It was confirmed that Hotel Lotte failed to recognize for at least six months that it had reversed net profit and net loss in disclosures for 11 affiliates in which it holds 100% equity.
According to the retail industry on the 19th, Hotel Lotte disclosed the net profit of Lotte Hotel Holdings USA as 313 billion won in its semiannual report in Jun. this year. In fact, it had recorded a 313 billion won loss in its 2024 annual report, but it was left as is. This continued through the quarterly report in Sep. this year. Lotte Hotel Holdings USA is wholly owned by Hotel Lotte with 100% equity. It is Hotel Lotte's U.S. subsidiary that owns the New York Palace Hotel in Manhattan, among others.
In addition, during the same period, there were disclosure errors in which net profit and net loss were reversed for 11 affiliates, including Lotte Duty Free Singapore, Hotel Lotte Holdings Hong Kong, Lotte Hotel Arai, Lotte Hotel Vladivostok, and Lotte World Vietnam. Lotte Duty Free Singapore, which posted a net loss of 227.9 billion won, was disclosed as a corporation that posted a net profit of 227.9 billion won, and Hotel Lotte Holdings Hong Kong, which posted a net loss of 25.2 billion won, was disclosed as a corporation that posted a net profit of 25.2 billion won. Lotte Hotel Arai posted a net loss of 10,284 million won but was disclosed as having earned the same amount of net profit.
Conversely, there were cases where companies that made a net profit were listed as having a net loss. Lotte Hotel Vladivostok earned 1,678 million won in revenue, but it was disclosed as having incurred the same amount of loss.
As an affiliate of Lotte Group, Hotel Lotte is an unlisted company, but it is required to file business reports under the Financial Investment Services and Capital Markets Act. Due to its size, it is also subject to the Act on External Audit of Stock Companies. Under current law, an entity is subject to an external audit if it meets any two of the following: total assets of at least 12 billion won, total liabilities of at least 7 billion won, sales of at least 10 billion won, or at least 100 employees.
When a disclosure error occurs in a business report, as in the case of Hotel Lotte, the Financial Supervisory Service determines materiality and whether it was intentional or negligent, and takes action for violations against the company under the Financial Investment Services and Capital Markets Act and the Act on External Audit. Errors in the content of business reports are handled under the Financial Investment Services and Capital Markets Act, and if there are accounting issues such as window dressing, sanctions are imposed under the Act on External Audit.
An FSS official said, "When something unusual occurs, we first ask the corporation to submit a statement of circumstances and then take light or heavy measures," adding, "If only a single number or sign is off, it is more likely to end with a light measure such as a warning or caution rather than a heavy measure such as a penalty surcharge or fines." The official added, "We need to look into this case, but if it is a simple entry mistake, we may only request a correction."
A Hotel Lotte official said, "We have confirmed that there was a mistake at the working level," adding, "The relevant department will take measures such as making corrections."