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Auditors question TTF's ability to continue

 Ernst & Young Vietnam (EY Vietnam) expressed doubts about the ability of the Truong Thanh Furniture Corporation (TTF) to continue as a going concern, TTF’s interim consolidated financial statements for the first half of 2016 reveal.

Ernst & Young Vietnam (EY Vietnam) expressed doubts about the ability of the Truong Thanh Furniture Corporation (TTF) to continue as a going concern, TTF’s interim consolidated financial statements for the first half of 2016 reveal.


Auditors question TTF's ability to continue


TTF’s cumulative losses as at June 30 increased by a further VND130 billion ($5.8 million) to VND1.2 trillion ($53.8 million) due to VND127 trillion ($5.7 million) in stock found to be missing.

Moreover, TTF’s short-term debts had exceeded current assets by VND425 billion ($19 million) as at June 30. “Those conditions reveal that uncertainty exists and raises substantial doubts about the entity’s ability to continue as a going concern,” EY Vietnam wrote in its report.

EY Vietnam was appointed to review TTF’s interim consolidated financial statements since December 31, 2015. The company therefore could not confirm the calculation of TTF’s inventory as at December 31, 2015 and inspections have not also provided EY Vietnam with appropriate evidence to clarify the level of inventory as at that date.

In the first half of 2016 TTF’s management board reported VND1.05 trillion ($47.1 million) worth of stock was missing and restated its inventory as at December 31, 2015 to VND92 billion ($4 million). The total value of its inventory was therefore down by VND1.14 trillion ($51.1 million) as at June 30, 2016.

EY Vietnam was unable to determine the incurred period for the missing stock. The company was therefore unable to determine whether there was a need for adjustments in the interim consolidated financial statement and the interim cash flow statement.

Moreover, TTF’s consolidated financial statement reported operating revenue of VND520 billion ($23.3 million) for a group of customers during the first six months. EY Vietnam, meanwhile, was unable to collect enough evidence to determine the existence of these operating activities.

Therefore, the auditing company could not determine whether there is a need to make a retrospective restatement for the amount of revenue and cost of goods sold received from those entities during the six month financial period ending June 30, 2016.

A subsidiary of Vingroup, the Tan Lien Phat Investment and Construction JSC, became TTF’s main shareholder in May after acquiring 72 million shares for VND1.8 trillion ($80.7 million), or a holding of 49.9 per cent.

In mid-July Tan Lien Phat suddenly announced the suspension of its loan to TTF of VND1.2 trillion ($53.8 million) in exchange for 69 million TTF shares after finding serious discrepancies in data relating to inventories and questionable debts.

Notably, rumors have spread that Vingroup will most likely not exchange its loan to TTF for TTF’s shares.

RECENT EVENTS AT TRUONG THANH FURNITURE CORPORATION

On August 2 TTF shocked the stock market and investors after declaring a loss after years of turning a profit. It reported VND980 billion ($43.9 million) worth of stock was found to have gone missing in the second quarter of this year. The corporation’s second quarter consolidated financial statement therefore announced losses of VND1.13 trillion ($50.6 million).

On August 9, TTF’s stocks were put under special supervision. According to the Ho Chi Minh City Stock Exchange (HoSE), the huge losses reported for the second quarter along with the retrospective restatement of figures as at December 31, 2015 have significantly impacted on the corporation’s operational activities and financial situation. HoSE therefore decided to protect investors’ rights.

On August 12, TTF’s founder Mr. Vo Truong Thanh was dismissed from his duties as Chairman of the Board of Management after not taking sufficient responsibility as Chairman given TTF’s tough times. His was replaced by Vingroup’s Deputy Managing Director Ms. Vu Tuyet Hang.

VN Economic Times

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