ICAI looking into the financial disclosures of Byju's

Institute of Chartered Accounts (ICAI) President, Debashis Mitra has said that ICAI is looking into the financial disclosures of Byju’s. This action follows a letter of complaint to ICAI by Congress MP, Karti Chidambaram. In this letter, he has alleged that in the financial year 2020-21, Byju’s treated 60% of its employee costs as Capital expenditure, in its financial statements. If these costs were treated as Operational expenditure, Byju’s loss for the year would have increased to Rs 5000 crore. By doing so, Byju’s has shown a lower loss than it actually incurred, the letter alleges.

Capital expenditures are those expenditures whose benefits are going to accrue over many years to come. Revenue expenditures or operational expenditures are those whose benefits accrue only in the year or financial period in which they are incurred. Capital expenditures are treated as an asset in the balance sheet. Annual depreciation or amortization is charged on capital expenditures, in the profit & loss statement. On the other hand, all the revenue expenditures incurred in a year are included in the profit & loss statement of the year.

Employee costs are usually treated as a Revenue expenditure and Not as a Capital expenditure. Training and Development costs incurred on employees, whose benefits can accrue to the company over many years, can be treated as a Capital expenditure. 

ICAI President added that ICAI does not see any serious lapses in the financial statements of Byju’s but there are certain issues that need to be looked into.