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FAQ concerning Securities and Futures Commission (SFC) and IFRS-based accounting

FAQ concerning Securities and Futures Commission (SFC) and IFRS-based accounting

1. How did the current accounting issue come about?
  The financial statements of both Samsung BioLogics (“BioLogics”) and Samsung Bioepis (“Bioepis”) have no accounting issues in regards to their operations.
  BioLogics established Bioepis as a joint venture with Biogen, USA in 2012. The current accounting issue only derives from a difference in interpretation of the accounting standards in the process of reflecting Bioepis into the books of BioLogics.
   
  Since its establishment in 2012, Bioepis had been reflected in the books of BioLogics as a consolidated subsidiary. However, it was converted into an equity-method affiliate when a series of events prompted a change in the value of Biogen’s call option, which in turn affected the controlling power in Bioepis. Accordingly, the Bioepis equity shares held by BioLogics were evaluated at their fair market value, while the value of the Biogen call option was posted as a liability.

* Consolidated subsidiary: A subsidiary in which the parent company holds management rights. Its assets, liabilities, sales, and income are all added to or consolidated with those of the parent company.
* Equity-method affiliate: The parent company reflects only the income of the affiliate on the parent company’s financial statements in proportion to its equity holdings, without reflecting or consolidating the assets, liabilities, or sales of the affiliate.

  BioLogics received unqualified opinions from three leading accounting firms in Korea (KPMG, PwC, and Deloitte). Following the financial audits by these three firms, the Securities and Futures Commission (“SFC”) requested the Korean Institute of Certified Public Accountants (“KICPA”) for oversight, which concluded that “no material misstatements have been discovered.” The offering circular for BioLogics’ IPO, along with its financial statements for the relevant years, were submitted to and accepted and approved by the Financial Supervisory Commission (“FSC”), and BioLogics was listed on the Korea Stock Exchange in November 2016.
 
  In late 2016, the NGO, People's Solidarity for Participatory Democracy (“PSPD”) filed an inquiry with the Financial Supervisory Service (“FSS”) as to the acceptability of the accounting by BioLogics. It was officially determined to have “no issues” at a meeting for response to the questions related to IFRS. FSS was also represented at the meeting.

  BioLogics received an audit review starting in April 2017 as the NGO and some politicians requested an audit review by the FSS on the audit reports of BioLogics. Following three sessions with the Accounting Oversight Deliberation Commission (“AODC”) and five sessions of SFC meetings from May 2018, the SFC announced its first decision on July 12.

  The SFC ordered the FSS to re-conduct its audit review of the accounting treatment in question in 2015. On November 14, the SFC finalized its actions taken based on its second audit review after two sessions of SFC meetings.

2. What are the final decisions by the SFC?
  In its first decision on July 12, the SFC ordered the FSS to re-conduct its audit review as to the appropriateness of the change in the accounting method in 2015 that became the center of the initial controversy. The SFC requested the prosecutors’ investigation of BioLogics and its representative director, recommended the dismissal of the CFO, and called for assignment of independent auditors at the company for three years for not disclosing/or insufficiently disclosing Biogen’s call option in its audit reports.
 
  In its final decision on November 14, the SFC adopted a resolution stating that the accounting of Bioepis as a consolidated subsidiary rather than as an equity-method affiliate in fiscal years 2012 and 2013 was “negligence”, and in fiscal year 2014 was “gross negligence”. For 2015 accounting treatment, the SFC concluded that BioLogics intentionally violated the accounting standards by applying the equity method in 2015 accounting, using fair market valuation on its shares of Bioepis, without correcting the previous years’ accounting treatments. In addition to the first decision of July 12, the SFC added a fine of a total 8 billion KRW (to be finalized by the FSC), recommendation to dismiss the representative director, and the restatement of the financial statements.
3. Has the FSS changed its position in its second audit review compared to its first audit review?

  In the first audit review, the FSS did not make any particular comments on BioLogics’ accounting treatment of fiscal years 2012 to 2014, understanding that it could be left to the company’s discretion. As for the accounting change in 2015, the FSS concluded that the company did not have a sufficient reason for the change, and the company should have kept Bioepis as a consolidated subsidiary.

  However, in its final decision after the second audit review, the FSS changed its position, saying that BioLogics should have reflected Bioepis as an equity-method affiliate from its founding in 2012 to the present.

4. Why was equity-method accounting not applied from 2012 when Bioepis was founded?
  BioLogics held 85% of the Bioepis equity shares when it was founded, and BioLogics was represented by four board directors (including the right to nominate the representative director), while Biogen was represented by only one board director. Thus, Bioepis was recorded as a consolidated subsidiary, as BioLogics exercised actual management rights over Bioepis. Biogen also officially disclosed each year that BioLogics exercised control over Bioepis from its founding.

