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Big 4's Whitepaper on 2006 SEC Speech Regarding Certain Hedge Accounting Relationships
Ernst & Young LLP (March 6, 2007)

Attached please find the Big 4's whitepaper as well as two illustrative examples recently authored regarding certain hedging relationships, including those where the Critical Terms Match, discussed by the SEC Staff at this year's AICPA National Conference on Current SEC & PCAOB Developments. This whitepaper was developed in connection with recent discussions among members of the Big 4, the SEC Staff and the FASB. We understand that no views have been expressed regarding these issues by either the FASB or the SEC.

The issues discussed in the attached whitepaper address certain questions that have arisen relating to the application of hedge accounting in circumstances where a hedging relationship is assumed to be perfectly effective as well as the SEC Staff's belief that the assumption of perfect effectiveness is being inappropriately applied in certain cases.

If you have any questions please call your On-Call team or
Lisa Filomia-Aktas
On-Call Practice Leader
tel: (212) 773-2833

On-Call Advisory Services Group:

Kobi Assaraf (212) 773-7064, Michael Brosnan (212) 773-1797, Betty Davis, (202) 327-5631, Peter Hornecker (212) 773-0227, Karla Johnsen (212) 773-5510, Tim Kane (212) 773-3648, Hee Lee (212) 773-8605, Jung Lee (212) 773-2196, James Medeiros, (212) 773-1884, Kirk Robinson (212) 773-2713, Deha Rozanes (212) 773-0731, Mandy Sagar (212) 773-6425, Paul Sheahen (212) 773-5578, Erik Swanson (212) 773-0532, David Thrope (212) 773-0930, Jonathan Tkach (212)773-0875, Ken Wilchfort (212) 773-3414

On-Call Advisory Services:

Ernst & Young's On-Call Advisory Services Group assist clients with accounting, tax and regulatory aspects of securitization, derivative, M&A, compensation, leasing and structured transactions. This experienced group is available 24/7 via phone, fax, email, or in person. In addition to our On-Call Advisory, we provide related services such as operational reviews, due diligence, and training sessions.

This alert is correct to the best of our knowledge and belief as at the date of this alert. It is, however, written in general terms and professional advice must always be obtained before any action is taken.



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