YANTAI CHANGYU PIONEER WINE
COMPANY LIMITED
Financial Statements and Auditor's Report
For the year ended 31 December 2018
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
FINANCIAL STATEMENTS AND AUDITOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
CONTENTS PAGE AUDITOR'S REPORT 1 - 5 THE CONSOLIDATED BALANCE SHEET 6 - 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 - 107
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (19) No. P02452 (Page 1 of 5) 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 2018, 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 2018, 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 year. 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 (19) No. P02452 (Page 2 of 5) 3. Key Audit Matters - continued
Impairment assessment of certain long-term assets
1. Item description
As stated in Note IV “Impairment of long-term assets”, the Production of Yantai Changyu Pioneer Wine Company Limited Research and Development Co., Ltd.("R&D Centre"), subsidiary of the Company as well as a new main production base of the Company, accounts for more than60% of theGroup’s production in 2018. As at 31 December 2018, the book values of long-term assets including fixed assets, construction in progress and intangible of"R&D Centre amounted to RMB 3.5 billion, accounting for26.6% of the total assets in the consolidated financial statements, which exerts significant influence on the consolidated financial statements. As there is little space for the development of the domestic wine market, the management of the Company faces great operating pressures with certain risks of impairment of related long-term assets. The management performs the impairment test by determining if the recoverable amount is less than the book value of long-term assets and determines the recoverable amount based on the present value of expected future cash flows. In the estimate of the present value of future cash flows, the management is required to make significant judgements in the assumptions including the sales growth rate, future selling price, production cost, operating expenses and discount rate. For the above reasons, we identified the valuation of the impairment of long-term assets 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) Test and evaluate the effectiveness of the design and implementation of the internal control related to the valuation of the impairment of long-term assets;
(2) Review and evaluate the reasonableness of key assumptions and judgements used in the estimate of the present value of expected future cash flows in the impairment test based on the historical records of the Company and our understanding of the business and industry in which the Company operates.
(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 (19) No. P02452 (Page 3 of 5) 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 2018 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 (19) No. P02452 (Page 4 of 5) 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 (19) No. P02452 (Page 5 of 5) 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 year 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: Xie Yanfeng Shanghai, China (Engagement partner)
Chinese Certified Public Accountant: Li Yangang 18 April 2019
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018
ASSETS Notes 31/12/2018 31/12/2017 RMB RMB CURRENT ASSETS
Cash and bank VI-1 1,475,700,477 1,402,522,509 Notes and accounts receivable VI-2 530,821,071 508,593,173 Including: Notes receivable VI-2.2 288,667,988 244,796,818 Accounts receivable VI-2.3 242,153,083 263,796,355 Prepayments VI-3 4,219,949 2,417,931 Other receivables VI-4 22,636,086 18,978,422 Including: Interest receivable VI-4.2 1,332,681 240,968 Inventories VI-5 2,724,591,457 2,473,614,046 Non-current assets held for sale - 2,000,197 Other current assets VI-6 258,676,396 230,822,759_____________ _____________ Total current assets 5,016,645,436 4,638,949,037_____________ _____________ NON-CURRENT ASSETS
Available-for-sale financial assets VI-7 467,251 467,251 Investment properties VI-8 31,572,489 18,467,989 Fixed assets VI-9 5,749,731,667 5,329,083,969 Construction in progress VI-10 759,296,591 1,026,141,569 Bearer biological assets VI-11 209,266,373 201,929,888 Intangible assets VI-12 655,473,459 655,448,897 Goodwill VI-13 165,199,111 128,135,981 Long-term prepaid expenses VI-14 244,640,416 230,009,231 Deferred tax assets VI-15 285,436,259 308,121,396_____________ _____________ Total non-current assets 8,101,083,616 7,897,806,171_____________ _____________ Total assets 13,117,729,052 12,536,755,208__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017 RMB RMB CURRENT LIABILITIES
Short-term borrowings VI-16 688,002,410 714,434,286 Notes and accounts payable VI-17 713,572,881 666,442,879 Receipts in advance VI-18 226,075,244 350,894,156 Employee benefits payable VI-19 212,304,217 210,824,234 Taxes payable VI-20 128,912,790 145,094,156 Other payables VI-21 608,479,890 603,735,569 Including: Interest payable 712,826 771,250 Other payables VI-21.2 607,767,064 602,964,319 Deferred income VI-22 15,860,254 16,878,199 Non-current liabilities due within one year VI-23 152,940,788 110,954,827_____________ _____________ Total current liabilities 2,746,148,474 2,819,258,306_____________ _____________ NON-CURRENT LIABILITIES
Long-term borrowings VI-24 156,480,662 156,125,854 Long-term payables VI-25 225,000,000 259,000,000 Deferred income VI-22 70,367,039 92,918,855 Deferred tax liabilities VI-15 22,010,647 24,264,203 Other non-current liabilities VI-26 7,234,853 7,209,312_____________ _____________ Total non-current liabilities 481,093,201 539,518,224_____________ _____________ Total liabilities 3,227,241,675 3,358,776,530_____________ _____________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017 RMB RMB EQUITY
Share capital VI-27 685,464,000 685,464,000 Capital reserve VI-28 565,955,441 565,955,441 Other comprehensive income VI-29 2,965,377 3,109,240 Surplus reserve VI-30 342,732,000 342,732,000 Retained earnings VI-31 8,008,982,547 7,309,081,618_____________ _____________ Equity attributable to shareholders
of the Company 9,606,099,365 8,906,342,299 Non-controlling interests 284,388,012 271,636,379_____________ _____________ Total equity 9,890,487,377 9,177,978,678_____________ _____________ Total liabilities and equity 13,117,729,052 12,536,755,208__________________________ __________________________ The accompanying notes form an integral part of these financial statements.
The financial statements on pages 6 to 107 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 2018
ASSETS Notes 31/12/2018 31/12/2017 RMB RMB CURRENT ASSETS
Cash and bank XIV-1 624,588,809 559,174,466 Notes and accounts receivable XIV-2 41,333,227 49,450,536 Including: Notes receivable XIV-2.2 39,885,254 41,645,203 Accounts receivable XIV-2.3 1,447,973 7,805,333 Prepayments 227 99,673 Other receivables XIV-3 1,025,643,356 999,846,643 Including: Interest receivable 254,088 76,646 Dividend receivables XIV-3.2 500,000,000 407,495,922 Inventories XIV- 4 385,154,740 348,042,053 Non-current assets held for sale - 2,000,197 Other current assets 24,704,844 29,706,058_____________ _____________ Total current assets 2,101,425,203 1,988,319,626_____________ _____________ NON-CURRENT ASSETS
Long-term equity investments XIV- 5 7,420,803,069 4,511,202,204 Investment properties VI-8 31,572,489 18,467,989 Fixed assets XIV- 6 265,311,274 288,150,901 Construction in progress XIV- 7 6,311,701 6,756,349 Construction in progress XIV- 8 125,002,793 119,572,539 Intangible assets XIV- 9 67,244,066 69,623,219 Deferred tax assets XIV- 10 24,194,967 28,787,907 Other non-current assets XIV- 11 972,700,000 3,718,674,166_____________ _____________ Total non-current assets 8,913,140,359 8,761,235,274_____________ _____________ Total assets 11,014,565,562 10,749,554,900__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017 RMB RMB CURRENT LIABILITIES
Short-term borrowings XIV- 12 150,000,000 600,000,000 Notes and accounts payable XIV- 13 132,704,304 97,833,124 Advances from customers - 6,000,000 Employee benefits payable XIV- 14 72,345,179 70,108,076 Taxes payable XIV- 15 13,111,431 14,569,690 Other payables XIV- 16 607,974,519 545,365,672 Including: Interest payable 181,250 652,500 Other payables XIV- 16.2 607,793,269 544,713,172 Deferred income 3,433,054 3,953,054_____________ _____________ Total current liabilities 979,568,487 1,337,829,616_____________ _____________ NON-CURRENT LIABILITIES
Deferred income 8,910,918 12,628,573 Other non-current liabilities XIV- 14 2,710,575 2,577,702_____________ _____________ Total non-current liabilities 11,621,493 15,206,275_____________ _____________ Total liability 991,189,980 1,353,035,891_____________ _____________ EQUITY
Share capital VI-27 685,464,000 685,464,000 Capital reserve XIV- 17 557,222,454 557,222,454 Surplus reserve VI-30 342,732,000 342,732,000 Retained earnings 8,437,957,128 7,811,100,555_____________ _____________ Total equity 10,023,375,582 9,396,519,009_____________ _____________ Total liabilities and equity 11,014,565,562 10,749,554,900__________________________ __________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017 RMB RMB I. Revenue VI-32 5,142,244,740 4,932,545,229 Less: Cost of sales VI-32 1,901,611,507 1,671,592,279 Taxes and surcharges VI-33 276,491,674 310,252,023 Selling expenses VI-34 1,274,599,146 1,272,522,443 Administrative expenses VI-35 343,580,651 336,461,133 Research and development expenses 4,784,118 4,320,825 Financial expenses VI-36 35,945,302 18,590,259 Including: Interest income 12,086,007 9,168,772 Interest expenses 46,354,902 26,095,487 (Reversal of)Impairment loss of assets VI-37 (912,166) 8,293,553 Add: Income (loss) from disposal of assets 11,368,355 (222,586) Other income VI-38 ___8_7_,_2_8_1_,4_3_4
_
___4_6_,_0_3_8_,3_8_4_ II. Operating profit 1,404,794,297 1,356,328,512 Add: Non-operating income VI-39 7,353,309 17,230,727 Less: Non-operating expenses VI-40 ____3_,_5_3_5_,9_0_8
_
____1_,_6_3_1_,4_7_6_ III. Profit before tax 1,408,611,698 1,371,927,763 Less: Income tax VI-41 __3_6_7_,_1_2_7_,5_2_2
_
__3_3_8_,_1_3_4_,2_4_5_ I V. Profit for the year _1_,0_4_1_,_4_8_4_,1_7_6
_
_1_,0_3_3_,_7_9_3_,5_1_8_ (I) Categorized by the nature of continuing operation
1. Net profit from continuing operations _1_,0_4_1_,_4_8_4_,1_7_6
_
_1_,0_3_3_,_7_9_3_,5_1_8_ (II) Categorized by ownership:
1. Profit or loss attributable to non-controlling interests (1,148,753) 2,098,462 2. Net profit attributable to owners of the Company _1_,0_4_2_,_6_3_2_,9_2_9
_
_1_,0_3_1_,_6_9_5_,0_5_6_ V . Other comprehensive income (post-tax) _____(_3_7_6_,5_2_4_) _____9_,_8_6_3_,8_7_2 Other comprehensive income attributable
to shareholders of the Company
Other comprehensive income
to be reclassified to profit and loss
Foreign currency statement translation difference (143,863) 8,368,254 Other comprehensive income attributable
to non-controlling interest _____(_2_3_2_,6_6_1_) ____1_,_4_9_5_,6_1_8_ V I. Total comprehensive income _1_,0_4_1_,_1_0_7_,6_5_2
_
_1_,0_4_3_,_6_5_7_,3_9_0_ Attribute to shareholders of the Company 1,042,489,066 1,040,063,310 Attribute to non-controlling interest of the Company (1,381,414) 3,594,080________________________ ________________________ VII. Earnings per share
(I) Basic earnings per share VI-42 1.52 1.51________________________ ________________________ (II) Diluted earnings per share VI-42 N/A N/A________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017 RMB RMB I. Revenue XIV-18 876,447,070 1,311,256,854 Less: Cost of sales XIV-18 774,487,031 1,165,953,408 Taxes and surcharges XIV-19 38,346,761 76,570,225 Administrative expenses XIV-20 90,505,208 79,119,135 Research and development expenses 887,355 1,573,909 Financial expenses XIV-21 (20,292,737) 637,568 Including: Interest income 41,821,372 18,602,199 Interest expenses 16,075,353 17,414,181 Add:Investment income XIV-22 964,128,659 798,877,905 Income (loss) from disposal of assets 12,411,962 (29,625) Other income 4,237,655 5,219,126____________ ____________ II. Operating Profit 973,291,728 791,470,015 Add: Non-operating income 1,483,478 686,646 Less: Non-operating expenses 593,694 335,237____________ ____________ III. Profit before tax 974,181,512 791,821,424 Less: Income tax 4,592,939 (1,776,586)____________ ____________ IV. Profit for the year 969,588,573 793,598,010________________________ ________________________ Net profit from continuing operations __9_6_9_,_5_8_8_,5_7_3
_
___79_3_,_5_9_8_,0_1_0_ V. Total comprehensive income 969,588,573 793,598,010________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017 RMB RMB CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 4,950,603,207 4,827,152,526 Receipts of tax refunds 57,056,690 53,196,910 Other cash receipts relating to operating activities VI-43(1) ____7_2_,7_0_3_,8_7_2 ____8_5_,2_3_6_,9_0_5 S ub-total of cash inflows from operating activities __5_,0_8_0_,3_6_3_,7_6_9 __4_,9_6_5_,5_8_6_,3_4_1 Cash payments for goods purchased and services received 1,383,945,233 1,143,840,915 Cash payments to and on behalf of employees 544,742,974 512,777,815 Payment of various types of taxes 1,111,980,499 1,260,813,596 Other cash payments relating to operating activities VI-43(2) __1_,0_6_3_,7_1_6_,3_1_7 __1_,0_7_4_,9_1_0_,9_8_8 S ub-total of cash outflows from operating activities __4_,1_0_4_,3_8_5_,0_2_3 __3_,9_9_2_,3_4_3_,3_1_4 N et cash flows from operating activities VI-44(1) ___9_7_5_,9_7_8_,7_4_6 ___9_7_3_,2_4_3_,0_2_7 CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts from disposals and recovery of investments 400,000,000 205,000,000 Proceeds from return on investments 3,445,895 4,084,350 Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets ____1_9_,9_6_7_,4_3_1 _____7_,5_9_4_,0_0_5 S ub-total of cash inflows from investing activities ___4_2_3_,4_1_3_,3_2_6 ___2_1_6_,6_7_8_,3_5_5 Cash paid for acquisition of properties, plants and equipment,
intangible assets and other long-term assets 347,384,820 435,960,357 Cash payments to acquire investments 478,042,400 297,129,216 Cash paid for the purchase subsidiaries and other equity VI-43(3) ___1_0_5_,8_3_4_,6_5_5 ___3_0_3_,7_9_6_,5_4_3 S ub-total of cash outflows from investing activities ___9_3_1_,2_6_1_,8_7_5 __1_,0_3_6_,8_8_6_,1_1_6 N et cash flows from investing activities ___(5_0_7_,8_4_8_,5_4_9) ___(8_2_0_,2_0_7_,7_6_1) CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from capital contributions 2,050,000 48,396,726 Including: cash receipts from capital contributions
from non-controlling owners of subsidiaries 2,050,000 48,396,726 Cash receipts from borrowings 1,049,815,411 963,564,600 Other cash received from financing activities VI-43(4) ____6_2_,4_6_8_,2_5_9 ____5_2_,9_3_0_,8_0_4 S ub-total of cash inflows from financing activities __1_,1_1_4_,3_3_3_,6_7_0 __1_,0_6_4_,8_9_2_,1_3_0 Cash paid for borrowings 1,103,189,409 876,502,273 Cash paid for dividends, profits and interests 397,351,813 369,791,284 Cash paid for other financing activities VI-43(5) ____4_6_,1_0_0_,0_0_0 ____6_1_,7_0_0_,0_0_0 S ub-total of cash outflows from financing activities __1_,5_4_6_,6_4_1_,2_2_2 __1_,3_0_7_,9_9_3_,5_5_7 N et cash flows from financing activities ___(4_3_2_,3_0_7_,5_5_2) ___(2_4_3_,1_0_1_,4_2_7) Effect of foreign exchange rate changes
on cash and cash equivalents (9,851,585) 14,013,131 NET INCREASE (DECREASE) OF CASH
AND CASH EQUIVALENTS 25,971,060 (76,053,030) A dd: cash and cash equivalents at beginning of the year VI-44(3) __1_,1_8_0_,8_8_9_,2_7_4 __1_,2_5_6_,9_4_2_,3_0_4 C ASH AND CASH EQUIVALENTS AT END OF THE YEAR VI-44(3) ____1__,2__0__6__,8__6__0__,3__3__4 ____1__,1__8__0__,8__8__9__,2__7__4
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017 RMB RMB CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 817,341,175 984,103,489 Other cash receipts relating to operating activities ___1_7_7_,7_8_6_,3_2_2 ___4_3_1_,9_8_3_,0_9_2 S ub-total of cash inflows from operating activities ___9_9_5_,1_2_7_,4_9_7 __1_,4_1_6_,0_8_6_,5_8_1 Cash payments for goods purchased and services received 608,241,452 398,827,772 Cash payments to and on behalf of employees 107,256,441 89,894,049 Payment of various types of taxes 62,066,449 207,917,864 Other cash payments relating to operating activities ____7_4_,3_5_7_,3_2_4 ___1_2_1_,3_7_7_,1_2_7 S ub-total of cash outflows from operating activities ___8_5_1_,9_2_1_,6_6_6 ___8_1_8_,0_1_6_,8_1_2 N et cash flows from operating activities XIV-23(1) ___1_4_3_,2_0_5_,8_3_1 ___5_9_8_,0_6_9_,7_6_9 CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts from disposals and recovery of investments 370,000,000 103,000,000 Proceeds from return on investments 874,520,633 827,218,467 Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets ____1_1_,2_1_2_,1_9_5 ____2_6_,7_6_0_,9_2_9 S ub-total of cash inflows from investing activities __1_,2_5_5_,7_3_2_,8_2_8 ___9_5_6_,9_7_9_,3_9_6 Cash paid for acquisition of properties, plants and equipment,
intangible assets and other long-term assets 28,842,911 22,527,073 Cash payments to acquire investments 410,000,000 105,000,000 Cash paid for the purchase subsidiaries and other equity ___1_0_7_,1_9_4_,4_2_0 ___8_8_1_,0_5_6_,2_2_0 S ub-total of cash outflows from investing activities ___5_4_6_,0_3_7_,3_3_1 __1_,0_0_8_,5_8_3_,2_9_3 N et cash flows from investing activities ___7_0_9_,6_9_5_,4_9_7 ___(_5_1_,6_0_3_,8_9_7) CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from borrowings ___2_0_0_,0_0_0_,0_0_0 ___6_0_0_,0_0_0_,0_0_0 S ub-total of cash inflows from financing activities ___2_0_0_,0_0_0_,0_0_0 ___6_0_0_,0_0_0_,0_0_0 Cash paid for borrowings 650,000,000 530,339,600 Cash paid for dividends, profits and interests ___3_6_4_,0_8_5_,3_1_2 ___3_6_0_,5_6_0_,6_0_4 S ub-total of cash outflows from financing activities __1_,0_1_4_,0_8_5_,3_1_2 ___8_9_0_,9_0_0_,2_0_4 N et cash flows from financing activities ___(8_1_4_,0_8_5_,3_1_2) ___(2_9_0_,9_0_0_,2_0_4) NET INCREASE OF CASH
AND CASH EQUIVALENTS 38,816,016 255,565,668 A dd: cash and cash equivalents at beginning of the year XIV-24 ___4_9_3_,5_6_8_,8_6_6 ___2_3_8_,0_0_3_,1_9_8 CASH AND CASH EQUIVALENTS AT END
O F THE YEAR XIV-24 ______5__3__2__,3__8__4__,8__8__2 ______4__9__3__,5__6__8__,8__6__6
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2018
2018
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 . 1/1/2018 _6_85_,4_6_4,_00_0 _5_65_,9_5_5,_44_1__3_,1_0_9,2_4_0__3_42_,7_3_2,_00_0_7_,3_09_,0_8_1,6_1_8_2_71_,6_3_6,_37_9_9_,1_77_,9_78_,6_7_8 II. Changes for the year
(I) Total comprehensive income - - (143,863) - 1,042,632,929 (1,381,414) 1,041,107,652 (II)Owners’ contributions and
reduction in capital
Acquisition of
subsidiaries (VIII-2) - - - - - 17,532,823 17,532,823 (III) Profit distribution
Distributions to
shareholders (VI-31, VIII-2 )______-_ ______-_______-________-___(3_42_,7_3_2,_00_0)__(3_,3_9_9,_77_6)__(3_46_,1_31_,7_7_6) I II. 31/12/2018 __6__85__,4__6__4,__00__0 __5__65__,9__5__5,__44__1____2__,9__6__5,3__7__7____3__42__,7__3__2,__00__0__8__,0__08__,9__82__,5__4__7__2__84__,3__8__8,__01__2__9__,8__90__,4__87__,3__7__7 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 . 1/1/2017 _6_85_,4_6_4,_00_0 _5_65_,9_5_5,_44_1__(5_,2_59_,0_14_) _3_42_,7_3_2,_00_0_6_,6_20_,1_18_,5_6_2_1_90_,4_7_3,_69_7__8,3_9_9,_48_4_,68_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 - - - - - 78,236,726 78,236,726 (III) Profit distribution
Distributions to
shareholders (VI-31) ______-_ ______-_______-_ ______-___(3_42_,7_3_2,_00_0)___(6_6_8,_12_4)__(3_43_,4_00_,1_2_4) I II. 31/12/2017 __6__85__,4__6__4,__00__0 __5__65__,9__5__5,__44__1____3__,1__09__,2__40__ __3__42__,7__3__2,__00__0__7__,3__09__,0__81__,6__1__8__2__71__,6__3__6,__37__9____9,1__7__7,__97__8__,67__8
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
2018
Issued capital Capital reserve Surplus reserve Retained earnings Total RMB RMB RMB RMB RMB I . 1/1/2018 _6_85_,_46_4_,0_0_0 _5_57_,_22_2_,4_5_4 _3_42_,_73_2_,0_0_0 _7_,8_1_1,_10_0_,5_5_5__9_,3_9_6,_51_9_,0_0_9 II. Changes for the year
(I) Total comprehensive income - - - 969,588,573 969,588,573 (II) Profit distribution
Distributions to shareholders (VI-31)_______-_ _______-_ _______-_ _(_3_42_,_73_2_,0_0_0)__(_3_42_,_73_2_,0_0_0) I II. 31/12/2018 __6__85__,__46__4__,0__0__0 __5__57__,__22__2__,4__5__4 __3__42__,__73__2__,0__0__0 __8__,4__37__,__95__7__,1__2__8__1__0__,0__2__3,__37__5__,5__8__2 2017
Issued capital Capital reserve Surplus reserve Retained earnings Total RMB RMB RMB RMB RMB I . 1/1/2017 _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-31)_______-_ _______-_ _______-_ _(_3_42_,_73_2_,0_0_0) _(_3_42_,_73_2_,0_0_0) I II. 31/12/2017 __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__9__6,__51__9__,0__0__9
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2018
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 2018 the total shares issued by the Company amounts to 685,464,000 shares. Please refer to Note VI-27 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 18 April 2019. 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 Note VIII "Equity in other entities" in detail. For detail of changes in consolidation scope of the year, please refer to Note 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 value of cash and cash equivalents or the fair value of consideration paid 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
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 2018, 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 2018, financial performance and cash flow in 2018 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. Overseas subsidiaries of the Company adopt Currency
Euro, Chilean Peso and Australian Dollar as their functional currencies on the basis of the primary
economic environment in which they operate. 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 recognized 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 recognizes 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.
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 - continued
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 8.2 Translation of financial statements denominated in foreign currencies - continued
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.
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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
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. The Group's financial assets are bought in a conventional way, and recognized and terminated according to the accounting transaction date. 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 cash and bank, notes and accounts receivable and other receivables, etc. 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.
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;
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
(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; namely, at the balance sheet date, if the initial cost of an equity instrument investment is more than50%(inclusive) in excess of the fair value of such investment, or the period in which the initial cost of an equity instrument investment exceeds the fair value of such investment is over 12 months(inclusive);
(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.
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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
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, 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. 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9. Financial instruments - continued
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.
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.
Agricultural products harvested are reported in accordance with the CAS 1 Inventories. 11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method. 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 based on categories of inventories.
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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
11. Inventories - continued
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.
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
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
investing enterprises or other parties that are currently exercisable or convertible shall be considered.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
13. Long term equity investments - continued
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.
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 recognized 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 depreciation or amortization 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 recognizes the amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss for the period.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
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.
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 are 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
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. 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. 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
18. Biological assets - continued
18.1 Bearer biological assets - continued
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.
19. Intangible assets
Intangible assets include land use rights, software and trademark, 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 intangible assets with infinite useful lives including the land use right and trademark. Land use rights with infinite useful lives are permanent land use rights with permanent ownership held by the Group under the relevant Chile and Australian laws arising from theGroup’s acquisition ofViñaIndómita, S.A.,Viña Dos Andes, S.A., and Bodegas Santa Alicia SPA. (collectively referred to as the "Chile Indomita Wine Group"), and the acquisition of Kilikanoon Estate Pty Ltd.( hereinafter referred to as the "Australia Kilikanoon Estate"), therefore there was no amortization. The right to use trademark refers to the trademark held by the Group arising from the acquisition of the Chile Indomita Wine Group and the Australia Kilikanoon Estate with infinite 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 an uncertain period. The useful life is indefinite as it was hard to predict the period that the trademark would bring economic benefits to the Group.
For an intangible asset with a definite useful life, the Group reviews the useful life and amortisation method at the end of the period, and makes adjustments when necessary.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
20. Impairment of long-term assets
The Group and the Company review the impairment status of long-term equity investments, fixed assets, investment properties, construction in progress, bearer biological asset and intangible assets with finite useful life at the end of each year. If there is any indication for impairment, the Group estimates the recoverable amount of the asset.Intangible assets with indefinite useful life and goodwill 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.
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 are amortized equally over the period of projected earnings. The amortization period are as follows:
Amortization period Land requisition fee 50 years Land lease prepayment 50 years Greening fee 5-20 years Leasehold improvement 3-5years Others 3 years
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
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.
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 restructuring.
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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
23. Revenue - continued
23.2 Revenue from rendering of services - continued
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.
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 amortised to profit or loss over the useful life of the related asset on a straight line basis.
24.2 Government 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.
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
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 recognized 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 recognized 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 capitalized when incurred, and are recognized 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 has adopted the Notice of the Revised Format of Financial Statements for General Business Enterprise in 2018 (Cai Kuai (2018) No. 15, hereinafter referred to as the "Cai Kuai No.15 Document") released by the MoF on 15 June 2018 since the preparation of the financial statements for 2018.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
27. Changes in accounting policies - continued
Cai Kuai No.15 Document revised the presentation items on the balance sheet and the income statement, which are as follows: add the line items of "notes and accounts receivable", "notes and accounts payable", "research and development expenses"; revise the presentation of "other payables", "fixed assets", "construction in progress", "other payables" , "long-term payables" and "administrative expenses"; less the line items of "notes receivable", "accounts receivable", "dividends receivable" and "interest receivable", "disposal of fixed assets", "materials for construction of fixed assets", "notes payable", "accounts payable", "dividends payable", and "special payables", add the line items of "including: interest expenses" and "interest income" under the item of "financial expenses"; and adjust the presentation location of certain items in the income statements.
For changes of the presentation items stated above, the Group has applied retrospectively for accounting treatments and adjusted the comparable data of the prior year for comparable periods. 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.
Key assumptions and uncertainties in accounting estimates
The following are the key assumptions and uncertainties in accounting estimates at the end of the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the future period.
Deferred tax assets recognized for deductible losses
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 of fixed assets
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.
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 the fair value of a long-term asset less costs of disposal and the present value of the future cash flows expected to be derived from the asset. As it is difficult for the Group to obtain the quoted market price of the long-term assets concerned, the fair value of the assets cannot be reliably estimated. In assessing the present value of future cash flows, the management of the Group is required to make significant judgements on the assumptions including sales growth rate, future selling price, production cost, operating expenses and discount rate, which are of high uncertainty.
Yantai Changyu Pioneer Wine Company Limited Research and Development Co., Ltd.("R&D Centre"), subsidiary of the Company started production at the end of 2017 being as a new main production base of the Company. In 2018, the production ofR&D Centre accounts for more than60% of theGroup’s production.R&DCentre’s total investment budget in its long-term assets approximates RMB 4.5 billion, which is a large-scale investment. As at 31 December 2018, the book values of relevant long-term assets including fixed assets, construction in progress and intangible amounted to RMB 3.5 billion, accounting for26.6% of the total assets in the consolidated financial statements, which exerts significant influence on the consolidated financial statements. As there is little space for the development of the domestic wine market, the management of the Company faces great operating pressures to apply the off-take potential of the new production base in an efficient way. In addition, there are certain risks of impairment for such long-term assets. The management performs the impairment test by determining if the recoverable amount is less than the book value of long-term assets and determines the recoverable amount based on the present value of expected future cash flows. In the assessment of the future cash flows, the management is required to, based on a reasonable and supportable basis, assess the cash flows for the future 5 years (“projecting period”) and cash flows after the projecting period (“subsequent period”) and make significant judgements and accounting estimates in the discount rate, sales growth rate, future selling price, production cost, operating expenses and other key assumptions.
According to the result of the impairment test, the management believes that as at 31 December 2018, the above long-term assets of the Group were not impaired. Therefore, no impairment
provision is made.
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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
V. TAXES
1. The main taxes and tax rate are as follows:
(1) China
Value added tax VAT is levied at6%,10%,11%,16% 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 at20% on the invoiced amount after deduction of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of33.3% 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.
(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 of27% on its taxable income.
(5) Australia
Value added tax VAT is levied at10% on the invoiced amount after deduction of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of30% on its taxable income.
Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2018 and 2017 are all stated as above.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
V. TAXES - continued
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.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank
31/12/2018 31/12/2017 RMB RMB Cash 114,335 136,973 Bank balance 1,382,399,749 1,278,397,711 Other currency fund 93,186,393 123,987,825____________ ____________ Total 1,475,700,477 1,402,522,509________________________ ________________________ At 31 December 2018, the balance of restricted cash of the Group is as follows:
31/12/2018 31/12/2017 RMB RMB Home maintenance funds 2,611,350 2,645,410
________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Group's other monetary assets is as follows:
31/12/2018 31/12/2017 RMB RMB Research and Development Co., Ltd("R&D Centre")
pledged deposit for long-term payables 46,100,000 61,700,000 Deposit for letter of credit 44,540,850 57,946,190 Alipay account balance 2,483,816 4,317,635 Deposit for Company cards 51,727 14,000 Deposit for ICBC platform 10,000 10,000____________ ____________ 93,186,393 123,987,825________________________ ________________________ As at 31 December 2018, the Group's term deposits with original maturity of more than three months when acquired is RMB 173,042,400 with interest rate1.50%-3.80% (31 December 2017:RMB 95,000,000).
2. Notes and accounts receivable
2.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Notes receivable 288,667,988 244,796,818 Accounts receivable 242,153,083 263,796,355____________ ____________ Total 530,821,071 508,593,173________________________ ________________________ 2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017 RMB RMB Bank acceptances 288,667,988 244,796,818________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.2 Notes receivable- continued
(2) Notes receivable which have been pledged as security at the end of the period
As at 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil). (3) Notes receivable endorsed but are not yet due at the balance sheet date
31/12/2018 31/12/2017 RMB RMB Bank acceptances 182,829,674 188,855,843________________________ ________________________ As at 31 December 2018, notes endorsed by the Group to other parties which are not yet due at the end of the period is RMB 182,829,674 (31 December 2017: RMB 188,855,843). 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, 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 2018, no notes receivable were reclassified as accounts receivable due to the default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017
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 __24__2,__15__3,__08__3__10__0__.0 ______-________-____24__2,__15__3,__08__3__26__3,__79__6,__35__5__10__0__.0 ______-________-____26__3,__79__6,__35__5 The normal credit term is one month, which can be extended to one year for certain customers. The accounts receivable are interest-free.
As at 31 December 2018, ownership restricted accounts receivable is RMB 52,015,032 (31 December 2017: RMB 46,337,062), referring to Note VI-45.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.3 Accounts receivable - continued
(1) Disclosure of accounts receivable by categories - continued
The aging analysis is as follows:
31/12/2018 31/12/2017 RMB RMB Within 1 year 240,312,773 263,112,714 1 to 2 years 1,566,622 683,641 2 to 3 years 273,688 -____________ ____________ 242,153,083 263,796,355________________________ ________________________ (2) Recognitions, collections and reversals during the current year:
As at 31 December 2018, there was no bad debt provision for accounts receivable (31 December 2017: Nil). There was no bad debt provision made, reversed or written-off by management in 2018 (2017: Nil).