  The SFC asserts that BioLogics should have recorded Bioepis as an equity-method affiliate from 2012, interpreting that Biogen had joint control rights over Bioepis, as BioLogics is required to obtain Biogen's consent when adding a new pipeline or licensing marketing rights of Bioepis. The provision in question, however, is usually included in a joint venture agreement to prevent decision-making that may disadvantage the minority shareholder, in this case, Biogen. Therefore, such provision does not reflect management rights, but rather a “defense right” that Biogen requested to prevent Bioepis from launching or selling products competing against Biogen. Thus, consolidation-based accounting, not the equity-method, was valid in 2012 when Bioepis was founded.

5. Why did Biogen request the call option, and what are the specific contents and consequences of its exercise?
  When Biogen signed the joint venture agreement in December 2011, they preferred a call option rather than a 50/50 ownership structure, whereby they could increase their share later and minimize the risk that is inherent at the start of the business.
  The call option so vested may be exercised within 90 days from the end of the first fiscal year when Bioepis has a net profit, or within 90 days from the end of the quarter following the end of the sixth year from its founding in February 28, 2012, whichever is earlier, and the expiry date for the exercise period was June 30, 2018.  
  Biogen exercised its call option on June 29, 2018, one day before the expiry date. On November 7, Biogen paid c.759.5 billion KRW to BioLogics and acquired 9,226,068 Bioepis equity shares from BioLogics, to hold a current total of 10,341,852 shares (50% minus one share). Also, Biogen and BioLogics now have the right to appoint an equal number of directors on the Bioepis board.

6. Why was Bioepis converted from a consolidated subsidiary into an equity-method affiliate in late 2015?

  When Bioepis began to reap significant success in its biosimilar development, gaining marketing approvals for its products in late 2015, the value of Bioepis significantly increased. And as the gains from the call option exercise greatly surpassed the cost of actually exercising the right, the call option right became “in the money” as defined under the IFRS. The call option held by Biogen became a substantial right. Accordingly, Bioepis was converted to an equity-method affiliate, reflecting Biogen's possible controlling right based on IFRS.

  K-IFRS 1110 Consolidated Financial Statements B23 clearly states that "determining whether rights are substantive requires judgment, taking into account all facts and circumstances" and "whether the party or parties that hold the rights would benefit from the exercise of those rights", and in B23 (3) that “The terms and conditions of potential voting rights are more likely to be substantive when the instrument is of ITM status or the investor would benefit for reasons other than from the exercise or conversion of the instrument.”

7. Did BioLogics make the decision independently to convert Bioepis to an affiliated company?
  BioLogics made the final decision by accommodating the advice of its independent auditor that BioLogics should strictly follow IFRS as a global company. The decision was further validated by the KICPA’s audit which had been requested by the FSS in 2016, and also at a meeting with FSS representatives and by many accounting experts.

8. An internal document revealed that BioLogics decided to switch the accounting standards based on a discussion with Samsung Group Future Strategy Office in 2015. Is this true?

  The internal documents were prepared for internal discussion purposes, to share the then outstanding financial issues and draw solutions within the company. They were not documents prepared for reporting, but rather to show issues that were still under discussion.

  One of the internal documents disclosed was the finance team’s weekly meeting agenda. The weekly meeting was held with all team members or with associate level or higher to discuss routine weekly issues, and not even a forum for discussing any confidential issues.

  Furthermore, some of the documents containing wordings such as “valuation issues”, “related to accounting treatment”, “accounting issues” were made for the purpose of sharing summarized contents of the then accounting related agenda. And therefore, they even included unconfirmed information and numbers. The documents were prepared for discussion purposes only – to figure out the best solutions for the company.

  Regarding the adequacy of communication with Samsung Group Future Strategy Office (“Samsung Strategy Office”), the issue of changing the accounting method was shared with the Samsung Strategy Office because it was an important accounting issue, causing significant changes in profit and loss. The decision-making itself, however, was solely done by the company at the recommendation of independent accounting firms.

9. Couldn’t BioLogics be listed if Bioepis was not changed to an equity-method affiliate?  

  A company could be listed pursuant to KOSPI listing requirements if it had a total market capitalization of 600 billion KRW or more and owner’s capital of 200 billion KRW or more (based on the paid-in capital after share prices are received on the day listed), regardless of whether it posted a net profit or loss. BioLogics had therefore already satisfied the listing requirements, leading to its successful IPO in November 2016, irrespective to the equity-method accounting change.

