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| The following is a quick snapshot of main US GAAP adjustments under the form of a Q&A. If you would like additional information, please contact Suez Investor Relations team at 331-40 06 66 29.
1-What are the main items of reconciliation between your financial statements prepared under French GAAP and U.S. GAAP? First, by the fact that the SEC does not recognize de facto unilateral control whereas under both French and IAS standards, control is presumed. An illustration is our investment in Electrabel which is accounted for under the equity method under U.S. GAAP whereas it is fully consolidated under both French and Belgian GAAP. Despite the fact that we are by far Electrabel's largest shareholder, that Suez exercised more than 90% of the voting rights at Electrabel's last three shareholders' general meetings and the closeness of the ties between Electrabel and the Group, the SEC still did not consider these elements to be sufficient to exercise legal control. In our opinion, the fact that Electrabel could not be fully consolidated in our financial statements under U.S. GAAP does not reflect accurately Suez's financial position and presence in the Energy business in Europe. Secondly, in recent years, the Suez Group has performed a large number of major acquisitions outside of France. The reconciliation of our accounts led to a restatement of: - the merger transaction realized to form the new Suez Group, following the merger of the Compagnie de Suez with Lyonnaise des Eaux, by reversing the initial direction of the merger (Reverse Acquisition under U.S. GAAP) and, all transactions subsequent to the buyout of the SGB, Tractebel and Sita minority interests via public offers of exchange, the main accounting. - consequence is the amortization of goodwill under U.S. GAAP, whereas such amounts were written off directly to the equity of the acquiring company under French GAAP. With respect to these differences, in 2000 Suez recorded an additional amortization charge of approximately EUR 400 million under U.S. GAAP. Other adjustments are quite usual for European companies applying US accounting principles, particularly for, the timing and recording of certain reserves, the marking to market of portfolio shares or the recording in the financial statements of the Employee Stock Ownership Plan (ESOP), the non discounting of deferred taxes etc. It is also important to remember that the differences between U.S. and French GAAP are often only timing differences (restructuring reserves, gain/loss realized on the disposal of assets, amortization of fair value. 2- In the future, do you expect your operating income under French GAAP to be closer to the figure under U.S. GAAP? - The amortization of goodwill, which is recorded under a specific caption under French GAAP, is included in operating income under U.S. GAAP. As a reminder, these amounts represented EUR 198 million and 368 million in 1999 and 2000, respectively. - The operating income of the mixed inter-municipal companies is re-classified under "share in income of companies accounted for under the equity method" under U.S. GAAP. This reclassification under U.S. GAAP resulted in a EUR 931 millions and EUR 437 millions decrease in operating income in 1999 and 2000. According to our internal medium term plan, the difference between the two should be significantly reduced in the future.
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