Chongqing Changan Automobile
Company Limited
Semi-annual report 20101
I. Important notes, Explaination and Catalogue
i. Important Notes
The Board of Directors& Supervisors of Chongqing Changan Automobile Co., Ltd. (hereinafter
referred to as “the Company”) , the directors, supervisors and senior management guarantee that the
information contained in the report is free of false records, misguiding statements or significant
omissions, and assume individual and joint liabilities for the truthfulness, accuracy and integrity of the
report.
No director, supervisor or senior management have raised any disagreement with regard to the
truthfulness, accuracy and completeness of the semi-annual report..
All directors attended the Board meeting.
The financial report in this reporting period is unaudited.
Chairman Mr. Xu Liuping, General Manager Mr. Zhang Baolin, Chief Accountant Mr. Cui Yunjiang,
and the Chief of Accountant department, Mr. Ni Erke, herein guarantee: the truthfulness and
completeness of the financial statements of this semi-annual report.
ⅱContents
I Important notes and contents 1
II General introduction of the Company 2
III Change in shares and information about shareholders 5
IV Information on directors, supervisors, senior executives and staffs 8
V Report by Board of Directors 9
VI Important Issues 12
VII Financial Statements 18
VIII Document for future reference 742
II.General Introduction of the Company
1. The Company’s legal Chinese name: 重庆长安汽车股份有限公司
The Company’s legal English name: Chongqing Changan Automobile Company
Limited
2. Place of listing: Shenzhen Stock Exchange
Abbreviated name of the stock: Changan Automobile Changan B
Stock Code: 000625 200625
3. Registered address: No. 260, Jian Xin East Road, J iang Bei District, Chongqing
Post code: 400023
Office Address: No. 260, Jian Xin East Road, Jiang Bei Distr ict, Chongqing
Post code: 400023
Internet Websi te of the Company: http://www.changan.com.cn
Email Address of the Company: cazqc@changan.com.cn
4. Legal representative of the Company: Mr. Xu Liuping
5. Secretar ies of the Board: Mr. Cui Yunjiang, Ms. Li Jun
Address: No. 260, Jian Xin East Road, Jiang Bei District, Chongqing
Telephone: (023) 67594009
Fax: (023) 67866055
Email address: cazqc@changan.com.cn
6. Pub l ications for information disclosure of the Company: China Secur i ties,
Securities Times and Hong Kong Commercial Daily
Website for information disclosure of the Company: http://www.cninfo.com.cn
Filing Location of Semiannual Report: Office of the Board of Directors
7. Key accounting data and financial indicators
Unit：（RMB）Yuan
This reporting
period end as
on 30 June
2010
Last reporting period end as on
31 December 2009
Increase/Dec
rease (%)
Before
adjustment
Adjusted Adjusted
Total assets 27,263,028,614.29 24,471,416,861.89 25,241,314,645.21 8.01%
Owner’s equity(or shareholder’s
equity) 9,907,922,628.88 8,800,120,393.15 8,895,667,191.69 11.38%
Share capital 2,325,657,615.00 2,334,022,848.00 2,334,022,848.00 -0.36%
Net assets per share 4.26 3.77 3.81 11.81%3
Reporting
period
(January-June
)
Corresponding period of
previous year
Increase/Decr
ease (%)
Before
adjustment
Adjusted Adjusted
operation total income 16,627,454,932.78 11,282,706,557.00 11,500,650,715.90 44.58%
Operation profit 1,374,742,402.37 499,571,315.00 486,019,960.40 182.86%
Gross profit 1,371,628,474.32 498,132,565.00 484,740,350.97 182.96%
Net profit 1,366,565,351.61 532,801,780.00 522,993,993.40 161.30%
Net profit except non-recurring loss
and profit 1,365,347,793.93 534,211,783.00 524,244,856.72 160.44%
Basic earnings per share 0.59 0.23 0.22 168.18%
Diluted earning per share 0.59 0.23 0.22 168.18%
Return rate on net assets 14.27% 6.78% 6.66% Increase 7.61
percentage points
Net cash flow from operating
activities 2,687,373,910.69 1,303,517,504.00 1,504,416,207.86 78.63%
Net cash flow from operating
activities per share 1.16 0.56 0.64 81.25%
Note1:Since May 31, 2010, the Company started to merge Chongqing Changan Jinling Automobile Parts Co., Ltd. which is
controlled by the same parent. According to the specifications in" Accounting Standards for Business Enterprises," all parties should be
seemed as in current condition when the final controller proceed control, corresponding reports are to be adjusted, including the
balance sheet, comparison of statement of changes in owner’s equity between last period and earlier this period, comparison of
income statement and cash flow over between last period and this period.
Note2: deduction from non-recurring profit and loss project and cash
Non-recurring profit and loss project Amount
Gain/loss of non-current assets -2,090,764.45
Government subsidies accounted into current gain/loss account, other than those
closely related to the Company’s common business, comply with the national
policy and continues to enjoy at certain fixed rate or amount.
1,557,629.83
Gain/loss from change of fair value of transactional asset and liabilities, and
investment gains from disposal of transactional financial assets and liabilities and
sellable financial assets, other than valid period value instruments related to the
Company’s common businesses
4,563,744.00
Other non-business income and expenditures other than the above -1,734,397.59
Influenced amount of income tax -537,688.81
Influenced amount of miniority shareholders’ equity -540,965.30
total 1,217,557.68
8. Net asset profit rate and profit index per share
Net asset profit rate Profit per share (yuan per share)
Profit in the reporting period Apportion Average Basic profit per
share
Diluted profit
per share
Net profit attributed to listed company
shareholders 13.79% 14.27% 0.59 0.59
Net profit attributed to listed company
shareholder except non-recurring loss
and profit
13.78% 14.25% 0.59 0.594
9. Reconciliation of the net prof its presented under the PRC accounting standards
and International Financial Reporting Standards
Unit：（RMB）Yuan
Net profits Net assets
Jan.-Jun., 2010 Jan.-Jun., 2009 As at 30 Jun.
2010
As at 31 Dec,
2009
Account report according to the
international finance report
rules
1,366,565,351.6
1 522,993,993.40 9,836,638,563.8
8 8,824,383,126.69
Account report according to the
enterprise accounting rule and
system under the PRC
1,366,565,351.6
1 522,993,993.40 9,907,922,628.8
8 8,895,667,191.69
Adjustment of according to international accounting rules：
Payment to currency
shareholders of A share cash
opposite price（Note ）
-71,284,065.00 -71,284,065.00
Total -71,284,065.00 -71,284,065.00
Difference between Chinese
and international accounting
standard
Note Jiangling Holding company, the Company’s JV, held by
Jiangling stake in listed companies the right to paid circulation on the
price in cash, according to international norms should be included in
the profit and loss.5
Ⅲ. Change in shareholdings and information about main shareholders
ⅰChange in shareholdings
Balance before
current change
Addition and deduction（+，-） during
change
Balance after current
change
Quantity Ratio
Addi
tiona
l
issu
ed
Bo
nus
sha
re
Transf
erred
from
accum
ulated
fund
other subtotal quantity ratio
Ⅰ.Non-circulated
shares 829,694,860 35.55% -622,263,878 -622,263,878 207,430,982 8.92%
1、State-owned
shares
2、State-owned
legal person shares 829,685,204 35.55% -622,263,903 -622,263,903 207,421,301 8.92%
3、Other domestic
holding shares
including:
domestic non-state
legal person shares
Domestic natural
person shares
4、Foreign-hold
shares
including:
foreign legal
person shares
foreign natural
person shares
5、share of senior
management 9,656 0.00% 25 25 9,681 0.00%
Ⅱ.Circulated
shares 1,504,327,988 64.45% 613,898,645 613,898,645 2,118,226,633 91.08%
1、Domestic listed
RMB shares 899,527,988 38.54% 622,263,878 622,263,878 1,521,791,866 65.43%
2、Domestic listed
foreign shares 604,800,000 25.91% -8,365,233 -8,365,233 596,434,767 25.65%
3、Oversea listed
foreign shares
4、Others
Ⅲ.Total shares 2,334,022,848 100.00% -8,365,233 -8,365,233 2,325,657,615 100.00%
Note：During the reporting period, the Company’s domestic listed foreign investment shares are reduced due to
repurchase of B shares for cancellation.
ⅱ. The information on top 10 shareholders
Unit: share
Total shareholders
number
Persons in total 239,721, among of which A shareholder is 204,277, B
shareholder is 35,444.
The top ten shareholders
Name of shareholders Nature of
Shareholders
Ratio of
total
share
Total number
of shares
Total number of
non-circulated
shares
Pledged/
Frozen shares
number6
CHINA CHANGAN
AUTOMOBILE COMPANY
LIMITED
State-owned legal
person 45.71% 1,063,087,489 207,421,301 0
DREYFUS PREMIER
INVESTMENT FDS
INC.-DREYF
Foreign legal
person 1.13% 26,292,615 0 0
BONJOUR CHINA FUND
2
Foreign legal
person 0.71% 16,568,176 0 0
Bank Of China－E Fund
Shenzhen Stock Exchange
100 Exchange-Traded Fund
Domestic
non-state legal pe 0.56% 13,131,333 0 0
GUOTAI JUNAN
SECURITIES(HONGKON
G) LIMITED
Foreign legal
person 0.49% 11,356,539 0 0
JPMBLSA RE FTIF
TEMPLETON CHINA
FUND GTI
Foreign legal
person 0.40% 9,239,280 0 0
China Reinsurance (Group) Co.,
Ltd. - Traditional - General
insurance products
Domestic
non-state legal pe 0.37% 8,499,844 0 0
Rongtong Shenzhen Stock
Exchange
100 Index Securities Investment
Fund
Domestic
non-state legal pe 0.35% 8,105,956 0 0
Tokai Securities - Bank of
Communications -
Dongfeng 5 Asset
Management Plan sets
Domestic
non-state legal pe 0.33% 7,634,123 0 0
TEMPLETON CHINA
WORLD FUND INC
Foreign legal
person 0.32% 7,507,924 0 0
The top 10 holders of circulated shares
Name of shareholders
Total number of
circulated
shares
Share type
CHINA CHANGAN AUTOMOBILE COMPANY
LIMITED 855,666,188 RMB ordinary share
DREYFUS PREMIER INVESTMENT FDS
INC.-DREYF 26,292,615 Foreign capital stock listed within
China
BONJOUR CHINA FUND 2 16,568,176 Foreign capital stock listed within
China
Bank Of China－E Fund Shenzhen Stock Exchange 100
Exchange-Traded Fund 13,131,333 RMB ordinary share
GUOTAI JUNAN SECURITIES(HONGKONG)
LIMITED 11,356,539 Foreign capital stock listed within
China
JPMBLSA RE FTIF TEMPLETON CHINA FUND GTI 9,239,280 Foreign capital stock listed within
China
China Reinsurance (Group) Co., Ltd. - Traditional -
General insurance products 8,499,844 RMB ordinary share
Rongtong Shenzhen Stock Exchange
100 Index Securities Investment Fund 8,105,956 RMB ordinary share
Tokai Securities - Bank of Communications - Dongfeng 5
Asset Management Plan sets 7,634,123 RMB ordinary share
TEMPLETON CHINA WORLD FUND INC 7,507,924 Foreign capital stock listed within
China
Related partner relationship of the ten largest
shareholders and their consistant act
Among the largest ten share holders, the state-owned legal person
shareholder CHINA CHANGAN AUTOMOBILE COMPANY7
LIMITED had no relationship with other share holders, and nor was
the party who agreed to act alike as stipulated in Administrative
Measures on Information Disclosure Concerning Changes in
Shareholdings of Listed Companies. The company did not know
whether there was relationship among the large ten circulated
shareholders , and nor knew whether they were the parties who
agreed to act alike as stipulated in Administrative Measures on
Information Disclosure Concerning Changes in Shareholdings of
Listed Companies.
ⅲ. The top 10 holders of non-circulated shares and condition of limited sale
By the end of the reporting period, the non-circulated shares shareholder,
China Changan Automobile Group Co., Ltd. holds 1,063,087,489 shares, of which
855,666,188 shares are circulated shares, the remaining 207,421,301 shares
are non-circulated shares and will be released after the implementation of
management incentive plan according to the commitment of share reform.
ⅳ. Change of controlling shareholder and actual controllers.
During the report period, there’s no change in controlling shareholder
and actual controllers.8
Ⅳ Information on Directors, Supervisors and Senior Executives
ⅰDuring the report period, there’s no change in shareholding for directors, supervisors and senior
executives.
ⅱ.In the report period, there are new employment or dismiss in directors, supervisors and senior
executives.
After taking a vote and passing through the ninth session of the Board of Director’s
fifth meeting on Feb, 09, 2010, Mr. Deng Zhiyou , Mr. Zhao Luchuan were no longer the
director of the company due to employment change. In accordance with the company’s
big shareholders’ recommendation, Mr. Lian Gang, Ma Junpo were appointed
director of the Company while Mr. Zou Wen chao , Wu Xuesong were no longer the
vice general manager of company. , nominated by General manager, elected Mr. Du Yi
by board of directors as vice general manager .
After taking a vote and passing through the forht session of the Board of Director’s
fifth meeting on Feb, 09, 2010, Mr. Liu Zhiyan was no longer the supervisor of the
company due to employment change. In accordance with the company’s big
shareholders’ recommendation, elected Mr. Yang Jian as the supervisor of company.
After taking a vote and passing through the first temporary big shareholders’on
Mar.08, 2010, elected Mr. Lian Gang, Ma Junpo as the director and supervisor of
company.9
Ⅴ The Report from Board of Directors
ⅠThe operation of the Company during the reporting period
㈠The main business of the company
The Company is mainly engaged in the development, manufacturing and sales of
passenger cars and commercial cars. The current products of the Company, its
subsidiaries and its joint venture mainly include: mini-vehicle such as Changan Star
mini-commercial vehicle, Changan Brand mini-truck, Changan sedan such as Benni,
Jiexun, CX30 and Yuexiang; Changan Suzuki’s Gazalle, Swift, new Alto and SX4;
Changan Ford Mazda’s new Mondeo“Zhisheng”, Focus, New Fiesta, Mazda 3, Mazda 2,
S-MAX, Volvo S40 sedan and Volvo S80 sedan; Jiangling Holding’s Landwind MPV,
and sedan such as Landwind Fenghua and Fengshang.
㈡The operation of the Company during the reporting period
In the first half of 2010, the Company continued to take " Course Leading Plan " as
the guide, overcame many difficulties such as economic environment complexity,
industry slowdown, increased market competition, closely focused on all-year goal, paid
close attention to marketing management, continually enhanced cost control and product
construction optimization, achieved good situations in a steady growth of own business
profitability, and increase of investment income contribution from JV business
year-on-year, the Company’s scale and efficiency continue to grow.
In the first half year, the Company and its subsidiaries, JVs totally produced 956,440
vehicles, up 49.85 percent year-on-year; sold 974,499 vehicles, up 47.60 percent
year-on-year, production and sales both broke the record. Production and sales still
ranked in the first 4 in Chinese automotive industry.
ⅡCompany’s operation harvest and finace status during the reporting period
㈠Chart of the industry or main products that account for over 10%
Unit: (RMB) Yuan
Distribution on industries
On industry or
product Turnover Operation
cost
Operation
profit
ratio
Change of
income over
last year %
Change of
cost over
last year %
Change of operation
profit ratio over last
year %
Vehicle
manufacturing
1,662,745.00 1,338,785.00 19.48% 44.58% 45.55% Decrease 0.54
percentage points
Distribution on products
Whole vehicles 1,602,941.00 1,287,431.00 19.68% 44.68% 44.86% Decrease 0.1
percentage points
others 59,805.00 51,354.00 14.13% 42.00% 65.34% Decrease 12.12
percentage points10
㈡Notes for the significant change in profit components, main business or its structure and
profit in the main business during the report period
During the reporting period, the Company’s Investment income has been increased to
1.0035 billion RMB from the same period of the last year which was 337.67 million
RMB, representing of proportion of up to 73.43 percent in the consolidated net profit
from 64.56% of the same period of last year, and that mainly because the investment
income from Changan Ford Mazda Automobile Co., Ltd. has increased 436.59 million
RMB and the investment income from Jiangling Holdings Co., Ltd. increased 132.25
million RMB.
㈢The share holding corporation whose investment income reach over 10%
(including 10%) of the Company’s net profit
Unit: RMB Ten Thousand Yuan
Corporation name Main product Revenue Net profit
Changan Ford Mazda
Corporation
Mondeo, Focus, Mazda 3, Mazda 2, SMAX
and Volvo S40 sedan 2,340,473 150,714
Jiangling Holding
Corporation
Landwind MPV, and sedan such as
Landwind Fenghua and Fengshang 78,749 31,727
㈣Operation Result and Financial Analysis
Due to the expansion of the production and sale, by the end of reporting period, the
total asset of Company is 27.263 billion Yuan, comparing with the beginning of this
year, up 8.01%. Total liability is 17.23 billion Yuan, comparing with the beginning of
this year, up 6.34%; liability rate is 63.20%, comparing with the beginning of this year,
down 0.99%. Monetary fund is 22.42%, up 4.82% than the beginning of this year,
receivable note and receivable are 25.25%, decreased 3.29% than the beginning of this
year, stock is 7.04%, decreased 3.66% than the beginning of this year, immaterial asset
is 3.14%, up 1.65% than the beginning of this year, total asset structural is more
reasonable.
