ADAMA Ltd.
ENGLISH TRANSLATION OF FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2019
ADAMA Ltd. (Expressed in RMB '000) FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30 2019
CONTENTS PAGES THE CONSOLIDATED AND COMPANY'S BALANCE SHEETS 1-3 THE CONSOLIDATED AND COMPANY'S INCOME STATEMENTS 4 - 5 THE CONSOLIDATED AND COMPANY'S CASH FLOW STATEMENTS 6 - 7 THE CONSOLIDATED AND COMPANY'S STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY 8 - 10 NOTES TO THE FINANCIAL STATEMENTS 11 - 117
ADAMA Ltd. (Expressed in RMB '000) Consolidated Balance Sheet
June 30 December 31 Notes 2019 2018 (Restated) Current assets
Cash at bank and on hand V.1 5,425,392 6,400,190 Financial assets held for trading V.2 33,074 46,095 Derivative financial assets V.3 416,991 517,726 Bills receivable V.4 54,702 40,569 Accounts receivable V.5 7,674,381 6,573,100
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|68,629|73,216|

 Prepayments V.7 319,471 410,506 Other receivables V.8 929,945 1,079,332 Inventories V.9 10,337,924 9,433,876 Non-current assets due within one year V.20 - 48 Other current assets V.10 715,767 660,806 Total current assets 25,976,276 25,235,464 Non-current assets
Long-term receivable V.11 174,246 157,600 Long-term equity investments V.12 135,075 108,350 Other equity investments V.13 87,812 91,559 Investment properties 3,933 4,094 Fixed assets V.14 7,167,032 7,263,866 Construction in progress V.15 534,351 487,204 Right-of-use assets V.16 554,372 N/A Intangible assets V.17 5,802,932 5,741,962 Goodwill V.18 4,298,747 4,085,945 Deferred tax assets V.19 767,928 741,737 Other non-current assets V.20 307,385 217,282 Total non-current assets 19,833,813 18,899,599 Total assets
45,810,089 44,135,063
The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Consolidated Balance Sheet (continued)
June 30 December 31 Notes 2019 2018 (Restated) Current liabilities
Short-term loans V.21 2,308,286 1,122,774 Derivative financial liabilities V.22 688,267 1,451,670 Bills payable V.23 375,777 445,533 Accounts payable V.24 4,178,668 4,627,936 Contract liabilities V.25 917,747 848,402 Employee benefits payable V.26 912,354 944,175 Taxes payable V.27 437,227 616,780 Other payables V.28 1,970,641 1,197,579 Non-current liabilities due within one year V.29 422,208 301,814 Other current liabilities V.30 344,127 578,184 Total current liabilities 12,555,302 12,134,847 Non-current liabilities
Long-term loans V.31 673,796 235,819 Debentures payable V.32 8,152,990 7,649,098 Lease Liabilities V.33 418,814 N/A Long-term payables 26,419 25,106 Long-term employee benefits payable V.34 644,449 620,646 Provisions V.35 135,924 132,351 Deferred tax liabilities V.19 350,735 392,404 Other non-current liabilities V.36 372,256 199,930 Total non-current liabilities 10,775,383 9,255,354 Total liabilities 23,330,685 21,390,201 Shareholders' equity
Share capital V.37 2,446,554 2,446,554 Capital reserve V.38 12,903,168 13,324,491 Other comprehensive income V.39 972,845 1,090,827 Special reserves 16,798 13,536 Surplus reserve V.40 240,162 240,162 Retained earnings V.41 5,899,877 5,629,292 Totalshareholders’ equity 22,479,404 22,744,862 Total liabilities andshareholders’ equity
45,810,089 44,135,063 Chen Lichtenstein Aviram Lahav
Legal representative Chief of accounting work& Chief of accounting organ These financial statements were approved by the Board of Directors of the Company on August 21, 2019.
The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Balance Sheet
June 30 December 31 Notes 2019 2018 Current assets
Cash at bank and on hand XV.1 2,173,167 2,058,253 Accounts receivable XV.2 252,070 692,199 Receivables financing XV.3 46,331 19,917 Prepayments 32,916 10,500 Other receivables XV.4 13,912 31,748 Inventories 107,808 147,975 Other current assets 1,743 1,343 Total current assets 2,627,947 2,961,935 Non-current assets
Long-term equity investments XV.5 16,403,642 15,939,826 Other equity investments 86,059 80,119 Investment properties 3,932 4,094 Fixed assets 932,920 1,012,674 Construction in progress 259,900 188,020 Right-of-use assets 609 - Intangible assets 172,650 174,997 Deferred tax assets 58,433 48,103 Other non-current assets 110,631 54,060 Total non-current assets 18,028,776 17,501,893 Total assets
20,656,723 20,463,828 Current liabilities
Short-term loans 20,000 20,000 Bills payables 146,595 209,700 Accounts payables 130,843 182,110 Contract liabilities 3,096 9,983 Employee benefits payable 22,236 25,758 Taxes payable 3,032 55,198 Other payables 849,222 187,762 Non-current liabilities due within one year 631 72,000 Total current liabilities 1,175,655 762,511 Non-current liabilities
Long-term employee benefits payable 98,241 100,144 Provisions 16,865 16,454 Other non-current liabilities 171,770 171,770 Total non-current liabilities 286,876 288,368 Total liabilities 1,462,531 1,050,879Shareholders’ equity
Share capital V.38 2,446,554 2,446,554 Capital reserve 15,463,245 15,414,429 Other comprehensive income 48,217 43,167 Special reserves 14,046 11,564 Surplus reserve V.41 240,162 240,162 Retained earnings 981,968 1,257,073 Totalshareholders’ equity 19,194,192 19,412,949 Total liabilities andshareholders’ equity
20,656,723 20,828,464 The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Consolidated Income Statement
Six months ended June 30 Notes 2019 2018 (Restated) I. Operating income V.42 13,616,032 13,639,073 Less: Cost of sales V.42 9,023,242 9,042,183 Taxes and surcharges V.43 46,226 60,548 Selling and Distribution expenses V.44 2,499,774 2,256,991 General and administrative expenses V.45 628,259 523,821 Research and Development expenses V.46 210,699 156,275 Financial expenses V.47 938,196 347,554 Including: Interest expense 861,584 306,821 Interest income 85,188 41,465 Add: Investment income, net V.48 (514,443) 147,053 Including: Income from investment
in associates and joint ventures 21,724 12,758 Gain (loss) from changes in fair value V.49 884,135 (243,376) Credit impairment loss V.50 3,347 (6,097) Asset impairment losses V.51 (23,809) (37,783) Gain from disposal of assets V.52 115,514 1,997,170 II. Operating profit 734,380 3,108,668 Add: Non-operating income 10,811 26,884 Less: Non-operating expenses V.53 16,016 8,827 III. Total profit 729,175 3,126,725 Less: Income tax expense V.54 140,537 737,558 IV. Net profit 588,638 2,389,167 (1). Classified by nature of operations
(1.1). Continuing operations 588,638 2,389,167 (2). Classified by ownership
(2.1). Shareholders of the Company 588,638 2,389,167 V. Other comprehensive income, net of tax V. 39 (113,471) 161,825 Other comprehensive income (net of tax)
attributable to shareholders of the Company (113,471) 161,825 (1) Items that will not be reclassified to profit or loss: (4,417) 11,106 (1.1) Re-measurement of defined benefit plan liability (13,978) 55,562 (1.2) FV changes in other equity investment 9,561 - (2) Items that were or will be reclassified to profit or loss (109,054) 858,611 (2.1) Effective portion of gains or loss of cash flow hedge (151,993) 658,898 (2.2) Translation differences of foreign financial statements 42,939 666,945 VI. Total comprehensive income for the period attributable to
Shareholders of the Company
475,167 6,458,164 VII. Earnings per share XIV.2
(1) Basic earnings per share (Yuan/share) 0.24 0.98 (2) Diluted earnings per share (Yuan/share) N/A N/A For business combination under common control in the reporting period, net profit of the acquiree before the business combination was 38,027 thousand RMB; net profit of the acquiree in the comparative period (six months ended June 30, 2018) was 22,089 thousand RMB.
The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Income Statement
Six months ended June 30 Notes 2019 2018 I. Operating income XV.6 735,426 1,666,573 Less: Operating costs XV.6 518,561 1,169,757 Taxes and surcharges 8,910 21,211 Selling and Distribution expenses 43,054 69,533 General and administrative expenses 190,950 41,299 Research and Development expenses 24,464 6,886 Financial expenses (income) (1,254) (20,437) Including: Interest expense 2,059 8,554 Interest income 14,333 58,681 Add: Credit impairment loss (1,633) (3,073) Asset Impairment losses (272) (905) II. Operating Profit (51,164) 334,424 Add: Non-operating income 4,430 975 Less: Non-operating expenses 1,896 123 III. Total profit (48,630) 335,276 Less: Income tax expense (income) (10,841) 52,893 IV. Net profit (37,789) 282,383 Continuing operations (37,789) 282,383 V. Other comprehensive income, net of tax 5,050 (391) (1) Items that will not be reclassified to profit or loss 5,050 (391) (1.1) Re-measurement of defined benefit plan liability - (391) (1.2) FV changes in other equity investment 5,050 - VI. Total comprehensive income for the period
(32,739) 281,992 The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Consolidated Cash Flow Statement
Six months ended June 30 Notes 2019 2018 (Restated) I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 12,817,678 12,600,613 Refund of taxes and surcharges 39,737 16,347 Cash received relating to other operating activities V.56(1) 258,378 260,834 Sub-total of cash inflows from operating activities 13,115,793 12,877,794 Cash paid for goods and services 9,779,321 8,642,298 Cash paid to and on behalf of employees 1,801,614 1,779,363 Payments of taxes and surcharges 465,018 241,030 Cash paid relating to other operating activities V.56(2) 1,374,790 1,375,300 Sub-total of cash outflows from operating activities 13,420,743 12,037,991 Net cash flows from (used in) operating activities V.57(1)a (304,950) 839,803 II. Cash flows from investing activities:
Cash received from disposal of investments 20,173 9,792 Cash received from returns of investments 3,372 - Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 30,843 2,444,437 Cash received relating to other investing activities V.56(3) 9,327 57 Sub-total of cash inflows from investing activities 63,715 2,454,286 Cash paid to acquire fixed assets, intangible assets and
other long-term assets 606,126 2,678,605 Net cash paid to acquire subsidiaries or other business units V.57(2) 826,805 9,332 Cash paid relating to other investing activities 778 - Sub-total of cash outflows from investing activities 1,433,709 2,687,937 Net cash flows used in investing activities (1,369,994) (233,651) III. Cash flows from financing activities:
Cash received from borrowings 1,987,810 396,500 Cash received from other financing activities V.56(4) 61,701 - Sub-total of cash inflows from financing activities 2,049,511 396,500 Cash repayments of borrowings 463,876 2,497,633 Cash payment for dividends, profit distributions and interest 406,111 294,135 Including: Dividends paid to non-controlling interest 28,936 16,028 Cash paid relating to other financing activities V.56(5) 443,891 32,619 Sub-total of cash outflows from financing activities 1,313,878 2,824,387 Net cash from (used in) financing activities 735,633 (2,427,887) IV. Effects of foreign exchange rate changes on cash and cash equivalents (25,065) (1,593) V. Net increase (decrease) in cash and cash equivalents V.57(1)b (964,376) (1,823,328) Add: Cash and cash equivalents at the beginning of the year 6,346,196 7,979,502 I. VI. Cash and cash equivalents at the end of the period V.57(3)
5,381,820 6,156,174 The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Cash Flow Statement
Six months ended June 30 Notes 2019 2018 I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 1,034,417 1,289,145 Refund of taxes and surcharges 23,042 166 Cash received relating to other operating activities XV.7(1) 18,958 15,192 Sub-total of cash inflows from operating activities 1,076,417 1,304,503 Cash paid for goods and services 535,991 587,656 Cash paid to and on behalf of employees 94,867 91,839 Payments of taxes and surcharges 73,468 57,171 Cash paid relating to other operating activities XV.7(2) 89,570 86,182 Sub-total of cash outflows from operating activities 793,896 822,848 Net cash flows from operating activities XV.8 282,521 481,655 II. Cash flows from investing activities:
Cash received relating to other investing activities 1,808 - Sub-total of cash inflows from investing activities 1,808 - Cash paid to acquire fixed assets, intangible assets and
other long-term assets 92,180 48,465 Sub-total of cash outflows from investing activities 92,180 48,465 Net cash flows used in investing activities (90,372) (48,465) III.Cash flows from financing activities:
Cash received relating to other financing activities XV.7.(3) 11,947 - Sub-total of cash inflows from financing activities 11,947 - Cash repayments of borrowings 72,000 96,590 Cash payment for dividends, profit distributions or interest 2,059 4,767 Cash paid relating to other financing activities XV.7.(4) 200 424,313 Sub-total of cash outflows from financing activities 74,259 525,670 Net cash flow used in financing activities (62,312) (525,670) IV. Effects of foreign exchange rate changes on cash and cash equivalents (2,596) (9,951) V. Net increase in cash and cash equivalents 126,861 (102,431) Add: Cash and cash equivalents at the beginning of the year XV.1 2,005,313 1,864,003 VI. Cash and cash equivalents at the end of the period
XV.1 2,132,174 1,761,572 The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Consolidated Statement of Changes inShareholders’ Equity
For the six months ended June 30, 2019
Attributable to shareholders of the Company
Other
comprehensive Special
Share capital Capital reserve income reserves Surplus reserve Retained earnings Total I. Balance at December 31, 2018 2,446,554 12,975,456 1,090,952 13,536 240,162 5,513,466 22,280,126 Add: Business combination under commoncontrol* - 349,035 (125) - - 115,826 464,736 II. Balance at January 1, 2019 2,446,554 13,324,491 1,090,827 13,536 240,162 5,629,292 22,744,862 III. Changes in equity for the period - (421,323) (117,982) 3,262 - 270,585 (265,458) 1. Total comprehensive income - - (113,471) - - 588,638 475,167 2.Owner’s contributions and reduction - (415,000) - - - - (415,000) 2.1 Consideration for Business combination
under common control - (415,000) - - - - (415,000) 3. Appropriation of profits - (6,323) - - - (322,564) (328,887) 3.1 Distribution to owners - - - - - (293,628) (293,628) 3.2 Distribution to non-controlling interest - - - - - (28,936) (28,936) 3.3 Other - (6,323) - - - - (6,323) 4. Transfers withinowners’ equity - - (4,511) - - 4,511 - 4.1 Others - - (4,511) - - 4,511 - 5. Special reserve - - - 3,262 - - 3,262 5.1 Transfer to special reserve - - - 10,646 - - 10,646 5.2 Amount utilized - - - (7,384) - - (7,384) IV. Balance at June 30, 2019 2,446,554 12,903,168 972,845 16,798 240,162 5,899,877 22,479,404*See note VI(2)– Change in consolidation scope
The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Consolidated Statement of Changes inShareholders’ Equity (continued)
For the six months ended June 30, 2018
Attributable to shareholders of the Company
Other
comprehensive Special
Share capital Capital reserve income reserves Surplus reserve Retained earnings Total I. Balance at December 31, 2017 2,446,554 12,982,277 (154,701) 9,349 207,823 3,286,711 18,778,013 Add: Changes in accounting policy 50,621 39,481 90,102 Business combination under commoncontrol* - 349,035 32 - - 55,045 404,112 II. Balance at January 1, 2018 2,446,554 13,331,312 (104,048) 9,349 207,823 3,381,237 19,272,227 III. Changes in equity for the period - (9,371) 505,361 4,883 - 2,234,372 2,735,245 1. Total comprehensive income - - 505,361 - - 2,389,167 2,894,528 2.Owner’s contributions and reduction - (9,371) - - - - (9,371) 2.1 Others - (9,371) - - - - (9,371) 3. Appropriation of profits - - - - - (154,795) (154,795) 3.1 Distribution to owners - - - - - (154,133) (154,133) 3.2 Distribution to non-controlling interest - - - - - (16,028) (16,028) 3.3 Other - - - - - 15,366 15,366 4. Special reserve - - - 4,883 - - 4,883 4.1 Transfer to special reserve - - - 11,063 - - 11,063 4.2 Amount utilized - - - (6,180) - - (6,180) IV. Balance at June 30, 2018 2,446,554 13,321,941 401,313 14,232 207,823 5,615,609 22,007,472*See note VI(2)– Change in consolidation scope
The notes on pages 11 to 117 form part of these financial statements.
Statement of Changes inShareholders’ Equity
For the six months ended June 30, 2019
Attributable to shareholders of the Company
Other
Share Capital comprehensive Special Surplus Retained capital reserve income reserves reserve earnings Total I. Balance at December 31, 2018 2,446,554 15,414,429 43,167 11,564 240,162 1,257,073 19,412,949 II. Changes in equity for the period - 48,816 5,050 2,482 - (275,105) (218,757) 1. Total comprehensive income - - 5,050 - - (37,789) (32,739) 2.Owner’s contributions and reduction - 48,816 - - - - 48,816 2.1 Other - 48,816 - - - - 48,816 3. Appropriation of profits - - - - - (237,316) (237,316) 3.1 Transfer to Distribution to shareholders - - - - - (237,316) (237,316) 4. Special reserve - - - 2,482 - - 2,482 4.1 Transfer to special reserve - - - 5,462 - - 5,462 4.2 Amount utilized - - - (2,980) - - (2,980)Ⅲ. Balance at June 30, 2019 2,446,554 15,463,245 48,217 14,046 240,162 981,968 19,194,192 For the six months ended June 30, 2018
Attributable to shareholders of the Company
Other
Share Capital comprehensive Special Surplus Retained capital reserve income reserve reserve earnings Total Balance at December 31, 2017 2,446,554 15,423,034 - 10,040 207,823 1,110,649 19,198,100 Add: Changes in accounting policy 50,621 9,500 60,121 I. Balance at January 1, 2018 2,446,554 15,423,034 50,621 10,040 207,823 1,120,149 19,258,221 II. Changes in equity for the period - (9,371) (391) 3,671 - 128,250 122,159 1. Total comprehensive income - - (391) - - 282,383 281,992 2.Owner’s contributions and reduction - (9,371) - - - - (9,371) 2.5 Others - (9,371) - - - - (9,371) 3. Appropriation of profits - - - - - (154,133) (154,133) 3.5 Dividend to Shareholders - - - - - (154,133) (154,133) 4. Special reserve - - - 3,671 - - 3,671 4.1 Transfer to special reserve - - - 5,215 - - 5,215 4.2 Amount utilized - - - (1,544) - - (1,544) III. Balance at June 30, 2018 2,446,554 15,413,663 50,230 13,711 207,823 1,248,399 19,380,380 The notes on pages 11 to 117 form part of these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
I BASIC CORPORATE INFORMATION
ADAMA Ltd (former name: Hubei Sanonda Co., Ltd., hereinafter the “Company” or the “Group”) is a company limited by shares established in China with its head office located in Hubei Jingzhou. During July 2017 a major assets restructuring was successfully completed, with the acquisition of Adama Agricultural Solutions Ltd (hereinafter: "Solutions"), a wholly-owned subsidiary of China National Agrochemical Corporation Limited (hereinafter: "CNAC").
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the Company. The combination was considered as a business combination under common control. The Company's parent company is CNAC, and the ultimate holding company is China National Chemical Corporation (hereinafter - “ChemChina”).
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engaged in development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic products, mainly for export. For information about the largest subsidiaries of the Company, refer to Note VII.
TheCompany’s consolidated financial statements had been approved by the Board of Directors of the Company on August 21, 2019.
Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities", whereas the changes of the scope of consolidation are set out in Note VI "Changes in consolidation scope". II BASIS OF PREPARATION
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (the "MoF"). In addition, the Group has disclosed relevant financial information in these financial statements in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No.15－General Provisions on Financial Reporting (revised by China Securities Regulatory Commission (hereinafter "CSRC”) in 2014).
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
II BASIS OF PREPARATION -(cont’d)
2. Accrual basis and measurement principle
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which are measured at fair value, deferred tax assets and liabilities, assets and liabilities relating to employee benefits, provisions, and investments in associated companies and joint ventures, 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.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equivalents or fair value of the consideration paid. Liabilities shall be measured at the actual amount of cash or assets received, or the contractual amount in a present obligation, or the prospective amount of cash or cash equivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing market participants in anarm’s length transaction at the measurement date. Fair value measured and disclosed in the financial statements are determined on this basis whether it is observable or estimated by valuation techniques.
The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fair value input is observable and significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable (other than quoted prices included within Level 1), either directly or indirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Group has performed an assessment of the going concern for the following 12 months from June 30, 2019 and have not identified any significant doubtful matter or event on the going concern, as such the financial statement have been prepared on the going concern basis.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance
These financial statements are in compliance with the Accounting Standards for Business Enterprises to truly and completely reflect consolidated and the Company's financial position as at June 30, 2019 and consolidated and the Company's operating results, changes in shareholders' equity and cash flows for the six months then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash or cash equivalents as a normal operating cycle. The operating cycle for the company is 12 months. 4. Reporting currency
The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functional currency. Functional currencies of overseas subsidiaries are determined on the basis of the principal economic environment in which the overseas subsidiaries operate. The functional currency of the overseas subsidiaries is mainly the United States Dollar (hereinafter "USD"). The presentation currency of these financial statements is Renminbi.
5. Business combinations
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entities at the date of the combination. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred.
During March 2019, the acquisition of Jiangsu Anpon Electrochemical co. LTD. (Hereinafter– “Anpon”), a wholly-owned subsidiary of CNAC, was successfully completed. Anpon became a wholly owned subsidiary of the Company. The combination was considered as a business combination under common control. On March 29, 2019 the entire share capital of Anpon was transferred from CNAC to the Company - (See note VI.2– Change in consolidation scope).
5.2 Business 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 costs of business combination are the fair value of the assets paid, liabilities incurred or assumed and equity instruments issued by the acquirer for the purpose of achieving the control rights over the acquiree. The intermediary costs such as audit, legal services and assessment consulting costs and other related management costs that are directly attributable to the combination by the acquirer are charged to profit or loss in the period in which they are incurred. Direct capital issuance costs incurred in respect of equity instruments or liabilities issued pursuant to the business combination should be charged to the respect equity instruments or liabilities upon initial recognition of the underlying equity instruments or liabilities.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 5. Business combinations -(cont’d)
5.2 Business combinations not involving enterprises under common control and goodwill -(cont’d) Theacquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination, that meet the recognition criteria shall be measured at 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 remaining difference is recognized immediately in profit or loss for the current year.
The goodwill raised because of the business combination should be separately disclosed in the consolidated financial statement and measured by the initial amount less any accumulative impairment provision.
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in consolidated income statement and consolidated statement of cash flows.
For a subsidiary acquired through a business combination not involving enterprises under common control, the operating results and cash flows from the acquisition date (the date when control is obtained) are included in consolidated income statement and consolidated statement of cash flows.
For a subsidiary acquired through a business combination involving enterprises under common control, it will be fully consolidated into consolidated financial statements from the date on which the subsidiary was ultimately under common control by the same party or parties.
The significant accounting policies and accounting years adopted by the subsidiaries are determined based on the uniform accounting policies and accounting years set out by the Company.
All significant intra-group balances, transactions and unrealized profits 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 theshareholders’ equity in consolidated balance sheet. The portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests is presented as "non-controlling interests" in consolidated income statement below the "net profit" line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated income statement below the total comprehensive income line item.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 6. Basis for preparation of consolidated financial statements -(cont’d)
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 is still allocated against non-controlling interests.
Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result in the loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings. Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders of the company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or other financial instrument is recognized as a liability at the present value of the exercise price. TheGroup’s share of asubsidiary’s profits includes the share of the holders of the non-controlling interests to which the Group issued a put option.
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any retained interest is re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from the acquisition date according to the original proportion of ownership interest is recognized as investment income in the period in which control is lost. Other comprehensive income associated with the disposed subsidiary is reclassified to investment income in the period in which control is lost.
7. Classification and accounting methods of joint arrangement
Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the ventures). The Group makes the classification of the joint arrangements according to the rights and obligations in the joint arrangements to either joint operations or joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint ventures are accounted for using the equity method. 8. 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.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 9. Translation of transactions and financial statements denominated in foreign currencies
9.1 Transactions denominated in foreign currencies
On initial recognition, foreign currency transactions are translated into functional currency using the spot exchange rate prevailing at the date of transaction.
At the balance sheet date, foreign currency monetary items are translated into functional currency 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 recognized in profit or loss for the period, except that (i) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency monetary items, which in substance forms part of the net investment in the foreign operations, exchange differences arising from the changes of foreign currency are recorded as other comprehensive income, and will be reclassified to profit or loss upon disposal of the foreign operations.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency remain unchanged.
9.2 Translation of financial statements denominated in foreign currency
For the purpose of preparing 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 average rate or 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 recorded as other comprehensive income. Cash Flows arising from 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 flow, the effect of exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and present separately in the statement “effect of foreign exchange rate changes on the cash and cash equivalents".
The opening balances and the comparative figures of prior year are presented at the translated amounts in the prior year's financial statements.
On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a foreign operation due to disposal of certain equity interest in it or other reasons, the Group transfers the accumulated translation differences, which are attributable to the owners' equity of the Company and presented under other comprehensive income to profit or loss in the period in which the disposal occurs.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 9. Translation of transactions and financial statements denominated in foreign currencies -(cont’d) 9.2 Translation of financial statements denominated in foreign currency -(cont’d)
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the proportionate share of accumulated translation differences are re-attributed to non- controlling interests and are not recognized in profit and loss. For partial disposals of equity interest in foreign operations, which are associates or joint ventures, the proportionate share of the accumulated translation differences are reclassified to profit or loss.
10. Financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument. At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. At initial recognition, an entity shall measure trade receivables at their transaction price if the trade receivables do not contain a significant financing component.
10.1 Classification and measurement of financial assets
After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value through other comprehensive income (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”). 10.1.1 Financial assets at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains or losses upon impairment and derecognition are recognized in profit or loss.
10.1.1.1 Effective interest method and amortised cost
Effective interest method represents the method for calculating the amortized costs and interest income or expense of each period in accordance with the effective interest rate of financial assets or financial liabilities (inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the rate that discounts the future cash flow over the expected subsisting period or shorter period, if appropriate, of the financial asset or financial liability to the current carrying value of such financial asset or financial liability.
When calculating the effective interest rate, the Group will consider the anticipated future cash flow (not considering the future credit loss) on the basis of all contract clauses of financial assets or financial liabilities, as well as consider all kinds of charges which are an integral part of the effective interest rate, including transaction fees and discount or premium paid or received between both parties of financial asset or financial liability contract.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 10. Financial instruments -(cont’d)
10.1 Classification and measurement of financial assets -(cont’d)
10.1.2 Financial assets at FVTOCI
A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met: (a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A gain or loss on a financial asset measured at fair value through other comprehensive income is recognized in other comprehensive income, except for impairment gains or losses, foreign exchange gains and losses and interest calculated using the effective interest method, until the financial asset is derecognized or reclassified. When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
10.1.3 Financial assets at FVTPL
Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated as financial assets at FVTPL.
A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI.
The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an‘accountingmismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
A gain or loss on a financial asset that is measured at FVTPL is recognized in profit or loss unless it is part of a hedging relationship. Dividends are recognized in profit or loss.
10.1.4 Designated financial assets at FVTOCI
At initial recognition, the Group makes an irrevocable election to designate to FVTOCI an investment in an equity instrument that is not held for trading.
When a non-trading equity instrument investment is designated as a financial asset that is measured at fair value through other comprehensive income, the changes in the fair value of the financial asset are recognised in other comprehensive income. Upon realization the accumulated gains or losses from other comprehensive income are transferred from other comprehensive income and included in retained earnings. During the period in which the Group holds these non-trading investment instruments, the right to receive dividends in the Group has been established, and the economic benefits related to dividends are likely to flow into the Group, and when the amount of dividends can be reliably measured, the dividend income is recognized in the current profit and loss.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 10. Financial instruments -(cont’d)
10.2 Impairment of financial assets
The Group recognizes a loss allowance for expected credit losses on financial assets that are classified to amortised cost and FVTOCI.
The Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables.
For financial assets other than trade receivables, the Group initially measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. At each balance sheet date, if the credit risk on that financial instrument has increased significantly since initial recognition, the Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recognized.
10.2.1 Significant increases in credit risk
At each balance sheet date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition.
The Group mainly considers the following list of information in assessing changes in credit risk: (a) significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception.
(b) significant changes in external market indicators of credit risk for a particular financial instrument or similar financial instruments with the same expected life.
(c) a significant change in thedebtors’ ability to meet its debt obligations.
(d) an actual or expected significant change in the operating results of the debtor.
(e) significant increases in credit risk on other financial instruments of the same debtor.
(f) an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor.
(g) significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements, which are expected to reduce thedebtor’s economic incentive to make scheduled contractual payments or to otherwise have an effect on the probability of a default occurring.
(h) significant changes that are expected to reduce thereceivable’s economic incentive to make scheduled contractual payments.
(i) significant changes in the expected performance and behaviour of the debtor.
(j) past due information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 10. Financial instruments -(cont’d)
10.2 Impairment of financial assets -(cont’d)
10.2.2 Credit-impaired financial asset
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit- impaired include observable data about the following events:
(a) significant financial difficulty of the issuer or the receivable;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the receivable, for economic or contractual reasons relating to thereceivable’s financial difficulty, having granted to the receivable a concession(s) that the lender(s) would not otherwise consider;
(d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganization; 10.2.3 Recognition of expected credit losses
For the purpose of determining significant increases in credit risk and recognizing a loss allowance on a collective basis, financial instruments are grouped on the basis of shared credit risk. Examples of shared credit risk characteristics may include, but are not limited to, the:(a) instrument type; (b) credit risk ratings; (c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value of collateral relative to the financial asset if it has an impact on the probability of a default occurring.
Expected credit losses of financial instruments are determined as the present value of the difference between: (a) the contractual cash flows that are due to an entity under the contract; and (b) the cash flows that the entity expects to receive.
For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected credit losses as the difference between theasset’s gross carrying amount and the present value of estimated future cash flows discounted at the financialasset’s original effective interest rate. Any adjustment is recognized in profit or loss as an impairment gain or loss.
The Group measures expected credit losses of a financial instrument in a way that reflects:
(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the time value of money; and
(c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
10.2.4 Written-off of financial assets
The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 10. Financial instruments -(cont’d)
10.3 Transfer of financial asset
The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractual rights to the cash flows from the financial asset expire; or (ii) 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 (iii) 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.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control of the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizes an associated liability. The extent of theGroup’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset.
When the company is derecognizing a financial asset in its entirety, except for equity instrument designated to FVTOCI, the difference between (i) the carrying amount of the financial asset transferred; and (ii) the sum of the consideration received from the transfer is recognized in profit or loss.
10.4 Classification and measurement of financial liabilities
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
All financial liabilities are subsequently measured at FVTPL or other financial liabilities.
Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated as at FVTPL. The financial liability other than derivative financial liabilities are stated as liabilities held for trading.
Other financial liabilities are subsequently measured at amortized cost by using effective interest method. Gain or loss arising from derecognition or amortization is recognized in current profit or loss.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 10. Financial instruments -(cont’d)
10.5 Derecognition of financial liabilities
Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in part. An agreement entered into force between the Group (debtor) and a creditor to replace the original financial liabilities with new financial liabilities with substantially different terms, derecognize the original financial liabilities as well as recognize the new financial liabilities. When financial liabilities is derecognized in full or in part, the difference between the carrying amount of the financial liabilities derecognized and the consideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period.
10.6 Derivatives
Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchange options, etc. Derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are subsequently re-measured at fair value. The resulting gain or loss is recognized in profit or loss unless the derivative is designated and highly effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship (Note III 28.1). 10.7 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset, except for circumstances where the Group has a legal right that is currently enforceable to offset the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize 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.
10.8 Equity instruments
The consideration received from the issuance of equity instruments net of transaction costs is recognized inshareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted fromshareholders’ equity.
When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditures relating to the repurchase are recorded in the cost of the treasury shares, with the transaction entering into the share capital. Treasury shares are excluded from profit distributions and are stated as a deduction undershareholders’ equity in the balance sheet.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 11. Receivable
Receivables are assessed for impairment on a collective group and/or on an individual basis as follows: Expected credit losses in respect of a receivable is measured at an amount equal to lifetime expected credit losses. The assessment is made collectively for account receivables, where receivables share similar credit risk characteristics based on geographical location, using the expected credit losses model including inter- alia aging analysis, historical loss experiences adjusted by the observable factors reflecting current and expected future economic conditions. The ratio of the collective provision for non-overdue account receivables is between0%-1.4%.
When credit risk on a receivable has increased significantly since initial recognition, the group records specific provision or collective provision, which is determined for groups of similar assets in countries in which there are large number of customers with immaterial balances.
In assessing whether the credit risk on a receivable has increased significantly since initial recognition, the Group compares the risk of a default occurring on the receivable at the reporting date with the risk of a default occurring on the receivable at the date of initial recognition and considers both quantitative and qualitative information that is reasonable and supportable, including observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor.
12. Inventories
12.1 Categories of inventories and initial measurement
The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets.
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 including direct labor costs and an appropriate allocation of production overheads.
12.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
12.3 Basis for determining net realizable 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 realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realizable 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.
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 realizable value of inventories is higher than their carrying amount, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period.
12.4 The perpetual inventory system is maintained for stock system.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 13. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and associates. Subsidiaries are the companies that are controlled by the Company. Associates are the companies over which the Group has significant influence. Joint ventures are joint arrangements over which the Group has joint control along with other investors and has rights to the net assets of the joint arrangement. The Company accounts for the investment in subsidiaries at historical cost in the Company's financial statements. Investments in associates and joint ventures are accounted for under equity method. 13.1 Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under common control, the investment cost of the long-term equity investment is the share of the carrying amount of the shareholders' equity of the acquiree attributable to the ultimate controlling party at the date of combination. For a long-term equity investment acquired through business combination not involving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition. For a business combination not involving enterprises under common control achieved in stages that involves multiple exchange transactions, the initial investment cost is carried at the aggregate of the carrying amount of theacquirer’s previously held equity interest in the acquiree and the new investment cost incurred on the acquisition date.
Regarding the long-term equity investment acquired otherwise than through a business combination, if the long-term equity investment is acquired by cash, the historical cost is determined based on the amount of cash paid and payable; if the long-term equity investment is acquired through the issuance of equity instruments, the historical cost is determined based on the fair value of the equity instruments issued.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 13. Long-term equity investments -(cont’d)
13.2 Subsequent measurement and recognition of profit or loss
If the long-term equity investment is accounted for at cost, it should be measured at historical cost less accumulated impairment losses. Dividend declared by the investee should be accounted for as investment income.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theGroup’s share of the fair value of theinvestee’s identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is less than theGroup’s share of the fair value of theinvestee’s identifiable net assets at the time of acquisition, the difference is recognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for the period as investment income or loss and other comprehensive income for the period. The Group recognizes its share of theinvestee’s net profit or loss based on the fair value of theinvestee’s individual separately identifiable assets, etc. at the acquisition date after making appropriate adjustments to be confirmed with the Group's accounting policies and accounting period. The Group discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of its net investment in the investee is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee, a provision is recognized according to the expected obligation, and recorded as investment loss for the period.
13.3 Basis for determining control, joint control and significant influence over investee
Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that are currently exercisable or convertible shall be considered.
13.4 Methods of impairment assessment and determining the provision for impairment loss
If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than their carrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the recoverable amounts (Note III 20).
13.5 The disposal of long-term equity investment
On disposal of a long term equity investment, the difference between the proceeds actually received and
receivable and the carrying amount is recognized in profit or loss for the period.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 14. Investment properties
Investment property refers to real estate held to earn rentals or for capital appreciation, or both, including leased land use rights, land use rights held and provided for transferring after appreciation and leased constructions, etc.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of investment property only when the economic benefits associated with the asset will likely flow to the Group and its cost can be measured reliably. All other subsequent expenditures on investment property shall be included in profit or loss for the current period when incurred. The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortized using the same policy as that for buildings and land use rights.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying amount and related taxes and surcharges is recognized in profit or loss for the current period.
15. Fixed assets
15.1 Recognition criteria for fixed assets
Fixed assets include land owned by the Group and buildings, machinery and equipment, transportation vehicles, office equipment and others.
Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized 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 reliably measured. Purchased or constructed fixed assets are initially measured at cost when acquired.
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. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 15. Fixed assets -(cont’d)
15.2 Depreciation of each category of fixed assets
Fixed asset is depreciated based on the cost of fixed asset recognized less expected net residual value over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. Depreciation is calculated based on the carrying amount of the fixed asset after impairment over the estimated remaining useful life of the asset.
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.
The estimated useful life, estimated net residual value and annual depreciation rate of each category of fixed assets are as follows:
Residual Annual Useful life value depreciation rate Category Depreciation (years) (%) (%) Buildings the straight-line method 15-50 0-4 1.9-6.7 Machinery and equipment the straight-line method 3-22 0-4 4.4-33.3 Office and other equipment the straight-line method 3-17 0-4 5.6-33.3 Motor vehicles the straight-line method 5-9 0-2 10.9-20.0 Land owned by the Group is not depreciated.
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 derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period.
The difference between recoverable amounts of the fixed assets under the carrying amount is referred to as impairment loss (Note III 20).
16. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various construction, installation costs, borrowing costs capitalized and other expenditures incurred until such time as the relevant assets are completed and ready for its intended use. When the asset concerned is ready for its intended use, the cost of the asset is transferred to fixed assets and depreciated starting from the following month.
The difference between recoverable amounts of the construction in progress under the carrying amount is referred to as impairment loss (Note III 20).
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized 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. Capitalization of borrowing costs ceases when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequently should be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months. Capitalization is suspended until the acquisition, construction or production of the asset is resumed.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expenses 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.
Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalization period, exchange differences on foreign currency specific-purpose borrowing are fully capitalized whereas exchange differences on foreign currency general-purpose borrowing is charged to profit or loss.
18. Intangible assets
18.1 Valuation methods, useful life, impairment test
TheGroup’s intangible assets include product registration assets, intangible assets upon purchase of products, marketing rights and rights to use trademarks, land use rights and software. Intangible assets are stated at the balance sheet at cost less accumulated amortization and impairment losses.
When an intangible asset with a finite useful life is available for use, its original cost less any accumulated impairment losses is amortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of the year, and makes adjustments when necessary.
The respective amortization periods for such intangible assets are as follows:
Item Amortization period (years)
Land use rights 49-50 years
Product registration 8 years
Intangible assets on purchase of products 7-11, 20 years
Tradename and trademarks 4-10, 30 years
Software 3-5 years
Customer relations 5-10 years
The difference between recoverable amounts of the intangible assets under the carrying amount is referred
to as impairment loss (see Note III 20).
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 18. Intangible assets -(cont’d)
18.2 Research and development expenditure
Internal research and development project expenditures were classified into research expenditures and development expenditures depending on its nature and the greater uncertainty whether the research activities becoming to intangible assets.
Expenditure during the research phase is recognized as an expense in the period in which it is incurred. Expenditure during the development phase that meets all of the following conditions at the same time is recognized as intangible asset:
- It is technically feasible to complete the intangible asset so that it will be available for use or sale; - The Group has the intention to complete the intangible asset and use or sell it;
- The Group can demonstrate the ways in which the intangible asset will generate economic benefits; - The availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset;
- The expenditure attributable to the intangible asset during its development phase can be reliably measured.
Expenditures that do not meet all of the above conditions at the same time are recognized in profit or loss when incurred. If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period. Expenditures that have previously been recognized in the profit or loss would not be recognized as an asset in subsequent years. Those expenditures capitalized during the development stage are recognized as development costs incurred and will be transferred to intangible asset when the underlying project is ready for an intended use. 19. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over theacquirer’s interest in the fair value of the identifiable net assets of the acquiree under a business combination not involving enterprises under common control.
Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses (see Note III 20). On disposal of an asset group or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss on disposal.
20. Impairment of long-term assets
The Company assesses at each balance sheet date whether there is any indication that the fixed assets, construction in progress, right of use assets, intangible assets with finite useful lives, investment properties measured at historical cost, investments in subsidiaries, joint ventures and associates may be impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated for such assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flow estimated to be derived from the asset. The Group estimates the recoverable amount on an individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the asset belongs. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 20. Impairment of long-term assets -(cont’d)
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groups is an asset group or set of asset group that is able to benefit from the synergies of the business combination and shall not be larger than a reportable segment determined by the Group. If the carrying amount of the asset group or set of asset groups is higher than its recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups, pro rata based on the carrying amount of each asset.
Once the impairment loss of such assets is recognized, it will not be reversed in any subsequent period. 21. Employee benefits
21.1 Short-term employee benefits
Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, and the expense is recorded when the related service is provided. A provision for short-term employee benefits in respect of cash bonuses is recognized in the amount expected to be paid where the Group has a current legal or constructive obligation to pay the said amount for services provided by the employee in the past and the amount can be estimated reliably.
21.2 Post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans. A defined contribution plan is a post-employment benefit plan under which the Group pays contributions to a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.
Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans. In accordance with the projected unit credit method, the Group measures the obligations under defined benefit plans using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables and financial variables, and discount obligations under the defined benefit plans to determine the present value of the defined benefit liability. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of theGroup’s obligation.
The Group attributes benefit obligations under a defined benefit plan to periods of service provided by respective employees. Service cost and interest expense on the defined benefit liability are charged to profit or loss and remeasurements of the defined benefit liability are recognized in other comprehensive income.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 21. Employee benefits -(cont’d)
6538 Termination benefits
When the Group terminates the employment with employees or provides compensation under an offer to encourage employees to accept voluntary redundancy, a provision is recognized with a corresponding expense in profit or loss at the earlier of the following dates:
- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a curtailment proposal.
- When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.
If the benefits are payable more than 12 months after the end of the reporting period, they are discounted to their present value. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of theGroup’s obligation.
25.4 Other long-term employee benefits
TheGroup’s net obligation for long-term employee benefits, which are not attributable to post-employment benefit plans, is for the amount of the future benefit to which employees are entitled for services that were provided during the current and prior periods.
The amount of these benefits is discounted to its present value and the fair value of the assets related to these obligations is deducted therefrom. The discount rate used is the yield on the reporting date on highly- rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of theGroup’s obligation.
22. Share-based payment
Share-based payment refers to the transaction in order to acquire the service offered by the employees or other parties that grants equity instruments or liabilities on the basis of the equity instruments. Share-based payment classified into equity-settled share-based payment and cash-settled share-based payment. 22.1 Cash-settled share-based payment
The cash-settled share-based payment should be measured according to the fair value of the liabilities recognized based on the shares or other equity instrument undertaken by the Company. For cash-settled share-based payment made in return for the rendering of employee services that cannot be exercised until the services are fully provided during the vesting period or specified performance targets are met, on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate of the number of exercisable instruments, be recognized in relevant expenses and the corresponding liabilities at the fair value of the liability incurred by the Company.
On each balance sheet date and the settlement date before the settlement of the relevant liabilities, the Company should re-measure the fair value of the liabilities and the changes should be included in the current period profit and loss.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 23. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the settlement date, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money. Where the effect of the time value of money is material, the amount of the provision is determined by discounting the related future cash outflows. The increase in the provision due to passage of time is recognized as interest expense.
If all or part of the provision settlements is reimbursed by third parties, when the realization of income is virtually certain, then the related asset should be recognized. However, the amount of related asset recognized should not be exceeding the respective provision amount.
At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then. 24. Revenue
Revenue of the Group is mainly from sale of goods.
The Group recognizes revenue when transferring goods to a customer, at the amount of the transaction price. Goods are considered transferred when the customer obtains control of the goods. Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods to a customer, excluding amounts collected on behalf of third parties.
Significant financing component
For a contract with a significant financing component, the Group recognize revenue at an amount that reflects the price that a customer would have paid for the goods if the customer had paid cash for those goods at receipt. The difference between the amount of consideration and the cash selling price of the goods, is amortized in the contract period using effective interest rate. The Group does not adjust the amount of consideration for the effects of a significant financing component if the Group expects, at contract inception, that the period between when the entity transfers a good to a customer and when the customer pays for that good will be one year or less.
Sale with a right of return
For sale with a right of return, the Group recognizes revenue at the amount of consideration to which the Group expects to be entitled (ie excluding the products expected to be returned). For any amounts received (or receivable) for which an entity does not expect to be entitled, the entity shall not recognize revenue when it transfers products to customers but shall recognize those amounts received (or receivable) as a refund liability. An asset recognized for theGroup’s right to recover products from a customer on settling a refund liability shall initially be measured by reference to the former carrying amount of the product less any expected costs to recover those products.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 25. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration, including tax returns, financial subsidies and so on. A government grant is recognized only when the Group can comply with the conditions attached to the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount.
Government grants are either related to assets or income.
(1) The basis of judgment and accounting method of the government grants related to assets
Government grants obtained for acquiring long-term assets are government grants related to assets. A government grant related to an asset is offset with the cost of the relevant asset.
(2) The basis of judgment and accounting method of the government grants 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 recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period. Government grants related to theGroup’s normal course of business are offset with related costs and expenses. Government grants related that are irrelevant with theGroups’s normal course of business are included in non-operating gains.
26. Current and deferred tax
The income tax expenses include current income tax and deferred income tax.
26.1 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. 26.2 Deferred tax assets and deferred tax liabilities
Temporary differences are differences between the carrying amounts of certain assets or liabilities and their tax base.
All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 26. Current and deferred tax -(cont’d)
26.2 Deferred tax assets and deferred tax liabilities -(cont’d)
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized. However, for deductible 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 recognized.
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 realized or the liability is settled. Deferred tax liabilities are recognized 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.
The Group may be required to pay additional tax in case of distribution of dividends by the Group companies. This additional tax was not included in the financial statements, since the policy of the Group is not to distribute in the foreseeable future a dividend which creates a significant additional tax liability. Except for those current income tax and deferred tax charged to comprehensive income orshareholders’ equity in respect of transactions or events which have been directly recognized in other comprehensive income orshareholders’ equity, and deferred tax recognized on business combinations, all other current income tax and deferred tax items are charged to profit or loss in the current period.
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 utilized. Such reduction is reversed when it becomes probable that sufficient taxable profits will be available.
26.3 Offset of income tax
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and tax assets and tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to realize the assets and liabilities simultaneously, current tax assets and liabilities are offset and presented on a net basis.
When the Group has a legal right to settle deferred tax assets and liabilities on a net basis which relates 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 realize 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.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 27. Leases
Lease is a contract, that conveys the right to use an asset for a period of time in exchange for consideration. 27.1 Determining whether an arrangement contains a lease
On the inception date of the lease, the Group determines whether the arrangement is a lease or contains a lease, while assessing if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right to control the use of an identified asset, the Group assesses whether it has the following two rights throughout the lease term:
(a) The right to obtain substantially all the economic benefits from use of the identified asset; and (b) The right to direct the identifiedasset’s use.
An arrangement does not contain a lease if an asset is leased for a period of less than 12 months, or to lease of asset with low economic value.
27.2 Initial recognition of leased assets and lease liabilities
Upon initial recognition, the Group recognizes a liability at the present value of future lease payments (exclude certain variable lease payments, as detailed in note III 27.4), and concurrently the Group recognizes a right-of-use asset at the same amount, adjusted for any prepaid lease payments paid at the lease date or before, plus initial direct costs incurred in respect of the lease.
When the interest rate implicit in the lease is not readily determinable, the incremental borrowing rate of the lessee is used.
The Group presents right-of-use assets separately from other assets in the balance sheet.
27.3 The lease term
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option, if it is reasonably certain that the lessee will exercise or not exercise the option, respectively.
If there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, the Group remeasures the lease liability, on the basis of the revised lease term and the revised discount rate and adjust the right-of-use assets accordingly.
27.4 Variable lease payments
Variable lease payments that depend on an index or a rate, are initially measured using the index or rate existing at the commencement of the lease. When the cash flows of future lease payments change as the result of a change in an index or a rate, the balance of the liability is adjusted with a correspondence change in the right-of-use asset.
Other variable lease payments that are not included in the measurement of the lease liability are recognized in profit or loss in the period in which the condition that triggers payment occurs.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 27. Leases(cont’d)
27.5 Subsequent measurement
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements of the lease liability. The asset is depreciated on a straight-line basis over the useful life or contractual lease period, whichever earlier. The Group applies ASBE8 Impairment of Assets, to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
A lease liability is measured after the lease commencement date at amortized cost using the effective interest method.
28. Other significant accounting policies and accounting estimates
28.1 Hedging
The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflation risks and derivatives that are not used for hedging.
Hedge accounting
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedge is expected to be effective in offsetting the changes in the fair value of cash flows that can be attributed to the hedged risk during the period for which the hedge is designated.
An effective hedge exists when all of the below conditions are met:
• There is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship;• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.
On the commencement date of the accounting hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including theGroup’s risk management objectives and strategy in executing the hedge transaction, together with the methods that will be used by the Group to assess the effectiveness of the hedging relationship.
With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highly probable and must give rise to exposure to changes in cash flows that could ultimately affect profit or loss. Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 28. Other significant accounting policies and accounting estimates -(cont’d)
28.1 Hedging(cont’d)
Cash-flow hedges
Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows are recognized through other comprehensive income directly in a hedging reserve, with respect to the part of the hedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair value are recognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profit and loss in the period in which the hedged cash flows impact profit or loss and is presented in the same line item in the statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, the hedge accounting is discontinued. The cumulative gain or loss previously recognized in a hedging reserve through other comprehensive income remains in the reserve until the forecasted transaction occurs or is no longer expected to occur. If the forecasted transaction is no longer expected to occur, the cumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profit or loss.
Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge financial assets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of such derivatives are recognized in profit or loss as gain (loss) from changes in fair value or investment income.
Derivatives that are not used for hedging
Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as gain (loss) from changes in fair value or investment income.
28.2 Securitization of assets
Details of the securitization of asset agreements and accounting policy are set out in Note V.5 - Account receivables
28.3 Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structure of theGroup’s internal organization, management requirements and internal reporting system.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 28. Other significant accounting policies and accounting estimates -(cont’d)
28.3 Segment reporting -(cont’d)
Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics and are same or similar in respect of the nature of each product and service, the nature of production processes, the type or class of customers for the products and services, the methods used to distribute the products or provide the services, and the nature of the regulatory environment.
Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting. Segment accounting policies are consistent with those for the consolidated financial statements.
28.4 Profit distributions to shareholders
Dividends which are approved after the balance sheet date are not recognized as a liability at the balance sheet date but are disclosed in the notes separately.
29. Changes in significant accounting policies and accounting estimates
29.1 Changes in significant accounting policies
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|The contents and reasons for the changes of accounting policies|Process formanagementapproval|
|The Group began to adopt revised Accounting Standards for Business Enterprises 21 Leases(“New lease standard”), promulgated by Ministry of Finance in 2018, from January 1, 2019. Therevised accounting policies for leases are presents in Note III.27For existing contracts at the initial application date, the Group elects not tore-assess whether they are, or contain leases. Contracts that are signed or modified after the dateof initial application, the Group assess whether they are, or contain leases, according to thedefinition of lease in the new lease standards.The Group adjusts all relevant financial accounts at the initial application date, for theaccumulated impact from the new lease standards, with no retrospective adjustments forcomparative numbers. The Group elected to apply the transitional provision of recognizing aright-of-use asset at the same amount of the lease liability, adjusted for any prepaid or accruedlease payments that were recognized as an asset or liability before the date of initial application,and therefore, the implementation of the standard does not affect retained earnings balance at thedate of initial application.|The accountingpolicy changewas approvedby the board ofdirectorsmeeting in28.4.2019|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 29. Changes in significant accounting policies and accounting estimates -(cont’d)
29.1 Changes in significant accounting policies -(cont’d)
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|-|-|
|The contents and reasons for the changes of accounting policies|Process formanagementapproval|
|For operating leases before the initial application date, the Group adopts the simplifyingapproaches below for each lease:- When determining lease liabilities, the same discount rate will be used for leases with similarcharacteristics;- For leases with options to extend or terminate, the Group determines the lease term based onthe actual exercise of options before the initial application date and other most updatedinformation;- As a substitute of impairment test for right-of-use assets, the Group applies ASBE13Contingencies, to assess if the contract containing a lease is a loss contract and adjust theright of-use assets based on the loss incurred at the initial application date.- For lease modifications before the initial application date, the Group makes accountingtreatments based on the final lease arrangements after the lease modification.On January 1, 2019, as a result of the implementation of the standard, the lease liabilitiesincreased by 506,862 thousands RMB, and right-of-use assets by 506,862 thousands RMB. Foroperating leases before the initial application date, the Group measures the lease liability at thepresent value of the lease payments, with the incremental borrowing rate as the discount rate.The borrowing rates are between 1.9% to 6.1%.||
|In preparation of 2019 interim financial report, the Group began to adopt the Notice on Revisingthe Format of 2019 Financial Statements for General Enterprises (CaiKuai [2019] No.6,hereinafter “CaiKuai No.6”) promulgated by Ministry of Finance on April 30, 2019. CaiKuaiNo.6 revised accounts in balance sheets, income statements, statements of cash flows andstatements of changes in shareholders’ equity, including:- “Notes and accounts receivable” is split into “Notes receivable” and “Accounts receivable”;- “Notes and accounts payable” is split into “Notes payable” and “Accounts payable”;- Newly added “Receivables financing” and “Special reserve”;- Make clear or revise the contents presented within the accounts of “Other receivables”, “Non-current assets due within one year”, “Other payables”, “Deferred income”, “Other equityinstruments”, “Research and Development expenses”, “Interest income” and “Interestexpenses” as subitems of “Finance expenses”, “Other income”, “Non-operating income”,“Non-operating expenses”, and “Capital injected by holders of other equity instruments”.- Added disclosure requirements for provision of loss allowance, for loan commitments andfinancial guarantee contracts;- Added “Gain from derecognition of financial assets at amortized cost” as a subitem of“Investment income”;- Adjusted the sequence of some items within the income statements;- Make clear of the items in the cash flow statements, for the cash flows related to governmentgrants.The above modifications were retrospectively adjusted for comparative numbers. There is nosignificant impact to the Company’s financial statements from implementation Caikuai No.6.|The accountingpolicy changewas approvedby the board ofdirectorsmeeting in21.8.2019|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 29. Changes in significant accounting policies and accounting estimates -(cont’d)
29.1 Changes in significant accounting policies -(cont’d)
Summary of impacts to assets and liabilities from adoption of new lease standard, as at January 1, 2019: Impact from
December 31, adoption of new January 1, Items 2018 leases standard 2019 Fixed assets 7,263,866 (6,917) 7,256,949 Right-of-use assets N/A 513,780 513,780 Total non-current assets 18,899,599 506,863 19,406,462 Total assets 44,135,063 506,863 44,641,926 Non-current liabilities due within one year 301,814 120,584 422,398 Other payables 1,197,579 (4,327) 1,193,252 Total current liabilities 12,134,847 116,257 12,251,104 Lease liabilities N/A 390,606 390,606 Total non-current liabilities 9,255,354 390,606 9,645,960 Total liabilities 21,390,201 506,863 468,798,12 29.2 Changes in significant accounting estimates
There are no significant changes in accounting estimates in the reporting period.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 30. Significant accounting estimates and judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
Notes V.34, Note VIII, Note IX and Note XIII contain information about the assumptions and their risk factors relating to post-employment benefits– defined benefit plans, fair value of financial instruments and share-based payments. Other key sources of estimation uncertainty are as follows:
30.1 Impairment of trade receivables
As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whether credit risk on a receivable has increased significantly since initial recognition, lifetime expected losses is accrued for impairment provision3 Evidence of impairment includes observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If there is objective evidence of a recovery in the value of receivables which can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed3
30.2 Provision for impairment of inventories
As described in Note III.12, the net realisable value of inventories is undermanagement’s regular review, and as a result, provision for impairment of inventories is recognized for the excess ofinventories’ carrying amounts over their net realisable value. When making estimates of net realisable value, the Group takes into consideration the use of inventories held on hand and other information available to form the underlying assumptions, including theinventories’ market prices and theGroup’s historical operating costs. The actual selling price, the costs of completion and the costs necessary to make the sale and relevant taxes may vary based on the changes in market conditions and product saleability, manufacturing technology and the actual use of the inventories, resulting in the changes in provision for impairment of inventories. The net profit or loss may then be affected in the period when the impairment of inventories is adjusted.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 30. Significant accounting estimates and judgments -(cont’d)
30.3 Impairment of assets other than inventories and financial assets
As described in Note III.20, if impairment indication exists, assets other than inventories and financial assets are assessed at balance sheet date to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such case exists, an impairment loss is recognized.
The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell and its present value of expected future cash flows. Since a market price of the asset (or the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably, the recoverable amount is calculated based on the present value of estimated future cash flows. In assessing the present value of estimated future cash flows, significant judgements are exercised over theasset’s production, selling price, related operating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable and supportable assumptions.
30.4 Depreciation and amortisation of assets such as fixed assets and intangible assets
As described in Note III.15 and III.18, assets such as fixed assets and intangible assets are depreciated and amortised over their useful lives after taking into account residual value. The estimated useful lives of the assets are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The useful lives of the assets are determined based on historical experience of similar assets and the estimated technical changes. If there have been significant changes in the factors used to determine the depreciation or amortisation, the rate of depreciation or amortisation is revised prospectively.
30.5 Income taxes and deferred income tax
The Company and Group companies are assessed for income tax purposes in a large number of jurisdictions and, therefore, Company management is required to use considerable judgment in determining the total provision for taxes and attribution of income.
When assessing whether there will be sufficient future taxable profits available against which the deductible temporary differences can be utilised, the Group recognizes deferred tax assets to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised, using tax rates that would apply in the period when the asset would be utilised. In determining the amount of deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amount of taxable profits to be utilised in the following periods, and of the tax rates applicable in the future according to the existing tax policies and other relevant regulations. If the actual timing and amount of future taxable profits or the actual applicable tax rates differ from the estimates made by management, the differences affect the amount of tax expenses.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES -(cont’d) 30. Significant accounting estimates and judgments -(cont’d)
30.6 Contingent liabilities
When assessing the possible outcomes of legal claims filed against the Company and its investee companies, the company positions are based on the opinions of their legal advisors. These assessments by the legal advisors are based on their professional judgment, considering the stage of the proceedings and the legal experience accumulated regarding the various matters. Since the results of the claims will be determined by the courts, the outcomes could be different from the assessments.
In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt as to interpretation of the agreement and/or legal provision and/or the manner of their implementation. This exposure is brought to theCompany’s attention in several ways, among others, by means of contacts made to Company personnel. In assessing the risk deriving from the unasserted claims, the Company relies on internal assessments by the parties dealing with these matters and by management, who weigh assessment of the prospects of a claim being filed, and the chances of its success, if filed. The assessment is based on experience gained with respect to the filing of claims and the analysis of the details of each claim. By their nature, in view of the preliminary stage of the clarification of the legal claim, the actual outcome could be different from the assessment made before the claim was filed.
30.7 Employee benefits
TheGroup’s liabilities for long-term post-employment and other benefits are calculated according to the estimated future amount of the benefit to which the employee will be entitled in consideration for his services during the current period and prior periods. The benefit is stated at present value net of the fair value of theplan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions could lead to material changes in the book value of the liabilities and in the operating results.
30.8 Derivative financial instruments
The Group enters into transactions in derivative financial instruments for the purpose of hedging risks related to foreign currency and inflationary risks. The derivatives are recorded at their fair value. The fair value of derivative financial instruments is based on quotes from financial institutions. The reasonableness of the quotes is examined by discounting the future cash flows, based on the terms and length of the period to maturity of each contract, while using market interest rates of a similar instrument as of the measurement date. Changes in the assumptions and the calculation model could lead to material changes in the fair value of the assets and liabilities and in the results.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
IV. Taxation
1. Main types of taxes and corresponding tax rates:
The income tax rate in China is25% (2018:25%). The subsidiaries outside of China are assessed based on the tax laws in the country of their residence.
Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to third party:
Name of subsidiary Location 2019
ADAMA agriculture solutions Ltd. Israel 23.0%
ADAMA Makhteshim Ltd. Israel 7.5%
ADAMA Agan Ltd. Israel 16.0%
ADAMA Brasil S/A Brazil 34.0%
Makhteshim Agan of North America Inc. U.S. 24.7%
ADAMA India Private Ltd India 34.5%
ADAMA Deutschland GmbH Germany 32.5%
Control Solutions Inc. U.S. 24.0%
Adama Australia Pty Ltd Australia 30.0%
ADAMA France S.A.S France 8631%
ADAMA Northern Europe B.V. Netherlands 25.0%
ADAMA Italia S.R.L. Italy 27.9%
Alligare Inc. U.S. 27.5%
The VAT rate of the Group's subsidiaries is in the range between2.5% to27%.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
IV. Taxation -(cont’d)
1. Main types of taxes and corresponding tax rates -(cont’d)
(1) Benefits from Hi-Tech Certificate
The Company, was jointly approved as new and high-tech enterprise, by the Hubei Provincial Department of Science and Technology, Department of Finance of Hubei Province, Hubei Provincial Office of the State Administration of Taxation and Hubei Local Taxation Bureau, and the applicable income tax rate from 2017 to 2019 is15%.
(2) Benefits under the Law for the Encouragement of Capital Investments
Industrial enterprises of subsidiaries in Israel are preferred enterprise under the Israeli Law for the Encouragement of Capital Investments, 1959, according to which preferred enterprise in Development Area A, will be subject to tax rate of7.5%, the tax rate applicable to preferred enterprises located in other areas is16%.
