September 10, 2019
Jason Wang
Chief Financial Officer
Fincera Inc.
27/F, Kaiyuan Finance Center, No. 5, East Main Street
Shijiazhuang, Hebei
People's Republic of China
Re: Fincera Inc.
Amendment No. 1 to Form 20-F for the Fiscal Year Ended December 31,
2018
Filed May 30, 2019
File No. 001-34477
Dear Mr. Wang:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Amendment No. 1 to Form 20-F for the Fiscal Year Ended December 31, 2018
Information on Our Company
History and Development of the Company, page 33
1. We note the disclosure of your corporate structure as of February 28,
2019 on page 34. In
the chart, we note that Hebei Anyong Trading Co., Ltd. has a 30% direct
ownership in
Hebei Ruiliang Trading. In addition, we note that Ganglian Finance
Leasing has a 100%
direct ownership in Hebei Ruiliang Trading. Please explain how these
entities can have a
combined direct ownership in Hebei Ruiliang Trading that is greater than
100% or
revise your future filings to provide the correct ownership percentages.
2. We also note that the Ganglian Finance Leasing and Hebei Chuanglian
Finance Leasing
Co., Ltd. entities (the "DiscOps Entities") are both classified as part
of discontinued
operations in your chart. Please clarify whether all of the wholly-owned
subsidiaries
and other entities consolidated by the DiscOps Entities are also
classified in discontinued
Jason Wang
FirstName LastNameJason Wang
Fincera Inc.
Comapany 10, 2019
September NameFincera Inc.
September 10, 2019 Page 2
Page 2
FirstName LastName
operations as well, or if they are still included in continuing
operations. If the wholly-
owned subsidiaries and other entities are still part of your
continuing operations, tell us
why and how they will consolidate up to the Company after
discontinuation of the
DiscOps Entities. Please advise, or revise your chart in future
filings to accurately reflect
your current corporate structure.
Notes to Consolidated Financial Statements
Note 2 - Going Concern, page F-11
3. We note your disclosure stating that since the third quarter of 2018,
the Company began
converting its existing wholly-owned store distribution network into a
broker distribution
network not owned by the Company, which will operate under a revenue
sharing
arrangement. Please address the following items:
Tell us more details about the steps the Company has undertaken
for the "conversion."
In this regard, tell us whether it was sold to third parties for
cash consideration, what
were the terms of that agreement, if the "conversion" has been
completed, and where
the conversion(s) are reflected in your financial statements.
Tell us, and disclose in your future filings, the terms of the
revenue sharing agreement
that will be in effect going forward.
Since these businesses were converted from wholly-owned
subsidiaries to no longer
being owned, tell us how you considered presenting them as
discontinued operations.
Tell us which entities in your corporate structure, as disclosed
on page 34, are
impacted as a result of this arrangement.
Note 3 - Basis of Presentation and Summary of Significant Accounting Policies
Revenue Recognition, page F-15
4. We note your disclosure that the Company adopted ASC 606 using the
modified-
retrospective approach on January 1, 2018. Please tell us, and
disclose in your future
filings, if there was any impact or change to the timing of revenue
recognition in the
current period, as compared to the guidance in effect in previous
periods, as a result of
your adoption. To the extent that there were any significant changes,
provide an
explanation of those changes with quantification.
Other Income, page F-16
5. We note your accounting treatment and disclosure relating to
promotional cash incentives
and referral incentives. Please revise your future filings to quantify
the respective
amounts for all reporting periods presented.
Jason Wang
FirstName LastNameJason Wang
Fincera Inc.
Comapany 10, 2019
September NameFincera Inc.
September 10, 2019 Page 3
Page 3
FirstName LastName
Note 5 - Loans, Net, page F-23
6. We note your disclosure on page F-11 that the Company sold
non-performing loans with a
total amount of RMB 2,724 million to third parties during 2018. In
addition, from July
2017 and onwards, we note that the Company re-developed the loan
transaction process in
order to eliminate the need for the Company to use its own working
capital for the initial
loan funding. However, the total amount of loans on your balance sheet
increased from
December 31, 2017 to December 31, 2018. Please address the following
items:
Tell us whether the Company continues to recognize loans on the
balance sheet under
the new re-developed transaction process and provide us with your
accounting policy
explaining your basis for recognition of loans on- or off-balance
sheet.
In light of your response to the above bullet point, tell us why
the total amount of
loans on the balance sheet increased from December 31, 2017 to
December 31, 2018
despite the fact that you changed your loan transactional process
and sold a significant
amount of your non-performing loans.
Tell us, and disclose in your future filings, how you define
non-performing loans and
quantify the amount of non-performing loans on your balance sheet
at the end of each
reporting period.
Tell us, and disclose in your future filings, your charge-off
policy for delinquent loans.
7. We note that you have a provision for credit losses of RMB 8,196
relating to your loans to
CeraVest borrowers in the amount of RMB 1,981,706. We also note your
tabular
disclosure of the movements to the provision for credit losses
included on page F-24.
Please address the following:
Tell us the terms of these loans, including average duration and
interest rate. In
addition, tell us whether the maturity date, interest rate or
other terms have been
modified or extended for any of these loans.
Tell us, and revise your future filings to disclose, more granular
information about
how you assess and calculate your provision for credit losses on
these loans , including
the various criteria (e.g., performing vs. non-performing, etc.)
you use to determine
your provision.
In your future filings, revise your tabular rollforward of the
movements to the
provision for credit losses to disaggregate the net (addition) /
reversal line item into the
various gross components. For example, disclose the gross amount
charged to
expense, gross amount of loans charged off, recoveries or other
components.
Jason Wang
Fincera Inc.
September 10, 2019
Page 4
8. We note your disclosure on page F-24 that as of December 31, 2018, the
Company has
five overdue loans to other borrowers, three of which have resigned
with extended terms
and new interest rates as they became defaulted in 2018. Please
provide us with your
analysis explaining how you considered these to be and accounted for
them as troubled
debt restructurings in the scope of ASC 310-40.
9. We note your disclosure on page F-25 that the Company reclassified a
portion of the
provision for credit losses to accrued marketing expenses during the
year ended December
31, 2017. We also note that these accrued marketing expenses were
subsequently
reversed during 2018, resulting in a gain recognized in the income
statement. Please
provide us with your accounting analysis, with reference to
authoritative literature,
supporting your treatment, classification and presentation of these
items in both 2017 and
2018.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Robert Klein, Staff Accountant, at (202) 551-3847 or Hugh
West,
Accounting Branch Chief, at (202) 551-3872 with any questions.
FirstName LastNameJason Wang Sincerely,
Comapany NameFincera Inc.
Division of
Corporation Finance
September 10, 2019 Page 4 Office of
Financial Services
FirstName LastName