China Evergrande’s unit under investigation for suspected manipulation of financial data
COMPANY NEWS POLICY & REGULATION REAL ESTATE
China Evergrande’s unit under investigation for suspected manipulation of financial data
COMPANY NEWS POLICY & REGULATION REAL ESTATE

China Evergrande’s unit under investigation for suspected manipulation of financial data

 

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Evergrande Real Estate, a unit of embattled developer China Evergrande Group, is under investigation by the China Securities Regulatory Commission (CSRC) for suspected manipulation of financial data, it said in a filing.

The company did not disclose details about the charges, but industry insiders say they are likely to be related to the change in its contract liabilities, which refer to unfulfilled obligations to buyers.

Evergrande Real Estate’s contract liabilities at the end of 2021 surged over five-fold from the year before to 974.3 billion yuan ($133 billion).China Evergrande started to count funds received for pre-sold properties towards revenue and profit after the change in Hong Kong law in 2017, allowing revenue to be logged even before the projects are completed, which boosted its profit for the the period of 2017 – 2019. 

But in 2021, it changed the calculation methods, leading to reallocation of 664.3 billion that used to be posted as revenue to contract liabilities and causing a spike in contract liabilities, and reduced its shareholders’ equity from 350.4 billion at the end of 2020 to minus 473.1 billion yuan at the end of 2021.