Garuda Indonesia is in the center of an accounting maelstrom. (JG Photo/Afriadi Hikmal)

Garuda Indonesia Slapped With Heavy Fines for Manipulating Financial Statement

BY :DION BISARA, THRESA SANDRA DESFIKA

JUNE 28, 2019

Jakarta. The Financial Services Authority has fined flag-carrier Garuda Indonesia hundreds of millions of rupiah for irregularities in its 2018 annual report. The authorities said the irregularities have the potential to mislead investors.

The airline turned losses of $206 million in 2017 to a net income of $810,000 last year, thanks to a deal with media startup Mahata Aero Teknologi. The startup promised to pay a total of $242 million to the airline over the next 15 years from ad revenues generated by WiFi networks installed in Garuda airplanes. 

Garuda put the deal in its book as receivables, thinking it was standard practice in corporate accounting, but some disagreed. 

In April, two of Garuda's commissioners, Chairal Tanjung dan Dony Oskaria, rejected the airline's 2018 financial statement on account of how the Mahata Aero deal was recorded in it.

The authorities now side with the commissioners.   

The Financial Services Authority, known as the OJK, said Garuda's financial report is faulty and ordered the airline to pay Rp 100 million ($7,000) in fines. Each of the airline's directors and commissioners also has to pay the same amount of fine. Garuda has 7 directors and 5 commissioners, so altogether they need to pay a fine of Rp 100 million. 

The Finance Ministry, in its capacity as the supervisor of public accounting practice, also slapped a one year ban on Tanubrata, Sutanto, Fahmi, Bambang & Partners, the public accounting firm that audited Garuda's financial report.

Garuda and the accounting firm now have two weeks to correct the 2018 financial statement.

"The sanctions on Garuda Indonesia, its board of directors, its commissioners and its accountant were a stern action intended to maintain public confidence in the Indonesian capital market," Fakhri Hilmi, OJK's deputy commissioner for capital market supervision, said.

M. Ikhsan Rosan, Garuda Indonesia’s corporate secretary, said the airline will honor the decision while studying the OJK's decision further. 

"We have never manipulated [the financial statement]," Ikhsan said in an official statement on Friday.

Ikhsan said Mahata Aero will make its first payment by the end of next month. 

"Mahata and its new partners have made a written commitment to pay $30 million in July this year, sooner than planned," Ikhsan said. 

Mahata Aero plans to pay its remaining debt to Garuda within three years. In this period, Garuda will hold bank guarantees from reputable lenders to show that Mahata Aero is capable of paying the outstanding amount, Ikhsan said.   


 

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