The Hindu Business Line : Telecom cos told to submit separate accounting statements

THE Telecom Regulatory Authority of India (TRAI) has made it mandatory for telecom operators to submit the accounting statements separately for every service offered by them in each of the licensed areas.

According to the `Reporting System on Accounting Separation Regulation, 2004' issued by the Authority, this would help it to monitor and measure the financial performance of individual telecom products/network services and information about disaggregated costs to the level of network elements.

It would also help in identification of cross-subsidisation practices in the industry, wherever these exist and investigate the cases of predatory pricing and anti-competitive conducts.

"The reporting system would help generate accurate information on costs, which is necessary to decide interconnection usage charges (IUC) and access deficit charges (ADC). It will facilitate the availability of more detailed and disaggregated information on revenues and costs on a regular basis from various service providers", the TRAI said.

This regulation will be equally applicable to integrated players and companies holding unified access services licence (UASL). In other words, both Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), which do not have a system of account separation at present, will have to start separating them with immediate effect.

In order to execute and implement the accounting and reporting practices prescribed in the regulation, service providers will have to prepare a manual containing comprehensive and complete documentation of policies, principles, methodologies and procedures for accounting and cost allocation.

Apart from an overview of the service provider's organisational structure, it will also have to submit a list of entities in the telecom sector within the group and its relationship with other group companies/related parties in terms of interconnection, common resources etc. An overview of the financial accounting system which may include policies relating to capitalisation, depreciation, advance receipts of revenue, security deposits, provision for bad and doubtful debts are also mandatory.

The service providers shall submit audited reports based on the historical cost accounting every year within six months of the end of accounting year to the Authority. They will also have to submit reports based on the replacement cost accounting every second year within six months of the end of accounting year. The reporting period shall be the same as followed by the company for preparation of the annual financial accounts under sub section (4) of section 210 of the Companies Act, 1956.

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