1-0 Listing of Major Difference Differences Between IAS 39 Versus FAS 133

1-1 Reference Source SOME KEY DIFFERENCES BETWEEN IFRSs AND US GAAP AS OF AUGUST

1-2 IFRS Versus FASB Standards General approach n IFRS: More 'principles-based' standards with limited application guidance. n US: More 'rule-based' standards with more specific application guidance. n Status: Not currently being addressed.

1-3 Most Differences are Not in Writing Since US GAAP is much more detailed, specific, and bright lined, there are many contractual clauses that are covered in US GAAP that are not addressed in writing in IFRS. International auditors sometimes, but not always, look to US GAAP when IFRS is silent about a particular issue.

1-4 IAS 1 Comprehensive Income IAS 1 Reporting "comprehensive income" n IFRS: Statement of changes in equity is required. A grand total of "comprehensive income" is permitted but not required. Comprehensive income is net income plus gains and losses that are recognised directly in equity rather than in net income. n US: Must present grand total of "comprehensive income". Can present in income statement, statement of comprehensive income, or statement of changes in equity. n Status: IASB's Comprehensive Income project is likely result in a multi-column performance statement separating current income flows from remeasurements of previously recognised items. The grand total would be similar to FASB's "comprehensive income".

1-5 IAS 1 Extraordinary Items IAS 1 Extraordinary items n IFRS: Prohibited. n US: Extraordinary items are permitted but restricted to items that are both infrequent in occurrence and unusual in nature. n Status: IASB abolished the category in its 2003 Improvements Project.

1-6 IAS 2 LIFO IAS 2 Method for determining inventory cost n IFRS: LIFO is prohibited. n US: LIFO is permitted. n Status: IASB prohibited LIFO in its 2003 Improvements Project. Not currently being addressed

1-7 IAS 32 Debt vs. Equity IAS 32 Classification of convertible debt instruments by the issuer n IFRS: Split the instrument into its liability and equity components at issuance. n US: Classify the entire instrument as a liability. However, the intrinsic value of the conversion feature at the commitment date of the instrument, if any, is recognised as additional paid-in capital. n Status: Not currently being addressed.

1-8 IAS 39 Basis Adjustment IAS 39 Use of "basis adjustment" n IFRS: Fair value hedge: Required. Cash flow hedge of a transaction resulting in a financial asset or liability: Same as US GAAP. Cash flow hedge of a transaction resulting in a non-financial asset or liability: Choice of US GAAP or basis adjustment. n US: Fair value hedge: Required. Cash flow hedge of a transaction resulting in an asset or liability: Gain/loss on hedging instrument that had been reported in equity remains in equity and is reclassified into earnings in the same period the acquired asset or incurred liability affects earnings. n Status: Not currently being addressed.

1-9 Net Investment in Foreign Operations IAS 39 Hedging gain or loss on net investment in a foreign entity n IFRS: The portion determined to be an effective hedge is recognised in equity. n US: Gains and losses relating to hedge ineffectiveness is recognised in profit or loss immediately. n Status: Not currently being addressed.

1-10 IAS 39 Macro Hedging IAS 39 Macro hedging n IFRS: Fair value hedge accounting treatment for a portfolio hedge of interest rate risk is allowed if certain specified conditions are met n US: Hedge accounting treatment is prohibited, though similar results may be achieved by designating specific assets or liabilities as hedged items. n Status: FASB does not have a project to address macro hedging.

1-11 IAS 30 Partial-Term Hedges IAS 39 Use of "partial-term hedges" (hedge of a fair value exposure for only a part of the term of a hedged item) n IFRS: Allowed. n US: Prohibited. n Status: Not currently being addressed.

1-12 FX Risk and HTM Classification IAS 39 Hedging foreign currency risk in a held-to-maturity investment n IFRS: Can qualify for hedge accounting. n US: Cannot qualify for hedge accounting. n Status: Not currently being addressed.

1-13 FX Risk of Firm Commitment IAS 39 Hedging foreign currency risk in a firm commitment to acquire a business in a business combination n IFRS: Can qualify for hedge accounting. n US: Cannot qualify for hedge accounting. n Status: Not currently being addressed.

1-14 Shortcut Method IAS 39 Assuming perfect effectiveness of a hedge if critical terms match n IFRS: Prohibited. Must always measure effectiveness. n US: Allowed for hedge of interest rate risk in a debt instrument if certain conditions are met – "Shortcut Method". n Status: Not currently being addressed

1-15 IAS 39 Fair Value Option IAS 39 Option to designate any financial asset or financial liability to be measured at fair value through profit or loss ('fair value option') n IFRS: Option is allowed. n US: No such option. n Status: This option was added in the December 2003 revisions to IAS 39. In 2006 the FASB has a new Exposure Draft

1-16 IAS 39 Available for Sale IAS 39 Option to designate loans and receivables as available for sale to be measured at fair value through equity ('available-for-sale option') n IFRS: Option is allowed. n US: No such option. n Status: This option was added in the December 2003 revisions to IAS 39.

1-17 Investments in unlisted equity instruments IAS 39 Investments in unlisted equity instruments n IFRS: Measured at fair value if reliably measurable; otherwise at cost. n US: Measured at cost. n Status: Not currently being addressed.

1-18 IAS 39 Measurement of derivatives n IFRS: All derivatives are measured at fair value except that a derivative that is linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured is measured at cost. n US: All derivatives are measured at fair value (though the definition of a derivative is not identical to that of IAS 39). n Status: Not currently being addressed.

1-19 IAS 39 Multiple embedded derivatives in a single hybrid instrument n IFRS: Sometimes accounted for separately. n US: Always treated as a single compound embedded derivative. n Status: Not currently being addressed.

1-20 Trading Classification IAS 39 Reclassification of financial instruments into or out of the trading category n IFRS: Prohibited. n US: Permitted, but generally transfers into or from the trading category should be rare. n Status: Not currently being addressed.

1-21 Held-to-Maturity Classification IAS 39 Effect of selling investments classified as held-to-maturity n IFRS: Prohibited from using held-to-maturity classification for the next two years. n US: Prohibited from using held-to-maturity classification. SEC indicates that prohibition is generally for two years. n Status: Not currently being addressed.

1-22 Subsequent reversal of an impairment loss IAS 39 Subsequent reversal of an impairment loss n IFRS: Required for loans and receivables, held-to-maturity, and available-for-sale debt instruments if certain criteria are met. n US: Prohibited for held-to-maturity and available-for-sale securities. Reversal of valuation allowances on loans is recognised in the income statement. n Status: Not currently being addressed.

1-23 Derecognition of financial assets IAS 39 Derecognition of financial assets n IFRS: Combination of risks and rewards and control approach. Can derecognise part of an asset. No "isolation in bankruptcy" test. Partial derecognition allowed only if specific criteria are complied with. n US: Derecognise assets when transferor has surrendered control over the assets. One of the conditions is legal isolation in bankruptcy. No partial derecognition. n Status: This is a subject that both Boards are likely to address in the future.

1-24 Use of "Qualifying SPEs" (VIEs) IAS 39 Use of "Qualifying SPEs" n IFRS: No such category of SPEs. n US: Necessary for derecognition of financial assets if transferee is not free to sell or pledge transferred assets. n Status: This is a subject that both Boards are likely to address in the future.

1-25 Offsets for Two Different Parties IAS 39 Offsetting amounts due from and owed to two different parties n IFRS: Required if legal right of set-off and intent to settle net. n US: Prohibited. n Status: Not currently being addressed.

1-26 N

1-27 N

1-28 N