(3) Top five entities with the largest balances of accounts receivable:
Relationship Percentage of Name with the Group Amount Aging total receivables RMB % Sainsbury's supermarkets Ltd Third party 17,428,889 Within 1 year 7.2 Nongongshang Supermarket
(Group) Co., Ltd Third party 10,928,458 Within 1 year 4.5 SLIGRO B.V. Third party 6,732,175 Within 1 year 2.8Viñedosy Bodegas Las Pircas Third party 6,430,387 Within 1 year 2.7 Suguo Supermarket Co., Ltd. Third party __6_,_41_5_,5_0_5 Within 1 year __2._6____4__7,__93__5__,4__1__4 __1__9.__8 3. Prepayments
(1) The aging analysis is as follows:
31/12/2018 31/12/2017
Amount Ratio Amount Ratio RMB % RMB % Within 1 year 4,219,949 100.0 2,417,931 100.0__________________ __________ __________________ __________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Prepayments - continued
(2) As at 31 December 2018, the top five of prepayments were as follows:
Reason Percentage of Relationship for being total advances with the Group Amount Aging outstanding to suppliers RMB % Shanghai Benchu
Trade&Development Co., Ltd. Third party 345,600 Within 1 year Goods not received 8.2 Carrington Estate T/A Karikari Esta Third party 340,498 Within 1 year Goods not received 8.1 DONELLI VINI S.P.A. Third party 304,204 Within 1 year Goods not received 7.2 Yantai Economic and Technological
Development Zone Thermal Co., Ltd Third party 250,000 Within 1 year Prepaid heating fees 5.9 Yantai Cihang International Freight
Agent Co., Ltd. Third party ___18_6_,3_9_2 Within 1 year Prepaid agency fees __4._4__1__,__42__6__,6__9__4 __3__3.__8 4. Other receivables
4.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Interest receivable 1,332,681 240,968 Other receivables 21,303,405 18,737,454___________ ___________ Total 22,636,086 18,978,422______________________ ______________________ (1) Categories of interest receivable
31/12/2018 31/12/2017 RMB RMB Interest receivable on bank deposits 1,332,681 240,968__________________ ________________ (2) Overdue interest
As at 31 December 2018, there was no overdue interest receivable (31 December 2017: Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables
(1) Disclosure of other receivables by categories
31/12/2018 31/12/2017
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 __2__1,__30__3,__40__5__10__0__.0________-______-____2__1,__30__3,__40__5__1__8,__73__7,__45__4__10__0__.0________-______-____1__8,__73__7,__45__4 The aging analysis is asfollows：
31/12/2018 31/12/2017
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 11,293,908 53.0 - 11,293,908 13,214,301 70.5 - 13,214,301 1 to 2 years 6,693,702 31.5 - 6,693,702 1,937,961 10.3 - 1,937,961 2 to 3 years 1,922,998 9.0 - 1,922,998 2,273,591 12.2 - 2,273,591 Over 3 years __1_,3_9_2,_79_7___6._5 _____-___1_,3_9_2,_79_7__1_,3_11_,6_0_1___7._0 _____-___1_,3_1_1,_60_1__2__1__,3__0__3,__40__5__1__0__0__.0 __________-____2__1__,3__0__3,__40__5__1__8__,7__37__,4__5__4__1__0__0__.0 __________-____1__8__,7__3__7,__45__4 (2) Accrual, reversal and written-off during the current year
As at 31 December 2018, no bad debt provision was made for other receivables (2017: RMB 354,805).
(3) Other receivables written off in the current year
As at 31 December 2018, the Group has no other receivables written off (31 December 2017: RMB 354,805).
(4) Disclosure of other receivables by categories
31/12/2018 31/12/2017 RMB RMB Deposit 10,453,624 10,075,901 Petty cash receivable 2,274,038 2,215,146 Investment fund - 2,050,000 Refund of consumption tax, real estate tax 6,273,882 2,451,188 Others 2,301,861 1,945,219____________ ____________ 21,303,405 18,737,454________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables- continued
(5) Five entities with the largest balances of other receivables
As at 31 December 2018, the top five of other receivables are as follows:
Percentage of total Bad debt Nature Amount Aging other receivables Closing balance RMB % RMB Yantai Development Zone
Construction Industry Association Construction deposit 7,709,477 Within 3 years 36.1 - Zhejiang Tmall Technology Co., Ltd. Shop deposits 867,426 Within 1 year 4.1 - Yantai Shenma Packaging Co., Ltd.
("Shenma Packaging") Lease receivables 813,440 Within 1 year 3.8 - Yantai Development Zone
Power Company Deposit 140,000 Within 3 years 0.7 - Yantai Development Zone
Heat Company Deposit ____1_30_,_0_0_0 Within 3 years __0_.6_ ________-_ 9,660,343 45.3 -__________________ ________ __________________ 5. Inventories
(1) Disclosure of inventories by categories
31/12/2018 31/12/2017
Net carrying Net carrying Balance Provision amount Balance Provision amount RMB RMB RMB RMB RMB RMB Raw material 67,267,035 - 67,267,035 66,881,090 - 66,881,090 Work in progress 1,787,819,923 - 1,787,819,923 1,568,230,851 - 1,568,230,851 Finished goods __8_94_,_18_7_,7_2_5_(_24_,_68_3_,2_2_6)__8_69_,_50_4_,4_9_9 __8_64_,_09_7_,4_9_7_(_25_,_59_5_,3_9_2)__8_38_,_50_2_,1_0_5__2__,7__4__9,__27__4__,6__8__3__(__24__,__68__3__,2__2__6)__2__,7__2__4,__59__1__,4__5__7 __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) Inventory provision
Opening balance Recognized Reversal Written off Closing balance RMB RMB RMB RMB RMB Provision for decline in
value of inventories 25,595,392 749,134 (1,661,300) - 24,683,226__________________ ________________ ________________ __________________________________ 6. Other current assets
31/12/2018 31/12/2017 RMB RMB Prepaid taxes 24,077,323 22,911,298 Pending deduct VAT on purchase 233,087,707 206,529,504 Prepaid rent 1,511,366 1,381,957___________ ____________
258,676,396 230,822,759
______________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Available-for-sale financial assets
(1) Available-for-sale financial assets
31/12/2018 31/12/2017
Amount Impairment Carrying amount Amount Impairment Carrying amount RMB RMB RMB RMB RMB RMB Available-for-sale
equity instruments
measured at cost ____4__6__7__,2__5__1 ____________-
__
__4__6__7__,2__5__1 ____4__6__7__,2__5__1 ____________-
__
__4__6__7__,2__5__1 (2) Available-for-sale financial assets measured at cost
Carrying amount Provision for impairment losses Proportion of Cash voting power dividend in the for the Investee Opening Increase Decrease Closing Opening Increase Decrease Closing investee period RMB RMB RMB RMB RMB RMB RMB RMB (%) RMB Other __46__7,__25__1________-________-__46__7__,25__1________- ________-________-________-________________ 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.
8. Investment properties
Investment properties measured by cost method
Buildings RMB Total original carrying amount
31/12/2017 38,347,283 Increase
Transfer from fixed assets 32,606,762____________ 31/12/2018 70,954,045____________ Total accumulated depreciation
31/12/2017 19,879,294 Increase
Transfer from fixed assets 17,644,360 Additions 1,857,902____________ 31/12/2018 39,381,556____________ Total carrying amount
31/12/2018 31,572,489________________________ 31/12/2017 18,467,989________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets
(1) Details of fixed assets
Buildings Machinery Motor Vehicles Total RMB RMB RMB RMB Total original carrying amount
31/12/2017 4,508,868,684 2,247,350,293 28,689,415 6,784,908,392 Increase
Purchase 4,490,675 235,607,780 923,222 241,021,677 Transfer from CIP 252,035,224 202,251,634 1,708,803 455,995,661 Acquisition increase (VII-1) 33,048,307 15,981,692 - 49,029,999 Decrease
Disposal (4,409,703) (35,392,585) (4,740,801) (44,543,089) Transfer to Investment
properties (VI-8) __(_3_2_,6_0_6_,7_6_2) _________-_ _______-_ __(_3_2_,6_0_6_,7_6_2) 31/12/2018 _4_,7_6_1_,4_2_6_,4_2_5 _2_,6_6_5_,7_9_8_,8_1_4 _2_6_,5_8_0_,6_3_9 _7_,4_5_3_,8_0_5_,8_7_8 Total accumulated depreciation
31/12/2017 512,643,486 922,944,520 20,236,417 1,455,824,423 Increase
Additions 126,510,348 168,695,471 2,632,539 297,838,358 Decrease
Disposal (242,705) (29,575,754) (2,125,751) (31,944,210) Transfer to Investment
properties (VI-8) __(_1_7_,6_4_4_,3_6_0) _________-_ _______-_ __(_1_7_,6_4_4_,3_6_0) 31/12/2018 __6_2_1_,2_6_6_,7_6_9 _1_,0_6_2_,0_6_4_,2_3_7 _2_0_,7_4_3_,2_0_5 _1_,7_0_4_,0_7_4_,2_1_1 Total carrying amount
31/12/2018 __4__,1__4__0__,1__5__9__,6__5__6 __1__,6__0__3__,7__3__4__,5__7__7 ____5__,8__3__7__,4__3__4 __5__,7__4__9__,7__3__1__,6__6__7 31/12/2017 __3__,9__9__6__,2__2__5__,1__9__8 __1__,3__2__4__,4__0__5__,7__7__3 ____8__,4__5__2__,9__9__8 __5__,3__2__9__,0__8__3__,9__6__9 As at 31 December 2018, fixed assets with ownership restricted are RMB 412,006,421 (31 December 2017: RMB 145,009,923). Please refer to Note VI-45 in detail.
As at 31 December 2018, the Group has net fixed assets that are temporarily idle of RMB 59,718,155(31 December 2017: Nil). The Group has no fixed assets acquired under finance leases or fixed assets classified as held for sale (31 December 2017: RMB 2,000,197).
(2) Fixed assets through operating lease
Amount RMB Machinery 134,111______________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, 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 1,755,472,791 Processing Changan Chateau Dormitory building, main building 284,890,228 Processing Beijing Chateau European town, main, service building 187,565,493 Processing Ding Luo Te Chateau main building 83,218,432 Processing Xinjiang Tianzhu fermentations and storage warehouse 17,768,840 Processing Ice Wine Chateau office building and packing workshop 9,198,373 Processing Jingyang factory fermentation building 4,171,918 Processing Fermentation centre office, experiment building and workshop 3,653,494 Processing Kylin Packaging finished goods warehouse and workshop 2,396,850 Processing Sales Company office buildings ____1_,1_2_3_,9_8_4 Processing__2__,3__4__9__,4__6__0__,4__0__3
The buildings without property certificate above have no significant influence on the group's management.
10. Construction in progress
(1) Construction in progress:
31/12/2018 31/12/2017 RMB RMBR&D Centre ("Changyu Wine integrational
Construction") Project 608,553,617 883,731,540 Changan Chateau Construction Project 39,793,893 53,290,036 Ningxia Chateau Construction Project 47,163,863 35,711,269 Shihezi Chateau Construction Project 23,664,124 25,463,724 Sales Company construction project 17,985,882 11,355,685 Other companies construction Project 22,135,212 16,589,315____________ ____________ 759,296,591 1,026,141,569________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Construction in progress- continued
(2) Changes in significant construction in progress:
Transfer to
Lone-term Total accumulated Capitalizing Interest Transfer to prepaid Capitalizing interest capitalization Budget 31/12/2017 Addition PPE expense 31/12/2018 Status interest for this period rate Financed by RMB RMB RMB RMB RMB RMB RMB RMB % Loans from financial Changyu Wine integrational institutions Construction" 4,505,780,000 883,731,540 118,142,779 (372,914,273) (20,406,429) 608,553,617 74.3 14,271,837 5,843,8721.2%及4.3% and Self-raised Changan Chateau Construction - - - - Project 620,740,000 53,290,036 12,149,197 (25,645,340) 39,793,893 108.7 Self-raised Shihezi Chateau Construction - - - - Project 780,000,000 25,463,724 37,629,835 (39,429,435) 23,664,124 96.3 Self-raised Ningxia Chateau Construction - - - - Project 414,150,000 35,711,269 14,307,265 (2,854,671) 47,163,863 102.1 Self-raised Sales Company construction project 161,350,000 11,355,685 6,893,191 (262,994) - 17,985,882 97.7 - - - Self-raised The interest capitalized in construction in progress is RMB 5,843,872 in 2018(2017: RMB 6,138,242).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Bearer biological assets
Bearer biological assets are Vines, which measured in cost method
Immature Mature
biological assets biological assets Total RMB RMB RMB Total original carrying amount
31/12/2017 12,175,000 217,537,353 229,712,353 Increase
Cultivated increase 19,371,297 - 19,371,297 Transfer to mature assets (17,708,689) 17,708,689 -__________ ___________ ___________ 31/12/2018 13,837,608 235,246,042 249,083,650__________ ___________ ___________ Total accumulated depreciation
31/12/2017 - 27,782,465 27,782,465 Increase
Additions - 12,034,812 12,034,812__________ ___________ ___________ 31/12/2018 - 39,817,277 39,817,277__________ ___________ ___________ Total net carrying amount
31/12/2018 13,837,608 195,428,765 209,266,373____________________ ______________________ ______________________ 31/12/2017 12,175,000 189,754,888 201,929,888____________________ ______________________ ______________________ As at 31 December 2018, there is no biological asset with ownership restricted. (31 December 2017:Nil)
As at 31 December 2018, there is no indication that biological assets may be impaired, and no provision is made. (31 December 2017:Nil)
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets
(1) Intangible assets
Land use rights Software use rights Trademark Total RMB RMB RMB RMB Total original carrying amount
31/12/2017 521,731,139 73,666,754 159,702,508 755,100,401 Increase
Purchase 1,596,780 922,809 105,827 2,625,416 Acquisition increase(VII-1) ____4_,9_2_4_,9_9_2 ____1_,2_3_2_,4_9_4 __1_0_,2_6_0_,4_0_0 ___1_6_,4_1_7_,8_8_6 31/12/2018 __5_2_8_,2_5_2_,9_1_1 ___7_5_,8_2_2_,0_5_7 _1_7_0_,0_6_8_,7_3_5 __7_7_4_,1_4_3_,7_0_3 Total accumulated depreciation
31/12/2017 67,547,772 21,516,741 10,586,991 99,651,504 Increase
Additions ___1_0_,5_2_3_,1_3_8 ____5_,2_0_6_,0_7_4 ___3_,2_8_9_,5_2_8 ___1_9_,0_1_8_,7_4_0 31/12/2018 ___7_8_,0_7_0_,9_1_0 ___2_6_,7_2_2_,8_1_5 __1_3_,8_7_6_,5_1_9 __1_1_8_,6_7_0_,2_4_4 Total carrying amount
31/12/2018 ____4__5__0__,1__8__2__,0__0__1 ______4__9__,0__9__9__,2__4__2 __1__5__6__,1__9__2__,2__1__6 ____6__5__5__,4__7__3__,4__5__9 31/12/2017 ____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) Land use right's location and years are as follows:
Item 31/12/2018 31/12/2017 RMB RMB In the PRC( within 50 years) 419,300,592 428,226,950 Out of the PRC (more than 50 years) 30,881,409 25,956,417___________ ____________ 450,182,001 454,183,367______________________ ________________________ As at 31 December 2018, the Group has land use right with infinite useful lives of RMB 30,881,409( 31 December 2017: RMB 25,956,417), representing the freehold land held by Chile Indomita Wine Group and Australia Kilikanoon Estate under relevant Chile and Australia laws, on which the amortization is not required.
As at 31 December 2018, the Group has trademark with infinite useful lives of RMB 154,150,933 (31 December 2017: 143,890,533), which is held by Chile Indomita Wine Group and Australia Kilikanoon Estate. The recoverable amount of the trademark is determined according to the present value of the expected future cash flows generated from the asset group to which the single assets of trademark right belongs. The management prepares the cash flow projection for future 5 years (the "projecting period") based on the latest financial budget assumption, and estimates the cash flows after the future 5 years (the "subsequent period"). The pretax discount rates used in the cash flow projections are12.3% and14.4%, respectively. A key assumption in the estimate of future cash flows is the revenue growth rate in the projecting period. Such revenue growth rate is determined based on the industry and the expected growth rate of Chile Indomita Wine Group and
Australia Kilikanoon Estate. The revenue growth rates in the subsequent period are3.0% and
2.5%, respectively.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets - continued
(2) Land use right's location and years are as follows:- continued
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. The management believes that any reasonable change of the above assumptions will not result in the total book value of the asset group to which the single assets of trademark right belongs exceeding its recoverable amount. According to the result of impairment assessment, by the end of 31 December 2018, the management believes there is no impairment loss on those trademark with infinite useful lives of the Group.
As at 31 December 2018, the intangible asset with restricted ownership is RMB 218,070,414 (December 31, 2017:RMB 164,051,996), Please refer to Note VI-45 in detail.
13. Goodwill
Investee 31/12/2017 Increase Decrease 31/12/2018 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 6,870,115 - - 6,870,115 Australia Kilikanoon Estate ________-_ _3_7_,0_6_3_,1_3_0 _____-_ __3_7_,0_6_3_,1_3_0 Total __1__2__8__,1__3__5__,9__8__1 __3__7__,0__6__3__,1__3__0 __________-
__
__1__6__5__,1__9__9__,1__1__1 The Group acquired Fransac Sales, Dicot and Mirefleurs and Chile Indomita Wine Group in December 2013, September 2015 January 2016 and July 2017 respectively, resulting in respective goodwill amounting to RMB 13,112,525, RMB 92,391,901, RMB 15,761,440 and RMB 6,870,115. The Group acquired Australia Kilikanoon Estate in January 2018, resulting goodwill amounting to RMB 37,063,130, 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). The pretax discount rate used in calculating the recoverable amounts of Fransac Sales, Dicot Mirefleurs, Indomita Wine and Australia Kilikanoon Estate are16.6%,12.4%, 16.6%,12.3% and13.1%(2017:15.4%,11.8%,15.4%,13.2% and 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, Indomita Wine and Australia Kilikanoon Estate is2.0%,2.0%,2.0%,3.0%,2.5% (2017:2%,2%,2%,3% 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Goodwill- continued
According to the assessment, the Group believes that no impairment provision need to be made for goodwill in the reporting period.
14. Long-term prepaid expenses
31/12/2017 Increase Amortization 31/12/2018 RMB RMB RMB RMB Land lease prepayments 56,365,385 - (2,147,622) 54,217,763 Land requisition fee 43,976,036 - (548,297) 43,427,739 Greening fee 125,628,334 24,511,623 (8,915,485) 141,224,472 Leasehold improvement 873,263 3,306 (100,922) 775,647 Others ___3_,_16_6_,_2_1_3 __2_,_19_8_,_3_7_3 ___(_36_9_,_7_9_1) ___4_,_99_4_,_7_9_5 230,009,231 26,713,302 (12,082,117) 244,640,416____________________ __________________ __________________ ____________________ Note: The greening fee transferred from CIP to long-term prepaid expenses amounted to RMB 20,406,429, refer to Note VI-10 for details.
15. 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:
31/12/2018 31/12/2017
Temporary Deferred tax Temporary Deferred tax differences assets differences assets RMB RMB RMB RMB Unrealized profit from intra
602,476,583 150,619,145 618,591,681 154,647,920 - company transactions
Unpaid bonus 141,808,257 35,485,814 94,462,722 23,671,611 Retirement benefit 26,186,243 6,546,561 27,980,857 6,995,214 Asset impairment provision 24,683,226 6,170,807 25,595,392 6,398,848 Deductible losses 262,937,999 67,566,387 345,639,059 88,584,337 Deferred income 86,227,293 18,868,963 109,797,054 24,285,203 Assets impairment loss 661,415 178,582 684,622 184,848 Accrued rebate - - 13,413,655 3,353,415 1,144,981,016 285,436,259 1,236,165,042 308,121,396
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Deferred tax assets/liabilities - continued
(2) Deferred tax liabilities
31/12/2018 31/12/2017
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
81,338,130 22,010,647 89,316,823 24,264,203 (3) Deferred tax assets and liabilities not recognized
31/12/2018 31/12/2017 RMB RMB Deductible losses 171,430,831 150,320,039______________________ ________________________ (4) Deductible losses not recognized as deferred tax assets will expire in:
31/12/2018 31/12/2017 RMB RMB 2018 - - 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 14,362,787 2023 21,110,792 -____________ ____________ 171,430,831 150,320,039________________________ ________________________ 16. Short-term borrowings
31/12/2018 31/12/2017 RMB RMB Credit loans 605,202,708 648,494,624 Mortgaged loans 79,467,832 65,939,662 Guaranteed loan 3,331,870 -____________ ____________ 688,002,410 714,434,286________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Short-term borrowings - continued
As at 31 December 2018, 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) 400,000,000 1.0000 400,000,000 Floating 1 year LPR- 0.04(Note 1) 4.35 Credit loans (RMB) 150,000,000 1.0000 150,000,000 Floating Annual benchmark rate 4.35 Credit loans (EUR) 912,455 7.8473 7,160,308 Fixed 0.86~2.53 0.86~2.53 Credit loans (USD) 7,000,000 6.8632 48,042,400 Fixed 3.97~4.90 3.97~4.90 Mortgaged loans (EUR) 6,628,399 7.8473 52,015,032 Fixed 0.35~0.95 0.35~0.95 Mortgaged loans (USD) 4,000,000 6.8632 27,452,800 Fixed 4.22~4.38 4.22~4.38 Guaranteed loan(AUD) 690,543 4. 8250 ___3_,_33_1_,8_7_0 Fixed 3.00 3.00____6__88__,__00__2__,4__1__0
Note 1: LPR is the basic interest rate of the People's Bank of China.
As at 31 December 2018, 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 6,628,399 (translated as RMB 52,015,032)(31 December 2017:RMB 46,337,062). Mortgaged loans were Indomita Wine mortgaged Chilean peso 7,642,470,000 (translated as RMB 75,601,849 ) fixed assets from BBVA bank USD 4,000,000 (translated as RMB 27,452,800 )( December 31, 2017: RMB 19,602,600 ). Australia Kilikanoon Estate has guaranteed loans of 690,543 Australian dollars (equivalent to RMB 3,331,870)(31 December 2017: Nil).
17. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017 RMB RMB Within 1 year 710,208,269 664,020,176 1 to 2 years 3,091,659 2,051,592 2 to 3 years 121,598 371,111 Over 3 years 151,355 -____________ ____________ 713,572,881 666,442,879________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Advances from customers
The aging analysis of advances from customers are as follows
31/12/2018 31/12/2017 RMB RMB Within 1 year 221,022,547 340,025,690 1 to 2 years 1,155,555 7,072,254 2 to 3 years 1,032,609 381,463 Over 3 years 2,864,533 3,414,749____________ ____________ 226,075,244 350,894,156________________________ ________________________ 19. Employee benefits payable
(1) Employee benefits payable as follows:
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Short-term payroll 182,545,284 481,042,461 (477,694,636) 185,893,109 Post-demission benefits
- predetermined provision plan 298,093 51,503,280 (51,576,508) 224,865 Termination benefits __2_7_,9_8_0_,8_5_7 __1_3_,6_7_7_,2_1_6 _(_1_5_,4_7_1_,8_3_0) __2_6_,1_8_6_,2_4_3__2__1__0__,8__2__4__,2__3__4 __5__4__6__,2__2__2__,9__5__7 __(5__4__4__,7__4__2__,9__7__4) __2__1__2__,3__0__4__,2__1__7 (2) Employee benefits payable:
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Salaries and bonus 185,014,318 428,052,734 (425,381,062) 187,685,990 Staff benefit 2,116,475 17,783,378 (16,885,565) 3,014,288 Staff welfare 524,316 20,677,314 (20,740,535) 461,095 Includes:
Medical insurance 524,316 19,045,528 (19,109,404) 460,440 Injury insurance - 895,750 (895,095) 655 Maternity insurance - 736,036 (736,036) - Housing fund 39,256 10,444,925 (10,431,671) 52,510 Union fee and education fee ___2_,0_6_0_,2_3_1 ___4_,1_0_9_,6_5_1 __(_4_,2_5_5_,8_0_3) ___1_,9_1_4_,0_7_9 Total _1_8_9_,7_5_4_,5_9_6 _4_8_1_,0_6_8_,0_0_2 _(4_7_7_,6_9_4_,6_3_6) _1_9_3_,1_2_7_,9_6_2 Less: Non-current liabilities ___7_,2_0_9_,3_1_2 ___7_,2_3_4_,8_5_3 Short-term payroll __1__8__2__,5__4__5__,2__8__4 __1__8__5__,8__9__3__,1__0__9
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Employee benefits payable - continued
(3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Pension 297,591 50,534,986 (50,608,044) 224,533 Unemployment insurance _____5_0_2 _____96_8_,_2_9_4 ____(_96_8_,_4_6_4) _____3_3_2 298,093 51,503,280 (51,576,508) 224,865______________ ____________________ ____________________ ______________ 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 50,534,986 and RMB 968,294 (2017: RMB 48,834,066 and RMB 1,141,605 ) respectively into pension insurance and unemployment insurance. As at 31 December 2018, the Group has unpaid pension and unemployment insurance of RMB 224,533 and RMB 332 respectively (31 December 2017: RMB 297,591 and RMB 502 ), 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.
20. Taxes payable
31/12/2018 31/12/2017 RMB RMB Value added tax 36,442,868 35,681,696 Consumption tax 28,636,646 44,961,022 Corporation income tax 40,869,507 38,834,293 Urban land use tax 2,476,527 2,645,687 Individual income tax 5,669,099 7,805,917 City construction tax 4,337,712 5,669,280 Property tax 5,165,128 4,647,644 Others 5,315,303 4,848,617____________ ____________ 128,912,790 145,094,156________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Other payables
21.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Interest payable 712,826 771,250 Other payables 607,767,064 602,964,319____________ ____________ 608,479,890 603,735,569________________________ ________________________ 21.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017 RMB RMB Payable to dealer deposit 159,191,138 139,710,963 Payables for equipment and construction 152,825,734 130,706,777 Payables for transportation 38,867,725 27,847,092 Royalty fee 78,414,978 77,208,929 Advertising costs 80,715,461 118,834,960 Withholding promotion costs 15,714,400 13,413,655 Employee deposit 2,806,766 13,327,132 Deposits from suppliers 15,901,210 3,082,595 Payables for contracting fee 27,070,584 38,070,571 Others 36,259,068 40,761,645____________ ____________ 607,767,064 602,964,319________________________ ________________________ (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") 9,493,506 Payables for contracting fee VASF Company ___4_,8_7_8_,8_6_6 Payables for contracting fee____1__4__,3__7__2__,3__7__2
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
22. Deferred income
31/12/2018 31/12/2017 RMB RMB Government grants
Current liabilities 15,860,254 16,878,199 Non-current liabilities 70,367,039 92,918,855____________ ____________ 86,227,293 109,797,054________________________ ________________________ 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 4,739,400 - (1,434,900) 3,304,500 Assets Shihezi chateau project funds 9,276,600 - (2,280,000) 6,996,600 Assets Xinjiang Industrial Rejuvenation and
Technological Reconstruction Project 17,064,000 - (1,422,000) 15,642,000 Assets Special support for infrastructure facilities 5,300,000 - (1,060,000) 4,240,000 Assets Ningxia industry revitalization and
technology reconstruction funds 1,086,000 - (1,086,000) - Assets Tourism Development Fund Subsidy Project 500,000 - - 500,000 Income Support enterprise development special funds 10,200,000 - (10,200,000) - Income (Huanren) wine production construction funds 3,600,000 - (400,000) 3,200,000 Assets Wine electronic tracking system
specific funds 3,192,311 - (667,054) 2,525,257 Assets Miyun Propaganda Department transfer 888,945 - (888,945) - Assets Wine industry specific funds 744,000 - (186,000) 558,000 Assets Shandong Peninsula Blue Economic
Area construction funds 8,000,000 - (2,000,000) 6,000,000 Assets Information system construction
project technology funds 3,480,000 - (580,000) 2,900,000 Assets Cross-border e-Business projects subsidies 702,615 300,000 (122,359) 880,256 Income Red wine phenolics research projects funds 284,601 - (284,601) - Income Grape base construction project 520,000 - (520,000) - Assets Water pollution abatement project 320,132 - (113,602) 206,530 Income Infrastructure construction project 1,843,750 - (125,000) 1,718,750 Assets Industrial development support project 36,900,000 - (4,100,000) 32,800,000 Assets Subsidy for updating of economic and
energy-saving technology 1,154,700 - (128,300) 1,026,400 Assets Special funds for efficient water saving
irrigation project - 1,720,000 (81,000) 1,639,000 Assets Guidance funds for service industry development - 2,000,000 - 2,000,000 Income Relocation allowance for boiler renovation ______-_ ___1_0_0,_00_0 ___(_10_,0_0_0) ____90_,_00_0 Income Total __10__9__,7__97__,0__5__4 ____4__,1__2__0,__00__0 __(2__7__,6__89__,7__6__1) __8__6__,2__2__7,__29__3
Less: Non-current liabilities due within one year_1_6_,8_7_8,_19_9 _1_5_,8_6_0,_25_4
Other non-current liabilities __9__2__,9__1__8,__85__5 __7__0__,3__6__7,__03__9
As at 31 December 2018, 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
23. Non-current liabilities due within one year
31/12/2018 31/12/2017 RMB RMB Long-term borrowings due within one year 118,940,788 76,954,827 Long-term payables due within one year 34,000,000 34,000,000____________ ____________ 152,940,788 110,954,827________________________ ________________________ As at 31 December 2018, Long-term borrowings due within one year refers to Note VI-24, Long- term payables due within one year refers to Note VI-25.
24. Long-term borrowings
31/12/2018 31/12/2017 RMB RMB Credit loan 41,805,746 68,182,310 Mortgaged loan 3,924,916 6,693,544 Guaranteed loan 110,750,000 81,250,000____________ ____________ 156,480,662 156,125,854________________________ ________________________ As at 31 December 2018, 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) 81,250,000 1.0000 81,250,000 Floating 5 year LPR- 0.9 4.275 18,750,000 62,500,000 Credit loan (EUR) 17,734,954 7.8473 139,171,506 Fixed 1.00-2.53 1.00-2.53 97,365,760 41,805,746 Mortgaged loan (EUR)(Note) 860,161 7.8473 6,749,944 Fixed 1.80 1.80 2,825,028 3,924,916 Guaranteed loan(AUD)(Note) 10,00 0,000 4. 8250__4_8,_25_0,_00_0 Fixed 3 .00 3 .00______-___4_8,_25_0,_00_0____27__5,__42__1,__45__0 ____11__8,__94__0,__78__8____15__6,__48__0,__66__2 Note: As at 31 December 2018, The secured loan is the long-term loan borrowed by the company forR&D Centre credit guarantee, RMB 81,250,000 (31 December 2017: RMB 100,000,000), mortgaged loans were Atrio using fixed assets EUR 4,264,170 (translated as RMB 33,462,225) as collateral for loans from PopularEspañol, EUR 860,161 (translated as RMB 6,749,944), (31 December 2017: RMB 9,502,372).The guaranteed loan(AUD) is the loan of AUD 10,000,000 borrowed by Australia Kilikanoon Estate from Australia& New Zealand banking( translated as RMB 48,250,000)(31 December 2017:Nil), which was guaranteed by the Company.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
25. Long-term payables
31/12/2018 31/12/2017 RMB RMB Agricultural Development
Fund of China ("CADF") 225,000,000 259,000,000________________________ ________________________ 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 RMB 34,000,000 in 2018. Refer to Note VI-45 for details of mortgaged and pledged assets.
Long-term Termination date Mortgaged payables Yield rate Investment date of repayment Due within 1 year Due after 1 year and pledged assets RMB RMB RMB 67,000,000 1.2% 12 January 2016 24 December 2025 10,000,000 57,000,000 Cash and Bank Intangible assets 176,000,000 1.2% 29 February 2016 28 February 2026 22,000,000 154,000,000 Fixed assets and intangible assets___1_6_,0_0_0_,_00_0_ 1.2% 16 June 2016 22 May 2026 ___2_,0_0_0_,_0_0_0 __1_4_,_0_0_0_,0_0_0_ Cash and bank__2__5__9__,__0__0__0__,0__0__0__ ____3__4__,0__0__0__,__0__0__0 __2__2__5__,__0__0__0__,0__0__0__
26. Other non-current liabilities
31/12/2018 31/12/2017 RMB RMB Employee benefit 7,234,853 7,209,312__________________ __________________ As at 31 December 2018, employee benefit represents deposit from bonus accrued for managers and above. According to the bonus payment schedule of 2018, the bonus is expected to be paid during 2020 to 2022.
