Metro PCS 2007 Annual Report Download - page 92

81
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 will be
required to adopt SFAS No. 159 on January 1, 2008. The adoption of SFAS No. 159 did not have a material impact
on our 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. We have not yet determined the effect on
our consolidated financial statements, 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. We have not yet determined the effect on our consolidated
financial statements, if any, upon adoption of SFAS No. 160.
Michigan Business Tax
On July 12, 2007, the Michigan Governor signed into law a new Michigan Business Tax (“MBT Act”) which
restructures the state business tax by replacing the Michigan Single Business Tax with a new two-part tax on
business income and modified gross receipts, collectively referred to as the (“BIT/GRT tax”). On September 30,
2007, the Michigan Governor signed into law a BIT/GRT tax future deduction which is intended to offset the
increased deferred tax liability and expense associated with the MBT Act. Because the main provision of the
BIT/GRT tax imposes a two-part tax on business income and modified gross receipts, we believe the BIT/GRT tax
and related future deduction should be accounted for under the provisions of SFAS No. 109 regarding the
recognition of deferred taxes. In accordance with SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax law should be included in tax expense attributable to continuing operations in the period that includes
the enactment date. Although the effective date of the MBT Act is January 1, 2008, certain effects of the change
should be reflected in the financial statements of the first interim or annual reporting period that includes July 12 and
September 30, 2007. We have recorded a deferred tax liability and offsetting asset of $4.4 million as of December
31, 2007 relating to the MBT Act and future deduction.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market prices and rates, including interest rates.
We do not routinely enter into derivatives or other financial instruments for trading, speculative or hedging
purposes, unless it is required by our senior secured credit facility. We do not currently conduct business
internationally, so we are generally not subject to foreign currency exchange rate risk.
As of December 31, 2007, we had approximately $1.6 billion in outstanding indebtedness under our senior
secured credit facility that bears interest at floating rates based on the London Inter Bank Offered Rate, or LIBOR,
plus 2.25%. The interest rate on the outstanding debt under our senior secured credit facility as of December 31,
2007 was 7.329%. On November 21, 2006, to manage our interest rate risk exposure and fulfill a requirement of our
senior secured credit facility, we entered into a three-year interest rate protection agreement. This agreement covers
a notional amount of $1.0 billion and effectively converts this portion of our variable rate debt to fixed-rate debt at
an annual rate of 7.169%. The quarterly interest settlement periods began on February 1, 2007. The interest rate
swap agreement expires in 2010. If market LIBOR rates increase 100 basis points over the rates in effect at