HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Auditor's Report and Financial Statements
(From January 1, 2017 to December 31, 2017)
Table of Contents Page I. Auditor's Report 1-5 II. Financial Statements
Balance Sheet 1-2 Income Statement 3 Statement of Cash Flows 4 Statement of Changes in Owners' Equity 5-6 Notes to the Financial Statements 1-47
Auditor's Report
PCPAR[2018] No. To all shareholders of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.,
I. Opinion
We have audited the financial statements of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (hereinafter referred to as "the Company"), which comprise the balance sheet as at December 31, 2017, and the income statement, the statement of cash flows and the statement of changes in owners' equity for the year then ended and notes to the financial statements.
In our opinion, the attached financial statements are prepared, in all material respects, in accordance with Accounting Standards for Business Enterprises and present fairly the financial position of the Company as at December 31, 2017 and its operating results and cash flows for the year then ended. II. Basis for Our Opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants in China. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. According to the Code of Ethics for Chinese CPA, we are independent of the Company in accordance with the Code of Ethics for Chinese CPA and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit 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. The key audit matters that we identified in the audit are as follows:
(I) Recognition of room income
1. Factual description
The Company had operating income of RMB27,906,600 in 2017, of which room income was RMB21,103,100, accounting for75.62% of operating income. According to Note 5.20 of the financial statements of the Company, the room income recognition process of the Company isas follows:
(1) For travel agencies and individual guests, make advance collection of payments from them or pre-authorization; recognize income of each day after 0:00 of the night of such day after confirmation with the Room Department and the hotel front desk.
Auditor's Report Page 1
(2) For websites under agreements,① guests who book rooms via websites with agreements with the Company shall make advance payment of room fees and deposits when they check in and pay the related website service fees according to a certain proportion set out in the agreements and after check by the finance department with the websites. Income of the current day shall be recognized after 00:00 according to the consumption situation after deducting servicecharges.② for guests who book rooms through websites with agreements with the Company and pay room fees to the websites, income of the current day shall be recognized after 00:00 according to the consumption situation and listed as accounts receivable which shall be settled and collected before the fifth day of each month after checking with the websites.
(3) For oriented guests, stay in account and make advance collection of payments at the time of check-in according toagreements, recognize income of the current day after 00:00 of each night according to consumption situation, and make regular reconciliation, settlement and collection.
Xiruan system will automatically generate daily sales statements for the above business, which shall be audited by examining personnel before submitted to the financial department to prepare accounting vouchers.
2. How our audit addressed the matter
For room sales revenue, we understood and evaluated the management's design of internal controls in sales processes from approval of contracts to the accounting of sales revenue and tested the effectiveness of the implementation of key control points. Via sample inspection of contracts and management interviews, we tested the timing point of significant risks and remuneration related to room revenue recognition, and thus assessed the Company's income recognition policies.
In addition, we implemented the following procedures in respect of room revenue by using sampling:
(1) Analyze income and gross profit margin in combination with the type of income, and judge whether there is any abnormal fluctuation in the income amount in the current period.
(2) Choose samples from reservation records and check-in records of rooms, check the samples against the contracts, accounting records, invoice issuance and payment receipts related to the corresponding sales, and pay special attention to whether the samples before and after the balance sheet date are included in the correct accounting period to assess whether room revenue is confirmed during the appropriate period.
(3) With respect to new customers and those bringing large amount of income in the current period, implement the external confirmation of incurred amounts and the balances, and analyzed the authenticity thereof in combination with the collection of payments and occupancy situation. At the same time, inquire the business information of some customers to further confirm the authenticity of transactions therewith.
Auditor's Report Page 2
(II) Non-operating income due to write-off of long-term investment and current account
1. Factual description
According to the Proposal on Write-off of Long-term Investments and Current Accounts" resolved at the 12th extraordinary meeting of the eighth board of directors of the Company and the fifth extraordinary meeting of the eighth board of supervisors of the Company, and as resolved at the third extraordinary general meeting of shareholders of the Company in 2017, the Company wrote off original book value of long-term equity investment of RMB 9,716,374.26 in 2017, and provided for the provision for impairment of RMB 9,716,374.26;wrote off original book value of available-for-sale financial assets of RMB 5,000,000.00, and provided for the provision for impairment of RMB 5,000,000.00;wrote off a total of 205 sums of accounts receivable with original book value of RMB80,243,805.62, and provided for the provision for bad debt of RMB80,243,805.62;wrote off a total of 201 sums of accounts payable with original book value of RMB1,303,540.11. The write-offs resulted in increase in the Company's non-operating income by RMB1,303,540.11 in 2017. 2. How our audit addressed the matter
(1) We understood the Company's internal control system on write-off of assets and liabilities to judge whether the write-off process complied with the requirements. We collected relevant resolutions of the meetings of the board of directors and the third extraordinary general meeting of shareholders and media and website announcements.
(2) For long-term equity investments, available-for-sale financial assets and claims and debts, we traced the original situations and collected relevant information to verify the authenticity thereof, and verified the relevant information of the investees and the creditors and debtors through the Enterprise Credit Information Publicity System and the enterprise verification system.Each of the written-off long-term equity investments, available-for-sale financial assets and claims and debts had aging of more than 5 years.
(3) We noticed that Hainan Dongfang Guoxin Law Firm issued the Legal Opinion on Time Limitation for Proceedings on Part of Accounts Payable of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. in respect of the above-mentioned written-off payables, in which the law firm believed that the above 201 sums of payables have exceeded the statutory time limitations, and the relevant creditors have lost their debt recovery right and the right to win. To this end, we conducted necessary communication with Hainan Dongfang Guoxin Law Firm in respect of the relevant situation on the said write-offs of accounts payable.
IV. Other information
The management of the Company is responsible for the other information. The other information comprises information of the Company's annual report in 2017, but excludes the financial statements and our auditor's report.
Our opinion on the financial statements does not cover the other information and we do not and will 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 identified above 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.
Auditor's Report Page 3
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, 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 Management and Those Charged with Governance for the Financial Statements
The Company's management is responsible for preparing the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises to achieve a fair presentation, and for designing, implementing and maintaining internal control that is necessary to ensure that the financial statements are free from material misstatements, whether due to frauds or errors.
In preparing the financial statements, management of the Company is responsible for assessing the Company's ability to continue as a going concern, disclosing matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
VI. Auditor's 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 an auditor's 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 the audit standards 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 ISAs, we exercise professional judgment and maintain professional scepticism 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, 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 management of the Company.
(4) Conclude on the appropriateness of using the going concern assumption by the management of the Company, and conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's 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 our auditor's 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.
Auditor's Report Page 4
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements and bear all liability for the opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit matters, 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 our auditor'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.
BDO CHINA Shu Lun Pan Certified Public Certified Public Accountant of China:
Accountants LLP
Certified Public Accountant of China:
Shanghai, China January 30, 2018
Thisauditors’ report and the accompanying notes to the financial statements are English translation of the Chineseauditors’ report. In case of doubt as to the presentation of these documents, the Chinese version shall prevail.
Auditor's Report Page 5
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Balance Sheet
As at December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
Assets Note 5 Ending balance Beginning balance Current assets:
Cash and cash equivalents 5.1 9,681,607.16 27,210,248.01 Financial assets measured at fair value through the
current profit or loss
Derivative financial assets
Notes receivable
Accounts receivable 5.2 594,130.89 690,444.72 Advances to suppliers 5.3 49,530.21 58,783.23 Interest receivable
Dividends receivable
Other receivables 5.4 139,561.29 174,103.52 Inventories 5.5 227,005.11 219,179.72 Assets held for sale
Non-current assets maturing within one year 5.6 1,173,597.68 584,369.42 Other current assets 5.7 1,957,863.56 1,876,449.22 Total current assets 13,823,295.90 30,813,577.84 Non-current assets:
Available-for-sale-financial assets 5.8
Held-to-maturity investments
Long-term receivables
Long-term equity investments 5.9
Investment properties 5.10 8,859,003.99 9,333,527.55 Fixed assets 5.11 39,088,708.83 40,395,680.91 Construction in progress 5.12
Project materials
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 5.13 23,017,636.20 23,830,023.36 Development expenses
Goodwill
Long-term deferred expenses 5.14 2,678,016.88 1,071,343.97 Deferred income tax assets
Other non-current assets
Total non-current assets 73,643,365.90 74,630,575.79 Total assets 87,466,661.80 105,444,153.63 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the accounting department:
Statements Page 1
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Balance Sheet (Continued)
As at December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
Liability and Owners' Equity Note 5 Ending balance Beginning balance Current liabilities:
Short-term borrowings
Financial liabilities measured at fair value through
current profit and loss
Derivative financial liabilities
Notes payable
Accounts payable 5.15 2,161,172.26 1,967,565.51 Advances from customers 5.16 1,271,174.12 1,894,524.28 Employee compensation payable 5.17 2,459,015.93 2,148,514.36 Taxes and surcharges payable 5.18 539,023.76 582,944.27 Interests payable
Dividends payable
Other payables 5.19 2,411,176.59 23,084,504.73 Liabilities held for sale
Non-current liabilities maturing within one year
Other current liabilities
Total current liabilities 8,841,562.66 29,678,053.15 Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preferred shares
Perpetual debt
Long-term payables
Special payables
Estimated liabilities 5.20 1,489,685.04 1,489,685.04 Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 1,489,685.04 1,489,685.04 Total liabilities 10,331,247.70 31,167,738.19 Owner's equity:
Share capital 5.21 364,100,000.00 364,100,000.00 Other equity instruments
Including: Preferred shares
Perpetual debt
Capital reserve 5.22 54,142,850.01 54,142,850.01 Less: Treasury stock
Other comprehensive income
Surplus reserve
Retained earnings 5.23 -341,107,435.91 -343,966,434.57 Total owners' equity 77,135,414.10 74,276,415.44 Total liabilities and owner's equity 87,466,661.80 105,444,153.63 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the accounting department:
Statements Page 2
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Income Statement
For the year ended December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
Item Note 5 Year 2017 Year 2016 I. Operating income 5.24 27,906,564.23 21,708,883.51 Less: operating costs 5.24 11,139,919.59 10,258,440.62 Taxes and surcharges 5.25 1,434,692.20 1,412,039.97 Selling and distribution expenses 5.26 5,124,503.55 4,931,333.26 General and administrative expenses 5.27 9,665,525.83 9,374,635.91 Financial expenses 5.28 -249,176.18 -193,645.29 Losses from asset impairment 5.29 11,709.50 -1,230.99 Plus: gains from changes in fair value ("-" for losses)
Investment income ("-" for loss) 5.30 805,825.24 1,390,918.55 Including: Income from investment in associates and joint
ventures
Income from disposal of assets ("-" for loss)
Other income
II. Operating profits ("-" for losses) 1,585,214.98 -2,681,771.42 Plus: non-operating income 5.31 1,303,800.11 69,606.00 Less: non-operating expenses 5.32 30,016.43 48,887.07 III. Total profits ("-" for total loss) 2,858,998.66 -2,661,052.49 Less: income tax expenses
IV. Net profit ("-" for net loss) 2,858,998.66 -2,661,052.49 (I) Net profit from operation on going concern basis ("-" for
net loss)
(II) Net profit from cease of operation ("-" for net loss)
V. Other comprehensive income after tax
(I) Other comprehensive income that cannot be reclassified
into profits or losses in the future
1. Changes arising from re-measurement of net liabilities or
net assets of defined benefit plan
2. Share in other comprehensive income of the investee that
cannot be reclassified into profit or loss under the equity
method
(II) Other comprehensive income to be reclassified into profits
or losses later
1. Share in other comprehensive income of the investee that
will be reclassified into profit or loss under the equity method
2.Profit or loss of change in fair value of available-for-sale
financial assets
3. Profit and loss arising from reclassification of
held-to-maturity investments as available-for-sale financial
assets
4. Effective portion of profit or loss on cash flow hedging
5. Translation differences of financial statements dominated in
foreign currency
6. Others
VI. Total comprehensive income 2,858,998.66 -2,661,052.49 VII. Earnings per share 5.13.2
(I) Basic earnings per share (RMB/share) 0.0079 -0.0073 (II) Diluted earnings per share (RMB/share) 0.0079 -0.0073 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the Accounting Department:
Statements Page 3
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Statement of Cash Flows
For the year ended December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
Item Note 5 Year 2017 Year 2016 I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 29,475,377.07 22,525,732.45 Refunds of taxes and surcharges 4,801.73 Cash received from other operating activities 5.33 1,082,486.86 584,448.51 Sub-total of cash inflows from operating activities 30,557,863.93 23,114,982.69 Cash paid for goods purchased and services received 8,848,190.06 5,520,980.68 Cash payments to and on behalf of employees 10,028,995.69 9,341,192.06 Cash paid for taxes and surcharges 2,678,621.46 2,515,054.34 Cash paid for other operating activities 5.33 3,874,768.25 2,971,383.59 Sub-total of cash outflows from operating activities 25,430,575.46 20,348,610.67 Net cash flows from operating activities 5,127,288.47 2,766,372.02 II. Cash flows from investing activities
Cash received from disposal of investments 9,000,000.00 9,000,000.00 Cash received from return on investments 830,000.00 961,165.05 Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 10,550.00 4,929,753.50 Net cash received from disposal of subsidiaries and other
business units
Other cash received from investing activities 29,081.45 Sub-total of cash inflows from investment activities 9,840,550.00 14,920,000.00 Cash paid to acquire and construct fixed assets, intangible
assets and other long-term assets 4,186,479.32 1,258,516.27 Cash paid for investments 9,000,000.00 9,000,000.00 Net cash paid to acquire subsidiaries and other business
units
Cash paid for other investing activities 5.33 19,310,000.00
Sub-total of cash outflows from investing activities 32,496,479.32 10,258,516.27 Net cash flows from the investing activities -22,655,929.32 4,661,483.73 III. Cash flows from financing activities
Cash received from absorption of investment
Cash received from borrowings
Cash received from bonds issue
Other cash received fromfinancing activities 5.33 19,810,000.00
Sub-total of cash inflow from financing activities 19,810,000.00
Cash paid for debt repayments
Cash paid for distribution of dividends and profits or
payment of interests
Other cash paid for financing activities 5.33 19,810,000.00
Sub-total of cash outflow for financing activities 19,810,000.00
Net cash flows from financing activities
IV.Effect of fluctuation in exchange rate on cash and
cash equivalents
V. Net increase in cash and cash equivalents -17,528,640.85 7,427,855.75 Plus: balance of cash and cash equivalents at the beginning
of the period 27,210,248.01 19,782,392.26 VI.Balance of cash and cash equivalents at the end of
the period 9,681,607.16 27,210,248.01 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the Accounting Department:
Statements Page 4
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Statement of Changes in Owners' Equity
For the year ended December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||2017||||||||||
|||Other equity instruments||||Less:|Other||||
|Item||||||||Surplus|Retained|Total owners'|
||Share capital|Preferred|Perpetual||Capital reserve|treasury|comprehensive||||
|||||Others||||reserve|earnings|equity|
|||shares|debt|||stock|income||||
|I. Balance as at the end of last year|364,100,000.00||||54,142,850.01||||-343,966,434.57|74,276,415.44|
|Plus: adjustments for changes in accounting policies|||||||||||
|Correction of accounting errors in prior periods|||||||||||
|Others|||||||||||
|II. Balance as at the beginning of the year|364,100,000.00||||54,142,850.01||||-343,966,434.57|74,276,415.44|
|III. Increases/decreases in the current period ("-" for|||||||||||
|decreases)|||||||||2,858,998.66|2,858,998.66|
|(I) Total comprehensive income|||||||||2,858,998.66|2,858,998.66|
|(II) Capital contributed or reduced by owners|||||||||||
|1. Common shares contributed by shareholders|||||||||||
|2. Capital invested by the holders of other equity|||||||||||
|instruments|||||||||||
|3. Amounts of share-based payments recognized in|||||||||||
|owner's equity|||||||||||
|4. Others|||||||||||
|(III) Profit distribution|||||||||||
|1.Withdrawal of surplus reserves|||||||||||
|2. Profit distributed to owners (or shareholders)|||||||||||
|3. Others|||||||||||
|(IV) Internal carry-forward of owner's equity|||||||||||
|1. Conversion of capital reserves into paid-in capital|||||||||||
|(or share capital)|||||||||||
|2. Conversion of surplus reserves into paid-in capital|||||||||||
|(or share capital)|||||||||||
|3. Surplus reserves offsetting losses|||||||||||
|4. Others|||||||||||
|(V)Special reserves|||||||||||
|1. Amount withdrawn in the current year|||||||||||
|2. Amount used in the current period|||||||||||
|(VI) Others|||||||||||
|IV. Balance as at end of the current period|364,100,000.00||||54,142,850.01||||-341,107,435.91|77,135,414.10|

 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the Accounting Department:
Statements Page 5
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Statement of Changes in Owner's Equity (Continued)
For the year ended December 31, 2017
(Amounts are expressed in RMB unless otherwise stated)
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||2016Other equity instruments Less: Other||||||||||||
|Item||Share capital||Preferred Perpetual Othersshares debt|||Capital reserve||treasury|comprehensive|Surplusreserve|Retainedearnings|Total owners'equity|
||||||shares|debt|||stock|income||||
||I. Balance as at the end of last year||364,100,000.00|||||54,142,850.01||||-341,305,382.08|76,937,467.93|
||Plus: adjustments for changes in accounting policies|||||||||||||
||Correction of accounting errors in prior periods|||||||||||||
||Others|||||||||||||
||II. Balance as at the beginning of the year||364,100,000.00|||||54,142,850.01||||-341,305,382.08|76,937,467.93|
||III. Increases/decreases in the current period ("-" for|||||||||||||
||decreases)|||||||||||-2,661,052.49|-2,661,052.49|
||(I) Total comprehensive income|||||||||||-2,661,052.49|-2,661,052.49|
||(II) Capital contributed or reduced by owners|||||||||||||
||1. Common shares contributed by shareholders|||||||||||||
||2. Capital invested by the holders of other equity|||||||||||||
||instruments|||||||||||||
||3. Amounts of share-based payments recognized in|||||||||||||
||owner's equity|||||||||||||
||4. Others|||||||||||||
||(III) Profit distribution|||||||||||||
||1.Withdrawal of surplus reserves|||||||||||||
||2. Profit distributed to owners (or shareholders)|||||||||||||
||3. Others|||||||||||||
||(IV) Internal carry-forward of owner's equity|||||||||||||
||1. Conversion of capital reserves into paid-in capital|||||||||||||
||(or share capital)|||||||||||||
||2. Conversion of surplus reserves into paid-in capital|||||||||||||
||(or share capital)|||||||||||||
||3. Surplus reserves offsetting losses|||||||||||||
||4. Others|||||||||||||
||(V)Special reserves|||||||||||||
||1. Amount withdrawn in the current year|||||||||||||
||2. Amount used in the current period|||||||||||||
||(VI) Others|||||||||||||
||IV. Balance as at end||364,100,000.00|||||54,142,850.01||||-343,966,434.57|74,276,415.44|

 The accompanying notes form an integral part of these financial statements.
Legal Representative: Accounting Principal: Head of the Accounting Department:
Statements Page 6
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.
Notes to the Financial Statements
For the Year Ended December 31, 2017
1. Company profile
1.1 Overview
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (hereinafter referred to as the "Company") is a standardized company limited by shares established on April 26, 1993 and restructured from Hainan Sanya Dadonghai Tourism Centre Development Co., Ltd. with the approval of Hainan Shareholding System Pilot Group office via its Document Qiong Gu Ban Zi[1993] No.11.On May 6, 1996, the Company was reorganized and separated with the reply of Hainan Securities Management Office by its Document Qiong Zheng Ban[1996] No.58.On October 8, 1996 and January 28, 1997,the Company was approved to respectively issue 80 million B shares and 14 million A shares on Shenzhen Stock Exchange and list for sales. On June 20, 2007, the Company carried out the split share structure reform. The non-tradable shareholders of the Company paid shares to the tradable shareholders for obtaining the circulation rights, and the tradable shareholders got 3 shares for every 10 shares. The Company belongs to tourism and catering service industry.
As at December 31, 2017, the Company's accumulative total issued capital was 364.1 million shares and the Company's registered capital was RMB 364.1 million. Legal representative: Li Yuanbin. Unified social credit code: 91460000201357188U.Domicile: Dadonghai, Hedong District, Sanya. Business scope: Accommodation and catering industry (limited to branches); photography; flower bonsai, knitwear, general merchandise, hardware, chemical products (except franchised operations), daily necessities, industrial means of production (except franchised operations), metal materials, machinery equipment; sales of train, bus, vehicle tickets on an agent basis etc. The Company's largest shareholder is Luoniushan Co., Ltd. The financial statements were approved by the board of directors of the Company on January 30, 2018 for disclosure.
1.2 Scope of consolidated financial statements
As at December 31, 2017, the subsidiaries included into the Company's scope of consolidated financial statements are as follows:
Name Relationship with the Company Hainan Dadonghai Tourism Centre (Holdings) Co.,
Ltd. South China Hotel (hereinafter referred to as
"the South China Hotel") Branch
See “Note 6 Changes in the scope of consolidation" for details of the scope of consolidated financial statements in the current period and the changes thereof.
2. Basis of preparation of the financial statements
2.1 Preparation basis
Based on going concern and according to actually occurred transactions and events, the Company prepared financial statements in accordance with the Accounting Standards for Business Enterprises— Basic Standards and the specific accounting standards, Application Guidance to the Accounting Standards for Business Enterprises, the interpretation of the Accounting Standards for Business Enterprises and other relevant provisions (hereinafter referred to collectively as the "Accounting Standards for Business Enterprises"), as well as the disclosure provisions of the Rules for the Compilation and Submission of Information Disclosure by Companies Offering Securities to the Public No.15 - General Requirements for Financial Reports (Revised in 2014).
Notes to Financial Statements Page 1
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
2.2 Going concern
The Company currently has sufficient working capital and normal operating conditions. It is estimated that the operating activities of the Company will continue in the next 12 months. 3. Significant accounting policies and accounting estimates
3.1 Statement on compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Company comply with the requirements of the Accounting Standards for Business Enterprises, and truly and completely present the financial position, operating results, cash flows of the Company and other related information.
3.2 Accounting period
The accounting year is from January 1 to December 31 in calendar year.
3.3 Operating cycle
The Company's operating cycle is 12 months.
3.4 Reporting currency
The Company adopts RMB as its reporting currency.
3.5 Recognition criteria of cash and cash equivalents
For the purpose of preparing the statement of cash flows, the term “cash” refers to the cash on hand and the unrestricted deposit of the Company. The term “cash equivalents” refers to short-term (maturing within three months from acquisition) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
3.6 Foreign currency business
Foreign currency transactions will be translated at the spot exchange rate on the transaction date and be accounted for at RMB.
The balance of foreign currency monetary items are translated at the spot exchange rate on the balance sheet date and the exchange differences arising therefrom shall be included in the current profit and loss, except those exchange differences arising from the special borrowings of foreign currency related to the acquired and constructed assets qualified for capitalization that will be capitalized at the borrowing expenses. Foreign currency non-monetary items measured at historical costs shall still be converted at the spot exchange rates when the transactions occur, without changing the functional currency amount. Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rates on the day when the fair value is determined. The exchange difference arising therefrom is included in the current profit and loss or capital reserves.
3.7 Financial instruments
Financial instruments include financial assets, financial liabilities and equity instruments. 3.7.1 Classification of financial instruments
Upon initial recognition, financial assets and financial liabilities are classified into: financial assets or financial liabilities measured at fair value through current profit and loss, including financial assets or financial liabilities held for trading and financial assets or financial liabilities directly designated to be measured at fair value through current profit and loss; held-to-maturity investments; receivables; available-for-sale financial assets; and other financial liabilities, etc.
Notes to Financial Statements Page 2
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.7.2 Recognition and measurement of financial instruments
(1) Financial assets (financial liabilities) measured at fair value through current profit and loss
Financial assets (financial liabilities) measured at fair value through current profit and loss are initially recognized at the fair value upon acquisition (net of cash dividends declared but not yet paid or bond interest due but not yet received) and the related transaction costs are included in current profit and loss. The interests or cash dividends to be received during the holding period are recognized as investment income. Change in fair values is included in the current profit and loss at the end of the period.
The difference between the fair value and the initial book-entry value is recognized as investment income upon disposal; meanwhile, adjustments are made to profits or losses from changes in fair values.
(2) Held-to-maturity investments
Held-to-maturity investments are initially recognized at the sum of the fair value (net of bond interest due but not yet received) and related transaction costs upon acquisition.
The interest income is calculated and recognized according to amortized costs and effective interest rates (as per coupon rates if the difference between effective interest rates and coupon rates is small) during the holding period, and is included in the investment income. The effective interest rates are determined upon acquisition and remain unchanged during the expected remaining period, or a shorter period if applicable.
Upon disposal, the difference between the purchase price obtained and the book value of the investment is recognized in investment income.
(3) Receivables
Forcreditor’s rights receivable arising from external sales of goods or rendering of service by the Company and other creditor's rights of other enterprises (excluding liability instruments quoted in an active market) held by the Company, including accounts receivable, other receivables, notes receivable, prepayment and others, the initial recognition amount shall be the contract price or agreement price receivable from purchasing party; for those with financing nature, they are initially recognized at their present values.
Upon recovery or disposal, the difference between the purchase price obtained and the book value of the receivables is recognized in current profit and loss. (4) Available-for-sale financial assets
Financial assets (financial liabilities) measured at fair value through current profit and loss are initially recognized at the fair value and related transaction expenses upon acquisition (net of cash dividends declared but not yet paid or bond interest due but not yet received).
The interests or cash dividends to be received during the holding period are recognized as investment income. The interest or cash dividends should be measured at fair value and their changes in fair value should be included in other comprehensive income. However, for an equity instrument investment that has no quoted price in an active market and whose fair value cannot be reliably measured, and for derivative financial asset linked to the said equity instrument investment and settled by delivery of the same equity instrument, they shall be
measured at cost.
Notes to Financial Statements Page 3
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Difference between the proceeds and the book value of the financial assets is recognized as investment profit or loss upon disposal; meanwhile, amount of disposal corresponding to the accumulated change in fair value which is originally and directly included in other comprehensive income shall be transferred out and recognized as investment gains or losses.
(5) Other financial liabilities
Other financial liabilities are initially recognized at the sum of fair value and transaction expenses, and subsequently measured at amortized costs. Subsequent measurement is conducted at the amortized cost.
3.7.3 Recognition and measurement of transfer of financial assets
When a financial assets transfer occurs, the financial assets will be derecognized when substantially all the risks and rewards on the ownership of the financial assets have been transferred to the transferee; and they will not be derecognized if substantially all the risks and rewards on the ownership of the financial assets have been retained. When determining whether the transfer of a financial asset meets the above de-recognition criteria of financial assets, the Company adopts the principle of substance over form. The Company classifies the transfer of a financial asset into the entire transfer and the partial transfer of financial asset. Where the entire transfer of the financial asset meets the de-recognition conditions, the difference of the following two amounts will be included in current profit and loss:
(1) The book value of the transferred financial asset;
(2) The sum of the consideration received from the transfer and the accumulated amount of the changes in fair value originally and directly included inowners’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved in).
If the partial transfer of financial asset satisfies the criteria for de-recognition, the entire book value of the transferred financial asset shall be split into the derecognized and recognized part according to their respective fair value and the difference between the amounts of the following two items shall be included in the current profit and loss: (1) The book value of the derecognized part;
(2) The sum of the consideration for the derecognized part and the portion of de-recognition corresponding to the accumulated amount of the changes in fair value originally and directly included inowners’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved in). If the transfer of financial assets does not meet the de-recognition criteria, the financial assets shall continue to be recognized, and the consideration received will be recognized as a financial liability.
3.7.4 De-recognition criteria of financial liabilities
Where the present obligations of financial liabilities have been discharged in whole or in part, the financial liability is derecognized or any part thereof will be derecognized; if the Company signs an agreement with creditors to replace the existing financial liabilities by undertaking new financial liabilities, and the new financial liabilities are substantially different from the existing ones in terms of contract terms, the existing financial liabilities will be derecognized, and at the same time, the new financial liability will be recognized.
Notes to Financial Statements Page 4
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Where substantive changes are made to the contract terms of existing financial liability in whole or in part, the existing financial liabilities or part thereof will be derecognized, and the financial liability the terms of which have been modified will be recognized as a new financial liability.
Where financial liabilities are derecognized is whole or in part, the difference between the book value of the financial liabilities derecognized and the consideration paid (including non-cash assets transferred out or new financial liabilities borne) will be included into current profit and loss.
Where the Company repurchases part of a financial liability, the entire book value of the financial liability shall be split into the derecognized part and continuously-recognized part according to their respective relatively fair values on the repurchase date. The difference between the book value of the derecognized part and the consideration paid (including non-cash assets transferred out or new financial liabilities assumed) shall be included in the current profit and loss.
3.7.5 Method of determining the fair value of financial assets and financial liabilities The fair value of a financial instrument, for which there is an active market, is the prices quoted for it therein. Fair value of a financial instrument having no active market shall be determined by using valuation techniques. At the time of valuation, the Company adopts the techniques that are applicable in the current situation and supported by enough available data and other information, selects the input values that are consistent with the features of assets or liabilities as considered by market participants in relevant asset or liability transactions, and gives priority to use relevant observable inputs. The unobservable inputs are used only under the circumstance when it is impossible or unobservable inputs to obtain relevant observable inputs.
3.7.6 Testing and accounting methods of impairment of financial assets (excluding receivables)
Except for the financial assets measured at fair values through current profit and loss, the book value of financial assets on the balance sheet date should be checked. If there is objective evidence that a financial asset is impaired, provision for impairment shall be made.
(1) Impairment provision for available-for-sale financial assets:
If the fair value of available-for-sale financial assets has significantly declined at the end of the period, or it is expected that the trend of decrease in value is non-temporary after considering various relevant factors, the impairment shall be recognized, and accumulated losses from decreases in fair value originally and directly included inowners’ equity shall be all transferred out and recognized as impairment loss.
For available-for-sale debt instruments whose impairment losses have been recognized, if their fair values rise in the subsequent accounting period and such rise is objectively related to the matters occurring after the recognition of impairment loss, the previously recognized impairment loss shall be reversed and recorded into the current profit and loss.
Impairment losses on available-for-sale equity instruments shall not be reversed through profit or loss.
(2) Impairment provision for held-to-maturity investments:
Measurement of impairment losses on held-to-maturity investments is treated in accordance with the measurement method for impairment losses on receivables.
Notes to Financial Statements Page 5
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.8 Allowance for bad debt of accounts receivable
3.8.1 Allowance for bad debts of accounts receivable with individually significant amount:
Basis and standard for "individually significant": Top 5 accounts receivable and other receivables by individual amount at the end of the year.
Methods for provision for bad debts of receivables with individually significant amount: The Company will separately conduct an impairment test on an individual basis and the allowance for bad debts will be made at the lower of the present value of the expected future cash flow and the book value thereof and included in current profit and loss. Those do not impair after the separate test shall be included into corresponding portfolio for provision for bad debts. If separate test indicates that there is impairment of receivables, they shall not be included the receivables portfolio with similar risk credit characteristics for an impairment test.
3.8.2 Receivables provided for bad debts on a portfolio basis
Determination basis of portfolio
Aging portfolio Length of aging
Methods for provision for bad debts by portfolios
Aging portfolio Aging analysis
Proportions for provisions for bad debts made by aging analysis method are as follows: Provision ratio for Proportion ratio for other Aging
receivables(%) receivables(%)
Within 1 year (inclusive)
1-2 years 5 5 2-3 years 15 15 3-4 years 25 25 4-5 years 50 50 Over 5 years 100 100 3.8.3 Accounts receivable with individually insignificant amounts and individual allowance for bad debt:
Reasons for separate provision of allowance for bad debts: At the end of the year, there are objective evidences showing that the individual balances below top five are impaired; for example, the debtor is dissolved, bankrupts or dies, and therefore the receivables cannot be recovered after the bankruptcy property or the estate is repaid. Provision method of allowance for bad debts: if there is an objective evidence that the impairment on receivables has occurred, such receivables shall be separated from relevant portfolio to conduct impairment test separately, based on which the impairment losses are recognized.
Receivables other than accounts receivable and other receivables are subject to impairment provision by using the specific identification methods.
3.8.4 Reversal of provision for bad debts
If there is any objective evidence showing that the value of the receivables has been recovered and it relates objectively to the event occurred after the recognition of the loss, the originally recognized impairment loss shall be reversed and included in the current profit or loss. However, the book value after the reversal does not exceed amortized cost of the receivables on the reversal date under the assumption that no provision for impairment is made.
Notes to Financial Statements Page 6
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.9 Inventories
3.9.1 Classification
Inventories are classified into: raw materials, stock commodities, low-cost consumables, good materials, fuel, etc.
3.9.2 Valuation method of inventories dispatched
Stock commodity is accounted for at the selling price and the difference between the purchase and sale prices are adjusted on a monthly basis by using the integrated price difference rate. The purchase and storage of all materials of inventories is measured at actual cost, and by using the first-in first-out method when applied for use. Low-cost consumables are amortized at lump-sum method when applied for use.
3.9.3 Determining basis of the net realizable value of inventories and method for inventory impairment provision
After the comprehensive inventory count at the end of the period, provisions for inventory depreciation reserve are made or adjusted at the lower of their costs or net realizable values. For merchandise inventories for direct sale, including stock commodities, goods in progress and materials for sale, during normal operations, their net realizable values are recognized at the estimated selling prices minus the estimated selling expenses and the relevant taxes and surcharges; for material inventories held for production, their net realizable values are recognized at the estimated selling prices of finished goods minus estimated costs until completion, estimated selling expenses and relevant taxes and surcharges.
The provisions for inventory depreciation reserve are made on an individual basis at the end of the period; for inventories with large quantities and relatively low unit prices, the provisions for inventory depreciation reserve are made on a category basis. For inventories related to the product portfolios manufactured and sold in the same area, and of which the final usage or purpose is identical or similar thereto, and which is difficult to separate from other items for measurement purposes, the provisions for inventory depreciation reserve are made on a portfolio basis.
Where the previous factors affecting the written-down of the value of inventory have disappeared, the amount of write-down shall be resumed and be reversed from the original provision for inventory devaluation with the reversal being included in current profit and loss.
3.9.4 Inventory system
The perpetual inventory system is adopted for accounting.
3.9.5 Amortization methods for low-cost consumables and packaging materials
(1) Low-cost consumables are amortized at lump-sum method;
(2) Packaging materials: lump-sum write-off method.
3.10 Long-term equity investments
3.10.1 Judgment criteria for common control and significant influence
Joint control refers to the control shared over an arrangement in accordance with the relevant stipulations, and the decision-making of related activities of the arrangement should not be made before the party sharing the control right agrees the same. Where the Company exercises joint control over the investee together with other parties to the joint venture and enjoys the right on the investee's net assets, the investee is a joint venture of the Company.
Notes to Financial Statements Page 7
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Significant influence refers to the power to participate in making decisions on the financial and operating policies of an enterprise, such as appointing representative to the board of directors or similar organs of authority of the investee, but not the power to control the investee, or jointly control, the formulation of such policies with other parties. Where an investor is able to have significant influences on an investee, the investee shall be the Company's associate.
3.10.2 Determining of initial investment cost
(1) Long-term equity investment acquired from business combination
Business combination under the common control: if the Company pays a consideration to the combinee in cash, by transferring non-cash assets or by assuming debts, the share of book value of its owners' equity in the combinee in the consolidated financial statements of the ultimate controlling party shall be regarded, on the merger date, as the initial investment cost of the long-term equity investment. If there is a difference between the initial investment cost of the long-term equity investment and the total of book values of the paid cash, transferred non-cash assets and of assumed debts as well as the face value of issued share, the difference shall be used to adjust the share premium in the capital reserve; and if the share premium in the capital reserve is insufficient to be offset, retained earnings shall be adjusted.
In case the Company can exercise control over the investee under common control for additional investment or other reasons, the initial investment cost of long-term equity investments is recognized at the share of book value of net asset of the acquiree after the combination in the consolidated financial statements of the ultimate controller on the combination date. The stock premium should be adjusted at the difference between the initial investment cost of long-term equity investments on the combination date and the book value of long-term equity investments before the combination plus the book value of consideration paid for additional shares; if there is no sufficient stock premium for write-downs, the retained earnings are adjusted.
Business combination not under the common control: the Company recognizes the combination cost determined on the combination date as the initial cost of long-term equity investments. Where the Company can control the investee not under common control from additional investments, the initial investment cost should be changed to be accounted for under the cost method and recognized at the sum of the book value of equity investments originally held and newly increased investment cost. Under business combination not under the common control, the auditing, legal services, consulting and other intermediary fees and other related administrative expenses for business combination will be included into current profit and loss upon occurrence; the transaction costs for the issuance of equity securities or debt securities shall be included into the initial recognition amount of equity securities or debt securities.
(2) Long-term equity investments obtained by other means
For long-term equity investments acquired from making payments in cash, the initial cost is the actually paid purchase cost.
For long-term equity investments acquired from issuance of equity securities, the initial investment cost is the fair value of the issued equity securities.
Notes to Financial Statements Page 8
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
If the exchange of non-monetary assets has commercial substance and the fair values of assets traded out and traded in can be measured reliably, the initial cost of long-term equity investment traded in with non-monetary assets are determined based on the fair values of the assets traded out and the relevant taxes and surcharges payable unless there is any conclusive evidence that the fair values of the assets traded in are more reliable; if the exchange of non-monetary assets does not meet the above criteria, the book value of the assets traded out and the relevant taxes and surcharges payable are recognized as the initial cost of long-term equity investment traded in.
For long-term equity investment acquired from debt restructuring, the initial cost is determined based on the fair value.
3.10.3 Subsequent measurements and recognition of gain or loss
(1) Long-term equity investment under cost method
Long-term equity investments in subsidiaries are accounted for under the cost method. Except for the actual price paid for acquisition of investment or the cash dividends or profits contained in the consideration which have been declared but not yet distributed, the Company recognizes the investment income in the current year at the cash dividends or profits declared by the investee. (2) Long-term equity investment accounted for in the equity method
The Company's long-term equity investments in associates and joint ventures are accounted for by using the equity method. If the initial cost is more than the share of the fair value of the investee' identifiable net asset to which the Company shall be entitled when investing, the initial cost of the long-term equity investment will not be adjusted. If the initial cost of a long-term equity investment is less than the share of the fair value of the investee's identifiable net asset to which the Company shall be entitled when investing, the difference shall be included in the current profit or loss.
The Company respectively recognizes the investment income and other comprehensive income according to the shares of net profit or loss and other comprehensive income realized by the investee that should enjoyed or assumed by the Company, and adjusts the book value of long-term equity investment; according to the profit declared to be distributed by the investee or the part shall be enjoyed cash dividends calculation, to reduce the book value of long-term equity investment correspondingly; for other changesin owners' equity excepting for ex all profit or loss of the investee, other comprehensive income and profit distribution, the book value of long-term equity investment shall be adjusted and included in the owners' equity.
When recognizing the share of net profit or loss of the investee that the Company shall enjoy, based on fair value of various identifiable assets and others of the investee on acquisition and according to accounting policies and accounting periods of the Company, the Company shall recognize such share after making adjustments to net profit of the investee. When holding the investment, the investee should prepare the consolidated financial statements, it shall account for the investment income based on the net profit, other comprehensive income and the changes in other owner's equity attributable to the investee.
Notes to Financial Statements Page 9
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
The Company shall write off the part of incomes from internal unrealized transactions between the Company and associates and joint ventures which are attributable to the Company according to the corresponding ratio and recognize the profit and loss on investments on such basis. Where the losses from internal transactions between the Company and the investee fall into the scope of assets impairment loss, the full amount of such losses should be recognized. For transactions on investments or sales of assets between the Company and associates and joint ventures, where such assets constitute business, they should be accounted for according to the relevant policies.
When the Company recognizes its share of loss incurred to the investee, treatment shall be done in the following sequence: firstly, the book value of the long-term equity investment shall be reduced; secondly, where the book value thereof is insufficient to cover the share of losses, investment losses are recognized to the extent of book value of other long-term equities which form net investment in the investee in substance and the book value of long term receivables shall be reduced. Finally, after all the above treatments, if the Company is still responsible for any additional liability in accordance with the provisions stipulated in the investment contracts or agreements, provisions are recognized and included into current investment loss according to the obligations estimated to undertake. An investing party shall recognize the net loss incurred by the invested entity until the book value of the long-term equity investment and other long-term interests which substantially form the net investment in the invested entity are reduced to zero, unless the investing party is obliged to undertake extra losses. If the invested entity realizes any net profit later, the investing party shall, after the amount of its attributable share of profits offsets its attributable share of the unrecognized losses, resume recognizing its attributable share of profits.
(3) Disposal of long-term equity investments
For disposal of long-term equity investments, the difference between the book value and the actual price shall be included into the current profit or loss. Where a long-term equity investment is accounted for under the equity method, accounting treatment should be made on the part which is originally included in other comprehensive income according to corresponding ratio by using the same basis for the investee to directly dispose of the relevant assets or liabilities when the investments are disposed of. Owner's equity recognized from the investee's changes in other owner's equity other than net profit or loss, other comprehensive income and profit distribution should all transferred to the current profit and loss in proportion.
In case the joint control or significant influence over the investee is lost for disposing part of equity investments or other reasons, the remaining equity will be changed to be accounted for according to the recognition and measurement principles of financial instruments. The difference between the fair value and the book value on the date of the loss of joint control or significant influence should be included in the current profit and loss. As to other comprehensive income recognized based on measurement of the original equity investment under the equity method, accounting treatment shall be made on the same basis as would be required if the investee had directly disposed of the assets or liabilities related thereto when measurement under the equity method is terminated. Owner's equity recognized from the investee's changes in other owner's equity other than net profit or loss, other comprehensive income and profit distribution should all
transferred to the current profit and loss when the equity method confirmed is no
longer adopted.
Notes to Financial Statements Page 10
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Where the Company loses the control over the investee due to disposal of partial equity investments or other reasons, when it prepares separate financial statements, the remaining equity after disposal that can jointly control or have significant influence on the investee will be measured at the equity method, and the remaining equity should be deemed to have been adjusted at equity method on acquisition;
If the remaining equity after disposal cannot exercise joint control or significant influence on the investee, such investments should be accounted for according to the provisions on the recognition and measurement of financial instruments and the difference between fair value and book value on the date of loss of the control should be included in the current profit and loss.
Where the disposed equities are acquired by the enterprise combination due to the reasons such as additional investment, the remaining equities after the disposal are calculated based on the cost method or equity method in preparing the individual financial statements, and other comprehensive income and other owners' equity recognized because of the equity method adopted for the calculation of the equity investment held prior to the purchase date are carried forward in proportion; the remaining equities after the disposal are changed to be made in accordance with the relevant provisions in the recognition and measurement criteria of financial instruments while other comprehensive income and other owners' equity are carried forward in full.
3.11 Investment property
Investment properties are properties to earn rentals or for capital appreciation or both. Examples include land leased out under operating leases, land held for long-term capital appreciation, buildings leased out under operating leases, (including buildings that have been constructed or developed for future lease out under operating leases, and buildings that are being constructed or developed for future lease out under operating leases).
The Company measures the existing investment properties by using the cost model. For investment property measured by using the cost model, the buildings for lease shall be depreciated by using policies the same as used for fixed assets of the Company, and the land use rights for lease shall be amortized by using the same policies as applicable to intangible assets.
3.12 Fixed assets
3.12.1 Recognition criteria of fixed assets
Fixed assets refer to the tangible assets held for the purpose of producing commodities, rendering services, renting or business management with useful lives exceeding one year. Fixed assets are recognized when they simultaneously meet the following conditions:
(1) It is probable that the economic benefits relating to the fixed assets will flow into the Company; and
(2) The costs of the fixed asset can be measured reliably.
3.12.2 Classification of fixed assets
Fixed assets can be classified into: buildings and constructions, electronic equipment, transport equipment, entertainment equipment, other equipment and decoration improvements.
3.12.3 Initial measurement of fixed assets
Fixed assets shall be initially measured at actual costs on acquisition.
Notes to Financial Statements Page 11
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
The costs of externally acquired fixed assets shall be determined by their purchase prices, related taxes and surcharges and any attributable transport expenses, loading and unloading expenses, installation expenses and professional service expenses incurred to prepare the fixed assets for its serviceable condition.
Where the payment for purchasing the fixed assets is delayed exceeding the normal credit period, which substantially, has a financing character, costs of the fixed assets are determined based on the present value of purchasing cost.
Costs of self-built fixed assets consist of necessary expenditures incurred before and for the purpose of making the self-built fixed assets to reach the predetermined serviceable condition.
For fix assets obtained in debt restructuring by debtors for the settlement of his liabilities, their book-entry value should be initially stated based on their fair values. Differences between the book values and the fair values of the fix assets are included in the current profit and loss;
If the exchange of non-monetary assets has commercial substance, and the fair value of these assets can be measured reliably, the book-entry value of fixed assets traded in is determined on the basis of the fair value of the fixed assets traded out unless there is any conclusive evidence that the fair value of the assets traded in is more reliable; if the exchange of non-monetary assets does not meet the above criteria, the cost of the fixed assets traded in should be the book value of the assets traded out and relevant taxes and surcharges payable, and no profit or loss shall be recognized.
For fixed assets acquired from business combination under common control, the initial book value are initially recognized at the book value of the combinee; for fixed assets acquired from business combination not under common control, the initial book value are initially recognized at the fair value.
The Group shall state the assets acquired under finance lease at the lower of the book value of the leased assets on the lease beginning date or the present value of the minimum lease payments.
3.12.4 Provision method for depreciation of fixed assets
Fixed assets are depreciated based on the straight-line method, their depreciation rates are determined based on category of fixed asset, estimated economic useful live and residual values(5% of the original value)as follows:
Estimated useful Estimated net residual Yearly depreciation Asset type
lives (year) value rate(%) rate(%) Houses and
buildings 20-40 5 4.75-2.37 Mechanical
equipment 8-20 5 11.87-4.75 Entertainment
equipment 5-16 5 19-5.93 Transportation
equipment 7-12 5 13.57-7.91 Other equipment 8 5 11.87
Notes to Financial Statements Page 12
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.13 Construction in progress
The book-entry values of the fixed assets are stated at total expenditures incurred before reaching working condition for their intended use. For construction in progress that has reached working conditions for its intended use but for which the completion of settlement has not been handled, it shall be transferred into fixed assets at the estimated value according to the project budget, construction price or actual cost, etc. from the date when it reaches the working conditions for its intended use. The fixed assets shall be depreciated in accordance with theCompany’s policy on fixed asset depreciation. Adjustment shall be made to the originally and provisionally estimated value based on the actual cost after the completion of settlement is handled, but depreciation already provided will not be adjusted.
3.14 Borrowing costs
3.14.1 Recognition principles of capitalization of borrowing costs
Borrowing costs include the interest of borrowings, the amortization of discount or premium, auxiliary expenses, exchange differences incurred by foreign currency borrowings, etc.
The borrowing costs incurred to the Company and directly attributable to the acquisition and construction or production of assets eligible for capitalization should be capitalized and recorded into relevant asset costs; other borrowing costs should be recognized as costs according to the amount incurred and be included into the current profit and loss.
Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assets which may reach their intended use or sale status only after long-time acquisition and construction or production activities.
Borrowing costs may be capitalized only when all the following conditions are met at the same time:
(1) Asset disbursements, which include those incurred by cash payment, the transfer of non-cash assets or the undertaking of interest-bearing debts for acquiring and constructing or producing assets eligible for capitalization, have already been incurred;
(2) Borrowing costs have already been incurred;
(3) Purchase, construction or manufacturing activities that are necessary to prepare the assets for their intended use are in progress.
3.14.2 Capitalization period of borrowing costs
Capitalization period refers to the period from commencement of capitalization of borrowing costs to its cessation; period of suspension for capitalization is excluded. Capitalization of borrowing costs should cease when the acquired and constructed or produced assets eligible for capitalization have reached the working condition for their intended use or sale.
When some projects among the acquired and constructed or produced assets eligible for capitalization are completed and can be used separately, the capitalization of borrowing costs of such projects should be ceased.
If all parts of the acquired and constructed or produced assets are completed but the assets cannot be used or sold externally until overall completion, the capitalization of borrowing costs should be ceased at the time of overall completion of the said assets.
Notes to Financial Statements Page 13
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.14.3 Period of suspension for capitalization
If the acquisition and construction or production activities of assets eligible for capitalization are abnormally interrupted and such condition lasts for more than three months, the capitalization of borrowing costs should be suspended; if the interruption is necessary procedures for the acquired, constructed or produced assets eligible for capitalization to reach the working conditions for its intended use or sale, the borrowing costs continue to be capitalized. Borrowing costs incurred during the interruption are recognized as the current profit and loss and continue to be capitalized until the acquisition, construction or production of the asset restarts.
3.14.4 Calculation of capitalization amount of borrowing costs
As for special borrowings borrowed for acquiring and constructing or producing assets eligible for capitalization, borrowing costs of special borrowing actually incurred in the current period less the interest income of the borrowings unused and deposited in bank or return on temporary investment should be recognized as the capitalization amount of borrowing costs.
As for general borrowings used for acquiring and constructing or producing assets eligible for capitalization, the interest of general borrowings to be capitalized should be calculated by multiplying the weighted average of asset disbursements of the part of accumulated asset disbursements exceeding special borrowings at end of each month by the capitalization rate of used general borrowings. The capitalization rate is calculated by weighted average interest rate of general borrowings.
As for borrowings with discount or premium, the to-be-amortized discount or premium in each accounting period should be recognized by effective interest rate method, and the interest for each period should be adjusted.
3.15 Intangible assets
3.15.1 Valuation method of intangible assets
(1) The Company initially measures intangible assets at cost on acquisition;
The costs of externally purchased intangible assets include purchase prices, relevant taxes and surcharges and other directly attributable expenditures incurred to prepare the assets for their intended use. If the payment for an intangible asset is delayed beyond the normal credit conditions and it is of the financing nature, the cost of the intangible asset shall be determined on the basis of the current value of the purchase price.
For an intangible asset obtained in debt restructuring by a debtor for the settlement of relevant liability, the book-entry value shall be initially recognized based on the fair value of the intangible asset. Difference between the book value of restructured debts and the fair value of the intangible asset used for debt off-set shall be included in the current profit or loss;
On the premise that non-monetary assets trade is of commercial nature and the fair value of the assets traded in or out can be measured reliably, the intangible assets traded in with non-monetary assets should be recognized at the fair value of the assets traded out, unless any unambiguous evidence indicates that the fair value of the assets traded in is more reliable; as to the non-monetary assets trade not meeting the aforesaid premise, the book value of the assets traded out and related taxes and surcharges payable should be recognized as the cost of the intangible assets, with gains or losses not recognized.
Notes to Financial Statements Page 14
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
For intangible assets acquired from business combination under common control, the initial book value are initially recognized at the book value of the combinee; for intangible assets acquired from business combination not under common control, the initial book value are initially recognized at the fair value.
Costs of intangible assets developed internally and independently include: the costs of materials and labor services used to develop the intangible assets, the registration fee, the amortization of other patents and franchise used in the process of development, the interest expenses meeting the condition for capitalization, and other direct expenses for preparing the intangible assets for their intended use.
(2) Subsequent measurement
The useful lives of the intangible assets are analyzed and determined on their acquisition.
For intangible assets with definite useful lives, the Company shall adopt the straight-line method for amortization within the period during which they can bring economic benefits to the Company; where the period during which they can bring economic benefits to the Company cannot be forecast, those intangible assets shall be deemed as assets with indefinite lives and no amortization will be made.
3.15.2 Estimates of useful lives of intangible assets with definite useful lives
Item Estimated useful lives Basis
Land use rights 50 years Use term for the land use right title The useful life and amortization method of intangible assets with limited useful life are reviewed at the end of each period.
Upon review, the useful lives and amortization method of the intangible assets as at the end of the year were not different from those estimated before.
3.15.3 Judgment basis for intangible assets with indefinite useful lives
As at the balance sheet date, the Company has no intangible assets with indefinite useful lives.
3.16 Impairment of long-term assets
For the long-term equity investments, investment properties, fixed assets, construction in progress, intangible assets, and other long-term assets measured at cost model, if there are signs of impairment, an impairment test will be conducted on the balance sheet date. If impairment test results indicate that the recoverable amounts of the assets are lower than their book value, the provision for impairment is made based on the differences, which are recognized as impairment losses. The recoverable amounts of intangible assets are the higher of their fair values less costs to sell and the present values of the future cash flows expected to be derived from the assets. The assets impairment provision is calculated and made on an individual basis. If it is difficult for the Company to estimate the recoverable amount of the individual asset, the recoverable amount of an asset group to which the said asset belongs to will be determined. Asset group is the minimum combination of assets that can independently generate cash inflows.
After the losses from asset impairment are recognized, they are not reversed in subsequent periods.
Notes to Financial Statements Page 15
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.17 Long-term deferred expenses
Long-term deferred expenses refer to various expenses which have been already incurred but will be born in the reporting period and in the future with an amortization period of over one year.
3.17.1 Amortization method
Long-term deferred expenses are evenly amortized over the beneficial period
3.17.2 Amortization period
Item Amortization period
Hotel exterior decoration 4 years
Fire stairs renovation 4 years
C floor room renovation 5 years
Villa renovation 5 years
Swimming pool renovation 5 years
3.18 Employee compensation
3.18.1 Short-term compensation
During the accounting period when employees serve the Company, the actual short-term compensation is recognized as liabilities and included in current profit and loss or costs associated with assets.
The appropriate amount of employee compensation payable will be determined during the accounting period when the employees provide services for the Company based on the medical insurance, work injury insurance and maternity insurance and other social insurance and housing fund paid by the Company for employees, as well as trade union funds and employee education funds withdrawn according to provisions at the accrual basis and accrual ratio.
The employee benefits in the non-monetary form shall be measured at fair value. 3.18.2 Dismiss welfare
Where the Company cannot unilaterally withdraw the dismissal welfare offered in view of the cancellation of the labor relation plan or the layoff proposal, or recognizes the cost or expenses as to the restructuring involving the payment of dismissal welfare (whichever is earlier), the employee compensation arising from the dismissal welfare should be recognized as the liabilities and charged to the current profit or loss.
3.18.3 Post-employment benefits
The Company will pay basic old-age insurance and unemployment insurance in accordance with relevant provisions of the local government for employees. During the accounting period when they provide services for the Company, the amount payable will be calculated at the basis and proportion specified by local authorities, recognized as a liability and charged into current profit and loss or costs associated with assets. 3.19 Estimated liabilities
When the Company is involved in litigation, debt guarantees, loss-making contract, reorganization matters, if such matters are likely to be satisfied by delivery of assets or provision of services in the future and the amount can be measured reliably, they shall be recognized as estimated liabilities.
3.19.1 Recognition criteria for estimated liabilities
When an obligation relating to a contingency meets all the following conditions at the same time, it is recognized as an estimated liability:
(1) Such obligation is a present obligation of the Company;
Notes to Financial Statements Page 16
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
(2) The performance of such obligation may well cause outflows of economic benefits from the Company; and
(3) The amount of such obligation can be measured reliably.
3.19.2 Measurement method of estimated liabilities
The estimated liabilities of the Company are initially measured as the best estimate of expenses required for the performance of relevant present obligations.
When the Company determines the best estimate, it should have a comprehensive consideration of risks with respect to contingencies, uncertainties and the time value of money. If the time value of money is significant, the best estimates will be determined after discount of relevant future cash outflows.
The best estimates shall be treated as follows in different circumstances:
If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence of all the outcomes within this range are equal, the best estimates will be determined at the average amount of upper and lower limits within the range.
If there is no continuous range (or interval) for the necessary expenses, or probabilities of occurrence of all the outcomes within this range are unequal despite such a range exists, in case that the contingency involves a single item, the best estimate shall be determined at the most likely outcome; if the contingency involves two or more items, the best estimate should be determined according to all the possible outcomes with their relevant probabilities.
When all or part of the expenses necessary for the settlement of estimated liabilities of the Company are expected to be compensated by a third party, the compensation shall be separately recognized as an asset only when it is virtually certain to be received. The compensation recognized shall not exceed the book value of the estimated liabilities. 3.20 Revenue
3.20.1 Recognition and measurement principles for revenues from sale of goods
(1) General recognition and measurement principles for revenue from sales of goods
Income from sales of goods is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuous management rights associated with ownership of the goods sold nor effective control over the goods sold; the relevant amount of income can be measured reliably; it is highly likely that the economic benefits associated with the transaction will flow into the Company; and the relevant amount of cost incurred or to be incurred can be measured reliably.
(2) Recognition criteria and time of revenue from sale of goods of the Company In the provision of hotel housing services at the same time, the Company provides goods to customers and will prepare daily sales list after confirming with the Rooms Department and the hotel front desk. Based on the sales list, the finance department confirms that the major risks and rewards of ownership of the goods have been transferred to the customer and then the sales revenue is recognized.
Notes to Financial Statements Page 17
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.20.2 Recognition and measurement principles of revenue from rendering of service (1) For the hotel rooms, catering (breakfast) and other services to be provided by the Company, after they are provided, and the Company checks with the sales department and the front check, the Company will prepare the daily sales reports and accounts receivable list to the finance department, which will review the same, after which, the revenue will be recognized.
(2) For the revenue from restaurants and venues contracted out, they will be recognized in accordance with the period stipulated in the contract or agreement and the collection timing.
3.20.3 Recognition basis for revenue from transfer of right to use assets
When the economic benefit related to the transaction is probably to flow into the Company and the relevant revenue can be reliably measured, the revenue from transfer of the asset use right is determined as follows: the revenue from transferring use right of assets shall be recognized based on the following circumstances:
(1) The amount of interest income is determined based on the time and effective interest rate for others to use the monetary funds of the Company.
(2) The amount of revenue from usage is determined based on the charging time and method as agreed in relevant contract or agreement.
3.21 Government subsidies
3.21.1 Type
Government subsidies are monetary assets and non-monetary assets freely obtained by the Company from the government. Government subsidies are classified into government subsidies related to assets and government subsidies related to income. Asset-related government subsidies refer to government subsidies obtained by the Company for forming long-term assets by acquisition, construction or other manners. Government subsidies related to income refer to government subsidies other than government subsidies related to assets.
3.21.2 Recognition timing and measurement
Government subsidies will be recognized if all the following criteria are satisfied at the same time:
1) Enterprises can meet the conditions attached to government subsidies;
2) The Company can receive government subsidies.
If government subsidies are monetary assets, they shall be measured in the light of the amount received or receivable. Government subsidies shall be measured at receivables when there is strong evidence at the end of the period that such subsidies comply with the relevant conditions prescribed by the financial support policies and the financial support funds are expected to be received. Other financial subsidies shall be confirmed according to the amount of money received.
If a government subsidy is a non-monetary asset, it shall be measured at its fair value; and if its fair value cannot be obtained in a reliable way, it shall be measured at a nominal amount.
Notes to Financial Statements Page 18
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.21.3 Accounting treatment
(1) Government subsidies related to assets
Set off the book value of related assets or be recognized as deferred income. Government subsidies related to assets are recognized as deferred income to be evenly distributed over the useful lives of the relevant assets and shall be recorded in current profit or loss by stages in a reasonable and systematic manner. Government subsidies measured in nominal amounts, are directly included in current profits and losses.
Where relevant assets are sold, transferred, scraped or damaged before the end of their lives, balance of the unallocated deferred income is transferred to the current profit and loss on asset disposal.
(2) Accounting treatment will be conducted for government subsidies associated with income in accordance with the following provisions:
1) To be used as compensation for future costs, expenses or losses are recognized as deferred income and are recorded in current profits and losses or used to write off the related costs where the relevant costs, expenses or losses are recognized.
2) To be used to compensate the related costs, expenses or losses incurred by the Company are directly included in current profit and loss or used to write off the related costs.
3) Accounting treatment will be conducted for government subsidies that at the same time include those associated with assets and income by different parts: if it is difficult to distinguish, they will be deemed as government subsidies associated with income.
(3) Any government grant related to the daily activities of an enterprise shall be included into other gains or to reduce the relevant costs and expenses in accordance with the business nature. Government subsidies unrelated to the daily activities of enterprises shall be recorded as non-operating revenues and expenditures.
3.22 Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets are recognized for deductible temporary differences to the extent that it shall not exceed the taxable income probably obtained in future period to be against the deductible temporary difference.
Taxable temporary differences are recognized as deferred tax liabilities except in special circumstances.
Special circumstances in which deferred assets or deferred tax liabilities cannot be recognized include: the initial recognition of goodwill; other transactions or matters excluding business combinations, which affect neither accounting profits nor the taxable income (or deductible losses) when occurred.
When the Company has the statutory right to do settlement with the net amounts, and has the intention to do so or the recovery of assets and the settlement of liabilities are achieved simultaneously, the Company shall present its current income tax assets and current income tax liabilities at the net amounts as the result of one offsetting another.
Notes to Financial Statements Page 19
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
When the Company has the legal right for netting of current income tax assets and current income tax liabilities and the income tax assets and income tax liabilities are related to the income tax levied on the same taxpayer by the same tax administrative department or are related to different taxpayers but, within each future period of reversal of important income tax assets and income tax liabilities, the taxpayers involved intend to settle current income tax assets and current income tax liabilities or acquire assets and liquidate liabilities at the same time, the Company's income tax assets and income tax liabilities shall be presented at the net amount after the offset.
3.23 Operating lease
3.23.1 Accounting treatment of assets leased
The rental fees paid for the asset leased by the Company will be amortized over the entire lease term without deducting rent-free period according to the straight-line method and included in the expenses for the current period. The initial direct costs related to the lease transactions paid by the Company are recorded in the current expenses.
When the lessor bears the lease related expenses which shall be undertook by the Company, the Company shall deduct this part of the expense from the rent and amortize the net amount over the lease term and charge into current costs or expenses.
3.23.2 Accounting treatment of leasing-out assets
Lease fees received by the Company from leasing assets shall be amortized at straight-line method over the whole lease period including rent-free period, and shall be recognized as lease income. Initial direct costs relating to lease transactions incurred by the Company shall be recognized as the current expenses; if the amounts are material, they shall be capitalized and included in the current income on the same basis as the recognition of lease income.
When the Company bears the lease related expenses which should be undertook by the lessee, the Company shall deduct this part of expense from the rent income, and amortize the net amount over the lease term.
3.24 Changes to principal accounting policies and accounting estimates
3.24.1 Changes in accounting policies
The Accounting Standards for Business Enterprises No.16 - Government Subsidies (Cai Kuai[2017] No.15) issued and revised by the Ministry of Finance have been implemented by enterprises adopting the Accounting Standards for Business Enterprises since June 12, 2017; therefore, for the government subsidies on January 1, 2017, the prospective application method shall apply for their accounting treatment; the Accounting Standards for Business Enterprises No.42 - Held-for-sale Non-current Assets and Disposal Group and Termination of Operation issued by the Ministry of Finance in 2017 have been implemented by enterprises adopting the Accounting Standards for Business Enterprises since May 28, 2017; therefore, for the held-for-sale non-current assets and disposal group and termination of operation existing on the implementation date, the prospective application method shall be applied for accounting treatment. On December 25, 2017, the Ministry of Finance issued the Circular of the Ministry of Finance on Revising the Format of General Financial Statements (Cai Kuai[2017] No.30), which revised the format of general financial statements, and applied to the financial statements in 2017 and afterwards.
The above-mentioned changes in accounting policies have no impacts on those figures listed in the Company' financial statements.
Notes to Financial Statements Page 20
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.24.2 Changes in accounting estimates
There were no changes in accounting estimates within the reporting period.
4. Taxation
Major tax types and tax rates applicable to the Company
Taxes Basis for tax assessment Tax rate Output VAT is calculated based on taxable sales
revenue and service revenue calculated in accordance
with tax laws and VAT payable or taxable sales
Value added revenue shall be the difference after deducting the
tax(VAT) input VAT deductible in the same period 5%,6%,11%,17% Business tax Levied based on the taxable business income 5% Urban maintenance
and construction tax Levied based on VAT payable 7% Education surtax Levied based on VAT payable 3% Local educational
surcharge Levied based on VAT payable 2% Remaining value after deducting30% from the original
value of the house (including the occupied land price)
Housing property tax and rental income 1.2%,12% Land use tax Land area RMB18/m2 Enterprise income
tax Levied based on taxable income 25% Remark: According to the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax (Cai Shui[2016] No.36) issued by the Ministry of Finance and the State Administration of Taxation, the pilot program of the collection of value-added tax in lieu of business tax was comprehensively promoted from May 1, 2016, and the Company shall calculate and pay value-added tax for different operating income at tax rates of5%,6%,11%, and17%, respectively.
5. Notes to the main items of financial statements
5.1 Cash and cash equivalents
Item Ending balance Beginning balance Cash 264,156.33 273,523.86 Bank deposits 9,417,450.83 26,936,724.15 Total 9,681,607.16 27,210,248.01 Remark: there are no amounts restricted for use due to mortgage or freeze, deposited in overseas institutions, and have potential risk in recovery.
Notes to Financial Statements Page 21
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.2 Accountsreceivable
5.2.1 Disclosure of account receivables by category
Ending balance Beginning balance
Book balance Provision for bad debt Book balance Provision for bad debt Category
Proportion Provision Book value Proportion Provision Book value Amount Amount Amount Amount
(%) ratio(%) (%) ratio(%) Accounts receivable with
significant single amount
subject to provision for
bad debts on a single
basis 1,466,400.49 50.22 1,466,400.49 100.00 Accounts receivable with
provision for bad debts
based on portfolios 662,651.14 100.00 68,520.25 10.34 594,130.89 1,453,566.38 49.78 763,121.66 52.50 690,444.72 Accounts receivable with
insignificant single amount
subject to provision for bad
debts on an individual basis
Total 662,651.14 100.00 68,520.25 594,130.89 2,919,966.87 100.00 2,229,522.15 690,444.72
Notes to Financial Statements Page 22
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
In the portfolio, accounts receivable with the allowance for bad debts made under the aging analysis method:
Ending balance
Aging Accounts Provision for Provision receivable bad debt proportion(%) Within 1 year 572,263.34
1-2 years 785.00 39.25 5.00 2-3 years 18,633.00 2,794.95 15.00 3-4 years 3,397.00 849.25 25.00 4-5 years 5,472.00 2,736.00 50.00 Over 5 years 62,100.80 62,100.80 100.00 Total 662,651.14 68,520.25
5.2.2 Provision, reversal or recovery of provision for bad debts in 2017
The provision for bad debts amounts to RMB15,211.00 in 2017.
5.2.3 Accounts receivable actually written off in 2017
Item Written-off amount
Accounts receivable 2,176,212.90 Details of written-off accounts receivable:
Nature of Whether it is due Name of Written-off Reasons for Write-off procedures
accounts to the related entity amount written-off performed
receivable party transactions Power Approval of the board of
supply Room and meal directors and the general
company charge 775,304.98 Irrecoverable meeting of shareholders No
Approval of the board of
Room and meal directors and the general
HMIT charge 464,563.21 Irrecoverable meeting of shareholders No
Approval of the board of
Southern Room and meal directors and the general
Cross charge 124,879.98 Irrecoverable meeting of shareholders No
Sanya
Municipal
Party
Committee Approval of the board of
Reception Room and meal directors and the general
Office charge 101,652.32 Irrecoverable meeting of shareholders No
Hainan
Baoping Approval of the board of
Travel Room and meal directors and the general
Agency charge 46,798.32 Irrecoverable meeting of shareholders No
Approval of the board of
Other 157 Room and meal directors and the general
companies charge 663,014.09 Irrecoverable meeting of shareholders No
Total 2,176,212.90
Remark: see 12.2.2 for details of written-off accounts receivable.
5.2.4 Top five accounts receivable in terms of ending balance collected by the debtor Relationship Proportion in total Book
Name of entity with the Aging amount of accounts balance
Company receivable(%) Shanghai
Hecheng
International
Travel Service Non-related
Co., Ltd. party 280,668.00 Within 1 year 42.36 Luoniushan Co., Non-consolidate
Ltd. d related party 166,412.00 Within 1 year 25.11
Guangzhou Non-related 38,980.00 Over 5 years 5.88
Notes to Financial Statements Page 23
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Relationship Proportion in total Book
Name of entity with the Aging amount of accounts balance
Company receivable(%) Institute of party
Design
Tianjin
Watermelon
Tourism
Limited
Liability Non-related
Company party 33,072.94 Within 1 year 4.99 Yilong Network
Information
Technology Co., Non-related
Ltd. party 25,581.00 Within 1 year 3.86 Total 544,713.94 82.20 5.3 Advances to suppliers
5.3.1 Advances to suppliers presented by aging
Ending balance Beginning balance
Aging
Book balance Proportion(%) Book balance Proportion(%) Within 1 year 49,530.21 100.00 58,783.23 100.00 Total 49,530.21 100.00 58,783.23 100.00 Remark: advances to suppliers are prepaid amounts for newspapers, oil, and software maintenance.
5.3.2 Top five advances to suppliers in terms of the ending balance collected by the prepaid object
Proportion in total ending Prepaid object Ending balance balance of advance to suppliers(%)
China Post Group Corporation
Sanya Branch 10,800.00 21.80 Sinopec Petrochemical Sales Co.,
Ltd. Hainan Sanya Branch 10,098.85 20.39 Hangzhou Xiruan Technology
Co., Ltd. 10,062.90 20.32 Sanya Daily 9,729.73 19.64 Sunshine Property Insurance Co.,
Ltd. Hainan Branch 8,838.73 17.85 Total 49,530.21 100.00
Notes to Financial Statements Page 24
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.4 Other receivables
5.4.1 Other receivables disclosed by category:
Ending balance Beginning balance
Book balance Provision for bad debt Book balance Provision for bad debt Category Provision
Proportion Book value Proportion Proportion Book value Amount Amount proportion Amount Amount
(%) (%) (%)(%)
Other receivables with
significant single
amount and individual
allowance for bad debts 77,363,143.31 98.85 77,363,143.31 100.00 Other receivables with
provision for bad debts
based on portfolio 160,709.19 100.00 21,147.90 13.16 139,561.29 903,202.33 1.15 729,098.81 80.72 174,103.52 Other receivables with
insignificant single
amount but with
individual provision for
bad debts
Total 160,709.19 100.00 21,147.90 139,561.29 78,266,345.64 100.00 78,092,242.12 174,103.52
Notes to Financial Statements Page 25
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Other receivables with provision for bad debts made by aging analysis method in portfolios:
Ending balance
Aging Provision for Provision Book balance
bad debt proportion(%) Within 1 year 139,111.29
1-2 years
2-3 years
3-4 years 600.00 150.00 25.00 4-5 years
Over 5 years 20,997.90 20,997.90 100.00 Total 160,709.19 21,147.90
5.4.2 Provision, reversal or recovery of provision for bad debts in 2017
The provision for bad debts in 2017 amounted to RMB-3,501.50.
5.4.3 Other receivables actually written off in 2017
Item Written-off amount
Other receivables 78,067,592.72 Details of written-off other receivables:
Whether it is Nature of Write-off
Name of Written-off Reasons for due to the other procedures
entity amount written-off related party receivables performed
transactions Approval of the
Hainan board of directors
Dadonghai Arrears and and the general
Tourism litigation meeting of
Company advances 54,767,945.15 Irrecoverable shareholders Yes Dividends to
be recovered
due to
punishment Approval of the
94-98 by the China board of directors
dividends Securities and the general
distributed Regulatory meeting of
in cash Commission 16,899,000.00 Irrecoverable shareholders Yes Contract Approval of the
revenue board of directors
originally and the general
falsely meeting of
HMIT included 4,145,704.16 Irrecoverable shareholders Yes Approval of the
Guangdong Dividends board of directors
Jinma receivable and and the general
Tourism interest meeting of
Co., Ltd. thereon 1,200,494.00 Irrecoverable shareholders No
Approval of the
board of directors
Shareholder and the general
s custodian Shareholders meeting of
fees custodian fees 350,000.00 Irrecoverable shareholders No
Approval of the
board of directors
Consumption and the general
Other 36 amounts and meeting of
companies deposits 704,449.41 Irrecoverable shareholders No
Total 78,067,592.72
Remark: see 12.2.2 for details of written-off other receivables.
Notes to Financial Statements Page 26
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.4.4 Classification of other receivables by the nature of payment
Book balance as at Book balance as at Nature of Payment
December 31, 2017 January 1, 2017 Current accounts between original
related entities 54,767,945.15 Contract profit receivable 4,145,704.16 Declared dividends receivable 16,899,000.00 Equity transaction amount 1,200,494.00 Deposit 600.00 563,818.99 Custody fee advances 350,000.00 Other current accounts 23,114.20 Petty cash 49,281.48 78,772.22 Water and electricity expenses 70,809.03 164,165.49 Shared amounts 30,500.00 Social insurance and housing
provident funds 40,018.68 37,831.43 Project funds 3,700.00 Deposit for invoices 1,300.00 Total 160,709.19 78,266,345.64 5.5 Inventories
5.5.1 Classification of inventory
Ending balance Beginning balance
Item Book Provision for Book Book Provision for Book balance price decline value balance price decline value Stocked
materials 880,621.58 735,181.58 145,440.00 876,822.10 742,966.17 133,855.93 Stock
commodi
ties 22,771.38 11,102.41 11,668.97 22,771.38 11,102.41 11,668.97 Food and
beverage 45,640.74 45,640.74 52,660.42 52,660.42 Fuel 24,255.40 24,255.40 20,994.40 20,994.40 Total 973,289.10 746,283.99 227,005.11 973,248.30 754,068.58 219,179.72 5.5.2 Provision for inventory depreciation
Increase in 2017 Decrease in 2017
Category of Beginning Ending Reversal or
inventories balance Provision Others Others balance write-off
Stocked
materials 742,966.17 7,784.59 735,181.58 Stock
commodities 11,102.41 11,102.41 Total 754,068.58 7,784.59 746,283.99 Remark: The reason for write-off is that a batch of cleaning supplies and other materials were subject to loss reporting as they can no longer be used due to long-term storage.
5.6 Non-current assets maturing within one year
Ending Beginning
Item Remark
balance balance
Long-term long-term Hotel exterior repair, and unamortized expenses transformation of guest rooms,
amortized within one year 1,173,597.68 584,369.42 swimming pools and others
Total 1,173,597.68 584,369.42
Notes to Financial Statements Page 27
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.7 Other current assets
Item Ending balance Beginning balance Remark Prepaid enterprise
income tax 1,702,702.80 1,702,702.80
Input tax to be deducted 255,160.76 173,746.42
Total 1,957,863.56 1,876,449.22
5.8 Available-for-sale-financial assets
5.8.1 Available-for-sale financial assets
Ending balance Beginning balance
Item Book Provision for Book Book Provision for Book balance impairment value balance impairment value Available-for-sale
bonds
Available-for-sale
equity instruments 5,000,000.00 5,000,000.00 Including: Measured
at fair value
Measured at cost 5,000,000.00 5,000,000.00 Total 5,000,000.00 5,000,000.00 5.8.2 Available-for-sale financial assets measured at cost at December 31, 2017
Book balance Provision for impairment Shareholding Cash Investee Beginning Increase Decrease Ending Beginning Increase Decrease Ending ratio in the dividend balance in 2017 in 2017 balance balance in 2017 in 2017 balance investee(%) in 2017 Shenzhen Difu
Investment
Development
Co., Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 14.28 Total 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00
Remark: the decrease in 2017 waswrite-off, and see 12.2.2 for details.
5.9 Long-term equity investment
5.9.1 Classification of long-term equity investments is as follows:
Ending balance Beginning balance
Investee Book Provision for Book Book Provision for Book balance impairment value balance impairment value Hubei Jingsha
Dadonghai
Club Co., Ltd. 4,566,207.42 4,566,207.42
Sanya Shun'an
Entertainment
Center 5,150,166.84 5,150,166.84
Total 9,716,374.26 9,716,374.26
5.9.2 Details of the long-term equity investments
Balance of provision for Provision for
Beginning Increase Decrease Ending impairment Investee impairment
balance in 2017 in 2017 balance as at in 2017
December 31, 2017 Hubei Jingsha
Dadonghai Club
Co., Ltd. 4,566,207.42 4,566,207.42
Sanya Shun'an
Entertainment
Center 5,150,166.84 5,150,166.84
Total 9,716,374.26 9,716,374.26
Notes to Financial Statements Page 28
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.9.3 Provision for impairment of long-term investments
Beginning Increase Decrease Ending
Investee Reason for provision balance in 2017 in 2017 balance
As the project has been terminated, investment cannot be Hubei Jingsha recovered and was Dadonghai Club thus written off in Co., Ltd. 4,566,207.42 4,566,207.42 2017.
Sanya Shun'an Written-off in 2017 Entertainment due to long-term Center 5,150,166.84 5,150,166.84 closure.
Total 9,716,374.26 9,716,374.26
Remark: the decrease in 2017 waswrite-off, and see 12.2.2 for details.
5.10 Investment property
Investment properties measured at cost
Buildings and
Item Land use rights Total constructions
1. Original book value
(1)Beginning balance 18,856,504.44 5,662,740.59 24,519,245.03 (2) Increase in 2017
- Purchase
- Transfer from fixed assets/ intangible
assets
- Increase from business combinations
(3) Decrease in 2017
- Disposal
- Transfer into inventories
(4)Ending balance 18,856,504.44 5,662,740.59 24,519,245.03 2. Accumulated depreciation and
accumulated amortization
(1)Beginning balance 9,771,216.42 2,107,046.45 11,878,262.87 (2) Increase in 2017 418,183.56 56,340.00 474,523.56 - Provision or amortization 418,183.56 56,340.00 474,523.56 - Transfer from fixed assets/ intangible
assets
(3) Decrease in 2017
- Disposal
- Transfer into inventories
(4)Ending balance 10,189,399.98 2,163,386.45 12,352,786.43 3. Provision for impairment
(1)Beginning balance 1,404,400.47 1,903,054.14 3,307,454.61 (2) Increase in 2017
- Provision
- Transfer from fixed assets/ intangible
assets
(3) Decrease in 2017
- Disposal
(4)Ending balance 1,404,400.47 1,903,054.14 3,307,454.61 4. Book value
(1) Book value as at December 31,
2017 7,262,703.99 1,596,300.00 8,859,003.99
(2) Book value as at January 1, 2017 7,680,887.55 1,652,640.00 9,333,527.55
Notes to Financial Statements Page 29
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.11 Fixed assets
Fixed assets details
Buildings and Machinery Electronic Other
Vehicles Total Item constructions equipment equipment equipment
1. Original book value
(1)Beginning balance 136,564,783.15 13,141,471.00 2,091,322.77 2,585,268.92 1,703,389.45 156,086,235.29 (2) Increase in 2017 224,718.67 138,461.54 253,752.14 258,270.53 623,373.72 1,498,576.60 -Purchase 224,718.67 138,461.54 253,752.14 258,270.53 623,373.72 1,498,576.60 (3) Decrease in 2017 220,096.00 266,875.00 486,971.00 - Disposal or write-off 220,096.00 266,875.00 486,971.00 (4)Ending balance 136,789,501.82 13,279,932.54 2,345,074.91 2,623,443.45 2,059,888.17 157,097,840.89 2. Accumulated depreciation
(1)Beginning balance 68,185,246.92 9,092,676.08 1,252,935.70 2,111,146.45 1,447,909.80 82,089,914.95 (2) Increase in 2017 2,135,104.65 278374.63 162,863.22 110,942.10 88,247.65 2,775,532.25 - Provision 2,135,104.65 278374.63 162,863.22 110,942.10 88,247.65 2,775,532.25 (3) Decrease in 2017 209,312.76 247,641.81 456,954.57 - Disposal or write-off 209,312.76 247,641.81 456,954.57 (4)Ending balance 70,320,351.57 9,371,050.71 1,415,798.92 2,012,775.79 1,288,515.64 84,408,492.63 3. Provision for impairment
(1)Beginning balance 31,072,788.17 2,527,851.26 33,600,639.43 (2) Increase in 2017
- Provision
(3) Decrease in 2017
- Disposal or write-off
(4)Ending balance 31,072,788.17 2,527,851.26 33,600,639.43 4. Book value
(1) Book value as at December 31,
2017 35,396,362.08 1,381,030.57 929,275.99 610,667.66 771,372.53 39,088,708.83 (2) Book value as at January 1,
2017 37,306,748.06 1,520,943.66 838,387.07 474,122.47 255,479.65 40,395,680.91 Remark: there were no temporarily idle fixed assets, and no secured or guaranteed fixed assets as at the end of the period.
Notes to Financial Statements Page 30
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.12 Construction in progress
Proportion of
Transfer into Accumulated Including: Capitalization Transfer into accumulative Project
Item Beginning Increase long-term Ending capitalization capitalization rate of the Sources of Budget fixed assets project progress
Name balance in 2017 deferred expenses balance amount of amount of the interest of funds in 2017 investments in (%)
in 2017 interest interest in 2017 2017(%) the budget(%)
Renovation of
rooms at F/C 961,729.74 961,729.74 100.00 Self-raised Villa
renovation 1,598,774.11 1,598,774.11 100.00 Self-raised Swimming
pool
renovation 299,959.04 299,959.04 100.00 Self-raised F/C
sightseeing
elevator shaft
project 166,485.00 166,485.00 100.00 Self-raised High-pressure
metering
cabinet 46,800.00 46,800.00 100.00 Self-raised F/A fire stairs
renovation
project 68,542.72 68,542.72 100.00 Self-raised Total 3,142,290.61 213,285.00 2,929,005.61
Notes to Financial Statements Page 31
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.13 Intangible assets
Item Land use rights Total 1. Original book value
(1)Beginning balance 81,653,137.15 81,653,137.15 (2) Increase in 2017
-Purchase
- Internal research and development
(3) Decrease in 2017
- Disposal
- Transfer into investment properties
(4)Ending balance 81,653,137.15 81,653,137.15 2. Accumulated amortization
(1)Beginning balance 30,382,276.95 30,382,276.95 (2) Increase in 2017 812,387.16 812,387.16 - Provision 812,387.16 812,387.16 (3) Decrease in 2017
- Disposal
- Transfer into investment properties
(4)Ending balance 31,194,664.11 31,194,664.11 3. Provision for impairment
(1)Beginning balance 27,440,836.84 27,440,836.84 (2) Increase in 2017
- Provision
(3) Decrease in 2017
- Disposal
- Transfer into investment properties
(4)Ending balance 27,440,836.84 27,440,836.84 4. Book value
(1) Book value as at December 31, 2017 23,017,636.20 23017,636.20 (2) Book value as at January 1, 2017 23,830,023.36 23,830,023.36 5.14 Long-term deferred expenses
Beginning balance Ending balance Long-term Long-term Increase Amortization Long-term Long-term Item
deferred deferred maturing in 2017 in 2017 deferred deferred maturing expenses within one year expenses within one year Hotel exterior
decoration 1,071,343.97 584,369.42 584,369.42 486,974.55 584,369.42 Fire stairs
renovation 68,542.72 5,711.88 45,695.16 17,135.68 Swimming
pool
renovation 299,959.04 14,997.95 224,969.28 59,991.81 Renovation of
rooms at F/C 961,729.74 48,086.48 721,297.31 192,345.95 Villa
renovation 1,598,774.11 79,938.71 1,199,080.58 319,754.82 Total 1,071,343.97 584,369.42 2,929,005.61 733,104.44 2,678,016.88 1,173,597.68 5.15 Accounts payable
5.15.1 Presentation of accounts payable by aging
Item Ending balance Beginning balance Within 1 year (inclusive) 2,026,871.12 856,048.21 1-2 years (including 2 years) 199,317.78 2-3 years (including 3 years) 334,316.59 Over 3 years 134,301.14 577,882.93
Total 2,161,172.26 1,967,565.51
Notes to Financial Statements Page 32
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.15.2 Top five accounts payable in terms of ending balance
Proportion in the total Item Ending balance
accounts payable(%) Sanya Yunwang Food
Distribution Co., Ltd. 743,186.25 34.39 Hainan Huanyu Decoration
Engineering Company Limited 134,274.10 6.21 Sanya Zhengzhuang Industrial
Co., Ltd. 115,247.50 5.33 Hainan Dingxin Jingdu
Elevator Co., Ltd. 62,972.50 2.91 Guo Yubo 56,759.13 2.63 Total 1,112,439.48 51.47 5.15.3 Accounts payable actually written off in 2017
Item Written-off amount
Accounts payable 375,553.60 Details of written-off accounts payable:
Whether it is due Nature of Written-off Reasons for Write-off procedures
Name of entity to the related accounts payable amount written-off performed
party transactions Feiying Approval of the board of
Advertisement directors and the general
Company Advertising fees 70,000.00 Unpayable meeting of shareholders No
Yuexin
Technology
Company in Central air Approval of the board of
Tianhe District, conditioning directors and the general
Guangzhou repair costs 56,204.00 Unpayable meeting of shareholders No
Hainan Lvleng
Environmental Central air Approval of the board of
Engineering conditioning directors and the general
Co., Ltd. repair costs 40,000.00 Unpayable meeting of shareholders No
Sanya Kaida
Electrical
Installation Approval of the board of
Engineering Air conditioning directors and the general
Company repair costs 16,262.00 Unpayable meeting of shareholders No
Guangzhou
Huashang
Suigang Costs of Approval of the board of
Equipment Co., purchase of directors and the general
Ltd. goods 15,622.50 Unpayable meeting of shareholders No
Other 50 sums Costs of agent Approval of the board of
of amounts sales of directors and the general
written off commodities 177,465.10 Unpayable meeting of shareholders No
Total 375,553.60
Remark: see Note 12.2.2for written-off accounts payable.
5.16 Advances from customers
5.16.1 Presentation of advances from customers
Item Ending balance Beginning balance Room and meal charge 1,271,174.12 1,894,524.28 Total 1,271,174.12 1,894,524.28
Notes to Financial Statements Page 33
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.16.2 Significant advances from customers with aging more than one year
Reasons for failure of Item Ending balance
repayment or carry-forward Guangzhou Nanbu Holiday
International Travel Service
Co., Ltd. Sanya Branch 101,244.00 Unsettled
PEGAS Zheng Qingbo 32,243.02 Unsettled
Hainan Qiongzhong
Ecological Investment
Guarantee Co., Ltd. 27,519.00 Unsettled
Sanya Public Security Fire
Brigade 19,420.88 Unsettled
Tianhong Group Wuzhizhou
Project Department 9,894.00 Unsettled
Total 190,320.90
5.16.3 Advances from customers actually written off in 2017
Item Written-off amount
Advances from customers 251,057.21 Details of written-off advances from customers:
Whether it is Nature of
Name of Written-off Reasons for Write-off procedures due to the accounts
entity amount written-off performed related party receivable
transactions Beijing Hualu
Xinchen Room charge Approval of the board
Management received/ not of directors and the
Consultants Room and pressing for general meeting of
Limited meal charge 30,540.00 payment shareholders No
Haikou Room charged Approval of the board
Tourism overpaid / not of directors and the
Company Room and pressing for general meeting of
Sanya Branch meal charge 16,563.00 payment shareholders No
Room charge Approval of the board
received/ not of directors and the
Room and pressing for general meeting of
Tiange Media meal charge 16,136.00 payment shareholders No
Room charged Approval of the board
overpaid / not of directors and the
Room and pressing for general meeting of
Ou Xin'en meal charge 9,900.00 payment shareholders No
Room charge Approval of the board
received/ not of directors and the
Huang Room and pressing for general meeting of
Meijun meal charge 9,030.00 payment shareholders No
Approval of the board
Room and of directors and the
Other 109 meal charge, general meeting of
companies etc. 168,888.21 shareholders No
Total 251,057.21
Remark: see 12.2.2 for details of written-off advances from customers.
5.17 Employee compensation payable
5.17.1 Classification of employee compensation payable
Beginning Increase in Decrease in Ending Item
balance 2017 2017 balance Short-term compensation 2,148,514.36 11,327,332.60 11,016,831.03 2,459,015.93 Post-employment benefits - defined
contribution plans 959,762.24 959,762.24
Dismissal benefits
Other benefits maturing within one year
Total 2,148,514.36 12,287,094.84 11,976,593.27 2,459,015.93
Notes to Financial Statements Page 34
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.17.2 Short-term compensation
Beginning Increase in Decrease in Ending Item
balance 2017 2017 balance (1) Salary, bonus, allowance
and subsidies 1,299,545.99 8,991,213.87 8,817,187.04 1,473,572.82 (2) Employee welfare 1,435,569.87 1,435,569.87
(3) Social insurance premiums 446,351.07 446,351.07
Including: Medical insurance
premiums 400,502.18 400,502.18
Work-related injury insurance
premiums 20,172.08 20,172.08
Maternity insurance premiums 25,676.81 25,676.81
(4) Housing provident funds 139,505.32 139,505.32
(5) Labor union funds and
employee education funds 848,968.37 314,692.47 178,217.73 985,443.11 (6) Short-term compensated
absences
(7) Short-term profit sharing
plans
Total 2,148,514.36 11,327,332.60 11,016,831.03 2,459,015.93 5.17.3 Presentation of defined contribution plan
Beginning Increase in Decrease in Ending Item
balance 2017 2017 balance Basic endowment
premiums 932,432.88 932,432.88
Unemployment insurance
premium 27,329.36 27,329.36
Total 959,762.24 959,762.24
5.18 Taxes and surcharges payable
Item Ending balance Beginning balance Value added tax(VAT) 222,989.34 228,923.41 Property taxes 194,101.74 234,032.26 Land use tax 108,590.91 108,588.06 Urban maintenance and
construction tax 7,782.70 6,505.86 Educational surcharges 3,335.43 2,788.22 Local educational surcharge 2,223.64 1,858.82 Stamp tax 246.50 Individual income tax 1.14 Total 539,023.76 582,944.27 5.19 Other payables
5.19.1 Presentation of other payables by nature
Nature of Payment Ending balance Beginning balance Staff dormitory rental
fees, etc. 742,742.74 1,001,405.96 Security deposit 711,046.99 662,541.29 Audit fees 285,003.21 285,003.21 Quality guarantee deposit
for projects 193,066.10 230,096.75 Employee deposits 166,200.90 350,600.90 Project funds 162,569.78 317,277.05 Funds collected and
remitted 100,036.07 139,319.74
Notes to Financial Statements Page 35
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Nature of Payment Ending balance Beginning balance Petty cash 28,446.80
Electric charges withheld 20,700.00
Individual current
amounts 1,364.00 73,752.85 Fines and confiscated
amount for illegal
operation of the
Company's stocks 19,810,000.00 Membership expenses of
directors and supervisors 214,506.98 Total 2,411,176.59 23,084,504.73 Remark: payable fines and confiscated amounts for unlawful operation of the Company's stocks was RMB19,810,000.00, of which: confiscated unlawful gains from the illegal operation of the Company's stocks was RMB19,310,000.00 and fines were RMB500,000.00, and they were paid to the China Securities Regulatory Commission on February 20, 2017.
5.19.2 Other significant payables with aging of over one year
Name of entity Ending balance Reason for non-repayment Hong Kong Deloitte&
Touche LLP 285,003.21 Reason for non-repayment Sanya Shuxin Housing
Waterproof Engineering
Limited 170,000.00 Reason for non-repayment China Building
Decoration Company
Hainan Branch 161,111.03 Reason for non-repayment Total 616,114.24
5.19.3 Other payables actually written off in 2017
Item Written-off amount
Other payables 676,929.30 Details of written-off other payables:
Whether it is Write-off
Nature of Written-off Reasons for due to the Name of entity procedures
other payables amount written-off related party performed
transactions Approval of the
Automatic fire Ruled to Unable to be board of
alarm linkage assume paid due to directors and the
system several long-term general meeting
engineering litigation fees 107,589.46 aging of shareholders No
Approval of the
Ruled to Unable to be board of
assume paid due to directors and the
several long-term general meeting
Litigation costs litigation fees 104,554.00 aging of shareholders No
Approval of the
Hainan Tiange Unable to be board of
Law Firm Agreed paid due to directors and the
(Huang litigation long-term general meeting
Wenmei) agent 100,680.60 aging of shareholders No
Notes to Financial Statements Page 36
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Whether it is Write-off
Nature of Written-off Reasons for due to the Name of entity procedures
other payables amount written-off related party performed
transactions Approval of the
Current Unable to be board of
account paid due to directors and the
Binhai holiday from/to prior long-term general meeting
villa related parties 83,558.94 aging of shareholders Yes
Approval of the
Unable to be board of
paid due to directors and the
Directors long-term general meeting
Su Guohua allowance 57,680.00 aging of shareholders Yes
Approval of the
Unable to be board of
paid due to directors and the
Other 27 long-term general meeting
companies Consignment 222,866.30 aging of shareholders No
Total 676,929.30
Remark: see 12.2.2 for details of written-off other payables.
5.20 Estimated liabilities
Item Ending balance Beginning balance Provisions for arrears of electricity
tariffs 1,489,685.04 1,489,685.04 Total 1,489,685.04 1,489,685.04 Remark: see Note 9 for details.
5.21 Share capital
Changes in 2017 ("+" for increase and "-" for decrease)
Issuance Public reserve
Item Beginning balance Share Ending balance of new transferred to Others Sub-total
donation
shares shares
Total
shares 364,100,000.00 364,100,000.00 5.22 Capital reserves
Beginning Increase Decrease Ending Item
balance in 2017 in 2017 balance Capital premium (share
premium) 33,336,215.58 33,336,215.58 Other capital reserves 20,806,634.43 20,806,634.43 Total 54,142,850.01 54,142,850.01 5.23 Undistributed profits
Item Year 2017 Year 2016 Undistributed profit at the beginning of the year -343,966,434.57 -341,305,382.08 Plus: net profit attributable to owners of the parent
company in current period 2,858,998.66 -2,661,052.49 Less: Withdrawal of statutory surplus reserves
Withdrawal of discretionary surplus reserves
Withdrawal of reserve funds
Withdrawal of enterprise expansion funds
Appropriation of bonus and welfare funds
Withdrawal of general risk reserves
Notes to Financial Statements Page 37
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Item Year 2017 Year 2016 Ordinary share dividends payable
Ordinary share dividends transferred to share capital
Undistributed profit as at the end of the year -341,107,435.91 -343,966,434.57 5.24 Operating income and operating costs
5.24.1 Operating income and operating costs
Year 2017 Year 2016
Item
Income Cost Income Cost Primary business 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 Other businesses 3,214,971.37 474,523.56 2,591,091.99 564,466.42 Total 27,906,564.23 11,139,919.59 21,708,883.51 10,258,440.62 Remark: the operating income in 2017 increased by28.55% compared with 2016, mainly due to the increase in number of Russian tourists in 2017.
5.24.2 Primary business (by industry)
Year 2017 Year 2016
Industry name
Operating income Operating cost Operating income Operating cost Tourism and
catering services 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 Total 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 5.24.3 Primary business (by product)
Year 2017 Year 2016
Product name
Operating income Operating cost Operating income Operating cost Room income 21,103,123.09 8,758,364.38 16,914,028.50 8,561,353.33 Catering and
entertainment
income 3,588,469.77 1,907,031.65 2,203,763.02 1,132,620.87 Total 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 5.24.4 Primary business (by region)
Year 2017 Year 2016
Region name
Operating income Operating cost Operating income Operating cost Hainan region 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 Total 24,691,592.86 10,665,396.03 19,117,791.52 9,693,974.20 5.25 Taxes and surcharges
Item Year 2017 Year 2016 Property taxes 872,805.50 482,833.44 Land use tax 434,366.47 289,572.87 Urban maintenance and construction tax 68,334.72 72,627.03 Educational surcharges 28,958.58 31,080.92 Local educational surcharge 19,786.33 20,720.64 Stamp tax 2,760.60 11,718.17 Vehicle and vessel use tax 7,680.00
Business tax 503,486.90 Total 1,434,692.20 1,412,039.97
Notes to Financial Statements Page 38
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.26 Selling and distribution expenses
Item Year 2017 Year 2016 Employee compensation 3,783,152.25 3,278,439.52 Depreciation 493,761.97 573,232.60 Repair charges 205,614.06 157,060.17 Water and electricity expenses 166,983.08 188,186.48 Other expenses 474,992.19 734,414.49 Total 5,124,503.55 4,931,333.26 5.27 General and administrative expenses
Item Year 2017 Year 2016 Salaries and welfares 5,402,093.17 4,580,727.09 Amortization of site use rights 812,387.16 812,387.16 Entertainment expenses 715,630.35 738,590.98 Social insurance premium 610,092.44 525,680.35 Agency fees 400,000.00 404,696.00 Announcing fees 328,688.00 240,345.40 Depreciation 271,883.34 270,946.41 Travelling expenses 206,199.69 212,223.67 Disabled security funds 36,433.27
Membership expenses of directors and supervisors 9,535.00 312,947.50 Other expenses 872,583.41 853,184.15 Taxes 422,907.20 Total 9,665,525.83 9,374,635.91 5.28 Financial expenses
Category Year 2017 Year 2016 Interest expense
Less: interest income 291,701.13 275,296.73 Gains or losses on exchange
Handling charges 42,524.95 81,651.44 Total -249,176.18 -193,645.29 5.29 Losses on assets impairment
Item Year 2017 Year 2016 Losses on bad debt 11,709.50 -1,230.99 Losses from inventory depreciation
Losses on impairment of other current assets
Losses from long-term investment impairment
Losses on impairment of fixed assets
Losses on impairment of intangible assets
Total 11,709.50 -1,230.99 5.30 Investment income
Details of investment income
Item Year 2017 Year 2016 Investment income acquired from disposal of the
available-for-sale financial assets and others 429,753.50 Income from other creditors' investment 805,825.24 961,165.05 Total 805,825.24 1,390,918.55
Notes to Financial Statements Page 39
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Remark: the income from other creditors' investment is the interest income generated from the loan of RMB 9 million offered to Wuhan Aierjia Technology Development Co., Ltd. As at December 31, 2017, the loan principal and interest were recovered.
5.31 Non-operating income
Details of operating income by item
Amount included in Item Year 2017 Year 2016 non-recurring profit and loss in the current period Total gains on disposal of
non-current assets
Including: Gains from
disposal of fixed assets
Gains from disposal of
intangible assets
Compensation income 64,926.00
Penalty and confiscatory
income
Debt write-offs 1,303,540.11 1,303,540.11 Others 260.00 4,680.00 260.00 Total 1,303,800.11 69,606.00 1,303,800.11 Remark: see 12.2.2 for details of the income from debt write-offs.
