## RSUs 

For each RSU granted we record a compensation expense that equals the market value of a BCE Inc. common share at the date of grant prorated over the vesting period. The compensation expense is adjusted for future changes in the market value of BCE Inc. common shares until the vesting date. The cumulative effect of the change in value is recognized in the period of the change. Vested RSUs will be paid in BCE Inc. common shares purchased on the open market or in cash, as the holder chooses, as long as minimum share ownership requirements are met. 

## Stock Options 

Effective January 2003, we use the fair-value based method to account for employee stock options and the Black-Scholes option pricing model to measure the compensation expense of options. This method is used for options granted on or after January 1, 2002. For options that contain specific performance-based targets, this is reflected in the calculation of the weighted average fair value per option granted. 

## Recent Changes to Accounting Standards 

## Asset Retirement Obligations 

Effective January 1, 2004, we retroactively adopted section 3110 of the CICA Handbook, Asset Retirement Obligations . This section describes how to recognize and measure liabilities related to the legal obligations of retiring property, plant and equipment. 

These obligations are initially measured at fair value and are adjusted for any changes resulting from age, and any changes to the timing or the amount of the original estimate of undiscounted cash flows. The asset retirement cost is capitalized as part of the related assets and is amortized into earnings over time. 

The impact on our consolidated statements of oper- ations for the year ended December 31, 2004 and the comparative periods was negligible. At December 31, 2003 and 2002, this resulted in: 

• an increase of $6 million in capital assets 

• an increase of $17 million in other long-term liabilities 

• a decrease of $4 million in future income tax liabilities 

• an increase of $7 million in the deficit. 

## Impairment of Long-Lived Assets 

Effective January 1, 2004, we adopted section 3063 of the CICA Handbook, Impairment of Long-Lived Assets . Adopting this section affects how we recognize, meas- ure and disclose the impairment of long-lived assets. 

An impairment loss is recognized on a long-lived asset to be held and used when its carrying value exceeds the total undiscounted cash flows expected from its use and disposition. 

Before January 1, 2004, the amount of the loss was determined by deducting the asset’s net recoverable amount (based on undiscounted cash flows expected from its use and disposition) from its carrying value. 

After January 1, 2004, the amount of the loss is determined by deducting the asset’s fair value (based on discounted cash flows expected from its use and disposition) from its carrying value. 

## Hedging Relationships 

Effective January 1, 2004, we adopted Accounting Guideline 13, Hedging Relationships . The guideline specifies when hedge accounting can be used, and includes requirements for documenting and designat- ing hedge relationships. It also requires companies to regularly and frequently assess the effectiveness of these hedging relationships. The guideline does not change the method of accounting for derivative instru- ments in hedging relationships. 

Adopting this guideline did not affect our consoli- dated financial statements. All outstanding hedges that previously qualified for hedge accounting continue to qualify for hedge accounting under this guideline. 

## Consolidation of Variable Interest Entities 

Effective July 1, 2003, we adopted Accounting Guide- line 15, Consolidation of Variable Interest Entities , on a retroactive basis without a restatement of previous periods. This resulted in an increase of $25 million in the deficit at July 1, 2003. At December 31, 2004 we had no interest in these types of entities. 

## Black-Scholes Option Pricing Model 

The Black-Scholes option pricing model is a financial model we use to calculate the weighted average fair value of a stock option granted using four key assumptions: stock dividend yield, expected stock volatility, risk-free interest rate and expected life of the stock option. 

