Mail Stop 7010
December 29, 2005
via U.S. mail and facsimile
Brian Lawson
Vice President and Chief Financial Officer
Brascan Corporation
BCE Place
181 Bay Street, Suite 300
Toronto, Ontario, Canada M5J 2T3
Re: Brascan Corporation
Form 40-F for the Fiscal Year Ended December 31, 2004
Filed March 31, 2005
File No. 33-97038
Dear Mr. Lawson:
We have reviewed your response letter dated December 1, 2005
and have the following additional comments. Where indicated, we
think you should revise your document in future filings in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
General
1. The Division of Investment Management is in the process of
reviewing your response to comment 2 in our letter dated October
31,
2005 regarding whether you are an investment company as defined in
the Investment Company Act of 1940, as amended. Once the review
is
complete, we will send you any additional comments.
23. Difference from United States Generally Accepted Accounting
Principles, page 80 of 2004 Annual Report
(a) Income Statement Differences, page 80 of 2004 Annual Report
2. We note your response to comment 4 in our letter dated October
31,
2005. Specifically, you state that you intend to revise your
disclosure to clarify that
basic and diluted EPS figures are equally applicable to Class A
and
Class B shares. However, you do not tell us how you intend to
clearly communicate this information to investors. We believe
including the two tables and the last paragraph included in your
response letter dated December 1, 2005 to this comment will
provide
sufficient information regarding your calculation of basic and
diluted earnings per share in accordance with paragraph 61.d. of
SFAS
128. As such, please confirm to us that you will include this
information in the footnotes to your audited financial statements
in
future filings.
3. We note your response to comment 5 in our letter dated October
31,
2005. Based on your position that it is your stated policy to
exercise your option to redeem for cash as opposed to allowing
conversion as requested by the holder, please revise your
disclosure
for your calculation of earnings per share under US GAAP to state
that the potential conversion of your Series 10-12 Class A
preferred
shares have not been included in the calculation of earnings per
share under US GAAP, as your policy is to exercise your option to
redeem these securities for cash upon request for conversion by
the
holder. Please provide us with the disclosure you intend to
include
in future filings.
(c) Balance Sheet Differences, page 83 of 2004 Annual Report
4. We note your response to comment 9 in our letter dated October
31,
2005. It remains unclear how you arrived at your conclusions to
not
bifurcate the embedded instruments in your Series 10-12 and Series
7
Class A preferred shares and to classify as permanent equity your
Series 10-12 Class A preferred shares.
For your Series 10-12 Class A preferred shares, it is unclear to
us
how you arrived at your conclusion for paragraph 12.a. of SFAS
133.
Specifically, based on the description of these shares on pages B-
12
- - B-17 of the 2005 Annual Information Form, it does not appear
that
these shares participate in dividends with your Class A Limited
Voting Shares but rather have fixed cumulative preferential cash
dividends with an optional redemption feature, which you have
stated
it is your policy to use in the case a shareholder were to
exercise
its option to convert the shares into Class A Limited Voting
Shares.
Furthermore, the terms of your Series 10-12 Class A preferred
shares
do not perfectly fit the scenario in paragraph 61.l. of SFAS 133
for
securities that are more akin to equity instruments.
For both your Series 10-12 and Series 7 Class A preferred shares,
it
is unclear how you arrived at your conclusion that you meet the
scope
exception under paragraph 11.a. of SFAS 133. Specifically, your
analysis appears to only address the classification of the
embedded
instrument. Both criteria listed in paragraph 11.a. of SFAS 133
are
required to be met to qualify for the scope exception.
Furthermore,
your analysis of the classification of the embedded instrument as
an
equity instrument
appears to only focus on the option of the holder in terms of the
conversion option. Your analysis should include the holder`s
option
and your options.
As such, please provide us with a comprehensive analysis for your
Series 10-12 and 7 Class A preferred shares, including the
following:
* Your analysis as to whether the embedded instrument is
considered
indexed to your stock.
o Please refer to paragraph 11.a.(1) of SFAS 133 and EITF 01-6 for
guidance.
o Please ensure your analysis includes all redemption and
conversion
features of the shares by both you and the holder.
* Your analysis of the classification of the embedded instrument.
o Please refer to paragraph 11.a.(2) of SFAS 133 and EITF 00-19
for
guidance. Please ensure your analysis of paragraph 8 of EITF 00-
19
fully addresses all redemption and conversion options of the
shares.
