The Hindu Business Line : `Significant distortion' led to Wipro revision

"THE significant distortion" in the estimated and actual earnings of joint venture Wipro-GE Medical Systems prompted Wipro to restate its April-June earnings, Wipro sources said.

Admitting that "often minor mismatches happen in the joint venture's estimated earnings to the actual," Wipro sources said that, "since this time the figures provided by Wipro-GE were significantly different, as the joint venture slipped into red, the company decided to re-state its first quarter earnings." Traditionally, the estimated earnings provided by the joint venture to Wipro prior to its quarterly disclosures were in line with "real figures" which are audited at year-end, sources added.

Minor distortions in the earnings provided by joint venture to its parent prior to quarterly disclosures are "common practices" which are accounted for in the year-end audited results of both the parent and joint venture firm, accountants and analysts said.

Accommodating estimated earnings from the partner firms are common according to Indian GAAP and US GAAP in quarterly income statements, but adjusted figures are required on the annual balance sheet of the parent firm, accountants said.

"We are awaiting the task-force report and depending on its recommendations, certain safeguards are likely to be placed to check such incidents in future," Wipro sources said. The GE's task force that is auditing Wipro-GE Medical Systems' accounts is likely to submit its report in six-eight weeks. It can be noted that GE nominates the chief financial officer of Wipro-GE, since GE is 51 per cent controlling stakeholder in the firm.

Wipro Ltd lowered its profits for the April-June quarter by Rs 18.6 crore, to Rs. 144.4 crore as the joint venture's loss mounted.

Wipro shares, which drifted low by 1.37 per cent Friday to Rs 1,139.95, is seen to rebound on fundamentals on Monday, analysts said. "The shares slipped following the re-stated earnings, but it is insignificant development to the overall Wipro growth story," a technology analyst with European brokerage said.

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`Significant distortion' led to Wipro revision