APEN Ltd sanctioned for error in financial statements
In its 2010 IFRS annual financial statements APEN Ltd significantly overstated the amount of its borrowings. The error in the valuation resulted from the incorrect application of the effective interest method. Due to the overstatement of the company's borrowings, interest expense from borrowings and the net loss for the period were overstated. The impact of the error on net loss for the period was CHF 14 million (57%).
As part of the sanction notice SIX Exchange Regulation has imposed a fine over CHF 15,000 on APEN Ltd. The company has accepted the sanction notice and has corrected the error through a restatement in its 2011 IFRS interim financial statements.
Previous sanctions in the area of financial reporting can be found at:
Appendix regarding the accounting standards
Periodic financial reporting is part of the information required under the Stock Exchange Act and the Listing Rules to ensure a functioning market. As part of this process, issuers must comply with the applicable accounting standards.
Information regarding financial reporting can be found at:
The following accounting standards were relevant for the assessment of the case in question
After their initial recognition financial liabilities are measured at amortised cost in accordance with IAS 39p47. Amortised cost are determined using the effective interest method. IAS 39p47(a)-(d) excludes certain financial liabilities measured at fair value through profit and loss, financial guarantees and loan commitments from the measurement at amortised cost. However, in this particular case none of the exceptions are applicable.
Under the effective interest method, an entity amortises any fees, points paid or received, transaction costs and other premiums or discounts included in the calculation of the effective interest rate over the expected life of the instrument on an accrual basis in accordance with IAS 39AG6.
In this case amortised cost was determined using the effective interest rate of the borrowings, however, interest paid was not deducted from the amount to be amortised. As a result, APEN Ltd did not comply with the requirements to measure its financial liabilities in accordance with the effective interest method in IAS 39p47.
SIX Group AG
SIX Exchange Regulation performs the functions assigned under Swiss federal law and enforces and monitors compliance with the rules laid down by the Regulatory Board. SIX Exchange Regulation imposes sanctions in so far as it is authorised to do so by the regulations, or submits sanction requests to SIX Swiss Exchange's Sanction Commission.
SIX Exchange Regulation's independence from SIX Swiss Exchange's operating business is guaranteed by its direct subordination to the Chairman of the Board of Directors of SIX Group. SIX Exchange Regulation consists of the divisions Listing & Enforcement, responsible for regulating issuers, and Surveillance & Enforcement monitoring trading. www.six-exchange-regulation.com
SIX Exchange Regulation can penalize violations of the provisions laid down in the Listing Rules through the issuance of a sanction notice, if such a sanction takes the form of a warning, reprimand or fine. The affected party may appeal a sanction notice to the Sanction Commission.