This refers to the report “Kingfisher, auditors differ again” (November 23). There is no compulsion to follow the tax principle of income recognition in financial accounts. This difference indeed is one of the reasons behind deferred tax treatment. As for repairs, it can be difficult to tag it as revenue or capital expenditure. The question is not how big the amount is, but if it significantly improves the asset or just restores its normative earning capability. Some analyst also pointed out to the sharp increase in current liabilities that can mask deferred payment credit from suppliers, which is nothing but another form of borrowing. Curiously, however, Kingfisher's board of directors in their 2010-11 Annual Report of May 23, 2011 said, “Your Company is optimistic of improved performance in the current year, primarily driven by improving domestic and international passenger revenue, the benefits of debt recast together with lowered interest burden, and various other initiatives taken by your Company to lower direct operating costs.”
Kingfisher Airlines stock has been hit by general market weakness and its own dismal performance. If FDI is allowed, then foreign investors will get into the company a beaten-down price, a clear destruction of value for the banks' shareholders and depositors. To use this one airline's woes to open up domestic skies to foreign airlines is not called for. Promoters should be required to bring in fresh equity at a premium to the depressed current market price, or exit. Big business houses interested in aviation can be cajoled to come in and replace discredited promoters. Selling family heirloom to foreigners should be absolutely the last resort.
P Datta, Kolkata
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