Mozambique Airlines (LAM) may discontinue its flight activities due to mismanagement that has taken hold at the company, according to auditing firm Ernst&Young. "A material uncertainty may call into question the Company's ability to continue its normal course of business."
The LAM company's financial statements for 2020 indicate that "future events or conditions may cause the entity to discontinue operations," says the audit firm quoted by a national portal.
Analyzing LAM's data, Ernst&Young suggests that LAM is at risk of halting operations for "presenting negative equity (triggering the measures provided for in article 119 of the Commercial Code), a current liabilities higher than current assets." Learn More
The audit report on LAM's financial statements for December 31, 2019, "included a reserve by limitation of scope related to the recoverability of an advance made to a supplier in the amount of 1.5 billion meticais and presented under the heading of other financial assets. In the year 2020, the Company recorded a loss related to the totality of this account receivable. We are unable to conclude to what extent the loss recorded in 2020 should have been recognized in previous years. Learn More
Further, Ernst&Young indicates that the results for the year ending December 31, 2020 include a 329.7 million metical loss related to the recoverable value of inventories.
"Our audit report on the financial statements as of December 31, 2019 includes a reservation due to limitation of scope related to this matter, and no additional evidence has been obtained that allows us to conclude to what extent the loss recorded in fiscal 2020 should have been recognized in prior years," our source quoted.
A Ernst&Young also disclosed in LAM's 2020 accounts a loss of 351.1 million meticais related to an impairment loss on property, plant and equipment and 299.4 million meticais related to depreciation for the year.
"The audit report on the financial statements as of December 31, 2019 included a scope limitation reserve related to this matter in the amount of 650.5 million meticals, and no additional evidence has been obtained that would allow us to conclude on the extent to which the depreciation loss and expense recorded in fiscal 2020 should have been recognized in prior years' earnings."
LAM's 2020 statements illustrate that equity is valued at 17.1 billion meticais. In the year under review, the company recorded total assets of 3.9 billion meticais, compared to 6.8 billion meticais in the previous economic year. Liabilities amounted to 21 billion meticais, compared to 18.4 billion meticais recorded in 2019. Operating results (which would be profits) stood at 4.6 billion meticais.
"These circumstances indicate the existence of a material uncertainty that may call into question the Company's ability to continue its normal course of business. In this context, the continuity of the entity is dependent on the support to be provided by shareholders and/or the achievement of future profitable operations," reads the firm's report, attached to LAM's 2020 Financial Statements.
Source: cartamz