BDO SEIDMAN, LLP’S May 2006 FINANCIAL REPORTING UPDATE

1. BDO SEIDMAN, LLP’SMay 2006FINANCIAL REPORTING UPDATE

2. Speakers and Replay Information • Speakers • Jeff Lenz • Jay Howell • Ben Neuhausen • Replay Access • www.bdo.com/about/publications/assurance

3. Agenda • SEC Update • PCAOB Update • New Independence Rules • Internal Control Reporting Update • GAAP Update • Questions and Answers

4. SEC UPDATEMay 2006

5. SEC Update – Agenda • Proposed Rules – Executive Compensation Disclosures • Other SEC Activities • SEC Practice Issues

6. Proposed Rules Executive Compensation Disclosures • Release 33-8655 (http://www.sec.gov/rules/proposed/33-8655.pdf) • Goal is a clearer and more complete picture of comp. • Provide compensation discussion and analysis • Report all compensation • Provide a total compensation figure • Value stock based awards at grant date fair value • More complete post-employment compensation disclosure • More complete director compensation disclosure • Use plain English • SEC hopes to have new rules in place for spring 2007 proxy season

7. Other SEC Activities • Chairman Cox Congressional Testimony • “Improving Financial Disclosure for Individual Investors”(http://www.sec.gov/news/testimony/ts042506cc.htm) • Making disclosure understandable for ordinary investors • Improving disclosure via interactive data • Reducing the complexity of accounting rules and regulations • Financial education for retirees and elderly investors • New Division of Corporation Finance Director – John White (http://www.sec.gov/news/press/2006-18.htm)

8. SEC Practice Issues • Reporting cash flows from discontinued operations • AICPA Center for Public Company Audit Firms E-Alert #98 • Updates E-Alert #90 for companies with fiscal year-ends • http://www.aicpa.org/cpcaf/download/news/CPCAFAlert98_041906.pdf • Interaction between retrospective application under Statement 154 and significance calculations under SEC rules (3-05, 3-09, 3-14) • Form S-8 – Updating considerations when filing new Form S-8s

9. PCAOB Update May 2006

10. New Independence Rules • SEC Release 34-53677 • http://www.sec.gov/rules/pcaob/2006/34-53677.pdf • PCAOB Release 2005-14 • http://www.pcaobus.org/Rules/Docket_017/2005-07-26_Release_2005-014.pdf • Rule 3521 – Contingent fees • Rule 3522 – Tax transactions • Rule 3523 – Tax services for persons in financial reporting oversight roles • Rule 3524 – Audit committee pre-approval of certain tax services

11. Section 404 Update Topics • Advisory Committee on Smaller Public Companies • Roundtable on Implementation of Internal Control Reporting Provisions • Auditing Standard #4 – Reporting on Whether a Previously Reported Material Weakness Continues to Exist

12. Advisory Committee on Smaller Public Companies • Draft report issued February 28, 2006 • Final report submitted to SEC on April 20, 2006 • Recommendations issued in the following areas: • Internal Controls • Accounting Standards • Corporate Governance and Disclosure • Capital Formation

13. Advisory Committee Definitions

14. Advisory Committee Recommendations Section 404 1. Exempt Microcaps from Section 404 • Revenues no greater than $125M 2. Exempt smaller public companies from the audit requirements of Section 404 • Revenues no greater than $250M 3. Alternatively to #2, develop a right-sized audit approach focused on the design of internal controls

15. Advisory Committee RecommendationsAccounting Standards • Reduce the number of years of financial statements required in SEC filings from 3 to 2 • Implement a de minimis provision for auditor independence rules • Permit microcap companies to apply the same effective dates as the FASB provides for private companies • Consider additional guidance with respect to materiality related to previously issued financial statements • Develop a “safe harbor” protocol for accounting

16. Advisory Committee RecommendationsCorporate Governance & Disclosure • As a condition to the relief from 404 reporting recommended by the 404 subcommittee, require: • Additional disclosure regarding internal controls and • Additional audit committee corporate governance standards • Increase the thresholds requiring registration under Section 12(g) and 15(d) • Allow smaller public companies to use Form S-3 and eliminate timely filing requirements

17. Advisory Committee RecommendationsCapital Formation • Adopt a new private offering exemption that does not prohibit general solicitation and advertising for transactions with certain purchasers • Make it easier for microcap companies to go private

18. Roundtable on Implementation of Internal Control Reporting Provisions • To be conducted jointly on May 10 by the SEC and PCAOB • Broad mix of distinguished participants • The five panel topics include: • Introduction • Management’s evaluation and assessment • The audit of internal control over financial reporting • The effect on the market • Next steps • A major focus of the day will be audit efficiency

