April 19, 2024

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[THE INVESTOR] The Securities and Futures Commission is wrapping up over a month-long review of Samsung BioLogics’s controversial accounting practices that could put the 27 trillion won (US$24.30 billion) company at risk of delisting.

The SFC, auditing and decision-assisting arm of the country’s top financial regulator Financial Supervisory Commission, convened the third round of meetings with Samsung BioLogics and its auditors KPMG and Deloitte Anjin on June 20 before a final ruling is announced on July 4 at the earliest. 

Today’s session will be focusing on verifying the legitimacy of accounting standards that Samsung BioLogics applied to categorize its drug developing unit Samsung Bioepis as a subsidiary in 2012 when the company established the 85:15 joint venture with US-based Biogen.

From 2015, Samsung BioLogics treated the JV as an affiliate, not a subsidiary and thus switched to fair market valuation, because it could lose control of the unit due to the possibility of Biogen exercising a call option to up its stake to nearly 50 percent.

Through the process, the value of loss-making Samsung Bioepis jumped by 18 times, resulting in Samsung BioLogics swinging to a profit before its listing on the benchmark KOSPI in 2016.

In a series of meetings, Samsung BioLogics has been defending itself to clear accounting fraud allegations since the Financial Supervisory Service had issued preliminary notice to the contract drug maker and its auditors of measures it could take concerning the suspected accounting rule breach on May 2.

If the Incheon-based firm is found to have intentionally committed accounting fraud to overstate profit, it will come under review for a potential delisting. It could be slapped with a lighter penalty like a fine, if the authorities find the case stemmed from minor accounting errors.

Shares of Samsung BioLogics surged 8.92 percent as of 2:30 pm on expectations that the company will receive a mild punishment.

By Park Han-na (hnpark@heraldcorp.com)