Wipro's Accounting Policies

Abstract

Wipro is one of India''s most well known computer software companies. The financial statements of the company are prepared in accordance with the Indian generally accepted accounting principles (GAAP) as well as the US GAAP. The case discusses Wipro''s accounting policies with special reference to revenue recognition, investments, intangible assets, goodwill, and employee stock plans.

INTRODUCTION

Wipro, one of India's well known computer software companies had staged a strong comeback in 2003. Wipro's senior managers looked back with satisfaction at the company's financial performance. The company had spent the last three years restructuring so that it could start selling end-to-end solutions to customers, instead of bidding for piecemeal projects. In a short time, Wipro had built three new businesses - enterprise solutions, infrastructure management and Business Process Outsourcing (BPO) that together accounted for 30% of total software revenues and were expected to be the company's major growth drivers in the future. No other Indian company had such a strong presence in all three service lines.

Several customers had started offering these jobs to Indian firms. Wipro had created a separate business unit for enterprise application services in 1999 and scaled it up to a 1700 man outfit by early 2004Wipro had also strengthened its presence in infrastructure management, a fast growing business. Although Wipro had a domestic presence in infrastructure management, it started offering this service to global customers only in 2001, when the slump forced it to look for new businesses. In 2004, Wipro had over 30 customers including Lehman Brothers, Transco and BestBuy.

But the business where Wipro had been really aggressive was BPO. When Wipro bought Spectramind, several analysts wondered whether the company was doing the right thing by paying $100 million for it. But in 2004, most of them agreed that it had been an inspired move. Wipro was far ahead of its peers like Infosys and Satyam in BPO. With 8,500 people, WiproSpectramind was the largest third-party BPO company in India, with an estimated valuation of $700 million in early 2004, thanks to high seat utilisation and attractive operating profit margin.

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        Case Code   FINA006
   Case Length    14 Pages
              Period    2003
 Organization     Wipro
        Pub Date     2004
Teaching Note    Not Available
     Countries    India
      Industry    Information Technolog (IT)

Issues

Wipro's Accounting Policies

Wipro Limited; Indian generally accepted accounting principles (GAAP); US GAAP; Consolidated financial analysis; Revenue recognition; Intangible assets; Goodwill; Sock based compensation; Deferred taxation; Segment reporting

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.