Bharti Airtel’s Debt Position

On November 28 2018, the Economic Times reported that Bharti Airtel bears net consolidated debt of 1,14,557 crore out of which the borrowings pertaining to the Indian Operators was seen as 80,000 crores. Therefore, as per the recent report it can be seen that the company is suffering major problems associated to increased debt ratio (Kumar 2018).  

Bharti Airtel Limited is recognised as leading globally established telecommunications organization operating in 16 countries across Asia and Africa. The company is headquartered in New Delhi, India and ranked among the top 3 services providers of mobile telecommunications services. The product and service offerings of the company are seen in form of services such as 2G, 3G and 4G wireless facilities (Airtel 2019).

The main form of the accounting issues present in the company can be considered with regulatory and political uncertainties. Some of the other accounting issues can be seen with economic uncertainties, poor quality of network, information technology and redundancies including disaster recoveries. The inadequacy in the quality of the customer lifecycle is also seen to pose potential issues in accounting. The inadequate quality of the customer lifecycle management needs to also depicted redundancies and disaster recoveries (Airtel 2019).

The board of directors of the company is depicted to implement “Section 134(5) of the Companies Act,2013, as per the standalone financial statements for providing a true and fair view of the position of the financial performance of the company. The relevant accounting standard followed by the company is seen in accordance with “Indian Accounting Standards (Ind AS)”, which is prescribed as per “section 133 of the Companies Act,2013. These rules are read with “Indian Accounting Standards) Rules, 2015” which are amended with the accounting principles accepted in India (Bhasin 2015).

The important theories are considered as per Management’s Responsibility for the Standalone Financial Statements, regulatory requirement and responsibility of the management for internal financial controls (Narayanaswamy 2017).

Potential risk in accounting	Definition of Risk
1. Gap in the internal control both financial and non-financial	This problem is related to the process of the compliance which will not only lead to frauds, wastages and loss having an adverse impact on the accounting of Airtel Brand.
2. Adverse fiscal or regulatory taxation inclusive of the risk of compliance	The various types of the tax policy developments and regulatory development in India, South Asia and Africa can pose several accounting challenges not only in Airtel but telecom sector in whole.
3. Increasing cost structures ahead of revenues impacting on the liquidity	The overall increment in the cost structures has led to changes in accounting as per volumes of new sites rollouts, capacity and increase in rates increase due to inflation, Fx impacts, wage hikes and energy.
4. Economic Uncertainties	The volatility pertaining to the economic factors such as inflation, interest rates and fluctuations in the currency has posed several challenges which will bring majority of the changes in the accounting.

The statutory and financial data needs to be presented as per the accordance of “Companies Act, 2013”. This is seen to eb inclusive of the “Indian Accounting Standards”, the “Securities and Exchange Board of India” (Listing Obligations and Disclosure Requirements) Regulations, 2015 and various types of other applicable laws. The accounting requirement for the different types of the guidelines under the corporate governance has been seen to be addressed with the use of requirements of “Regulation 34 of the Listing Regulations”. In addition to this, terms of “Regulation 43A of the SEBI” is seen to be applicable with accounting standards (Ghio and Verona 2015).

Potential risk in accounting	Appropriateness with the accounting problems previously identified
1. Gap in the internal control both financial and non-financial	The internal audit function is responsible for assisting the auditing committee for providing a complete review of the risk management and related managerial actions.
2. Adverse fiscal or regulatory taxation inclusive of the risk of compliance	The application of the guidance of vigil mechanism and code of conduct has been seen to be applicable for Directors and Senior Management to follow Whistle Blower Policy and compliance with Code of Conduct. These are seen to be main actions taken by the company in dealing with the problems of adverse fiscal or regulatory taxation inclusive of the risk of compliance (Bloomfield et al. 2017).
3. Increasing cost structures ahead of revenues impacting on the liquidity	During the financial year 2017-2018 the company took several types of initiatives related to meet liquidity and finding requirement. On March 31,2018 the company was able to generate operating free cash flow of Rs. 36,303 Mn and also able to reduce the net debt through proceeds.
4. Economic Uncertainties	Some of the most suitable accounting requirement to curb the problem of economic uncertainty is identified with policy of “Measurement and recognition”. This will assess whether the measurements consider uncertainty among the investors with the use of useful information. The “disclosure” concept understand and assess the challenges pertaining to the uncertainty. The “audibility” theory will be conducive for defining the responsibility and role of the auditors for reporting with uncertainties in the financial statement (Sec.gov. 2019).

