SBI flags 17.28m yuan unauthorised write-off

THE board of SBI Offshore will seek to reverse an unauthorised write-off of some 17.28 million yuan in the books of its subsidiary, Jiangyin SBI offshore Equipment Co (JSBI).

As a consequence of this write-off, SBI is subject to a potential tax exposure of close to 2.5 million yuan in the event the China tax bureau imposes a value-added tax of 17 per cent on the amount, the company disclosed after Wednesday trading hours.

The directors of SBI were first alerted to this unauthorised write-off by the company's auditors, BDO LLP. The auditors have pointed out a difference between the audited accounts of SBI and JSBI.

The difference arose because the 17.28 million yuan that was owed by JSBI to SBI was written off in the audited 2015 accounts of JSBI without the authorisation of the board.

SBI's board is of the view that there is no basis for JSBI to write off the amount and the company said it will seek to reverse the write-off amount.

The board is consulting the auditors on the appropriate accounting treatment in relation to this unauthorised write-off and its financial effect on the group's accounts.

The board is of the opinion, however, that the accounts of SBI may not be materially misstated but the write-off may lead to certain liabilities for the company.

The 17.28 million yuan write-off amount may be deemed as income of JSBI. Consequently, a potential tax of 2.5 million yuan may apply in China though JSBI has not paid any taxes relating to the write-off.

In consultation with its sponsor and the Singapore Exchange, SBI's board will appoint an independent reviewer to investigate the matter giving rise to this situation.