"Extension of Business Report Submission Deadline, Need for Comprehensive Measures"

Accounting Industry Must Consider Overall Schedule Including Shareholders' Meetings and Corporate Tax Filings Beyond 1-2 Month Delays

[Asia Economy Reporter Park Jihwan] Financial authorities are preparing measures to waive related penalties even if companies delay the submission of business and audit reports due to the spread of the novel coronavirus infection (COVID-19). While companies and the accounting industry see this as an immediate relief measure, voices are emerging that in order for the extension of submission deadlines to be truly effective, schedules such as shareholders' meetings and corporate tax filings must be comprehensively considered.

According to financial authorities and the accounting industry on the 26th, the Financial Services Commission is expected to discuss at the Securities and Futures Commission meeting held as early as this afternoon a plan to exempt administrative actions for companies expected to be affected by COVID-19 that delay the submission of business reports. It is anticipated that a 'No-action letter' (a non-regulatory opinion letter) will be reviewed, which ensures that companies will not face market or administrative sanctions even if they exceed the business report submission deadline by 1 to 2 months. Currently, for corporations with a December fiscal year-end, the business report submission deadline is the 30th of next month, and this plan would extend it by 1 to 2 months. Penalties such as trading suspension or delisting by the Korea Exchange and fines or penalties by the Securities and Futures Commission due to delayed submission can be waived.

A financial authority official explained, "The voices of companies finding it difficult to meet the deadlines for business report preparation or accounting settlement due to the spread of COVID-19 are growing," adding, "We are considering actively refraining from imposing sanctions on companies that meet the requirements for No-action letters and similar measures."

This is due to many listed companies with business sites in China and Daegu facing difficulties in preparing audit reports and business reports amid the COVID-19 crisis. Especially after last weekend, confirmed COVID-19 cases surged in the Daegu and Gyeongbuk regions, effectively paralyzing all local business operations. Accounting firms have also withdrawn audit personnel, making it difficult to prepare proper audit reports.

The accounting industry insists that comprehensive measures beyond simple deadline extensions are necessary. For companies that already have shareholders' meetings scheduled, extending the report deadlines could result in having to hold two shareholders' meetings. One of the key agenda items of the shareholders' meeting is the approval of financial statements, but as the audit schedule itself is delayed, companies may have no choice but to approve only agenda items excluding the financial statements.

The issue of overlapping schedules with corporate tax filings remains a challenge. An accounting firm official stated, "If a confirmed case occurs at a specific company making it impossible to work, accounting settlement and audits become difficult," and explained, "If the submission deadlines for audit reports and financial statements are extended, it is reasonable for the corporate tax filing schedule to be delayed as well." If corporate tax filings are forced without proper accounting settlement, companies will have no choice but to file initially and later submit amended returns through adjustments.