YANTAI CHANGYU PIONEER WINE
COMPANY LIMITED
Financial Statements and Auditor's Report
For the year ended 31 December 2018
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
FINANCIAL STATEMENTS AND AUDITOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
CONTENTS PAGE
AUDITOR'S REPORT 1-5
THE CONSOLIDATED BALANCE SHEET 6-8
THE COMPANY'S BALANCE SHEET 9 - 10
THE CONSOLIDATED INCOME STATEMENT 11
THE COMPANY'S INCOME STATEMENT 12
THE CONSOLIDATED CASH FLOW STATEMENT 13
THE COMPANY'S CASH FLOW STATEMENT 14
THE CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 15
THE COMPANY'S STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 16
NOTES TO THE FINANCIAL STATEMENTS 17 - 107
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (19) No. P02452
(Page 1 of 5)
TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
1. Opinion
We have audited the financial statements of Yantai Changyu Pioneer Wine Company Limited
("Yantai Changyu Company"), which comprise the consolidated and Company's balance sheets as at
31 December 2018, and the consolidated and Company's income statements, the consolidated and
Company's cash flow statements and the consolidated and Company's statements of changes in
owners' equity for the year then ended, and the notes to the financial statements.
In our opinion, the accompanying financial statements of Yantai Changyu Pioneer Wine Company
Limited is prepared and present fairly, in all material respects, the consolidated and Company's
financial position as of 31 December 2018, and the consolidated and the Company's results of
operations and cash flows for the year then ended in accordance with Accounting Standards for
Business Enterprises.
2. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under
those standards are further described in the Auditor's Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of Yantai Changyu Company in accordance
with the code of ethics for Chinese Certified Public Accountants, and we have fulfilled our other
ethical responsibilities in accordance with the Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. We determine the followings are key audit matters in
need of communication in our report.
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AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 2 of 5)
3. Key Audit Matters - continued
Impairment assessment of certain long-term assets
1. Item description
As stated in Note IV “Impairment of long-term assets”, the Production of Yantai Changyu
Pioneer Wine Company Limited Research and Development Co., Ltd. ("R&D Centre"),
subsidiary of the Company as well as a new main production base of the Company, accounts for
more than 60% of the Group’s production in 2018. As at 31 December 2018, the book values of
long-term assets including fixed assets, construction in progress and intangible of "R&D Centre
amounted to RMB 3.5 billion, accounting for 26.6% of the total assets in the consolidated
financial statements, which exerts significant influence on the consolidated financial statements.
As there is little space for the development of the domestic wine market, the management of the
Company faces great operating pressures with certain risks of impairment of related long-term
assets. The management performs the impairment test by determining if the recoverable amount is
less than the book value of long-term assets and determines the recoverable amount based on the
present value of expected future cash flows. In the estimate of the present value of future cash
flows, the management is required to make significant judgements in the assumptions including
the sales growth rate, future selling price, production cost, operating expenses and discount rate.
For the above reasons, we identified the valuation of the impairment of long-term assets as a key
audit matter.
2. How our audit addressed the key audit matter
Our procedures in relation to the key audit matter mainly included:
(1) Test and evaluate the effectiveness of the design and implementation of the internal
control related to the valuation of the impairment of long-term assets;
(2) Review and evaluate the reasonableness of key assumptions and judgements used in the
estimate of the present value of expected future cash flows in the impairment test based on
the historical records of the Company and our understanding of the business and industry
in which the Company operates.
(3) Using our internal valuation specialists, reviewing the appropriateness of the future cash
flows discount model prepared by the management and the rationality of the discount rate
used;
(4) Performing the recalculation procedure, checking the accuracy of calculations in the
discount future cash flows model.
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AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 3 of 5)
4. Other Information
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for other
information. The other information comprises the information included in the Yantai Changyu 2018
annual report, but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
5. Responsibilities of the Management and Those Charged with Governance for the Financial
Statements
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for the
preparation and fair presentation of the financial statements in accordance with Accounting Standards
for Business Enterprises, and designing, implementing and maintaining internal control that is
necessary to enable the financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the management is responsible for assessing Yantai Changyu
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the management either intends to
liquidate Yantai Changyu Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing Yantai Changyu Company’s financial
reporting process.
6. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion solely to you. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with China Standards on Auditing will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
-3-
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 4 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the internal control.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on Yantai Changyu Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor's report. However, future
events or conditions may cause the Yantai Changyu Company to cease to continue as a going
concern.
(5) Evaluate the overall presentation, structure and content of the financial statements (including
the disclosures), and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Yantai Changyu Company to express an opinion on the
financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
-4-
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 5 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current year and are therefore
the key audit matters. We describe these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant: Xie Yanfeng
Shanghai, China (Engagement partner)
Chinese Certified Public Accountant: Li Yangang
18 April 2019
-5-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018
ASSETS Notes 31/12/2018 31/12/2017
RMB RMB
CURRENT ASSETS
Cash and bank VI-1 1,475,700,477 1,402,522,509
Notes and accounts receivable VI-2 530,821,071 508,593,173
Including: Notes receivable VI-2.2 288,667,988 244,796,818
Accounts receivable VI-2.3 242,153,083 263,796,355
Prepayments VI-3 4,219,949 2,417,931
Other receivables VI-4 22,636,086 18,978,422
Including: Interest receivable VI-4.2 1,332,681 240,968
Inventories VI-5 2,724,591,457 2,473,614,046
Non-current assets held for sale - 2,000,197
Other current assets VI-6 258,676,396
_____________ 230,822,759
_____________
Total current assets 5,016,645,436
_____________ 4,638,949,037
_____________
NON-CURRENT ASSETS
Available-for-sale financial assets VI-7 467,251 467,251
Investment properties VI-8 31,572,489 18,467,989
Fixed assets VI-9 5,749,731,667 5,329,083,969
Construction in progress VI-10 759,296,591 1,026,141,569
Bearer biological assets VI-11 209,266,373 201,929,888
Intangible assets VI-12 655,473,459 655,448,897
Goodwill VI-13 165,199,111 128,135,981
Long-term prepaid expenses VI-14 244,640,416 230,009,231
Deferred tax assets VI-15 285,436,259
_____________ 308,121,396
_____________
Total non-current assets 8,101,083,616
_____________ 7,897,806,171
_____________
Total assets 13,117,729,052
_____________ 12,536,755,208
_____________
-6-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017
RMB RMB
CURRENT LIABILITIES
Short-term borrowings VI-16 688,002,410 714,434,286
Notes and accounts payable VI-17 713,572,881 666,442,879
Receipts in advance VI-18 226,075,244 350,894,156
Employee benefits payable VI-19 212,304,217 210,824,234
Taxes payable VI-20 128,912,790 145,094,156
Other payables VI-21 608,479,890 603,735,569
Including: Interest payable 712,826 771,250
Other payables VI-21.2 607,767,064 602,964,319
Deferred income VI-22 15,860,254 16,878,199
Non-current liabilities due within one year VI-23 152,940,788
_____________ 110,954,827
_____________
Total current liabilities 2,746,148,474
_____________ 2,819,258,306
_____________
NON-CURRENT LIABILITIES
Long-term borrowings VI-24 156,480,662 156,125,854
Long-term payables VI-25 225,000,000 259,000,000
Deferred income VI-22 70,367,039 92,918,855
Deferred tax liabilities VI-15 22,010,647 24,264,203
Other non-current liabilities VI-26 7,234,853
_____________ 7,209,312
_____________
Total non-current liabilities 481,093,201
_____________ 539,518,224
_____________
Total liabilities 3,227,241,675
_____________ 3,358,776,530
_____________
-7-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017
RMB RMB
EQUITY
Share capital VI-27 685,464,000 685,464,000
Capital reserve VI-28 565,955,441 565,955,441
Other comprehensive income VI-29 2,965,377 3,109,240
Surplus reserve VI-30 342,732,000 342,732,000
Retained earnings VI-31 8,008,982,547
_____________ 7,309,081,618
_____________
Equity attributable to shareholders
of the Company 9,606,099,365 8,906,342,299
Non-controlling interests 284,388,012
_____________ 271,636,379
_____________
Total equity 9,890,487,377
_____________ 9,177,978,678
_____________
Total liabilities and equity 13,117,729,052
_____________ 12,536,755,208
_____________
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 6 to 107 were signed by the following:
Legal Representative Person in Charge of the Chief Accountant
Accounting Body
-8-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
ASSETS Notes 31/12/2018 31/12/2017
RMB RMB
CURRENT ASSETS
Cash and bank XIV-1 624,588,809 559,174,466
Notes and accounts receivable XIV-2 41,333,227 49,450,536
Including: Notes receivable XIV-2.2 39,885,254 41,645,203
Accounts receivable XIV-2.3 1,447,973 7,805,333
Prepayments 227 99,673
Other receivables XIV-3 1,025,643,356 999,846,643
Including: Interest receivable 254,088 76,646
Dividend receivables XIV-3.2 500,000,000 407,495,922
Inventories XIV- 4 385,154,740 348,042,053
Non-current assets held for sale - 2,000,197
Other current assets 24,704,844
_____________ 29,706,058
_____________
Total current assets 2,101,425,203
_____________ 1,988,319,626
_____________
NON-CURRENT ASSETS
Long-term equity investments XIV- 5 7,420,803,069 4,511,202,204
Investment properties VI-8 31,572,489 18,467,989
Fixed assets XIV- 6 265,311,274 288,150,901
Construction in progress XIV- 7 6,311,701 6,756,349
Construction in progress XIV- 8 125,002,793 119,572,539
Intangible assets XIV- 9 67,244,066 69,623,219
Deferred tax assets XIV- 10 24,194,967 28,787,907
Other non-current assets XIV- 11 972,700,000
_____________ 3,718,674,166
_____________
Total non-current assets 8,913,140,359
_____________ 8,761,235,274
_____________
Total assets 11,014,565,562
_____________ 10,749,554,900
_____________
-9-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017
RMB RMB
CURRENT LIABILITIES
Short-term borrowings XIV- 12 150,000,000 600,000,000
Notes and accounts payable XIV- 13 132,704,304 97,833,124
Advances from customers - 6,000,000
Employee benefits payable XIV- 14 72,345,179 70,108,076
Taxes payable XIV- 15 13,111,431 14,569,690
Other payables XIV- 16 607,974,519 545,365,672
Including: Interest payable 181,250 652,500
Other payables XIV- 16.2 607,793,269 544,713,172
Deferred income 3,433,054
_____________ 3,953,054
_____________
Total current liabilities 979,568,487
_____________ 1,337,829,616
_____________
NON-CURRENT LIABILITIES
Deferred income 8,910,918 12,628,573
Other non-current liabilities XIV- 14 2,710,575
_____________ 2,577,702
_____________
Total non-current liabilities 11,621,493
_____________ 15,206,275
_____________
Total liability 991,189,980
_____________ 1,353,035,891
_____________
EQUITY
Share capital VI-27 685,464,000 685,464,000
Capital reserve XIV- 17 557,222,454 557,222,454
Surplus reserve VI-30 342,732,000 342,732,000
Retained earnings 8,437,957,128
_____________ 7,811,100,555
_____________
Total equity 10,023,375,582
_____________ 9,396,519,009
_____________
Total liabilities and equity 11,014,565,562
_____________ 10,749,554,900
_____________
- 10 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
RMB RMB
I. Revenue VI-32 5,142,244,740 4,932,545,229
Less: Cost of sales VI-32 1,901,611,507 1,671,592,279
Taxes and surcharges VI-33 276,491,674 310,252,023
Selling expenses VI-34 1,274,599,146 1,272,522,443
Administrative expenses VI-35 343,580,651 336,461,133
Research and development expenses 4,784,118 4,320,825
Financial expenses VI-36 35,945,302 18,590,259
Including: Interest income 12,086,007 9,168,772
Interest expenses 46,354,902 26,095,487
(Reversal of)Impairment loss of assets VI-37 (912,166) 8,293,553
Add: Income (loss) from disposal of assets 11,368,355 (222,586)
Other income VI-38 87,281,434
____________ 46,038,384
____________
II. Operating profit 1,404,794,297 1,356,328,512
Add: Non-operating income VI-39 7,353,309 17,230,727
Less: Non-operating expenses VI-40 3,535,908
____________ 1,631,476
____________
III. Profit before tax 1,408,611,698 1,371,927,763
Less: Income tax VI-41 367,127,522
____________ 338,134,245
____________
IV. Profit for the year 1,041,484,176
____________ 1,033,793,518
____________
(I) Categorized by the nature of continuing operation
1. Net profit from continuing operations 1,041,484,176
____________ 1,033,793,518
____________
(II) Categorized by ownership:
1. Profit or loss attributable to non-controlling interests (1,148,753) 2,098,462
2. Net profit attributable to owners of the Company 1,042,632,929
____________ 1,031,695,056
____________
V. Other comprehensive income (post-tax) (376,524)
____________ 9,863,872
____________
Other comprehensive income attributable
to shareholders of the Company
Other comprehensive income
to be reclassified to profit and loss
Foreign currency statement translation difference (143,863) 8,368,254
Other comprehensive income attributable
to non-controlling interest (232,661)
____________ 1,495,618
____________
VI. Total comprehensive income 1,041,107,652
____________ 1,043,657,390
____________
Attribute to shareholders of the Company 1,042,489,066 1,040,063,310
Attribute to non-controlling interest of the Company (1,381,414) 3,594,080
____________ ____________
VII. Earnings per share
(I) Basic earnings per share VI-42 1.52
____________ 1.51
____________
(II) Diluted earnings per share VI-42 N/A
____________ N/A
____________
- 11 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
RMB RMB
I. Revenue XIV-18 876,447,070 1,311,256,854
Less: Cost of sales XIV-18 774,487,031 1,165,953,408
Taxes and surcharges XIV-19 38,346,761 76,570,225
Administrative expenses XIV-20 90,505,208 79,119,135
Research and development expenses 887,355 1,573,909
Financial expenses XIV-21 (20,292,737) 637,568
Including: Interest income 41,821,372 18,602,199
Interest expenses 16,075,353 17,414,181
Add:Investment income XIV-22 964,128,659 798,877,905
Income (loss) from disposal of assets 12,411,962 (29,625)
Other income 4,237,655
____________ 5,219,126
____________
II. Operating Profit 973,291,728 791,470,015
Add: Non-operating income 1,483,478 686,646
Less: Non-operating expenses 593,694
____________ 335,237
____________
III. Profit before tax 974,181,512 791,821,424
Less: Income tax 4,592,939
____________ (1,776,586)
____________
IV. Profit for the year 969,588,573
____________ 793,598,010
____________
Net profit from continuing operations 969,588,573
____________ 793,598,010
____________
V. Total comprehensive income 969,588,573
____________ 793,598,010
____________
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
RMB RMB
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 4,950,603,207 4,827,152,526
Receipts of tax refunds 57,056,690 53,196,910
Other cash receipts relating to operating activities VI-43(1) 72,703,872
___________ 85,236,905
___________
Sub-total of cash inflows from operating activities 5,080,363,769
___________ 4,965,586,341
___________
Cash payments for goods purchased and services received 1,383,945,233 1,143,840,915
Cash payments to and on behalf of employees 544,742,974 512,777,815
Payment of various types of taxes 1,111,980,499 1,260,813,596
Other cash payments relating to operating activities VI-43(2) 1,063,716,317
___________ 1,074,910,988
___________
Sub-total of cash outflows from operating activities 4,104,385,023
___________ 3,992,343,314
___________
Net cash flows from operating activities VI-44(1) 975,978,746
___________ 973,243,027
___________
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts from disposals and recovery of investments 400,000,000 205,000,000
Proceeds from return on investments 3,445,895 4,084,350
Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 19,967,431
___________ 7,594,005
___________
Sub-total of cash inflows from investing activities 423,413,326
___________ 216,678,355
___________
Cash paid for acquisition of properties, plants and equipment,
intangible assets and other long-term assets 347,384,820 435,960,357
Cash payments to acquire investments 478,042,400 297,129,216
Cash paid for the purchase subsidiaries and other equity VI-43(3) 105,834,655
___________ 303,796,543
___________
Sub-total of cash outflows from investing activities 931,261,875
___________ 1,036,886,116
___________
Net cash flows from investing activities (507,848,549)
___________ (820,207,761)
___________
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from capital contributions 2,050,000 48,396,726
Including: cash receipts from capital contributions
from non-controlling owners of subsidiaries 2,050,000 48,396,726
Cash receipts from borrowings 1,049,815,411 963,564,600
Other cash received from financing activities VI-43(4) 62,468,259
___________ 52,930,804
___________
Sub-total of cash inflows from financing activities 1,114,333,670
___________ 1,064,892,130
___________
Cash paid for borrowings 1,103,189,409 876,502,273
Cash paid for dividends, profits and interests 397,351,813 369,791,284
Cash paid for other financing activities VI-43(5) 46,100,000
___________ 61,700,000
___________
Sub-total of cash outflows from financing activities 1,546,641,222
___________ 1,307,993,557
___________
Net cash flows from financing activities (432,307,552)
___________ (243,101,427)
___________
Effect of foreign exchange rate changes
on cash and cash equivalents (9,851,585) 14,013,131
NET INCREASE (DECREASE) OF CASH
AND CASH EQUIVALENTS 25,971,060 (76,053,030)
Add: cash and cash equivalents at beginning of the year VI-44(3) 1,180,889,274
___________ 1,256,942,304
___________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR VI-44(3) 1,206,860,334
___________ 1,180,889,274
___________
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
RMB RMB
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from the sale of goods
and the rendering of services 817,341,175 984,103,489
Other cash receipts relating to operating activities 177,786,322
___________ 431,983,092
___________
Sub-total of cash inflows from operating activities 995,127,497
___________ 1,416,086,581
___________
Cash payments for goods purchased and services received 608,241,452 398,827,772
Cash payments to and on behalf of employees 107,256,441 89,894,049
Payment of various types of taxes 62,066,449 207,917,864
Other cash payments relating to operating activities 74,357,324
___________ 121,377,127
___________
Sub-total of cash outflows from operating activities 851,921,666
___________ 818,016,812
___________
Net cash flows from operating activities XIV-23(1) 143,205,831
___________ 598,069,769
___________
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts from disposals and recovery of investments 370,000,000 103,000,000
Proceeds from return on investments 874,520,633 827,218,467
Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 11,212,195
___________ 26,760,929
___________
Sub-total of cash inflows from investing activities 1,255,732,828
___________ 956,979,396
___________
Cash paid for acquisition of properties, plants and equipment,
intangible assets and other long-term assets 28,842,911 22,527,073
Cash payments to acquire investments 410,000,000 105,000,000
Cash paid for the purchase subsidiaries and other equity 107,194,420
___________ 881,056,220
___________
Sub-total of cash outflows from investing activities 546,037,331
___________ 1,008,583,293
___________
Net cash flows from investing activities 709,695,497
___________ (51,603,897)
___________
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from borrowings 200,000,000
___________ 600,000,000
___________
Sub-total of cash inflows from financing activities 200,000,000
___________ 600,000,000
___________
Cash paid for borrowings 650,000,000 530,339,600
Cash paid for dividends, profits and interests 364,085,312
___________ 360,560,604
___________
Sub-total of cash outflows from financing activities 1,014,085,312
___________ 890,900,204
___________
Net cash flows from financing activities (814,085,312)
___________ (290,900,204)
___________
NET INCREASE OF CASH
AND CASH EQUIVALENTS 38,816,016 255,565,668
Add: cash and cash equivalents at beginning of the year XIV-24 493,568,866
___________ 238,003,198
___________
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR XIV-24 532,384,882
___________ 493,568,866
___________
- 14 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2018
2018
Attributable to shareholders of the Company
Issued Capital Other comprehensive Surplus Retained Non-controlling
capital surplus income reserve earnings interests Total
RMB RMB RMB RMB RMB RMB RMB
I. 1/1/2018 _______
685,464,000 _______
565,955,441 _______
3,109,240 ________
342,732,000 ________
7,309,081,618 _______
271,636,379 ________
9,177,978,678
II. Changes for the year
(I) Total comprehensive income - - (143,863) - 1,042,632,929 (1,381,414) 1,041,107,652
(II) Owners’ contributions and
reduction in capital
Acquisition of
subsidiaries (VIII-2) - - - - - 17,532,823 17,532,823
(III) Profit distribution
Distributions to
shareholders (VI-31, VIII-2 ) _______- _______- _______- ________- ________ _______ ________
(342,732,000) (3,399,776) (346,131,776)
III. 31/12/2018 685,464,000 565,955,441 2,965,377 342,732,000 8,008,982,547 284,388,012 9,890,487,377
_______ _______ _______ ________ ________ _______ ________
2017
Attributable to shareholders of the Company
Issued Capital Other comprehensive Surplus Retained Non-controlling
capital surplus income reserve earnings interests Total
RMB RMB RMB RMB RMB RMB RMB
I. 1/1/2017 _______
685,464,000 _______
565,955,441 _______
(5,259,014) _______
342,732,000 ________
6,620,118,562 _______
190,473,697 ________
8,399,484,686
II. Changes for the year
(I) Total comprehensive income - - 8,368,254 - 1,031,695,056 3,594,080 1,043,657,390
(II) Owners’ contributions and
reduction in capital
Non-controlling interests' capital
contribution - - - - - 78,236,726 78,236,726
(III) Profit distribution
Distributions to
shareholders (VI-31) _______- _______- _______- _______- ________ _______ ________
(342,732,000) (668,124) (343,400,124)
III. 31/12/2017 685,464,000 565,955,441 3,109,240 342,732,000 7,309,081,618 271,636,379 9,177,978,678
_______ _______ _______ _______ ________ _______ ________
- 15 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2018
2018
Issued capital Capital reserve Surplus reserve Retained earnings Total
RMB RMB RMB RMB RMB
I. 1/1/2018 685,464,000
________ 557,222,454
________ 342,732,000
________ 7,811,100,555 9,396,519,009
_________ __________
II. Changes for the year
(I) Total comprehensive income - - - 969,588,573 969,588,573
(II) Profit distribution
Distributions to shareholders (VI-31) ________- ________- ________- (342,732,000) (342,732,000)
_________ __________
III. 31/12/2018 685,464,000
________ 557,222,454
________ 342,732,000
________ 8,437,957,128
_________ 10,023,375,582
__________
2017
Issued capital Capital reserve Surplus reserve Retained earnings Total
RMB RMB RMB RMB RMB
I. 1/1/2017 685,464,000
________ 557,222,454
________ 342,732,000
________ 7,360,234,545
_________ 8,945,652,999
_________
II. Changes for the year
(I) Total comprehensive income - - - 793,598,010 793,598,010
(II) Profit distribution
Distributions to shareholders (VI-31) ________- ________- ________- (342,732,000)
_________ (342,732,000)
_________
III. 31/12/2017 685,464,000
________ 557,222,454
________ 342,732,000
________ 7,811,100,555
_________ 9,396,519,009
_________
- 16 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2018
I. CORPORATE INFORMATION
Yantai Changyu Pioneer Wine Co., Ltd. (the "Company") was incorporated as a joint stock
limited company in accordance with the Company Law of the People's Republic of China (the
"PRC") in a reorganization carried out by Yantai Changyu Group Co., Ltd. ("Changyu Group
Company"), in which Changyu Group Company injected certain assets and liabilities in relation to
the brandy, wine, and sparkling wine production and sales businesses to the Company. The
Company and its subsidiaries (the "Group") are principally engaged in the production and sales of
wine, brandy, sparkling wine, grape growing and acquisition, as well as travel resource
development, etc. . Registration place of the Company is Yantai, Shandong. Headquarter of the
Company is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong, PRC.
