TD Bank 2011 Annual Report Download - page 96

TD BANK GROUP ANNUAL REPORT 2011 FINANCIAL RESULTS94
The fair values in the following table exclude the value of assets that
are not financial instruments, such as land, buildings and equipment,
as well as goodwill and other intangible assets, including customer
relationships, which are of significant value to the Bank.
Financial Assets and Liabilities
(millions of Canadian dollars) 2011 2010
Carrying value Fair value Carrying value Fair value
FINANCIAL ASSETS
Cash and due from banks $ 3,096 $ 3,096 $ 2,574 $ 2,574
Interest-bearing deposits with banks 21,015 21,015 19,136 19,136
Trading securities1
Government and government-related securities $ 29,880 $ 29,880 $ 23,921 $ 23,921
Other debt securities 10,045 10,045 9,206 9,206
Equity securities 27,065 27,065 24,978 24,978
Retained interests 1,289 1,289 1,437 1,437
Total trading securities $ 68,279 $ 68,279 $ 59,542 $ 59,542
Available-for-sale securities
Government and government-related securities $ 83,064 $ 83,064 $ 59,761 $ 59,761
Other debt securities 30,277 30,277 36,361 36,361
Equity securities 1,942 2,058 2,005 2,173
Debt securities reclassified from trading2 1,986 1,986 4,228 4,228
Total available-for-sale securities3 $ 117,269 $ 117,385 $ 102,355 $ 102,523
Held-to-maturity securities
Government and government-related securities $ 6,488 $ 6,627 $ 9,119 $ 9,330
Other debt securities 502 510 596 607
Total held-to-maturity securities $ 6,990 $ 7,137 $ 9,715 $ 9,937
Securities purchased under reverse repurchase agreements $ 53,599 $ 53,599 $ 50,658 $ 50,658
Loans1 303,495 306,957 269,853 271,822
Customers’ liability under acceptances 7,815 7,815 7,757 7,757
Derivatives 60,420 60,420 51,675 51,675
Other assets 12,648 12,648 14,155 14,155
FINANCIAL LIABILITIES
Deposits $ 451,501 $ 453,601 $ 406,980 $ 409,067
Trading deposits 29,613 29,613 22,991 22,991
Acceptances 7,815 7,815 7,757 7,757
Obligations related to securities sold short 24,434 24,434 23,695 23,695
Obligations related to securities sold under repurchase agreements 25,625 25,625 25,426 25,426
Derivatives 63,217 63,217 53,685 53,685
Other liabilities 16,158 16,158 15,905 15,905
Subordinated notes and debentures 11,670 12,526 12,506 13,529
Liability for preferred shares and capital trust securities 32 53 582 613
1 Trading securities and loans include securities and loans, respectively designated
as trading under the fair value option.
2
Includes fair value of government and government-insured securities as at
October 31, 2011, of nil (2010 – $18 million) and other debt securities of
$1,986 million (2010 – $4,210 million).
3 As at October 31, 2011, certain securities in the available-for-sale portfolio with a
carrying value of $1,742 million (2010 – $2,004 million) do not have quoted
market prices and are carried at cost. The fair value of these certain securities was
$1,858 million (2010 – $2,172 million) and is included in the table above.
Fair Value Hierarchy
CICA Handbook Section 3862 requires disclosure of a three-level hier-
archy 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. Level 2 assets and liabilities
generally include 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 determined
using valuation models, discounted cash flow methodologies, or similar
techniques. Level 3 assets and liabilities primarily include retained
interests in loan securitizations and certain derivative contracts.