SEC Comment Letter for NetEase, Inc. (NTES, NETTF) (CIK 0001110646) (NTES) — Nov 10, 2011
NetEase, Inc. (NTES, NETTF) (CIK 0001110646)
Date: Nov. 10, 2011 · CIK: 0001110646 · Accession: 0000000000-11-065643
AI Filing Summary & Sentiment
Reasoning
Referenced dates: August 11, 2011, October 26, 2011, September 27, 2011
Letter
November 10, 2011 Via-Email Onward Choi Acting Chief Financial Officer NetEase.Com, Inc. 26/F, SP Tower D Tsinghua Science Park Building 8 No. 1 Zhongguancun East Road, Haidian District Beijing 100084, People’s Republic of China Re: NetEase.Com, Inc. Form 20-F for Fiscal Year Ended December 31, 2010 Filed June 22, 2011 Response dated November 7, 2011 File No. 0-30666
Dear Mr. Choi: We have reviewed your response dated November 7, 2011 and have the following additional comment. In our comment, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comment applies to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to this comment, we may have additional comments. Form 20-F for Fiscal Year Ended December 31, 2010
Consolidated Financial Statements
Management’s Report on Internal Cont rol over Financial Reporting, page F-1
1. We have considered your responses to co mment 14 in our letter dated August 11, 2011, comment 4 in our letter dated September 27, 2011 and comment 7 in our letter dated October 26, 2011. Based on the information you pr ovided, it is not clear to us that your senior accounting and financial personnel have sufficient expertise to prepare financial statements in accordance with U.S. GAAP. In this regard, we note that your Acting Chief Financial Officer does not hold a license as a Certified Pub lic Accountant in the
Onward Choi NetEase.Com, Inc. November 10, 2011 Page 2
U.S. and did not attend U.S. institutions or extended educational programs that would appear to provide enough relevant educa tion relating to U.S. GAAP. In addition, although your Acting Chief Financial Offi cer and Reporting Manager have prior experience with U.S. GAAP, we do not believe th e total level of experience is adequate. Also, we note that your Reporting Manager is not the final decisi on maker since your Acting Chief Financial Officer is ultimately responsible for the fi nancial statements. Accordingly, we believe that your lack of U. S. GAAP experience constitutes a material weakness and thus, your internal control over fi nancial reporting would not be effective. If you disagree, please provide us with a mo re in depth analysis of the training and experience of your Acting Chief Financial O fficer and Reporting Manager in preparing U.S. GAAP financial statements. Otherwise please state that your internal control over financial reporting is not effective as of December 31, 2010, explain in detail that you have financial accounting and reporting depa rtments with limited knowledge of U.S. GAAP and disclose how you will remedy this material weakness in the future. You should also consider the impact of this ma terial weakness on your conclusion regarding disclosure controls and proce dures as of December 31, 2010.
You may contact Adam Phippe n, Staff Accountant, at ( 202) 551-3336 or me at (202) 551-3344 if you have questions regarding our comment or any other questions.
Sincerely,
/s/ William H. Thompson
William H. Thompson Accounting Branch Chief
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November 10, 2011 Via-Email Onward Choi Acting Chief Financial Officer NetEase.Com, Inc. 26/F, SP Tower D Tsinghua Science Park Building 8 No. 1 Zhongguancun East Road, Haidian District Beijing 100084, People’s Republic of China Re: NetEase.Com, Inc. Form 20-F for Fiscal Year Ended December 31, 2010 Filed June 22, 2011 Response dated November 7, 2011 File No. 0-30666 Dear Mr. Choi: We have reviewed your response dated November 7, 2011 and have the following additional comment. In our comment, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comment applies to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to this comment, we may have additional comments. Form 20-F for Fiscal Year Ended December 31, 2010 Consolidated Financial Statements Management’s Report on Internal Cont rol over Financial Reporting, page F-1 1. We have considered your responses to co mment 14 in our letter dated August 11, 2011, comment 4 in our letter dated September 27, 2011 and comment 7 in our letter dated October 26, 2011. Based on the information you pr ovided, it is not clear to us that your senior accounting and financial personnel have sufficient expertise to prepare financial statements in accordance with U.S. GAAP. In this regard, we note that your Acting Chief Financial Officer does not hold a license as a Certified Pub lic Accountant in the Onward Choi NetEase.Com, Inc. November 10, 2011 Page 2 U.S. and did not attend U.S. institutions or extended educational programs that would appear to provide enough relevant educa tion relating to U.S. GAAP. In addition, although your Acting Chief Financial Offi cer and Reporting Manager have prior experience with U.S. GAAP, we do not believe th e total level of experience is adequate. Also, we note that your Reporting Manager is not the final decisi on maker since your Acting Chief Financial Officer is ultimately responsible for the fi nancial statements. Accordingly, we believe that your lack of U. S. GAAP experience constitutes a material weakness and thus, your internal control over fi nancial reporting would not be effective. If you disagree, please provide us with a mo re in depth analysis of the training and experience of your Acting Chief Financial O fficer and Reporting Manager in preparing U.S. GAAP financial statements. Otherwise please state that your internal control over financial reporting is not effective as of December 31, 2010, explain in detail that you have financial accounting and reporting depa rtments with limited knowledge of U.S. GAAP and disclose how you will remedy this material weakness in the future. You should also consider the impact of this ma terial weakness on your conclusion regarding disclosure controls and proce dures as of December 31, 2010. You may contact Adam Phippe n, Staff Accountant, at ( 202) 551-3336 or me at (202) 551-3344 if you have questions regarding our comment or any other questions. Sincerely, /s/ William H. Thompson William H. Thompson Accounting Branch Chief