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96
VimpelCom / Annual Report 2007
13. VALUATION AND QUALIFYING ACCOUNTS
The following summarizes the changes in the allowance for doubtful
accounts for the years ended December 31, 2007, 2006 and 2005:
Balance as of December 31, 2004 $12,884
Provision for bad debts 13,668
Accounts receivable written off (10,085)
Balance as of December 31, 2005 16,467
Provision for bad debts 25,781
Accounts receivable written off (2,765)
Balance as of December 31, 2006 39,483
Provision for bad debts 62,444
Accounts receivable written off (52,823)
Balance as of December 31, 2007 $49,104
The provision for bad debts included in the accompanying consolidated
statements of income is net of related value-added taxes of US$9,525,
US$3,933 and US$2,085 for the years ended December 31, 2007, 2006 and
2005, respectively.
14. RELATED PARTY TRANSACTIONS
The Company from time to time enters into certain transactions with its
shareholders and their affiliates and other related parties.
VimpelCom maintains bank accounts in Alfa Bank, which are used for
payroll and other payments in the ordinary course of business. The
balances in these bank accounts were US$52,736 and US$850 at December
31, 2007 and 2006, respectively.
VimpelCom has contracts for the rent of channels from ZAO
Investelectrosvyaz (working under the trademark «Corbina»), a
broadband operator based in Moscow, in the amount of US$8,160,
US$5,567 and US$5,575 for the years ended December 31, 2007, 2006
and 2005, respectively. Accounts payable due to Investelectrosvyaz
amounted to US$1,097 and US$574 as of December 31, 2007 and 2006,
respectively.
VimpelCom also has a contract to provide telecommunication services to
Investelectrosvyaz. Total revenue under the Investelectrosvyaz contract
included in service revenue in the accompanying consolidated statements
of income for the years ended December 31, 2007, 2006 and 2005 amounted
to US$21,079, US$8,407 and US$8,116 respectively. Accounts receivable
due from Investelectrosvyaz amounted to US$5,272 and US$4,760 as of
December 31, 2007 and 2006, respectively.
VimpelCom purchased bill delivery services from its affiliate Firma Kurier
in the amount of US$2,476, US$2,292 and US$2,315 for the years ended
December 31, 2007, 2006 and 2005, respectively. The amounts payable
to Firma Kurier were US$205 and $40 as of December 31, 2007 and 2006,
respectively.
VimpelCom provides to CSI Loyalty Partners Limited, its affiliate,
maintenance and support services for the amount of US$520 and US$111
for the years ended December 31, 2007 and 2006, respectively. The
amounts receivable from CSI Loyalty Partners Limited were US$133 and
$93 as of December 31, 2007 and 2006, respectively.
Also CSI Loyalty Partners Limited is the provider of subscriber loyalty
programs for VimpelCom, the commission that VimpelCom pays for these
services comprised US$5,516 and US$2,115 for the years ended December
31, 2007 and 2006, respectively. The amounts payable to CSI Loyalty
Partners Limited were US$1,422 and $421 as of December 31, 2007 and
2006, respectively.
In February 2006, the Board approved a General Agreement with Telenor
Russia AS for provision of personnel and a General Services Agreement with
Telenor Russia AS, both of which were effective starting from September
1, 2005, in replacement of the 2003 General Services Agreement. Total
expense under the General Services Agreement included in selling,
general and administrative expenses in the accompanying consolidated
statements of income for the years ended December 31, 2007, 2006
and 2005 amounted to US$590, US$1,293, US$2,625, respectively. As of
December 31, 2007 and 2006, the liability to Telenor Russia AS amounted
to US$49 and nil, respectively.
In October, 2006, a new General Services Agreement with Altimo
for provision of services came into effect. Total expense under
this new General Services Agreement included in selling, general
and administrative expenses in the accompanying consolidated
statements of income for the year ended December 31, 2007 and
2006, amounted to US$1,806 and US$384, respectively. There were no
amounts payables at the years ended December 31, 2007 and 2006.
On November 10, 2005, VimpelCom acquired 100% of the issued
and outstanding stock of each of Crayola Properties Limited, Cradel
Investments Limited, Wintop Management Limited, Crisden Holdings
Limited and Cellcroft Holdings Limited, which together owned a 100%
interest in URS (Note 3), for a total cash purchase price of approximately
US$231,200. VimpelCom also assumed approximately US$22,800 in URS
debt. At the time of the acquisition, one of the members of Company’s
Board was on the board of directors of one of the sellers, Karino Trading
Limited.