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Financial authority orders Garuda to restate 2018 results

Garuda Indonesia was ordered by the country's Financial Services Authority (OJK) to restate its 2018 financial statement, after questions were raised over the way it booked future revenue from an inflight wi-fi and entertainment deal as an operating item.

The OJK says Garuda will have to submit a restated financial report within 14 days, as it was not compliant with the Indonesian accounting standards.

Three separate fines, worth Rp100 million ($7,080) each, was imposed on Garuda, the company's directors, and its commissioner members, for violating stipulated standards on annual reports.

A one-year suspension was also imposed Garuda's auditor, and it was given three months to "improve the quality control and procedures" of its audit reports.

OJK's orders took place weeks after two of Garuda's commissioners questioned the accounting treatment of the deal, which saw the airline report a $101 million full-year operating profit for 2018, after booking a one-off $242 million deal with Mahata Aero Teknologi as an operating item.

"The imposition of sanctions and/or written order by OJK on Garuda Indonesia, its members and/or commission members, public auditor, and the auditing company is one of the firm measures it undertakes to maintain public trust in Indonesia's capital markets," says the authority.

Garuda's group revenue for the year ended 31 December 2018 rose nearly 5% to $4.37 billion, but higher operating and maintenance charges pushed total expense up by 8% to $4.58 billion. Put together, these figures suggest that the carrier’s loss before interest, tax, depreciation and amortisation would have amounted to $210 million.

In May, Garuda explained that it would be able to book income from services once the deal fulfilled four specific conditions. Though it had yet to receive payment from Mahata, the monies it was due to receive had become receivables owed to the airline.

Following OJK's decision, Garuda says it will study the authority's decision, while acknowledging that Indonesia's state audit board is conducting its own investigations.

The airline also stressed that its 2018 results were audited independently, and that its deal with Mahata does not violate any laws or regulations.

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