As at 31 December 2018 the total shares issued by the Company amounts to 685,464,000 shares.
Please refer to Note VI-27 in detail.
The holding company of the Group is Changyu Group Company, which is jointly controlled by
Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, International
Finance Corporation and Yantai Yuhua Investment and Development Company Limited.
The financial statements have been authorized by the board of directors on 18 April 2019.
According to the Company's articles of association, the financial statements will be reviewed by
shareholders on the shareholder's meeting.
For consolidation scope of the year, please refer to Note VIII "Equity in other entities" in detail.
For detail of changes in consolidation scope of the year, please refer to Note VII "Change in
consolidation scope".
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") issued by
the Ministry of Finance ("MoF"). In addition, the Group has disclosed relevant financial
information in accordance with Information Disclosure and Presentation Rules for Companies
Offering Securities to the Public No. 15 - General Provisions on Financial Reporting (Revised in
2014).
2. Basis of accounting and principle of measurement
The Group has adopted the accrual basis of accounting. The Group adopts the historical cost as
the principle of measurement in the financial statements. Where assets are impaired, provisions
for asset impairment are made in accordance with relevant requirements.
Under the historical cost measurement, an asset is measured at the value of cash and cash
equivalents or the fair value of consideration paid at the date of the purchase. Liability is
measured at the value of asset received through taking current obligation, the contract value for
taking current obligation, or the cash and cash equivalents value estimated for repaying debt in
daily business activity.
- 17 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
- 18 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
2. Basis of accounting and principle of measurement - continued
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another valuation technique. Fair value for
measurement and/or disclosure purposes in these consolidated financial statements is determined
on such a basis.
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
2) Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
3) Level 3 inputs are unobservable inputs for the asset or liability.
3. Going concern
As at 31 December 2018, the Group evaluated the profitability ability in the foreseeable 12
months and did not notice any event or circumstance that would constitute significant doubt on
going concern ability of the Group. Therefore, the financial statements have been prepared on a
going concern basis.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
1. Declaration for implementing CAS
The financial statements are prepared in accordance with CAS, which showing a true and fair
view of the financial position on 31 December 2018, financial performance and cash flow in 2018
of the Company and the Group.
2. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
3. Business cycle
Business cycle refers to the period from purchasing assets to be processed to receiving cash or
cash equivalents by the Company. The business cycle of the Company is 12 months.
4. Reporting currency
Renminbi ("RMB") is the currency of the primary economic environment in which the Company
and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries
choose RMB as their functional currency. Overseas subsidiaries of the Company adopt Currency
Euro, Chilean Peso and Australian Dollar as their functional currencies on the basis of the primary
economic environment in which they operate. The Company adopts RMB to prepare its financial
statements.
- 19 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
5. Business combination
5.1Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business
combination in which all of the combining enterprises are not ultimately controlled by the same
party or parties before and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets
given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for
control of the acquiree. The intermediary expenses incurred by the acquirer in respect of auditing,
legal services, valuation and consultancy services, etc. and other associated administrative
expenses attributable to the business combination are recognised in profit or loss when they are
incurred.
Qualified identifiable assets, liabilities and contingent liabilities obtained by acquirer in the
acquisition are measured using fair value at the acquisition date.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’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 the acquirer’s
interest in the fair value of the acquiree’s identifiable net assets, the acquirer firstly reassesses the
measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent
liabilities and measurement of the cost of combination. If after that reassessment, the cost of
combination is still less than the acquirer’s interest in the fair value of the acquiree’s identifiable
net assets, the acquirer recognizes the remaining difference immediately in profit or loss for the
current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment
losses, and is presented separately in the consolidated financial statements.
6. Preparation of consolidated financial statements
6.1 Preparation of consolidated financial statements
The scope of consolidation in the consolidated financial statements is determined on the basis of
control. Control is the power to govern the financial and operating policies of an enterprise so as
to obtain benefits from its operating activities. The Group will re-evaluate if changes in relevant
facts and circumstances results in changes in relevant factors involved in the above definition of
control.
Consolidation of subsidiary starts from the control on the subsidiary by the Group and ends at the
loss of control on the subsidiary by the Group.
For the subsidiaries through business combination not involving enterprises under common
control, the results of operations and cash flows from the acquisition day were properly included
in the consolidated income statements and consolidated cash flow statements.
- 20 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
6. Preparation of consolidated financial statements - continued
6.1 Preparation of consolidated financial statements - continued
The significant accounting policies and accounting periods adopted by the subsidiaries are
determined based on the uniform accounting policies and accounting periods set out by the
Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non-
controlling interests and presented as "non-controlling interests" in the consolidated balance sheet
within shareholders' equity. The portion of net profits or losses of subsidiaries for the period
attributable to non-controlling interests is presented as "non-controlling interests" in the
consolidated income statement below the net profit line item.
When the amount of loss for the period attributable to the non-controlling shareholders of a
subsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners'
equity of the subsidiary, the excess amount are still allocated against non-controlling interests.
7. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash
equivalents are the Group's short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
8. Translation of transactions and financial statements denominated in foreign currencies
8.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange
rate on the date of the transaction.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spot
exchange rates at the balance sheet date. Exchange differences arising from the differences
between the spot exchange rates prevailing at the balance sheet date and those on initial
recognition or at the previous balance sheet date are recognised in profit or loss for the period,
except that (1) exchange differences related to a specific-purpose borrowing denominated in
foreign currency that qualify for capitalisation are capitalised as part of the cost of the qualifying
asset during the capitalisation period; (2) exchange differences related to hedging instruments for
the purpose of hedging against foreign currency risks are accounted for using hedge accounting;
(3) exchange differences arising from available-for-sale non-monetary items denominated in
foreign currencies and changes in the carrying amounts of available-for-sale monetary items are
recognised as other comprehensive income and included in capital reserve.
- 21 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
8. Translation of transactions and financial statements denominated in foreign currencies - continued
8.2 Translation of financial statements denominated in foreign currencies - continued
For the purpose of preparing the consolidated financial statements, financial statements of a
foreign operation are translated from the foreign currency into RMB using the following method:
assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the
balance sheet date; shareholders' equity items except for retained earnings are translated at the
spot exchange rates at the dates on which such items arose; all items in the income statement as
well as items reflecting the distribution of profits are translated at the spot exchange rates on the
dates of the transactions; the opening balance of retained earnings is the translated closing balance
of the previous year's retained earnings; the closing balance of retained earnings is calculated and
presented on the basis of each translated income statement and profit distribution item. The
difference between the translated assets and the aggregate of liabilities and shareholders' equity
items is separately presented as the exchange differences arising on translation of financial
statements denominated in foreign currencies of other comprehensive income under the
shareholders' equity in the balance sheet.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign
subsidiary are translated at the spot exchange rate on the date of the cash flows. The effect of
exchange rate changes on cash and cash equivalents is regarded as a reconciling item and
presented separately in the cash flow statement as "effect of exchange rate changes on cash and
cash equivalents".
The opening balances and the comparative figures of previous year are presented at the translated
amounts in the previous year's financial statements.
9. Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial assets and financial liabilities are initially
measured at fair value. For other financial assets and financial liabilities, transaction costs are
included in their initial recognised amounts.
9.1 Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or a
financial liability (or a group of financial assets or financial liabilities) and of allocating the
interest income or interest expense over the relevant period, using the effective interest rate. The
effective interest rate is the rate that exactly discounts estimated future cash flows through the
expected life of the financial asset or financial liability or, where appropriate, a shorter period to
the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering all
contractual terms of the financial asset or financial liability (without considering future credit
losses), and also considers all fees paid or received between the parties to the contract giving rise
to the financial asset and financial liability that are an integral part of the effective interest rate,
transaction costs, and premiums or discounts, etc.
- 22 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.2 Classification, recognition and measurement of financial assets
On initial recognition, the Group's financial assets are classified into one of the four categories,
including financial assets at fair value through profit or loss, held-to-maturity investments, loans
and receivables, and available-for-sale financial assets. All regular way purchases or sales of
financial assets are recognised and derecognised on a trade date basis. The Group's financial
assets are bought in a conventional way, and recognized and terminated according to the
accounting transaction date. Financial assets of the Group are loans and receivables and available-
for-sale financial assets.
9.2.1 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Financial assets classified as loans and receivables by the
Group include cash and bank, notes and accounts receivable and other receivables, etc.
Loans and receivables are subsequently measured at amortised cost using the effective interest
method. Gain or loss arising from derecognition, impairment or amortisation is recognised in
profit or loss.
9.2.2 Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are designated on
initial recognition as available for sale, and financial assets that are not classified as financial
assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.
For investments in equity instruments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured, they are measured at cost.
9.3 Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other than
those at fair value through profit or loss. If there is objective evidence that a financial asset is
impaired, the Group determines the amount of any impairment loss. Objective evidence that a
financial asset is impaired is evidence that, arising from one or more events that occurred after the
initial recognition of the asset, the estimated future cash flows of the financial asset, which can be
reliably measured, have been affected.
Objective evidence that a financial asset is impaired includes the following observable events:
(1) Significant financial difficulty of the issuer or obligor;
(2) A breach of contract by the borrower, such as a default or delinquency in interest or
principal payments;
(3) The Group, for economic or legal reasons relating to the borrower's financial difficulty,
granting a concession to the borrower;
(4) It becoming probable that the borrower will enter bankruptcy or other financial
reorganisations;
- 23 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.3 Impairment of financial assets - continued
(5) The disappearance of an active market for that financial asset because of financial
difficulties of the issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that
there is a measurable decrease in the estimated future cash flows from the group of
financial assets since the initial recognition of those assets, although the decrease cannot
yet be identified with the individual financial assets in the group. Such observable data
includes:
- Adverse changes in the payment status of borrower in the group of assets;
- Economic conditions in the country or region of the borrower which may lead to a
failure to pay the group of assets;
(7) Significant adverse changes in the technological, market, economic or legal environment
in which the issuer operates, indicating that the cost of the investment in the equity
instrument may not be recovered by the investor;
(8) A significant or prolonged decline in the fair value of an investment in an equity
instrument below its cost; namely, at the balance sheet date, if the initial cost of an equity
instrument investment is more than 50%(inclusive) in excess of the fair value of such
investment, or the period in which the initial cost of an equity instrument investment
exceeds the fair value of such investment is over 12 months(inclusive);
(9) Other objective evidence indicating there is an impairment of a financial asset.
- Impairment of financial assets measured at amortised cost
If financial assets carried at amortised cost are impaired, the carrying amounts of the financial
assets are reduced to the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset's original effective interest
rate. The amount of reduction is recognised as an impairment loss in profit or loss. If, subsequent
to the recognition of an impairment loss on financial assets carried at amortised cost, there is
objective evidence of a recovery in value of the financial assets which can be related objectively
to an event occurring after the impairment is recognised, the previously recognised impairment
loss is reversed. However, the reversal is made to the extent that the carrying amount of the
financial asset at the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
For a financial asset that is individually, the Group assesses the asset individually for impairment.
- Impairment of available for sale assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without
a quoted price in an active market) whose fair value cannot be reliably measured, or on a
derivative financial asset that is linked to and must be settled by delivery of such an unquoted
equity instrument, the carrying amount of the financial asset is reduced to the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial
asset. The amount of reduction is recognised as an impairment loss in profit or loss. The
impairment loss on such financial asset is not reversed once it is recognised.
- 24 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.4 Transfer of financial assets
The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the
contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has
been transferred and substantially all the risks and rewards of ownership of the financial asset is
transferred to the transferee; or (3) although the financial asset has been transferred, the Group
neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset but has not retained control of the financial asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the
difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of
the consideration received from the transfer and any cumulative gain or loss that has been
recognised in other comprehensive income, is recognised in profit or loss.
9.5 Classification, recognition and measurement of financial liabilities
Debt and equity instruments issued by the Group are classified into financial liabilities or equity
on the basis of the substance of the contractual arrangements and definitions of financial liability
and equity instrument.
On initial recognition, financial liabilities are classified into financial liabilities at fair value
through profit or loss and other financial liabilities. The financial liabilities in group are other
financial liabilities, including short-term borrowings, notes payable, account payables, other
payables, non-current liabilities due within one year and long-term payables etc.
9.5.1 Other financial liabilities
Other financial liabilities are subsequently measured at amortised cost using the effective interest
method, with gain or loss arising from derecognition or amortisation recognised in profit or loss.
9.6 Derecognition of financial liabilities
The Group derecognises a financial liability (or part of it) only when the underlying present
obligation (or part of it) is discharged.
When the Group derecognises a financial liability or a part of it, it recognises the difference
between the carrying amount of the financial liability (or part of the financial liability)
derecognised and the consideration paid (including any non-cash assets transferred or new
financial liabilities assumed) in profit or loss.
9.7 Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognised financial
assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial
asset and settle the financial liability simultaneously, a financial asset and a financial liability shall
be offset and the net amount is presented in the balance sheet. Except for the above circumstances,
financial assets and financial liabilities shall be presented separately in the balance sheet and shall
not be offset.
- 25 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.8 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities. The Group does not recognise any changes in the fair value of
equity instruments. The equity instruments transaction expenses deducted from equity.
The Group treats distribution to equity instrument holders as profit distributions. Shareholder
equity is not affected by share dividend distributed.
10. Accounts Receivable
The Group believes that the individual receivables are all significant, and the corresponding
receivables are individually tested for impairment, and individual recognition method is used to
confirm bad debt provision.
11. Inventories
11.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress and finished goods.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase,
costs of conversion and other expenditures incurred in bringing the inventories to their present
location and condition.
Agricultural products harvested are reported in accordance with the CAS 1 Inventories.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
11.3 Basis for determining net realisable value of inventories and provision methods for decline in
value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realisable value.
If the net realisable value is below the cost of inventories, a provision for decline in value of
inventories is made. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion, the estimated costs necessary to make the sale and
relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and
takes into consideration the purposes of holding inventories and effect of post balance sheet
events.
Provision for decline in value of other inventories is made based on the excess of cost of
inventory over its net realisable value based on categories of inventories.
After the provision for decline in value of inventories is made, if the circumstances that
previously caused inventories to be written down below cost no longer exist so that the net
realisable value of inventories is higher than their cost, the original provision for decline in value
is reversed and the reversal is included in profit or loss for the period.
- 26 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
11. Inventories - continued
11.4 Inventory count system
The perpetual inventory system is maintained for stock system.
11.5 Amortisation method for low cost and short-lived consumable items and packaging materials
Packaging materials and low cost and short-lived consumable items are amortised using the
immediate write-off method.
12. Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale category when the Group
recovers the book value through a sale (including an exchange of nonmonetary assets that has
commercial substance) rather than continuing use.
Non-current assets or disposal groups classified as held for sale are required to satisfy the
following conditions: (1) the asset or disposal group is available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such asset or disposal
group; (2) the sale is highly probable, i.e. the Group has made a resolution about selling plan and
obtained a confirmed purchase commitment and the sale is expected to be completed within one
year.
The Group measures the no-current assets or disposal groups classified as held for sale at the
lower of their carrying amount and fair value less costs to sell. Where the carrying amount is
higher than the net amount of fair value less costs to sell, carrying amount should be reduced to
the net amount of fair value less costs to sell, and such reduction is recognized in impairment loss
of assets and included in profit or loss for the period. Meanwhile, provision for impairment of
held-for-sale assets are made. When there is increase in the net amount of fair value of non-
current assets held for sale less costs to sell at the balance sheet date, the original deduction
should be reversed in impairment loss of assets recognized after the classification of held-for-sale
category, and the reverse amount is include in profit or loss for the period.
Non-current assets held for sale in non-current assets are not subject to depreciation or
amortization.
13. Long term equity investments
13.1 Basis for determining control, joint control and significant influence
Control is the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. Joint control is the contractually agreed sharing of control over an
economic activity, and exists only when the strategic financial and operating policy decisions
relating to the activity require the unanimous consent of the parties sharing control. Significant
influence is the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies. When determining whether an investing
enterprise is able to exercise control or significant influence over an investee, the effect of
potential voting rights of the investee (for example, warrants and convertible debts) held by the
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
investing enterprises or other parties that are currently exercisable or convertible shall be
considered.
- 28 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
13. Long term equity investments - continued
13.2 Determination of initial investment cost
For a long-term equity investment acquired not involving enterprises under common control, the
investment cost of the long-term equity investment is the cost of acquisition.
Audit fee, legal services, consulting fees and other related management costs in acquisition are
expensed in profits and losses when happened.
Other long-term equity investments acquired from other than acquisitions are recognised using
original cost.
13.3 Subsequent measurement and recognition of profit or loss
13.3.1 Long-term equity investment accounted for using the cost method
The Group accounts for long-term equity investment using the cost method. A subsidiary is an
investee that is controlled by the Group.
Under the cost method, a long-term equity investment is measured at initial investment cost.
Long-term equity investment is adjusted when capital is added or recollected. Investment income
is recognised in the period in accordance with the attributable share of cash dividends or profit
distributions declared by the investee.
13.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually
received and receivable and the carrying amount is recognised in profit or loss for the period.
14. Investment properties
Investment property is property held to earn rentals or for capital appreciation or both.
An investment property is measured initially at cost. Subsequent expenditures incurred for such
investment property are included in the cost of the investment property if it is probable that
economic benefits associated with an investment property will flow to the Group and the
subsequent expenditures can be measured reliably. Other subsequent expenditures are recognized
in profit or loss in the period in which they are incurred.
The Group uses the cost model for subsequent measurement of investment property, and adopts a
depreciation or amortization policy for the investment property which is consistent with that for
buildings or land use rights.
When an investment property is sold, transferred, retired or damaged, the Group recognizes the
amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss
for the period.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
15. Fixed assets
15.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes, and have useful lives of more than
one accounting year. A fixed asset is recognised only when it is probable that economic benefits
associated with the asset will flow to the Group and the cost of the asset can be measured reliably.
Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and
if it is probable that economic benefits associated with the asset will flow to the Group and the
subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the
replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in the
period in which they are incurred.
15.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month
subsequent to the one in which it is ready for intended use. The useful life, estimated net residual
value rate and annual depreciation rate of each category of fixed assets are as follows:
Estimated Estimated Annual
useful life residual rate depreciation rate
Buildings 20-40years 0-5% 2.4%-5.0%
Machinery 5-30years 0-5% 3.2%-20.0%
Motor Vehicles 4-12years 0-5% 7.9%-25.0%
Estimated net residual value assumes the situation where a fixed asset expire for its estimated
useful life and is in its expected final status. Estimated net residual value is the amount that the
Group can obtain from the disposal less expected disposal fees.
15.3 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from
its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired
or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and
related taxes are recognised in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the
depreciation method applied at least once at each financial year-end, and account for any change
as a change in an accounting estimate.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
16. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various
construction expenditures during the construction period, borrowing costs capitalised before it is
ready for intended use and other relevant costs. Construction in progress is not depreciated.
Construction in progress is transferred to a fixed asset when it is ready for intended use.
17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
asset are capitalised when expenditures for such asset and borrowing costs are incurred and
activities relating to the acquisition, construction or production of the asset that are necessary to
prepare the asset for its intended use or sale have commenced. Capitalisation of borrowing costs
ceases when the qualifying asset being acquired, constructed or produced becomes ready for its
intended use or sale. Other borrowing costs are recognised as an expense in the period in which
they are incurred.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be
capitalized is the actual interest expense incurred on that borrowing for the period less any bank
interest earned from depositing the borrowed funds before being used on the asset or any
investment income on the temporary investment of those funds.
18. Biological assets
The Group's biological assets are bearer biological assets.
18.1 Bearer biological assets
Bearer biological assets are biological assets, for example, held for the production of agricultural
produce, provision of services or rental, Bearer biological assets in the Group are vines. A bearer
biological asset is initially measured at cost. The cost of a bearer biological asset self-grown or
self-bred comprises those costs necessarily incurred and directly attributable to the asset before
the asset becomes available for its intended production and operating purposes, and any
borrowing cost meeting the capitalisation criteria.
The Group charge deprecation for productive biological assets which satisfy expected production,
and record the deprecation in balance sheet and income statement. The Group uses straight line
method to calculate the deprecation, and details as follows:
Estimated Estimated Annual
Category useful life residual rate depreciation rate
Vines 20 years - 5.0%
The Group evaluates the useful life and expected net salvage value by considering the normal
producing life of the bearer biological assets.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
18. Biological assets - continued
18.1 Bearer biological assets - continued
The Group reviews the useful life and estimated net residual value of bearer biological assets and
the depreciation method applied at least once at each financial year-end, and account for any
change as a change in an accounting estimate.
On the sale, identification of any shortages during stocktaking, death or damage of biological
asset, the proceeds on disposal net of the carrying amount and relevant taxes is recognised in
profit or loss for the current period.
19. Intangible assets
Intangible assets include land use rights, software and trademark, etc.
An intangible asset is measured initially at cost method. When an intangible asset with a finite
useful life is available for use, its original cost less net residual value and any accumulated
impairment losses is amortised over its estimated useful life using the straight-line method.
Intangible assets with indefinite useful lives are not amortized. The useful lives of the intangible
assets are as follows:
Annual
Item Useful life Net residual value amortization rate
Land use rights 40-50 years - 2.0%-2.5%
Software 5-10 years - 10.0%-20.0%
Trademark 10 years - 10.0%
Except for the above intangible assets with finite useful lives, the Group had also intangible assets
with infinite useful lives including the land use right and trademark. Land use rights with infinite
useful lives are permanent land use rights with permanent ownership held by the Group under the
relevant Chile and Australian laws arising from the Group’s acquisition of Via Indómita, S.A.,
Via Dos Andes, S.A., and Bodegas Santa Alicia SPA. (collectively referred to as the "Chile
Indomita Wine Group"), and the acquisition of Kilikanoon Estate Pty Ltd.( hereinafter referred to
as the "Australia Kilikanoon Estate"), therefore there was no amortization. The right to use
trademark refers to the trademark held by the Group arising from the acquisition of the Chile
Indomita Wine Group and the Australia Kilikanoon Estate with infinite useful lives. The valuation
of trademark was based on the trends in the market and competitive environment, product cycle,
and managing long-term development strategy. Those basis indicated the trademark will provide
net cash flows to the Group within an uncertain period. The useful life is indefinite as it was hard
to predict the period that the trademark would bring economic benefits to the Group.
