通讯地址：北京市东城区永定门西滨河路8号院7号楼中海地产广场西塔9层
Postal Address:9/F,West Tower of China Overseas Property Plaza, Building 7,NO.8,Yongdingmen Xibinhe Road, Dongcheng District, Beijing
邮政编码（PostCode）：100077
电话（Tel）：+86(10)88095588传真（Fax）：+86(10)88091199
AUDITORS’ REPORT
Ruihua Shen Zi[2019] No. 01210010 To the Shareholders of FIYTA Holdings Ltd.:
I. Opinion
We have audited the financial statements of FIYTA Holdings Ltd. (“FIYTA Ltd.” or the “Company”), which comprise the consolidated and theCompany’s balance sheet as at 31 December 2018, the consolidated and theCompany’s income statement, the consolidated and theCompany’s cash flow statement for the year then ended and consolidated and theCompany’s statement of changes inshareholders’ equity, and notes to the financial statements.
In our opinion, the financial statements give a fair presentation of the consolidated and theCompany’s financial position of FIYTA Ltd. as at 31 December 2018, and of its consolidated and theCompany’s financial performance and its consolidated and theCompany’s cash flows for the year then ended in all material aspects in accordance with Accounting Standards for Business Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in theAuditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the FIYTA Ltd. in accordance with the Code of Ethics for Chinese Certified Public Accountants, and we have fulfilled our other ethical responsibilities in professional ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters that need to communicate in our audit report are identified as follows:
1. Existence, valuation and allocation of inventories
(1) Description
As described in Note IV 11 and Note VI. 5 Inventory, the balance and provision of inventory were RMB1,870,015,903.32 and RMB87,709,601.62 respectively. The carrying amount of inventory was RMB1,782,306,301.70 as at 31 December 2018.
(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and branded watches, the main inventory of FIYTA Ltd are finished watches and watch components. The inventories are distributed in stores, regional warehouses,resellers’ warehouses and theCompany’s warehouses which increased the difficulty of stock observation;
(ii) The management of FIYTA Ltd measures inventory at lower of cost and net realizable value (NRV) at balance sheet date. Where the cost of an inventory exceeds its NRV, the difference is recognized as provision. The determination of NRV involves material management judgment and estimates.
The inventories have significant impact to theCompany’s assets, as a result, we identified existence, valuation and allocation of inventories as a key audit matter.
(2) How our audit addressed the key audit matter
(i) Understanding, assessing and testing the design and operating effectiveness of internal controls of purchase and payment, production and storage, and the accrual of inventory provision;
(ii) Understanding and evaluating the appropriateness of theCompany’s inventory provision policy;
(iii) Understanding locations of inventory storage, accounting method of inventory and determining the scope of inventory observation;
(iv) Discussing physical stocktaking status with the management and attending the physical stocktaking to the locations and inventories within the scope of inventory observation and conducting observation and test count on site;
(v) Performing alternative procedures of confirmation and inspecting contracts, goods delivery
notes and account statements for the inventories outside the scope of inventory observation and stored in reseller's warehouses;
(vi) Obtaining schedule of inventory provision calculation, reviewing whether the provision was made according to relating accounting policies and re-calculating the provision to evaluate the accuracy of inventory provision;
(vii) Reviewing and evaluating the appropriateness of the material estimates made by the management in determining the NRV of inventory;
(viii) Agreeing current period purchases in large amount to corresponding contract, tax invoice and inspecting purchase requisition form and goods receipt notes etc...
2. Revenue recognition
(1) Description
TheCompany’s revenue mainly comes from sales of FIYTA brand watches and distribution of branded watches. FIYTA brand watches and branded watches are mainly sold through shops in department store except for minor direct sale and consignment sale. Refer to Note IV. 24 for accounting policies relating to revenue recognition.
As described in Note VI. 30 Operating revenue and operating cost, theCompany’s revenue from main business was RMB3,382,346,730.19 in year 2018. Operating revenue represents major line item in income statement and is main source of profit. Accuracy and completeness of revenue recognition have significant impact to theCompany’s profit, as a result, we identified revenue recognition as a key audit matter.
(2) How our audit addressed the key audit matter
(i) Understanding, assessing and testing the design and operating effectiveness of internal controls relating to revenue recognition;
(ii) Checking whether the condition, method and timing of revenue recognition is in conformance with principle of Accounting Standards for Business Enterprises;
(iii) Selecting samples from currentyear’s transaction record, agreeing to supporting documents such as contract, tax invoice and goods dispatch noteetc… to evaluate occurrence of revenue recognition;
(iv) In connection with audit of accounts receivable, selecting major customers and confirming corresponding sales in current year to evaluate the completeness of revenue recognition;
(v) Conducting cut-off test to sales transactions before and after the balance sheet date to evaluate whether the revenue was recorded in appropriate accounting period;
IV. Other Information
The management of FIYTA Ltd are responsible for the Other Information. The Other Information comprises all of the information included in theCompany’s 2018 annual report other than the
financial statements and ourauditors’ report thereon.
Our opinion expressed on the financial statements does not cover the Other Information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this Other Information, we are required to report that fact. We have nothing to report in this regard.
V. Responsibilities of the Management and those Charged with Governance for the Financial Statements
The management of the FIYTA Ltd (the “Management”) is responsible for the preparation of the financial statements that give a fair view in accordance with Accounting Standards for Business Enterprises and design, implementing and maintaining necessary internal controls to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Those who charged with governance is responsible for overseeing theCompany’s financial reporting process.
VI.Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with China Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management.
4. Conclude on the appropriateness of theManagement’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required, according to China Standards on Auditing, to draw attention in ourauditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within FIYTA Ltd to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period
and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Ruihua Certified Public Accountants Chinese CPA
(Special General Partnership) (Engagement Partner):___________
Yuqiao Wang
Beijing, China Chinese CPA: ____________
Xin Liu
Financial Statements
The currency applied in the financial notes and statements is Renminbi (CNY)
1. Consolidated Balance Sheet
Prepared by FIYTA HOLDINGS LTD.
December 31, 2018
In CNY
||||
|-|-|-|
|Items|Ending balance|Opening balance|
|Current assets:|||
|Monetary capital|164,828,059.97|187,152,891.32|
|Settlement reserve|||
|Inter-bank lending|||
|Financial assets which is measured based on|||
|the fair value and whose movement is counted to the|||
|current gain/loss|||
|Derivative financial assets|||
|Notes receivable and accounts receivable|377,597,503.46|335,948,508.62|
|Where: Notes receivable|7,051,846.85|9,693,883.68|
|Accounts receivable|370,545,656.61|326,254,624.94|
|Advance payments|13,666,816.33|24,663,314.53|
|Receivable premium|||
|Reinsurance accounts receivable|||
|Reserve for reinsurance contract receivable|||
|Other receivables|45,870,582.26|34,990,539.09|
|Including: Interest receivable|||
|Dividends receivable|||
|Redemptory monetary capital for sale|||
|Inventories|1,782,306,301.70|1,820,526,676.26|
|Held-for-sale assets|||
|Non-current assets due within a year|||
|Other current assets|73,703,312.24|24,616,815.21|
|Total current assets|2,457,972,575.96|2,427,898,745.03|
|Non-current assets:|||
|Loan issuing and advance in cash|||
|Available-for-sale financial assets|85,000.00|85,000.00|
|Held-to-due investments|||

||||
|-|-|-|
|Long term accounts receivable|||
|Long-term equity investment|44,881,063.15|43,879,518.09|
|Investment real estate|377,319,433.03|305,493,987.77|
|Fixed assets|425,649,562.85|523,699,592.65|
|Construction-in-process|12,041,126.00|10,947,300.53|
|Productive biological asset|||
|Oil and gas assets|||
|Intangible assets|43,545,477.61|44,223,280.21|
|Development expenses|||
|Goodwill|||
|Long-term expenses to be apportioned|128,572,545.15|109,409,785.49|
|Deferred income tax asset|100,675,706.09|105,905,944.80|
|Other non-current assets|8,949,160.42|8,246,538.33|
|Total non-current assets|1,141,719,074.30|1,151,890,947.87|
|Total assets|3,599,691,650.26|3,579,789,692.90|
|Current liabilities:|||
|Short term borrowings|547,118,452.97|525,990,510.00|
|Borrowings from central bank|||
|Deposits taking and interbank placement|||
|Loans from other banks|||
|Financial liabilities measured based on the fair|||
|value and whose change was charged to the current|||
|gain and loss.|||
|Derivative financial liabilities|||
|Notes payable and accounts payable|259,913,612.34|263,256,495.65|
|Advances from customers|16,459,445.00|15,141,587.79|
|Funds from selling out and repurchasing|||
|financial assets|||
|Service charge and commission payable|||
|Salaries payable to the employees|69,779,037.83|71,564,367.14|
|Taxes payable|55,923,171.92|55,857,236.59|
|Other payables|71,819,930.30|59,232,265.75|
|Including: interest payable|772,351.26|1,464,729.11|
|Dividends payable|||
|Payable reinsurance|||
|Reserve for insurance contract|||
|Acting trading securities|||

||||
|-|-|-|
|Income from securities underwriting on|||
|commission|||
|Held-for-sale liabilities|||
|Non-current liabilities due within a year|347,470.00|35,000,000.00|
|Other current liabilities|||
|Total current liabilities|1,021,361,120.36|1,026,042,462.92|
|Non-current liabilities:|||
|Long-term borrowings|4,517,110.00|79,870,353.00|
|Bonds payable|||
|Including: preferred shares|||
|Perpetual bond|||
|Long-term accounts payable|||
|Long term accrued payroll|||
|Predicted liabilities|||
|Deferred income|3,672,855.36|5,904,000.00|
|Deferred income tax liability|||
|Other non-current liabilities|||
|Total non-current liabilities|8,189,965.36|85,774,353.00|
|Total liabilities|1,029,551,085.72|1,111,816,815.92|
|Owner’s equity:|||
|Capital Stock|438,744,881.00|438,744,881.00|
|Other equity instruments|||
|Including: preferred shares|||
|Perpetual bond|||
|Capital Reserve|1,062,455,644.22|1,062,455,644.22|
|Less: shares in stock|||
|Other comprehensive income|-5,442,139.78|-11,523,442.39|
|Special reserve|||
|Surplus Reserve|223,015,793.80|206,805,713.35|
|Reserve against general risks|||
|Retained earnings|851,360,603.66|771,484,565.02|
|Total owners’ equity attributable to the parent company|2,570,134,782.90|2,467,967,361.20|
|Minority shareholders’ equity|5,781.64|5,515.78|
|Total owner’s equity|2,570,140,564.54|2,467,972,876.98|
|Total liabilities and owners’ equity|3,599,691,650.26|3,579,789,692.90|

Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
2. Balance Sheet (Parent Company)
In CNY
||||
|-|-|-|
|Items|Ending balance|Opening balance|
|Current assets:|||
|Monetary capital|137,175,466.27|131,163,944.43|
|Financial assets which is measured based on the|||
|fair value and whose movement is counted to the|||
|current gain/loss|||
|Derivative financial assets|||
|Notes receivable and accounts receivable|737,636.38|6,832,006.11|
|Where: Notes receivable|||
|Accounts receivable|737,636.38|6,832,006.11|
|Advance payments|||
|Other receivables|870,739,378.37|831,952,437.86|
|Including: Interest receivable|||
|Dividends receivable|||
|Inventories|||
|Held-for-sale assets|||
|Non-current assets due within a year|||
|Other current assets|10,081,272.94|9,089,170.12|
|Total current assets|1,018,733,753.96|979,037,558.52|
|Non-current assets:|||
|Available-for-sale financial assets|85,000.00|85,000.00|
|Held-to-due investments|||
|Long term accounts receivable|||
|Long-term equity investment|1,376,129,654.08|1,375,128,109.02|
|Investment real estate|297,042,937.87|270,241,724.52|
|Fixed assets|297,517,472.81|340,765,873.45|
|Construction-in-process|12,041,126.00|10,947,300.53|
|Productive biological asset|||
|Oil and gas assets|||
|Intangible assets|35,337,052.82|36,932,963.95|
|Development expenses|||
|Goodwill|||
|Long-term expenses to be apportioned|4,500,638.97|4,418,287.94|

||||
|-|-|-|
|Deferred income tax asset|952,857.33|1,499,126.32|
|Other non-current assets|4,493,971.35|2,687,910.84|
|Total non-current assets|2,028,100,711.23|2,042,706,296.57|
|Total assets|3,046,834,465.19|3,021,743,855.09|
|Current liabilities:|||
|Short term borrowings|505,000,000.00|470,000,000.00|
|Financial liabilities measured based on the fair|||
|value and whose change was charged to the current|||
|gain and loss.|||
|Derivative financial liabilities|||
|Notes payable and accounts payable|52,324,191.98|60,520,874.66|
|Advances from customers|1,636,520.02|4,212,930.07|
|Salaries payable to the employees|11,589,634.34|9,291,422.00|
|Taxes payable|943,919.26|1,038,481.26|
|Other payables|57,997,397.28|21,596,100.44|
|Including: interest payable|685,419.80|929,155.39|
|Dividends payable|||
|Held-for-sale liabilities|||
|Non-current liabilities due within a year||35,000,000.00|
|Other current liabilities|||
|Total current liabilities|629,491,662.88|601,659,808.43|
|Non-current liabilities:|||
|Long-term borrowings||74,861,928.00|
|Bonds payable|||
|Including: preferred shares|||
|Perpetual bond|||
|Long-term accounts payable|||
|Long term accrued payroll|||
|Predicted liabilities|||
|Deferred income|3,672,855.36|5,904,000.00|
|Deferred income tax liability|||
|Other non-current liabilities|||
|Total non-current liabilities|3,672,855.36|80,765,928.00|
|Total liabilities|633,164,518.24|682,425,736.43|
|Owner’s equity:|||
|Capital Stock|438,744,881.00|438,744,881.00|
|Other equity instruments|||

||||
|-|-|-|
|Including: preferred shares|||
|Perpetual bond|||
|Capital Reserve|1,068,111,185.32|1,068,111,185.32|
|Less: shares in stock|||
|Other comprehensive income|||
|Special reserve|||
|Surplus Reserve|223,015,793.80|206,805,713.35|
|Retained earnings|683,798,086.83|625,656,338.99|
|Total owner’s equity|2,413,669,946.95|2,339,318,118.66|
|Total liabilities and owners’ equity|3,046,834,465.19|3,021,743,855.09|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
3. Consolidated Profit Statement
In CNY
||||
|-|-|-|
|Items|Amount incurred in the reporting period|Amount incurred in the previous period|
|I. Turnover|3,400,450,599.90|3,345,809,703.98|
|Including: operating income|3,400,450,599.90|3,345,809,703.98|
|Interest income|||
|Earned insurance premium|||
|Service charge and commission|||
|income|||
|II. Total operating costs|3,190,243,356.71|3,182,619,506.27|
|Including: Operating costs|1,993,809,774.20|1,986,652,591.57|
|Interest payment|||
|Service charge and commission|||
|payment|||
|Surrender Value|||
|Compensation expenses, net|||
|Provision of reserve for insurance|||
|contract, net|||
|Payment of policy dividend|||
|Reinsurance expenses|||
|Taxes and surcharges|33,769,344.40|32,871,258.58|
|Sales costs|856,970,173.10|811,437,932.01|
|Administrative expenses|219,162,525.85|190,589,582.24|

||||
|-|-|-|
|R & D expenditures|47,350,342.82|49,453,899.35|
|Financial expenses|35,916,240.16|49,186,742.91|
|Where: Interest cost|27,552,558.81|41,825,035.34|
|Interest income|2,269,447.05|2,915,602.99|
|Loss from impairment of assets|3,264,956.18|62,427,499.61|
|Plus: Other income|19,375,618.48|17,508,255.98|
|Investment income (loss is stated with|||
||1,001,545.06|455,893.22|
|“-“)|||
|Including: return on investment in|||
||1,001,545.06|455,893.22|
|associate and joint venture|||
|Income from change of fair value (loss|||
|is stated with “-”)|||
|Exchange income (loss stated with “-”)|||
|Income from disposal of assets (loss|||
||-181,302.24|7,321,993.36|
|stated with “-”)|||
|III. Operating Profit (loss is stated with “-“)|230,403,104.49|188,476,340.27|
|Plus: Non-operating income|1,446,357.53|2,607,653.91|
|Less: Non-operating expenses|652,514.97|1,368,680.92|
|IV. Total profit (total loss is stated with “-”)|231,196,947.05|189,715,313.26|
|Less: Income tax expense|47,361,851.76|47,098,954.06|
|V. Net Profit (net loss is stated with “-“)|183,835,095.29|142,616,359.20|
|(I) Net Profit from sustainable operation (net|||
||183,835,095.29|142,616,359.20|
|loss is stated with “-“)|||
|(II) Net profit from termination of business|||
|operation (net loss is stated with “-“)|||
|Net profit attributable to the parent|||
||183,835,095.29|140,216,258.28|
|company’s owner|||
|Minority shareholders’ gain/loss||2,400,100.92|
|VI. Net of other comprehensive income after tax|6,081,568.47|-28,676.16|
|Net of other comprehensive income after tax|||
||6,081,302.61|255,055.85|
|attributable to the parent company’s owner|||
|(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|||

||||
|-|-|-|
|(II) Other comprehensive income which shall|||
||6,081,302.61|255,055.85|
|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. Gain/loss from change in the fair|||
|value of the financial assets available for sale|||
|3. Gain/loss from which the|||
|held-to-maturity investment is re-classified as|||
|available-for-sale financial assets|||
|4. Valid part of the gain/loss from|||
|cash flow hedge|||
|5. Conversion difference in foreign|||
||6,081,302.61|255,055.85|
|currency statements|||
|6. Others|||
|Net amount of other comprehensive income|||
||265.86|-283,732.01|
|after tax attributable to minority shareholders|||
|VII. Total comprehensive income|189,916,663.76|142,587,683.04|
|Total comprehensive income attributable to|||
||189,916,397.90|140,471,314.13|
|the parent company’s owner|||
|Total comprehensive income attributable to|||
||265.86|2,116,368.91|
|minority shareholders|||
|VIII. Earnings per share:|||
|(I) Basic earnings per share|0.4190|0.3196|
|(II) Diluted earnings per share|0.4190|0.3196|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui
4. Statement of Profit, Parent Company
In CNY
||||
|-|-|-|
|Items|Amount incurred in the reporting period|Amount incurred in the previous period|
|I. Revenue|130,901,823.99|117,746,387.79|
|Less: Operating cost|19,010,293.07|17,785,254.56|
|Taxes and surcharges|4,340,938.33|4,244,709.29|
|Sales costs||5,024,222.36|
|Administrative expenses|62,841,044.26|56,597,226.83|
|R & D expenditures|24,155,557.54|24,358,700.54|
|Financial expenses|9,231,733.69|11,051,564.46|

||||
|-|-|-|
|Where: Interest cost|10,189,512.00|12,432,288.90|
|Interest income|1,756,834.88|1,384,504.01|
|Loss from impairment of assets|46,068.70|62,283.14|
|Plus: Other income|7,689,684.27|11,482,400.00|
|Investment income (loss is stated with|||
||144,001,545.06|117,455,893.22|
|“-“)|||
|Including: return on investment in|||
||1,001,545.06|455,893.22|
|associate and joint venture|||
|Income from change of fair value (loss|||
|is stated with “-”)|||
|Income from disposal of assets (loss|||
||-51,942.13|-54,661.87|
|stated with “-”)|||
|II. Operating Profit (loss is stated with “-“)|162,915,475.60|127,506,057.96|
|Plus: Non-operating income|38,080.00|231,994.49|
|Less: Non-operating expenses|446,782.97|320,029.00|
|III. Total profit (total loss is stated with “-“)|162,506,772.63|127,418,023.45|
|Less: Income tax expense|405,968.14|-1,022,105.57|
|IV. Net Profit (net loss is stated with “-“)|162,100,804.49|128,440,129.02|
|(I) Net Profit from sustainable operation (net|||
||162,100,804.49|128,440,129.02|
|loss is stated with “-“)|||
|(II) Net profit from termination of business|||
|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|||
|(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. Gain/loss from change in the fair|||
|value of the financial assets available for sale|||
|3. Gain/loss from which the|||
|held-to-maturity investment is re-classified as|||

||||
|-|-|-|
|available-for-sale financial assets|||
|4. Valid part of the gain/loss from|||
|cash flow hedge|||
|5. Conversion difference in foreign|||
|currency statements|||
|6. Others|||
|VI. Total comprehensive income|162,100,804.49|128,440,129.02|
|VII. Earnings per share:|||
|(I) Basic earnings per share|||
|(II) Diluted earnings per share|||

Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
5. Consolidated Cash Flow Statement
In CNY
||||
|-|-|-|
|Items|Amount incurred in the reporting period|Amount incurred in the previous period|
|I. Cash flows arising from operating activities|||
|Cash received from sales of goods and|||
||3,810,404,536.16|3,799,342,843.85|
|supply of labor service|||
|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|||
|Net increase from disposal of financial|||
|assets which is measured based on the fair value|||
|and whose movement is counted to the current|||
|gain/loss|||
|Cash received from interest, service charge|||
|and commission|||
|Net increase of loan from other banks|||

||||
|-|-|-|
|Net increase of fund from repurchase|||
|business|||
|Rebated taxes received|4,793,245.20|886,252.20|
|Other operation activity related cash receipts|49,628,593.69|49,178,644.63|
|Subtotal of cash flow in from operating activity|3,864,826,375.05|3,849,407,740.68|
|Cash paid for purchase of goods and|||
||2,189,921,981.01|2,070,318,097.62|
|reception of labor services|||
|Net increase of loans and advances to|||
|customers|||
|Net increase of due from central bank and|||
|due from banks|||
|Cash from payment for settlement of the|||
|original insurance contract|||
|Cash paid for interest, service charge and|||
|commission|||
|Cash for payment of policy dividend|||
|Cash paid to and for staff|583,417,253.40|516,928,806.69|
|Taxes paid|305,622,391.83|285,279,057.38|
|Other business activity related cash|||
||454,236,959.19|411,927,217.02|
|payments|||
|Subtotal of cash flow out from operating activity|3,533,198,585.43|3,284,453,178.71|
|Net cash flow arising from operating activities|331,627,789.62|564,954,561.97|
|II. Cash flows 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|53,280.03|10,678,135.25|
|long term assets|||
|Net cash received from disposal of|||
|||-230,053.69|
|subsidiaries and other operating units|||
|Other investment related cash receipts|||
|Subtotal of cash flow in from investment activity|53,280.03|10,448,081.56|
|Cash paid for purchase/construction of fixed|||
|assets, Intangible assets and other long term|146,877,130.29|136,914,522.99|
|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|146,877,130.29|136,914,522.99|
|Net cash flows arising from investment activities|-146,823,850.26|-126,466,441.43|
|III. Cash flows arising from fund raising activities|||
|Cash received from absorbing investment|||
|Incl.: Cash received from the subsidiaries’|||
|absorption of minority shareholders’ investment|||
|Cash received from loans|741,192,340.23|575,282,350.00|
|Cash received from bond issuing|||
|Other fund-raising related cash receipts|||
|Subtotal of cash flow in from fund raising activity|741,192,340.23|575,282,350.00|
|Cash paid for debt repayment|832,333,208.63|1,167,061,934.80|
|Cash paid for dividend/profit distribution or|||
||116,690,155.91|85,355,204.78|
|repayment of interest|||
|Including: Dividend and profit paid by the|||
|subsidiaries to minority shareholders|||
|Cash paid for other financing activities||3,376,589.16|
|Sub-total cash flow paid for financing activities|949,023,364.54|1,255,793,728.74|
|Net cash flows arising from fund raising activities|-207,831,024.31|-680,511,378.74|
|IV. Change of exchange rate influencing the cash|||
||702,253.60|-256,606.29|
|and cash equivalent|||
|V. Net increase of cash and cash equivalents|-22,324,831.35|-242,279,864.49|
|Plus: Opening balance of cash and cash|||
||184,947,891.32|427,227,755.81|
|equivalents|||
|VI. Ending balance of cash and cash equivalents|162,623,059.97|184,947,891.32|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
6. Cash Flow Statement, Parent Company
In CNY
||||
|-|-|-|
|Items|Amount incurred in the reporting period|Amount incurred in the previous period|
|I. Cash flows arising from operating activities|||
|Cash received from sales of goods and|||
||116,016,128.07|118,206,419.70|
|supply of labor service|||
|Rebated taxes received|||
|Other operation activity related cash receipts|3,085,141,911.13|938,657,962.92|

||||
|-|-|-|
|Subtotal of cash flow in from operating activity|3,201,158,039.20|1,056,864,382.62|
|Cash paid for purchase of goods and|||
||300,000.00||
|reception of labor services|||
|Cash paid to and for staff|58,785,131.65|52,908,089.08|
|Taxes paid|10,909,143.22|13,645,601.66|
|Other business activity related cash|||
||3,050,352,344.19|560,857,112.69|
|payments|||
|Subtotal of cash flow out from operating activity|3,120,346,619.06|627,410,803.43|
|Net cash flow arising from operating activities|80,811,420.14|429,453,579.19|
|II. Cash flows arising from investment activities:|||
|Cash received from recovery of investment|||
|Cash received from investment income|143,000,000.00|117,000,000.00|
|Net cash from disposal of fixed assets,|||
|intangible assets and recovery of other long term|1,430.00|30,112.00|
|assets|||
|Net cash received from disposal of|||
|subsidiaries and other operating units|||
|Other investment related cash receipts|||
|Subtotal of cash flow in from investment activity|143,001,430.00|117,030,112.00|
|Cash paid for purchase/construction of fixed|||
|assets, Intangible assets and other long term|27,763,546.06|47,230,065.02|
|assets|||
|Cash paid for investment|||
|Net cash paid for acquisition of subsidiaries|||
|||114,299,236.67|
|and other operation units|||
|Other investment related cash payments|||
|Subtotal of cash flow out from investment activity|27,763,546.06|161,529,301.69|
|Net cash flows arising from investment activities|115,237,883.94|-44,499,189.69|
|III. Cash flows arising from fund raising activities|||
|Cash received from absorbing investment|||
|Cash received from loans|700,000,000.00|540,000,000.00|
|Cash received from bond issuing|||
|Other fund-raising related cash receipts|||
|Subtotal of cash flow in from fund raising activity|700,000,000.00|540,000,000.00|
|Cash paid for debt repayment|774,861,928.00|986,000,000.00|
|Cash paid for dividend/profit distribution or|||
||115,249,277.23|79,277,672.20|
|repayment of interest|||
|Cash paid for other financing activities|||

||||
|-|-|-|
|Sub-total cash flow paid for financing activities|890,111,205.23|1,065,277,672.20|
|Net cash flows arising from fund raising activities|-190,111,205.23|-525,277,672.20|
|IV. Change of exchange rate influencing the cash|||
||73,422.99|-90,699.34|
|and cash equivalent|||
|V. Net increase of cash and cash equivalents|6,011,521.84|-140,413,982.04|
|Plus: Opening balance of cash and cash|||
||128,958,944.43|269,372,926.47|
|equivalents|||
|VI. Ending balance of cash and cash equivalents|134,970,466.27|128,958,944.43|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
7. Consolidated Statement of Changes inOwner’s Equity
Amount in the reporting period
In CNY
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||Reporting period|||||||||||||
|||Owners’ equity attributable to the parent company|||||||||||||
||||Other equity instruments||||||||Reserv||Minority||
|Items||||||||Other||||Retaine||Total|
|||Capit|Prefe|||Capital|Less:|||Surplus|e||shareholders’||
|||||Perp||||compre|Special|||d||owner’s|
|||alStock|rredshare|etual|Others|Reserve|sharesin stock|hensive|reserve|Reserve|againstgeneral|earning|equity|equity|
|||||bond||||income||||s|||
||||s||||||||risks||||
|||438,7||||1,062,4||||||||2,467,9|
||I. Ending balance of|||||||-11,523,||206,805||771,484|5,515.7||
|||44,88||||55,644.||||||||72,876.|
||the previous year|||||||442.39||,713.35||,565.02|8||
|||1.00||||22||||||||98|
||Plus: Change in||||||||||||||
||accounting policy||||||||||||||
||Correction||||||||||||||
||of previous errors||||||||||||||
||Consolidation of||||||||||||||
||enterprises under the||||||||||||||
||same control||||||||||||||
||Others||||||||||||||
|||438,7||||1,062,4||||||||2,467,9|
||II. Opening balance of|||||||-11,523,||206,805||771,484|5,515.7||
|||44,88||||55,644.||||||||72,876.|
||the reporting year|||||||442.39||,713.35||,565.02|8||
|||1.00||||22||||||||98|
||III. Decrease/increase|||||||||||||102,16|
|||||||||6,081,3||16,210,||79,876,|||
||of the report year||||||||||||265.86|7,687.5|
|||||||||02.61||080.45||038.64|||
||(decrease is stated|||||||||||||6|

|||||||
|-|-|-|-|-|-|
|with “-“)||||||
|(I) Total|||||189,91|
||6,081,3||183,835|||
|comprehensive||||265.86|6,663.7|
||02.61||,095.29|||
|income|||||6|
|(II) Owners’ input and||||||
|decrease of capital||||||
|1. Common shares||||||
|contributed by the||||||
|owner||||||
|2. Capital contributed||||||
|by other equity||||||
|instruments holders||||||
|3. Amount of payment||||||
|for shares credited to||||||
|owners’ equity||||||
|4. Others||||||
||||-103,95|||
|||16,210,|||-87,748|
|(III) Profit Distribution|||9,056.6|||
|||080.45|||,976.20|
||||5|||
|1. Provision of surplus||16,210,|-16,210|||
|reserve||080.45|,080.45|||
|2. Provision of||||||
|reserve against||||||
|general risks||||||
|3. 3. Distribution to||||||
||||-87,748||-87,748|
|the owners (or||||||
||||,976.20||,976.20|
|shareholders)||||||
|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 with||||||
|surplus reserve||||||
|4. Setting of the||||||
|amount involved in||||||

|||||||||
|-|-|-|-|-|-|-|-|
|the movement of the||||||||
|beneficial plan carried||||||||
|over to the retained||||||||
|earnings||||||||
|5. Others||||||||
|(V) Special reserve||||||||
|1. Provision in the||||||||
|reporting period||||||||
|2. Applied in the||||||||
|reporting period||||||||
|(VI) Others||||||||
||438,7|1,062,4|||||2,570,140,564.54|
|IV. Ending balance of|||-5,442,|223,015|851,360|5,781.6||
||44,88|55,644.||||||
|the reporting period|||139.78|,793.80|,603.66|4||
||1.00|22||||||

 Amount in the previous period
In CNY
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||Previous period|||||||||||||
|||Owners’ equity attributable to the parent company|||||||||||||
||||Other equity instruments||||||||Reserv||Minority||
|Items||||||||Other||||Retaine||Total|
|||Capit|Prefe|||Capital|Less:|||Surplus|e||shareholders’||
|||||Perp||||compre|Special|||d||owner’s|
|||alStock|rredshare|etual|Others|Reserve|sharesin stock|hensive|reserve|Reserve|againstgeneral|earning|equity|equity|
|||||bond||||income||||s|||
||||s||||||||risks||||
|||438,7||||1,062,4||||||||2,374,9|
||I. Ending balance of|||||||-11,778,||193,961||687,986|3,577,6||
|||44,88||||55,644.||||||||48,189.|
||the previous year|||||||498.24||,700.45||,807.74|54.56||
|||1.00||||22||||||||73|
||Plus: Change in||||||||||||||
||accounting policy||||||||||||||
||Correction||||||||||||||
||of previous errors||||||||||||||
||Consolidation of||||||||||||||
||enterprises under the||||||||||||||
||same control||||||||||||||
||Others||||||||||||||
|||438,7||||1,062,4||||||||2,374,9|
||II. Opening balance of|||||||-11,778,||193,961||687,986|3,577,6||
|||44,88||||55,644.||||||||48,189.|
||the reporting year|||||||498.24||,700.45||,807.74|54.56||
|||1.00||||22||||||||73|
||III. Decrease/increase||||||||||||||
||of the report year|||||||255,055||12,844,||83,497,|-3,572,|93,024,|
||(decrease is stated|||||||.85||012.90||757.28|138.78|687.25|
||with “-“)||||||||||||||

|||||||
|-|-|-|-|-|-|
|(I) Total|||||142,58|
||255,055||140,216|2,116,3||
|comprehensive|||||7,683.0|
||.85||,258.28|68.91||
|income|||||4|
|(II) Owners’ input and||||-5,688,|-5,688,|
|decrease of capital||||507.69|507.69|
|1. Common shares||||||
|contributed by the||||||
|owner||||||
|2.. Capital contributed||||||
|by other equity||||||
|instruments holders||||||
|3. Amount of payment||||||
|for shares credited to||||||
|owners’ equity||||||
|||||-5,688,|-5,688,|
|4. Others||||||
|||||507.69|507.69|
|||12,844,|-56,718,||-43,874|
|(III) Profit Distribution||||||
|||012.90|501.00||,488.10|
|1. Provision of surplus||12,844,|-12,844,|||
|reserve||012.90|012.90|||
|2. Provision of||||||
|reserve against||||||
|general risks||||||
|3. Distribution to the||||||
||||-43,874,||-43,874|
|owners (or||||||
||||488.10||,488.10|
|shareholders)||||||
|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 with||||||
|surplus reserve||||||
|4. Setting of the||||||
|amount involved in||||||
|the movement of the||||||

||||||||||
|-|-|-|-|-|-|-|-|-|
|beneficial plan carried|||||||||
|over to the retained|||||||||
|earnings|||||||||
|5. Others|||||||||
|(V) Special reserve|||||||||
|1. Provision in the|||||||||
|reporting period|||||||||
|2. Applied in the|||||||||
|reporting period|||||||||
|(VI) Others|||||||||
||438,7|1,062,4|.|||||2,467,9|
|IV. Ending balance of||||-11,523,|206,805|771,484|5,515.7||
||44,88|55,644||||||72,876.|
|the reporting period||||442.39|,713.35|,565.02|8||
||1.00|22||||||98|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
8. Consolidated Statement of Changes inOwner’s Equity, Parent Company
Amount in the reporting period
In CNY
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Reporting period|||||||||||
|||Other equity instruments|||||Other|||Retaine||
|||||||Less:|||||Total|
|Items|Capital|Preferre|||Capital||comprehe|Special|Surplus|d||
||||Perpetu|||shares in|||||owner’s|
||Stock|d||Others|Reserve||nsive|reserve|Reserve|earning||
||||al bond|||stock|||||equity|
|||shares|||||income|||s||
|I. Ending balance of|438,744||||1,068,111,||||206,805,7|625,656|2,339,318|
|the previous year|,881.00||||185.32||||13.35|,338.99|,118.66|
|Plus: Change in||||||||||||
|accounting policy||||||||||||
|Correction||||||||||||
|of previous errors||||||||||||
|Others||||||||||||
|II. Opening balance of|438,744||||1,068,111,||||206,805,7|625,656|2,339,318|
|the reporting year|,881.00||||185.32||||13.35|,338.99|,118.66|
|III. Decrease/increase||||||||||||
|of the report year|||||||||16,210,08|58,141,|74,351,82|
|(decrease is stated|||||||||0.45|747.84|8.29|
|with “-“)||||||||||||
|(I) Total||||||||||162,100|162,100,8|
|comprehensive||||||||||,804.49|04.49|

|||||
|-|-|-|-|
|income||||
|(II) Owners’ input and||||
|decrease of capital||||
|1. Common shares||||
|contributed by the||||
|owner||||
|2. Capital contributed||||
|by other equity||||
|instruments holders||||
|3. Amount of payment||||
|for shares credited to||||
|owners’ equity||||
|4. Others||||
|||-103,95||
||16,210,08||-87,748,9|
|(III) Profit Distribution||9,056.6||
||0.45||76.20|
|||5||
|1. Provision of surplus|16,210,08|-16,210,||
|reserve|0.45|080.45||
|2. Distribution to the||||
|||-87,748,|-87,748,9|
|owners (or||||
|||976.20|76.20|
|shareholders)||||
|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 with||||
|surplus reserve||||
|4. Setting of the||||
|amount involved in||||
|the movement of the||||
|beneficial plan carried||||
|over to the retained||||
|earnings||||
|5. Others||||

|||||||
|-|-|-|-|-|-|
|(V) Special reserve||||||
|1. Provision in the||||||
|reporting period||||||
|2. Applied in the||||||
|reporting period||||||
|(VI) Others||||||
|IV. Ending balance of|438,744|1,068,111,|223,015,7|683,798|2,413,669,946.95|
|the reporting period|,881.00|185.32|93.80|,086.83||

 Amount in the previous period
In CNY
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Previous period|||||||||||
|||Other equity instruments|||||Other|||Retaine||
|||||||Less:|||||Total|
|Items|Capital|Preferre|||Capital||comprehe|Special|Surplus|d||
||||Perpetu|||shares in|||||owner’s|
||Stock|d||Others|Reserve||nsive|reserve|Reserve|earning||
||||al bond|||stock|||||equity|
|||shares|||||income|||s||
|I. Ending balance of|438,744||||1,068,111,||||193,961,7|553,934|2,254,752|
|the previous year|,881.00||||185.32||||00.45|,710.97|,477.74|
|Plus: Change in||||||||||||
|accounting policy||||||||||||
|Correction||||||||||||
|of previous errors||||||||||||
|Others||||||||||||
|II. Opening balance of|438,744||||1,068,111,||||193,961,7|553,934|2,254,752|
|the reporting year|,881.00||||185.32||||00.45|,710.97|,477.74|
|III. Decrease/increase||||||||||||
|of the report year|||||||||12,844,01|71,721,|84,565,64|
|(decrease is stated|||||||||2.90|628.02|0.92|
|with “-“)||||||||||||
|(I) Total||||||||||||
|||||||||||128,440|128,440,1|
|comprehensive||||||||||||
|||||||||||,129.02|29.02|
|income||||||||||||
|(II) Owners’ input and||||||||||||
|decrease of capital||||||||||||
|1. Common shares||||||||||||
|contributed by the||||||||||||
|owner||||||||||||
|2. Capital contributed||||||||||||
|by other equity||||||||||||
|instruments holders||||||||||||
|3. Amount of payment||||||||||||
|for shares credited to||||||||||||

|||||||
|-|-|-|-|-|-|
|owners’ equity||||||
|4. Others||||||
||||12,844,01|-56,718,|-43,874,4|
|(III) Profit Distribution||||||
||||2.90|501.00|88.10|
|1. Provision of surplus|||12,844,01|-12,844,||
|reserve|||2.90|012.90||
|2. Distribution to the||||||
|||||-43,874,|-43,874,4|
|owners (or||||||
|||||488.10|88.10|
|shareholders)||||||
|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 with||||||
|surplus reserve||||||
|4. Setting of the||||||
|amount involved in||||||
|the movement of the||||||
|beneficial plan carried||||||
|over to the retained||||||
|earnings||||||
|5. Others||||||
|(V) Special reserve||||||
|1. Provision in the||||||
|reporting period||||||
|2. Applied in the||||||
|reporting period||||||
|(VI) Others||||||
|IV. Ending balance of|438,744|1,068,111,|206,805,7|625,656|2,339,318|
|the reporting period|,881.00|185.32|13.35|,338.99|,118.66|

 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo
Person in charge of the Accounting Department: Tian Hui
Notes to the Financial Statements
for the Year Ended 31 December 2018
(Expressed in RMB Yuan unless otherwise indicated)
I. Company status
FIYTA Holdings Ltd. (the “Company”) was founded, under the approval of Shen Fu Ban Fu (1992) 1259 issued by the General Office of Shenzhen Municipal Government, through the restructuring of former Shenzhen FIYTA Time Industrial Company by the promoter of China National Aero-Technology Import and Export Shenzhen Industry& Trade Center (name changed to “China National Aero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992, and the name changed to “Shenzhen FIYTA Holdings Limited”. The headquarters is located at FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao, Nanshan District, Shenzhen, Guangdong Province.
Pursuant to the approval of Shen Ren Yin Fu Zi (1993) 070 issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, the Company issued Renminbi ordinary shares (A shares) and Renminbi special shares (B shares) publicly on 10 March 1993. On 3 June 1993, both theCompany’s A shares and B shares were listed and traded on Shenzhen Stock Exchange pursuant to the approval of Shen Zheng BanFu[1993]20 issued by Shenzhen Securities Regulatory Office and Shen Zheng Shi Zi (1993)16 issued by Shenzhen Stock Exchange. On 30 January 1997, the company name changed to Shenzhen FIYTA Holdings Limited with the approval of Shenzhen Municipal Administration for Industry and Commerce.
On 4 July 1997, China National Aero-Technology Shenzhen Co., Ltd. ("CATIC Shenzhen Company") transferred 72,360,000 corporate shares (accounting for52.24% of the Company's total share capital) to Shenzhen China Aviation Group Company Limited (previously known as "Shenzhen China Aviation Industry Company Limited", hereinafter referred to as "China National Aviation Group") according to share transfer agreement signed by both parties. As a result, theCompany’s controlling shareholder changed from CATIC Shenzhen Company to China National Aviation Group.
On 26 October 2007, the Company implemented split-share reform. Under the premise of maintaining the Company's total of 249,317,999 shares unchanged, the Company's shareholders of non-tradable shares paid 3.1 shares per 10 tradable shares to all the tradable share shareholders registered on option registration date designated by the split-share reform program. At that point, after the reform, the shares held by China National Aviation Group reduced to44.69% from52.24%.
On 29 February 2008, due to expanding the scope of business, theCompany’s corporate business license was altered from Shen Si Zi No. 4403011001583 to No. 440301103196089 with the approval of Shenzhen Municipal Administration for Industry and Commerce.
With the approval of “Reply of China Securities Regulatory Commission (CSRC) to the Approval of Private
Placement of Shenzhen FIYTA Holdings Limited” (Zheng Jian Xu Ke[2010]1703) and “Reply of State-owned Assets Supervision and Administration Commission of the State Council (SASAC) on Issues in Private Placement of Shenzhen FIYTA Holdings Limited” (SASAC (2010)430) in 2010, the Company is approved to issue not more than 50,000,000 ordinary shares (A shares) by private placement. After the completion of the placement on 9 December 2010, theCompany’s registered capital increased to RMB280,548,479.00 and the equity capital of the Company held by China National Aviation Group reduced to41.49%.
On 3 March 2011, the company name changed to FIYTA Holdings Limited with the approval of Shenzhen Municipal Administration for Industry and Commerce.
On 8 April 2011, the Company increased its share capital by 4 shares for every 10 shares by capitalizing the capital reserves on the basis of total shares of 280,548,479 as at 31 December 2010. Total shares of the Company changed to 392,767,870 shares after the increase.
On 11 November 2015, with the approval of China Securities Regulatory Commission (CSRC) “Reply of non-public offering of stocks of Shenzhen FIYTA Holdings Limited”(ZhengJianXuKe[2015]2588) and the approval of State-owned Assets Supervision and Administration Commission of the State Council (SASAC) “Reply of non-public offering of stocks of Shenzhen FIYTA Holdings Limited” (SASAC(2015)415), the Company was approved to issue not more than 46,911,649 ordinary shares (A shares) through non-public offering. After the completion of the non-public offering of stocks on 22 December 2015, theCompany’s registered capital was increased to RMB438,744,881.00 and the equity capital of the Company held by China National Aviation Group reduced to37.15%.
As at 31 December 2018, the Company has accumulatively issued 438,744,881 shares in total (refer to Notes VI. 25 “Share capital” for detail).
Corporate governance institutions that were established by the Company include General Meeting of Shareholders, Board of Directors, Board of Supervisors, Strategy Committee, Audit Committee, and Nomination, Remuneration and Evaluation Committee. TheCompany’s functional departments include Administration, Party Affairs, Discipline Inspection and Audit, Finance, Human Resources, Strategy and Operating, Data and Information, Innovative Design Center,R&D, and Property Management departments.
The financial statements have been approved and authorised for issue by the Board of Directors of the Company on 13 March 2019.
There are 11 subsidiaries that are included in theCompany’s scope of consolidation for year 2018, see Note VIII “Equity in other entities” for detail. Comparing with prior year, the status of changes in scope of consolidation is: zero addition and one decrease. See Note VII “Changes in scope of consolidation” for detail.
The business scope of the Company and its subsidiaries mainly includes: producing and selling of analogue indication mechanical watches, quartz watches and its movements, components, various timing devices, processing and wholesaling karat gold jewellery watches, intelligent watches; domestic commercial and material
supply and distributing business (excluding goods under exclusive operational rights, special control and exclusive sales); property management and leasing; providing design service. Import and export business of self-design and construction; import and export business (according to Shen Mao Guan Deng Zheng Zi No.2007-072).The legal representative of the Company is Huang Yongfeng.
II. Basis of preparation
The financial statements of the Company have been prepared based on going concern assumption and based on actual transactions and events occurred. It is prepared in accordance with the requirements of “Accounting Standards for Business Enterprises - Basic Standard” (promulgated under Decree No. 33 of the Ministry of Finance and revised under Decree No. 76 of the Ministry of Finance) and 42 Specific Standards issued and revised by the Ministry of Finance on and after 15 February 2006, and application guidance, illustrations to the standards and related pronouncements (collectively known as “Accounting Standards for Business Enterprises” or “CAS”). These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2014) issued by China Securities Regulatory Commission (CSRC).
According to Accounting Standards for Business Enterprises, accrual basis is adopted for theCompany’s accounting activity. Except for some financial instruments, the financial statements are measured using historical cost. In case of impairment occurred on assets, provisions for impairment are provided for in accordance with related rules.
III. Statement of compliance with corporate accounting standards
The financial statements of the Company have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises. These financial statements present truly and completely the financial position as at 31 December 2018, the results of operations and the cash flows for the year then ended of the Company. In addition, the financial statements of the Company comply with, in all material respects, the disclosure requirements for financial statements and notes to the financial statements under “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” as revised by CSRC in 2014.
IV. Significant accounting policies and estimates
The Company and each subsidiaries determines specific accounting policies and estimates for revenue recognition, depreciation of fixed asset, amortization of intangible assets andR&D expenses according to the characteristics of their production and operation and based on CAS. Refer to Notes IV. 24 “Revenue”, Note IV 15
“Fixed Asset”, Note IV 18 (1) “Intangible Asset” and Note IV 18 (2)“R&D Expenses” for detail. For explanation of significant accounting judgement and estimate made by the management, refer to Note IV 30 “Significant accounting judgement and estimate” for detail.
1. Accounting period
The accounting period of the Company includes accounting year and interim accounting period. An interim period refers to a reporting period which is shorter than a full accounting year. The accounting year of the Company is the calendar year, i.e. from 1 January to 31 December of each year.
2. Operating cycle
Normal operating cycle refer to the period start from purchasing asset for manufacturing until realization of cash or cash equivalent. The operating cycle of the Company is 12 months, which is the basis for distinguishing liquidity of assets and liabilities.
3. Recording currency
Renminbi (RMB) is the functional currency of the main economic environment in which the Company and its domestic subsidiaries operate. The Company and its domestic subsidiaries adopt Renminbi as the recording currency.
Except for the Swiss-based subsidiary Montres Chouriet SA (the “Swiss Company”) , which is a subsidiary of FIYTA (Hong Kong) Limited (FIYTA Hong Kong), uses Swiss Franc as the recording currency according to the main economic environment where the Swiss Company operated, all other subsidiaries outside the mainland China, including FIYTA Hong Kong and its subsidiary Station 68 Limited (Station 68) use Hong Kong Dollar (HKD) as the recording currency and translate to Renminbi when preparing financial statements.
The currency used in preparing theCompany’s financial statements is Renminbi.
4. Accounting treatment for business combinations involving entities under common control and not under common control
Business combination refers to transactions or events that combine two or more separate enterprises and form one reporting entity. Business combinations are classified into business combinations involving enterprises under common control and business combinations involving enterprises not under common control.
(1) Business combination involving entities under common control
If the enterprises involved in a combination are subject to control of the same party or parties both before and after the combination, and that control is not temporary in nature, it is business combination under common control. The party who obtains control over other participating enterprises on the combination date is the combining party, and the other participating enterprises are combined parties in a business combination under common control. Combination date means the date on which the combining party actually obtains control over the combined parties.
Assets and liabilities that the combining party obtained are measured using book value of the combinedparty’s accounts on combination date. Difference between book value of net assets the combining party obtained and book value of combination consideration paid (or the aggregate nominal amount of shares issued) is recognized in capital reserve (share premium). If the capital reserve (share premium) is insufficient to offset, retained earnings will be adjusted accordingly.
All direct expenses incurred by the acquirer in relation to the combination are included in the current profit or loss at the time such expenses incurred.
(2) Business combinations involving entities not under common control
If the enterprises involved in a combination are not subject to control of the same party or parties both before and after the combination, it is the business combination involving entities not under common control. The party who obtains control over the other participating enterprises on acquisition date is the acquirer, and the other participating enterprises are the acquiree in a business combination not under common control. The acquisition date is the date on which the acquirer actually obtains the control over the acquirees.
As for business combinations involving enterprises not under common control, combination cost includes assets paid, liabilities incurred or assumed, and the fair value of equity securities issued by the acquirer to obtain control over the acquiree on the acquisition date. Fees for auditing, legal service, evaluation and consultation, and other administrative expenses incurred for the combination are recognized in profit or loss in the period in which such expenses incurred. Transaction costs incurred by the acquirer for issuing equity securities or debt securities as combination consideration are recognized in initial recognition amount of equity securities or debt securities. Contingent consideration, if any, is included in acquisition cost at its fair value on the acquisition date. If, within 12 months, new or further evidence revealed regarding conditions that already existed on acquisition date, the contingent consideration required to be adjusted, adjusting the goodwill arising from the acquisition accordingly. For acquisition that realized step by step through multiple transfer transactions, the equity of the acquiree held by the acquirer before the acquisition date are re-measured using fair value on the acquisition date. Any difference between the fair value and its carrying amount is recognized as investment income and transfer other comprehensive income related to this part of equity to investment gain in the period where the acquisition date falls. The acquisition cost is the aggregate of fair value ofacquiree’s equity held by the acquirer before the acquisition date and fair value of additional equity acquired on the acquisition date.
Acquisition cost incurred by the acquirer and identifiable net assets acquired in the acquisition are measured at fair value on the acquisition date. If the acquisition cost is greater than the fair value of the part of identifiable net assets acquired on the acquisition date, the difference is recognized as goodwill. If the acquisition cost is lesser than the fair value of the part of identifiable net assets acquired on the acquisition date, review the fair value of each identifiable asset, liability and contingent liability that acquired and the calculation of acquisition cost. If, after the review, the acquisition cost is still lesser than the fair value of the part of identifiable net assets acquired, the
difference is recognized in profit or loss in corresponding period.
Deductible temporary differences that the acquirer obtained from the acquiree, which are not recognized on acquisition date due to the conditions of recognition as deferred tax assets are not fulfilled, are recognized as deferred tax assets and correspondingly deduct goodwill if new or further evidence shows, within 12 months after the acquisition date, that relevant conditions exist on the acquisition date and it is probable that the economic benefit arising from the deductible temporary differences on acquisition date can be realized. If the goodwill is insufficient to the deduction, the excess part is recognized in profit or loss in corresponding period. Deferred tax assets recognized in relation to acquisition that other than the circumstances mentioned above are recognized in profit or loss in corresponding period.
For business combination involving entities not under common control that achieved in stages that involves multiple transactions, judgement of whether a transaction belongs to “a basket transaction” requires to be carried out in accordance with the “Notice of the Ministry of Finance on Circulating the Fifth Interpretation to Accounting Standards for Business Enterprise” (Cai Kuai (2012) No. 19) and criteria of “a basket transaction” stated in clause 51 of “Accounting Standards for Business Enterprise No. 33– Financial Statements Consolidation” (see Note IV 5 (2) for detail). If it is “a basket transaction”, the accounting treatment shall be referred to descriptions in above paragraphs and Note IV 13 “Long-term equity investment”. If itisn’t “a basket transaction”, the accounting treatment shall be differentiated for individual and consolidated financial statements.
In the individual financial statements, the initial investment cost is the sum of the carrying amount of equity investment of the acquiree held prior to the acquisition date and the additional investment cost at the acquisition date. When disposing an equity held prior the acquisition date that involving other comprehensive income, the other comprehensive income shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities (i.e. except for the portion resulted from changes in re-measuring theacquiree’s net liability or net asset of a defined benefit plan according to equity method accounting, the rest shall be recorded in current period investment gain).
In the consolidated financial statements, the cost of equity investment of the acquiree held prior to the acquisition date is re-measured at the fair value on the acquisition date, the difference between the fair value and carrying value is recognized as investment gain for the current period.
For an equity held prior the acquisition date that involving other comprehensive income, the other comprehensive income shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities (i.e. except for the portion resulted from changes in re-measuring theacquiree’s net liability or net asset of a defined benefit plan according to equity method accounting, the rest shall be recorded in current period investment gain).
5. Method of preparing consolidated financial statements
(1) Principles in determining the scope of the consolidation
The scope of consolidation is determined on the basis of control. Control refers to the right that the Company is able to make decision on financial and operational policies of the invested company, and receiving benefits from the business activities conducted by the invested company. The scope of the consolidation includes the Company and all its subsidiaries. Subsidiary means enterprise or entity that is controlled by the Company.
The Company will re-evaluate the scope of consolidation once related facts and situation changes, which in turn results in changes to key factors that define control.
(2) Method of preparing consolidated financial statements
The Group begins to include a subsidiary in the scope of consolidation from the date that the Company acquires the net assets and effective control over the operation and business decisions of the subsidiary. A subsidiary is excluded out of the scope of theGroup’s consolidation from the date the Company losses effective control over it. For subsidiary that is disposed, the operating performance and cash flows before the disposal date are properly included in the consolidated income statement and consolidated cash flow statement. The opening balance of the consolidated balance sheet is not adjusted if the disposal occurs in the same period. The business performance and cash flows of the addition of subsidiary through combination involving entities not under common control after the acquisition date have been properly included in the consolidated income statement and consolidated cash flow statement, and no adjustments are made to the opening balance and comparative figures of the consolidated financial statements. For addition of subsidiary through combination involving entities under common control, the business performance and cash flows from the beginning of the period to the combination date are properly included in the consolidated income statement and consolidated cash flow statement, and the opening and comparative figures of the consolidated financial statements are adjusted at the same time.
If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments are made to the financial statements of the subsidiary according to theCompany’s accounting policies and period when preparing consolidated financial statements. If the subsidiary is acquired through combinations involving entities not under common control, the adjustments are made based on the fair value of its identifiable net assets on the acquisition date.
All material intra-group current account balances, transactions and unrealized profits are offset when preparing the consolidated financial statements.
The part of subsidiaryshareholders’ equity and current period net profit or loss that do not attribute to the Company are presented separately undershareholders’ equity and net profit in consolidated financial statements as minorityshareholders’ equity and minorityshareholders’ profit or loss respectively. Portion ofsubsidiaries’ current net profit or loss attributable to minorityshareholder’s equity are presented under the title of “minorityshareholders’ profit or loss” under net profit in consolidated income statement. Ifsubsidiary’s losses that attributable to minority shareholders exceed the openingowners’ equity attributable to minority shareholders, minorityshareholders’ equity is deducted.
If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons, the remaining equity is measured at fair value on the date when the control lost. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the Company calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control lost. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time control lost. The remaining equity interests are measured subsequently according to “CAS No. 2– Long-term Equity Investment” or “CAS No. 22– Recognition and measurement of Financial Instrument”. See Note IV. 9 “Financial instrument” or Note IV. 13 “Long-term equity investment” for details.
If the Company losses control over a subsidiary step by step through multiple disposal transactions, judgment of whether these transactions belong to “a basket transaction”.It’s typically considered to account the multiple transaction as “a basket transaction” if the terms, conditions or economic effects of each of the transactions meet one or more criteria list below:
a. The transactions are entered into at the same time or in contemplation of each other;
b. The transactions together can achieve a complete commercial effect;
c. The occurrence of one transaction is dependent on the occurrence of at least one other transaction;
d. One transaction is not economically justified, but it is economically justified when considered together with other transactions.
If the transactions do not belong to a basket transaction, each transactions shall be accounted for as a disposal transaction that does not resulted in loss of control (refer to Note IV. 13 (2)④ for detail) and applicable principle of loss of control over a subsidiary because of partial disposal of equity investment or other reason (refer to previous paragraph). However, the difference between each consideration received for disposal and portion of net asset related to the disposal shall be accounted as other comprehensive income in consolidated financial statement and charged to profit or loss at the time control losses and in the period of loss of control.
6. Categorizing of joint arrangement and accounting treatment for joint operation
A joint arrangement is an arrangement of which two or more parties have joint control. The Company classifies joint arrangements into joint operations and joint ventures. A joint operation is a joint arrangement whereby the joint operators have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the joint ventures have rights to the net assets of the arrangement. The Company adopts equity method to joint venture investment and accounted for in accordance with accounting policies stated in Note IV 13 (2)②“Long-term investment accounted for using equity method”.
As a party in a joint operation, the Company recognize the followings: asset held independently; liability undertaken independently; theCompany’s share of asset held commonly and liability undertaken commonly;
revenue from selling output of the joint operation that enjoyed by the Company; revenue from selling output of the joint operation based on theCompany’s share; expenses incurred independently by the Company and common expenses incurred and shall be borne by the Company according to its shares.
When the Company, as a party in a joint operation, invest or sell asset (the asset does not constitute business) to the joint operation or purchase asset from the joint operation, the Company only recognize the portion of profit or loss that attribute to other parties in the joint operation arises from the transaction before the asset is sold to third party. If the asset impaired according to “CAS No. 8– Asset impairment”, the Company recognize the loss in full if the asset is invested or sold to the joint operation by the Company, or only recognize the portion attributable to the Company should be recognized if the asset is purchased by the Company from the joint operation.
7. Determination of cash and cash equivalents
The Company's cash and cash equivalents include cash on hand, deposit that can be used for immediate payment, andCompany’s investments that are with characteristics of short term (generally matures in three months from the date of purchase), highly liquid, readily convertible to known amount of cash, and with insignificant risks of changes in value.
8. Foreign currency transactions and financial statements translation
(1) Translation of foreign currency transactions
Initial recognition of foreign currency transactions incurred by the Company are translated to recording currency using the spot exchange rate at the trading date (usually refers to middle rate of foreign exchange rate on that day published by the People's Bank of China). For foreign currency exchange transactions and transactions related to foreign currency exchange, they are translated into recording currency using actual exchange rate.
(2) Translation of monetary items and non-monetary items denominated in foreign currencies
At the balance sheet date, monetary items denominated in foreign currencies are translated using the spot rate at the balance sheet date. Translation differences arising from the translation are recognized in current profit or loss exceptfor:①Capitalized exchange difference attributable to assets purchased or constructed, which can be capitalized, using foreign currency specified loan;②Exchange differences on hedging instruments used for effective hedging of net investments in overseas operations (the difference is included in other comprehensive income until the net investment is disposed of to be recognized as current gains andlosses;③Amortized cost of available for sale monetary items denominated in foreign currency. The exchange difference arose from the two scenario mentioned above shall be treated under the principal of capitalizing of borrowing cost and charged to other comprehensive income respectively.
In preparing of the consolidated financial statements involving overseas operations, if there is any foreign-currency monetary item constituting substantially net investment in overseas operation, the exchange difference arising from exchange rate variation is recognized in other comprehensive income and will be charged
to profit or loss at the period the investment is disposed.
Non-monetary items denominated in foreign currencies that are measured using historical costs are still measured using recording currency translated at the spot rate at transaction date. Non-monetary items denominated in foreign currency which are measured using fair value are translated at spot rate of the day the fair value is determined. The differences between amount of recording currency after the translation and the original amount of recording currency are treated as changes in fair value (including exchange rate change) and are recognized in current profit or loss or recognized in capital reserves as other comprehensive income.
(3) Translation of financial statements prepared in foreign currencies
In preparing of the consolidated financial statements involving overseas operations, if there is any foreign-currency monetary item constituting substantially net investment in overseas operation, the exchange difference arising from exchange rate variation is recognized as “translation difference” underowners’ equity in balance sheet. In case of disposal of overseas operation, it is charged to the profit and loss of the period.
Financial statements of foreign businesses that denominated in foreign currencies are translated to financial statements in RMB using following rules: asset and liability items in balance sheet are translated using the spot rate on balance sheet date; except for “undistributed profit”, all other items inowners’ equity are translated using the spot rate on the date the corresponding transactions occurred. Revenue and expenses items in income statement are translated using the average rate on the transaction date. The undistributed profit at the beginning of the year is the year-end balance translated at the prior year. The undistributed profit at the year-end is presented using translated items in profit distribution. Difference between the translated assets and sum of liabilities andowners’ equity is recognized in other comprehensive income as translation differences and is presented separately underowners’ equity in balance sheet. When disposing overseas operations and losing controls over the operations, relevant translation differences which are originally presented underowners’ equity are charged to profit or loss entirely or proportionately according to percentage of disposal.
Cash flows denominated in foreign currency and cash flows of subsidiaries outside Mainland China are translated using the average exchange rate on the date when cash flows occur. The amount of cash changes due to exchange rate variations are recognized as adjustment item and presented in the cash flow statement separately. The balance at the beginning of the year and amount actually incurred prior year are presented using figures in prioryear’s translated financial statements.
All foreign exchange translation difference of an oversea investment recorded under equity and attributable to the shareholders of the parent company shall be charged to current period profit or loss when the Company losses control over this oversea investment due to disposal of all equity owned or partial disposal or other reasons. If the equity holding in an oversea investment decreased but still maintain control due to partial disposal or other reasons, foreign exchange translation difference related to the part disposed shall be included as minorityshareholders’ interest and should not be charged to current period profit or loss. If the partial disposal is for
oversea associate or joint ventured enterprise, foreign exchange difference related to the oversea operation shall be charged to profit or loss when the disposal occurred based on the percentage disposed.
9. Financial instruments
A financial asset or financial liability is recognized when the Company becomes one party of financial instrument contracts. Financial asset and financial liability are initially recognized at fair value. Transaction expenses for fair value through profit or loss financial asset and liability shall be charged to the profit or loss directly. Transaction expenses for financial asset and liability other than that shall be included in the initial recognition amount.
(1) Determination of fair values for financial assets and financial liabilities
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in anarm’s length transaction. If there is an active market for a financial instrument, the quoted price in the active market shall be used to establish the fair value of the financial instruments. Quoted prices from an active market are prices that are readily and regularly available from an exchange, broker, industry association or pricing service agencyetc… and represent prices used in actual market transactions on anarm’s length basis. If no active market exists for a financial instrument, the Group establishes fair values by using valuation techniques. Valuation techniques include using the prices quoted in latest market transactions between knowledgeable, willing parties for reference, referencing to the current fair value of another instrument that is substantially the same in nature, discounted cash flow method and option pricing model, etc...
(2) Classification, recognition and measurement of financial assets
Financial assets which are traded in conventional manner are recognized or derecognized on the transaction date. On initial recognition, financial assets are classified into fair value through profit or loss financial assets, held-to-maturity financial assets, loans and receivables, and available-for-sale financial assets.
① Fair value through profit or loss financial asset
Fair value through profit or loss financial asset includes financial asset held for trade and designated upon initial recognition as at fair value through profit or loss.
Financial asset meet one of the following criteria is categorized as financial asset held for trade: A. the purpose of acquiring the financial asset is for selling in short-term; B. belongs to identifiable financial instrument portfolio that is centralized managed and objective evidence proofed that the Company manages the portfolio in a manner to make profit in short-term; C. belongs to derivative instrument except for derivative instruments that are designated as effective hedging tools, financial guarantee contract or connected with equity instrument investment that do not have quotation in an active market and that the fair value cannot be measured reliably and the settlement of derivative instrument must involve delivery of this equity instrument.
Financial asset can be recognized initially as designated fair value through profit or loss financial asset if one of the following conditions is met: A. the designation can eliminate or reduce significantly the situation of inconsistency in recognition or measurement of profit or loss caused by different measurement basis; B. the official documents of theCompany’s risk management or investment strategy state that the financial asset portfolio or portfolio combines financial asset and financial liability that contains the financial asset are managed, evaluated and reported to key management based on fair value.
Fair value through profit or loss financial asset is measured consequently using fair value. Profit or loss arose from changes in fair value and dividend and interest income related to the asset are recorded in current period profit or loss.
② Held-to-maturity investment
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intention and ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortized cost using the effective interest method; gains and losses arising from de-recognition, impairment or amortization is recognized in profit or loss for the current period.
Effective interest rate method refers to the method that calculates amortized cost and interest income or expenses for each period based on actual interest rate of a financial asset or financial liability (or a group of financial asset or financial liability). Effective interest rate is the rate that used to discount future cash flows of a financial asset or financial liability in its holding period or a shorter time applicable to its current book value.
When calculating effective interest, the Company estimates future cash flows (do not consider future credit loss) based on all contractual terms of the financial asset or financial liability, and taking into consideration of expenses, transaction fee and discount or premium, which consist part of the actual interest rate, that are paid to or received from different parties of the financial asset or financial liability contract.
③Loan and receivables
Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. TheCompany’s assets fall under this category include notes receivable, accounts receivable, interest receivable, dividends receivable and other receivablesetc…
Loan and receivables are subsequently measured at amortized cost using the effective interest method; gains and losses arising from de-recognition, impairment or amortization is recognized in profit or loss for the current period.
④Available-for-sale financial asset (AFS financial asset)
AFS financial assets are those non-derivative financial assets that are designated as available for sale and those financial assets in addition to those above mentioned.
The cost of AFS debt instrument investment at period end is determined according to amortized cost, i.e. the initial
recognized amount minus principal repaid plus or minus the accumulated amortization of difference between initial recognized amount and amount at the maturity date, and minus impairment loss incurred. The cost of AFS equity instrument at period end is the initial cost when it is acquired.
AFS financial assets are subsequently measured at fair value. Gain and losses arising from changes in fair value of AFS financial assets (other than impairment losses and foreign exchange gains and losses resulted from foreign currency monetary assets which are recognized in profit or loss for the current period) are recognized as other comprehensive income, until the financial assets are derecognized, are transferred to profit or loss for the current period. Equity instrument investment with no quoted price in active markets and with not reliably measured fair value, and derivative financial assets for the equity instrument and settled by paying the equity instrument are subsequently measured at cost.
Interest income and dividends related to the AFS financial assets are recognized as investment gain for the current period.
(3) Impairment of financial assets
The Company assesses the carrying amount of financial assets at each balance sheet date other than those at fair value through profit or loss, if there is objective evidence that financial assets are impaired, the Company determines the amount of impairment loss.
The Company conducts impairment test on individually significant financial assets separately. Financial assets that are not individually significant in amount are tested for impairment separately or grouped into different asset portfolios based on similarity and correlation of the credit risk characteristics. Financial assets that are not impaired after standalone impairment tests will be tested again by including it in a portfolio of financial assets with similar credit risk characteristics. Financial assets that have been impaired in standalone test will not be tested again by including it in a portfolio of financial assets with similar credit risk characteristics.
①Impairment to held-to-maturity, loan and receivables
The carrying amount of financial assets that are measured at cost or amortized cost shall be reduced to the present value of estimated future cash flows. The amount reduced shall be recognized as impairment loss and charged to current period profit or loss. If there is objective evidence shows that the value of the financial asset recovered after impairment loss was recognized, and the recovery is connected with matters happened after the recognition of impairment loss, the loss recognized previously could be reversed. The carrying amount after the reversal shall not exceed the amortized cost at the reversal date as if there is no impairment before.
②Available-for-sale financial assets
It indicated that impairment incurred to the AFS financial asset if the air value decrease is judged as severe and not temporary by considering all relevant factors.
If AFS financial assets are impaired, accumulated losses due to decreases in fair value previously recognized
directly in other comprehensive income are reversed and charged to profit or loss for the current period. The reversed accumulated losses are the asset's initial acquisition costs after deducting amounts recovered and amortized, current fair value and impairment losses previously recognized in profit or loss.
If, in a subsequent period, the fair value of financial assets increases and the increase can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment losses can be reversed. The reversal of impairment losses of AFS equity instruments are to be included in other comprehensive income and the AFS debt instrument impairments are to be reversed through current period profit or loss.
The impairment for derivative financial asset that do not have quotation in an active market and that the fair value cannot be measured reliably and the settlement of derivative instrument must involve delivery of this equity instrument are not allowed to be reversed.
(4) Condition of recognition and measurement of transfer of financial assets
Financial asset is derecognized if one of the following conditions is satisfied:①the contractual rights of receiving cash flows from the financial asset is terminated;②financial asset has been transferred, and substantially all risks and reward associated with the ownership of the financial asset have been transferred to transferee;③the financial asset has been transferred. The enterprise neither transfers nor retains substantially all the risks and rewards associated with the ownership of the financial asset, but it has not retained control over the financial asset.
If the enterprise neither transfers nor retains substantially all the risks and rewards associated with the ownership of a financial asset, and it retains control over the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizing associated liability. The extent of continuing involvement in the transferred asset is the extent to which the enterprise is exposed to risks of changes in the value of the transferred asset.
For an entire transfer of a financial asset that satisfies the de-recognition criteria, the difference between the carrying amount of the financial asset transferred and the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income is recognized in current profit or loss.
If a part of the transferred financial asset qualifies for de-recognition, the carrying amount of the transferred financial asset in its entirety shall be allocated between the part that is derecognized and the remaining portion proportionately based on the relative fair value of each part. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss attributable to it that had been recognized in other comprehensive income is recognized in current profit or loss.
For financial asset sold with recourse or endorsed, it needs to assure that almost all risk and rewards associated with the financial asset have been transferred. If almost all risk and rewards associated with the financial asset have been transferred to the recipient, the financial asset shall be de-recognized. If the Company retains almost all risk and rewards associated with the financial asset, it shall not be de-recognized. If the Company neither transfers nor retains almost all risk and rewards associated with the financial asset, judgment of whether the Company retains control over the asset needs to be carried out and it shall be accounted for based on principals stated in above paragraphs.
(5) Classification and measurement of financial liabilities
On initial recognition, financial liabilities are classified in financial liabilities at fair value through profit or loss and other financial liabilities. A financial liability is initially recognized at fair value. Transaction costs for financial liability at fair value through profit or loss are charged to current profit or loss. Transaction costs for other financial liabilities are included in their initial recognition amounts.
①Fair value through profit or loss financial liability
The condition of categorizing fair value through profit or loss financial liability and designated as fair value through profit or loss financial liability is the same as fair value through profit or loss financial asset and designated fair value through profit or loss asset.
Fair value through profit or loss financial liability is measured subsequently using fair value and gain or losses resulted from changes in fair value and dividend or interest payment related to the financial liability shall be charged to current period profit or loss.
②Other financial liability
Derivative financial liabilities, which connected with equity instrument without quotation in an active market and that the fair value cannot be measured reliably and the settlement of such financial liabilities require delivery of the equity instrument, are measured subsequently at cost. Other financial liabilities are measured at amortized cost using effective interest rate method. Gain or losses arising from derecognizing or amortization are charged to current profit or loss.
③Financial guarantee contract
Financial guarantee contracts that are not belong to financial liabilities designated as fair value and record changes in profit or loss are initially recognized at fair value, and initially recognized at the determined amount in accordance with the "CAS No. 13 - Contingencies" and the higher of the initial balance after deducting the accumulated amortization according to the "CAS No. 14 - Income".
(6) De-recognition of financial liability
A financial liability or part of it can only be derecognized only when the present obligations are fully or partly discharged. If an agreement between the Company (the debtor) and creditor indicates that the present financial
liability are to be replaced with a new financial liability which has substantially different terms compare with the present financial liability, the present financial liability is derecognized and the new financial liability is recognized. When a financial liability is entirely or partly derecognized, the difference between the carrying amount of the derecognized financial liability and the consideration paid (including any non-cash assets transferred or new financial liabilities undertook) is charged to current profit or loss.
(7) Derivative instrument and embedded derivative instrument
Derivative financial instruments of the Company are initially measured at the fair value of the date a derivative contract entered into and subsequently measured at their fair value. Gain or losses arising from changes in fair value of derivative instrument that designated hedging instrument and highly effective are charged to profit or loss based on hedging accounting. Any gains or losses arising from changes in fair value which do not meet the requirements of hedge accounting are directly recognized to profit or loss for the current period.
For hybrid instrument with embedded derivative, where financial assets or liabilities not designated as fair value through profit or loss, the economic features and risks of the embedded derivative are not closely related to that of the host contract, and a similar instrument with the same terms as the embedded derivative would meet the definition of a derivative, then embedded derivative is separated from hybrid instrument and accounted for as a derivative. If embedded derivative is unable to measure separately either at acquisition or subsequently at balance sheet date, hybrid instrument as a whole is designated as financial assets or liabilities at fair value through profit or loss.
(8) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities can be presented in the balance sheet using net figure after offsetting only when the Group has the legal rights to offset the financial assets and liabilities that are already recognized and plans to execute such rights, and the Group intends to settle corresponding financial assets and liabilities on net basis or to realize the financial asset and settle the financial liability simultaneously. Other than situations mentioned above, financial assets and liabilities are presented separately in balance sheet and cannot be offset. (9) Equity Instrument
An equity instrument is a contract that evidences any residual interest in the assets of the Group after deducting all of its liabilities. The equity instrument will increase theowners’ equity by deducting transaction costs from consideration received for the issuance of the equity instrument.
All kinds of distributions to the owners of equity instrument (excluding stock dividends) decrease theowners’ equity. The Company does not recognize fair value changes of equity instrument.
10. Accounts receivable
Receivables include accounts receivable and other receivables.
(1) Recognition principle for bad debts provision
The Company examines, at the balance sheet date, the carrying amounts of receivables and impairment provision is recognized if following objective evidences that indicating impairment to receivables occurs:①severe financial difficulties of the debtor;②a breach of contract by the debtor (such as a default or breach of contract in interest or principle repayments);③it is probable that the debtor will be bankrupted or conduct other financial reorganization; and④other objective evidences indicating there is an impairment of the receivables.
(2) Method of recognizing bad debt provision
①Determination and providing bad debt provision for receivables which are individually significant in amount and provided for bad debt individually
The Company identifies single accounts receivable item that above RMB800,000.00 (inclusive) and single other receivable item that above RMB500,000.00 (inclusive) as receivables that individually significant in amount. The Company conducts impairment test on individually significant receivables separately. Financial assets that are not impaired after standalone impairment tests will be tested again by including it in a portfolio of financial assets with similar credit risk characteristics. Receivables that have been impaired in standalone test will not be tested again by including it in a portfolio of financial assets with similar credit risk characteristics.
②Determination of receivables that recognize bad debt provision under credit risk portfolio and bad debt provision recognition.
A. Basis of determining portfolio with similar credit risk characteristics
Receivables that are not individually significant in amount and receivables that are individually significant in amount but not impaired after individual impairment test are grouped into different asset portfolios based on similarity and correlation of the credit risk characteristics. These credit risk characteristics reflect the ability of the debtor to repay all amounts due according to terms of contracts related to the assets under test and are in connection with estimation of future cash flows expected to be generated by these assets.
Basis of portfolio determination
Item Basis of portfolio determination
Portfolio of aging Based on aging of receivables
Receivables from petty cash advanced to employees, from subsidiaries of the Company Portfolio of specific accounts and sales revenue between the last settlement date with the department store and the balance sheet date
B. Recognizing bad debt provision based on credit risk portfolio
If the impairment test is carried out for a portfolio of assets, the amount of bad debt provision is recognized based on the structure of the portfolio and similar credit risk characteristics (the ability of repayment by the debtor according to contract terms) by assessing historical experience on assets impairment with similar credit risk characteristics, current economic condition, and losses that are already exist in the portfolio.
Method of recognizing bad debt provision for different portfolios
Item Method
Portfolio of aging Analyzing the aging of receivables
Portfolio of specific accounts No bad debt provision is recognized
a. Recognizing bad debt provision based on aging analysis method within the portfolio
Percentage of provision recognized for Percentage of provision recognized for Aging
accounts receivable(%) other receivables(%)
Within 1 year (inclusive) 5 5
1-2 years (inclusive) 10 10
2-3 years (inclusive) 30 30
Above 3 years 50 50
b. Recognizing bad debt provision at a percentage based on balance within the portfolio
Percentage of provision recognized for Percentage of provision recognized for Name of portfolio
accounts receivable(%) other receivables(%)
No bad debt provision is recognized as the risk of impairment does not exist according Portfolio of specific accounts
to its credit risk characteristics
Based on historical experience, theCompany’s receivables from petty cash advanced to employees, from subsidiaries of the Company and sales revenue between the last settlement date of the same department store and the balance sheet date are with high recoverability and low possibility of incurring bad debt, as a result, no bad debt provisions are provided for such receivables.
③Receivables that are insignificant in amount individually but recognize bad debt provision individually
The Company conducts impairment test to receivables that insignificant in amount individually but with the following characteristics: receivables that involving dispute or legal case, arbitration with the other party; obvious indicators show that it is probable that the debtor is unable to fulfil the repayment obligation. Standalone impairment test is carried out for this kind of receivables. If any objective evidence indicate that the receivables impaired, impairment losses are recognized based on the difference between the carrying amount and the present value of estimated future cash flows. Bad debt provision is recognized accordingly.
(3) Reversal of bad debt provision
If, subsequent to the recognition of an impairment loss on a receivable, there are objective evidences of a recovery in value of the receivable and the recovery is related objectively to events occurred after the impairment was recognized, the impairment loss recognized previously is reversed and recognized in profit or loss. The
carrying amount after the reversal shall not exceed the amortized cost of the receivable on the reversal date as if there is no impairment previously.
Accounts receivable transferred by the Company to financial institutions without recourse, the difference between transaction amount minus the carrying amount of receivable and related transaction taxes and fees is charged to current period profit or loss.
11. Inventory
(1) Classification of inventory
Inventory mainly includes raw material, work-in-process and stored goods.
(2) Costing method of acquiring and delivering of inventory
The inventory is valued using actual cost when it is acquired. The cost of inventory includes cost of purchase, manufacturing cost and other costs. Costing methods used for inventory usage and shipment include: weighted average costing (except for branded watches), specific identification method (for stored goods of branded watches).
(3) Determination of net realizable value of the inventory and method of recognizing impairment provision Net realizable value (NRV) equals to estimated selling price less estimated costs of completion, estimated selling costs and related taxes in the ordinary course of business. The determination of net realizable value of the inventory is based on reliable evidence and taking into consideration of the intents of holding the inventory and impacts of events after the balances sheet date. In particular: (a) the NRV of inventories that are available for sale such as finished goods and materials held for trading are determined using the estimated selling price less estimated selling expenses and related taxes if the business is in the ordinary course of operation; (b) the NRV of materials that need to be processed are determined using estimated selling price of finished goods which is manufactured from the material less estimated cost of completion, estimated selling expenses and related taxes if the business is in the ordinary course of operation.
The Company recognizes inventory impairment provision for FIYTA brand watches based on models.
Impairment provisions for branded watches are recognized by specific item.
Impairment provisions for raw materials of FIYTA watches are recognized by categories based on terminal selling status of FIYTA finished watches taking into considerations of the exchangeability of the spare parts and the special usage of materials.
If, after the impairment provision is recognized, the influence conditions are no longer exist and as a result, the NRV of the inventory is higher than its carrying amount, the impairment provision recognized previously can be reversed. The amount reversed is to be recognized in current profit or loss.
(4) The inventory system is perpetual inventory system
(5) Amortization of low-value consumables and packaging material
The low-value consumables and packaging material are amortized using one-off method at the time it is used.
12. Asset held for sale and disposal group
If the Company mainly recovers a non-current asset or disposal group by disposal (including non-monetary transaction with commercial substance, the same below) rather than continuously usage. The asset is then classified as assets held for sale. The following conditions are to be met at the same time: A non-current asset or disposal group can be immediately sold under current conditions based on the practice of selling such assets or disposal group in a similar transaction; the Company has already decided on the sales plan and has been confirmed the purchase commitment; the sale is expected to be completed within one year. Among them, the disposal group refers to a group of assets that are disposed of by the sale or other means together in a transaction, and the liabilities directly related to these assets transferred in the transaction. The disposal group belongs to the asset group or the asset group combination in accordance with "CAS No. 8–Asset impairment" to share the goodwill acquired in the business combination, the disposal group shall include the goodwill allocated to the disposal group.
When the Company initially measures or re-measures the non-current assets held for sale and the disposal group on the balance sheet date, if the book value is higher than the net amount after the fair value minus the selling expenses, then the book value is reduced to the net amount after deducting the selling expenses from the fair value shall be recognized as the asset impairment loss and recorded in the current profits and losses, and at the same time, provision shall be made for the impairment of assets held for sale. For the disposal group, the recognized impairment loss on assets is offset against the carrying amount of the goodwill in the disposal group, and then reduced in proportion to the applicable "CAS No. 42 - Non-current Assets Held for Sale , Disposal Group and Discontinued Operations" ("Held-for-Sale Standard") measurement requirements of the non-current assets of the book value. On the subsequent balance sheet date, if the fair value minus the selling expenses increases, the amount previously written-down should be restored and the applicable sale-for-sale criterion should be applied after classification as held-for-sale category reversal of the amount of the asset impairment loss recognized in the measurement of non-current assets shall be recorded into the profits and losses of the current period; and according to the book value of the non-current assets held by the disposal group other than goodwill, the carrying amount of the goodwill that has been offset against and the non-current assets subject to the measurement of the held for sale criteria cannot be reversed .
Non-current assets held for sale or disposal of non-current assets in the disposal group are not subject to depreciation or amortization. The interest on liabilities held in the disposal group for sale and other expenses are continuously recognized.
Non-current assets or disposal group no longer meet the classified conditions for holding the sale category, the Company will no longer be classified as held for sale or remove non-current assets from held-for-sale disposal group, and shall be measured at the lower of the following: (1) The carrying amount before classification as held for sale is adjusted according to the depreciation, amortization or impairment that should be recognized if it is not
classified as held for sale; (2) recoverable amount.
13. Long-term equity investment
Long-term equity investment refers to equity investments where the Company has control, joint control or significant influence over, an investee. Equity investment where the Company cannot control, joint control or exercise significant influence over the investee, shall be accounted for as AFS financial asset or Fair value through profit or loss financial asset, of which the accounting policies are stated in Note IV 9 “Financial instrument”.
Joint control means jointly control of a certain business activity according to the agreement of contract. It exists only when the agreement on important accounting and business policies that needs to be reached between investors who share the control rights. Significant influence means participation in decision making to acompany’s finance and business policies, but could not control or jointly control with other parties to the policy making.
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving entities under common control, the investment cost of the long-term equity investment is the attributable share of the carrying amount of the shareholders' equity of the acquiree at the date of combination. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the acquirer shall offset against the capital reserve. If the capital reserve is insufficient to deduct, retained earnings shall be adjusted. If the consideration is paid by issuing equity securities, it shall, on the date of acquisition, regard the share of the book value of the shareholder's equity of the acquiree on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. The equities of the combined party which respectively acquired through multiple transaction under the same control that ultimately form into the combination of the enterprises under the common control, should be disposed according whether belongs to a basket transaction. If it belongs to a basket transaction, each transaction shall be accounted for by the Company as a transaction of acquiring the control right. If not belongs to package deal, it shall, on the date of merger, regard the enjoyed share of the book value of the shareholder's equity of the merged enterprise on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment, and as for the difference between the initial investment cost of the long-term equity investment and sum of the book value of the long-term equity investment before the combination and the book value of the consideration of the new payment that further required on the combination date, should adjust the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. The equity investment held
before the combination date which adopted the equity method for accounting, or the other comprehensive income confirmed for the available-for-sale financial assets, should not have any accounting disposal for the moment. For the long-term investment required acquired from the business combination involving entities not under common control, the initial investment cost regarded as long-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of the fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company. The equity of the acquirees which respectively acquired through multiple transactions that ultimately form into the combination of the entities under common control, should be disposed according whether belongs to a basket transaction. If it belongs to a basket transaction, each transaction would be accounted for by the Company as a transaction of acquiring the control right. If it does not belong to a basket transaction, the sum of the book value of the original held equity investment of the acquirees and the newly added investment cost should be regarded as the initial investment cost of the long-term equity investment that changed to be accounted by cost method. If the original held equity is calculated by cost method, the other relevant comprehensive income would not have any accounting disposal for the moment. If the original held equity investment is the financial assets available for sale, its difference between the fair value and the book value as well as the accumulative changes of the fair value that include in the other comprehensive income, should transfer into the current gains and losses.
Agent fees incurred by the acquirer for the business combination such as audit, legal service, and valuation and consultation fees, and other related administration expenses are charged to current profit or loss at the time such expenses incurred.
Equity investments that other than the kind originated from business combinations are measured at cost initially. The investment cost differs based on ways of acquiring the long-term equity investment. It can be determined based on cash consideration actually paid by the Company, fair value of equity securities issued by the Company, value stimulated in investment contract or agreement reached, fair value or carrying amount of assets that is exchanged in a non-monetary asset transfer transaction, or the fair value of the long-term equity investment itself. Expenses that directly related to the acquisition of the long-term equity investment, taxes and other necessary expenditure are included in the investment cost. Cost for long-term equity investment that has significant influences over the investees because of addition of the investment or execute joint control, shall be accounted for based on the sum of the fair value of the equity investment original held according to “CAS No.22– Recognition and Measurement of Financial Instrument” and the newly added investment cost.
(2) Subsequent measurement and recognition of gain or losses
Equity method is used for measurement of long-term equity investment if there is common control (except joint operation) with or significant influence over the invested entity. Cost method is used for measurement of long-term equity investment if there is control over the invested entity.
①Long-term equity investments that are measured using cost method
Under cost method, long-term equity investment is measured at initial investment cost. Current period investment gain or losses are recognized according to the cash dividend or profit distribution that is announced by the invested entity, except for cash dividend or profit distribution that is already announced but not distributed which is included in the consideration that actually paid.
②Long-term equity investments that are measured using equity method
If the initial investment cost of a long-term equity investment, which is measured using equity method, is greater than the portion of fair value of the identifiable net assets of the invested entity attributable to the Company, the initial investment cost of the long-term equity investment is not adjusted. Otherwise, the difference is charged to current profit or loss, and the cost of long-term equity investment is adjusted accordingly.
When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and theowners’ equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policies adopted by the investees is not accord with that of the Company, should be adjusted according to the accounting policies of the Company and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The assets launched by the Company to the associated enterprises or the joint ventures if could form into business, the long-term equity investment without control right which acquired by the investors, should regard the fair value of the launched business as the initial investment cost the newly added long-term equity investment, and for the difference between the initial investment cost and the book value of the launched business, should be included into the current gains and losses with full amount. The assets sold by the Company to the associated enterprises or the joint ventures if could form into business, the difference between the acquired consideration and the book value of the business should be included in the current gains and losses with full amount. The assets purchased
by the Company to the associated enterprises or the joint ventures if could form into business, should be accounting disposed according to the CAS - No. 20– “Business Combination”, and should be recognized gains or losses related to the transaction with full amount.
The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. However, if the Company has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Company shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits.
For the long-term equity investment in the associates and joint ventures held by the Company for the first time before the implementation of the new accounting standards, if there is a debit balance of the equity investment related to the investment, the difference shall be amortized and charged to current profit or loss using straight line method based on original remaining period.
③Purchasing minority equity
When preparing consolidated financial statements, the difference, resulted from addition of long-term equity investment and shares of net assets calculated continuously since acquisition date (or combination date) according to new shareholding, is adjusted to capital reserve. If the capital reserve is insufficient to offset, adjusting retained earnings.
④Disposal of long-term equity investment
In consolidated financial statements, the parent company can dispose part of the long-term equity investment to a subsidiary given that the parent does not lose control over the subsidiary. The difference between consideration received for the disposal and the part of net assets disposed attributable to the parent is recognized inowners’ equity. If the parent company losses control over a subsidiary because of long-term equity investment disposal, the accounting treatment shall refer to accounting policies stated in Note IV. 5 (2)– “Preparing consolidated financial statements”.
For long-term equity investment disposal other than situations mentioned above, the difference of carrying amount of disposed equity and the consideration actually received is charged to current profit or loss.
For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded intoowners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion. Theowners’ equity recognized owning to the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits
distribution of the investees, should be transferred into the current gains and losses according to the proportion. For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to the proportion; the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. If the Company lost control over the investee by disposing part of the equity investment and the remained equity after disposal could execute joint control or significant influences over the investees, it should change to measure by equity method when preparing the individual financial statement and should adjust the measurement of the remained equity to equity method as adopted since the time acquired. If the remaining equity after disposal could not execute joint control or significant influences on the investees, it should change the accounting disposal according to the relevant regulations of the recognition and measurement standards of financial instrument, and its difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized by adopting equity method for measurement or the recognition and measurement standards of financial instrument before the Company acquired the control of the investees, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the control of them, while the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. Of which, for the disposed remained equity which adopted the equity method for measurement, the other comprehensive income and the otherowners’ equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to the recognition and measurement standards of financial instrument, the other comprehensive income and the otherowners’ equity should be charged to profit or loss in full.
For those the Company lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the
equity method for measurement, while for theowners’ equity recognized owning to the changes of the otherowner’s equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current investment income with full amount when terminate adopting the equity method.
The Company respectively disposes the equity investment of the subsidiaries through multiple transactions until lose the control right, if the above transactions belongs to the package deal, should execute the accounting disposal by regarding each transaction as a deal of disposing the equity investment of the subsidiaries until lose the control right, while the difference between each expenses of the disposal and the book value of the long-term equity investment in accord with the disposed equity before losing the control right, should firstly be recognized as other comprehensive income then be transferred into the current gains and losses of losing the control right along until the time when lose it.
14. Investment property
Investment property is property held to earn rentals or for capital appreciation or both. It includes buildings that are already leased out. Besides, for the vacant buildings held by the Company for the purpose of operating leases, if the board of directors (or similar institution) makes a written resolution that expressly indicates that it will be used for operating leases and the intention to keep no longer changes in the short-term, it also can serve as an investment real estate.
An investment property is measured initially at cost. If it is probable that the benefit related to subsequent expenditures incurred for an investment property will flow into the Company and that the cost can be measured reliably, the expenditure is included in the cost of investment property. Other subsequent expenditures are charged to profit or loss in the period in which they are incurred.
The Company adopts cost method for subsequent measurement to investment property. Depreciation or amortization policy for investment properties are the same as the one for plants and buildings or land use rights. Please refer to Note IV. 20 “Impairment of Long-term assets” for details of impairment test and impairment provision recognition for investment property.
If the usage of a property changed from self-use to investment or vice versa, the carrying amount before change shall be used as initial recognition amount after the change.
When the usage of the property changed from investment property to self-use property, the property is transferred from investment property to fixed asset or intangible asset on the changing date. If the usage of the property changes from self-use to earn rental or capital appreciation, the property is switched to investment property from fixed asset or intangible asset. If it switched to investment property that measured using cost method, it is recognized using the carrying amount before the switch. If it switched to investment property that measured using fair value method, it is recognized using the fair value on the switching date.
The investment property is derecognized when it is disposed or ceased usage permanently and it is estimated
that no benefit can be obtained from the disposal. Disposal income arising from selling, transfer, disposing and damaging the investment property, less its carrying amount and taxes related to the disposal, is recognized in profit or loss.
15. Fixed asset
(1) Recognition principles
Fixed assets refer to tangible assets that are held for the purpose of goods production, providing services, lease, or for administrative purposes with useful life of more than one accounting year. Fixed asset is recognized only when the economic benefit associated with the fixed asset is probable to flow into the Company and the cost can be measured reliably. Fixed asset is recognized initially at cost by considering estimated disposal expenses. (2) Depreciation method
The fixed asset is depreciated on straight-line basis over its estimated useful life from the next month after it reached estimated useful condition. The useful lives, estimated residual ratios and annual depreciation rates for each category of fixed assets are as follows:
Estimated net
Estimated useful lives Annual depreciation Categories Method of depreciation residual value
(year) rates(%) ratios(%)
Plants and buildings straight-line 20-35 5.00 2.70-4.80 Machinery equipment straight-line 10 5.00-10.00 9.00-9.50 Electronics devices straight-line 5 5.00 19.00 Transportation vehicles straight-line 5 5.00 19.00 Other equipments straight-line 5 5.00 19.00 Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if theasset’s useful life is passed and in the condition expected at the end of its useful life.
(3) Impairment test and impairment provision recognition for fixed asset
For impairment test and impairment provision recognition for fixed asset, please refer to Note IV. 20 “Impairment of Long-term asset”.
(4) Recognition basis and pricing method of financing leased fixed assets
A financing lease is a lease that transfers all the risks and rewards incidental to the ownership of the asset in substance and the ownership may or may not eventually be transferred. The depreciation accrued method of the fixed assets rented out under financing leases using a same policy as its own fixed assets. If it is reasonably certain that the ownership of the leased asset can be acquired when the lease term expires, depreciation is
accrued over the useful life of the leased asset. If it cannot reasonably determine that the ownership of the leased asset can be acquired when the lease term expires, the depreciation will be accrued in the shorter of lease term and the useful life of leased asset.
(5) Others
Subsequent expenditure in relation to fixed asset is recognized in the cost of the fixed asset and derecognizing the carrying amount of the part replaced if it is probable that the economic benefit related to the fixed asset will flow in the entity and the cost can be measured reliably. Subsequent expenditures other than this are charged to current profit or loss.
When a fixed asset is sold, transferred, retired or damaged, the disposal proceed net of the carrying amount and related taxes is charged in profit or loss for the current period.
The Company conduct reviews to the useful life, estimated net residual rate and depreciation method at least at each end of the accounting year. Any changes will be treated as changes in accounting estimates.
16. Construction in progress
Construction in progress is measured at actual project expenditure which includes construction expenditures, capitalized borrowing costs before the project reaches estimated useful condition and other related expenses. Construction in progress is transferred to fixed asset when the asset reaches its estimated useful condition. For impairment test and impairment provision recognition for construction in progress, please refer to Note IV. 20 “Impairment of Long-term asset”.
17. Borrowing cost
Borrowing cost includes loan interest, associated expenses incurred in connection with the arrangement of borrowings and exchange difference arising from foreign currency loans. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset can be capitalized starting from the time the necessary acquisition or production for bringing the asset to its estimated useful or sellable condition started, and given that the capital expenditure and borrowing cost have been incurred. The capitalization stops when the asset reaches its estimated useful or sellable conditions. Other borrowing costs are charged to profit or loss at the time they are incurred.
The interest expenses actually incurred current-period special borrowing less unused borrowing funds in bank interest earned or investment income on the temporary investment of those funds, the above mentioned amount shall be capitalized. The weighted average asset disbursement of general borrowing multiplies the capitalization rate to determine the amount of capitalization based on the accumulative asset disbursements of special loans. The capitalization rate is the weighted average interest rate of the general borrowing.
During the capitalization period, exchange differences on foreign currency borrowings are all capitalized; Exchange differences on foreign currency borrowings are generally included into current profit or loss.
The assets which have qualified condition of capitalization is the assets necessarily take a substantial period of time after the acquisition, construction or production activities in order to achieve their intended use or sale of fixed assets, investment property, inventories and other assets.
If the process of acquiring, constructing or producing of the assets that are capable for capitalization is interrupted abnormally and the interruption lasts more than three months, the capitalization of borrowing costs shall be suspended until the acquisition, construction or production resumes.
18. Intangible assets
(1) Intangible assets
An Intangible asset is the identifiable non-monetary asset without physical substances that is owned or controlled by the Company.
An intangible asset is initially measured at its cost. Expenditures related to the intangible asset are included in its cost if it is probable that the related economic benefit will flow into the Company and the cost can be measured reliably. Other expenditures apart from this will be charged to profit or loss in corresponding period at the time it incurred.
Land use right is generally accounted for as intangible asset. When the plants or buildings are constructed by the Group, expenditures on the land use right and on the buildings shall be recognized as the intangible asset and the fixed asset respectively. When the plants or buildings are purchased, the consideration paid shall be allocated between the land use right and the buildings. If it can be allocated reasonably, recognize entirely as fixed assets. An intangible asset with a finite useful life shall be amortized by using the straight-line method over its estimated useful life when it is available for use. The depreciable amount of an intangible asset is its cost less estimated residual value and impairment provision. An intangible asset with an indefinite useful life is not amortized.
Method of amortization for intangible asset with finite useful life is as follows:
Category Useful life (year) Method of amortization
Land use right 50 straight-line
Software 5 straight-line
Brand use right 5-10 straight-line
For an intangible asset with a finite useful life, its useful life and amortize method are reviewed at the end of each accounting period. Any changes will be treated under changes in accounting estimates. Besides, the useful life of the intangible assets with indefinite useful life will be reviewed at the end of each accounting period. If there is evidence indicating that it is foreseeable that the period during which the economic benefit associated with the asset would flow into the entity, its useful life will be estimated and the asset will be amortized in accordance to the amortization policies applicable for an intangible asset with finite useful life.
(2) Research and development expenditure
TheCompany’s expenditure on internal research and development projects are classified into expenditure on the research phase and expenditure on the development phase.
Expenditure on the research phase is recognized in profit or loss in the period in which it is incurred.
Expenditure on the development phase is capitalized and recognized as intangible asset only when all of the following conditions are satisfied. Expenditures on the development phase, failing to meet the below conditions, are recognized in profit or loss in the period it is incurred:
①The technical feasibility of completing the intangible asset so that it will be available for use or sale;
②The intention to complete the intangible asset and use or sell it;
③The intangible asset will generate economic benefits. Among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;
④The availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and
⑤The expenditure attributable to the intangible asset during its development phase can be measured reliably. Expenditures which cannot be divided into expenditures on research phase and expenditures on development phase are charged entirely in current profit or loss.
(3) Impairment test and impairment provision recognition for intangible assets
For impairment test and impairment provision recognition for intangible asset, please refer to Note IV. 20 “Impairment of Long-term asset”.
19. Long-term deferred expenses
Long-term deferred expenses refer to expenditures which are incurred but shall be expensed over the beneficiary period of more than one year. TheCompany’s long-term deferred expenses mainly include counter fabrication and decoration expenses. Long-term deferred expenses shall be amortized on straight-line basis over its beneficiary period.
20. Impairment of Long-term assets
The Company assesses, on balance sheet date, whether there are indicators for impairment to fixed assets, construction in process, intangible assets with finite useful life, investment property measured at cost, and long-term equity investment to subsidiaries, joint ventured companies and associated companies. If there are any indictors of impairment, recoverable amount is estimated and impairment test is conducted. Impairment tests are conducted each year to goodwill, intangible assets that with indefinite useful life and intangible assets that have not reached its useful condition despite whether there is indicators of impairment.
If the recoverable amount of an asset is less than its carrying amount in the impairment test, provision for impairment shall be made for the difference and recognized as an impairment loss. The recoverable amount of an
asset is the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. The fair value of an asset is determined according to the price in a sale agreement in anarm’s length transaction. If there is no sale agreement but an active market for the asset, the fair value shall be determined according to the current bid price. If there is no sale agreement or active market for the asset, the fair value shall be based on the best information available. Costs of disposal include legal costs related to the disposal of the asset, related taxes, cost of removing the asset and direct cost to bring the asset into its condition of sale. The present value of expected future cash flows of an asset shall be determined by estimating the future cash flows to be derived from continuing use of the asset and from its ultimate disposal and applying the appropriate discount rate to those future cash flows. Provision for impairment shall be made and recognized on an individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Company shall determine the recoverable amount of the asset group to which the asset belongs. An asset group is the minimum group of assets which can generate cash flows independently.
When conducting impairment test on goodwill, which is presented separately in balance sheet, the carrying amount of goodwill will be allocated to asset group or combination of asset group which are expected to enjoy benefit from the synergy effect in a business combination. If the test results indicate that the recoverable amount of the asset group or combination of asset group, which consist goodwill allocated, is lower than its carrying amount, impairment loss is recognized accordingly. The impairment loss reduces the carrying amount of goodwill that allocated to the asset group or combination of asset group. If the goodwill is insufficient to deduct, then offsetting other assets within the asset group or combination of asset group proportionately based on the weight of the carrying amount of assets other than goodwill in the asset group or combination of group.
Once an impairment loss is recognized, it shall not be reversed in subsequent periods.
21. Employee benefit
Employee benefit include short-term employee benefit, post-employment benefits and termination benefits. Short-term benefit mainly includes employee salary, bonus, allowance, employee welfare, maternity insurance, work injury insurance, housing fund, labor union fee, employee education fund and non-monetary welfareetc… The Company recognize short-term benefit as liabilities through profit or loss or related cost of assets for the financial year in which the employees render the related services. Non-monetary welfare is measured at fair value.
Post-employment benefit mainly include basic endowment insurance, unemployment insurance and annuityetc… Post-employment benefit plan includes defined contribution plans. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into an escrow fund and the amount shall be charged to cost of related asset or current period profit or loss.
When the Company terminates the employment relationship with employees before the employment contracts expire or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision
shall be recognized at the date earlier of the Company cannot unilaterally withdraw from the termination plan or the redundancy offer and the Company determined the reconstruction cost related with the payment of termination benefit. Termination benefit shall be recognized as employee benefit payable and charged to the profit or loss for the current accounting period. If the termination benefit cannot be paid within 12 month after the balance sheet date, it shall be treated as long-term employee benefit.
The earlier retirement plan shall be accounted for in accordance with the accounting principles for compensation for termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire before schedule from the date on which the employees stop rendering services to the Company to the scheduled retirement date, shall be recognized (as compensation for termination of employment) in the current profit or loss if the recognition principles for provisions are satisfied.
If other long-term employee welfare provided by the Company meets the criteria of defined contribution plan, it shall be accounted for according to defined contribution plan, otherwise, defined benefit plan accounting treatment is applicable.
22. Provision
A provision is recognized when obligation related to contingencies satisfies following condition: (1) the obligation is a present obligation of the Company; (2) it is probable that an outflow of economic benefits will be required to settle the obligation; and (3) and the amount of the obligation can be measured reliably.
At the balance sheet date, a provision shall be initially measured at the best estimate of the expenditure required to settle the related present obligation, taking the risks, uncertainties and time value of money that related to the contingencies into consideration.
When all or part of the expenditure that needed for settling a provision is expected to be reimbursed by a third party, the reimbursement shall be recognized as an asset separately only when it is virtually certain that reimbursement will be received. The amount recognized for the reimbursement shall not exceed the carrying amount of the estimated liability.
(1) Onerous contract
An onerous contract is a contract in which the aggregate cost required to fulfil the agreement is higher than the economic benefit to be obtained from it. If the contract to be executed becomes an onerous contract, and the obligation arising from the onerous contract meets the conditions for the recognition of the above-mentioned provision, the portion of the contract's estimated loss that exceeds the recognized impairment loss (if any) of the contracted asset is recognized as a provision.
(2) Restructuring obligations
For detailed and formal restructuring plans that have been publicly announced, if it meets the recognition conditions of a liability mentioned above, a provision is determined based on the direct expenses related to the
restructuring.
23. Share-based payment
(1) Accounting treatment of share-based payment
A share-based payment is a transaction that grants an equity instrument or assumes a liability determined on the basis of an equity instrument in order to obtain services from employees or other parties. Share-based payments are divided into equity-settled share-based payments and cash-settled share-based payments.
① Equity-settled share-based payments
The equity-settled share-based payment in exchange for the services provided by the employee is measured at the fair value of the equity instruments granted to employees at the grant date. If the option can only be exercised after completing the service within the vesting period or meeting the required performance conditions, the amount of the fair value shall be charged to cost or expenses based on straight-line method during the vesting period using the best estimate of the amount of exercisable equity instrument. If the right can be exercised immediately after the grant, the relevant costs or expenses are included in the grant date, and the capital reserve are increased accordingly.
On each balance sheet date during the waiting period, the Company makes the best estimate based on the latest information on the changes in the number of employees with vesting rights, and corrects the number of equity instruments that are expected to be exercised. The impact of the above estimates is recognized in the current related costs or expenses, and the capital reserve is adjusted accordingly.
Equity-settled share-based payments in exchange for other parties' services, if the fair value of other parties' services can be reliably measured, is measured at the fair value of other services on the date of acquisition. If the fair value cannot be measured reliably, it is measured at the fair value of the equity instrument on the acquisition date, and is included in the relevant cost or expense, which increases the shareholders' equity accordingly. Cash-settled share-based payments
The cash-settled share-based payment is measured at the fair value of the liabilities determined by the Company based on shares or other equity instruments. If the right can be exercise immediately after the grant, the relevant costs or expenses are included in the grant date, and the liabilities are increased accordingly. If the option can only be exercised after completing the service within the vesting period or meeting the required performance conditions, the service obtained by the Company in current period shall be charged to profit or loss based on fair value of the liabilities undertake by the Company, calculated on the basis of the best estimation of the exercisable option on each balance sheet date of the vesting period. The liabilities shall be increased accordingly.
The fair value of the liability is re-measured at each balance sheet date and settlement date before the settlement of related liabilities, the changes are included in the current profit and loss.
(2) Modifying and terminating the relevant accounting treatment of the share-based payment plan
When the Company changes the share-based payment plan, if the modification increases the fair value of the granted equity instruments, the increase in the fair value of the equity instruments is recognized accordingly. The increase in the fair value of equity instruments refers to the difference between the fair value, measured on the modification date, of the equity instruments before and after the modification. If the modification reduces the total fair value of the share-based payment or adopts other methods that are not in favor of employees, the accounting treatment of it will not be changed, as if the modification never happened unless the Company cancelled part or all of the granted equity instruments.
During the vesting period, if the granted equity instrument is cancelled, the Company shall treat the cancelled equity instrument as accelerated exercise, and shall immediately charge the amount that should be recognized in the remaining vesting period into the current profit and loss and adjusting the capital reserves at the same time. If the employee or other party can choose to meet the non-vesting conditions but fails during the vesting period, the Company will treat it as a cancellation of the equity instrument.
(3) Accounting treatment involving share-based payment transactions between the Company and its
shareholders or actual controllers of the Company
In respect of the share-based payment transaction between the Company and its shareholders or actual
controllers of the Company, if one of the settlement company and the service recipient is in the Company, and the other is outside the Company, the accounting treatment is carried out in the consolidated financial statements of the Company according to the following rules:
① If the settlement company settles with its own equity instrument, the share-based payment transaction shall be treated as equity-settled share-based payment; otherwise, it shall be treated as a cash-settled share-based payment.
If the settlement company is the investor of the service recipient, it shall recognized as the long-term equity investment to the service recipient according to the fair value of the equity instrument at the grant date or the fair value of the liability to be undertaken. The capital reserve (other capital reserve) or liabilities shall be recognized at the same time.
② If the service recipient does not have a settlement obligation or the equity instruments granted to its
employees are its own equity instruments, the share-based payment transaction shall be treated as equity-settled share-based payment. If the enterprise that accepts service has the settlement obligation and the equity
instrument granted to employees are not its own equity instrument, the share payment transaction shall be treated as a cash-settled share-based payment.
For share-based payment transactions occurred between companies within the Company, if the service recipient and the settlement company are not the same entity, the recognition and subsequent measurement of the share-based payment transaction in their individual financial statements shall be treated in accordance with
principles above.
24. Revenue
(1) General principal
①Revenue from sale of goods
Revenue from the sale of goods shall be recognized only when all of the following conditions are satisfied: (a) significant risk and rewards of ownership of the goods have been transferred to the buyer; (b) the seller retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c)the amount of revenue can be measured reliably; (d) it is probable that the associated economic benefits will flow to the seller, and (e) the associated costs incurred or to be incurred can be measured reliably.
②Revenue from rendering of service
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction are recognized using the percentage of completion method on balance sheet date. The percentage of completion is calculated based on the proportion of services performed to date to the total volume of services to be performed.
The outcome of a transaction involving the rendering of services can be estimated reliably when all of the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the associated economic benefits will flow to the entity: (c) the percentage of completion can be measured reliably; and (d) the costs incurred and to be incurred for the transaction can be measured reliably.
When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognized to the extent of costs incurred and expected to be recovered. Costs of service provided are charged to the current profit or loss as service costs. If the costs incurred are not expected to be recoverable, no revenue is recognized.
③Revenue from rendering usage rights
The revenue is recognized on accrual basis and based on related contracts or agreements.
④Interest income
The interest income shall be calculated based on the tenure of theCompany’s monetary funds used by others and the actual interest rates used.
(2) Detailed method of revenue recognition
The watches sold by the Company includes two types, one is the self-manufactured FIYTA watch, the sales of which is managed by branch offices and provincial-level sale sections by regions set up by Sales Company, a subsidiary of the Company. The other is brand watches, the sales of which are controlled by Shenzhen HARMONY World Watch Center Co., Ltd., a subsidiary of the Company, and the Company act as agent Regarding to sales modes, a portion of the sales of self-manufactured FIYTA watches is sold through direct sales
to customer and consignment sales while most of the self-manufactured FIYTA watches and brand watches are sold under two sales modes, namely exclusive shop and shop-in-shop. Detailed method of revenue recognition as follows:
① Direct sales to the customer
Under direct sales to the customer mode, the Company delivers products to customers and recognizes sales income after customer inspection and acceptance.
② Exclusive shop
Under exclusive shop mode, the Company delivers products to customers and recognizes sales income after customer inspection, acceptance and pay.
③Shop-in-shop
Under shop-in-shop mode, the Company delivers products to customers, sales staff issues notes to retail customers and recognizes sales revenue after customer inspection and acceptance and the department store collects the payment from the customer.
④Consignment sales
Under consignment sales mode, the Company receives the detail of the sales list from distributors and recognizes revenue while issuing invoice to distributors.
25. Government grants
Government grants are monetary assets or non-monetary assets obtained by the Company from the government free of charge. It does not include capital contributions from the government as an owner. Government grants are classified into government grants related to assets and government grants related to income. The Company defines the government grants obtained for the acquisition or other formation of long-term assets as the government grants related to the assets; the remaining government grants are defined as the government grants related to income. If the government documents do not clearly define the object of subsidy, the subsidy shall be divided into the government grant related to income and the government grant related to assets in the following ways: (1) If the government document specifies the specific project for which the subsidy is targeted, the budget of the project will be divided into the relative proportion of the expenditure amount of the assets and the expenses included in the expenses, and the division ratio shall be reviewed on each balance sheet date and changed when necessary; (2) If the government documents use only for general statement, and not specify a specific project, it will be as income-related government grants. If a government grant is in form of monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of non-monetary asset, is measured at fair value. If the fair value cannot be measured reliably, it is measured at a nominal amount and recognize directly in the current profit or loss.
The Company usually confirms and measures government grants according to the actual amount received.
However, when there is conclusive evidence that can meet the financial support policies and regulations related to the conditions expected to be able to receive financial support funds for the end of the year, it will measure according to the actual amount received. The government grants measured according to the receivable amount shall meet the following conditions at the same time: (1) The amount of the grants receivable has been authorized by the government department to issue the documents or can be reasonably measured according to the relevant provisions of the formally promulgated financial capital management measures; (2) It is based on the financial support items formally promulgated by the local finance department and proactively disclosed in accordance with the provisions of the "Regulations Governing the Disclosure of Government Information" and the fiscal fund management measures, and the management measures should be generalized (any eligible enterprises can apply), rather than specifically for a specific company; (3) the relevant grant approval has been clearly committed to the deadline for disbursement, and the disbursement of funds has corresponding budget as a guarantee, so that it can reasonably ensure that it can be received within the prescribed time limit; (4) Other relevant conditions (if any) that should be satisfied according to the Company and the specific circumstances of the grants.
A government grant related to asset is recognized as deferred income, and evenly amortized and charged to profit or loss over its useful life. If a government grant related to income is used to compensate related expenses and losses in subsequent periods, it is recognized as deferred income and charged to current profit or loss when recognize the relevant cost and expense or loss. If it is used to compensate related expenses and losses that are already incurred, it is charged to current profit or loss directly.
Government grants including assets-related parts and income-related parts at the same time should be treated separately. If it is difficult to distinguish them, they will be classified as income-related government grants completely.
The government grants related to the daily activities of the Company are included in other gain or offset the related costs according to the essence of the economic business. The government grants that are not related to the daily activities are included in the non-operating income and expenses.
If a government grant already recognized needs to be repaid, the carrying amount of related deferred income, if any, is to be reduced. Any excess are charged to current profit or loss. If there is no deferred income, the
repayment is charged to current profit or loss directly.
26. Deferred tax asset / deferred tax liability
(1) Current period corporate income tax
At the balance sheet date, current income tax liabilities (or assets) for the current period and prior periods shall be measured at the amount expected to be paid (refunded) according to the requirement of taxation laws. The taxable income used to calculate current period income tax expenses is calculated by making corresponding adjustments to current period profit before tax in accordance with relevant taxation regulations.
(2) Deferred tax asset and deferred tax liability
Temporary differences can be recognized as deferred tax asset and deferred tax liability using balance sheet liability method. Temporary differences arise from: the difference between the carrying amount and tax base of certain assets and liabilities; the difference between the carrying amount and the tax base of an item which are not recognized as assets and liabilities but its tax base can be determined according to relevant taxation laws. A deferred tax liability shall not be recognized for the taxable temporary differences arising from the following events: (a) the initial recognition of goodwill; (b) the initial recognition of an asset or liability in a transaction which contains both of the following characteristics: (i) the transaction is not a business combination; (ii) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss). For taxable temporary differences associated with investment in subsidiaries, associates and interests in jointly controlled enterprises, a deferred tax liability shall not be recognized if both of the following conditions are satisfied: (a) the Company is able to control the timing of the reversal of the temporary differences; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. Except for exceptions mentioned above, the Company recognizes all other taxable temporary difference as deferred tax liability.
A deferred tax asset shall not be recognized for the deductible temporary differences associated with the initial recognition of an asset or liability in a transaction which contains both of the following characteristics: (a) the transaction is not a business combination; (b) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss). For deductible temporary differences associated with investment in subsidiaries, associates and interests in jointly controlled enterprises, a deferred tax asset shall not be recognized if one of the following conditions is satisfied: (a) it is probable that the temporary difference will not reverse in the foreseeable future; and (b) taxable profits will not be available in the future, against which the temporary difference can be utilized. Except for exceptions mentioned above, the Company recognizes deductible temporary difference as deferred tax asset to the extent of the future taxable profit which is probably achieved by the Company.
A deferred tax asset shall be recognized for the carry forward of unused deductible losses and tax credits to the extent that it is probable that future taxable profit will be available against which the deductible losses and tax credits can be utilized.
At the balance sheet date, deferred tax assets and deferred tax liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirement of tax laws.
At the balance sheet date, the carrying amount of a deferred tax asset shall be reviewed. The Company shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefit of the deferred tax asset to be utilized. Any such reduction in amount shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.
(3) Corporate income tax
The corporate income tax includes current period income tax and deferred income tax.
The current income tax and deferred income tax shall be recognized in the current profit or loss except for: (a) the income tax arising from events or transactions which are recognized in the comprehensive income orowners’ equity are recognized in the comprehensive income orowners’ equity accordingly; and (b) the income tax arising from business combinations which are adjusted to the carrying amount of goodwill.
(4) Offsetting of income tax
When legal right to netting settlement is owned, net settlement or intent to acquire the assets and settle the liabilities happen simultaneously, the Group had net current tax assets against current tax liabilities are netting presentation after offset.
When the legal right to offset current tax assets against current tax liabilities is owned and the deferred tax assets and deferred tax liabilities relate to the same taxation authority on the same taxable income levied by or related to different taxable entities, but within the reverse period of significant amounts of deferred tax assets and liabilities in each future period, and the tax payer's intention to offset current tax assets and liabilities or both to obtain assets or repay debts, the deferred income tax and deferred tax assets and liabilities of the Group to netting presentation after offset.
27. Leasing
A finance lease is a lease that transfers substantially all the risks and rewards associated with the ownership of an asset. Title of the asset may or may not eventually be transferred. An operating lease is a lease other than a finance lease.
(1) Accounting treatment for the Company as lessee under operating leases
Lease payments under an operating lease are recognized as cost of relevant assets or charged to profit or loss for the current period on straight-line basis over the lease term. Initial direct costs incurred are charged to profit or loss for the current period directly. Contingent rentals are charged to profit or loss in the period in which they are actually incurred.
(2) Accounting treatment for the Company as lessor under operating leases
Lease receipts under an operating lease are recognized by the in the current profit or loss on a straight-line basis over the lease term. Significant initial direct costs are capitalized when they are incurred, and are recognized in profit or loss over the lease term on the basis on which the lease income is recognized. Insignificant initial direct costs shall be charged to the current profit or loss directly. Contingent rentals are charged to profit or loss in the period in which they are actually incurred.
(3) Accounting treatment for the Company as lessee under finance leases
On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the
present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease payments shall be respectively stated in long-term liabilities and long-term liabilities due within 1 year. Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise.
(4) Accounting treatment for the Company as lessor under finance leases
On the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims due within 1 year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise.
28. Other main accounting policies and estimates
Discontinued operation
Discontinued operation refer to the components that can be separated and disposed of or classified as held for sale separately by one of the following conditions:①The component represents an independent main business or a separate main operation area;②This component is part of a related plan to be disposed of by an independent major business or a separate major operating area;③This component is a subsidiary acquired exclusively for resale.
Refer to Note IV.12 "Description of Assets Held-for-Sale and Disposal Group" for details of accounting treatment of discontinued operations.
29. Changes in main accounting policies and estimates
(1) Change of accounting policies
There was no changes of accounting policies of the Company in the reporting period.
(2) Changes of accounting estimates
There was no changes of accounting estimate of the Company in the reporting period.
30. Significant accounting judgment and estimates
When adopting the accounting policies, the Company needs to make judgments, estimates and assumptions for the carrying amount of items which are presented in financial statements and cannot be measured accurately due to internal uncertainties of business. The judgments, estimates and assumptions that are made according to historical experience of the management and with consideration of other relevant factors will have effects on the reported amounts of revenue, expenses, assets as well as liabilities and the disclosure of contingent liabilities at the balance sheet date. The uncertainties of these estimates will probably result in significant adjustments on the carrying amounts of assets or liabilities which will be affected by those judgments, estimates and assumptions in future accounting periods.
The judgments, estimates and assumptions are reviewed by the Company periodically on going concern basis. If the changes in accounting estimates affect current period only, the amounts affected are recognized in current period. If the change affects both current and future periods, the amounts affected are recognized in the current accounting period as well as subsequent accounting periods.
At the balance sheet date, significant areas that require the Company to make judgments, estimates and assumptions to the amounts of financial statements items are as follows:
(1) The classification of lease
According to the “CAS No.21– Leasing”, the Company classifies leases as operating leases and finance leases. When categorizing, management needs to make analysis and judgment on whether all the risks and rewards associated with the ownership of the leased asset be transferred substantially to lessee, or whether the Company took all the risks and rewards associated with the ownership of the leased assets substantially.
(2) Bad debt provision recognition
The allowance method is adopted by the Company to account for losses on bad debts in accordance with the accounting policies for receivables. Impairment of accounts receivable is made based on estimation of its recoverability, which requires the management to make judgments and estimates. The difference between the actual outcome and the estimates will have effects on the carrying amounts of accounts receivable and on provision or reversal of the provision for bad debts of the accounting period in which the estimates will be changed.
(3) Provision for impairment of inventories
According to the accounting policies of inventories, it is measured at lower of cost and the net realizable value (NRV). For inventory cost that is higher than its NRV and obsolete and slow moving inventory, impairment provision shall be accrued. Evaluating the impairment of inventories needed the management level gain the valid evidence and take full consideration of the purpose of inventories, influence of events after balance sheet date and other factors, and then made relevant judgments and estimates. The actual amount and the difference of
previous estimate would affect the book value of inventories and the accrual and reversal of provision.
(4) The impairment of available-for-sale financial assets
Whether an available-for-sale financial asset is impaired relies largely on the judgment and assumption of the management, so as to decide whether recognized the impairment losses in the income statement. During the process of making the judgment and assumption, the Company needed to appraise the balance of the cost of the investment exceeding its fair value and the continuous period, the financial status and business forecast in a short period, including the industrial situation, technical reform, credit level, default rate and risk of counterparty. (5) Impairment provision for long-term asset
At the balance sheet date, the Company judges whether there are indicators of impairment for non-current assets other than financial assets. For an intangible asset with an indefinite useful life except for annually impairment test, an impairment test will be conducted if there are any indicators of impairment occur. For non-current assets other than financial assets, an impairment test shall be made if there are evidences indicating the carrying amounts cannot be recovered in full amount.
An asset or asset group is impaired when its carrying amount is higher than its recoverable amount i.e. the higher of its fair value less the disposal expenses and the present value of the estimated future cash flows.
The net amount of fair value less the disposal expenses are determined with reference to the quoted price of similar assets in a sales agreement in anarm’s length transaction or an observable market price less incremental costs directly attributable to disposal of the asset.
When estimating the present value of future cash flows, significant judgments are involved to the production output, selling price, relevant business costs of the asset (or asset group) and the discount rate adopted in calculating the present value. In estimating the recoverable amount, the Company will adopt all information available, such as forecasts for the production output, the selling price and relevant business costs, which are made according to reasonable and supportive assumptions.
The Company conducts impairment test to goodwill at least once a year. This requires estimating the present value of future cash flows of asset group or combination of asset group to which goodwill has been allocated. In estimating the present value of future cash flows, the Company needs estimate future cash flows generated from the asset group or the combination of asset groups and choose appropriate discount rates.
(6) Depreciation and amortization
Taking the residual value into consideration, an investment property, fixed asset and intangible asset are depreciated or amortized on a straight-line basis over its useful life. The Company reviews the useful life periodically to determine the amount of depreciation or amortization which shall be recognized in each accounting period. The useful life is determined according to historical experience of similar assets and technological renovation estimated. The amount of depreciation or amortization shall be adjusted in future accounting periods if
there are material changes in estimates made before.
(7) Deferred income tax asset
A deferred tax asset shall be recognized for the unused deductible losses to the extent that it is probable that future taxable profit will be available against which the deductible losses can be utilized. Taking the taxation planning into consideration, the management of the Company is required to make significant amount of judgments to estimate the time and the amount of future taxable profit in order to determine the amount of deferred income tax assets to be recognized.
(8) Corporate income tax
For some transactions in theCompany’s ordinary course of business, uncertainties exist in their tax treatment and calculation. An approval from the tax authority is needed to determine whether an item is deductible before tax. If the final confirmation from the tax authority differs with the original estimation, the difference will have effects on the current income tax and deferred income tax of the period in which the final confirmation is made by the tax authority.
(9) Provision
The Company estimates and accrues related provision on its after-sale quality warranty commitment to customers with respect to the goods sold, estimated onerous contract and penalty for delay in delivery based on contract terms, current knowledge and historical experience. In case that the contingent event becomes a current obligation and performance of the current obligation may be very likely to cause economic benefit flow out of the Company, the Company recognizes provision based on the best estimates for fulfilling the related current obligation. Recognition and measurement of contingent liability is largely depend on themanagement’s judgment. In the course of making judgement, the Company need to evaluate factors of risk, uncertainty and time value of money related to the contingent event.
The Company will make provision for after sale quality commitment for product sold, maintenance and re-fabrication of product sold. When accruing the provision, it needs to consider the recent maintenance data which may not be likely to reflect the future maintenance situations. Any increase or reduction of the provision may possibly affect the profit or loss in future years.
V. Taxation
1. Main taxes and tax rates
Tax Tax rate
Output tax is calculated at3%、5%、6%、10%、16% of taxable income and VAT Value-addedtax（Note（1））
is paid after offset the output tax with input tax allowed at current period
Tax Tax rate
Consumption tax is applicable for imported or manufactured luxury watches with Consumption tax
unit price above 10,000 (inclusive).
Urban maintenance and construction tax 5%、7% on the turnover tax actually paid
1.2% on the basis of70% of the original cost of the property and12% for rental Propertytax（Note（2））
income.
Corporate income tax See Note (3) for detail.
Note (1): Value-added tax
Value-added tax rate originally applied to17%,11% when the Company have VAT taxable sales or import goods. According to “Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Value-Added TaxRate”（with Cai Shui (2018) No.32）, applicable tax rate adjusted to16%,10% since May 1st, 2018
Other taxable income arising from the Company is calculated on the basis of the applicable tax rate.
Note (2): Property Tax
In accordance with Article 5 of “Notice to Publish “Reply to Issues Related to Property Tax and Vehicle and Vessel Usage Tax””, Shen Di Shui Fa (1999) No.374 issued by Shenzhen Local Taxation Bureau, property leased out by manufacturing or business entity are taxed at1.2% on the bases of70% of the original cost of the property. Properties of the Company that situated in Shenzhen are taxed according to this notice. Properties situated in other cities are taxed according to local regulations.
Note (3): Corporate income tax
Name of entity subject to corporate income tax Applicable tax rate
TheCompany（Note①②⑤） 25.00%
Shenzhen HARMONY World Watch Center Co.,Ltd.（HARMONYCompany）（Note①
25.00%
⑤）
Shenzhen FIYTA Precision Timer Manufacturing Co., Ltd. (ManufacturingCompany（) Note
15.00%
②③）
FIYTA HongKong（Note④） 16.50%
Station68（Note④） 16.50%
Shenzhen FIYTA Technology Development Co., Ltd (TechnologyCompany（) Note②③） 15.00%
TEMPORAL (Shenzhen) Co.,Ltd.（TEMPORALCompany）（Note⑤） 25.00%
Name of entity subject to corporate income tax Applicable tax rate
Harbin Harmony World Watches Distribution Co., Ltd. (HarbinCompany)（Note⑤） 25.00%
Emile Choureit Timing (Shenzhen) Ltd. (Emile Choureit Shenzhen Company)（Note⑤） 25.00%
FIYTA Sales Co., Ltd (SalesCompany)（Note①⑤） 25.00%
Liaoning Hengdarui Commercial& Trade Co., Ltd (HengdaruiCompany)（Note⑤） 25.00%
SwissCompany（Note⑥） 30.00%
Note①:According to the regulations stated in Guo Shui Fa (2008) No. 28, “Interim Administration Method for Levy of Corporate Income Tax to Enterprise that Operates Cross-regionally”, the head office of the Company and its branch offices, the head office of HARMONY Company and its branch offices, and the head office of Sales Company and its branch offices adopt tax submission method of “unified calculation, managing by classes, pre-paid in its registered place, settlement in total, and adjustment by finance authorities” starting from 1 January 2008. Branch offices mentioned above share50% of the enterprise income tax and prepay locally; and50% will be prepaid by the head offices mentioned above.
Note②: According to “Notice of the Ministry of Finance, the State Administration of Taxation and Ministry of Science on Improving the Pre-tax Super Deduction Ratio of Research and Development Expenses” (Cai Shui (2018) No. 99), if the research and development costs, which were incurred for developing new technologies, new products, and new processes by the Company, the Manufacturing Company and the Technology Company, are not capitalized as intangible assets but charged to current profits and losses, the companies can enjoy a75% super deduction on top of theR&D expenses that allowed to deduct before income tax during the period from January 1, 2018 to December 31, 2020.
Note③:The company enjoyed for “Reduction and Exemption in Corporate Income Tax Rate for High and New Technology Enterprises that Require Key Support from the State”.
Note④: These companies are registered in Hong Kong and the income tax rate of Hong Kong applicable is16.50% this year.
Note⑤: According to the People's Republic of China Enterprise Income Tax Law, the income tax rate is25% for residential enterprises since 1 January 2008.
Note⑥: The comprehensive tax rate of30% is applicable for Swiss Company as it registered in Switzerland. 2. Preferential treatment and corresponding approval
According to clause 2 in Shen Dishui Fa (2003) No. 676 “Notice of Forwarding State Administration of Taxation on Policies Related to Property Tax and Urban Lan Usage Tax”, for newly constructed or purchased property by tax payer, property tax is exempted for 3 years from the next month it is constructed or purchased. The property tax for FIYTA Watch Building owned by the Company located in Shenzhen Guangming New District is exempted for 3 years from the next month when construction is completed.
VI. Notes to the consolidated financial statements
Unless otherwise indicated, the beginning of the year for items (including notes for theCompany’s financial statements) list below refers to 1 January 2018 and the end of the year refers to 31 December 2018. Prior year refers to year 2017 and current year refers to year 2018.
1. Cash and bank balances
Item 31 Dec 2018 1 Jan 2018
Cash on hand 420,783.85 414,210.14 Bank deposit 160,135,454.62 184,528,160.32 Other monetary funds 4,271,821.50 2,210,520.86 Total 164,828,059.97 187,152,891.32 Incl: deposit outside Mainland China 9,192,653.31 7,880,620.64 Note: Amount of RMB1,575,000.00 (RMB1,575,000.00 as at 31 Dec 2017) in other monetary funds is the security deposit with Bank for issuing of unconditional and irrevocable letter of guarantee; amount of RMB630,000.00 was judicial freeze due to the legal proceedings.
2. Note and accounts receivables
Item 31 Dec 2018 1 Jan 2018
Notes receivables 7,051,846.85 9,693,883.68 Accounts receivables 370,545,656.61 326,254,624.94 Total 377,597,503.46 335,948,508.62 (1) Notes receivable
①Notes receivable classification
Item 31 Dec 2018 1 Jan 2018
Banker's acceptance bill - 2,398,579.72 Commercial acceptance bill 7,051,846.85 7,295,303.96 Total 7,051,846.85 9,693,883.68②There is no pledge of notes at the end of the period.
③Endorsed notes that is not yet due at the end of the period.
Item Amount derecognized at year end Amount not derecognized at year end Banker's acceptance bill 1,294,584.13 -
④There is no notes receivable transferred to receivables due toissuer’s default at the end of the period.
(2) Accounts receivable
① Accounts receivables presented by types
31 Dec 2018
Book balance Bad debt provision
Types
Percentage
Carrying amount Amount Amount Percentage（%）
（%）
Receivables that are individually significant
in amount and provided for bad debt 1,702,371.94 0.44 1,702,371.94 100.00 - separately
Receivables provided for bad debt by
381,434,944.02 99.53 10,889,287.41 2.85 370,545,656.61 portfolio
Incl. Aging portfolio 189,655,491.08 49.49 10,889,287.41 5.74 178,766,203.67 Portfolio of specific accounts 191,779,452.94 50.04 - - 191,779,452.94 Receivables that are individually insignificant
in amount but provided for bad debt 97,147.84 0.03 97,147.84 100.00 - separately
Total 383,234,463.80 100.00 12,688,807.19 3.31 370,545,656.61 (Continued)
1 Jan 2018
Book balance Bad debt provision
Types
Percentage
Book Value Amount Amount Percentage(%)
(%)
Receivables that are individually significant in
6,985,493.80 2.04 6,985,493.80 100.00 - amount and provided for bad debt separately
Receivables provided for bad debt by
334,903,968.85 97.93 8,649,343.91 2.58 326,254,624.94 portfolio
Incl. Aging portfolio 160,056,201.19 46.80 8,649,343.91 5.40 151,406,857.28 Portfolio of specific accounts 174,847,767.66 51.13 - - 174,847,767.66 Receivables that are individually insignificant
in amount but provided for bad debt 97,147.84 0.03 97,147.84 100.00 - separately
1 Jan 2018
Book balance Bad debt provision
Types
Percentage
Book Value Amount Amount Percentage(%)
(%)
Total 341,986,610.49 100.00 15,731,985.55 4.60 326,254,624.94 A. Year-end balance of receivables that are individually significant in amount and provided for bad debt separately
31 Dec 2018
Accounts receivable
Accounts
（bycompany） Bad debt provision Percentage(%) Reason
receivable
Chances of recovering is GinwaXi’an Qujiang Shopping Center
1,702,371.94 1,702,371.94 100.00 remote due to Co., Ltd.
management condition B. Amongst portfolio, accounts receivable that are provided for bad debt based on aging analysis
31 Dec 2018
Aging
Accounts receivable Bad debt provision Percentage(%) Within 1 year 176,490,750.08 8,818,234.89 5.001~2 years 10,632,348.03 1,063,234.80 10.002~3 years 1,291,893.89 387,568.17 30.00 over 3 years 1,240,499.08 620,249.55 50.00 Total 189,655,491.08 10,889,287.41 5.74 C. Among the portfolio, accounts receivable that are provided for bad debt using other method
31 Dec 2018
Name of portfolio
Account Percentage Accounts receivable Bad debt provision
(%)
Portfolio of specific accounts 191,779,452.94 - - Note: Based on historical experience, theCompany’s receivables including petty cash receivable from employees, accounts receivable from subsidiaries of the Company and sales revenue between the last settlement date of the same department store and the balance sheet date are with high recoverability and low possibility of incurring bad debt, as a result, no bad debt provisions are provided for such receivables.
②Status of bad debt accrual, recovery or reversed in current year
In 2018, bad debt accrual is RMB4,506,633.93, and the amount of recovery or reversal of bad debt provision is RMB7,549,812.29.
Incl. the amount of significant recovery or reversal of bad debt provision this year
Name of accounts The amount of recovery or reversal Recovery method Ginwa Xinjiang Time Squire Shopping Center Co., Ltd 2,250,000.00 Bank deposit
GinwaXi’an Century Shopping Co., Ltd. 5,283,121.86 Bank deposit
Total 7,533,121.86 -
③No accounts receivable was written-off during the year
④Top 5 receivable accounts
The amount of top 5 receivables based on year-end receivable balance is RMB65,652,234.68, accounts for17.13% of total receivables as at 31 Dec 2018. Corresponding bad debt provision is RMB602,002.24.
3. Prepayments
(1) Prepayments presented by aging
31 Dec 2018 1 Jan 2018
Account aging
Amount Percentage(%) Amount Percentage(%) Within 1 year 12,886,273.93 94.29 20,284,829.30 82.251~2 years - - 2,034,407.41 8.252~3 years 780,542.40 5.71 2,344,077.82 9.50 Over 3 years - - - - Total 13,666,816.33 100.00 24,663,314.53 100.00 (2) Top 5 prepayment accounts
The amount of top 5 prepayment accounts based on year-end balance is RMB9,393,700.19, accounts for68.73% of total prepayments as at 31 Dec 2018.
4. Other receivables
Item 31 Dec 2018 1 Jan 2018
Other receivables 45,870,582.26 34,990,539.09 (1) Other receivables
①Other receivables presented by types
31 Dec 2018
Types Book balance Bad debt provision
Carrying amount Amount Percentage(%) Amount Percentage(%)
Other receivables that individually
significant in amount and provided for 7,093,237.65 12.69 7,093,237.65 100.00 - bad debt separately
Other receivables provided for bad debt
48,249,486.72 86.30 2,378,904.46 4.93 45,870,582.26 by portfolio
Incl. Aging portfolio 45,771,039.24 81.87 2,378,904.46 5.20 43,392,134.78 Portfolio of specific accounts 2,478,447.48 4.43 - - 2,478,447.48 Other receivables that individually
insignificant in amount but provided for 565,400.00 1.01 565,400.00 100.00 - bad debt separately
Total 55,908,124.37 100.00 10,037,542.11 17.95 45,870,582.26 (Continued)
1 Jan 2018
Book balance Bad debt provision
Types
Percentage
Carrying amount Amount Amount Percentage(%)
(%)
Other receivables that individually significant
in amount and provided for bad debt 6,847,372.68 15.23 6,847,372.68 100.00 - separately
Other receivables provided for bad debt by
38,090,257.88 84.73 3,099,718.79 8.14 34,990,539.09 portfolio
Incl. Aging portfolio 33,690,435.20 74.94 3,099,718.79 9.20 30,590,716.41 Portfolio of specific accounts 4,399,822.68 9.79 - - 4,399,822.68 Other receivables that individually
insignificant in amount but provided for bad 20,000.00 0.04 20,000.00 100.00 - debt separately
Total 44,957,630.56 100.00 9,967,091.47 22.17 34,990,539.09
A.
Year-end balance of other receivables that are individually significant in amount and provided for bad debt separately
31 Dec 2018
Accounts
Other receivable Bad debt provision Percentage(%) Reasons
The possibility of recovery China Resources (Chong Qing) is remote due to the 800,000.00 800,000.00 100.00
Industrial Co., Ltd. termination of cooperative project.
Business faces
Beat Blattman Marketing 4,041,632.05 4,041,632.05 100.00 bankruptcy, the possibility of recovery is remote. Business faces
Liberty Time Center GmbH 2,251,605.60 2,251,605.60 100.00 bankruptcy, the possibility of recovery is remote. Total 7,093,237.65 7,093,237.65 — —
B.
Among the portfolio, other receivables that are provided for bad debt based on aging analysis
Ageing 31 Dec 2018
Other receivable Bad debt provision Percentage(%) Within 1 year 44,291,589.79 2,214,579.51 5.00 1 to 2 years 1,438,499.45 143,849.95 10.00 2 to 3 years - - - Over 3 years 40,950.00 20,475.00 50.00 Total 45,771,039.24 2,378,904.46 5.20 C.
Among the portfolio, other receivables that are provided for bad debt using other methods
31 Dec 2018
Name of portfolio
Other receivable Bad debt provision Percentage(%) Portfolio of specific accounts 2,478,447.48 - - Note: Based on historical experience, theCompany’s receivables from petty cash advanced to employees, from
subsidiaries of the Company and sales revenue between the last settlement date of the same department store and the balance sheet date are with high recoverability and low possibility of incurring bad debt, as a result, no bad debt provisions are provided for such receivables.
②Among the portfolio, other receivables that are provided for bad debt using other methods
Nature 31 Dec 2018 1 Jan 2018
Employee petty cash 2,478,447.48 4,399,822.68 Down payment and deposit 38,091,767.87 30,200,936.65 Product promotion expenses 7,827,524.03 3,387,360.70 Others 7,510,384.99 6,969,510.53 Total 55,908,124.37 44,957,630.56③Status of bad debt accrual, recovery or reversed in current year:
In 2018, bad debt accrual is RMB70,450.64. There was no recovery or reversal of bad debt provision this year.④There was no other receivables actually written-off during this year
⑤Top 5 other receivable accounts
Percentage of
Balance of Name of accounts Nature Amount Aging total other
provision receivables(%)
Beat Blattman Marketing Trade receivables 4,041,632.05 Over 3 years 7.23 4,041,632.05 China Resources (Shenzhen) Co., Ltd Deposit 3,010,024.00 Within 1 year 5.38 150,501.20 Liberty Time Center GmbH Trade receivables 2,251,605.60 Over 3 years 4.03 2,251,605.60 Beijing Jingdong Century Trading Co., Deposit Within 1 year
1,906,697.76 3.41 95,334.89 Ltd.
China Resources Sun Hung Kai Real Deposit Within 1 year
1,497,003.00 2.68 74,850.15 Estate (Hangzhou) Co., Ltd.
Total —— 12,706,962.41 —— 22.73 6,613,923.89 5. Inventory
(1) Inventory classification
31 Dec 2018
Item
Book balance Provision Carrying amount Raw material 183,679,226.95 28,296,729.51 155,382,497.44
31 Dec 2018
Item
Book balance Provision Carrying amount Work-in-progress 10,787,777.81 - 10,787,777.81 Goods in stock 1,675,548,898.56 59,412,872.11 1,616,136,026.45 Total 1,870,015,903.32 87,709,601.62 1,782,306,301.70 (Continued)
1 Jan 2018
Item
Book balance Provision Carrying amount Raw material 192,872,336.46 26,899,506.29 165,972,830.17 Work-in-progress 16,744,428.79 - 16,744,428.79 Goods in stock 1,708,413,402.70 70,603,985.40 1,637,809,417.30 Total 1,918,030,167.95 97,503,491.69 1,820,526,676.26 (2) Provision
Increase Decrease
Item 1 Jan 2018 31 Dec 2018 Accrual Others Reversed Others
Raw materials 26,899,506.29 3,625,562.93 - 2,228,339.71 - 28,296,729.51 Goods in stock 70,603,985.40 5,922,928.30 - 17,114,041.59 - 59,412,872.11 Total 97,503,491.69 9,548,491.23 - 19,342,381.30 - 87,709,601.62 (3) Reasons for accruing inventory impairment provision and the reason for reversal of provision or written-off this year.
Reason for reversal of provision
Item Basis for recognizing provision Reasons for written-off this year
Raw materials NRV is lower than cost － Disposed
Goods in stock NRV is lower than cost － Sales
6. Other current assets
Item 31 Dec 2018 1 Jan 2018
Deductible input tax of VAT 52,444,448.67 18,745,349.24 CIT prepaid 7,846,471.11 314,917.39
Item 31 Dec 2018 1 Jan 2018
Others 13,412,392.46 5,556,548.58 Total 73,703,312.24 24,616,815.21 7. AFS financial assets
(1) Status of AFS financial assets
31 Dec 2018 1 Jan 2018
Item
Impairment Carrying Impairment Carrying Book balance Book balance
provision amount provision amount AFS equity instrument 385,000.00 300,000.00 85,000.00 385,000.00 300,000.00 85,000.00 Incl: measured at cost 385,000.00 300,000.00 85,000.00 385,000.00 300,000.00 85,000.00 Total 385,000.00 300,000.00 85,000.00 385,000.00 300,000.00 85,000.00 (2) AFS financial assets measured at cost
Book balance Provision % of equity Cash Investee held in 1 Jan 2018 increase decrease 31 Dec 2018 1 Jan 2018 increase decrease 31 Dec 2018
dividend investee Shenzhen
Zhonghang
300,000.00 - - 300,000.00 300,000.00 - - 300,000.00 15.00 - Culture Co.
Ltd
Xi’an
Tangcheng 85,000.00 - - 85,000.00 - - - - 0.10 - Limited
Total 385,000.00 - - 385,000.00 300,000.00 - - 300,000.00 — - (3) Movements of impairment provision for AFS financial asset
Types of AFS financial asset AFS equity instrument Total Balance of impairment provision at the beginning of the year 300,000.00 300,000.00 Accrual in current year - - Incl: transferred from other comprehensive income - -
Decrease in current year - - Incl: reversed due to fair value increases —— —— Balance of impairment provision at the end of the year 300,000.00 300,000.00 8. Long-term equity investment
Changes during 2018
Investment gain Adjustment of other
Investee 1 Jan 2018
Changes of other Addition Withdraw recognized under comprehensive
equity item equity method income
I. Associated
company
Shanghai Watch Co., Ltd.
43,879,518.09 - - 1,001,545.06 - - (Shanghai Watch)
(Continued)
Changes during 2018
Balance of impairment Cash dividend
Investee
Impairment
31 Dec 2018 provision as at 31 Dec declared or profit Others
provision accrued
2018
distribution
I. Associated company
Shanghai Watch Co., Ltd.
- - - 44,881,063.15 - (Shanghai Watch)
9. Investment property
(1) Details of investment property measured at cost
Item Property and buildings
I. Total original cost
Item Property and buildings
(1) purchased - (2) Transferred from fixed asset 97,541,932.65 (3) increased due to business combination - 3. Decreased in current year - (1) Disposal - (2) Other decrease - 4. Balance at the end of the year 546,695,433.81 II. Total accumulated depreciation and amortization
1. Balance at the beginning of the year 143,659,513.39 2. Increased in current year 25,716,487.39 (1) Accrual or amortization 13,170,394.47 (2) Transferred from fixed asset 12,546,092.92 3. Decreased in current year - (1) Disposal - (2) Other decrease - 4. Balance at the end of the year 169,376,000.78 III. Impairment provision
1. Balance at the beginning of the year - 2. Increased in current year - (1) Accrual - 3. . Decreased in current year - (1) Disposal - (2) Other decrease - 4. Balance at the end of the year - IV. Total book value
(2) Reason of the investment property without the certificate for property right:
As of 31 December 2018, investment property without the certificate for property right did not exist.
(3) Changes of purpose of property
In July 2018, the Company leases out a property previously used itself. The property is transferred from fixed asset to investment property and accounted for using cost method. The book value of it was RMB84,995,839.73 at the time changed.
10. Fixed asset
Item 31 Dec 2018 1 Jan 2018
Fixed asset 425,649,562.85 523,699,592.65 (1) Fixed asset
①Detail of fixed asset
Property and Transportation Electronic Other
Item Machinery Total buildings vehicles devices equipments
I. Total cost
1.Balance at beginning
548,203,064.99 76,359,195.91 15,572,717.72 43,168,802.82 56,767,439.55 740,071,220.99 of year
2. Additions 7,960,183.62 4,481,681.31 - 3,481,827.98 3,127,468.34 19,051,161.25 (1)Purchasing 7,960,183.62 4,481,681.31 - 3,481,827.98 3,127,468.34 19,051,161.25 (2)Transfer from - - - - - - construction in progress
(3)Increase due to - - - - - - business combination
3. Decrease 97,541,932.65 41,222.22 - 2,513,094.39 1,472,743.27 101,568,992.53 (1)Disposal or retired - 41,222.22 - 2,513,094.39 1,472,743.27 4,027,059.88 (2) transferred into
97,541,932.65 - - - - 97,541,932.65 investment property
4.Balance at end of the
458,621,315.96 80,799,655.00 15,572,717.72 44,137,536.41 58,422,164.62 657,553,389.71 year
II. Accumulated
depreciation
Property and Transportation Electronic Other
Item Machinery Total buildings vehicles devices equipments
of year
2. Increase 15,490,407.34 6,940,310.81 859,797.03 5,027,186.68 3,372,846.73 31,690,548.59 (1)Accrual 15,490,407.34 6,940,310.81 859,797.03 5,027,186.68 3,372,846.73 31,690,548.59 3. Decrease 12,546,092.92 34,032.10 - 2,280,132.22 1,298,092.83 16,158,350.07 (1)Disposal or retire - 34,032.10 - 2,280,132.22 1,298,092.83 3,612,257.15 (2)Transferred into
12,546,092.92 - - - - 12,546,092.92 investment property
4.Balance at end of the
97,899,718.69 43,012,974.47 13,664,912.06 28,707,685.36 48,618,536.28 231,903,826.86 year
III. Provision for
impairment
1.Balance at beginning - - - - - - of the year
2. Additions - - - - - - (1)Accrual - - - - - - 3. Decrease - - - - - - (1)Disposal or retire - - - - - - 4.Balance at end of the - - - - - - year
IV. Total book value
1.Balance at end of the
360,721,597.27 37,786,680.53 1,907,805.66 15,429,851.05 9,803,628.34 425,649,562.85 year
2.Balance at the
453,247,660.72 40,252,500.15 2,767,602.69 17,208,171.92 10,223,657.17 523,699,592.65 beginning of the year
②Fixed assets that do not have certificate for property right
Item Book value Reason for not having certificate for property rights Office rooms for Harbin Branch 287,345.82 Defective in property right
Property for Zhengzhou Branch 6,138,196.00 Under application process
11. Construction in progress
Item 31 Dec 2018 1 Jan 2018
Construction in progress 12,041,126.00 10,947,300.53 (1) Construction in progress
①Details of construction in progress
31 Dec 2018 1 Jan 2018
Item
Impairment Impairment
Book balance Carrying amount Book balance Carrying amount provision provision
Clock& Watch base in
Guangming New District 12,041,126.00 - 12,041,126.00 10,947,300.53 - 10,947,300.53 auxiliary projects
②Changes for material construction-in-progress projects
Transferred to fixed
Project name Budget 31 Dec 2017 Increase asset in current Other decrease 31 Dec 2018 year
Clock& Watch base
in Guangming New
34,050,900.00 10,947,300.53 1,093,825.47 - - 12,041,126.00 District auxiliary
projects
(Continued)
Percentage of Rate of
Total capitalized Incl. capitalized in Source of Project name investment to Progress(%) capitalization in
interest current year funding budget(%) current year(%)
Clock& Watch base
in Guangming New
35.36 35.36 - - - Self-raised District auxiliary
projects
12. Intangible assets
(1) Details of intangible assets
Item Land-use right Software system Right to use trademarks Total
I. Total original cost
Item Land-use right Software system Right to use trademarks Total
1.Balance at beginning of the
34,854,239.40 19,904,736.57 9,547,313.86 64,306,289.83 year
2. Additions 79,583.00 3,982,478.51 545,994.75 4,608,056.26 (1)Purchase 79,583.00 3,982,478.51 545,994.75 4,608,056.26 (2)InternalR&D - - - - (3)Increased due to business
- - - - combination
3. Decreases - - - - (1)Disposal - - - - 4.Balance at end of the year 34,933,822.40 23,887,215.08 10,093,308.61 68,914,346.09 II. Total accumulated
amortization
1.Balance at beginning of the
9,887,164.24 6,951,113.14 3,244,732.24 20,083,009.62 year
2. Additions 3,694,544.65 1,124,998.55 466,315.66 5,285,858.86 (1)Accrual 3,694,544.65 1,124,998.55 466,315.66 5,285,858.86 3. Decreases - - - - (1)Disposal - - - - 4.Balance at end of the year 13,581,708.89 8,076,111.69 3,711,047.90 25,368,868.48 III. Total impairment provision
1.Balance at beginning of the
- - - - year
Item Land-use right Software system Right to use trademarks Total
1. Balance at end of the year 21,352,113.51 15,811,103.39 6,382,260.71 43,545,477.61 2. Balance at beginning of the
24,967,075.16 12,953,623.43 6,302,581.62 44,223,280.21 year
13. Long-term deferred expenses
Item 1 Jan 2018 Increase Amortization Other decrease 31 Dec 2018 Counter fabrication
49,334,415.56 49,200,596.00 49,230,011.46 - 49,305,000.10 expenses
Renovation expenses 58,392,053.11 50,885,181.89 34,625,947.87 - 74,651,287.13 Others 1,683,316.82 7,333,478.59 4,400,537.49 - 4,616,257.92 Total 109,409,785.49 107,419,256.48 88,256,496.82 - 128,572,545.15 14. Deferred income tax assets/Deferred income tax liabilities
(1) Detail of deferred income tax before offsetting
31 Dec 2018 1 Jan 2018
Item
Deductible temporary Deductible temporary Deferred income tax Deferred income tax asset
differences differences asset
Asset impairment provision 79,775,704.17 17,676,690.28 93,805,178.33 22,891,430.26 Unrealized profit for related party
272,840,911.63 67,717,517.83 309,982,920.90 76,608,130.54 transaction
Deferred income 3,672,855.36 918,213.84 5,904,000.00 1,476,000.00 Deductible loss 61,529,125.81 14,363,284.14 27,342,976.03 4,930,384.00 Total 417,818,596.97 100,675,706.09 437,035,075.26 105,905,944.80 (2) Details of unrecognized deferred income tax asset
Item 31 Dec 2018 1 Jan 2018
Impairment of assets 30,660,246.75 29,691,944.68 Deductible loss 65,181,936.05 41,326,518.50 Total 95,842,182.80 71,018,463.18 Note: Deductible losses of Swiss Company, which are subsidiaries of the Company, is not recognized as deferred income tax asset asit’s uncertain that the companies can get sufficient taxable income in future.
Hong Kong Company, a subsidiary of the Company, does not need to recognize the deferred income tax assets
for impairment provision according to the local tax policy.
15. Other non-current asset
Item 31 Dec 2018 1 Jan 2018
Prepayment for project and equipment purchase 8,949,160.42 8,246,538.33 16. Short-term loan
(1) Short-term loan classification
Item 31 Dec 2018 1 Jan 2018
Guaranteed loan 187,118,452.97 120,990,510.00 Credit Loan 360,000,000.00 405,000,000.00 Total 547,118,452.97 525,990,510.00 (2) There are no overdue short-term loans.
(3) Refer to Note XIV. 2 for details of guaranteed loans between parent companies and subsidiaries.
17. Note and accounts payables
Item 31 Dec 2018 1 Jan 2018
Accounts payable 259,913,612.34 263,256,495.65 (1) Accounts payables
Item 31 Dec 2018 1 Jan 2018
Trade payables 188,957,240.00 197,139,603.70 Payables for material purchased 18,632,180.36 5,596,017.29 Payables for project 52,324,191.98 60,520,874.66 Total 259,913,612.34 263,256,495.65 18. Advances from customer
(1) Presentation of advances received
Item 31 Dec 2018 1 Jan 2018
Advances received for trade 14,822,924.98 10,928,657.72 Rental received 1,636,520.02 4,212,930.07 Total 16,459,445.00 15,141,587.79 19. Employee benefit payable
(1) Presentation of employee benefit payable
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 I. Short-term benefit 67,145,581.32 533,345,700.37 536,685,964.81 63,805,316.88 II. Post-employment welfare-defined
4,418,785.82 46,014,765.45 44,459,830.32 5,973,720.95 contribution plans
III. Dismissal welfare - 2,271,458.27 2,271,458.27 - IV. Other welfare within one year - - - - Total 71,564,367.14 581,631,924.09 583,417,253.40 69,779,037.83 (2) Short-term employee benefits
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 1. Wages, bonuses and allowances 66,712,129.20 477,129,729.95 480,534,845.69 63,307,013.46 2. Employee Welfare - 9,959,168.00 9,959,168.00 - 3. Social insurance - 19,465,988.82 19,465,988.82 - Incl.: (1) medical insurance - 17,305,121.22 17,305,121.22 - (2) work-related injury insurance - 814,287.85 814,287.85 - (3) maternity insurance - 1,346,579.75 1,346,579.75 - 4. Housing fund - 17,311,498.67 17,311,498.67 - 5. Expenditure for labor union and
433,452.12 9,479,314.93 9,414,463.63 498,303.42 employee training
6. Other short-term benefits - - - - Total 67,145,581.32 533,345,700.37 536,685,964.81 63,805,316.88 (3) Defined contribution plans
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 1. Endowment insurance 1,044.89 42,071,562.15 41,599,355.66 473,251.38 2. Unemployment insurance - 1,136,009.40 1,136,009.40 - 3. Enterprise annuity payment 4,417,740.93 2,807,193.90 1,724,465.26 5,500,469.57 Total 4,418,785.82 46,014,765.45 44,459,830.32 5,973,720.95 20. Taxes payable
Item 31 Dec 2018 1 Jan 2018
Item 31 Dec 2018 1 Jan 2018
Value added tax 32,344,121.18 28,234,436.08 Corporate income tax 21,599,264.54 24,051,749.74 Property tax 248,795.56 640,117.90 City maintenance& construction tax 321,914.01 948,001.89 Individual income tax 998,190.73 779,154.31 Educational surcharges 229,955.09 677,393.80 Others 180,930.81 526,382.87 Total 55,923,171.92 55,857,236.59 21. Other payables
Item 31 Dec 2018 1 Jan 2018
Interest payable 772,351.26 1,464,729.11 Other payables 71,047,579.04 57,767,536.64 Total 71,819,930.30 59,232,265.75 (1) Interest payable
Item 31 Dec 2018 1 Jan 2018
Interest payable for instalment long-term loan - 152,151.14 Interest payable for short-term loan 772,351.26 1,312,577.97 Total 772,351.26 1,464,729.11 (2) Other payables
①Other payables presented by nature
Item 31 Dec 2018 1 Jan 2018
Security deposit 22,954,307.95 23,026,920.95 Shop activity fund 17,461,589.65 15,096,271.16 Personal accounts payable 3,058,122.71 4,911,856.36 Decoration expenses 6,096,460.99 3,175,612.64 Down payment 612,659.73 1,132,084.26 Others 20,864,438.01 10,424,791.27
Item 31 Dec 2018 1 Jan 2018
Total 71,047,579.04 57,767,536.64②Significant other payables with aging over 1 year:
Item Balance as at 31 Dec 2018 Reasons for unpaid or unsettled Shenzhen Tencent Computer System Co., Ltd. 4,693,429.16 within lease term
Shenzhen Zhongshen Commercial Property Service Co., Ltd. 903,166.80 within lease term
Oracle Research and Development Center (Shenzhen) Co.,
804,000.00 within lease term
Ltd.
Tropical Rainforest Restaurant, Nanshan District, Shenzhen 791,320.00 within lease term
Shenzhen Keman Medical Equipment Co., Ltd. 734,775.68 within lease term
China Merchants Bank Co., Ltd. Shenzhen Branch 654,532.30 within lease term
Beijing Yuante Technology Co., Ltd. Shenzhen Branch 519,007.36 within lease term
Shenzhen Beigaozhi Electronics Co., Ltd. 506,358.16 within lease term
AVIC Property Management Co., Ltd. 678,154.06 within lease term
Total 10,284,743.52 ——
22. Non-current liabilities that fall due within one year
Item 31 Dec 2018 1 Jan 2018
Long-term loans due within 1 year (Note VI. 23) 347,470.00 35,000,000.00 23. Long-term loan
Item 31 Dec 2018 1 Jan 2018
Pledge loans 4,864,580.00 5,008,425.00 Guaranteed loan - 109,861,928.00 Less: Long-term loan due within one year
347,470.00 35,000,000.00 (Note VI. 22)
Total 4,517,110.00 79,870,353.00 Note: (1) There is no overdue long-term loans.
(2) See Note VI.46 for type and amount of pledged assets.
(3) There is no guarantee in the balance of long-term loan.
(4) The interest rate for long-term loan is3.00%.
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 Forming reasons Income to be recognized in Government grant 5,904,000.00 66,037.74 2,297,182.38 3,672,855.36
later periods
Incl: items involving government grant
Recognized in
Recognized in Other Related to Subsidized project 1 Jan 2018 Increase non-operating 31 Dec 2018
other gains Changes assets/income Income
Special fund for
Shenzhen industrial
design industry 2,000,000.00 - - 1,066,988.78 - 933,011.22 Asset related development
(Note (1))
Funding project for
construction of
National Enterprise 2,000,000.00 - - 488,578.43 - 1,511,421.57 Asset related Technology Center
(Note (2))
Researching
project for key
technique of
480,000.00 - - 480,000.00 - - Income related benchmark timing
system of
DF101(Note (3))
2017 Nanshan
District
Independent
124,000.00 - - 124,000.00 - - Income related Innovation Industry
Development
Special Fund
2017 Provincial
Specialized Fund
for Industrial and 1,300,000.00 - - 137,615.17 - 1,162,384.83 Income related Information
Technology (Note
Recognized in
Recognized in Other Related to Subsidized project 1 Jan 2018 Increase non-operating 31 Dec 2018
other gains Changes assets/income Income
(4))
Special funds for
consumer goods
standards and - 66,037.74 - - - 66,037.74 Income related quality
improvement
Total 5,904,000.00 66,037.74 - 2,297,182.38 - 3,672,855.36 —— Note (1): Special fund for Shenzhen industrial design industry development was obtained according to the Shen Jingmao Xinxi Jishu Zi (2013) No. 227 - Operating Specification for Affirmation and Fund Plan of Shenzhen Industrial Design Center (Trial) which is jointly issued by Economy, Trade and Information Commission of Shenzhen Municipality and Finance Commission of Shenzhen Municipality.
Note(2)：Funding project for construction of Shenzhen Enterprise Technology Center was obtained according to the Notice for the 1st Supportive Project in 2015 of Funding Project for Construction of Shenzhen Enterprise Technology Center which was issued by Shenzhen Development and Reform Commission (Shen Jing Mao Xin XiYu[2015] No. 129).
Note(3)：Special fund for university-industry cooperation in 2013 was obtained according to Yue Ke Gong Shi[2014] No. 13– Publicity about Projects which would be Supported by Special Fund of Comprehensive Strategic Cooperation between Province and College and Special Fund of Province-Ministry University-Industry Cooperation in 2013, issued by Guangdong Science and Technology Department.
Note (4): According to the Notice of Guangdong Provincial Economic and Information Technology Commission on Doing a Good Job of Applying for Provincial Special Projects in Production and Service Industry in 2017 (the Circular of the Ministry of Economic Affairs and Information Technology of Guangdong Province and Guangdong Provincial Department of Finance) Guangdong Letter of Manufacture[2016] No. 53) obtained provincial 2017 special funds for industrial and informatization.
25. Share capital
Additions or reduction(+, -)
Capitalization
Item 1 Jan 2018
Issuance of Bonus
31 Dec 2018 of capital Others Subtotal
new share shares
reserves
Additions or reduction(+, -)
Capitalization
Item 1 Jan 2018
Issuance of Bonus
31 Dec 2018 of capital Others Subtotal
new share shares
reserves
Total shares 438,744,881 - - - - - 438,744,881 26. Capital reserve
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 Share premium 1,047,963,195.57 - - 1,047,963,195.57 Other capital reserves 14,492,448.65 - - 14,492,448.65 Total 1,062,455,644.22 - - 1,062,455,644.22
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
27. Other comprehensive income
Movement
Less: recorded in other
Amount incurred before comprehensive income in
Item 1 Jan 2018
Less: Income tax Attribute to parent Attribute to minority
31 Dec 2018 income tax in current prior period and transferred
expenses company after tax shareholders after tax
period to profit or loss in current
period
I. Other comprehensive
income items which will not be
- - - - - - - reclassified subsequently to
profit or loss
II. Other comprehensive
income items which will be
-11,523,442.39 6,081,568.47 - - 6,081,302.61 265.86 -5,442,139.78 reclassified subsequently to
profit or loss
Incl. translation difference of
foreign currency financial -11,523,442.39 6,081,568.47 - - 6,081,302.61 265.86 -5,442,139.78 statements
Total other comprehensive
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
28. Surplus reserve
Item 1 Jan 2018 Increase Decrease 31 Dec 2018 Statutory surplus reserve 144,820,819.35 16,210,080.45 - 161,030,899.80 Discretionary surplus reserve 61,984,894.00 - - 61,984,894.00 Total 206,805,713.35 16,210,080.45 - 223,015,793.80 Note: according to the Company Law and Articles of Association, the Company draws statutory surplus reserve at10% of net profit. If the statutory surplus reserve is over50% of theCompany’s registered capital, drawing of statutory surplus reserve stopped.
The Company can draw discretionary surplus reserve after drawing statutory surplus reserve. If approved, discretionary surplus reserve can be used to make up for losses in previous years or increase share capital. 29. Undistributed profit
Item 2018 2017
Undistributed profit at the end of prior year before adjustments 771,484,565.02 687,986,807.74 Adjustments to undistributed profit at the beginning of year - - Undistributed profit at the beginning of year after adjustment 771,484,565.02 687,986,807.74 Plus: Net profit attributable to the owner of the parent company for
183,835,095.29 140,216,258.28 the year
Less: statutory surplus reserve drawn 16,210,080.45 12,844,012.90 Dividends payable to ordinary shares 87,748,976.20 43,874,488.10 Undistributed profit at the end of year 851,360,603.66 771,484,565.02 Note: Information on distribution of dividend
Pursuant to the “Resolution of Equity Distribution for Year 2017” approved at the 2017 Annual General Meeting held on 21 June 2018, the Company distributed to all shareholders cash dividend of RMB2.00 (tax inclusive) for every 10 shares held based on total shares of 438,744,881 as at 31 December 2017. Total cash dividend distributed was RMB87,748,976.20.
30. Operating revenue and operating cost
2018 2017
Item
Operating revenue Operating cost Operating revenue Operating cost Revenue from main
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
2018 2017
Item
Operating revenue Operating cost Operating revenue Operating cost Revenue from other
18,103,869.71 903,932.64 19,093,942.55 3,697,637.98 business
Total 3,400,450,599.90 1,993,809,774.20 3,345,809,703.98 1,986,652,591.57 31. Tax and surcharges
Item 2018 2017
Urban maintenance and construction tax 14,746,181.35 14,218,262.08 Educational surcharge 6,338,803.59 6,122,809.94 Local educational surcharge 4,221,251.51 4,099,162.87 Property tax 3,858,983.33 4,057,806.73 Stamp duty 2,216,200.85 2,322,319.03 Land use tax 387,741.44 461,094.63 Consumption tax 56,184.87 68,144.07 Tax for usage of vehicle and ship 7,785.00 8,085.00 Others 1,936,212.46 1,513,574.23 Total 33,769,344.40 32,871,258.58 Note: The criteria of business taxes and surcharges accrued and paid refer to Note V. Taxation.
32. Selling and distribution expenses
Item 2018 2017
Salary 284,754,162.08 282,332,694.94 Employee welfare 5,639,512.33 5,021,378.47 Housing fund 11,646,901.18 10,766,215.15 Social insurance 45,976,594.63 40,320,843.22 Department store expense and rental 137,788,340.17 129,811,336.38 Market promotion expenses 186,814,362.00 177,352,152.54 Depreciation and amortization 91,323,930.38 90,339,654.46 Packaging expenses 17,013,895.11 13,166,738.72 Utilities and property management expenses 18,464,692.62 12,459,271.35
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 2018 2017
Shipping fees 12,444,864.89 11,637,994.76 Office expenses 10,934,189.89 6,953,441.44 Travel expenses 12,076,624.12 11,774,153.69 Others 22,092,103.70 19,502,056.89 Total 856,970,173.10 811,437,932.01 33. Administrative expenses
Item 2018 2017
Salary 132,152,678.81 116,005,739.67 Social insurance 11,333,830.56 13,262,398.74 Depreciation and amortization 23,465,976.86 20,786,423.56 Enterprise annuity 2,318,455.78 3,706,212.20 Union funds 4,967,113.07 2,748,390.12 Training fee 2,817,832.13 1,431,427.23 Travel expenses 7,436,745.07 5,917,863.79 Office expenses 4,411,920.54 4,896,447.32 Housing fund 4,217,069.96 4,134,079.62 Agents fees 2,397,253.16 2,632,061.65 Employee welfare 2,908,900.50 2,645,453.19 Others 20,734,749.41 12,423,085.15 Total 219,162,525.85 190,589,582.24 34. R& D expenses
Item 2018 2017
Salary 24,158,997.53 22,773,695.65 Employee welfare 466,603.29 301,488.36 Social insurance 2,270,552.06 1,560,336.14 Housing fund 705,146.39 747,618.62 Material cost 3,062,922.51 4,216,717.28
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 2018 2017
Sample fee 2,042,439.14 4,620,567.85 Processing fee 2,150,154.58 198,047.66 Depreciation and amortization 4,869,828.83 4,559,562.30 Technical cooperation fee 1,254,524.99 2,611,783.01 Others 6,369,173.50 7,864,082.48 Total 47,350,342.82 49,453,899.35 35. Finance expenses
Item 2018 2017
Interest expense 27,552,558.81 41,825,035.34 Less: Interest capitalization - - Less: Interest income 2,269,447.05 2,915,602.99 Exchange gain or losses 713,080.72 1,082,289.43 Bank charges and others 9,920,047.68 9,195,021.13 Total 35,916,240.16 49,186,742.91 36. Impairment losses
Item 2018 2017
Bad debt loss -5,488,944.07 11,818,649.06 Inventory impairment loss 8,753,900.25 50,608,850.55 Total 3,264,956.18 62,427,499.61 37. Other gains
Amount included in currentyear’s Item 2018 2017
non-recurring profit or loss Government grant 19,375,618.48 17,508,255.98 19,375,618.48 For details of government grants, refer to Note VI. 48.
38. Investment gain
Item 2018 2017
Investment gain from the long-term equity investment measured by equity 1,001,545.06 455,893.22
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 2018 2017
method
39. Gain on disposal of assets
Amount included in currentyear’s Item 2018 2017
non-recurring profit or loss Total gain/loss on disposal of the
-181,302.24 7,321,993.36 -181,302.24 non-current assets
40. Non-operating income
Amount included in currentyear’s Item 2018 2017
non-recurring profit or loss Total gain on damage and retirement of
1,000.00 - 1,000.00 non-current assets
Clearing of payables that cannot be paid 2,810.50 2,256,661.00 2,810.50 Others 1,442,547.03 350,992.91 1,442,547.03 Total 1,446,357.53 2,607,653.91 1,446,357.53 41. Non-operating expenses
Amount included in non-recurring profit or Item 2018 2017
loss in current year
Fines and late payment expenses 154,626.88 - 154,626.88 External donation 380,000.00 399,250.00 380,000.00 Others 117,888.09 969,430.92 117,888.09 Total 652,514.97 1,368,680.92 652,514.97 42. Income tax expenses
(1) Details of income taxes expenses
Item 2018 2017
Current income tax 42,131,613.05 57,825,323.60 Deferred income tax 5,230,238.71 -10,726,369.54 Total 47,361,851.76 47,098,954.06 (2) Reconciliation between income tax expenses and accounting profits is as follows:
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 2018
Profit before tax 231,196,947.05 Income tax expenses calculated at legal (or applicable) tax rate 57,799,236.76 Impact of different tax rate in certain subsidiaries -12,360,815.15 Adjustment for income tax in prior year 413,122.52 Income not subject to tax -250,386.27 Expenses not deductible for tax purposes 1,286,216.68 Taxation influence by using unrecognized deductible loss and deductible temporary difference
-250,920.28 of prior periods
Taxation influence of unrecognized deductible loss and deductible temporary difference 7,158,514.85 Effect of tax rate change on carrying amount of opening deferred income tax asset - Effect of super deduction ofR&D expenses -6,433,117.35 Income tax expenses 47,361,851.76 43. Other comprehensive income
Details of other comprehensive income refer to Note VI. 27.
44. Notes to cash flow statement
(1) Cash received from other operating activities
Item 2018 2017
Government grant 17,144,473.84 17,432,255.98 Product promotion fee 7,388,696.14 7,256,201.41 Security deposit 9,977,697.98 9,327,099.78 Interest income 2,269,447.05 2,915,602.99 Petty cash 4,066,408.69 4,615,494.88 Others 8,781,869.99 7,631,989.59 Total 49,628,593.69 49,178,644.63 (2) Cash paid for other operating activities
Item 2018 2017
Marketing promotion fee 158,123,421.13 116,083,360.98
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 2018 2017
Rental 88,198,420.82 80,557,649.30 Departmental store expenses 27,617,954.29 40,296,610.32 Advertising fee 25,754,222.71 32,028,348.16 Travel expenses 16,716,869.03 15,287,674.97 R& D expenses 18,696,076.85 22,883,770.79 Office expenses 14,807,127.70 10,087,223.06 Transportation expenses 13,966,858.83 10,445,774.44 Exhibition expenses 7,794,285.04 10,686,979.91 Posting and telecommunication expenses 1,284,007.36 4,942,120.45 Business entertainment 3,881,281.50 5,909,392.82 Packaging expenses 2,123,627.83 1,010,445.61 Utilities 18,131,634.75 15,035,484.37 Petty cash 5,131,463.98 4,405,955.94 Agents fees 3,417,891.86 3,602,250.55 Conference expenses 1,856,933.80 3,477,562.92 Insurance expense 2,447,666.64 2,720,711.50 Security deposit 19,915,997.96 2,803,293.12 Vehicle expenses 1,296,416.06 2,110,291.06 Bank charges 9,723,496.15 9,036,367.69 Others 13,351,304.90 18,515,949.06 Total 454,236,959.19 411,927,217.02 45. Supplement to cash flow statement
(1) Supplement to Cash Flow Statement
Supplement 2018 2017
1. Reconciliation of net profit to cash flow from operating activities:
Net profit 183,835,095.29 142,616,359.20
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Supplement 2018 2017
Add: Impairment for assets 3,264,956.18 62,427,499.61 Depreciation of fixed assets, and gas assets, and productive biological 44,860,943.06
43,011,539.25 assets
Amortization of intangible assets 5,285,858.86 3,453,462.25 Amortization of long-term deferred expenses 88,256,496.82 92,532,517.56 Loss on disposal of fixed assets, intangible assets, and other long-term
181,302.24 -7,321,993.36 assets (“-“ for gain)
Loss on retirement of fixed assets (“-“ for gain) -1,000.00 - Loss on changes of fair value (“-“ for gain) - - Financial expenses (“-“ for income) 27,552,558.81 41,825,035.34 Investment loss (“-“ for gain) -1,001,545.06 -455,893.22 Decrease in deferred tax assets (“-“ for increase) 5,230,238.71 -10,726,369.54 Increase in deferred tax liabilities (“-“ for decrease) - - Decrease in inventories (“-“ for increase) 30,900,223.04 126,768,439.60 Decrease in operating receivables (“-“ for increase) -36,309,812.09 -19,073,303.46 Increase in operating payables (“-“ for decrease) -20,427,526.24 89,897,268.74 Others - - Net cash flows from operating activities 331,627,789.62 564,954,561.97 2. Significant investment or financing activities not involving cash:
Debts converted to capital - - Convertible debts mature within one year - - Fixed assets acquired under finance leases - - 3. Net changes in cash and cash equivalents:
Cash at end of year 162,623,059.97 184,947,891.32 Less: cash at beginning of year 184,947,891.32 427,227,755.81 Plus: cash equivalents at end of year - - Less: cash equivalents at beginning of year - - Net increase in cash and cash equivalents -22,324,831.35 -242,279,864.49
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
(2) Cash and cash equivalents
Item 31 Dec 2018 31 Dec 2017 I. Cash 162,623,059.97 184,947,891.32 Incl. Cash on hand 420,783.85 414,210.14 Bank deposit available for immediate payment 160,135,454.62 184,528,160.32 Other monetary funds available for immediate payment 2,066,821.50 5,520.86 II. Cash equivalents
Incl. Bond investment due in three months - - III. Cash and cash equivalents at the end of year 162,623,059.97 184,947,891.32 Incl. Restricted cash and cash equivalents for the Company - Note: Restricted cash and cash equivalents for the Company are not included in cash and cash equivalents amounts.
46. Assets of restricted ownership or use rights
Amount as of 31 Dec
Item Restriction reason
2018
Security deposit of RMB1,575,000.00, judicial frozen fund of RMB Currency funds 2,205,000.00
630,000.00.
Fixed assets 14,978,058.58 Guarantee
Total 17,183,058.58 —
47. Monetary item denominated in foreign currency
(1) Monetary item denominated in foreign currency
Balance denominated in
Balance translated in RMB as at Item foreign currency as at 31 Exchange rate
31 Dec 2018
Dec 2018
Currency fund
Incl: USD 634,531.28 6.8632 4,354,915.08 HKD 3,646,197.04 0.8762 3,194,797.85 CHF 620,245.24 6.9494 4,310,332.27 EUR 1,943.58 7.8473 15,251.86
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Balance denominated in
Balance translated in RMB as at Item foreign currency as at 31 Exchange rate
31 Dec 2018
Dec 2018
Accounts receivable
Incl: USD 688,191.90 6.8632 4,723,198.65 HKD 6,007,034.35 0.8762 5,263,363.50 EUR 34,266.75 7.8473 268,901.47 CHF 185,687.50 6.9494 1,290,416.71 Prepayments
Incl : CHF 681,143.82 6.9494 4,733,540.86 Other receivable
Incl: HKD 299,737.08 0.8762 262,629.63 EUR 4,250.00 7.8473 33,351.03 CHF 905,580.00 6.9494 6,293,237.65 Accounts payable
Incl: HKD 3,030,447.60 0.8762 2,655,278.19 Advances from customer
Incl: HKD 74,499.32 0.8762 65,276.30 Other payable
Incl: HKD 42,812.50 0.8762 37,512.31 CHF 65,094.65 6.9494 452,368.76 Short-term loan
Incl: HKD 33,000,000.00 0.8762 28,914,600.00 CHF 1,900,000.00 6.9494 13,203,860.00 Non-current liability that due in one year
Incl: CHF 50,000.00 6.9494 347,470.00 Long-term bank loan
Incl： CHF 650,000.00 6.9494 4,517,110.00
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
(2) Overseas operational entity
For main business location and recording currency of important overseas operational entity, refer to Note IV. 3. 48. Government grant
(1) The status of the government grants
Accounting Amount included in current Item Amount
subject profit or loss
2017 Shenzhen Standard Special Fund (Note(1)) 496,000.00 Other income 496,000.00 2017 Guangming District Watch Exhibition Funding 50,000.00 Other income 50,000.00 Science and Technology Commission 2017 Corporate
1,890,000.00 Other income 1,890,000.00 Research and Development Funding (Note (2))
2017 Shenzhen Patent Award 2,000.00 Other income 2,000.00 Special fund for industrial transformation and upgrading in
500,000.00 Other income 500,000.00 2018 (Note (3))
2018 annual industrial transformation and upgrading special
4,480,000.00 Other income 4,480,000.00 fund and innovation rewards (Note (4))
2018 Independent Innovation Industry Development Special
6,000.00 Other income 6,000.00 Fund, Nanshan District
Special Fund for the Development of Independent Innovation
479,200.00 Other income 479,200.00 Industry, Nanshan District, 2018 (Note (5))
Funding for Informatization and Industrialization Integration
400,000.00 Other income 400,000.00 project,2018 (Note(6))
Funding for the domestic market development of the
demonstration enterprise under Chinese Entrepreneurship 128,920.00 Other income 128,920.00 and Innovation Strategy in 2018
Basel Watch and Clock Exhibition International Trade
779,907.74 Other income 779,907.74 Development Fund(Note (7))
High-tech Enterprise Recognition Award, Baoan District 30,000.00 Other income 30,000.00 China DisabledPersons’ Federation subsidy 6,000.00 Other income 6,000.00 Export credit insurance 57,605.00 Other income 57,605.00 Activity fund for Guangming division during the Second
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Accounting Amount included in current Item Amount
subject profit or loss
The 18th China Design Excellence Award (Note (8)) 250,000.00 Other income 250,000.00 Special support fund for economic development in
208,000.00 Other income 208,000.00 Guangmign District (Note (9))
Standardization Strategy Funding, Guangming New District
600,000.00 Other income 600,000.00 (Note (9))
Convention and Exhibition Industry Financial Subsidy,
50,000.00 Other income 50,000.00 Guangming New District (Note (9))
Disabled care and medical insurance subsidy for the first half
2,882.30 Other income 2,882.30 of the year in 2018, GuangMing New district
R&D Funding, Guangming New District (Note (10)) 360,000.00 Other income 360,000.00 Exhibition Subsidy, Guangming New District (Note (10)) 50,000.00 Other income 50,000.00 Annual fee incentive for domestic patent invention 2,000.00 Other income 2,000.00 Government funds granted for admission to the China
6,154.00 Other income 6,154.00 International Import Expo
Special Fund for the Development of the Service Industry of
1,000,000.00 Other income 1,000,000.00 the Economic and Trade Commission (Note (11))
Crystal Products Exhibition Special Funding 103,267.00 Other income 103,267.00 CorporateR&D Funding by Science and Technology
1,155,000.00 Other income 1,155,000.00 Commission, 2017 (Note (12))
Creating excellence and rating funding project by Economic
200,000.00 Other income 200,000.00 Promotion Bureau, Nanshan District
Funding for Informatization and Industrialization Integration
100,000.00 Other income 100,000.00 project by Economic Promotion Bureau, Nanshan District
Special fund for independent innovation industry
development by Nanshan District Science and Technology 250,000.00 Other income 250,000.00 Commission
Project funded by Commerce Circulation Industry 360,800.00 Other income 360,800.00 Subsidy under Shenzhen Nanshan Finance Bureau
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Accounting Amount included in current Item Amount
subject profit or loss
(Note (13))
Commerce Circulation Industry Funding Project by Shenzhen
549,500.00 Other income 549,500.00 Nanshan District Finance Bureau (Note (13))
Commerce Circulation Industry Funding Project by Shenzhen
Nanshan District Economic Promotion Bureau 215,100.00 Other income 215,100.00 (Note (13))
Funding for the Talent Quality Improvement Project of the
Industrial Innovation Talents by the Human Resources 21,500.00 Other income 21,500.00 Bureau of Nanshan District, Shenzhen (Note (13))
Patent subsidy by Shenzhen Municipal Market and Quality
10,000.00 Other income 10,000.00 Supervision and Administration Committee, 2017
The 19th China Patent Award of the Market and Quality
330,000.00 Other income 330,000.00 Committee (Note (14))
Funds on Enterprise Intellectual Property Management
Standards Certification by Market Supervision Committee 200,000.00 Other income 200,000.00 (Note (15))
Subsidy for enhancing international operating capacity 60,000.00 Other income 60,000.00 Subsidy for keeping stable job positions 229,106.17 Other income 229,106.17 Demonstration special fund, financial aid project in exhibition
industry, for small and micro enterprise entrepreneurship 159,810.00 Other income 159,810.00 innovation base (Note(16))
Watch exhibition subsidy of small and micro enterprises 128,008.00 Other income 128,008.00 Government exhibition industry special fund 128,008.00 Other income 128,008.00 Government Talent Quality Improvement Project Subsidy 100,000.00 Other income 100,000.00 China Light Industry Federation's international standards
16,000.00 Other income 16,000.00 funding
16-26 batch special subsidy for Central Foreign Trade and
60,000.00 Other income 60,000.00 Economic
Government special subsidy fund for central foreign
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Accounting Amount included in current Item Amount
subject profit or loss
Shenzhen Industrial Design Industry Development Special
2,000,000.00 Deferred income 1,066,988.78 Fund (Note VI. 24 note (1))
Nationally Recognized Enterprise Technology Center
2,000,000.00 Deferred income 488,578.43 Construction Funding Project (Note VI.24. note (2))
Key technology research and development project of DF101
480,000.00 Deferred income 480,000.00 aircraft benchmark timing system (Note VI. 24. note (3))
Development Special Fund for Independent Innovation
124,000.00 Deferred income 124,000.00 Industry, Nanshan District, 2017
2017 provincial industrial and information special funds (Note
1,300,000.00 Deferred income 137,615.17 VI.24. (note (4))
Special funds for consumer goods standards and quality
Deferred income - improvement 66,037.74
Total 23,048,473.84 — 19,375,618.48 Note (1): The 2017 Shenzhen Standard special funds obtained according to “The Publicity for the 2017 Construction of the Shenzhen Standard Special Fund Standards Project” issued by Shenzhen Municipal Market and Quality Supervision and Management Committee.
Note (2): The 2017 Shenzhen Enterprise Research and Development Funding obtained according to “Management Measures of Shenzhen Science and Technology Research and Development Fund” issued by Shenzhen Finance Committee and Shenzhen Science and Technology Innovation Committee (Shen Caike[2012] No. 168).
Note (3): The special funds for industrial transformation and upgrading obtained according to the Notice of the Shenzhen Economic and Trade and Informatization Commission on the “Application of 2018 Annual Industrial Transformation and Upgrading Special Funds for Developing Industrial Zone of Community Joint-stock Companies” (Shen Jingmao Xinxi Guihua Zi[2017] No. 243)
Note (4): The 2018 annual industrial transformation and upgrading special fund and innovation rewards obtained according to the Notice issued by the Shenzhen Economic and Trade Information Commission, on the publicity of projects to be funded by 2018 annual industrial transformation and upgrading of special fund (Shen Jingmao Xinxi Xinxing Zi[2018] No. 208).
Note (5): Special Fund for the Development of Independent Innovation Industry, Nanshan District, obtained according to the “Management Measures for Special Funds for Independent Innovation Industry Development in Nanshan District (Trial)” (Shen Nan Fuban Gui[2018] No. 3).issued by the Office of the People's Government of
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Nanshan District, Shenzhen.
Note (6): Fund for Informatization and Industrialization Integration project obtained according to the “Shenzhen City Industrial Transformation and Special Fund Management Measures” (Shen Caigui[2016] No. 9), issued by Shenzhen Municipal Finance Committee and the Shenzhen Municipal Commission of Economy, Trade and Information Technology.
Note (7): International Trade Development Fund granted by Shenzhen Municipal Government, obtained according to the “Notice on the Relevant Work on the Special Fund for Foreign Economic and Trade Development in 2017” issued by the Ministry of Commerce (Shang Caihan[2017] No. 314) and “Implementation Rules for the Administration of Funds for Enhancing International Operational Capabilities of Less thanUS$65 Million” issued by the Municipal Economic and Trade Information Committee and the Municipal Finance Committee (Shen Jingmao Xinxi YusuanZi[2015] No. 180).
Note (8): Patent award obtained according to the “Decision on the Award of the 18th China Patent Award” issued by the State Intellectual Property Office (Guo Zhi Fa Guan Zi[2016] No. 95).
Note (9): Project funding for the Economic Development Special Fund Standardization Strategic Project in the first half of 2018, Guangming New District, the International Certification Project and activity support for economic and trade exhibition funded by Economic Development Special Fund in Guangming District. Funds are obtained according to the “Guangming New District Economic Development Special Fund Management Measures and Supporting Implementation Rules” issued by the Shenzhen Guangming New District Management Committee (Shen Guanggui[2017] No. 16)
Note (10): 2017 Guangming New District Economic Development Special Fund forR&D Investment and activity support for Domestic Trade Exhibition obtained according to "Shenzhen Guangming New District Economic Development Special Fund Management Measures and Supporting Implementation Rules" (Shen Guang Gui[2017] No. 16) issued by Shenzhen Guangming New District Management Committee.
Note (11): The second batch of Shenzhen City e-commerce development special fund project award in 2018 obtained according to “Notice of the Municipal Economic and Trade Information Commission on the Public Announcement of the Second Batch of Shenzhen E-Commerce Development Special Fund Projects” issued by the Shenzhen Economic and Trade Information Commission (Shen Jingmao Xinxi Shengchan Zi[2018] No. 100) Note (12): Subsequent subsidies for corporate research and development grants obtained according to the "Shenzhen City-level Industry Special Funds Disbursement Operation Regulations" (Shen Caike[2010] No. 173) and "Release of<Shenzhen City Special Funds Entrusted Commercial Bank SupervisionScheme>" (Shen Caike[2012] No. 1) issued by Shenzhen Municipal Science and Technology Innovation Committee.
Note (13): Special funds for Nanshan district independent innovation industry development obtained according to “Nanshan District Independent Innovation Industry Development Special Fund Management Measures (Trial)” issued by the Office of the People's Government of Nanshan District, Shenzhen (Shennan Fuban Gui[2017] No. 2)
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Note (14): Patent award obtained according to “Notice of the Shenzhen Municipal Market and Quality Supervision Commission on distributing the Fifth Guangdong Patent Award and the 19th China Patent Award for Guangdong Province Intellectual Property Support A
Note(15): Fund for Enterprise Intellectual Property Management Standard Certification obtained according to “Shenzhen Municipal People's Government of ShenzhenMunicipality’s notice on Several Measures for Promoting Scientific and Technological Innovation" issued by the Shenzhen Municipal Market and Quality Supervision and Management Committee (Shenfa[2016] No. 7) and the Shenzhen Municipal People's Government of Shenzhen Municipal Committee of the Communist Party of China Printing and Distributing the Notice on Several Measures to Support Enterprises to Enhance Their Competitiveness (Shenfa[2016] No. 8)
Note (16): 2018 Small and Medium Enterprises Development Special Fund (Under “Innovation and Entrepreneurship” Strategy), Enterprise Domestic Market Development Project Funding, obtained according to the "Interim Measures for the Administration of Special Funds for the Development of Private and SMEs in Shenzhen" issued by Shenzhen Municipal Commission of Economy, Trade and Information and Shenzhen Municipal Finance Committee (Shen Jingmao Xinxi Gui[2017] No. 8), and “The Detailed Rules for the Implementation of the Special Demonstration Fund for the Small and Medium Enterprise Entrepreneurship Innovation Base in Shenzhen” issued by Shenzhen Economic and Trade and Information Commission (Shen Jingmao Xinxi Zhongxiao Zi[2016] No. 217).
VII.
Changes of consolidation scope
1. Changes of consolidation scope for other reasons
On 9 March, 2018, World Watches International obtained the company revocation announcement (No. 1554) issued by the Hong Kong Companies Registry. At the end of the period, the Company did not include it in the scope of consolidation.
VIII.
Equity in other entities
1. Equity in subsidiaries
(1) Structure of enterprise group
Main Shareholdingratio%
Place of Nature of
Name of subsidiary business Ways acquired
registration business
Direct Indirect
location
HARMONY Company Shenzhen Shenzhen Commerce 100.00 - Establishment or investment
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Main Shareholdingratio%
Place of Nature of
Name of subsidiary business Ways acquired
registration business
Direct Indirect
location
Manufacturing Company Shenzhen Shenzhen Manufacture 90.00 10.00 Establishment or investment FIYTA Hong Kong Hong Kong Hong Kong Commerce 100.00 - Establishment or investment Station 68 Hong Kong Hong Kong Commerce - 60.00 Establishment or investment Harbin Company Harbin Harbin Commerce 100.00 - Establishment or investment Technology Company Shenzhen Shenzhen Manufacture 100.00 - Establishment or investment TEMPORAL Company Shenzhen Shenzhen Commerce 100.00 - Establishment or investment Emile Choureit Shenzhen
Shenzhen Shenzhen Commerce 100.00 - Establishment or investment Company
FIYTA Sales Company Shenzhen Shenzhen Commerce 100.00 - Establishment or investment Business combination under Hengdarui Company Shenyang Shenyang Commerce 100.00 -
common control
Business combination not under Swiss Company Switzerland Switzerland Commerce - 100.00
common control
2. Equity in joint arrangement or associates
(1) Significant associates
Principal place Registration
Shareholding ratio(%)
Accounting treatment Name Business nature
of business place
Direct Indirect
for associates Shanghai Watch Shanghai Shanghai Manufacture 25.00 - Equity method (2) Principal financial information of significant associate company:
Balance as of 31 Dec 2018 Balance as of 1 Jan 2018 Item
or 2018 or 2017
Current assets 99,901,286.09 88,035,307.16 Non-current assets 15,459,207.08 17,515,363.92 Total assets 115,360,493.17 105,550,671.08 Current liabilities 10,833,917.48 5,527,973.92 Non-current liabilities - -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Balance as of 31 Dec 2018 Balance as of 1 Jan 2018 Item
or 2018 or 2017
Total liabilities 10,833,917.48 5,527,973.92 Minorityshareholders’ interests - -Owners’ equity attributable to parent company 104,526,575.69 100,022,697.16 Share of net assets calculated as shareholding
26,131,643.92 25,005,674.29 percentage
Adjustment matters
- Goodwill - - - Unrealized profit or losses from internal transaction - - - Others - - Book value of investment to associates 44,881,063.15 43,879,518.09 Operating revenue 97,282,978.95 79,475,581.06 Net profit 4,006,180.22 1,823,572.89 Other comprehensive income - - Total comprehensive income 4,006,180.22 1,823,572.89 Dividends received from associated company during
- - the year
IX.
Risk related to financial instruments
Main financial instruments of the Company include monetary fund, note and accounts receivable, other receivables, available-for-sale financial assets, equity investment, note and accounts payable, other payables, and loans etc. Details of financial instruments refer to related items in Note VI. The risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate these risks are described below. The management of the Company manages and monitors these exposures to ensure that the above risks are controlled in a limited extent.
The Company adopts sensitivity analysis technique to analyse the reasonability of risk variables, impact of possible change on current profit and loss orshareholder’s equity. Since risk variables barely change in isolation, and correlation between variables have significant impact on the final amount affected by one variable, the
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
following content is based on the assumption that each variable changes in isolation.
1. Risk management goals and policies
The goal of risk management is to keep proper balance between risk and profit, to reduce negative influence of financial risk to financial performance of the Company to the minimum and maximize the benefit of shareholders and other equity investors. Based on the goal, the fundamental risk management policies of the Company are to identify and analyse risks the Company faces, set proper acceptable risk level to manage risk, supervise various risk reliably and timely and control risk within limited range.
(1) Market Risk
① Exchange rate risk
Exchange rate risk refers to the risk of loss caused by exchange rate change. The main exchange rate risk the company undertakes is relevant to Hong Kong dollar and Swiss Franc. Except several subsidiaries which purchase and sell with Hong Kong dollar and Swiss Franc, other major business transactions are settled in RMB. On 31 December, 2018, except balance of following assets and liabilities shown in the table are in Hong Kong dollar, Swiss Franc and US dollar, balance of other assets and liabilities of the company are in RMB. The exchange rate risk due to these assets and liabilities with balance in foreign currency could have impact on the financial performance of the Company.
Item Balance as of 31 Dec 2018 Balance as of 1 Jan 2018 Cash and bank balance 11,875,297.06 9,103,319.22 Note and accounts receivables 11,545,880.33 11,193,694.31 Prepayments 4,733,540.86 12,872,520.90 Other receivables 6,589,218.31 6,290,491.67 Note and accounts payables 2,655,278.19 1,330,403.14 Advances from customers 65,276.30 185,101.44 Other payables 489,881.07 794,190.64 Short-term loans 42,118,460.00 50,990,510.00 Non-current liabilities due within one year 347,470.00 - Long-term loans 4,517,110.00 5,008,425.00 The Company closely monitors the impact of exchange rate changes on the Company's foreign exchange risk. The Company has not taken any measures to avoid foreign exchange risks.
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Foreign exchange rate risk sensitivity analysis:
Foreign exchange rate risk sensitivity analysisassumption：all the hedges of the net investment in an overseas operation and cash flow hedging are highly effective. Under this assumption, controlling other variables, the pre-tax impact on current profit andshareholders’ equity due to reasonable change of exchange rate, are shown as following.
2018 2017
Impact on Impact on Item Fluctuation in exchange rate
Impact on profit shareholders’ Impact on profit shareholders’ equity equity Appreciate against RMB by 593,764.85 593,764.85 455,165.96 455,165.96 Cash and bank
5%
balance
Depreciate against RMB by -593,764.85 -593,764.85 -455,165.96 -455,165.965%
Appreciate against RMB by 577,294.02 577,294.02 559,684.72 559,684.72 Note and account s
5%
receivables
Depreciate against RMB by -577,294.02 -577,294.02 -559,684.72 -559,684.725%
Appreciate against RMB by 236,677.04 236,677.04 643,626.05 643,626.055%
Prepayments
Depreciate against RMB by -236,677.04 -236,677.04 -643,626.05 -643,626.055%
Appreciate against RMB by 329,460.92 329,460.92 314,524.58 314,524.585%
Other receivables
Depreciate against RMB by -329,460.92 -329,460.92 -314,524.58 -314,524.585%
Appreciate against RMB by -132,763.91 -132,763.91 -66,520.16 -66,520.16 Note and accounts
5%
payables
Depreciate against RMB by 132,763.91 132,763.91 66,520.16 66,520.165%
Advances from Appreciate against RMB by -3,263.82 -3,263.82 -9,255.07 -9,255.07 customer 5%
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
2018 2017
Impact on Impact on Item Fluctuation in exchange rate
Impact on profit shareholders’ Impact on profit shareholders’ equity equity Depreciate against RMB by 3,263.82 3,263.82 9,255.07 9,255.075%
Appreciate against RMB by -24,494.05 -24,494.05 -39,709.53 -39,709.535%
Other payables
Depreciate against RMB by 24,494.05 24,494.05 39,709.53 39,709.535%
Appreciate against RMB by -2,105,923.00 -2,105,923.00 -2,549,525.50 -2,549,525.505%
Short-term loans
Depreciate against RMB by 2,105,923.00 2,105,923.00 2,549,525.50 2,549,525.505%
Appreciate against RMB by -17,373.50 -17,373.50 - - Non-current liabilities
5%
due within one year
Depreciate against RMB by 17,373.50 17,373.50 - -5%
Appreciate against RMB by -225,855.50 -225,855.50 -250,421.25 -250,421.255%
Long-term loans
Depreciate against RMB by 225,855.50 225,855.50 250,421.25 250,421.255%
②Interest risk-risk of change in cash flow
The risk of change in cash flow in the Company due to the change of interest rate is mainly relevant to floating interest rate bank loans. The strategy of the Company is to maintain the floating rate of these loans.
Interest rate sensitivity analysis:
Interest rate sensitivity analysis is based on following assumption:
• The income and expense of financial instruments with variable interest rate is influenced by change of market interest rate
• For fixed interest rate financial instruments measured by fair value, change of market interest rate only
influences the interest income and expense
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
• For derivative financial instruments that designated as hedging instruments, change of market interest rate influence the fair value and interest rate hedging is estimated to be highly effective
• The change in fair value of derivative financial instruments and other financial assets and liabilities is calculated with market interest rate on balance sheet date under discount cash flow method
On the basis of above assumptions, with other variables not changed, the pre-tax impact on current profit andshareholders’ equity due to reasonable change of interest rate is as follows:
On December 31, 2018, the Company did not have a loan with floating interest rate (On 31 December 2017, if the borrowing rate calculated with floating interest rate increases of decreases by 50 basis points, and other factors remain unchanged, the net profit andshareholders’ equity was estimated to decrease or increase by around RMB326,300 yuan)
③Other price risk.
Available-for-sale financial assets held by the Company are measured at cost on balance sheet date, so there is no price risk to be disclosed
(2) Credit risk
The biggest credit risk exposure which possibly leads to financial loss of the Company on 31 December 2018 is default of contract obligation of transaction counterparty, which may lead to the loss on financial assets of the Company. Specifically, it includes the book balance of financial assets recognized in consolidated balance sheet and the failure of not setting any guarantees to any other credit risks that the Company may bear.
To reduce credit risk, based on the financial status of debtor, external rating, guarantee possibility, credit record gained from the third party and other factors including current market status and that the Company evaluates credit qualification of debtor and set corresponding debt limit and credit period. The Company will regularly supervise credit record of debtor. For debtor with bad credit record, the Company will ensure the whole credit risk of the Company within controllable range in the forms of written reminder letter, reducing credit period and cancelling credit period. Additionally, the Company examines the collection of receivables on every balance sheet date to ensure sufficient provision for bad debts. Hence, the management of the Company suppose that the credit risk undertaken by the Company has been reduced significantly.
The working capital of the Company is deposited in bank with high credit rating, so the credit risk of working capital is low.
For amount of accounts receivable, the amount of top 5 accounts receivable accounts for17.13% of total accounts receivable of the Company. In other receivables, the amount of top 5 accounts receivable accounts for22.73% of total other receivable of the Company.
(3) Liquidity risk
In managing liquidity risk, the Company keeps the cash and cash equivalents that the Company deems sufficient
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
and controls them to meet operating needs, reduce influence of cash liquidity fluctuation. The Company management monitors the use of bank loans and ensures to comply with borrowing agreement.
The main source of capital is generated by the cash fromCompany’s business operations and bank loans. As at 31 December 2018, bank borrowing facility that the Company has not yet used is about RMB1,981,030,000(31 December 2017: RMB2,723,970,000).
The maturity of financial assets and financial liabilities held by the Company according to the undiscounted remaining contractual obligations is as follows (Unit: in RMB ten thousands):
Item Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total Financial assets:
Cash and bank balance 16,482.81 - - - 16,482.81 Note and accounts receivables 38,848.67 - - - 38,848.67 Incl: Notes receivable 705.18 - - - 705.18 Accounts receivable 38,143.49 - - - 38,143.49 Other receivables 4,824.95 - - - 4,824.95 Total financial assets 60,156.43 - - - 60,156.43 Financial liabilities:
Short-term loans 54,711.85 - - - 54,711.85 Note and accounts payables 25,991.36 - - - 25,991.36 Incl: Accounts payable 25,991.36 - - - 25,991.36 Other payables 7,181.99 - - - 7,181.99 Incl: Interest payable 77.23 - - - 77.23 Other payables 7,104.76 - - - 7,104.76 Non-current liabilities due in one
34.75 - - - 34.75 year
Long-term loan - 34.75 34.75 382.21 451.71 Financial guarantee 26,711.85 - - - 26,711.85 Total of financial liabilities 114,631.80 34.75 34.75 382.21 115,083.51
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total and contingent liabilities
2. Transfer of financial assets
(1) Notes receivable that have been endorsed at the end of the year and have not expired on the balance sheet date
Amount derecognized at the end of Amount not derecognized at the end of Item
2018 2018
Banker's acceptance bill 1,294,584.13 - X.
Fair value
1. Financial assets and liabilities measured at fair value
On 31 December 2018, the Company did not have assets and liabilities measured at fair value.
2. Financial assets and liabilities not measured at fair value
TheCompany’s financial assets and financial liabilities measured at amortized cost mainly include: cash and bank balances, note and accounts receivables, other receivables, short-term loans, note and accounts payables, other payables, and long-term loans,etc…
The difference between the book value and fair value of financial assets and liabilities that are not measured at fair value is small.
XI.
Related party relationship and transactions
1. Details of the parent company of the Company
Shareholding ratio of
Registration Ratio of vote right of parent Name Type of business Registered capital parent company to the
place company to theCompany% Company%
Investment in
industries, domestic
China National
Shenzhen trade, material 1,166,161,996 37.15 37.15 Aviation Group
supply and
distribution
Note: CATIC Shenzhen Company holds33.93% shareholding of China National Aviation Group. CATIC Shenzhen Company is a wholly owned subsidiary of China Aero Space International Holdings Limited (CASI), and China
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Aviation Industry Corporation (AVIC) directly holds62.52% of the equity of CASI. Therefore, the ultimate controlling party of the Company is AVIC.
2. Subsidiaries
Details of subsidiaries refer to Note VIII.1 “Equity in subsidiary”.
3. Joint venture and association
Details of joint ventures and associates refer to NoteVIII.2 “Equity in joint arrangement or joint venture”.
4. Other related parties
Name Relationship with the Company Shenzhen CATIC Property Management Limited ( CATIC Property Management) Controlled by the same party Shenzhen CATIC Building Equipment Co., Ltd. ( CATIC Building Company) Controlled by the same party Rainbow Department Store Co., Ltd. (Rainbow Department Store ) Controlled by the same party Shennan Circuits Co., Ltd. ( Shennan Circuits ) Controlled by the same party CATIC Real Estate Company Controlled by the same party AVIC Securities Co., Ltd. ( AVIC Securities Company) Controlled by the same partyXi’an Skytel Hotel Co., Ltd. (Skytel Hotel) Controlled by the same party Shenzhen CATIC City Real Estate Development Co., Ltd. ( CATIC City Real Estate Company) Controlled by the same party Shenzhen CATIC City Development Co., Ltd. ( CATIC City Development Company) Controlled by the same party CATIC Guanlan Property Development Co., Ltd.（CATIC GuanlanProperty） Controlled by the same party CATIC Changtai Investment Development Co., Ltd. (CATIC Changtai Company ) Controlled by the same party Shenzhen CATIC Jiufang Asset Management Limited (CATIC Jiufang Asset Mgmt Company) Controlled by the same party Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment) Controlled by the same party AVIC Training Center Controlled by the same party Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company) Controlled by the same party CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company) Controlled by the same party Shenzhen CATIC Huacheng Real Estate Development Co, Ltd (CATIC Huacheng Company) Controlled by the same party AVIC Finance Co., Ltd. (AVIC Finance Company) Controlled by the same party Shenzhen AVIC Security Service Co., Ltd ( AVIC SecurityService)） Controlled by the same party Shenzhen AVIC Property Asset Management Co., Ltd.(AVIC Property Asset Management) Controlled by the same party Jiujiang 9 Square Business Management Co., Ltd (Jiufang Business Management) Controlled by the same party
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Name Relationship with the Company Shenzhen CATIC Grand Skylight Hotel Co., Ltd (Grand Skylight Hotel) Controlled by the same party Shenzhen CATIC City Parking Management Co, Ltd (CATIC City Parking Management Company) Controlled by the same party Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel Management
Controlled by the same party Company)
Shenzhen CATIC Technical Testing Institute ( CATIC Technical Testing Institute) Controlled by the same party Gongqingcheng CATIC Culture Investment Co., Ltd ( Gongqingcheng CATIC Culture Investment
Controlled by the same party Company)
AVIC-INTL Project Engineering Co., Ltd (AVIC-INTL Project Engineering Company) Controlled by the same party Shenzhen CATIC Property Development Co., Ltd (CATIC Property) Controlled by the same party Jiujiang CIATIC City Real Estate Development Co., Ltd (Jiujiang CATIC Real Estate Company) Controlled by the same party Huang Yongfeng Key management member Wang Mingchuan Key management member Fu Debin Key management member Xiao Zhanglin Key management member Wang Bo Key management member Chen Libin Key management member Wang Jianxin Key management member Zhong Hongming Key management member Tang Xiaofei Key management member Wang Baoying Key management member Sheng Qing Key management member Zou Zhixiang Key management member Lu Bingqiang Key management member Lu Wanjun Key management member Liu Xiaoming Key management member Pan Bo Key management member Li Ming Key management member Chen Zhuo Key management member
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Name Relationship with the Company Zhang Hongguang Key management member Zhang Shunwen Key management member Wang Yan Key management member Wang Jingqi Key management member 5. Transactions with related parties
(1) Related transactions for the purchase and sale of goods, provision and receipt of services
①Purchasing goods and receiving services
Related party Type of transaction 2018 2017
CATIC Property Management Property management 8,208,102.96 8,243,916.72 Department store expenses/
Rainbow Department Store 5,865,816.91 5,868,872.26 Commodity purchase
AVIC Training Center Training 273,596.25 - AVIC Technical Testing Institute Testing - 3,207.55 Shennan Circuits Material purchase 29,914.50 4,273.50 Ganzhou 9 Square Company Department store expenses 177,372.93 - CATIC City Estate (Kunshan) Company Department store expenses 76,674.66 - Jiufang Business Management Department store expenses 58,322.11 -②Selling products and providing services
Related party Type of transaction 2018 2017
Rainbow Department Store Product sales and services 71,764,856.50 77,301,661.83 Grand Skylight Hotel Management
Product sales and services 5,982.91 6,837.60 Company
Ganzhou 9 Square Company Product sales and services 960,563.85 1,763,367.26 Shennan Circuits Material sales and services 5,883,132.72 3,810,125.07 Gongqingcheng CATIC Culture Investment Product sales
655,161.45 - Company
AVIC-INTL Product sales 10,215.52 - CATIC City Estate Company Product sales 4,051.28 -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Related party Type of transaction 2018 2017
AVIC-INTL Project Engineering Company Product sales 15,351.72 - (2) Lease between related party
①The Company as a lessor
Recognized rental income in Recognized rental income Lessee Type of leased assets
current year in prior year CATIC Property Management Property 6,997,899.09 6,761,603.07 Skytel Hotel Property 4,190,476.18 4,190,476.18 CATIC Real Estate Company Property 1,813,948.87 1,719,424.99 CATIC City Investment Property 364,293.91 1,154,505.27 AVIC Securities Company Property 1,231,342.83 1,182,657.15 CATIC City Real Estate Company Property 342,330.05 702,125.82 Rainbow Department Store Property 529,166.26 532,715.48 CATIC Huacheng Company Property 257,234.48 404,075.33 Jiufang Asset Mgmt Company Property 1,560,410.13 392,865.14 AVIC Security Service Property 1,160,868.75 618,958.25 CATIC Guanlan Property Property 119,748.00 98,012.11 AVIC Property Asset Management Property 57,154.70 132,279.06 CATIC City Development Company Property 2,428.57 27,131.52 CATIC Real Estate Company Property 165,612.56 - CATIC City Parking Management Company Property 9,916.44 -②The Company as a lessee
Rental expenses charged in Rental expenses charged in Lessor Type of leased assets
current year prior year
Ganzhou 9 Square Company Property 894,582.84 1,053,882.06 CATIC Changtai Company Property - 244,255.29 CATIC City Estate (Kunshan) Company Property 156,942.79 211,572.02
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Jiufang Business Management Property 337,541.02 334,028.93 (3) Related party funds lending
Recognized interest Related Party Amount Effective date Expiring date
expenses in current year Borrowing:
AVIC Finance Company 150,000,000.00 2018-5-14 2019-5-14 3,805,804.17 (4) Benefit for key management members
Item 2018 2017
Remuneration for key management members 13,123,100.00 13,564,900.00 (5) Other related transactions
The year-end balance of theCompany’s cash was RMB128,255,699.54, which was deposited with AVIC Finance Company. Interests received from the deposit during the year were RMB365,094.51.
6. Receivables from and payables to related parties
(1) Receivables
31 Dec 2018 1 Jan 2018
Item
Carrying amount Bad debt Carrying amount Bad debt provision Provision Accounts receivable:
Rainbow Department Store 2,305,867.79 115,293.39 1,782,356.36 89,117.82 Shennan Circuits 1,659,077.38 82,953.87 786,443.94 39,322.20 Ganzhou 9 Square Company 4,000.00 200.00 115,742.00 5,787.10 Gongqingcheng CATIC Culture Investment 28,269.36 1,413.47 - - Jiufang Business Management Company 4,288.00 214.40 - - AVIC Securities Company 101,428.57 5,071.43 - - CATIC City Real Estate Company 3.00 0.15 - - CATIC Jiufang Asset Mgmt Company 33,331.01 1,666.55 - - CATIC Guanlan Property 8,315.43 415.77 - -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
31 Dec 2018 1 Jan 2018
Item
Carrying amount Bad debt Carrying amount Bad debt provision Provision CATIC Real Estate Company 148,915.46 7,445.77 - - CATIC Property Management 0.52 0.03 - - Total: 4,293,496.52 214,674.83 2,684,542.30 134,227.12 Notes receivable:
Shennan Circuits - - 2,398,579.72 - Total - - 2,398,579.72 - Other receivables:
Rainbow Department Store 761,860.00 38,093.00 832,774.30 41,638.72 CATIC Property Management 10,100.00 505.00 100.00 5.00 Ganzhou 9 Square Company 122,665.60 6,133.28 122,665.60 6,133.28 Jiujiang CATIC Estate Company - - 50,000.00 2,500.00 CATIC City Estate (Kunshan) Company 50,400.00 2,520.00 35,000.00 1,750.00 Grand Skylight Hotel 32,000.00 1,600.00 32,000.00 1,600.00 AVIC Training Center - - 150,000.00 7,500.00 CATIC Building Company - - 126,598.73 6,329.94 Gongqingcheng CATIC Culture Investment 5,500.00 275.00 - - Jiufang Business Management 50,000.00 2,500.00 - - CATIC Real Estate Company 54,923.00 2,746.15 - - AVIC-INTL 11,101.80 555.09 - - Total 1,098,550.40 54,927.52 1,349,138.63 67,456.94 (2) Payables
Item 31 Dec 2018 1 Jan 2018
AccountsPayable：
CATIC Building Company 24,000.00 24,000.00 CATIC Property Management 40,821.05 40,821.05
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item 31 Dec 2018 1 Jan 2018
Total 64,821.05 64,821.05 Advances from customers:
CATIC Real Estate Company - 148,915.46 CATIC Guanlan Property - 8,315.43 CATIC Jiufang Asset Mgmt Company - 33,331.01 AVIC Securities Company - 101,428.57 Total - 291,990.47 Other payables:
CATIC Property Management 1,131,164.13 472,032.00 CATIC Real Estate Company 442,407.92 442,407.92 CATIC City Investment Company 309,732.00 309,732.00 AVIC Securities Company 213,000.00 213,000.00 CATIC Building Company 116,960.23 89,289.47 CATIC City Real Estate Company 99,052.32 99,052.32 CATIC Huacheng Company 73,819.68 73,819.68 CATIC Jiufang Asset Mgmt Company 378,483.84 66,666.60 Rainbow Department Store 60,000.00 60,000.00 CATIC City Development Company - 5,100.00 CATIC Changtai Company 4,064.81 4,064.81 CATIC Real Estate Company 51,014.88 - CATIC Guanlan Property 25,401.60 - AVIC Security Service 10,533.44 - Ganzhou 9 Square Company 3,446.22 - Shennan Circuits 150,000.00 - Total 3,069,081.07 1,835,164.80
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
XII. Commitments and contingencies
1. Significant commitments
(1) Operating lease commitment
As of the balance sheet date, the irrevocable operating lease contracts signed by the Company are as follows: Item 31 Dec 2018 1 Jan 2018
Minimum lease payment for irrevocable operating lease:
The 1st year after the balance sheet date 54,382,100.37 29,799,099.00 The 2nd year after the balance sheet date 28,501,337.58 14,570,632.00 The 3rd year after the balance sheet date 12,406,400.37 7,533,388.00 Years in arrears 9,533,027.43 1,121,206.00 Total 104,822,865.75 53,024,325.00 (2) Other commitments
As of 31 December, 2018, the Company has no commitment that shall be disclosed.
2. Contingencies
(1) Contingent liabilities and financial influence formed by providing liability guarantee to other units
Refer to Note XIV. 2 for details of guarantee between parent company and subsidiaries.
(2) Other contingent liabilities and its financial influence
As of 31 December 2018, there is no other contingency that shall be disclosed by the Company.
XIII. Post balance sheet date events
1. Restricted stock incentive plan
In 2018, the Company implemented a restricted stock incentive plan (the “Incentive Plan”) to motivate and reward individuals who contribute to the Company's operations. Incentives includecompany’s directors, senior management, middle management, core technical staff and senior management and core backbone of subsidiaries.
On 11 January, 2019, after the first extraordinary general meeting of 2019 and the fifth meeting of the ninth board of directors, the Company intends to grant 4,224,000 A-share restricted shares to 128 incentive individuals at a price of RMB4.40 per share. As of 11 January, 2019 (grant date), the actual number of individual received the grant was 128, and a total of 4,224,000 restricted stocks were granted. The total amount of subscriptions received by the incentive individuals was RMB18,585,600.00, of which RMB4,224,000.00 increased share capital and RMB14,361,600.00 was included in capital reserve (share premium).
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
The incentive program is valid for 5 years (60 months), including a lock-up period of 2 years (24 months) and an unlock period of 3 years (36 months).
2. Profit distribution
The resolution of 2018 profit distribution proposal has been passed on the 6th Board Meeting of the 9th Board of Directors on 13 March 2019. It proposed to distribute cash dividend of RMB2.00 (tax inclusive) for every 10 shares held by shareholders based on the total 438,744,881 shares as at 31 December 2018. Cash dividend that proposed to be distributed amounts to RMB87,748,976.20, no bonus shares and no capitalization of reserves. The proposal is subject to approval from Annual GeneralShareholders’ Meeting.
3. Impact of the implementation of the new accounting standards from 1 January, 2019
On 31 March, 2017, the Ministry of Finance issued the "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments (Revised in 2017)" (Caikuai[2017] No. 7) and "Accounting Standards for Business Enterprises No. 23" Transfer of Financial Assets (Revised in 2017) (Caikuai[2017] No. 8), "Accounting Standards for Business Enterprises No. 24 - Hedge Accounting (Revised in 2017)" (Caikuai[2017] No. 9), and issued the “Accounting Standards for Business Enterprises No. 37– Financial Instruments Presentation (Revised in 2017)” (Caikuai[2017] No. 14) in 2 May, 2017, (the above-mentioned standards are collectively referred to as the “New Financial Instruments Standards”), and the domestic list companies shall adopt the new guidelines from 1 January, 2019. The Company will implement the above New Financial Instruments Standards from 1 January, 2019, and will change the relevant accounting policies in accordance with the New Financial Instrument Standards.
The following are the main contents of the accounting policy changes that will be involved:
All financial assets currently recognized shall be subsequently measured at amortised cost or fair value under the New Financial Instrument Standards.
On the implementation date of the New Financial Instrument Standards, the business model of managing financial assets is evaluated based on the facts and circumstances of the Company on the day, and the contractual cash flow characteristics on the financial assets are evaluated based on the facts and circumstances at the initial confirmation of the financial assets. Financial assets are classified into three categories: measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss. When fair value through other comprehensive income equity instrument is derecognised, the accumulated gain or loss previously recognised in other comprehensive income shall be transferred from other comprehensive income to retained earnings, but not included in current profit and loss.
Under the New Financial Instrument Standard, the Company adopts expected credit losses model to make provision and recognize impairment of credit losses for financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, lease receivables, contract assets and the financial guarantee contract.
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
4. Other significant non-adjusting events after balance sheet date
(1) On 13 March, 2019, approved by the 6th meeting of the 9th Board of Directors of the Company, the Company intends to apply credit facility for no more than RMB900,000,000 from banks in various ways including credit, guarantee and mortgage in 2019. The above-mentioned proposal of the total credit line of the bank is subject to the approval of the general meeting of the Company.
(2) On 13 March, 2019, approved by the 6th meeting of the 9th Board of Directors of the Company, the Company intends to apply for a guarantee loan of not exceeding RMB 600,000,000 for the wholly owned subsidiary at relevant banks in 2019. The line of credit is included in the actual line of bank loans applied by the Company in 2019, which is RMB 900,000,000. The above guarantee amount is subject to the approval of the general meeting of the Company.
XIV. Other significant events
1. Deregistration of subsidiary
Station 68 Company is going through the deregistration procedure and has not finished until 31 December 2018 2. Guarantee situation
In 2018, the Company and China Merchants Bank Co., Ltd. Shenzhen Branch signed a credit facility agreement with a credit limit of RMB200,000,000. The Company's subsidiary, Harmony Company, provided guarantee, and the guarantee method is joint liability guarantee. The guarantee period is from the date of the guarantee agreement (2 July, 2018) to each debt maturity date under the credit agreement plus three years. The agreement credit limit is valid from 18 June, 2018 to 17 June, 2019. As of 31 December, 2018, the total balance of loans under the credit agreement was RMB110,000,000.
In May 2018, the Company and China Agricultural Bank of China Shenzhen Central Branch signed a comprehensive credit facility agreement with a credit limit of RMB200,000,000 (can be used in form of bank loan, bank guaranteeetc…). The credit limit is valid from 21 May 2018 to 21 May 2019. As of 31 Dec 2018, balance of bank loans under this facility was RMB10,000,000. In November 2018, the Company applied to open a RMB80,000,000 performance guarantee letter with joint liability. The beneficiaries of the performance guarantee letter are suppliers of HARMONY Company, one of theCompany’s subsidiary. The valid period of the performance guarantee letter is from 30 December 2018 to 29 December 2019.
In July 2018, the Company's subsidiary, FIYTA Hong Kong Co., Ltd. and China Trust Commercial Bank Co., Ltd. signed a credit line contract with a credit limit of HKD 40,000,000. The guarantee is provided by the Company, and the expiration date of the guarantee is 31 May, 2020. The contract maturity date is 31 May, 2020. As of December 31, 2018, the total loan balance under the credit agreement is HKD18,070,000.
In December 2018, the Company's subsidiary, FIYTA Hong Kong Co., Ltd. and Nanyang Commercial Bank (China)
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Co., Ltd. Shenzhen Branch signed a credit line agreement with a credit limit of HKD80,000,000. The Company provided guarantee, and the guarantee method was joint liability guarantee. The term of guarantee shall be two years from the date of expiration of the repayment period of the principal claim. The credit facility is valid from 17 December, 2018 to 12 November, 2020. As of December 31, 2018, the total loan balance under the credit agreement is HKD 30,000,000.
In December 2018, the Company signed a comprehensive financing contract with China Construction Bank Co., Ltd. Shenzhen Branch with a credit limit of RMB300,000,000. The Company's subsidiary, Harmony Company, provided guarantee, and the guarantee method is joint liability guarantee. The guarantee period starts from the date of the single credit extension and ends three years after the maturity of the debt. The contract credit facility is valid from 4 December, 2018 to 8 March, 2020. As of 31 December, 2018, the total loan balance under the credit agreement is RMB35,000,000.
3. Others
The proposal about acquiring wholly-owned sub-subsidiary Montres Chouriet SA has been passed in the 16th Board Meeting of the eighth Board of Directors on 2 June 2017. The Company is going to acquire100% share of Swiss Company, owned by the subsidiary of the Company, FIYTA Hong Kong. The consideration of CHF12 million was made on the basis of audited net asset as at 31 December 2016. The acquisition has not been finalized as of 31 December 2018.
XV. Notes to theCompany’s financial statements
1．Note and accounts receivables
Item 31 Dec 2018 1 Jan 2018
Accounts receivable 737,636.38 6,832,006.11 (1) Accounts receivable
①Accounts receivable presented by categories:
31 Dec 2018
Category Book balance Provision for bad debts
Carrying Amount Percentage% Amount Percentage% amount Receivables that are individually significant in - - - - -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
31 Dec 2018
Category Book balance Provision for bad debts
Carrying Amount Percentage% Amount Percentage% amount amount and provided for bad debt
separately
Receivables provided for bad debt by portfolio 776,459.35 100.00 38,822.97 5.00 737,636.38Incl：Portfolio of aging 776,459.35 100.00 38,822.97 5.00 737,636.38 Portfolio of specific accounts - - - - - Receivables that are individually insignificant
in amount but provided for bad debt - - - - - separately
Total 776,459.35 100.00 38,822.97 5.00 737,636.38 (Continued)
1 Jan 2018
Category
Book balance Provision for bad debt
Carrying Amount Percentage% Amount Provision rate% amount Receivables that are individually significant in
amount and provided for bad debt - - - - - separately
Receivables provided for bad debt by portfolio 6,871,446.35 100.00 39,440.24 0.57 6,832,006.11Incl：Portfolio of aging 788,804.75 11.48 39,440.24 5.00 749,364.51 Portfolio of specific accounts 6,082,641.60 88.52 - - 6,082,641.60 Receivables that are individually insignificant
in amount but provided for bad debt - - - - - separately
Total 6,871,446.35 100.00 39,440.24 0.57 6,832,006.11 A. Accounts receivable that are provided for bad debt based on aging analysis in aging portfolio:
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
1 Jan 2018
Aging
Amount Provision Provision Rate(%) Within one year 776,459.35 38,822.97 5.00② Bad debt provisions accrued, received or reversed in the current period
The amount of Bad debt provision accrued in current year is RMB16,073.16; The amount of the reversal of bad debt provision in current year is RMB16,690.43.
③ Top 5 accounts receivable as at the year end
The amount of top 5 receivables based on year-end receivable balance is RMB776,458.78, accounts for100% of total receivables as at 31 Dec 2018. Corresponding bad debt provision is RMB38,822.93.
2． Other receivables
Item 31 Dec 2018 1 Jan 2018
Other receivables 870,739,378.37 831,952,437.86 (1) Other receivable
①Other receivables disclosed by categories:
31 Dec 2018
Category Book balance Provision for bad debt Carrying amount Amount Percentage% Amount Provision rate%
Other receivables that are individually
significant in amount and provided for bad - - - - - debt separately
Other receivables provided for bad debt by
870,839,129.37 100.00 99,751.00 0.01 870,739,378.37 portfolio
Incl：Portfolio of aging 1,426,516.07 0.16 99,751.00 6.99 1,326,765.07 Portfolio of specific accounts 869,412,613.30 99.84 - - 869,412,613.30 Receivables that are individually
insignificant in amount but provided for - - - - - bad debt separately
Total 870,839,129.37 100.00 99,751.00 0.01 870,739,378.37
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
(Continued)
Category 1 Jan 2018
Book balance Provision for bad debt Carrying amount Amount Percentage% Amount Provision rate%
Other receivables that are individually
significant in amount and provided for bad - - - - - debt separately
Other receivables provided for bad debt by
832,005,502.89 100.00 53,065.03 0.01 831,952,437.86 portfolio
Incl：Portfolio of aging 727,550.50 0.09 53,065.03 7.29 674,485.47 Portfolio of specific accounts 831,277,952.39 99.91 - - 831,277,952.39 Receivables that are individually
insignificant in amount but provided for bad - - - - - debt separately
Total 832,005,502.89 100.00 53,065.03 0.01 831,952,437.86 A. Other receivables that are provided for bad debt based on aging analysis:
31 Dec 2018
Aging
Other receivable Provision Provision rate(%) Within 1 year 1,178,412.07 58,920.60 5.00 1-2 years 208,054.00 20,805.40 10.00 2-3 years - - - Above 3 years 40,050.00 20,025.00 50.00 Total 1,426,516.07 99,751.00 6.99 B. Other receivables that are provided for bad debt based on other methods:
31 Dec 2018
Portfolio of specific accounts
Other receivable Provision Provisionrate%
petty cash advanced to
431,623.24 - - employees
Subsidiary funds within the 868,980,990.06 - -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
31 Dec 2018
Portfolio of specific accounts
Other receivable Provision Provisionrate%
scope of consolidation
Total 869,412,613.30 - - Note: Based on historical experience, theCompany’s receivables from petty cash advanced to employees, subsidiary funds within the scope of consolidation and sales revenue between the last settlement date of the same department store and the balance sheet date are with high recoverability and low possibility of incurring bad debt, as a result, no bad debt provisions are provided for such receivables.
②Other receivables classified by nature
The nature of receivables 31 Dec 2018 1 Jan 2018
Related party balances within consolidated scope 868,980,990.06 831,217,702.17 Petty cash 431,623.24 60,250.22 Security deposit 248,104.00 352,131.00 Others 1,178,412.07 375,419.50 Total 870,839,129.37 832,005,502.89③Bad debt provision accrued, received or reversed in the current period
The amount of Bad debt provision accrued is RMB46,685.97 in current year. There is no received or reversed of bad debt provision in current year.
④The top 5 other receivable accounts as at the year end
Percentage in total closing Provision for Company name Nature Balance Aging balance of other bad and receivables(%) doubtful debts TEMPORAL Company Inter-group movement 20,819,991.24 Within 1 year 2.39 - FIYTA Sales Company Inter-group movement 229,966,446.75 Within 1 year 26.41 - HARMONY Company Inter-group movement 488,575,998.73 Within 1 year 56.10 - Hengdarui Company Inter-group movement 100,860,500.00 Within 1 year 11.58 - Emile Choureit Shenzhen Inter-group movement
28,758,053.34 Within 1 year 3.30 - Company
Total — 868,980,990.06 — 99.78 -3． Long-term equity investments
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
(1) Types of long-term equity investment
31 Dec 2018 1 Jan 2018
Item
Book balance Provision Carrying amount Book balance Provision Carrying amount Investment in
1,331,248,590.93 1,331,248,590.93 1,331,248,590.93 - 1,331,248,590.93 subsidiaries
Investment to
associated and
44,881,063.15 - 44,881,063.15 43,879,518.09 - 43,879,518.09 joint venture
companies
Total 1,376,129,654.08 1,376,129,654.08 1,375,128,109.02 - 1,375,128,109.02 (2) Investment in subsidiaries
Balance of Provision
provision as Invested units 1 Jan 2018 Increase Decrease 31 Dec 2018 accrued in
at 31 Dec 2018
2018 HARMONY Company 601,307,200.00 - - 601,307,200.00 - - Harbin Company 2,184,484.39 - - 2,184,484.39 - - Manufacturing Company 9,000,000.00 - - 9,000,000.00 - - Technology Company 10,000,000.00 - - 10,000,000.00 - - FIYTA Hong Kong 137,737,520.00 - - 137,737,520.00 - - TEMPORAL Company 5,000,000.00 - - 5,000,000.00 - - FIYTA Sales Company 450,000,000.00 - - 450,000,000.00 - - Hengdarui Company 36,867,843.96 - - 36,867,843.96 - - Emile Choureit Shenzhen 79,151,542.58 - - 79,151,542.58 - - Company
Total 1,331,248,590.93 - - 1,331,248,590.93 - - (3) Investment to associates and joint venture companies
Invested units 1 Jan 2018 Changes in 2018
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Investment Adjustment of
income/loss other Changes of Addition Withdraw
recognized under the comprehensive other equity equity method income
Associates
Shanghai Watch 43,879,518.09 - - 1,001,545.06 - - (Continued)
Changes in 2018
Balance of Cash dividend or
Invested units
Provision for
31 Dec 2018 provision at 31 Dec profit announced to Other
impairment
2018 be issued
Associates
Shanghai Watch - - - 44,881,063.15 -4． Operating revenue and operating cost
2018 2017
Item
Revenue Cost Revenue Revenue
Main businesses 130,886,023.99 19,010,293.07 117,673,738.22 17,785,254.56 Other businesses 15,800.00 - 72,649.57 - Total 130,901,823.99 19,010,293.07 117,746,387.79 17,785,254.565． Investment income
Item 2018 2017
Investment income from long-term equity investment measured by cost
143,000,000.00 117,000,000.00 method
Investment income from long-term equity investment measured by
1,001,545.06 455,893.22 equity method
Total 144,001,545.06 117,455,893.22
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
XVI. Supplementary information
1． Details of non-recurring gain or loss for the year
Item Amount Note
Disposal gain or loss of non-current assets -180,302.24
Overridden approval, or without official approval document, or incidental tax return or
-
exemption
Government grants included in current profit or loss (except for the fixed or quantitative
government grants, enjoyed in a consecutive way, which closely related to the enterprise 19,375,618.48
businesses and according to nation policies)
Charges for the possessions of funds collected from non-monetary enterprises -
Investment cost of subsidiaries, joint venture and cooperative enterprises less than the profit
-
incurred in identifiable net asset fair value of invested unit when investment
Profit and loss of non-monetary assets exchange -
Profit and loss from entrusting others to invest or manage assets -
Asset impairment provision accrued due to force majeure such as natural disasters -
Profit and loss of debt restructuring -
Enterprise restructuring expenses, such as expenses for arranging employees, integrating
-
cost
Profit and loss over fair value part accrued in transactions of unreasonable transaction price -
Current net profit and loss of subsidiaries from business combination under common control from the
-
opening period to combination date
Profit and loss incurred contingent matters unrelated to normal operating business -
Except for effective hedging business related to normal operating business, profit and loss
from changes in fair value incurred in financial assets and financial liabilities, and the
-
investment gain from disposal of financial assets, financial liabilities and available-for-sale
financial assets
Impairment provision reversal of accounts receivable under standalone impairment test 7,533,121.86
Profit and loss obtained in external entrusting loans -
Profit and loss incurred in fair value change of investment property subsequently measured in
-
fair value mode
Influence on current profit and loss caused by one-off adjustment according to requirements of -
FIYTA HOLDINGS LTD. 2018 Annual Report, Full Text
Item Amount Note
laws and regulations about taxation and accounting
Income from trustee fee obtained by trusting operation -
Other non-operating income and expenses other than the above items 792,842.56
Profit and loss items pursuant to the definition of non-recurring profit and loss -
Subtotal 27,521,280.66
Effect of income tax of non-recurring profit or loss 6,444,246.37
Effect of non-recurring profit or losses attributable to minority shareholders
-
(after tax)
Total 21,077,034.29
Note:“+” refer to gain or income and “-” means loss or expense.
The Company recognize non-recurring gain or loss according to “Interpretation Announcement to Information Disclosure of Companies with Shares Offered Publicly No. 1– Non-recurring gain or loss” (CSRC (2008) No. 43.)
2． Return on Equity (ROE) and Earnings per share (EPS)
Weighted average EPS
Profit of the reporting period
ROE%
Basic EPS Diluted EPS Net profit attributable to ordinary shareholders of the Company 7.30 0.4190 0.4190 Net profit attributable to ordinary shareholders of the Company