BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Authority's operating results for the interim period, have been included. The Authority's operating results for the three months ended December 31, 2011 are not necessarily indicative of results for the fiscal year ending September 30, 2012.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Authority's Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly-owned subsidiaries and entities. In accordance with authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”) pertaining to consolidation of variable interest entities, the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW, and the accounts of MG&H, Mohegan Resorts and its subsidiaries are consolidated into the accounts of MTGA Gaming, as Mohegan Ventures-NW and MTGA Gaming are deemed to be the primary beneficiaries. In consolidation, all intercompany balances and transactions were eliminated.

Fair Value of Financial Instruments

The fair value amounts presented below are reported to satisfy disclosure requirements pursuant to authoritative guidance issued by the FASB pertaining to disclosures about fair values of financial instruments and are not necessarily indicative of amounts that the Authority could realize in a current market transaction.

The Authority applies the following fair value hierarchy, which prioritizes the inputs utilized to measure fair value into three levels:


•	Level 1-Quoted prices for identical assets or liabilities in active markets;


•	Level 2-Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets or valuations based on models where the significant inputs are observable or can be corroborated by observable market data; and


•	Level 3-Valuations based on models where the significant inputs are unobservable. The unobservable inputs reflect the Authority's estimates or assumptions that market participants would utilize in pricing such assets or liabilities.

The Authority's assessment of the significance of a particular input requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.

The carrying amount of cash and cash equivalents, receivables, trade payables and promissory notes approximates fair value. The estimated fair value of the Authority's financing facilities and notes were as follows (in thousands):



	December 31, 2011
	Carrying Value		Fair Value
Bank Credit Facility	$	505,000	$	479,119
2009 11¹/2% Second Lien Senior Secured Notes	$	193,853	$	183,750
2005 6 ¹/8% Senior Unsecured Notes	$	250,000	$	169,375
2002 8% Senior Subordinated Notes	$	250,000	$	161,833
2004 7¹/8% Senior Subordinated Notes	$	225,000	$	112,037
2005 6⁷/8% Senior Subordinated Notes	$	150,000	$	66,188

The estimated fair values of the Authority's financing facilities and notes were based on quoted market prices or prices of similar instruments on or about December 31, 2011.

Long-Term Receivables

Long-term receivables consist primarily of receivables from affiliates and tenants. The following table presents a reconciliation of long-term receivables and the related reserves for doubtful collection of these long-term receivables (in thousands):



	Long-Term Receivables
	Affiliates (1)		Tenants			Total
Balance, September 30, 2011	$	46,561	$	1,285		$	47,846
Additions:
Issuance of affiliate advances and tenant loans	1,196		—			1,196
Deductions:
Payments received	—		(38		)	(38		)
Balance, December 31, 2011	$	47,757	$	1,247		$	49,004

__________


(1)	Includes interest receivable of $19.5 million and $18.4 million as of December 31, 2011 and September 30, 2011, respectively. The WTG receivables no longer accrue interest pursuant to a release and reimbursement agreement entered into in September 2010.



	Reserves for Doubtful Collection of Long-Term Receivables
	Affiliates		Tenants			Total
Balance, September 30, 2011	$	20,201	$	78		$	20,279
Additions:
Charges to bad debt expense	286		—			286
Deductions:
Adjustments	—		(3		)	(3		)
Balance, December 31, 2011	$	20,487	$	75		$	20,562

New Accounting Standards

In September 2011, the FASB issued revised guidance pertaining to the accounting standard for goodwill impairment tests. The revised guidance allows an entity the option to assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying value before performing the two-step goodwill impairment test. The revised guidance is effective for interim and annual periods beginning after December 15, 2011; however, early adoption is permitted. The Authority does not expect its adoption to impact its financial position, results of operations or cash flows.

In June 2011, the FASB issued revised guidance pertaining to reporting of comprehensive income. The revised guidance allows an entity the option of presenting the total of comprehensive income, components of net income and components of other comprehensive income, either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The revised guidance is effective retrospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2011. The Authority does not expect its adoption to impact its financial position, results of operations or cash flows.

In April 2010, the FASB issued guidance pertaining to accruals for casino jackpot liabilities. The new guidance clarifies that an entity should not accrue jackpot liabilities (or portions thereof) before a jackpot is won if the entity can avoid paying such jackpot. The new guidance specifies that jackpots should be accrued and charged to revenue when the entity has the obligation to pay such jackpot and applies to both base and progressive jackpots and requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. The new guidance was effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2010. The Authority adopted this guidance in its first quarter of fiscal 2012, and as such, recorded a cumulative-effect adjustment, which decreased other current liabilities and increased retained earnings by $2.0 million.