Notes to Consolidated Financial Statements Future Changes to Accounting Standards Financial Instruments The CICA issued section 3855 of the CICA Handbook, Financial Instruments – Recognition and Measurement . The section is effective for fiscal years beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that: The CICA issued revisions to section 3860 of the CICA Handbook,  Financial Instruments – Disclosure and Presentation . The revisions change the accounting for certain financial instruments that have liability and equity characteristics. It requires instruments that meet specific criteria to be classified as liabilities on the balance sheet. Some of these financial instruments were previously classified as equities. These revisions come into effect on January 1, 2005. Because we do not have any instruments with these characteristics, adopting this section on January 1, 2005 will not affect our consolidated financial statements. The CICA issued section 1530 of the CICA Handbook, Comprehensive Income . The section is effective for fiscal years beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components. Comprehensive income is the change in a com- pany’s net assets that results from transactions, events and circumstances from sources other than the com- pany’s shareholders. It includes items that would not normally be included in net earnings, such as:  We are currently evaluating the impact on our consol- idated financial statements of adopting this section on January 1, 2007. The CICA recently issued section 3865 of the CICA Handbook,  Hedges . The section is effective for fiscal years beginning on or after October 1, 2006, and describes when and how hedge accounting can be used. Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between: The CICA also made changes to section 3250 of the CICA Handbook,  Surplus , and reissued it as section 3251,  Equity . The section is also effective for fiscal years beginning on or after October 1, 2006. The changes in how to report and disclose equity and changes in equity are consistent with the new require- ments of section 1530,  Comprehensive Income . Adopting these sections on January 1, 2007 will require us to start reporting the following items in the consolidated financial statements: Hedge accounting makes sure that all gains, losses, revenues and expenses from the derivative and the item it hedges are recorded in the statement of opera- tions in the same period. We are currently evaluating the impact on our  consolidated financial statements of adopting this  section on January 1, 2007. Financial Instruments – Recognition and Measurement Comprehensive Income Hedges • all financial assets be measured at fair value, with some exceptions like loans and investments that are classified as held-to-maturity • all financial liabilities be measured at fair value if they are derivatives or classified as held for trading purposes. Other financial liabilities are measured at their carrying value. • all derivative financial instruments be measured  at fair value, even when they are part of a hedging relationship. • changes in the fair value of a hedged item and a hedging item • changes in the cash flows attributable to a hedged item and a hedging item, or • changes resulting from a risk exposure relating to a hedged item and a hedging item. • accumulated other comprehensive income and its components. • comprehensive income and its components • unrealized gains or losses on available-for-sale  investments. • changes in the currency translation adjustment  relating to self-sustaining foreign operations  92 Bell Canada Enterprises  2004 Annual Report