Central Group's bond investment victims' legal team has called for an investigation into contradictory conclusions regarding impairment losses on new capital securities issued by JTBC.
In a statement on August 4, the legal team, which includes Lee Bok-hyun Law Office and Law Firm Changcheon, explained the issue of 'unrecognized impairment losses' outlined in their audit request.
According to the materials presented by the legal team, a complex flow of funds occurred within Central Group in 2024. The holding company, Central Holdings, directly acquired 20 billion won worth of the 34th series of new capital securities issued by JTBC in March 2024. In May, it lent 40 billion won to its affiliate, Dabo Central, which then used those funds to acquire 54 billion won worth of the 35-1 series of new capital securities from JTBC.
The problem lies in the fact that the accounting treatment for the two affiliates diverged in the 2024 financial statements. Central Holdings fully recognized an impairment loss on the 20 billion won worth of JTBC's new capital securities, citing 'accumulated losses' as the reason, reducing its book value to zero. This acknowledgment raised serious doubts about the recoverability of the securities issued by JTBC within the group.
The legal team pointed out, "Central Holdings treated one asset as fully impaired while the other was recorded in full without any allowance for bad debts, despite both being linked to JTBC's repayment capacity in the same accounting year."
They also noted that Dabo Central recognized an impairment on a small equity security worth about 600 million won in the same 2024 financial statements, suggesting that this was unlikely to be a mere oversight.
Furthermore, the legal team criticized Central Holdings for not setting aside any allowance for bad debts on the 40 billion won long-term loan to Dabo Central, asserting that the only source for Dabo Central to repay Central Holdings' loan was through the repayment of principal and interest from JTBC's new capital securities.
The legal team highlighted that both companies were audited by the same external auditor, 'Our Accounting Firm.' They argued that despite having the same accounting year, foundational facts, and external auditor, the contradictory accounting results created a distorted structure.
The legal team suspects that the background of this accounting treatment may involve an intention to conceal capital impairment. They believe that if consistent standards had been applied to recognize impairment on Dabo Central's 54 billion won in new capital securities and Central Holdings' 40 billion won loan, Central Holdings' consolidated total capital (2.29 billion won) would have turned negative, resulting in a 'severe capital impairment' status.
They emphasized, "The unrecognized impairment loss is a typical type of accounting violation frequently detected in financial authorities' audit practices. A thorough audit by the Financial Supervisory Service is necessary to determine whether an actual impairment review was conducted and the basis for such contradictory judgments."
Meanwhile, the Seoul Rehabilitation Court has accepted JTBC's application for the Autonomous Restructuring Support (ARS) program, and the extension of the deferral period for the commencement of rehabilitation proceedings suggests that the financial risks and accounting controversies surrounding the group are likely to continue for the time being.
* This article has been translated by AI.
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