(2) Under United States GAAP, gains on all securitized assets are recorded at the date of the securitization. Under Canadian GAAP, prior to July 1, 2001, gains on sales of NHA-insured mortgages were recorded at the date of the securitization and gains on sales of loans securitized were recorded over the life of the loans securitized. Effective July 1, 2001, we adopted a new Canadian accounting  standard on securitizations that eliminates this difference between Canadian and United States GAAP. There will continue to be an adjustment to our Consolidated Statement of Income until the gains related to loans securitized prior to July 1, 2001 have all been recorded in income. As a result of this difference, non-interest  revenue has been decreased by $40, $17 and $19 for the years ended October 31, 2002, 2001 and 2000, respectively. (3) Under United States GAAP, we adopted a new accounting stan- dard on derivatives and hedging effective November 1, 2000. Under this new standard, all derivatives are recorded at fair value in our Consolidated Balance Sheet. Changes in the fair value of derivatives that are not hedges are recorded in our Consolidated Statement of Income as they arise. If the derivative is a hedge, depending on the nature of the hedge, a change in the fair value of the derivative is either offset in our Consolidated Statement of Income against the change in the fair value of the hedged asset, liability or firm commit- ment or is recorded in other comprehensive income until the hedged item is recorded in our Consolidated Statement of Income. If the change in the fair value of the derivative is not completely offset by the change in the fair value of the item it is hedging, the difference is recorded immediately in our Consolidated Statement of Income. When we adopted this new United States accounting standard  on November 1, 2000, it increased consolidated assets by $163, increased consolidated liabilities by $149, increased other compre- hensive income by $13 and increased net income by $1. Because  the transition adjustment was not material to our consolidated net income, the adjustment to net income was included in non-interest revenue on a before-tax basis rather than shown separately as the cumulative effect of an accounting change. Under current Canadian GAAP and United States GAAP prior  to November 1, 2000, hedging derivatives were accounted for on  an accrual basis, with gains or losses deferred and recorded in income on the same basis as the underlying hedged item. As a result of this difference, non-interest revenue has been decreased by $37 and $19 for the years ended October 31, 2002 and 2001, respectively. (4) The impact of applying United States GAAP to total non-interest expense before restructuring charge is as follows: (i) Under United States GAAP, the fair value of stock options granted is recorded as compensation expense over the period that the options vest. Under Canadian GAAP, we currently include the amount of proceeds in shareholders’ equity when the options are exercised.  (ii) Under United States GAAP, certain costs of internally developed software are required to be capitalized and amortized over the expected useful life of the software. Under Canadian GAAP, only cer- tain external costs of internally developed software are capitalized and amortized over the expected useful life of the software. (iii) Under United States GAAP, both pension and other future employee benefits are recorded in our Consolidated Statement of Income in the period services are provided by our employees. The related obligations are valued using current market rates. Under Canadian GAAP, prior to November 1, 2000, pension benefits were The Financial Accounting Standards Board has issued a proposed interpretation regarding the consolidation of special-purpose entities, which we expect will be consistent with the draft guideline being developed by the Canadian Institute  of Chartered Accountants discussed in Note 7. As a result, we do not expect that this will create a new difference between Canadian and United States GAAP. The Financial Accounting Standards Board has issued a proposed interpretation on the measurement and disclosure of guarantees. The proposed interpretation would require companies to recognize a liability equal to the fair value of its obli- gations under certain guarantees. Although the Canadian Institute of Chartered Accountants has issued a draft guideline on the disclosure of guarantees, it does not address the recognition of similar guarantees in the consolidated financial statements. We expect that this will create a new difference between Canadian and United States GAAP. We are currently reviewing the proposed interpretation to determine its impact on our consolidated financial statements. (8) Includes cumulative adjustment to shareholders’ equity arising from current and prior years’ GAAP differences. (7) During the year ended October 31, 2001, we sold our investment in Bancomer and recognized translation losses of $99 in non-interest income under Canadian GAAP. Under United States GAAP, we recog- nized translation losses of $18, net of the $81 previously recognized in net income in the years ended October 31, 1999, 1998 and 1997. As a result of this difference, non-interest revenue has been increased by $81 for the year ended October 31, 2001. (6) Under United States GAAP, non-cash collateral received in secu - rity lending transactions that we are permitted by contract to sell or repledge is recorded as an asset in our Consolidated Balance Sheet and a corresponding liability is recorded for the obligation  to return the collateral. Under Canadian GAAP, such collateral and the related obligation are not recorded in our Consolidated Balance Sheet. As a result of this difference, securities and other liabilities have been increased by $2,399 at October 31, 2002 and $740 at Octo- ber 31, 2001. (5) In addition to the tax impact of differences outlined above, under United States GAAP, tax rate changes do not impact the measure- ment of our future income tax balances until they are passed into law. Under Canadian GAAP, tax rate changes are reflected in the measurement of our future income tax balances when they are  substantively enacted.  (v) Under United States GAAP, our acquisition of Suburban Bank Corp. would have been accounted for using the pooling of interests method. Under Canadian GAAP, we accounted for this acquisition using the purchase method which resulted in the recognition and amortization of goodwill and other intangible assets associated with the acquisition. Effective November 1, 2001, goodwill is no longer amortized to income under either United States or Canadian GAAP. (iv) Effective November 1, 2001, we adopted a new accounting  standard on goodwill that is identical under Canadian and United States GAAP. Previously, we presented goodwill amortization ex- pense net-of-tax on a separate line in our Consolidated Statement of Income under Canadian GAAP. That presentation was not per- mitted under United States GAAP. recorded in our Consolidated Statement of Income in the period services were provided by our employees, with the corresponding obligation valued using management’s best estimate of the long- term rate of return on assets, while other future employee benefits were expensed as incurred. Effective November 1, 2000, we adopted a new Canadian accounting standard on pension and other future employee benefits that eliminates this difference between Canadian and United States GAAP. When we adopted this new standard, we accounted for the change in accounting as a charge to retained earnings. As a result, there will continue to be an adjustment to our Consolidated Statement of Income until amounts previously deferred under United States GAAP have been fully amortized to income. Future Changes in United States Accounting Policies BMO FINANCIAL GROUP ANNUAL REPORT 2002 93 2002 2001 200 0 Increase (decrease) Stock options (i) $ 47 $ 40  Software development costs (ii) (40) (44) (47) Pension and related benefits (iii) 4 8 82 Amortization of goodwill (iv) — 62 54 Amortization of goodwill and other assets (v) (10) (10) (10) Total $ 1 $ 56  $  111