Financial Services Commission Reviews Extension of Deadline for Listed Companies' China Business Financial Statements Due to COVID-19 Impact

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[Asia Economy Reporter Park Ji-hwan] The impact of the novel coronavirus infection (COVID-19) is extending to corporate audits. Financial authorities are considering allowing domestic listed companies operating in China to delay the submission of their business reports. This is due to restrictions on gathering accounting information necessary for preparing financial statements, considering the local conditions in China where access is virtually controlled because of COVID-19.

A Financial Services Commission official stated on the 21st, "There have been voices from companies operating in China expressing difficulties due to the COVID-19 outbreak, and we are reviewing various measures, including extending the deadline for submitting financial statements."

The FSC is expected to soon promote a plan through the Securities and Futures Commission to make exceptions to administrative measures related to delayed business report submissions, taking into account the circumstances of delayed submissions and business operations in China. It is reported that a 'No-action letter' plan, which would exempt companies with major subsidiaries in China from market or administrative sanctions even if they exceed the business report submission deadline by 1 to 2 months, is likely.

According to the current Capital Markets Act, listed companies must submit their business reports within 90 days after the end of the previous fiscal year. This year, the deadline is March 30. However, if there are unavoidable reasons, an additional 5-day extension can be granted. If this period is exceeded, the company is immediately designated as a management item under Korea Exchange regulations, and if the business report is not submitted even after 10 days, it qualifies for delisting. In such cases, the Securities and Futures Commission imposes measures such as restrictions on securities issuance and fines.

Currently, listed companies with subsidiaries in China are reportedly facing difficulties in collecting accounting data for their local business operations due to the spread of COVID-19. With the adoption of International Financial Reporting Standards (K-IFRS), listed companies must complete consolidated financial statements that include subsidiary performance, which is proving challenging.

A senior official from a major accounting firm explained, "With the COVID-19 crisis, there are many restrictions on inventory checks and local business trips in China. There have even been requests not to conduct audits on-site due to concerns about the spread of the epidemic, making it difficult to gather accounting information."

This content was produced with the assistance of AI translation services.