Hyundai E&C:Modified statements show few changes

Modified financial statements for 2013-2016 released: Hyundai Engineering &Construction on Jun 22 after market hours released modified financial statements for2013-2016 to reflect changes in cost recognition for 20 now-complete projects it receivedaround 2010. The affected projects, (ie, 7 domestic and 10 overseas ones for Hyundai E&Cand 3 overseas ones for Hyundai Engineering) shifted from recognizing unexpectedCOGS over a period of time to a lump-sum format at the time of occurrence.

    Cumulative sales, operating profit fall just KRW5.1b and KRW9.5b: HyundaiE&C’s adjustment of its cost recognition method, of course, impacted figures for annualsales and COGS. The company’s recently released figures for cumulative sales andoperating profit over 2013-2016 were down just KRW5.1b and KRW9.5b from theprevious ones, respectively. The firm’s financial statements from 2017 should not beaffected.

    Uncertainty over FSS audit eases: Hyundai E&C’s release of modified statementsare almost certainly connected to the ongoing Financial Supervisory Service (FSS) audit.

    Considering themed audits typically last up to 80 days, the FSS was expected to announceits findings as early as end-March, so the release of related data should help ease concernsthat had been mounting over a delay. The FSS is expected to announce its findingsthrough the Supervision Commission or Securities & Futures Commission in the nearfuture. For reference, the financial regulator on Jan 4 reportedly told the constructor tosubmit information on accrued receivables and COGS estimates, and called for AnjinAccounting (the company’s external auditor) to submit five years-worth of data.