The Financial Reporting Review Board (FRRB) is hopeful of concluding its ongoing review of Byju’s accounting practices in the next two months, Aniket Sunil Talati, President, Institute of Chartered Accountants of India (ICAI), said.

“It’s (review) under process and they are hoping to conclude it in about two months from now,” Talati told businessline when asked about the status of FRRB’s review of Byju’s financial statements. 

It must be noted that both ICAI President and Vice-President are not ex-officio members of FRRB, which is an independent board. 

FRRB is a non-standing committee of the CA Institute’s Council and not an investigative agency. 

Also read: Point blank. Byju’s leap from frying pan into the fire

Talati’s remarks are significant as the FRRB had in December last year —following complaints (including by a Member of Parliament) — commenced review of edtech major Byju’s financial statements for two financial years —2019-20 and 2020-21.

Deloitte, Haskins & Sells, which resigned as Byju’s statutory auditor on Thursday, revealed that it had not been able to commence audit of financial statements for 2021-22 as the company had not communicated the status of audit readiness of the financial statements and the underlying books and records for the year ended March 31,2022.

FRRB can review only those financial statements filed with the Corporate Affairs Ministry (MCA) and those in public domain. This would mean that FRRB is not looking into the issues around financial statements of 2021-22, which has reportedly not been filed with the MCA. 

Not rigorous

Meanwhile, sources said that the oversight and regulatory intervention in Byju’s matter may not be as rigorous as that of a listed entity or an enterprise with loans from banks or NBFCs or FIs.

But the agencies would be definitely interested to know as to why this has happened and such governance practices could have a bearing on the whole startup story of India or other edtechs, they added.

The mandate of FRRB is to look at all entities (in terms of accounting practices) where public interest is involved.

If after review it is found that the non-compliances are not material, then an advisory is sent to the concerned audit firm. However, if non-compliances are material and they affect true and fair view of the financial statements, then the concerned auditor is referred to Director (Discipline) of ICAI for disciplinary action. 

The company’s financials are then sent to the regulator (MCA or RBI or IRDAI or PFRDA) for further action. This is because action cannot be taken by the CA Institute on the company concerned and the regulator alone can do it, sources added.

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 pointed out.