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Chirputkar, Abhijit V.
- Impact of IFRS on Financial Aspects of Indian Telecom Operators: a Conceptual Framework
Authors
1 Symbiosis Institute of Telecom Management, Symbiosis International University, Pune, Maharashtra., IN
Source
Telecom Business Review, Vol 6, No 1 (2013), Pagination: 17-26Abstract
International Financial Reporting Standards (IFRS) are now to be compulsorily followed by all companies in India. The transition to IFRS-converged accounting standards has already started and is being implemented in a phased manner from 2011 to 2014. This is supposed to bring about global unification of standards for reporting financial information to shareholders, lenders and various other stakeholders. Implementation of IFRS-converged accounting standardsis going to give rise to various changes in reporting which will have an effect primarily on financial statements and consequently on certain aspects of financial management. The implementation of IFRS is going to affect not only the disclosure of profits (income statement) and financial position (balance sheet) but also financial performance and decision making. The changes in reporting are likely to impact various financial aspects. Such financial aspects include (but are not limited to) revenue recognition, cost and profitability aspects, capital budgeting policies, working capital management,etc.There are a few unique issues and financial implications thereof, related to application of IFRS to telecom industry which need special attention. This article attempts to propose a conceptual framework for analysing the effect of IFRS (with special reference to IFRS applicable to Indian Telecom Operators) on certain financial aspects of business such as revenue recognition, property plant and equipment, intangible assets, impairment of non-financial assets, outsourcing arrangements, provisions and contingencies, inventory, borrowing costs, etc. The parameters considered for analysis include various drivers of profits, financial position, earning per share (EPS) and Enterprise Value.This framework could also be applied to telecom companies in other countries with suitable modifications/adaptation.Keywords
IFRS, Impact, Financial Aspects, Indian Telecom Operators, Conceptual Framework
References
- Chandra, P. (2008). Book on Financial Management-Theory & Practice. 7e.
- For Ind AS and IFRS Retrieved from http://www.icai.org/new_post.html?post_id=400&c_id=139;.
- Framework for preparation and presentation of Financial Statements by ICAI, Retrieved from http://www.icai.org.
- Accounting Under IFRS: Telecoms, January 2010 ©2010 KPMG IFRG Limited.
- JenoBeke , (2011). How can International Accounting Standar ds support Business Management? Int. J. of Management and Business Research, 1(1).
- Iatridis, G. (2010). IFRS Adoption and Financial Statement Effects: The UK Case. International Research Journal of Finance and Economics, 38, 165-172.
- Stent, W., Bradbury, M., & Hooks, J. (2010). IFRS in New Zealand: effects on fi nancial statements and ratios. Pacifi c Accounting Review, 22(2), 92-107.
- Valuation Techniques in Telecommunication Industry – An Alternative Approach based on Operating Cash Flow and Number of Subscribers
Authors
1 Symbiosis Institute of Telecom Management, Constituent of Symbiosis International University, Pune, Maharashtra, IN
2 Symbiosis Institute of Telecom Management, Constituent of Symbiosis International University, Pune, Maharashtra, IN
Source
Telecom Business Review, Vol 9, No 1 (2016), Pagination: 32-38Abstract
The Indian economy has witnessed tremendous growth after liberalization. The valuation of telecom companies has gained specific importance after 2010. The government has received revenue of more than Rs. 1.06 lac crores through 3G/BWA spectrum auction from telecom operators. The operators raised debt to finance acquisition of spectrum in the above auction. Due to this almost all the operators had to raise debt and now it is impacting their profits, cash flow and valuation. Apart from this the telecom operators are highly regulated. There are various issues due to which the valuation of the telecom companies prior to 2010 (i.e. before auction) and post 2010 shows a huge difference.
The valuation of telecom operators is very crucial and has invited special attention in the recent past. This article attempts to evaluate some special aspects of telecom valuation like valuation based on subscriber, per subscriber EV, PE ratios (EV ratios) etc. which may not be used while valuing other types of industries.
This paper evaluates existing valuation techniques, assesses limitations of these techniques in the light of 3G auction. The valuation of the telecom companies under the conventional techniques may not depict fair results, considering the fact that the telecom sector witnessed an increase in number of subscribers, increase in revenue however a reduction in profits & valuation and heavy cost of debt involved in acquiring spectrum and upgrading technology during 2009 to 2015. The paper attempts to find out an alternative basis to arrive at valuation based upon operating cash flows and the number of subscribers.