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The Financial Reporting Review Board (FRRB), a non-standing committee of the CA Institute’s Council, is likely to take up edtech major BYJU’S financial statements and its allegedly irregular accounting practices for review.
“FRRB is meeting in the next two days to look into the issue,” said sources, adding that the President of the CA Institute, too, is in favour of the move.
This comes in the backdrop of several complaints received by the Ministry of Corporate Affairs (MCA), Serious Frauds Investigation Office (SFIO) and the CA Institute in the recent months, over the alleged irregular accounting practices at BYJU’S.
The start-up had also delayed filing of its FY21 results (filed in October this year), prompting the MCA to demand an explanation on the same. The Ministry, reportedly sent its letter on this issue in August.
The current legal framework says private companies need to file their financial statements with MCA within 30 days of holding the annual general meeting (AGM). The AGM has to be held within six months of the end of the financial year.
“With all the signals that are coming to the CA Institute on this case, it has been decided to move on this. This has nothing to do with any member of Parliament’s writing. The issue has to be seen in its entirety...,” sources said.
Revenue recognition
Currently, FRRB has powers to review the general-purpose financial statements either suo moto or on a reference made to it by any regulatory body such as RBI, SEBI, Insurance Regulatory and Development Authority, MCA etc. The FRRB also reviews the general-purpose financial statements of enterprises relating to which serious accounting irregularities have been highlighted by media reports.
One of the accounting practices adopted by BYJU’S that came under scrutiny was in the area of “revenue recognition”. It was alleged that the company’s practice of recognising revenues from “streaming services” upfront and in full, was not consistent with the generally accepted accounting principles. The more prudent way and the right manner would be to recognise the revenue over the period of delivery of service, critics highlighted.
BYJU’S recently raised $250 million in a new funding round from existing investors, including the Qatar Investment Authority at $22-billion valuation. This fundraise came a week after the start-up announced laying off of more than 2,500 employees.
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