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  "documentTitle": "TAL Education Group (TAL)",
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  "authorName": "Carson C. Block",
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  "notes": "The slide serves as a forensic accounting analysis identifying a specific 'Fraud Indicator'.",
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      "text": "The changes to DFRL's CY2016 financials added Rmb 129 million (~US $19.7 million) to its assets and Rmb 131 million (~US $19.7 million) to its liabilities.",
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      "text": "These changes came on May 31, 2017, five months after calendar year end, over one month after its April earnings release for fiscal year 2017, and just under a month before its June submission of its audited financials and 20-F to the SEC.64",
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      "text": "The changes to DFRL's CY2016 financials added Rmb 129 million (~US $19.7 million) to its assets and Rmb 131 million (~US $19.7 million) to its liabilities. Its assets were substantially all composed of cash, pre-payments to suppliers (compensation to consultants), and other receivables from customers. DFRL's updated liabilities were almost entirely (97.4%) composed of pre-payments or advances from customers, or as listed in TAL's books, \"deferred revenue\".",
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      "text": "The documents below will first show where the changes were found, how they match up with the detailed financial information in DFRL's credit report, and then we present a table to compare before and after.",
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      "text": "/ DFRL's financial statements. The first is significant post hoc changes to DFRL's SAIC accounts – these changes were executed just before TAL filed its 20-F disclosing the deferred revenue. Among the amendments was an improbable near three times increase in deferred revenue. Further, comparing the CY2016 deferred revenue balance to CY2017 recognized revenue makes the changed deferred revenue balance (which matches the 20-F) implausible.63",
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      "text": "CFO Rong Luo explained on multiple occasions that a unique aspect of Shunshun's model is that revenue recognition can take up a full year, or longer. — Footnote 63",
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      "text": "64 TAL FY2017 and Q4 6-K, dated April 28, 2017. The totals for current and non-current deferred revenue in the earnings release matches that in TAL's FY2017 20-F.",
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      "text": "63 We also obtained Shunshun and DFRL's CY2017 SAIC financials and reviewed them to assess the conversion of CY2016 deferred revenue to CY2017 revenue. CFO Rong Luo explained on multiple occasions that a unique aspect of Shunshun's model is that revenue recognition can take up a full year, or longer. DFRL's CY2017 revenue totaled only Rmb53.4 million. This closely ties with the expected conversion of deferred revenue from the pre-amendment ~Rmb 74 million level as opposed to the post-amendment Rmb 199 million level.",
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