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35. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES continued
In February 2006, the FASB issued SFAS No. 155, ‘Accounting for Certain Hybrid Financial Instruments – an amendment of FASB
Statements No. 133 and 140’, that amends SFAS No. 133, ‘Accounting for Derivative Instruments and Hedging Activities’, and
No. 140, ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities’. This Statement resolves
issues addressed in SFAS No. 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 SFAS No. 133. SFAS No. 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 SFAS No. 155 amends SFAS No. 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. SFAS No. 155 is effective for BT for all financial instruments acquired or issued after 31 March 2007. BT is currently
evaluating the impact of this statement.
In March 2006 the FASB issued SFAS No. 156, ‘Accounting for Servicing of Financial Assets: an amendment of FASB Statement
No. 140’ that amends SFAS No. 140, ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities’, with respect to the accounting for separately recognised servicing assets and servicing liabilities. SFAS No. 156 is
effective for BT on 1 April 2007. BT does not anticipate that the adoption of this new statement at the required effective date will
have a significant effect on its results of operations, financial position or cash flows.
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 121