SEC rules on disclosure of
off-balance sheet arrangements and
contractual obligations:

• Adopted per SOX Act § 401(a)
• Added to SEC's S-K 303 MD&A required disclosures

Requires a separately captioned subsection of MD&A about off-balance sheet arrangements

• S-K Item 303(a)(4)

Requires a tabular presentation of
aggregate contractual obligations

• S-K Item 303(a)(5)

Requires disclosures about
off-balance sheet arrangements, including

• Their nature and business purpose
• Their importance to registrant
• Amount of related revenues, expenses and cash flows
• Interests retained, securities issued, indebtedness incurred
• Other related obligations including contingent liabilities reasonably likely to become material
• Potential termination or reduction thereof
• Such other information registrant believes necessary

Put in a separately captioned subsection of MD&A

• Generally, covers most recent fiscal year - 303(a)(4)
  Instr. 4
• Aggregate specific items into categories - 303(a)(4) Instr. 2
• Can cross-reference to financial statement footnotes - 303(a)(4) Instr. 5

Requires disclosure of aggregate information about contractual obligations in a single table

• Potential termination or reduction thereof
• table to be included in annual report
• interim reports to disclose any material changes (note 116)
• generally, categories in table are standard US GAAP items
  ~ but also includes "purchase obligations"
  ~ to capture capital expenditures over a five-year period
• more detailed sub-categories can be used
• additional footnoted detail may be required
• doesn't apply to small business issuers
• Presentation / style requirements
  ~ can cross-reference to financial statement footnotes

Form of table provided

• Generally, covers most recent fiscal year - 303(a)(4)
  Instr. 4
• Aggregate specific items into categories - 303(a)(4) Instr. 2
• Can cross-reference to financial statement footnotes -
  303(a)(4) Instr. 5

Domestic issuers -- per S-K 303(a)(4)

Small business issuers, with some modification --
per S-B 303(c)

Foreign private issuers -- amends Form 20-F Item 5

Canadian issuers -- amends Form 40-F Gen. Instr. B

But doesn't apply to Form 6-K reports

Discussion of application to foreign private issuers

S-K 303(a)(4)(ii)

Covers specified contractual arrangements with unconsolidated entities, including:

• Guarantees

• Refers to FASB FIN 45 --
  Guarantor's accounting and disclosure requirements

• Retained or contingent interests

• Certain derivative instruments

• Refers to FASB 133

• Variable interests

• Refers to FASB FIN 46 - Consolidation of Variable Interests

Applies to definitive agreements, or when transaction closes - 303(a)(4) Instr. 1

Excludes contingent liabilities arising out of litigation, arbitration or regulatory actions - 303(a)(4) Instr. 3

S-K 303(a)(4)(i)

• "either have, or are reasonably likely to have, a current or future effect on the registrant's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors"

Conforms to "reasonably likely" standard otherwise applicable to MD&A:

• a lower threshold than "more likely than not" -- SEC release 33-8056 (1/22/02)
• an even lower threshold was included in proposal release

Sarbanes-Oxley Act - mandated study

S-K 303(a)(4) supercedes in relevant part, SEC's January 2002 MD&A interpretive guidance

Proposal for tabular/textual disclosure about contingent liabilities or commitments was not adopted

Safe harbor -- Forward-looking information -- S-K 303(c)

MD&A (S-K 303)