TD Bank 2011 Annual Report Download - page 92

TD BANK GROUP ANNUAL REPORT 2011 FINANCIAL RESULTS90
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1
Notes to Consolidated Financial Statements
BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements and accounting
principles followed by The Toronto-Dominion Bank and its subsidiaries
(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
Managing Risk section of the 2011 MD&A. These disclosures are
shaded in the 2011 MD&A and form an integral part of the 2011
Consolidated Financial Statements. The 2011 Consolidated Financial
Statements include all adjustments that are, in the opinion of manage-
ment, necessary for a fair presentation of results for the periods
presented. 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. VIEs are described in
Note 6. 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 accru-
ing to the minority interest holders, net of tax, is disclosed as a sepa-
rate 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-retire-
ment benefits, and contingent liabilities are areas where management
makes significant estimates that are dependent on significant assump-
tions 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 non-interest income except for available-for-sale securities
where unrealized translation gains and losses are recorded in other
comprehensive 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 aver-
age 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.
The accumulated translation gains or losses are included in non-interest
income either on disposal of the investments or upon the reduction in
the net investment as a result of capital transactions such as dividend
distributions. The investment balance of a foreign entity accounted for
by the equity method is translated into Canadian dollars, prior to the
application of the equity method, with any exchange gains or losses
recognized in non-interest income.
CASH AND DUE FROM BANKS
Cash and due from banks consist of cash and amounts due from banks
which are issued by investment grade financial institutions. These
amounts are due on demand or have an original maturity of three
months or less.
REVENUE RECOGNITION
Investment and securities services income include asset management
fees, administration and commission fees, and investment banking
fees. Asset management fees and administration and commission fees
include income from investment management and related services,
custody and institutional trust services and brokerage services, which
are recognized as income over the period in which the related service
is rendered. Investment banking fees including advisory fees, are
recognized as income when earned, and underwriting fees, net of
syndication expenses, are recognized as income when the Bank has
rendered all services to the issuer and is entitled to collect the fee.
Card services income including interchange income from credit
and debit cards and annual fees, are recognized as earned, except
for annual fees, which are recognized over a 12-month period.
Service charges and trust fee income are recognized as earned.