Professionals in all fields often face dilemmatic situations. On the one hand, they must save their company from harsh conditions. On the other hand, they must maintain an ethical attitude in making decisions, especially when such decisions may upset public interests.
The world is a tough place right now. Things become tougher during the pandemics. The COVID-19 pandemic has given severe setbacks on almost all walks of life including the aviation and airlines business. Garuda Indonesia is the flag carrier of Indonesia. PT. Garuda is a state-owned company that has gone public in the Indonesian capital market. The company's performance has suffered losses in recent years. It is suspected that the company’s 2018 financial report violated Financial Accounting Standard.
Let’s follow what the two students of accounting here have to say about the financial report flaws.
The management of PT Garuda has tried to improve its performance by making cooperation contracts with other companies. Among the business deal was the installation of connectivity and entertainment services on Garuda aircrafts. The result of this agreement resulted in a cooperation contract for 15 years, with a contract value of approximately US $ 212 million (Two hundred and twelve million US $).
The flag carrier company reported all of this contract revenue in 2018. This has significantly boosted PT Garuda's performance report so that it received a positive response from the capital market as indicated by the skyrocketing increase of the company's stock price.
But the report was flawed. PT Garuda was alleged to have inflated revenue by reporting the revenue of the 15-year contract all at once in 2018.
Indeed, as a public company, this case involves several professionals such as management, public accountants, board of commissioners, and other related institutions.
This case invites students to think critically and provide solutions in dealing with such problems.
Did the report meet the accountancy standard? Does it abide the existing regulations?
PT Garuda argues no flaws in its 2018 financial reports.