There is confusion among the professional accountants
C L Jose
KOCHI/October 31, 2023: Accounting professionals are divided over the recent Kochi Metro claim that the company has earned an operating profit of Rs5.35 crore for the financial year 2022-23 (FY23).
“If Kochi Metro has made an operating profit of Rs5.35 crore, how come the management failed to make it part of the directors’ report, more so, this being the first operating profit in Kochi Metro’s history as is claimed by the company itself?” a senior chartered accountant with a leading audit firm noted.
There is confusion among the professional accountants as to how the company has arrived at this Rs5.35 crore figure as the operating profit of the company for the financial year 2022-23 (FY23).
Though there is a section of professional accountants, mostly chartered accountants, who argue that operating profit is defined as the earnings before interest and tax (EBIT), there are a few others who dispute this.
The former argue that the generally accepted formula for operating profit is EBIT and if this formula is applied to arrive at operating profit, the company has not only earned any operating profit, but on the contrary, has closed the year with an operating loss of Rs113.26 crore.
“No ‘authentic texts’ have categorically stated that the operating profit means earnings before interest and taxes (EBIT),” a veteran chartered accountant told this writer.
Though a few queries had been sent to Kochi Metro seeking clarification on its claim on operating profit, the company never bothered to respond to the queries, especially on how the company arrived at the operating profit of Rs5.35 crore.
This reporter has even approached the auditors of Kochi Metro for clarity, but they remained almost non-committal on the issue as is generally believed to be an ideal stand on the part of any statutory auditors for that matter.
The 2022-23 (FY23) income statement of Kochi Metro has stated that while the gross income of the company for FY23 was Rs200.99 crore, the operating expenses were at Rs128.89 crore taking the profit before interest and depreciation to Rs72.09 crore.
With the finance charges having gone up to Rs222.08 crore the company closed the financial year with a gross loss of Rs149.99 crore and a net loss of Rs335.34 crore.
KMRL Managing Director Loknath Behera while talking to myfinpoint recently said the company’s repeated loss doesn’t affect the running of the company as the arrangement is that the State government repays Kochi Metro’s loans, which amount to about Rs4,500 crore as of March 31, 2023.
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