Specifically, your previous analysis does not appear to address
your
ability to redeem the shares at C$25 per share and all unpaid
dividends from time to time with notice provided to the holder.
Your
analysis should fully explain why you believe you fall into the
situation selected.
o If you determine that the embedded instrument is in the
situation
for "contracts that give the company a choice of net-cash
settlement
or settlement in its own shares," then you also need to address
paragraphs 12-32 of ETIF 00-19. Please then provide us with your
analysis of these paragraphs.
o Please note that a distribution of your Class A Limited Voting
Shares pursuant to a document filed with a securities regulatory
agency or stock exchange is not within your control but rather the
control of the securities regulatory agency or stock exchange that
determines the effectiveness of such document prior to
distribution
of such shares.
* If you determine that you do not meet the scope exception of
paragraph 11.a. of SFAS 133, please provide us with your detailed
analysis of paragraph 12 of SFAS 133 to determine if you need to
bifurcate the embedded instrument.
o For your analysis of paragraph 12.a. of SFAS 133, please refer
to
paragraph 61.l. of SFAS 133 for guidance. If the terms of the
shares
do not fit perfectly to the scenario included in paragraph 61.l.
of
SFAS 133, you need to provide us with a detailed explanation as to
how you arrived at your conclusion for this criterion.
o For paragraph 12.b. of SFAS 133, since preferred stock
instruments
are not carried at fair value, this criterion will be met.
o For paragraph 12.c. of SFAS 133, you need to analyze if the
embedded instrument would meet the definition of a derivative in
paragraphs 6 - 9 of SFAS 133 as a stand alone instrument.
Typically,
this criterion is met, as conversion options typically meet the
net
settlement criteria because the option is settled by delivering
shares of the company, which can be readily converted into cash.
As
such, please provide us with a detailed analysis of this
criterion,
in light of the fact that you state in your response letter that
you
fail to meet the criterion in this paragraph.
Finally, please provide us with a detailed analysis of how you
determined your Series 10-12 Class A preferred shares are should
not
be classified outside of permanent equity under EITF D-98, as
revised
on September 15, 2005. In addition, please provide us with
additional information regarding your adoption of the amendment to
CICA handbook section 3861. Specifically, please tell us:
* The preferred shares that have been reclassified from permanent
equity to liabilities, which includes the reclassification of the
associated dividends to interest expense.
* How you determined that these shares are required to be
reclassified from permanent equity to liabilities along with the
associated dividends to interest expense. Please cite the
specific
terms of the shares and the corresponding sections of the
literature
that require the restatement.
* How you determined such terms of the shares do not also meet the
requirements to be classified outside of permanent equity in
accordance with SFAS 150, ASR 268 and/or EITF D-98.
If after further analysis you determine that the embedded
instrument
in your Series 7 and/or Series 10-12 Class A preferred shares
requires bifurcation under SFAS 133 and/or you determine that your
Series 10-12 Class A preferred shares should be classified as
liabilities, please provide us with your revised accounting for
these
shares and/or embedded instrument. If you do not believe the
revision for these shares and/or embedded instruments are material
to
your consolidated financial statements, please provide us with
your
detailed SAB 99 analysis of the quantitative and qualitative
factors.
(d) Cash Flow Statement Differences, page 85 of 2004 Annual
Report
5. We note your response to comment 10 in our letter dated October
31, 2005. We note your statement that the impact of reclassifying
trading securities in 2004 would have been to reclassify $5
million
from operating activities to investing activities. Please confirm
that the actual reclassification would have been from investing
activities to operating activities, or tell us why the
reclassification why a reclassification from operating activities
to
investing activities is appropriate. Please also tell us the
amount
of your investments classified as trading, available for sale, and
held to
maturity as of December 31, 2004 and September 30, 2005. Please
also
tell us the amount of your investments that are held for resale.
Finally, please note that we are still evaluating your
determination
that your funds management business does not meet the definition
of
an investment company and may have further comment once that
evaluation is complete.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a letter that keys your responses to our comments
and
provides any requested information. Detailed response letters
greatly facilitate our review. Please file your response letter
on
EDGAR. Please understand that we may have additional comments
after
reviewing your responses to our comments.
You may contact Tracey Houser, Staff Accountant, at (202)
551-
3736, or me at (202) 551-3769, if you have questions regarding
comments on the financial statements and related matters.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Brian Lawson
Brascan Corporation
December 29, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE