KFA report opens flaps on networth erosion, tardy accounts

The Kingfisher Airlines (KFA) annual report reveals that while Mallya promises to recapitalise the airline and enable it to garner market share, the company's networth has been completely eroded. The auditors have raised several questions, reports CNBC-TV18's Sunanda Jayaseelan.

Auditors to KFA are raising several questions regarding an item of subsidy granted to Kingfisher Airlines by suppliers which amounts to Rs 26.7 crore for June 2006 is not in line with Accounting Standard 19.
Another query is regarding Kingfisher's accounting treatment of cost for fixed assets and amortisation which is not in accordance with current accounting standards.
The report explains the deferred tax credit on account of unabsorbed losses and allowances. Now the tax credit during the year were about Rs 1,118 crore versus Rs 493 crore last year and according to auditors, this does not satisfy Accounting Standard 22.
If various accounting standards were to be followed, the loss for the year, according to the auditors, would have been only about Rs 3,444 crore for FY12 instead of Rs 2,328 crore as reported by Kingfisher.
The auditors also say that an undisputed statuary reduced in respect of service tax withholding taxes and fringe benefit dues have not been regularly deposited with appropriate authorities and that the total outstanding on these accounts stands at about Rs 292 crore.
CNBC-TV18 has been constantly been reporting on Kingfisher's tedious claims with the I-T department in Bangalore. The auditor’s report says that the airline has become tardy with payments of undisputed statuary dues in respect of provident fund, employees state insurance funds, investors education and protection fund, wealth tax, customs, excise duty and cess.
Now with regards to other unpaid dues to banks and institutions related to FY11, the report says the airline owes an aggregated due of about Rs 797.74 crore and according to auditors, while Kingfisher may have borrowed Rs 6,304.4 crore for short-term purposes, they indicate that these funds have been used for long-term investments in FY12.
The auditors' report goes onto say that Kingfisher's networth has completely eroded. Apart from all this, the auditors say that the airline's balance-sheet, P&L and the cash flow statements are compliant in all material aspects.