Telecom Licensees Must Adopt New PTA Accounting Standards

The Pakistan Telecommunication Authority (PTA) has proposed the “Accounting Separation (1st Amendment) Regulations, 2024,” aimed at enhancing financial transparency among telecom operators. Under these draft regulations, telecom licensees holding both fixed and mobile licenses will be required to maintain separate accounts for each category of their licenses.

The regulations outline that licensees must prepare annual separated accounts for various business units, including:

• Network operations related to the licensed system
• Retail services pertaining to licensed offerings
• Telecom operations segmented by region
• Individual licenses
• Non-licensed activities

For fixed networks, accounts must be further divided into Access Network and Core Network categories. Licensees are also required to provide separated accounts for their retail activities related to licensed services, while non-licensed activities should be reported under “Retail – Remaining Activities.”

When providing licensed services to wholesale licensees, such as Mobile Virtual Network Operators, the service provider must implement an accounting separation system to accurately reflect costs and avoided costs associated with wholesale service provisions.

Significant Market Players (SMPs) are mandated to adhere to the cost accounting principles outlined in the “Guidelines on Cost Accounting Methodologies for Accounting Separation Purposes, 2007,” ensuring that their cost accounting systems meet regulatory standards.

The separated accounts must offer a clear breakdown of costs and revenues for each licensed service. The PTA reserves the right to issue further directions or clarifications on regulatory accounting principles, conventions, transfer charging, and costing methodologies as needed.

The regulations stipulate that separated accounts must follow specific principles, including:

• Cost causality, where revenues, costs, assets, and liabilities are attributed to the activities generating them
• Use of appropriate allocation bases where necessary to ensure fair representation of costs
• Compliance with International Accounting Standards where applicable, or regulatory principles if they take precedence

The licensees are required to prepare the separated accounts annually, including comparative information from the previous year. The accounts should also disclose significant changes and effects of prior year restatements.

For each business unit, licensees must submit reports to the PTA, including:

• Profit and Loss statements detailing revenues and operating costs for each activity, with profits stated before interest and tax
• Balance Sheet information, reflecting fixed assets, current assets, and current liabilities, averaged for the reporting period
• Supporting notes for reconciliation with statutory accounts

These new regulations are expected to enhance transparency and accountability within Pakistan’s telecommunications sector.