In the first half of 2010, due to the growth in car sales, the operating income,
operating costs, sales taxes and additional sales expenses increased significantly. Gross
margin remained stable during the reporting period and the investment income increased
197.18 percent year on year, total profit, and net profit attributable to the parent
increased 161.30% and 182.96% respectively year on year.
In the first half of 2010, the Company achieved net increase in cash and cash
equivalents of 2.453 billion Yuan, up 80.03 percent year on year, of which net cash flow
from the operating activities is 2.687 billion Yuan, up 78.63 percent year on year, the
Company's net increase in cash and cash equivalents mainly is from the operations, that
reflects the Company is with high quality in operation.11
Ⅲ The problems ,troubles and solutions of operation
At present, China is facing a complexity of the macroeconomic situation of economic
restructuring and economic slowdown, the domestic automobile industry is gradually
returning to a rational growth. On the other hand, China’s promotion of energy-saving
vehicles and recalling system become stronger and stricter, which brings the domestic
auto manufacturers opportunities and challenges.
To achieve the goal of the year and the long-term planning, the Company’s
management will focus on the following work in the second half of this year: First is to
innovate the marketing services to win the market tough fight. Second is to strengthen
quality control. Third is to make an overall plan for brand and marketing strategy.
Fourth is to strengthen the strategic planning. Fifth is to enhance R & D ability to build
a first-class R & D system. Sixth is to do a good job in work safety in production and
procurement, and strengthen cost competitiveness strategy. Seventh is to accelerate the
development of joint ventures. Eighth is to promote the leading strategy of human
resources. Ninth is to build a standardized management system.
Ⅳ Investment of the company during the reporting period
㈠No usage information on raised money is available during the reporting period
㈡Usage information on non-raised money during the reporting period was as follows (Unit:
RMB ten thousand Yuan)：
NO. Investment
project
Invested capital in
Reporting period Schedule Anticipated profit
1 vehicle
programme
11,621 Under construction
2 engine
programme
18,478 Under construction
3 TechnologyDev
elopment
3,998 Under construction
4 Industry Zone 8,770
5 others 25,536 Under construction
Total 68,403
Included in the total
profit of the Company12
VI. Important Issues
Ⅰ. Corporate Governance
The Company has been strictly complying with the relevant laws and regulations,
including the Company Law, the Securities Law, the Regulations for the Governance of
Listed Companies, the Regulations for Information Disclosure of Listed Companies, the
Regulations for Stock Listing in Shenzhen stock exchange, the Guidelines for Internal
Control Listed Companies’ in Shenzhen stock exchange and continuously improving the
corporate governance structure of the Company, adopting modern best practices and
standardizing the management and operations of the Company. The Company drew up and
executed a series of disciplines, including Articles of Association, Regulations on
Shareholders’ general meeting, Regulations on Board of Directors, Regulations on Board
of Supervisors, Regulations on Guarantee, Management Regulations on Investment
Relationship and regulations on Information Disclose.
In the report period, the Company made External Message Submission, Application and
Management Procedure and Responsibility Tracking System for Information Disclosure Error in
Annual Report, and modified Collected Capital Management System. In accordance with
Determination on Modifying Provision on Cash Bonus of Listed Company (Zhengjianhui No. 57) by
China Securities Regulatory Commission, the Company edited the policy of cash bonus in the
regulations. In the report period, the company will continue to promote corporate
governance, to further improve the internal control system, to strengthen the management
of related party transactions, to raise the level of normal operation of the company, and
effectively protect the interests of small and medium-sized shareholders and promote rapid
and healthy development of the company. The actual conditions of the Company’s
corporate governance do not differ substantially from those stipulated by the regulations
on corporate governance of listed companies issued by China Securities Regulatory
Commission.
Ⅱ.The implementation situation of the annual distribution of profits in 2009 and the
semi-annual distribution plan of profits in 2010
1.The implementation situation of the annual distribution of profits in 2009
The profit distribution plan of 2009 is made in the company’s 2009 annual
shareholders’ meeting which was held on April 26th, 2010.The plan is as follow: The basis
of total shares 2,325,657,615 at the end of 2009, donating 10 shares, giving interest 0.65
RMB. A share interest rights registration date is 9th Jun.2010, Ex. Right and ex. dividend
date is 10th Jun.2010. B share final dealing date is 9th Jun.2010, ex dividend date is10th
Jun.2010, registry date is17th Jun.2010.
2. The semi-annual distribution plan of profits in 2010: non-distributed and no
transformation from provident fund to stock shares
3. In the report period, the company did not implement the equity incentive program
III. In the report period, the company did not have any significant litigation and arbitration13
matters
IV. In the report period, the company did not have any significant matters related of the
acquisitions, sale and restructuring of the asset.
V. Significant related party transactions issues
1. Related party transactions execution regarding to the daily operation
In the period, the company’s transaction issues related to the daily operation such as,
the transaction parties, the transaction content, the pricing basis and the transaction price
etc. has been published in , and on April, 27th, 2010, according to the pre-arranged plan approved in
the 2009 annual shareholders’ meeting. Until the end of this report period, related parties
purchasing volume amounted to 3,684,060,000 RMB, sales volume amounted to
2,584,220,000 RMB, general service volume amounted to 169,430,000 RMB, respectively
accounted for 45.48%,39.10%, and 53.14% of the predicted total volume of 2010.
In the first half year, the performance of the Company exceeds the expectation. The
content of related-party transaction fulfils the estimation.
The transaction content has no significant change compared to the predicted one.
2. During the reporting period, significant related party transactions issues, see the
financial report noted as transaction parties’ relationship and the transactions
VI. Major contracts and their fulfillment
1. There were no major entrustment, contracting by the Company of the assets of
other companies and there were no major entrustment, contracting of the Company’s assets
by other companies. The lease of the assets of other companies by the Company and lease
of the assets of the Company was shown as follows:
According to the production needs, the Company rented the office building of
Changan Automobile (Group) Company’s Sales Branch, the total area is 2886.79 square
meters, the monthly rental is RMB 40 yuan per sq. m. rented some offices in Changxin
Road from Changan Automobile (Group) Company, he total area is 588 square meters, the
monthly rental is RMB 40 yuan per sq. m and the Company rented Auto workshops
building of 34,147 square meters and monthly rental is RMB 35 yuan per sq. m.; The
Company rented 385,770 square meters land of Changan Automobile (Group) Company,
yearly rental is RMB 33 yuan per sq. m. The company rented 2,803.1 square meters
production and office building in Cuntan of Changan Automobile (Group) Company，
monthly rental is RMB 35 yuan per sq. m. The company rented 11,617.65 square meters
production building in Dashiba of Changan Automobile (Group) Company，monthly rental
is RMB 35 Yuan per sq. m. The company rented 2,387.47 square meters office building in
Dashiba of Changan Automobile (Group) Company，monthly rental is RMB 40 Yuan per
sq. m. The Company rented 214,623.55 square meters land in Cuntan of Changan
Automobile (Group) Company，yearly rental is RMB 33 yuan per sq. m. ;the Company14
rented 48,500 square meters land in Yubei Airport Machining Area of Changan
Automobile (Group) Company, the yearly rental is RMB 33 yuan per sq. m.; The company
rented 5,800.56 square meters offices from Changan Real Estate Development Company,
monthly rental is RMB 48 Yuan per sq. m.; Changan International Trading Company , a
subsidiary of Changan Automobile Company rented 1,933.56 square meters offices from
Changan Real Estate Development Company, monthly rental is RMB 48 Yuan per sq. m.
2. Asset entrustment matters
There is no entrustment or no continuous entrustment of cash management occurring
in the reporting period except for loans entrustment. According to the directorate’s
decision of Nanjing Changan on November 3, 2007, Nanjing Changan as the entruster has
delivered a trust credit of RMB 23.50 million yuan to Lishui State-Owned Asset Holding
Company Limited through the Lishui sub-branch of Bank of China. The Above three
parties signed a 24-month trust credit contract with the annual rate of 7.2% on November
28th, 2007. The interest started to execute from November 29, 2007. Upon the expiration
the contract,three patties re-signed a loan agreement entrusted entrusted loan period: one
year from November 29, 2009 to November 28, 2010, other conditions are the same.
VII. Commitment
Commitment of the controlling shareholder (CHINA CHANGAN AUTOMOBILE
COMPANY LIMITED) in the non-tradable shares reform:
1. Comply with laws, rules and regulations, and perform legal duty of commitment.
2. Since the non-circulated shares are entitled to be circulated, they can’t be dealt
with or transfer it within 24 months. At the expiration of 24 months, the shareholders of
non-circulated shares can sell the shares in exchange in amount of no more than 5% of
total within 12 month, and no more than 10% of total within 24 months.
3. After the reform of non-tradable shares, perform the scheme of incentive share
awards for the management according to government regulation.
VIII. Share status held by the Company in other listed companies, unlisted financial firms
and the companies planning to list
1. By the end of the reporting period, the Company held 5.33% shares of Weaponry
Equipment Group Accounting Ltd, with initial capital cost RMB80 million and book value
RMB80 million.
2. In the end of reporting period, the Company held 17.75 million shares, which
accounted for 0.932% shares of the whole shares of South-western Securities Co., Ltd., the
sales period is during the 36 months since February 17, 2009. According to the
requirement of Chongqing municipal government on the Southwest Securities’ reform and
recombination, the Company signed Share Entrustment Agreement with Chongqing Yufu
Asset Management Co. Ltd that is a state-owned company under the Chongqing municipal
government, entrusting Chongqing Yufu Asset Management Co. Ltd to manage the shares
held by Changan in Southwest Securities.15
IX. The independent directors’ special notes and independent advices towards the funds
transaction between the related parties and external security issue
The company’s five independent directors, Mr. Ouyang Gaoming, Mr. Dong Yang, Mr.
Chen Zhong Mr. Wang Zhixiong and Mr. Peng Shaobing have given some special advices
towards the funds transaction between the related parties and external guarantee as
followissue related to the issues mentioned above according to the specified regulation
made by the China Securities such as, Norms of Financial Transactions and External
Security Notice With Related Parties and Listed Companies ([2003]56); Norms of Listed
Company’s External Security ([2005]120); Advisory Norm of Establishing Independent
Director Regulation in Listed Company and Governance Notice of Listed Company, their
advices are as follow:
1. The company has strictly controlled the external security risk and has no
law-violated security matter during the reporting period.
2. During the reporting period, all the transaction funds between the related parties
are related to the normal operational funds. There’s no shareholder or subsidiary that has
held the company’s fund.
X. The Semi-Annual financial report of 2010 is unaudited
XI. Other important issues
1. During the reporting period, the company and its directors, supervisors, senior
management, the actual controller is not subject to the right authorities or judicial
discipline inspection departments to investigate, or be held criminally responsible by the
china securities regulatory commission for inappropriate candidates, or got punishment
from other administrative departments and stock exchange.
2. According to the proposal on buy-back partial domestic listed foreign shares (B
shares) , examined and passed on the second temporary Shareholder Meeting on March 3,
2009, the Company’s domestic partial foreign shares (B shares) listed in China expired to
buy back until March 3, 2010, and the Company's B shares repurchase program was
completed. In the repurchase, the company’s repurchased total number of B shares
accumulated to 8,365,233 shares, occupying 0.3584% of the company's total share capital.
On March 17, 2010, the Company had finished write-off of share repurchase in the China
Securities Register and Clearing Co., Ltd. Shenzhen Branch, carried out industry
&commerce change formalities related to capital reduction.
3.According to the related proposal to issue additional A shares to raise funds, which
was examined and approved on the first time temporary General Shareholders’ Meeting on
March 8, 2010 meeting, the Company will issue share less than 20% of total capital stock
before the issuance, to raise not more than RMB 4 billion yuan (including issuance costs)
which will be used for Changan car production line expansion, technological
transformation projects, small-displacement engine upgrading projects, and its own brand
R&D capacity-building projects. The current application materials have been submitted to16
the China Securities Regulatory Commission.
4.Changes in consolidation scope
During the reporting period, in order to improve the Company’s mold development
and manufacturing capacity, lower the manufacturing costs, the Company has
accomplished the cancellation of Chongqing Changan Automobile Mould Co., Ltd.
through overall absorption and merging. The absorption and merging have no effect on the
Company's financial statements.
During the reporting period, in order to strengthen the management of components &
parts and control of quality of the components & parts, the Company acquired 97.1% of
the shares of Chongqing Changan Jinling Automobile Parts Co., Ltd., which was held by
China Changan Automobile Group Co., Ltd., makes it become wholly-owned subsidiary of
the Company. And the Company carried out merge in May 31, 2010 by taking as it is
under the same controller, this new added consolidation scope has no significant impact on
the Company’s financial statements.
5.The research and interview reception during the reporting period
During the reporting period, the Company received the research and production line
visit from domestic and overseas fund management company, Securities Company,
investment institute and so on. During the communication with the investors, related
personnel of the company strictly followed the regulation of Shenzhen Stock and
Exchange’s instruction for Information Fair Release for Listed Companies and Investors
Relationship Management System of the company, did not selectively or privately release,
reveal or disclose non-published important information to special persons or companies,
guaranteeing the fairness of information release.
Registration form of research, communication and interview reception etc. during
the reporting period
Date Location manner Reception object Content discussed and material
offered
2010.1.5 Meeting Room,
Changan Headquarters On-Site Survey Value Partners Ltd Automotive Industry Development and
Company’s Business
2010.1.6 Meeting Room,
Changan Headquarters On-Site Survey Dong Xing Securities Automotive Industry Development and
Company’s Business
2010.1.11 Meeting Room,
Changan Headquarters On-Site Survey Gao Hua Securities Automotive Industry Development and
Company’s Business
2010.1.18 Meeting Room,
Changan Headquarters On-Site Survey DAIWA Automotive Industry Development and
Company’s Business
2010.1.19 Meeting Room,
Changan Headquarters On-Site Survey Huatai United Securities、
HuaAn Funds
Automotive Industry Development and
Company’s Business
2010.1.21 Meeting Room,
Changan Headquarters On-Site Survey Deutsche Bank Automotive Industry Development and
Company’s Business
2010.3.8 Meeting Room,
Changan Headquarters On-Site Survey
Huatai United Securities、
Sinolink Securities、
Shenyin & Wanguo
Securities
Automotive Industry Development and
Company’s Business
2010.3.11 Meeting Room,
Changan Headquarters On-Site Survey CLSA Automotive Industry Development and
Company’s Business17
2010.3.15 Meeting Room,
Changan Headquarters On-Site Survey NOMURA Automotive Industry Development and
Company’s Business
2010.3.18 Meeting Room,
Changan Headquarters On-Site Survey Morgan Stanley Automotive Industry Development and
Company’s Business
2010.3.19 Meeting Room,
Changan Headquarters On-Site Survey China Merchants
Securities
Automotive Industry Development and
Company’s Business
2010.4.22 Meeting Room,
Changan Headquarters On-Site Survey RCM Automotive Industry Development and
Company’s Business
2010.5.7 Meeting Room,
Changan Headquarters On-Site Survey TX Investment
Consulting Ltd
Automotive Industry Development and
Company’s Business
2010.5.13 Meeting Room,
Changan Headquarters On-Site Survey Morgan Stanley Automotive Industry Development and
Company’s Business
2010.5.14 Meeting Room,
Changan Headquarters On-Site Survey UBS Automotive Industry Development and
Company’s Business
2010.5.18 Meeting Room,
Changan Headquarters On-Site Survey Citigroup Global Markets
Asia
Automotive Industry Development and
Company’s Business
2010.5.18 Meeting Room,
Changan Headquarters On-Site Survey CICC Automotive Industry Development and
Company’s Business
2010.5.20 Meeting Room,
Changan Headquarters On-Site Survey BOC International
Limited
Automotive Industry Development and
Company’s Business
2010.6.1 Meeting Room,
Changan Headquarters On-Site Survey Macquarie Securities Automotive Industry Development and
Company’s Business
2010.6.2 Meeting Room,
Changan Headquarters On-Site Survey Industrial Securities Automotive Industry Development and
Company’s Business
2010.6.4 Meeting Room,
Changan Headquarters On-Site Survey Goldman Sachs Automotive Industry Development and
Company’s Business
2010.6.7 Meeting Room,
Changan Headquarters On-Site Survey KGI Automotive Industry Development and
Company’s Business
2010.6.9 Meeting Room,
Changan Headquarters On-Site Survey Morgan Stanley Automotive Industry Development and
Company’s Business
4. Other Information Notice Index
The company’s notice is published in China Securities, Securities Times and
Hongkong Commercial Newspaper, the online disclosure address is
http://www.cninfo.com.cn.18
VII. Financial Report (Unaudited)
i Financial statements
Chongqing Changan Automobile Company Limited
30, June 2010 Assets Balance Sheet
( Expressed in RMB Yuan )
At the end of term Beginning of term
Items Note
Consolidated Parent
company Consolidated Parent
company
Current asset:
Monetary fund （V）1 6,111,751,380.02 4,358,177,385.28 3,658,380,928.50 1,973,263,003.71
Settlement provision
Outgoing call loan
Trading financial
assets
Notes receivable （V）2 6,067,446,783.19 4,576,975,714.19 7,022,333,591.84 5,372,680,455.66
Account receivable
（V）3
（VI）1 812,311,870.26 865,754,953.34 182,991,180.86 581,698,017.44
Prepayment （V）4 418,347,206.71 230,990,885.90 503,479,133.38 329,644,151.89
Insurance receivable
Reinsurance
receivable
Provisions of
Reinsurance
contracts receivable
Interest receivable
Dividend receivable 450,030.00 450,030.00 450,030.00 450,030.00
Other account
receivable
（V）3
（VI）1 125,300,303.97 181,538,598.24 63,636,373.59 129,910,087.06
Repurchasing of
financial assets
Inventories （V）5 1,920,290,852.51 1,222,728,801.31 2,701,131,615.71 1,438,979,289.27
Non-current asset
due in 1 year
Other current asset 20,508.87
Total of current asset 15,455,898,426.66 11,436,616,368.26 14,132,423,362.75 9,826,625,035.03
Non-current assets
Loans and payment
on other’s behalf
disbursed
Disposable financial
asset
167,915,000.00 167,915,000.00 238,205,000.00 238,205,000.00
Expired investment
in possess
Long-term
receivable
Long-term share
equity investment
（V）6
（VI）2 4,986,300,890.30 5,987,888,619.17 4,787,860,441.63 5,856,668,740.78
Property investment 64,275,896.63 65,563,825.59
Fixed assets （V）7 3,320,118,655.45 2,750,178,968.38 3,347,742,796.93 2,572,674,562.93
Construction in
process （V）8
1,731,408,362.29 1,449,872,987.15 1,316,169,651.80 1,226,791,383.3919
Engineering material 756,912.75 795,898.75 838,718.75 838,718.75
Fixed asset disposal 30,627.62 869,564.07
Production physical
assets
Gas & petrol
Intangible assets （V）9 856,961,808.23 682,267,030.72 378,030,601.16 250,935,419.01
R&D expense （V）10 182,624,926.05 182,450,250.63 200,849,901.80 199,526,282.03
Goodwill 9,804,394.00 9,804,394.00
Long-term prepaid
expenses
35,128,993.99 1,170,520.00 33,495,141.27 1,260,560.00
Differed income tax
asset （V）11
321,803,720.32 227,520,627.46 322,381,245.46 204,563,633.47
Other non-current
asset
130,000,000.00 130,000,000.00 407,080,000.00 407,080,000.00
Total of non-current
assets
11,807,130,187.63 11,580,059,902.26 11,108,891,282.46 10,958,544,300.36
Total of assets 27,263,028,614.29 23,016,676,270.52 25,241,314,645.21 20,785,169,335.39
Current liabilities
Short-term loans （V）12 425,949,532.00 50,000,000.00 350,270,268.00 50,000,000.00
Loan from Central
Bank
Deposit received and
hold for others
Call loan received
Trade off financial
liabilities
4,563,744.00
Notes payable （V）13 5,197,331,956.01 4,958,851,814.32 2,797,030,532.62 2,716,438,173.31
Account payable （V）14 5,651,372,861.25 3,187,046,760.76 6,559,948,368.16 3,988,443,774.45
Prepayment received （V）15 1,436,274,911.19 1,069,862,282.90 3,031,972,501.29 1,718,105,586.42
Selling of
repurchased financial
assets
Fees and
commissions
receivable
Employees’ wage
payable （V）16
165,062,189.71 137,038,267.05 177,703,190.75 145,719,031.19
Tax payable （V）17 313,722,136.91 296,493,851.80 246,689,891.89 289,396,852.43
Interest payable 420,000.00 420,000.00 420,000.00 420,000.00
Dividend payable 4,032,810.45 3,953,067.65 79,742.80
Other account
payable （V）18
628,148,683.16 213,972,473.10 683,865,744.49 416,328,996.78
Reinsurance fee
payable
Insurance contract
provision
Entrusted trading of
securities
Entrusted selling of
securities
Non-current liability 300,000,000.00 300,000,000.00 15,000,000.0020
due in 1 year
Other current
liability
1,774,467,224.37 910,412,491.88 842,516,160.16 465,475,119.91
Total of current
liability
15,896,782,305.05 11,128,051,009.46 14,710,060,144.16 9,790,327,534.49
Non-current
liabilities
Long-term
borrowings
157,000,000.00 499,000,000.00 300,000,000.00
Bond payable
Long-term payable 20,737,270.84 20,737,270.84 30,081,000.00 22,216,000.00
Special payable 536,306,817.92 536,306,817.92 515,089,405.79 515,089,405.79
Expected liabilities （V）19 597,071,607.61 334,361,961.06 416,077,626.26 222,800,775.48
Differed income tax
liability （V）11
21,755,250.00 21,755,250.00 32,298,750.00 32,298,750.00
Other non-recurring
liabilities
Total of non-current
liabilities
1,332,870,946.37 913,161,299.82 1,492,546,782.05 1,092,404,931.27
Total of liability 17,229,653,251.42 12,041,212,309.28 16,202,606,926.21 10,882,732,465.76
Owners’ equity (or
shareholders’ equity)
Practical capital
collected (or share
capital)
2,325,657,615.00 2,325,657,615.00 2,334,022,848.00 2,334,022,848.00
Capital reserves 1,575,795,664.76 1,705,578,707.86 1,797,604,215.47 1,859,502,088.33
Less: Shares in stock 26,925,731.38 26,925,731.38
Special reserves
Surplus reserves 1,167,011,424.00 1,167,011,424.00 1,167,011,424.00 1,167,011,424.00
Common risk
provision
Attributable profit 4,839,457,925.12 5,777,216,214.38 3,623,954,435.60 4,568,826,240.68
Different of foreign
currency translation
Total of owner’s
equity belong to the
parent company
9,907,922,628.88 10,975,463,961.24 8,895,667,191.69 9,902,436,869.63
Minor shareholders’
equity
125,452,733.99 143,040,527.31
Total of owners’
equity
10,033,375,362.87 10,975,463,961.24 9,038,707,719.00 9,902,436,869.63
Total of liabilities
and owners’ equity
27,263,028,614.29 23,016,676,270.52 25,241,314,645.21 20,785,169,335.39
Legal representative: Mr. Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke21
Chongqing Changan Automobile Company Limited
From January to June, 2010 PROFIT STATEMENT
(Expressed in RMB Yuan)
Current term Same period last year
Items Note
Consolidated Parent
company Consolidated Parent
company
I. Total business income 16,627,454,932.78 11,242,504,620.75 11,500,650,715.90 7,459,190,467.92
Incl. Business income
（V）20
（VI）3 16,627,454,932.78 11,242,504,620.75 11,500,650,715.90 7,459,190,467.92
Interest income
Insurance fee earned
Fee and commission
received
II. Total business cost 16,260,772,013.79 10,863,723,696.48 11,353,159,199.03 7,276,568,173.08
Incl. Business cost
（V）20
（VI）3 13,387,852,025.12 9,040,356,397.63 9,197,935,588.53 5,886,190,296.31
Interest expense
Fee and commission paid
Insurance discharge
payment
Net claim amount paid
Net insurance policy
reserves provided
Insurance policy dividend
paid
Reinsurance expenses
Business tax and
surcharge
（V）21
357,977,295.97 259,268,103.04 231,957,920.12 161,801,778.74
Sales expense 1,810,978,661.82 1,083,721,040.71 1,145,717,652.72 605,248,449.00
Administrative expense 721,615,349.36 543,393,337.92 552,022,387.45 425,752,699.12
Financial expenses （V）22 -565,730.67 -35,911,495.01 7,335,138.19 -21,570,630.22
Asset impairment loss （V）23 -17,085,587.81 -27,103,687.81 218,190,512.02 219,145,580.13
Plus: Gains from change
of fair value (“-“ for loss)
4,563,744.00 859,303.20
Investment gain (“-“ for
loss)
（V）24
（VI）4 1,003,495,739.38 992,273,032.91 337,669,140.33 344,993,270.11
Incl. Investment gains
from affiliates
975,094,449.15 975,094,449.15 330,869,140.33 330,869,140.33
Gains from currency
exchange (“-“ for loss)
III. Operational profit
(“-“ for loss)
1,374,742,402.37 1,371,053,957.18 486,019,960.40 527,615,564.95
Plus: Non business
income
7,583,973.03 4,025,336.74 6,024,436.29 2,584,497.97
Less: Non-business
expenses
10,697,901.08 6,509,739.05 7,304,045.72 6,080,192.54
Incl. Loss from disposal
of non-current assets
3,061,777.08 1,056,225.15 931,000.00
IV. Gross profit (“-“ for
loss)
1,371,628,474.32 1,368,569,554.87 484,740,350.97 524,119,870.38
Less: Income tax 22,650,916.03 9,117,719.08 -39,261,220.20 -48,577,660.9022
expenses
V. Net profit (“-“ for net
loss)
1,348,977,558.29 1,359,451,835.79 524,001,571.17 572,697,531.28
Net profit attributable to
the owners of parent
company
1,366,565,351.61 1,359,451,835.79 522,993,993.40 572,697,531.28
Minor shareholders’
equity
-17,587,793.32 1,007,577.77
VI. Earnings per share:
(I) Basic earnings per
share
0.59 0.58 0.22 0.25
(II) Diluted earnings per
share
0.59 0.58 0.22 0.25
VII. Other misc. incomes -75,863,340.95 -75,863,340.95 1,077,628.00 1,077,628.34
VIII. Total of misc.
incomes
1,273,114,217.34 1,283,588,494.84 525,079,199.17 573,775,159.62
Total of misc. incomes
attributable to the owners
of
the parent company
1,290,702,010.66 1,283,588,494.84 524,071,621.40 573,775,159.62
Total misc gains
attributable to the minor
shareholders
-17,587,793.32 1,007,577.77
Legal representative: Mr. Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Chongqing Changan Automobile Company Limited
From January to June, 2010
CASH FLOW STATEMENT
(Expressed in RMB Yuan)
Current term Same period last year
Items
Consolidated
Parent
company Consolidated
Parent
company
I. Net cash flow from business operation
Cash received from sales of products and
providing of services 12,878,287,105.69 11,422,262,368.36 7,179,920,577.00 5,067,535,401.08
Net increase of customer deposits and capital kept
for brother company
Net increase of loans from central bank
Net increase of inter-bank loans from other
financial bodies
Cash received against original insurance contract
Net cash received from reinsurance business
Net increase of client deposit and investment
Net increase of trade financial asset disposal
Cash received as interest, processing fee, and
commission
Net increase of inter-bank fund received
Net increase of repurchasing business
Tax returned 25,871,777.12 25,658,619.45
Other cash received from business operation 154,597,784.42 50,715,275.98 147,001,840.36 89,819,373.4923
Sub-total of cash inflow from business activities 13,058,756,667.23 11,472,977,644.34 7,352,581,036.81 5,157,354,774.57
Cash paid for purchasing of merchandise and
services 7,025,953,870.17 6,301,692,529.40 3,887,292,800.30 3,178,516,504.83
Net increase of client trade and advance
Net increase of savings in central bank and
brother company
Cash paid for original contract claim
Cash paid for interest, processing fee and
commission
Cash paid for policy dividend
Cash paid to staffs or paid for staffs 642,032,020.93 484,525,672.57 397,404,229.13 294,924,179.08
Taxes paid 1,128,844,421.45 789,035,660.48 797,798,309.73 516,319,520.17
Other cash paid for business activities 1,574,552,443.99 1,365,936,628.09 765,669,489.79 629,286,181.61
Sub-total of cash outflow from business activities 10,371,382,756.54 8,941,190,490.54 5,848,164,828.95 4,619,046,385.69
Cash flow generated by business operation, net 2,687,373,910.69 2,531,787,153.80 1,504,416,207.86 538,308,388.88
II. Cash flow generated by investing
Cash received from investment retrieving 4,900,000.00 4,900,000.00
Cash received as investment gains 827,029,165.91 832,155,290.91 553,796,025.00 564,201,172.92
Net cash retrieved from disposal of fixed assets,
intangible assets, and other long-term assets 11,843,177.68 10,750,089.68 2,050,602.02 74,598.28
Net cash received from disposal of subsidiaries or
other operational units
Other investment-related cash received 190,000.00
Sub-total of cash inflow due to investment
activities 843,772,343.59 847,805,380.59 556,036,627.02 564,275,771.20
Cash paid for construction of fixed assets,
intangible assets and other long-term assets 767,014,993.08 659,139,599.99 653,892,164.48 531,254,216.50
Cash paid as investment 168,482,160.00 141,382,160.00 1,896,370.15 1,896,370.15
Net increase of loan against pledge
Net cash received from subsidiaries and other
operational units
Other cash paid for investment activities
Sub-total of cash outflow due to investment
activities 935,497,153.08 800,521,759.99 655,788,534.63 533,150,586.65
Net cash flow generated by investment -91,724,809.49 47,283,620.60 -99,751,907.61 31,125,184.55
III. Cash flow generated by financing
Cash received as investment
Incl. Cash received as investment from minor
shareholders
Cash received as loans 584,203,930.00 1,065,547,854.00 400,000,000.00
Cash received from bond placing
Other financing-related cash received 1,608,635.34 44,155.76 2,652,103.55 626,297.00
Subtotal of cash inflow from financing activities 585,812,565.34 44,155.76 1,068,199,957.55 400,626,297.00
Cash to repay debts 555,807,718.50 39,000,000.00 1,018,225,505.59 455,026,516.4224
Cash paid as dividend, profit, or interests 168,058,219.00 155,122,263.94 63,486,017.20 60,664,990.01
Incl. Dividend and profit paid by subsidiaries to
minor shareholders
Other cash paid for financing activities 3,983,709.92 78,284.65 28,218,581.72 17,757,930.60
Subtotal of cash outflow due to financing
activities 727,849,647.42 194,200,548.59 1,109,930,104.51 533,449,437.03
Net cash flow generated by financing -142,037,082.08 -194,156,392.83 -41,730,146.96 -132,823,140.03
IV. Influence of exchange rate alternation on cash
and cash equivalents -241,567.60 -195,230.51
V. Net increase of cash and cash equivalents 2,453,370,451.52 2,384,914,381.57 1,362,738,922.78 436,610,433.40
Plus: Balance of cash and cash equivalents at the
beginning of term 3,658,380,928.50 1,973,263,003.71 1,661,738,524.68 1,166,965,437.50
VI. Balance of cash and cash equivalents at the
end of term 6,111,751,380.02 4,358,177,385.28 3,024,477,447.46 1,603,575,870.90
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke25
Consolidated Statement of Change in Owners’ Equity
Chongqing Changan Automobile Company Limited
30 June 2010 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
Amount of the Current Term Amount of Last Year
Owners’ Equity Attributable to the Parent Company Owners’ Equity Attributable to the Parent Company
Items Capital
paid in
(or
share
capital)
Capital
reserve
s
Less:
Shares
in stock
Special
reserve
s
Surplus
reserve
s
Commo
n risk
provisi
on
Retaine
d profit Others
Minor
shareho
lders’
equity
Total of
owners
’
equity
Capital
paid in
(or
share
capital)
Capital
reserve
s
Less:
Shares
in stock
Special
reserve
s
Surplus
reserve
s
Commo
n risk
provisi
on
Retaine
d profit Others
Minor
shareho
lders’
equity
Total of
owners
’
equity
I. Balance at the end of last
year
2,334,
022,84
8.00
1,797,
604,21
5.47
26,925
,731.3
8
1,167,
011,42
4.00
3,623,
954,43
5.60
143,04
0,527.
31
9,038,
707,71
9.00
2,334,
022,84
8.00
1,603,
529,68
1.06
0.00
1,042,
968,94
8.06
2,706,
071,67
1.34
146,54
1,141.
19
7,833,
134,28
9.65
Plus: Change of accounting
policy
Correcting of previous
errors
Others
II. Balance at the beginning
of current year
2,334,
022,84
8.00
1,797,
604,21
5.47
26,925
,731.3
8
1,167,
011,42
4.00
3,623,
954,43
5.60
143,04
0,527.
31
9,038,
707,71
9.00
2,334,
022,84
8.00
1,603,
529,68
1.06
0.00
1,042,
968,94
8.06
2,706,
071,67
1.34
146,54
1,141.
19
7,833,
134,28
9.65
III. Changed in the current
year (“ -“ for decrease)
-8,365,
233.00
-221,8
08,550
.71
-26,92
5,731.
38
0.00 0.00 0.00
1,215,
503,48
9.52
0.00
-17,58
7,793.
32
994,66
7,643.
87
0.00
194,07
4,534.
41
26,925
,731.3
8
0.00
124,04
2,475.
94
0.00
917,88
2,764.
26
-3,500,
613.88
1,205,
573,42
9.35
(I) Net profit
1,366,
565,35
1.61
-17,58
7,793.
32
1,348,
977,55
8.29
1,083,
937,38
5.76
21,460
,521.0
3
1,105,
397,90
6.79
(II) Other misc. income
0.00
-75,86
3,340.
95
0.00 0.00 0.00 0.00
-75,86
3,340.
95
0.00
183,02
6,250.
00
0.00 0.00 0.00
183,02
6,250.
00
Total of (I) and (II)
0.00
-75,86
3,340.
95
0.00 0.00 0.00 0.00
1,366,
565,35
1.61
0.00
-17,58
7,793.
32
1,273,1
14,217
.34
0.00
183,02
6,250.
00
0.00 0.00 0.00 0.00
1,083,
937,38
5.76
21,460
,521.0
3
1,288,
424,15
6.79
(III) Investment or
decreasing of capital by
owners
-8,365,
233.00
-13,59
9,049.
76
-26,92
5,731.
38
0.00 0.00 0.00 0.00 0.00 0.00 4,961,
448.62 0.00 11,048,
284.41
26,925
,731.3
8
0.00 0.00 0.00 0.00
-19,96
1,134.
91
-35,83
8,581.
88
1. Capital inputted by
owners
0.00 -9,760,
000.00
-9,760,
000.00
2. Amount of shares paid
and accounted as owners ’
equity
0.00 0.0026
3. Others
-8,365,
233.00
-13,59
9,049.
76
-26,92
5,731.
38
0.00 0.00 0.00 4,961,
448.62
11,048,
284.41
26,925
,731.3
8
-10,20
1,134.
91
-26,07
8,581.
88
(IV) Profit allotment
0.00
-132,3
46,160
.00
0.00 0.00 0.00 0.00
-151,0
61,862
.09
0.00 0.00
-283,4
08,022
.09
0.00 0.00 0.00 0.00
124,04
2,475.
94
0.00
-166,0
54,621
.50
-5,000,
000.00
-47,01
2,145.
56
1. Providing of surplus
reserves
0.00
124,04
2,475.
94
-124,0
42,475
.94
0.00
2. Common risk
provision 0.00 0.00
3. Allotment to the
owners (or shareholders)
-132,3
46,160
.00
-151,0
61,862
.09
-283,4
08,022
.09
0.00
-42,01
2,145.
56
-42,01
2,145.
56
4. Others
0.00 -5,000,
000.00
-5,000,
000.00
(V) Internal transferring of
owners’ equity 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1. Capitalizing of capital
reserves (or to capital shares) 0.00 0.00
2. Capitalizing of surplus
reserves (or to capital shares) 0.00 0.00
3. Making up losses by
surplus reserves 0.00 0.00
4. Others 0.00 0.00
(VI) Special reserves 0.00 0.00
1. Provided this year 0.00 0.00
2. Used this term 0.00 0.00
IV. Balance at the end of this
term
2,325,
657,61
5.00
1,575,
795,66
4.76
0.00 0.00
1,167,
011,42
4.00
0.00
4,839,
457,92
5.12
0.00
125,45
2,733.
99
10,033
,375,3
62.87
2,334,
022,84
8.00
1,797,
604,21
5.47
26,925
,731.3
8
0.00
1,167,
011,42
4.00
0.00
3,623,
954,43
5.60
143,04
0,527.
31
9,038,
707,71
9.00
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Statement of Change in Owners’ Equity
Chongqing Changan Automobile Company Limited
30 June 2010 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
Amount of the Current Term Amount of Last Year
Items
Capital
paid in
(or
share
Capital
reserve
s
Less:
Shares
in
stock
Special
reserve
s
Surplus
reserve
s
Comm
on risk
provisi
on
Retaine
d profit
Total
of
owners
’
Capital
paid in
(or
share
Capital
reserve
s
Less:
Shares
in
stock
Special
reserve
s
Surplus
reserve
s
Comm
on risk
provisi
on
Retaine
d profit
Total
of
owners
’27
capital) equity capital) equity
I. Balance at the end
of last year
2,334,02
2,848.00
1,859,50
2,088.33
26,925,7
31.38 0.00 1,167,01
1,424.00 0.00 4,568,82
6,240.68
9,902,43
6,869.63
2,334,02
2,848.00
1,675,52
8,688.83 0.00 1,042,96
8,948.06
3,450,65
2,154.50
8,503,17
2,639.39
Plus: Change of
accounting policy 0.00 0.00
Correcting of
previous errors 0.00 0.00
Others 0.00 0.00
II. Balance at the
beginning of current
year
2,334,02
2,848.00
1,859,50
2,088.33
26,925,7
31.38
1,167,01
1,424.00
4,568,82
6,240.68
9,902,43
6,869.63
2,334,02
2,848.00
1,675,52
8,688.83 0.00 1,042,96
8,948.06
3,450,65
2,154.50
8,503,17
2,639.39
III. Changed in the
current year (“-“ for
decrease)
-8,365,2
33.00
-153,923
,380.47
-26,925,
731.38 0.00 1,208,38
9,973.70
1,073,02
7,091.61 0.00 183,973,
399.50
26,925,7
31.38 0.00 124,042,
475.94 0.00 1,118,17
4,086.18
1,399,26
4,230.24
(I) Net profit 1,359,45
1,835.79
1,359,45
1,835.79
1,284,22
8,707.68
1,284,22
8,707.68
(II) Other misc.
income 0.00 -75,863,
340.95 0.00 0.00 0.00 -75,863,
340.95 0.00 183,026,
250.00 0.00 0.00 0.00 183,026,
250.00
Total of (I) and (II) 0.00 -75,863,
340.95 0.00 0.00 1,359,45
1,835.79
1,283,58
8,494.84 0.00 183,026,
250.00 0.00 0.00 0.00 0.00 1,284,22
8,707.68
1,467,25
4,957.68
(III) Investment or
decreasing of capital
by owners
-8,365,2
33.00
-13,599,
049.76
-26,925,
731.38 0.00 0.00 4,961,44
8.62 0.00 947,149.
50
26,925,7
31.38 0.00 0.00 0.00 0.00 -25,978,
581.88
1. Capital
inputted by owners 0.00 0.00
2. Amount of
shares paid and
accounted as owners’
equity
0.00 0.00
3. Others
-8,365,2
33.00
-13,599,
049.76
-26,925,
731.38
4,961,44
8.62
947,149.
50
26,925,7
31.38 -25,978,
581.88
(IV) Profit
allotment 0.00 -64,460,
989.76 0.00 0.00 -151,061
,862.09
-215,522
,851.85 0.00 0.00 0.00 0.00 124,042,
475.94 0.00 -166,054
,621.50
-42,012,
145.56
1. Providing of
surplus reserves 0.00 124,042,
475.94
-124,042
,475.94 0.00
2. Common risk
provision 0.00 -42,012,
145.56
-42,012,
145.56
3. Allotment to -64,460, -151,061 -215,522 0.0028
the owners (or
shareholders)
989.76 ,862.09 ,851.85
4. Others 0.00 0.00
(V) Internal
transferring of
owners’ equity
0.00 0.00
1. Capitalizing of
capital reserves (or to
capital shares)
0.00 0.00
2. Capitalizing of
surplus reserves (or to
capital shares)
0.00 0.00
3. Making up
losses by surplus
reserves
0.00 0.00
4. Others 0.00 0.00
(VI) Special
reserves 0.00 0.00
1. Provided this
year 0.00 0.00
2. Used this term 0.00 0.00
IV. Balance at the end
of this term
2,325,65
7,615.00
1,705,57
8,707.86 0.00 0.00 1,167,01
1,424.00 0.00 5,777,21
6,214.38
10,975,4
63,961.2
4
2,334,02
2,848.00
1,859,50
2,088.33
26,925,7
31.38 0.00 1,167,01
1,424.00 0.00 4,568,82
6,240.68
9,902,43
6,869.63
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke29
ⅱNotes to financial statements
I. Corporate information
Chongqing Changan Automobile Co., Ltd. (hereafter abbreviated as the “Company”or
“Parent Company”) taking Changan Automobile (Group) Liability Co. Ltd. (hereinafter
abbreviated as “Changan Group”) as individual initiator, with its business net asset related
to mini-vehicle & engine production and its share equity of Changan Suzuki Automobile
Co. Ltd. as converted into506,190,000 shares (B share) for investment, was established on
October 31, 1996 by issuing 250,000,000 oversea shares domestically listed for abroard
investors in the form of money-collecting. Its total share capital is RMB 756,190,000
Yuan.The Legal Representative’s Operating License issued by Chongqing Industrial and
Commercial Administrative Bureau is Yu-Jing No. 28546236-3.
Under the approval of China Securities Regulatary Committes, the Company publicly
issued 120,000,000 RMB ordinary shares (share A) on May 19, 1997. The total share
capital increased to RMB 876,190,000 Yuan.
On June 26th 1998, based on the total capital stock of 876,190,000 shares for the end
of 1997, the capital reserve is transferred into share capital, and the bonus share is 4shares
per 10 shares, then the total capital increases toRMB 1,226,666,000 Yuan.
On May 26th 2004, based on the total capital stock of 1,226,666,000 shares for the
end of 2003, 2 shares per 10 sharesare donated, and then the total capital increases to RMB
1,471,999,200 Yuan.
Under the assent of China Securities Regulatary Committes, the Company publicly
issued the 148,850,000 RMB ordinary shares (A share) on May 19, 1997. The total share
capital increases to RMB 1,620,849,200 Yuan.
The Company’s 850,399,200 ordinary shares (state-owned share, 52.47% of its total
share) held by its final control company: China South Industry Group Corporation and its
complete subsidy-Changan Automobile (Group) Liability Co. Ltd. was taken as part of
investment into China South Industry Autmobile Co. Ltd. (hereinafter abbreviated as
“China South Automobile”). On March 30, 2006 registered and acknowledged by30
Shenzhen Branch Company of China Security Register and Settlement Co Ltd. The
mentioned above 850,399,200 shares of state-owned stocks held by Changan Automobile
(Group) Liability Co. Ltd. had been transferred to China South Automobile and China
South Automobile therefore became the parent company of the Company. On May 11,
2006, the company implemented the plan of share equity restructing. As the share equity
restructing implementation ends the Company’s 738,255,200 ordinary shares held by
China South Automobile accounts for 45.55% of the Company’s total equity share.
The Company, its subsidiaries and jointly cooperated entities (hereafter abbreviated
as the “Group”) are principally engaged in the manufacture and sail of automobiles
(including sedan), the engine series and parts& components.
On May 15th, 2007, based on the total capital stock of 1,620,849,200 shares for the
end of 2006, 2 shares per 10 sharesare are donated, and then the total capital increases to
RMB 1, 945,019,040 Yuan. On April 20th 2006, the Company fetched the enterprise legal
person’s license with the registration mark of Yuzhi No 5000001805570.
On April 15th, 2008, based on the total capital stock of 1,945,019,040 shares for the
end of 2006, the capital reserve is transferred into share capital, and the bonus share is 2
shares per 10 shares, and then the total capital increases to RMB 2,334,022,848 Yuan. Up
to the end of reporting period, capital reserve had already been transferred into share
capital.
On 5th ,July,2009, Company received the notice from control shareholder China
South Motor Co.ltd: through approved by State Administration for Industrry and
Commmerce of the P.R.c, the name of ”China South Motor Co.LTD” changed into “China
Changan Auto.CO.LTD”, after change the name, the character of company,owenership,
control share percentage and control relationship never been changed.
By March 3, 2010, the Company’s repurchase program of B shares was completed.
During the repurchase period, the Company repurchased totally 8,365,233 B shares. By
March 17, 2010, the Company has already accomplished the cancellation of the31
repurchased shares in Shenzhen Branch under China Securities Depository and Clearing
Co., Ltd., after the cancellation, the Company’s registered capital is RMB 2,325,657,615
Yuan, of which 45.71% is held by China Changan, the public shares (A shares) occupies
28.64%, the public shares (B shares) occupies 25.65%.
The Company and its subsidiaries and jointly controlled entities (hereafter
collectively referred to as the “Group”) are principally engaged in the manufacture and sail
of automobiles (including sedan), the engine series and parts& components.
II. Representation regarding the preparation basis and compliance with the Accounting Standards for
Business Enterprises
The financial statements have been prepared, in accordance with the Accounting
Standards for Business Enterprises (including basic standards, specific standards,
implementation guidance and other relevant provisions; the same below) promulgated by
the MOF in 2006.
According to the Notice of the Ministry of Finance on Publishing the “Accounting
Standard for Business Enterprises No. 1- Inventory” and other 38 Specific Standards (Cai
Kuai [2006] No. 3), the Company applied the Accounting Standards for Business
Enterprises promulgated by the Ministry of Finance in 2006 commencing from 1 January
2007.
The financial statements are presented on a going concern basis.
Ⅲ.Significant accounting policies and estimates
The financial statements of the Company and its subsidiaries (collectively “the
Group”) are prepared based on the following significant accounting policies and
estimates set out by the Accounting Standards for Business Enterprises.
1. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar
year.
2. Functional currency
The Group’s functional and reporting currency is the Renminbi (“RMB”). Unless32
otherwise stated, the unit of the currency is Yuan.
3． Basis of accounting and measurement basis
The Group maintains its accounting records on an accrual basis. Except for certain
financial instruments, assets are recorded at actual cost when they are acquired.
Subsequently, if the assets are impaired, the corresponding provisions should be made
accordingly. The assets invested during the restructuring of the Company, should be
recorded at the appraisal price determined by the National Assets Management
Department.
4. Business combinations
A business combination is a transaction or event that brings together two or more
separate entities into one reporting entity. Business combinations are classified into
business combinations involving entities under common control and business combinations
involving entities not under common control.
Business combination involving entities under common control
A business combination involving entities under common control is a business
combination in which all of the combining entities are ultimately controlled by the same
party or parties both before and after the combination, and that control is not transitory.
For a business combination involving entitites under common control, the party that, on
the combination date, obtains control of another entity participating in the combination is
the acquiring party, while that other entity participating in the combination is a party being
acquired. Combination date is the date on which the acquiring party effectively obtains
control of the party being acquired.
Assets and liabilities that are obtained by the acquiring party in a business
combination shall be measured at their carrying amounts at the combination date as
recorded by the party being acquired. The difference between the carrying amount of the
net assets obtained and the carrying amount of the consideration paid for the combination
(or the aggregate face value of shareds issued as consideration) shall be adjusted to capital
reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall33
be adjusted against retained earnings.
The cost of a combination incurred by the acquiring party includes any costs directly
attributable to the combination, which shall be expensed when incurred.
Business combination involving entities not under common control
A business combination involving entities not under common control is a business
combination in which all of the combining entities are not ultimately controlled by the
same party or parties both before and after the combination. For a business combination
involving entitites not under common control, the party that, on the acquisition date,
obtains control of another entity participating in the combination is the acquirer, while that
other entity participating in the combination is the acquiree. Acquisition date is the date on
which the acquirer effectively obtains control of the acquiree.
For a business combination that involves one single exchange transaction, 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. For a business combination achieved in stages that involves
multiple exchange transactions, the cost of combination is the aggregate of the costs of
individual transactions. When a business combination contract provides for an
adjustment to the cost of combination contingent on a future event, the acquirer shall
include the amount of that adjustment in the cost of the combination if it is expected on the
acquisition date that the occurrence of the future event is probable and the amount
affecting the cost of combination can be measured reliably.
The acquirer shall measure the acquiree’s identifiable assets, liabilities and contingent
liabilities acquired in the business combination at their fair values on the acquisition date.
Where the cost of a business combination exceeds the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the difference shall be recognized as
goodwill. Where the cost of combination is less than the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the difference shall be accounted for34
according to the following requirements: (i) the acquirer shall reassess the measurement of
the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and
measurement of the cost of combination; (ii) if after that reassessment, the cost of
combination is still less than the acquirer’s interest in the fair values of the acquiree’s
identifiable net assets, the acquirer shall recognize the remaining difference immediately
in the income statement for the current period.
5. Consolidated financial statements
The scope of consolidation of consolidated financial statements is determined based
on control, and includes the financial statements of the Company and its subsidiaries for
the year ended 31 December 2007. A subsidiary is an entity that is controlled by the
Group.
Consolidated financial statements are prepared using uniform reporting dates and
accounting policies. All significant intercompany transactions and balances within the
Group are eliminated on consolidation.
For any subsidiary consolidated by the Group, the portion of the profit or loss and net
assets of such a subsidiary attributable to equity interests that are not owned, directly or
indirectly by the Group is separately presented as minority interest in the consolidated
financial statements.
With respect to subsidiaries acquired through business combinations involving
entities not under common control, the operating results and cash flows of the acquiree
should be included in the consolidated financial statements, from the day that the Group
gains control, till the Group ceases the control of it. While preparing the consolidated
financial statements, the acquirer should adjust the subsidiary’s financial statements, on
the basis of the fair values of the identifiable assets, liabilities and contingent liabilities
recognized on the acquisition date.
With respect to subsidiaries acquired through business combinations involving
entities under common control, the operating results and cash flows of the acquiree should
be included in the consolidated financial statements from the beginning of the period in35
which the combination occurs.
