The sixth was the charm. Six years after the re-nationalization of Aerolineas Argentinas, and after five consecutive abstentions of opinion, finally the General Audit Office (AGN, for its acronym in Spanish) approved the Airline’s balance sheets.

These are the numbers for the year 2012, which the Watchdog analyzed and gave its approval on November 25, eight days ago.

"The financial statements of Aerolineas Argentinas SA, taken together, present fairly, in all material respects, the financial, economic and financial situation on 31/12/2012, according to Argentine professional standards," says the AGN’s report.

Well yes, but ...

In fact, the favorable opinion of the audit does not necessarily mean that airlines in 2012 has improved the management of their income and expenses, but the company numbers were expressed in the financial statements with more thoroughness than in previous years.

In fact, the situation of the company is still red. The report notes that "on December 31, 2012, the financial statements show an accumulated loss of $ 2.407.120.549, and a negative unallocated aggregate of $ 12.107.553.660."

Furthermore, it adds that "equity is negative $ 1,000,286,497; It presents working capital deficit of $ 1,213,766,390, notwithstanding an increase of $ 1,165,341,027 in cash."

Moreover, during the analysis of the balance sheets of 2012, there also arose different situations that once created uncertainty in the auditors (see: The long road to the favorable opinion).

This is the case of successive claims made by the National Revenue Agency of the Province of Buenos Aires (ARBA) on the tax on gross income of the international transport of passengers. Such procedures, according to the AGN, are "in various procedural stages," nevertheless "the financial statements included in the liability quantification (tribute) claimed and interests, amounting to $ 448,479,864. At the date of this report –full research-, it is not possible to determine the final resolution of the claims of the collection agency and the effect on valuation and accounting exposure."

Another uncertainty arises from the impossibility that is presented to compute the airlines money on account of Income Tax, "so, at year end, the (company) maintains an allowance $ 102,974,028.55" in concept of Minimum Presumed Income.

The AGN says there is a list of limitations on the scope of their work. It is, on the one hand, the Airline’s "update of its financial management systems, whose implementation is currently in process." In this framework, the auditors noted that "the prevailing controls during 2012 have not been sufficient, in order to minimize the risks arising from the significant administrative decentralization which the company operates. And the weaknesses identified in the area of internal control and information technology does not allow us to ensure that all errors or omissions, if any, have been identified and corrected."

Furthermore, the report argues that the National Airline "has exposed in notes to the financial statements subsequent events affecting issues of valuation and disclosure" and acknowledges that, for this situation, "We could not implement all procedures to satisfy the integrity of the information included "in the balance sheets analyzed.

The audit mentioned as limiting the scope of its work, an "account balance replenished for $ 421,511,357, which is not supported with detailed inventories and valued," adding: "The method of accounting valuation of adjusted cost differs from that used by the system inventory management and accounting data features at the level of total fleet in a spreadsheet; so (that) it is not possible to identify accounting goods with physical inventories."

"Decreased Indefiniteness"

Earlier it was mentioned that the 2012 numbers of the Airline were exposed to greater length than in previous years.

In that sense, the same report notes that the AGN analyzed a balance "that decreased the uncertainty concerning the manner of implementation of the financial assistance from the Federal Government."

Briefly, this means that after years of "uncertainty" they finally decided to leave the company settled in its financial statements, some of the money that arrives from the Federal Government corresponds to "capital contributions" and not "current transfers."

On this, the control body details that since July 2008, "the Argentine State Airlines financially assisted the transfer of funds to meet current expenses that by 31/12/2012 amounted to $ 13.307.322.188 (includes $ 873,276,167 for the purchase of new aircraft); of which $ 10,197,430,925 were rendered by the company and registered in its net assets as a capital contribution."

Side note: counted from July 2008 until September 30 this 2014, transfers from the national government to the airlines group (which also includes Austral, Jet Paq and Aerohandling) amounted to $ 20.342.300.914.

Moreover, the AGN also recognizes that some of the issues that generated uncertainty in the technical, as government transfers, "have been relevant" in the case of "reconciliation process transactions between related companies and survey liabilities; compliance with clauses in operating leases; the valuation of the liability for the Aerolíneas Plus program; airport charges; and the deferred tax impact of the cancellation and the agreement with National Civil Aviation (ANAC).

The Long Road to Assent

Since the re-nationalization of Aerolineas, the General Audit Office conducted six reports on the financial statements of the main airline. Apart from this, the only one with a favorable opinion, all previous obtained the same rating: disclaimer of opinion.

Such opinions are not unfavorable in themselves. Specifically, an abstention is based on that auditors cannot pass judgment on the financial statements, either because of limited scope of their work or because of the uncertainty generated by the data collected. In the case of the airline, and up to the 2012 balance, these two things always occurred.

The first works were about 2008. The use of the plural is not capricious: it’s that the AGN declined to comment on the financial statements of that year, after which it attempted to rectify their numbers; however the same disclaimer of opinion was stated by the Watchdog.

The same happened with the balances of 2009, 2010 and 2011. Overall, the reasons for abstention were also repeated: "lack of sufficient controls to minimize the risks of administrative decentralization in which the company operates"; balancing Parts Inventory that is not backed by a "physical inventory"; lack of information to validate Airlines, and numbers in red, which have multiplied in recent years.