THE Securities and Exchange Commission (SEC) is seeking explanations from the previous management of 2GO Group, Inc., its previous auditor R.G. Manabat & Co., as well as the current auditor SyCip Gorres Velayo & Co. (SGV) over the revisions in the logistics company’s audited 2015 and 2016 financial reports.
In an e-mail to reporters on Tuesday, the SEC said its Market and Securities Regulation Department (MRD) and Office of the General Accountant (OGA) want written clarifications from the previous management of 2GO, and auditors R.G. Manabat and SGV, before making any conclusion in its investigation into the substantial discrepancy in 2GO’s financial statements.
“In order for MSRD and OGA to make a conclusion, the explanation and clarification of other relevant parties are also necessary,” the corporate regulator said.
At the same time, the SEC said it has received 2GO’s written clarification on the following:
– the circumstances requiring the restatement and reclassification;
– the details of the basis of the restatement and reclassification of accounts discussing the impact of the newly adopted accounting policy, estimate or recognition method to the specific restated or reclassified account;
– the relevant accounting standards supporting the restatement and reclassification;
– overall impact of the restatement and reclassification to the company’s result of operations and financial condition, and;
– any other information material to the restatement and reclassification.
The new management of 2GO, led by businessman Dennis A. Uy’s Udenna Corp. and Henry Sy, Sr.’s SM group hired SGV to conduct a special audit after they took over the logistics company in April.
In July, the SEC was prompted to conduct an investigation on 2GO after the audit revealed substantially lower financial results for full year 2015 and 2016, as well as for the first quarter of 2017.
Among others, that audit zeroed in on receivables as a “key audit matter,” resulting in P3.86 billion worth of receivables in the first quarter, stripped of P1.46 billion in doubtful accounts.
It also reduced consolidated revenue “by the amounts that did not meet the revenue recognition criteria” amounting to P53.7 million and P19.1 million for the three months ending March 31, 2017 and 2016, as well as P222 million and P34.7 million for the years ended Dec. 31, 2016 and 2015, respectively.
Neither did 2GO meet in some cases the minimum current ratio and the maximum debt-to-equity ratio required by the company’s long-term loan agreements, resulting in reclassification of some noncurrent liabilities to current liabilities — or those falling due within a year. That resulted, for instance, in current liabilities ballooning 39% to P12.119 billion in the first quarter from the original P8.718 billion.
“However, the group has not received a notice of default from its creditors and the group continues to pay the long-term loans based on original credit terms,” the revised report read.
SGV’s review also significantly altered bottom lines, with net income for 2015 cut by 90% to P105.13 million from the P1.08 billion previously reported, 2016 profit slashed by 74% to P344.03 million from P1.35 billion, and this year’s first quarter recording a P264.863-million net loss from a P267.562-million net income originally.
If proven that the company has violated provisions under the Securities and Regulation Code, 2GO could face of fine of not less than a million pesos, with an additional P10,000 fine for every day since the mistake has been discovered.
Shares in 2GO slipped by 30 centavos or 1.32% to P22.50 each on Tuesday. — Arra B. Francia