6. Cash equivalents
Cash equivalents represent short-term, highly liquid investments which are readily
convertible into known amounts of cash, and which are subject to an insignificant risk of
changes in value.
7. Foreign currency conversion
foreign currency transactions
The amount of foreign currency transactions occurred in the reporting year is
converted into functional currency.
The foreign currency transactions are recorded, on initial recognition in the functional
currency, by applying to the foreign currency amount at the spot exchange rate as at the
transaction dates. Foreign currency monetary items are translated using the spot exchange
rate quoted by the People’s Bank of China at the balance sheet date. The exchange gains or
losses arising from occurrence of transactions and exchange of currencies, except for those
relating to foreign currency borrowings specifically for construction and acquisition of
fixed assets capitalized, are dealt with in the profit and loss accounts. Non-monetary
foreign currency items measured at historical cost remain to be translated at the spot
exchange rate prevailing on the transaction date, and the amount denominated in the
functional currency should not be changed. Non-monetary foreign currency items
measured at fair value should be translated at the spot exchange rate prevailing on the date
when the fair values are determined. The exchange difference thus resulted should be
charged to the current income or capital surplus account of the current period.
settlement of oversea transaction
When preparing consolidated financial statements, the financial statements of the
subsidiaries presented in foreign currencies are translated into Renminbi as follows: asset
and liability accounts are translated into Renminbi at exchange rates ruling at the balance
sheet date; shareholders’ equity accounts other than retained profits are translated into
Renminbi at the applicable exchange rates ruling at the transaction dates; items in income36
statement other than profit appropriation statement are translated into Renminbi at spot
exchange rates on transaction occurrence; total difference between translated assets and
translated liabilities and shareholders’ equity is separately listed as “foreign currency
exchange differences” below retained profits. The translation difference arising from the
settlement of oversea subsidiaries is charged to the current liquidation profit and loss in
proportion to the settlement ratio of the assets concerned.
Foreign currency cash flows and the cash flows of foreign subsidiaries should be
translated using the average exchange rate prevailing on the transaction month during
which the cash flows occur. The amount of the effect on the cash arising from the change
in the exchange rate should be separately presented as an adjustment item in the cash flow
statement.
8. Inventory
Inventory includes raw materials, goods in transit, work in progress,
finished goods, consigned processing materials, packaging materials and
low-value consumables. Inventories are assets (a) held for sales in the
ordinary course of business (b) in the process of production for such sale (c)
in the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Inventory is initially carried at the actual cost. Inventory costs comprise all costs of
purchase, costs of conversion and other costs incurred in bringing the inventory to its
present location and condition.
Weighted average method is assigned to the determination of actual costs of
inventories.
The Group applies a perpetual inventory system.
One-off writing off method is adopted in amortization of packaging materials and
low-value consumables.
At the balance sheet date, the inventory is stated at the lower of cost and net37
realizable value. If the cost is higher than the net realizable value, provision for the
inventory should be made through profit or loss. If factors that resulted in the provision
for the inventory have disappeared and made the net realizable value higher than their
book value, the amount of the write-down should be reversed, to the extent of the amount
of the provision for the inventory, and the reversed amount should be recognized in the
income statement for the current period.
Net realizable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the sale.
The impairment provision should be made on a basis of each item of finished goods
according to the difference between cost and net realizeable value. For large numbers of
inventories at relatively low unit prices, the provision for loss on decline in value of
inventories should be made by category.
9. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and
associates. The long-term investments are initially recorded at cost on acquisition. It is
accounted for using either the cost method or the equity method as appropriate under the
following circumstances.
ost method is applied to account for long-term equity investments, when the Group
has control of the investee enterprise, or does not have jointly control or significant
influence on the investee enterprise, the fair value of which cannot be reliably measured
due to the fact they are not quoted in an active market.
Under cost method, the long-term equity investment is valued at the cost of the initial
investment. Profit or cash dividends declared by the invested enterprise are recognized as
investment income for the current period. The amount of investment income recognized
is limited to the amount distributed out of accumulated net profit of the invested enterprise
that arises after the investment is made. The amount of profit or cash dividends declared
by the invested enterprise in excess of the above threshold is treated as return on38
investment cost, and netted against the carrying amount of investments.
The equity method is applied to account for long-term equity investments, when the
Group has jointly control, or significant influence on the investee companies.
Under equity method, when the initial investment cost of a long-term equity
investment exceeds the investing enterprise’s interest in the fair values of the investee’s
identifiable net assets at the acquisition date, the difference between them is accounted for
as an initial cost. As to the initial investment cost is less than the investing enterprise’s
interest in the fair values of the investee’s identifiable net assets at the acquisition date, the
difference shall be charged to the income statement for the current period, and the cost of
the long-term equity investment shall be adjusted accordingly.
Under equity method, the Group recognizes its share of post-acquisition equity in the
investee enterprise for the current period as a gain or loss on investment, and also
increases or decreases the carrying amount of the investment. When recognizing its share
in the net profit or loss of the investee entities, the Group should, based on the fair values
of the identifiable assets of the investee entity when the investment is acquired, in
accordance with the Group’s accounting policies and periods, after eliminating the portion
of the profits or losses, arising from internal transactions with joint ventures and associates,
attributable to the investing entity according to the share ratio (but losses arising from
internal transactions that belong to losses on the impairment of assets, should be
recognized in full), recognize the net profit of the investee entity after making appropriate
adjustments. The book value of the investment is reduced to the extent that the Group’s
share of the profit or cash dividend declared to be distributed by the investee enterprise.
However, the share of net loss is only recognized to the extent that the book value of
the investment is reduced to zero, except to the extent that the Group has incurred
obligations to assume additional losses. The Group shall adjust the carrying amount of
the long-term equity investment for other changes in owners’ equity of the investee
enterprise (other than net profits or losses), and include the corresponding adjustments in39
equity, which should be realized thourgh profit or loss in subsequent settlement of the
respective long-term investment.
On settlement of a long-term equity investment, the difference between the proceeds
actually received and the carrying amount shall be recognized in the income statement for
the current period.
10. Fixed assets
Fixed assets are tangible assets held by: (a) for use in production or supply of goods
or services, for rental to others or for administrative purposes; (b) have useful life of more
than one year.
A fixed asset shall be recognized only when the economic benefits associated with the
asset will flow to the Group and the cost of the asset can be measured reliably. Subsequent
expenditure incurred for a fixed asset that meet the recognition criterial shall be included
in the cost of the fixed asset, and the book value of the component of the fixed asset that is
replaced shall be derecognized. Otherwise, such expenditure shall be recognized in the
income statement in the period in which they are incurred.
Fixed assets are initially measured at actual cost on acquisition. The cost of a
purchased fixed asset comprises the purchase price, relevant taxes and any directly
attributable expenditure for bringing the asset to working condition for its intended use,
such as delivery and handling costs, installation costs and other surcharges.
Fixed assets are depreciated on straight-line basis. The estimated useful lives,
estimated residual values and annual depreciation rates for each category of fixed assets
are as follows:
Usage life Estimated Residual Rate Annual Depreciation Rate
Buildings 20~40 years 3% 2.43%~4.85%
Machinery 10~20 years 3% 4.85%~9.7%
Vehicles 5~8 years 3% 12.13%~19.4%
Others 5 years 3% 19.4%
Note: the mould tools in machinery should be depreciated in proportionate to the40
estimated production.
The Group reviews the useful life and estimated net residual value of a fixed asset
and the depreciation method applied at least at the end of each year and makes adjustments
if necessary.
11. Construction in progress
The cost of construction in progress is determined according to the actual expenditure
for the construction, including all necessary construction expenditure incurred during the
construction period, borrowing costs that should be capitalized before the construction
reaches the condition for intended use and other relevant expenses.
Construction in progress is transferred to fixed assets when the asset is ready for its
intended use.
12. Intangible assets
Intangible assets of the Group are recorded at actual cost on acquisition.
The useful life of the intangible assets shall be assessed according to the estimated
beneficial period expected to generate economic benefits. An intangible asset shall be
regarded as having an indefinite useful life when there is no foreseeable limit to the period
over which the asset is expected to generate economic benefits for the Group.
The useful lives of the intangible assets are as follow:
Useage life
Land use right 25~61 years
Software 2 years
Trademark 15 years
Land use rights that are purchased or acquired through the payment of land use fees
are accounted for as intangible assets. With respect to Self-developed properties, the
corresponding land use right and buildings should be recorded as intangible and fixed
assets separately. As to the purchased properties, if encountered the reasonable allocation
of outlays between land and buildings, all assets purchased will be recorded as fixed
assets.
The cost of a finite useful life intangible asset is amortized using the straight-line41
method during the estimated useful life. For an intangible asset with a finite useful life, the
Group reviews the estimated useful life and amortization method at least at the end of each
year and adjusts if necessary.
13. Research and development exenditures
The Group classified the internal research and development expenditures as follows:
research expenditures and development cost.
The expenditures in research stage are charged to the current income on occurrence.
The expenditures in development stage are capitalized that meet all the conditions of
(a) it is feasible technically to finish intangible assets for use or sale; (b) it is intended to
finish and use or sell the intangible assets; (c) the usefulness of methods for intangible
assets to generate economic benefits shall be proved, including being able to prove that
there is a potential market for the products manufactured by applying the intangible assets
or there is a potential market for the intangible assets itself or the intangible assets will be
used internally; (d) it is able to finish the development of the intangible assets, and able to
use or sell the intangible assets, with the support of sufficient technologies, financial
resources and other resources; and The development expenditures of the intangible assets
can be reliably measured. Expenses incurred that don’t meet the above requirements
unanimously should be expensed in the income statement of the reporting period.
The Company discriminates between research and development stage with the
condition that the project research comes into project-determination stage ,in which the
relevant research complete all the fractionization of products measurements and final
product scheme under final approval of management. The expenditures incurred in and
before project-determination stage is charged to the current income, otherwise it is
recorded as development cost.
14. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity42
and a financial liability or equity instrument of another entity.
Recognition and derecognition of financial instruments
The Group recognizes a financial asset or a financial liability on its balance sheet,
when the Group becomes a party to the contractural provision of the instrument.
The Group derecognizes a financial asset when:
1) The contractual rights to the cash flows from the financial asset expire;
2) It transfers the financial asset and the transfer qualifies for derecognition as set out
below.
If the obligation relating to a financial liability has been discharged or cancelled or
has expired, the financial liability is derecognized. If the existing financial liaibility is
replaced by the same creditor, with another financial liability that has terms with an almost
completely different nature, or if almost all the terms of the existing liability are
substantially revised, such replacement or revision is accounted for as the derecognition of
the original liability and the recognition of a new liability, and the difference thus resulted
is recognized in the income statement of the current period.
Classification and measurement of financial assets
Financial assets are, on initial recognition, classified into the following four
categories: financial assets at fair value through profit or loss, held-to-maturity
investments, loans and receivables and available-for-sale financial assets. When financial
assets are recognized initially, they are measured at fair value. In the case of financial
assets at fair value through profit or loss, relevant transaction costs are directly charged to
the profit and loss of the current period; transaction costs relating to financial assets of
other categories are included in the amount initially recognized.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition as at fair value through profit or loss. A
financial asset held for trading is the financial asset that meets one of the following conditions: 1)43
the financial asset is acquired for the purpose of selling in a short term; 2) the financial asset is a
part of a portfolio of identifiable financial instruments that are collectively managed, and there is
objective evidence indicating that the enterprise recently manages this portfolio for the purpose of
short-term profits; 3) the financial asset is a derivative financial instrument. For such kind of
financial assets, fair values are adopted for subsequent measurement. All the realized or
unrealized gains or losses on these financial assets are recognized in the income statement of the
current period.
Financial assets may be designated upon initial recognition as at fair value through profit or
loss if one of the following criteria is met:
1) The designation eliminates or significantly reduces the inconsistency in the measurement
or recognition of relevant gains or losses that would otherwise arise from measuring the financial
instruments on a different basis.
2) A group of financial instruments is managed and its performance is evaluated on a fair
value basis, in accordance wih a documented risk management or investment strategy, and
information about the group is provided internally on that basis to the key management personnel.
3) The financial asset involves a hybrid instrument that contains one or more embedded
derivatives, except where the embedded derivative does not significantly modify the cash flows or
it is clear that separation of the embedded derivative is prohibited.
4) The financial asset contains an embedded derivative that would need to be separately
recorded and cannot be separately measured when acquired or at the subsequent balance sheet
date.
Investments in equity instruments, which have no quoted market price in active
markets and whose fair values cannot be reliably measured, should not be designated as
financial assets at fair value through profit or loss.
If the financial assets are, on initial recognition, classified into financial assets at fair
value through profit or loss, it couldn’t be reclassified into other categories; and other
categories couldn’t be classified into financial assets at fair value through profit or loss.44
There are no financial assets at fair value through profit or loss in the reporting period
of the Group.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or
determineable payments and fixed maturity that an entity has the positive intention and
ability to hold to maturity. Held-to-maturity investments shall be measured at amortized
cost using the effective interest method. Gains or losses arising from derecognition,
impairment or amortization are recognized in current profit or loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Loans and receivables shall be measured
at amortized cost using the effective interest method. Gains or losses arising from
derecognition, impairment or amortization are recognized in the income statement.
Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are
designated as available for sale or are not classified as (a) loans and receivables, (b)
held-to-maturity investments or (c) financial assets at fair value through profit or loss.
After initial recognition, available-for-sale financial assets are measured at fair value. The
premium/ discount is amortized using effective interest method and recognized as interest
income or expense. A gain or loss arising from a change in the fair value of an
available-for-sale financial asse is recognized in a separate component of capital reserve,
except for impairment losses and foreign exchange gains and losses resulted from
monetary financial assets, until the financial asset is derecognized or determined to be
impaired, at which time the cumulative gain or loss previously recognized in capital
reserve shall be removed from capital reserve and recognized in the income statement.
Interests and dividends relating to an available-for-sale financial asset are recognized in
the income statement for the period they relate to.45
Classification and measurement of financial liabilities
The financial liabilities are, upon initial recognition, classified as financial liabilities
at fair value through profit or loss and other financial liabilities. For financial liabilities
at fair value through profit or loss, relevant transaction costs are directly recognized in the
income statement of the current period, and transaction costs relating to other financial
liabilities are included in the initially recognized amount.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and those designated as at fair value through profit or loss. A financial
liability held for trading is the financial liability that meets one of the following
conditions:
1) the financial liability is assumed for the purpose of repurchasing in a short term;
2) the financial liability is a part of a portfolio of identifiable financial instruments
that are collectively managed, and there is objective evidence indicating that the enterprise
recently manages this portfolio for the purpose of short-term profits;
3) the financial liability is a derivative financial instrument.
For such kind of financial liabilities, fair values are adopted for subsequent
measurement. All the realized or unrealized gains or losses on these financial liabilities
are recognized in the income statement of the current period.
Financial liabilities may be designated upon initial recognition as at fair value
through profit or loss only when one of the following criteria is met:
1) The designation eliminates or significantly reduces the inconsistency in the measurement
or recognition of relevant gains or losses that would otherwise arise from measuring the financial
instruments on a different basis.
2) A group of financial instruments is managed and its performance is evaluated on a
fair value basis, in accordance wih a documented risk management or investment strategy,
and information about the group is provided internally on that basis to the key46
management personnel.
3) The financial liability involves a hybrid instrument that contains one or more
embedded derivatives, except where the embedded derivative does not significantly
modify the cash flows or it is clear that separation of the embedded derivative is prohibited.
The financial liability contains an embedded derivative that would need to be separately
recorded and cannot be separately measured when acquired or at the subsequent balance
sheet date.
If an enterprise has classified a financial liability as financial liability at fair value
through profit or loss, the financial liability cannot be reclassified into other financial
liabilities; other financial liabilities cannot be reclassified into financial liability at fair
value through profit or loss, either.
The Group holds no financial liabilities at fair value through profit or loss at its
initial recognition in the reporting period.
Other financial liabilities
After initial recognition, these financial liabilities are measured at amortized cost using the
effective interest method.
Derivative financial instruments
Derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are
carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do not
qualify for hedge accounting are directly recognized in the income statement.
Fair value of financial instruments
If there is an active market for a financial asset or financial liability, the Group determines the
fair value bu using the quoted prices. If no active market exits for a financial instrument, the Group
establishes fair value by using a valuation technique. Valuation techniques include using recent
arm’s length market transactions between knowledgeable, willing parties reference to the current
fair value of another instrument that is substantially the same, discounted cash flow analysis and47
option pricing models.
Impairment of financial assets
The Group assesses the carrying amount of a financial asset, at the balance sheet date.
If there is objective evidence that the financial asset is impaired, the Group makes
provision for the impairment loss. Objective evidence that a financial asset is impaired is
evidence arising from one or more events that occurred after the initial recognition of the
asset and that event has an impact on the estimated future cash flows of the financial asset
which can be reliably estimated.
Financial assets carried at amortized cost
If objective evidence shows that the financial assets carried at amortized cost are impaired,
the carrying amount of the financial asset shall be reduced to the present value of the estimated
future cash flow (excluding future credit losses that have not been incurred). The amount of
reduction is recognized as an impairment loss in the income statement. Present value of estimated
future cash flow is discounted at the financial asset’s original effective interest rate and includes
the value of any related collateral.
If a financial asset is individually significant, the Group assesses the asset individually for
impairment, and recognizes the amount of impairment in the income statement if there is objective
evidence of impairment. For a financial asset that is not individually significant, the Group can
include the asset in a group of financial assets with similar credit risk characteristics and
collectively assess them for impairment [or assess the asset individually for impairment]. For
financial assets that are not impaired upon individual tests (including financial assets that are
individually significant or insignificant), impairment tests should be conducted on them again by
including them in the group of financial assets. Assets for which an impairment loss is
individually recognized will not be included in a collective assessment of impairment.
If, subsequent to the recognition of an impairment loss on a financial asset carried at
amortized cost, there is objective evidence of a recovery in value of the financial asset which can
be related ovjectively to an event occurring after the impairment was recognized, the previously48
recognized impairment loss is reversed and recongised in the income statement. However, the
reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized
cost would have been had the impairment not been recognized at the date the impairment is
reversed.
Financial assets carried at cost
If objective evidence shows that the financial assets carried at cost are impaired, the
difference between the present value discounted at the prevailing rate of return of similar financial
assets and the book value of the financial asset are provided as a provision. The impairment loss
recognized cannot be reversed.
For long-term equity investments, which are accounted for according to the cost
method set out by Accounting Standards for Business Enterprises No. 2 – Long-term
Equity Investments and has no quoted market price in active markets, and whose fair
values cannot be reliably measured, their impairment should also be treated in accordance
with the above principle.
Available-for-sale financial assets
When there is objective evidence that the asset is impaired, the cumulative loss from declines
in fair value that had been recognized directly in capital reserve are removed from equity and
recognized in the income statement. The amount of the cumulateive loss that is removed from
capital reserves and recognized in the income statement (net of any principal repayment and
amortization) and current fair value, less any impairment loss on that financial asset previously
recognized in the income statement.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale
increases and the increase can be related objectively to an event occurring after the impairment
was recognized in the income statement, the previously recognized imapairment loss shall be
reversed with the amount of the reversal recognized in the income statement. Impairment losses
recognized in the income statement for a debt instrument investment shall not be reversed through
proit or loss.49
Transfer of financial assets
Transfer of a financial asset is a transaction whereby the Group assigns or conveys a financial
asset to another party (the transferee).
If the Group transfers substantially all the risks and rewards of ownership of the financial
asset, the Group derecognizes the financial asset; and if the Group retains substantially all the risks
and rewards of the financial asset, the Group does not derecognize the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, the Group determines whether it has retained control of
the financial asset. In this case: (i) it the Group has not retained control, it derecognizes
the financial asset and recognize separately as assets or liabilities any rights and
obligations created not retained in the transfer; (ii) if the Group has retained control, it
continues to recognize the financial asset to the extent of its continuing involvement in the
transferred financial asset and recognizes an associated liability.
15． Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with the
borrowing of the funds. Borrowing costs include interest, amortization of discounts or premiums
related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings,
and exchange differences arising from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalized. A qualifying asset is an asset (an item of property,
plant and equipment and inventory etc.) that necessarily takes a substantial period of time to get
ready for its intended use of sale.
The capitalization of borrowing costs are as part of the cost of a qualifying asset shall
commence when:
1) Expenditure for the asset is being incurred;
2) Borrowing costs are being incurred;
3) Activities that are necessary to prepare the asset for its intended use or sale are in
progress.50
Capitalization of borrowing costs shall cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale. And subsequent
borrowing costs are recognized in the income statement.
During the capitalization period, the amount of interest to be capitalized for each
accounting period shall be determined as follows:
1) where funds are borrowed for a specific-purpose, the amount of interest to be capitalized
is the actual interest expense incurred on that borrowing for the period less any bank interest
earned form depositing the borrowed funds before being used on the asset or any investment
income on the temporary investment of those funds;
2) Where funds are borrowed for a general-purpose, the amount of interest to be capitalized
on such borrowings is determined by applying a weighted average interest rate to the weighted
average of the excess amounts of cumulative expenditure on the asset over and above the amounts
of specific-purpose borrowings.
During the construction or manufacture of assets that are qualified for capitalization,
if abnormal discontinuance, other than procedures necessary for their reaching the
expected useful conditions, happens, and the duration of the discontinuance is over three
months, the capitalization of the borrowing costs is suspended. Borrowing costs incurred
during the discontinuance are recognized as expense and charged to the income statement
of the current period, till the construction or manufacture of the assets resumes.
16． Impairment of assets
The Group determines the impairment of assets, other than the impairment of inventory,
deferred income taxes, financeial assets, and long-term equity investment which is measured by
employing the cost method, for which there is no offer in the active market and of which the fair
value cannot be reliably measured, using the following methods:
The Group assesses at the balance sheet date whether there is any indication that an
asset may be impaired. If any indication exists that an asset may be impaired, the Group
estimates the recoverable amount of the asset and performs impairment tests. Goodwill51
arising from a businesss combination and an intangible asset with an indefinite usefull life
are tested for impairment at least at the end of every year, irrespective of whether there is
any indication that the asset may be impaird.
The recoverable amount of an asset is the higher of its fair value less costs to sell and the
present value of the future cash flow expected to be derived from the asset. The Group estimates
the recoverable amount on an individual basis. If it is not possible to estimate the recoverable
amount of the individual asset, the Group determines the recoverable amount of the asset group to
which the asset belongs. Identification of an asset group is based on whether major cash flows
generated by the asset group are largely independent of the cah flows from other assets or asset
groups.
When the recoverable amount of an asset or asset group is less than its carrying
amount, the carrying amount is reduced to the recoverable amount. The impairment of
asset is provided for and the impairment loss is reconised in the income statement for the
current period.
For the purpose of impairment testing, the carrying amount of goodwill acquired in a
business combination is allocated, on a reasonable basis, to related asset groups; if it is impossible
to allocate to the related asset groups, it is allocated to each of the related sets of asset groups.
Each of the related asset groups or related sets of asset groups is an group or set of asset group that
is able to benefit from the synergies of the business combination and shall not be larger than a
reportable segment determined by the Group.
When an impairment test is conducted on an asset group or a set of asset groups that contains
goodwill, if there is any indication of impairment, the Group firstly tests the asset group or the set
of asset groups excluding the amount of goodwill allocated for impairment, i.e., it determines and
compares the recoverable amount with the related carrying amount and then recognize impairment
loss if any. Whereafter, the Group tests the asset group or set of asset groups including goodwill
for impairment, the carrying amount (including the portion of the carrying amount of goodwill
allocated) of the related asset group or set of asset groups is compared to its recoverable amount. If52
the carrying amount of the asset group or set of asset groups is higher than its recoverable amount,
the amount of the impairment loss is firstly eliminated by and amortized to the book value of the
goodwill included in the asset group or set of asset groups, and then eliminated by the book value
of other assets according to the proportion of the book values of assets other than the goodwill in
the asset group or set of asset groups.
Once the above impairment loss is recognized, it cannot be reversed in subsequent
periods.
17. Estimated liabilities
The Group recognizes an estimated liability when the obligation arising from a
contingency meets the following conditions:
1) the obligation is a present obligation of the Group;
2) it is probable that an outflow of economic benefits from the Group will be required to
settle the obligation;
3) a reliable estimate can be made of the amount of the obligation.
18. Revenue
Revenue is recognized only when an inflow of economic benefits is probable, the
amount of which can be reliably measured, and all of the following conditions are
qualified.
Revenue from the sale of goods
The Group has transferred to the buyer the significant risks and rewards of ownership
of the goods; the Group retains neither continuing management involvement to the degree
usually associated with ownership nor effective control over the goods sold; the amount of
revenue can be measured reliably.
Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be
estimated reliably at the balance sheet date, revenue associated with the transaction is
recognized using the percentage of completion method, or otherwise, the revenue is
recognized to the extent of costs incurred that are expected to be recoverable. The outcome53
of a transaction involving rendering of services can be estimated reliably when all of the
following conditions are satisfied: the amount of revenue can be measured reliably; it is
probable that the associated economic benefits will flow to the Group; the stage of
completion of the transaction can be measured reliably; the costs incurred and to be
incurred for the transaction can be measured reliably. The Group determines the stage of
completion of a transaction involving the rendering of services by using the proportion of
services performed to date to the total services to be performed.
Interest income
It should be measured based on the length of time for which the Group’s cash is used
by others and the applicable effective interest rate.
Rental income
Rental income from operating leases is recognized by the lessor in the income
statement on a straight-line basis over the lease term.
19. Leases
A finance lease is a lease that transfers in substance all the risks and benefits incident
to ownership of an asset. An operating lease is a lease other than a finance lease.
The Group recording the operating lease as a lessee
Lease payments under an operating lease are recognized by a lessee on a straight-line
basis over the lease term, and either included in the cost of another related asset or charged
to the income statement for the current period.
The Group recording the operating lease as a lessor
Rental income under a finance lease is recognized by a lessor on a straight-line basis
over the lease term, through profit or loss.
20. Employee benefits
Employee benefits are all forms of consideration given and other relevant expenditure
incurred by the Group in exchange for service rendered by employees. During the accounting
period that the employees render services to the Group, the employee benefits payable is
recognized as a liability. When the termination benefits fall due more than 1 year after the balance54
sheet date, if the discounted value is material, it is reflected in present value.
The employees of the Group participate in social insurance, such as pension insurance,
medical insurance, non-employment insurance, etc., and housing accumulation fund, which
is managed by local government and the relevant expenditure, is recognized, when
incurred, in the costs of relevant assets or the profit and loss for the current period.
When the Group terminates the employment relationship with employees before the
end of the employment contracts or provides compensation as an offer to encourage
employees to accept voluntary redundancy, a provision shall be recognized for the
compensation arising from termination of employment relationship with employees, with a
corresponding charge to the income statement for the current period, when both of the
following conditions are satisfied: (a) the Group has a formal plan for termination of
employment relationship, or has made an offer for voluntary redundancy, which will be
implemented immediately; (b) the Group cannot unilaterally withdraw from the
termination plan or the redundancy offer.
The same principle is applied to the early retirement plan, as it is for the
above-mentioned termination benefits. The salaries, social insurance premiums, etc., to be
paid for the early retired employees, during the period from the date when the employees
stop rendering service to the normal retirement date, should be recognized as employee
benefits payable and charged to the income statement of the current period, when the
above conditions for recognising the termination benefit plan are satisfied.
21. Income taxes
Income tax comprises current and deferred tax. Income tax is recognized as an income
or an expense and include in the income statement for the current period, except to the
extent that the tax arises from a business combination or if it relates to a transaction or
event which is recognized directly in equity.
Current tax is the amount of income tax payable in respect of the taxable profit for the current
period. Taxable profit is the profit for current period, which is determined in accordance with rules
established by the taxation authorities.55
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 to (or recovered from) the tax
authorities according to the requirements of the tax laws.
For temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their book values, and temporary differences between the book values
and the tax bases of items, the tax bases of which can be determined for tax purposes, but
which have not been recognized as assets and liabilities, deferred taxes are provided using
the liability method.
A deferred tax liability is recognized for all taxable temporary differences, except:
1) to the extent that the deferred tax liability arises from the initial recognition of
goodwill or the initial recognition of an asset or liability in a transaction which contains
both of the following characteristics: (i) the transaction is not a business combination; and
(ii) at the time of the transaction, it affects neither the accounting profit nor taxable profit
or loss.
2) In respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in jointly-controlled enterprises, where the timing of
the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
A deferred tax asset is recognized for deductible temporary differences, carryforward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the
carryforward of unused tax credits and unused tax losses can be utilized except:
1) where the deferred tax asset relating to the deductible temporary differences arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss;
2) in respect of deductible temporary differences associated with investments in56
subsidiaries, associates and interests in joint ventures, deferred tax assets are only
recognized to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary
differences can be utilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realized or the liability is
settled, according to the requirements of tax laws. The measurement of deferred tax assets
and deferred tax liabilities reflects the tax consequences that would follow from the
manner in which the Group expects at the balance sheet date, to recover the assets or settle
the liabilities.
At the balance sheet date, the Group reviews the book value of diferred tax assets. If
it is probable that sufficient taxable income cannot be generated to use the tax benefits of
deferred tax assets, the book value of deferred tax assets should be reduced. When it is
probable that sufficient taxable income can be generated, the amount of such reduction
should be reversed.
22． Significant accounting judgements and estimates
Judgements
When applying the accouoting policies of the Group, except for accounting estimates,
management will make accounting judgements which have significant effects on the
financial statements:
The Group makes a judgment on whether there is any sign of possible assets
impairment on the day of balance sheet date at least. If there is any sign of possible assets
impairment, the assets concerned should be subject to impairment test based on the
estimated recoverable amount. The recoverable amount shall be determined in light of the
higher one of the net amount of the fair value of the assets minus the disposal expenses
and the current value of the expected future cash flow of the assets. When making an
estimate of the present value of the future cash flow of an asset, the Group should estimate
the future cash flows of the asset or the relevant assets group, with the appropriate
discount rate selected to reflect the repsent value of the future cash flows.57
Uncertainty of accouting estimates
The crucial assumptions of significant accounting estimates in future and other
crucial sources of estimated uncertainty, which may result in the significant adjustments to
the book value of the subsequent accouting period, are as the following:
Impairment of goodwill
Goodwill is subject to the impairment test yearly at least, which brings the estimates
of the use value of the assets group that is allocated in goodwill. When making an estimate
of the use value of the assets concerning goodwill, the Group should estimate the future
cash flows of the assets group concerned, with the approriate discount rate to reflect the
present value of the cash flows.
23. Other changes in Accounting Policies and Accounting Estimates
There are no other changes in accounting policies and accounting estimates.
Ⅲ Taxes
The major categories of taxes and surcharges with the respective tax rates applicable
to the Group are as follows:
Value added tax (“VAT”) – In accordance with the relevant tax laws in the PRC,
the VAT rate for domestic sales is 17%. VAT is levied at 17%
on the invoiced value of sales of goods and rendering of srvices,
and is payable by the purchaser. The Group is required to pay
the VAT it collects to the tax authority, but may deduct the VAT
it has paid on eligible purchases.
Business tax – In accordance with the relevant tax laws in the PRC, Business
Tax is levied at 5% on the relevant revenue.
City maintenance and construction surtax
– In accordance with the relevant tax laws in the PRC, it is levied at
7% on the turnover taxes paid.
Educational surcharge – In accordance with the relevant tax laws in the PRC, it is levied
at 3% on the turnover taxes paid.
Corporate income tax – In accordance with the relevant tax laws in the PRC, the Group is
subject to a corporate income tax rate of 15%~33% on its taxable
income. The Company is subject to the PRC EIT and local income
tax. As the Company is qualified as a domestic enterprise in
encouraged industries, the Company is entitled to a preferential
EIT rate of 15% from 2001 to 2010, in accordance to Circular on
the Issue of Preferential Taxation Policies for Western
Development Program (Paragragh 1, Article 2, No 202-2001)
collectively issued by the Ministry of Finance, the National58
Taxation Bureau and the Customs General Administration of PRC
and also approved by the Guo Shui Han-Yu (2002) No 186. And it
is exempted from local income tax.to a corporate income tax rate
of 15%~33% on its taxable income. The EIT rate for other
companies of the Group is 33%.
The Entreprise income tax law of the People’s Republic of
China(hereafter as “New EIT Law”) approved by the Fifth Session
of The Tenth National People’s Congress, ended on March 16 2007,
will be enforced as of 1st January 2008. In accordance to the New
EIT law, the domestic and foreign enterprises will be subject to
25% unanimously.Whereas the Company keeps a preferential tax
rate of 15% in conforms to the relevant tax policies, and the
subisidiaries are subject to 25%. The Group has been made
respective adjustments due to the reversal of taxable temporary
time difference and deductible temporary time difference,
according to new applicable tax rates in effect as of 1st January
2008.
Ⅳ Consolidation scope
On 30 June 2010, the main subsidiaries of the Group are as follows:
Total proportion of shares heldTotalproportion
Company
Name of Subsidiaries Registration Nature of BusinessRegisteredInvestment Direct(%) Indirect(%) of voting sharesCode
Place Capitalof the Group
(RMB 10,000)(RMB 10,000)
Nanjing Changan Auto-NanjingManufacturer, development and 60,181 47,308 74.13 - 83.75 75410659-X
Mobile Co., Ltd seller of mini cars and spare parts
Hebei Changan Auto- DingzhouManufacturer, development and 46,469 42,019 92.43 - 95.62 73872432-0
Mobile Co., Ltd seller of mini cars and spare parts
Chongqing Changan InternationalChongqingSeller and agent of import / export1,376 1,307 95.00 - 100.00 20282099-8
Automobile Sales Co., Ltd services of commodities and tech niques
Chongqing Changan Auto-ChongqingSeller of cars and spare parts4,850 4,850 100.00 - 100.0020289809-0
Mobile Sales Co., Ltd
Chongqing Anfu Auto-ChongqingSeller of cars and spare parts 4,200 2,100 50.00 - 50.0073657088-2
Mobile Co., Ltd.
Chongqing Changan SpecialChongqingSeller of special cars and spare parts 500 250 50.00 - 50.00 74534852-X
Automobile Co., Ltd and vehicles maintainance
Chongqing Changan Auto- ChinaSeller of Changan series cars and 1,900 1,900 90 -100 20.0 100.00
Mobile sales subsidiaries spare parts
Chongqing Changan Auto-ChongqingManufacturer and seller of Car 11,550 11,616 100.00 - 100.0066089542-8
Mobile Mould Co. Ltd moulds and car spare parts
Chongqing Changan EuropeTurin, Research and development ofEUR 10 97 100.00 - 100.000937244001759
Design Academy Co. Ltd.Italy vehicles
Chongqing Changan Jinling Auto parts manufacturing, sales 10,000 13,498 100.00 - 100.00 75306009-1
Automobile Parts Co., Ltd.
Although the Group owns more than half of the voting power of the following investees, it
does not have control over the investees as:
Name of Subsidiaries Registration Nature of Business Registered Investment Direct(%) Indirect(%) of voting shares Code
Place Capital of the Group
(RMB 10,000) (RMB 10,000)
Changan Ford Mazda Auto- Chongqing Manufacturer and seller of cars USD35,144 139,510 50.00 - 50.00 70937510-9
Mobile Co., Ltd. and spare parts
Changan Ford Mazda Engine Nanjing Manufacturer and seller of automobile USD 13,920 55,729 50.00 - 50.00 71785962-1
Co., Ltd enegine and spare parts
Chongqing Changan Suziki Chongqing Manufacturer and seller of cars USD19,000 23,991 51.00 - 51.00 62190016-7
Automobile Co., Ltd. and spare parts
Jiangling Holding Co., Ltd. Nanchang Manufacturers and seller of cars 200,000 100,000 50.00 - 50.00 76703230-7
and spare parts
The company does not have control over the four joint-ventures above, and their main
finance and management decision were controlled by the company
and other shareholders. Therefore, it is not included in scope of
consolidated financial statements, and the retrospective
adjustments have been made.
Ⅴ Notes to the consolidated financial statements
⒈Monetary capital
30 June 2010 31 December 2009
Cash 35,700.54 469,185.20
Deposit in bank 5,757,810,717.63 3,505,335,019.14
Other monetary capital 353,904,961.85 152,576,724.16
Total 6,111,751,380.02 3,658,380,928.50
⒉Notes receivable
30 June 2010 31 December 2009
Trade acceptance 1,847,438,684.00 1,523,503,760.00
Bank acceptance 4,220,008,099.19 5,498,829,831.84
6,067,446,783.19 7,022,333,591.84
⒊Accounts receivable and others
⑴Accounts receivable
The credit period is generally one month, extending up to three months for major customers.
Trade receivables are non-interest-bearing.
An aged analysis of the accounts receivable as at the balance sheet date is as follows:
30 June 2010 31 December 2009
Within 1 year 777,817,004.72 162,465,366.27
1 to 2 years 24,330,074.87 24,269,094.91
2 to 3 years 10,368,527.55 6,443,036.93
Over 3 years 89,687,253.97 63,983,882.68
Less:Bad debt Provision 89,890,990.85 74,170,199.9360
812,311,870.26 182,991,180.86
Provisions for bad debts are as follows：
30 June 2010
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 679,364,217.04 75.30 30,353,487.90 4.47
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
74,468,295.74 8.25 57,268,402.40 76.90
Other insignificant items 148,370,348.33 16.45 2,269,100.55 1.53
902,202,861.11 100 89,890,990.85
31 December 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 38,921,454.89 18.39 21,410,982.64 55.01
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
59,679,247.90 28.19 50,481,025.16 84.59
Other insignificant items 158,560,678.00 53.42 2,278,192.13 1.44
257,161,380.79 100 74,170,199.93
⑵other receivables
An aged analysis of other accounts receivable as at the balance sheet date is as follows
30 June 2010 31 December 2009
Within 1 year 88,944,489.12 47,066,938.51
1 to 2 years 55,611,650.98 24,444,744.22
2 to 3 years 10,347,391.43 29,485,593.56
Over 3 years 9,838,336.16 9,013,100.50
Less:Bad debt Provision 39,441,563.72 46,374,003.20
125,300,303.97 63,636,373.59
Provisions for bad debts drawing are as follows
30 June 2010
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant
item 115,983,430.29 65.49% 0.00 -
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
39,441,563.72 22.27% 39,441,563.72 100%
Other insignificant items 9,316,873.68 5.26% 0.00 -
164,741,867.69 93.02% 39,441,563.72
31 December 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant
item 48,403,593.30 45.96 24,199,000.00 49.99
individual insignificant
items with similar credit
risk characteristics, that
25,737,764.42 24.44 9,209,376.54 35.7861
has significant risk
Other insignificant items 35,869,019.07 29.60 12,965,626.66 36.15
110,010,376.79 100 46,374,003.20
⒋Prepayments
30 June 2010 31 December 2009
Amount Percentage(%) Amount Percentage(%)
Within 1 year 335,018,080.78 80.08 503,272,740.86 99.96
1 to 2 years 56,369,607.80 13.47 200,664.12 0.04
2 to 3 years 25,867,742.76 6.18 5,728.40 0.00
over 3years 1,091,775.37 0.26
total 418,347,206.71 100 503,479,133.38 100
⒌Inventory
30, June 2010 31, December 2009
Raw materials 427,590,285.91 413,799,028.06
Materials in transit 107,033,266.14 56,735,363.45
Work in progress 223,493,492.15 434,795,412.61
Commodity stock 1,258,469,885.20 1,921,760,309.40
Consigned processed
material 0.00 413,619.91
Low-value
Consumables 37,308,909.96 36,718,611.21
Less: provision for
value decline of
inventory 133,604,986.85 163,090,728.93
Inventory net value 1,920,290,852.51 2,701,131,615.71
Changes in provision for value decline of inventory:
provision for value
decline of
inventory:
31 December 2009 Increase charge off 30 June 2010
Raw materials 136,192,171.02 18,100 28,437,134.81 107,773,136.21
work in progress 457,129.84 457,129.84
finished goods 26,441,428.07 1,066,707.27 25,374,720.80
Low-
ValueConsumables
163,090,728.93 18,100 29,503,842.08 133,604,986.85
⒍Long-term equity investments
31, December 2009 Increase Decrease 30, June 2010
Cost method 148,609,274 148,609,274
Equity method 4,434,600,109 323,390,925 550,000,000 4,207,991,034
Less: impairment for
long-term equity
investments
27,120,000 27,120,000
Net value for long-term
equity investments 4,556,089,383 323,390,925 550,000,000 4,329,480,308
⒎Fixed assets
31, December
2009 Increase Decrease 30, June 2010
1、Original price 6,260,669,432.20 257,552,466.91 47,436,349.62 6,470,785,549.49
Buildings 1,175,211,359.09 100,205,489.23 642,173.44 1,274,774,674.88
Machinery 3,579,890,858.24 86,307,993.10 45,214,152.66 3,620,984,698.68
Vehicles 48,997,033.64 5,002,780.60 900,553.67 53,099,260.5762
other Equipments 1,456,570,181.23 66,036,203.98 679,469.85 1,521,926,915.36
2、Accumulated
depreciation 2,504,679,993.88 271,562,984.74 27,156,057.33 2,749,086,921.29
Buildings 298,585,099.81 23,744,577.86 76,846.41 322,252,831.26
Machinery 1,571,518,869.96 184,673,820.52 25,923,688.42 1,730,269,002.06
Vehicles 20,876,297.03 2,826,359.87 650,018.21 23,052,638.69
other Equipments 613,699,727.08 60,318,226.49 505,504.29 673,512,449.28
3、Net Value 3,755,989,438.32 -14,010,517.83 20,280,292.29 3,721,698,628.20
Buildings 876,626,259.28 76,460,911.37 565,327.03 952,521,843.62
Machinery 2,008,371,988.28 -98,365,827.42 19,290,464.24 1,890,715,696.62
Vehicles 28,120,736.61 2,176,420.73 250,535.46 30,046,621.88
other Equipments 842,870,454.15 5,717,977.49 173,965.56 848,414,466.08
4、Impairment
provision 408,246,641.39 0.00 6,666,668.64 401,579,972.75
Buildings
Machinery 407,594,423.53 6,666,668.64 400,927,754.89
Vehicles
other Equipments 652,217.86 652,217.86
5、Book Value 3,347,742,796.93 -14,010,517.83 13,613,623.65 3,320,118,655.45
Buildings 876,626,259.28 76,460,911.37 565,327.03 952,521,843.62
Machinery 1,600,777,564.75 -98,365,827.42 12,623,795.60 1,489,787,941.73
Vehicles 28,120,736.61 2,176,420.73 250,535.46 30,046,621.88
other Equipments 842,218,236.29 5,717,977.49 173,965.56 847,762,248.22
⒏Construction in progress
31 December
2009
Increase Decrease Transferred to
Fixed assets
Other
deduction
30 June 2010
Equipment for
Mini Vehicle
Production
46,516,097.99 98,554,269.25 10,912,842.55 10,912,842.55 134,157,524.69
Changan
Industrial
Zone Project
661,623,502.53 87,701,908.13 141,335,814.64 141,335,814.64 607,989,596.02
Engine Plant 339,268,528.26 184,779,389.97 26,643,000.82 26,638,060.82 4,940.00 497,404,917.41
Equipment for
Sedan
Production
85,158,914.56 17,655,387.14 42,179,065.19 42,179,065.19 60,635,236.51
Projects of
Changan
Engineering
Institute
36,291,436.76 39,979,526.04 33,089,292.00 33,089,292.00 43,181,670.80
Vehicle Dies 57,776,903.29 21,203,992.14 78,980,895.43
Car moulds 89,534,268.41 234,156,030.57 14,631,777.55 9,784,357.32 4,847,420.23 309,058,521.43
Others 1,316,169,651.8
0 684,030,503.24 268,791,792.75 263,939,432.52 4,852,360.23 1,731,408,362.29
Total 46,516,097.99 98,554,269.25 10,912,842.55 10,912,842.55 134,157,524.69
⒐Intangible assets
31, December
2009 Increase Decrease 30, June 201063
1、Original price 494,355,855.84 530,665,746.58 1,025,021,602.42
Land use rights 189,410,325.45 392,551,896.04 581,962,221.49
Software use rights 49,601,206.83 26,958,666.17 76,559,873.00
Trademark use rights 36,770,000.00 36,770,000.00
Non-patent technology 218,574,323.56 111,155,184.37 329,729,507.93
2、Accumulated amortization 109,625,254.68 51,734,539.51 161,359,794.19
Land use rights 18,695,564.22 4,037,893.46 22,733,457.68
Software use rights 28,320,601.61 13,824,370.01 42,144,971.62
Trademark use rights 23,491,945.15 1,225,666.68 24,717,611.83
Non-patent technology 39,117,143.70 32,646,609.36 71,763,753.06
3、Net Value 384,730,601.16 478,931,207.07 863,661,808.23
Land use rights 170,714,761.23 388,514,002.58 559,228,763.81
Software use rights 21,280,605.22 13,134,296.16 34,414,901.38
Trademark use rights 13,278,054.85 -1,225,666.68 12,052,388.17
Non-patent technology 179,457,179.86 78,508,575.01 257,965,754.87
4、Impairment
provision 6,700,000.00 6,700,000.00
Land use rights 6,700,000.00 6,700,000.00
Software use rights
Trademark use rights
Non-patent technology
5、Book Value 378,030,601.16 478,931,207.07 856,961,808.23
Land use rights 164,014,761.23 388,514,002.58 552,528,763.81
Software use rights 21,280,605.22 13,134,296.16 34,414,901.38
Trademark use rights 13,278,054.85 -1,225,666.68 12,052,388.17
Non-patent technology 179,457,179.86 78,508,575.01 257,965,754.87
⒑Development expenditure
31 December 2009 30 June 2010
Automobile Development 200,849,901.80 182,624,926.05
⒒Deferred tax assets
31 December 2009 30 June 2010
Provision for the assets impairment 78,107,700.60 61,813,368.27
Accrued expenses and contingent liabilities 193,911,878.20 241,921,065.86
Unpaid Tech develop. Expense and ad
Expense 6,377,189.92 1,810,851.92
Unpaid Salary and bonus 43,984,476.74 16,258,434.27
322,381,245.46 321,803,720.32
⒓Short-term loans
31 December 2009 30 June 2010
Mortgage loans 30,270,268 125,949,532
Pledge loans 230,000,000 200,000,000
Credit loans 80,000,000 100,000,000
Bill purchased 10,000,000
Bill discounted 350,270,268 425,949,532
Total 30,270,268 125,949,53264
⒔Notes payable
31 December 2009 30 June 2010
Trade acceptance 20,000,000.00 36,000,000.00
Bank acceptance 2,777,030,532.62 5,161,331,956.01
Total 2,797,030,532.62 5,197,331,956.01
⒕Acounts payable
Accounts payable bear no interest, and are normally repaid in four months.
On 30 June 2010, the accounts payable to units that hold 5% or more of the
Company’s voting shares or to related parties included in this account balance is
RMB125,404,137Yuan (31 December 2009: RMB26,757,579 Yuan).
On 30 June 2010 and 31 December 2009, there is no significant accounts payable of
over one year.
⒖Advances receipts
On 30 June 2010, within the aforesaid balance, there is no amount due to shareholders that
hold 5% or more of the Company’s voting shares. (31 December 2009: nil)
On 30 June 2010 and 31 December 2009, there are no significant advances receipts of over
one year.
