FIYTA Precision Technology Co., Ltd.
2021 Semi-annual ReportFinancial Report
I. Auditors’ ReportHas the semi-annual report been auditedNo
II. 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, 2021
In CNY
| Items | June 30, 2021 | December 31, 2020 |
| Current assets: | ||
| Monetary capital | 234,840,156.69 | 353,057,285.71 |
| Settlement reserve | ||
| Inter-bank lending | ||
| Transactional financial assets | ||
| Derivative financial assets | ||
| Notes receivable | 54,521,848.62 | 48,192,442.15 |
| Accounts receivable | 493,350,677.26 | 475,598,684.88 |
| Financing with accounts receivable | ||
| Advance payment | 17,014,006.71 | 16,612,773.76 |
| Receivable premium | ||
| Reinsurance accounts receivable | ||
| Reserve for reinsurance contract receivable | ||
| Other receivables | 61,004,359.97 | 52,902,779.63 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Redemptory monetary capital for sale | ||
| Inventories | 2,014,209,378.86 | 1,931,780,185.85 |
| Contract assets | ||
| Held-for-sale assets | ||
| Non-current assets due within a year | ||
| Other current assets | 47,287,225.10 | 75,935,141.76 |
| Total current assets | 2,922,227,653.21 | 2,954,079,293.74 |
| Non-current assets: |
| Loan issuing and advance in cash | ||
| Equity investment | ||
| Other equity investment | ||
| Long term accounts receivable | ||
| Long-term equity investments | 53,029,994.16 | 51,400,665.92 |
| Investment in other equity instruments | 85,000.00 | 85,000.00 |
| Other non-current financial assets | ||
| Investment-oriented real estate | 390,386,341.42 | 398,086,447.78 |
| Fixed assets | 350,973,834.39 | 352,734,280.76 |
| Construction-in-progress | ||
| Productive biological asset | ||
| Oil and Gas Assets | ||
| Use right assets | 145,971,912.86 | |
| Intangible assets | 34,770,175.43 | 37,859,316.51 |
| Development expenses | ||
| Goodwill | ||
| Long term expenses to be apportioned | 147,942,069.65 | 130,017,587.99 |
| Deferred income tax asset | 74,528,698.05 | 80,913,800.35 |
| Other non-current assets | 5,499,554.07 | 13,536,307.13 |
| Total non-current assets | 1,203,187,580.03 | 1,064,633,406.44 |
| Total assets | 4,125,415,233.24 | 4,018,712,700.18 |
| Current liabilities: | ||
| Short term borrowings | 460,023,601.43 | 542,673,278.09 |
| Borrowings from central bank | ||
| Loans from other banks | ||
| Transactional financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | 2,181,360.00 | 3,581,360.00 |
| Accounts payable | 242,658,707.35 | 301,211,515.39 |
| Advance receipt | 8,932,926.97 | 9,991,850.67 |
| Contract liabilities | 18,658,899.34 | 18,213,396.49 |
| 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 | 84,206,571.74 | 132,853,462.20 |
| Taxes payable | 65,945,245.27 | 68,925,271.90 |
| Other payables | 224,725,778.18 | 128,577,597.94 |
| Including: interest payable | ||
| Dividends payable | 5,210,370.29 | 1,639,513.77 |
| Service charge and commission payable | ||
| Payable reinsurance | ||
| Held-for-sale liabilities | ||
| Non-current liabilities due within a year | 95,744,266.63 | 370,030.00 |
| Other current liabilities | 2,374,396.18 | 2,299,755.09 |
| Total current liabilities | 1,205,451,753.09 | 1,208,697,517.77 |
| Non-current liabilities: | ||
| Reserve for insurance contract | ||
| Long-term borrowings | 3,702,300.00 | 4,070,330.00 |
| Bonds payable | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Lease liabilities | 52,886,029.26 | |
| Long-term accounts payable | ||
| Long term payroll payable to the employees | ||
| Estimated liabilities | ||
| Deferred income | 2,377,718.35 | 2,916,346.43 |
| Deferred income tax liability | 3,837,833.16 | 3,067,834.55 |
| Other non-current liabilities | ||
| Total non-current liabilities | 62,803,880.77 | 10,054,510.98 |
| Total liabilities | 1,268,255,633.86 | 1,218,752,028.75 |
| Owner’s equity: | ||
| Capital stock | 435,550,522.00 | 428,091,881.00 |
| Other equity instruments | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Capital reserve | 1,078,658,797.94 | 1,021,490,387.78 |
| Less: shares in stock | 117,872,472.46 | 61,633,530.48 |
| Other comprehensive income | -5,501,083.75 | 976,871.41 |
| Special reserve | 295,691.96 | |
| Surplus reserve | 246,531,866.87 | 246,531,866.87 |
| Reserve against general risks | ||
| Retained earnings | 1,219,496,276.82 | 1,164,490,911.51 |
| Total owners’ equity attributable to the parent company | 2,857,159,599.38 | 2,799,948,388.09 |
| Minority shareholders’ equity | 12,283.34 | |
| Total owner’s equity | 2,857,159,599.38 | 2,799,960,671.43 |
| Total liabilities and owners’ equity | 4,125,415,233.24 | 4,018,712,700.18 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
2. Balance Sheet (Parent Company)
In CNY
| Items | June 30, 2021 | December 31, 2020 |
| Current assets: | ||
| Monetary capital | 177,611,362.38 | 292,055,169.74 |
| Transactional financial assets | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 3,108,258.93 | 1,464,798.79 |
| Financing with accounts receivable | ||
| Advance payment | ||
| Other receivables | 578,424,821.93 | 621,512,680.69 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Inventories | ||
| Contract assets | ||
| Held-for-sale assets | ||
| Non-current assets due within a year | ||
| Other current assets | 12,678,135.67 | 11,655,617.82 |
| Total current assets | 771,822,578.91 | 926,688,267.04 |
| Non-current assets: | ||
| Equity investment | ||
| Other equity investment | ||
| Long term accounts receivable | ||
| Long-term equity investments | 1,535,486,644.71 | 1,529,415,188.28 |
| Investment in other equity instruments | 85,000.00 | 85,000.00 |
| Other non-current financial assets | ||
| Investment-oriented real estate | 316,968,024.06 | 323,296,494.84 |
| Fixed assets | 228,543,657.25 | 224,709,747.39 |
| Construction-in-progress | ||
| Productive biological asset | ||
| Oil and Gas Assets | ||
| Use right assets | ||
| Intangible assets | 25,149,757.70 | 27,347,950.13 |
| Development expenses | ||
| Goodwill | ||
| Long term expenses to be apportioned | 10,238,644.03 | 11,980,697.97 |
| Deferred income tax asset | 1,549,679.94 | 1,380,180.94 |
| Other non-current assets | 1,169,264.97 | 473,312.35 |
| Total non-current assets | 2,119,190,672.66 | 2,118,688,571.90 |
| Total assets | 2,891,013,251.57 | 3,045,376,838.94 |
| Current liabilities: |
| Short term borrowings | 450,413,888.89 | 400,425,930.05 |
| Transactional financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 1,232,967.42 | 1,481,135.49 |
| Advance receipt | 8,932,926.97 | 9,991,850.67 |
| Contract liabilities | 37,735.85 | |
| Payroll payable to the employees | 19,101,278.54 | 25,256,531.70 |
| Taxes payable | 7,810,440.56 | 2,778,265.84 |
| Other payables | 192,044,409.36 | 240,824,305.37 |
| Including: interest payable | ||
| Dividends payable | 5,210,370.29 | 1,639,513.77 |
| Held-for-sale liabilities | ||
| Non-current liabilities due within a year | ||
| Other current liabilities | 2,264.15 | |
| Total current liabilities | 679,535,911.74 | 680,798,019.12 |
| 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 | 2,377,718.35 | 2,377,718.35 |
| Deferred income tax liability | ||
| Other non-current liabilities | ||
| Total non-current liabilities | 2,377,718.35 | 2,377,718.35 |
| Total liabilities | 681,913,630.09 | 683,175,737.47 |
| Owner’s equity: | ||
| Capital stock | 435,550,522.00 | 428,091,881.00 |
| Other equity instruments | ||
| Including: preferred shares | ||
| Perpetual bond | ||
| Capital reserve | 1,083,200,014.48 | 1,027,145,928.88 |
| Less: shares in stock | 117,872,472.46 | 61,633,530.48 |
| Other comprehensive income | ||
| Special reserve | ||
| Surplus Reserve | 246,531,866.87 | 246,531,866.87 |
| Retained earnings | 561,689,690.59 | 722,064,955.20 |
| Total owner’s equity | 2,209,099,621.48 | 2,362,201,101.47 |
| Total liabilities and owners’ equity | 2,891,013,251.57 | 3,045,376,838.94 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
3. Consolidated Statement of Profit
In CNY
| Items | Semi-annual of 2021 | Semi-annual of 2020 |
| I. Turnover | 2,777,519,521.34 | 1,581,834,715.03 |
| Including: operating income | 2,777,519,521.34 | 1,581,834,715.03 |
| Interest income | ||
| Earned insurance premium | ||
| Service charge and commission income | ||
| II. Total operating costs | 2,484,774,500.03 | 1,501,108,535.92 |
| Including: Operating costs | 1,738,149,481.70 | 977,435,676.87 |
| 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 | 16,455,961.46 | 7,270,983.69 |
| Sales costs | 561,630,052.63 | 380,928,312.51 |
| Administrative expenses | 121,391,665.85 | 98,240,348.73 |
| R & D expenditures | 26,370,064.68 | 20,704,270.76 |
| Financial expenses | 20,777,273.71 | 16,528,943.36 |
| Where: Interest cost | 14,778,321.69 | 13,485,670.67 |
| Interest income | 2,153,626.51 | 2,482,721.82 |
| Plus: Other income | 11,662,934.28 | 10,154,015.67 |
| Investment income (loss is stated with “-”) | 1,629,328.24 | 2,160,911.92 |
| Including: return on investment in associate and joint venture | 1,629,328.24 | 2,160,911.92 |
| 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 “-”) | -2,035,236.95 | -2,467,361.35 |
| Loss from impairment of assets (loss is stated with “-”) | -1,226,362.68 | |
| Income from disposal of assets (loss is stated with “-“) | -73,807.46 | -200,140.17 |
| III. Operating Profit (loss is stated with “-“) | 302,701,876.74 | 90,373,605.18 |
| Plus: Non-operating income | 271,968.27 | 1,391,859.42 |
| Less: Non-operating expenses | 859,659.12 | 118,646.41 |
| IV. Total profit (total loss is stated with “-”) | 302,114,185.89 | 91,646,818.19 |
| Less: Income tax expense | 68,549,402.06 | 13,907,911.89 |
| V. Net Profit (net loss is stated with “-“) | 233,564,783.83 | 77,738,906.30 |
| (I) Classification based on operation sustainability | ||
| 1. Net Profit from sustainable operation (net loss is stated with “-”) | 233,564,783.83 | 77,738,906.30 |
| 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 | 233,544,726.55 | 77,738,906.30 |
| 2. Minority shareholders’ gain/loss | 20,057.28 | |
| VI. Net of other comprehensive income after tax | -6,510,295.78 | 4,329,973.83 |
| Net of other comprehensive income after tax attributable to the parent company’s owner | -6,477,955.16 | 4,329,877.58 |
| (I) Other comprehensive income which cannot be re-classified into gain and loss | ||
| 1. Movement of the net liabilities and net assets re-measured for setting the beneficial plan | ||
| 2. Other comprehensive income which cannot 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 | -6,477,955.16 | 4,329,877.58 |
| shall be re-classified into gain and loss | ||
| 1. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 2. Movement of the fair value of the investment in other debt instruments | ||
| 3. Amount of the reclassified financial assets counted to the other comprehensive income | ||
| 4. Provision for impairment of the credit of the other debt investment | ||
| 5. Reserve for cash flow hedge | ||
| 6. Conversion difference in foreign currency statements | -6,477,955.16 | 4,329,877.58 |
| 7. Others | ||
| Net amount of other comprehensive income after tax attributable to minority shareholders | -32,340.62 | 96.25 |
| VII. Total comprehensive income | 227,054,488.05 | 82,068,880.13 |
| Total comprehensive income attributable to the parent company’s owner | 227,066,771.39 | 82,068,783.88 |
| Total comprehensive income attributable to minority shareholders | -12,283.34 | 96.25 |
| VIII. Earnings per share: | ||
| (I) Basic earnings per share | 0.5421 | 0.1775 |
| (II) Diluted earnings per share | 0.5421 | 0.1775 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
4. Statement of Profit, Parent Company
In CNY
| Items | Semi-annual of 2021 | Semi-annual of 2020 |
| I. Operating revenue | 86,734,149.72 | 57,313,218.41 |
| Less: Operating cost | 17,699,646.51 | 17,626,390.24 |
| Taxes and surcharges | 3,878,641.68 | 1,616,108.15 |
| Sales costs | 1,502,340.61 | 597,618.02 |
| Administrative expenses | 35,277,870.48 | 31,406,670.97 |
| R & D expenditures | 10,669,576.37 | 7,989,092.54 |
| Financial expenses | 2,473,687.51 | 3,458,375.39 |
| Where: Interest cost | 4,352,044.36 | 5,364,370.20 |
| Interest income | 1,885,611.98 | 2,363,907.44 |
| Plus: Other income | 1,283,696.46 | 4,334,756.32 |
| Investment income (loss is stated | 1,629,328.24 | 2,160,911.92 |
| with “-”) | ||
| Including: return on investment in associate and joint venture | 1,629,328.24 | 2,160,911.92 |
| 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 “-”) | -227,114.99 | -100,902.52 |
| Loss from impairment of assets (loss is stated with “-”) | ||
| Income from disposal of assets (loss is stated with “-“) | -32,709.96 | -15,641.58 |
| II. Operating Profit (loss is stated with “-“) | 17,885,586.31 | 998,087.24 |
| Plus: Non-operating income | 68,243.42 | 33,077.28 |
| Less: Non-operating expenses | ||
| III. Total profit (total loss is stated with “-“) | 17,953,829.73 | 1,031,164.52 |
| Less: Income tax expense | 4,109,028.61 | -250,708.51 |
| IV. Net Profit (net loss is stated with “-“) | 13,844,801.12 | 1,281,873.03 |
| (I) Net Profit from sustainable operation (net loss is stated with “-”) | 13,844,801.12 | 1,281,873.03 |
| (II) Net Profit from termination of operation (net loss is stated with “-”) | ||
| V. Net of other comprehensive income after tax | ||
| (I) Other comprehensive income which cannot be re-classified into gain and loss | ||
| 1. Movement of the net liabilities and net assets re-measured for setting the beneficial plan | ||
| 2. Other comprehensive income which cannot 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 |
| 1. Other comprehensive income which can be converted into gain and loss based on the equity method | ||
| 2. Movement of the fair value of the investment in other debt instruments | ||
| 3. Amount of the reclassified financial assets counted to the other comprehensive income | ||
| 4. Provision for impairment of the credit of the other debt investment | ||
| 5. Reserve for cash flow hedge | ||
| 6. Conversion difference in foreign currency statements | ||
| 7. Others | ||
| VI. Total comprehensive income | 13,844,801.12 | 1,281,873.03 |
| VII. Earnings per share: | ||
| (I)Basic earnings per share | ||
| (II)Diluted earnings per share |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
5. Consolidated Cash Flow Statement
In CNY
| Items | Semi-annual of 2021 | Semi-annual of 2020 |
| I. Cash flows arising from operating activities: | ||
| Cash received from sales of goods and supply of services | 3,032,558,393.33 | 1,704,132,389.05 |
| 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 | 332,318.54 | 1,408,520.48 |
| Other operation activity related cash receipts | 38,766,804.92 | 31,287,429.73 |
| Subtotal of cash flow in from operating activity | 3,071,657,516.79 | 1,736,828,339.26 |
| Cash paid for purchase of goods and reception of labor services | 2,066,444,330.76 | 1,124,364,970.39 |
| 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 | 393,019,916.39 | 280,396,366.01 |
| Taxes paid | 162,959,165.63 | 62,495,543.38 |
| Other business activity related cash payments | 244,079,540.08 | 165,926,224.21 |
| Subtotal of cash flow out from operating activity | 2,866,502,952.86 | 1,633,183,103.99 |
| Net cash flows arising from operating activities | 205,154,563.93 | 103,645,235.27 |
| 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 | 40,157.94 | 19,552.47 |
| Net cash received from disposal of subsidiaries and other operating units | ||
| Other investment related cash receipts | ||
| Subtotal of cash flow in from investment activity | 40,157.94 | 19,552.47 |
| Cash paid for purchase/construction of | 80,158,290.74 | 53,912,380.03 |
| fixed assets, Intangible assets and other long term assets | ||
| 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 | 80,158,290.74 | 53,912,380.03 |
| Cash flow arising from investment activities: | -80,118,132.80 | -53,892,827.56 |
| 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 | 662,716,163.39 | 572,430,000.00 |
| Other fund-raising related cash receipts | ||
| Subtotal of cash flow in from fund raising activity | 720,932,163.39 | 572,430,000.00 |
| Cash paid for debt repayment | 726,557,058.70 | 467,250,228.75 |
| Cash paid for dividend/profit distribution or repayment of interest | 182,851,224.13 | 98,229,142.76 |
| Including: Dividend and profit paid by the subsidiaries to minority shareholders | ||
| Cash paid for other financing activities | 54,063,872.68 | 26,825,873.78 |
| Sub-total cash flow paid for financing activities | 963,472,155.51 | 592,305,245.29 |
| Net cash flow arising from fund-raising activities | -242,539,992.12 | -19,875,245.29 |
| IV. Change of exchange rate influencing the cash and cash equivalent | -713,568.03 | -64,085.83 |
| V. Net increase of cash and cash equivalents | -118,217,129.02 | 29,813,076.59 |
| Plus: Opening balance of cash and cash equivalents | 353,057,285.71 | 315,093,565.09 |
| VI. Ending balance of cash and cash equivalents | 234,840,156.69 | 344,906,641.68 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
6. Cash Flow Statement, Parent Company
In CNY
| Items | Semi-annual of 2021 | Semi-annual of 2020 |
| I. Net cash flows arising from operating activities | ||
| Cash received from sales of goods and supply of services | 85,465,489.50 | 84,447,213.29 |
| Rebated taxes received | ||
| Other operation activity related cash receipts | 2,790,729,542.97 | 1,761,219,003.00 |
| Subtotal of cash flow in from operating activity | 2,876,195,032.47 | 1,845,666,216.29 |
| Cash paid for purchase of goods and reception of labor services | ||
| Cash paid to and for staff | 38,235,882.75 | 28,476,180.31 |
| Taxes paid | 7,088,803.03 | 5,608,474.08 |
| Other business activity related cash payments | 2,851,858,748.03 | 1,646,751,070.92 |
| Subtotal of cash flow out from operating activity | 2,897,183,433.81 | 1,680,835,725.31 |
| Net cash flows arising from operating activities | -20,988,401.34 | 164,830,490.98 |
| 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 | 3,200.00 | 550.00 |
| Net cash received from disposal of subsidiaries and other operating units | ||
| Other investment related cash receipts | ||
| Subtotal of cash flow in from investment activity | 3,200.00 | 550.00 |
| Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets | 14,452,808.81 | 15,073,283.59 |
| 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 | 14,452,808.81 | 15,073,283.59 |
| Cash flow arising from investment activities: | -14,449,608.81 | -15,072,733.59 |
| III. Cash flow arising from fund-raising activities: | ||
| Cash received from absorbing investment | 58,216,000.00 | |
| Cash received from loans | 650,000,000.00 | 450,000,000.00 |
| Other fund-raising related cash receipts | ||
| Subtotal of cash flow in from fund raising activity | 708,216,000.00 | 450,000,000.00 |
| Cash paid for debt repayment | 600,000,000.00 | 450,000,000.00 |
| Cash paid for dividend/profit distribution or repayment of interest | 180,890,301.90 | 97,351,309.71 |
| Cash paid for other financing activities | 6,106,577.91 | 26,693,235.96 |
| Sub-total cash flow paid for financing activities | 786,996,879.81 | 574,044,545.67 |
| Net cash flow arising from fund-raising activities | -78,780,879.81 | -124,044,545.67 |
| IV. Change of exchange rate influencing the cash and cash equivalent | -224,917.40 | 26,311.50 |
| V. Net increase of cash and cash equivalents | -114,443,807.36 | 25,739,523.22 |
| Plus: Opening balance of cash and cash equivalents | 292,055,169.74 | 269,098,346.02 |
| VI. Ending balance of cash and cash equivalents | 177,611,362.38 | 294,837,869.24 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
7. Consolidated Statement of Changes in Owner’s Equity
Amount in the reporting period
In CNY
| Items | Semi-annual of 2021 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority shareholders’ equity | Total owner’s equity | |||||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: shares in 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 | |||||||||||||||
| Business combination 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 income | -6,477,955.16 | 233,544,726.55 | 227,066,771.39 | -12,283.34 | 227,054,488.05 | ||||||||||
| (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 Conversion of capital reserve into capital (or capital stock) | |||||||||||||||
| 2 Conversion of surplus reserve into capital (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 | 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 | -195,91 | -195,91 | -195,91 |
| reporting period | 3.72 | 3.72 | 3.72 | ||||||||||||
| (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 |
Amount in the previous period
In CNY
| Items | Semi-annual of 2020 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority shareholders’ equity | Total owner’s equity | |||||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: shares in 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 | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | 235,701,180.14 | 966,840,818.40 | 2,654,533,766.99 | 5,910.84 | 2,654,539,677.83 | ||||||
| Plus: Change in accounting policy | |||||||||||||||
| Correction of previous errors | |||||||||||||||
| Business combination under the common control | |||||||||||||||
| Others | |||||||||||||||
| II. Opening balance of the reporting year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | 235,701,180.14 | 966,840,818.40 | 2,654,533,766.99 | 5,910.84 | 2,654,539,677.83 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | -14,797,000.00 | -61,845,192.53 | -53,819,130.10 | 4,329,877.58 | -7,895,469.90 | -26,388,654.75 | 96.25 | -26,388,558.50 | |||||||
| (I) Total comprehensive income | 4,329,877.58 | 77,738,906.30 | 82,068,783.88 | 96.25 | 82,068,880.13 | ||||||||||
| (II) Owners’ input and decrease of | -14,797,000. | -61,845,192.53 | -53,819,130.10 | -22,823,062.43 | -22,823,062.43 | ||||||||||
| capital | 00 | ||||||||||||||
| 1 Common shares contributed by the owner | -14,797,000.00 | -64,385,948.25 | -53,819,130.10 | -25,363,818.15 | -25,363,818.15 | ||||||||||
| 2 Capital contributed by other equity instruments holders | |||||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 2,784,096.62 | 2,784,096.62 | 2,784,096.62 | ||||||||||||
| 4 Others | -243,340.90 | -243,340.90 | -243,340.90 | ||||||||||||
| (III) Profit Distribution | -85,634,376.20 | -85,634,376.20 | -85,634,376.20 | ||||||||||||
| 1 Provision of surplus reserve | |||||||||||||||
| 2 Provision for general risks | |||||||||||||||
| 3 Distributions to the owners (or shareholders) | -85,634,376.20 | -85,634,376.20 | -85,634,376.20 | ||||||||||||
| 4 Others | |||||||||||||||
| (IV) Internal carry-over of owners’ equity | |||||||||||||||
| 1 Conversion of capital reserve into capital (or capital stock) | |||||||||||||||
| 2 Conversion of surplus reserve into capital (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 | |||||||||||||||
| 1 Provision in the reporting period | |||||||||||||||
| 2 Applied in the reporting period | |||||||||||||||
| (VI) Others | |||||||||||||||
| IV. Ending balance of the reporting period | 428,171,881.00 | 1,019,385,022.79 | 17,447,988.68 | 3,389,668.49 | 235,701,180.14 | 958,945,348.50 | 2,628,145,112.24 | 6,007.09 | 2,628,151,119.33 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
8. Consolidated Statement of Changes in Owner’s Equity, Parent CompanyAmount in the reporting period
In CNY
| Items | Semi-annual of 2021 | |||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: shares in 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 income | 13,844,801.12 | 13,844,801.12 | ||||||||||
| (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 Conversion of capital reserve into capital (or capital stock) | ||||||||||||
| 2 Conversion of surplus reserve into capital (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 | ||||||||||||
| 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 |
Amount in the previous period
In CNY
| Items | Semi-annual of 2020 | |||||||||||
| Capital stock | Other equity instruments | Capital reserve | Less: shares in 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 | 442,968,881.00 | 1,086,885,756.42 | 71,267,118.78 | 235,701,180.14 | 710,223,150.82 | 2,404,511,849.60 | ||||||
| Plus: Change in accounting policy | ||||||||||||
| Correction of previous errors | ||||||||||||
| Others | ||||||||||||
| II. Opening | 442,96 | 1,086,88 | 71,267,1 | 235,701, | 710,223,1 | 2,404,511,84 | ||||||
| balance of the reporting year | 8,881.00 | 5,756.42 | 18.78 | 180.14 | 50.82 | 9.60 | ||||||
| III. Decrease/increase of the report year (decrease is stated with “-“) | -14,797,000.00 | -61,845,192.53 | -53,819,130.10 | -84,352,503.17 | -107,175,565.60 | |||||||
| (I) Total comprehensive income | 1,281,873.03 | 1,281,873.03 | ||||||||||
| (II) Owners’ input and decrease of capital | -14,797,000.00 | -61,845,192.53 | -53,819,130.10 | -22,823,062.43 | ||||||||
| 1 Common shares contributed by the owner | -14,797,000.00 | -64,385,948.25 | -53,819,130.10 | -25,363,818.15 | ||||||||
| 2 Capital contributed by other equity instruments holders | ||||||||||||
| 3 Amount of payment for shares counted to owners’ equity | 2,784,096.62 | 2,784,096.62 | ||||||||||
| 4 Others | -243,340.90 | -243,340.90 | ||||||||||
| (III) Profit Distribution | -85,634,376.20 | -85,634,376.20 | ||||||||||
| 1 Provision of surplus reserve | ||||||||||||
| 2 Distributions to the owners (or shareholders) | -85,634,376.20 | -85,634,376.20 | ||||||||||
| 3 Others | ||||||||||||
| (IV) Internal carry-over of owners’ equity | ||||||||||||
| 1 Conversion of capital reserve into capital (or capital stock) | ||||||||||||
| 2 Conversion of |
| surplus reserve into capital (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 | ||||||||||||
| 1 Provision in the reporting period | ||||||||||||
| 2 Applied in the reporting period | ||||||||||||
| (VI) Others | ||||||||||||
| IV. Ending balance of the reporting period | 428,171,881.00 | 1,025,040,563.89 | 17,447,988.68 | 235,701,180.14 | 625,870,647.65 | 2,297,336,284.00 |
Legal representative: Zhang Xuhua Chief Financial Officer: Chen Zhuo Person in charge of the AccountingDepartment: Tian Hui
III. Company ProfileFIYTA Precision Technology Co., Ltd. (hereinafter referred to as the Company) was reorganized, incorporated andrenamed from Shenzhen Fiyta Timer Industry Company on December 25 1992 with approval by the General Office ofShenzhen Municipal People’s Government with Document SHEN FU BAN FU [1992] No. 1259 and with China NationalAero-Technology Import & Export Corporation Shenzhen Industry & Trade Center (which was renamed as AVICInternational Shenzhen Company Limited) as the sponsor. The Company's head office is located at the 20th Floor, FIYTATechnology Building, Gaoxin S. Road One, Nanshan District, Shenzhen, Guangdong Province.
On March 10, 1993, the Company, with approval by the People’s Bank of China Shenzhen Special Economic Zone Branch[SHEN REN YIN FU ZI (1993) No. 070], issued publically domestic CNY based common shares (A-shares) and CNY basedspecial shares (B-shares). In accordance with the Approval Document of Shenzhen Municipal Securities Regulatory Office
SHEN ZHENG BAN FU [1993] No. 20 and the Approval Document of Shenzhen Stock Exchange SHEN ZHENG SHI ZI(1993) No. 16, the Company’s A-shares and B-shares were all listed with Shenzhen Stock Exchange for tradingcommencing from June 3, 1993.
On January 30, 1997, with approval by Shenzhen Municipal Administration for Industry and Commerce, the Company wasrenamed as Shenzhen Fiyta Holdings Ltd.
On July 4, 1997, according to the equity assignment agreement between AVIC International Shenzhen Co., Ltd. (AVICInternational Shenzhen) and AVIC International Holding Corporation ( with original name of Shenzhen CATIC Group Co.,Ltd. and renamed as AVIC International Holding Corporation later on (hereinafter referred to as AVIC International), AVICInternational Shenzhen assigned 72.36 million corporate shares (taking 52.24% of the Company’s total shares) to AVICInternational. From then on, the Company’s controlling shareholder turned to be AVIC International from AVIC InternationalShenzhen.
On October 26, 2007, the Company implemented the equity separation reform, according to which the shareholder of theCompany’s non-negotiable shares would pay shares to the whole shareholders of negotiable shares registered on theequity record day as designated in the equity separation reform plan at the rate of 3.1 shares for every 10 shares held bythem while the Company’s total 249,317,999 shares remained unchanged. So far, after the equity separation reform, theproportion of the Company’s shares held by CATIC Shenzhen reduced from 52.24% to 44.69%.
On February 29, 2008, due to expansion of the Company’s business scope and with approval by Shenzhen MunicipalAdministration for Industry and Commerce, the Company’s enterprise corporate business licence number was changedfrom 4403011001583 into 440301103196089.
In 2010, approved by China Securities Regulatory Commission (CSRC) with the Official Reply on Approval of Non-publicIssuing of Shenzhen Fiyta Holdings Ltd., ZHENG JIAN XU KE [2010] No. 1703 and the Official Reply on the Issue ofNon-Public Issuing of Shenzhen Fiyta Holdings Ltd. by State-owned Assets Supervision and Administration Commission ofthe State Council [2010] No. 430, the Company was approved to non-publically issue no more than 50 million commonshares (A-shares). After completion of non-public issuing on December 9, 2010, the Company’s registered capitalincreased to CNY 280,548,479.00 and CATIC Shenzhen holds 41.49% of the Company’s equity based capital.
On March 3, 2011, with approval by Shenzhen Municipal Administration for Industry and Commerce, the Company wasrenamed as Shenzhen Fiyta Holdings Ltd. On April 8, 2011, the Company took the total capital stock of 280,548,479 sharesas the base, converted its capital reserve into capital stock at the rate of 4 shares for every 10 shares. After the conversion,the Company’s total capital stock became 392,767,870 shares.
On November 11, 2015, approved by China Securities Regulatory Commission (CSRC) with the Official Reply on Approvalof Non-public Issuing of Fiyta Holdings Ltd., ZHENG JIAN XU KE [2015] No. 2588 and the Official Reply on the Issue ofNon-Public Issuing of Fiyta Holdings Ltd. by State-owned Assets Supervision and Administration Commission of the StateCouncil [2015] No. 415, the Company was approved to non-publically issue no more than 46,911,649 common shares(A-shares). After completion of non-public issuing on December 22, 2015, the Company’s registered capital increased toCNY 438,744,881.00 and AVIC IHL holds 37.15% of the Company’s equity based capital.
On January 4, 2019,approved by State-owned Assets Supervision and Administration Commission of the State Council
with the “Official Reply on Fiyta Holdings Ltd. to Implement the Restrictive Stock Incentive Plan” (GUO ZI KAO FEN [2018]No. 936), and at the same time reviewed and approved by the Board of Directors and the General Meeting, the Companyawarded 4.277 million shares of A-share restrictive stock to 128 incentive objects in the Company’s Restrictive StockIncentive Plan (Phase I) as at January 30, 2019. the Company’s registered capital increased to CNY 442,968,881.00 andAVIC International holds 36.79% of the Company’s equity based capital.
According to the “Proposal on the Intentional Change of the Company Name and the Short Term of A-share Securitiesreviewed and approved at 2019 3rd Extraordinary General Meeting of the Company and approved by the Administrationfor Industry and Commerce of Shenzhen Municipality, commencing from January 9, 2020, the Company changed its namefrom FIYTA Holdings Limited to FIYTA Precision Technology Co., Ltd.
Verified and confirmed by the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, on April30, 2020, the Company wrote off 14,730,000 B-shares repurchased by the Company.
According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 A-ShareRestricted Stock Incentive Plan (Phase 2)” approved at the board meeting and general meeting, in year 2020, the Companyrepurchased and canceled a total of 147,000 A-share restricted shares that were granted with the restriction not released to6 retired former incentive objects. After the change, the Company’s registered capital decreased to CNY 428,091,881.00.
Reviewed and approved at the 23rd session of the Ninth Board of Directors and 2021 1st Extraordinary General Meeting,the Company granted 7,660,000 A-share restricted shares to 128 incentive objects based on the Company's A-ShareRestricted Stock Incentive Plan (Phase 2) on January 29, 2021. The Company’s registered capital increased to CNY435,751,881.00.
In the first half year of 2021, the Company repurchased and canceled 201,359 A-share restricted shares that had beengranted to and held by 1 retired and 1 deceased former incentive objects with the restriction had not yet been relieved. Afterthe change, the Company’s registered capital decreased to CNY 435,550,522.00.
Ended June 30, 2021, the Company accumulatively issued altogether 435,550,522.00 shares of capital stock. For the detail,refer to Note VII. 53 “Share Capital”.
The Company has established the Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee, andthe Audit Committee, the Strategy Committee and the Nomination, Remuneration and Assessment Committee under theBoard of Directors as the governance organs, etc. The Company has also established a number of functional departments,including comprehensive management department, the Party construction work & propaganda department, department ofdiscipline inspection, supervision and audit, financial department, human resource department, planning and operationdepartment, data & information department, property operation department, etc.
The business nature and principal business activities of the Company and its subsidiaries (collectively the Group) are:
production and sales of various pointer type mechanical watches, quartz watches and their driving units, spares andparts, various timing apparatus, processing and wholesale of K gold watches and ornament watches, smart watches;domestic trade, materials supply and sales (excluding the commodities for exclusive operation, exclusive control andmonopoly); property management and lease; design service; R&D, design, production, sales and technical services of
chronometers and their parts and components, and other precision parts; self-run import & export business(implemented according to the Document SHEN MAO GUAN DENG ZHENG ZI No. 2007-072), etc. The Company's legalrepresentative is Zhang Xuhua.
These financial statements and notes to the financial statements were approved at the 32nd session of the Ninth Board ofDirectors on August 18, 2021.
There were 13 subsidiaries consolidated during the reporting period. For the detail, refer to Note IX. "Equity in OtherEntities". For the consolidation scope in the reporting period, refer to Note VIII "Change of the Consolidation Scope".
IV. Basis for preparation of the financial statements
1. Preparation Basis
These financial statements are prepared according to the accounting standards for enterprises promulgated by the Ministryof Finance and their application guidance, interpretations and other relevant regulations (with the unified name of“Accounting Standards for Enterprises”) . In addition, the Group disclosed the relevant financial information according toChina Securities Regulatory Commission- Preparation Rules for Information Disclosure by Companies Offering Securitiesto the Public No. 15 - General Provisions on Financial Reports (2014 Revision).
The Group follows the accrual basis of accounting. With the exception of some financial instruments, these financialstatements are measured based on the historic cost basis. If impaired, the assets shall provide for impairment inaccordance with the relevant regulations.
2. Operation on Going Concern Basis
The financial 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:
The Group determines the depreciation of fixed assets, amortization of intangible assets and revenue recognition policiesbased on its own production and operation characteristics. For specific accounting policies, please refer to Note V.24, NoteV.30 and Note V.39.
1. Statement on complying with the accounting standards for business enterpriseThe financial statements prepared by the Group comply with requirements of the enterprise accounting standards, truly andcompletely reflect the concerned information, including the Company’s consolidation and financial position as at June 30,2021 and the Company’s consolidation and operation achievements and consolidation, and the Company's cash flow, etc.from January to June, 2021.
2. Fiscal period
The fiscal year of the Group is the Gregorian year, i.e. from January 1 to December 31st of a year.
3. Business Cycle
The Group's operating cycle is 12 months.
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 (hereinafter referred to as "FIYTA HK") and Station-68 Limited(hereinafter referred to as “Station-68”), one of the subsidiaries of FIYTA HK (hereinafter referred to as “Station-68”) havedetermined Hong Kong Dollars as its recording currency for accounting in accordance with the currencies available in itsmajor economic environment where it is operated. Montres Chouriet SA (hereinafter referred to as the "Swiss Company"),one of the subsidiaries of FIYTA Hong Kong, determines Swiss Franc as its recording currency for accounting inaccordance with the currencies available in its major economic environment where it is operated and Swiss France isconverted into Renminbi in preparing its financial statements. The currency the Group takes in preparation of thesefinancial statements is Renminbi.
5. The accounting treatment on business consolidation under the common control and not under the commoncontrol
(1) Business combination under the common control
For a business combination under the common control, the assets and liabilities of the combined party acquired by thecombining party in the combination, except for adjustments made due to different accounting policies, are measured basedon the book value of the combined party in the ultimate controlling party’s consolidated financial statements on thecombination date. The differences between the book value of the combination consideration (or sum of book value ofissued shares) and the book value of net assets acquired in the combination are used to adjust the capital reserve(premium on stock capital); if the capital reserve (premium on stock capital) is not sufficient to be write down, the retainedearnings shall be adjusted.
Business combination under the common control realized through a number of transactionsIn some financial statements, the share of the book value of the net assets of the combined party enjoyable on the date ofcombination calculated based on the shareholding ratio on the date of combination in the consolidated financial statementsof the eventual controller is taken as the initial investment cost of the said investment; the differences between the initialinvestment cost and the sum of the book value of investment held prior to the combination plus the book value of theconsideration newly paid are used to adjust the capital reserve (capital stock premium); if the capital reserve is not enoughfor writing down, the retained earnings should be adjusted.
In the consolidated financial statements, the assets and liabilities of the combined party acquired by the combining party inthe combination, except for adjustments made due to different accounting policies, are measured based on the book valueof the combined party in the eventual controller’s consolidated financial statements on the date of combination. Thedifference between the sum of the book value of investment held prior to the combination plus the book value of theconsideration newly paid and the book value of the net assets acquired in the combination is used to adjust the capitalreserve (capital stock premium). If the capital reserve is not enough for writing down, the retained earnings should beadjusted. The long-term equity investment held by the combining party before acquiring the control over the combined partyhas been confirmed between the latter of the date when the original equity is obtained and the date when the combiningparty and the combined party are under the final control of the same party to the date of the combination. Changes inprofit and loss, other comprehensive income and other owners’ equity should be used to offset the initial retained earningsor current gains and losses during the comparative reporting period.
(2) Business combination not under the common control
For the combination of enterprises not under the common control, the combination costs contain the assets paid by thepurchasing party on the date of purchase for acquiring the control over the purchased party, the liabilities incurred orundertaken and the fair value of the issued equity securities. On the purchase date, the acquired assets, liabilities andcontingent liabilities of the acquired party are recognized at fair value.
The difference between the combination cost and the fair value of the acquiree's identifiable net assets acquired in thecombination is recognized as goodwill, and subsequent measurement is conducted at cost minus the accumulatedprovision for impairment; the difference between the combination cost and the fair value of the acquiree’s identifiable netassets obtained in the combination is included in the current profit and loss after a review.
Business combination not under the common control realized through a number of transactions
In some financial statements, the sum of the book value of the purchased party’s equity investment held before thepurchase date and the new investment cost on the purchase date is used as the initial investment cost of the investment.Other comprehensive income of the equity investment held before the purchase date, which is measured and recognizedby the equity method, shall not be subject to accounting treatment on the date of purchase according to the same basis withthe investee's direct disposal of relevant assets or liabilities when such investment is disposed of; the owner’s equity otherthan the net profits or losses, other comprehensive income and distributed profits of the investee shall be included in thecurrent profit and loss during the disposal at the time of disposal of the said investment. In case the equity investment heldbefore the date of purchase is measured based on the fair value, the cumulative changes in fair value originally included inother comprehensive income shall be transferred to the current profits and losses measured by the equity method.
In the consolidated financial statements, the combination cost is the sum of the payment as at the date of purchase and thefair value of the equity of the acquiree as at the date of acquisition already held before the date of purchase. The equity ofthe purchased party as held before the date of purchase is remeasured at the fair value on the date of purchase of suchequity, and the difference between the fair value and its book value is included in the current profits and losses; if the equityof the purchased party as held before the date of purchase is involved with other comprehensive incomes, the change ofother owner’s equity is transferred to the current income as at the date of purchase except the other comprehensive incomearising from the change of the net liabilities or net assets due to the investee’s remeasured and reset income plan.
(3) Treatment of the relevant transaction expenses in business combination
Intermediary fees in connection with audit, law service, appraisal and consulting as well as the other relevant administrativeexpenses incurred during the business combination shall be counted to the current profit and income at the time ofincurrence. The transaction costs of equity securities or debt securities issued as combination consideration shall beincluded in the initial confirmation amount of equity securities or debt securities.
6. Method of preparing consolidated financial statements
(1) Combination Scope
The consolidation scope of the consolidated financial statements is determined on the basis of control. Control refers to thatthe Company owns the power over the investee, enjoys variable return by participating in the relevant activities of theinvestee and is able to impact the amount of return by using the power over the investee. A subsidiary refers to an entityunder control of the Company (including the divisible part, structurized subject in the Company and/or investee).
(2) Method of preparing consolidated financial statements
The consolidated financial statements are, on the basis of the financial statements of the Company and its subsidiaries,prepared by the Company. In preparation of the consolidated financial statements, the accounting policies and accountingperiod of the Company and its subsidiaries should be kept unified and the balance of the mutual significant transactionsand dealings should be offset.
During the reporting period, the subsidiaries and businesses added due to a business combination under the commoncontrol are deemed to be included in the Company’s consolidation scope from the date when they are controlled by theeventual controlling party, and the operating results and cash flows commencing the date when they are controlled by theeventual controlling party are respectively included in the consolidated income statement and consolidated cash flowstatement.
For the subsidiaries and businesses added due to business combinations not under the common control during thereporting period, the income, expenses, and profits of the subsidiaries and businesses from the purchase date to the end ofthe reporting period are included in the consolidated income statement, and their cash flows are included in theconsolidated cash flow statement.
The part of the subsidiary’s shareholder’s equity that does not belong to the Company is presented separately as a minorityshareholder’s equity in the consolidated balance sheet under the shareholder’s equity item; the item of "MinorityShareholders' Profit and Loss" is presented under the item of net profit in the consolidated profit statement. When the lossin a subsidiary shared by minority shareholders exceeds the share in the shareholders’ equity enjoyable by the minorityshareholders at the beginning of the reporting period, and its balance still writes down the minority shareholders’ equity.
(3) Purchase of the minority shareholders’ equity of subsidiaries
The difference between the long-term equity investment cost newly acquired due to the purchase of minority equity and theenjoyable net asset share of the subsidiaries that are continuously calculated from the date of purchase or the combinationdate calculated based on the proportion of the newly added shareholding, and without losing control, the differencebetween the disposal price obtained from the partial disposal of the equity investment in the subsidiary and the disposal ofthe long-term equity investment corresponding to the subsidiary’s net asset share continuously calculated from the date ofpurchase or combination, both adjust the capital reserve (equity premium) in the consolidated balance sheet. If the capitalreserve is insufficient to offset, adjust the retained earnings.
(4) Treatment of loss of control over a subsidiary
If the control of an original subsidiary is lost due to the disposal of part of the equity investment or other reasons, theremaining equity shall be remeasured according to its fair value on the date of loss of control; the difference formedbetween the sum of the consideration obtained from the disposal of the equity and the fair value of the remaining equity,minus the sum of the share of the book value of the original subsidiary’s net assets calculated continuously from the date ofpurchase and the sum of the goodwill calculated based on the original shareholding ratio is counted to the return oninvestment in the very period when the control is lost.
Other comprehensive income related to the equity investment of the original subsidiary shall be transferred to the profit andloss of the period when the control is lost, except for other comprehensive income arising from changes in net liabilities ornet assets of the investee's re-measurement of the defined income plan.
7. Classification of joint venture arrangements and accounting treatment method of joint managementJoint venture arrangement refers to an arrangement that two or more participants jointly control. The Group classifies jointventure arrangements into joint management and joint venture.
(1) Joint management
Joint management refers to the joint venture arrangement that the Group enjoys the relevant assets of the arrangementand undertakes the relevant liabilities of the arrangement.
The Group confirms the following items related to the share of interests in joint management, and conducts accountingtreatment in accordance with the relevant accounting standards for enterprises:
A. to recognize the assets held separately, and recognize the assets held jointly by their shares;B. to recognize the liabilities borne individually and the liabilities borne jointly according to their share;C. to recognize the income generated from the sale of its share of joint management output;D. to recognize the income generated by the joint management from the sale of output according to its share;E. to recognize the expenses incurred separately, and recognize the expenses incurred in joint management according totheir share.
(2) Joint Venture
Joint venture refers to the joint venture arrangement that the Group only enjoys rights to the net assets of the arrangement.
The Group accounts for the investment in joint ventures in accordance with the provisions of the equity method forlong-term equity investments.
8. Standard for recognizing cash and cash equivalent
Cash refers to the cash in stock and the deposit in hand available for payment at any time. Cash equivalent refers to theinvestment held by the Group with short term, strong liquidity and low risk of value fluctuation that is easy to be convertedinto cash of known amount.
9. Foreign currency transactions and translation of foreign currency statements
(1) Foreign Currency Translation
At the time of recognition of foreign currency transaction in the Group, the amount in a foreign currency shall be translatedinto amount in the functional currency at the spot exchange rate of the transaction date.
On the balance sheet date, foreign currency monetary items are translated at the spot exchange rate of the balance sheetdate. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date andthe spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits andlosses in the current period; a foreign currency non-monetary item measured at the historical costs shall still be translatedat the spot exchange rate on the transaction date; non-monetary items in foreign currencies measured at fair value aretranslated at the spot exchange rate on the date when the fair value is determined, and the difference between thetranslated bookkeeping currency amount and the original bookkeeping currency amount is included in the current profit andloss.
(2) Translation of Foreign Currency Financial Statements
On the balance sheet date, when translating the foreign currency financial statements of overseas subsidiaries, the assetsand liabilities in the balance sheet are translated at the spot exchange rate on the balance sheet date. The shareholders’equity items except for "retained earnings", other items are translated by using the spot exchange rate on the date ofoccurrence.
The items of incomes and expenses in the profit statement are translated at the current average exchange rate on thetransaction occurring date.
All items in the cash flow statement are translated at the spot exchange rate on the date of the cash flow. The impact ofexchange rate changes on cash is regarded as an adjustment item, and the item "impact of exchange rate changes oncash and cash equivalents" is reflected separately in the cash flow statement.
The difference arising from the translation of financial statements is reflected in the “other comprehensive income” underthe shareholders’ equity of the balance sheet.
If overseas operation is disposed and the control right is lost, the translated difference of foreign currency statements aslisted under the item of stockholder's equity in balance sheet and related to overseas operation is transferred fully or at theratio of disposing the overseas operation into the current profits and losses from disposal.
10. Financial instruments
Financial instruments refer to contracts that form one party's financial assets and other parties' financial liabilities or equityinstruments.
(1) Recognition and derecognition of financial instruments
A financial asset or financial liability is recognized when the Group becomes a party to a financial instrument contract.
Where a financial asset meets any of the following requirements, it shall be stopped from recognition:
① where the contractual rights for collecting the cash flow of the said financial asset are terminated; or
② Where the said financial asset is transferred and it meets the conditions for recognizing the termination of the transfer ofthe following financial assets.
A financial liability may not be stopped from recognition in all or in part until the prevailing obligations of financial liabilitiesare all or partly dissolved. The Group (the debtor) and the creditor enter an agreement to substitute the existing financialliabilities in the manner of undertaking new financial liabilities, and the contract's articles of new financial liabilities and theexisting financial liabilities are materially different, recognition on the existing liabilities is terminated and new liabilities arerecognized synchronously.
The financial assets purchased or sold in any conventional manner are made accounting confirmation and termination ofconfirmation on the date of transaction.
(2) Classification and measurement of financial assets
The financial assets of the Group are classified into three categories at the initial recognition according to the businessmodel of the Group's management of financial assets and the contractual cash flow characteristics of the financial assets:
financial assets measured at amortized cost, financial assets measured at fair value and whose movement is counted in theother comprehensive income and financial assets measured at fair value and whose movement is counted in the currentprofit and loss.
Financial assets measured based on the amortized costThe Group classifies financial assets that meet the following conditions and are not designated as financial assetsmeasured at fair value and whose changes are included in the current profits and losses, as financial assets measured atamortized cost:
The business model of the Group to manage the financial assets is to collect contractual cash flow as the goal;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.
After the initial recognition, the actual interest rate method is used to measure such financial assets at amortized cost. Thegains or losses arising from financial assets that are measured at amortized cost and are not part of any hedgingrelationship are included in the current profits and losses when they are terminated, amortized according to the effectiveinterest method, or recognized as impairment.
Financial asset that is measured at fair value and whose change is included in other comprehensive incomeThe Group classifies financial assets that meet the following conditions and are not designated as financial assetsmeasured at fair value and whose changes are included in the current profits and losses, as financial assets measured atfair value and whose change is included in other comprehensive income:
The Group’s business model for managing this financial asset is aimed at both collecting contractual cash flow and sellingthe financial asset;
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.
After the initial confirmation, the subsequent measurement of such financial assets shall be carried out at fair value. Interest,impairment losses or gains and exchange gains and losses calculated using the effective interest rate method are includedin the current profit and loss, and other gains or losses are included in other comprehensive income. When the recognitionis terminated, the accumulated gains or losses previously included in other comprehensive income are transferred fromother comprehensive income and included in the current profit and loss.
The financial asset measured at fair values with the change counted to the current profit and lossExcept for the above-mentioned financial assets measured at amortized cost and at fair value with changes included inother comprehensive income, the Group classifies all other financial assets as financial assets at fair value with changesincluded in current profits and losses. At the time of initial recognition, in order to eliminate or significantly reduceaccounting mismatches, the Group irrevocably designates part of the financial assets that should be measured atamortized cost or at fair value with changes included in other comprehensive income as the financial assets which aremeasured at fair value and whose changes are included in the current profit and loss.
After initial recognition, such financial assets are subsequently measured at fair value, and the resulting gains or losses(including interest and dividend income) are included in the current profits and losses, unless the financial assets are part ofthe hedging relationship.
However, for non-transactional equity instrument investments, the Group irrevocably designates them as financial assetsmeasured at fair value and whose changes are included in other comprehensive income at the time of initial recognition.The designation is made on the basis of an individual investment, and the related investment meets the definition of anequity instrument from the issuer's perspective.
After the initial confirmation, the subsequent measurement of such financial assets shall be carried out at fair value.Dividend income that meets the conditions is included in profit and loss, and other profits or losses and changes in fairvalue are included in other comprehensive income. When the recognition is terminated, the accumulated gains or lossespreviously included in other comprehensive income are transferred out from other comprehensive income and included inthe current profit and loss.
The business model of managing financial assets refers to how the Group manages financial assets to generate cash flow.The business model determines whether the source of the cash flow of the financial assets managed by the Group is tocollect contractual cash flows, sell financial assets, or both. The Group determines the business model for managingfinancial assets based on objective facts and the specific business objectives of the management of financial assetsdetermined by key management personnel.
The Group evaluates the contractual cash flow characteristics of financial assets to determine whether the contractual cashflow generated by the relevant financial assets on a specific date is only the payment of the principal and interest based onthe outstanding principal amount. Where, the principal refers to the fair value of financial assets at the time of initialrecognition; interest includes consideration for the time value of money, the credit risk associated with the outstandingprincipal amount in a specific period, and other basic borrowing risks, costs and consideration of profit. In addition, theGroup evaluates contract terms that may cause changes in the time distribution or amount of contractual cash flows offinancial assets to determine whether they meet the above-mentioned contractual cash flow characteristics.
Only when the Group changes the business model of managing financial assets, all affected financial assets will bereclassified on the first day of the first reporting period after the business model is changed, otherwise the financial assetsshall not be reclassified after initial recognition.
Financial assets are measured at fair value at the initial recognition time. For the financial assets measured at fair valuewith the change counted to the current profits and losses, the relevant transaction expenses are directly included in thecurrent profit and loss; the relevant transaction expenses for other categories of financial assets are counted to the amountof the initial recognition. For accounts receivable arising from the sale of products or the provision of labor services that donot contain or consider significant financing components, the amount of consideration that the Group expects to be entitledto receive is taken as the amount initially recognized.
(3) Classification and measurement of financial liabilities
At the time of initial recognition, the Group’s financial liabilities are classified into: financial liabilities measured at fair valueand whose changes are included in the current profit and loss and financial liabilities measured at amortized cost. For
financial liabilities that are not classified as measured at fair value and whose changes are included in the current profit andloss, the relevant transaction costs are included in the the initially recognized amount.
The financial asset measured at fair values with the change counted to the current profit and lossFinancial liabilities measured at their fair values with the change included in the current profits and losses includetransactional financial liabilities, including transactional financial liabilities and the financial liabilities measured at fair valuewith the change counted to the current profits and losses directly designated at the initial recognition. This type of financialliability is subsequently measured at fair value, and the gains or losses arising from change of fair value and the dividendsand interests related to such financial liabilities are included in the current profits and losses.
Financial liabilities measured based on the amortized costThe gains or losses generating in case of terminated confirmation, occurrence of devaluation or amortization are includedin the current profits and losses.
Financial guarantee contractFinancial guarantee contracts are not designated as financial liabilities measured at fair value with the change included inthe current profit and loss. They are measured at fair value at the time of initial recognition, and subsequently measuredbased on the higher of the provision for the loss of the predicted liabilities determined by the expected credit loss model andthe initially recognized amount less the balance of the accumulated amortization amount.
Distinction between financial liabilities and equity instruments"Financial liabilities" refers to the liabilities which satisfy one of the following conditions:
①the contractual obligations to deliver cash or any other financial assets to any other entity;
② the contractual obligations to exchange with any other entity financial assets or financial liabilities under potentiallyunfavorable conditions;
③ the contractual obligations to non-derivative instruments which must be settled or may be settled by the enterprise withits own equity instruments in the future, whereby the enterprise will deliver an unfixed amount of equity instruments of itsown according to the said contract;
④the contractual obligations to non-derivative instruments which must be settled or may be settled by the enterprise with itsown equity instruments in the future, but with the exception of the contractual obligations to the derivative instruments forwhich the enterprise will exchange for a fixed amount of its own equity instruments with a fixed amount of cash or any otherfinancial assets.
“Equity instruments” refers to the contracts which can prove that a certain enterprise holds the surplus equities of the assetsafter all the debts have been deducted.
If the Group cannot unconditionally avoid the delivery of cash or other financial assets to fulfill a contractual obligation, thecontractual obligation meets the definition of a financial liability.
If a financial instrument needs to be settled with or can be settled with the Group’s own equity instruments, it is necessary toconsider whether the Group’s own equity instrument used for settle that instrument is used as cash or the substitution of
other financial asset or to make the instrument holder enjoy the residual equity in the asset with all liabilities deducted. If it isthe former, the instrument is a financial liability of the Group; if it is the latter, the instrument is an equity instrument of theGroup.
(4) Fair value of financial instrument
For the method for determining fair value of financial assets and financial liabilities, refer to Sections 10 and 11.
(5) Impairment of financial assets
Based on expected credit losses, the Group performs impairment accounting treatments on the following items andrecognizes the provision for loss:
Financial assets measured based on the amortized cost;Receivables and debt investments that are measured at fair value and whose changes are included in othercomprehensive income;
The contractual assets defined in Accounting Standards for Enterprises No. 14 – Revenues;
Lease receivables;
Financial guarantee contracts (with the exception of those formed with the financial assets measured with fair value and thechange included in the current profit and loss and transfer of financial assets not satisfying the derecognition or continuedto be involved in the transfer).
Measurement of expected credit lossesExpected 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 Group discounted at the original effective interest rate, that is, the present value of all cashshortages.
The Group confirms the expected credit loss by considering reasonable and evidenced information about past events,current conditions, forecasting the future economic conditions, taking the risk of default as the weight, calculating theprobability weighted amount of the present value of the difference between the cash flow receivable from the contract andthe cash flow expected to be received.
The Group measures the expected credit losses of financial instruments at different stages. If the credit risk has notincreased significantly since the initial recognition, the financial instrument is at the first stage, and the Group measures theprovision for the loss according to the expected credit loss within the next 12 months; if the credit risk has increasedsignificantly since the initial confirmation but impairment of the credit has not yet occurred, the financial instrument is at thesecond stage, the Group measures the loss provision based on the expected credit loss for the entire duration of theinstrument; if a financial instrument has been credit-impaired since its initial recognition, it is in the third stage. The Groupmeasures the loss provision based on the expected credit loss for the entire duration of the instrument.
For financial instruments with lower credit risk on the balance sheet day, the Group assumes that its credit risk has notincreased significantly since the initial recognition, and provision for loss is measured based on expected credit losses in
the next 12 months.
Expected credit loss during the entire lifetime refers to the expected credit loss caused by all possible default events duringthe entire expected lifetime of a financial instrument. Expected credit losses in the next 12 months refer to the expectedcredit loss caused by default events of financial instruments that may occur within 12 months after the balance sheet date(if the expected duration of the financial instrument is less than 12 months, it is then the expected duration). It is part of theexpected credit losses in the entire duration.
When measuring the expected credit losses, the longest period that the Group needs to consider is the longest contractperiod during which the Company is confronted with credit risk (including consideration of the option of renewal).
For the financial instrument at the first stage or the second stage or with lower credit risk, the Group calculates the interestincome based on book balance before deduction of the provision for impairment and the actual interest rate. For thefinancial instrument at the third stage, the Group calculates the interest income according to the book balance less theamortized cost after provision for the impairment and actual interest rate.
Regarding notes receivable, accounts receivable, and contract assets, regardless of whether there is a significant financingcomponent, the Group always measures its loss reserves at an amount equivalent to expected credit losses during theentire duration.
When the information of the expected credit loss of a single financing asset cannot be assessed with reasonable cost, TheGroup divides and combines notes receivable and accounts receivable based on credit risk characteristics, and calculatesexpected credit losses on the basis of the combination. The basis for determining the combination is as follows:
A. Notes receivableCombination of notes receivable 1: Bank acceptanceCombination of notes receivable 2: Trade acceptance
B. Accounts receivableCombination of accounts receivable 1: Accounts receivable from the related parties within the combination scopeCombination of accounts receivable 2:Accounts receivable from other customers
C. Contract assetsCombination of contract assets 1: Sales of products
For notes receivable and contract assets classified into portfolios, the Group refers to historical credit loss experience, withcombination of current conditions and forecasts of future economic conditions, calculates expected credit losses based onthe default risk exposure and the lifetime expected credit loss rate.
For accounts receivable divided into portfolios, the Group refers to historical credit loss experience, with combination ofcurrent conditions and forecasts of future economic conditions, and compiles a comparison table of accounts receivableage/days overdue and the expected credit loss rate for the entire duration, calculates the expected credit losses.
Other receivables
The Group divides other receivables into several combinations based on the characteristics of credit risk, and calculatesexpected credit losses on the basis of the combination. The basis for determining the combination is as follows:
Combination of other receivables 1: Deposit and margin receivableCombination of other receivables 2: Employee reserves receivableCombination of other receivables 3: Advances for social security premiumCombination of accounts receivable 4: Accounts receivable from the related parties within the combination scopeCombination of other receivables 5: Other receivables
For other receivables classified into portfolios, the Group calculates expected credit losses based on the default riskexposure and the expected credit loss rate within the next 12 months or the entire duration.
Equity investment and other equity investmentFor debt investments and other debt investments, the Group calculates the expected credit loss based on the nature of theinvestment, the counterparty and various types of risk exposures, through the default risk exposure and the expected creditloss rate within the next 12 months or the entire duration.
Assessment of significant increase in credit riskThe Group compares the default risk of financial instruments on the balance sheet date and the risk of default on the initialrecognition date to determine the relative change in the default risk of the financial instrument during the expected life of thefinancial instrument to assess whether the credit risk of the financial instrument has significantly increased since the initialrecognition.
When determining whether the credit risk has increased significantly since the initial recognition, the Group considersreasonable and evidence-based information that can be obtained without unnecessary additional costs or efforts, includingforward-looking information. The information the Group takes into consideration includes:
A debtor fails to pay the principal and interest on the due date of the contract;
A serious deterioration in the external or internal credit rating (if any) of the financial instrument has occurred or is expected;
A serious deterioration in the debtor’s operating results that has occurred or is expected;
The existing or anticipated changes in technology, market, economic or legal environment will have a significant adverseimpact on the debtor's ability to repay the Group.
According to the nature of financial instruments, the Group assesses whether credit risk has increased significantly on thebasis of individual financial instruments or a portfolio of financial instruments. When conducting assessment with a portfolioof financial instruments as base, the Group may classify financial instruments based on common credit risk characteristics,such as overdue information and credit risk ratings.
Financial assets with credit impairment already incurredOn the balance sheet date, the Group assesses whether financial assets measured at amortized cost and debt investmentsmeasured at fair value with changes included in other comprehensive income have experienced credit impairment. When
one or more events that have an adverse effect on the expected future cash flow of a financial asset occur, the financialasset becomes a financial asset that has been credit-impaired. Evidence of credit impairment of financial assets includesthe following observable information:
The issuer or debtor has experienced major financial difficulty;
The debtor has violated the contract, such as failure in or late payment of the interest or the principal;
The Group, 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;
The debtor is likely to go bankrupt or carry out other financial restructuring;
The issuer or debtor’s financial difficulties caused the disappearance of the active market for the financial asset.
Presentation of the provision for expected credit lossIn order to reflect the changes in the credit risk of financial instruments since the initial recognition, the Group remeasuresexpected credit losses on each balance sheet date, and the resulting increase in loss provision or the amount reversedshould be counted in the current profit and loss as impairment losses or gains. For financial assets measured at amortizedcost, the provision for loss is offset against the book value of the financial asset listed in the balance sheet; for debtinvestments that are measured at fair value and whose changes are included in other comprehensive income, the Grouprecognizes the provision for loss in other comprehensive income without writing down the book value of the financial asset.
Written-offIf the Group no longer reasonably expects that the contractual cash flow of a financial asset can be recovered in whole or inpart, it will directly write down the book balance of the financial asset. This write-down constitutes the derecognition ofrelated financial assets. This situation usually occurs when the Group determines that the debtor has no assets or sourcesof income that can generate sufficient cash flow to repay the amount to be written down. However, in accordance with theGroup's procedures for recovering due due payments, the financial assets that have been written down may still be affectedby the execution activities.
The written-down financial assets are later on recovered, as the reversal of the impairment loss is included in the currentprofit and loss of the recovery period.
(6) Transfer of financial assets
The transfer of financial assets refers to the transfer or delivery of financial assets to a party other than the issuer of thefinancial asset (the transferee).
If substantially all of risks and remunerations on the ownership of the financial asset have been transferred to the transferee,the financial asset's recognition is terminated; if substantially all of risks and remunerations on the ownership of thefinancial asset are kept, the financial asset's recognition is not terminated;
If the Group has neither transferred nor kept substantially all of risks and remunerations on the ownership of the financialasset, treatment is made respectively based on the following conditions: in case control over the financial asset has been
given up, recognition of that financial asset as well and the assets and liabilities generated are terminated; in case controlover the financial asset has not been given up, relevant financial assets are recognized based on the extent continuallyinvolved with the transferred financial asset, and relevant liabilities are recognized accordingly.
(7) Offsetting of financial assets and financial liabilities
When the Group has the legal rights of setting off the recognized financial assets and financial liabilities and can currentlythese legal rights now, and if the Group has the plan to settle with net amount or synchronously realize these financialassets and discharge these financial liabilities, the financial assets and financial liabilities are listed in the balance sheetwith the amount after mutual offsetting. Except that, financial assets and financial liabilities are listed respectively in thebalance sheet and are not set off mutually.
11. Notes receivable
For the detail, refer to Note V.10.
12. Accounts receivable
For the detail, refer to Note V.10.
13. Financing with accounts receivable
For the detail, refer to Note V.10.
14. Other receivables
Method for determination and accounting treatment of the expected credit loss of other receivablesFor the detail, refer to Note V.10.
15. Inventories
(1) Classification of Inventories
The Group classifies inventories into raw materials, products-in-process and commodity stocks.
(2) Price Measurement of Inventories Delivered
The Group's inventory is priced at actual cost when it is obtained. Raw materials and merchandise inventory are pricedrespectively according to the weighted average (with brand world watch stocks exclusive), specific identification (for famousbrand watch stocks) at the time of delivery.
(3) Basis for determining net realizable value of inventories and method for providing reserve for price falling of inventoriesThe net realizable value of the inventories refers to the amount of the estimated sales price of the inventory less theestimated sales costs to incur at the time of completion, sales expenses and relevant taxes. In determining the netrealizable value of inventory, with the obtained valid evidence as the base, the purpose of holding the inventory and theinfluence from the events after the balance sheet day is taken into consideration at the same time..
On the balance sheet date, if the cost of inventories is higher than its net realizable value, provision for falling prices ofinventories shall be made. The Group makes provision for inventory depreciation for self-produced FIYTA watch inventoryaccording to model classification, and makes provision for inventory depreciation for brand-name watches sold inaccordance with individual inventory items. On the balance sheet date, if the factors affecting the previous write-down of theinventory value have disappeared, the inventory depreciation reserve shall be reversed within the amount originally
withdrawn.
(4) Inventory system
The Group adopts the perpetual inventory system.
(5) Amortization of low-value consumption goods and packing materials.
Low value consumables and packing materials are amortized in lump sum at the time of reception.
16. Contract assets
For the detail, refer to Note V.10.
17. Contract cost
Contract costs include incremental costs incurred in obtaining contracts and their performance costs.
The incremental cost incurred in obtaining the contract refers to the cost that no cost may incur if the Group does not obtainthe contract (such as sales commission, etc.) If the cost is expected to be recovered, the Group recognizes it as a contractacquisition cost as an asset. Other expenses incurred by the Group in order to obtain the contract, other than theincremental cost that is expected to be recovered, are included in the current profit and loss when incurred.
If the cost incurred to fulfill the contract does not fall within the scope of other accounting standards for enterprises such asinventory and meets the following conditions at the same time, the Group will recognize it as the contract performance costas an asset:
①The 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;
②The cost has increased the resource the Group shall use to fulfill its performance obligation in the future;
③The cost is expected to be recoverable.
Assets recognized for contract acquisition costs and assets recognized for contract performance costs (hereinafter referredto as "assets related to contract costs") are amortized on the same basis as the revenue recognition of goods or servicesrelated to the asset and included in the current profit and loss. If the amortization period does not exceed one year, it shallbe included in the current profit and loss when it incurs.
When the book value of the asset related to the contract cost is higher than the difference between the following two items,the Group makes provision for impairment of the excess part and recognizes it as an asset impairment loss:
①The remaining consideration that the Group expects to obtain due to the transfer of goods or services related to theasset;
②Estimate the costs to incur for the transfer of the related goods or services.
The contract performance cost recognized as an asset with the amortization period not to exceed one year or a normalbusiness cycle at the initial recognition is presented in the "inventory"; if the amortization period exceeds one year or a
normal business cycle at the initial recognition, the same is presented in the “other non-current assets”.
The contract acquisition cost recognized as an asset with the amortization period not to exceed one year or a normalbusiness cycle at the initial recognition is presented in the "other current assets"; if the amortization period exceeds oneyear or a normal business cycle at the initial recognition, the same is presented in the “other non-current assets”.
18. Classified as assets held for sale
Inapplicable
19. Equity investment
Inapplicable
20. Other equity investment
Inapplicable
21. Long term accounts receivable
Inapplicable
22. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries, joint ventures and associates. If the Group is ableto exert significant influence on an investee, the investee is an associated enterprise of the Group.
(1) Determination of the initial investment cost
Long term equity investment which forms business combination: for long-term equity investments obtained in a businesscombination under the common control, the book value share of the acquired owner’s equity in the ultimate controllingparty’s consolidated financial statements on the combination date shall be used as the investment cost; for long-term equityinvestments obtained in a business combination not under the same control, the combined cost is regarded as theinvestment cost of long-term equity investment.
For long-term equity investments obtained by other means: for long-term equity investments obtained by paying cash, theactual purchase price paid shall be used as the initial investment cost; for long-term equity investments obtained by issuingequity securities, the fair value of the issued equity securities shall be used as the initial investment cost.
(2)Subsequent measurement and recognition of gains and losses
Investments in subsidiaries are accounted for using the cost method, unless the investment meets the conditions forholding for sale; investments in associates and joint ventures are accounted for using the equity method.
For long-term equity investments accounted for by the cost method, in addition to the actual price paid when the investmentis obtained or the cash dividends or profits declared but not yet paid is included in the consideration, the cash dividends orprofits declared to be distributed by the investee are recognized as investment income and included in the current profit andloss.
For long-term equity investments accounted for by the equity method, if the initial investment cost is greater than the fairvalue of the investee’s identifiable net assets at the time of investment, the investment cost of the long-term equityinvestment shall not be adjusted; if the initial investment cost is less than the investment and if the fair value share of
distinguishable net asset in the invested entity is enjoyable, the book value of the long-term equity investment is adjusted,and the difference shall be included in the current profit and loss of the investment.
When the equity method is used for calculation, the net gains and losses realized by the investee and the share of the othercomprehensive income enjoyable or sharable shall be respectively used to recognize the return on investment and othercomprehensive income and at the same time the book value of the long term equity investment is adjusted; according to theprofit announced for distribution by the investee or the part of the cash dividend enjoyable upon calculation, the book valueof the long term equity investment is reduced correspondingly. For other change in the net profit and loss, othercomprehensive income and owner's equity other than the profit distribution, the book value of the long term equityinvestment 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 the investee when the investment is acquired as the base, the netprofit of the investee is recognized after adjustment based on the accounting policy and accounting period of the Group.
If it is possible to exert a significant influence on the investee or implement joint control but does not constitute control dueto additional investment or other reasons, on the conversion date, the fair value of the original equity plus the sum of thenew investment cost shall be used as the initial investment cost accounted by changing to use the equity method cost. Thedifference between the fair value and book value of the original equity on the conversion date, and the accumulated fairvalue changes originally included in other comprehensive income are transferred to the current profit and loss accountedfor by the equity method.
If the joint control or significant influence on the investee is lost due to the disposal of part of the equity investment, theremaining equity after the disposal shall undergo accounting treatment according to "Accounting Standards for EnterprisesNo. 22 - Recognition and Measurement of Financial Instruments instead on the day when joint control or significantinfluence is lost, and the difference between the fair value and the book value is included in the current profit and loss. Theother comprehensive income from the original equity investment calculated and recognized by means of the equity methodundergoes accounting treatment by using the same base as the investee directly disposes the relevant assets or liabilitieswhen the calculation based on the equity method is terminated; all other changes in owner's equity related to the originalequity investment are transferred to the current profit and loss.
In case the Group has lost the control over an investee due to disposal of partial equity, etc., the remaining equity afterdisposal can still implement joint control over or significant influence on the investee; the equity method is applied forcalculation instead and the said remaining equity is adjusted as if the equity method was used for calculation commencingfrom the time of its acquisition; in case the remaining equity after the adjustment can no longer implement joint control overor significant influence on the investee, the accounting treatment shall be conducted according to the Accounting Standardsfor Enterprises No. 22 - Recognition and Measurement of Financial Instruments; the balance between the fair value as atthe day of loosing the control power and the book value is counted to the current gains and losses.
If the Company’s shareholding ratio decreases due to the increase of capital by other investors, thereby losing control, butmay exercise joint control or exert significant influence on the invested entity, the new shareholding ratio shall be used toconfirm the Company’s share of the invested entity due to the increase in capital; difference between the increase in theshare of net assets due to share expansion and the original book value of the long-term equity investment correspondingto the decline in the shareholding ratio that should be carried forward is included in the current profit and loss; then,according to the new shareholding ratio, it is deemed that the equity method is used for accounting and adjustment whenthe investment is obtained.
The unrealized internal transaction gains and losses between the Group and associates and joint ventures are calculatedbased on the shareholding ratio attributable to the group, and the investment gains and losses are recognized on the basisof offset. However, the loss from no internal transaction between the Group and an investee shall not be offset if the lossbelongs to impairment of the assets assigned.
(3) Determining the basis for joint control and significant influence on the investee
Joint control refers to the joint control over some arrangement according to the relevant agreement and the relevantactivities for the arrangement must be jointly decided by all the parties sharing the control power. When judging whetherthere exists joint control, firstly determine whether all participants or a combination of participants collectively control thearrangement, and secondly determine whether the decision-making related to the arrangement must be unanimouslyagreed by the participants who collectively control the arrangement. If all participants or a group of participants must act inconcert to determine the relevant activities of an arrangement, it is considered that all participants or a group of participantscollectively control the arrangement; if there is a combination of two or more parties that can collectively control anarrangement, it does not constitute joint control. When judging whether there is joint control, the protective rights enjoyedare not taken into consideration.
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. When determining whether itcan exert a significant influence on the investee, consider that the investor directly or indirectly holds the voting shares ofthe investee and the current executable potential voting rights held by the investor and other parties. The impact of theequity of the company includes the impact of current convertible warrants, share options and convertible corporate bondsissued by the investee.
When the Company directly or indirectly through its subsidiaries owns more than 20% (including 20%) but less than 50% ofthe voting shares of the investee, it is generally considered to have a significant impact on the investee, unless there isclear evidence that under such situation the Company cannot participate in the production and operation decision-makingof the invested entity resulting in no significant influence; when the Group owns less than 20% (excluding 20%) of the votingshares of the investee, it is generally not considered to have a significant impact on the investee unless there is clearevidence that under such a situation the Group can participate in the production and operation decision-making of theinvestee resulting in significant influence.
(4) Method for testing the impairment and provision for impairment
For investment in subsidiaries, associates and joint ventures, refer to Note V. 31 - method for provision for impairment ofassets.
23. Investment real estate
Measurement model for investment real estateMeasured based on the cost methodDepreciation or amortization methodInvestment real estate refers to the real estate held by the Company which creates rental or added value of capital or both,including housing and building already let out. The Group's investment real estate includes the land use right which hasalready been let out, the land use right held and to be assigned after appreciation, building which has been leased out, etc.
The Group's investment real estate is initially measured at the cost at the time of acquisition, and depreciation oramortization is accrued on schedule in accordance with the relevant regulations on fixed assets or intangible assets.
For investment real estate that adopts the cost model for subsequent measurement, refer to Note V. 31 - method ofaccruing asset impairment.
The balance of the income from disposal of investment based real estate, including sale, assignment, discarding ordamage, after deduction of the book value and the relevant taxes. is counted to the current profit and loss.
The depreciation method of investment real estate is the same as the depreciation method of fixed assets. Refer to NoteV.24.
24. Fixed asset
(1) Recognition of fixed assets
Fixed assets of the Group are tangible assets that are held for use in the production or supply of services, for rental toothers, or for administrative purposes and have useful lives more than one accounting year. The economic benefits relatedto the fixed asset are likely to flow into the enterprise, and the cost of the fixed asset can be reliably measured before thefixed asset can be recognized. When fixed assets are acquired, they are initially measured at actual cost.
(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 | Average service life 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% |
Where, for fixed assets with provision for impairment, the accumulated amount of provision for impairment of fixed assetsshould also be deducted to determine the depreciation rate.
(3) Basis for recognizing the fixed assets under financing lease, Pricing and Depreciation MethodsInapplicable
25. Construction-in-progress
The cost of construction-in-process is determined according to the actual expenditure incurred for the construction,including all necessary construction expenditures incurred during the construction period, borrowing costs that shall becapitalized before the construction reaches the condition for intended use and other relevant expenses.
Construction-in-process is transferred to fixed assets when the asset is ready for its intended use.Refer to Note V. 31 for the method of provision for asset impairment of construction-in-process.
26. Borrowing Costs
(1)Recognition principle of capitalization of borrowing costs
If the borrowing costs incurred to the Group can be directly attributable to the acquisition, construction or production of
assets 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. If the borrowing costs meet the following conditions at the same time, capitalization begins:
① 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 thecapitalization conditions;
② Borrowing costs have incurred;
③ 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
When the Group's acquisition, construction or production of assets that meet the capitalization conditions reaches theintended usable or saleable state, the capitalization of borrowing costs shall cease. The borrowing costs incurred after theassets that meet the capitalization conditions reach the expected usable or saleable state, when incurred, are recognizedas expenses based on the amount incurred and included in the current profit and loss.
If an asset that meets the capitalization conditions is abnormally interrupted during the acquisition, construction orproduction process, and the interruption lasts for more than 3 months, the capitalization of borrowing costs shall besuspended; the capitalization of borrowing costs during the normal interruption period shall continue.
(3) Borrowing cost capitalization rate and calculation method of capitalization amountInterest expenses of special borrowings incurred actually for the current period less interest income from borrowings atbank or investment income from temporary investments is capitalized; capitalization amount is determined as accumulativeasset expenditure of general borrowings over weighted average asset expenditure of special borrowings multiplescapitalization rate of general borrowings. Capitalization rate is determined as calculating weighted average interest rate ofgeneral borrowings.
In the capitalization period, exchange differences of special borrowings in foreign currency is totally capitalized; exchangedifferences of general borrowings in foreign currency is recognized in profit or loss for the current period.
27. Biological Assets
Inapplicable
28. Oil and Gas Assets
Inapplicable
29. Use right assets
The assets the Company has the right to use mainly include houses and buildings.
On the starting date of the lease term, the Group recognizes its right to use the leased asset during the lease term as anasset with use right, including: the initial measurement amount of the lease liability; for lease payments paid on or before
the starting date of the lease term, if there is a lease incentive, the amount of the lease incentive already enjoyed isdeducted; initial direct expenses incurred by the lessee; the costs the lessee expects to incur for dismantling and removingthe leased asset, restoring the site where the leased asset is located, or restoring the leased asset to the state agreed uponin the lease terms. The Company subsequently adopts the life average method to depreciate the assets with use right. If itcan be reasonably determined to obtain the ownership of the leased asset at the expiration of the lease term, the Companyshall accrue depreciation during the remaining useful life of the leased asset. If it is impossible to reasonably determine thatthe ownership of the leased asset can be obtained when the lease term expires, the Company shall accrue depreciationduring the shorter period of the lease term and the remaining useful life of the leased asset.
When the Company remeasures the lease liability according to the present value of the lease payment after the change,and adjusts the book value of the asset with use right accordingly, if the book value of the asset with use right has beenreduced to zero, but the lease liability still needs to be further reduced, and the Company will include the remaining amountin the current profit and loss.
30. Intangible assets
(1) Pricing Method, Service Life and Impairment Test
The Group's intangible assets include land use right, software systems, trademark use right, etc.
Intangible assets are initially measured at cost, and their useful lives are analyzed and judged when the intangible assetsare acquired. If the service life is limited, from the time the intangible asset is available for use, an amortization method thatreflects the expected realization method of the economic benefits related to the asset shall be adopted and amortized withinthe expected service life; if the expected realization method cannot be reliably determined, the straight-line method is usedfor amortization; intangible assets with uncertain service life are not amortized.
The method for amortization of intangible assets with limited service life is as follows:
| Categories | Useful Life | Amortization Method | Remarks |
| Land use right | 50 | Straight-line method | |
| Software system | 5 | Straight-line method | |
| Trademark rights | 5-10 | Straight-line method |
At the end of each year, the Group reviews the useful life and amortization method of intangible assets with a limited usefullife. If it is different from the previous estimate, the original estimate is adjusted and the accounting estimate is changed.
If an intangible asset is expected to no longer bring future economic benefits to the Company on the balance sheet date,the book value of the intangible asset shall be transferred to the current profit and loss.Refer to Note V. 31 for the method of provision for impairment of intangible assets.
(2) Accounting policy for internal research and development expenditure
Expenditure on an internal research and development project is classified into expenditure on the research phase andexpenditure on the development phase.
Expenditure on the research phase is recognized in profit or loss when incurred.
Expenditures in the development stage can be capitalized only if the following conditions are met at the same time, that is, itis technically feasible to complete the intangible asset so that it can be used or sold; it has the intention to complete theintangible asset and use or sell it; the way intangible assets generate economic benefits, including the ability to prove thatthe products produced by the intangible assets exist in the market or the intangible assets themselves exist in the market,and the intangible assets will be used internally, which can prove their usefulness; there are sufficient technical, financialand other resources to support to complete the development of the intangible asset, and have the ability to use or sell theintangible asset; the expenditure attributable to the development stage of the intangible asset can be reliably measured.Development expenditures that do not meet the above conditions are included in the current profit and loss.
The research and development projects of the Group will enter into the development stage after meeting the aboveconditions and passing through the technical feasibility and economic feasibility studies and the formation of the project.Capitalized expenditure on the development phase is presented as “development costs” in the balance sheet and shall betransferred to intangible assets when the project is completed to its intended use state.
31. Impairment of long term assets
Impairment of the assets, including long-term equity investment in subsidiaries, associates and joint ventures, investmentreal estate, fixed assets, construction in progress, intangible assets (excluding inventory, deferred income tax assets,financial assets) that are subsequently measured using the cost model is determined by the following method:
It is judged on the balance sheet date whether there are signs of possible impairment of assets. If there are signs ofimpairment, the Group will estimate its recoverable amount and conduct impairment test. For goodwill and the intangibleassets formed in the business combination with the service life undetermined and the intangible assets which have notreached applicable status, regardless whether there exists sign of impairment, the Company makes impairment test everyyear.
The recoverable amount shall be determined according to the net amount of the fair value of an asset minus the disposalexpenses, and the current value of the expected future cash flow of the asset, whichever is higher. The Group estimates itsrecoverable amount on the basis of a single asset; if it is difficult to estimate the recoverable amount of a single asset, therecoverable amount of the asset group is determined based on the asset group to which the asset belongs. The recognitionof an asset group shall base on whether the main cash inflow generated by the asset group is independent of thosegenerated by other assets or other group assets.
When the recoverable amount of an asset or asset group is lower than its book value, the Group writes down its book valueto the recoverable amount. The reduced amount is included in the current profit and loss, and the corresponding assetimpairment provision is made at the same time.
As far as goodwill impairment test is concerned, the carrying value of the goodwill formed by enterprise merger isapportioned to the relevant asset group according to the reasonable method commencing from the date of acquisition; incase it is difficult to be apportioned to the relevant asset group, it is apportioned to the combination of the relevant assetgroups. The relevant asset group or combination of asset groups are those which get benefit from the coordinative effect ofenterprise consolidation but should not be greater than the reporting segment determined by the Group.
During the impairment testing, in case there exists impairment evidence in the goodwill related asset group or combinationof asset groups, impairment testing should be first conducted on the asset group or combination of asset groups without
goodwill and the recoverable amount is calculated, and the corresponding impairment loss is recognized. Then conduct animpairment test on the asset group or combination of asset groups that contains goodwill, and compare its book value withthe recoverable amount. If the recoverable amount is lower than the book value, confirm the impairment loss of goodwill.
The loss of asset impairment, once recognized, shall no longer be reversible in the future fiscal periods.
32. Long term expenses to be apportioned
The long-term expenses to be apportioned incurred to the Group are priced at actual cost and amortized evenly over theexpected benefit period. For long-term expenses to be apportioned that cannot benefit the future accounting period, all theamortized value is included in the current profit and loss.
33. Contract liabilities
The Group’s obligation to transfer goods or services to customers for consideration received or receivable from customersis regarded as contract liabilities.
34. Payroll to Employees
(1) Accounting treatment of short term salaries
During the accounting period when the employees provide services, the Group recognizes the actual wages, bonuses,medical insurance premiums, industrial injury insurance premiums, maternity insurance premiums and other socialinsurance premiums and housing provident funds paid for the employees in accordance with the prescribed benchmarksand proportions. Liabilities are included in the current profit and loss or the cost of related assets. If the liability is notexpected to be fully paid within twelve months after the end of the annual reporting period in which employees providerelated services, and the financial impact is significant, the liability will be measured at the discounted amount.
(2) Post-employment benefits
Post-employment benefits include defined contribution plan and defined benefit plan. Where, the defined contribution planrefers to a post-employment benefit plan in which the enterprise no longer assumes further payment obligations after thefixed fee is paid to an independent fund; the defined benefit plan refers to a post-employment benefit plan other than thedefined contribution plan.
Defined contribution planThe defined contribution plans include basic pension insurance, unemployment insurance, enterprise annuity plans, etc.
In addition to basic pension insurance, the Group establishes an enterprise annuity plan ("annuity plan") in accordance withthe relevant policies of the national enterprise annuity system, and employees can participate in the annuity plan voluntarily.Apart from this, the Group has no other major employee social security commitments.
During the accounting period in which the employees provide services, the amount of the deposit payable calculatedaccording to the defined contribution plan is recognized as a liability and included in the current profit and loss or the cost ofrelated assets.
Defined benefit planFor a defined benefit plan, an independent actuary performs actuarial valuation on the annual balance sheet date, and usesthe expected cumulative benefit unit method to determine the cost of providing benefits. The employee compensation cost
caused by the defined benefit plan of the Group includes the following components：
①Service costs, including current service costs, past service costs, and settlement gains or losses. Where, the currentservice cost refers to the increase in the present value of the defined benefit plan obligations caused by the employee'scurrent provision of services; the past service cost refers to the increase or decrease of the present value of the obligationof the defined benefit plan related to employee services in the previous period caused by the modification of the definedbenefit plan.
② The net interest of the net liabilities or net assets of the defined benefit plan includes the interest income of the planassets, the interest expense of the defined benefit plan obligations, and the interest affected by the asset ceiling.
③ Movement of the net liabilities or net assets re-measured for setting the beneficial planUnless other accounting standards require or allow the cost of employee benefits to be included in the cost of assets, theGroup will include the above items ① and ② in the current profit and loss;item ③ is included in other comprehensiveincome and will not be transferred back to profit or loss in the subsequent accounting period. When the original definedbenefit plan is terminated, the part originally included in other comprehensive income will be carried forward to the retainedearnings within the scope of equity.
(3) Dismissal welfare
If the Group provides dismissal benefits to employees, the employee compensation liabilities arising from the dismissalbenefits is recognized at the earlier of the following two, and is included in the current profit and loss; when the Groupcannot unilaterally withdraw the dismissal benefits provided due to the termination of the labor relationship plan or reductionproposal; when the Group confirms the costs or expenses related to the reorganization involving the payment of terminationbenefits.
If an employee’s internal retirement plan is implemented, the economic compensation before the official retirement daterefers to the dismissal benefit. From the day when the employee ceases to provide services to the normal retirement day,the wages and social insurance premiums paid for early retiring employees are included in the current profit and loss.Economic compensation after the official retirement date (such as regular old-age pension) shall be treated aspost-employment benefits.
(4) Other long term employees' welfare
Other long-term employee benefits provided by the Group to employees that meet the conditions of the defined contributionplan shall be dealt with in accordance with the above-mentioned relevant provisions on the defined contribution plan. Thosethat meet the defined benefit plan shall be dealt with in accordance with the above-mentioned relevant regulations ondefined benefit plans, but the “changes in the remeasured net liabilities or net assets of the defined benefit plan” in therelevant employee compensation costs shall be included in the current profit and loss or related cost of assets.
35. Lease liabilities
At the beginning of the lease term, the Company recognizes the present value of the outstanding lease payments as leaseliabilities with short-term leases and leases of low-value assets exclusive. When calculating the present value of leasepayments, the Company uses the interest rate implicit in the lease as the discount rate; if the interest rate implicit in thelease cannot be determined, the lessee’s incremental borrowing interest rate is used as the discount rate. The Companycalculates the interest expense of the lease liability during each period of the lease term in accordance with a fixed periodic
interest rate, and includes it in the current profit and loss, unless otherwise specified in the cost of related assets. Variablelease payments that are not included in the measurement of lease liabilities are included in the current profit and loss whenthey actually occur, unless otherwise specified in the cost of related assets.
After the starting date of the lease term, when the actual fixed payment changes, the expected amount payable of theguarantee residual value changes, the index or ratio used to determine the lease payment changes, the purchase option,the renewal option, or the evaluation of the termination option when the result or actual exercise situation changes, theCompany remeasures the lease liability according to the present value of the lease payment after the change.
36. Predicted liabilities
If the obligations related to the contingencies meet the following conditions at the same time, the Group shall recognizethem as estimated liabilities:
(1) This obligation is the current obligation assumed by the Group;
(2)The performance of this obligation is likely to cause economic benefits to flow out of the Group;
(3) The amount of this obligation can be measured reliably.
The estimated liabilities are initially measured in accordance with the best estimate of the expenditure required to performthe relevant current obligations, and comprehensively consider factors such as risks, uncertainties and time value of moneyrelated to contingencies. If the time value of money has a significant impact, the best estimate is determined by discountingthe relevant future cash outflows. The Group reviews the book value of estimated liabilities on the balance sheet date andadjusts the book value to reflect the current best estimate.
If all or part of the expenses required to settle the confirmed estimated liabilities are expected to be compensated by a thirdparty or other parties, the compensation amount can only be separately confirmed as an asset when it is basically certainthat it can be received. The recognized compensation amount does not exceed the book value of the recognized liability.
37. Share-based payment
(1) Varieties of Share-based Payment
The Group classifies share-based payments into equity-settled share-based payments and cash-settled share-basedpayments.
(2) Method for determining the fair value of equity instruments
The Group determines the fair value of the granted equity instruments such as options that exist in an active market basedon the quoted prices in the active market. For equity instruments such as options for which there is no active market, the fairvalue of the equity instruments is determined using option pricing model. The selected option pricing model considers thefollowing factors: A, the exercise price of the option; B, the validity period of the option; C, the current price of the underlyingstock; D, the expected volatility of the stock price; E, the expected dividend of the stock; F, risk-free interest rate in thevalidity period of the option.
(3) Basis for confirming the best estimate of exercisable equity instruments
On each balance sheet day during the westing period, the Group may make best estimate based on the subsequentinformation, such as the movement of the number of employees eligible for exercising the wrights as latest obtained and
the number of the equity instrument of the predicted exercisable is corrected. On the vesting date, the final estimatednumber of vesting equity instruments should be consistent with the actual vesting number.
(4) Relevant accounting treatment for implementation, amendment or termination of the share-based payment planEquity-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 Group determined andbased on shares and other equity instruments. If the right can be exercised immediately after the grant, the fair value of theliabilities assumed by the Group shall be included in the relevant costs or expenses on the date of grant, and the liabilitiesshall be increased accordingly. Cash-settled share-based payments that can only be exercised after the completion of thewaiting 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 Group, includingthe services obtained in the current period as costs or expenses and corresponding liabilities. The fair value of the liabilitiesis re-measured and the movement is counted in the current profits and losses on each balance sheet day and settlementday before the settlement of related liabilities.
When the Group makes amendments to the share-based payment plan, if the amendment increases the fair value of theequity instruments granted, the increase in the services obtained shall be correspondingly confirmed according to theincrease in the fair value of the equity instruments; if the modification increases the number of equity instruments granted,the fair value of the increased equity instruments shall be correspondingly recognized as an increase in services obtained.Increase of the fair value of the equity instrument refers to the difference between the fair value of the equity instrument onthe amendment day before and after the amendment. If the modification reduces the total fair value of the share-basedpayment or adopts any other method unfavorable to the employees in amendment of the terms and conditions of the sharepayment plan , the service obtained will continue to undergo accounting treatment, unless the Group cancels part or all ofthe granted equity instruments.
If the Group cancels the granted equity instrument (except for those canceled due to non-market conditions that do notmeet the exercisable conditions) during the vesting period, the Group shall treat it as accelerated vesting, the amount whichshould be recognized during the remaining vesting period is counted to the current profit and loss immediately and at thesame time the capital reserve is recognized. If an employee or other party can choose to meet the non-vesting conditionsbut fails to meet the vesting period, the Group treats it as a cancellation of the granted equity instrument.
38. Other financial instruments, such as preferred shares, perpetual liabilities, etc.Inapplicable
39. Revenue
Accounting policies used in revenue recognition and measurement
(1) General Principle
The Group has fulfilled the performance obligations in the contract, that is, revenue is recognized when the customerobtains control of the relevant goods or services.
If the contract contains two or more performance obligations, the Group shall allocate the transaction price to eachindividual performance obligation in accordance with the relative proportion of the stand-alone selling price of the goods orservices promised by each individual performance obligation on the date of the contract. The transaction price of eachindividual performance obligation measures revenue.
When one of the following conditions is met, the Group is to perform its performance obligations within a certain period oftime; otherwise, it is to perform its performance obligations at a certain point in time:
① Customers obtain and consume the economic benefits brought by the Group's performance at the same time as theGroup's performance.
② Customers can control the products under construction during the performance of the Group.
③The goods produced during the performance of the Group are irreplaceable in usage, and the Group has the right toreceive payment for the cumulative performance portion of the contract that has been completed so far during the entirecontract period.
For performance obligations performed within a certain period of time, the Group recognizes revenue in accordance withthe performance progress during that period. When the performance progress cannot be reasonably determined, if the costincurred by the Group is expected to be compensated, the revenue shall be recognized according to the amount of the costincurred until the performance progress can be reasonably determined.
For performance obligations performed at a certain point in time, the Group recognizes revenue at the point when thecustomer obtains control of the relevant goods or services. When determining whether a customer has obtained control ofgoods or services, the Group may consider the following signs:
①The Group enjoys the current right of payment for the goods or services, that is, the customer has the current paymentobligation for the goods.
②The Group has transferred the legal ownership of the product to the customer, that is, the customer has the legalownership of the product.
③ The Group has transferred the goods in kind to the customer, that is, the customer has taken possession of the goods inkind.
④The Group has transferred the main risks and rewards of the ownership of the goods to the customers, that is, thecustomers have obtained the main risks and rewards of the ownership of the goods.
⑤The customer has accepted the goods or services.
⑥Other signs that the customer has obtained control of the product.
The Group has transferred goods or services to customers and has the right to receive consideration (and the rightdepends on other factors other than the passage of time) as contract assets, and provision for impairment of contractassets is made on the basis of expected credit losses. The Group's unconditional (only depending on the passage of time)right to collect consideration from customers is presented as accounts receivable. The Group’s obligation to transfer goodsor services to customers for consideration received or receivable from customers is regarded as contract liabilities.The contract assets and contract liabilities under the same contract are presented in net amount. If the net amount is thedebit balance, it shall be listed in the item of "contract assets" or "other non-current assets" according to its liquidity; If thenet amount is the credit balance, it shall be presented in the “contract liabilities” or “other non-current liabilities” according toits liquidity.
Differences in accounting policies for revenue recognition caused by the adoption of different business models for similarbusinesses
① General sales
When the goods are dispatched, the receipt of the customer's receipt is obtained, and according to the sales contractsigned by both parties, it is confirmed that the control of the goods has been transferred to the purchaser, and the salesrevenue is recognized.
② Direct sales
a. Offline retail: Under the direct sales business model, sales revenue is recognized when the goods is sent out, the salespayment is received and the products are delivered to the customer.
b. Online retail: Under the e-commerce platform sales model, sales revenue is recognized when products are delivered andsigned for reception by customers.
③ Mall Associates
Under the joint sales model, the Group recognizes revenue when products are delivered to customers, shop assistantsissue small invoices to retail customers, customers accept acceptance and shopping malls collect payments.
④ Consignment sales
Under the consignment sales model, the Group recognizes revenue when it receives the sales list from the consignee andconfirms that the control over the ownership of the goods has been transferred to the purchaser.
⑤ Consignment Sales
Under the consignment sales model, when the Group delivers external consignment products to customers and confirmsthat the control over the ownership of the goods has been transferred to the purchaser, the Group recognizes revenuebased on the net method.
40. Government subsidies
Government subsidies are recognized when they meet the conditions attached to the government subsidies and can bereceived.
Government subsidies for monetary assets are measured according to the amount received or receivable. Governmentsubsidies for non-monetary assets shall be measured at fair value; if the fair value cannot be obtained reliably, it shall bemeasured at a nominal amount of CNY 1.
Government subsidies related to assets refer to government subsidies obtained by the Group for purchase andconstruction or to form long-term assets in other ways; otherwise, they are government subsidies related to income.
If the government documents do not clearly specify the subsidy object, and can form long-term assets, the part of thegovernment subsidy corresponding to the asset value shall be regarded as the government subsidy related to the assets,and the remaining part shall be regarded as the government subsidy related to the income; if it is difficult to distinguish, thegovernment subsidy as a whole is regarded as the government subsidy related to income.
The government subsidies related to assets, which offset the book value of related assets, or are recognized as deferredincome, shall be included in profit and loss in installments according to a reasonable and systematic method during theuseful life of the related assets. Government subsidies related to income, if used to compensate related costs or losses thathave occurred, are included in the current profit and loss or offset related costs; if they are used to compensate for relatedcosts or losses in subsequent periods, they are included in deferred income. In the period when the relevant costs or lossesare recognized, they are included in the current profits and losses or offset the relevant costs. A government subsidymeasured according to the nominal amount is directly recorded into the current profit and loss. The Group adopts the samemethod to deal with the same or similar government subsidy business.
A government subsidy related to the daily activities is included in other income or offset against related costs and expensesaccording to the nature of economic business. Government subsidies not related to daily activities are included innon-operating income and expenditure.
When the confirmed government subsidy needs to be returned, if the book value of the relevant asset is deducted at thetime of initial confirmation, the book value of the asset is adjusted; if there exists a relevant deferred income balance, thecarrying balance of the relevant deferred income should be written off, and the excess part is recorded into the current profitand loss; under other circumstances, it is directly recorded into the current profits and losses.
For the obtained policy-based preferential loan interest discount, if the finance allocates the interest-subsidized funds to thelending bank, the actual loan amount received is used as the entry value of the loan, and the borrowing cost is calculatedaccording to the loan principal and the policy preferential interest rate. If the public finance directly allocates the interestdiscount fund to the Group, the interest discount will write down the borrowing cost.
41. Deferred income tax asset/deferred income tax liability
Income tax includes the current income tax and deferred income tax. Except for the adjusted goodwill arising from thebusiness combination, or the deferred income tax related to the transaction or event directly included in the owner's equity,they are all included in the current profit and loss as the income tax expense.
The Group adopts the balance sheet debt method to recognize the deferred income tax based on the temporary differencebetween the book value of assets and liabilities on the balance sheet date and the tax base.
All taxable temporary differences are recognized as related deferred income tax liabilities, unless the taxable temporary
differences are generated in the following transactions:
(1) The initial recognition of goodwill, or the initial recognition of assets or liabilities arising from a transaction with thefollowing characteristics: the transaction is not a business combination, and the transaction does not affect accountingprofits nor taxable income;
(2) For taxable temporary differences related to investments in subsidiaries, joint ventures and associates, the time for thereversal of the temporary differences can be controlled and the temporary differences may not be reversed in theforeseeable future.
For offsetable temporary differences, offsetable losses that can be carried forward to future years, and tax deductions, theGroup is likely to obtain deductions for offsetable temporary differences, offsetable losses and tax deductions with thelimitation of future taxable income, and the resulting deferred income tax assets are recognized, unless the offsetabletemporary difference is generated in the following transactions:
(1) The transaction is not a business combination, and the transaction does not affect accounting profits nor taxableincome;
(2) For offsetable temporary differences related to investments in subsidiaries, joint ventures and associates, and meet thefollowing conditions at the same time, confirm the corresponding deferred income tax assets: temporary differences arelikely to be reversed in the foreseeable future, and the taxable income that can be used to deduct temporary differences islikely to be obtained in the future.
On the balance sheet date, the Group measures the deferred income tax assets and deferred income tax liabilities at thetax rate applicable to the period during which the asset is expected to be recovered or the liability is settled, and reflects theincome tax impact of the way the asset is expected to be recovered or the liability is settled on the balance sheet date.The carrying amount of deferred income tax assets shall be reviewed at each balance sheet date. If it is probable thatsufficient taxable profits will not be available in future to allow the benefit of the deferred tax asset to be utilized, the carryingamount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it becomes probable thatsufficient taxable profits will be available.
42. Lease
(1) Accounting process for operating lease
Original Lease StandardWhen the Company is a lessee, during each period of lease term, the rent is included in the relevant asset cost orrecognized as the current profit and loss according to the straight-line method, and the initial direct expenses incurred aredirectly included in the current profit and loss. Contingent rental is recorded in the current profit and loss when it actuallyincurs.
When the Company is a lessor, during each period of lease term, the rent is recognized as the current profit and lossaccording to the straight-line method. The initial direct costs incurred are directly included in the current profit and lossexcept for the larger amount which is capitalized and included in the profit and loss in the very period. Contingent rental isrecorded in the current profit and loss when it actually incurs.
The new standards for lease (commencing from January 2, 2021)
1.Lessee
When the Company is a lessee, at the beginning of the lease period, in addition to short-term leases and low-value assetleases subject to simplified treatment, the Company recognizes the lease as the use right asset and lease liability.
After the starting date of the lease term, the Company adopts the cost model for subsequent measurement of the asset withuse right. Depreciation of assets with use right is provided in accordance with the provisions concerning depreciation of the“Accounting Standards for Enterprises No. 4—Fixed Assets”. If the lessee can be reasonably determined to obtain theownership of the leased asset at the expiration of the lease term, depreciation should be provided during the remaininguseful life of the leased asset. If it is impossible to reasonably determine that the ownership of the leased asset can beobtained when the lease term expires, depreciation should be provided during the shorter period of the lease term and theremaining useful life of the leased asset. The Company determines whether an asset with use right is impaired inaccordance with the “Accounting Standards for Enterprises No. 8-Asset Impairment” and conducts accounting treatment ofthe identified impairment loss.
The Company calculates the interest expense of the lease liability during each period of the lease term in accordance with afixed periodic interest rate, and includes it in the current profit and loss. That which should be included in the relevant assetcost in accordance with other standards, such as “Accounting Standards for Enterprises No. 17-Borrowing Costs” shouldbe included in the cost of relevant assets, follow those provisions.
For short-term leases and low-value asset leases, the Company chooses the assets and lease liabilities with the use rightnot recognized and records the lease payment amount of the short-term leases and low-value asset leases in the relevantasset cost or current profit and loss according to the straight-line basis during different periods of the lease term.
2.Lessor
As the lessor, the Company adopts the straight-line method during each period of the lease term to recognize the leasereceipts from operating leases as rental income. Capitalize the initial direct costs incurred in relation to operating leases,amortize them on the same basis as the confirmation of rental income during the lease term, and include them in thecurrent profit and loss periodically.
For fixed assets in operating lease assets, the Company should use the depreciation policy for similar assets fordepreciation; for other operating lease assets, it shall use systematic and reasonable method for amortization inaccordance with the applicable accounting standards for enterprises for the assets. The Company determines whether anasset with use right is impaired in accordance with the “Accounting Standards for Enterprises No. 8-Asset Impairment” andconducts accounting treatment of the identified impairment loss.
(2) Accounting treatment method for finance lease
Original Lease StandardAs a leasee, at the starting date of lease period, the Company recognizes the lower of the fair value of the lease asset atthe beginning of the lease and the present value of the minimum amount of rent payment as the entry value of rent asset;takes the minimum rent payment as the entry value of long term account payable and its balance as the unrecognizedfinancial charges; the initial direct expenses incurred is recorded in the value of lease assets. In each period of the leaseterm, the actual interest rate method is used to calculate and recognize the current financing costs.
As a leasor, at the starting date of lease period, the Company takes the sum of the minimum amount of the rent collected atthe beginning of the lease and the initial direct expense as the entry value of the finance lease receivable and at the sametime records the unsecured residual value; the recognizes the balance of the sum of the minimum rent collection amount,initial direct expenses and unsecured residual value and the sum of its present value as the unrealized financing income. Ineach period of the lease term, the actual interest rate method is used to calculate and recognize the current financingincome.
The new standards for lease (commencing from January 2, 2021)
1.Lessee
When the Company is a lessee, at the beginning of the lease period, in addition to short-term leases and low-value assetleases subject to simplified treatment, the Company recognizes the lease as the use right asset and lease liability.
After the starting date of the lease term, the Company adopts the cost model for subsequent measurement of the asset withuse right. Depreciation of assets with use right is provided in accordance with the provisions concerning depreciation of the“Accounting Standards for Enterprises No. 4—Fixed Assets”. If the lessee can be reasonably determined to obtain theownership of the leased asset at the expiration of the lease term, depreciation should be provided during the remaininguseful life of the leased asset. If it is impossible to reasonably determine that the ownership of the leased asset can beobtained when the lease term expires, depreciation should be provided during the shorter period of the lease term and theremaining useful life of the leased asset. The Company determines whether an asset with use right is impaired inaccordance with the “Accounting Standards for Enterprises No. 8-Asset Impairment” and conducts accounting treatment ofthe identified impairment loss.
The Company calculates the interest expense of the lease liability during each period of the lease term in accordance with afixed periodic interest rate, and includes it in the current profit and loss. That which should be included in the relevant assetcost in accordance with other standards, such as “Accounting Standards for Enterprises No. 17-Borrowing Costs” shouldbe included in the cost of relevant assets, follow those provisions.
For short-term leases and low-value asset leases, the Company chooses the assets and lease liabilities with the use rightnot recognized and records the lease payment amount of the short-term leases and low-value asset leases in the relevantasset cost or current profit and loss according to the straight-line basis during different periods of the lease term.
2.Lessor
As a lessor, the Company recognizes the receivable funds for financial leasing at the starting date of the lease period,terminates the recognition of the financial lease asset, and calculates and recognizes the interest income during eachperiod of the lease term according to a fixed periodic interest rate.
43. Other important accounting policy and accounting estimate
Repurchase of sharesThe shares repurchased by the Company before cancellation or transfer of the shares are managed as treasury stock andall the payments for the repurchased shares are converted into the cost of treasury stock. The consideration andtransaction costs paid in repurchase of shares reduce the owner’s equity. When repurchasing, transferring or canceling theCompany’s shares, no profit or loss is recognized.
When transferring treasury shares, the difference between the actual amount received and the book value of the treasuryshares is included in the capital reserve. If the capital reserve is insufficient to offset, the surplus reserve and retainedearnings shall be used for offsetting. For the cancellation of treasury shares, the share capital shall be reduced according tothe book value of the shares and the number of shares canceled, and the capital reserve shall be offset based on thedifference between the book balance and the book value of the canceled treasury shares. If the capital reserve isinsufficient to offset, the surplus reserve and retained earnings shall be used for offsetting.
44. Changes in significant accounting policies and accounting estimates
(1) Change in significant accounting policies
| Contents and causes of the change in accounting policies | Examination and approval procedures | Remarks |
| On December 7, 2018, the Ministry of Finance issued the "Notice on Revising and Issuing the "Accounting Standards for Enterprises No. 21-Leases" (Cai Kuai [2018] No. 35) (hereinafter referred to as the "New Lease Standards") | Reviewed any approved at the 27th session of the Ninth Board of Directors. | About the affected items and amount of the statements, refer to (3) of this section. |
In accordance with the standard convergence provisions, the Company retrospectively adjusted the retained earnings atthe beginning of 2021 and the amount of other related items in the financial statements based on the difference betweenthe new lease standard and the current lease standard on the date of first implementation, and no adjustment is made tothe comparable period information.
(2) Change in significant accounting estimates
Inapplicable
(3) The Company started implementing the updated standards for lease commencing from 2021 and adjusted therelevant items of the financial statements at the beginning of the very year involved in the initial implementation ofthe said standardsApplicable
Is it necessary to adjust the items of the balance sheet at the year beginningYes
Consolidated Balance Sheet
In CNY
| Items | December 31, 2020 | January 01, 2021 | Amount involved in the adjustment |
| Current assets: | |||
| Monetary capital | 353,057,285.71 | 353,057,285.71 | |
| Settlement reserve | |||
| Inter-bank lending | |||
| Transactional financial assets | |||
| Derivative financial assets | |||
| Notes receivable | 48,192,442.15 | 48,192,442.15 |
| Accounts receivable | 475,598,684.88 | 475,598,684.88 | |
| Financing with accounts receivable | |||
| Advance payment | 16,612,773.76 | 16,612,773.76 | |
| Receivable premium | |||
| Reinsurance accounts receivable | |||
| Reserve for reinsurance contract receivable | |||
| Other receivables | 52,902,779.63 | 52,902,779.63 | |
| Including: Interest receivable | |||
| Dividends receivable | |||
| Redemptory monetary capital for sale | |||
| Inventories | 1,931,780,185.85 | 1,931,780,185.85 | |
| Contract assets | |||
| Held-for-sale assets | |||
| Non-current assets due within a year | |||
| Other current assets | 75,935,141.76 | 73,796,501.05 | -2,138,640.71 |
| Total current assets | 2,954,079,293.74 | 2,951,940,653.03 | -2,138,640.71 |
| Non-current assets: | |||
| Loan issuing and advance in cash | |||
| Equity investment | |||
| Other equity investment | |||
| 21. Long term accounts receivable | |||
| Long-term equity investments | 51,400,665.92 | 51,400,665.92 | |
| Investment in other equity instruments | 85,000.00 | 85,000.00 | |
| Other non-current financial assets | |||
| Investment-oriented real estate | 398,086,447.78 | 398,086,447.78 | |
| Fixed assets | 352,734,280.76 | 352,734,280.76 | |
| Construction-in-progress | |||
| Productive biological asset | |||
| Oil and Gas Assets | |||
| Use right assets | 170,138,212.72 | 170,138,212.72 | |
| Intangible assets | 37,859,316.51 | 37,859,316.51 | |
| Development expenses | |||
| Goodwill | |||
| Long term expenses to be | 130,017,587.99 | 130,017,587.99 |
| apportioned | |||
| Deferred income tax asset | 80,913,800.35 | 80,913,800.35 | |
| Other non-current assets | 13,536,307.13 | 13,536,307.13 | |
| Total non-current assets | 1,064,633,406.44 | 1,234,771,619.16 | 170,138,212.72 |
| Total assets | 4,018,712,700.18 | 4,186,712,272.19 | 167,999,572.01 |
| Current liabilities: | |||
| Short term borrowings | 542,673,278.09 | 542,673,278.09 | |
| Borrowings from central bank | |||
| Loans from other banks | |||
| Transactional financial liabilities | |||
| Derivative financial liabilities | |||
| Notes payable | 3,581,360.00 | 3,581,360.00 | |
| Accounts payable | 301,211,515.39 | 301,211,515.39 | |
| Advance receipt | 9,991,850.67 | 9,991,850.67 | |
| Contract liabilities | 18,213,396.49 | 18,213,396.49 | |
| 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 | 132,853,462.20 | 132,853,462.20 | |
| Taxes payable | 68,925,271.90 | 68,925,271.90 | |
| Other payables | 128,577,597.94 | 128,577,597.94 | |
| Including: interest payable | |||
| Dividends payable | 1,639,513.77 | 1,639,513.77 | |
| Service charge and commission payable | |||
| Payable reinsurance | |||
| Held-for-sale liabilities | |||
| Non-current liabilities due within a year | 370,030.00 | 96,546,555.48 | 96,176,525.48 |
| Other current liabilities | 2,299,755.09 | 2,299,755.09 | |
| Total current liabilities | 1,208,697,517.77 | 1,304,874,043.25 | 96,176,525.48 |
| Non-current liabilities: | |||
| Reserve for insurance contract | |||
| Long-term borrowings | 4,070,330.00 | 4,070,330.00 | |
| Bonds payable | |||
| Including: preferred shares | |||
| Perpetual bond | |||
| Lease liabilities | 76,142,342.03 | 76,142,342.03 |
| Long-term accounts payable | |||
| Long term payroll payable to the employees | |||
| Estimated liabilities | |||
| Deferred income | 2,916,346.43 | 2,916,346.43 | |
| Deferred income tax liability | 3,067,834.55 | 3,067,834.55 | |
| Other non-current liabilities | |||
| Total non-current liabilities | 10,054,510.98 | 86,196,853.01 | 76,142,342.03 |
| Total liabilities | 1,218,752,028.75 | 1,391,070,896.26 | 172,318,867.51 |
| Owner’s equity: | |||
| Capital stock | 428,091,881.00 | 428,091,881.00 | |
| Other equity instruments | |||
| Including: preferred shares | |||
| Perpetual bond | |||
| Capital reserve | 1,021,490,387.78 | 1,021,490,387.78 | |
| Less: shares in stock | 61,633,530.48 | 61,633,530.48 | |
| Other comprehensive income | 976,871.41 | 976,871.41 | |
| Special reserve | |||
| Surplus Reserve | 246,531,866.87 | 246,531,866.87 | |
| Provision for general risks | |||
| Retained earnings | 1,164,490,911.51 | 1,160,171,616.01 | -4,319,295.50 |
| Total owners’ equity attributable to the parent company | 2,799,948,388.09 | 2,795,629,092.59 | -4,319,295.50 |
| Minority shareholders’ equity | 12,283.34 | 12,283.34 | |
| Total owner’s equity | 2,799,960,671.43 | 2,795,641,375.93 | -4,319,295.50 |
| Total liabilities and owners’ equity | 4,018,712,700.18 | 4,186,712,272.19 | 167,999,572.01 |
Note to the AdjustmentThe Company has implemented the new lease standards for the first time since January 1, 2021. In 2021, in accordancewith the requirements of the new lease standards, the opening balance of lease-related assets has been adjusted to theasset of use right and lease liabilities.
Balance Sheet, Parent Company
In CNY
| Items | December 31, 2020 | January 01, 2021 | Amount involved in the adjustment |
| Current assets: | |||
| Monetary capital | 292,055,169.74 | 292,055,169.74 | |
| Transactional financial assets | |||
| Derivative financial assets | |||
| Notes receivable | |||
| Accounts receivable | 1,464,798.79 | 1,464,798.79 | |
| Financing with accounts receivable |
| Advance payment | |||
| Other receivables | 621,512,680.69 | 621,512,680.69 | |
| Including: Interest receivable | |||
| Dividends receivable | |||
| Inventories | |||
| Contract assets | |||
| Held-for-sale assets | |||
| Non-current assets due within a year | |||
| Other current assets | 11,655,617.82 | 11,655,617.82 | |
| Total current assets | 926,688,267.04 | 926,688,267.04 | |
| Non-current assets: | |||
| Equity investment | |||
| Other equity investment | |||
| Long term accounts receivable | |||
| Long-term equity investments | 1,529,415,188.28 | 1,529,415,188.28 | |
| Investment in other equity instruments | 85,000.00 | 85,000.00 | |
| Other non-current financial assets | |||
| Investment-oriented real estate | 323,296,494.84 | 323,296,494.84 | |
| Fixed assets | 224,709,747.39 | 224,709,747.39 | |
| Construction-in-progress | |||
| Productive biological asset | |||
| Oil and Gas Assets | |||
| Use right assets | |||
| Intangible assets | 27,347,950.13 | 27,347,950.13 | |
| Development expenses | |||
| Goodwill | |||
| Long term expenses to be apportioned | 11,980,697.97 | 11,980,697.97 | |
| Deferred income tax asset | 1,380,180.94 | 1,380,180.94 | |
| Other non-current assets | 473,312.35 | 473,312.35 | |
| Total non-current assets | 2,118,688,571.90 | 2,118,688,571.90 | |
| Total assets | 3,045,376,838.94 | 3,045,376,838.94 | |
| Current liabilities: | |||
| Short term borrowings | 400,425,930.05 | 400,425,930.05 | |
| Transactional financial liabilities | |||
| Derivative financial liabilities | |||
| Notes payable | |||
| Accounts payable | 1,481,135.49 | 1,481,135.49 | |
| Advance receipt | 9,991,850.67 | 9,991,850.67 | |
| Contract liabilities | 37,735.85 | 37,735.85 |
| Payroll payable to the employees | 25,256,531.70 | 25,256,531.70 | |
| Taxes payable | 2,778,265.84 | 2,778,265.84 | |
| Other payables | 240,824,305.37 | 240,824,305.37 | |
| Including: interest payable | |||
| Dividends payable | 1,639,513.77 | 1,639,513.77 | |
| Held-for-sale liabilities | |||
| Non-current liabilities due within a year | |||
| Other current liabilities | 2,264.15 | 2,264.15 | |
| Total current liabilities | 680,798,019.12 | 680,798,019.12 | |
| 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 | 2,377,718.35 | 2,377,718.35 | |
| Deferred income tax liability | |||
| Other non-current liabilities | |||
| Total non-current liabilities | 2,377,718.35 | 2,377,718.35 | |
| Total liabilities | 683,175,737.47 | 683,175,737.47 | |
| Owner’s equity: | |||
| Capital stock | 428,091,881.00 | 428,091,881.00 | |
| Other equity instruments | |||
| Including: preferred shares | |||
| Perpetual bond | |||
| Capital reserve | 1,027,145,928.88 | 1,027,145,928.88 | |
| Less: shares in stock | 61,633,530.48 | 61,633,530.48 | |
| Other comprehensive income | |||
| Special reserve | |||
| Surplus Reserve | 246,531,866.87 | 246,531,866.87 | |
| Retained earnings | 722,064,955.20 | 722,064,955.20 | |
| Total owner’s equity | 2,362,201,101.47 | 2,362,201,101.47 | |
| Total liabilities and owners’ equity | 3,045,376,838.94 | 3,045,376,838.94 |
(4) Note to the retroactive adjustment of the previous comparative data according to the new standards for leaseinitially implemented from 2021Inapplicable
45. Others
Inapplicable
VI. Taxation
1. Types of major taxes and tax rates
| Type of taxes | Tax basis | Tax rates |
| Value-added tax | Taxable income | 13%, 9%, 6% and 5% |
| Consumption tax | Taxable income | 20% |
| Urban maintenance and construction tax | Amount of turnover tax payable | 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 |
| The Company | 25.00% |
| Shenzhen Harmony World Watches Center Co., Ltd. (HARMONY) | 25.00% |
| Shenzhen FIYTA Precision Technology Co., Ltd. (Precision Technology Co.) | 15.00% |
| FIYTA (Hong Kong) Limited (FIYTA HK) | 16.50% |
| Shenzhen FIYTA Technology Development Co., Ltd. (Technology Development Co. ) | 15.00% |
| Shiyuehui Boutique (Shenzhen) Co., Ltd. (Shiyuehui) | 25.00% |
| Shenzhen Harmony E-Commerce Limited (Harmony E-Commerce) | 20.00% |
| Emile Chouriet (Shenzhen) Limited (Emile Choureit Shenzhen) | 25.00% |
| FIYTA Sales Co., Ltd. (The Sales Co.) | 25.00% |
| Liaoning Hengdarui Commerce & Trade Co., Ltd. (Hengdarui) | 25.00% |
| Montres Chouriet SA (the Swiss Co.) | 30.00% |
| Shenzhen XUNHANG Precision Technology Co., Ltd. (XUNHANG Co.) | 25.00% |
| Harmony World Watches Center (Hainan) Co., Ltd. (HARMONY Hainan) | 15.00% |
2. Tax Preferences
(1)According to Notice of the Ministry of Finance and the State Administration of Taxation on Improving the Policies for theWeighted Pre-tax Deduction of Research and Development Expenses (Notice of the Ministry of Finance and the StateAdministration of Taxation 2021 No. 13), the R & D expenses arising from development of new technology, new productsand new process in Precision Technology and Technology Development which have not formed intangible assets andcounted to the current profit and loss shall be subject to weighted pre-tax deduction by 100% of the amount actuallyincurred commencing from January 1, 2021 based on the actual deduction according to the regulations.
(2) Precision Technology Co. and Technology Development Co. may enjoy the “income tax rate exclusion of high-techenterprises key supported by the state”.
(3) In accordance with the relevant provisions of the Announcement of the Ministry of Finance and the State TaxationAdministration on Matters Concerning the Implementation of Preferential Income Tax Policies Supporting the Developmentof Small Low-Profit Enterprises and Individual Industrial and Commercial Households (Announcement of of the Ministry ofFinance and the State Administration of Taxation 2021 No. 12), for the part of small and low-profit enterprises (e-commercecompanies) whose annual taxable income does not exceed CNY 1 million, in addition to the preferential policy as specified
in Article 2 of the Notice of the Ministry of Finance and the State Administration of Taxation on Implementing the InclusiveTax Deduction and Exemption Policies for Micro and Small Enterprises (CAI SHUI (2019)No.13), the business income taxshall be paid at the further reduced rate of 50%.
(4) 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.
(5)According to the Circular of the Ministry of Finance and the State Taxation Administration on Preferential Policies ofIncome Tax on Enterprises in Hainan Free Trade Port (Cai Shui [2020] No.31),HARMONY Hainan is qualified for therelevant requirements and may enjoy the preferential business income tax at the rate of 15%.
3. Others
Inapplicable
VII. Notes to items of consolidated financial statements
1. Monetary capital
In CNY
| Items | Ending balance | Opening balance |
| Cash in stock | 119,448.51 | 183,759.72 |
| Bank deposit | 214,931,355.40 | 346,055,209.29 |
| Other Monetary Funds | 19,789,352.78 | 6,818,316.70 |
| Total | 234,840,156.69 | 353,057,285.71 |
| Including: total amount deposited overseas | 5,061,912.69 | 3,412,028.94 |
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 | 13,039,172.34 | 16,813,464.36 |
| Trade acceptance | 41,482,676.28 | 31,378,977.79 |
| Total | 54,521,848.62 | 48,192,442.15 |
In CNY
| Categories | Ending balance | Opening balance | ||||
| Book balance | Bad debt reserve | Book | Book balance | Bad debt reserve | Book | |
| Amount | Proportion | Amount | Provision proportion | value | Amount | Proportion | Amount | Provision proportion | value | |
| in which | ||||||||||
| Notes receivable for which bad debt reserve has been provided based on portfolios | 56,657,795.58 | 100.00% | 2,135,946.96 | 3.77% | 54,521,848.62 | 49,843,967.32 | 100.00% | 1,651,525.17 | 3.31% | 48,192,442.15 |
| Where | ||||||||||
| Bank acceptance | 13,039,172.34 | 23.01% | 13,039,172.34 | 16,813,464.36 | 33.73% | 16,813,464.36 | ||||
| Trade acceptance | 43,618,623.24 | 76.99% | 2,135,946.96 | 4.90% | 41,482,676.28 | 33,030,502.96 | 66.27% | 1,651,525.17 | 5.00% | 31,378,977.79 |
| Total | 56,657,795.58 | 100.00% | 2,135,946.96 | 3.77% | 54,521,848.62 | 49,843,967.32 | 100.00% | 1,651,525.17 | 3.31% | 48,192,442.15 |
Individual provision for bad and doubtful debts:
Inapplicable
Provision for bad and doubtful debts based on portfolio: trade acceptance
In CNY
| Name | Ending balance | ||
| Book balance | Bad debt reserve | Provision proportion | |
| Trade acceptance | 43,618,623.24 | 2,135,946.96 | 4.90% |
| Total | 43,618,623.24 | 2,135,946.96 | -- |
Note to the basis for determining the combination:
Inapplicable
Provision for bad and doubtful debts based on portfolio: Bank acceptance
In CNY
| Name | Ending balance | ||
| Book balance | Bad debt reserve | Provision proportion | |
| Bank acceptance | 13,039,172.34 | ||
| Total | 13,039,172.34 | -- | |
Note to the basis for determining the combination:
Inapplicable
Provision for bad and doubtful debts based on portfolio:
Inapplicable
Provision for bad and doubtful debts based on portfolio:
Inapplicable
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 | Amount recovered or reversed | Written-off | Others | |||
| Notes receivable | 1,651,525.17 | 484,421.79 | 2,135,946.96 | |||
| Total | 1,651,525.17 | 484,421.79 | 2,135,946.96 | |||
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 |
| Trade acceptance | 0 | 7,013,609.04 |
| Total | 0 | 7,013,609.04 |
(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 receivables disclosed by types
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 | 45,854,918.07 | 8.68% | 20,784,770.01 | 45.33% | 25,070,148.06 | 21,208,447.13 | 4.16% | 19,133,975.43 | 90.22% | 2,074,471.70 |
| items | ||||||||||
| Where | ||||||||||
| Accounts receivable from other customers | 45,854,918.07 | 8.68% | 20,784,770.01 | 45.33% | 25,070,148.06 | 21,208,447.13 | 4.16% | 19,133,975.43 | 90.22% | 2,074,471.70 |
| Accounts receivable for which bad debt reserve has been provided based on portfolios | 482,713,896.57 | 91.32% | 14,433,367.37 | 2.99% | 468,280,529.20 | 488,240,164.32 | 95.84% | 14,715,951.14 | 3.01% | 473,524,213.18 |
| Where | ||||||||||
| Accounts receivable from other customers | 482,713,896.57 | 91.32% | 14,433,367.37 | 2.99% | 468,280,529.20 | 488,240,164.32 | 95.84% | 14,715,951.14 | 3.01% | 473,524,213.18 |
| Total | 528,568,814.64 | 100.00% | 35,218,137.38 | 6.66% | 493,350,677.26 | 509,448,611.45 | 100.00% | 33,849,926.57 | 6.64% | 475,598,684.88 |
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 | 45,854,918.07 | 20,784,770.01 | 45.33% | Small possibility of recovery as predicted |
| Total | 45,854,918.07 | 20,784,770.01 | -- | -- |
Individual provision for bad and doubtful debts:
Inapplicable
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 | 482,713,896.57 | 14,433,367.37 | 2.99% |
| Total | 482,713,896.57 | 14,433,367.37 | -- |
Note to the basis for determining the combination:
Inapplicable
Provision for bad and doubtful debts based on portfolio:
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:
Inapplicable
Disclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 505,202,937.24 |
| 1 to 2 years | 10,502,650.24 |
| 2 to 3 years | 6,741,191.06 |
| Over 3 years | 6,122,036.10 |
| 3 to 4 years | 3,888,023.85 |
| 4 to 5 years | 953,707.55 |
| Over 5 years | 1,280,304.70 |
| Total | 528,568,814.64 |
(2) Bad debt provision accrual, received or reversed in the reporting period
Provision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Amount recovered or reversed | Written-off | Others | |||
| Accounts receivable from other customers | 33,849,926.57 | 2,347,869.39 | 976,332.27 | 0 | -3,326.31 | 35,218,137.38 |
| Total | 33,849,926.57 | 2,347,869.39 | 976,332.27 | 0 | -3,326.31 | 35,218,137.38 |
Where the significant amount of the reserve for bad debt recovered or reversed:
Inapplicable
(3) Accounts receivable actually written off in current period
Inapplicable
(4) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Description of Unit | Ending balance of the accounts receivable | Proportion in total ending balance of accounts receivable | Ending balance of the provision for bad debts |
| Accounts receivable owed by the top five customer debtors based on the ending balance | 117,790,202.46 | 22.28% | 4,178,394.78 |
| Total | 117,790,202.46 | 22.28% |
(5) Account receivable with recognition terminated due to transfer of financial assetsInapplicable
(6) Amount of assets and liabilities formed through transfer of long term account receivable and continuing to beinvolvedInapplicable
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 | 17,014,006.71 | 100.00% | 16,612,773.76 | 100.00% |
| Total | 17,014,006.71 | -- | 16,612,773.76 | -- |
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 of the ending balance collected based on the payees of the advancepayment
The total amount of advance payment to the top five payees of the ending balance collected based on the payees of theadvance payment was CNY 7,873,293.29, taking 46.28% of the toal ending balance of the advance payment.
(8) Other receivables
In CNY
| Items | Ending balance | Opening balance |
| Other receivables | 61,004,359.97 | 52,902,779.63 |
| Total | 61,004,359.97 | 52,902,779.63 |
(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 Payment | Ending book balance | Opening book balance |
| Reserve | 5,304,012.62 | 2,438,803.09 |
| Security deposit | 50,542,710.78 | 45,981,846.00 |
| Employees’ social security premium reimbursed | 494,186.13 | 792,711.42 |
| Others | 8,879,314.85 | 7,726,146.03 |
| Total | 65,220,224.38 | 56,939,506.54 |
2) Provision for bad debts
In CNY
| Bad debt reserve | 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, 2021 | 2,369,057.01 | 1,667,669.90 | 4,036,726.91 | |
| Balance as at January 1, 2021 in the reporting period | —— | —— | —— | —— |
| Provision in the reporting period | 179,137.50 | 0 | 179,137.50 | |
| Other changes | -212.19 | 0 | -212.19 | |
| Balance as at June 30, 2021 | 2,548,194.51 | 1,667,669.90 |
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) | 63,765,972.60 |
| 1 to 2 years | 865,591.15 |
| 2 to 3 years | 595.63 |
| Over 3 years | 588,065.00 |
| 3 to 4 years | 0.00 |
| 3 to 5 years | 0.00 |
| Over 5 years | 588,065.00 |
| Total | 65,220,224.38 |
3) Bad debt provision accrual, received or reversed in the reporting period
Provision for bad debt during the reporting period
In CNY
| Categories | Opening balance | Amount of movement during the reporting period | Ending balance | |||
| Provision | Amount recovered or reversed | Written-off | Others | |||
| Bad debt reserve | 4,036,726.91 | 218,513.64 | 39,163.95 | -212.19 | 4,215,864.41 | |
| Total | 4,036,726.91 | 218,513.64 | 39,163.95 | -212.19 | 4,215,864.41 | |
Where a significant amount of the reserve for bad debt recovered or reversed during the reporting period:
Inapplicable
4) Accounts receivable actually written off in the reporting period
Inapplicable
5) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Description of Unit | Nature of Payment | Ending balance | Aging | Proportion in total ending balance of other receivables | Ending balance of the provision for bad debts |
| Accounts receivable owed by the top five debtors based on the ending balance | Collateral, deposit, etc. | 11,736,193.18 | Within 1 year | 17.99% | 586,809.66 |
| Total | -- | 11,736,193.18 | -- | 17.99% | 586,809.66 |
6) Accounts receivable involving government subsidy
Inapplicable
7) Other receivables with recognition terminated due to transfer of financial assetsInapplicable
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 | 171,237,349.97 | 18,664,834.02 | 152,572,515.95 | 179,270,879.56 | 19,017,726.57 | 160,253,152.99 |
| Products in process | 11,073,464.10 | 0 | 11,073,464.10 | 12,570,005.95 | 0 | 12,570,005.95 |
| Commodities in stock | 1,930,724,116.19 | 80,160,717.38 | 1,850,563,398.81 | 1,837,664,688.01 | 78,707,661.10 | 1,758,957,026.91 |
| Total | 2,113,034,930.26 | 98,825,551.40 | 2,014,209,378.86 | 2,029,505,573.52 | 97,725,387.67 | 1,931,780,185.85 |
(2) Provision for price falling of inventory or provision for impairment of contract performance costs
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance | ||
| Provision | Others | Reversal or write-off | Others | |||
| Raw materials | 19,017,726.57 | 0 | 237,447.08 | 115,445.47 | 18,664,834.02 | |
| Commodities in stock | 78,707,661.10 | 1,463,809.76 | 0 | 10,753.48 | 80,160,717.38 | |
| Total | 97,725,387.67 | 1,463,809.76 | 237,447.08 | 126,198.95 | 98,825,551.40 | |
(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 |
| Input VAT to be offset | 37,488,179.03 | 59,218,711.69 |
| Income tax paid in advance | 11,464.27 | 25,684.51 |
| Others | 9,787,581.80 | 14,552,104.85 |
| Total | 47,287,225.10 | 73,796,501.05 |
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 with recognition terminated due to transfer of financial assetsInapplicable
(3) Amount of assets and liabilities formed through transfer of long term account receivable and continuing to beinvolvedInapplicable
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 | Other comprehensive income adjustment | Other equity movement | Announced for distributing cash dividend or profit | Provision for impairment | Others | ||||
| I. Joint Venture | |||||||||||
| II. Associates | |||||||||||
| Shanghai Watch Industry Co., Ltd. (Shanghai Watch) | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 | ||||||||
| Sub-total | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 | ||||||||
| Total | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 |
18. Investment in other equity instruments
In CNY
| Ending balance | Opening balance | |
| Shenzhen CATIC Culture Communication Co., Ltd. | 0 | 0 |
| 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 based real estate
(1) Investment property measured based on the cost method
In CNY
| Items | Plant and buildings | Land use right | Construction-in-progress | Total |
| I. Original book value | ||||
| 1. Opening balance | 609,605,406.79 | 609,605,406.79 | ||
| 2. Increase in the reporting period | ||||
| (1) Purchased | ||||
| (2) Inventories\fixed assets/construction- in – process transferred in | ||||
| (3) Increase of enterprise consolidation | ||||
| 3. Amount decreased in the reporting period | ||||
| (1) Disposal | ||||
| (2) Other transfer out |
| 4. Ending balance | 609,605,406.79 | 609,605,406.79 | ||
| II. Accumulative depreciation and accumulative amortization | ||||
| 1. Opening balance | 211,518,959.01 | 211,518,959.01 | ||
| 2. Increase in the reporting period | 7,700,106.36 | 7,700,106.36 | ||
| (1) Provision or amortization | 7,700,106.36 | 7,700,106.36 | ||
| 3. Amount decreased in the reporting period | ||||
| (1) Disposal | ||||
| (2) Other transfer out | ||||
| 4. Ending balance | 219,219,065.37 | 219,219,065.37 | ||
| III. Provision for impairment | ||||
| 1. Opening balance | ||||
| 2. Increase 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 | 390,386,341.42 | 390,386,341.42 | ||
| 2.Book value at the beginning of the reporting period | 398,086,447.78 | 398,086,447.78 |
(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 | 350,973,834.39 | 352,734,280.76 |
| Total | 350,973,834.39 | 352,734,280.76 |
(1) About fixed assets
In CNY
| Items | Plant & buildings | Machinery & equipment | Motor vehicle | Electronic equipment | Others | Total |
| I. Original book value | ||||||
| 1. Opening balance | 399,020,198.97 | 101,896,803.98 | 15,166,013.42 | 45,435,251.53 | 45,782,206.31 | 607,300,474.21 |
| 2. Increase in the reporting period | 9,624,523.09 | 946,483.28 | 549,108.35 | 1,317,843.60 | 743,336.81 | 13,181,295.13 |
| (1) Purchase | 9,624,523.09 | 946,483.28 | 549,108.35 | 1,317,843.60 | 743,336.81 | 13,181,295.13 |
| (2) Construction-in-process transferred in | ||||||
| (3) Increase of business combination | ||||||
| 3. Amount decreased in the reporting period | 2,142,434.06 | 1,048,238.10 | 1,063,923.00 | 897,565.89 | 262,101.88 | 5,414,262.93 |
| (1) Disposal or scrapping | 1,063,923.00 | 827,972.46 | 201,157.51 | 2,093,052.97 | ||
| (2) Others | 2,142,434.06 | 1,048,238.10 | 69,593.43 | 60,944.37 | 3,321,209.96 | |
| 4. Ending balance | 406,502,288.00 | 101,795,049.16 | 14,651,198.77 | 45,855,529.24 | 46,263,441.24 | 615,067,506.41 |
| II. Accumulative depreciation | ||||||
| 1. Opening balance | 111,755,686.24 | 56,383,949.04 | 13,429,376.63 | 34,165,037.86 | 38,832,143.68 | 254,566,193.45 |
| 2. Increase in the reporting period | 6,118,013.36 | 3,859,292.50 | 210,986.77 | 2,092,250.62 | 1,135,541.03 | 13,416,084.28 |
| (1) Provision | 6,118,013.36 | 3,859,292.50 | 210,986.77 | 2,092,250.62 | 1,135,541.03 | 13,416,084.28 |
| 3. Amount decreased in the reporting period | 1,123,885.90 | 678,105.04 | 1,010,726.85 | 848,016.88 | 227,871.04 | 3,888,605.71 |
| (1) Disposal or scrapping | 1,010,726.85 | 799,831.33 | 172,835.57 | 1,983,393.75 | ||
| (2) Others | 1,123,885.90 | 678,105.04 | 48,185.55 | 55,035.47 | 1,905,211.96 | |
| 4. Ending | 116,749,813.70 | 59,565,136.50 | 12,629,636.55 | 35,409,271.60 | 39,739,813.67 | 264,093,672.02 |
| balance | ||||||
| III. Provision for impairment | ||||||
| 1. Opening balance | ||||||
| 2. Increase 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 | 289,752,474.30 | 42,229,912.66 | 2,021,562.22 | 10,446,257.64 | 6,523,627.57 | 350,973,834.39 |
| 2.Book value at the beginning of the reporting period | 287,264,512.73 | 45,512,854.94 | 1,736,636.79 | 11,270,213.67 | 6,950,062.63 | 352,734,280.76 |
(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 property ownership certificate has not been granted |
| Office occupancy of Harbin Office | 230,978.57 | There existed problem in ownership |
(5) Disposal of fixed assets
Inapplicable
22. Construction-in-progress
Inapplicable
(1)About construction-in-progress
Inapplicable
(2) Movements of important construction-in-progress projects in the reporting period
Inapplicable
(3) Provision for impairment of construction in progress in the current periodInapplicable
(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 modelInapplicable
24. Oil and Gas Assets
Inapplicable
25. Use right assets
In CNY
| Items | Housing and buildings | Total |
| I. Original book value | ||
| 1. Opening balance | 264,657,797.63 | 264,657,797.63 |
| 2. Increase in the reporting period | 28,291,257.85 | 28,291,257.85 |
| 3. Amount decreased in the reporting period | 10,779,708.54 | 10,779,708.54 |
| 4. Ending balance | 282,169,346.95 | 282,169,346.95 |
| II. Accumulative depreciation | ||
| 1. Opening balance | 94,519,584.92 | 94,519,584.92 |
| 2. Increase in the reporting period | 48,686,092.09 | 48,686,092.09 |
| (1) Provision | 48,686,092.09 | 48,686,092.09 |
| 3. Amount decreased in the reporting period | 7,008,242.92 | 7,008,242.92 |
| (1) Disposal | 7,008,242.92 | 7,008,242.92 |
| 4. Ending balance | 136,197,434.09 | 136,197,434.09 |
| III. Provision for impairment |
| 1. Opening balance | ||
| 2. Increase 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 | 145,971,912.86 | 145,971,912.86 |
| 2.Book value at the beginning of the reporting period | 170,138,212.72 | 170,138,212.72 |
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 | 29,134,692.80 | 14,068,906.86 | 78,137,422.06 | ||
| 2. Increase in the reporting period | 223,907.16 | 129,827.25 | 353,734.41 | |||
| (1) Purchase | 223,907.16 | 129,827.25 | 353,734.41 | |||
| (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 | 29,358,599.96 | 14,198,734.11 | 78,491,156.47 | ||
| II. Accumulative amortization | ||||||
| 1. Opening balance | 15,048,815.45 | 18,612,740.91 | 6,616,549.19 | 40,278,105.55 |
| 2. Increase in the reporting period | 366,776.65 | 2,412,854.66 | 663,244.18 | 3,442,875.49 | ||
| (1) Provision | 366,776.65 | 2,412,854.66 | 663,244.18 | 3,442,875.49 | ||
| 3. Amount decreased in the reporting period | ||||||
| (1) Disposal | ||||||
| 4. Ending balance | 15,415,592.10 | 21,025,595.57 | 7,279,793.37 | 43,720,981.04 | ||
| III. Provision for impairment | ||||||
| 1. Opening balance | ||||||
| 2. Increase 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 | 19,518,230.30 | 8,333,004.39 | 6,918,940.74 | 34,770,175.43 | ||
| 2.Book value at the beginning of the reporting period | 19,885,006.95 | 10,521,951.89 | 7,452,357.67 | 37,859,316.51 |
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 |
| Charge of fabrication of special counters | 25,146,766.71 | 10,751,796.91 | 10,524,308.51 | 0 | 25,374,255.11 |
| Refurbishment expenses | 98,681,716.46 | 40,401,202.23 | 30,849,126.59 | 0 | 108,233,792.10 |
| Others | 6,189,104.82 | 13,207,546.87 | 5,062,629.25 | 0 | 14,334,022.44 |
| Total | 130,017,587.99 | 64,360,546.01 | 46,436,064.35 | 0 | 147,942,069.65 |
30. Deferred tax assets and deferred tax liabilities
(1) Deferred income tax asset without offsetting
In CNY
| Items | Ending balance | Opening balance | ||
| Offsetable provisional difference | Deferred income tax asset | Offsetable provisional difference | Deferred income tax asset | |
| Asset impairment reserve | 126,005,356.71 | 24,881,788.48 | 122,763,597.44 | 24,130,990.19 |
| Unrealized profit from the intracompany transactions | 111,501,304.92 | 27,738,982.77 | 135,402,764.86 | 33,674,974.92 |
| Offsetable loss | 52,775,719.35 | 12,473,390.66 | 64,272,084.42 | 15,216,766.23 |
| Restricted shares | 12,138,511.75 | 2,820,567.68 | 10,011,227.40 | 2,398,201.09 |
| Promotion expenses available for carrying-forward to the next year | 14,351,406.36 | 2,691,237.41 | 18,840,253.36 | 3,378,321.23 |
| Lease liabilities | 148,110,170.80 | 37,027,542.70 | 0 | 0 |
| Others | 10,019,558.65 | 2,504,889.67 | 8,458,186.73 | 2,114,546.69 |
| Total | 474,902,028.54 | 110,138,399.37 | 359,748,114.21 | 80,913,800.35 |
(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 | 20,004,473.90 | 3,000,671.09 | 20,452,230.39 | 3,067,834.55 |
| Use right assets | 145,787,453.52 | 36,446,863.39 | 0 | 0 |
| Total | 165,791,927.42 | 39,447,534.48 | 20,452,230.39 | 3,067,834.55 |
(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 | 35,609,701.32 | 74,528,698.05 | 0 | 80,913,800.35 |
| Deferred income tax liability | 35,609,701.32 | 3,837,833.16 | 0 | 3,067,834.55 |
(4) Statement of deferred income tax asset not recognized
In CNY
| Items | Ending balance | Opening balance |
| Offsetable provisional difference | 14,665,778.78 | 14,790,427.78 |
| Offsetable loss | 55,713,663.36 | 61,104,363.07 |
| Total | 70,379,442.14 | 75,894,790.85 |
(5) Unrecognized deferred income tax asset available for offsetting loss is going to expire in thefollowing years
In CNY
| Year | Amount at the end of the reporting period | Amount at the year beginning | Remarks |
| 2020 | |||
| 2021 | |||
| 2022 | |||
| 2023 | |||
| 2024 | 1,724,268.09 | 7,114,967.80 | |
| 2025 | 11,684,299.22 | 11,684,299.22 | |
| 2026 | 18,449,678.50 | 18,449,678.50 | |
| 2027 | 23,855,417.55 | 23,855,417.55 | |
| 2028 |
| 2029 | |||
| 2030 | |||
| 2031 | |||
| Total | 55,713,663.36 | 61,104,363.07 | -- |
31. Other non-current assets
In CNY
| Items | Ending balance | Opening balance | ||||
| Book balance | Impairment reserve | Book value | Book balance | Impairment reserve | Book value | |
| Advance payment for engineering works and equipment | 5,499,554.07 | 0 | 5,499,554.07 | 13,536,307.13 | 0 | 13,536,307.13 |
| Total | 5,499,554.07 | 0 | 5,499,554.07 | 13,536,307.13 | 0 | 13,536,307.13 |
32. Short term loans
(1) Classification of short-term loans
In CNY
| Items | Ending balance | Opening balance |
| Secured loan | 9,609,712.54 | 142,247,348.04 |
| Credit loan | 450,413,888.89 | 400,425,930.05 |
| Total | 460,023,601.43 | 542,673,278.09 |
(2)Short-term loans overdue but still remaining outstanding
Inapplicable
33. Transactional financial liabilities
Inapplicable
34. Derivative financial liabilities
Inapplicable
35. Notes payable
In CNY
| Categories | Ending balance | Opening balance |
| Trade acceptance | 2,181,360.00 | 3,581,360.00 |
| Total | 2,181,360.00 | 3,581,360.00 |
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 | 228,935,070.03 | 284,050,848.79 |
| Payment for materials | 12,490,669.90 | 15,679,531.11 |
| Engineering payment payable | 1,232,967.42 | 1,481,135.49 |
| Total | 242,658,707.35 | 301,211,515.39 |
(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 | 8,932,926.97 | 9,991,850.67 |
| Total | 8,932,926.97 | 9,991,850.67 |
(2) Significant advances from customers with age exceeding 1 year
Inapplicable
38. Contract liabilities
In CNY
| Items | Ending balance | Opening balance |
| Payment for goods | 18,658,899.34 | 18,213,396.49 |
| Total | 18,658,899.34 | 18,213,396.49 |
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) 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 | 125,981,238.62 | 340,145,971.72 | 391,091,056.48 | 75,036,153.86 |
| II. Post-employment benefit Plan - defined contribution plan. | 6,767,477.58 | 23,305,565.10 | 20,902,624.80 | 9,170,417.88 |
| III. Dismissal welfare | 104,746.00 | 554,962.97 | 659,708.97 | 0 |
| Total | 132,853,462.20 | 364,006,499.79 | 412,653,390.25 | 84,206,571.74 |
(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 | 125,136,477.65 | 301,577,842.12 | 352,422,107.31 | 74,292,212.46 |
| subsidies | ||||
| 2. Staff’s welfare | 3,805.46 | 6,149,022.84 | 6,144,031.30 | 8,797.00 |
| 3. Social security premium | 18,617,626.35 | 18,617,626.35 | ||
| Including: medical insurance premium | 9,721,058.77 | 9,721,058.77 | ||
| Work injury insurance | 334,853.76 | 334,853.76 | ||
| Maternity Insurance | 416,392.62 | 416,392.62 | ||
| 4. Housing provident fund | 2,932.00 | 9,462,521.35 | 9,456,234.35 | 9,219.00 |
| 5. Trade union fund and staff education fund | 838,023.51 | 4,338,959.06 | 4,451,057.17 | 725,925.40 |
| Total | 125,981,238.62 | 340,145,971.72 | 391,091,056.48 | 75,036,153.86 |
(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 | 295,976.45 | 19,802,009.67 | 20,096,653.74 | 1,332.38 |
| 2. Unemployment insurance premium | 437.76 | 580,246.73 | 580,684.49 | 0 |
| 3. Contribution to the enterprise annuity Plan | 6,471,063.37 | 2,923,308.70 | 225,286.57 | 9,169,085.50 |
| Total | 6,767,477.58 | 23,305,565.10 | 20,902,624.80 | 9,170,417.88 |
40. Taxes payable
In CNY
| Items | Ending balance | Opening balance |
| Value-added tax | 33,133,848.51 | 36,028,888.63 |
| Business income tax | 26,311,470.96 | 29,488,177.68 |
| Individual income tax | 2,544,435.89 | 1,609,420.04 |
| Urban maintenance and construction tax | 478,365.65 | 631,469.18 |
| Education Surcharge | 341,348.02 | 450,946.60 |
| Others | 3,135,776.24 | 716,369.77 |
| Total | 65,945,245.27 | 68,925,271.90 |
41. Other payables
In CNY
| Items | Ending balance | Opening balance |
| Dividends payable | 5,210,370.29 | 1,639,513.77 |
| Other payables | 219,515,407.89 | 126,938,084.17 |
| Total | 224,725,778.18 | 128,577,597.94 |
(1) Interest payable
Inapplicable
(2) Dividend payable
In CNY
| Items | Ending balance | Opening balance |
| Dividends of common shares | 5,210,370.29 | 1,639,513.77 |
| Total | 5,210,370.29 | 1,639,513.77 |
(3) Other payables
1) Other payments stated based on nature of fund
In CNY
| Items | Ending balance | Opening balance |
| Cash pledge or cash deposit | 40,538,496.20 | 46,419,944.64 |
| Fund for shop-front activities | 22,245,132.28 | 21,861,578.14 |
| Personal account payable | 504,712.15 | 137,818.57 |
| Refurbishment | 9,382,435.53 | 7,481,768.84 |
| Obligation of repurchase of restricted shares | 66,673,709.70 | 16,299,166.73 |
| Others | 80,170,922.03 | 34,737,807.25 |
| Total | 219,515,407.89 | 126,938,084.17 |
2) Other payables in significant amount and with aging over 1 year
Inapplicable
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 | 352,600.00 | 370,030.00 |
| Long-term lease liabilities due within one year | 95,391,666.63 | 96,176,525.48 |
| Total | 95,744,266.63 | 96,546,555.48 |
44. Other current liabilities
In CNY
| Items | Ending balance | Opening balance |
| Pending output VAT | 2,374,396.18 | 2,299,755.09 |
| Total | 2,374,396.18 | 2,299,755.09 |
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 | 3,702,300.00 | 4,070,330.00 |
| Total | 3,702,300.00 | 4,070,330.00 |
Notes to classification of long term borrowings:
As of June 30, 2021, the book value of the fixed assets of the Group used for loan collateral was CNY 12,210,771.28.
Other notes, including the interest rate interval:
The interest rate of the borrowing is 3%.
46. Bonds Payable
(1) Bonds payable
Inapplicable
(2) Increase/Decrease of bonds payable (excluding other financial instruments classified asfinancial 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. Lease liabilities
In CNY
| Items | Ending balance | Opening balance |
| Lease liabilities | 52,886,029.26 | 76,142,342.03 |
| Total | 52,886,029.26 | 76,142,342.03 |
48. Long term accounts payable
Inapplicable
(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) Long term payroll payable to the employees
Inapplicable
(2) Change of defined benefit plans
Inapplicable
50. Predicted 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 |
| Government subsidies | 2,916,346.43 | 0 | 538,628.08 | 2,377,718.35 | Income to be recognized |
| Total | 2,916,346.43 | 0 | 538,628.08 | 2,377,718.35 | -- |
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 |
| Deferred income | 551,309.04 | 0 | 551,309.04 | Related with assets | ||||
| Deferred income | 925,127.45 | 0 | 925,127.45 | Related with assets | ||||
| Deferred income | 901,281.86 | 0 | 901,281.86 | Related with assets | ||||
| Deferred income | 538,628.08 | 538,628.08 | 0 | 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 | Others | Sub-total | |||
| converted from reserve | |||||||
| Total Shares | 428,091,881.00 | 7,458,641.00 | 0 | 7,458,641.00 | 435,550,522.00 |
Other notes:
(1) On January 15, 2021, the Company held the 25th session of the Ninth Board of Directors and the 22nd session of theNinth Supervisory Committee, which reviewed and approved the Proposal on Granting Restricted Shares to the IncentiveObjects as Specified in 2018 A Share Restricted Stock Incentive Plan (Phase II)” and other related proposals, granted 7.66million restricted A-shares to 135 incentive objects, accounting for 1.79% of the Company’s total share capital before theregistration of the shares granted.
(2) According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 A-ShareRestricted Stock Incentive Plan (Phase I)” and the “Proposal for Repurchase and Cancellation of the Partial RestrictedShares Involved in 2018 A-Share Restricted Stock Incentive Plan (Phase II)” approved at the board meeting and generalmeeting, in year 2021, the Company repurchased and canceled a total of 201,359 A-share restricted shares that were heldby, granted to but with restriction not released to 2 retired former incentive objects.
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 other financial instruments, including preferred shares, perpetualbonds, etc. at the end 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) | 996,986,711.73 | 50,595,978.03 | 1,147,454.00 | 1,046,435,235.76 |
| Other capital reserve | 24,503,676.05 | 7,719,886.13 | 0 | 32,223,562.18 |
| Total | 1,021,490,387.78 | 58,315,864.16 | 1,147,454.00 | 1,078,658,797.94 |
Other notes, including the note to its increase/decrease and the main cause(s) of its movement in the reporting period:
(1) On January 15, 2021, the Company held the 25th session of the Ninth Board of Directors and the 22nd session of theNinth Supervisory Committee, which reviewed and approved the Proposal on Granting Restricted Shares to the IncentiveObjects as Specified in 2018 A Share Restricted Stock Incentive Plan (Phase II)” and other related proposals, granted 7.66million restricted A-shares to 135 incentive objects, accounting for 1.79% of the Company’s total share capital before theregistration of the shares granted. Thus the capital reserve increased correspondingly by CNY 50,556,000.00.
(2) According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 A-ShareRestricted Stock Incentive Plan (Phase I)” and the “Proposal for Repurchase and Cancellation of the Partial RestrictedShares Involved in 2018 A-Share Restricted Stock Incentive Plan (Phase II)” approved at the board meeting and generalmeeting, in first half year of 2021, the Company repurchased and canceled a total of 201,359 A-share restricted shares thatwere held by, granted to with the restriction but not released to 2 retired former incentive objects. Thus the capital reservewas written down by CNY 1,144,077.00.
(3) On January 4, 2019,approved by State-owned Assets Supervision and Administration Commission of the State Councilwith the “Official Reply on Fiyta Holdings Ltd. to Implement the Restrictive Stock Incentive Plan” (GUO ZI KAO FEN [2018]No. 936), and at the same time reviewed and approved by the Board of Directors and the General Meeting, the Companyawarded 4.277 million shares of A-share restrictive stock to the incentive objects in the Company’s Restrictive StockIncentive Plan (Phase I) as at January 11, 2019. Reviewed and approved by the Company's Board of Directors and theGeneral Meeting of shareholders, the Company granted the second phase of restricted A shares to incentive objects onJanuary 15, 2021. In the first half year of 2021, the services of the above-mentioned incentive objects obtained by theCompany shall be included in the relevant costs or expenses and the capital reserve shall be increased by CNY6,158,808.77 accordingly.
(4) The 24th session of the Ninth Board of Directors held on December 29, 2020 reviewed and approved the Proposal onthe Release Conditions having been Satisfied for the First Release Period of 2018 Restricted A-Share Incentive Plan(Phase I). According to the relevant provisions of the Measures for Management of Equity Incentive of Listed Companiesand 2018 A Share Restricted Stock Incentive Plan (Phase I)(Draft Revision Version), the release conditions for the firstrelease period of 2018 Restricted A-Share Incentive Plan (Phase I) have been satisfied. After the release, the Company’scapital reserve shall increase by CNY 1,561,077.36.
(5) According to "Proposal on the Repurchase of the Company's Partial Domestically Listed Foreign Shares (B Shares)”reviewed and approved at the 7th session of the Ninth Board of Directors and 2019 2nd Extraordinary General Meeting andthe “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares in the Company (B-shares)”reviewed andapproved at 2020 2nd Extraordinary General Meeting, in the first half year of 2021，the Company repurchased its ownshares through a centralized bidding method with the special account for the securities repurchased at expenseequivalent to CNY 3,377.00 which has written off capital reserve amounting to CNY 3,377.00.
56. Treasury shares
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Shares in stock | 61,633,530.48 | 63,013,838.49 | 6,774,896.51 | 117,872,472.46 |
| Total | 61,633,530.48 | 63,013,838.49 | 6,774,896.51 | 117,872,472.46 |
Other notes, including the note to its increase/decrease and the main cause(s) of its movement in the reporting period:
(1) As stated in Note VII. 55. Capital Reserves and Note (1), the Company has increased treasury shares by CNY58,216,000.00 for the issue of the second phase of equity incentives.
(2) As stated in Note VII. 55. Capital Reserves and Note (2), the Company reduced treasury shares by CNY 1,345,436.00in relation to the repurchase and cancellation of restricted stocks.
(3) In the semi-annual of 2021，the Company repurchased accumulatively 847,685 shares of the Company's B-sharesthrough a centralized bidding method with Shenzhen Stock Exchange and paid HKD 5,691,273.88 (with trading costexclusive) which was equivalent to CNY 4,757,740.96. As a result, the treasury stock increased by CNY 4,757,740.96.
(4) The 24th session of the Ninth Board of Directors held on December 29, 2020 reviewed and approved the Proposal onthe Release Conditions having been Satisfied for the First Release Period of 2018 Restricted A-Share Incentive Plan(Phase I). According to the relevant provisions of the Measures for Management of Equity Incentive of Listed Companiesand 2018 A Share Restricted Stock Incentive Plan (Phase I)(Draft Revision Version), the release conditions for the firstrelease period of 2018 Restricted A-Share Incentive Plan (Phase I) have been satisfied. After the said release, the treasurystock decreased by CNY 5,429,460.51.
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 reporting period which had been counted to the other comprehensive income in the previous period. | Less: the amount counted to the retained earnings during the reporting period which had been counted to the other comprehensive income in the previous period. | Less: Income tax expense | Attributable to the parent company after tax | Attributable to minority shareholders after tax | |||
| I. Other comprehensive income which cannot be re-classified into profit and loss | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||
| Where: Amount of change of the beneficial plan remeasured for setting | ||||||||
| Other comprehensive income which cannot be converted into gain and loss based on the equity method | ||||||||
| Movement of the fair | ||||||||
| value of the investment in other equity instruments | ||||||||
| Movement of the fair value of the Company’s own credit risk | ||||||||
| II. Other comprehensive income which shall be re-classified into profit and loss | 976,871.41 | -6,510,295.78 | -6,477,955.16 | -32,340.62 | -5,501,083.75 | |||
| Where: other comprehensive income which can be converted into gain and loss based on the equity method | ||||||||
| Change of the fair value of the investment in other creditor investment | ||||||||
| Amount of the reclassified financial assets counted to the other comprehensive income | ||||||||
| Provision for impairment of the credit of the other debt investment | ||||||||
| Reserve for cash flow hedge | ||||||||
| Conversion difference in foreign currency statements | 976,871.41 | -6,510,295.78 | -6,477,955.16 | -32,340.62 | -5,501,083.75 | |||
| Total other comprehensive income | 976,871.41 | -6,510,295.78 | -6,477,955.16 | -32,340.62 | -5,501,083.75 |
58. Special reserve
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Safety production costs | 0 | 491,605.68 | 195,913.72 | 295,691.96 |
| Total | 0 | 491,605.68 | 195,913.72 | 295,691.96 |
59. Surplus Reserve
In CNY
| Items | Opening balance | Increase in the reporting period | Decrease in the reporting period | Ending balance |
| Statutory surplus reserve | 184,546,972.87 | 0 | 0 | 184,546,972.87 |
| Discretionary surplus reserve | 61,984,894.00 | 0 | 0 | 61,984,894.00 |
| Total | 246,531,866.87 | 0 | 0 | 246,531,866.87 |
60. Retained earnings
In CNY
| Items | Reporting period | Previous period |
| Before adjustment: Retained earnings at the end of the previous period | 1,164,490,911.51 | 966,840,818.40 |
| Total retained earnings under adjustment at the beginning of the reporting year (adjustment up +, adjustment down -) | -4,319,295.51 | 0 |
| After adjustment: Retained earnings at the beginning of the reporting period | 1,160,171,616.00 | 966,840,818.40 |
| Plus: Net profit attributable to the parent company’s owner in the report period | 233,544,726.55 | 294,115,156.04 |
| Less: Provision of statutory surplus public reserve | 0 | 10,830,686.73 |
| Dividends of common shares payable | 174,220,065.73 | 85,634,376.20 |
| Retained earnings at the end of the reporting period | 1,219,496,276.82 | 1,164,490,911.51 |
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 -4,319,295.50.
2) The amount involved in change of the accounting policy influencing the retained earnings at the beginning of thereporting period was CNY 0.
3) The amount involved in correction of the significant accounting errors influencing the retained earnings at the beginningof the reporting period was CNY 0.
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.
5) The total amount involved in other adjustments influencing the retained earnings at the beginning of the reporting periodwas CNY 0.
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 | 2,770,803,774.51 | 1,736,967,152.08 | 1,579,084,669.87 | 977,121,580.01 |
| Other businesses | 6,715,746.83 | 1,182,329.62 | 2,750,045.16 | 314,096.86 |
| Total | 2,777,519,521.34 | 1,738,149,481.70 | 1,581,834,715.03 | 977,435,676.87 |
Information in connection with the revenue:
In CNY
| Classification of Contracts | Segment 1 | Segment 2 | Total | |
| Types of commodities | ||||
| Including: | ||||
| Watch brand business | 541,632,277.89 | 541,632,277.89 | ||
| Watch retail and services | 2,095,715,705.60 | 2,095,715,705.60 | ||
| Precision technology business | 59,305,901.13 | 59,305,901.13 | ||
| Leases | 74,149,889.89 | 74,149,889.89 | ||
| Others | 6,715,746.83 | 6,715,746.83 | ||
| Classification based on the operation regions | ||||
| Including: | ||||
| South China | 1,404,978,399.03 | 1,404,978,399.03 | ||
| Northwest China | 414,691,758.15 | 414,691,758.15 | ||
| Northeast China | 138,241,583.29 | 138,241,583.29 | ||
| East China | 381,212,790.12 | 381,212,790.12 | ||
| Northeast China | 158,038,232.08 | 158,038,232.08 | ||
| Southwest China | 280,356,758.67 | 280,356,758.67 | ||
| Total | 2,777,519,521.34 | 2,777,519,521.34 |
Information concerning obligation performance:
① General sales
When the goods are dispatched, the receipt of the customer's receipt is obtained, and according to the sales contractsigned by both parties, it is confirmed that the control of the goods has been transferred to the purchaser, and the salesrevenue is recognized.
② Direct sales
a. Offline retail: Under the direct sales business model, sales revenue is recognized when the goods is sent out, the salespayment is received and the products are delivered to the customer.
b. Online retail: Under the e-commerce platform sales model, sales revenue is recognized when products are delivered andsigned for reception by customers.
③ Mall Associates
Under the joint sales model, the Group recognizes revenue when products are delivered to customers, shop assistantsissue small invoices to retail customers, customers accept acceptance and shopping malls collect payments.
④ Consignment sales
Under the consignment sales model, the Group recognizes revenue when it receives the sales list from the consignee andconfirms that the control over the ownership of the goods has been transferred to the purchaser.
⑤ Consignment Sales
Under the consignment sales model, when the Group delivers external consignment products to customers and confirmsthat the control over the ownership of the goods has been transferred to the purchaser, the Group recognizes revenuebased on the net 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 CNY 0.00, of which CNY 0.00 is expected to berecognized as revenue in the year, CNY 0.00 is expected to be recognized as revenue in the yea, and CNY 0.00 isexpected to be recognized as revenue in the year.Inapplicable
62. Business Taxes and Surcharges
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Consumption tax | 726,813.41 | 39,803.71 |
| Urban maintenance and construction tax | 5,877,927.84 | 2,489,349.64 |
| Education Surcharge | 4,121,272.93 | 1,762,953.17 |
| Real estate tax | 3,567,272.30 | 1,403,403.52 |
| Land use tax | 197,939.71 | 119,304.10 |
| Tax on using vehicle and boat | 2,520.00 | 2,880.00 |
| Stamp duty | 1,641,839.17 | 1,007,174.51 |
| Others | 320,376.10 | 446,115.04 |
| Total | 16,455,961.46 | 7,270,983.69 |
63. Sales expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to Employees | 213,043,074.52 | 157,546,673.59 |
| Shopping mall and rental fees | 129,400,920.28 | 89,783,779.60 |
| Advertising, exhibition and market promotion fee | 91,568,222.91 | 61,631,796.14 |
| Depreciation and amortization | 92,926,914.28 | 44,191,277.25 |
| Packing expenses | 4,481,736.64 | 3,301,568.93 |
| Water & power supply and property management fee | 10,882,939.50 | 8,864,424.63 |
| Freight | 4,242,070.29 | 5,368,007.05 |
| Office expenses | 3,919,959.69 | 2,324,895.41 |
| Business travel expenses | 3,520,062.70 | 1,975,223.92 |
| Business entertainment | 1,950,807.85 | 1,052,159.62 |
| Others | 5,693,343.97 | 4,888,506.37 |
| Total | 561,630,052.63 | 380,928,312.51 |
64. Administrative expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to Employees | 90,780,253.80 | 72,157,594.27 |
| Depreciation and amortization | 12,421,579.17 | 13,362,685.84 |
| Business travel expenses | 1,799,515.00 | 967,235.20 |
| Office expenses | 1,767,686.85 | 2,085,464.53 |
| Service fee to intermediary agencies | 1,662,615.14 | 1,598,683.57 |
| Water, electricity, property and rent | 3,315,987.84 | 1,751,821.99 |
| Others | 9,644,028.05 | 6,316,863.33 |
| Total | 121,391,665.85 | 98,240,348.73 |
65. R & D expenditures
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Payroll to Employees | 18,674,577.25 | 13,262,678.07 |
| Materials and moulds | 384,901.07 | 89,596.90 |
| Payment for samples | 640,496.08 | 593,599.24 |
| Depreciation and amortization | 3,117,098.99 | 3,162,020.53 |
| Technical cooperation fee | 657,671.10 | 1,536,929.13 |
| Others | 2,895,320.19 | 2,059,446.89 |
| Total | 26,370,064.68 | 20,704,270.76 |
66. Financial expenses
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Interest payment | 14,778,321.69 | 13,485,670.67 |
| Less: capitalized interest | 0 | 0 |
| Less: Interest income | 2,153,626.51 | 2,482,721.82 |
| Exchange gain & loss | -9,312.50 | 713,188.07 |
| Service charges and miscellaneous | 8,161,891.03 | 4,812,806.44 |
| Total | 20,777,273.71 | 16,528,943.36 |
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 | 11,662,934.28 | 10,154,015.67 |
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 | 1,629,328.24 | 2,160,911.92 |
| Total | 1,629,328.24 | 2,160,911.92 |
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 | -173,755.96 | -1,851.58 |
| Loss from bad debt of notes receivable | -484,421.80 | 0 |
| Loss from bad debt of accounts receivable | -1,377,059.19 | -2,465,509.77 |
| Total | -2,035,236.95 | -2,467,361.35 |
72. Loss from impairment of assets
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| I. Loss from bad debt | 0.00 | 0.00 |
| II. Loss from price falling of inventory and loss from impairment of contract performance costs | -1,226,362.68 | 0 |
| Total | -1,226,362.68 | 0 |
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 from disposal of fixed assets (loss is stated with “-”) | -73,807.46 | -200,140.17 |
74. Non-operating income
In CNY
| Items | Amount incurred in the | Amount incurred in the | Amount counted to the |
| reporting period | previous period | current non-operating gain and loss | |
| Compensation | 3,475.00 | 0 | 3,475.00 |
| Disposal of account payable impossible to be paid | 124,191.89 | 877,410.33 | 124,191.89 |
| Others | 144,301.38 | 514,449.09 | 144,301.38 |
| Total | 271,968.27 | 1,391,859.42 | 271,968.27 |
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 | 100,000.00 | 0 | 100,000.00 |
| Others | 759,659.12 | 118,646.41 | 759,659.12 |
| Total | 859,659.12 | 118,646.41 | 859,659.12 |
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 | 61,394,301.15 | 26,235,776.22 |
| Deferred income tax expense | 7,155,100.91 | -12,327,864.33 |
| Total | 68,549,402.06 | 13,907,911.89 |
(2) Process of adjustment of accounting profit and income tax expense
In CNY
| Items | Amount incurred in the reporting period |
| Total profit | 302,114,185.89 |
| Income tax expense calculated based on the statutory/ applicable tax rate | 75,528,546.47 |
| Influence of different tax rates applicable to subsidiaries | -4,424,414.99 |
| Influence of adjustment of the income tax in the previous period | 447,731.08 |
| Profit and loss of the joint ventures and associated calculated based on the equity method | -407,332.06 |
| Influence of the non-offsetable costs, expenses and loss | 1,525,570.31 |
| The effect of using deductible losses of deferred income tax assets that have not been recognized in the previous period | -1,330,766.11 |
| Influence from the addition of the R & D expenses upon deduction of tax payment (to be stated with “-“) | -2,789,932.65 |
| 76. Income tax expense | 68,549,402.06 |
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 |
| Commodity promotion fee | 6,760,506.27 | 5,210,311.30 |
| Government subsidies | 10,827,370.77 | 10,154,015.67 |
| Cash deposit | 5,023,790.54 | 7,315,744.37 |
| Interest income | 2,125,691.94 | 2,482,721.82 |
| Reserve | 2,279,469.79 | 1,303,065.89 |
| Others | 11,749,975.61 | 4,821,570.68 |
| Total | 38,766,804.92 | 31,287,429.73 |
(2) Other operation activities related cash receipts
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Expenses during cash payment | 220,464,795.10 | 152,218,961.04 |
| Margin | 13,205,523.62 | 5,539,017.16 |
| Petty cash | 10,265,576.39 | 7,966,971.55 |
| Others | 143,644.97 | 201,274.46 |
| Total | 244,079,540.08 | 165,926,224.21 |
Note to other cash received in connection with operating activitiesInapplicable
(2) Other cash paid in connection with operation activities
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Market promotion | 48,479,393.47 | 30,650,504.85 |
| Rent | 62,446,320.30 | 56,722,191.19 |
| Shopping mall fees | 29,488,720.99 | 12,740,511.78 |
| Advertisement fee | 7,280,642.93 | 6,000,177.41 |
| Packing expenses | 789,630.85 | 3,491,359.91 |
| Business travel expenses | 5,267,489.46 | 2,955,291.84 |
| Water and electricity fees | 11,249,169.79 | 5,422,039.82 |
| R & D expenses | 5,121,243.29 | 3,588,855.18 |
| Office expenses | 4,886,848.76 | 5,169,903.19 |
| Freight | 4,918,962.22 | 5,917,126.15 |
| Exhibition fee | 223,410.62 | 45,727.87 |
| Property management fee | 12,275,513.14 | 9,544,159.17 |
| Business entertainment | 2,602,399.87 | 1,310,428.39 |
| Service fee to intermediary agencies | 2,570,315.73 | 2,671,307.29 |
| Others | 46,479,478.66 | 19,696,640.17 |
| Total | 244,079,540.08 | 165,926,224.21 |
Note to other cash paid in connection with operating activities:
Inapplicable
(3) Other investment activities related cash receipts
Inapplicable
(4) Other investment activities related cash payments
Inapplicable
(5) Other fund-raising activities related cash receipts
Inapplicable
(6) Other fund-raising activities related cash payments
In CNY
| Items | Amount incurred in the reporting period | Amount incurred in the previous period |
| Repurchase of B-shares | 6,106,577.91 | 26,825,873.78 |
| Lease liabilities | 47,957,294.77 | 0 |
| Total | 54,063,872.68 | 26,825,873.78 |
Note to other cash paid in connection with financing activities:
Inapplicable
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 | 233,564,783.83 | 77,738,906.30 |
| Plus: Provision for impairment of assets | 3,261,599.63 | 2,467,361.35 |
| Depreciation of fixed assets, depletion of oil and gas asset, depreciation of productive biological asset | 21,116,190.64 | 21,037,291.58 |
| Depreciation of use right assets | 48,686,092.09 | 0 |
| Amortization of intangible assets | 3,442,875.49 | 3,829,094.00 |
| Amortization of long term expenses to be apportioned | 46,436,064.35 | 50,739,190.23 |
| Loss (income is stated in “-”) from disposal of fixed assets, intangible assets and other long term assets | 73,807.46 | 200,140.17 |
| Loss on scrapping of fixed assets (profit is stated with “-”) | ||
| Loss from change of fair value (income is stated with “-”) | ||
| Financial expenses (income is stated with “-”) | 14,769,009.19 | 13,485,670.67 |
| Investment loss (income is stated with “-”) | -2,000,000.00 | -2,160,911.92 |
| Decrease of the deferred income tax asset (increase is stated with “_”) | 6,385,102.30 | -12,327,864.33 |
| Increase of deferred income tax liability (decrease is stated with “-”) | 769,998.61 | -63,520.78 |
| Decrease of inventories (Increase is stated with “-”) | -83,529,356.74 | 10,360,528.74 |
| Decrease of operative items receivable (Increase is stated with “-”) | -31,249,035.35 | -57,935,867.20 |
| Increase of operative items payable (Decrease is stated with “-”) | -56,572,567.57 | -3,724,783.54 |
| Others | ||
| Net cash flows arising from operating activities | 205,154,563.93 | 103,645,235.27 |
| 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 | 234,840,156.69 | 344,906,641.68 |
| Less: Opening balance of cash | 353,057,285.71 | 315,093,565.09 |
| Plus: Ending balance of cash equivalent | ||
| Less: Opening balance of cash |
| equivalent | ||
| Net increase of cash and cash equivalents | -118,217,129.02 | 29,813,076.59 |
(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 | 234,840,156.69 | 353,057,285.71 |
| Including: Cash in stock | 119,448.51 | 183,759.72 |
| Bank deposit available for payment at any time | 214,931,355.40 | 346,055,209.29 |
| Other monetary fund used for payment at any time | 19,789,352.78 | 6,818,316.70 |
| II. Cash equivalent | 0.00 | 0.00 |
| III. Ending balance of cash and cash equivalents | 234,840,156.69 | 353,057,285.71 |
| Including: cash and cash equivalents restricted for use from the parent company or other subsidiaries of the Group | 5,061,912.69 | 3,412,028.94 |
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 | 6,662,928.59 | Notes discounted |
| Fixed asset | 12,210,771.28 | Security guarantee |
| Total | 18,873,699.87 | -- |
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 | 2,763,496.16 | 6.4601 | 17,852,461.54 |
| Euro | 218,828.11 | 7.6862 | 1,681,956.62 |
| HKD | 23,371,434.27 | 0.83208 | 19,446,903.03 |
| SF | 676,581.00 | 7.0134 | 4,745,133.19 |
| Accounts receivable | -- | -- | |
| Including: USD | 523,915.78 | 6.4601 | 3,384,548.33 |
| Euro | 93,237.95 | 7.6862 | 716,645.53 |
| HKD | 2,739,341.11 | 0.8321 | 2,279,350.95 |
| SF | 14,180.64 | 7.0134 | 99,454.48 |
| GBP | 15,566.13 | 8.9410 | 139,176.77 |
| Long-term Loan | -- | -- | |
| Including: USD | |||
| Euro | |||
| HKD | |||
| SF | 527,889.47 | 7.0134 | 3,702,300.00 |
| 36. Accounts payable | |||
| Including: USD | 1,019.00 | 6.4601 | 6,582.84 |
| HKD | 5,665,116.10 | 0.8321 | 4,713,829.80 |
| SF | 212,526.65 | 7.0134 | 1,490,534.39 |
| JP Yen | 15,075,000.00 | 0.0584 | 880,802.10 |
| Other receivables | |||
| HKD | 124,383.64 | 0.8321 | 103,497.14 |
| Other payables | |||
| Including: USD | 17,787.95 | 6.4601 | 114,911.94 |
| Euro | 152.84 | 7.6862 | 1,174.76 |
| HKD | 16,832.91 | 0.8321 | 14,006.33 |
| SF | 30,683.00 | 7.0134 | 215,192.13 |
| Non-current liabilities due within a year | |||
| SF | 50,275.19 | 7.0134 | 352,600.00 |
(2) Note to overseas operating entities, including important overseas operating entities, whichshould be disclosed about its principal business place, function currency for bookkeeping andbasis for the choice. In case of 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
| Categories | Amount | Items presented | Amount counted to the current |
| profit and loss | |||
| Fund of the Talent Qualification Improvement Engineering Project of the Human Resource Bureau of Nanshan District, Shenzhen | 108,000.00 | Other income | 108,000.00 |
| Subsidy of the work-for-training granted by Human Resource Bureau of Nanshan District, Shenzhen | 355,000.00 | Other income | 355,000.00 |
| Enterprise R & D investment supporting Plan fund (A) granted by Science & Technology Innovation Bureau of Nanshan District, Shenzhen | 466,100.00 | Other income | 466,100.00 |
| Financial support fund of the 2nd Industry Design Development Supporting Plan 2021 granted by Shenzhen Industrial and Information Technology Bureau | 50,000.00 | Other income | 50,000.00 |
| Fund for the projects to be financed in the Patent Support Plan of Science & Technology Innovation Bureau of Nanshan District, Shenzhen | 5,500.00 | Other income | 5,500.00 |
| 2020 patent financial support granted by Shenzhen Agency of China National Intellectual Property Administration | 10,000.00 | Other income | 10,000.00 |
| Special financial support of 2020 Shenzhen Standard Field (B) from Market Supervision Administration of Shenzhen Municipality | 582,152.00 | Other income | 582,152.00 |
| Steady growth financial support of the second half year of 2020 (C) from Nanshan District Bureau of Finance, Shenzhen | 4,447,800.00 | Other income | 4,447,800.00 |
| Sale and retail growth promotion award 2021 (D) of Shenzhen Municipal Bureau of Finance | 3,500,000.00 | Other income | 3,500,000.00 |
| Allowance Wentaorun Foreign Trade Quality Growth Support Project | 35,439.00 | Other income | 35,439.00 |
| Financial support of enterprise social security subsidy (E) | 609,576.69 | Deferred income | 538,628.08 |
| Subsidy for stabilizing employment | 150.04 | Other income | 150.04 |
| Training allowance for enterprises in difficulty | 75,600.00 | Other income | 75,600.00 |
| Enterprise R & D financial support of year 2016 (municipal level) (F) received | 460,000.00 | Other income | 460,000.00 |
| 2020 financial support of Shenzhen | 254,553.00 | Other income | 254,553.00 |
| Standards Field received | |||
| Employment allowance for employing impoverished laborers under data tracking by enterprises in January 2021 | 25,000.00 | Other income | 25,000.00 |
| Special financial support of technology innovation multiplication 2020 from Shenzhen Industry and Information Technology Bureau | 70,000.00 | Other income | 70,000.00 |
| Allowance for the Endowment and Medical Insurance for the Disabled in the Second Half of 2020 from Guangming District | 1,993.08 | Other income | 1,993.08 |
| Financial support with loan with discounted interest to medium and small enterprises against COVID-19 in Shenzhen | 4,392.64 | Other income | 4,392.64 |
| Financial support for domestic and foreign invention patent in 2020 | 2,500.00 | Other income | 2,500.00 |
| 2020 financial support with loan with discounted interest during the pandemic in Guangming District | 9,095.00 | Other income | 9,095.00 |
| 2019 R & D financial support from the Technology Innovation Commission of Shenzhen Municipality | 296,000.00 | Other income | 296,000.00 |
| Electricity subsidies | 450,562.00 | Administrative expenses | 450,562.00 |
| Others | 365,031.44 | Other income | 365,031.44 |
(A) It is a government subsidy obtained in accordance with the Notice of the General Office of Nanshan District People'sGovernment Shenzhen on Printing and Issuing the “Measures for the Management of Special Fund for the Development ofIndependent Innovation Industries in Nanshan District” (Shennan Fuban Gui [2019] No. 2).
(B) It is a government subsidy obtained according to the Notice on 2020 Special Financial Support Award of ShenzhenStandard Field promulgated by the Market Supervision Administration of Shenzhen Municipality
(C）It is a government subsidy obtained according to the Official Presentation of the List of Enterprises Qualified forEnjoying the Financial Support to be Deliberated at 2021 1st Session of the Special Fund for Independent InnovationIndustry Development of Nanshan District.
(D) It is a government subsidy obtained according to the Notice of Shenzhen Municipal Bureau of Commerce on the AwardPlan for Promoting Consumption Upgrading Support Plan - Retail Volume (Turnover) Growth Reward Project in Year 2021.
(E) It is a government subsidy obtained according to the Notice on Printing and Issuing the Measures for Verification of theSubsidy for Stabilizing the Employment by Enterprises in Temporary Difficulty in Chengdu promulgated by ten governmentdepartments, including the Human Resources and Social Security Bureau of Chengdu Municipality (CHENG REN SHE FA
(2019) No. 15).
(F) It is a government subsidy obtained according to the Notice of the Science & Technology Innovation Commission ofShenzhen Municipality Advance Collection of the Application Materials, Fund Allocation Materials and Letter of Good FaithCommitment of Scientific Research for the 1st Financial Support Fund in the Enterprise R & D Financial Support Plan inYear 2020.
(2) Refunding of the government subsidies
Inapplicable
85. Others
Inapplicable
VIII. Change in consolidation scope
1. Business combination not under the 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-measurementbased on the fair valueDoes 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 andliabilities of the purchasee which cannot be reasonably identified as at the date of purchase or atthe end of the very period of consolidationInapplicable
(6) Other notes
Inapplicable
2. Business combination under the 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 consolidation
Inapplicable
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?No
Does 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
Note to the change in the scope of consolidation caused by other reasons (such as newly established subsidiaries,liquidation subsidiaries, etc.) and related conditions:
1. The Company's 23rd Session of the Ninth Board of Directors held on December 4, 2020, reviewed and approved the"Proposal on the Establishment of a Wholly Owned Subsidiary" and decided to invest in the establishment of awholly-owned subsidiary - Shenzhen Xunhang Precision Technology Co., Ltd., with its own capital amounting to CNY10million. For the detail, please refer to the “Announcement on Investment and Establishment of a Wholly Owned Subsidiary2020-072” disclosed in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com. As of the end of thereporting period, the Company completed the industrial and commercial establishment registration procedures andreceived the business license issued by the Shenzhen Municipal Market Supervision Administration.
2. The Company's 29th Session of the Ninth Board of Directors held on May 21, 2021, reviewed and approved the"Proposal on the Establishment of a Wholly Owned Subsidiary" and decided to invest in the establishment of awholly-owned subsidiary - HARMONY World Watch Center (Hainan) Limited, with its own capital amounting to CNY10million. For the detail, please refer to the “Announcement on Investment and Establishment of a Wholly Owned Subsidiary2021-049” disclosed in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com. As of the end of thereporting period, the Company completed the industrial and commercial establishment registration procedures andreceived the business license issued by the Hainan Provincial Market Supervision Administration.
3. On March 5, 2021, the Company received the Announcement on Cancellation of 68-Station Co. issued by the HongKong Companies Registry, and 68-Station Co. completed the procedures of its cancellation.
6. Others
Inapplicable
IX. 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 | |||||
| Harmony | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Precision Technology Co. | Shenzhen | Shenzhen | Manufacture | 99.00% | 1.00% | Establishment or investment |
| the Hong Kong Co. | Hong Kong | Hong Kong | Commerce | 100.00% | Establishment or investment | |
| 68-Station Limited | Hong Kong | Hong Kong | Commerce | 60.00% | Establishment or investment | |
| Harmony E-Commerce Limited | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Science & Technology Development Co. | Shenzhen | Shenzhen | Manufacture | 100.00% | Establishment or investment | |
| SHIYUEHUI | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Emile Choureit (Shenzhen) | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| The Sales Co. | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| Hengdarui | Shenyang | Shenyang | Commerce | 100.00% | Business combination under the common control | |
| Switzerland Company | Switzerland | Switzerland | Commerce | 100.00% | Business combination not under the common control | |
| Xunhang Co. | Shenzhen | Shenzhen | Commerce | 100.00% | Establishment or investment | |
| HARMONY (Hainan) Co. | Hainan | Hainan | 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 enterprisegroup’s liabilitiesInapplicable
(5) Financial support or other support provided to the structured entities incorporated in thescope of consolidated financial statementsInapplicable
2. Transaction with a subsidiary with the share of the owner’s equity changed but still undercontrol
(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 parentcompanyInapplicable
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 | 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 not
having 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 reporting period | |
| Current assets | 142,602,075.39 | 142,137,359.85 |
| Non-current assets | 12,782,341.54 | 13,783,021.02 |
| Total assets | 155,384,416.93 | 155,920,380.87 |
| Current liabilities | 28,946,536.33 | 35,999,813.24 |
| Total liabilities | 28,946,536.33 | 35,999,813.20 |
| Equity attributable to the parent company’s shareholders | 126,437,880.60 | 119,920,567.63 |
| Share of net assets calculated according to the shareholding proportion | 31,609,470.15 | 29,980,141.91 |
| Book value of the equity investment in associates | 53,029,994.16 | 51,400,665.92 |
| Revenue | 71,770,916.04 | 54,674,292.84 |
| Net profit | 6,517,312.97 | 8,643,647.69 |
| Total comprehensive income | 6,517,312.97 | 8,643,647.69 |
(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 intransferring funds to the CompanyInapplicable
(6) Excessive loss incurred to a joint venture or an associate
Inapplicable
(7) Unrecognized commitment in connection with investment in a joint venture
Inapplicable
(8) Contingent liabilities in connection with investment in joint ventures or associates
Inapplicable
4. Important joint operation
Inapplicable
5. Equity in the structurized entities not incorporated in the consolidated financial statementsInapplicable
6. Others
Inapplicable
X. Financial instruments and risk managementThe main financial instruments of the Group include monetary funds, notes receivable, accounts receivable, otherreceivables, investment in other equity instruments, accounts payable, other payables, short-term borrowings, non-currentliabilities due within one year, and long-term loan. The details of various financial instruments has been disclosed in therelevant notes. The risks involved in these financial instruments and the Group’s risk control policies aiming at reducingthese risks are stated as follows. The Group’s management conducts management and monitoring of these risk exposuresso as to ensure risks to be controlled within a specific limitation.
1. Risk management goals and policies
The goal of the Group's risk management is to achieve an appropriate balance between risks and returns, and strive toreduce the adverse effects of financial risks on the Group's financial performance. Based on this risk management objective,the Group has formulated a risk management policy to identify and analyze the risks faced by the Group, set an appropriateacceptable level of risk and design corresponding internal control procedures to monitor the Group's risk level. The Groupregularly reviewed these risk management policies and related internal control systems to adapt to market conditions orchanges in the Group's operating activities. The Group's internal audit department also regularly or randomly checkedwhether the implementation of the internal control system complied with the risk management policy.
The main risks caused by the Group's financial instruments were credit risk, liquidity risk, and market risk (includingexchange rate risk, interest rate risk and commodity price risk).
The Board of Directors is responsible for planning and establishing the Group's risk management structure, formulating theGroup's risk management policies and related guidelines, and supervising the implementation of risk managementmeasures. The Group has formulated risk management policies to identify and analyze the risks faced by the Group. Theserisk management policies clearly stipulate specific risks, covering many aspects such as market risk, credit risk and liquidityrisk management. The Group regularly evaluates the market environment and changes in the Group's operating activitiesto determine whether to update the risk management policy and system. The Group's risk management is carried out by theRisk Management Committee in accordance with the policies approved by the Board of Directors. The Risk ManagementCommittee works closely with other business departments of the Group to identify, evaluate and avoid related risks. Theinternal audit department of the Group conducts regular audits on risk management controls and procedures, and reportsthe audit results to the audit committee of the Group.
The Group diversifies the risks of financial instruments through appropriate diversified investment and business portfolios,and formulates corresponding risk management policies to reduce the risks concentrated in a single industry, a specificregion or a specific counterparty.
(1) Credit risk
Credit risk refers to the risk of financial losses incurred to the Group due to the failure of the counterparty to perform thecontractual obligations.
The Group manages credit risk according to portfolio classification. Credit risk mainly arises from bank deposits, notesreceivable, accounts receivable, and other receivables.
The Group's bank deposits are mainly deposited in financial institutions with good reputation and high credit ratings. TheGroup expects that there is no significant credit risk for bank deposits.
For notes receivable, accounts receivable and other receivables, the Group has concluded relevant policies to control creditrisk exposure. The Group assesses the credit qualifications of customers based on their financial status, credit records andother factors such as current market conditions and sets corresponding credit periods. The Group regularly monitorscustomer credit records. For customers with poor credit records, the Group uses written reminders, shortens credit periodsor cancels credit periods, etc., to ensure that the overall credit risk of the Group is within the controllable range.
The debtors of the Group's accounts receivable are customers in different sectors and regions. The Group continues toimplement credit assessments on the financial status of accounts receivable and purchase credit guarantee insurancewhen appropriate.
The maximum credit risk exposure of the Group is the book value of each financial asset in the balance sheet. The Groupalso faces credit risk due to the provision of financial guarantees.
Among the accounts receivable of the Group, the accounts receivable owed by the top five customers accounted for 22.28%(2020: 31.28%) of the total accounts receivable of the Group; among the other receivables of the Group, the amount owedby the top five companies accounted for 17.99% of the total other receivables of the Group (2020: 34.96%).
(2) Liquidity risks
Liquidity risk refers to the risk that the Group encounters a shortage of funds when fulfilling its obligations to implementsettlements with cash or other financial assets.
When managing liquidity risks, the member enterprises of the Group are responsible for their cash flow forecasts. TheGroup's financial center monitors the long- and short-term fund needs at the Group level based on the cash flow forecastresults of each member enterprise. The Group coordinates and dispatches surplus funds within the Group through the fundpool plan established in large banking financial institutions, and ensures that each member enterprise has sufficient cashreserves to fulfill payment obligations due to settlement. In addition, the Group has entered into a financing line creditagreement with major business banks to provide support for the Group to fulfill its obligations related to commercial papers.
The Group raises working capital through the funds generated from operating business and bank borrowings. As at June30,2021, the amount of the bank loan not yet used by the Group was CNY 1,188.2539 million (December 31,2020: CNY1,104.4306 million).
At the end of the reporting period, the financial liabilities held by the Group are analyzed based on the maturity period of the
undiscounted remaining contractual cash flows as follows (in CNY 10,000):
| Items | 6/30/2021 |
| Within 1 year | 1 to 2 years | 2 to 3 years | Over 3 years | Total | |
| Financial liabilities: | |||||
| Short term loans | 46,723.58 | - | - | - | 46,723.58 |
| Accounts payable | 24,265.87 | - | - | - | 24,265.87 |
| Other payables | 21,988.61 | - | 106.94 | 414.10 | 22,509.64 |
| Non-current liabilities due within a year | 36.12 | - | - | - | 36.12 |
| Long-term Loan | 379.25 | 3.68 | - | - | 382.93 |
| Total financial liabilities | 93,393.42 | 3.68 | 106.94 | 414.10 | 93,918.14 |
At the beginning of the reporting period, the financial liabilities held by the Group are analyzed based on the maturity periodof the undiscounted remaining contractual cash flows as follows (in CNY 10,000):
| Items | 12/31/2020 | ||||
| Within 1 year | 1 to 2 years | 2 to 3 years | Over 3 years | Total |
| Financial liabilities: | |||||
| Short term loans | 55,023.98 | - | - | - | 55,023.98 |
| Notes payable | 358.14 | 358.14 | |||
| Accounts payable | 30,121.15 | - | - | - | 30,121.15 |
| Other payables | 12,693.81 | - | 163.95 | 12,857.76 | |
| Non-current liabilities due within a year | 38.11 | - | - | - | 38.11 |
| Long-term Loan | 13.33 | 419.24 | - | 432.57 | |
| Total financial liabilities | 98,248.52 | 419.24 | 163.95 | - | 98,831.71 |
The amount of financial liabilities disclosed in the above table is the undiscounted contract cash flow, and therefore may bedifferent from the book amount in the balance sheet.
(3) Market Risks
The market risk of financial instruments refers to the risk of fluctuations in the fair value or future cash flows of financialinstruments due to changes in market prices, including interest rate risk, exchange rate risk and other price risks.
Interest rate riskInterest risk is the risk that the fair value of a financial instrument or future cash flow will fluctuate because of change inmarket interest rate. Interest rate risk may originate from the recognized interest-bearing financial instruments andunrecognized financial instruments (such as certain loan commitments).
The interest rate risk of the Group mainly arises from interest-bearing debts such as short-term bank borrowings andlong-term bank borrowings. Financial liabilities with floating interest rate expose the Group to cash flow interest rate risk,and financial liabilities with fixed interest rate expose the Group to fair value interest rate risk. The Group determines the
relative proportions of fixed-rate and floating-rate contracts based on the prevailing market environment, and maintains anappropriate combination of fixed and floating-rate instruments through regular reviews and monitoring.
The Group pays close attention to the impact of interest rate changes on the Group's interest rate risk. The Group currentlydoes not adopt an interest rate hedging policy. However, the management is responsible for monitoring interest rate risksand will consider hedging significant interest rate risks when necessary. Rise of interest rates may increase the cost of newinterest-bearing liabilities and have a significant adverse impact on the Group’s financial performance. The managementmay make timely adjustments based on the latest market conditions. These adjustments may be through interest rate swaparrangements to lower the risk of interest rates.
The interest-bearing financial instruments held by the Group are as follows (in CNY10,000):
| Items | Amount in the reporting year | Amount in the previous year |
| Financial instruments with fixed interest rate | ||
| Financial liabilities: |
| Including: short-term loan | 45,960.97 | 27,539.02 |
| Long-term Loan | 405.49 | 444.04 |
| Sub-total | 46,366.46 | 27,983.06 |
| Financial instruments with floating interest rate | ||
| Financial liabilities | ||
| Including: short-term loan | 25,000.00 | |
| Total | 46,366.46 | 52,983.06 |
For financial instruments held on the balance sheet date that expose the Group to fair value interest rate risk, the impact ofnet profit and shareholders’ equity in the above sensitivity analysis is based on the assumption that the interest ratechanges on the balance sheet date and is the impact of the new interest rate on the aforesaid financial instrument afterremeasurement is carried out. For non-derivative instruments with floating interest rates held on the balance sheet date thatexpose the Group to cash flow interest rate risk, the impact of the above-mentioned sensitivity analysis on net profit andshareholders’ equity is the impact of the change of the above-mentioned interest rate on the annual estimated interestexpense or income. The analysis of the previous year was based on the same assumptions and methods.
Exchange rate riskExchange rate risk is the risk that the fair value of a financial instrument or future cash flow will fluctuate because of changein market exchange rate. Exchange rate risk can be derived from financial instruments denominated in foreign currenciesother than the functional currency.
Exchange rate risk is mainly due to the impact of fluctuations in foreign exchange rates on the Group's financial status andcash flows. Except for the subsidiary established in Hong Kong holding Hong Kong dollars as the settlement currency, anda sub-subsidiary established in Switzerland holding assets with Swiss Francs as the settlement currency, other majorbusiness activities of the Group are mainly settled in Renminbi. However, the Group's confirmed foreign currency assetsand liabilities and future foreign currency transactions still expose to foreign exchange risks.
As of June 30, 2021, the amounts of foreign currency financial assets and foreign currency financial liabilities held by theGroup converted into Renminbi are listed as follows (in CNY 10,000)：
| Items | Foreign currency | Foreign currency |
| liabilities | assets | |||
| Amount at the end of the reporting period | Amount at the beginning of the reporting period | Amount at the end of the reporting period | Amount at the beginning of the reporting period |
| USD | 12.15 | - | 2,123.70 | 2,366.05 |
| HKD | 472.78 | 179.63 | 2,182.98 | 1,774.03 |
| SF | 576.06 | 1,005.75 | 484.46 | 1,974.28 |
| Euro | 0.12 | - | 239.86 | 164.13 |
| JP Yen | 88.08 | - | ||
| GBP | - | 13.92 | ||
| Total | 1,149.19 | 1,185.38 | 5,044.91 | 6,278.49 |
The Group pays close attention to the impact of exchange rate changes on the Group's exchange rate risk. The Group hasnot taken any measures to avoid foreign exchange risks at present. However, the management is responsible formonitoring exchange rate risks and will consider hedging significant exchange rate risks when necessary.
As of June 30, 2021, for monetary funds, bank borrowings, and other financial instruments of the Group denominated inforeign currencies, it is assumed that if Renminbi appreciates or depreciates against foreign currencies (mainly against USDollar, Hong Kong Dollar and Swiss Franc) by 5% with other factors remaining unchanged, it will result in an increase ordecrease in the Group’s shareholders’ equity and net profit by approximately CNY 1,947,900 (December 31, 2020:
approximately CNY 2,546,600).
2.Capital management
The goal of the Group’s capital management policy is to ensure the Group able to continue to operate, thereby providingreturns to the shareholders and benefiting other stakeholders, while maintaining the best capital structure to reduce thecost of capital.
In order to maintain or adjust the capital structure, the Group may adjust financing method, adjust the amount of dividendspaid to shareholders, return capital to shareholders, issue new shares and other equity instruments, or sell assets to reducedebts.
The Group monitors the capital structure based on the asset-liability ratio (that is, total liabilities divided by total assets). Asof June 30, 2021, the Group's asset-liability ratio was 30.74% (December 31, 2020: 30.33%).
XI. Disclosure of Fair Value
1. Fair value at the end of the reporting period of the assets and liabilities measured based on thefair valueInapplicable
2. Basis for determining the market price of the items measured based on the continuous andnon-continuous first level fair valueInapplicable
3. Items measured based on the continuous or uncontinuous 2nd level fair value, valuationtechnique as used, nature of important parameters and quantitative informationInapplicable
4. Items measured based on the continuous or uncontinuous 3rd level fair value, valuationtechnique as used, nature of important parameters and quantitative informationInapplicable
5. Items measured based on the continuous 3rd level fair value, sensitivity analysis on adjustedinformation and unobservable parameters between the book value at beginning and end of theperiodInapplicable
6. In case items measured based on fair value are converted between different levels incurred inthe current period, state the cause of conversion and determine conversion time point
Inapplicable
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 value
Inapplicable
9. Others
Inapplicable
XII. 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 in industries, domestic trade, material supply and distribution | 116,616.20 | 37.42% | 37.42% |
Note to the parent company:
AVIC IHL is a subsidiary 100% indirectly held by AVIC International Holding Corporation (AVIC International). AviationIndustry Corporation of China, Ltd. (AVIC) directly holds 91.13% of shares in AVIC International (with the eventualbeneficiary equity by 91.897%), therefore, the eventual controller of the Company is AVIC.
The eventual controller of the Company is AVIC.
