipment, furniture and fixtures, computer equip-
ment and software and leasehold improvements are recorded at
cost less accumulated depreciation. Land is recorded at cost.
Gains and losses on disposal are included in other income in the
Consolidated Statement of Income. When the Bank reports a
gain on sale of property in which it retains a significant leasing
interest, the portion of the gain which can be allocated to the
leased interest is deferred and amortized to income over the
remaining term of the lease. When land, building and equipment
are no longer in use or considered impaired they are written
down to their net recoverable amount. The Bank evaluates the
carrying value of long-lived assets whenever changes in circum-
stances indicate that a potential impairment has occurred.
Impairment is considered to have occurred if the projected undis-
counted cash flows resulting from the use and eventual disposi-
tion of the assets areless than their carrying value, at which time
awrite-down would be recorded. There was no impairment of
the Bank’s land, buildings, equipment, furniture and fixtures or
leasehold improvements during 2006, 2005 and 2004.
The Bank recognizes the legal obligation associated with the
retirement of a long-lived asset in the period in which it occurs
and can be reasonably estimated. The liability and corresponding
asset are recognized at fair value. The increase in the long-lived
asset is depreciated over the remaining useful life of the asset.
Depreciation methods and rates by asset category are as follows:
(millions of Canadian dollars) 2006 2005
Accumulated Net book Net book
Cost depreciation value value
Land $229 $ – $ 229 $180
Buildings 760 355 405 358
Computer equipment and software 1,125 664 461 482
Furniture, fixtures and other equipment 920 553 367 376
Leasehold improvements 755 355 400 405
Total $3,789 $1,927 $1,862 $1,801
LAND, BUILDINGS AND EQUIPMENT
NOTE 7
Demand deposits arethose for which the Bank does not have
the right to require notice prior to withdrawal. These deposits
arein general chequing accounts, some of which earn interest.
Notice deposits are those for which the Bank can legally
require notice prior to withdrawal. These deposits are in general
savings accounts.
Term deposits are those payable on a fixed date of maturity
purchased by customers to earn interest over a fixed period. The
terms arefrom one day to 10 years. Accrued interest on deposits
is included in other liabilities on the Consolidated Balance Sheet.
The deposits are generally term deposits, guaranteed investment
certificates and similar instruments. The aggregate amount of
term deposits in denominations of $100,000 or more as at
October 31, 2006 were $83 million (2005 – $81 million).
DEPOSITS
NOTE 8
Accumulated depreciation at the end of 2005 was $1,795
million. Depreciation expense for buildingsand equipment
amounted to $343 million for 2006 (2005 – $322 million;
2004 – $294 million).
to loss for these conduits was $4 billion (2005 – $3 billion),
through sole provision of liquidity facilities only available in the
event of a general market disruption.
OTHER FINANCIAL TRANSACTIONS
The Bank sells trading securities to VIEs in conjunction with
its balance sheet management strategies. The Bank does not
retain effective control over the assets sold. Assets sold during
the year under such arrangements amounted to $1 billion (2005
– $1 billion). The Bank enters into total return swaps with the
sale counterparties in respect of the assets sold. Market risk for
all such transactions is tracked and monitored.
The Bank is involved in collateralized debt obligation vehicles
(CDOs). The Bank may serve in the capacity of underwriter, third-
party investor or derivative counterparty. CDOs raise capital by
issuing debt securities and use their capital to invest in portfolios
of securities and derivatives. Any net income or loss is shared by
the CDO’s variable interest holders. As at October 31, 2006, the
Bank did not have a significant position in any CDO.
The Bank offers equity-linked notes and credit-linked notes to
various VIEs and third-party clients. As at October 31, 2006, the
Bank’s exposure to risk from these transactions was not significant.
The Bank, through The Canada Trust Company, acts as a
trustee for personal and corporate trusts. Fees earned by the
Bank for its role as a trustee are not significant.
In addition to the transactions and products noted above, the
Bank also offers other financial products, including mutual funds,
to clients. These financial products are, on occasion, created
using a VIE as the issuer or obligor of the financial products. The
Bank may provide certain administrative services and other finan-
cial products to the VIE in exchange for market rate compensa-
tion. The Bank’s position in these transactions is not considered
significant.