South Korea’s top financial watchdog ruled on Thursday that Samsung BioLogics, the country’s leading biotech company, intentionally violated accounting rules in 2015.

The decision comes after a months-long review of the company’s’ bookkeeping, and a provisional decision made by regulators in early May that it had violated accounting rules — a ruling contested by Samsung at the time.

The accounting change relates to the way Samsung BioLogics valued its 94.6 per cent stake in drugmaker Samsung Bioepis, which it switched from book to market value.

The accounting change caused a considerable swing to BioLogics’ profits three years ago: after four straight years of losses, the biopharmaceutical unit of Samsung Group reported a net profit of Won1.9tn ($1.8bn) for 2015, ahead of its $2bn initial public offering in 2016.

Thursday’s ruling is expected to dent Samsung Group’s corporate image further, at a time when the conglomerate is under growing pressure to address its labour practices and complex ownership structure.

“We think the company gravely breached clear accounting rules. It intentionally dropped a regulatory filing on this [the accounting change] although it was aware of the possibility of violating accounting standards,” Kim Yong-beom, the vice-chairman of the Financial Services Commission, told a news briefing.

The FSC will recommend the dismissal of company executives involved in the accounting breach and restrict the responsible auditor’s duty for the next four years. It will refer the case to prosecutors for further investigation.

Samsung Biologics said the ruling was “regrettable,” adding that it has followed international accounting standards. The company said it would take legal action against the ruling to protect investor interests.

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