SAIC: there is an interesting summary on the official role of SAIC in that wefe's blog. As I suspected, it is more an administrative gov. bureau that mainly regulates business licenses, governance and consumer protection. It's completely different from SEC.
A US-listed China company that does business mainly in China, may be registered and headquartered in another country and usually consists of many different entities (China and non-China subsidiaries or sub-entities with or without controlling interests and reporting to different legislations). While the company may report only to SAIC the (unaudited) financials of its China registered individual entity (that may not do much business by itself), it must report to the SEC as a US listed company all (audited) financials as a consolidated entity. Big difference. In this light, it would almost be a wonder that financials reported to SAIC and SEC match 100%. Why should they?
from the wefe's blog:
Thursday, July 22, 2010
more on SAIC issue
In an attempt to better understand the SAIC issue, I emailed investor relations of over 30 US listed Chinese companies. The companies I emailed ran the gamut from micro cap to large cap. Some became public through IPOs while others became public through reverse merger. I have now heard back from nearly all of them. In almost every instance I received a response from either the CFO or an investor relations person who works at the company - not an external investor relations firm. I asked them to please explain to me the function of the SAIC and to explain the financial statements they are required to file with SAIC and how they compare to SEC filings.
I am not going to cut and paste all the responses I received, but I will summarize the results. The main points I got from the responses I received were as follows:
1) They confirmed the functions of the SAIC as revealed by my earlier research. That is, the SAIC is responsible for issuing and renewing business licenses, as well as for governing business practices, trademarks, and consumer protection. Each year Chinese companies are required to file financial statements with the SAIC and the Tax Bureau.
2) An important distinction between SAIC filings and SEC filings is that SAIC filings are for individual Chinese entities, whereas SEC filings are for the consolidated entity. Furthermore, there are slight differences between PRC GAAP and US GAAP.
3) A couple responses indicated to me that it was common for some companies to report lower results to SAIC because they did not want competitors to know their true numbers.
This seems like a likely explanation to me for the lower SAIC numbers for many firms. The SAIC fine for incorrect filings was between RMB 10,000 and RMB 50,000 (roughly $1,500 USD and $7,500 USD), which is a negligible amount.
Posted by wefe5433 at 6:57 PM
