The Securities and Exchange Surveillance Commission Imposes a 2-Month Securities Issuance Restriction on Sangsangin Plus Savings Bank for "Accounting Standards Violation"

[Asia Economy Reporter Park Jihwan] The Securities and Futures Commission under the Financial Services Commission announced on the 30th that it has imposed measures such as restrictions on securities issuance and designation of auditors on Sangsangin Plus Savings Bank for preparing financial statements in violation of accounting standards.

The Securities and Futures Commission found that Sangsangin Plus Savings Bank violated accounting standards related to derivatives. It pointed out that convertible bonds (CB) and bonds with warrants (BW) should have been separated into embedded derivatives and host contracts, and the embedded derivatives should have been measured at fair value. However, the bank classified the entire complex product as loan receivables and measured it at acquisition cost, resulting in an understatement of equity capital. As a result, amounts of 21.9 billion KRW in June 2015, 35.18 billion KRW in December of the same year, and 12.712 billion KRW in December 2016 were omitted.

It was also found that the bank understated derivative liabilities by failing to perform fair value evaluation. The Securities and Futures Commission pointed out, "A call option granted to a third party on the company's held financial assets should have been measured at fair value and accounted for as derivative liabilities, but the related fair value evaluation was omitted, leading to an understatement of derivative liabilities."

The Securities and Futures Commission resolved to restrict Sangsangin Plus Savings Bank from issuing securities for two months and to designate an auditor for one year.

Hanul Accounting Corporation, which conducted the audit, was ordered to additionally allocate 10% to the joint compensation fund, and two certified public accountants were restricted from auditing Sangsangin Plus Savings Bank for one year and required to complete two hours of job training.

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