Firms overlook provisional funds in first-half reports
Firms overlook provisional funds in first-half reports
Many listed companies, in order to report profits for the first half of the year, have omitted provisions for risky financial investments in their required financial reports to the nation's two stock exchanges.
Many reports were given "qualified opinions" by auditors due to the decision to delay reporting these provisions until full-year reports are prepared. A qualified opinion suggests that the information reported was limited in scope and/or the report had not adhered to GAAP accounting principles.
Petrolimex International Trading Co (PIT) posted a net profit of almost VND97 billion (US$4.6 million) in the first six months of this year, but in the reviewed first-half report, auditing firm Deloitte noted that PIT had not made the required allowance of VND3.36 billion ($160,000) against a bad debt of Derya Ticaret Co Ltd totalling VND4.85 billion ($231,000).
American Auditing Co also noted that textile company Mirae (KMR) had not made an allowance for the bad debt of its major shareholder, Fiber Tech Co, totalling VND47.33 billion ($2.3 million). By delaying the provision to the end-of-year report, KMR was able to report a net profit of VND1.08 billion ($51,400) in the first half of the year.
Reports from Vinavico Investment Construction & Mining Co (CTM), Da Nang Construction Building Materials & Cement Co (DXV) and Thang Long Telecomunications Co (TLC) were also given "qualified opinions" for the failure to make provisions for bad debts, risky financial investments or foreign exchange losses.
Semiannual reports were provided for reference for investors and were not bound by strict accounting standards like audit reports, said the head of the financial investment department of HCM City University of Economics, Le Dat Chi, in remarks made to Thoi bao Kinh te Sai Gon (Saigon Economic Times) newspaper.
In fact, auditors would not verify accounts receivable, delayed payment, or bad debts of companies in the review reports, Chi said.
"Companies are forced to make provisions for inventory changes, bad debts and securities investments in the reporting period, but if they do not do this in the first six months, it will only be deemed missing but not a violation of the regulation on setting up provisional funds," Chi said.
Nevertheless, he said, qualified opinions in the six-month reports were notable as they reflected on the financial situation of businesses and could affect their profitability at the end of the year
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