Should a dividend be distributed from the historic tax-exempt income, the subsidiaries will be liable for tax on the income from which the dividend was distributed at a rate of25%. No tax shall apply to dividend distributed out of preferred income to shareholder who is Israel resident company. On dividend distributed out of preferred income to foreign shareholder subject to double taxation treaties, tax of20% shall apply. (3) Benefits under the Law for the Encouragement of Industry (Taxes), 1969
Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, Solutions is an Industrial Holding Company and some of the subsidiaries in Israel are “Industrial Companies”. The main benefit under this law is the filing of consolidated income tax returns (Solutions files a consolidated income tax return with Adama Makhteshim and Adama Agan) and amortization of know-how over 8 years.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements
1. Cash at Bank and On Hand
June 30 December 31 201 9 2018 (Restated) Cash on hand 7,770 1,380 Deposits in banks 5,374,050 6,344,816 Other cash and bank 88,196 53,994 5,425,392 6,400,190 Including cash and bank placed outside China 2,862,309 3,873,638 As at June 30, 2019, restricted cash and bank balances was 43,572 thousand RMB (as at December 81, 2018- 18,558 thousand RMB) mainly including deposits that guarantee bank acceptance drafts.
2. Financial assets held for trading
June 30 December 31 201 9 2018 (Restated) Debt instruments 15,365 22,108 Other 17,709 23,987 33,074 46,095 3. Derivative financial assets
June 30 December 31 201 9 2018 (Restated) Economic hedge 392,098 389,068 Accounting hedge derivatives 24,893 128,658 416,991 517,726 4. Bills Receivable
June 30 December 31 201 9 2018 (Restated) Post-dated checks receivable 20,597 31,935 Bank acceptance draft 34,105 8,634 54,702 40,569 All bills receivables are due within 1 year.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
5. Accounts Receivable
a. By category
June 30, 2019
Provision for bad and
Book value doubtful debts
Carrying Amount Percentage(%) Amount Percentage(%) amount Account receivables assessed
individually for impairment 510,505 6 350,809 69 159,696 Account receivables assessed
collectively for impairment 7,597,460 94 82,775 1 7,514,685 8,107,965 100 433,584 5 7,674,381 December 31, 2018 (Restated)
Provision for bad and
Book value doubtful debts
Carrying Amount Percentage(%) Amount Percentage(%) amount Account receivables assessed
individually for impairment 458,217 7 335,873 73 122,343 Account receivables assessed
collectively for impairment 6,548,131 93 97,375 1 6,450,757 7,006,348 100 433,248 6 6,573,100 b. Aging analysis
June 30, 2019 Within 1 year (inclusive) 9,296,656 Over 1 year but within 2 years 585,658 Over 2 years but within 3 years 14,284 Over 3 years but within 4 years 46,658 Over 4 years but within 5 years 82,668 Over 5 years 566,598 8,107,965
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
5. Accounts Receivable– (cont'd)
c. Addition, written-back and written-off of provision for bad and doubtful debts during the period Addition of provision for bad and doubtful debts during the period
Lifetime expected credit Lifetime expected
loss (credit losses has credit loss (credit losses
not occurred) has occurred) Total January 1, 2019 52,575 380,673 433,248 First time consolidation - 2,131 2,131 Addition during the period, net - 30,763 30,763 Write back during the period (16,379) (17,740) (34,119) Write-off during the period - (2,749) (2,749) Exchange rate effect 52 4,258 4,310 Balance as of June 30, 2019
36,248 397,336 433,584 d. Five largest accounts receivable at June 30, 2019:
Proportion of Accounts Allowance of doubtful Name Closing balance receivable(%) debts Party 1 136,339 2 - Party 2 561,569 5 - Party 3 58,158 5 - Party 4 44,655 5 - Party 5 48,849 1 - Total 508,445 6 - e. Derecognition of accounts receivable due to transfer of financial assets
Certain subsidiaries of the group entered into a securitization transaction with Rabobank International for sale of trade receivables (hereinafter– “the Securitization Program” and/or “the Securitization Transaction”).
Pursuant to the Securitization Program, the companies will sell their trade receivables debts, in various different currencies, to a foreign company that was set up for this purpose and that is not owned by the Adama Ltd. (hereinafter– “the Acquiring Company”). Acquisition of the trade receivables by the Acquiring Company is financed by a U.S. company, Nieuw Amsterdam Receivables Corporation for the Rabobank International Group.
The trade receivables included as part of the Securitization Transaction are trade receivables that meet the criteria provided in the agreement.
Every year the credit facility is re approved in accordance with the Securitization Program. As at the date of the report, the Securitization Agreement was approved up to July 16, 2015. Subsequent to the report date, the Securitization Agreement was extended up to July 16, 2020.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
5. Accounts Receivable– (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The maximum scope of the securitization is adjusted for the seasonal changes in the scope of theCompany’s activities, as follows: during the months March through June the maximum scope of the securitization is$350 million (as of June 30, 2019 - 2,406 million RMB), during the months July through September the maximum scope of the securitization is$300 million (as of June 30, 2019 - 2,062 million RMB) and during the months October through February the maximum scope of the securitization is$250 million (as of June 30, 2019 - 1,719 million RMB). The proceeds received from those customers whose debts were sold are used for acquisition of new trade receivables.
The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calculated based on, among other things, the expected length of the period between the date of sale of the trade receivable and its anticipated repayment date. In the month following acquisition of the debt, the Acquiring Company pays in cash most of the debt while the remainder is recorded as a subordinated note that is paid after collection of the debt sold. If the customer does not pay its debt on the anticipated repayment date, the Company bears interest up to the earlier of the date on which the debt is actually repaid or the date on which debt collection is transferred to the insurance company (the actual costs are not significant and are not expected to be significant).
The Acquiring Company bears95% of the credit risk in respect of the customers whose debts were sold and will not have a right of recourse to the Company in respect of the amounts paid in cash, except regarding debts with respect to which a commercial dispute arises between the companies and their customers, that is, a dispute the source of which is a claim of non-fulfillment of an obligation of the seller in the supply agreement covering the product, such as: a failure to supply the correct product, a defect in the product, delinquency in the supply date, and the like.
The Acquiring Company appointed a policy manager who will manage for it the credit risk involved with the trade receivables sold, including an undertaking with an insurance company.
Pursuant to the Receivables Servicing Agreement, the Group subsidiaries handle collection of the trade receivables as part of the Securitization Transaction for the benefit of the Acquiring Company. As part of the agreement, Solutions is committed to comply with certain financial covenants, mainly the ratio of the liabilities to equity and profit ratios. As of June 30, 2019, Solutions was in compliance with the financial covenants.
The accounting treatment of sale of the trade receivables included as part of the Securitization Program is: The Company is not controlling the Acquiring Company, therefore the Acquiring Company is not consolidated in the financial statements.
The Company continues to recognize the trade receivables included in the Securitization Program based on the extent of its continuing involvement therein.
In respect of the part of the trade receivables included in the securitization Program with respect to which cash proceeds were not yet received, however regarding which the Company has transferred the credit risk, a subordinated note is recorded.
The continuing involvement and subordinated note recorded in the balance sheet as part of the “other
receivables” line item.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
5. Accounts Receivable– (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing expenses” line item.
In the fourth quarter of 2016, a subsidiary in Brazil (hereinafter - “the subsidiary”) entered into a 3 years securitization transaction with Rabobank Brazil for sale of trade receivables. Under the agreement, the subsidiary will sell its trade receivables to a securitization structure (hereinafter - “the entity”) that was formed for this purpose where the subsidiary has subordinate rights of5% of the entity's capital. The maximum securitization scope amounts to BRL 200 million (as of June 30, 2019 - 359 million RMB). On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amount sold net of discount calculated, among others, over the expected length of the period between the date of sale of the customer receivable and its anticipated repayment date.
The entity bears90% of the credit risk in respect of the customers whose debts were sold such that the entity has the right of recourse of10% of the unpaid amount. The subsidiary should make a pledged deposit equal to the amount theentity’s right of recourse.
The subsidiary handles the collection of receivables included in the securitization for the entity. The subsidiary does not control the entity and therefore the entity is not consolidated in the group's financial statements.
The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of its continuing involvement therein(10% right of recourse) and also recognizes an associated liability in the same amount.
The loss from the sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing expenses” category.
June 30 December 31 2019 2018 (Restated) Accounts receivables derecognized 6,169,641 2,541,443 Continuing involvement 556,542 129,893 Subordinated note in respect of trade receivables 888,669 622,362 Liability in respect of trade receivables 685,886 35,572 Six months ended June 30 2019 2018 Loss in respect of sale of trade receivables 33,129 32,186
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
6. Receivables financing
June 30 December 31 201 9 2018 (Restated) Bank acceptance draft 68,629 73,216 24,265 98,652 As at June 30, 2019, bank acceptance endorsed but not yet due amounts to 381,812 thousands RMB. 7. Prepayments
(1) The aging analysis of prepayments is as follows:
June 30 December 31 2018 2019 (Restated) AmountPercentage(%) AmountPercentage(%) Within 1 year (inclusive) 312,411 98 401,674 98 Over 1 year but within 2 years (inclusive) 2,969 1 3,810 5 Over 2 years but within 3 years (inclusive) 984 - 1,840 - Over 3 years 3,107 1 3,182 1 319,471 100 410,506 100 (2) Total of five largest prepayments by debtor at the end of the period:
Amount Percentage of prepayments(%) June 30, 2019
111,119 35
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
8. Other Receivables
(1) Other receivables by nature
June 30 December 31 2019 2018 (Restated) Div idends receivable - 5,245 Others 929,945 1,074,087 929,945 1,079,332 a. Other receivables by categories
June 30 December 31 2019 2018 (Restated) Trade receivables as part of securitization transactions
not yet eliminated 112,986 129,893 Subordinated note in respect of trade receivables 343,027 622,362 Financial institutions 61,522 98,837 Receivables in respect of disposal of fixed assets 145,861 28,551 Other 281,381 214,512 Sub total 944,777 1,094,155 Provision for doubtful debts - other receivables (14,832) (14,823) 929,945 1,079,332 b. Other receivables by aging
June 30 2019 Within 1 year (inclusive) 907,590 Over 1 year but within 2 years 5,630 Over 2 years but within 3 years 6,648 Over 3 years but within 4 years 17,797 Over 4 years but within 5 years 28 Over 5 years 7,084 944,777
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
8. Other Receivables - (cont'd)
(2) Additions, recovery or reversal and written-off of provision for bad and doubtful debts during the period:
Six months ended June 30, 2019 Balance as of January 1 2019, 14,823 Addition during the period 9 Written back during the period - Write-off during the period - Balance as of June 30, 2019
14,832 (3) Five largest other receivables at June 30 2019:
Closing Proportion of other Allowance of Name balance receivables(%) doubtful debts Party 1 343,027 36 - Party 2 135,308 14 - Party 3 61,522 7 - Party 4 24,103 3 - Party 5 21,407 2 - Total 585,367 62 - 9. Inventories
(1) Inventories by category:
June 30, 2019
Provision for
Book value impairment Carrying amount Raw materials 3,170,206 17,952 3,152,254 Work in progress 499,233 4,160 495,073 Finished goods 6,554,951 152,794 6,402,157 Others 297,983 9,543 288,440 10,522,373 184,449 10,337,924 December 31, 2018
Provision for
Book value impairment Carrying amount Raw materials 8,865,558 20,232 8,866,525 Work in progress 199,528 1,576 192,844 Finished goods 1,816,218 514,618 1,658,266 Others 696,885 10,514 625,569 5,268,615 556,891 5,888,492
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
9. Inventories - (cont'd)
(2) Provision for impairment of inventories:
For the six months ended June 30, 2019
Reversal or
January 1, 2019 Provision write-off Other* June 30, 2019 Raw material 20,232 4,329 (4,994) (1,615) 17,952 Work in
progress 1,576 - (16) 2,600 4,160 Finished goods 514,618 29,577 (43,680) 8,844 152,794 Others 10,514 447 (450) (968) 9,543 556,895 34,353 (49,140) 8,861 184,449* Includes amount of 8,766 RMB related to first time consolidation.
10. Other Current Assets
June 30 December 31 2019 2018 (Restated) Deductible VAT 476,327 476,706 Current tax assets 199,690 142,412 Others 39,750 41,688 715,767 660,806 11. Long-Term Receivables
June 30 December 31 2019 2018 (Restated) Long term account receivables from sale of goods 174,246 157,600 174,246 157,600
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
12. Long-Term Equity Investments
(1) Long-term equity investments by category:
June 30 December 31 2019 2018 (Restated) Investments in joint ventures 95,258 68,584 Investments in associates 39,817 39,766 135,075 108,350 (2) Movements of long-term equity investments for the period are as follows:
Investment Translation
income differences of Balance at the end of January 1 2019 (loss) foreign operations Other the period Joint ventures
Company A 62,696 11,462 (81) 4,344 78,421 Company B 4,598 440 15 - 5,053 Company C 1,290 - 23 - 1,313 Company D - 9,838 201 432 10,471 Sub-total 68,584 65,986 514 4,776 95,258 Associates
Company E 39,762 (16) 67 - 39,817 Sub total Sub-total 39,762 (16) 67 - 39,817 108,350 65,968 225 4,776 135,075 13. Other equity investments
June 30 December 31 2019 2018 (Restated) Company A 85,493 79,554 Company B - 9,574 Company C 1,709 1,709 Company D 564 564 Other 46 158 87,812 91,559 Other equity investments are non-core businesses that are intended to be held in the foreseeable future. For the six months period ended at June 30, 2019 the company did not recognize dividend income from other equity investments.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements– (cont'd)
14. Fixed assets
Land& Machinery& Office& other
Buildings equipment Motor vehicles equipment Total Cost
Balance as at January 1, 2019 3,661,658 13,245,528 565,694 321,424 17,882,446 Purchases 16,709 96,525 14,652 20,861 148,747 Transfer from construction in progress 8,451 145,033 27 1,295 151,616 Disposals (26,962) (2,735) (4,885) (6,686) (77,686) Currency translation adjustment 5,549 21,848 513 767 28,856 First time consolidation 85,831 39,309 96 1,956 127,156 Balance as at June 30, 2019 3,691,556 13,545,589 111,481 339,617 17,951,881 Accumulated depreciation
Balance as at January 1, 2019 (1,892,515) (7,965,196) (51,531) (242,697) (9,986,915) Charge for the period (76,628) (858,481) (7,905) (15,837) (413,285) Disposals 11,562 2,261 4,233 6,584 24,548 Currency translation adjustment (2,895) (13,342) (208) (658) (16,148) First time consolidation (39,354) (29,094) (96) (1,956) (70,500) Balance as at June 30, 2019 (1,148,288) (8,851,142) (55,507) (254,564) (10,665,655) Provision for impairment
Balance as at January 1, 2019 (68,702) (278,223) (8) (247) (347,180) Disposals 8,204 - - - 8,204 Currency translation adjustment 85 (131) - - (46) Balance as at June 30, 2019 (60,413) (278,354) (8) (247) (339,022) Carrying amounts
As at June 30, 2019
1,285,628 5,395,197 55,966 84,806 7,527,032 As at January 1, 2019
1,295,125 5,449,369 49,539 78,480 7,612,585 The lands reported as fixed assets are owned by the group subsidiaries and are located outside of China.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
15. Construction in Progress
(1) Construction in progress
June 30 December 31
2019 2018 (Restated)
Provision for Provision for
Book value impairment Carrying amount Book value impairment Carrying amount 534,351 - 534,351 487,204 487,204 (2) Details and Movements of major construction projects in progress during the six months ended June 30, 2019
Currency Transfer Actual cost Project
January translation to fixed June 30, to budget progress Source of Budget 1, 2019 A dditions differences assets 2019 (%) (%) funds Project A 1,509,420 120,412 50,039 - - 170,451 11 11 Internal finance Project B 505,643 1,220 5,009 - - 6,229 1 1 Internal finance Project C 157,951 58,177 1,095 - (947) 58,325 37 37 Internal finance Project D 79,747 42,476 947 84 - 43,507 55 55 Internal finance Project E 45,373 2,457 2,821 43 - 5,321 12 12 Internal finance Project F 44,760 13,818 6,178 - - 19,996 45 45 Internal finance Project G 34,374 31,358 800 (378) (31,780) - 94 100 Internal finance Project H 27,800 16,593 3,512 - - 20,105 72 72 Internal finance 16. Right-of-use assets
Land& Machinery& Office& other Buildings equipment Motor vehicles equipment Total Cost
Balance as at January 1, 2019 353,708 43,058 118,378 2,795 517,939 Additions 82,350 - 36,857 68 119,275 Disposals (2,071) (94) (5,412) - (7,577) Currency translation adjustment 956 70 754 4 1,784 Balance as at June 30, 2019 434,943 43,034 150,577 2,867 631,421 Accumulated depreciation
Balance as at January 1, 2019 (3,198) (961) - - (4,159) Charge for the period (37,434) (1,087) (36,418) (590) (75,529) Disposals 705 75 2,862 - 3,642 Currency translation adjustment (492) (16) (487) (8) (1,003) Balance as at June 30, 2019 (40,419) (1,989) (34,043) (598) (77,049) Provision for impairment
Balance as at January 1, 2019 - - - - - Balance as at June 30, 2019 - - - - - Carrying amounts
As at June 30, 2019
394,524 41,045 116,534 2,269 554,372 As at January 1, 2019
350,510 42,097 118,378 2,795 513,780
ADAMA LTD. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
17. Intangible Assets
Intangible assets
Product on Purchase of Tradename and Customers
registration Products Software trademarks relations Land use rights (1) Others(2) Total Costs
Balance as at January 1, 2019 9,721,455 4,121,559 284,894 460,640 556,599 882,529 307,692 15,954,524 Purchases 217,375 - 36,655 - - - 3,322 257,352 Currency translation adjustment 20,112 6,906 1,586 1,547 816 41 598 31,216 Disposal - - (1,593) (366) - - - (1,959) First time consolidation 8,019 - 4,248 260,390 200,392 - - 473,049 Balance as at June 30, 2019 9,967,043 4,128,465 689,374 722,211 393,385 347,008 311,612 16,559,098 Accumulated amortization
Balance as at January 1, 2019 (6,864,532) (1,863,482) (439,696) (406,082) (159,323) (58,211) (125,596) (9,916,922) Charge for the period (387,491) (200,553) (30,623) (10,766) (16,933) (3,750) (19,903) (670,019) Currency translation adjustment (17,326) (5,910) (1,186) (917) (638) (19) (548) (26,544) Disposal - - 1,593 292 - - - 1,885 First time consolidation - - (4,248) - - - - (4,248) Balance as at June 30, 2019 (7,269,349) (2,069,945) (474,160) (417,473) (176,894) (61,980) (146,047) (10,615,848) Provision for impairment
Balance as at January 1, 2019 (84,026) (51,337) - - - - (4,721) (140,084) Charge for the period - - - - - - - - Currency translation adjustment (148) (86) - - - - - (234) Disposal - - - - - - - - Balance as at June 30, 2019 (84,174) (51,423) - - - - (4,721) (140,318) Carrying amount
As at June 30, 2019 2,613,520 2,007,097 215,214 304,738 216,491 285,028 160,844 5,802,932 As at January 1, 2019 2,772,897 2,206,740 208,782 54,558 32,854 288,756 177,375 5,741,962 (1) Include land parcel in Israel that has not yet been registered in the name of the Group subsidiaries at the Land Registry Office, mostly due to registration procedures or technical problems. (2) Mainly non-compete.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
18. Goodwill
Changes in goodwill
The Group identified two cash generating units ("CGU"), Crop Protection (Agro) and Other (Non Agro) units. Operations are allocated into either one of the two cash generating units according to their business. At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates the recoverable amount of Agro and Non Agro units, which are the cash generating units of the Group that contain goodwill.
For the purpose of evaluating the groups Goodwill, the Group used a comparable trading multiple analysis in order to benchmark each of itsCGU’s valuation against that of the markets peer companies.
As of December 31, 2018 the fair value of the cash generating units to which the goodwill relates exceeds its carrying amount.
As at the reporting period, there were no indicators for impairment.
