TD Bank 2014 Annual Report Download - page 142

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS140
CURRENT AND FUTURE CHANGES IN ACCOUNTING POLICIES
NOTE 4
users may evaluate the basis of control; any restrictions on consolidated
assets and liabilities; risk exposures arising from involvement with
unconsolidated structured entities; non-controlling interest holders’
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 frame-
work 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 earn-
ings 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 employees covered by the plan. A settlement occurs
when the Bank enters into a transaction that eliminates all further
legal or constructive obligation 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.
The amendments to IAS 19 are effective for annual periods begin-
ning on or after January 1, 2013, which was November 1, 2013, for the
Bank, and have been applied retrospectively. On November 1, 2011,
the transition date, the amendments resulted in an increase to deferred
tax assets of $74 million, a decrease to other assets of $112 million, an
increase in other liabilities of $98 million, and a decrease to retained
earnings of $136 million.
Disclosures – Offsetting Financial Assets and Financial Liabilities
The amendments to IFRS 7, Financial Instruments: Disclosures (IFRS 7),
issued in December 2011 provide common disclosure requirements
intended to help investors and other users to better assess the effect
or potential effect of offsetting arrangements on a company’s financial
position. While the IFRS 7 amendments will result in additional
disclosures, the amendments did not have a material impact on the
Consolidated Financial Statements of the Bank. The IFRS 7 amendments
are effective for annual periods beginning on or after January 1, 2013,
which was November 1, 2013, for the Bank. The disclosures required
by the IFRS 7 amendments have been presented on a retrospective
basis by the Bank as at October 31, 2014. Refer to Note 6 for the
disclosures required by the IFRS 7 amendments.
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 State-
ments. 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 significant.
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.
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
objective of IFRS 12 is to present information so that financial statement