Local Regulations Prevent AirAsia to Consolidate Affiliates' Accounts

22nd Jun 2015

A report from the Hong Kong-based GMT Research from 10th June said that AirAsia Berhad is unwilling to consolidate its foreign associate’s accounts. As a result, the carrier’s stock dropped almost 30 per cent within the next few days.

This prompted the Malaysian-based carrier to disprove the report by saying it was prevented from consolidating those accounts by local aviation laws.

The carrier’s internal audit committee issued a statement in which it said that AirAsia was in talks with PricewaterhouseCooppers (AirAsia’s auditors), as well as local authorities in Indonesia, India, Thailand and Philippines regarding the possibility of consolidating its affiliates’ accounts.

Local Regulations Prevent AirAsia to Have Majority in Foreign Affiliates

The committee further said that AirAsia was unable to do so, despite the fact it has considerable influence over its foreign affiliates. The reason, it was revealed, was that AirAsia does not have legal control over its India, Indonesia, Philippines and Thailand units because of their aviation laws.

AirAsia holds a 40% stake in AirAsia Indonesia, 45% in Thai AirAsia, 49% in AirAsia India and a 40 per cent stake in Philippines’ AirAsia.

According to AirAsia’s report, any change in equity holdings in its affiliates for purposes of gaining legal control over them would put those same units in danger of losing their licenses to operate in their countries.

In the statement, AirAsia’s audit committee also said it is:

Somewhat distressed and peeved to have been accused of corporate governance abuses and condoning accounting gimmicks.

Last week, the carrier said that its financial statement for the upcoming quarter will reflect the results of the associates as well. In addition, the carrier also explained that is accounts were transparent, despite the claims from GMT Research, and that they are organized according to both international and local accounting rules and standards.


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