Wandong Medical recently replied to a Shanghai Stock Exchange inquiry letter, explaining the internal control deficiency in revenue recognition under its distribution model. The company stated that for conventional equipment distributed, revenue is recognized upon distributor acceptance, while for large imaging equipment, revenue is recognized upon terminal installation and acceptance, in line with accounting standards and industry practice. In 2025, to support market expansion under volume-based procurement, some distributors began holding buffer inventory, but the supporting inventory tracking system was not promptly improved. After period-end verification, products that had been accepted but not yet delivered to end-user medical institutions were removed from current-period revenue and reclassified as goods in transit. This involved revenue reductions of 15.85 million yuan, 38.80 million yuan, and 27.35 million yuan for the first three quarters of 2025 respectively, representing only timing differences between quarters within the same year, so no retrospective correction was made. The company determined this internal control flaw to be a significant deficiency rather than a material weakness, with no subjective fraud, and it does not affect the authenticity of full-year financial data. The company has revised its distributor management system, set a safety stock cap and a 90-day turnover period, established monthly inventory inspections, and incorporated inventory reasonableness into sales performance evaluations. The remediation is now complete and internal controls are operating effectively.
Beijing Wandong Medical Technology Co LtdCompany disclosed a significant internal control deficiency in revenue recognition, triggering an SSE inquiry and requiring remediation.