FIYTA Precision Technology Co., Ltd.
2022 Semi-annual
Financial Report
August 20, 2022
I. Auditors’ ReportHas the semi-annual report been auditedNoII. Financial StatementsThe currency applied in the financial notes and statements is Renminbi (CNY)
1. Consolidated Balance Sheet
Prepared by FIYTA Precision Technology Co., Ltd.
June 30, 2022
In CNY
| Items | June 30, 2022 | January 01, 2022 |
| Current assets: | ||
| Monetary capital | 393,873,930.55 | 210,254,737.14 |
| Settlement reserve | ||
| Inter-bank lending | ||
| Transactional financial assets | ||
| Derivative financial assets | ||
| Notes receivable | 53,854,971.13 | 61,258,145.80 |
| Accounts receivable | 419,635,705.95 | 388,885,601.28 |
| Financing with accounts receivable | ||
| Advance payment | 10,582,818.74 | 7,946,750.81 |
| Receivable premium | ||
| Reinsurance accounts receivable | ||
| Reserve for reinsurance contract receivable | ||
| Other receivables | 58,848,161.73 | 61,553,267.82 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Redemptory monetary capital for sale | ||
| Inventories | 1,979,996,270.39 | 2,050,148,750.89 |
| Contract assets | ||
| Held-for-sale assets | ||
| Non-current assets due within a year | ||
| Other current assets | 31,268,616.20 | 72,698,692.72 |
| Total current assets | 2,948,060,474.69 | 2,852,745,946.46 |
| Non-current assets: | ||
| Loan issuing and advance in cash | ||
| Equity investment | ||
| Other equity investment | ||
| Long term accounts receivable |
| Long-term equity investments | 57,618,231.83 | 55,155,605.31 |
| Investment in other equity instruments | 85,000.00 | 85,000.00 |
| Other non-current financial assets | ||
| Investment-oriented real estate | 375,707,647.63 | 383,425,916.35 |
| Fixed assets | 340,122,918.20 | 349,495,316.65 |
| Construction-in-progress | ||
| Productive biological asset | ||
| Oil and Gas Assets | ||
| Use right assets | 123,271,656.00 | 147,932,475.42 |
| Intangible assets | 32,119,424.82 | 34,035,330.43 |
| Development expenses | ||
| Goodwill | ||
| Long term expenses to be apportioned | 155,688,540.87 | 163,790,333.44 |
| Deferred income tax asset | 86,798,187.24 | 81,233,274.65 |
| Other non-current assets | 42,617,285.90 | 42,680,753.78 |
| Total non-current assets | 1,214,028,892.49 | 1,257,834,006.03 |
| Total assets | 4,162,089,367.18 | 4,110,579,952.49 |
| Current liabilities: | ||
| Short term borrowings | 452,593,861.01 | 265,994,595.43 |
| Borrowings from central bank | ||
| Loans from other banks | ||
| Transactional financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | 582,928.10 | 21,223.10 |
| Accounts payable | 199,394,655.23 | 254,588,895.34 |
| Advance Receipts | 7,011,421.98 | 11,025,664.72 |
| Contract liabilities | 22,785,751.84 | 22,505,426.65 |
| Money from sale of the repurchased financial assets | ||
| Deposits taking and interbank placement | ||
| Acting trading securities | ||
| Income from securities underwriting on commission | ||
| Payroll payable to the employees | 116,493,751.73 | 145,936,150.06 |
| Taxes payable | 67,138,530.84 | 67,769,880.01 |
| Other payables | 165,853,898.74 | 167,808,759.95 |
| Including: interest payable | ||
| Dividends payable | 6,324,013.97 | 5,015,026.30 |
| Service charge and commission payable | ||
| Payable reinsurance | ||
| Held-for-sale liabilities | ||
| Non-current liabilities due within a year | 77,656,258.23 | 86,949,906.35 |
| Other current liabilities | 2,623,083.96 | 2,798,738.32 |
| Total current liabilities | 1,112,134,141.66 | 1,025,399,239.93 |
| Non-current liabilities: | ||
| Reserve for insurance contract | ||
| Long-term borrowings | ||
| Bonds payable | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Lease liabilities | 51,240,136.68 | 64,918,722.10 |
| Long-term accounts payable | ||
| Long term payroll payable to the employees | ||
| Estimated liabilities | ||
| Deferred income | 2,042,833.90 | 1,792,833.90 |
| Deferred income tax liability | 4,909,143.79 | 5,236,514.03 |
| Other non-current liabilities | ||
| Total non-current liabilities | 58,192,114.37 | 71,948,070.03 |
| Total liabilities | 1,170,326,256.03 | 1,097,347,309.96 |
| Owner’s equity: | ||
| Capital stock | 426,051,015.00 | 426,051,015.00 |
| Other equity instruments | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Capital reserve | 1,046,504,891.62 | 1,040,908,194.13 |
| Less: shares in stock | 103,841,654.84 | 60,585,678.92 |
| Other comprehensive income | -7,233,490.68 | -7,658,346.40 |
| Special reserve | 1,553,977.57 | 1,062,731.13 |
| Surplus reserve | 275,010,401.50 | 275,010,401.50 |
| Reserve against general risks | ||
| Retained earnings | 1,353,717,970.98 | 1,338,444,326.09 |
| Total owners’ equity attributable to the parent company | 2,991,763,111.15 | 3,013,232,642.53 |
| Minority shareholders’ equity | ||
| Total owner’s equity | 2,991,763,111.15 | 3,013,232,642.53 |
| Total liabilities and owners’ equity | 4,162,089,367.18 | 4,110,579,952.49 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
2. Balance Sheet，Parent Company
In CNY
| Items | June 30, 2022 | January 01, 2022 |
| Current assets: | ||
| Monetary capital | 351,314,698.75 | 171,022,392.92 |
| Transactional financial assets | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 6,179,493.15 | 129,880.48 |
| Financing with accounts receivable | ||
| Advance payment | ||
| Other receivables | 630,494,908.53 | 717,183,139.00 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Inventories | ||
| Contract assets | ||
| Held-for-sale assets | ||
| Non-current assets due within a year | ||
| Other current assets | 12,757,760.91 | 13,389,835.13 |
| Total current assets | 1,000,746,861.34 | 901,725,247.53 |
| Non-current assets: | ||
| Equity investment | ||
| Other equity investment | ||
| Long term accounts receivable | ||
| Long-term equity investments | 1,547,944,151.34 | 1,542,067,945.03 |
| Investment in other equity instruments | 85,000.00 | 85,000.00 |
| Other non-current financial assets | ||
| Investment-oriented real estate | 305,032,601.43 | 311,379,234.57 |
| Fixed assets | 217,935,401.13 | 222,462,397.20 |
| Construction-in-progress | ||
| Productive biological asset | ||
| Oil and Gas Assets | ||
| Use right assets | ||
| Intangible assets | 22,988,881.14 | 23,910,597.39 |
| Development expenses | ||
| Goodwill | ||
| Long term expenses to be apportioned | 8,858,911.15 | 9,966,739.10 |
| Deferred income tax asset | 1,743,054.84 | 1,671,761.28 |
| Other non-current assets | 4,823,913.52 | 1,435,800.93 |
| Total non-current assets | 2,109,411,914.55 | 2,112,979,475.50 |
| Total assets | 3,110,158,775.89 | 3,014,704,723.03 |
| Current liabilities: | ||
| Short term borrowings | 440,415,555.56 | 250,256,666.67 |
| Transactional financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 1,181,651.95 | 1,232,967.42 |
| Advance Receipts | 6,908,249.59 | 11,025,664.72 |
| Contract liabilities | ||
| Payroll payable to the employees | 24,440,846.88 | 24,758,938.89 |
| Taxes payable | 7,411,107.76 | 2,676,682.58 |
| Other payables | 276,663,976.00 | 230,594,166.14 |
| Including: interest payable | ||
| Dividends payable | 6,324,013.97 | 5,015,026.30 |
| Held-for-sale liabilities | ||
| Non-current liabilities due within a year | ||
| Other current liabilities | ||
| Total current liabilities | 757,021,387.74 | 520,545,086.42 |
| Non-current liabilities: | ||
| Long-term borrowings | ||
| Bonds payable | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Lease liabilities | ||
| Long-term accounts payable | ||
| Long term payroll payable to the employees | ||
| Estimated liabilities | ||
| Deferred income | 1,792,833.90 | 1,792,833.90 |
| Deferred income tax liability | ||
| Other non-current liabilities | ||
| Total non-current liabilities | 1,792,833.90 | 1,792,833.90 |
| Total liabilities | 758,814,221.64 | 522,337,920.32 |
| Owner’s equity: | ||
| Capital stock | 426,051,015.00 | 426,051,015.00 |
| Other equity instruments | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Capital reserve | 1,050,336,024.33 | 1,045,449,410.67 |
| Less: shares in stock | 103,841,654.84 | 60,585,678.92 |
| Other comprehensive income | ||
| Special reserve | ||
| Surplus Reserve | 275,010,401.50 | 275,010,401.50 |
| Retained earnings | 703,788,768.26 | 806,441,654.46 |
| Total owner’s equity | 2,351,344,554.25 | 2,492,366,802.71 |
| Total liabilities and owners’ equity | 3,110,158,775.89 | 3,014,704,723.03 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
3. Consolidated Profit Statement
In CNY
| Items | The first half year of 2022 | The first half year of 2021 |
| I. Turnover | 2,183,570,749.11 | 2,777,519,521.34 |
| Including: operating income | 2,183,570,749.11 | 2,777,519,521.34 |
| Interest income |
| Earned insurance premium | ||
| Service charge and commission income | ||
| II. Total operating costs | 2,019,291,580.02 | 2,484,774,500.03 |
| Including: Operating costs | 1,373,664,560.41 | 1,738,149,481.70 |
| Interest payment | ||
| Service charge and commission payment | ||
| Surrender Value | ||
| Compensation expenses, net | ||
| Provision of reserve for insurance liabilities, net | ||
| Payment of policy dividend | ||
| Reinsurance expenses | ||
| Taxes and surcharges | 14,201,193.33 | 16,455,961.46 |
| Sales costs | 477,806,040.76 | 561,630,052.63 |
| Administrative expenses | 116,715,664.69 | 121,391,665.85 |
| R & D expenditures | 25,026,713.85 | 26,370,064.68 |
| Financial expenses | 11,877,406.98 | 20,777,273.71 |
| Where: Interest cost | 9,731,247.68 | 14,778,321.69 |
| Interest income | 1,981,825.39 | 2,153,626.51 |
| Plus: Other income | 13,369,782.95 | 11,662,934.28 |
| Investment income (loss is stated with “-”) | 2,462,626.52 | 1,629,328.24 |
| Including: return on investment in associate and joint venture | 2,462,626.52 | 1,629,328.24 |
| Gain from the derecognition of the financial assets measured at amortised cost | ||
| Exchange income (loss stated with “-“) | ||
| Net exposure hedge income (loss stated with “-“) | ||
| Income from change of fair value (loss is stated with “-”) | ||
| Loss from impairment of credit (loss is stated with “-”) | 1,848.85 | -2,035,236.95 |
| Loss from impairment of assets (loss is stated with “-”) | -348,218.69 | -1,226,362.68 |
| Income from disposal of assets (loss is stated with “-“) | -816,021.16 | -73,807.46 |
| III. Operating Profit (loss is stated with “-“) | 178,949,187.56 | 302,701,876.74 |
| Plus: Non-operating income | 208,587.88 | 271,968.27 |
| Less: Non-operating expenses | 825,897.36 | 859,659.12 |
| IV. Total profit (total loss is stated with “-”) | 178,331,878.08 | 302,114,185.89 |
| Less: Income tax expense | 37,639,093.79 | 68,549,402.06 |
| V. Net Profit (net loss is stated with “-“) | 140,692,784.29 | 233,564,783.83 |
| (I) Classification based on operation sustainability | ||
| 1. Net Profit from sustainable operation (net loss is stated with “-”) | 140,692,784.29 | 233,564,783.83 |
| 2. Net Profit from termination of operation (net loss is stated with “-”) | ||
| (II) Classification by ownership | ||
| 1. Net profit attributable to the parent company’s owner | 140,692,784.29 | 233,544,726.55 |
| 2. Minority shareholders’ gain/loss | 0.00 | 20,057.28 |
| VI. Net of other comprehensive income after tax | 424,855.72 | -6,510,295.78 |
| Net of other comprehensive income after tax attributable to the parent company’s owner | 424,855.72 | -6,477,955.16 |
| (I) Other comprehensive income which cannot be re-classified into gain and loss | 0.00 | 0.00 |
| 1. Change of the beneficial plan remeasured for setting | ||
| 2. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 3. Movement of the fair value of the investment in other equity instruments | ||
| 4. Movement of the fair value of the Company’s own credit risk | ||
| 5. Others | ||
| (II) Other comprehensive income which shall be re-classified into gain and loss | 424,855.72 | -6,477,955.16 |
| 1. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 2. Movement of the fair value of other creditor’s right investment | ||
| 3. Amount of the reclassified financial assets counted to the other comprehensive income | ||
| 4. Provision for impairment of the credit of the other creditor's right investment | ||
| 5. Reserve for cash flow hedge | ||
| 6. Conversion difference in foreign currency statements | 424,855.72 | -6,477,955.16 |
| 7. Others | ||
| Net amount of other comprehensive income after tax attributable to minority shareholders | 0.00 | -32,340.62 |
| VII. Total comprehensive income | 141,117,640.01 | 227,054,488.05 |
| Total comprehensive income attributable to the parent company’s owner | 141,117,640.01 | 227,066,771.39 |
| Total comprehensive income attributable to minority shareholders | 0.00 | -12,283.34 |
| VIII. Earnings per share: | ||
| (I) Basic earnings per share | 0.3351 | 0.5421 |
| (II) Diluted earnings per share | 0.3351 | 0.5421 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
4. Statement of Profit, Parent Company
In CNY
| Items | The first half year of 2022 | The first half year of 2021 |
| I. Operating revenue | 91,642,614.69 | 86,734,149.72 |
| Less: Operating cost | 19,190,036.95 | 17,699,646.51 |
| Taxes and surcharges | 3,830,748.17 | 3,878,641.68 |
| Sales costs | 630,681.48 | 1,502,340.61 |
| Administrative expenses | 32,867,677.72 | 35,277,870.48 |
| R & D expenditures | 9,134,485.17 | 10,669,576.37 |
| Financial expenses | -613,920.42 | 2,473,687.51 |
| Where: Interest cost | 1,770,519.63 | 4,352,044.36 |
| Interest income | 1,830,268.89 | 1,885,611.98 |
| Plus: Other income | 587,709.30 | 1,283,696.46 |
| Investment income (loss is stated with “-”) | 2,462,626.52 | 1,629,328.24 |
| Including: return on investment in associate and joint venture | 2,462,626.52 | 1,629,328.24 |
| Gain from the derecognition of the financial assets measured at amortised cost (loss is stated with “-”) | ||
| Net exposure hedge income (loss stated with “-“) | ||
| Income from change of fair value (loss is stated with “-”) | ||
| Loss from impairment of credit (loss is stated with “-”) | -186,946.13 | -227,114.99 |
| Loss from impairment of assets (loss is stated with “-”) | 0.00 | 0.00 |
| Income from disposal of assets (loss is stated with “-“) | -13,335.34 | -32,709.96 |
| II. Operating Profit (loss is stated with “-“) | 29,452,959.97 | 17,885,586.31 |
| Plus: Non-operating income | 104,980.99 | 68,243.42 |
| Less: Non-operating expenses | 3,084.22 | 0.00 |
| III. Total profit (total loss is stated with “-“) | 29,554,856.74 | 17,953,829.73 |
| Less: Income tax expense | 6,788,603.54 | 4,109,028.61 |
| IV. Net Profit (net loss is stated with “-“) | 22,766,253.20 | 13,844,801.12 |
| (I) Net Profit from sustainable operation (net loss is stated with “-”) | 22,766,253.20 | 13,844,801.12 |
| (II) Net Profit from termination of operation (net loss is stated with “-”) | ||
| V. Net of other comprehensive income after tax | 0.00 | 0.00 |
| (I) Other comprehensive income which cannot be re-classified into gain and loss | 0.00 | 0.00 |
| 1. Change of the beneficial plan |
| remeasured for setting | ||
| 2. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 3. Movement of the fair value of the investment in other equity instruments | ||
| 4. Movement of the fair value of the Company’s own credit risk | ||
| 5. Others | ||
| (II) Other comprehensive income which shall be re-classified into gain and loss | 0.00 | 0.00 |
| 1. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 2. Movement of the fair value of other creditor’s right investment | ||
| 3. Amount of the reclassified financial assets counted to the other comprehensive income | ||
| 4. Provision for impairment of the credit of the other creditor's right investment | ||
| 5. Reserve for cash flow hedge | ||
| 6. Conversion difference in foreign currency statements | ||
| 7. Others | ||
| VI. Total comprehensive income | 22,766,253.20 | 13,844,801.12 |
| VII. Earnings per share: | ||
| (I)Basic earnings per share | ||
| (II)Diluted earnings per share |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
5. Consolidated Cash Flow Statement
In CNY
| Items | The first half year of 2022 | The first half year of 2021 |
| I. Cash flows arising from operating activities: | ||
| Cash received from sales of goods and supply of services | 2,393,028,123.16 | 3,032,558,393.33 |
| Net increase of customers’ deposit and due from banks | ||
| Net increase of borrowings from the central bank | ||
| Net increase of borrowings from other financial institutions | ||
| Cash received from the premium of the original insurance contract | ||
| Net cash received from the reinsurance business | ||
| Net increase of the reserve from policy holders and investment |
| Cash received from interest, service charge and commission | ||
| Net increase of loan from other banks | ||
| Net increase of fund from repurchase business | ||
| Net cash received from securities trading on commission | ||
| Rebated taxes received | 4,558,409.98 | 332,318.54 |
| Other operation activity related cash receipts | 37,580,077.51 | 38,766,804.92 |
| Subtotal of cash flow in from operating activity | 2,435,166,610.65 | 3,071,657,516.79 |
| Cash paid for purchase of goods and reception of labor services | 1,500,723,327.63 | 2,066,444,330.76 |
| Net increase of loans and advances to customers | ||
| Net increase of due from central bank and due from other banks | ||
| Cash from payment for settlement of the original insurance contract | ||
| Net increase of the lending capital | ||
| Cash paid for interest, service charge and commission | ||
| Cash for payment of policy dividend | ||
| Cash paid to and for staff | 367,134,428.28 | 393,019,916.39 |
| Taxes paid | 133,532,633.53 | 162,959,165.63 |
| Other business activity related cash payments | 155,389,957.61 | 244,079,540.08 |
| Subtotal of cash flow out from operating activity | 2,156,780,347.05 | 2,866,502,952.86 |
| Net cash flows arising from operating activities | 278,386,263.60 | 205,154,563.93 |
| II. Cash flow arising from investment activities: | ||
| Cash received from recovery of investment | ||
| Cash received from investment income | ||
| Net cash from disposal of fixed assets,intangible assets and recovery of other long term assets | 119,998.33 | 40,157.94 |
| Net cash received from disposal of subsidiaries and other operating units | ||
| Other investment activity related cash receipts | ||
| Subtotal of cash flow in from investment activity | 119,998.33 | 40,157.94 |
| Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets | 53,962,036.53 | 80,158,290.74 |
| Cash paid for investment | ||
| Net increase of the pledged loan | ||
| Net cash paid for acquisition of subsidiaries and other operation units | ||
| Other investment related cash payments |
| Subtotal of cash flow out from investment activity | 53,962,036.53 | 80,158,290.74 |
| Net cash flow arising from investment activities: | -53,842,038.20 | -80,118,132.80 |
| III. Cash flow arising from fund-raising activities: | ||
| Cash received from absorbing investment | 58,216,000.00 | |
| Incl.: Cash received from the subsidiaries’ absorption of minority shareholders’ investment | ||
| Cash received from loans | 705,155,704.29 | 662,716,163.39 |
| Other fund-raising activity related cash receipts | ||
| Subtotal of cash flow in from fund raising activity | 705,155,704.29 | 720,932,163.39 |
| Cash paid for debt repayment | 500,174,365.00 | 726,557,058.70 |
| Cash paid for dividend/profit distribution or repayment of interest | 129,988,270.60 | 182,851,224.13 |
| Including: Dividend and profit paid by the subsidiaries to minority shareholders | 0.00 | 0.00 |
| Cash paid for other financing activities | 116,704,112.45 | 54,063,872.68 |
| Sub-total cash flow paid for financing activities | 746,866,748.05 | 963,472,155.51 |
| Net cash flow arising from fund-raising activities | -41,711,043.76 | -242,539,992.12 |
| IV. Change of exchange rate influencing the cash and cash equivalent | 786,011.77 | -713,568.03 |
| V. Net increase of cash and cash equivalents | 183,619,193.41 | -118,217,129.02 |
| Plus: Opening balance of cash and cash equivalents | 210,254,737.14 | 353,057,285.71 |
| VI. Ending balance of cash and cash equivalents | 393,873,930.55 | 234,840,156.69 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
6. Cash Flow Statement, Parent Company
In CNY
| Items | The first half year of 2022 | The first half year of 2021 |
| I. Cash flows arising from operating activities: | ||
| Cash received from sales of goods and supply of services | 83,213,751.44 | 85,465,489.50 |
| Rebated taxes received | 7,647.56 | 0.00 |
| Other operation activity related cash receipts | 2,152,559,822.69 | 2,790,729,542.97 |
| Subtotal of cash flow in from operating activity | 2,235,781,221.69 | 2,876,195,032.47 |
| Cash paid for purchase of goods and reception of labor services | 0.00 | 0.00 |
| Cash paid to and for staff | 31,495,381.68 | 38,235,882.75 |
| Taxes paid | 8,848,751.02 | 7,088,803.03 |
| Other business activity related cash | 2,023,994,609.32 | 2,851,858,748.03 |
| payments | ||
| Subtotal of cash flow out from operating activity | 2,064,338,742.02 | 2,897,183,433.81 |
| Net cash flows arising from operating activities | 171,442,479.67 | -20,988,401.34 |
| II. Cash flow arising from investment activities: | ||
| Cash received from recovery of investment | ||
| Cash received from investment income | ||
| Net cash from disposal of fixed assets,intangible assets and recovery of other long term assets | 3,973,162.69 | 3,200.00 |
| Net cash received from disposal of subsidiaries and other operating units | ||
| Other investment activity related cash receipts | ||
| Subtotal of cash flow in from investment activity | 3,973,162.69 | 3,200.00 |
| Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets | 2,196,743.47 | 14,452,808.81 |
| Cash paid for investment | ||
| Net cash paid for acquisition of subsidiaries and other operation units | ||
| Other investment related cash payments | ||
| Subtotal of cash flow out from investment activity | 2,196,743.47 | 14,452,808.81 |
| Net cash flow arising from investment activities: | 1,776,419.22 | -14,449,608.81 |
| III. Cash flow arising from fund-raising activities: | ||
| Cash received from absorbing investment | 58,216,000.00 | |
| Cash received from loans | 690,000,000.00 | 650,000,000.00 |
| Other fund-raising activity related cash receipts | 0.00 | 0.00 |
| Subtotal of cash flow in from fund raising activity | 690,000,000.00 | 708,216,000.00 |
| Cash paid for debt repayment | 500,000,000.00 | 600,000,000.00 |
| Cash paid for dividend/profit distribution or repayment of interest | 129,931,071.56 | 180,890,301.90 |
| Cash paid for other financing activities | 53,318,818.77 | 6,106,577.91 |
| Sub-total cash flow paid for financing activities | 683,249,890.33 | 786,996,879.81 |
| Net cash flow arising from fund-raising activities | 6,750,109.67 | -78,780,879.81 |
| IV. Change of exchange rate influencing the cash and cash equivalent | 323,297.27 | -224,917.40 |
| V. Net increase of cash and cash equivalents | 180,292,305.83 | -114,443,807.36 |
| Plus: Opening balance of cash and cash equivalents | 171,022,392.92 | 292,055,169.74 |
| VI. Ending balance of cash and cash equivalents | 351,314,698.75 | 177,611,362.38 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
7. Consolidated Statement of Changes in Owner’s Equity
Amount in the reporting period
In CNY
| Items | The first half year of 2022 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority shareholders’ equity | Total owner’s equity | |||||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: treasury stock | Other comprehensive income | Special reserve | Surplus Reserve | Provision for general risks | Retained earnings | Others | Sub-total | |||||
| Preferred shares | Perpetual bond | Others | |||||||||||||
| I. Ending balance of the previous 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 | 3,013,232,642.53 | ||||||
| Plus: Change in accounting policy | |||||||||||||||
| Correction of previous errors | |||||||||||||||
| Consolidation of enterprises under the common control | |||||||||||||||
| Others | |||||||||||||||
| II. Opening balance of the reporting 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 | 3,013,232,642.53 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | 5,596,697.49 | 43,255,975.92 | 424,855.72 | 491,246.44 | 15,273,644.89 | -21,469,531.38 | -21,469,531.38 | ||||||||
| (I) Total comprehensive income | 424,855.72 | 140,692,784.29 | 141,117,640.01 | 141,117,640.01 | |||||||||||
| (II) Owners’ input and decrease of capital | 5,596,697.49 | 43,255,975.92 | -37,659,278.43 | -37,659,278.43 | |||||||||||
| 1 Common shares contributed by | 50,252,831.88 | -50,252,831 | -50,252,831 | ||||||||||||
| the owner | .88 | .88 | |||||||||||||
| 2 Capital contributed by other equity instruments holders | |||||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 5,611,740.66 | -6,996,855.96 | 12,608,596.62 | 12,608,596.62 | |||||||||||
| 4 Others | -15,043.17 | -15,043.17 | -15,043.17 | ||||||||||||
| (III) Profit Distribution | -125,419,139.40 | -125,419,139.40 | -125,419,139.40 | ||||||||||||
| 1 Provision of surplus reserve | |||||||||||||||
| 2 Provision for general risks | |||||||||||||||
| 3 Distributions to the owners (or shareholders) | -125,419,139.40 | -125,419,139.40 | -125,419,139.40 | ||||||||||||
| 4 Others | |||||||||||||||
| (IV) Internal carry-over of owners’ equity | |||||||||||||||
| 1 Capitalization of capital reserve (or capital stock) | |||||||||||||||
| 2 Capitalization of surplus reserve (or capital stock) | |||||||||||||||
| 3 Loss made up for with surplus reserve | |||||||||||||||
| 4 Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings | |||||||||||||||
| 5 Other comprehensive income carried-over to the retained earnings |
| 6 Others | |||||||||||||||
| (V) Special reserve | 491,246.44 | 491,246.44 | 491,246.44 | ||||||||||||
| 1 Provision in the reporting period | 600,000.00 | 600,000.00 | 600,000.00 | ||||||||||||
| 2 Applied in the reporting period | -108,753.56 | -108,753.56 | -108,753.56 | ||||||||||||
| (VI) Others | |||||||||||||||
| IV. Ending balance of the reporting period | 426,051,015.00 | 1,046,504,891.62 | 103,841,654.84 | -7,233,490.68 | 1,553,977.57 | 275,010,401.50 | 1,353,717,970.98 | 2,991,763,111.15 | 2,991,763,111.15 |
Amount of the previous year
In CNY
| Items | The first half year of 2021 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority shareholders’ equity | Total owner’s equity | |||||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: treasury stock | Other comprehensive income | Special reserve | Surplus Reserve | Provision for general risks | Retained earnings | Others | Sub-total | |||||
| Preferred shares | Perpetual bond | Others | |||||||||||||
| I. Ending balance of the previous 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 | 2,799,948,388.09 | 12,283.34 | 2,799,960,671.43 | ||||||
| Plus: Change in accounting policy | -4,319,295.51 | -4,319,295.51 | -4,319,295.51 | ||||||||||||
| Correction of previous errors | |||||||||||||||
| Consolidation of enterprises under the common control | |||||||||||||||
| Others | |||||||||||||||
| II. Opening balance of the reporting year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,160,171,616.00 | 2,795,629,092.58 | 12,283.34 | 2,795,641,375.92 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | 7,458,641.00 | 57,168,410.16 | 56,238,941.98 | -6,477,955.16 | 295,691.96 | 59,324,660.82 | 61,530,506.80 | -12,283.34 | 61,518,223.46 | ||||||
| (I) Total comprehensive | -6,477 | 233,544,72 | 227,066,77 | -12,28 | 227,054,48 | ||||||||||
| income | ,955.16 | 6.55 | 1.39 | 3.34 | 8.05 | ||||||||||
| (II) Owners’ input and decrease of capital | 7,458,641.00 | 57,168,410.16 | 56,238,941.98 | 8,388,109.18 | 8,388,109.18 | ||||||||||
| 1 Common shares contributed by the owner | 7,458,641.00 | 49,411,923.00 | 61,668,402.49 | -4,797,838.49 | -4,797,838.49 | ||||||||||
| 2 Capital contributed by other equity instruments holders | |||||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 7,759,864.16 | -5,429,460.51 | 13,189,324.67 | 13,189,324.67 | |||||||||||
| 4 Others | -3,377.00 | -3,377.00 | -3,377.00 | ||||||||||||
| (III) Profit Distribution | -174,220,065.73 | -174,220,065.73 | -174,220,065.73 | ||||||||||||
| 1 Provision of surplus reserve | |||||||||||||||
| 2 Provision for general risks | |||||||||||||||
| 3 Distributions to the owners (or shareholders) | -174,220,065.73 | -174,220,065.73 | -174,220,065.73 | ||||||||||||
| 4 Others | |||||||||||||||
| (IV) Internal carry-over of owners’ equity | |||||||||||||||
| 1 Capitalization of capital reserve (or capital stock) | |||||||||||||||
| 2 Capitalization of surplus reserve (or capital stock) | |||||||||||||||
| 3 Loss made up for with surplus reserve | |||||||||||||||
| 4 Setting of the amount involved in the movement of the beneficial |
| plan carried over to the retained earnings | |||||||||||||||
| 5 Other comprehensive income carried-over to the retained earnings | |||||||||||||||
| 6 Others | |||||||||||||||
| Special reserve | 295,691.96 | 295,691.96 | 295,691.96 | ||||||||||||
| 1 Provision in the reporting period | 491,605.68 | 491,605.68 | 491,605.68 | ||||||||||||
| 2 Applied in the reporting period | -195,913.72 | -195,913.72 | -195,913.72 | ||||||||||||
| (VI) Others | |||||||||||||||
| IV. Ending balance of the reporting period | 435,550,522.00 | 1,078,658,797.94 | 117,872,472.46 | -5,501,083.75 | 295,691.96 | 246,531,866.87 | 1,219,496,276.82 | 2,857,159,599.38 | 2,857,159,599.38 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian Hui
8. Consolidated Statement of Changes in Owner’s Equity, Parent Company
Amount in the reporting period
In CNY
| Items | The first half year of 2022 | |||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: treasury stock | Other comprehensive income | Special reserve | Surplus Reserve | Retained earnings | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bond | Others | ||||||||||
| I. Ending balance of the previous 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 | ||||||
| Plus: Change in accounting policy | ||||||||||||
| Correction of previous errors | ||||||||||||
| Others | ||||||||||||
| II. Opening balance of the reporting 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 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | 4,886,613.66 | 43,255,975.92 | -102,652,886.20 | -141,022,248.46 | ||||||||
| (I) Total comprehensive income | 22,766,253.20 | 22,766,253.20 | ||||||||||
| (II) Owners’ input and decrease of capital | 4,886,613.66 | 43,255,975.92 | -38,369,362.26 | |||||||||
| 1 Common shares contributed by the owner | 50,252,831.88 | -50,252,831.88 | ||||||||||
| 2 Capital contributed by other equity instruments holders | ||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 4,901,656.83 | -6,996,855.96 | 11,898,512.79 | |||||||||
| 4 Others | -15,043.17 | -15,043.17 | ||||||||||
| (III) Profit Distribution | -125,419,139.40 | -125,419,139.40 | ||||||||||
| 1 Provision of surplus reserve | ||||||||||||
| 2 Distributions to the owners (or shareholders) | -125,419,139.40 | -125,419,139.40 | ||||||||||
| 3 Others | ||||||||||||
| (IV) Internal carry-over of owners’ equity | ||||||||||||
| 1 Capitalization of capital reserve (or capital stock) | ||||||||||||
| 2 Capitalization of surplus reserve (or capital stock) | ||||||||||||
| 3 Loss made up for with surplus reserve | ||||||||||||
| 4 Setting of the amount involved |
| in the movement of the beneficial plan carried over to the retained earnings | ||||||||||||
| 5 Other comprehensive income carried-over to the retained earnings | ||||||||||||
| 6 Others | ||||||||||||
| Special reserve | ||||||||||||
| 1 Provision in the reporting period | ||||||||||||
| 2 Applied in the reporting period | ||||||||||||
| (VI) Others | ||||||||||||
| IV. Ending balance of the reporting period | 426,051,015.00 | 1,050,336,024.33 | 103,841,654.84 | 275,010,401.50 | 703,788,768.26 | 2,351,344,554.25 |
Amount of the previous year
In CNY
| Items | The first half year of 2021 | |||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: treasury stock | Other comprehensive income | Special reserve | Surplus Reserve | Retained earnings | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bond | Others | ||||||||||
| I. Ending balance of the previous 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 | ||||||
| Plus: Change in accounting policy | ||||||||||||
| Correction of previous errors | ||||||||||||
| Others | ||||||||||||
| II. Opening balance of the reporting 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 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | 7,458,641.00 | 56,054,085.60 | 56,238,941.98 | -160,375,264.61 | -153,101,479.99 | |||||||
| (I) Total comprehensive | 13,844,801.12 | 13,844,801.12 | ||||||||||
| income | ||||||||||||
| (II) Owners’ input and decrease of capital | 7,458,641.00 | 56,054,085.60 | 56,238,941.98 | 7,273,784.62 | ||||||||
| 1 Common shares contributed by the owner | 7,458,641.00 | 49,411,923.00 | 61,668,402.49 | -4,797,838.49 | ||||||||
| 2 Capital contributed by other equity instruments holders | ||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 6,645,539.60 | -5,429,460.51 | 12,075,000.11 | |||||||||
| 4 Others | -3,377.00 | -3,377.00 | ||||||||||
| (III) Profit Distribution | -174,220,065.73 | -174,220,065.73 | ||||||||||
| 1 Provision of surplus reserve | ||||||||||||
| 2 Distributions to the owners (or shareholders) | -174,220,065.73 | -174,220,065.73 | ||||||||||
| 3 Others | ||||||||||||
| (IV) Internal carry-over of owners’ equity | ||||||||||||
| 1 Capitalization of capital reserve (or capital stock) | ||||||||||||
| 2 Capitalization of surplus reserve (or capital stock) | ||||||||||||
| 3 Loss made up for with surplus reserve | ||||||||||||
| 4 Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings | ||||||||||||
| 5 Other comprehensive |
| income carried-over to the retained earnings | ||||||||||||
| 6 Others | ||||||||||||
| Special reserve | ||||||||||||
| 1 Provision in the reporting period | ||||||||||||
| 2 Applied in the reporting period | ||||||||||||
| (VI) Others | ||||||||||||
| IV. Ending balance of the reporting period | 435,550,522.00 | 1,083,200,014.48 | 117,872,472.46 | 246,531,866.87 | 561,689,690.59 | 2,209,099,621.48 |
Legal representative: Zhang Xuhua Chief Financial Officer: Song Yaoming
Person in charge of the Accounting Department: Tian HuiIII. Company Profile
1.Place of Registration, Organization Form and Address of the Head Office
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval of Shen Fu Ban Fu (1992) 1259issued by the General Office of Shenzhen Municipal Government, through the restructuring of former Shenzhen FIYTA TimeIndustrial Company by the promoter of China National Aero-Technology Import and Export Shenzhen Industry & TradeCenter (name changed to “China National Aero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992. On 3 June1993, both the Company was listed on Shenzhen Stock Exchange. The Company holds business license with the UnifiedSocial Credit Code of 91440300192189783K.
After the distribution of bonus shares, placement of new shares, conversion to share capital, additional issuance of newshares, and share repurchase and cancellation over the years, as of June 30, 2022, the Company has issued a total of426,051,000 shares, with a registered capital of CNY 426,051,000. The Company’s registered address is FIYTA TechnologyBuilding, Gaoxin S. Road One, Nanshan District, Shenzhen,China. Head office address: FIYTA Technology Building, GaoxinS. Road One, Nanshan District, Shenzhen, Guangdong Province; the Parent Company is AVIC International Holding Limited;the Eventual Controller is Aviation Industry Corporation of China
2.Business Nature and Principal Business Activities
The business nature and principal business activities of the Company and its subsidiaries are: production and sales ofvarious pointer type mechanical watches, quartz watches and their driving units, spares and parts, various timingapparatus, processing and wholesale of K gold watches and ornament watches, smart watches; domestic trade, materialssupply and sales (excluding the commodities for exclusive operation, exclusive control and monopoly); propertymanagement and lease; design service; R&D, design, production, sales and technical services of chronometers and theirparts and components, and other precision parts; self-run import & export business (implemented according to theDocument SHEN MAO GUAN DENG ZHENG ZI No. 2007-072), etc.
3. Approval for the Financial Statements for Issuing
The financial statements were approved and issued through the by the Board of Directors dated August 18, 2022.
There were 12 subsidiaries consolidated in the financial statements during the reporting period. For the detail, refer to NoteIX. "Equity in Other Entities".
The entities included in the scope of the consolidated financial statements in the reporting period remain unchangedcompared with the previous period. For details please refer to Note VIII “Changes of the consolidation scope”.IV. Basis for preparation of the financial statements
1. Preparation Basis
The Company makes recognitions and measurements according to the actual transactions and events in the light of the"Accounting Standards for Business Enterprises - Basic Standards" promulgated by the Ministry of Finance and specificaccounting standards, guidelines for the application of accounting standards for enterprises, interpretations of accountingstandards for enterprises and other relevant regulations (hereinafter collectively referred to as the "Accounting Standardsfor Enterprises"); on this basis, prepares the financial statements with consideration of the relevant provisions of the ChinaSecurities Regulatory Commission - " Preparation Rules for Information Disclosure by Companies Offering Securities to thePublic No. 15—General Provisions on Financial Reports (2014 Revision) and the Notice on Issues concerning theImplementation of the New Accounting Standards for Business Enterprises by Listed Companies.
2. Operation on Going Concern Basis
The Company has assessed its going-concern ability for 12 months from the end of the reporting period, and has notfound any matters or circumstances that may lead to significant doubts about the going-concern ability. As a result, thefinancial statements of the Company have been prepared on going concern basis.V. Important accounting policies and accounting estimatesPresentation on specific accounting policies and accounting estimates:
1. The Company makes specific accounting policies and estimates according to its nature of business. Accounting policiesand estimates mainly includes: method of estimated credit loss accrual (Note V. 11, Note V. 12 and Note V. 14) ,measurement of inventory (Note V. 15) , depreciation of investment property and fixed asset and amortization of intangibleasset (Note V. 23, Note V.24 and Note V. 30) , revenue (Note V, 39) etc.
Based on historical experience and other factors, including reasonable expectations for future events, the Companycontinuously evaluates the important estimates and key assumptions used. If material changes to following accountingestimate and key assumption incurred, material impact would happened to the carrying value of the Company’s assets andliabilities in coming accounting year：
Measurement of expected credit loss of accounts receivable and other receivables The management estimates impairmentloss provision to accounts receivable and other receivables based on the judgments to estimated credit loss of accountsreceivable and other receivables. If any events occurred that indicated the Company may not be able to recover the balance
amount, estimation is needed in provision accrual. If the expected number is different with the estimated figure, the differencewill affect the carrying value of accounts receivable and other receivables and the impairment loss expenses incorresponding accounting period.
Impairment to inventory. The Company recognizes provision for obsolete inventories based on the excess of the cost ofinventory over its net realizable value. In determining the net realizable value of inventories, the management uses significantjudgments to estimate the selling price, cost to finish manufacturing, and selling expenses and associated taxes. If themanagement revises estimated selling price and cost to finish manufacturing and selling expenses, the NAV estimationwould be affected and the difference would have an effect to the inventory provision.
Estimation of long-term asset impairment. When evaluating whether there is impairment to long-term asset, the managementmainly considers the following: (1) whether the events affect the asset impairment have already incurred; (2) whether thediscounted cash flow from continue usage of the asset or disposal is lower than its carrying amount; and (3) whether majorassumption used in estimating the future cash flow is appropriate.
Changes to related assumption adopted in determining impairment such as profitability, discounting rate and growth ratemay have material impact to the present value used in impairment test and result in impairment to above mentioned long-term assets.
Depreciation and amortization. The estimated residual value and useful life of investment property, fixed asset and intangibleasset that used by the Company are based on historical actual useful life and actual residual value of assets with similarnature or functions. In the process of using such assets, estimated useful life and residual value may vary depending on theeconomic environment, technological environment and other environment that the assets located. If there is differencebetween the expectation and previous estimation, proper adjustments will be made by the management.
Share-based payments. The management makes best estimation based on up-to-date number of employees who haveexercisable shares and adjusting the number of exercisable equity instrument on each balance sheet date in the vestingperiod. If there is difference between current year exercisable employee and previous estimation, proper adjustments willbe made by the management.
Deferred income tax asset. Deferred income tax asset of taxable losses shall be recognized to the extent that there will havesufficient taxable income to offset. This involves significant judgments to estimate the timing and amount of future taxableprofit and taking into consideration of tax planning so as to determine the amount of deferred tax asset.
Income tax. The final tax treatment of many transaction and events are with uncertainty in the normal course of operation.Significant judgments involves in accrual of corporate income tax. If there is difference between the final discretion and theamount recorded in books, the difference will affect the amount of tax in the period of final discretion.
1. Statement on complying with the accounting standards for business enterpriseThe financial statements of the Company have been prepared in accordance with the requirements of Accounting Standardsfor Business Enterprises. These financial statements present truly and completely the financial position, the results ofoperations and the cash flows for reporting period of the Company.
2.Accounting period
The accounting period of the Company is the calendar year, i.e. from 1
st January to 31
stDecember of each year.
3. Operating cycle
The operating cycle refer to the period from purchasing assets for process to realizing cash or cash equivalent. TheCompany’s operating cycle is 12 months which is also used as standard to determine the liquidity of asset and liabilities.
4. Recording Currency
The Company and its domestic subsidiaries use Renminbi (CNY) as the function currency for book keeping. FIYTA HongKong Co., Ltd., one of the Company's overseas subsidiaries, one of the subsidiaries of FIYTA HK (hereinafter referred toas “Station-68”) has determined Hong Kong Dollars as its recording currency for accounting in accordance with thecurrencies available in its major economic environment where it is operated. Montres Chouriet SA, one of the subsidiariesof FIYTA Hong Kong, determines Swiss Franc as its recording currency for accounting in accordance with the currenciesavailable in its major economic environment where it is operated and Swiss France is converted into Renminbi in preparingits financial statements. The currency the Company takes in preparation of these financial statements is Renminbi.
5. The accounting treatment on consolidation of the enterprises under the same control and not under the samecontrol
(1) If a business combination is achieved through multiple steps, of which the terms, condition and economicaleffect is in line with one or more criteria as followed, the multiple transactions shall be dealt with as one-packagetransaction.
① the transactions were entered into at the same time or by considering each other’s influence;
② a complete business result can only be achieved by combining all these transactions together;
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 become economical if it is considered incombination with other transactions.
(2)Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquired and liabilities assumed aremeasured based on their carrying amounts in the consolidated financial statements of the ultimate controlling party at thecombination date, except for adjustments due to different accounting policies. The difference between the carrying amountof the net assets acquired and the consideration paid for the combination (or the total par value of shares issued) is adjustedagainst share premium in the capital reserve, with any excess adjusted against retained earnings.
If there is contingent consideration and provision or assets are required to be recognized, the difference between theprovision or assets and the contingent consideration shall adjust the capital reserve, with any excess adjusted againstretained earnings.
If business combinations involving entities under common control achieved in stages that involves multiple transactionsbelongs to one-package transaction, all transactions shall be dealt with as one transaction. If not, the accounting treatmentis as follows: Initial investment cost is the acquirer’s share of the carrying amount of the net assets of the acquiree in the
consolidated financial statements of the ultimate controlling party at the combination date. The difference between the initialinvestment cost and the sum of carrying amount of investment prior to combination date and carrying amount of newconsiderations paid for the combination 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. he difference betweenthe carrying amount of the net assets acquired and the sum of carrying amount of investment prior to combination date andcarrying amount of new considerations paid for the combination at the combination date is adjusted to capital reserve (sharepremium) . If the capital reserve 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 by the acquirer during theperiod from the later of initial investment date and the date that the acquirer and acquiree both under common ultimatecontrol to the combination date are offset the opening retained earnings or profit for loss for the current period in thecomparative statements.
(3)Business combination involving entities not under common control
The purchase date refers to the date that the Company actually acquired control over the acquire i.e. the date when thecontrol over the acquiree’s net assets or decision of business operation has been transferred to the Company. If theCompany fulfills the following conditions at the same time, it is considered that the control has been transferred:
① the contract or agreement of business combination has been approved by internal power department;
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 make the residual payments;
⑤ the Company is in substances acquired the business and operating policies and enjoyed corresponding interests andundertaking risks of the acquire.
On the purchase date, assets transferred, liabilities incurred or assumed as the consideration paid shall be measured at fairvalue. The difference between the fair value and carrying amount shall be charged to current period profit or loss.
Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, thedifference is recognized as goodwill, and subsequently measured on the basis of its cost less accumulated impairmentprovisions. Where the combination cost is less than the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognized in profit or loss for the current period after reassessment.
If business combinations involving entities not under common control achieved in stages that involves multiple transactionsbelong to one-package transaction, all the transactions shall be treated as one. Otherwise, if the equity investment heldbefore the combination date is accounted for by the equity method, the sum of the book value of the equity investment ofthe acquiree held before the acquisition date and the new investment cost on the acquisition date shall be regarded as theinitial investment cost of the investment; Other comprehensive income recognized by the equity investment held before theacquisition date due to accounting by the equity method shall be accounted for on the same basis as the investee's directdisposal of the relevant assets or liabilities when the investment is disposed of. If the equity investment held before thecombination date is accounted for by the recognition and measurement standards of financial instruments, the sum of thefair value of the equity investment on the combination date plus the new investment cost shall be regarded as the initialinvestment cost on the combination date. The difference between the fair value and book value of the originally held equityand the accumulated changes in fair value originally included in other comprehensive income should be fully transferred tothe current return on investment on the combination date.
(4)Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services, valuation advisory, and otheradministrative expenses, are recorded in profit or loss for the current period when incurred. The transaction costs of equityor debt securities issued as the considerations of business combination are included in the initial recognition amount of theequity or debt securities.
6. Method of preparing consolidated financial statements
(1) Scope of consolidation
The scope of consolidated financial statements is based on control. All subsidiaries (including standalone entity thatcontrolled 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 financial statements of the Company andits subsidiaries and other relevant information. The whole enterprise is considered as one accounting body when preparingconsolidated financial statement and reflect the whole group’s financial position, performance and cash flow according tounified accounting policies based on accounting standards.
All subsidiaries that are included in the scope of consolidation adopt same accounting policies, and accounting period. Ifthere are differences, the subsidiaries shall adjust its policies and accounting period accordingly.
When preparing consolidated financial statements, the accounting policies and accounting periods of the subsidiaries shouldbe consistent with those established by the Company, and all significant intra-group balances and transactions areeliminated. If the treatment based on enterprise group angle is different with the angle from subsidiaries’, it shall be treatedbased on enterprise group angle.
The portion of a subsidiary’s equity that is not attributable to the parent is treated as non-controlling interests and presentedseparately in the consolidated balance sheet within shareholders’ equity. The portion of net profit or loss of subsidiaries forthe period attributable to non-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 the non-controlling shareholders of asubsidiary exceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, the excess isstill allocated against the non-controlling interests.
Where a subsidiary or business has been acquired through a business combination involving enterprises under commoncontrol in the reporting period, the subsidiary or business is deemed to be included in the consolidated financial statementsfrom the date they are controlled by the ultimate controlling party.
Where a subsidiary or business has been acquired through a business combination not involving enterprises under commoncontrol in the reporting period, the financial statements of subsidiaries shall be adjusted on the basis of fair value ofidentifiable net assets on purchase date.
(3) Addition of subsidiaries or business operation
Where a subsidiary or business has been acquired through a business combination involving enterprises under commoncontrol in the reporting period, the subsidiary or business is deemed to be included in the consolidated financial statementsfrom the date they are controlled by the ultimate controlling party. Their operating results and cash flows are included in theconsolidated income statement and consolidated cash flow statement respectively from the date they are controlled by theultimate controlling party.
If the Company can exert control over the investee under common control because of addition of investment, adjustmentsshall be made as if all the combining party are at the current condition in the angle of ultimate controlled party. Equityinvestment held before acquired control, profit or loss, other comprehensive income and other net asset changes that havealready recognized between the later of acquiring original equity and the date under common control, and combination dateshall offset opening retained earnings or current period profit or loss respectively.
In the reporting period, if there is subsidiary or business addition involving entities not under common control, no adjustmentsshall be made to the consolidated balance sheet. The revenue, expenses and profit from the purchasing date to period endshall be included in consolidated income statement. The cash flows from the purchasing date to period end shall be includedin consolidated cash flow statement.
Where a subsidiary or business has been acquired through a business combination not involving enterprises under commoncontrol by means of investment addition in the reporting period, equity held before the purchase date shall be re-measuredat fair value. Difference between the fair value and the carrying amount shall be charged to current period investment gain.Changes related to equity method such as other comprehensive income and other equity changes beside net profit, othercomprehensive income and profit distribution shall be transferred to current period investment gain.
(4) Disposal of subsidiaries
1) General disposal method
In the reporting period, if the Company disposed a subsidiary or business, the subsidiary’s revenue, expenses, profit andcash flows from the beginning of the period to the disposal date would be included in consolidated financial statements; thecash flow of the subsidiary or business from the beginning of the period to the date of disposal is included in the consolidatedcash flow statement.
When the control right to the investee is lost due to disposal of partial equity investment or other reasons, the Companyremeasures residual equity investment after the disposal at its fair value on the date of losing the control right. The differencebetween the sum of the consideration acquired from disposal of equity and the fair value of residual equity minus the portionof net assets of the original subsidiary as continually calculated from the date of purchase or date of combination at theoriginal shareholding ratio and the goodwill is included in the investment income in the current period of losing the controlright. A gain or loss is recognized in the current period and is calculated by the aggregate of consideration received indisposal and the fair value of remaining part of the equity investment deducting the share of net assets in proportion toprevious shareholding percentage in the former subsidiary since acquisition date and the goodwill.
2) Disposal of subsidiary through multiple steps
In the event that the Company losses control over a subsidiary through multiple transactions, if one or more conditions beloware fulfilled, it shall be treated as one-package transaction:
A. the transactions were entered into at the same time or by considering each other’s influence;
B. a complete business result can only be achieved by combining all these transactions together;
C. the performing of one transaction is depended on at least one other transaction;
D. a transaction is not economical if it is considered stand along but it will become economical if it is considered incombination with other transactions.
If the various transactions disposing the investment on the subsidiary's equity until losing control power are package deals,various transactions undergo accounting treatment as a transaction of disposing the subsidiary and losing control power;however, before losing control power, the difference between every disposal amount and the share of the subsidiary's netassets enjoyed corresponding to disposal of investment is recognized as other comprehensive income in the consolidatedfinancial statements, and is included in the current profit and loss corresponding to loss of control power.
If disposal of the equity investment in the subsidiary until the loss of control does not belong to one-package transaction,before the loss of control, the accounting treatment shall be carried out in accordance with the relevant policies for partialdisposal of the equity investment in the subsidiary without losing control; when the control is lost, accounting treatment shallbe carried out according to the general treatment method of disposal of subsidiaries.
(5) Purchase of the minority shareholders’ equity of subsidiaries
The difference between the long term equity investment newly acquired resulted from purchase of minority equity and theshare of the net asset continuously calculated commencing from the date of purchase (or date of consolidation) enjoyableby the subsidiary shall be used to adjust the capital stock premium in the capital reserve. In case the capital stock premiumin the capital reserve is not enough for writing-down, the retained earnings shall be adjusted.
(6) Partial disposal of equity investment in subsidiary without loss of control
The difference between the disposal income obtained from the partial disposal of the long-term equity investment in asubsidiary without loss of control and the corresponding portion of the subsidiary's net assets calculated from the acquisitiondate or the combination date corresponding to the disposal of the long-term equity investment is used to adjust the sharepremium in the capital reserve in the consolidated balance sheet, and adjust the retained earnings if the capital stockpremium in the capital reserve is insufficient to offset.
7. Classification of joint venture arrangements and accounting treatment method of joint management
(1) Classification of Joint Venture Arrangement
The Company classifies joint venture arrangements into joint operations and joint ventures based on the structure, legalform, 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 realizedthrough independent entity is normally recognized as joint venture but it also can be classified as joint operation if clearevidence showed that one of the following condition is met:
The legal form of an joint arrangement showed that the joint parties enjoyed rights over related assets and undertake liabilityrespectively.
The contract showed that the joint parties enjoyed rights over related assets and undertake liability respectively.
Other facts and situation indicated that the joint parties enjoyed rights over related assets and undertake liability respectively.If the joint venture party enjoys substantially all of the output associated with the joint arrangement, and the settlement ofthe liabilities in the arrangement continues to depend on the joint venture party's support.
(2) Accounting treatment to joint operation
The Company confirms the following items related to the Company in the portion of interests in joint operation, and conductsaccounting treatment in accordance with the relevant accounting standards for enterprises:
to recognize the assets held separately, and recognize the assets held jointly by their shares;to recognize the liabilities borne individually and the liabilities borne jointly according to their share;to recognize the income generated from the sale of its share of joint management output;to recognize the income generated by the joint operation from the sale of output according to its portion;to recognize the expenses incurred separately, and recognize the expenses incurred in joint management according to theirshare.
Before the Company delivers or sells assets to the joint operation (except the assets constituting business), or the jointoperation sells such assets to a third party, the Company only confirms the parts in the profit and loss arising from suchtransaction and belonging to other participants of the joint operation. If occurrence of such assets is in conformity with theimpairment loss as stated in the Accounting Standards for Business Enterprises No. 8 - Impairment of Assets, the Companyfully confirms the loss;
Before the Company sells an asset in the joint operation, etc. (except the assets constituting business) to a third party, theCompany only confirms the part in the profit and loss arising from such transaction and belonging to other participants ofthe joint operation. If occurrence of purchase of an asset is in conformity with the impairment loss as stated in the AccountingStandards for Business Enterprises No. 8 - Impairment of Assets, the Company fully recognizes this part of loss based onthe portion the Company should take.
The Company does not enjoy joint control to joint operation. If the Company enjoys joint operation’s asset and undertakingrelated liabilities, the accounting treatment is the same. Otherwise, it shall be accounted for based on accounting standards.
8. Cash and cash equivalents
The term “cash” refers to cash on hand and deposits that are readily available for payment in preparation of the cash flowstatement. The term “cash equivalents” refers to short-term (generally due within 3 months from the purchase date) andhighly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant riskof change in value.
9. Foreign currency transactions and translation of foreign currency statements
(1) Foreign Currency Transactions
In the initial recognition of foreign currency transactions, the spot exchange rate on the transaction date is used as the rateto translate the foreign currency amount into Renminbi for bookkeeping.
On the date of balance sheet, the foreign currency monetary items are translated based on the spot rate as at the date ofbalance sheet and the balance of exchange arising therefrom is counted to the current gains and losses except the balanceof exchange arising from the special foreign currency borrowings in connection with the assets satisfying the capitalizationconditions which is treated based on the principle of capitalization of borrowing expenses The foreign currency non-monetaryitems measured at historical cost shall still be translated at the spot exchange rate on the date of transaction, without changeof the amount of the functional currency for bookkeeping.
The non-monetary items in foreign currency measured at fair value are translated at the exchange rate on the date ofrecognizing fair value, and the difference between the amount in bookkeeping base currency and the previous amount inbookkeeping base currency after translated is treated as change of fair value (including change of exchange rate) andincluded in the current profits and losses or recognized as other comprehensive incomes.
(2) Translation of Foreign Currency Financial Statements
The asset and liability items in the balance sheet are translated by means of the spot rate of the balance sheet; all the otherowner's equity type items, with the exception of "retained earnings" item, are translated by means of the spot rate of the daywhen the transaction takes place. The items of incomes and expenses in the profit statement are translated at the currentaverage exchange rate on the transaction occurring date. The foreign currency financial statement translation differencearising from the above conversion is counted to the other comprehensive income.
In disposal of overseas business, the translation difference of the foreign currency financial statements related to the foreignbusiness listed in other comprehensive income items in the balance sheet is transferred from the other comprehensiveincome items to the current profit and loss; in case the proportion of the equity in the overseas business held by the Companydrops due to disposal of partial equity investment or other reason but the control power over the overseas business has notlost, the translation difference of the foreign currency statements in connection with the disposed part of the overseasbusiness shall be attributable to the minority shareholders’ equity instead of being transferred into the current profit and loss.When the disposal of overseas operation is involved with the partial equity of a joint venture or a cooperative enterprise, thetranslated difference of foreign currency statements related to the overseas operation is transferred at the ratio of disposingthe overseas operation into the current profits and losses from disposal.
10. Financial instruments
A financial asset or financial liability is recognized when the Company becomes a party of financial instrument contract.
The effective interest rate method refers to the method for calculating the amortized cost of financial assets or financialliabilities and apportioning the interest income or interest expense of each period into each accounting period.
Effective interest rate refers to such interest rate with which the future cash flow of any financial asset or financial liabilityin the expected period of existence is discounted to the current book value of such financial asset or financial liability. Whendetermining the effective interest rate, the future cash flow shall be predicted on the basis of taking into account all thecontractual stipulations (Such as prepayment, rollover, call option or other similar options) concerning the financial asset orfinancial liability, but the future credit losses shall not be taken into account.
Amortized cost of financial assets or financial liabilities is the initial recognition amount deduct principal and add or lessaccumulated amortization to the difference between initial recognition and the amount at maturity and less accumulated lossprovision (for financial assets only).
(1) Classification, confirmation and measurement of financial assets
Financial assets are classified into the following three categories depending on the Company’s business mode of managingfinancial assets and cash flow characteristics of financial assets:
A. Financial assets measured at amortized cost.B. Financial asset that is measured at fair value and whose change is included in other comprehensive income.C. The financial asset measured at fair values with the change counted to the current profit and loss.
Financial assets are measured at their fair value at the time of initial recognition, but if the accounts receivable or notesreceivable generated from the sale of commodities or provision of services do not contain significant financing elements orthe financing elements not exceeding one year are not considered, the initial measurement shall be made according to thetransaction price.
For the financial assets measured at fair value with the change counted to the current profits and losses, the relevanttransaction expenses are directly included in the current profit and loss; the relevant transaction expenses for othercategories of financial assets are counted to the amount of the initial recognition.
The subsequent measurement of financial assets depends on their classification, and all affected relevant financial assetsshall be reclassified if and only if the Company changes its business model for managing financial assets.
1) Classified as financial assets measured based on the amortized cost
According to the contractual terms of the financial asset， the cash flow created on the specific date is exclusively forpayment of the principal and the interest based on the outstanding amount of the principal，while if the business model ofmanaging the financial asset is to take the collection of contractual cash flow as the goal, the Company shall classify thefinancial asset as a financial asset measured at amortized cost. Such financial assets include monetary fund, notesreceivable, accounts receivable and other receivables.
The Company recognizes the interest income of such financial assets based on the effective interest rate method,subsequent measurement is carried out at amortized cost, and the gain or loss arising from derecognition or modificationwhen impairment occurs, shall be included in the current profit and loss. Except for the following circumstances, theCompany calculates and determines interest income based on the book balance of financial assets multiplied by the actualinterest rate:
A. For purchased or originated credit-impaired financial assets, the Company calculates and determines the interest incomefrom the initial recognition based on the amortized cost of the financial assets and the credit-adjusted effective interest rate.B. For purchased or originated financial assets without credit impairment but become credit-impaired in the subsequentperiod, the Company calculates and determines the interest income based on the amortized cost and effective interest rateof the financial asset in the subsequent period. If the financial instrument no longer has credit impairment due to theimprovement of its credit risk in the subsequent period, the Company calculates and determines the interest income bymultiplying the actual interest rate by the book balance of the financial asset.
2) Classified as financial asset that is measured at fair value and whose change is included in other comprehensive income.
According to the contractual terms of the financial asset，the cash flow created on the specific date is exclusively for paymentof the principal and the interest based on the outstanding amount of the principal; while if the business model for managingthe financial asset is aimed at both collecting contractual cash flow and selling the financial asset, the Company classifiesthe financial asset as a financial asset measured at fair value whose change is included in other comprehensive income.
The Company recognizes interest income of such financial assets by the effective interest rate method. Except for interestincome, impairment losses and exchange differences, which are recognized as profit or loss for the current period, otherchanges in fair value are included in other comprehensive income. When the recognition of the said financial assets isterminated, the accumulated gains or losses previously included in other comprehensive income are transferred out fromother comprehensive income and included in the current profit and loss.
Notes and accounts receivable measured at fair value whose change is included in other comprehensive income arepresented as receivables financing and other such financial assets are presented as other creditor's rights investments,where other debt investments that mature within one year as of the balance sheet date are reported as non-current assetsthat mature within one year, and other creditor's rights investments whose original maturity is within one year are presentedas other current assets.
3) Designated as financial asset measured at fair value and whose change is included in other comprehensive income.At the initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financialassets at fair value through other comprehensive income on the basis of individual financial assets.
Changes in fair value of such financial assets are included in other comprehensive income, and no provision for impairmentis required. When the recognition of the said financial assets is terminated, the accumulated gains or losses previouslyincluded in other comprehensive income are transferred out from other comprehensive income and included in the retainedearnings. During the period when the Company holds the investment in the equity instrument, when the Company's right toreceive dividends has been established, the economic benefits related to dividends are likely to flow into the Company, andthe amount of dividends can be measured reliably, dividend income is recognized and included in the current profit and loss.The Company represents such financial assets under other equity instrument investment items.
An equity instrument investment that satisfies one of the following conditions is a financial asset measured at fair value andits changes are included in the current profit and loss: the purpose of obtaining the financial asset is mainly for recent sales;it is part of a centrally managed portfolio of identifiable financial assets and instruments at initial recognition, and there isobjective evidence that there is a short-term profit model in the near future; it is a derivative instrument (with a derivativeinstrument that meets the definition of a financial guarantee contract and is designated as an effective hedging instrumentexclusive).
4) The financial asset measured at fair value with the change counted to the current profit and loss.Financial assets that do not meet the criteria for classification as financial assets measured at amortized cost or at fair valuewhose change is concluded in other comprehensive income, nor designated as financial assets measured at fair valuewhose change is included in other comprehensive income are all classified as financial assets measured at fair value whosechange is included in the current profit and loss.
The Company makes subsequent measurement of these financial assets at fair value and their profit or loss formed due tochange of fair value and the dividends and interests related to such financial assets are included in the current profits andlosses.
The Company present the financial assets as financial asset held for trade, other non-current financial assets.
5)The financial asset designated for measurement at fair value with the change counted to the current profit and loss.At initial recognition, in order to eliminate or significantly reduce the accounting mismatch can be eliminated or significantlyreduced, the Company may irrevocably designate the financial assets as that measured at fair value with the change countedto the current profit and loss based on the individual financial assets.
If the hybrid contract includes one or more embedded derivatives and the main contract does not belong to the abovefinancial assets, the Company may designate the whole as a financial instrument that is measured at fair value throughprofit 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 is little need for analysis to make itclear that the embedded derivatives it contains should not be split. If the prepayment right of the embedded loan allows theholder to repay the loan in advance with an amount close to the amortized cost, the prepayment right does not need to besplit.
The Company makes subsequent measurement of these financial assets at fair value and their profit or loss formed due tochange of fair value and the dividends and interests related to such financial assets are included in the current profits andlosses.
The Company present the financial assets as financial asset held for trade, other non-current financial assets.
(2) Classification, recognition and measurement of financial liabilities
The Company categorizes such financial instruments or their components as financial liabilities or equity instrument at theinitial recognition based on the contract terms for issuing such financial instruments and economical nature they havereflected rather than solely on its legal form with the combination of the definition of financial liabilities and equity instrument.In the initial recognition, financial liabilities are classified as the financial liabilities that are measured at fair value and whosechange is included in the current profits and losses, other financial liabilities and derivative instrument designated as effectivehedging instrument.
Financial liabilities are measured at fair value at the initial recognition time. For financial liabilities that are measured at fairvalue and which change is included in the current profits and losses, the relevant transaction expenses are directly includedin the current profits and losses; for other financial liabilities, relevant transaction expenses are included in the initiallyrecognized amount.
The successive measurement of financial liabilities depends on their classification:
1) The financial liabilities designated for measurement at fair value with the change counted to the current profit and loss.
Such financial liabilities include financial liabilities held for trade (including the derivative instruments belonging to financialliabilities) and the financial liabilities measured at fair value with the change counted to the current profits and losses directlydesignated at the initial recognition.
The Company classifies financial liabilities that meet one of the following conditions: the purpose of assuming the relevantfinancial liabilities is mainly for recent sale or repurchase; if they belong to part of the portfolio of identifiable financialinstruments under concentrated management, and objective evidences showing that the Company has recently adoptedshort-term profit making mode; they belong to a derivative instrument, except the derivative instruments designated as andbeing effective hedging instruments with the derivative instruments in compliance with financial guarantee contract excluded.Financial liabilities held for trade (including the derivative instruments belonging to financial liabilities) are measured at fairvalue subsequently and all fair value changes except for hedging accounting shall be included in current period profit or loss.
At initial recognition, in order to provide more relevant accounting information, the Company classifies financial liabilities thatmeet one of the following conditions as financial liabilities designated at fair value through profit or loss (the designationcannot be revoked once it is made) :
A. accounting mismatches can be eliminated or significantly reduced.
B. according to the corporate risk management or investment strategy specified in the formal written documents, the financialliability portfolio or the financial asset and financial liability portfolio is managed and performance evaluated on the basis offair value, and reported to key management personnel within the Company on this basis.
When the Company initially recognizes a financial liability and designates it at fair value through profit or loss according tostipulations of standards, the changes in the fair value of the financial liability arising from changes in the company’s owncredit risk are included in other comprehensive income, and other changes in fair value are recognized in profit or loss forthe period. However, if the accounting causes or expands the accounting mismatch in profit or loss, the entire gain or lossof the financial liability (including the affected amount from changes in the company’s own credit risk) is included in thecurrent profit or loss.
2) Other financial liabilities
Except for the following items, the Company classifies financial liabilities as financial liabilities measured at amortized cost.The effective interest method is adopted for such financial liabilities, and the subsequent measurement is carried outaccording to the amortized cost, and the profit or losses arising from the derecognition or amortization are included in thecurrent profit and loss:
A. The financial liabilities designated for measurement at fair value with the change counted to the current profit and loss.
B. The transfer of financial assets does not meet the conditions for derecognition or financial liabilities arising from thecontinued involvement in the transferred financial assets.
C. Financial guarantee contracts that are not in the first two categories of this article, and loan commitments granted at arate lower than market interest rates and that are not in the first category of this article.
A financial guarantee contract refers to a contract that requires the issuer to pay a specific amount to the contract holderwho has suffered losses when a specific debtor fails to repay the debt in accordance with the original or revised terms ofthe liability instrument. For financial guarantee contracts that are not designated as financial liabilities measured at fair valueand whose changes are included in the current profit and loss, the initial recognition shall be carried out at the higher of theprovision for loss and the balance after deducting the accumulated amortization during the guarantee period from the initialrecognition amount.
(3) Derecognition of financial assets and financial liabilities
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 contractual right to receive the cash flow of the financial asset is terminated.
Conditions for derecognition of financial liabilitiesIf the current obligation of a financial liability (or a part thereof) has been discharged, the financial liability (or such part offinancial liability) is derecognized.
When the Company and the lender sign an agreement to replace the original financial liability with a new financial liability,and the new financial liability is substantially different from the original financial liability, the original financial liability isderecognized and a new financial liability is recognized. The difference between the carrying amount and the considerationpaid (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 the financial liabilities as a whole isallocated based on the proportion of the fair value of the continuing recognition portion and the derecognition portion on therepurchase date. The difference between the carrying amount assigned to the derecognition portion and the considerationpaid (including the transferred non-cash assets or liabilities assumed) shall be included in the current profit or loss.
(4) Recognition basis and measurement method for transfer of financial assetsIn the event of transfer of financial assets, the Company assesses the extent to which it retains the risks and rewards ofownership of the financial assets and treats them in the following cases:
A. If almost all risks and rewards of ownership of financial assets are transferred, the financial assets are derecognized andthe rights and obligations arising from or retained in the transfer are separately recognized as assets or liabilities.
B. If almost all the risks and rewards of ownership of financial assets are retained, the financial assets shall continue to berecognized.
C. If there is neither transfer nor retention of almost all risks and rewards of ownership of financial assets (i.e., other than (1)and (2) of this article) , then depending on whether or not they retain control over financial assets:
A. If the control of the financial asset is not retained, the financial asset shall be derecognized, and the rights and obligationsarising or retained during the transfer shall be separately recognized as assets or liabilities.
B. If the control over the financial assets is retained, the relevant financial assets shall be continuously recognized accordingto the degree of its continued involvement in the transferred financial assets, and the relevant liabilities shall be recognizedaccordingly. The degree of continued involvement in the transferred financial assets refers to the degree to which theCompany undertakes the risks or rewards of changes in the value of the transferred financial assets.
When judging whether the transfer of financial assets meets the above conditions for derecognition of financial assets, theprinciple of substance over form is adopted. The Company distinguishes the transfer of financial assets into overall transferand partial transfer of financial assets.
If the overall transfer of financial assets meets the conditions for termination of recognition, the difference between thefollowing two amounts shall be included in the current profit and 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 the amount corresponding to thederecognized portion in the accumulated changes in the fair value originally and directly recognized in other comprehensiveincome (the financial assets involved in the transfer are measured at fair value through other comprehensive income).
C. If the transfer of partial financial assets while the part to be transferred overally satisfy the conditions of derecognition,the entire book value of the transferred financial asset shall, between the portion derecognized and the portion notderecognized (in such a case, the retained service assets shall be deemed to be part of the continued recognition of financialassets), be apportioned according to their respective relative fair value, and the difference between the amounts of thefollowing 2 items shall be included into the profits and losses of the current period :
A. The carrying amount of the portion derecognized on the date of derecognition.
B. The sum of the consideration received in respect of the derecognition of the financial assets and the amountcorresponding to the derecognized portion in the accumulated changes in the fair value originally and directly recognized inother comprehensive income (the financial assets involved in the transfer are measured at fair value through othercomprehensive income).
If the transfer of financial assets does not satisfy the conditions for termination of recognition, continue to recognize thefinancial asset, and the received consideration is recognized as a financial liability.
(5) The method of determining the fair value of financial assets and financial liabilitiesFor the financial assets or financial liabilities existing in the active market, the fair value is determined by the quotation inthe active market, unless there is a restricted period for the financial asset itself. For a financial asset with restricted salesof the asset itself, it is determined according to the quotation in the active market after deducting the compensation amountrequired by market participants for bearing the risk of not being able to sell the financial asset in the open market within aspecified period. The quotation in the active market includes the quotation that is readily and regularly available fromexchanges, dealers, brokers, industry groups, pricing agencies or regulators, etc. for the relevant assets or liabilities, andare representative of actual and frequently occurring markets on an arm's length basis trade.
For the initially acquired or derived financial assets or assumed financial liabilities, the market transaction price is used asthe basis for determining their fair value.
For financial assets or financial liabilities not existing in the active market, the fair value is determined using valuationtechniques. At the time of valuation, the Bank adopts valuation techniques that are applicable under the currentcircumstances and have sufficient data and other information to support, and the selection is consistent with thecharacteristics of the assets or liabilities considered by market participants in the transactions of relevant assets or liabilitiesand it takes priority to use the relevant observable input value as far as possible. When the relevant observable input valuecannot be obtained or it is not feasible to obtain, the unobservable input value is used.
(6) Impairment of financial instruments
Based on the expected credit losses, the Company assesses the expected credit losses of the financial assets measuredat amortized cost and financial assets at fair value through other comprehensive income, lease receivables, contract assets,loan commitment and financial liabilities that are not measured at fair value through profit or loss, and financial guaranteecontract etc., and makes impairment accounting and recognizes loss provisions.
Expected credit loss refers to the weighted average of the credit losses of financial instruments based on the risk of default.Credit loss refers to the difference between all contractual cash flows receivable under the contract and all cash flowsexpected to be received by the Company discounted at the original effective interest rate, that is, the present value of allcash shortages. Where, for the purchased or originated credit-impaired financial assets, the Company discounts based onthe credit-adjusted effective interest rate according to the credit of the financial assets.
For accounts receivable, contract assets, and lease receivables, the Company shall always measure the loss allowance forthem at an amount equal to the lifetime expected credit losses.
For financial assets that have been purchased or generated with credit impairment, loss provision is recognized only for thecumulative changes in lifetime expected credit losses after the initial recognition on the balance sheet date. On each balancesheet date, the amount of changes 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 than the expected credit lossreflected in the estimated cash flow at the initial recognition, the positive change in expected credit loss is also recognizedas an impairment gain.
Except for the provision for loss of financial instruments in item (3) of this article, the Company assesses whether the creditrisk of the relevant financial instruments 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 based on the followingcircumstances：
A. If the credit risk of the financial instruments has increased significantly since the initial recognition, the loss provision ismeasured at the amount equivalent 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 a combination of financialinstruments, and the increase or reversal of the loss provision resulting therefrom should be included in the current profit orloss as an impairment loss or gain
B. If the credit risk of the financial instruments has not increased significantly since the initial recognition, the loss provisionis measured at the amount equivalent to the expected credit loss of the 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 combinationof financial instruments, and the increase or reversal of the loss provision resulting therefrom shall be included in the currentprofit or loss as an impairment loss or gain.
C. For financial instruments in the third stage, the Company measures loss provision on the basis of life-time expected creditloss and calculating interest income according to their book balance minus the impairment provision and the actual interestrate.
Incremental or reversal of credit loss provision shall be included in current profit or loss as impairment loss or gain. Exceptfor financial asset at fair value through other comprehensive income, credit loss provision is to offset the carrying amount offinancial assets. For financial assets at fair value through other comprehensive income, the credit loss provision isrecognized in other comprehensive income and will not offset the financial asset’s carrying amount in balance sheet.
In the previous fiscal period, the loss provision was measured at an amount equivalent to the expected credit loss duringthe entire duration of the financial instrument, but on the current balance sheet date, the financial instrument is no longer ina situation where the credit risk has significantly increased since the initial recognition; if, on the current balance sheet date,the loss provision of the financial instrument was measured at the amount equivalent to the expected credit loss in the next12 months, and the resulting loss provision was reversed as the impairment gain and included in the current profit and loss.
1) Assessment of significant increase of credit risk
By comparing the default risk of financial instruments on balance sheet day with that on initial recognition day, the Companydetermines the relative change of default risk of financial instruments during the expected life of financial instruments, toevaluate whether the credit risk of financial instruments has increased significantly since the initial recognition. For financialguarantee contracts, when applying the provisions on impairment of financial instruments, the Company takes the datewhen the Company becomes the party that has made the irrevocable commitment as the initial recognition date.
To determine whether credit risk has increased significantly since the initial recognition, factors considered by the Companyincludes:
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 technical environment will have a significantnegative impact on the debtor’s repayment capacity;
C. Whether there have been significant changes in the value of collateral used as collateral for the debt or the quality ofguarantees or credit enhancements provided by third parties that are expected to reduce the debtor's economic incentive torepay within the contractual terms or affect the probability of default;
D. Whether the expected performance and repayment of debtor changes significantly;
E. Whether the Company changed the way of managing financial assets, etc.
On the balance sheet date, if the Company assesses that the financial instrument only has lower level of credit risk, theCompany assumes that the credit risk associated with the financial instrument does not increased after the initial recognition.If the default rate of a financial instrument 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 in economic and operatingenvironment in long-term which may not necessarily decrease the debtor’s ability of fulfilling its cash flow liabilities.
2) Financial assets with credit impairment already incurred
When one or more events that have an adverse effect on the expected future cash flow of a financial asset occur, thefinancial asset becomes a financial asset that has been credit-impaired. Evidence of credit impairment of financial assetsincludes the following observable information:
A. The issuer or debtor has experienced major financial difficulty;
B. The debtor has violated the contract, such as failure in or late payment of the interest or the principal;
C. The Creditor, out of economic or contractual considerations related to the debtor’s financial difficulties, gives the debtorconcessions that the Group shall never make under any other circumstances;
D. The debtor is likely to go bankrupt or carry out other financial restructuring;
E. The issuer or debtor’s financial difficulties caused the disappearance of the active market for the financial asset.
F. Purchase or originate a financial asset at a substantial discount that reflects the fact that a credit loss has occurred;Credit-impairment of a financial asset may be caused by the combined action of multiple events, not necessarily by anindividually identifiable event.
3) Determining expected credit loss (ECL)
The Company evaluates ECL based on single or portfolio of financial instrument. When evaluating ECL, the Companyconsiders past events, current situation and future economic condition.
The Company categorizes financial instrument into different portfolios based on common credit risk characteristics.Common credit risk characteristics includes: types of financial instruments, aging portfolio, settlement period, debtor’sindustries etc. Refer to accounting policies of financial instruments for standard for single evaluation and credit riskcharacteristics.
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 contractual cash flows receivable from thecontract and all cash flows expected to be received by the Company.
B. For lease receivable, credit loss is the present value of difference between all contractual cash flows receivable from thecontract and all cash flows expected to be received by the Company.
C. For financial guarantee contract, credit loss is the present value of expected payment amount due to credit losseshappened to the owner of the contract and less any amount that the Company 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 when purchasing, the credit loss is thedifference of carrying amount and present value of future cash flows discounted at original effective interest rate.
Factors that the Company measures ECL of financial instrument includes: assessing a series of possible results and todetermine a weighted average amount without bias; time value of money; information of past event, current situation andfuture economic condition forecast that can be obtained without paying extra cost or efforts on balance sheet date.
4) Write off
The Company no longer reasonably expects that the contractual cash flow of the financial asset can be recovered wholly orpartially, it will directly write down the book balance of the financial asset. This write-down constitutes the derecognition ofrelated financial assets.
(7) Offset of financial assets and financial liabilities
Financial assets and financial liabilities are presented in the balance sheet respectively and are not offset with each other.However, the net value after offset is presented in the balance sheet when the following conditions are satisfied:
A. The Company has the legal right to offset the recognised amount and such right is exercisable;
B. The Company plans to settle by net amount or realize the financial assets and repay the financial liabilities at the sametime.
11. Notes receivable
For the determination method and accounting treatment method of the expected credit loss of the Company's notesreceivable, please refer to Note V. 10
If the Company has sufficient evidence to evaluate the ECL of notes receivable on single basis, it will be assessed on singlebasis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make judgment based on historicalloss experience, current situation and future economic situation, and classifying the bill receivable into different portfolios.The basis for portfolios is determined as follows:
| Portfolio Description | The basis for portfolios is determined as follows: | Provision method |
Risk-free bankacceptance portfolio
Risk-free bankacceptance portfolioThe issuer has higher level of credit rating and no default in past andhas strong ability to fulfill its contractual cash follow obligation
| Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions | ||
| Business acceptance note | Notes receivables with same aging have similar credit risk characteristics | Provision based on the ECL checklist of aging against the loss rate throughout the duration |
12. Accounts receivable
For the determination method and accounting treatment method of the expected credit loss of the Company's accountsreceivable, please refer to Note V. 10
If the Company has sufficient evidence to evaluate the ECL of accounts receivable on single basis, it will be assessed onsingle basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make judgment based on historicalloss experience, current situation and future economic situation, and classifying the accounts receivable into differentportfolios. The basis for portfolios is determined as follows:
| Portfolio Description | The basis for portfolios is determined as follows: | Provision 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 otherparties
| Accounts receivables from other parties | Notes receivables with same aging have similar credit risk characteristics | Provision based on the ECL checklist of aging against the loss rate throughout the duration |
13. Financing with accounts receivable
Inapplicable
14. Other receivables
Method for determination and accounting treatment of the expected credit loss of other receivables
For the determination method and accounting treatment method of the expected credit loss of the Company's otherreceivables, please refer to Note V. 10
If the Company has sufficient evidence to evaluate the ECL of other receivables on single basis, it will be assessed on singlebasis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make judgment based on historicalloss experience, current situation and future economic situation, and classifying the other receivables into different portfolios.The basis for portfolios is determined as follows:
| Portfolio Description | The basis for portfolios is determined as follows: | Provision method |
| Receivables of down payment and guarantee | The portfolio has similar credit risk characteristics based on the business nature, down payment and guarantee | Provision based on the ECL checklist of aging against the loss rate throughout the duration |
| Petty cash for employees | The portfolio has similar credit risk characteristics based on the business nature | 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 based on the business nature | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
Receivables for related parties in scope ofconsolidation
| 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 |
| Portfolio of other receivables | Notes receivables with same aging have similar credit risk characteristics | Provision based on the ECL checklist of aging against the loss rate throughout the duration |
15. Inventories
(1) Classification of Inventories
The Company’s inventories refer to the finished products or commodities held for sale, products in process and the materialsand supplies consumed in process of production or rendering of services, etc. in the Company’s daily activities, which areclassified into three categories, including raw materials, products-in-process and commodity stocks. which are classifiedinto three categories, Inventories mainly include raw materials, products-in-process,finished products (commodity stocks),etc.
(2) Valuation method of inventories
When inventory is acquired, it is initially measured at cost, including procurement costs, processing costs and other costs.Raw materials and merchandise inventory are priced respectively according to the weighted average (except for brandedwatches), specific identification (for branded watches) at the time of delivery.
(3) Basis for determining net realizable value of inventories and method for providing reserve for price falling ofinventoriesAfter the inventory is thoroughly inspected at the end of the period, the provision shall be provided or adjusted at the lowerof the cost of the inventory and its net realizable value. The net realizable value of inventory of goods directly used for sale,such as finished goods, stocked goods and materials for sale in the normal production and operation process, is determinedby the estimated selling price of the inventory minus the estimated selling expenses and related taxes; net realizable valueof inventory of materials that need to be processed is determined based on the estimated selling price of the finishedproducts produced minus the estimated cost till completion, estimated selling expenses and related taxes and fees in thenormal production and operation process; the net realizable value of the inventory held for the execution of a sales contractor labour contract is calculated on the basis of the contract price. If the quantity of the inventory held exceeds the quantityordered by the sales contract, the net realizable value of the excess inventory is 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 ofinventories with lower unit price, the provision is accrued according to the category of inventory; for those related to theproduct series produced and sold in the same region, have the same or similar end use or purpose and that are difficult tomeasure separately from other projects, they are combined for provision for inventory depreciation
If the influencing factors of the write-down of inventory value have disappeared, the amount of write down will be restoredand will be reversed within the amount of the provision for decline in value of the inventory that has been accrued. Theamount of the reversal is included in the current profit or loss
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
A. Low cost and short lived articles are amortized on once-and-for-all basis.
B. Packaging materials are amortized on once-and-for-all basis.
16. Contract assets
The Company has the right to receive the consideration for the transfer of goods to the customers. If the right depends onfactors other than the passage of time, it is recognized as a contract asset. If the Company has the right (only depends onpassage of time) to receive consideration from client, accounts receivable shall be recognized.
For the determination method and accounting treatment method of the expected credit loss of the Company's contract assets,please refer to Note V. 10.
17. Contract cost
If the cost incurred to fulfill the contract does not fall within the scope of other accounting standards for enterprises otherthan the standards for revenue and meets the following conditions at the same time, the Company recognizes it as thecontract performance cost as an asset:
A. The cost is directly related to a current or anticipated contract, including direct labor, direct materials, manufacturingexpenses (or similar expenses), costs clearly borne by the customer, and other costs incurred solely due to the contract;
B. The cost has increased the resource the Company shall use to fulfill its performance obligation in the future.
C. The cost is expected to be recoverable.The asset is presented in inventory or other non-current assets based on whether the amortization period at initial recognitionexceeds one normal operating cycle.
(1) Contract acquisition cost
If the incremental cost incurred to the Company for obtaining the contract is expected to be recoverable, it is recognized asan asset as the cost of obtaining the contract. The incremental cost refers to the cost that no cost may incur if the Companydoes not obtain the contract (such as sales commission, etc.) If the amortization period does not exceed one year, it shallbe included in the current profit and loss when it incurs.
(2) Amortization of contract cost
The above assets related to contract costs are recognized on the same basis as the income from goods or services relatedto the asset, and are amortized at the time when the performance obligations are performed or in accordance with theprogress of the performance obligations, and are included in the current profit and loss.
(3) Impairment of contract cost
For the above-mentioned assets related to contract costs, if the book value is higher than the difference between theremaining consideration expected to be obtained by the Company due to the transfer of commodities related to the assets
and the estimated cost to incur for the transfer of the related commodities, the excess shall be provided for impairment , andrecognized as asset impairment loss.
After provision for the impairment, ff the factors of impairment in the previous period change afterward, so that the differenceof the above two items is higher than the book value of the asset, the original provision for asset impairment should bereversed and included in the current profit and loss, but the book value of the asset after the reversal should not exceed thebook value of the asset on the reversal date if no provision for impairment is made.
18. Held-for-sale assets
Inapplicable
19. Equity investment
Inapplicable
20. Other equity investment
Inapplicable
21. Long term accounts receivable
Inapplicable
22. Long-term equity investments
(1) Determination of the initial investment cost
A. For the long-term equity investment formed by business combination, the specific accounting policies are detailed in theaccounting treatment of business combination under common control and not under common control as set out in this NoteV.5.
B. Long-term equity investment obtained by other meansFor long-term equity investments obtained by paying cash, the actual purchase price paid shall be used as the initialinvestment cost. The initial investment cost includes expenses directly related to the acquisition of long-term equityinvestments, taxes and other necessary expenses.The initial investment cost of the long-term equity investment obtained by issuing equity securities is the fair value of theissued equity securities; the transaction cost incurred in the issuance or acquisition of its own equity instruments is deductedfrom equity if it is directly attributable to equity transactions.
Under the premise that the non-monetary asset exchange has the commercial substance and the fair value of the assetsreceived or surrendered can be reliably measured, the initial investment cost of the long-term equity investment exchangedfor non-monetary assets is determined 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-monetaryasset that does not meet the above premise, the initial investment cost of long-term equity investment is the carrying amountof the assets exchanged and the related taxes and fees payable.
The initial investment cost of a long-term equity investment obtained through debt restructuring includes the fair value of thewaived debt, taxes that can be directly attributable to the asset and other costs.
(2)Subsequent measurement and profit and loss recognition
A. Cost methodThe long-term equity investment that the Company can control over the investee is accounted for using the cost method,and the cost of the long-term equity investment is adjusted by adding or recovering the investment according to the initialinvestment cost.
Except for the actual payment or the cash dividends or profits included in the consideration that have been announced butnot yet paid at the time of acquiring the investment, the Company recognizes the current investment income according toits share of cash dividends or profits declared to be distributed by the investee.
B. Equity methodThe Company’s long-term equity investments in associates and joint ventures are accounted for using the equity method,and some of the equity investments in associates that are indirectly held by venture capital institutions, mutual funds, trustcompanies or similar entities including investment-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 the investment, the initial investment costof the long-term equity investment shall not be adjusted by the difference between the fair value of the identifiable net assetsof the investee; if the initial investment cost is less than the investment, the difference between the fair value of the identifiablenet assets of the investee should be included in the current profit or loss.
After the Company has acquired the long term equity investment, the net gains and losses realized by the investee andthe share of the other comprehensive income enjoyable or sharable should be respectively used to recognize the return oninvestment and other comprehensive income and at the same time the book value of the long term equity investment isadjusted; according to the profit announced for distribution by the investee or the part of the cash dividend enjoyable uponcalculation, the book value of the long term equity investment is reduced correspondingly. For other change in the net profitand loss, other comprehensive income and owner's equity other than the profit distribution, the book value of the long termequity investment is adjusted and counted to the capital reserve.
In determining the net profit and loss in the investee enjoyable, with the fair value of various identifiable assets, etc. in theinvestee when the investment is acquired as the base, the net profit of the investee is recognized after adjustment. For thetransactions between the Company and its associates or joint ventures, the part calculated based on the proportion of theunrealized internal transaction gains and losses attributable to the Company shall be offset and the gains and losses on theinvestment shall be recognized on this basis.
When the Company recognizes the losses incurred by the investee that it should bear, it shall deal with it in the followingorder: Firstly, offset the carrying amount of the long-term equity investment. Secondly, if the carrying amount of the long-term equity investment is not enough to be offset, the investment loss will continue to be recognized to the extent of carryingamount of other long-term equity that virtually constitutes a net investment in the investee, and the carrying amount of thelong-term receivables is offset. Finally, after the above-mentioned treatment, if the enterprise still bears additional obligations
in accordance with the investment contract or agreement, the projected liabilities are recognized according to the estimatedobligations and included in the current investment losses.
If the investee realizes profit in the future period, after deducting the unrecognized loss share, and the reduction of bookbalance of the recognized projected liabilities and recovery of other long-term equity that virtually constitutes a netinvestment in the investee and carrying amount of long-term equity investment as opposite to the order above, the Companyshall restore the investment 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, joint control or significant influence onthe investee, which is accounted for according to the recognition and measurement criteria of financial instruments, canexert significant influence on the 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 investment originally held inaccordance with the “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of FinancialInstruments” and new investment cost after being accounted for under the equity method.
If the initial investment cost accounted for under the equity method is less than the fair value share of the identifiable netassets of the investee on the additional investment date determined by the new shareholding ratio after the additionalinvestment, the carrying amount of the long-term equity investment is adjusted and included in the current non-operatingincome.
2) Fair value measurement or equity method accounting to cost method accountingIf the equity investment originally held by the Company, that does not have control, joint control or significant influence onthe investee and which is accounted for in accordance with the financial instrument recognition and measurement criteria,or the long-term equity investment originally held in associates or joint venture, can exercise control over the investee notunder common control due to additional investment or otherwise, in the preparation of individual financial statements, thesum of the carrying amount of the equity investment originally held plus the new investment cost shall be regarded as theinitial investment cost after being accounted for under the cost method.
The other comprehensive income recognized by the equity method in respect of the equity investment originally held beforethe purchase date is accounted for on the same basis as the investee directly disposes of the relevant assets or liabilitieswhen the investment is disposed of.
If the equity investment held before the purchase date is accounted for in accordance with the relevant provisions of the“Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments”, thecumulative fair value changes originally included in other comprehensive income are transferred to current profit or losswhen the cost method is adopted.
3) Equity method accounting to fair value measurement
If the Company loses joint control or significant influence on the investee due to the disposal of part of the equity investmentor otherwise, the remaining equity after disposal shall be accounted for according to the “Accounting Standards for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments”. The difference between the fair value andthe carrying amount on the date of losing joint control or significant impact is recognized in profit or loss.
The other comprehensive income recognized in respect of the original equity investment using the equity method isaccounted for on the same basis as the investee directly disposes of the relevant asset.
A. Cost method to equity methodWhere the Company loses control over the investee due to the disposal of part of the equity investment, etc., in thepreparation of individual financial statements, if the remaining equity after disposal can exercise joint control or significantinfluence on the investee, the equity method is adopted for accounting, and the remaining equity is deemed to be adjustedunder the equity method when it is acquired.
B. Cost method to fair value measurementWhere the Company loses control over the investee due to the disposal of part of the equity investment, etc., in thepreparation of individual financial statements, if the remaining equity after disposal cannot jointly control or exert significantinfluence on the investee, the relevant provisions of the “Accounting Standards for Business Enterprises No. 22 –Recognition and Measurement of Financial Instruments” are adopted. The difference between the fair value and the carryingamount 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 amount and the actual purchase priceshall be included in the current profit or loss. For the long-term equity investment accounted for using the equity method,when the investment is disposed of, the part that is originally included in the other comprehensive income is accounted forin the same proportion based on the same basis as the investee directly disposes of the relevant assets or liabilities.
If the terms, conditions and economic impact of each transaction on disposal of the equity investment in a subsidiary satisfyone or more of the following cases, the multiple transactions are treated as a package transaction:
A. the transactions were entered into at the same time or by considering each other’s influence;
B. a complete business result can only be achieved by combining all these transactions together;
C. the performing of one transaction is depended on at least one other transaction;D. a transaction is not economical if it is considered stand along but it will become economical if it is considered incombination with other transactions.
Where the loss of control over the original subsidiary due to disposal of part of the equity investment or otherwise which isnot a package transaction, the individual financial statements and consolidated financial statements shall be classified forrelevant accounting treatment:
1) In the individual financial statements, the difference between the carrying amount of the disposed equity and the actualpurchase price is included in the current profit or loss. If the remaining equity after disposal can exert joint control orsignificant influence on the investee, it shall be accounted for under the equity method, and the residual equity shall bedeemed to be adjusted by equity method when it is acquired; if the remaining equity after disposal cannot exert joint controlor significant influence over the investee, it shall be accounted for by the relevant provisions of the “Accounting Standardsfor Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments”, and the difference between thefair value and the carrying amount on the date of loss of control is included in the current profit or loss.
2) In the consolidated financial statements, for each transaction before the loss of control over the subsidiary, capital reserve(share premium) is adjusted for the difference between the disposal price and the share of the net assets corresponding tothe disposed long-term equity investment that the subsidiary has continuously calculated from the date of purchase or themerger date; if the capital reserve is insufficient to offset, the retained earnings will be adjusted; when the control of thesubsidiary is lost, the remaining equity shall be re-measured according to its fair value on the date of loss of control. Thesum of the consideration for the disposal of the equity and the fair value of the remaining equity, less the share of the netassets that that the original subsidiary has continuously calculated from the date of purchase calculated based on the originalshareholding, is included 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 into current investment incomewhen control is lost.
If each transaction on disposal of the equity investment in a subsidiary until the loss of control is a package transaction,each transaction is accounted for as a transaction to dispose of the equity investment in the subsidiary with loss of control,which is distinguished between individual financial statements and consolidated financial statements:
1) In the individual financial statements, the difference between each disposal price and the carrying amount of the long-term equity investment corresponding to the disposed equity before the loss of control is recognized as other comprehensiveincome, and when the control is lost, it is transferred to profit or loss for the period of the loss of control.
2) In the consolidated financial statements, the difference between each disposal price and the disposal investment that hasthe share of the net assets of the subsidiary before the loss of control is recognized as other comprehensive income, andtransferred to profit or loss for the period of the loss of control.
(5) Judging criteria for joint control and significant influence
If the Company collectively controls an arrangement with other parties in accordance with the relevant agreement, and theactivity decision that has a significant impact on the return of the arrangement needs to be unanimously agreed upon by theparties sharing the control, it is considered that the Company and other parties jointly control an arrangement, which is ajoint arrangement.
If the joint arrangement is reached through a separate entity and it determines that the Company has rights to the net assetsof the separate entity in accordance with the relevant agreement, the separate entity is regarded as a joint venture and isaccounted for using the equity method. If it is judged according to the relevant agreement that the Company does not haverights to the net assets of the separate entity, the separate entity acts as a joint operation, and the Company recognizes theitems related to the share of the interests of the joint operation and conducts accounting treatment in accordance with therelevant ASBEs.
Significant influence refers to the investor's power of participation in making an investee's financial and operation policiesbut the Company cannot control or jointly control with other parties to make these policies. The Company has a significantinfluence on the investee under one or more of the following situations and taking into account all facts and circumstances:
(1) it is represented on the board of directors or similar authorities of the investee; (2) it involves in the formulation of financialand operating policy of the investee; (3) it has important transactions with the investee; (4) it dispatches managementpersonnel to the investee; (5) it provides key technical information to the investee.
23. Investment Property
Measurement model for investment propertyMeasured based on the cost methodDepreciation or amortization methodInvestment property refers to real estate held to earn rentals or for capital appreciation, or both, including the land use rightwhich has already been let out, the land use right held and to be assigned after appreciation, building which has been leasedout, etc. In addition, if the Board of Directors has a written resolution on the vacant buildings held by the Company for thepurpose of operating the lease, it is clearly stated that they will be used for operating leases and that the intention to hold isno longer changed in the short term and they are presented as investment property.
The Company’s investment property is recorded at its cost, and the cost of purchased investment property includes thepurchase price, related taxes and other expenses directly attributable to the asset; the cost of self-built investment propertyis composed of the necessary expenses incurred before the asset is ready for expected use.
The Company adopts the cost model for subsequent measurement of investment property, and depreciates or amortizesbuildings and land use rights according to their estimated service life and net residual value. Expected useful life, residualvalue and annual depreciation rate are as follows:
| Categories | Expected useful life (years) | Expected residual value rate (%) | Annual depreciation (amortization) (%) |
| Housing & buildings | 20 -35 | 5.00 | 4.80 -2.70 |
When the use of investment property is changed to self-use, the Company converts the investment property into fixed assetsor intangible assets from the date of change. When the use of self-use property changes to rental earning or capitalappreciation, the Company converts fixed assets or intangible assets into investment property from the date of change.When a conversion occurs, the carrying amount before conversion is used as the converted value.
The investment property is derecognized when the investment property is disposed of, or permanently withdrawn from useand is not expected to obtain economic benefits from its disposal. The amount of disposal income from the sale, transfer,retirement or damage of the investment property after deducting its carrying amount and related taxes and expenses isrecognized in profit or loss for the current period.
24. Fixed asset
(1)Recognition conditions of fixed assets
Fixed assets are tangible assets that are held for production of goods, supply of services, for rental to others, or foradministrative purposes and have useful lives more than one accounting year. Fixed assets are recognized when thefollowing conditions are met at the same time:
1) The economic benefit related to the fixed asset is likely to flow into the enterprise;
2) The cost of the fixed asset can be reliably measured.
(2) Depreciation methods
| Categories | Depreciation methods | Depreciation life | Residual rate | Yearly depreciation rate |
| Plant & buildings | Average service life method | 20 -35 | 5.00 | 4.80 -2.70 |
| Machinery & equipment | Straight-line method | 10 | 5.00 -10.00 | 9.50 -9.00 |
| Electronic equipment | Straight-line method | 5 | 5.00 | 19.00 |
| Motor vehicle | Straight-line method | 5 | 5.00 | 19.00 |
| Other equipment | Straight-line method | 5 | 5.00 | 19.00 |
Depreciation of fixed assets is accrued over the estimated useful life based on its recorded value less the estimated netresidual value. The fixed assets that have been provided for impairment losses are depreciated in the future period basedon the carrying amount after deducting the impairment provision and the remaining useful life.
The Company determines the service life and estimated net residual value of fixed assets based on the nature and usageof fixed assets. The Company rechecks the service life, predicted net residual value and depreciation method of the fixedasset at the end of of a year. In case there exists any difference with the original estimate, the corresponding adjustmentshould be made.
(3) Basis for recognizing the fixed assets under financing lease, Pricing and Depreciation MethodsInapplicable
25. Construction-in-progress
(1) Construction-in-progress
The self-built construction in progress of the Company is measured at the actual cost, which is determined by the necessaryexpenses incurred before the construction of the asset reaches the intended usable condition, including the cost ofengineering materials, labour costs and relevant taxes payable, capitalized borrowing costs and indirect costs that shouldbe apportioned.
(2) Criteria for and time point of construction in progress to convert into fixed assetFor a construction-in-progress, its entry value shall be the total expenses incurred before the built asset reaches theexpected use condition. Where a construction in progress has reached the expected use condition but the final accounts ofthe as-built project have not been settled, from the day when the fixed asset reaches the expected use condition, valuesestimated according to the construction budget and cost or the actual construction cost shall be assigned to the fixed asset,and the fixed asset shall be depreciated under the fixed asset depreciation provisions. The depreciation amount alreadyprovided is not adjusted.
26. Borrowing Costs
(1)Recognition principle of capitalization of borrowing costs
If the borrowing costs incurred to the Company can be directly attributable to the acquisition, construction or production ofassets that meet the conditions for capitalization, they shall be capitalized and included in the cost of the relevant assets;other borrowing costs shall be recognized as expenses based on the amount incurred when they incur and included in thecurrent profit and loss.
The assets in compliance with the capitalization conditions refer to such assets as fixed assets, investment based real estate,inventories, etc. which need to undergo long time of acquisition or construction or production activities before they can reachthe predicted applicable or sellable status.
As soon as the borrowing costs meet the following conditions, capitalization starts:
A. Asset expenditures have already occurred, including expenditures in the form of paying cash, transferring non-cashassets, or assuming interest-bearing debts for the purchase, construction or production of assets that meet the capitalizationconditions;
B. Borrowing costs have incurred;
C. The purchase, construction or production activities necessary for the assets to reach the expected usable or saleablestate have already begun.
(2) Period of capitalization of borrowing costs
The capitalization period refers to the period from the time when the capitalization of borrowing costs starts to the time whenthe capitalization is stopped, excluding the period during which the capitalization of borrowing costs is suspended.
When the acquisition, construction or production of assets that meet the capitalization conditions reaches the intendedusable or saleable state, the capitalization of borrowing costs shall cease.
When a part of the assets purchased or produced that meet the capitalization conditions are completed and can be usedalone, such part of the assets shall stop capitalization of borrowing costs.
Where each part of the assets purchased or produced is completed separately, but must wait until the whole is completedor can be sold externally, the capitalization of the borrowing costs shall be stopped when the assets are completed as awhole.
(3) Suspension of capitalization period
If an abnormal interruption occurs during the acquisition, construction or production of an asset that meets the capitalizationconditions, and the interruption lasts for more than 3 months, the capitalization of borrowing costs shall be suspended; if theinterruption is a necessary procedure for the acquired, constructed or produced assets eligible for capitalization to reach theintended use or sale state, the borrowing costs may continue to be capitalized. The borrowing costs incurred during theinterruption period are recognized as the current profit and loss, and the borrowing costs continue to be capitalized after theacquisition, construction or production activities of the asset are resumed.
(4) Calculation method for the capitalized amount of borrowing costs
Interest charges on special borrowings (excluding interest income on unused borrowings deposited in the bank, orinvestment income on temporary investment) and their ancillary expenses shall be capitalized before the assets purchasedor produced that meet the capitalization conditions are ready for intended use or sale.
The amount of capitalized interest on general borrowings is calculated by the weighted average of the excess portion of theaccumulative asset expenditures over the special borrowings multiplied by the capitalization rate of general borrowings. Thecapitalization rate is determined based 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 theeffective interest rate method to determine the discount or premium amount that shall be amortized during each accountingperiod.
27. Biological Assets
Inapplicable
28. Oil and Gas Assets
Inapplicable
29. Right-to-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 the relevant amount of rentalincentives if any;
3) initial direct expenses incurred by the Company;
4) expected costs to be incurred by the Company for dismantling and removing leased assets, restoring the site of leasedassets or restoring leased assets to the state agreed in the lease terms (excluding costs incurred for the production ofinventory)
After the starting date of the lease term, the Company adopts the cost model for subsequent measurement of the asset withuse right.
If it can be reasonably determined to obtain the ownership of the leased asset at the expiration of the lease term, theCompany shall accrue depreciation during the remaining useful life of the leased asset. If it is impossible to reasonablydetermine that the ownership of the leased asset can be obtained when the lease term expires, the Company shall accruedepreciation during the shorter period of the lease term and the remaining useful life of the leased asset. For the right-to-use assets with impairment provision, depreciation shall be calculated based on the book value after deduction of impairmentprovision in according with the above principles in future periods.
30. Intangible assets
(1) Pricing Method, Service Life and Impairment Test
Intangible assets refer to the identifiable non-monetary assets owned or controlled by the Company which have no physicalform, including land use rights, software and trademark use rights.
1) Initial measurement of intangible assets
The cost of outsourcing intangible assets includes the purchase price, relevant taxes, and other expenditures directlyattributable to the asset's intended use. If the payment for the purchase of intangible assets is delayed beyond the normal
credit conditions and is of a financing nature, the cost of the intangible assets is determined on the basis of the presentvalue of the purchase price.
For an intangible asset acquired through debt restructuring by the debtor for the purpose of repaying debts, the Companydetermines its entry value on the basis of the fair value of the intangible assets, and includes the difference between thebook value of the restructured debt and the fair value of the fixed assets used to repay the debts in the current period profitand loss.
On the premise that the exchange of non-monetary assets has commercial substance and the fair value of the exchangedassets or exchanged assets can be reliably measured, the intangible assets exchanged in with non-monetary assets aredetermined on the basis of the fair value of the exchanged assets, unless there is conclusive evidence showing that the fairvalue of the assets exchanged in is more reliable; for non-monetary asset exchanges that do not meet the above premises,the book value of the assets exchanged and the relevant taxes and fees payable shall be used as the cost of the exchangeof intangible assets, and no profit or loss is recognized.
For intangible asset obtained through business absorption or combination under common control, its book value isdetermined by the carrying amount of the combined party; for intangible asset obtained through business absorption ormerger not under common control, its book value is determined by the fair value of the intangible asset.
The costs of intangible assets developed internally includes: materials used in the development of the intangible asset, laborcosts, registration fees, amortization of other patents and franchises used in the development process, and interestexpenses that meet the capitalization conditions , and other direct expenses incurred before the intangible asset reachesits intended use.
2) Subsequent measurement of intangible assets
The Company determines the useful life of intangible assets on acquisition, which are classified as intangible assets withlimited useful life and indefinite useful life.
Intangible assets with a limited useful lifeIntangible assets with a limited useful life are depreciated using straight line method over the term during which they bringeconomic benefits to the Company. The estimated life and basis for the intangible assets with a limited useful life are asfollows:
| Items | Estimated useful life | Amortization Method |
| Land use right | 50 | Straight-line method |
Software system
| Software system | 5 | Straight-line method |
| Trademark rights | 5 -10 | Straight-line method |
The useful life and depreciation method of intangible assets with a limited useful life are reassessed at the end of eachperiod. 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 of intangible assets from theprevious estimates at the end of the period.
(2) Accounting policy for internal research and development expenditure
1)Specific basis for determining the research stage and development stage of internal research and development projectsof the Company
Research phase: The phase of original planned investigations, research activities to acquire and understand new scienceor technology knowledge, etc.
Development phase: It is the phase in which the research result or other knowledge is applied in some plan or design sothat new or substantially improved materials, devices, products, etc. are produced prior to commercial production or use.
The expenditure of the research stage of the internal research and development project is included in the current profit orloss at the time of occurrence
2) Specific standard for capitalization of expenditure in the development stage
The expenditure of an internal research and development project in the development stage is recognized as an intangibleasset when meeting all of the following conditions:
A. It is technically feasible to complete the intangible asset so that it can be used or sold;B. With an intention to complete the intangible asset and to use or sell it;C. The way the intangible asset generates economic benefits can prove the existence of a market for the products producedusing the intangible asset or a market for the intangible asset itself, and if the intangible asset will be used internally, itsusefulness can be proven;D. Having sufficient technical, financial resources and other resource support to complete the development of the intangibleasset, and having the ability to use or sell the intangible asset;E. Expenditure attributable to the development stage of the intangible asset can be reliably measured.
Expenditures incurred in the development stage that do not meet the above conditions shall be included in the current profitor loss at the time of occurrence. The development expenditures which have been included in the profit or loss in the previousperiods will not be recognized as an asset in the future period. The capitalized expenditures in the development phase areshown in the balance sheet as development expenditures and are converted into intangible assets from the date of theproject’s intended use.
31. Impairment of long term assets
On the balance sheet date, the Company determines whether there may be a sign of impairment on long-term assets. Ifthere is a sign of impairment on long-term assets, the recoverable amount is estimated on the basis of a single asset. If it isdifficult to estimate the recoverable 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 of disposal and the present valueof the expected future cash flow of the asset.
The measurement results of recoverable amount show that when the recoverable amount of an long-term asset is lowerthan its book value, the book value of the long-term asset is reduced to its recoverable amount. The reduced amount isrecognized as an impairment loss on the asset and included in the current profit or loss, at the same time, asset impairment
provision will be made accordingly. Asset impairment loss shall not be reversed during the subsequent accounting periodonce recognized.
After the loss of asset impairment has been recognized , the depreciation or amortization expenses of the impaired assetshall be adjusted accordingly in the future periods so as to amortize the post - adjustment carrying value of the assetsystematically (deducting the expected net salvage value) within the residual service life of the asset.
For the goodwill formed from consolidation of an enterprise and intangible asset with the undetermined service life,regardless whether there exists any evidence of impairment, impairment testing is conducted every year.
In the impairment test of goodwill, the book value of goodwill would be apportioned to asset group or portfolio of asset groupexpected to benefit from the synergy effect of an enterprise merger. When taking an impairment test on the relevant assetgroup or portfolio of asset group containing goodwill, if there is a sign of impairment on the asset group or portfolio of assetgroup related to the goodwill, the Company first calculates the recoverable amount after testing the asset group or portfolioof asset group which does not contain the goodwill for impairment, and then compares it with the related book value torecognize the corresponding impairment loss. Next, the Company conducts an impairment test on the asset group orportfolio of asset group which contains the goodwill and compares the book value of the related asset group or portfolio ofasset group (book value includes the share of goodwill) with the recoverable amount. If the recoverable amount of the relatedasset group or portfolio of asset group is lower than the book value, the Company will recognize the impairment loss ofgoodwill.
32. Long term expenses to be apportioned
(1) Amortization Method
Long term expenses to be apportioned refer to expenses that have already been spent by the Company, but shall beapportioned in the current period and the future periods and the benefit period is over 1 year. Long term expenses to beapportioned are amortized in benefit period.
(2) Amortization period
| Categories | Amortization period |
| Counter fabrication expenses | 2 -3 |
| Decoration expenses | 3 -5 |
| Others | 2 -3 |
33.Contract liabilities
The obligation to transfer goods to a customer for which consideration has been received or receivable is recognized in partas a contract liability.
34. Payroll to Employees
(1) Accounting treatment of short term salaries
Short-term remuneration refers to the remuneration of the employees that needs to be fully paid within 12 monthsafter the end of the annual reporting period in which the employees provide related services, except for post-employment
benefits and termination benefits. During the accounting period in which employees provide services, the Companyrecognizes the short-term remuneration payable as a liability and accounts for the relevant asset costs and expenses basedon the beneficiaries of the services provided by the employees.
(2) Post-employment benefits
Post-employment benefits refer to the compensation and benefits provided, after employees’ retirement andtermination of employment, by the Company in order to obtain services from employees, except for the short-term compensation and employee benefits.
The Company’s post-employment benefits is defined contribution plan.
The defined contribution plan of the Company refers to the basic endowment insurance, unemployment insurance paid forthe employees according to relevant regulation by local governments. During the accounting period when employees renderservices to the Company, amount payable calculated by the base and ratio in conformity with local regulation is recognizedas liability and accounted for profit and loss or related cost of assets.
After paying the above-mentioned funds regularly in accordance with the standards and annuity plans stipulated by the state,the Company does not have other payment obligations.
(3) Termination benefits
Termination benefits refer to the compensation paid to an employee when the Company terminates the employmentrelationship with the employee before the expiry of the employment contract or provides compensation as an offer toencourage the employee to accept voluntary redundancy. The Company recognizes the liabilities arising from thecompensation paid to terminate the employment relationship with employees and includes the same in the current profit orloss at the earlier date of the following: when the Company cannot reverse the termination benefits due to the plan ofcancelling the labour relationship or the termination benefits provided by the advice of reducing staff; and the Companyrecognizes the cost or expense relative to the payment of termination benefits of restructuring into the current profit or loss.
The Company provides internal retirement benefits to employees who accept internal retirement arrangements. The internalretirement benefits refer to the remuneration and the social insurance premiums paid to the employees who have notreached the retirement age set by the State, and voluntarily withdrew from the job after approval of the Company’smanagement. The Company pays internal retired benefits to an internal retired employee from the day when the internalretirement arrangement begins till the employee reaches the normal retirement age. For internal retirement benefits, theCompany conducts accounting treatment in contrast to the termination benefits. When the related recognition conditions oftermination benefits are met, the Company 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 and normal retirement date asliabilities and include the same in the current profit or loss in one time. Changes in actuarial assumptions of internalretirement benefits and differences arising from the adjustment of welfare standards are included in current profit or losswhen incurred.
(4) Other long term employee benefits
Other long-term employee benefits refer to all employee benefits except for short-term remuneration, post-employmentbenefits, and termination benefits.
For other long-term employee benefits that meet the conditions of the defined contribution plan, during the accounting periodin which the employees provide services for the Company, the amount that should be paid is recognized as a liability and isincluded in the current profit or loss or related asset costs. In addition to the above situations, other long-term employeebenefits are actuarially calculated by the independent actuary using the expected cumulative welfare unit method on thebalance sheet date, and the welfare obligations arising from the defined benefit plans are attributed to the period duringwhich the employees provide services and are included in the current profit or loss or related asset costs.
35. Lease liabilities
The Company initially measures the lease liabilities according to the present value of the unpaid lease payments at thebeginning of the lease term. In calculating the present value of lease payments, the Company adopts the interest rateimplicit in the lease as the discount rate. If it is impossible to determine the interest rate implicit in the lease, the incrementalborrowing rate of the Company shall be used as the discount rate. Lease payments include:
1)Fixed payments and substantive fixed payments after deducting the relevant amount of lease incentives;
2)Variable lease payments depending on an index or rate;
3) Where the Company reasonably determines that the option will be exercised, the amount of the lease payment includesthe exercise price of purchase option;
4)Where the lease term reflects that the Company will exercise the option to terminate the lease, the amount of the leasepayment includes the amount to be paid for the exercise of the option 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 the lease term at a fixed discount rateand includes the same in the profit or loss of the current period or the related asset costs.
Variable lease payments not included in the measurement of lease liabilities shall be included in the current profit or loss orthe related asset costs when they actually occur.
36. Projected liabilities
(1) Basis for recognition of projected liabilities
The Company will recognize projected liabilities if the obligation relating to contingent matters meets all of the followingconditions:
This obligation is a present obligation assumed by the Company;
The fulfillment of this obligation will probably cause the outflow of economic benefits from the 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 estimate of the expenditure required forthe performance of the related present obligations.
When determining the best estimate, the Company comprehensively considers the risks, uncertainties relating to thecontingent matters and time value of currency. If the time value of currency has a great influence, the Company determinesthe best estimate by discounting the related 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 of the occurrence of all the resultsin the range is the same, the best estimate is determined according to the median value of the range, which is the averageof the upper and lower limit.
Where there is not a continuous range (or interval) of the required expenditure, or there is a continuous range, but theprobability of the occurrence of all the results in the range is different, if the contingencies involve a single project, the bestestimate is determined by the amount which is most likely to occur; if the contingencies involve a number of projects, thebest estimate is determined based on various possible results and related probability calculation.
If all or part of the expenses of the Company required to settle projected liabilities are expected to be compensated by athird party and it is basically certain to receive the amount of compensation, it is independently recognized as an asset. Theamount of compensation recognized will not exceed the book value of the projected liabilities.
37. Share-based payments
(1)Category of share-based payment
The Company’s share-based payments include equity-settled share-based payments and cash settled share-basedpayments.
(2) Method for determining the fair value of equity instruments
For options and other equity instruments granted by the Company with an active market, the fair value is determined at theactive market quotations. For options and other equity instruments granted by the Company with no active market, optionpricing model shall be used to estimate the fair value of the equity instruments. Factors as follows shall be taken into accountusing option pricing models: (1) the exercise price of the option; (2) the validity of the option; (3) the current price of thetarget share; (4) the expected volatility of the share price: (5) predicted dividend of the share; (6) risk-free rate of the optionwithin the validity period.
In determining the fair value of the equity instruments at the date of grant, the Company shall consider the impact of marketconditions in the vesting conditions and non-vesting conditions stated in the share-based payment agreement. If there areno vesting conditions in the share-based payments, as long as the employees or other parties satisfy the non-marketconditions in all of the vesting 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 exercisable equity instruments is amendedbased on the best estimate made by the Company according to the latest available subsequent information as to changesin the number of employees with exercisable rights. As at the exercise date, the final estimated number of exercisable equityinstruments should equal the actual number of exercisable equity instruments.
(4) Accounting treatment
Equity-settled share-based payments are measured at the fair value of the equity instruments granted to employees. If theright can be exercised immediately after the grant, the fair value of the equity instrument shall be included in the relevantcosts or expenses on the date of grant, and the capital reserve shall be increased accordingly. If the right is exercised afterthe completion of the waiting period services or the achievement of the specified performance conditions, on each balancesheet date during the waiting period, based on the best estimate of the number of exerciseable equity instruments, the fairvalue of the equity instruments is granted on the basis of value, including the services obtained in the current period intorelated costs or expenses and capital reserves. No adjustment will be made to the recognized related costs or expensesand the total owner's equity after the vesting date.
The cash-settled share-based payment is measured at the fair value of the liabilities assumed by the Company determinedand based on shares and other equity instruments. If the right can be exercised immediately after the grant, the fair valueof the liabilities assumed by the Company shall be included in the relevant costs or expenses on the date of grant, and theliabilities shall be increased accordingly. Cash-settled share-based payments that can only be exercised after the completionof the waiting period services or the specified performance conditions are exercised. At each balance sheet date during thewaiting period, the best estimate of the exercise is based on the fair value of the liabilities assumed by the Company,including the services obtained in the current period as costs or expenses and corresponding liabilities. The fair value of theliabilities is re-measured and the movement is counted in the current profits and losses on each balance sheet day andsettlement day before the settlement of related liabilities.
If the Company cancels the granted equity instrument during the vesting period, the Company shall treat it as acceleratedvesting, the amount which should be recognized during the remaining vesting period is counted to the current profit and lossimmediately and at the same time the capital reserve is recognized. If an employee or other party can choose to meet thenon-vesting conditions but fails to meet the vesting period, the Company treats it as a cancellation of the granted equityinstrument.
38. Other financial instruments, such as preferred shares, perpetual liabilities, etc.Inapplicable
39. Revenue
Accounting policies used in revenue recognition and measurement
The Company’s revenue mainly come from:
Sales of watchPrecision manufacturingProperty leasing
(1) General principle of revenue recognition
The Company recognizes revenue when the contract performance obligations have been fulfilled i.e. the customer hasgained control over the relevant goods or services.
Performance obligation means the Company’s commitment to transfer identifiable goods or service to clients.
Obtaining control of the relevant goods means that it is able to dominate the use of the goods and derive almost all economicbenefits therefrom.
The Company assesses contracts at the beginning date of a contract to identify each performance obligations contained ina contract and to determine whether each performance obligation is to be finished over a period of time or at a point of time.The Company satisfies a performance obligation over time if one of the following criteria is met; or otherwise, a performanceobligation is satisfied at a certain point in time: (1) the customer simultaneously receives and consumes the benefits providedby the Company’s performance as the Company performs; (2) the customer can control the goods under construction duringthe Company’s performance; (3) the Company’s performance does not create goods with an alternative use to it and theCompany has a right to payment for performance completed to date throughout the contract term. Otherwise, the Companyrecognizes revenue at the point of time.
For performance obligation satisfied over time, the Company recognizes revenue over time by measuring the progresstowards complete satisfaction of that performance obligation. The input method is to determine the performance progressbased on the Company's input for fulfilling its performance obligations. When the outcome of that performance obligationcannot be measured reasonably, but the Company expects to recover the costs incurred in satisfying the performanceobligation, the Company recognizes revenue only to the extent of the amount of costs incurred until it can reasonablymeasure the outcome of the performance obligation.
(2) Detailed method of revenue recognition
The Company has three main business sectors: sales of watch, precision manufacturing and property leasing. Based onthe Company’s business mode and terms of settlement, the Company set detailed method of revenue recognition methodas 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 customer confirmed received the goods.
② Offline sales
Revenue shall be recognized at the point when the goods are delivered and payment by customer is collected.
③ Consignment sale
The Company recognizes revenue when the Company receives the detail of the sales list from distributors and confirms thatthe 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 amount when it delivered consigned salegoods to customer and confirms that control over the ownership of goods were transferred to the purchaser.
2) Precision manufacturing
Precision manufacturing business belongs to fulfilling performance obligations at a point of time. Revenue from domesticsales shall be recognized when the goods are delivered and the economic benefit associated with the goods is probable toflow into the Company. Revenue from export shall be recognized when the following criteria is satisfied: The Companydeclared the good at custom; obtained bill of lading; the right of collecting payment is obtained and its probable that theeconomic benefit associated with the goods flows into the Company.
3)Property leasing
Refer to Note V 42 for details:accounting treatment with the Company as the lessor
(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 the amount of considerationexpected to be received due to the transfer of goods to the customers (exclusive of the amount expected to be refundeddue to the return of sales) , while liability is recognized based on the amount expected to be refunded due to the return ofsales.
The carrying amount of goods expected to be returned at sales of goods, after deduction of costs expected to incur forrecovery of such goods (including impairment of value of the returned goods) , will be accounted for under the item of “Rightof return assets”.
2) Contracts with quality assurance provisions
The Company assesses whether a separate service is rendered in respect of the quality assurance besides guaranteeingthe sales of goods to customers are in line with the designated standards. When additional service is provided by theCompany, it is considered as a single performance obligation and under accounting treatment according to the standardson revenue; otherwise, quality assurance obligations will be under accounting treatment according to the accountingstandards on contingent matters
Differences in accounting policies for revenue recognition caused by the adoption of different business models for similarbusinessesNil
40. Government subsidies
(1) Classification
Government subsidies refer to monetary and non-monetary assets received from the government without compensation,however excluding the capital invested by the government as a corporate owner. According to the subsidy objects stipulatedin the documents of relevant government, government subsidies are divided into subsidies related to assets and subsidiesrelated to income.
Government subsidies related to assets are obtained by the Company for the purposes of acquiring, constructing orotherwise forming long-term assets. Government subsidies related to income refer to the government subsidies other thanthose related to assets.
(2) Recognition of government subsidies
Where evidence shows that the Company complies with relevant conditions of policies for financial supports and is expectedto receive the financial support funds at the end of the period, the amount receivable is recognized as government subsidies.Otherwise, the government subsidy is recognized upon actual receipt.
Government subsidies in the form of monetary assets are stated at the amount received or receivable. Governmentsubsidies in the form of non-monetary assets are measured at fair value; if fair value cannot be reliably obtained, a nominalamount (CNY 1) is used. Government subsidies that are measured at nominal amount shall be recognized in the currentprofit or loss directly.
(3) Accounting treatment
The Company determines whether a government subsidy shall use gross method or net method based on its economicalsubstance. In general, only one method is used for one category or similar government subsidy and it shall be used in aconsistent way.
Government subsidies related to assets are recognized as deferred income, and are recognized, under reasonable andsystematic approach, in profit and loss in each period over the useful life of the constructed or purchased assets;
Government subsidies related to income aiming at compensating for relevant expenses or losses to be incurred by theenterprise in subsequent periods are recognized as deferred income, and are recognized in current profit or loss whenrelevant expenses or losses are recognized. Government subsidies aiming at compensating for relevant expenses or lossesof the enterprise that 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 arenot related to daily activities of enterprises are included in non-operating income and expense.
Government subsidies related to the discount interest received from policy-related preferential loans offset the relevantborrowing costs; if the policy-based preferential interest rate loan provided by the lending bank is obtained, the borrowingamount actually received shall be taken as the recording value of the borrowings, and borrowing cost should be calculatedusing the preferential 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 write down the carrying value ofrelevant assets on initial recognition, the carrying value of the relevant assets shall be adjusted; if there is balance of relevantdeferred income, it shall be written down to the book balance of relevant deferred income, and the excess is included in thecurrent profit or loss; where there is no relevant deferred income, it shall be directly included in the current profit or loss
41. Deferred Income Tax Assets and Deferred Income Tax Liabilities
Deferred income tax assets and deferred income tax liabilities are measured and recognized based on the difference(temporary difference) between the taxable base of assets and liabilities and book value. On balance sheet date, the
deferred income tax assets and deferred income tax liabilities are measured at the applicable tax rate during the periodwhen it is expected to recover such assets or settle such liabilities.
(1) Criteria for recognition of deferred income tax assets
The Company recognizes deferred income tax assets arising from deductible temporary difference to the extent it is probablythat future taxable amount will be available against which the deductible temporary difference can be utilized, and deductiblelosses and taxes can be carried forward to subsequent years. However, the deferred income tax assets arising from theinitial recognition of assets or liabilities in a transaction with the following features are not recognized: 1) the transaction isnot a business combination; 2) neither the accounting profit or the taxable income or deductible losses will be affected whenthe transaction occurs.
For deductible temporary difference in relation to investment in the associates, corresponding deferred income tax assetsare recognized in the following conditions: the temporary difference is probably reversed in a foreseeable future and it islikely that taxable income is obtained for deduction 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 paidtaxation 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 accounting profit or the taxable income (ordeductible losses) will be affected when the transaction or event occurs;
3) for taxable temporary difference in relation to investment in subsidiaries or associates, the time for reversal of thetemporary difference can be controlled and the temporary difference is probably not reversed in a foreseeable future
(3) When all of the following conditions are satisfied, deferred income tax assets and deferred income tax liabilitiesshall be presented on a net basis
1) An enterprise has the statutory right to settle the current income tax assets and current income tax liabilities at their netamounts;
2) The deferred income tax assets and deferred income tax liabilities relate to income taxes levied by the same taxationauthority on either the same taxable entity or different taxable entities which intend either to settle current income tax assetsand current income tax liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in eachfuture period in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
42. Lease
(1) Accounting process for operating lease
The Company adopts the straight-line method or other systematic and reasonable method in each period of the lease term,and recognizes the lease receipts from operating leases as rental income; the initial direct expenses incurred in relation tooperating leases are capitalized and amortized on the same basis as rental income recognition during the lease term, and
included in the current profit and loss in installments; the variable lease payments obtained in relation to operating leasesthat are not included in the lease receipts are included in the current profit and loss when actually incurred.
(2) Accounting treatment method for finance lease
If a lease has one or more of the following characteristics, the Company usually classifies it as a financial lease：
1) At the expiry of the lease term, the ownership of the leased assets is transferred to the lessee.
2) The lessee has the option to purchase the leased assets, and the purchase price set by the lessee is low enoughcompared with the expected fair value of the leased assets when exercising the option. Therefore, it can be reasonablydetermined on the lease start date that the lessee will exercise the option.
3) Although the ownership of the assets is not transferred, the lease term accounts for the majority of the life of the leasedassets.
4) On the commencement date of the lease, the present value of the lease receipts is almost equal to the fair value of theleased assets.
5)The nature of leased assets is special. If there is no major transformation, only the lessee can use them.
If one or more of the following conditions exist in a lease, it may also be classified as a financial lease:
1)If the lessee stops the lease, the lessee shall bear the losses caused by the termination of the lease to the lessor.
2)The profits or losses caused by the fluctuation of the fair value of the balance of assets belong to the lessee.
3) The lessee can continue to lease far below the market level for the next period.
On the commencement date of lease term, the Company recognizes the financial lease receivable on the financial leasesand derecognizes the financial lease assets.
When the initial measurement of the financial lease receivable is made, the book value of the financial lease receivable isthe sum of the unsecured balance and the present value of lease receipts that have not yet been received at the beginningof the lease term discounted at the interest rate implicit in the lease. The lease receipts include:
1) Fixed payments and substantive fixed payments after deducting the relevant amount of lease 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 theexercise 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 theamount to be paid by the lessee in exercising the option to terminate the lease;
5) Guarantee residual value provided to the lessor by the lessee, the party concerned with the lessee and an independentthird party with financial capacity to fulfill the guarantee obligation.
The Company calculates and recognizes the interest income for each period of the lease term based on the fixed interestrate implicit in the lease, and the variable lease payments which are obtained and not included in the net rental investmentamount are included in the profit or loss of the period when they actually occur.
43. Other important accounting policy and accounting estimate
Inapplicable
44. Changes in significant accounting policies and accounting estimates
(1) Change in significant accounting policies
Inapplicable
(2) Change in significant accounting estimates
Inapplicable
45. Others
InapplicableVI. Taxation
1. Types of major taxes and tax rates
| Type of taxes | Tax basis | Tax rates |
| Value-added tax | Domestic sales and provision of processing, repairing and repairing services; property lease services; other taxable sales service activities; simplified method | 13%, 9%, 6% and 5% |
| Consumption tax | High-grade watches | 20% |
| Urban maintenance and construction tax | Amount of the turnover tax actually paid | 7% and 5% |
| Business income tax | Taxable income amount | For the detail, refer to the following table |
In case there exist taxpayers subject to different corporate income tax rates, disclose the information.
| Taxpayers | Income tax rates |
| Shenzhen Harmony World Watches 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 Watches Center (Hainan) Ltd.(⑥) | 20% |
| Shenzhen XUNHANG Precision Technology Co., Ltd. | 25% |
| Emile Chouriet (Shenzhen) Limited | 25% |
| Liaoning Hengdarui Commerce & Trade Co., Ltd. | 25% |
| Shiyuehui Boutique (Shenzhen) Co., Ltd. | 25% |
| Shenzhen Harmony E-Commerce Limited (⑥) | 20% |
| FIYTA (Hong Kong) Limited (④) | 16.5% |
| Montres Chouriet SA (⑤) | 30% |
2. Tax Preferences
Note ① : According to the regulations stated in “Interim Administration Method for Levy of Corporate Income Tax toEnterprise that Operates Cross-regionally”, the head office of the Company and its branch offices, the head office ofHARMONY Company and its branch offices, and the head office of Sales Company and its branch offices adopt taxsubmission 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 enterprise income tax and prepaylocally; and 50% will be prepaid by the head offices mentioned above;
Note ②: According to “Notice of the Ministry of Finance, the State Administration of Taxation and Ministry of Science onFurther Perfection of the Pre-tax Super Deduction Ratio of Research and Development Expenses” (Cai Shui (2021) No.
13) , if the research and development costs are not capitalized as intangible assets but charged to current profit or loss, allof these entities can enjoy a 100% super deduction on top of the R&D expenses that allowed to deduct before income taxsince 1 January 2021.
Note ③: The Company enjoyed for “Reduction and Exemption in Corporate Income Tax Rate for High and New TechnologyEnterprises that Require Key Support from the State”;
Note ④: These companies are registered in Hong Kong and the income tax rate of Hong Kong applicable is 16.50% thisyear.
Note ⑤: The comprehensive tax rate of 30% is applicable for Swiss Company as it registered 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 the Announcement of the Ministry of Finance and the State Administration of Taxation on Implementing thePreferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial and Commercial Households(CAISHUI (2022) No. 13), “Proclamation of Ministry of Finance and State Administration of Taxation in ImplementingPreferential Tax Rate to Small and Low Profit Enterprises and Sole-proprietors” (Caishui (2021) No.12) and “Notice ofMinistry of Finance and State Administration of Taxation on Implementation of the Inclusive Income Tax Deduction and
Exemption Policies for Small Low-Profit Enterprises” (Cai Shui (2019) No.13) , the portion of annual taxable income of smalllow-profit enterprise that is below CNY1,000,000.00 will be included in taxable income at 12.5% and to be taxed at a rate of20%; and for annual taxable income that is greater than CNY1,000,000.00 but not exceeding CNY3,000,000.00, of which25% will be included in taxable income and to be taxed at 20%.
In accordance with Notice of the Ministry of Finance and the State Administration of Taxation on Extending the LossCarryover Period for High and New Technology Enterprises and Small and Medium-Sized Technological Enterprises (CAISHUI (2018)No.76), commencing from January 1, 2018, the unrecovered losses incurred in the 5 fiscal years before beingqualified for becoming a high-tech enterprise are allowed to be carried forward to make up for subsequent years, and thelongest carry-forward period has been extended from 5 years to 10 years.
According to the Announcement of the Ministry of Finance and the State Taxation Administration on Further KeepingAccelerating the Implementation of the Policies Regarding the Refund of Term-End Excess Input Value-Added Tax Credits,the eligible small and micro enterprises may apply to the competent tax authority for refund of the incremental tax creditsstarting from the tax filing period in April 2022. Eligible micro-enterprises may apply to competent tax authorities for refundof existing excess input tax credits commencing from April 2022; eligible small enterprises pay apply to competent taxauthorities for the refund of existing excess input tax credits in a lump sum from the tax return filing period of May 2022.
3. Others
InapplicableVII. Notes to items of consolidated financial statements
1. Monetary capital
In CNY
| Items | Ending balance | Opening balance |
| Cash in stock | 175,028.83 | 108,612.08 |
| Bank deposit | 392,393,331.66 | 188,908,798.10 |
| Other Monetary Funds | 1,305,570.06 | 21,237,326.96 |
| Total | 393,873,930.55 | 210,254,737.14 |
| Including: total amount deposited overseas | 4,702,798.19 | 1,724,651.93 |
Other noteAs at 30th June 2021, the Company does not have balance of cash or other monetary funds that are restricted becausebeing pledged as security, frozen or have potential risk in recovery.
2. Transactional financial assets
Inapplicable
3. Derivative financial assets
Inapplicable
4. Notes receivable
(1) Presentation of classification of notes receivable
In CNY
| Items | Ending balance | Opening balance |
| Bank acceptance | 4,401,079.80 | 2,989,331.70 |
| Trade acceptance | 49,453,891.33 | 58,268,814.10 |
| Total | 53,854,971.13 | 61,258,145.80 |
In CNY
| Categories | Ending balance | Opening balance | ||||||||
| Book balance | Bad debt reserve | Book value | Book balance | Bad debt reserve | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
| Including: | ||||||||||
| Notes receivable for which bad debt reserve has been provided based on portfolios | 56,457,807.54 | 100.00% | 2,602,836.41 | 4.61% | 53,854,971.13 | 64,324,925.49 | 100.00% | 3,066,779.69 | 4.77% | 61,258,145.80 |
| Including: | ||||||||||
| Business acceptance note | 52,056,727.74 | 92.20% | 2,602,836.41 | 5.00% | 49,453,891.33 | 61,335,593.79 | 95.35% | 3,066,779.69 | 5.00% | 58,268,814.10 |
| Risk-free bank acceptance portfolio | 4,401,079.80 | 7.80% | 0.00% | 4,401,079.80 | 2,989,331.70 | 4.65% | 0.00% | 2,989,331.70 | ||
| Total | 56,457,807.54 | 100.00% | 2,602,836.41 | 4.61% | 53,854,971.13 | 64,324,925.49 | 100.00% | 3,066,779.69 | 4.77% | 61,258,145.80 |
Provision for bad debts based on portfolio: commercial acceptance portfolio
In CNY
| Name | Ending balance | ||
| Book balance | Bad debt reserve | Provision proportion | |
| Business acceptance note | 52,056,727.74 | 2,602,836.41 | 5.00% |
| Total | 52,056,727.74 | 2,602,836.41 | |
Note to the basis for determining the combination:
Notes receivables with same aging have similar credit risk characteristics
Provision for bad debts based on portfolio: bank acceptance portfolio
In CNY
| Name | Ending balance | ||
| Book balance | Bad debt reserve | Provision proportion | |
| Risk-free bank acceptance portfolio | 4,401,079.80 | 0.00% | |
| Total | 4,401,079.80 | ||
Note to the basis for determining the combination:
The issuer has higher level of credit rating and no default in past and has strong ability to fulfill its contractual cash followobligation
If the provision for bad debts of notes receivable is accrued in accordance with the general expected credit loss model,please refer to the disclosure of other receivables to disclose the relevant information of the provision for bad debts:
Inapplicable
(2) Provision, recovery or reversal of reserve for bad debts during the reporting periodProvision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Recovery or reversal | Written-off | Others | |||
| Notes receivable with expected credit loss by portfolio | 3,066,779.69 | 0.00 | 463,943.28 | 0.00 | 0.00 | 2,602,836.41 |
| Total | 3,066,779.69 | 0.00 | 463,943.28 | 0.00 | 0.00 | 2,602,836.41 |
Where the significant amount of the reserve for bad debt recovered or reversed:
Inapplicable
(3) Notes receivable already pledged by the Company at the end of the reporting periodInapplicable
(4) Endorsed or discounted notes receivable at the end of the reporting period, but not yet due on the balancesheet date
In CNY
| Items | Amount involved in the termination of recognition at the end of the reporting period | Amount without termination of recognition at the end of the reporting period |
| Commercial acceptance bills | 0.00 | 12,178,305.45 |
| Total | 0.00 | 12,178,305.45 |
(5) Notes transferred to receivables due to issuer’s default at the end of the reporting periodInapplicable
(6) Notes receivable actually written off in current period
Inapplicable
5. Accounts receivable
(1) Accounts receivable disclosed by category
In CNY
| Categories | Ending balance | Opening balance | ||||||||
| Book balance | Bad debt reserve | Book value | Book balance | Bad debt reserve | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
| Accounts receivable for which bad debt reserve has been provided based on individual items | 42,011,496.08 | 9.07% | 30,585,384.60 | 72.80% | 11,426,111.48 | 41,742,982.67 | 9.66% | 32,056,051.67 | 76.79% | 9,686,931.00 |
| Including: | ||||||||||
| Accounts receivable for which bad debt reserve has been provided based on portfolios | 421,417,857.95 | 90.93% | 13,208,263.48 | 3.13% | 408,209,594.47 | 390,245,370.43 | 90.34% | 11,046,700.15 | 2.83% | 379,198,670.28 |
| Including: | ||||||||||
| Accounts receivable from other customers | 421,417,857.95 | 90.93% | 13,208,263.48 | 3.13% | 408,209,594.47 | 390,245,370.43 | 90.34% | 11,046,700.15 | 2.83% | 379,198,670.28 |
| Total | 463,429,354.03 | 100.00% | 43,793,648.08 | 9.45% | 419,635,705.95 | 431,988,353.10 | 100.00% | 43,102,751.82 | 9.98% | 388,885,601.28 |
Bad debt reserve provided based on individual items: Accounts receivable from other customers
In CNY
| Name | Ending balance | |||
| Book balance | Bad debt reserve | Provision proportion | Provision reason | |
| Accounts receivable from other customers | 42,011,496.08 | 30,585,384.60 | 72.80% | Small possibility of recovery as predicted |
| Total | 42,011,496.08 | 30,585,384.60 | ||
Bad debt reserve provided based on portfolio: Accounts receivable from other customers
In CNY
| Name | Ending balance | ||
| Book balance | Bad debt reserve | Provision proportion | |
| Accounts receivable from other customers | 421,417,857.95 | 13,208,263.48 | 3.13% |
| Total | 421,417,857.95 | 13,208,263.48 | |
Note to the basis for determining the combination:
Notes receivables with same aging have similar credit risk characteristicsProvision for bad and doubtful debts based on portfolio:
InapplicableNote to the basis for determining the combination:
Inapplicable
If the provision for bad debts of accounts receivable is accrued in accordance with the general expected credit loss model,please refer to the disclosure of other receivables to disclose the relevant information of the provision for bad debts:
InapplicableDisclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 426,691,644.02 |
| 1 to 2 years | 18,361,770.82 |
| 2 to 3 years | 6,003,104.55 |
| Over 3 years | 12,372,834.64 |
| 3 to 4 years | 5,990,829.06 |
| 4 to 5 years | 4,181,220.96 |
| Over 5 years | 2,200,784.62 |
| Total | 463,429,354.03 |
(2) Provision, recovery or reversal of reserve for bad debts during the reporting periodProvision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Recovery or reversal | Written-off | Others | |||
| Accounts receivable with single provision for expected credit loss | 32,056,051.67 | 612,187.80 | 2,130,784.84 | 0.00 | 47,929.97 | 30,585,384.60 |
| Accounts receivable with provision for expected credit loss by portfolio | 11,046,700.15 | 2,182,725.60 | 27,507.41 | 0.00 | 6,345.14 | 13,208,263.48 |
| Total | 43,102,751.82 | 2,794,913.40 | 2,158,292.25 | 0.00 | 54,275.11 | 43,793,648.08 |
Where the significant amount of the reserve for bad debt recovered or reversed:
In CNY
| Organization name | Amount recovered or reversed | Way of recovery |
| Suning.com Co.,Ltd. | 1,827,384.80 | Bank transfer |
| Total | 1,827,384.80 |
(3) Accounts receivable actually written off in the reporting period
Inapplicable
(4) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Organization name | Ending balance of the accounts receivable | Proportion in total ending balance of accounts receivable | Ending balance of the provision for bad debts |
| Summary of the top five accounts receivable in the ending balance | 153,783,424.18 | 33.18% | 16,278,612.40 |
| Total | 153,783,424.18 | 33.18% |
(5) Account receivable with recognition terminated due to transfer of financial assetsInapplicable
(6) Amount of assets and liabilities formed through transfer of accounts receivable and continuing to be involvedInapplicable
6. Financing with accounts receivable
Inapplicable
7. Advance payments
(1) Advance payments are presented based on ages
In CNY
| Aging | Ending balance | Opening balance | ||
| Amount | Proportion | Amount | Proportion | |
| Within 1 year | 10,582,818.74 | 100.00% | 7,946,750.81 | 100.00% |
| Total | 10,582,818.74 | 7,946,750.81 | ||
Note to the reason why advance payments with an age exceeding 1 year and significant amount are not settled in time:
Inapplicable
(2) Advance payment to the top five payees in the ending balance collected based on the payees of the advancepayment
| Organization name | Ending balance | Proportion in the total advance payments |
| Summary of the advance payments in the ending balance to the top 5 payees | 5,734,567.00 | 54.19% |
8. Other receivables
In CNY
| Items | Ending balance | Opening balance |
| Other receivables | 58,848,161.73 | 61,553,267.82 |
| Total | 58,848,161.73 | 61,553,267.82 |
(1) Interest receivable
1) Classification of interest receivable
Inapplicable
2) Significant overdue interest
Inapplicable
3) Provision for bad debts
Inapplicable
(2) Dividends receivable
1) Classification of dividends receivable
Inapplicable
2) Significant dividends receivable with age exceeding 1 year
Inapplicable
3) Provision for bad debts
Inapplicable
(3) Other receivables
1) Classification of other receivables based on nature of payment
In CNY
| Nature of the fund | Ending book balance | Opening book balance |
| Reserve for employees | 4,787,803.12 | 2,556,673.37 |
| Collateral, deposit | 49,614,405.76 | 55,467,644.12 |
| Others | 8,691,913.30 | 7,949,229.66 |
| Total | 63,094,122.18 | 65,973,547.15 |
2) Provision for bad debts
In CNY
| Provision for bad debt | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit loss in future 12 months | Expected credit loss in the whole duration (no credit impairment incurred) | Expected credit loss in the whole duration (credit impairment already incurred) | ||
| Balance as at January 01, 2022 | 3,055,122.43 | 1,365,156.90 | 4,420,279.33 | |
| Balance as at January 01, 2022 in the reporting period | ||||
| Provision in the reporting period | 42,606.08 | 20,570.00 | 63,176.08 | |
| Reversal in the reporting period | 228,782.56 | 8,100.00 | 236,882.56 | |
| Other changes | -612.40 | -612.40 | ||
| Balance as at June 30, 2022 | 2,868,333.55 | 1,377,626.90 | 4,245,960.45 |
Provision for loss - Change of the book balance with significant amount during the reporting periodInapplicableDisclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 61,807,524.74 |
| 1 to 2 years | 649,029.90 |
| 2 to 3 years | 477,214.06 |
| Over 3 years | 160,353.48 |
| 3 to 4 years | 120,303.48 |
| Over 5 years | 40,050.00 |
| Total | 63,094,122.18 |
(3) Provision, recovery or reversal of reserve for bad debts during the reporting periodProvision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Recovery or reversal | Written-off | Others | |||
| Provision for bad debt | 4,420,279.33 | 63,176.08 | 236,882.56 | 0.00 | -612.40 | 4,245,960.45 |
| Total | 4,420,279.33 | 63,176.08 | 236,882.56 | 0.00 | -612.40 | 4,245,960.45 |
Where a significant amount of the reserve for bad debt recovered or reversed during the reporting period:
Inapplicable
4) Other receivables actually written off in the reporting period
Inapplicable
5) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Organization name | Nature of Payment | Ending balance | Aging | Proportion in total ending balance of other receivables | Ending balance of the provision for bad debts |
| Summary of the top five other receivables in the ending balance | Collateral, deposit, etc. | 17,475,483.52 | Within 1 year | 27.70% | 873,774.17 |
| Total | 17,475,483.52 | 27.70% | 873,774.17 |
6) Accounts receivable involving government subsidy
Inapplicable
7) Other receivables derecognized due to transfer of financial assets
Inapplicable
8) Amount of assets and liabilities formed through transfer of other receivables and continuing to be involvedInapplicable
9. Inventories
Does the Company need to comply with the requirements on information disclosure for real estate industryNo
(1) Classification of inventories
In CNY
| Items | Ending balance | Opening balance | ||||
| Book balance | Provision for price falling of inventory or provision for impairment of contract performance costs | Book value | Book balance | Provision for price falling of inventory or provision for impairment of contract performance costs | Book value | |
| Raw materials | 159,690,508.07 | 18,231,497.79 | 141,459,010.28 | 181,764,220.90 | 17,693,135.85 | 164,071,085.05 |
| Products in process | 8,473,878.87 | 0.00 | 8,473,878.87 | 20,682,530.58 | 0.00 | 20,682,530.58 |
| Commodities in stock | 1,919,590,959.85 | 89,527,578.61 | 1,830,063,381.24 | 1,960,110,199.48 | 94,715,064.22 | 1,865,395,135.26 |
| Total | 2,087,755,346.79 | 107,759,076.40 | 1,979,996,270.39 | 2,162,556,950.96 | 112,408,200.07 | 2,050,148,750.89 |
(2) Provision for price falling of inventory or provision for impairment of contract performance costs
In CNY
| Items | Opening balance | Amount increased in the reporting period | Decrease in the reporting period | Ending balance | ||
| Provision | Others | Reversal or write-off | Others | |||
| Raw materials | 17,693,135.85 | 0.00 | 551,010.65 | 12,648.71 | 0.00 | 18,231,497.79 |
| Commodities in stock | 94,715,064.22 | 360,867.40 | 51,325.37 | 5,599,678.38 | 0.00 | 89,527,578.61 |
| Total | 112,408,200.07 | 360,867.40 | 602,336.02 | 5,612,327.09 | 0.00 | 107,759,076.40 |
Note to provision for price falling:
| Items | Evidence of determine NRV and future selling cost | Reason for reversal or write-off of the provision for price falling of inventories in the reporting period |
| Raw materials | 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 |
| Commodities in stock | Estimated selling price less estimated selling and distributing expenses and associated taxes | Inventory that already provided for was sold or used in current period |
(3) Note to the amount of capitalized borrowing costs involved in the ending balance of inventoriesInapplicable
(4) Description of the current amortization amount of contract performance costsInapplicable
10. Contract assets
Inapplicable
11. Held-for-sale assets
Inapplicable
12. Non-current assets due within a year
Inapplicable
13. Other current assets
In CNY
| Items | Ending balance | Opening balance |
| Excess VAT paid | 12,669,164.38 | 20,468,630.65 |
| Input VAT to be certified | 13,369,767.27 | 41,895,970.19 |
| Income tax paid in advance | 282,638.67 | 2,459,142.75 |
| Others | 4,947,045.88 | 7,874,949.13 |
| Total | 31,268,616.20 | 72,698,692.72 |
14. Equity investment
Inapplicable
15. Other equity investment
Inapplicable
16. Long term accounts receivable
(1) About long term accounts receivable
Inapplicable
(2) Long term account receivable derecognized due to transfer of financial assetsInapplicable
(3) Amount of assets and liabilities formed through transfer of long term accounts receivable and continuing tobe involvedInapplicable
17. Long-term equity investments
In CNY
| Investees | Opening balance (book value) | Increase/ Decrease (+ / -) in the reporting period | Ending balance (book value) | Ending balance of the provision for impairment | |||||||
| Additional investment | Decrease of investment | Income from equity investment recognized under equity method | Adjustment of other comprehensive income | Other equity movement | Announced for distributing cash dividend or profit | Provision for impairment | Others | ||||
| I. Joint Venture | |||||||||||
| II. Associates | |||||||||||
| Shanghai Watch Industry Co., Ltd. | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
| Sub-total | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
| Total | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
18. Investment in other equity instruments
In CNY
| Items | Ending balance | Opening balance |
| Xi'an Tangcheng Co., Ltd. | 85,000.00 | 85,000.00 |
| Total | 85,000.00 | 85,000.00 |
Itemized disclosure of investment in non-transactional equity instruments in the reporting periodInapplicable
19. Other non-current financial assets
Inapplicable
20. Investment Property
(1) Investment property measured based on the cost method
In CNY
| Items | Housing & buildings | Land use right | Construction-in-progress | Total |
| I. Original book value | ||||
| Opening balance | 610,886,415.67 | 610,886,415.67 | ||
| Amount increased in the reporting period | ||||
| (1) Purchased | ||||
| (2) Inventories\fixed assets/construction-in–progress transferred in | ||||
| (3) Increase of enterprise consolidation | ||||
| 3. Amount decreased in the reporting period | ||||
| (1) Disposal | ||||
| (2) Other transfer out | ||||
| 4. Ending balance | 610,886,415.67 | 610,886,415.67 | ||
| II. Accumulative depreciation and accumulative amortization | ||||
| Opening balance | 227,460,499.32 | 227,460,499.32 | ||
| 2. Amount increased in the reporting period | 7,718,268.72 | 7,718,268.72 | ||
| (1) Provision or amortization | 7,718,268.72 | 7,718,268.72 | ||
| 3. Amount decreased in the reporting period | ||||
| (1) Disposal | ||||
| (2) Other transfer out | ||||
| 4. Ending balance | 235,178,768.04 | 235,178,768.04 | ||
| III. Provision for impairment | ||||
| 1. Opening balance | ||||
| 2. Amount increased in the reporting period | ||||
| (1) Provision | ||||
| 3. Amount decreased in the reporting period | ||||
| (1) Disposal | ||||
| (2) Other transfer out | ||||
| 4. Ending balance | ||||
| IV. Book value | ||||
| 1.Book value at the end of the reporting period | 375,707,647.63 | 375,707,647.63 | ||
| 2.Book value at the | 383,425,916.35 | 383,425,916.35 |
beginning of the reportingperiod
(2) Investment property measured based on fair value
Inapplicable
(3) Investment property that does not have certificate for property right
Inapplicable
21. Fixed asset
In CNY
| Items | Ending balance | Opening balance |
| Fixed asset | 340,122,918.20 | 349,495,316.65 |
| Total | 340,122,918.20 | 349,495,316.65 |
(1) About fixed assets
In CNY
| Items | Plant & buildings | Machinery & equipment | Motor vehicle | Electronic equipment | Others | Total |
| I. Original book value | ||||||
| 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. Amount increased in the reporting period | 118,161.68 | 1,855,411.01 | 1,078,086.78 | 580,646.30 | 3,632,305.77 | |
| (1) Purchase | 550.00 | 1,806,833.02 | 1,077,578.59 | 580,646.30 | 3,465,607.91 | |
| (2) Construction-in-process transferred in | ||||||
| (3) Increase of business combination | ||||||
| (4) Change of the exchange rate | 117,611.68 | 48,577.99 | 508.19 | 166,697.86 | ||
| 3. Amount decreased in the reporting period | 36,450.82 | 322,696.37 | 773,422.24 | 1,597,503.47 | 2,730,072.90 | |
| (1) Disposal or scrapping | 304,801.68 | 772,796.44 | 1,595,859.48 | 2,673,457.60 | ||
| (2) Change of the exchange rate | 36,450.82 | 17,894.69 | 625.80 | 1,643.99 | 56,615.30 | |
| 4. Ending balance | 408,269,419.92 | 109,000,815.50 | 14,780,510.38 | 46,622,113.07 | 45,870,412.77 | 624,543,271.64 |
| II. Accumulative 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. Amount increased in the reporting period | 6,188,691.41 | 3,630,322.25 | 180,931.88 | 1,650,494.43 | 969,824.20 | 12,620,264.17 |
| (1) Provision | 6,030,493.33 | 3,579,918.79 | 180,931.88 | 1,650,011.65 | 969,824.20 | 12,411,179.85 |
| (2) Change of the exchange rate | 158,198.08 | 50,403.46 | 482.78 | 209,084.32 | ||
| 3. Amount decreased in the reporting period | 21,068.56 | 243,575.86 | 698,604.15 | 1,382,384.28 | 2,345,632.85 | |
| (1) Disposal or scrapping | 230,386.66 | 698,156.64 | 1,380,859.88 | 2,309,403.18 | ||
| (2) Change of the exchange rate | 21,068.56 | 13,189.20 | 447.51 | 1,524.40 | 36,229.68 | |
| 4. Ending balance | 128,317,188.03 | 66,426,481.52 | 13,028,402.69 | 36,848,395.94 | 39,799,885.27 | 284,420,353.44 |
| III. Provision for impairment | ||||||
| 1. Opening balance | ||||||
| 2. Amount increased in the reporting period | ||||||
| (1) Provision | ||||||
| 3. Amount decreased in the reporting period | ||||||
| (1) Disposal or scrapping | ||||||
| 4. Ending balance | ||||||
| IV. Book value | ||||||
| 1.Book value at the end of the reporting period | 279,952,231.89 | 42,574,333.98 | 1,752,107.69 | 9,773,717.14 | 6,070,527.50 | 340,122,918.20 |
| 2.Book value at the beginning of the reporting 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) About temporarily idle fixed assets
Inapplicable
(3) Fixed assets leased through operating lease
Inapplicable
(4) Fixed assets that do not have certificate for property right
In CNY
| Items | Book value | The reason why the title certificate has not been granted |
| Housing & buildings | 214,873.64 | There existed problem in ownership |
(5) Disposal of fixed assets
Inapplicable
22. Construction-in-progress
(1)About construction-in-progress
Inapplicable
(2) Movements of important construction-in-progress projects in the reporting periodInapplicable
(3) Provision for impairment of construction in progress in the current period
Inapplicable
(4) Engineering materials
Inapplicable
23. Productive biological asset
(1) Productive biological asset by using the cost measurement model
Inapplicable
(2) Productive biological asset by using the fair value measurement model
Inapplicable
24. Oil and Gas Assets
Inapplicable
25. Right-to-use Assets
In CNY
| Items | Housing & buildings | Total |
| I. Original book value | ||
| 1. Opening balance | 313,578,633.64 | 313,578,633.64 |
| 2. Amount increased in the reporting period | 37,399,385.30 | 37,399,385.30 |
| Lease | 37,394,626.91 | 37,394,626.91 |
| Other increases | 4,758.39 | 4,758.39 |
| 3. Amount decreased in the reporting period | 11,919,488.44 | 11,919,488.44 |
| Disposal | 11,919,488.44 | 11,919,488.44 |
| 4. Ending balance | 339,058,530.50 | 339,058,530.50 |
| II. Accumulative depreciation | ||
| 1. Opening balance | 165,646,158.22 | 165,646,158.22 |
| 2. Amount increased in the reporting period | 57,747,319.25 | 57,747,319.25 |
| (1) Provision | 57,747,319.25 | 57,747,319.25 |
| 3. Amount decreased in the reporting period | 7,606,602.97 | 7,606,602.97 |
| (1) Disposal | 7,401,955.53 | 7,401,955.53 |
| (2) Other decreases | 204,647.44 | 204,647.44 |
| 4. Ending balance | 215,786,874.50 | 215,786,874.50 |
| III. Provision for impairment | ||
| 1. Opening balance | ||
| 2. Amount increased in the reporting period | ||
| (1) Provision | ||
| 3. Amount decreased in the reporting period | ||
| (1) Disposal | ||
| 4. Ending balance | ||
| IV. Book value | ||
| 1.Book value at the end of the reporting period | 123,271,656.00 | 123,271,656.00 |
| 2.Book value at the beginning of the reporting period | 147,932,475.42 | 147,932,475.42 |
26. Intangible assets
(1) About the intangible assets
In CNY
| Items | Land use right | Patent Right | Non-patent technology | Software system | Trademark rights | Total |
| I. Original book value | ||||||
| 1. Opening balance | 34,933,822.40 | 30,286,420.21 | 15,255,625.58 | 80,475,868.19 |
| 2. Amount increased in the reporting period | 834,137.57 | 834,137.57 | ||||
| (1) Purchase | 834,137.57 | 834,137.57 | ||||
| (2) Internal R & D | ||||||
| (3) Increase of business combination | ||||||
| 3. Amount decreased in the reporting period | ||||||
| (1) Disposal | ||||||
| 4. Ending balance | 34,933,822.40 | 31,120,557.78 | 15,255,625.58 | 81,310,005.76 | ||
| II. Accumulative amortization | ||||||
| 1. Opening balance | 15,782,368.73 | 22,778,471.88 | 7,879,697.15 | 46,440,537.76 | ||
| 2. Amount increased in the reporting period | 366,776.65 | 1,800,726.11 | 582,540.42 | 2,750,043.18 | ||
| (1) Provision | 366,776.65 | 1,800,726.11 | 582,540.42 | 2,750,043.18 | ||
| 3. Amount decreased in the reporting period | ||||||
| (1) Disposal | ||||||
| 4. Ending balance | 16,149,145.38 | 24,579,197.99 | 8,462,237.57 | 49,190,580.94 | ||
| III. Provision for impairment | ||||||
| 1. Opening balance | ||||||
| 2. Amount increased in the reporting period | ||||||
| (1) Provision | ||||||
| 3. Amount decreased in the reporting period | ||||||
| (1) Disposal | ||||||
| 4. Ending balance | ||||||
| IV. Book value | ||||||
| 1.Book value at the end of the reporting period | 18,784,677.02 | 6,541,359.79 | 6,793,388.01 | 32,119,424.82 | ||
| 2.Book value at the beginning of the reporting period | 19,151,453.67 | 7,507,948.33 | 7,375,928.43 | 34,035,330.43 |
At the end of the reporting period, the intangible assets formed through the Company's internal research and developmentaccounted for 0.00% of the balance of intangible assets.
(2) About the land use right that does not have certificate of title
Inapplicable
27. Development expenditure
Inapplicable
28. Goodwill
(1) Original book value of the goodwill
Inapplicable
(2) Provision for impairment of the goodwill
Inapplicable
29. Long term expenses to be apportioned
In CNY
| Items | Opening balance | Amount increased in the reporting period | Amount amortized in the reporting period | Other decrease | Ending balance |
| Counter fabrication expenses | 28,563,171.72 | 14,554,656.70 | 14,082,604.76 | 0.00 | 29,035,223.66 |
| Decoration expenses | 120,695,905.90 | 28,488,235.63 | 32,865,151.60 | 0.00 | 116,318,989.93 |
| Others | 14,531,255.82 | 908,758.29 | 5,105,686.83 | 0.00 | 10,334,327.28 |
| Total | 163,790,333.44 | 43,951,650.62 | 52,053,443.19 | 0.00 | 155,688,540.87 |
30. Deferred Income Tax Assets and Deferred Income Tax Liabilities
(1) Deferred income tax asset without offsetting
In CNY
| Items | Ending balance | Opening balance | ||
| Deductible provisional difference | Deferred income tax asset. | Deductible provisional difference | Deferred income tax asset. | |
| Asset impairment reserve | 142,660,453.73 | 30,207,730.28 | 148,079,831.14 | 31,562,627.52 |
| Unrealized profit from the intracompany transactions | 84,064,294.99 | 20,987,571.65 | 96,716,186.61 | 24,021,244.01 |
| Offsetable loss | 106,516,674.31 | 26,263,504.09 | 62,781,216.23 | 15,188,881.56 |
| Equity incentive | 18,127,165.97 | 4,219,722.81 | 17,502,152.62 | 4,121,326.77 |
| Promotion expenses available for carrying-forward to the next year | 10,871,480.00 | 2,935,951.53 | 11,503,471.12 | 2,219,622.49 |
| Rent liabilities | 125,150,138.17 | 31,287,534.55 | 147,888,578.26 | 36,972,144.57 |
| Others | 1,792,833.90 | 448,208.48 | 9,993,278.10 | 2,498,319.53 |
| Total | 489,183,041.07 | 116,350,223.39 | 494,464,714.08 | 116,584,166.45 |
(2) Deferred income tax liabilities without offsetting
In CNY
| Items | Ending balance | Opening balance | ||
| Provisional difference of taxes payable | Deferred income tax liability | Provisional difference of taxes payable | Deferred income tax liability | |
| Fixed assets deducted in once-and-for-all way before taxation | 24,438,453.07 | 3,665,767.96 | 24,113,302.98 | 3,616,995.45 |
| 29. Right-to-use Assets | 123,181,647.91 | 30,795,411.98 | 147,881,641.51 | 36,970,410.38 |
| Total | 147,620,100.98 | 34,461,179.94 | 171,994,944.49 | 40,587,405.83 |
(3) Deferred income tax asset or liabilities stated with net amount after offsetting
In CNY
| Items | Amount mutually offset between the deferred income tax assets and liabilities at the end of the reporting period | Ending balance of the deferred income tax asset or liabilities after offsetting | Amount mutually offset between the deferred income tax assets and liabilities at the beginning of the reporting period | Opening balance of the deferred income tax asset or liabilities after offsetting |
| Deferred income tax asset. | 29,552,036.15 | 86,798,187.24 | 35,350,891.80 | 81,233,274.65 |
| Deferred income tax liability | 29,552,036.15 | 4,909,143.79 | 35,350,891.80 | 5,236,514.03 |
(4) Statement of deferred income tax asset not recognized
In CNY
| Items | Ending balance | Opening balance |
| Offsetable loss | 52,429,164.08 | 54,139,145.45 |
| Provision for impairment of assets | 15,923,669.81 | 15,218,179.77 |
| Total | 68,352,833.89 | 69,357,325.22 |
(5) Unrecognized deferred income tax asset available for offsetting loss is going to expire in the following years
In CNY
| Year | Amount at the end of the reporting period | Amount at the year beginning | Remarks |
| 2021 | 0.00 | 0.00 | |
| 2022 | 0.00 | 0.00 | |
| 2023 | 0.00 | 149,750.18 | |
| 2024 | 10,124,068.03 | 11,684,299.22 | |
| 2025 | 18,449,678.50 | 18,449,678.50 | |
| 2026 | 23,855,417.55 | 23,855,417.55 | |
| Total | 52,429,164.08 | 54,139,145.45 |
31. Other non-current assets
In CNY
| Items | Ending balance | Opening balance | ||||
| Book balance | Provision for impairment | Book value | Book balance | Provision for impairment | Book value | |
| Advance payment for long term assets | 42,617,285.90 | 0.00 | 42,617,285.90 | 42,680,753.78 | 0.00 | 42,680,753.78 |
| Total | 42,617,285.90 | 0.00 | 42,617,285.90 | 42,680,753.78 | 0.00 | 42,680,753.78 |
32. Short term borrowings
(1) Classification of short-term borrowings
In CNY
| Items | Ending balance | Opening balance |
| Secured loan | 12,178,305.45 | 15,737,928.76 |
| Credit loan | 440,000,000.00 | 250,000,000.00 |
| Undue interest payable | 415,555.56 | 256,666.67 |
| Total | 452,593,861.01 | 265,994,595.43 |
(2)Short-term borrowings overdue but still remaining outstanding
Inapplicable
33. Transactional financial liabilities
Inapplicable
34. Derivative financial liabilities
Inapplicable
35. Notes payable
In CNY
| Category | Ending balance | Opening balance |
| Commercial acceptance bills | 582,928.10 | 21,223.10 |
| Total | 582,928.10 | 21,223.10 |
The total amount of due but outstanding notes payable at the end of the reporting period is CNY 0.00.
36. Accounts payable
(1) Presentation of accounts payable
In CNY
| Items | Ending balance | Opening balance |
| Payment for goods | 175,600,153.08 | 232,841,934.81 |
| Payment for materials | 22,612,850.20 | 20,513,993.11 |
| Engineering payment payable | 1,181,651.95 | 1,232,967.42 |
| Total | 199,394,655.23 | 254,588,895.34 |
(2) Significant accounts payable with age exceeding 1 year
Inapplicable
37. Advance receipt
(1) Statement of advances from customers
In CNY
| Items | Ending balance | Opening balance |
| Rent received in advance | 7,011,421.98 | 11,025,664.72 |
| Total | 7,011,421.98 | 11,025,664.72 |
(2) Significant advances from customers with age exceeding 1 year
Inapplicable
38. Contract liabilities
In CNY
| Items | Ending balance | Opening balance |
| Payment for goods | 22,785,751.84 | 22,505,426.65 |
| Total | 22,785,751.84 | 22,505,426.65 |
The amount involved in the significant change of the book value and the cause during the reporting periodInapplicable
39. Payroll payable to the employees
(1) Presentation of payroll payable to the employees
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| I. Short term remuneration | 134,696,286.49 | 308,998,487.47 | 340,364,871.41 | 103,329,902.55 |
| II. Post-employment benefit program - defined contribution plan. | 9,463,874.19 | 25,913,498.96 | 23,163,574.14 | 12,213,799.01 |
| III. Dismissal benefit | 1,775,989.38 | 2,286,057.29 | 3,111,996.50 | 950,050.17 |
| Total | 145,936,150.06 | 337,198,043.72 | 366,640,442.05 | 116,493,751.73 |
(2) Presentation of short term remuneration
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| 1. Salaries, bonus, allowances and subsidies | 133,818,692.76 | 277,258,207.61 | 308,464,975.29 | 102,611,925.08 |
| 2. Staff’s welfare | 708.80 | 5,614,697.05 | 5,612,905.85 | 2,500.00 |
| 3. Social security premium | 20,620.66 | 11,965,465.70 | 11,948,966.40 | 37,119.96 |
| Including: medical insurance premium | 20,620.66 | 11,187,569.76 | 11,171,364.60 | 36,825.82 |
| Work injury insurance | 403,974.05 | 403,679.91 | 294.14 | |
| Maternity Insurance | 373,921.89 | 373,921.89 | ||
| 4.Housing accumulation fund | 27,104.00 | 9,935,136.47 | 9,938,552.47 | 23,688.00 |
| 5. Trade union fund and staff education fund | 829,160.27 | 4,224,980.64 | 4,399,471.40 | 654,669.51 |
| Total | 134,696,286.49 | 308,998,487.47 | 340,364,871.41 | 103,329,902.55 |
(3) Presentation of the defined contribution plan
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| 1. Basic endowment insurance premium | 226,815.55 | 21,911,076.39 | 21,940,885.43 | 197,006.51 |
| 2. Unemployment insurance premium | 624,795.71 | 623,900.59 | 895.12 | |
| 3. Contribution to the enterprise annuity scheme | 9,237,058.64 | 3,377,626.86 | 598,788.12 | 12,015,897.38 |
| Total | 9,463,874.19 | 25,913,498.96 | 23,163,574.14 | 12,213,799.01 |
40. Taxes payable
In CNY
| Items | Ending balance | Opening balance |
| Value-added tax | 46,261,358.11 | 46,711,341.16 |
| Enterprise income tax | 15,812,596.69 | 15,663,227.68 |
| Individual income tax | 892,279.50 | 1,568,912.16 |
| Urban maintenance and construction tax | 580,674.96 | 1,624,353.62 |
| Education Surcharge | 335,024.69 | 1,161,292.58 |
| Others | 3,256,596.89 | 1,040,752.81 |
| Total | 67,138,530.84 | 67,769,880.01 |
41. Other payables
In CNY
| Items | Ending balance | Opening balance |
| Dividends payable | 6,324,013.97 | 5,015,026.30 |
| 41. Other payables | 159,529,884.77 | 162,793,733.65 |
| Total | 165,853,898.74 | 167,808,759.95 |
(1) Interest payable
Inapplicable
(2) Dividend payable
In CNY
| Items | Ending balance | Opening balance |
| Dividends of common shares | 6,324,013.97 | 5,015,026.30 |
| Total | 6,324,013.97 | 5,015,026.30 |
Other notes, including that if significant dividends payable have not been paid for more than 1 year, it is necessary to disclosethe reasons for non-payment：
Inapplicable
(3) Other payables
1) Other payments stated based on nature of fund
In CNY
| Items | Ending balance | Opening balance |
| Cash pledge or cash deposit | 32,710,186.12 | 33,536,237.44 |
| Fund for shop-front activities | 29,795,358.41 | 19,208,694.86 |
| Refurbishment | 8,492,347.70 | 10,201,524.91 |
| Obligation of repurchase of restricted shares | 50,759,806.16 | 60,585,678.92 |
| Others | 37,772,186.38 | 39,261,597.52 |
| Total | 159,529,884.77 | 162,793,733.65 |
2) Other payables in significant amount and with aging over 1 year
In CNY
| Items | Ending balance | Cause of failure in repayment or carry-over |
| Deposit for property rent | 10,503,250.06 | Settlement not due yet |
| Total | 10,503,250.06 |
42. Held-for-sale liabilities
Inapplicable
43. Non-current liabilities due within a year
In CNY
| Items | Ending balance | Opening balance |
| Long-term liabilities due within a year | 3,660,090.00 | 3,924,900.00 |
| Long-term rent liabilities due within one year | 73,996,168.23 | 83,025,006.35 |
| Total | 77,656,258.23 | 86,949,906.35 |
44. Other current liabilities
In CNY
| Items | Ending balance | Opening balance |
| Pending output VAT | 2,623,083.96 | 2,798,738.32 |
| Total | 2,623,083.96 | 2,798,738.32 |
Increase/decrease of the short term bonds payable:
Inapplicable
45. Long-term Loan
(1) Classification of Long-term Borrowings
In CNY
| Items | Ending balance | Opening balance |
| Pledge loan | 3,660,090.00 | 3,924,900.00 |
| Less: Long-term borrowings due within 1 year | -3,660,090.00 | -3,924,900.00 |
Notes to classification of long term borrowings:
As of June 30, 2022, the book value of the fixed assets of the Company used for loan collateral was CNY 10,889,815.89.
Other notes, including the interest rate interval: the interest rate for the borrowings was 3%.
46. Bonds Payable
(1) Bonds payable
Inapplicable
(2) Increase/Decrease of bonds payable (excluding other financial instruments classified as financial liabilities,such as preferred shares, perpetual bonds, etc.)Inapplicable
(3) Note to the conditions and time of share conversion of convertible company bondsInapplicable
(4) Note to other financial instruments classified as financial liabilities
Inapplicable
47. Rent liabilities
In CNY
| Items | Ending balance | Opening balance |
| Within 1 year | 66,427,767.95 | 87,412,539.35 |
| 1-2 years | 44,983,744.95 | 45,978,062.22 |
| 2-3 years | 14,188,991.93 | 13,813,526.70 |
| Over 3 years | 5,281,039.63 | 7,720,317.07 |
| Less: Unrecognized financing expenses | -5,645,239.55 | -6,980,716.89 |
| Long-term rent liabilities due within one year | -73,996,168.23 | -83,025,006.35 |
| Total | 51,240,136.68 | 64,918,722.10 |
Long-term accounts payable
(1) Long term accounts payable stated based on the nature
Inapplicable
(2) Special accounts payable
Inapplicable
49. Long term payroll payable to the employees
(1) Statement of long term payroll payable to the employees
Inapplicable
(2) Change of defined benefit plans
Inapplicable
50. Projected liabilities
Inapplicable
51. Deferred income
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance | Cause of formation |
| Asset-related government subsidies | 1,792,833.90 | 0.00 | 0.00 | 1,792,833.90 | For the detail, refer to the following table |
| Income-related government subsidies | 0.00 | 250,000.00 | 0.00 | 250,000.00 | For the detail, refer to the following table |
| Total | 1,792,833.90 | 250,000.00 | 0.00 | 2,042,833.90 |
Items involving government subsidies:
In CNY
| Liabilities | Opening balance | Amount of newly added subsidy in the reporting period | Amount counted to the non-operating income in the reporting period | Amount counted to the other income in the reporting period | Amount offsetting costs and expenses in the reporting period | Other changes | Ending balance | Related with assets/related with income |
| Special purpose fund of Shenzhen industrial design development | 390,123.15 | 390,123.15 | Related with assets | |||||
| Funding project for construction of enterprise technology center designated by the state | 631,980.39 | 631,980.39 | Related with assets | |||||
| Special purpose fund for the Industry and Informationization at Provincial Level | 770,730.36 | 770,730.36 | Related with assets | |||||
| The fifth batch of key technology research projects assigned by the State Commission of Science and Technology | 0.00 | 250,000.00 | 250,000.00 | Related with income |
52. Other non-current liabilities
Inapplicable
53. Capital stock
In CNY
| Opening balance | Increase / Decrease (+/ -) | Ending balance | |||||
| New issuing | Bonus shares | Shares converted from reserve | Others | Sub-total | |||
| Total Shares | 426,051,015.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 426,051,015.00 |
54. Other equity instruments
(1) Basic information on the outstanding other financial instruments, including preferred shares, perpetual bonds,etc. at the end of the reporting periodInapplicable
(2)Movement of the outstanding financial instruments, including preferred shares, perpetual bonds, etc. at theend of the reporting periodInapplicable
55. Capital reserve
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Capital premium (capital stock premium) | 1,010,108,533.81 | 4,231,031.40 | 15,043.17 | 1,014,324,522.04 |
| Other capital reserve | 30,799,660.32 | 5,611,740.66 | 4,231,031.40 | 32,180,369.58 |
| Total | 1,040,908,194.13 | 9,842,772.06 | 4,246,074.57 | 1,046,504,891.62 |
Other notes, including the note to its increase/decrease and the cause(s) of its movement in the reporting period:
(1) During the reporting period, the services of the incentive objects obtained by the Company were included in the relevantcosts or expenses and the capital reserve increased by CNY 4,629,604.79 accordingly.
(2) The 4th session of the Tenth Board of Directors held on December 28, 2021 reviewed and approved the Proposal onthe Release Conditions having been Satisfied for the Second Release Period of 2018 Restricted A-Share Incentive Scheme(Phase I). Differences, caused by fair value different when unlock the restricted shares, between CIT deducted amount andcost or expenses recognized in vesting period increased the capital reserve by CNY 982,135.87. Meanwhile, thereclassification of capital reserves was adjusted for the unlocked part, other capital reserves decreased by CNY4,231,031.40, and capital premium increased by CNY 4,231,031.40.
(3) The 2nd session of the Tenth Board of Directors held on October 25, 2021 and 2021 5th Extraordinary General Meetingheld on November 30, 2021, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed ForeignShares in the Company (B-shares)”. in the first half year of 2022，the Company repurchased its own shares through acentralized bidding method with the special account for the securities repurchased at expense equivalent to CNY 15,043.17which has written off capital reserve amounting to CNY 15,043.17.
56. Treasury shares
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Decrease of the repurchase of the registered capital | 0.00 | 50,252,831.88 | 0.00 | 50,252,831.88 |
| Payment for restricted shares | 60,585,678.92 | 0.00 | 6,996,855.96 | 53,588,822.96 |
| Total | 60,585,678.92 | 50,252,831.88 | 6,996,855.96 | 103,841,654.84 |
Other notes, including the note to its increase/decrease and the cause(s) of its movement in the reporting period:
(1) During the reporting period，the Company repurchased accumulatively 7,987,217 shares of the Company's B-sharesthrough a centralized bidding method and paid HKD 61,438,781.55 (with trading cost exclusive) which was equivalent toCNY 50,252,831.88, equal to CNY 50,252,831.88 after conversion. As a result, the treasury stock increased by CNY50,252,831.88.
(2) As stated on Note VII.55(2), based on the authorization of the General Meeting, the Board of Directors lifted restrictionfor 114 incentive individuals. The corresponding shares may be traded on February 7, 2022, of which the cash dividenddecreased treasury shares by CNY4,468,408.56.
(3) The Company's 2021 equity distribution plan was reviewed and approved at the 2021 annual general meeting held onMay 13, 2022, and the cash dividends corresponding to the remaining restricted shares were reduced by CNY 2,528,447.40for treasury shares.
57. Other comprehensive income
In CNY
| Items | Opening balance | Amount incurred in the reporting period | Ending balance | |||||
| Amount incurred before income tax in the reporting period | Less: the amount counted to the profit and loss during the previous period was transferred to the profit and loss of the reporting period. | Less: the amount counted to the other comprehensive income during the previous period was transferred to the retained earnings of the reporting period. | Less: Income tax expense | Attributable to the parent company after tax | Attributable to minority shareholders after tax | |||
| I. Other comprehensive income | 0.00 | 0.00 | 0.00 | 0.00 | ||||
| which cannot be re-classified into profit and loss | ||||||||
| Where: Change of the beneficial plan remeasured for setting | 0.00 | 0.00 | 0.00 | 0.00 | ||||
| Other comprehensive income which can be converted into profit and loss based on the equity method | 0.00 | 0.00 | 0.00 | 0.00 | ||||
| Movement of the fair value of the investment in other equity instruments | 0.00 | 0.00 | 0.00 | 0.00 | ||||
| Movement of the fair value of the Company’s own credit risk | 0.00 | 0.00 | 0.00 | 0.00 | ||||
| II. Other comprehensive income which shall be re-classified into profit and loss | -7,658,346.40 | 424,855.72 | 424,855.72 | -7,233,490.68 | ||||
| Conversion difference in foreign currency statements | -7,658,346.40 | 424,855.72 | 424,855.72 | -7,233,490.68 | ||||
| Total other comprehensive income | -7,658,346.40 | 424,855.72 | 424,855.72 | -7,233,490.68 |
58. Special reserve
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Safety production costs | 1,062,731.13 | 600,000.00 | 108,753.56 | 1,553,977.57 |
| Total | 1,062,731.13 | 600,000.00 | 108,753.56 | 1,553,977.57 |
59. Surplus Reserve
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Statutory surplus reserve | 213,025,507.50 | 0.00 | 0.00 | 213,025,507.50 |
| Discretionary surplus reserve | 61,984,894.00 | 0.00 | 0.00 | 61,984,894.00 |
| Total | 275,010,401.50 | 0.00 | 0.00 | 275,010,401.50 |
Note to surplus reserve, including the note to its increase/decrease and the cause(s) of its movement in the reporting period:
According to the Company Law and the Articles of Association, the Company provided statutory surplus reserve based on10% of the net profit. When the accumulative amount of the statutory surplus reserve exceeds 50% of the Company’sregistered capital, no such reserve shall be provided any longer.
After provision of the statutory surplus reserve, the Company may provide free surplus reserve. With authorization, the freesurplus reserve may be used to make up for the deficits of previous years or increase capital stock.
60. Retained earnings
In CNY
| Items | Reporting period | Previous period |
| Retained earnings at the end of the previous period before the adjustment | 1,338,444,326.09 | 1,164,490,911.51 |
| Total retained earnings under adjustment at the beginning of the reporting year (adjustment up +, adjustment down -) | -11,188,268.01 | |
| After adjustment: Retained earnings at the beginning of the reporting period | 1,338,444,326.09 | 1,153,302,643.50 |
| Plus: Net profit attributable to the parent company’s owner in the report period | 140,692,784.29 | 387,840,282.95 |
| Less: Provision of statutory surplus public reserve | 28,478,534.63 | |
| Dividends of common shares payable | 125,419,139.40 | 174,220,065.73 |
| Retained earnings at the end of the reporting period | 1,353,717,970.98 | 1,338,444,326.09 |
Statement of adjustment of retained earnings at the beginning of the reporting period:
1). The amount involved in the retroactive adjustment according to the Enterprise Accounting Standards and the relevantnew provisions influencing the retained earnings at the beginning of the reporting period was CNY 0.00.
2). The amount involved in change of the accounting policy influencing the retained earnings at the beginning of thereporting period was CNY 0.00.
3). The amount involved in correction of the significant accounting errors influencing the retained earnings at the beginningof the reporting period was CNY 0.00.
