*This content was translated by AI.
Youngpoong and Korea Zinc were each fined 204.741 billion won and 84.281 billion won, respectively, by financial authorities recently for violating accounting standards.
The Financial Services Commission announced at its 13th meeting on the 15th that it imposed a fine of 204.741 billion won on Youngpoong for preparing and disclosing financial statements in violation of accounting standards. According to officials, the amount of the fine received by Youngpoong is the largest for a single accounting-related incident.
Previously, Youngpoong argued regarding this sanction that "the accounting treatment related to provisions pointed out by the Financial Supervisory Service falls within an 'area of estimation' where various opinions may exist even among experts in the process of applying and interpreting Korean International Financial Reporting Standards (K-IFRS)."
According to the Financial Services Commission, Youngpoong did not recognize a provision for 2021–2022 despite clear legal obligations to clean up contaminated soil around its smelter, and undercounted provisions in 2023–2024 by calculating them using cleaning methods not permitted by law.
In the past, Youngpoong's Seokpo Smelter discharged heavy metal cadmium into the Nakdong River and was fined 28.1 billion won by the Ministry of Environment. It is understood that provisions were accumulated to fulfill environmental cleanup obligations, but this amount was understated in financial statements.
Furthermore, Youngpoong failed to recognize provisions despite having an obligation to clean up contaminated soil around the Seokpo Smelter and beneath the buildings of its No. 1 and No. 2 factories. Provisions related to groundwater purification were also undercounted. Youngpoong's auditor, Daeju Accounting Firm, was found to have neglected audit procedures for provisions intended for soil cleanup.
In particular, the Financial Services Commission stated that regarding Youngpoong's violation of accounting standards, "it understated impairment losses by reflecting future cash flows that arbitrarily removed the effects of production stoppage during the 2023 asset impairment assessment." In the accounting field, violations of accounting standards confirmed to be intentional are typically evaluated as "financial statement fraud." This is the background for accusations that Youngpoong committed financial statement fraud.
Additionally, the Financial Services Commission decided on measures including a recommendation to dismiss Youngpoong's Jeon (CEO) director on this day. It determined that Youngpoong's violation of accounting standards was not "gross negligence" but "intent." The recommendation for dismissal is explicitly stated only at the "intent" level.
The Financial Services Commission also imposed a fine of 84.281 billion won on Korea Zinc, which prepared and disclosed financial statements in violation of accounting standards. This amount is about one-third of the fine received by Youngpoong, meaning the Financial Services Commission evaluated Youngpoong's violation of accounting standards as far more serious.
Korea Zinc is understood to have understated related impairment losses despite decreases in the fair value and recoverable amounts of financial instruments and investments in affiliates, and failed to recognize impairment losses even though impairments occurred on goodwill of overseas subsidiaries, among other items.
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*This content was translated by AI.
