Loncin GM and related executives were given regulatory warnings by the Shanghai Stock Exchange for violations

On November 4, the Shanghai Stock Exchange (hereinafter referred to as the "SSE") disclosed a decision to impose a regulatory warning on Wang Jianchao, the timely chief financial officer of Loncin General Dynamics Co., Ltd.

According to the decision, it was found that on August 31, 2021, Loncin General Dynamics Co., Ltd. (hereinafter referred to as "Loncin GM") disclosed the "Announcement on the Correction and Retrospective Adjustment of Accounting Errors in the Previous Period", saying that due to the debt default of Dongxu Group Co., Ltd. (hereinafter referred to as Dongxu Group), a downstream customer of six customers of the company's holding subsidiary Guangzhou Vaillant Electromechanical Co., Ltd., the accounts receivable of the above six customers were at risk of not being fully recovered, affecting their solvency.

At the same time, Loncin GM has made a provision for bad debts for business arrears incurred with Dongxu Group in the early stage, because the above six customers belong to the same category of Matters of Dongxu Group, and they need to be corrected as accounting errors and retrospectively adjust the 2020 annual report. After the correction of the above errors, the company's 2020 accounts receivable were reduced by 63.6953 million yuan, accounting for 3.01% of the corrected accounts receivable, and the company's net profit attributable to the parent was reduced by 38.1212 million yuan, accounting for 7.94% of the corrected net profit attributable to the parent.

Listed companies should adopt appropriate accounting methods for their daily business operations, and for risk matters that may affect the recovery of accounts receivable, they should conduct accounting treatment in a timely and accurate manner in accordance with the relevant provisions of accounting standards. In the case of debt default by Dongxu Group, Loncin GM did not accurately assess and judge the amount of impact of the relevant matters, resulting in the inaccurate presentation of accounts receivable and provision for bad debts in the 2020 annual report, and the disclosure of relevant financial information was inaccurate.

The above-mentioned acts of Loncin GM violated Articles 2.1, 2.5 and 2.6 of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (hereinafter referred to as the "Stock Listing Rules") and Article 19 of the Accounting Standards for Business Enterprises - Basic Standards. Wang Jianchao, the Company's then Chief Financial Officer (whose term of office dated 3 September 2012 to date), as the person in charge of financial management, failed to exercise due diligence and was responsible for the Company's irregularities, violating the provisions of Articles 2.2, 3.1.4 and 3.1.5 of the Stock Listing Rules and the commitments he made in the Declaration and Undertaking of Directors (Supervisors and Senior Management).

In view of the above-mentioned facts and circumstances of the violation, in accordance with Article 16.1 of the Stock Listing Rules and the Measures for the Implementation of Disciplinary Sanctions and Regulatory Measures of the Shanghai Stock Exchange, the SSE made the following regulatory measure decision: Wang Jianchao, the timely chief financial officer of Loncin General Dynamics Co., Ltd., was given a regulatory warning. (Source: SSE)