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APT SATELLITE TELECOMMUNICATIONS LIMITED




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    2Balance Sheets as of December 31, 2004 and 2005
    
    
    3 & 4Statements of Operations for the years ended
December 31, 2003, 2004 and 2005
    
    
    5Statements of Changes in Equity
for the years ended December 31, 2003, 2004 and 2005
    
    
    6Statements of Cash Flows for the years ended
December 31, 2003, 2004 and 2005
    
    
    7Notes to Financial Statements
    
    
    8-27
 1




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
         2




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2005
 December 31,Note
    
    2004
    
    2005
    
    2005(restated)HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    438
    
    
    
    4,379
    
    
    
    562Pledged bank deposits
    
    
    7
    (b)
    
    
    1,429
    
    
    
    
    
    
    
    Trade receivables
    
    
    
    
    
    
    16
    
    
    
    87
    
    
    
    11Deposits, prepayments and other receivables
    
    
    
    
    
    
    1,707
    
    
    
    1,712
    
    
    
    219Total current assets
    
    
    
    
    
    
    3,590
    
    
    
    6,178
    
    
    
    792Investment property
    
    
    5
    
    
    
    150,000
    
    
    
    137,000
    
    
    
    17,564TOTAL ASSETS
    
    
    
    
    
    
    153,590
    
    
    
    143,178
    
    
    
    18,356
  3




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 BALANCE SHEETS (continued)
AS OF DECEMBER 31, 2004 AND 2005
 December 31,Note
    
    2004
    
    2005
    
    2005(restated)HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)LIABILITIES AND EQUITYCurrent liabilitiesTrade and other payables
    
    
    6
    
    
    
    17,728
    
    
    
    17,094
    
    
    
    2,192Amounts due to related companies
    
    
    
    
    
    
    3,553
    
    
    
    5,953
    
    
    
    763Total current liabilities
    
    
    
    
    
    
    21,281
    
    
    
    23,047
    
    
    
    2,955Amount due to a related company
    
    
    
    
    
    
    10,800
    
    
    
    8,100
    
    
    
    1,038Amounts due to shareholders
    
    
    
    
    
    
    103,844
    
    
    
    107,956
    
    
    
    13,841TOTAL LIABILITIES
    
    
    
    
    
    
    135,925
    
    
    
    139,103
    
    
    
    17,834Contingencies and commitments
    
    
    7Shareholders equityCapital stock  Common stock
    
    
    8
    
    
    
    153,792
    
    
    
    153,792
    
    
    
    19,717Accumulated losses
    
    
    
    
    
    
    (136,127
    )
    
    
    (149,717
    )
    
    
    (19,195
    )Total shareholders equity
    
    
    
    
    
    
    17,665
    
    
    
    4,075
    
    
    
    522TOTAL LIABILITIES AND EQUITY
    
    
    
    
    
    
    153,590
    
    
    
    143,178
    
    
    
    18,356
  4




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Years ended December 31,Note
    
    2003
    
    2004
    
    2005
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)Operating revenuesService income received from:Unaffiliated customers
    
    
    
    
    
    
    17,546
    
    
    
    1,508
    
    
    
    1,729
    
    
    
    222Related parties
    
    
    11
    
    
    
    6,641
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    
    
    
    
    24,187
    
    
    
    1,508
    
    
    
    1,729
    
    
    
    222Costs and expensesCost of service including depreciation
and amortization of 2003: HK$2,852,
2004: HK$nil and 2005: HK$nil
    
    
    
    
    
    
    (32,493
    )
    
    
    (1,546
    )
    
    
    (1,897
    )
    
    
    (243
    )Selling, general and administrative
    
    
    
    
    
    
    (22,418
    )
    
    
    (907
    )
    
    
    (478
    )
    
    
    (61
    )Total costs and expenses
    
    
    
    
    
    
    (54,911
    )
    
    
    (2,453
    )
    
    
    (2,375
    )
    
    
    (304
    )(30,724
    )
    
    
    (945
    )
    
    
    (646
    )
    
    
    (82
    )Other operating revenuesInterest income  net
    
    
    
    
    
    
    130
    
    
    
    16
    
    
    
    56
    
    
    
    7Other income
    
    
    
    
    
    
    1,734
    
    
    
    3
    
    
    
    
    
    
    
    Impairment loss recognized in respect
of property, plant and equipment,
and other assets
    
    
    
    
    
    
    (89,018
    )
    
    
    
    
    
    
    
    
    
    
    Valuation gain/(loss) recognized in respect
of investment property
    
    
    
    
    
    
    14,000
    
    
    
    (4,000
    )
    
    
    (13,000
    )
    
    
    (1,667
    )Loss before income taxes
    
    
    12
    (c)
    
    
    (103,878
    )
    
    
    (4,926
    )
    
    
    (13,590
    )
    
    
    (1,742
    )Provision for income taxes
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    (103,878
    )
    
    
    (4,926
    )
    
    
    (13,590
    )
    
    
    (1,742
    )
  5




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Revaluation
    
    AccumulatedNote
    
    Capital stock
    
    reserves
    
    losses
    
    TotalHK$
    
    HK$
    
    HK$
    
    HK$Balance at 1 January 2003 as previously reported
    
    
    
