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Indonesia’s market regulator ordered Garuda Indonesia to restate its 2018 financial results after finding the national carrier breached accounting rules. The shares plunged to a six-month low.
The Financial Services Authority, known locally as OJK, also slapped a fine of $7,078 (100 million rupiah) on the airline and each of its directors. The directive to restate earnings within 14 days follows investor complaints of accounting irregularities related to a contract with a startup company to provide inflight entertainment.
The airline booked revenue of $211.9 million from Mahata Aero Teknologi, its annual report showed. That helped Garuda swing to a profit of $809,846 last year from a loss in 2017.
Garuda spokesman Ikhsan Rosan said there were no accounting violations in recording the revenue from the deal with Mahata, but the airline respects the opinion of the regulator and the different interpretations of the financial statements. Garuda will study the order further, he said in a statement.
Garuda’s failure to disclose and explain the disagreement of two of its commissioners about the inclusion of revenue from Mahata broke the rules, Fakhri Hilmi, deputy commissioner for capital market supervision at OJK, told reporters in Jakarta on Friday. The regulator also froze the license of Garuda’s auditor, Kasner Sirumapea, for a year.
The auditor was guilty of not following accounting rules by claiming upfront receivables expected over 15 years from the contract with Mahata, according to Hadiyanto, secretary general at the finance ministry.
The fine and order to restate accounts are “firm steps by OJK to maintain public trust in the Indonesian capital market,” the regulator said in a statement.
©2019 Bloomberg L.P.