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**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**___________________**FORM 10-QSB**___________________

 

**ý                                QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

  

For the quarterly period endedDecember 31, 2005

  

OR

 

** ̈                                TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

For the transition period from               to

 

Commissionfile number: 0-27511

  

**PEREGRINEINDUSTRIES, INC.**(Exact Name Of RegistrantAs Specified In Its Charter)
| Florida |      |      |      | 65-0611007

(State of Incorporation)
            
(I.R.S. Employer    Identification No.)

 
                           
115 East 57th Street, Suite 1118, New    York, NY
            
10022

(Address of Principal Executive Offices)
            
(ZIP Code)

 Registrant'sTelephone Number, Including Area Code: (212) 688-5688

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x No  ̈

At December 31,2005, the Registrant had 44,320,000 shares of common stock issued and outstanding.

Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act). Yes   ̈ No x Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes x No  ̈

 

**TABLE OF CONTENTS**

 
Item    Description    Page
**PART I - FINANCIAL    INFORMATION**
  
ITEM 1.
            
   FINANCIAL STATEMENTS.
        3  
ITEM 2.
            
   MANAGEMENT'S    DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
        3   
ITEM 3.
            
   CONTROLS AND PROCEDURES.
        3     
**PART II - OTHER    INFORMATION**
  
ITEM 1.
            
   LEGAL PROCEEDINGS.
        4  
ITEM 2.
            
   CHANGES IN SECURITIES.
        4   
ITEM 3.
            
   DEFAULT UPON    SENIOR SECURITIES.
        4   
ITEM 4.
            
   SUBMISSION OF    MATERS TO A VOTE OF SECURITY HOLDERS.
        4   
ITEM 5.
            
   OTHER INFORMATION.
        4   ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.4
 
****
**PART I - FINANCIAL INFORMATION**

ITEM1. FINANCIAL STATEMENTS****Backto Table of Contents

The Registrant's financial statements for the six-monthperiods ended December 31, 2005 and 2004 are attached to this quarterly report.

Financial Statements

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONBack to Table of Contents

Some of the statements contained in this quarterlyreport of Peregrine Industries, Inc. (hereinafter the "Company", "We"or the "Registrant") discuss future expectations, contain projections of ourplan of operation or financial condition or state other forward-looking information.Forward-looking statements give our current expectations or forecasts of future events.You can identify these statements by the fact that they do not relate strictly tohistorical or current facts. They use of words such as "anticipate,""estimate," "expect," "project," "intend,""plan," "believe," and other words and terms of similar meaning inconnection with any discussion of future operating or financial performance. From time totime, we also may provide forward-looking statements in other materials we release to thepublic.

Plan of Operation

We have no present operations orrevenues and our current activities are related to seeking new business opportunities,including seeking an acquisition or merger with an operating company. The Registrant doesnot intend to limit itself to a particular industry and has not established any particularcriteria upon which it shall consider and proceed with a business opportunity.

If the Company seeks to acquire anotherbusiness or pursue a business opportunity, management would have substantial flexibilityin identifying and selecting a prospective business. Registrant would not be obligated nordoes management intend to seek pre-approval by our shareholders. Under the laws of theState of Florida, the consent of holders of a majority of the issued and outstandingshares, acting without a shareholders meeting, can approve an acquisition.

The Registrant is entirely dependent onthe judgment of management in connection with the selection process for a target company.In evaluating a prospective business opportunity, we would consider, among other factors,the following: (i) costs associated with effecting a transaction; (ii) equity interest inand opportunity to control the prospective candidate; (iii) growth potential of the targetbusiness; (iv) experience and skill of management and availability of additionalpersonnel; (v) necessary capital requirements; (vi) the prospective candidate'scompetitive position; (vii) stage of development of the business opportunity; (viii) themarket acceptance of the business its products or services; (ix) the availability ofaudited financial statements of the potential business opportunity; and (x) the regulatoryenvironment that may be applicable to any prospective business opportunity. 

The foregoing criteria are not intendedto be exhaustive and there may be other criteria that management may deemed relevant. Inconnection with an evaluation of a prospective or potential business opportunity,management may be expected to conduct a due diligence review.

