Google India, the Indian arm of the technology giant, reported a 56% decrease in yearly revenue, hurt by the adoption of new accounting standards.
Its net income fell to Rs 4,147 crore in the financial year ended March 2019, from Rs 9,337.7 crore, a year earlier, the company said in a Registrar of Companies (RoC) filing to the Ministry of Corporate Affairs (MCA).
The Bengaluru-based company’s adoption of IND AS 115, a new accounting standard, resulted in a change in the presentation of revenue relating to advertising and other miscellaneous reseller agreements, Google India clarified in the filing.
The adoption of IND AS 115 has, however, not resulted in an impact on net profit. Profit rose about 16% to Rs 473 crore.
Advertising, one of Google India’s largest revenue channels, stood at 28% of the financial year’s total turnover. Other main contributors to revenue were information technology (IT) services and IT-enabled services at 35 % and 36 % respectively.
Adwords shifted to Singapore-based GAP
Google has also shifted the revenue recognition for its 'AdWords' business from India to Singapore-based Google Asia Pacific.
Under IND AS 18, the previous accounting standard, Google India acted as a principal in advertising and other reseller agreements along with Google Asia Pacific Pte Ltd or GAP. “As a result, revenues and associated direct cost of sales were reported on a gross basis,” Google India added.
However, under the new set-up of reporting company financials, Google Asia Pacific is the sole principal in the advertising as it operates the Adwords program.
Commercially, as per the reseller agreement, the transaction between Google Asia Pacific and Google India is still on a principal to principal basis. Google India now only recognises the “net revenues” it makes from India.