Garuda Indonesia to ‘fix and restate’ its financial statements and pay fines for accounting errors

Indonesian flag carrier Garuda will comply with requests from regulators to “fix and restate” its financial statements and pay fines for accounting errors, company executives said on Sunday.

Garuda’s shares plunged 7.6 per cent on Friday to their lowest since January, after the Financial Services Authority (OJK) ordered Garuda to restate its 2018 financial results within two weeks and, along with its directors, pay fines for the errors.

The Indonesia Stock Exchange (IDX) separately ordered the same for 2019 results.

The total sum of fines Garuda has to pay the OJK and IDX is 1.25 billion rupiah ($88,496; Dh325,045).

“We will not argue with what the OJK has decided,” chief executive Ari Askhara told a news conference.

On Friday, the finance ministry also ordered global accounting firm BDO International Limited to improve quality control and carry out a review of its local affiliate who handled Garuda’s finances, while suspending the main person who audited the financial statements.

Askhara said Garuda would appoint a new accounting firm.

Garuda’s initial reaction was that the orders from the authorities was “premature”.

While regulators did not disclose details of the errors, Garuda’s executives confirmed on Sunday that they were related to a misrepresentation of $240 million in revenue that it had yet to receive from PT Mahata Aero Teknologi.

The carrier forward-booked the revenue from Mahata in its 2018 earnings. Mahata had agreed to pay Garuda in exchange for installing Wi-Fi connectivity and advertisements on some planes.

Askhara said the required changes by regulators would not affect Garuda’s financial health, including its debt-to-equity ratio.

“The correction will not affect operations because there is no cash out,” he said.