The Securities and Futures Commission Imposes a 7.9 Billion KRW Fine on Korea Aerospace Industries

[Asia Economy Reporter Park Jihwan] The Securities and Futures Commission under the Financial Services Commission announced on the 17th that it has decided to impose a fine of 7.889 billion KRW and a two-year auditor designation on Korea Aerospace Industries for preparing and disclosing financial statements in violation of accounting standards.

The SFC pointed out that Korea Aerospace Industries inflated its performance by overstating sales and understating cost of sales from 2011 to 2017. The commission judged that the company accounted for sales and cost of sales in its favor by estimating the progress of construction using advance payments to partner companies as material costs regardless of whether the construction was performed.

Additionally, the SFC found that Korea Aerospace Industries violated accounting standards by arbitrarily processing deliveries as shipments to inflate the construction progress rate. It also judged that the company’s practice of recognizing expected losses over multiple accounting periods by dividing total estimated costs, instead of immediately expensing them, was problematic.

A fine of 396 million KRW was imposed on Samil Accounting Corporation, the auditor of Korea Aerospace Industries. Along with restrictions on audit work related to Korea Aerospace Industries for the next two years, an additional 30% contribution to the joint damage compensation fund was ordered.

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