How the Bank reports
The Bank prepares its financial statements in accordance with Canadian generally accepted accounting principles (GAAP), which are presented on pages 54 to 90 of this Annual Report. The Bank refers to results prepared in accordance with GAAP as the “reported basis”.
The Bank also utilizes the “operating cash basis” to assess each of its businesses and to measure overall Bank performance against goals. The calculation of operating cash basis begins with the reported GAAP results and then excludes special items and the non-cash charge for intangible amortization and, prior to 2002, non-cash amortization of goodwill. There were no special items in fiscal 2003. For fiscal 2002, the only special item excluded was a gain on sale of the Bank’s mutual fund record keeping and custody business in the first and third quarter of 2002, respectively. The Bank views special items as transactions that are not part of the Bank’s normal business operations and are therefore not indicative of underlying trends. The majority of the Bank’s non-cash intangible amortization charge relates to the Canada Trust acquisition in fiscal 2000. The Bank excludes amortization of intangibles as it is a non-cash charge and this approach ensures comparable treatment between periods and comparable treatment with goodwill. Consequently, the Bank believes that the operating cash basis provides the reader with an understanding of the Bank’s results that can be consistently tracked from period to period.
The goodwill impairment recorded by the Bank in fiscal 2003 relating to the international unit of its wealth management business and its U.S. equity options business was not considered a special item for exclusion when determining the operating cash basis results. The restructuring charges recognized by the Bank in fiscal 2003, related to the international unit of its wealth management business and its U.S. equity options business, were not considered special items given that they were incurred as part of the rationalization of the existing businesses.
The reversal of general allowances in fiscal 2003 was not considered a special item given that the Bank views the reversal as potentially recurring. However, it may also be possible that in the future it may be necessary to increase general allowances.
As explained, operating cash basis results are different from reported results determined in accordance with GAAP. The term “operating cash basis results” is not a defined term under GAAP, and therefore may not be comparable to similar terms used by other issuers. The table below provides a reconciliation between the Bank’s operating cash basis results and its reported results.
Reconciliation of operating cash basis results to reported results