FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
FIYTA Precision Technology Co., Ltd.
2022 Annual Report
March, 2023
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
2022 Annual ReportSection 1 Important Notice, Table of Contents and Definition
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executiveshereby individually and collectively accept responsibility for the correctness, accuracy andcompleteness of the contents of this report and confirm that there are neither material omissionsnor errors which would render any statement misleading.
Zhang Xuhua, the Company leader, Song Yaoming, chief financial officer, and Tian Hui, themanager of the accounting department (treasurer) hereby confirm the authenticity andcompleteness of the financial report enclosed in this Annual Report.
All the directors attended the board meeting for reviewing the Annual Report.
Any perspective description, such as the future plan, development strategy, etc. involved in theAnnual Report shall not constitute the Company’s substantial commitment to the investors andthe investors should please pay attention to their investment risks.
In this report, the Company has described in detail the existing macro-economic risks as well asoperation risks. Investors are advised to refer to the contents concerning the Company's futuredevelopment prospect in Section 3 Discussion and Analysis of the Management.
Reviewed and approved by the Board of Directors , the Company's profit distribution preplan issummarized as follows: based on the total share capital as at the date of record (with the sharesin the special securities account for repurchase deducted) when the profit distribution plan isimplemented in the future, the Company is going to distribute dividend to all the shareholders atthe rate of CNY2.50 for every 10 shares (with the tax inclusive), 0 bonus shares (with the taxinclusive),and no public reserve shall be converted into share capital.
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Table of Contents
Section 1 Important Notice, Table of Contents and Definition
Section 2 Company Profile and Financial Highlights
Section 3 Discussion and Analysis by the Management
Section 4 Corporate Governance
Section 5 Environment and Social Responsibility
Section 6 Significant Events
Section 7 Change of the Shares and Particulars about Shareholders
Section 8 About the Preferred Shares
Section 9 About Bonds
Section 10 Financial Report
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Documents Available for Inspection
I. Financial Statements signed by and under the seal of the legal representative, chief accountant andaccounting supervisors;
II. The original Auditors’ Report affixed with the seal of the accounting firm, signed by and affixed with theseal of the certified public accountant.
III. Originals of all documents and manuscripts of all the Company’s documents disclosed to the publicduring the reporting period.
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Definitions
| Terms to be defined | Refers to | Definition |
| This Company, the Company or FIYTA | Refers to | FIYTA Precision Technology Co., Ltd. |
| AVIC | Refers to | Aviation Industry Corporation of China, Ltd. |
| AVIC International | Refers to | AVIC International Holding Corporation |
| AVIC IHL | Refers to | AVIC International Holding Limited |
| AVIC Finance | Refers to | AVIC Finance Co., Ltd. |
| Restricted Stock Incentive Plan Phase I | Refers to | Restricted A-Share Incentive Plan 2018 (Phase I) |
| Restricted Stock Incentive Plan Phase II | Refers to | Restricted A-Share Incentive Plan 2018 (Phase II) |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 2 Company Profile and Financial HighlightsI. Company Information
| Short form of the stock | FIYTA and FIYTA B | Stock Code | 000026 and 200026 |
| Stock abbreviation before change (if any) | None | ||
| Stock Exchange Listed with | Shenzhen Stock Exchange | ||
| Company Name in Chinese | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company Name in Chinese | 飞亚达公司 | ||
| Company name in English (if any) | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company name in English (if any) | FIYTA | ||
| Legal Representative | Zhang Xuhua | ||
| Registered address: | FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Changes of the Company's Registered Address | On January 30, 1997, the Company’s registered address was changed from "Building 6, CATIC Zone, Shennan Road Central, Shenzhen" to "Building 6, CATIC Zone, Shennan Road Central, Futian District, Shenzhen"; on April 5, 2000, the registered address was changed to "Fiyta Building, 163 Zhenhua Road, Futian District, Shenzhen"; on February 20, 2004, the registered address was changed to "FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen". | ||
| Office Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Website: | www.fiytagroup.com | ||
| E-mail: | investor@fiyta.com.cn | ||
II. Liaison Persons and Communication Information
| Secretary of the Board | Securities Affairs Representative | |
| Names | Song Yaoming | Xiong Yaojia |
| Liaison Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | 18th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen |
| Tel. | 0755-86013669 | 0755-86013669 |
| Fax | 0755-83348369 | 0755-83348369 |
| investor@fiyta.com.cn | investor@fiyta.com.cn |
III. Information Disclosure and Place where the Regular Reports are Prepared
| The website of the Stock Exchange on which the Company discloses the Annual Report | http://www.szse.cn |
| Names and websites of the media on which the Company discloses the Annual Report | Securities Times, Hong Kong Commercial Daily, and www.cninfo.com.cn |
| Place where the Company’s Annual Report was prepared and is placed for inquiry | The Planning & Operation Department of the Company |
IV. Changes in Registration
| Organization Code | 91440300192189783K |
| Changes in principal business activities since listing (if any) | No change |
| Changes in the controlling shareholder over the past years (if any) | No change |
V. Other Relevant InformationThe CPAs appointed by the Company
| Name of the CPAs | Da Hua Certified Public Accountants (Special General Partnership) |
| Office address | 1101, Building 7, No. 16 Xisi huanzhong Road, Haidian District, Beijing |
| Names of the CPAs as the authorized signatories | Long Jiao and Wang Dong |
The sponsor performing persistent supervision duties engaged by the Company in the reporting period
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Inapplicable
The financial advisor performing persistent supervision duties engaged by the Company in the reportingperiodInapplicableVI. Summary of Accounting/Financial DataDoes the Company need to make retroactive adjustment or restatement of the accounting data of theprevious years?No
| 2022 | 2021 | Increase/decrease in the reporting year over the previous year | 2020 | |
| Turnover in CNY | 4,354,096,880.36 | 5,243,733,540.93 | -16.97% | 4,243,439,952.59 |
| Net profit attributable to the Company’s shareholders, in CNY | 266,681,451.84 | 387,840,282.95 | -31.24% | 294,115,156.04 |
| Net profit attributable to the Company’s shareholders less the non-recurring items, in CNY | 249,791,455.73 | 369,418,754.83 | -32.38% | 269,095,012.41 |
| Net cash flows arising from operating activities, in CNY | 476,228,776.52 | 547,249,108.45 | -12.98% | 378,210,505.87 |
| Basic earning per share (CNY/share) | 0.6398 | 0.9036 | -29.19% | 0.6764 |
| Diluted earning per share (CNY/share) | 0.6398 | 0.9036 | -29.19% | 0.6764 |
| Return on equity, weighted average (%) | 8.68% | 13.39% | -4.71% | 10.78% |
| End of 2022 | End of 2021 | Increase/decrease of the end of the reporting year over the end of the previous year | End of 2020 | |
| Total assets, in CNY | 4,117,143,911.99 | 4,110,579,952.49 | 0.16% | 4,018,712,700.18 |
| Net assets attributable to the Company’s shareholders (owner’s equity attributable to the Company’s shareholders, in CNY) | 3,136,423,492.15 | 3,013,232,642.53 | 4.09% | 2,799,948,388.09 |
The lower of the Company’s net profit before and after the deduction of non-recurring gains and losses inthe last three fiscal years is negative, and the auditor's report of the previous year shows that theCompany’s going concern ability is uncertain.NoThe lower of the net profit before and after the deduction of the non-recurring gains and losses isnegative.NoVII. Discrepancy in accounting data between IAS and CAS
1. Differences in the net profit disclosed in the financial report & the net assets attributable to theCompany’s shareholders respectively according to the IAS and the CAS.Inapplicable
2. Difference of the net profit and net asset in the financial report disclosed respectivelyaccording to the IAS and the CAS.Inapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
VIII. Financial Data Summary based on Quarters
In CNY
| The first quarter | The second quarter | The third quarter | The fourth quarter | |
| Turnover | 1,173,700,720.94 | 1,009,870,028.17 | 1,201,863,621.73 | 968,662,509.52 |
| Net profit attributable to the Company’s shareholders | 86,354,073.76 | 54,338,710.53 | 89,108,590.17 | 36,880,077.38 |
| Net profit less the non-recurring profit/loss attributable to the Company’s shareholders | 84,104,404.06 | 45,827,352.84 | 86,658,935.58 | 33,200,763.25 |
| Net cash flows arising from operating activities | 16,020,422.02 | 262,365,841.58 | 122,195,340.18 | 75,647,172.74 |
Are the above financial indicators or their totals significantly different from the financial indicatorsdisclosed by the Company in the quarterly and semi-annual reports?NoIX. Extraordinary items and amount
In CNY
| Items | Amount in 2022 | Amount in 2021 | Amount in 2020 | Note |
| Gain/loss from disposal of non-current assets, including the part written-off with the provision for impairment of assets. | 91,925.06 | 730,134.87 | -369,857.30 | |
| The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s normal business and conform with the national standard amount or quantity) | 18,648,210.06 | 23,476,186.50 | 30,634,128.57 | |
| Reversal of provision for impairment of accounts receivable that has been separately tested for impairment | 4,389,902.44 | 2,225,653.32 | 163,925.30 | |
| Other non-operating income and expenses with the aforesaid items exclusive | -1,064,064.23 | -3,058,731.52 | 1,556,300.78 | |
| Less: Amount affected by the income tax | 5,175,977.22 | 4,951,715.05 | 6,964,353.72 | |
| Total | 16,889,996.11 | 18,421,528.12 | 25,020,143.63 | -- |
Details of other gains and losses in compliance with the definition of non-recurring gains and losses.Inapplicable
Explanation of the non-recurring gains and losses listed in the Explanatory Announcement No.1 onInformation Disclosure for Companies Offering Their Securities to the Public as recurring gains andlossesInapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 3 Discussion and Analysis by the ManagementI. About the Industry the Company Engages inThe watch industry the Company is engaged in has a long history and profound cultural precipitation, andis one of the representative industries of high-precision manufacturing with the nature of precisiontechnology. The domestic watch industry closely follows the national light industry modernizationprogress, and is flourishing with the Chinese national craftsmanship and self-improvement culture.According to the strategic deployment of the 20th National Congress of the Communist Party of Chinaand the "Guiding Opinions on the High-quality Development of Light Industry in the 14th Five-Year Plan"promulgated by the China Light Industry Federation, light industry, as an important consumer goodsindustry, undertakes the mission of providing high-quality consumer products for the people, amongwhich, watches because of their multiple attributes of function and art, integrate a variety of needs of thenew consumption era such as emotional value and aesthetic experience, and gradually develop in thedirection of quality, fashion and personalization, so as to continuously meet the increasingly upgradedconsumption needs of consumers.
With the improvement of national purchasing power and the growth of consumer demand, the overallscale of China's consumer market has continued to expand, ranking the second in the world. Thedomestic watch consumer market has also continued to grow at a compound growth rate of about 5% inthe past five years. At present, under the guidance of relevant national policies such as "dual circulation"and "common prosperity", the middle-income group as the target consumer group of watches continuesto expand, and is stimulating the consumption growth of urban clusters and infiltrating the consumptiondemand of second- and third-tier cities. With the comprehensive release of travel policies, the offlinepassenger flow is gradually restored, and the watch consumption market is expected to continue tomaintain the growth trend.
However, the rapidly growing domestic watch consumption market also shows significant differentiation.On the one hand, with the differentiation of price ranges, watches in the middle and high-end priceranges present double growth trend in both amount and quantity. The compound growth rate of theamount of Swiss watches exported to Chinese Mainland in the past five years has exceeded 10%,significantly higher than the market average. As a whole, domestic watch brands in the middle andlow-end price ranges are facing greater pressure. On the other hand, with the differentiation of thecompetition pattern, the head brand or channel is promoting M & A and integration in the industry andaccelerating the expansion of market share and further enhancing the concentration ratio relying on itscompetition advantages in scale, operation management, resources integration and so on. Theincreasingly intensified challenge is forcing watch brands, especially domestic watch brands to to makecontinuous efforts to improve the price range and market share of the brands, and some domestic watchbrands are rising after fierce competition.
The Company has had long-term prospects on watch industry, has been continuously cultivating andinvesting in the core businesses of "FIYTA", the own brand and "Harmony” world watch retails, constantlyconsolidating the "brand power, product power and channel power", and has been enjoying a goodmarket share and industry position foundation. At present, in the face of the opportunities and challengesembodied in the watch consumption market, the Company shall, as always, maintain a positive attitude,take customer needs as the guide, adhere to the principle of high-quality development, and promote the“FIYTA", the self-owned brand, to develop in the direction of high quality and differentiation. "HARMONY"world watch retail is developing towards professionalization and benchmarking of operations andservices; at the same time, shall continue to promote digital transformation and upgrading, and furtherintegrate digital concepts and technologies into R&D, design, manufacturing, sales, services and otherlinks in order to build its digital ability to use data to empower value creation.II. Main business the Company operated in the reporting periodThe Company bases its establishment and development on the aviation precision technology andmaterial technology, has been adhering to the values of “the leading role of brand, customer orientation,value creation, cooperation and responsibility, learning and innovation", taking “inheriting of the spirit ofaeronautical patriotism and creating a quality life” as its mission, focusing on the watch industry; the corewatch business has formed the business layout of “Brand + Channel” which consists of the self-ownedbrand and retails of world brand watches. In addition, the Company is actively exploring and cultivatingnew businesses such as precision technology and smart wearables, which are in the stage of continuousdevelopment.
The Company is deeply involved in the construction of professional watchmaking capabilities and brandoperations, has a number of self-owned brands such as "Fiyta", "Emile Chouriet", "Beijing" and "Jeep",covering different dimensions of mid-to-high-end, popular professional, fashion and cool and so on. Ofthem, the core self-owned brand of "FIYTA" is positioned as "a high-quality Chinese watch brand withaerospace watch as its characteristic". Relying on technology and quality advantages, the Company has
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
continuously provided professional chronograph watches for China's aerospace industry. Through theidea of taking “the nation” as the core and "fashion" as the form, the Company has developeddifferentiated products which match the "aerospace quality", carried out integrated marketing,continuously expanded brand influence, and gradually established its leading position in the domesticindustry.
In order to seize the opportunities in the domestic brand watch market, promote the long-termdevelopment of its own brands, and expand the retail business of "Harmony" world brand watches,"Harmony" is committed to "becoming the best comprehensive service provider of famous watches", andhas long-term and in-depth cooperation with many famous watch groups and brands; Relying on itsindustry-leading operation management capabilities and customer service capabilities, it shall graduallybecome a professional high-end chain commercial brands of famous watches.
In recent years, the Company has relied on high-end precision manufacturing technology and industrialaccumulation, based on the development principle of “technology being homologous, the industry beingsame-rooted and value being co-directional”, and extended the development of precision technologybusiness and smart wearables business. At present, these two businesses have begun to take shape.III. Analysis on Core Competitiveness(I) Brand operation and management capabilities of the whole-industry-chainThe Company has been deeply involved in the watch industry. Over the years, it has continued to investand accumulate around brand building, technology research and development, product design, productoperation, customer research, membership operations, etc. It has a whole-industry- chain operationintegrating R&D, design, manufacturing, sales, and services, has strong management ability and richexperience in brand management, and has successfully built its own brand cluster with the "Fiyta" brandas the core.
(II) Elaborative channel operation and management capabilitiesThe Company continues to strengthen the construction of channel operation capability, deeply implantsthe concepts of "three-tier marketing" and "excellent operation" in the daily work of channel operation,and provides customers with the highest quality consumption experience in an all-round way. Customersatisfaction has long been at the forefront of the industry and has been highly recognized by cooperativebrands and channels, and has established a cooperative relationship of in-depth mutual trust. On thisbasis, the Company's "Fiyta" self-owned brand and "Harmony" world watch retails have established arelatively complete and high-quality channel network. Of them, offline channels cover most parts of thecountry, consisting of flagship stores, franchise houses, theme stores, collection stores, etc.; onlinechannels cover mainstream e-commerce platforms, and focus on new media such as live broadcasts,applets, etc.; online and offline channels are also further integrated through the application of digital retailsystems.
(III) Digital capabilities to empower businessesThe Company continues to take customers as the core and data as the basis, and invest in digitalcapacity building for the purpose of improving customer experience and gaining insight into customerneeds and changes. By building CRM system, digital retail system, SAP system and other platforms, theCompany has gradually built data analysis capabilities in the application process, promotedmulti-channel and multi-scenario customer acquisition, tapped the value of the whole life cycle ofcustomers. As a result, significant improvement has been achieved in number of members and potentialcustomers, transactions by potential customers, repurchase by old customers, private domain operationsand conversion efficiency.
(IV)Capacity of Core Precision TechnologyThe Company has been devoting itself to the building of precision technology research and developmentcapability, has successively built advanced R & D, production technology and manufacturing technologyplatforms, and has established R & D and production bases in Shenzhen and Switzerland respectively;and has established professional watchmaking capabilities, including self-made driving units of watchesand key components manufacturing, space watch research and development and high-end watchmakingtechniques, etc., and achieved continuous breakthroughs in research and development and applicationof new materials, new processes and new technologies. At present, the Company has 2 nationalhigh-tech enterprises, established a national enterprise technology center, a national industrial designcenter, and is a national technological innovation demonstration enterprise.
(V) Ability of Building Professional Talent TeamThe Company attaches great importance to talent team building, continues to improve the "valuecreation"-oriented market-based salary distribution mechanism, provides employees with diversifiedpromotion and development channels, organizes employees to carry out professional learning andtraining, and through check of high-potential talents, professional talent development measures such as
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
channel construction, the Company has enriched the reserve echelon of talents. At the same time, theCompany implements medium and long-term restricted stock incentive plans for core management andkey teams, closely linking the interests of key talents with the Company's development, and promotingmutual development of both the Company and employees. At present, the Company has manyoutstanding talents of the industry in design, research and development and other core fields, and theteam stability and employee satisfaction are at a high level.
During the reporting period, based on the continuous consolidation of core competitiveness, the "FIYTA"brand won the "Most Influential Brand of the Year" Award in the Guangdong-Hong Kong-Macao GreaterBay Area in 2022; the "Fiyta" aerospace watch was launched again with the "Shenzhou 14" and"Shenzhou 15" manned spacecrafts; and HARMONY was awarded one of “the Top Ten Powers ofAnnual Increase in Wholesale and Retail Industry 2021 in Nanshan District, Shenzhen"; the TechnologyDevelopment Company was elected "2021 Technologically Advanced Small and Medium-sizedEnterprises in Guangdong Province".IV. Analysis on Principal Businesses
1. General
In 2022, the global political and economic situation was even more turbulent and in addition, people borethe pressure persistently in employment and income, and consumption was expected to be weakened.The total retail sales of consumer goods for the whole year dropped by 0.2% year-on-year. Undermultiple pressures, the overall domestic watch consumption market was in a downturn. According tostatistics, the business revenue of industrial enterprises above designated size in the watch industry fellby 10.09% year-on-year, and the amount of Swiss watches exported to Mainland China also fell by 13.6%year-on-year. In the face of the rapidly changing and severe market situation, the Company continued toadhere to the business strategy of "Stability" and "Defensive counterattack", effectively prevented riskssuch as inventory and accounts receivable, strictly controlled various costs and expenses, and activelyseized various business “Counterattack Points”. In the reporting period, the Company realized businessrevenue amounting to CNY 4,354.09 million, a year-on-year decrease of 16.97%, an increase of 2.61%over 2020, and an increase of 17.54% over 2019; realized total profit amounting to CNY 339.12 million, ayear-on-year decrease of 32.49%.
(1) Upgrading the Positioning of the Self-owned Brand, and Taking Multiple Measures to EnhanceProduct and Brand PowerDuring the reporting period, the "FIYTA" Brand defined its positioning as "a high-quality Made-in-Chinawatch brand featuring aerospace watches", focusing on six core series including "Aerospace", "Clover","Heartstring" and "Impression” and increased resource input. The core series increased resourceinvestment. The total revenue from them accounted for nearly 50% of the revenue from the Brand, ofwhich the "Aerospace" series accounted for more than 10%. The Company continued to carry outintegrated marketing, and promoted the popularity of individual products through cross-field cooperation,membership salon, event marketing, etc., and successfully created hot selling products such as J-20,Xiaokeke, and three-body joint models, which helped the brand AOV to significantly increase and thebrand image to be younger.
(2) Improving channel operation capability and optimizing the structure to promote high-qualitydevelopmentDuring the reporting period, the "Fiyta" Brand offline focused on the "Space Station" concept store,package store and fashion collection store, explored ecological win-win and reproducible store models,continued to optimize the channel structure, and actively developed store membership salon activities,enhanced customer experience and product sales with the innovative theme and form; quickly boostedbreakthrough in new online channels such as TikTok. During the "Double Eleven" period, the Companyachieved positive growth in GMV, and sales on the TikTok platform throughout the year also increasedsignificantly year-on-year .
"Harmony" World Watch Retail continued to focus on customer research, customer value mining,customer services and other dimensions to deepen the refined operation of stores, and customerstickiness continued to increase. Meanwhile, "Harmony" continued to promote channel structureupgrading and high-quality channel expansion, promoted cooperation with Time Vallée of RichemontGroup, and opened two new Time Vallée collection stores; explored cross-category operations, openedthe first optical store Harmony Optical; actively cooperated with automobiles, Securities, banks, etc. tocarry out cross-field activities.
(3) Adhering to innovation-driving and accelerating digital transformation
During the reporting period, the "Fiyta" Brand continued to optimize the CRM system, and the number ofmembers and the conversion rate of potential customers continued to grow steadily; the private domainoperation was promoted in an orderly manner, and the cloud store project was fully launched and
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
connected with the public account, and thus realized the transition from the public domain to the privatedomain. "Harmony” World Watch Retail continued to deepen its membership operations, and thetransaction amount of potential customers and the repurchase amount of old customers accounted formore than 60%.
(4) Strengthening the Technical Strength of Precision Technology and Promoting the SustainableDevelopment of New BusinessDuring the reporting period, the Company accelerated the advancement of watch movement technologybreakthrough and the application of new materials such as aerospace, and achieved positive progress inthe related special project. The Company continued to strengthen cooperation in the fields of opticalcommunication and lasers in its precision technology business, strove to build a technical team thatmatched complex and high-precision aerospace products, improved the processing capabilities ofhigh-precision products, and tapped new customers in the fields of aerospace and medical equipment.The Company achieved breakthrough in some key projects, and realized year-on-year increase of bothoperating revenue and profit. The Company continued to optimize the channel structure of smartwearables business, quickly developed the self-run e-commerce channels, accounting for more than 70%of the revenue. At the same time, the Company focused on promoting the starting amount of its ownbrand ADASHER.Year-on-year Movements of the Key Financial Items are summarized as follows:
Balance sheet items
| Items | Ending balance | Opening balance | Percentage of change | Cause of the change |
| Notes receivable | 32,214,912.10 | 61,258,145.80 | -47.41% | Mainly due to the liquidation of partially discounted notes due during the reporting year. |
| Other non-current assets | 11,593,741.57 | 42,680,753.78 | -72.84% | Mainly due to the conversion of the real estate in Hainan into fixed assets. |
| Accounts payable | 170,589,456.68 | 254,588,895.34 | -32.99% | Mainly due to decrease in the account payable for procurement of brand watches during the reporting period. |
| Advance receipts | 16,960,128.83 | 11,025,664.72 | 53.82% | Mainly due to increase in advance receipts from the property business. |
| Lease liabilities | 41,642,561.58 | 64,918,722.10 | -35.85% | Mainly due to the improvement of the store structures and the number of stores thus decreased during the reporting year. |
| Other comprehensive income | 5,739,589.89 | -7,658,346.40 | 174.95% | Mainly due to movement of the translation balance of foreign currency statements |
Income statement items from the beginning of the year to the end of the reporting period
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Percentage of change | Cause of the change |
| Financial expenses | 21,188,742.11 | 34,677,073.65 | -38.90% | Mainly due to decrease of the interest expenses and thus the exchange earning increased during the reporting year. |
| Loss from impairment of credit | 4,845,379.45 | -11,075,001.77 | 143.75% | Mainly due to decrease in the provision for accounts receivable during the year. |
| Loss from impairment of assets | -37,625,482.96 | -25,861,394.56 | -45.49% | Mainly due to the increase of the provision for price falling of the brand watch inventory in the reporting year. |
Cash flow statement items from the beginning of the year to the end of the reporting period
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Percentage of change | Cause of the change |
| Rebated taxes received | 7,793,409.24 | 1,466,381.60 | 431.47% | Mainly due to the increase in VAT retention refunds received during the reporting year. |
| Other operation activity related cash payments | 324,035,659.54 | 478,099,748.10 | -32.22% | Mainly due to decrease of expenditures during the reporting year. |
| Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets | 114,090,573.97 | 204,422,787.61 | -44.19% | Mainly due to decrease of payments for store refurbishment and improvement during the reporting year. |
| Cash received from investment absorption | - | 58,216,000.00 | -100.00% | Mainly due to the receipt of subscriptions under Phase II restricted stock incentive plan in the previous year. |
| Cash paid for debt repayment | 794,083,975.00 | 1,386,708,158.95 | -42.74% | Mainly due to decrease in the amount of bank loans repaid during the year. |
| Cash paid for other financing related activities | 177,477,740.46 | 124,710,390.58 | 42.31% | Mainly due to increase of the payment for repurchasing B-shares. |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
2. Revenue and Costs
(1) Composition of Revenues
In CNY
| 2022 | 2021 | Year-on-year increase/decrease | |||
| Amount | Proportion in the revenue | Amount | Proportion in the revenue | ||
| Total operating revenue | 4,354,096,880.36 | 100% | 5,243,733,540.93 | 100% | -16.97% |
| Based on sectors | |||||
| Watches | 4,044,205,847.74 | 92.88% | 4,923,280,724.48 | 93.89% | -17.86% |
| Precision technology business | 163,114,009.23 | 3.75% | 150,094,350.20 | 2.86% | 8.67% |
| Leases | 129,266,616.76 | 2.97% | 151,461,309.62 | 2.89% | -14.65% |
| Others | 17,510,406.63 | 0.40% | 18,897,156.63 | 0.36% | -7.34% |
| Based on products | |||||
| Watch brand business | 725,388,535.22 | 16.66% | 1,012,443,357.87 | 19.31% | -28.35% |
| Watch retail and services | 3,318,817,312.52 | 76.22% | 3,910,837,366.61 | 74.58% | -15.14% |
| Precision technology business | 163,114,009.23 | 3.75% | 150,094,350.20 | 2.86% | 8.67% |
| Leases | 129,266,616.76 | 2.97% | 151,461,309.62 | 2.89% | -14.65% |
| Others | 17,510,406.63 | 0.40% | 18,897,156.63 | 0.36% | -7.34% |
| Based on regions | |||||
| South China | 2,142,082,539.80 | 49.20% | 2,685,613,515.77 | 51.21% | -20.24% |
| Northwest China | 610,765,393.07 | 14.03% | 746,028,947.88 | 14.23% | -18.13% |
| Northeast China | 231,541,393.72 | 5.32% | 249,949,686.95 | 4.77% | -7.36% |
| East China | 572,584,950.61 | 13.15% | 732,103,484.67 | 13.96% | -21.79% |
| Northeast China | 281,347,840.46 | 6.46% | 294,675,252.56 | 5.62% | -4.52% |
| Southwest China | 515,774,762.70 | 11.84% | 535,362,653.10 | 10.21% | -3.66% |
| Based on Sales Models | |||||
| Direct Selling | 4,196,696,430.85 | 96.39% | 5,047,771,480.39 | 96.26% | -16.86% |
| Distribution | 157,400,449.51 | 3.61% | 195,962,060.54 | 3.74% | -19.68% |
(2) Sector(s), Product(s), Region(s) and Sales Models Taking over 10% of the Operating Revenueor Operating Profit
In CNY
| Operating revenue | Operating cost | Gross profit rate | Year-on-year increase/decrease of operating revenue over the previous year | Year-on-year increase/decrease of operating costs over the previous year | Year-on-year increase/decrease of gross profit rate over the previous year | |
| Based on sectors | ||||||
| Watches | 4,044,205,847.74 | 2,556,597,458.46 | 36.78% | -17.86% | -17.99% | 0.10% |
| Precision technology business | 163,114,009.23 | 135,466,654.66 | 16.95% | 8.67% | 9.89% | -0.92% |
| Leases | 129,266,616.76 | 46,036,416.11 | 64.39% | -14.65% | 7.40% | -7.31% |
| Others | 17,510,406.63 | 872,261.88 | 95.02% | -7.34% | -60.74% | 6.78% |
| Based on products | ||||||
| Watch brand business | 725,388,535.22 | 213,729,285.07 | 70.54% | -28.35% | -25.74% | -1.03% |
| Watch retail and services | 3,318,817,312.52 | 2,342,868,173.39 | 29.41% | -15.14% | -17.20% | 1.76% |
| Precision technology business | 163,114,009.23 | 135,466,654.66 | 16.95% | 8.67% | 9.89% | -0.92% |
| Leases | 129,266,616.76 | 46,036,416.11 | 64.39% | -14.65% | 7.40% | -7.31% |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Others | 17,510,406.63 | 872,261.88 | 95.02% | -7.34% | -60.74% | 6.78% |
| Based on regions | ||||||
| South China | 2,142,082,539.80 | 1,319,785,360.39 | 38.39% | -20.24% | -23.05% | 2.25% |
| Northwest China | 610,765,393.07 | 391,755,839.58 | 35.86% | -18.13% | -15.10% | -2.29% |
| Northeast China | 231,541,393.72 | 143,727,145.64 | 37.93% | -7.36% | 0.34% | -4.77% |
| East China | 572,584,950.61 | 370,003,060.69 | 35.38% | -21.79% | -16.09% | -4.39% |
| Northeast China | 281,347,840.46 | 191,508,963.76 | 31.93% | -4.52% | -5.89% | 0.99% |
| Southwest China | 515,774,762.70 | 322,192,421.05 | 37.53% | -3.66% | 0.25% | -2.44% |
| Based on Sales Models | ||||||
| Direct Selling | 4,196,696,430.85 | 2,665,718,744.04 | 36.48% | -16.86% | -17.09% | 0.17% |
| Distribution | 157,400,449.51 | 73,254,047.07 | 53.46% | -19.68% | 3.88% | -10.55% |
While adjustment of the statistical caliber for the principal business data took place in the reporting period,the principal business data with the statistical caliber adjusted at the end of the reporting period in thelatest year.Inapplicable
(3) Is the physical sales income greater than the service income
Yes
| Classified based on sectors | Items | In CNY | 2022 | 2021 | Year-on-year increase/decrease |
| Brand watches | Sales volume | pcs | 771,846.00 | 795,178.00 | -2.93% |
| Output | pcs | 592,041.00 | 727,091.00 | -18.57% | |
| Inventory | pcs | 816,989.00 | 996,794.00 | -18.04% |
Note to the cause of the year-on-year movement of the relevant data by over 30%Inapplicable
(4) Implementation of Important Sale Contracts and Important Purchase Contracts Concludedduring the Reporting YearInapplicable
(5) Composition of Operating Costs
Classified based on sectors and products
In CNY
| Classified based on sectors | Items | 2022 | 2021 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watches | Goods purchase costs | 2,342,868,173.39 | 85.54% | 2,829,459,485.45 | 86.12% | -17.20% |
| Raw materials | 191,690,987.81 | 7.00% | 256,857,016.25 | 7.82% | -25.37% | |
| Labor costs | 17,406,869.24 | 0.64% | 24,624,829.03 | 0.75% | -29.31% | |
| Depreciation expense | 774,944.08 | 0.03% | 776,630.56 | 0.02% | -0.22% | |
| Water and electricity fees | 493,392.62 | 0.02% | 557,212.31 | 0.02% | -11.45% | |
| Rent | 260,130.07 | 0.01% | 254,302.70 | 0.01% | 2.29% | |
| Others | 3,102,961.25 | 0.11% | 4,759,127.90 | 0.14% | -34.80% | |
| Precision technology business | Raw materials | 98,488,952.82 | 3.60% | 88,916,323.84 | 2.71% | 10.77% |
| Labor costs | 20,496,222.84 | 0.75% | 19,308,218.35 | 0.59% | 6.15% | |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Depreciation expense | 2,454,475.24 | 0.09% | 2,929,018.86 | 0.09% | -16.20% | |
| Water and electricity fees | 1,267,740.58 | 0.05% | 1,185,220.49 | 0.04% | 6.96% | |
| Rent | 105,177.92 | 0.00% | 127,758.44 | 0.00% | -17.67% | |
| Others | 12,654,085.26 | 0.46% | 10,812,906.46 | 0.33% | 17.03% | |
| Leases | Depreciation expense | 15,821,128.29 | 0.58% | 16,068,736.92 | 0.49% | -1.54% |
| Labor costs | 4,216,863.25 | 0.15% | 3,216,088.80 | 0.10% | 31.12% | |
| Others | 25,998,424.57 | 0.95% | 23,581,556.59 | 0.72% | 10.25% | |
| Others | Purchase of finished products | 872,261.88 | 0.03% | 2,221,796.17 | 0.07% | -60.74% |
In CNY
| Classified based on products | Items | 2022 | 2021 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watch brand business | Raw materials | 191,690,987.81 | 7.00% | 256,857,016.25 | 7.82% | -25.37% |
| Labor costs | 17,406,869.24 | 0.64% | 24,624,829.03 | 0.75% | -29.31% | |
| Depreciation expense | 774,944.08 | 0.03% | 776,630.56 | 0.02% | -0.22% | |
| Water and electricity fees | 493,392.62 | 0.02% | 557,212.31 | 0.02% | -11.45% | |
| Rent | 260,130.07 | 0.01% | 254,302.70 | 0.01% | 2.29% | |
| Others | 3,102,961.25 | 0.11% | 4,759,127.90 | 0.14% | -34.80% | |
| Watch retail and services | Goods purchase costs | 2,342,868,173.39 | 85.54% | 2,829,459,485.45 | 86.12% | -17.20% |
| Precision technology business | Raw materials | 98,488,952.82 | 3.60% | 88,916,323.84 | 2.71% | 10.77% |
| Labor costs | 20,496,222.84 | 0.75% | 19,308,218.35 | 0.59% | 6.15% | |
| Depreciation expense | 2,454,475.24 | 0.09% | 2,929,018.86 | 0.09% | -16.20% | |
| Water and electricity fees | 1,267,740.58 | 0.05% | 1,185,220.49 | 0.04% | 6.96% | |
| Rent | 105,177.92 | 0.00% | 127,758.44 | 0.00% | -17.67% | |
| Others | 12,654,085.26 | 0.46% | 10,812,906.46 | 0.33% | 17.03% | |
| Leases | Depreciation expense | 15,821,128.29 | 0.58% | 16,068,736.92 | 0.49% | -1.54% |
| Labor costs | 4,216,863.25 | 0.15% | 3,216,088.80 | 0.10% | 31.12% | |
| Others | 25,998,424.57 | 0.95% | 23,581,556.59 | 0.72% | 10.25% | |
| Others | Purchase of finished products | 872,261.88 | 0.03% | 2,221,796.17 | 0.07% | -60.74% |
(6) Is there any change in the consolidation scope in the reporting period
No
(7) Is there any significant change or adjustment related situation taken place in the Company’sbusiness, products or services in the reporting periodInapplicable
(8) Major sales customers and major suppliers
Information about the major sales customers
| Total sales to the top five customers, in CNY | 840,148,872.05 |
| Proportion of the total sales to the top five customers in the total sales of the year | 19.29% |
| Proportion of the total sales to the related parties in | 0.00% |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
the top five customers in the total sales of the year
Information of the top 5 customers
| No. | Customers | Sales (in CNY) | Proportion in the total sales of the year |
| 1 | No. 1 | 234,784,497.82 | 5.39% |
| 2 | No. 2 | 200,544,447.73 | 4.61% |
| 3 | No. 3 | 142,759,850.40 | 3.28% |
| 4 | No. 4 | 133,423,223.98 | 3.06% |
| 5 | No. 5 | 128,636,852.12 | 2.95% |
| Total | -- | 840,148,872.05 | 19.29% |
Other Information about the major customersInapplicableMajor suppliers
| Total amount of purchase from top five suppliers, in CNY | 2,393,337,201.19 |
| Proportion of the purchase amount from the top five suppliers in the Company’s total purchase amount | 84.52% |
| Proportion of the purchase amount from the related parties in the top five suppliers in the Company’s total purchase amount | 0.00% |
Information about the top 5 suppliers
| No. | Suppliers | Purchase amount, in CNY | Proportion in the total purchases of the year (%) |
| 1 | No. 1 | 937,593,533.96 | 33.11% |
| 2 | No. 2 | 756,077,714.55 | 26.70% |
| 3 | No. 3 | 358,538,552.98 | 12.66% |
| 4 | No. 4 | 188,869,079.60 | 6.67% |
| 5 | No. 5 | 152,258,320.10 | 5.38% |
| Total | -- | 2,393,337,201.19 | 84.52% |
Other information about the major suppliersInapplicable
3. Expenses
In CNY
| 2022 | 2021 | Year-on-year increase/decrease | Note to significant changes | |
| Sales costs | 931,832,830.40 | 1,049,898,223.28 | -11.25% | Inapplicable |
| Administrative expenses | 219,014,508.52 | 261,626,762.41 | -16.29% | Inapplicable |
| Financial expenses | 21,188,742.11 | 34,677,073.65 | -38.90% | Inapplicable |
| R & D expenditures | 61,088,585.61 | 57,802,569.17 | 5.68% | Inapplicable |
4. Investment in R & D
| Description of the Main R & D Projects | Project purpose | Project progress | The objective to be reached | Impact on the predicted future development of the Company |
| New series products with the quality of FIYTA Brand | Innovative products with the brand characteristics provided to the market | Continuously promoting fulfillment of the tasks in the very year | With aerospace industry as the theme, developing multiple series of products with FIYTA brand characteristics, | Providing innovative products |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| and launching for sales as planned | ||||
| Developing new product innovation structure | Improving new product performances and market competitiveness | Fulfillment of the tasks in the very year | According to the demand of theme new products development, innovating and developing new products structure | Improving new product performances and market competitiveness |
| Development of mechanical watch movements with brand differentiation characteristics | Improving new product performances and market competitiveness | Continuously promoting fulfillment of the tasks in the very year | According to the needs of brand differentiation, developing mechanical watch movements and the relevant critical parts with special functions and directing methods | Improving new product performances and market competitiveness |
| Development of watch for manned spaceflight | Providing special equipment watches for the field of manned spaceflight | Fulfillment of the tasks in the very year | According to the requirements of manned space missions, developed and delivered special equipment watches | Providing special equipment watches for the field of manned spaceflight |
| Smart watches with the functions of camera, payment, sport and physical signs monitoring | Improving new product performances and market competitiveness | Fulfillment of the tasks in the very year | Developing smart watches with functions of camera and payment; developing smart watches with functions of monitoring physical exercise status and physical sign data, and launch the products in the market according to the plan | Improving new product performances and market competitiveness |
R & D Staff
| 2022 | 2021 | Percentage of change | |
| Number of R & D staff (persons) | 115 | 128 | -10.16% |
| Proportion of R & D staff in total employees | 2.66% | 2.52% | 0.14% |
| Educational background structure of R & D staff | |||
| Undergraduate | 61 | 63 | -3.17% |
| Master’s degree | 18 | 22 | -18.18% |
| PhD | 2 | 3 | -33.33% |
| Junior college and below | 34 | 40 | -15.00% |
| Age composition of R & D staff | |||
| Below 30 | 38 | 47 | -19.15% |
| 30 - 40 | 51 | 60 | -15.00% |
| Over 40 | 26 | 21 | 23.81% |
Investment in R & D
| 2022 | 2021 | Percentage of change | |
| Amount of investment in R | 61,088,585.61 | 57,802,569.17 | 5.68% |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| & D, in CNY | |||
| Proportion of investment in R & D in operating revenue | 1.40% | 1.10% | 0.30% |
| Amount of capitalized investment in R & D (in CNY) | 0.00 | 0.00 | 0.00% |
| Proportion of capitalized investment in R & D in the total investment in R & D | 0.00% | 0.00% | 0.00% |
Reasons and effects of major changes in the composition of the Company's R&D personnelInapplicableCause(s) of significant change of the total investment in R & D in the operating revenueInapplicableNote to the cause of significant change in the capitalization rate of investment in R & D and note to thereasonabilityInapplicable
5. Cash Flow
In CNY
| Items | 2022 | 2021 | Year-on-year increase/decrease |
| Subtotal of cash flow in from operating activity | 4,997,924,003.93 | 5,944,580,198.34 | -15.92% |
| Subtotal of cash flow out from operating activity | 4,521,695,227.41 | 5,397,331,089.89 | -16.22% |
| Net cash flows arising from operating activities | 476,228,776.52 | 547,249,108.45 | -12.98% |
| Subtotal of cash flow in from investment activity | 138,721.29 | 59,657.53 | 132.53% |
| Subtotal of cash flow out from investment activity | 114,090,573.97 | 204,422,787.61 | -44.19% |
| Net cash flows arising from investment activities | -113,951,852.68 | -204,363,130.08 | 44.24% |
| Subtotal of cash flow in from fund raising activity | 845,155,704.29 | 1,213,940,412.23 | -30.38% |
| Sub-total cash flow paid for financing activities | 1,106,081,523.22 | 1,698,488,462.84 | -34.88% |
| Net cash flow arising from capital-raising activities | -260,925,818.93 | -484,548,050.61 | 46.15% |
| Net increase of cash and cash equivalents | 103,483,652.50 | -142,802,548.57 | 172.47% |
Note to the major influencing factors for the significant change in the relevant year-on-year data
1. Net cash flow arising from investment activities amounted to CNY -113,951,852.68 in the reporting year,while it was CNY -204,363,130.08 in the same period of the previous year with the payment decreased byCNY 90,411,277.40, which was mainly due to the decrease of payments for refurbishment andimprovement of the stores during the reporting year.
2. Net cash flow arising from financing activities amounted to CNY -260,925,818.93 in the reporting year, whileit was CNY -484,548,050.61 in the same period of the previous year, with the payment decreased by CNY223,622,231.68. It was mainly due to decrease of the bank loans, decrease of cash dividends payment andincrease of the payment for B-shares buy-back.Note to the cause of significant difference between the net cash flow arising from the Company'sbusiness activities and the net profit of the reporting year during the reporting period.InapplicableV. Analysis on Non-Principal BusinessesInapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
VI. Analysis on Assets and Liabilities
1. Significant Changes in Assets Composition
In CNY
| End of 2022 | Beginning of 2022 | Increase/decrease in proportion | Note to significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary fund | 313,747,463.64 | 7.62% | 210,254,737.14 | 5.11% | 2.51% | Inapplicable |
| Accounts receivable | 305,290,959.68 | 7.42% | 388,885,601.28 | 9.46% | -2.04% | Inapplicable |
| Contract assets | 0.00 | 0.00% | 0.00 | 0.00% | 0.00% | Inapplicable |
| Inventories | 2,141,320,373.67 | 52.01% | 2,050,148,750.89 | 49.87% | 2.14% | Inapplicable |
| Investment-oriented real estate | 374,979,494.71 | 9.11% | 383,425,916.35 | 9.33% | -0.22% | Inapplicable |
| Long-term equity investment | 58,182,086.90 | 1.41% | 55,155,605.31 | 1.34% | 0.07% | Inapplicable |
| Fixed assets | 364,628,765.17 | 8.86% | 349,495,316.65 | 8.50% | 0.36% | Inapplicable |
| Construction-in-process | 0.00 | 0.00% | 0.00 | 0.00% | 0.00% | Inapplicable |
| Right-of-use assets | 110,330,512.03 | 2.68% | 147,932,475.42 | 3.60% | -0.92% | Inapplicable |
| Short term loans | 290,237,111.11 | 7.05% | 265,994,595.43 | 6.47% | 0.58% | Inapplicable |
| Contract liabilities | 16,844,437.47 | 0.41% | 22,505,426.65 | 0.55% | -0.14% | Inapplicable |
| Long-term borrowings | 0.00 | 0.00% | 0.00 | 0.00% | 0.00% | Inapplicable |
| Lease liabilities | 41,642,561.58 | 1.01% | 64,918,722.10 | 1.58% | -0.57% | Inapplicable |
Higher proportion of foreign assetsInapplicable
2. Assets and liabilities measured based on fair value
Inapplicable
3. Restriction on rights in the assets ended the reporting period
InapplicableVII. Analysis of Investment Situation
1. General
Inapplicable
2. Significant Equity Investment Acquired in the Reporting Period
Inapplicable
3. Significant non-equity investment in process in the reporting period
Inapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
4. Financial assets investment
(1) Investment in securities
Inapplicable
(2) Investment in derivatives
Inapplicable
5. Application of the raised capital
InapplicableVIII. Sales of Significant Assets and Equity
1. Sales of Significant Assets
Inapplicable
2. Sales of Significant Equity
Inapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
IX. Analysis on the Major Companies in Which the Company has Controlling Shares and Equity ParticipationParticulars about the principal subsidiaries and equity participation companies which may affect the Company’s net profit by over 10%.In CNY
| Company name | Company type | Principal business | Registered capital | Total assets | Net assets | Operation revenue | Operating profit | Net profit |
| Shenzhen Harmony World Watches Center Co., Ltd. | Subsidiary | Purchase & sale and repairing service of watches and components | 600,000,000 | 2,161,382,584.47 | 1,118,528,035.10 | 3,278,422,398.34 | 309,176,857.65 | 233,439,395.74 |
| FIYTA Sales Co., Ltd. | Subsidiary | Design, R & D and sales of watches and components & parts | 450,000,000 | 422,716,826.38 | 335,763,679.35 | 370,444,152.24 | -75,508,139.28 | -59,165,687.66 |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Subsidiary | Manufacture and production of watches and components | 100,000,000 | 293,295,862.44 | 164,907,155.56 | 290,140,152.23 | 46,693,091.41 | 43,033,593.08 |
| Shenzhen FIYTA Technology Development Co., Ltd. | Subsidiary | Production and machining of sophisticated components and parts | 50,000,000 | 190,517,189.95 | 149,568,017.27 | 180,965,059.37 | 15,264,456.62 | 14,737,012.11 |
| FIYTA (Hong Kong) Limited | Subsidiary | Trading of watches and accessories and investment | 137,737,520 | 235,725,466.46 | 225,158,507.30 | 65,571,419.73 | 5,651,783.88 | 5,469,059.43 |
| Emile Chouriet (Shenzhen) Limited | Subsidiary | Design, R & D and sales of watches and components & parts | 41,355,200 | 120,344,664.31 | 53,966,581.14 | 77,723,111.54 | 1,153,922.91 | 822,619.09 |
| Shanghai Watch Industry Co., Ltd. | Mutual shareholding company | Production and sales of watches and components & parts | 15,350,000 | 197,527,401.33 | 147,046,251.53 | 141,379,376.32 | 11,431,815.11 | 12,105,926.36 |
Acquisition and disposal of subsidiaries in the reporting periodInapplicableNote to the principal equity participation companiesInapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
X. Structural Subjects Controlled by the CompanyInapplicableXI. Expectation on future development of the Company(I) Trend of External Environment and RisksAt present, the global political and economic environment is intensified in evolution, and the domesticconsumer market is still facing the pressure of demand shrinking and expectation of weakening, and thecompetition is becoming increasingly fierce. The continuous diversification and rationalization ofconsumer preferences has led to more differentiation and quality-orientation of consumer products; theexplosion of the Internet and digital economy has driven the rapid rise of new media channels, and theintegration of online and offline channels; the upgrading of national manufacturing levels, lifting ofnational self-confidence promotes the rise of domestic brands; the full liberalization of consumers'overseas travel may lead to short-term fluctuations in the domestic luxury watch consumption market; therapid development of offshore duty-free channels will bring incremental market opportunities and furtherintensify competition of the watch market.