5.32 Non-operating expenses
Amount included in Item Year 2017 Year 2016 non-recurring profit and loss in the current period Losses from debt
restructuring
Donations made
Abnormal losses
Inventory losses
Losses from damage and
scrap of non-current assets 30,016.43 48,887.07 30,016.43 Total 30,016.43 48,887.07 30,016.43 5.33 Notes to items of the cash flow statement
5.33.1 Cash received from other operating activities
Item Year 2017 Year 2016 Water, electrical and gas fees collected 684,442.21
Interest income 291,701.13 275,296.73 Security deposit and rent for lease of site 75,000.00 244,000.00 Agent collection of social security insurance
premiums 15,515.52 11,615.09 Income from compensation for articles in rooms 8.00 Others 15,828.00 53,528.69 Total 1,082,486.86 584,448.51
Notes to Financial Statements Page 40
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
5.33.2 Cash paid for other operating activities
Item Year 2017 Year 2016 Social intercourse fees 730,464.44 641,721.21 Paid fines for illegal operation of the Company's
stocks 500,000.00
Intermediary audit charges 400,000.00 404,696.00 Announcing fees 220,000.00 240,345.40 Travelling expenses 181,369.69 205,293.67 Promotion fee 75,167.49 116,318.27 Costs of listing on the Shenzhen Stock Exchange 80,000.00 80,000.00 Repair charges 291,287.80 79,354.40 Fuel, electricity, gas charges 274,909.12 62,767.95 Office expenses 11,553.14 31,066.70 Posts costs 27,493.61 30,171.22 Financial expenses 42,524.95 81,651.44 Property insurance premiums 49,740.21
Membership expenses of directors and
supervisors 9,535.00 12,947.50 Price adjustment funds 156,797.00 Labor insurance premiums, housing provident
fund paid by individuals 592,554.72 553,990.56 Other expenses 388,168.08 274,262.27 Total 3,874,768.25 2,971,383.59 5.33.3 Cash paid for other investing activities
Item Year 2017 Year 2016 Fines and confiscated amounts for illegal
operation of the Company's stocks 19,310,000.00
Total 19,310,000.00
5.33.4 Cash received from other financing activities
Item Year 2017 Year 2016 Luoniushan Group Co., Ltd. 19,810,000.00
Total 19,810,000.00
5.33.5 Cash paid for other financing activities
Item Year 2017 Year 2016 Luoniushan Group Co., Ltd. 19,810,000.00
Total 19,810,000.00
5.34 Supplementary information to statement of cash flows
5.34.1 Supplementary information to statement of cash flows
Item Year 2017 Year 2016 1. Net profit adjusted to cash flows from operating
activities
Net profits 2,858,998.66 -2,661,052.49 Plus: provision for assets impairment 11,709.50 -1,230.99 Depreciation of fixed assets, depreciation and
depletion of oil and gas assets and depreciation of
productive biological assets 3,193,715.81 3,533,710.59 Amortization of intangible assets 868,727.16 868,727.16 Amortization of long-term fees to apportioned 733,104.44 593,014.30
Loss from disposal of fixed assets, intangible 30,016.43 48,887.07
Notes to Financial Statements Page 41
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Item Year 2017 Year 2016 assets and other long-term assets ("-" for gains)
Losses on write-off of fixed assets ("-" for gains)
Losses on changes in fair value ("-" for gains)
Financial expenses ("-" for gains)
Investment losses ("-" for gains) -805,825.24 -1,390,918.55 Losses from debt restructuring ("-" for gains)
Decreases in deferred tax assets ("-" for increases)
Increases in deferred tax liabilities ("-" for
decreases)
Decreases in inventories ("-" for increases) -40.80 -1,104.29 Decreases in operating receivables ("-" for
increases) 14,283.36 555,543.09 Increases in operating payables ("-" for decreases) -1,777,400.85 -268,888.91 Others (Estimated liabilities) 1,489,685.04 Net cash flows from operating activities 5,127,288.47 2,766,372.02 2. Significant investing and financing activities
not involving cash receipts and payments
Transfer of debt to equity
Convertible corporate bonds maturing within one
year
Fixed assets acquired under financing leases
3. Net changes in cash and cash equivalents
Balance of cash at the end of the period 9,681,607.16 27,210,248.01 Less: balance of cash at the beginning of the
period 27,210,248.01 19,782,392.26 Plus: balance of cash equivalents at the end of the
period
Less: beginning balance of cash equivalents
Net increase in cash and cash equivalents -17,528,640.85 7,427,855.75 5.34.2 Breakdown of cash and cash equivalents:
Ending Beginning Item
balance balance I. Cash 9,681,607.16 27,210,248.01 Including: cash on hand 264,156.33 273,523.86 Unrestricted bank deposits 9,417,450.83 26,936,724.15 Unrestricted other cash and cash equivalents
Unrestricted deposits in central bank
Deposits in banks and other financial institutions
Loans to or from banks and other financial
institutions
II. Cash equivalents
Including: bond investments maturing within three
months
III. Ending balance of cash and cash equivalents 9,681,607.16 27,210,248.01 6. Change of the consolidation scope
6.1 Scope of the consolidated financial statements
The scope of consolidated financial statements includes the headquarters of the Company and Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. South China Hotel, a non-legal-person affiliated to the Company and subject to independent accounting.
Notes to Financial Statements Page 42
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
6.2 Change in the consolidation scope of consolidated financial statements:
There was no change in the scope of the consolidated financial statements of the Company in 2017.
7. Risks related to financial instruments
The Company faces all kinds of financial risks in the operating process: Credit risks, market risks and liquidity risks. The Board of Directors of the Company takes full responsibilities for determining the risk management objects and policies and bearing the ultimate liabilities for that, however, the Board of Directors has authorized the management department of the Company to design and implement the process capable of ensuring the effective implementation of the risk management objects and policies. The Board of Directors reviews the effectiveness of the enforced procedures and the rationality of risk management objectives and policies by the reports submitted by the management department of the Company. The internal auditors of the Company also will audit the risk management policies and procedures, and report the relative facts to the audit committee.
The overall objective of risk management of the Company is to prepare the risk management policies ensuring the risk under control as far as possibility without affecting the Company's business development goals.
7.1 Credit risk
Credit risk refers to a risk that one party to the financial instruments suffers financial losses due to the failure of the other party in performing the obligations The Company mainly faces customer credit risks caused by sales on account. Before signing a new contract, the Company will understand and assess credit risks of the new customer. The Company rates the credit of existing customers and analyzes the aging of accounts receivable to ensure that the Company's overall credit risk is within the controllable range.
7.2 Market risk
Market risk associated with financial instruments refers to the risk that fair value or future cash flows of financial instruments fluctuate due to variations in market prices, and it includes exchange rate risk, interest rate risk and other price risks.
7.3 Liquidity risk
Liquidity risks refer to the risks of capital shortage occurred when enterprises perform the obligations of settlement in cash or other financial assets. The policy of the Company is to ensure that there are sufficient cash for the payment of the matured debts. Liquidity risk is under centralized control of the financial department of the Company. The financial department monitors cash balance and readily realizable and marketable securities and makes rolling forecast on cash flows of the next 12 months to ensure that the Company has sufficient funds to repay debts in all cases of reasonable prediction.
8. Related parties and related-party transactions
8.1 The largest shareholder of the Company
Registered Shareholding Ratio of voting Name of the largest Enterprise Registered Legal
Relationship Nature of business capital ratio in the right in the shareholder type place Representative
(RMB'0,000) Company(%) Company(%) The largest Listed Crop farming and
Luoniushan Co., Ltd. shareholder company Haikou Xu Zili breeding industry 115,151.00 17.55 19.80 Remark: as at December 31, 2017, Luoniushan Co., Ltd. (hereinafter referred to as "Luoniushan") and its wholly-owned subsidiary Hainan Ya'anju Property Services Co., Ltd. held a total of 72,091,780 A shares of the Company, accounting for19.80% of the total share capital of the Company, and being the largest shareholder of the Company.
Notes to Financial Statements Page 43
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
8.2 Related-party transactions
8.2.1 Sales of goods/ rendering of services
Pricing and Year 2017 Year 2016 Contents of decision-making Contribution Contribution Related
related-party process of to similar to similar party Amount Amount
transaction related-party transactions transactions transactions (%) (%) Luoniushan Room and
Co., Ltd. meal charge Market price 787,474.00 3.19 29,566.04 0.15 8.2.2 Accounts due to and from the related parties
Ending Beginning Item Related party
balance balance Accounts receivable Luoniushan Co., Ltd. 166,412.00 10,668.00 8.2.3 Key management personnel emoluments
Year 2017 Year 2016 Item
(RMB’0,000) (RMB’0,000) Key management personnel emoluments 188.57 116.19 9. Contingencies
On May 26, 2016, the Company received a lawyer letter from Hainan Yunfan Law Firm entrusted by Sanya Power Supply Bureau of Hainan Power Grid Co., Ltd. (hereinafter referred to as "Sanya Power Supply Bureau"), saying that Sanya Power Supply Bureau found, in verifying electricity consumption by South China Hotel, a subsidiary of the Company, that the current transformer (CT) installed in the distribution center metering counters in South China Hotel installed was inconsistent with the record in themarketing management system file of Sanya Power Supply Bureau, and the duration of the inconsistence was from July 2006 when South China Hotel changed its electricity consumption measuring device to April 2016.According to the statistics, electricity consumption of10313373 KWH was measured in short, which was estimated to be valued at RMB7,200,165.75 according to the electricity prices and surcharge rates in the years.
According to the Legal Consultation Advice on Electricity Quantity (Electricity Charge) Claiming Dispute between South China Hotel and Sanya Power Supply Bureau issued by Beijing Junhe (Haikou) Law Firm on December 20, 2016, as all electricity consumption metering devices are purchased, installed, sealed, opened and replaced by Sanya Power Supply Bureau Responsible, the short measurement of electricity charge from South China Hotel for many years was due to the fault of Sanya Power Supply Bureau, and was irrelevant to South China Hotel.Pursuant to Article 135 of the General Principles of Civil Law: "Except as otherwise stipulated by law, the limitation of action regarding applications to a people's court for protection of civil rights shall be two years., the Company accrued an amount of RMB1,489,685.04 for the electricity charge for electricity quantity measured in short during two years from April 2014 to April 2016.As at December 31, 2017, no further progress was made on this matter.
10. Commitment
The Company has no commitments required to be disclosed.
11. Post balance-sheet events
On January 30, 2018, as resolved at the 16th meeting of the 8th board of directors of the Company, the Company does not intend to make profit distribution or convert capital reserve into share capital. 12. Other significant events
12.1 Correction of accounting errors in previous periods
12.1.1 Retrospective restatement method
There was no correction of accounting errors in prior periods made under the
retrospective restatement method during the reporting period.
Notes to Financial Statements Page 44
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
12.1.2 Prospective application
There was no correction of accounting errors in prior periods with the prospective application adopted during the reporting period.
12.2 Miscellaneous
12.2.1 According to the requirements of the Guidelines for the Supervision of Listed Companies No.4 -- Commitments of and Performance of Commitments by Actual Controllers, Shareholders, Related Parties, Acquirers of Listed Companies and Listed Companies (Announcement of the China Securities Regulatory Commission[2013] No.55) issued by the China Securities Regulatory Commission (CSRC), on June 7, 2014, Luoyunshan Co., Ltd. (hereinafter referred to as "Luoniushan") issued to the Company a Letter on Change in Commitment by Luoyunshan Co., Ltd. to Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd.and undertakes in the letter that within three years from the date when the general meeting of shareholders of the Company reviewed and approved the change in the commitment, Luoniushan will actively seek reorganization party to reorganize assets of the Company. Such matter were reviewed and approved by the general meeting of shareholders of the Company on June 27, 2014. On February 22, 2017, the Company received from Luoniushan a Letter on Progress in the Planning of Commitment Implementation, in which Luoniushan intended to transfer100% of the equity it held in the Industrial Company, a wholly-owned subsidiary (specifically, the Industrial Company will first be transferred with part of financial assets equity held by Luniushan and of6.91% equity of Sanya Rural Commercial Bank Co., Ltd.) to the Company, the transaction was made in cash with transaction amount of about RMB300 million. The proposal was not adopted at the 11th extraordinary meeting of the eighth board of directors of the Company due to the Company's lack of sufficient debt repayment ability.
On June 23, 2017, Luoniushan issued to the Company a Letter on Change in Term of Commitment by Luoyunshan Co., Ltd. to Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd., extending Luoniushan's performance period of the above restructuring commitment of the Company by 6 months, whichmeans the deadline for the fulfillment of reorganization commitment was changed to December 27, 2017.As the reorganization would take a certain amount of time, on November29, 2017, Luoniushan again applied to extend the performance period of the reorganization commitment for two years, that is, the performance deadline of the reorganization commitment was changed from December 27, 2017 to December 26, 2019, which was not approved at the fourth extraordinary general meeting of shareholders of the Company in 2017. 12.2.2 According to the Proposal on Write-off of Long-term Investments and Current Accounts reviewed and adopted at the 12th interim meeting of the 8th board of directors of the Company on October 25, 2017 and the third extraordinary general meeting of shareholders of the Company for 2017 on November 10, 2017, the Company wrote off long-term equity investment and available-for-sale financial assets for which provision for impairment was provided for in full and part of claims; and wrote off part of accounts payable which were unable to be paid, including: writing off long-term equity investment of RMB9,716,374.26, available-for-sale financial assets of RMB5,000,000.00, accounts receivable of RMB 2,176,212.90, other receivables of RMB78,067,592.72, accounts payable of RMB375,553.60, advance from customers of RMB 251,057.21, other payables of RMB676,929.30.Non-operating income arising from the write-offs amounted to RMB 1,303,540.11.
On October 20, 2017, Hainan Dongfang Guoxin Law Firm issued a Legal Opinion on
Notes to Financial Statements Page 45
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Time Limitation for Proceedings on Part of Accounts Payable of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. for the above-mentioned written-off payables, confirming that the above 201 sums of payables have exceeded the statutory time limitation, and the relevant creditors have lost their debt recovery right and the right to win.
13. Supplementary information
13.1 Breakdown of non-recurring profits and losses in 2017
Item Year 2017 Remark Profits or losses from disposal of non-current assets -30,016.43
Tax returns, deduction and exemption approved beyond
the authority or without official approval documents
Government grants included in current profits and
losses (except for government grants closely related to
the enterprise business, obtained by quota or quantity at
unified state standards)
Expenses for using funds charged from non-financial
enterprises and included in the current profit or loss 805,825.24
Gains from the difference of the investment costs for
acquiring subsidiaries, associates and joint ventures in
short of the share in the net fair value of identifiable
assets of the investee when investing
Profits or losses on exchange of non-monetary assets
Profit or loss on entrusting the investment or
management of assets
Various provision of asset impairment made due to
force majeure, such as natural disasters
Profit or loss from debt restructuring
Enterprise reorganizing expenses, such as employee
accommodation costs and integration expenses,etc.
Profit or loss on transactions made at unfair transaction
price in excess of their fair value
Current net profit and loss of the subsidiaries generated
in the enterprise merger under the same control from
the beginning of the period to the merger date.
Profit or loss on contingent matter irrelevant to normal
business operation of the Company
Profits or losses from fair value changes in
held-for-trading financial assets and held-for-trading
financial liabilities, and investment income from
disposal of held-for-trading financial assets,
held-for-trading financial liabilities and
available-for-sale financial assets except for effective
hedging business related to the normal business of the
company
Reversal of the impairment provision for receivables
subject to separate impairment test
Profit or loss from the external entrusted loans
Profit or loss on changes in fair value of investment
property subsequently measured by adopting the fair
value model
Effect on current profit or loss due to one-off
adjustment thereto in accordance with the requirements
of laws and regulations regarding taxation or
accounting
Notes to Financial Statements Page 46
HAINAN DADONGHAI TOURISM CENTRE (HOLDINGS) CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
Item Year 2017 Remark Income from trustee fees charged for entrusted
operation
Other non-operating income and expenses except for
the above-mentions items 1,303,800.11
Income tax effects
Minority shareholders' equity effects (after tax)
Total 2,079,608.92
13.2 Return on net assets and earnings per share
Yield rate of net Earnings per share (Yuan) Profit for the reporting period weighted average Basic earnings Diluted earnings assets(%) per share per share Net profit attributable to ordinary
shareholders of the Company 3.7765 0.0079 0.0079 Net profit attributable to ordinary
shareholders of the Company
after deducting the non-recurring
profit and loss 1.0295 0.0021 0.0021 13.3 Accounting data difference between the domestic and overseas accounting standards There was no accounting data difference between the domestic and overseas accounting standards.
Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. January 30, 2018
Notes to Financial Statements Page 47