Metro PCS 2009 Annual Report Download - page 128

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
F-14
In October 2009, the FASB issued Accounting Standards Update 2009-13, “Multiple-Deliverable Revenue
Arrangements - a consensus of the EITF,” (“ASU 2009-13”) which amends ASC 605 (Topic 605, “Revenue
Recognition”). This amended guidance addresses the determination of when individual deliverables within an
arrangement may be treated as separate units of accounting and modifies the manner in which transaction
consideration is allocated across the separately identifiable deliverables. ASU 2009-13 is effective prospectively for
the Company on January 1, 2011, although early adoption is permitted provided that it is retroactively applied to the
beginning of the year of adoption. The Company has not yet determined the effect on its financial condition or
results of operations upon adoption of ASU 2009-13.
In December 2009, the FASB issued ASU 2009-17, “Amendments to FASB Interpretation 46(R),” (“ASU 2009-
17”) revising authoritative guidance associated with the consolidation of variable interest entities. This revised
guidance replaces the current quantitative-based assessment for determining which enterprise has a controlling
interest in a variable interest entity with an approach that is now primarily qualitative. This qualitative approach
focuses on identifying the enterprise that has (i) the power to direct the activities of the variable interest entity that
can most significantly impact the entity’s performance; and (ii) the obligation to absorb losses and the right to
receive benefits from the entity that could potentially be significant to the variable interest entity. This revised
guidance also requires an ongoing assessment of whether an enterprise is the primary beneficiary of a variable
interest entity rather than a reassessment only upon the occurrence of specific events. ASU 2009-17 was effective
for the Company on January 1, 2010. The implementation of this standard did not have a material impact on the
Company’s financial condition, results of operations or cash flows.
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 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 58. At Royal Street’s request
and subject to Royal Street’s control and direction, MetroPCS assisted or 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 ASC 810.
Royal Street qualifies as a variable interest entity under ASC 810 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 $1.95 billion of 9¼% Senior
Notes due 2014 (the “9¼% Senior Notes”). 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.
C9 Wireless, LLC has a right to sell, or put, its limited liability company interests in Royal Street
Communications to the Company at specific future dates based on a contractually determined amount (the “Put
Right”). The Put Right represents an unconditional obligation of MetroPCS and its wholly-owned subsidiaries to
purchase from C9 Wireless, LLC its limited liability company interests in Royal Street Communications. In
accordance with ASC 480 (Topic 480, “Distinguishing Liabilities from Equity”), this obligation is recorded as a
liability and is measured at each reporting date at the amount of cash that would be required to settle the obligation
under the contract terms if settlement occurred at the reporting date.