Sec Form 20-F - Registration Statement/annual Report/transition Report/shell Company Report Page 35
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69B.
For purposes of instruction 3.A. of the Instructions to Item 11(a), the term reasonably possible has the same meaning
as defined by generally accepted accounting principles (see, e.g., FASB, Statement of Financial Accounting
Standards No. 5, “Accounting for Contingencies,” (“FAS 5”) paragraph 3 (March 1975));
C.
For purposes of instruction 3.A. of the Instructions to Item 11(a), the term near term means a period of time going
forward up to one year from the date of the financial statements (see generally AICPA, Statement of Position 946,
“Disclosure of Certain Significant Risks and Uncertainties,” (“SOP 94-6”) at paragraph 7 (December 30, 1994));
D.
Market risk sensitive instruments that are exposed to rate or price changes in more than one market risk exposure
category should be included in the sensitivity analysis disclosures for each market risk category to which those
instruments are exposed;
E.
Registrants with multiple foreign currency exchange rate exposures should prepare foreign currency sensitivity
analysis disclosures that measure the aggregate sensitivity to changes in all foreign currency exchange rate
exposures, including the effects of changes in both transactional currency/functional currency exchange rate
exposures and functional currency/reporting currency exchange rate exposures. For example, assume a French
division of a registrant presenting its financial statements in U.S. dollars ($US) invests in a deutschmark
(DM)-denominated debt security. In these circumstances, the $US is the reporting currency and the DM is the
transactional currency. In addition, assume this division determines that the French franc (FF) is its functional
currency according to FAS 52. In preparing the foreign currency sensitivity analysis disclosures, this registrant
should report the aggregate potential loss from hypothetical changes in both the DM/FF exchange rate exposure
and the FF/$US exchange rate exposure; and
F.
Model, assumptions, and parameters that should be described include, but are not limited to, how loss is defined
by the model (e.g., loss in earnings, fair values, or cash flows), a general description of the modeling technique (e.g.,
duration modeling, modeling that measures the change in net present values arising from selected hypothetical
changes in market rates or prices, and a description as to how optionality is addressed by the model), the types of
instruments covered by the model (e.g., derivative financial instruments, other financial instruments, derivative
commodity instruments, and whether other instruments are included voluntarily, such as certain commodity
instruments and positions, cash flows from anticipated transactions, and certain financial instruments excluded
under instruction 3.C.ii.of the General Instructions to Items 11(a) and 11(b)), and other relevant information about
the model’s assumptions and parameters, (e.g., the magnitude and timing of selected hypothetical changes in market
rates or prices used, the method by which discount rates are determined, and key prepayment or reinvestment
assumptions).
4.
Under Item 11(a)(1)(iii):
A.
The confidence intervals selected should reflect reasonably possible near-term changes in market rates and prices.
In this regard, absent economic justification for the selection of different confidence intervals, registrants should
use intervals that are 95 percent or higher;
B.
For purposes of instruction 4.A. of the Instructions to Item 11(a), the term reasonably possible has the same meaning
as defined by generally accepted accounting principles (see, e.g., FAS 5, paragraph 3 (March 1975));
C.
For purposes of instruction 4.A. of the Instructions to Item 11(a), the term near term means a period of time going
forward up to one year from the date of the financial statements (see generally SOP 94-6, at paragraph 7 (December
30, 1994));
D.
Registrants with multiple foreign currency exchange rate exposures should prepare foreign currency value at risk
analysis disclosures that measure the aggregate sensitivity to changes in all foreign currency exchange rate
exposures, including the aggregate effects of changes in both transactional currency/functional currency exchange
rate exposures and functional currency/reporting currency exchange rate exposures. For example, assume a French
division of a registrant presenting its financial statements in U.S. dollars ($US) invests in a
deutschmark(DM)-denominated debt security. In these circumstances, the $US is the reporting currency and the
DM is the transactional currency. In addition, assume this division determines that the French franc (FF) is its
functional currency according to FAS 52. In preparing the foreign currency value at risk disclosures, this registrant
should report the aggregate potential loss from hypothetical changes in both the DM/FF exchange rate exposure
and the FF/$US exchange rate exposure; and
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