TD Bank 2014 Annual Report Download - page 155

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS 153
Other Liabilities Designated at Fair Value through Profit or Loss
Certain deposits and loan commitments issued to customers to
provide a mortgage at a fixed rate have been designated at fair value
through profit or loss. These deposits and commitments are economi-
cally hedged with derivatives and other financial instruments where
the changes in fair value are recognized in non-interest income. The
designation of these deposits and loan commitments at fair value
through profit or loss eliminates an accounting mismatch that would
otherwise arise.
The amount the Bank would be contractually required to pay at
maturity for the deposits designated at fair value through profit or loss
was $48 million less than the carrying amount as at October 31, 2014
(October 31, 2013 – nil). As at October 31, 2014, the fair value of
deposits designated at fair value through profit or loss includes
$5 million of the Bank’s own credit risk (October 31, 2013 – nil).
Due to the short-term nature of these loan commitments, changes
in the Bank’s own credit do not have a significant impact on the
determination of fair value.
Income (Loss) from Changes in Fair Value of Financial Assets and
Liabilities Designated at Fair Value through Profit or Loss
During the year ended October 31, 2014, the income (loss) representing
net changes in the fair value of financial assets and liabilities designated at
fair value through profit or loss was $55 million (2013 – $(129) million).
Fair Value Hierarchy for Assets and Liabilities not carried
at Fair Value
The following table presents the levels within the fair value hierarchy
for each of the assets and liabilities not carried at fair value as at
October 31, 2014, but for which fair value is disclosed.
Securities Designated at Fair Value through Profit or Loss
Certain securities that support insurance reserves within certain of
the Bank’s insurance subsidiaries have been designated at fair value
through profit or loss. The actuarial valuation of the insurance reserve
is measured using a discount factor which is based on the yield of
the supporting invested assets, with changes in the discount factor
being recognized in the Consolidated Statement of Income. By desig-
nating the securities at fair value through profit or loss, the unrealized
gain or loss on the securities is recognized in the Consolidated
Statement of Income in the same period as a portion of the income
or loss resulting from changes to the discount rate used to value
the insurance liabilities.
In addition, certain government and government-insured securities
have been combined with derivatives to form economic hedging rela-
tionships. These securities are being held as part of the Bank’s overall
interest rate risk management strategy and have been designated at
fair value through profit or loss. The derivatives are carried at fair
value, with the change in fair value recognized in non-interest income.
Securitization Liabilities at Fair Value
Securitization liabilities at fair value include securitization liabilities
classified as trading and those designated at fair value through profit
or loss. The fair value of a financial liability incorporates the credit risk
of that financial liability. The holders of the securitization liabilities are
not exposed to credit risk of the Bank and accordingly, changes in the
Bank’s own credit does not impact the determination of fair value.
The amount that the Bank would be contractually required to pay
at maturity for all securitization liabilities designated at fair value
through profit or loss was $8 million less than the carrying amount as
at October 31, 2014 (October 31, 2013 – $123 million less than the
carrying amount).
Fair Value Hierarchy for Assets and Liabilities not carried at Fair Value
(millions of Canadian dollars) As at
October 31, 2014
Level 1 Level 2 Level 3 Total
ASSETS
Cash and due from banks $ 2,781 $ – $ – $ 2,781
Interest-bearing deposits with banks – 43,773 – 43,773
Held-to-maturity securities
Government and government-related securities – 34,371 – 34,371
Other debt securities – 22,955 – 22,955
Total held-to-maturity securities – 57,326 – 57,326
Securities purchased under reverse repurchase agreements – 66,877 – 66,877
Loans – 189,331 290,983 480,314
Debt securities classified as loans – 984 1,746 2,730
Total Loans – 190,315 292,729 483,044
Other
Customers’ liability under acceptances – 13,080 – 13,080
Amounts receivables from brokers, dealers, and clients – 9,319 – 9,319
Other assets – 3,121 469 3,590
Total Assets with fair value disclosures $ 2,781 $ 383,811 $ 293,198 $ 679,790
LIABILITIES
Deposits $ – $ 601,705 $ – $ 601,705
Acceptances – 13,080 – 13,080
Obligations related to securities sold under repurchase agreements – 37,345 – 37,345
Securitization liabilities at amortized cost – 25,271 – 25,271
Amounts payable to brokers, dealers, and clients – 10,384 – 10,384
Other liabilities – 9,204 754 9,958
Subordinated notes and debentures – 8,358 – 8,358
Total liabilities with fair value disclosures $ – $ 705,347 $ 754 $ 706,101