YANTAI CHANGYU PIONEER WINE
COMPANY LIMITED
Financial Statements and Auditor's Report
For the year ended 31 December 2017
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
FINANCIAL STATEMENTS AND AUDITOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
CONTENTS PAGE AUDITOR'S REPORT 1 - 6 THE CONSOLIDATED BALANCE SHEET 7 - 8 THE COMPANY'S BALANCE SHEET 9 - 10 THE CONSOLIDATED INCOME STATEMENT 11 THE COMPANY'S INCOME STATEMENT 12 THE CONSOLIDATED CASH FLOW STATEMENT 13 THE COMPANY'S CASH FLOW STATEMENT 14 THE CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 15 THE COMPANY'S STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 16 NOTES TO THE FINANCIAL STATEMENTS 17 - 110
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (18) No. P02977 (Page 1 of 6 pages) TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
1. Opinion
We have audited the financial statements of Yantai Changyu Pioneer Wine Company Limited ("Yantai Changyu Company"), which comprise the consolidated and Company's balance sheets as at 31 December 2017, and the consolidated and Company's income statements, the consolidated and Company's cash flow statements and the consolidated and Company's statements of changes in owners' equity for the year then ended, and the notes to the financial statements.
In our opinion, the accompanying financial statements of Yantai Changyu Pioneer Wine Company Limited is prepared and present fairly, in all material respects, the consolidated and Company's financial position as of 31 December 2017, and the consolidated and the Company's results of operations and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.
2. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Yantai Changyu Company in accordance with the code of ethics for Chinese Certified Public Accountants, and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We determine the followings are key audit matters in need of communication in our report.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (18) No. P02977 (Page 2 of 6 pages) 3. Key Audit Matters - continued
The determination of the fair value of identifiable assets and liabilities associated with business combination
1、Item description
As disclosed in Notes VII, during the year, the Company through its acquired100% shares of Chile Indomita Wine Group. As disclosed in Notes III-5, the Company need to recognize the acquiree's identifiable assets and liabilities which were met the recognition criteria generated during the acquisition at their fair value on the acquisition day. As disclosed in Notes IV "The determination of the fair value of identifiable assets and liabilities associated with business combination", during the recognition of the above identifiable assets and liabilities' fair value based on the present value of future cash flow, the management of the Company need to forecast the cash flow according the growth rate of sales based on future market's supply and demand, and considered selecting the appropriate discount rate for discounting, which involved the management to exercise significant estimations and judgments. Therefore, we identified the determination of the fair value of identifiable assets and liabilities associated with business combination as a key audit matter.
2、How our audit addressed the key audit matter
Our procedures in relation to the key audit matter mainly included:
(1) Understanding and assessing the appropriateness of the method used by the management to Identify and recognize the various identifiable assets and liabilities on the acquisition day;
(2) Understanding and assessing the competence and independence of the valuation specialists appointed by the management;
(3) Using our internal valuation specialists, and reviewing the rationality of the significant estimations, (including the growth rate of sales, the discount rate and etc.), used by the management and their valuation specialists in the value of various identifiable assets and liabilities' fair value.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (18) No. P02977 (Page 3 of 6 pages) 3. Key Audit Matters - continued
Valuation of long-term assets' impairment
1、Item description
As disclosed in Notes VI-12 and 13, some subsidiaries of the Company were sustained loss and the cash flow from operating activities were net out and the related assets existed an indication of impairment. As at 31 December 2017, the book values of fixed assets and construction in progress ("CIP") were RMB 928,058,429 and RMB 89,001,307, respectively, and were significant in financial statement level. As disclosed in Notes IV "Impairment of long-term assets ", a highly uncertainty existed related to the Company's management to determine the recoverable amount based on expected future cash flows, which involved the use of significant accounting estimation and judgment on the growth rate of sales, average gross rate, other operating expenses of those subsidiaries of the relevant assets (group of assets) and the discount rate used in calculation the present value. For the above reasons, we identified the valuation of long-term assets' impairment as a key audit matter.
2、How our audit addressed the key audit matter
Our procedures in relation to the key audit matter mainly included:
(1) Understanding, assessing and testing the relatively designing, implementing and effectiveness of key internal controls over the valuation of book values of the fixed assets and CIP;
(2) Based on our understanding of the business and industry of those subsidiaries, assessing the rationality of significant accounting estimation and judgment used by the management to forecast the future cash flows during the impairment test, including the growth rate of sales, the average gross rate, other operating expenses and the discount rate used in calculation the present value;
(3) Using our internal valuation specialists, reviewing the appropriateness of the future cash flows discount model prepared by the management and the rationality of the discount rate used;
(4) Performing the recalculation procedure, checking the accuracy of calculations in the discount future cash flows model.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (18) No. P02977 (Page 4 of 6 pages) 4. Other Information
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for other information. The other information comprises the information included in the Yantai Changyu 2017 annual report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 5. Responsibilities of the Management and Those Charged with Governance for the Financial Statements
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for the preparation and fair presentation of the financial statements in accordance with Accounting Standards for Business Enterprises, and designing, implementing and maintaining internal control that is necessary to enable the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing Yantai ChangyuCompany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate Yantai Changyu Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing Yantai ChangyuCompany’s financial reporting process.
6. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (18) No. P02977 (Page 5 of 6 pages) 6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Yantai ChangyuCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Yantai Changyu Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements (including the disclosures), and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Yantai Changyu Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (18) No. P02977 (Page 6 of 6 pages) 6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant: Li Xu Shanghai, China (Engagement partner) Chinese Certified Public Accountant: Li Yangang 19, April , 2018
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2017
ASSETS Notes Closing balance Opening balance RMB RMB CURRENT ASSETS
Cash and bank VI-1 1,402,522,509 1,391,517,607 Notes receivable VI-2 244,796,818 210,470,027 Accounts receivable VI-3 263,796,355 173,062,628 Prepayments VI-4 2,417,931 2,175,606 Interest receivable VI-5 240,968 24,200 Other receivables VI-6 18,737,454 18,880,800 Inventories VI-7 2,473,614,046 2,248,609,740 Non-current assets held for sale VI-8 2,000,197 2,000,197 Other current assets VI-9 230,822,759 169,522,242_____________ _____________ Total current assets 4,638,949,037 4,216,263,047_____________ _____________ NON-CURRENT ASSETS
Available-for-sale financial assets VI-10 467,251 340,263 Investment properties VI-11 18,467,989 - Fixed assets VI-12 5,329,083,969 4,683,187,493 Construction in progress VI-13 1,026,141,569 1,346,281,737 Bearer biological assets VI-14 201,929,888 201,428,980 Intangible assets VI-15 655,448,897 483,815,080 Goodwill VI-16 128,135,981 121,265,866 Long-term prepaid expenses VI-17 230,009,231 162,206,229 Deferred tax assets VI-18 308,121,396 295,937,037 Other non-current assets VI-19 - 17,352,239_____________ _____________ Total non-current assets 7,897,806,171 7,311,814,924_____________ _____________ Total assets 12,536,755,208 11,528,077,971__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2017 - continued
LIABILITIES AND EQUITY Notes Closing balance Opening balance RMB RMB CURRENT LIABILITIES
Short-term borrowings VI-20 714,434,286 662,388,882 Notes payable VI-21 - 38,900,000 Accounts payable VI-22 666,442,879 545,231,319 Receipts in advance VI-23 350,894,156 425,246,421 Advances from customers VI-24 210,824,234 206,431,734 Taxes payable VI-25 145,094,156 144,042,600 Interest payable 771,250 563,613 Deferred income VI-26 16,878,199 11,163,883 Other payables VI-27 602,964,319 546,305,310 Non-current liabilities due within one year VI-28 110,954,827 71,799,093_____________ _____________ Total current liabilities 2,819,258,306 2,652,072,855_____________ _____________ NON-CURRENT LIABILITIES
Long-term borrowings VI-29 156,125,854 49,140,555 Long-term payables VI-30 259,000,000 293,000,000 Deferred income VI-26 92,918,855 101,775,243 Deferred tax liabilities VI-18 24,264,203 24,908,410 Other non-current liabilities VI-31 7,209,312 7,696,222_____________ _____________ Total non-current liabilities 539,518,224 476,520,430_____________ _____________ Total liabilities 3,358,776,530 3,128,593,285_____________ _____________ EQUITY
Share capital VI-32 685,464,000 685,464,000 Capital reserve VI-33 565,955,441 565,955,441 Other comprehensive income VI-34 3,109,240 (5,259,014) Surplus reserve VI-35 342,732,000 342,732,000 Retained earnings VI-36 7,309,081,618 6,620,118,562_____________ _____________ Equity attributable to shareholders
of the Company 8,906,342,299 8,209,010,989 Non-controlling interests 271,636,379 190,473,697_____________ _____________ Total equity 9,177,978,678 8,399,484,686_____________ _____________ Total liabilities and equity 12,536,755,208 11,528,077,971__________________________ __________________________ The accompanying notes form an integral part of these financial statements.
The financial statements on pages 7 to 110 were signed by the following:
Legal Representative Person in Charge of the Chief Accountant Accounting Body
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
ASSETS Notes Closing balance Opening balance RMB RMB CURRENT ASSETS
Cash and bank XIV- 1 559,174,466 269,460,060 Notes receivable XIV- 2 41,645,203 1,114,200 Accounts receivable XIV- 3 7,805,333 3,326,683 Prepayments XIV- 4 99,673 702,647 Interest receivable 76,646 24,200 Dividend receivables XIV- 5 407,495,922 531,819,113 Other receivables XIV- 6 592,274,075 3,582,532,862 Inventories XIV- 7 348,042,053 792,732,418 Non-current assets held for sale VI-8 2,000,197 2,000,197 Other current assets 29,706,058 20,085,058_____________ _____________ Total current assets 1,988,319,626 5,203,797,438_____________ _____________ NON-CURRENT ASSETS
Long-term equity investments XIV- 8 4,511,202,204 1,834,341,541 Investment properties VI-11 18,467,989 - Fixed assets XIV- 9 288,150,901 347,481,417 Construction in progress XIV- 10 6,756,349 500,000 Bearer biological assets XIV- 11 119,572,539 123,036,693 Intangible assets XIV- 12 69,623,219 72,002,372 Deferred tax assets XIV- 13 28,787,907 26,985,252 Other non-current assets XIV- 14 3,718,674,166 2,617,457,460_____________ _____________ Total non-current assets 8,761,235,274 5,021,804,735_____________ _____________ Total assets 10,749,554,900 10,225,602,173__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017 - continued
LIABILITIES AND EQUITY Notes Closing balance Opening balance RMB RMB CURRENT LIABILITIES
Short-term borrowings XIV- 15 600,000,000 500,000,000 Accounts payable XIV- 16 97,833,124 247,568,857 Advances from customers XIV- 17 6,000,000 6,000,000 Employee benefits payable XIV- 18 70,108,076 70,812,761 Taxes payable XIV- 19 14,569,690 33,266,225 Interest payable 652,500 563,613 Deferred income 3,953,054 1,767,054 Other payables XIV- 20 544,713,172 368,310,362 Non-current liabilities due within one year XIV- 21 - 29,227,200_____________ _____________ Total current liabilities 1,337,829,616 1,257,516,072_____________ _____________ NON-CURRENT LIABILITIES
Deferred income 12,628,573 19,933,699 Other non-current liabilities 2,577,702 2,499,403_____________ _____________ Total non-current liabilities 15,206,275 22,433,102_____________ _____________ Total liability 1,353,035,891 1,279,949,174_____________ _____________ EQUITY
Share capital VI-32 685,464,000 685,464,000 Capital reserve XIV- 22 557,222,454 557,222,454 Surplus reserve VI-35 342,732,000 342,732,000 Retained earnings 7,811,100,555 7,360,234,545_____________ _____________ Total equity 9,396,519,009 8,945,652,999_____________ _____________ Total liabilities and equity 10,749,554,900 10,225,602,173__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2017
Notes 2017 2016 RMB RMB I. Revenue VI-37 4,932,545,229 4,717,596,472 Less: Cost of sales VI-37 1,671,592,279 1,575,770,979 Taxes and surcharges VI-38 310,252,023 269,716,646 Selling expenses VI-39 1,272,522,443 1,253,260,668 Administrative expenses VI-40 340,781,958 309,783,548 Financial expenses VI-41 18,590,259 21,968,859 Impairment loss of assets VI-42 8,293,553 3,279,266 Add: Loss (income) from disposal of assets (222,586) 14,719 Other income VI-43 ____4_6_,_03_8_,_3_8_4 ___________-_ II. Operating profit 1,356,328,512 1,283,831,225 Add: Non-operating income VI-44 17,230,727 55,014,314 Less: Non-operating expenses VI-45 _____1_,_63_1_,_4_7_6 _____1_,_22_6_,_6_9_9 III. Profit before tax 1,371,927,763 1,337,618,840 Less: Income tax VI-46 ___3_3_8_,_13_4_,_2_4_5 ___3_5_7_,_02_9_,_4_4_6 I V. Profit for the year __1_,0_3_3_,_79_3_,_5_1_8 ___9_8_0_,_58_9_,_3_9_4 (I) Categorized by the nature of continuing operation
1. Net profit(loss) from continuing operations __1_,0_3_3_,_79_3_,_5_1_8 ___9_8_0_,_58_9_,_3_9_4 (II) Categorized by ownership:
1. Profit or loss attributable to non-controlling interests 2,098,462 (1,871,094) 2. Net profit attributable to owners of the Company __1_,0_3_1_,_69_5_,_0_5_6 ___9_8_2_,_46_0_,_4_8_8 V . Other comprehensive income (post-tax) _____9_,8_6_3_,_8_7_2 _____5_,_61_5_,_6_8_9 Other comprehensive income attributable
to shareholders of the Company
Other comprehensive income
to be reclassified to profit and loss
Foreign currency statement translation difference 8,368,254 5,183,498 Other comprehensive income attributable
to non-controlling interest _____1_,_49_5_,_6_1_8 _______43_2_,_1_9_1 V I. Total comprehensive income __1_,0_4_3_,_65_7_,_3_9_0 ___9_8_6_,_20_5_,_0_8_3 Attribute to shareholders of the Company 1,040,063,310 987,643,986 Attribute to non-controlling interest of the Company 3,594,080 (1,438,903)________________________ ________________________ VII. Earnings per share
(I) Basic earnings per share VI-47 1.51 1.43________________________ ________________________ (II) Diluted earnings per share VI-47 N/A N/A________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
Notes 2017 2016 RMB RMB I. Revenue XIV- 23 1,311,256,854 1,415,104,946 Less: Cost of sales XIV- 23 1,165,953,408 1,152,076,500 Taxes and surcharges XIV- 24 76,570,225 106,469,217 Administrative expenses XIV- 25 80,693,044 85,962,137 Financial expenses XIV- 26 637,568 34,226,452 Add:Investment income XIV- 27 798,877,905 1,798,129,418 Loss (income) from disposal of assets (29,625) 111,362 Other income 5,219,126 -____________ ____________ II. Operating Profit 791,470,015 1,834,611,420 Add: Non-operating income 686,646 7,275,905 Less: Non-operating expenses 335,237 359,415____________ ____________ III. Profit before tax 791,821,424 1,841,527,910 Less: Income tax (1,776,586) 10,953,440____________ ____________ IV. Profit for the year 793,598,010 1,830,574,470________________________ ________________________ Net profitfrom continuing operations __7_9_3_,_5_9_8_,0_1_0
_
_1_,8_3_0_,_5_7_4_,4_7_0_ V. Total comprehensive income 793,598,010 1,830,574,470________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2017
Notes 2017 2016 RMB RMB CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 4,827,152,526 4,441,041,101 Receipts of tax refunds 53,196,910 17,860,500 Other cash receipts relating to operating activities VI-48(1) 85,236,905 66,707,865____________ ____________ Sub-total of cash inflows from operating activities 4,965,586,341 4,525,609,466____________ ____________ Cash payments for goods purchased and services received 1,143,840,915 961,128,796 Cash payments to and on behalf of employees 512,777,815 435,621,220 Payment of various types of taxes 1,260,813,596 1,133,232,957 Other cash payments relating to operating activities VI-48(2) 1,074,910,988 1,105,714,523____________ ____________ Sub-total of cash outflows from operating activities 3,992,343,314 3,635,697,496____________ ____________ Net cash flows from operating activities VI-49(1) 973,243,027 889,911,970____________ ____________ CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in term deposits over 3 months 205,000,000 98,021,025 Proceeds from return on investments 4,084,350 7,723,126 Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 7,594,005 7,208,774____________ ____________ Sub-total of cash inflows from investing activities 216,678,355 112,952,925____________ ____________ Cash paid for acquisition of properties, plants and equipment,
intangible assets and other long-term assets 435,960,357 704,834,302 Cash paid for term deposits over 3 months 297,000,000 92,021,025 Cash paid for purchase of available-for-sale financial assets 129,216 - Cash paid for the purchase subsidiaries and other equity VI-48(3) 303,796,543 3,539,144____________ ____________ Sub-total of cash outflows from investing activities 1,036,886,116 800,394,471____________ ____________ Net cash flows from investing activities (820,207,761) (687,441,546)____________ ____________ CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from capital contributions 48,396,726 - Including: cash receipts from capital contributions
from minority owners of subsidiaries 48,396,726 - Cash receipts from borrowings 963,564,600 1,011,089,858 Other cash received from financing activities VI-48(4) 52,930,804 180,477,587____________ ____________ Sub-total of cash inflows from financing activities 1,064,892,130 1,191,567,445____________ ____________ Cash paid for borrowings 876,502,273 839,962,581 Cash paid for dividends, profits and interests 369,791,284 372,529,256 Cash paid from other financing activities VI-48(5) 61,700,000 20,000,000____________ ____________ Sub-total of cash outflows from financing activities 1,307,993,557 1,232,491,837____________ ____________ Net cash flows from financing activities (243,101,427) (40,924,392)____________ ____________ Effect of foreign exchange rate changes
on cash and cash equivalents 14,013,131 3,154,611 NET DECREASE/( INCREASE ) OF CASH AND CASH EQUIVALENTS (76,053,030) 164,700,643 Add: cash and cash equivalents at beginning of the year VI-49(3) 1,256,942,304 1,092,241,661____________ ____________ CASH AND CASH EQUIVALENTS AT END OF THE YEARVI-49(3) 1,180,889,274 1,256,942,304________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
Notes 2017 2016 RMB RMB CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 984,103,489 1,260,184,309 Other cash receipts relating to operating activities 431,983,092 232,328,473____________ ____________ Sub-total of cash inflows from operating activities 1,416,086,581 1,492,512,782____________ ____________ Cash payments for goods purchased and services received 398,827,772 887,413,606 Cash payments to and on behalf of employees 89,894,049 121,662,409 Cash payment of various types of taxes 207,917,864 132,372,497 Other cash payment relating to operating activities 121,377,127 805,127,368____________ ____________ Sub-total of cash outflows from operating activities 818,016,812 1,946,575,880____________ ____________ Net cash flows from operating activities XIV- 28 598,069,769 (454,063,098)____________ ____________ CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts from deposits over 3 months 103,000,000 18,021,025 Cash receipts from return on investments 827,218,467 1,530,872,587 Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 26,760,929 9,705,026____________ ____________ Sub-total of cash outflows from investing activities 956,979,396 1,558,598,638____________ ____________ Cash payments to acquire or construct fixed assets, intangible
assets and other long-term assets 22,527,073 28,351,843 Cash payments for term deposits over 3 months 105,000,000 12,021,025 Cash payments for subsidiary investment 881,056,220 468,882,418____________ ____________ Sub-total of cash outflows from investing activities 1,008,583,293 509,255,286____________ ____________ Net cash flows from investing activities (51,603,897) 1,049,343,352____________ ____________ CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from borrowings 600,000,000 500,000,000 Cash inflows from financing activities - 135,584,347____________ ____________ Sub-total of cash outflows from investing activities 600,000,000 635,584,347____________ ____________ Cash paid for borrowings 530,339,600 764,619,892 Cash paid for dividends, profits and interests 360,560,604 372,039,591____________ ____________ Sub-total of Cash outflows from financing activities 890,900,204 1,136,659,483____________ ____________ Net cash flows from financing activities (290,900,204) (501,075,136)____________ ____________ NET INCREASE/(DECREASE) OF CASH
AND CASH EQUIVALENTS 255,565,668 94,205,118 Add: cash and cash equivalents at beginning of the year XIV- 29 238,003,198 143,798,080____________ ____________ CASH AND CASH EQUIVALENTS AT END
OF THE YEAR XIV- 29 493,568,866 238,003,198________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2017
2017
Attributable to shareholders of the Company
Issued Capital Other comprehensive Surplus Retained Non-controlling
capital surplus income reserve earnings interests Total RMB RMB RMB RMB RMB RMB RMB I. Opening balance
of the current year _68_5_,4_64_,0_0_0 _56_5_,9_55_,4_4_1__(5_,2_59_,0_1_4) _34_2_,7_32_,0_0_0_6,_62_0_,1_18_,5_6_2_19_0_,4_73_,6_9_7_8,_39_9_,4_84_,6_8_6 II. Changes for the year
(I) Total comprehensive income - - 8,368,254 - 1,031,695,056 3,594,080 1,043,657,390 (II)Owners’ contributions and reduction in capital
Non-controlling interests' capital
contribution (VIII-2) - - - - - 78,236,726 78,236,726 (II) Profit distribution
Distributions to
shareholders (VI-36) ______-_ ______-_______-_ ______-__(_34_2_,7_32_,0_0_0)___(6_68_,1_2_4)_(_34_3_,4_00_,1_2_4) III. Closing balance
of the current year __68__5__,4__64__,0__0__0 __56__5__,9__55__,4__4__1____3__,1__09__,2__4__0 __34__2__,7__32__,0__0__0__7,__30__9__,0__81__,6__1__8__27__1__,6__36__,3__7__9__9,__17__7__,9__78__,6__7__8 2016
Attributable to shareholders of the Company
Issued Capital Other comprehensive Surplus Retained Non-controlling
capital surplus income reserve earnings interests Total RMB RMB RMB RMB RMB RMB RMB I. Opening balance
of the current year _68_5_,4_64_,0_0_0 _56_5_,9_55_,4_4_1_(1_0_,4_42_,5_1_2) _34_2_,7_32_,0_0_0_5,_98_0_,3_90_,0_7_4_19_2_,4_59_,0_2_3_7,_75_6_,5_5_8,0_2_6 II. Changes for the year
(I) Total comprehensive income - - 5,183,498 - 982,460,488 (1,438,903) 986,205,083 (II) Profit distribution
Distributions to
shareholders (VI-36) ______-_ ______-_______-_ ______-__(_34_2_,7_32_,0_0_0)___(5_46_,4_2_3)_(_34_3_,2_78_,4_2_3) III. Closing balance
of the current year __68__5__,4__64__,0__0__0 __56__5__,9__55__,4__4__1____(5__,2__59__,0__1__4) __34__2__,7__32__,0__0__0__6,__62__0__,1__18__,5__6__2__19__0__,4__73__,6__9__7__8,__39__9__,4__84__,6__8__6
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
2017
Issued capital Capital reserve Surplus reserve Retained earnings Total RMB RMB RMB RMB RMB I. Opening balance
of the current year _6_85_,_46_4_,0_0_0 _5_57_,_22_2_,4_5_4 _3_42_,_73_2_,0_0_0 _7_,3_6_0,_23_4_,5_4_5 _8_,9_4_5,_65_2_,9_9_9 II. Changes for the year
(I) Total comprehensive income - - - 793,598,010 793,598,010 (II) Profit distribution
Distributions to shareholders (VI-36) _______-_ _______-_ _______-_ _(_3_42_,_73_2_,0_0_0) _(_3_42_,_73_2_,0_0_0) III.Closing balance
of the current year __6__85__,__46__4__,0__0__0 __5__57__,__22__2__,4__5__4 __3__42__,__73__2__,0__0__0 __7__,8__11__,__10__0__,5__5__5 __9__,3__96__,__51__9__,0__0__9 2016
Issued capital Capital reserve Surplus reserve Retained earnings Total RMB RMB RMB RMB RMB I. Opening balance
of the current year _6_85_,_46_4_,0_0_0 _5_57_,_22_2_,4_5_4 _3_42_,_73_2_,0_0_0 _5_,8_7_2,_39_2_,0_7_5 _7_,4_5_7,_81_0_,5_2_9 II. Changes for the year
(I) Total comprehensive income - - - 1,830,574,470 1,830,574,470 (II) Profit distribution
D istributions to shareholders (VI-36) _______-_ _______-_ _______-_ _(_3_42_,_73_2_,0_0_0) _(_3_42_,_73_2_,0_0_0) III.Closing balance
of the current year __6__85__,__46__4__,0__0__0 __5__57__,__22__2__,4__5__4 __3__42__,__73__2__,0__0__0 __7__,3__6__0,__23__4__,5__4__5 __8__,9__4__5,__65__2__,9__9__9
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2017
I. CORPORATE INFORMATION
Yantai Changyu Pioneer Wine Co., Ltd. (the "Company") was incorporated as a joint stock limited company in accordance with the Company Law of the People's Republic of China (the "PRC") in a reorganization carried out by Yantai Changyu Group Co., Ltd. ("Changyu Group Company"), in which Changyu Group Company injected certain assets and liabilities in relation to the brandy, wine, and sparkling wine production and sales businesses to the Company. The Company and its subsidiaries (the "Group") are principally engaged in the production and sales of wine, brandy, sparkling wine, grape growing and acquisition, as well as travel resource development, etc. . Registration place of the Company is Yantai, Shandong. Headquarter of the Company is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong, PRC.
As at 31 December 2017 the total shares issued by the Company amounts to 685,464,000 shares. Please refer to Note VI-32 in detail.
The holding company of the Group is Changyu Group Company, which is jointly controlled by Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, International Finance Corporation and Yantai Yuhua Investment and Development Company Limited. The financial statements have been authorized by the board of directors on 19 April 2018. According to the Company's articles of association, the financial statements will be reviewed by shareholders on the shareholder's meeting.
For consolidation scope of the year, please refer to Notes VIII "Equity in other entities" in detail. For detail of changes in consolidation scope of the year, please refer to Notes VII "Change in consolidation scope".
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") issued by the Ministry of Finance ("MoF"). In addition, the Group has disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15 - General Provisions on Financial Reporting (Revised in 2014).
2. Basis of accounting and principle of measurement
The Group has adopted the accrual basis of accounting. The Group adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements.
Under the historical cost measurement, an asset is measured at the fair value of consideration paid in cash and cash equivalents at the date of the purchase. Liability is measured at the value of asset
received through taking current obligation, the contract value for taking current obligation, or the
cash and cash equivalents value estimated for repaying debt in daily business activity.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
2. Basis of accounting and principle of measurement - continued
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis.
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
2) Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
3) Level 3 inputs are unobservable inputs for the asset or liability.
3. Going concern
As at 31 December 2017, the Group evaluated the profitability ability in the foreseeable 12 months and did not notice any event or circumstance that would constitute significant doubt on going concern ability of the Group. Therefore, the financial statements have been prepared on a going concern basis.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING 1. Declaration for implementing CAS
The financial statements are prepared in accordance with CAS, which showing a true and fair view of the financial position on 31 December 2017, financial performance and cash flow in 2017 of the Company and the Group.
2. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year. 3. Business cycle
Business cycle refers to the period from purchasing assets to be processed to receiving cash or cash equivalents by the Company. The business cycle of the Company is 12 months.
4. Reporting currency
Renminbi ("RMB") is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose RMB as their functional currency. The Company's foreign subsidiary chooses Currency Euro and Chilean Peso as its functional currency on the basis of the primary economic
environment in which it operates. The Company adopts RMB to prepare its financial statements.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
5. Business combination
5.1Business combinations not involving enterprises under common control and goodwill 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.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services, etc. and other associated administrative expenses attributable to the business combination are recognised in profit or loss when they are incurred.
Qualified identifiable assets, liabilities and contingent liabilities obtained by acquirer in the acquisition are measured using fair value at the acquisition date.
Where the cost of combination exceeds theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference is treated as an asset and recognised as goodwill, which is measured at cost on initial recognition. Where the cost of combination is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the acquirer firstly reassesses the measurement of the fair values of theacquiree’s identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that reassessment, the cost of combination is still less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the acquirer recognises the remaining difference immediately in profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is presented separately in the consolidated financial statements. It is tested for impairment at least at the end of each year.
6. Preparation of consolidated financial statements
6.1 Preparation of consolidated financial statements
The scope of consolidation in the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The Group will re-evaluate if changes in relevant facts and circumstances results in changes in relevant factors involved in the above definition of control.
Consolidation of subsidiary starts from the control on the subsidiary by the Group and ends at the loss of control on the subsidiary by the Group.
For the subsidiaries through business combination not involving enterprises under common control, the results of operations and cash flows from the acquisition day were properly included
in the consolidated income statements and consolidated cash flow statements.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
6. Preparation of consolidated financial statements - continued
6.1 Preparation of consolidated financial statements
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on the uniform accounting policies and accounting periods set out by the Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non- controlling interests and presented as "non-controlling interests" in the consolidated balance sheet within shareholders' equity. The portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests is presented as "non-controlling interests" in the consolidated income statement below the net profit line item.
When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount are still allocated against non-controlling interests. 7. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 8. Translation of transactions and financial statements denominated in foreign currencies
8.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange rate on the date of the transaction.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheet date are recognised in profit or loss for the period, except that (1) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalisation are capitalised as part of the cost of the qualifying asset during the capitalisation period; (2) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting; (3) exchange differences arising from available-for-sale non-monetary items denominated in foreign currencies and changes in the carrying amounts of available-for-sale monetary items are recognised as other comprehensive income and included in capital reserve.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
8. Translation of transactions and financial statements denominated in foreign currencies - continued 8.1 Transactions denominated in foreign currencies - continued
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency remain unchanged. Foreign currency non-monetary items measured at fair value are re-translated at the spot exchange rate on the date the fair value is determined. Difference between the re-translated functional currency amount and the original functional currency amount is treated as changes in fair value (including changes of exchange rate) and is recognised in profit and loss or as other comprehensive income included in capital reserve. 8.2 Translation of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation are translated from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items except for retained earnings are translated at the spot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated at the spot exchange rates on the dates of the transactions; the opening balance of retained earnings is the translated closing balance of the previous year's retained earnings; the closing balance of retained earnings is calculated and presented on the basis of each translated income statement and profit distribution item. The difference between the translated assets and the aggregate of liabilities and shareholders' equity items is separately presented as the exchange differences arising on translation of financial statements denominated in foreign currencies of other comprehensive income under the shareholders' equity in the balance sheet.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flows. The effect of exchange rate changes on cash and cash equivalents is regarded as a reconciling item and presented separately in the cash flow statement as "effect of exchange rate changes on cash and cash equivalents".
The opening balances and the comparative figures of previous year are presented at the translated amounts in the previous year's financial statements.
9 Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. For other financial assets and financial liabilities, transaction costs are included in their initial recognised amounts.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued 9 Financial instruments - continued
9.1 Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or a group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period, using the effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial asset or financial liability (without considering future credit losses), and also considers all fees paid or received between the parties to the contract giving rise to the financial asset and financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc.
9.2 Classification, recognition and measurement of financial assets
On initial recognition, the Group's financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Financial assets of the Group are loans and receivables and available-for-sale financial assets.
9.2.1 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets classified as loans and receivables by the Group include notes receivable, accounts receivable, interest receivable and other receivables. Loans and receivables are subsequently measured at amortised cost using the effective interest method. Gain or loss arising from derecognition, impairment or amortisation is recognised in profit or loss.
9.2.2 Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are designated on initial recognition as available for sale, and financial assets that are not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments. For investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
9.3 Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other than those at fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Group determines the amount of any impairment loss. Objective evidence that a financial asset is impaired is evidence that, arising from one or more events that occurred after the initial recognition of the asset, the estimated future cash flows of the financial asset, which can be reliably measured, have been affected.
Objective evidence that a financial asset is impaired includes the following observable events: (1) Significant financial difficulty of the issuer or obligor;
(2) A breach of contract by the borrower, such as a default or delinquency in interest or principal payments;
(3) The Group, for economic or legal reasons relating to the borrower's financial difficulty, granting a concession to the borrower;
(4) It becoming probable that the borrower will enter bankruptcy or other financial reorganisations;
(5) The disappearance of an active market for that financial asset because of financial difficulties of the issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that there is a measurable decrease in the estimated future cash flows from the group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group. Such observable data includes:
- Adverse changes in the payment status of borrower in the group of assets; - Economic conditions in the country or region of the borrower which may lead to a failure to pay the group of assets;
(7) Significant adverse changes in the technological, market, economic or legal environment in which the issuer operates, indicating that the cost of the investment in the equity instrument may not be recovered by the investor;
(8) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost;
(9) Other objective evidence indicating there is an impairment of a financial asset.
- Impairment of financial assets measured at amortised cost
If financial assets carried at amortised cost are impaired, the carrying amounts of the financial assets are reduced to the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The amount of reduction is recognised as an impairment loss in profit or loss. If, subsequent to the recognition of an impairment loss on financial assets carried at amortised cost, there is objective evidence of a recovery in value of the financial assets which can be related objectively to an event occurring after the impairment is recognised, the previously recognised impairment loss is reversed. However, the reversal is made to the extent that the carrying amount of the
financial asset at the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
9.3 Impairment of financial assets - continued
- Impairment of financial assets measured at amortised cost - continued
For a financial asset that is individually, the Group assesses the asset individually for impairment. - Impairment of available for sale assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be reliably measured, or on a derivative financial asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the carrying amount of the financial asset is reduced to the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The amount of reduction is recognised as an impairment loss in profit or loss. The impairment loss on such financial asset is not reversed once it is recognised.
9.4 Transfer of financial assets
The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (3) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised in other comprehensive income, is recognised in profit or loss.
9.5 Classification, recognition and measurement of financial liabilities
Debt and equity instruments issued by the Group are classified into financial liabilities or equity on the basis of the substance of the contractual arrangements and definitions of financial liability and equity instrument.
On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial liabilities. The financial liabilities in group are other financial liabilities, including short-term borrowings, notes payable, account payables, interest payables, other payables, non-current liabilities due within one year and long-term payables etc. 9.5.1 Other financial liabilities
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with gain or loss arising from derecognition or amortisation recognised in profit or loss.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
9.6 Derecognition of financial liabilities
The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged.
When the Group derecognises a financial liability or a part of it, it recognises the difference between the carrying amount of the financial liability (or part of the financial liability) derecognised and the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
9.7 Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognised financial assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.
9.8 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group does not recognise any changes in the fair value of equity instruments. The equity instruments transaction expenses deducted from equity. The Group treats distribution to equity instrument holders as profit distributions. Shareholder equity is not affected by share dividend distributed.
10 Accounts Receivable
The Group believes that the individual receivables are all significant, and the corresponding receivables are individually tested for impairment, and individual recognition method is used to confirm bad debt provision.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
11 Inventories
11.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress and finished goods. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method. Agricultural products harvested are reported in accordance with the CAS 1 Inventories. 11.3 Basis for determining net realisable value of inventories and provision methods for decline in value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realisable value. If the net realisable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events.
Provision for decline in value of other inventories is made based on the excess of cost of inventory over its net realisable value on an item-by-item basis.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realisable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period.
11.4 Inventory count system
The perpetual inventory system is maintained for stock system.
11.5 Amortisation method for low cost and short-lived consumable items and packaging materials Packaging materials and low cost and short-lived consumable items are amortised using the immediate write-off method.
12 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale category when the Group recovers the book value through a sale (including an exchange of nonmonetary assets that has
commercial substance) rather than continuing use.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
12. Non-current assets held for sale - continued
Non-current assets or disposal groups classified as held for sale are required to satisfy the following conditions: (1) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset or disposal group; (2) the sale is highly probable, i.e. the Group has made a resolution about selling plan and obtained a confirmed purchase commitment and the sale is expected to be completed within one year.
The Group measures the no-current assets or disposal groups classified as held for sale at the lower of their carrying amount and fair value less costs to sell. Where the carrying amount is higher than the net amount of fair value less costs to sell, carrying amount should be reduced to the net amount of fair value less costs to sell, and such reduction is recognized in impairment loss of assets and included in profit or loss for the period. Meanwhile, provision for impairment of held-for-sale assets are made. When there is increase in the net amount of fair value of non- current assets held for sale less costs to sell at the balance sheet date, the original deduction should be reversed in impairment loss of assets recognized after the classification of held-for-sale category, and the reverse amount is include in profit or loss for the period.
Non-current assets held for sale in non-current assets are not subject to depreciation or amortization.
13. Long term equity investments
13.1 Basis for determining control, joint control and significant influence
Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that are currently exercisable or convertible shall be considered.
13.2 Determination of initial investment cost
For a long-term equity investment acquired not involving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition.
Audit fee, legal services, consulting fees and other related management costs in acquisition are expensed in profits and losses when happened.
Other long-term equity investments acquired from other than acquisitions are recognised using original cost.
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III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
13. Long term equity investments - continued
13.3 Subsequent measurement and recognition of profit or loss
13.3.1 Long-term equity investment accounted for using the cost method
The Group accounts for long-term equity investment using the cost method. A subsidiary is an investee that is controlled by the Group.
Under the cost method, a long-term equity investment is measured at initial investment cost. Long-term equity investment is adjusted when capital is added or recollected. Investment income is recognised in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee.
13.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognised in profit or loss for the period. 14. Investment properties
Investment property is property held to earn rentals or for capital appreciation or both.
An investment property is measured initially at cost. Subsequent expenditures incurred for such investment property are included in the cost of the investment property if it is probable that economic benefits associated with an investment property will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.
The Group uses the cost model for subsequent measurement of investment property, and adopts a depreciationor amortisation policy for the investment property which is consistent with that for buildings or land use rights.
When an investment property is sold, transferred, retired or damaged, the Group recognises the amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss for the period.
15. Fixed assets
15.1 Recognition criteria for fixed assets
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 useful lives of more than one accounting year. A fixed asset is recognised only when it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at cost.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING- continued
15. Fixed assets - continued
15.1 Recognition criteria for fixed assets - continued
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.
15.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assets are as follows:
Estimated Estimated Annual useful life residual rate depreciation rate Buildings 20-40years 0-5% 2.4%-5.0% Machinery 5-30years 0-5% 3.2%-20.0% Motor Vehicles 4-12years 0-5% 7.9%-25.0% Estimated net residual value assumes the situation where a fixed asset expire for its estimated useful life and is in its expected final status. Estimated net residual value is the amount that the Group can obtain from the disposal less expected disposal fees.
15.3 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognised in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate.
16. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalised before it is ready for intended use and other relevant costs. Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready for intended use.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalised when expenditures for such asset and borrowing costs are incurred and 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. Capitalisation of borrowing costs ceases when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Capitalisation of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months. Capitalisation is suspended until the acquisition, construction or production of the asset is resumed. Other borrowing costs are recognised as an expense in the period in which they are incurred. Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds.
18. Biological assets
The Group's biological assets are bearer biological assets.
18.1 Bearer biological assets
Bearer biological assets are biological assets, for example, held for the production of agricultural produce, provision of services or rental, Bearer biological assets in the Group are vines. A bearer biological asset is initially measured at cost. The cost of a bearer biological asset self-grown or self-bred comprises those costs necessarily incurred and directly attributable to the asset before the asset becomes available for its intended production and operating purposes, and any borrowing cost meeting the capitalisation criteria.
The Group charge deprecation for productive biological assets which satisfy expected production, and record the deprecation in balance sheet and income statement. The Group uses straight line method to calculate the deprecation, and details as follows:
Estimated Estimated Annual Category useful life residual rate depreciation rate Vines 20 years - 5.0% The Group evaluates the useful life and expected net salvage value by considering the normal producing life of the bearer biological assets.
The Group reviews the useful life and estimated net residual value of bearer biological assets and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate.
On the sale, identification of any shortages during stocktaking, death or damage of biological
asset, the proceeds on disposal net of the carrying amount and relevant taxes is recognised in
profit or loss for the current period.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
19. Intangible assets
Intangible assets include land use rights, software, etc.
An intangible asset is measured initially at cost method. When an intangible asset with a finite useful life is available for use, its original cost less net residual value and any accumulated impairment losses is amortised over its estimated useful life using the straight-line method. Intangible assets with indefinite useful lives are not amortized. The useful lives of the intangible assets are as follows:
Annual Item Useful life Net residual value amortization rate Land use rights 40-50 years - 2.0%-2.5% Software 5-10 years - 10.0%-20.0% Trademark 10 years - 10.0% Except for the above intangible assets with finite useful lives, the Group had also land use right and trademark with infinite useful lives. Land use right with infinite useful lives was related to the Group acquiredViñaIndómita, S.A.,Viña Dos Andes, S.A., and Bodegas Santa Alicia SpA. (collectively referred to as the "Chile Indomita Wine Group"), which was a permanent ownership and held by the Chile Indomita Wine Group according to the relatively Chilean law, therefore there was no amortization. Trademark was related to the Group acquired the Chile Indomita Wine Group, which had no finite useful lives. The valuation of trademark was based on the trends in the market and competitive environment, product cycle, and managing long-term development strategy. Those basis indicated the trademark will provide net cash flows to the Group within a given period. Because it was hard to predict the period that it would bring economic benefits to the Group, the useful lives were uncertain.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation method at the end of the period, and makes adjustments when necessary.
20. Impairment of long-term assets
The Group and the Company review the impairment status of long-term equity investments, fixed assets, construction in progress, bearer biological asset and intangible assets with finite useful life at the end of each year. If the assets exist impairment, the Group estimates the recoverable amount of the assets.Intangible assets with indefinite useful life and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. 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.
If recoverable amount of assets is less than book value, the difference is recognised as impairment
provision and expensed in current period.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
20. Impairment of long-term assets - continued
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwill is considered together with the related assets group (s), i.e., goodwill is reasonably allocated to the related assets group (s) or each of assets group (s) expected to benefit from the synergies of the combination. An impairment loss is recognised if the recoverable amount of the assets group or sets of assets groups (including goodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then to the other assets of the group pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group. The impairment is recognised in profit or loss for the period in which it is incurred and will not be reversed in any subsequent period.
21. Long term prepaid expenses
Long term prepaid expenses of the Group are amortized over the following period:
Amortization period Land requisition fee 50 years Land lease prepayment 50 years Greening fee 5-20 years Leasehold improvement 3-5years Others 3 years 22. Employee benefits
22.1 Short-term employee benefits
In an accounting period in which an employee has rendered service to the Group, the Group recognises the actual employee benefits for that service as a liability. The employee benefits of the Group are either included in cost of related assets or charged to profit or loss in the period when they are incurred. Non-monetary employee benefits are measured at fair value.
Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing funds, labor union and employee education fees paid by the Group for employees, are recognised as relevant liability in the period in which the employees provide service, in accordance with the regulated recognition basis and percentage. The related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred.
22.2 Accounting treatments of retired benefits
Retired benefits of the Group are all predetermined provision plan.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
22. Employee benefits- continued
22.2 Accounting treatments of retired benefits- continued
In the period in which the employees provide service, the Group recognise liability in accordance with the amounts to be paid calculated according to the predetermined provision plan, and the related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred.
22.3 Accounting treatments of termination benefits
When providing termination benefits to employees, the Group recognise employee benefits payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally withdraw from the termination plan or the redundancy offer; the Group recognise relevant costs and expenses related to the payment of termination benefits in reconstructuring.
23. Revenue
23.1 Revenue from sale of goods
Revenue from sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. The amount of revenue can be measured reliably and it is probable that the associated economic benefits will flow to the Group. The associated costs incurred or to be incurred can be measured reliably.
23.2 Revenue from rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the costs incurred that will be recoverable, and the costs incurred are recognised as expenses for the period. When it is not probable that the costs incurred will be recovered, revenue is not recognised.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
24. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration. A government grant is recognised only when the Group can comply with the conditions attaching to the grant and the Group will receive the grant. Monetary government grants are measured by the amount received or receivable.
24.1 Government grant related to an asset
A government grant related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset.
24.2Government grant related to income
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 is 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 is recognised immediately in profit or loss for the period.
A government grant related to the Group's daily activities is recognized in other income based on the nature of economic activities; a government grant is not related to the Group's daily activities is recognized in non-operating income and expenses.
The Company's government loans with below-market rate of interest are directly paid to the Company, and the related low rate interest will write off related borrowing costs . The government loans with below-market rate of interest obtained by other subsidiaries of the Group are government loans, which is provided by local bureau of finance through bank with below- market rate of interest. The actual amount of the loan received by the Group recognized as borrowings, and the related borrowing costs are calculated according to the principal of the loan and the below-market rate.
25. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
25.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
25. Deferred tax assets/deferred tax liabilities - continued
25.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognised as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognised using the balance sheet liability method.
Deferred tax is generally recognised for all temporary differences. Deferred tax assets for deductible temporary differences are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised. However, for temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognised.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognised 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.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group 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 tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to apply in the period in which the asset is realised or the liability is settled.
Current and deferred tax expenses or income are recognised in profit or loss for the period, except when they arise from transactions or events that are directly recognised in other comprehensive income or in shareholders' equity, in which case they are recognised in other comprehensive income or in shareholders' equity; and when they arise from business combinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
25. Deferred tax assets/deferred tax liabilities - continued
25.3 Net off of income taxes
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis. 26. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 26.1. Operating lease accounting methods
26.1.1 The Group as lessee under operating leases
Operating lease payments are recognised on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit or loss for the period.
26.1.2 The Group as lessor under operating leases
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs with more than an insignificant amount are capitalised when incurred, and are recognised in profit or loss on the same basis as rental income over the lease term. Other initial direct costs with an insignificant amount are charged to profit or loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the period in which they actually arise.
