The financial regulator, OJK, said Garuda and its directors would each be fined 100 million rupiah ($7,078), in addition to another collective sanction that will be imposed on directors and commissioners who had signed off on the results.
Garuda's shares fell as much as 7% to hit their lowest since January after the news, and came under further pressure as the Indonesia Stock Exchange (IDX) issued a statement asking the airline to restate its first-quarter 2019 results as well.
IDX said it would impose a 250 million rupiah fine on Garuda over alleged errors in the results.
The carrier said it disagreed with regulators' assessment and would need to re-examine the results. It did not immediately respond to questions over IDX's statement.
While it was not clear what accounting errors the regulators and IDX were referring to, two of Garuda's largest private shareholders had in April questioned the airline's 2018 results and alleged it misrepresented a $240 million financial transaction - a claim the airline rejected.
CT Corp and Finegold Resources Ltd, which own a total 28 percent of Garuda shares, said they had refused to sign the earnings report over the "misleading" way it portrayed an October 2018 deal.
Garuda, majority-owned by the Indonesian government, in its 2018 financial report indicated a modest profit of $809,850, after struggling with fuel costs and a firmer rupiah.
But the shareholders believe Garuda should actually be listing an additional loss of $240 million that it was still owed by PT Mahata Aero Teknologi.
The airline forward-booked this revenue from Mahata in its 2018 earnings. Mahata had agreed to pay Garuda in exchange for installing WiFi connectivity and advertisements on some planes.
Regulators did not respond to questions over whether the accounting errors related to this deal.
However, Garuda in its statement on Friday referred to shareholders' allegations and said Mahata had agreed to pay Garuda $30 million by July.
The rest will be covered by a guarantee of payment letter issued on behalf of Mahata by a reputable bank, Garuda added. - Reuters
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