Accounting Theory

This article discusses the accounting issues, relevant accounting standards, theories, and critical analysis of Bharti Airtel's accounting practices. It also provides suggestions for improving reporting and disclosures.

Running head: ACCOUNTING THEORY
Accounting Theory
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction..........................................................................................................................3
Discussion of issues associated to the company..............................................................3
Discussion of the background of the company................................................................3
Accounting issues present in the company......................................................................3
Application of relevant accounting standards..................................................................3
Relevant Theories............................................................................................................4
Critical Analysis..................................................................................................................4
Details of the issues in accounting...................................................................................4
Discussion of accounting requirement in detail...............................................................5
Discussion of the theory appropriate to the case firm and the accounting problems......5
Discussion of the main theme of the theory....................................................................6
Changes/suggestions for improving the reporting accounting practices and disclosures6
Conclusion...........................................................................................................................7
References............................................................................................................................8

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Introduction
Discussion of issues associated to the company
On November 28 2018, the Economic Times reported that Bharti Airtel bears net
consolidated debt of 1,14,557 crore out of which the borrowings pertaining to the Indian
Operators was seen as 80,000 crores. Therefore, as per the recent report it can be seen that the
company is suffering major problems associated to increased debt ratio (Kumar 2018).
Discussion of the background of the company
Bharti Airtel Limited is recognised as leading globally established telecommunications
organization operating in 16 countries across Asia and Africa. The company is headquartered in
New Delhi, India and ranked among the top 3 services providers of mobile telecommunications
services. The product and service offerings of the company are seen in form of services such as
2G, 3G and 4G wireless facilities (Airtel 2019).
Accounting issues present in the company
The main form of the accounting issues present in the company can be considered with
regulatory and political uncertainties. Some of the other accounting issues can be seen with
economic uncertainties, poor quality of network, information technology and redundancies
including disaster recoveries. The inadequacy in the quality of the customer lifecycle is also seen
to pose potential issues in accounting. The inadequate quality of the customer lifecycle
management needs to also depicted redundancies and disaster recoveries (Airtel 2019).
Application of relevant accounting standards
The board of directors of the company is depicted to implement “Section 134(5) of the
Companies Act,2013, as per the standalone financial statements for providing a true and fair
view of the position of the financial performance of the company. The relevant accounting

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standard followed by the company is seen in accordance with “Indian Accounting Standards
(Ind AS)”, which is prescribed as per “section 133 of the Companies Act,2013. These rules are
read with “Indian Accounting Standards) Rules, 2015” which are amended with the accounting
principles accepted in India (Bhasin 2015).
Relevant Theories
The important theories are considered as per Management’s Responsibility for the
Standalone Financial Statements, regulatory requirement and responsibility of the management
for internal financial controls (Narayanaswamy 2017).
Critical Analysis
Details of the issues in accounting
Potential risk in
accounting
Definition of Risk
1. Gap in the internal
control both financial
and non-financial
This problem is related to the process of the compliance which will not only
lead to frauds, wastages and loss having an adverse impact on the accounting of
Airtel Brand.
2. Adverse fiscal or
regulatory taxation
inclusive of the risk of
compliance
The various types of the tax policy developments and regulatory development in
India, South Asia and Africa can pose several accounting challenges not only in
Airtel but telecom sector in whole.
3. Increasing cost
structures ahead of
revenues impacting on
the liquidity
The overall increment in the cost structures has led to changes in accounting as
per volumes of new sites rollouts, capacity and increase in rates increase due to
inflation, Fx impacts, wage hikes and energy.
4. Economic The volatility pertaining to the economic factors such as inflation, interest rates

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Uncertainties and fluctuations in the currency has posed several challenges which will bring
majority of the changes in the accounting.
Discussion of accounting requirement in detail
The statutory and financial data needs to be presented as per the accordance of
“Companies Act, 2013”. This is seen to eb inclusive of the “Indian Accounting Standards”, the
“Securities and Exchange Board of India” (Listing Obligations and Disclosure Requirements)
Regulations, 2015 and various types of other applicable laws. The accounting requirement for
the different types of the guidelines under the corporate governance has been seen to be
addressed with the use of requirements of “Regulation 34 of the Listing Regulations”. In
addition to this, terms of “Regulation 43A of the SEBI” is seen to be applicable with accounting
standards (Ghio and Verona 2015).
Discussion of the theory appropriate to the case firm and the accounting problems
Potential risk in
accounting
Appropriateness with the accounting problems previously identified
1. Gap in the
internal control
both financial and
non-financial
The internal audit function is responsible for assisting the auditing committee for
providing a complete review of the risk management and related managerial
actions.
2. Adverse fiscal or
regulatory taxation
inclusive of the risk
of compliance
The application of the guidance of vigil mechanism and code of conduct has been
seen to be applicable for Directors and Senior Management to follow Whistle
Blower Policy and compliance with Code of Conduct. These are seen to be main
actions taken by the company in dealing with the problems of adverse fiscal or
regulatory taxation inclusive of the risk of compliance (Bloomfield et al. 2017).
3. Increasing cost During the financial year 2017-2018 the company took several types of initiatives