    
    
    
    88,300
    
    
    
    
    
    
    
    (27,323
    )
    
    
    60,977Share issued
    
    
    
    
    
    
    65,492
    
    
    
    
    
    
    
    
    
    
    
    65,492Net loss for the year (restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,878
    )
    
    
    (103,878
    )Balance at 31 December 2003 (restated)
    
    
    
    
    
    
    153,792
    
    
    
    
    
    
    
    (131,201
    )
    
    
    22,591Balance at 1 January 2004 as
previously reported
    
    
    
    
    
    
    153,792
    
    
    
    14,000
    
    
    
    (145,201
    )
    
    
    22,591Prior period adjustment arising from changes in
accounting policies under:- HKAS 40
    
    
    4
    (a)
    
    
    
    
    
    
    (14,000
    )
    
    
    14,000
    
    
    
    At 1 January 2004 (restated)
    
    
    
    
    
    
    153,792
    
    
    
    
    
    
    
    (131,201
    )
    
    
    22,591Net loss for the year (restated and unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,926
    )
    
    
    (4,926
    )Balance at 31 December 2004 (restated and
unaudited)
    
    
    
    
    
    
    153,792
    
    
    
    
    
    
    
    (136,127
    )
    
    
    17,665Balance at 1 January 2005 as
previously reported (unaudited)
    
    
    
    
    
    
    153,792
    
    
    
    10,000
    
    
    
    (146,127
    )
    
    
    17,665Prior period adjustment arising from changes in
accounting policies under:- HKAS 40 (unaudited)
    
    
    4
    (a)
    
    
    
    
    
    
    (10,000
    )
    
    
    10,000
    
    
    
    At 1 January 2005 (restated and unaudited)
    
    
    
    
    
    
    153,792
    
    
    
    
    
    
    
    (136,127
    )
    
    
    17,665Net loss for the year (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,590
    )
    
    
    (13,590
    )Balance at 31 December 2005 (unaudited)
    
    
    
    
    
    
    153,792
    
    
    
    
    
    
    
    (149,717
    )
    
    
    4,075
  6




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Years ended December 31,2003
    
    2004
    
    2005
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)Operating activitiesLoss before income taxes
    
    
    (103,878
    )
    
    
    (4,926
    )
    
    
    (13,590
    )
    
    
    (1,742
    )Adjustments for:Depreciation and amortization
    
    
    2,852
    
    
    
    
    
    
    
    
    
    
    
    Impairment losses recognized
    
    
    89,018
    
    
    
    
    
    
    
    
    
    
    
    Net valuation (gain)/loss on investment property
    
    
    (14,000
    )
    
    
    4,000
    
    
    
    13,000
    
    
    
    1,667Interest income
    
    
    (130
    )
    
    
    (16
    )
    
    
    (56
    )
    
    
    (7
    )Provision for bad debts written back
    
    
    
    
    
    
    
    
    
    
    (185
    )
    
    
    (24
    )Provision for bad debts
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposal of property, plant and equipment,
and other assets
    
    
    (1,377
    )
    
    
    
    
    
    
    
    
    
    
    Operating loss before changes in working capital
    
    
    (27,451
    )
    
    
    (942
    )
    
    
    (831
    )
    
    
    (106
    )Decrease in trade receivables
    
    
    1,303
    
    
    
    1,653
    
    
    
    114
    
    
    
    15Decrease in amounts due from related companies
    
    
    93
    
    
    
    947
    
    
    
    
    
    
    
    Decrease/(increase) in deposits, prepayments and other
receivables
    
    
    1,164
    
    
    
    (86
    )
    
    
    (5
    )
    
    
    (1
    )Increase/(decrease) in trade and other payables
    
    
    13,559
    
    
    
    (14,554
    )
    
    
    (634
    )
    
    
    (81
    )Increase/(decrease) in amounts due to related companies
    
    
    14,408
    
    
    
    (156
    )
    
    
    (300
    )
    
    
    (38
    )Net cash from/(used in) operating activities
    
    
    3,076
    
    
    
    (13,138
    )
    
    
    (1,656
    )
    
    
    (211
    )Investing activitiesPayment for the purchase of property, plant and equipment
    
    
    (90,028
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment,
and other assets
    
    
    12,359
    
    
    
    
    
    
    
    
    
    
    
    Interest received
    
    
    130
    
    
    
    16
    
    
    
    57
    
    
    
    7Decrease/(increase) in pledged bank deposits
    
    
    9,139
    
    
    
    (3
    )
    
    
    1,429
    
    
    
    183Net cash (used in)/from investing activities
    
    
    (68,400
    )
    
    
    13
    
    
    
    1,486
    
    
    
    190Financing activitiesAdvances from shareholders
    
    
    8,908
    
    
    
    
    
    
    
    4,111
    
    
    
    527Proceeds from shares issued
    
    
    65,492
    
    
    
    
    
    
    
    
    
    
    
    Net cash from financing activities
    
    
    74,400
    
    
    
    
    
    
    
    4,111
    
    
    
    527Net cash and cash equivalents
    
    
    9,076
    
    
    
    (13,125
    )
    