We had operating expenses of $2,452 and$13,415 during the three-month and six-month period ended December 31, 2005, respectively,consisting mainly of accounting fees and general and administrative expenses. The Companydoes not expect its operating expenses to increase significantly until it starts to pursuea new business opportunity or enters into a business combination.

Liquidity and Capital Resources

During the three-month period endedDecember 31, 2005, we received $2,452 through advances made to us by management and/orrelated parties. While we are dependent upon interim funding provided by management and/orrelated parties to pay professional fees and other expenses. We have no written financeagreement with management and/or related parties to provide any continued funding.

At December 31, 2005, we had no assetsand $2,452 current liabilities.

Aspart of our intent to seek new business opportunities, we may determine to seek to raisefunds from the sale of equity or debt securities. We have no agreements to issue any debtor equity securities and cannot predict whether equity or debt financing will becomeavailable at terms acceptable to us, if at all.

We anticipate that in connection withthe commencement of a new business opportunity or consummation of a business combination,we will issue a substantial number of additional restricted shares or other securities. Ifsuch additional securities are issued, our shareholders will experience a dilution intheir ownership interest in the Company. If a substantial number of shares are issued inconnection with a business combination, a change in control may be expected to occur.

Thereare no limitations in our articles of incorporation on our ability to borrow funds orraise funds through the issuance of restricted common stock to pursue new businessopportunities. Our limited resources and lack of operating history may make it difficultto do borrow funds or raise capital. Our inability to borrow funds or raise funds throughthe issuance of restricted common stock required to facilitate new business opportunitiesmay have a material adverse effect on our financial condition and future prospects.

ITEM 3.CONTROLS AND PROCEDURES****Backto Table of Contents
*Evaluation of disclosure controls and procedures.As of December 31, 2005, the Company's chief executiveofficer and chief financial officer conducted an evaluation regarding the effectiveness ofthe Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or15d-15(e) under the  Exchange Act. Based upon the evaluation of these controls andprocedures, our chief executive officer and chief financial officer concluded that ourdisclosure controls and procedures were effective as of the end of the period covered bythis report.

*Changes in internal controls*. During the quarterly period covered by this report, no changesoccurred in our internal control over financial reporting that materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION**

ITEM 1. LEGALPROCEEDINGS****Back to Table ofContents

None.

ITEM 2. CHANGESIN SECURITIESBack to Table ofContents

None.

ITEM3. DEFAULTS UPON SENIOR SECURITIES****Back to Table of Contents

None.

ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSBack to Table of Contents

None.

ITEM5. OTHER INFORMATION****Backto Table of Contents

None.

ITEM6. EXHIBITS AND REPORTS ON FORM 8-K****Back to Table of Contents

(a) The following documents are filed as exhibits tothis report on Form 10-QSB or incorporated by reference herein. Any document incorporatedby reference is identified by a parenthetical reference to the SEC filing that includedsuch document.

Exhibit    No.Description31.1Certification of Chief    Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to    Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of Chief    Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to    Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief    Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of    the Sarbanes-Oxley Act of 2002.32.2Certification of Chief    Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of    the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K during the quarter covered by this report:

The Registrant did not filed a Form 8-K during the quarter endedDecember 31, 2005. 

**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and on the dateindicated.

/s/ Richard Rubin    Richard Rubin*   Chief Executive Officer and Director      Dated: February 7, 2006*
                                  
/s/ Ivo Heiden    Ivo Heiden      *Chief Financial Officer and Director**   Dated: February 7, 2006*
                            
**FinancialStatements**Back to Tableof Contents
**Peregrine Industries, Inc.**Balance    Sheets as of December 31, 2005 (Unaudited) and June 30, 2005  **  ****December    31, 2005****June 30,    2004**(Unaudited)  
ASSETSCurrent assets:Cash$0$0Advances to related parties00      Total current assets00               **Total Assets**$0$0  
LIABILITIES    AND STOCKHOLDERS' DEFICIENCY  Current liabilities:Advances due to related parties$2,452$2,421      Total current liabilities$2,452$2,421  Stockholders' equity:   Preferred stock,    $0.0001 par value; 5,000,000 shares authorized; none issued--   Common stock,    $0.0001 par value; 100,000,000 shares authorized;         44,320,000 issued and outstanding at December 31, 2005; and        29,270,000 issued and outstanding at June 30, 20054,4322,927   Additional paid in    capital16,4524,573   Accumulated deficit(23,336)(9,921)     Total    Stockholders' Deficiency(2,452)(2,421)          **Total Liabilities and Stockholders' Deficiency**$0$0     See    Notes to Unaudited Interim Financial Statements
 