  Though BioLogics had originally targeted listing on NASDAQ, it finally decided to list on KOSPI in April 2016, as Korea Stock Exchange (“KRX”) had persuaded the company to list on KOSPI, after KRX had amended its listing requirements in advance in order to motivate companies with high growth potential.

10. How are the financial statements affected if only the call option liability is valuated without the valuation of the equity shares of Bioepis?
  BioLogics and Biogen held 91% and 9% respectively of Bioepis equity shares at the time when the company adopted the equity method accounting in 2015, while Biogen held a call option to purchase the Bioepis shares up to 50% minus one share from BioLogics. If BioLogics reflected only the call option liability (41%), without proper valuation of Bioepis equity shares, its net asset would gradually decrease as the Bioepis share value increases, creating a distortion in the financial statements.

11. What is the next procedure to be followed after the SFC’s November 14 decision?  

  First, this case is alleged to be a breach of the accounting standards involving 2.5% or more of the owner’s capital (standard for large enterprises), a case that may be reported to the public prosecutor's office. KOSPI trading is suspended, and its listing eligibility will be reviewed pursuant to the securities listing regulations.

  Apart from such procedure, as BioLogics disagrees with SFC’s decision, BioLogics plans to file an administrative lawsuit and apply for a stay of execution as soon as the company receives SFC’s formal notice of its decision.

12. What is the expected duration of trading suspension if so decided by KRX based on its listing eligibility review?
  According to KRX regulations, it takes a maximum of 15 business days (may be extended by 15 business days) for KRX to determine whether a company is subject to its listing eligibility review. When determined to be subject to the review, the listing eligibility review committee (“Committee”) meeting is convened and the review should be completed within 20 business days, and the decision should be announced with seven business days. Trading may be suspended for up to maximum 57 business days to determine whether or not the company should stay listed, or postpone its decision after the company’s workout period.

  When KRX and the Committee review the company’s listing eligibility, they consider: (1) the company’s going concern of its business, (2) its financial soundness, and (3) transparency of management, including governance, internal control, and disclosure systems.

13. What is the basis of the 8 trillion KRW and the 3 trillion KRW that was mentioned in the internal document?
  Market analyst reports at the time valuated Samsung C&T’s bio business to be around 8 trillion KRW in average. BioLogics is not aware of the details.

  Deloitte valuated the total Samsung bio business to be 6.8 trillion KRW when they created the post-merger financial statement for Samsung C&T. Therefore, they concluded 51% of the equity shares held by Samsung C&T of the bio business to be 3.5 trillion KRW (as of end of August 2015).

14. Some of the press reports compare this case to the accounting fraud by Enron. Is this appropriate?

   Enron was concluded to have materially misrepresented the value of the company by inflating the profit with overstated sales and understated costs and expenses. The company also hid the details of its accounting treatments from outside parties. BioLogics has not misstated any of its accounts in regards to its operation, and has maintained its accounting books in a transparent and conservative manner. This case is completely different from the case of accounting fraud, as no essential business value has been affected.

  This case is concerned with the issue of whether the change of treatment of Bioepis, a subsidiary of BioLogics, into an affiliated company in 2015 is adequate under IFRS. BioLogics valued its Bioepis equity shares by the fair market value in accordance with the changed accounting standards, as BioLogics believed its control over Bioepis changed in 2015. Currently, BioLogics’ market capitalization is much higher than the then fair market value.

  Furthermore, BioLogics’ 2016 offering circular and 2015 audit report specifically stated that the one-time special gain was accrued due to the change of Bioepis from consolidated subsidiary to the equity-method affiliate.

15. What is the reason for a private company to so strongly resist the decision of a regulatory body?
 
   For a company that develops and manufactures bio-pharmaceuticals that hugely impacts human health, data integrity is more important than anything.  
   
   BioLogics exerts its greatest efforts to maintain data integrity internally. The company does not even allow the use of correction pens or paper shredders in its manufacturing facilities to prevent the tampering of data.
   
   Thus, the SFC’s allegation that BioLogics committed accounting fraud is not just an issue of accounting, but is actually detrimental to the company that could shake its core foundations of trust and integrity and could directly affect the trust of its customers and investors.

   BioLogics concluded that it is inevitable to state its formal position to outside parties as even content irrelevant to the accounting issue were continually disclosed during and after the SFC review process, and were continuously interpreted in the market in a distorted manner.

   BioLogics will continue to give its utmost efforts to prove the adequacy of its accounting.


FAQ concerning Securities and Futures Commission (SFC) and IFRS-based accounting

1. How did the current accounting issue come about?
  The financial statements of both Samsung BioLogics (“BioLogics”) and Samsung Bioepis (“Bioepis”) have no accounting issues in regards to their operations.
  BioLogics established Bioepis as a joint venture with Biogen, USA in 2012. The current accounting issue only derives from a difference in interpretation of the accounting standards in the process of reflecting Bioepis into the books of BioLogics.
   