    
    3,941
    
    
    
    506Cash and cash equivalents at January 1,
    
    
    4,487
    
    
    
    13,563
    
    
    
    438
    
    
    
    56Cash and cash equivalents at December 31,
    
    
    13,563
    
    
    
    438
    
    
    
    4,379
    
    
    
    562Analysis of the balance of cash and cash equivalentsDeposits with banks
    
    
    9,352
    
    
    
    393
    
    
    
    3,985
    
    
    
    511Cash at bank and in hand
    
    
    4,211
    
    
    
    45
    
    
    
    394
    
    
    
    51Cash and cash equivalents at December 31,
    
    
    13,563
    
    
    
    438
    
    
    
    4,379
    
    
    
    562
  7




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIESAPT Satellite Telecommunications Limited (the Company) is a private limited company
incorporated in Hong Kong.The Company completed the reorganization on October 10, 2003, whereby its entire cable
interests were sold to Singapore Telecommunications Limited, the immediate holding company
of one of the Companys shareholders at HK$5,560; while the Fixed Carrier Licence and all
its related business were sold to APT Telecom Services Limited, the fellow subsidiary of
another shareholder of the Company at HK$6,800, respectively. A surrender of service and
facilities leasing agreement between the Company and APT Satellite Company Limited, the
holding company of one of the Companys shareholders, was executed on the same date in
respect of a premises of 6,850 sq. ft. located at the Tai Po Industrial Estate for a total
compensation of HK$13,500 by 5 equal instalments with the first payment date being February
1, 2005.The principal activities of the Company had been engaging in the provision of
telecommunication services under the Fixed Carrier Licence. After the completion of the
construction of the building on June 24, 2003 and the reorganization, the Company is engaged
in property leasing and related facilities management services.2.
    
    BASIS OF PRESENTATIONThe financial statements have been prepared in accordance with all applicable Hong Kong
Financial Reporting Standards (HKFRSs), which collective term includes all applicable
individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs)
and Interpretations issued by the Hong Kong Institute of Certified Public Accountants
(HKICPA), accounting principles generally accepted in Hong Kong (HK GAAP). Significant
difference between HK GAAP and accounting principles generally accepted in the United States
of America (US GAAP) are summarized in note 15.The HKICPA has issued a number of new and revised HKFRSs that are effective or
available for early adoption for accounting periods beginning on or after January 1,
2005. Information on the changes in accounting policies resulting from initial
application of these new and revised HKFRSs for the current and prior accounting
periods reflected in these financial statements is provided in note 4.The measurement basis used in the preparation of the financial statements is
historical cost modified by the revaluation of investment properties as explained in
the accounting policies set out below.The financial statements of the Company are expressed in Hong Kong dollars (HK$). The
translations of amounts from Hong Kong dollars into United States dollars for convenience of
the reader have been made at the rate on December 31, 2005 of HK$7.80 = US$1.00 , which
approximates the noon buying rate in New York City for cable transfers in Hong Kong Dollars
as certified for customs purposes by the Federal Reserve Bank of New York on December 31,
2005. No representation is made that the Hong Kong dollar amounts could have been, or
could be,
converted into United States dollars at that rate or at any other certain rate on December
31, 2005, or any other certain date.
 8




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a)
    
    Investment propertyInvestment properties are land and/or buildings which are owned or held under a
leasehold interest to earn rental income and/or for capital appreciation. These
include land held for a currently undetermined future use.Investment properties are stated in the balance sheet at fair value. Any gain or loss
arising from a change in fair value or from the retirement or disposal of an
investment property is recognised in profit or loss. Rental income from investment
properties is accounted for as described in (note 3(g)(i)).When the Company holds a property interest under an operating lease to earn rental
income and/or for capital appreciation, the interest is classified and accounted
for as an investment property on a property-by-property basis. Any such property
interest which has been classified as an investment property is accounted for as if
it were held under a finance lease, and the same accounting policies are applied to
that interest as are applied to other investment properties leased under finance
leases.(b)
    
    Impairment of other assetsInternal and external sources of information are reviewed at each balance sheet date
to identify indications that trade and other receivables may be impaired or an
impairment loss previously recognised no longer exists or may have decreased.If any such indication exists, the assets recoverable amount is estimated. In
addition, for goodwill, intangible assets that are not yet available for use and
intangible assets that have indefinite useful lives, the recoverable amount is
estimated annually whether or not there is any indication of impairment.
 -
    
    Calculation of recoverable amountThe recoverable amount of an asset is the greater of its net selling price
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and the risks specific to the
asset. Where an asset does not generate cash inflows largely independent of
those from other assets, the recoverable amount is determined for the smallest
group of assets that generates cash inflows independently (i.e. a
cash-generating unit).-
    
    Recognition of impairment lossesAn impairment loss is recognised in the income statement whenever the carrying
amount of an asset, or the cash-generating unit to which it belongs, exceeds its
recoverable amount. Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generating unit (or group of units) and then, to reduce
the carrying amount of the other assets in the unit (or group of units) on a pro
rata basis, except that the carrying value of an asset will not be reduced below
its individual fair value less costs to sell, or value in use, if determinable.
 9




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APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (b)
    