**Peregrine    Industries, Inc.**Statement of    Operations For the Three and Six Months ended December 31, 2005 and December 31, 2004  **Three Months****Three Months****Six Months****Six Months****Ended****Ended****Ended****Ended****December 31, 2005****December 31, 2004****December 31, 2005****December 31, 2004**(Unaudited)(Unaudited)(Unaudited)(Unaudited)Revenue$0$0$0$0Costs and Expenses:   General and    administrative2,45245013,415900Total costs and expenses2,45245013,415900  Loss before income taxes2,452(450)(13,415)(900)Income taxes0000Loss from continuing    operations(2,452)(450)(13,415)(900)  Net loss$(2,452)$(450)$(13,415)$(900)  Per shares amounts:0Basic and diluted from continuing operations$(0.00)$(0.00)$(0.00)$0.00Basic and diluted net loss$(0.00)$(0.00)$(0.00)$0.00  Weighted average shares    outstanding (basic and diluted)Loss    Per Share Basic earnings per share is computed by dividing income available to common    shareholders (the numerator) by the weighted-average number of common shares outstanding    (the denominator) for the period. Diluted earnings per share assume that any dilutive    convertible securities outstanding were converted, with related preferred stock dividend    requirements and outstanding common shares adjusted accordingly. It also assumes that    outstanding common shares were increased by shares issuable upon exercise of those stock    options for which market price exceeds the exercise price, less shares which could have    been purchased by us with the related proceeds. In periods of losses, diluted loss per    share is computed on the same basis as basic loss per share as the inclusion of any other    potential shares outstanding would be anti-dilutive. 3. Stockholders' Equity Common Stock    In July 2005, we issued 15,050,000 shares of common stock to related parties. 9,000,000    shares were issued to pay outstanding advances of $ 7,999 and 6,050,000 shares, valued at    $5,385, were issued to reflect the cost of services provided to our company to meet    ongoing reporting and compliance obligations. 4. New Accounting Standards In December    2004, the FASB issued SFAS No. 123 (revised 2004) "Share-Based Payment," or SFAS No.    123(R). SFAS No. 123(R) revises FASB Statement No. 123 "Accounting for Stock-Based    Compensation," and supersedes APB Opinion No. 25, and its related implementation    guidance. This Statement eliminates the ability to account for share-based compensation    using the intrinsic value method under APB Opinion No. 25. SFAS No. 123(R) focuses    primarily on accounting for transactions in which an entity obtains employee services in    share-based payment transactions. SFAS No. 123(R) requires a public entity to measure the    cost of employee services received in exchange for an award of equity instruments based on    the grant-date fair value of the award (with limited exceptions). That cost will be    recognized over the period during which an employee is required to provide service in    exchange for the award, known as the requisite service period, which is usually the    vesting period. SFAS No. 123(R) is effective for companies filing under Regulation SB as    of the beginning of the first interim or annual reporting period that begins after    December 15, 2005, which for us will be our first quarter of the year ending December 31,    2006. We anticipate adopting SFAS No. 123(R) beginning in the quarter ending March 31,    2006. Accordingly, the provisions of SFAS No. 123(R) will apply to new awards and to    awards modified, repurchased, or cancelled after the required effective date.    Additionally, compensation cost for the portion of awards for which the requisite service    has not been rendered that are outstanding as of the required effective date must be    recognized as the requisite service is rendered on or after the required effective date.    These new accounting rules will lead to a decrease in reported earnings. Although our    adoption of SFAS No. 123(R) could have a material impact on our financial position and    results of operations, we are still evaluating the potential impact from adopting this    statement. In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary    Assets-an amendment of APB Opinion No. 29, "which is effective for us starting July 1,    2005. In the past, we were frequently required to measure the value of assets exchanged in    non-monetary transactions by using the net book value of the asset relinquished. Under    SFAS No. 153, we will measure assets exchanged at fair value, as long as the transaction    has commercial substance and the fair value of the assets exchanged is determinable within    reasonable limits. A non-monetary exchange has commercial substance if the future cash    flows of the entity are expected to change significantly as a result of the exchange. The    adoption of SFAS No. 153 is not anticipated to have a material effect on our consolidated    financial position, results of operations or cash flows. In September 2004, the EITF    reached a consensus regarding Issue No. 04-1, "Accounting for Preexisting Relationships    Between the Parties to a Business Combination" ("EITF 04-1"). EITF 04-1 requires an    acquirer in a business combination to evaluate any preexisting relationship with the    acquiree to determine if the business combination in effect contains a settlement of the    preexisting relationship. A business combination between parties with a preexisting    relationship should be viewed as a multiple element transaction. EITF 04-1 is effective    for business combinations after October 13, 2004, but requires goodwill resulting from    prior business combinations involving parties with a preexisting relationship to be tested    for impairment by applying the guidance in the consensus. We will apply EITF 04-1 to    acquisitions subsequent to the effective date and in our future goodwill impairment    testing. In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, or FAS    109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation    Provision within the American Jobs Creations Act of 2004. " The AJCA introduces a limited    time 85% dividends received deduction on the repatriation of certain foreign earnings to a    U.S. taxpayer (repatriation provision), provided certain criteria are met. FAS No. 109-2    provides accounting and disclosure guidance for the repatriation provision. Although FAS    109-2 is effective immediately, we have not begun our analysis and do not expect to be    able to complete our evaluation of the repatriation provision until after Congress or the    Treasury Department provides additional clarifying language on key elements of the    provision In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error    Corrections," which replaces APB Opinion No. 20 "Accounting Changes," and FASB    Statement No. 3 "Reporting Accounting Changes in Interim Financial Statements," and    changes the requirements for the accounting for and reporting of a change in accounting    principle. This Statement requires retrospective application to prior periods  financial    statements of changes in accounting principle, unless it is impracticable to determine    either the period-specific effects or the cumulative effect of the change. This Statement    shall be effective for accounting changes and corrections of errors made in fiscal years    beginning after December 15, 2005. Early adoption is permitted for accounting changes and    corrections of errors made in fiscal years beginning after the date this Statement is    issued. We do not believe that adoption of SFAS 154 will have a material impact on our    financial statements. align="right" bgcolor="#00FFFF">43,305,55629,270,00043,305,55629,270,000  See Notes to    Unaudited Interim Financial Statements
 
