TD Bank 2011 Annual Report Download - page 154

TD BANK GROUP ANNUAL REPORT 2011 FINANCIAL RESULTS152
h) Consolidation: Other Differences between Canadian GAAP
and IFRS
The control and consolidation of an entity is evaluated under Canadian
GAAP using two different models. The variable interest model applies
when an entity holds a variable interest in a variable interest entity
(VIE). If an entity is not a VIE, consolidation is assessed under the voting
interest model, where voting rights or governance provisions will
determine which party consolidates the entity. In addition, entities that
are structured to meet specific characteristics such as Qualifying Special
Purpose Entities (QSPE) are exempt from the consolidation guidance.
IFRS guidance on consolidation is based on the principles of control.
Control is defined as the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. The
power of control can be obvious, for example, through the holding of
a majority of voting rights. When control is not apparent, such as
when the entity is a SPE, consolidation is based on an overall assessment
of all the relevant facts, including an assessment of risks and rewards.
Typically, the party with the majority of rewards or exposure to the
residual risk must consolidate the entity. In contrast to Canadian
GAAP, there is no such concept as a QSPE.
Under IFRS, the Bank must consolidate certain entities that are not
consolidated under Canadian GAAP, including certain former QSPEs
and various capital structures. Consolidation of any previously uncon-
solidated entities have resulted in increased assets, liabilities, and
non-controlling interest, as disclosed in the table below.
Consolidation: Other Adjustments
(millions of Canadian dollars) As at
Nov. 1, 2010
Increase/(decrease) in assets:
Trading loans, securities and other $ (795)
Derivatives 15
Available-for-sale securities (5)
Loans – consumer instalment and other personal 6,554
Deferred tax assets 21
Other assets (9)
(Increase)/decrease in liabilities:
Derivatives 1
Deposits – banks 7
Deposits – business and government 2,100
Obligations related to securities sold short 4
Current tax payable 3
Other liabilities (5,889)
Subordinated notes and debentures 255
Liability for capital trust securities (2,344)
Increase/(decrease) in equity $ (82)
As noted in the table above, the total impact to the Bank’s opening
equity was a decrease of $82 million, comprised of a decrease to
contributed surplus of $1 million and a decrease to retained earnings
of $81 million.
i) Share-based Payments: Other Differences between Canadian
GAAP and IFRS
Under Canadian GAAP, the cost of share-based payments was recog-
nized from the date awards were granted over the service period
required for employees to become fully entitled to the award.
Under IFRS, the cost of share-based payments is recognized over the
period that an employee provides the service to earn the award. This
includes a period prior to the grant date where employees are consid-
ered to have provided service in respect of the awards during that
period. Under Canadian GAAP, the Bank did not recognize an expense
prior to the grant date.
The impact of this difference to the Bank’s IFRS opening Consolidated
Balance Sheet as at November 1, 2010 was an increase to deferred tax
assets of $44 million, an increase to other liabilities of $151 million, and
a decrease to opening equity of $107 million. The total impact to the
Bank’s opening equity comprised of an increase to contributed surplus
of $16 million, a decrease to accumulated other comprehensive income
of $10 million and a decrease to retained earnings of $113 million.
Under IFRS, a first-time adopter is encouraged but not required to
apply IFRS 2, Share-based Payment, to liabilities arising from share-
based payment transactions that were settled before the transition
date and to equity instruments that were unvested at transition. The
Bank has taken this exemption and has not applied IFRS 2, to liabilities
settled prior to the transition date or to equity instruments which were
vested at November 1, 2010.
j) Income Taxes: Other Differences between Canadian GAAP
and IFRS
Income tax related adjustments result from differences in accounting for
income taxes between Canadian GAAP and IFRS income tax accounting
standards as well as the tax impact of all other transitional adjustments.
i) Adjustments Related to Income Tax Accounting Standard Differences
Under Canadian GAAP, the deferred tax liability related to the Bank’s
investments in associates is calculated based on the presumption
that temporary differences will reverse through disposition unless there
is persuasive evidence that it will be reversed through the receipt
of dividends.
Under IFRS, unless there is evidence that the investment will be
disposed of in the foreseeable future, the deferred tax liability on such
temporary differences is calculated on the basis that it will be recov-
ered through the receipt of dividends.
The impact of all income tax accounting standard differences to the
Bank’s Consolidated Balance Sheet as at November 1, 2010 was an
increase to deferred tax assets of $1 million, an increase to deferred
tax liabilities of $73 million, and a decrease to opening equity of
$72 million. The total impact to the Bank’s equity comprised of an
increase to accumulated other comprehensive income of $6 million
and a decrease to retained earnings of $78 million.
ii) Income Tax Effect of Other Adjustments between Canadian GAAP
and IFRS
Differences for income taxes include the effect of recording, where
applicable, the deferred tax effect on transition adjustments between
Canadian GAAP and IFRS. The impact to the Bank’s Consolidated
Balance Sheet is disclosed with the related IFRS difference throughout
this note.