SEC forms panel to look into United Airways' anomalies | The Daily Star
12:00 AM, November 20, 2012 / LAST MODIFIED: 12:00 AM, November 20, 2012

SEC forms panel to look into United Airways' anomalies

The Securities and Exchange Commission yesterday formed a two-member panel to investigate irregularities in the annual and first quarterly financial statements of United Airways.
The SEC also asked the probe body, led by SEC Director Abul Kalam, to look into the trading pattern of the airline's shares. Another member of the panel is SEC Director Sheikh Mahbub Ur Rahman, said Saifur Rahman, the spokesman for the SEC.
The SEC asked the committee to submit a report to the commission in 15 workdays.
The market watchdog formed the probe body after media reports on the allegation of inflating earnings in the listed airline's financial statements.
Earlier, the Dhaka Stock Exchange in an investigation found irregularities in preparing financial statements by United Airways. It also detected a manipulative trading pattern by an individual investor to create artificial demand for United Airways' shares. United Airways doctored its first quarter earnings' report to show positive earnings per share.
“It appears that you have submitted false or incorrect information to Dhaka Stock Exchange and the users [investors] of your financial statements,” said the report, which had been forwarded to the SEC a week ago.
United Airways' first quarter EPS was supposed to be Tk -2.19, but the airline publicly disclosed it to be Tk 0.81, the investigation found.
The higher EPS was due to the exclusion of deferred taxes -- a liability -- from the computation methodology, which was a clear violation of Bangladesh's accounting standards and securities rules, said the premier bourse.
According to the airline's quarterly accounts, net profit during the July-September period this year was Tk 35.72 crore, while the deferred taxes as of September 2012 were Tk 132.38 crore.
Deferred tax, basically, represents a company's liability for taxes that is postponed to future periods.
Had United Airways incorporated deferred taxes in its earnings calculations, the first quarter results would have yielded a net loss of around Tk 97 crore.
United Airways, which was listed on the stockmarket in 2010, declared a 15 percent stock dividend for the year that ended in June 2012.
The investigation also found the figures for travel taxes, fuel costs, aircraft lease and lease interests to be unusual.
Using six BO accounts, an individual investor sold shares from one account, but later bought those from another account, found the DSE probe.
United Airways shares traded between Tk 22.40 and Tk 20.50 yesterday to close at Tk 21.30.

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