Hot potato…

November 11, 2003

11/12: UPDATE In SBC’s 10-Q filed earlier today, the company omitted its claim that Cingular did not qualify as a VIE. Whether that means Cingular will find its way onto SBC’s balance sheet in the 4th Q remains to be seen.

Most kids probably no longer play this game. After all, it’s about as low-tech as one can get. But that’s not stopping major corporations from playing the game. BellSouth (BLS) , which owns a 40 percent stake in Cingular, the nation’s second largest cell phone operator, said in the 10-Q it filed yesterday that it doesn’t consider Cingular to be a variable interest entity (VIE) under accounting rules (for more on VIEs, see Chapter 7) and has no plans to consolidate the company on its balance sheet. SBC Communications (SBC) , which owns 60 percent of Cingular, but notes in its second quarter 10-Q (it hasn’t filed its 3rd quarter Q yet) that it shares management responisbilities 50-50 with BellSouth, has also said that Cingular doesn’t count as a VIE. Both companies, however, seem to have few problems counting up the revenues that Cingular brings in. The risks, however, are a big hot potato!

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