(II) Key Work in 2023In 2023, the Company shall continue to implement the big country brand strategy, keep a close eye onthe value creation goal, take "high-quality development" as the guiding principle, adhere to the generaltone of "seeking progress while maintaining stability", and implement the "defense and counterattack"business strategy, solidly carry forward the following work:
1. Continuing to promote brand upgrading and product enhancement
The "Fiyta" brand shall focus on the positioning of "a high-quality Chinese watch brand with aerospacewatches as the character" and carry out systematic operation in respect of research and development,design, production, quality, service, image, membership, marketing, operation, channels, etc.,concentrate on investing resources in the core series and mainstream price segments, focus on thecreation of popular products from the perspective of customers, carry out integrated marketing incombination with hot events in a joint and cross-field way, optimize communication efficiency, expandbrand communication volume, and promote rejuvenation and mainstreaming of customer groups.
2. Continuing to promote channel operation improvement and structure optimizationThe Company shall continue to focus on the improvement of channel operation capabilities and structuraloptimization, lay a solid foundation of offline channels for operation and management, improve excellentoperation and customer service capabilities, and flexibly expand diversified channel forms; adhere to theintegration of products and sales for online channels, and actively explore private domain operation;continue to deepen the application of the digital retail system, and realize the integrated development ofonline and offline integration.
3. Continuing to promote transformation and upgrading to build hard core strength
The Company shall insist on long-term investment in digitalization, continue to deepen the application ofdigital retail system, promote management digitalization in an orderly manner, carry out refinedmembership management based on accumulation of membership data, optimize membership life cyclemanagement, and promote potential customer transactions, regular customer repurchase and percustomer transaction; accelerate the advancement of movement technology breakthroughs and productapplications, promote the application of new materials and technologies such as aerospace, and createhard-core capability for the products that match "aerospace quality".
4. Continuing to promote the development of precision technology and new business of smart wearablesIn respect of precision technology business, the Company shall continue to strengthen and expand itsadvantageous fields such as optical communications and lasers, further expand new markets and newcustomers such as aerospace and medical equipment, continuously improve the ability in processcompounding and product overall solution, and enhance new product development for target customersand importing ability, and continuously improve the ability in process optimization and cost reductionthrough lean production.
The Company shall continue to improve its technical strength in the business of smart wearables, striveto create product differentiation, actively expand key channels and customers, and enlarge businessscale.XII. Reception of Survey, Communications, Interviews, etc. during the Reporting Period
| Reception time | Place of reception | Way of reception | Types of Visitors | Visitors Received | Main contents discussed and | Index of Basic Information on the Investigation and Survey |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Received | information provided | |||||
| March 22, 2022 | Teleconference | Telephone communication | Institution | Soochow Securities Co., Ltd., Guoyuan Securities Co., Ltd., Shenwan Hongyuan Securities Co., Ltd., Cinda Securities Co., Ltd., Sealand Securities Co., Ltd., Guotai Junan Securities Co., Ltd., China Merchants Securities Co., Ltd., Wanlian Securities Co., Ltd., Guolian Securities Co., Ltd., Shenzhen Haifuling Capital Management Co., Ltd., Yingda Asset Management Co., Ltd. | The Company conducted communication on management of watch brands, retail of brand watches, development of precision technology business and smart wearables | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
| March 30, 2022 | Wechat Mini Program Titled “FIYTA Relationship with Investors | Others | Others | Extensive investors’ participation in the Company's 2021 Annual Online Performance Presentation by network remoteness | In order to provide investors with a comprehensive and in-depth understanding of the Company’s situation, the Company held a 2021 Online Performance Briefing and conducted communications and exchange with investors on the Company’s 2021 operating status, development strategy, watch brand | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| management business, brand watch retails, and development of precision technology and smart wearables. | ||||||
| July 06, 2022 | Conference Room of Shenzhen FIYTA Technology Building | Field survey | Institution | Pingan Fund Management Co., Ltd., Guotai Junan Securities Co., Ltd., Hangzhou Lianhua Huashang Group Co., Ltd., Shenzhen Huitong Fund Management Co., Ltd. and Penghua Fund Management Co., Ltd. | The Company conducted communication on management of watch brands, retail of brand watches, development of precision technology business, etc. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
| August 26, 2022 | Teleconference | Telephone communication | Institution | Shenwan Hongyuan Securities Co., Ltd., Huatai Securities Co., Ltd., New China Fund Management Co., Ltd., Shanghai Shangjin Investment Management Partnership (Limited Partnership), Sunshine Insurance Group Corporation Limited, Shanghai Whitestream Fund Management Co., Ltd., Hangzhou Haoche | The Company conducted communication on management of watch brands, retail of brand watches, development of precision technology business, etc. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| ng Investment Management Co., Ltd. and China Merchants Securities Co., Ltd. | ||||||
| November 09, 2022 | “https://rs.p5w.net”, WeChat public account, APP | Others | Others | Internet Remote Participation Company Investors at the 2022 Investor Online Collective Reception Day | The Company communicated with investors on the Company's operating conditions, development strategy, watch brand management business, luxury watch retail business, precision technology business and smart wearables business development. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 4 Corporate GovernanceI. GeneralIn year 2022, the Company kept improving the Company’s corporate governance structure strictlyaccording to the PRC Company Law, the PRC Securities Law and the regulations of China SecuritiesRegulatory Commission concerning governance of listed companies, and tried to enhance constructionof modern enterprise system, upgraded the level of regulatory operation of the Company. As a result,there was no discrepancy between the situation of the Company’s corporate governance and theregulatory documents of China Securities Regulatory Commission concerning governance of listedcompanies.
The Company established and improved relatively standardized corporate governance structure andrules of procedures strictly according to law, rules and regulations, including the PRC Company Law, andthe Articles of Association of the Company, formed a decision-making and operation managementsystem with the Shareholders’ Meeting, the Board of Directors, the Supervisory Committee and themanagement of the Company as the principal structure. They implemented their respective dutiesaccording to the PRC Company Law and the Articles of Association.
The General Meeting is the Company’s power organ and has the power of deciding the Company’soperation policy and investment plan, reviewing and approving the Company’s annual financial budgetscheme, settlement scheme, profit distribution plan, loss make-up plan, change of the application of theproceeds raised through issuing, the equity incentive plan, etc., make resolutions on the Company'sincrease or decrease of registered capital, issuance of corporate bonds and bond-like financinginstruments, merger, division, dissolution, liquidation or change of company form, formulate or approvethe Company's articles of association and amendments to the articles of association, elect and replacethe directors and supervisors serving as employee representatives and decide matters concerning theremuneration of directors and supervisors.
The Board of Directors plays the role of "setting strategies, making decisions, and preventing risks", andis responsible for implementing the resolutions of the general meetings of shareholders, convening andreporting to the general meeting of shareholders. Within the authorization from the General Meeting,decides the Company’s external investment, acquisition and sales of assets, assets pledge, externalguarantee, related transactions, etc., decides establishment of the Company’s internal managementorgans and branches, engagement and disengagement of the Company’s general manager, the Boardsecretary and other senior executives, etc. The Board of Directors consists of nine directors, includingthree independent directors. The Board of Directors has established three subordinate specialcommittees, namely the Strategy Committee, the Audit Committee and Nomination, Emolument andAssessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of reviewing the Company'sregular reports, examining the Company's financial affairs, supervising the directors and seniorexecutives in performing duties according to the law and proposes dismissal of any director or seniorexecutive who breaches the law, the administrative rules and regulations, the Articles of Association orresolutions of the General Meeting, etc. The Supervisory Committee consists of three supervisorsincluding one staff representative supervisor.
The management is responsible for "seeking operation, carrying out implementation, and strengtheningmanagement". The General Manager is responsible to the Board of Directors, presides over theproduction, operation and management of the Company under the leadership of the Board of Directors,organizes the implementation of resolutions of the Board of Directors, reports work to the Board ofDirectors, and organizes the implementation of the Company's annual development plan, operation andmanagement; plans and formulates the Company's investment plan and investment plan, annualfinancial budget plan, final account plan, profit distribution plan and loss recovery plan and theCompany's plan for increasing or decreasing registered capital, etc.Whether there is a material difference between the actual situation of corporate governance and laws,administrative regulations and regulations on the governance of listed companies issued by the ChinaSecurities Regulatory Commission.NoII. Independence in securing the Company's assets, personnel, finance, organization, business,etc. relative to the controlling shareholder and actual controllerThe Company is independent in business, personnel, assets, organization and finance from itscontrolling shareholder. The Company has complete and independent business and the ability ofautonomous operation.
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Business: The Company is mainly engaged in timepiece businesses and has independent production,auxiliary production system and complementary facilities, and possesses its own procurement and salessystems. There exists no competition in the same sector between the Company and its controllingshareholder.
Personnel: The Company is completely independent in organization and has sound systems in labor,personnel and salaries management. Except Mr. Xiao Yi, Mr. Xiao Zhanglin, Mr. Li Peiyin and Mr. DengJianghu as directors, and Mr. Zheng Qiyuan, the chairman of the Supervisory Committee, and Ms. CaoZhen as supervisor, none of other senior executives takes any concurrent office in the shareholders andnone of the financial staff works concurrently for any related parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Companyenjoys the corporate ownership over its assets and the assets are completely independent from itscontrolling shareholder. In addition, the Company enjoys sole ownership of such trademarks as FIYTA,HARMONY, etc.
Organization: The Board of Directors, the Supervisory Committee and the other internal organs are wellestablished and work independently. There exist neither subordinate relations between the controllingshareholder/its functional departments nor doing joint office work. The controlling shareholder enjoys itsrights and undertakes the corresponding obligations according to the law and has never been involved inany action which directly or indirectly interferes the Company’s business activities surpassing theauthority of the General Meeting.
Finance: The Company has established independent financial department, worked out sound andindependent financial and accounting system and financial management system and independentlyopened bank accounts. The controlling shareholder has never interfered the Company in its financial andaccounting activities.III. Horizontal CompetitionsInapplicableIV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period
1. General Meetings
| Sessions | Meeting type | Proportion of attendance of the investors | Meeting date | Date of disclosure | Resolutions of the meetings |
| 2021 Annual General Meeting | Annual General Meeting | 41.22% | May 13, 2022 | May 14, 2022 | For the detail, refer to the "Announcement on the Resolutions of 2021 Annual General Meeting No. 2022-026" disclosed on www.cninfo.com.cn |
2. Extraordinary general meeting requested for holding by the preferred shareholders with thevoting power recovered.Inapplicable
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
V. Directors, Supervisors and Senior Executives
1. Basic information
| Name | Title | Office Status | Gender | Age | Starting date of tenure | Expiry date of tenure | Number of shares held at the beginning of the reporting period (shares) | Shareholding increased in the reporting period (shares) | Shareholding decreased in the reporting period (shares) | Change of other increase/decrease (shares) | Number of shares held at end of the reporting period (shares) | Cause of increase/decrease of shares |
| Zhang Xuhua | Chairman of the Board | In office | Male | 46 | July 01, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Xiao Yi | Director | In office | Male | 49 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Xiao Zhanglin | Director | In office | Male | 47 | September 20, 2017 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Li Peiyin | Director | In office | Male | 37 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Deng Jianghu | Director | In office | Male | 39 | September 08, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Pan Bo | Director | In office | Male | 47 | February 24, 2021 | September 08, 2024 | 280,000 | 0 | 0 | 0 | 280,000 | |
| General Manager | January 15, 2021 | September 08, 2024 | ||||||||||
| Wang Jianxin | Independent Director | In office | Male | 53 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Zhong Hongming | Independent Director | In office | Male | 48 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Tang Xiaofei | Independent Director | In office | Male | 49 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Zheng Qiyuan | Chairman of the Supervisory Committee | In office | Male | 60 | March 08, 2022 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Cao Zhen | Supervisor | In office | Female | 52 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Hu Jing | Supervisor | In office | Female | 52 | September 07, 2021 | September 08, 2024 | 9,000 | 0 | 0 | 0 | 9,000 | |
| Lu Wanjun | Deputy GM | In office | Male | 56 | August 08, 2014 | September 08, 2024 | 280,000 | 0 | 0 | 0 | 280,000 | |
| Chief Law Adviser | In office | October 25, 2021 | September 08, 2024 |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Liu Xiaoming | Deputy GM | In office | Male | 52 | October 17, 2016 | September 08, 2024 | 280,000 | 0 | 0 | 0 | 280,000 | |
| Li Ming | Deputy GM | In office | Male | 50 | October 17, 2016 | September 08, 2024 | 280,040 | 0 | 0 | 0 | 280,040 | |
| Song Yaoming | Chief Accountant | In office | Male | 56 | February 06, 2022 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | |
| Deputy GM and the Secretary of the Board | In office | Male | April 21, 2022 | September 08, 2024 | ||||||||
| Tang Haiyuan | Deputy GM | In office | Male | 50 | September 29, 2019 | September 08, 2024 | 210,000 | 0 | 0 | 0 | 210,000 | |
| Chen Zhuo | Chief Accountant | Retired | Male | 47 | October 17, 2016 | January 28, 2022 | 281,000 | 0 | 0 | -176,720 | 104,280 | After his leaving office, 176,720 restricted A-shares held by him with the restriction not yet lifted were repurchased and canceled. |
| Secretary of the Board | January 15, 2021 | January 28, 2022 | ||||||||||
| Total | -- | -- | -- | -- | -- | -- | 1,620,040 | 0 | 0 | -176,720 | 1,443,320 | -- |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
During the reporting period, is there any resignation of directors and supervisors and dismissal of senior executives duringtheir term of office?The Company received a written resignation report submitted by Mr. Chen Zhuo, the Chief Accountant and the Secretary ofthe Board in January 2022. For work reason, Mr. Chen Zhuo applied for resigning the posts of the Chief Accountant and theSecretary of the Board of the Company. Mr. Chen no longer holds any position in the Company after his resignation.Personnel Change in Directors, Supervisors and Senior Executives
| Names | Office Taken | Type | Date | Cause |
| Song Yaoming | Chief Accountant | Being appointed | February 06, 2022 | Appointed as the Chief Accountant of the Company at the 6th session of the Tenth Board of Directors. |
| Deputy GM and the Secretary of the Board | Being appointed | April 21, 2022 | Appointed as deputy General Manager and the Secretary of the Board of the Company at the 7th session of the Tenth Board of Directors. | |
| Chen Zhuo | Chief Accountant & Secretary of the Board | Termination | January 28, 2022 | For work reason, Mr. Chen Zhuo resigned the posts of the Chief Accountant and the Secretary of the Board of the Company. |
2. Incumbency
Professional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in Office
Mr. Zhang Xuhua，born in March, 1977, holding MBA of Xi’an Jiaotong University and EMBA of China Europe InternationalBusiness School. He is now the Chairman of the Company. Mr. Zhang used to be the managing director, deputy GM,assistant to the GM, GM of the business department of the shopping center of Rainbow Digital Commercial Co.,Ltd., theGM of Chengdu Company, the GM of the business department of the Shopping Center, the GM of Chengdu Company, theGM of the Merchandise Center, the GM, manager of the procurement department, the supervisor of the merchantsdepartment of Dreams-On Department Store; staff of the market department of Vanke Industry Co., Ltd.
Mr. Xiao Yi，born in March 1974, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics. Mr. Xiao is now a director of the Company, the Director of Organization Department of the CPCCommittee/Human Resources Department of AVIC International Holding Corporation, a director of TianmaMicroelectronics Co., Ltd., a director of Shennan Circuit Co., Ltd. He used to be a deputy director and the director of theComprehensive Management Department, assistant director of the Administration Department, and the ComprehensiveSecretary of the Management Department of AVIC International Holding Corporation, the project manager of thetechnology transfer center of Beijing BUAA Assets Management Co., Ltd.
Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiao Tong University. He is currently adirector of the company, a director and the general manager of Rainbow Digital Commercial Co., Ltd., and a director ofShennan Circuit Co., Ltd. He used to be the assistant manager of the Innovation Design Department of the Company,deputy chief of the strategy development department and deputy chief and the chief of the operation and managementdepartment, the general manager of the Millimeter Wave Communication Business Department of AVIC InternationalHolding Corporation, the director of the Planning and Operation Department of AVIC International Shenzhen Co.,Ltd., thesecretary of AVIC International Holding Limited, a director of Tianma Micro-electronics Co., Ltd. and a director of AVICSunda Holding Company Limited.
Mr. Li Peiyin, born in September, 1986, Master of Accounting of Xiamen University, MBA of Missouri State University, CPAand senior accountant. Mr. Xiao is a director of the Company, the chief of the financial management department of AVICInternational Holding Corporation, a director of Rainbow Digital Commercial Co.,Ltd., a director of Shennan Circuit Co., Ltd.and a director of Tianma Micro-electronics Co., Ltd. He used to be the deputy chief and assistant chief and businessmanager of the financial management department of AVIC International Holding Corporation.
Mr. Deng Jianghu, born in July 1984, holding MBA of Northeast Normal University. Mr. Xiao is a director of the Company,the deputy chief of the planning and development department and the operation management department of AVICInternational Holding Corporation (executive), a director of Shennan Circuit Co., Ltd. and a director of Rainbow DigitalCommercial Co.,Ltd. He used to be deputy manager and manager of the planning and operation department of theCompany, director of modern service office of AVIC International Shenzhen Co., Ltd., senior project manager of theoperation management department of AVIC International Holding Co., Ltd., a commissioner of the strategic managementand senior commissioner of the Strategic Development Department of Shennan Circuit Co., Ltd.
Mr. Pan Bo，born in March, 1976, bachelor of electromechanical engineering of Beijing University of Aeronautics &Astronautics, and EMBA of China Europe International Business School. He is the Managing Director of the Company. Mr.Pan used to be a deputy GM, the secretary of the board, and the assistant to the GM of the Company, the GM, deputy GM,the assistant to the GM, manager of the sales department, manager of the logistics department, manager of the after-saleservice department of FIYTA Sales Co., Ltd.
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Mr. Wang Jianxin, born in June, 1970, a Chinese CPA, holding bachelor of auditing of Zhongnan University of Economicsand Law. Mr. Wang is an independent director of the Company and a partner of ShineWing Certified Public Accountants(Special General Partnership).
Mr. Zhong Hongming, born in January 1975, PhD of Civil and Commercial Law in Renmin University of China andpost-doctor of Civil and Commercial Law in Southwest University Political Science and Law. He is an independent directorof the Company, an associate research fellow of Law Research Institute of Sichuan Academy of Social Sciences andconcurrently a director of China Commercial Law Society, a director of China Securities Law Research Council, theSecretary-General of Commercial Law Association of Sichuan Law Society, an independent director of Mango ExcellentMedia Co., Ltd., and an independent director of Chengdu Shengbang Seals Co., Ltd.
Mr. Tang Xiaofei, born in May, 1974, PhD of Management of Southwest Jiaotong University. Mr. Tang is an independentdirector of the Company, a professor and doctorial tutor of the Business School of Southwest Jiaotong University, directorof Urban Brand Strategy Research Institute of Southwest University of Finance and Economics, enjoying the title ofOutstanding Talent of the New Century granted by the Ministry of Education, a council member of the Chinese Associationof Market Development, and an independent director of Qianhe Condiment and Food Co., Ltd.
Mr. Zheng Qiyuan, born in July, 1963, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics, MBA of Paris Business School; senior engineer. Mr.Zheng is the Chairman of the Supervisory Committee ofthe Company and and a full-time director and supervisor of AVIC International Holding Corporation. Mr. Zheng used to bethe secretary of the Ministry of Aviation Industry,chief staff of the Planning Department of the Ministry of Aviation Industry,deputy chief and chief of the Planning Department of AVIC Corporation, deputy manager and manager of the BiddingCenter of AVIC Corporation, deputy manager and manager of AVIC International Economic & Trade Development Limited,a commissioner of AVIC International Holding Corporation, Chief Business Officer of AVIC International (HK) Group Limited,GM of AVIC International (HK) Trading Limited.
Ms. Cao Zhen, born in October, 1971, bachelor of literature of Jiangxi Normal University, EMBA of China EuropeInternational Business School. Ms. Cao is a supervisor of the Company, vice-secretary of the Discipline InspectionCommission and the chief of the Discipline Inspection Department of AVIC International Holding Corporation. Ms. Cao usedto be the chief editor, deputy manager and manager of the administrative management department, the secretary of theBoard, the assistant to the GM of AVIC News of AVIC International Shenzhen Company Limited, the manager of theenterprise culture department of AVIC International Holding Corporation, the chief of the CPC Construction and Ideologicaland Political Work Department, the discipline secretary and the chairman of the trade union of AVIC International ShenzhenCompany Limited, deputy leader of the discipline inspection team and the chief of the discipline inspection, supervision andaudit department of AVIC International Holding Corporation.
Ms. Hu Jing, born in September, 1971, accountant, bachelor of accounting from Jiangxi University of Finance andEconomics. She is a staff representative supervisor and senior taxation management of the financial department of theCompany. She used to be the senior business manager of the audit department,the tax supervisor and manager of capitalof the finance department of the Company.
Mr. Lu Wanjun, born in February, 1967, accountant and EMBA of China Europe International Business School. He is nowa deputy GM and chief law adviser of the Company. He used to be the assistant to the GM of the Company, executivedeputy GM and deputy GM, the assistant to the GM and concurrently the manager of the financial department of ShenzhenHarmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University ofAeronautics & Astronautics, and EMBA of China Europe International Business School. He is now a deputy GM of theCompany. He used to be the assistant to the GM of the Company, a deputy GM and the assistant to the GM of ShenzhenHarmony World Watches Center Co., Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBA ofChina Europe International Business School. He is now a deputy GM of the Company. Mr. Li used to be the assistant to theGM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR department ofShenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of China NetcomShenzhen; manager of big customers and manager of market planning of China Telecom Shenzhen.
Mr. Song Yaoming, born in July, 1967, accountant, master of economics of Shaanxi College of Finance and Economicsand EMBA of China Europe International Business School. Mr. Song is now the Chief Accountant, Deputy GM and theSecretary of the Board of the Company. He used to be the deputy general manager and chief accountant of RainbowDigital Commercial Co., Ltd., director of Shenzhen Aoxuan Investment Co., Ltd., director of Shenzhen Aoer InvestmentDevelopment Co., Ltd., and deputy manager and accountant of the financial department of Shenyang FAW JinbeiAutomobile Co., Ltd.
Mr. Tang Haiyuan, born in February, 1973, senior engineer, bachelor of plastic molding technology and equipment of HefeiUniversity of Technology, and EMBA of China Europe International Business School. He is now a deputy GM of the
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Company. Mr. Tang used to work for Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd., taking the officesof the GM, a deputy GM, the assistant to the GM, and the manager of its quality department, manager and deputy managerof the engineering and technical department; also work for Shenzhen FIYTA Technology Development Co., Ltd., takingoffices of the assistant to the GM and the manager of the technical department.Office taking in shareholder companies
| Names of the persons in office | Names of the Shareholders | Titles engaged in the shareholders | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from the shareholder |
| Xiao Yi | AVIC International Holding Corporation | Chief of the CPC Organization Department/Human Resource Department | January 18, 2021 | Yes | |
| Li Peiyin | AVIC International Holding Corporation | Chief of the Financial and Management Department | February 28, 2022 | Yes | |
| Deng Jianghu | AVIC International Holding Corporation | Deputy chief of the planning & development department and operation & management department (executive) | July 05, 2021 | Yes | |
| Zheng Qiyuan | AVIC International Holding Corporation | Full-time independent supervisor | December 01, 2019 | Yes | |
| Cao Zhen | AVIC International Holding Corporation | Vice-secretary of the discipline inspection committee and the chief of the discipline inspection department | December 23, 2019/June 10, 2020 | Yes | |
| Office taking in shareholder companies | Inapplicable | ||||
Office taking in other organizations
| Names of the persons in office | Names of the other organizations | Titles engaged in other organizations | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from other organization |
| Xiao Yi | Tianma Micro-electronics Co., Ltd. | Director | February 26, 2021 | No | |
| Shennan Circuit Co., Ltd. | Director | April 06, 2021 | No | ||
| Xiao Zhanglin | Shennan Circuit Co., Ltd. | Director | June 18, 2015 | No | |
| Rainbow Digital Commercial Co., Ltd. | Director | September 27, 2017 | Yes | ||
| Rainbow Digital Commercial Co., Ltd. | General Manager | April 02, 2022 | Yes | ||
| Li Peiyin | Rainbow Digital Commercial Co., Ltd. | Director | February 24, 2021 | No | |
| Shennan Circuit Co., Ltd. | Director | April 06, 2021 | No | ||
| Tianma Micro-electronics Co., Ltd. | Director | July 08, 2022 | No | ||
| Deng Jianghu | Tianma Micro-electronics Co., Ltd. | Director | November 29, 2021 | No | |
| Shennan Circuit Co., Ltd. | Director | April 07, 2022 | No | ||
| Rainbow Digital Commercial Co., Ltd. | Director | September 09, 2022 | No | ||
| Wang Jianxin | SHINEWING Certified Public Accountants LLP | Partnership | December 01, 2006 | Yes | |
| Zhong Hongming | Institute of Law of Sichuan Academy of | Associate research fellow | November 24, 2017 | Yes |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Social Sciences | |||||
| Mango Excellent Media Co., Ltd. | Independent Director | June 14, 2017 | Yes | ||
| Chengdu Shengbang Seals Co., Ltd. | Independent Director | November 17, 2022 | Yes | ||
| Tang Xiaofei | The School of Business Administration of Southwest University of Finance Economics | Professor and doctorial tutor | September 01, 2008 | Yes | |
| Qianhe Condiment and Food Co., Ltd. | Independent Director | November 30, 2022 | Yes | ||
| Office taking in other organizations | Inapplicable | ||||
Punishment imposed by the securities regulatory authority on the directors, supervisors and senior executives both in officeand having left their posts in the reporting period.Inapplicable
3. Remuneration to Directors, Supervisors and Senior Executives
Decision-making procedures, basis for determining the remuneration and actual payment to directors, supervisors andsenior executive to directors, supervisors and senior executives
The Company practiced the annual salary system for its directors and senior executives. The annual salary structureconsists of the basic annual salary and performance based annual salary. The assessment of senior executives isconducted according to the Measures for the Management of the Management Members' Business Performance Appraisaland the Measures for the Management of the Remuneration to the Management Members.Remuneration to Directors, Supervisors and Senior Executives during the Reporting Period
In CNY 10,000
| Names | Title | Gender | Age | Office Status | Total pretax remuneration received from the Company | Is the remuneration from one of the Company's related parties |
| Zhang Xuhua | Chairman of the Board | Male | 46 | In office | 180.48 | No |
| Xiao Yi | Director | Male | 49 | In office | Yes | |
| Xiao Zhanglin | Director | Male | 47 | In office | Yes | |
| Li Peiyin | Director | Male | 37 | In office | Yes | |
| Deng Jianghu | Director | Male | 39 | In office | Yes | |
| Pan Bo | Managing Director | Male | 47 | In office | 233.8 | No |
| Wang Jianxin | Independent Director | Male | 53 | In office | 9 | No |
| Zhong Hongming | Independent Director | Male | 48 | In office | 9 | No |
| Tang Xiaofei | Independent Director | Male | 49 | In office | 9 | No |
| Zheng Qiyuan | Chairman of the Supervisory Committee | Male | 60 | In office | Yes | |
| Cao Zhen | Supervisor | Female | 52 | In office | Yes | |
| Hu Jing | Supervisor | Female | 52 | In office | 30.96 | No |
| Lu Wanjun | deputy GM and chief law adviser | Male | 56 | In office | 198.33 | No |
| Liu Xiaoming | Deputy GM | Male | 52 | In office | 253.33 | No |
| Li Ming | Deputy GM | Male | 50 | In office | 189.33 | No |
| Song Yaoming | Chief Accountant, Deputy GM and the Secretary of the Board of the Company | Male | 56 | In office | 74.55 | No |
| Tang Haiyuan | Deputy GM | Male | 50 | In office | 204 | No |
| Chen Zhuo | Chief Accountant & Secretary of the Board | Male | 47 | Retired | 123.08 | Yes |
| Total | -- | -- | -- | -- | 1,514.86 | -- |
VI. Duty Performance of Directors in the Reporting Period
1. Board Meetings
| Sessions | Meeting date | Date of disclosure | Resolutions of the meetings |
| 5th session of the Tenth Board of Directors | February 06, 2022 | February 07, 2022 | For details, please refer to the “Announcement on the Resolution of the 5th Session of the Tenth Board of Directors 2022-003”disclosed by the Company on http://www.cninfo.com.cn/. |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| 6th session of the Tenth Board of Directors | March 08, 2022 | March 10, 2022 | For details, please refer to the “Announcement on the Resolution of the 6th Session of the Tenth Board of Directors 2022-007”disclosed by the Company on http://www.cninfo.com.cn/. |
| 7th session of the Tenth Board of Directors | April 21, 2022 | April 23, 2022 | For details, please refer to the “Announcement on the Resolution of the 7th Session of the Tenth Board of Directors 2022-018”disclosed by the Company on http://www.cninfo.com.cn/. |
| 8th session of the Tenth Board of Directors | August 18, 2022 | August 20, 2022 | For details, please refer to the “Announcement on the Resolution of the 8th Session of the Tenth Board of Directors 2022-035”disclosed by the Company on http://www.cninfo.com.cn/. |
| 9th session of the Tenth Board of Directors | October 24, 2022 | October 26, 2022 | The meeting reviewed and approved 2022 Third Quarter Report |
| 10th session of the Tenth Board of Directors | December 20, 2022 | December 21, 2022 | For details, please refer to the “Announcement on the Resolution of the 10th Session of the Tenth Board of Directors 2022-046”disclosed by the Company on http://www.cninfo.com.cn/. |
2. Attendance of Directors for Board Meetings and General Meetings
| Attendance of Directors for Board Meetings and General Meetings | |||||||
| Names of Directors | Number of Board meetings which should be be attended in the reporting period | Number of Spot Attendances | Number of Meetings Attended by Communication | Number of attendances of board meeting by proxy | Number of absence | Failure to personally attend board meetings successively twice | Number of attendance of the General Meeting |
| Zhang Xuhua | 6 | 2 | 4 | 0 | 0 | No | 1 |
| Xiao Yi | 6 | 0 | 6 | 0 | 0 | No | 0 |
| Xiao Zhanglin | 6 | 0 | 6 | 0 | 0 | No | 0 |
| Li Peiyin | 6 | 0 | 6 | 0 | 0 | No | 0 |
| Deng Jianghu | 6 | 0 | 6 | 0 | 0 | No | 0 |
| Pan Bo | 6 | 2 | 4 | 0 | 0 | No | 1 |
| Wang Jianxin | 6 | 0 | 6 | 0 | 0 | No | 1 |
| Zhong Hongming | 6 | 0 | 6 | 0 | 0 | No | 0 |
| Tang Xiaofei | 6 | 0 | 6 | 0 | 0 | No | 0 |
Note to failure to attend the board meeting successively twiceInapplicable
3. Objection of directors on some relevant issues
Have the directors proposed any objection on the relevant issues of the CompanyNo
4. Other Note to Duty Performance of Directors
Have the directors' recommendations to the Company been acceptedYesExplanation on why the directors' recommendations have been accepted or not been acceptedDuring the reporting period, the Board of Directors gave full play to the role of "setting strategies, making decisions, andpreventing risks". The directors of the Company attended Board Meetings on time in strict accordance with the "CompanyLaw", "Code of Corporate Governance for Listed Companies" and other laws and regulations and the "Articles ofAssociation", diligently and conscientiously performed duties and rights of directors, and fully deliberated, madesuggestions and voted on the resolutions of the Board of Directors. The Company fully considered and adopted theconstructive opinions put forward by directors in terms of business development, revision of the rules and regulations,implementation of equity incentive plan, etc.VII. Duty Performance of Special Committees under the Board of Directors in the Reporting Period
| Names of Special Committees | About the members | Number of meetings held | Meeting date | Description of meetings | Important comments and suggestions made | Other duty performances | Specific objections (if any) |
| Strategy Committee | Chairman of the committee: Zhang Xuhua Committee | 1 | March 08, 2022 | Reviewed and approved 2021 Annual Work Report of the Board | During the reporting period, members of the Strategy |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| members: Xiao Zhanglin, Deng Jianghu, Pan Bo and Tang Xiaofei | of Directors . | Committee conducted in-depth discussions and analysis on the Company's operating conditions, proposed corresponding suggestions and opinions for the Company's development, and provided support for the scientific decision-making of the Board of Directors. | |||||
| Audit Committee | Chairman of the committee: Wang Jianxin Members: Li Peiyin, Xiao Zhanglin, Zhong Hongming and Tang Xiaofei | 4 | March 08, 2022 | Reviewed and approved 2021 Annual Report, 2021 Annual Profit Distribution, 2021 Annual Internal Control Self-assessment Report, the 2021 Annual Internal Audit Work Report, and other proposals. | During the reporting period, members of the Audit Committee provided advice and suggestions in guiding internal audit work, supervising and evaluating external audit institutions, and establishing effective internal control mechanisms, and actively safeguarded the interests of the Company and all shareholders. | ||
| April 21, 2022 | Reviewed and approved the Company's 2022 1st Quarter Report, and 2022 1st Quarter Audit Work Report of the Discipline Inspection and Law Department | ||||||
| August 18, 2022 | |||||||
Reviewed andapproved theCompany's 2022Semi-annualReport and thesigning of afinancial serviceagreement withAVIC Finance Co.,Ltd.
| October 24, 2022 | Reviewed and approved the Company's 2022 3rd Quarter Report, and 2022 3rd Quarter Audit Work Report of the Discipline Inspection and Law Department | ||||||
| Committee of Nomination, Remuneration and Assessment of the Board of Directors | Chairman of the committee: Zhong Hongming Members: Xiao Yi, Xiao Zhanglin, Wang Jianxin and Tang Xiaofei | 4 | February 06, 2022 | Reviewed and approved the proposal of appointing the Company's chief accountant and appointing the chief accountant to act as the secretary of the Board of Directors. | During the reporting period, the members of the Nomination, Remuneration and Assessment Committee prudently discussed and judged the qualifications of nominated directors and senior executives, carefully reviewed the directors’ and senior executives’ remuneration assessment plan, and the implementation of the Company's equity incentive plan etc., and effectively fulfilled relevant responsibilities. | ||
| March 08, 2022 | Reviewed and approved the proposal on the remuneration to directors and senior executives in 2021 and the repurchase and cancellation of some restricted shares. | ||||||
| April 21, 2022 | Reviewed and approved the proposals on the repurchase and cancellation of some restricted shares and appointment of the Company’s deputy GM and the |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| secretary of the Board. | ||||
| December 20, 2022 | Reviewed and approved the proposal on the achievement of the release of restrictions during the third release period of the A-share Restricted Stock Incentive Plan (Phase I) and the achievement of the release of restrictions during the first release period of the A-share Restricted Stock Incentive Plan (Phase II). |
VIII. Work Summary of the Supervisory CommitteeDid the Supervisory Committee find any risk involved in performing the supervision activities in the reporting periodNoIX. Employees
1. Number, Job Composition and Education Background of Employees
| Number of employees working for the parent company at the end of the reporting period (persons) | 110 |
| Number of employees working for the major subsidiaries at the end of the reporting period (persons) | 4,211 |
| Total of employees at the end of the reporting period (persons) | 4,321 |
| Total employees receiving remuneration in the reporting period (persons) | 4,321 |
| Number of the retired employees for whom the parent company and the major subsidiaries need to share the pension (persons) | 0 |
| Job Composition | |
| Job Composition Categories | Number of persons involved in the job composition |
| Production | 331 |
| Sales | 3,126 |
| Technical | 342 |
| Financial | 129 |
| Administrative | 393 |
| Total | 4,321 |
| Education background | |
| Education levels | Number of persons |
| Master's degree or higher | 77 |
| Undergraduate | 698 |
| Junior college | 1,203 |
| Below junior college | 2,343 |
| Total | 4,321 |
2. Remuneration Policy
The Company has worked out its remuneration policy by taking its business development planning and managementpractice into consideration and based on the principles of insisting on the values, creating core concepts, followinghierarchical management, budget control, performance orientation, efficiency priority, fairness, positive incentives, andlong-term attention; Successively established and improved a remuneration system with the assessment based annualsalary system for medium and senior executives, performance-based salary systems for staff positions, and the production& performance jointly related payroll systems for production operators in accordance with the national laws, regulations andpolicies. The following administrative measures have been taken in implementation of the remuneration policy:
Total salary management: the Company has prepared an annual remuneration budget based on the annual businessplanning, adjusted and controlled the total remuneration with such factors as the market remuneration level, organizationefficiency, adjustment of the talent team, etc., and has achieved the management goal of benefit-orientation, positiveincentive, classification management and adjusted distribution;
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Classification and grading management: The Company has established a differentiated, standardized, and market-orientedsalary framework system that matches the job sequence and job level according to the professional/occupationaldevelopment system of employees;
With value as the key link, co-creating and sharing: the Company designs the incentive system according to the closed-loopvalue chain of value creation, evaluation and distribution. Through the establishment of value evaluation system andreal-time incentive system consistent with the strategic development goals, the Company has formed a compensationalong with the Company's benefits and personal performance, incremental compensation to the core key positions,excellent talent incentive mechanism.
3. Training Program
(I) Building a team of high-quality professional talents and improve the readiness of talents for key positions
The Company, relying on FIYTA Training Center, focused on the training of echelon talents, built a talent reserve pool, andimproved the organization's talent readiness; enhanced the professional ability learning of key posts, extracted knowledgeand experience of posts, created a learning atmosphere within the organization, and promoted the construction of aprofessional talent learning system.
(II) Consolidating the terminal business talent training system, and consolidating the ability of the terminal teamThe Company has built a customer-oriented terminal retail post training system, strengthened the training of businesspersonnel through the “bullseye training model”, optimized learning contents, strengthened learning methods, and used"double excellence" as a starting point to consolidate the business echelon management and operation ability.
(III) With the project-based talent training system to create outstanding training projectCultivate talents by means of project management method and logic, introduce conceptual tools such as experienceextraction, action learning, performance improvement, and situational assessment, by combination of online and offlineapproaches, and precipitate star training programs such as "Nova Program", "Spring Bamboo Shoot Program", etc.
(IV) Carrying out targeted training in close combination with business prioritiesThe development of training content closely matches the Company's business priorities, and continues to promoteexcellent sales ability improvement training to empower terminals; is timely carried out according to the launching of newproducts and key marketing node arrangements, activities such as "Stars Talk" live broadcast, watch knowledge contests,etc. are carried out in a timely way, to help employees understand the direction of key products and boost achievement ofthe sales goals.
4. Labor Outsourcing
InapplicableX. Profit Distribution and Conversion of Capital Reserve into Share CapitalPreparation, Implementation or Adjustment of the Policy for Profit Distribution, Especially the Policy for Cash DividendDistribution in the Reporting Period
The Company's 2021 Profit Distribution Plan was reviewed and approved at the 6th session of the Tenth Board of Directorsheld on March 08, 2022 and 2021 Annual General Meeting held on May 13, 2022. It was resolved that with the Company’stotal share capital as at the date of record for future implementation of the profit distribution plan after deducting the sharesin the special securities account for repurchase as the base, the Company distributed cash dividend at the rate of CNY 3.00for every 10 shares (with tax inclusive) with the total cash dividend distributed not exceeding CNY 127,815,304.50,distributed bonus share at the rate of 0 share for every 10 shares to the whole shareholders and capitalized no reserve.
During the period from the disclosure to the implementation of the equity distribution plan, the Company repurchased a totalof 7,987,217 B-shares through the special securities account for repurchase. With the 418,063,798 shares available forparticipating in the dividend distribution (the total share capital of 426,051,015 shares as at the date of record less the7,987,217 repurchased B-shares), the Company distributed cash dividend at the rate of CNY 3.00 (with the tax inclusive)for every 10 shares to all shareholders. The total amount of the cash dividend distributed was CNY 125,419,139.40.
The profit distribution plan was implemented on June 14, 2022. For the detail, please refer to the “Announcement on theImplementation of 2021 Annual Equity Distribution 2022-028”disclosed by the Company on www.cninfo.com.cn.
| Special Note to Cash Dividend Distribution Policy | |
| Does it comply with the Articles of Association or the resolution of the General Meeting? | Yes |
| Are the dividend distribution standard and proportions explicit and clear? | Yes |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Are the relevant decision-making procedures and mechanism complete? | Yes |
| Have the independent directors done their duties and brought their role into full play? | Yes |
| Do minority shareholders have opportunity to fully express their opinions and claims? Has their legal interest been fully protected? | Yes |
| In case the cash dividend distribution policy has been adjusted or altered, do the conditions and procedures comply with the law and are they transparent? | Inapplicable |
In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders were positivebut no cash dividend distribution proposal has been put forward.InapplicableProfit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period
| Bonus shares distributed at the rate of __ (share) for every 10 shares | 0 |
| Dividend distributed at the rate of CNY___ for every 10 shares (with tax inclusive) | 2.50 |
| Share capital base for the dividend distribution preplan (shares) | based on the total share capital as at the date of record (with the shares in the special securities account for repurchase deducted) |
| Total cash dividend distributed (with tax inclusive) | 104,406,990.00 |
| Amount of cash dividend distributed in other way(s) (such as shares repurchased) | 50,252,831.88 |
| Total amount of cash dividend (including other way(s) (CNY) | 154,659,821.88 |
| Profit available for distribution (CNY) | 943,017,166.88 |
| Proportion of the cash dividend in the total profit available for distribution | 100% |
| Cash Dividend Distribution for the Reporting Year | |
| Others | |
| Detailed information for profit distribution or conversion of capital reserve into share capital preplan | |
| The Company's 2022 Profit Distribution Plan was reviewed and approved at the 11th session of the Tenth Board of Directors held on March 16, 2023. The Company planned to take the number of shares on the date of record (with the shares in the special securities account for repurchase deducted) as the base when the profit distribution plan was implemented in the future and distributed cash dividend at rate of CNY 2.50 (with tax inclusive) for every 10 shares to all shareholders, and distribute 0 bonus share, and capitalize no reserve. From the time of disclosing this profit distribution plan to that prior to the implementation, in case change took place in the total amount of the share capital, the Company intended to adjust the total distribution amount in accordance with the principle of fixed distribution ratio. The profit distribution plan is subject to review and approval of the General Meeting before implementation. | |
XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other EmployeeIncentive Measures
1. Equity incentive
(1) Restricted Stock Incentive Plan Phase I
The 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meetingheld on January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I), which was later onreviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Companyeventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive. The grant price of this part ofthe restricted stock was CNY 4.40 per share, which was granted and registered for listing on January 30, 2019. For thedetail, refer to the relevant announcement disclosed on http://www.cninfo.com.cn. on January 12, 2019. The specificimplementation during the reporting period is summarized as follows:
Reviewed and approved at the 4th session of the Tenth Board of Directors, the Company satisfied the conditions for therelease of the restriction for sales in the second release period of the Company's Restricted Stock Incentive Plan (Phase I)and the 1.244421 million restricted A-shares involved were listed for trading on February 7, 2022. For the detail, refer to theCompany's relevant announcement disclosed on http://www.cninfo.com.cn. on January 28, 2022.
Reviewed and approved at the 6th session of the Tenth Board of Directors, the 7th session of the Tenth Board of Directorsand 2021 Annual General Meeting, the Company decided to repurchase and cancel the 85,838 restricted A-shares whichwere already granted to but with the restriction not yet relieved held by 5 retired incentive objects. For the detail, refer to theCompany's relevant announcements disclosed on http://www.cninfo.com.cn. on March 10, 2022, April 23, 2022 and May14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company satisfied the conditions for therelease of the restriction for sales in the third release period of the Company's Restricted Stock Incentive Plan (Phase I)
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
and the 1.162320 million restricted A-shares involved were listed for trading on January 31, 2023. For the detail, refer to theCompany's relevant announcement disclosed on http://www.cninfo.com.cn. on January 19, 2023.
(2) Restricted Stock Incentive Plan Phase II
The 23rd session of the Ninth Board of Directors held on December 04, 2020 and 2021 1st Extraordinary GeneralMeeting held on January 06, 2021 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase II), whichwas later on reviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and theCompany eventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. The grant price of thispart of the restricted stock was CNY 7.60 per share, which was granted and registered for listing on January 29, 2021. Forthe detail, refer to the relevant announcement disclosed on http://www.cninfo.com.cn. on January 16, 2021. The specificimplementation during the reporting period is summarized as follows:
Reviewed and approved at the 6th session of the Tenth Board of Directors, the 7th session of the Tenth Board of Directorsand 2021 Annual General Meeting, the Company decided to repurchase and cancel the 350,000 restricted A-shares whichwere already granted to but with the restriction not yet relieved held by 4 retired incentive objects. For the detail, refer to theCompany's relevant announcements disclosed on http://www.cninfo.com.cn. on March 10, 2022, April 23, 2022 and May14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company satisfied the conditions for therelease of the restriction for sales in the first release period of the Company's Restricted Stock Incentive Plan (Phase II) andthe 2.27439 million restricted A-shares involved were listed for trading on January 31, 2023. For the detail, refer to theCompany's relevant announcement disclosed on http://www.cninfo.com.cn. on January 19, 2023.
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Equity incentive to directors and senior executives of the Company
In shares
| Name | Title | Number of stock options held at the beginning of the year | Number of newly granted stock options during the reporting period | Number of vested shares during the reporting period | Number of exercised shares during the reporting period | Strike price and the number of the exercised shares during the reporting period (CNY/share) | Number of stock options held at the end of the reporting period | Market price at the end of the reporting period (CNY/share) | Quantity of restricted shares held at the beginning of the reporting period | Quantity of the shares unlocked in the reporting period | Quantity of restricted shares newly granted during the reporting period | Price of the restricted shares granted (CNY/share) | Quantity of restricted shares held at the end of the reporting period |
| Zhang Xuhua | Chairman of the Board | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Xiao Yi | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Xiao Zhanglin | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Li Peiyin | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Deng Jianghu | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Pan Bo | Managing Director | 0 | 0 | 0 | 0 | 0 | 0 | 203,360 | 26,640 | 0 | 176,720 | ||
| Wang Jianxin | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Zhong Hongming | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Tang Xiaofei | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Lu Wanjun | deputy GM and chief law adviser | 0 | 0 | 0 | 0 | 0 | 0 | 203,360 | 26,640 | 0 | 176,720 | ||
| Liu Xiaoming | Deputy GM | 0 | 0 | 0 | 0 | 0 | 0 | 203,360 | 26,640 | 0 | 176,720 |
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
| Li Ming | Deputy GM | 0 | 0 | 0 | 0 | 0 | 0 | 203,360 | 26,640 | 0 | 176,720 | ||
| Song Yaoming | Chief Accountant, Deputy GM and the Secretary of the Board | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Tang Haiyuan | Deputy GM | 0 | 0 | 0 | 0 | 0 | 0 | 190,020 | 19,980 | 0 | 170,040 | ||
| Chen Zhuo (who has left office) | Chief Accountant & Secretary of the Board | 0 | 0 | 0 | 0 | 0 | 0 | 203,360 | 26,640 | 0 | 0 | ||
| Total | -- | 0 | 0 | 0 | 0 | -- | 0 | -- | 1,206,820 | 153,180 | 0 | -- | 876,920 |
| Remarks (If any) | According to the relevant regulations of the Company's restricted stock incentive plan, because Mr. Chen Zhuo, one of the former incentive objects, has resigned, the Company has completed the procedures for the repurchase and cancellation of the restricted shares which have not yet been lifted held by him during the reporting period. | ||||||||||||
Assessment and Incentive Mechanism for Senior ExecutivesIn order to establish and improve the Company's incentive and restraint mechanism for senior executives,give full play to and mobilize the enthusiasm of the Company's executives, improve the Company'soperational capabilities and economic benefits, and ensure the realization of the company's strategicgoals, the Company continuously improved the work of tenure and contractual management ofexecutives. With year/tenure as a period, the Company carried out the assessment of businessperformance objectives, and continued to promote the implementation of the rigid realization of rewardsand punishments based on the assessment results, reflecting the strong incentives and hard constraintsof remuneration, adhered to performance orientation, and strengthened effective incentives for accurateassessments.
