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Trouble mounts for Byju's: Karti Chidambaram calls edtech firm's accounting practices 'irregular', demands probe by ICAI

Trouble mounts for Byju's: Karti Chidambaram calls edtech firm's accounting practices 'irregular', demands probe by ICAI

The Lok Sabha MP, in his letter, pointed out that the edtech giant’s decision to lay off 2,500 employees from its workforce indicates that it is not in a “sound state of financial health".

Addressing the letter to Dr Debashis Mitra, President of ICAI, the MP wrote that Byju’s recent announcement to lay off 2,500 employees from its workforce indicates that it is not in a “sound state of financial health.” Addressing the letter to Dr Debashis Mitra, President of ICAI, the MP wrote that Byju’s recent announcement to lay off 2,500 employees from its workforce indicates that it is not in a “sound state of financial health.”

Edtech giant Byju’s’ accounting practices are irregular and that its total loss in FY 2021 is over Rs 5,000 crore, senior Congress leader and Lok Sabha MP Karti Chidambaram has claimed in a letter to the Institute of Chartered Accountants of India (ICAI). The lawmaker has urged the institute to investigate the company's financial statements. 

Byju’s recently announced its FY21 results which saw its losses widen by nearly 20 times to Rs 4,588.75 crore from Rs 231.69 crore in FY20. 

However, Chidambaram has highlighted some red flags in its financial statements for FY21. He pointed out that these statements are 18 months late, “nearly missing four deadlines.”

Addressing the letter to Dr Debashis Mitra, President of ICAI, the MP wrote that Byju’s recent announcement to lay off 2,500 employees from its workforce indicates that it is not in a “sound state of financial health.”

He mentioned three aspects of the company’s operations and revenues that “puzzled” him. He emphasised that as per the company’s claims 81 per cent of the revenues in FY21 came from the sale of edutech products. He questioned this model stating, “...Is it not blatant misinterpretation of facts to classify hardware products as edutech.”

He also called Byju’s accounting practices “irregular” as 60 per cent of its employee-related costs have been recognised as capital expenses. “If these costs were counted as a direct expense, instead of capital expense, Byju’s total loss for FY 2021 would have gone over Rs 5,000 crore,” he said. 

Lastly, the Lok Sabha MP said that the company was recognising revenues from ‘streaming services’ upfront and in full, on the commencement of a contract that violates accounting practices. “It is a standard accounting practice that subscription revenue can’t be recognised upfront, and has to be recognised over the period of delivery of the service,” the Sivaganga MP said. 

All these discrepancies warrant opening up the previous financial statements, he concluded.

Published on: Oct 15, 2022, 1:58 PM IST
Posted by: Bhavya Kaushal, Oct 15, 2022, 1:51 PM IST