AI under-reported losses in 2009-10: CAG

The Comptroller and Auditor General (CAG) has found discrepancies in Air India's accounts which show that the airline under-reported its losses in 2009-10 by over Rs 3,000 crore.

According to an interim report of the government audit body, the loss should have been Rs 8,589.1 crore, instead of Rs 5,551 crore as has been shown in the accounts book, sources said.

The national carrier, which is in the process of responding to the queries raised by CAG, has stated that the figure of losses was arrived at after accounting for deferred tax assets (DTA) of Rs 2842.52 crore and not showing Rs 195.58 crore as expenditure in the books as maintenance cost for leased planes.

DTA is an asset on a company's balance sheet that may be used to reduce income tax expense of any subsequent period.

For example, if a company has a DTA of $25,000 on its balance sheet and the company earns $75,000 before tax accounting income, accounting tax expense will be applied on $50,000 (that is $75,000 minus 25,000) instead of the total of $75,000.

"DTA is a standard accounting practice followed globally by all airlines. DTA has to be treated like expenditure for accounting purposes," an Air India spokesperson said.

"The DTA pertains to the year 2008-09 and was created last year on the grounds that Air India has a turnaround plan in place and it would be possible to adjust the tax benefit on the losses in the future years out of the profits available," he said.

Maintaining that there was "no understatement of loss" for the year 2009-10, the spokesperson said "DTA as a conservative measure was not created. If the same was created the losses would have been much lower".

He further said that during 2009-10, there was an improvement of 39 per cent in the operational performance of the company as compared to 2008-09 and there was scope for further improvement in 2010-11 due to a series of measures to control costs.

The CAG had earlier questioned the airline's decisions on ordering 111 new aircraft worth Rs 50,000 crore. It had also raised questions on poor progress on the merger of the two erstwhile state-owned carriers into Air India.