21. Investment in EMEA Subsidiaries

As discussed in note 1, Nortel accounted for its interest in the EMEA Subsidiaries under the equity method of accounting in accordance with ASC 323, from the Petition Date to May 31, 2010. Only certain of the entities included in the EMEA Subsidiaries have filed for creditor protection at March 31, 2010. Under the equity method of accounting, Nortel recorded its initial investments at their estimated fair value as of the Petition Date, being the date the entities that comprise the EMEA Subsidiaries were deconsolidated by Nortel. Nortel subsequently recognized its interests in the losses and capital transactions of the EMEA Subsidiaries and gave effect to the elimination of unrealized intercompany profits and losses arising from transactions between Nortel and its consolidated subsidiaries and the EMEA Subsidiaries.

At March 31, 2010, Nortel's net investment in the EMEA Subsidiaries was in a net liability position. Until May 31, 2010, in accordance with ASC 323, Nortel had continued to recognize losses in excess of its net investment in the EMEA Subsidiaries as it had concluded that it was committed to provide non-financial support to the investees. On commencement of the application of the cost method, however, Nortel concluded that this was no longer applicable. Accordingly, Nortel recognized a loss for the net impact of the cessation of equity accounting – reflecting the net carrying value of its investments, which was classified in reorganization items. This loss is presented separately from the recognition of NNL's estimated fair value of its obligations under certain guarantees it has provided for the previously equity accounted for investees. Refer to note 14 for details.

The following table summarizes financial information for the EMEA Subsidiaries operations for the year ended December 31, 2010:


	2010
Revenues from continued operations	$	243
Revenues from discontinued operations		4

Total revenues	$	247

Gross profit		49
Selling, general and adminstrative expense		116
Research and development expense		8
Reorganization items		13
Investments and other income		(44	)
Other		6

Net loss	$	(50	)