4). The amount involved in change of the consolidation scope caused by the common control influencing the retainedearnings at the beginning of the reporting period was CNY 0.00.
5). The total amount involved in other adjustments influencing the retained earnings at the beginning of the reporting
period was CNY 0.00.
61. Operation Income and Costs
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | ||
| Income | Cost | Income | Cost | |
| Principal business | 2,176,850,503.24 | 1,373,173,952.09 | 2,770,803,774.51 | 1,736,967,152.08 |
| Other businesses | 6,720,245.87 | 490,608.32 | 6,715,746.83 | 1,182,329.62 |
| Total | 2,183,570,749.11 | 1,373,664,560.41 | 2,777,519,521.34 | 1,738,149,481.70 |
62. Business Taxes and Surcharges
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Consumption tax | 1,080,093.60 | 726,813.41 |
| Urban maintenance and construction tax | 4,471,185.46 | 5,877,927.84 |
| Education Surcharge | 3,176,217.12 | 4,121,272.93 |
| Real estate tax | 3,617,599.55 | 3,567,272.30 |
| Land use tax | 202,038.96 | 197,939.71 |
| Tax on using vehicle and boat | 2,880.00 | 2,520.00 |
| Stamp duty | 1,271,846.47 | 1,641,839.17 |
| Others | 379,332.17 | 320,376.10 |
| Total | 14,201,193.33 | 16,455,961.46 |
63. Sales expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to Employees | 207,143,891.55 | 213,043,074.52 |
| Shopping mall and rental fees | 76,494,295.56 | 129,400,920.28 |
| Advertising, exhibition and market promotion fee | 57,874,652.62 | 91,568,222.91 |
| Depreciation and amortization | 107,506,179.52 | 92,926,914.28 |
| Packing expenses | 4,439,070.05 | 4,481,736.64 |
| Water & power supply and property management fee | 11,198,105.55 | 10,882,939.50 |
| Freight | 2,865,405.58 | 4,242,070.29 |
| Office expenses | 2,712,847.35 | 3,919,959.69 |
| Business travel expenses | 2,022,337.58 | 3,520,062.70 |
| Business entertainment | 1,346,935.04 | 1,950,807.85 |
| Others | 4,202,320.36 | 5,693,343.97 |
| Total | 477,806,040.76 | 561,630,052.63 |
64. Administrative expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to Employees | 90,844,037.52 | 90,780,253.80 |
| Depreciation and amortization | 11,956,926.63 | 12,421,579.17 |
| Business travel expenses | 610,091.19 | 1,799,515.00 |
| Office expenses | 2,112,092.81 | 1,767,686.85 |
| Service fee to intermediary agencies | 1,632,375.61 | 1,662,615.14 |
| Water, electricity, property and rent | 1,529,714.92 | 3,315,987.84 |
| Business entertainment | 288,878.74 | 616,327.45 |
| Trucks and freight | 631,799.40 | 776,804.47 |
| Communication fee | 376,723.40 | 431,608.09 |
| Others | 6,733,024.47 | 7,819,288.04 |
| Total | 116,715,664.69 | 121,391,665.85 |
65. R & D expenditures
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to employees | 19,230,230.93 | 18,674,577.25 |
| Sample and material charges | 797,464.23 | 728,873.08 |
| Cost of moulds | 98,716.00 | 296,524.07 |
| Depreciation and amortization | 2,501,878.19 | 3,117,098.99 |
| Technical cooperation fee | -136,897.08 | 657,671.10 |
| Others | 2,535,321.58 | 2,895,320.19 |
| Total | 25,026,713.85 | 26,370,064.68 |
66. Financial expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Interest payment | 9,731,247.68 | 14,778,321.69 |
| Less: capitalized interest | ||
| Less: Interest income | 1,981,825.39 | 2,153,626.51 |
| Exchange gain & loss | -1,648,258.56 | -9,312.50 |
| Service charges and miscellaneous | 5,776,243.25 | 8,161,891.03 |
| Total | 11,877,406.98 | 20,777,273.71 |
67. Other income
In CNY
| Source of arising of other income | Amount incurred in the reporting period | Amount incurred in the previous period |
| Government subsidies | 13,369,782.95 | 11,662,934.28 |
68. Return on investment
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Income from long term equity investment based on equity method | 2,462,626.52 | 1,629,328.24 |
| Total | 2,462,626.52 | 1,629,328.24 |
69. Net exposure hedge income
Inapplicable
70. Income from change of the fair value
Inapplicable
71. Loss from impairment of credit
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Provision for bad debt of other receivables | 174,478.00 | -173,755.96 |
| Loss from bad debt of notes receivable | 463,943.28 | -484,421.80 |
| Loss from bad debt of accounts receivable | -636,572.43 | -1,377,059.19 |
| Total | 1,848.85 | -2,035,236.95 |
72. Loss from impairment of assets
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| I. Loss from impairment of assets | 0.00 | 0.00 |
| II. Loss from price falling of inventory and loss from impairment of contract performance costs | -348,218.69 | -1,226,362.68 |
| Total | -348,218.69 | -1,226,362.68 |
73. Income from disposal of assets
In CNY
| Source of income from disposal of assets | Amount incurred in the reporting period | Amount incurred in the previous period |
| Profit or loss from disposal of fixed assets | -14,180.88 | -73,807.46 |
| Profit or loss from disposal of right-to-use assets | -801,840.28 | 0.00 |
74. Non-operating income
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Amount counted to the current non-operating gain and loss |
| Compensation | 146,132.71 | 3,475.00 | 146,132.71 |
| Disposal of account payable impossible to be paid | 0.40 | 124,191.89 | 0.40 |
| Others | 62,454.77 | 144,301.38 | 62,454.77 |
| Total | 208,587.88 | 271,968.27 | 208,587.88 |
Government subsidy counted to the current profit and loss:
Inapplicable
75. Non-operating expenditure
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Amount counted to the current non-operating gain and loss |
| Outward donation | 0.00 | 100,000.00 | 0.00 |
| Fine and overdue fine | 15,080.06 | 0.00 | 15,080.06 |
| default fine | 693,689.72 | 0.00 | 693,689.72 |
| Others | 117,127.58 | 759,659.12 | 117,127.58 |
| Total | 825,897.36 | 859,659.12 | 825,897.36 |
76. Income tax expense
(1) Statement of income tax expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Income tax expenses in the reporting period | 43,213,735.62 | 61,394,301.15 |
| Deferred income tax expense | -5,574,641.83 | 7,155,100.91 |
| Total | 37,639,093.79 | 68,549,402.06 |
(2) Process of adjustment of accounting profit and income tax expenses
In CNY
| Items | Amount incurred in the reporting period |
| Total profit | 178,331,878.08 |
| Income tax expense calculated based on the statutory/ applicable tax rate | 44,582,969.52 |
| Influence of different tax rates applicable to subsidiaries | -4,809,328.68 |
| Influence of the non-taxable income | -615,656.63 |
| Influence of the non-offsetable costs, expenses and loss | 1,678,343.82 |
| The effect of using deductible losses of deferred income tax assets that have not been recognized in the previous period | -484,703.66 |
| Influence from the addition of the R & D expenses upon deduction of tax payment (to be stated with “-“) | -2,712,530.58 |
| 76. Income tax expense | 37,639,093.79 |
77. Other comprehensive income
For the detail, refer to Note VII. 57.
78. Cash Flow Statement Items
(1) Other operation activities related cash receipts
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Collateral and deposit | 6,532,789.76 | 5,023,790.54 |
| Government subsidies | 13,193,456.48 | 10,827,370.77 |
| Commodity promotion fee | 4,611,388.01 | 6,760,506.27 |
| Interest income | 1,985,621.79 | 2,125,691.94 |
| Reserve | 2,740,310.90 | 2,279,469.79 |
| Others | 8,516,510.57 | 11,749,975.61 |
| Total | 37,580,077.51 | 38,766,804.92 |
(2) Other operation activities related cash payments
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Collateral and deposit | 7,419,015.67 | 13,205,523.62 |
| Reserve | 5,082,764.84 | 10,265,576.39 |
| Duration Expenses | 138,375,768.78 | 220,464,795.10 |
| Others | 4,512,408.32 | 143,644.97 |
| Total | 155,389,957.61 | 244,079,540.08 |
(3) Other operation activities related cash receipts
Inapplicable
(4) Other operation activities related cash payment
Inapplicable
(5) Other financing activities related cash receipts
Inapplicable
(6) Other financing activities related cash payment
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Rent cash flow out | 63,385,293.68 | 47,957,294.77 |
| Payment for repurchase of shares | 53,318,818.77 | 6,106,577.91 |
| Total | 116,704,112.45 | 54,063,872.68 |
79. Supplementary information of the cash flow statement
(1) Supplementary information of the cash flow statement
In CNY
| Supplementary information | Amount in the reporting period | Amount in the previous period |
| 1 Adjustment of net profit into cash flows of operating activities: | ||
| Net profit | 140,692,784.29 | 233,564,783.83 |
| Plus: Provision for impairment of assets | 346,369.84 | 3,261,599.63 |
| Depreciation of fixed assets, depletion of oil and gas asset, depreciation of productive biological asset | 20,129,448.57 | 21,116,190.64 |
| Depreciation of use right assets | 57,747,319.25 | 48,686,092.09 |
| Amortization of intangible assets | 2,750,043.18 | 3,442,875.49 |
| Amortization of long term expenses to be apportioned | 52,053,443.19 | 46,436,064.35 |
| Loss (income is stated in “-”) from disposal of fixed assets, intangible assets and other long term assets | 816,021.16 | 73,807.46 |
| Loss on scrapping of fixed assets (profit is stated with “-”) | ||
| Loss from change of fair value (profit is stated with “-”) | ||
| Financial expenses (income is stated with “-”) | 8,082,989.12 | 14,769,009.19 |
| Investment loss (income is stated with “-”) | -2,462,626.52 | -1,629,328.24 |
| Decrease of the deferred income tax asset (increase is stated with “_”) | -5,564,912.60 | 6,385,102.30 |
| Increase of deferred income tax liability (decrease is stated with “-”) | -327,370.24 | 769,998.61 |
| Decrease of inventories (Increase is stated with “-”) | 74,801,604.17 | -83,529,356.74 |
| Decrease of operative items receivable (Increase is stated with “-”) | -23,794,469.22 | -31,249,035.35 |
| Increase of operative items payable (Decrease is stated with “-”) | -46,884,380.59 | -56,943,239.33 |
| Others | ||
| Net cash flows arising from operating activities | 278,386,263.60 | 205,154,563.93 |
| 2 Significant investment and fund-raising activities with no cash income and expenses involved: | ||
| Capital converted from liabilities | ||
| Convertible company bonds due within a year | ||
| Fixed assets under financing lease | ||
| 3 Net change in cash and cash equivalents: | ||
| Ending cash balance | 393,873,930.55 | 234,840,156.69 |
| Less: Opening balance of cash | 210,254,737.14 | 353,057,285.71 |
| Plus: Ending balance of cash equivalent | ||
| Less: Opening balance of cash equivalent | ||
| Net increase of cash and cash equivalents | 183,619,193.41 | -118,217,129.02 |
(2) Net cash paid for acquisition of subsidiary in the reporting period
Inapplicable
(3) Net cash received from disposal of subsidiary in the reporting period
Inapplicable
(4) Composition of cash and cash equivalents
In CNY
| Items | Ending balance | Opening balance |
| I. Cash | 393,873,930.55 | 210,254,737.14 |
| Including: Cash in stock | 175,028.83 | 108,612.08 |
| Bank deposit available for payment at any time | 392,393,331.66 | 188,908,798.10 |
| Other monetary fund used for payment at any time | 1,305,570.06 | 21,237,326.96 |
| II. Cash equivalents | ||
| Including: Bond investment due within three months | ||
| III. Ending balance of cash and cash equivalents | 393,873,930.55 | 210,254,737.14 |
| Including: cash and cash equivalents restricted for use from the parent company or other subsidiaries of the Group | 4,702,798.19 | 1,724,651.93 |
80. Notes to items of statement of change in owner’s equity
Inapplicable
81. Assets restricted in ownership or use right
In CNY
| Items | Book value at the end of the reporting period | Cause of restriction |
| Notes receivable | 12,178,305.45 | Notes discounted |
| 24. Fixed asset | 10,889,815.89 | Bank mortgage |
| Total | 23,068,121.34 |
82. Foreign currency monetary items
(1) Foreign currency monetary items
In CNY
| Items | Ending balance of foreign currency | Conversion rate | Ending balance of Renminbi converted |
| Monetary capital | |||
| Including: USD | 3,083,565.75 | 6.7114 | 20,695,043.17 |
| Euro | 372,721.34 | 7.0084 | 2,612,180.24 |
| HKD | 930,062.14 | 0.8552 | 795,379.84 |
| SF | 661,407.08 | 7.0299 | 4,649,625.63 |
| Accounts receivable | |||
| Including: USD | 770,328.27 | 6.7114 | 5,169,981.15 |
| Euro | 61,459.30 | 7.0084 | 430,731.36 |
| HKD | 1,058,093.59 | 0.8552 | 904,871.06 |
| SF | 10,858.62 | 7.0299 | 76,335.05 |
| Long-term Loan | |||
| Including: USD | |||
| Euro | |||
| HKD | |||
| Accounts payable | |||
| Including: USD | 1,019.00 | 6.7114 | 6,838.92 |
| HKD | 1,576,987.13 | 0.8552 | 1,348,623.62 |
| SF | 131,940.99 | 7.0299 | 927,531.99 |
| Other receivables | |||
| Including: HKD | 116,645.42 | 0.8552 | 99,754.00 |
| Other payables | |||
| Including: USD | 5,759.05 | 6.7114 | 38,651.29 |
| Euro | 3,043.21 | 7.0084 | 21,328.03 |
| HKD | 14,507.16 | 0.8552 | 12,406.38 |
| SF | 37,070.78 | 7.0299 | 260,603.85 |
| Non-current liabilities due within a year | |||
| Where: SF | 520,646.10 | 7.0299 | 3,660,090.00 |
(2) Note to overseas operating entities, including important overseas operating entities, which should bedisclosed about its principal business place, function currency for bookkeeping and basis for the choice. In caseof any change in function currency, the cause should be disclosed.For the principal business place, function currency for bookkeeping for key oversease business entities, refer to Note V.4.
83. Hedging
Inapplicable
84. Government subsidies
(1) Basic information of government subsidies
In CNY
| Category | Amount | Items presented | Amount counted to the current profit and loss |
| Subsidy for stabilizing employment | 282,569.53 | Other income | 282,569.53 |
| Project subsidy to technology support institutions for standardization with the special fund in the field of standards in Shenzhen | 490,347.00 | Other income | 490,347.00 |
| The 2nd batch of subsidies for the industrial design development support program | 270,000.00 | Other income | 270,000.00 |
| Refund of the service charge for individual | 724,853.24 | Other income | 724,853.24 |
| income tax | |||
| Subsidy for the registered trade marks | 1,000.00 | Other income | 1,000.00 |
| Social security allowance | 154,548.92 | Other income | 154,548.92 |
| Others | 16,617.26 | Other income | 16,617.26 |
| Award for the growth of retail sales (turnover) from Commerce Bureau of Shenzhen Municipality | 5,000,000.00 | Other income | 5,000,000.00 |
| Financial support for the steady growth of commerce from Nanshan District Bureau of Industry and Information, Shenzhen | 1,709,700.00 | Other income | 1,709,700.00 |
| Financial support for the commercial circulation from Nanshan District Bureau of Industry and Information, Shenzhen | 1,150,000.00 | Other income | 1,150,000.00 |
| Financial support for the COVID-19 control from Nanshan District Bureau of Industry and Information, Shenzhen | 500,000.00 | Other income | 500,000.00 |
| Government subsidy as the financial support for steady growth of commerce | 1,210,800.00 | Other income | 1,210,800.00 |
| Subsidy as financial support to the improvement of the business outlay allocation in the commercial circulation industry | 150,000.00 | Other income | 150,000.00 |
| Government subsidy for industrialization and informationization in Nanshan District | 100,000.00 | Other income | 100,000.00 |
| Subsidy for employee training | 285,500.00 | Other income | 285,500.00 |
| Rent subsidy for small and micro enterprises during the COVID-19 Epidemic from Yuehai Neighborhood of Nanshan District | 10,000.00 | Other income | 10,000.00 |
| Financial support for the cultivation of the high and new technology division | 500,000.00 | Other income | 500,000.00 |
| Special government subsidy for the technological breakthrough activities | 1,000,000.00 | Other income | 1,000,000.00 |
| Allowance from the standards field of Shenzhen | 60,347.00 | Other income | 60,347.00 |
| Financial support for hi-tech enterprise cultivation from the high and new technology division of the science and technology innovation commission | 200,000.00 | Other income | 200,000.00 |
| Subsidy for the fifth batch of key technology research projects assigned by the State Commission of Science and Technology | 250,000.00 | Deferred income | |
| Subsidy for stabilizing enterprises from the Bureau of Industrialization and Informationization of Nanshan District | 50,000.00 | Other income | 50,000.00 |
(2) Refunding of the government subsidies
In CNY
| Items | Amount | Cause |
| Partial fund of the award of the economic contribution by head offices refunded from the National Development and Reform Commission of Shenzhen Municipality | 496,500.00 | Excessive allocation |
85. Others
InapplicableVIII. Change in consolidation scope
1. Business combination involving entities not under common control
(1) Consolidation of enterprises not under common control during the reporting periodInapplicable
(2) Consolidation cost and goodwill
Inapplicable
(3) Purchasee's distinguishable assets and liabilities as at the date of purchaseInapplicable
(4) Profit or loss of the equity held before the date of purchase arising from re-measurement based on the fairvalueDoes there exist any transaction in which the enterprise consolidation is realized step by step through several transactionsand the control power is obtained within the reporting period.No
(5) Note to the consolidation consideration or the fair value of the distinguishable assets and liabilities of thepurchasee which cannot be reasonably identified as at the date of purchase or at the end of the very period ofconsolidationInapplicable
(6) Other note
Inapplicable
2. Business combination involving entities under common control
(1) Consolidation of enterprises under common control during the reporting periodInapplicable
(2) Consolidation cost
Inapplicable
(3) Book value of the consolidatee's assets and liabilities as at the date of consolidationInapplicable
3. Counter purchase
Inapplicable
4. Disposal of subsidiaries
Does there exist any such situation that a single disposal may cause the control power over the investment in a subsidiarylost?NoDoes there exist any such situation that disposal in steps through a number of transactions may cause the control powerover the investment in a subsidiary lost during the reporting period?No
5. Change of consolidation scope due to other reason
Inapplicable
6. Others
InapplicableIX. Equity in other entities
1. Equity in a subsidiary
(1) Composition of an enterprise group
| Subsidiaries | Main business location | Place of registration | Nature of business | Shareholding proportion | Way of acquisition | |
| Direct | Indirect | |||||
| Shenzhen Harmony World Watches Center Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Shenzhen | Shenzhen | Manufacture | 99.00% | 1.00% | Establishment or investment |
| FIYTA (Hong Kong) Limited | Hong Kong | Hong Kong | Commerce | 100.00% | Establishment or investment | |
| Shenzhen Harmony E-Commerce Limited | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Shenzhen FIYTA Technology Development | Shenzhen | Shenzhen | Manufacture | 100.00% | Establishment or investment | |
| Co., Ltd. | ||||||
| Shiyuehui Boutique (Shenzhen) Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Emile Chouriet (Shenzhen) Limited | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| FIYTA Sales Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Liaoning Hengdarui Commerce & Trade Co., Ltd. | Shenyang | Shenyang | Commerce | 100.00% | Consolidation of enterprises under the common control | |
| Montres Chouriet SA | Switzerland | Switzerland | Manufacture | 100.00% | Business combination involving entities not under common control | |
| Shenzhen XUNHANG Precision Technology Co., Ltd. | Shenzhen | Shenzhen | Manufacture | 100.00% | Establishment or investment | |
| Harmony World Watches Center (Hainan) Ltd. | Sanya | Sanya | Commerce | 100.00% | Establishment or investment |
Note to the proportion of shareholding in a subsidiary different from the proportion of voting power:
Inapplicable
Basis of holding less than a half of the voting power but still controlling the investee and holding more than a half of thevoting power but not controlling the investee:
Inapplicable
Basis of an important structurized entity being brought to the consolidation scope and being controlled:
Inapplicable
Basis of distinguishing an agent from consignor:
Inapplicable
(2) Important non-wholly-owned subsidiaries
Inapplicable
(3) Key financial information of important non-wholly-owned subsidiaries
Inapplicable
(4) Significant restriction on use of enterprise group’s assets and paying off the enterprise group’s liabilitiesInapplicable
(5) Financial support or other support provided to the structured entities incorporated in the scope ofconsolidated financial statementsInapplicable
2. Transaction with a subsidiary with the share of the owner’s equity changed but still under control
(1) Note to change in the share of the owner's equity in subsidiaries
Inapplicable
(2) Affect of the transaction on the minority equity and owner's equity attributable to the parent companyInapplicable
3. Equity in joint venture arrangement or associates
(1) Important joint ventures or associates
| Name of joint venture or associate | Main business location | Place of registration | Nature of business | Shareholding proportion | Accounting treatment method for investment in joint ventures or associates | |
| Direct | Indirect | |||||
| Shanghai Watch Industry Co., Ltd. | Shanghai | Shanghai | Commerce | 25.00% | Equity method | |
Note to the proportion of the shareholding in a joint venture or an associate different from voting power therein:
Inapplicable
Basis of holding below 20% voting power but having significant influence or holding more than 20% voting power but nothaving significant influenceInapplicable
(2) Key financial information of important joint ventures
Inapplicable
(3) Key financial information of important associates
In CNY
| Ending balance/amount incurred in the reporting period | Opening balance/amount incurred in the previous period | |
| Current assets | 158,167,622.54 | 143,367,298.98 |
| Non-current assets | 15,374,040.32 | 17,537,419.20 |
| Total assets | 173,541,662.86 | 160,904,718.18 |
| Current liabilities | 28,750,831.63 | 24,124,925.22 |
| Non-current liabilities | 0.00 | 1,839,467.79 |
| Total liabilities | 28,750,831.63 | 25,964,393.01 |
| Minority shareholders’ equity | ||
| Equity attributable to the parent company’s shareholders | 144,790,831.23 | 134,940,325.17 |
| Share of net assets calculated according to the shareholding proportion | 36,197,707.81 | 33,735,081.29 |
| Adjustment events | 21,420,524.02 | 21,420,524.02 |
| -- Goodwill | 21,420,524.02 | 21,420,524.02 |
| -- Unrealized profit from the intracompany transactions | ||
| -- Others | ||
| Book value of the equity investment in associates | 57,618,231.83 | 55,155,605.31 |
| Fair value of equity investments in associates with public quotation | ||
| Turnover | 65,530,729.89 | 71,770,916.04 |
| Net profit | 9,850,506.06 | 6,517,312.97 |
| Net profit from operation termination | ||
| Other comprehensive income | ||
| Total comprehensive income | 9,850,506.06 | 6,517,312.97 |
| Dividends received from associates during the year |
(4) Financial information summary of unimportant joint ventures and associatesInapplicable
(5) Note to significant restriction on the competence of a joint venture or an associate in transferring funds to theCompanyInapplicable
(6) Excessive loss incurred to a joint venture or an associate
Inapplicable
(7) Unrecognized commitment in connection with investment in a joint ventureInapplicable
(8) Contingent liabilities in connection with investment in joint ventures or associatesInapplicable
4. Important joint operation
Inapplicable
5. Equity in the structurized entities not incorporated in the consolidated financial statementsInapplicable
6. Others
InapplicableIX. 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, etc. The Company is exposed to risks from various financial instruments in day-to-day operation, mainly including 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 are summarized as follows:
The Board of Directors is responsible for planning and establishing the risk management structure for the Company,developing risk management policies and the related guidelines across the Company, and supervising the performance ofrisk management measures. The Company has formulated risk management policies to identify and analyze the risks facedby the Company. These risk management policies clearly stipulate specific risks, covering many aspects such as marketrisk, credit risk and liquidity risk management. The Group regularly evaluates the market environment and changes in theCompany's operating activities to determine whether to update the risk management policy and system. The Company'srisk management is carried out by the Risk Management Committee in accordance with the policies approved by the Boardof Directors. The Risk Management Committee works closely with other business departments of the Company to identify,evaluate and avoid related risks. The internal audit department of the Company conducts regular audits on risk managementcontrols and procedures, and reports the audit results to the audit committee of the Company. The Company diversifies therisks of financial instruments through appropriate diversified investment and business portfolios, and formulatescorresponding risk management policies to reduce the risks concentrated in a single industry, a specific region or a specificcounterparty.
1. Credit risk
Credit risk refers to the risk of financial losses to the Company as a result of the failure of performance of contractualobligations by the counterparties. The management has developed proper credit policies and continuously monitors creditrisk exposures.
The Company has adopted the policy of transacting with creditworthy counterparties only. In addition, the Companyevaluates the credit qualification of customers and sets up corresponding credit term based on the financial status ofcustomers, the possibility of obtaining guarantees from third parties, credit records and other factors such as current marketconditions. The Company monitors 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, shorten the credit term or cancelthe credit term to ensure that the Company is free from material credit losses. In addition, the Company reviews the recovery
of financial assets on each balance sheet date to ensure adequate expected credit loss provision is made for relevantfinancial assets.
The Company’s other financial assets include currency funds and other receivables. The credit risk relating to these financialassets arises from the default of counterparties, but the maximum exposure to credit risk is the carrying amount of eachfinancial asset in the balance sheet. The Company does not provide any other guarantee that may expose the Company tocredit risk.
The monetary funds held by the Company are mainly deposited with financial institutions such as state-owned banks andother large and medium-sized commercial banks. The management believes that these commercial banks have a higherreputation and assets, so there is no major credit risk and the Company would not have any significant losses caused bythe default by these institutions. 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 the credit risk amount of anysingle financial institution.As a part of its credit risk asset management, the Company assesses the credit loss of receivables using aging. TheCompany’s receivable and other receivables involve large amount of customers. Aging information can reflect the ability torepay and risk of bad debt of these customers. The Company determined expected loss rate by calculating historical baddebt rate for receivables with different aging based on historical data and also taking forecast of future economic conditioninto consideration such as GDP growth rate, state currency policy etc. For long-term receivables, the Company assessesexpected credit loss reasonably by considering settlement period, contracted payment terms, debtor’s financial situation andthe economic situation of the debtor’s industry.
As at June 30, 2022, the carrying amount of related assets and corresponding ECL is as follows:
| Aging | Book balance | Provision for impairment |
| Notes receivable | 56,457,807.54 | 2,602,836.41 |
| Accounts receivable | 463,429,354.03 | 43,793,648.08 |
| Other receivables | 63,094,122.18 | 4,245,960.45 |
| Total | 582,981,283.75 | 50,642,444.94 |
As the Company’s customer base is large, there exists no material credit concentration risk.
As at June 30 2022, the balance of top 5 receivable accounts accounted for 33.18% of total accounts receivables (2021:
35.48%).
2. Liquidity risk
Liquidity risk refers to the risk of short of funds when the company performs its obligation of cash payment or settlement byother financial assets. The Company’s subordinate member companies are responsible for their respective cash flowprojections. Based on the results thereof, the subordinate financial management department continually monitors its short-term and long-term capital needs at the company level to ensure adequate cash reserves; in the meantime, continuallymonitors the compliance with loan agreements and secures undertakings for sufficient reserve funds from major financialinstitutions, to address its short-term and long-term capital needs. Besides, the Company mainly signs financing agreementswith banks that have business transactions to provide support to fulfill commercial bill obligation. As at 31 December 2021,the Company has financing facilities from several banks amounting to CNY2,299.2099 million. Amongst, CNY 605.8707million has already been used.
As at 31 December 2021, the discounted contractual cash flows for financial liabilities and off-balance sheet guarantee thatpresented in maturity are as follows:
| Items | Ending balance (CNY 10,000) | ||||
| Within 1 year | 1-2 years | 2-3 years | Over 3 years | Total | |
| Short term borrowings | 45,872.90 | 45,872.90 | |||
| 35. Notes payable | 58.29 | 58.29 | |||
| Accounts payable | 19,939.47 | 19,939.47 | |||
| Other payables | 16,262.65 | 161.13 | 161.61 | 16,585.39 | |
| Non-current liabilities due within a year | 366.01 | 366.01 | |||
| Total | 82,499.32 | 161.13 | 161.61 | - | 82,822.05 |
3. Market Risks
1) Exchange rate risk
Except that the Company’s subsidiary in Hong Kong uses HKD as settlement currency and sub-subsidiary in Swiss usedCHF as settlement currency, the principal places of operations of the Company are located in China and the majorbusinesses are settled in Renminbi. However, the Company’s recognized foreign currency assets and liabilities as well asthe foreign currency transactions in the future (the functional currencies of foreign assets and liabilities as well as thetransactions are mainly HKD and SF) remain exposed to exchange rate risk
As at June 30 2022, the Renminbi equivalent of financial assets and financial liabilities denominated in foreign currenciesare as follows:
| Items | Ending balance | ||||
| HKD | USD | EURO | SF | Total | |
| Financial asset denominated in foreign currency: | |||||
| Monetary capital | 795,379.84 | 20,695,043.17 | 2,612,180.24 | 4,649,625.63 | 28,752,228.89 |
| Accounts receivable | 904,871.06 | 5,169,981.15 | 430,731.36 | 76,335.05 | 6,581,918.61 |
| Other receivables | 99,754.00 | 99,754.00 | |||
| Sub-total | 1,800,004.90 | 25,865,024.33 | 3,042,911.60 | 4,725,960.68 | 35,433,901.50 |
| Financial liabilities denominated in foreign currency: | |||||
| Accounts payable | 1,348,623.62 | 6,838.92 | 927,531.99 | 2,282,994.53 | |
| Other payables | 12,406.38 | 38,651.29 | 21,328.03 | 260,603.85 | 332,989.55 |
| Non-current | 3,660,090.00 | 3,660,090.00 | |||
| liabilities due within a year | |||||
| Sub-total | 1,361,030.00 | 45,490.20 | 21,328.03 | 4,848,225.84 | 6,276,074.08 |
Sensitivity analysis:
As at June 30, 2022, for financial assets and financial liabilities that denominated in foreign currency, if Renminbi appreciateor depreciate of 5% to foreign currency and other factors remain unchanged, the net profit will decrease or increase aboutCNY 1.2824 million(2021: CNY 0.485 million).
