Insights into IFRS Lease Accounting Accountants Group in Germany 54th AGiG Seminar 7 November 2006 WP StB CPA Karsten Ganssauge PwC International Reporting Group PwC Agenda IFRS Lease Accounting US-GAAP Lease Accounting German GAAP Lease Accounting Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice US-GAAP Lease Accounting German GAAP Lease Accounting Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice US-GAAP Lease Accounting German GAAP Lease Accounting IFRS Lease Accounting - Lease Classification Lease Classification - Relevant IFRS Guidance • IAS 17 “Leases” • Interpretations related to IAS 17: - SIC-27 “Evaluating the substance of transactions involving the legal form of a lease” - IFRIC-4 “Determining whether an arrangement contains a lease” • Other guidance, eg. - SIC-12 “Special Purpose Entities” IAS 39 “Financial Instruments – Recognition and Measurement” IASB Updates and IFRIC Updates Related US GAAP guidance, eg. FAS 13 “Accounting for leases” IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 5 . IAS 17.4 IFRS Lease Accounting - Applications & Challenges in Practice Lease classification – what is a lease? “A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or a series of payments the right to use an asset for an agreed period of time” Use of an asset Lessee Lessor Cash IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 6 IFRS Lease Accounting - Lease Classification IAS 17.7 IAS 17.8 IAS 17.10-.11 Lease Classification – IAS 17 “Classification of leases (…) in this Standard is based on the extent to which risks and rewards (…) of a leased asset lie with the lessor or the lessee.” Transfer of substantially all risks and rewards? Yes No Finance Lease Operating Lease Indicators for lease classification: Ö IAS 17.10 (a)-(e), 17.11 (a)-(c) IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 7 . IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.10-.11 Lease classification: Finance vs. Operating Leases Indicators for lease classification: IAS 17.10 (a) Transfer of ownership (b) Bargain purchase option (c) Lease term is for majority of economic life (>75%)* (d) PV of MLP = at least subtantially all of the FV (>90%)* (e) Specialised nature of leased asset IAS 17.11 (a) Lessee bears costs of cancellation (b) Gains/ losses from FV fluctuation accrue to lessee (c) Bargain renewal option * no bright line IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 8 . IFRS Lease Accounting - Lease Classification IAS 17.13 IAS 17.15 Lease Classification • Lease classification is made at the inception of the lease - unless change in the contractual terms • Classification on an asset-by-asset basis • Leases of land and buildings: - Elements are considered separately for lease classification - Allocation not based on relative fair values - Land element is normally classified as an operating lease unless title is expected to pass IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 9 . IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Lease classification – practical examples Simplified SPE structure … Leasing Company X% Y% Loan Use of an asset Lessor SPE Lessee Bank Cash Cash Often combined with: • Hereditary building rights • Purchase options • Renewal options • Financial guarantees • etc. IFRS Lease Accounting PricewaterhouseCoopers Asset Cash Manufacturer September 2006 Slide 10 IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Lease classification – other practical examples Sale-leaseback-structures … Finance or operating Sublease Sub-Lessee Lessee Cash IFRS Lease Accounting PricewaterhouseCoopers Leaseback Sale Loan Lessor (SPE) Bank Cash September 2006 Slide 11 IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Lease classification – other practical examples Indirect leases … Manufacturer Lease Continuing involvement* Bank Sale Lessee Cash * e.g. buyback obligation or financial guarantee or remarketing agreement with profit sharing IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 12 Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice US-GAAP Lease Accounting German GAAP Lease Accounting IFRS Lease Accounting - Accounting Consequences of Lease Classification IAS 17.20-.57 Accounting Consequences of Lease Classification Initial recognition - overview Lessor Lessee Finance lease Lease receivable (@ net investment in the lease ) Asset (@ FV or lower PV of MLP) plus lease liability Operating lease Asset IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 14 . IFRS Lease Accounting - Accounting Consequences of Lease Classification IAS 17.25-.32 IAS 17.39-.48 Accounting Consequences of Lease Classification Subsequent accounting – Finance lease Lessor Finance lease Lease receivable Subsequent measurement IFRS Lease Accounting PricewaterhouseCoopers • Split into finance income and Lessee Asset (@ FV or lower PV of MLP) plus lease liability • Split into finance charge and reduction of liability reduction of receivable • Constant periodic rate of return • Constant periodic rate of return • Finance charges + depreciation September 2006 Slide 15 . IFRS Lease Accounting - Accounting Consequences of Lease Classification IAS 17.33-.35 IAS 17.49-.57 Accounting Consequences of Lease Classification Subsequent accounting – Operating lease Lessor Operating lease Asset (presented according to nature) Subsequent measurement • Lease income is recognised in IFRS Lease Accounting PricewaterhouseCoopers Lessee • Lease expenses are P&L (normally straight-line) recognised as an expense over the lease term • Costs incurred in earning the lease income (incl. depreciation) (normally straight-line) are recognised as an expense September 2006 Slide 16 . Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice Classification: Finance vs. Operating Leases SPE Consolidation Issues Embedded Leases US-GAAP Lease Accounting German GAAP Lease Accounting Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice Classification: Finance vs. Operating Leases SPE Consolidation Issues Embedded Leases US-GAAP Lease Accounting German GAAP Lease Accounting IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.10-.11 Classification: Finance vs. Operating Leases Reminder: Indicators for lease classification: IAS 17.10 (a) Transfer of ownership (b) Bargain purchase option (c) Lease term is for majority of economic life (>75%)* (d) PV of MLP = at least subtantially all of the FV (>90%)* (e) Specialised nature of leased asset IAS 17.11 (a) Lessee bears costs of cancellation (b) Gains/ losses from FV fluctuation accrue to lessee (c) Bargain renewal option * no bright line IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 19 . IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.10-.11 Classification: Finance vs. Operating Leases • Criteria individually or in combination normally point to the existence of a finance lease - Relevance of individual criteria - Criteria are only indicators • No straightforward “check list” to determine lease type unless transaction is of a simple structure. • Accounting policy manuals IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 20 . IFRS Lease Accounting - Applications & Challenges in Practice Classification: Finance vs. Operating Leases IAS 17.10(b) IAS 17.10(d) IAS 17.11(b) Common pitfalls • Bargain purchase options • Present value of minimum lease payments (MLP) • Residual value gains/losses accruing to the lessee Let’s take a closer look … IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 21 . IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.10(b) Classification: Finance vs. Operating Leases Bargain purchase option • Look at effect of option rather than on strike price only - Example: option is at future fair value, combined with “penalty” • “reasonably certain” - look at probabilities based on strike price - not other considerations, such as management strategy or other non-risk/benefit-considerations • If bargain purchase option: - include strike price in MLP / “PV test” - effects on distribution of gains and losses IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 22 . IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.10(d) Classification: Finance vs. Operating Leases Present value of MLP • FAS 13 indicator (90%), but cannot be applied as a “checklist” • Often calculations do not include all relevant costs • Watch out for terms & conditions outside of the lease contract! - transaction expenses costs for operation of SPE (incl. income taxes) general terms & conditions stakeholdings in lessor SPE • Potential problem in mass business (eg manufacturer lessors) IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 23 . IFRS Lease Accounting - Applications & Challenges in Practice IAS 17.11(b) Classification: Finance vs. Operating Leases Residual value gains/losses accruing to the lessee • consider options • watch out for agreements outside of lease contract IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 24 . Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice Classification: Finance vs. Operating Leases SPE Consolidation Issues Embedded Leases US-GAAP Lease Accounting German GAAP Lease Accounting IFRS Lease Accounting - Applications & Challenges in Practice SPE Consolidation Issues SIC-12 - a “must consider” issue in many leasing transactions • • • • Looking at lease classification under IAS 17 only has limited value Consider whether lessor is consolidated SPE = entity with “narrow and well-defined objective” Interpretation of IAS 27 control model in SIC-12: - “An SPE shall be consolidated when the substance of the relationship between an entity and the SPE indicates that the SPE is controlled by the entity” - Consolidation may be required even if lessee does not hold any voting rights! IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 26 IFRS Lease Accounting - Applications & Challenges in Practice SIC-12.10 SPE Consolidation Issues Indicators of control under SIC-12: (a) in substance, the activities of the SPE are being conducted on behalf of the entity according to its specific business needs so that the entity obtains benefits from the SPE’s operation; (b) in substance, the entity has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an "autopilot" mechanism, the entity has delegated these decisionmaking powers; (c) in substance, the entity has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incident to the activities of the SPE; or (d) in