  Since its establishment in 2012, Bioepis had been reflected in the books of BioLogics as a consolidated subsidiary. However, it was converted into an equity-method affiliate when a series of events prompted a change in the value of Biogen’s call option, which in turn affected the controlling power in Bioepis. Accordingly, the Bioepis equity shares held by BioLogics were evaluated at their fair market value, while the value of the Biogen call option was posted as a liability.

* Consolidated subsidiary: A subsidiary in which the parent company holds management rights. Its assets, liabilities, sales, and income are all added to or consolidated with those of the parent company.
* Equity-method affiliate: The parent company reflects only the income of the affiliate on the parent company’s financial statements in proportion to its equity holdings, without reflecting or consolidating the assets, liabilities, or sales of the affiliate.

  BioLogics received unqualified opinions from three leading accounting firms in Korea (KPMG, PwC, and Deloitte). Following the financial audits by these three firms, the Securities and Futures Commission (“SFC”) requested the Korean Institute of Certified Public Accountants (“KICPA”) for oversight, which concluded that “no material misstatements have been discovered.” The offering circular for BioLogics’ IPO, along with its financial statements for the relevant years, were submitted to and accepted and approved by the Financial Supervisory Commission (“FSC”), and BioLogics was listed on the Korea Stock Exchange in November 2016.
 
  In late 2016, the NGO, People's Solidarity for Participatory Democracy (“PSPD”) filed an inquiry with the Financial Supervisory Service (“FSS”) as to the acceptability of the accounting by BioLogics. It was officially determined to have “no issues” at a meeting for response to the questions related to IFRS. FSS was also represented at the meeting.

  BioLogics received an audit review starting in April 2017 as the NGO and some politicians requested an audit review by the FSS on the audit reports of BioLogics. Following three sessions with the Accounting Oversight Deliberation Commission (“AODC”) and five sessions of SFC meetings from May 2018, the SFC announced its first decision on July 12.

  The SFC ordered the FSS to re-conduct its audit review of the accounting treatment in question in 2015. On November 14, the SFC finalized its actions taken based on its second audit review after two sessions of SFC meetings.

2. What are the final decisions by the SFC?
  In its first decision on July 12, the SFC ordered the FSS to re-conduct its audit review as to the appropriateness of the change in the accounting method in 2015 that became the center of the initial controversy. The SFC requested the prosecutors’ investigation of BioLogics and its representative director, recommended the dismissal of the CFO, and called for assignment of independent auditors at the company for three years for not disclosing/or insufficiently disclosing Biogen’s call option in its audit reports.
 
  In its final decision on November 14, the SFC adopted a resolution stating that the accounting of Bioepis as a consolidated subsidiary rather than as an equity-method affiliate in fiscal years 2012 and 2013 was “negligence”, and in fiscal year 2014 was “gross negligence”. For 2015 accounting treatment, the SFC concluded that BioLogics intentionally violated the accounting standards by applying the equity method in 2015 accounting, using fair market valuation on its shares of Bioepis, without correcting the previous years’ accounting treatments. In addition to the first decision of July 12, the SFC added a fine of a total 8 billion KRW (to be finalized by the FSC), recommendation to dismiss the representative director, and the restatement of the financial statements.
3. Has the FSS changed its position in its second audit review compared to its first audit review?

  In the first audit review, the FSS did not make any particular comments on BioLogics’ accounting treatment of fiscal years 2012 to 2014, understanding that it could be left to the company’s discretion. As for the accounting change in 2015, the FSS concluded that the company did not have a sufficient reason for the change, and the company should have kept Bioepis as a consolidated subsidiary.

  However, in its final decision after the second audit review, the FSS changed its position, saying that BioLogics should have reflected Bioepis as an equity-method affiliate from its founding in 2012 to the present.

4. Why was equity-method accounting not applied from 2012 when Bioepis was founded?
  BioLogics held 85% of the Bioepis equity shares when it was founded, and BioLogics was represented by four board directors (including the right to nominate the representative director), while Biogen was represented by only one board director. Thus, Bioepis was recorded as a consolidated subsidiary, as BioLogics exercised actual management rights over Bioepis. Biogen also officially disclosed each year that BioLogics exercised control over Bioepis from its founding.

  The SFC asserts that BioLogics should have recorded Bioepis as an equity-method affiliate from 2012, interpreting that Biogen had joint control rights over Bioepis, as BioLogics is required to obtain Biogen's consent when adding a new pipeline or licensing marketing rights of Bioepis. The provision in question, however, is usually included in a joint venture agreement to prevent decision-making that may disadvantage the minority shareholder, in this case, Biogen. Therefore, such provision does not reflect management rights, but rather a “defense right” that Biogen requested to prevent Bioepis from launching or selling products competing against Biogen. Thus, consolidation-based accounting, not the equity-method, was valid in 2012 when Bioepis was founded.

