Google India revenue declines 56% due to change in accounting standards

Google India, the arm of the technology giant operating in the country, reported a 56 per cent fall in revenue in the year ended March 31, 2019. The fall was attributed to a new accounting standard, according to regulatory filings sourced from business intelligence firm Tofler.

Revenue from advertising fell to 28 per cent from 69 per cent a year ago. Profit rose 16 per cent to Rs 473 crore during FY19 from Rs 406 crore a year ago.

The changes have happened because of changes in accounting standards from IND AS 18 to IND AS 115, according to the filing.

IND AS 115 came into effect for reporting periods from April 1, 2018, after the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules 2018. Some provisions in the new accounting standards provide more transparency in the way technology services companies report results.

“As the control to operate the adword platform is with GAP (Google Asia Pacific) and not with the company (Google India), accordingly, revenues and associated direct cost of sales are presented on a net basis in the statement of profit or loss and comprehensive income,” Google said in the filing.

Google’s AdWords have been a contentious issue for a long time now.

While Google insists it is a reseller of advertising space of its Google AdWords programme, transferring a portion of its India arm’s revenue to its overseas arms as a consideration of purchase of advertising space.

However, Indian tax authorities have insisted that such transfers are royalty payments and must be taxed.

The digital advertising industry in India and globally has been growing over the past few years, and Google and Facebook are the two largest players in the segment globally.

According to a report by the Dentsu Aegis Network Digital Report earlier this year, the digital advertising industry in India is expected to grow at a rate of 32 per cent to reach Rs 24,920 cr in 2019.

IT services contributed 35 per cent to Google India’s revenue and IT-enabled services contributed 36 per cent, according to the filings.