National airline's liabilities greater than its assets, audit report reveals

The current liabilities of debt-ridden national carrier SriLankan Airlines exceeded its assets, an audit report has revealed. The current liabilities exceeded its current assets by Rs. 214,6 billion, the report said.

The report compiled by National Audit Office said the company incurred a net loss of Rs. 45,231.46 million during the financial year which ended on March 31 last year, with an accumulated loss of Rs. 371,733.52 million. From that date onwards, the company's current liabilities exceeded its current assets by Rs. 221,308.99 million and total liabilities exceeded its total assets by Rs. 289,265.27 million.

Further, the group also incurred a net loss of Rs. 49,704.51 million during the financial year, the audit report compiled by Auditor General W. P. C. Wickramaratne said.

He also noted these events or conditions, along with other matters indicate a material uncertainty that may cast significant doubt on the company and the group's ability to continue is a growing concern.

Drawing attention to the controversial payments to purchase aircraft, the Auditor General said as of March 31, aircraft pre-delivery payments amounting to Rs. 2,528.12 million (US$ 19.21 million) had been reclassified under as trade and other receivables by the company's audit as of the end of the year under review.

"The company has sent a letter of demand to Airbus S.A.S. and Airbus SE claiming the return of the pre-delivery payments with interest. There is no information available to the management of the company at this point in time to believe that the outcome of the recovery of pre- delivery payments could be unfavourable to the company. However, the recovery is dependent upon the outcome of a possible legal action in the absence of a settlement. I have not been made aware of any additional information that contradicts the company’s assumption on the recoverability of said pre-delivery payments up to the date of this report," Auditor General Wickramaratne said.

In keeping with Sri Lanka Auditing Standards Auditor General said "I exercise professional judgment and maintain professional skepticism throughout the audit," in addition to "identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion."

In the latest annual report published by the national carrier, company secretary Dalrene Thirukumar said company directors continue to adopt the 'growing concern' basis in preparing the financial statements after considering the Government's continuous support to the company by providing letters of comfort to obtain bank facilities, and also considering the Government efforts in the restructuring the company.

The report further said the Government, by way of the Cabinet approval dated February 7, through a letter issued by the Treasury Secretary, had confirmed that the Government would extend the required financial support to the company to continue its operations as a 'growing concern' until the proposed restructuring process was completed.

During an address to the nation soon after he assumed office in May, Prime Minister Ranil Wickremesinghe proposed to privatise the national career after considering the billions of rupees lost every year, and noted that the loss had to be borne by the poorest of the poor who had not set foot in an aircraft.