    Impairment of other assets (continued)
 -
    
    Reversals of impairment lossesIn respect of assets other than goodwill, an impairment loss is reversed if
there has been a favourable change in the estimates used to determine the
recoverable amount. An impairment loss in respect of goodwill is not reversed.A reversal of impairment losses is limited to the assets carrying amount that
would have been determined had no impairment loss been recognised in prior
years. Reversals of impairment losses are credited to the income statement in
the year in which the reversals are recognised.
 (c)
    
    Trade and other receivablesTrade and other receivables are initially recognised at fair value and thereafter
stated at amortised cost less impairment losses for bad and doubtful debts (see note
3(b)), except where the receivables are interest-free loans made to related parties
without any fixed repayment terms. In such cases, the receivables are stated at cost
less impairment losses for bad and doubtful debts.(d)
    
    Trade and other payablesTrade and other payables are initially recognised at fair value and thereafter stated
at amortised cost unless the effect of discounting would be immaterial, in which case
they are stated at cost.(e)
    
    Cash and cash equivalentsCash and cash equivalents comprise cash at bank and on hand, demand deposits with
banks, and short-term, highly liquid investments that are readily convertible into
known amounts of cash and which are subject to an insignificant risk of changes in
value, having been within three months of maturity at acquisition. None of the
Companys cash and cash equivalents is restricted as to withdrawal.(f)
    
    Income taxIncome tax for the year comprises current tax and movements in deferred tax assets
and liabilities. Current tax and movements in deferred tax assets and liabilities
are recognized in the statements of operations except to the extent that they
relate to items recognized directly in equity, in which case they are recognized in
equity.
 10




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (f)
    
    Income tax (continued)Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.Deferred tax assets and liabilities arise from deductible and taxable
temporary differences respectively, being the differences between the carrying
amounts of assets and liabilities for financial reporting purposes and their tax
bases. Deferred tax assets also arise from unused tax losses and unused tax
credits.Apart from certain limited exceptions, all deferred tax liabilities, and all
deferred tax assets to the extent that it is probable that future taxable profits
will be available against which the asset can be utilized, are recognized. Future
taxable profits that may support the recognition of deferred tax assets arising
from deductible temporary differences include those that will arise from the
reversal of existing taxable temporary differences, provided those differences
relate to the same taxation authority and the same taxable entity, and are expected
to reverse either in the same period as the expected reversal of the deductible
temporary difference or in periods into which a tax loss arising from the deferred
tax asset can be carried back or forward. The same criteria are adopted when
determining whether existing taxable temporary differences support the recognition
of deferred tax assets arising from unused tax losses and credits, that is, those
differences are taken into account if they relate to the same taxation authority
and the same taxable entity, and are expected to reverse in a period, or periods,
in which the tax loss or credit can be utilised.The limited exceptions to recognition of deferred tax assets and liabilities are
those temporary differences arising from the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit (provided they are
not part of a business combination), and temporary differences relating to
investments in subsidiaries to the extent that, in the case of taxable differences,
the Company controls the timing of the reversal and it is probable that the
differences will not reverse in the foreseeable future, or in the case of
deductible differences, unless it is probable that they will reverse in the future.The amount of deferred tax recognized is measured based on the expected manner of
realization or settlement of the carrying amount of the assets and liabilities,
using tax rates enacted or substantively enacted at the balance sheet date.
Deferred tax assets and liabilities are not discounted.The carrying amount of a deferred tax asset is reviewed at each balance sheet date
and is reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow the related tax benefit to be utilized. Any such
reduction is reversed to the extent that it becomes probable that sufficient
taxable profit will be available.Additional income taxes that arise from the distribution of dividends are
recognised when the liability to pay the related dividends is recognised.
 11




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (f)
    
    Income tax (continued)Current tax balances and deferred tax balances, and movements therein, are
presented separately from each other and are not offset. Current tax assets are
offset against current tax liabilities, and deferred tax assets against deferred
tax liabilities if, and only if, the Company has the legally enforceable right to
set off current tax assets against current tax liabilities and the following
additional conditions are met:
 -
    
    in the case of current tax assets and liabilities, the Company
intends either to settle on a net basis, or to realize the asset and settle
the liability simultaneously; or-
    
    in the case of deferred tax assets and liabilities, if they
relate to income taxes levied by the same taxation authority on either:
 -
    
    the same taxable entity; or-
    
    different taxable entities, which, in each future period
in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered, intend to realise the current tax
assets and settle the current tax liabilities on a net basis or realise and
settle simultaneously.
 12




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (g)
    
    Revenue recognitionProvided it is probable that the economic benefits will flow to the Company and the
revenue and costs, if applicable, can be measured reliably, revenue is recognized
in the statement of operations as follows:
 (i)
    
    Rental income from operating leasesRental income receivable under operating leases is recognized in the
statement of operations in equal instalments over the accounting periods
covered by the lease term. Lease incentives granted are recognised in the
statement of operations as an integral part of the aggregate net lease
payments receivable.(ii)
    
    Service incomeService income in respect of provision of satellite-based
telecommunications and related service is recognized when services are
provided.(iii)
    
