MegaFon Converts from Reporting under US GAAP to IFRS
OREANDA-NEWS. Open Joint Stock Company “MegaFon” (“MegaFon”, the “Company”, or the “Group”) (LSE: MFON), a leading Russian universal telecommunications operator, today announces the completion of its project to convert its primary financial reporting framework from United States generally accepted accounting principles (“GAAP”) to International Financial Reporting Standards (“IFRS”). In connection with this, it has released audited consolidated financial statements as of and for the year ended 31 December 2012 prepared in accordance with IFRS, including comparative statements for the years 2010 and 2011, and these are now available for download on the Company’s website at: http://english.corp.megafon.ru/
The decision to change the Company’s financial reporting to IFRS was made because many Russian and international peers of the Company already report under IFRS, and therefore the conversion to IFRS will provide the investment community and others with the opportunity to make a more meaningful comparison of the Company’s reported numbers with those of its peers. The decision is also consistent with the global trend towards the convergence of GAAP into IFRS and with the Russian government’s initiative (under Federal law # 208 on consolidated financial reporting) to bring Russian Accounting Standards closer to IFRS. Going forward, the Company will publish its financial results solely in accordance with IFRS and, as previously announced, the Company’s first quarter 2013 results under IFRS will be announced on 15 May 2013.
IFRS reporting will continue to be in Russian Rubles with the Ruble being the Company’s operational currency. Key consolidated financial data line items showing the differences between GAAP and IFRS and relevant explanations are presented below. For a more detailed reconciliation of the major differences between GAAP and IFRS, please refer to Note 5 of the IFRS audited consolidated financial statements as of and for the year ended 31 December 2012 which, as noted above, are available for download on the Company’s website at: http://english.corp.megafon.ru/
The 301 million Rubles difference in Revenue and the 207 million Rubles difference in OIBDA reflect the different treatment under IFRS of the award credits granted to our subscribers participating in the loyalty programme ‘MegaFon Bonus’, for which, under IFRS, the revenue is deferred until the unused award credits are redeemed or expire. In contrast, under GAAP no revenue is deferred, but rather the costs to provide certain services to redeem award credits are accrued.
The 6,087 million Rubles difference in Net Profit is primarily due to the different treatment under IFRS and GAAP of the effects of the IPO-related share put option agreed to by our shareholders in April 2012. Under GAAP, the fair value of the put option, which was treated under GAAP as a freestanding financial instrument, was assessed as close to zero at inception and at all times until its expiry in November 2012. Under IFRS, the shares subject to the put option met the definition of a financial liability and, accordingly, that financial liability was measured and reported separately from equity in the amount of its expected net present value until it expired, at which time it was reclassified back to equity at its carrying amount and a corresponding gain was recognised.
The 1,153 million Rubles difference in accrued Capital Expenditures (CAPEX) is primarily due to different accounting requirements in calculating decommissioning provisions between GAAP and IFRS. Cash CAPEX remained the same under IFRS and GAAP. The 1,188 million Rubles difference in Net Debt is due to the treatment of deferred issuance fees on loans and borrowings as a reduction of financial liabilities under IFRS.
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