TD Bank 2009 Annual Report Download - page 98

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS94
SPECIFIC ACCOUNTING POLICIES
To facilitate a better understanding of the Bank’s Consolidated Finan-
cial Statements, significant accounting policies are disclosed in the
notes, where applicable, with related financial disclosures. A listing of
all the notes is as follows:
Note Topic Page
2 Securities 96
3 Loans, Impaired Loans and Allowance for Credit Losses 99
4 Financial Instruments Designated as Trading under
the Fair Value Option 101
5 Loan Securitizations 102
6 Variable Interest Entities 104
7 Acquisitions, Dispositions and Other 105
8 Derivative Financial Instruments 106
9 Goodwill and Other Intangibles 113
10 Land, Buildings and Equipment 114
11 Other Assets 114
12 Deposits 114
13 Other Liabilities 115
14 Subordinated Notes and Debentures 116
15 Liability for Preferred Shares 117
16 Capital Trust Securities 117
17 Non-Controlling Interests in Subsidiaries 118
18 Share Capital 118
19 Regulatory Capital 121
20 Accumulated Other Comprehensive Income (loss) 121
21 Trading-Related Income 122
22 Insurance 122
23 Other Non-Interest Income 122
24 Stock-Based Compensation 123
25 Employee Future Benefits 125
26 Restructuring Costs 128
27 Other Non-Interest Expenses 129
28 Income Taxes 129
29 Earnings Per Share 130
30 Fair Value of Financial Instruments 131
31 Interest Rate Risk 135
32 Contingent Liabilities, Commitments, Pledged Assets,
Collateral and Guarantees 136
33 Credit Risk 137
34 Segmented Information 141
35 Related-Party Transactions 143
36 Risk Management 143
CHANGES IN ACCOUNTING POLICIES
Financial Instruments – Amendments
a) Debt Securities Classified as Loans and Loans
Classified as Trading
In August 2009, the Accounting Standards Board (AcSB) of the Canadian
Institute of Chartered Accountants (CICA) amended CICA Handbook
Section 3855, Financial Instruments – Recognition and Measurement
and CICA Handbook Section 3025, Impaired Loans (the 2009 Amend-
ments). The 2009 Amendments changed the definition of a loan such
that certain debt securities may be classified as loans if they do not
have a quoted price in an active market and it is not the Bank’s intent
to sell the securities immediately or in the near term. Debt securities
classified as loans are assessed for impairment using the incurred credit
loss model of CICA Handbook Section 3025. Under this model, the
carrying value of a loan is reduced to its estimated realizable amount
when it is determined that it is impaired. Loan impairment accounting
requirements are also applied to held-to-maturity financial assets as
a result of the 2009 Amendments. Debt securities that are classified
as available-for-sale continue to be written down to their fair value
through the Consolidated Statement of Income when the impairment
is considered to be other than temporary; however, the impairment
loss can be reversed if the fair value subsequently increases and the
increase can be objectively related to an event occurring after the
impairment loss was recognized.
As a result of the 2009 Amendments, the Bank reclassified certain
debt securities from available-for-sale to loans effective November 1,
2008 at their amortized cost as of that date. To be eligible for reclassi-
fication, the debt securities had to meet the amended definition of
a loan on November 1, 2008. Prior to the reclassification, the debt
securities were accounted for at fair value with changes in fair value
recorded in other comprehensive income. After the reclassification,
they are accounted for at amortized cost using the effective interest
rate method.
In addition, the Bank also reclassified held-to-maturity securities
that did not have a quoted price in an active market to loans as
required by the 2009 Amendments. The securities were accounted
for at amortized cost both before and after the reclassification.
The following table shows carrying values of the reclassified debt
securities as at October 31, 2008 and November 1, 2008.
Debt Securities Reclassified to Loans
(millions of Canadian dollars) Amount
Available-for-sale debt securities reclassified to loans1
Non-agency collateralized mortgage obligation portfolio $ 8,435
Corporate and other debt 277
8,712
Held-to-maturity debt securities reclassified to loans
U.S. Federal, state, and municipal government
and agencies debt 69
Other OECD government guaranteed debt 459
Other debt securities 1,424
1,952
Total carrying value of debt securities reclassified
to loans on October 31, 2008 10,664
Transition adjustment for change in measurement basis,
pre tax2895
Gross amount of debt securities classified as loans
on November 1, 2008 11,559
Transition adjustment for recognition of a general
allowance, pre tax3(95)
Net carrying value of debt securities classified as loans
on November 1, 2008 $ 11,464
1
Prior to the reclassification, the debt securities were accounted for at fair value
with changes in fair value recorded in other comprehensive income. After the
reclassification, the debt securities are accounted for at amortized cost.
2Includes $563 million after tax.
3Includes $59 million after tax.