**Peregrine Industries, Inc.**Statement of Cash Flows for the Six Months ended December 31, 2005 and 2004
        **Six Months****Six Months**** ****Ended****Ended****December 31, 2005****December 31, 2004**  (Unaudited)(Unaudited)Cash flows from operating activities:Net loss$(13,415)$(900)Adjustments required to reconcile net loss to    cash used in operating activities:   Expenses paid by issuance of common    stock5,3850   (Increase) decrease in prepaid    expenses00   Increase (decrease) in accounts    payable and accrued expenses2,452900     **Cash    flows used by operating activities**(5,578)0  Cash flows from investing    activities:   Purchase of equipment00     **Cash    used in investing activities**00   Cash flows from financing activities:   Proceeds from    issuance of common stock00   Loans from    related parties5,5780   Repayment of related loans00     **Cash    generated by financing activities**5,5780  Change in cash00Cash - Beginning of period00**Cash - End of period**$0$0  See Notes to    Unaudited Interim Financial Statements
 
**PEREGRINE INDUSTRIES, INC.Notes to Unaudited Interim Financial StatementsDecember 31, 2005
**1. Basis of Presentation

Peregrine Industries, Inc. (the "Company") was formed onOctober 1, 1995 for the purpose of manufacturing residential pool heaters. On March 29,2004, the U.S. Bankruptcy Court confirmed the sale of the Peregrine corporate shellentity. The accounts of the former subsidiaries were not included in the sale and have notbeen carried forward. 

The Financial Statements presented herein have been prepared by us inaccordance with the accounting policies described in our June 30, 2005 Annual Report onForm 10-KSB and should be read in conjunction with the Notes to Consolidated FinancialStatements which appear in that report.

The preparation of these financial statements in conformity withaccounting principles generally accepted in the United States requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities. On an on goingbasis, we evaluate our estimates, including those related intangible assets, income taxes,insurance obligations and contingencies and litigation. We base our estimates onhistorical experience and on various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparent from otherresources. Actual results may differ from these estimates under different assumptions orconditions.

