v3.22.2.2
Goodwill and other intangible assets
 12 Months Ended
Oct. 31, 2022
Text Block [Abstract]  
Goodwill and other intangible assets
Note 11    Goodwill and other intangible assets
Goodwill
 
   
   
For the year ended October 31, 2022
  
                     
(Millions of
Canadian dollars)
  
Canadian
Banking
    
Caribbean
Banking
    
Canadian
Wealth
Management
    
Global Asset
Management
    
U.S. Wealth
Management
(including
City National)
    
International
Wealth
Management
    
Insurance
    
Investor &
Treasury
Services
    
Capital
Markets
    
Total
  
Balance at beginning of period
  
$
2,557
 
  
$
1,600
 
  
$
577
 
  
$
1,964
 
  
$
2,768
 
  
$
115
 
  
$
112
 
  
$
148
 
  
$
1,013
 
  
$
10,854
 
Acquisitions
  
 
17
 
  
 
–
 
  
 
–
 
  
 
33
 
  
 
–
 
  
 
880
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
930
 
Dispositions
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
(19
) 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
(19
) 
Currency translations
  
 
–
 
  
 
159
 
  
 
12
 
  
 
(69
) 
  
 
278
 
  
 
47
 
  
 
–
 
  
 
(1
) 
  
 
86
 
  
 
512
 
Balance at end of period
  
$
2,574
 
  
$
1,759
 
  
$
589
 
  
$
1,928
 
  
$
3,027
 
  
$
1,042
 
  
$
112
 
  
$
147
 
  
$
1,099
 
  
$
12,277
 
                     
                                                             
   
    For the year ended October 31, 2021  
                     
(Millions of
Canadian dollars)
   Canadian
Banking		     Caribbean
Banking		     Canadian
Wealth
Management		     Global Asset
Management		     U.S. Wealth
Management
(including
City National)		     International
Wealth
Management		     Insurance     Investor &
Treasury
Services		     Capital
Markets		     Total  
Balance at beginning of period
   $ 2,557     $ 1,719     $ 587     $ 2,001     $ 2,978     $ 121     $ 112     $ 149     $ 1,078     $ 11,302  
Acquisitions
     –       –       –       –       –       –       –       –       –       –  
Dispositions
     –       (3 )      –       –       –       (4 )      –       –       –       (7 ) 
Currency translations
     –       (116 )      (10 )      (37 )      (210 )      (2 )      –       (1 )      (65 )      (441 ) 
Balance at end of period
   $ 2,557     $ 1,600     $ 577     $ 1,964     $ 2,768     $ 115     $ 112     $ 148     $ 1,013     $ 10,854  
We perform our annual impairment test by comparing the carrying amount of each CGU to its recoverable amount. The recoverable amount of a CGU is represented by its VIU, except in circumstances where the carrying amount of a CGU exceeds its VIU. In such cases, the greater of the CGU’s FVLCD and its VIU is the recoverable amount. Our annual impairment test is performed as at August 1. The impact of subsequent acquisitions has also been considered in our impairment test.
In our 2022 and 2021 annual impairment tests, the recoverable amounts of our Caribbean Banking and International Wealth Management CGUs were based on their FVLCD. The recoverable amounts of all other CGUs tested were based on their VIU.
Value in use
We calculate VIU using a five-year discounted cash flow method. Future cash flows are based on financial plans agreed by management, estimated based on forecast results, business initiatives, capital required to support future cash flows and returns to shareholders. Key drivers of future cash flows include net interest margins and average interest-earning assets. The values assigned to these drivers over the forecast period are based on past experience, external and internal economic forecasts, and management’s expectations of the impact of economic conditions on our financial results. Beyond the initial cash flow projection period, cash flows are assumed to increase at a constant rate using a nominal long-term growth rate (terminal growth rate). Terminal growth rates are based on the long-term steady state growth expectations in the countries within which the CGU operates. The discount rates used to determine the present value of each CGU’s projected future cash flows are based on the bank-wide cost of capital, adjusted for the risks to which each CGU is exposed.
CGU-specific
risks include: country risk, business/operational risk, geographic risk (including political risk, devaluation risk, and government regulation), currency risk, and price risk (including product pricing risk and inflation).
The estimation of VIU involves significant judgment in the determination of inputs to the discounted cash flow model and is most sensitive to changes in future cash flows, discount rates and terminal growth rates applied to cash flows beyond the forecast period. The sensitivity of the VIU to key inputs and assumptions used was tested by recalculating the recoverable amount using reasonably possible changes to those parameters. As at August 1, 2022, no reasonably possible change in an individual key input or assumption, as described, would result in a CGU’s carrying amount exceeding its recoverable amount based on VIU.
 
