Sasken finalises assets impairment scheme

Sasken Communication Technologies, a leading telecom software products firm, said it has finalised a scheme relating to impairment of assets.

Sasken’s Chief Financial Officer Neeta Revankar said the company will file the scheme in a court next week. However, she did not reveal the extent of impairment losses suffered.

An asset is said to be impaired when its carrying amount is higher than both its value in use (estimated future cash flows from an asset) and net selling price (from sale of the asset). Accounting for impairment of assets has been made mandatory by the Institute of Chartered Accountants of India (ICAI) on a regular basis for both listed and unlisted firms.

“We are finalising a scheme, which we will file in court by next week,” Revankar said.

During the three months ended December 2008, the company had capitalised assets of Rs 15 crore on its balance sheet for its product line alone. “We have accounted for asset impairment costs on our product line, but are in the process of assessing value erosions across other asset classes since December,” Revankar said.

Sasken’s products business clocked 23 per cent year-on-year growth in the quarter, but this was significantly lower than the 106.5 per cent annual rise clocked in the September quarter.

On a sequential basis, revenues from products fell a steep 43.5 per cent (Rs 12 crore against Rs 21 crore earlier) in December, with royalty income dipping as much as 54.9 per cent. Customisation revenues fell 38.7 per cent sequentially and licence fees by 34.2 per cent. EBITDA margins in Q3 declined by 62 basis points on a sequential basis due to the product margins contracting 16 per cent.

While Sasken has outstandings to the extent of Rs 7 crore from Nortel Network Corp, it has been assured of payments, according to Revankar. Nortel, the largest maker of telecom equipment in North America, had recently filed for bankruptcy. Nortel has been contributing nearly 10 per cent to Sasken’s annual revenues.