Review of financial reporting - Solør Bioenergi Holding AS
Published: 28 April 2015
Last updated: 18 March 2019
Finanstilsynet (The Financial Supervisory Authority of Norway) has reviewed certain matters in the financial reporting of Solør Bioenergi Holding AS ("Solør Holding"). The issuer has bonds listed on the Oslo Stock Exchange. Material errors have been identified in the reporting.
Error in income recognition
Solør Høring has, in the financial statements for 2013, recognised a success fee of NOK 71.6 million as income. The auditor has issued an audit report with a qualified opinion regarding the income, and is of the opinion that the income should have been recognised in 2014, not before. Without the income, Solør Holding would have been in breach of covenants in the listed bond. The success fee is based on an agreement on delivery of transaction services (M&A) to a Swedish group company, which previously was a sister company to and is now the parent of Solør Holding.
In Finanstilsynet's view, the agreement does not provide a basis for income recognition either in 2013 or in 2014. The wrongly recognised success fee amounts to about one-quarter of Solør Holding's total revenue in 2013, and entails that the financial statements for 2013 contain material errors. In February 2015, Finanstilsynet gave notice of an order to correct the error. Solør Holding replied, in March 2015, that such correction would be made, and in the corrected half-yearly report for 2014 the issuer has reversed the income item of NOK 71.6 million.
Late filing of 2013 financial statements
In addition to the errors associated with income recognition, Solør Holding published its financial statements for 2013 more than two months after the expiration of the dead line in the Norwegian Securities Trading Act. Finanstilsynet imposed a late filing penalty of NOK 75,450 on Solør Holding for the delay. In May 2014, before the publishing of the financial statements with the qualified opinion from the auditor, the issuer completed a private placement of SEK 720 million and a bond issue of SEK 950 million. At this point in time, Solør Holding had published an un-audited interim report for fourth quarter 2013, where the success fee of NOK 71.6 million was recognised.
Error in half year report 2014
Solør Holding's initial half year report 2014 contained a number of significant errors, in addition to the wrongly recognised success fee. Finanstilsynet gave notice of an order to publish a new half year report in December 2014. In January 2015 the issuer informed Finanstilsynet that a new half year report would be prepared and the corrected half year report was published in February 2014. Finanstilsynet has noted this, and expects the errors to be corrected in the financial statement for the full year 2014 and in future interim reports.