The terminal growth rates and
pre-tax
discount rates used in our discounted cash flow models are summarized below.
 
     As at      
   
August 1, 2022
          August 1, 2021  
           
    
Discount
rate
(1)
     
Terminal
growth
rate
           Discount
rate
(1)
      Terminal
growth
rate		  
Group of cash generating units
                                       
Canadian Banking
  
 
11.0%
 
   
 
3.0%
 
          9.4%        3.0%  
Caribbean Banking
  
 
12.6    
 
   
 
3.5    
 
          10.9            3.5      
Canadian Wealth Management
  
 
11.8    
 
   
 
3.0    
 
          10.5            3.0      
Global Asset Management
  
 
11.8    
 
   
 
3.0    
 
          10.5            3.0      
U.S. Wealth Management (including City National)
  
 
12.8    
 
   
 
3.0    
 
          11.1            3.0      
International Wealth Management
(2)
  
 
n.m.    
 
   
 
n.m.    
 
          n.m.            n.m.      
Insurance
  
 
11.6    
 
   
 
3.0    
 
          10.2            3.0      
Investor & Treasury Services
  
 
11.8    
 
   
 
3.0    
 
          9.9            3.0      
Capital Markets
  
 
12.4    
 
   
 
3.0    
 
  
 
      11.8            3.0      
 
(1)  
Pre-tax
discount rates are determined implicitly based on
post-tax
discount rates.
(2)   The recoverable amount for our International Wealth Management CGU is determined using a multiples-based approach.
n.m.
not meaningful
Fair value less costs of disposal – Caribbean Banking
As at August 1, 2022, the recoverable amount of our Caribbean Banking CGU, based on FVLCD, was 109% of its carrying amount (August 1, 2021 – 123%). We calculated FVLCD using a discounted cash flow method that projects future cash flows over a
5-year
period. Cash flows are based on management forecasts, adjusted to approximate the considerations of a prospective third-party buyer. Cash flows beyond the initial
5-year
period are assumed to increase at a constant rate using a nominal long-term growth rate. Future cash flows, terminal growth rates, and discount rates are based on the same factors noted above. The forecast future cash flows were discounted using a pre-tax rate of 12.6% (August 1, 2021 –
 
10.9%), reflecting a higher interest rate environment. This fair value measurement is categorized as level 3 in the fair value hierarchy as certain significant inputs are not observable. We use significant judgment to determine inputs to the discounted cash flow model, which is most sensitive to changes in future cash flows, discount rates and terminal growth rates.
We considered reasonably possible alternative scenarios, including market comparable transactions, which yielded valuations ranging from an immaterial deficit to an immaterial surplus. The sensitivity of the FVLCD to key inputs and assumptions was tested by recalculating the recoverable amount using reasonably possible change to those parameters. A 50 bps change in the terminal growth rate would increase and decrease the recoverable amount by $231 million and $203 million, respectively. A 50 bps increase in the discount rate would decrease the recoverable amount by $267 million. A reduction in the forecasted cash flows of 10% per annum would reduce the recoverable amount by $440 million. If future cash flows were reduced by 8%, the recoverable amount would approximate the carrying amount. Changes in these assumptions have been applied holding other individual factors constant.
However, changes in one factor may be magnified or offset by related changes in other assumptions as impacts to the recoverable amount are highly interdependent and changes in assumptions may not have a linear effect on the recoverable amount of the CGU. In aggregate, the range of reasonably possible outcomes would not materially affect the recoverable amount of the CGU.
Other intangible assets
 
   
   
For the year ended October 31, 2022
  
             
(Millions of Canadian dollars)
  
Internally
generated
software
    
Other
software
    
Core
deposit
intangibles
    
Customer
list and
relationships
    
In process
software
     
Total
  
Gross carrying amount
                                                 
Balance at beginning of period
  
$
4,886
 
  
$
894
 
  
$
1,474
 
  
$
1,414
 
  
$
1,236
 
   
$
9,904
 
Additions
  
 
25
 
  
 