In the opinion of management, the information furnished in this Form10-QSB reflects all adjustments necessary for a fair statement of the financial positionand results of operations and cash flows as of and for the three and six-month periodsended December 31, 2005 and 2004. All such adjustments are of a normal recurring nature.The Consolidated Financial Statements have been prepared in accordance with theinstructions to Form 10-QSB and therefore do not include some information and notesnecessary to conform with annual reporting requirements.
**"Fresh Start" Accounting: On September 4, 2002 all assetswere transferred to the chapter 7 trustee in settlement of all outstanding corporateobligations. We adopted "fresh-start" accounting as of September 5, 2002 inaccordance with procedures specified by AICPA Statement of Position ("SOP") No.90-7, "Financial Reporting by Entities in Reorganization under the BankruptcyCode."

On March 29, 2004, the U.S. Bankruptcy Court for the Southern Districtof Florida confirmed the order previously granted on March 15, 2004 for the sale ofPeregrine as a shell entity. All results for periods including and subsequent to September5, 2002 are referred to as those of the "Successor Company".

In accordance with SOP No. 90-7, the reorganized value of the Companywas allocated to the Company's assets based on procedures specified by SFAS No. 141,"Business Combinations". Each liability existing at the plan sale date, otherthan deferred taxes, was stated at the present value of the amounts to be paid atappropriate market rates. It was determined that the Company's reorganization valuecomputed immediately before September 5, 2002 was $0. We adopted "fresh-start"accounting because holders of existing voting shares immediately before filing andconfirmation of the sale received less than 50% of the voting shares of the emergingentity and its reorganization value is less than its post-petition liabilities and allowedclaims. 

The accounts of the former subsidiaries were not included in thebankruptcy sale and have not been carried forward.
***Change of Control:**On February 12, 2004, the Trustee forPeregrine and Park Avenue Group, Inc. entered into a contract resulting in a change incontrol of Peregrine. On March 15, 2004, the Bankruptcy Court granted an order approvingthe contract and finding that Park Avenue Group is a good faith purchaser within themeaning of 11 USC Section 363(m). On March 29, 2004, the U.S. Bankruptcy Court for theSouthern District of Florida confirmed the order previously granted on March 15, 2004. 

The confirmed Court order provided that the existing officers anddirectors were deemed removed from office and also authorized the following: (i)the appointment of new members to the board of directors; (ii) the amendment of theArticle of Incorporation to increase the number of authorized shares to 100,000,000shares; (iii) the issuance of up to 30,000,000 shares of common stock, par value $0.0001to the new management;(iv) the authority to implement a reverse split of the issued andoutstanding shares in a ratio to be determined by the board of directors; (v) thecancellation and extinguishment of all common share conversion rights of any kind,including without limitation, warrants, options, convertible bonds, other convertible debtinstruments and convertible preferred stock; and (vi) the cancellation and extinguishmentof all preferred shares of every series and accompanying conversion rights of any kind.
**2. Earnings/Loss Per Share

Basic earnings per share is computed by dividing income available tocommon shareholders (the numerator) by the weighted-average number of common sharesoutstanding (the denominator) for the period. Diluted earnings per share assume that anydilutive convertible securities outstanding were converted, with related preferred stockdividend requirements and outstanding common shares adjusted accordingly. It also assumesthat outstanding common shares were increased by shares issuable upon exercise of thosestock options for which market price exceeds the exercise price, less shares which couldhave been purchased by us with the related proceeds. In periods of losses, diluted lossper share is computed on the same basis as basic loss per share as the inclusion of anyother potential shares outstanding would be anti-dilutive.
**3. Stockholders' Equity *Common Stock

In July 2005, we issued 15,050,000 shares of common stock to relatedparties. 9,000,000 shares were issued to pay outstanding advances of $ 7,999 and 6,050,000shares, valued at $5,385, were issued to reflect the cost of services provided to ourcompany to meet ongoing reporting and compliance obligations. 
**4. New Accounting Standards

