Upto the year 1993-94, VSNL used to record its income on a net basis. This implied that the costs associated with delivery of traffic, both on the domestic network as well as to the foreign carriers, were reduced from income derived from these calls, and only the net payable was recorded as income.
When the company started preparing itself for the launch of its Euro issue in 1993-94, it was pointed out by Coopers & Lybrand, the international auditors associated with the certification of offering memorandum, that such accounting was not in line with generally accepted international accounting principles. Further, the company's own statutory auditors, in their report of 1993-94, pointed out that showing net traffic revenue was not in accordance with the provisions of the Indian Companies Act. Accordingly, since 1994-95, the company has been accounting for both revenues and costs on a gross basis.
VSNL, as the carrier of international calls into India derives its revenue from two sources:
DoT which pays VSNL for the carriage of outward bound calls;
Foreign administrations