For an intangible asset with a definite useful life, the Group reviews the useful life and
amortisation method at the end of the period, and makes adjustments when necessary.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
20. Impairment of long-term assets
The Group and the Company review the impairment status of long-term equity investments, fixed
assets, investment properties, construction in progress, bearer biological asset and intangible
assets with finite useful life at the end of each year. If there is any indication for impairment, the
Group estimates the recoverable amount of the asset.Intangible assets with indefinite useful life
and goodwill are tested for impairment annually, irrespective of whether there is any indication
that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the
recoverable amount of an individual asset, the recoverable amount of the asset group to which the
asset belongs will be estimated. The recoverable amount of an asset is the higher of its fair value
less costs of disposal and the present value of the future cash flows expected to be derived from
the asset.
If recoverable amount of assets is less than book value, the difference is recognised as impairment
provision and expensed in current period.
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment
testing, goodwill is considered together with the related assets group(s), i.e., goodwill is
reasonably allocated to the related assets group(s) or each of assets group(s) expected to benefit
from the synergies of the combination. An impairment loss is recognised if the recoverable
amount of the assets group or sets of assets groups (including goodwill) is less than its carrying
amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill
allocated to such assets group or sets of assets groups, and then to the other assets of the group
pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group.
The impairment is recognised in profit or loss for the period in which it is incurred and will not be
reversed in any subsequent period.
21. Long term prepaid expenses
Long-term prepaid expenses are amortized equally over the period of projected earnings. The
amortization period are as follows:
Amortization period
Land requisition fee 50 years
Land lease prepayment 50 years
Greening fee 5-20 years
Leasehold improvement 3-5years
Others 3 years
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
22. Employee benefits
22.1 Short-term employee benefits
In an accounting period in which an employee has rendered service to the Group, the Group
recognises the actual employee benefits for that service as a liability. The employee benefits of
the Group are either included in cost of related assets or charged to profit or loss in the period
when they are incurred. Non-monetary employee benefits are measured at fair value.
Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing
funds, labor union and employee education fees paid by the Group for employees, are recognised
as relevant liability in the period in which the employees provide service, in accordance with the
regulated recognition basis and percentage. The related expenditures are either included in cost of
related assets or charged to profit or loss in the period when they are incurred.
22.2 Accounting treatments of retired benefits
Retired benefits of the Group are all predetermined provision plan.
In the period in which the employees provide service, the Group recognise liability in accordance
with the amounts to be paid calculated according to the predetermined provision plan, and the
related expenditures are either included in cost of related assets or charged to profit or loss in the
period when they are incurred.
22.3 Accounting treatments of termination benefits
When providing termination benefits to employees, the Group recognise employee benefits
payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally
withdraw from the termination plan or the redundancy offer; the Group recognise relevant costs
and expenses related to the payment of termination benefits in restructuring.
23. Revenue
23.1 Revenue from sale of goods
Revenue from sale of goods is recognised when the Group has transferred to the buyer the
significant risks and rewards of ownership of the goods. The Group retains neither continuing
managerial involvement to the degree usually associated with ownership nor effective control
over the goods sold. The amount of revenue can be measured reliably and it is probable that the
associated economic benefits will flow to the Group. The associated costs incurred or to be
incurred can be measured reliably.
23.2 Revenue from rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably,
revenue associated with the transaction shall be recognized by reference the stage of completion
of the transaction at the reporting date. The outcome of a transaction can be estimated reliably.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
23. Revenue - continued
23.2 Revenue from rendering of services - continued
When the outcome of the transaction involving the rendering of services cannot be estimated
reliably, revenue is recognised only to the extent of the costs incurred that will be recoverable,
and the costs incurred are recognised as expenses for the period. When it is not probable that the
costs incurred will be recovered, revenue is not recognised.
24. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government
to the Group at no consideration. A government grant is recognised only when the Group can
comply with the conditions attaching to the grant and the Group will receive the grant.
Monetary government grants are measured by the amount received or receivable.
24.1 Government grant related to an asset
A government grant related to an asset is recognised as deferred income, and amortised to profit
or loss over the useful life of the related asset on a straight line basis.
24.2 Government grant related to income
For a government grant related to income, if the grant is a compensation for related expenses or
losses to be incurred in subsequent periods, the grant is recognised as deferred income, and
recognised in profit or loss over the periods in which the related costs are recognised. If the grant
is a compensation for related expenses or losses already incurred, the grant is recognised
immediately in profit or loss for the period.
A government grant related to the Group's daily activities is recognized in other income based on
the nature of economic activities; a government grant is not related to the Group's daily activities
is recognized in non-operating income.
The Company's government loans with below-market rate of interest are directly paid to the
Company, and the related low rate interest will write off related borrowing costs. The government
loans with below-market rate of interest obtained by other subsidiaries of the Group are
government loans, which is provided by local bureau of finance through bank with below-market
rate of interest. The actual amount of the loan received by the Group recognized as borrowings,
and the related borrowing costs are calculated according to the principal of the loan and the
below-market rate.
25. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
25.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods
are measured at the amount expected to be paid (or recovered) according to the requirements of
tax laws.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
25. Deferred tax assets/deferred tax liabilities - continued
25.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their
tax base, or between the nil carrying amount of those items that are not recognised as assets or
liabilities and their tax base that can be determined according to tax laws, deferred tax assets and
liabilities are recognised using the balance sheet liability method.
Deferred tax is generally recognised for all temporary differences. Deferred tax assets for
deductible temporary differences are recognised to the extent that it is probable that taxable
profits will be available against which the deductible temporary differences can be utilised.
However, for temporary differences associated with the initial recognition of goodwill and the
initial recognition of an asset or liability arising from a transaction (not a business combination)
that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of
transaction, no deferred tax asset or liability is recognised.
For deductible losses and tax credits that can be carried forward, deferred tax assets are
recognised to the extent that it is probable that future taxable profits will be available against
which the deductible losses and tax credits can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the Group
is able to control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be taxable profits against which to utilise
the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates,
according to tax laws, that are expected to apply in the period in which the asset is realised or the
liability is settled.
Current and deferred tax expenses or income are recognised in profit or loss for the period, except
when they arise from transactions or events that are directly recognised in other comprehensive
income or in shareholders' equity, in which case they are recognised in other comprehensive
income or in shareholders' equity; and when they arise from business combinations, in which case
they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it
is no longer probable that sufficient taxable profits will be available in the future to allow the
benefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it becomes
probable that sufficient taxable profits will be available.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
25. Deferred tax assets/deferred tax liabilities - continued
25.3 Net off of income taxes
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis
or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax
liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and
deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities which intend either to settle
current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously,
in each future period in which significant amounts of deferred tax assets or liabilities are expected to
be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
26. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
26.1. Operating lease accounting methods
26.1.1 The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant
lease, and are either included in the cost of related asset or charged to profit or loss for the period.
Initial direct costs incurred are charged to profit or loss for the period.
26.1.2 The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the
term of the relevant lease. Initial direct costs with more than an insignificant amount are
capitalized when incurred, and are recognized in profit or loss on the same basis as rental income
over the lease term. Other initial direct costs with an insignificant amount are charged to profit or
loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the
period in which they actually arise.
27. Changes in accounting policies
The Group has adopted the Notice of the Revised Format of Financial Statements for General
Business Enterprise in 2018 (Cai Kuai (2018) No. 15, hereinafter referred to as the "Cai Kuai
No.15 Document") released by the MoF on 15 June 2018 since the preparation of the financial
statements for 2018.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
27. Changes in accounting policies - continued
Cai Kuai No.15 Document revised the presentation items on the balance sheet and the income
statement, which are as follows: add the line items of "notes and accounts receivable", "notes and
accounts payable", "research and development expenses"; revise the presentation of "other
payables", "fixed assets", "construction in progress", "other payables" , "long-term payables" and
"administrative expenses"; less the line items of "notes receivable", "accounts receivable",
"dividends receivable" and "interest receivable", "disposal of fixed assets", "materials for
construction of fixed assets", "notes payable", "accounts payable", "dividends payable", and
"special payables", add the line items of "including: interest expenses" and "interest income"
under the item of "financial expenses"; and adjust the presentation location of certain items in the
income statements.
For changes of the presentation items stated above, the Group has applied retrospectively for
accounting treatments and adjusted the comparable data of the prior year for comparable periods.
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES
In the application of accounting policies as set out in Note III, the Group is required to make
judgments, estimates and assumptions about the carrying amounts of items in the financial
statements that cannot be measured accurately, due to the internal uncertainties of the operating
activities. These judgments, estimates and assumptions are based on historical experience of the
Group's management as well as other factors that are considered to be relevant. Actual results
may differ from these estimates.
The Group periodically review the judgments, estimates and assumptions above on a going
concern basis. For those changes in accounting policies that only affect current financial
statements, the influences are recognized in current period. For those changes in accounting
policies that affect both current and future financial statements, the influences are recognized in
both current and prospective periods.
Key assumptions and uncertainties in accounting estimates
The following are the key assumptions and uncertainties in accounting estimates at the end of the
reporting period, that may have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities in the future period.
Deferred tax assets recognized for deductible losses
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilized. Significant management
judgment is required to determine the amount of deferred tax assets that can be recognized, based
upon the likely timing and level of future taxable profits together with future tax planning
strategies.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates - continued
Depreciation of fixed assets
As set out in Note III-15, the depreciation is calculated on the straight line basis to write-off the
cost of each item of fixed assets to its residual value over its estimated useful life. The Group's
management determines the estimated useful lives for its fixed assets. This estimate is based on
the historical experience of the actual useful lives of fixed assets of similar nature and functions.
If the previous estimates have significant changes, and depreciation expenses will be adjusted in
the future periods.
Impairment of long-term assets
The Group assesses whether the recoverable amount is lower than the book value. If there are any
indicators that the book value of non-current assets cannot be fully recoverable, impairment losses
should be recorded.
The recoverable amount is the higher of the fair value of a long-term asset less costs of disposal
and the present value of the future cash flows expected to be derived from the asset. As it is
difficult for the Group to obtain the quoted market price of the long-term assets concerned, the fair
value of the assets cannot be reliably estimated. In assessing the present value of future cash flows,
the management of the Group is required to make significant judgements on the assumptions
including sales growth rate, future selling price, production cost, operating expenses and discount
rate, which are of high uncertainty.
Yantai Changyu Pioneer Wine Company Limited Research and Development Co., Ltd. ("R&D
Centre"), subsidiary of the Company started production at the end of 2017 being as a new main
production base of the Company. In 2018, the production of R&D Centre accounts for more than
60% of the Group’s production. R&D Centre’s total investment budget in its long-term assets
approximates RMB 4.5 billion, which is a large-scale investment. As at 31 December 2018, the
book values of relevant long-term assets including fixed assets, construction in progress and
intangible amounted to RMB 3.5 billion, accounting for 26.6% of the total assets in the
consolidated financial statements, which exerts significant influence on the consolidated financial
statements. As there is little space for the development of the domestic wine market, the
management of the Company faces great operating pressures to apply the off-take potential of the
new production base in an efficient way. In addition, there are certain risks of impairment for such
long-term assets. The management performs the impairment test by determining if the recoverable
amount is less than the book value of long-term assets and determines the recoverable amount
based on the present value of expected future cash flows. In the assessment of the future cash
flows, the management is required to, based on a reasonable and supportable basis, assess the cash
flows for the future 5 years (“projecting period”) and cash flows after the projecting period
(“subsequent period”) and make significant judgements and accounting estimates in the discount
rate, sales growth rate, future selling price, production cost, operating expenses and other key
assumptions.
According to the result of the impairment test, the management believes that as at 31 December
2018, the above long-term assets of the Group were not impaired. Therefore, no impairment
provision is made.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates - continued
Inventory provision based on net realizable value
The inventories are measured on the lower of carrying value and net realizable value, and
provision should be made for impairment on obsolete and slow moving inventories. The group
will reassess whether the net realizable value is lower than the carrying cost at the end of each
year.
The determination of the fair value of identifiable assets and liabilities associated with business
combination.
For the cost of business combination, the Group allocates the purchase price based on fair value of
relatively identifiable assets and liabilities. When the fair value of relatively identifiable assets
and liabilities are evaluated by the present value of its future cash flows, The management need
estimate the growth rate of sales based on future market supply and demand to predict cash flows,
and considered the proper discount rate for calculating, management need use major accounting
estimates and judgments in the progress.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
V. TAXES
1. The main taxes and tax rate are as follows:
(1) China
Value added tax VAT is levied at 6%, 10%, 11%, 16% and 17% on the invoiced
amount after deduction of eligible input VAT.
Consumption tax The consumption tax of the group is levied on gross revenue
at rates ranging from 10% to 20%.
City development tax Levied at 7% of total business tax payment.
Corporate income tax The Group is subject to a corporate income tax rate of 25%
on its taxable income.
(2) France
Value added tax VAT is levied at 20% on the invoiced amount after deduction
of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of 33.3%
on its taxable income.
(3) Spain
Value added tax VAT is levied at 21% on the invoiced amount after deduction
of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of 28%
on its taxable income.
(4) Chile
Value added tax VAT is levied at 19% on the invoiced amount after deduction
of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of 27%
on its taxable income.
(5) Australia
Value added tax VAT is levied at 10% on the invoiced amount after deduction
of eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of 30%
on its taxable income.
Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2018 and 2017
are all stated as above.
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YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
V. TAXES - continued
2. Tax incentives and relative permit
Ningxia Changyu Grape Growing Co., Ltd.("Ningxia Growing"), a subsidiary of the Group,
whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region.
According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income
Tax Measures for Implementation, Ningxia Growing enjoys an exemption of corporate income
tax.
Yantai Changyu Grape Growing Co., Ltd.(" Grape Growing "), a branch of the Company, whose
principal activity is grape growing is incorporated in Zhifu District, Yantai City, Shandong
Province. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate
Income Tax Measures for Implementation, Grape Growing enjoys an exemption of corporate
income tax.
Xinjiang Tianzhu Co., Ltd ("Xinjiang Tianzhu"), a subsidiary of the Company, is an enterprise of
wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In
accordance with the Notice on Tax Policy Issues concerning Further Implementation of the
Western China Development Strategy (Cai Shui [2011] No.58), Xinjiang Tianzhu is qualified to
enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential
rate of 15% for the period from 2015 to 2020.
Xinjiang Babao Baron Chateau Co., Ltd. ("Shihezi Chateau"), a subsidiary of the Company, is an
enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous.
In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the
Western China Development Strategy (Cai Shui [2011] No.58), Shihezi Chateau is qualified to
enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential
rate of 15% for the period from 2015 to 2020.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank
31/12/2018 31/12/2017
RMB RMB
Cash 114,335 136,973
Bank balance 1,382,399,749 1,278,397,711
Other currency fund 93,186,393
____________ 123,987,825
____________
Total 1,475,700,477
____________ 1,402,522,509
____________
At 31 December 2018, the balance of restricted cash of the Group is as follows:
31/12/2018 31/12/2017
RMB RMB
Home maintenance funds 2,611,350
____________ 2,645,410
____________
- 43 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Group's other monetary assets is as follows:
31/12/2018 31/12/2017
RMB RMB
Research and Development Co., Ltd ("R&D Centre")
pledged deposit for long-term payables 46,100,000 61,700,000
Deposit for letter of credit 44,540,850 57,946,190
Alipay account balance 2,483,816 4,317,635
Deposit for Company cards 51,727 14,000
Deposit for ICBC platform 10,000
____________ 10,000
____________
93,186,393
____________ 123,987,825
____________
As at 31 December 2018, the Group's term deposits with original maturity of more than three
months when acquired is RMB 173,042,400 with interest rate 1.50%-3.80% (31 December
2017:RMB 95,000,000).
2. Notes and accounts receivable
2.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Notes receivable 288,667,988 244,796,818
Accounts receivable 242,153,083
____________ 263,796,355
____________
Total 530,821,071
____________ 508,593,173
____________
2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017
RMB RMB
Bank acceptances 288,667,988
____________ 244,796,818
____________
- 44 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.2 Notes receivable- continued
(2) Notes receivable which have been pledged as security at the end of the period
As at 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil).
(3) Notes receivable endorsed but are not yet due at the balance sheet date
31/12/2018 31/12/2017
RMB RMB
Bank acceptances 182,829,674
____________ 188,855,843
____________
As at 31 December 2018, notes endorsed by the Group to other parties which are not yet due at
the end of the period is RMB 182,829,674 (31 December 2017: RMB 188,855,843). The notes are
used for payment to suppliers and constructions. The Group believes that due to good reputation
of bank, the risk of notes not accepting by bank on maturity is very low, therefore derecognise the
note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the
relevant laws and regulations of China, the Group would undertake limited liability for the notes.
(4) Notes receivable reclassified to accounts receivable due to the drawers' inability to settle the note
on maturity
As at 31 December 2018, no notes receivable were reclassified as accounts receivable due to the
default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Ratio Amount Amount Proportion Amount Ratio Amount
RMB % RMB % RMB RMB % RMB % RMB
Accounts receivable for which
bad debt provision has been
assessed individually 242,153,083 100.0
______ ___ ____- 242,153,083 263,796,355
____- ______ ______ ___ 100.0
____- 263,796,355
____- ______
The normal credit term is one month, which can be extended to one year for certain customers.
The accounts receivable are interest-free.
As at 31 December 2018, ownership restricted accounts receivable is RMB 52,015,032 (31
December 2017: RMB 46,337,062), referring to Note VI-45.
- 45 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.3 Accounts receivable - continued
(1) Disclosure of accounts receivable by categories - continued
The aging analysis is as follows:
31/12/2018 31/12/2017
RMB RMB
Within 1 year 240,312,773 263,112,714
1 to 2 years 1,566,622 683,641
2 to 3 years 273,688
____________ -
____________
242,153,083
____________ 263,796,355
____________
(2) Recognitions, collections and reversals during the current year:
As at 31 December 2018, there was no bad debt provision for accounts receivable (31 December
2017: Nil). There was no bad debt provision made, reversed or written-off by management in
2018 (2017: Nil).
(3) Top five entities with the largest balances of accounts receivable:
Relationship Percentage of
Name with the Group Amount Aging total receivables
RMB %
Sainsbury's supermarkets Ltd Third party 17,428,889 Within 1 year 7.2
Nongongshang Supermarket
(Group) Co., Ltd Third party 10,928,458 Within 1 year 4.5
SLIGRO B.V. Third party 6,732,175 Within 1 year 2.8
Viedosy Bodegas Las Pircas Third party 6,430,387 Within 1 year 2.7
Suguo Supermarket Co., Ltd. Third party 6,415,505
________ Within 1 year 2.6
___
47,935,414
________ 19.8
___
3. Prepayments
(1) The aging analysis is as follows:
31/12/2018 31/12/2017
Amount Ratio Amount Ratio
RMB % RMB %
Within 1 year 4,219,949
_________ 100.0
_____ 2,417,931
_________ 100.0
_____
- 46 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Prepayments - continued
(2) As at 31 December 2018, the top five of prepayments were as follows:
Reason Percentage of
Relationship for being total advances
with the Group Amount Aging outstanding to suppliers
RMB %
Shanghai Benchu
Trade&Development Co., Ltd. Third party 345,600 Within 1 year Goods not received 8.2
Carrington Estate T/A Karikari Esta Third party 340,498 Within 1 year Goods not received 8.1
DONELLI VINI S.P.A. Third party 304,204 Within 1 year Goods not received 7.2
Yantai Economic and Technological
Development Zone Thermal Co., Ltd Third party 250,000 Within 1 year Prepaid heating fees 5.9
Yantai Cihang International Freight
Agent Co., Ltd. Third party 186,392
_______ Within 1 year Prepaid agency fees 4.4
___
1,426,694
_______ 33.8
___
4. Other receivables
4.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Interest receivable 1,332,681 240,968
Other receivables 21,303,405
___________ 18,737,454
___________
Total 22,636,086
___________ 18,978,422
___________
(1) Categories of interest receivable
31/12/2018 31/12/2017
RMB RMB
Interest receivable on bank deposits 1,332,681
_________ 240,968
________
(2) Overdue interest
As at 31 December 2018, there was no overdue interest receivable (31 December 2017: Nil).
- 47 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables
(1) Disclosure of other receivables by categories
31/12/2018 31/12/2017
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Ratio Amount Amount Proportion Amount Ratio Amount
RMB % RMB % RMB RMB % RMB % RMB
Other receivable for which
bad debt provision has been
assessed individually 21,303,405 100.0
______ ___ _____- ___- ______ ______ ___ _____-
21,303,405 18,737,454 100.0 18,737,454
___- ______
The aging analysis is as follows：
31/12/2018 31/12/2017
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Amount Amount Proportion Amount Amount
RMB % RMB RMB RMB % RMB RMB
Within 1 year 11,293,908 53.0 - 11,293,908 13,214,301 70.5 - 13,214,301
1 to 2 years 6,693,702 31.5 - 6,693,702 1,937,961 10.3 - 1,937,961
2 to 3 years 1,922,998 9.0 - 1,922,998 2,273,591 12.2 - 2,273,591
Over 3 years 1,392,797
_______ ____6.5 ______- 1,392,797
_______ 1,311,601
_______ ____7.0 ______- 1,311,601
_______
21,303,405 100.0
_______ ____ ______- 21,303,405
_______ 18,737,454
_______ 100.0
____ ______- _______
18,737,454
(2) Accrual, reversal and written-off during the current year
As at 31 December 2018, no bad debt provision was made for other receivables (2017: RMB
354,805).
(3) Other receivables written off in the current year
As at 31 December 2018, the Group has no other receivables written off (31 December 2017:
RMB 354,805).
(4) Disclosure of other receivables by categories
31/12/2018 31/12/2017
RMB RMB
Deposit 10,453,624 10,075,901
Petty cash receivable 2,274,038 2,215,146
Investment fund - 2,050,000
Refund of consumption tax, real estate tax 6,273,882 2,451,188
Others 2,301,861
____________ 1,945,219
____________
21,303,405
____________ 18,737,454
____________
- 48 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables- continued
(5) Five entities with the largest balances of other receivables
As at 31 December 2018, the top five of other receivables are as follows:
Percentage of total Bad debt
Nature Amount Aging other receivables Closing balance
RMB % RMB
Yantai Development Zone
Construction Industry Association Construction deposit 7,709,477 Within 3 years 36.1 -
Zhejiang Tmall Technology Co., Ltd. Shop deposits 867,426 Within 1 year 4.1 -
Yantai Shenma Packaging Co., Ltd.
("Shenma Packaging") Lease receivables 813,440 Within 1 year 3.8 -
Yantai Development Zone
Power Company Deposit 140,000 Within 3 years 0.7 -
Yantai Development Zone
Heat Company Deposit 130,000
_________ Within 3 years 0.6
____ -
_________
9,660,343
_________ 45.3
____ -
_________
5. Inventories
(1) Disclosure of inventories by categories
31/12/2018 31/12/2017
Net carrying Net carrying
Balance Provision amount Balance Provision amount
RMB RMB RMB RMB RMB RMB
Raw material 67,267,035 - 67,267,035 66,881,090 - 66,881,090
Work in progress 1,787,819,923 - 1,787,819,923 1,568,230,851 - 1,568,230,851
Finished goods 894,187,725
_________ (24,683,226)
________ 869,504,499
_________ 864,097,497
_________ (25,595,392)
________ 838,502,105
_________
2,749,274,683 (24,683,226) 2,724,591,457
_________ ________ _________ 2,499,209,438 (25,595,392) 2,473,614,046
_________ ________ _________
(2) Inventory provision
Opening balance Recognized Reversal Written off Closing balance
RMB RMB RMB RMB RMB
Provision for decline in
value of inventories 25,595,392
_________ 749,134
________ (1,661,300)
________ -
________ 24,683,226
_________
6. Other current assets
31/12/2018 31/12/2017
RMB RMB
Prepaid taxes 24,077,323 22,911,298
Pending deduct VAT on purchase 233,087,707 206,529,504
Prepaid rent 1,511,366
___________ 1,381,957
____________
258,676,396
___________ 230,822,759
____________
- 49 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Available-for-sale financial assets
(1) Available-for-sale financial assets
31/12/2018 31/12/2017
Amount Impairment Carrying amount Amount Impairment Carrying amount
RMB RMB RMB RMB RMB RMB
Available-for-sale
equity instruments
measured at cost 467,251
_______ -
_______ 467,251
______ 467,251
_______ -
_______ 467,251
______
(2) Available-for-sale financial assets measured at cost
Carrying amount Provision for impairment losses Proportion of Cash
voting power dividend
in the for the
Investee Opening Increase Decrease Closing Opening Increase Decrease Closing investee period
RMB RMB RMB RMB RMB RMB RMB RMB (%) RMB
Other 467,251
____ ____- ____- 467,251
____ ____- ____- ____- ____- ____ ____
The Group holding equity ratios of investment companies are less than 1%. Investment companies
are all unlisted companies, and their fair value cannot be measured reliably, therefore, the Group
uses cost method to measure these available-for-sale financial assets.
8. Investment properties
Investment properties measured by cost method
Buildings
RMB
Total original carrying amount
31/12/2017 38,347,283
Increase
Transfer from fixed assets 32,606,762
____________
31/12/2018 70,954,045
____________
Total accumulated depreciation
31/12/2017 19,879,294
Increase
Transfer from fixed assets 17,644,360
Additions 1,857,902
____________
31/12/2018 39,381,556
____________
Total carrying amount
31/12/2018 31,572,489
____________
31/12/2017 18,467,989
____________
- 50 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets
(1) Details of fixed assets
Buildings Machinery Motor Vehicles Total
RMB RMB RMB RMB
Total original carrying amount
31/12/2017 4,508,868,684 2,247,350,293 28,689,415 6,784,908,392
Increase
Purchase 4,490,675 235,607,780 923,222 241,021,677
Transfer from CIP 252,035,224 202,251,634 1,708,803 455,995,661
Acquisition increase (VII-1) 33,048,307 15,981,692 - 49,029,999
Decrease
Disposal (4,409,703) (35,392,585) (4,740,801) (44,543,089)
Transfer to Investment
properties (VI-8) (32,606,762)
__________ __________- ________- (32,606,762)
__________
31/12/2018 4,761,426,425
__________ 2,665,798,814
__________ 26,580,639
________ 7,453,805,878
__________
Total accumulated depreciation
31/12/2017 512,643,486 922,944,520 20,236,417 1,455,824,423
Increase
Additions 126,510,348 168,695,471 2,632,539 297,838,358
Decrease
Disposal (242,705) (29,575,754) (2,125,751) (31,944,210)
Transfer to Investment
properties (VI-8) (17,644,360)
__________ __________- ________- (17,644,360)
__________
31/12/2018 621,266,769
__________ 1,062,064,237
__________ 20,743,205
________ 1,704,074,211
__________
Total carrying amount
31/12/2018 4,140,159,656
__________ 1,603,734,577
__________ 5,837,434
________ 5,749,731,667
__________
31/12/2017 3,996,225,198
__________ 1,324,405,773
__________ 8,452,998
________ 5,329,083,969
__________
As at 31 December 2018, fixed assets with ownership restricted are RMB 412,006,421 (31
December 2017: RMB 145,009,923). Please refer to Note VI-45 in detail.
As at 31 December 2018, the Group has net fixed assets that are temporarily idle of RMB
59,718,155(31 December 2017: Nil). The Group has no fixed assets acquired under finance leases
or fixed assets classified as held for sale (31 December 2017: RMB 2,000,197).
(2) Fixed assets through operating lease
Amount
RMB
Machinery 134,111
_______
- 51 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, buildings without property certificate are as follows:
Reasons why certificates
Amount of title have not been obtained
RMB
Research and Development Co, Ltd
Industry Production Centre 1,755,472,791 Processing
Changan Chateau Dormitory building, main building 284,890,228 Processing
Beijing Chateau European town, main, service building 187,565,493 Processing
Ding Luo Te Chateau main building 83,218,432 Processing
Xinjiang Tianzhu fermentations and storage warehouse 17,768,840 Processing
Ice Wine Chateau office building and packing workshop 9,198,373 Processing
Jingyang factory fermentation building 4,171,918 Processing
Fermentation centre office, experiment building and workshop 3,653,494 Processing
Kylin Packaging finished goods warehouse and workshop 2,396,850 Processing
Sales Company office buildings 1,123,984
__________ Processing
2,349,460,403
__________
The buildings without property certificate above have no significant influence on the group's
management.
10. Construction in progress
(1) Construction in progress:
31/12/2018 31/12/2017
RMB RMB
R&D Centre ("Changyu Wine integrational
Construction") Project 608,553,617 883,731,540
Changan Chateau Construction Project 39,793,893 53,290,036
Ningxia Chateau Construction Project 47,163,863 35,711,269
Shihezi Chateau Construction Project 23,664,124 25,463,724
Sales Company construction project 17,985,882 11,355,685
Other companies construction Project 22,135,212
____________ 16,589,315
____________
759,296,591
____________ 1,026,141,569
____________
- 52 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Construction in progress- continued
(2) Changes in significant construction in progress:
Transfer to
Lone-term Total accumulated Capitalizing Interest
Transfer to prepaid Capitalizing interest capitalization
Budget 31/12/2017 Addition PPE expense 31/12/2018 Status interest for this period rate Financed by
RMB RMB RMB RMB RMB RMB RMB RMB %
Loans from
financial
Changyu Wine integrational institutions
Construction" 4,505,780,000 883,731,540 118,142,779 (372,914,273) (20,406,429) 608,553,617 74.3 14,271,837 5,843,872 1.2%及 4.3% and Self-raised
Changan Chateau Construction - - - -
Project 620,740,000 53,290,036 12,149,197 (25,645,340) 39,793,893 108.7 Self-raised
Shihezi Chateau Construction - - - -
Project 780,000,000 25,463,724 37,629,835 (39,429,435) 23,664,124 96.3 Self-raised
Ningxia Chateau Construction - - - -
Project 414,150,000 35,711,269 14,307,265 (2,854,671) 47,163,863 102.1 Self-raised
Sales Company construction project 161,350,000 11,355,685 6,893,191 (262,994) - 17,985,882 97.7 - - - Self-raised
The interest capitalized in construction in progress is RMB 5,843,872 in 2018(2017: RMB 6,138,242).
- 49 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Bearer biological assets
Bearer biological assets are Vines, which measured in cost method
Immature Mature
biological assets biological assets Total
RMB RMB RMB
Total original carrying amount
31/12/2017 12,175,000 217,537,353 229,712,353
Increase
Cultivated increase 19,371,297 - 19,371,297
Transfer to mature assets (17,708,689)
__________ 17,708,689
___________ -
___________
31/12/2018 13,837,608
__________ 235,246,042
___________ 249,083,650
___________
Total accumulated depreciation
31/12/2017 - 27,782,465 27,782,465
Increase
Additions -
__________ 12,034,812
___________ 12,034,812
___________
31/12/2018 -
__________ 39,817,277
___________ 39,817,277
___________
Total net carrying amount
31/12/2018 13,837,608
__________ 195,428,765
___________ 209,266,373
___________
31/12/2017 12,175,000
__________ 189,754,888
___________ 201,929,888
___________
As at 31 December 2018, there is no biological asset with ownership restricted. (31 December
2017:Nil)
As at 31 December 2018, there is no indication that biological assets may be impaired, and no
provision is made. (31 December 2017:Nil)
- 48 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets
(1) Intangible assets
Land use rights Software use rights Trademark Total
RMB RMB RMB RMB
Total original carrying amount
31/12/2017 521,731,139 73,666,754 159,702,508 755,100,401
Increase
Purchase 1,596,780 922,809 105,827 2,625,416
Acquisition increase(VII-1) 4,924,992
__________ 1,232,494
__________ 10,260,400
_________ 16,417,886
__________
31/12/2018 528,252,911
__________ 75,822,057
__________ 170,068,735
_________ 774,143,703
__________
Total accumulated depreciation
31/12/2017 67,547,772 21,516,741 10,586,991 99,651,504
Increase
Additions 10,523,138
__________ 5,206,074
__________ 3,289,528
_________ 19,018,740
__________
31/12/2018 78,070,910
__________ 26,722,815
__________ 13,876,519
_________ 118,670,244
__________
Total carrying amount
31/12/2018 450,182,001
__________ 49,099,242
__________ 156,192,216
_________ 655,473,459
__________
31/12/2017 454,183,367
__________ 52,150,013
__________ 149,115,517
_________ 655,448,897
__________
(2) Land use right's location and years are as follows:
Item 31/12/2018 31/12/2017
RMB RMB
In the PRC( within 50 years) 419,300,592 428,226,950
Out of the PRC (more than 50 years) 30,881,409
___________ 25,956,417
____________
450,182,001 454,183,367
___________ ____________
As at 31 December 2018, the Group has land use right with infinite useful lives of RMB
30,881,409( 31 December 2017: RMB 25,956,417), representing the freehold land held by Chile
Indomita Wine Group and Australia Kilikanoon Estate under relevant Chile and Australia laws,
on which the amortization is not required.
As at 31 December 2018, the Group has trademark with infinite useful lives of RMB 154,150,933
(31 December 2017: 143,890,533), which is held by Chile Indomita Wine Group and Australia
Kilikanoon Estate. The recoverable amount of the trademark is determined according to the
present value of the expected future cash flows generated from the asset group to which the single
assets of trademark right belongs. The management prepares the cash flow projection for future 5
years (the "projecting period") based on the latest financial budget assumption, and estimates the
cash flows after the future 5 years (the "subsequent period"). The pretax discount rates used in the
cash flow projections are 12.3% and 14.4%, respectively. A key assumption in the estimate of
future cash flows is the revenue growth rate in the projecting period. Such revenue growth rate is
determined based on the industry and the expected growth rate of Chile Indomita Wine Group and
Australia Kilikanoon Estate. The revenue growth rates in the subsequent period are 3.0% and
2.5%, respectively.
- 49 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets - continued
(2) Land use right's location and years are as follows:- continued
The Group recognizes the trademark with infinite useful lives as intangible assets, the impairment
assessment of which is made at the end of each reporting year. The management believes that any
reasonable change of the above assumptions will not result in the total book value of the asset
group to which the single assets of trademark right belongs exceeding its recoverable amount.
According to the result of impairment assessment, by the end of 31 December 2018, the
management believes there is no impairment loss on those trademark with infinite useful lives of
the Group.
As at 31 December 2018, the intangible asset with restricted ownership is RMB 218,070,414
(December 31, 2017:RMB 164,051,996), Please refer to Note VI-45 in detail.
13. Goodwill
Investee 31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Etablissements Roullet Fransac
("Fransac Sales") 13,112,525 - - 13,112,525
Dicot Partners, S.L
(" Dicot") 92,391,901 - - 92,391,901
Societe Civile Argricole Du Chateau
De Mirefleurs ("Mirefleurs") 15,761,440 - - 15,761,440
Indomita Wine 6,870,115 - - 6,870,115
Australia Kilikanoon Estate _________ - 37,063,130
________ -
______ 37,063,130
_________
Total 128,135,981
_________ 37,063,130
________ -
______ 165,199,111
_________
The Group acquired Fransac Sales, Dicot and Mirefleurs and Chile Indomita Wine Group in
December 2013, September 2015 January 2016 and July 2017 respectively, resulting in respective
goodwill amounting to RMB 13,112,525, RMB 92,391,901, RMB 15,761,440 and RMB
6,870,115. The Group acquired Australia Kilikanoon Estate in January 2018, resulting goodwill
amounting to RMB 37,063,130, which have been allocated to corresponding asset groups for
impairment testing.
The recoverable amount of the group of assets is determined by the present value of its future cash
flows. Future cash flow projections are made based on the recently financial budgets for the future
5 years period (projecting period) and presume that cash flows after the projecting period
(subsequent period). The pretax discount rate used in calculating the recoverable amounts of
Fransac Sales, Dicot Mirefleurs, Indomita Wine and Australia Kilikanoon Estate are 16.6%,
12.4%, 16.6 %, 12.3% and 13.1%(2017: 15.4%, 11.8%, 15.4%, 13.2% and N/A) respectively. One
key assumption in projecting future cash flows is the growth rate of sales in projecting period,
which is computed based on the expected growth rate of the industry and each group of assets.
Growth rate of sales in subsequent period of Fransac Sales, Dicot, Mirefleurs, Indomita Wine and
Australia Kilikanoon Estate is 2.0%, 2.0%, 2.0%, 3.0%,2.5% (2017: 2%, 2%, 2%, 3% and
N/A)respectively. Management of the Group believes that any reasonable changes in the above
assumptions will not cause book values of these subsidiaries exceeds their recoverable amounts.
- 50 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Goodwill- continued
According to the assessment, the Group believes that no impairment provision need to be made
for goodwill in the reporting period.
14. Long-term prepaid expenses
31/12/2017 Increase Amortization 31/12/2018
RMB RMB RMB RMB
Land lease prepayments 56,365,385 - (2,147,622) 54,217,763
Land requisition fee 43,976,036 - (548,297) 43,427,739
Greening fee 125,628,334 24,511,623 (8,915,485) 141,224,472
Leasehold improvement 873,263 3,306 (100,922) 775,647
Others 3,166,213
__________ 2,198,373
_________ (369,791)
_________ 4,994,795
__________
230,009,231
__________ 26,713,302
_________ (12,082,117)
_________ 244,640,416
__________
Note: The greening fee transferred from CIP to long-term prepaid expenses amounted to RMB
20,406,429, refer to Note VI-10 for details.
15. Deferred tax assets/liabilities
Deferred tax assets and deferred tax liabilities are not related to income tax of the same tax
authorities of the same tax subjects, thus not presented with the net amount after netting.
(1) Deferred tax assets:
31/12/2018 31/12/2017
Temporary Deferred tax Temporary Deferred tax
differences assets differences assets
RMB RMB RMB RMB
Unrealized profit from intra
602,476,583 150,619,145 618,591,681 154,647,920
- company transactions
Unpaid bonus 141,808,257 35,485,814 94,462,722 23,671,611
Retirement benefit 26,186,243 6,546,561 27,980,857 6,995,214
Asset impairment provision 24,683,226 6,170,807 25,595,392 6,398,848
Deductible losses 262,937,999 67,566,387 345,639,059 88,584,337
Deferred income 86,227,293 18,868,963 109,797,054 24,285,203
Assets impairment loss 661,415 178,582 684,622 184,848
Accrued rebate - - 13,413,655 3,353,415
1,144,981,016 285,436,259 1,236,165,042 308,121,396
- 51 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Deferred tax assets/liabilities - continued
(2) Deferred tax liabilities
31/12/2018 31/12/2017
Item Taxable temporary Deferred Taxable temporary Deferred
difference tax liability difference tax liability
RMB RMB RMB RMB
Revaluation surplus in
business combination not
under common control 81,338,130 22,010,647 89,316,823 24,264,203
(3) Deferred tax assets and liabilities not recognized
31/12/2018 31/12/2017
RMB RMB
Deductible losses 171,430,831
___________ 150,320,039
____________
(4) Deductible losses not recognized as deferred tax assets will expire in:
31/12/2018 31/12/2017
RMB RMB
2018 - -
2019 7,311,273 7,311,273
2020 45,960,766 45,960,766
2021 82,685,213 82,685,213
2022 14,362,787 14,362,787
2023 21,110,792
____________ -
____________
171,430,831
____________ 150,320,039
____________
16. Short-term borrowings
31/12/2018 31/12/2017
RMB RMB
Credit loans 605,202,708 648,494,624
Mortgaged loans 79,467,832 65,939,662
Guaranteed loan 3,331,870
____________ -
____________
688,002,410
____________ 714,434,286
____________
- 52 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Short-term borrowings - continued
As at 31 December 2018, short-term borrowings detail were as follows:
Nature of Interest rate Year ended
Loans amount Exchange rate RMB interest in contract Interest rate
% %
Credit loans (RMB) 400,000,000 1.0000 400,000,000 Floating 1 year LPR- 0.04(Note 1) 4.35
Credit loans (RMB) 150,000,000 1.0000 150,000,000 Floating Annual benchmark rate 4.35
Credit loans (EUR) 912,455 7.8473 7,160,308 Fixed 0.86~2.53 0.86~2.53
Credit loans (USD) 7,000,000 6.8632 48,042,400 Fixed 3.97~4.90 3.97~4.90
Mortgaged loans (EUR) 6,628,399 7.8473 52,015,032 Fixed 0.35~0.95 0.35~0.95
Mortgaged loans (USD) 4,000,000 6.8632 27,452,800 Fixed 4.22~4.38 4.22~4.38
Guaranteed loan(AUD) 690,543 4.8250 3,331,870
_________ Fixed 3.00 3.00
688,002,410
_________
Note 1: LPR is the basic interest rate of the People's Bank of China.
As at 31 December 2018, mortgaged loans were Hacienda y Vinedos Marques del Atrio, S.L.U ("
Atrio ") factoring of accounts receivable from Banco de Sabadell, S.A. etc. EUR 6,628,399
(translated as RMB 52,015,032)(31 December 2017:RMB 46,337,062). Mortgaged loans were
Indomita Wine mortgaged Chilean peso 7,642,470,000 (translated as RMB 75,601,849 ) fixed
assets from BBVA bank USD 4,000,000 (translated as RMB 27,452,800 )( December 31, 2017:
RMB 19,602,600 ). Australia Kilikanoon Estate has guaranteed loans of 690,543 Australian
dollars (equivalent to RMB 3,331,870)(31 December 2017: Nil).
17. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017
RMB RMB
Within 1 year 710,208,269 664,020,176
1 to 2 years 3,091,659 2,051,592
2 to 3 years 121,598 371,111
Over 3 years 151,355
____________ -
____________
713,572,881
____________ 666,442,879
____________
- 53 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Advances from customers
The aging analysis of advances from customers are as follows
31/12/2018 31/12/2017
RMB RMB
Within 1 year 221,022,547 340,025,690
1 to 2 years 1,155,555 7,072,254
2 to 3 years 1,032,609 381,463
Over 3 years 2,864,533
____________ 3,414,749
____________
226,075,244
____________ 350,894,156
____________
19. Employee benefits payable
(1) Employee benefits payable as follows:
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Short-term payroll 182,545,284 481,042,461 (477,694,636) 185,893,109
Post-demission benefits
- predetermined provision plan 298,093 51,503,280 (51,576,508) 224,865
Termination benefits 27,980,857
_________ 13,677,216
_________ (15,471,830)
_________ 26,186,243
_________
210,824,234
_________ 546,222,957
_________ (544,742,974)
_________ 212,304,217
_________
(2) Employee benefits payable:
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Salaries and bonus 185,014,318 428,052,734 (425,381,062) 187,685,990
Staff benefit 2,116,475 17,783,378 (16,885,565) 3,014,288
Staff welfare 524,316 20,677,314 (20,740,535) 461,095
Includes:
Medical insurance 524,316 19,045,528 (19,109,404) 460,440
Injury insurance - 895,750 (895,095) 655
Maternity insurance - 736,036 (736,036) -
Housing fund 39,256 10,444,925 (10,431,671) 52,510
Union fee and education fee 2,060,231
_________ 4,109,651
_________ (4,255,803)
_________ 1,914,079
_________
Total 189,754,596
_________ 481,068,002
_________ (477,694,636)
_________ 193,127,962
_________
Less: Non-current liabilities 7,209,312
_________ 7,234,853
_________
Short-term payroll 182,545,284
_________ 185,893,109
_________
- 54 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Employee benefits payable - continued
(3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Pension 297,591 50,534,986 (50,608,044) 224,533
Unemployment insurance 502
_______ 968,294
__________ (968,464)
__________ 332
_______
298,093
_______ 51,503,280
__________ (51,576,508)
__________ 224,865
_______
The Group participates in pension insurance and unemployment insurance plans established by
government institution. According to those plans, the Group pays pension and unemployment
insurance each month on the basis of 12%-32% and 0.5%-3% last period salary respectively.
Apart from these monthly expenses, the Group does not bear any further payment obligation. This
year the Group should pay RMB 50,534,986 and RMB 968,294 (2017: RMB 48,834,066 and
RMB 1,141,605 ) respectively into pension insurance and unemployment insurance. As at 31
December 2018, the Group has unpaid pension and unemployment insurance of RMB 224,533
and RMB 332 respectively (31 December 2017: RMB 297,591 and RMB 502 ), which is due to
the pension insurance and unemployment insurance plan at the end of the reporting period. These
payments have been paid after the end of the reporting period.
20. Taxes payable
31/12/2018 31/12/2017
RMB RMB
Value added tax 36,442,868 35,681,696
Consumption tax 28,636,646 44,961,022
Corporation income tax 40,869,507 38,834,293
Urban land use tax 2,476,527 2,645,687
Individual income tax 5,669,099 7,805,917
City construction tax 4,337,712 5,669,280
Property tax 5,165,128 4,647,644
Others 5,315,303
____________ 4,848,617
____________
128,912,790
____________ 145,094,156
____________
- 55 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Other payables
21.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Interest payable 712,826 771,250
Other payables 607,767,064
____________ 602,964,319
____________
608,479,890
____________ 603,735,569
____________
21.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017
RMB RMB
Payable to dealer deposit 159,191,138 139,710,963
Payables for equipment and construction 152,825,734 130,706,777
Payables for transportation 38,867,725 27,847,092
Royalty fee 78,414,978 77,208,929
Advertising costs 80,715,461 118,834,960
Withholding promotion costs 15,714,400 13,413,655
Employee deposit 2,806,766 13,327,132
Deposits from suppliers 15,901,210 3,082,595
Payables for contracting fee 27,070,584 38,070,571
Others 36,259,068
____________ 40,761,645
____________
607,767,064
____________ 602,964,319
____________
(2) Description of significant other payables aged more than one year
Company Amount Reasons
RMB
Beijing Qinglang Agriculture Science
and Technology Development Limited
Company ("Beijing Qinglang") 9,493,506 Payables for contracting fee
VASF Company 4,878,866
_________ Payables for contracting fee
14,372,372
_________
- 56 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
22. Deferred income
31/12/2018 31/12/2017
RMB RMB
Government grants
Current liabilities 15,860,254 16,878,199
Non-current liabilities 70,367,039
____________ 92,918,855
____________
86,227,293
____________ 109,797,054
____________
Government grants:
Recognized in Related to
Opening Addition non-operating income Closing Assets/Income
/other income
RMB RMB RMB RMB RMB
Wine base liquor brewage project 4,739,400 - (1,434,900) 3,304,500 Assets
Shihezi chateau project funds 9,276,600 - (2,280,000) 6,996,600 Assets
Xinjiang Industrial Rejuvenation and
Technological Reconstruction Project 17,064,000 - (1,422,000) 15,642,000 Assets
Special support for infrastructure facilities 5,300,000 - (1,060,000) 4,240,000 Assets
Ningxia industry revitalization and
technology reconstruction funds 1,086,000 - (1,086,000) - Assets
Tourism Development Fund Subsidy Project 500,000 - - 500,000 Income
Support enterprise development special funds 10,200,000 - (10,200,000) - Income
(Huanren) wine production construction funds 3,600,000 - (400,000) 3,200,000 Assets
Wine electronic tracking system
specific funds 3,192,311 - (667,054) 2,525,257 Assets
Miyun Propaganda Department transfer 888,945 - (888,945) - Assets
Wine industry specific funds 744,000 - (186,000) 558,000 Assets
Shandong Peninsula Blue Economic
Area construction funds 8,000,000 - (2,000,000) 6,000,000 Assets
Information system construction
project technology funds 3,480,000 - (580,000) 2,900,000 Assets
Cross-border e-Business projects subsidies 702,615 300,000 (122,359) 880,256 Income
Red wine phenolics research projects funds 284,601 - (284,601) - Income
Grape base construction project 520,000 - (520,000) - Assets
Water pollution abatement project 320,132 - (113,602) 206,530 Income
Infrastructure construction project 1,843,750 - (125,000) 1,718,750 Assets
Industrial development support project 36,900,000 - (4,100,000) 32,800,000 Assets
Subsidy for updating of economic and
energy-saving technology 1,154,700 - (128,300) 1,026,400 Assets
Special funds for efficient water saving
irrigation project - 1,720,000 (81,000) 1,639,000 Assets
Guidance funds for service industry development - 2,000,000 - 2,000,000 Income
Relocation allowance for boiler renovation _______- 100,000
_______ (10,000)
_______ 90,000
_______ Income
Total 109,797,054 4,120,000 (27,689,761) 86,227,293
_______ _______ _______ _______
Less: Non-current liabilities due within one year 16,878,199
_______ 15,860,254
_______
Other non-current liabilities 92,918,855 70,367,039
_______ _______
As at 31 December 2018, the Group recognise current liability for deferred income to be
accounted in profit or loss within one year, and recognise non-current liability for deferred income
to be accounted in profit or loss over one year.
- 57 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Non-current liabilities due within one year
31/12/2018 31/12/2017
RMB RMB
Long-term borrowings due within one year 118,940,788 76,954,827
Long-term payables due within one year 34,000,000
____________ 34,000,000
____________
152,940,788
____________ 110,954,827
____________
As at 31 December 2018, Long-term borrowings due within one year refers to Note VI-24, Long-
term payables due within one year refers to Note VI-25.
24. Long-term borrowings
31/12/2018 31/12/2017
RMB RMB
Credit loan 41,805,746 68,182,310
Mortgaged loan 3,924,916 6,693,544
Guaranteed loan 110,750,000
____________ 81,250,000
____________
156,480,662
____________ 156,125,854
____________
As at 31 December 2018, loans detail is as follows:
Nature Year-end Due within Due over
Loans amount Exchange rate Amount of interest Interest rate borrowing rate one year one year
RMB % %
Guaranteed loan (RMB) (Note) 81,250,000 1.0000 81,250,000 Floating 5 year LPR- 0.9 4.275 18,750,000 62,500,000
Credit loan (EUR) 17,734,954 7.8473 139,171,506 Fixed 1.00-2.53 1.00-2.53 97,365,760 41,805,746
Mortgaged loan (EUR)(Note) 860,161 7.8473 6,749,944 Fixed 1.80 1.80 2,825,028 3,924,916
Guaranteed loan(AUD)(Note) 10,000,000 4.8250 _______
48,250,000 Fixed 3.00 3.00 _______ _______
- 48,250,000
275,421,450 118,940,788 156,480,662
_______ _______ _______
Note: As at 31 December 2018, The secured loan is the long-term loan borrowed by the
company for R&D Centre credit guarantee, RMB 81,250,000 (31 December 2017: RMB
100,000,000), mortgaged loans were Atrio using fixed assets EUR 4,264,170 (translated as RMB
33,462,225) as collateral for loans from Popular Espaol, EUR 860,161 (translated as RMB
6,749,944), (31 December 2017: RMB 9,502,372).The guaranteed loan(AUD) is the loan of AUD
10,000,000 borrowed by Australia Kilikanoon Estate from Australia & New Zealand
banking( translated as RMB 48,250,000)(31 December 2017:Nil), which was guaranteed by the
Company.
- 58 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
25. Long-term payables
31/12/2018 31/12/2017
RMB RMB
Agricultural Development
Fund of China ("CADF") 225,000,000
____________ 259,000,000
____________
In 2016, RMB 305,000,000 from CADF was invested in R&D Centre, CADF accounted for
37.9% of the registered capital. According to the investment agreement, CADF will recovery
investment funds over 10 years, the investment income received equal to 1.2% of the remaining
unpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy other
profits or bear the loss of R&D Centre .Therefore although the investment in R&D Centre,
nominally equity investment, is actually a debt investment (Financial discount loan). The group
take this investment as long-term payables, which measured in amortized cost. The Group
repays the principal of RMB 34,000,000 in 2018. Refer to Note VI-45 for details of mortgaged
and pledged assets.
Long-term Termination date Mortgaged
payables Yield rate Investment date of repayment Due within 1 year Due after 1 year and pledged assets
RMB RMB RMB
67,000,000 1.2% 12 January 2016 24 December 2025 10,000,000 57,000,000 Cash and Bank
Intangible assets
176,000,000 1.2% 29 February 2016 28 February 2026 22,000,000 154,000,000 Fixed assets and intangible assets
16,000,000
___________ 1.2% 16 June 2016 22 May 2026 2,000,000
__________ 14,000,000
___________ Cash and bank
259,000,000
___________ 34,000,000
__________ 225,000,000
___________
26. Other non-current liabilities
31/12/2018 31/12/2017
RMB RMB
Employee benefit 7,234,853
_________ 7,209,312
_________
As at 31 December 2018, employee benefit represents deposit from bonus accrued for managers
and above. According to the bonus payment schedule of 2018, the bonus is expected to be paid
during 2020 to 2022.
27. Share capital
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Unrestricted shares
A shares 453,460,800 - - 453,460,800
B shares 232,003,200
__________ -
______ -
______ 232,003,200
__________
Total of unrestricted shares
and total shares 685,464,000
__________ -
______ -
______ 685,464,000
__________
- 59 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Capital reserve
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Share premium 560,038,853 - - 560,038,853
Other 5,916,588
__________ -
______ -
______ 5,916,588
__________
Total 565,955,441
__________ -
______ -
______ 565,955,441
__________
29. Other comprehensive income
2018
2018 Less: last year other Post-tax Post-tax
Opening Before-tax comprehensive income Less: attributable attributable Closing
balance amount in P/L current year tax expense to parent to NCI balance
Other comprehensive
income to be reclassified
to profit and loss 3,109,240 (376,524) - - (143,863) (232,661) 2,965,377
Foreign currency statement
translation difference 3,109,240 (376,524) - - (143,863) (232,661) 2,965,377
______ _____ ____ ____ _____ _____ ______
30. Surplus reserve
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Statutory surplus reserve 342,732,000
__________ -
______ -
______ 342,732,000
__________
In accordance with the Company Law of the People's Republic of China and the Articles of
Association of the Company, the Company is required to appropriate 10% of the net profit to the
statutory surplus reserve until the accumulated balance of the statutory surplus reserve reaches 50%
of the registered share capital. The Company does not appropriate net profit to the surplus reserve
in 2018.
The Company can appropriate discretionary surplus reserve after appropriation of the statutory
surplus reserve. Discretionary surplus reserve can be utilized to offset the deficit or increase the
share capital after approval.
31. Retained earnings
31/12/2018 31/12/2017
RMB RMB
Retained earnings brought forward 7,309,081,618 6,620,118,562
Profit attributable to shareholders of the Company 1,042,632,929 1,031,695,056
Less: Dividends paid in respect prior year's profit (342,732,000)
____________ (342,732,000)
____________
Retained earnings carried forward 8,008,982,547
____________ 7,309,081,618
____________
- 60 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Retained earnings - continued
(1) Appropriation to surplus reserve by subsidiaries
As at 31 December 2018, the balance of the Group's unappropriated profits include appropriation
to surplus reserve by subsidiaries amounting to RMB 54,336,543 (31 December 2017: RMB
51,994,942).
(2) Cash dividends approved by general meeting
According to the annual general meeting on 25 May 2018, dividends distribution plan has been
made. On the basis of 685,464,000 issued share capital, RMB 5.0 (including taxes) for every 10
shares was distributed to shareholders, in total RMB 342,732,000 cash dividends.
(3) Profit distribution decided after the balance sheet date
According to a proposal of the board of directors approved on 18 April 2019, on the basis of
685,464,000 issued shares in 2018, cash dividends of RMB 6.0 (including taxes) for every 10 share
will be distributed to all the shareholders. The aggregate amount of cash dividend is RMB
411,278,400. The above proposal regarding dividends distribution is yet to be approved in a
shareholders' meeting.
32. Revenue and costs
Revenue is analysed as follows:
2018 2017
RMB RMB
Principal Revenue 5,066,265,044 4,856,168,699
Other Revenue 75,979,696
____________ 76,376,530
____________
5,142,244,740
____________ 4,932,545,229
____________
Operating cost is analysed as follows:
2018 2017
RMB RMB
Principal operating cost 1,872,991,039 1,645,690,616
Other operating cost 28,620,468
____________ 25,901,663
____________
1,901,611,507
____________ 1,671,592,279
____________
The Revenue for the Group is mainly from the sales of wine, brandy and sparkling wine. In 2018,
Over 87% (2017: over 91%) of the sales generated in PRC.
- 61 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
33. Taxes and surcharges
2018 2017
RMB RMB
Consumption tax 157,037,382 177,879,324
City construction tax 39,655,738 52,247,915
Education fee and surcharges 28,762,507 35,831,575
Property tax 31,461,708 23,113,211
Land use tax 12,098,790 11,874,984
Stamp tax 4,507,785 3,945,731
Others 2,967,764
____________ 5,359,283
____________
276,491,674
____________ 310,252,023
____________
For detail standards of tax rate please refer to Note V.
34. Selling expenses
2018 2017
RMB RMB
Marketing expenses 386,519,123 428,828,931
Salary and employee benefit 297,489,665 272,148,620
Freight 141,756,007 139,218,637
Trademark fee 73,976,395 72,838,612
Labor fee 72,036,252 67,860,856
Warehouse leasing expenses 45,668,613 53,075,132
Depreciation cost 41,410,740 34,963,089
Advertising fees 35,857,276 34,753,090
Conference expenses 32,731,215 31,609,123
Design cost 29,437,757 27,226,277
Travelling expenses 27,176,277 27,709,534
Security and sanitation fee 12,896,986 12,659,228
Water and electricity fee 11,297,244 11,247,163
Office allowance 9,707,518 6,165,561
Packing cost 8,195,160 7,163,930
Taxes 7,113,764 6,771,337
Amortization of low-value consumables 5,756,602 4,028,573
Business entertainment 5,665,336 4,403,750
Others 29,907,216
____________ 29,851,000
____________
1,274,599,146
____________ 1,272,522,443
____________
- 62 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Administrative expense
2018 2017
RMB RMB
Salary and employee benefit 114,473,209 106,342,126
Depreciation 71,978,485 71,558,307
Maintenance fee 25,189,384 21,665,024
Administrative expenses 23,766,176 22,173,925
Amortization 18,187,049 22,438,364
Greening fee amortization 14,730,804 10,667,941
Contracting fee 13,364,835 21,162,623
Rental fees 13,012,167 12,414,249
Safe production cost 9,692,574 7,840,215
Security and sanitation fee 8,659,405 6,317,723
Service fee 6,556,258 12,118,257
Entertainment fee 5,300,526 5,470,001
Travelling expenses 3,630,225 4,747,256
Others 15,039,554
____________ 11,545,122
____________
343,580,651
____________ 336,461,133
____________
36. Financial expense
2018 2017
RMB RMB
Interest income (12,086,007) (9,168,772)
Exchange income (666,323) (182,610)
Interest expenses 52,198,774 32,233,729
Less: Capitalization of interests 5,843,872 6,138,242
Bank charges 2,342,730
____________ 1,846,154
____________
35,945,302
____________ 18,590,259
____________
37. (Reversal of)Impairment loss of assets
2018 2017
RMB RMB
(Reversal of) Inventory impairment (912,166) 7,938,748
Impairment losses from other receivables -
________ 354,805
__________
(912,166) 8,293,553
________ __________
- 63 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
38. Other income
2018 2017 Assets/income related
Project Subsidy RMB RMB
Tax refund 6,587,773 17,765,560 Income
Special funds for manufacturing industry 4,750,000 4,100,000 Income
Industrial development support project 4,100,000 - Assets
Ningxia industry revitalization and
technology reconstruction funds 1,086,000 3,295,000 Assets
Project funds 2,280,000 2,280,000 Assets
Shandong Peninsula Blue Economic
Area construction funds 2,000,000 2,000,000 Assets
Special funds for the development
of enterprises 42,953,900 - Income
Others 7,493,199 6,352,199 Assets
Others 16,030,562
__________ 10,245,625
__________ Income
87,281,434
__________ 46,038,384
__________
39. Non-operation income
Recognized in
extraordinary
2018 2017 profit and loss
RMB RMB RMB
Government grants - 1,600,000 -
Penalty income 1,901,530 7,993,571 1,901,530
Others 5,451,779
__________ 7,637,156
__________ 5,451,779
__________
7,353,309
__________ 17,230,727
__________ 7,353,309
__________
40. Non-operation expenses
Recognized in
extraordinary
2018 2017 profit and loss
RMB RMB RMB
Compensation and penalty loss 2,576,838 347,528 2,576,838
Donation 293,819 294,899 293,819
Others 665,251
__________ 989,049
__________ 665,251
__________
3,535,908
__________ 1,631,476
__________ 3,535,908
__________
- 64 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
41. Income tax
2018 2017
RMB RMB
Current income tax 352,598,370 330,784,002
Deferred income tax 14,529,152
____________ 7,350,243
____________
367,127,522
____________ 338,134,245
____________
Reconciliation between income tax expenses and profits is as follows:
2018 2017
RMB RMB
Profit before tax 1,408,611,698 1,371,927,763
Income tax expense at statutory tax rate 25% (2017:25%) 352,152,925 342,981,941
Effect of different tax rates applied by certain subsidiaries (949,634) (9,600,821)
Changes in opening balances of deferred tax
liabilities due to tax rate adjustment - (1,342,916)
Unrecognised Deductible loss 4,642,727 3,590,697
Utilization of Deductible losses which were not
recognized previously - (6,157,735)
Non-deductible expenses 5,496,292 7,550,095
Write-off of deferred tax assets 5,785,212
____________ 1,112,984
____________
Income tax expenses 367,127,522
____________ 338,134,245
____________
42. Basic and dilutive earnings per share
The calculation of basic earnings per share is based on the consolidated profit attributable to
ordinary shareholders of the Company during the year and the weighted average number of
outstanding ordinary shares.
2018 2017
RMB RMB
Earnings
Consolidated profit attributable to ordinary
shareholders of the Company 1,042,632,929
____________ 1,031,695,056
____________
Shares
Weighted average number of outstanding
ordinary shares 685,464,000
____________ 685,464,000
____________
Basic earnings per share 1.52
____________ 1.51
____________
- 65 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Basic and dilutive earnings per share - continued
The Company does not have potential dilutive ordinary shares.
From the balance sheet date to the date of approval of this report, there are no subsequent events
which would affect the numbers of the weighted average number of outstanding of ordinary
shares.
43. Notes to consolidated cash flow statement
(1) Cash received relating to other operating activities:
2018 2017
RMB RMB
Government grants 57,123,900 20,930,752
Interest income 7,871,853 3,839,079
Penalty income 1,901,530 7,993,571
Refundable deposits of notes payable - 46,900,000
Others 5,806,589
____________ 5,573,503
____________
72,703,872
____________ 85,236,905
____________
(2) Cash paid relating to other operating activities:
2018 2017
RMB RMB
Selling expenses 918,966,855 956,902,163
General and administrative expenses 140,112,380 107,905,766
Refundable deposits of notes payable - 8,000,000
Others 4,637,082
____________ 2,103,059
____________
1,063,716,317 1,074,910,988
____________ ____________
(3) Cash paid for the purchase subsidiaries and other equity:
2018 2017
RMB RMB
Cash paid for acquisition of Australia Kilikanoon Estate 107,194,420 -
Less: Cash and bank for Australia Kilikanoon Estate
at acquisition date 1,359,765 -
Cash paid for acquisition of Indomita Wine - 318,867,650
Less: Cash and bank for Indomita
Wine at acquisition date -
____________ 15,071,107
____________
105,834,655
____________ 303,796,543
____________
- 66 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
43. Notes to consolidated cash flow statement - continued
(4) Cash received relating to other financing activities:
2018 2017
RMB RMB
Received government grants related to assets - 5,800,000
R&D Centre long-term payables pledged time deposit 61,700,000 46,100,000
Interest income from R&D Centre long-term payables
pledged time deposit 768,259
____________ 1,030,804
____________
62,468,259
____________ 52,930,804
____________
(5) Cash paid relating to other financing activities:
2018 2017
RMB RMB
R&D Centre long-term payables pledged time deposit 46,100,000
__________ 61,700,000
__________
44. Supplementary information to consolidated cash flow statement
(1) Supplementary information to consolidated cash flow statement
2018 2017
RMB RMB
Cash flows from operating activities
calculated by adjusting the net profit:
Net profit 1,041,484,176 1,033,793,518
Add:Loss for (reversal of) impairment of assets (912,166) 8,293,553
Depreciation of investment properties 1,857,902 590,610
Depreciation of fixed assets 297,838,358 250,264,403
Amortization of intangible assets 19,018,740 24,098,781
Depreciation of biological assets 12,034,812 10,160,981
Amortization of long-term prepaid expenses 12,082,117 13,911,581
(Gains) losses on disposal of assets (11,368,355) 222,586
Finance expense 45,855,744 22,381,504
Decrease in deferred tax assets 22,685,137 13,315,979
Decrease in deferred tax liabilities (8,155,985) (5,965,736)
Increase in inventories (180,452,933) (138,995,031)
Increase in operating receivables (137,899,294) (180,593,570)
Decrease in operating payables (138,089,507)
____________ (78,236,132)
____________
Net cash flows from operating activities 975,978,746
____________ 973,243,027
____________
- 67 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Supplementary information to consolidated cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments.
2018 2017
RMB RMB
Payment of intangible assets and other
long-term assets by bank acceptances 109,378,598
____________ 140,493,507
____________
(3) Cash and cash equivalents
31/12/2018 31/12/2017
RMB RMB
Closing balance of Cash and bank 1,475,700,477 1,402,522,509
Less:
Restricted bank deposits 2,611,350 2,645,410
Restricted other monetary funds 93,186,393 123,987,825
Deposit with a period of over three months 173,042,400
____________ 95,000,000
____________
Closing balance of cash and cash equivalents 1,206,860,334
____________ 1,180,889,274
____________
31/12/2018 31/12/2017
RMB RMB
Cash 1,206,860,334 1,180,889,274
Including: Cash on hand 114,335 136,973
Bank deposits on demand 1,206,745,999
____________ 1,180,752,301
____________
Closing balance of cash and cash equivalents 1,206,860,334
____________ 1,180,889,274
____________
45. Assets with restriction of ownership
31/12/2018 31/12/2017
RMB RMB
Cash and bank 95,797,743 126,633,235
Account receivable 52,015,032 46,337,062
Fixed assets 412,006,421 145,009,923
Intangible assets 218,070,414 164,051,996
____________ ____________
- 68 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Cash and bank with restriction of ownership as follows:
31/12/2018 31/12/2017
RMB RMB
R&D Centre long-term payables pledged time deposit 46,100,000 61,700,000
Refundable deposits of letter of credit 44,540,850 57,946,190
Balance in Alipay account 2,483,816 4,317,635
Home maintenance funds 2,611,350 2,645,410
Margin for entity card 51,727 14,000
Deposit for ICBC platform 10,000
____________ 10,000
____________
Total 95,797,743
____________ 126,633,235
____________
Among the aforementioned items, the amount of RMB 2,483,816 which is the blocked balances
of goods payment in Alipay account can be unlocked after 15 days.
As at 31 December 2018, the amount of accounts receivable with restricted ownership is EUR
6,628,399 (translated as RMB 52,015,032) , which refers to accounts receivable Atrio conducted
for factoring from Banco de Sabadell, S.A. etc.