2. Implementation of the Employee Stock Ownership Plan
Inapplicable
3. Other employee incentive measures
InapplicableXII. Construction and Implementation of the Internal Control System during the Reporting Period
1. Construction and Implementation of the Internal Control System
In order to strengthen the Company's internal control, promote the Company's standardized operationand healthy development, and protect the legitimate rights and interests of shareholders, the Companyhas established and improved the Company's internal control system in accordance with the "CompanyLaw", "Securities Law" and other laws and regulations, and has conducted effective implementation.
During the reporting period, the Company continued to promote the work related to the integration andoptimization of internal control, risk management and compliance management supervision. TheCompany did not have any significant defects and shortcomings in the internal control.
2. Particular case found involving material defects in the internal control during the reportingperiodNoXIII. Management and Control of the Subsidiaries during the Reporting PeriodInapplicableXIV. Internal Control Self-assessment Report or Internal Control Audit Report
1. Self-assessment Report of the Internal Control
| Date of disclosing the full text of the internal control assessment report | March 18, 2023 | |
| Index of disclosure of the full text of the internal control assessment report | www.cninfo.com.cn | |
| Proportion of the total assets of the organizations involved in the assessment in the total assets of the Company’s consolidated financial statements | 100.00% | |
| Proportion of the operation revenue of the entitled involved in the assessment in the total operation revenue of the Company’s consolidated financial statements | 100.00% | |
| Criteria for affirming the defects | ||
| Categories | Financial report | Non-financial Report |
| Qualitative criteria | (1) This defect involves the fraud of directors, supervisors and senior executives; (2) Correction of the financial statements already disclosed; (3) The CPAs found there existed material misstatements in the financial statements of the reporting period, but the internal control failed to detect the | (1) Serious violation of the national laws, administrative regulations and normative documents; (2) Any of “decision on important events, appointment and removal of important officers, arrangement of important projects and application of big amount of fund” did not undergo collective decision-making procedure; |
| misstatements during the operation; (4) The supervision of the internal control conducted by the Company's audit committee and the discipline inspection, audit and law department was proved ineffective. | (3) Serious loss of management personnel and technical personnel of key positions; (4) Lack of system control or failure of the institutional system for important businesses involved in the production and operation of the Company (5) The failure of internal control over information disclosure leading to the Company being publicly condemned by the regulatory authorities; (6) The results of internal control evaluation, especially major defects or important defects, have not been rectified. | |
| Quantitation criteria | (1) Significant defect: misstatement ≥ 5% of pre-tax profit (2) Important defect: 1% of the pre-tax profit≤ misstatement ＜ 5% of pre-tax profit (3) General defect: misstatement ＜ 1% of pre-tax profit | (1) Significant defect: misstatement ≥ 5% of pre-tax profit (2) Important defect: 1% of the pre-tax profit≤ misstatement ＜ 5% of pre-tax profit (3) General defect: misstatement ＜ 1% of pre-tax profit |
| Number of significant defects in the financial statements (pcs) | 0 | |
| Number of significant defects in the non-financial report (pcs) | 0 | |
| Number of important defects in the financial report (pcs) | 0 | |
| Number of important defects in the non-financial report (pcs) | 0 | |
2. Internal Control Audit Report
| Deliberation Opinions in the Internal Control Audit Report | |
| In our opinion, the Company maintained effective internal control over its financial report in all major aspects in accordance with the Basic Standard for Enterprise Internal Control and other relevant regulations as at December 31, 2022. | |
| Disclosure of the internal control audit report | Disclosed |
| Date of disclosing the full text of the internal control assessment report | March 18, 2023 |
| Index of disclosing the full text of the internal control audit report | www.cninfo.com.cn |
| Type of the onions in the internal control audit report | Standard unqualified auditor’s report |
| Are there any material defects in the non-financial report | No |
Has the CPAs issued a qualified auditor’s report of internal controlNoDoes the internal control audit report issued by the CPAs agree with the self-assessment report of theBoard of DirectorsYesXV. Rectification of the Problems Found in the Self-inspection during the Special Campaign toImprove the Governance of Listed CompaniesThe Company has fully completed the self-inspection and rectified the problems found in theself-inspection in accordance with the requirements of the Announcement on Launching a SpecialCampaign to Improve the Governance of Listed Companies promulgated by the CSRC. The Companycomplies with the requirements specified in the "Company Law", the “Securities Law”, the "Code ofCorporate Governance for Listed Companies.", and other laws and regulations in its overall companygovernance with quite complete governance structure and law-compliance operation.
Section 5 Environment and Social ResponsibilityI. Significant Issues concerning Environmental ProtectionDoes the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced tothe public by the environmental protection authority?Yes
Relevant policies and industrial standards for environmental protectionShanghai Watch Industry Co., Ltd., one of the companies in which the Company has equity participation,is a key pollutants emission organization announced by the relevant department of environmentalprotection in Shanghai. During the production process, it is required to comply with the relevantprovisions of the Emission Standard of Pollutants for Electroplating (GB21900-2008) and the IntegratedWastewater Discharge Standard (DB31/199-2018).
Environmental protection administrative licensingIn 2018，Yangpu District Bureau of Ecology and Environment of Shanghai organized and held the CleanProduction Auditing and Assessment Seminar of Shanghai Watch Co., Ltd. where the Company's cleanproduction work was assessed, audited and approved. Shanghai Watch Co., Ltd.has passed thepollution discharge verification organized by Yangpu District Bureau of Ecology and Environment ofShanghai and has received the Pollutant Discharge Permit issued by the said authority at the end of2019.
Since the individual non-heavy pollutant factors originally approved in the "Pollutant Discharge Permit"did not belong to the emission scope of Shanghai Watch Industry Co., Ltd. Therefore the Company wasrequested to renew the "Pollutant Emission Permit". After being re-examined by Yangpu District Bureauof Ecology and Environment and the renewed “Pollutant Emission Permit” was approved and issued onOctober 20, 2021
Industrial emission standard and specific conditions of pollutant emissions involved in production andoperation activities
| Name of the Company or its Subsidiary | Major pollutants and varieties of specific pollutants | Major pollutants and description of specific pollutants | Way of discharging | Number of discharging outlets | Distribution of the discharging outlets | Discharging concentration/intensity | Pollutant Discharge Standards in Force | Total discharge volume | Total discharge volume verified | Over-discharging |
| Shanghai Watch Industry Co., Ltd. | Waste water | Nickel and chromium effluent | Intermittent and interruption | 1 | At the port of effluent treatment equipment | Nickel ﹤0.03, chromium ﹤0.01 | Nickel: 0.1; chromium: 0.1 | 290 tons/year | 650 tons/year | None |
Treatment of pollutantsShanghai Watch Co., Ltd. Complied with the Emission Standard of Pollutants for Electroplating,reconstructed the waste water treatment facility in 2016 and added 2 sets of equipment in 2018 for thepurpose of ensuring discharging of nickel and chromium effluent within the specified standard. Up to now,the facility has been operating normally and its emission has never exceeded the limit as specified by thestandard. The Company's online monitoring terminal has been docked with the government monitoringplatform for timely testing. Ensuring the emission factors up to standard.In compliance with the Document of Shanghai Municipal Bureau of Ecology and Environment, HU HUANGUI (2020) No. 6, the primary pollutant wastewater should comply with the general principle of “the waterwhich should be classified must be classified; the water which can be classified must be classified”.Shanghai Watch Industry Co., Ltd. started to entrust the municipal engineering department to arrangeand improve the Company’s existing wastewater pipelines commencing from August, 2020, separate,collect and treat the domestic sewage and electroplating effluent.In order to implement the requirements of the Ministry of Ecology and Environment for energy saving andconsumption reduction, Shanghai Watch Industry Co., Ltd. newly added a set of membrane filtrationheavy metal device during the reporting year. As a result, its electroplating wastewater has reached thestandard for clean water after the treatment. Therefore, the Company reuses a part of the water
(recycling) , so that the total wastewater discharge last year was reduced by about 100 tons, and therecycling rate was about 37%.
Environment Self-Monitoring ProgramYangpu District Bureau of Ecology and Environment of Shanghai monitors Shanghai Watch Industry Co.,Ltd. once a quarter. The company entrusted a qualified third-party organization (Shanghai Textile EnergyConservation Center) to monitor and issue monitoring report every six months. The Company isequipped with online monitoring instruments and communicates with the district bureau of ecology andenvironment. The platforms of the bureau and the district government are connected to the Internet totransmit the concentration data of heavy pollution factors 24 hours a day. In response to the ShanghaiMunicipal Bureau of Ecology and Environment's policy on the reduction of the emission of Category-Iheavy metal pollutants, the Company carried out product optimization and upgrading, and theelectroplating production and processing workshop was closed at the end of December 2022.
Contingency Plan for Emergent Environmental IncidentsShanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent EnvironmentalIncidents and regularly organizes training and exercise every year. The aforesaid plan has beenapproved and filed for record by Yangpu District Bureau of Ecology and Environment of Shanghai andhas been published on the Environmental Information Disclosure Platform of Enterprises and Institutionsof Shanghai.
Investment in environmental governance and protection and the payment of environmental protection taxIn 2022, Shanghai Watch Industry Co., Ltd. paid a total of CNY 121,200 for environmental governanceand protection.
Measures taken to reduce carbon emissions during the reporting period and their effectInapplicable
Administrative penalties for environmental issues during the reporting periodInapplicable
Other environment information necessary to be disclosedShanghai Watch Industry Co., Ltd. has disclosed the concerned information on the EnvironmentalInformation Disclosure Platform of Enterprises and Institutions of Shanghai according to therequirements of the local environmental protection authorities. Website:https://e2.sthj.sh.gov.cn/.
Other information in connection with the environmental protectionInapplicableII. Social ResponsibilitiesFor the detail, please refer to the "2022 Corporate Social Responsibility Report" disclosed by theCompany on www.cninfo.com.cn. on March 18, 2023.III. Consolidating and Expanding the Achievements of Poverty Alleviation and Rural RevitalizationDuring the reporting period, the Company purchased "Love·Aviation" agricultural products in conjunctionwith traditional Chinese festivals such as the Dragon Boat Festival and Mid-Autumn Festival through theaviation industry consumption assistance platform "Love·Aviation", to help poverty-stricken counties suchas Guizhou to get rid of poverty; has continuously cooperated with Shanghai Dream CharitableFoundation since 2012, built by donation 32 “Dream Centers” in 11 provinces including Guizhou,Fujian,etc. helping nearly 40,000 children in poverty-stricken areas enjoy high-quality literacy educationcourses and made contribution to rural revitalization.
Section 6 Significant EventsI. Implementation of Commitments
1. Commitments finished in implementation by the Company, shareholders, actual controller,acquirer, directors, supervisors, senior executives or other related parties in the reporting periodand commitments unfinished in implementation at the end of the reporting periodInapplicable
2. There existed profit anticipation for the Company’s assets or projects while the reportingperiod was still within the duration of the profit anticipation. The Company made explanation onwhether the assets or projects reached the anticipated profit and the causeInapplicableII. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and itsRelated PartiesInapplicableIII. Outward guarantee against regulationsInapplicableIV. Explanation of the Board of Directors on the Qualified Auditors' Report for the Latest PeriodIssued by the CPAsInapplicableV. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors(if any) on the “Qualified Auditor’s Report” issued by the CPAs in the Reporting PeriodInapplicableVI. Explanation of changes in accounting policies, accounting estimates or correction ofsignificant accounting errors compared with the financial report of the previous yearInapplicableVII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison withthe Financial Report of the Previous YearInapplicableVIII. Engagement/Disengagement of CPAsThe CPAs currently engaged by the Company
| Name of the domestic CPAs | Da Hua Certified Public Accountants (Special General Partnership) |
| Remuneration to the domestic CPAs (in CNY 10,000) | 120 |
| Successive years of the domestic CPAs offering auditing services | 2 |
| Name of the certified public accountants from the domestic CPAs | Long Jiao and Wang Dong |
| Successive years of the domestic CPAs offering auditing services | 2 |
Has the CPAs been changed for the reporting period?NoEmployment of CPAs, financial consultant or sponsor for auditing the internal controlAfter the review and approval at the Company's 2021 Annual General Meeting, the Company appointedDa Hua Certified Public Accountants (Special General Partnership) as the auditor of Company's 2022annual financial statements and the internal control.
IX. Delisting Possibly to be Confronted with after Disclosure of the Annual ReportInapplicableX. Matters concerning Bankruptcy ReorganizationInapplicableXI. Significant Lawsuits and ArbitrationsInapplicableXII. Penalty and RectificationInapplicableXIII. Integrity of the Company, its Controlling Shareholder and Actual ControllerInapplicableXIV. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Inapplicable
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Inapplicable
5. Transactions with the finance company with incidence relation
Deposit business
| Related party | Incidence relation | Maximum deposit limit per day (CNY 10,000) | Deposit interest range | Opening balance (CNY 10,000) | Amount incurred in the reporting period | Ending balance (CNY 10,000) | |
| Total amount deposited during the reporting period (in CNY 10,000) | Total amount withdrawn during the reporting period (in CNY 10,000) | ||||||
| AVIC Finance | Finance company with incidence relation | 80,000 | 1.665% | 14,778.6 | 374,432.54 | 362,078.44 | 27,132.7 |
Loan business
| Related party | Incidence relation | Loan amount (CNY 10,000) | Loan interest rate range | Opening balance (CNY 10,000) | Amount incurred in the reporting period | Ending balance (CNY 10,000) | |
| Total loan during the reporting period (in CNY 10,000) | Total repayments during the reporting period (in CNY 10,000) | ||||||
| AVIC Finance | Finance company with incidence relation | 80,000 | 2.7%-3.65% | 0 | 20,000 | 20,000 | 0 |
Credit extension and other financial businessDuring the reporting period, the balance of the daily maximum related deposits and loans between theCompany and AVIC Finance did not exceed the above-mentioned limit as specified in the financialservice agreement, and there were no credit grants or other financial services incurred for time being. Atthe same time, the Company issued the "Risk Assessment Report on the Related Deposits and Loanswith AVIC Finance Co., Ltd." for the above matters every six months.
6. Transactions between the finance company controlled by the Company and the related partiesInapplicable
7. Other Significant Related Transactions
The 6th Session of the Tenth Board of Directors held on March 08, 2022 and 2021 Annual GeneralMeeting held on May 13, 2022 reviewed and approved the Proposal on the Prediction of the RegularRelated Transactions of Year 2022. During the reporting period, the cumulative transaction amount of theCompany's related transactions related to its daily operations was within the expected range of the year.Inquiry on the website for disclosing the provisional report concerning significant related transactions
| Description of the provisional announcements | Date of disclosure | Disclosure website |
| Announcement on the Resolution of the 6th Session of the Tenth Board of Directors, 2022-007 | March 10, 2022 | http://www.cninfo.com.cn/ |
| Announcement of the Prediction of the Regular Related Transactions in 2022, 2022-010 | March 10, 2022 | http://www.cninfo.com.cn/ |
| Announcement on the Resolution of 2021 Annual General Meeting, 2022-026 | May 14, 2022 | http://www.cninfo.com.cn/ |
XV. Important Contracts and Implementation
1. Custody, Contacting and Leases
(1) Custody
Inapplicable
(2) Contracting
Inapplicable
(3) Leases
Inapplicable
2. Significant Guarantees
In CNY 10,000
| Outward Guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries) | ||||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||||
| Total amount of outward guarantee approved in the report period (A1) | 0 | Total amount of outward guarantee actually incurred in the report period (A2) | 0 | |||||||
| Total amount of outward guarantee already approved at the end of the report period (A3) | 0 | Total ending balance of outward guarantee at the end of the report period (A4) | 0 | |||||||
| Guarantee to the subsidiaries | ||||||||||
| Names | Date of | Guaran | Date of | Actual | Type of | Collat | Counte | Guaran | Implement | Guaran |
| of Guarantees | the announcement on the guarantee line | tee line | occurrence | amount of guarantee | guarantee | eral (if any) | r guarantee (if any) | tee period | ation status | tee to related party? |
| Shenzhen Harmony World Watch Limited Company | March 10, 2022 | 35,000 | December 30, 2022 | 15,000 | Guarantee with joint responsibility | 1 year | No | No | ||
| Total guarantee quota to the subsidiaries approved in the reporting period (B1) | 35,000 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (B2) | 15,000 | |||||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (B3) | 35,000 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (B4) | 15,000 | |||||||
| Guarantee among the subsidiaries | ||||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (C1) | 0 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (C2) | 0 | |||||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (C3) | 0 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (C4) | 0 | |||||||
| Total amount of guarantees (i.e. Total of the previous three major items) | ||||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (A1+B1+C1) | 35,000 | Total amount of outward guarantee actually incurred in the reporting period (A2+B2+C2) | 15,000 | |||||||
| Total amount of guarantees already approved at the end of the reporting period (A3+B3+C3) | 35,000 | Total ending balance of guarantees at the end of the reporting period (A4+B4+C4) | 15,000 | |||||||
| Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4) | 4.78% | |||||||||
| Where | ||||||||||
| Amount of guarantees offered to the shareholders, actual controller and its related parties (D) | 0 | |||||||||
| Amount of guarantee for liabilities directly or indirectly offered to the guarantees with the asset-liability ratio exceeding 70% (E) | 0 | |||||||||
| Guarantee with total amount exceeding 50% of the net assets (F) | 0 | |||||||||
| Total amount of the aforesaid three guarantees (D+E+F) | 0 | |||||||||
| For the guarantee contract not yet due, guarantee responsibility incurred in the reporting period or there is evidence showing | Inapplicable | |||||||||
| the description of the possible related discharge duty (if any) | |
| Note to the outward guarantee against the established procedures (if any) | Inapplicable |
Description of the guarantee with complex methodInapplicable
3. Entrusting a Third Party to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Other Important Contracts
InapplicableXVI. Notes to Other Significant Events
1. About the Amendment of the Articles of Association
Reviewed and approved at the 7th session of the Tenth Board of Directors and 2021 Annual GeneralMeeting, the Company decided to revise partial articles of the Articles of Association of the Companyaccording to the law and regulations. For detail, please refer to the “Plan for Revising the Articles ofAssociation” and “Announcement on the Resolution of 2021 Annual General Meeting 2022-026 disclosedby the Company on http://www.cninfo.com.cn/ on April 23, 2022 and May 14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company, based on theauthorization of 2019 1st Extraordinary General Meeting, 2021 1st Extraordinary General Meeting and2021 5th Extraordinary General Meeting, revised partial articles of the "Articles of Association" . Fordetails, please refer to the Proposal for the Amendment of the Articles of Association and the“Announcement on the Resolution of the 10th Session of the Tenth Board of Directors 2022-046”disclosed by the Company on http://www.cninfo.com.cn/ on December 21, 2022.
2. Repurchase of Partial Domestically Listed Foreign Investment Shares (B-Shares)The Company’s 2nd Session of the Tenth Board of Directors and 2021 5th Extraordinary GeneralMeeting reviewed and approved the “Proposal on Repurchase of Partial Domestically Listed ForeignShares (B- Shares), and subsequently disclosed the repurchase report and series of progressannouncements in accordance with relevant regulations. Ended November 29, 2022, the repurchase ofthe shares was finished in implementation and the relevant shares had been canceled. For the detail,please refer to the “Announcement on the Expiration and the Implementation Result of the Repurchase ofPartial Domestically Listed Foreign Investment Shares (B-Shares) 2022-045”and the “Announcement ofCompletion of the Cancellation of Partial Domestically Listed Foreign Investment Shares (B-Shares) asRepurchased and Change of the Company’s Shares 2022-045 disclosed in the Securities Times, HongKong Commercial Daily and http://www.cninfo.com.cn respectively on November 30, 2022 andDecember 17, 2022.XVII. Significant Events of the Company's SubsidiariesInapplicable
Section 7 Change of the Shares and Particulars about ShareholdersI. Change of the Shares
1. Change of the Shares
In shares
| Before the change | Increase/decrease (+, -) upon the change | After the change | |||||||
| Quantity | Proportion | New issuing | Bonus shares | Shares converted from reserve | Others | Sub-total | Quantity | Proportion | |
| I. Restricted shares | 10,135,484 | 2.38% | 0 | 0 | 0 | -1,908,174 | -1,908,174 | 8,227,310 | 1.97% |
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2. State corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Other domestic shares | 10,135,484 | 2.38% | 0 | 0 | 0 | -1,908,174 | -1,908,174 | 8,227,310 | 1.97% |
| Including: Domestic corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by domestic natural persons | 10,135,484 | 2.38% | 0 | 0 | 0 | -1,908,174 | -1,908,174 | 8,227,310 | 1.97% |
| 4. Foreign invested shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Including: Foreign corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by foreign natural persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| II. Unrestricted shares | 415,915,531 | 97.62% | 0 | 0 | 0 | -6,514,881 | -6,514,881 | 409,400,650 | 98.03% |
| 1. CNY ordinary shares | 357,991,617 | 84.03% | 0 | 0 | 0 | 1,472,336 | 1,472,336 | 359,463,953 | 86.07% |
| 2. Foreign invested shares listed in Mainland China | 57,923,914 | 13.60% | 0 | 0 | 0 | -7,987,217 | -7,987,217 | 49,936,697 | 11.96% |
| 3. Foreign invested shares listed abroad | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0.00% | |
| III. Total shares | 426,051,015 | 100.00% | 0 | 0 | 0 | -8,423,055 | -8,423,055 | 417,627,960 | 100.00% |
Cause of the change of shares
1. During the reporting period, the release conditions of the second restriction release period for theCompany’s restricted stock incentive plan (Phase I) were satisfied, and the restricted sharescorresponding to the release were listed for trading and as a result, 1,244,421 shares of the restrictedshares were reduced (converted into circulating shares);
2. During the reporting period, 227,915 restricted shares (converted into tradable shares) were reduceddue to the adjustment of the transferable quota of the senior executives;
3. During the reporting period, due to the resignation of six original incentive objects of the Company'sfirst and second restricted stock incentive plans, the Company repurchased and canceled 435,838A-share restricted shares held by them in total, which had been granted but had not been released fromthe restrictions, and therefore 435,838 restricted shares were reduced(the Company's share capital wasreduced);
4. During the reporting period, the Company finished the implementation of repurchase of partialdomestically listed foreign shares (B-shares), and finished cancellation of the repurchased B-shares. Asa result, 7,987,217 circulating shares were reduced (the Company’s share capital was reduced).In view of the aforesaid reason, the Company’s total share capital decreased by 8,423,055 shares, andthe total share capital decreased from 426,051,015 shares to 417,627,960 shares.
Approval of the Change of the SharesAuthorized and approved by 2021 5th Extraordinary General Meeting, the Company canceled 7,987,217B-shares accumulatively repurchased during the reporting period.
With the approval of the Company's 2021 Annual General Meeting, the Company repurchased andcanceled 435,838 A-share restricted shares that had been granted to 6 former incentive objects but therestriction had not yet been relieved.
Transfer of the Shares ChangedVerified and confirmed by China Securities Depository & Clearing Corporation Limited Shenzhen Branch,as at July 11, 2022, the Company completed repurchase and cancellation of 435,838 A-share restrictedstock and finished the cancellation of the 7,987,217 shares of the repurchased B-shares by December 15,2022.
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS,net asset value per share attributable to the common stockholders in the past year and the latest period
| Net return on equity, weighted average (%) | Earnings per share | ||||
| Basic earning per share (CNY/share) | Diluted earning per share (CNY/share) | ||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| 8.68% | 13.39% | 0.6398 | 0.9036 | 0.6398 | 0.9036 |
Other information the Company considers necessary or required by the securities regulatory authority tobe disclosed.Inapplicable
2. Change of the Restricted Shares
In shares
| Names of the Shareholders | Number of restricted shares at the beginning of the reporting period | Number of restricted shares increased in the reporting period | Number of restricted shares relieved in the reporting period | Number of restricted shares at the end of the reporting period | Cause of restriction | Date of relieving the restriction |
| Li Ming | 247,530 | 0 | 33,280 | 214,250 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity |
| incentive management | ||||||
| Pan Bo | 247,500 | 0 | 33,280 | 214,220 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Lu Wanjun | 247,500 | 0 | 33,280 | 214,220 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Liu Xiaoming | 247,500 | 0 | 33,280 | 214,220 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Chen Libin | 306,700 | 0 | 93,300 | 213,400 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Tang Haiyuan | 195,000 | 0 | 24,960 | 170,040 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Bao Xianyong | 160,020 | 0 | 19,980 | 140,040 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Sun Lei | 160,020 | 0 | 19,980 | 140,040 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity |
| incentive management | ||||||
| Sheng Li | 160,020 | 0 | 19,980 | 140,040 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Others | 8,163,694 | 33,320 | 1,194,336 | 6,566,840 | Locked and not yet unlocked restricted shares held by the retired senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Total | 10,135,484 | 33,320 | 1,505,656 | 8,227,310 | -- | -- |
II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting periodInapplicable
2. Note to changes of the Company’s total shares and the structure of shareholders as well as thestructure of assets and liabilitiesSame as the description in “the Cause of the Change of Shares”.
3. Existing Employee Shares
InapplicableIII. Shareholders and Actual Controlling Shareholder
1. Number of Shareholders and Shareholding
In shares
| Total common shareholders at the end of the reporting period | 31,527 | Total common shareholders at the end of the month before the date of disclosing the annual report | 36,789 | Total preference shareholders with the voting power recovered at the end of the reporting period (if any) (Refer to Note 8) | 0 | Total preference shareholders with the voting power recovered at the end of the month before the day of disclosing the Annual Report (if any) (Refer to Note 8) | 0 | |
| Shares held by the shareholders holding over 5% shares or the top ten shareholders | ||||||||
| Names of the Shareholders | Nature of the shareholder | Shareholding proportion | Number of shares held at the end of the reporting period | Increase/decrease in the reporting period | Number of the restricted shares held | Quantity of unrestricted shares held | Pledging, marking or freezing | |
| Status of the shares | Quantity | |||||||
| AVIC International Holding Limited | State corporate | 39.02% | 162,977,327 | 0 | 0 | 162,977,327 | |||
| # Wu Jilin | Domestic natural person | 4.30% | 17,945,614 | 17,945,614 | 0 | 17,945,614 | |||
| # Xu Guoliang | Domestic natural person | 1.26% | 5,264,768 | 4,772,468 | 0 | 5,264,768 | |||
| Qiu Hong | Domestic natural person | 0.57% | 2,370,000 | 70,000 | 0 | 2,370,000 | |||
| #Zhu Rui | Domestic natural person | 0.41% | 1,702,600 | 1,702,600 | 0 | 1,702,600 | |||
| Li Shuyuan | Domestic natural person | 0.33% | 1,377,600 | 1,377,600 | 0 | 1,377,600 | |||
| # Qu Yongjie | Domestic natural person | 0.30% | 1,266,800 | 1,266,800 | 0 | 1,266,800 | |||
| # Zhang Mingrong | Domestic natural person | 0.29% | 1,228,200 | 1,228,200 | 0 | 1,228,200 | |||
| Lu Shaowen | Domestic natural person | 0.28% | 1,166,100 | 566,100 | 0 | 1,166,100 | |||
| Chen Hao | Domestic natural person | 0.26% | 1,088,943 | 47,800 | 0 | 1,088,943 | |||
| About the fact that a strategic investor or ordinary corporate became one of the top ten shareholders due to placement of new shares (if any) (Refer to Note 3) | Inapplicable | ||||||||
| Explanation on associated relationship or consistent action of the above shareholders | The Company has no idea on whether the above 10 shareholders are associated or are acting in concert. | ||||||||
| Note to the aforesaid shareholders involving entrusting/being entrusted with voting power and the waiver of voting power | Among the above shareholders, AVIC International Holding Limited authorized representatives to exercise voting rights on their behalf in the Company’s 2021 Annual General Meeting with the number of representative shares being 162,977,327 shares. For the result of the voting, refer to the relevant announcement published by the Company on http://www.cninfo.com.cn. | ||||||||
| There is a special repurchase account among the top 10 shareholders (if any) (see Note 10) Special note to the designated repurchase account in top 10 shareholders (if any) (Refer to Note 10) | Inapplicable | ||||||||
| Shares held by top 10 shareholders of unrestricted shares | |||||||||
| Names of the Shareholders | Quantity of unrestricted shares held at the end of the reporting period | Share type | |||||||
| Share type | Quantity | ||||||||
| AVIC International Holding Limited | 162,977,327 | CNY ordinary shares | 162,977,327 | ||||||
| # Wu Jilin | 17,945,614 | CNY ordinary shares | 17,945,614 | ||||||
| # Xu Guoliang | 5,264,768 | CNY ordinary shares | 5,264,768 | ||||||
| Qiu Hong | 2,370,000 | CNY ordinary shares | 2,370,000 | ||||||
| #Zhu Rui | 1,702,600 | CNY ordinary shares | 1,702,600 | ||||||
| Li Shuyuan | 1,377,600 | CNY ordinary shares | 1,377,600 | ||||||
| # Qu Yongjie | 1,266,800 | CNY ordinary shares | 1,266,800 | ||||||
| # Zhang Mingrong | 1,228,200 | CNY ordinary shares | 1,228,200 | ||||||
| Lu Shaowen | 1,166,100 | CNY ordinary shares | 1,166,100 | ||||||
| Chen Hao | 1,088,943 | CNY ordinary shares | 1,088,943 |
| Explanation to the associated relationship or consistent action among the top 10 shareholders of non-restricted negotiable shares and that between the top 10 shareholders of non-restricted negotiable shares and top 10 shareholders. | The Company has no idea on whether the above 10 shareholders are associated or are acting in concert. | ||
| Note to the top 10 common shareholders involved in margin financing & securities lending (if any) (Refer to Note 4) | 1. In addition to the 11,221,862 shares held through the ordinary securities account, Wu Jilin, one of the shareholders of the Company, also holds 6,723,752 shares through the credit transaction guarantee securities account. Therefore, Wu Jilin is actually holding 17,945,614 shares; 2. In addition to the 4,604,568 shares held through the ordinary securities account, Xu Guoliang, one of the shareholders of the Company, also holds 660,200 shares through the credit transaction guarantee securities account. Therefore, Xu Guoliang is actually holding 5,264,768 shares; 3. In addition to the 107,900 shares held through the ordinary securities account, Zhu Rui, one of the shareholders of the Company, also holds 1,594,700 shares through the credit transaction guarantee securities account. Therefore, Wu Jilin is actually holding 1,702,600 shares; 4. In addition to the 22,800 shares held through the ordinary securities account, Qu Yongjie, one of the shareholders of the Company, also holds 1,244,000 shares through the credit transaction guarantee securities account. Therefore, Qu Yongjie is actually holding 1,266,800 shares; 5. In addition to the 0 shares held through the ordinary securities account, Zhang Mingrong, one of the shareholders of the Company, also holds 1,228,200 shares through the credit transaction guarantee securities account. Therefore, Zhang Mingrong is actually holding 1,228,200 shares; | ||
Did the top ten common shareholders or top ten shareholders of unrestricted common shares conductcontractual repurchase during the reporting period?No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned shareholding directly under the central governmentType of the controlling shareholder: corporate
| Name of the Controlling Shareholder | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| AVIC International Holding Limited | Li Bin | June 20, 1997 | 91440300279351229A | Investment in industries (specific projects are subject to application for approval); domestic trade, material supply and distribution (with commodities for exclusive operation, exclusive control and monopoly exclusive); import and export. |
| Equity in other domestic and foreign listed companies held by the controlling shareholder by means of control and mutual shareholding in the reporting period. | AVIC International Holdings Limited holds 11.86% equity in Tianma Micro-electronics Co., Ltd. (000050) and 63.97% equity in Shennan Circuits Company Limited (002916). | |||
Change of the controlling shareholder in the reporting periodInapplicable
3. Actual Controller and its Concerted Parties
Nature of the actual controller: State-owned assets regulatory agency directly under the centralgovernment
Type of the actual controller: corporate
| Name of the Actual Controller | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| Aviation Industry Corporation of China, Ltd. | Tan Ruisong | November 06, 2008 | 91110000710935732K | Operating state-owned assets within the scope of authorization of the State Council; military aircraft and engines, guided weapons, military gas turbines, weapons and equipment supporting systems and products research, design, development, testing, production, sales, maintenance, guarantees and services, etc.; investment and management of finance, lease, general aviation services, transportation, medical care, engineering survey and design, engineering contracting and construction, real estate development and other industries; design, research, development, testing, production, sales and maintenance services of civil aircraft and engines, airborne equipment and systems, gas turbines, automobiles and motorcycles and engines (including parts and components), refrigeration equipment, electronic products, environmental protection equipment and new energy equipment; equipment leasing; engineering survey and design; project contracting and construction; real estate development and operation; technology transfer and technical services related to the above businesses; import and export business; technical development and sales of ships; engineering equipment technology development; technology development of new energy products. |
| Equity in other domestic and foreign listed companies controlled by the actual controller in the reporting period. | In addition to holding the Company's equity, AVIC, directly or indirectly, holds or controls the shares of domestic and foreign listed companies: holding 27.66% equity in Tianma Micro-electronics Co., Ltd. (000050), 51.74% in China Avionics Systems Co., Ltd. (SZ.002013), 37.68% in AVIC Jonhon Optronic Technology Co.,Ltd. (SZ.002179), 50.79% in Sichuan Chengfei Integration Technology Corp. Ltd. (SZ.002190), 64.24% in Shennan Circuits Company Ltd. (002916), 53.79% in Zhonghang Electronic Measuring Instruments Co.,Ltd., (SZ.300114), 49.30% in AVICOPTER PLC (SH.600038), 48.15% in Jiangxi Hongdu Aviation Industry Co., Ltd. (SH.600316), 66.31% in | |||
China Avionics Systems Co., Ltd. (SH.600372), 46.29% in Guizhou Guihang AutomotiveComponents Co., Ltd. (SH.600523), 48.19% in AVIC Industry-finance Holdings Co., Ltd.(SH.600705), 69.16% in AVIC Shenyang Aircraft Company Limited (SH.600760), 38.15% in AVICHeavy Machinery Co., Ltd. (SH.600765), 39.78% in Baosheng Science And Technology InnovationCo., Ltd. (SH.600973), 46.40% in AVIC International Holding (HK) Limited (HK.0232); 64.94% inAVIC Forstar S&T Co., Ltd (HK.1316), 62.30% in AVICHINA INDUSTRY & TECHNOLOGYCOMPANY LIMITED (HK.2357), 89% in KHD Humboldt Wedag International AG (KWG:GR), 55% inFACC AG (AT00000FACC), 54.91% in AVIC Xi’an Aircraft Industry Group Co., Ltd. (SZ.000768),
56.19% in AVIC Hefei Jianghang Aircraft Equipment Corporation Ltd. (SH.688586), 45.21% in
AVIC Aviation High-Technology Co., Ltd. (SH.600862), 46.64% in AVIC FORSTAR Technology Co.,Ltd. (BJ.835640), and 53.66% in AVIC (CHENGDU) UAS CO., LTD. (688297.SH).
Change of the actual controller in the reporting periodInapplicableBlock Diagram of the Ownership and Control Relations between the Company and the Actual Controller
The actual controller controls the Company by means of trust or managing the assets in other ways:
Inapplicable
4. The number of shares pledged by the Company's controlling shareholder or the first majorshareholder and its persons acting in concert having accounted for 80% of the shares held bythemInapplicable
5. Other Corporate Shareholder Holding over 10% of the Company’s Shares
Inapplicable
6. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, theReorganizing Party and other Committing PartyInapplicableIV. Specific implementation of the repurchase of shares during the reporting periodProgress of implementation of the stock repurchase
| Proposal disclosure time | Number of shares to be repurchased | Proportion in the total share | Amount for the planned repurchase | Duration for the planned repurchase | Purpose of repurchase | Number of shares already | Proportion of the number of |
| (shares) | capital | (CNY10,000) | repurchased (shares) | shares repurchased in the target shares involved in the equity incentive plan (if any) | |||
| October 27, 2021 | 7.46 million shares to 14.92 million shares | 1.75% to 3.5% | No lower than CNY 50 million but not exceeding CNY 100 million | November 30, 2021 to November 29, 2022 | Canceled according to the law and the registered capital decreased | 7,987,217 |
Progress of implementation of reduction of the holding size of the shares repurchased by centralizedbiddingInapplicable
Section 8 About the Preferred SharesInapplicable
Section 9 About Bonds
Inapplicable
Da Hua Certified Public Accountants（Special General Partnership）
| FIYTA Precision Technology Co., Ltd. |
| Independent Auditor’s Report |
| D.H.S.Z. [2023]000189 |
FIYTA Precision Technology Co., Ltd.Independent Auditor’s Report and Financial Statements
(1
January 2022 to 31 December 2022)
| Content | Page | ||
| I. | Independent Auditor’s Report | 1-7 | |
| II. | Audited Financial Statements | ||
| Consolidated Balance Sheet | 1-2 | ||
| Consolidated Statement of Comprehensive Income | 3 | ||
| Consolidated Cash Flow Statement | 4 | ||
| Consolidated Statement of Changes in Equity | 5-6 | ||
| Parent Company’s Balance Sheet | 7-8 | ||
| Parent Company’s Statement of Comprehensive Income | 9 | ||
| Parent Company’s Cash Flow Statement | 10 | ||
| Parent Company’s Statement of Changes in Equity | 11-12 | ||
| Notes to Financial Statements | 13-118 |
Da Hua Certified Public Accountants (Special General Partnership)12th Floor, Building 7, No. 16, Xisihuan Middle Road, Haidian District, Beijing [100039]
Tel: 86 (10) 5835 0011 Fax: 86 (10) 5835 0006
www.dahua-cpa.com
Independent Auditor’s Report - Page 1
Independent Auditor’s Report
D.H.S.Z.[2023]000189
To the Shareholders of FIYTA Precision Technology Co., Ltd.:
I.Audit OpinionWe have audited the accompanying financial statements of FIYTA PrecisionTechnology Co., Ltd. (herein after “FIYTA Ltd.” or the Company) , which comprisethe consolidated and the parent company’s balance sheet as at 31 December 2021, theconsolidated and the parent company’s statement of comprehensive income, theconsolidated and the parent company’s cash flow statements and the consolidated andthe parent company’s statement of changes in equity for the year then ended, andnotes to the financial statements.In our opinion, the accompanying financial statements present in all materialrespects in accordance with the requirements of Accounting Standards for BusinessEnterprises, and fairly reflect FIYTA Ltd.’s financial position at 31 December 2021and the financial performance and cash flows for the year then ended.II.Basis for Audit OpinionWe conducted our audit in accordance with CICPA Standards on Auditing(“CSAs”) . In ‘Certified Public Accountant’s Responsibilities for the Audit ofFinancial Statements’ of this report, our responsibilities under these standards aredescribed. Those standards require that we comply with CICPA professional ethicalrequirements, that we are independent from FIYTA Ltd. and have fulfilled all otherethical obligations. We believe that we have obtained sufficient and appropriate auditevidence as basis of for our opinion.
III.Key Audit Matters
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Key audit matters are those matters that, in our professional judgment, were ofmost significance in our audit of the financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinionon these matters.
We have determined the following key audit matters that need to becommunicated in audit report.
(I) Existence of inventory and its net realizable value
1. Description
As at 31 December 2022, the book balance, provision for decline in value, andcarrying amount of inventory were RMB2,255.18million, RMB113.86 million andRMB2,141.32 million respectively. The carrying amount of inventory accounts for
52.01% of the total assets of the Company.
(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and otherbranded watches, the main inventory of FIYTA Ltd are finished watches and watchcomponents. The inventories are distributed in stores, regional warehouses, resellers’warehouses and the Company’s warehouses which caused difficulty in inventoryphysical observation;
(ii) The management of FIYTA Ltd measures inventory at lower of cost and netrealizable value (NRV) at balance sheet date. Where the cost of an inventory exceedsits NRV, the difference is recognized as provision for decline in value. Thedetermination of NRV involves significant judgment and estimates by theManagement.
Inventory value is significant to the Company’s assets and it requires significantjudgement by the Management, as a result, we identified existence of inventory andits net realizable value as key audit matters.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operating effectivenessof internal controls of procurement and payment, production and storage, and theprovision for decline in value of inventory;
(ii) Using the work of experts to conduct IT audit to information system andevaluating the authenticity and accuracy of business data which related to financial
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statements.
(iii) Understanding and evaluating the appropriateness of the Company’s policyin provision for decline in value;
(iv) Understanding and inquiring the locations of inventory storage,measurement method of inventory so as to determining the scope of inventoryphysical observation;
(v) Discussing physical inventory count status with the Management andattending the physical inventory count and conducting observation and test count onsite to check the quantity of the inventories and observe their condition.
(vi) Obtaining the ageing report of inventory and taking into consideration ofinventory condition in order to perform analytical review on the ageing as well asanalyze the reasonableness of provision for decline in value;
(vii) Reviewing and evaluating the appropriateness of significant estimates madeby the Management in determining the NRV of inventory;
(viii) Obtaining the calculation of provision for decline in value of inventory,reviewing whether the provision was made in compliance with relevant accountingpolicies and performing recalculation of provision. Checking the movements of prioryear’s provision and analyzing whether the provision was adequately accrued in priorperiod.
(ix) Tracing samples of large purchases in current period to their correspondingcontracts and tax invoices, and inspecting their purchase requisition form and goodsreceipt notes.
Based on audit work conducted above, we believe that the inventory exists andthe measurement is reasonable stated according to the Company’s policies.
(II) Revenue recognition
1. Description
In 2022, the Company’s income from main business was RMB4,354.10 million.The Company’s revenue mainly comes from sales of FIYTA brand watches anddistribution of other branded watches. Except for small amount of sales by direct salesand consignment sales of FIYTA brand watches, most of the sales of FIYTA brandwatches and other branded watches are sold through shops in department store andon-line shops. Refer to Note III 31 for accounting policy relating to revenuerecognition.
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Operating revenue represents major line item in income statement and is mainsource of profit, the accuracy and completeness of revenue recognition havesignificant impact to the Company’s profit, as a result, we identified revenuerecognition as a key audit matter.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operatingeffectiveness of internal controls relating to revenue recognition;
(ii) Using the work of experts to conduct IT audit to information system andevaluating the authenticity and accuracy of business data which related to financialstatements.
(iii) Obtaining and understanding accounting policies relating to revenuerecognition, and reviewing and evaluating whether the point in time of control righttransfer, measurement of transaction price and accounting for special transactions arecomplied with the accounting standards;
(iv) Selecting samples from current year’s transaction records, and tracingthem to supporting documents such as contract, tax invoice and goods dispatch note(if applicable) and courier waybill (if applicable) ;
(v) In connection with audit of accounts receivable, selecting majorcustomers and confirming corresponding sales in current year and year-end balance;
(vi) Conducting cut-off test to revenue recognized before and after the balancesheet date by selecting samples to check supporting documents such as contract, taxinvoice and goods dispatch note (if applicable) and courier waybill (if applicable) toevaluate whether the revenue was recorded in appropriate accounting period.
Based on audit work conducted above, we believe that the Company’s revenuerecognition is in conformity to its revenue recognition policy.
IV.Other Information
The management of FIYTA Ltd (the “Management”) are responsible for theOther Information. The Other Information comprises all of the information includedin the Company’s annual report other than the financial statements and our auditors’report thereon.
Our opinion expressed on the financial statements does not cover the OtherInformation and we do not express any form of assurance conclusion thereon.
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In connection with our audit of the financial statements, our responsibility is toread the Other Information and, in doing so, consider whether the Other Informationis materially inconsistent with the financial statements or our knowledge obtained inthe audit or otherwise appears to be materially misstated.If, based on the work we have performed, we conclude that there is a materialmisstatement of this Other Information, we are required to report that fact. We havenothing to report in this regard.V.Responsibilities of the Management and those Charged withGovernance for the Financial StatementsThe Management of the Company is responsible for the preparation of thefinancial statements that give a fair view in accordance with Accounting Standards forBusiness Enterprises and for the design, implementation and maintenance of suchinternal controls as the Management determine is necessary to enable the preparationof financial statements that are free from material misstatement, whether due to fraudor error.
In preparing the financial statements, the Management is responsible forassessing the Company’s ability to continue as a going concern, disclosing, asapplicable, matters related to going concern and using the going concern basis ofaccounting unless the Management either intend to liquidate the Company or to ceaseoperations, or have no realistic alternative but to do so.
Those who charged with governance is responsible for overseeing theCompany’s financial reporting process.
VI.Auditors’ Responsibilities for the Audit of the FinancialStatements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud orerror, and to issue an auditors’ report that includes our opinion. Reasonable assuranceis a high level of assurance, but is not a guarantee that an audit conducted inaccordance with China Standards on Auditing will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably beexpected to influence the economic decisions of users taken on the basis of these
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financial statements.As part of an audit in accordance with China Standards on Auditing, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. Wealso:
1. Identify and assess the risks of material misstatement of the financialstatements, whether due to fraud or error, design and perform audit proceduresresponsive to those risks, and obtain audit evidence that is sufficient and appropriateto provide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.
2. Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by theManagement.
4. Conclude on the appropriateness of the Management’s use of the goingconcern basis of accounting and, based on the audit evidence obtained, whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required, according to China Standards onAuditing, to draw attention in our auditors’ report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditors’report. However, future events or conditions may cause the Company to cease tocontinue as a going concern.
5. Evaluate the overall presentation, structure and content of the financialstatements, including the disclosures, and whether the financial statements representthe underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financialinformation of the entities or business activities within FIYTA Ltd to express anopinion on the financial statements. We are responsible for the direction, supervisionand performance of the group audit. We remain solely responsible for our audit
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opinion.We communicate with those charged with governance regarding, among othermatters, the planned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identify during ouraudit.We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor’s report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
| Da Hua Certified Public Accountants (Special General Partnership) | CICPA: | ||
| Beijing, China | Engagement partner | Long Jiao | |
| CICPA: | |||
| Wang Dong | |||
| 16 March 2023 | |||
| Consolidated Balance Sheet | ||||||||||
| As at 31 December 2022 | ||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB) | ||||||||||
| Assets | NoteV | Closing Balance | Closing Balance of prior period | |||||||
| Current assets: | ||||||||||
| Monetary funds | note 1 | 313,747,463.64 | 210,254,737.14 | |||||||
| Financial assets held for trading | ||||||||||
| Derivative financial assets | ||||||||||
| Notes receivable | note 2 | 32,214,912.10 | 61,258,145.80 | |||||||
| Accounts receivable | note 3 | 305,290,959.68 | 388,885,601.28 | |||||||
| Accounts receivable financing | ||||||||||
| Prepayments | note 4 | 8,039,794.97 | 7,946,750.81 | |||||||
| Other receivables | note 5 | 56,918,019.48 | 61,553,267.82 | |||||||
| Inventories | note 6 | 2,141,320,373.67 | 2,050,148,750.89 | |||||||
| Contract assets | ||||||||||
| Held-for-sale assets | ||||||||||
| Current portion of non-current assets | ||||||||||
| Other current assets | note 7 | 66,339,505.32 | 72,698,692.72 | |||||||
| Total current assets | 2,923,871,028.86 | 2,852,745,946.46 | ||||||||
| Non-current assets: | ||||||||||
| Debt investments | ||||||||||
| Other debt investments | ||||||||||
| Long-term receivables | ||||||||||
| Long-term equity investments | note 8 | 58,182,086.90 | 55,155,605.31 | |||||||
| Investment in other equity instruments | note 9 | 85,000.00 | 85,000.00 | |||||||
| Other non-current financial assets | ||||||||||
| Investment properties | note 10 | 374,979,494.71 | 383,425,916.35 | |||||||
| Fixed assets | note 11 | 364,628,765.17 | 349,495,316.65 | |||||||
| Construction in progress | ||||||||||
| Productive biological assets | ||||||||||
| Oil and gas assets | ||||||||||
| Right-of-use assets | note 12 | 110,330,512.03 | 147,932,475.42 | |||||||
| Intangible assets | note 13 | 33,200,218.63 | 34,035,330.43 | |||||||
| Development expenditure | ||||||||||
| Goodwill | ||||||||||
| Long-term deferred expenses | note 14 | 144,488,452.18 | 163,790,333.44 | |||||||
| Deferred tax assets | note 15 | 95,784,611.94 | 81,233,274.65 | |||||||
| Other non-current assets | note 16 | 11,593,741.57 | 42,680,753.78 | |||||||
| Total non-current assets | 1,193,272,883.13 | 1,257,834,006.03 | ||||||||
| Total assets | 4,117,143,911.99 | 4,110,579,952.49 | ||||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager: Tian Hui | ||||||||||
| Consolidated Balance Sheet (Continued) | |||||||
| As at 31 December 2022 | |||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||
| Liability and Equity | Note V | Closing Balance | Closing Balance of prior period | ||||
| Current liabilities: | |||||||
| Short-term borrowings | note 17 | 290,237,111.11 | 265,994,595.43 | ||||
| Financial liabilities held for trading | |||||||
| Derivative financial liabilities | |||||||
| Notes payable | note 18 | 2,000,600.00 | 21,223.10 | ||||
| Accounts payable | note 19 | 170,589,456.67 | 254,588,895.34 | ||||
| Payments received in advance | note 20 | 16,960,128.83 | 11,025,664.72 | ||||
| Contract liabilities | note 21 | 16,844,437.47 | 22,505,426.65 | ||||
| Employee benefits payable | note 22 | 136,587,939.38 | 145,936,150.06 | ||||
| Tax payables | note 23 | 60,770,168.30 | 67,769,880.01 | ||||
| Other payables | note 24 | 165,060,122.58 | 167,808,759.95 | ||||
| Held-for-sale liabilities | |||||||
| Current portion of non-current liabilities | note 25 | 71,546,316.16 | 86,949,906.35 | ||||
| Other current liabilities | note 26 | 1,686,806.01 | 2,798,738.32 | ||||
| Total current liabilities | 932,283,086.51 | 1,025,399,239.93 | |||||
| Non-current liabilities: | |||||||
| Long-term borrowings | note 27 | ||||||
| Bonds payable | |||||||
| Including: Preferred stock | |||||||
| Including: Perpetual debt | |||||||
| Lease liabilities | note 28 | 41,642,561.58 | 64,918,722.10 | ||||
| Long-term payables | |||||||
| Long-term employee benefits payable | |||||||
| Provisions | |||||||
| Deferred income | note 29 | 1,295,926.80 | 1,792,833.90 | ||||
| Deferred tax liabilities | note 15 | 5,498,844.95 | 5,236,514.03 | ||||
| Other non-current liabilities | |||||||
| Total non-current liabilities | 48,437,333.33 | 71,948,070.03 | |||||
| Total liabilities | 980,720,419.84 | 1,097,347,309.96 | |||||
| Equity: | |||||||
| Share capital | note 30 | 417,627,960.00 | 426,051,015.00 | ||||
| Other equity instruments | |||||||
| Including: Preferred stock | |||||||
| Including: Perpetual debt | |||||||
| Capital reserves | note 31 | 1,007,086,643.48 | 1,040,908,194.13 | ||||
| Less: Treasury stock | note 32 | 50,759,806.16 | 60,585,678.92 | ||||
| Other comprehensive income | note 33 | 5,739,589.89 | -7,658,346.40 | ||||
| Special reserves | note 34 | 2,012,064.91 | 1,062,731.13 | ||||
| Surplus reserve | note 35 | 275,010,401.50 | 275,010,401.50 | ||||
| Retained earnings | note 36 | 1,479,706,638.53 | 1,338,444,326.09 | ||||
| Equity attributable to parent company | 3,136,423,492.15 | 3,013,232,642.53 | |||||
| Non-controlling interests | |||||||
| Total shareholders' equity | 3,136,423,492.15 | 3,013,232,642.53 | |||||
| Total liabilities and shareholders' equity | 4,117,143,911.99 | 4,110,579,952.49 | |||||
| (Attached notes to statements are part of the consolidated financial statements) | |||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||
| Consolidated Statement of Comprehensive Income | |||||||
| For the year ended 31 December 2022 | |||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||
| Items | Note V | Current Period | Prior Period | ||||
| 1. Operating revenue | note 37 | 4,354,096,880.36 | 5,243,733,540.93 | ||||
| Less: | Operating costs | note 37 | 2,738,972,791.11 | 3,285,656,229.13 | |||
| Taxes and surcharges | note 38 | 30,800,199.73 | 37,563,586.80 | ||||
| Selling expenses | note 39 | 931,832,830.40 | 1,049,898,223.28 | ||||
| Administrative expenses | note 40 | 219,014,508.52 | 261,626,762.41 | ||||
| Research and development expenses | note 41 | 61,088,585.61 | 57,802,569.17 | ||||
| Finance expenses | note 42 | 21,188,742.11 | 34,677,073.65 | ||||
| Including: Interest expenses | 16,846,749.14 | 23,159,963.74 | |||||
| Interest income | 3,923,999.48 | 3,589,649.85 | |||||
| Add: | Other income | note 43 | 18,648,210.06 | 21,328,673.21 | |||
| Income from investments | note 44 | 3,026,481.59 | 3,754,939.39 | ||||
| Including: Investment income from associates and joint ventures | 3,026,481.59 | 3,754,939.39 | |||||
| Derecognition of financial assets at amortized cost | |||||||
| Gains or losses from net exposure hedging | |||||||
| Gains or losses from changes in fair values | |||||||
| Credit impairment losses | note 45 | 4,845,379.45 | -11,075,001.77 | ||||
| Impairment losses | note 46 | -37,625,482.96 | -25,861,394.56 | ||||
| Gains or losses from asset disposals | note 47 | 91,925.06 | 730,134.87 | ||||
| 2. Operating profit | 340,185,736.08 | 505,386,447.63 | |||||
| Add: Non-operating income | note 48 | 1,287,202.08 | 627,435.03 | ||||
| Less: Non-operating expenses | note 49 | 2,351,266.31 | 3,686,166.55 | ||||
| 3. Profit before tax | 339,121,671.85 | 502,327,716.11 | |||||
| Less: Income tax | note 50 | 72,440,220.01 | 114,467,375.88 | ||||
| 4. Net profit | 266,681,451.84 | 387,860,340.23 | |||||
| Including: Net profit realized before business combinations under common control | |||||||
| I. Net profit classified by going concern | |||||||
| Net profit from continuing operations（"-" for net loss) | 266,681,451.84 | 387,860,340.23 | |||||
| Net profit from discontinuing operations（"-" for net loss) | |||||||
| II. Net profit classified by ownership | |||||||
| Net profit attributable to parent company | 266,681,451.84 | 387,840,282.95 | |||||
| Net profit attributable to non-controlling interests | 20,057.28 | ||||||
| 5. Other comprehensive income after tax | 13,397,936.29 | -8,635,217.81 | |||||
| Other comprehensive income after tax attributable to parent company | 13,397,936.29 | -8,635,217.81 | |||||
| I. Items of other comprehensive income that will not be reclassified to profit or loss | |||||||
| i. | Changes in remeasurement of defined benefit plans | ||||||
| ii. | Other comprehensive income that cannot be transferred to profit or loss under the equity method | ||||||
| iii. | Changes in fair value of investments in equity instruments | ||||||
| iv. | Changes in fair value of the Company's own credit risk | ||||||
| II. Items of other comprehensive income that will be reclassified to profit or loss | 13,397,936.29 | -8,635,217.81 | |||||
| i. | Other comprehensive income that can be transferred to profit or loss under the equity method | ||||||
| ii. | Changes in fair value of other debt investments | ||||||
| iii. | Amount of financial assets reclassified into other comprehensive income | ||||||
| iv. | Provisions for credit impairment of other debt investments | ||||||
| v. | The effective portion of gains or losses arising from cash flow hedging | ||||||
| vi. | Translation differences arising from financial statements in foreign currencies | 13,397,936.29 | -8,635,217.81 | ||||
| Other comprehensive income attributable to non-controlling interests after tax | |||||||
| 6. Total comprehensive income | 280,079,388.13 | 379,225,122.42 | |||||
| Total comprehensive income attributable to parent company | 280,079,388.13 | 379,205,065.14 | |||||
| Total comprehensive income attributable to non-controlling interests | 20,057.28 | ||||||
| 7. Earnings per share | |||||||
| I. Basic earnings per share | 0.6398 | 0.9036 | |||||
| II. Diluted earnings per share | 0.6398 | 0.9036 | |||||
| (Attached notes to statements are part of the consolidated financial statements) | |||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||
| Consolidated Cash Flows Statement | |||||||
| For the year ended 31 December 2022 | |||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||
| Items | Note V | Current Period | Prior Period | ||||
| 1. Cash flows from operating activities | |||||||
| Cash received from sales and services | 4,910,473,741.41 | 5,857,726,359.18 | |||||
| Tax and surcharge refunds | 7,793,409.24 | 1,466,381.60 | |||||
| Other cash receipts related to operating activities | note 51 | 79,656,853.28 | 85,387,457.56 | ||||
| Total cash inflows from operating activities | 4,997,924,003.93 | 5,944,580,198.34 | |||||
| Cash paid for goods and services | 3,266,497,299.47 | 3,862,745,653.01 | |||||
| Cash paid to and for employees | 659,058,385.84 | 710,102,185.80 | |||||
| Taxes and surcharges paid | 272,103,882.56 | 346,383,502.98 | |||||
| Other cash payments related to operating activities | note 51 | 324,035,659.54 | 478,099,748.10 | ||||
| Total cash outflows from operating activities | 4,521,695,227.41 | 5,397,331,089.89 | |||||
| Net cash flows from operating activities | 476,228,776.52 | 547,249,108.45 | |||||
| 2. Cash flows from investing activities | |||||||
| Cash received from withdrawal of investments | |||||||
| Cash received from investment income | |||||||
| Net proceeds from disposals of fixed assets, intangible assets and other long-term assets | 138,721.29 | 59,657.53 | |||||
| Net proceeds from disposal of subsidiaries and other business units | |||||||
| Other cash receipts related to investing activities | |||||||
| Total cash inflows from investing activities | 138,721.29 | 59,657.53 | |||||
| Cash paid for fixed assets, intangible assets and other long-term assets | 114,090,573.97 | 204,422,787.61 | |||||
| Cash paid for investments | |||||||
| Net cash paid for acquiring subsidiaries and other business units | |||||||
| Other cash payments related to investing activities | |||||||
| Total cash outflows from investing activities | 114,090,573.97 | 204,422,787.61 | |||||
| Net cash flows from investing activities | -113,951,852.68 | -204,363,130.08 | |||||
| 3. Cash flows from financing activities | |||||||
| Cash received from investments by others | 58,216,000.00 | ||||||
| Including: Cash received by subsidiaries from non-controlling investors | |||||||
| Cash received from borrowings | 845,155,704.29 | 1,155,724,412.23 | |||||
| Other cash receipts related to other financing activities | |||||||
| Total cash inflows from financing activities | 845,155,704.29 | 1,213,940,412.23 | |||||
| Cash repayments for debts | 794,083,975.00 | 1,386,708,158.95 | |||||
| Cash paid for distribution of dividends and profit and for interest expenses | 134,519,807.76 | 187,069,913.31 | |||||
| Including: Dividends or profit paid by subsidiaries to non-controlling investors | |||||||
| Other cash payments related to financing activities | note 51 | 177,477,740.46 | 124,710,390.58 | ||||
| Total cash outflows from financing activities | 1,106,081,523.22 | 1,698,488,462.84 | |||||
| Net cash flows from financing activities | -260,925,818.93 | -484,548,050.61 | |||||
| 4. Effect of changes in foreign exchange rates on cash and cash equivalents | 2,132,547.59 | -1,140,476.33 | |||||
| 5. Net increase in cash and cash equivalents | 103,483,652.50 | -142,802,548.57 | |||||
| Add: Opening balance of cash and cash equivalents | 210,254,737.14 | 353,057,285.71 | |||||
| 6. Closing balance of cash and cash equivalents | note 52 | 313,738,389.64 | 210,254,737.14 | ||||
| (Attached notes to statements are part of the consolidated financial statements) | |||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||
| Consolidated Statement of Changes in Equity | |||||||||
| For the year ended 31 December 2022 | |||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||||
| Items | Current Period | ||||||||
| Equity attributable to parent company | Non-controlling interests | Total shareholders' equity | |||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | |||
| 1. Closing balance of prior year | 426,051,015.00 | 1,040,908,194.13 | 60,585,678.92 | -7,658,346.40 | 1,062,731.13 | 275,010,401.50 | 1,338,444,326.09 | 3,013,232,642.53 | |
| Add: Increase/decrease due to changes in accounting policies | |||||||||
| Increase/decrease due to corrections of errors in prior period | |||||||||
| Business combination under common control | |||||||||
| Others | |||||||||
| 2. Opening balance of current year | 426,051,015.00 | 1,040,908,194.13 | 60,585,678.92 | -7,658,346.40 | 1,062,731.13 | 275,010,401.50 | 1,338,444,326.09 | 3,013,232,642.53 | |
| 3. Increase/decrease for current year | -8,423,055.00 | -33,821,550.65 | -9,825,872.76 | 13,397,936.29 | 949,333.78 | 141,262,312.44 | 123,190,849.62 | ||
| I. Total comprehensive income | 13,397,936.29 | 266,681,451.84 | 280,079,388.13 | ||||||
| II. Owner's contributions to and withdrawals of capital | -8,423,055.00 | -33,821,550.65 | -9,825,872.76 | -32,418,732.89 | |||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -7,987,217.00 | -42,265,614.88 | -50,252,831.88 | ||||||
| ii. Capital contributed by other equity instruments holders | |||||||||
| iii. Share-based payments to owners' equity | -435,838.00 | 8,459,107.40 | -9,825,872.76 | 17,849,142.16 | |||||
| iv. Others | -15,043.17 | -15,043.17 | |||||||
| III. Profits distribution | -125,419,139.40 | -125,419,139.40 | |||||||
| i. Appropriation of surplus reserve | |||||||||
| ii. Distribution to owners | -125,419,139.40 | -125,419,139.40 | |||||||
| iii. Others | |||||||||
| IV. Transfers within owners' equity | |||||||||
| i. Capital reserves transferred to paid-in capital | |||||||||
| ii. Surplus reserve transferred to paid-in capital | |||||||||
| iii. Use of surplus reserve to cover previous losses | |||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | |||||||||
| v. Other comprehensive income transferred to retained earnings | |||||||||
| vi. Others | |||||||||
| V. Special reserves | 949,333.78 | 949,333.78 | |||||||
| i. Appropriated during current year | 1,246,390.69 | 1,246,390.69 | |||||||
| ii. Used during current year | -297,056.91 | -297,056.91 | |||||||
| VI. Others | |||||||||
| 4. Closing balance of current year | 417,627,960.00 | 1,007,086,643.48 | 50,759,806.16 | 5,739,589.89 | 2,012,064.91 | 275,010,401.50 | 1,479,706,638.53 | 3,136,423,492.15 | |
| (Attached notes to statements are part of the consolidated financial statements) | |||||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||||
| Consolidated Statement of Changes in Equity | |||||||||
| For the year ended 31 December 2022 | |||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||||
| Items | Prior Period | ||||||||
| Equity attributable to parent company | Non-controlling interests | Total shareholders' equity | |||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | |||
| 1. Closing balance of prior year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,164,490,911.51 | 12,283.34 | 2,799,960,671.43 | |
| Add: Increase/decrease due to changes in accounting policies | -11,188,268.01 | -11,188,268.01 | |||||||
| Increase/decrease due to corrections of errors in prior period | |||||||||
| Business combination under common control | |||||||||
| Others | |||||||||
| 2. Opening balance of current year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,153,302,643.50 | 12,283.34 | 2,788,772,403.42 | |
| 3. Increase/decrease for current year | -2,040,866.00 | 19,417,806.35 | -1,047,851.56 | -8,635,217.81 | 1,062,731.13 | 28,478,534.63 | 185,141,682.59 | -12,283.34 | 224,460,239.11 |
| I. Total comprehensive income | -8,635,217.81 | 387,840,282.95 | 20,057.28 | 379,225,122.42 | |||||
| II. Owner's contributions to and withdrawals of capital | -2,040,866.00 | 19,417,806.35 | -1,047,851.56 | -32,340.62 | 18,392,451.29 | ||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -8,994,086.00 | -41,132,596.76 | -45,368,941.80 | -4,757,740.96 | |||||
| ii. Capital contributed by other equity instruments holders | |||||||||
| iii. Share-based payments to owners' equity | 6,953,220.00 | 60,553,780.11 | 44,321,090.24 | 23,185,909.87 | |||||
| iv. Others | -3,377.00 | -32,340.62 | -35,717.62 | ||||||
| III. Profits distribution | 28,478,534.63 | -202,698,600.36 | -174,220,065.73 | ||||||
| i. Appropriation of surplus reserve | 28,478,534.63 | -28,478,534.63 | |||||||
| ii. Distribution to owners | -174,220,065.73 | -174,220,065.73 | |||||||
| iii. Others | |||||||||
| IV. Transfers within owners' equity | |||||||||
| i. Capital reserves transferred to paid-in capital | |||||||||
| ii. Surplus reserve transferred to paid-in capital | |||||||||
| iii. Use of surplus reserve to cover previous losses | |||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | |||||||||
| v. Other comprehensive income transferred to retained earnings | |||||||||
| vi. Others | |||||||||
| V. Special reserves | 1,062,731.13 | 1,062,731.13 | |||||||
| i. Appropriated during current year | 1,421,605.68 | 1,421,605.68 | |||||||
| ii. Used during current year | -358,874.55 | -358,874.55 | |||||||
| VI. Others | |||||||||
| 4. Closing balance of current year | 426,051,015.00 | 1,040,908,194.13 | 60,585,678.92 | -7,658,346.40 | 1,062,731.13 | 275,010,401.50 | 1,338,444,326.09 | 3,013,232,642.53 | |
| (Attached notes to statements are part of the consolidated financial statements) | |||||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||||
| Parent Company's Balance Sheet | |||||||
| As at 31 December 2022 | |||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||
| Assets | Note XV | Closing Balance | Closing Balance of prior period | ||||
| Current assets: | |||||||
| Monetary funds | 274,691,023.16 | 171,022,392.92 | |||||
| Financial assets held for trading | |||||||
| Derivative financial assets | |||||||
| Notes receivable | |||||||
| Accounts receivable | note 1 | 603,216.03 | 129,880.48 | ||||
| Accounts receivable financing | |||||||
| Prepayments | |||||||
| Other receivables | note 2 | 839,782,543.07 | 717,183,139.00 | ||||
| Inventories | |||||||
| Contract assets | |||||||
| Held-for-sale assets | |||||||
| Current portion of non-current assets | |||||||
| Other current assets | 14,107,604.63 | 13,389,835.13 | |||||
| Total current assets | 1,129,184,386.89 | 901,725,247.53 | |||||
| Non-current assets: | |||||||
| Debt investments | |||||||
| Other debt investments | |||||||
| Long-term receivables | |||||||
| Long-term equity investments | note 3 | 1,552,310,486.50 | 1,542,067,945.03 | ||||
| Investment in other equity instruments | 85,000.00 | 85,000.00 | |||||
| Other non-current financial assets | |||||||
| Investment properties | 305,676,084.09 | 311,379,234.57 | |||||
| Fixed assets | 209,495,642.59 | 222,462,397.20 | |||||
| Construction in progress | |||||||
| Productive biological assets | |||||||
| Oil and gas assets | |||||||
| Right-of-use assets | |||||||
| Intangible assets | 23,522,355.93 | 23,910,597.39 | |||||
| Development expenditure | |||||||
| Goodwill | |||||||
| Long-term deferred expenses | 8,240,653.62 | 9,966,739.10 | |||||
| Deferred tax assets | 1,904,597.73 | 1,671,761.28 | |||||
| Other non-current assets | 2,051,932.75 | 1,435,800.93 | |||||
| Total non-current assets | 2,103,286,753.21 | 2,112,979,475.50 | |||||
| Total assets | 3,232,471,140.10 | 3,014,704,723.03 | |||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||
| Parent Company's Balance Sheet (Continued) | |||||||
| As at 31 December 2022 | |||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||
| Liability and Equity | Note XV | Closing Balance | Closing Balance of prior period | ||||
| Current liabilities: | |||||||
| Short-term borrowings | 290,237,111.11 | 250,256,666.67 | |||||
| Financial liabilities held for trading | |||||||
| Derivative financial liabilities | |||||||
| Notes payable | |||||||
| Accounts payable | 1,048,201.41 | 1,232,967.42 | |||||
| Payments received in advance | 16,960,128.83 | 11,025,664.72 | |||||
| Contract liabilities | |||||||
| Employee benefits payable | 27,139,007.97 | 24,758,938.89 | |||||
| Tax payables | 778,299.01 | 2,676,682.58 | |||||
| Other payables | 299,198,966.56 | 230,594,166.14 | |||||
| Held-for-sale liabilities | |||||||
| Current portion of non-current liabilities | |||||||
| Other current liabilities | |||||||
| Total current liabilities | 635,361,714.89 | 520,545,086.42 | |||||
| Non-current liabilities: | |||||||
| Long-term borrowings | |||||||
| Bonds payable | |||||||
| Including: Preferred stock | |||||||
| Including: Perpetual debt | |||||||
| Lease liabilities | |||||||
| Long-term payables | |||||||
| Long-term employee benefits payable | |||||||
| Provisions | |||||||
| Deferred income | 1,295,926.80 | 1,792,833.90 | |||||
| Deferred tax liabilities | |||||||
| Other non-current liabilities | |||||||
| Total non-current liabilities | 1,295,926.80 | 1,792,833.90 | |||||
| Total liabilities | 636,657,641.69 | 522,337,920.32 | |||||
| Equity: | |||||||
| Share capital | 417,627,960.00 | 426,051,015.00 | |||||
| Other equity instruments | |||||||
| Including: Preferred stock | |||||||
| Including: Perpetual debt | |||||||
| Capital reserves | 1,010,917,776.19 | 1,045,449,410.67 | |||||
| Less: Treasury stock | 50,759,806.16 | 60,585,678.92 | |||||
| Other comprehensive income | |||||||
| Special reserves | |||||||
| Surplus reserve | 275,010,401.50 | 275,010,401.50 | |||||
| Retained earnings | 943,017,166.88 | 806,441,654.46 | |||||
| Total owners' equity | 2,595,813,498.41 | 2,492,366,802.71 | |||||
| Total liabilities and owners' equity | 3,232,471,140.10 | 3,014,704,723.03 | |||||
| (Attached notes to statements are part of the consolidated financial statements) | |||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||||
| Parent Company's Statement of Comprehensive Income | |||||
| For the year ended 31 December 2022 | |||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||
| Items | Note XV | Current Period | Prior Period | ||
| 1. Operating revenue | note 4 | 155,284,801.05 | 179,455,712.71 | ||
| Less: | Operating costs | note 4 | 41,765,441.70 | 38,852,252.32 | |
| Taxes and surcharges | 5,984,017.16 | 7,760,628.42 | |||
| Selling expenses | 4,340,253.59 | 6,483,523.47 | |||
| Administrative expenses | 64,698,540.45 | 72,514,603.81 | |||
| Research and development expenses | 16,464,924.76 | 21,461,359.36 | |||
| Finance expenses | -1,030,335.57 | 3,650,109.37 | |||
| Including: Interest expenses | 3,264,769.63 | 6,662,862.52 | |||
| Interest income | 3,699,364.22 | 3,158,156.74 | |||
| Add: | Other income | 1,221,085.39 | 2,603,212.27 | ||
| Income from investments | note 5 | 243,622,178.29 | 263,673,435.95 | ||
| Including: Investment income from associates and joint ventures | 3,026,481.59 | 3,754,939.39 | |||
| Derecognition of financial assets at amortized cost | |||||
| Gains or losses from net exposure hedging | |||||
| Gains or losses from changes in fair values | |||||
| Credit impairment losses | 108,040.61 | 192,081.60 | |||
| Impairment losses | |||||
| Gains or losses from asset disposals | -14,615.44 | -63,188.36 | |||
| 2. Operating profit | 267,998,647.81 | 295,138,777.42 | |||
| Add: Non-operating income | 191,981.02 | 41,001.96 | |||
| Less: Non-operating expenses | 21,262.34 | 216,805.57 | |||
| 3. Profit before tax | 268,169,366.49 | 294,962,973.81 | |||
| Less: Income tax | 6,174,714.67 | 7,887,674.19 | |||
| 4. Net profit | 261,994,651.82 | 287,075,299.62 | |||
| Net profit from continuing operations（"-" for net loss) | 261,994,651.82 | 287,075,299.62 | |||
| Net profit from discontinuing operations（"-" for net loss) | |||||
| 5. Other comprehensive income after tax | |||||
| I. Items of other comprehensive income that will not be reclassified to profit or loss | |||||
| i. | Changes in remeasurement of defined benefit plans | ||||
| ii. | Other comprehensive income that cannot be transferred to profit or loss under the equity method | ||||
| iii. | Changes in fair value of investments in equity instruments | ||||
| iv. | Changes in fair value of the Company's own credit risk | ||||
| II. Items of other comprehensive income that will be reclassified to profit or loss | |||||
| i. | Other comprehensive income that can be transferred to profit or loss under the equity method | ||||
| ii. | Changes in fair value of other debt investments | ||||
| iii. | Amount of financial assets reclassified into other comprehensive income | ||||
| iv. | Provisions for credit impairment of other debt investments | ||||
| v. | The effective portion of gains or losses arising from cash flow hedging | ||||
| vi. | Translation differences arising from financial statements in foreign currencies | ||||
| 6. Total comprehensive income | 261,994,651.82 | 287,075,299.62 | |||
| (Attached notes to statements are part of the consolidated financial statements) | |||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||
| Parent Company's Cash Flows Statement | |||||
| For the year ended 31 December 2022 | |||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||
| Items | Note XV | Current Period | Prior Period | ||
| 1. Cash flows from operating activities | |||||
| Cash received from sales and services | 166,402,067.64 | 183,608,762.33 | |||
| Tax and surcharge refunds | 7,647.56 | ||||
| Other cash receipts related to operating activities | 4,309,971,160.78 | 5,194,227,139.68 | |||
| Total cash inflows from operating activities | 4,476,380,875.98 | 5,377,835,902.01 | |||
| Cash paid for goods and services | |||||
| Cash paid to and for employees | 59,513,788.17 | 68,672,552.40 | |||
| Taxes and surcharges paid | 20,686,403.89 | 22,768,419.51 | |||
| Other cash payments related to operating activities | 4,383,872,472.45 | 5,359,975,023.49 | |||
| Total cash outflows from operating activities | 4,464,072,664.51 | 5,451,415,995.40 | |||
| Net cash flows from operating activities | 12,308,211.47 | -73,580,093.39 | |||
| 2. Cash flows from investing activities | |||||
| Cash received from withdrawal of investments | |||||
| Cash received from investment income | 240,595,696.70 | 259,918,496.56 | |||
| Net proceeds from disposals of fixed assets, intangible assets and other long-term assets | 3,973,887.69 | 5,740.00 | |||
| Net proceeds from disposal of subsidiaries and other business units | |||||
| Other cash receipts related to investing activities | |||||
| Total cash inflows from investing activities | 244,569,584.39 | 259,924,236.56 | |||
| Cash paid for fixed assets, intangible assets and other long-term assets | 5,810,205.37 | 21,039,730.26 | |||
| Cash paid for investments | |||||
| Net cash paid for acquiring subsidiaries and other business units | |||||
| Other cash payments related to investing activities | |||||
| Total cash outflows from investing activities | 5,810,205.37 | 21,039,730.26 | |||
| Net cash flows from investing activities | 238,759,379.02 | 238,884,506.30 | |||
| 3. Cash flows from financing activities | |||||
| Cash received from investments by others | 58,216,000.00 | ||||
| Cash received from borrowings | 830,000,000.00 | 1,110,000,000.00 | |||
| Other cash receipts related to other financing activities | |||||
| Total cash inflows from financing activities | 830,000,000.00 | 1,168,216,000.00 | |||
| Cash repayments for debts | 790,000,000.00 | 1,260,000,000.00 | |||
| Cash paid for distribution of dividends and profit and for interest expenses | 134,389,016.01 | 185,045,678.32 | |||
| Other cash payments related to financing activities | 53,390,338.09 | 9,178,101.51 | |||
| Total cash outflows from financing activities | 977,779,354.10 | 1,454,223,779.83 | |||
| Net cash flows from financing activities | -147,779,354.10 | -286,007,779.83 | |||
| 4. Effect of changes in foreign exchange rates on cash and cash equivalents | 380,393.85 | -329,409.90 | |||
| 5. Net increase in cash and cash equivalents | 103,668,630.24 | -121,032,776.82 | |||
| Add: Opening balance of cash and cash equivalents | 171,022,392.92 | 292,055,169.74 | |||
| 6. Closing balance of cash and cash equivalents | 274,691,023.16 | 171,022,392.92 | |||
| (Attached notes to statements are part of the consolidated financial statements) | |||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | |||||
| Parent Company's Statement of Changes in Equity | ||||||||||||||||
| For the year ended 31 December 2022 | ||||||||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||||||||||
| Items | Current Period | |||||||||||||||
| Share capital | Capital reserves | Less:Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Total shareholders' equity | |||||||||
| 1. Closing balance of last year | 426,051,015.00 | 1,045,449,410.67 | 60,585,678.92 | 275,010,401.50 | 806,441,654.46 | 2,492,366,802.71 | ||||||||||
| Add: Increase/decrease due to changes in accounting policies | ||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | ||||||||||||||||
| Others | ||||||||||||||||
| 2. Opening balance of current year | 426,051,015.00 | 1,045,449,410.67 | 60,585,678.92 | 275,010,401.50 | 806,441,654.46 | 2,492,366,802.71 | ||||||||||
| 3. Increase/decrease for current year | -8,423,055.00 | -34,531,634.48 | -9,825,872.76 | 136,575,512.42 | 103,446,695.70 | |||||||||||
| I. Total comprehensive income | 261,994,651.82 | 261,994,651.82 | ||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -8,423,055.00 | -34,531,634.48 | -9,825,872.76 | -33,128,816.72 | ||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -7,987,217.00 | -42,265,614.88 | -50,252,831.88 | |||||||||||||
| ii. Capital contributed by other equity instruments holders | ||||||||||||||||
| iii. Share-based payments to owners' equity | -435,838.00 | 7,749,023.57 | -9,825,872.76 | 17,139,058.33 | ||||||||||||
| iv. Others | -15,043.17 | -15,043.17 | ||||||||||||||
| III. Profits distribution | -125,419,139.40 | -125,419,139.40 | ||||||||||||||
| i. Appropriation of surplus reserve | ||||||||||||||||
| ii. Distribution to owners | -125,419,139.40 | -125,419,139.40 | ||||||||||||||
| iii. Others | ||||||||||||||||
| IV. Transfers within owners' equity | ||||||||||||||||
| i. Capital reserves transferred to paid-in capital | ||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | ||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | ||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | ||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | ||||||||||||||||
| vi. Others | ||||||||||||||||
| V. Special reserves | ||||||||||||||||
| i. Appropriated during current year | ||||||||||||||||
| ii. Used during current year | ||||||||||||||||
| VI. Others | ||||||||||||||||
| 4. Closing balance of current year | 417,627,960.00 | 1,010,917,776.19 | 50,759,806.16 | 275,010,401.50 | 943,017,166.88 | 2,595,813,498.41 | ||||||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||||||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | ||||||||||||||||
| Parent Company's Statement of Changes in Equity | ||||||||||||||||
| For the year ended 31 December 2022 | ||||||||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||||||||||
| Items | Prior Period | |||||||||||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Total shareholders' equity | |||||||||
| 1. Closing balance of last year | 428,091,881.00 | 1,027,145,928.88 | 61,633,530.48 | 246,531,866.87 | 722,064,955.20 | 2,362,201,101.47 | ||||||||||
| Add: Increase/decrease due to changes in accounting policies | ||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | ||||||||||||||||
| Others | ||||||||||||||||
| 2. Opening balance of current year | 428,091,881.00 | 1,027,145,928.88 | 61,633,530.48 | 246,531,866.87 | 722,064,955.20 | 2,362,201,101.47 | ||||||||||
| 3. Increase/decrease for current year | -2,040,866.00 | 18,303,481.79 | -1,047,851.56 | 28,478,534.63 | 84,376,699.26 | 130,165,701.24 | ||||||||||
| I. Total comprehensive income | 287,075,299.62 | 287,075,299.62 | ||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -2,040,866.00 | 18,303,481.79 | -1,047,851.56 | 17,310,467.35 | ||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -8,994,086.00 | -41,132,596.76 | -45,368,941.80 | -4,757,740.96 | ||||||||||||
| ii. Capital contributed by other equity instruments holders | ||||||||||||||||
| iii. Share-based payments to owners' equity | 6,953,220.00 | 59,439,455.55 | 44,321,090.24 | 22,071,585.31 | ||||||||||||
| iv. Others | -3,377.00 | -3,377.00 | ||||||||||||||
| III. Profits distribution | 28,478,534.63 | -202,698,600.36 | -174,220,065.73 | |||||||||||||
| i. Appropriation of surplus reserve | 28,478,534.63 | -28,478,534.63 | ||||||||||||||
| ii. Distribution to owners | -174,220,065.73 | -174,220,065.73 | ||||||||||||||
| iii. Others | ||||||||||||||||
| IV. Transfers within owners' equity | ||||||||||||||||
| i. Capital reserves transferred to paid-in capital | ||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | ||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | ||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | ||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | ||||||||||||||||
| vi. Others | ||||||||||||||||
| V. Special reserves | ||||||||||||||||
| i. Appropriated during current year | ||||||||||||||||
| ii. Used during current year | ||||||||||||||||
| VI. Others | ||||||||||||||||
| 4. Closing balance of current year | 426,051,015.00 | 1,045,449,410.67 | 60,585,678.92 | 275,010,401.50 | 806,441,654.46 | 2,492,366,802.71 | ||||||||||
| Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui | ||||||||||||||||
FIYTA Precision Technology Co., Ltd.
Notes to the Financial StatementsFor the year ended 31 December 2022
I. Company status
1. Registered place, organization and address of headquarters
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approvalof Shen Fu Ban Fu (1992) 1259 issued by the General Office of Shenzhen MunicipalGovernment, through the restructuring of former Shenzhen FIYTA Time Industrial Company bythe promoter of China National Aero-Technology Import and Export Shenzhen Industry & TradeCenter (name changed to “China National Aero-Technology Shenzhen Co., Ltd” lately) on 25December 1992. On 3 June 1993, both the Company was listed on Shenzhen Stock Exchange.The Company holds business license with the Unified Social Credit Code of91440300192189783K.As at 31 December 2022, the outstanding shares issued by the Company was 417.628million shares and the registered capital was RMB417.628 million after a series of sharedividend, right offering, share capital conversion from retained earnings, and issuing of newshares. The Company’s registered address is FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao,Nanshan District, Shenzhen, Guangdong Province, where the Company’s headquarters locates.The parent company of the Company is CATIC Shenzhen Holdings Limited (CATIC Shenzhen)and the ultimate controlling party of the Company is Aviation Industry Corporation of China, Ltd.(AVIC) .
2. Nature of the Company’s business and main operating activities
The business nature and main operating activities of the Company and its subsidiariesmainly include: producing and selling of analogue indication mechanical watches, quartzwatches and its movements, components, various timing devices, processing and wholesalingkarat gold jewelry watches, intelligent watches; domestic commercial and material supply anddistributing business (excluding goods under exclusive operational rights, special control andexclusive sales) ; property management and leasing; providing design service; research, design,production, sales and technical support for precise watches and components; import and exportbusiness (according to Shen Mao Guan Deng Zheng Zi No.2007-072) .
3. Scope of consolidation
There were 12 subsidiaries that are included in the Company’s scope of consolidation foryear 2022, see Note VI for details. The scope of consolidation was the same as last year.
4. Authorization for issue
The financial statements have been approved and authorized for issue by the Board ofDirectors on 16 March 2023.II. Basis of preparation
1. Basis of preparation
The financial statement is prepared in accordance with the requirements of AccountingStandards for Business Enterprises and associated application guidance, illustrations to thestandards and related pronouncements (collectively known as “Accounting Standards forBusiness Enterprises” or “CAS”) . These financial statements also comply with the disclosurerequirements of “Regulation on the Preparation of Information Disclosure of Companies IssuingPublic Shares, No. 15: General Requirements for Financial Reports” (revised in 2014) issued byChina Securities Regulatory Commission (CSRC) .
2. Going concern
The Company assesses the going concern ability to the extent of 12 month afterthe balance sheet date. No issues that would result in significant doubt about the Company’sgoing concern is noted. As a result, the financial statements of the Company have been preparedon going concern basis.
3. Basis and principles of accounting
Accrual basis is adopted for the Group’s accounting activity. Except for some financialinstruments, the financial statements are measured using historical cost. In case of impairmentoccurred on assets, provisions for impairment are provided for in accordance with relatedregulations.
III. Significant accounting policies and accounting estimates
1. Highlight to specific accounting policies and estimates
(1) The Company make specific accounting policies and estimates according to its nature ofbusiness. Accounting policies and estimates mainly includes: method of estimated credit lossaccrual (Note III. 12, Note III. 13 and Note III. 14) , measurement of inventory (Note III. 15) ,depreciation of investment property and fixed asset and amortization of intangible asset (Note III.18, Note III. 19 and Note III. 23) , revenue (Note III, 31) etc.
(2) Based on historical experience and other factors including reasonable estimation to futureevents, the Company continues to evaluate significant accounting estimates and key assumptions.If material changes to following accounting estimate and key assumption incurred, material impactwould happened to the carrying value of the Company’s assets and liabilities in comingaccounting year.
1) Measurement of Expected Credit Loss of accounts receivable and other receivablesThe management estimates impairment loss provision to accounts receivable and otherreceivables based on the judgments to estimated credit loss of accounts receivable and otherreceivables. If any events occurred that indicated the Company may not be able to recover thebalance amount, estimation is needed in provision accrual. If the expected number is differentwith the estimated figure, the difference will affect the carrying value of accounts receivable andother receivables and the impairment loss expenses in corresponding accounting period.
2) Impairment to inventory. The Company recognizes provision for obsolete inventoriesbased on the excess of the cost of inventory over its net realizable value. In determining the netrealizable value of inventories, the management uses significant judgments to estimate the sellingprice, cost to finish manufacturing, and selling expenses and associated taxes. If the managementrevises estimated selling price and cost to finish manufacturing and selling expenses, the NAVestimation would be affected and the difference would have an effect to the inventory provision.
3) Estimation of long-term asset impairment. When evaluating whether there is impairment tolong-term asset, the management mainly considers the following: (a) whether the events affect theasset impairment have already incurred; (b) whether the discounted cash flow from continue usageof the asset or disposal is lower than its carrying amount; and (c) whether major assumption usedin estimating the future cash flow is appropriate.
Changes to related assumption adopted in determining impairment such as profitability,discounting rate and growth rate may have material impact to the present value used in impairmenttest and result in impairment to above mentioned long-term assets.
(a) Depreciation and amortization. The estimated residual value and useful life of investmentproperty, fixed asset and intangible asset that used by the Company are based on historical actualuseful life and actual residual value of assets with similar nature or functions. In the process ofusing such assets, estimated useful life and residual value may vary depending on the economicenvironment, technological environment and other environment that the assets located. If there isdifference between the expectation and previous estimation, proper adjustments will be made bythe management.
(b) Share-based payments. The management makes best estimation based on up-to-datenumber of employees who have exercisable shares and adjusting the number of exercisable equityinstrument on each balance sheet date in the vesting period. If there is difference between currentyear exercisable employee and previous estimation, proper adjustments will be made by themanagement.
(c) Deferred tax asset. Deferred tax asset of taxable losses shall be recognized to the extentthat there will have sufficient taxable income to offset. This involves significant judgments toestimate the timing and amount of future taxable profit and taking into consideration of tax
planning so as to determine the amount of deferred tax asset.(d) Corporate income tax. The final tax treatment of many transaction and events are withuncertainty in the normal course of operation. Significant judgments involves in accrual ofcorporate income tax. If there is difference between the final discretion and the amount recorded inbooks, the difference will affect the amount of tax in the period of final discretion.
2. Statement of compliance with Accounting Standards for Business EnterprisesThe financial statements of the Company have been prepared in accordance with therequirements of Accounting Standards for Business Enterprises. These financial statementspresent truly and completely the financial position as at 31 December 2021, the results ofoperations and the cash flows for the year then ended of the Company.
3. Accounting period
The accounting period of the Company is the calendar year, i.e. from 1 January to 31December of each year.
4. Operating cycle
The operating cycle refer to the period from purchasing assets for process to realizing cash orcash equivalent. The Company’s operating cycle is 12 months which is also used as standard todetermine the liquidity of asset and liabilities.
5. Recording currency
The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recordingcurrency. FIYTA (Hong Kong) Limited (“FIYTA Hong Kong”) , a subsidiary of the Companyoutside mainland China, and Station 68 Limited (“Station 68”) , a subsidiary of FIYTA HongKong, use Hong Kong Dollar (“HKD”) as the recording currency according to the main economicenvironment where the companies operated in. Montres Chouriet SA, a subsidiary of FIYTA HongKong (“Swiss Company”) , uses Swiss Franc as the recording currency according to the maineconomic environment where the Swiss Company operated in. The recording currenciesmentioned above will be translated to Renminbi when preparing financial statements. Thecurrency used in preparing the Group’s financial statements is Renminbi.
6. Accounting treatment for business combinations involving entities under commoncontrol and not under common control
(1) If a business combination is achieved through multiple steps, of which the terms,condition and economical effect is in line with one or more criteria as followed, themultiple transactions shall be dealt with as one-basket transaction.
1) the transactions were entered into at the same time or by considering each other’sinfluence;
2) a complete business result can only be achieved by combining all these transactionstogether;
3) the performing of one transaction is depended on at least one other transaction;
4) a transaction is not economical if it is considered stand along but it will becomeeconomical if it is considered in combination with other transactions.
(2) Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquiredand liabilities assumed are measured based on their carrying amounts in the consolidated financialstatements of the ultimate controlling party at the combination date, except for adjustments due todifferent accounting policies. The difference between the carrying amount of the net assetsacquired and the consideration paid for the combination (or the total par value of shares issued) isadjusted against share premium in the capital reserve, with any excess adjusted against retainedearnings.
If there is contingent consideration and provision or assets are required to be recognized, thedifference between the provision or assets and the contingent consideration shall adjust the capitalreserve, with any excess adjusted against retained earnings.
If business combinations involving entities under common control achieved in stages thatinvolves multiple transactions belongs to one-basket transaction, all transactions shall be dealtwith as one transaction. If not, the accounting treatment is as follows: Initial investment cost is theacquirer’s share of the carrying amount of the net assets of the acquiree in the consolidatedfinancial statements of the ultimate controlling party at the combination date. The differencebetween the initial investment cost and the sum of carrying amount of investment prior tocombination date and carrying amount of new considerations paid for the combination at thecombination date is adjusted to capital reserve (share premium) . If the capital reserve is notsufficient to absorb the difference, any excess is adjusted against retained earnings. he differencebetween the carrying amount of the net assets acquired and the sum of carrying amount ofinvestment prior to combination date and carrying amount of new considerations paid for thecombination at the combination date is adjusted to capital reserve (share premium) . If the capitalreserve is not sufficient to absorb the difference, any excess is adjusted against retained earnings.The profit or loss, other comprehensive income and changes in other owner’s equity recognized bythe acquirer during the period from the later of initial investment date and the date that theacquirer and acquiree both under common ultimate control to the combination date are offset theopening retained earnings or profit for loss for the current period in the comparative statements.
(3) Business combinations involving entities not under common control
The purchase date refers to the date that the Company actually acquired control over theacquire i.e. the date when the control over the acquiree’s net assets or decision of businessoperation has been transferred to the Company. If the Company fulfills the following conditions atthe same time, it is considered that the control has been transferred:
① the contract or agreement of business combination has been approved by internal powerdepartment;
② related matters has been approved by state supervisory authorities, if needed;
③ procedures of asset transfer has been completed;
④ the Company has been made majority of payments and has the ability and plan to makethe residual payments;
⑤ the Company is in substances acquired the business and operating policies and enjoyedcorresponding interests and undertaking risks of the acquire.
On the purchase date, assets transferred, liabilities incurred or assumed as the considerationpaid shall be measured at fair value. The difference between the fair value and carrying amountshall be charged to current period profit or loss.
Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’sidentifiable net assets, the difference is recognized as goodwill, and subsequently measured onthe basis of its cost less accumulated impairment provisions. Where the combination cost is lessthan the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the differenceis recognized in profit or loss for the current period after reassessment.
If business combinations involving entities not under common control achieved in stagesthat involves multiple transactions belong to one-basket transaction, all the transactions shall betreated as one. Otherwise, it shall be treated as follows: In the separate financial statements, theinitial investment cost is the sum of the carrying amount of equity investment of the acquireeheld prior to the acquisition date and additional investment cost at the acquisition date. When thepreviously-held equity investment which was accounted for under the e Accounting treatment forbusiness combinations involving entities under common control and not under common controlequity method before the acquisition date, any other comprehensive income previouslyrecognized is not adjusted on acquisition date. When the investment is disposed of in later date,the amount that was recognized in other comprehensive income is recognized on the same basisas would be required if the investee had disposed directly of the related assets or liabilities. Theowners’ equity recognized as the changes of the investee’s other owners’ equity except for netprofit or loss, other comprehensive income and profit distribution, are transferred to profit or lossfor the current period when disposing the investment. When the previously-held equityinvestment which was measured at fair value before the acquisition date, the accumulatedchanges in fair value included in other comprehensive income is transferred to profit or loss forthe current period upon commencement of the cost method.
(4) Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services,valuation advisory, and other administrative expenses, are recorded in profit or loss for the current
period when incurred. The transaction costs of equity or debt securities issued as theconsiderations of business combination are included in the initial recognition amount of the equityor debt securities.
7. Consolidated financial statements
(1) Scope of consolidation
The scope of consolidated financial statements is based on control. All subsidiaries (includingstandalone entity that controlled by the Company) are all included in the scope of consolidation.
(2) Procedures of consolidation
The consolidated financial statements are prepared by the Company based on the financialstatements of the Company and its subsidiaries and other relevant information. The wholeenterprise is considered as one accounting body when preparing consolidated financial statementand reflect the whole group’s financial position, performance and cash flow according to unifiedaccounting policies based on accounting standards.
All subsidiaries that are included in the scope of consolidation adopt same accountingpolicies, and accounting period. If there are differences, the subsidiaries shall adjust its policiesand accounting period accordingly.
When preparing consolidated financial statements, the accounting policies and accountingperiods of the subsidiaries should be consistent with those established by the Company, and allsignificant intra-group balances and transactions are eliminated. If the treatment based onenterprise group angle is different with the angle from subsidiaries’, it shall be treated based onenterprise group angle.
The portion of a subsidiary’s equity that is not attributable to the parent is treated asnon-controlling interests and presented separately in the consolidated balance sheet withinshareholders’ equity. The portion of net profit or loss of subsidiaries for the period attributable tonon-controlling interests is presented separately in the consolidated income statement below the“net profit” line item. When the amount of loss for the current period attributable to thenon-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ share ofthe opening owners’ equity of the subsidiary, the excess is still allocated against thenon-controlling interests.
Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemedto be included in the consolidated financial statements from the date they are controlled by theultimate controlling party. Their operating results and cash flows are included in the consolidatedincome statement and consolidated cash flow statement respectively from the date they arecontrolled by the ultimate controlling party.
Where a subsidiary or business has been acquired through a business combination not
involving enterprises under common control in the reporting period, the financial statements ofsubsidiaries shall be adjusted on the basis of fair value of identifiable net assets on purchase date.