19. Auditing Standard No. 4 - Reporting on Whether a Previously Reported Material Weakness Continues to Exist • Approved by the SEC in February 2006 • PCAOB directed to issue a clear concise outline of audit steps required. • Registrants have not yet expressed significant interest in obtaining reports under AS 4

20. Links • Advisory committee’s final recommendations http://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf • BDO’s recent comment letter on the above: http://www.sec.gov/rules/other/265-23/bdoseidman9239.pdf • Roundtable preparatory materials http://www.sec.gov/news/press/2006-22.htm http://www.pcaobus.org/News_and_Events/News/2006/05-01b.aspx • BDO’s recent public statement for the roundtable: http://www.sec.gov/news/press/4-511.shtml

21. GAAP Update May 2006

22. Agenda • FASB Statements • FASB Exposure Drafts • FASB Staff Positions • Proposed FASB Staff Positions • EITF Tentative Consensuses • EITF Open Issues

23. FASB Statement No. 155 • Fair value option for hybrid financial instruments • Hybrid financial instruments have embedded derivatives. FAS 133 requires an embedded derivative to be split out from the “host” and accounted for in accordance with FAS 133, unless impracticable. If impracticable, then carry entire hybrid financial instrument at fair value with gains and losses in earnings. • FAS 155 permits any hybrid financial instrument to be carried at fair value with gains and losses in earnings. Optional by instrument. Choice is irrevocable. • Reason for change—often simpler to estimate the fair value of the entire instrument than to split and estimate the fair value of the embedded derivative • Applies to any hybrid, either held as investment or issued (for example, nonconventional convertible debt) • Effective for fiscal years beginning after 9/15/06

24. FASB Statement No. 156 • Servicing rights on financial assets • All servicing rights to be measured initially at estimated fair value • Thereafter, irrevocable option to carry at amortized cost or at fair value • Reason for change—difficult to satisfy conditions for hedge accounting in FAS 133. Easier to carry both servicing rights and hedging instruments at fair value. • Effective for fiscal years beginning after 9/15/06

25. FASB Exposure Drafts • Uncertain tax positions • Pensions and postretirement benefits • Earnings per share • Amendments to sale accounting guidance in FAS 140 • Fair value option for all financial instruments • Fair value measurements

26. FASB Exposure Drafts • Business combinations • Consolidation procedures • Hierarchy of GAAP • Invitation to Comment—assets and liabilities with uncertainties

27. FASB Staff Positions--Final • FAS 123R-3: Simplified method of computing “APIC Pool” • FAS 123R-4: Classification of employee awards with contingent cash settlement • FAS 115-1 and 124-1: Other-than-temporary impairment of securities • FIN 46R-6: What variability should be considered in defining variable interests

28. FASB Staff Positions--Final • FAS 140-2: Derivatives in securitization transactions • FIN 45-3: Minimum revenue guarantees • FTB 85-4-1: Investments in life insurance contracts (viatical settlements) • SOP 94-6-1: Disclosure of nontraditional loans • AAG INV-1 and SOP 94-4-1: Benefit responsive investment contracts

29. FASB Staff Positions--Proposed • FAS 142-d: Renewable intangible assets • FAS 133-a: Instant gains (losses) on derivatives • FAS 13-a: Tax contingencies and leverage leases

30. EITF Update SELECTED EITF ISSUES

31. EITF Update • New Procedures • All consensuses considered tentative • Cleared by FASB • Exposed for public comment • EITF reconsiders based on comments • FASB ratifies

32. EITF Update • EITF agenda has been shorter in recent months • Some meetings cancelled • More issues handled as FASB Staff Positions

33. Tentative Consensus • 05-1, Convertible debt that becomes convertible upon issuer’s call • Latest of several convertible debt issues discussed by EITF in last year • Need to assess substance of conversion right—at issuance is it considered reasonably possible that the conversion right will become exercisable absent the issuer’s call • If so, then conversion upon call is accounted for as a conversion with no gain or loss • If not, then conversion upon call is accounted for as an extinguishment with gain or loss

34. Tentative Consensus • 06-2, Accounting for Sabbaticals • Sabbatical for which an employee becomes eligible after a period of years are considered to accumulate as that term is used in FAS 43 and 112 • As a result, accrue estimated cost over service period

35. Tentative Consensus • 06-3, Accounting for Sales, Use, Value Added, or Excise Taxes • Whether taxes should be presented gross as revenues and costs, or net • Presentation gross or net is a policy decision • If gross presentation, disclose amount included in revenues and costs

36. Open Issues • 05-4, Liquidated damages in equity derivative contracts • 06-1, Consideration paid by manufacturer to retailer that is passed through to customer • 06-4, Split-dollar life insurance • 06-D, Measurement of cash surrender value