Hundreds of millions of dollars in inconsistencies are strewn throughout accounts about its coal venture in Australia, it can be revealed.
In central Queensland, across kilometres of brown-green scrubland, orange locomotives are hauling steel-grey wagons loaded with a controversial commodity and a $155 million error., shunted on its 189 kilometre railway. The error is about a value once ascribed to using that railway.
On one reading, they are simply errors, albeit mistakes missed by one of the world’s largest auditors, EY . If they are mistakes, it would be a bad look given Adani has cited its use of large auditors in rejecting claims made by Hindenburg.Some discrepancies could fuel into Hindenburg’s narrative of accounting tricks, although the conglomerate has rejected such claims.But the conglomerate is adamant it is not breaking the law or any local regulations.
That is normal accounting treatment. Instead of treating some costs as immediate expenses against profits, they are recorded as a capitalised asset and whittled away over a project’s life. Unless disaster strikes. If problems emerge, reducing how much a company thinks the project is worth, it records a profit hit immediately, known as an impairment or write-off.That is one issue Hindenburg raised.
“In substance, the Australian company realised a $23 million gain on sale of assets to a Singaporean related party, which flowed through to a $23 million boost to net profit,” he says. “The gain on sale was presented as a ‘reimbursement’ of prior period expenses and an offset of current period expenses. In my view, this obfuscates the nature of the $23 million gain and the true extent of operating expenses at the Australian entity.
The sources with knowledge of preparing Adani’s accounts say the fees validly represented costs across the venture. The Australian subsidiary would on-charge costs it had incurred for the rail project, then owned by the Singapore entity, they say. The Australian subsidiary then booked these as expense reimbursements and management fees.
One open question is how the Singapore entity paid for these management fees and reimbursements, and assets. They say that meant the money owing was differently, yet correctly, detailed as “non-current” on the Singaporean accounts, filed far later than the Australian accounts. They would not explain why the same discrepancy was repeated a year later in accounts, and the old inconsistency never corrected.The missing rail use asset
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