substance, the entity retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities. IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 27 . SIC-12.10 IFRS Lease Accounting - Applications & Challenges in Practice SPE Consolidation Issues Qualitative vs. quantitative factors: Relationship and Models Quantitative factors: • Risks • Rewards Qualitative factors: • Activities on behalf of entity • decision making / autopilot IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 28 . IFRS Lease Accounting - Applications & Challenges in Practice SIC-12.10 IAS 39.21 SPE Consolidation Issues Transfer of risks and rewards Î No guidance in SIC-12! Î What are risks and rewards? Î Which risks and rewards are relevant? Î What is meant by “transfer” of risks and rewards? IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 29 IFRS Lease Accounting - Applications & Challenges in Practice SIC-12.10 IAS 39.21 SPE Consolidation Issues • Risks and rewards – IAS 39 - “variability in the amounts and timing of the net cash flows of the transferred asset” - Upside (downside) potential from deviations between expected and actual cash flows • When is there a transfer? - “An entity has transferred substantially all the risks and rewards of ownership (…) if its exposure to such variability is no longer significant in relation to the total variability in the present value of the future net cash flows associated with the financial asset.” IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 30 SIC-12.10 IAS 39.21 IFRS Lease Accounting - Applications & Challenges in Practice SPE Consolidation issues only for demonstration Probability borne by lessee purposes - not to scale borne by the bank, the dormant partner and the general partner 4,800’ 8,300’ Residual fair value in K€ 9,195’ IFRS Lease Accounting PricewaterhouseCoopers E(RFV) = 9,200’ September 2006 Slide 31 IFRS Lease Accounting - Applications & Challenges in Practice SIC-12.10 IDW RS HFA 2, Tz. 65 SPE Consolidation Issues – Reminders When assessing risks and rewards, consider: • • • • what is meant by risks & rewards? which risks & rewards exist and which are relevant? risks & rewards of entity vs. risks & rewards of leased asset statistical analysis and expert opinions may be required! IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 32 IFRS Lease Accounting - Applications & Challenges in Practice SIC-12.10 IDW RS HFA 2, Tz. 65 SPE Consolidation Issues - Reminders Judgement required • Often lessee will consolidate • Sometimes the SPE is not (exclusively) designed to specifically serve the purposes of one of the parties involved • However, consider facts & circumstances if other parties involved in setting up the SPE clearly bear the majority of risks & rewards IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 33 Section one IFRS Lease Accounting Lease Classification Accounting Consequences of Lease Classification Applications & Challenges in Practice Classification: Finance vs. Operating Leases SPE Consolidation Issues Embedded Leases US-GAAP Lease Accounting German GAAP Lease Accounting IFRS Lease Accounting - Applications & Challenges in Practice IFRIC-4 Embedded Leases Why accounting guidance for embedded leases? • Contracts may have economic substance of a lease agreement, eg: - purchase contracts - servicing contracts - outsourcing contracts • Look out for specific assets where the entity receives substantially all of the output of that asset - Look at substance rather than form - Such agreements may need to be accounted for as a lease • Determining whether an arrangement contains a lease - Defining the term specific asset - Defining the scope of usage IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 35 IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Embedded Leases No Assets within scope of IAS 17? CONTINUE HERE Yes No Specific asset explicitly identified? No Yes No Asset implicitly specified? No Yes No Fulfillment of arrangement dependent on use of specific asset ? Yes Yes Purchaser has ability or right to operate the asset or direct others to operate the asset in a manner it determines while obtaining or controlling more than an insignificant amount of the output/utility of the asset ? Facts and circumstances indicate that it is remote that one or more parties other than the purchaser will take more than an insignificant amount of the output/ other utility produced or generated by the asset during the term of the arrangement Yes Yes Price the purchaser pays is either contractually fixed per unit of output or equal to the current market price per unit of output as of time of delivery No Purchaser has ability or right to control physical access to the underlying asset while obtaining more than an insignificant amount of the output/utility of the asset ? Yes Arrangement contains a lease No CONTINUE ON RIGHT HAND IFRS Lease Accounting PricewaterhouseCoopers No Arrangement does not contain a lease September 2006 Slide 36 IFRS Lease Accounting - Applications & Challenges in Practice IFRIC-4 Embedded Leases Embedded lease? Supply contract - delivery of steam & electricity B IFRS Lease Accounting PricewaterhouseCoopers Darlehen € 750 Mio. Power Plant September 2006 