    Interest incomeInterest income from bank deposits is accrued on a time-apportioned basis by
reference to the principal outstanding and the rate applicable.
 (h)
    
    Translation of foreign currenciesForeign currency transactions during the year are translated into Hong Kong dollars
at the foreign exchange rates ruling at the transaction dates. Monetary assets
and liabilities denominated in foreign currencies are translated into Hong
Kong dollars at the foreign exchange rates ruling at the balance sheet date.
Exchange gains and losses are recognised in the statement of operations.
 13




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (i)
    
    Related partiesFor the purposes of these financial statements, parties are considered to be
related to the Company if the Company has the ability, directly or indirectly, to
control the party or exercise significant influence over the party in making
financial and operating decisions, or vice versa, or where the Company and the
party are subject to common control or common significant influence. Related
parties may be individuals (being members of key management personnel, significant
shareholders and/or their close family members) or other entities and include
entities which are under the significant influence of related parties of the
Company where those parties are individuals, and post-employment benefit plans
which are for the benefit of employees of the Company or of any entity that is a
related party of the Company.(j)
    
    Use of estimatesThe preparation of financial statements in conformity with HKFRSs requires management
judgements, estimates any assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which estimate is revised if
the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.Judgements made by management in the application of HKFRSs that have significant
effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are discussed in note 13.
 4.
    
    CHANGES IN ACCOUNTING POLICIESThe HKICPA has issued a number of new and revised HKFRSs that are effective for accounting
periods beginning on or after January 1, 2005.The accounting policies of the Company after the adoption of these new and revised HKFRSs
have been summarized in note 3. The following sets out information on the significant
changes in accounting policies for the current and prior accounting periods reflected in
these financial statements.The Company has not applied any new standard or interpretation that is not yet effective for
the current accounting period (see note 14).
 14




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 4.
    
    CHANGES IN ACCOUNTING POLICIES (continued)
 (a)
    
    Investment properties (HKAS 40, Investment property)Changes in accounting policies relating to investment properties are as follows.Timing of recognition of movements in fair value in the income statementIn prior years, movements in the fair value of the Companys investment properties were
recognized directly in the investment properties revaluation reserve except when, on a
portfolio basis, the reserve was insufficient to cover a deficit on the portfolio, or
when a deficit previously recognized in the income statement had reversed, or when an
individual investment property was disposed of. In these limited circumstances movements
in the fair value were recognized in the income statement.Upon adoption of HKAS 40 as from January 1, 2005, all changes in the fair value of
investment properties are recognized directly in the income statement in accordance with
the fair value model in HKAS 40.These changes in accounting policy have been adopted retrospectively by increasing the
opening balance of retained earnings as of January 1, 2004 and
2005 by HK$14,000 and
HK$10,000 respectively, to include all of the Companys previous investment properties
revaluation reserve.As a result of this new policy, the Companys loss before income taxes has decreased by
HK$14,000 for the year ended December 31, 2003 and has increased by HK$4,000 and
HK$13,000 for the year ended December 31, 2004 and 2005 respectively.(b)
    
    Definition of related parties (HKAS 24, Related party disclosures)As a result of the adoption of HKAS 24, Related party disclosures, the definition of
related parties as disclosed in note 3(i) has been expanded to clarify that related
parties include entities that are under the significant influence of a related party
that is an individual (i.e. key management personnel, significant shareholders and/or
their close family members) and post-employment benefit plans which are for the benefit
of employees of the Company or of any entity that is a related party of the Company. The
clarification of the definition of related parties has not resulted in any material
changes to the previously reported disclosures of related party transactions nor has it
had any material effect on the disclosures made in the current period, as compared to
those that would have been reported had SSAP 20, Related party disclosures, still been
in effect.
 15




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 5.
    
    INVESTMENT PROPERTYThe investment property was revalued at December 31, 2004 and 2005 at HK$150,000 and
HK$137,000, respectively, by American Appraisal China Limited, an independent professional
property valuer, on an open market value basis by reference to net rental income allowing
for reversionary income potential. The revaluation deficit of HK$4,000 and HK$13,000 has
been charged to the statements of operations for the years ended December 31, 2004 and
2005, respectively.The investment property is located on a medium-term leasehold land in Hong Kong.
 Investment propertyHK$(unaudited)Cost or valuation:At January 1, 2005
    
    
    150,000Deficit on revaluation
    
    
    (13,000
    )At December 31, 2005, at valuation (unaudited)
    
    
    137,000
 6.
    
    TRADE AND OTHER PAYABLES
 2004
    
    2005HK$
    
    HK$(unaudited)
    
    (unaudited)Accrued costs for construction
of investment property
    
    
    13,990
    
    
    
    13,990Trade and other payables
    
    
    3,738
    
    
    
    3,10417,728
    
    
    
    17,094
 7.
    
    CONTINGENCIES AND COMMITMENTS
 (a)
    
    Leasing arrangements  operating lease:The Company as lessorAt December 31, 2004 and 2005, the Company had contracted with a third party for
future minimum lease payments under non-cancellable operating lease in respect of
leasing of property which fall due within one year amounting to HK$1,638 and HK$131,
and after one but within five years amounting to HK$137 and HK$nil.(b)
    
    At December 31, 2004 and 2005, the Company had pledged bank deposits amounted
to HK$1,429 and HK$nil, respectively, with a bank to secure general banking facilities
granted to the Company.
 16




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 8.
    
