Citigroup (C)

Leveraged Lease Transactions

        The FASB has issued a proposed FASB Staff Position (FSP) No. 13-a, "Accounting for a Change or Projected Change in the Timing of Cash Flows relating to Income Taxes Generated by a Leveraged Lease Transaction." The FSP would amend SFAS 13 to require a lessor to re-determine the rate of return and allocation of pretax income for a leveraged lease when there is a change in the expected timing of the realization of tax benefits generated by the lease. Under the proposed FSP, recalculations of existing leveraged leases would result in a one-time non-cash charge to be recorded as a cumulative effect of a change in accounting principle. If the FSP is finalized as proposed, Citigroup currently expects that the effect of adopting the FSP will be an after-tax non-cash charge of $100 to $140 million. An approximately equivalent amount would be recognized as additional income over the remaining term of the leases such that over the full term of these leases, total cumulative pretax income on the leveraged leases would be unaffected. The FSP is expected to be issued and effective in the 2005 fourth quarter.