Here’s how Byju’s loss widened by 19 times because of revenue recognition changes

The shift from accrual accounting to cash accounting method, came after Byju’s auditors sought changes in revenue calculation.

FPJ Web DeskUpdated: Thursday, September 15, 2022, 06:00 PM IST
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Byju's has also pushed off its IPO by 9-12 months. | newsgram

As schools shut down at the beginning of the pandemic, an Indian startup started making waves amidst a surge of online education as an alternative for students. The crisis triggered a dream run for Byju’s which saw it become one of India’s most valuable startups, worth more than $23 billion now. But the edtech startup has shocked markets by announcing a Rs4588 crore loss in FY21, which is 19 times more than FY20.

This sudden fall raises a lot of questions about a startup that was surging ahead and is backed by ace investors including Tencent, Sequoia, Chan-Zuckerberg Initiative and Tiger Global. After showing a drop in revenue from Rs2511 crore in FY20 to Rs2428 crore in FY21, the company posted revenues of Rs10,000 crore for FY22, without revealing profits and loss data for the same time period. Apart from losses incurred after its acquisition of WhiteHat Jr which offered coding lessons, Byju’s also cites deferment of revenues as a reason behind the FY21 numbers.

A simple tweak changed the bigger picture

Changes in parameters to calculate revenue have resulted in this sudden spike in losses for Byju’s, since streaming revenue is now recognised over the period of consumption, EMI sales are only recognised after collection is complete, and credit sales are included only after payment. Simply put, Byju’s was earlier calculating the entire payment for a three-year-course in the same fiscal year as revenue.

But the company had to readjust its revenues for FY21 after its auditors Deloitte Haskins & Sells sought changes to the revenue recognition method. Now the company has deferred revenue, which means that the payment yet to be received by subscribers is now calculated as a liability on the balance sheet.

So the disparity in numbers between two fiscal years, is a result of a simple shift from the accrual accounting method to cash accounting method. On the other hand, Byju’s has reported a revenue of Rs4,530 crore between April and July 2022 alone, thanks to the strong performance of Akash Educational Services. At $1 billion, Akash is the biggest acquisition for Byju’s, which has enabled it to gain a foothold in physical classrooms.

The startup which is expecting to be cash flow positive by the end of FY23, has also pushed its IPO by 9-12 months citing macroeconomic factors.

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