1) Addition of subsidiaries or business operation
Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed tobe included in the consolidated financial statements from the date they are controlled by theultimate controlling party. Their operating results and cash flows are included in the consolidatedincome statement and consolidated cash flow statement respectively from the date they arecontrolled by the ultimate controlling party.If the Company can exert control over the investee under common control because ofaddition of investment, adjustments shall be made as if all the combining party are at the currentcondition in the angle of ultimate controlled party. Equity investment held before acquired control,profit or loss, other comprehensive income and other net asset changes that have alreadyrecognized between the later of acquiring original equity and the date under common control, andcombination date shall offset opening retained earnings or current period profit or lossrespectively.
In the reporting period, if there is subsidiary or business addition involving entities not undercommon control, no adjustments shall be made to the consolidated balance sheet. The revenue,expenses and profit from the purchasing date to period end shall be included in consolidatedincome statement. The cash flows from the purchasing date to period end shall be included inconsolidated cash flow statement.
Where a subsidiary or business has been acquired through a business combination notinvolving enterprises under common control by means of investment addition in the reportingperiod, equity held before the purchase date shall be re-measured at fair value. Difference betweenthe fair value and the carrying amount shall be charged to current period investment gain. Changesrelated to equity method such as other comprehensive income and other equity changes beside netprofit, other comprehensive income and profit distribution shall be transferred to current periodinvestment gain.
2) Disposal subsidiary or business
a) General principal
In the reporting period, if the Company dispose of subsidiary or business, the subsidiary’srevenue, expenses, profit and cash flows from the beginning of the period to the disposal date shallbe included in consolidated financial statements.
When the Company loses control over a subsidiary because of disposing part of equityinvestment or other reasons, the remaining part of the equity investment is re-measured at fairvalue at the date when the control is lost. A gain or loss is recognized in the current period and is
calculated by the aggregate of consideration received in disposal and the fair value of remainingpart of the equity investment deducting the share of net assets in proportion to previousshareholding percentage in the former subsidiary since acquisition date and the goodwill.b) Disposal of subsidiary through multiple stepsIn the event that the Company losses control over a subsidiary through multiple transactions,if one or more conditions below are fulfilled, it shall be treated as one-basket transaction:
i) the transactions were entered into at the same time or by considering each other’sinfluence;
ii) a complete business result can only be achieved by combining all these transactions
together;
iii) the performing of one transaction is depended on at least one other transaction;
iv) a transaction is not economical if it is considered stand along but it will become
economical if it is considered in combination with other transactions.
If the disposal was categorized as one-basket transaction, the Company dealt with alltransactions as one transaction that resulted in lost control over subsidiary. But, before losingcontrol, the difference between disposal consideration and the portion of net asset of the disposalpart shall be recognized in other comprehensive income each time of disposal and charged toincome statement in whole in the period loss control.
If the disposal does not belong to one-basket transaction, the accounting treatment before lostcontrol shall be in accordance with policies of disposal equity but not losing control. At the timecontrol lost, deal with as normal subsidiary disposal.
3) Acquiring non-controlling interests of subsidiary
Where the Company acquires a non-controlling interest from a subsidiary’s non-controllingshareholders, the book value of shareholder’s equity attributed to the Company and to thenon-controlling interest is adjusted to reflect the change in the Company’s interest in thesubsidiaries. The difference between the proportion interests of the subsidiary’s net assets beingacquired or disposed and the amount of the consideration paid or received is adjusted to the capitalreserve in the consolidated balance sheet, with any excess adjusted to retained earnings.
4) Partially disposal subsidiary equity without losing control
The difference between the consideration received from partial disposal of the long-termequity investment in the subsidiary without losing control and the share of net assets of thesubsidiary that is continuously calculated from the purchase date or the merger date correspondingto the disposal of the long-term equity investment , to adjust the share premium in the capitalreserve in the consolidated balance sheet, if the share premium in the capital reserve is insufficientto offset, adjust the retained earnings.
8. Joint arrangement classification and accounting treatment for joint operation
(1) Classification
The Company classifies joint arrangements into joint operations and joint ventures based onthe structure, legal form, terms and conditions in the arrangement, and other related facts.
Joint operations means joint arrangement that does not realized through independent entity.Joint arrangement that realized through independent entity is normally recognized as jointventure but it also can be classified as joint operation if clear evidence showed that one of thefollowing condition is met:
1) The legal form of an joint arrangement showed that the joint parties enjoyed rights over
related assets and undertake liability respectively;
2) The contract showed that the joint parties enjoyed rights over related assets and undertake
liability respectively;
3) Other facts and situation indicated that the joint parties enjoyed rights over related assets
and undertake liability respectively;
(2) Accounting treatment to joint operation
The Company recognizes the following items relating to its interest in a joint operation, andaccount for them in accordance with relevant accounting standards:
1) its solely-held assets, and its share of any assets held jointly;
2) its solely-assumed liabilities, and its share of any liabilities assumed jointly;
3) its revenue from the sale of its share of the output arising from the joint operation;
4) its share of the revenue from the sale of the output by the joint operation; and
5) its solely-incurred expenses, and its share of any expenses incurred jointly.
The Company contribute or disposal of assets (except that asset constitute business) . Beforethese assets are sold to third party, the Company only recognizes the portion of profit or lossesthat attributes to the other party. If the assets incurred impairment (meets the requirements of the"Accounting Standards for Business Enterprises No. 8 - Impairment of Assets"), the Companyrecognizes losses in full.
For the assets purchased from joint operation (except that constitutes business) , before it issold to third party, only the portion that attributable to the other parties. If assets incurredimpairment (meets the requirements of the "Accounting Standards for Business Enterprises No.8 - Impairment of Assets"), the Company recognizes losses based on its share.
The Company does not enjoy joint control to joint operation. If the Company enjoys jointoperation’s asset and undertaking related liabilities, the accounting treatment is the same.Otherwise, it shall be accounted for based on accounting standards.
9. Cash and cash equivalents
When preparing cash flow statement, the Company recognizes cash in hand and bank
deposit that available for payment as cash. Cash equivalents include short-term (generallyexpires within three months from the date of purchase),highly liquid investments that are readilyconvertible to known amounts of cash and are subject to an insignificant risk of change in value.
10. Foreign currency transactions and translation of foreign currency financialstatements
(1) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company,using the exchange rates prevailing at the dates of the transactions.
Monetary items denominated in foreign currencies are translated to Renminbi at the spotexchange rate at the balance sheet date. The resulting exchange differences between the spotexchange rate on balance sheet date and the spot exchange rate on initial recognition or on theprevious balance sheet date are recognized in profit or loss. Non-monetary items that aremeasured at historical cost in foreign currencies are translated to Renminbi using the exchangerate at the transaction date.
Non-monetary items that are measured at fair value in foreign currencies are translated usingthe exchange rate at the date the fair value is determined. The resulting exchange differences arerecognized in profit or loss or other comprehensive income.
(2) Translation of foreign currency financial statements
When translating the foreign currency financial statements of overseas subsidiaries, assetsand liabilities of foreign operation are translated to Renminbi at the spot exchange rate at thebalance sheet date. Equity items, excluding “retained earnings”, are translated to Renminbi at thespot exchange rates at the transaction dates.
When disposing overseas operations, foreign translation difference that related to theoverseas business shall be charged to current period profit or losses from other comprehensiveincome. If the disposal resulted in decrease in shareholding but still maintain control, thetranslation difference will be included in non-controlling interest. If the disposal related toassociate entity or joint venture entities, the translation difference will be included in currentperiod profit or loss.
11. Financial instruments
The Company recognizes financial assets or financial liabilities when the Company become aparty of the financial instruments.
Effective interest rate method refer to calculating the amortized cost of financial assets orliabilities and amortizes interest income or expenses into corresponding accounting periodaccordingly.
Effective interest rate refers to the interest that is used to discount the estimated future cash
flows of existing financial assets or financial liabilities to its amortized cost. When determiningthe effective interest rate, the cash flow is estimated taking consideration of all contractual termsof financial assets or financial liabilities but does not including estimated credit loss.Amortized cost of financial assets or financial liabilities is the initial recognition amountdeduct principal and add or less accumulated amortization to the difference between initialrecognition and the amount at maturity and less accumulated loss provision (for financial assetsonly) .
(1) Recognition and derecognition of financial instruments
Financial assets are classified into the following three categories depends on the Company’sbusiness mode of managing financial assets and cash flow characteristics of financial assets
1) Financial assets measured at amortized cost
2) Financial assets at fair value through other comprehensive income
3) Financial assets at fair value through profit or loss
Financial assets are measured at fair value at initial recognition. But it is recognized usingtrading price for accounts receivable or notes receivable arose from sale of goods or providing ofservice that does not including material financing component or does not consider financingcomponent within one year.
For financial assets at fair value through profit or loss, the related transaction costs aredirectly recognized through profit or loss, and the related transaction costs of other types offinancial assets are included in the initial recognition amounts.
Only when the Company changes its business model of managing financial assets, all thefinancial assets affected shall be reclassified on the first day of the first reporting period after thebusiness model changes.
1) Financial assets measured at amortized cost
The Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets at fair value through profit or loss as financial assets measured atamortized cost: The Company’s business model for managing the financial assets is to collectcontractual cash flows; The terms of the financial asset contract stipulate that cash flows generatedon a specific date are only payments of principal and interest based on the amount of outstandingprincipal. Financial assets measured at amortized cost of the Company includes cash and bankbalances, notes receivable, accounts receivables and other receivables.
After initial recognition, the effective interest rate method is used to measure the amortizedcost of such financial assets. Profits or losses arising from financial assets measured at amortizedcosts and not part of any hedging relationship are included in current profit or loss when therecognition is terminated, amortized or impaired according to the effective interest rate.
a) for financial assets that already impaired when it is acquired, the Company determines its
interest income using adjusted effective interest rate based on its amortized cost.b) for financial assets that does not impaired when it is acquired but impaired latterly, theCompany determines its interest income using adjusted effective interest rate based on itsamortized cost. If there is no credit impairment in later period due to changes to risk factors, theCompany uses effective interest rate times of carrying amount of the financial asset to determineinterest income.
2) Financial assets at fair value through other comprehensive income
The Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets measured at fair value and whose changes are recorded in currentprofit or loss as financial assets measured at fair value through other comprehensive income: TheGroup’s business model for managing the financial assets is both to collect contractual cash flowsand to sell the financial assets, and the terms of the financial asset contract stipulate that cashflows generated on a specific date are only payments of principal and interest based on the amountof outstanding principal.After initial recognition, financial assets are subsequently measured at fair value. Interest,impairment losses or gains and exchange gains calculated by the effective interest rate method arerecognized in profit or loss, while other gains or losses are recognized in other comprehensiveincome. When derecognized, the accumulated gains or losses previously recognized in othercomprehensive income are transferred from other comprehensive income and recorded in currentprofit or loss.
Notes receivable and accounts receivable measured at fair value through other comprehensiveincome are listed as receivables financing, and other such financial assets are listed as other debtinvestments, of which: one year from the balance sheet date Other debt investments due withinone year are listed as non-current assets due within one year, and other debt investments with anoriginal maturity date within one year are listed as other current assets.
3) Financial assets designated as fair value through other comprehensive income
At initial recognition, the Company may designate non-trading equity instrument investmentsas financial assets at fair value through other comprehensive income, presented as other equityinstrument investment, and recognize dividend income when the conditions are met (thedesignation cannot be revoked once it is made) .
The fair value changes of this kind of financial asset shall be included in other comprehensiveincome and no impairment provision is needed. When de-recognizing the financial asset,accumulated gain or loss in other comprehensive income shall be transferred out of othercomprehensive income and charged to retained earnings. During the investing period when theCompany holds equity instruments, the Company recognizes dividends in current period profit orloss when the right of receiving dividends is confirmed and the associated economic benefit is
probable to flow into the Company and that the amount can be measured reliably. The Companytreated this kind of financial instrument under other equity investment.The designated equity instrument investment does not belong to the following: the purpose ofobtaining the financial asset is mainly for the recent sale; it is part of the identifiable financialasset instrument combination under centralized management at initial recognition, and there isobjective evidence that the short-term gain actually exists in the near future; it is a derivative(except for derivatives that meet the definition of a financial guarantee contract and are designatedas effective hedging instruments) .
4) Financial assets at fair value through profit or loss
The financial assets other than financial assets measured at amortized cost and financialassets at fair value through other comprehensive income are classified as financial assets at fairvalue through profit or loss.After initial recognition, the financial assets are subsequently measured at fair value, and theprofits or losses generated from which are recognized in profit or loss.The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.
5) Financial assets designated at fair value through profit or loss.
At initial recognition, if the accounting mismatch can be eliminated or significantly reduced,the financial assets can be designated as financial assets at fair value through profit or loss.
If the hybrid contract includes one or more embedded derivatives and the main contract doesnot belong to the above financial assets, the Company may designate the whole as a financialinstrument that is measured at fair value through profit or loss, except in the following cases:
a) Embedded derivatives do not materially change the cash flow of a hybrid contract
b) When it is first determined whether a similar hybrid contract requires a spin-off, there islittle need for analysis to make it clear that the embedded derivatives it contains should not be split.If the prepayment right of the embedded loan allows the holder to repay the loan in advance withan amount close to the amortized cost, the prepayment right does not need to be split.
After initial recognition, the financial assets are subsequently measured at fair value, and theprofits or losses generated from which are recognized in profit or loss.
The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.
(2) Classification and measurement of financial liabilities
The Company categorizes financial liabilities into financial liabilities and equity instrumentbased on the contract terms and economical nature rather than solely on its legal form. Financialliabilities initially recognized as financial liabilities at fair value through profit or loss, otherfinancial liabilities and derivative instrument designated as effective hedging instrument.
The financial liabilities of the Company are initially measured at fair value. The related
transaction costs of financial liabilities at fair value through profit or loss are directly recognizedin profit or loss. The related transaction costs of other categories of financial liabilities areincluded in the initial recognition amount.Subsequent measurement of financial liabilities depends on its category:
1) Financial liabilities at fair value through profit or loss
This category includes financial liabilities held for trade (including derivatives that arefinancial liabilities) and financial liabilities designated at fair value through profit or loss.At initial recognition, in order to provide more relevant accounting information, theCompany classifies financial liabilities that meet one of the following conditions as financialliabilities at fair value through profit or loss (the designation cannot be revoked once it is made) :
the aim of undertaking related financial liabilities is to sell or repurchase in the short run; it is partof identifiable financial instruments and there is objective evidence indicated that the enterpriseadopts short-term profitability mode; belong to derivative instrument except for derivativeinstrument designated as effective hedging instrument and financial guarantee contract. Financialliabilities held for trade are measured at fair value subsequently and all fair value changes exceptfor hedging accounting shall be included in current period profit or loss.
At initial recognition, in order to provide more relevant accounting information, theCompany classifies financial liabilities that meet one of the following conditions as financialliabilities designated at fair value through profit or loss (the designation cannot be revoked once itis made) :
a) accounting mismatches can be eliminated or significantly reduced.
b) management and performance evaluation of financial liability portfolios or combinationsof financial assets and financial liabilities based on fair value according to corporate riskmanagement or investment strategies as stated in formal written documents, and report to keymanagement personnel on this basis.
When the Company initially recognizes a financial liability and designates it at fair valuethrough profit or loss according to stipulations of standards, the changes in the fair value of thefinancial liability arising from changes in the company’s own credit risk are included in othercomprehensive income, and other changes in fair value are recognized in profit or loss for theperiod. However, if the accounting causes or expands the accounting mismatch in profit or loss,the entire gain or loss of the financial liability (including the affected amount from changes in thecompany’s own credit risk) is included in the current profit or loss.
2）Other financial liabilities
Except for the following items, the Company classifies financial liabilities as financialliabilities measured at amortized cost:
a) Financial liabilities at fair value through profit or loss.
b) The transfer of financial assets does not meet the conditions for derecognition or financialliabilities arising from the continued involvement in the transferred financial assets.c) Financial guarantee contracts that are not in the first two categories of this article, and loancommitments granted at a rate lower than market interest rates and that are not in the first categoryof this articleFinancial guarantee contracts that are not designated as financial liabilities measured at fairvalue through profit or loss are initially recognized at fair value. Subsequent to initial recognition,the subsequent measurement is determined according to the higher loss allowance of contingentliabilities under expected credit loss model and the initial recognition amount deducting by theaccumulated amortization.
(3) Derecognition of financial instruments
1）If a financial asset meets one of the following conditions, it shall be derecognized:
a) The contractual right to receive the cash flow of the financial asset is terminated.
b) The financial asset has been transferred, and the transfer meets the requirements of the“Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” regardingderecognition of financial assets.
2) Conditions of derecognition of financial liabilities
If the current obligation of a financial liability (or a part thereof) has been discharged, thefinancial liability (or such part of financial liability) is derecognized.
When the Company and the lender sign an agreement to replace the original financial liabilitywith a new financial liability, and the new financial liability is substantially different from theoriginal financial liability, the original financial liability is derecognized and a new financialliability is recognized. The difference between the carrying amount and the consideration paid(including the transferred non-cash assets or liabilities assumed) is recognized in profit or loss
If the Company repurchases part of the financial liabilities, the carrying amount of thefinancial liabilities as a whole is allocated based on the proportion of the fair value of thecontinuing recognition portion and the derecognition portion on the repurchase date. Thedifference between the carrying amount assigned to the derecognition portion and theconsideration paid (including the transferred non-cash assets or liabilities assumed) shall beincluded in the current profit or loss.
(4) Recognition basis and measurement for transfer of financial assets
In the event of transfer of financial assets, the Company assesses the extent to which it retainsthe risks and rewards of ownership of the financial assets and treats them in the following cases:
1) If almost all risks and rewards of ownership of financial assets are transferred, thefinancial assets are derecognized and the rights and obligations arising from or retained in thetransfer are separately recognized as assets or liabilities.
2) If almost all the risks and rewards of ownership of financial assets are retained, thefinancial assets shall continue to be recognized
3) If there is neither transfer nor retention of almost all risks and rewards of ownership offinancial assets (i.e., other than (1) and (2) of this article) , then depending on whether or not theyretain control over financial assets
a) If control over the financial asset is not retained, the financial asset shall be derecognized,and the rights and obligations arising or retained during the transfer shall be separately recognizedas assets or liabilities.
b) If the control over the financial asset is retained, the relevant financial asset shall becontinuously recognized according to the degree of its continuous involvement in the transferredfinancial asset, and the relevant liabilities shall be recognized accordingly. The degree ofcontinued involvement in the transferred financial assets refers to the degree to which thecompany bears the risk or reward of the value change of the transferred financial assets
When judging whether the transfer of financial assets satisfies the conditions forderecognition above, the principle of substance over form is adopted. The Company divides thetransfer of financial assets into the overall transfer and partial transfer of financial assets:
1) If the overall transfer of financial assets meets the conditions for derecognition, thedifference between the following is included in the current profit or loss:
a) The carrying amount of the transferred financial assets on the date of derecognition.
b) The sum of the consideration received in respect of the transfer of financial assets and theamount corresponding to the derecognized portion in the accumulated changes in the fair valueoriginally and directly recognized in other comprehensive income (the financial assets involved inthe transfer are measured at fair value through other comprehensive income)
If the transfer of a financial asset does not meet the conditions for derecognition, the financialasset will continue to be recognized and the consideration received is recognized as a financialliability
(5) Method for determining the fair value of financial assets and financial liabilities
The fair value of financial assets or financial liabilities with active market is determined byactive market quotations; active market quotations include quotations that are readily andregularly available from exchanges, dealers, brokers, industry groups, pricing agencies orregulatory authorities for related assets or liabilities, and represent actual and frequentlyoccurring market transactions on a fair trade basis.
The fair value of financial assets initially acquired or derived or financial liabilities assumedshall be determined on the basis of the market transaction price.
The fair value of financial assets or financial liabilities without active market is determinedusing valuation techniques. In valuation, the Company adopts valuation techniques that are
applicable under current circumstances and that are supported by adequate available data andother information, selects inputs with consistent asset or liability characteristics considered bymarket participants in trading related asset or liability, and uses relevant observable inputs wherepossible. Unobservable inputs are used where the relevant observable inputs are not available orare impracticable.
(6) Provision for impairment of financial assets
Based on the expected credit losses, the Company assesses the expected credit losses of thefinancial assets measured at amortized cost and financial assets at fair value through othercomprehensive income, lease receivables, contract assets, loan commitment and financialliabilities that are not measured at fair value through profit or loss, and financial guaranteecontract etc., and makes impairment accounting and recognizes loss provisions.The expected credit loss refers to the weighted average of the credit losses of financialinstruments that are weighted by the risk of default. Credit loss refers to the difference between allcontractual cash flows discounted at the original effective interest rate and receivable from thecontract and all cash flows expected to be received by the Company, and the present value of allcash shortages. For financial assets that have been purchased or generated with credit impairment,loss provision is recognized only for the cumulative changes in lifetime expected credit lossesafter the initial recognition on the balance sheet date.For accounts receivable, contract assets, and lease receivables, the Company shall alwaysmeasure the loss allowance for them at an amount equal to the lifetime expected credit losses.
For financial assets that have been purchased or generated with credit impairment, lossprovision is recognized only for the cumulative changes in lifetime expected credit losses afterthe initial recognition on the balance sheet date. On each balance sheet date, the amount ofchanges in lifetime expected credit losses is included in profit or loss as an impairment loss orgain. Even if the lifetime expected credit loss determined on the balance sheet date is less thanthe expected credit loss reflected in the estimated cash flow at the initial recognition, the positivechange in expected credit loss is also recognized as an impairment gain
Except for the above-mentioned simplified measurement methods and purchased ororiginated credit-impaired assets, the Company assesses whether the credit risk of the otherfinancial assets has increased significantly since the initial recognition on each balance sheet date,and separately measures its loss provision, recognizes expected credit loss and its changes basedon the following circumstances：
a) If the credit risk of the financial instruments has not increased significantly since the initialrecognition, the loss provision is measured at the amount equivalent to the expected credit loss ofthe financial instruments in the next 12 months, regardless of whether the basis the Company
assesses the credit loss is on individual financial instrument or the combination of financialinstruments, and the increase or reversal of the loss provision resulting therefrom shall be includedin the current profit or loss as an impairment loss or gain.b) If the credit risk of the financial instruments has increased significantly since the initialrecognition but no impairment has occurred, the loss provision is measured at the amountequivalent to the lifetime expected credit loss of the financial instruments, regardless of whetherthe basis the Company assesses the credit losses is on individual financial instrument or acombination of financial instruments, and the increase or reversal of the loss provision resultingtherefrom should be included in the current profit or loss as an impairment loss or gain.c) For financial instruments in the third stage which the financial instrument has beenimpaired since initial recognition, the Company measures loss provision on the basis of life-timeexpected credit loss and calculating interest income according to their book balance minus theimpairment provision and the actual interest rate.Incremental or reversal of credit loss provision shall be included in current profit or loss asimpairment loss or gain. Except for financial asset at fair value through other comprehensiveincome, credit loss provision is to offset the carrying amount of financial assets. For financialassets at fair value through other comprehensive income, the credit loss provision is recognizedin other comprehensive income and will not offset the financial asset’s carrying amount inbalance sheet.
If the Company recognized credit loss provision in prior accounting period in terms oflife-time credit loss, but on current period balance sheet date, the associated financial asset doesnot belong to the situation of risk increased after the initial recognition, the Company shallaccrue credit loss provision for this financial asset based on the next 12 month expected creditloss. Difference arose from above changes shall be included in current period profit or loss asimpairment gain.
1) Assessment of significant increase of credit risk
By comparing the default risk of financial instruments on balance sheet day with that oninitial recognition day, the Company determines the relative change of default risk of financialinstruments during the expected life of financial instruments, to evaluate whether the credit risk offinancial instruments has increased significantly since the initial recognition.
To determine whether credit risk has increased significantly since the initial recognition,factors considered by the Company includes:
a) Whether there is serious deterioration of the debtor’s operating results that have occurred
or are expected to occur;
b) Changes in the existing or anticipated technological, market, economic or legalenvironment will have a significant negative impact on the debtor’s repayment capacity.c) Serious deterioration of external or internal credit ratings (if any) of financial instrumentsthat have occurred or are expected to occur;d) Whether the expected performance and repayment of debtor changes significantly.e) Whether the Company changed the way of managing financial assets.On the balance sheet date, if the Company assesses that the financial instrument only haslower level of credit risk, the Company assumes that the credit risk associated with the financialinstrument does not increased after the initial recognition. If the default rate of a financialinstrument is low and the debtor’s ability to fulfill its cash flow liability is strong, the financialinstrument will be regarded with lower credit risk even if there will be adverse changed ineconomic and operating environment in long-term which may not necessarily decrease thedebtor’s ability of fulfilling its cash flow liabilities.
2) Provision for impairment of financial assets
When one or more events that adversely affect the expected future cash flows of a financialasset occur, the financial asset becomes a financial asset that has suffered credit impairment.Evidence that credit impairment has occurred in a financial asset includes the followingobservable information:
a) significant financial difficulties of the issuer or debtor;
b) the debtor breaches the contract, such as failure to pay or delay in the payment of interestor principal;
c) the creditor gives the debtor a concession which would not have been made under anyother circumstances for economic or contractual considerations relating to the financial difficultiesof the debtor;
d) the debtor is likely to go bankrupt or carry out other financial restructurings;
e) the financial difficulties of the issuer or the debtor cause the active market of the financialasset to disappear;
f) purchase or source a financial asset at a substantial discount that reflects the fact that creditlosses have occurred.
The credit impairment of financial assets may be caused by the joint action of multiple events,and may not be caused by separately identifiable event
3) Determining expected credit loss (ECL)
The Company evaluates ECL based on single or portfolio of financial instrument. Whenevaluating ECL, the Company considers past events, current situation and future economiccondition.
The Company categorizes financial instrument into different portfolios based on common
credit risk characteristics. Common credit risk characteristics includes: types of financialinstruments, aging portfolio, settlement period, debtor’s industries etc… Refer to accountingpolicies of financial instruments for standard for single evaluation and credit risk characteristics.The Company uses the following way to determine the ECL of financial instruments:
a) For financial assets, credit loss is the present value of difference between all contractualcash flows receivable from the contract and all cash flows expected to be received by theCompany.b) For lease receivable, credit loss is the present value of difference between all contractualcash flows receivable from the contract and all cash flows expected to be received by theCompany.c) For financial guarantee contract, credit loss is the present value of expected paymentamount due to credit losses happened to the owner of the contract and less any amount that theCompany expected to receive from the contract owner, debtor or other parties.d) For financial assets that already impaired on balance sheet date but not impaired whenpurchasing, the credit loss is the difference of carrying amount and present value of future cashflows discounted at original effective interest rate.
Factors that the Company measures ECL of financial instrument includes: assessing a seriesof possible results and to determine a weighted average amount without bias; time value of money;information of past event, current situation and future economic condition forecast that can beobtained without paying extra cost or efforts on balance sheet date.
4) Write off
If the Company no longer reasonably expects that the financial assets contract cash flow canbe recovered fully or partially, the financial assets book balance will be reduced directly. Suchreduction constitutes the derecognition of the financial assets.
(7) Offset of financial assets and financial liabilities
Financial assets and financial liabilities are presented separately in the balance sheet and arenot offset. However, if all of the following conditions are met, the net amount offset by eachother is presented in the balance sheet:
1) The Company has a statutory right to offset the recognized amount, and such legal right iscurrently enforceable;
2) The Company plans to settle in net amount or to realize the financial assets and settle thefinancial liabilities at the same time.
12. Bill receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination andaccounting method to bill receivable.
If the Company has sufficient evidence to evaluate the ECL of bill receivable on single basis,it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the bill receivable into different portfolios. The basis for portfolios is determined asfollows:
| Portfolio | Basis | method |
| Risk-free banker’s acceptance note | The issuer has higher level of credit rating and no default in past and has strong ability to fulfil its contractual cash follow obligation | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Business acceptance note | Bill receivables with same aging have similar credit risk characteristics | Based on aging analysis |
13. Accounts receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination andaccounting method to accounts receivable.
If the Company has sufficient evidence to evaluate the ECL of account receivable on singlebasis, it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the account receivable into different portfolios. The basis for portfolios is determinedas follows:
| Portfolio | Basis | method |
| Receivables for related parties in scope of consolidation | Account receivables for related parties in scope of consolidation have similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Accounts receivables from other parties | Account receivables with same aging have similar credit risk characteristics | Based on aging analysis |
14. Other receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination andaccounting method to other receivables.
If the Company has sufficient evidence to evaluate the ECL of other receivables on singlebasis, it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the other receivable into different portfolios. The basis for portfolios is determined asfollows:
| Portfolio | Basis | method |
| Receivables of down payment and guarantee | The portfolio has similar credit risk characteristics | Based on aging and ECL rate |
| Petty cash for employees | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Social security payment paid on-behalf of employees | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Receivables from related parties within scope of consolidation | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Others | The portfolio has similar credit risk characteristics | Based on aging and ECL rate |
15. Inventory
(1) Classification
Inventory refers to the finished products or commodities that the Company holds for sale inits daily activities, semi-products in the production process, materials and consumables used inthe production process or the provision of labour services. Inventories include raw materials,work in progress, and finished goods.
(2) Valuation method of inventory
When inventory is acquired, it is initially measured at cost, including procurement costs,processing costs and other costs. When the inventory is issued, it is measured by the weightedaverage method (except for branded watches) and specific identification method (for brandedwatches) .
(3) Basis for determining the net realizable value and method for provision for obsolete inventories
After the inventory is thoroughly inspected at the end of the period, the provision shall beprovided or adjusted at the lower of the cost of the inventory and its net realizable value. The netrealizable value of inventory of goods directly used for sale, such as finished goods, stocked goodsand materials for sale in the normal production and operation process, is determined by theestimated selling price of the inventory minus the estimated selling expenses and related taxes; netrealizable value of inventory of materials that need to be processed is determined based on theestimated selling price of the finished products produced minus the estimated cost till completion,estimated selling expenses and related taxes and fees in the normal production and operationprocess; the net realizable value of the inventory held for the execution of a sales contract orlabour contract is calculated on the basis of the contract price. If the quantity of the inventory heldexceeds the quantity ordered by the sales contract, the net realizable value of the excess inventoryis calculated based on the general sales price.
The provision is accrued according to the individual inventory project at the end of the period;but for a large number of inventories with lower unit price, the provision is accrued according to
the category of inventory; for those related to the product series produced and sold in the sameregion, have the same or similar end use or purpose and that are difficult to measure separatelyfrom other projects, they are combined for provision for inventory depreciationIf the influencing factors of the write-down of inventory value have disappeared, the amountof write down will be restored and will be reversed within the amount of the provision for declinein value of the inventory that has been accrued. The amount of the reversal is included in thecurrent profit or loss
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
Low-value consumables and packaging materials are charged to profit or loss when they areused.
16. Contract assets
The Company has the right to receive the consideration for the transfer of goods to thecustomers. If the right depends on factors other than the passage of time, it is recognized as acontract asset. If the Company has the right (only depends on passage of time) to receiveconsideration from client, accounts receivable shall be recognized.
Refer to Note XI 6 for impairment to contract asset.
17. Long-term Equity Investment
(1) Determination of investment cost
1) For the long-term equity investment formed by business combination, the specificaccounting policies are detailed in the accounting treatment of business combination undercommon control and not under common control as set out in this Note VI.
2) Long-term equity investment obtained by other means
The initial investment cost of the long-term equity investment obtained by cash payment isthe actual purchase price. The initial investment cost includes expenses directly related to theacquisition of long-term equity investments, taxes and other necessary expenses
The initial investment cost of the long-term equity investment obtained by issuing equitysecurities is the fair value of the issued equity securities; the transaction cost incurred in theissuance or acquisition of its own equity instruments is deducted from equity if it is directlyattributable to equity transactions.
Under the premise that the non-monetary asset exchange has the commercial substance andthe fair value of the assets received or surrendered can be reliably measured, the initialinvestment cost of the long-term equity investment exchanged for non-monetary assets isdetermined based on the fair value of the assets exchanged and relevant taxes payable, unlessthere is conclusive evidence that the fair value of the assets transferred is more reliable; for the
exchange of non-monetary asset that does not meet the above premise, the initial investment costof long-term equity investment is the carrying amount of the assets exchanged and the relatedtaxes and fees payable.The initial investment cost of a long-term equity investment obtained through debtrestructuring includes the fair value of the waived debt, taxes that can be directly attributable tothe asset and other costs
(2) Subsequent measurement and profit and loss recognition
1) Cost method
The long-term equity investment that the Company can control over the investee is accountedfor using the cost method, and the cost of the long-term equity investment is adjusted by addingor recovering the investment according to the initial investment cost. Except for the actualpayment or the cash dividends or profits included in the consideration that have been announcedbut not yet paid at the time of acquiring the investment, the Company recognizes the currentinvestment income according to its share of cash dividends or profits declared to be distributedby the investee.
2) Equity method
The Company’s long-term equity investments in associates and joint ventures are accountedfor using the equity method, and some of the equity investments in associates that are indirectlyheld by venture capital institutions, mutual funds, trust companies or similar entities includinginvestment-linked insurance funds are measured at fair value through profit or loss.
When the initial investment cost of a long-term equity investment is greater than theinvestment, the initial investment cost of the long-term equity investment shall not be adjusted bythe difference between the fair value of the identifiable net assets of the investee; if the initialinvestment cost is less than the investment, the difference between the fair value of theidentifiable net assets of the investee should be included in the current profit or loss
After obtaining the long-term equity investment, the Company shall recognize the investmentincome and other comprehensive income according to the share of net profit and loss and othercomprehensive income realized by the investee that is entitled or should be shared respectively,and adjust the carrying amount of the long-term equity investment; and reduces the carryingamount of the long-term equity investment based on portion of the profit or cash dividenddeclared to be distributed by the investee; and for other changes in the owners’ equity other thanthe net profit or loss, other comprehensive income and profit distribution of the investee, thecarrying amount of the long-term equity investment is adjusted and included in the owners’equity.
When recognizing the share of the net profit or loss of the investee, the Company shall adjustand recognize the net profit of the investee based on the fair value of the identifiable assets of the
investee at the time of obtaining the investment. The unrealized internal transaction gains andlosses between the Company and the associates and joint ventures shall be offset against theportion attributable to the Company in accordance with the proportion to be enjoyed, on the basisof which the investment gains and losses are recognized.When the Company recognizes the losses incurred by the investee that it should bear, it shalldeal with it in the following order: Firstly, offset the carrying amount of the long-term equityinvestment. Secondly, if the carrying amount of the long-term equity investment is not enough tobe offset, the investment loss will continue to be recognized to the extent of carrying amount ofother long-term equity that virtually constitutes a net investment in the investee, and the carryingamount of the long-term receivables is offset. Finally, after the above-mentioned treatment, if theenterprise still bears additional obligations in accordance with the investment contract oragreement, the projected liabilities are recognized according to the estimated obligations andincluded in the current investment losses.If the investee realizes profit in the future period, after deducting the unrecognized loss share,and the reduction of book balance of the recognized projected liabilities and recovery of otherlong-term equity that virtually constitutes a net investment in the investee and carrying amount oflong-term equity investment as opposite to the order above, the Company shall restore theinvestment income.
(3) Conversion of accounting methods for long-term equity investment
1) Fair value measurement to equity method accounting
If the equity investment originally held by the Company that does not have control, jointcontrol or significant influence on the investee, which is accounted for according to therecognition and measurement criteria of financial instruments, can exert significant influence onthe investee or jointly control but does not constitute control over it due to additional investmentand otherwise, its initial investment cost shall be the sum of the fair value of the equity investmentoriginally held in accordance with the “Accounting Standards for Business Enterprises No. 22 –Recognition and Measurement of Financial Instruments” and new investment cost after beingaccounted for under the equity method.If the initial investment cost accounted for under the equity method is less than the fair valueshare of the identifiable net assets of the investee on the additional investment date determined bythe new shareholding ratio after the additional investment, the carrying amount of the long-termequity investment is adjusted and included in the current non-operating income.
2) Fair value measurement or equity method accounting to cost method accounting
If the equity investment originally held by the Company, that does not have control, jointcontrol or significant influence on the investee and which is accounted for in accordance with thefinancial instrument recognition and measurement criteria, or the long-term equity investment
originally held in associates or joint venture, can exercise control over the investee not undercommon control due to additional investment or otherwise, in the preparation of individualfinancial statements, the sum of the carrying amount of the equity investment originally held plusthe new investment cost shall be regarded as the initial investment cost after being accounted forunder the cost method.The other comprehensive income recognized by the equity method in respect of the equityinvestment originally held before the purchase date is accounted for on the same basis as theinvestee directly disposes of the relevant assets or liabilities when the investment is disposed of.If the equity investment held before the purchase date is accounted for in accordance with therelevant provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognitionand Measurement of Financial Instruments”, the cumulative fair value changes originally includedin other comprehensive income are transferred to current profit or loss when the cost method isadopted.
3) Equity method accounting to fair value measurement
If the Company loses joint control or significant influence on the investee due to the disposalof part of the equity investment or otherwise, the remaining equity after disposal shall beaccounted for according to the “Accounting Standards for Business Enterprises No. 22 –Recognition and Measurement of Financial Instruments”. The difference between the fair valueand the carrying amount on the date of losing joint control or significant impact is recognized inprofit or loss.The other comprehensive income recognized in respect of the original equity investmentusing the equity method is accounted for on the same basis as the investee directly disposes of therelevant asset
4) Cost method to equity method
Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity afterdisposal can exercise joint control or significant influence on the investee, the equity method isadopted for accounting, and the remaining equity is deemed to be adjusted under the equitymethod when it is acquired.
5) Cost method to fair value measurement
Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity afterdisposal cannot jointly control or exert significant influence on the investee, the relevantprovisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments” are adopted. The difference between the fair value and thecarrying amount on the date of loss of control is recognized in profit or loss for the current period.
(4) Disposal of long-term equity investment
For the disposal of long-term equity investment, the difference between the carrying amountand the actual purchase price shall be included in the current profit or loss. For the long-termequity investment accounted for using the equity method, when the investment is disposed of, thepart that is originally included in the other comprehensive income is accounted for in the sameproportion based on the same basis as the investee directly disposes of the relevant assets orliabilities.
If the terms, conditions and economic impact of each transaction on disposal of the equityinvestment in a subsidiary satisfy one or more of the following cases, the multiple transactions aretreated as a package transaction:
1) The transactions are made simultaneously or with consideration of each other’s influence;
2) The transactions as a whole can achieve a complete business outcome;
3) The occurrence of a transaction depends on the occurrence of at least one othertransaction;
4) A transaction is uneconomic alone, but it is economic when considered together with othertransactions
Where the loss of control over the original subsidiary due to disposal of part of the equityinvestment or otherwise which is not a package transaction, the individual financial statements andconsolidated financial statements shall be classified for relevant accounting treatment:
a) In the individual financial statements, the difference between the carrying amount of thedisposed equity and the actual purchase price is included in the current profit or loss. If theremaining equity after disposal can exert joint control or significant influence on the investee, itshall be accounted for under the equity method, and the residual equity shall be deemed to beadjusted by equity method when it is acquired; if the remaining equity after disposal cannot exertjoint control or significant influence over the investee, it shall be accounted for by the relevantprovisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments”, and the difference between the fair value and the carryingamount on the date of loss of control is included in the current profit or loss.
b) In the consolidated financial statements, for each transaction before the loss of control overthe subsidiary, capital reserve (share premium) is adjusted for the difference between the disposalprice and the share of the net assets corresponding to the disposed long-term equity investmentthat the subsidiary has continuously calculated from the date of purchase or the merger date; if thecapital reserve is insufficient to offset, the retained earnings will be adjusted; when the control ofthe subsidiary is lost, the remaining equity shall be re-measured according to its fair value on thedate of loss of control. The sum of the consideration for the disposal of the equity and the fairvalue of the remaining equity, less the share of the net assets that that the original subsidiary has
continuously calculated from the date of purchase calculated based on the original shareholding, isincluded in the investment income for the period of loss of control, while reducing goodwill. Othercomprehensive income related to the original subsidiary’s equity investment will be converted intocurrent investment income when control is lost.If each transaction on disposal of the equity investment in a subsidiary until the loss ofcontrol is a package transaction, each transaction is accounted for as a transaction to dispose of theequity investment in the subsidiary with loss of control, which is distinguished between individualfinancial statements and consolidated financial statements:
a) In the individual financial statements, the difference between each disposal price and thecarrying amount of the long-term equity investment corresponding to the disposed equity beforethe loss of control is recognized as other comprehensive income, and when the control is lost, it istransferred to profit or loss for the period of the loss of control.
b) In the consolidated financial statements, the difference between each disposal price and thedisposal investment that has the share of the net assets of the subsidiary before the loss of controlis recognized as other comprehensive income, and transferred to profit or loss for the period of theloss of control.
(5) Judging criteria for joint control and significant influence
If the Company collectively controls an arrangement with other parties in accordance withthe relevant agreement, and the activity decision that has a significant impact on the return of thearrangement needs to be unanimously agreed upon by the parties sharing the control, it isconsidered that the Company and other parties jointly control an arrangement, which is a jointarrangement.
If the joint arrangement is reached through a separate entity and it determines that theCompany has rights to the net assets of the separate entity in accordance with the relevantagreement, the separate entity is regarded as a joint venture and is accounted for using the equitymethod. If it is judged according to the relevant agreement that the Company does not have rightsto the net assets of the separate entity, the separate entity acts as a joint operation, and theCompany recognizes the items related to the share of the interests of the joint operation andconducts accounting treatment in accordance with the relevant ASBEs.
Significant influence refers to the investor’s power to participate in the decision-making ofthe financial and operating policies of the investee, but it cannot control or jointly control theformulation of these policies with other parties. The Company has a significant influence on theinvestee under one or more of the following situations and taking into account all facts andcircumstances: (1) it is represented on the board of directors or similar authorities of the investee;
(2) it involves in the formulation of financial and operating policy of the investee; (3) it hasimportant transactions with the investee; (4) it dispatches management personnel to the investee;
(5) it provides key technical information to the investee.
18. Investment Property
Investment property refers to property held for the purpose of earning rent or capitalappreciation, or both, including leased land use rights, land use rights held and prepared fortransfer after appreciation, and leased buildings. Besides, for empty constructions that theCompany held for rent lately but with the written resolution from the board stated that it will beused as operating lease and that intention will not be changed in short-term, it can be treated asinvestment property.The Company’s investment property is recorded at its cost, and the cost of purchasedinvestment property includes the purchase price, related taxes and other expenses directlyattributable to the asset; the cost of self-built investment property is composed of the necessaryexpenses incurred before the asset is ready for expected use.The Company adopts the cost model for subsequent measurement of investment property, anddepreciates or amortizes buildings and land use rights according to their estimated service lifeand net residual value. Expected useful life, residual value and annual depreciation rate are asfollows:
| Category | Estimated useful life (years) | Residual value rate % | Depreciation rate % |
| Property | 20-35 | 5.00 | 4.80-2.70 |
When the use of investment property is changed to self-use, the Company converts theinvestment property into fixed assets or intangible assets from the date of change. When the useof self-use property changes to rental earning or capital appreciation, the Company convertsfixed assets or intangible assets into investment property from the date of change. When aconversion occurs, the carrying amount before conversion is used as the converted value
The investment property is derecognized when the investment property is disposed of, orpermanently withdrawn from use and is not expected to obtain economic benefits from itsdisposal. The amount of disposal income from the sale, transfer, retirement or damage of theinvestment property after deducting its carrying amount and related taxes and expenses isrecognized in profit or loss for the current period.
19. Fixed assets
(1) Recognition conditions of fixed assets
Fixed assets refer to tangible assets held for the purpose of producing goods, providing labourservices, renting or operating management, and having a useful life of more than one fiscal year.Fixed assets are recognized when they meet all of the following conditions:
1) the economic benefits associated with the fixed assets are likely to flow into the enterprise;
2) the cost of the fixed assets can be reliably measured.
(2) Initial measurement of fixed assets
The fixed assets of the Company are initially measured at cost.
1) The cost of outsourcing fixed assets includes the purchase price, import duties and otherrelated taxes and fees, as well as other expenses that can be directly attributed to the assets beforethey reach their intended usable state.
2) The cost of self-built fixed assets is determined by the necessary expenditures incurredbefore the assets reach their expected usable state.
3) For fixed assets invested by investors, the value agreed in the investment contract oragreement is regarded as the book value, but the value agreed in the contract or agreement is notaccounted for at fair value.
4) If the payment for the purchase of fixed assets is delayed beyond the normal creditconditions, and is of a financing nature in essence, the cost of fixed assets is determined on thebasis of the present value of the purchase price. The difference between the actual payment andthe present value of the purchase price is recorded in the current profit or loss during the creditperiod, except where it should be capitalized.
(3) Subsequent measurement and disposal of fixed assets
1) Depreciation of fixed assets
Depreciation of fixed assets is accrued over the estimated useful life based on its recordedvalue less the estimated net residual value. The fixed assets that have been provided forimpairment losses are depreciated in the future period based on the carrying amount afterdeducting the impairment provision and the remaining useful life.
The Company determines the service life and estimated net residual value of fixed assetsbased on the nature and use of fixed assets. At the end of the year, the service life, the estimatednet residual value and the depreciation method of the fixed assets are reviewed. If there is adifference from the original estimate, corresponding adjustments will be made.
The depreciation method, depreciation period and annual depreciation rate of various fixedassets are as follows.
| Class | Method of depreciation | Estimated useful life (years) | Residual value rate % | Depreciation rate % |
| Property and plant | Straight-line | 20-35 | 5.00 | 4.80-2.70 |
| Machinery and equipment | Straight-line | 10 | 5.00-10.00 | 9.50-9.00 |
| Electronic equipment | Straight-line | 5 | 5.00 | 19.00 |
| Motor vehicles | Straight-line | 5 | 5.00 | 19.00 |
| Others | Straight-line | 5 | 5.00 | 19.00 |
2) Subsequent expenditures on fixed assets
Subsequent expenditures related to fixed assets that meet the conditions for recognition offixed assets are included in the cost of fixed assets; those that do not meet the conditions forrecognition of fixed assets are included in the current profit or loss when they occur.
3) Disposal of fixed assets
When a fixed asset is disposed of or no economic benefit is expected to result from its use ordisposal, the fixed asset is derecognized. The amount of disposal income from sale, transfer,retirement or damage of the fixed asset after deducting its book value and related taxes isincluded into the current profit or loss.
20. Construction in Progress
(1) Initial measurement of construction in progress
The self-built construction in progress of the Company is measured at the actual cost, whichis determined by the necessary expenses incurred before the construction of the asset reaches theintended usable condition, including the cost of engineering materials, labour costs and relevanttaxes payable, capitalized borrowing costs and indirect costs that should be apportioned. TheCompany’s construction in progress is classified into projects when in accounting
(2) Criteria for and time point of construction in progress to convert into fixed asset
The total expenditure incurred before the construction in progress project is constructed toreach the intended usable condition shall be recorded as the book value of the fixed assets. Forthe construction in progress built which has reached the intended usable condition, but has notyet completed the final accounts, since the date of reaching expected use condition, according tothe project budget, cost or actual project costs, it shall be converted into fixed assets at theestimated value, and fixed assets shall be depreciated in accordance with the depreciation policyof the Company for fixed assets. After the completion of the final accounts, the original estimatedvalue shall be adjusted according to the actual cost, but the original depreciation amount shall notbe adjusted.
21. Borrowing Costs
(1) Recognition principle for capitalization of borrowing costs
If the borrowing costs of the Company can be directly attributable to the acquisition andconstruction or production of assets eligible for capitalization, it shall start capitalization and beincluded in the cost of relevant assets in the case of eligible for capitalization; other borrowingcosts shall be recognized as expenses at the time of occurrence and shall be included in thecurrent profit or loss.
Assets that are eligible for capitalization are assets that require a long period of time topurchase or produce activities to achieve fixed assets, investment property and inventory that areavailable for intended use or sale.
Borrowing costs begin to capitalize when all of the following conditions are met:
1) Assets expenditure has occurred, including expenditure incurred in the form of cashpayment, transfer of non-cash assets or assuming of interest-bearing debt for the acquisition andconstruction or production of assets eligible for capitalization;
2) Borrowing costs have already occurred;
3) The purchase and construction or production activities necessary for the assets to reach theintended use or saleable status have started.
(2) Capitalization period of borrowing costs
The period of capitalization refers to the period from the point of time when the borrowingcosts are capitalized to the point of time where the capitalization is stopped, excluding the periodduring which the borrowing costs are suspended from capitalization.
The borrowing costs shall cease to be capitalized when the assets acquired or produced thatmeet the conditions for capitalization are ready for intended use or sale.
When a part of the assets purchased or produced that meet the capitalization conditions arecompleted and can be used alone, such part of the assets shall stop capitalization of borrowingcosts.
Where each part of the assets purchased or produced is completed separately, but must waituntil the whole is completed or can be sold externally, the capitalization of the borrowing costsshall be stopped when the assets are completed as a whole.
(3) Suspension of capitalization period
If the assets that meet the capitalization conditions are interrupted abnormally during theconstruction or production process and the interruption time lasts for more than 3 months, thecapitalization of borrowing costs shall be suspended; the borrowing costs shall continue to becapitalized if the acquisition or production of assets eligible for capitalization is necessary to meetthe required usable status or the availability of sales. The borrowing costs incurred during theinterruption are recognized as profit or loss for the current period and the borrowing costs continueto be capitalized until the acquisition or production of assets is resumed.
(4) Calculation for capitalization amount of borrowing costs
Interest charges on special borrowings (excluding interest income on unused borrowingsdeposited in the bank, or investment income on temporary investment) and their ancillaryexpenses shall be capitalized before the assets purchased or produced that meet the capitalizationconditions are ready for intended use or sale.
The amount of capitalized interest on general borrowings is calculated by the weightedaverage of the excess portion of the accumulative asset expenditures over the special borrowingsmultiplied by the capitalization rate of general borrowings. The capitalization rate is determinedbased on the weighted average interest rate of general borrowings.
Where there is a discount or premium in the borrowings, the interest amount shall be adjusted
in accordance with the effective interest rate method to determine the discount or premium amountthat shall be amortized during each accounting period.
22. Right-of-use Assets
The Company initially measures the right-to-use assets at cost, which includes:
(1) initial measurement amount of lease liabilities;
(2) lease payments made before or at the beginning of the lease term, and deduction of therelevant amount of rental incentives if any;
(3) initial direct expenses incurred by the Company;
(4) expected costs to be incurred by the Company for dismantling and removing leasedassets, restoring the site of leased assets or restoring leased assets to the state agreed in the leaseterms (excluding costs incurred for the production of inventory)
After the beginning of the lease term, the Company adopts the cost model for subsequentmeasurement of the right-of-use assets
If it is reasonably certain to obtain the ownership of the leased assets at the expiration of thelease term, the Company shall depreciate the leased assets within the remaining useful life of theleased assets. If it is not reasonably certain to obtain the ownership of the leased assets at theexpiration of the lease term, the Company shall depreciate the leased assets within the shorter ofthe lease term and the remaining useful life of the leased assets. For the right-of-use assets withimpairment provision, depreciation shall be calculated based on the book value after deduction ofimpairment provision in according with the above principles in future periods.
23. Intangible Assets and Development Expenditure
Intangible assets refer to the identifiable non-monetary assets owned or controlled by theCompany which have no physical form, including land use rights, software and trademark userights.
(1) Initial measurement of intangible assets
The cost of externally purchased intangible assets includes the purchase price, relevanttaxation and other expenses directly attributable to bringing the assets to expected usage. Ifpayment for the purchase price of intangible assets is delayed beyond normal credit conditions andis in fact financing in nature, the cost of the intangible assets is determined based on the presentvalue of the purchase price.
For intangible asset obtained through debt restructuring for offsetting the debt of the debtor,its initial measurement cost includes the fair value of the waived creditor’s rights and taxes andother costs directly attributable to bringing the asset to expected usage. The difference between thefair value of the waived creditor’s rights and the carrying amount shall be recognized in profit orloss for the period.
The book value of intangible asset received in exchange for non-monetary asset is based on
the fair value of the asset surrendered and relevant taxes payable, provided that the exchange ofnonmonetary asset has a commercial substance and the fair value of both the asset received andthe asset surrendered can be reliably measured, except there is definite evidence that the fair valueof the asset received is more reliable; for exchange of non-monetary asset that cannot satisfy theabove conditions, the cost of the intangible asset received is based on the carrying amount of theasset surrendered and relevant taxes payable, and no profit or loss is recognized.For intangible asset obtained through business absorption or combination under commoncontrol, its book value is determined by the carrying amount of the combined party; for intangibleasset obtained through business absorption or merger not under common control, its book value isdetermined by the fair value of the intangible asset.The cost of an internally developed intangible asset includes the materials consumed indeveloping the intangible asset, labour costs, registration fees, amortization of other patentedrights and licensed rights used during the development process, interest expenses meetingcapitalization conditions, and other direct costs for bringing the intangible asset to expected usage.
(2) Subsequent measurement of intangible assets
The Company determines the useful life of intangible assets on acquisition, which areclassified as intangible assets with limited useful life and indefinite useful life.
1) Intangible assets with a limited useful life
Intangible assets with a limited useful life are depreciated using straight line method over theterm during which they bring economic benefits to the Company. The estimated life and basis forthe intangible assets with a limited useful life are as follows:
| Item | Estimated useful life | Amortization method |
| Land use right | 50 | Straight-line |
| Software systems | 5 | Straight-line |
| Right to use the trademark | 5-10 | Straight-line |
The useful life and depreciation method of intangible assets with a limited useful life arereassessed at the end of each period. If there is a difference from the original estimate,corresponding adjustments will be made.
Upon re-assessment, there was no difference in the useful life and depreciation method ofintangible assets from the previous estimates at the end of the period.
(3) Specific basis for determining the research stage and development stage of internalresearch and development projects of the Company
Research stage: a stage of scheduled innovative investigations and research activities for theacquisition and understanding of new scientific or technical knowledge.
Development stage: before the commercial production or use, the research results or otherknowledge will be applied to a plan or design to produce new or substantial improvements in
materials, devices, products and other activities.The expenditure of the research stage of the internal research and development project isincluded in the current profit or loss at the time of occurrence
(4) Specific standard for capitalization of expenditure in the development stageThe expenditure of an internal research and development project in the development stage isrecognized as an intangible asset when meeting all of the following conditions:
1) It is technically feasible to complete the intangible asset so that it can be used or sold;
2) With an intention to complete the intangible asset and to use or sell it;
3) The way the intangible asset generates economic benefits can prove the existence of amarket for the products produced using the intangible asset or a market for the intangible assetitself, and if the intangible asset will be used internally, its usefulness can be proven;
4) Having sufficient technical, financial resources and other resource support to complete thedevelopment of the intangible asset, and having the ability to use or sell the intangible asset;
5) Expenditure attributable to the development stage of the intangible asset can be reliablymeasured.
Expenditures incurred in the development stage that do not meet the above conditions shallbe included in the current profit or loss at the time of occurrence. The development expenditureswhich have been included in the profit or loss in the previous periods will not be recognized as anasset in the future period. The capitalized expenditures in the development phase are shown in thebalance sheet as development expenditures and are converted into intangible assets from the dateof the project’s intended use.
24. Impairment on Long-term Assets
On the balance sheet date, the Company determines whether there may be a sign ofimpairment on long-term assets. If there is a sign of impairment on long-term assets, therecoverable amount is estimated on the basis of a single asset. If it is difficult to estimate therecoverable amount of a single asset, then determine the recoverable amount of the asset group onthe basis of the asset group to which the asset belongs.
The estimated recoverable amount of an asset is the higher of its fair value less the cost ofdisposal and the present value of the expected future cash flow of the asset.
The measurement results of recoverable amount show that when the recoverable amount ofan long-term asset is lower than its book value, the book value of the long-term asset is reduced toits recoverable amount. The reduced amount is recognized as an impairment loss on the asset andincluded in the current profit or loss, at the same time, asset impairment provision will be madeaccordingly. Asset impairment loss shall not be reversed during the subsequent accounting periodonce recognized.
After the asset impairment loss is recognized, the depreciation or amortization expenses of
the impaired assets will be adjusted accordingly in the future period, so that the assets’ book valueafter adjustment (deducting the estimated net residual value) will be systematically apportionedover the remaining useful life of the assets.No matter whether there is any sign of impairment or not, the impairment test is carried outevery year for goodwill and intangible assets with an indefinite useful life arising from anenterprise merger.In the impairment test of goodwill, the book value of goodwill would be apportioned to assetgroup or portfolio of asset group expected to benefit from the synergy effect of an enterprisemerger. When taking an impairment test on the relevant asset group or portfolio of asset groupcontaining goodwill, if there is a sign of impairment on the asset group or portfolio of asset grouprelated to the goodwill, the Company first calculates the recoverable amount after testing the assetgroup or portfolio of asset group which does not contain the goodwill for impairment, and thencompares it with the related book value to recognize the corresponding impairment loss. Next, theCompany conducts an impairment test on the asset group or portfolio of asset group whichcontains the goodwill and compares the book value of the related asset group or portfolio of assetgroup (book value includes the share of goodwill) with the recoverable amount. If the recoverableamount of the related asset group or portfolio of asset group is lower than the book value, theCompany will recognize the impairment loss of goodwill.
25. Long-term Deferred Expenses
(1) Amortization method
Long-term deferred expenses refer to expenses that have already been spent by the Company,but shall be apportioned in the current period and the future periods and the benefit period is over1 year. Long-term deferred expenses are amortized in benefit period
(2) Amortization period
| Category | Amortization period | Note |
| Counter fabrication expenses | 2-3 | |
| Decoration expenses | 3-5 | |
| Others | 2-3 |
26. Contract liabilities
The obligation to transfer goods to a customer for which consideration has been received orreceivable is recognized in part as a contract liability
27. Employee Remuneration
Employee remuneration refers to the various forms of remuneration or compensation givenby the Company to obtain the services provided by the employees or to terminate the labourrelationship. Employee remuneration includes short-term remuneration, post-employment benefits,termination benefits and other long-term employee benefits.
(1) Short-term remuneration
Short-term remuneration refers to the employee compensation other than post-employmentbenefits and termination benefits required to be fully paid by the Company within 12 monthsafter the end of the annual reporting period in which the employees render relevant services.During the accounting period in which the employees render services, the Company recognizesthe short-term remuneration payable as liabilities and includes the same in related asset costs orexpenses according to the object which benefits from the services rendered by employees.
(2) Post-employment benefits
Post-employment benefits refer to various forms of remuneration and benefits other thanshort-term remuneration and termination benefits provided by the Company after the retirementof employees or termination of labour relationship with the Company in exchange for theservices rendered by employees.
The Company’s post-employment benefits is defined contribution plan.
Defined contribution plan of the post-employment benefits mainly refers to the social basicendowment insurance, unemployment insurance, etc. organized and implemented by local labourand social security institutions; During the accounting period when employees render services tothe Company, amount payable calculated by the defined contribution plan is recognized as aliability and included in the current profit or loss or related asset costs.
The Company will no longer have any other payment obligations after making theabove-mentioned payments on a regular basis in accordance with the standards and annuity plansprescribed by the State.
(3) Termination benefits
Termination benefits refer to the compensation paid to an employee when the Companyterminates the employment relationship with the employee before the expiry of the employmentcontract or provides compensation as an offer to encourage the employee to accept voluntaryredundancy. The Company recognizes the liabilities arising from the compensation paid toterminate the employment relationship with employees and includes the same in the currentprofit or loss at the earlier date of the following: 1) when the Company cannot reverse thetermination benefits due to the plan of cancelling the labour relationship or the terminationbenefits provided by the advice of reducing staff; and 2) the Company recognizes the cost orexpense relative to the payment of termination benefits of restructuring into the current profit orloss.
The Company provides internal retirement benefits to employees who accept internalretirement arrangements. The internal retirement benefits refer to the remuneration and the socialinsurance premiums paid to the employees who have not reached the retirement age set by theState, and voluntarily withdrew from the job after approval of the Company’s management. The
Company pays internal retired benefits to an internal retired employee from the day when theinternal retirement arrangement begins till the employee reaches the normal retirement age. Forinternal retirement benefits, the Company conducts accounting treatment in contrast to thetermination benefits. When the related recognition conditions of termination benefits are met, theCompany will recognize the remuneration and the social insurance premiums of the internalretired employee to be paid during the period between the employee’s termination of service andnormal retirement date as liabilities and include the same in the current profit or loss in one time.Changes in actuarial assumptions of internal retirement benefits and differences arising from theadjustment of welfare standards are included in current profit or loss when incurred.
(4) Other long-term employee benefits
Other long-term employee benefits refer to all employee benefits except for short-termremuneration, post-employment benefits, and termination benefits. For other long-term employeebenefits that meet the conditions of the defined contribution plan, during the accounting period inwhich the employees provide services for the Company, the amount that should be paid isrecognized as a liability and is included in the current profit or loss or related asset costs. Inaddition to the above situations, other long-term employee benefits are actuarially calculated bythe independent actuary using the expected cumulative welfare unit method on the balance sheetdate, and the welfare obligations arising from the defined benefit plans are attributed to theperiod during which the employees provide services and are included in the current profit or lossor related asset costs.
28. Projected liabilities
(1) Basis for recognition of projected liabilities
The Company will recognize projected liabilities if the obligation relating to contingentmatters meets all of the following conditions:
This obligation is a present obligation assumed by the Company;
The fulfillment of this obligation will probably cause the outflow of economic benefits fromthe Company;
The amount of this obligation can be measured reliably.
(2) Measurement method of projected liabilities
The initial measurement of projected liabilities of the Company is based on the best estimateof the expenditure required for the performance of the related present obligations.
When determining the best estimate, the Company comprehensively considers the risks,uncertainties relating to the contingent matters and time value of currency. If the time value ofcurrency has a great influence, the Company determines the best estimate by discounting therelated future cash outflows.
The best estimate is determined in different situations as follow:
If there is a continuous range (or interval) of the required expenditure and the probability ofthe occurrence of all the results in the range is the same, the best estimate is determined accordingto the median value of the range, which is the average of the upper and lower limit.
Where there is not a continuous range (or interval) of the required expenditure, or there is acontinuous range, but the probability of the occurrence of all the results in the range is different, ifthe contingencies involve a single project, the best estimate is determined by the amount which ismost likely to occur; if the contingencies involve a number of projects, the best estimate isdetermined based on various possible results and related probability calculation.
If all or part of the expenses of the Company required to settle projected liabilities areexpected to be compensated by a third party and it is basically certain to receive the amount ofcompensation, it is independently recognized as an asset. The amount of compensation recognizedwill not exceed the book value of the projected liabilities.
29. Lease liabilities
The Company initially measures the lease liabilities according to the present value of theunpaid lease payments at the beginning of the lease term. In calculating the present value of leasepayments, the Company adopts the interest rate implicit in the lease as the discount rate. If it isimpossible to determine the interest rate implicit in the lease, the incremental borrowing rate ofthe Company shall be used as the discount rate. Lease payments include:
(1) Fixed payments and substantive fixed payments after deducting the relevant amount oflease incentives;
(2) Variable lease payments depending on an index or rate;
(3) Where the Company reasonably determines that the option will be exercised, the amountof the lease payment includes the exercise price of purchase option;
(4) Where the lease term reflects that the Company will exercise the option to terminate thelease, the amount of the lease payment includes the amount to be paid for the exercise of theoption to terminate the lease;
(5) Expected payments based on the guaranteed residual value provided by the Company.
The Company calculates the interest charges of the lease liabilities for each period of thelease term at a fixed discount rate and includes the same in the profit or loss of the current periodor the related asset costs.
Variable lease payments not included in the measurement of lease liabilities shall beincluded in the current profit or loss or the related asset costs when they actually occur.
30. Share-based payment
(1) Category of share-based payment
The Company’s share-based payments include equity-settled share-based payments and cashsettled share-based payments.
(2) Recognition method of fair value of equity instrument
For options and other equity instruments granted by the Company with an active market, thefair value is determined at the active market quotations. For options and other equity instrumentsgranted by the Company with no active market, option pricing model shall be used to estimate thefair value of the equity instruments. Factors as follows shall be taken into account using optionpricing models: 1) the exercise price of the option, 2) the validity of the option, 3) the current priceof the target share, 4) the expected volatility of the share price, 5) predicted dividend of the share,
6) risk-free rate of the option within the validity period.
In determining the fair value of the equity instruments at the date of grant, the Company shallconsider the impact of market conditions in the vesting conditions and non-vesting conditionsstated in the share-based payment agreement. If there are no vesting conditions in the share-basedpayments, as long as the employees or other parties satisfy the non-market conditions in all of thevesting conditions (such as term of service) , the Company shall recognize the services rendered asan expense accordingly.
(3) Recognition basis for the best estimate of exercisable equity instruments
On each balance sheet date within the vesting period, the estimated number of exercisableequity instruments is amended based on the best estimate made by the Company according to thelatest available subsequent information as to changes in the number of employees with exercisablerights. As at the exercise date, the final estimated number of exercisable equity instruments shouldequal the actual number of exercisable equity instruments.
(4) Accounting treatment
Equity-settled share-based payments are measured at the fair value of the equity instrumentsgranted to employees. For those exercisable immediately after the grant, they shall be included inthe relevant costs or expenses at the fair value of equity instruments at the grant date with anincrease in capital reserve accordingly. For those exercisable only after provision of services orsatisfaction of prescribed performance conditions within the vesting period, on each balance sheetdate within the vesting period, the Company will recognize the services received in the currentperiod in related costs or expenses and capital reserves at the fair value of equity instruments onthe grant date based on the best estimate of the number of exercisable equity instruments. After thevesting period, relevant costs or expenses and total owners’ equity which have been recognizedwill not be adjusted.
Cash-settled share-based payments are calculated by the fair value of liabilities assumed inaccordance with the Company’s shares or other equity instruments. For those exercisableimmediately after the grant, they shall be included in the relevant costs or expenses at the fairvalue of the liabilities assumed by the Company at the grant date with an increase in liabilities
accordingly. For cash-settled share-based payments exercisable only after provision of services orsatisfaction of prescribed performance conditions within the vesting period, on each balance sheetdate within the vesting period, the Company will recognize the services received in the currentperiod in costs or expenses and corresponding liabilities at the amount of fair value of theliabilities assumed by the Company based on the best estimate of the number of exercisable equityinstruments. At each balance sheet date and the settlement date prior to the settlement of relevantliabilities, the fair value of the liabilities is re-measured through profit or loss.
During the vesting period, if the equity instruments granted are cancelled, the Company willtreat the cancelled equity instruments granted as accelerated vesting, and the amount within theremaining period should be recognized immediately in profit or loss while recognizing the capitalreverse. If employees or other parties can meet non-vesting conditions but do not meet within thevesting period, the Company will treat it as cancelled equity instruments granted.
31. Revenue
The Company’s revenue mainly come from:
1) Sales of watch
2) Precision manufacturing
3) Property leasing
(1) General principal of revenue recognition
The Group recognizes revenue when the contract performance obligations have been fulfilledi.e. the customer has gained control over the relevant goods or services.
Performance obligations means the Company’s commitment to transfer identifiable goods orservice to clients.
Obtaining control of the relevant goods means that it is able to dominate the use of the goodsand derive almost all economic benefits therefrom.
The Company assesses contracts at the beginning date of a contract to identify eachperformance obligations contained in a contract and to determine whether each performanceobligation is to be finished over a period of time or at a point of time. The Company satisfies aperformance obligation over time if one of the following criteria is met; or otherwise, aperformance obligation is satisfied at a certain point in time: 1) the customer simultaneouslyreceives and consumes the benefits provided by the Company’s performance as the Companyperforms; 2) the customer can control the goods under construction during the Company’sperformance; 3) the Company’s performance does not create goods with an alternative use to itand the Company has a right to payment for performance completed to date throughout thecontract term. Otherwise, the Company recognizes revenue at the point of time.
For performance obligation satisfied over time, the Company recognizes revenue over timeby measuring the progress towards complete satisfaction of that performance obligation. When
the outcome of that performance obligation cannot be measured reasonably, but the Companyexpects to recover the costs incurred in satisfying the performance obligation, the Companyrecognizes revenue only to the extent of the amount of costs incurred until it can reasonablymeasure the outcome of the performance obligation
(2) Detailed method for revenue recognition
The Company has three main business sectors: sales of watch, precision manufacturing andproperty leasing. Based on the Company’s business mode and terms of settlement, the Companyset detailed method of revenue recognition method as follows:
1) Sales of watch
Sale of watch belongs to fulfilling performance obligations at a point of time.
① Online sales
Revenue shall be recognized at the point that the goods are dispatched and the customerconfirmed received the goods.
② Offline sales
Revenue shall be recognized at the point when the goods are delivered and payment bycustomer is collected.
③ Consignment sale
The Company recognizes revenue when the Company receives the detail of the sales list fromdistributors and confirms that the control over goods ownership were transferred to the purchaser.
④ Sale of consigned goods from others
Under Sale of consigned goods from others, the Group recognizes revenue in net amountwhen it delivered consigned sale goods to customer and confirms that control over the ownershipof goods were transferred to the purchaser.
2) Precision manufacturing
Precision manufacturing business belongs to fulfilling performance obligations at a point oftime. Revenue from domestic sales shall be recognized when the goods are delivered and theeconomic benefit associated with the goods is probable to flow into the Company. Revenue fromexport shall be recognized when the following criteria is satisfied: The Company declared thegood at custom; obtained bill of lading; the right of collecting payment is obtained and itsprobable that the economic benefit associated with the goods flows into the Company.
3) Property leasing
Refer to Note III 35. (4) for details.
(3) Revenue treatment principles for specific transactions
1) Contracts with sales return provisions
When the customer obtains control of the relevant goods, revenue is recognized based on theamount of consideration expected to be received due to the transfer of goods to the customers
(exclusive of the amount expected to be refunded due to the return of sales) , while liability isrecognized based on the amount expected to be refunded due to the return of sales.
The carrying amount of goods expected to be returned at sales of goods, after deduction ofcosts expected to incur for recovery of such goods (including impairment of value of the returnedgoods) , will be accounted for under the item of “Right of return assets”.
2) Contracts with quality assurance provisions
The Company assesses whether a separate service is rendered in respect of the qualityassurance besides guaranteeing the sales of goods to customers are in line with the designatedstandards. When additional service is provided by the Company, it is considered as a singleperformance obligation and under accounting treatment according to the standards on revenue;otherwise, quality assurance obligations will be under accounting treatment according to theaccounting standards on contingent matters
32. Contract costs
(1) Contract performance cost
The Company recognizes the cost of contract performance as an asset for the cost ofperforming the contract as meeting all of the following conditions:
1) The cost is directly related to a current or expected contract, including direct labour, directmaterials, manufacturing expenses (or similar expenses) , costs clearly to be borne by the customer,and other costs incurred solely for the contract;
2) This cost increases the resources that the company will use to fulfill its performanceobligations in the future.
3) The cost is expected to be recovered
The asset will be presented under inventory or other non-current assets based on the length ofits amortization period.
(2) Contract obtainment cost
If the incremental cost of the Company is expected to be recovered, the contract acquisitioncost is recognized as an asset. Incremental cost refers to the cost that the Company will not occurwithout obtaining a contract, such as sales commission. For the amortization period not exceedingone year, it is included in the current profit or loss when it occurs.
(3) Amortization of contract costs
The Company recognizes the contract performance cost and the contract acquisition cost onthe same basis as the commodity income related to the contract cost asset, and amortizes it at thetime when the performance obligation is performed or in accordance with the performance of theperformance obligation, and is included in the current profit or loss.
(4) Contract cost impairment
For assets related to contract costs, if the book value is higher than the difference between the
remaining consideration expected to be received by the Company for transfer of the goods relatedto the assets and the estimated cost of transferring the relevant goods, the excess should bedepreciated and confirmed as an asset impairment loss
If the factors caused impairment changed after impairment provision is accrued, impairmentprovision shall be reversed and included in current period profit or loss but the carrying amountof asset after the reversal shall not exceed the carrying amount at the reversal date as if there wasno impair.
33. Government Subsidies
(1) Classification
Government subsidies refer to monetary and non-monetary assets received from thegovernment without compensation, however excluding the capital invested by the government as acorporate owner. According to the subsidy objects stipulated in the documents of relevantgovernment, government subsidies are divided into subsidies related to assets and subsidies relatedto income.
Government subsidies related to assets are obtained by the Company for the purposes ofacquiring, constructing or otherwise forming long-term assets. Government subsidies related toincome refer to the government subsidies other than those related to assets
(2) Recognition of government subsidies
Where evidence shows that the Company complies with relevant conditions of policies forfinancial supports and is expected to receive the financial support funds at the end of the period,the amount receivable is recognized as government subsidies. Otherwise, the government subsidyis recognized upon actual receipt.
Government subsidies in the form of monetary assets are stated at the amount received orreceivable. Government subsidies in the form of non-monetary assets are measured at fair value; iffair value cannot be reliably obtained, a nominal amount (RMB1) is used. Government subsidiesthat are measured at nominal amount shall be recognized in the current profit or loss directly.
(3) Accounting treatment
The Company determines whether a government subsidy shall use gross method or netmethod based on its economical substance. In general, only one method is used for one categoryor similar government subsidy and it shall be used in a consistent way.
Government subsidies related to assets are recognized as deferred income, and are recognized,under reasonable and systematic approach, in profit and loss in each period over the useful life ofthe constructed or purchased assets;
Government subsidies related to income aiming at compensating for relevant expenses orlosses to be incurred by the enterprise in subsequent periods are recognized as deferred income,and are recognized in current profit or loss when relevant expenses or losses are recognized.
Government subsidies aiming at compensating for relevant expenses or losses of the enterprisethat are already incurred are charged to current profit or loss once received.Government subsidies related to daily activities of enterprises are included in other income;government subsidies that are not related to daily activities of enterprises are included innon-operating income and expense.
Government subsidies related to the discount interest received from policy-relatedpreferential loans offset the relevant borrowing costs; if the policy-based preferential interest rateloan provided by the lending bank is obtained, the borrowing amount actually received shall betaken as the recording value of the borrowings, and borrowing cost should be calculated using thepreferential interest rate according to the loan principal and the policy.
When it is required to return recognized government subsidy, if such subsidy is used to writedown the carrying value of relevant assets on initial recognition, the carrying value of the relevantassets shall be adjusted; if there is balance of relevant deferred income, it shall be written down tothe book balance of relevant deferred income, and the excess is included in the current profit orloss; where there is no relevant deferred income, it shall be directly included in the current profitor loss
34. Deferred Income Tax Assets and Deferred Income Tax Liabilities
Deferred income tax assets and deferred income tax liabilities are measured and recognizedbased on the difference (temporary difference) between the taxable base of assets and liabilitiesand book value. On balance sheet date, the deferred income tax assets and deferred income taxliabilities are measured at the applicable tax rate during the period when it is expected to recoversuch assets or settle such liabilities.
(1) Criteria for recognition of deferred income tax assets
The Company recognizes deferred income tax assets arising from deductible temporarydifference to the extent it is probably that future taxable amount will be available against whichthe deductible temporary difference can be utilized, and deductible losses and taxes can be carriedforward to subsequent years. However, the deferred income tax assets arising from the initialrecognition of assets or liabilities in a transaction with the following features are not recognized: 1)the transaction is not a business combination; 2) neither the accounting profit or the taxableincome or deductible losses will be affected when the transaction occurs.
For deductible temporary difference in relation to investment in the associates, correspondingdeferred income tax assets are recognized in the following conditions: the temporary difference isprobably reversed in a foreseeable future and it is likely that taxable income is obtained fordeduction of the deductible temporary difference in the future.
(2) Criteria for recognition of deferred income tax liabilities
The Company recognizes deferred income tax liabilities on the temporary difference between
the taxable but not yet paid taxation in the current and previous periods, excluding:
1) temporary difference arising from the initial recognition of goodwill;
2) a transaction or event arising from non-business combination, and neither the accountingprofit or the taxable income (or deductible losses) will be affected when the transaction or eventoccurs;
3) for taxable temporary difference in relation to investment in subsidiaries or associates, thetime for reversal of the temporary difference can be controlled and the temporary difference isprobably not reversed in a foreseeable future
(3) When all of the following conditions are satisfied, deferred income tax assets and
deferred income tax liabilities shall be presented on a net basis
1) An enterprise has the statutory right to settle the current income tax assets and currentincome tax liabilities at their net amounts;
2) The deferred income tax assets and deferred income tax liabilities relate to income taxeslevied by the same taxation authority on either the same taxable entity or different taxable entitieswhich intend either to settle current income tax assets and current income tax liabilities on a netbasis, or to realize the assets and settle the liabilities simultaneously, in each future period inwhich significant amounts of deferred tax assets or liabilities are expected to be recovered orsettled.
35. Lease
On the commencement date of the contract, the Company evaluates whether the contract isa lease or contains a lease. If one party to a contract gives up the right to control the use of one ormore identifiable assets for a period of time in exchange for consideration, the contract is a leaseor contains a lease.
(1) Splitting a lease contract
When the contract contains a number of separate leases, the Company will split the contractinto separate leases for accounting individually.
When the contract contains both leasing and non-leasing parts, the Company will split theleasing and non-leasing parts. The leasing part shall be accounted for in accordance with thelease standards, and the non-leasing part shall be accounted for in accordance with otherapplicable accounting standards for business enterprises.
(2) Combination of lease contracts
When two or more lease-containing contracts concluded by the Company with the sametrader or its related parties at the same time or at a similar time meet one of the followingconditions, the Company shall merge them into one contract for accounting:
1) Such two or more contracts are concluded for general commercial purposes andconstitute a package of transactions. If these are not considered as a whole, these overallcommercial purposes cannot be recognized.
2) The amount of consideration for a contract in such two or more contracts depends on thepricing or performance of other contracts.
3) The right-of-use assets transferred by such two or more contracts together constitute aseparate lease.
(3) Accounting treatment for the Company as a lessee
On the commencement date of lease term, the Company recognizes right-of-use assets andlease liabilities for leases, in addition to short-term leases and low-value asset leases withsimplified treatment.
1) Short-term lease and low value lease
Short-term lease refers to a lease that does not include purchase options and has a lease termnot exceeding 12 months. Low-value asset lease refers to the lease with lower value when asingle leased asset is a new asset.
The Company does not recognize right-of-use assets and lease liabilities for short-term leaseand low value lease. The payment of such leases shall be charged to profit or loss usingstraight-line method or other systematic method.
2) Refer to Note III. 22 and Note III. 29 for accounting policies for right-of-use assets andlease liabilities.
(4) Accounting treatment for the Company as a lessor
1) Classification of leases
The Company divides leases into financial leases and operating leases on the start date of thelease. Financial lease refers to a lease that essentially transfers almost all of the risks and rewardsrelated to the ownership of leased assets. Its ownership may or may not be transferred eventually.Operating leases refer to leases other than financial leases.
If a lease has one or more of the following characteristics, the Company usually classifies itas a financial lease:
① At the expiry of the lease term, the ownership of the leased assets is transferred to thelessee.
② The lessee has the option to purchase the leased assets, and the purchase price set by thelessee is low enough compared with the expected fair value of the leased assets when exercisingthe option. Therefore, it can be reasonably determined on the lease start date that the lessee willexercise the option.
③ Although the ownership of the assets is not transferred, the lease term accounts for themajority of the life of the leased assets.
④ On the commencement date of the lease, the present value of the lease receipts is almostequal to the fair value of the leased assets.
⑤ The nature of leased assets is special. If there is no major transformation, only the lesseecan use them.
If one or more of the following conditions exist in a lease, it may also be classified as afinancial lease:
① If the lessee stops the lease, the lessee shall bear the losses caused by the termination ofthe lease to the lessor.
② The profits or losses caused by the fluctuation of the fair value of the balance of assetsbelong to the lessee.
③ The lessee can continue to lease far below the market level for the next period.
2) Accounting treatment for financial leases
On the commencement date of lease term, the Company recognizes the financial leasereceivable on the financial leases and derecognizes the financial lease assets.
When the initial measurement of the financial lease receivable is made, the book value ofthe financial lease receivable is the sum of the unsecured balance and the present value of leasereceipts that have not yet been received at the beginning of the lease term discounted at theinterest rate implicit in the lease. The lease receipts include:
① Fixed payments and substantive fixed payments after deducting the relevant amount oflease incentives;
② Variable lease payments depending on an index or rate;
③ In the case of reasonably determining that the lessee will exercise the purchase option,the lease receipts include the exercise price of purchase option;
④ If the lease term reflects that the lessee will exercise the option to terminate the lease,the lease receipts include the amount to be paid by the lessee in exercising the option toterminate the lease;
⑤ Guarantee residual value provided to the lessor by the lessee, the party concerned withthe lessee and an independent third party with financial capacity to fulfill the guaranteeobligation.
The Company calculates and recognizes the interest income for each period of the leaseterm based on the fixed interest rate implicit in the lease, and the variable lease payments whichare obtained and not included in the net rental investment amount are included in the profit orloss of the period when they actually occur.
3) Accounting treatment for operating leases
The Company adopts the straight line method or other systematic and reasonable method torecognize the lease receipts from operating leases as rental income during each period of thelease term. Capitalization of the initial direct expenses incurred in connection with operatingleases shall be apportioned on the same basis as the recognition of rental income during the leaseterm, and shall be recorded in the profit or loss of the current period. Variable lease paymentsobtained in connection with operating leases that are not incorporated in the lease receipts shallbe incorporated in the profit or loss of the period when they actually occur.
36. Termination of business
The Company recognizes components as termination of business components if one of thefollowing condition is met and that the component has already been disposed or classified asheld-for-sale assets and identifiable.
(1) The component represents a stand along major business or a stand along major area inconducting business.
(2) The component is part of plan connecting to disposal of a stand along major business ormajor area of conducting business.
(3) The component is a subsidiary that obtained specifically for resale.
Operating profit or loss such as the impairment loss and the amount of reversal shall bepresented in income statement as profit or loss from terminated business.
37. Re-purchase of shares
Before written-off or transfer, the shares that the Company re-purchased are dealt as treasuryshares. All expenses incurred for the re-purchase are charged in the cost of treasury shares.Consideration and transaction expenses paid during the share re-purchase shall decreaseshareholder’s equity. No gain or losses shall be recognized during re-purchase, transfer orwritten-off of the Company’s shares.
If the treasury shares is transferred, the difference between amount actually received and theshare’s carrying amount shall be charged to capital reserve, if the capital reserve is not sufficient tooffset, surplus reserve and retained earing shall be offset. If the treasury share is to written-off, theshare capital shall be decreased based on the face value of shares and the difference between thecarrying amount and its face value shall offset the capital reserve. If the capital reserve is notsufficient to offset, deducting surplus reserve and retained earnings.
38. Safety production fee
The safety production fee is accrued by the Company in accordance with national regulationsand is included in the cost of related products or current profit or loss, and is also recorded in the"specific reserve" item. When using the safety production fee, if it is an expense expenditure, itshall be directly offset against the special reserve. If the fixed assets are formed, the expensesincurred through the collection of "construction in progress" will be recognized as fixed assets
when the safety project is completed and reach the intended usable state; at the same time, the costof forming fixed assets will be offset against the special reserve, and recognize the accumulateddepreciation of the same amount. The fixed assets will not be depreciated in the subsequentperiod.
39. Significant changes in accounting policies and estimates
(1) Changes in accounting policies
1) effect of adopting Interpretation of China Accounting Standards for Business EnterprisesNo. 15
The Company has adopted the regulations about “accounting for sales of products orby-products produced by fixed assets before intended use or during the R&D process” and“judgment on onerous contract” as stipulated the “Interpretation of China Accounting Standardsfor Business Enterprises No. 15” issued by the Ministry of Finance since January 1, 2022. Suchchange in accounting policies has no impact on the Company’s financial statements.
2) effect of adopting Interpretation of China Accounting Standards for Business EnterprisesNo. 16
The Company has adopted the regulations about “accounting for deferred tax related to assetsand liabilities arising from a single transaction to which the initial recognition exemption does notapply” and “accounting for income tax consequences of dividends on a financial instrumentclassified by the issuer as an equity instrument” in the “Interpretation of China AccountingStandards for Business Enterprises No. 16” issued by the Ministry of Finance since 2022. Suchchange in accounting policies has no impact on the Company’s financial statements.
(2)Significant changes in accounting estimates
There was no significant changes in accounting estimates during the year.
IV. Taxes
1. Main types of taxes and corresponding tax rates
| Tax type | Basis | Tax rate | note |
| VAT | Domestic sales, providing manufacturing and repairing services | 13% | |
| Property leasing | 9% | ||
| Other taxable services | 6% | ||
| Simplified method | 5% | ||
| Consumption tax | Luxury watches | 20% | |
| Urban maintenance and construction tax | Turnover tax payable | 7%、5% | |
| Corporate income | Taxable income | See below table |
| Tax type | Basis | Tax rate | note |
| tax | |||
| Property tax | 70% or 80% of the original cost of property or rental income | 1.2%、12% |
Corporate income tax of different entities:
| Name of entities | CIT rate |
| Shenzhen HARMONY World Watch Center Co., Ltd.(①) | 25% |
| FIYTA Sales Co., Ltd.(①) | 25% |
| Shenzhen FIYTA Precision Technology Co., Ltd.(②③) | 15% |
| Shenzhen FIYTA Technology Development Co., Ltd.(②③) | 15% |
| HARMONY World Watch Center(Hainan) Co., Ltd.(⑥) | 20% |
| Shenzhen Xunhang Precision Technology Co., Ltd. | 20% |
| Emile Choureit Timing (Shenzhen) Ltd. | 25% |
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | 25% |
| EMPORAL (Shenzhen) Co., Ltd. | 25% |
| Shenzhen Harmony E-commerce Co., Ltd.(⑥) | 20% |
| FIYTA (Hong Kong) Ltd.(④) | 16.5% |
| Montres Chouriet SA(⑤) | 30% |
Note ①:According to the regulations stated in “Interim Administration Method for Levy ofCorporate Income Tax to Enterprise that Operates Cross-regionally”, the head office of theCompany and its branch offices, the head office of HARMONY Company and its branch offices,and the head office of Sales Company and its branch offices adopt tax submission method of“unified calculation, managing by classes, pre-paid in its registered place, settlement in total, andadjustment by finance authorities”. Branch offices mentioned above share 50% of the enterpriseincome tax and prepay locally; and 50% will be prepaid by the head offices mentioned above.
Note ②: According to “Notice of the Ministry of Finance, the State Administration ofTaxation and Ministry of Science on Further Perfection of the Pre-tax Super Deduction Ratio ofResearch and Development Expenses” (Cai Shui (2021) No. 13) , if the research anddevelopment costs, which were incurred for developing new technologies, new products, andnew processes by the Company, the Precision Technology Company and the TechnologyCompany, are not capitalized as intangible assets but charged to current profit or loss, all of theseentities can enjoy a 100% super deduction on top of the R&D expenses that allowed to deductbefore income tax since 1 January 2022.
Note ③:The Company enjoyed for “Reduction and Exemption in Corporate Income TaxRate for High and New Technology Enterprises that Require Key Support from the State”.
Note ④: These companies are registered in Hong Kong and the income tax rate of HongKong applicable is 16.50% this year.Note ⑤: The comprehensive tax rate of 30% is applicable for Swiss Company as itregistered in Switzerland.Note ⑥: These companies are small and low-profit enterprises, which enjoy 20% tax rate.
2. Preferential treatment and corresponding approval
According to “Proclamation of Ministry of Finance and State Administration of Taxation inImplementing Preferential Tax Rate to Small and Low Profit Enterprises and Sole-proprietors” (Caishui(2022) No.13) and “Notice of Ministry of Finance and State Administration of Taxation onImplementation of the Inclusive Income Tax Deduction and Exemption Policies for Small Low-ProfitEnterprises” (Cai Shui (2021) No.12) , the portion of annual taxable income of small low-profitenterprise that is below RMB1,000,000.00 will be included in taxable income at 12.5% and to be taxedat a rate of 20%; and for annual taxable income that is greater than RMB1,000,000.00 but notexceeding RMB3,000,000.00, of which 25% will be included in taxable income and to be taxed at20%.
According to “Notice of Ministry of Finance and State Administration of Taxation in ExtendingExpiration Period of Utilizing Losses for High-Tech Enterprises and Scientific Oriented Medium andSmall Enterprises” (Cai Shui [2018] No. 76) , starting from January 1, 2018.，unutilized lossesincurred in prior 5 years before obtaining the status of High and New Tech Enterprise can be carriedforward and utilized in future years. The longest period was extended from 5 years to 10 years.
According to the "Notice of the Ministry of Finance, the State Administration of Taxation, and theMinistry of Science and Technology on Increasing Support for Pre-tax Deductions for Scientific andTechnological Innovation" (Cai Shui [2022] No. 28), high-tech enterprises will purchase new productsfrom October 1, 2022 to December 31, 2022. The equipment and utensils are allowed to be deducted inone lump sum when calculating taxable income, and 100% additional deduction is allowed before tax.
V. Notes to main items of the consolidated financial statements
(Unless otherwise indicated, the currency unit is Renminbi Yuan, the end of the period refers toDecember 31,2022,the beginning of the period refers to January 1, 2022, and the end of the last periodrefers to December 31, 2021)
Note 1. Monetary funds
| Item | Closing balance | Opening balance |
| Cash on hand | 173,368.68 | 108,612.08 |
| Cash at bank | 312,433,893.29 | 188,908,798.10 |
| Other monetary funds | 1,140,201.67 | 21,237,326.96 |
| Item | Closing balance | Opening balance |
| Total | 313,747,463.64 | 210,254,737.14 |
| Including: Total overseas deposits | 716,733.44 | 1,724,651.93 |
| Including: deposit in finance company | 271,327,031.83 | 147,786,041.19 |
Deposit in finance company mainly deposited with AVIC Finance Co., Ltd.As of December 31, 2022, RMB 9,074.00 was frozen due to bank account that is beingincluded in as long-term immobile bank account.
Cash with restricted usage is as follows
| Item | Closing balance | Opening balance |
| Overseas deposit with restrictions remitting back | 716,733.44 | 1,724,651.93 |
Note 2. Bill receivable1． Presented by category
| Item | Closing balance | Opening balance |
| Bank acceptance bills | 10,690,221.03 | 2,989,331.70 |
| Commercial acceptance bills | 21,524,691.07 | 58,268,814.10 |
| Total | 32,214,912.10 | 61,258,145.80 |
2． Presented by ECL types
| Type | Closing balance | ||||
| Carrying amount | Provision | Book value | |||
| Amount | Percentage (%) | Amount | Percentage (%) | ||
| Notes receivable that provided expected credit losses on single basis | |||||
| Notes receivable that provided expected credit losses on single basis | 33,347,790.58 | 100.00 | 1,132,878.48 | 3.40 | 32,214,912.10 |
| Including: Commercial acceptance bills | 22,657,569.55 | 67.94 | 1,132,878.48 | 5.00 | 21,524,691.07 |
| Risk-free Bank acceptance bills | 10,690,221.03 | 32.06 | 10,690,221.03 | ||
| Total | 33,347,790.58 | 100.00 | 1,132,878.48 | 3.40 | 32,214,912.10 |
Continued：
| Type | Opening balance | ||||
| Carrying amount | Provision | Book value | |||
| Amount | Percentage (%) | Amount | Percentage (%) | ||
| Notes receivable that provided expected credit | |||||
| Type | Opening balance | ||||
| Carrying amount | Provision | Book value | |||
| Amount | Percentage (%) | Amount | Percentage (%) | ||
| losses on single basis | |||||
| Notes receivable that provided expected credit losses on single basis | 64,324,925.49 | 100.00 | 3,066,779.69 | 4.77 | 61,258,145.80 |
| Including: Commercial acceptance bills | 61,335,593.79 | 95.35 | 3,066,779.69 | 5.00 | 58,268,814.10 |
| Risk-free Bank acceptance bills | 2,989,331.70 | 4.65 | 2,989,331.70 | ||
| Total | 64,324,925.49 | 100.00 | 3,066,779.69 | 4.77 | 61,258,145.80 |
3． Notes receivable with expected credit loss provided based on credit riskcharacteristic portfolio
| Portfolio | Closing balance | ||
| Carrying amount | Provision | Percentage (%) | |
| Bank acceptance bills | 22,657,569.55 | 1,132,878.48 | 5.00 |
| Commercial acceptance bills | 10,690,221.03 | ||
| Total | 33,347,790.58 | 1,132,878.48 | 3.40 |
4． Bad debt movements in current period
| Types | Opening balance | Movements | Closing balance | |||
| Accrual | Received or reversal | Written-off | Other changes | |||
| Notes receivable that provided expected credit losses on single basis | ||||||
| Notes receivable that provided expected credit losses on single basis | 3,066,779.69 | 1,933,901.21 | 1,132,878.48 | |||
| Including: Commercial acceptance bills | 3,066,779.69 | 1,933,901.21 | 1,132,878.48 | |||
| Risk-free Bank acceptance bills | ||||||
| Total | 3,066,779.69 | 1,933,901.21 | 1,132,878.48 | |||
5． Bills have been endorsed but not yet due at the end of the period.
| Item | Amount de-recognized | Amount not de-recognized |
| Bank acceptance bills | 30,350,443.25 |
Note 3. Accounts receivable
1． Presentation by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 311,934,503.90 | 411,327,173.23 |
| 1-2 years | 14,972,671.61 | 4,211,418.24 |
| 2-3 years | 2,781,542.85 | 7,582,641.50 |
| Over 3 years | 16,064,539.96 | 8,867,120.13 |
| Subtotal | 345,753,258.32 | 431,988,353.10 |
| Less: provision for bad debt | 40,462,298.64 | 43,102,751.82 |
| Total | 305,290,959.68 | 388,885,601.28 |
2． Presentation by method of providing bad debt
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | 34,982,967.68 | 10.12 | 29,705,797.13 | 84.92 | 5,277,170.55 |
| Accounts receivable that provided expected credit losses on portfolio basis` | 310,770,290.64 | 89.88 | 10,756,501.51 | 3.46 | 300,013,789.13 |
| Including: Receivable from other customers | 310,770,290.64 | 89.88 | 10,756,501.51 | 3.46 | 300,013,789.13 |
| Total | 345,753,258.32 | 100.00 | 40,462,298.64 | 11.70 | 305,290,959.68 |
Continued：
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | 41,742,982.67 | 9.66 | 32,056,051.67 | 76.79 | 9,686,931.00 |
| Accounts receivable that provided expected credit losses on portfolio basis` | 390,245,370.43 | 90.34 | 11,046,700.15 | 2.83 | 379,198,670.28 |
| Including: Receivable from other customers | 390,245,370.43 | 90.34 | 11,046,700.15 | 2.83 | 379,198,670.28 |
| Total | 431,988,353.10 | 100.00 | 43,102,751.82 | 9.98 | 388,885,601.28 |
3． Accounts receivable that provided expected credit losses on single basisincluded in the closing balance
| Name | Closing balance | |||
| Carrying amount | Bad debt provision | ECL rate (%) | Reasons | |
| Name | Closing balance | |||
| Carrying amount | Bad debt provision | ECL rate (%) | Reasons | |
| Receivable from other customers | 34,982,967.68 | 29,705,797.13 | 84.92 | Chances of recovery is remote |
4． In the portfolio, accounts receivable with expected credit loss providedbased on credit risk characteristic portfolioPortfolio of receivable from other customers
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 309,196,675.71 | 9,547,976.11 | 3.09 |
| 1-2 years | 251,098.70 | 25,109.87 | 10.00 |
| 2-3 years | 244,533.54 | 105,432.84 | 43.12 |
| Over 3 years | 1,077,982.69 | 1,077,982.69 | 100.00 |
| Total | 310,770,290.64 | 10,756,501.51 | 3.46 |
5． Movements of provision during the period
| Types | Opening balance | Movements during the period | Closing balance | |||
| Accrual | Recovered or reversed | Written-off | Other movements | |||
| Accounts receivable that provided expected credit losses on single basis | 32,056,051.67 | 1,920,661.90 | 4,371,302.44 | -100,386.00 | 29,705,797.13 | |
| Accounts receivable that provided expected credit losses on portfolio basis` | 11,046,700.15 | 395,343.70 | 700,099.94 | -14,557.60 | 10,756,501.51 | |
| Including: Receivable from other customers | 11,046,700.15 | 395,343.70 | 700,099.94 | -14,557.60 | 10,756,501.51 | |
| Total | 43,102,751.82 | 2,316,005.60 | 5,071,402.38 | -114,943.60 | 40,462,298.64 | |
Including：main recovery of bad debt provision in current period:
| Name | Amount | Way of recovery | Note |
| Shanghai Pudong Suning e-buy Business Management Co., Ltd. | 1,827,135.74 | Bank transfer | |
| Hefei Swan Lake Suning Department Store Co., Ltd. | 763,751.84 | Bank transfer |
6． No actual write-off of accounts receivable during the current period
7． Top 5 receivable accounts
| Name | Closing balance | Proportion in total closing balance of accounts receivable (%) | Bad debt provision |
| Top 5 receivables accounts in total | 113,261,096.28 | 32.76 | 15,232,226.34 |
Note 4. Prepayments1． Presentation of prepayments by aging
| Aging | Closing balance | Opening balance | ||
| Amount | Percentage (%) | Amount | Percentage (%) | |
| Within one year | 8,039,794.97 | 100.00 | 7,946,750.81 | 100.00 |
2． Top 5 prepayments
| Name | Closing balance | Proportion in total closing balance of prepayments (%) |
| Top 5 prepayments in total | 4,261,286.17 | 53.00 |
Note 5. Other receivable
1． Presentation of other receivables by aging
| Aging | Closing balance | Opening balance |
| Within one year | 59,711,314.91 | 64,697,975.58 |
| 1 - 2 years | 216,120.00 | 655,341.52 |
| 2- 3 years | 649,029.90 | 484,750.05 |
| Over 3 years | 606,105.00 | 135,480.00 |
| Subtotal | 61,182,569.81 | 65,973,547.15 |
| Less: bad debt provision | 4,264,550.33 | 4,420,279.33 |
| Total | 56,918,019.48 | 61,553,267.82 |
2． Presented by nature
| Nature | Closing balance | Opening balance |
| Security deposit | 49,430,408.24 | 55,467,644.12 |
| Petty cash | 2,841,915.70 | 2,556,673.37 |
| Others | 8,910,245.87 | 7,949,229.66 |
| Subtotal | 61,182,569.81 | 65,973,547.15 |
| Less: bad debt provision | 4,264,550.33 | 4,420,279.33 |
| Total | 56,918,019.48 | 61,553,267.82 |
3． Presented according to three stages of financial assets impairment
| Item | Closing balance | Opening balance |
| Carrying amount | Bad debt provision | Book value | Carrying amount | Bad debt provision | Book value | |
| First stage | 59,703,389.91 | 2,850,206.43 | 56,853,183.48 | 64,508,342.25 | 3,055,122.43 | 61,453,219.82 |
| Second stage | ||||||
| Third stage | 1,479,179.90 | 1,414,343.90 | 64,836.00 | 1,465,204.90 | 1,365,156.90 | 100,048.00 |
| Total | 61,182,569.81 | 4,264,550.33 | 56,918,019.48 | 65,973,547.15 | 4,420,279.33 | 61,553,267.82 |
4． Presented by bad debt provision method
| category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | 1,479,179.90 | 2.42 | 1,414,343.90 | 95.62 | 64,836.00 |
| Other receivables that provided expected credit losses on portfolio basis | 59,703,389.91 | 97.58 | 2,850,206.43 | 4.77 | 56,853,183.48 |
| Including: Security deposit portfolio | 48,600,258.24 | 79.43 | 2,476,810.04 | 5.10 | 46,123,448.20 |
| Petty cash portfolio | 2,841,915.70 | 4.64 | 2,841,915.70 | ||
| Social security payment on-behalf portfolio | 279,769.98 | 0.46 | 279,769.98 | ||
| Portfolio of others | 7,981,445.99 | 13.05 | 373,396.39 | 4.68 | 7,608,049.60 |
| Total | 61,182,569.81 | 100.00 | 4,264,550.33 | 6.97 | 56,918,019.48 |
Continued
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | 1,465,204.90 | 2.22 | 1,365,156.90 | 93.17 | 100,048.00 |
| Other receivables that provided expected credit losses on portfolio basis | 64,508,342.25 | 97.78 | 3,055,122.43 | 4.74 | 61,453,219.82 |
| Including: Security deposit portfolio | 55,467,644.12 | 84.08 | 2,781,540.05 | 5.01 | 52,686,104.07 |
| Petty cash portfolio | 2,556,673.37 | 3.88 | 2,556,673.37 | ||
| Social security payment on-behalf portfolio | 483,396.42 | 0.73 | 483,396.42 | ||
| Portfolio of others | 6,000,628.34 | 9.09 | 273,582.38 | 4.56 | 5,727,045.96 |
| Total | 65,973,547.15 | 100.00 | 4,420,279.33 | 6.70 | 61,553,267.82 |
5． Other receivables that provided expected credit losses on single basis included in theclosing balance
| Name | Closing balance | |||
| Carrying amount | Bad debt provision | ECL rate (%) | Reason | |
| Receivable from others | 1,479,179.90 | 1,414,343.90 | 95.62 | Chances of recovery is remote |
6． In the portfolio, other receivables with expected credit loss providedbased on credit risk characteristic portfolio
（1）Security deposit portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 48,560,208.24 | 2,436,760.04 | 5.02 |
| 1 - 2 years | |||
| 2- 3 years | |||
| Over 3 years | 40,050.00 | 40,050.00 | 100.00 |
| Total | 48,600,258.24 | 2,476,810.04 | 5.10 |
（2）Petty cash portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 2,841,915.70 | ||
（3）Social security payment on-behalf portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 279,769.98 | ||
（4）Portfolio of others
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 7,981,445.99 | 373,396.39 | 4.68 |
7． Provision for bad debts of other receivables
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit losses over the next 12 months | Lifetime expected credit losses (no credit impairment occurred) | Lifetime expected credit losses (credit impairment occurred) | ||
| Opening balance | 3,055,122.43 | 1,365,156.90 | 4,420,279.33 | |
| Opening balance movements in current period | —— | —— | —— | —— |
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit losses over the next 12 months | Lifetime expected credit losses (no credit impairment occurred) | Lifetime expected credit losses (credit impairment occurred) | ||
| —Transfer into the second stage | ||||
| —Transfer into the third stage | -2,398.75 | 2,398.75 | ||
| —Reverse back to the second stage | ||||
| —Reverse back to the first stage | ||||
| Accrual during the period | 86,177.11 | 65,388.25 | 151,565.36 | |
| Reversed during the period | 289,046.82 | 18,600.00 | 307,646.82 | |
| Recovered during the period | ||||
| Written-off during the period | ||||
| Other movements | 352.46 | 352.46 | ||
| Closing balance | 2,850,206.43 | 1,414,343.90 | 4,264,550.33 |
8． No other receivables were written-off during the period.9． Top 5 other receivable accounts
| Name | Closing balance | Proportion to closing balance of other receivables (%) | Closing balance of bad debts provision |
| Top 5 other receivables in total | 21,733,290.84 | 35.52 | 1,086,664.54 |
Note 6. Inventory
1． Classification
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Raw material | 162,338,704.65 | 17,241,512.65 | 145,097,192.00 | 181,764,220.90 | 17,693,135.85 | 164,071,085.05 |
| WIP | 7,204,699.11 | 7,204,699.11 | 20,682,530.58 | 20,682,530.58 | ||
| Stored goods | 2,085,640,712.37 | 96,622,229.81 | 1,989,018,482.56 | 1,960,110,199.48 | 94,715,064.22 | 1,865,395,135.26 |
| Total | 2,255,184,116.13 | 113,863,742.46 | 2,141,320,373.67 | 2,162,556,950.96 | 112,408,200.07 | 2,050,148,750.89 |
2． Provision for inventory
| Item | Opening balance | Increase in current period | Decrease in current period | Closing balance |
| Accrual | Other | Reversed | Realized | Others | |||
| Raw material | 17,693,135.85 | 164,122.95 | 1,621,613.03 | 154,260.44 | -1,160,127.32 | 17,241,512.65 | |
| Stored goods | 94,715,064.22 | 39,082,973.04 | 37,296,014.80 | -120,207.35 | 96,622,229.81 | ||
| Total | 112,408,200.07 | 39,247,095.99 | 1,621,613.03 | 37,450,275.24 | -1,280,334.67 | 113,863,742.46 |
Notes to provision for inventory
| Item | Evidence of determine NRV and future selling cost | Reason for reversal or realized |
| Raw material | Estimated selling price less estimated cost to complete and selling and distribution expenses and associated taxes | Factors that caused impairment has been disappeared and the NAV is higher than its carrying amount |
| Stored goods | Estimated selling price less estimated selling and distributing expenses and associated taxes | Inventory that already provided for was sold or used in current period. |
Note 7. Other current assets
| Item | Closing balance | Opening balance |
| Input VAT | 12,967,188.47 | 20,468,630.65 |
| Input VAT not yet certified | 39,454,283.19 | 41,895,970.19 |
| Prepaid corporate income tax | 3,419,026.38 | 2,459,142.75 |
| Others | 10,499,007.28 | 7,874,949.13 |
| Total | 66,339,505.32 | 72,698,692.72 |
Note 8. Long-term equity investment
| Investee | Opening balance | Movements during the period | |||
| Addition/new investment | Withdrawn | Investment gains and losses recognized by equity method | Adjustment of other comprehensive income | ||
| Associate | |||||
| Shanghai Watch Co., Ltd. (Shanghai Watch) | 55,155,605.31 | 3,026,481.59 | |||
Continued
| Investee | Movements during the period | Closing balance | Closing balance of impairment provision | |||
| Changes in other equity | Cash dividend declared | Impairment provision | Others | |||
| Associate | ||||||
| Shanghai Watch | 58,182,086.90 | |||||
Note 9. Other equity instrument investments
| Item | Closing balance | Opening balance |
| Xi’an Tangcheng Limited | 85,000.00 | 85,000.00 |
Note 10. Investment property
1. Details of investment property
| Item | Property |
| I. Original cost | |
| 1． Opening balance | 610,886,415.67 |
| 2． Addition | 8,876,202.69 |
| Purchase | |
| Transferred from fixed assets | 8,876,202.69 |
| Other reasons | |
| 3． Decrease | |
| Disposal | |
| Other reasons | |
| 4． Closing balance | 619,762,618.36 |
| II. Accumulated depreciation | |
| 1． Opening balance | 227,460,499.32 |
| 2． Increased in current period | 17,322,624.33 |
| Accrual | 15,436,537.44 |
| Transferred from fixed assets | 1,886,086.89 |
| Other reasons | |
| 3． Decreased in current period | |
| Disposal | |
| Other reasons | |
| 4． Closing balance | 244,783,123.65 |
| III. Impairment provision | |
| 1． Opening balance | |
| 2． Increased in current period | |
| Accrual | |
| Transferred from fixed assets | |
| Other reasons | |
| 3． Decreased in current period | |
| Disposal | |
| Other reasons | |
| 4． Closing balance |
| Item | Property |
| IV. Book value | |
| 1． Carrying amount at end of the period | 374,979,494.71 |
| 2． Carrying amount at opening of the period | 383,425,916.35 |
2. Notes to investment property
During the reporting period, certain self-use property of the Company were changed to leaseout and they were transferred from fixed assets to investment properties measured at cost model.
Note 11. Fixed assets
1. Status of fixed assets
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| I.Original cost | ||||||
| 1. Opening balance | 408,187,709.06 | 107,468,100.86 | 14,780,510.38 | 46,317,448.53 | 46,887,269.94 | 623,641,038.77 |
| 2. Increased in current period | 37,009,440.83 | 10,535,309.18 | 2,901,332.68 | 1,468,735.41 | 51,914,818.10 | |
| Re-classification | ||||||
| Purchased | 33,325,717.80 | 8,934,592.37 | 2,808,299.86 | 1,163,182.48 | 46,231,792.51 | |
| Translation difference | 3,683,723.03 | 1,600,716.81 | 93,032.82 | 305,552.93 | 5,683,025.59 | |
| Other increase | ||||||
| 3. Decrease in current period | 8,876,202.69 | 450,600.66 | 308,000.00 | 1,618,430.56 | 2,897,202.38 | 14,150,436.29 |
| Disposal or retired | 450,600.66 | 308,000.00 | 1,618,430.56 | 2,897,202.38 | 5,274,233.60 | |
| Transferred to investment property | 8,876,202.69 | 8,876,202.69 | ||||
| Translation difference | ||||||
| Other decrease | ||||||
| 4. Closing balance | 436,320,947.20 | 117,552,809.38 | 14,472,510.38 | 47,600,350.65 | 45,458,802.97 | 661,405,420.58 |
| II. Accumulated depreciation | ||||||
| 1. Opening balance | 122,149,565.18 | 63,039,735.12 | 12,847,470.81 | 35,896,505.66 | 40,212,445.35 | 274,145,722.12 |
| 2. Increased in current period | 15,125,262.69 | 8,788,140.30 | 346,250.08 | 2,666,771.95 | 2,025,385.02 | 28,951,810.04 |
| Re-classification | ||||||
| Accrual | 12,857,763.74 | 7,479,521.06 | 346,250.08 | 2,620,234.71 | 1,784,335.34 | 25,088,104.93 |
| Translation difference | 2,267,498.95 | 1,308,619.24 | 46,537.24 | 241,049.68 | 3,863,705.11 | |
| Other increase | ||||||
| 3. Decrease in current period | 1,886,086.89 | 361,550.68 | 292,600.00 | 1,396,127.01 | 2,384,512.17 | 6,320,876.75 |
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| Disposal or retired | 361,550.68 | 292,600.00 | 1,396,127.01 | 2,384,512.17 | 4,434,789.86 | |
| Transferred to investment property | 1,886,086.89 | 1,886,086.89 | ||||
| Translation difference | ||||||
| Other decrease | ||||||
| 4. Closing balance | 135,388,740.98 | 71,466,324.74 | 12,901,120.89 | 37,167,150.60 | 39,853,318.20 | 296,776,655.41 |
| III. Impairment provision | ||||||
| 1. Opening balance | ||||||
| 2. Increase in current period | ||||||
| Re-classification | ||||||
| Accrual | ||||||
| Translation difference | ||||||
| Other increase | ||||||
| 3. Decrease in current period | ||||||
| Disposal or retired | ||||||
| Transferred into investment property | ||||||
| Translation difference | ||||||
| Other decrease | ||||||
| 4. Closing balance | ||||||
| IV. Book value | ||||||
| 1. Carrying amount at end of period | 300,932,206.22 | 46,086,484.64 | 1,571,389.49 | 10,433,200.05 | 5,605,484.77 | 364,628,765.17 |
| 2. Carrying amount at beginning of period | 286,038,143.88 | 44,428,365.74 | 1,933,039.57 | 10,420,942.87 | 6,674,824.59 | 349,495,316.65 |
2. Fixed assets that do not have certificate for property right
| Item | Book value | Reason for not having certificate for property rights |
| Property | 206,821.17 | Issues relating to property right |
| Property | 33,318,636.37 | Not yet completed |
Note 12. Right-of-use assets
| Item | Property |
| Item | Property |
| I. Original cost | |
| 1． Opening balance | 313,578,633.64 |
| 2． Increase in current period | 84,622,611.32 |
| Re-classification | |
| Lease | 84,599,774.43 |
| Translation difference | 22,836.89 |
| Other increase | |
| 3． Decrease in current period | 35,784,166.11 |
| Maturity of lease term | 6,898,304.78 |
| Translation difference | |
| Other decrease | 28,885,861.33 |
| 4． Closing balance | 362,417,078.85 |
| II. Accumulated depreciation | |
| 1． Opening balance | 165,646,158.22 |
| 2． Increase in the period | 110,667,667.15 |
| Reclassification | |
| Accrual | 110,464,700.15 |
| Translation difference | 202,967.00 |
| Other increase | |
| 3． Decrease in the period | 24,227,258.55 |
| Maturity of lease term | 6,898,304.78 |
| Translation difference | |
| Other decrease | 17,328,953.77 |
| 4． Closing balance | 252,086,566.82 |
| III. Impairment provision | |
| 1． Opening balance | |
| 2． Increase in the period | |
| Reclassification | |
| Accrual | |
| Translation difference | |
| Other increase | |
| 3． Decrease in the period | |
| Maturity of lease term | |
| Translation difference | |
| Other decrease | |
| 4． Closing balance |
| Item | Property |
| IV. Book value | |
| 1． Carrying amount at end of period | 110,330,512.03 |
| 2． Carrying amount at beginning of period | 147,932,475.42 |
Note 13. Intangible asset
1． Status
| Item | Land-use right | Software system | Right to use trademarks | Total |
| I. Original cost | ||||
| 1． Opening balance | 34,933,822.40 | 30,286,420.21 | 15,255,625.58 | 80,475,868.19 |
| 2． Increase in the period | 2,911,272.30 | 1,262,964.71 | 4,174,237.01 | |
| Purchase | 2,911,272.30 | 1,262,964.71 | 4,174,237.01 | |
| Internal R&D | ||||
| Other source | ||||
| 3． Decrease in the period | ||||
| Disposal | ||||
| Other reasons | ||||
| 4． Closing balance | 34,933,822.40 | 33,197,692.51 | 16,518,590.29 | 84,650,105.20 |
| II. Accumulated amortization | ||||
| 1． Opening balance | 15,782,368.73 | 22,778,471.88 | 7,879,697.15 | 46,440,537.76 |
| 2． Increase in the period | 733,553.28 | 3,125,436.27 | 1,150,359.26 | 5,009,348.81 |
| Accrual | 733,553.28 | 3,125,436.27 | 1,150,359.26 | 5,009,348.81 |
| Other reasons | ||||
| 3． Decrease in the period | ||||
| Disposal | ||||
| Other reasons | ||||
| 4． Closing balance | 16,515,922.01 | 25,903,908.15 | 9,030,056.41 | 51,449,886.57 |
| III. Impairment provision | ||||
| 1． Opening balance | ||||
| 2． Increase in the period | ||||
| Accrual | ||||
| Other reasons | ||||
| 3． Decrease in the period | ||||
| Transfer |
| Item | Land-use right | Software system | Right to use trademarks | Total |
| Other reasons | ||||
| Other transfer | ||||
| 4． Closing balance | ||||
| IV. Book value | ||||
| 1． Book value at end of the period | 18,417,900.39 | 7,293,784.36 | 7,488,533.88 | 33,200,218.63 |
| 2． Book value at beginning of the period | 19,151,453.67 | 7,507,948.33 | 7,375,928.43 | 34,035,330.43 |
Note 14. Long-term deferred expenses
| Item | Opening balance | Increase | Amortized | Other decrease | Closing balance |
| Counter fabrication expenses | 28,563,171.72 | 30,477,977.80 | 36,794,079.35 | 22,247,070.17 | |
| Renovation expenses | 120,695,905.90 | 60,604,305.97 | 65,269,888.26 | 116,030,323.61 | |
| Others | 14,531,255.82 | 50,849.06 | 8,371,046.48 | 6,211,058.40 | |
| Total | 163,790,333.44 | 91,133,132.83 | 110,435,014.09 | 144,488,452.18 |
Note 15. Deferred tax assets and deferred tax liabilities
1． Detail of deferred tax assets before offsetting
| Item | Closing balance | Opening balance | ||
| Deductible temporary difference | Deferred tax assets | Deductible temporary difference | Deferred tax assets | |
| Impairment provision | 143,503,292.94 | 30,225,885.07 | 148,079,831.14 | 31,562,627.52 |
| Unrealized profit for related party transactions | 75,781,866.09 | 18,681,772.44 | 96,716,186.61 | 24,021,244.01 |
| Deductible losses | 157,860,317.75 | 37,779,977.71 | 62,781,216.23 | 15,188,881.56 |
| Restricted shares | 23,141,270.85 | 5,411,762.47 | 17,502,152.62 | 4,121,326.77 |
| Advertisement expenses that allowed to deduct in future years | 515,068.99 | 128,767.25 | 11,503,471.12 | 2,219,622.49 |
| Lease liabilities | 113,136,916.00 | 28,284,229.00 | 147,888,578.26 | 36,972,144.57 |
| Others | 7,295,926.80 | 1,823,981.80 | 9,993,278.10 | 2,498,319.53 |
| Total | 521,234,659.42 | 122,336,375.74 | 494,464,714.08 | 116,584,166.45 |
2． Detail of deferred tax liabilities before offsetting
| Item | Closing balance | Opening balance | ||
| taxable temporary difference | Deferred tax liabilities | Taxable temporary difference | Deferred tax liabilities | |
| One-off deduction of fixed asset before Corporate income tax | 29,872,344.91 | 4,480,851.74 | 24,113,302.98 | 3,616,995.45 |
| Right-of-use asset | 110,279,028.02 | 27,569,757.01 | 147,881,641.51 | 36,970,410.38 |
| Item | Closing balance | Opening balance | ||
| taxable temporary difference | Deferred tax liabilities | Taxable temporary difference | Deferred tax liabilities | |
| Total | 140,151,372.93 | 32,050,608.75 | 171,994,944.49 | 40,587,405.83 |
3． Net-off of deferred tax asset or liabilities
| Item | Amount off-set at current period | Closing balance of deferred tax asset or liability after off-set | Amount off-set at prior period | Opening balance of deferred tax asset or liability after off-set |
| deferred tax asset | 26,551,763.80 | 95,784,611.94 | 35,350,891.80 | 81,233,274.65 |
| deferred tax liabilities | 26,551,763.80 | 5,498,844.95 | 35,350,891.80 | 5,236,514.03 |
4． Details of deductible temporary difference and deductible losses that
does not recognize as deferred income tax asset
| Item | Closing balance | Opening balance |
| Impairment provision | 16,220,176.97 | 15,218,179.77 |
| Deductible losses | 50,761,915.00 | 54,139,145.45 |
| Total | 66,982,091.97 | 69,357,325.22 |
Deductible losses of Montres Chouriet SA, which are sub-subsidiary of the Company, is notrecognized as deferred income tax asset as it’s uncertain that the companies can get sufficient taxableincome in future. FIYTA （Hong Kong) Ltd, a subsidiary of the Company, does not need to recognizethe deferred income tax assets for impairment provision according to the local tax policy.
5． Deductible losses that are not recognized as deferred tax asset will due in
the following years：
| Year | Closing balance | Opening balance | Note |
| 2022 | |||
| 2023 | 149,750.18 | ||
| 2024 | 8,456,818.95 | 11,684,299.22 | |
| 2025 | 18,449,678.50 | 18,449,678.50 | |
| 2026 | 23,855,417.55 | 23,855,417.55 | |
| Total | 50,761,915.00 | 54,139,145.45 |
Note 16. Other non-current assets
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Prepayment for construction and equipment | 11,593,741.57 | 11,593,741.57 | 42,680,753.78 | 42,680,753.78 | ||
Note 17. Short-term loan
| Item | Closing balance | Opening balance |
| Guaranteed loans | 15,737,928.76 | |
| Credit loans | 290,000,000.00 | 250,000,000.00 |
| Accrued interest payable | 237,111.11 | 256,666.67 |
| Total | 290,237,111.11 | 265,994,595.43 |
Note 18. Notes payable
| Types | Closing balance | Opening balance |
| Commercial bills payable | 2,000,600.00 | 21,223.10 |
Note 19. Account payables
| Item | Closing balance | Opening balance |
| Trade payables | 149,811,781.06 | 232,841,934.81 |
| Payables for material purchased | 19,729,474.20 | 20,513,993.11 |
| Payables for project | 1,048,201.41 | 1,232,967.42 |
| Total | 170,589,456.67 | 254,588,895.34 |
Note 20. Advances from customer
| Item | Closing balance | Opening balance |
| Rental received in advance | 16,960,128.83 | 11,025,664.72 |
Note 21. Contract liabilities
| Item | Closing balance | Opening balance |
| Advances for goods received | 16,844,437.47 | 22,505,426.65 |
Note 22. Employee remuneration payable
1． Status
| Item | Opening balance | Increase | Decrease | Closing balance |
| Short-term employee benefits | 134,696,286.49 | 589,665,061.23 | 601,971,744.25 | 122,389,603.47 |
| Post-employment benefits - defined contribution plans | 9,463,874.19 | 47,055,374.87 | 47,236,557.06 | 9,282,692.00 |
| Termination benefits | 1,775,989.38 | 12,171,724.72 | 9,032,070.19 | 4,915,643.91 |
| Total | 145,936,150.06 | 648,892,160.82 | 658,240,371.50 | 136,587,939.38 |
2． Short-term employee benefits
| Item | Opening balance | Increase | Decrease | Closing balance |
| Salaries, bonus, allowances | 133,818,692.76 | 527,003,225.07 | 539,652,871.30 | 121,169,046.53 |
| Staff welfare | 708.80 | 10,278,373.02 | 10,268,438.54 | 10,643.28 |
| Social insurances | 20,620.66 | 24,553,180.40 | 24,169,772.77 | 404,028.29 |
| Including:1.Medical insurance | 20,620.66 | 22,974,776.23 | 22,591,368.60 | 404,028.29 |
| 2. Supplementary medical insurance | 20,383.00 | 20,383.00 | ||
| 3.Work-related injury insurance | 847,053.99 | 847,053.99 | ||
| 4.Maternity insurance | 710,967.18 | 710,967.18 | ||
| Housing Fund | 27,104.00 | 20,489,164.92 | 20,347,147.92 | 169,121.00 |
| Labor union fees and education fee | 829,160.27 | 7,341,117.82 | 7,533,513.72 | 636,764.37 |
| Total | 134,696,286.49 | 589,665,061.23 | 601,971,744.25 | 122,389,603.47 |
3． Defined contribution plans
| Item | Opening balance | Increase | Decrease | Closing balance |
| Basic pension insurance | 226,815.55 | 43,565,311.09 | 43,501,344.69 | 290,781.95 |
| Unemployment insurance | 1,225,920.84 | 1,225,339.16 | 581.68 | |
| Annuity | 9,237,058.64 | 2,264,142.94 | 2,509,873.21 | 8,991,328.37 |
| Total | 9,463,874.19 | 47,055,374.87 | 47,236,557.06 | 9,282,692.00 |
Note 23. Taxes payable
| Item | Closing balance | Opening balance |
| VAT | 39,086,878.23 | 46,711,341.16 |
| Corporate income tax | 16,751,872.66 | 15,663,227.68 |
| Individual income tax | 1,070,872.15 | 1,568,912.16 |
| Urban maintenance and construction tax | 1,353,097.21 | 1,624,353.62 |
| Educational surcharges | 966,809.02 | 1,161,292.58 |
| Others | 1,540,639.03 | 1,040,752.81 |
| Total | 60,770,168.30 | 67,769,880.01 |
Note 24. Other payables
| Item | Closing balance | Opening balance |
| Dividends payable | 6,324,013.97 | 5,015,026.30 |
| Other payables | 158,736,108.61 | 162,793,733.65 |
| Total | 165,060,122.58 | 167,808,759.95 |
Note: Other payables in above table refers to other payables excluding interest payable anddividends payable.
1. Dividends payable
| Item | Closing balance | Opening balance | Reasons for not being paid |
| Dividends for ordinary shares | 6,324,013.97 | 5,015,026.30 | unlock |
2. Other payables
(1) Other payables by nature
| Nature | Closing balance | Opening balance |
| Security deposit | 38,319,837.05 | 33,536,237.44 |
| Shop activity fund | 16,105,216.84 | 19,208,694.86 |
| Decoration expenses | 12,827,532.03 | 10,201,524.91 |
| Repurchase liability for restricted shares | 50,759,806.16 | 60,585,678.92 |
| Other | 40,723,716.53 | 39,261,597.52 |
| Total | 158,736,108.61 | 162,793,733.65 |
(2) Material other receivables with aging over 1 year
| Name | Closing balance | Reasons for not being paid |
| Company A | 4,600,000.00 | Undue |
| Company B | 1,676,337.60 | Undue |
| Company C | 1,442,275.27 | Undue |
| Company D | 1,332,652.89 | Undue |
| Total | 9,051,265.76 |
Note 25. Non-current liabilities due within one year
| Item | Closing balance | Opening balance |
| Long-term loan due within one year | 3,924,900.00 | |
| Lease liabilities due in one year | 71,546,316.16 | 83,025,006.35 |
| Total | 71,546,316.16 | 86,949,906.35 |
Note 26. Other current liabilities
| Item | Closing balance | Opening balance |
| Output VAT not yet realized | 1,686,806.01 | 2,798,738.32 |
Note 27. Long-term loan
| Category | Closing balance | Opening balance |
| Mortgage loans | 3,924,900.00 | |
| Less: Long-term loan due within one year | 3,924,900.00 | |
| Total |
Note 28. Lease liabilities
| Item | Closing balance | Opening balance |
| Buildings and Structures | 113,188,877.74 | 147,943,728.45 |
| Less: lease liabilities due in one year | 71,546,316.16 | 83,025,006.35 |
| Total | 41,642,561.58 | 64,918,722.10 |
Interest expenses for lease liabilities recognized in current period was RMB7,115,049.25.Note 29. Deferred income
| Item | Opening balance | Increase | Decrease | Closing balance | Reason |
| Asset related government subsidy | 1,792,833.90 | 496,907.10 | 1,295,926.80 | See below table 1 |
1． Deferred income related to government subsidy
Note 30. Share capital
| Item | Opening balance | Movements: increase(+) , decrease(－) | Closing balance | ||||
| Newly issued | Bonus share | Capitalization of capital reserves | Others | Subtotal | |||
| Total shares | 426,051,015 | -8,423,055 | -8,423,055 | 417,627,960 | |||
Notes to movements：
1. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restrictedshares authorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and theresolution of ““Proposal of repurchase and de-registration part of restricted shares authorizedunder 2018 A-share Restricted Share Incentive Plan (Second Phase) ”, the Company repurchasedand de-registered, in 2022, 435,838 A-share restricted shares that had been authorized but stillunder restriction period. Those shares were owned by 6 former incentive object that are resigned.
| Item | Opening balance | Addition | Include in non-operating income in current period | Include in other gains in current period | Offsetting expense or cost | Closing balance | Related to asset /income |
| Special fund for Shenzhen industrial design industry development | 390,123.15 | 75,583.79 | 314,539.36 | Asset related | |||
| Funding project for construction of National Enterprise Technology Center | 631,980.39 | 293,147.06 | 338,833.33 | Asset related | |||
| Provincial Specialized Fund for Industrial and Information | 770,730.36 | 128,176.25 | 642,554.11 | Asset related | |||
| Total | 1,792,833.90 | 496,907.10 | 1,295,926.80 |
2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the2nd meeting of the 10th Board of Directors and the 5th extraordinary shareholder’s meeting of2021, the Company was authorized to repurchase B Shares, using the Company’s fund, to reducethe registered capital. On 15 December 2022, confirmed by China Securities Depository andClearing Co., Ltd Shenzhen Branch, the Company de-registered 7,987,217 B-shares.Note 31. Capital reserve
| Item | Item | Opening balance | Increase | Decrease |
| Share premium | 1,010,108,533.81 | 4,231,031.40 | 44,673,836.85 | 969,665,728.36 |
| Other capital reserve | 30,799,660.32 | 10,852,286.20 | 4,231,031.40 | 37,420,915.12 |
| Total | 1,040,908,194.13 | 15,083,317.60 | 48,904,868.25 | 1,007,086,643.48 |
Notes to capital reserve
1. Pursuant to the resolution of “Proposal of granting part of restricted shares authorizedunder 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of““Proposal of granting part of restricted shares authorized under 2018 A-share Restricted ShareIncentive Plan (Second Phase) ”. In 2022, the Company charged RMB9,870,150.33 into cost orexpenses in change of incentive personnel’s service and increased the capital reserve by the sameamount accordingly.
2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the2nd meeting of the 10th Board of Directors on 25th October 2021 and the 5th extraordinaryshareholder’s meeting of 2021 on 30th November 2021, the Company was authorized torepurchase B Shares, using the Company’s fund, to reduce the registered capital. On 15thDecember 2022, confirmed by China Securities Depository and Clearing Co., Ltd ShenzhenBranch, the Company de-registered 7,987,217 B-shares, which in turn decreased the capitalreserve by RMB42,265,614.88
3. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the2nd meeting of the 10th Board of Directors and the 5th extraordinary shareholder’s meeting of2021, the Company incurred transaction cost of RMB15,043.17 for the repurchase in 2022. Theexpenses of RMB15,043.17 was deducted from capital reserve.
4. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restrictedshares authorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and theresolution of ““Proposal of repurchase and de-registration part of restricted shares authorizedunder 2018 A-share Restricted Share Incentive Plan (Second Phase) ”, the Company repurchasedand de-registered, in 2022, 435,838 A-share restricted shares that had been authorized but stillunder restriction period. Those shares were owned by 6 former incentive object that are resigned.Capital reserve of RMB2,393,178.80 was deducted accordingly.
5. Differences, caused by fair value different when unlock the restricted shares, betweenCIT deducted amount and cost or expenses recognized in vesting period increased the capitalreserve by RMB982,135.87.Note 32. Treasury shares
| Item | Opening balance | Increase | Decrease | Closing balance |
| Share repurchase | 50,252,831.88 | 50,252,831.88 | ||
| Share based payment | 60,585,678.92 | 9,825,872.76 | 50,759,806.16 | |
| Total | 60,585,678.92 | 50,252,831.88 | 60,078,704.64 | 50,759,806.16 |
Notes to treasury shares:
1. In 2022, the Company re-purchased B-share of 7,987,217 shares through the ShenzhenStock Exchange. Consideration paid was HKD61,438,781.55 (excluding trading fee) , equivalentto RMB50,252,831.88. The treasury share increased by 50,252,831.88.
2. As described in Note V. 31. 2, the treasury shares decreased by RMB50,252,831.88 due tore-purchase of B-share.
3. As described in Note V. 31. 4, the treasury shares decreased by RMB2,829,016.80 due tore-purchase of restricted shares. And cash dividend to the remaining restricted shares decreasedtreasury shares by RMB2,528,447.40.
4. On 28 December 2021, Pursuant to the “Resolution of Fulfilling Unlocking Condition forthe 2018 A-Share Restricted Share Incentive Plan (First Phase) ” passed on the 4th meeting of the10th Board, the first unlocking condition was met. Based on the authorization of the GeneralMeeting, the Board lifted restriction for 114 incentive individuals. The corresponding shares canbe traded on 7th February 2022, of which the cash dividend decreased treasury shares byRMB4,468,408.56.
Note 33. Other Comprehensive income
| Item | Opening balance | Amount in current period | Closing balance | ||||||||
| Pre-tax amount | Less: recorded in OCI in prior period and transferred to profit or loss in current period | Less: recorded in OCI in prior period and transferred to financial assets at amortized cost | Less: reserve of hedging transferred to related assets or liabilities | Less: CIT | Attribute to parent company after tax | Attribute to non-controlling shareholders after tax | Less: movements of defied benefit plan | Less: recorded in OCI in prior period and transferred to retained earnings in current period | |||
| I. Other comprehensive income items which will not be reclassified subsequently to profit or loss | |||||||||||
| II. Other comprehensive income items which may be reclassified subsequently to profit or loss | |||||||||||
| translation difference | -7,658,346.40 | 13,397,936.29 | 13,397,936.29 | 5,739,589.89 | |||||||
Note 34. Specific reserve
| Item | Opening balance | Increase | Decrease | Closing balance |
| Safety production fee | 1,062,731.13 | 1,246,390.69 | 297,056.91 | 2,012,064.91 |
Note 35. Surplus reserve
| Item | Opening balance | Increase | Decrease | Closing balance |
| Statutory surplus reserve | 213,025,507.50 | 213,025,507.50 | ||
| Discretionary surplus reserve | 61,984,894.00 | 61,984,894.00 | ||
| Total | 275,010,401.50 | 275,010,401.50 |
Notes to surplus reserve:
Note: According to the Company Law and Articles of Association, the Company drawsstatutory surplus reserve at 10% of net profit. If the statutory surplus reserve is over 50% of theCompany’s registered capital, drawing of statutory surplus reserve will be stopped.
The Company can draw discretionary surplus reserve after drawing statutory surplus reserve.If approved, discretionary surplus reserve can be used to make up for losses in previous years orincrease share capital.
Note 36. Undistributed profit
| Item | Current period | Prior period |
| Undistributed profit at the end of prior year before adjustments | 1,338,444,326.09 | 1,164,490,911.51 |
| Adjustments to undistributed profit at the beginning of year (“+” for increase and “-“ for decrease) | -11,188,268.01 | |
| Undistributed profit at the beginning of year after adjustment | 1,338,444,326.09 | 1,153,302,643.50 |
| Plus: Net profit attributable to the owner of the parent company for the year | 266,681,451.84 | 387,840,282.95 |
| Less: statutory surplus reserve drawn | 28,478,534.63 | |
| Dividends payable to ordinary shares | 125,419,139.40 | 174,220,065.73 |
| Undistributed profit at the end of year | 1,479,706,638.53 | 1,338,444,326.09 |
Note 37. Operating income and operating cost
1． Operatingincomeandoperating cost
| Item | Amount in current period | Amount in prior period |
| Item | Amount in current period | Amount in prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Main business | 4,336,586,473.74 | 2,738,100,529.23 | 5,224,836,384.30 | 3,283,434,432.96 |
| Other business | 17,510,406.62 | 872,261.88 | 18,897,156.63 | 2,221,796.17 |
2． Revenuegenerated bycontract
| Types of contract | Amount in current period | Amount in prior period |
| I. Types of goods | ||
| Watch business | 4,044,205,847.75 | 4,923,280,724.48 |
| Precision manufacturing | 163,114,009.23 | 150,094,350.20 |
| Other business | 17,510,406.62 | 18,897,156.63 |
| II. Categorized based on timing of goods transfer | ||
| At a point of time | 4,212,548,175.21 | 5,078,899,659.72 |
| During a period of time | 12,282,088.39 | 13,372,571.59 |
Note: revenue generated by contract does not include lease income of RMB129,266,616.76which is regulated under “CAS No.21 – Lease”.
Note 38. Tax and surcharges
| Item | Amount in current period | Amount in prior period |
| Consumption tax | 10,509,059.81 | 13,898,225.16 |
| Urban maintenance and construction tax | 4,483,205.18 | 5,907,693.68 |
| Educational surcharge | 2,988,250.62 | 3,923,712.57 |
| Property tax | 5,824,577.36 | 7,224,965.66 |
| Stamp duty | 3,814,124.17 | 4,156,804.98 |
| Others | 3,180,982.59 | 2,452,184.75 |
| Total | 30,800,199.73 | 37,563,586.80 |
Note 39. Selling and distribution expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 390,723,066.47 | 433,505,654.18 |
| Department store expense and rental | 154,977,256.13 | 189,748,898.49 |
| Market promotion expenses | 114,559,488.13 | 161,389,740.20 |
| Item | Amount in current period | Amount in prior period |
| Depreciation and amortization | 210,324,656.21 | 191,787,912.35 |
| Packaging expenses | 8,210,424.75 | 8,739,319.16 |
| Utilities and property management expenses | 22,115,070.79 | 22,588,777.26 |
| Shipping fees | 5,928,120.89 | 8,530,775.41 |
| Office expenses | 5,617,713.76 | 7,446,024.76 |
| Travel expenses | 4,533,814.79 | 7,279,500.39 |
| Entertainment expenses | 3,081,324.66 | 4,046,655.86 |
| Others | 11,761,893.82 | 14,834,965.22 |
| Total | 931,832,830.40 | 1,049,898,223.28 |
Note 40. Administrative expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 169,831,180.19 | 202,675,218.51 |
| Depreciation and amortization | 23,584,581.61 | 24,544,056.69 |
| Travel expenses | 1,651,207.39 | 3,980,000.38 |
| Office expenses | 3,967,189.58 | 5,390,287.09 |
| Agents fees | 1,764,355.96 | 3,342,562.00 |
| Rental and utilities | 941,300.03 | 852,555.31 |
| Entertainment expenses | 764,414.05 | 1,494,588.12 |
| Vehicle and transportation expenses | 1,528,304.66 | 1,718,083.11 |
| Telecommunication expenses | 825,712.63 | 983,910.06 |
| Others | 14,156,262.42 | 16,645,501.14 |
| Total | 219,014,508.52 | 261,626,762.41 |
Note 41. R&D expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 47,534,889.46 | 40,498,469.51 |
| Sample and material expenses | 1,964,204.63 | 1,557,455.43 |
| Molding expenses | 853,056.11 | 744,578.81 |
| Depreciation and amortization | 4,852,325.18 | 6,048,741.96 |
| Technical cooperation fee | 217,203.80 | 2,480,127.69 |
| Others | 5,666,906.43 | 6,473,195.77 |
| Total | 61,088,585.61 | 57,802,569.17 |
Note 42. Financial expenses
| Item | Amount in current period | Amount in prior period |
| Interest expenses | 16,846,749.14 | 23,159,963.74 |
| Less: Interest income | 3,923,999.48 | 3,589,649.85 |
| Exchange gain or losses | -3,053,760.78 | 634,406.96 |
| Item | Amount in current period | Amount in prior period |
| Bank charges | 11,319,753.23 | 14,472,352.80 |
| Total | 21,188,742.11 | 34,677,073.65 |
Note 43. Other income
1． Details
| Sources of other income | Amount in current period | Amount in prior period |
| Government subsidy | 18,648,210.06 | 21,328,673.21 |
2． Government subsidy included in other income
| Item | Amount in current period | Amount in prior period | Asset or income related |
| Subsidy to promote consumption | 7,920,500.00 | 420,000.00 | Income related |
| Trade and Distribution Industry Funding Projects | 2,579,700.00 | Income related | |
| Quality and Branding Promotion Multiplication Subsidy | 1,180,000.00 | 1,960,000.00 | Income related |
| Relief Policy Subsidy | 1,058,150.00 | Income related | |
| Shenzhen Special Fund for Technology Research | 1,000,000.00 | Income related | |
| Training subsidy | 953,220.00 | 322,500.00 | Income related |
| Subsidy for stabilizing job position | 819,833.38 | 833,013.44 | Income related |
| Subsidy to Foster High and New Technology Enterprise | 700,000.00 | Income related | |
| Commission on IIT payment | 730,811.84 | 502,644.31 | Income related |
| Other subsidies | 624,893.74 | 711,026.01 | Income related |
| Shenzhen Standard Special Fund | 550,694.00 | 836,705.00 | Income related |
| Shenzhen E-commerce Innovation and Development Support Program Subsidy | 330,000.00 | Income related | |
| Professional, Specialize,Unique and New" SME Development Subsidy | 200,000.00 | Income related | |
| State certified R&D center | 293,147.06 | 293,147.06 | Asset related |
| Provincial industry and information special subsidy | 128,176.25 | 130,551.50 | Asset related |
| Special fund for Shenzhen industrial designing | 75,583.79 | 161,185.89 | Asset related |
| 2019 Headquarters Economic Contribution Award | -496,500.00 | Income related | |
| Special fund of Nanshan district to support self-innovation industry development | 4,913,900.00 | Income related | |
| Subsidy to assist high quality development of fashion industry | 3,730,000.00 | Income related | |
| Subsidy to support sales promotion | 3,500,000.00 | Income related | |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project | 1,090,000.00 | Income related | |
| Corporate Research and Development Funding | 756,000.00 | Income related | |
| Shenzhen post-doctoral subsidy | 550,000.00 | Income related | |
| R&D project subsidy | 378,000.00 | Income related | |
| Guangming District specific subsidy for online market expanding | 200,000.00 | Income related |
| Government subsidy for R&D project | 200,000.00 | Income related | |
| High precision watch technology innovation project | -160,000.00 | Income related | |
| Total | 18,648,210.06 | 21,328,673.21 |
Note 44. Investment gain
| Item | Amount in current period | Amount in prior period |
| Gain from long-term equity investments accounted for using equity method | 3,026,481.59 | 3,754,939.39 |
Note 45. Credit impairment loss
| Item | Amount in current period | Amount in prior period |
| Bad debt loss | 4,845,379.45 | -11,075,001.77 |
Note 46. Asset impairment loss
| Item | Amount in current period | Amount in prior period |
| Inventory decline in value | -37,625,482.96 | -25,861,394.56 |
Note 47. Gains from assets disposal
| Item | Amount in current period | Amount in prior period |
| Gains (losses) from assets disposal | -203,932.45 | -134,543.49 |
| Gains (losses) from right-of-use assets disposal | 295,857.51 | 864,678.36 |
| Total | 91,925.06 | 730,134.87 |
Note 48. Non-operating income
| Item | Amount in current period | Amount in prior period | Amount included in non-recurring gains or losses in current period |
| Payables cannot be paid | 305,066.79 | 383,893.25 | 305,066.79 |
| Compensation | 860,904.01 | 113,138.61 | 860,904.01 |
| Others | 121,231.28 | 130,403.17 | 121,231.28 |
| Total | 1,287,202.08 | 627,435.03 | 1,287,202.08 |
Note 49. Non-operating expense
| Item | Amount in current period | Amount in prior period | Amount included in non-recurring gains or losses in current period |
| Donation | 78,860.00 | 300,000.00 | 78,860.00 |
| Fine and penalty for late payment | 403,084.07 | 698,864.04 | 403,084.07 |
| Payment for breach of agreement | 1,412,548.66 | 2,507,649.06 | 1,412,548.66 |
| Others | 456,773.58 | 179,653.45 | 456,773.58 |
| Total | 2,351,266.31 | 3,686,166.55 | 2,351,266.31 |
Note 50. CIT expenses
1． Details
| Item | Amount in current period | Amount in prior period |
| Current tax expense for the year based on tax law and regulations | 86,356,685.06 | 112,084,704.70 |
| Changes in deferred tax assets/liabilities | -13,916,465.05 | 2,382,671.18 |
| Total | 72,440,220.01 | 114,467,375.88 |
2． Reconciliation between income tax expenses and accounting profit is as
follows:
| Item | Amount in current period |
| Profits before tax | 339,121,671.85 |
| Income tax calculated based on statutory tax rate | 84,780,417.96 |
| Effect of different tax rates applied by subsidiaries | -6,456,358.40 |
| Adjustment to income tax of previous years | -1,354,677.99 |
| Effect of non-taxable income | -756,620.39 |
| Effect of non-deductible costs, expenses and losses | 2,294,175.14 |
| Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in prior period | -224,619.68 |
| Effect of deductible temporary differences or deductible losses for which no deferred tax asset was recognized this year | |
| Effect of research and development expenses super deduction | -5,842,096.63 |
| Others | |
| Income tax expenses | 72,440,220.01 |
Note 51. Notes to cash flow statement
1. Cash received from other operating activities
| Item | Amount in current period | Amount in prior period |
| Security deposit | 15,956,047.24 | 12,286,247.59 |
| Government subsidy | 18,151,302.96 | 22,985,857.32 |
| Promotion expenses | 12,201,925.26 | 13,582,651.81 |
| Interest income | 3,923,999.48 | 3,589,649.85 |
| Return of petty cash | 8,030,966.63 | 7,070,953.20 |
| Others | 21,392,611.71 | 25,872,097.79 |
| Total | 79,656,853.28 | 85,387,457.56 |
2. Cash paid for other operating activities
| Item | Amount in current period | Amount in prior period |
| Security deposit | 24,008,323.15 | 27,774,098.01 |
| Petty cash advanced to employee | 11,049,894.11 | 11,532,694.33 |
| Current period expenses | 288,360,173.00 | 436,157,747.82 |
| Others | 617,269.28 | 2,635,207.94 |
| Total | 324,035,659.54 | 478,099,748.10 |
3. Cash paid for other financing activities
| Item | Amount in current period | Amount in prior period |
| Lease payment | 124,087,402.37 | 115,532,289.07 |
| Cash paid for re-purchase of shares | 53,390,338.09 | 9,178,101.51 |
| Total | 177,477,740.46 | 124,710,390.58 |
Note 52. Supplement information to cash flow statement
1. Supplement to cash flow statement
| Item | Amount in current period | Amount in prior period |
| 1. Reconciliation of net profit/loss to cash flows from operating activities： | ||
| Net profit | 266,681,451.84 | 387,860,340.23 |
| Add: Credit impairment loss | -4,845,379.45 | 11,075,001.77 |
| Impairment for assets | 37,625,482.96 | 25,861,394.56 |
| Depreciation of fixed assets、oil and gas assets and productive biological assets | 40,524,642.37 | 42,404,375.44 |
| Depreciation of right-of-use assets | 110,464,700.15 | 100,275,414.73 |
| Intangible asset amortization | 5,009,348.81 | 6,162,432.21 |
| Amortization of long-term deferred expenses | 110,435,014.09 | 103,932,868.69 |
| Loss on disposal of fixed assets, intangible assets, and other long-term assets (“-“ for gain) | -91,925.06 | -730,134.87 |
| Loss on scrap of fixed assets (“-“ for gain) | ||
| Loss on changes of fair value (“-“ for gain) | ||
| Financial expenses (“-“ for income) | 16,846,749.14 | 23,159,963.74 |
| Investment loss (“-“ for gain) | -3,026,481.59 | -3,754,939.39 |
| Decrease in deferred tax assets (“-“ for increase) | -14,551,337.29 | -319,474.30 |
| Increase in deferred tax liabilities (“-“ for decrease) | 262,330.92 | 2,168,679.48 |
| Decrease in inventories (“-“ for increase) | -92,627,165.17 | -133,051,377.44 |
| Decrease in operating receivables (“-“ for increase) | 121,164,749.65 | 59,770,087.01 |
| Increase in operating payables (“-“ for decrease) | -117,643,404.85 | -77,565,523.41 |
| Others | ||
| Net cash flows from operating activities | 476,228,776.52 | 547,249,108.45 |
| 2. Significant investment or financing activities not involving cash: | ||
| Debts converted to capital | ||
| Convertible debts mature within one year | ||
| Added right-of-use assets in the current period | ||
| 3．Net changes in cash and cash equivalents: | ||
| Cash at end of year | 313,738,389.64 | 210,254,737.14 |
| Less: cash at beginning of year | 210,254,737.14 | 353,057,285.71 |
| Plus: cash equivalents at end of year | ||
| Less: cash equivalents at beginning of year |
| Item | Amount in current period | Amount in prior period |
| Net increase in cash and cash equivalents | 103,483,652.50 | -142,802,548.57 |
2. Total cash outflows related to lease
Total cash outflows related to lease amounted to RMB124,087,402.37.（Prior period：
RMB115,532,289.07）
3. Cash and cash equivalents
| Item | Closing balance | Opening balance |
| I. Cash | 313,738,389.64 | 210,254,737.14 |
| Incl. Cash on hand | 173,368.68 | 108,612.08 |
| Bank deposit available for immediate payment | 312,433,893.29 | 188,908,798.10 |
| Other monetary funds available for immediate payment | 1,131,127.67 | 21,237,326.96 |
| II. Cash equivalents | ||
| Including Bond investment due in three months | ||
| III. Cash and cash equivalents at the end of year | 313,738,389.64 | 210,254,737.14 |
| Including Restricted cash and cash equivalents for the Company and its subsidiaries | 716,733.44 | 1,724,651.93 |
As of December 31, 2022, the company has been frozen at RMB 9,074.00 due to beingincluded in a long-term immobile bank account.
