TD Bank 2009 Annual Report Download - page 136

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS132
Financial Assets and Liabilities
(millions of Canadian dollars) 2009 2008
Carrying value Fair value Carrying value Fair value
FINANCIAL ASSETS
Cash and due from banks $ 2,414 $ 2,414 $ 2,517 $ 2,517
Interest-bearing deposits with banks 19,103 19,103 15,429 15,429
Trading securities1
Government and government-related securities $ 21,023 $ 21,023 $ 20,993 $ 20,993
Other debt securities 9,331 9,331 15,281 15,281
Equity securities 22,627 22,627 22,697 22,697
Retained interests 1,339 1,339 526 526
Total trading securities $ 54,320 $ 54,320 $ 59,497 $ 59,497
Available-for-sale securities
Government and government-related securities $ 47,953 $ 47,953 $ 44,579 $ 44,579
Other debt securities 29,010 29,010 19,886 19,886
Equity securities31,915 2,144 3,301 3,587
Debt securities reclassified from trading45,963 5,963 7,355 7,355
Total available-for-sale securities $ 84,841 $ 85,070 $ 75,121 $ 75,407
Held-to-maturity securities2
Government and government-related securities $ 9,024 $ 9,244 $ 6,622 $ 6,675
Other debt securities 638 653 2,885 2,887
Total held-to-maturity securities $ 9,662 $ 9,897 $ 9,507 $ 9,562
Securities purchased under reverse repurchase agreements $ 32,948 $ 32,948 $ 42,425 $ 42,425
Loans1,2 253,128 253,448 219,624 218,308
Customers’ liability under acceptances 9,946 9,946 11,040 11,040
Derivatives 49,445 49,445 83,548 83,548
Other assets 9,503 9,503 12,800 12,800
FINANCIAL LIABILITIES
Deposits $ 355,615 $ 358,696 $ 331,000 $ 333,080
Trading deposits 35,419 35,419 44,694 44,694
Acceptances 9,946 9,946 11,040 11,040
Obligations related to securities sold short 17,641 17,641 18,518 18,518
Obligations related to securities sold under repurchase agreements 16,472 16,472 18,654 18,654
Derivatives 48,152 48,152 74,473 74,473
Other liabilities 14,717 14,717 14,085 14,085
Subordinated notes and debentures 12,383 13,087 12,436 11,609
Liability for preferred shares and capital trust securities 1,445 1,484 1,444 1,472
1Trading securities and loans include securities and loans, respectively designated
as trading under the fair value option.
2As a result of the 2009 Amendments to CICA Handbook Section 3855, certain
available-for-sale and held-to-maturity securities were reclassified to loans, and
certain loans are classified as trading loans, as described in Note 1a).
3As at October 31, 2009, equity securities in the available-for-sale portfolio with
a carrying value of $2,242 million (2008 – $1,504 million) do not have quoted
market prices and are carried at cost. The fair value of these equity securities
was $2,471 million (2008 – $1,790 million) and is included in the table above.
4Includes fair value of government and government-insured securities as at
October 31, 2009, of $38 million (2008 – $41 million) and other debt securities
of $5,925 million (2008 – $7,314 million).
Management validates that the estimates of fair value are reasonable
using a process of obtaining multiple quotes of external market prices
and inputs, consistent application of valuation models over a period
of time, and the controls and processes over the valuation process. The
valuations are also validated by past experience and through the actual
cash settlement of contracts.
CICA Handbook Section 3862 requires disclosure of a three-level
hierarchy for fair value measurements based upon transparency of
inputs to the valuation of an asset or liability as of the measurement
date. The three levels are defined as follows:
Level 1: Fair value is based on quoted market prices in active markets
for identical assets or liabilities. Level 1 assets and liabilities generally
include debt and equity securities and derivative contracts that are
traded in an active exchange market, as well as certain Canadian and
U.S. Treasury bills and other Canadian and U.S. Government and
agency mortgage-backed securities that are highly liquid and are
actively traded in OTC markets.
Level 2: Fair value is based on observable inputs other than Level 1
prices, such as quoted market prices for similar (but not identical) assets
or liabilities in active markets, quoted market prices for identical assets
or liabilities in markets that are not active, and other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. Level 2 assets and
liabilities include debt securities with quoted prices that are traded less
frequently than exchange-traded instruments and derivative contracts
whose value is determined using valuation techniques with inputs that
are observable in the market or can be derived principally from or
corroborated by observable market data. This category generally
includes Canadian and U.S. Government securities, Canadian and U.S.
agency mortgage-backed debt securities, corporate debt securities,
certain derivative contracts and certain trading deposits.
Level 3: Fair value is based on non-observable inputs that are supported
by little or no market activity and that are significant to the fair value
of the assets or liabilities. Financial instruments classified within Level 3
of the fair value hierarchy are initially fair valued at their transaction
price, which is considered the best estimate of fair value. After initial
measurement, the fair value of Level 3 assets and liabilities is deter-
mined using valuation models, discounted cash flow methodologies,
or similar techniques. This category generally includes retained inter-
ests and certain derivative contracts.