IPSCO 2006 Annual Report

23 Significant Differences Between United States and Canadian Generally Accepted Accounting Principles (GAAP)

a) Reconciliation of net income between accounting principles generally accepted in the United States and Canada:

	2006			2005			2004
Net income available to common shareholders as reported under U.S. GAAP	$	643,114		$	585,816		$	454,942
Adjustments relating to amortization of capital assets(i)	(6,320		)	(4,094		)	(2,460		)
Adjustments relating to sale-leaseback(ii)	2,136			2,367			2,839
Adjustments relating to natural gas hedge(iii)	—			—			321
Adjustments relating to change in accounting(iv)	—			—			(14,250		)
Adjustments relating to valuation allowance on net deferred income tax asset(v)	—			—			(10,500		)
Net income available to common shareholders, in accordance with Canadian GAAP	$	638,930		$	584,089		$	430,892
Earnings per common share:
Basic	$	13.48		$	12.03		$	8.92
Diluted	$	13.35		$	11.92		$	8.24
Net income available to common shareholders, in accordance with Canadian GAAP	$	638,930		$	584,089		$	430,892
Dividends on preferred shares	—			—			2,461
Interest on subordinated notes	—			—			5,257
Numerator for diluted earnings per share	$	638,930		$	584,089		$	438,610
Common shares outstanding—December 31	47,213,592			48,051,619			49,737,180
Non-vested restricted shares	(163,884		)	(210,003		)	(171,504		)
Weighted average impact of shares repurchased (issued)	331,455			705,925			(1,263,632		)
Denominator for basic earnings per share	47,381,163			48,547,541			48,302,044
Adjustment for share options	97,760			202,061			554,164
Adjustment for deferred share units	119,037			110,243			94,433
Adjustment for restricted shares	128,324			106,847			55,289
Adjustment for performance units	146,167			33,832			35,139
Adjustment for preferred shares	—			—			2,284,644
Adjustment for subordinated notes	—			—			1,908,213
Denominator for diluted earnings per share	47,872,451			49,000,524			53,233,926

(i) United States GAAP requires amortization of capital assets to commence when the capital assets are available for use. Under Canadian GAAP, amortization commences when the assets are placed into production which occurs at the end of the commissioning or start-up period. Further, the amount capitalized to capital assets under United States GAAP differs from the amount capitalized under Canadian GAAP. United States GAAP requires interest to be capitalized on the expenditures incurred for all major projects under construction to a maximum of all interest costs during the year or until the assets are placed into production. Commissioning and start-up costs are not included in the calculation of interest to be capitalized. For Canadian GAAP, commissioning and start-up costs are included in the calculation. United States GAAP requires commissioning or start-up costs to be expensed as incurred. For Canadian GAAP, these costs have been capitalized.

(ii) U.S. GAAP requires the financing method of accounting for a 2000 sale and leaseback transaction which involves real property resulting in interest expense on the obligation and amortization of the capital asset. Under Canadian GAAP, the transaction has been afforded operating lease treatment and lease expense is incurred.

(iii) U.S. GAAP requires recording of the ineffective portion of cash flow hedges in the income statement including the mark-to-market adjustment of the natural gas contract and the amortization of the effective portion (prior to the counter party bankruptcy) of the natural gas hedge over the remaining life of the contract. As the contract expired in 2004, the impact of AG 13 for Canadian GAAP purposes was insignificant.

(iv) U.S. GAAP requires the cumulative effect of a change in accounting principle to be recorded, net of income taxes, as a charge to income in the current period. For Canadian GAAP, the change has been applied retroactively with restatement of prior periods, as discussed in Note 5.