The 2011 annul report of Kingfisher Airlines is a must read, especially the auditor’s report. The auditor’s, B.K. Ramadhyani & Co., have raised number of questions, disagreed with the way the company has accounted for multiple items in their books and also under several situations have not expressed any independent opinion on the matter.
A few areas of concern the auditor’s raised were under Accounting Standard 22- Accounting for Income Taxes and Accounting Standard 19- Leases. The company recognized deferred tax credit on account of unabsorbed losses and allowance during the year, which the auditor’s state does not satisfy the virtual certainty test for recognition of deferred tax credits per AS 22. Also the audit’s pointed out that the company has included under fixed assets costs incurred on major repairs and maintenance of engines of aircrafts taken on operating leases, and further these costs have been amortized over the estimated useful life of the repairs.
The most interesting line, I feel, in the auditor’s report is “ Attention of the members is invited to note 45 of the Notes regarding the financial statements of the Company having been prepared on a going concern basis, notwithstanding the fact that its net worth is completely eroded. The appropriateness of the said basis is interalia dependent on the Company’s ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations.”
So now the question is how long will the Kingfisher fly!