Slide 37 IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Embedded Leases Utility company A Leasing Company 100% Supply contract - delivery of steam & electricity 100% Lease SPE (power plant) B 100% Lessor SPE Loan Bank Sale of steam-electricity plant IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 38 IFRIC-4 IFRS Lease Accounting - Applications & Challenges in Practice Embedded Leases Determining whether an arrangement contains a lease – Specific asset Purchaser Purchaser exclusively exclusively entitled entitled to to use use the the asset asset Used Used asset asset is is implicitly implicitly defined defined by by the the terms terms of of the the transaction transaction • Usage of the asset is explicitly defined • Usage of other assets technically not within the contract • Service provider has just one asset suitable to fulfil his part of the contract • There is only one (unique) asset (e.g intellectual property) possible • Usage of other assets technically possible, but not feasible from an economic point of view The asset is a specific asset, if (from an economic point of view) fulfilment of the contract is only possible via the usage of the asset IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 39 IFRS Lease Accounting - Applications & Challenges in Practice IFRIC-4 Embedded Leases Determining whether an arrangement contains a lease • Specific asset - - No embedded lease, if fulfilment is not dependent on the usage of the specified asset, but can also be effected using another asset or the service provider is able to fulfil the contract using other assets. A right or commitment by the service provider to exchange the asset in case of a malfunction or at regular intervals does not preclude the existence of a specific asset. • Use of the asset: - Direct physical control (ability or right to operate) over the asset, or Control physical access to the asset Purchaser takes significant part of the output • contractually fixed price per unit of output or • current market price per unit of output as of time of delivery. IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 40 Section two IFRS Lease Accounting US-GAAP Lease Accounting German GAAP Lease Accounting Section two IFRS Lease Accounting US-GAAP Lease Accounting Differences to IFRS German GAAP Lease Accounting US-GAAP Lease Accounting - Differences to IFRS FAS 13.7-.8 FAS 13.9-.17 US GAAP Guidance FAS 13 ”Accounting for leases” - Overview • Scope: does not apply to intangibles • Lease classification – generally similar, but devil is in the detail: - Lessee: capital or operating - Lessor: sales-type, direct financing, leveraged or operating - US-GAAP “bright-line guidance” • Detailed and complex guidance for changes in provisions, contract renewals and terminations IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 43 IFRS Lease Accounting - Lease Classification US GAAP Guidance FAS 43/EITF 00-13 FAS 98/FAS 66 EITF 97-10 EITF 97-1 Q2 Complex rules for real estate leases, eg • Integral Equipment • Real estate sale-and-lease back • Built-to-suit leases • Non-performance default provision IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 44 . IFRS Lease Accounting - Lease Classification FAS 43/EITF 00-13 US GAAP Guidance Integral Equipment • If an asset is considered an “integral equipment”, the real estate lease guidance needs to be applied • Integral equipment: “Any physical structure or equipment attached to the real estate that cannot be removed and used separately without incurring significant cost” • EITF 00-13 defines what "cannot be removed and used separately without incurring significant cost" means IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 45 . IFRS Lease Accounting - Lease Classification FAS 98/FAS 66 US GAAP Guidance Real estate sale-and-lease back • All of the following criteria must be met - The lease must be a normal leaseback - A sale has occurred - No form on continuing involvement by the seller-lessee • Examples: - Repurchase option or obligation Seller-lessee guarantees the buyer-lessor’s investment or return on that investment Residual value guarantee • If any criteria are not met, seller accounts for the transaction as a financing (i.e. Dr. cash, Cr. financing obligation) IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 46 . IFRS Lease Accounting - Lease Classification EITF 97-10 US GAAP Guidance Built-to-suit leases • Examples: Lessee is involved in the construction or asset will be leased to the lessee upon construction completion • If BTS, the accounting consequences are as follows: - Future lessee is deemed the owner of the asset during the construction period - Upon construction completion, lease must be accounted for as a sale-leaseback IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 47 . IFRS Lease Accounting - Lease Classification EITF 97-1 Q2 US GAAP Guidance Non-performance default provision • Framework to evaluate effect of default provisions unrelated to lessee’s use of the leased asset on lease classification • Non-performance default provisions do not affect lease classification if certain conditions are met • Failure to comply with the criteria results in the inclusion of