Qualified audit opinion on Sri Lanka airport operator over Mattala

ECONOMYNEXT – Sri Lanka’s auditor general has issued a qualified opinion on the annual accounts of Aviation Services (Sri Lanka) Limited (AASL), which runs civil airports, over continued losses at the southern Mattala airport.

There had been a downturn in the operations of Mattala Rajapaksha International Airport (MRIA) from the time it opened, Auditor General W. P. C. Wickramaratne said, according to the company’s 2018 annual report.

“ . . . presently there are a few international flight movements and domestic flights.”

AASL in its accounts is carrying 22 billion rupees worth of assets of Mattala Rajapaksha International Airport, which has failed to draw regular commercial airline traffic after being built with Chinese loans.

“I consider these to be indicators of impairment in accordance with LKAS 36, Impairment of assets, as the economic performance of MRIA has deteriorated at the date of this report with full potential of the airport not expected to be realized in the near future,” the audit report said

“However, management has not carried out an impairment assessment to check whether there is any indication that MRIA may be impaired, on the basis of it being a separate cash generating unit,” Wickramaratne said.

AASL management also has not carried out an impairment test to determine whether any impairment write down should be applied to the amounts recorded in the statement of financial position at 31 December 2018, he said.

“In the absence of information to assess the recoverable amount of the property, plant and equipment of MRIA, I am unable to satisfy myself as to the carrying amount of such property, plant and equipment as at 31 December 2018.”

Wickramaratne also noted that foreign loans obtained for the Mattala airport had been transferred to AASL by General Treasury through a Memorandum of Understanding (MOU) “without any valid loan agreement or transfer.”

 The outstanding loan balance as at 31 December 2018 was 27 billion rupees, equivalent to 146 million dollars.

AASL management in response to the qualified audit opinion said the Mattala airport loan has been transferred to AASL with Cabinet of ministers’ approval.

“In addition, a MOU has been signed with the Treasury to affect the loan transfer,” the AASL management said.

The airport management company said it had asked the Auditor General to get the government loans transferred to AASL books in a “proper manner” to avoid the duplication, “since it is beyond the control of AASL and the action needs to be taken by the Treasury.”
(COLOMBO, 15 August 2019)