Metro PCS 2007 Annual Report Download - page 115

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-16
periods within those fiscal years for items within the scope of this FSP. The Company will be required to adopt
SFAS No. 157 in the first quarter of fiscal year 2008, except as it applies to those nonfinancial assets and
nonfinancial liabilities as noted in FSP FAS 157-6. The partial adoption of SFAS No. 157 is not expected to have a
material impact on the Company’ s financial condition or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115,” (“SFAS No. 159”), which permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective of SFAS No. 159
is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company was
required to adopt SFAS No. 159 on January 1, 2008. The adoption of SFAS No. 159 did not have a material impact
on the Company’ s financial condition or results of operations.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS No. 141(R)”), which
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill
acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS No. 141(R) is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and early adoption is prohibited. The Company has not yet determined the
effect on its financial condition or results of operations, if any, upon adoption of SFAS No. 141(R).
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements,” (“SFAS No. 160”), which establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent
and to the noncontrolling interest, changes in a parent’ s ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after
December 15, 2008 and early adoption is prohibited. The Company has not yet determined the effect on its financial
condition or results of operations, if any, upon adoption of SFAS No. 160.
3. Majority-Owned Subsidiary:
On November 24, 2004, MetroPCS, through its wholly-owned subsidiaries, together with C9 Wireless, LLC, an
independent, unaffiliated third-party, formed a limited liability company, Royal Street Communications, that
qualified to bid for closed licenses and to receive bidding credits as a very small business DE on open licenses in
FCC Auction No. 58. MetroPCS indirectly owns 85% of the limited liability company member interest of Royal
Street Communications, but may elect only two of five members of the Royal Street Communications’ management
committee, which has the full power to direct the management of Royal Street. Royal Street Communications has
formed limited liability company subsidiaries which hold all licenses won in Auction No. 58. At Royal Street
Communications’ request and subject to Royal Street Communications’ control and direction, MetroPCS is assisting
in the construction of Royal Street’ s networks and has agreed to purchase, via a resale arrangement, as much as 85%
of the engineered service capacity of Royal Street’ s networks. The Company’ s consolidated financial statements
include the balances and results of operations of MetroPCS and its wholly-owned subsidiaries as well as the
balances and results of operations of Royal Street. The Company consolidates its interest in Royal Street in
accordance with FIN 46(R). Royal Street qualifies as a variable interest entity under FIN 46(R) because the
Company is the primary beneficiary of Royal Street and will absorb all of Royal Street’ s expected losses. Royal
Street does not guarantee MetroPCS Wireless, Inc.’ s (“Wireless”) obligations under its senior secured credit facility,
pursuant to which Wireless may borrow up to $1.7 billion, as amended, (the “Senior Secured Credit Facility”) and
its $1.4 billion of 9¼% Senior Notes due 2014 (the “9¼% Senior Notes”). See the “non-guarantor subsidiaries”
information in Note 19 for the financial position and results of operations of Royal Street. C9 Wireless, LLC, a
beneficial interest holder in Royal Street, has no recourse to the general credit of MetroPCS. All intercompany
accounts and transactions between the Company and Royal Street have been eliminated in the consolidated financial
statements.