27. Changes in accounting policies
The Group started adopting the Accounting Standard for Business Enterprise No.16 - Government Grants revised by MoF in 2017 respectively since 28 May 2017 and 12 June 2017 respectively. Besides, the financial statements have been prepared under the Notice of the Revised Format of Financial Statements for General Business Enterprise (Cai Kuai (2017) No. 30, hereinafter referred to as the "Cai Kuai No.30 Document") released by the MoF on 25 December 2017.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
27. Changes in accounting policies - continued
Government grants
Prior to the implementation of the Accounting Standard for Business Enterprise No.16 - Government Grants (revised), the Group did not distinguish whether government grants were related to daily activities and were included in non-operating income.After the implementation of the Accounting Standard for Business Enterprise No.16 - Government Grants (revised), a government grant related to the Group's daily activities is recognized in other income based on the nature of economic activities; a government grant is not related to the Group's daily activities is recognized in non-operating income.
The Group has accounted for the above change in accounting policy retrospectively. Such changes in accounting policy has no impact on the financial statements for the comparable years. IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES
In the application of accounting policies as set out in Note III, the Group is required to make judgments, estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately, due to the internal uncertainties of the operating activities. These judgments, estimates and assumptions are based on historical experience of the Group's management as well as other factors that are considered to be relevant. Actual results may differ from these estimates.
The Group periodically review the judgments, estimates and assumptions above on a going concern basis. For those changes in accounting policies that only affect current financial statements, the influences are recognized in current period. For those changes in accounting policies that affect both current and future financial statements, the influences are recognized in both current and prospective periods.
Significant accounting judgments and accounting estimates
The following are key assumptions for after balance sheet date event and other factors of uncertain estimation. They may cause material adjustment on balance sheet in following accounting period.
Deferred tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued Significant accounting judgments and accounting estimates - continued
Depreciation
As set out in Note III-15, the depreciation is calculated on the straight line basis to write-off the cost of each item of fixed assets to its residual value over its estimated useful life. The Group's management determines the estimated useful lives for its fixed assets. This estimate is based on the historical experience of the actual useful lives of fixed assets of similar nature and functions. If the previous estimates have significant changes, and depreciation expenses will be adjusted in the future periods.
Useful life of intangible assets
The estimated useful lives of the intangible assets are determined based on the historical experience of the actual useful lives of intangible assets of similar nature and functions as well as considering the contractual rights and statutory rights applicable to the intangible assets. When the estimated useful lives of finite intangible assets are shortened or extended, the amortization periods should be adjusted accordingly.
Impairment of long-term assets
The Group assesses whether the recoverable amount is lower than the book value. If there are any indicators that the book value of non-current assets cannot be fully recoverable, impairment losses should be recorded.
The recoverable amount is the higher of an asset's fair value less costs to sell and the present value of the future cash flows expected to be derived from an asset. As it is difficult for the Group to obtain the quoted market price of the assets (or assets group), the fair value of the assets cannot be reliably estimated. When the management make estimation on the expected future cash flows from the asset or cash generating unit, estimates should be made on choosing a suitable growth rate of sales , average gross profit , related operating costs and discount rate in order to calculate the present value of those cash flows, which has a high uncertainty.
Estimated provision for accounts receivable
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy are considered indicators that the trade receivable is impaired. The provision is reassessed at the end of each year.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued Significant accounting judgments and accounting estimates - continued
Inventory provision based on net realizable value
The inventories are measured on the lower of carrying value and net realizable value, and provision should be made for impairment on obsolete and slow moving inventories. The group will reassess whether the net realizable value is lower than the carrying cost at the end of each year.
The determination of the fair value of identifiable assets and liabilities associated with business combination.
For the cost of business combination, the Group allocates the purchase price based on fair value of relatively identifiable assets and liabilities. When the fair value of relatively identifiable assets and liabilities are evaluated by the present value of its future cash flows, The management need estimate the growth rate of sales based on future market supply and demand to predict cash flows, and considered the proper discount rate for calculating, management need use major accounting estimates and judgments in the progress.
V. TAXES
1. The main taxes and tax rate are as follows:
(1) China
Value added tax VAT is levied at6% and17% on the invoiced amount after deduction of eligible input VAT.
Consumption tax The consumption tax of the group is levied on gross revenue at rates ranging from10% to20%.
City development tax Levied at7% of total business tax payment.
Corporate income tax The Group is subject to a corporate income tax rate of25% on its taxable income.
(2) France
Value added tax VAT is levied at19.6% on the invoiced amount after deduction of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of33% on its taxable income.
(3) Spain
Value added tax VAT is levied at21% on the invoiced amount after deduction of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of28% on its taxable income.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
V. TAXES
1. The main taxes and tax rate are as follows - continued:
(4) Chile
Value added tax VAT is levied at19% on the invoiced amount after deduction of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of25.5% on its taxable income.
Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2017 and 2016 are all stated as above.
2. Tax incentives and relative permit
Ningxia Changyu Grape Growing Co., Ltd.("Ningxia Growing"), a subsidiary of the Group, whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Ningxia Growing enjoys an exemption of corporate income tax.
Yantai Changyu Grape Growing Co., Ltd.(" Grape Growing "), a branch of the Company, whose principal activity is grape growing is incorporated in Zhifu District, Yantai City, Shandong Province. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Grape Growing enjoys an exemption of corporate income tax.
Xinjiang Tianzhu Co., Ltd ("Xinjiang Tianzhu"), a subsidiary of the Company, is an enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the Western China Development Strategy (Cai Shui[2011] No.58), Xinjiang Tianzhu is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of15% for the period from 2015 to 2020.
Xinjiang Babao Baron Chateau Co., Ltd. ("Shihezi Chateau"), a subsidiary of the Company, is an enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the Western China Development Strategy (Cai Shui[2011] No.58), Shihezi Chateau is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of15% for the period from 2015 to 2020.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank
Closing balance Opening balance RMB RMB Cash 136,973 117,507 Bank balance 1,278,397,711 1,240,607,797 Other currency fund 123,987,825 150,792,303____________ ____________ Total 1,402,522,509 1,391,517,607________________________ ________________________ At 31 December 2017, the balance of restricted cash of the Group is as follows:
Closing balance Opening balance RMB RMB The Company's housing fund 2,645,410 2,711,926______________________ ______________________ As at 31 December 2017, the Group's other monetary assets is as follows:
Closing balance Opening balance RMB RMB Research and Development Co., Ltd
("R&D Centre") pledged deposit 61,700,000 46,100,000 Refundable deposit for notes payable - 38,900,000 Deposit for letter of credit 57,946,190 25,694,735 Alipay account balance 4,317,635 40,047,367 Deposit for Company cards 14,000 50,201 Deposit for ICBC platform 10,000 -___________ ___________ 123,987,825 150,792,303______________________ ______________________ As at 31 December 2017, the Group's term deposits with original maturity of more than three months when acquired is RMB 95,000,000 with interest rate1.40%-1.95% (31 December 2016:RMB3,000,000).
2. Notes receivable
(1) Categories of notes receivable
Closing balance Opening balance RMB RMB Bank acceptances 244,796,818 210,470,027____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes receivable - continued
(2) Notes receivable which have been pledged as security at the end of the period
As at 31 December 2017, there was no pledged notes receivable (31 December 2016: Nil). (3) Notes endorsed by the Group to other parties which are not yet due at the end of the period Closing balance Opening balance RMB RMB Bank acceptances 188,855,843 198,302,531____________________ ____________________ As at 31 December 2017, notes endorsed by the Group to other parties which are not yet due at the end of the period is RMB 188,855,843 (31 December 2016: RMB 198,302,531). The notes are used for payment to suppliers and constructions. The Group believes that due to good reputation of bank, the risk of notes not accepting by bank on maturity is very low, and almost all the risks and rewards on ownership of the notes receivable have been transferred to the supplier, therefore derecognise the note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the relevant laws and regulations of China, the Group would undertake limited liability for the notes.
(4) Notes receivable reclassified to accounts receivable due to the drawers' inability to settle the note on maturity
As at 31 December 2017, no notes receivable were reclassified as accounts receivable due to the default of drawer (31 December 2016: Nil).
3. Accounts receivable
(1) Disclosure of accounts receivable by categories:
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying Amount provision amount Amount provision amount Amount Proportion Amount Ratio Amount Amount Proportion Amount Ratio Amount RMB % RMB % RMB RMB % RMB % RMB Accounts receivable for which
bad debt provision has been
assessed individually __26__3,__79__6,__35__5__10__0__.0 ____-________-______26__3,__79__6,__35__5__17__3,__06__2,__62__8__10__0__.0 ____-________-______17__3,__06__2,__62__8 The normal credit term is one month, which can be extended to one year for certain major customers. The accounts receivable are interest-free.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Accounts receivable - continued
(1) Disclosure of accounts receivable by categories - continued
As at 31 December 2017, ownership restricted accounts receivable is RMB 46,337,062 (31 December 2016: RMB 30,732,944), referring to Note VI-50.
The aging analysis is as follows:
Closing balance Opening balance RMB RMB Within 1 year 263,112,714 172,610,351 1 to 2 years 683,641 452,277__________ __________ 263,796,355 173,062,628____________________ ____________________ (2) Recognitions, collections and reversals during the current period:
As at 31 December 2017, there was no bad debt provision for accounts receivable (31 December 2016: Nil). There was no bad debt provision made, reversed or written-off by management in 2017 (2016: Nil).
(3) Top five entities with the largest balances of accounts receivable:
Relationship Percentage of Name with the Group Amount Aging total receivables RMB %VIÑA SAN PEDRO TARAPACA S.A. Third party 18,700,096 Within 1 year 7.1 Nongongshang Supermarket
(Group) Co., Ltd Third party 10,810,966 Within 1 year 4.1 DISTRIBUIDORA INTERNACIONAL Third party 9,999,760 Within 1 year 3.8 SLIGRO B.V. Third party 8,487,591 Within 1 year 3.2 SAINSBURY'S SUPERMARKETS LTD Third party __6_,5_1_1_,7_6_2 Within 1 year _2_._5__5__4__,5__1__0__,1__7__5 __20__.__7 4. Prepayments
(1) The aging analysis is as follows:
Closing balance Opening balance Amount Ratio Amount Ratio RMB % RMB % Within 1 year 2,417,931 100.0 2,175,606 100.0________________ __________ ________________ __________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Prepayments
(2) As at 31 December 2017, the top 5 of prepayments were as follows:
Reason Percentage of Relationship for being total advances with the Group Amount Aging outstanding to suppliers RMB % DONELLI VINI S.P.A. Third party 370,673 Within 1 year goods not received 15.3 Shenzhen Yijia Packaging
Product Co., Ltd. Third party 313,200 Within 1 year goods not received 13.0 Shandong Electricity Company
Yantai branch Third party 200,000 Within 1 year electricity purchase 8.3 Beijing Aidixi Time International
Trade Co., Ltd. Third party 168,000 Within 1 year goods not received 6.9 Yantai Cihang International Freight
Agent Co., Ltd. Third party ___12_1_,9_0_7 Within 1 year prepaid agency fees __5._0__1__,__17__3__,7__8__0 __4__8.__5 5. Interest receivable
(1) Categories of interest receivable
Closing balance Opening balance RMB RMB Interests of term deposits 240,968 24,200________________ ________________ (2) Overdue interest
As at 31 December 2017, there was no overdue interest receivable (31 December 2016: Nil). 6. Other receivables
(1) Disclosure of other receivables by categories
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying Amount provision amount Amount provision amount Amount Proportion Amount Ratio Amount Amount Proportion Amount Ratio Amount RMB % RMB % RMB RMB % RMB % RMB Other receivable for which
bad debt provision has been
assessed individually __1__8,__73__7,__45__4__10__0__.0________-______-____1__8,__73__7,__45__4__1__8,__88__0,__80__0__10__0__.0________-______-____1__8,__88__0,__80__0
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables- continued
(1) Disclosure of other receivables by categories- continued
The aging analysis is asfollows：
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying Amount provision amount Amount provision amount Amount Proportion Amount Amount Amount Proportion Amount Amount RMB % RMB RMB RMB % RMB RMB Within 1 year 13,214,301 70.5 - 13,214,301 8,204,303 43.5 - 8,204,303 1 to 2 years 1,937,961 10.3 - 1,937,961 7,715,992 40.8 - 7,715,992 2 to 3 years 2,273,591 12.2 - 2,273,591 1,929,613 10.2 - 1,929,613 Over 3 years __1_,3_11_,6_0_1___7._0 _____-___1_,3_1_1,_60_1__1_,0_3_0,_89_2___5._5 _____-___1_,0_3_0,_89_2 Total __1__8__,7__37__,4__5__4__1__0__0__.0 __________-____1__8__,7__37__,4__5__4__1__8__,8__8__0,__80__0__1__0__0__.0 __________-____1__8__,8__8__0,__80__0 (2) Accrual, reversal and written-off during the current period
The Group accrued bed provisions RMB 354,805 for 2017 (2016: bad debt was reversed RMB: Nil).
(3) Other receivables written off in the reporting period
Other receivables were written off RMB 354,805 in 2017.(2016：RMB7,199,521)。
(4) Disclosure of other receivables by categories
Closing balance Opening balance RMB RMB Deposit 10,075,901 13,191,851 Petty cash receivable 2,215,146 2,934,424 Investment fund 2,050,000 2,050,000 Refund of consumption tax, real estate tax 2,451,188 573,586 Others 1,945,219 130,939__________ _________ 18,737,454 18,880,800____________________ __________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables - continued
(5) Five entities with the largest balances of other receivables
As at 31 December 2017, the top 5 of other receivables are as follows:
Percentage of total Bad debt Nature Amount Aging other receivables Amount RMB % RMB Yantai Development Zone Construction
Industry Association Construction deposit 7,709,477 Within 2 years 41.1 - Canada Oros Ice-wine Co., Ltd Foreign investment fund 2,050,000 2-3years 10.9 - Yantai Economic and Technological
Development Zone Thermal Co., Ltd Deposit 630,000 Within 1 year 3.4 - Beijing Shanshui Decoration
Engineering Co.,Ltd. Receivables on behalf 465,460 Within 1 year 2.5 - of others' electricity fee
Shanxi Fangyuan Jiangong Receivables on behalf
Group Limited of others' electricityfee____4_49_,_3_3_7 Within 1 year __2_.4_ ________-_ 11,304,274 60.3 -__________________ ________ __________________ 7. Inventories
(1) Disclosure of inventories by categories
Closing balance Opening balance
Net carrying Net carrying Balance Provision amount Balance Provision amount RMB RMB RMB RMB RMB RMB Raw material 66,881,090 - 66,881,090 72,011,633 - 72,011,633 Work in progress 1,568,230,851 - 1,568,230,851 1,253,218,347 - 1,253,218,347 Finished goods __8_64_,_09_7_,4_9_7(_25_,_59_5_,3_9_2)__8_38_,_50_2_,1_0_5 __9_44_,_80_6_,5_1_6(_21_,_42_6_,7_5_6)__9_23_,_37_9_,7_6_0__2__,4__9__9,__20__9__,4__3__8(__25__,__59__5__,3__9__2)__2__,4__7__3,__61__4__,0__4__6 __2__,2__7__0,__03__6__,4__9__6(__21__,__42__6__,7__5__6)__2__,2__4__8,__60__9__,7__4__0 (2) Inventory provision
Opening balance Recognized Reversal Written off Closing balance RMB RMB RMB RMB RMB Provision for decline in
value of inventories __21__,__42__6__,7__5__6 __8__,__21__5__,5__7__8 __(__27__6__,8__3__0) __(3__,__77__0__,1__1__2) __25__,__59__5__,3__9__2
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8. Non-current assets held for sale
Expected Expected Closing balance Fair value disposal fees disposal time RMB RMB RMB
Zhen Shan Tun Department 2,000,197 16,282,224 3,878,560 2018年________________ ________________ ______________
Note: The Company has signed an irrevocable agreement for disposal of fixed assets, with the amount of RMB 16,282,224. Because the property rights hadn't been changed, the disposal didn't finish by the end of 2017, and the disposal is expected to be completed by 2018.
9. Other current assets
Closing balance Opening balance RMB RMB Prepaid taxes 22,911,298 26,238,092 Pending deduct VAT on purchase 206,529,504 135,316,274 Prepaid rent 1,381,957 7,967,876__________ __________ 230,822,759 169,522,242____________________ ______________________ 10. Available-for-sale financial assets
(1) Available-for-sale financial assets
Closing balance Opening balance
Amount Impairment Carrying amount Amount Impairment Carrying amount RMB RMB RMB RMB RMB RMB Available-for-sale
equity instruments
measured at cost ______46__7__,2__5__1 ____________-__ ____46__7__,2__5__1 __10__,__34__0__,2__6__3 (__10__,__00__0__,0__0__0) ____34__0__,2__6__3 (2) Available-for-sale financial assets measured at cost
Carrying amount Provision for impairment losses Proportion of Cash voting power dividend Decrease Closing in the for the Investee Opening Increase Opening Increase Decrease Closing investee(%) period RMB RMB RMB RMB RMB RMB RMB % RMB Yantai Ding Tao
Construction and
Development Co., Ltd
(Note 1).
Other(Note 2) 10,000,000 - (10,000,000) - 10,000,000 - (10,000,000) - 18.0 - Less than Investee 340,263 129,216 (2,228) 467,251 - - - - 1% - 10,340,263 129,216 (10,002,228) 467,251 10,000,000 - (10,000,000) -
Note 1: An impairment provision amounting to RMB 10,000,000 has been made by the Company for the balance of the carrying amount of the equity investment in Yantai Dingtao Construction and Development Co., Ltd, the fair value of the investee which is an unlisted company cannot be measured reliably, the Company measured such available-for-sale
financial asset at cost. The Company has accrued the impairment of RMB 10,000,000 in
the previous year, and the Company write off the equity investment this year.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Available-for-sale financial assets - continued
(2) Available-for-sale financial assets measured at cost - continued
Note 2: The Group holding equity ratios of investment companies are less than1%. Investment companies are all unlisted companies, and their fair value cannot be measured reliably, therefore, the Group uses cost method to measure these available-for-sale financial assets. 11. Investment properties
Investment properties measured by cost method
Buildings RMB I. Total original carrying amount
1. Opening balance - 2. Increase
Transfer from fixed assets 38,347,283__________ 3.Closing balance 38,347,283__________ II. Total accumulated depreciation
1. Opening balance - 2. Increase
(1) Transfer from fixed assets 19,288,684 (2) Additions 590,610__________ 3. Closing balance 19,879,294____________________ III. Total carrying amount
1. Closing carrying amount 18,467,989____________________ 2. Opening carrying amount -____________________ As at 1 July 2017, the Group changed the own used properties to rent, from then the fixed assets recognized as investment properties measured by cost method.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Fixed assets
(1) Details of fixed assets
Buildings Machinery Motor Vehicles Total RMB RMB RMB RMB I. Total original carrying amount
1. Opening balance 3,956,177,208 1,969,135,575 29,329,141 5,954,641,924 2. Increase
(1)Purchase 8,762,218 36,809,492 2,867,768 48,439,478 (2)Transfer from CIP 545,584,623 239,819,904 105,602 785,510,129 (3)Acquisition increase (VII-1) 37,209,412 51,877,050 - 89,086,462 3. Decrease
(1) Disposal (517,494) (50,291,728) (3,613,096) (54,422,318) (2) Transfer to Investment
properties (VI-11) (38,347,283) - - (38,347,283)____________ ____________ __________ ____________ 4. Closing balance 4,508,868,684 2,247,350,293 28,689,415 6,784,908,392____________ ____________ __________ ____________ II. Total accumulated depreciation
1. Opening balance 410,161,600 840,158,129 21,134,702 1,271,454,431 2. Increase
(1)Additions 122,262,189 125,609,728 2,392,486 250,264,403 3. Decrease
(1) Disposal (491,619) (42,823,337) (3,290,771) (46,605,727) (2)Transfer to Investment
properties (VI-11) (19,288,684) - - (19,288,684)____________ ____________ __________ ____________ 4. Closing balance 512,643,486 922,944,520 20,236,417 1,455,824,423____________ ____________ __________ ____________ III. Total carrying amount
1. Closing carrying amount 3,996,225,198 1,324,405,773 8,452,998 5,329,083,969________________________ ________________________ ____________________ ________________________ 2. Opening carrying amount 3,546,015,608 1,128,977,446 8,194,439 4,683,187,493________________________ ________________________ ____________________ ________________________ As at 31 December 2017, fixed assets with ownership restricted are RMB 145,009,923 (31 December 2016: RMB 68,658,094). Please refer to Notes VI-50 in detail.
As at 31 December 2017, Classified as available for sale assets are RMB 2,000,197 (31 December 2016: RMB 2,000,197), there was no temporary idle fixed assets, no fixed assets acquired under finance leases, at the end of the period.
(2) Fixed assets through operating lease
Amount RMB Machinery 265,471________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2016, buildings without property certificate are as follows:
Reasons why certificates Amount of title have not been obtained RMB
Research and Development Co, Ltd
Industry Production Centre 1,643,057,463 Processing Changan Chateau Dormitory building, main building 357,956,446 Processing Beijing Chateau European town, main, service building 193,321,864 Processing Ding Luo Te Chateau main building 86,444,831 Processing Xinjiang Tianzhu fermentations and storage warehouse 18,413,198 Processing Ice Wine Chateau office building and packing workshop 9,506,188 Processing Jingyang factory fermentation building 4,481,717 Processing Fermentation centre office, experiment building and workshop 3,824,105 Processing Kylin Packaging finished goods warehouse and workshop 2,487,528 Processing Sales Company office buildings ____2_,_0_4_5_,6_0_3
_
Processing 2,321,538,943
________________________
(4) By the end of 31 December 2017, some subsidiaries of the Company are sustained loss and the cash flow from operating activities are net out and the related assets existed an indication of impairment. As at 31 December 2017, the book values of fixed assets, which exists an indication of impairment, are RMB 928,058,429. The management performs impairment testing for fixed assets, which exists an indication of impairment, of the above subsidiaries based on the assets belonged group of assets. The recoverable amount of the group of assets is determined by the present value of its future cash flows. Future cash flow projections are made based on the recently financial budgets for the future 5 years period (projecting period) and the projecting period (subsequent period) of 15 years, which are prepared by the management. Discount rate used in calculating the use value of the group of assets in future is12.6%. Other key assumptions include the result of operations' forecast of the projecting period, which was estimated according to such subsidiaries' growth rate of sales, average gross rate, other operating expenses based on historical experience and future trends. The management believes that any reasonable change of the above assumptions will not result in the total book value of fixed assets of those subsidiaries exceeding its recoverable amount. By the end of 31 December 2017, the management believes there is no impairment loss on those fixed assets of the Group.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Construction in progress
(1) Construction in progress:
Closing balance Opening balance RMB RMBR&D Centre ("Changyu Wine integrational
Construction") Project 883,731,540 1,227,968,480 Xianyang Chateau Construction Project 53,290,036 10,346,598 Ningxia Chateau Construction Project 35,711,269 36,717,169 Shihezi Chateau Construction Project 25,463,724 30,600,684 Sales Company construction project 11,355,685 26,011,600 Ding Luo Te Chateau Project 5,819,246 4,871,422 Other companies construction Project 10,770,069 9,765,784____________ ____________ 1,026,141,569 1,346,281,737________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Construction in progress- continued
(2) Changes in significant construction inprogress：
Transfer to Interest Transfer to Lone-term Total accumulated Capitalizing capitalizat Transfer to
intangible prepaid
Closing
Capitalizing interest ion Budge Opening balance Addition PPE assets expense balance Status interest for this period rate Financed by RMB RMB RMB RMB RMB RMB RMB Status RMB RMB % Loans from financial Changyu Wine integrational
institutions Construction" 4,505,780,000 1,227,968,480 425,697,814 (689,475,320) - (80,459,434) 883,731,540 71.6 8,427,965 6,138,2421.2&&4.3 and Self-raised Changan Chateau Construction -
Project 620,740,000 10,346,598 73,012,018 (30,068,580) - 53,290,036 106.8 - - - Self-raised Shihezi Chateau Construction -
Project 780,000,000 30,600,684 27,980,421 (33,117,381) - 25,463,724 91.5 - - - Self-raised Sales Company construction project 161,350,000 26,011,600 5,486,264 - (20,142,179) - 11,355,685 93.4 - - - Self-raised Ningxia Chateau Construction -
Project 414,150,000 36,717,169 15,097,212 (16,103,112) - 35,711,269 98.6 - - - Self-raised Ding Luo Te Chateau project 192,400,000 4,871,422 1,212,824 (265,000) - - 5,819,246 96.3 - - - Self-raised 1,336,515,953 548,486,553 (769,029,393) (20,142,179) (80,459,434) 1,015,371,500 8,427,965 6,138,242 The interest capitalized in construction in progress is RMB 6,138,242 in 2017(2016: RMB 2,289,723).
