ASSETS AND LIABILITIES HELD FOR SALE
|9 Months Ended
Dec. 31, 2022
|Discontinued Operations and Disposal Groups [Abstract]
|ASSETS AND LIABILITIES HELD FOR SALE
|ASSETS AND LIABILITIES HELD FOR SALE
In the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022, the Company announced its plans to divest its interests in its Russian securities brokerage and complementary banking operations in Russia (the "Russia Segment"). On October 17, 2022, the Company entered into an agreement with Maxim Povalishin for the sale of 100% of the share capital of the companies comprising the Russia Segment. Maxim Povalishin, the purchaser, is currently the Deputy General Director and a member of the Board of Directors of Freedom RU. The transaction was approved by the Central Bank of the Russian Federation on February 10, 2023, and the sale is expected to be completed before the end of the February 2023.
The consideration for the purchase of the Russian Subsidiaries consists of the following:
•Mr. Povalishin will be assigned the Company’s obligation to Freedom RU under an outstanding deferred payment in the amount of approximately RUB 6.6 billion (at foreign exchange rate on the reporting date approximately $91 million) (the “Deferred Payment Obligation”) which resulted from the purchase by the Company of 90.43% of the share capital of Freedom RU’s Kazakhstan subsidiary Freedom Finance JSC (“Freedom KZ”) (with its subsidiaries) from Freedom RU as part of a corporate restructuring, as a result of which the Company has become the 100% direct owner of Freedom KZ. The agreement for the purchase of Freedom KZ was entered on September 13, 2022, that was approved by regulatory body and finalized during November 2022; and
•Mr. Povalishin will pay cash in an amount equal to (x) $140 million less (y) the amount of the Deferred Payment Obligation as translated into U.S. dollars at the official exchange rate on the closing date.
In addition, in July 2022, Freedom RU established a Russian subsidiary Freedom Finance Auto LLC. In January 2023, Freedom RU concluded an agreement to sell this new subsidiary to Mr. Povalishin for RUB 50 million (approximately
$695 based on the applicable currency exchange rate on the reporting date). On February 7, 2023, the sale of Freedom Finance Auto LLC was completed.
The Company has classified the Russia Segment as discontinued operations as of December 31, 2022 and for the three and nine months ended December 31, 2022, because the subsidiaries to be disposed of in this transaction met the held for sale criteria as of December 31, 2022.
The cumulative translation adjustment attributable to the Russia Segment of $18,650 is included within Accumulated Other Comprehensive Loss within the Condensed Consolidated Balance Sheet as of December 31, 2022. In light of the Russia/Ukraine Conflict, and the consequent U.S., UK and EU economic sanctions and Russian countersanctions, the Company was seeking to sell its interests in its three Russian subsidiaries that resulted in a net non-cash $43,973 impairment charge, which was recorded for the nine months ended December 31, 2022, within the line item Net income from discontinued operation on the Condensed Consolidated Statements of Operations. The Company will continue to evaluate the Russia Segment for changes in the valuation until it is sold.
In accordance with United States tax regulations, the Company applies the check-the-box election for disregarding the Russian Segment and treating it as an asset. The Company's position that the loss arising from the Russian Segment in the amount of $43,973 for the nine months ended December 31, 2022, cannot be deducted for income tax purposes in the United States and, therefore, it does not recognize a related deferred tax asset.
In accordance with US GAAP, the Company has reported separately the discontinued operations in the condensed consolidated financial statements. As of December 31, 2022 and March 31, 2022, the major classes of assets and liabilities from discontinued operations included the following:
The results of operations for discontinued operations for the three and nine months ended December 31, 2022, and 2021, consist of the following:
The net cash flows used in operating and investing activities for discontinued operations for the nine months ended December 31, 2022, and 2021, consist of the following:
The following table presents reconciliation of anticipated provision for impairment from sale of net assets held for sale as of disposal date: