SHANNGDONNG CHEENMINNG PAPPER HOOLDINGGS LIMMITED INNTERIMM FINAANCIALL REPOORT 20017
Auugust 20017
I. Auditors’ Report
Is the interim report audited
□ Yes√ No
The interim financial report is unaudited.
II. Financial Statements
The unit in the financial statements of the financial report is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
30 June 2017
Unit: RMB Item Closing balance Opening balance CURRENT ASSETS:
Monetary funds 12,541,497,475.48 10,109,930,319.49 Bills receivable 2,245,126,472.85 1,590,460,875.23 Accounts receivable 3,767,714,992.67 3,974,065,104.15 Prepayments 1,618,194,292.51 1,511,362,674.64 Other receivables 1,819,966,043.11 1,614,214,645.48 Inventories 6,057,467,324.08 4,862,668,746.90 Non-current assets due within one year 4,313,561,787.97 5,487,376,588.22 Other current assets 10,341,054,498.85 6,616,744,831.28 Total current assets 42,704,582,887.52 35,766,823,785.39 NON-CURRENT ASSETS:
Available-for-sale financial assets 2,445,000,000.00 1,945,000,000.00 Long-term receivables 9,573,697,226.65 8,844,262,173.65 Long-term equity investments 169,207,699.57 67,251,992.88 Investment property 14,258,675.83 Fixed assets 28,536,783,322.01 28,811,555,365.39 Construction in progress 5,054,138,263.16 4,115,194,870.23 Construction materials 12,057,242.74 18,847,584.79 Intangible assets 1,980,339,282.53 1,540,959,330.74 Goodwill 20,283,787.17 20,283,787.17 Long-term prepaid expenses 142,759,273.13 157,772,100.69 Deferred income tax assets 517,745,917.35 497,457,826.70 Other non-current assets 611,518,493.67 485,687,038.68 Total non-current assets 49,063,530,507.98 46,518,530,746.75 Total assets 91,768,113,395.50 82,285,354,532.14
SHANDONG CHENMING PAPER HOLDINGS LIMITED 1
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
1. Consolidated Balance Sheet(Cont’d)
Unit: RMB Item Closing balance Opening balance CURRENT LIABILITIES:
Short-term borrowings 31,686,575,360.39 27,875,506,988.53 Bills payable 883,353,441.56 515,301,703.08 Accounts payable 3,530,375,213.22 3,724,266,382.06 Advance receipts 302,305,850.69 377,135,566.33 Staff remuneration payables 162,599,897.73 159,968,262.82 Taxes payable 233,992,028.84 236,927,459.78 Interest payable 131,056,170.58 30,731,253.71 Other payables 1,026,057,983.92 948,919,195.80 Non-current liabilities due within one year 5,401,943,371.59 6,237,021,557.17 Other current liabilities 10,156,266,146.23 6,602,863,069.45 Total current liabilities 53,514,525,464.75 46,708,641,438.73 NON-CURRENT LIABILITIES:
Long-term borrowings 7,786,639,310.56 6,935,598,781.23 Bonds payable 1,000,000,000.00
Long-term payables 4,171,099,838.19 3,951,368,854.00 Special payables 681,039,716.66 681,039,716.66 Deferred income 1,470,755,158.93 1,443,846,526.33 Total non-current liabilities 15,109,534,024.34 13,011,853,878.22 TOTAL LIABILITIES 68,624,059,489.09 59,720,495,316.95OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00 Other equity instruments 7,060,300,000.00 7,060,300,000.00 Of which: Preference shares 4,477,500,000.00 4,477,500,000.00 Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Capital reserves 6,149,257,784.90 6,149,257,784.90 Other comprehensive income -634,548,351.99 -805,245,771.89 Surplus reserves 1,132,116,106.40 1,132,116,106.40 Retained profit 7,112,269,231.70 6,745,974,781.02 Total equity attributable to equity holders of the company 22,755,800,238.01 22,218,808,367.43 Minority interest 388,253,668.40 346,050,847.76 Totalowners’ equity 23,144,053,906.41 22,564,859,215.19 TOTAL LIABILITIES ANDOWNERS’ EQUITY 91,768,113,395.50 82,285,354,532.14 Legal Representative: Chen Hongguo Financial controller: Hu Jinbao Head of the financial department: Dong Lianming
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
2. Balance sheet of the Company
Unit: RMB Item Closing balance Opening balance CURRENT ASSETS:
Monetary funds 10,271,461,000.35 7,934,163,265.76 Bills receivable 471,596,818.52 112,943,069.85 Accounts receivable 54,823,865.39 84,089,911.81 Prepayments 2,256,017,645.32 1,003,699,885.05 Interest receivable 14,373,283.56
Other receivables 27,570,416,090.05 22,848,685,985.74 Inventories 778,395,625.91 663,006,714.42 Non-current assets due within one year 900,000,000.00 Total current assets 41,417,084,329.10 33,546,588,832.63 NON-CURRENT ASSETS:
Available-for-sale financial assets 2,445,000,000.00 1,909,000,000.00 Long-term equity investments 16,527,269,447.22 14,558,097,658.49 Investment property 14,258,675.83 Fixed assets 3,254,771,603.27 3,343,366,320.45 Construction in progress 107,018,276.20 52,757,799.47 Construction materials 42,121.99 71,973.35 Intangible assets 476,440,219.26 300,218,996.05 Deferred income tax assets 143,984,689.87 164,139,190.27 Other non-current assets 67,400,000.00 67,400,000.00 Total non-current assets 23,021,926,357.81 20,409,310,613.91 Total assets 64,439,010,686.91 53,955,899,446.54 CURRENT LIABILITIES:
Short-term borrowings 8,029,060,574.36 8,203,392,554.58 Bills payable 7,174,250,000.00 3,057,000,000.00 Accounts payable 697,359,927.59 654,411,787.56 Advance receipts 2,614,683,825.23 537,139,483.60 Staff remuneration payables 59,757,890.43 58,599,576.37 Taxes payable 38,730,979.85 43,087,056.70 Interest payable 110,626,170.55 30,731,253.71 Other payables 6,184,320,558.44 3,689,371,275.46 Non-current liabilities due within one year 5,067,194,973.19 5,648,861,310.04 Other current liabilities 10,156,266,146.23 6,602,863,069.45 Total current liabilities 40,132,251,045.87 28,525,457,367.47
SHANDONG CHENMING PAPER HOLDINGS LIMITED 3
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
2. Balance sheet of the Company(Cont’d)
Unit: RMB Item Closing balance Opening balance NON-CURRENT LIABILITIES:
Long-term borrowings 1,171,672,793.14 1,521,611,382.77 Long-term payables 3,220,909,734.68 3,005,178,750.49 Deferred income 53,823,776.90 56,572,797.75 Total non-current liabilities 4,446,406,304.72 4,583,362,931.01 TOTAL LIABILITIES 44,578,657,350.59 33,108,820,298.48OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00 Other equity instruments 7,060,300,000.00 7,060,300,000.00 Of which: Preference shares 4,477,500,000.00 4,477,500,000.00 Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Capital reserves 5,938,960,168.19 5,938,960,168.19 Surplus reserves 1,119,926,524.49 1,119,926,524.49 Retained profit 3,804,761,176.64 4,791,486,988.38 Totalowners’ equity 19,860,353,336.32 20,847,079,148.06 TOTAL LIABILITIES ANDOWNERS’ EQUITY 64,439,010,686.91 53,955,899,446.54
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
3. Consolidated Income Statement
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Total revenue 13,749,235,007.24 10,606,358,733.02 Including: Revenue 13,749,235,007.24 10,606,358,733.02 II. Total operating costs 11,880,087,434.81 9,622,587,179.13 Including: Operating costs 9,529,854,215.34 7,576,566,708.17 Taxes and surcharges 105,960,012.36 85,488,437.29 Sales expenses 641,498,275.35 573,734,657.05 Administrative expenses 856,354,999.17 694,013,827.38 Finance expenses 696,609,279.51 655,744,163.67 Loss on impairment of assets 49,810,653.08 37,039,385.57 Plus: Gain on change in fair value (“-” denotes loss) -11,009,851.10 -10,599,543.68 Investment income (“-” denotes loss) 65,864,672.36 37,008,429.78 Including: Investment income from associates
and joint ventures -4,154,293.31 -7,203,834.37 III. Operating profit (“-” denotes loss) 1,924,002,393.69 1,010,180,439.99 Plus: Non-operating income 158,519,294.68 228,908,354.31 Including: Gain on disposal of non-current assets 1,822,923.95 2,416,628.05 Less: Non-operating expenses 3,550,702.42 6,002,982.36 Including: Loss on disposal of non-current assets 1,478,120.96 4,043,314.21 IV. Total profit (“-” denotes total loss) 2,078,970,985.95 1,233,085,811.94 Less: Income tax expenses 331,253,327.08 307,031,422.46 V. Net profit (“-” denotes net loss) 1,747,717,658.87 926,054,389.48 Net profit attributable to owners of the Company 1,745,514,838.23 939,164,870.60 Minority interest 2,202,820.64 -13,110,481.12 VI. Other comprehensive income after tax, net 170,697,419.90 -154,317,270.14 Other comprehensive income after tax attributable to
owners of the Company, net 170,697,419.90 -154,317,270.14 (I) Other comprehensive income that cannot be reclassified
to profit and loss in subsequent periods
(II) Other comprehensive income that will be reclassified
to profit and loss in subsequent periods 170,697,419.90 -154,317,270.14 Translation difference of financial statements denominated
in foreign currency 170,697,419.90 -154,317,270.14 VII. Total comprehensive income 1,918,415,078.77 771,737,119.34 Total comprehensive income attributable to owners of the Company 1,916,212,258.13 784,847,600.46 Total comprehensive income attributable to minority interest 2,202,820.64 -13,110,481.12 VIII. Earnings per share:
(I) Basic earnings per share 0.75 0.45 (II) Diluted earnings per share 0.75 0.45 Legal Representative: Chen Hongguo Financial controller: Hu Jinbao Head of the financial department: Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 5
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
4. Income Statement of the Company
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Revenue 3,682,570,308.92 3,404,907,928.96 Less: Operating costs 2,560,699,253.09 2,749,395,766.42 Taxes and surcharges 38,197,149.42 13,030,965.17 Selling expenses 131,699,019.76 128,062,939.31 Administrative expenses 306,624,272.42 267,555,727.82 Finance expenses 302,220,430.04 490,569,574.44 Loss on impairment of assets 13,038,951.61 1,356,150.48 Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 69,489,948.67 244,172,165.82 Including: Investment income from associates and joint ventures -30,620.30 -40,098.33 II. Operating profit (“-” denotes loss) 399,581,181.25 -891,028.86 Plus: Non-operating income 13,151,629.14 40,001,738.10 Including: Gain on disposal of non-current assets 369,306.40 373,450.11 Less: Non-operating expenses 83,734.18 21,731.34 Including: Loss on disposal of non-current assets 83,734.18 21,731.34 III. Total profit (“-” denotes total loss) 412,649,076.21 39,088,977.90 Less: Income tax expenses 20,154,500.40 -33,539,996.43 IV. Net profit (“-” denotes net loss) 392,494,575.81 72,628,974.33 V. Other comprehensive income after tax, net
(I) Other comprehensive income that cannot be reclassified
to profit and loss in subsequent periods
(II) Other comprehensive income that will be reclassified
to profit and loss in subsequent periods
VI. Total comprehensive income 392,494,575.81 72,628,974.33
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
5. Consolidated cash flow statement
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 12,367,242,687.49 11,293,635,802.59 Tax rebates received 2,575,753.81 3,612,601.13 Cash received relating to other operating activities 230,498,726.61 390,470,872.96 Subtotal of cash inflows from operating activities 12,600,317,167.91 11,687,719,276.68 Cash paid for goods and services 8,746,611,691.32 6,247,052,235.36 Cash paid to and for employees 544,347,530.25 486,900,606.26 Payments of taxes 793,983,398.34 631,814,661.29 Cash paid relating to other operating activities 6,987,103,543.24 7,019,461,626.81 Subtotal of cash outflows from operating activities 17,072,046,163.15 14,385,229,129.72 Net cash flows from operating activities -4,471,728,995.24 -2,697,509,853.04 II. Cash flows from investing activities:
Cash received from investments 16,861,112.27 45,750,000.00 Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 395,843.67 213,406.40 Cash received relating to other investing activities 972,391,073.00 104,056,200.00 Subtotal of cash inflows from investing activities 989,648,028.94 150,019,606.40 Cash paid for purchase of fixed assets, intangible assets and
other long-term assets 746,966,959.23 990,227,873.52 Cash paid on investments 606,110,000.00
Subtotal of cash outflows from investing activities 1,353,076,959.23 990,227,873.52 Net cash flows from investing activities -363,428,930.29 -840,208,267.12
SHANDONG CHENMING PAPER HOLDINGS LIMITED 7
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
5. Consolidated cash flow statement(Cont’d)
Unit: RMB Amounts for Amounts for Item the reporting period the prior period III. Cash flows from financing activities:
Cash received from investments 40,000,000.00
Including: cash received by subsidiaries from minority investments 40,000,000.00
Cash received from borrowings 23,101,617,576.90 23,019,156,541.90 Cash received from bond issuance
Cash received relating to other financing activities 7,720,000,594.49 12,132,838,789.75 Subtotal of cash inflows from financing activities 30,861,618,171.39 35,151,995,331.65 Cash repayments of amounts borrowed 13,156,774,323.31 19,068,968,880.27 Cash paid for dividend and profit distribution or interest payment 2,125,109,981.16 786,313,234.84 Cash paid relating to other financing activities 10,195,554,187.00 10,071,692,038.29 Subtotal of cash outflows from financing activities 25,477,438,491.47 29,926,974,153.40 Net cash flows from financing activities 5,384,179,679.92 5,225,021,178.25 IV. Effect of foreign exchange rate changes on cash and cash equivalents -107,391,377.48 -7,969,200.70 V. Net increase in cash and cash equivalents 441,630,376.91 1,679,333,857.39 Plus: Balance of cash and cash equivalents as at
the beginning of the period 1,979,861,045.62 1,888,107,493.76 VI. Balance of cash and cash equivalents as at the end of the period 2,421,491,422.53 3,567,441,351.15
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
6. Cash flow statement of the Company
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 2,947,603,434.58 3,582,406,689.02 Cash received relating to other operating activities 697,159,595.97 79,542,569.75 Subtotal of cash inflows from operating activities 3,644,763,030.55 3,661,949,258.77 Cash paid for goods and services 1,907,092,137.24 3,315,453,666.09 Cash paid to and for employees 227,658,831.17 202,298,099.22 Payments of taxes 226,985,971.66 83,292,921.05 Cash paid relating to other operating activities 610,188,242.33 127,733,680.37 Subtotal of cash outflows from operating activities 2,971,925,182.40 3,728,778,366.73 Net cash flows from operating activities 672,837,848.15 -66,829,107.96 II. Cash flows from investing activities:
Cash received from investments 16,861,111.11 245,750,000.00 Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 17,628.00 93,406.40 Cash received relating to other investing activities 900,000,000.00
Subtotal of cash inflows from investing activities 916,878,739.11 245,843,406.40 Cash paid for purchase of fixed assets, intangible assets and
other long-term assets 54,575,321.80 31,377,557.00 Cash paid on investments 2,665,511,220.00
Subtotal of cash outflows from investing activities 2,720,086,541.80 31,377,557.00 Net cash flows from investing activities -1,803,207,802.69 214,465,849.40
SHANDONG CHENMING PAPER HOLDINGS LIMITED 9
INTERIM FINANCIAL REPORT 2017
II. Financial Statements(Cont’d)
6. Cash flow statement of the Company(Cont’d)
Unit: RMB Amounts for Amounts for Item the reporting period the prior period III. Cash flows from financing activities:
Cash received from borrowings 14,360,451,015.03 15,208,998,560.00 Cash received relating to other financing activities 7,190,741,096.00 10,733,403,288.89 Subtotal of cash inflows from financing activities 21,551,192,111.03 25,942,401,848.89 Cash repayments of amounts borrowed 10,665,502,742.60 14,730,286,609.26 Cash paid for dividend and profit distribution or interest payment 2,240,461,564.72 322,578,000.95 Cash paid relating to other financing activities 7,751,076,273.64 10,675,743,122.70 Subtotal of cash outflows from financing activities 20,657,040,580.96 25,728,607,732.91 Net cash flows from financing activities 894,151,530.07 213,794,115.98 IV. Effect of foreign exchange rate changes on cash and cash equivalents -5,297,986.97 -15,526,949.47 V. Net increase in cash and cash equivalents -241,516,411.44 345,903,907.95 Plus: Balance of cash and cash equivalents as at
the beginning of the period 582,578,426.62 49,438,736.95 VI. Balance of cash and cash equivalents as at the end of the period 341,062,015.18 395,342,644.90
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
SHANDONG CHENMING PAPER HOLDINGS LIMITED 11
INTERIM FINANCIAL REPORT 2017)d’tnoC(
stnemetatS
laicnaniF
.II
ytiuqe
’srenwo
ni
segnahc
fo
tnemetats
detadilosnoC
.7
doirep
eht
rof
stnuomA
BMR
:tinUdoirep
gnitroper
eht
roFmetI
ynapmoC
eht
fo
srenwo
ot
elbatubirtta
ytiuqEstnemurtsni
ytiuqe
rehtO
rehtO
latoTlareneGevisneherpmoc:sseL ytiuqe
’srenwotseretni
ytironiMtiforp
deniateRsnoisivorp
ksirsevreser
sulpruSsevreser
laicepSemocni
serahs
yrusaertsevreser
latipaCsrehtOsdnob
lauteprePserahs
ecnereferPlatipac
erahS
91.512,958,465,2267.748,050,64320.187,479,547,604.601,611,231,198.177,542,508-09.487,752,941,600.000,008,285,200.000,005,774,400.764,504,639,1doirep
roirp
eht
fo
dne
eht
ta
sa
ecnalaB
.I
seicilop
gnitnuocca
ni
segnahc
:ddA
srorre
suoiverp
fo
snoitcerroC
lortnoc
nommoc
rednu
seinapmoc
fo
sregreM
srehtO
91.512,958,465,2267.748,050,64320.187,479,547,604.601,611,231,198.177,542,508-09.487,752,941,600.000,008,285,200.000,005,774,400.764,504,639,1doirep
eht
fo
gninnigeb
eht
ta
sa
ecnalaB
.II
22.196,491,97546.028,202,2486.054,492,66309.914,796,071)esaerced
setoned
”-“(
doirep
eht
ni
segnahC
.III
77.870,514,819,146.028,202,232.838,415,547,109.914,796,071emocni
evisneherpmoc
latoT
)I(
00.000,000,0400.000,000,04srenwo
yb
decuder
dna
ni
diap
latipaC
)II(
00.000,000,0400.000,000,04sredloherahs
yb
diap
serahs
yranidrO
.1
stnemurtsni
ytiuqe
rehto
fo
sredloh
yb
diap
latipaC
.2
stnemyap
desab-erahs
fo
tnuomA
.3
ytiuqe
’srenwo
ni
desingocer
srehtO
.4
55.783,022,973,1-55.783,022,973,1-noitubirtsid
tiforP
)III(
sevreser
sulprus
ot
refsnarT
.1
noisivorp
ksir
lareneg
ot
refsnarT
.2
55.783,022,973,1-55.783,022,973,1-)sredloherahs
ro(
srenwo
ot
noitubirtsiD
.3
srehtOv.4
ytiuqe
’srenwo
fo
refsnarT
)VI(
evreser
latipac
no
detaerc
)latipac
erahs
ro(
latipaC
.1
no
detaerc
)latipac
erahs
ro(
latipaC
.2
evreser
sulprus
sessol
pu
gnikam
evreser
sulpruS
.3
srehtO
.4
evreser
laicepS
)V(
lawardhtiW
.1
desU
.2
srehtO
)IV(
14.609,350,441,3204.866,352,88307.132,962,211,704.601,611,231,199.153,845,436-09.487,752,941,600.000,008,285,200.000,005,774,400.764,504,639,1doirep
eht
fo
dne
eht
ta
sa
ecnalaB
.VI
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
)d’tnoC(
stnemetatS
laicnaniF
.II
)d’tnoC(
ytiuqe
’srenwo
ni
segnahc
fo
tnemetats
detadilosnoC
.7
doirep
roirp
eht
rof
stnuomA
BMR
:tinUdoirep
roirp
eht
roFmetI
ynapmoC
eht
fo
srenwo
ot
elbatubirtta
ytiuqEstnemurtsni
ytiuqe
rehtO
rehtO
lareneGevisneherpmoc
:sseL
ytiuqe
’srenwo
latoTtseretni
ytironiMtiforp
deniateRsnoisivorp
ksirsevreser
sulpruSsevreser
laicepSemocniserahs
yrusaertsevreser
latipaCsrehtOsdnob
lauteprePserahs
ecnereferPlatipac
erahS
84.544,629,852,7166.068,134,78378.895,940,614,504.601,611,231,162.468,410,543-18.672,831,941,600.000,008,285,200.764,504,639,1doirep
roirp
eht
fo
dne
eht
ta
sa
ecnalaB
.I
seicilop
gnitnuocca
ni
segnahc
:ddA
srorre
suoiverp
fo
snoitcerroC
lortnoc
nommoc
rednu
seinapmoc
fo
sregreM
srehtO
84.544,629,852,7166.068,134,78378.895,940,614,504.601,611,231,162.468,410,543-18.672,831,941,600.000,008,285,200.764,504,639,1doirep
eht
fo
gninnigeb
eht
ta
sa
ecnalaB
.II
48.973,775,924,221.184,011,31-05.032,342,85341.072,713,451-06.009,1100.000,057,832,2)esaerced
setoned
”-“(
doirep
eht
ni
segnahC
.III
43.911,737,17721.184,011,31-06.078,461,93941.072,713,451-emocni
evisneherpmoc
latoT
)I(
06.009,167,832,206.009,1100.000,057,832,2srenwo
yb
decuder
dna
ni
diap
latipaC
)II(
06.009,1106.009,11sredloherahs
yb
diap
serahs
yranidrO
.1
00.000,057,832,200.000,057,832,2stnemurtsni
ytiuqe
rehto
fo
sredloh
yb
diap
latipaC
.2
desingocer
stnemyap
desab-erahs
fo
tnuomA
.3
ytiuqe
’srenwo
ni
srehtO
.4
01.046,129,085-01.046,129,085-noitubirtsid
tiforP
)III(
sevreser
sulprus
ot
refsnarT
.1
noisivorp
ksir
lareneg
ot
refsnarT
.2
01.046,129,085-01.046,129,085-)sredloherahs
ro(
srenwo
ot
noitubirtsiD
.3
srehtO
.4
ytiuqe
’srenwo
fo
refsnarT
)VI(
evreser
latipac
no
detaerc
)latipac
erahs
ro(
latipaC
.1
no
detaerc
)latipac
erahs
ro(
latipaC
.2
evreser
sulprus
sessol
pu
gnikam
evreser
sulpruS
.3
srehtO
.4
evreser
laicepS
)V(
lawardhtiW
.1
desU
.2
srehtO
)IV(
SHANDONG CHENMING PAPER HOLDINGS LIMITED 13
INTERIM FINANCIAL REPORT 2017)d’tnoC(
stnemetatS
laicnaniF
.II
ynapmoC
eht
fo
ytiuqe
’srenwo
ni
segnahc
fo
tnemetatS
.8
doirep
eht
rof
stnuomA
BMR
:tinUdoirep
gnitroper
eht
roFmetI
stnemurtsni
ytiuqe
rehtO
latoTrehtO ytiuqe
’srenwotiforp
deniateRsevreser
sulpruSsevreser
laicepSemocni
evisneherpmocserahs
yrusaert
:sseLsevreser
latipaCsrehtOsdnob
lauteprePserahs
ecnereferPlatipac
erahS
60.841,970,748,0283.889,684,197,494.425,629,911,191.861,069,839,500.000,008,285,200.000,005,774,400.764,504,639,1doirep
roirp
eht
fo
dne
eht
ta
sa
ecnalaB
.I
seicilop
gnitnuocca
ni
segnahc
:ddA
srorre
suoiverp
fo
snoitcerroC
srehtO
60.841,970,748,0283.889,684,197,494.425,629,911,191.861,069,839,500.000,008,285,200.000,005,774,400.764,504,639,1doirep
eht
fo
gninnigeb
eht
ta
sa
ecnalaB
.II
47.118,527,689-47.118,527,689-)esaerced
setoned
”-“(
doirep
eht
ni
segnahC
.III
18.575,494,29318.575,494,293emocni
evisneherpmoc
latoT
)I(
srenwo
yb
decuder
dna
ni
diap
latipaC
)II(
sredloherahs
yb
diap
serahs
yranidrO
.1
rehto
fo
sredloh
yb
diap
latipaC
.2
stnemurtsni
ytiuqe
stnemyap
desab-erahs
fo
tnuomA
.3
ytiuqe
’srenwo
ni
desingocer
srehtO
.4
55.783,022,973,1-55.783,022,973,1-noitubirtsid
tiforP
)III(
sevreser
sulprus
ot
refsnarT
.1
55.783,022,973,1-55.783,022,973,1-)sredloherahs
ro(
srenwo
ot
noitubirtsiD
.2
srehtO
.3
ytiuqe
’srenwo
fo
refsnarT
)VI(
no
detaerc
)latipac
erahs
ro(
latipaC
.1
evreser
latipac
detaerc
)latipac
erahs
ro(
latipaC
.2
evreser
sulprus
no
sessol
pu
gnikam
evreser
sulpruS
.3
srehtO
.4
evreser
laicepS
)V(
lawardhtiW
.1
desU
.2
srehtO
)IV(
23.633,353,068,9146.671,167,408,394.425,629,911,191.861,069,839,500.000,008,285,200.000,005,774,400.764,504,639,1doirep
eht
fo
dne
eht
ta
sa
ecnalaB
.VI
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
)d’tnoC(
stnemetatS
laicnaniF
.II
)d’tnoC(
ynapmoC
eht
fo
ytiuqe
’srenwo
ni
segnahc
fo
tnemetatS
.8
doirep
roirp
eht
rof
stnuomA
BMR
:tinUdoirep
roirp
eht
roFmetI
stnemurtsni
ytiuqe
rehtO
rehtO
ytiuqe
’srenwo
latoTtiforp
deniateRsevreser
sulpruSsevreser
laicepSemocni
evisneherpmocserahs
yrusaert
:sseLsevreser
latipaCsrehtOsdnob
lauteprePserahs
ecnereferPlatipac
erahS
53.503,541,367,6167.356,271,581,594.425,629,911,101.066,048,839,500.000,008,285,200.764,504,639,1doirep
roirp
eht
fo
dne
eht
ta
sa
ecnalaB
.I
seicilop
gnitnuocca
ni
segnahc
:ddA
srorre
suoiverp
fo
snoitcerroC
srehtO
53.503,541,367,6167.356,271,581,594.425,629,911,101.066,048,839,500.000,008,285,200.764,504,639,1doirep
eht
fo
gninnigeb
eht
ta
sa
ecnalaB
.II
38.432,964,037,177.566,292,805-06.009,1100.000,057,832,2)esaerced
setoned
”-“(
doirep
eht
ni
segnahC
.III
33.479,826,2733.479,826,27emocni
evisneherpmoc
latoT
)I(
06.009,167,832,206.009,1100.000,057,832,2srenwo
yb
decuder
dna
ni
diap
latipaC
)II(
06.009,1106.009,11sredloherahs
yb
diap
serahs
yranidrO
.1
rehto
fo
sredloh
yb
diap
latipaC
.2
00.000,057,832,200.000,057,832,2stnemurtsni
ytiuqe
stnemyap
desab-erahs
fo
tnuomA
.3
ytiuqe
’srenwo
ni
desingocer
srehtO
.4
01.046,129,085-01.046,129,085-noitubirtsid
tiforP
)III(
sevreser
sulprus
ot
refsnarT
.1
01.046,129,085-01.046,129,085-)sredloherahs
ro(
srenwo
ot
noitubirtsiD
.2
srehtO
.3
ytiuqe
’srenwo
fo
refsnarT
)VI(
no
detaerc
)latipac
erahs
ro(
latipaC
.1
evreser
latipac
detaerc
)latipac
erahs
ro(
latipaC
.2
evreser
sulprus
no
sessol
pu
gnikam
evreser
sulpruS
.3
srehtO
.4
evreser
laicepS
)V(
lawardhtiW
.1
desU
.2
srehtO
)IV(
81.045,416,394,8199.789,978,676,494.425,629,911,107.065,258,839,500.000,008,285,200.000,057,832,200.764,504,639,1doirep
eht
fo
dne
eht
ta
sa
ecnalaB
.VI
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was incorporated in May 1993 in Shouguang City, Shandong Province, with its headquarters at No. 2199 Nongsheng Road East, Shouguang City, Shandong Province.
The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards, hotel service, marine engineering project investment, equipment financial and operating leasing, etc.
The financial statements were e considered, approved and issued by the Board of the Company on 15 August 2017. Subsidiaries of the Company included in the scope of consolidation for the first half of 2017 totalled 54. For details, please refer to this Note IX “Equity in other entities”. The scope of consolidation of the Company during the year had 3 companies included and two companies excluded compared to the prior year. For details, please refer to this Note VIII “Changes in the scope of consolidation”.
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
TheCompany’s financial statements are prepared on a going concern basis and based on actual transactions and events, in accordance with the Accounting Standards for Business Enterprises-Basic Standards promulgated by the Ministry of Finance (Order of Ministry of Finance No. 33, as amended by Order of Ministry of Finance No. 76) and 41 specific accounting standards as promulgated and amended on and after 15 February 2006, the application guidelines of the Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2014) of China Securities Regulatory Commission.
TheCompany’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except for certain financial instruments and consumable biological assets, the financial statements are prepared under the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
The Company has been implementing the ASBEs since 1 January 2007.
In addition to preparing and issuing financial statements in accordance with the new accounting standards, the Company, as an H-share listed company, also has to provide financial statements for the public in accordance with the Hong Kong Financial Reporting Standards. Pursuant to the relevant requirements under Rule 1 of “Accounting Standards for Business Enterprises Interpretation No. 1”, with respect to the transactions or matters which do not have any difference in terms of standards between the new accounting standards and the Hong Kong Financial Reporting Standards, the Company shall make retrospective adjustments in accordance with Rules 5 to 19 of “Accounting Standards for Business Enterprises No. 38– First-time Implementation of Accounting Standards for Business Enterprises” (“Standard No. 38”) and other relevant requirements. The Company shall also make retrospective adjustments to the financial statements for the comparable years in respect of the changes in accounting policies due to the implementation of new accounting standards for the transactions and matters other than those attributable to Rules 5 to 19 of Standard No. 38 with reference to the relevant available information based on the financial statements prepared by the Company according to the Hong Kong Financial Reporting Standards.
2. Going concern
No facts or circumstances comprise a material uncertainty about theCompany’s going concern basis within 12 months since the end of the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 15
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates
Specific accounting policies and accounting estimates are indicated as follows:
The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine made paper and paper board), paper making raw materials and machinery. The Company and its subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters such as revenue recognition based on their actual production and operation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises. For details, please refer to this Note V. 25 “Revenue”. For the critical accounting judgments and estimates made by the management, please refer to Note V. 33 “Critical accounting judgments and estimates”.
1. Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared by the Company in conformity with the ASBEs, which truly and fully reflect the consolidated andcompany’s financial position as at 30 June 2017 and relevant information such as the operating results and cash flows for the first half of 2017. In addition, the financial statements of the Company also comply with, in all material respects, the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” revised by the China Securities Regulatory Commission in 2014 and the notes thereto.
2. Accounting period
The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January to 31 December of each calendar year.
3. Operating cycle
Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an indicator for classification of liquidity of assets and liabilities.
Our subsidiaries, including Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming Arboriculture Co., Ltd., were engaged in arboriculture cultivating, plantation and sale. Their ordinary operating cycle lasts for over 1 year.
4. Functional currency
The Company and its domestic subsidiaries recognise RMB as their functional currency according to the primary economic environment in which they operate. The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or“US$”), Japanese yen (“JPY”), Euro (“EUR”) and South Korean Won (“KRW”) as their respective functional currency according to the general economic environment in which these subsidiaries operate. The Company prepares its financial statements in RMB.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
5. Accounting treatment of business combinations under common control and not under common control Business combinations refer to the transactions or events in which two or more separate enterprises merged as a single reporting entity. Business combinations are divided into business combinations under common control and not under common control.
(1) Business combinations under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties before and after the combination, and that control is not transitory. The party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. The combination date is the date on which the absorbing party effectively obtains control of the party being absorbed.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination date as recorded by the party being merged. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve (share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to profit or loss in the period in which they are incurred.
(2) Business combination not under common control
A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business combination is the aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency fee such as audit, legal service and evaluation consultation and other management fees charged to the profit or loss for the period when incurred. Transaction cost attributable to equity or debt securities issued by the acquirer as consideration is included in the initial costs. Contingent consideration involved is charged to the combination cost at its fair value on the acquisition date, in the event that adjustment on the contingent consideration is required as a result of new or additional evidence in relation to circumstances existed on the acquisition date emerges within twelve months from the acquisition date, the combination goodwill shall also be adjusted. The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination are measured at their fair values on the acquisition date. Where the cost of a business combination exceeds theacquirer’s interest in the fair value of theacquiree’s identifiable net assets on the acquisition date, the difference is recognised as goodwill. Where the cost of a business combination is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the acquirer shall first reassess the measurement of the fair value of theacquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of combination. If after such reassessment the cost of combination is still less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference is charged to profit or loss for the period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 17
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
5. Accounting treatment of business combinations under common control and not under common control(Cont’d)
(2) Business combination not under common control(Cont’d)
In relation to the deductible temporary difference acquired from the acquiree, which was not recognised as deferred tax assets due to non-fulfilment of the recognition criteria at the date of the acquisition, if new or further information that is obtained within 12 months after the acquisition date indicates that related conditions at the acquisition date already existed, and that the implementation of the economic benefits brought by the deductible temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be recognised and goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets that shall be recognised, the difference shall be recognised in the profit or loss of the period. Except for the above circumstances, deferred tax assets in relation to business combination are recognised in the profit or loss of the period.
For combination of business not under common control achieved by several transactions, these several transactions will be judged whether they belong to “transactions in a basket” in accordance with the judgement standards on “transactions in a basket” as set out in the Notice of the Ministry of Finance on Issuing Accounting Standards for Business Enterprises Interpretation No. 5 (Cai Kuai[2012] No. 19) and Rule of 51 to “Accounting Standard for Business Enterprises No. 33– Consolidated Financial Statements”(see Note V. 6 (2)). If they belong to “transactions in a basket”, they are accounted for with reference to the descriptions as set out in the previous paragraphs of this section and Note V. 14 “Long-term equity investments”, and if they do not belong to “transactions in a basket”, they are accounted for in separate financial statements and consolidated financial reports:
In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of the equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as at the acquisition date. In respect of any other comprehensive income attributable to the equity interest in the acquiree prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time of disposal (i.e. to be transferred to investment income for the period, except for the changes arising from re-measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree).
In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is remeasured at fair value as at the acquisition date, and the difference between the fair value and the carrying amount is recognised as investment income for the current period. In respect of any other comprehensive income attributable to the equity interest in the acquiree held prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree (i.e. to be transferred to investment income at the acquisition date, except for the changes arising from re- measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree) is transferred to investment income in the period of the acquisition date.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
6. Preparation of consolidated financial statements
(1) Basis for principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of those returns. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an entity controlled by the Company.
The Company will conduct reassessment in the event there are changes in actual condition and situation causing changes in relevant elements involved in the definition of control above.
(2) Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Company obtains net assets and the effective control of decision making of production and operation and are deconsolidated from the date that such control ceases. For disposal of subsidiaries, the operating results and cash flows of such subsidiaries before the date of disposal are properly included into the consolidated income statement and consolidated cash flow statements; for disposal of subsidiaries during the reporting period, no adjustment shall be made to the opening balance of the consolidated balance sheet. For those subsidiaries acquired through business combination not under common control, the operating results and cash flows after the acquisition date have been properly included in the consolidated income statements and consolidated cash flow statements. No adjustments shall be made to the opening balance of the consolidated balance sheet and the comparative consolidated financial statements amount. For those subsidiaries acquired through business combinations under common control, the operating results and cash flows from the beginning of the consolidation period to the consolidation date are also presented in the consolidated income statement and the consolidated cash flow statements. The comparative amounts presented in the consolidated financial statements are also adjusted accordingly.
The financial statements of the subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company in the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and the subsidiaries. For acquisition of subsidiaries arising from merger of entities not under same control, the financial statements of the subsidiaries will be adjusted according to the fair value of the identifiable net assets at the acquisition date. All intra-company significant balances, transactions and unrealised profit are eliminated in the consolidated financial statements.
Theshareholders’ equity and the portion of the profit or loss for the period of the subsidiaries that are not attributable to the Company are presented undershareholders’ equity and net profit in the consolidated financial statements as minority interests and net profit of minority interest respectively. The portion of net profit or loss of subsidiaries for the period attributable to minority interest is presented in the consolidated income statement under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders’ portion of the opening balance ofowners’ equity of the subsidiary, the excess amount shall be allocated against minority interest.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 19
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
6. Preparation of consolidated financial statements(Cont’d)
(2) Basis for preparation of the consolidated financial statements(Cont’d)
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons, the remaining equity is measured at fair value on the date when the control is lost. The difference arising from the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest over the share of net assets of the former subsidiary calculated continuously since the purchase date based on the shareholding percentage before disposal are recognised as investment income in the period when the control is lost. Other comprehensive income related to equity investment in the subsidiary is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time when the control is lost (i.e. to be transferred to investment income, except for the changes arising from re-measuring net assets or net liabilities of defined benefit plan of the subsidiary using the equity method). The remaining equity interests are measured subsequently according to “Accounting Standard for Business Enterprises No. 2– Long-term Equity Investments” or “Accounting Standard for Business Enterprises No. 22– Recognition and Measurement of Financial Instruments”. See Note V. 14 “Long-term equity investments” or Note V. 10 “Financial instruments” for details.
When the Company disposes of equity investment in a subsidiary by a stage-up approach with several transactions until the control over the subsidiary is lost, it shall determine whether these several transactions related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to “transactions in a basket”. Usually, these several transactions related to the disposal of equity investment in a subsidiary are accounted for as transactions in a basket when the terms, conditions and economic impacts of these several transactions meet the following one or more conditions:① these transactions are entered into at the same time or after considering their impacts on each other;② these transactions as a whole can reach complete business results;③ the occurrence of a transaction depends on at least the occurrence of another transaction;④ an individual transaction is not deemed as economic, but is deemed as economic when considered with other transactions. If they are not transactions in a basket, each of which are accounted for in accordance with applicable rules in “partial disposal of long-term equity investment of a subsidiary without losing control over a subsidiary” (see Note V. 14 (2)④) separately, and “the control over a subsidiary is lost due to partial disposal of equity investment or other reasons” (see the preceding paragraph). When several transactions related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to transactions in a basket, each of which is accounted for as disposal of a subsidiary with a transaction until the control over a subsidiary is lost; however, the different between the amount of disposal prior to the loss of control and the net assets of a subsidiary attributable to the disposal investment shall be recognised as other comprehensive income in consolidated financial statements and transferred to profit or loss at the time when the control is lost.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
7. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with theCompany’s rights and obligations under a joint arrangement, the Company classifies joint arrangements into: joint ventures and joint operations. Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and obligations of this arrangement. Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this arrangement.
The Company treats investments in joint ventures by using the equity method of accounting in accordance with accounting policies as set out in Note V. 14 (2)②“long-term equity investments by using equity method of accounting”. The Company shall, as a joint venture, recognise the assets held and obligations assumed solely by the Company, and recognise assets held and obligations assumed jointly by the Company in appropriation to the share of the Company; recognise revenue from disposal of the share of joint operations of the Company; recognise fees solely occurred by Company and recognise fees from joint operations in appropriation to the share of the Company.
When the Company, as a joint venture, invests or sells assets (the assets does not constitute a business, the same below) to or purchase assets from joint operations, the Company shall only recognise the part of profit or lost from this transaction attributable to other parties of joint operations before these assets are sold to the third party. If the occurrence of these assets meet the impairment loss of asset as set out in “Accounting Standard for Business Enterprises No. 8– Asset Impairment”, the Company shall recognise the full amount of this loss in relation to the Company invests in or sells assets to joint operations; the Company recognise the loss according to theCompany’s share of commitment in relation to the Company purchase assets from joint operations.
8. Standards for recognising cash and cash equivalents
Cash and cash equivalents of the Company include cash on hand, deposits readily available for payment purpose and short-term (normally fall due within three months from the date of acquisition) and highly liquid investments held the Company which are readily convertible into known amount of cash and which are subject to insignificant risk of value change.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into the functional currency at the prevailing spot exchange rate on the date of exchange, i.e. the middle price of RMB exchange rate published by thePeople’s Bank of China on that date in general and the same hereinafter, while the foreign currency exchange operations and transactions in connection with foreign currency exchange shall be translated into the functional currency at the exchange rate actually adopted.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 21
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency(Cont’d) (2) Basis for translation of foreign currency monetary items and foreign currency non-monetary items On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. All differences are included in the profit or loss in the period, except for:① the differences arising from foreign currency borrowings related to the acquisition or construction of fixed assets that are qualified for capitalisation will be accounted for according to the principle of capitalisation; and② exchange difference arising from change in balance of carrying amount other than amortised cost of available for sale foreign monetary items will be included in other comprehensive income.
Exchange differences arising from change in exchange rate where the preparation of consolidated financial statements relates to foreign operations and foreign currency monetary items materially constitute net investment in foreign operations shall be recorded into “other comprehensive income”; disposal of foreign operations shall be included into profits and losses on disposal in the current period.
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange rate on the date of determination of the fair value. The difference between the amounts of the functional currency before and after the translation will be treated as changes in fair value (including changes in foreign exchange rates) and recognised in profit or loss for the period or recognised as other comprehensive income.
(3) Basis for translation of foreign currency financial statements
Exchange differences arising from change in exchange rate where the preparation of consolidated financial statements relates to foreign operations and foreign currency monetary items materially constitute net investment in foreign operations shall be recorded into “other comprehensive income” under “translation reserve”; disposal of foreign operations shall be included into profits and losses on disposal in the current period.
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in compliance with the following requirements: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which such items arose; income and expenses items in the income statement are translated at the spot exchange rate at the date of transaction. The retained profit brought forward are reported at the prioryear’s closing balance; the retained profit as at the end of the year are presented after translated the profit appropriation items; differences between the aggregate of asset and liability items andowners’ equity items are recognised as “translation differences arising on the translation of financial statements denominated in foreign currencies” in other comprehensive income. On disposal of foreign operations and loss of control, exchange differences arising from the translation of financial statements denominated in foreign currencies related to the disposed foreign operations which has been included inowners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place.
Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate when it incurs. Effects arising from changes of exchange rate of cash shall be presented separately in the cash flow statements.
The opening balance and the prioryear’s figures are presented according to the translated amounts of the prior year.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency(Cont’d) (3) Basis for translation of foreign currency financial statements(Cont’d)
On disposal of the entireowners’ equity in a foreign operation of the Company, or upon a loss of control over a foreign operation due to disposal of certain equity investment or other reasons, the Company transfers the exchange differences arising on translation of financial statements of this foreign operation attributable toowners’ equity of parent company presented underowners’ equity in the balance sheet, to profit or loss in the period in which the disposal took place.
In case of partial disposal of equity investment or other reason that result in reduction in shareholding in a foreign operation without losing control over it, the proportionate share of exchange differences arising from the translation of financial statements will be attributable to minority interests and will not recognised in profit or loss. For partial disposals of equity interests in foreign operations which are associates or joint ventures, the proportionate share of the exchange differences arising from the translation of financial statements of foreign operations is reclassified to profit or loss.
10. Financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under a financial instrument contract. Financial assets and financial liabilities are initially recognised at fair value, except for equity instruments that are not quoted in an active market, the fair value of which cannot be reliably measured and over relevant investees of which the Company does not have control, joint control or significant influence, and debt financing instruments subsequently measured at amortised cost using the effective interest method. For financial assets and financial liabilities measured at fair value and whose changes are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For financial assets and financial liabilities classified as other categories, relevant transaction costs are included in the amount initially recognised.
(1) Determination of fair values for financial assets and financial liabilities
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability in an orderly transaction between market participants on the date of measurement. Financial instruments exist in an active market. Fair value is determined based on the quoted price in such market. An active market refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and price fixing service organisations, representing the actual price of a market transaction that takes place in a fair deal. While financial instruments do not exist in an active market, the fair value is determined using valuation techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent market transactions entered into by both willing parties, reference to present fair values of similar other financial instruments, cash flow discounting method and option pricing models.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 23
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(2) Classification, recognition and measurement of financial assets
Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial assets shall be classified into loans and accounts receivable, available-for-sale financial assets and others for initial recognition.
① Loans and receivables
They are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets, including bills receivable, accounts receivable, interest receivable, dividends receivable and other receivables are classified as loans and receivables by the Company.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate method. Gains or losses incurred at the time of derecognition, impairment or amortisation are charged to profit or loss in the current period.
② Available-for-sale financial assets
Available-for-sale financial assets represent equity instruments over relevant investees of which the Company does not have control, joint control or significant influence.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change in fair value are recognised as other comprehensive income, except for impairment loss and exchange differences arising from foreign monetary financial assets and amortised cost which are accounted for through profit or loss for the current period. The financial assets will be transferred out of the financial assets on derecognition and accounted for through profit or loss for the current period. However, for equity investment of which the Company does not have control, joint control or significant influence, not quoted in an active market and the fair value of which cannot be measured reliably, their fair values are subsequently measured at cost.
Interests received from available-for-sale financial assets held and the cash dividends declared by the investee are recognised as investment income.
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(3) Impairment of financial assets
The Company reviews the carrying amount of financial assets on each balance sheet date and provides for impairment where there is objective evidence that financial assets are impaired.
For a financial asset that is individually significant, the Company assesses the asset individually for impairment. For a financial asset that is not individually significant, the Company assess the asset individually for impairment or include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether the financial asset is individually significant or not, the financial asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Financial assets for which an impairment loss is individually recognised are not included in the collective assessment for impairment.
① Impairment of loans and receivables
The carrying amount of financial assets measured as costs or amortised costs are subsequently reduced to the present value discounted from its projected future cash flow. The reduced amount is recognised as impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss from financial assets, if there is objective evidence showing recovery in value of such financial assets impaired and which is related to any event occurring after such recognition, the impairment loss originally recognised shall be reversed to the extent that the carrying amount of the financial assets upon reversal will not exceed the amortised cost as at the reversal date assuming there is no provision for impairment.
② Impairment of available-for-sale financial assets
In the event that decline in fair value of the available-for-sale equity instrument or fair value of the interest in theinvestee’s identifiable net assets is regarded as “severe decline” or “non-temporary decline” on the basis of comprehensive related factors, it indicates that there is impairment loss of the available-for-sale equity instrument. In particular, “severe decline” refers to decline of over20% in such fair value. “Non-temporary decline” refers to such fair value decreased continuously for more than 12 months. The continuous decreasing period is determined on the basis of the drop of such fair value accumulated over10%. When the available-for-sale financial assets impair, the accumulated loss originally included in the other comprehensive income arising from the decrease in fair value was transferred out and included in the profit or loss for the period. The accumulated loss that transferred out is the balance of the initial acquisition cost of asset, after deduction of the principal recovered, amortised amounts, current fair value and the impairment loss originally included in the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such financial assets impaired and which is related to any event occurring after such recognition in subsequent periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of the available-for-sale equity instrument will be recognised as other comprehensive income, and the impairment loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period. When an equity investment that is not quoted in an active market and the fair value of which cannot be measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that shall be settled by delivery of that equity instrument, then it will not be reversed.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 25
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(4) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognised:① the contract right to receive the cash flows of the financial asset has terminated;② the financial asset, along with substantially all the risk and return arising from the ownership of the financial asset, has been transferred to the transferee; and③ the financial asset has been transferred to the transferee, and the transferor has given up the control on such financial asset, though it does not assign maintain substantially all the risk and return arising from the ownership of the financial asset.
When the entity does not either assign or maintain substantially all the risk and return arising from the ownership of the financial asset and does not give up the control on such financial asset, to the extent of its continuous involvement in the financial asset, the entity recognises such financial asset and the relevant liability accordingly. The extent of the continuous involvement is the extent to which the entity exposes to changes in the value of such financial assets.
If all criteria of recognition of transfer of financial assets are satisfied, the difference between the carrying amount of the financial assets transferred and the sum of the consideration received from the transfer and the accumulated changes in fair value originally included in other comprehensive income shall be recognised in the profit or loss for the period.
If a part of the financial assets is qualified for derecognition, the carrying amount of the financial asset is allocated between the part that continues to be recognised and the part that qualifies for derecognition, based on the fair values of the respective parts. The difference between the following amounts is recognised in profit or loss for the period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition and the aforementioned carrying amount.
For financial assets that are sold or transferred with recourse or endorsement, the Company needs to determine whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk and rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be derecognised. If the risk and rewards of ownership of the financial asset have been retained, the financial assets shall not be derecognised. If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the Company shall assess whether the control over the financial asset is retained, and the financial assets shall be accounting for according to the above paragraphs.
(5) Classification and measurement of financial liabilities
Financial liabilities are classified at initial recognition: financial liabilities recognised at fair value with changes carried through profit or loss and other financial liabilities. For financial liabilities measured at fair value with changes recognised in profit or loss of the current period, relevant transaction costs are directly recognised in profit or loss for the period. The amount is recognised initially at fair value and the subsequent changes in fair value will be recognised in profit or loss for the period. For other financial liabilities, relevant transaction costs are included in the amount initially recognised and subsequently measured at amortised cost using the effective interest method, and relevant gain or loss arising from derecognition or amortisation are included in current profit or loss.
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(6) Derecognition of financial liabilities
Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or in part. An agreement is entered between the Company (debtor) and a creditor to replace the original financial liabilities with new financial liabilities with substantially different terms, derecognise the original financial liabilities as well as recognise the new financial liabilities.
When financial liabilities are derecognised in full or in part, the difference between the carrying amount of the financial liabilities derecognised and the consideration paid (including transferred non-cash assets or new financial liability) is recognised in profit or loss for the current period.
(7) Offset of Financial Assets and Financial Liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which are enforceable currently, and the Company plans to realise the financial assets or to clear off the financial liabilities on a net amount basis or simultaneously, the financial assets and financial liabilities shall be reported in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented separately in the balance sheet without offsetting.
(8) Equity instruments
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The issuance (including refinancing), repurchase, sale or cancellation of equity instruments by the Company is accounted for movement in equity. The Company does not recognise the movement in fair value of equity instruments. Transaction costs related to equity transactions are deducted from equity.
Various distributions (excluding dividends) made by the Company to holders of equity instruments reducesowners’ equity. The Company does not recognise the movement in fair value of equity instruments.
11. Accounts receivable
Accounts receivable include accounts receivable, other receivables, long-term receivables, etc. For the recognition and measurement of long-term receivables, please refer to Note V. 28.
(1) Basis for recognition and measurement of bad debt provision
The Company carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date. Where there arises any of the following objective evidences indicating that accounts receivable have been impaired, an impairment provision will be made:① a serious financial difficulty occurs to the debtor;② the debtor breaches any of the contractual stipulations (such as he fails to pay or delays the payment of interests or the principal);③ the debtor will probably go bankrupt or carry out other financial reorganisations;④ other objective evidences show that the accounts receivable are impaired.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 27
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
11. Accounts receivable(Cont’d)
(2) Method for making bad debt provision
① Recognition standard and method for making bad debt provision individually for individually significant accounts receivable
Accounts receivable of more than RMB1 million is recognised as individually significant accounts receivable by the Company.
For accounts receivable that is individually significant, the Company assesses such accounts receivable individually for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the financial asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Accounts receivable for which an impairment loss is individually recognised are not included in a group of accounts receivable with similar credit risk characteristics and collectively assessed for impairment.
② Determination and method for making bad debt provision for accounts receivable provided for bad debt by credit risk portfolio
A. Basis for determining the credit risk portfolio
The Company classifies its individually insignificant accounts receivable and individually significant but not impaired accounts receivable in accordance with their credit risk characteristics and relevance of financial assets. These credit risks usually reflect the ability of debtor in repaying all debts due based on the contracted terms of relevant assets, and are related to the forecast on future cash flows of asset under assessment.
Portfolios are determined according to the following basis:
Portfolio Basis for determining the portfolio
Specific fund portfolio A portfolio which is classified as a category on the basis of accounts receivable related to authority units and related parties
Ageing portfolio A portfolio which is classified as a category on the basis of credit risk features such as ageing
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
11. Accounts receivable(Cont’d)
(2) Method for making bad debt provision(Cont’d)
② Determination and method for making bad debt provision for accounts receivable provided for bad debt by credit risk portfolio(Cont’d)
B. Method for making bad debt provision according to credit risk characteristics
When an impairment test is performed by means of a group, bad debt provision will be assessed and ascertained according to the structure of the group of accounts receivable and similar credit risk characteristics(debtors’ ability to settle outstanding amounts based on contracted terms), taking into account historical experience of losses, prevailing economic condition and losses that are expected to incur in the group of accounts receivable.
Method for making bad debt provision for different portfolio:
Portfolio Method for making provision
Specific fund portfolio No bad debt provision provided
Ageing portfolio Ageing analysis
Use of ageing analysis for making bad debt provision in the portfolio:
Ratio of Ratio of accounts other accounts receivable receivable Ageing provision(%) provision(%) Within 1 year (including 1 year,
same applies to the below) 5 5 1-2 years 10 10 2-3 years 20 20 Over 3 years 100 100③ Accounts receivable individually insignificant but provided for bad debt separately
Accounts receivable which are individually insignificant but have the following features are subject to impairment tests separately by the Company. If there is objective evidence indicating that the accounts receivable are impaired, then impairment loss will be recognised and bad debts will be provided according to the difference when the present value of future cash flow is lower than its carrying amount, such as accounts receivable with dispute against counterparties or involved in litigation or arbitration; there is obvious objective of the accounts receivable indicated that the debtor is likely to fail to comply with the repayment obligation, etc.
(3) Reversal of provision for bad debts
If there are evidences indicating that the value of the account receivable is recovered and that recovery is connected to the event subsequent to the recognition of the loss, the impairment loss previously recognised will be reversed and recorded into profit or loss for the period. However, the carrying amount so reversed shall not exceed the amortised cost of the account receivable on the date of reversal on the assumption that no bad debt provision has been made.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 29
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
12. Inventories
Whether the Company needs to comply with the disclosure requirements for specific industries
No
(1) Classification of inventories
Inventories mainly include raw materials, work in progress, goods in stock, developing products and consumable biological assets etc.
(2) Pricing of inventories received and dispatched
Inventories are measured at their actual cost when obtained. Cost of an inventory consists of purchase costs, processing costs and other costs. When used and dispatched, inventories will be calculated with weighted average method.
The developing products of land development companies under the Company are initially measured at cost. The costs of developing products include preconstruction costs, expenditures for auxiliary facilities, expenses on construction and installation, borrowing costs incurred before the completion of the subject project and other related expenses during the course of the development. Once the inventories are delivered, the actual costs will be determined using specific measurement methods.
Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumable biological assets without a stock are stated at cost at initial recognition, and subsequently measured at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current period. The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or loss for the current period. The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying amount using the batch averaging method.
(3) Recognition of net realisable value of inventory and provision for inventory impairment
Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion, estimated sales expenses and taxes and levies in daily operation. The realisable value of inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.
At the balance sheet date, inventories are calculated at the lower of cost and net realisable value. Usually, provision for inventory impairment is made when the net realisable value is lower than the cost. Provisions for impairment of inventory shall be made according to the amount by which the cost of a single item exceeds its net realisable value. For large quantity and low value items of inventories, provision may be made based on categories of inventories. For items of inventories relating to a product line that is produced and marketed in the same geographical area and with the same or similar end uses or purposes, which cannot be practicable evaluated separately from other items in that product line, provision for decline in value of inventories may be determined on an aggregate basis.
After making the provision for inventory impairment, in case the factors causing inventory impairment no longer exists, and the net realisable value of an inventory is higher than its book-value, the original provision for inventory impairment shall be transferred back and incorporated into the profit or loss for the current period.
(4) We implement permanent inventory system as our inventory stock taking system.
(5) Low-value consumables and packaging materials are amortised when issued for use.
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Classified as assets held-for-sale
When a non-current asset can be sold immediately under the circumstances by the common practice, and the Company has passed a resolution to dispose of a non-current asset, and has signed an irrevocable contract with the transferee, and the transfer will be completed within a year, the non-current asset shall be accounted for as an asset held-for-sale, which will not be depreciated or amortised starting from the date of re-classification, and is stated at the lower of its carrying amount or its fair value less costs to dispose of. Non-current assets held-for-sale include an individual asset and disposal group. If a disposal group is a group of assets, and the goodwill arising from business combinations is allocated to the group of assets in accordance with “Accounting Standards for Business Enterprises No. 8– Impairment of Assets”, or the disposal group is an operation operating in such asset group, then the disposal group includes the goodwill arising from business combinations.
A single non-current asset classified as an asset held-for-sale or assets grouped in a disposal group should be listed separately in the balance sheet under current assets. Liabilities grouped in a disposal group and relating to transferring assets should be listed separately in the balance sheet under current liabilities.
When an asset or a disposal group previously recognised under assets held-for-sale no longer satisfy the conditions to be regarded as assets held-for-sale, the Company ceases to account for the asset as assets held-for-sale, and the asset is measured at the lower of: (1) the carrying amount of the asset or the disposal group prior to be classified as assets held-for-sale, adjusted for depreciation, amortisation or impairment as if it was not classified as assets held-for- sale; or (2) the recoverable amount of the asset or the disposal group on the date when the decision of not disposing of the asset or the disposal group is made.
14. Long-term equity investments
Long-term equity investments under this section refer to long-term equity investments in which the Company has control, joint control or significant influence over the investee. Long-term equity investment without control or joint control or significant influence of the Company is accounted for as available-for-sale financial assets or financial assets measured at fair value with any change in fair value charged to profit or loss. Details on its accounting policy please refer to Note V. 10. “Financial instruments”.
Joint control is theCompany’s contractually agreed sharing of control over an arrangement, which relevant activities of such arrangement must be decided by unanimously agreement from parties who share control. Significant influence is the power of the Company to participate in the financial and operating policy decisions of an investee, but to fail to control or joint control the formulation of such policies together with other parties.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 31
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Long-term equity investments(Cont’d)
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the cash paid, non-cash assets transferred as well as the carrying amount of the debts borne by the absorbing party shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. With the total face value of the shares issued as share capital, the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall be used to offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For business combination resulted in an enterprise under common control by acquiring equity of the absorbing party under common control through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they do not belong to “transactions in a basket”, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the aggregate of the carrying amount of the long-term equity investment before merging and the carrying amount the additional consideration paid for further share acquisition on the date of combination shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. Other comprehensive income recognised as a result of the previously held equity investment accounted for using equity method on the date of combination or recognised for available-for-sale financial assets will not be accounted for.
For a long-term equity investment acquired through a business combination involving enterprises not under common control, the initial investment cost of the long-term equity investment shall be the cost of combination on the date of acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer, liabilities incurred or borne and equity securities issued. For business combination resulted in an enterprise not under common control by acquiring equity of the acquiree under common control through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they do not belong to “transactions in a basket”, the initial investment cost of the long- term equity investment accounted for using cost method shall be the aggregate of the carrying amount of equity investment previously held by the acquiree and the additional investment cost. For previously held equity accounted for using equity method, relevant other comprehensive income will not be accounted for. For previously held equity investment classified as available-for-sale financial asset, the difference between its fair value and carrying amount, as well as the accumulated movement in fair value previously included in the other comprehensive income shall be transferred to profit or loss for the current period.
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Long-term equity investments(Cont’d)
(1) Determination of investment cost(Cont’d)
Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service, and valuation and consultation fees, and other related administration expenses are charged to profit or loss in the current period at the time such expenses incurred.
The long-term equity investment acquired through means other than a business combination shall be initially measured at its cost. Such cost is depended upon the acquired means of long-term equity investments, which is recognised based on the purchase cost actually paid by the Company, the fair value of equity securities issued by the Company, the agreed value of investment contract or agreement, the fair value or original carrying amount of the non-monetary asset exchange transaction which the asset will be transferred out of the Company, and the fair value of long-term equity investment itself. The costs, taxes and other necessary expenses that are directly attributable to the acquisition of the long-term equity investments are also included in the investment cost. For additional equity investment made in order to obtain significant influence or common control over investee without resulted in control, the relevant cost for long-term equity investment shall be the aggregate of fair value of previously held equity investment and additional investment cost determined according to “Accounting Standard for Business Enterprises No. 22– Recognition and measurement of Financial Instruments”.
(2) Subsequent measurement and method for profit or loss recognition
Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence on the investee are accounted for using equity method. In addition, long-term equity investments with control on the investee are accounted for using cost method and record in theCompany’s financial statements.
① Long-term equity investments accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. The cost for long-term equity investment is adjusted in the event of additional investment or investment recovery. Except receiving the actual consideration paid for the investment or the declared but not yet distributed cash dividends or profits which is included in the consideration, investment gains for the period is recognised as the cash dividends or profits declared by the investee.
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theinvestor’s interest in the fair value of theinvestee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial investment cost is less than theinvestor’s interest in the fair value of theinvestee’s identifiable net assets at the acquisition date, the difference shall be charged to profit or loss for the current period, and the cost of the long-term equity investment shall be adjusted accordingly.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 33
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Long-term equity investments(Cont’d)
(1) Determination of investment cost(Cont’d)
② Long-term equity investments accounted for using the equity method(Cont’d)
Under the equity method, investment gain and other comprehensive income shall be recognised based on theCompany’s share of the net profits or losses and other comprehensive income made by the investee, respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be reduced based on theCompany’s share of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income and profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted and included in the capital reserves. The Company shall recognise its share of theinvestee’s net profits or losses based on the fair values of theinvestee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto. In the event of inconformity between the accounting policies and accounting periods of the investee and the Company, the financial statements of the investee shall be adjusted in conformity with the accounting policies and accounting periods of the Company. Investment gain and other comprehensive income shall be recognised accordingly. In respect of the transactions between the Company and its associates and joint ventures in which the assets disposed of or sold are not classified as operation, the share of unrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Company. Investment gain shall be recognised accordingly. However, any unrealised loss arising from internal transactions between the Company and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets. In the event that the Company disposed of an asset classified as operation to its joint ventures or associates, which resulted in acquisition of long-term equity investment by the investor without obtaining control, the initial investment cost of additional long-term equity investment shall be the fair value of disposed operation. The difference between initial investment cost and the carrying amount of disposed operation will be fully included in profit or loss for the current period. In the event that the Company sold an asset classified as operation to its associates or joint ventures, the difference between the carrying amount of consideration received and operation shall be fully included in profit or loss for the current period. In the event that the Company acquired an asset which formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in accordance with “Accounting Standards for Business Enterprises No. 20 - Business combination”. All profit or loss related to the transaction shall be accounted for.
TheCompany’s share of net losses of the investee shall be recognised to the extent that the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of theinvestor’s net investment in the investee are reduced to zero. If the Company has to assume additional obligations, the estimated obligation assumed shall be provided for and charged to the profit or loss as investment loss for the period. Where the investee is making profits in subsequent periods, the Company shall resume recognising its share of profits after setting off against the share of unrecognised losses.
If there is debit variation in relation to the long-term equity investments in associates and joint venture held prior to first adoption of the Accounting Standards for Business Enterprises by the Company on 1 January 2007, the amounts amortised over the original residual term using the straight-line method is included in the profit or loss for the period.
③ Acquisition of minority interest
Upon the preparation of the consolidated financial statements, capital reserve is adjusted based on the difference between the additional long term equity investment from acquisition of minority interest and the share of net assets of the subsidiary attributable to the additional shareholding from the date of acquisition (or date of combination). In the case of insufficient capital surplus to offset impairment, retained earnings shall
be adjusted.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Long-term equity investments(Cont’d)
(1) Determination of investment cost(Cont’d)
④ Disposal of long-term equity investments
In these consolidated financial statements, for disposal of a portion of the long-term equity investments in a subsidiary without loss of control, the difference between disposal cost and disposal of long-term equity investments relative to the net assets of the subsidiary is charged to theowners’ equity. If disposal of a portion of the long-term equity investments in a subsidiary by the parent company results in a loss in control, it shall be accounted for in accordance with the relevant accounting policies as described in Note V. 6. (2) “Preparation Method of the Consolidated Financial Statements”.
On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the investment and the actual consideration paid is recognised through profit or loss in the current period. In respect of long-term equity investment accounted for using equity method with the remaining equity interest after disposal also accounted for using equity method, other comprehensive income previously underowners’ equity shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee on pro rata basis at the time of disposal. Theowners’ equity recognised for the movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis.
In respect of long-term equity investment accounted for using cost method with the remaining equity interest after disposal also accounted for using cost method, other comprehensive income recognised using equity method or the recognition and measurement standard of financial instruments before obtaining control over the investee shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee, and transferred to profit or loss for the current period on pro rata basis. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period on pro rata basis.
In the event of loss of control over investee due to partial disposal of equity investment by the Company, in preparing separate financial statements, the remaining equity interest which can apply common control or impose significant influence over the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest which cannot apply common control or impose significant influence over the investee after disposal, it shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing control shall be included in profit or loss for the current period. In respect of other comprehensive income recognised using equity method or the recognition and measurement standard of financial instruments before the Company obtained control over the investee, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when the control over investee is lost. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period at the time when the control over investee is lost. Of which, for the remaining equity interest after disposal accounted for using equity method, other comprehensive income and otherowners’ equity shall be transferred on pro rata basis. For the remaining equity interest after disposal accounted for using the recognition and measurement standard of financial instruments, other comprehensive income and otherowners’ equity shall be fully transferred.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 35
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Long-term equity investments(Cont’d)
(1) Determination of investment cost(Cont’d)
④ Disposal of long-term equity investments(Cont’d)
In the event of loss of common control or significant influence over investee due to partial disposal of equity investment by the Company, the remaining equity interest after disposal shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing common control or significant influence shall be included in profit or loss for the current period. In respect of other comprehensive income recognised under previous equity investment using equity method, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when equity method was ceased to be used. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period at the time when equity method was ceased to be used. The Company disposes its equity investment in subsidiary by a stage-up approach with several transactions until the control over the subsidiary is lost. If the said transactions belong to “transactions in a basket”, each transaction shall be accounted for as a single transaction of disposing equity investment of subsidiary and loss of control. The difference between the disposal consideration for each transaction and the carrying amount of the corresponding long-term equity investment of disposed equity interest before loss of control shall initially recognised as other comprehensive income, and subsequently transferred to profit or loss arising from loss of control for the current period upon loss of control.
15. Investment Property
Measurement of investment property
Measured by using the cost method
Depreciation or amortisation methods
Investment property refers to real estate held to earn rentals or for capital appreciation, or both.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of investment property only when the economic benefits associated with the asset will likely flow to the Company and its cost can be measured reliably. All other expenditures on investment property shall be included in profit or loss for the current period when incurred.
The Company adopts cost method for subsequent measurement of investment property, which is depreciated using the same policy as that for buildings.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note V. 20 “Impairment of long-term assets”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa), upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
In the event that an investment property is converted to an owner-occupied property, such property shall become fixed assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is converted to real estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall become an investment property since the date of its conversion. Investment property is measured at cost during its conversion. Upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be obtained from the disposal, the recognition of it as an investment property shall be terminated. When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying
amount and related tax and surcharges is recognised in profit or loss for the current period.
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
16. Fixed assets
(1) Conditions for recognition
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting year. Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset and its cost can be measured reliably. A fixed asset shall be initially measured at cost and the effect of any expected costs of abandoning the asset at the end of its use.
(2) Depreciation method
Useful lives Estimated Annual Depreciation of depreciation residual depreciation Category method (Year) value(%) rate(%) Housing and building structure Straight-line method 20-40 5-10 2.25-4.75 Machinery and equipment Straight-line method 8-20 5-10 4.50-11.88 Transportation equipment Straight-line method 5-8 5-10 11.25-19.00 Electronic equipment Straight-line method 5 5-10 18.00-19.00 and others
Estimated net residual value of a fixed asset is the estimated amount that the Company would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the stage and in the condition expected at the end of its useful life.
(3) Methods of impairment test and provision of fixed assets
The method for impaired test of fixed assets and measurement of impairment provision are detailed in Note V. 20 “Impairment of long-term assets”.
(4) Recognition, accounting and depreciation method of fixed assets acquired under finance leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. For fixed assets acquired under finance leases, the basis for provision of leased assets depreciation is the same as that of self-owned fixed assets. When it can be reasonably determined that the ownership of a leased asset will be transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the lease asset is depreciated over the shorter period of the lease term and the period of expected use.
(5) Explanation on other matters
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is probable that economic benefits associated with the asset will flow to Chenming Paper and the relevant cost can be measured reliably; meanwhile the carrying amount of the replaced part shall be derecognised. Other subsequent expenditures shall be charged to profit or loss when incurred.
Fixed assets are derecognised when there is no economic benefit arising from disposal or expected use or disposal of fixed assets. When a fixed asset is sold, transferred, retired or damaged, the Company shall recognise the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes in profit or loss for the current period.
The Company reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed asset or the depreciation method used shall be accounted for as a change in accounting estimate.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 37
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
17. Construction in progress
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before it has reached the working condition for its intended use, and other related expenses during the construction period. A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended use.
The method for impaired test of construction in progress and measurement of impairment provision are detailed in Note V. 20 “Impairment of long-term asset”.
18. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. For borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, when expenditures for the asset and borrowing costs are being incurred, activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced, such borrowing costs shall be capitalised as part of the cost of that asset; and capitalisation shall discontinue when the qualifying asset is ready for its intended use or sale. Other borrowing costs shall be recognised as expense in the period in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used into banks or any investment income on the temporary investment of those funds. Where funds are borrowed for general purpose, the Company shall determine the amount of interest to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings. The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign currency shall be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months, until the acquisition, construction or production of the qualifying asset is resumed.
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
19. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Company.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be recognised as cost of the intangible asset only if it is probable that economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably. Other expenditures on an item asset shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g. plants), related land use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For buildings and structures purchased, the purchase consideration shall be allocated among the land use right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation, the consideration shall be recognised in full as fixed assets.
An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any accumulated impairment loss provision and amortised using the straight-line method over its useful life when the asset is available for use. Intangible assets with indefinite life are not amortised.
The Company shall review the useful life of intangible asset with a finite useful life and the amortisation method applied at least at each financial year-end. A change in the useful life or amortisation method used shall be accounted for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the Company shall review the useful life of the asset in each accounting period. If there is evidence indicating that the useful life of that intangible asset is finite, the Company shall estimate the useful life of that asset and apply the accounting policies accordingly.
(2) Research and development expenditure
Research and development expenditure of the Company was divided into expenses incurred during the research phase and expenses incurred during the development phase.
Expenses incurred during the research phase are recognised as profit or loss in the current period.
Expenses incurred during the development phase that satisfy the following conditions are recognised as intangible assets, while those that do not satisfy the following conditions are accounted for in the profit or loss for the current period:
① it is technically feasible that the intangible asset can be used or sold upon completion;
② there is intention to complete the intangible asset for use or sale;
③ the intangible asset can produce economic benefits, including there is evidence that the products produced using the intangible asset has a market or the intangible asset itself has a market; and if the intangible asset is for internal use, there is evidence that there exists usage for the intangible asset;
④ there is sufficient support in terms of technology, financial resources and other resources in order to complete the development of the intangible asset, and there is capability to use or sell the intangible asset;⑤ the expenses attributable to the development phase of the intangible asset can be measured reliably. If the expenses incurred during the research phase and the development phase cannot be distinguished separately, all development expenses incurred are accounted for in the profit or loss for the current period. (3) Methods of impairment test and provision of intangible assets
The method for impaired test of intangible assets and measurement of impairment provision are detailed in Note V.
20 “Impairment of long-term assets”.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 39
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
20. Impairment of long-term asset
The Company will judge if there is any indication of impairment as at the balance sheet date in respect of noncurrent non-financial assets such as fixed assets, construction in progress, intangible assets with a finite useful life, investment properties measured at cost, and long-term equity investments in subsidiaries, joint controlled entities and associates. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefinite useful life and intangible assets beyond working conditions will be tested for impairment annually, regardless of whether there is any indication of impairment.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the impairment provision will be made according to the difference and recognised as an impairment loss. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. Anasset’s fair value is the price in a sale agreement in anarm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair value shall be based on the best available information. Costs of disposal are expenses attributable to disposal of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from the asset over the course of continued use and final disposal is determined as the amount discounted using an appropriately selected discount rate. Provisions for assets impairment shall be made and recognised for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company shall determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest group of assets capable of generating cash flows independently. For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the recoverable amount is less than the carrying amount, the Company shall recognise an impairment loss. The amount of impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of other assets (other than goodwill) within the asset group or set of asset groups, pro rata on the basis of the carrying amount of each asset.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of the restorable value.
21. Long-term prepaid expenses
Long-term prepaid expenses are expenditures and other expenses which have incurred but that shall be amortised over the current period and subsequent periods of more than one year. Long-term prepaid expenses of the Company mainly include expenses on improvement of fixed assets and woodland rent. Long-term prepaid expenses are amortised over the estimated benefit period using the straight-line method.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
22. Employee benefits
Staff remuneration of the Company mainly includes short-term staff remuneration, post-employment benefits and termination benefits, in which:
Short-term remuneration mainly includes salaries, bonuses, allowance and subsides, staff welfare, medical insurance premium, maternity insurance premium, work-related injury insurance premium, housing provident funds, union operation costs and employee education costs and non-monetary welfare etc. Short-term remuneration incurred during the accounting period in which theCompany’s staff provided services for the Company is recognised as liability, and included in profit or loss for the current period or related asset costs. Of which, non-monetary welfare is measured at fair value.
Post-employment benefits mainly include pension insurance premium and unemployment insurance premium. Post- employment benefits mainly adopt defined contribution plan. Relevant contribution amount is included in related asset costs or profit or loss for the current period during the period in which the expenses incurred.
When the Company terminates the employment relationship with employees before the end of the employment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, the Company shall recognise employee compensation liabilities arising from compensation for staff dismissal and included in profit or loss for the current period, when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labour relationship plans and employee redundant proposals; and the Company recognise cost and expenses related to payment of compensation for dismissal and restructuring, whichever is earlier. However, if the compensation for termination of employment is not expected to be fully paid within 12 months from the reporting period, it shall be accounted for other long-term staff remuneration.
The early retirement plan shall be accounted for in accordance with the accounting principles for compensation for termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire before schedule from the date on which the employees stop rendering services to the scheduled retirement date, shall be recognised (as compensation for termination of employment) in the current profit or loss by the Company if the recognition principles for provisions are satisfied.
The Company does not provide any other long-term employee benefit for its staff.
23. Accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued liabilities: (1) The obligation is a current obligation borne by the Company; (2) it is likely that an outflow of economic benefits will be resulted from the performance of the obligation; and (3) the amount of the obligation can be reliably measured. At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses required for the performance of existing obligations, after taking into account relevant risks, uncertainties, time value of money and other factors pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount recognised shall not be more than the carrying amount of accrued liabilities.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 41
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
24. Preference shares, perpetual bonds and other financial instruments
(1) Classification of perpetual bonds and preference shares
Perpetual bonds, preference shares and other financial instruments issued by the Company are classified as equity instruments when all of the following conditions are satisfied:
① The financial instruments have no contractual obligation to pay in cash or other financial assets to other parties nor to exchange financial assets or financial liabilities under potential adverse condition with other parties;
② If the financial instrument will or may be settled in theentity’s own equity instruments, it is a non- derivative instrument that includes no contractual obligations to deliver a variable number of its own equity instruments; or a derivative that will be settled only by the Company exchanging a fixed amount of cash or other financial asset for a fixed number of its own equity instruments.
Other than financial instruments classified as equity instruments according to the above conditions, other financial instruments issued by the Company shall be classified as financial liabilities.
The financial instruments issued by the Company which are compound financial instruments are recognised as a liability based on the fair value of the liability component, and the amount net of the fair value of the liability component from the actual amount received is recognised as “other equity instruments”. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components in proportion to the allocation of gross proceeds.
(2) Accounting treatment of perpetual bonds and preference shares
For financial instruments classified as financial liabilities (such as perpetual bonds and preference shares), except borrowing costs qualifying for capitalisation (please refer to this Note V. 18 “Borrowing costs”), its related interest, dividends, gains or losses, and gains or losses arising from redemption or refinancing are credited to profit or loss for the current period.
For financial instruments classified as equity instruments (such as perpetual bonds and preference shares), its issue (including refinancing), repurchase, sale or cancellation are treated by the Company as changes in equity, with related transaction costs deducted from equity. TheCompany’s distribution to holders of equity instruments are treated as a distribution of profits.
Changes in the fair value of equity instruments are not recognised by the Company.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
25. Revenue
Whether the Company needs to comply with the disclosure requirements for specific industries
No
(1) Revenue from sales of goods
Revenue is recognised when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods, retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, will receive the economic benefits associated with the transaction, and can reliably measure the relevant amount of revenue and costs. Confirmation time for sales revenue: In terms of domestic sales, confirmation will be made on the day when goods are delivered to the clients. While in terms of overseas sales, confirmation will be made on the day when goods are loaded on board and declared.
(2) Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the balance sheet date, recognise the revenue from the rendering of services employing the percentage of completion method. The completion schedule of transaction concerning the rendering of services shall be ascertained according to the proportion of service costs incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall concurrently satisfy:① The relevant amount of revenue can be reliably measured;② it is probable that the economic benefits will flow into the Company;③ the completion schedule of the transaction can be reliably ascertained; and④ transaction costs incurred and to be incurred can be reliably measured.
When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall recognise the revenue from the rendering of services based on the cost of rendering services already incurred and expected to be compensated, and the cost of rendering services incurred shall be recognised as an expense for the current period. If the cost of rendering services is expected not to be compensated, it shall be recognised as an expense.
When a contract or agreement signed by the Company includes sales of goods and rendering of services, if sales of goods and rendering of services can be differentiated and separately measured, they will be recognised respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately measured, they will be recognised as sales of goods in full.
(3) Revenue from rendering of services
Revenue from rendering of services is recognised as income on the accrual basis in accordance with the underlying contracts or agreements.
(4) Interest income
Interest income is calculated based on the time during which theCompany’s monetary fund, and the effective interest rates.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 43
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
26. Government grants
Government grants are transfer of monetary assets or non-monetary assets from the government to the Company at no consideration, excluding capital considerations from the government as an owner of the Company. Government grants are classified into government grants related to assets and government grants related to income. Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset formation are classified as related to assets. Other government grants are classified as related to revenue. If related government documents do not specify the objective of the grants, the grants are classified as related to assets or income as follows: (1) In case a project for which the grants are granted is specified in such documents, the grants are classified as related to assets and income based on the budgeted ratio of the expenditure on asset formation and the expenditure recorded as expenses, where such ratio should be reviewed and, if necessary, changed on each balance sheet date; and (2) in case of general description without specifying any project in such documents, the grants are classified as related to income. If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount and recognised immediately in profit or loss for the current period. Government grants are generally recognised when received and measured at the amount actually received, but are measured at the amount likely to be received when there is conclusive evidence at the end of the accounting period that the Company will meet related requirements of such grants and will be able to receive the grants. The government grants so measured should also satisfy the following conditions: (1) the amount of the grants be confirmed with competent authorities in written form or reasonably deduced from related requirements under financial fund management measures officially released without material uncertainties; (2) the grants be given based on financial support projects and fund management policies officially published and voluntarily disclosed by local financial authorities in accordance with the requirements under disclosure of government information, where such policies should be open to any company satisfying conditions required and not specifically for certain companies; and (3) the date of payment be specified in related documents and the payment thereof be covered by corresponding budget to ensure such grants will be paid on time as specified.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over the periods in which the related costs are recognised; if the grant is a compensation for related expenses or losses already incurred, the grant shall be recognised immediately in profit or loss for the current period.
For the repayment of a government grant already recognised, if there is any related deferred income, the repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognised immediately in profit or loss for the current period.
27. Deferred income tax assets/deferred income tax liabilities
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable profits, which are the basis for calculating the current income tax expense, are determined after adjusting the accounting profits before tax for the year in accordance with relevant requirements of tax laws.
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
27. Deferred income tax assets/deferred income tax liabilities(Cont’d)
(2) Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base, and the difference between the tax base and the carrying amount of those items that are not recognised as assets or liabilities but have a tax base that can be determined according to tax laws, shall be recognised as deferred income tax assets and deferred income tax liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Company recognises the corresponding deferred income tax liability for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except when both of the following conditions are satisfied: the Company is able to control the timing of the reversal of the temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are not recognised for deductible temporary differences related to the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Company recognises the corresponding deferred income tax asset for deductible temporary differences associated with investments in subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised, except when both of the following conditions are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is not probable that taxable profits will be available in the future, against which the temporary difference can be utilised. Chenming Paper recognises a deferred income tax asset for the carry forward of deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilised.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, according to the requirements of tax laws.
At the balance sheet date, Chenming Paper shall review the carrying amount of a deferred income tax asset. If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred income tax asset to be utilised, the carrying amount of the deferred income tax asset shall be reduced. Any such reduction in amount shall be reversed when it becomes probable that sufficient taxable profits will be available. (3) Income tax expense
Income tax expense comprises current income tax expense and deferred income tax expense.
Current income tax expense (current income tax income) and deferred income tax expense (deferred income tax income) are included in profit or loss for the current period, except for: recognised as other comprehensive income or current income tax and deferred income tax related to transactions or events that are directly recognised in other comprehensive income orowners’ equity, which are recognised directly inowners’ equity, and deferred income tax arising from a business combination, which is adjusted against the carrying amount of goodwill.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 45
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
27. Deferred income tax assets/deferred income tax liabilities(Cont’d)
(4) Offset of income tax
After granted the legal rights of net settlement and with the intention to use net settlement or obtain assets, repay debt, the Company, at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.
The Company was granted the legal rights of net settlement of current income tax assets and current income tax liabilities. Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid by the same entity liable to pay tax to the same tax collection and management authority or related to different entities liable to pay tax, but the relevant entity liable to pay tax is intended to apply net settlement of current income tax assets and liabilities or, at the same time, obtain assets, repay debt whenever every deferred income tax assets and liabilities with importance would be reversed in the future, the Company records the net amount after offsetting its current income tax assets and current income tax liabilities.
28. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. All other leases are classified as operating leases.
(1) Operating lease business with the Company recorded as lessee
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current period using the straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for the current period. Contingent rent is recognised as profit or loss for the current period upon occurrence. (2) Operating lease business with the Company recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the lease term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for as profit or loss for the current period on the same basis as recognition of rental income over the entire lease period; the initial direct cost where the amount is fewer is included in the profit or loss for the period when incurred. Contingent rental is accounted for as profit or loss for the period in which it is incurred.
(3) Financing lease business with the Company recorded as lessee
On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value of the leased asset and the present value of minimum lease payment at the beginning date of the lease. Minimum lease payment shall be the entry value of long-term accounts payable, with difference recognised as unrecognised financing expenses. In addition, initial direct costs attributable to leased items incurred during the process of lease negotiation and signing of lease agreement shall be included in the value of leased assets. The balance of minimum lease payment after deducting unrecognised financing expenses shall be accounted for long-term liability and long-term liability due within one year.
Unrecognised financing expenses shall be recognised as financing expenses for the current period using effective interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it incurred.
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
28. Lease(Cont’d)
(4) Financing lease business with the Company recorded as lessor
On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of minimum lease receivable and initial direct costs at the beginning date of the lease. The unsecured balance shall be recorded. The aggregate of minimum lease receivable, initial direct costs and unsecured balance and the different between their present values shall be recognised as unrealised financing income. The balance of lease receivable after deducting unrecognised financing income shall be accounted for long-term debt and long-term debt due within one year.
Unrecognised financing income shall be recognised as financing income for the current period using effective interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it incurred.
(5) The debts arising from the financing lease business shall be provided for impairment at5% to10%. 29. Discontinued operation
Discontinued operation refers to the operation disposed or classified as held-for-sale by the Company and presented separately under operation segments and financial statements, which has fulfilled one of the following criteria:① it represents an independent key operation or key operating region;② it is part of the proposed disposal plan on an independent key operation or proposed disposal in key operating region; or③ it only establishes for acquisition of subsidiary through disposal.
30. Repurchase of shares
Share repurchase consideration paid and transaction costs to reduce theowner’s equity, repurchase, transfer or cancellation of ChenmingPaper’s shares, the gains or losses are not recognised.
In respect of transfer of treasury shares, the difference between the actual amount received and the carrying amount of treasury shares shall be included in capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and retained profits. Treasury shares are cancelled at par value and by the number of shares cancelled to reduce the share capital. The difference between the book balance and the nominal value of the treasury shares shall be offset against the capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and retained profits.
31. Changes in Significant Accounting Policies and Estimates
(1) Changes in significant accounting policies
□ Applicable√ Not applicable
(2) Changes in significant accounting estimates
□ Applicable√ Not applicable
32. Comparative figures
Certain comparative figures for prior periods have been restated in conformity with the currentyear’s financial statement presentation.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 47
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
33. Critical accounting judgments and estimates
The Company needs to make judgments, estimates and assumptions as to the carrying amount of statement items which cannot be accurately calculated during the application of theCompany’s accounting policies. Such judgments, estimates and assumptions are made based on the historical experiences of theCompany’s management and taking into account other relevant factors, which may affect the reported amount of revenue, expenses, assets and liabilities and disclosure of contingent liabilities at the balance sheet date. However, the outcome from such estimate uncertainties may different from the current estimation of theCompany’s management, which may cause critical adjustment to the carrying amount of assets or liabilities which may be affected in the future.
The Company regularly reviews the aforesaid judgments, estimates and assumptions on the basis of continued operation. A revision to accounting estimates is recognised in the period in which the estimate is revised if it only affects that period. A revision is recognised in the period of the revision and future periods if it affects both current and future periods.
At the balance sheet date, the critical areas where Company needs to make judgments, estimates and assumptions as to the items amount of financial statements are set out below:
(1) Classification of leases
The Company classifies its leases as operating lease and financing lease in accordance with “Accounting Standard for Business Enterprises No. 21– Leases”. When classifying leases, the management needs to analyse and judge whether all risks and returns relating to the ownership of leased out assets have transferred to the leasee, or whether the Company has obliged to all risks and returns relating to the ownership of leased assets. (2) Provision for bad debts
The Company adopts the allowance method to account for bad debt loss under the accounting policies of accounts receivable. Impairment of accounts receivable is based on the recoverability of assessed accounts receivable. Given themanagement’s judgment and estimate required for impairment of accounts receivable, the difference between the actual outcome and original estimate will affect the carrying amount of accounts receivable and provision and reversal of bad debts of accounts receivable during the estimate revision period.
(3) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the Company makes allowance for inventories which have costs higher than net realisable value or become obsolete and slow-moving. Write-down of inventories to their net realisable values is based on the sale ability of the evaluated inventory and their net realisable values. Given themanagement’s judgments and estimates required for inventory impairment on the basis of definite evidence, purpose of holding the inventories and other factors, the difference between the actual outcome and original estimate will affect the carrying amount of inventories and provision and reversal of bad debts of inventories allowance during the estimate revision period.
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
33. Critical accounting judgments and estimates(Cont’d)
(4) Fair value of consumable biological assets
A consumable biological asset is measured at fair value when there is a stock. A stock is judged to be formed when the consumable biological asset - timber survives well after a growth period and the merchantable timber exceeds 0.8 cubic metres.
The fair value of a consumable biological asset is discounted using expected cash flow and estimated and measured using income approach.
(5) Impairment of available-for-sale financial assets
In respect of impairment of available-for-sale financial assets, whether impairment loss shall be recognised in income statement significantly depends on the judgments and assumptions of the management. While making judgments and assumptions, the Company shall assess the excess of cost of theinvestee’s identifiable net assets attributable to the investment over fair value and the duration.
(6) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Company makes its judgment as to whether there is any evidence indicating potential impairment of non-current assets other than financial assets. Intangible assets with indefinite useful life shall be tested for impairment when there is any indication of impairment in addition to the annual impairment testing. Other non-current assets other than financial assets shall be tested for impairment if there is any evidence indicating that their carrying amount cannot be recovered.
When the carrying amount of an asset or asset groups is higher than the recoverable amount, being the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset, it indicates impairment.
The net amount of the fair value less costs of disposal is determined by making reference to the price in a sale agreement in anarm’s length transaction or the observable market price less the incremental costs directly attributable to such assets disposal.
In projecting the present value of the future cash flows, critical judgments shall be made to the output, selling price and relevant operating costs of such assets (or asset groups) and the discount rate applied in calculating the discount. In estimating the recoverable amount, the Company may adopt all relevant materials including the projections as to the output, selling price and relevant operating costs based on reasonable and supportive assumptions.
The test shall be performed at least once a year as to whether there is any impairment. This requires an estimate for the present value of the future cash flows of the asset groups or sets of asset groups to which goodwill is allocated. In estimating the present value of the future cash flows, the Company needs to estimate the cash flows generated from the future asset groups or sets of asset groups. Meanwhile, the present value of future cash flows is determined using an appropriately selected discount rate.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 49
INTERIM FINANCIAL REPORT 2017
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
33. Critical accounting judgments and estimates(Cont’d)
(7) Depreciation and amortisation
The Company shall provide depreciation and amortisation for investment properties, fixed assets and intangible assets over their useful lives and after taking into account of their residual value, using straight-line method. The Company shall regularly review the useful lives to determine the amount depreciated and amortised to be accounted for in each reporting period. The useful life is determined by the Company according to its previous experience on the similar assets and estimated technical innovation. If there is any material change in the previously made estimate, the depreciation and amortisation will be adjusted over the future period.
(8) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there will be sufficient taxable profits against which the deducible loss is available. This requires theCompany’s management to apply numerous judgments to estimate the time and amount generated from the future taxable profits so as to determine the amount of deferred income tax assets with reference to the tax planning strategy. (9) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Company during its ordinary course of business. The approval from the tax authority is required for pre-tax expending of some items. Any difference between the final recognition outcome of such tax matters and the initially estimated amount will exert an effect on the current income tax and deferred income tax during their final recognition period. VI. Taxation
1. Main Tax Types and Tax Rates
Tax type Tax rate
Value added tax 17% for general,13% for sales of gas and water and6% for the service industry. Value-added tax is computed on the difference after deduction of input value-added tax
Urban maintenance and construction tax 7% of actual payment of turnover tax
Enterprise income tax 25% of taxable income; for the companies which are subject to preferential policies, please refer to Note V. 2(1); the overseas companies shall pay taxes at the tax rate pursuant to the requirements of the countries or regions where the companies are located Educational surcharges 3% of actual payment of turnover tax
Local educational surcharges 2% of actual payment of turnover tax
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VI. Taxation(Cont’d)
2. Tax Incentives
(1) Enterprise Income Tax
On 10 December 2015, the Company received a high and new technology enterprise certificate with a certification number of GR201537000611. Pursuant to the requirements under the Law of thePeople’s Republic of China on Enterprise Income Tax and the relevant policies, the Company is subject to a corporate income tax rate of15% of taxable income, and is entitled to the preferential treatment from 2016 to 2018.
Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201537000228 on 10 December 2015. Pursuant to the requirements under the Law of thePeople’s Republic of China on Enterprise Income Tax and the relevant policies, Shouguang Meilun is subject to a corporate income tax rate of15% of taxable income, and is entitled to the preferential treatment from 2016 to 2018.
Zhanjiang Chenming Pulp& Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201544000146 on 30 September 2015. Pursuant to the requirements under the Law of thePeople’s Republic of China on Enterprise Income Tax and the relevant policies, Zhanjiang Chenming is subject to a corporate income tax rate of15% of taxable income, and is entitled to the preferential treatment from 2016 to 2018.
Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201622000039 on 1 November 2016. Pursuant to the requirements under the Law of thePeople’s Republic of China on Enterprise Income Tax and the relevant policies, Jilin Chenming is subject to a corporate income tax rate of15% of taxable income, and is entitled to the preferential treatment from 2016 to 2018.
Pursuant to the requirements of Rule 27 of Law of thePeople’s Republic of China on Enterprise Income Tax(《中華人民共和國企業所得稅法》) and Rule 86 of Regulations for the Implementation of Law of thePeople’s Republic of China on Enterprise Income Tax(《中華人民共和國企業所得稅法實施條例》), subsidiaries of Chenming Paper, namely, Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming Arboriculture Co., Ltd. are engaged in arboriculture cultivating and thus exempt from corporate income tax.
Pursuant to the “Revenue Bill 2008” passed by The Legislative Council of the Hong Kong Special Administrative Region on 26 June 2008, Chenming (HK) Limited, a subsidiary of Chenming Paper, has been subject to a corporate income tax rate of16.5% commencing 2008, and the applicable tax rate for 2016 was16.5%. Except for the above preferential policies, other subsidiaries of the Company are subject to enterprise income tax rate of25%.
(2) Value-added Tax (“VAT”) incentives
Pursuant to the Notice on Issuing the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of Resources by the Ministry of Finance and the State Administration of Taxation (Cai Shui[2015] No. 78), Zhanjiang Chenming New-style Wall Materials Co., Ltd., a subsidiary of the Company, produces bricks and blocks using waste residues and is therefore subject to a preferential policy of an immediate VAT refund of70% in 2016.
Pursuant to the Notice on Issuing the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of Resources by the Ministry of Finance and the State Administration of Taxation (Cai Shui[2015] No. 78), Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produces products that apply integrated use of resources and is therefore subject to a preferential policy of an immediate VAT refund of70%.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 51
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB Item Closing balance Opening balance Cash on hand 1,937,873.98 1,920,226.94 Bank deposit 2,419,553,548.55 1,977,940,818.68 Other monetary funds 10,120,006,052.95 8,130,069,273.87 Total 12,541,497,475.48 10,109,930,319.49 Of which: Total deposits with overseas banks 168,755,726.85 142,776,755.56 Note:① Other monetary funds of RMB2,300,611,785.00 (31 December 2016: RMB2,451,941,798.13) were the guarantee deposit for the application for bank acceptance with the banks by the Company.
② Other monetary funds of RMB1,452,051,797.35 (31 December 2016: RMB1,017,170,039.57) were the guarantee deposit for the application for letter of credit with the banks by the Company.
③ Other monetary funds of RMB5,513,885,243.14 (31 December 2016: RMB4,022,026,785.91) were the guarantee deposit for the application for guarantees with the banks by the Company
④ Other monetary funds of RMB522,257,227.46 (31 December 2016: RMB372,430,650.26) were the guarantee deposit for the application for loans with the banks by the Company
⑤ Other monetary funds of RMB331,200,000.00 (31 December 2016: RMB266,500,000.00) were the statutory deposit reserve funds with thePeople’s Bank of China by Shandong Chenming Group Finance Co., Ltd., a subsidiary of the Company
2. Bills receivable
(1) Classification of bills receivable
Unit: RMB Item Closing balance Opening balance Bank acceptance bills 2,145,126,472.85 1,590,460,875.23 Commercial acceptance bills 100,000,000.00
Total 2,245,126,472.85 1,590,460,875.23 (2) Bills receivable of the Company pledged at the end of the period
Unit: RMB Pledged amount at the end of Item the period Bank acceptance bills 1,259,355,685.71 Total 1,259,355,685.71
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
2. Bills receivable(Cont’d)
(3) Outstanding bills receivable endorsed or discounted by the Company as at the end of the period
Unit: RMB Derecognised Recognised amount as at amount as at the end of the end of Item the period the period Bank acceptance bills 3,568,406,501.74
Total 3,568,406,501.74
(4) Other explanation
As at 31 December 2017, bills at the carrying amount of RMB595,051,159.66 (31 December 2016: RMB399,133,608.25) were pledged in exchange for short-term borrowings of RMB560,332,305.23. As at 31 December 2017, bills at the carrying amount of RMB39,000,000.00 (31 December 2016: RMB238,738,261.00) were pledged for the issuance of acceptance bills of RMB39,000,000.00. As at 31 December 2017, bills at the carrying amount of RMB625,304,526.05 were pledged for the issuance of guarantees of RMB599,069,856.00. 3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB Closing balance Opening balance
Book balance Bad debts provision Carrying Book balance Bad debts provision Carrying Category Amount Percentage Amount Percentage amount Amount Percentage Amount Percentage amount Accounts receivable that are
individually significant and
provided for bad debts separately 38,728,887.83 0.94% 38,728,887.83 100.00% 38,728,887.83 0.90% 38,728,887.83 100.00% Accounts receivable that are
provided for bad debts on
credit risk features portfolio basis 4,072,088,648.05 99.06% 304,373,655.38 7.47% 3,767,714,992.67 4,275,829,807.39 99.10% 301,764,703.24 7.06% 3,974,065,104.15 Receivables that are individually
insignificant and are provided for
bad debts separately 107,640.12 0.00% 107,640.12 100.00% Total 4,110,817,535.88 100.00% 343,102,543.21 3,767,714,992.67 4,314,666,335.34 100.00% 340,601,231.19 7.89% 3,974,065,104.15
SHANDONG CHENMING PAPER HOLDINGS LIMITED 53
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(1) Disclosure of accounts receivable by category(Cont’d)
Accounts receivable that are individually significant and are provided for bad debts separately as at the end of the period:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Accounts Bad debt
Receivable (by entity) receivable provision Percentage Reason for provision Foshan Shunde Xingchen
Paper Co., Ltd. 26,236,528.70 26,236,528.70 100.00% Unlikely to be recovered Beijing Huaxia Cultural
Media Co., Ltd. 9,072,165.42 9,072,165.42 100.00% Unlikely to be recovered Jiangxi Longming
Enterprise Co., Ltd. 1,763,987.74 1,763,987.74 100.00% Unlikely to be recovered Nanchang Xingbo
Paper Co., Ltd. 1,656,205.97 1,656,205.97 100.00% Unlikely to be recovered Total 38,728,887.83 38,728,887.83 ——
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Account Bad debt
Ageing receivable provision Percentage Within 1 year
Of which: within 3 months 2,841,804,946.99 142,090,247.35 5.00% Within 4-6 months 452,054,909.78 22,602,745.49 5.00% 7-12 months 148,596,470.73 7,429,823.54 5.00% Sub-total for within 1 year 3,442,456,327.50 172,122,816.38 5.00% 1-2 years 152,856,054.23 15,285,605.42 10.00% 2-3 years 66,312,183.37 13,262,436.67 20.00% Over 3 years 103,702,796.91 103,702,796.91 100.00% Total 3,765,327,362.01 304,373,655.38 8.08% Explanation on the basis of recognition of the portfolio:
Accounts receivable using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the current period amounted to RMB28,409,408.01. The amount for bad debt provision recovered or reversed during the current period was RMB25,908,095.99.
(3) Top five accounts receivable based on to closing balance of debtors
The total amount of top five accounts receivable according to closing balance of debtors of the Company for the year was RMB495,451,420.66, which accounted for12.05% of the closing balance of the total accounts receivable. The total closing balance of corresponding bad debt provision amounted to RMB26,608,431.78. 4. Prepayments
(1) Presentation of prepayments stated according to ageing analysis
Unit: RMB Closing balance Opening balance
Ageing Amount Percentage Amount Percentage Within 1 year 1,458,107,677.37 90.11% 1,426,710,882.76 94.40% 1-2 years 160,086,615.14 9.89% 84,651,791.88 5.60% Total 1,618,194,292.51 — 1,511,362,674.64 — (2) Top five prepayment according to closing balance of prepaid parties
Percentage Reason for
Name of entity Amount (%) Term being unsettled
Guangdong Lepeng 147,556,152.59 9.12 Within 1 year Prepayments for goods Trading Co. Ltd. according to
the agreed contract All villages of 85,205,510.40 5.27 Within 1 year The deposit for timber Huanggang City and 1-2 years according to
the agreed contract Jiangxi Province Zhonglian 46,085,730.21 2.85 Within 1 year Prepayments for goods Energy Development according to
Co., Ltd., Nanchang the agreed contract branch company
Junhong (Shanghai) 41,417,292.27 2.56 Within 1 year Prepayments for goods International Trade according to
Co., Ltd. the agreed contract Henan Xinyu International 36,891,253.39 2.28 Within 1 year Prepayments for goods Pulp and Paper Co., Ltd. according to
the agreed contract Total 357,155,938.86 22.07
SHANDONG CHENMING PAPER HOLDINGS LIMITED 55
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
5. Other receivables
(1) Disclosure of other receivables according to category
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage Amount Percentage Book balance Amount Percentage Amount Percentage Book balance Receivables that are individually
significant and are provided for
bad debts separately 15,121,825.16 0.89% 15,121,825.16 100.00% Accounts receivable that are
provided for bad debts on
credit risk features portfolio basis 1,923,689,876.44 100.00% 103,723,833.33 5.39% 1,819,966,043.11 1,683,132,593.75 98.86% 68,917,948.27 4.09% 1,614,214,645.48 Receivables that are individually
insignificant and are provided for
bad debts separately 4,335,364.21 0.25% 4,335,364.21 100.00% Total 1,923,689,876.44 100.00% 103,723,833.33 5.39% 1,819,966,043.11 1,702,589,783.12 100.00% 88,375,137.64 5.19% 1,614,214,645.48 Other receivables that are individually significant and are provided for bad debts separately as at the end of the period:
□ Applicable√ Not applicable
Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Other Bad debt
Ageing Receivables provision Percentage Items within 1 year
Within 1 year 177,030,956.77 8,851,547.84 5.00% Subtotal for within 1 year 177,030,956.77 8,851,547.84 5.00% 1-2 years 11,266,726.14 1,126,672.61 10.00% 2-3 years 29,122,182.68 5,824,436.54 20.00% Over 3 years 87,921,176.34 87,921,176.34 100.00% Total 305,341,041.93 103,723,833.33
Explanation on the basis of recognition of the portfolio:
Other receivables using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
Other receivables using other methods for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
5. Other receivables(Cont’d)
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the year amounted to RMB24,387,819.69. The amount for bad debt provision recovered or reversed during the period was RMB9,039,124.00.
(3) Top five other receivables according to closing balance of debtors
Unit: RMB Percentage of
closing balance Closing balance Closing of total other of bad debt Name of entity Nature balance Ageing receivables provision Wuhan Chenming Open credit 1,284,982,919.14 Within 1 year, 66.80% 0.00 Wan Xing Real Estate 1-2 years,
Co., Ltd. 2-3 years and
3-4 years
Xiashan Customs Prepaid duties 87,310,538.89 Within 1 year 4.54% 4,365,526.94 of the PRC
Shouguang City Litigation fee 17,731,500.00 Within 1 year 0.92% 886,575.00People’s Court
Changle County Judicial deduction 16,450,000.00 Within 1 year 0.86% 822,500.00People’s Court
Guangdong Zhongtuo Open credit 15,200,000.00 3-4 years 0.79% 15,200,000.00 Construction Co., Ltd
Total — 1,421,674,958.03 — 73.90% 21,274,601.94 6. Inventories
(1) Categories of inventories
Unit: RMB Closing balance Opening balance
Impairment Carrying Impairment Carrying Item Book balance provision amount Book balance provision amount Raw materials 2,362,149,883.05 8,138,005.87 2,354,011,877.18 1,791,864,383.60 8,138,005.87 1,783,726,377.73 Work-in-process products 89,062,386.29 1,835,271.09 87,227,115.20 67,947,038.81 1,835,271.09 66,111,767.72 Goods in stock 1,613,764,011.61 1,613,764,011.61 1,069,500,932.31 1,069,500,932.31 Consumable biological assets 1,692,640,645.23 1,692,640,645.23 1,633,513,994.28 1,633,513,994.28 Developing products 309,823,674.86 309,823,674.86 309,815,674.86 309,815,674.86 Total 6,067,440,601.04 9,973,276.96 6,057,467,324.08 4,872,642,023.86 9,973,276.96 4,862,668,746.90
SHANDONG CHENMING PAPER HOLDINGS LIMITED 57
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
6. Inventories(Cont’d)
(2) Impairment provision for inventories
Unit: RMB Increase for the period Decrease for the period
Opening Reversal Closing Item balance Provision Others or transfer Others balance Raw materials 8,138,005.87 8,138,005.87 Work in process 1,835,271.09 1,835,271.09 Total 9,973,276.96 9,973,276.96 7. Non-current assets due within one year
Unit: RMB Item Closing balance Opening balance Long-term receivables due within one year 4,313,561,787.97 4,587,376,588.22 Entrusted loans due within one year 900,000,000.00 Total 4,313,561,787.97 5,487,376,588.22 8. Other current assets
Unit: RMB Item Closing balance Opening balance VAT proceeds recoverable 1,119,933,525.08 905,435,684.67 Prepaid tax 3,459,997.43 90,837.12 Receivables under financial lease due within one year 9,217,660,976.34 5,711,218,309.49 Total 10,341,054,498.85 6,616,744,831.28 9. Available-for-sale financial assets
(1) Particulars of available-for-sale financial assets
Unit: RMB Closing balance Opening balance
Provision for Carrying Provision for Carrying Item Book balance impairment amount Book balance impairment amount Available-for-sale
equity instruments: 2,446,450,000.00 1,450,000.00 2,445,000,000.00 1,946,450,000.00 1,450,000.00 1,945,000,000.00 At cost 2,446,450,000.00 1,450,000.00 2,445,000,000.00 1,946,450,000.00 1,450,000.00 1,945,000,000.00 Total 2,446,450,000.00 1,450,000.00 2,445,000,000.00 1,946,450,000.00 1,450,000.00 1,945,000,000.00
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
9. Available-for-sale financial assets(Cont’d)
(2) Available-for-sale financial assets measured at cost as at the end of the period
Unit: RMB Book balance Provision for impairment Equity interest in Increase for Decrease Increase for Decrease the investee held Cash dividends Investee Opening balance the period for the period Closing balance Opening balance the period for the period Closing balance by the Company for the period Qingzhou Chenming Denaturation
Amylum Co., Ltd. 900,000.00 900,000.00 900,000.00 900,000.00 30.00% Shandong Paper Making& Printing
Enterprises Corporation 200,000.00 200,000.00 200,000.00 200,000.00 2.00% Jinan Shangyou Commercial
Company Limited 350,000.00 350,000.00 350,000.00 350,000.00 5.00% Zhejiang Guangyu Idall Print Co., Ltd. 2,000,000.00 2,000,000.00 1.67% Anhui Time Source Corporation 1,000,000.00 1,000,000.00 10.00% Shandong Hongqiao Venture
Capital Co., Ltd. 50,000,000.00 50,000,000.00 16.67% Lide Technology Co., Ltd. 36,000,000.00 36,000,000.00 3.00% Shanghai Hengzheng Venture
Investment Center
(Limited Partnership) 6,000,000.00 6,000,000.00 11.43% Guangdong Dejun Investment
Co., Ltd. 1,850,000,000.00 500,000,000.00 2,350,000,000.00 50.00% Total 1,946,450,000.00 500,000,000.00 2,446,450,000.00 1,450,000.00 1,450,000.00 — (3) Changes in impairment of available-for-sale assets during the reporting period
Unit: RMB Available- Available-
for-sale equity for-sale debt
Type of available-for-sale assets instruments instruments Total Opening balance of provision for impairment 1,450,000.00 1,450,000.00 Provision made during the current period 0.00 0.00 Decrease for the current period 0.00 0.00 Closing balance of provision for impairment 1,450,000.00 1,450,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 59
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
10. Long-term receivables
(1) Particulars of long-term receivables
Unit: RMB Closing balance Opening balance Range of Provision for Carrying Provision for Carrying discount rate Item Book balance bad debts amount Book balance bad debts amount (%) Finance leasing payments 13,999,253,038.93 111,994,024.31 13,887,259,014.62 13,545,382,743.83 113,743,981.96 13,431,638,761.87 6.15-10.00 of which: unrealised
finance income 281,578,169.99 281,578,169.99 296,928,815.45 296,928,815.45
Less: non-current assets
due within one year 4,348,348,576.58 34,786,788.61 4,313,561,787.97 4,624,371,560.71 36,994,972.49 4,587,376,588.22
Total 9,650,904,462.35 77,207,235.70 9,573,697,226.65 8,921,011,183.12 76,749,009.47 8,844,262,173.65 — 11. Long-term equity investments
Unit: RMB Increase/decrease for the period
Profit/loss of Adjustment
investment of other Distribution of
Opening Investment Investment recognised under comprehensive Changes in cash dividends Provision Closing Closing balance Investee balance addition reduction equity method income other equity or profit declared for impairment Others balance of provision I. Joint venture
Shouguang Chenming Huisen
New Building Materials Co., Ltd. 3,338,480.03 374,446.28 3,712,926.31 Weifang Sime Darby West Port Co., Ltd. 106,110,000.00 -343,346.21 105,766,653.79 Subtotal 3,338,480.03 106,110,000.00 31,100.07 109,479,580.10 II. Associate
Arjo Wiggins Chenming Specialty Paper Co., Ltd.
Jiangxi Jiangbao Media Colour Printing Co., Ltd. 3,063,072.03 -513,244.56 2,549,827.47 Zhuhai Dechen New Third Board
Equity Investment Fund Company
(Limited Partnership) 51,280,148.98 451,524.18 51,731,673.16 Wuhan Chenming Wan Xing Real Estate Co., Ltd. 3,596,725.38 -3,596,725.38
Jiangxi Chenming Port Co., Ltd. 5,973,566.46 -526,947.62 5,446,618.84 Subtotal 63,913,512.85 -4,185,393.38 59,728,119.47 Total 67,251,992.88 -4,154,293.31 169,207,699.57
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
12. Investment properties
(1) Investment properties measured at cost
√ Applicable□ Not applicable
Unit: RMB Housing and
building Construction
Item structure Land use right in progress Total I. Original carrying amount
1. Opening balance 38,291,395.70 38,291,395.70 2. Increase for the period
3. Decrease for the period 38,291,395.70 38,291,395.70 (1) Disposal 38,291,395.70 38,291,395.70 4. Closing balance 0.00 0.00 II. Accumulated depreciation and
accumulated amortisation
1. Opening balance 24,032,719.87 24,032,719.87 2. Increase for the period 1,738,256.04 1,738,256.04 (1) Provision or
amortisation 1,738,256.04 1,738,256.04 3. Decrease for the period 25,770,975.91 25,770,975.91 (1) Disposal 25,770,975.91 25,770,975.91 4. Closing balance 0.00 0.00 III. Carrying amount
1. Closing carrying amount 14,258,675.83 14,258,675.83 2. Opening carrying amount 14,258,675.83 14,258,675.83
SHANDONG CHENMING PAPER HOLDINGS LIMITED 61
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
13. Fixed assets
(1) Particulars of fixed assets
Unit: RMB Housing Electronic
and building Machinery equipment
Item structure and equipment Vehicles and others Total I. Original carrying amount
1. Opening balance 7,099,380,406.80 33,685,801,628.82 303,662,747.57 468,378,426.16 41,557,223,209.35 2. Increase for the period 189,177,388.77 329,683,285.16 27,278,293.91 4,537,584.33 550,676,552.17 (1) Acquisition 179,644,900.98 56,363,380.56 27,278,293.91 4,537,584.33 267,824,159.78 (2) Transferred from
construction in
progress 9,532,487.79 273,319,904.60 282,852,392.39 (3) Increase in business
combination
3. Decrease for the period 23,030,003.12 10,488,589.20 5,422,220.36 10,326,044.85 49,266,857.53 (1) Disposal or
retirement 23,030,003.12 10,488,589.20 5,422,220.36 10,326,044.85 49,266,857.53 4. Closing balance 7,265,527,792.45 34,004,996,324.78 325,518,821.12 462,589,965.64 42,058,632,903.99 II. Accumulated depreciation
1. Opening balance 1,251,769,048.48 10,911,866,637.99 130,018,612.53 257,190,343.60 12,550,844,642.60 2. Increase for the period 103,156,624.51 665,356,062.01 15,668,610.52 7,736,891.47 791,918,188.51 (1) Provision 103,156,624.51 665,356,062.01 15,668,610.52 7,736,891.47 791,918,188.51 3. Decrease for the period 6,566,012.95 3,828,643.23 3,310,098.02 1,460,027.25 15,164,781.45 (1) Disposal or
retirement 6,566,012.95 3,828,643.23 3,310,098.02 1,460,027.25 15,164,781.45 4. Closing balance 1,348,359,660.04 11,573,394,056.77 142,377,125.03 263,467,207.82 13,327,598,049.66 III. Provision for impairment
1. Opening balance 52,087,272.07 142,315,419.93 58,196.03 362,313.33 194,823,201.36 2. Increase for the period 0.00 (1) Provision
3. Decrease for the period 179,059.16 370,636.91 21,972.97 571,669.04 (1) Disposal or
retirement
4. Closing balance 51,908,212.91 141,944,783.02 36,223.06 362,313.33 194,251,532.32 IV. Carrying amount
1. Closing carrying amount 5,865,259,919.50 22,289,657,484.99 183,105,473.03 198,760,444.49 28,536,783,322.01 2. Opening carrying amount 5,795,524,086.25 22,631,619,570.90 173,585,939.01 210,825,769.23 28,811,555,365.39
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
13. Fixed assets
(2) Particulars of temporarily idle fixed assets
Unit: RMB Original Accumulated Provision for
Item carrying amount depreciation impairment Carrying amount Remark Buildings 146,112,969.46 49,299,339.43 51,908,212.91 44,905,417.12
Machinery and equipment 332,397,490.11 103,213,202.65 141,916,156.11 87,268,131.35
Vehicles 4,276,332.83 3,872,364.25 362,313.33 41,655.25
Electronic equipment 2,082,370.62 1,604,628.68 36,223.06 441,518.88
and others
Total 484,869,163.02 157,989,535.01 194,222,905.41 132,656,722.60
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMB Reason for not yet obtaining Item Carrying amount property right certificates Zhanjiang Chenming Pulp& Paper Co., Ltd. 1,276,113,497.21 Processing with scheduled operation commencement not imminent Jilin Chenming Paper Co., Ltd. 545,399,775.96 Processing with scheduled operation commencement not imminent Shouguang Meilun Paper Co., Ltd. 220,376,028.35 Processing with scheduled operation commencement not imminent Jiangxi Chenming Paper Co., Ltd. 201,679,853.57 Processing with scheduled operation commencement not imminent Qingdao Chenming Nonghai 96,586,206.48 Processing with scheduled Financial Leasing Co., Ltd. operation commencement not imminent Shandong Chenming Paper Holdings Limited 92,082,082.83 Processing with scheduled operation commencement not imminent Wuhan Chenming Hanyang Paper 78,297,070.13 Processing with scheduled Holdings Co., Ltd. operation commencement not imminent Total 2,510,534,514.53
SHANDONG CHENMING PAPER HOLDINGS LIMITED 63
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
14. Construction in progress
(1) Particulars of construction in progress
Unit: RMB Closing balance Opening balance
Provision Provision
Item Book balance for impairment Carrying amount Book balance for impairment Carrying amount Static dust removal of captive power
plant and renovation of induced fans
(Headquarters) 27,442,438.71 27,442,438.71 17,021,225.03 17,021,225.03 Captive power plant ink sludge burning
renovation project (Jiangxi Chenming) 7,300,823.73 7,300,823.73 7,252,340.14 7,252,340.14 Magnesite mining (Haicheng Haiming) 881,174,407.27 881,174,407.27 758,224,355.23 758,224,355.23 Forestry pulp integration project
(Huanggang Chenming) 2,067,200,502.66 2,067,200,502.66 2,147,036,838.90 2,147,036,838.90 Integrated terminal project
(Huanggang Chenming) 111,571,288.60 111,571,288.60 62,908,602.53 62,908,602.53 Chemical pulp project (Meilun) 1,426,697,472.53 1,426,697,472.53 613,458,994.30 613,458,994.30 High-end cultural paper (Meilun) 292,160,129.83 292,160,129.83 119,232,939.56 119,232,939.56 Others 255,355,426.06 14,764,226.23 240,591,199.83 404,823,800.77 14,764,226.23 390,059,574.54 Total 5,068,902,489.39 14,764,226.23 5,054,138,263.16 4,129,959,096.46 14,764,226.23 4,115,194,870.23
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
SHANDONG CHENMING PAPER HOLDINGS LIMITED 65
INTERIM FINANCIAL REPORT 2017)d’tnoC(
stnemetatS
laicnaniF
detadilosnoC
eht
fo
smeti
ot
setoN
.IIV
)d’tnoC(
ssergorp
ni
noitcurtsnoC
.41
doirep
eht
rof
stcejorp
ssergorp
ni
noitcurtsnoc
lairetam
ni
segnahC
)2(
BMR
:tinUnoitasilatipaC:hcihw
fO
eht
fo
etardesilatipacdetalumuccArefsnarT
tnuoma
tseretnitnuoma
tseretnidetalumuccAnoitcurtsnoCtnemtsevnIsnoitcuded
rehtOtessa
dexif
otesaercnI
dnuf
fo
ecruoSdoirep
eht
rofdoirep
eht
roftseretni
desilatipac
ssergorp
nitegdub
otecnalab
gnisolCdoirep
eht
rofdoirep
eht
rofdoirep
eht
rofecnalab
gninepOtegduBeman
metI
srehtO%67.58%67.5817.834,244,7286.312,124,0130.522,120,7123.0tnalp
rewop
evitpac
fo
lavomer
tsud
citatS
)sretrauqdaeH(
snaf
decudni
fo
noitavoner
dna
srehtO%00.99%00.9937.328,003,795.384,8441.043,252,770.0gninrub
egduls
kni
tnalp
rewop
evitpaC
)gnimnehC
ixgnaiJ(
tcejorp
noitavoner
snoitutitsni
laicnanif
morf
snaoL%53.462.960,038,5120.157,100,08%34.37%34.3772.704,471,18872.582,817,51100.403,1613.146,927,83232.553,422,85700.21gnimiaH
gnehciaH(
gninim
etisengaM
snoitutitsni
laicnanif
morf
snaoL%51.559.330,200,107.010,742,16%59.05%59.0566.205,002,760,234.481,407,27400.091.848,768,29309.838,630,741,258.43)gnimnehC
gnaggnauH(
tcejorp
noitargetni
plup
yrtseroF
srehtO%97.13%97.1306.882,175,11170.686,266,8435.206,809,2615.3gnimnehC
gnaggnauH(
tcejorp
lanimret
detargetnI
desiar
dnuF%53.415.119,293,7%65.74%65.7435.274,796,624,132.874,832,31803.499,854,31601.14)nulieM(
tcejorp
plup
lacimehC
snoitutitsni
laicnanif
morf
snaoL%53.431.115,453,146.557,226,1%77.7%77.738.921,061,29272.091,729,27165.939,232,91116.73)nulieM(
repap
larutluc
dne-hgiH
srehtO38.991,195,04293.880,197,28276.317,223,33145.475,950,093srehtO
—43.416,681,8178.824,462,051——61.362,831,450,507.964,224,88593.293,258,28210.552,812,018,132.078,491,511,464.921latoT
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
15. Materials for project
Unit: RMB Item Closing balance Opening balance Special materials 10,460,416.77 12,095,968.55 Special equipment 1,596,825.97 6,751,616.24 Total 12,057,242.74 18,847,584.79 16. Intangible assets
(1) Particulars of intangible assets
Unit: RMB Item Land use rights Software Total I. Original carrying amount
1. Opening balance 1,810,144,722.41 23,265,385.83 1,833,410,108.24 2. Increase for the period 475,714,872.25 850,427.35 476,565,299.60 (1) Acquisition 475,714,872.25 850,427.35 476,565,299.60 (2) In-house research and development
(3) Increase in business combination
3. Decrease for the period 14,792,292.93 14,792,292.93 (1) Disposal
Others 14,792,292.93 14,792,292.93 4. Closing balance 2,271,067,301.73 24,115,813.18 2,309,975,407.84 II. Accumulated amortisation
1. Opening balance 273,817,046.91 18,633,730.59 292,450,777.50 2. Increase for the period 21,710,375.12 682,679.76 22,393,054.88 (1) Provision 21,710,375.12 682,679.76 22,393,054.88 3. Decrease for the period
(1) Disposal
4. Closing balance 295,527,422.03 19,316,410.35 314,843,832.38 III. Impairment provision
1. Opening balance
2. Increase for the period
(1) Provision
3. Decrease for the period
(1) Disposal
4. Closing balance
III. Carrying amount
1. Closing carrying amount 1,975,539,879.70 4,799,402.83 1,980,339,282.53 2. Opening carrying amount 1,536,327,675.50 4,631,655.24 1,540,959,330.74
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
17. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB Name of investee or item Opening
generating goodwill balance Increase for the period Decrease for the period Closing balance Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60 Shandong Chenming 5,969,626.57 5,969,626.57 Panels Co., Ltd.
Total 20,283,787.17 20,283,787.17 (2) Provision for impairment of goodwill
Goodwill arose from business combination not under common control during prior years.
On the balance sheet date, the management of the Company assessed the recoverable amount of cash generating unit which results in goodwill, in order to determine whether to make provision for impairment loss accordingly. The recoverable amount of cash-generating unit was determined based on the estimated cash flow in the financial budget for the next five years by the management, and the time value of currency was estimated using the discount rate of8.32% (2015:8.32%). Results of impairment test showed that no provision for impairment loss was necessary to be made for goodwill.
18. Long-term prepaid expenses
Unit: RMB Opening Increase for Amortisation Other
Item balance the period for the period deductions Closing balance Woodland expenses 147,204,251.72 12,659,887.20 134,544,364.52 Others 10,567,848.97 61,132.08 352,407.30 2,061,665.14 8,214,908.61 Total 157,772,100.69 61,132.08 13,012,294.50 2,061,665.14 142,759,273.13 Note: Other deductions are transferred from shoreline rights of Huanggang terminal to intangible assets.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 67
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
19. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB Closing balance Opening balance Deductible Deferred Deductible Deferred temporary income tax temporary income tax Item differences assets differences assets Provision for impairment 649,110,274.85 148,841,526.02 597,834,988.96 140,836,946.10 of assets
Unrealised profit arising from 323,553,303.32 80,888,325.82 120,874,958.12 30,218,739.52 intra-group transactions
Deductible loss 1,207,453,909.58 218,739,848.58 1,479,562,089.74 260,263,772.80 Outstanding payables 105,077,412.31 26,512,852.34 114,938,961.38 25,368,213.93 Deferred income 160,106,786.97 42,763,364.59 231,252,430.87 40,770,154.35 Total 2,445,301,687.03 517,745,917.35 2,544,463,429.07 497,457,826.70 (2) The breakdown of unrecognised deferred income tax assets
Unit: RMB Item Closing balance Opening balance Deductible temporary differences 205,715,040.35 189,462,869.39 Deductible loss 556,680,211.11 593,978,877.06 Total 762,395,251.46 783,441,746.45 (3) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows Unit: RMB Year Closing amount Opening amount Remark
2017 197,732,325.65
2018 204,706,029.31 119,236,265.65
2019 134,178,903.92 93,579,660.13
2020 109,624,219.87 75,266,633.57
2021 91,012,529.55 108,163,992.06
2022 17,158,528.46
Total 556,680,211.11 593,978,877.06—
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
20. Other non-current assets
Unit: RMB Item Closing balance Opening balance Entrusted loans 900,000,000.00 Prepayments of properties 411,518,493.67 485,687,038.68 Prepayments of real estates 200,000,000.00
Less: portion due within one year (see Note VII. 7) 900,000,000.00 Total 611,518,493.67 485,687,038.68 21. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB Item Closing balance Opening balance Pledged borrowings 709,789,930.23 375,226,912.50 Guarantee borrowings 13,044,389,855.80 9,905,203,494.05 Credit borrowings 7,979,085,574.36 8,191,184,231.09 Discounted borrowings 9,953,310,000.00 9,403,892,350.89 Total 31,686,575,360.39 27,875,506,988.53 22. Bills payable
Unit: RMB Category Closing balance Opening balance Commercial acceptance bills 452,943,441.56
Bank acceptance bills 430,410,000.00 515,301,703.08 Total 883,353,441.56 515,301,703.08 Unpaid bills payable due as at the end of the period amounted to nil.
23. Accounts payable
(1) Particulars of accounts payable
Unit: RMB Item Closing balance Opening balance Within 1 year 3,064,594,256.05 3,296,220,303.37 1-2 years 243,535,697.67 140,901,523.75 2-3 years 90,308,295.26 184,442,132.75 Over 3 years 131,936,964.24 102,702,422.19 Total 3,530,375,213.22 3,724,266,382.06
SHANDONG CHENMING PAPER HOLDINGS LIMITED 69
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
23. Accounts payable(Cont’d)
(2) Significant accounts payable for over 1 year
Unit: RMB Reasons for outstanding or not Item Closing balance carried forward Guangdong Huadeli Electric Co., Ltd. 9,985,421.28 Not to be collected yet AstenJohnson Asia Sales& Marketing 7,824,210.33 Not to be collected yet Lianjiang Junlong Packing Co., Ltd. 5,551,906.74 Not to be collected yet Shenzhen Zhixiongda Logistics Co., Ltd. 4,685,638.88 Not to be collected yet Total 28,047,177.23 — 24. Advance receipts
(1) Particulars of advance receipts
Unit: RMB Item Closing balance Opening balance Within 1 year 285,739,667.77 323,949,855.39 1-2 years 16,566,182.92 53,185,710.94 Total 302,305,850.69 377,135,566.33 (2) Significant advance receipts for over 1 year
Unit: RMB Item Closing balance Reasons
YEKTA PERSIAN BOOK PAPAER 1,520,471.94 No delivery requirement from the counterparty yet INDUSTRIES CO.
TOSEE TEJARAT BONYAN SAZ 1,705,213.05 No delivery requirement from the counterparty yet YONG YI ADHESIVE (ZHONGSHAN) 1,384,668.41 No delivery requirement from the counterparty yet CO., LTD.
Total 4,610,353.40—
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
25. Staff remuneration payables
(1) Particulars of staff remuneration payables
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance I. Short-term remuneration 159,317,246.24 540,746,288.88 538,129,206.91 161,934,328.21 II. Retirement benefit
plan– defined
contribution scheme 651,016.58 62,539,050.31 62,524,497.37 665,569.52 III. Lay off welfare 903,712.27 903,712.27
Total 159,968,262.82 604,189,051.46 601,557,416.55 162,599,897.73 (2) Particulars of short-term remuneration
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance 1. Salaries, bonuses,
allowance and
subsidies 109,349,417.56 449,645,720.23 453,559,833.94 105,435,303.85 2. Staff welfare 19,835,211.37 19,835,211.37
3. Social insurance
premium 2,823,510.65 26,411,421.14 27,580,755.77 1,654,176.02 Of which: Medical
insurance premium 1,851,113.49 21,583,134.71 22,649,463.24 784,784.96 Work-related injury
insurance premium 6,141.58 2,787,149.78 2,855,159.69 -61,868.33 Maternity insurance
premium 966,255.58 2,041,136.65 2,076,132.84 931,259.39 4. Housing provident funds 5,481,598.96 31,664,601.44 30,346,381.28 6,799,819.12 5. Union funds and
workers’ education 22,872,059.64 11,522,361.30 5,280,910.85 29,113,510.09 6. Other short-term
remuneration 18,790,659.43 1,666,973.40 1,526,113.70 18,931,519.13 Total 159,317,246.24 540,746,288.88 538,129,206.91 161,934,328.21
SHANDONG CHENMING PAPER HOLDINGS LIMITED 71
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
25. Staff remuneration payables(Cont’d)
(3) Defined contribution plan
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance 1. Basic pension insurance 548,637.38 60,237,350.11 60,232,588.59 553,398.90 2. Unemployment
insurance 102,379.20 2,301,700.20 2,291,908.78 112,170.62 Total 651,016.58 62,539,050.31 62,524,497.37 665,569.52 26. Taxes payable
Unit: RMB Item Closing balance Opening balance Value added tax 25,479,099.64 53,237,826.18 Enterprise income tax 158,596,339.43 150,743,301.02 Individual income tax 10,810,172.74 3,440,230.58 Urban maintenance and construction tax 3,531,451.69 4,472,485.43 Land use tax 13,764,102.65 10,984,814.56 Property tax 15,867,963.38 6,886,755.05 Educational surcharges and others 3,031,923.92 3,924,688.24 Stamp duty 2,910,975.39 3,237,358.72 Total 233,992,028.84 236,927,459.78 27. Interest payable
Unit: RMB Item Closing balance Opening balance Interest on corporate bonds 112,876,170.58 3,276,170.53 Interest on medium-term notes 27,455,083.18 Interest on privately placed bonds 18,180,000.00
Total 131,056,170.58 30,731,253.71
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
28. Other payables
(1) Other payables by nature
Unit: RMB Item Closing balance Opening balance Within 1 year 824,339,858.71 834,154,891.32 1-2 years 91,950,315.05 37,518,148.35 2-3 years 32,521,654.02 24,930,994.02 Over 3 years 77,246,156.14 52,315,162.11 Total 1,026,057,983.92 948,919,195.80 (2) Significant other payables for over 1 year
Unit: RMB Reason for outstanding
Item Closing balance or not carried forward
Wenzhou Dongda Mine Construction 5,450,000.00 Deposit outstanding
Engineering Co., Ltd.
Tianjin Jinbao Commerce and 5,000,000.00 Deposit outstanding
Trade Co., Ltd.
Guangxi Construction Engineering 4,030,000.00 Deposit outstanding
Group No. 1 Installation Co., Ltd.
Total 14,480,000.00—
29. Non-current liabilities due within 1 year
Unit: RMB Item Closing balance Opening balance Long-term borrowings due within 1 year 1,604,088,371.55 1,343,940,282.00 Bonds payable due within 1 year 3,797,855,000.04 3,794,932,919.70 Medium-term notes due within 1 year 1,098,148,355.47 Total 5,401,943,371.59 6,237,021,557.17
SHANDONG CHENMING PAPER HOLDINGS LIMITED 73
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
30. Other current liabilities
Unit: RMB Item Closing balance Opening balance Short-term commercial paper 10,156,266,146.23 6,602,863,069.45 Total 10,156,266,146.23 6,602,863,069.45 Increase/decrease in short-term commercial papers payable:
Unit: RMB Name of Date of Issue during Interest at Amortisation of Redemption commercial paper Par value issue Term Amount Opening balance the period par value premium/discount during the period Closing balance 16 Lu Chenming scp005 1,500,000,000.00 2016-4-15 270 days 1,497,750,000.00 1,545,131,250.00 916,695.21 1,546,047,945.21 0.00 16 Lu Chenming scp008 500,000,000.00 2016-6-24 270 days 499,250,000.00 511,054,581.00 4,423,957.81 166,666.67 515,645,205.48 0.00 16 Lu Chenming scp009 1,000,000,000.00 2016-7-7 270 days 998,500,000.00 1,021,000,002.00 11,787,669.23 500,000.00 1,033,287,671.23 0.00 16 Lu Chenming scp010 500,000,000.00 2016-8-10 270 days 499,250,000.00 507,026,665.00 6,250,960.57 333,333.33 513,610,958.90 0.00 16 Lu Chenming scp011 1,000,000,000.00 2016-10-18 270 days 998,500,000.00 1,006,605,556.56 18,602,777.78 1,000,000.00 1,026,208,334.34 16 Lu Chenming scp012 1,000,000,000.00 2016-11-4 270 days 998,500,000.00 1,004,939,444.44 19,055,277.78 1,000,000.00 1,024,994,722.22 16 Lu Chenming scp013 1,000,000,000.00 2016-12-1 270 days 998,500,000.00 1,007,105,570.45 24,636,111.11 1,000,000.00 1,032,741,681.56 17 Lu Chenming cp001 1,500,000,000.00 2017-1-6 287 days 1,497,641,096.00 1,497,641,096.00 35,860,000.00 1,572,600.00 1,535,073,696.00 17 Lu Chenming scp001 1,000,000,000.00 2017-1-9 256 days 998,577,777.78 998,577,777.78 23,403,055.56 790,125.00 1,022,770,958.34 17 Lu Chenming scp002 1,000,000,000.00 2017-3-8 252 days 998,600,000.00 998,600,000.00 15,556,944.44 608,333.00 1,014,765,277.44 17 Lu Chenming scp003 1,000,000,000.00 2017-3-15 181 days 999,000,000.00 999,000,000.00 1,020,000.00 666,667.00 1,000,686,667.00 17 Lu Chenming cp002 1,500,000,000.00 2017-4-13 365 days 1,497,000,000.00 1,497,000,000.00 1,300,000.00 750,000.00 1,499,050,000.00 17 Lu Chenming scp004 1,000,000,000.00 2017-4-24 270 days 998,500,000.00 998,500,000.00 974,809.33 500,000.00 999,974,809.33 31. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB Item Closing balance Opening balance Secured borrowings 2,166,870,668.89 2,369,123,668.89 Guarantee borrowings 6,070,164,977.28 4,689,223,358.40 Credit borrowings 1,153,692,035.94 1,221,192,035.94 Less: long-term borrowings due within 1 year 1,604,088,371.55 1,343,940,282.00 Total 7,786,639,310.56 6,935,598,781.23 32. Bonds payable
(1) Bonds payable
Unit: RMB Item Closing balance Opening balance 12 Chenming bond 3,797,855,000.04 3,791,215,868.81 17 Privately placed bonds 1,000,000,000.00
Less: bonds due within 1 year 3,797,855,000.04 3,791,215,868.81 Total 1,000,000,000.00
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
33. Long-term payables
(1) By nature
Unit: RMB Item Closing balance Opening balance Retention for the financial leasing operations 250,190,103.51 246,190,103.51 Specific capital for China Development 700,000,000.00 700,000,000.00 Equipment leaseback 3,220,909,734.68 3,005,178,750.49 Total 4,171,099,838.19 3,951,368,854.00 34. Special accounts payable
Unit: RMB Opening Increase for Decrease for Closing
Item balance the period the period balance Reason Huanggang Chenming
integrated forestry,
pulp and paper project 681,039,716.66 681,039,716.66
Total 681,039,716.66 681,039,716.66 — 35. Deferred income
Unit: RMB Opening Increase for Decrease for Closing
Item balance the period the period balance Reason Government grants 1,443,846,526.33 72,391,073.00 45,482,440.40 1,470,755,158.93
Total 1,443,846,526.33 72,391,073.00 45,482,440.40 1,470,755,158.93 — Items in respect of government grant:
SHANDONG CHENMING PAPER HOLDINGS LIMITED 75
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
35. Deferred income(Cont’d)
Unit: RMB Include in
non-operating
New grants income for Asset-related/ Liabilities item Opening balance for the period the period Other Changes Closing balance income-related Special subsidy funds
for environmental protection 865,690,958.67 24,800,367.34 840,890,591.33 Asset-related Project fund for National
technological support scheme 1,946,625.00 82,350.35 1,864,274.65 Asset-related Special subsidy fund for Songhuajiang
environmental protection project 1,589,263.01 1,589,263.01 Asset-related Sewage treatment and water
conservation reconfiguration project 7,324,085.45 596,341.46 6,727,743.99 Asset-related Financial grants for
technological modification project 177,600,549.89 5,673,864.39 171,926,685.50 Asset-related Zhanjiang integrated forestry,
pulp and paper project 286,335,959.68 5,090,000.00 8,740,837.29 282,685,122.39 Asset-related Interest Subsidy 87,441,351.47 13,674,372.00 3,147,766.73 97,967,956.74 Asset-related Railway line change compensation 14,135,416.66 245,833.33 13,889,583.33 Asset-related Logistics park project 53,626,701.00 53,626,701.00 Asset-related Others 1,782,316.50 605,816.50 1,176,500.00 Asset-related Total 1,443,846,526.33 72,391,073.00 45,482,440.40 1,470,755,158.93 — 36. Other non-current liabilities
Unit: RMB Item Closing balance Opening balance Medium-term notes 1,098,148,355.47 Privately placed bonds
Less: the portion maturing within one year 1,098,148,355.47 Total — —
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
37. Share capital
Increase/decrease
Item Opening balance for the period Closing balance RMB ordinary shares (A shares) 1,113,278,456.00 1,113,278,456.00 Domestic listed foreign shares (B shares) 470,923,511.00 470,923,511.00 Overseas listed foreign shares (H shares) 352,203,500.00 352,203,500.00 Total number of shares 1,936,405,467.00 1,936,405,467.00 38. Other equity instruments
(1) Preference shares, perpetual bonds and other financial instruments outstanding at the end of the period Increase during Decrease during
Item Opening balance the period the period Closing balance Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Preference shares 4,477,500,000.00 4,477,500,000.00 Total 7,060,300,000.00 7,060,300,000.00 (2) Changes in preference shares, perpetual bonds and other outstanding financial instruments at the end of the period
Unit: RMB Increase during Decrease during
Opening balance the period the period Closing balance Carrying Carrying
Outstanding financial instruments Size Carrying amount Size amount Size amount Size Carrying amount 15 Lu Chenming MMTN001 13,000,000 1,291,900,000.00 13,000,000 1,291,900,000.00 15 Lu Chenming MMTN001 13,000,000 1,290,900,000.00 13,000,000 1,290,900,000.00 Chenming You 01 22,500,000 2,238,750,000.00 22,500,000 2,238,750,000.00 Chenming You 02 10,000,000 995,000,000.00 10,000,000 995,000,000.00 Chenming You 03 12,500,000 1,243,750,000.00 12,500,000 1,243,750,000.00 Total — 7,060,300,000.00 — 7,060,300,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 77
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
38. Other equity instruments(Cont’d)
(2) Changes in preference shares, perpetual bonds and other outstanding financial instruments at the end of the period(Cont’d)
Changes (increase or decrease) during the period, reasons for such changes and basis for relevant accounting treatment of other equity instruments:
Particulars of the perpetual bonds
① Particulars of issue: The Company issued medium-term notes amounting to RMB2.6 billion on 6 July and 8 September 2015 at a coupon rate of6.00% and5.78%. The proceeds net of issue costs amounted to RMB2,582.8000 million.
② Particulars of the notes as perpetual bonds
The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of redemption by the Company.
The Company has the right to defer any payment of interest.
The right of redemption of the notes is vested with the Company so that it is up to the Company to decide whether to redeem or not.
Based on the above, the notes do not contain any term giving rise to any contractual obligation to deliver cash or other financial assets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adverse circumstances. Consequently, they were eligible to be recognised and accounted for as equity instruments and included under other equity instruments.
Particulars of the preference shares
① Particulars of issue: The Company non-publicly issued preference shares amounting to RMB4.5 billion on 17 March, 17 August and 22 September 2016 at a dividend rate of6%. The proceeds net of issue costs amounted to RMB4,477.50 million.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
38. Other equity instruments(Cont’d)
(2) Changes in preference shares, perpetual bonds and other outstanding financial instruments at the end of the period(Cont’d)
Particulars of the preference shares(Cont’d)
② Particulars of the preference shares as equity Instruments
Shareholders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed based on a fixed dividend rate and the distribution of retained earnings realised for the year. A. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on the preference shares in accordance with the issuance plan under the framework and principles considered and approved in the general meeting in respect of the preference shares. The general meeting of the Company has the right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the Company shall inform the shareholders of preference shares at least 10 working days before the date of dividend payment in accordance with the requirements of the related authorities.
B. Participation in the distribution of retained earnings realised for the year.
Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares which may be classified under equity.50% of the retained earnings shall be distributed to holders of preference shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained earnings by receiving cash dividends or dividends on ordinary shares. Based on the above, the preference shares do not contain any term giving rise to any contractual obligation to deliver cash or other financial assets to any other entity, or to exchange any financial asset or financial liability with any other entity under potential adverse circumstances. Consequently, they were eligible to be recognised and accounted for as equity instruments and included under other equity instruments– preference shares.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 79
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
39. Capital reserves
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance Capital premium (share premium) 5,478,935,277.69 5,478,935,277.69 Other capital reserves 670,322,507.21 670,322,507.21 Total 6,149,257,784.90 6,149,257,784.90 40. Other comprehensive income
Unit: RMB During the period
Less:
Transferred
from Other
Comprehensive
Income in prior Attributable
Incurred before periods to profit Attributable to minority
Income tax for or loss during Less: income to parent shareholders
Item Opening balance the period the period tax expenses company after tax after tax Closing balance II. Other comprehensive
income to
be reclassified
to profit or loss in
subsequent periods -805,245,771.89 170,697,419.90 170,697,419.90 -634,548,351.99 Exchange differences
on translation
of foreign operations -805,245,771.89 170,697,419.90 170,697,419.90 -634,548,351.99 Total other
comprehensive
income -805,245,771.89 170,697,419.90 170,697,419.90 -634,548,351.99 41. Surplus reserve
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance Statutory surplus reserve 1,132,116,106.40 1,132,116,106.40 Total 1,132,116,106.40 1,132,116,106.40 Particulars of the surplus reserve, including changes (increase or decrease) during the period and reasons for such changes:
Pursuant to the Companies Law and the Articles of Association, the Company transferred10% of the net profit to the statutory surplus reserves. There was no need to transfer if the accumulated amounts of the statutory reserves exceeded50% of theCompany’s registered capital.
The Company can transfer the discretionary surplus reserve upon the transfer of statutory surplus reserve. Once approved, the discretionary surplus reserve can be used to offset loss for prior years or increase the share capital.
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
42. Retained profit
Unit: RMB Item The period The prior period Retained profit as at the end of the prior year before adjustment 6,745,974,781.02 5,416,049,598.87 Retained profit as at the beginning of the year after adjustment 6,745,974,781.02 5,416,049,598.87 Plus: Net profit for year attributable to shareholders of the parent company 1,745,514,838.23 939,164,870.60 Ordinary dividend payable 1,161,843,280.20 580,921,640.10 Preference dividend payable 217,377,107.35
Retained profit as at the end of the period 7,112,269,231.70 5,774,292,829.37 43. Revenue and operating costs
Unit: RMB Item Amount for the period Amount for the prior period Revenue Costs Revenue Costs Principal activities 13,563,143,834.69 9,468,056,148.11 10,531,214,461.68 7,550,568,444.39 Other activities 186,091,172.55 61,798,067.23 75,144,271.34 25,998,263.78 Total 13,749,235,007.24 9,529,854,215.34 10,606,358,733.02 7,576,566,708.17 Note: In order to disclose the gross profit by business segment of the Company more accurately, the financial costs incurred by the financing lease business are recognised in the operating costs instead of finance expenses. The relevant adjustment is made in the corresponding period of the prior year. This adjustment has no effect on the profit for the period and the prior period.
44. Taxes and surcharges
Unit: RMB Amount for Amount for Item the period the prior period Urban maintenance and construction tax 22,398,860.35 19,040,816.07 Educational surcharges 14,388,582.42 13,519,315.18 Property tax 26,916,701.19
Land use tax 24,234,332.85
Vehicle and vessel use tax 34,306.91
Stamp tax 13,148,327.87
Business tax 50,110,672.72 Water engineering funds 3,177,917.53 2,565,046.51 Others 1,660,983.24 252,586.81 Total 105,960,012.36 85,488,437.29
SHANDONG CHENMING PAPER HOLDINGS LIMITED 81
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
45. Selling and distribution expenses
Unit: RMB Amount for Amount for Item the period the prior period Wages and surcharges 65,953,852.36 62,610,240.72 Depreciation expenses 6,409,390.78 7,716,005.86 Office expenses 1,835,605.09 2,284,579.17 Transportation expenses 453,538,636.06 398,501,300.34 Selling commissions 6,775,566.23 9,680,049.87 Cargo handling charges 9,619,073.45 7,496,104.53 Travel expenses 10,999,160.71 14,079,701.21 Business hospitality expenses 36,623,061.92 33,198,045.00 Warehouse expenses 714,169.93 1,750,686.55 Rental expenses 4,580,600.56 3,836,615.38 Others 44,449,158.26 32,581,328.42 Total 641,498,275.35 573,734,657.05 46. General and administrative expenses
Unit: RMB Amount for Amount for Item the period the prior period Wages and surcharges 91,040,324.67 83,040,079.11 Welfare expenses 20,103,576.01 19,735,058.11 Labour insurance premium 6,102,709.36 26,637,831.86 Insurance premium 9,518,602.13 10,302,590.82 Depreciation expenses 33,612,163.11 33,670,891.00 Waste disposal expenses 9,214,959.75 12,242,348.57 Hospitality expenses 23,024,208.87 19,243,914.33 Amortisation of intangible assets 16,315,486.42 11,943,479.38 Technological development expenses 446,835,957.44 305,617,867.77 Tax 97,755.03 53,373,398.17 Production interruption loss 32,610,068.28 33,255,858.46 Repair fees 25,429,045.13 14,967,595.79 Others 142,450,142.97 69,982,914.01 Total 856,354,999.17 694,013,827.38
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
47. Finance expenses
Unit: RMB Amount for Amount for Item the period the prior period Interest expenses 714,171,231.76 694,652,263.63 Less: Interest income 117,395,792.54 96,175,924.81 Capitalised interest amount 90,133,011.27 82,706,472.39 Foreign exchange gains and losses 107,381,433.91 49,068,370.62 Bank charges 82,585,417.66 90,905,926.61 Total 696,609,279.51 655,744,163.67 Note: In order to disclose the gross profit by business segment of the Company more accurately, the financial costs incurred by the financing lease business are recognised in the operating costs instead of finance expenses. The relevant adjustment is made in the corresponding period of the prior year. This adjustment has no effect on the profit for the period and the prior period.
48. Loss on impairment of assets
Unit: RMB Amount for Amount for Item the period the prior period I. Loss on bad debts 50,382,322.12 27,039,385.57 II. Loss on inventory impairment -571,669.04
III. Loss on fixed assets impairment 10,000,000.00 Total 49,810,653.08 37,039,385.57 49. Gain on change in fair value
Unit: RMB Amount for Amount for Source of gain on change in fair value the period the prior period Consumable biological assets measured at fair value -11,009,851.10 -10,599,543.68 Total -11,009,851.10 -10,599,543.68
SHANDONG CHENMING PAPER HOLDINGS LIMITED 83
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
50. Investment income
Unit: RMB Amount for Amount for Item the period the prior period Income from long-term equity investments accounted
for using the equity method -4,154,293.30 -7,203,834.37 Investment gain on disposal of long-term equity investments 480,189.88
Investment gain on disposal of available-for-sale financial assets 56,226,406.81
Income on external entrusted loans 13,312,368.97 44,212,264.15 Total 65,864,672.36 37,008,429.78 51. Non-operating income
Unit: RMB Amounts included in extraordinary Amount for Amount for gains and losses Item the period the prior period for the period Total gain on disposal of non-current assets 1,822,923.95 2,416,628.05 1,822,923.95 Of which: Gain on disposal of fixed assets 1,822,923.95 2,416,628.05 1,822,923.95 Gain on debt restructuring 1,909,002.10
Government grants 140,637,717.90 218,025,169.93 138,061,964.09 Others 16,058,652.83 6,557,554.23 16,058,652.83 Total 158,519,294.68 228,908,354.31 155,943,540.87 Further particulars:
Amount for Amount for Asset-related/ Grants item the period the prior period income-related Amortised deferred income 45,482,440.40 41,480,887.29 Asset-related Grants income 92,579,523.69 172,931,681.51 income-related Value-added tax refund 2,575,753.81 3,612,601.13 income-related Total 140,637,717.90 218,025,169.93 —
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
52. Non-operating expenses
Unit: RMB Amounts included in extraordinary Amount for Amount for gains and losses Item the period the prior period for the period Total loss on disposal of non-current assets 1,478,120.96 4,043,314.21
Of which: loss on disposal of fixed assets 1,478,120.96 4,043,314.21
Donation 450,000.00
Others 1,959,668.15 1,959,668.15
Total 3,550,702.42 6,002,982.36
53. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB Amount for Amount for Item the period the prior period Income tax expenses for the period 351,541,417.73 230,829,355.97 Deferred income tax expenses -20,288,090.65 76,202,066.49 Total 331,253,327.08 307,031,422.46 (2) The reconciliation between accounting profit and income tax expenses
Unit: RMB Amount for Item the period Total profit 2,078,970,985.95 Income tax expenses 331,253,327.08
SHANDONG CHENMING PAPER HOLDINGS LIMITED 85
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
54. Other comprehensive income
For details, please see Notes.
55. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB Amount for Amount for Item the period the prior period Finance support fund 93,044,281.20 172,931,681.51 Interest income 117,395,792.54 96,175,924.81 External security deposit of the Financial Leasing Company 4,000,000.00 55,000,000.00 Open credit, and income from default penalty and fine 16,058,652.87 66,363,266.64 Total 230,498,726.61 390,470,872.96 (2) Cash paid relating to other operating activities
Unit: RMB Amount for Amount for Item the period the prior period Expense and open credit 1,541,645,097.56 805,195,276.10 Net increase in principal receivables relating to finance lease business 5,445,458,445.68 6,214,266,350.71 Total 6,987,103,543.24 7,019,461,626.81 (3) Cash received relating to other investing activities
Unit: RMB Amount for Amount for Item the period the prior period Government grants 72,391,073.00
Special subsidy funds of Huanggang 104,056,200.00 Entrusted loans 900,000,000.00
Total 972,391,073.00 104,056,200.00
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
55. Items on statements of cash flow(Cont’d)
(4) Cash paid relating to other financing activities
Unit: RMB Amount for Amount for Item the period the prior period Issuance of short-term and super&-short term commercial paper 6,990,741,096.00 8,494,653,288.89 Issuance of preference shares 2,238,750,000.00 Capital contribution by CDB Fund to Zhanjiang Chenming 200,000,000.00 Equipment financing 729,259,498.49 1,199,435,500.86 Total 7,720,000,594.49 12,132,838,789.75 (5) Cash paid relating to other financing activities
Unit: RMB Amount for Amount for Item the period the prior period Repayment of privately placed bonds 1,587,000,000.00 Repayment of commercial paper 7,159,436,554.95 7,375,483,606.56 Increase in restricted bank deposits 3,036,117,632.05 1,109,208,431.73 Total 10,195,554,187.00 10,071,692,038.29
SHANDONG CHENMING PAPER HOLDINGS LIMITED 87
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
56. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB Amount for Amount for Supplementary information the period the prior period 1. Reconciliation of net profit as cash flows from operating activities: — — Net profit 1,747,717,658.87 926,054,389.48 Plus: Provision for impairment of assets 199,810,653.08 37,039,385.57 Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 816,376,614.36 694,931,226.76 Amortisation of intangible assets 25,214,975.98 16,835,509.25 Amortisation of long-term prepaid expenses 10,052,618.57 3,733,859.91 Loss on disposal of fixed assets, intangible assets and other
long-term assets (“-” denotes gain) -344,802.99 1,626,686.16 Loss on changes in fair value (“-” denotes gain) 11,087,873.76 10,599,543.68 Finance expenses (“-” denotes gain) 714,171,231.76 1,007,251,661.57 Investment loss (“-” denotes gain) -65,864,672.36 -37,008,429.78 Decrease in deferred income tax assets (“-” denotes increase) -20,288,090.65 76,202,066.49 Decrease in inventories (“-” denotes increase) -1,194,720,554.52 -15,307,641.68 Decrease in operating receivables (“-” denotes increase) -3,414,834,472.92 -5,584,481,269.74 Increase in operating payables (“-” denotes decrease) -3,300,108,028.18 165,013,159.29 Net cash flows from operating activities -4,471,728,995.24 -2,697,509,853.04 2. Major investing and financing activities not involving cash
settlements: — — 3. Net change in cash and cash equivalents: — — Closing balance of cash 2,421,491,422.53 3,567,441,351.15 Less: Opening balance of cash 1,979,861,045.62 1,888,107,493.76 Net increase in cash and cash equivalents 441,630,376.91 1,679,333,857.39 (2) Cash and cash equivalents composition
Unit: RMB Item Closing balance Opening balance I. Cash 2,421,491,422.53 1,979,861,045.62 Of which: Cash on hand 1,937,873.98 192,022.94 Bank deposits readily available for payment 2,419,553,548.54 1,977,940,818.68 III. Balance of cash and cash equivalent as at end of period 2,421,491,422.53 1,979,861,045.62 Note: As at 31 December 2016, restricted monetary funds amounted to RMB10,120,006,052.96 (31 December 2015: RMB8,130,069,273.87).
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
57. Assets with restricted ownerships or right to use
Unit: RMB Closing
Item carrying amount Reason for such restrictions
Monetary funds 10,120,006,052.96 As guarantee deposits for bank acceptance bills, letter of credit, and bank borrowings deposits, and deposit reserves
Bills receivable 1,259,355,685.71 As collateral for short-term borrowings, bills payable, letters of guarantee and letters of credit Fixed assets 4,458,390,058.49 As collateral for bank borrowings and long-term payables
Intangible assets 427,899,004.31 As collateral for bank borrowings and long-term payables
Total 16,265,650,801.47—
58. Foreign currency items
(1) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose their overseas principal places of business, functional currency and basis. Reasons shall be disclosed if there is any change in the functional currency.
√ Applicable□ Not applicable
Principal Place of Functional No. Name of subsidiary place of business incorporation currency 1 Chenming GmbH Hamburg, Germany Hamburg, Germany EUR 2 Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW 3 Chenming (HK) Limited Hong Kong, China Hong Kong, China USD 4 Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD 5 Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY The companies numbered 3, 4 and 5 are companies of the fourth level. Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or“US$”), Japanese yen (“JPY”) Euro (“EUR”) and Korean Won (“KRW”) as their respective functional currency according to the general economic environment in which these subsidiaries operate.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 89
INTERIM FINANCIAL REPORT 2017
VIII. Change in scope of consolidation
1. Business combinations under common control
(1) Business combinations under common control for the period
Unit: RMB Income Net profit
of the party being of the party being
absorbed from absorbed from Income Net profit Shareholding the beginning the beginning of the party being of the party being acquired during Basis for business of the current of the current absorbed during absorbed during the business combination under Combination period to the period to the the comparative the comparative Name of the party being absorbed combination common control date Basis for the combination date combination date combination date period period Shouguang Chenming Hongxin 100.00% Both were subsidiaries of 1 June 2017 Completion of the cancellation of 0 -92,680.78 — — Packaging Co., Ltd. Shandong Chenming industry and commerce
registration and tax registration
(2) Combination costs
Unit: RMB Shouguang Chenming Hongxin Combination costs Packaging Co., Ltd.– -Carrying amount of non-cash assets 3,227,202.77 (3) Carrying amount of assets and liabilities of the party being absorbed at the combination date
Unit: RMB Shouguang Chenming Hongxin Packaging Co., Ltd. At the end of Combination date the prior period Monetary funds 9,259.54 Fixed assets 4,260,662.32 4,352,649.52 Other current assets 56,830.95 56,830.95 Accounts payables 1,090,290.50 1,098,856.46 Net assets 3,227,202.77 3,319,883.55 Net assets acquired 3,227,202.77 3,319,883.55
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
SHANDONG CHENMING PAPER HOLDINGS LIMITED 91
INTERIM FINANCIAL REPORT 2017)d’tnoC(
noitadilosnoc
fo
epocs
ni
egnahC
.IIIV
seiraidisbus
fo
lasopsiD
.2
lasopsid
elgnis
a
no
seiraidisbus
revo
lortnoc
fo
ssol
si
ereht
rehtehW
oN
□
seY
√
BMR
:tinU
rehto
fo
tnuomA
neewteb
ecnereffiD
evisneherpmoc
rof
noitaredisnoc
derrefsnart
emocni
fo
dohteM
ten
dna
lasopsid
tnemtsevni
otni
dna
noitanimreted
eht
fo
stessa
sessol
ro
sniag
snoitpmussa
yek
yraidisbus
tcejbus
ytiuqe
ot
detaler
eulav
riaf
eht
rof
ssol
ro
tiforP
fo
eulav
riaF
tnuoma
gniyrraC
fo
egatnecreP
eht
ot
elbatubirtta
fo
sisaB
fo
tnemtsevni
ytiuqe
gniniamer
fo
tnemerusaemer
morf
ytiuqe
gniniamer
ytiuqe
gniniamer
fo
ytiuqe
gniniamer
rednu
ynapmoC
fo
noitanimreted
lanigiro
eht
fo
yad
eht
no
ytiuqe
gniniamer
fo
fo
yad
eht
no
fo
yad
eht
no
fo
yad
eht
no
detadilosnoc
gnisol
fo
gnimit
fo
gnimiT
fo
dohteM
fo
egatnecreP
rof
noitaredisnoC
yraidisbuslortnoc
gnisoleulav
riaf
talortnoc
gnisollortnoc
gnisollortnoc
gnisolstnemetats
laicnaniflortnoclortnoc
gnisollasopsid
ytiuqelasopsid
ytiuqelasopsid
ytiuqeyraidisbus
fo
emaN
ytiuqE
——————88.981,084tnemeerga
refsnart7102
yaM
1refsnarT%00.00100.0detimiL
,.oC
gnirutcafunaM
yrenihcaM
gnimnehC
niliJ
doirep
gnitroper
eht
gnirud
lortnoc
fo
ssol
ni
gnitluser
snoitcasnart
lareves
hguorht
yraidisbus
a
ni
tnemtsevni
fo
lasopsid
saw
ereht
rehtehW
oN
√
seY
□
VIII. Change in scope of consolidation(Cont’d)
3. Change in scope of consolidation due to other reasons
Explanations for other reasons resulting in changes in the scope of combination (e.g. newly established subsidiary, liquidation of subsidiary) and relevant circumstances:
Unit:RMB’0,000 Date of Registered Percentage of Name of the company establishment Operating scope capital shareholding Qingdao Chenming Pulp and Paper May 2017 Spot transactions, trading and electronic 3000.00 100% Electronic Commodity Exchange commerce of pulp, finished paper products,
Co., Ltd. paper-making auxiliary materials, etc., online
sale of pulp, paper, paper products, etc.,
warehousing services, logistics distribution
and economic information consultation, etc.
Xuchang Chenming Paper Co., Ltd. April 2017 Packaging and production of pulp, finished 40,000.00 60% paper products and paper products,
generation and supply of thermal power,
treatment and recycling of sewage, and
recycling of recycling materials, etc.
Shandong Chenming Commercial June 2017 Relevant consultation services for domestic 20,000.00 100% Factoring Co., Ltd. factoring, export factoring and commercial
factoring, corporate management
consultation, and asset valuation services.
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Shareholding
Principle place Place of Nature of
Name of subsidiary of business incorporation business Indirect Acquisition Zhanjiang Chenming Pulp& Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making 100.00% Establishment Shouguang Meilun Paper Co., Ltd. Shouguang, China Shouguang, China Paper making 100.00% Establishment Jilin Chenming Paper Co., Ltd. Jilin, China Jilin, China Paper making 100.00% Merger and acquisition Huanggang Chenming Pulp& Paper Co., Ltd. Huanggang, China Huanggang, China Pulp production100.00% Establishment Shandong Chenming Paper Sales Co., Ltd. Shouguang, China Shouguang, China Sales of paper 100.00% Establishment Shouguang Chenming Import and Export Shouguang, China Shouguang, China Import and 100.00% Establishment Trade Co., Ltd. export trade
Chenming GmbH Hamburg, Germany Hamburg, Germany Paper product 100.00% Establishment trading
Shouguang Chenming Papermaking Shouguang, China Shouguang, China Machinery 100.00% Establishment Machine Co., Ltd. manufacturing
Shouguang Hongxiang Printing and Shouguang, China Shouguang, China Printing and 100.00% Merger and Packaging Co., Ltd. packaging acquisition Shouguang Chenming Modern Logistic Co., Ltd. Shouguang, China Shouguang, China Transportation 100.00% Establishment Shouguang Chenming Industrial Logistics Co., Ltd. Shouguang, China Shouguang, China Logistics 100.00% Establishment Jinan Chenming Investment Management Co., Ltd. Jinan, China Jinan, China Investment 100.00% Establishment management
Huanggang Chenming Arboriculture Co., Ltd. Huanggang, China Huanggang, China Arboriculture 100.00% Establishment Chenming Arboriculture Co., Ltd. Wuhan, China Wuhan, China Arboriculture 100.00% Establishment Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea Sales of paper 100.00% Establishment Shandong Chenming Power Supply Shouguang, China Shouguang, China Power 100.00% Establishment Holdings Co., Ltd.
Shouguang Shun Da Customs Declaration Co, Ltd. Shouguang, China Shouguang, China Customs 100.00% Establishment declaration
Wuxi Song Ling Paper Co., Ltd. Wuxi, China Wuxi, China Paper making 100.00% Merger and acquisition Shandong Chenming Paper Group (Fuyu) Fuyu, China Fuyu, China Sales of paper 100.00% Establishment Sales Co., Ltd.
Shandong Chenming Group Finance Co., Ltd. Jinan, China Jinan, China Finance 80.00% 20.00% Establishment Jiangxi Chenming Paper Co., Ltd. Nanchang, China Nanchang, China Paper making 51.00% 49.00% Establishment Qingdao Chenming International Logistics Co., Ltd. Qingdao, China Qingdao, China Logistics 30.00% 70.00% Establishment Qingdao Chenming Pulp and Paper Electronic Qingdao, China Qingdao, China Pulp and paper30.00% 70.00% Establishment Commodity Exchange Co., Ltd. trading
Shouguang Chenming Art Paper Co., Ltd. Shouguang, China Shouguang, China Paper making 75.00% Establishment Hailaer Chenming Paper Co., Ltd. Hailaer, China Hailaer, China Paper making 75.00% Establishment Shandong Grand View Hotel Co., Ltd. Shouguang, China Shouguang, China Catering 70.00% Establishment Haicheng Haiming Mining Co., Ltd. Haicheng, China Haicheng, China Mining 60.00% Establishment Wuhan Chenming Hanyang Paper Wuhan, China Wuhan, China Paper making 50.93% Establishment Holdings Co., Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 93
INTERIM FINANCIAL REPORT 2017
IX. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
(1) Constitution of the Group(Cont’d)
Shareholding
Principle place Place of Nature of
Name of subsidiary of business incorporation business Indirect Acquisition Xuchang Chenming Paper Co., Ltd. Xuchang, China Xuchang, China Paper making 60.00% Establishment Shandong Chenming Financial Leasing Co., Ltd. Jinan, China Jinan, China Financial leasing 100.00% Establishment Qingdao Chenming Nonghai Financial Qingdao, China Qingdao, China Financial leasing 100.00% Establishment Leasing Co., Ltd.
Chenming (HK) Limited Hong Kong, China Hong Kong, China Paper product 100.00% Establishment trading
Shouguang Hongyi Decorative Packaging Co., Ltd. Shouguang, China Shouguang, China Packaging 100.00% Merger and acquisition Shouguang Xinyuan Coal Co., Ltd. Shouguang, China Shouguang, China Coal 100.00% Merger and acquisition Shouguang City Run Sheng Wasted Paper Shouguang, China Shouguang, China Purchase and 100.00% Merger and Recycle Co., Ltd. sale of waste acquisition Shouguang Wei Yuan Logistics Company Limited Shouguang, China Shouguang, China Logistics 100.00% Merger and acquisition Shandong Chenming Panels Co., Ltd. Shouguang, China Shouguang, China Panels 100.00% Merger and acquisition Shandong Chenming Floor Board Co., Ltd. Shouguang, China Shouguang, China Floor board 100.00% Merger and acquisition Shouguang Chenming Cement Co., Limited Shouguang, China Shouguang, China Cement 100.00% Establishment Wuhan Chenming Qianneng Electric Wuhan, China Wuhan, China Electric power 51.00% Establishment Power Co., Ltd.
Shandong Chenming Investment Limited Jinan, China Jinan, China nvestment 100.00% Establishment Japan Chenming Paper Co., Ltd. Tokyo, Japan Tokyo, Japan Paper product 100.00% Establishment trading
Chenming International Co., Ltd. Los Angeles, Los Angeles, the Paper product 100.00% Establishment the United States United States trading
Zhanjiang Chenming Arboriculture Co., Ltd. Zhanjiang, China Zhanjiang, China Arboriculture 100.00% Establishment Yangjiang Chenming Arboriculture Co., Ltd. Yangjiang, China Yangjiang, China Arboriculture 100.00% Establishment Nanchang Chenming Arboriculture Co., Ltd. Nanchang, China Nanchang, China Arboriculture 100.00% Establishment Guangdong Huirui Investment Co., Ltd. Zhanjiang, China Zhanjiang, China Investment 51.00% Merger and acquisition Zhanjiang Chenming New-style Wall Zhanjiang, China Zhanjiang, China Wall materials 100.00% Establishment Materials Co., Ltd.
Jilin Chenming New-style Wall Materials Co., Ltd. Jilin, China Jilin, China Wall materials 100.00% Establishment Jilin Chenming Logistics Co., Ltd. Jilin, China Jilin, China Logistics 100.00% Establishment Jiangxi Chenming Logistics Co., Ltd. Nanchang, China Nanchang, China Logistics 100.00% Establishment Fuyu Chenming Paper Co., Ltd. Fuyu, China Fuyu, China Paper making 100.00% Establishment Zhanjiang Meilun Pulp& Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making 100.00% Establishment Shandong Chenming Commercial Factoring Co., Ltd. Jinan, China Jinan, China Factoring 100.00% Establishment
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
IX. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
(2) Major non-wholly owned subsidiaries
Unit: RMB Gain or
loss attributable Dividend to Closing to minority minority interests balance interests during declared during of minority Name Minority interests the period the period interests Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 49.07% 2,231,565.56 124,427,022.92 Shouguang Chenming Art
Paper Co., Ltd. 25.00% 5,015,501.71 43,065,434.26 Shandong Grand View Hotel
Co., Ltd. 30.00% -2,964,051.26 -35,732,102.07 Hailaer Chenming Paper
Co., Ltd. 25.00% 9,135,357.41 Haicheng Haiming Mining
Co., Ltd. 40.00% -1,682,792.35 94,265,905.65 Guangdong Huirui Investment
Co., Ltd. 49.00% -397,403.01 113,092,050.24 Xuchang Chenming
Paper Co., Ltd. 40.00% 40,000,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 95
INTERIM FINANCIAL REPORT 2017
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
)d’tnoC(
seititne
rehto
ni
tseretnI
.XI
)d’tnoC(
seiraidisbus
ni
tseretnI
.1
seiraidisbus
denwo
yllohw-non
rojam
fo
noitamrofni
laicnanif
yeK
)3
BMR
:tinUecnalab
gninepOecnalab
gnisolC
latoT
tnerruc-noN
tnerruC
tnerruc-noN
tnerruC
latoT
tnerruc-noN
tnerruC
latoT
tnerruc-noN
tnerruC
seitilibailseitilibailseitilibailstessa
latoTstessastessaseitilibailseitilibailseitilibailstessastessastessaemaN
repaP
gnaynaH
gnimnehC
nahuW
84.834,898,808,230.415,344,6554.429,454,257,263.823,644,399,233.696,084,422,130.236,569,867,190.214,278,298,256.199,218,4544.024,950,838,238.056,440,001,369.353,757,652,178.692,782,348,1.dtL
,.oC
sgnidloH
77.509,146,42777.509,146,42729.536,148,67876.445,680,22752.190,557,45114.777,450,18714.777,450,18704.415,613,35913.326,987,49690.198,625,852.dtL
,.oC
repaP
trA
gnimnehC
gnauguohS
01.064,534,34301.064,534,34360.426,802,43241.440,025,91229.975,886,4151.793,671,25351.793,671,25332.093,960,33214.448,474,71228.545,495,51.dtL
,.oC
letoH
weiV
dnarG
gnodnahS
55.818,215,555.818,215,581.842,450,2423.386,134,8268.465,226,3155.818,215,555.818,215,581.842,450,2423.386,134,8268.465,226,31.dtL
,.oC
repaP
gnimnehC
realiaH
76.926,196,13776.926,196,13776.473,365,17911.828,502,41965.645,753,7541.509,509,33841.509,509,33862.966,075,960,126.747,938,110,146.129,037,75.dtL
,.oC
gniniM
gnimiaH
gnehciaH
29.608,396,5800.000,089,7729.608,317,799.539,403,71338.462,68161.176,811,71390.408,277,9700.000,089,7790.408,297,116.609,275,01308.133,66418.475,601,013.dtL
,.oC
tnemtsevnI
iuriuH
gnodgnauG
IX. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
3) Key financial information of major non-wholly owned subsidiaries(Cont’d)
Unit: RMB Amount during the year Amount during the prior year
Total Cash flows Total Cash flows comprehensive from operating comprehensive from operating Name Revenue Net profit income activities Revenue Net profit income activities Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 600,890,033.83 6,940,887.35 6,940,887.35 -6,556,195.80 554,350,364.42 -27,322,183.58 -27,322,183.58 4,831,299.33 Shouguang Chenming Art Paper Co., Ltd. 315,445,237.82 20,062,006.83 20,062,006.84 857,026.40 312,682,091.71 11,706,212.99 11,706,212.99 461,691.92 Shandong Grand View Hotel Co., Ltd. 16,349,994.57 -9,880,170.88 -9,880,170.88 -1,592,519.03 17,794,419.06 -7,233,315.31 -7,233,315.31 -844,051.71 Haicheng Haiming Mining Co., Ltd. -4,206,980.88 20,062,006.84 -19,856,846.14 -63,834.09 -63,834.09 62,143,196.78 Guangdong Huirui Investment Co., Ltd. -811,026.55 -811,026.55 181,814.34 -3,075,130.28 -3,075,130.28 -15,394.01 2. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Name of joint ventures Principle place Place of Nature of Accounting and associates of business incorporation business Shareholding method Direct Indirect
Shouguang Chenming Huisen New-style Shouguang, China Shouguang, China Construction 50.00% Equity method Construction Materials Co., Ltd. materials
Arjo Wiggins Chenming Specialty Shouguang, China Shouguang, China Paper making 30.00% Equity method Paper Co., Ltd.
Jiangxi Jiangbao Media Colour Printing Nanchang, China Nanchang, China Printing 21.15% Equity method Co. Ltd.
Zhuhai Dechen New Third Board Equity Zhuhai, China Zhuhai, China Investment 50.00% Equity method Investment Fund Company management
(Limited Partnership)
Wuhan Chenming Wan Xing Real Estate Wuhan, China Wuhan, China Real estate 40.00% Equity method Co., Ltd. development
Jiangxi Chenming Port Co., Ltd. Nanchang, China Nanchang, China Handling and 40.00% Equity method transportation of
goods and storage
Weifang Sime Darby West Port Co., Ltd. Weifang, China Weifang, China Port 50.00% Equity method
SHANDONG CHENMING PAPER HOLDINGS LIMITED 97
INTERIM FINANCIAL REPORT 2017
IX. Interest in other entities(Cont’d)
2. Interest in joint arrangements or associates(Cont’d)
(2) Key financial information of major joint ventures
Unit: RMB Closing balance/amount Opening balance/amounts during the year during the prior year Shouguang Shouguang
Chenming Chenming
Huisen New-style Weifang Sime Huisen New-style Weifang Sime Construction Darby West Construction Darby West Materials Co., Ltd. Port Co., Ltd. Materials Co., Ltd. Port Co., Ltd. Current assets 1,139,638.73 84,951,176.93 4,249,054.46 38,351,661.82 Of which: Cash and
cash equivalents 672,928.87 52,125,946.07 458,458.31 22,738,319.93 Non-current assets 11,710,167.40 312,397,949.42 12,473,449.30 311,606,614.65 Total assets 12,849,806.13 397,349,126.35 16,722,503.76 349,958,276.47 Current liabilities 5,423,953.49 47,686,964.33 10,045,543.68 165,609,422.04 Total liabilities 5,423,953.49 199,309,246.72 10,045,543.68 286,231,704.43 Equity interest attributable to
shareholders of the parent
company 7,425,852.64 198,039,879.63 6,676,960.08 63,726,572.04 Share of net assets based on
shareholding 3,712,926.32 99,019,939.82 3,338,480.04 31,863,286.02 Carrying amount of investment
in joint ventures 3,712,926.32 99,019,939.82 3,338,480.04 31,863,286.02 Revenue 5,519,650.45 9,413,451.32
Finance expenses 84,056.46 -75,920.03 231,928.00
Income tax expenses 125,563.08 22,169.33
Net profit 748,892.56 -686,692.41 723,325.04
Total comprehensive income 748,892.56 723,325.04
Other explanation
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
IX. Interest in other entities(Cont’d)
2. Interest in joint arrangements or associates(Cont’d)
(3) Key financial information of major associates
Unit: RMB Closing balance/amount during the period Opening balance/amount during the prior period Zhuhai Dechen Zhuhai Dechen
New Third Wuhan New Third Wuhan
Board Equity Chenming Board Equity Chenming
Jiangxi Jiangbao Investment Fund Wan Xing Jiangxi Jiangxi Jiangbao Investment Fund Wan Xing Jiangxi Media Colour Company (Limited Real Estate Chenming Media Colour Company (Limited Real Estate Chenming Printing Co. Ltd. Partnership Co., Ltd. Port Co., Ltd. Printing Co. Ltd. Partnership Co., Ltd. Port Co., Ltd. Current assets 20,483,612.38 33,718,693.70 1,803,256,045.33 13,383,695.55 24,068,421.70 39,815,555.02 1,675,978,214.45 9,736,438.88 Non-current assets 9,154,281.02 69,760,000.00 31,366,998.95 108,029,471.37 10,816,762.76 62,760,000.00 21,774,839.04 110,970,435.58 Totalassets計 29,637,893.40 103,478,693.70 1,834,623,044.28 121,413,166.92 34,885,184.46 102,575,555.02 1,697,753,053.49 120,706,874.46 Current liabilities 17,579,120.74 5,000.00 729,571,780.74 107,796,619.81 20,399,149.78 5,000.00 590,521,405.00 105,780,641.88 Non-current liabilities 1,066,021,254.91 1,046,021,254.91
Total liabilities 17,579,120.74 5,000.00 1,795,593,035.65 107,796,619.81 20,399,149.78 5,000.00 1,636,542,659.91 105,780,641.88 Equity interest attributable to shareholders
of the parent company 12,058,772.66 103,473,693.70 39,030,008.63 13,616,547.11 14,486,034.68 102,570,555.02 61,210,393.58 14,926,232.58 Share of net assets based on shareholding 2,549,827.48 51,731,673.16 15,612,003.45 5,446,618.84 3,063,072.03 51,280,148.98 24,484,157.43 5,973,566.46– Unrealised profit arising from
intra-group transactions -20,887,432.05
Carrying amount of investment in associates 2,549,827.48 51,731,673.16 15,612,003.45 5,446,618.84 3,063,072.03 51,280,148.98 3,596,725.38 5,973,566.46 Revenue 6,950,458.93 39,982,570.54 12,360,478.60 13,455,840.99 284,917,004.35 28,290,476.10 Net profit -2,332,303.36 903,138.68 -22,180,384.95 -1,309,685.47 -5,446,338.94 1,530,728.19 13,800,471.65 428,354.35 Total comprehensive income -2,332,303.36 903,138.68 -22,180,384.95 -1,309,685.47 -5,446,338.94 1,530,728.19 13,800,471.65 428,354.35 (4) Excess loss of joint ventures or associates
Unit: RMB Accumulated Unrecognised Accumulated unrecognised loss (or share unrecognised loss loss incurred of net profit) as at the end Name for prior periods for the period of the period Arjo Wiggins Chenming Specialty
Paper Co., Ltd. 7,308,869.16 7,308,869.16
SHANDONG CHENMING PAPER HOLDINGS LIMITED 99
INTERIM FINANCIAL REPORT 2017
X. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total I. Continuous measurement
at fair value — — — — (IV) Biological assets 1,184,374,214.74 1,184,374,214.74 1. Consumable biological assets 1,184,374,214.74 1,184,374,214.74 Total assets continuously measured
at fair value 1,184,374,214.74 1,184,374,214.74 II. Non-continuous measurement
at fair value — — — — 2. Level 3 continuous and non-continuous measurement, valuation techniques and qualification and quantification of key inputs
The Company adopts the income method in determining the fair value of its consumable biological assets. Under the income method, the valuation is arrived at based on the aggregate expected future profit estimates from forest resources discounted to their present values at an applicable rate which is usually equivalent to yield prevailing in the forestry industry.
Key inputs of the method include expected annual income and discount rate.
Expected annual profit= expected annual income - expected total input
Expected annual income= expected output x expected sales price
Expected output= based on normal output of theCompany’s logging
Expected sales price= normal sales price of the Company in 2017
Expected total input is based on total historic input of saplings growing of the Company up to logging.
Discount rate is10.74%, based on the yield prevailing in the industry.
3. Fair value of financial assets and financial liabilities not measured at fair value
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions
1. Parent company of the Company
Shareholding Voting right of the parent of the parent Place of company in company in Name of parent company incorporation Business nature Registered capital the Company the Company Shouguang Chenming Shouguang City, Investment in manufacture of paper, 1,238,787,742 26.77% 26.77% Holdings Co., Ltd. Shandong Province electricity, steam, arboriculture
Explanation on the parent company of the Company: Shouguang Chenming Holdings Co., Ltd. directly held15.13% equity interest in the Company and indirectly held11.64% equity interest in the Company through Chenming Holdings (Hong Kong) Limited, its wholly-owned subsidiary. It held26.77% equity interest in the Company in total.
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office. 2. Subsidiaries of the Company
Please refer to Note IX. 1. Interest in subsidiaries for details.
3. Joint ventures and associates of the Company
Please refer to Note IX. 2. Interest in joint arrangements or associates for details.
Balance of related party transaction between the Company and its joint ventures or associates during the period or prior periods are as follows:
Name of joint ventures or associates Relation
Wuhan Chenming Wan Xing Real Estate Co., Ltd. An associate of the Company
Jiangxi Jiangbao Media Colour Printing Co. Ltd. An associate of the Company
Arjo Wiggins Chenming Specialty Paper Co., Ltd. An associate of the Company
Shouguang Chenming Huisen New-style A joint venture of the Company
Construction Materials Co., Ltd.
Weifang Sime Darby West Port Co., Ltd. A joint venture of the Company
4. Other related parties
Name of other related parties Relation
Anhui Time Source Corporation A subsidiary
Shouguang Hengtai Enterprise Investment A company invested by the senior management of the Company Company Limited
Jiangxi Chenming Natural Gas Co., Ltd. The senior management of the Company serving as directors
SHANDONG CHENMING PAPER HOLDINGS LIMITED 101
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB Amount Whether
Details of related during Transaction the transaction Amount during Related party party transaction the period facility approved facility is exceeded the prior period Jiangxi Chenming Procurement 84,339,429.95 350,000,000.00 No 51,346,339.83 Natural Gas Co., Ltd. of natural gas
Table on sales of goods/provision of services
Unit: RMB Details of related Amount Amount for Related party party transactions during the period the prior period Anhui Time Source Corporation Sales of paper 122,403,067.72 133,818,532.79 (2) Guarantee
The Company as guarantor
Unit: RMB Amount Starting date Expiry date Whether performance of Party being guaranteed under guarantee of guarantee of guarantee guarantee is completed Zhanjiang Chenming Pulp& Paper Co., Ltd. 60,000,000.00 5 December 2016 25 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 40,000,000.00 27 December 2016 20 December 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 2 March 2017 12 February 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 27 May 2017 26 May 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 2 June 2017 1 June 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 800,000,000.00 13 January 2017 12 January 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 550,000,000.00 30 March 2017 29 March 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 350,000,000.00 1 April 2017 29 March 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 80,000,000.00 28 October 2016 27 October 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 115,000,000.00 1 December 2016 30 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 10 February 2017 9 February 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 175,000,000.00 2 March 2017 1 March 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 4 November 2016 3 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 22 September 2016 21 September 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 8 December 2016 7 December 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 15 December 2016 14 December 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 3 January 2017 2 January 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 90,000,000.00 28 April 2017 27 April 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 73,000,000.00 17 May 2017 16 May 2018 No
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amount Starting date Expiry date Whether performance of Party being guaranteed under guarantee of guarantee of guarantee guarantee is completed Zhanjiang Chenming Pulp& Paper Co., Ltd. 49,263,419.48 17 March 2017 13 September 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 110,000,000.00 24 October 2016 23 October 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 90,000,000.00 29 November 2016 29 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 99,896,000.00 26 June 2017 20 September 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 3 January 2017 2 January 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 3 January 2017 2 January 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 63,500,000.00 27 November 2015 27 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 190,000,000.00 26 October 2016 26 October 2018 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 65,000,000.00 3 June 2015 21 May 2020 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 200,000,000.00 20 June 2017 20 June 2019 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 65,711,680.00 5 June 2015 21 May 2020 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 67,744,000.00 26 october 2016 26 October 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 50,000,000.00 1 December 2016 1 November 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 214,000,000.00 7 June 2017 7 June 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 34,454,598.40 28 November 2014 27 November 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 519,223,200.00 22 May 2015 26 March 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 129,340,824.00 24 November 2015 10 November 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 317,733,600.00 20 November 2015 5 November 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 619,968,000.00 17 December 2015 16 December 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 307,659,120.00 2 March 2016 2 February 2019 No
Shandong Chenming Financial Leasing Co., Ltd. 307,659,120.00 18 March 2016 2 February 2019 No
Shandong Chenming Financial Leasing Co., Ltd. 158,014,344.00 28 July 2016 28 July 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 9,070,000.00 17 August 2015 26 December 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 20,000,000.00 17 August 2015 26 December 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 15,000,000.00 17 August 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 5,000,000.00 14 December 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 20,000,000.00 14 December 2015 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 30,000,000.00 14 December 2015 26 September 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 30,000,000.00 14 December 2015 26 December 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 40,000,000.00 14 December 2015 26 March 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 39,000,000.00 24 June 2016 26 June 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 21,000,000.00 5 January 2017 26 June 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 60,000,000.00 5 January 2017 26 December 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 60,000,000.00 5 January 2017 26 March 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 59,000,000.00 5 January 2017 26 June 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 1,000,000.00 3 February 2017 26 June 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 70,000,000.00 3 February 2017 26 September 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 70,000,000.00 3 February 2017 26 December 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 9,000,000.00 3 February 2017 26 March 2021 No
Huanggang Chenming Pulp& Paper Co., Ltd. 47,420,800.00 7 August 2015 26 December 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 33,872,000.00 7 August 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 7,451,840.00 20 July 2016 26 March 2018 No
SHANDONG CHENMING PAPER HOLDINGS LIMITED 103
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amount Starting date Expiry date Whether performance of Party being guaranteed under guarantee of guarantee of guarantee guarantee is completed Huanggang Chenming Pulp& Paper Co., Ltd. 6,096,960.00 22 July 2016 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 4,877,568.00 22 July 2016 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 2,880,474.88 8 August 2016 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 35,633,344.00 16 August 2016 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 4,029,413.12 26 September 2016 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 54,195,200.00 26 September 2016 26 September 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 54,195,200.00 26 September 2016 26 December 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 54,195,200.00 26 September 2016 26 March 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 17,106,714.88 26 September 2016 26 June 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 40,142,928.00 5 December 2016 26 June 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 65,871,600.00 5 December 2016 26 September 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 41,227,872.00 5 December 2016 26 December 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 24,643,728.00 12 April 2017 26 December 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 65,871,600.00 12 April 2017 26 March 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 10,229,472.00 12 April 2017 26 June 2020 No
Huanggang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 30 December 2015 29 December 2018 No
Jiangxi Chenming Paper Co., Ltd. 49,800,000.00 22 January 2017 21 July 2017 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 1 May 2017 1 May 2018 No
Jiangxi Chenming Paper Co., Ltd. 94,841,600.00 14 March 2017 9 September 2017 No
Jiangxi Chenming Paper Co., Ltd. 19,578,016.00 26 April 2017 21 October 2017 No
Jiangxi Chenming Paper Co., Ltd. 17,816,672.00 8 June 2017 8 December 2017 No
Jiangxi Chenming Paper Co., Ltd. 15,388,830.41 16 June 2017 16 June 2018 No
Jiangxi Chenming Paper Co., Ltd. 22,355,520.00 20 June 2017 16 June 2018 No
Jiangxi Chenming Paper Co., Ltd. 200,000,000.00 30 September 2016 29 September 2018 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 16 March 2017 16 March 2019 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 1 April 2017 16 March 2019 No
Jiangxi Chenming Paper Co., Ltd. 73,000,000.00 12 June 2017 12 June 2019 No
Shouguang Meilun Paper Co., Ltd. 70,000,000.00 12 January 2017 10 july 2017 No
Shouguang Meilun Paper Co., Ltd. 214,999,999.99 12 January 2017 10 July 2017 No
Shandong Chenming Paper Sales Co., Ltd. 250,000,000.00 14 October 2016 12 October 2017 No
Shandong Chenming Paper Sales Co., Ltd. 200,000,000.00 26 October 2016 24 October 2017 No
Shandong Chenming Paper Sales Co., Ltd. 56,071,275.69 5 January 2017 4 July 2017 No
Shandong Chenming Paper Sales Co., Ltd. 420,000,000.00 13 January 2017 4 July 2017 No
Shandong Chenming Paper Sales Co., Ltd. 300,000,000.00 26 February 2017 23 August 2017 No
Shandong Chenming Paper Sales Co., Ltd. 200,000,000.00 1 March 2017 30 August 2017 No
Shandong Chenming Paper Sales Co., Ltd. 364,380,340.04 17 May 2017 17 November 2017 No
Shandong Chenming Paper Sales Co., Ltd. 130,000,000.00 5 June 2017 5 June 2018 No
Shandong Chenming Paper Sales Co., Ltd. 351,364,726.02 5 June 2017 4 December 2017 No
Shandong Chenming Paper Sales Co., Ltd. 280,369,025.46 22 June 2017 20 December 2017 No
Chenming (HK) Limited 223,555,200.00 29 July 2016 14 July 2017 No
Chenming (HK) Limited 162,585,600.00 12 August 2016 26 July 2017 No
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amount Starting date Expiry date Whether performance of Party being guaranteed under guarantee of guarantee of guarantee guarantee is completed Chenming (HK) Limited 206,957,920.00 23 August 2016 2 August 2017 No
Chenming (HK) Limited 112,658,272.00 17 October 2016 1 September 2017 No
Chenming (HK) Limited 105,795,804.80 22 September 2016 23 August 2017 No
Chenming (HK) Limited 300,105,920.00 7 November 2016 31 October 2017 No
Chenming (HK) Limited 186,296,000.00 21 November 2016 9 November 2017 No
Chenming (HK) Limited 186,973,440.00 13 December 2016 4 December 2017 No
Chenming (HK) Limited 93,486,720.00 23 December 2016 9 December 2017 No
Chenming (HK) Limited 48,287,645.45 20 December 2016 20 November 2017 No
Chenming (HK) Limited 96,303,820.37 23 December 2016 23 November 2017 No
Chenming (HK) Limited 83,325,120.00 23 December 2016 13 December 2017 No
Chenming (HK) Limited 101,616,000.00 23 December 2016 13 December 2017 No
Chenming (HK) Limited 136,842,880.00 27 Janusry 2017 24 January 2018 No
Chenming (HK) Limited 181,215,200.00 22 Februsry 2017 6 February 2018 No
Chenming (HK) Limited 145,649,600.00 27 February 2017 25 August 2017 No
Chenming (HK) Limited 93,757,696.00 1 March 2017 9 February 2018 No
Chenming (HK) Limited 134,776,688.00 20 March 2017 3 March 2018 No
Chenming (HK) Limited 119,568,160.00 5 May 2017 4 April 2018 No
Chenming (HK) Limited 165,667,952.00 18 April 2017 1 April 2018 No
Chenming (HK) Limited 158,859,680.00 27 April 2017 18 April 2018 No
Chenming (HK) Limited 94,502,880.00 22 May 2017 9 April 2018 No
Chenming (HK) Limited 98,228,800.00 15 June 2017 12 May 2018 No
Chenming (HK) Limited 276,056,800.00 20 June 2017 1 June 2018 No
Chenming (HK) Limited 198,151,200.00 28 June 2017 28 May 2018 No
Chenming (HK) Limited 36,920,480.00 30 June 2017 30 May 2018 No
Chenming (HK) Limited 32,178,400.00 30 June 2017 30 May 2018 No
Chenming (HK) Limited 103,844,640.00 10 January 2017 23 December 2017 No
Chenming (HK) Limited 199,939,680.00 12 January 2017 14 December 2018 No
Chenming (HK) Limited 242,137,995.66 26 January 2017 2 January 2018 No
Chenming (HK) Limited 92,375,232.00 14 March 2017 2 March 2018 No
Chenming (HK) Limited 189,090,240.00 21 March 2017 3 March 2018 No
Chenming (HK) Limited 137,942,880.00 21 March 2017 13 March 2018 No
Chenming (HK) Limited 133,913,088.00 28 April 2017 9 April 2018 No
Chenming (HK) Limited 100,744,800.00 4 May 2017 30 April 2018 No
Chenming (HK) Limited 154,992,000.00 13 May 2017 27 April 2018 No
Chenming (HK) Limited 139,492,800.00 24 May 2017 10 May 2018 No
Chenming (HK) Limited 7,979,898.18 27 January 2017 26 July 2017 No
Chenming (HK) Limited 20,444,752.25 20 April 2017 18 August 2017 No
Chenming (HK) Limited 12,281,046.37 6 March 2017 4 September 2017 No
Chenming (HK) Limited 25,531,485.54 9 March 2017 4 September 2017 No
Chenming (HK) Limited 12,399,615.71 11 April 2017 4 September 2017 No
Chenming (HK) Limited 15,320,491.90 9 March 2017 5 September 2017 No
Chenming (HK) Limited 25,729,457.76 26 June 201 6 September 2017 No
SHANDONG CHENMING PAPER HOLDINGS LIMITED 105
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amount Starting date Expiry date Whether performance of Party being guaranteed under guarantee of guarantee of guarantee guarantee is completed Chenming (HK) Limited 16,410,772.77 16 March 2017 12 September 2017 No
Chenming (HK) Limited 8,967,541.68 29 March 2017 25 September 2017 No
Chenming (HK) Limited 7,938,000.48 11 May 2017 26 September 2017 No
Chenming (HK) Limited 9,404,489.47 5 June 2017 3 October 2017 No
Chenming (HK) Limited 7,646,361.00 7 June 2017 3 October 2017 No
Chenming (HK) Limited 8,914,066.06 6 June 2017 4 October 2017 No
Chenming (HK) Limited 31,245,243.34 12 April 2017 9 October 2017 No
Chenming (HK) Limited 15,100,977.56 20 April 2017 17 October 2017 No
Chenming (HK) Limited 7,500,950.47 31 May 2017 17 October 2017 No
Chenming (HK) Limited 12,839,329.89 31 May 2017 17 October 2017 No
Chenming (HK) Limited 37,496,484.61 2 June 2017 17 October 2017 No
Chenming (HK) Limited 11,846,005.85 2 June 2017 17 October 2017 No
Chenming (HK) Limited 9,385,068.75 7 June 2017 17 October 2017 No
Chenming (HK) Limited 17,445,167.63 20 June 2017 18 October 2017 No
Chenming (HK) Limited 4,917,893.29 20 June 2017 18 October 2017 No
Chenming (HK) Limited 9,221,534.87 28 April 2017 25 October 2017 No
Chenming (HK) Limited 3,687,302.40 27 June 2017 25 October 2017 No
Chenming (HK) Limited 22,539,870.80 27 June 2017 25 October 2017 No
Chenming (HK) Limited 18,154,921.86 28 June 2017 26 October 2017 No
Chenming (HK) Limited 15,615,978.01 10 May 2017 6 November 2017 No
Chenming (HK) Limited 18,942,917.49 17 May 2017 13 November 2017 No
Chenming (HK) Limited 9,113,077.34 18 May 2017 14 November 2017 No
Chenming (HK) Limited 16,719,203.82 19 May 2017 15 November 2017 No
Chenming (HK) Limited 17,757,468.08 22 May 2017 20 November 2017 No
Chenming (HK) Limited 34,556,959.58 24 May 2017 20 November 2017 No
Chenming (HK) Limited 27,350,586.58 25 May 2017 21 November 2017 No
Chenming (HK) Limited 17,511,897.23 5 June 2017 4 December 2017 No
Chenming (HK) Limited 30,900,880.94 9 June 2017 6 December 2017 No
Chenming (HK) Limited 25,005,077.19 9 June 2017 6 December 2017 No
Chenming (HK) Limited 16,022,918.19 9 June 2017 6 December 2017 No
Chenming (HK) Limited 16,621,501.50 9 June 2017 6 December 2017 No
Chenming (HK) Limited 193,070,400.00 6 October 2016 30 August 2018 No
Chenming (HK) Limited 284,524,800.00 2 November 2016 10 September 2019 No
Chenming (HK) Limited 203,232,000.00 12 January 2017 12 July 2018 No
Chenming (HK) Limited 105,274,176.00 12 January 2017 12 July 2018 No
Chenming (HK) Limited 359,043,200.00 18 January 2017 8 April 2019 No
Jilin Chenming Paper Co., Ltd. 40,000,000.00 20 July 2016 11 July 2017 No
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XI. Related parties and related party transactions(Cont’d)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB Closing balance Opening balance Bad Bad Item Related party Book balance debt provision Book balance debt provision Accounts receivable Anhui Time Source Corporation 41,749,671.13 2,087,483.56 46,710,218.01 2,335,510.90 Accounts receivable Jiangxi Jiangbao Media 693,760.56 69,376.06 Colour Printing Co. Ltd.
Prepayments Jiangxi Chenming Natural 1,549,719.60 1,984,282.12
Gas Co., Ltd.
Other receivables Arjo Wiggins Chenming 1,191,705.08 1,191,705.08 1,191,705.08 1,191,705.08 Specialty Paper Co., Ltd.
Other receivables Wuhan Chenming Wan Xing 1,251,282,621.32 1,284,982,919.14
Real Estate Co., Ltd.
Other receivables Shouguang Chenming Huisen 685,000.00 34,250.00 1,992,435.48 99,621.77 New-style Construction
Materials Co., Ltd.
Other receivables Weifang Sime Darby West 75,500,000.00
Port Co., Ltd.
XII. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
(1) Capital commitment
Item Closing balance Opening balance Contracted but not yet recognised in the financial statements
Commitments in relation to acquisition and
construction of long-term assets 3,641,093,560.29 5,798,429,688.37 Huirui BT Project 3,000,000,000.00 3,000,000,000.00 Total 6,641,093,560.29 8,798,429,688.37 (2) Operating lease commitments
As at the balance sheet date, the Company entered into irrevocable operating lease contracts with external companies as follows:
Item Closing balance Opening balance Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 4,426,069.03 24,255,504.88 The second year after balance sheet date 4,821,581.97 15,163,089.04 The third year after balance sheet date 4,514,173.22 14,855,680.29 In the years thereafter 90,751,463.45 531,299,664.72 Total 104,513,287.67 585,573,938.93
SHANDONG CHENMING PAPER HOLDINGS LIMITED 107
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company
1. Accounts receivable
(1) Accounts receivable by category
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage Amount Percentage Carrying amount Amount Percentage Amount Percentage Carrying amount Accounts receivable that are provided
for bad debts on portfolio basis
based on credit risk features 55,459,120.33 100.00% 635,254.94 1.15% 54,823,865.39 85,778,155.11 100.00% 1,688,243.30 1.97% 84,089,911.81 Total 55,459,120.33 100.00% 635,254.94 1.15% 54,823,865.39 85,778,155.11 100.00% 1,688,243.30 1.97% 84,089,911.81 Accounts receivable that are individually significant and are provided for bad debts separately as at the end of the period:
□ Applicable√ Not applicable
Accounts receivable using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Accounts Provision for
Ageing receivable bad debts Percentage Within 1 year
Subtotal for within 1 year 4,272,065.36 213,603.27 5.00% 1 to 2 years 1,922,682.16 192,268.22 10.00% Over 3 years 229,383.45 229,383.45 100.00% Total 6,424,130.97 635,254.94 9.89% Explanation on the basis of recognition of the portfolio:
Accounts receivable using percentage of amount outstanding for making bad debt provision in the portfolio:□ Applicable√ Not applicable
Accounts receivables using other methods for making bad debt provision in the portfolio:
(2) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB442,839.91. The amount of bad debt provision recovered or reversed during the current period was RMB1,495,828.27.
(3) Top five accounts receivable based on closing balance by debtor
The total amount of theCompany’s top five accounts receivable based on closing balance of debtors for the year was RMB54,257,023.17, which accounted for63.26% of the closing balance of the total accounts receivable. The closing balance of corresponding bad debt provision amounted to RMB271,834.44.
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables
(1) Other receivables by category
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage Amount Percentage Carrying amount Amount Percentage Amount Percentage Carrying amount Other receivables that are individually
significant and are provided
for bad debts separately 13,295,125.16 0.06% 13,295,125.16 100.00% Other receivables that are provided for
bad debts on portfolio basis based
on credit risk features 27,632,797,669.99 100.00% 62,381,579.94 0.23% 27,570,416,090.05 22,879,345,136.34 99.92% 30,659,150.60 0.13% 22,848,685,985.74 Other receivables that are individually
insignificant and are provided
for bad debts separately 4,335,364.21 0.02% 4,335,364.21 100.00% Total 27,632,797,669.99 100.00% 62,381,579.94 0.23% 27,570,416,090.05 22,896,975,625.71 100.00% 48,289,639.97 0.21% 22,848,685,985.74 Other receivables that are individually significant and are provided for bad debts separately as at the end of the period:
□ Applicable√ Not applicable
Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Age Other receivables Bad debt provision Provision percentage Items under within 1 year
Within 1 year 81,875,354.60 4,093,767.73 5.00% 1 to 2 years 7,771,472.04 777,147.20 10.00% 2 to 3 years 5,177,817.85 1,035,563.57 20.00% Over 3 years 56,475,101.44 56,475,101.44 100.00% Total 151,299,745.93 62,381,579.94 41.23% Explanation on the basis of recognition of the portfolio:
Other receivables using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
Other receivables using other methods for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
(2) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB14,091,939.97. The amount of bad debt provision recovered or reversed during the current period was RMB0.00.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 109
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(3) Top five other receivables based on closing balance by debtor
Unit: RMB Percentage of
total closing Closing balance of other balance of bad Name of entity Nature Closing balance Ageing receivables debt provision Shandong Chenming Financial Open credit 17,416,894,093.47 Within 1 year 63.03%
Leasing Co., Ltd.
Shouguang Meilun Paper Co., Ltd. Open credit 1,469,166,116.67 Within 1 year 5.32%
Shandong Chenming Paper Open credit 1,050,843,244.89 Within 1 year 3.80%
Sales Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. Open credit 1,646,628,324.19 Within 1 year 5.96%
Zhanjiang Chenming Open credit 889,132,565.06 Within 1 year 3.22%
Pulp& Paper Co., Ltd.
Total — 22,472,664,344.28— 81.33%
3. Long-term equity investments
Unit: RMB Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value Interest in subsidiaries 16,363,508,366.48 16,363,508,366.48 14,500,415,957.45 14,500,415,957.45 Interest in associates and
joint ventures 163,761,080.74 163,761,080.74 57,681,701.04 57,681,701.04 Total 16,527,269,447.22 16,527,269,447.22 14,558,097,658.49 14,558,097,658.49
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments(Cont’d)
(1) Interest in subsidiaries
Unit: RMB Impairment Closing balance of Investee Increase for Decrease for provision impairment Investee Opening balance the period the period Closing balance for the period provision Shandong Chenming Power Supply
Holdings Co., Ltd. 157,810,117.43 157,810,117.43
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 202,824,716.34 202,824,716.34
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40
Shandong Grand View Hotel Co., Ltd. 80,500,000.00 80,500,000.00
Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00
Zhanjiang Chenming Pulp& Paper
Co., Ltd. 3,000,000,000.00 2,000,000,000.00 5,000,000,000.00
Shouguang Chenming Modern Logistic
Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Art Paper
Co., Ltd. 113,616,063.80 113,616,063.80
Huanggang Chenming Arboriculture
Co., Ltd. 70,000,000.00 70,000,000.00
Huanggang Chenming Pulp& Paper
Co., Ltd. 1,200,000,000.00 1,200,000,000.00
Shouguang Meilun Paper Co., Ltd. 4,646,349,570.28 196,907,590.97 4,449,441,979.31
Shouguang Shun Da Customs
Declaration Co, Ltd. 1,500,000.00 1,500,000.00
Shandong Chenming Paper Sales
Co., Ltd. 662,641,208.20 662,641,208.20
Shouguang Chenming Import and
Export Trade Co., Ltd. 100,000,000.00 100,000,000.00
Shouguang Chenming Papermaking
Machine Co., Ltd. 2,000,000.00 2,000,000.00
Shouguang Chenming Industrial
Logistics Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Hongxin
Packaging Co., Ltd. 1,000,000.00 1,000,000.00
Haicheng Haiming Mining Co., Ltd. 144,000,000.00 144,000,000.00
Chenming GmbH 4,083,235.00 4,083,235.00
Shouguang Hongxiang Printing and
Packaging Co., Ltd. 2,730,000.00 1,000,000.00 3,730,000.00
Shandong Chenming Paper Group
(Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00
Shandong Chenming Group Finance
Co., Ltd. 1,600,000,000.00 1,600,000,000.00
Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00
Xuchang Chenming Paper Co., Ltd 60,000,000.00 60,000,000.00
Qingdao Chenming International
Logistics Co., Ltd. 3,000,000.00 3,000,000.00
Jinan Chenming Investment
Management Co., Ltd. 100,000,000.00 100,000,000.00
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Total 14,500,415,957.45 2,061,000,000.00 197,907,590.97 16,363,508,366.48
SHANDONG CHENMING PAPER HOLDINGS LIMITED 111
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments(Cont’d)
(2) Interest in associates and joint ventures
Unit: RMB Change for the period
Investment Adjustment
gain or loss of other Distribution of Closing balance Opening Additiona Withdrawn recognised under comprehensive Other change in cash dividend or Impairment of impairment Investee balance contribution contribution equity method income equity interest profit declared provision Others Closing balance provision I. Joint venture
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 3,338,480.03 374,446.28 3,712,926.31 Weifang Chenming Sime Darby
West Port Co., Ltd.
(濰坊晨鳴森達美西港有限公司) 106,110,000.00 -343,346.21 105,766,653.79 Sub-total 3,338,480.03 106,110,000.00 31,100.07 109,479,580.10 II. Associates
Arjo Wiggins Chenming
Specialty Paper Co., Ltd.
Jiangxi Jiangbao Media
Colour Printing Co. Ltd. 3,063,072.03 -513,244.55 2,549,827.48 Zhuhai Dechen New Third Board
Equity Investment Fund
Company (Limited Partnership) 51,280,148.98 451,524.18 51,731,673.16 Sub-total 54,343,221.01 -61,720.37 54,281,500.64 Total 57,681,701.04 -30,620.30 163,761,080.74 4. Revenue and operating costs
Unit: RMB Amounts during the period Amounts during the prior period Item Revenue Costs Revenue Costs Principal activities 3,098,374,716.53 2,056,980,676.10 2,964,265,435.57 2,355,738,024.24 Other activities 584,195,592.39 503,718,576.99 440,642,493.39 393,657,742.18 Total 3,682,570,308.92 2,560,699,253.09 3,404,907,928.96 2,749,395,766.42
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017
XIII. Notes to major financial statement items of the parent company(Cont’d)
5. Investment income
Unit: RMB Amounts during Amounts during Item the period the prior period Income from long-term equity investments accounted
for using the cost method 200,000,000.00 Income from long-term equity investments accounted
for using the equity method -30,620.30 -40,098.33 Investment gain from available-for-sale financial assets held 56,208,200.00
Interest income from entrusted loans 13,312,368.97 44,212,264.15 Total 69,489,948.67 244,172,165.82 XVI. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
√ Applicable□ Not applicable
Unit: RMB Item Amount Remark
Profit or loss from disposal of non-current assets 344,802.99
Government grants (except for the government grants
closely related to the normal operation of the Company
and granted constantly at a fixed amount or quantity in
accordance with a certain standard based on state
policies) accounted for in profit or loss
for the current period 139,985,255.40
Gain or loss on external entrusted loans 13,312,368.97
Non-operating gains and losses other than the above items 12,062,780.06
Gain or loss from change in fair value of consumable
biological assets adopting fair value method
for follow-up measurements -11,009,851.10
Less: Effect of income tax 31,709,677.73
Effect of minority interest 765,398.57
Total 122,220,280.02—
Notes for theCompany’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items.□ Applicable√ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 113
INTERIM FINANCIAL REPORT 2017
XVI. Supplementary information(Cont’d)
2. Returns on net assets and earnings per share
Profit for the reporting period Rate of return Earnings per share on net assets Basic earnings Diluted earnings on weighted per share per share Profit for the reporting period average basis (RMB per share) (RMB per share) Net profit attributable to ordinary shareholders
of the Company 7.24% 0.75 0.75 Net profit after extraordinary gains and
losses attributable to ordinary shareholders
of the Company 6.71% 0.69 0.69 3. Difference in accounting data under domestic and overseas accounting standards
(1) Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM FINANCIAL REPORT 2017