Reconciliation of Financial Statements Filed with U.S. and Chinese Regulatory Bodies

Every U.S. listed Chinese company with actual business operations in China has to file financial statements with three agencies:

Because of differences in the basis of accounting, the financial results filed with the SEC are almost always different than those filed with the Chinese governmental authorities. In certain cases, discrepancies between SEC results and SAIC and SAT results have been the result of companies intentionally misreporting to the Chinese authorities, often to lower their tax liability, or increase their asset base for more favorable borrowing terms.

However, in many cases the results reported in the US are different from those reported in China because the accounting rules are different. Some common reasons why the reports may be legitimately different include:

Discrepancies amongst these financial reports have become an area of concern for investors who own stock in companies based in China but listed in the US. Short-sellers have taken hold of this fact and are currently scouring listed Chinese companies for discrepancies, then blindly pointing to any differences as fraudulent, in an attempt to drive down the stock price for their profit.

Thornhill can review SEC, SAIC, and SAT filings, and create a detailed report reconciling the differences amongst the three sets of financial statements. We can also recommend, and help implement, any corrective action required to ensure compliance going forward.