Note 53. Monetary items denominated in foreign currency
1． Monetary items denominated in foreign currency
| Item | Balance denominated in foreign currency as at 31 Dec 2022 | Exchange rate | Balance translated in RMB as at 31 Dec 2022 |
| Monetary fund | 24,163,612.98 | ||
| USD | 2,954,765.31 | 6.9646 | 20,578,758.48 |
| EUR | 337,623.94 | 7.4229 | 2,506,148.74 |
| HKD | 501,707.26 | 0.8932 | 448,160.04 |
| CHF | 83,603.65 | 7.5432 | 630,545.72 |
| Accounts receivable | 4,753,372.10 | ||
| USD | 466,956.15 | 6.9646 | 3,252,162.80 |
| EUR | 73,533.12 | 7.4229 | 545,829.00 |
| HKD | 674,663.15 | 0.8932 | 602,656.35 |
| CHF | 46,760.52 | 7.5432 | 352,723.95 |
| Other receivables | 104,397.30 | ||
| HKD | 116,870.93 | 0.8932 | 104,397.30 |
| Item | Balance denominated in foreign currency as at 31 Dec 2022 | Exchange rate | Balance translated in RMB as at 31 Dec 2022 |
| Accounts payable | 473,247.09 | ||
| HKD | 241,027.73 | 0.8932 | 215,302.84 |
| CHF | 34,195.60 | 7.5432 | 257,944.25 |
| Other payables | 168,702.98 | ||
| USD | 5,588.86 | 6.9646 | 38,924.17 |
| EUR | 490.28 | 7.4229 | 3,639.30 |
| HKD | 11,588.20 | 0.8932 | 10,351.39 |
| CHF | 15,350.00 | 7.5432 | 115,788.12 |
2． Overseas operational entityFor main business location and recording currency of important overseas operating entities, referto Note III. 5.Note 54. Government subsidy
1． Status
| Types of government subsidy | Amount in current period | Amount included in current period profit or loss | note |
| Subsidy included in deferred income | 496,907.10 | Note V 29 |
Subsidy included in other income
| Subsidy included in other income | 18,647,802.96 | 18,647,802.96 | Note V 43 |
Less: subsidy returned
| Less: subsidy returned | 496,500.00 | 496,500.00 | Note 2 below |
Total
| Total | 18,151,302.96 | 18,648,210.06 |
2． Subsidy returned
| Item | Type | Amount in current period | Amount in prior period | Reasons for return |
| Over disbursement of subsidy and its interest | Income related | 496,500.00 | Not qualified |
VI. Interests in other entities
1. Equity in subsidiary
(1) Composition of enterprise group
| Name | Place of operation | Place of registration | Nature of business | Shareholding ratio (%) | Ways acquired | |
| Direct | Indirect | |||||
| Shenzhen Harmony World Watch Center Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| FIYTA Sales Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Shenzhen | Shenzhen | Manufacturing | 99.00 | 1.00 | incorporated or investment |
| Shenzhen FIYTA Technology Development | Shenzhen | Shenzhen | Manufacturing | 100.00 | incorporated or investment | |
| Name | Place of operation | Place of registration | Nature of business | Shareholding ratio (%) | Ways acquired | |
| Co., Ltd. | ||||||
| Harmony World Watch Center (Hainan) Co., Ltd. | Sanya | Sanya | Commerce | 100.00 | incorporated or investment | |
| Shenzhen Xunhang Precision Technology Co., Ltd. | Shenzhen | Shenzhen | Manufacturing | 100.00 | incorporated or investment | |
| Emile Choureit Timing (Shenzhen) Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | Shenyang | Shenyang | Commerce | 100.00 | Business combination under common control | |
| TEMPORAL (Shenzhen) Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Shenzhen Harmony E-commerce Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| FIYTA (Hong Kong) Ltd. | Hong Kong | Hong Kong | Commerce | 100.00 | incorporated or investment | |
| Montres Chouriet SA | Swiss | Swiss | Manufacturing | 100.00 | Business combination not under common control | |
2. Equity in joint arrangement or associates
(1) Significant associates
| Name | Place of operation | Place of registration | Nature of business | Shareholding ratio (%) | Accounting treatment | |
| Direct | Indirect | |||||
| Shanghai Watch Co., Ltd. | Shanghai | Shanghai | Commercial | 25% | Equity method | |
(2) Principal financial information of significant associate company
| Item | Closing balance/Amount in current period | Opening balance/Amount in prior period |
| Current assets | 175,890,077.66 | 143,367,298.98 |
| Non-current assets | 21,637,323.67 | 17,537,419.20 |
| Total assets | 197,527,401.33 | 160,904,718.18 |
| Current liabilities | 44,595,566.75 | 24,124,925.22 |
| Non-current liabilities | 5,885,583.05 | 1,839,467.79 |
| Total liabilities | 50,481,149.80 | 25,964,393.01 |
| Non-controlling interest | ||
| Equity attributable to parent company | 147,046,251.53 | 134,940,325.17 |
| Portion of net asset calculated based on shareholding | 36,761,562.88 | 33,735,081.29 |
| Adjustment matters | 21,420,524.02 | 21,420,524.02 |
| - Goodwill | 21,420,524.02 | 21,420,524.02 |
| - Unrealized profit or losses from internal transaction | ||
| - Others |
| Item | Closing balance/Amount in current period | Opening balance/Amount in prior period |
| Carrying value of investment to associates | 58,182,086.90 | 55,155,605.31 |
| Fair value of equity investment that has public quotation | ||
| Operating income | 141,379,376.32 | 150,929,452.87 |
| Net profit | 12,105,926.36 | 15,019,757.54 |
| Net profit from discontinued operation | ||
| Other comprehensive income | ||
| Total comprehensive income | 12,105,926.36 | 15,019,757.54 |
| Dividends received from associated company during the year |
VII. Risk disclosure related to financial instrumentThe major financial instruments of the Company primarily include cash at bank and on hand,equity investments, borrowings, accounts receivable, accounts payables and bond payables. TheCompany is exposed to risks from various financial instruments in day-to-day operation, mainlyincluding credit risk, liquidity risk and market risk. The risks in connection with such financialinstruments and the risk management policies adopted by the Company to mitigate such risks aresummarized as follows:
The board of directors is responsible for planning and establishing the risk managementstructure for the Company, developing risk management policies and the related guidelines acrossthe Company, and supervising the performance of risk management measures. The Company hasdeveloped risk management policies to identify and analyse risks exposed by the Company. Theserisk management policies have clear regulations over specific risks, covering various aspects ofmarket risk, credit risk and liquidity risk management. The Company will evaluate the marketenvironment and changes of the Company’s operating activities on a regular basis to decidewhether to update the risk management policies and systems. Risk management of the Company iscarried out by the Risk Management Committee based on the policies as approved by the board ofdirectors. Risk Management Committee identifies, evaluates and mitigates related risks byworking closely with other business divisions of the Company. Internal Audit Department of theCompany will review the risk management control and process regularly, and submit the reviewresults to Audit Committee of the Company. The Company spreads the risks of financialinstruments through appropriate diversified investment and business portfolio, and mitigates therisk of focusing on any single industry, specific regions or counterparties by way of formulatingthe corresponding policies for risk management.
1. Credit risk
Credit risk refers to the risk of financial losses to the Company as a result of the failure ofperformance of contractual obligations by the counterparties. The management has developedproper credit policies and continuously monitors credit risk exposures.
The Company has adopted the policy of transacting with creditworthy counterparties only. Inaddition, the Company evaluates the credit qualification of customers and sets up corresponding
credit term based on the financial status of customers, the possibility of obtaining guarantees fromthird parties, credit records and other factors such as current market conditions. The Companymonitors the balances and recovery of bills and accounts receivable, and contract assets on acontinual basis. As for bad credit customers, the Company will use the written reminders, shortenthe credit term or cancel the credit term to ensure that the Company is free from material creditlosses. In addition, the Company reviews the recovery of financial assets on each balance sheetdate to ensure adequate expected credit loss provision is made for relevant financial assets.The Company’s other financial assets include currency funds and other receivables. Thecredit risk relating to these financial assets arises from the default of counterparties, but themaximum exposure to credit risk is the carrying amount of each financial asset in the balancesheet. The Company does not provide any other guarantee that may expose the Company to creditrisk.
The monetary funds held by the Company are mainly deposited with financial institutionssuch as state-owned banks and other large and medium-sized commercial banks. The managementbelieves that these commercial banks have a higher reputation and assets, so there is no majorcredit risk and the Company would not have any significant losses caused by the default by theseinstitutions. The Company’s policy is to control the amount deposited with these famous financialinstitutions based on their market reputation, operating size and financial background, to limit thecredit risk amount of any single financial institution.As a part of its credit risk asset management, the Company assesses the credit loss ofreceivables using aging. The Company’s receivable and other receivables involve large amount ofcustomers. Aging information can reflect the ability to repay and risk of bad debt of thesecustomers. The Company determined expected loss rate by calculating historical bad debt rate forreceivables with different aging based on historical data and also taking forecast of futureeconomic condition into consideration such as GDP growth rate, state currency policy etc... Forlong-term receivables, the Company assesses expected credit loss reasonably by consideringsettlement period, contracted payment terms, debtor’s financial situation and the economicsituation of the debtor’s industry.As at 31 December 2022, the carrying amount of related assets and corresponding ECL is asfollows:
| Aging | Carrying amount | Provision |
| Bill receivable | 33,347,790.58 | 1,132,878.48 |
| Accounts receivable | 345,753,258.32 | 40,462,298.64 |
| Other receivable | 61,182,569.81 | 4,264,550.33 |
| Total | 440,283,618.71 | 45,859,727.45 |
As the Company’s customer base is large, no material credit concentration risk.
As at 31 December 2022, the balance of top 5 receivable accounts accounted for 32.76% oftotal accounts receivables (2021: 35.48%) .
2. Liquidity risk
Liquidity risk refers to the risk of short of funds when the company performs its obligation ofcash payment or settlement by other financial assets. The Company’s subordinate membercompanies are responsible for their respective cash flow projections. Based on the results thereof,the subordinate financial management department continually monitors its short-term andlong-term capital needs at the company level to ensure adequate cash reserves; in the meantime,continually monitors the compliance with loan agreements and secures undertakings for sufficientreserve funds from major financial institutions, to address its short-term and long-term capitalneeds. Besides, the Company mainly signs financing agreements with banks that have businesstransactions to provide support to fulfill commercial bill obligation. As at 31 December 2022, theCompany has financing facilities from several banks amounting to RMB2,127.16 million.Amongst, RMB467.16 million has already been used.As at 31 December 2022, the discounted contractual cash flows for financial liabilities andoff-balance sheet guarantee that presented in maturity are as follows:
| Item | Closing balance in ten thousands yuan | ||||
| Within 1 year | 1 - 2 years | 2 - 3 years | Over 3 years | Total | |
| Short term loan | 29,353.84 | 29,353.84 | |||
| Bills payable | 200.06 | 200.06 | |||
| Accounts payable | 17,058.95 | 17,058.95 | |||
| Other payables | 15,873.61 | 231.76 | 200.79 | 199.85 | 16,506.01 |
| Total | 62,486.46 | 231.76 | 200.79 | 199.85 | 63,118.86 |
3. Market risk
(1) Exchange rate risk
Except that the Company’s subsidiary in Hong Kong uses HKD as settlement currency andsub-subsidiary in Swiss used CHF as settlement currency, the principal places of operations of theCompany are located in China and the major businesses are settled in RMB. However, theCompany’s recognized foreign currency assets and liabilities as well as the foreign currencytransactions in the future (the functional currencies of foreign assets and liabilities as well as thetransactions are mainly HKD and CHF) remain exposed to exchange rate risk
As at 31 December 2022, the RMB equivalent of financial assets and financial liabilitiesdenominated in foreign currencies are as follows:
| Item | Closing balance | ||||
| HKD | USD | EUR | CHF | Total | |
| Financial asset denominated in foreign currency: | |||||
| Monetary fund | 448,160.04 | 20,578,758.48 | 2,506,148.74 | 630,545.72 | 24,163,612.98 |
| Accounts receivable | 602,656.35 | 3,252,162.80 | 545,829.00 | 352,723.95 | 4,753,372.10 |
| Item | Closing balance | ||||
| HKD | USD | EUR | CHF | Total | |
| Other receivables | 104,397.30 | 104,397.30 | |||
| Subtotal | 1,155,213.69 | 23,830,921.28 | 3,051,977.74 | 983,269.67 | 29,021,382.38 |
| Financial liabilities denominated in foreign currency: | |||||
| Accounts payables | 215,302.84 | 257,944.25 | 473,247.09 | ||
| Other payables | 10,351.39 | 38,924.17 | 3,639.30 | 115,788.12 | 168,702.98 |
| Total | 225,654.23 | 38,924.17 | 3,639.30 | 373,732.37 | 641,950.07 |
Sensitivity analysisAs at 31 December 2022, for financial assets and financial liabilities that denominated in foreigncurrency, if Renminbi appreciate or depreciate of 5% to foreign currency and other factors remainunchanged, the net profit will decrease or increase about RMB 1.419 million(31 Dec 2021:RMB485,000) .
(2) Interest rate risk
The interest rate risk of the Company mainly associates with bank borrowings, bonds payable,etc. Floating rate financial liabilities expose the Company to cash-flow interest rate risk, whilefixed rate financial liabilities expose the Company to fair-value interest rate risk. The Companydetermines the comparative proportion of fixed rate contracts and floating rate contracts based onthe then market conditions.The interest rate risk of the Company mainly associates with bank borrowings, bonds payable,etc. Floating rate financial liabilities expose the Company to cash-flow interest rate risk, whilefixed rate financial liabilities expose the Company to fair-value interest rate risk. The Companydetermines the comparative proportion of fixed rate contracts and floating rate contracts based onthe latest market conditions.Sensitivity analysis:
As at 31 December 2022, it is estimated that a general increase or decrease 50 basis points inthe borrowings with floating interest rates, with all other variables held constant, the Company’snet profit and shareholder’s equity for the year will decrease or increase by approximatelyRMB1,200,000.00 (2021: RMB 1,000,000.00) .
The above sensitivity analysis assumes that interest rate changed on the balance sheet dateand applicable to all loans with floating interest rate terms.
VIII. Fair value
1. Financial instruments measured at fair value
As at 31 December 2022, the Company does not have financial instruments measured at fairvalue.
2. Status of financial assets and financial liabilities not measured at fair valueFinancial assets and financial liabilities not measured at fair value include: accountsreceivable, short-term loans, accounts payable, long-term loans due within one year, and equityinstrument investment that does not have public quotation in an active market and its fair valuecannot be measured reliably.
The difference between fair value and carrying amount of the above financial assets andliabilities that not measured at fair value is insignificant.
IX. Related party and related transaction
1. The parent company of the Company
| Name | Registration place | Type of business | Registered capital (in ten thousand RMB) | Shareholding ratio of parent company to the Company % | Ratio of vote right of parent company to the Company% |
| CATIC Shenzhen | Shenzhen | Commercial | 116,616.20 | 39.02 | 39.02 |
(1) Notes to the parent company
CATIC Shenzhen is a subsidiary that 100% held, indirectly, by AVIC International, and AVICdirectly holds 91.14% of the equity of AVIC International.
(2) The ultimate controlling party of the Company is AVIC.
2. Refer to Note VI. 1 for information about the Company’s subsidiaries
3. Refer to Note VI. 2 for information about the Company’s material associates
4. Other related parties
| Name of other related parties | Relationship |
| Shenzhen CATIC Property Management Limited (CATIC Property Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Building Equipment Co., Ltd. (CATIC Building Company) | Associate company of the controlling shareholder |
| Shenzhen CATIC Nanguang Elevator Engineering Co., Ltd. (CATIC Nanguang) | Associate company of the controlling shareholder |
| China Merchants Property Operation & Service Co., Ltd (China Merchants Property OS) | Associate company of the controlling shareholder |
| Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment) | Associate company of the controlling shareholder |
| Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company) | Associate company of the controlling shareholder |
| CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company) | Associate company of the controlling shareholder |
| Shenzhen AVIC Security Service Co., Ltd (AVIC Security Service) | Associate company of the controlling shareholder |
| Jiujiang 9 Square Business Management Co., Ltd (Jiujiang 9 Square Business Management) | Associate company of the controlling shareholder |
| Rainbow Digital Science Co., Ltd. and its associated companies (Rainbow Company | Controlled by the same party |
| Shennan Circuits Co., Ltd. and its associated companies (Shennan Circuits) | Controlled by the same party |
| Name of other related parties | Relationship |
| AVIC Lutong Co., Ltd.(AVIC Lutong) | Controlled by the same party |
| AVIC International Aero-Development Corporation(AVIC Int’l Aero Development) | Controlled by the same party |
| AVIC Huadong Photoelectric Co., Ltd.(AVIC Huadong Photoelectric) | Controlled by the same party |
| AVIC Xi’an Flight Automatic Control Research Institute(AVIC Xi’an Flight Institute) | Controlled by the same party |
| Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel Management Company) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities Company) | Controlled by the same party |
| AVIC Training Center | Controlled by the same party |
| AVIC Finance Co., Ltd. (AVIC Finance Company) | Controlled by the same party |
| Gongqingcheng CATIC Culture Investment Co., Ltd (Gongqingcheng CATIC Culture Investment Company) | Controlled by the same party |
| China National Aero-Technology Shenzhen Co., Ltd. | Controlled by the same party |
| Beijing Hangtou Real-Estate Co., Ltd. (Beijing Hangtou) | Controlled by the same party |
| Avic Jonhon Optronic Technology Co., Ltd.(AVIC Jonhon) | Controlled by the same party |
| China Aviation International Simulation Technology Services Co., Ltd. (China Aviation International Simulation ) | Controlled by the same party |
| AVIC International Holdings (Zhuhai) Co., Ltd. (AVIC Zhuhai) | Controlled by the same party |
| China National Aero-technology Import & Export Corporation (CATIC) | Controlled by the same party |
| China Aviation Industry General Aircraft Co., Ltd.(CAIGA) | Controlled by the same party |
| AVIC Capital Co., Ltd. (AVIC Capital) | Controlled by the same party |
| Guizhou HUAYANG Electronics Co., Ltd. | Controlled by the same party |
| Zhuhai Pilot Composite Material Technology Co., Ltd. | Controlled by the same party |
| Guangdong International Mansion Industrial Co., Ltd. (Guangdong International Mansion) | Controlled by the same party |
| Shenzhen Zhonghang Technology Checking & Measuring Institute (Shenzhen ZHTCMI) | Controlled by the same party |
| Company directors, managers, CFO, and secretary of the board | Key management member |
5. Related party transactions
(1) Related transaction between subsidiaries and between parent company andsubsidiaries which are in the scope of consolidation have already been offset.
(2) Purchase good and receiving service
| Related parties | Related transaction content | Amount in current period | Amount in prior period |
| CATIC Property Management | Property management | 11,539,094.22 | 10,672,790.93 |
| Rainbow Company | Department store expenses/ Commodity purchase | 4,184,883.88 | 4,964,647.21 |
| AVIC Training Center | Training fee | 147,652.13 | |
| Ganzhou 9 Square Company | Department store expense | 74,815.04 | 178,484.53 |
| CATIC City Estate (Kunshan) Company | Department store expense | 63,779.35 | 64,060.80 |
| Jiufang Business Management | Department store expense | 90,606.52 | 86,305.01 |
| CATIC Building Company | Renovation | 19,200.60 | 82,276.21 |
| AVIC Nanguang Company | Elevator maintenance | 46,660.32 | 463,226.05 |
| AVIC Jonhon | Purchase of goods | 238,755.07 | 76,667.61 |
| Gongqingcheng CATIC Culture Investment Company | Departmental store expense | 25,733.73 | 31,544.56 |
| Grand Skylight Hotel Management Company | Purchase of goods | 3,855.65 | - |
| Guangdong International Mansion | Property management | 18,157.71 | |
| Shenzhen ZHTCM | Accept labour | 6,590.00 | |
| AVIC Xi’an Flight Automatic Control Research Institute(AVIC Xi’an Flight Institute) | Accept labour | 179,245.28 | |
| Total | 16,491,377.37 | 16,767,655.04 |
Notes: All amount listed above exclude tax
(3) Sale of goods and providing services
| Related party | Nature of transaction | Amount in current period | Amount in prior period |
| Beijing Hangtou | Sale of product | 3,504.42 | |
| Ganzhou 9 Square | Product and service | 16,327.43 | 23,850.44 |
| Gongqingcheng CATIC Culture Investment Company | Sale of product | 310,404.70 | 461,064.03 |
| 9 Square Business Management | Sale of product | 45,548.67 | 2,648.00 |
| Shennan Circuit | Sale of material and providing service | 335,070.20 | 2,179,951.09 |
| Grand Skylight Hotel Management Company | Sale of product | 17,610.62 | |
| AVIC Training Center | Others | 2,453.10 | 2,180.53 |
| Rainbow Company | Product and service | 53,197,052.19 | 79,467,519.77 |
| AVIC International | Sale of product | 28,237.17 | |
| AVIC Jonhon | Sale of product | 1,252,054.56 | 383,989.41 |
| China Aviation International Simulation | Sale of product | 60,530.97 | |
| AVIC Zhuhai | Sale of product | 8,800.00 | 31,831.86 |
| CATIC | Sale of product | 105,929.20 | |
| CAIGA | Sale of product | 1,319,881.42 | |
| AVIC Capital | Sale of product | 8,681.42 | |
| CATIC Property Management | Share of Utilities and management fee | 3,236,626.25 | 3,372,087.78 |
| Guizhou HUAYANG Electronics Co., Ltd. | Sale of product | 87,263.71 | |
| AVIC Huadong PHOTOELECTRIC | Sale of product | 21,238.94 | |
| Zhuhai Pilot Composite Material Technology Co., Ltd. | Sale of product | 1,805,929.20 | |
| Total | 60,318,768.95 | 87,469,498.13 |
Notes: All amount listed above exclude tax
(4) Related party lease
1) The Company as lessor
| Lessee | Type of leased assets | Recognized rental income in current year | Recognized rental income in prior year |
| CATIC Property Management | Property | 4,040,909.78 | 7,876,636.32 |
| AVIC Securities Company | Property | 1,411,885.68 | 1,377,399.99 |
| Rainbow Company | Property | 437,897.82 | 931,939.92 |
| AVIC Security Service | Property | 906,404.52 | 799,448.76 |
| Total | 6,797,097.80 | 10,985,424.99 |
2) The Company as lessee
| Lessor | Type | Variable lease payments that are not included in lease liabilities | Rental payment | Interest payment of lease liabilities | Addition of right-of-use asset | ||||
| Current period | Prior period | Current period | Prior period | Current period | Prior period | Current period | Prior period | ||
| Guangdong International Mansion Industrial Co., Ltd. | Property | 40,527.84 | 3,572.58 | 51,030.81 | |||||
| Kunshan Company | Property | 94,596.41 | 105,759.65 | 5,615.80 | 8,266.43 | 138,708.90 | 123,534.02 | ||
| Rainbow Company | Property | 417,268.91 | 594,532.47 | 14,378.80 | 31,093.92 | 247,505.55 | 622,708.60 | ||
| Ganzhou 9 Square Company | Property | 396,395.25 | 951,348.60 | 8,974.33 | 43,131.68 | ||||
| Jiufang Business Management | Property | 60,513.53 | 260,384.38 | 320,485.10 | 508,577.07 | 14,747.54 | 14,547.95 | ||
| Total | 60,513.53 | 260,384.38 | 1,269,273.51 | 2,160,217.79 | 47,289.05 | 97,039.98 | 437,245.26 | 746,242.62 | |
(5) Related party fund lending and borrowing
1) Borrowings from related parties
| Related Party | Amount | starting date | Expiring date | Note |
| AVIC Finance Company | 100,000,000.00 | 14 January 2022 | 9 February 2022 | |
| AVIC Finance Company | 100,000,000.00 | 18 February 2022 | 25 February 2022 | |
| Total | 200,000,000.00 |
Note:
The Company paid interest to AVIC Finance Company amounted to RMB324,444.44 duringthe year.
(6) Remuneration to key management
| Item | Amount in current period | Amount in prior period |
| Remuneration to key management | 15,148,600.00 | 18,610,600.00 |
(7) Other related transactions
The year-end balance of the Company’s cash that is deposited with AVIC Finance Companyis RMB271,327,031.83. Interests received from the deposit during the year were RMB425,324.08.
(8) Receivables from and payables to related parties
1) Receivables from related parties
| Item | Related party | Closing balance | Opening balance |
| Carrying amount | Bad debt provision | Carrying amount | Bad debt provision | ||
| Monetary fund | |||||
| AVIC Finance Company | 271,327,031.83 | 147,786,041.19 | |||
| Accounts receivable | |||||
| Ganzhou 9 Square | 6,000.00 | 300.00 | |||
| Gongqingcheng CATIC Culture Investment Company | 27,297.28 | 1,364.88 | 10,536.96 | 303.21 | |
| Shennan Circuit | 7,255.14 | 544.14 | 161,653.56 | 8,082.68 | |
| Rainbow Company | 3,808,470.31 | 219,873.20 | 3,958,751.41 | 244,056.19 | |
| AVIC Jonhon | 649,797.16 | 48,734.79 | 44,718.38 | 2,235.92 | |
| CAIGA | 1,471,466.00 | 73,573.30 | |||
| CATIC Property Management | 55,910.00 | 2,795.50 | 0.30 | ||
| Guizhou HUAYANG Electronics Co., Ltd. | 59,528.00 | 4,464.60 | |||
| Zhuhai Pilot Composite Material Technology Co., Ltd. | 1,412,045.00 | 105,903.38 | |||
| AVIC Training Center | 2,772.00 | 207.90 | |||
| Jiufang Business Management | 45,762.00 | 2,288.10 | |||
| Bill receivable | |||||
| Shennan Circuit | 308,698.46 | 15,434.92 | |||
| AVIC Jonhon | 262,429.22 | 187,090.69 | 9,354.53 | ||
| Other receivables | |||||
| Ganzhou 9 Square Company | 192,064.00 | 9,603.20 | |||
| Gongqingcheng CATIC Culture Investment Company | 6,500.00 | 325.00 | 5,500.00 | 275.00 | |
| Jiufang Business Management | 50,000.00 | 2,500.00 | 50,000.00 | 2,500.00 | |
| Rainbow Company | 1,055,557.43 | 52,777.87 | 1,051,020.00 | 52,551.00 | |
| Kunshan Company | 73,000.00 | 2,800.00 | 56,000.00 | 2,800.00 | |
| AVIC | 49.32 | 2.47 | 49.32 | 2.47 |
2）Payables to related parties
| Item | Related party | Closing balance | Opening balance |
| Accounts payable | |||
| CATIC Building Company | 32,992.35 | 41,283.89 |
| Item | Related party | Closing balance | Opening balance |
| AVIC Jonhon | 19,411.27 | ||
| Other payables: | |||
| Rainbow Company | 108,186.52 | 198,661.82 | |
| AVIC International | 3,600.00 | ||
| CATIC Property Management | 2,375,070.47 | 2,307,322.31 | |
| AVIC Securities Company | 247,080.00 | 247,080.00 | |
| CATIC Nanguang | 23,432.43 | 34,430.13 | |
| CATIC Building Company | 31,270.67 | ||
| AVIC Security Service | 158,620.80 | 226,603.44 | |
| Advance received | |||
| Rainbow Company | 162,324.03 | 16,537.50 | |
| AVIC Securities Company | 123,540.00 |
X. Share-based payments
1.General information about share-based payments
| Total equity instrument granted during current period | |
| Total equity instrument exercised during current period | 1,244,421.00 |
| Total equity instruments voided in current period | |
| Scope of outstanding share option exercise price and remaining contract term | Not applicable |
| Scope of outstanding other equity instrument exercise price and remaining contract term. |
2.Equity settled share-based payment
| Method of determining fair value of equity instrument on grant date | Close price of share on grant date |
| Evidence to determine the number of exercisable equity instrument | Term of employee service, status of target completion, and personal performance assessment |
| Reasons for significant difference between current period estimation and prior period estimation | Nil |
| Accumulated amount charged to capital reserve for equity settled share-based payment | 31,988,282.05 |
| Total expenses for equity settled share-based payment recognized in current period | 9,870,150.33 |
XI. Commitment and contingencies
1. Significant commitments
(1) Lease contract that already signed or prepared to fulfil and its financial effectRefer to Note XIII for details.
2.Contingencies on balance sheet date
The Company does not have material contingent events that need to be disclosed
XII. Post balance sheet date events
1. Profit distribution
| Profit distributions or dividends proposed | Cash dividend of RMB2.50 (tax inclusive) for every 10 shares held |
2.Other events after the balance sheet date
(1) Financing and guarantee after the balance sheet date
1) On 16 March 2023, pursuant to approval by the 11
th
meeting of the 10
thBoard of directors, theCompany proposed to apply for financing facility of no more than RMB 1,200 million by means ofcredit, pledge and mortgage in 2023. The resolution is pending for approval by the shareholder’smeeting.
2) On 16 March 2023, pursuant to approval by the 11
th meeting of the 10
th
Board of directors, theCompany proposed to provide guarantee for the Company’s wholly-owned subsidiary to borrow frombanks of no more than RMB 600 million in 2023. The credit line is included in the actual usage limit ofRMB1,200 million mentioned above. The resolution is waiting approval from the shareholder’smeeting.
(2) Others
As at 16 March 2023, the Company does not have other post-balance sheet events that needto be disclosed.
XIII. Disclosure regarding lease
The Company as a lessor:
1. Lease activities
All lease of the Company is property lease, including short-term lease and other leased thatrecognized right-of-use asset and lease liabilities.
2. Short-term lease
Short-term leases are treated using simplified method. Short-term leases include lease termthat is shorter than 12 month and no renew options attached, and leases that will be matured in 12month after first adoption of CAS 21 – Lease. Short-term lease expenses charged to profit or losswas RMB407,454.71.
3.Future potential cash outflows that does not included in lease liabilities
(1) Variable lease payment
The lessee leased a lot of retail shops which contains variable lease payment terms inconnection with sales.
Many of the Company’s property lease contain variable lease payment terms in connectionwith sales. In most circumstances, the Company uses these terms to matches lease payment toshops that can generate more cash flows lease payment. For standalone shops, variable can reach100% of all lease payment at most and that the scope of percentage of sales used is quite large. Insome circumstances, variable payment terms include annual bottom payment and upper limit.
In 2022, the variable lease payment included in the current profit and loss is RMB85,618,040.29.
(2) Option to renew
Many lease contracts entered by the Company has option to renew. The Company hasalready estimated the option to renew reasonably when determining lease terms in measuring leaseliabilities.
(3) Option to discontinue lease
Some of the lease contract entered by the Company has option to discontinue. The Companyhas already estimated the option to discontinue reasonably when determining lease terms inmeasuring lease liabilities.
(4) Residual value guarantee
The Company’s lease does not involve residual value guarantee.
(5) Lease that the lessee has already made commitment but not yet started
The Company does not have lease that has already made commitment but not yet started.
Disclosure as a lessor:
1. Lease activities
The Company’s leases are all properties.
2. Risk management strategy of retaining rights over lease assets
To reduce risks of lease, the Company normally asks lessee to pay rental in advance andcollects 1-3 months rental as deposit.
XIV. Other material information
1. Segments
Operating segments of the Company are identified on the basis of internal organizationstructure, management requirements and internal reporting system. An operating segmentrepresents a component of the Company that satisfied the following criteria simultaneously:
(1) Its business activities are engaged to earn revenue and incur expenses;
(2) Its operating results are regularly reviewed by the Company’s management to makedecisions on resources allocation and performance assessment;
(3) Its financial conditions, operating results, cash flow and related accounting informationare available to the Company.
The Company determines the reporting segment based on the operating segment, and theoperating segment that meets any of the following conditions is determined as the reportingsegment:
(1) The segment income of the operating segment accounts for 10.00% or more of totalincome of all segments;
(2) The absolute amount of profits (losses) of the segment account for 10.00% or more of thehigher of the absolute amount of total profits of the profiting segment and the absolute amount oftotal losses of the unprofitable segment.
The Company’s business is simple. The business mainly involves manufacturing and sales ofwatch. The management considers the business as a whole in implementing management andassessing its performance. As a result, no segment information is disclosed in this financialstatement.
2. Other material events
As at 31 December 2022, the Company does not have other significant matters that require todisclose.
XV. Notes to the parent company’s financial statement
Note 1. Accounts receivables
1. Presented by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 635,132.16 | 132,980.92 |
| Over 1 year | 3,942.90 | |
| Subtotal | 635,132.16 | 136,923.82 |
| Less: bad debt provision | 31,916.13 | 7,043.34 |
| Total | 603,216.03 | 129,880.48 |
2. Presentation by method of providing bad debt
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit | |||||
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| losses on single basis | |||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 635,132.16 | 100.00 | 31,916.13 | 5.03 | 603,216.03 |
| Including: Receivable from other customers | 635,132.16 | 100.00 | 31,916.13 | 5.03 | 603,216.03 |
Continued
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | |||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 136,923.82 | 100.00 | 7,043.34 | 5.14 | 129,880.48 |
| Including: Receivable from other customers | 136,923.82 | 100.00 | 7,043.34 | 5.14 | 129,880.48 |
3. In the portfolio, accounts receivable with expected credit loss provided based on creditrisk characteristic portfolio
(1) Portfolio of receivable from other customer
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 635,132.16 | 31,916.13 | 5.03 |
4. Movements of provision during the period
| Category | Opening balance | Movements during the period | Closing balance | |||
| Accrual | Recovered or reversed | Written-off | Other movements | |||
| Accounts receivable that provided expected credit losses on single basis | ||||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 7,043.34 | 24,872.79 | 31,916.13 | |||
| Including: Receivable from other customers | 7,043.34 | 24,872.79 | 31,916.13 | |||
5. No actual write-off of accounts receivable during the current period.
6. Top 5 receivable accounts
| Name | Closing balance | Proportion in total closing balance of accounts receivable (%) | Bad debt provision |
| Top 5 receivables accounts in total | 571,032.93 | 89.91 | 28,551.65 |
Note 2. Other receivables
1． Presentation of other receivables by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 839,808,164.17 | 717,341,673.50 |
| 1 - 2 years | ||
| 2- 3 years | ||
| Over 3 years | 40,050.00 | 40,050.00 |
| Subtotal | 839,848,214.17 | 717,381,723.50 |
| Less: bad debt provision | 65,671.10 | 198,584.50 |
| Total | 839,782,543.07 | 717,183,139.00 |
2． Presented by nature
| Nature | Closing balance | Opening balance |
| Related party in scope of consolidation | 839,174,096.87 | 713,813,300.99 |
| Security deposit | 537,615.90 | 3,117,526.90 |
| Petty cash | 24,542.88 | |
| Others | 111,958.52 | 450,895.61 |
| Total | 839,848,214.17 | 717,381,723.50 |
| Less: bad debt provision | 65,671.10 | 198,584.50 |
| Total | 839,782,543.07 | 717,183,139.00 |
3． Presented according to three stages of financial assets impairment
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | Carrying amount | Bad debt provision | Book value | |
| First stage | 839,848,214.17 | 65,671.10 | 839,782,543.07 | 717,381,723.50 | 198,584.50 | 717,183,139.00 |
| Second stage | ||||||
| Third stage | ||||||
| Total | 839,848,214.17 | 65,671.10 | 839,782,543.07 | 717,381,723.50 | 198,584.50 | 717,183,139.00 |
4． Presented by bad debt provision method
| Category | Closing balance | ||
| Carrying amount | Bad debt provision | Book value | |
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | |||||
| Other receivables that provided expected credit losses on portfolio basis | 839,848,214.17 | 100.00 | 65,671.10 | 0.01 | 839,782,543.07 |
| Including: Security deposit portfolio | 537,615.90 | 0.06 | 64,928.30 | 12.08 | 472,687.60 |
| Petty cash portfolio | 24,542.88 | 0.01 | 24,542.88 | ||
| Social security payment on-behalf portfolio | 97,102.57 | 0.01 | 97,102.57 | ||
| Receivables from related parties within scope of consolidation | 839,174,096.87 | 99.92 | 839,174,096.87 | ||
| Portfolio of others | 14,855.95 | 0.00 | 742.80 | 5.00 | 14,113.15 |
| Total | 839,848,214.17 | 100.00 | 65,671.10 | 0.01 | 839,782,543.07 |
Continued
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | |||||
| Other receivables that provided expected credit losses on portfolio basis | 717,381,723.50 | 100.00 | 198,584.50 | 0.03 | 717,183,139.00 |
| Including: Security deposit portfolio | 3,117,526.90 | 0.44 | 193,923.85 | 6.22 | 2,923,603.05 |
| Petty cash portfolio | |||||
| Social security payment on-behalf portfolio | 357,682.66 | 0.05 | 357,682.66 | ||
| Receivables from related parties within scope of consolidation | 713,813,300.99 | 99.50 | 713,813,300.99 | ||
| Portfolio of others | 93,212.95 | 0.01 | 4,660.65 | 5.00 | 88,552.30 |
| Total | 717,381,723.50 | 100.00 | 198,584.50 | 0.03 | 717,183,139.00 |
5． In the portfolio, other receivables with expected credit loss providedbased on credit risk characteristic portfolio
(1) Security deposit portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 497,565.90 | 24,878.30 | 5.00 |
| 1 - 2 years | |||
| 2- 3 years | |||
| Over 3 years | 40,050.00 | 40,050.00 | 100.00 |
| Total | 537,615.90 | 64,928.30 | 12.08 |
(2) Petty cash portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 24,542.88 | ||
(3) Social security payment on-behalf portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 97,102.57 | ||
(4) Receivables from related parties within scope of consolidation
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 839,174,096.87 | ||
(5) Portfolio of others
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 14,855.95 | 742.80 | 5.00 |
6． Bad debt provision status
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit losses over the next 12 months | Lifetime expected credit losses (no credit impairment occurred) | Lifetime expected credit losses (credit impairment occurred) | ||
| Opening balance | 198,584.50 | 198,584.50 | ||
| Opening balance movements in current period | —— | —— | —— | —— |
| —Transfer into the second stage | ||||
| —Transfer into the third stage | ||||
| —Reverse back to the second stage | ||||
| —Reverse back to the first stage | ||||
| Accrual during the period | ||||
| Reversed during the period | 132,913.40 | 132,913.40 | ||
| Recovered during the period | ||||
| Written-off during the period | ||||
| Other movements | ||||
| Closing balance | 65,671.10 | 65,671.10 |
7． No other receivables were written-off during the period.8． Top 5 other receivable accounts
| Name | Closing balance | Proportion to closing balance of other receivables (%) | Bad debt provision Closing balance |
| Top 5 other receivables in total | 839,174,096.87 | 99.92 |
Note 3. Long-term equity investment
| Nature | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Investment in subsidiaries | 1,494,128,399.60 | 1,494,128,399.60 | 1,486,912,339.72 | 1,486,912,339.72 | ||
| Investment in associates | 58,182,086.90 | 58,182,086.90 | 55,155,605.31 | 55,155,605.31 | ||
| Total | 1,552,310,486.50 | 1,552,310,486.50 | 1,542,067,945.03 | 1,542,067,945.03 | ||
1． Investment in subsidiaries
| Investee | Opening balance | Addition/new investment | Withdrawn | Closing balance | Provision accrued in current period | Closing balance of provision |
| Shenzhen Harmony World Watch Center Co., | 607,684,512.15 | 2,669,885.19 | 610,354,397.34 | |||
| Shenzhen Harmony E-commerce Co., Ltd. | 11,684,484.39 | 11,684,484.39 | ||||
| Shenzhen FIYTA Precision Technology Co., Ltd. | 101,249,207.88 | 1,232,861.88 | 102,482,069.76 | |||
| Shenzhen FIYTA Technology Development Co., Ltd. | 50,775,222.76 | 449,752.22 | 51,224,974.98 | |||
| FIYTA (Hong Kong) Ltd. | 137,737,520.00 | 137,737,520.00 | ||||
| TEMPORAL (Shenzhen) Co., Ltd. | 5,000,000.00 | 5,000,000.00 | ||||
| FIYTA Sales Co., Ltd. | 455,791,572.32 | 2,291,679.57 | 458,083,251.89 | |||
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | 36,867,843.96 | 36,867,843.96 | ||||
| Emile Choureit Timing (Shenzhen) Ltd. | 80,121,976.26 | 571,881.02 | 80,693,857.28 | |||
| Total | 1,486,912,339.72 | 7,216,059.88 | 1,494,128,399.60 |
2． Investment in associates
| Investee | Opening balance | Movements in current period | |||
| Addition/new investment | Withdrawn | Investment gain recognized under equity method | Adjustment to OCI | ||
| Associates | |||||
| Shanghai Watch | 55,155,605.31 | 3,026,481.59 | |||
Continued
| Investee | Movements in current period | Closing balance | Closing |
| Other equity movements | Cash dividends declared or distribution of profit | Impairment provision accrual | Others | balance of provision | ||
| Associates | ||||||
| Shanghai Watch | 58,182,086.90 |
Note 4. Operating income and operating cost
| Item | Amount in current period | Amount in prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Main business | 148,557,095.50 | 41,765,441.70 | 175,936,431.09 | 38,852,252.32 |
| Other business | 6,727,705.55 | 3,519,281.62 | ||
Note 5. Investment gain
| Item | Amount in current period | Amount in prior period |
| Gain from long-term equity investments accounted for using equity method | 3,026,481.59 | 3,754,939.39 |
| Gain from long-term equity investments accounted for using cost method | 240,595,696.70 | 259,918,496.56 |
| Total | 243,622,178.29 | 263,673,435.95 |
XVI. Supplementary information
1. Details of non-recurring gain or loss for the year
| Item | Amount | Note |
| Disposal gain or loss of non-current assets | 91,925.06 | |
| Overridden approval, or without official approval document, or incidental tax return or exemption | ||
| Government grants included in current profit or loss (except for the fixed or quantitative government grants, enjoyed in a consecutive way, which closely related to the enterprise businesses and according to nation policies) | 18,648,210.06 | |
| Charges for the possessions of funds collected from non-monetary enterprises | ||
| Gain from investment in subsidiaries, joint venture and cooperative enterprises when cost of investment is less than the profit incurred in identifiable net asset fair value of invested unit when investment | ||
| Profit and loss of non-monetary assets exchange | ||
| Profit and loss from entrusting others to invest or manage assets | ||
| Asset impairment provision accrued due to force majeure such as natural disasters | ||
| Profit and loss of debt restructuring | ||
| Enterprise restructuring expenses, such as expenses for arranging employees, integrating cost | ||
| Profit and loss over fair value part accrued in transactions of unreasonable transaction price | ||
| Current net profit and loss of subsidiaries from business combination under common control from the opening period to combination date | ||
| Profit and loss incurred contingent matters unrelated to normal operating business | ||
| Except for effective hedging business related to normal operating business, profit and loss from changes in fair value incurred in financial assets and financial liabilities, and the investment gain from disposal of financial assets, financial liabilities and available-for-sale financial assets | ||
| Impairment provision reversal of accounts receivable under standalone | 4,389,902.44 |
| Item | Amount | Note |
| impairment test | ||
| Profit and loss obtained in external entrusting loans | ||
| Profit and loss incurred in fair value change of investment property subsequently measured in fair value mode | ||
| Influence on current profit and loss caused by one-off adjustment according to requirements of laws and regulations about taxation and accounting | ||
| Income from trustee fee obtained by trusting operation | ||
| Other non-operating income and expenses other than the above items | -1,064,064.23 | |
| Profit and loss items pursuant to the definition of non-recurring profit and loss | ||
| Less：Effect of income tax of non-recurring profit or loss | 5,175,977.22 | |
| Effect of non-recurring profit or losses attributable to minority shareholders (after tax) | ||
| Total | 16,889,996.11 |
2. Return on Equity (ROE) and Earnings per share (EPS)
| Profit of the reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 8.68 | 0.6398 | 0.6398 |
| Net profit attributable to ordinary shareholders of the Company after deducting non-recurring profit or loss | 8.13 | 0.5989 | 0.5989 |
FIYTA Precision Technology Co., Ltd.Board of Directors18 March 2023