27. Share capital
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Unrestricted shares
A shares 453,460,800 - - 453,460,800 B shares _2_3_2_,_00_3_,_2_0_0 _____-
_
_____-
_
_2_3_2_,0_0_3_,_2_0_0 Total of unrestricted shares
and total shares 685,464,000 - - 685,464,000____________________ ____________ ____________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Capital reserve
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Share premium 560,038,853 - - 560,038,853 Other ___5_,_91_6_,_5_8_8 _____-
_
_____-
_
___5_,9_1_6_,_5_8_8 Total 565,955,441 - - 565,955,441____________________ ____________ ____________ ____________________ 29. Other comprehensive income
2018
2018 Less: last year other Post-tax Post-tax
Opening Before-tax comprehensive income Less: attributable attributable Closing balance amount in P/L current year tax expense to parent to NCI balance Other comprehensive
income to be reclassified
to profit and loss 3,109,240 (376,524) - - (143,863) (232,661) 2,965,377 Foreign currency statement
translation difference ____3,__10__9,__24__0__(__37__6,__52__4) ____-____ ____-____ __(__14__3,__86__3) __(__23__2,__66__1) ____2__,96__5__,37__7 30. Surplus reserve
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Statutory surplus reserve 342,732,000 - - 342,732,000____________________ ____________ ____________ ____________________ 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 2018.
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.
31. Retained earnings
31/12/2018 31/12/2017 RMB RMB Retained earnings brought forward 7,309,081,618 6,620,118,562 Profit attributable to shareholders of the Company 1,042,632,929 1,031,695,056 Less: Dividends paid in respect prior year's profit (342,732,000) (342,732,000)____________ ____________ Retained earnings carried forward 8,008,982,547 7,309,081,618________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Retained earnings - continued
(1) Appropriation to surplus reserve by subsidiaries
As at 31 December 2018, the balance of the Group's unappropriated profits include appropriation to surplus reserve by subsidiaries amounting to RMB 54,336,543 (31 December 2017: RMB 51,994,942).
(2) Cash dividends approved by general meeting
According to the annual general meeting on 25 May 2018, 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 18 April 2019, on the basis of 685,464,000 issued shares in 2018, cash dividends of RMB 6.0 (including taxes) for every 10 share will be distributed to all the shareholders. The aggregate amount of cash dividend is RMB 411,278,400. The above proposal regarding dividends distribution is yet to be approved in a shareholders' meeting.
32. Revenue and costs
Revenue is analysed as follows:
2018 2017 RMB RMB Principal Revenue 5,066,265,044 4,856,168,699 Other Revenue 75,979,696 76,376,530____________ ____________ 5,142,244,740 4,932,545,229________________________ ________________________ Operating cost is analysed as follows:
2018 2017 RMB RMB Principal operating cost 1,872,991,039 1,645,690,616 Other operating cost 28,620,468 25,901,663____________ ____________ 1,901,611,507 1,671,592,279________________________ ________________________ The Revenue for the Group is mainly from the sales of wine, brandy and sparkling wine. In 2018, Over87% (2017: over91%) of the sales generated in PRC.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
33. Taxes and surcharges
2018 2017 RMB RMB Consumption tax 157,037,382 177,879,324 City construction tax 39,655,738 52,247,915 Education fee and surcharges 28,762,507 35,831,575 Property tax 31,461,708 23,113,211 Land use tax 12,098,790 11,874,984 Stamp tax 4,507,785 3,945,731 Others 2,967,764 5,359,283____________ ____________ 276,491,674 310,252,023________________________ ________________________ For detail standards of tax rate please refer to Note V.
34. Selling expenses
2018 2017 RMB RMB Marketing expenses 386,519,123 428,828,931 Salary and employee benefit 297,489,665 272,148,620 Freight 141,756,007 139,218,637 Trademark fee 73,976,395 72,838,612 Labor fee 72,036,252 67,860,856 Warehouse leasing expenses 45,668,613 53,075,132 Depreciation cost 41,410,740 34,963,089 Advertising fees 35,857,276 34,753,090 Conference expenses 32,731,215 31,609,123 Design cost 29,437,757 27,226,277 Travelling expenses 27,176,277 27,709,534 Security and sanitation fee 12,896,986 12,659,228 Water and electricity fee 11,297,244 11,247,163 Office allowance 9,707,518 6,165,561 Packing cost 8,195,160 7,163,930 Taxes 7,113,764 6,771,337 Amortization of low-value consumables 5,756,602 4,028,573 Business entertainment 5,665,336 4,403,750 Others 29,907,216 29,851,000____________ ____________ 1,274,599,146 1,272,522,443________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Administrative expense
2018 2017 RMB RMB Salary and employee benefit 114,473,209 106,342,126 Depreciation 71,978,485 71,558,307 Maintenance fee 25,189,384 21,665,024 Administrative expenses 23,766,176 22,173,925 Amortization 18,187,049 22,438,364 Greening fee amortization 14,730,804 10,667,941 Contracting fee 13,364,835 21,162,623 Rental fees 13,012,167 12,414,249 Safe production cost 9,692,574 7,840,215 Security and sanitation fee 8,659,405 6,317,723 Service fee 6,556,258 12,118,257 Entertainment fee 5,300,526 5,470,001 Travelling expenses 3,630,225 4,747,256 Others 15,039,554 11,545,122____________ ____________ 343,580,651 336,461,133________________________ ________________________ 36. Financial expense
2018 2017 RMB RMB Interest income (12,086,007) (9,168,772) Exchange income (666,323) (182,610) Interest expenses 52,198,774 32,233,729 Less: Capitalization of interests 5,843,872 6,138,242 Bank charges 2,342,730 1,846,154____________ ____________ 35,945,302 18,590,259________________________ ________________________ 37. (Reversal of)Impairment loss of assets
2018 2017 RMB RMB (Reversal of) Inventory impairment (912,166) 7,938,748 Impairment losses from other receivables - 354,805________ __________ (912,166) 8,293,553________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
38. Other income
2018 2017 Assets/income related Project Subsidy RMB RMB
Tax refund 6,587,773 17,765,560 Income Special funds for manufacturing industry 4,750,000 4,100,000 Income Industrial development support project 4,100,000 - Assets Ningxia industry revitalization and
technology reconstruction funds 1,086,000 3,295,000 Assets Project funds 2,280,000 2,280,000 Assets Shandong Peninsula Blue Economic
Area construction funds 2,000,000 2,000,000 Assets Special funds for the development
of enterprises 42,953,900 - Income Others 7,493,199 6,352,199 Assets Others 16,030,562 10,245,625 Income__________ __________
87,281,434 46,038,384
____________________ ____________________
39. Non-operation income
Recognized in extraordinary 2018 2017 profit and loss RMB RMB RMB Government grants - 1,600,000 - Penalty income 1,901,530 7,993,571 1,901,530 Others 5,451,779 7,637,156 5,451,779__________ __________ __________ 7,353,309 17,230,727 7,353,309____________________ ____________________ ____________________ 40. Non-operation expenses
Recognized in extraordinary 2018 2017 profit and loss RMB RMB RMB Compensation and penalty loss 2,576,838 347,528 2,576,838 Donation 293,819 294,899 293,819 Others 665,251 989,049 665,251__________ __________ __________ 3,535,908 1,631,476 3,535,908____________________ ____________________ ____________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
41. Income tax
2018 2017 RMB RMB Current income tax 352,598,370 330,784,002 Deferred income tax 14,529,152 7,350,243____________ ____________ 367,127,522 338,134,245________________________ ________________________ Reconciliation between income tax expenses and profits is as follows:
2018 2017 RMB RMB Profit before tax 1,408,611,698 1,371,927,763 Income tax expense at statutory tax rate25%(2017:25%) 352,152,925 342,981,941 Effect of different tax rates applied by certain subsidiaries (949,634) (9,600,821) Changes in opening balances of deferred tax
liabilities due to tax rate adjustment - (1,342,916) Unrecognised Deductible loss 4,642,727 3,590,697 Utilization of Deductible losses which were not
recognized previously - (6,157,735) Non-deductible expenses 5,496,292 7,550,095 Write-off of deferred tax assets 5,785,212 1,112,984____________ ____________ Income tax expenses 367,127,522 338,134,245________________________ ________________________ 42. 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.
2018 2017 RMB RMB Earnings
Consolidated profit attributable to ordinary
shareholders of the Company 1,042,632,929 1,031,695,056____________ ____________ Shares
Weighted average number of outstanding
ordinary shares 685,464,000 685,464,000____________ ____________ Basic earnings per share 1.52 1.51________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Basic and dilutive earnings per share - continued
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.
43. Notes to consolidated cash flow statement
(1) Cash received relating to other operating activities:
2018 2017 RMB RMB Government grants 57,123,900 20,930,752 Interest income 7,871,853 3,839,079 Penalty income 1,901,530 7,993,571 Refundable deposits of notes payable - 46,900,000 Others 5,806,589 5,573,503____________ ____________ 72,703,872 85,236,905________________________ ________________________ (2) Cash paid relating to other operating activities:
2018 2017 RMB RMB Selling expenses 918,966,855 956,902,163 General and administrative expenses 140,112,380 107,905,766 Refundable deposits of notes payable - 8,000,000 Others 4,637,082 2,103,059____________ ____________ 1,063,716,317 1,074,910,988________________________ ________________________ (3) Cash paid for the purchase subsidiaries and other equity:
2018 2017 RMB RMB Cash paid for acquisition of Australia Kilikanoon Estate 107,194,420 - Less: Cash and bank for Australia Kilikanoon Estate
at acquisition date 1,359,765 - Cash paid for acquisition of Indomita Wine - 318,867,650 Less: Cash and bank for Indomita
Wine at acquisition date - 15,071,107____________ ____________ 105,834,655 303,796,543________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
43. Notes to consolidated cash flow statement - continued
(4) Cash received relating to other financing activities:
2018 2017 RMB RMB Received government grants related to assets - 5,800,000R&D Centre long-term payables pledged time deposit 61,700,000 46,100,000 Interest income fromR&D Centre long-term payables
pledged time deposit 768,259 1,030,804____________ ____________ 62,468,259 52,930,804________________________ ________________________ (5) Cash paid relating to other financing activities:
2018 2017 RMB RMBR&D Centre long-term payables pledged time deposit 46,100,000 61,700,000____________________ ____________________ 44. Supplementary information to consolidated cash flow statement
(1) Supplementary information to consolidated cash flow statement
2018 2017 RMB RMB Cash flows from operating activities
calculated by adjusting the net profit:
Net profit 1,041,484,176 1,033,793,518 Add:Loss for (reversal of) impairment of assets (912,166) 8,293,553 Depreciation of investment properties 1,857,902 590,610 Depreciation of fixed assets 297,838,358 250,264,403 Amortization of intangible assets 19,018,740 24,098,781 Depreciation of biological assets 12,034,812 10,160,981 Amortization of long-term prepaid expenses 12,082,117 13,911,581 (Gains) losses on disposal of assets (11,368,355) 222,586 Finance expense 45,855,744 22,381,504 Decrease in deferred tax assets 22,685,137 13,315,979 Decrease in deferred tax liabilities (8,155,985) (5,965,736) Increase in inventories (180,452,933) (138,995,031) Increase in operating receivables (137,899,294) (180,593,570) Decrease in operating payables (138,089,507) (78,236,132)____________ ____________ Net cash flows from operating activities 975,978,746 973,243,027________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Supplementary information to consolidated cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments. 2018 2017 RMB RMB Payment of intangible assets and other
long-term assets by bank acceptances 109,378,598 140,493,507________________________ ________________________ (3) Cash and cash equivalents
31/12/2018 31/12/2017 RMB RMB Closing balance of Cash and bank 1,475,700,477 1,402,522,509 Less:
Restricted bank deposits 2,611,350 2,645,410 Restricted other monetary funds 93,186,393 123,987,825 Deposit with a period of over three months 173,042,400 95,000,000____________ ____________ Closing balance of cash and cash equivalents 1,206,860,334 1,180,889,274________________________ ________________________ 31/12/2018 31/12/2017 RMB RMB Cash 1,206,860,334 1,180,889,274 Including: Cash on hand 114,335 136,973 Bank deposits on demand 1,206,745,999 1,180,752,301____________ ____________ Closing balance of cash and cash equivalents 1,206,860,334 1,180,889,274________________________ ________________________ 45. Assets with restriction of ownership
31/12/2018 31/12/2017 RMB RMB Cash and bank 95,797,743 126,633,235 Account receivable 52,015,032 46,337,062 Fixed assets 412,006,421 145,009,923 Intangible assets 218,070,414 164,051,996________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Cash and bank with restriction of ownership as follows:
31/12/2018 31/12/2017 RMB RMBR&D Centre long-term payables pledged time deposit 46,100,000 61,700,000 Refundable deposits of letter of credit 44,540,850 57,946,190 Balance in Alipay account 2,483,816 4,317,635 Home maintenance funds 2,611,350 2,645,410 Margin for entity card 51,727 14,000 Deposit for ICBC platform 10,000 10,000____________ ____________ Total 95,797,743 126,633,235________________________ ________________________ Among the aforementioned items, the amount of RMB 2,483,816 which is the blocked balances of goods payment in Alipay account can be unlocked after 15 days.
As at 31 December 2018, the amount of accounts receivable with restricted ownership is EUR 6,628,399 (translated as RMB 52,015,032) , which refers to accounts receivable Atrio conducted for factoring from Banco de Sabadell, S.A. etc.
As at 31 December 2018, fixed assets with restriction of ownership as follows:
Restricted reasons 31/12/2018 Company RMB The Company Long-term payable collateral fromR&D Centre 34,246,887 Sales Company Long-term payable collateral fromR&D Centre 39,557,304 Atrio Company Long-term borrowings collateral 33,462,225 Indomita Wine Short-term borrowings collateral 75,601,849 Ningxia Moser 15th Changyu
Wine Chateau Co., Ltd.
(" Ningxia Chateau") Long-term payable collateral fromR&D Centre 184,678,629 Ningxia Wine Co.Ltd.
("Ningxia Wine"). Long-term payable collateral fromR&D Centre 44,459,527___________ Total 412,006,421______________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Intangible assets with restriction of ownership as follows:
Restricted reasons 31/12/2018 Company RMB The Company Long-term payable collateral fromR&D Centre 50,902,950R&D Centre Long-term payable collateral fromR&D Centre 108,913,538 Ningxia Chateau Long-term payable collateral fromR&D Centre 8,906,611 Ningxia Wine Long-term payable collateral fromR&D Centre 49,347,315___________ Total 218,070,414______________________ 46. 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 7.8473 997 HKD 213 0.8762 187 USD 7,196,107 6.8632 49,388,322____________________ ____________ ______________________ (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 functional currency of Australia Kilikanoon Estate is AUD. 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 25,328 7.8473 198,756 USD 276,196 6.8632 1,895,588 Short-term borrowings
USD 11,000,000 6.8632 75,495,200____________________ ____________ ______________________
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
Net profit Equity Revenue from from Equity acquisitio Equity acquisition acquisition Name of acquisition acquisitio Equity n ratio acquisitio Acquisitio Basis of date to year date to year company n date acquisition cost (%) n method n date acquisition date end end RMB RMB Finish payment
Australia Kilikanoon Estate 18 January AUD 18 January and acquire
2018 20,860,825 80% Purchase 2018 equity 57,648,905 217,869 Other detail information:
Pursuant to the Agreement on the delivery of transferred equities entered into between the shareholders of the Company and Australia Kilikanoon Estate on 5 December 2017, the Company acquired80% equity interests of Australia Kilikanoon Estate at the consideration of AUD 20,860,825( translated as RMB 107,194,420). The Company completed the equity transfer on 18 January 2018 and obtained the control of financial and operating policies over Australia Kilikanoon Estate.