    COMMON STOCK
 Issued andNumber
    
    
    fully paidof shares
    
    
    capital stockHK$Ordinary shares of HK$1 each
Balance at December 31, 2004 and
at December 31, 2005 (unaudited)
    
    
    153,792
    
    
    
    153,792
 The Companys authorized share capital is 1,000,000 shares of HK$1 each. There were no
changes in the Companys authorized share capital during either year.9.
    
    INCOME TAXES IN THE STATEMENT OF OPERATIONSNo provision for Hong Kong Profits Tax has been made in the financial statements as the
Company has no assessable profit for the years ended December 31, 2003, 2004 and 2005.Reconciliation between tax expense and accounting loss at the applicable tax rates:
 Years ended December 31,2003
    
    2004
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Loss before income taxes
    
    
    (103,878
    )
    
    
    (4,926
    )
    
    
    (13,590
    )Notional tax on loss before tax, calculated at the
rates applicable to losses in Hong Kong
    
    
    (18,179
    )
    
    
    (862
    )
    
    
    (2,378
    )Tax effect of non-deductible expenses
    
    
    17,879
    
    
    
    5
    
    
    
    1Tax effect of non-taxable revenue
    
    
    (203
    )
    
    
    (2
    )
    
    
    (10
    )Tax effect of unused tax losses not recognized
    
    
    503
    
    
    
    859
    
    
    
    2,387Actual tax expenses
    
    
    
    
    
    
    
    
    
    
    
 10.
    
    INCOME TAXES IN THE BALANCE SHEETDeferred tax assets not recognized:The Company has not recognized deferred tax assets in respect of tax losses of HK$57,734 and
HK$65,075 and other deductible temporary differences of HK$2,135 and HK$8,462 as the
realization of the assets was considered not probable as at December 31, 2004 and 2005,
respectively. The tax losses do not expire under current tax legislation.
 17




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 11.
    
    RELATED PARTY TRANSACTIONSDuring the years ended December 31, 2003, 2004 and 2005, the Company entered into the
following transactions with related parties:
 Years ended December 31,Note
    
    2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Expenses in connection with the provison
of satellite transponder capacity and other
telecommunication network facilities paid
and payable to group companies of the
Companys shareholders
    
    (i)
    
    
    11,202
    
    
    
    
    
    
    
    Income from provision of satellite transponder
capacity and other telecommunication
network facilities received and receivable
from the group companies of one of the
Companys shareholders
    
    (i)
    
    
    6,641
    
    
    
    
    
    
    
    Management services fee paid and payable
to the immediate holding companies of
the Companys shareholders
    
    (ii)
    
    
    2,243
    
    
    
    480
    
    
    
    480Operating and maintenance charges paid and
payable to a fellow subsidiary of one of the
Companys shareholders
    
    (iii)
    
    
    1,584
    
    
    
    
    
    
    
    Compensation payable to the immediate
holding company of one of the Companys
shareholder for early termination of
services and facilities lease
    
    (iv)
    
    
    13,500
    
    
    
    
    
    
    
    Sale of plant and equipment, and other assets to
the immediate holding company of one of
the Companys shareholders
    
    (v)
    
    
    5,560
    
    
    
    
    
    
    
    Sale of other assets to the fellow subsidiary of
another shareholder of the Company
    
    (v)
    
    
    6,800
    
    
    
    
    
    
    
    
 18




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 11.
    
    RELATED PARTY TRANSACTIONS (continued)Notes:
 (i)
    
    The terms and conditions of these lease agreements were determined with
reference to comparable market price.(ii)
    
    Management services fee paid and payable arose from a reimbursement of cost of
service provided by the immediate holding companies of the Companys shareholders under
the management services agreement.(iii)
    
    Operating and maintenance charges were paid based on mutually agreed terms.(iv)
    
    As a result of the reorganization of the Company, the Company early terminated
the services and facilities lease agreement and the immediate holding company of a
Companys shareholder received a compensation for the early termination of the
agreement.(v)
    
    As a result of the reorganization of the Company, plant and equipment, and
other assets are sold to the immediate holding company of one of the Companys
shareholders and the fellow subsidiary of another shareholder of the Company. The
directors consider that the proceeds from sales of plant and equipment, and other
assets are arrived after arms length negotiation with reference to the valuation
conducted by an independent valuation company.
 19




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 12.
    
    SUPPLEMENTAL INFORMATION
 (a)
    
    Other operating revenuesOther operating revenues include the following:
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Exchange gain
    
    
    6
    
    
    
    
    
    
    
    Gain on disposal of property, plant and
equipment and other assets
    
    
    1,377
    
    
    
    
    
    
    
    
 (b)
    
    Staff costs
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Refund from defined
contribution plan
    
    
    (117
    )
    
    
    
    
    
    
    Salaries, wages and other benefits
    
    
    4,412
    
    
    
    
    
    
    
    4,295
    
    
    
    
    
    
    
    
 (c)
    
    Loss before income taxes
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Loss before income taxes has been arrived
at after charging:Amortization on other assets (included in
administrative expenses)
    
    
    772
    
    
    
    
    
    
    
    Provision for bad debts
    
    
    64
    
    
    
    
    
    
    
    Provision for bad debts written back
    
    
    
    
    
    
    
    
    
    
    (185
    )Compensation for early termination of
services and facilities lease (included in
administrative expenses)
    
    
    13,500
    
    
    
    
    
    
    
    Depreciation
    
    
    2,080
    
    
    
    
    
    
    
    
 20




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 13.
    