The main theory associated to the accounting theory needs to be inferred in terms of the risks presently involved in the accounting theory of Bharti Airtel. Some of the general theories related to the topic needs to be considered in terms of the various types of the topics which are related to the compliance of the accounting theory which will be able to solve the existing problems in accounting. In addition to this, the relevant theories aim to identify the problems associated to possibility of material misstatement for Bharti Airtel (Bhasin 2016).

Potential risk in accounting	Mitigation Actions
1. Gap in the internal control both financial and non-financial	The compliance action taken by the company has ensured substantial contributions in the investment in IT system for automating the workflow process. Moreover, the internal audits of the company have a self-validation checker which ensures that it is able to conduct the duties of maker and checker in an appropriate manner (Bhasin 2015).
2. Adverse fiscal or regulatory taxation inclusive of the risk of compliance	Bharti Airtel has insisted the government of all countries to maintain a sustainable regulatory regime which will lead to a greater compliance for tax regulation.
3. Increasing cost structures ahead of revenues impacting on the liquidity	The company is seen to institutionalise the programme named War on Waste (WOW) which has led to significant reduction in the cost.
4. Economic Uncertainties	The mitigation of the currency risk is followed with a prudent management policy and use of techniques such as hedging mechanisms.

Conclusion

The various types of the issues in the accounting is seen to be considered with gap in the internal control both financial and non-financial, Adverse fiscal or regulatory taxation inclusive of the risk of compliance, increasing cost structures ahead of revenues impacting on the liquidity and Economic Uncertainties. The various types of the problem Gap in the internal control both financial and non-financial is seen with related to the process of the compliance which will not only lead to frauds, wastages and loss having an adverse impact on the accounting of Airtel Brand.

References

Airtel. (2019). India’s leading provider of Prepaid & Postpaid Mobile Services in India – Airtel.in. [online] Available at: https://www.airtel.in/about-bharti/about-bharti-airtel [Accessed 2 Jan. 2019].

Airtel. (2019). India’s leading provider of Prepaid & Postpaid Mobile Services in India – Airtel.in. [online] Available at: https://www.airtel.in/about-bharti/equity/results [Accessed 2 Jan. 2019].

Bhasin, M.L., 2015. Creative accounting practices in the Indian corporate sector: An empirical study.

Bhasin, M.L., 2015. Disclosure of intellectual capital in annual reports: An empirical study of the Indian IT corporations.

Bhasin, M.L., 2016. Survey of Creative Accounting Practices: An Empirical Study. Wulfenia Journal KLAGENFURT, 23(1), pp.143-162.

Bloomfield, M.J., Brüggemann, U., Christensen, H.B. and Leuz, C., 2017. The Effect of Regulatory Harmonization on Cross?Border Labor Migration: Evidence from the Accounting Profession. Journal of Accounting Research, 55(1), pp.35-78.

Ghio, A. and Verona, R., 2015, June. Accounting harmonization in the BRIC countries: A common path?. In Accounting Forum (Vol. 39, No. 2, pp. 121-139). Elsevier.

Kumar, A. 2018. Bharti Airtel may raise Rs 15,000 crore through issue of fresh shares. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/markets/stocks/news/bharti-airtel-may-raise-rs-15000-crore-through-issue-of-fresh-shares/articleshow/66837382.cms [Accessed 2 Jan. 2019].

Narayanaswamy, R., 2017. Financial Accounting: A Managerial Perspective. PHI Learning Pvt. Ltd.

Sec.gov. (2019). SEC.gov | Measurement Uncertainty in Financial Reporting: How Much to Recognize and How Best to Communicate It. [online] Available at: https://www.sec.gov/about/offices/oca/ocafrseries-briefing-measurement.htm [Accessed 2 Jan. 2019].