TD Bank 2014 Annual Report Download - page 106

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS104
ACCOUNTING STANDARDS AND POLICIES
Current and Future Changes in Accounting Policies
Joint Arrangements
IFRS 11 replaces guidance previously provided in IAS 31 Interests
in Joint Ventures (IAS 31) and SIC-13 Jointly Controlled Entities –
Non-Monetary Contributions by Venturers. The new standard outlines
the principles relating to the accounting for joint arrangements which
are arrangements where two or more parties have joint control. It also
requires use of the equity method of accounting when accounting for
joint ventures as compared to proportionate consolidation which was
the accounting policy choice adopted by the Bank under IAS 31. On
November 1, 2012, the transition date, the Bank’s adoption of IFRS 11
did not result in a material impact on the financial position, cash flows,
or earnings of the Bank.
Disclosure of Interests in Other Entities
IFRS 12 requires enhanced disclosures about both consolidated and
unconsolidated entities in which the Bank has involvement. The objec-
tive of IFRS 12 is to present information so that financial statement
users may evaluate the basis of control; any restrictions on consoli-
dated assets and liabilities; risk exposures arising from involvement
with unconsolidated structured entities; non-controlling interest hold-
ers’ involvement in the activities of consolidated entities; and the
Bank’s exposure to associates and joint ventures. The adoption of IFRS
12 did not result in a material impact on the Consolidated Financial
Statements of the Bank; however, the standard resulted in additional
disclosures, which are included in Note 10 on a retrospective basis.
Fair Value Measurement
IFRS 13, Fair Value Measurement (IFRS 13), provides a single framework
for fair value measurement and applies when other IFRS require or
permit fair value measurements or disclosures. The standard provides
guidance on measuring fair value using the assumptions that market
participants would use when pricing the asset or liability under current
market conditions. IFRS 13 is effective for annual periods beginning on
or after January 1, 2013, which was November 1, 2013 for the Bank,
and is applied prospectively. This new standard did not have a material
impact on the financial position, cash flows, or earnings of the Bank;
however the standard resulted in additional fair value disclosures
which are disclosed in Note 5 of the Consolidated Financial Statements
on a prospective basis.
Employee Benefits
The amendments to IAS 19, Employee Benefits (IAS 19), issued in June
2011, eliminate the corridor approach for actuarial gains and losses,
requiring the Bank to recognize immediately all actuarial gains and
losses in other comprehensive income. Under the amended standard,
the Bank has elected to reclassify cumulative actuarial gains and losses
to retained earnings. Net interest expense or income is calculated by
applying the discount rate to the net defined benefit asset or liability,
and is recorded on the Consolidated Statement of Income, along with
present and past service costs for the period. Plan amendment costs
are recognized in the period of a plan amendment, irrespective of its
vested status. Curtailments and settlements are recognized in income
by the Bank when the curtailment or settlement occurs. A curtailment
occurs when there is a significant reduction in the number of employ-
ees covered by the plan. A settlement occurs when the Bank enters
into a transaction that eliminates all further legal or constructive obli-
gation for part or all of the benefits provided under a defined benefit
plan. Furthermore, a termination benefit obligation is recognized when
the Bank can no longer withdraw the offer of the termination benefit,
or when it recognizes related restructuring costs.
CURRENT CHANGES IN ACCOUNTING POLICY
The following new and amended standards have been adopted
by the Bank.
Consolidation
The following new and amended guidance relates to consolidated
financial statements:
• IFRS 10, Consolidated Financial Statements (IFRS 10), which replaces
IAS 27, Consolidated and Separate Financial Statements (IAS 27),
and SIC-12, Consolidation – Special-Purpose Entities (SIC-12);
• IFRS 11, Joint Arrangements (IFRS 11); and
• IFRS 12, Disclosure of Interests in Other Entities (IFRS 12).
The Bank also adopted related amendments to IFRS 10 and any
conforming changes to related standards.
The standards and amendments resulted in a revised definition of
control that applies to all entities. Each of the above standards is
effective for annual periods beginning on or after January 1, 2013,
which was November 1, 2013, for the Bank, and have been applied
retrospectively, allowing for certain practical exceptions and transition
relief. In order to adopt the above standards the Bank reassessed its
consolidation analyses for all of its investees, including but not limited
to, its subsidiaries, associates, joint ventures, structured entities such
as special purpose entities (SPEs) and its involvement with other third
party entities.
Consolidated Financial Statements
The Bank consolidates an entity as a result of controlling the entity,
based on the following criteria:
• The Bank has the power to direct the activities of the entity which
have the most significant impact on the entity’s risks and/or returns;
• The Bank is exposed to significant risks and/or returns arising from
the entity; and
• The Bank is able to use its power to affect the risks and/or returns
to which it is exposed.
When assessing whether the Bank controls an entity, the entity’s
purpose and design are considered in order to determine the activities
which most significantly impact the entity’s risks and/or returns.
On November 1, 2012, the transition date, the Bank’s adoption of
IFRS 10 resulted in the deconsolidation of TD Capital Trust IV (Trust IV)
which was previously consolidated by the Bank. Upon deconsolidation
of Trust IV, the TD Capital Trust IV Notes (TD CaTS IV Notes) issued
by Trust IV were removed from the Bank’s Consolidated Financial
Statements. This resulted in a decrease to liabilities related to capital
trust securities of $1.75 billion which was replaced with an equivalent
amount of deposit note liabilities issued by the Bank to Trust IV.
The impact to the Bank’s opening retained earnings was not signifi-
cant. Other than the deconsolidation of Trust IV, IFRS 10 did not result
in a material impact on the financial position, cash flows, or earnings
of the Bank.