(2) Consideration and Goodwill
Consideration
Australia Kilikanoon Estate RMB Cash 107,194,420 Total consideration 107,194,420 Less: acquired provisional value of net assets 70,131,290___________ Goodwill 37,063,130______________________ (3) Recognised assets and liabilities of mergee at acquisition date
Australia Kilikanoon Estate Fair 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 Prepayment 237,174 237,174 Other receivables 187,720 187,720 Inventories 69,612,312 57,946,312 Fixed assets 49,029,999 38,696,709 Intangible assets 16,417,886 7,461,624____________ ____________ Total assets 147,211,137 116,255,585
________________________ ________________________
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 acquiree at acquisition date- continued
Australia Kilikanoon Estate Fair value Book value at acquisition date at acquisition date RMB RMB 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________________________ ________________________ 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 Manufacturing 60% - Subsidiary acquired in 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 Navarra, Spain Navarra, Spain Sales 75% - Subsidiary acquired in business combination under non- common control IWCC Santiago, Chile Santiago, Chile Sales 85% -
Subsi ed sia tar bie ls is a hc mq eu nir te d by Subsidiary acquired in business Australia Kilikanoon Estate Adelaide Australia Adelaide Australia Sales 80% - combination under non- common control Beijing Changyu Sales and distribution Co., Ltd ("Beijing Sales") Beijing, China Beijing, China Sales 100% - Subsidiaries acquired by establishment Yantai Kylin Packaging Co., Ltd. Yantai, Shandong, China Yantai, Shandong, China Manufacturing 100% - Subsidiaries acquired by ("Kylin Packaging") establishment Yantai Changyu-Castel Wine Chateau Co., Ltd ("Changyu Chateau") (b) Yantai, Shandong, China Yantai, Shandong, China Manufacturing 70% - Subsidiaries acquired by establishment Changyu (Jingyang) Wine Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturing 90% 10% Subsidiaries acquired by ("Jingyang Wine") establishment Yantai Changyu Pioneer Wine Sales Co., Ltd. ("Sales Company") Yantai, Shandong, China Yantai, Shandong, China Sales 100% - Subsidiaries acquired by establishment Langfang Development Zone Castel-Changyu Wine Co., Ltd ("Langfang Lanfang, Hebei, China Lanfang, Hebei, China Manufacturing 39% 10% Subsidiaries acquired by Castel") (c) 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
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 Sales") Lanfang, Hebei, China Lanfang, Hebei, China Sales 10% 90% Subsidiaries acquired by establishment Shanghai Changyu Sales and distribution Co., Ltd. ("Shanghai Sales") Shanghai, China Shanghai, China Sales 30% 70% Subsidiaries acquired by establishment Beijing Changyu AFIP Agriculture development Co., Ltd ("Agriculture Miyun, Beijing, China Miyun, Beijing, China Sales - 100% Subsidiaries acquired by Development") establishment Beijing Chateau (d) Beijing, China Beijing, China Manufacturin 90% - Subsidiaries acquired by g establishment Yantai ("Beijing Chateau") Changyu Wine Sales Co., Ltd. ("Wines Yantai, Shandong, China Yantai, Shandong, China Sales 90% 10% Subsidiaries acquired by Sales") establishment Yantai Changyu Pioneer International Co., Ltd. ("Pioneer International") Yantai, Shandong, China Yantai, Shandong, China Sales 70% 30% Subsidiaries acquired by establishment Hangzhou Changyu Wine Sales Co., Ltd. ("Hangzhou Changyu") Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by establishment Ningxia Growing Yinchuang, Ningxia, China Yinchuang, Ningxia, China Planting 100% - Subsidiaries acquired by establishment Huanren Changyu National Wines Sales Co., Ltd. ("National Wines") Benxi, Liaoning, China Benxi, Liaoning, China Sales 100% - Subsidiaries acquired by establishment Liaoning Changyu Ice Wine Chateau Co., Ltd. ("Ice Chateau") (e) Benxi, Liaoning, China Benxi, Liaoning, China Manufacturin 51% - Subsidiaries acquired by g establishment Yantai Development Zone Changyu Trading Co., Ltd ("Development Yantai, Shandong, China Yantai, Shandong, China Sales - 100% Subsidiaries acquired by Zone Trading") establishment Shenzhen Changyu Wine Marketing Ltd. ("Shenzhen Marketing") Shenzhen, Guangdong, China Shenzhen, Guangdong, China Sales - 100% Subsidiaries acquired by 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 Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturin 100% - Subsidiaries acquired by g 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 Xia Sales") Qing Tong Xia, Ningxia, China Qing Tong Xia, Ningxia, China Sales - 100% Subsidiaries acquired by establishment Shihezi Chateau Shihezi, Xinjiang, China Shihezi, Xinjiang, China Manufacturin 100% - Subsidiaries acquired by g establishment Ningxia Chateau Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturin 100% - Subsidiaries acquired by g establishment Shanxi Changyu Rina Castle Chateau Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturin 100% - Subsidiaries acquired by (" Chang'an Chateau") g establishmentR&D Centre (f) Yantai, Shandong China Yantai, Shandong China Manufacturin 72% - 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 Changyu Sales Co., Ltd Shihezi Xinjiang China Shihezi Xinjiang China Sales - 100% Subsidiaries acquired by ("Xinjiang Sales") 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 Pioneer") Xianyang, Shanxi, China Xianyang, Shanxi, China Sales - 100% Subsidiaries acquired by establishment Shenyang Changyu Pioneer Sales Co., Ltd ("Shenyang Pioneer") Shenyang, Liaoning, China Shenyang, Liaoning, China Sales - 100% Subsidiaries acquired by 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 Pioneer") Shanghai, China Shanghai, China Sales - 100% Subsidiaries acquired by 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 Pioneer") Shijiazhuang, Hebei, China Shijiazhuang, Hebei, China Sales - 100% Subsidiaries acquired by establishment Hangzhou Yuzefeng Sales Co., Ltd ("Hangzhou Yuzefeng") Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by establishment Jilin Changyu Pioneer Sales Co., Ltd ("Jilin Pioneer") Changchun, Jilin, China Changchun, Jilin, 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
Beijing Changyu Pioneer Sales Co., Ltd ("Beijing Pioneer") Beijing, China Beijing, China Sales - 100% Subsidiaries acquired by establishment Harbin Changyu Pioneer Sales Co., Ltd ("Harbin Pioneer") Harbin, Heilongjiang, China Harbin, 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 Pioneer") Yinchuan, Ningxia, China Yinchuan, Ningxia, China Sales - 100% Subsidiaries acquired by establishment Kunming Changyu Pioneer Sales Co., Ltd ("Kunming Pioneer") Kunming, Yunnan, China Kunming, Yunnan, China Sales - 100% Subsidiaries acquired by establishment Chongqing Changyu Pioneer Sales Co., Ltd ("Chongqing Pioneer") Chongqing, China Chongqing, China Sales - 100% Subsidiaries acquired by establishment Wuhan Changyu Pioneer Sales Co., Ltd ("Wuhan Pioneer") Wuhan, Hubei, China Wuhan, Hubei, China Sales - 100% Subsidiaries acquired by establishment Hohhot Changyu Pioneer Sales Co., Ltd ("Hohhot Pioneer") Hohhot Inner Mongolia, China Hohhot Inner Mongolia, China Sales - 100% Subsidiaries acquired by establishment Chengdu Changyu Pioneer Sales Co., Ltd ("Chengdu Pioneer") Chengdu, Sichuan, China Chengdu, Sichuan, China Sales - 100% Subsidiaries acquired by establishment Nanning Changyu Pioneer Sales Co., Ltd ("Nanning Pioneer") Nanning, Guangxi, China Nanning, Guangxi, China Sales - 100% Subsidiaries acquired by establishment Lanzhou Changyu Pioneer Sales Co., Ltd ("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 Changyu Pioneer Sales Co., Ltd ("Hefei Pioneer") Hefei, Anhui, China Hefei, Anhui, China Sales - 100% Subsidiaries acquired by establishment Urumchi Changyu Pioneer Sales Co., Ltd ("Urumchi Pioneer") Urumchi Xinjiang, China Urumchi Xinjiang, China Sales - 100% Subsidiaries acquired by establishment Guangzhou Changyu Pioneer Sales Co., Ltd ("Guangzhou Pioneer") Guangzhou Guangdong, China Guangzhou Guangdong, China Sales - 100% Subsidiaries acquired by 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) 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.
(c) 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 was terminated on 31 December 2017. Non-controlling shareholders of Langfang Chateau will be entitled to/abided by the rights/obligations of the shareholders as agreed in the Articles of Association upon the due date of the agreement arrangement.
(d) Beijing Chateau is a joint venture established by the Company, Yantai De'an and Beijing Qinglang, and the Company increases the capital contribution RMB 502,910,000 in this period, Yantai De'an and Beijing Qinglang together increase the capital contribution RMB29,840,000. Beijing Chateau has compelled the business registration 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
(e) 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.
(f) R&D Centre is a joint venture established by the Company and CADF, accounting for72% ofR&D Centre's equity interest at 31 December 2018. The Company has complete control over the operation, investment and financial policies of theR&D Centre subject to the contract arrangement as described in Note VI-25. The contract arrangement will expire on 22 May 2026. As at 31 December 2018, the remaining investment of IFAD accounted for28% of the registered capital.
2. Non-wholly owned subsidiaries
Profit and loss belongs 31/12/2018 Non-controlling to non-controlling Distributions to Assimilate non-controlling Name interest shareholder ratio interest shareholders non-controlling interest interest Xinjiang Tianzhu 40% (2,760,804) - - 50,612,648 Atrio 25% 844,190 (744,149) - 31,726,931 Changyu Chateau 30% - - - 12,365,016 Langfang Castel 51% (1,774,541) - - 20,927,981 Beijing Chateau 10% - - - 65,133,868 Ice Chateau 49% - - - 33,319,062 IWCC 15% 2,619,885 (2,655,627) - 53,079,827 Australia Kilikanoon Estate 20% ____(_31_0_,1_4_4) ________-_ ___17_,_53_2_,8_2_3 ___17_,_22_2_,6_7_9______(1__,__38__1__,4__1__4) ______(3__,__39__9__,7__7__6) ______17__,__53__2__,8__2__3 ____2__84__,__38__8__,0__1__2
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
3. Key financial information of important non-wholly owned subsidiaries
31/12/2018 31/12/2017
Current Non-current Total Current Non-current Total Current Non-current Current Non-current Total Total assets
Name assets assets assets liabilities liabilities liabilities assets assets liabilities liabilities liabilities Xinjiang Tianzhu 27,390,495 66,486,795 93,877,290 - 5,336,114 5,336,114 30,264,441 71,323,940 101,588,381 809,080 5,336,114 6,145,194 Changyu Chateau 141,298,023 114,694,168 255,992,191 171,869,662 - 171,869,662 140,038,021 115,435,985 255,474,006 175,061,601 - 175,061,601 Langfang Castel 17,659,511 16,001,682 33,661,193 3,358,322 - 3,358,322 22,728,536 17,973,719 40,702,255 6,133,909 - 6,133,909 Beijing Chateau 219,973,582 461,115,089 681,088,671 62,598,545 - 62,598,545 214,079,274 481,668,050 695,747,324 73,963,043 - 73,963,043 Ice Chateau 45,194,591 23,920,890 69,115,481 14,974,458 100,000 15,074,458 38,657,358 25,484,359 64,141,717 10,871,695 100,000 10,971,695 Atrio 464,421,130 99,080,668 563,501,798 381,659,315 54,520,937 436,180,252 398,835,959 116,299,504 515,135,463 299,030,002 89,336,338 388,366,340 IWCC 214,784,490 300,969,342 515,753,832 148,359,328 4,976,161 153,335,489 175,669,256 305,664,706 481,333,962 122,023,764 5,206,406 127,230,170 Australia Kilikanoon Estate 87,634,707 63,759,866 151,394,573 13,387,942 51,893,171 65,281,113 N/A N/A N/A N/A N/A N/A 2018 2017
Total comprehensive Operating activities Total comprehensive Operating activities Revenue Net profit (loss) Revenue Net profit (loss)
Name income cash flows income cash flows Xinjiang Tianzhu 18,803 (6,902,010) (6,902,010) 43,112 116,555,588 15,531,513 15,531,513 32,224,800 Changyu Chateau 121,235,278 3,710,124 3,710,124 16,096,447 68,964,230 985,910 985,910 19,629,212 Langfang Castel 5,038,281 (3,479,492) (3,479,492) 673,422 39,165,527 (1,616,638) (1,616,638) (1,554,380) Beijing Chateau 159,369,783 16,555,846 16,555,846 19,627,933 145,103,200 17,475,647 17,475,647 49,964,881 Ice Chateau 57,290,490 870,994 870,994 289,782 49,643,396 1,241,699 1,241,699 (1,748,535) Atrio 327,550,545 3,811,465 3,376,761 6,129,923 281,007,167 2,000,682 7,701,416 (32,148,326) IWCC 262,104,563 15,934,347 17,465,900 3,584,648 157,953,467 28,791,684 31,458,952 16,482,765 Australia Kilikanoon Estate 57,648,905 217,869 (1,550,720) (1,522,151) N/A N/A N/A N/A* This is amount incurred in the period between acquisition date and 31 December 2018.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT
The Group's major financial instruments include cash and bank, notes and account receivable, 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.
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, Chilean peso and Australia dollar, borrowings denominated in USD, while the Group's other principal activities are denominated and settled in RMB.As at 31 December 2018, 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. 31/12/2018 31/12/2017 RMB RMB Bank and cash (EUR) 199,753 1,190,459 Bank and cash (USD) 51,283,910 34,843,968 Short-term borrowings (USD) 75,495,200 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
1.1.1 Currency risk - continued
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 50 50 EUR 5% decrease against RMB (50) (50) (50) (50) USD 5% increase against RMB 2,469,416 2,469,416 1,456,525 1,456,525 USD 5% increase against RMB ____(__2__,4__6__9__,4__1__6) __(__2__,4__6__9__,4__1__6) __(__1__,4__5__6__,5__2__5) __(__1__,4__5__6__,5__2__5) 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 900 900 52,695 52,695 USD 5% decrease against EUR (900) (900) (52,695) (52,695) USD 15% increase against Chile Peso (11,042,641) (11,042,641) (5,275,651) (5,275,651) USD 15% decrease against Chile Peso 11,042,641 11,042,641 5,275,651 5,275,651 EUR 10% increase against Chile Peso 19,876 19,876 58,350 58,350 EUR 10% decrease against Chile Peso________(__1__9__,8__7__6) ______(__1__9__,8__7__6) ______(__5__8__,3__5__0) ______(__5__8__,3__5__0) Note: As at 31 December 2018, the Group's management anticipated a change of5% in exchange rate for USD to EUR,10% in exchange rate for EUR to Chilean Peso and15% in exchange rate for USD to Chilean Peso.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
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-16 and Note VI-24 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.
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 bps increase (2,016,667) (2,016,667) (2,046,646) (2,046,646) Bank borrowings 50 bps decrease ____2__,0__1__6__,6__6__7 ____2__,0__1__6__,6__6__7 ____2__,0__4__6__,6__4__6 ____2__,0__4__6__,6__4__6 Note: As at 13 December 2018, the Group's management anticipated a change of 50 basis points in the bank's variable interest rate.
1.2 Credit risk
As at 31 December 2018, 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.2 Credit risk - continued
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 2018,19.8% of the Group trade receivables are due from top five customers (31 December 2017:20.7%). 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 2,338,698 57,691,463 641,831,131 - - 701,861,292 Accounts payable 163,879,578 327,759,156 221,934,147 - - 713,572,881 Other payables 155,842,255 179,896,318 256,314,091 - - 592,052,664 Interest payable 712,826 - - - - 712,826 Long-term borrowings 8,382,996 31,970,170 85,822,835 168,574,037 - 294,750,038 Long-term payables________-___2_2_,7_62_,9_3_4___1_4_,1_58_,4_3_3 __1_4_3_,5_55_,4_3_3__9_0_,3_56_,3_0_0__2_7_0_,8_33_,1_0_0____3__3__1__,1__56__,3__5__3__6__2__0__,0__80__,0__4__1__1__,2__2__0__,0__60__,6__3__7 ____3__1__2__,1__29__,4__7__0____9__0__,3__56__,3__0__0__2__,5__7__3__,7__82__,8__0__1 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__59__,__00__0__,0__0__0 ____________-__ __2__23__,__26__3__,8__8__6______________-__ __2__23__,__26__3__,8__8__6 As at 31 December 2018, 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
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 % %
Changyu Group Parent Limited Zhou Manufactu
Yantai 50,000,000 50.4 50.4 265645824 Company Company Company Hongjiang ring
During the year ended 31 December 2018, there is no change in parent company's registered capital, shares holding or voting power.
