J, I think your post hit the nail on the head. A related story.
May 7, 1998 (SEOUL) -- Net losses in 1997 nearly doubled for the 276
companies listed on the Korea Stock Exchange, after the exclusion of profits generated from intersubsidiary business deals. The Financial Supervisory Board and the Korea Stock Exchange said that after assessing the profits of listed Korean companies last year based on a consolidated financial sheet, those companies posted a total net loss of 8.245 trillion won (US$6.15 billion), a 97.58 percent rise compared to a total net loss of 4.615 trillion won when profits from intersubsidiary business deals were included.
Samsung Electronics Co., which posted a net profit of 123.5 billion won in 1997, ended up with a net loss of 608.9 billion won based on a consolidated financial sheet.
LG Electronics, which posted a net profit of 91.5 billion won in 1997, ended up with a net loss of 572.8 billion won based on a consolidated financial sheet.
Total debts of the listed companies rose 36.53 percent, from 286.271 trillion won to 1,070.8 trillion won, based on a consolidated financial sheet, while total net worth fell 3.44 percent to 103.9514 trillion won.
The numbers not only displayed an over reliance on intersubsidary business deals among major Korean companies, but also showed that insolvencies at a major company's subsidiaries led to insolvencies at parent companies.
One of the major reasons for the declining financial health of major
corporations was insolvencies at overseas subsidiaries.
A total of 203 firms, or 73 percent of all listed firms, had their profit volume reduced or transformed into losses when based on a consolidated financial sheet.
Only 71 listed companies, or 26.25 percent of all listed firms, saw their net losses reduced or net profits increase based on consolidated financial sheets.
Only two listed companies, Kohap and Hyosung T&C corporations saw
their net losses transform into net profits when based on consolidated
financial sheets.
The 92 listed subsidiaries of the top 30 conglomerates saw their total net losses of 130.3 billion won rise 23 times in size to 3.1425 trillion won when based on consolidated financial sheets.
Per group, Hyundai saw its 5.2 billion won net profit turn into a net loss of 900.1 billion won when based on a consolidated financial sheet. Also, 10 other business groups faced the same situation.
(Maeil Business Newspaper, Korea)
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