TD Bank 2009 Annual Report Download - page 97

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS 93
BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements and accounting
principles followed by The Toronto-Dominion Bank (the Bank), including
the accounting requirements of the Office of the Superintendent of
Financial Institutions Canada (OSFI), conform with Canadian generally
accepted accounting principles (GAAP).
Certain disclosures are included in the Management’s Discussion and
Analysis (MD&A) as permitted by GAAP and are discussed in the Manag-
ing
Risk section of the 2009 MD&A. These disclosures are shaded in the
2009 MD&A and form an integral part of the 2009 Consolidated Finan-
cial
Statements. The 2009 Consolidated Financial Statements include
all adjustments that are, in the opinion of management, necessary for
a fair presentation of the results for the periods presented. Note that
certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
The significant accounting policies and practices followed by the
Bank are:
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the assets, liabilities,
results of operations, and cash flows of the Bank and its subsidiaries
and certain variable interest entities (VIEs) after elimination of inter-
company transactions and balances. Subsidiaries are corporations or
other legal entities controlled by the Bank. The Bank uses the purchase
method to account for all business acquisitions.
When the Bank does not own all of the equity of the subsidiary, the
minority shareholders’ interest is disclosed in the Consolidated Balance
Sheet as non-controlling interest in subsidiaries and the income accruing
to the minority interest holders, net of tax, is disclosed as a separate
line item in the Consolidated Statement of Income.
The proportionate consolidation method is used to account for
investments in which the Bank exercises joint control. Only the Bank’s
specific pro-rata share of assets, liabilities, income, and expenses
is consolidated.
Entities over which the Bank has significant influence are accounted
for using the equity method of accounting. The Bank’s share of earnings,
gains and losses realized on disposition, and write-downs to reflect
other-than-temporary impairment in the value of such entities is reported
in the Consolidated Statement of Income. The Bank’s equity share in
TD Ameritrade’s earnings is reported on a one month lag basis.
USE OF ESTIMATES IN THE PREPARATION OF
FINANCIAL STATEMENTS
The preparation of the Consolidated Financial Statements requires
management to make estimates and assumptions based on information
available as at the date of the financial statements. Actual results
could materially differ from those estimates. Loan losses, fair value
of certain financial instruments, consolidation of VIEs, income taxes,
securitizations, valuation of goodwill and other intangibles, pensions
and post-retirement benefits and contingent liabilities are areas
where management makes significant estimates and assumptions
in determining the amounts to be recorded in the Consolidated
Financial Statements.
TRANSLATION OF FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies
are translated at exchange rates prevailing at the balance sheet date
and non-monetary assets and liabilities are translated at historical
exchange rates. Foreign currency income and expenses are translated
at average exchange rates prevailing throughout the year. Unrealized
translation gains and losses and all realized gains and losses are
included in other income except for available-for-sale securities where
unrealized translation gains and losses are recorded in other compre-
hensive income until the asset is sold or becomes impaired.
For self-sustaining foreign currency denominated operations, all
assets and liabilities are translated at exchange rates in effect at the
balance sheet date and all income and expenses are translated at
average exchange rates for the year. Unrealized translation gains and
losses relating to the Bank’s self-sustaining operations, net of any
offsetting gains or losses arising from hedges of these positions, and
applicable income taxes, are included in other comprehensive income
in shareholders’ equity. The accumulated translation gains or losses
are included in other income either on disposal of the investments
or upon the reduction in the equity of the investments as a result of
capital transactions such as dividend distributions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and amounts due from
banks which are issued by investment grade financial institutions.
REVENUE RECOGNITION
Investment and securities services include asset management, admin-
istration and commission fees, and investment banking fees. Asset
management, administration and commissions fees from investment
management and related services, custody and institutional trust
services and brokerage services are all recognized over the period in
which the related service is rendered. Investment banking fees include
advisory fees, which are recognized as income when earned, and
underwriting fees, net of syndicate expenses, which are recognized as
income when the Bank has rendered all services to the issuer and is
entitled to collect the fee.
Card services include interchange income from credit and debit
cards and annual fees. Fee income, including service charges, is recog-
nized as earned, except for annual fees, which are recognized over a
12-month period.
Notes to Consolidated Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1