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adoption is allowed under certain conditions. Management does not
believe that the adoption of SFAS No. 159 will have a material impact
on VimpelCom’s results of operations or financial position.
In December 4, 2007, the FASB issued SFAS No. 141(R) («SFAS No.
141(R)»), Business Combinations, and SFAS No. 160 («SFAS No.
160»), Accounting and Reporting of Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51. These
new standards will significantly change the financial accounting and
reporting of business combination transactions and noncontrolling (or
minority) interests in consolidated financial statements. The Company
will be required to adopt SFAS No.141(R) and 160 on January 1, 2009,
and early adoption and retroactive application are prohibited. The
Company has not yet determined the effect that the adoption of SFAS
No. 141(R) and 160 will have on its consolidated financial statements.
In June 2007, the Emerging Issues Task Force reached a consensus
on EITF Issue No. 06-11 («EITF No. 06-11»), Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards. EITF No.
06-11 provides that companies are required to recognize the tax
benefits of dividends on unvested share-based payments in equity
and reclassify those tax benefits from additional paid-in capital to the
income statement when the related award is forfeited (or is no longer
expected to vest). The Issue is effective for dividends declared in fiscal
years beginning after December 15, 2007. The adoption of EITF Issue
No. 06-11 is not expected to have a material impact on the results of
operations or financial position of the Company.
In December 2007, the Emerging Issues Task Force reached a consensus on
EITF Issue No. 07-01 («EITF No. 07-01»), Accounting for Collaborative
Arrangements. EITF No. 07-01 provides that an entity should consider
all relevant facts and circumstances when evaluating whether an
arrangement is a collaborative arrangement. The issue is effective for
annual periods beginning after December 15, 2008. The adoption of
EITF Issue No. 07-01 is not expected to have a material impact on the
results of operations or financial position of the Company.
On December 21, 2007 the SEC staff issued Staff Accounting Bulletin
No. 110 («SAB 110»), which, effective January 1, 2008, amends
and replaces Question 6 of Section D.2 of SAB Topic 14, Share-Based
Payment. SAB 110 expresses the views of the SEC staff regarding the use
of a «simplified» method in developing an estimate of expected term
of «plain vanilla» share options in accordance with FASB Statement No.
123(R). SAB 110 extends the use of the «simplified» method for «plain
vanilla» awards in certain situations. Although VimpelCom has availed
itself to the «plain vanilla» option in the past, management does not
expect that the adoption of SAB 110 will have a material impact on
VimpelCom’s results of operations or financial position.
Reclassifications
Certain reclassifications have been made to the prior years’ consolidated
financial statements to conform to the current year’s presentation.
Equipment financing obligations and capital lease obligations were combined
in the line «Bank and other loans» from the line «Accrued liabilities».
3. BUSINESS COMBINATIONS
AND DISPOSALS
ВымпелКом / Годовой отчет 2007
Severnaya Korona
On August 13, 2007, VimpelCom acquired Closed Joint Stock Company
«Corporation Severnaya Korona» («CSK»), which holds GSM 900/1800
and D-AMPS licenses covering the Irkutsk Region. The Company acquired
100% of the shares of CSK for approximately US$235,509, including
US$1,274 of acquisition related costs. The sole shareholder of CSK was
Tele2 Sverige AB of Sweden, a member of the telecommunications holding
company Tele2 which operates in the Nordic and Russian markets.
The primary reason for the acquisition was VimpelCom’s entry into the
mobile telephony market in the Irkutsk region. CSK’s GSM-900/1800
and D-AMPS licenses cover a territory with a population of about 2.5
million. The acquisition was recorded under the purchase method of
accounting. The preliminary fair value of acquired identifiable net assets
of CSK amounted to US$58,460. The excess of the acquisition cost over
the preliminary fair market value of the identifiable net assets of CSK
amounted to US$177,049. This amount was recorded as goodwill, was
assigned to the Russian Federation reporting unit and is subject to
annual impairment tests. The results of operations of CSK were included
in the accompanying consolidated statement of income from the date of
acquisition.
The following table summarizes the Company’s preliminary estimate of
the fair values of the assets acquired and liabilities assumed at the date
of acquisition:
As of the Date of Acquisition
Cash and cash equivalents $2,766
Other current assets 3,639
Property and equipment 27,637
Licenses and allocation of frequencies
(14 years weighted average remaining useful life) 19,502
Other intangible assets
(2 years weighted average remaining useful life) 18,444
Goodwill 177,049
Other non-current assets 771
Total assets acquired 249,808
Current liabilities (4,279)
Long-term liabilities (10,020)
Total liabilities assumed (14,299)
Total acquisition price $235,509
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