2. Subsidiaries: Please refer to Note 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 Culture Tourism Production Company controlled 91370602MA3N7A877P Sales Co., Ltd.(" Culture Sales") by the same parent
Yantai Changyu Culture Tourism Development Company controlled 91370602MA3N59J300 Co., Ltd.(" Culture Development ") by the same parent
4. Significant related party transactions
(1) Purchases from and sales to related parties
Purchase from related parties
The content of related 2018 2017 party transactions RMB RMB ShenMa Packing product purchase 173,238,289 145,872,001 Zhongya Pharmaceutical product purchase 15,690,930 9,279,380 Wine Culture Museum product purchase 16,784,711 6,336,832 Window of the Wine City product purchase 7,913,342 2,756,050 Culture Sales product purchase 35,857
___________ ___________ 213,663,129 164,244,263______________________ ______________________ All related party transactions are based on the negotiated price.
In 2018, purchases from related parties accounted for11.2% of the Group's total purchase (2016:10.9%)
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(1) Purchases from and sales to related parties- continued
Sales to related parties
The content of related 2018 2017 party transactions RMB RMB Wine Culture Museum goods sales 23,515,379 8,235,520 Window of the Wine City goods sales 13,821,555 12,205,247 Zhongya Pharmaceutical goods sales 4,552,269 2,035,003 Culture Sales goods sales 2,914,686 - ShenMa Packing goods sales 348,247 1,634,883___________ ___________ 45,152,136 24,110,653______________________ ______________________ All related party transactions are based on the negotiated price. In 2018, sales to related parties accounted for less than1% of the Group's total sales (2017: less than1%).
(2) Property leased from a related party
The Group as Lessee
2018 Assets leased Beginning date Ending date Rental expense RMB Changyu Group Company office building 1 January 2016 31 December 2020 1,538,840 Changyu Group Company office building and factory 1 January 2017 31 December 2021 1,331,364 Changyu Group Company office building an d factory 1 Januar y 2017 31 Decemb er 2021 _3_,_99_4_,0_9_1__6__,__86__4__,2__9__5 All related party transactions are based on the negotiated price.
The Group as Lessor
2018 Assets leased Beginning date Ending date Rental income RMB ShenMa Packing office building and factory 1 July 2017 30 June 2022 1,478,982 Zhongya Pharmaceutical office building an d factory 1 Januar y 2018 31 Decemb er 2018 ___51_8_,1_8_2__1__,__99__7__,1__6__4 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
The content of related
party transactions Note 2018 2017 RMB RMB Changyu Group Company Royalty fee (a) 73,976,395 72,838,612 Changyu Group Company Patents fee (b) 50,000 50,000____________________ ____________________ All related party transactions are based on the negotiated price.
(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 2018, royalty fee paid to related company accounted for100% of the Group (2017:100%).
(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 2018, the patents usage fee payable to Changyu Group Company is amounted to RMB 50,000(2017:RMB 50,000).
During 2018, patent fee paid to related company accounted for100% of the Group (2017:100%).
(4) Remuneration of the management
2018 2017 RMB RMB Remuneration of the management 13,102,005 10,309,409________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
5. Balance due from/to related parties
(1) Balance due from related parties
31/12/2018 31/12/2017
Accounts receivable Balance Provision Balance Provision RMB RMB RMB RMB Zhongya Pharmaceutical 2,768,391 - 8,134,150 - Shen Ma Packing. 17,137 - 1,342,348 - Window of the Wine City 1,911,157 - 3,196,095 - Wine Culture Museum ________-
_
______-_
_
____3_4_,_2_8_0 ______-__ 4,696,685 - 12,706,873 -__________________ ________________ __________________ ________________ 31/12/2018 31/12/2017
Other receivable Balance Provision Balance Provision RMB RMB RMB RMB Shen Ma Packing. 813,440 - 813,440 -__________________ ______________ ________________ ______________ (2) Balance due to related parties
Accounts payable 31/12/2018 31/12/2017 RMB RMB Shen Ma Packing. 55,366,785 52,403,056 Zhongya Pharmaceutical 6,722,667 2,051,991 Wine Culture Museum 4,646,731 2,040,860 Window of the Wine City 4,789,600 1,485,766____________ ____________ 71,525,783 57,981,673________________________ ________________________ Other payable 31/12/2018 31/12/2017 RMB RMB Shen Ma Packing. 450,000 - Changyu Group Company 78,414,978 77,208,929____________ ____________ 78,864,978 77,208,929________________________ ________________________ The above amounts due to related parties are unsecured and interest-free.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XI. COMMITMENT
1. Important commitments
(1) Capital commitments
31/12/2018 31/12/2017 RMB'000 RMB'000 Capital commitment for
purchasing non-current assets 996,675 1,246,506________________________ ________________________ (2) Operating lease commitment
As lessee
Significant operating lease: Total future minimal lease payments under non-cancelable contract with lessor are as follow:
31/12/2018 31/12/2017 RMB'000 RMB'000 Within 1 year 20,576 32,236 1 to 2 years 11,757 19,116 2 to 3 years 10,064 11,943 3 years and above 84,095 95,342____________ ____________ 126,492 158,637________________________ ________________________ 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 18 April 2019, the Company proposed a cash dividend of RMB 6.0 (including taxes) for every 10 shares in respect of 2018 based on the issued shares of 685,464,000. The aggregate amount of cash dividend is RMB 411,278,400. The resolution is to be approved by the annual general meeting.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIII. OTHER SIGNIFICANT EVENTS
Capital management
The main target of the capital management of the group is to ensure the continuous operation of the group, optimize the portfolio structure of equity financing and debt financing, so as to achieve the goal of maximizing shareholder benefits. The capital structure of the group consists of the following parts:
(1) Cash and cash equivalents
(2) Share capital, capital reserve, surplus reserve and retained earnings
The management reviews the group's capital structure according to the interim or year-end financial reports and considers the cost of capital and the corresponding risks of various capital types. Based on the choice of the management, the group optimizes the overall capital structure by issuing additional shares and borrowing or repaying loans.
Segment report
The Group is principally engaged in the production and sales of wine, brandy, and champagne in China, France, Spain, Chile and Australia. 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, Chile and Australia. The management periodically evaluates segment results, in order to allocate resources and evaluate performances. In 2018, more than87% revenue and more than99% profit derived from China, and more than92% 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
31/12/2018 31/12/2017 RMB RMB Cash 3,177 5,280 Bank balance 579,993,055 501,208,996 Other currency fund 44,592,577 57,960,190____________ ____________ Total 624,588,809 559,174,466________________________ ________________________ As at 31 December 2018, the balance of restricted cash of the Company is RMB 2,611,350 (31 December 2017: RMB 2,645,410), which is home maintenance funds.
As at 31 December 2018, other currency fund of the Company include: deposit of RMB 44,540,850 for letter of credit (31 December 2017: RMB 57,946,190) and deposit of RMB 51,727 for entity card (31 December 2017: RMB 14,000).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Company's time deposits include the short-term deposits with original maturity from six months to twelve months amounting to RMB 45,000,000 (31 December 2017: RMB 5,000,000 ) with interest rate ranging from1.55% to2.03%.
2. Notes and account receivable
2.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Notes receivable 39,885,254 41,645,203 Accounts receivable 1,447,973 7,805,333____________ ____________ Total 41,333,227 49,450,536________________________ ________________________ 2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017 RMB RMB Bank acceptances 39,885,254 41,645,203________________________ ________________________ (2) Pledged notes receivable
As of 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil). (3) Notes endorsed by the Group to other parties which are not yet due at the end of the period 31/12/2018 31/12/2017 RMB RMB Bank acceptances 94,755,124 72,316,589________________________ ________________________ As at 31 December 2018, notes endorsed by the Company to other parties which are not yet due at the end of the period is RMB 94,755,124 (31 December 2017: RMB 72,316,589). 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, 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.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable- continued
2.2 Notes receivable - continued
(4) Notes receivable were reclassified as accounts receivable due to the default of drawer
As at 31 December 2018, there was no notes receivable were reclassified as accounts receivable due to the default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017
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____1__,4__47__,97__3__10__0__.0 ______-________-______1__,4__47__,97__3 ____7__,8__05__,33__3__10__0__.0 ______-________-______7,__80__5,__33__3 The normal credit term of trade receivables is one month. The trade receivables are interest free. The aging analysis is as follows:
31/12/2018 31/12/2017 RMB RMB Within 1 year 1,447,973 7,805,333________________________ ________________________ (2) Provision, reversals and collections during the current period:
As at 31 December 2018, there was no provision provided for trade receivables (31 December 2017: Nil). The Company did not provide, reverse or write off any provision during 2018 (31 December 2017: 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 ______1__,4__4__7__,9__7__3 Within 1 year ____1__00__.__0
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables
3.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Interest receivable 254,088 76,646 Dividend receivables 500,000,000 407,495,922 Other receivables 525,389,268 592,274,075____________ ____________ Total 1,025,643,356 999,846,643________________________ ________________________ 3.2 Dividend receivables
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Within 1 year
Including: Sales Company 402,595,884 867,404,116 (770,000,000) 500,000,000 Wines Sales - 30,000,000 (30,000,000) - Langfang Castel - 785,986 (785,986) - Beijing Chateau - 19,850,000 (19,850,000) - Shihezi Chateau 4,900,038 15,531,228 (20,431,266) - National Wines - 20,000,000 (20,000,000) - Langfang sales - 1,981,410 (1,981,410) - Atrio - 2,080,191 (2,080,191) - Chile Indomita
Wine Group ________-______6,_4_95_,7_2_8____(_6,_4_95_,7_2_8)________-_ Total ____4__0__7__,4__95__,9__2__2______9__6__4,__1__28__,6__5__9______(8__7__1,__6__24__,5__8__1)____5__0__0__,0__00__,0__0__0 3.3 Other receivables
(1) Disclosure of other receivables by categories:
31/12/2018 31/12/2017
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__25,__38__9,2__68____100__.0________- ____-____5__25,__38__9,2__68__5__92,__27__4,0__75__1__00__.0__________-______-__5__92,__27__4,0__75
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables - continued
3.3 Other receivables - continued
(1) Disclosure of other receivables by categories: - continued
The aging analysis is as follows:
31/12/2018 31/12/2017
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 491,483,881 93.5 - 491,483,881 589,011,103 99.5 - 589,011,103 1 to 2 years 33,897,084 6.5 - 33,897,084 3,006,488 0.5 - 3,006,488 2 to 3 years 8,303 - - 8,303 53,794 - - 53,794 Over 3 years _______-_____-______-________-_____2_02_,6_9_0____-_____-_____2_02_,6_9_0____52__5__,3__89__,2__6__8__1__00__.0______________-______52__5__,3__89__,2__6__8____59__2__,2__74__,0__7__5__1__0__0__.0__________-______59__2__,2__74__,0__7__5 (2) Accrual, reversal and written-off during the current period
No bad debt accrued or reversed in 2018 (2017:Nil.).
(3) Other receivables written off current year
No other receivables written off in 2018 (2017:Nil.).
(4) Disclosure of other receivables by nature
31/12/2018 31/12/2017 RMB RMB Receivable from subsidiary 523,579,831 589,897,407 Receivable deposit 12,500 2,500 Others 1,796,937 2,374,168____________ ____________ 525,389,268 592,274,075________________________ ________________________ (5) Top five entities with the largest balances of other receivables
As at 31 December 2018, the particulars of top five other receivables are as follows:
Proportion of total Nature Amount Aging prepayments RMB % Sales Company Internal balance 369,060,579 Within 1 year 70.2R&D Centre Internal balance 120,589,826 Within 1 year 23.0 Changyu Chateau Internal balance 12,404,563 Within 1 year 2.4 Pioneer International Internal balance 10,704,391 Within 1 year 2.0 Ningxia Chateau Internal balance ____7,_0_85_,5_4_0 Within 1 year __1._3____5__1__9__,8__44__,8__9__9 __9__8.__9
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
4. Inventories
31/12/2018 31/12/2017
Net carrying Net carrying Balance Provision amount Balance Provision amount RMB RMB RMB RMB RMB RMB Raw material 1,200,528 - 1,200,528 1,841,216 - 1,841,216 Work in progress 358,230,774 - 358,230,774 307,104,357 - 307,104,357 Finished goods __2_5_,7_2_3_,4_3_8______-_ __2_5_,7_2_3_,4_3_8 __3_9_,0_9_6_,4_8_0______-_ __3_9_,0_9_6_,4_8_0__3__8__5__,1__5__4__,7__4__0____________-
__
__3__8__5__,1__5__4__,7__4__0 __3__4__8__,0__4__2__,0__5__3____________-
__
__3__4__8__,0__4__2__,0__5__3 5. Long-term equity investments
2018 Cost 31/12/2017 for the year 31/12/2018 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 - 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 - Changyu Chateau (a) 3,500,000 3,500,000 - 3,500,000 70 100 - Ningxia Growing 36,573,247 36,573,247 - 36,573,247 100 100 - National Wines 2,000,000 2,000,000 - 2,000,000 100 100 20,000,000 Ice Chateau (a) 30,440,500 30,440,500 - 30,440,500 51 100 - Beijing Chateau (a) 579,910,000 579,910,000 - 579,910,000 90 100 19,850,000 Sales Company 7,200,000 7,200,000 - 7,200,000 100 100 867,404,116 Langfang Sales (b) 100,000 100,000 - 100,000 10 100 1,981,410 Langfang Castel(a) 19,835,730 19,835,730 - 19,835,730 39 100 785,986 Wine Sales 4,500,000 4,500,000 - 4,500,000 100 100 30,000,000 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 - Jingyang Wine (b) 900,000 900,000 - 900,000 90 100 - Ningxia Wine 222,309,388 222,309,388 - 222,309,388 100 100 - Ningxia Chateau 443,463,500 443,463,500 10,000,000 453,463,500 100 100 - Dingluote Chateau (b) 212,039,586 212,039,586 - 212,039,586 65 100 - Shihezi Chateau 809,019,770 809,019,770 3,000,000 812,019,770 100 100 15,531,228 Changan Chateau 803,892,258 803,892,258 - 803,892,258 100 100 -R&D Centre (a) 500,000,000 500,000,000 2,788,906,445 3,288,906,445 72 100 - Huanren Wine 21,700,000 21,700,000 500,000 22,200,000 100 100 - Grape Wine Sales Co., 5,000,000 - - - - 100 - Francs Champs 236,025,404 236,025,404 - 236,025,404 100 100 - Atrio 190,150,544 190,150,544 - 190,150,544 75 75 2,080,191 IWCC 274,248,114 274,248,114 - 274,248,114 85 85 6,495,728 Australia Kilikanoon
Estate ______-_ ______-___10_7,_19_4,_42_0 __10_7,_19_4,_42_0 80 80 ______-___4,__51__6,__20__2,__20__4 __4,__51__1,__20__2,__20__4__2,__90__9,__60__0,__86__5 __7,__42__0,__80__3,__06__9 ____96__4,__12__8,__65__9 (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 2018, 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
6. Fixed assets
(1) Fixed assets
Buildings Machinery Motor vehicles Total RMB RMB RMB RMB Total original carrying amount
31/12/2017 265,340,049 475,569,634 10,129,313 751,038,996 Increase
Purchase - 9,345,433 - 9,345,433 CIP transfer 8,887,802 139,665 - 9,027,467 Decrease
Disposal - (13,137,771) (3,479,487) (16,617,258) Transfer to Investment
property (VI-8) _(_3_2_,6_0_6_,7_6_2) ________-_ ________-_ _(_3_2_,6_0_6_,7_6_2) 31/12/2018 _2_4_1_,6_2_1_,0_8_9 _4_7_1_,9_1_6_,9_6_1 ___6_,6_4_9_,8_2_6 _7_2_0_,1_8_7_,8_7_6 Total accumulated depreciation
31/12/2017 111,607,494 346,413,532 4,867,069 462,888,095 Increase
Additions 7,784,794 15,133,656 531,639 23,450,089 Decrease
Disposal (227,951) (12,642,520) (946,751) (13,817,222) Transfer to Investment
property (VI-8) _(_1_7_,6_4_4_,3_6_0) ________-_ ________-_ _(_1_7_,6_4_4_,3_6_0) 31/12/2018 _1_0_1_,5_1_9_,9_7_7 _3_4_8_,9_0_4_,6_6_8 ___4_,4_5_1_,9_5_7 _4_5_4_,8_7_6_,6_0_2 Total net carrying amount
31/12/2018 __1__4__0__,1__0__1__,1__1__2 __1__2__3__,0__1__2__,2__9__3 ______2__,1__9__7__,8__6__9 __2__6__5__,3__1__1__,2__7__4 31/12/2017 __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 As at 31 December 2018, fixed assets with restricted ownership is RMB 34,246,887 (December 31, 2017:RMB 36,349,289 ), referring to Note VI-45 for details.
