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Under-reported listed company losses spook major investors
A number of listed companies have been forced to revise their financial disclosures once their financial statements were audited, resulting in many instances in lower earnings or profits from those previously announced.
The large number of such incidences this year has cast corporate governance of listed firms, and the Vietnamese stock market as a whole, in a negative light, say some experts.
Investors have been forced to accept the risks of a non-transparent disclosure environment to take fleeting profit opportunities, suggested the director for brokerage of Apec Securities Company, Doan Viet Hung.
"Businesses have tried to make their financial reports look brighter to manipulate share prices," said Hung. "The consequence is the divestment of major shareholders."
Some companies have seen their losses rise to double or even triple the levels reported in initial disclosures, including Meca Vneco Investment And Electricity Construction Company (VES) which revised its losses from VND1.14 billion (US$55,340) to VND4.9 billion ($237,860).
Two companies listed on the Ha Noi Stock Exchange – Underground Works Construction Co (CTN) and American Vietnamese Biotech Incorporation (AMV) – reported losses over double initial disclosures after issuing their audited financial statements.
In a few cases, estimated losses were revised downwards. Telecommunications device trader Viet-Han (VHG) trimmed its initially reported losses by about a third from VND10.8 billion ($524,300) to VND7.2 billion ($349,500).
The current downturn of the economy is affecting the operations of enterprises," said the head of Thang Long Securities Co's corporate finance division, Nguyen Trong Nghia. "So these companies have added other revenue sources to make up for the losses without acknowledging that those sources would not pass review by auditors."
In practice, auditors can propose changes in some entries, including writedowns of foreign currency loans and the valuation of investments in unlisted shares, consistent with accounting standards, so long as they are reasonably reflecting the financial status of enterprises.
However, the variation in profits and losses before and after audits has been sizeable on the Vietnamese stock market, and investors have been caught by surprise by ballooning profits from the liquidation or transfer of assets.
"Enterprises should not continue this practice, as the unaudited results, whether profitable or not, suggest a lack of transparency in corporate governance," Nghia said. "This will contribute to the increasing disappointment of investors in the declining stock market."
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