Asiana Airlines Faces Securities Issuance Restriction...Sanction for 'Omission of Related Party Transactions'

Securities and Futures Commission Sanctions 7 Companies for Accounting Standards Violations
Actions Include Recommendation to Dismiss CEO of Kumho Express and Referral to Prosecutors

The financial authorities have decided to impose sanctions such as restrictions on securities issuance on Asiana Airlines for omitting related party transactions in the notes to its financial statements. Additionally, Kumho Express, which inflated the consideration for stock acquisition rights in its disclosures, was subjected to restrictions on securities issuance along with recommendations for the dismissal of its CEO and notification to the prosecution.

The Securities and Futures Commission (SFC) under the Financial Services Commission held a meeting on the 27th and announced that it resolved to designate auditors and take other measures against seven companies, including Asiana Airlines, for violating accounting standards.

According to the SFC, Asiana Airlines violated accounting standards by failing to disclose related party transactions amounting to 330 billion KRW in 2015 and 160 billion KRW in 2016 in the notes to its financial statements.

Asiana Airlines had an in-flight meal supply contract under unfavorable terms but arranged for the contracting company to subscribe to bonds with stock acquisition rights; however, it did not disclose these details in the notes. Consequently, the SFC resolved to impose an 8-month restriction on securities issuance and a 2-year auditor designation on Asiana Airlines.

Furthermore, Kumho Express, which omitted notes on related party transactions worth 260 billion KRW and inflated the consideration for stock acquisition rights by 67.069 billion KRW in its disclosures, was subjected to a 12-month restriction on securities issuance, a 3-year auditor designation, a recommendation for CEO dismissal, corrective orders, and notification to the prosecution.

Kumho Express, serving as the holding company of the Kumho Asiana Group, was pointed out for recognizing the difference between the issuance amount of bonds with stock acquisition rights and the bond amount as capital surplus instead of recognizing it as profit or loss, thereby overstating the consideration for stock acquisition rights.

Additionally, Asiana IDT, an affiliate of the Kumho Asiana Group, was resolved to have an 8-month restriction on securities issuance, a 2-year auditor designation, and a recommendation for dismissal of the responsible executive for failing to disclose related party transactions amounting to 18 billion KRW in the notes.

Asiana Airport, which failed to disclose related party transactions worth 16 billion KRW, was also subjected to a 6-month restriction on securities issuance and a 2-year auditor designation. Air Busan was notified of a 10-month restriction on securities issuance and a 3-year auditor designation for failing to disclose related party transactions amounting to 36 billion KRW.

D.L. Pharm, which falsely recorded accounts receivable, was fined, and New Medipharm, which falsely recorded inventory assets, was subjected to a 4-month restriction on securities issuance and a 2-month auditor designation.