Vijay Mallya, Chairman, KFA

The limited review of the first quarter results of Kingfisher Airlines has raised questions about the accounting standards being followed by the airline. The review report says that besides other irregularities, tax expense and employee cost were reported 27 per cent and 21 per cent less, respectively.

A limited review of financial results is conducted at the end of each quarter in accordance with the Institute of Chartered Accountants of India norms.

According to the report, the company incurred a re-delivery cost of Rs 39.77 crore on account of premature termination of agreements for taking aircraft on operating lease and recognised this amount in the profit and loss account in the current quarter and the balance three quarters. “This is against the recognition and measurement principles laid down in Accounting Standards 25 and the entire amount should have been recognised in the profit and loss account,” said the report.

The airline’s quarterly report showed the tax expense — which includes current tax, deferred tax and fringe benefit tax — at Rs 809 crore. The review found that the amount was Rs 1,028 crore, 27 per cent more than what was reported.

Also, the reported employee cost was 21 per cent less (at Rs 156 crore) than the figure reached by the review while loss from ordinary activities was 40 per cent less at Rs 242 crore.

The airline also incurred a loss of Rs 136.29 crore on account of leasing aircraft from the same party with whom it had earlier novated (substitution of a new contract for an old one) its rights in aircraft purchase agreements.

“The company novated its rights in aircraft purchase agreements during the year ended March 31, 2009, in favour of a certain lessor and took such aircraft on operating lease from the same person, incurring a loss of Rs 136.29 crore on the same,” said the report.

An emailed query on sent to the airline spokesperson did not elicit any response.

In the first quarter, Kingfisher had reported a net loss of Rs 240 crore. The revenue was at Rs 1,314 crore, which according to the review was 2 per cent less at Rs 1,283 crore.

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