SAN JOSE, Calif. An accounting snafu has caused silicon foundry provider United Microelectronics Corp. (UMC) to restate its earnings for the last three years. The new figures show a wider loss in 2004 and a deficit instead of a profit in 2002.
In a release issued on Tuesday (Dec. 13), UMC (Hsinchu, Taiwan) said that it originally reported earnings under US GAAP for 2002, 2003 and 2004 of NT$294 million ($8.8 million), NT$10,476 million ($312.6 million) and a loss of NT$(4,749) million (minus $141.7 million), respectively.
Under the new, restated figures, UMC will report a loss of NT$(222) million (minus $6.6 million), a profit of NT$12,331 million ($368.9 million), and a loss of NT$(14,237) million (minus $424.8 million) for 2002, 2003 and 2004, respectively.
The response to the recent inquiries from the U.S. Securities and Exchange Commission (SEC) is subject to SEC review and the resolution of such inquiries may result in additional restatements, according to UMC.
The errors discovered do not affect UMC's financial results reported under ROC GAAP for any years in the three-year period ended Dec. 31, 2004. The exchange rate between New Taiwan and U.S. dollars on Dec. 12 was approximately NT$ 33.55=US$1.
These errors, including calculation errors relating to non-cash charges and adjustments to goodwill, derivative instruments, and employee stock bonuses, were discovered in the course of preparing responses to the comments received from the U.S. SEC in relation to the company's annual report on Form 20-F for the year ended Dec. 31, 2004.
The decision to restate its financial statements was made by the audit committee of UMC's board of directors, upon the recommendation of management and with the concurrence of Ernst & Young, the company's independent auditors. UMC expects to file its restated financial statements in an amendment to its annual report on Form 20-F/A for the year ended Dec. 31, 2004.
Management currently estimates that the errors will result in the following adjustments:
In 2004, UMC recorded a substantial impairment loss of NT$31,720 million ($946.6 million). However, the fair values of certain equity investments and liabilities were not correctly calculated in the impairment calculation under US GAAP.
As a result, the fair value of certain equity method was understated by approximately NT$9,090 million ($271.2 million) and the fair value of certain liabilities was understated by NT$1,015million ($30.2 million).
UMC has also recalculated an estimate of the fair value of certain derivative instruments embedded in certain of its convertible and exchangeable bonds. It also discovered an error in the calculation of its 2004 employee bonuses under US GAAP. The error arose from the use of an incorrect market price in determining the value of the company's employee stock bonuses.