This is a tale of two auditors and their treatment of income and expenditure of Deccan Aviation Ltd, operator of budget carrier Air Deccan, and its impact on the airline’s financial results.
One auditor says it posted a loss, the other feels it’s a profit
BANGALORE: This is a tale of two auditors and their treatment of income and expenditure of Deccan Aviation Ltd, operator of budget carrier Air Deccan, and its impact on the airline’s financial results.
The story emerges from observations of the low-cost carrier’s two auditors (previous and current) posted on the BSE website.
Under one version, for the quarter ended December 31, 2006, Deccan Aviation posted a profit of Rs 13.32 crore. The other version says the airline suffered a loss of Rs 125.81 crore.
Simply put, if the previous auditor’s views on amortisation of training and pre-operative costs, subsidy on leased aircraft, credit inflow for spare/service/software, income on pledging of aircraft purchase rights, foreign exchange loss error and others are considered, then the net profit of Rs 9.64 crore reported by Deccan Aviation for the third-quarter of the current fiscal would have transformed into a loss Rs 125.81 crore — a whopping difference of Rs 135.45 crore
In contrast, the no-frill airline’s new auditor’s reading of the accounts would have boosted the profit by Rs 3.68 crore to Rs 13.32 crore.
For the six months ended December 31, the difference between the auditor’s numbers is Rs 261.65 crore with a wide gap in the loss figure of Rs 26 crore and Rs 293.65 crore, respectively, of the previous and the current auditors.
Interestingly, the new auditor’s losses for the 15 months ended June 30, 2006, of Rs 375.60 crore would have been higher than the previous auditor’s loss for the same period of Rs 340.55 crore.
If the current auditor’s higher profit would have been taken into consideration, then the budget carrier’s reserves, excluding revaluation reserves for the 15-month period (ended June 30, 2006) would have been Rs 64.87 crore as compared to the reported credit of Rs 125.95 crore.
Chartered accountants feel these kinds of wide difference in opinions are not very surprising in a sunrise sector. “Low-cost airlines being new in India, such difference in interpretation of activities can be subjective. Some may take the accounting standards in spirit and others in words,” said a chartered accountant.
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