New accounting norms will impact telecom firms' profits: TRAI

Our Bureau New Delhi | Updated on October 13, 2011

The Telecom Regulatory Authority of India on Thursday said that convergence of Indian accounting norms with global audit practice IFRS will have a bearing on the profits of telecom companies as they will be required to assign fair value to their assets.

“Under IFRS, financial assets or liabilities are recognised at fair value on the date of initial recognition. Adoption of IND AS will affect the profit for the year as well as the profit for subsequent years. Further, the current assets or liabilities will also change due to recognition of security deposit at present value,” TRAI said in a ‘Draft Study Paper on Implication of Adoption of IFRS on Indian Telecom Service Sector Companies' .

TRAI said the change in profit will also have an impact on the income-tax payable to the government by the operators. The regulator said that the convergence will have an impact on annual licence fee payable by the service providers as there will be changes in accounting treatment of revenue recognition of certain services.

“As the revenue for the year of transaction will come down, the licence fee payable will be reduced for that year. However, the revenue will be accounted for in future years and licence fee will accordingly be deferred to those years,” TRAI said.

The IFRS accounting standards were supposed to have come into effect in April but the Government deferred it after the industry raised concerns. No new date of implementation has been notified.

Earlier Roadmap

As per the earlier roadmap laid out by the Ministry of Corporate Affairs, companies will have to prepare their accounts as per the new norm in a phased manner, beginning with companies that have a networth of over Rs 1,000 crore.

Scheduled commercial banks and urban cooperative banks are expected to adopt IFRS from April 1, 2013 and all insurance companies will convert their opening balance sheets with IFRS from April, 2012. Large, listed non-banking finance companies, will converge their opening books of accounts with IFRS norms from April 1, 2013.

Published on October 13, 2011

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