Financial Reporting

As strategic advisors and leaders, building a culture of transparency is vital now more than ever (CPA, 2017). Unethical financial reporting can cause major problems, not only within an organization, but also for the economy. As seen in the Enron scandal, unethical financial reporting affects individuals, investors, companies and the economy as a whole. (Accounting Zone, 2019).

TD Bank Group reports its first quarter 2019 results at three months ended on January 31, 2019. The report’s purpose is to provide information about the company’s financial position, performance and changes in financial position, which allows external stakeholders to make economic decisions. The first quarter report shows the company’s diluted earnings per share have risen to $1.27 compared to $1.24 from the last year along with net income rising to $2,410 million compared to $2,353 from last year (TD, 2019). The CEO of the company states that the “TD’s retail segments in both Canada and the U.S. had a strong start to the year, with continued revenue growth and solid earnings. However, market volatility and lower client activity impacted our Wholesale segment in the quarter.” The CEO is being transparent with his shareholders and providing them with accurate information. The reports also follow accounting standards such as GAAP and IFRS. These standards provide guidelines and rules that companies must comply with when generating financial statements for external stakeholders. These reports allow for external stakeholders to get a clear and transparent picture of the company. A company is held to a certain standard when it comes to their financial reports, and they must meet the standards set out by IFRS. If these standards are not met, TD’s reputation can take a hit and they would look untrustworthy as an organization. It also makes their competitors much more appealing to shareholders. TD’s reports are reviewed by the Bank’s Audit Committee and then approved by the Bank’s Board of Directors, prior to its release. There are different levels of management that review and approve the financial statements before they’re released, allowing for a thorough examination of the reports. The reports need to be as accurate as possible before they are released while also providing information such as possible legal battles the company is going through, which allows for the investors to get an insight in to the possible legal issues a company is facing. The more transparency a company provides its investors the more trust they will gain in that company.

TD in their second quarter of 2019 had a total profit rise of 9% year-over-year to #3.17 billion in the three-month period ending Apr 30. There was some relief for investors in TD’s wholesale business, which returned to profitability after posting a $17-million loss in the previous quarter (Zivitz, 2019). TD Bank showed growth in their retail businesses, which portrayed a much healthier financial image to potential and current investors. Major issues facing TD Bank are fintech and the housing crisis. Fintech firms both support and compete with traditional financial institutions. Though this was seen as an issue originally, as TD had lacked the infrastructure and technology to compete with newer fintech firms, the newer fintech firms caused TD to invest large amounts of money into new technology. Although this increased expenditure initially, it was an investment that was required and has helped them understand and help provide better service for their customers (Smith, 2019). RIAs tell TD that 41% of the incoming clients will be Gen X and Millennials by 2023 (Business Wire, 2018). In order to support the younger client’s TD is shifting towards newer technologies. If TD do not work along with fintech companies, they will lose a lot of their younger customers who are more apt to use technology to perform certain tasks. The housing crisis is also a major issue that TD is battling with. As Canadian interest rates are expected to continue rising through to 2020 and more stringent mortgage regulations on the horizon, mortgage demand is expected to drop considerably over the next several years (Conference Board of Canada, 2018). With records level of debt and weaker employment gains, household budgets will tighten this year and lead to more moderate growth. TD has to be weary of the consumers spending power decreasing and if they’re not prepared it can lead to missing expectations regarding their profits (Thompson, 2019).

In conclusion, TD generates its financial reports according to international accounting standards and generates transparent reports for its external stakeholders. Their reports provide information for external stakeholders that help them make economic decisions. TD Bank is consistently battling with external issues in order to meet their goals set out in order to portray a healthy financial image for their investors.

References

Accounting Zone. (2019, July 26). Ethics in Financial Reporting. Retrieved from Accounting Zone: https://accountingzone.weebly.com/ethics-in-finanacial-reporting.html

Business Wire. (2018, May 9). To Meet Next Gen Demand, RIAs Say Changes in Marketing, Networking Are Critical. Retrieved from Business Wire: https://www.businesswire.com/news/home/20180509005177/en/RIAs-TD-Ameritrade-41-Incoming-Clients-Gen

Conference Board of Canada. (2018, April 6). Canada’s banking industry facing challenges from fintech and housing market slowdown. Retrieved from Cision: https://www.newswire.ca/news-releases/canadas-banking-industry-facing-challenges-from-fintech-and-housing-market-slowdown-678964253.html

CPA. (2017, December 6). Ethical business is good business. Retrieved from CPA: https://www.cpacanada.ca/en/members-area/profession-news/2017/december/ethical-business-is-good-business

Smith, B. (2019, May 22). Collision 2019: TD calls for banks to collaborate more with fintech startups on AI solutions. Retrieved from IT Business: https://www.itbusiness.ca/news/collision-2019-td-calls-for-banks-to-collaborate-more-with-fintech-startups-on-ai-solutions/110473

TD. (2019, February 28). TD Bank Group Reports First Quarter 2019 Results. Retrieved from TD: http://td.mediaroom.com/2019-02-28-TD-Bank-Group-Reports-First-Quarter-2019-Results

Thompson, P. J. (2019, February 28). TD raises dividend, but profit rise misses expectations. Retrieved from Financial Post: https://business.financialpost.com/news/fp-street/td-q1-earnings-up-2-4-but-miss-expectations-amid-loyalty-program-charge

Zivitz, N. (2019, May 23). COMPANY NEWS May 23, 2019 TD sails past Q2 estimates amid profit surge in U.S. banking. Retrieved from BNN Bloomberg: https://www.bnnbloomberg.ca/td-sails-past-estimates-amid-profit-surge-in-u-s-banking-1.1263072