5. Why did Biogen request the call option, and what are the specific contents and consequences of its exercise?
  When Biogen signed the joint venture agreement in December 2011, they preferred a call option rather than a 50/50 ownership structure, whereby they could increase their share later and minimize the risk that is inherent at the start of the business.
  The call option so vested may be exercised within 90 days from the end of the first fiscal year when Bioepis has a net profit, or within 90 days from the end of the quarter following the end of the sixth year from its founding in February 28, 2012, whichever is earlier, and the expiry date for the exercise period was June 30, 2018.  
  Biogen exercised its call option on June 29, 2018, one day before the expiry date. On November 7, Biogen paid c.759.5 billion KRW to BioLogics and acquired 9,226,068 Bioepis equity shares from BioLogics, to hold a current total of 10,341,852 shares (50% minus one share). Also, Biogen and BioLogics now have the right to appoint an equal number of directors on the Bioepis board.

6. Why was Bioepis converted from a consolidated subsidiary into an equity-method affiliate in late 2015?

  When Bioepis began to reap significant success in its biosimilar development, gaining marketing approvals for its products in late 2015, the value of Bioepis significantly increased. And as the gains from the call option exercise greatly surpassed the cost of actually exercising the right, the call option right became “in the money” as defined under the IFRS. The call option held by Biogen became a substantial right. Accordingly, Bioepis was converted to an equity-method affiliate, reflecting Biogen's possible controlling right based on IFRS.

  K-IFRS 1110 Consolidated Financial Statements B23 clearly states that "determining whether rights are substantive requires judgment, taking into account all facts and circumstances" and "whether the party or parties that hold the rights would benefit from the exercise of those rights", and in B23 (3) that “The terms and conditions of potential voting rights are more likely to be substantive when the instrument is of ITM status or the investor would benefit for reasons other than from the exercise or conversion of the instrument.”

7. Did BioLogics make the decision independently to convert Bioepis to an affiliated company?
  BioLogics made the final decision by accommodating the advice of its independent auditor that BioLogics should strictly follow IFRS as a global company. The decision was further validated by the KICPA’s audit which had been requested by the FSS in 2016, and also at a meeting with FSS representatives and by many accounting experts.

8. An internal document revealed that BioLogics decided to switch the accounting standards based on a discussion with Samsung Group Future Strategy Office in 2015. Is this true?

  The internal documents were prepared for internal discussion purposes, to share the then outstanding financial issues and draw solutions within the company. They were not documents prepared for reporting, but rather to show issues that were still under discussion.

  One of the internal documents disclosed was the finance team’s weekly meeting agenda. The weekly meeting was held with all team members or with associate level or higher to discuss routine weekly issues, and not even a forum for discussing any confidential issues.

  Furthermore, some of the documents containing wordings such as “valuation issues”, “related to accounting treatment”, “accounting issues” were made for the purpose of sharing summarized contents of the then accounting related agenda. And therefore, they even included unconfirmed information and numbers. The documents were prepared for discussion purposes only – to figure out the best solutions for the company.

  Regarding the adequacy of communication with Samsung Group Future Strategy Office (“Samsung Strategy Office”), the issue of changing the accounting method was shared with the Samsung Strategy Office because it was an important accounting issue, causing significant changes in profit and loss. The decision-making itself, however, was solely done by the company at the recommendation of independent accounting firms.

9. Couldn’t BioLogics be listed if Bioepis was not changed to an equity-method affiliate?  

  A company could be listed pursuant to KOSPI listing requirements if it had a total market capitalization of 600 billion KRW or more and owner’s capital of 200 billion KRW or more (based on the paid-in capital after share prices are received on the day listed), regardless of whether it posted a net profit or loss. BioLogics had therefore already satisfied the listing requirements, leading to its successful IPO in November 2016, irrespective to the equity-method accounting change.

  Though BioLogics had originally targeted listing on NASDAQ, it finally decided to list on KOSPI in April 2016, as Korea Stock Exchange (“KRX”) had persuaded the company to list on KOSPI, after KRX had amended its listing requirements in advance in order to motivate companies with high growth potential.

10. How are the financial statements affected if only the call option liability is valuated without the valuation of the equity shares of Bioepis?
  BioLogics and Biogen held 91% and 9% respectively of Bioepis equity shares at the time when the company adopted the equity method accounting in 2015, while Biogen held a call option to purchase the Bioepis shares up to 50% minus one share from BioLogics. If BioLogics reflected only the call option liability (41%), without proper valuation of Bioepis equity shares, its net asset would gradually decrease as the Bioepis share value increases, creating a distortion in the financial statements.

