The higher valuations of dotcoms accorded to companies in the US and their subsequent falling values in recent past has perhaps made regulator look into this specific area. Since many Internet companies are likely to enter the capital market in near future, formulation of appropriate valuation norms, so that the investors and the stakeholders get a realistic view about the current and the future prospects of the business is the need of the hour. The sub-committee will look into the disclosure requirements for public offerings by dotcoms, accounting standards for dotcom companies and the continuing disclosure requirements for them. SEBI has further stated that the norms will be finalized after extensive public debate. The higher valuations of dotcoms accorded to companies in the US and their subsequent falling values has perhaps made regulator look into this specific area.
Public memory is still fresh.
And leading the pack were mostly Internet companies. The SEC has concluded that the principal versus agency principle should be examined and revenue should be booked accordingly. Further gross revenue can be recorded only if the entity acts as a principal to the transaction, takes title of the products and bears the risk and reward of ownership such as the risk of bad debt. An agent can merely record his commission earned on, lets say, the sale of an airline ticket. Back home, SEBI, in its discussion paper sometime back had called for extending the already established accounting models to transactions which are similar to those undertaken by traditional companies.