Consolidated Financial Statements - TD

1 TD BANK GROUP ANNUAL REPORT 2020 Financial RESULTS125 Financial RESULTSC onsolidated Financial Statements PAGE PAGEM anagement s Responsibility for Financial Information 126 Independent Auditor s Report Canadian Generally Accepted Auditing Standards 127 Report of Independent Registered Public Accounting Firm Public Company Accounting Oversight Board Standards (United States) 129 Report of Independent Registered Public Accounting Firm Internal Control over Financial Reporting 131 Consolidated Financial StatementsConsolidated Balance Sheet 132 Consolidated Statement of Income 133 Consolidated Statement of Comprehensive Income 134 Consolidated Statement of Changes in Equity 135 Consolidated Statement of Cash Flows 136 NOTES TO Consolidated Financial STATEMENTSNOTE TOPIC PAGENOTE TOPIC PAGE 1 Nature of Operations 137 2 Summary of Significant Accounting Policies 137 3 Significant Accounting Judgments, Estimates.

2 And Assumptions 147 4 Current and Future Changes in Accounting Policies 150 5 Fair Value Measurements 151 6 Offsetting Financial Assets and Financial Liabilities 160 7 Securities 162 8 Loans, Impaired Loans, and Allowance for Credit Losses 165 9 Transfers of Financial Assets 172 10 Structured Entities 173 11 Derivatives 176 12 Investment in Associates and Joint Ventures 185 13 Significant Acquisitions and Disposals 187 14 Goodwill and Other Intangibles 187 15 Land, Buildings, Equipment, and Other Depreciable Assets 189 16 Other Assets 190 17 Deposits 190 18 Other Liabilities 192 19 Subordinated Notes and Debentures 192 20 Capital Trust Securities 193 21 Equity 194 22 Insurance 196 23 Share-Based Compensation 198 24 Employee Benefits 199 25 Income Taxes 204 26 Earnings Per Share 206 27 Provisions, Contingent Liabilities, Commitments, Guarantees, Pledged Assets.

3 And Collateral 206 28 Related Party Transactions 209 29 Segmented Information 210 30 Interest Income and Expense 212 31 Credit Risk 212 32 Regulatory Capital 214 33 Risk Management 214 34 Information on Subsidiaries 215 TD BANK GROUP ANNUAL REPORT 2020 Financial RESULTS126 MANAGEMENT S RESPONSIBILITY FOR Financial INFORMATIONThe management of The Toronto-Dominion Bank and its subsidiaries (the Bank ) is responsible for the integrity, consistency, objectivity, and reliability of the Consolidated Financial Statements of the Bank and related Financial information as presented. International Financial Reporting Standards as issued by the International Accounting Standards Board, as well as the requirements of the Bank Act (Canada), and related regulations have been applied and management has exercised its judgment and made best estimates where Bank s accounting system and related internal controls are designed, and supporting procedures maintained, to provide reasonable assurance that Financial records are complete and accurate, and that assets are safeguarded against loss from unauthorized use or disposition.

4 These supporting procedures include the careful selection and training of qualified staff, the establishment of organizational structures providing a well-defined division of responsibilities and accountability for performance, and the communication of policies and guidelines of business conduct throughout the has assessed the effectiveness of the Bank s internal control over Financial reporting as at October 31, 2020, using the framework found in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 Framework. Based upon this assessment, management has concluded that as at October 31, 2020, the Bank s internal control over Financial reporting is effective. The Bank s Board of Directors, acting through the Audit Committee which is composed entirely of independent directors, oversees management s responsibilities for Financial reporting.

5 The Audit Committee reviews the Consolidated Financial Statements and recommends them to the Board for approval. Other responsibilities of the Audit Committee include monitoring the Bank s system of internal control over the Financial reporting process and making recommendations to the Board and shareholders regarding the appointment of the external auditor. The Bank s Chief Auditor, who has full and free access to the Audit Committee, conducts an extensive program of audits. This program supports the system of internal control and is carried out by a professional staff of Office of the Superintendent of Financial Institutions Canada, makes such examination and enquiry into the affairs of the Bank as deemed necessary to ensure that the provisions of the Bank Act, having reference to the safety of the depositors, are being duly observed and that the Bank is in sound Financial & Young LLP, the independent auditors appointed by the shareholders of the Bank, have audited the effectiveness of the Bank s internal control over Financial reporting as at October 31, 2020, in addition to auditing the Bank s Consolidated Financial Statements as of the same date.

6 Their reports, which expressed an unqualified opinion, can be found on the following pages of the Consolidated Financial Statements . Ernst & Young LLP have full and free access to, and meet periodically with, the Audit Committee to discuss their audit and matters arising therefrom, such as, comments they may have on the fairness of Financial reporting and the adequacy of internal controls. Bharat B. Masrani Riaz AhmedGroup President and Group Head andChief Executive Officer Chief Financial OfficerToronto, CanadaDecember 2, 2020TD BANK GROUP ANNUAL REPORT 2020 Financial RESULTS127 INDEPENDENT AUDITOR S REPORTTo the Shareholders and Directors of The Toronto-Dominion BankOpinionWe have audited the Consolidated Financial Statements of The Toronto-Dominion Bank and its subsidiaries (TD)

7 Which comprise the Consolidated Balance Sheet as at October 31, 2020 and 2019, and the Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, and Consolidated Statement of Cash Flows for each of the years in the three-year period ended October 31, 2020, and notes to the Consolidated Financial Statements , including a summary of significant accounting policies (collectively referred to as the Consolidated Financial Statements ). In our opinion, the accompanying Consolidated Financial Statements present fairly, in all material respects, the Consolidated Financial position of TD as at October 31, 2020 and 2019, and its Consolidated Financial performance and its Consolidated cash flows for each of the years in the three-year period ended October 31, 2020, in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards for OpinionWe conducted our audit in accordance with Canadian generally accepted auditing standards.

8 Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of TD in accordance with the ethical requirements that are relevant to our audit of the Consolidated Financial Statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated Financial Statements of the year ended October 31, 2020. These matters were addressed in the context of our audit of the Consolidated Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

9 For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Consolidated Financial Statements . The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Consolidated Financial for credit lossesKey audit matterTD describes its significant accounting judgments, estimates, and assumptions in relation to the allowance for credit losses in Note 3 of the Consolidated Financial Statements .

10 As disclosed in Note 7 and Note 8 to the Consolidated Financial Statements , TD recognized $9,384 million in allowances for credit losses on its Consolidated balance sheet using an expected credit loss model (ECL). The ECL is an unbiased and probability-weighted estimate of credit losses expected to occur in the future, which is based on the probability of default (PD), loss given default (LGD) and exposure at default (EAD) or the expected cash shortfall relating to the underlying Financial asset. The ECL is determined by evaluating a range of possible outcomes incorporating the time value of money and reasonable and supportable information about past events, current conditions, and future economic forecasts. ECL allowances are measured at amounts equal to either (i) 12-month ECL; or (ii) lifetime ECL for those Financial instruments that have experienced a significant increase in credit risk (SICR) since initial recognition or when there is objective evidence of the allowance for credit losses was complex and required the application of significant judgment and involvement of specialists because of the sophistication of the models, the forward-looking nature of the key assumptions, and the inherent interrelationship of the critical variables used in measuring the ECL.