The Securities and Exchange Commission (SEC) has instructed mining company Tongkah Harbour to rectify its financial statements for 2006 and the first quarter of 2007.

"The SEC working group with responsibility for monitoring accounting and good governance pointed out from Tongkah Harbour's submissions and clarifications that account recognition and disclosure did not comply with generally accepted accounting principles," the watchdog said in a statement.

The company must present revised or audited financial statements by July 10.

Stock market officials started asking questions about Tongkah's accounting after the company fell back into the red just one quarter after trading its way back on to the main board.

It had been consigned to the non-performing list but reported a net profit last year. However, several expenses allegedly incurred in 2006 were booked in the first quarter of this year.

The SEC has now instructed Tongkah to show Bt4.1 million in profit sharing with the Primary Industries and Mines Department as a 2006 expense. The company had accounted for it in the financial statement for the first quarter of  2007.

Tongkah claimed it did not record profit sharing with the department as a 2006 expense because it was uncertain of the amount at the time. The SEC rejected the argument.

"As at the end of 2006, Tongkah had adequate information in terms of production volume and gold prices published both in London and by the department.

"Tongkah paid royalties in 2006 and it has long experience in mining. So, it should have been able to reasonably estimate such expenses in the 2006 financial statement," the statement added.

The SEC had also asked Tongkah to explain the payment of a Bt11.6-million penalty fee for the early redemption of a loan payment.

"The SEC considered this made no sense. Tongkah reached an agreement [for a new loan facility to allow the early repayment] on January 29 this year and the company was in a position to know the full details of the new contract and that the fee payment of Bt11.6 million would have a significant impact on earnings in the following quarter," the statement said.

The SEC asked the company to book another Bt4.7 million in fees attached to the new loan facility over time, starting from when it was received.

According to stock-exchange regulations, for companies to be released from the non-performing list they must post net profits for at least three consecutive quarters.

Tongkah reported a 2006 net profit in the amount of Bt6.1 million but for the first three months of this year it plunged to a net loss of Bt29.53 million.

SEC corporate affairs director Charuphan Intararoong said it would launch a probe if Tongkah continued to adopt its current accounting standards.The SEC will summon the company auditor to seek clarification and examine documents, she said.

If auditors are found at fault, the commission can reprimand them or suspend or withdraw their licences, she explained.

Meanwhile, Stock Exchange of Thailand president Patareeya Benjapolchai alerted stock investors to read the company's amended financial statements.

She believed the company's 2006 results would, however, remain in profit after the amendments.

Siriporn Chanjindamanee

The Nation