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structures ahead of
revenues impacting
on the liquidity
related to meet liquidity and finding requirement. On March 31,2018 the company
was able to generate operating free cash flow of Rs. 36,303 Mn and also able to
reduce the net debt through proceeds.
4. Economic
Uncertainties
Some of the most suitable accounting requirement to curb the problem of economic
uncertainty is identified with policy of “Measurement and recognition”. This will
assess whether the measurements consider uncertainty among the investors with
the use of useful information. The “disclosure” concept understand and assess the
challenges pertaining to the uncertainty. The “audibility” theory will be conducive
for defining the responsibility and role of the auditors for reporting with
uncertainties in the financial statement (Sec.gov. 2019).
Discussion of the main theme of the theory
The main theory associated to the accounting theory needs to be inferred in terms of the
risks presently involved in the accounting theory of Bharti Airtel. Some of the general theories
related to the topic needs to be considered in terms of the various types of the topics which are
related to the compliance of the accounting theory which will be able to solve the existing
problems in accounting. In addition to this, the relevant theories aim to identify the problems
associated to possibility of material misstatement for Bharti Airtel (Bhasin 2016).
Changes/suggestions for improving the reporting accounting practices and disclosures
Potential risk in
accounting
Mitigation Actions
1. Gap in the
internal control
both financial and
non-financial
The compliance action taken by the company has ensured substantial contributions
in the investment in IT system for automating the workflow process. Moreover, the
internal audits of the company have a self-validation checker which ensures that it
is able to conduct the duties of maker and checker in an appropriate manner

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(Bhasin 2015).
2. Adverse fiscal or
regulatory taxation
inclusive of the risk
of compliance
Bharti Airtel has insisted the government of all countries to maintain a sustainable
regulatory regime which will lead to a greater compliance for tax regulation.
3. Increasing cost
structures ahead of
revenues impacting
on the liquidity
The company is seen to institutionalise the programme named War on Waste
(WOW) which has led to significant reduction in the cost.
4. Economic
Uncertainties
The mitigation of the currency risk is followed with a prudent management policy
and use of techniques such as hedging mechanisms.
Conclusion
The various types of the issues in the accounting is seen to be considered with gap in the
internal control both financial and non-financial, Adverse fiscal or regulatory taxation inclusive
of the risk of compliance, increasing cost structures ahead of revenues impacting on the liquidity
and Economic Uncertainties. The various types of the problem Gap in the internal control both
financial and non-financial is seen with related to the process of the compliance which will not
only lead to frauds, wastages and loss having an adverse impact on the accounting of Airtel
Brand.

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References
Airtel. (2019). India's leading provider of Prepaid & Postpaid Mobile Services in India -
Airtel.in. [online] Available at: https://www.airtel.in/about-bharti/about-bharti-airtel [Accessed 2
Jan. 2019].
Airtel. (2019). India's leading provider of Prepaid & Postpaid Mobile Services in India -
Airtel.in. [online] Available at: https://www.airtel.in/about-bharti/equity/results [Accessed 2 Jan.
2019].
Bhasin, M.L., 2015. Creative accounting practices in the Indian corporate sector: An empirical
study.
Bhasin, M.L., 2015. Disclosure of intellectual capital in annual reports: An empirical study of the
Indian IT corporations.
Bhasin, M.L., 2016. Survey of Creative Accounting Practices: An Empirical Study. Wulfenia
Journal KLAGENFURT, 23(1), pp.143-162.
Bloomfield, M.J., Brüggemann, U., Christensen, H.B. and Leuz, C., 2017. The Effect of
Regulatory Harmonization on Cross‐Border Labor Migration: Evidence from the Accounting
Profession. Journal of Accounting Research, 55(1), pp.35-78.
Ghio, A. and Verona, R., 2015, June. Accounting harmonization in the BRIC countries: A
common path?. In Accounting Forum (Vol. 39, No. 2, pp. 121-139). Elsevier.
Kumar, A. 2018. Bharti Airtel may raise Rs 15,000 crore through issue of fresh shares. [online]
The Economic Times. Available at:

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https://economictimes.indiatimes.com/markets/stocks/news/bharti-airtel-may-raise-rs-15000-
crore-through-issue-of-fresh-shares/articleshow/66837382.cms [Accessed 2 Jan. 2019].
Narayanaswamy, R., 2017. Financial Accounting: A Managerial Perspective. PHI Learning Pvt.
Ltd.
Sec.gov. (2019). SEC.gov | Measurement Uncertainty in Financial Reporting: How Much to
Recognize and How Best to Communicate It. [online] Available at:
https://www.sec.gov/about/offices/oca/ocafrseries-briefing-measurement.htm [Accessed 2 Jan.
2019].