Economic Observer reporter Liang JiOn November 19, the Shanghai Stock Exchange issued “Shanghai Stock Exchange Self-Regulatory Guidelines for Listed Companies No. 2-Financial Delisting Indicators: Operating Income Deduction” and “Science and Technology Innovation Board Information Disclosure Business Guide No. 9-Financial Delisting Indicators” : Operating income deduction.” The Shenzhen Stock Exchange issued the “Guidelines for Business Handling of Listed Companies No. 12-Business Income Deduction Relevant Matters” and “Guidelines for Business Handling of Listed Companies on the Growth Enterprise Market No. 13-Business Income Deduction Relevant Matters” (hereinafter collectively referred to as the “Guide”).
The Shanghai and Shenzhen Stock Exchange stated that the “Guide” was issued to implement the “Implementation Plan for Improving the Delisting Mechanism for Listed Companies” of the Central Deep Reform Commission, to further improve the market-based and legalized exit mechanism, to purify the capital market ecology, and to protect the legality of investors rights and interests.
Help the market clarify expectations
The revised “Guide” aims to clarify the specific deductions of operating income from financial delisting indicators, improve the enforceability of financial delisting indicators, and implement new delisting regulations.
According to the Shanghai Stock Exchange, one is to adhere to the goal-oriented principle and target shell companies with precision. In the process of formulating the “Guide”, the shell companies that do not have the ability to continue operations were sorted out, and the common methods for such companies to use to increase their operating income to protect their shells were refined, and the relevant deduction standards were formulated with a goal-oriented approach. , Aiming to accurately attack shell companies, and strive to achieve “retreat and retreat.”
The second is to adopt a “definition + enumeration” approach to clarify the deduction items for operating income. Operating income deductions are similar in nature to non-recurring gains and losses, and the characteristics and specific content of operating income deductions can be better described through the “definition + enumeration” method. Therefore, the “Guide” enumerates specific deductions based on the definition of “business income not related to the main business and income without commercial substance”.
The third is to strengthen the verification requirements of audit institutions and tighten the responsibilities of intermediary agencies. Audit institutions are an important starting point for financial delisting supervision. The “Guide” clarifies the verification requirements of audit institutions and urges them to be “gatekeepers” and provide investors with true, accurate and complete information.
The Shenzhen Stock Exchange also stated that the first is to refine implementation standards and crack down on deliberate evasion. Operating income deduction is directly related to delisting. In the practice of operating income deduction for listed companies’ 2020 annual reports, a small number of companies have deliberately circumvented it. The “Guide” further refines the implementation standards for revenue deduction based on the 2020 annual report supervision practice, with the aim of accurately cracking down on “shell companies” and striving to eliminate “zombie companies.”
The second is to compact intermediary responsibilities and strengthen the role of “gatekeeper”. The prerequisite for the implementation of the “net profit + operating income” indicator is to accurately calculate income and profit, which puts forward higher requirements for the practice level of annual review agencies. The “Guide” further strengthens the inspection responsibility of the annual review agency, refines its requirements for issuing verification opinions, and clarifies the key verification conditions.
The third is to clarify market expectations and improve service quality. The disclosure of the 2021 annual report has not yet started. The issuance of the “Guide” will help clarify market expectations and facilitate listed companies to prepare for the preparation and disclosure of annual reports. At the same time, it will also help the annual review agency understand the verification of operating income deductions before the audit enters the market. Focus, and communicate with listed companies accordingly to smoothly advance the annual review work.
Optimize the revenue deduction standard
The relevant person in charge of the Shanghai Stock Exchange said that the key content of the specific deductions for operating income in the “Guide” includes the following three aspects:
One is to refine the deduction requirements for trade and financial services. The Shanghai Stock Exchange found in its supervisory practice that some shell companies have increased their operating income by rushing to carry out trade, quasi-finance and other businesses and avoid delisting. Trading business and financial-like businesses generally have low input and low entry and exit costs. It is difficult to form a stable business model and cannot fundamentally change the essence of a shell company. In order to prevent such situations, the “Guide” clarifies that new trade business income and qualified financial business income should be deducted for the current fiscal year and the previous fiscal year. At the same time, for unqualified financial services, such as interest income from borrowed funds, since it is income that has nothing to do with the main business, in order to prevent listed companies from turning out of reality, it is clearly deducted every year.
The second is to standardize the judgment criteria of “stable business model”. In order to prevent the company from using various types of other new business to protect the shell, the “Guide” will “unformed or difficult to form a stable business model of business income generated” as the “business income has nothing to do with the main business” the bottom line clause. At the same time, the judgment principle of “stable business model” is further clarified, such as whether the business has complete input, processing and output capabilities, whether it is sustainable, whether the company has relevant experience in the business, and a certain scale of investment, etc. .
The third is to clearly deduct the income from the merger of abnormal transactions. In order to prevent listed companies from rushing to “control” other companies to achieve “consolidation” through entrusted voting rights, donated subsidiaries or businesses, and then expand their operating income to avoid delisting, the “Guide” clearly requires the deduction of “significant losses in the current fiscal year” Fair consideration or income generated by a subsidiary or business of a business combination obtained through non-transactional means”.
Compact the responsibility of intermediary agencies
According to the Shanghai Stock Exchange, the new delisting regulations clarify that audit agencies of listed companies’ annual reports need to issue special verification opinions on whether the deduction of listed companies’ operating income is appropriate, and that they are intended to require audit agencies to shoulder the responsibility of “gatekeepers”. Judging from the delisting supervision of the Shanghai Stock Exchange in 2020, the audit agency is an important starting point for financial delisting supervision. Therefore, the “Guide” issued this time emphasizes the verification requirements for audit institutions, and continues to tighten and compact the responsibilities of audit institutions.
When implementing the “Guide”, the annual audit accountant should focus on verifying whether the current income of the listed company is true and accurate, and taking into account factors such as company size and historical operating conditions, further verify whether the deduction of the listed company’s operating income meets the requirements of the “Guide” and related regulations. . For companies whose operating income is less than 100 million yuan but the lower of the net profit before and after the deduction is positive, the annual audit accountant should also focus on the authenticity, accuracy and completeness of its non-recurring profit and loss disclosure, and issue a special verification opinion.
The Shenzhen Stock Exchange also stated that the verification requirements for intermediary agencies: First, for companies whose operating income is less than 100 million yuan but the lower of the net profit before and after the deduction is positive, the annual review agency is required to recognize their non-recurring gains and losses. Issue a special verification opinion for accuracy. The second is to prevent conflicts between audit opinions and business income deductions. If a standard unqualified audit opinion is issued but the business income deduction items do not have commercial income, the annual audit agency should check and make an explanation. Third, the annual review agency should consider the sustainability of the business and the value it creates for the company to determine whether a stable business model can be formed.
Regarding investors, the Shanghai and Shenzhen Stock Exchanges all reminded that according to the new delisting regulations, after the disclosure of the 2021 annual report, if a listed company first touches the financial sector where the lower of the net profit before and after the deduction is negative and the operating income is less than 100 million yuan Such delisting indicators will be subject to a delisting risk warning (*ST). Companies that have been warned of delisting risks, namely *ST companies, will be directly delisted if they continue to hit the delisting indicators in 2021. Investors should pay close attention to the annual performance forecasts, performance forecast correction announcements, performance bulletins, performance bulletin correction announcements, risk warnings and other announcements that may be disclosed by relevant listed companies, make investment decisions cautiously, and effectively prevent investment risks.Return to Sohu to see more
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