Zhitong Finance APP News, Dongguan Huali Industries (603038.SH) has issued an announcement, and the company recently received the China Securities Regulatory Commission Guangdong Regulatory Bureau's administrative supervision measure decision No. 185 - 'Decision on Issuing a Warning Letter to Dongguan Huali Industries Co., Ltd., Tan Hongru, Tan Xujie, He Quanhong, Xie Zhikun, Lu Xuqiu, and Sun Yuanyuan'. After inspection, the company has the following issues:

First, after careful determination of the essence of the relevant trade business model, Dongguan Huali Industries adjusted the revenue recognition method for some trade businesses in the first three quarters of 2022 from the gross amount method to the net amount method. Based on this, accounting errors in the first quarter, half-year, and third quarter reports of 2022 were corrected. After the adjustment, the company's revenue in the first quarter, half-year, and the first three quarters of 2022 decreased by 16.9072 million yuan, 84.1675 million yuan, and 108.6959 million yuan respectively. The company's original 2022 first quarter, half-year, and third quarter reports did not comply with the relevant provisions of Article 34 of 'Enterprise Accounting Standards No. 14 - Revenue'.

Second, in 2022, Dongguan Huali Industries acted as an agent for a construction company to procure concrete, steel, and pipe piles and other building materials, involving a sales amount of 27.354 million yuan, sales cost of 24.0235 million yuan, and the company recognized revenue of 3.3305 million yuan using the net amount method. Upon investigation, it was found that this business actually constituted a capital financing business in the form of trade transactions, with occasional and special characteristics, yet the company recognized it as revenue without disclosing it as non-recurring gains or losses. The above situation does not comply with the relevant provisions of Article 66 of 'Enterprise Accounting Standards No. 22 - Recognition and Measurement of Financial Instruments', Article 79 of 'The General Provisions for Financial Reports of Publicly Issued Companies (Revised in 2023)' (CSRC Announcement [2023] No. 64), and Article 4 of 'Interpretation Notice No. 1 on Non-recurring Gains and Losses' (CSRC Announcement [2023] No. 65).

Third, when Dongguan Huali Industries conducted an impairment test on Fujian Shangrun Investment Management Co., Ltd., it failed to fully consider the impact of subsequent events on the company's revenue, resulting in an under-provision of 1.6928 million yuan for impairment of the company's goodwill in 2023. This situation does not comply with the relevant provisions of Article 11 of 'Enterprise Accounting Standards No. 8 - Impairment of Assets'.

The above situations led to inaccurate financial data disclosed in Dongguan Huali Industries' relevant periodic reports, violating Article 3, paragraph 1 of the 'Measures for the Administration of Information Disclosure by Listed Companies' (CSRC Order No. 182, the same below). The former Chairman of Dongguan Huali Industries, the former General Manager Tan Hongru, Chairman He Quanhong, former Chairman Tan Xujie, General Manager Xie Zhikun, former Chief Financial Officer Lu Xuqiu, and Chief Financial Officer Sun Yuanyuan failed to diligently fulfill their duties in accordance with Articles 4 and 51 of the 'Measures for the Administration of Information Disclosure by Listed Companies', bearing primary responsibility for the aforementioned violations by Dongguan Huali Industries. Among them, Tan Hongru, Tan Xujie, Xie Zhikun, and Lu Xuqiu bear primary responsibility for the first and second violations, while He Quanhong and Sun Yuanyuan bear primary responsibility for the third violation. In accordance with Articles 51(3) and 52 of the 'Measures for the Administration of Information Disclosure by Listed Companies', the Guangdong Regulatory Bureau decided to issue a warning letter as an administrative supervision measure to the company, Tan Hongru, Tan Xujie, He Quanhong, Xie Zhikun, Lu Xuqiu, and Sun Yuanyuan.