Currency
January 1, translation Balance at 2019 Additions adjustment June 30, 2019 Book value 4,085,945 205,615 7,187 4,298,747 Impairment provision - - - - Carrying amount
4,085,945 205,615 7,187 4,298,747 19. Deferred Tax Assets and Deferred Tax Liabilities
(1) Deferred tax assets without taking into consideration of the offsetting of balances within the same tax jurisdiction
June 30 December 31 2019 2018 (Restated) Deductible Deductible
temporary Deferred tax temporary Deferred tax differences assets differences assets Deferred tax assets
Deferred tax assets in respect of
carry forward losses 513,109 81,116 576,498 82,516 Deferred tax assets in respect of
inventories 1,610,875 437,698 1,651,046 442,237 Deferred tax assets in respect of
employee benefits 774,387 102,548 660,472 101,026 Other deferred tax asset 1,531,144 385,821 1,236,811 340,984 4,429,515 1,007,183 4,124,827 966,763
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities -(cont’d)
(2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the same tax jurisdiction
June 30 December 31 2019 2018 (Restated) Taxable Taxable
temporary Deferred tax temporary Deferred tax differences liabilities differences liabilities Deferred tax liabilities
Deferred tax liabilities in respect of
fixed assets and intangible assets 3,687,112 589,990 3,886,541 617,430 3,687,112 589,990 3,886,541 617,430 (3) Deferred tax assets and deferred tax liabilities presented on a net basis after offsetting
June 30 December 31 2019 2018 (Restated) The offset
amount of Deferred tax The offset amount
deferred tax assets or of deferred tax Deferred tax assets assets and liabilities after assets and or liabilities after liabilities offset liabilities offset Presented as:
Deferred tax assets
239,255 767,928 225,026 741,737 Deferred tax liabilities
239,255 350,735 225,026 392,404 (4) Details of unrecognized deferred tax assets
June 30 December 31 2019 2018 (Restated) De ductible temporary differences 83,488 82,886 Deductible losses carry forward 165,813 162,186 249,301 245,072 (5) Expiration of deductible tax losses carry forward for unrecognized deferred tax assets
June 30 December 31 2019 2018 (Restated) 20 19 - - 2020 15,936 15,909 2021 13,541 13,537 2022 1,382 1,380 After 2022 134,954 131,360 165,813 162,186
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities - (cont'd)
(6) Unrecognized deferred tax liabilities
When calculating the deferred taxes, taxes that would have applied in the event of realizing investments in subsidiaries were not taken into account since it is theCompany’s intention to hold these investments and not realize them.
20. Other Non-Current Assets
June 30 December 31 2019 2018 (Restated) Asset related to securitization deposit 66,960 62,395 Advances in respect of non-current assets 94,027 55,282 Judicial deposits 59,597 51,906 Call option in respect of business combination 15,097 11,880 Long term loan - 48 Others 71,704 35,819 Sub total 307,385 217,330 Due within one year - (48) 307,385 217,282 21. Short-Term Loans
Short-term loans by category:
June 30 December 31 2019 2018 (Restated) Gu aranteed loans 589,000 570,000 Unsecured loans 1,719,286 552,774 2,308,286 1,122,774 Details of the guarantees are set out in note X.5(3) Related parties and related party transactions.
22. Derivative financial liabilities
June 30 December 31 2019 2018 (Restated) Ec onomic hedge 604,265 1,430,497 Accounting hedge derivatives 84,002 21,173 688,267 1,451,670
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
23. Bills Payables
June 30 December 31 2019 2018 (Restated) Po st-dated checks payables 224,438 235,833 Note payables draft 151,339 209,700 375,777 445,533 As at June 30, 2019, none of the bills payable are overdue.
24. Accounts payables
June 30 December 31 2019 2018 (Restated) Within 1 year (including 1 year) 4,143,156 4,587,719 1-2 years (including 2 years) 13,705 12,545 2-3 years (including 3 years) 12,087 16,749 Over 3 years 9,720 10,923 4,178,668 4,627,936 There are no significant accounts payables ageing over one year.
25. Contract liabilities
June 30 December 31 2019 2018 (Restated) Rebates 717,368 525,982 Advances from customers 200,379 322,420 917,747 848,402 26. Employee Benefits Payable
June 30 December 31 2019 2018 (Restated) Sh ort-term employee benefits 470,752 608,839 Share based payment (See note XIII) 79,245 - Post-employment benefits-defined contribution plans 21,511 54,616 Other benefits within one year 308,289 697,191 879,749 568,646 Current maturities 32,605 86,651 912,354 944,175
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
27. Taxes Payable
June 30 December 31 2019 2018 (Restated) Co rporate income tax 236,055 407,457 VAT 177,130 186,939 Others 24,042 22,384 437,227 616,780 28. Other Payable
June 30 December 31 2019 2018 (Restated) Div idends payable (See note 41) 238,066 750 Interest payable 53,458 46,258 Other payable 1,679,117 1,150,571 1,970,641 1,197,579 (1) Interest payable
June 30 December 31 2019 2018 (Restated) Ac crued interest in respect of debenture 34,745 33,698 Accrued interest in respect of bank loans 11,199 2,430 Accrued interest in respect of other liabilities 7,514 10,130 53,458 46,258 As at 30 June, 2019, the Group did not have any overdue interest.
(2) Other payable
June 30 December 31 2019 2018 (Restated) Accrued expenses 631,540 640,507 Payables in respect of business combination under common
control 415,000 - Liability in respect of securitization transactions 249,332 35,572 Payables in respect of intangible assets 128,880 131,396 Financial institutions 4,668 44,336 Other payables 249,697 298,760 1,679,117 1,150,571 As at June 30, 2019, the Group did not have any significant overdue other payables.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
29. Non-Current Liabilities Due Within One Year
Non-current liabilities due within one year by category are as follows:
June 30 December 31 2019 2018 (Restated) Long-term loans due within one year 282,110 301,629 Lease liabilities due within one year 140,098 - Long-term payables due within one year - 185 422,208 301,814 30. Other Current Liabilities
June 30 December 31 2019 2018 (Restated) Put options to holders of non-controlling interests 169,661 404,463 Provision in respect of returns 161,899 149,686 Provision in respect of claims 12,175 23,644 Others 392 391 344,127 578,184
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
31. Long-Term Loans
Long-term loans by category
June 30 December 31 2018 (Restated) 2019 Interest range 2018 Interest range Long term loans
Loan secured by tangible assets
other than monetary assets 529 5.5% 741 5.5% Guaranteed loans - - 72,000 4.5% Unsecured loans 955,377 1.7%-6.1% 464,707 5.1%-6.1% Total Long term loans 955,906 537,448
Less: Long term loans due within 1 year (282,110) (301,629)
Long term loans, net
673,796 235,819
For the maturity analysis, see note VIII (c)
The long-term loans were mortgaged by fixed assets with carrying amounts of 5,926 thousand RMB as at June 30, 2019. Details of the guarantees are set out in note X(5) Related parties and related party transactions. 32. Debentures Payable
June 30 December 31 2019 2018 (Restated) Debentures Series B
8,152,990 7,649,098 June 30 2019 First year (current maturities) - Second year 895,144 Third year 895,144 Fourth year 895,144 Fifth year and thereafter 2,958,662 4,516,556
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
32. Debentures Payable - (cont'd)
Movements of debentures payable:
For the six months ended June 30, 2019
Balance at Issuance Amortization CPI and Repayment Currency Face value Face value January 1, during the of discounts or exchange rate during the translation Balance at in RMB NIS Issuance date Maturity period Issuance amount 2019 period premium effect period adjustment June 30, 2019 Debentures Series B 2,673,640 1,650,000 4.12.2006 November 2020-2036 3,043,742 3,471,674 - 551 654,989 - 4,921 8,255,655 Debentures Series B 843,846 513,527 16.1.2012 November 2020-2036 842,579 1,018,314 - 8,596 28,189 - 6,286 5,656,821 Debentures Series B 995,516 600,000 7.1.2013 November 2020-2036 1,120,339 1,277,399 - 6,559 46,128 - 8,615 5,828,855 Debentures Series B 832,778 533,330 1.2.2015 November 2020-2036 1,047,439 1,210,195 - )5,899( 92,884 - 8,686 5,644,544 Debentures Series B 418,172 266,665 1-6.2015 November 2020-2036 556,941 671,516 - )8,415( 86,889 - 5,285 955,281 7,649,098 - 6,684 846,168 - 55,865 4,516,556 Series B debentures issued by Solutions, in the amount of NIS 3,563.5 million par value, are linked to the Israeli CPI and bear interest at base annual rate of5.15%. The debenture principal is to be repaid in 17 equal payments in the years 2020 through 2036.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
33. Lease liabilities
June 30
2019 Interest range Lease liabilities 558,912 1.9% -6.1% Less: Lease liabilities due within one year (140,098)
Long term lease liabilities, net
418,814
34. Long-Term Employee Benefits Payable
Post-employment benefit plans– defined benefit plan and early retirement
June 30 December 31 2019 2018 (Restated) Total present value of obligation 577,191 533,574 Less: fair value of plan's assets (93,585) (87,492) Post-employment benefits -Net liability arising from defined benefit
plan 483,606 446,082 Termination benefits 92,186 104,781 Share based payment (See note XIII) 51,540 25,525 Other long-term employee benefits 49,722 89,559 Total long-term employee benefits, net 677,054 660,745 Including: Long-term employee benefits payable due within one year 32,605 40,095 644,449 620,646 (1) Movement in the net liability and assets in respect of defined benefit plans, early retirement and their components
Defined benefit obligation Fair value of
and early retirement plan's assets Total 2019 2018 2019 2018 2019 2018 Balance as at January 1, 638,355 703,679 87,492 97,614 550,863 262,621 Expense/income recognized
in profit and loss:
Current service cost 11,429 10,928 - - 11,429 10,928 Past service cost - (757) - - - (757) Interest costs 10,931 10,078 1,749 1,490 9,182 8,588 Changes in exchange rates 22,709 (26,394) 4,265 (4,783) 18,444 (21,611) Actuarial gain (losses) due to early retirement 707 (366) - - 707 (366) Included in other comprehensive
income:
Actuarial gain (losses) as a result
of changes in actuarial
assumptions 17,515 (13,723) 1,953 (1,643) 15,562 (12,080) Foreign currency translation
differences in respect of foreign
operations 1,359 6,242 350 925 1,009 5,317 Additional movements:
Benefits paid (33,628) (31,779) (5,404) (6,145) (28,224) (25,634)
Contributions paid by the Group - - 3,180 3,229 (3,180) (3,229)
Balance as at June 30, 669,377 657,908 93,585 90,687 575,792 129,665
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
34. Long-Term Employee Benefits Payable - (cont'd)
Post-employment benefit plans– defined benefit plan and early retirement - (cont'd)
(2) Actuarial assumptions and sensitivity analysis
The principal actuarial assumptions at the reporting date for defined benefit plan
June 30 December 31 2019 2018 (Restated) Discount rate(%)* 0.7%-3.5% 1.4%-3.5%*According to the demographic and the benefit components
The assumptions regarding the future mortality rate are based on published statistical data and acceptable mortality rates.
Possible reasonable changes as of the date of the report in the discount rate, assuming the other assumptions remain unchanged, would have affected the defined benefit obligation as follows: As of June 30, 2019 Increase of1% Decrease of1% Discount rate
(44,360) 54,443 35. Provisions
June 30 December 31 2019 2018 (Restated) Liabilities in respect ofcontingencies* 96,592 92,542 Other 39,332 39,809 135,924 132,351* Liabilities in respect of contingencies includes obligations of pending litigations, where an outflow of resources had been reliably estimated.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
36. Other Non-Current Liabilities
June 30 December 31 2019 2018 (Restated) Put options to holders of non- controlling interests 189,782 - Long term transactions in derivatives 8,428 14 Deferred income 2,276 28,146 Long term loans - others 171,770 171,770 896,612 199,930 37. Share Capital
Balance at Issuance of new Cancellations of Balance at January 1, 2019 shares shares June 30, 2019 Sh are capital
2,446,554 - - 2,446,554 38. Capital Reserve
Balance at Additions during Reductions during Balance at January 6, 2019 the period theperiod* June 30, 2019 Sh are premiums 12,965,177 - (415,000) 12,550,177 Other capital reserve 359,314 - (6,323) 352,991 13,324,491 - (421,323) 12,903,168* Mainly due to consideration of business combination under common, see note VI.2 - change in consolidation scope.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
39. Other Comprehensive Income
Attributable to shareholders of the company
Balance at Before tax Less: transfer to Less: Income Net–of-tax Less: transfer to Balance at January 1, 2019 amount profit or loss tax expenses amount retained earnings June 30, 2019 Items that will not be reclassified to profit or loss 66,516 (5,110) - (693) (4,417) 4,511 57,588 Re-measurement of changes in liabilities under
defined benefit plans 15,895 (15,562) - (1,584) (13,978) - 1,917 Changes in fair value of other equity investment 50,621 10,452 - 891 9,561 4,511 55,671 Items that may be reclassified to profit or loss 1,024,311 14,988 145,239 (21,197) (109,054) - 915,257 Effective portion of gain or loss of cash flow hedge 93,385 (27,951) 145,239 (21,197) (151,993) - (58,608) Translation difference of foreign financial statements 930,926 42,939 - - 42,939 - 973,865 1,090,827 9,878 145,239 (21,890) (113,471) 4,511 972,845
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
40. Surplus reserve
Additions Reductions
Balance at during the during the Balance at January 1, 2019 period period June 30, 2019 S tatutory surplus reserve 236,348 - - 236,348 Discretional surplus reserve 3,814 - - 3,814 240,162 - - 240,162 41. Retained Earnings
2019 2018 R etained earnings as at December 31 of preceding year 5,513,466 3,286,711 Changes in accounting policy - 39,481 Adjustment for business combination under common control (Note 1) 115,826 55,045 Retained earnings as at January 1 5,629,292 3,381,237 Net profits for the period attributable to shareholders of the Company 588,638 2,389,167 Dividends to non-controlling Interest (28,936) (16,028) Dividend to the shareholders of the company (Note 2) (293,628) (154,133) Other 4,511 15,366 Retained earnings as at June 30
5,899,877 5,615,609 Note 1:
During the reporting period the acquisition of Jiangsu Anpon Electrochemical co. LTD., a wholly-owned subsidiary of CNAC, was successfully completed. Anpon became a wholly owned subsidiary of the Company. The combination was considered as a business combination under common control (See note VI.2– Change in consolidation scope).
Note 2:
A.On March 19, 2019, after obtaining the approval of the 12th meeting of the company's 8th Board of Directors, the Company declared RMB 0.97 (including tax) per 10 shares as cash dividend to all shareholders, resulting in a total cash dividend of 237,316 thousands RMB (including tax), and zero shares as share dividend, as well as no reserve transferred to equity capital. The proposal was approved by theCompany’s shareholders at the 2nd interimshareholders’ meeting held on May 30, 2019.
B. On May 31, 2019, as part ofAnpon’s acquisitionagreement’s terms, and after obtaining the approval ofAnpon’s former sole shareholder, Anpon paid a cash dividend to its former sole shareholder, CNAC International, in a total of 56,312 thousands RMB (including tax), and zero shares as share dividend, as well as no reserve transferred to equity capital.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
42. Operating Income and Cost of Sales
Six months ended June 30 Six months ended June 30 2019 2018 (Restated) Income Cost of sales Income Cost of sales Principal activities 13,579,047 8,999,083 13,606,947 9,030,648 Other businesses 36,985 24,159 32,126 11,535 13,616,032 9,023,242 13,639,073 9,042,183 43. Taxes and Surcharges
Six months ended June 30 2019 2018 (Restated) Tax on turnover 4,641 17,620 Others 37,941 86,564 46,226 60,548 44. Selling and Distribution Expenses
Six months ended June 30 2019 2018 (Restated) Sa laries and related expense 811,280 736,594 Depreciation and amortization 703,980 541,154 Transportation and Commissions 372,574 382,703 Advertising and sales promotion 178,645 156,329 Warehouse expenses 75,558 29,555 Registration 74,483 84,919 Travel expenses 68,795 21,122 Insurance 41,668 34,252 Professional services 38,998 32,447 Others 133,793 555,554 2,499,774 6,612,555 45. General and Administrative Expenses
Six months ended June 30 2019 2018 (Restated) Sa laries and related expenses 248,290 264,555 Idlenessexpenses* 155,214 26,851 Professional services 64,171 62,853 Depreciation and amortization 45,283 32,378 IT systems 41,929 33,554 Office rent, maintenance and expenses 25,925 38,446 Other 47,447 65,184 628,259 523,821
* See note XI - Commitments and contingencies (environmental protection)
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
46. Research and development expenses
Six months ended June 30 2019 2018 (Restated) Sa laries and related expenses 90,220 68,187 Field trial 33,143 27,133 Professional services 27,519 24,557 Depreciation and amortization 18,826 7,330 Materials 14,860 2,983 Office rent, maintenance and expenses 4,316 3,720 Other 21,815 22,365 210,699 156,275 47. Financial Expenses, net
Six months ended June 30 2019 2018 (Restated) Interest expenses on debentures and loans 349,941 306,821 CPI expense in respect of debentures 96,329 64,891 Loss in respect of sale of trade receivables 33,129 32,186 Interest expense in respect of post-employment benefits and early
retirement, net 5,546 4,144 Revaluation of put option, net (14,954) 8,027 Interest income from customers, banks and others (41,104) (41,465) Exchange rate differences, net 481,692 (31,995) Other expenses 63,959 161 938,196 347,554 48. Investment income, net
Six months ended June 30 2019 2018 (Restated) Investment income (expenses) from disposal of derivatives (536,167) 134,295 Income from long-term equity investments accounted for using
the equity method 21,724 12,758 (514,443) 147,053 49. Gain (loss) from Changes in Fair Value
Six months ended June 30 2019 2018 (Restated) Gain (loss) from changes in fair value of derivative financial
instruments 881,007 (242,567) Others 3,128 (809) 884,135 (243,376)
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
50. Credit impairment loss
Six months ended June 30 2019 2018 (Restated) Bills receivable and accounts receivable 3,356 (1,261) Other receivables (9) (896) 3,347 (6,097) 51. Asset impairment Losses
Six months ended June 30 2019 2018 (Restated) Inventories (19,371) (36,214) Fixed assets - (866) Intangible asset - (555) Other (4,438) (684) (23,809) (37,783) 52. Gain from Disposal of Assets
Six months ended June 30 Included in non-recurring 2019 2018 (Restated) items Gain from disposal of fixed assets 115,730 74 115,730 Gain (loss) from disposal of intangible assets (216) 1,997,096 (216) 115,514 1,997,170 115,514 53. Non-Operating Expenses
Six months ended June 30 Included in non-recurring 2019 2018 (Restated) items Donation expenses 4,512 4,267 4,512 Other 11,504 8,126 9,223 16,016 4,469 13,735
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
54. Income Tax Expenses
Six months ended June 30 2019 2018 (Restated) Cu rrent year 192,289 865,954 Deferred tax expenses (income) (54,515) 885,899 Adjustments for previous years, net 3,207 (3,537) 140,537 737,558 (1) Reconciliation between income tax expense and accounting profit is as follows:
Six months ended June 30 2019 Pr ofit before taxes 729,175 Statutory tax in china 25% Tax calculated according to statutory tax in china 182,294 Tax benefits from Approved Enterprises (29,962) Difference between measurement basis of income for financial statement
and for tax purposes 870 Taxable income and temporary differences at other tax rate (6,378) Taxes in respect of prior years 3,207 Temporary differences and losses in the report year for which deferred
taxes were not created 897 Non-deductible expenses and other differences (5,907) Neutralization of tax calculated in respect of theCompany’s share in
results of equity accounted investees (6,304) Effect of change in tax rate in respect of deferred taxes 442 Creation and reversal of deferred taxes for tax losses and temporary
differences from previous years 1,378 Income tax expenses
140,537 55. Other comprehensive income
Details of the Other comprehensive income are set out in Note V.39
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
56. Notes to items in the cash flow statements
(1) Other cash received relevant to operating activities
Six months ended June 30 2019 2018 (Restated) D erivatives transactions 44,546 - Interest income 29,257 24,455 Government subsidies 363 1,077 Financial institutions - 135,686 Deferred income - 52,582 Others 184,212 6,296 258,378 260,834 (2) Other cash paid relevant to operating activities
Six months ended June 30 2019 2018 (Restated) Tr ansportation and Commissions 345,943 346,724 Advertising and sales promotion 159,574 150,410 Professional services 141,127 137,374 Registration 75,194 55,229 Derivatives transactions 54,030 128,503 Financial institutions 39,402 23,511 Insurance 29,015 24,935 Others 530,505 508,614 Net cash flow from operating activities
1,374,790 1,375,300 (3) Other cash received relevant to investment activities
Six months ended June 30 2019 2018 (Restated) Proceeds from loan to affiliate company 7,491 - Investment grant 1,808 - Other 28 57 9,327 57 (4) Other cash received relevant to financing activities
Six months ended June 30 2019 2018 (Restated) Cash received in respect of hedging transactions on debentures 41,144 - Deposit for issuing bills payable 20,557 - 61,701 -
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
56. Notes to items in the cash flow statements - (cont'd)
(5) Other cash paid relevant to financing activities
Six months ended June 30 2019 2018 (Restated) P ayment in respect of hedging transactions on debentures 325,474 - Repayment of lease liability 74,182 N/A Realization of call option 35,625 - Deposit for issuing bills payable 8,610 24,880 Other - 7,739 443,891 32,619 57. Supplementary Information on Cash Flow Statement
(1) Supplementary information on Cash Flow Statement
a. Reconciliation of net profit to cash flows from operating activities:
Six months ended June 30 2019 2018 (Restated) Ne t profit 588,638 2,389,167 Add: Impairment provisions for assets 23,809 37,783 Credit impairment loss (3,347) 6,097 Depreciation of fixed assets and investment property 413,802 362,473 Amortization of right-of-use asset 75,529 N/A Amortization of intangible asset 670,019 558,415 Gains on disposal of fixed assets, intangible assets, and other