    ACCOUNTING ESTIMATES AND JUDGEMENTSKey sources of estimation uncertaintyThe financial statements are based on the selection and application of significant
accounting policies, which require management to make significant estimates and assumptions
that affect the reported amount of assets and liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results may differ from these estimates under different assumptions or
conditions.14.
    
    POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
FOR THE ANNUAL ACCOUNTING PERIOD ENDED DECEMBER 31, 2005Up to the date of issue of these financial statements, the HKICPA has issued the following
amendments, new standards and interpretations which are not yet effective for the accounting
period ending December 31, 2005 and which have not been adopted in these financial
statements:
 Effective for accountingperiods beginning on orafterAmendments to HKAS 39, Financial instruments: Recognition and
measurement:- Cash flow hedge accounting of forecast intragroup transactions
    
    January 1, 2006- The fair value option
    
    January 1, 2006- Financial guarantee contracts
    
    January 1, 2006Amendments, as a consequence of the Hong Kong Companies
(Amendment) Ordinance 2005, to:- HKAS 1, Presentation of financial statements
    
    January 1, 2006- HKAS 27, Consolidated and separate financial statements
    
    January 1, 2006- HKFRS 3, Business combinations
    
    January 1, 2006HKFRS 7, Financial instruments: disclosures
    
    January 1, 2007Amendment to HKAS 1, Presentation of financial statements:capital disclosures
    
    January 1, 2007
   21




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAPThe Companys accounting policies conform with generally accepted accounting
principles in Hong Kong (HK GAAP) which differ in certain significant respects from
those applicable generally accepted accounting principles in the United States of
America (US GAAP).As further described in note 4, the Group adopted all applicable HKASs that required
initial adoption in 2005. As a result, certain amounts under HK GAAP for the years
ended December 31, 2003 and 2004 were required to and have been restated to comply
with those 2005 initial adoption requirements. Consequently, the amounts of certain
differences between HK GAAP and US GAAP for the years ended December 31, 2003 and
2004 have been restated as a result of the initial adoption of certain HKASs in 2005
that required retrospective application ad follows:
 As
    
    Effects ofpreviously
    
    adopting
    
    AsReconciliation of net income to US GAAP
    
    reported
    
    HKAS 40
    
    restatedHK$
    
    HK$
    
    HK$2003Loss attributable to the equity shareholders in
accordance with HK GAAP
    
    
    (117,878
    )
    
    
    14,000
    
    
    
    (103,878
    )Adjustments required under US GAAP
Revaluation of investment properties
    
    
    
    
    
    
    (14,000
    )
    
    
    (14,000
    )2004 - unauditedLoss attributable to the equity shareholders in
accordance with HK GAAP
    
    
    (926
    )
    
    
    (4,000
    )
    
    
    (4,926
    )Adjustments required under US GAAP
Revaluation of investment properties
    
    
    
    
    
    
    4,000
    
    
    
    4,000
  22




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
  (i)
    
    Investment properties revaluation and depreciationIn prior years under HKGAAP, movements in the fair value of the Companys
investment properties were recognised directly in the investment properties
revaluation reserve except when, on a portfolio basis, the reserve was
insufficient to cover a deficit on the portfolio, or when a deficit
previously recognised in the income statement had reversed, or when an
individual investment property was disposed of. In these limited
circumstances movements in the fair value were recognised in the income
statement. Upon adoption of new HK GAAP as from January 1, 2005, all changes
in the fair value of investment properties are recognised directly in the
income statement in accordance with the fair value model.Under US GAAP, investment properties are stated at cost and depreciated over
the shorter of the useful life and the land lease terms. Accordingly, the
investment properties of the Company, which are stated at open market value,
have been restated at historical cost less accumulated depreciation.Depreciation has been based on the historical cost of the property held by
the Company and the useful life of such property at 44 years. The gross
historical cost of property held by the Company subject to depreciation under
US GAAP which were not depreciated under HK GAAP at December 31, 2004 and
2005 amounted to HK$140,000 and HK$140,000, respectively.In the US GAAP reconciliation of net loss for the year
ended December 31, 2005, the adjustments represent the reversal of
revaluation loss in respect of the property held by the Company of
HK$13,000 (2004: HK$4,000; 2003: revaluation gain: HK$14,000) and the
depreciation in respect of the property held by the Company amounting
HK$3,182 (2004: HK$3,182; 2003: HK$1,591). In the US GAAP reconciliation
of shareholders equity at December 31, 2005, the adjustments represent
the reversal of revaluation deficit in respect of the investment property
of the Company of HK$3,000 (2004 revaluation gain: HK$10,000) and the
additional accumulated depreciation charged on the Companys property
under US GAAP amounting HK$7,955 (2004: HK$4,773).
 23




