Rate Regulation
The Fund follows Canadian Generally Accepted Accounting Principals, which may differ for regulated operations from those otherwise expected in non-regulated operations. These differences generally involve the timing of revenue and expense recognition.

The accounting for these items is based on an expectation of future approved rates. For example, the deferral of differences between amounts included in rates and actual experience for specified expenses is based on the expectation that refunds to, or the recovery from, shippers of the deferred balance, will be allowed in the future.

If rates allowed in future years are different from the Fund’s expectations, the timing and amount of the recovery of liabilities or refund of assets, recorded or unrecorded, could be significantly different from that reflected in the financial statements.

Revenue Recognition
Alliance Canada’s TSAs are designed to provide toll revenues sufficient to recover the costs of providing transportation service to shippers. The period in which costs are recovered from toll receipts may differ from the period that these costs are recognized in the financial statements. Differences between the recorded transportation revenue and actual toll receipts give rise to receivable or payable balances.

Generally, the Saskatchewan System’s transportation revenues are recorded when products have been delivered or services have been performed. For operations that are subject to regulation, revenues are not necessarily recognized in the same period as the cash tolls or the billed amounts. For rate-regulated operations, revenue is recognized in a manner that is consistent with the underlying rates allowed by the regulatory authority.

Financial Instruments, Hedging Relationships and Other Comprehensive Income
New accounting standards will be in effect for fiscal years beginning on or after October 1, 2006 for hedge accounting, recognition and measurement of financial instruments and disclosure of comprehensive income.

The Fund will apply these standards beginning on January 1, 2007 resulting in the recognition of other comprehensive income in a separate financial statement and the inclusion of accumulated other comprehensive income as a component of unitholders equity. To the extent economic hedges do not qualify, or are not documented as hedges in accordance with the new standards, gains and losses will be charged to current period earnings. The Fund anticipates that the adoption of these standards will not result in a material impact on the financial statements.