FINANCIAL ANALYSIS ON THE IMPLEMENTATION OF THE NEW IFRS 16 “LEASES” (PSAK 73) (CASE STUDY: PT GARUDA INDONESIA (PERSERO) TBK.)

• Main Author: Fadhilah Hadi, Ryan
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/32882
• Institution: Institut Teknologi Bandung

Garuda Indonesia is the flag carrier of Indonesia which has received plenty awards and acknowledgements in the last several years. Yet, in the last several months, albeit its accomplishments, there were quite plenty bad news spreading, including the poor financial performance which led to loss of shareholders’ trust. Besides, Garuda Indonesia is also facing the implementation of the new IFRS 16 which many said would definitely change the air transport industry. The new IFRS 16, which will be adapted as PSAK 73, will eliminate the term “operating lease” so that it has to be reported as “financial lease”, making airlines who use operating lease strategy will be financially affected, especially their financial statement and ratios. To understand the effect, using quantitative approach by looking at historical data, the financial statement and ratio are projected. The constructive lease capitalization method is used to see the difference between statement and ratio with and without capitalization. Two determinant factors which are leased aircraft growth rate and cost of capital as discount rate are analyzed to understand the step Garuda Indonesia shall implement to reduce the negative impact. The result shows that by doing nothing, the financial statement and ratio will be severely impacted, and by reducing those determinant factors, the effects can be reduced to improve its position. In the end, based on the analysis, a set of strategies are proposed. Therefore, the senior management can understand what to do to mitigate the effects. Even though as claimed by IASB that the new standard would not affect the company’s economic value, analysts expected that it will still affect the shareholders’ perception as they usually only look at the figures without requiring to understand the cause. These could lead to a worse condition for Garuda Indonesia. Therefore, the senior management has to treat this matter seriously and arrange a set of strategies to mitigate the negative impacts. Limitations in this study include the method of capitalization, the ratios being analyzed which only cover debt and profitability ratio, and statements being analyzed do not include cash flow statement and change in shareholder’s equity