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Annual Report > Report of the directors > Financial review > US GAAP developments

US GAAP DEVELOPMENT


In February 2006, the FASB issued SFAS No 155, ‘Accounting for Certain Hybrid Instruments – an amendment to FASB statements No 133 and 140’ (“FAS 155”), that amends SFAS No 133, ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities’ (“FAS 133”). This statement resolves issues addressed in FAS 133 Implementation Issue No. D1, ‘Application of Statement 133 to Beneficial Interests in Securitised Financial Assets’. The statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. Additionally it clarifies which interest-only strips and principal-only strips are not subject to the requirements of FAS 133. FAS 155 also establishes a requirement to evaluate interests in securitised financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. It clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. Also FAS 155 amends FAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS 155 is effective for BT for all financial instruments acquired or issued after 31 March 2007. The group does not expect this to have a material impact on the consolidated financial statements.

     In March 2006 the FASB issued SFAS No 156, ‘Accounting for Servicing of Financial Assets: an amendment of FASB No 140’ (“FAS 156”) that amends SFAS No 140 ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities’ (“FAS 140”) with respect to the accounting for separately recognised servicing assets and servicing liabilities. FAS 156 is effective for BT from 1 April 2007. The group does not anticipate that the adoption of this new statement at the required effective date will have a material impact on the consolidated financial statements.
     In September 2006, the FASB issued SFAS No 157, ‘Fair Value Measurements’ (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. FAS 157 applies for the group’s financial year beginning 1 April 2008. The group is currently evaluating the impact, if any, that the adoption of FAS 157 will have on the consolidated financial statements.
     In February 2007, the FASB issued SFAS No 159 ‘The Fair Value Option for Financial Assets and Financial Liabilities’ (“FAS 159”). FAS 159 permits entities to choose to measure, on an item by item basis, specified financial instruments and certain other items at fair value. Unrealised gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. FAS 159 is effective for the 2009 financial year, the provisions of which are required to be applied prospectively. The group is currently evaluating the impact, if any, that the adoption of FAS 159 will have on the consolidated financial statements.
     In July 2006, the FASB issued Interpretation No 48 ‘Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No 109’ (“FIN 48”). FIN 48 requires tax benefits from uncertain positions to be recognised only if it is “more likely than not” that the position is sustainable based on its technical merits. The interpretation also requires qualitative and quantitative disclosures, including discussion of reasonably possible changes that might occur in unrecognised tax benefits over the next 12 months, a description of open tax years by major jurisdiction, and a roll-forward of all unrecognised tax benefits. FIN 48 applies to the group’s 2008 financial. The group is currently in the process of evaluating the impact, if any, that the adoption of FIN 48 will have on the consolidated financial statements.
     In September 2006, the FASB ratified Emerging Issues Task Force No 06-01 ‘Accounting for Consideration Given by a Service Provider to Manufactures or Resellers of Equipment Necessary for an End-Customer to Receive Service from the Service Provider’ (“EITF 06-01”). This guidance requires the application of EITF 01-09 ‘Accounting for Consideration Given by a Vendor to a Service provider’s end customer’ (“EITF 01-09”), when consideration is given to a reseller or manufacturer for benefit to the service provider’s end customer. EITF 01-09 requires the consideration given to be recorded as a liability at the time of the sale of the equipment and, also, provides guidance for the classification of the expense. EITF 06-01 is effective for the group’s 2008 financial year. The group is currently in the process of quantifying the impact, if any, that the adoption of EITF 01-09 will have on the consolidated financial statements.
 

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