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (b)
    
    Net lossThe effect on net loss of differences between HK GAAP and US GAAP is as follows:
 Years ended December 31,2003
    
    2004
    
    2005
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)Net loss in accordance with
HK GAAP
    
    
    (103,878
    )(1)
    
    
    (4,926
    )(1)
    
    
    (13,590
    )
    
    
    (1,742
    )Adjustment required under US GAAP:Depreciation of investment
property
    
    
    (1,591
    )
    
    
    (3,182
    )
    
    
    (3,182
    )
    
    
    (408
    )Revaluation of investment
property
    
    
    (14,000
    )(1)
    
    
    4,000
    (1)
    
    
    13,000
    
    
    
    1,666Net loss in accordance with US
GAAP
    
    
    (119,469
    )
    
    
    (4,108
    )
    
    
    (3,772
    )
    
    
    (484
    )
 
 (1)
    
    With effect from January 1, 2005, HK GAAP has been converged in all material
respects with the international Financial Reporting Standards. Accordingly,
certain of the Company accounting polices have been changed in line with
adoption of the new standards (see note 4 to the financial statements). As a
result, certain comparative figures for the year ended December 31, 2003 and
2004 have been restated. 24




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (c)
    
    Shareholders EquityThe effect on shareholders equity of differences between HK GAAP and US GAAP is as
follows:
 December 31,2004
    
    2005
    
    2005HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)Shareholders equity in accordance
with HK GAAP
    
    
    17,665
    (1)
    
    
    4,075
    
    
    
    522Adjustments:Accumulated depreciation on
Investment property
    
    
    (4,773
    )
    
    
    (7,955
    )
    
    
    (1,020
    )Revaluation reserve
    
    
    (10,000
    )(1)
    
    
    3,000
    
    
    
    385Shareholders equity in accordance
with US GAAP
    
    
    2,892
    
    
    
    (880
    )
    
    
    (113
    )
  Capital
    
    Accumulatedstock
    
    lossesHK$
    
    HK$Balance at December 31, 2002
    
    
    88,300
    
    
    
    (27,323
    )New shares issued during the year
    
    
    65,492
    
    
    
    Net loss for the year
    
    
    
    
    
    
    (119,469
    )Balance at December 31, 2003
    
    
    153,792
    
    
    
    (146,792
    )Net loss for the year (unaudited)
    
    
    
    
    
    
    (4,108
    )Balance at December 31, 2004 (unaudited)
    
    
    153,792
    
    
    
    (150,900
    )Net loss for the year (unaudited)
    
    
    
    
    
    
    (3,772
    )Balance at December 31, 2005 (unaudited)
    
    
    153,792
    
    
    
    (154,672
    )
 25




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (d)
    
    Statements of operations and balance sheets under US GAAPThe impairment loss on property, plant and equipment, and other assets is presented
as part of costs and expenses under US GAAP.The statements of operations under US GAAP is as follows:
 Years ended December 31,2003
    
    2004
    
    2005
    
    2005HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)
    
    (unaudited)Total revenues
    
    
    24,187
    
    
    
    1,508
    
    
    
    1,729
    
    
    
    222Total costs and expenses
    
    
    145,520
    
    
    
    5,635
    
    
    
    5,557
    
    
    
    713Loss from operations
    
    
    (121,333
    )
    
    
    (4,127
    )
    
    
    (3,828
    )
    
    
    (491
    )Other incomeInterest income
    
    
    130
    
    
    
    16
    
    
    
    56
    
    
    
    7Others-net
    
    
    1,734
    
    
    
    3
    
    
    
    
    
    
    
    Net loss
    
    
    (119,469
    )
    
    
    (4,108
    )
    
    
    (3,772
    )
    
    
    (484
    )
 Under US GAAP, the Companys total assets were HK$138,817 and HK$138,223 at
December 31, 2004 and 2005, respectively, and total liabilities were HK$135,925
and HK$139,103 at December 31, 2004 and 2005, respectively.
 26




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED
 NOTES TO FINANCIAL STATEMENTS
 15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (e)
    
    Recent US accounting pronouncementsSFAS No. 153In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
which eliminates an exception in Accounting Principles Board Opinion No. 29,
Accounting for Nonmonetary Transactions, for recognizing nonmonetary exchanges of
similar productive assets at fair value and replaces it with a general exception for
recognizing exchanges of nonmonetary assets at fair value that do not have commercial
substance. This Statement will be effective for the Group for nonmonetary asset
exchanges occurring on or after January 1, 2006. The Group does not believe that the
adoption of SFAS 153 will have a significant effect on its financial statements.SFAS No. 154In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces APB 20 and SFAS No. 3, Reporting Changes in Interim
Financial Statements. SFAS No. 154 establishes, unless impracticable, retrospective
application as the required method for reporting a change in accounting principle in
the absence of explicit transition requirements specific to a newly adopted
accounting principle. This statement will be effective for the Company for all
accounting changes and any error corrections occurring after January 1, 2006. The
impact on the financial statements will depend on new pronouncements that are
subsequently issued.
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