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.

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