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I Summary of significant accounting policies Bank Aa The Bank Au and related instructions pre• scribed by the Minister of Finance stipulate the format of the financial statements and the significant accounting policies. The accounting principles followed in determining net income conform with accounting principle generally accepted in Canada escape for: (i) the accounting for foreign currency Translation gams and losses (note 1(b)), no the defertal of guns and losses on the disposal of terrain debt securities (note 1(0). Ino the accounting for losses on loans mote 1(d)). The significant accounting policies and practices followed by the Bank are. (a) Basis of consolidation The financial statements include the assets and liabilities and results of operations of subsidiaries, namely corporations in which the Bank owns more than 50% of the voting shares. Corporations in which the Bank owns 2056 to 50% of the voting shares are reported in other securities in the Console dated statement of assets and liabilities and are accounted foe using the equsry method of accounting. The Bank's there of tunings of such corporations is reported in income from securities in the Consolidated state• ment of income. (b) Translation of foreign currencies Foreign currency assets and liabilities, other than investments in foreign currency secute ties and fixed assets which were purchased with Canadian dollars and which are ca tied at historical cost, are translated into Canadian dollars at prevailing year end rates. Foreign currency income and expenses are translated into Canadian dol• las at The average exchange rates prevailing throughout the year. Unrealised translation gains and losses related to the Bank s net investment pose tions in foreign operations, net of any offsetting gains or losses arising from eco• nomic hedges of these positions and appli• cable income taxes. are included in retained tunings. Unrealized and realized gains and losses on instruments designated as hedges are deferred and amortized over the remaining life of the hedged item All other unrealized translation gains and losses and all realized gains and losses are in.luded in other income in the Consolidated sratemenc of income. (c) Securities Investment securities, other than Those that qualify as loan substitutes according to The definition of the Minister of Finance, are carried at cost or amortized cost. Where applicable, such securities are adjusted to recognize permanent impairment in the underlying value. Loan subsciruces are car ried at cost less any provisions established to recognize anticipated credit losses. such losses are included in loan loss experience Realized gains and lostes on dnpi»al oil debt securities held in the Investment account, other than treasury hills, ,ire drier mined on the average cost method and deferred and amortized to income ever tits, yeah Gains and losses realized on daryis,d of treasury bills and other mvcstment kc renes which are determined on an ateuge Inst basis. and write-downs to reflect pct manent impairment in value .d mtestment securities other than loan substitutes. ars. included in income trom securities in the yese in which they o fur Trading account secunnrs are carried at market values Gains and losses on disposal and adjustments to market are rcpoticd in income from securities in the year in which they occur. (d) Loans Loans are stated net ufuneatned income and of any specstic or general provisions established to recognize anttupateJ losses The general provisions, which are pruden• (til in nature. ate in respect of dams on a number of countries which are expcuent• ing ditticulry servicing these claims. Guide• lines issued by the Inspector General of Banks require the Bank to carry pruvmuns At October 51. 1996 of at least MIT of else related claims on a prescribed group of s2 countries Interest income is recorded on the accrual bins until such time as the loan is classified as non accrual At that Time any uncollected interest is rc, crted and charged against current income Interest on nom accrual loans subwquenrtv received is recorded as interest muime only when man. agemenr has determined .hat the ultimate collectibilim of the loan is no longer in doubt, otherwise the amount is offset against the principal balance owing. A nomaccrual loan is any loan. where in management s opinion there is doubt as to the ultimate vollectibdiry, of some portion of the principal or interest In addition. any Icon. where mrereit is contractually past due 90 days is classified as numacsrud. other than a consumer insi—ent or VISA loan or a loan that is guaranteed by Canada. the provinces or an agency controlled by these governments, or is insured Consumer instalment loans are placed on a nun -accrual basis when a pavment is contractually past due 51 days VISA loans remain on an accrual basis until the point of write off or 100 per cent provision which occurs when payment is contractually pas, due 190 days Actual loan loss experience for the vest consists of direct write-offs and increased provisions established in recognize antics, pared losses. less reversals of previously established provisions no longer required and recoveries on loans previously written off. The provision for loan losses included in the Consolidated statement of income is determined by applying to the outstanding eligioie loans at the end of the year, the weighted average ratio of actual loan loss experience to eligible loans outstanding for A-15