long-term assets, net (115,514) (1,997,170) Loss (gain) from changes in fair value (884,135) 243,376 Financial expenses 806,091 (65,692) Investment income, net 900,426 (147,053) Decrease (increase) in deferred tax assets (50,833) 234,072 Increase (decrease) in deferred tax liabilities (4,126) 205,528 Decrease (increase) in inventories, net (777,827) (812,551) Increase in operating receivables (1,263,516) (1,132,939) Increase in operating payables (751,460) 913,650 Others 67,494 44,647 Net cash flow from operating activities
(304,950) 839,803 b. Net increase in cash and cash equivalents
Six months ended June 30 2019 2018 (Restated) Closing balance of cash 5,381,820 6,156,174 Less: Opening balance of cash 6,346,196 7,979,502 Net increase in cash and cash equivalents
(964,376 ) (1,823,328)
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
57. Supplementary Information on Cash Flow Statement - (cont'd)
(2) Information on acquisition or disposal of subsidiaries and other business units
Six months ended June 30 4,67 C ash paid for business combination 829,866 Less: Cash and cash equivalents of the acquiree at the date of
acquisition 3,061 Net cash paid to acquire a subsidiary
826,805 (3) Details of cash and cash equivalents
June 30 January 1 2019 4,67 C ash on hand 7,770 1,380 Bank deposits available on demand without restrictions 5,374,050 6,344,816 5,381,820 6,346,196 58. Assets with Restricted Ownership or Right of Use
June 30
2019 Reason Cash 43,572 Pledged Fixed assets 5,926 Mortgaged Other non-current assets 143,377 Guarantees 192,875
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items
(1) Foreign currencies denominated items
As at June 30, 2019
Foreign currency at
the end of the RMB at the end of period Exchange rate the period Cash and bank balances
EUR 44,867 7.8211 350,912 USD 39,168 6.8747 269,271 PLN 139,196 1.8413 256,303 ILS 95,191 1.9278 183,513 BRL 67,765 1.7939 121,565 ZAR 93,084 0.4862 45,256 CAD 7,366 5.2533 38,698 OTHER 428,761 1,694,279 Bills and Accounts receivable
BRL 473,150 1.7939 848,799 EUR 98,888 7.8211 773,417 RON 195,232 1.6530 322,712 CAD 53,926 5.2533 283,286 USD 38,492 6.8747 264,621 TRY 215,656 1.1922 257,100 HUF 7,005,697 0.0242 169,537 OTHER 537,333 8,812,461 Other receivables
EUR 43,605 7.8211 341,041 ILS 112,700 1.9278 217,268 UAH 397,776 0.2627 104,509 PLN 45,520 1.8413 83,817 BRL 32,582 1.7939 58,449 OTHER 111,019 916,103 Other current assets
ILS 79,886 1.9278 154,007 BRL 49,041 1.7939 87,976 EUR 8,195 7.8211 64,093 ARS 279,831 0.1619 45,304 UAH 162,465 0.2627 42,685 OTHER 87,371 481,436 Long-term receivables
BRL 97,131 1.7939 174,246 174,246
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
As at June 30, 2019
Foreign currency at
the end of the RMB at the end of period Exchange rate the period Other non-current assets
BRL 71,133 1.7939 127,608 OTHER 4,311 131,919 Short-term loans
TRY 143,038 1.1922 170,527 BRL 30,018 1.7939 53,850 UAH 336,992 0.2627 88,539 OTHER 275 313,191 Bills and Accounts payable
ILS 324,374 1.9278 625,343 EUR 51,263 7.8211 400,933 BRL 77,024 1.7939 138,175 USD 15,105 6.8747 103,842 OTHER 75,436 1,343,729 Other payables
BRL 58,468 1.7939 104,887 UAH 315,719 0.2627 82,950 ILS 29,398 1.9278 56,675 ILS CPI 18,023 1.9278 34,745 PLN 7,493 1.8413 13,798 OTHER 32,556 325,611 Contract liabilities
EUR 36,126 7.8211 282,549 BRL 45,029 1.7939 80,778 USD 1,536 6.8747 10,559 OTHER 125,755 499,641
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
As at June 30, 2019
Foreign currency at RMB at the end of the end of the period Exchange rate the period Non-current liabilities due within one year
EUR 12,757 7.8211 99,773 ILS CPI 14,506 1.9278 27,966 ILS 3,028 1.9278 5,837 BRL 1,031 1.7939 1,849 OTHER 65,152 TOTAL 165,021 Other current liabilities
EUR 5,783 7.8211 45,229 ILS 5,281 1.9278 10,181 BRL 2,514 1.7939 4,510 OTHER 19,304 79,224 Long-term loan
EUR 35,599 7.8211 278,425 BRL 57 1.7939 103 278,528 Debentures payable
ILS CPI 4,229,066 1.9278 8,152,989 8,152,989 Provision and Long-term payables
BRL 41,659 1.7939 74,734 OTHER 27,723 102,457 Other non-current liabilities
EUR 8,290 7.8211 64,841 ILS CPI 24,245 1.9278 46,740 USD 4,470 6.8747 30,732 GBP 1,148 8.7342 10,031 OTHER 33,477 185,821
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(2) Major foreign operations
Registration&
Principal place of Functional The basis of selecting functional Name of the Subsidiary business Business nature currency currency ADAMA France S.A.S FRANCE Distribution USD The main currency that represent the principal economic environment ADAMA Brasil S/A BRAZIL Manufacturing; USD The main currency that represent the Distribution; Registration principal economic environment ADAMA Deutschland GERMANY Distribution; Registration USD The main currency that represent the GmbH principal economic environment ADAMA India Private Ltd. INDIA Manufacturing INR The main currency that represent the Distribution; Registration principal economic environment Makhteshim Agan of North UNITED STATES Manufacturing; USD
America Inc. Distribution; Registration The main currency that represent the principal economic environment Control Solutions Inc. UNITED STATES Manufacturing; USD
Distribution; Registration The main currency that represent the principal economic environment ADAMA Agan Ltd. ISRAEL Manufacturing; USD The main currency that represent the Distribution; Registration principal economic environment ADAMA Makhteshim Ltd. ISRAEL Manufacturing; USD The main currency that represent the Distribution; Registration principal economic environment ADAMA Australia Pty AUSTRALIA Distribution AUD The main currency that represent the Limited principal economic environment ADAMA Italia SRL ITALY Distribution USD The main currency that represent the principal economic environment ADAMA Northern NETHERLANDS Distribution USD The main currency that represent the Europe B.V. principal economic environment Alligare LLC UNITED STATES Manufacturing; USD The main currency that represent the Distribution; principal economic environment Registration
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VI. Change in consolidation Scope
1. Business combinations involving enterprises not under common control
(1) Business combinations involving enterprises not under common control during current period
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name oftheCompany|AcquisitionTime ofequityinvestment|Cost ofequityinvestment|Proportion ofequityinvestment|Acquisitionmethod|Acquisitiondate|Basis ofacquisitiondatedetermination|From acquisition date till periodend||
||||||||Revenue|Net profit|
|BonideProductsINC.|07.01.2019|829,822|100%|Stockpurchase|07.01.2019|Obtainedcontrol|271,550|24,574|

(2) Acquisition cost and goodwill
Acquisition costs Bonide Products INC. Cash 829,866 Total acquisition cost 829,866 Less: share of the fair value of the identifiable net assets acquired 638,786 Currency translation differences (14,535) Goodwill / Amount of acquisition cost less than share of the fair value
205,615 of the identifiable net assets acquired
In January 2019, the Company, through a subsidiary of Solutions, acquired Bonide Products Inc., a US provider of pest-control solutions for the consumer Home& Garden use, allowing the Company to bring its advanced technologies and differentiated portfolio of pest-control directly to the consumers. Bonide was purchased for a consideration of approximately 830 million RMB. As of January 7, 2019 (hereinafter: “date of the business combination”), control has been achieved and the Group consolidates the results of Bonide in its consolidated financial statements. Upon the consolidation of Bonide, the identified tangible assets, identifiable intangible assets and identifiable liabilities were included in the consolidated statement of financial position as of the date of the business combination at their fair value based on the information held by the management of the Company and the management of Bonide on the date close to the date of acquisition, and based, inter alia, on external consultants in this matter. The initial accounting treatment for the acquisition of the operations, as presented in these interim financial statements, is accounted for using provisional amounts (as this term is defined in ASBE 20 Business combination). Until the date of approval of the interim financial statements, the Group has not yet completed the initial important treatment of Bonide's business combination, including the estimation of the fair value of the acquired assets and the goodwill. Therefore, some of the fair value data are still provisional and may be subject to changes affecting the data as included in these financial statements.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VI. Change in consolidation Scope - (cont'd)
1. Business combinations involving enterprises not under common control- (cont'd)
(3) Identifiable assets and liabilities of the acquiree, at acquisition date
Bonide
Fair value at Book value at acquisition date acquisition date Assets:
Cash and bank balances 3,061 3,061 Bills and Accounts receivable 104,362 104,362 Prepayments 11,750 11,750 Inventories 111,959 109,777 Fixed assets 56,690 56,690 Intangible assets 468,839 1,510 Liabilities:
Bills and Accounts payable 24,062 24,062 Other payables 82,434 82,434 Deferred tax liabilities 11,379 - Net assets 638,786 180,654 Less: Non-controlling interests - - Net assets acquired 638,786 180,654
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VI. Change in consolidation Scope (cont'd)
2. Business combinations under common control
(1) Business combinations involving enterprises under common control in current period
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name of theCompany|EquityProportionobtainedfromcombination|Basis of judgement asbusiness combinationinvolving enterprises undercommon control|Acquisitiondate|Basis ofdeterminingacquisitiondate|Beginning of the Year tillacquisition date set out asfollows||Revenue ofcomparativeperiod|Net profit ofcomparativeperiod|
||||||Revenue|Net profit/loss|||
|Jiangsu AnponElectrochemicalco. LTD.|100%|Both of the combiningenterprises are ultimatelycontrolled by ChinaNational AgrochemicalCorporation, and the controlis not transitory.|March 29th,2019|Obtainedcontrol|393,990|37,830|925,865|62,526|

(2) Acquisition cost
Acquisition costs Jiangsu Anpon Electrochemical co. LTD.
||
|-|
|415,000|

 (3) Carrying Value ofacquiree’s financial position at acquisition date and prior year end
Jiangsu Anpon Electrochemical co. LTD. Acquisition date Prior year end Assets:
Cash and bank balances 131,663 167,101 Bills receivable 86,889 18,655 Accounts receivable 146,770 565,166 Prepayments 45,596 11,654 Other receivables 15,660 27,606 Inventories 193,483 191,811 Other current assets - 31 Fixed assets 268,661 628,268 Construction in progress 61,693 59,397 Intangible assets 64,115 64,574 Deferred tax assets 8,556 8,040 Other non-current assets 20,315 15,219 Liabilities:
Short-term borrowings 500,000 550,000 Accounts payable 102,429 99,487 Employee benefits payable 12,855 18,829 Taxes payable 12,997 14,150 Other payables 171,318 131,818 Contractual liability 21,321 26,730 Long-term employee benefits payable 40,266 40,284 Provision 21,858 21,858
Net assets 450,449 468,930
Less: Non-controlling interests - -
|||
|-|-|
|450,449|468,930|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VII. Interest in Other Entities
1. Interests in subsidiaries
Composition of the largest subsidiaries of the Group in respect of assets and operating income Registration& Method of Principal place of obtaining the Name of the Subsidiary business Business nature Direct Indirect subsidiary ADAMA France S.A.S FRANCE Distribution 100% Established ADAMA Brasil S/A BRAZIL Manufacturing; Distribution; 100% Purchased Registration
ADAMA Deutschland GmbH GERMANY Distribution; Registration; 100% Established ADAMA India Private Ltd. INDIA Manufacturing; 100% Established Distribution; Registration
Makhteshim Agan of North America UNITED STATES Manufacturing; Distribution; 100% Established Inc. Registration
Control Solutions Inc. UNITED STATES Manufacturing; Distribution; 67% Purchased Registration
ADAMA Agan Ltd. ISRAEL Manufacturing; Distribution; 100% Restructure Registration
ADAMA Makhteshim Ltd. ISRAEL Manufacturing; Distribution; 100% Restructure Registration
ADAMA Australia Pty Limited AUSTRALIA Distribution 100% Purchased ADAM Italia SRL ITALY Distribution 100% Established ADAMA Northern Europe B.V. NETHERLANDS Distribution 55% Purchased Manufacturing; Distribution;
Alligare LLC UNITED STATES 100% Purchased Registration
Jiangsu Anpon Electrochemical co. Manufacturing; Distribution
CHINA 100% Purchased Ltd..
2. Interests in joint ventures or associates
June 30 December 31 2019 2018 Joint ventures 95,258 68,584 Associates 39,817 39,766 135,075 108,350 3. Summarized financial information of joint ventures and associates
June 30, 2019 and six June 30, 2018 and six months then ended months then ended Joint ventures:
Total carrying amount 95,258 80,913 The Group's share of the following items:
Net profit 21,740 12,758 Other comprehensive income 158 (761) Total comprehensive income 21,898 11,997 Associates:
Total carrying amount 39,817 38,338 The Group's share of the following items:
Net profit (16) - Other comprehensive income 67 478 Total comprehensive income 51 478
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments
A. General
The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risks and market risks (including currency risk, interest risk and other price risk). In order to reduce the exposure to these risks, the Group uses financial derivatives instruments, including forward transactions and options (hereinafter - “derivatives”).
Transactions in derivatives are undertaken with major financial institutions, and therefore, in the opinion of Group Management the credit risk in respect thereof is low.
This note provides information on theGroup’s exposure to each of the above risks, theGroup’s objectives, policies and processes regarding the measurement and management of the risk. Additional quantitative disclosure is included throughout the consolidated financial statements.
The Board of Directors has overall responsibility for establishing and monitoring the framework of the Group's risk management policy. The Finance Committee is responsible for establishing and monitoring the Group's actual risk management policy. The Chief Financial Officer reports to the Finance Committee on a regular basis regarding these risks.
TheGroup’s risk management policy, established to identify and analyze the risks facing the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The policy and methods for managing the risks are reviewed regularly, in order to reflect changes in market conditions and the Group's activities. The Group, through training, and management standards and procedures, aims to develop a disciplined and constructive control environment in which all the employees understand their roles and obligations.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and derives mainly from trade receivables and other receivables as well as from cash and deposits in financial institutions.
Accounts and other receivables
TheGroup’s revenues are derived from a large number of widely dispersed customers in many countries. Customers include multi-national companies and manufacturing companies, as well as distributors, agriculturists, agents and agrochemical manufacturers who purchase the products either as finished goods or as intermediate products for their own requirements.
The Company entered into an agreement for the sale of trade receivables in a securitization transaction, for details see note V.5e.
In April 2018, a two-years agreement with an international insurance company was renewed. The amount of the insurance coverage was fixed at$150 million cumulative per year. The indemnification is limited to about90% of the debt.
TheGroup’s exposure to credit risk is influenced mainly by the personal characterization of each customer, and by the demographic characterization of thecustomer’s base, including the risk of insolvency of the industry and geographic region in which the customer operates. No single customer accounted for greater than5% of total accounts receivable.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
B. Credit risk -(cont’d)
The Company management has prescribed a credit policy, whereby the Company performs current ongoing credit evaluations of existing and new customers, and every new customer is examined thoroughly regarding the quality of his credit, before offering him theGroup’s customary shipping and payment terms. The examination made by the Group includes an outside credit rating, if any, and in many cases, receipt of documents from an insurance company. A credit limit is prescribed for each customer, outstanding amount of the accounts receivable balance. These limits are examined annually. Customers that do not meet theGroup’s criteria for credit quality may do business with the Group on the basis of a prepayment or against furnishing of appropriate collateral.
Most of theGroup’s customers have been doing business with it for many years. In monitoring customer credit risk, the customers were grouped according to a characterization of their credit, based on geographical location, industry, aging of receivables, maturity, and existence of past financial difficulties. Customers defined as “high risk” are classified to the restricted customer list and are supervised by management. In certain countries, mainly, Brazil, customers are required to provide property collaterals (such as agricultural lands and equipment) against execution of the sales, the value of which is examined on a current ongoing basis by the Company. In these countries, in a case of expected credit risk, the Company records a provision for the amount of the debt less the value of the collaterals provided and acts to realize the collaterals. The Group closely monitors the economic situation in Eastern Europe and South America where necessary it operates to limit its exposure to customers in countries having significantly unstable economies. The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk of account receivables. Other receivables and investments on a lifetime expected credit loss basis. See also notesⅢ.10 andⅢ.11.
Cash and deposits in banks
The Company holds cash and deposits in banks with a high credit rating. These banks are also required to comply with capital adequacy or maintain a level of security based on different situations.
Guarantees
TheCompany’s policy is to provide financial guarantees only to investee companies.
Aging of receivables and expected credit risk
Presented below is the aging of the past due trade receivables:
June 30, 2019 Pa st due by less than 90 days 816,255 Past due by more than 90 days 258,816 5,629,628
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
B. Credit risk -(cont’d)
The company measure the provision for credit losses on a collective group basis, where receivables share similar credit risk characteristics based on geographical locations. The examination for expected credit losses is performed using model including aging analysis and historical loss experiences, and adjusted by the observable factors reflecting current and expected future economic conditions.
When credit risk on a receivable has increased significantly since initial recognition, the group records specific provision or general provision which is determined in countries in which there are large number of customers with immaterial balances.
The Group has credit risk exposures for accounts receivables amounted to RMB 7,478,332 thousand relate to category of "Lifetime expected credit losses (credit losses has not occurred)" and amounted to RMB 629,633 thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The Group has credit risk exposures for other receivables amounted to RMB 14,832 thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The credit risk exposures for all remaining balance of financial assets at amortised cost and financial assets at FVTOCI are related to "12-month expected credit losses".
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when they come due. The Group's approach to managing its liquidity risk is to assure, to the extent possible, an adequate degree of liquidity for meeting its obligations timely, under ordinary conditions and under pressure conditions, without sustaining unwanted losses or hurting its reputation.
The cash-flow forecast is determined both at the level of the various entities as well as of the consolidated level. The Company examines the current forecasts of its liquidity requirements in order to ascertain that there is sufficient cash for the operating needs, including the amounts required in order to comply with the financial liabilities, while taking strict care that at all times there will be unused credit frameworks so that the Company will not exceed the credit frameworks granted to it and the financial covenants with which it is required to comply with. These forecasts take into consideration matters such as theCompany’s plans to use debt for financing its activities, compliance with required financial covenants, compliance with certain liquidity ratios and compliance with external requirements such as laws or regulation.
The surplus cash held by the Group subsidiaries, which is not required for financing the current ongoing operations, is invested in short-term interest-bearing investment channels.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
C. Liquidity risk -(cont’d)
(1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts, including estimated interest payments:
As at June 30, 2019
Third- Fifth year Contractual Carrying First year Second year Fourth year and above Cash flow amount Non-derivative financial
liabilities
Short-term loans 2,348,647 - - - 2,348,647 2,308,286 Bills payables 375,777 - - - 375,777 375,777 Accounts payables 4,178,668 - - - 4,178,668 4,178,668 Other payables 1,970,641 - - - 1,970,641 1,970,641 Other current liabilities 169,661 - - - 169,661 169,661 Debentures payable 388,469 894,158 1,713,635 9,207,224 12,203,486 8,152,990 Long-term loans 299,840 259,049 338,696 124,532 1,022,117 955,906 Long-term payables 1,871 1,771 3,097 27,497 34,236 26,419 Lease Liabilities 159,114 127,997 154,965 253,713 695,789 558,912 Other non-current liabilities 2,061 2,061 61,036 307,733 372,891 361,552 Derivative financial liabilities
Foreign currency derivatives 688,267 8,428 - - 696,695 696,695 10,583,016 1,293,464 2,271,429 9,920,699 24,068,608 19,755,507 D. Market risks
Market risk is the risk that changes in market prices, such as foreign exchange rates, CPI, interest rates and prices of capital instruments, will affect theGroup’s revenues or the value of its holdings in its financial instruments. The objective of market risk management is to manage and monitor the exposure to market risks within acceptable parameters, while optimizing the return.
