THE FINANCIAL SUPERVISION AUTHORITY STOCK EXCHANGE RELEASE 3 MARCH 2008 AT 11:05AM PUBLIC WARNING BY FIN-FSA TO CENCORP FOR NEGLECT OF DISCLOSURE OBLIGATION The Financial Supervision Authority (FIN-FSA) has issued a public warning to Cencorp Corporation for neglect of the disclosure obligation. The FIN-FSA is of the view that Cencorp's conduct has repeatedly during the year 2006 been in violation of financial markets provisions, since it has provided unjustified estimates of the company's prospects and has delayed the correction of these estimates and because, due to the recognition of a deferred tax asset, has failed to give a true and fair view of the result of the company's operations and financial position in its financial statements for 2005 and 2006. Due to the continuous and repetitive nature of the company's misconduct, FIN-FSA is of the opinion that the company's behaviour qualifies for a public warning. The prospects of the company's net sales and results published by Cencorp in 2006 were unjustified, since in publishing its prospects, the company failed to pay due attention to its actual performance and uncertainties related to its business operations, such as changes in customers' purchasing behaviour and tightening of the competitive situation. The further the period proceeded, the clearer the excessive optimism of the prospects became. The company revised its prospects during the period, but these changes were inadequate and were not made without undue delay. The company has failed to provide sufficient justifications for the guidance it issued. The financial statements for 2005 and 2006 failed to give a true and fair view of the result of the company's operations and financial position, as the consolidated financial statements contained a material error. The company should not have recognised deferred tax assets for the carryforward of unused tax losses in its consolidated financial statements for years 2005 and 2006. The criteria for recognising a deferred tax asset for carryforward of unused tax losses were not met, since the company had a history of recent losses and it could not present in its consolidated financial statements for 2005 and 2006 other convincing evidence, as required by IAS 12 Income Taxes, that sufficient taxable profit would be available against which the unused tax losses could be utilised. The amount of the error was material, since the deferred tax asset, the recognition criteria of which was not met, amounted to 24% of equity in the consolidated balance sheet on 31 December 2005, and 51% of equity on 31 December 2006. The company announced its decision to restate in its financial statements for 2007 the comparative figures for 2005 and 2006 concerning the deferred tax asset. This is the first public warning issued by the FIN-FSA. A public warning is an administrative sanction, which the FIN-FSA has been authorised to issue since 2003. The decision is not legally final as Cencorp Corporation has the right to appeal the decision, issued on 3 March 2008, with the Market Court within 30 days of receiving the decision. FINANCIAL SUPERVISION AUTHORITY Jarmo Parkkonen Terhi Lambert-Karjalainen Deputy Director-General Head of Communications For further information, please contact Mr Jarmo Parkkonen, tel +358 10 831 5255 Annex: Decision by the Financial Supervision Authority (decision and appendices are available, in Finnish, on the Financial Supervision Authority's Internet pages at www.fin-fsa.fi). DISTRIBUTION Helsinki Stock Exchange, main media
PUBLIC WARNING BY FIN-FSA TO CENCORP FOR NEGLECT OF DISCLOSURE OBLIGATION
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