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 Controlling Shareholder |
| Shenzhen AVIC Building Technology Co., Ltd. (AVIC Building) | An associate of the Controlling Shareholder |
| Shenzhen AVIC Nanguang Elevator Co., Ltd. (AVIC Nanguang ) | An associate of the Controlling Shareholder |
| China Merchants Property Operation & Service Co., Ltd. (China Merchants Property) | An associate of the Controlling Shareholder |
| Shenzhen AVIC Guanlan Real Estate Development Co., Ltd. (AVIC Guanlan Real Estate) | An associate of the Controlling Shareholder |
| China Merchants 9 Square Commercial Management (Shenzhen) Ltd. (9 Square Assets) | An associate of the Controlling Shareholder |
| Shenzhen AVIC City Investment Co., Ltd.(AVIC City Investment) | An associate of the Controlling Shareholder |
| Ganzhou CATIC 9 Square Commerce Co., Ltd. (Ganzhou 9 Square) | An associate of the Controlling Shareholder |
| AVIC City Property (Kunshan) Co., Ltd. (AVIC City Property (Kunshan) ) | An associate of the Controlling Shareholder |
| Shenzhen AVIC Security Service Co., Ltd. (AVIC Security Service) | An associate of the Controlling Shareholder |
| Jiujiang 9 Square Commerce Management Co., Ltd. (9 Square Commerce Management) | An associate of the Controlling Shareholder |
| Shenzhen AVIC Real Estate Development Co., Ltd. (AVIC Real Estate) | An associate of the Controlling Shareholder |
| Shaanxi Baocheng Aviation Instruments Co., Ltd. (Shaanxi Baocheng) | 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 |
| AVIC Lutong Company Limited. (AVIC Lutong) | Controlled by the same party |
| AVIC International Aero-Development Corporation (AVIC Aero-Development) | Controlled by the same party |
| AVIC Huadong Photoelectric Co., Ltd. (Huadong Photoelectric) | Controlled by the same party |
| AVIC Flight Automatic Control Research Institute (FACRI) | Controlled by the same party |
| Nanjing Engineering Institute of Aircraft Systems (NEIAS) | Controlled by the same party |
| AVIC Industry Supply and Marketing Co., Ltd. (AVIC Industry Supply & Marketing) | Controlled by the same party |
| AVIC Hubei Steel Special Steel Sales Co., Ltd. (AVIC Hubei Steel) | Controlled by the same party |
| AVIC (Chengdu) UAV System Co., Ltd. (AVIC UAV) | Controlled by the same party |
| Harbin Hafei Aviation Industry Co., Ltd.（Hafei Aviation） | Controlled by the same party |
| Shenzhen AVIC Grand Skylight Hotel Management Co., Ltd. (Grand | Controlled by the same party |
| Skylight Hotel Management) | |
| Shenzhen AVIC City Commerce Development Co., Ltd. (AVIC City Commerce Development) | Controlled by the same party |
| Shenzhen AVIC Center Commerce Development Co., Ltd. (AVIC Center Commerce Development) | Controlled by the same party |
| Tianma Micro-electronics Co., Ltd. (SHEN TIANMA) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities) | Controlled by the same party |
| Xi’an Skytel Hotel Co., Ltd. (Skytel Hotel) | Controlled by the same party |
| Shenzhen AVIC Training Center (AVIC Training Center) | Controlled by the same party |
| AVIC Finance Co., Ltd. (AVIC Finance ) | Controlled by the same party |
| Shenzhen AVIC Grand Skylight Hotel Co., Ltd. (Grand Skylight Hotel) | Controlled by the same party |
| Gongqingcheng CATIC Cultural Investment Co., Ltd. (Gongqingcheng CATIC Cultural Investment) | Controlled by the same party |
| AVIC International Simulation Technology Service Co., Ltd. (AVIC International Simulation) | Controlled by the same party |
| AVIC Jonhon Optronic Technology Co.,Ltd. (AVIC Optronic) | Controlled by the same party |
| AVIC General Aircraft Co., Ltd. Zhuhai Composite Material Technology Branch (AVIC General Aircraft Zhuhai Branch) | 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 |
| Director, Manager, Chief Financial Officer and Secretary of the Board of the Company | A senior executive |
5. Related transactions
(1) Related transactions of purchase and sale of commodities and supply and acceptance of laborservicesStatement of purchase of commodities and acceptance of labor services
In CNY
| Related parties | 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 | 5,394,418.03 | 18,000,000.00 | No | 5,938,619.97 |
| Rainbow Ltd. | Shopping mall fees/purchase of goods | 2,662,052.00 | 10,000,000.00 | No | 2,389,264.94 |
| AVIC Training Center | Training fee | -2,298.55 | 500,000.00 | No | |
| Ganzhou 9 Square | Shopping mall fees | 89,105.10 | 2,000,000.00 | No | 92,549.84 |
| 9 Square Commerce Management Co., Ltd. | Shopping mall fees | 42,485.78 | 43,147.68 | ||
| SHEN TIANMA | Procurement of | 31,309.90 |
| goods | |||||
| AVIC Building Co. | Refurbishment | 32,924.52 | 32,924.52 | ||
| AVIC City Commerce Development | Shopping mall fees | 19,346.13 | |||
| AVIC Nanguang | Elevator maintenance | 122,830.20 | 122,830.20 |
Statement of sales of goods/supply of services
In CNY
| Related parties | Description of Related Transactions | Amount incurred in the reporting period | Amount incurred in the previous period |
| Rainbow Ltd. | Products and labor services | 42,139,011.64 | 29,669,833.80 |
| Ganzhou 9 Square | Products and labor services | 8,748.67 | |
| Shennan Circuit | Sales of materials and supply of services | 1,356,891.42 | 3,086,589.15 |
| Gongqingcheng CATIC Cultural Investment | Sales of products | 307,621.86 | 182,271.24 |
| AVIC International | Sales of products | 8,610.61 | 4,424.78 |
| AVIC City Commerce Development | Sales of products | 94,585.88 | |
| Shanghai Watch Industry | Sales of products | 1,812,292.04 | |
| Huadong Photoelectric | Sales of products | 247,787.61 | |
| AVIC Supply & Marketing | Sales of products | 7,079.65 | |
| AVIC Aviation Development | Sales of products | 140,884.97 | |
| AVIC Lutong | Sales of products | 14,123.89 | |
| AVIC Nanjing Electro-Mechanical Research Center | Sales of products | 176,991.15 | |
| FACRI | Sales of products | 7,061.95 | |
| AVIC International Simulation | Sales of products | 60,530.97 | |
| AVIC Optronic | Sales of products | 346,870.70 | |
| AVIC General Aircraft Zhuhai Branch | Sales of products | 17,699.13 | |
| AVIC IHL (Zhuhai) | Sales of products | 10,592.92 | |
| CATIC | Sales of products | 105,929.20 |
Note to the related transactions of purchase and sale of commodities and supply and acceptance of labor services
(1)The Group adopts market price for its pricing policy for related transactions;
(2)The above transaction volume does not include 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 | 5,721,901.64 | 6,196,298.09 |
| CMPO | Housing | 972,906.73 | |
| AVIC City Investment | Housing | 139,986.58 | |
| AVIC Securities | Housing | 681,600.00 | 657,257.16 |
| Rainbow Ltd. | Housing | 548,843.48 | 696,114.82 |
| 9 Square Assets | Housing | 1,042,900.03 | |
| CATIC Public Security Service Co. | Housing | 399,724.38 | 502,635.07 |
| Guanlan Real Estate | Housing | 69,993.29 | |
| AVIC Real Estate | Housing | 140,569.86 |
The Company as lessee:
In CNY
| Names of lessees | Categories of leasehold properties | Rental fee recognized in the current period | Rental fee recognized in the previous period |
| Ganzhou 9 Square | Housing | 475,674.30 | 449,741.52 |
| AVIC City Property (Kunshan) | Housing | 68,571.42 | |
| 9 Square Commerce Management Co., Ltd. | Housing | 290,728.10 | 192,860.44 |
| AVIC City Commerce Development | Housing | 68,807.29 |
Note to the related lease
(1)The Group adopts market price for its pricing policy for related transactions;
(2)The above transaction volume does not include tax amount.
(4) Related guarantee
Inapplicable
(5) Borrowings and lendings among related parties
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 CNY155,266,966.15, of which the deposit interest received during the year amounted to CNY 244,618.36.
6. Accounts receivable from and payable to related parties
(1) Receivables
In CNY
| Project name | Related parties | Ending balance | Opening balance | ||
| Book balance | Bad debt reserve | Book balance | Bad debt reserve | ||
| Notes receivable: | |||||
| Shennan Circuit | 973,731.59 | 5,083,025.01 | |||
| Shaanxi Baocheng | 50,000.00 | 2,500.00 | |||
| Accounts receivable: | |||||
| Rainbow Ltd. | 7,097,155.30 | 153,922.94 | 9,489,446.66 | 285,632.34 | |
| Shennan Circuit | 480,325.88 | 24,016.30 | 1,370,425.31 | 41,249.80 | |
| Ganzhou 9 Square | 3,500.00 | 175.00 | |||
| Gongqingcheng CATIC Cultural Investment | 52,299.70 | 2,614.99 | 58,834.76 | ||
| AVIC Property | 183,809.37 | 12,541.06 | 40,947.74 | ||
| HAFEI Aviation | 20,130.00 | 605.91 | |||
| CATIC Public Security Service Co. | 0.27 | 0.01 | |||
| AVIC Optronic | 391,963.89 | 19,598.19 | |||
| AVIC General Aircraft Zhuhai Branch | 20,000.00 | 1,000.00 | |||
| Other receivables | |||||
| Rainbow Ltd. | 1,010,955.00 | 50,547.75 | 1,064,073.00 | 45,648.73 | |
| Ganzhou 9 Square | 192,064.00 | 9,603.20 | 189,432.77 | 8,126.67 | |
| AVIC City Property (Kunshan) | 56,000.00 | 2,800.00 | 40,000.00 | 1,716.00 | |
| Gongqingcheng CATIC Cultural Investment | 7,462.00 | 320.12 | |||
| 9 Square Commerce Management Co., Ltd. | 50,000.00 | 2,500.00 | 50,000.00 | 2,145.00 | |
| AVIC IHL | 11,101.80 | 476.27 | |||
| AVIC Training Center | 2,464.00 | 74.17 | |||
(2) Payables
In CNY
| Project name | Related parties | Ending book balance | Opening book balance |
| Other payables: | AVIC Property | 2,298,674.20 | 1,717,018.14 |
| CMPO | 442,407.92 | ||
| AVIC City Investment | 309,732.00 | ||
| AVIC Securities | 238,560.00 | 238,560.00 | |
| AVIC Building Co. | 31,270.67 | 47,732.93 | |
| Rainbow Ltd. | 144,651.82 | 257,490.98 | |
| AVIC Real Estate | 51,014.88 | ||
| Guanlan Real Estate | 25,401.60 | ||
| CATIC Public Security Service Co. | 226,603.44 | 226,603.44 | |
| AVIC Nanguang | 25,179.84 | ||
| Advance receipts: | Huadong Photoelectric | 10,500.00 | |
| AVIC Securities | 119,280.00 |
7. Related parties’ commitments
Inapplicable
8. Others
Inapplicable
XIII. Stock payment
1. General
In CNY
| Total amount of various equity instruments granted by the Company during the reporting period | 7,660,000.00 |
| Total amount of various equity instruments of the Company exercisable during the reporting period | 1,357,641.00 |
| 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 | The exercise price of restricted stocks in the first phase: CNY 4.4/share, and the remaining unlocked shares shall be unlocked in January 2022 and January 2023 respectively; the exercise price of restricted stocks in the second phase: CNY 7.6 /share, and the remaining unlocked shares shall be unlocked in January 2023, January 2024, and January 2025, respectively. |
| 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 | Inapplicable |
2. Stock payment for equity settlement
In CNY
| Method for determining the fair value of equity instruments | Closing price of the Company's stock on the grant date |
| granted | |
| 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 | 81,004,836.53 |
| Total expenses recognized in the equity-settled share-based payment during the reporting period | 6,158,808.77 |
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 dateImplementation of irrevocable operating lease contract signed by the Company ended the balance sheet date is as follows:
| Minimum rent payment for irrevocable operational lease | Ending balance | Opening balance |
| 1st year after the balance sheet day | 82,187,671.26 | 81,612,695.21 |
| 2nd year after the balance sheet day | 40,485,074.22 | 37,104,794.98 |
| 3rd year after the balance sheet day | 17,360,276.92 | 16,579,529.38 |
| Subsequent years | 7,911,129.31 | 3,567,104.00 |
| Total | 147,944,151.72 | 138,864,123.57 |
2. Contingencies
(1) Significant contingencies existing as at the balance sheet day
As of June 30, 2021, the guarantees within the Group are as follows:(In CNY 10,000):
| Guarantees | Guarantors | Guarantees | Credit line | Used credit line | Effective date | Expiring date |
| Harmony | The Company | L/G | 30,000.00 | 10,000.00 | December 30, 2020 | December 29, 2021 |
| The Company | L/G | 20,000.00 | 5,000.00 | October 01, 2020 | December 31, 2021 |
| Science & Technology Development | The Company | Notes discounted | 3,000.00 | 486.00 | April 21, 2020 | April 19, 2021 |
| 315.00 | June 23, 2021 | June 02, 2022 |
| Co. | ||||||
| Total | 53,000.00 | 15,801.00 |
(2) Important contingencies unnecessary to be disclosed but necessary to be explainedInapplicable
3. Others
Inapplicable
XV. Events after balance sheet day
1. Significant non-adjustment events
Inapplicable
2. Profit distribution
In CNY
| Profit or dividend to be distributed | 174,220,065.73 |
| Profit or dividend announced to be distributed after review and approval | 174,220,065.73 |
3. Sales return
Inapplicable
4. Note to other matters after the balance sheet date
(1) Restricted Stock Incentive Plan
On July 1, 2021, the Company’s 2021 3rd Extraordinary General Meeting reviewed and approved the “Proposal onRepurchase and Cancellation of Part of the Restricted A-Shares Stock Incentive Plan in 2018 (Phase I)”, and decided torepurchase and cancel 33,350 A-share restricted stocks which have been held by the original incentive object who hasresigned and have been granted but have not yet lifted the restriction on sales at a repurchase price of CNY 3.60pershare; reviewed and approved the "Proposal on Repurchase and Cancellation of Part of the Restricted A-Shares StockIncentive Plan in 2018 (Phase II)", and and decided to repurchase and cancel 100,000 restricted A-share restricted stockswhich have been held by the original incentive object who has been retired and have been granted but have not lifted therestriction on sales at the repurchase price of CNY 7.20 per share. As of a trading day before the disclosure, the proceduresfor the repurchase and cancellation of the relevant A-share restricted stocks has not been completed.
On July 1, 2021, the 31st session of the Ninth Board of Directors and the 27th session of the Ninth Supervisory Committeereviewed and approved the “Proposal on Repurchase and Cancellation of Part of the Restricted A-Shares Stock IncentivePlan in 2018 (Phase I)”, according to which the Company intended to repurchase and cancel a total of 66,700 A-sharerestricted shares that were granted with the restriction not released to 1 retired former incentive objects at the repurchaseprice of CNY 3.60/share. The proposal still needs to be submitted to the Company's General Meeting for discussion andapproval.
On July 06, 2021, the Company completed the procedures of repurchase and cancellation of 40,020 A-share restrictedstocks which have been held by 2 original incentive objects who have been retired and have been granted but have notyet lifted the restriction on sales; and on the same day, the Company completed the procedures of repurchase andcancellation of 120,000 A-share restricted stocks which have been held by 3 original incentive objects who have been
retired and have been granted but have not yet lifted the restriction on sales involved in the Restricted A-Shares StockIncentive Plan in 2018 (Phase II). After cancellation of the repurchased shares, the total capital stock of the Companydecreased from 435,550,522 shares to 435,390,502 shares.
On August 18, 2021, the 32nd session of the Ninth Board of Directors and the 28th session of the Ninth SupervisoryCommittee reviewed and approved the “Proposal on Repurchase and Cancellation of Part of the Restricted A-Shares StockIncentive Plan in 2018 (Phase I)”, according to which the Company intended to repurchase and cancel a total of 35,351A-share restricted shares that were granted with the restriction not released to 2 retired former incentive objects at therepurchase price of CNY 3.60/share. The proposal still needs to be submitted to the Company's General Meeting fordiscussion and approval.
On August 18, 2021, the 32nd session of the Ninth Board of Directors and the 28th session of the Ninth SupervisoryCommittee reviewed and approved the “Proposal on Repurchase and Cancellation of Part of the Restricted A-Shares StockIncentive Plan in 2018 (Phase I)”, according to which the Company intended to repurchase and cancel a total of 110,000A-share restricted shares that were granted with the restriction not released to 2 retired former incentive objects at therepurchase price of CNY 7.20/share. The proposal still needs to be submitted to the Company's General Meeting fordiscussion and approval.
(2) Repurchase of shares
The 7th session of the Ninth Board of Directors held on July 06, 2020 and 2020 2nd Extraordinary General Meeting heldon July 23, 2020, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed Foreign Sharesin the Company (B-shares)”. As of July 22, 2021 when the stock repurchase deadline expired, the Company accumulativelyrepurchased 8,994,086 shares in the Company through a centralized bidding method with the special account for thesecurities repurchased , accounting for 2.07% of the Company’s total share capital. The highest transaction price of therepurchased shares was HK$6.74 per share, and the lowest transaction price was HK$5.93/share, the total amount paidwas HK$ 58,207,259.08 (with the transaction cost exclusive). As of August 3, 2021, the cancellation of the Company'sshare repurchase was completed, and the Company's total share capital has been reduced from 435,390,502 shares to426,396,416 shares.
(3) Change of the members of the Board of Directors and the Supervisory Committee2021 3rd Extraordinary General Meeting held on July 1, 2021 reviewed and passed the "Proposal on the Proposed Changeof Directors” according to which Mr. Zhang Xuhua was elected a nonb-independent director of the Ninth Board of Directorsof the Company with the tenure from the date of the approval by the general meeting to the date of expiry of the Ninth Boardof Directors. On the same day, after review and approval at the 31st session of the Ninth Board of Directors of the Company,Director Mr. Zhang Xuhua was elected as the Chairman of the Board of the Company with the tenure from the date of theapproval by the general meeting to the date of expiry of the Ninth Board of Directors.
The 32nd session of the Ninth Board of Directors of the Company held on August 18, 2021 reviewed and approved the“Proposal on the Election of Non-Independent Directors for the Company's New Board of Directors” and the “Proposal onthe Election of Independent Directors for the Company's New Board of Directors.”Given that the term of the Company’sNinth Board of Directors is going to expire on September 11, 2021, according to relevant regulations, AVIC IHL, theCompany’s controlling shareholder, nominated Mr. Zhang Xuhua, Mr. Xiao Yi, Mr. Xiao Zhanglin, Mr. Li Peiyin, Mr. DengJianghu, and Mr. Pan Bo as candidates for non-independent directors of the Company's Tenth Board of Directors; theBoard of Directors is going to nominate Mr. Wang Jianxin, Mr. Zhong Hongming, and Mr. Tang Xiaofei as candidates for
independent directors of the Company's Tenth Board of Directors. The above two proposals still need to be submitted to theCompany’s General Meeting for deliberation, and the qualification and independence of independent director candidatesneed to be filed with the Shenzhen Stock Exchange before voting at the General Meeting.
The 28th meeting of the Ninth Supervisory Committee of the Company held on August 18, 2021, reviewed and approvedthe “Proposal on the Election for the New Supervisory Committee of the Company". According to relevant regulations, AVICIHL, the Company’s controlling shareholder, nominated Mr. Zheng Qiyuan and Ms. Cao Zhen as candidates ofnon-employee supervisors of the 10th Supervisory Committee of the Company. The proposal still needs to be submitted tothe Company's General Meeting for discussion and approval.
(4) Change of the Accounting Firm
The 32nd Session of the Ninth Board of Directors and the 28th Session of the Ninth Supervisory Committee reviewed andapproved the "Proposal on Change of the Accounting Firm". As the employment term of Grant Thornton LLP as theCompany's auditor expired, according to the Company's business development needs, in order to better promote thedevelopment of audit work, after comprehensive evaluation and prudent consideration, the Company plans to employDahua accounting firm (special general partnership) as the Company's auditor of the financial statements and internalcontrol. The proposal still needs to be submitted to the Company's General Meeting for discussion and approval.
(5) Related transactions
The 32nd session of the 9th Board of Directors and the 28th session of the 9th Supervisory Committee held on August 18,2021, reviewed and approved the “Proposal on Signing a Financial Service Agreement with AVIC Finance Co., Ltd.”, anddecided to terminate the previous agreement with AVIC Finance and re-sign the “Financial Service Agreement”. Theproposal still needs to be submitted to the Company's General Meeting for discussion and approval.
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
Inapplicable
(2) Financial information of the reporting segments
Inapplicable
(3) In case there is no reporting segment or the total assets and liabilities of the reportingsegments cannot be disclosed, explain the reasonInapplicable
(4) Other notes
Inapplicable
7. Other significant transactions and matters that may affect investors' decision makingInapplicable
8. Others
Inapplicable
XVII. Notes to the parent company’s financial statements
1. Accounts receivable
(1) Accounts receivables disclosed by types
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: | ||||||||||
| Accounts receivable for which bad debt reserve has been provided based on portfolios | 3,532,773.98 | 100.00% | 424,515.05 | 12.02% | 3,108,258.93 | 1,776,602.11 | 100.00% | 311,803.32 | 17.55% | 1,464,798.79 |
| Including: | ||||||||||
| Accounts receivable from other customers | 3,532,773.98 | 100.00% | 424,515.05 | 12.02% | 3,108,258.93 | 1,776,602.11 | 100.00% | 311,803.32 | 17.55% | 1,464,798.79 |
| Total | 3,532,773.98 | 100.00% | 424,515.05 | 12.02% | 3,108,258.93 | 1,776,602.11 | 100.00% | 311,803.32 | 17.55% | 1,464,798.79 |
Individual provision for bad and doubtful debts:
Inapplicable
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 | 3,532,773.98 | 424,515.05 | 12.02% |
| Total | 3,532,773.98 | 424,515.05 | -- |
Note to the basis for determining the combination:
Inapplicable
Provision for bad and doubtful debts based on portfolio:
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:
Inapplicable
Disclosed based on aging
In CNY
| Aging | Ending balance |
| Within 1 year (with 1 year inclusive) | 3,335,859.99 |
| 1 to 2 years | 196,913.99 |
| Total | 3,532,773.98 |
(2) Bad debt provision accrual, received or reversed in 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 | Amount recovered or reversed | Written-off | Others | |||
| Bad debt reserve | 311,803.32 | 112,711.73 | 424,515.05 | |||
| Total | 311,803.32 | 112,711.73 | 424,515.05 | |||
Where the significant amount of the reserve for bad debt recovered or reversed:
Inapplicable
(3) Accounts receivable actually written off in current period
Inapplicable
(4) Accounts receivable owed by the top five debtors based on the ending balance
In CNY
| Description of Unit | Ending balance of the accounts receivable | Proportion in total ending balance of accounts receivable | Ending balance of the provision for bad debts |
| Ending balance owed by the top five customer debtors based on the ending balance | 2,465,100.24 | 69.78% | 168,190.34 |
| Total | 2,465,100.24 | 69.78% |
(5) Account receivable with recognition terminated due to transfer of financial assetsInapplicable
(6) Amount of assets and liabilities formed through transfer of long term account receivable andcontinuing to be involvedInapplicable
(2) Other receivables
In CNY
| Items | Ending balance | Opening balance |
| Other receivables | 578,424,821.93 | 621,512,680.69 |
| Total | 578,424,821.93 | 621,512,680.69 |
(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 Payment | Ending book balance | Opening book balance |
| Dealings among related parties within the consolidation scope | 574,537,694.12 | 620,792,324.27 |
| Security deposit | 3,277,526.90 | 217,525.90 |
| Employees’ social security premium reimbursed | 81,249.56 | 392,074.21 |
| Others | 728,660.73 | 196,662.43 |
| Total | 578,625,131.31 | 621,598,586.81 |
2) Provision for bad debts
In CNY
| Bad debt reserve | 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, 2021 | 85,906.12 | 85,906.12 | ||
| Balance as at January 1, 2021 in the reporting period | —— | —— | —— | —— |
| Provision in the reporting period | 114,403.26 | 114,403.26 | ||
| Balance as at June 30, 2021 | 200,309.38 | 200,309.38 |
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) | 578,388,773.78 |
| 1 to 2 years | 195,711.90 |
| 2 to 3 years | 595.63 |
| Over 3 years | 40,050.00 |
| 3 to 4 years | 0.00 |
| 4 to 5 years | 0.00 |
| Over 5 years | 40,050.00 |
| Total | 578,625,131.31 |
3) Bad debt provision accrual, received or reversed in the reporting periodInapplicable
4) Other receivables actually written off in the reporting period
Inapplicable
5) Other receivables owed by the top five debtors based on the ending balance
In CNY
| Description of Unit | Nature of Payment | Ending balance | Aging | Proportion in total ending balance of other receivables | Ending balance of the provision for bad debts |
| Accounts receivable owed by the top five debtors based on the ending balance | Current accounts, etc. | 577,047,481.52 | Within 1 year | 99.73% | 145,000.05 |
| Total | -- | 577,047,481.52 | -- | 99.73% | 145,000.05 |
6) Accounts receivable involving government subsidy
Inapplicable
7) Other receivables with recognition terminated due to transfer of financial assetsInapplicable
8) Amount of assets and liabilities formed through transfer of other receivables and continuing tobe involved
Inapplicable
3. Long-term equity investments
In CNY
| Items | Ending balance | Opening balance | ||||
| Book balance | Impairment reserve | Book value | Book balance | Impairment reserve | Book value | |
| Investment in subsidiaries | 1,482,456,650.55 | 1,482,456,650.55 | 1,478,014,522.36 | 1,478,014,522.36 | ||
| Investment in associates and joint ventures | 53,029,994.16 | 53,029,994.16 | 51,400,665.92 | 51,400,665.92 | ||
| Total | 1,535,486,644.71 | 1,535,486,644.71 | 1,529,415,188.28 | 1,529,415,188.28 | ||
(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 | ||||
| Harmony | 604,067,211.20 | 1,849,555.21 | 605,916,766.41 | ||||
| Harmony E-Commerce Limited | 11,684,484.39 | 11,684,484.39 | |||||
| Precision Technology Co. | 99,800,505.05 | 706,501.43 | 100,507,006.48 | ||||
| Science & Technology Development Co. | 50,245,552.53 | 285,905.92 | 50,531,458.45 | ||||
| the Hong Kong Co. | 137,737,520.00 | 137,737,520.00 | |||||
| SHIYUEHUI | 5,000,000.00 | 5,000,000.00 | |||||
| The Sales Co. | 453,130,819.72 | 1,279,470.28 | 454,410,290.00 | ||||
| Hengdarui | 36,867,843.96 | 36,867,843.96 | |||||
| Emile Choureit (Shenzhen) | 79,480,585.51 | 320,695.35 | 79,801,280.86 | ||||
| Total | 1,478,014,522.36 | 4,442,128.19 | 1,482,456,650.55 |
(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 | Other comprehensive income adjustment | Other equity movement | Announced for distributing cash dividend or profit | Provision for impairment | Others | ||||
| I. Joint Venture | |||||||||||
| II. Associates | |||||||||||
| Shanghai Watch Industry Co., Ltd. | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 | ||||||||
| Sub-total | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 | ||||||||
| Total | 51,400,665.92 | 1,629,328.24 | 53,029,994.16 | ||||||||
(3) Other notes
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 | 82,132,996.59 | 17,699,646.51 | 57,329,018.41 | 17,626,390.24 |
| Other businesses | 4,601,153.13 | 0 | -15,800.00 | 0 |
| Total | 86,734,149.72 | 17,699,646.51 | 57,313,218.41 | 17,626,390.24 |
Information in connection with the revenue:
In CNY
| Classification of Contracts | Segment 1 | Segment 2 | Total | |
| Including: | ||||
| Leases | 82,132,996.59 | 82,132,996.59 | ||
| Others | 4,601,153.13 | 4,601,153.13 | ||
| Including: | ||||
| Northwest China | 10,780,902.77 | 10,780,902.77 | ||
| South China | 75,953,246.95 | 75,953,246.95 |
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 CNY 0.00, of which CNY 0.00 is expected to berecognized as revenue in the year, CNY 0.00 is expected to be recognized as revenue in the year, and CNY 0.00 isexpected to be recognized as revenue in the year. Inapplicable
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 | 1,629,328.24 | 2,160,911.92 |
| Total | 1,629,328.24 | 2,160,911.92 |
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 | -73,807.46 | |
| The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s business and conform with the national standard amount or quantity) | 12,113,496.28 | |
| Reversal of the impairment | 976,332.27 |
| provision for receivables and contract assets which have been tested individually for impairment | ||
| Other non-operating income and expenses other than the aforesaid items | -587,690.85 | |
| Less: Amount affected by the income tax | 2,679,837.11 | |
| Total | 9,748,493.13 | -- |
For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on InformationDisclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses and its non-recurringgain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offeringtheir Securities to the Public – Non-recurring Gains and Losses which have been defined as recurring gains and losses, it isnecessary to explain the reason.Inapplicable
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 | 8.09% | 0.5421 | 0.5421 |
| Net profit attributable to the Company’s shareholders of ordinary shares less non-recurring gains and loss | 7.76% | 0.5192 | 0.5192 |
3. Discrepancy in accounting data between IAS and CAS
(1) Discrepancy in net profit and net assets as disclosed in the financial report respectivelyaccording to IAS and CASInapplicable
(2) Discrepancy in net profit and net assets as disclosed in the financial report respectivelyaccording to the accounting standards outside Mainland China and CASInapplicable
(3) Note to the discrepancy in accounting data under the accounting standards outside MainlandChina. In case the discrepancy in data which have been audited by an overseas auditing agenthas been adjusted, please specify the name of the overseas auditing agent.
Inapplicable
4. Others
Inapplicable