As at 31 December 2018, the Company has no fixed assets classified as held for sale ( 31 December 2017:RMB 2,000,197), and the Company has no temporary idle fixed assets and fixed assets under finance leases.
(2) Fixed assets through operating lease
Amount RMB Machinery 134,111________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, buildings without property certificate are asfollows：
Reasons why certificates of title have Amount not been obtained RMB
Fermentation centre office,
experiment building and workshop 3,653,494 Processing____________________
7. Construction in progress
(1) Construction in progress
31/12/2018 31/12/2017 RMB RMB Reconstruction of boiler heating systems - 3,556,349 Drainage project - 3,200,000 Non-dry sticker labeling machine project 4,105,264 - Others 2,206,437 -____________ ____________ 6,311,701 6,756,349________________________ ________________________ (2) Current year movement on important construction:
The
Accumulated progress of Transfer to expenditure/ constructio Budget 31/12/2017 Addition PPE 31/12/2018 budget n Financed by RMB RMB RMB RMB RMB %
Reconstructio n of boiler
heating systems 13,000,000 3,556,349 - (3,556,349) - 100.0 100.0 Self-raised Non-dry sticker labeling
machine project 6,920,000
- 5,431,516 (1,326,252) 4,105,264
78.5 78.5 Self-raised There was no interest capitalized in construction in progress in 2018.
(3) As at 31 December 2018, there was no provision was made for the construction in process, and no provision was made (31 December 2017:Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
8 Bearer biological assets
Bearer biological assets are grapetrees，which measured in cost method.
Immature Mature
biological assets biological assets Total RMB RMB RMB Total original carrying amount
31/12/2017 6,306,963 130,929,124 137,236,087 Increase
Cultivated increase 12,930,423 - 12,930,423 Transfer to mature assets
from immature assets (9,802,191) 9,802,191 -__________ ___________ __________ 31/12/2018 9,435,195 140,731,315 150,166,510__________ ___________ __________ Total accumulated depreciation
31/12/2017 - 17,663,548 17,663,548 Increase
Additions - 7,500,169 7,500,169__________ ___________ __________ 31/12/2018 - 25,163,717 25,163,717__________ ___________ __________ Total net carrying amount
31/12/2018 9,435,195 115,567,598 125,002,793____________________ ______________________ ____________________ 31/12/2017 6,306,963 113,265,576 119,572,539____________________ ______________________ ____________________ As at 31 December 2018, there is no biological asset with ownership restricted (31 December 2017: Nil).
As at 31 December 2018, there is no indication that biological assets may be impaired, and no provision was made. (31 December 2017: Nil).
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Intangible assets
Intangible assets
Land use right RMB Total original carrying amount
31/12/2017 and 31/12/2018 96,594,766__________ Total accumulated depreciation
31/12/2017 26,971,547 Increase
Additions 2,379,153__________ 31/12/2018 29,350,700__________ Total net carrying amount
31/12/2018 67,244,066____________________ 31/12/2017 69,623,219____________________ As at 31 December 2018, Intangible assets with restricted ownership are RMB 50,902,950 (December 31, 2017: RMB 52,720,912), Please refer to Note VI-45 in detail.
10. Deferred tax assets
Recognised deferred tax assets not presented at the net amount after offset
31/12/2018 31/12/2017
Deductible Deferred Deductible Deferred Item
temporary difference tax assets temporary difference tax assets RMB RMB RMB RMB Unrealized profit from intra
5,897,436 1,474,359 7,163,828 1,790,957 - company transactions
Unpaid bonus 37,973,000 9,493,249 35,822,735 8,955,683 Retirement benefit 10,143,950 2,535,988 10,057,113 2,514,278 Deductible losses 30,421,511 7,605,378 45,526,327 11,381,582 Deferred income 12,343,972 3,085,993 16,581,627 4,145,407 96,779,869 24,194,967 115,151,630 28,787,907 11. Other non-current assets
31/12/2018 31/12/2017 RMB RMB Receivables from subsidiaries 972,700,000 3,718,674,166________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
12. Short-term borrowings
31/12/2018 31/12/2017 RMB RMB Credit loans 150,000,000 600,000,000________________________ ________________________ As at 31 December 2018, credit loans detail are as follows:
Loan bank Loans amount Loan term Interest rate in contract Interest rat RMB % % ICBC Yantai br anch __1__5__0__,0__0__0__,0__0__0 24 May 2018– 24 May 2019 Annual benchmark rate 4.35 13. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017 RMB RMB Within 1 year 132,664,195 97,036,146 1 to 2 years - 556,883 2 to 3 years 395 240,095 Over 3 years 39,714 -____________ ____________ 132,704,304 97,833,124________________________ ________________________ 14. Employee benefits payable
(1) Employee benefits payable
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Short-term salaries and welfare 60,050,963 97,491,895 (95,341,628) 62,201,230 Post-demission benefits
- predetermined provision plan - 6,785,401 (6,785,401) - Termination benefit __1_0_,0_5_7_,1_1_3 ___5_,2_1_6_,2_4_8 __(_5_,1_2_9_,4_1_2) __1_0_,1_4_3_,9_4_9____7__0__,1__0__8__,0__7__6 __1__0__9__,4__9__3__,5__4__4 __(1__0__7__,2__5__6__,4__4__1) ____7__2__,3__4__5__,1__7__9
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
14. Employee benefits payable - continued
(2) Short-term salaries and welfare
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Salaries and bonus 60,694,620 83,892,951 (81,609,810) 62,977,761 Staff benefit 37,173 6,191,811 (6,191,811) 37,173 Staff welfare - 4,004,223 (4,004,223) - Includes:
Medical insurance - 3,476,931 (3,476,931) - Injury insurance - 289,904 (289,904) - Maternity insurance - 237,388 (237,388) - Housing fund - 3,005,993 (3,005,993) - Union fee and education fee ___1_,8_9_6_,8_7_2 ____5_2_9_,7_9_0 ____(5_2_9_,7_9_1) ___1_,8_9_6_,8_7_1 Total __6_2_,6_2_8_,6_6_5 __9_7_,6_2_4_,7_6_8 _(_9_5_,3_4_1_,6_2_8) __6_4_,9_1_1_,8_0_5 Less: Non-current liabilities ___2_,5_7_7_,7_0_2 ___2_,7_1_0_,5_7_5 Short-term salaries and welfare ____6__0__,0__5__0__,9__6__3 ____6__2__,2__0__1__,2__3__0 (3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Pension - 6,534,445 (6,534,445) - Unemployment insurance ____-
_
____2_5_0,_9_5_6 ___(_2_5_0,_9_5_6) ____-_ - 6,785,401 (6,785,401) -__________ __________________ __________________ __________ 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 6,534,445 and RMB 250,956 (2017: RMB 8,595,215 and RMB 323,852) respectively into pension insurance and unemployment insurance. As at 31 December 2018, the Company does not have unpaid pension and unemployment insurance (31 December 2017: 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
15. Taxes payable
31/12/2018 31/12/2017 RMB RMB Value added tax 1,686,599 - Consumption tax 3,902,791 6,450,962 Corporation income tax - 26,069 Urban land use tax 685,626 784,627 Individual income tax 6,316,001 6,630,393 City construction tax 36,314 345,138 Property tax 243,814 82,669 Others 240,286 249,832____________ ____________ 13,111,431 14,569,690________________________ ________________________ 16. Other payables
16.1 Presented by categories
31/12/2018 31/12/2017 RMB RMB Interest payable 181,250 652,500 Other payables 607,793,269 544,713,172____________ ____________ 607,974,519 545,365,672________________________ ________________________ 16.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017 RMB RMB Payable to subsidiaries 585,044,038 534,530,323 Payables for equipment and construction 10,554,451 8,538,687 Deposits from suppliers 5,982,500 183,000 Others 6,212,280 1,461,162____________ ____________ 607,793,269 544,713,172________________________ ________________________ (2) As at 31 December 2018, there were no significant outstanding balance aged over than one year.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
17. Capital reserve
2018 31/12/2017 Increase Decrease 31/12/2018 RMB RMB RMB RMB Share premium 557,222,454 - - 557,222,454______________________ ____________ ____________ ______________________ 18. Revenue and costs
Revenue is analysed as follows:
2018 2017 RMB RMB Principal revenue 874,292,088 1,310,443,414 Other revenue 2,154,982 813,440____________ ____________ 876,447,070 1,311,256,854________________________ ________________________ Operating cost is analysed as follows:
2018 2017 RMB RMB Principal operating cost 772,497,769 1,165,362,798 Other operating cost 1,989,262 590,610____________ ____________ 774,487,031 1,165,953,408________________________ ________________________ 19. Taxes and surcharges
2018 2017 RMB RMB Consumption tax 27,262,209 53,236,697 City construction tax 3,214,543 10,190,867 Education fee and surcharges 2,159,612 5,817,116 Property tax 1,854,486 2,267,901 Land use tax 3,168,559 3,168,559 Stamp tax 310,835 603,461 Others 376,517 1,285,624____________ ____________ 38,346,761 76,570,225________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
20. General and administrative expense
2018 2017 RMB RMB Salary and employee benefit 55,580,888 38,430,904 Maintenance fee 8,396,432 6,192,525 Office fee 3,641,210 3,881,091 Service fee 3,495,328 9,194,005 Depreciation 3,375,180 4,286,164 Property insurance fees 2,961,742 3,080,521 Leasing expenses 2,790,358 2,276,896 Amortization 2,379,153 2,695,110 Shuttle bus 1,442,340 1,719,660 Security and sanitation fee 763,792 941,434 Travelling expenses 324,566 527,464 Greening fee amortization 312,080 394,604 Others 5,042,139 5,498,757____________ ____________ 90,505,208 79,119,135________________________ ________________________ 21. Financial Expense
2018 2017 RMB RMB Interest income (41,821,372) (18,602,199) Exchange loss 4,443,175 1,040,832 Interest expenses 16,075,353 17,414,181 Bank charges 1,010,107 784,754____________ ____________ (20,292,737) 637,568________________________ ________________________ 22. Investment income
2018 2017 RMB RMB Long-term equity investment income accounted
for by using the cost method 964,128,659 798,877,905________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
22. 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 2018 2017 RMB RMB Sales Company 867,404,116 577,813,022 Beijing Chateau - 87,000,000 Wine Sales - 53,461,029 Xinjiang Tianzhu - 48,620,373____________ ____________ 867,404,116 766,894,424________________________ ________________________ As at 31 December 2018 and at 31 December 2017, there are no significant restriction on the remittance of investment income to the Company.
23. Supplement to cash flow statement
2018 2017 RMB RMB (1) Cash flows from operating activities calculated by
adjusting the net profit:
Net profit 969,588,573 793,598,010 Add: Depreciation of investment properties 1,857,902 590,610 Depreciation of fixed assets 23,450,089 32,201,177 Amortization of intangible assets 2,379,153 2,379,153 Depreciation of biological assets 7,500,169 6,781,447 (Gains)Losses on disposal of assets (12,411,962) 29,625 Finance expenses 17,808,569 18,614,396 Investment income (964,128,659) (798,877,905) Decrease/(increase) in deferred tax assets 4,592,940 (1,802,655) Increase / (decrease) in inventories (37,112,687) 444,690,365 Decrease in trade receivables 37,072,169 103,406,898 Increase / (decrease) in trade payables 92,609,575 (3,541,352)____________ ____________ Net cash flows from operating activities 143,205,831 598,069,769________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
23. Supplement to cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments 2018 2017 RMB RMB Change the claim on subsidiaries into Long-term
equity investments 2,802,406,445 2,386,907,749 Increase the investment in subsidiaries
with bank acceptances - 96,345,678 Recover the investment in subsidiaries
with bank acceptances - (96,345,678)____________ ____________ 2,802,406,445 2,386,907,749________________________ ________________________ 24. Cash and cash equivalents
2018 2017 RMB RMB Closing balance of Cash and bank 624,588,809 559,174,466 Less:
Restricted bank deposits 2,611,350 2,645,410 Restricted other monetary assets 44,592,577 57,960,190 Deposit with a period of over three months 45,000,000 5,000,000____________ ____________ Closing balance of cash and cash equivalents 532,384,882 493,568,866________________________ ________________________ 2018 2017 RMB RMB Cash and bank 532,384,882 493,568,866 Including: Cash and bank 3,177 5,280 Bank deposits on demand 532,381,705 493,563,586____________ ____________ Closing balance of cash and cash equivalents 532,384,882 493,568,866________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions
(1) Purchase of materials
2018 2017 RMB RMB Subsidiaries 209,808,816 352,495,622 Other related parties 88,897,126 82,394,392____________ ____________ 298,705,942 434,890,014________________________ ________________________ (2) Sales of goods
2018 2017 RMB RMB Subsidiaries 867,995,960 1,302,056,254 Other related parties 8,451,110 9,200,600____________ ____________ 876,447,070 1,311,256,854________________________ ________________________ (3) Sales of Fixed assets
2018 2017 RMB RMB Subsidiaries 134,445 47,843,203 Other related parties - 3,934,643____________ ____________ 134,445 51,777,846________________________ ________________________ (4) Interest income from occupation of funds
2018 2017 RMB RMB Subsidiaries 35,823,556 14,912,649________________________ ________________________ (5) Lease income
2018 2017 RMB RMB Subsidiaries 1,997,164 739,491________________________ ________________________
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions - continued
(6) Guarantees
Whether guarantees are Guaranteed party Currency Amount Beginning date Due date fulfilled completelyR&D Center RMB 500,000,000 8 March 2017 8 March 2022 No Australian Kilikanoon
Estate AUD 17,000,000 13 December 2018 13 December 2023 No 26. Receivables and payables to related parties
(1) Trade receivables
Trade receivables 31/12/2018 31/12/2017
Bad debts Bad debts Balance provision Balance provision RMB RMB RMB RMB Other related parties 1,447,973 - 7,805,333 -____________________ ______________ ____________________ ______________ Other receivables 31/12/2018 31/12/2017
Bad debts Bad debts Balance provision Balance provision RMB RMB RMB RMB Subsidiaries 523,579,831 - 589,897,407 - Other related parties 813,440 - 813,440 -__________ _______ __________ _______ 524,393,271 - 590,710,847 -____________________ ______________ ____________________ ______________ Other non-current assets 31/12/2018 31/12/2017
Bad debts Bad debts Balance provision Balance provision RMB RMB RMB RMB Subsidiaries ____9__7__2,__7__00__,__0__00__ __________-__
__
__3__,7__1__8__,6__7__4__,1__6__6 __________-____ The above receivables due from related parties are unsecured, have no interest or fixed date of repayment.
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
26. Receivables and payables to related parties - continued
(2) Trade payables
Trade payables 31/12/2018 31/12/2017 RMB RMB Other related parties 28,892,583 29,145,914________________________ ________________________ Other payables 31/12/2018 31/12/2017 RMB RMB Subsidiaries 585,044,038 534,530,323 Other related parties 450,000 -____________ ____________ 585,494,038 534,530,323________________________ ________________________ The above payables due to related parties are unsecured, have no interest or fixed date of repayment.
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2018
I. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2018 RMB Corporate income tax effect 11,368,355 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) 87,281,434 Other non-operating income and expense 3,817,401 Corporate income tax effect (25,157,188) The impact of non-controlling interests' equity (103,311)__________ 77,206,691____________________ 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).
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
2018 ROE Basic EPS% RMB Net profit attributable to shareholders of the Company 11.23 1.52 Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 10.40 1.41__________ ________ The Company did not have any potential dilutive shares.
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.