11. What is the next procedure to be followed after the SFC’s November 14 decision?  

  First, this case is alleged to be a breach of the accounting standards involving 2.5% or more of the owner’s capital (standard for large enterprises), a case that may be reported to the public prosecutor's office. KOSPI trading is suspended, and its listing eligibility will be reviewed pursuant to the securities listing regulations.

  Apart from such procedure, as BioLogics disagrees with SFC’s decision, BioLogics plans to file an administrative lawsuit and apply for a stay of execution as soon as the company receives SFC’s formal notice of its decision.

12. What is the expected duration of trading suspension if so decided by KRX based on its listing eligibility review?
  According to KRX regulations, it takes a maximum of 15 business days (may be extended by 15 business days) for KRX to determine whether a company is subject to its listing eligibility review. When determined to be subject to the review, the listing eligibility review committee (“Committee”) meeting is convened and the review should be completed within 20 business days, and the decision should be announced with seven business days. Trading may be suspended for up to maximum 57 business days to determine whether or not the company should stay listed, or postpone its decision after the company’s workout period.

  When KRX and the Committee review the company’s listing eligibility, they consider: (1) the company’s going concern of its business, (2) its financial soundness, and (3) transparency of management, including governance, internal control, and disclosure systems.

13. What is the basis of the 8 trillion KRW and the 3 trillion KRW that was mentioned in the internal document?
  Market analyst reports at the time valuated Samsung C&T’s bio business to be around 8 trillion KRW in average. BioLogics is not aware of the details.

  Deloitte valuated the total Samsung bio business to be 6.8 trillion KRW when they created the post-merger financial statement for Samsung C&T. Therefore, they concluded 51% of the equity shares held by Samsung C&T of the bio business to be 3.5 trillion KRW (as of end of August 2015).

14. Some of the press reports compare this case to the accounting fraud by Enron. Is this appropriate?

   Enron was concluded to have materially misrepresented the value of the company by inflating the profit with overstated sales and understated costs and expenses. The company also hid the details of its accounting treatments from outside parties. BioLogics has not misstated any of its accounts in regards to its operation, and has maintained its accounting books in a transparent and conservative manner. This case is completely different from the case of accounting fraud, as no essential business value has been affected.

  This case is concerned with the issue of whether the change of treatment of Bioepis, a subsidiary of BioLogics, into an affiliated company in 2015 is adequate under IFRS. BioLogics valued its Bioepis equity shares by the fair market value in accordance with the changed accounting standards, as BioLogics believed its control over Bioepis changed in 2015. Currently, BioLogics’ market capitalization is much higher than the then fair market value.

  Furthermore, BioLogics’ 2016 offering circular and 2015 audit report specifically stated that the one-time special gain was accrued due to the change of Bioepis from consolidated subsidiary to the equity-method affiliate.

15. What is the reason for a private company to so strongly resist the decision of a regulatory body?
 
   For a company that develops and manufactures bio-pharmaceuticals that hugely impacts human health, data integrity is more important than anything.  
   
   BioLogics exerts its greatest efforts to maintain data integrity internally. The company does not even allow the use of correction pens or paper shredders in its manufacturing facilities to prevent the tampering of data.
   
   Thus, the SFC’s allegation that BioLogics committed accounting fraud is not just an issue of accounting, but is actually detrimental to the company that could shake its core foundations of trust and integrity and could directly affect the trust of its customers and investors.

   BioLogics concluded that it is inevitable to state its formal position to outside parties as even content irrelevant to the accounting issue were continually disclosed during and after the SFC review process, and were continuously interpreted in the market in a distorted manner.

   BioLogics will continue to give its utmost efforts to prove the adequacy of its accounting.


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PRIVACY POLICY

초점받기 링크 PRIVACY STATEMENT OF SAMSUNG BIOLOGICS CO.LTD

Samsung BioLogics (hereinafter, the “Company”) values users’ personal information, complies with statutory obligation s on protection of personal information such as the Act on Promotion of Information and Communication Network Utilization and Information Protection, etc. and the Act on Protection of Personal Information, and has created a Policy to Handle (Process) Personal Information to protect the users’ right and interest to the maximum extent possible.

Through the Policy to Handle (Process) Personal Information, the Company publicizes its operations on personal information treatment (processing) with particulars such as the types of personal information collected from the users and the purpose of processing such information, the time limit for processing and holding in possession, users’ method to exercise their rights, measures to procure the security, and so on.