16
 
  
 
–
 
  
 
–
 
  
 
1,256
 
   
 
1,297
 
Acquisition through business combination
  
 
–
 
  
 
14
 
  
 
–
 
  
 
1,292
 
  
 
148
 
   
 
1,454
 
Transfers
  
 
1,121
 
  
 
76
 
  
 
–
 
  
 
–
 
  
 
(1,197
)

   
 
–
 
Dispositions
  
 
(960
)
 
  
 
(111
)

  
 
–
 
  
 
(329
)

  
 
(5
)
 
   
 
(1,405
)
 
Impairment losses
  
 
(16
)

  
 
–
 
  
 
–
 
  
 
–
 
  
 
(11
)

   
 
(27
)
Currency translations
  
 
71
 
  
 
48
 
  
 
149
 
  
 
113
    
 
30
 
   
 
411
 
Other changes
  
 
(51
)

  
 
(29
)

  
 
7
 
  
 
(18
)

  
 
78
 
   
 
(13
)
Balance at end of period
  
$
5,076
 
  
$
908
 
  
$
1,630
 
  
$
2,472
 
  
$
1,535
 
   
$
11,621
 
Accumulated amortization
                                                 
Balance at beginning of period
  
$
(2,979
) 
  
$
(572
) 
  
$
(885
) 
  
$
(997
) 
  
$
–
 
   
$
(5,433
) 
Amortization charge for the year
  
 
(976
)

  
 
(137
)

  
 
(153
)

  
 
(103
)

  
 
–
 
   
 
(1,369
)
Dispositions
  
 
959
 
  
 
109
 
  
 
–
 
  
 
315
 
  
 
–
 
   
 
1,383
 
Impairment losses
  
 
9
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
   
 
9
 
Currency translations
  
 
(36
)

  
 
(31
)
 
  
 
(98
)
 
  
 
13
 
  
 
–
 
   
 
(152
)
Other changes
  
 
(8
)

  
 
19
 
  
 
(10
)
 
  
 
23
 
  
 
–
 
   
 
24
 
Balance at end of period
  
$
(3,031
) 
  
$
(612
) 
  
$
(1,146
) 
  
$
(749
) 
  
$
–
 
   
$
(5,538
) 
Net balance at end of period
  
$
2,045
 
  
$
296
 
  
$
484
 
  
$
1,723
 
  
$
1,535
 
   
$
6,083
 
 
 
   
    For the year ended October 31, 2021  
             
(Millions of Canadian dollars)
   Internally
generated
software 
(1)
     Other
software 
(1)
     Core
deposit
intangibles		     Customer
list and
relationships 
(1)
     In process
software		     Total  
Gross carrying amount
                                                
Balance at beginning of period
   $ 4,321     $ 1,031     $ 1,586     $ 1,493     $ 1,241     $ 9,672  
Additions
     48       15       –       –       1,129       1,192  
Acquisition through business combination
     –       –       –       –       –       –  
Transfers
     1,022       69       –       –       (1,091 )      –  
Dispositions
     (258 )      (186 )      –       (43 )      (8 )      (495 ) 
Impairment losses
     (157 )      –       –       –       (9 )      (166 ) 
Currency translations
     (83 )      (43 )      (112 )      (41 )      (29 )      (308 ) 
Other changes
     (7 )      8       –       5       3       9  
Balance at end of period
   $ 4,886     $ 894     $ 1,474     $ 1,414     $ 1,236     $ 9,904  
Accumulated amortization
                                                
Balance at beginning of period
   $ (2,529 )    $ (630 )    $ (793 )    $ (968 )    $ –     $ (4,920 ) 
Amortization charge for the year
     (898 )      (138 )      (150 )      (101 )      –       (1,287 ) 
Dispositions
     257       185       –       43       –       485  
Impairment losses
     137       –       –       –       –       137  
Currency translations
     45       24       58       29       –       156  
Other changes
     9       (13 )      –       –       –       (4 ) 
Balance at end of period
   $ (2,979 )    $ (572 )    $ (885 )    $ (997 )    $ –     $ (5,433 ) 
Net balance at end of period
   $ 1,907     $ 322     $ 589     $ 417     $ 1,236     $ 4,471  
 
(1)   Certain amounts have been revised from those previously presented.