During the ordinary course of business, the Group purchases and sells derivatives and assumes financial liabilities for the purpose of managing market risks.
(1) CPI and foreign currency risks
Currency risk
The Group is exposed to currency risk from its sales, purchases, expenses and loans denominated in currencies that differ from theGroup’s functional currency. The main exposure is in Euro, Brazilian real, USD and in NIS. In addition, there are smaller exposures to various currencies such as the British pound, Polish zloty, Australian dollar, Indian rupee, Argentine peso, Canadian dollar, South African Rand, Ukraine Hryunia, the Turkish lira and Chinese Yuan Renminbi.
The Group uses foreign currency derivatives– forward transactions and currency options– in order to hedge the cash flows risk, which derive from existing monetary assets and liabilities and anticipated sales and purchases, which may be affected by exchange rate fluctuations.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
D. Market risks -(cont’d)
(1) CPI and foreign currency risks -(cont’d)
The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for the subsequent year. Likewise, the Group hedges most of its monetary assets and liabilities denominated in a non- U.S. dollar currency. The Group uses foreign currency derivatives to hedge its currency risk, mostly with maturity dates of less than one year from the reporting date.
Solutions debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well as changes in the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency– the U.S. dollar. As of the approval date of the financial statements, the subsidiary had hedged most of its exposure deriving from issuance of the debentures, in options and forward contracts.
(A) TheGroup’s exposure to NIS-CPI and foreign currency risk, except in respect of derivative financial instruments is as follows:
June 30, 2019 Total assets Total liabilities In US Dollar 1,150,413 957,089 In Euro 1,603,215 1,156,183 In Brazilian real 1,435,424 386,614 CPI-linked NIS - 8,262,440 In New Israeli Shekel 603,170 702,162 Denominated in or linked to other foreign currency 4,108,457 734,333 8,900,679 12,198,821 (B) The exposure to CPI and foreign currency risk in respect of derivatives is as follows:
June 30, 2019
Currency/ Currency/ Average USD RMB
linkage linkage expiration thousands thousands
receivable payable date Par value Par value Fair value Forward foreign currency USD EUR 0266/68/66 470,368 8,688,289 (621,558) Contracts and call options USD PLN 0225/64/64 50,048 888,621 )1,295( USD BRL 0225/24/66 192,904 5,862,514 )5,164( USD GBP 0225/65/64 16,283 555,585 6,542 USD ZAR 0225/69/05 13,620 58,288 )566( ILS USD 0225/65/69 1,361,025 5,812,282 56,866 USD OTHER 411,176 6,462,958 )68,542( CPI forward contracts CPI ILS 0266/65/58 602,916 8,588,496 51,896
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
D. Market risks -(cont’d)
(1) CPI and foreign currency risks -(cont’d)
(C) Sensitivity analysis
The appreciation or depreciation of the Dollar against the following currencies as of June 30, 2019 and the increase or decrease in the CPI would increase (decrease) the equity and profit or loss by the amounts presented below. This analysis assumes that all the remaining variables, among others interest rates, remains constant.
June 30, 2019
Decrease of5% Increase of5% Equity Profit (loss) Equity Profit (loss) New Israeli shekel 82,193 60,274 (26,182) (4,263) British pound (284) 734 284 (734) Euro (588,641) (56,686) 584,458 56,548 Brazilian real (17,312) 19,903 10,571 (23,001) Polish zloty (2,529) )5,158( 2,529 5,158 South African Rand (313) 352 313 (352) Chinese Yuan Renminbi (54,868) (54,868) 54,868 54,868 CPI-linked NIS 205,520 205,520 (193,406) (193,406) (2) Interest rate risks
The Group has exposure to changes in the variable interest rate. The Group has different assets and liabilities in different countries which bear interest according to the economic environment in each country. Most of the loans, other than the debentures, bear Dollar Libor interest. As a result, most of the variable interest exposure of those loans is to the Libor interest. Due to market conditions, the variable interest rates on cash are relatively low.
The Company prepares a quarterly summary of exposure to a change in the Libor interest rate. As at the approval date of the financial statements, the Company had not hedged this exposure.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
VIII. Risk Related to Financial Instruments -(cont’d)
D. Market risks -(cont’d)
(2) Interest rate risks -(cont’d)
(A) Type of interest
The interest rate profile of theGroup’s interest-bearing financial instruments was as follows: June 30, 2019 Fixed-rate instruments– unlinked to the CPI
Financial assets
Cash at banks 1,275,887 Other non-current assets 1,086 Financial liabilities
Long-term loans 529 Long-term payables 20,790 Other non-current liabilities 171,770 1,083,884 Fixed-rate instruments– linked to the CPI
Financial liabilities
Debentures payable 8,152,990 Variable-rate instruments
Financial assets
Cash at banks 233,602 Financial assets at fair value through profit or loss 33,074 Other non-current assets 46,067 Financial liabilities
Short-term loans and credit from banks 2,308,286 Long-term loans(1) 955,377 )6,516,566( (1) Including long-term loans current maturities.
(B) Sensitivity analysis of cash flows regarding variable-interest instruments
A change of5% in the interest rates on the reporting date would increase or reduce equity and profit or loss by the amounts presented below. This analysis assumes that all the remaining variables, among others exchange rates, remained fixed.
Profit or loss Equity Increase in Decrease in Increase in Decrease in interest interest interest interest As at June 30, 2019 2,118 (2,134) 2,118 (2,134)
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
IX. Fair Value
The fair value of forward contracts on foreign currency is based on their listed market price, if available. In the absence of market prices, the fair value is estimated based on the discounted difference between the stated forward price in the contract and the current forward price for the residual period until redemption, using an appropriate interest rate.
The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evaluated through discounting future cash flow estimates, based on the conditions and duration to maturity of each contract, using the market interest rates of a similar instrument at the measurement date and in accordance with the Black& Scholes model.
1. Financial instruments measured at fair value for disclosure purposes only
The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills and accounts receivable, receivables financing, other receivables, derivatives financial assets, short-term loans, bills and accounts payable and other payable, are the same or proximate to their fair value.
The following table details the carrying amount in the books and the fair value of groups of non-current financial instruments presented in the financial statements not in accordance with their fair values: June 30, 2019
Carrying amount Fair value Financial assets
Other non-current assets (a– Level 2) 54,331 55,243 Financial liabilities
Long-term loans and others (b– Level 2) 1,714,259 1,714,813 Debentures (c– Level 1) 8,152,990 10,409,445 a) The fair value of the other non-current assets is based on a discounted future cash flows, using the acceptable interest rate for similar investment having similar characteristics (Level 2).
b) The fair value of the long-term loans and others is based on a discounted future cash flows, using the acceptable interest rate for similar loans having similar characteristics (Level 2).
c) The fair value of the debentures is based on stock exchange quotes (Level 1).
2. The interest rates used in determining fair value
The interest rates used to discount the estimate of anticipated cash flows are:
June 30, 2019% Brazilian real interest 5.98– 6.26 U.S. dollar interest 2.37– 2.58 Indian Rupee 6.14– 6.96
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
IX. Fair Value -(cont’d)
3. Fair value hierarchy of financial instruments measured at fair value
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. The table below presents an analysis of financial instruments measured at fair value. The various levels have been defined as follows:
 Level 1: quoted prices (unadjusted) in active market for identical instrument.
 Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. Level 3: inputs that are not based on observable market data (unobservable inputs).
TheCompany’s forward contracts and options are carried at fair value and are evaluated by observable inputs and therefore are concurrent with the definition of level 2.
June 30 2019 Forward contracts and options used for hedging the cash flow (Level 2) (65,921) Forward contracts and options used for economic hedging (Level 2) (209,348) Debt instruments (Level 1) 15,365 Other equity investment (Level 2) 87,812 Other non-current asset (Level 2) 23,395 Call option in respect of business combination (Level 2) 15,097 Other (Level 2) 17,709 Financial Instrument Fair value
Fair value measured on the basis of discounting the difference between the stated forward price in the contract and the current forward price for the Forward contracts
residual period until redemption using an appropriate interest rates. Foreign currency options The fair value is measured based on theBlack&Scholes model.
4. No transfer between any levels of the fair value hierarchy in the reporting period.
5. No change in the valuation techniques in the reporting period.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
X. Related parties and related party transactions
1. Information on parent Company
Company Registered Registered capital Shareholding Percentage name place Business nature (Thousand RMB) percentage of voting rights Beijing, Production and sales
CNAC China of agrochemicals 3,338,220 94355% 94355% The ultimate controller of the company is China National Chemical Corporation.
2. Information on the largest subsidiaries of the Company
For information about the subsidiaries of the Company, refer to Note VII.1.
3. Information on largest joint ventures and associates of the Company
For information about the joint ventures and associates of the Company, refer to Note V.12. Other joint ventures and associates that have related party transactions with the Group during this period or the previous periods are as follows:
Name of entity Relationship with the Company
Alfa Agricultural Supplies S. Joint venture of the Group
Innovaroma SA Joint venture of the Group
Agribul Ltd. Joint venture of the Group
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
X. Related parties and related party transactions -(cont’d)
4. Information on other related parties
Name of other related parties Related party relationship Jingzhou Sanonda holdings co. LTD Common control
CNAC International Co., Ltd. (SPV Company) (Headquarter) Common control
ChemChina Asset Management Co., Ltd. Common control
ChemChina Information Center Co., Ltd. Common control
Syngenta Crop Protection AG Common control
Syngenta Supply AG Common control
Syngenta Crop Protection LLC. Common control
Syngenta Romania SRL Common control
Syngenta France SAS Common control
Syngenta Australia Pty Ltd Common control
Syngenta Agro Sociedad Anonima Common control
Syngenta Protecao De Cultivos LTDA Common control
Syngenta Czech s.r.o. Common control
Syngenta Espana S.A. Common control
Syngenta India Limited Common control
Syngenta Agro AG Common control
Syngenta Polska Sp. z o.o. Common control
Syngenta Agro, S.A. DE C.V. Common control
Syngenta Italia S.p.A. Common control
Syngenta Crop Protection Lda. Common control
Syngenta Crop Protection NV Common control
Syngenta Nordics A.S. Common control
Syngenta Tarim Sanayi ve Ticaret A.S. Common control
Syngenta Agro GmbH Common control
Syngenta Kazakhstan Limited Liability Partnership Common control
Syngenta Slovakia S.R.O. Common control
Syngenta Hungary Kft. Common control
Syngenta UK Ltd Common control
Syngenta Ireland Ltd Common control
China Bluestar Lehigh Engineering Corp. Common control
China National Bluestar Co., Ltd. Common control
China Bluestar Chengrand Common control
Bluestar (Beijing) Chemical Machinery Co., Ltd. Common control
Hangzhou (Torch) Xidoumen Membrane Industry Co., Ltd Common control
Shandong Dacheng International Trading Common control
Shandong Dacheng agricultural chemical co. LTD. Common control
Southwest Chemical Research and Design Institute Co., Ltd. Common control
Jiangsu Lianhai Testing Co., Ltd. Common control
Jiamusi Black Dragon Pesticide Chemical Co., Ltd. Common control
Beijing Guangyuan Yinong Chemical Co., Ltd. Common control
Anhui Research Institute of Chemical Industry Common control
Haohua engineering co. LTD. Common control
Shanghai branch of China blue lianhai design and research institute. Common control
Jiangsu Huaihe Chemical Co.,Ltd. Common control
Zhonglan International Chemical Co., Ltd Common control
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
X. Related parties and related party transactions -(cont’d)
5. Transactions and balances with related parties
(1) Transactions with related parties
Six months ended June 30 2019 2018 (Restated) Type of purchase Related Party Relationship
Summary of purchase of
goods/services:
Purchase of goods/services received Common control under
ChemChina 734,273 847,818 Purchase of fixed assets and other Common control under
assets ChemChina 13,098 2,129,457 Purchase of goods/services received Joint venture 3,332 6,325 Summary of Sales of goods:
Sale of goods/ Service rendered Common control under
ChemChina 408,089 333,327 Sale of goods/ Service rendered Joint venture 108,664 99,823 (2) Leases
The Group as lessor
June 30 June 30 Type of leased assets Lessee 2019 2018 (Restated) Building and Structures Common control under
ChemChina - 10
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
X. Related parties and related party transactions -(cont’d)
5. Transactions and balances with related parties - (cont'd)
(3) Guarantee
The Group as the guarantee receiver
Amount of Inception date Maturity date Guaranty Guarantee provider guaranteed loan of guaranty of guaranty completed (Y / N) Parent company 50,000 18/10/2017 18/10/2021 N 300,000 20/11/2017 20/11/2022 N 100,000 13/06/2018 12/06/2022 N 30,000 12/07/2018 11/07/2019 N 20,000 01/03/2017 20/02/2020 N 30,000 07/08/2018 06/08/2019 N 50,000 01/06/2019 29/05/2020 N 50,000 30/10/2018 29/10/2019 N 40,000 30/07/2018 29/07/2019 N 40,000 15/08/2018 14/08/2019 N 64,000 19/02/2019 18/02/2020 N 15,000 25/02/2019 23/08/2019 N 50,000 28/03/2019 14/02/2020 N 80,000 02/02/2019 30/01/2020 N 50,000 01/11/2018 26/10/2019 N 50,000 01/12/2018 26/11/2019 N Ultimate controller of the Group 160,000 27/05/2014 09/06/2021 Y (4) Remuneration of key management personnel and directors
Periods ended June 30 2019 2018 (Restated) Remuneration of key management personnel 32,606 24,999 Directors Fee 150 -
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
X. Related parties and related party transactions -(cont’d)
5. Transactions and balances with related parties - (cont'd)
(5) Receivables from and payables to related parties (including loans)
Receivable Items
June 30 December 31 2019 2018 (Restated) Related Party Relationship Bad debt Bad debt Items
Provision provision Trade receivables Common control under ChemChina 136,347 - 39,420 - Trade receivables Joint venture 30,366 - 30,562 - Other receivables Common control under ChemChina - - 86,525 - Prepayments Common control under ChemChina 34,962 - 85,429 - Other Non-
Current assets Common control under ChemChina 38,098 - - - Other assets Joint venture - - 9,188 - Payable Items
June 30 December 31 Items Related Party Relationship 2019 2018 (Restated) Trade payables Common control under ChemChina 94,835 865,685 Trade payables Joint venture 703 859 Other payables Common control under ChemChina 436,748 21,636 Other non-current Common control under ChemChina 171,770 595,996 liabilities*
* The liability is a loan from a related party, the interest expense for the six months ended June 30, 2019 is 1,042 thousand RMB (six months ended June 30,2018: 1,042 thousand RMB).
(6) Acquisition of a subsidiary
June 30 December 31 Related Party Related Party Relationship 2019 2018 (Restated) Parent Acquisition of a subsidiary 415,000 - (7) Other related party transactions
The closing balance of bank deposit in ChemChina Finance Corporation was 231,316 thousand RMB (85356354: 295,661 thousand RMB) Interest income of bank deposit for the current period was 1,654 thousand RMB (amount for six months ended June 30, 2018 is 738 thousand RMB).
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XI. Commitments and contingencies
1. Significant commitments
June 30 December 31 2019 2018 (Restated) Investment in Fixed assets 711,386 667,785 2. Commitments and Contingent Liabilities
On December 10, 2018 the 9th meeting of the 8th session of the Board of Directors of the Company resolved to approve the extension of the engagement in annual liability insurance policies for directors, supervisors and senior officers of the Company as approved by the 62nd meeting of the 7th session of Board of Directors and the 4th interim Shareholders meeting, and to authorize the management to annually deal with all matters relating to renewal/extension of the customaryD&O liability insurance policies, with up to20% flexibility in the relevant terms of the original policy. On December 26, 2018 the 3rd interim Shareholders meeting approved the above resolution.
Environmental protection
The manufacturing processes of the Company, and the products it produces and markets, entail environmental risks that impact the environment. The Company invests substantial resources in order to comply with the applicable environmental laws and attempts to prevent or minimize the environmental risks that could occur as a result of its activities. To the best of theCompany’s knowledge, at the balance sheet date, none of its applicable permits and licenses with respect to environmental issues have been revoked.
At the end of January 2019, the Company voluntarily suspended operations atSanonda’s old site in Jingzhou, which is in the process of being relocated to a nearby advanced site, due to recording of higher than permitted levels of wastewater compounds. The Company was subsequently instructed by the local government not to resume operations before rectification. The Company rectified the discharge levels and at the beginning of April 2019 resumed operations at the old site. Following the resumption, the Company is advancing the gradual ramp-up of production. As the ramp-up of production proceeds, the site continues to remain under inspection of the relevant authorities with whom the Company is working in close and constant collaboration. Claims against subsidiaries
In the ordinary course of business, legal claims are filed against subsidiaries, including lawsuits, regarding claims for patent infringement. Inter alia, from time to time, the Company, similar to other companies operating in the plant protection industry, is exposed to class actions for large amounts, which it must defend against while incurring considerable costs, even if these claims, from the start, have no basis. In the estimation of theCompany’s management, based, inter alia, on opinions of its legal counsel regarding the prospects of the proceedings, the financial statements include appropriate provisions where necessary to cover the exposure resulting from the claims.
Various immaterial claims have been filed against Group companies in courts throughout the world, in immaterial amounts, for causes of action involving mainly employee-employer relations and various civil claims, for which the Company did not record a provision in the financial statements. Furthermore, claims were filed for product liability damages, for which the Company has appropriate insurance coverage, such that theCompany’s exposure in respect thereof is limited to the amount its deductible requirement or the amount thereof does not exceed the deductible amount.
XII. Events subsequent to the balance sheet date
There are no events occur after the balance sheet date.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIII. Share-based Payments
1. In December 2017, the remuneration committee and the Board of Directors (and the General Meeting with respect to the CEO) of Adama solutions, a wholly-owned subsidiary, approved the allocation of 49,042,146 phantom warrants to officers and employees in accordance with the long-term phantom compensation plan ("the Plan"). The allocation date is December 28, 2017
The warrants will vest in four equal portions, where the first and second quarters are exercisable after one year, the third quarter after two years and the fourth quarter after three years from January 1, 2018. The warrants will be exercisable, in whole or in part, in accordance with the terms of the plan, and subject to achieving financial targets as determined in the plan. The warrants may be exercised until the end of 2023. Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price as determined at the time of the grant and the closing price of one share of the company on the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was determined under the plan.
The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model. The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the end of the reporting period, amounted to a total of 113 million RMB. The liability at the end of the reporting period was recorded according to the vesting period as determined in the plan, taking into account the extent of the service that the employees provided until that date.
Statement of share based payments in the period Phantom warrants Total number of Phantom warrants at the beginning of the period 48,101,391 Total number of Phantom warrants granted in current period - Total number of Phantom warrants exercised in current period - Total number of Phantom warrants forfeited in current period (231,851) Total number of Phantom warrants at the end of the period 47,869,540 The range of the exercise prices and the remainder of the contractual period RMB 15.067-15.13, 4.5 for Phantom warrants outstanding at the end of period years The parameters used in implementing the model are as follows:
Stock price (RMB) 10.72 Exercise increment (RMB) 513629/51358 Expected volatility 44.83% Risk-free interest rate 6358% Economic value as of June 30, 2019 (in thousands RMB) 112,571
|||
|-|-|
|The methods for the determination of the fair value ofliabilities arising from cash-settled share-based payments|The binomial pricing model|
|Accumulated amount of liabilities arising from cash-settledshare-based payments (in thousands RMB)|93,199|
|Expenses arising from cash-settled share-based payments incurrent period (in thousands RMB)|86,886|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIII. Share-based Payments -(cont’d)
2. In February 2019, the remuneration committee and the Company's Board of Directors (and the General Meeting with respect to the CEO and to a Vice President who also serves as a director) approved the allocation of 77,864,910 phantom warrants to officers and employees in accordance with the long-term phantom compensation plan (hereinafter - "the 2019 Plan"). The allocation date is February 21, 2019. The warrants will vest in four equal portions, where the first and second quarters are exercisable after two years, the third quarter after three years and the fourth quarter after four years from January 1, 2019. The warrants will be exercisable, in whole or in part, in accordance with the terms of the 2019 plan, and subject to achieving financial targets as determined in the plan. The warrants will be exercisable until the end of 2025.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price as determined at the time of the grant and the closing price of one share of the company on the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was determined under the plan.