Whenever there is a change in the Policy to Handle (Process) Personal Information, including updating, deleting, or adding its contents, whether resulting from any amendment to the relevant statutory sources or the administrative policy or change in the Company’s internal policy, we will post the change on our website at www.samsungbiologics. com so as to keep the users updated.

The Company’s Policy to Handle (Proce ss) Personal Information contains the following:

  • 1. Purpose of collecting and using personal information
  • 2. Types of personal information collected and method of collection
  • 3. Time limit for possessing and using personal information
  • 4. Matters regarding entrustment of personal information
  • 5. Matters on providing personal information to a third party
  • 6. Rights of users and legal representatives and how to exercise such rights
  • 7. Installation and operation of automatic collection of personal information and disallow ance
  • 8. Measures to procure security of personal information
  • 9. Personal information manager and customer complaint center
  • 10. Measures to remedy infringement of rights and interest
  • 11. Amendment to the Policy to Handle (Process) Personal Information
1.Purpose of collecting and using personal information

The Company collects personal information for the following purposes. The pfi will not be used for any other purpose and whenever it is necessary to change the purpose, we will comply with the statutory requirements such as obtaining users’ consents in advance.

  • Customer inquiry (Contact Us)

    Review and reply to the inquiries from users

  • Upload a curriculum vitae (Talent Pool Registration)

    Check employment history, give notices for future recruitment opportunities.

2.Types of personal information collected and method of collection
  • Types of personal information collected
    Collection Item information items include Category, Collection Item, and so on.
    Category Collection Item
    Contact Us,
    Talent Pool
    Required Name, Email Address, Company, Occupation, Country, Areas of Interest
    Optional Job Title, Phone Number

    The following information may be generated and collected in the course of using the service.

    Access long, cookie

  • Method to collect

    Collection through Contact Us, Talent Pool within the Website

    Collection through generated information collection tool (for access long, cookie, etc.)

3.Time limit for possessing and utilizing personal information
  • The time limit that the Company may possess and utilize personal information is as follows.

    Personal information that needs to be collected and utilized inevitably as specifically required by law or regulations, or in order to comply with statutory requirements : As long as it is necessary to keep such information in possession under relevant statute.

    Personal information that needs to be collected and utilized inevitably in order to execute and perform various contracts: Until the purpose of collection/utilization is accomplished.

    Personal information collected and used with the consent of individual user: For the time period consented to.

  • Once time period for possession and utilization of the collected personal informationexpires or the purpose is accomplished, the Company will immediately destroy the personal information. However, the Company may continue to possess it beyond the time limit if deemed necessary under the
4.Entrustment of personal information
  • If, in order to provide better service, it is desirable to entrust the handling of personal information to an independent professional business, the Company will obtain the consent of the owner of information and notify the name of the trustee company and the service to be entrusted.
  • When entrusting personal information processing, the Company will ensure to safeguard the personal information. In particular, we will clearly define in the contract such matters as strict compliance with instructions for personal information protection, keeping the personal information confidential, prohibition of disclosing the personal information to a third party, liability attribution at an accident, entrustment period, return or destruction of personal information after the completion of the processing, which will be recorded in paper and/or electronic media.
  • In case of any change in the service contents or in the trustee, we will immediately disclose such change via this Policy to Handle (Process) Personal Information
5.Matters on providing personal information to a third party
  • The Company will not disclose duly collected users’ personal information outside the Company as a matter of principle. However, as follows are the exceptions.

    If the user has given his/her consent in advance.

    If it is specifically required by laws or regulations or inevitable in order to comply with statutory requirements, or if it is deemed necessary for the sake of life, body or property of the information owner or a third party when the information owner or his/her legal representative is under a state incapable of communication or unable to give consent due to unknown domiciles or otherwise (only to the extent the purpose of collecting personal information is served).

  • A user has right to disallow disclosure of his/her personal information to a third party. However, those users who refuse to give consents may have his/her use of the service limited.
6.Rights of users and legal representatives and how to exercise such rights
  • Any user (or his/her legal representative) may withdraw the consent to collection, utilization and conveyance of personal information at any time and may also demand that the following information be tendered for viewing corrected, deleted, or suspended processing, in accordance as prescribed in laws or decrees. Once demanded by a user (or his/her legal representative), the Company will immediately take the appropriate actions, as long as such demand is reasonable and well-grounded.

    User’s personal information

    History of the users personal information being utilized or provided to a third party

    History of consents given to collection, utilization and provision of personal information

  • In any of the following cases, the Company may restrict or refuse to allow access to, tender, correct, delete or suspend processing personal information upon notifying user (or his/her legal representative) of the reason.

    If it is specifically required by laws or regulations or inevitable in order to comply with statutory requirements.