In December 2004, the FASB issued SFAS No. 123 (revised 2004)"Share-Based Payment," or SFAS No. 123(R). SFAS No. 123(R) revises FASBStatement No. 123 "Accounting for Stock-Based Compensation," and supersedes APBOpinion No. 25, and its related implementation guidance. This Statement eliminates theability to account for share-based compensation using the intrinsic value method under APBOpinion No. 25. SFAS No. 123(R) focuses primarily on accounting for transactions in whichan entity obtains employee services in share-based payment transactions. SFAS No. 123(R)requires a public entity to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award (withlimited exceptions). That cost will be recognized over the period during which an employeeis required to provide service in exchange for the award, known as the requisite serviceperiod, which is usually the vesting period. SFAS No. 123(R) is effective for companiesfiling under Regulation SB as of the beginning of the first interim or annual reportingperiod that begins after December 15, 2005, which for us will be our first quarter of theyear ending December 31, 2006. We anticipate adopting SFAS No. 123(R) beginning in thequarter ending March 31, 2006. Accordingly, the provisions of SFAS No. 123(R) will applyto new awards and to awards modified, repurchased, or cancelled after the requiredeffective date. Additionally, compensation cost for the portion of awards for which therequisite service has not been rendered that are outstanding as of the required effectivedate must be recognized as the requisite service is rendered on or after the requiredeffective date. These new accounting rules will lead to a decrease in reported earnings.Although our adoption of SFAS No. 123(R) could have a material impact on our financialposition and results of operations, we are still evaluating the potential impact fromadopting this statement.

In December 2004, the FASB issued SFAS No. 153, *"Exchanges ofNonmonetary Assets—an amendment of APB Opinion No. 29,"* which is effectivefor us starting July 1, 2005. In the past, we were frequently required to measure thevalue of assets exchanged in non-monetary transactions by using the net book value of theasset relinquished. Under SFAS No. 153, we will measure assets exchanged at fair value, aslong as the transaction has commercial substance and the fair value of the assetsexchanged is determinable within reasonable limits. A non-monetary exchange has commercialsubstance if the future cash flows of the entity are expected to change significantly as aresult of the exchange. The adoption of SFAS No. 153 is not anticipated to have a materialeffect on our consolidated financial position, results of operations or cash flows.

In September 2004, the EITF reached a consensus regarding IssueNo. 04-1, "Accounting for Preexisting Relationships Between the Parties to aBusiness Combination" ("EITF 04-1"). EITF 04-1 requires an acquirer in abusiness combination to evaluate any preexisting relationship with the acquiree todetermine if the business combination in effect contains a settlement of the preexistingrelationship. A business combination between parties with a preexisting relationshipshould be viewed as a multiple element transaction. EITF 04-1 is effective for businesscombinations after October 13, 2004, but requires goodwill resulting from priorbusiness combinations involving parties with a preexisting relationship to be tested forimpairment by applying the guidance in the consensus. We will apply EITF 04-1 toacquisitions subsequent to the effective date and in our future goodwill impairmenttesting. 

In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, orFAS 109-2, *"Accounting and Disclosure Guidance for the Foreign EarningsRepatriation Provision within the American Jobs Creations Act of 2004."* The AJCAintroduces a limited time 85% dividends received deduction on the repatriation of certainforeign earnings to a U.S. taxpayer (repatriation provision), provided certain criteriaare met. FAS No. 109-2 provides accounting and disclosure guidance for the repatriationprovision. Although FAS 109-2 is effective immediately, we have not begun our analysis anddo not expect to be able to complete our evaluation of the repatriation provision untilafter Congress or the Treasury Department provides additional clarifying language on keyelements of the provision

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes andError Corrections," which

replaces APB Opinion No. 20 "Accounting Changes," and FASBStatement No. 3 "Reporting Accounting Changes in Interim Financial Statements,"and changes the requirements for the accounting for and reporting of a change inaccounting principle. This Statement requires retrospective application to priorperiods’ financial statements of changes in accounting principle, unless it isimpracticable to determine either the period-specific effects or the cumulative effect ofthe change. This Statement shall be effective for accounting changes and corrections oferrors made in fiscal years beginning after December 15, 2005. Early adoption is permittedfor accounting changes and corrections of errors made in fiscal years beginning after thedate this Statement is issued. We do not believe that adoption of SFAS 154 will have amaterial impact on our financial statements.*************** |
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