Trai Paper To Set Norms For Accounting

The Telecom Regulatory Authority of India yesterday released a consultation paper on "Accounting Separation and Formats for Accounting/ Regulatory Statements". The paper is expected to initiate the process of laying down accounting norms for reporting requirements to monitor service providers.

TRAI chairman M S Verma has asked for submissions on the consultation paper by June 2.

Consultations on the paper are expected to lead to the formulation of an accounting manual to prescribe TRAI's accounting and reporting practices requirements that will have to adhered by the licensees. The reporting formats and the frequency of the reports will be determined after consultations.

 

Account separation will also be a product of the consultation which will help TRAI analyse the costs, revenue and capital employed in major areas of service provider's business to take appropriate regulatory decisions.

The accounting separation exercise would also help the regulator in identifying the instances of cross subsidisation of services and strengthen the TRAI's capabilities to provide regulatory supervision in an increasingly competitive telecom market, thereby enabling the authority to make regulatory decision based on accurate cost data. The need for such an accounting system was felt last year at the time of working out tariff rebalancing based on cost data.

The paper has presented costing concepts based on those of Broad Financial Category Costing (BFCC) and Service Specific Costing (SSC). BFCC is expected to provide a framework to identify the sources and recipients of cross subsidies among broad categories of existing services.

The procedures assign a service provider's total realised revenues and costs among a few broad service categories. The results are then summarised in the revenue surplus or shortfall presentation for each category and reconciled to the service provider's income statement.

TRAI has suggested that for assigning the costs steps should include:

l assigning revenues

l assigning telephone plant investment

l assigning operating expenses associated with plant investment

l assigning operating expenses associated with employee activities

l assigning operating expenses as regards employee activities and

l determination of net investment of each category to assign financial and income tax expense.