    If it is likely to jeopardize a person’s life or body or unjustly infringe a person’s property or other interests.

  • When the Company decides not to honor a user (or his/her legal representative) demand, we will advise him/her of the fact, reason and process to object the decision in accordance as prescribed in the laws and decrees.
7.Installation and operation of automatic collection of personal information and disallowance

The Company is operating cookies that regularly stores and locates users’ information.

  • Purpose of operating cookies The purpose of the cookie operation is to provide users with optimized information based on the data of users’ website visit and utilization as well as the number of users.
  • Cookie creation, confirmation and how to disallow Each user has the option to allow or disallow cookie installation. By setting an option on the web browser, a user may allow all the cookies, give confirmation every time a cookie is stored, or disallow any cookie storage. However, refusing to allow installation of cookies may lead to some limitation of service to the user.

    How to install cookies (if using Internet explorer 8.0) Select “Internet Option” in the “Tool”. Click “Privacy” tab. Using “Setting”, users may set the level of allowing cookies as suitable for their own needs.

    How to view the cookie received (if using Internet explorer 8.0)

    Select “Internet Option” in the “Tool”. Click “General” tab and select “Setting” of the Browsing History to check the files in “View Files”.

    How to disallow cookie installation (if using Internet explorer 8.0) Select “Internet Option” in the “Tool”. Click “Privacy” tab. Using “Setting”, set it to the higher level, that is, “Block All Cookies”

8.Measures to procure security of personal information

in handling users’personal information, the Company endeavors to keep the personal information from being lost, stolen, revealed, tampered or damaged. To this end, the following technical and managerial actions are taken.

  • Establishment and implementation of internal management plan

    The Company implements its own internal management plan to secure safety in processing the personal information.

    The Company is operating an internal organization dedicated to personal information protection to monitor the status of compliance with the personal information protective requirements and the responsible staff’s duty performance and takes corrective measures when any irregularity is found.

  • Restriction of access to personal information

    Installation and operation of access restriction device Using the intrusion blocking system, the Company controls any unauthorized access from outside and endeavors to procure all the technological system to the maximum extent feasible in order to secure systematic security.

    Minimized designation of personal information processors and education The Company minimizes designation of personal information processors and implements internal and/or outsourced education on a regular basis. Personal information processors’ duty handover is conducted with the security fully maintained and their responsibilities for any personal information accident are clearly defined even after they have left the Company.

    Restrictions on access to personal information The Company places restrictions on access to personal information through granting, changing or revoking the right to access to database system that processes personal information. We also record the history of granting, changing or revoking the right, which are retained for our records for at least three years.

  • Encryption of personal information

    The personal information of users is protected by the password and the file and transmission data are encrypted or stored by using file lock function. More important data are protected through certain separate security measures.

    The Company has adopted security devices that enable safe transmission of personal information on the network using encryption algorithm.

  • Installation and updating of security program

    To safeguard personal information from leak or loss by hackers or computer viruses, the Company has installed a security program and conducts periodic updating and reviewing.

    For unmistakable security operation, every server is installed with intrusion blocking system as a means to block outsider intrusion by hacking as well as a system to analyze vulnerability.

9.Personal information manager and customer complaint center

To protect users’personal information and handle personal information-related customer complaint, the Company has appointed a personal information manager and processor. Any inquiry related to personal information protection and management should be directed to the personal information processor for instant and adequate reply.

  • personal information management (protection) processor

    Division: General Affairs Security Part, Personnel Management Team

    Contact: 032-455-3739

    E-mail: bio.security@samsung.com

10.Measures to remedy infringement of rights and interest

Any user seeking to relief from personal information infringement may apply for resolution or consultation to Personal Information Dispute Mediation Committee, Korea Internet and Security Agency (Personal Information Grievance Center). In addition, users may contact the following institutions to be consulted on personal information infringement cases.

  • Personal Information Dispute Mediation Committee (118)

    Korea Internet and Security Agency (Personal Information Grievance Center)(www.kopico.or.kr/1336)
    Information Protection Mark Verification Committee (http://eprivacy.or.kr/02-580-0533~4)
    Internet Crime Investigation Center of the Supreme Prosecutors’ Office
    (http://icic.sppo.go.kr/02-3480-3600)
    Cyber Police Agency (www.police.go.kr/1566-0112)
    Personal information Protection Committee (http://privacy.kisa.or.kr/kor/main.jsp)/02-2180-3000)

11.Amendment to the Policy to Handle (Process) Personal Information

When this ‘Policy to Handle (Process) Personal Information’ needs to be changed to reflect the change in statutory sources or government policies, we will put such change in public notice through an advisory statement and a separate window on the website.

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