the maximum remedy in the 90% test (almost always resulting in a capital lease) !!! IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 48 . Major differences between IFRS and US GAAP (1/4) Difference IFRS US GAAP Scope IAS 17 also applies to intangibles FAS 13 does not apply to intangibles Economic life test and PV test No fixed percentages Fixed percentages (75% & 90%) Lease of specialized Classified as a finance lease asset Classified based on the general four criteria or specific guidance (e.g. BTS leases) The lower of the implicit interest rate or the incremental borrowing rate Discount rate Implicit interest rate if known or determinable, otherwise the incremental borrowing rate Implicit interest rate Needs to be determined if the Generally not applied if the lessee has sufficient information lessor does not share his to determine the lessor’s implicit calculation with the lessee interest rate IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 49 Major differences between IFRS and US GAAP (2/4) Difference IFRS US GAAP Bifurcation of land & Not required if land element is building element immaterial; 25% threshold may be too high; facts and circumstance based Only required if land element is equal to or exceeds 25% of the total FV of the leased asset Bifurcation of MLP for leases involving land & building Based on the relative fair value of the leasehold interest MLP relating to land is determined by applying the IBR to the FV of the land Integral equipment No such concept Real estate lease guidance is applied to integral equipment Lease of a portion of a building No such simplification rule; however, application issue Only the 75% needs to be applied if the FV of the portion of the building is not readily determinable IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 50 Major differences between IFRS and US GAAP (3/4) Difference IFRS US GAAP Economic life test Always applied; no such exception Not applied if lease inception is during the last 25% of the economic useful life of the leased asset Sale & Lease-back (gain/loss recognition) Different gain/loss recognition rules apply under both GAAPs See IFRS Sale & Lease-back (sale treatment) No such restrictive rules; the general SLB criteria apply Specific, very restrictive rules for sale treatment (e.g. continuing involvement) Built-to-suit leases No such concept; however, BTS Detailed guidance; Future lessee leases might be indicative for is often considered the owner of finance lease or specific asset; the asset during construction currently analyzed by the Lease Working Group of Global ACS IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 51 Major differences between IFRS and US GAAP (4/4) Difference IFRS Non-performance default provision No such concept Consolidation SIC-12 Lessor accounting No additional criteria Terminology Finance lease Participation of third No explicit guidance parties Embedded leases IFRS Lease Accounting PricewaterhouseCoopers IFRIC-4 US GAAP Not meeting any of the four criteria often times leads to capital lease treatment FIN 46(R) generally has a wider scope and different approach to determine primary beneficiary of the VIE FAS 13 has 2 additional criteria for lessors Capital lease Guidance on sale-leasebacksublease transactions and on sales of assets intended to be leased out by the 3rd party (where seller retains risks) EITF 01-08 does not apply to intangibles and does not demand retrospective application September 2006 Slide 52 Section three IFRS Lease Accounting US-GAAP Lease Accounting German GAAP Lease Accounting German GAAP Lease Accounting German GAAP Lease Accounting • • • No explicit guidance in German Commercial Code (HGB) Accounting generally follows tax rules published by the Ministry of Finance in 1971, 1972, 1975 and 1991 which distinguish between movable property and real estate and between full amortisation and partial amortisation contracts (ie where lease payments cover cost plus financing either fully or only partially) In simplified terms: Full amortisation contracts are finance leases, if: - • the basic lease period is either < 40% or > 90 per cent of the economic life of the leased asset; or - the basic lease period is 40%-90% of the economic life and a purchase option or an option to extend the lease period exists and • strike price of purchase option is ≤ net book value; or • scheduled lease payments after the basic lease period are less than the depreciation expense using the straight-line method. Additional rules for certain situations (eg partial amoritisation contracts, specialised leased assets, etc.) IFRS Lease Accounting PricewaterhouseCoopers September 2006 Slide 54 Thank you! © 2006 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the German firm PricewaterhouseCoopers AG WPG and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. PwC Contact WP StB CPA Karsten Ganssauge International Reporting Group Frankfurt Office: +49 (69) 9585 1822 Fax: +49 (69) 9585 951648 Mobile: +49 (160) 8085 397 Karsten.Ganssauge@de.pwc.com © 2006 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the German firm PricewaterhouseCoopers AG WPG and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. PwC