As at 31 December 2018, fixed assets with restriction of ownership as follows:
Restricted reasons 31/12/2018
Company RMB
The Company Long-term payable collateral from R&D Centre 34,246,887
Sales Company Long-term payable collateral from R&D Centre 39,557,304
Atrio Company Long-term borrowings collateral 33,462,225
Indomita Wine Short-term borrowings collateral 75,601,849
Ningxia Moser 15th Changyu
Wine Chateau Co., Ltd.
(" Ningxia Chateau") Long-term payable collateral from R&D Centre 184,678,629
Ningxia Wine Co.Ltd.
("Ningxia Wine"). Long-term payable collateral from R&D Centre 44,459,527
___________
Total 412,006,421
___________
- 69 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Intangible assets with restriction of ownership as follows:
Restricted reasons 31/12/2018
Company RMB
The Company Long-term payable collateral from R&D Centre 50,902,950
R&D Centre Long-term payable collateral from R&D Centre 108,913,538
Ningxia Chateau Long-term payable collateral from R&D Centre 8,906,611
Ningxia Wine Long-term payable collateral from R&D Centre 49,347,315
___________
Total 218,070,414
___________
46. Foreign monetary items
(1) Foreign monetary items
The foreign monetary items located within China are as follows:
Closing foreign Exchange Closing translated
currency balance rate RMB balance
Cash and bank
EUR 127 7.8473 997
HKD 213 0.8762 187
USD 7,196,107 6.8632 49,388,322
__________ ______ ___________
(2) Overseas business entities
The Company’s overseas subsidiaries determine bookkeeping currency based on the primary
economic environment. The bookkeeping base currency of Atrio and Francs Champs
Participations SAS ("Francs Champs") are all in Euro, and the bookkeeping base currency of
Indomita Wine is Chilean peso. The functional currency of Australia Kilikanoon Estate is AUD.
The foreign monetary assets and liabilities of the overseas subsidiaries are as follows:
Closing foreign Exchange Closing translated
currency balance rate RMB balance
Cash and bank
EUR 25,328 7.8473 198,756
USD 276,196 6.8632 1,895,588
Short-term borrowings
USD 11,000,000
__________ 6.8632
______ 75,495,200
___________
- 70 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VII. CHANGE IN CONSOLIDATION SCOPE
1. Business combination under different control
(1) Business combination under different control in current period
Net profit
Equity Revenue from from
Equity acquisitio Equity acquisition acquisition
Name of acquisition acquisitio Equity n ratio acquisitio Acquisitio Basis of date to year date to year
company n date acquisition cost (%) n method n date acquisition date end end
RMB RMB
Finish payment
Australia Kilikanoon Estate 18 January AUD 18 January and acquire
2018 20,860,825 80% Purchase 2018 equity 57,648,905 217,869
Other detail information:
Pursuant to the Agreement on the delivery of transferred equities entered into between the
shareholders of the Company and Australia Kilikanoon Estate on 5 December 2017, the Company
acquired 80% equity interests of Australia Kilikanoon Estate at the consideration of AUD
20,860,825( translated as RMB 107,194,420). The Company completed the equity transfer on 18
January 2018 and obtained the control of financial and operating policies over Australia
Kilikanoon Estate.
(2) Consideration and Goodwill
Consideration
Australia Kilikanoon Estate
RMB
Cash 107,194,420
Total consideration 107,194,420
Less: acquired provisional value of net assets 70,131,290
___________
Goodwill 37,063,130
___________
(3) Recognised assets and liabilities of mergee at acquisition date
Australia Kilikanoon Estate
Fair value Book value
at acquisition date at acquisition date
RMB RMB
Assets
Cash and bank 1,359,765 1,359,765
Accounts receivable 10,366,281 10,366,281
Prepayment 237,174 237,174
Other receivables 187,720 187,720
Inventories 69,612,312 57,946,312
Fixed assets 49,029,999 38,696,709
Intangible assets 16,417,886
____________ 7,461,624
____________
Total assets 147,211,137
____________ 116,255,585
____________
- 71 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VII. CHANGE IN CONSOLIDATION SCOPE - continued
1. Business combination under different control - continued
(3) Recognised assets and liabilities of acquiree at acquisition date- continued
Australia Kilikanoon Estate
Fair value Book value
at acquisition date at acquisition date
RMB RMB
Liabilities
Short-term borrowings 1,282,550 1,282,550
Accounts payable 6,198,846 6,198,846
Employee benefits payable 876,987 876,987
Taxes payable 1,789,093 1,789,093
Long-term borrowings 43,497,119 43,497,119
Deferred tax liabilities 5,902,429
____________ -
____________
Total liabilities 59,547,024
____________ 53,644,595
____________
Net assets 87,664,113 62,610,990
Less：Non-controlling interests 17,532,823
____________ 12,522,198
____________
Acquired net assets 70,131,290
____________ 50,088,792
____________
VIII. INTERESTS IN OTHER ENTITIES
1. Structure of the Group
Equity interest owned
by the company Acquisition method
Name Address Place of registration Nature Direct Indirect
Xinjiang Tianzhu (a) Shihezi, Xinjiang, China Shihezi, Xinjiang, China Manufacturing 60% - Subsidiary acquired in business
combination under non-
common control
Fransac Sales Cognac, France Cognac, France Trading - 100% Subsidiary acquired in business
combination under non-
common control
Mirefleurs Bordeaux, France Bordeaux, France Trading - 100% Subsidiary acquired in business
combination under non-
common control
Atrio Navarra, Spain Navarra, Spain Sales 75% - Subsidiary acquired in business
combination under non-
common control
Subsidiaries acquired by
IWCC Santiago, Chile Santiago, Chile Sales 85% -
establishment
Subsidiary acquired in business
Australia Kilikanoon Estate Adelaide Australia Adelaide Australia Sales 80% - combination under non-
common control
Beijing Changyu Sales and distribution Co., Ltd ("Beijing Sales") Beijing, China Beijing, China Sales 100% - Subsidiaries acquired by
establishment
Yantai Kylin Packaging Co., Ltd. Yantai, Shandong, China Yantai, Shandong, China Manufacturing 100% - Subsidiaries acquired by
("Kylin Packaging") establishment
Yantai Changyu-Castel Wine Chateau Co., Ltd ("Changyu Chateau") (b) Yantai, Shandong, China Yantai, Shandong, China Manufacturing 70% - Subsidiaries acquired by
establishment
Changyu (Jingyang) Wine Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturing 90% 10% Subsidiaries acquired by
("Jingyang Wine") establishment
Yantai Changyu Pioneer Wine Sales Co., Ltd. ("Sales Company") Yantai, Shandong, China Yantai, Shandong, China Sales 100% - Subsidiaries acquired by
establishment
Langfang Development Zone Castel-Changyu Wine Co., Ltd ("Langfang Lanfang, Hebei, China Lanfang, Hebei, China Manufacturing 39% 10% Subsidiaries acquired by
Castel") (c) establishment
- 72 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
Equity interest owned
by the company Acquisition method
Name Address Place of registration Nature Direct Indirect
Changyu (Jingyang) Wine Sales Co., Ltd. ("Jingyang Sales") Xianyang, Shanxi, China Xianyang, Shanxi, China Sales 10% 90% Subsidiaries acquired by
establishment
Langfang Changyu Pioneer Wine Sales Co., Ltd ("Langfang Sales") Lanfang, Hebei, China Lanfang, Hebei, China Sales 10% 90% Subsidiaries acquired by
establishment
Shanghai Changyu Sales and distribution Co., Ltd. ("Shanghai Sales") Shanghai, China Shanghai, China Sales 30% 70% Subsidiaries acquired by
establishment
Beijing Changyu AFIP Agriculture development Co., Ltd ("Agriculture Miyun, Beijing, China Miyun, Beijing, China Sales - 100% Subsidiaries acquired by
Development") establishment
Beijing Chateau (d) Beijing, China Beijing, China Manufacturin 90% - Subsidiaries acquired by
g establishment
Yantai ("Beijing Chateau") Changyu Wine Sales Co., Ltd. ("Wines Yantai, Shandong, China Yantai, Shandong, China Sales 90% 10% Subsidiaries acquired by
Sales") establishment
Yantai Changyu Pioneer International Co., Ltd. ("Pioneer International") Yantai, Shandong, China Yantai, Shandong, China Sales 70% 30% Subsidiaries acquired by
establishment
Hangzhou Changyu Wine Sales Co., Ltd. ("Hangzhou Changyu") Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by
establishment
Ningxia Growing Yinchuang, Ningxia, China Yinchuang, Ningxia, China Planting 100% - Subsidiaries acquired by
establishment
Huanren Changyu National Wines Sales Co., Ltd. ("National Wines") Benxi, Liaoning, China Benxi, Liaoning, China Sales 100% - Subsidiaries acquired by
establishment
Liaoning Changyu Ice Wine Chateau Co., Ltd. ("Ice Chateau") (e) Benxi, Liaoning, China Benxi, Liaoning, China Manufacturin 51% - Subsidiaries acquired by
g establishment
Yantai Development Zone Changyu Trading Co., Ltd ("Development Yantai, Shandong, China Yantai, Shandong, China Sales - 100% Subsidiaries acquired by
Zone Trading") establishment
Shenzhen Changyu Wine Marketing Ltd. ("Shenzhen Marketing") Shenzhen, Guangdong, China Shenzhen, Guangdong, China Sales - 100% Subsidiaries acquired by
establishment
Yantai Changyu Fushan Trading Company("Fushan Trading") Yantai, Shandong, China Yantai, Shandong, China Sales - 100% Subsidiaries acquired by
establishment
Beijing AFIP Meeting Center ("Meeting Center") Miyun, Beijing, China Miyun, Beijing, China Service - 100% Subsidiaries acquired by
establishment
Beijing AFIP Tourism and Culture ("AFIP Tourism") Miyun, Beijing, China Miyun, Beijing, China Tourism - 100% Subsidiaries acquired by
establishment
Ningxia Wine Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturin 100% - Subsidiaries acquired by
g establishment
Yantai Changyu DingLuoTe Chateau. Yantai, Shandong China Yantai, Shandong China Retail and 65% 35% Subsidiaries acquired by
("Ding Luo Te Chateau") Sales establishment
Qing Tong Xia Changyu Wine Marketing Ltd("Qing Tong Xia Sales") Qing Tong Xia, Ningxia, China Qing Tong Xia, Ningxia, China Sales - 100% Subsidiaries acquired by
establishment
Shihezi Chateau Shihezi, Xinjiang, China Shihezi, Xinjiang, China Manufacturin 100% - Subsidiaries acquired by
g establishment
Ningxia Chateau Yinchuan, Ningxia, China Yinchuan, Ningxia, China Manufacturin 100% - Subsidiaries acquired by
g establishment
Shanxi Changyu Rina Castle Chateau Co., Ltd. Xianyang, Shanxi, China Xianyang, Shanxi, China Manufacturin 100% - Subsidiaries acquired by
(" Chang'an Chateau") g establishment
R&D Centre (f) Yantai, Shandong China Yantai, Shandong China Manufacturin 72% - Subsidiaries acquired by
g establishment
Changyu (HuanRen) Wine Co., Ltd Benxi LiaoNing China Benxi LiaoNing China Wine 100% - Subsidiaries acquired by
("Huan Ren Wine") production establishment
Projecting
Xinjiang Changyu Sales Co., Ltd Shihezi Xinjiang China Shihezi Xinjiang China Sales - 100% Subsidiaries acquired by
("Xinjiang Sales") establishment
Ningxia Changyu Trading Co., Ltd Yinchuan Ningxia China Yinchuan Ningxia China Sales - 100% Subsidiaries acquired by
("Ningxia Trading") establishment
Shanxi Changyu Rina Wine Sales Co., Ltd ("Shanxi Sales") Xianyang Shanxi China Xianyang Shanxi China Sales - 100% Subsidiaries acquired by
establishment
Penglai Changyu Wine Sales Co., Ltd Penglai Shandong China Penglai Shandong China Sales - 100% Subsidiaries acquired by
("Penglai Sales") establishment
Laizhou Changyu Wine Sales Co., Ltd Laizhou Shandong China Laizhou Shandong China Sales - 100% Subsidiaries acquired by
("Laizhou Sales") establishment
Francs Champs Cognac, France Cognac, France Investment 100% - Subsidiaries acquired by
and trading establishment
Lanzhou Changyu Wine Sales Co., Ltd ("Lanzhou Sales") Lanzhou Gansu, China Lanzhou Gansu, China Sales - 100% Subsidiaries acquired by
establishment
Beijing Retailing Co. Ltd("Beijing Retailing") Beijing, China Beijing, China Sales - 100% Subsidiaries acquired by
establishment
Tianjin Changyu Pioneer Sales Co., Ltd ("Tianjin Pioneer") Tianjin, China Tianjin, China Sales - 100% Subsidiaries acquired by
establishment
Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") Fuzhou Fujian, China Fuzhou Fujian, China Sales - 100% Subsidiaries acquired by
establishment
Nanjing Changyu Pioneer Sales Co., Ltd ("Nanjing Pioneer") Nanjing, Jiangsu, China Nanjing, Jiangsu, China Sales - 100% Subsidiaries acquired by
establishment
Xianyang Changyu Pioneer Sales Co., Ltd ("Xianyang Pioneer") Xianyang, Shanxi, China Xianyang, Shanxi, China Sales - 100% Subsidiaries acquired by
establishment
Shenyang Changyu Pioneer Sales Co., Ltd ("Shenyang Pioneer") Shenyang, Liaoning, China Shenyang, Liaoning, China Sales - 100% Subsidiaries acquired by
establishment
Jinan Changyu Pioneer Sales Co., Ltd ("Jinan Pioneer") Jinan, Shandong, China Jinan, Shandong, China Sales - 100% Subsidiaries acquired by
establishment
Shanghai Changyu Pioneer Sales Co., Ltd ("Shanghai Pioneer") Shanghai, China Shanghai, China Sales - 100% Subsidiaries acquired by
establishment
Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") Fuzhou, Jiangxi, China Fuzhou, Jiangxi, China Sales - 100% Subsidiaries acquired by
establishment
Shijiazhuang Changyu Pioneer Sales Co., Ltd ("Shijiazhuang Pioneer") Shijiazhuang, Hebei, China Shijiazhuang, Hebei, China Sales - 100% Subsidiaries acquired by
establishment
Hangzhou Yuzefeng Sales Co., Ltd ("Hangzhou Yuzefeng") Hangzhou, Zhejiang, China Hangzhou, Zhejiang, China Sales - 100% Subsidiaries acquired by
establishment
Jilin Changyu Pioneer Sales Co., Ltd ("Jilin Pioneer") Changchun, Jilin, China Changchun, Jilin, China Sales - 100% Subsidiaries acquired by
establishment
- 73 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
Equity interest owned
by the company Acquisition method
Name Address Place of registration Nature Direct Indirect
Beijing Changyu Pioneer Sales Co., Ltd ("Beijing Pioneer") Beijing, China Beijing, China Sales - 100% Subsidiaries acquired by
establishment
Harbin Changyu Pioneer Sales Co., Ltd ("Harbin Pioneer") Harbin, Heilongjiang, China Harbin, Heilongjiang, China Sales - 100% Subsidiaries acquired by
establishment
Hunan Changyu Pioneer Sales Co., Ltd ("Hunan Pioneer") Changsha, Hunan, China Changsha, Hunan, China Sales - 100% Subsidiaries acquired by
establishment
Yinchuan Changyu Pioneer Sales Co., Ltd ("Yinchuan Pioneer") Yinchuan, Ningxia, China Yinchuan, Ningxia, China Sales - 100% Subsidiaries acquired by
establishment
Kunming Changyu Pioneer Sales Co., Ltd ("Kunming Pioneer") Kunming, Yunnan, China Kunming, Yunnan, China Sales - 100% Subsidiaries acquired by
establishment
Chongqing Changyu Pioneer Sales Co., Ltd ("Chongqing Pioneer") Chongqing, China Chongqing, China Sales - 100% Subsidiaries acquired by
establishment
Wuhan Changyu Pioneer Sales Co., Ltd ("Wuhan Pioneer") Wuhan, Hubei, China Wuhan, Hubei, China Sales - 100% Subsidiaries acquired by
establishment
Hohhot Changyu Pioneer Sales Co., Ltd ("Hohhot Pioneer") Hohhot Inner Mongolia, China Hohhot Inner Mongolia, China Sales - 100% Subsidiaries acquired by
establishment
Chengdu Changyu Pioneer Sales Co., Ltd ("Chengdu Pioneer") Chengdu, Sichuan, China Chengdu, Sichuan, China Sales - 100% Subsidiaries acquired by
establishment
Nanning Changyu Pioneer Sales Co., Ltd ("Nanning Pioneer") Nanning, Guangxi, China Nanning, Guangxi, China Sales - 100% Subsidiaries acquired by
establishment
Lanzhou Changyu Pioneer Sales Co., Ltd ("Lanzhou Pioneer") Lanzhou Gansu, China Lanzhou Gansu, China Sales - 100% Subsidiaries acquired by
establishment
Yantai Fulangduo Yantai Shandong, China Yantai Shandong, China Sales - 100% Subsidiaries acquired by
establishment
Hefei Changyu Pioneer Sales Co., Ltd ("Hefei Pioneer") Hefei, Anhui, China Hefei, Anhui, China Sales - 100% Subsidiaries acquired by
establishment
Urumchi Changyu Pioneer Sales Co., Ltd ("Urumchi Pioneer") Urumchi Xinjiang, China Urumchi Xinjiang, China Sales - 100% Subsidiaries acquired by
establishment
Guangzhou Changyu Pioneer Sales Co., Ltd ("Guangzhou Pioneer") Guangzhou Guangdong, China Guangzhou Guangdong, China Sales - 100% Subsidiaries acquired by
establishment
Grape Wine Marketing Ltd. Sales 100% - Subsidiaries acquired by
Yantai Shandong China Yantai Shandong China
establishment
Explanation in difference between holding interests and voting rights in subsidiaries:
(a) Xinjiang Tianzhu was acquired by the Company, accounting for 60% of Xinjiang Tianzhu's equity
interest. Through agreement arrangement, the Company has the full power to control Xinjiang
Tianzhu's strategic operating, investing and financing policies. The agreement arrangement will
be terminated on 6 August 2017. Upon the expiry of the agreement arrangement, the non-
controlling interests of Xinjiang Tianzhu will normally enjoy/commit all the rights and obligations
of the shareholders as stipulated in the Articles of Association.
(b) Changyu Chateau is a Sino-foreign joint venture established by the Company and a foreign
investor, accounting for 70% of Changyu Chateau's equity interest. Through agreement
arrangement, the Company has the full power to control Changyu Chateau's strategic operating,
investing and financing policies. The agreement arrangement will be terminated on 31 December
2022.
(c) Langfang Chateau is a Sino-foreign joint venture established by the Company and a foreign
investor, accounting for 49% of Langfang Chateau's equity interest by the Company and
subsidiaries. Through agreement arrangement, the Company has the full power to control
Langfang Chateau's strategic operating, investing and financing policies. The agreement
arrangement was terminated on 31 December 2017. Non-controlling shareholders of Langfang
Chateau will be entitled to/abided by the rights/obligations of the shareholders as agreed in the
Articles of Association upon the due date of the agreement arrangement.
(d) Beijing Chateau is a joint venture established by the Company, Yantai De'an and Beijing
Qinglang, and the Company increases the capital contribution RMB 502,910,000 in this period,
Yantai De'an and Beijing Qinglang together increase the capital contribution RMB29,840,000.
Beijing Chateau has compelled the business registration on 22 December 2017. After capital
contribution increased, the Company is accounting for 90% of Beijing Chateau's equity interest.
The Company gets the control over operation, investment, and financial decision of Beijing
Chateau through agreement arrangement, which will terminate on 2 September 2019.
- 74 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
(e) Ice Chateau is a Sino-foreign joint venture established by the Company and a foreign investor,
accounting for 51% of Ice Chateau's equity interest. Through agreement arrangement, the
Company has the full power to control Ice Chateau's strategic operating, investing and financing
policies. The agreement arrangement will be terminated on 31 December 2021.
(f) R&D Centre is a joint venture established by the Company and CADF, accounting for 72% of
R&D Centre's equity interest at 31 December 2018. The Company has complete control over the
operation, investment and financial policies of the R&D Centre subject to the contract
arrangement as described in Note VI-25. The contract arrangement will expire on 22 May 2026.
As at 31 December 2018, the remaining investment of IFAD accounted for 28% of the registered
capital.
2. Non-wholly owned subsidiaries
Profit and loss belongs 31/12/2018
Non-controlling to non-controlling Distributions to Assimilate non-controlling
Name interest shareholder ratio interest shareholders non-controlling interest interest
Xinjiang Tianzhu 40% (2,760,804) - - 50,612,648
Atrio 25% 844,190 (744,149) - 31,726,931
Changyu Chateau 30% - - - 12,365,016
Langfang Castel 51% (1,774,541) - - 20,927,981
Beijing Chateau 10% - - - 65,133,868
Ice Chateau 49% - - - 33,319,062
IWCC 15% 2,619,885 (2,655,627) - 53,079,827
Australia Kilikanoon Estate 20% (310,144)
_________ _________- 17,532,823
_________ 17,222,679
_________
(1,381,414)
_________ (3,399,776)
_________ 17,532,823
_________ 284,388,012
_________
- 75 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
VIII. INTERESTS IN OTHER ENTITIES - continued
3. Key financial information of important non-wholly owned subsidiaries
31/12/2018 31/12/2017
Current Non-current Total Current Non-current Total Current Non-current Current Non-current Total
Total assets
Name assets assets assets liabilities liabilities liabilities assets assets liabilities liabilities liabilities
Xinjiang Tianzhu 27,390,495 66,486,795 93,877,290 - 5,336,114 5,336,114 30,264,441 71,323,940 101,588,381 809,080 5,336,114 6,145,194
Changyu Chateau 141,298,023 114,694,168 255,992,191 171,869,662 - 171,869,662 140,038,021 115,435,985 255,474,006 175,061,601 - 175,061,601
Langfang Castel 17,659,511 16,001,682 33,661,193 3,358,322 - 3,358,322 22,728,536 17,973,719 40,702,255 6,133,909 - 6,133,909
Beijing Chateau 219,973,582 461,115,089 681,088,671 62,598,545 - 62,598,545 214,079,274 481,668,050 695,747,324 73,963,043 - 73,963,043
Ice Chateau 45,194,591 23,920,890 69,115,481 14,974,458 100,000 15,074,458 38,657,358 25,484,359 64,141,717 10,871,695 100,000 10,971,695
Atrio 464,421,130 99,080,668 563,501,798 381,659,315 54,520,937 436,180,252 398,835,959 116,299,504 515,135,463 299,030,002 89,336,338 388,366,340
IWCC 214,784,490 300,969,342 515,753,832 148,359,328 4,976,161 153,335,489 175,669,256 305,664,706 481,333,962 122,023,764 5,206,406 127,230,170
Australia Kilikanoon Estate 87,634,707 63,759,866 151,394,573 13,387,942 51,893,171 65,281,113 N/A N/A N/A N/A N/A N/A
2018 2017
Total comprehensive Operating activities Total comprehensive Operating activities
Revenue Net profit (loss) Revenue Net profit (loss)
Name income cash flows income cash flows
Xinjiang Tianzhu 18,803 (6,902,010) (6,902,010) 43,112 116,555,588 15,531,513 15,531,513 32,224,800
Changyu Chateau 121,235,278 3,710,124 3,710,124 16,096,447 68,964,230 985,910 985,910 19,629,212
Langfang Castel 5,038,281 (3,479,492) (3,479,492) 673,422 39,165,527 (1,616,638) (1,616,638) (1,554,380)
Beijing Chateau 159,369,783 16,555,846 16,555,846 19,627,933 145,103,200 17,475,647 17,475,647 49,964,881
Ice Chateau 57,290,490 870,994 870,994 289,782 49,643,396 1,241,699 1,241,699 (1,748,535)
Atrio 327,550,545 3,811,465 3,376,761 6,129,923 281,007,167 2,000,682 7,701,416 (32,148,326)
IWCC 262,104,563 15,934,347 17,465,900 3,584,648 157,953,467 28,791,684 31,458,952 16,482,765
Australia Kilikanoon Estate 57,648,905 217,869 (1,550,720) (1,522,151) N/A N/A N/A N/A
* This is amount incurred in the period between acquisition date and 31 December 2018.
