IFRS 15: Byju’s Financial Fallout of Rs. 4,588 crores

??Did you know Byju’s reported a loss of Rs. 4,588 crores in FY 2021, which was 19 times higher than FY 2020? However, the company says it could report only 52% of the cash revenue in FY 2021.

??But what led to such a significant financial discrepancy in one of the world’s most valued ed-tech firms?

????Well, the company missed out on a major aspect of accounting and reporting, “Revenue Recognition.”

??You see, the primary auditor of Byju’s realised that the company was using the cash basis of accounting rather than an accrual basis, which is preferred as per International Standards. ????To revise the revenue recognition method, the auditor put in an additional 3,500 hours to rework the financials. This caused the 17-month delay in the FY21 ROC filing.

??But why was Byju’s so confused and why was the revenue recognition deferred in the first place?

1?? First, in a subscription business model, the revenue must be accounted for once the services are delivered, accounting as a liability until the services are delivered.

2?? Second, sometimes the customer takes a loan to pay for the services. In that scenario, Byju’s acts as a guarantor and would be liable if the customer defaults on payments. Thus, this increases the liability side in the balance sheet.

?? Now, let’s understand what happened with Byju’s in FY 2021 with the help of a student named Raju.Raju availed of live tuition services for the next 2 years. Raju paid Rs. 48,000 in May 2020.

??Before the change in method, Byju’s was recognising the whole Rs. 48,000 as revenue under FY 2021. However, Raju will realise the services until May 2023. After the change in method ->

Read further details at below link: https://contetra.com/2024/02/10/ifrs-15-byjus-financial-fallout-of-rs-4588-crores/

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