Photo by Garuda Indonesia

JAKARTA (TheInsiderStories) – The two major shareholders of PT Garuda Indonesia Tbk (IDX: GIAA) Commissioners Chairal Tanjung and Dony Oskaria expressed objections to the 2018′ financial statements. According to them, they found misleading in calculating earnings that gave profits to the company, said an official statement on Wednesday (04/24).

The Commissioners who were representatives of PT Trans Airways and Finegold Resources Ltd, with ownership of 25.6 percent and 5 percent respectively, refused to sign the 2018′ financial statement. The reasoned, the odd revenue of GIAA from the collaboration of wifi services between PT Mahata Aero Teknologi as the company’s partner and PT Citilink Indonesia on Oct. 31, 2018.

From the cooperation, the Transcorp Group owner explained, GIAA actually did get new income. However, revenues from Mahata amounting to US$239.94 million and $28 million from profit sharing with PT Sriwijaya Air cannot be included in fiscal year 2018, because the income is a separate transaction from the company’s income record.

According to them, the Mahata agreement has not yet clarified the payment system, even though one unit of equipment has been installed on the Citilink aircraft, a subsidiary of Garuda Indonesia.

“Until now there is no guarantee of irrevocable payments (such as Bank Guarantees or equivalent financial instruments) from Mahata to the company. Even though Bank Guarantee is an instrument that shows the capacity of Mahata as a bankable company,” Tanjung said.

The refusal is based on clear law as stated in the annex to the Statement of Financial Accounting Standard No.23 Paragraph 28, that the license fee or royalty will be accepted or not accepted depends on the occurrence of a future event.

In this case the income is only recognized if there is a high probability that the reward or royalty will be received. The reliability of receipt of income must be measured by fixed income or guarantees that cannot be returned in an irrevocable contract.

These objections have been filed with the Minister of State-Owned Enterprises and are expected to be read out at the Annual General Meeting of Shareholders on Wednesday, but not approved by the chairperson of the meeting, so that only included as attachments in the annual report.

But, Finance and Risk Management Director Fuad Rizal claims that the financial statements of the 2018 financial year are in accordance with the Statement of Financial Accounting Standard, including income from compensation for installation rights to equipment and connectivity services in aircraft and content management valued at $267.94 million, despite no payment.

“Legally, these financial statements are legitimate and reasonable without exception even though there has been no income received from the collaboration. We have audited and this is only a dissent opinion,” he stated.

The company’ management noted that the financial statements were independently audited and received unqualified opinions, so the company did not need to replace the 2018 financial statements, even though the two largest shareholders did not sign.

However, in the open letter, the two leaders assessed that the recognition of the income caused the company’s tax obligations both income tax and value-added tax which should not be time yet and this could create a cash flow burden for the company.

In its financial report, Garuda Indonesia managed to record a positive performance in the first quarter of 2019, where get a net profit of $19.7 million or around Rp275.8 billion.

This figure rose significantly from the same period last year when the company still losses of $4.3 million or around Rp900 billion.

The management claimed the profit growth is in line with the increase in the company’s operating income which grew by 11.9 percent to $1.09 billion.

Meanwhile, in 2018, the flight carrier recorded a profit of $809,856. The financial performance of this state-owned company shows improvement compared to the previous year which lost up to $216.582 million.

However, there are irregularities in the financial statements of 2018, where there were receivables worth $204.22 million or equivalent to Rp2.9 trillion (exchange rate of Rp14,200) which was recorded as income so that net income was raised. It means, in 2018 GIAA still loses $203.41 million or equivalent to Rp2.88 trillion.

In addition to finding irregularities related to financial statements, Garuda Indonesia also conducts reshuffle of directors and commissioners, in which the board of commissioners is reduced by 2 from 7 to 5.

There were four commissioners who had stopped, including GIAA President Commissioner Agus Santoso who was replaced by Sahala Lumban Gaol, representatives from the Ministry of SOEs, Dony Oskaria, Muzaffar Ismail and Luky Alfirman. While additional new commissioners included Eddy Purwanto.

With that, the representative commissioner of Trans Airways at Garuda Indonesia is only one person, Chairal Tanjung.

While for the directors, there were two people who were dismissed, namely the Director of Services, Nicodemus Panarung Lampe and Technical Director I Wayan Susena. The two directors’ positions are now combined to become the Director of Engineering and Service which is filled by a new person, Iwan Juniarto.

The Deputy of the Financial Services Business, Survey Services and Ministry of SOEs Consultant Gatot Trihargo, said that the change was in accordance with the airliners procedures to optimize the company’ performance.

“Some are from SOEs, so we want the company to have a more solid commissioner and the directors can run the company faster,” he said.

Commissioner Oskaria himself only said that the change of commissioner was of the same age as the company’s articles of association, where he had served for five years.

Written by Daniel Deha, Email: daniel@theinsiderstories.com