MTS BALANCE SHEET AND EITF D-98 IMPLEMENTATION
Monday, June 01, 2009
Per requests from our followers, we have compiled additional information about the changes in our Balance Sheet in Q1 2009.
In 2007-2008, FASB recommended changes to how certain equity investments were recognized. Beginning from Q1 2009, MTS was required to apply EITF D-98 ("Classification and measurement of redeemable securities") to fulfill our obligations under US GAAP accounting. The addition of "Redeemable non-controlling interests" line item supersedes Minority Interest (as of 31 Dec 2008 roughly $23.5mln), and the changes in the figures simply relates to the retroactive application of Topic D-98. In the case of MTS, both of these items referred to our stakes in K-Telecom (MTS Armenia) and Dagtelecom, a small regional player acquired in 2006.
As it relates to MTS, the changes are as follows:
- As of 31 Dec 2008, we arrive at the total sum of $143.7 mln in Redeemable non-controlling interests, of which $102 mln relates to our 20% non-controlling interest in K-Telecom (MTS Armenia) and $42 mln relates to our 25.01% redeemable non-controlling interest in Dagtelecom;
- As of 31 Mar 2009, the sum equals $100.5 million due to the fact that the option on Dagtelecom was exercised, compelling MTS to buy back the remaining interest in Dagtelecom.
To give you a sense of how this works, the Dagtelecom transaction and quarterly revaluation of K-Telecom prompted the following reconciliation:
- decrease in Additional Paid-in Capital of $41.4 mln (due to Dagtelecom non-controlling interest revaluation) and
- decrease in Retained Earnings of $78.8 mln (due to K-Telecom non-controlling interest revaluation)
For detailed information, please review the following excel sheet.