January 8, 2020
This is a critical question for Wirecard. Why do the consolidated accounts show materially lower equity values to the individual subsidiary reports? Why do these local auditors generate materially different subsidiary equity figures to Ernst & Young when they compile the group audit? On an individual subsidiary basis these may be deemed immaterial, but in aggregate we have found a delta of >€100M between Wirecard Group accounts and Wirecard’s individual subsidiary accounting for both 2017 and 2018.
We set out below the apparent mismatches between figures reported in the group consolidated accounts and those for the individual subsidiaries for 2017 and 2018.
|2017 Balance Sheet Equity||Group reporting (EUR)||Subsidiary reporting (EUR)||Delta||Subidiary reporting (local FX)||FX rate at YE||Local auditor|
|Wirecard Asia Holding||(31,252,000)||30,247,761||(61,499,761)||48,543,991||0.62||RSM Chio / former EY|
|Wirecard Singapore||8,663,000||31,216,524||(22,553,524)||50,098,739||0.62||EY (disclaimed)|
|Wirecard Payment Solutions Malaysia||3,187,000||102,599||3,084,401||500,970||0.20||Crowe Malaysia|
|Wirecard India Private Ltd||1,408,000||1,878,743||(470,743)||144,185,960||0.01||Suresh Surana & Assoc.|
|Wirecard Thailand||1,262,000||31,120||1,230,880||1,216,093||0.03||RSM Thailand|
|Wirecard NZ Limited||932,000||1,610,911||(678,911)||2,725,738||0.59||Grant Thornton|
|Hermes i-Tickets **||(8,926)||29,137,461||(29,146,387)||2,236,182,703||0.01||Suresh Surana & Assoc.|
|Wirecard Australia A&I||(324,000)||49,368||(373,368)||75,880||0.65||Grant Thornton|
|Wirecard E-Money Philippines||(1,621,000)||1,663,964||(3,284,964)||99,638,539||0.02||Reyes Tacandong|
** Hermes i-Tickets financial year end was 31/3/18. We struggle to see how Wirecard can include an audited 31/12/17 figure. Suresh Surana qualified their opinion on the 2017 accounts.
|2018 Balance Sheet Equity||Group reporting (EUR)||Subsidiary reporting (EUR)||Delta||Subidiary reporting (local FX)||FX rate at YE||Local auditor|
|Wirecard Asia Holding||(50,670,000)||42,506,056||(93,176,056)||66,343,150||0.64||RSM Chio / former EY|
|Wirecard Singapore||3,570,000||–||Disclaimed||–||0.64||EY (disclaimed)|
|Wirecard Australia A&I||(5,709,000)||(2,750,184)||(2,958,816)||(13,015,542)||0.21||Grant Thornton|
|Wirecard Thailand||914,000||5,517,758||(4,603,758)||33,438,929||0.17||RSM Thailand|
|Wirecard E-Money Philippines||(2,645,000)||978,888||(3,623,888)||78,123,569||0.01||Reyes Tacandong|
|Wirecard Payment Solutions Malaysia||(13,711,000)||187,961||(13,898,961)||6,956,364||0.03||Crowe Malaysia|
|Wirecard India Private Ltd||(13,287,000)||–||Not yet filed||–||–||Suresh Surana & Assoc.|
|Wirecard NZ Limited||(2,981,000)||–||Not yet filed||–||–||Grant Thornton|
|Hermes i-Tickets||(792,000)||–||Not yet filed||–||–||Suresh Surana & Assoc.|
Full sources below
This discrepancy is most apparent in Singapore. Wirecard Asia Holding (WDAH), the subsidiary that Edo Kurniawan was a director of until April 2019, reported positive equity of €30M to their local auditors, but Wirecard Group included negative equity in their accounts when consolidating them. The 2017 WDAH individual accounts were filed on 31/12/18, long after the group accounts were published, which questions the validity of the group audit. The €61.5M difference between the €30M of equity reported at the local level and the (€31M) of negative equity consolidated at the group level is clearly over the materiality threshold.
This brings into question the accuracy of EY’s audit and the value of EY’s unqualified audit opinion. How does EY Munich justify these substantial imbalances? Or are the seven different local auditors listed in the table above (including Deloitte and Grant Thornton) incorrect in their assessments of the shareholders equity?
We recently revealed that Wirecard Germany sent >€110M to their Singaporean subsidiaries in the last week of December 2019. Does this correspond with the substantial equity mismatch?
|Balance sheet reported Equity||2018||2017||2016|
|Wirecard Asia Holding Pte. Ltd., (Singapore)|
|Local as reported (SGD k)||66,343||48,544||(2,144)|
|Local accounts (EUR k)||42,503||30,244||(1,409)|
|Group accounts (EUR k)||(50,670)||(31,252)||297|
|Wirecard Singapore Pte. Ltd. (Singapore)|
|Local as reported (SGD k)||N/A||50,099||48,921|
|Local accounts (EUR k)||N/A||31,212||32,149|
|Group accounts (EUR k)||3,570||8,663||12,996|
We have previously commented on the late filing of financial statements by Wirecard entities. Even the FCA-regulated UK subsidiary is over three months late in filing 2018 accounts.
|Wirecard Brazil (€M)||Our|
|Company Reported MCA||400||400|
|Brazil % Estimate||40%|
|Brazil MCA Estimate||160||160|
|Monthly Credit Volume||37.2||37.2|
|Calculated MCA Balance||18.6||18.6|