- 78 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT
The Group's major financial instruments include cash and bank, notes and account receivable,
other receivables, available-for-sale financial assets, other non-current assets, short-term
borrowings, accounts payable, other payables, interest payables, and long-term borrowings.
Details of these financial instruments are disclosed in Note VI. The risks associated with these
financial instruments and the policies on how to mitigate these risks are set out below.
Management manages and monitors these exposures to ensure the risks are monitored at a certain
level.
The Group adopts sensitivity analysis technique to analyse how the profit and loss for the period
and shareholders' equity would have been affected by reasonably possible changes in the relevant
risk variables. As it is unlikely that risk variables will change in an isolated manner, and the
interdependence among risk variables will have significant effect on the amount ultimately
influenced by the changes in a single risk variable, the following are based on the assumption that
the change in each risk variable is on a stand-alone basis.
The Group's risk management objectives are to achieve a proper balance between risks and yield,
minimise the adverse impacts of risks on the Group's operation performance, and maximise the
benefits of the shareholders and other stakeholders. Based on these risk management objectives,
the Group's basic risk management strategy is to identify and analyse the Group's exposure to
various risks, establish an appropriate maximum tolerance to risk, implement risk management,
and monitors regularly and effectively these exposures to ensure the risks are monitored at a
certain level.
1. Risk management objectives and policies
1.1 Market risk
1.1.1 Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. The
Group's exposure to the currency risk is primarily associated with EUR and USD. Several of the
Group's subsidiaries have purchases and sales denominated in EUR, Chilean peso and Australia
dollar, borrowings denominated in USD, while the Group's other principal activities are
denominated and settled in RMB.As at 31 December 2018, except that the assets and liabilities
stated in the table below are foreign currency deposits or excess of borrowings, the assets and
liabilities of each entity of the Group are settled in their respective functional currencies.
31/12/2018 31/12/2017
RMB RMB
Bank and cash (EUR) 199,753 1,190,459
Bank and cash (USD) 51,283,910 34,843,968
Short-term borrowings (USD) 75,495,200 58,807,800
____________ ____________
Currency risk arising from the assets and liabilities denominated in foreign currencies may have
impact on the Group's performance. The Group closely monitors the effects of changes in the
foreign exchange rates on the Group's currency risk exposures. The Group currently does not take
any measures to hedge currency risk exposures.
- 79 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
1.1.1 Currency risk - continued
Sensitivity analysis on currency risk
Where all other variables are held constant, the reasonably possible changes in the foreign
exchange rate may have the following pre-tax effect on the profit or loss for the period and
shareholders' equity:
Domestic entities:
Current year Prior year
Effect on Effect on
shareholders' shareholders'
Change in exchange rate Effect on profit equity Effect on profit equity
RMB RMB RMB RMB
EUR 5% increase against RMB 50 50 50 50
EUR 5% decrease against RMB (50) (50) (50) (50)
USD 5% increase against RMB 2,469,416 2,469,416 1,456,525 1,456,525
USD 5% increase against RMB (2,469,416)
_________ (2,469,416)
________ (1,456,525)
________ (1,456,525)
________
_________ ________ ________ ________
Overseas entities:
Current year Prior year
Effect on Effect on
shareholders' shareholders'
Change in exchange rate Effect on profit equity Effect on profit equity
RMB RMB RMB RMB
USD 5% increase against EUR 900 900 52,695 52,695
USD 5% decrease against EUR (900) (900) (52,695) (52,695)
USD 15% increase against Chile Peso (11,042,641) (11,042,641) (5,275,651) (5,275,651)
USD 15% decrease against Chile Peso 11,042,641 11,042,641 5,275,651 5,275,651
EUR 10% increase against Chile Peso 19,876 19,876 58,350 58,350
EUR 10% decrease against Chile Peso (19,876) (19,876)
________ (58,350)
________ (58,350)
________
_________ ________ ________ ________
Note: As at 31 December 2018, the Group's management anticipated a change of 5% in
exchange rate for USD to EUR, 10% in exchange rate for EUR to Chilean Peso and 15%
in exchange rate for USD to Chilean Peso.
- 80 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
1.1.2 Interest rate risk - risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-rate
bank borrowings (Refer to Note VI-1, Note VI-16 and Note VI-24 for details). It is the Group's
policy to keep its borrowings at floating rate of interests so as to eliminate the fair value interest
rate risk.
The sensitivity analysis on interest rate risk
The sensitivity analysis on interest rate risk is based on the changes in the market interest rate may
influence the interest income or expense of the variable rate financial instruments.
Management of the Group believes interest rate risk on bank deposit is not significant, therefore
does not disclose sensitivity analysis for interest rate risk.
Where all other variables are held constant, the reasonably possible changes in the interest rate
may have the following pre-tax effect on the profit or loss for the period and shareholders' equity
Current year Prior year
Effect on Effect on
shareholders' shareholders'
Change in interest rate Effect on profit equity Effect on profit equity
Bank borrowings 50 bps increase (2,016,667) (2,016,667) (2,046,646) (2,046,646)
Bank borrowings 50 bps decrease 2,016,667
________ 2,016,667
________ 2,046,646
________ 2,046,646
________
________ ________ ________ ________
Note: As at 13 December 2018, the Group's management anticipated a change of 50 basis points
in the bank's variable interest rate.
1.2 Credit risk
As at 31 December 2018, the Group's maximum exposure to credit risk which will cause a
financial loss to the Group due to failure to discharge an obligation by the counterparties.
In order to minimise the credit risk, the Group has adopted a policy to ensure that all sales
customers have good credit records. The Group has delegated a team responsible for
determination of credit limits, credit approvals and other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. For transactions that are not denominated in
the functional currency of the relevant operating unit, the Group does not offer credit terms
without the specific approval of the Department of Credit Control in the Group. In addition, the
Group reviews the recoverable amount of each individual trade debt at each balance sheet date to
ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the
management of the Group considers that the Group's credit risk is significantly reduced.
- 81 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.2 Credit risk - continued
Since the Group trades only with recognized and creditworthy third parties, there is no
requirement for collateral. Concentrations of credit risk are managed by customer/counterparty, by
geographical region and by industry sector. As at 31 December 2018, 19.8% of the Group trade
receivables are due from top five customers (31 December 2017: 20.7%). There is no collateral or
other credit enhancement on the balance of the trade receivables of the Group.
1.3 Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and
cash equivalents deemed adequate by the management to finance the Group's operations and
mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of
bank borrowings and ensures compliance with loan covenants.
The following is the maturity analysis for financial assets and financial liabilities held by the
Group which is based on undiscounted remaining contractual obligations:
Non-derivative financial liabilities
Less than one month 1-3 months 3-12 months 1-5 years More than five years Total
RMB RMB RMB RMB RMB RMB
Short-term borrowings 2,338,698 57,691,463 641,831,131 - - 701,861,292
Accounts payable 163,879,578 327,759,156 221,934,147 - - 713,572,881
Other payables 155,842,255 179,896,318 256,314,091 - - 592,052,664
Interest payable 712,826 - - - - 712,826
Long-term borrowings 8,382,996 31,970,170 85,822,835 168,574,037 - 294,750,038
Long-term payables _________- 22,762,934
________ 14,158,433
_________ 143,555,433
_________ 90,356,300
________ 270,833,100
_________
331,156,353 620,080,041 1,220,060,637 312,129,470 90,356,300 2,573,782,801
_________ ________ _________ _________ ________ _________
1.4 Fair value disclosure - Financial assets and liabilities not measured using fair value
Fair value
Carrying amount Level 1 Level 2 Level 3 Total
of fair value of fair value of fair value
Long-term payables measured
at amortized cost 259,000,000
________ _______- 223,263,886
________ ________- 223,263,886
________
As at 31 December 2018, The management of the Group believes that, apart from the
aforementioned long-term payables, the carrying amounts of other financial assets and financial
liabilities measured at amortised cost in the financial statements are close to the fair values of
these assets and liabilities.
- 82 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS
1. Parent company
Name of Type of Place of Legal Scope Registered Percentage Percentage Incorporate
parent company Relation enterprise registration representative of business capital of shares of voting rights Code
RMB % %
Changyu Group Parent Limited Zhou Manufactu
Yantai 50,000,000 50.4 50.4 265645824
Company Company Company Hongjiang ring
During the year ended 31 December 2018, there is no change in parent company's registered
capital, shares holding or voting power.
2. Subsidiaries: Please refer to Note VIII.
3. Other related parties
Name of related parities Nature of related parties Incorporate code
Yantai Changyu Wine Culture Museum Company controlled 913706007582586548
Co., Ltd.("Wine Culture Museum") by the same parent
Yantai Changyu International Window of the Company controlled 91370600672208146X
Wine City Co., Ltd.("Window of the Wine City) by the same parent
Yantai ShenMa Packing Co., Ltd. Company controlled 91370600553393350J
("ShenMa Packing") by the same parent
Yantai Zhongya Pharmaceutical Tonic Company controlled 91370600726203923M
Wine Co., Ltd.("Zhongya Pharmaceutical") by the same parent
Yantai Changyu Culture Tourism Production Company controlled 91370602MA3N7A877P
Sales Co., Ltd.(" Culture Sales") by the same parent
Yantai Changyu Culture Tourism Development Company controlled 91370602MA3N59J300
Co., Ltd.(" Culture Development ") by the same parent
4. Significant related party transactions
(1) Purchases from and sales to related parties
Purchase from related parties
The content of related 2018 2017
party transactions RMB RMB
ShenMa Packing product purchase 173,238,289 145,872,001
Zhongya Pharmaceutical product purchase 15,690,930 9,279,380
Wine Culture Museum product purchase 16,784,711 6,336,832
Window of the Wine City product purchase 7,913,342 2,756,050
Culture Sales product purchase 35,857
___________ ___________
213,663,129
___________ 164,244,263
___________
All related party transactions are based on the negotiated price.
In 2018, purchases from related parties accounted for 11.2% of the Group's total purchase (2016:
10.9%)
- 83 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(1) Purchases from and sales to related parties- continued
Sales to related parties
The content of related 2018 2017
party transactions RMB RMB
Wine Culture Museum goods sales 23,515,379 8,235,520
Window of the Wine City goods sales 13,821,555 12,205,247
Zhongya Pharmaceutical goods sales 4,552,269 2,035,003
Culture Sales goods sales 2,914,686 -
ShenMa Packing goods sales 348,247
___________ 1,634,883
___________
45,152,136
___________ 24,110,653
___________
All related party transactions are based on the negotiated price. In 2018, sales to related parties
accounted for less than 1% of the Group's total sales (2017: less than 1%).
(2) Property leased from a related party
The Group as Lessee
2018 Assets leased Beginning date Ending date Rental expense
RMB
Changyu Group Company office building 1 January 2016 31 December 2020 1,538,840
Changyu Group Company office building and factory 1 January 2017 31 December 2021 1,331,364
Changyu Group Company office building and factory 1 January 2017 31 December 2021 3,994,091
_______
6,864,295
_______
All related party transactions are based on the negotiated price.
The Group as Lessor
2018 Assets leased Beginning date Ending date Rental income
RMB
ShenMa Packing office building and factory 1 July 2017 30 June 2022 1,478,982
Zhongya Pharmaceutical office building and factory 1 January 2018 31 December 2018 518,182
_______
1,997,164
_______
All related party transactions are based on the negotiated price.
- 84 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(3) Other significant related party transactions
The content of related
party transactions Note 2018 2017
RMB RMB
Changyu Group Company Royalty fee (a) 73,976,395 72,838,612
Changyu Group Company Patents fee (b) 50,000 50,000
__________ __________
All related party transactions are based on the negotiated price.
(a) Royalty fee
Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, the
Company may use certain trademarks of Changyu Group Company, which have been
registered with the PRC Trademark Office. An annual royalty fee at 2% of the Group's
annual sales is payable to Changyu Group Company. The license is effective until the
expiry of the registration of the trademarks.
During 2018, royalty fee paid to related company accounted for 100% of the Group (2017:
100%).
(b) Patents fee
The Company renewed the contract on 20 August 2016 for 10 years. The annual patents
usage fee payable by the Company to Changyu Group Company remained RMB
50,000.For the year ended 31 December 2018, the patents usage fee payable to Changyu
Group Company is amounted to RMB 50,000(2017:RMB 50,000).
During 2018, patent fee paid to related company accounted for 100% of the Group (2017:
100%).
(4) Remuneration of the management
2018 2017
RMB RMB
Remuneration of the management 13,102,005
____________ 10,309,409
____________
- 85 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
5. Balance due from/to related parties
(1) Balance due from related parties
31/12/2018 31/12/2017
Accounts receivable Balance Provision Balance Provision
RMB RMB RMB RMB
Zhongya Pharmaceutical 2,768,391 - 8,134,150 -
Shen Ma Packing. 17,137 - 1,342,348 -
Window of the Wine City 1,911,157 - 3,196,095 -
Wine Culture Museum _________- -
________ 34,280
_________ -
________
4,696,685
_________ -
________ 12,706,873
_________ -
________
31/12/2018 31/12/2017
Other receivable Balance Provision Balance Provision
RMB RMB RMB RMB
Shen Ma Packing. 813,440
_________ -
_______ 813,440
________ -
_______
(2) Balance due to related parties
Accounts payable 31/12/2018 31/12/2017
RMB RMB
Shen Ma Packing. 55,366,785 52,403,056
Zhongya Pharmaceutical 6,722,667 2,051,991
Wine Culture Museum 4,646,731 2,040,860
Window of the Wine City 4,789,600
____________ 1,485,766
____________
71,525,783
____________ 57,981,673
____________
Other payable 31/12/2018 31/12/2017
RMB RMB
Shen Ma Packing. 450,000 -
Changyu Group Company 78,414,978
____________ 77,208,929
____________
78,864,978
____________ 77,208,929
____________
The above amounts due to related parties are unsecured and interest-free.
- 86 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XI. COMMITMENT
1. Important commitments
(1) Capital commitments
31/12/2018 31/12/2017
RMB'000 RMB'000
Capital commitment for
purchasing non-current assets 996,675
____________ 1,246,506
____________
(2) Operating lease commitment
As lessee
Significant operating lease: Total future minimal lease payments under non-cancelable contract
with lessor are as follow:
31/12/2018 31/12/2017
RMB'000 RMB'000
Within 1 year 20,576 32,236
1 to 2 years 11,757 19,116
2 to 3 years 10,064 11,943
3 years and above 84,095
____________ 95,342
____________
126,492
____________ 158,637
____________
2. Contingent liability
The Group do not have any significant contingent liabilities as at balance sheet date.
XII. POST BALANCE SHEET DATE EVENT
1. Profit appropriation
According to the board of the director resolution raised on 18 April 2019, the Company proposed
a cash dividend of RMB 6.0 (including taxes) for every 10 shares in respect of 2018 based on the
issued shares of 685,464,000. The aggregate amount of cash dividend is RMB 411,278,400. The
resolution is to be approved by the annual general meeting.
- 87 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIII. OTHER SIGNIFICANT EVENTS
Capital management
The main target of the capital management of the group is to ensure the continuous operation of
the group, optimize the portfolio structure of equity financing and debt financing, so as to achieve
the goal of maximizing shareholder benefits. The capital structure of the group consists of the
following parts:
(1) Cash and cash equivalents
(2) Share capital, capital reserve, surplus reserve and retained earnings
The management reviews the group's capital structure according to the interim or year-end
financial reports and considers the cost of capital and the corresponding risks of various capital
types. Based on the choice of the management, the group optimizes the overall capital structure by
issuing additional shares and borrowing or repaying loans.
Segment report
The Group is principally engaged in the production and sales of wine, brandy, and champagne in
China, France, Spain, Chile and Australia. In accordance with the Group's internal organization
structure, management requirements and internal reporting system, the Group's operation is
divided into four parts: China, Spain, France, Chile and Australia. The management periodically
evaluates segment results, in order to allocate resources and evaluate performances. In 2018, more
than 87% revenue and more than 99% profit derived from China, and more than 92% non-current
assets are located in China. Therefore the Group does not need to disclose additional segment
report information.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS
1. Cash and bank
31/12/2018 31/12/2017
RMB RMB
Cash 3,177 5,280
Bank balance 579,993,055 501,208,996
Other currency fund 44,592,577
____________ 57,960,190
____________
Total 624,588,809
____________ 559,174,466
____________
As at 31 December 2018, the balance of restricted cash of the Company is RMB 2,611,350 (31
December 2017: RMB 2,645,410), which is home maintenance funds.
As at 31 December 2018, other currency fund of the Company include: deposit of RMB
44,540,850 for letter of credit (31 December 2017: RMB 57,946,190) and deposit of RMB 51,727
for entity card (31 December 2017: RMB 14,000).
- 88 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Company's time deposits include the short-term deposits with
original maturity from six months to twelve months amounting to RMB 45,000,000 (31 December
2017: RMB 5,000,000 ) with interest rate ranging from 1.55% to 2.03%.
2. Notes and account receivable
2.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Notes receivable 39,885,254 41,645,203
Accounts receivable 1,447,973
____________ 7,805,333
____________
Total 41,333,227
____________ 49,450,536
____________
2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017
RMB RMB
Bank acceptances 39,885,254
____________ 41,645,203
____________
(2) Pledged notes receivable
As of 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil).
(3) Notes endorsed by the Group to other parties which are not yet due at the end of the period
31/12/2018 31/12/2017
RMB RMB
Bank acceptances 94,755,124
____________ 72,316,589
____________
As at 31 December 2018, notes endorsed by the Company to other parties which are not yet due at
the end of the period is RMB 94,755,124 (31 December 2017: RMB 72,316,589). It is for the
payment to suppliers. The Company believes that due to bank good reputation, the risk of
maturity cannot be cashed is very low, therefore confirm the termination of the endorsement notes
receivable. If bank is unable to settle the notes on maturity, according to the relevant laws and
regulations of China, the Group would undertake limited liability for the notes.
- 89 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable- continued
2.2 Notes receivable - continued
(4) Notes receivable were reclassified as accounts receivable due to the default of drawer
As at 31 December 2018, there was no notes receivable were reclassified as accounts receivable
due to the default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017
Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying Amount
Amount Proportion Amount Proportion Amount Amount Proportion Amount Proportion Amount
RMB (%) RMB (%) RMB RMB (%) RMB (%) RMB
Accounts receivable
for which bad debt
provision has been
assessed individually 1,447,973
______ ___ 100.0 1,447,973
____- ____- ______ 7,805,333
______ ___ 100.0
____- 7,805,333
____- ______
The normal credit term of trade receivables is one month. The trade receivables are interest free.
The aging analysis is as follows:
31/12/2018 31/12/2017
RMB RMB
Within 1 year 1,447,973
____________ 7,805,333
____________
(2) Provision, reversals and collections during the current period:
As at 31 December 2018, there was no provision provided for trade receivables (31 December
2017: Nil). The Company did not provide, reverse or write off any provision during 2018 (31
December 2017: Nil).
(3) The balance of accounts receivable at the end of the year
Relationship Proportion of
with the Group Amount Aging total receivables
Zhongya Pharmaceutical Other related parties 1,447,973
_________ Within 1 year 100.0
_____
- 90 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables
3.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Interest receivable 254,088 76,646
Dividend receivables 500,000,000 407,495,922
Other receivables 525,389,268
____________ 592,274,075
____________
Total 1,025,643,356
____________ 999,846,643
____________
3.2 Dividend receivables
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Within 1 year
Including: Sales Company 402,595,884 867,404,116 (770,000,000) 500,000,000
Wines Sales - 30,000,000 (30,000,000) -
Langfang Castel - 785,986 (785,986) -
Beijing Chateau - 19,850,000 (19,850,000) -
Shihezi Chateau 4,900,038 15,531,228 (20,431,266) -
National Wines - 20,000,000 (20,000,000) -
Langfang sales - 1,981,410 (1,981,410) -
Atrio - 2,080,191 (2,080,191) -
Chile Indomita
Wine Group _________- 6,495,728 (6,495,728)
__________ __________ _________-
Total 407,495,922 964,128,659 (871,624,581) 500,000,000
_________ __________ __________ _________
3.3 Other receivables
(1) Disclosure of other receivables by categories:
31/12/2018 31/12/2017
Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying Amount
Amount Proportion Amount Proportion Amount Amount Proportion Amount Proportion Amount
RMB (%) RMB (%) RMB RMB (%) RMB (%) RMB
Other receivables for
which bad debt
provision has been
assessed individually
_____ ___ ____-
525,389,268 100.0
___- _____ _____ ___ _____- ___-
525,389,268 592,274,075 100.0
_____
592,274,075
- 91 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables - continued
3.3 Other receivables - continued
(1) Disclosure of other receivables by categories: - continued
The aging analysis is as follows:
31/12/2018 31/12/2017
Bad debts Carrying Bad debts Carrying
Balance provision amount Balance provision amount
Amount Proportion Amount Amount Amount Proportion Amount Amount
RMB % RMB RMB RMB % RMB RMB
Within 1 year 491,483,881 93.5 - 491,483,881 589,011,103 99.5 - 589,011,103
1 to 2 years 33,897,084 6.5 - 33,897,084 3,006,488 0.5 - 3,006,488
2 to 3 years 8,303 - - 8,303 53,794 - - 53,794
Over 3 years ________- ____- _______- ________- 202,690
________ ____- ______- 202,690
________
525,389,268 100.0
________ ____ 525,389,268 592,274,075 100.0 592,274,075
_______- ________ ________ ____ ______- ________
(2) Accrual, reversal and written-off during the current period
No bad debt accrued or reversed in 2018 (2017:Nil.).