2) Interest rate risk
The interest rate risk of the Company mainly associates with bank borrowings. Floating rate financial liabilities expose theCompany to cash-flow interest rate risk, while fixed rate financial liabilities expose the Company to fair-value interest raterisk. The Company determines the comparative proportion of fixed rate contracts and floating rate contracts based on thethen market conditions.The financial department of the Company continuously monitors the Company’s interest rate level. Rise of interest ratesmay increase the cost of new interest-bearing liabilities and interest costs on the Company's outstanding interest-bearingliabilities at variable rates, and have a material adverse effect on the Company's financial results. The management maymake timely adjustments based on the latest market conditions to reduce interest rate risk.XI. Disclosure of Fair Value
1. Fair value at the end of the reporting period of the assets and liabilities measured based on the fair valueInapplicable
2. Basis for determining the market price of the items measured based on the continuous and non-continuousfirst level fair valueInapplicable
3. Items measured based on the continuous or uncontinuous 2nd level fair value, valuation technique as used,nature of important parameters and quantitative informationInapplicable
4. Items measured based on the continuous or uncontinuous 3rd level fair value, valuation technique as used,nature of important parameters and quantitative informationInapplicable
5. Items measured based on the continuous 3rd level fair value, sensitivity analysis on adjusted information andunobservable parameters between the book value at beginning and end of the periodInapplicable
6. In case items measured based on fair value are converted between different levels incurred in the currentperiod, state the cause of conversion and determine conversion time pointInapplicable
7. Change of valuation technique incurred in the current period and cause of such changeInapplicable
8. Fair value of financial assets and financial liabilities not measured at fair valueInapplicable
9. Others
InapplicableXII. Related parties and transactions
1. Details of the parent company of the Company
| Name of the parent company | Place of registration | Nature of business | Registered capital | Shareholding ratio of the parent company in the Company | Ratio of vote right of the parent company in the Company |
| AVIC IHL | Shenzhen | Investment | 1,166,161,996.00 | 38.25% | 38.25% |
Note to the parent company:
AVIC IHL holds 38.25% of the Company's voting rights, and is the parent company of the Company. AVIC indirectly holds
91.14% equity in AVIC IHL, so the actual controller of the Company is AVIC.
The eventual controller of the Company is State owned assets supervision and Administration Commission of the StateCouncil.
2. Subsidiaries of the Company
Refer to Note IX. 1 for details of subsidiaries of the Company.
3. Joint venture and association of the Company
Inapplicable
4. Other related parties
| Names of other related parties | Relationship between other related parties and the Company |
| AVIC Property Management Co., Ltd. (AVIC Property) | An associate of the actual controller |
| Ganzhou CATIC 9 Square Commerce Co., Ltd. (Ganzhou 9 Square) | An associate of the actual controller |
| AVIC City Property (Kunshan) Co., Ltd. (AVIC City Property (Kunshan) ) | An associate of the actual controller |
| Jiujiang 9 Square Commerce Management Co., Ltd. (9 Square Commerce Management) | An associate of the actual controller |
| Shenzhen AVIC Building Technology Co., Ltd. (AVIC Building) | An associate of the actual controller |
| Shenzhen AVIC Nanguang Elevator Co., Ltd. (AVIC Nanguang ) | An associate of the actual controller |
| Shenzhen AVIC Security Service Co., Ltd. (AVIC Security Service) | An associate of the actual controller |
| AVIC International Holding Corporation | Controlled by the same party |
| Rainbow Digital Commercial Co., Ltd. (RAINBOW) | Controlled by the same party |
| Shennan Circuit Co., Ltd. (Shennan Circuit) | Controlled by the same party |
| Shenzhen AVIC Training Center (AVIC Training Center) | Controlled by the same party |
| Gongqingcheng CATIC Cultural Investment Co., Ltd. (Gongqingcheng CATIC Cultural Investment) | Controlled by the same party |
| AVIC Jonhon Optronic Technology Co.,Ltd. (AVIC Optronic) | Controlled by the same party |
| AVIC General Aircraft Co., Ltd. (AVIC General Aircraft) | Controlled by the same party |
| AVIC Huadong Photoelectric Co., Ltd. (Huadong Photoelectric) | Controlled by the same party |
| AVIC International Simulation Technology Service Co., Ltd. (AVIC International Simulation) | Controlled by the same party |
| AVIC IHL (Zhuhai) Limited (AVIC IHL (Zhuhai)) | Controlled by the same party |
| China National Aero-Technology Import & Export Corporation (CATIC) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities) | Controlled by the same party |
| Guizhou Huayang Electric Co., Ltd. (GUIZHOU HUAYANG ELECTRIC) | Controlled by the same party |
5. Related transactions
(1) Related transactions of purchase and sale of commodities and supply and acceptance of labor servicesStatement of purchase of commodities and acceptance of labor services
In CNY
| Related party | Description of Related Transactions | Amount incurred in the reporting period | Transaction quota as approved | Has it exceeded the transaction quota | Amount incurred in the previous period |
| AVIC Property | Water & power supply and property management fee | 5,674,190.55 | 70,000,000.00 | No | 5,394,418.03 |
| Rainbow Ltd. | Shopping mall fees/purchase of goods | 2,205,812.33 | No | 2,662,052.00 | |
| Ganzhou 9 Square | Shopping mall fees | 89,558.78 | No | 89,105.10 | |
| AVIC City Property (Kunshan) | Shopping mall fees | 23,584.90 | No | 0.00 | |
| 9 Square Commerce Management Co., Ltd. | Shopping mall fees | 45,264.34 | No | 42,485.78 | |
| AVIC Training Center | Training fee | 0.00 | No | -2,298.55 | |
| AVIC Building Co. | Refurbishment | 0.00 | No | 32,924.52 | |
| AVIC Nanguang | Elevator maintenance | 0.00 | No | 122,830.20 | |
| Total | 8,038,410.90 | 70,000,000.00 | 8,341,517.08 |
Statement of sales of goods/supply of labor services
In CNY
| Related party | Description of Related Transactions | Amount incurred in the reporting period | Amount incurred in the previous period |
| Rainbow Ltd. | Products and labor services | 29,104,305.23 | 42,139,011.64 |
| Ganzhou 9 Square | Products and labor services | 13,008.85 | 0.00 |
| Shennan Circuit | Sales of materials and supply of services | 228,541.46 | 1,356,891.42 |
| Gongqingcheng CATIC Cultural Investment | Sales of products | 192,621.21 | 307,621.86 |
| AVIC Optronic | Sales of products | 379,058.98 | 346,870.70 |
| AVIC General Aircraft | Sales of products | 554,207.98 | 17,699.13 |
| Huadong Photoelectric (Shanghai) | Sales of products | 21,238.94 | 0.00 |
| AVIC International | Sales of products | 0.00 | 8,610.61 |
| AVIC International Simulation | Sales of products | 0.00 | 60,530.97 |
| AVIC IHL (Zhuhai) | Sales of products | 0.00 | 10,592.92 |
| CATIC | Sales of products | 0.00 | 105,929.20 |
| GUIZHOU HUAYANG ELECTRIC | Sales of products | 50,353.97 | 0.00 |
| Total | 30,543,336.62 | 44,353,758.45 |
Note to the related transactions of purchase and sale of commodities and supply and acceptance of labor servicesThe above transaction volume does not contain tax amount.
(2) Related entrusted management/contracted and mandatory management/contractingInapplicable
(3) Related lease
The Company as lessor:
In CNY
| Names of lessees | Categories of leasehold properties | Rental income recognized in the current period | Rental income recognized in the previous period |
| AVIC Property | Housing | 5,220,338.61 | 5,721,901.64 |
| AVIC Securities | Housing | 705,942.84 | 681,600.00 |
| Rainbow Ltd. | Housing | 309,104.34 | 548,843.48 |
| CATIC Public Security Service Co. | Housing | 453,202.26 | 399,724.38 |
The Company as lessee:
In CNY
| Names of lessor | Categories of leasehold properties | Rental charges for short-term leases and leases of low-value assets for simplified processing (if applicable) | Variable rental payment not included in the measurement of the rent liability (if applicable) | Rent paid | Payment of the rental liability interest undertaken | Increased right-to-use assets | |||||
| Amount incurred in the reporting period | Amount incurred in the previous period | Amount incurred in the reporting period | Amount incurred in the previous period | Amount incurred in the reporting period | Amount incurred in the previous period | Amount incurred in the reporting period | Amount incurred in the previous period | Amount incurred in the reporting period | Amount incurred in the previous period | ||
| Ganzhou 9 Square | Housing | 475,674.30 | 475,674.30 | 7,302.99 | 26,254.89 | -458,518.56 | -458,518.56 | ||||
| AVIC City Property | Housing | 75,600.00 | 71,999.99 | 3,504.11 | 4,670.69 | -71,606.28 | -65,702.28 | ||||
| (Kunshan) | |||||||||||
| 9 Square Commerce Management Co., Ltd. | Housing | 37,267.73 | 167,122.58 | 129,495.42 | 123,605.52 | 8,636.46 | 8,022.15 | -124,732.08 | -116,019.36 |
Note to the related leaseThe above transaction volume does not contain tax amount.
(4) Related guarantee
Inapplicable
(5) Borrowings and lendings among related parties
In CNY
| Related party | Borrowing amount | Starting date | Due date | Note |
| Borrowed from | ||||
| AVIC Finance | 100,000,000.00 | January 14, 2022 | February 9, 2022 | |
| AVIC Finance | 100,000,000.00 | February 18, 2022 | February 25, 2022 | |
| Lending | ||||
| Inapplicable | ||||
(6) Assets assignment and liabilities reorganization of related parties
Inapplicable
(7)Remuneration to senior executives
Inapplicable
(8) Other related transactions
The Company’s deposit balance deposited with AVIC Finance at the end of the current year amounted to CNY348,755,831.42, of which the deposit interest received during the year amounted to CNY 284,223.67.
6. Accounts receivable from and payable to related parties
(1) Receivables
In CNY
| Project name | Related party | Ending balance | Opening balance | ||
| Book balance | Provision for bad debt | Book balance | Provision for bad debt | ||
| Bank deposit | AVIC Finance | 348,755,831.42 | 147,786,041.19 | ||
| Accounts receivable | Rainbow Ltd. | 2,632,134.75 | 159,544.92 | 3,958,751.41 | 244,056.19 |
| Shennan Circuit | 50,277.05 | 2,513.85 | 161,653.56 | 8,082.68 | |
| Ganzhou 9 Square | 2,250.00 | 112.50 | 6,000.00 | 300.00 | |
| AVIC Optronic | 136,121.85 | 9,339.80 | 44,718.38 | 2,235.92 | |
| AVIC General | 626,255.00 | 31,312.75 | 1,471,466.00 | 73,573.30 | |
| Aircraft | |||||
| GUIZHOU HUAYANG ELECTRIC | 39,080.00 | 1,954.00 | |||
| Gongqingcheng AVIC Cultural Investment | 23,174.90 | 1,158.75 | 10,536.96 | 303.21 | |
| AVIC Property | 751,145.22 | 37,557.26 | 0.30 | ||
| Notes receivable | Shennan Circuit | 308,698.46 | 15,434.92 | ||
| AVIC Optronic | 98,016.45 | 187,090.69 | 9,354.53 | ||
| Other receivables | Rainbow Ltd. | 1,072,342.17 | 53,617.11 | 1,051,020.00 | 52,551.00 |
| Ganzhou 9 Square | 192,064.00 | 9,603.20 | 192,064.00 | 9,603.20 | |
| AVIC City Property (Kunshan) | 56,000.00 | 2,800.00 | 56,000.00 | 2,800.00 | |
| Gongqingcheng AVIC Cultural Investment | 5,500.00 | 275.00 | 5,500.00 | 275.00 | |
| 9 Square Commerce Management Co., Ltd. | 50,000.00 | 2,500.00 | 50,000.00 | 2,500.00 | |
| AVIC IHL | 49.32 | 2.47 | 49.32 | 2.47 |
(2) Payables
In CNY
| Project name | Related party | Ending book balance | Opening book balance |
| Accounts payable | AVIC Building Co. | 41,283.89 | |
| Other payables | AVIC Property | 2,405,584.31 | 2,307,322.31 |
| AVIC Securities | 247,080.00 | 247,080.00 | |
| AVIC Building Co. | 14,808.41 | 31,270.67 | |
| Rainbow Ltd. | 144,651.82 | 198,661.82 | |
| CATIC Public Security Service Co. | 158,620.80 | 226,603.44 | |
| AVIC Nanguang | 13,958.43 | 34,430.13 | |
| AVIC International | 3,600.00 | ||
| Advance from customers | AVIC Securities | 123,540.00 | 123,540.00 |
| Rainbow Ltd. | 16,537.50 |
7. Related parties’ commitments
Inapplicable
8. Others
InapplicableXIII. Stock payment
1. General
In CNY
| Total amount of various equity instruments granted by the Company | 0.00 |
| during the reporting period | |
| Total amount of various equity instruments of the Company exercisable during the reporting period | 1,244,421.00 |
| Total amount of various equity instruments of the Company expired during the reporting period | 0.00 |
| The scope of the exercise price of stock options issued at the end of the reporting period and the remaining time of the contract | Inapplicable |
| The scope of the exercise price of other equity instruments issued at the end of the reporting period and the remaining time of the contract | 2018 A-share restricted stock incentive plan (phase I): the grant price is 3.30 yuan / share (after the adjustment of equity distribution), the limited sale period is 24 months after the grant date of January 11, 2019, and the unlocking period is 36 months after the expiration of the limited sale period (on the premise of meeting the established unlocking conditions, the unlocking ratio is 33.3%, 33.3%, and 33.4% respectively). 2018 A-share restricted stock incentive plan (phase II): the grant price is 6.90 yuan / share (after the adjustment of equity distribution), the limited sale period is 24 months after the grant completion date is January 29, 2021, and the unlocking period is 36 months after the expiration of the limited sale period (on the premise that the established unlocking conditions are met, the unlocking ratio is 33.3%, 33.3%, and 33.4% respectively). |
2. Stock payment for equity settlement
In CNY
| Method for determining the fair value of equity instruments granted | Closing price of the Company's stock on the grant date |
| Basis for determining the quantity of exercisable equity instruments | Employee service period, achievement rate of performance indicators, and employee individual performance evaluation result |
| Cause of significant difference between the estimation of the reporting period and that of the previous period | Inapplicable |
| Accumulated amount of the equity-settled share-based payment counted to the capital reserve | 26,747,736.51 |
| Total expenses recognized in the equity-settled share-based payment during the reporting period | 4,629,604.79 |
3. Stock payment for cash settlement
Inapplicable
4. Correction and termination of stock payment
Inapplicable
5. Others
Inapplicable
XIV. Commitments and contingencies
1. Important commitments
Important commitments existing as at the balance sheet dateLease contract that already signed or prepared to fulfill and its financial effectDisclosure as lessee:
(1) Lease activities
The Company's lease categories are all housing and buildings, including simplified short-term lease and leases other thanshort-term rent where right-to-use assets and lease liabilities are recognized.
(2) Short-term rentals with simplified processing
Short-term leases are treated using simplified method. Short-term leases include lease term that is shorter than 12 monthand no renew options attached, and leases that will be matured in 12 month after first adoption of CAS 21 – Lease. Short-term lease expenses charged to profit or loss was CNY2,332,300.37.
(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 in connection with sales.
Many of the Company’s property lease contain variable lease payment terms in connection with sales. In most circumstances,the Company uses these terms to matches lease payment to shops that can generate more cash flows lease payment.For standalone shops, variable can reach 100% of all lease payment at most and that the scope of percentage of sales usedis quite large. In some circumstances, variable payment terms include annual bottom payment and upper limit.
In the first half year of 2021, the amount of variable lease payments included in the current profit and loss was CNY42,557,635.84.
2) Option to renew
Many lease contracts entered by the Company has option to renew. The Company has already estimated the option torenew reasonably when determining lease terms in measuring lease liabilities.
3) Option to discontinue lease
Some of the lease contract entered by the Company has option to discontinue. The Company has already estimated theoption to discontinue reasonably when determining lease terms in measuring 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 and collects 1-3 months rental asdeposit.
2. Contingencies
(1) Significant contingencies existing as at the balance sheet day
Inapplicable
(2) Important contingencies unnecessary to be disclosed but necessary to be explainedInapplicable
3. Others
InapplicableXV. Events after balance sheet day
1. Significant non-adjustment events
Inapplicable
2. Profit distribution
Inapplicable
3. Sales return
Inapplicable
4. Note to other matters after the balance sheet date
Inapplicable
XVI. Other significant events
1. Correction of the accounting errors in the previous period
(1) Retroactive restatement
Inapplicable
(2) Prospective application
Inapplicable
2. Liabilities restructuring
Inapplicable
3. Replacement of assets
(1) Non-monetary assets exchange
Inapplicable
(2) Other assets exchange
Inapplicable
4. Annuity plan
Inapplicable
5. Discontinuing operation
Inapplicable
6. Segment information
(1) Basis for determining the reporting segments and accounting policy
Operating segments of the Company are identified on the basis of internal organization structure, management requirementsand internal reporting system. An operating segment represents a component of the Company that satisfied the followingcriteria 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 make decisions on resources allocationand performance assessment;
(3) Its financial conditions, operating results, cash flow and related accounting information are available to the Company.
The Company determines the reporting segment based on the operating segment, and the operating segment that meetsany of the following conditions is determined as the reporting segment:
(1)The segment income of the operating segment accounts for 10.00% or more of total income of all segments;
(2)The absolute amount of profits (losses) of the segment account for 10.00% or more of the higher of the absolute amountof total profits of the profiting segment and the absolute amount of total losses of the unprofitable segment.
(2) Financial information of the reporting segments
Inapplicable
(3) In case there is no reporting segment or the total assets and liabilities of the reporting segments cannot bedisclosed, explain the reasonThe Company’s business is simple. The business mainly involves manufacturing and sales of watch. The managementconsiders the business as a whole in implementing management and assessing its performance. As a result, no segmentinformation is disclosed in this financial statement.
(4) Other note
Inapplicable
7. Other significant transactions and matters that may affect investors' decision makingInapplicable
8. Others
InapplicableXVII. Notes to the parent company’s financial statements
1. Accounts receivable
(1) Accounts receivable disclosed by category
In CNY
| Categories | Ending balance | Opening balance | ||||||||
| Book balance | Provision for bad debt | Book value | Book balance | Provision for bad debt | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
| Including: | ||||||||||
| Accounts receivable for which bad debt reserve has been provided based on portfolios | 6,504,763.22 | 100.00% | 325,270.07 | 5.00% | 6,179,493.15 | 136,923.82 | 100.00% | 7,043.34 | 5.14% | 129,880.48 |
| Including: | ||||||||||
| Accounts receivable from other customers | 6,504,763.22 | 100.00% | 325,270.07 | 5.00% | 6,179,493.15 | 136,923.82 | 100.00% | 7,043.34 | 5.14% | 129,880.48 |
| Total | 6,504,763.22 | 100.00% | 325,270.07 | 5.00% | 6,179,493.15 | 136,923.82 | 100.00% | 7,043.34 | 5.14% | 129,880.48 |
Bad debt reserve provided based on portfolio: Accounts receivable from other customers based on portfolio
In CNY
| Description | Ending balance | ||
| Book balance | Provision for bad debt | Provision proportion | |
| Accounts receivable from other customers | 6,504,763.22 | 325,270.07 | 5.00% |
| Total | 6,504,763.22 | 325,270.07 | |
Note to the basis for determining the combination:
Accounts receivable with same aging have similar credit risk characteristics
If the provision for bad debts of accounts receivable is accrued in accordance with the general expected credit loss model,please refer to the disclosure of other receivables to disclose the relevant information of the provision for bad debts:
Inapplicable
Disclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 6,504,125.13 |
| 1 to 2 years | 638.09 |
| Total | 6,504,763.22 |
(2) Provision, recovery or reversal of reserve for bad debts during the reporting periodProvision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Recovery or reversal | Written-off | Others | |||
| Accounts | 7,043.34 | 325,206.26 | 6,979.53 | 325,270.07 | ||
| receivable with provision for expected credit loss by portfolio | ||||||
| Total | 7,043.34 | 325,206.26 | 6,979.53 | 325,270.07 |
Where the significant amount of the reserve for bad debt recovered or reversed:
Inapplicable
(3) Accounts receivable actually written off in the reporting period
Inapplicable
(4) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Organization name | Ending balance of the accounts receivable | Proportion in total ending balance of accounts receivable | Ending balance of the provision for bad debts |
| Summary of the top five accounts receivable in the ending balance | 4,816,558.22 | 74.05% | 240,827.91 |
| Total | 4,816,558.22 | 74.05% |
(5) Account receivable with recognition terminated due to transfer of financial assetsInapplicable
(6) Amount of assets and liabilities formed through transfer of accounts receivable and continuing to be involvedInapplicable
2. Other receivables
In CNY
| Items | Ending balance | Opening balance |
| Other receivables | 630,494,908.53 | 717,183,139.00 |
| Total | 630,494,908.53 | 717,183,139.00 |
(1) Interest receivable
1) Classification of interest receivable
Inapplicable
2) Significant overdue interest
Inapplicable
3) Provision for bad debts
Inapplicable
(2) Dividends receivable
1) Classification of dividends receivable
Inapplicable
2) Significant dividends receivable with age exceeding 1 year
Inapplicable
3) Provision for bad debts
Inapplicable
(3) Other receivables
1) Classification of other receivables based on nature of payment
In CNY
| Nature of the fund | Ending book balance | Opening book balance |
| Related party in scope of consolidation | 629,882,199.56 | 713,813,300.99 |
| Security deposit | 553,413.90 | 3,117,526.90 |
| Others | 126,598.97 | 450,895.61 |
| Total | 630,562,212.43 | 717,381,723.50 |
2) Provision for bad debts
In CNY
| Provision for bad debt | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit loss in future 12 months | Expected credit loss in the whole duration (no credit impairment incurred) | Expected credit loss in the whole duration (credit impairment already incurred) | ||
| Balance as at January 1, 2022 | 198,584.50 | 198,584.50 | ||
| Balance as at January 1, 2022 in the reporting period | ||||
| Provision in the reporting period | ||||
| Reversal in the reporting period | 131,280.60 | 131,280.60 | ||
| Charge-off in the reporting period |
| Written-off in the reporting period | ||||
| Other changes | ||||
| Balance as at June 30, 2022 | 67,303.90 | 67,303.90 |
Provision for loss - Change of the book balance with significant amount during the reporting periodInapplicable
Disclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 630,512,034.90 |
| 1 to 2 years | 0.00 |
| 2 to 3 years | 0.00 |
| Over 3 years | 50,177.53 |
| 3 to 4 years | 10,127.53 |
| 4 to 5 years | 0.00 |
| Over 5 years | 40,050.00 |
| Total | 630,562,212.43 |
3) Provision, recovery or reversal of reserve for bad debts during the reporting periodProvision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Recovery or reversal | Written-off | Others | |||
| Receivables of down payment and guarantee | 193,923.85 | 128,205.65 | 65,718.20 | |||
| Portfolio of other receivables | 4,660.65 | 3,074.95 | 1,585.70 | |||
| Total | 198,584.50 | 131,280.60 | 67,303.90 | |||
Where a significant amount of the reserve for bad debt recovered or reversed during the reporting period:
Inapplicable
4) Other receivables actually written off in the reporting period
Inapplicable
5) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Organization name | Nature of Payment | Ending balance | Aging | Proportion in total ending balance of | Ending balance of the provision for bad |
| other receivables | debts | ||||
| Summary of the top five other receivables in the ending balance | Receivables for related parties in scope of consolidation | 629,882,199.56 | Within 1 year | 99.89% | 0.00 |
| Total | 629,882,199.56 | 99.89% | 0.00 |
6) Accounts receivable involving government subsidy
Inapplicable
7) Other receivables derecognized due to transfer of financial assets
Inapplicable
8) Amount of assets and liabilities formed through transfer of other receivables and continuing to be involvedInapplicable
3. Long-term equity investments
In CNY
| Items | Ending balance | Opening balance | ||||
| Book balance | Provision for impairment | Book value | Book balance | Provision for impairment | Book value | |
| Investment in subsidiaries | 1,490,325,919.51 | 1,490,325,919.51 | 1,486,912,339.72 | 1,486,912,339.72 | ||
| Investment in associates and joint ventures | 57,618,231.83 | 57,618,231.83 | 55,155,605.31 | 55,155,605.31 | ||
| Total | 1,547,944,151.34 | 1,547,944,151.34 | 1,542,067,945.03 | 1,542,067,945.03 | ||
(1) Investment in subsidiaries
In CNY
| Investees | Opening balance (book value) | Increase/ Decrease (+ / -) in the reporting period | Ending balance (book value) | Ending balance of the provision for impairment | |||
| Additional investment | Decrease of investment | Provision for impairment | Others | ||||
| Shenzhen Harmony World Watches Center Co., Ltd. | 607,684,512.15 | 1,168,586.67 | 608,853,098.82 | ||||
| FIYTA Sales Co., Ltd. | 455,791,572.32 | 1,117,745.55 | 456,909,317.87 | ||||
| Shenzhen FIYTA | 101,249,207.88 | 616,430.95 | 101,865,638.83 | ||||
| Precision Technology Co., Ltd. | |||||||
| Shenzhen FIYTA Technology Development Co., Ltd. | 50,775,222.76 | 224,876.11 | 51,000,098.87 | ||||
| FIYTA (Hong Kong) Limited | 137,737,520.00 | 137,737,520.00 | |||||
| Shiyuehui Boutique (Shenzhen) Co., Ltd. | 5,000,000.00 | 5,000,000.00 | |||||
| Shenzhen Harmony E-Commerce Limited | 11,684,484.39 | 11,684,484.39 | |||||
| Liaoning Hengdarui Commerce & Trade Co., Ltd. | 36,867,843.96 | 36,867,843.96 | |||||
| Emile Chouriet (Shenzhen) Limited | 80,121,976.26 | 285,940.51 | 80,407,916.77 | ||||
| Total | 1,486,912,339.72 | 3,413,579.79 | 1,490,325,919.51 |
(2) Investment in associates and joint ventures
In CNY
| Investees | Opening balance (book value) | Increase/ Decrease (+ / -) in the reporting period | Ending balance (book value) | Ending balance of the provision for impairment | |||||||
| Additional investment | Decrease of investment | Income from equity investment recognized under equity method | Adjustment of other comprehensive income | Other equity movement | Announced for distributing cash dividend or profit | Provision for impairment | Others | ||||
| I. Joint Venture | |||||||||||
| Inapplicable | |||||||||||
| II. Associates | |||||||||||
| Shanghai Watch Industry Co., Ltd. | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
| Sub-total | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
| Total | 55,155,605.31 | 2,462,626.52 | 57,618,231.83 | ||||||||
(3) Other note
Inapplicable
4. Operation Income and Costs
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | ||
| Income | Cost | Income | Cost | |
| Principal business | 90,020,775.90 | 19,190,036.95 | 82,132,996.59 | 17,699,646.51 |
| Other businesses | 1,621,838.79 | 4,601,153.13 | ||
| Total | 91,642,614.69 | 19,190,036.95 | 86,734,149.72 | 17,699,646.51 |
Information in connection with the revenue:
In CNY
| Classification of Contracts | Segment 1 | Total |
| Types of commodities | ||
| Including: | ||
| Leases | 90,020,775.90 | 90,020,775.90 |
| Others | 1,621,838.79 | 1,621,838.79 |
| Classification based on the operation regions | ||
| Including: | ||
| Northwest China | 10,794,617.06 | 10,794,617.06 |
| South China | 80,847,997.63 | 80,847,997.63 |
| Total | 91,642,614.69 | 91,642,614.69 |
Information concerning obligation performance:
The Company's income is mainly lease income. During each period of the lease term, the current profit and loss arerecognized according to the straight-line method.
Information related to the transaction price allocated to the remaining obligations performance:
At the end of the reporting period, the amount of revenue corresponding to the performance obligations of the contractswhich have been signed, but not yet performed or not yet completed is CNY0.00.
5. Return on investment
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Income from long term equity investment based on equity method | 2,462,626.52 | 1,629,328.24 |
| Total | 2,462,626.52 | 1,629,328.24 |
6. Others
Inapplicable
XVIII. Supplementary information
1. Statement of non-recurring gains and losses in the reporting period
In CNY
| Items | Amount | Notes |
| 1. Gain/Loss from disposal of non-current assets | -816,021.16 | |
| 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) | 13,369,782.95 | |
| Reversal of provision for impairment of accounts receivable that has been separately tested for impairment | 2,130,784.84 | |
| Other non-operating income and expenses with the aforesaid items exclusive | -617,309.48 | |
| Less: Amount affected by the income tax | 3,306,209.76 | |
| Total | 10,761,027.39 | -- |
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 on Information Disclosurefor Companies Offering Their Securities to the Public as recurring gains and lossesInapplicable
2. ROE and EPS
| Profit in the reporting period | Return on equity, weighted average | Earnings per share | |
| Basic earning per share (CNY/share) | Diluted earning per share (CNY/share) | ||
| Net profit attributable to the Company’s shareholders of ordinary shares | 4.62% | 0.3351 | 0.3351 |
| Net profit attributable to the Company’s shareholders of ordinary shares less non-recurring gains and loss | 4.27% | 0.3090 | 0.3090 |
3. Discrepancy in accounting data between IAS and CAS
(1) Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’sshareholders respectively according to the IAS and the CAS.Inapplicable
(2) Differences in the net profit & the net assets disclosed in the financial report respectively according to the IASand the CASInapplicable
(3) Note to the discrepancy in accounting data under the IAS and the CAS. In case the discrepancy in data whichhave been audited by an overseas auditing agent has been adjusted, please specify the name of the overseasauditing agent.Inapplicable
4. Others
Inapplicable
FIYTA Precision Technology Co., Ltd.
Board of DirectorsAugust 20, 2022