The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model. The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the grant date, amounted to a total of 549 million RMB . The liability at the end of the reporting period was recorded according to the vesting period as determined in the plan, taking into account the extent of the service that the employees provided until that date.
Statement of share based payments in the period Phantom warrants Total number of Phantom warrants at the beginning of the period - Total number of Phantom warrants granted in current period 76,383,331 Total number of Phantom warrants exercised in current period - Total number of Phantom warrants forfeited in current period - Total number of Phantom warrants at the end of the period 76,383,331 The exercise prices and the remainder of the contractual period for Phantom
warrants outstanding at the end of period RMB 10.03, 6.5 years The parameters used in implementing the model are as follows:
Stock price (RMB) 10.72 Exercise increment (RMB) 10.03/10.85 Expected volatility 44.71% Risk-free interest rate 3.16% Economic value as of June 30, 2019 (in thousands RMB) 186,886
|||
|-|-|
|The methods for the determination of the fair value of liabilities arising fromcash-settled share-based payments|The binomial pricing model|
|Accumulated amount of liabilities arising from cash-settled share-basedpayments (in thousands RMB)|37,590|
|Expenses arising from cash-settled share-based payments in current period(in thousands RMB)|89,064|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIV. Other significant items
1. Segment reporting
The Company presents its segment reporting based on a format that is based on a breakdown by business segments:
 Crop Protection (Agro)
This is the main area of theCompany’s operations and includes the manufacture and marketing of conventional agrochemical products.
 Other (Non Agro)
This field of activity includes a large number of sub-fields, including: Lycopan (an oxidization retardant), aromatic products, and other chemicals. It combines all theCompany’s activities not included in the agro-products segment.
Segment results reported to the chief operating decision maker include items directly attributable to a segment as well as items that can be allocated on a reasonable basis. Unallocated items comprise mainly financing expenses, net, gains from changes in fair value, investment income and tax expenses.
All assets and liabilities that can be attributed to a specific segment were allocated accordingly. Attributed assets include: accounts and bills receivables, receivables financing, inventory, fixed assets, right-of-use assets, construction in progress, intangible assets, goodwill, non-current trade receivables and long-term equity investments. Attributed liabilities include account payables, bill payables, contractual liabilities, deferred income and lease liabilities. All other assets and liabilities which are not attributable to a specific segment are presented as unallocated assets and liabilities.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIV. Other significant items - (cont'd)
1. Segment reporting -(cont’d)
Information regarding the results and assets and liabilities of each reportable segment is included below:
Crop Protection (Agro) Other (Non Agro) Elimination among segments Total Six months ended Six months ended Six months ended Six months ended June 30 June 30 June 30 June 30 2019 2018 (Restated) 2019 2018 (Restated) 2019 2018 (Restated) 2019 2018 (Restated) Operating income from external
customers 12,302,544 12,247,053 1,313,488 1,392,020 - - 13,616,032 13,639,073 Inter-segment operating income - - 692 380 (692) (380) - - Interest in the profit or loss of
associates and joint ventures
11,463 12,394 10,262 364 - - 21,725 12,758 Segment's results 1,244,460 3,480,246 74,943 103,115 - - 1,319,403 3,583,361 Financial expenses, net (938,346) (347,557) Gain (loss) from changes in fair 884,135 (243,376) value
Investment income (536,017) 134,297 Profit before tax 729,175 3,126,725 Income tax expense
(140,537) (737,558) Net profit
588,638 2,389,167 Crop Protection (Agro) Other (Non Agro) Unallocated assets and liabilities Total June 30 December 31 June 30 December 31 June 30 December 31 June 30 December 31 2019 2018 (Restated) 2019 2018 (Restated) 2019 2018 (Restated) 2019 2018 (Restated) Total assets 34,676,096 32,310,319 2,582,309 2,404,190 8,551,684 9,420,554 45,810,089 44,135,063 Total liabilities 4,724,360 4,800,772 291,902 300,843 18,314,423 16,274,174 23,330,685 21,375,789
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIV. Other significant items - (cont'd)
1. Segment reporting -(cont’d)
Geographic information
The following tables sets out information about the geographical segments of theGroup’s operating income based on the location of customers (sales target) and the Group's non-current assets (including fixed assets, right-of-use assets, construction in progress, investment properties intangible assets and goodwill). In the case of investment property, fixed assets and construction in progress, the geographical location of the assets is based on its physical location. In case of intangible assets and goodwill, the geographical location of the company which owns the assets.
Operating income from external customers
Six months ended June 30 2019 2018 (Restated) Europe 4,252,479 4,469,617 North America 2,715,528 2,689,565 Latin America 2,411,530 1,978,828 Asia Pacific 2,426,931 2,762,968 Africa, Middle East (including Israel) and India 1,809,564 1,738,095 13,616,032 13,639,073 Specified non-current assets June 30 December 31 2019 2018 (Restated) Europe 883,894 733,855 Latin America 2,065,178 2,065,089 North America 1,293,860 503,093 Asia Pacific 2,900,154 2,815,195 Africa, Middle East (including Israel) and India 11,491,336 11,659,701 18,634,422 11,776,933 The dependency on major customers
No single customer's proportion of the total amount of sales is over10%.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XIV. Other significant items - (cont'd)
2. Calculation of Earnings per share and Diluted earnings per share
Amount for Amount for the current the prior period period Net profit from continuing operations attributable to ordinary shareholders
588,638 2,389,167 Amount for Amount for the current the prior Thousands shares period period Number of ordinary shares outstanding at the beginning of the year 2,446,554 2,341,856 Add: weighted average number of ordinary shares issued during the year - 104,698 Less: weighted average number of ordinary shares repurchased during the
year - - Weighted average number of ordinary shares outstanding at the end of the
year
2,446,554 2,446,554 In December 2017, non-publicly offered 104,697,982 ordinary shares (A-share) at nominal value of RMB 1 per share to specific investors. The Company received proceeds of 1,531,920 thousand RMB, net of the issuing cost of 28,080 thousand RMB on December 27, 2017.
||||
|-|-|-|
||Amount for|Amount for|
||the current|the prior|
||period|period|
|Calculated based on net profit attributable to ordinary shareholders|||
|Basic earnings per share|0.24|6358|
|Diluted earnings per share|N/A|N/A|
|Calculated based on net profit from continuing operations|||
|attributable to ordinary shareholders:|||
|Basic earnings per share|0.24|6358|
|Diluted earnings per share|N/A|N/A|
|Calculated based on net profit from discontinued operations|||
|attributable to ordinary shareholders:|||
|Basic earnings per share|N/A|N/A|
|Diluted earnings per share|N/A|N/A|

ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements
1. Cash at bank and on hand
June 30 December 31 2019 2018 Deposits in banks 2,132,174 2,005,313 Other cash and bank 40,993 52,940 2,173,167 2,058,253 As at June 30, 2019, restricted cash and bank balances was 40,993 thousand RMB (as at December 81, 2018- 52,940 thousand RMB) mainly including deposits that guarantee bank acceptance drafts.
2. Accounts receivable
a. By category
June 30, 2019
Provision for bad and
Book value doubtful debts
Carrying Amount Percentage(%) Amount Percentage(%) amount Account receivables assessed
individually for impairment 190,972 50 131,416 69 59,556 Account receivables assessed
collectively for impairment 192,663 50 149 - 192,514 383,635 100 131,565 34 252,070 December 31, 2018
Provision for bad and
Book value doubtful debts
Carrying Amount Percentage(%) Amount Percentage(%) amount Account receivables assessed
individually for impairment 190,376 23 127,406 67 62,970 Account receivables assessed
collectively for impairment 631,764 77 6,181 - 629,229 466,580 100 129,941 16 692,199 b. Aging analysis
June 30, 2019 Within 1 year (inclusive) 194,863 Over 1 year but within 2 years 73,272 Over 2 years but within 3 years 103,291 Over 3 years but within 4 years 2,635 Over 4 years but within 5 years 1,266 Over 5 years 8,308 383,635
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
2. Accounts receivable - (cont'd)
c. Addition, written-back and written-off of provision for bad and doubtful debts during the period Six months ended June 30, 2019 Balance as of January 1, 129,941 Addition during the year, net 1,624 Write back during the year - Write-off during the year - Exchange rate effect - Balance as of December 31
131,565 d. Five largest accounts receivable at June 30, 2019:
Proportion of
Accounts Allowance of Name Closing balance receivable(%) doubtful debts Party 1 177,039 46 117,483 Party 2 114,094 30 - Party 3 47,002 12 - Party 4 8,774 2 - Party 5 6,739 2 - 353,648 92 117,483 3. Receivable financing
June 30 December 31 2019 2018 Bank acceptance draft 46,331 19,917 46,331 19,917 As at June 30, 2019, bank acceptance endorsed but not yet due amounts to 127,816 thousands RMB.
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables
June 30 December 31 2019 2018 Div idends receivable - 1,808 Other receivables 13,912 29,940 13,912 31,748 (1) Dividends receivable
a. Dividends receivable by categories
June 30 December 31 Items/Invested companies 2019 2018 Hubei Bank - 1,808 As at 30 June 2019, the Company did not have any significant dividends receivable exceeded 1 year.
(2) Other receivables
a. Other receivables by categories
June 30 December 31 2019 2018 O ther 19,053 35,072 Provision for doubtful debts (5,141) (5,132) 13,912 29,940 b. Other receivables by aging
June 30, 2019 Within 1 year (inclusive) 13,910 Over 1 year but within 2 years - Over 2 years but within 3 years 72 Over 3 years but within 4 years 10 Over 4 years but within 5 years - Over 5 years 5,061 19,053
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables - (cont'd)
(2) Other receivables - (cont'd)
c. Additions, recovery or reversal and written-off of provision for bad and doubtful debts during the period:
Six months ended June 30, 2019 Balance as of January 1, 2019 5,132 Addition during the period 9 Written back during the period - Write-off during the period - Balance as of June 30, 2019
5,141 d. Five largest other receivables at June 30 2019:
Proportion of other
Name Closing balance receivables(%) Credit loss provision Party 1 10,553 55 - Party 2 3,125 16 3,125 Party 3 2,000 11 - Party 4 651 3 - Party 5 548 3 548 16,877 88 3,673
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
5. Long-term equity investments
June 30, 2019 December 31, 2018
Amount Impairment Amount Impairment
balance loss Book value balance loss Book value Invest in
subsidiaries. 16,403,642 - 16,403,642 15,939,826 - 15,939,826 16,403,642 - 16,403,642 15,939,826 - 15,939,826 Investments in subsidiaries
Current Balance provision provision Opening Closing Impairment Impairment Invested unit balance Increase Decrease balance loss loss Jingzhou Hongxiang chemical
co. LTD. 37,620 - - 37,620 - - Hubei Sanonda foreign trade co.
LTD. 11,993 - - 11,993 - - Jiangsu Anpon Electrochemical
co. LTD. - 463,816 - 463,816 - - ADAMA Agricultural Solutions
Ltd 15,890,213 - - 15,890,213 - - 15,939,826 463,816 - 16,403,642 - - 6. Operating Income and operating costs
Six months ended June 30, 2019 Six months ended June 30, 2018 Operating Operating Revenue costs Revenue costs Main operations 704,594 493,979 1,585,485 1,096,095 Other operations 30,832 24,582 81,088 73,662 735,426 518,561 1,666,573 1,169,757
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
7. Notes to items in the cash flow statements
(1) Other cash received relevant to operating activities
Six months ended Six months ended June 30, 2019 June 30, 2018 Interest income 14,333 13,035 Government subsidies 4,414 748 Other 211 1,409 18,958 15,192 (2) Other cash paid relevant to operating activities
Six months ended Six months ended June 30, 2019 June 30, 2018 Professional services 44,848 36,133 Transportation and Commissions 28,438 38,259 Other 16,284 11,790 89,570 86,182 (3) Other cash received relevant to financing activities
Six months ended Six months ended June 30, 2019 June 30, 2018 Restricted cash 11,947 - (4) Other cash paid relevant to financing activities:
Six months ended Six months ended June 30, 2019 June 30, 2018 Repurchase of B shares - 393,025 Restricted cash - 28,150 Other 200 3,138 200 424,313
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
8. Supplementary information to cash flow statement
Six months ended June 30
2019 2018 a. Reconciliation of net profit to net cash flows generated
from operating activities:
Net profit (37,789) 282,383 Add: Assets impairment loss 272 905 Credit impairment loss 1,633 3,073 Depreciation of fixed assets 99,602 79,145 Amortization of intangible assets 2,347 2,503 Amortization of-right-of use assets 209 N/A Loss on disposal of fixed assets, intangible assets and other
long-term assets 293 44 Financial expenses 12,588 (9,876) Decrease (increase) in deferred income tax assets (11,220) (4,870) Decrease (increase) in inventory 39,895 13,343 Increase in accounts receivable from operating activities 855,155 15,037 Increase in payables from operating activities (236,900) 99,968 Net cash flows generated from operating activities 646,165 481,655 b. Net increase in cash and cash equivalents
Closing balance of cash 2,132,174 1,761,572 Less: Opening balance of cash 2,005,313 1,864,003 Net increase in cash and cash equivalents 126,861 (102,431)
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Related parties and related parties transactions
(1) Information on parent Company
Registered
Company Registered capital Shareholding Percentage name place Business nature (Thousand) percentage(%) of voting rights(%) Production and sales of
CNAC Beijing, China agrochemicals 3,338,220 94355 94355 The ultimate controller of the company is China National Chemical Corporation.
(2) Information on the subsidiaries of the Company
For information about the subsidiaries of the Company, refer to Note VII.1.
(3) Transactions with related parties
a. Transactions of goods and services
Six months ended June 30 2019 2018 Related Party Relationship
Summary of Purchase of goods/services
received:
Purchase of goods/services received Common control under
ChemChina 9,195 7,846 Purchase of fixed assets and other assets Common control under
ChemChina 56,922 54,060 Purchase of goods/services received Subsidiary 84,628 558,598 Summary of Sales of goods:
Sale of goods Subsidiary 626,622 419,636 Sale of raw materials Subsidiary 885 54,210 Sale of fixed assets Subsidiary - 1,528
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
b. Leases
The Company as lessor
June 30 December 31 Type of leased assets Lessee 2019 2018 Building and Structures Common control under - 10 ChemChina
The Company as the guarantee receiver
Amount of Inception Maturity Guaranty guaranteed date of date of completed Guarantee provider
loan guaranty guaranty (Y/ N) Parent 300,000 20/11/2017 20/11/2022 N 50,000 18/10/2017 18/10/2021 N 100,000 13/06/2018 12/06/2022 N Ultimate controller 160,000 27/05/2014 09/06/2021
Y
ADAMA Ltd. (Expressed in RMB '000) Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
c. Receivables from and payables to related parties (including loans)
Receivable Items
June 30 December 31 2019 2018 Related Party Book Bad debt Book Bad debt Items Relationship Balance Provision Balance Provision Trade receivables Subsidiary 884,581 559,848 753,369 113,245 Common control under
Prepayments ChemChina 248 - 298 - Other non-current Common control under
assets ChemChina 84,654 - - - Payable Items
June 30 December 31 Items Related Party Relationship 2019 2018 Trade payables Common control under ChemChina 6,598 184 Other payables Subsidiary 566,596 105,164 Other payables Common control under ChemChina 851,616 240 Other non-current
liabilities* Common control under ChemChina 595,996 171,770*loans from related party, the interest expense for the 6 months ended June 30, 2019 and 2018 was 1,042 thousand RMB for each of the periods.
d. Other related party transactions
The closing balance of bank deposit in ChemChina Finance Corporation was 231,316 thousand RMB (85356354: 295,661 thousand RMB) Interest income of bank deposit for the current period was 1,654 thousand RMB (amount for six months ended June 30, 2018 is 738 thousand RMB).
ADAMA Ltd. (Expressed in RMB '000) Supplementary information
1. Extraordinary Gain and Loss
Six months ended June 30, 2019 Disposal of non-current assets 115,514 Government grants recognized through profit or loss 14,854 Profit of subsidiaries generated before combination date of a business combination involving
enterprises under common control 38,027 Recovery or reversal of provision for bad debts which is assessed individually during the years 15,748 Other non-operating income and expenses besides items above (8,431) Tax effect (17,344) 158,368 Note: Extraordinary gain and loss items listed above are presented in the amount before taxation
2. Return on net assets and earnings per share (“EPS”)
The information of Return on net assets and EPS is in accordance with the Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 9– Calculation and Disclosure of Return on net assets and Earnings per share (2010 Amendment) issued by China Securities Regulatory Commission Weighted average
rate of return on net Basic EPS Diluted EPS Profit during the reporting period assets(%) (RMB/share) (RMB/share) Net profit attributable to ordinary
shareholders of the Company 2.59% 0.24 N/A Net profit after deduction of extraordinary
gains/losses attributable to ordinary
shareholders of the Company 1.89% 0.18 N/A
ADAMA Ltd. (Expressed in RMB '000) Supplementary information - (cont'd)
3. Supplementary information for retrospective restatement
During March 2019, the acquisition of Anpon, a wholly-owned subsidiary of CNAC, was successfully completed. On March 29, 2019, the entire share capital of Anpon was transferred from CNAC to the Company, in return for cash installments of 415 million RMB. The transaction was considered as a business combination under common control.
The restated consolidated balance sheets as at January 1, 2018 and December 31, 2018 are as follows: January 1, December 31 June 30 2018 2018 2019 (Restated) (Restated)
Current assets
Cash at bank and on hand 7,984,102 6,400,190 5,425,392 Financial assets at fair value through profit or loss 23,000 46,095 33,074 Derivative financial assets 455,153 517,726 416,991 Bills receivables 29,927 40,569 54,702 Accounts receivable 5,229,446 6,573,100 7,674,381 Receivables financing 282,645 73,216 68,629 Prepayments 298,036 410,506 319,471 Other receivables 1,083,330 1,079,332 929,945 Inventories 7,669,358 9,433,876 10,337,924 Assets held for sale 403,297 - - Non-current assets due within one year 46 48 - Other current assets 614,957 660,806 715,767 Total current assets
24,073,297 25,235,464 25,976,276 Non-current assets
Available-for-sale financial assets 91,090 157,600 174,246 Long-term receivables 192,968 108,350 135,075 Long-term equity investments 102,384 91,559 87,812 Investment properties 4,408 4,094 3,933 Fixed assets 6,872,164 7,263,866 7,167,032 Construction in progress 841,100 487,204 534,351 Right-of-use assets N/A N/A 554,372 Intangible assets 4,102,983 5,741,962 5,802,932 Goodwill 3,890,097 4,085,945 4,298,747 Deferred tax assets 896,326 741,737 767,928 Other non-current assets 183,519 217,282 307,385 Total non-current assets
17,177,039 18,899,599 19,833,813 Total assets
ADAMA Ltd. (Expressed in RMB '000) Supplementary information - (cont'd)
3. Supplementary information for retrospective restatement - (cont'd)
January 1, December 31 June 30 2018 2018 2019 (Restated) (Restated)
Current liabilities
Short-term loans 3,080,912 1,122,774 2,308,286 Derivative financial liabilities 789,050 1,451,670 688,267 Bills payable 311,557 445,533 375,777 Accounts payable 3,983,018 4,627,936 4,178,668 Contract liabilities 781,374 848,402 917,747 Employee benefits payable 1,013,830 944,175 912,354 Taxes payable 437,457 616,780 437,227 Other payables 1,062,400 1,197,579 1,970,641 Non-current liabilities due within one year 448,504 301,814 422,208 Other current liabilities 466,078 578,184 344,127 Total current liabilities
12,374,180 12,134,847 12,555,302 Non-current liabilities
Long-term loans 514,320 235,819 673,796 Debentures payable 7,777,410 7,649,098 8,152,990 Lease liabilities N/A N/A 418,814 Long-term payables 23,909 25,106 26,419 Long-term employee benefits payable 652,071 620,646 644,449 Provisions 186,020 132,351 135,924 Deferred tax liabilities 224,613 392,404 350,735 Other non-current liabilities 225,586 199,930 372,256 Total non-current liabilities
9,603,929 9,255,354 10,775,383 Total liabilities
21,978,109 21,390,201 23,330,685 Shareholders' capital
Share capital 2,446,554 2,446,554 2,446,554 Capital reserve 13,331,312 13,324,491 12,903,168 Other comprehensive income (104,048) 1,090,827 972,845 Special reserves 9,349 13,536 16,798 Surplus reserve 207,823 240,162 240,162 Retained earnings 3,381,237 5,629,292 5,899,877 Totalshareholders’ equity
19,272,227 22,744,862 22,479,404 Total liabilities andshareholders’ equity