Preparations For The 2019 Annual Report Of The Shenzhen Stock Exchange: Strike Hard Deals And Lock In High-Risk Companies Ahead Of Schedule

As the core content of the information disclosure system of listed companies, the annual review is not only the annual "physical examination" for listed companies, but also the annual "big test" of supervision work.

Recently, twenty-first Century economic report reporter learned that the annual report is coming soon, the Shenzhen Stock Exchange moved forward regulatory port, 2019 annual review preparation work has opened the curtain.

From the end of 2019 to the end of the year, the Shenzhen Stock Exchange issued 58 letters of concern and 26 letters of inquiry for the purpose of whitewashing the financial transactions at the end of the year. At the same time, the Shenzhen stock exchange used the "enterprise portrait" system and the classified supervision and evaluation system to identify key and high-risk companies, and issued 72 copies of the letter of practice quality to the audit institutions, indicating the possible risks of the company.

"Annual report is an important basis for investment, the current downward pressure on the economy is relatively large, some listed companies may end the year of assault transactions whitewash financial statements, avoid delisting." Pan Xiangdong, chief economist of new era securities, pointed out.

Forward regulatory port

The pre examination of the 2019 annual report has been further strengthened as an important part of the implementation of the front-line regulation work.

First of all, the "strike hard" front of the Shenzhen Stock Exchange began to spread in 2019 from the end of the year. At the end of January 2020, the Shenzhen Stock Exchange had sent 84 letters of concern and enquiries about the issue of "year-end surprise deal".

At the end of 2019, some problem companies whitewash their financial statements through various means of raids at the end of the year in order to avoid delisting or profit transfer.

The means include selling assets or shares at a fair price, the actual controller or associated party "generous" waiver of debt or donation of cash, adjusting profits through the provision of bad debts and depreciation of fixed assets, and supporting the controlling shareholders through the difficulties in purchasing assets or paying large sums of money through related parties' cash.

In view of the above violations, the Shenzhen Stock Exchange remains highly sensitive, stares at the lack of commercial real assets sales, assault debt restructuring, accounting estimates and accounting policy changes, and asset impairment provision referred back, and so on. It requires the company to explain and disclose relevant information on transaction motives, transaction fairness, pricing fairness and accounting treatment compliance.

Secondly, the "early recognition" of the Shenzhen Stock Exchange (GSE) has done enough work to advance the risk identification work of the 2019 annual report in advance by using the "enterprise portrait" system and the classified supervision and evaluation system.

It is understood that the Shenzhen Stock Exchange forecasts the risks of listed companies ahead of schedule from the perspective of company profitability and standard operation level. It focuses on screening lists of companies that may regulate risks such as profit adjustment, capital occupation and illegal guarantee. It distinguishes risk categories, preparedness risk plans ahead of time, highlights supervision priorities, and further improves regulatory efficiency.

In view of the key concerns and high-risk companies identified by the "enterprise portrait" and the classified supervision and evaluation system, the Shenzhen Stock Exchange concentrates on supervising resources, and urges the agencies, especially the auditing institutions to work diligently and responsibly. At the end of 2019, it has issued 72 copies of the letter of practice quality concern to the auditing institutions.

In the letter of concern, the Shenzhen Stock Exchange focuses on guiding the audit institutions to pay attention to the authenticity of the money and the existence of non operating capital, and the compliance of the accounting treatment, the fairness of asset pricing and the adequacy and compliance of the impairment of goodwill.

A broker from a brokerage firm in Shenzhen told reporters that "from the perspective of practitioners, the contents of the exchanges are becoming more and more professional, and the questions raised are striking. This is a good thing. Investors do not necessarily have special professional knowledge of listed companies' earnings and merger and acquisition targets, so as to enhance transparency of information disclosure and enable investors to have accurate judgments.

Focus on "six major contents"

In addition to preemptive attack and strict prevention of "illegal" actions, the Shenzhen Stock Exchange has also made various precautions against listed companies in advance through various training work.

In January 7th, the Shenzhen stock exchange held a video training seminar on annual reports of listed companies. More than 4200 responsible persons from 2137 companies in Shenzhen participated in the online seminar, focusing on the latest disclosure rules of the annual report, the latest changes in the industry information disclosure guidelines, the compilation points of the annual report, and the operation of the system.

It is understood that the annual review of the Shenzhen Stock Exchange in 2019 will focus on six aspects, namely, the authenticity of listed companies' performance, the capital occupation and irregularities guaranteed by major shareholders, the effectiveness and independence of internal control, the fulfillment of merger and integration and performance commitments, the integrity of information disclosure, and the practice quality of intermediaries.

The Shenzhen Stock Exchange pointed out that the classified review mechanism of the differentiated annual reports would be exempt from the examination of the companies with sound performance, good operation standards and good information disclosure quality. The multi round cross examination mode of "double examination + industry group plus trial" should be implemented for high-risk companies, and expert review mechanisms in accounting, reorganization and corporate governance should be established to strictly check the quality of the review.

Through the efficient differentiated supervision system and the monitoring of high-risk companies, the Shenzhen stock exchange can quickly identify risks and feedback in time.

As of the evening of January 15th, 887 listed companies of A share listed companies had disclosed their 2019 earnings forecasts. In response to some "abnormal" results, the Shenzhen Stock Exchange promptly sent a letter of inquiry. In 2019, when the loss of assets impairment was first reported in ten years, it was less than five hours after the announcement of the 2019 performance notice.

The Shenzhen Stock Exchange's head of relevant departments said that the Shenzhen Stock Exchange will continue to conscientiously perform the front-line regulatory responsibilities, and take "giving investors a real listed company" as its regulatory objective, strengthen continuous supervision, precise supervision and classified supervision, make use of scientific and technological supervision tools, make good use of the supervision toolbox, intensify inquiries and disciplinary actions, and urge listed companies and major shareholders, Dong Jiangao to achieve "four awe" and keep the "four bottom line", enhance the quality of information disclosure and standardize the operation level, promote various market players to fulfill their duties, strengthen supervision and coordination, work together to work together to prevent and defuse the risks of listed companies, and continuously promote the quality of listed companies, and help to create a standardized, transparent, open, dynamic and resilient capital market.