labels: markets - general, bharti tele-ventures ltd / bharti airtel
Bharti TeleVentures clarifies on media report on restatement of results news
29 December 2005

Bharti TeleVentures Ltd has clarified to the BSE on the report aired by a TV channel on December 27, 2005, pointing out the difference arising out of "restatement" of its results under US GAAP for and up to year ended March 31, 2004, based on the audit reports and material on the Bharti website for the past few months.

Bharti has stated that the differences were purely non-cash and technical in nature as they pertained to a switch over from the Indian accounting norms to the more stringent US GAAP norms as a prelude to its proposed ADR issue, which was subsequently cancelled. The company has reiterated that there is "no bearing on operational performance or cash flow of the company either in (the) past or on an ongoing basis." Reproduced below is the verbatim clarification"

"Before the company go into the specific questions raised and its response / clarifications thereto, it may be pertinent to point out the background which led to these changes.

1. Till 2004, the company used to prepare and present it''s accounts under IFRS, in addition to the statutory IGAAP accounts. These IFRS results also reflected the reconciliation of net income / loss and total shareholders equity to US GAAP.

2. Early this year, as is publicly known, the company planned a sponsored ADR for US Listing. As a part of preparation for the same, company decided to move to US GAAP, which is the most stringent and preferred accounting standard internationally.

3. The company subsequently dropped the ADR plan due to lack of sponsorship by its principal shareholders, but decided to anyway shift to US GAAP in line with its commitment to highest standards of corporate governance, disclosures and transparency.

4. The group had not previously issued complete US GAAP financial statements and thus the "restatement" and the reconciliation are between the US GAAP audited results and the above stated reconciliation between IFRS and US GAAP. In essence the complete US GAAP financial statements have been issued for the first time in July 2005.

5. The difference between the two are comprised of the following two categories of adjustments: · The adoption of ''purchase accounting'' in accordance with statement of Financial Accounting Standard (FAS) 141 - Business Combinations and FAS 142 - Goodwill and Intangible Assets. Historically, the group had accounted for various business acquisitions at book values with excess of purchase consideration over book value of net assets being treated as goodwill. This fact was duly disclosed in the previous audit report. FAS141 and 142 require the business acquisitions to be accounted at "fair values". This is purely technical since it is well know that all acquisitions of operations made by the Company have been at very favourable valuations.

· Adjustments on account of different treatment for certain other items under US GAAP. These related to items like revenue recognition and activation costs, fair valuation of shares issues, ESOP accounting etc.

6. The company, in keeping with its tradition of highest standards of transparency, decided to reconcile these audited figures with the IFRS reconciled US GAAP figures earlier. The full report and explanations were also posted on the Company''s website and have been in public domain since last several months. The company, in it''s earning call held on July 27, 2005, also upfront informed the investors about shift to US GAAP and about posting details on the website.

7. The overall effect on the shareholders equity upto March 31, 2004 on account of all the above adjustments is approx. Rs9,150 million. Of this approx. Rs8,000 million pertains to business combination, goodwill and deferred tax adjustments and the balance pertains to various items under the other category of adjustments mentioned above.

The following questions / doubts were raised by the channel in their telecast. The company''s response to each follows after the question.

Whether the ADR issue was dropped because of these changes? The ADR plan was dropped only due to lack of sponsorship from principal shareholders. The above changes had nothing to do with that decision.

Whether there is any change in Indian GAAP results? There is no change in our results under India GAAP which is the only mandatory GAAP for our company under the listing requirements.

That the company "forgot" to account for these differences earlier. We hope that the explanations and clarifications provided above would make it amply clear that there was no element of forgetfulness or negligence and that the changes arose purely on account of technicalities of treatment under different standards.

To conclude, the Company would like to categorically state that the differences were purely non-cash and technical in nature and have no bearing on operational performance or cash flow of the company either in past or on an ongoing basis."

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Bharti TeleVentures clarifies on media report on restatement of results