A company is termed as a 'going concern' if it has sufficient resources to continue to operate indefinitely and to avoid any potential bankruptcy risks...
Auditors of Jet Airways have raised red flag over the carrier’s ‘going concern’ status, saying the assumption is dependent on various factors including its synergy with Etihad and ability to raise funds.
A company is termed as a ‘going concern’ if it has sufficient resources to continue to operate indefinitely and to avoid any potential bankruptcy risks.
Jet Airways, which turned profitable in the three months ended December 2014, today said strategic investment by Etihad Airways and other initiatives are expected to provide sustainable cash flows for its business.
Hence, the financial results continue to be prepared on a ‘going concern basis’, it said while announcing the latest quarterly results.
Drawing attention to the aspect of ‘going concern basis’, the company’s independent auditors have said the same is dependent on various factors.
“The appropriateness of assumption of going concern is dependent upon realisation of the synergies from alliance with the strategic partner, the company’s ability to raise requisite finance/generate cash flows in future to meet its obligations, including financial support to its subsidiaries,” they said.
Deloitte Haskins & Sells LLP and Chaturvedi & Shah — have drawn attention to the matter in their independent auditors’ review report to the board of Jet Airways.
Jet Airways has submitted this report along with its results for the three months ended December 2014 to the stock exchanges today.
According to Jet Airways, strategic investment by Etihad Airways and gradual implementation of the recommendations provided by a domain expert would help the company to achieve required operating cash inflows. This would be done through cost synergies, revenue management, network synergy and leasing aircraft, among others.
“These measures coupled with on going initiatives to raise funds are expected to result in sustainable cash flows for business and for providing financial support to its subsidiaries.
“Accordingly, the statement of financial results continue to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business,” Jet Airways said.
After seven straight quarters of losses, Jet Airways returned to profitability with Rs 3 crore profit from operations in the latest December quarter on the back of higher international passenger traffic and lower fuel prices.
It had posted a loss of Rs 284 crore in the same period a year ago.