Byju’s audit firm Deloitte sought two key changes in FY21 financials
“Revenues from streaming services (online courses), which was previously recognised fully on commencement of contract, has been adjusted to be recognised rateably over the period of the contract,” according to notes accompanying the annual earnings report of Think & Learn Pvt Ltd, Byju’s parent.
“That’s what we have to do — that’s the standard,” a top edtech founder said. ET had reported in its September 12 edition that this was one of the changes Byju’s was making so that the auditor would sign off on the results.
Deloitte’s notes
The results were released Wednesday after a delay of over 18 months. Byju’s reported audited revenue of Rs 2,280 crore for FY21 against Rs 4,400 crore in its unaudited earnings.
The other change related to interest paid by Byju’s to partners that provide loans to customers to buy courses. This interest has been accounted for under revenue, moving it out of finance costs, since the loans are in the nature of payments to customers.
Discover the stories of your interest
“They have been counted as gross revenue this year but not net revenue,” a person briefed on the matter said.
Deloitte India didn’t respond to queries.
Byju’s reported a surge in FY21 losses to Rs 4,588 crore from Rs 262 crore in FY20 in the audited earnings.
Deloitte said in its remarks in the report that Byju’s provides guarantees to its loan partners on behalf of customers. The fair value of the guarantees is based on the probability of defaults determined by historical default rates and future expectations.
The notes pointed out that Byju’s provides first loss default guarantees (FLDGs) to its partners and is obligated to reimburse them for any monthly installments that are unpaid and overdue for a prescribed period–typically 75-90 days. Further, when a customer takes a loan, Byju’s parent collects a down payment, with the rest of the cost settled by the loan partner.
“The (Byju’s) parent receives the balance consideration from the loan partner net of subvention costs charged by the loan partner to the (Byju’s) parent. The subvention costs being in the nature of interest paid on behalf of customers are netted off against revenue,” according to Deloitte’s notes.
Products and services worth Rs 1,156.27 crore have not been recognised as revenue because of deferred payments from customers. It will be recognised when the amount is received by the company.
“Revenues from these transfer of products will be recognised when substantially all of the consideration is received by the (Byju’s) parent or when the deferred payment terms expire because of default or any non-performance by the customer and to extent any consideration received is non-refundable,” Deloitte said.
Revenue relating to course fees is being recognised proportionately based on the number of classes availed of by a student rather than those expected to be taken. Revenue from other services is recognised as income when such services are performed.
Incentives to the salesforce have also been factored in the company’s annual audited results. A cost item of Rs 109.18 crore has been expensed in Byju’s FY21 profit and loss statement as direct selling cost in the form of employee incentives and customer referral incentives.
During the FY21 period, Byju’s had come under the scanner of the Directorate General of Goods and Services Tax Intelligence over alleged evasion. The matter was settled after the company agreed to pay what it was liable for.
“The Directorate General of GST Intelligence finalised the investigation on February 18, 2021, against books supplied during the period July 2017 to October 2020,” according to the audited earnings report. “This has resulted in payment of GST of Rs 96.17 crore, interest of Rs 27.95 crore and penalty of Rs. 14.43 crore. The authority has concluded the investigation without issuing show-cause notice since the GST liability was accepted and paid by (Byju’s) parent.”
For all the latest Technology News Click Here
For the latest news and updates, follow us on Google News.