(3) By the end of 31 December 2017, some subsidiaries of the Company are sustained loss and the cash flow from operating activities are net out and the related assets existed an indication of impairment. As at 31 December 2017, the book values of construction in progress ("CIP"), which exists an indication of impairment, are RMB 89,001,307. The management performs impairment testing for CIP, which exists an indication of impairment, of the above subsidiaries based on the assets belonged group of assets. The key assumptions used by the management during the assessment refer to Note VI-12. By the end of 31 December 2017, the management believes there is no impairment loss on those CIP of the Group.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
14. Bearer biological assets
Bearer biological assets are Vines, which measured in cost method
Immature Mature
biological assets biological assets Total RMB RMB RMB I. Total original carrying amount
1. Opening balance 77,841,960 141,208,504 219,050,464 2. Increase
(1)Cultivated increase 9,248,294 - 9,248,294 (2) Acquisition increase (VII-1) - 1,413,595 1,413,595 (3) Transfer to mature assets
from immature assets (74,915,254) 74,915,254 -__________ __________ __________ 3. Closing balance 12,175,000 217,537,353 229,712,353__________ __________ __________ II. Total accumulated depreciation
1. Opening balance - 17,621,484 17,621,484 2. Increase
(1)Additions - 10,160,981 10,160,981__________ __________ __________ 3. losing balance - 27,782,465 27,782,465__________ __________ __________ III. Total net carrying amount
1. Closing net carrying amount 12,175,000 189,754,888 201,929,888____________________ ____________________ ____________________ 2. Opening net carrying amount 77,841,960 123,587,020 201,428,980____________________ ____________________ ____________________ As at 31 December 2017, there is no biological asset with ownership restricted. (31 December 2016:Nil)
As at 31 December 2017, there is no indication that biological assets may be impaired, and no provision is made. (31 December 2016:Nil)
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOIDATED FINANCIAL STATEMENTS - continued
15. Intangible assets
(1) Intangible assets
Land use rights Software use rights Trademark Total RMB RMB RMB RMB I. Total original carrying amount
1. Opening balance 491,490,069 52,435,669 15,442,065 559,367,803 2. Increase
(1)Purchase 4,284,653 330,511 369,910 4,985,074 (2) Transfer from CIP - 20,142,179 - 20,142,179 (3)Acquisition increase(VII-1)___2_5_,9_5_6_,4_1_7 _____7_5_8_,3_9_5 1_4_3_,8_9_0_,5_3_3 __1_7_0_,6_0_5_,3_4_5 3. Closing balance __5_2_1_,7_3_1_,1_3_9 ___7_3_,6_6_6_,7_5_4 1_5_9_,7_0_2_,5_0_8 __7_5_5_,1_0_0_,4_0_1 II. Total accumulated depreciation
1. Opening balance 56,803,430 12,548,283 6,201,010 75,552,723 2. Increase
(1) Additions ___1_0_,7_4_4_,3_4_2 ____8_,9_6_8_,4_5_8 __4_,3_8_5_,9_8_1 ___2_4_,0_9_8_,7_8_1 3. Closing balance ___6_7_,5_4_7_,7_7_2 ___2_1_,5_1_6_,7_4_1 _1_0_,5_8_6_,9_9_1 ___9_9_,6_5_1_,5_0_4 III. Total carrying amount
1. Closing carrying amount ____4__5__4__,1__8__3__,3__6__7 ______5__2__,1__5__0__,0__1__3 1__4__9__,1__1__5__,5__1__7 ____6__5__5__,4__4__8__,8__9__7 2. Opening carrying amount ____4__3__4__,6__8__6__,6__3__9 ______3__9__,8__8__7__,3__8__6 ____9__,2__4__1__,0__5__5 ____4__8__3__,8__1__5__,0__8__0 (2) Land use right's location and years are as follows:
Item Closing balance Opening balance RMB RMB In the PRC( within 50 years) 428,226,950 434,686,639 Out of the PRC (more than 50 years) 25,956,417 -__________ __________ 454,183,367 434,686,639____________________ ____________________ As at 31 December 2017, land use right with infinite useful lives of the Group, which is a permanent ownership and holds by the Indomita Wine according to the relatively Chilean law is RMB 25,956,417 (31 December 2016: Nil), therefore there is no amortization.
By the end of 31 December 2017, trademark with infinite useful lives of the Group is RMB 143,890,533 (31 December 2016: Nil), which is held by the Indomita Wine. The recoverable amount of trademark is determinated based on the present value of the expected future cash flows generated by group of assets owns by individual trademark. Future cash flow projections are made based on the recently financial budgets for the future 5 years period (projecting period) and presume that cash flows after the projecting period (subsequent period). Discount rate used in calculating the recoverable amounts is9.6%. One key assumption in projecting future cash flows is the growth rate in projecting period, which is computed based on the expected growth rate of the industry and Indomita Wine. Growth rate of sales in subsequent period are3%. The Group recognizes the trademark with infinite useful lives as intangible assets, the impairment assessment
of which is made at the end of each reporting year.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Intangible assets - continued
The management believes that any reasonable change of the above assumptions will not result in the total book value of fixed assets of those subsidiaries exceeding its recoverable amount. According to the result of impairment assessment, by the end of 31 December 2017, the management believes there is no impairment loss on those trademark with infinite useful lives of the Group.
As at 31 December 2017, the intangible asset with restricted ownership is RMB
164,051,996(December 31, 2016:RMB 145,937,719), Please refer to Note VI-50 in detail. 16. Goodwill
Investee Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Etablissements Roullet Fransac
(“Fransac Sales”) 13,112,525 - - 13,112,525 Dicot Partners, S.L
(“Dicot”) 92,391,901 - - 92,391,901 Societe Civile Argricole Du Chateau
De Mirefleurs (“Mirefleurs”) 15,761,440 - - 15,761,440 Indomita Wine ________-_ __6_,8_7_0_,1_1_5 _____-_ ___6_,8_7_0_,1_1_5 Total __1__2__1__,2__6__5__,8__6__6 ____6__,8__7__0__,1__1__5 __________-
__
__1__2__8__,1__3__5__,9__8__1 The Group acquired Fransac Sales, Dicot and Mirefleurs and Chile Indomita Wine Group in December 2013, September 2015 January 2016 and January 2017respectively, resulting in respective goodwill amounting to RMB 13,112,525,RMB 92,391,901, RMB 15,761,440 and RMB 6,870,115, which have been allocated to corresponding asset groups for impairment testing. The recoverable amount of the group of assets is determined by the present value of its future cash flows. Future cash flow projections are made based on the recently financial budgets for the future 5 years period (projecting period) and presume that cash flows after the projecting period (subsequent period). Discount rate used in calculating the recoverable amounts of Fransac Sales, Dicot Mirefleurs and Indomita Wine are 10.3%, 8.5% ,10.3% and9.6%(2016:10.3%,8.5%,10.3%,N/A) respectively. One key assumption in projecting future cash flows is the growth rate of sales in projecting period, which is computed based on the expected growth rate of the industry and each group of assets. Growth rate of sales in subsequent period of Fransac Sales, Dicot, Mirefleurs and Indomita Wine is2%,2%,2% and3% (2016:2%,2%,2% and N/A) respectively. Management of the Group believes that any reasonable changes in the above assumptions will not cause book values of these subsidiaries exceeds their recoverable amounts. According to the assessment, the Group believes that no impairment provision need to be made for goodwill in the reporting period.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Long-term prepaid expenses
Opening balance Increase Amortization Closing balance RMB RMB RMB RMB Land lease prepayments 57,846,986 - (1,481,601) 56,365,385 Land requisition fee 45,192,900 - (1,216,864) 43,976,036 Greening fee 54,460,971 80,459,434 (9,292,071) 125,628,334 Leasehold improvement 1,091,579 244,847 (463,163) 873,263 Others ___3_,6_1_3_,7_9_3 __1_,0_1_0_,3_0_2 _(_1_,4_5_7_,8_8_2) ___3_,1_6_6_,2_1_3__1__6__2__,2__0__6__,2__2__9 __8__1__,7__1__4__,5__8__3 (__1__3__,9__1__1__,5__8__1) __2__3__0__,0__0__9__,2__3__1 Note: Greening fee for the period increased due to RMB 80,459,434 transfer from CIP. Please refer to Notes VI-13 in detail.
18. Deferred tax assets/liabilities
Deferred tax assets and deferred tax liabilities are not related to income tax of the same tax authorities of the same tax subjects, thus not presented with the net amount after netting. (1) Deferred tax assets:
Closing balance Opening balance
Temporary Deferred tax Temporary
differences assets differences Deferred tax assets RMB RMB RMB RMB Unrealized profit from intra
618,591,681 154,647,920 676,375,006 169,093,751 - company transactions
Unpaid bonus 94,462,722 23,671,611 154,895,784 38,723,946 Retirement benefit 27,980,857 6,995,214 13,115,948 3,278,987 Asset impairment provision 25,595,392 6,398,848 31,426,756 7,856,689 Deductable losses 345,639,059 88,584,337 176,273,380 44,068,345 Deferred income 109,797,054 24,285,203 112,939,126 25,230,521 Assets impairment loss 684,622 184,848 - - Accrued rebate 13,413,655 3,353,415 30,739,192 7,684,798 1,236,165,042 308,121,396 1,195,765,192 295,937,037 (2) Deferred tax liabilities
Closing balance Opening balance
Item Taxable temporary Deferred Taxable temporary Deferred difference tax liability difference tax liability RMB RMB RMB RMB Revaluation surplus in
business combination
not under common
control
89,316,823 24,264,203 90,877,162 24,908,410
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Deferred tax assets/liabilities - continued
(3) Deferred tax assets and liabilities not recognized
Closing balance Opening balance RMB RMB Deductable losses 150,320,039 135,957,252____________________ ____________________ (4) Deductable losses not recognized as deferred tax assets will expire in:
Closing balance Opening balance RMB RMB 2019 7,311,273 7,311,273 2020 45,960,766 45,960,766 2021 82,685,213 82,685,213 2022 14,362,787 -__________ __________ 150,320,039 135,957,252____________________ ____________________ 19. Other non-current assets
Closing balance Opening balance RMB RMB Receivable from transfer of biological assets - 17,352,239__________________ __________________ 20. Short-term borrowings
Closing balance Opening balance RMB RMB Credit loans 648,494,624 631,655,938 Mortgaged loans 65,939,662 30,732,944__________ __________ 714,434,286 662,388,882____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
20. Short-term borrowings - continued
As at 31 December 2017, short-term borrowings detail were as follows:
Nature of Interest rate Year ended Loans amount Exchange rate RMB interest in contract Interest rate% % Credit loans (RMB) 600,000,000 1.0000 600,000,000 Floating 1 year LPR- 0.39(Note 1) 3.92 Credit loans (EUR)) 991,759 7.8023 7,738,003 Fixed 1.00~4.42 1.00~4.42 Credit loans (EUR) 198,841 7.8023 1,551,421 Floating 2.10+ Euribor(Note 2) 1.77 Credit loans (USD) 6,000,000 6.5342 39,205,200 Fixed 3.00 3.00 Mortgaged loans (EUR) 5,938,898 7.8023 46,337,062 Fixed 0.50~0.95 0.50~0.95 Mortgaged loans (USD) 3,000,0 00 6.5342___19_,_60_2_,6_0_0 Fixed 3.50~3.64 3.50~3.64____7__14__,__43__4__,2__8__6
Note 1: LPR is the basic interest rate of the People's Bank of China.
Note 2: Euribor is Euro Interbank Offered Rate
As at 31 December 2017, mortgaged loans were Hacienda y Vinedos Marques del Atrio, S.L.U (" Atrio ") factoring of accounts receivable from Banco de Sabadell, S.A. etc. EUR 5,938,898 (translated as RMB 46,337,062)(31 December 2016:RMB 30,732,944). Mortgaged loans were Indomita Wine mortaged Peso 3,242,627,000 (translated as RMB 34,390,191) fixed assets from BBVA bank USD 3,000,000(translated as RMB 19,602,600)( December 31, 2016:Nil) 21. Notes payable
Closing balance Opening balance RMB RMB Bank acceptances - 38,900,000__________________ __________________ As at 31 December 2017, there is no due notes payable unpaid (31 December 2016: Nil). 22. Accounts payable
The aging analysis of accounts payable are as follows
Closing balance Opening balance RMB RMB Within 1 year 664,020,176 544,128,280 1 to 2 years 2,051,592 1,103,039 2 to 3 years 371,111 -__________ __________ 666,442,879 545,231,319____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Advances from customers
The aging analysis of advances from customers are as follows
Closing balance Opening balance RMB RMB Within 1 year 340,025,690 419,382,071 1 to 2 years 7,072,254 2,046,166 2 to 3 years 381,463 108,748 Over 3 years 3,414,749 3,709,436__________ __________ 350,894,156 425,246,421____________________ ____________________ 24. Employee benefits payable
(1) Employee benefits payable as follows:
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Short-term payroll 193,300,619 439,517,529 (450,272,864) 182,545,284 Post-demission benefits
- predetermined provision plan 15,167 49,975,671 (49,692,745) 298,093 Termination benefits __1_3_,1_1_5_,9_4_8 __2_7_,6_7_7_,1_1_5 _(_1_2_,8_1_2_,2_0_6) __2_7_,9_8_0_,8_5_7__2__0__6__,4__3__1__,7__3__4 __5__1__7__,1__7__0__,3__1__5 __(5__1__2__,7__7__7__,8__1__5) __2__1__0__,8__2__4__,2__3__4 (2) Employee benefits payable:
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Salaries and bonus 197,486,176 390,256,786 (402,728,644) 185,014,318 Staff benefit 622,735 14,139,321 (12,645,581) 2,116,475 Staff welfare 257,249 20,336,922 (20,069,855) 524,316 Includes:
Medical insurance 257,249 18,018,716 (17,751,649) 524,316 Injury insurance - 1,499,042 (1,499,042) - Maternity insurance - 819,164 (819,164) - Housing fund 37,672 10,993,230 (10,991,646) 39,256 Union fee and education fee ___2_,5_9_3_,0_0_9 ___3_,3_0_4_,3_6_0 __(_3_,8_3_7_,1_3_8) ___2_,0_6_0_,2_3_1 Total _2_0_0_,9_9_6_,8_4_1 _4_3_9_,0_3_0_,6_1_9 _(4_5_0_,2_7_2_,8_6_4) _1_8_9_,7_5_4_,5_9_6 Less: Non-current liabilities ___7_,6_9_6_,2_2_2 ___7_,2_0_9_,3_1_2 Short-term payroll __1__9__3__,3__0__0__,6__1__9 __1__8__2__,5__4__5__,2__8__4
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
24. Employee benefits payable - continued
(3) Predetermined provision plan
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Pension 14,978 48,834,066 (48,551,453) 297,591 Unemployment insurance ___1_8_9 __1_,1_4_1_,6_0_5 _(_1_,1_4_1_,2_9_2) ____5_0_2__1__5__,1__6__7 __4__9__,9__7__5__,6__7__1 (__4__9__,6__9__2__,7__4__5) __2__9__8__,0__9__3 The Group participates in pension insurance and unemployment insurance plans established by government institution. According to those plans, the Group pays pension and unemployment insurance each month on the basis of12%-32% and0.5%-3% last period salary respectively. Apart from these monthly expenses, the Group does not bear any further payment obligation. This year the Group should pay RMB 48,834,066 and RMB 1,141,605 (2016: RMB 38,404,278 and RMB 1,663,062) respectively into pension insurance and unemployment insurance. As at 31 December 2017, the Group has unpaid pension and unemployment insurance of RMB 297,591 and RMB 502 respectively (31 December 2016: RMB 14,978 and RMB 189), which is due to the pension insurance and unemployment insurance plan at the end of the reporting period. These payments have been paid after the end of the reporting period.
25. Taxes payable
Closing balance Opening balance RMB RMB Value added tax 35,681,696 23,496,328 Consumption tax 44,961,022 30,361,471 Corporation income tax 38,834,293 69,388,730 Urban land use tax 2,645,687 2,651,262 Individual income tax 7,805,917 7,811,301 City construction tax 5,669,280 4,248,115 Property tax 4,647,644 1,071,223 Others 4,848,617 5,014,170__________ __________ 145,094,156 144,042,600____________________ ____________________ 26. Deferred income
Closing balance Opening balance RMB RMB Government grants
Current liabilities 16,878,199 11,163,883 Non-current liabilities 92,918,855 101,775,243__________ __________ 109,797,054 112,939,126____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
26. Deferred income - continued
Government grants:
Recognized in Related to Opening Addition non-operating income Closing Assets/Income /other income
RMB RMB RMB RMB RMB Wine base liquor brewage project 6,174,300 - (1,434,900) 4,739,400 Assets Shihezi chateau project funds 11,556,600 - (2,280,000) 9,276,600 Assets Xinjiang Industrial Rejuvenation and
Technological Reconstruction Project 18,486,000 - (1,422,000) 17,064,000 Assets Special support for infrastructure facilities - 5,300,000 - 5,300,000 Assets Ningxia industry revitalization and
technology reconstruction funds 4,381,000 - (3,295,000) 1,086,000 Assets Wine grape subsidies 376,000 - (376,000) - Income Modern agriculture grape production
development subsidies 259,200 - (259,200) - Income Tourism Promotion Project - 600,000 (600,000) - Income Modern service industry special - 500,000 (500,000) - Income Tourism Development Fund Subsidy Project - 500,000 - 500,000 Income Marketing reward - 500,000 (500,000) - Income Support enterprise development special funds - 10,200,000 - 10,200,000 Income (Huanren) wine production construction funds 4,000,000 - (400,000) 3,600,000 Assets Wine electronic tracking system
specific funds 3,859,365 - (667,054) 3,192,311 Assets Miyun Propaganda Department transfer 1,777,890 - (888,945) 888,945 Assets Wine industry specific funds 930,000 - (186,000) 744,000 Assets Shandong Peninsula Blue Economic
Area construction funds 10,000,000 - (2,000,000) 8,000,000 Assets 863 Program subsidy funds for scientific research 343,090 - (343,090) - Income Information system construction
project technology funds 4,060,000 - (580,000) 3,480,000 Assets Integration projects subsidies 28,800 - (28,800) - Income Cross-border e-Business projects subsidies 1,485,797 - (783,182) 702,615 Income Red wine phenolics research projects funds 295,601 - (11,000) 284,601 Income Grape base construction project 1,040,000 - (520,000) 520,000 Assets Water pollution abatement project 133,733 300,000 (113,601) 320,132 Income Infrastructure construction project 1,468,750 500,000 (125,000) 1,843,750 Assets Industrial development support project 41,000,000 - (4,100,000) 36,900,000 Assets Subsidy for updating of economic and energy-saving
technology __1_,2_8_3,_00_0 ______-_ ___(1_28_,3_0_0) __1_,1_5_4,_70_0 Assets Total __11__2__,9__39__,1__2__6 __1__8__,4__0__0,__00__0 __(2__1__,5__42__,0__7__2) __10__9__,7__97__,0__5__4
Less: Non-current liabilities due within one year _1_1_,1_6_3,_88_3 _1_6_,8_7_8,_19_9
Other non-current liabilities __10__1__,7__75__,2__4__3 __9__2__,9__1__8,__85__5
As at 31 December 2017, the Group recognise current liability for deferred income to be accounted in profit or loss within one year, and recognise non-current liability for deferred income to be accounted in profit or loss over one year.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
27. Other payables
(1) Natures of other payables are as follows
Closing balance Opening balance RMB RMB Payable to dealer deposit 139,710,963 128,539,352 Payables for equipment and construction 130,706,777 77,261,072 Payables for transportation 27,847,092 36,690,764 Royalty fee 77,208,929 78,572,540 Advertising costs 118,834,960 79,414,075 Withholding promotion costs 13,413,655 30,739,192 Capital increment from minority intere - 29,847,320 Employee deposit 13,327,132 16,296,186 Deposits from suppliers 3,082,595 2,206,379 Payables for contracting fee 38,070,571 31,011,929 Others 40,761,645 35,726,501__________ __________ 602,964,319 546,305,310____________________ ____________________ (2) Description of significant other payables aged more than one year
Company Amount Reasons
RMB
Beijing Qinglang agriculture science and technology
development limited company ("Beijing Qinglang") 16,461,930 Payables for contracting fee Yantai De'an Investment Company Limited ("Yantai De'an") ____6,_7_08_,1_7_4 Payables for contracting fee______2__3,__1__70__,1__0__4
28. Non-current liabilities due within one year
Closing balance Opening balance RMB RMB Long-term borrowings due within one year 76,954,827 59,799,093 Long-term payables due within one year 34,000,000 12,000,000__________ __________ 110,954,827 71,799,093____________________ ____________________ As at 31 December 2017, Long-term borrowings due within one year refers to Note VI-29, Long- term payables due within one year refers to Note VI-30.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
29. Long-term borrowings
Closing balance Opening balance RMB RMB Credit loan 68,182,310 40,304,811 Mortgaged loan 6,693,544 8,835,744 Guaranteed loan 81,250,000 -__________ __________ 156,125,854 49,140,555____________________ ____________________ As at 31 December 2017, loans detail is as follows:
Nature Year-end Due within Due over Loans amount Exchange rate Amount of interest Interest rate borrowing rate one year one year RMB % %
Guaranteed loan (RMB) (Note) 100,000,000 1.0000 100,000,000 Floating 5 year LPR- 0.9 4.28 18,750,000 81,250,000 Credit loan (EUR) 15,838,703 7.8023 123,578,309 Fixed 1.00-2.53 1.00-2.53 55,395,999 68,182,310 Mortgaged loan (EUR)(Note) 1,217,894 7.8023__9_,5_0_2,_37_2 Fixed 1.80 1.80 _2_,8_0_8,_82_8__6_,6_9_3,_54_4__23__3__,0__80__,6__8__1 7__6__,9__5__4,__82__7__15__6__,1__25__,8__5__4 Note: As at 31 December 2017, The secured loan is the long-term loan borrowed by the company forR&D Centre credit guarantee, RMB 100,000,000 (31 December 2016:Nil), mortgaged loans were Atrio using fixed assets EUR 4,264,170 (translated as RMB 33,270,334) as collateral for loans from PopularEspañol, EUR 1,217,894 (translated as RMB 9,502,372), (31 December 2016: RMB 27,517,168).
30. Long-term payables
Closing balance Opening balance RMB RMB Agricultural Development
Fund of China("CADF") 259,000,000 293,000,000____________________ ____________________ In 2016, RMB 305,000,000 from CADF was invested inR&D Centre, CADF accounted for37.9% of the registered capital. According to the investment agreement, CADF will recovery investment funds over 10 years, the investment income received equal to1.2% of the remaining unpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy other profits or bear the loss ofR&D Centre .Therefore although the investment inR&D Centre, nominally equity investment, is actually a debt investment(Financial discount loan). The group take this investment as long-term payables, which measured in amortized cost. The Group repays the principal of RMB12,000,000 in 2017. Refer to Note VI-50 for details of mortgaged and pledged assets.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
30. Long-term payables - continued
Termination date
Long-term payables Yield rate Investment date of repayment Due within 1 year Due after 1 year Mortgaged and pledged assets RMB RMB RMB
77,000,000 1.2% 12 January 2016 24 December 2025 10,000,000 67,000,000 Cash and bank and intangible assets 198,000,000 1.2% 29 February 2016 28 February 2026 22,000,000 176,000,000 Cash and bank fixed assets and intangible assets_1_8_,00_0_,00_0 1.2% 16 June 2016 22 May 2026 __2,_00_0,_00_0 _1_6,_00_0,_00_0 Cash and bank
__29__3__,00__0__,00__0 __3__4,__00__0,__00__0 __25__9,__00__0,__00__0
31. Other non-current liabilities
Closing balance Opening balance RMB RMB Employee benefit 7,209,312 7,696,222__________________ __________________ As at 31 December 2017, employee benefit represents deposit from bonus accrued for managers and above. According to the bonus payment schedule of 2017, the bonus is expected to be paid during 2019 to 2021.
32. Share capital
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Unrestricted shares
A shares 453,460,800 - - 453,460,800 B shares _2_3_2_,0_0_3_,2_0_0 ___-___ ___-___ _2_3_2_,0_0_3_,2_0_0 Total of unrestricted shares
and total shares __6__8__5__,4__6__4__,0__0__0 ______-__
____
______-__
____
__6__8__5__,4__6__4__,0__0__0 33. Capital reserve
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Share premium 560,038,853 - - 560,038,853 Other ___5_,9_1_6_,5_8_8 ____-___ ___-___ ___5_,9_1_6_,5_8_8 Total __5__6__5__,9__5__5__,4__4__1 ________-__
____
______-__
____
__5__6__5__,9__5__5__,4__4__1 34. Other comprehensive income
2017
2017 Less: last year other Post-tax Post-tax
Before-tax comprehensive income Less: attributable attributable
Opening balance amount in P/L current year tax expense to parent to NCI Closing balance Other comprehensive
income to be reclassified
to profit and loss (5,259,014) 9,863,872 - - 8,368,254 1,495,618 3,109,240
Foreign currency statement
translation difference __(__5,__25__9,__01__4)__9,__86__3,__87__2 ____-____ ____-____ __8,__36__8,__25__4 __1,__49__5,__61__8 ____3__,10__9__,2__40
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Surplus reserve
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Statutory surplus reserve __3__4__2__,7__3__2__,0__0__0 ______-__
____
______-__
____
__3__4__2__,7__3__2__,0__0__0 In accordance with the Company Law of the People's Republic of China and the Articles of Association of the Company, the Company is required to appropriate10% of the net profit to the statutory surplus reserve until the accumulated balance of the statutory surplus reserve reaches50% of the registered share capital. The Company does not appropriate net profit to the surplus reserve in 2017.
The Company can appropriate discretionary surplus reserve after appropriation of the statutory surplus reserve. Discretionary surplus reserve can be utilized to offset the deficit or increase the share capital after approval.
36. Retained earnings
Closing balance Opening balance RMB RMB Retained earnings brought forward 6,620,118,562 5,980,390,074 Profit attributable to shareholders of the Company 1,031,695,056 982,460,488 Less: Dividends paid in respect prior year's profit (342,732,000) (342,732,000)____________ ____________ Retained earnings carried forward 7,309,081,618 6,620,118,562________________________ ________________________ (1) Appropriation to surplus reserve by subsidiaries
As at 31 December 2017, the balance of the Group's unappropriated profits include appropriation to surplus reserve by subsidiaries amounting to RMB 51,994,942 (31 December 2016: RMB 71,360,640).
(2) Cash dividends approved by general meeting
According to the annual general meeting on 15 June 2017, dividends distribution plan has been made. On the basis of 685,464,000 issued share capital, RMB 5.0 (including taxes) for every 10 shares was distributed to shareholders, in total RMB 342,732,000 cash dividends.
(3) Profit distribution decided after the balance sheet date
According to a proposal of the board of directors approved on 19 April 2018, on the basis of 685,464,000 issued shares in 2017, cash dividends of RMB 5.0 (including taxes) for every 10 share will be distributed to all the shareholders. The aggregate amount of cash dividend is RMB 342,732,000. The above proposal regarding dividends distribution is yet to be approved in a shareholders' meeting.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
37. Operating income and costs
Operating income is analysed as follows:
2017 2016 RMB RMB Principal operating income 4,856,168,699 4,646,909,704 Other operating income 76,376,530 70,686,768____________ ____________ 4,932,545,229 4,717,596,472________________________ ________________________ Operating cost is analysed as follows:
2017 2016 RMB RMB Principal operating cost 1,645,690,616 1,552,022,043 Other operating cost 25,901,663 23,748,936____________ ____________ 1,671,592,279 1,575,770,979________________________ ________________________ The operating income for the Group is mainly from the sales of wine, brandy and sparkling wine. In 2017, Over91% (2016: over94%) of the sales generated in PRC.
38. Taxes and surcharges
2017 2016 RMB RMB Consumption tax 177,879,324 161,411,393 Business Tax - 1,358,414 City construction tax 52,247,915 46,375,109 Education fee and surcharges 35,831,575 33,975,886 Property tax 23,113,211 8,221,152 Land use tax 11,874,984 9,146,595 Stamp tax 3,945,731 2,659,421 Others 5,359,283 6,568,676__________ __________ 310,252,023 269,716,646____________________ ____________________ For detail standards of tax rate please refer to Notes V.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
39. Selling expenses
2017 2016 RMB RMB Advertising costs 560,533,714 536,552,061 Salary and employee benefit 272,148,620 258,845,366 Freight 139,218,637 135,375,515 Trademark fee 72,838,612 74,125,038 Warehouse leasing expenses 53,075,132 73,141,275 Depreciation cost 34,963,089 29,477,270 Labor fee 29,744,563 29,411,296 Travelling expenses 27,709,534 27,589,397 Water and electricity fee 11,247,163 8,160,610 Security and sanitation fee 9,020,885 4,244,698 Packing cost 7,163,930 5,651,814 Taxes 6,771,337 4,418,811 Office allowance 6,165,561 6,166,163 Business entertainment 4,403,750 3,871,778 Amortization of low-value consumables 4,028,573 2,039,574 Renovation costs 463,163 25,292,999 Others 33,026,180 28,897,003____________ ____________ 1,272,522,443 1,253,260,668________________________ ________________________ 40. Administrative expense
2017 2016 RMB RMB Salary and employee benefit 106,342,126 98,464,931 Depreciation 71,558,307 45,605,723 Contracting fee 21,162,623 20,635,049 Maintenance fee 21,665,024 18,625,443 Administrative expenses 22,173,925 15,829,574 Amortization 22,438,364 14,795,181 Rental fees 12,414,249 10,702,734 Service fee 12,118,257 5,194,426 Greening fee 10,667,941 11,509,618 Security and sanitation fee 6,317,723 5,889,095 Entertainment fee 5,470,001 7,253,858 Travelling expenses 4,747,256 4,961,661 Other taxes 288,907 10,169,607 Fire charge - 10,923,600 Others 23,417,255 29,223,048__________ __________ 340,781,958 309,783,548____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
41. Financial income
2017 2016 RMB RMB Interest income (9,168,772) (15,397,901) Exchange loss (income) (182,610) 7,632,532 Interest expenses 32,233,729 30,120,902 Less: Capitalization of interests 6,138,242 2,289,723 Bank charges 1,846,154 1,903,049__________ __________ 18,590,259 21,968,859____________________ ____________________ 42. Impairment loss of assets
2017 2016 RMB RMB Inventory impairment 7,938,748 3,279,266 Impairment losses from other receivables 354,805 -__________ __________ 8,293,553 3,279,266____________________ ____________________ 43. Other income
2017 2016 Assets/income related RMB RMB
Industrial development support project 4,100,000 - Assets Ningxia industry revitalization and
technology reconstruction funds 3,295,000 - Assets Project funds 2,280,000 - Assets Shandong Peninsula Blue Economic
Area construction funds 2,000,000 - Assets Others 6,352,199 - Assets Tax refund 17,765,560 - Income Others 10,245,625 - Income_________ _________
46,038,384 -
__________________ __________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Non-operation income
Recognized in extraordinary 2017 2016 profit and loss RMB RMB RMB Government grants 1,600,000 49,130,643 1,600,000 Penalty income 7,993,571 2,617,684 7,993,571 Others 7,637,156 3,265,987 7,637,156_________ _________ _________ 17,230,727 55,014,314 17,230,727__________________ __________________ __________________ Government grants recognized in the income statement is as follows:
Assets/income 2017 2016 related RMB RMB
Major projects support fund - 7,040,888 Assets Small and medium enterprises
support fund - 4,138,304 Assets Tax refund - 17,860,500 Income Others 1,600,000 20,090,951 Income_________ _________
1,600,000 49,130,643
__________________ __________________
45. Non-operation expenses
Recognized in extraordinary 2017 2016 profit and loss RMB RMB RMB Compensation and penalty loss 347,528 618,190 347,528 Donation 294,899 305,080 294,899 Others 989,049 303,429 989,049_________ _________ _________ 1,631,476 1,226,699 1,631,476__________________ __________________ __________________ 46. Income tax
2017 2016 RMB RMB Current income tax 330,784,002 360,001,766 Deferred income tax 7,350,2433 (2,972,320)__________ __________
338,134,245 357,029,446
____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
46. Income tax - continued
Reconciliation between income tax expenses and profits is as follows:
2017 2016 RMB RMB Profit before tax 1,371,927,763 1,337,618,840 Income tax expense at statutory tax rate25%(2016:25%) 342,981,941 334,404,710 Effect of different tax rates applied by certain subsidiaries (9,459,223) (7,350,239) Impact of tax exemptions (141,598) - Changes in opening balances of deferred tax
liabilities due to tax rate adjustment (1,342,916) (1,992,564) Unrecognised deductable loss 3,590,697 20,671,303 Utilisation of deductable losses which were not
recognised previously (6,157,735) - Reversal of recognized deductible losses - 2,895,497 Non-deductible expenses 7,550,095 6,892,488 Others 1,112,984 1,508,251____________ ____________ Income tax expenses at the Group's effective tax rate 338,134,245 357,029,446________________________ ________________________ 47. Basic and dilutive earnings per share
The calculation of basic earnings per share is based on the consolidated profit attributable to ordinary shareholders of the Company during the year and the weighted average number of outstanding ordinary shares.
2017 2016 RMB RMB Earnings
Consolidated profit attributable to ordinary
shareholders of the Company 1,031,695,056 982,460,488____________ ____________ Shares
Weighted average number of outstanding
ordinary shares 685,464,000 685,464,000____________ ____________ Basic earnings per share 1.51 1.43________________________ ________________________ The Company does not have potential dilutive ordinary shares.
From the balance sheet date to the date of approval of this report, there are no subsequent events which would affect the numbers of the weighted average number of outstanding of ordinary shares.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
48. Notes to consolidated cash flow statement
(1) Cash received relating to other operating activities:
2017 2016 RMB RMB Government grants 20,930,752 19,347,985 Interest income 3,839,079 2,808,735 Penalty income 7,993,571 2,617,684 Refundable deposits of notes payable 46,900,000 38,130,000 Others 5,573,503 3,803,461_________ _________ 85,236,905 66,707,865__________________ __________________ (2) Cash paid relating to other operating activities:
2017 2016 RMB RMB Selling expenses 956,902,163 942,936,949 General and administrative expenses 107,905,766 113,297,901 Refundable deposits of notes payable 8,000,000 47,030,000 Others 2,103,059 2,449,673____________ ____________ 1,074,910,988 1,105,714,523________________________ ________________________ (3) Cash paid for the purchase subsidiaries and other equity:
2017 2016 RMB RMB Cash paid for acquisition of Indomita Wine 318,867,650 - Less: cash and cash equivalents for Indomita
Wine at acquisition date 15,071,107 - Cash paid investment fund for Mirefleurs - 3,540,923 Less: cash and cash equivalents for Mirefleurs
at acquisition date - 1,779__________ ___________ 303,796,543 3,539,144____________________ ______________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
48. Notes to consolidated cash flow statement - continued
(4) Cash received relating to other financing activities:
2017 2016 RMB RMB Pledged borrowing deposits and interest - 135,584,347 Received government grants related to assets 5,800,000 43,783,000R&D Centre long-term loan pledged time deposit 46,100,000 - Interest income from restricted deposits of
R&D Centre 1,030,804 1,110,240__________ __________ 52,930,804 180,477,587____________________ ____________________ (5) Cash paid relating to other financing activities:
2017 2016 RMB RMBR&D Centre long-term loan pledged time deposit 61,700,000 20,000,000____________________ ____________________ 49. Supplementary information to consolidated cash flow statement
(1) Supplementary information to consolidated cash flow statement
2017 2016 RMB RMB Cash flows from operating activities
calculated by adjusting the net profit:
Net profit 1,033,793,518 980,589,394 Add: Loss for impairment of assets 8,293,553 3,279,266 Depreciation of investment properties 590,610 - Depreciation of fixed assets 250,264,403 197,779,010 Amortization of intangible assets 24,098,781 18,955,762 Amortization of biological assets 10,160,981 6,251,910 Amortization of long-term prepaid expenses 13,911,581 41,685,937 Loss(gains) on disposal of property
plant and equipment 222,586 (14,719) Finance expense 22,381,504 25,919,561 Decrease in deferred tax assets 13,315,979 6,469,619 Decrease in deferred tax liabilities (5,965,736) (9,441,939) Decrease(increase) in inventories (138,995,031) 18,897,985 Increase in operating receivables (180,593,570) (737,321,198) Decrease(increase) in operating payables (78,236,132) 336,861,382____________ ____________ Net cash flows from operating activities 973,243,027 889,911,970
________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
49. Supplementary information to consolidated cash flow statement- continued
(2) Significant investing and financing activities not involving cash receipts and payments. Closing balance Opening balance RMB RMB Payment of intangible assets and other
long-term assets by bank acceptances 140,493,507 503,817,808________________________ ________________________ (3) Cash and cash equivalent
Closing balance Opening balance RMB RMB Closing balance of cash and bank 1,402,522,509 1,391,517,607 Less:
Restricted bank deposits 2,645,410 2,711,926 Restricted other monetary funds 123,987,825 128,863,377 Deposit with a period of over three months 95,000,000 3,000,000____________ ____________ Closing balance of cash and cash equivalents 1,180,889,274 1,256,942,304________________________ ________________________ Closing balance Opening balance RMB RMB Cash 1,180,889,274 1,256,942,304 Including: Cash on hand 136,973 117,507 Bank deposits on demand 1,180,752,301 1,256,824,797____________ ____________ Closing balance of cash and cash equivalents 1,180,889,274 1,256,942,304________________________ ________________________ 50. Assets with restriction of ownership
Closing balance Opening balance RMB RMB Cash and bank 126,633,235 131,575,303 Account receivable 46,337,062 30,732,944 Fixed assets 145,009,923 68,658,094 Intangible assets 164,051,996 145,937,719____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
50. Assets with restriction of ownership - continued
As at 31 December 2017, cash and bank balances with restriction of ownership as follows: Closing balance Opening balance RMB RMB Pledged time deposits forR&D Centre 61,700,000 46,100,000 Refundable deposits of notes payable - 38,900,000 Refundable deposits of letter of credit 57,946,190 25,694,735 Balance in Alipay account 4,317,635 18,118,441 TheCompany’s housing fund 2,645,410 2,711,926 Margin for entity card 14,000 50,201 Deposit for ICBC platform 10,000 -___________ ___________ Total 126,633,235 131,575,303______________________ ______________________ Among the aforementioned items, the amount of RMB 4,317,635 which is the blocked balances of goods payment in Alipay account can be unlocked after 15 days.
As at 31 December 2017, the amount of accounts receivable with restricted ownership is EUR 5,938,898 (translated as RMB 46,337,062) , which refers to accounts receivable Atrio conducted for factoring from Banco de Sabadell, S.A. etc.
As at 31 December 2017, fixed assets with restriction of ownership as follows:
Restricted reasons Closing balance Company RMB The Company Long-term payable collateral 36,349,289 Sales Company Long-term payable collateral 41,000,106 Atrio Long-term borrowings collateral 33,270,337 Indomita Wine Short-term borrowings collateral 34,390,191___________ Total 145,009,923______________________ As at 31 December 2017, Intangible assets with restriction of ownership as follows:
Restricted reasons Closing balance Company RMB The Company Long-term payable collateral 52,720,912R&D Centre Long-term payable collateral 111,331,084___________ Total 164,051,996______________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
51. Foreign monetary items
(1) Foreign monetary items
The foreign monetary items located within China are as follows:
Closing foreign Exchange Closing translated currency balance rate RMB balance Cash and bank
EUR 127 7.8023 991 HKD 219 0.8359 183 USD 4,458,159 6.5342 29,130,503____________________ ____________ ____________________ (2) Overseas business entities
TheCompany’s overseas subsidiaries determine bookkeeping currency based on the primary economic environment. The bookkeeping base currency of Atrio and Francs Champs
Participations SAS ("Francs Champs") are all in Euro, and the bookkeeping base currency of Indomita Wine is Chilean peso. The foreign monetary assets and liabilities of the overseas subsidiaries are as follows:
Closing foreign Exchange Closing translated currency balance rate RMB balance Cash and bank
EUR 152,451 7.8023 1,189,468 USD 874,394 6.5342 5,713,465 Short-term borrowings
USD 9,000,000 6.5342 58,807,800____________________ ____________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VII. CHANGE IN CONSOLIDATION SCOPE
1. Business combination under different control
(1) Business combination under different control in current period
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name of acquisitioncompany|Equityacquisitiondate|Equityacquisitioncost|Equityacquisition ratio(%)|Equityacquisition method|Acquisitiondate|Basis ofacquisitiondate|Revenue fromacquisition dateto year end|Net profit fromacquisition dateto year end|
|Viña Indómita, S.A.Viña Dos Andes, S.A.Bodegas Santa Alicia SpA|1 July 2017|USD40,110,000|100%100%100%|Purchase|1 July 2017|Finishpayment andacquire equity|RMB157,953,467|RMB28,791,684|

Other detail information:
According to<Shareholdagreement> and<Price adjustmentagreement> signed between the Company and LAMBO SpA ("Chile Bethwines") on 11 May 2017, both will join contribute USD 47,190,000 (translated as RMB 322,644,840) to set up Indomita Wine Company Chile, SpA (Chinesename:智利魔狮葡萄酒简式股份公司, “IWCC”). USD 40,110,000 (translated as RMB 274,248,114) was paid by the Company and hold for85% of theIWCC’s share. IWCC as the transferee, contributed USD 47,190,000 (translated as RMB 318,867,650) to acquire Indomita Wine,100% shares hold by Chile Bethwines. The Group had completed the prerequisite for the transfer of all shares, and get the control over financial and operating decisions of Indomita Wine. (2) Consideration and Goodwill
Consideration
Indomita Wine RMB Cash 318,867,650 Total consideration 318,867,650 Less: acquired provisional value of net assets 311,997,535__________ Goodwill 6,870,115____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VII. CHANGE IN CONSOLIDATION SCOPE - continued
1. Business combination under different control - continued
(3) Recognised assets and liabilities of mergee at acquisition date
Chile Indomita Wine Group Fair value Book value at acquisition date at acquisition date RMB RMB Assets
Cash and bank 15,071,107 15,071,107 Accounts receivable 77,173,885 77,173,885 Other receivables 12,149,546 12,149,546 Inventories 93,948,023 93,948,023 Fixed assets 89,086,462 69,377,096 Intangible assets 170,605,345 27,264,647 Bearer biological assets 1,413,595 2,109,821 Deferred tax assets 25,500,338 25,312,357____________ ____________ Total assets 484,948,301 322,406,482________________________ ________________________ Liabilities
Short-term borrowings 61,998,579 61,998,579 Accounts payable 89,556,186 89,556,186 Other payables 8,750,612 8,750,612 Taxes payable 1,969,430 1,969,430 Employee benefits payable 5,354,430 5,354,430 Deferred tax liabilities 5,321,529 -____________ ____________ Total liabilities 172,950,766 167,629,237________________________ ________________________ Net assets 311,997,535 154,777,245Less：Non-controlling interests - -____________ ____________ Acquired net assets 311,997,535 154,777,245________________________ ________________________ 2. Change in consolidation scope due to other reasons (new established subsidiaries)
Name Place and date of registration Legal representative Business nature Registered capital Principal activities Incorporate code Yantai Changyu Pioneer Grape
Wine Marketing Ltd 18 January 2017 Zhou Hongjiang Sales RMB 5,000,000 Retail and Sales 91370600MA3D591TXW (“Grape Wine MarketingLtd.”)* Yantai Shandong, China
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES
1. Structure of the Group
Equity interest owned
by the company Acquisition method Name Address Place of registration Nature Direct Indirect
Xinjiang Tianzhu (a) Shihezi, Xinjiang, China Shihezi, Xinjiang, China Manufacturi 60% - Subsidiary acquired in ng business combination under non-common control Fransac Sales Cognac, France Cognac, France Trading - 100% Subsidiary acquired in business combination under non-common control Mirefleurs Bordeaux, France Bordeaux, France Trading 100% Subsidiary acquired in business combination under non-common control Atrio (b) Navarra, Spain Navarra, Spain Sales 75% Subsidiary acquired in business combination under non-common control IWCC (c) Santiago, Chile Santiago, Chile Sales 85% -
Subsi ed sia tar bie ls is a hc mq eu nir te d by Beijing Changyu Sales and distribution Co., Ltd ("Beijing Beijing, China Beijing, China Sales 100% - Subsidiaries acquired by Sales") establishment Yantai Kylin Packaging Co., Ltd. Yantai, Shandong, China Yantai, Shandong, China Manufacturi 100% - Subsidiaries acquired by ("Kylin Packaging") ng establishment Yantai Changyu-Castel Wine Chateau Co., Ltd ("Changyu Yantai, Shandong, China Yantai, Shandong, China Manufacturi 70% - Subsidiaries acquired by Chateau") (d) ng establishment Changyu (Jingyang) Wine Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturi 90% 10% Subsidiaries acquired by ("Jingyang Wine") ng establishment Yantai Changyu Pioneer Wine Sales Co., Ltd. ("Sales Yantai, Shandong, China Yantai, Shandong, China Sales 100% - Subsidiaries acquired by Company") establishment Langfang Development Zone Castel-Changyu Wine Co., Ltd Lanfang, Hebei, China Lanfang, Hebei, China Manufacturi 39% 10% Subsidiaries acquired by ("Langfang Castel") (e) ng establishment Changyu (Jingyang) Wine Sales Co., Ltd. ("Jingyang Sales") Xianyang, Shanxi, China Xianyang, Shanxi, China Sales 10% 90% Subsidiaries acquired by establishment Langfang Changyu Pioneer Wine Sales Co., Ltd ("Langfang Lanfang, Hebei, China Lanfang, Hebei, China Sales 10% 90% Subsidiaries acquired by Sales") establishment Shanghai Changyu Sales and distribution Co., Ltd. ("Shanghai Shanghai, China Shanghai, China Sales 30% 70% Subsidiaries acquired by Sales") establishment Beijing Changyu AFIP Agriculture development Co., Ltd Miyun, Beijing, China Miyun, Beijing, China Sales - 100% Subsidiaries acquired by ("Agriculture Development") establishment Beijing Chateau (f) Beijing, China Beijing, China Manufacturi 90% - Subsidiaries acquired by ng establishment Yantai ("Beijing Chateau") Changyu Wine Sales Co., Ltd. Yantai, Shandong, China Yantai, Shandong, China Sales 90% 10% Subsidiaries acquired by ("Wines Sales") establishment Yantai Changyu Pioneer International Co., Ltd. ("Pioneer Yantai, Shandong, China Yantai, Shandong, China Sales 70% 30% Subsidiaries acquired by International") establishment Hangzhou Changyu Wine Sales Co., Ltd. ("Hangzhou Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by Changyu") establishment Ningxia Growing Yinchuang, Ningxia, China Yinchuang, Ningxia, China Planting 100% - Subsidiaries acquired by establishment Huanren Changyu National Wines Sales Co., Ltd. ("National Benxi, Liaoning, China Benxi, Liaoning, China Sales 100% - Subsidiaries acquired by Wines") establishment Liaoning Changyu Ice Wine Chateau Co., Ltd. ("Ice Benxi, Liaoning, China Benxi, Liaoning, China Manufacturi 51% - Subsidiaries acquired by Chateau") (g) ng establishment Yantai Development Zone Changyu Trading Co., Ltd Yantai, Shandong, China Yantai, Shandong, China Sales - 100% Subsidiaries acquired by ("Development Zone Trading") establishment Shenzhen Changyu Wine Marketing Ltd. ("Shenzhen Shenzhen, Guangdong, China Shenzhen, Guangdong, China Sales - 100% Subsidiaries acquired by Marketing") establishment Yantai Changyu Fushan Trading Company("Fushan Trading") Yantai, Shandong, China Yantai, Shandong, China Sales - 100% Subsidiaries acquired by establishment Beijing AFIP Meeting Center ("Meeting Center") Miyun, Beijing, China Miyun, Beijing, China Service - 100% Subsidiaries acquired by establishment Beijing AFIP Tourism and Culture ("AFIP Tourism") Miyun, Beijing, China Miyun, Beijing, China Tourism - 100% Subsidiaries acquired by establishment Ningxia Wine Co.Ltd. ("Ningxia Wine"). Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturi 100% - Subsidiaries acquired by ng establishment Yantai Changyu DingLuoTe Chateau. Yantai, Shandong China Yantai, Shandong China Retail and 65% 35% Subsidiaries acquired by ("Ding Luo Te Chateau") Sales establishment Qing Tong Xia Changyu Wine Marketing Ltd("Qing Tong Qing Tong Xia, Ningxia, China Qing Tong Xia, Ningxia, China Sales - 100% Subsidiaries acquired by Xia Sales") establishment Shihezi Chateau Shihezi, Xinjiang, China Shihezi, Xinjiang, China Manufacturi 100% - Subsidiaries acquired by ng establishment Ningxia Moser 15th Changyu Wine Chateau Co., Ltd. (" Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturi 100% - Subsidiaries acquired by Ningxia Chateau") ng establishment Shanxi Changyu Rina Castle Chateau Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturi 100% - Subsidiaries acquired by (" Chang'an Chateau") ng establishmentR&D Centre (g) Yantai, Shandong China Yantai, Shandong China Manufacturin63% - Subsidiaries acquired by g establishment Changyu (HuanRen) Wine Co., Ltd Benxi LiaoNing China Benxi LiaoNing China Wine 100% - Subsidiaries acquired by ("Huan Ren Wine") production establishment Projecting
Xinjiang Sales Shihezi Xinjiang China Shihezi Xinjiang China Sales - 100% Subsidiaries acquired by establishment Xinjiang Changyu Winery Co., Ltd Shihezi Xinjiang China Shihezi Xinjiang China Manufacturi - 100% Subsidiaries acquired by ("Xinjiang Winery") ng establishment Ningxia Changyu Trading Co., Ltd Yinchuan Ningxia China Yinchuan Ningxia China Sales - 100% Subsidiaries acquired by ("Ningxia Trading") establishment Shanxi Changyu Rina Wine Sales Co., Ltd ("Shanxi Sales") Xianyang Shanxi China Xianyang Shanxi China Sales - 100% Subsidiaries acquired by establishment Penglai Changyu Wine Sales Co., Ltd Penglai Shandong China Penglai Shandong China Sales - 100% Subsidiaries acquired by ("Penglai Sales") establishment Laizhou Changyu Wine Sales Co., Ltd Laizhou Shandong China Laizhou Shandong China Sales - 100% Subsidiaries acquired by ("Laizhou Sales") establishment Francs Champs Cognac, France Cognac, France Investment 100% - Subsidiaries acquired by and trading establishment Lanzhou Changyu Wine Sales Co., Ltd ("Lanzhou Sales") Lanzhou Gansu, China Lanzhou Gansu, China Sales - 100% Subsidiaries acquired by establishment Beijing Retailing Co. Ltd("Beijing Retailing") Beijing, China Beijing, China Sales - 100% Subsidiaries acquired by establishment Tianjin Changyu Pioneer Sales Co., Ltd ("Tianjin Pioneer") Tianjin, China Tianjin, China Sales - 100% Subsidiaries acquired by establishment Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") Fuzhou Fujian, China Fuzhou Fujian, China Sales - 100% Subsidiaries acquired by establishment Nanjing Changyu Pioneer Sales Co., Ltd ("Nanjing Pioneer") Nanjing, Jiangsu, China Nanjing, Jiangsu, China Sales - 100% Subsidiaries acquired by establishment Xianyang Changyu Pioneer Sales Co., Ltd ("Xianyang Xianyang, Shanxi, China Xianyang, Shanxi, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Shenyang Changyu Pioneer Sales Co., Ltd ("Shenyang Shenyang, Liaoning, China Shenyang, Liaoning, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Jinan Changyu Pioneer Sales Co., Ltd ("Jinan Pioneer") Jinan, Shandong, China Jinan, Shandong, China Sales - 100% Subsidiaries acquired by establishment Shanghai Changyu Pioneer Sales Co., Ltd ("Shanghai Shanghai, China Shanghai, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") Fuzhou, Jiangxi, China Fuzhou, Jiangxi, China Sales - 100% Subsidiaries acquired by
establishment
Shijiazhuang Changyu Pioneer Sales Co., Ltd ("Shijiazhuang Shijiazhuang, Hebei, China Shijiazhuang, Hebei, China Sales - 100% Subsidiaries acquired by
Pioneer") establishment
Hangzhou Yuzefeng Sales Co., Ltd ("Hangzhou Yuzefeng") Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by
establishment
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
Equity interest owned
by the company Acquisition method Name Address Place of registration Nature Direct Indirect
Jilin Changyu Pioneer Sales Co., Ltd ("Jilin Pioneer") Changchun, Jilin, China Changchun, Jilin, China Sales - 100% Subsidiaries acquired by establishment Beijing Changyu Pioneer Sales Co., Ltd ("Beijing Pioneer") Beijing, China Beijing, China Sales - 100% Subsidiaries acquired by establishment Haerbin Changyu Pioneer Sales Co., Ltd ("Haerbin Pioneer") Haerbin, Heilongjiang, China Haerbin, Heilongjiang, China Sales - 100% Subsidiaries acquired by establishment Hunan Changyu Pioneer Sales Co., Ltd ("Hunan Pioneer") Changsha, Hunan, China Changsha, Hunan, China Sales - 100% Subsidiaries acquired by establishment Yinchuan Changyu Pioneer Sales Co., Ltd ("Yinchuan Yinchuan, Ningxia, China Yinchuan, Ningxia, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Kunming Changyu Pioneer Sales Co., Ltd ("Kunming Kunming, Yunnan, China Kunming, Yunnan, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Chongqing Changyu Pioneer Sales Co., Ltd ("Chongqing Chongqing, China Chongqing, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Zhengzhou Changyu Pioneer Sales Co., Ltd ("Zhengzhou Zhengzhou, Henan, China Zhengzhou, Henan, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Wuhan Changyu Pioneer Sales Co., Ltd ("Wuhan Pioneer") Wuhan, Hubei, China Wuhan, Hubei, China Sales - 100% Subsidiaries acquired by establishment Taiyuan Changyu Pioneer Sales Co., Ltd ("Taiyuan Pioneer") Taiyuan, Shanxi, China Taiyuan, Shanxi, China Sales - 100% Subsidiaries acquired by establishment Huhehaote Changyu Pioneer Sales Co., Ltd ("Huhehaote Huhehaote Inner Mongolia, China Huhehaote Inner Mongolia, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Chengdu Changyu Pioneer Sales Co., Ltd ("Chengdu Chengdu, Sichuan, China Chengdu, Sichuan, China Sales - 100% Subsidiaries acquired by Pioneer") establishment Nanning Changyu Pioneer Sales Co., Ltd ("Nanning Pioneer") Nanning, Guangxi, China Nanning, Guangxi, China Sales - 100% Subsidiaries acquired by establishment Lanzhou Pioneer Lanzhou Gansu, China Lanzhou Gansu, China Sales - 100% Subsidiaries acquired by establishment Yantai Fulangduo Yantai Shandong, China Yantai Shandong, China Sales - 100% Subsidiaries acquired by establishment Hefei Pioneer Hefei, Anhui, China Hefei, Anhui, China Sales - 100% Subsidiaries acquired by establishment Urumchi Pioneer Urumchi Xinjiang, China Urumchi Xinjiang, China Sales - 100% Subsidiaries acquired by establishment Guizhou Pioneer Guiyang Guizhou, China Guiyang Guizhou, China Sales - 100% Subsidiaries acquired by establishment Guangzhou Changyu Pioneer Sales Co. Ltd Guangzhou Guangdong China Guangzhou Guangdong China Sales - 100% Subsidiaries acquired by ("Guangzhou Pioneer") establishment Grape Wine Marketing Ltd. Yantai Shandong China Yantai Shandong China Sales 100 -
Subsi ed sia tar bie ls is a hc mq eu nir te d by Explanation in difference between holding interests and voting rights in subsidiaries:
(a) Xinjiang Tianzhu was acquired by the Company, accounting for60% of Xinjiang Tianzhu's equity interest. Through agreement arrangement, the Company has the full power to control Xinjiang Tianzhu's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 6 August 2017. Upon the expiry of the agreement arrangement, the non-controlling interests of Xinjiang Tianzhu will normally enjoy/commit all the rights and obligations of the shareholders as stipulated in the Articles of Association. (b) As at 12 September 2016, Dicot has completed an internal reorganization. Atrio, consolidated Enotec S.L, Hostaler I S.L., Faustino Rivero Ulecia S.L.by absorption merger. After the completion of the reorganization, Atrio became the only surviving company.
(c) IWCC is a Sino-foreign joint venture estabilished by the Company and Chile Bethwines, accounting for85% of Indomita Wine's equity interest, and the capital contribution of USD 40,110,000 (translated as RMB 274,248,114) was paid by the Company, and USD7,080,000 (translated as RMB 48,396,726) was paid by the Chile Bethwines and accounting for15% of Indomita Wine's equity interest.
(d) Changyu Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, accounting for70% of Changyu Chateau's equity interest. Through agreement arrangement, the Company has the full power to control Changyu Chateau's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 31 December 2022.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
(e) Langfang Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, accounting for49% of Langfang Chateau's equity interest by the Company and subsidiaries. Through agreement arrangement, the Company has the full power to control Langfang Chateau's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 31 December 2022.
(f) Beijing Chateau is a joint venture established by the Company, Yantai De'an and Beijing Qinglang, and the Company increases the capital contribution RMB502,910,000 in this period, Yantai De'an and Beijing Qinglang together increase the capital contribution RMB29,840,000. Beijing Chateau has compeled the business registion on 22 December 2017. After capital contribution increased, the Company is accounting for90% of Beijing Chateau's equity interest. The Company gets the control over operation, investment, and financial decision of Beijing Chateau through agreement arrangement, which will terminate on 2 September 2019. (g) Ice Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, accounting for51% of Ice Chateau's equity interest. Through agreement arrangement, the Company has the full power to control Ice Chateau's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 31 December 2021. (h)R&D Centre is a joint venture established by the Company and CADF, accounting for63.1% ofR&D Centre's equity interest at 31 December 2017. As mentioned in Note VI-30 ,in 2016, RMB 305,000,000 from CADF was invested inR&D Centre's, CADF accounted for37.9% of the registered capital. According to the investment agreement, CADF will recovery investment funds over 10 years, the investment income received equal to1.2% of the remaining unpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy other profits or bear the loss ofR&D Centre. Therefore although the investment inR&D Centre, nominally equity investment, is actually a debt investment. The group take this investment as long-term payables, which measured in amortized cost. The company is fully responsible for the operation, investment and financial policies of theR&D Centre in the form of such agreements. The agreement will expire on 22 May 2026.
2. Non-wholly owned subsidiaries
Profit and loss belongs
Minority to non-controlling Distributions to Assimilate Closing balance of Name interest shareholder ratio interest shareholders non-controlling interest non-controlling Xinjiang Tianzhu 40% (2,720,460) - - 53,373,452 Atrio 25% 1,595,697 (668,124) - 31,626,890 Changyu Chateau 30% - - - 12,365,016 Langfang Castel 51% - - - 22,702,522 Beijing Chateau 10% - - 29,840,000 65,133,868 Ice Chateau 49% - - - 33,319,062 IWCC 15% ____4,_7_18_,8_4_3 ________-_ ___4_8,_39_6_,7_2_6 ___53_,_11_5_,5_6_9________3,__5__94__,0__8__0 ________(__66__8__,1__2__4) ______7__8,__23__6__,7__2__6 ____2__71__,__63__6__,3__7__9 Explanation in difference between share percentage and voting power of non-controlling interests: Please see Note VIII-1.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
3. Key financial information of important non-wholly owned subsidiaries
Closing balance Opening balance
Name
C au sr sr ee tn st No n a- sc su er tr se nt aT so seta tsl liC abur ilr ie tn iet
s
N lo in ab-c ilu ir tir ee sn t liaT bo ilt ia til
e s
C au sr sr ee tn
s
t No n a- sc su er tr se nt
Total assets
liC abur ilr ie tn iet
s
N lo in ab-c ilu ir tir ee sn t liaT bo ilt ia tl i es Xinjiang
Tianzhu 30,264,441 71,323,940 101,588,381 809,080 5,336,114 6,145,194 80,126,247 77,008,886 157,135,133 23,266,974 5,336,114 28,603,088 Changyu
Chateau 140,038,021 115,435,985 255,474,006 175,061,601 - 175,061,601 173,934,285 116,396,690 290,330,975 210,904,481 - 210,904,481 Langfang
Castel 22,728,536 17,973,719 40,702,255 6,133,909 - 6,133,909 26,528,622 19,890,293 46,418,915 10,233,932 - 10,233,932 Beijing
Chateau 214,079,274 481,668,050 695,747,324 73,963,043 - 73,963,043 88,294,417 502,368,404 590,662,821 431,222,472 888,945 432,111,417 Ice Chateau 38,657,358 25,484,359 64,141,717 10,871,695 100,000 10,971,695 38,239,653 27,545,615 65,785,268 13,756,944 100,000 13,856,944 Atrio 398,835,959 116,299,504 515,135,463 299,030,002 89,336,338 388,366,340 333,455,551 131,921,130 465,376,681 272,843,155 69,572,335 342,415,490 IWCC 175,669,256 305,664,706 481,333,962 122,023,764 5,206,406 127,230,170 N/A N/A N/A N/A N/A N/A 2017 2016
Total Operating Total Operating Revenue Net profit (loss) comprehensive activities cash Revenue Net profit (loss) comprehensive activities cash Name income flows income flows Xinjiang Tianzhu 116,555,588 15,531,513 15,531,513 32,224,800 118,253,496 11,561,969 11,561,969 5,647,080 Changyu Chateau 68,964,230 985,910 985,910 19,629,212 102,588,593 13,184,637 13,184,637 16,751,337 Langfang Castel 39,165,527 (1,616,638) (1,616,638) (1,554,380) 41,948,391 731,204 731,204 8,681,926 Beijing Chateau 145,103,200 17,475,647 17,475,647 49,964,881 178,662,315 29,417,483 29,417,483 55,561,102 Ice Chateau 49,643,396 1,241,699 1,241,699 (1,748,535) 43,742,412 (5,895,304) (5,895,304) 4,922,305 Atrio 281,007,167 2,000,682 7,701,416 (32,148,326) 281,328,100 (7,484,378) (8,473,348) (28,411,777)IWCC* 157,953,467 28,791,684 31,458,952 16,482,765 N/A N/A N/A N/A* This is amount incurred in the period between acquisition date and 31 December 2017. IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT
The Group's major financial instruments include cash and bank, notes receivable, accounts receivable, interest receivables, other receivables, available-for-sale financial assets, other non- current assets, short-term borrowings, accounts payable, other payables, interest payables, and long-term borrowings. Details of these financial instruments are disclosed in Note VI. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure the risks are monitored at a certain level.
The Group adopts sensitivity analysis technique to analyse how the profit and loss for the period and shareholders' equity would have been affected by reasonably possible changes in the relevant risk variables. As it is unlikely that risk variables will change in an isolated manner, and the interdependence among risk variables will have significant effect on the amount ultimately influenced by the changes in a single risk variable, the following are based on the assumption that the change in each risk variable is on a stand-alone basis.
The Group's risk management objectives are to achieve a proper balance between risks and yield, minimise the adverse impacts of risks on the Group's operation performance, and maximise the benefits of the shareholders and other stakeholders. Based on these risk management objectives, the Group's basic risk management strategy is to identify and analyse the Group's exposure to various risks, establish an appropriate maximum tolerance to risk, implement risk management, and monitors regularly and effectively these exposures to ensure the risks are monitored at a certain level.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies
1.1 Market risk
1.1.1 Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. . The Group's exposure to the currency risk is primarily associated with EUR and USD.Several of the Group's subsidiaries have purchases and sales denominated in EUR and Chilean peso, borrowing denominated in USD, while the Group's other principal activities are denominated and settled in RMB.As at 31 December 2017, except that the assets and liabilities stated in the table below are foreign currency deposits or excess of borrowings, the assets and liabilities of each entity of the Group are settled in their respective functional currencies.
Closing balance Opening balance RMB RMB Bank and cash (EUR) 1,190,459 566,182 Bank and cash (USD) 34,843,968 - Non-current liabilities due within one year (EUR) - 29,227,200 Short-term borrowings (USD) 58,807,800 -______________________ ______________________ Currency risk arising from the assets and liabilities denominated in foreign currencies may have impact on the Group's performance.The Group closely monitors the effects of changes in the foreign exchange rates on the Group's currency risk exposures. The Group currently does not take any measures to hedge currency risk exposures.
Sensitivity analysis on currency risk
Where all other variables are held constant, the reasonably possible changes in the foreign exchange rate may have the following pre-tax effect on the profit or loss for the period and shareholders' equity:
Domestic entities:
Current year Prior year
Effect on Effect on shareholders' shareholders' Change in exchange rate Effect on profit equity Effect on profit equity RMB RMB RMB RMB EUR 5% increase against RMB 50 50 (1,433,051) (1,433,051) EUR 5% decrease against RMB (50) (50) 1,433,051 1,433,051 USD 5% increase against RMB 1,456,525 1,456,525 - - USD 5% decrease against RMB____(__1__,4__5__6__,5__2__5) __(__1__,4__5__6__,5__2__5) ______________-
__
______________-__
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market ris k- continued
1.1.1 Currency risk - continued
Sensitivity analysis on currency risk - continued
Overseas entities:
Current year Prior year
Effect on Effect on shareholders' shareholders' Change in exchange rate Effect on profit equity Effect on profit equity RMB RMB RMB RMB USD 5% increase against EUR 52,695 52,695 - - USD 5% decrease against EUR (52,695) (52,695) - - USD 10% increase against Chile Peso (5,275,651) (5,275,651) - - USD 10% decrease against Chile Peso 5,275,651 5,275,651 - - EUR 5% increase against Chile Peso 58,350 58,350 - - EUR 5% decrease against Chile Peso________(__5__8__,3__5__0) ______(__5__8__,3__5__0) ______________-
__
______________-__ Note: As at 31 December 2017, the Group's management anticipated a change of5% in exchange rate for Euro, USD to RMB, Euro to USD, Euro to Chilean Peso and anticipated a change of10% in exchange rate for USD to Chilean Peso.
1.1.2 Interest rate risk - risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-rate bank borrowings (Refer to Note VI-1, Note VI-20, Note VI-28 and Note VI-29 for details). It is the Group's policy to keep its borrowings at floating rate of interests so as to eliminate the fair value interest rate risk.
The sensitivity analysis on interest rate risk
The sensitivity analysis on interest rate risk is based on the changes in the market interest rate may influence the interest income or expense of the variable rate financial instruments.
Management of the Group believes interest rate risk on bank deposit is not significant, therefore does not disclose sensitivity analysis for interest rate risk.
1.1.2 Interest rate risk - risk of changes in cash flows - continued
Where all other variables are held constant, the reasonably possible changes in the interest rate may have the following pre-tax effect on the profit or loss for the period and shareholders' equity Current year Prior year
Effect on Effect on shareholders' shareholders' Change in interest rate Effect on profit equity Effect on profit equity Bank borrowings 50% increase (2,046,646) (2,046,646) (1,774,725) (1,774,725) Bank borrowings 50% decrease ____2__,0__4__6__,6__4__6 ____2__,0__4__6__,6__4__6 ____1__,7__7__4__,7__2__5 ____1__,7__7__4__,7__2__5
Note: As at 13 December 2017, the Group's management anticipated a change of 50 basis points
in the bank's variable interest rate.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.2 Credit risk
As at 31 December 2017, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties. In order to minimise the credit risk, the Group has adopted a policy to ensure that all sales customers have good credit records. The Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms without the specific approval of the Department of Credit Control in the Group. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Group considers that the Group's credit risk is significantly reduced. Since the Group trades only with recognized and creditworthy third parties, there is no requirement for collateral. Concentrations of credit risk are managed by customer/counterparty, by geographical region and by industry sector. As at 31 December 2017,20.7% of the Group trade receivables are due from top 5 customers (31 December 2016:26.3%). There is no collateral or other credit enhancement on the balance of the trade receivables of the Group.
1.3 Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants.
The following is the maturity analysis for financial assets and financial liabilities held by the Group which is based on undiscounted remaining contractual obligations:
Non-derivative financial liabilities
Less than one month 1-3 months 3-12 months 1-5 years More than five years Total RMB RMB RMB RMB RMB RMB Short-term borrowings 2,472,728 51,052,400 686,717,082 - - 740,242,210 Accounts payable 153,234,366 306,468,734 206,739,779 - - 666,442,879 Other payables 187,443,697 168,777,348 233,329,619 - - 589,550,664 Interest payable 771,250 - - - - 771,250 Long-term borrowings 9,110,307 15,315,648 54,449,723 168,580,979 - 247,456,657 Long-term payables ________-___2_2_,8_64_,9_3_3___1_4_,4_70_,1_0_0 ___14_5_,2_10_,1_0_0__12_5_,6_23_,0_0_0___30_8_,1_68_,1_3_3______35__3__,0__32__,3__4__8____56__4__,4__79__,0__6__3____1,__19__5__,7__06__,3__0__3 ______31__3__,7__91__,0__7__9____12__5__,6__2__3,0__0__0____2,__55__2__,6__31__,7__9__3
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.4 Fair value disclosure - Financial assets and liabilities not measured using fair value
Fair value
Carrying amount Level 1 Level 2 Level 3 Total of fair value of fair value of fair value
Long-term payables measured
at amortized cost __2__93__,__00__0__,0__0__0 ____________-
__
2__48__,__59__8__,5__5__7______________-
__
__2__48__,__59__8__,5__5__7 As at 31 December 2017, The management of the Group believes that, apart from the aforementioned long-term payables, the carrying amounts of other financial assets and financial liabilities measured at amortised cost in the financial statements are close to the fair values of these assets and liabilities.
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS
1. Parent company
Name of Type of Place of Legal Scope Registered Percentage Percentage Incorporate parent company Relation enterprise registration representative of business capital of shares of voting rights Code RMB % %
Controlling Parent Limited
Company Company Company Yantai SunLiqiang Manufacturing 50,000,000 50.4 50.4 265645824 During the year ended 31 December 2017, there is no change in parent company's registered capital, shares holding or voting power.
2. Subsidiaries: Please refer to Notes VIII.
3. Other related parties
Name of related parities Nature of related parties Incorporate code Yantai Changyu Wine Culture Museum Company controlled 913706007582586548 Co., Ltd.("Wine Culture Museum") by the same parent
Yantai Changyu International Window of the Company controlled 91370600672208146X Wine City Co., Ltd.("Window of the Wine City) by the same parent
Yantai ShenMa Packing Co., Ltd. Company controlled 91370600553393350J ("ShenMa Packing") by the same parent
Yantai Zhongya Pharmaceutical Tonic Company controlled 91370600726203923M Wine Co., Ltd.("Zhongya Pharmaceutical") by the same parent
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions
(1) Purchases from and sales to related parties
Purchase from related parties
The content of related 2017 2016 party transactions RMB RMB ShenMa Packing product purchase 145,872,001 150,590,287 Zhongya Pharmaceutical product purchase 9,279,380 12,567,066 Wine Culture Museum product purchase 6,336,832 10,210,089 Window of the Wine City product purchase 2,756,050 2,032,847__________ __________ 164,244,263 175,400,289____________________ ____________________ All related party transactions are based on the negotiated price.
In 2017, purchases from related parties accounted for10.9% of the Group's total purchase (2016:13.2%)
Sales to related parties
The content of related 2017 2016 party transactions RMB RMB Wine Culture Museum goods sales 8,235,520 15,670,982 Window of the Wine City goods sales 12,205,247 10,945,578 Zhongya Pharmaceutical goods sales 2,035,003 3,387,900 ShenMa Packing goods sales 1,634,883 1,496,669__________ __________ 24,110,653 31,501,129____________________ ____________________ All related party transactions are based on the negotiated price.In 2017, sales to related parties accounted for less than1% of the Group's total sales (2016: less than1%).
(2) Property leased from a related party
The Group as Lessee
2017 Assets leased Beginning date Ending date Rental expense RMB Changyu Group Company office building 1 January 2016 31 December 2020 1,692,724 Changyu Group Company office building and factory 1 January 2017 31 December 2021 1,464,500 Changyu Group Company offi ce building and factory 1 January 2017 31 December 2 021 4_,_39_3_,5_0_07__,__55__0__,7__2__4
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
The Group as Lessee - continued
(2) Property leased from a related party - continued
Pursuant to the lease agreement entered into between the Company and Changyu Group Company on 1 January 2016, starting from 1 January 2016, the Company rented properties from Changyu Group Company for operation purposes at annual rental of RMB 1,692,724, and till 31 December 2020. For the year ended 31 December 2017, the rental payable to Changyu Group Company amounted to RMB 1,692,724 (2016: RMB 1,692,724).
Pursuant to the lease agreement entered into between the Company and Changyu Group Company on 1 January 2017, starting from 1 January 2017, the Company rented properties from Changyu Group Company for operation purposes at annual rental of RMB 1,464,500, and till 31 December 2021. For the year ended 31 December 2017, the rental payable to Changyu Group Company amounted to RMB 1,464,500 (2016: RMB 1,464,500).
Pursuant to the lease agreement entered into between the Company and Changyu Group Company on 1 January 2017, starting from 1 January 2017, the Company rented properties from Changyu Group Company for operation purposes at annual rental of RMB 4,393,500, and till 31 December 2021. For the year ended 31 December 2017, the rental payable to Changyu Group Company amounted to RMB 4,393,500 (2016: RMB 4,393,500).
All related party transactions are based on the negotiated price.
The Group as lessor
2017 Assets leased Beginning date Ending date Rental expense RMB ShenMa Packing offi ce building and factory 1 July 2017 30 June 202 2 ____81__3__,4__4__0 Pursuant to the lease agreement entered into between the Company and ShenMa Packing on 1 July 2017, starting from 1 July 2017, the Company rented properties from ShenMa Packing for operation purposes at annual rental of RMB 1,626,880 and till 30 June 2022. For the year ended 31 December 2017, the rental payable to ShenMa Packing amounted to RMB 813,440 (2016: Nil). All related party transactions are based on the negotiated price.
(3) Other significant related party transactions
The content of related
party transactions Note 2017 2016 RMB RMB Changyu Group Company Royalty fee (a) 72,838,612 74,125,038 Changyu Group Company Patents fee (b) 50,000 50,000 Zhongya Pharmaceutical Sales of fix ed assets (c) ____3__,9__3__4__,6__4__3 ______4__1__1__,4__0__7
All related party transactions are based on the negotiated price.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(3) Other significant related party transactions - continued
(a) Royalty fee
Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, the Company may use certain trademarks of Changyu Group Company, which have been registered with the PRC Trademark Office. An annual royalty fee at2% of the Group's annual sales is payable to Changyu Group Company. The license is effective until the expiry of the registration of the trademarks.
During 2017, royalty fee paid to related company accounted for100% of the Group (2016:100%).
(b) Patents fee
The Company renewed the contract on 20 August 2016 for 10 years. The annual patents usage fee payable by the Company to Changyu Group Company remained RMB 50,000.For the year ended 31 December 2017, the patents usage fee payable to Changyu Group Company is amounted to RMB 50,000(2016:RMB 50,000).
During 2017, patent fee paid to related company accounted for100% of the Group (2016:100%).
(c) Sales of fixed assets
As at 28 December 2017, fixed assets sold by the Group to Zhongya Pharmaceutical amounted to RMB 3,934,643 (31 December 2016: 411,407), accounting for54.0% (31 December 2016:34.0%).
(4) Remuneration of the management
2017 2016 RMB RMB Remuneration of the management 10,309,409 9,166,918__________________ ________________ 5. Balance due from/to related parties
(1) Balance due from related parties
Closing balance Opening balance Accounts receivable Balance Provision Balance Provision RMB RMB RMB RMB Zhongya Pharmaceutical 8,134,150 - 3,913,997 - Shen Ma Packing. 1,342,348 - 50,700 - Window of the Wine City 3,196,095 - 1,833,273 - Wine Culture Museum 34,280 - 876,724 -_________ _______ ________ _______ 12,706,873 - 6,674,694 -__________________ ______________ ________________ ______________
The above amounts due from related parties are unsecured and interest-free.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
5. Balance due from/to related parties - continued
(2) Balance due to related parties
Accounts payable Closing balance Opening balance RMB RMB Shen Ma Packing 52,403,056 59,058,023 Zhongya Pharmaceutical 2,051,991 4,328,184 Wine Culture Museum 2,040,860 3,038,520 Window of the Wine City 1,485,766 619,578_________ _________ Total 57,981,673 67,044,305__________________ __________________ Other payable Closing balance Opening balance RMB RMB Royalty fee payable to parent company 77,208,929 78,572,540__________________ __________________ The above amounts due to related parties are unsecured and interest-free.
XI. COMMITMENT
1. Important commitments
(1) Capital commitments
Closing balance Opening balance RMB'000 RMB'000 Capital commitment for
purchasing non-current assets 1,246,506 1,508,310________________ ________________ (2) Operating lease commitment
As lessee
Significant operating lease: Total future minimal lease payments under non-cancelable contract with lessor are as follow:
Closing balance Opening balance RMB'000 RMB'000 Within 1 year 32,236 44,631 1 to 2 years 19,116 20,262 2 to 3 years 11,943 12,836 3 years and above 95,342 36,533__________ __________ 158,637 114,262____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XI. COMMITMENT - continued
1. Important commitments - continued
(2) Operating lease commitment - continued
As lessor
Closing balance Opening balance RMB'000 RMB'000 Within 1 year 1,627 - 1 to 2 years 1,627 - 2 to 3 years 1,627 - 3 years and above 2,440 -__________ __________ 7,321 -____________________ ____________________ 2. Contingent liability
The Group do not have any significant contingent liabilities as at balance sheet date.
XII. POST BALANCE SHEET DATE EVENT
1. Profit appropriation
According to the board of the director resolution raised on 19 April 2018, the Company proposed a cash dividend of RMB 5.0 (including taxes) for every 10 shares in respect of 2017 based on the issued shares of 685,464,000. The aggregate amount of cash dividend is RMB 342,732,000. The resolution is to be approved by the annual general meeting.
2． Description of other events after the balance sheet date
(1) Business combinations not under common control
Timing of equity acquisition Proportion Acquisition Determination basis Name of acquiree Acquisition date
acquisition cost acquired(%) approach of acquisition date Kilikanoon Estate Pty Ltd
Finish payment and ("Australia Kilikanoon 18 January 2018 AUD 20,605,000 80% purchase 18 January 2018
acquire equity Chateau")
Other detail information:
The Company using AUD 20,605,000 (translated as RMB 105,926,184) to acquire the Australia Kilikanoon Chateau's80% equity interest according to the< Equity settlementagreement> signed on 5 December 2017. The Company had completed the prerequisite for the transfer of all shares, and get the control over financial and operating decisions of Australia Kilikanoon Chateau.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XII. POST BALANCE SHEET DATE EVENT - continued
2. Description of other events after the balance sheet date - continued
(1) Business combinations not under common control- continued
Consideration and Goodwill
Consideration
Australia Kilikanoon Chateau RMB Cash 105,926,184 Total consideration 105,926,184 Less: acquired provisional value of net assets 70,131,290___________ The provisional goodwill 35,794,894______________________ Recognised assets and liabilities of mergee at acquisition date
Australia Kilikanoon Chateau Provisional value Book value at acquisition date at acquisition date RMB RMB Assets
Cash and bank 1,359,765 1,359,765 Accounts receivable 10,366,281 10,366,281 Prepayments 237,174 237,174 Other receivables 182,667 182,667 Inventories 69,612,312 57,946,312 Available-for-sale financial assets 5,053 5,053 Fixed assets 49,029,999 38,696,709 Intangible assets 16,417,886 7,461,624____________ ____________ Total assets 147,211,137 116,255,585________________________ ________________________ Liabilities
Short-term borrowings 1,282,550 1,282,550 Accounts payable 6,198,846 6,198,846 Employee benefits payable 876,987 876,987 Taxes payable 1,789,093 1,789,093 Long-term borrowings 43,497,119 43,497,119 Deferred tax liabilities 5,902,429 -____________ ____________ Total liabilities 59,547,024 53,644,595________________________ ________________________ Net assets 87,664,113 62,610,990Less：Non-controlling interests 17,532,823 12,522,198____________ ____________
Acquired net assets 70,131,290 50,088,792
________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XII. POST BALANCE SHEET DATE EVENT - continued
2. Description of other events after the balance sheet date - continued
(1) Business combinations not under common control- continued
In order to calculate the fair value of Australia Kilikanoon Chateau's assets and liabilities, the Company has engaged asset appraisal agency to assess. Because as of this annual report issue date, the assessment works haven't finished, the fair value of Australia Kilikanoon Chateau's assets and liabilities are recognized as an estimated amount based on the management's booking value on the acquisition day. Accordingly, the Group recognized estimated goodwill RMB 35,794,894. The above asset appraisal work will be finished within 12 months after the acquisition date, and the above booking value of the above assets, liabilities and goodwill will be adjusted (if any) based on the appriaisal result.
(2) External guarantee
A loan of AUD 12,000,000 (translated as RMB 71,000,000) for Australia Kilikanoon Chateau is guaranteed by the Company through offshore financing against domestic guamntee method and get a financing guarantee within the Company domestic bank's line of credit. The guarantee will be effective from 17 January 2018 and will expire on 15 January 2019.
XIII. OTHER SIGNIFICANT EVENTS
Segment report
The Group is principally engaged in the production and sales of wine, brandy, and champagne in China, France, Spain and Chile. In accordance with the Group's internal organization structure, management requirements and internal reporting system, the Group's operation is divided into four parts: China, Spain France and Chile. The management periodically evaluates segment results, in order to allocate resources and evaluate performances. In 2017, more than91.2% revenue and more than97.9% profit derived from China, and more than92.5% non-current assets are located in China. Therefore the Group does not need to disclose additional segment report information.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS
1. Cash and bank
Closing balance Opening balance RMB RMB Cash 5,280 6,631 Bank balance 501,208,996 243,708,493 Other currency fund 57,960,190 25,744,936____________ __________ Total 559,174,466 269,460,060________________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2017, the balance of restricted cash of the Company is RMB 2,645,410 (31 December 2016: RMB 2,711,926), which is the Company's housing fund.
As at 31 December 2017, other currency fund of the Company include: deposit of RMB 57,946,190 for letter of credit (31 December 2016: RMB 25,694,735). and deposit of RMB 14,000 for entity card (31 December 2016: RMB 50,201).
As at 31 December 2017, the Company's term deposits with original maturity from three months to six months when acquired is RMB 5,000,000 (31 December 2016: RMB 3,000,000 ) with interest rate1.95%.
2. Notes receivable
(1) Categories of notes receivable
Closing balance Opening balance RMB RMB Bank acceptances 41,645,203 1,114,200__________________ __________________ (2) Pledged notes receivable
As of 31 December 2017, there was no pledged notes receivable (31 December 2016: Nil). (3) Notes endorsed by the Group to other parties which are not yet due at the end of the period Closing balance Opening balance RMB RMB Bank acceptances 72,316,589 29,199,486____________________ __________________ As at 31 December 2017, notes endorsed by the Company to other parties which are not yet due at the end of the period is RMB 72,316,589 (31 December 2016: RMB 29,199,486). It is for the payment to suppliers. The Company believes that due to bank good reputation, the risk of maturity cannot be cashed is very low, these notes receivable ownership of the risks and rewards have been transferred to the supplier, therefore confirm the termination of the endorsement notes receivable. If bank is unable to settle the notes on maturity, according to the relevant laws and regulations of China, the Group would undertake limited liability for the notes.
(4) Notes receivable were reclassified as accounts receivable due to the default of drawer
As at 31 December 2017, there was no notes receivable were reclassified as accounts receivable due to the default of drawer (31 December 2016: Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Accounts receivable
(1) Disclosure of accounts receivable by categories:
Closing balance Opening balance
Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying Amount Amount Proportion Amount Proportion Amount Amount Proportion Amount Proportion Amount RMB (%) RMB (%) RMB RMB (%) RMB (%) RMB Accounts receivable
for which bad debt
provision has been
assessed individually____7__,8__05__,33__3__10__0.__0 ____-________-__________7,8__05__,3__33____3__,3__26__,68__3__10__0.__00 ____-________-________3__,3__26__,68__3 The normal credit term of trade receivables is one month. The trade receivables are interest free. The aging analysis is as follows:
Closing balance Opening balance RMB RMB Within 1 year 7,805,333 3,326,683__________________ ________________ (2) Provision, reversals and collections during the current period:
As at 31 December 2017, there was no provision provided for trade receivables (31 December 2016: Nil). The Company did not provide, reverse or write off any provision during 2017 (31 December 2016: Nil).
(3) The balance of accounts receivable at the end of the year
Relationship Proportion of with the Group Amount Aging total receivables Zhongya Pharmaceutical Other related parties 6,752,890 Within 1 year 86.5 ShenMa Packing Other related parties__1_,0_5_2_,4_4_3 Within 1 year __13_._5____7__,8__0__5__,3__3__3 __1__00__.__0 4. Prepayments
(1) The aging analysis is as follows:
Closing balance Opening balance Amount Proportion Amount Proportion RMB % RMB % Within 1 year 99,673 100.0 702,647 100.0____________ ________ ____________ ________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
4. Prepayments - continued
(2) Top three entities with the largest balances of prepayments:
Percentage of Reason for total advances Relationship Amount being to suppliers with the Group RMB Aging outstanding % Yantai Bohong Gongmao Co., Ltd. Third party 50,000 Within 1 year Goods not received 50.2 Xiangshan Jinxing Soft Machine
Factory Third party 39,880 Within 1 year Goods not received 40.0 Shanghai Juwei Machinery Co.,Ltd. Third party ____9_,7_9_3 Within 1 year Goods not received___9._8______9__9__,6__7__3 __1__0__0.__0 5. Dividend receivables
(1) Dividend receivables
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Within 1 year
Including: Sales Company 402,666,078 577,813,022 (577,883,216) 402,595,884 Wines Sales 60,351,018 53,461,029 (113,812,047) - Xinjiang Tianzhu - 48,620,373 (48,620,373) - Changyu Chateau 11,370,607 - (11,370,607) - Beijing Chateau - 87,000,000 (87,000,000) - Shihezi Chateau 5,842,003 24,076,746 (25,018,711) 4,900,038 Jingyang Sales - 4,000,000 (4,000,000) - Jingyang Wine - 2,000,000 (2,000,000) - Atrio 1,475,343 1,906,735 (3,382,078) - More than 1 year
Including: Pioneer International __5_0_,1_1_4_,0_6_4 _________-_ __(_5_0_,1_1_4_,0_6_4) ________-_ Total __5__3__1__,8__1__9__,1__1__3 ____7__9__8__,8__7__7__,9__0__5 ____(9__2__3__,2__0__1__,0__9__6) __4__0__7__,4__9__5__,9__2__2 6. Other receivables
(1) Disclosure of other receivables by categories:
Closing balance Opening balance
Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying Amount Amount Proportion Amount Proportion Amount Amount Proportion Amount Proportion Amount RMB (%) RMB (%) RMB RMB (%) RMB (%) RMB Other receivables for
which bad debt
provision has been
assessed individually__5__92__,2__74__,07__5__1__00__.0 ______-__ ____-______59__2,2__74__,0__75__3,5__82__,5__32__,86__2__1__00__.0 ________-______-____3,5__82__,5__32__,86__2
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Other receivables - continued
(1) Disclosure of other receivables by categories: - continued
The aging analysis is as follows:
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying Balance provision amount Balance provision amount Amount Proportion Amount Amount Amount Proportion Amount Amount RMB % RMB RMB RMB % RMB RMB Within 1 year 589,011,103 99.5 - 589,011,103 2,138,473,742 59.7 - 2,138,473,742 1 to 2 years 3,006,488 0.5 - 3,006,488 1,443,856,430 40.3 - 1,443,856,430 2 to 3 years 53,794 - - 53,794 37,123 - - 37,123 Over 3 years ____2_02_,6_9_0___-_______-_____2_0_2,_69_0____1_6_5,_56_7____-_____-_____1_65_,5_6_7____59__2__,2__74__,0__7__5__1__00__.0______________-______59__2__,2__74__,0__7__5__3,__58__2__,5__32__,8__6__2__1__0__0__.0__________-____3,__58__2__,5__32__,8__6__2 (2) Accrual, reversal and written-off during the current period
No bad debt accrued or reversed in 2017 (2016:Nil.).
(3) Other receivables written off current year
No other receivables written in 2017 (2016: RMB 7,199,521).
(4) Disclosure of other receivables by nature
Closing balance Opening balance RMB RMB Receivable from subsidiary 589,897,407 3,580,805,532 Receivable deposit 2,500 8,000 Others 2,374,168 1,719,330____________ ____________ 592,274,075 3,582,532,862________________________ ________________________ (5) Top five entities with the largest balances of other receivables
As at 31 December 2017, the particulars of top five other receivables are as follows:
Proportion of total Nature Amount Aging prepayments RMB % Sales Company Internal balance 342,506,785 Within 1 year 57.8R&D Centre Internal balance 182,570,758 Within 1 year 30.8 Pioneer International Internal balance 13,162,463 Within 1 year 2.2 Ding Luo Te Chateau Internal balance 11,426,640 Within 1 year 1.9 Kylin Packaging Internal balance ____7_,8_7_3_,4_0_9 Within 1 year _1_._3____5__5__7__,5__4__0__,0__5__5 __94__.__0
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
7. Inventories
Closing balance Opening balance
Net carrying Net carrying Balance Provision amount Balance Provision amount RMB RMB RMB RMB RMB RMB Raw material 1,841,216 - 1,841,216 4,190,928 - 4,190,928 Work in progress 307,104,357 - 307,104,357 747,521,822 - 747,521,822 Finished goods __3_9_,0_9_6_,4_8_0____-___ __3_9_,0_9_6_,4_8_0 __4_1_,0_1_9_,6_6_8____-___ __4_1_,0_1_9_,6_6_8__3__4__8__,0__4__2__,0__5__3________-
______
__3__4__8__,0__4__2__,0__5__3 __7__9__2__,7__3__2__,4__1__8________-
______
__7__9__2__,7__3__2__,4__1__8 8. Long-term equity investments
2017 Cost Opening balance for the year Closing balance Share holding Voting power for the year RMB RMB RMB RMB % % RMB Cost Method
Xinjiang Tianzhu (a) 60,000,000 60,000,000 - 60,000,000 60 100 48,620,373 Kylin Packaging 23,176,063 23,176,063 - 23,176,063 100 100 - Changyu Chateau (a) 28,968,100 28,968,100 - 28,968,100 70 100 - Pioneer International (b) 3,500,000 3,500,000 - 3,500,000 70 100 - Ningxia Growing 36,573,247 1,000,000 35,573,247 36,573,247 100 100 - National Wines 2,000,000 2,000,000 - 2,000,000 100 100 - Ice Chateau (a) 30,440,500 30,440,500 - 30,440,500 51 100 - Beijing Chateau (a) 579,910,000 77,000,000 502,910,000 579,910,000 90 100 87,000,000 Sales Company 7,200,000 7,200,000 - 7,200,000 100 100 577,813,022 Langfang Sales (b) 100,000 100,000 - 100,000 10 100 - Langfang Castel (a) 19,835,730 19,835,730 - 19,835,730 39 100 - Wine Sales 4,500,000 4,500,000 - 4,500,000 100 100 53,461,029 Shanghai Sales(b) 300,000 300,000 - 300,000 30 100 - Beijing Sales 850,000 850,000 - 850,000 100 100 - Jingyang Sales (b) 100,000 100,000 - 100,000 10 100 4,000,000 Jingyang Wine (b) 900,000 900,000 - 900,000 90 100 2,000,000 Ningxia Wine 222,309,388 1,000,000 221,309,388 222,309,388 100 100 - Ningxia Chateau 443,463,500 2,000,000 441,463,500 443,463,500 100 100 - Dingluote Chateau (b) 212,039,586 80,000,000 132,039,586 212,039,586 65 100 - Shihezi Chateau 809,019,770 550,000,000 259,019,770 809,019,770 100 100 24,076,746 Changan Chateau 803,892,258 20,000,000 783,892,258 803,892,258 100 100 -R&D Centre (a) 500,000,000 500,000,000 - 500,000,000 63 100 - Huanren Wine 21,700,000 11,000,000 10,700,000 21,700,000 100 100 - Grape Wine Sales Co., 5,000,000 - - - 100 100 - Francs Champs 236,025,404 220,320,604 15,704,800 236,025,404 100 100 - Atrio 190,150,544 190,150,544 - 190,150,544 75 75 1,906,735 IWCC __27_4,_24_8,_11_4 ______-___27_4,_24_8,_11_4 __27_4,_24_8,_11_4 85 85 ______-___4,__51__6,__20__2,__20__4 __1,__83__4,__34__1,__54__1__2,__67__6,__86__0,__66__3 __4,__51__1,__20__2,__20__4 ____79__8,__87__7,__90__5 (a) The Company has100% voting power of those subsidiaries by the way of indirect controlling, referring to Note VIII-1.
(b) The Company has100% voting power of these subsidiaries by the way of indirect controlling through wholly owned subsidiaries.
During 2017, there was no significant restriction on the remittance of fund from the investees to the Company.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Fixed assets
(1) Fixed assets
Buildings Machinery Motor vehicles Total RMB RMB RMB RMB I. Total original carrying amount
1. Opening balance 302,370,711 577,087,188 12,762,342 892,220,241 2. Increase
(1) Purchase 1,316,621 15,819,684 1,083,509 18,219,814 (2) CIP transfer - 500,000 - 500,000 3. Decrease
(1) Disposal - (117,837,238) (3,716,538) (121,553,776) (2) Transfer to Investment
property (VI-11) _(_3_8_,3_4_7_,2_8_3) ________-_ ________-_ _(_3_8_,3_4_7_,2_8_3) 4.Closing balance _2_6_5_,3_4_0_,0_4_9 _4_7_5_,5_6_9_,6_3_4 __1_0_,1_2_9_,3_1_3 _7_5_1_,0_3_8_,9_9_6 II. Total accumulated depreciation
1. Opening balance 121,589,403 415,743,718 7,405,703 544,738,824 2. Increase
(1) Additions 9,306,775 22,095,168 799,234 32,201,177 3. Decrease
(1) Disposal - (91,425,354) (3,337,868) (94,763,222) (2) Transfer to Investment
property (VI-11) _(_1_9_,2_8_8_,6_8_4) ________-_ ________-_ _(_1_9_,2_8_8_,6_8_4) 4. Closing balance _1_1_1_,6_0_7_,4_9_4 _3_4_6_,4_1_3_,5_3_2 ___4_,8_6_7_,0_6_9 _4_6_2_,8_8_8_,0_9_5 III. Total net carrying amount
1. Closing net carrying amount __1__5__3__,7__3__2__,5__5__5 __1__2__9__,1__5__6__,1__0__2 ______5__,2__6__2__,2__4__4 __2__8__8__,1__5__0__,9__0__1 2. Opening net carrying amount __1__8__0__,7__8__1__,3__0__8 __1__6__1__,3__4__3__,4__7__0 ______5__,3__5__6__,6__3__9 __3__4__7__,4__8__1__,4__1__7 As at 31 December 2017, fixed assets with restricted ownership is RMB 36,349,289(December 31, 2016:RMB 27,145,520), referring to Note VI-50 for details.
As at 31 December 2017, net amount of fixed assets classified as non-current assets held for sale was RMB 2,000,197, and the Company has no temporary idle fixed assets and fixed assets leased in under finance leases.
(2) Fixed assets through operating lease
Amount RMB Machinery 265,471________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2017, buildings without property certificate are asfollows：
Reasons why certificates of title have Amount not been obtained RMB
Fermentation centre office,
experiment building and workshop 3,824,105 Processing____________________
10. Construction in progress
(1) Construction in progress
Closing balance Opening balance RMB RMB Reconstruction of boiler heating systems 3,556,349 500,000 Drainage project 3,200,000 -________ ________ 6,756,349 500,000________________ ________________ (2) Current year movement on important construction:
||||||||||
|-|-|-|-|-|-|-|-|-|
||Budget|Openingbalance|Addition|Transferto PPE|Closingbalance|Accumulatedexpenditure/budget|The progress ofconstruction|Financed by|
||RMB|RMB|RMB|RMB|RMB|%|||
|Reconstructio n of boilerheating systems|13,000,000|500,000|3,556,349|(500,000)|3,556,349|88.8|95.0|Self-raised|
|Drainage project|3,200,000|-|3,200,000|-|3,200,000|100.0|90.0|Self-raised|
|||500,000|6,756,349|(500,000)|6,756,349||||

There was no interest capitalized in construction in progress in 2017.
(3) As at 31 December 2017, there was no provision was made for the construction in process, and no provision was made (December 31, 2016:Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
11. Bearer biological assets
Bearer biological assets are grapetrees，which measured in cost method.
Immature Mature
biological assets biological assets Total RMB RMB RMB I. Total original carrying amount
1. Opening balance 54,866,214 79,052,580 133,918,794 2. Increase
(1) Cultivated increase 3,317,293 - 3,317,293 (2) Transfer to mature assets
from immature assets (51,876,544) 51,876,544 -__________ ___________ __________ 3. Closing balance 6,306,963 130,929,124 137,236,087__________ ___________ __________ II. Total accumulated depreciation
1. Opening balance - 10,882,101 10,882,101 2. Increase
(1) Additions - 6,781,447 6,781,447__________ ___________ __________ 3. Closing balance - 17,663,548 17,663,548__________ ___________ __________ III. Total net carrying amount
1. Closing net carrying amount 6,306,963 113,265,576 119,572,539____________________ ______________________ ____________________ 2. Opening net carrying amount 54,866,214 68,170,479 123,036,693____________________ ______________________ ____________________ As at 31 December 2017, there is no biological asset with ownership restricted(December 31, 2016:Nil).
As at 31 December 2017, there is no indication that biological assets may be impaired, and no provision was made. (December 31, 2016:Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
12. Intangible assets
Intangible assets
Land use right RMB I. Total original carrying amount
Opening and closing balance 96,594,766__________ II. Total accumulated depreciation
1. Opening balance 24,592,394 2. Increase
Additions 2,379,153__________ 3. Closing balance 26,971,547____________________ III. Total net carrying amount
1. Closing net carrying amount 69,623,219____________________ 2. Opening net carrying amount 72,002,372____________________ As at 31 December 2017, Intangible assets with restricted ownership are RMB 52,720,912 (December 31, 2016:RMB 11,220,838), Please refer to Note VI-50 in detail.
13. Deferred tax assets
Recognised deferred tax assets not presented at the net amount after offset
Closing balance Opening balance
Item
Deductible Deferred Deductible Deferred temporary difference tax assets temporary difference tax assets RMB RMB RMB RMB Unrealized profit from intra
7,163,828 1,790,957 5,333,339 1,333,335 - company transactions
Unpaid bonus 35,822,735 8,955,683 35,607,406 8,901,851 Retirement benefit 10,057,113 2,514,278 10,754,547 2,688,637 Asset impairment provision - - 10,000,000 2,500,000 Deductable losses 45,526,327 11,381,582 24,544,964 6,136,241 Deferred income 16,581,627 4,145,407 21,700,753 5,425,188 115,151,630 28,787,907 107,941,009 26,985,252 14. Other non-current assets
Closing balance Opening balance RMB RMB Receivables from subsidiaries 3,718,674,166 2,617,457,460________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
15. Short-term borrowings
Closing balance Opening balance RMB RMB Credit loans 600,000,000 500,000,000____________________ ____________________ As at 31 December 2017, credit loans detail are as follows:
Loan bank Loans amount Loan term Interest rate in contract Interest rat RMB % % ICBC Yantai branch 200,000,000 13 June 2017– 25 May 2018 1 year LPR-0.39 3.92 ICBC Yantai branch 200,000,000 22 June 2017– 08 June 2018 1 year LPR-0.39 3.92 ICBC Yantai branch _2_0_0_,0_0_0_,0_0_0 22 June 2017– 20 June 2018 1 year LPR-0.39 3.92__6__0__0__,0__0__0__,0__0__0
16. Accounts payable
The aging analysis of accounts payable are as follows
Closing balance Opening balance RMB RMB Within 1 year 97,036,146 246,743,228 1 to 2 years 556,883 825,629 2 to 3 years 240,095 -__________ __________ 97,833,124 247,568,857____________________ ____________________ 17. Advances from customers
The aging analysis of advances from customers are as follows
Closing balance Opening balance RMB RMB Within 1 year - 6,000,000 1 to 2 years 6,000,000 -__________ __________ 6,000,000 6,000,000____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
18. Employee benefits payable
(1) Employee benefits payable
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Short-term salaries and welfare 60,058,214 75,267,441 (75,274,692) 60,050,963 Post-demission benefits
- predetermined provision plan - 8,919,067 (8,919,067) - Termination benefit __1_0_,7_5_4_,5_4_7 ___5_,0_0_2_,8_5_6 __(_5_,7_0_0_,2_9_0) __1_0_,0_5_7_,1_1_3____7__0__,8__1__2__,7__6__1 ____8__9__,1__8__9__,3__6__4 __(__8__9__,8__9__4__,0__4__9) ____7__0__,1__0__8__,0__7__6 (2) Short-term salaries and welfare
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Salaries and bonus 59,990,567 60,428,268 (59,724,215) 60,694,620 Staff benefit 193,400 6,898,548 (7,054,775) 37,173 Staff welfare - 4,553,096 (4,553,096) - Includes:
Medical insurance - 3,362,111 (3,362,111) - Injury insurance - 842,385 (842,385) - Maternity insurance - 348,600 (348,600) - Housing fund - 3,082,393 (3,082,393) - Union fee and education fee ___2_,3_7_3_,6_5_0 ____3_8_3_,4_3_5 ____(8_6_0_,2_1_3) ___1_,8_9_6_,8_7_2 Total __6_2_,5_5_7_,6_1_7 __7_5_,3_4_5_,7_4_0 _(_7_5_,2_7_4_,6_9_2) __6_2_,6_2_8_,6_6_5 Less: Non-current liabilities ___2_,4_9_9_,4_0_3 ___2_,5_7_7_,7_0_2 Short-term salaries and welfare ____6__0__,0__5__8__,2__1__4 ____6__0__,0__5__0__,9__6__3 (3) Predetermined provision plan
Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Pension - 8,595,215 (8,595,215) - Unemployment insurance ____-_ ____3_2_3_,8_5_2 ____(3_2_3_,8_5_2) ____-_________-
__
______8__,9__1__9__,0__6__7 ____(__8__,9__1__9__,0__6__7) ________-__ The Company participates in pension insurance and unemployment insurance plans established by government institution. According to those plans, the Company pays pension and unemployment insurance each month on the basis of18% and0.7% last period salary respectively. Apart from these monthly expenses, the Company does not bear any further payment obligation. This year the Company should pay RMB 8,595,215and RMB 323,852 (2016: RMB 9,488,517and RMB 738,525) respectively into pension insurance and unemployment insurance. As at 31 December 2017, the Company does not have unpaid pension and unemployment insurance (31 December
2016: Nil) which is due to the pension insurance and unemployment insurance plan and not paid
at the end of the reporting period.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
19. Taxes payable
Closing balance Opening balance RMB RMB Value added tax - 2,199,892 Consumption tax 6,450,962 18,887,846 Corporation income tax 26,069 211,105 Urban land use tax 784,627 802,207 Individual income tax 6,630,393 7,289,253 City construction tax 345,138 1,941,063 Property tax 82,669 270,492 Others 249,832 1,664,367__________ _________ 14,569,690 33,266,225____________________ __________________ 20. Other payables
(1) Natures of other payables are as follows
Closing balance Opening balance RMB RMB Payable to subsidiaries 534,530,323 359,161,772 Payables for equipment and construction 8,538,687 2,772,304 Deposits from suppliers 183,000 589,300 Others 1,461,162 5,786,986____________ ____________ 544,713,172 368,310,362________________________ ________________________ (2) As at 31 December 2017, there were no significant outstanding balance aged over than one year. 21. Non-current liabilities due within one year
Closing balance Opening balance RMB RMB Long-term borrowings due within one year - 29,227,200________________________ ________________________ 22. Capital reserve
2017 Opening balance Increase Decrease Closing balance RMB RMB RMB RMB Share premium __5__5__7__,2__2__2__,4__5__4 ______-__
____
______-__
____
__5__5__7__,2__2__2__,4__5__4
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
23. Operating income and costs
Operating income is analysed as follows:
2017 2016 RMB RMB Principal operating income 1,310,443,414 1,415,104,946 Other operating income 813,440 -____________ ____________ 1,311,256,854 1,415,104,946________________________ ________________________ Operating cost is analysed as follows:
2017 2016 RMB RMB Principal operating cost 1,165,362,798 1,152,076,500 Other operating cost 590,610 -____________ ____________ 1,165,953,408 1,152,076,500________________________ ________________________ 24. Taxes and surcharges
2017 2016 RMB RMB Consumption tax 53,236,697 86,244,674 City construction tax 10,190,867 8,665,672 Education fee and surcharges 5,817,116 6,189,856 Property tax 2,267,901 1,229,545 Land use tax 3,168,559 2,534,985 Stamp tax 603,461 315,520 Others 1,285,624 1,288,965__________ __________ 76,570,225 106,469,217____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. General and administrative expense
2017 2016 RMB RMB Salary and employee benefit 38,430,904 34,475,802 Maintenance fee 6,192,525 8,755,646 Leasing expenses 2,276,896 6,525,996 Leasing expenses 3,881,091 5,041,108 Depreciation 4,286,164 4,266,502 Property insurance fees 3,080,521 3,594,451 Greening fee 394,604 2,779,497 Amortization 2,695,110 2,333,153 Service fee 9,194,005 2,008,619 Other taxes 39,285 1,952,995 Shuttle bus 1,719,660 1,914,130 Security and sanitation fee 941,434 1,727,077 Postal charges 74,354 1,689,281 Travelling expenses 527,464 1,657,767 Others 6,959,027 7,240,113__________ __________ 80,693,044 85,962,137____________________ ____________________ 26. Financial Expense
2017 2016 RMB RMB Interest expense from occupation of funds (14,912,649) - Interest income (3,689,550) (3,704,355) Exchange loss 1,040,832 10,474,409 Interest expenses 17,414,181 26,658,795 Bank charges 784,754 797,603__________ __________ 637,568 34,226,452____________________ ____________________ 27. Investment income
2017 2016 RMB RMB Long-term equity investment income accounted
for by using the cost method 798,877,905 1,798,129,418________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
27. Investment income - continued
Among the long-term equity investment income accounted for by using cost method, the investees with investment income accounting for more than5% of the Company's total profit before tax are as follows:
Investees 2017 2016 RMB RMB Sales Company 577,813,022 1,515,829,419 Beijing Chateau 87,000,000 20,000,000 Wine Sales 53,461,029 82,388,043 Xinjiang Tianzhu 48,620,373 46,502,728____________ ____________ 766,894,424 1,664,720,190________________________ ________________________ As at 31 December 2017 and at 31 December 2016, there are no significant restriction on the remittance of investment income to the Company.
28. Supplement to cash flow statement
(1) Cash flows from operating activities calculated by adjusting the net profit:
2017 2016 RMB RMB Net profit 793,598,010 1,830,574,470 Add: Depreciation of investment properties 590,610 - Depreciation of fixed assets 32,201,177 35,112,571 Amortization of intangible assets 2,379,153 2,379,153 Amortization of biological assets 6,781,447 3,257,386 Loss(Gains)on disposal of property, plant and equipment 29,625 (111,362) Finance expenses 18,614,396 34,300,141 Investment income (798,877,905) (1,798,129,418) Decrease/(increase) in deferred tax assets (1,802,655) 10,953,440 Decrease/(increase) in inventories 444,690,365 (64,559,311) Increase in trade receivables 103,406,898 130,012,325 Decrease in trade payables (3,541,352) (637,852,493)____________ ____________ Net cash flows from operating activities 598,069,769 (454,063,098)________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
28. Supplement to cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payaments 2017 2016 RMB RMB Change the claim on subsidiaries into Long-term
equity investments 2,386,907,749 400,000,000 Increase the investment in subsidiaries
with bank acceptances 96,345,678 523,977,060 Recover the investment in subsidiaries
with bank acceptances (96,345,678) (523,977,060)____________ ____________ 2,386,907,749 400,000,000________________________ ________________________ 29. Cash and cash equivalents
2017 2016 RMB RMB Closing balance of cash and bank 559,174,466 269,460,060 Less:
Restricted bank deposits 2,645,410 2,711,926 Restricted other monetary assets 57,960,190 25,744,936 Deposit with a period of over three months 5,000,000 3,000,000__________ __________ Closing balance of cash and cash equivalents 493,568,866 238,003,198____________________ ____________________ 2017 2016 RMB RMB Cash and bank 493,568,866 238,003,198 Including: Cash and bank 5,280 6,631 Bank deposits on demand 493,563,586 237,996,567__________ __________ Closing balance of cash and cash equivalents 493,568,866 238,003,198____________________ ____________________ 30. Related party transactions
(1) Purchase of materials
2017 2016 RMB RMB Subsidiaries 352,495,622 397,141,028 Other related parties 82,394,392 109,448,605__________ __________ 434,890,014 506,589,633
____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
30. Related party transactions - continued
(2) Sales of goods
2017 2016 RMB RMB Subsidiaries 1,302,056,254 1,399,002,536 Other related parties 9,200,600 16,102,410____________ ____________ 1,311,256,854 1,415,104,946________________________ ________________________ (3) Sales of Fixed assets
2017 2016 RMB RMB Subsidiaries 47,843,203 2,971,880 Other related parties 3,934,643 411,407____________ ____________ 51,777,846 3,383,287________________________ ________________________ (4) Interest income from occupation of funds
2017 2016 RMB RMB Subsidiaries 14,912,649 -________________________ ________________________ (5) Lease income
2017 2016 RMB RMB Subsidiaries 813,440 -________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
31. Receivables and payables to related parties
(1) Trade receivables
Trade receivables Closing balance Opening balance Balance Bad debts provision Balance Bad debts provision RMB RMB RMB RMB Other related parties ____7,__8__0__5,__3__33 ________-
______
____3__,__32__6__,__68 3 ________-______ Other receivables Closing balance Opening balance Balance Bad debts provision Balance Bad debts provision RMB RMB RMB RMB Subsidiaries ____5__8__9__,8__9__7__,4__0__7 ________-
______
__3__,5__8__0__,8__0__5__,5__3__2 ________-______ Other non-current assets Closing balance Opening balance Balance Bad debts provision Balance Bad debts provision RMB RMB RMB RMB Subsidiaries __3__,7__1__8__,6__7__4__,1__6__6 ________-
______
__2__,6__1__7__,4__5__7__,4__6__0 ________-______ The above receivables due from related parties are unsecured, have no interest or fixed date of repayment.
(2) Trade payables
Trade Payables Closing balance Opening balance RMB RMB Other related parties 29,145,914 46,834,283__________________ __________________ Other payables Closing balance Opening balance RMB RMB Subsidiaries 534,530,323 359,161,772____________________ ________________________ The above payables due to related parties are unsecured, have no interest or fixed date of repayment.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2017
I. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2017 RMB Corporate income tax effect (222,586) Government grants credited in profit and loss
(except for those recurring government grants
that are closely related to the Group's operation
and have proper basis of calculation) 47,638,384 Other non-operating income and expense 13,999,251 Corporate income tax effect (15,523,424) The impact of non-controlling interests' equity (292,441)__________ 45,599,184____________________ The Company's extraordinary profit and loss items are recognized in accordance with the regulations of the "public offering of securities of the Company Disclosure Explanatory Notice No. 1 - non-recurring profit and losses" (SFC[2008] No. 43).
All non-operation income and non-operation expenses are non-operating profit in 2017. Please refer to Note VI-44 and VI-45.
II. RETRUN ON EQUITY ("ROE") AND EARNINGS PRE SHARE ("EPS")
The Company's ROE and EPS are calculated in accordance with the CSRC regulations of the "Information Preparing and Disclosure Rules of Public Company No. 9 - calculation and disclosure of ROE and EPS" (Revised 2010).
Weighted average
2017 ROE Basic EPS% RMB Net profit attributable to shareholders of the Company 12.14 1.51 Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 11.60 1.44__________ ________ The Company did not have any potential dilutive shares.
Weighted average
2016 ROE Basic EPS% RMB Net profit attributable to shareholders of the Company 12.55 1.43 Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 12.03 1.37__________ ________
The Company did not have any potential dilutive shares.