TD Bank 2012 Annual Report Download - page 183

TD BANK GROUP ANNUAL REPORT 2012 FINANCIAL RESULTS 181
(c) Employee Benefits
(i) Employee Benefits: Elective Exemption
The Bank has elected to recognize unamortized actuarial gains or losses
in its IFRS opening retained earnings. The impact of this election to
the Bank’s IFRS opening Consolidated Balance Sheet as at November 1,
2010 was a decrease to other assets of $933 million, an increase
to deferred tax assets of $309 million, an increase to other liabilities
of $196 million, and a decrease to opening retained earnings of
$820 million.
(ii) Employee Benefits: Other Differences between Canadian GAAP
and IFRS
Measurement Date
Under Canadian GAAP, the defined benefit obligation and plan assets
may be measured up to three months prior to the date of the financial
statements as long as the measurement date is applied consistently.
Under Canadian GAAP, the Bank measured the obligation and assets
of its principal pension and non-pension post-retirement benefit plans
as at July 31.
IFRS requires that valuations be performed with sufficient regularity
such that the amounts recognized in the financial statements do not
differ materially from amounts that would be determined at the end of
the reporting period. Under IFRS, the Bank will measure the assets and
obligations of all defined benefit plans as at October 31.
Defined Benefit Plans – Plan Amendment Costs
Canadian GAAP does not differentiate between accounting for the
vested and unvested cost of plan amendments, deferring and amortiz-
ing both over the expected average remaining service life of active
plan members.
Under IFRS, the cost of plan amendments is recognized immediately
in income if it relates to vested benefits; otherwise, they are recognized
over the remaining vesting period.
Defined Benefit Plans – Asset Ceiling Test
Under Canadian GAAP, when a defined benefit plan gives rise to a
prepaid pension asset, a valuation allowance is recognized for any
excess of the prepaid pension asset over the expected future benefits
expected to be realized by the Bank.
Under IFRS, the prepaid pension asset is subject to a ceiling which
limits the asset recognized on the Consolidated Balance Sheet to the
amount that is recoverable through refunds of contributions or future
contribution holidays.
In addition, under Canadian GAAP, the Bank was not required to
recognize regulatory funding deficits. Under IFRS, the Bank is required
to record a liability equal to the present value of all future cash
payments required to eliminate any regulatory funding deficits related
to its defined benefit plans.
Defined Benefit Plans – Attributing Benefits to Periods of Service
Under Canadian GAAP, for a defined benefit plan other than a pension
plan, the obligation for employee future benefits should be attributed
on a straight-line basis to each year of service in the attribution period
unless the plan formula attributes a significantly higher level of benefits
to employees’ early years of service. Under those circumstances, the
obligation should be attributed based on the plan’s benefit formula.
IFRS requires that benefits be attributed to periods of service either
under the plan benefit formula or on a straight-line basis from the date
when service first leads to benefits to the date when further service
will lead to no material amount of further benefits, other than from
further salary increases. For the Bank’s principal non-pension post-
retirement plan, benefits are not earned until certain criteria are met.
As a result, the attribution period will be shorter under IFRS, resulting
in a reduction in the accrued benefit liability on transition to IFRS.
The impact of these other employee benefit differences between
Canadian GAAP and IFRS to the Bank’s IFRS opening Consolidated
Balance Sheet as at November 1, 2010 was a decrease to other assets
of $95 million, an increase to deferred tax assets of $26 million, an
increase to other liabilities of $8 million, and a decrease to opening
retained earnings of $77 million.
(d) Business Combinations: Elective Exemption
As permitted under IFRS transition rules, the Bank has applied IFRS 3,
Business Combinations (IFRS 3) (revised 2008), to all business combina-
tions occurring on or after January 1, 2007. Certain differences exist
between IFRS and Canadian GAAP in the determination of the purchase
price allocation. The most significant differences are described below.
Under Canadian GAAP, an investment in a subsidiary which is
acquired through two or more purchases is commonly referred to as
a “step acquisition”. Each transaction is accounted for as a step-by-
step purchase, and is recognized at the fair value of the net assets
acquired at each step. Under IFRS, the accounting for step acquisitions
differs depending on whether a change in control occurs. If a change
in control occurs, the acquirer remeasures any previously held equity
investment at its acquisition-date fair value and recognizes any
resulting gain or loss in the Consolidated Statement of Income. Any
transactions subsequent to obtaining control are recognized as
equity transactions.
Under Canadian GAAP, shares issued as consideration are measured
at the market price over a reasonable time period before and after the
date the terms of the business combination are agreed upon and
announced. Under IFRS, shares issued as consideration are measured
at their market price on the closing date of the acquisition.
Under Canadian GAAP, an acquirer’s restructuring costs to exit an
activity or to involuntarily terminate or relocate employees are recog-
nized as a liability in the purchase price allocation. Under IFRS, these
costs are generally expensed as incurred and not included in the
purchase price allocation.
Under Canadian GAAP, costs directly related to the acquisition (i.e.,
finders fees, advisory, legal, etc.) are included in the purchase price
allocation. Under IFRS, these costs are expensed as incurred and not
included in the purchase price allocation.
Under Canadian GAAP, contingent consideration is recorded when
the amount can be reasonably estimated at the date of acquisition and
the outcome is determinable beyond reasonable doubt. Under IFRS,
contingent consideration is recognized immediately in the purchase
price equation at fair value and marked to market as events and
circumstances change in the Consolidated Statement of Income.
The impact of the differences between Canadian GAAP and IFRS to
the Bank’s IFRS opening Consolidated Balance Sheet is disclosed in
the table below.
Business Combinations: Elective Exemption
(millions of Canadian dollars) November 1, 2010
Increase/(decrease) in assets:
Available-for-sale securities $ (1)
Goodwill (2,147)
Loans – residential mortgages 22
Intangibles (289)
Land, buildings, equipment, and other depreciable assets 2
Deferred tax assets (12)
Other assets 104
(Increase)/decrease in liabilities:
Deferred tax liabilities 102
Other liabilities 37
Subordinated notes and debentures 2
Increase/(decrease) in equity $ (2,180)
The total impact of business combination elections to the Bank’s
IFRS opening equity was a decrease of $2,180 million, comprised of
a decrease to common shares of $926 million, a decrease to contrib-
uted surplus of $85 million and a decrease to retained earnings
of $1,169 million.