How did Air Deccan post a profit in October quarter?
According to a report by business news channel CNBC TV-18, Air Deccan entered into a unique financial arrangement last October. It set up a special purpose vehicle with Germany's Nordic Bank and Investec of UK. The aim was: Air Deccan would give the SPV rights to purchase 60 aircraft on its behalf from Airbus. In return, Air Deccan would receive $100 million from the SPV.
The arranged work well first and Air Deccan received $30 million as the first installment. Deccan accountants listed the $30 million as income, which helped Air Deccan show a Rs 13 crore profit.
However, according to the CNBC TV 18 report, Air Deccan's auditors Ernst & Young were not happy with this and objected to it. Their view was that since this is just a financial arrangement, Air Deccan would later have to return the $100 million in full. So, the $30 million should not have been listed as "income".
According to the report, Deccan and E&Y disagreed on how the money should be treated. Since there was no meeting of minds, E&Y parted with auditing Air Deccan.
Soon after, Air Deccan chief financial officer Mohan Kumar also left the company. Later, the company's Chief operating officer too quit Deccan to join an Indonesian airline.
In the last Air Deccan AGM, Air Deccan replaced E&Y, which is one of the Big Five auditing firms in the world, with a less-known company called BK Ramadhyani & Co. Air Deccan shareholders are well within their rights to replace the auditor at any AGM, but this time, the resolution to change the auditor was moved by just one shareholders and immediately accepted by the rest.
recently, Air Deccan was again in the news after it asked India's stock market regulator Sebi to probe an unnatural rise in its share price in the last one month. The last month has see rumors of Air Deccan selling a major stake to the Reliance Anil Dhirubhai Ambani Group.
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According to a report by business news channel CNBC TV-18, Air Deccan entered into a unique financial arrangement last October. It set up a special purpose vehicle with Germany's Nordic Bank and Investec of UK. The aim was: Air Deccan would give the SPV rights to purchase 60 aircraft on its behalf from Airbus. In return, Air Deccan would receive $100 million from the SPV.
The arranged work well first and Air Deccan received $30 million as the first installment. Deccan accountants listed the $30 million as income, which helped Air Deccan show a Rs 13 crore profit.
However, according to the CNBC TV 18 report, Air Deccan's auditors Ernst & Young were not happy with this and objected to it. Their view was that since this is just a financial arrangement, Air Deccan would later have to return the $100 million in full. So, the $30 million should not have been listed as "income".
According to the report, Deccan and E&Y disagreed on how the money should be treated. Since there was no meeting of minds, E&Y parted with auditing Air Deccan.
Soon after, Air Deccan chief financial officer Mohan Kumar also left the company. Later, the company's Chief operating officer too quit Deccan to join an Indonesian airline.
In the last Air Deccan AGM, Air Deccan replaced E&Y, which is one of the Big Five auditing firms in the world, with a less-known company called BK Ramadhyani & Co. Air Deccan shareholders are well within their rights to replace the auditor at any AGM, but this time, the resolution to change the auditor was moved by just one shareholders and immediately accepted by the rest.
recently, Air Deccan was again in the news after it asked India's stock market regulator Sebi to probe an unnatural rise in its share price in the last one month. The last month has see rumors of Air Deccan selling a major stake to the Reliance Anil Dhirubhai Ambani Group.
Discuss
Add this link to...
Tell a friend
Bury
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