(3) Other receivables written off current year
No other receivables written off in 2018 (2017:Nil.).
(4) Disclosure of other receivables by nature
31/12/2018 31/12/2017
RMB RMB
Receivable from subsidiary 523,579,831 589,897,407
Receivable deposit 12,500 2,500
Others 1,796,937
____________ 2,374,168
____________
525,389,268
____________ 592,274,075
____________
(5) Top five entities with the largest balances of other receivables
As at 31 December 2018, the particulars of top five other receivables are as follows:
Proportion of total
Nature Amount Aging prepayments
RMB %
Sales Company Internal balance 369,060,579 Within 1 year 70.2
R&D Centre Internal balance 120,589,826 Within 1 year 23.0
Changyu Chateau Internal balance 12,404,563 Within 1 year 2.4
Pioneer International Internal balance 10,704,391 Within 1 year 2.0
Ningxia Chateau Internal balance 7,085,540
_________ Within 1 year ___1.3
519,844,899
_________ 98.9
___
- 92 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
4. Inventories
31/12/2018 31/12/2017
Net carrying Net carrying
Balance Provision amount Balance Provision amount
RMB RMB RMB RMB RMB RMB
Raw material 1,200,528 - 1,200,528 1,841,216 - 1,841,216
Work in progress 358,230,774 - 358,230,774 307,104,357 - 307,104,357
Finished goods 25,723,438
_________ _______- 25,723,438
_________ 39,096,480
_________ _______- 39,096,480
_________
385,154,740
_________ _______- 385,154,740
_________ 348,042,053
_________ _______- 348,042,053
_________
5. Long-term equity investments
2018 Cost 31/12/2017 for the year 31/12/2018 Share holding Voting power for the year
RMB RMB RMB RMB % % RMB
Cost Method
Xinjiang Tianzhu (a) 60,000,000 60,000,000 - 60,000,000 60 100 -
Kylin Packaging 23,176,063 23,176,063 - 23,176,063 100 100 -
Changyu Chateau (a) 28,968,100 28,968,100 - 28,968,100 70 100 -
Changyu Chateau (a) 3,500,000 3,500,000 - 3,500,000 70 100 -
Ningxia Growing 36,573,247 36,573,247 - 36,573,247 100 100 -
National Wines 2,000,000 2,000,000 - 2,000,000 100 100 20,000,000
Ice Chateau (a) 30,440,500 30,440,500 - 30,440,500 51 100 -
Beijing Chateau (a) 579,910,000 579,910,000 - 579,910,000 90 100 19,850,000
Sales Company 7,200,000 7,200,000 - 7,200,000 100 100 867,404,116
Langfang Sales (b) 100,000 100,000 - 100,000 10 100 1,981,410
Langfang Castel(a) 19,835,730 19,835,730 - 19,835,730 39 100 785,986
Wine Sales 4,500,000 4,500,000 - 4,500,000 100 100 30,000,000
Shanghai Sales(b) 300,000 300,000 - 300,000 30 100 -
Beijing Sales 850,000 850,000 - 850,000 100 100 -
Jingyang Sales (b) 100,000 100,000 - 100,000 10 100 -
Jingyang Wine (b) 900,000 900,000 - 900,000 90 100 -
Ningxia Wine 222,309,388 222,309,388 - 222,309,388 100 100 -
Ningxia Chateau 443,463,500 443,463,500 10,000,000 453,463,500 100 100 -
Dingluote Chateau (b) 212,039,586 212,039,586 - 212,039,586 65 100 -
Shihezi Chateau 809,019,770 809,019,770 3,000,000 812,019,770 100 100 15,531,228
Changan Chateau 803,892,258 803,892,258 - 803,892,258 100 100 -
R&D Centre (a) 500,000,000 500,000,000 2,788,906,445 3,288,906,445 72 100 -
Huanren Wine 21,700,000 21,700,000 500,000 22,200,000 100 100 -
Grape Wine Sales Co., 5,000,000 - - - - 100 -
Francs Champs 236,025,404 236,025,404 - 236,025,404 100 100 -
Atrio 190,150,544 190,150,544 - 190,150,544 75 75 2,080,191
IWCC 274,248,114 274,248,114 - 274,248,114 85 85 6,495,728
Australia Kilikanoon
Estate _______- _______- _______
107,194,420 _______
107,194,420 80 80 _______-
4,516,202,204 4,511,202,204 2,909,600,865 7,420,803,069 964,128,659
_______ _______ _______ _______ _______
(a) The Company has 100% voting power of those subsidiaries by the way of indirect
controlling, referring to Note VIII-1.
(b) The Company has 100% voting power of these subsidiaries by the way of indirect
controlling through wholly owned subsidiaries.
During 2018, there was no significant restriction on the remittance of fund from the investees to
the Company.
- 93 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Fixed assets
(1) Fixed assets
Buildings Machinery Motor vehicles Total
RMB RMB RMB RMB
Total original carrying amount
31/12/2017 265,340,049 475,569,634 10,129,313 751,038,996
Increase
Purchase - 9,345,433 - 9,345,433
CIP transfer 8,887,802 139,665 - 9,027,467
Decrease
Disposal - (13,137,771) (3,479,487) (16,617,258)
Transfer to Investment
property (VI-8) (32,606,762)
_________ _________- _________- (32,606,762)
_________
31/12/2018 241,621,089
_________ 471,916,961
_________ 6,649,826
_________ 720,187,876
_________
Total accumulated depreciation
31/12/2017 111,607,494 346,413,532 4,867,069 462,888,095
Increase
Additions 7,784,794 15,133,656 531,639 23,450,089
Decrease
Disposal (227,951) (12,642,520) (946,751) (13,817,222)
Transfer to Investment
property (VI-8) (17,644,360)
_________ _________- _________- (17,644,360)
_________
31/12/2018 101,519,977
_________ 348,904,668
_________ 4,451,957
_________ 454,876,602
_________
Total net carrying amount
31/12/2018 140,101,112
_________ 123,012,293
_________ 2,197,869
_________ 265,311,274
_________
31/12/2017 153,732,555
_________ 129,156,102
_________ 5,262,244
_________ 288,150,901
_________
As at 31 December 2018, fixed assets with restricted ownership is RMB 34,246,887 (December
31, 2017:RMB 36,349,289 ), referring to Note VI-45 for details.
As at 31 December 2018, the Company has no fixed assets classified as held for sale ( 31
December 2017:RMB 2,000,197), and the Company has no temporary idle fixed assets and fixed
assets under finance leases.
(2) Fixed assets through operating lease
Amount
RMB
Machinery 134,111
________
- 94 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, buildings without property certificate are as follows：
Reasons why
certificates of title have
Amount not been obtained
RMB
Fermentation centre office,
experiment building and workshop 3,653,494
__________ Processing
7. Construction in progress
(1) Construction in progress
31/12/2018 31/12/2017
RMB RMB
Reconstruction of boiler heating systems - 3,556,349
Drainage project - 3,200,000
Non-dry sticker labeling machine project 4,105,264 -
Others 2,206,437
____________ -
____________
6,311,701
____________ 6,756,349
____________
(2) Current year movement on important construction:
The
Accumulated progress of
Transfer to expenditure/ constructio
Budget 31/12/2017 Addition PPE 31/12/2018 budget n Financed by
RMB RMB RMB RMB RMB %
Reconstruction of boiler
heating systems 13,000,000 3,556,349 - (3,556,349) - 100.0 100.0 Self-raised
Non-dry sticker labeling
machine project 6,920,000 - 5,431,516 (1,326,252) 4,105,264 78.5 78.5 Self-raised
There was no interest capitalized in construction in progress in 2018.
(3) As at 31 December 2018, there was no provision was made for the construction in process, and no
provision was made (31 December 2017:Nil).
- 95 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
8 Bearer biological assets
Bearer biological assets are grape trees，which measured in cost method.
Immature Mature
biological assets biological assets Total
RMB RMB RMB
Total original carrying amount
31/12/2017 6,306,963 130,929,124 137,236,087
Increase
Cultivated increase 12,930,423 - 12,930,423
Transfer to mature assets
from immature assets (9,802,191)
__________ 9,802,191
___________ -
__________
31/12/2018 9,435,195
__________ 140,731,315
___________ 150,166,510
__________
Total accumulated depreciation
31/12/2017 - 17,663,548 17,663,548
Increase
Additions -
__________ 7,500,169
___________ 7,500,169
__________
31/12/2018 -
__________ 25,163,717
___________ 25,163,717
__________
Total net carrying amount
31/12/2018 9,435,195
__________ 115,567,598
___________ 125,002,793
__________
31/12/2017 6,306,963
__________ 113,265,576
___________ 119,572,539
__________
As at 31 December 2018, there is no biological asset with ownership restricted (31 December
2017: Nil).
As at 31 December 2018, there is no indication that biological assets may be impaired, and no
provision was made. (31 December 2017: Nil).
- 96 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Intangible assets
Intangible assets
Land use right
RMB
Total original carrying amount
31/12/2017 and 31/12/2018 96,594,766
__________
Total accumulated depreciation
31/12/2017 26,971,547
Increase
Additions 2,379,153
__________
31/12/2018 29,350,700
__________
Total net carrying amount
31/12/2018 67,244,066
__________
31/12/2017 69,623,219
__________
As at 31 December 2018, Intangible assets with restricted ownership are RMB 50,902,950
(December 31, 2017: RMB 52,720,912), Please refer to Note VI-45 in detail.
10. Deferred tax assets
Recognised deferred tax assets not presented at the net amount after offset
31/12/2018 31/12/2017
Item Deductible Deferred Deductible Deferred
temporary difference tax assets temporary difference tax assets
RMB RMB RMB RMB
Unrealized profit from intra
5,897,436 1,474,359 7,163,828 1,790,957
- company transactions
Unpaid bonus 37,973,000 9,493,249 35,822,735 8,955,683
Retirement benefit 10,143,950 2,535,988 10,057,113 2,514,278
Deductible losses 30,421,511 7,605,378 45,526,327 11,381,582
Deferred income 12,343,972 3,085,993 16,581,627 4,145,407
96,779,869 24,194,967 115,151,630 28,787,907
11. Other non-current assets
31/12/2018 31/12/2017
RMB RMB
Receivables from subsidiaries 972,700,000
____________ 3,718,674,166
____________
- 97 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
12. Short-term borrowings
31/12/2018 31/12/2017
RMB RMB
Credit loans 150,000,000
____________ 600,000,000
____________
As at 31 December 2018, credit loans detail are as follows:
Loan bank Loans amount Loan term Interest rate in contract Interest rat
RMB % %
ICBC Yantai branch 150,000,000
_________ 24 May 2018 – 24 May 2019 Annual benchmark rate 4.35
13. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017
RMB RMB
Within 1 year 132,664,195 97,036,146
1 to 2 years - 556,883
2 to 3 years 395 240,095
Over 3 years 39,714
____________ -
____________
132,704,304
____________ 97,833,124
____________
14. Employee benefits payable
(1) Employee benefits payable
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Short-term salaries and welfare 60,050,963 97,491,895 (95,341,628) 62,201,230
Post-demission benefits
- predetermined provision plan - 6,785,401 (6,785,401) -
Termination benefit 10,057,113
_________ 5,216,248
_________ (5,129,412)
_________ 10,143,949
_________
70,108,076
_________ 109,493,544
_________ (107,256,441)
_________ 72,345,179
_________
- 98 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
14. Employee benefits payable - continued
(2) Short-term salaries and welfare
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Salaries and bonus 60,694,620 83,892,951 (81,609,810) 62,977,761
Staff benefit 37,173 6,191,811 (6,191,811) 37,173
Staff welfare - 4,004,223 (4,004,223) -
Includes:
Medical insurance - 3,476,931 (3,476,931) -
Injury insurance - 289,904 (289,904) -
Maternity insurance - 237,388 (237,388) -
Housing fund - 3,005,993 (3,005,993) -
Union fee and education fee 1,896,872
_________ 529,790
_________ (529,791)
_________ 1,896,871
_________
Total 62,628,665
_________ 97,624,768
_________ (95,341,628)
_________ 64,911,805
_________
Less: Non-current liabilities 2,577,702
_________ 2,710,575
_________
Short-term salaries and welfare 60,050,963
_________ 62,201,230
_________
(3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Pension - 6,534,445 (6,534,445) -
Unemployment insurance -
_____ 250,956
_________ (250,956)
_________ -
_____
-
_____ 6,785,401
_________ (6,785,401)
_________ -
_____
The Company participates in pension insurance and unemployment insurance plans established by
government institution. According to those plans, the Company pays pension and unemployment
insurance each month on the basis of 18% and 0.7% last period salary respectively. Apart from
these monthly expenses, the Company does not bear any further payment obligation. This year the
Company should pay RMB 6,534,445 and RMB 250,956 (2017: RMB 8,595,215 and RMB
323,852) respectively into pension insurance and unemployment insurance. As at 31 December
2018, the Company does not have unpaid pension and unemployment insurance (31 December
2017: Nil) which is due to the pension insurance and unemployment insurance plan and not paid
at the end of the reporting period.
- 99 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
15. Taxes payable
31/12/2018 31/12/2017
RMB RMB
Value added tax 1,686,599 -
Consumption tax 3,902,791 6,450,962
Corporation income tax - 26,069
Urban land use tax 685,626 784,627
Individual income tax 6,316,001 6,630,393
City construction tax 36,314 345,138
Property tax 243,814 82,669
Others 240,286
____________ 249,832
____________
13,111,431
____________ 14,569,690
____________
16. Other payables
16.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Interest payable 181,250 652,500
Other payables 607,793,269
____________ 544,713,172
____________
607,974,519
____________ 545,365,672
____________
16.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017
RMB RMB
Payable to subsidiaries 585,044,038 534,530,323
Payables for equipment and construction 10,554,451 8,538,687
Deposits from suppliers 5,982,500 183,000
Others 6,212,280
____________ 1,461,162
____________
607,793,269
____________ 544,713,172
____________
(2) As at 31 December 2018, there were no significant outstanding balance aged over than one year.
- 100 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
17. Capital reserve
2018 31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Share premium 557,222,454
___________ -
______ -
______ 557,222,454
___________
18. Revenue and costs
Revenue is analysed as follows:
2018 2017
RMB RMB
Principal revenue 874,292,088 1,310,443,414
Other revenue 2,154,982
____________ 813,440
____________
876,447,070
____________ 1,311,256,854
____________
Operating cost is analysed as follows:
2018 2017
RMB RMB
Principal operating cost 772,497,769 1,165,362,798
Other operating cost 1,989,262
____________ 590,610
____________
774,487,031
____________ 1,165,953,408
____________
19. Taxes and surcharges
2018 2017
RMB RMB
Consumption tax 27,262,209 53,236,697
City construction tax 3,214,543 10,190,867
Education fee and surcharges 2,159,612 5,817,116
Property tax 1,854,486 2,267,901
Land use tax 3,168,559 3,168,559
Stamp tax 310,835 603,461
Others 376,517
____________ 1,285,624
____________
38,346,761
____________ 76,570,225
____________
- 101 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
20. General and administrative expense
2018 2017
RMB RMB
Salary and employee benefit 55,580,888 38,430,904
Maintenance fee 8,396,432 6,192,525
Office fee 3,641,210 3,881,091
Service fee 3,495,328 9,194,005
Depreciation 3,375,180 4,286,164
Property insurance fees 2,961,742 3,080,521
Leasing expenses 2,790,358 2,276,896
Amortization 2,379,153 2,695,110
Shuttle bus 1,442,340 1,719,660
Security and sanitation fee 763,792 941,434
Travelling expenses 324,566 527,464
Greening fee amortization 312,080 394,604
Others 5,042,139
____________ 5,498,757
____________
90,505,208
____________ 79,119,135
____________
21. Financial Expense
2018 2017
RMB RMB
Interest income (41,821,372) (18,602,199)
Exchange loss 4,443,175 1,040,832
Interest expenses 16,075,353 17,414,181
Bank charges 1,010,107
____________ 784,754
____________
(20,292,737)
____________ 637,568
____________
22. Investment income
2018 2017
RMB RMB
Long-term equity investment income accounted
for by using the cost method 964,128,659
____________ 798,877,905
____________
- 102 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
22. Investment income - continued
Among the long-term equity investment income accounted for by using cost method, the investees
with investment income accounting for more than 5% of the Company's total profit before tax are
as follows:
Investees 2018 2017
RMB RMB
Sales Company 867,404,116 577,813,022
Beijing Chateau - 87,000,000
Wine Sales - 53,461,029
Xinjiang Tianzhu -
____________ 48,620,373
____________
867,404,116
____________ 766,894,424
____________
As at 31 December 2018 and at 31 December 2017, there are no significant restriction on the
remittance of investment income to the Company.
23. Supplement to cash flow statement
2018 2017
RMB RMB
(1) Cash flows from operating activities calculated by
adjusting the net profit:
Net profit 969,588,573 793,598,010
Add: Depreciation of investment properties 1,857,902 590,610
Depreciation of fixed assets 23,450,089 32,201,177
Amortization of intangible assets 2,379,153 2,379,153
Depreciation of biological assets 7,500,169 6,781,447
(Gains)Losses on disposal of assets (12,411,962) 29,625
Finance expenses 17,808,569 18,614,396
Investment income (964,128,659) (798,877,905)
Decrease/(increase) in deferred tax assets 4,592,940 (1,802,655)
Increase / (decrease) in inventories (37,112,687) 444,690,365
Decrease in trade receivables 37,072,169 103,406,898
Increase / (decrease) in trade payables 92,609,575
____________ (3,541,352)
____________
Net cash flows from operating activities 143,205,831
____________ 598,069,769
____________
- 103 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
23. Supplement to cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments
2018 2017
RMB RMB
Change the claim on subsidiaries into Long-term
equity investments 2,802,406,445 2,386,907,749
Increase the investment in subsidiaries
with bank acceptances - 96,345,678
Recover the investment in subsidiaries
with bank acceptances -
____________ (96,345,678)
____________
2,802,406,445
____________ 2,386,907,749
____________
24. Cash and cash equivalents
2018 2017
RMB RMB
Closing balance of Cash and bank 624,588,809 559,174,466
Less:
Restricted bank deposits 2,611,350 2,645,410
Restricted other monetary assets 44,592,577 57,960,190
Deposit with a period of over three months 45,000,000
____________ 5,000,000
____________
Closing balance of cash and cash equivalents 532,384,882
____________ 493,568,866
____________
2018 2017
RMB RMB
Cash and bank 532,384,882 493,568,866
Including: Cash and bank 3,177 5,280
Bank deposits on demand 532,381,705
____________ 493,563,586
____________
Closing balance of cash and cash equivalents 532,384,882
____________ 493,568,866
____________
- 104 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions
(1) Purchase of materials
2018 2017
RMB RMB
Subsidiaries 209,808,816 352,495,622
Other related parties 88,897,126
____________ 82,394,392
____________
298,705,942
____________ 434,890,014
____________
(2) Sales of goods
2018 2017
RMB RMB
Subsidiaries 867,995,960 1,302,056,254
Other related parties 8,451,110
____________ 9,200,600
____________
876,447,070
____________ 1,311,256,854
____________
(3) Sales of Fixed assets
2018 2017
RMB RMB
Subsidiaries 134,445 47,843,203
Other related parties -
____________ 3,934,643
____________
134,445
____________ 51,777,846
____________
(4) Interest income from occupation of funds
2018 2017
RMB RMB
Subsidiaries 35,823,556
____________ 14,912,649
____________
(5) Lease income
2018 2017
RMB RMB
Subsidiaries 1,997,164
____________ 739,491
____________
- 105 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions - continued
(6) Guarantees
Whether
guarantees are
Guaranteed party Currency Amount Beginning date Due date fulfilled completely
R&D Center RMB 500,000,000 8 March 2017 8 March 2022 No
Australian Kilikanoon
Estate AUD 17,000,000 13 December 2018 13 December 2023 No
26. Receivables and payables to related parties
(1) Trade receivables
Trade receivables 31/12/2018 31/12/2017
Bad debts Bad debts
Balance provision Balance provision
RMB RMB RMB RMB
Other related parties 1,447,973
__________ -
_______ 7,805,333
__________ -
_______
Other receivables 31/12/2018 31/12/2017
Bad debts Bad debts
Balance provision Balance provision
RMB RMB RMB RMB
Subsidiaries 523,579,831 - 589,897,407 -
Other related parties 813,440
__________ -
_______ 813,440
__________ -
_______
524,393,271
__________ -
_______ 590,710,847
__________ -
_______
Other non-current assets 31/12/2018 31/12/2017
Bad debts Bad debts
Balance provision Balance provision
RMB RMB RMB RMB
Subsidiaries 972,700,000
__________ -
_______ 3,718,674,166
__________ -
_______
The above receivables due from related parties are unsecured, have no interest or fixed date of
repayment.
- 106 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
26. Receivables and payables to related parties - continued
(2) Trade payables
Trade payables 31/12/2018 31/12/2017
RMB RMB
Other related parties 28,892,583
____________ 29,145,914
____________
Other payables 31/12/2018 31/12/2017
RMB RMB
Subsidiaries 585,044,038 534,530,323
Other related parties 450,000
____________ -
____________
585,494,038
____________ 534,530,323
____________
The above payables due to related parties are unsecured, have no interest or fixed date of
repayment.
- 107 -
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2018
I. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2018
RMB
Corporate income tax effect 11,368,355
Government grants credited in profit and loss
(except for those recurring government grants
that are closely related to the Group's operation
and have proper basis of calculation) 87,281,434
Other non-operating income and expense 3,817,401
Corporate income tax effect (25,157,188)
The impact of non-controlling interests' equity (103,311)
__________
77,206,691
__________
The Company's extraordinary profit and loss items are recognized in accordance with the
regulations of the "public offering of securities of the Company Disclosure Explanatory Notice
No. 1 - non-recurring profit and losses" (SFC [2008] No. 43).
II. RETRUN ON EQUITY ("ROE") AND EARNINGS PRE SHARE ("EPS")
The Company's ROE and EPS are calculated in accordance with the CSRC regulations of the
"Information Preparing and Disclosure Rules of Public Company No. 9 - calculation and
disclosure of ROE and EPS" (Revised 2010).
Weighted average
2018 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 11.23 1.52
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 10.40
_____ 1.41
____
The Company did not have any potential dilutive shares.
Weighted average
2017 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 12.14 1.51
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 11.60
_____ 1.44
____
The Company did not have any potential dilutive shares.