⒗Employee compensation payable
31 December 2009 Additions Payments 30 June 2010
Salary, bonus, allowance and
subsidy 139,455,178.37 512,314,028.89 529,909,423.68 121,859,783.58
Employee salary 1,733,710.25 28,473,896.66 28,207,820.20 1,999,786.71
Labour fund 7,073,946.35 14,088,724.98 13,009,818.81 8,152,852.52
Social insurance premium 29,961,126.29 85,697,857.08 82,592,565.99 33,066,417.38
Housing accumulation fund -520,770.51 22,252,302.64 21,748,182.61 -16,650.48
Total 177,703,190.75 662,826,810.25 675,467,811.29 165,062,189.71
⒘Taxes payable
31 December 2009 30 June 2010
Corporate income tax 173,837,776.17 130,490,130.53
Business tax 3,436,963.09 2,225,535.44
Value-added tax -137,863,378.62 30,591,328.58
City maintenance and construction tax 19,282,957.77 9,295,329.58
Income tax 430,934.76 273,942.67
Consumption tax 177,386,383.88 136,396,899.56
Additional education expenses 8,521,228.09 4,642,278.58
Others 1,657,026.75 -193,308.03
Total 246,689,891.89 313,722,136.91
⒙Other payables
31 December 2009 30 June 2010
Dealer earnest money 54,699,650.84 68,011,208.92
Warrenty 74,803,551.86 30,079,820.16
Repair fees 126,734,419.08 48,892,936.4665
Rental fees 21,737,709.69 25,778,527.39
Advertisment fees 59,557,629.05 18,924,117.97
Sales bonus 3,418,872.18 12,644.00
Warehousing and transport fees 202,013,385.88 74,901,493.15
Loans temporarily 9,365,418.92 0.00
Information technology expense 3,243,039.18 42,119,486.88
Project funds and Project earnest
money 70,855,136.57 12,454,137.14
Others 57,436,931.24 306,974,311.09
Total 683,865,744.49 628,148,683.16
⒚Anticipated liabilities
Categoris of
Expenses
31 December
2009 Additions
Deduction 30 June 2010
Reasons for
year-end cash
in hand
Warranty expenses 405,475,601.66 355,135,796.26 198,845,455.29 561,765,942.63
maintenance
expense drew
beforehand
External guarantee 10,602,024.60 10,602,024.60 Bank
Guarantee
Termination
benefits
11,912,814.71 2,664,874.33 9,247,940.38
Accrued
termination
benefits
Accrued sales
support costs
15,455,700.00 15,455,700.00
Total 416,077,626.26 382,504,310.97 201,510,329.62 597,071,607.61
⒛ Operatiing revenue and expenses
From January to June 2010 From January to June 2009
Catogories of business Operating revenue Operating cost Operating revenue Operating cost
Major business 16,029,407,679.42 12,874,313,867.46 11,079,479,580.56 8,887,336,514.42
Others 598,047,253.36 513,538,157.66 421,171,135.34 310,599,074.11
Total 16,627,454,932.78 13,387,852,025.12 11,500,650,715.90 9,197,935,588.53
21. Business tax and surcharges
From January to June 2010 From January to June 2009
Business tax 1,118,313.18 1,708,694.69
Consumption tax 281,176,249.35 154,636,512.22
City maintenance and construction tax 51,129,939.77 51,328,507.20
Additional education expenses 24,547,851.28 24,284,206.01
Others 4,942.39
Total 357,977,295.97 231,957,920.12
22. Financial expenses
From January to June 2010 From January to June 2009
Interest expense 42,819,868.65 33,993,175.68
Deduction: the amount of capitalized
interest 50,578,770.32 14,281,823.01
Deduction: interest income 527,918.23 14,358,693.81
Exchange gain or loss 5,138,099.24 1,261,411.9866
Others 2,582,989.99 721,067.35
Total -565,730.67 7,335,138.19
23. Impairment on assets
From January to June 2010 From January to June 2009
Bad debt loss 6,728,663.67 -760,964.74
Loss due to the market price
decline of inventory -28,644,429.48 76,928,557.05
Impairment of long-term
equity investment loss 4,830,178.00 0.00
Impairment on fixed assets 0.00 142,022,919.71
Total -17,085,587.81 218,190,512.02
24.Investment income
Sources of investment income generated From January to June
2010
From January to June
2009
Long-term equity investment income accounted for by
using the equity method 975,094,449.15 330,869,140.33
Long-term equity investment income accounted for by
using the cost method 6,245,999.32 6,800,000.00
Equity investment income 22,155,290.91
Total 1,003,495,739.38 337,669,140.33
VI. Notes to the financial statements of parent company
⒈Accounts receivable and others
⑴Accounts receivable
30 June 2010 31 December 2009
Within 1 year 832,776,318.53 551,094,346.95
1 to 2 years 9,404,862.34 14,606,768.76
2 to 3 years 10,201,701.99 10,327,396.62
Over 3 years 72,281,137.44 62,961,016.83
Provisions for bad debts
drawing 58,909,066.96 57,291,511.72
865,754,953.34 581,698,017.44
Provisions for bad debts drawing are as follows：
30 June 2010
Sum Percentage（%） debt Provision provision rate（%）
Individual significant item 719,721,420.65 77.84% 21,410,982.64 2.97
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
59,833,129.90 6.47% 37,498,084.32 62.67
Other insignificant items 145,109,469.75 15.69%
924,664,020.30 58,909,066.96
31 December 2009
Sum Percentage（%） debt Provision provision rate（%）
Individual significant item 546,809,919.75 85.58 21,410,982.64 3.91
individual insignificant
item with similar credit
43,143,272.69 6.75 35,880,529.08 83.1767
risk characteristics, that
has significant risk
Other insignificant items 49,036,336.72 7.67
638,989,529.16 100.00 57,291,511.72
⑵Other receivables
An analysis of other accounts receivable as at the balance sheet date is as follows:
30 June 2010 31 December 2009
Within 1 year 154,099,953.96 29,401,719.20
within 1 to 2 years 22,186,185.16 100,063,039.90
within 2 to 3 years 5,339,859.00 643,604.00
Over 3 years 2,318,517.44 2,266,354.85
Deduct:Provisions for other bad debts 2,405,917.32 2,464,630.89
181,538,598.24 129,910,087.06
Provisions for bad debts drawing are as follows
30 June 2010
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 56,550,601.25 28.81%
individual insignificant item with
similar credit risk characteristics,
that has significant risk
8,685,462.25 4.42% 2,405,917.32 27.70
Other insignificant items 118,708,452.06 66.77%
183,944,515.56 100.00% 2,405,917.32
31 December 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 100,000,000.00 75.54
individual insignificant items
with similar credit risk
characteristics, that has
significant risk
18,993,018.77 14.35 2,464,630.89 12.98
Other insignificant items 13,381,699.18 10.11
132,374,717.95 100.00 2,464,630.89
⒉Long-term equity investments
31, December
2009 Increase Decrease 30, June 2010
Cost method 1,179,774,110.00 77,185,170.24 121,059,741.00 1,135,899,539.24
Equity method 4,676,894,630.78 231,941,281.19 56,846,832.04 4,851,989,079.93
Less: impairment for
long-term equity investments
Net value for long-term
equity investments 5,856,668,740.78 309,126,451.43 177,906,573.04 5,987,888,619.17
⒊ Operatiing revenue and expenses
From January to June 2010 From January to June 2009
type of business operation income operation cost operation income operation cost
primary business 10,647,826,495.36 8,488,995,509.05 7,041,468,826.01 5,555,206,850.27
other business 594,678,125.39 551,360,888.58 417,721,641.91 330,983,446.04
total 11,242,504,620.75 9,040,356,397.63 7,459,190,467.92 5,886,190,296.3168
⒋ Investment income
Sources of investment income
generated
From January to June 2010 From January to June 2009
Gain arising from dividends of
subsidiaries 10,000,000.00 330,792,097.19
Long-term equity investment
income 975,094,449.15 14,201,172.92
Gain or loss arising from the
disposal of long-term equity
investments 7,178,583.76
Total 992,273,032.91 344,993,270.11
Ⅶ Related party relationships and transactions
1． Criteria for the identification of related parties
If a party has the power to control, jointly control or exercise significant influence over
another party, they are regarded as related parties. Two or more parties are also regarded
as related parties if they are subject to control, joint control or significant influence from the
same party.
The following are related parties of the Group:
1) Parent company of the Group;
2) Subsidiaries of the Group;
3) Other enterprises that are controlled by the parent company as the Group;
4) Investors who have joint control over the Group;
5) Investors who can exercise significant influence over the Group;
6) Joint ventures of the Group ;
7) Associates of the Group;
8) Principal individual investors of the Group, and close family members of such
individuals;
9) Key management personnel of the Group or its parent, and close family members of such
individuals;
10) Other enterprises that are controlled, jointly controlled, or significantly influenced by
the Group’s principal individual investors, key management personnel, or close
family members of such individuals.
Enterprises are not regarded as related parties simply because they are under the
common control from the State, if no other related party relationships exist between them.
2． Parents Company and subsidiaries
Name of the Place of Main Proportion of shares Corporate Legal
Parent Company registration business in the Company type representative
China Changan Beijing Manufacture and sale of 45.71% Stock Company Limited Xu Bin
Automobile Company automobiles, engine,
Limited and comporents
Notes: On July 3, 2009, apporved by SAIC, China South Industries Motor Company Limited
is changed into China Changan Automobile Group Company Limited.
Refer to Note Ⅳ “Scope of consolidation for consolidated financial statements” for the
Group’s subsidiaries.
3. Other related parties
Name of the related parties Relationship with related
parties69
China South Industries Automobile Co., Ltd – Chongqing
Tsingshan Transmission Branch Company (hereafter abbreviated
as “CSIA-Chongqing Tsingshan Transmission Branch”)
Branch of parent company
China South Industries Automobile Co., Ltd - Sichuan Ningjiang
Shock-absorber Branch (hereafter referred to as “CSIA-Ningjiang
Shock-absorber Branch”)
Branch of parent company
China South Industries Automobile Co., Ltd - Jian'an Automobile
Axle Branch (hereafter abbreviated as “CSIA-Jian'an Automobile
Axle Branch”)
Branch of parent company
Chongqing Automobile Air-conditioner Co., Ltd under control of CSIA
Chongqing Changfeng Jiquan Machinery Co., Ltd under control of CSIA
Chongqing Changan Jinling Vehicles Parts Co., Ltd under control of CSIA
Changan Ford Mazda Engine Co., Ltd Joint ventures
Changan Ford Mazda Automobile Co., Ltd Joint ventures
Chongqing Changan Suzuki Automobile Co., Ltd Joint ventures
Jiangling Holding Co., Ltd Joint ventures
Chongqing HelpGo Information Technology Co., Ltd Associate of the Group
Chongqing Shangfang Automobile Fittings Co., Ltd under control of CSIA
Chongqing Dajiang Xinda Vehicles Shares Co., Ltd under control of CSIA
Chengdu Lingchuan Vehicle Fuel Tank Co., Ltd under control of CSIA
China South Industry Group Finance Co., Ltd under control of CSIA
Chongqing Wanbing Material Co., Ltd under control of CSIA
Sichuan Hongguang Machinery and Electrics Co., Ltd under control of CSIA
Chengdu Lingchuan Special Industry Co., Ltd under control of CSIA
Chongqing Yihong Engineering Plastic Products Co., Ltd under control of CSIA
Hubei Xiaogan Huazhong Automobile Lamp Co., Ltd under control of CSIA
Yunnan Xiyi Industries Co., Ltd under control of CSIA
Longchang Shanchuan Shock-absorber Industries Co., Ltd under control of CSIA
Chongqing Jianshe Automobile Air-conditioner Co., Ltd under control of CSIA
Southwest Industries Corporation under control of CSIA
Chongqing Wanyou Economic Development Co., Ltd under control of CSIA
Chengdu Wanyou Economic Technological Development Co., Ltd under control of CSIA
Chongqing Jiangling Construction Co., Ltd under control of CSIA
Baoding Changan Bus Manufacturing Co., Ltd under control of CSIA
Chongqing Changan Construction Co., Ltd under control of CSIA
Changan Automobile (Group) Liability Co. Ltd under control of CSIA
Chengdu Ningxing Automobile Spring Co., Ltd under control of CSIA
South Yingte Air-conditioner Co, .Ltd under control of CSIA
South Tianhe Chassis System Co., Ltd under control of CSIA
Chongqing Changan Lingyun Automobile Components Co., Ltd under control of CSIA
Chongqing Shanrui Automobile Components Co., Ltd Associate of CSIA
Chongqing Xiyi Automobile Connecting Rod Co., Ltd Associate of CSIA
Beijing Beiji Mechanical and Electrical Industry Co., Ltd under control of CSIA
Chengdu Wanyou Filter Co., Ltd under control of CSIA
Chongqing Changan Kuayue Automobile Co., Ltd under control of CSIA
Chongqing Dajiang Millison Die-Casting Co., Ltd under control of CSIA
Chongqing Dajiang Yuqiang Plastic Co., Ltd under control of CSIA
Congqing Jiangda Aluminium Alloy Wheel Co., Ltd under control of CSIA
Chongqing Jinhai Standard Parts Co., Ltd under control of CSIA
Chongqing Qingshan Sales Co., Ltd under control of CSIA70
Chongqing Wanyou Auto Sales and Service Corporation under control of CSIA
Chongqing Changrong Machinery Co., Ltd under control of CSIA
Chongqing Changan Minsheng Logistics Co., Ltd Under singificant influence from
manager
4. Major transactions between the Group and its related parties
⑴Selling goods to related parties(the transactions below not including tax )
Selling goods to related parties
From January to
June 2010
From January
to June 2009
Total 2,584,415,409 1,964,097,598
⑵Purchases of goods from related parties
Purchases of goods from related parties
From January to
June 2010
From January
to June 2009
Total 3,144,518,401 1,917,846,801
⑶Other major related-party transactions
Payment for comprehensive service charges
Name of related parties Content of transaction From January to
June 2009
From January
to June 2008
Changan Industry (Group) Liability Co. Ltd Payment for trademark royalties 11,724,300 8,530,980
Changan Industry (Group) Liability Co. Ltd Payment for land rental fees 7,841,346 10,249,095
Changan Industry (Group) Liability Co. Ltd Payment for building rental fees 14,630,384 11,278,345
Changan Industry (Group) Liability Co. Ltd Payment for water, electricity and gas
expenses 121,935,914 82,947,241
Changan Industry (Group) Liability Co. Ltd Payment for social welfare expenses 0 15,704,488
Changan Industry (Group) Liability Co. Ltd Payment for education expense 0 0
Changan Industry (Group) Liability Co. Ltd Payment for police security &fire
fighting expense 5,509,971 5,500,078
Changan Industry (Group) Liability Co. Ltd Payment for labour union expense 0 0
Changan Industry (Group) Liability Co. Ltd Others 4,756,124 4,510,590
Total 166,398,039 138,720,817
Engineering procurement
Name of related parties From January to
June 2010
From January
to June 2009
Changan Industry (Group) Liability Co. Ltd 1,226,000 2,479,887
Chongqing Changan Construction Co., Ltd 63,898,527 96,352,297
Chongqing HelpGo Information Technology Co., Ltd 6,239 12,741,525
Total 65,130,766 111,573,710
other
Name of related parties Content of
transaction
From January
to June 2010
From January to
June 2009
Chongqing HelpGo Information Technology Co.,
Ltd
Development and
maintenance of
information system
119,644 17,696,304
Changan Industry (Group) Liability Co. Ltd Housing rental revenue 2,173,400
Chongqing Changan Real Estate Development Co., Housing rental fees paid 3,029,10871
Ltd
Chongqing Changan Minsheng Logistics Co., Ltd Logistic Storage 474,288,045 354,926,715
China South Industry Group Finance Co., Ltd revenue 2,781,358 1,720,378
⑸balance of related-party receivable and payable
notes receivable
notes receivable June 30, 2010 Dec. 31, 2009
Total 806,616,300 633,602,075
Accounts receivable
Accounts receivable June 30, 2010 Dec. 31, 2009
Total 232,787,363 131,130,930
other accounts receivable
other accounts receivable June 30, 2010 Dec. 31, 2009
Changan Ford Mazda Automobile Co., Ltd 78,880 73,034
Notes payable
Notes payable June 30, 2010 Dec. 31, 2009
Total 505,333,747 252,818,781
accounts payable
accounts payable June 30, 2010 Dec. 31, 2009
Total 550,668,695 556,744,080
Advances receipts
Advances receipts June 30, 2010 Dec. 31, 2009
Total 29,727,916 13,885,657
Other payables
Other payables June 30, 2010 Dec. 31, 2009
Total 100,535,306 60,986,360
⑹Cash saved in related parties
Cash in bank
June 30, 2010 Dec. 31, 2009
China South Industry Group Finance Co., Ltd 367,936,730 581,879,526
⑺Loans
Short-term loans June 30, 2010 Dec. 31, 2009
China South Industry Group Finance Co., Ltd 280,949,532 85,649,590
China South Industries Automobile Co., Ltd 100,000,000
Ⅷ Contingencies72
As on 30 June 2008, the Group has no important events or contingencies.
Ⅸ Fututre matters on banlance sheet
As on 30 June 2010, the Group has no future matters on the balance sheet.
Ⅹ Provision for the impairment of assets
Deductions
Items
Opening balance at
the beginning of the
year
Provision Reversal Write-off
Closing balance at the
end of the year
1.Bad debt provision 120,544,203.13 8,788,351.44 129,332,554.57
2.Provision for obsolete inventory 163,090,728.93 18,100.00 28,662,529.48 841,312.60 133,604,986.85
3. Provision for the impairment of
available-for-sale financial assets
4.Provision for the impairment of
held-to-maturity investments
5.Provision for the impairment of long-term
equity investments 4,830,178.00 4,830,178.00
6.Provision for the impairment of investmental
realty
7.Provision for the impairment of fixed assets 408,246,641.39 6,666,668.64 401,579,972.75
8.Provision for the impairment of
constructional materials
9.Provision for the impairment of
Construction in progress
10.Provision for the impairment of productive
assets
11.Provision for the impairment of oil gas
assets
12.Provision for the impairment of intangible
assets 6,700,000.00 6,700,000.00
13.Provision for the impairment of goodwill 73,465,335.00 73,465,335.00
14.others
Total 772,046,908.45 13,636,629.44 35,329,198.12 841,312.60 749,513,027.17
Ⅺ Net profit except non-recurring profit and loss
Non-recurring profit and loss project Amount
Gain/loss of non-current assets -2,090,764.45
Government subsidies accounted into current gain/loss account, other than those closely
related to the Company’s common business, comply with the national policy and continues
to enjoy at certain fixed rate or amount.
1,557,629.83
Gain/loss from change of fair value of transactional asset and liabilities, and investment gains
from disposal of transactional financial assets and liabilities and sellable financial assets, other
than valid period value instruments related to the Company’s common businesses
4,563,744.00
Other non-business income and expenditures other than the above -1,734,397.59
Influenced amount of income tax -537,688.81
Influenced amount of miniority shareholders’ equity -540,965.30
total 1,217,557.68
Ⅻ Reconciliation of the net profits presented under the PRC accounting
standards and International Financial Reporting Standards (“IFRS”)
Unit：（RMB）Yuan73
Jan.-Jun., 20N10e t profJitasn .-Jun., 2009 As at 30 Jun. 2N01e0t asAses tast 31 Dec, 2009
Account report according to the
international finance report rules 1,366,565,351.61 522,993,993.409,836,638,563.88 8,824,383,126.69
Account report according to the
enterprise accounting rule and system
under the PRC
1,366,565,351.61 522,993,993.409,907,922,628.88 8,895,667,191.69
Adjustment of according to international accounting rules：
.Payment to currency shareholders of
A share cash opposite price（Note ） -71,284,065.00 -71,284,065.00
Total -71,284,065.00 -71,284,065.00
Difference between Chinese and
international accounting standard
Note Jiangling Holding company, the Company’s JV, held by Jiangling stake in listed
companies the right to paid circulation on the price in cash, according to international
norms should be included in the profit and loss.74
VIII Documents for Future Reference
1. semi-annual report with the signature of chairman
2. Financial reports with signatures and stamps of the legal representative, the chief
accountant and the chief of accounting organization.
3. All the original documents and manuscripts of the Company which has been disclosed
in the reporting period in the newspapers designated by China Securities Regulatory
Commission
4. Article of Association
5. Semi-annual reports disclosed in other securities markets.
6. Other relevant document.
Chairman of BOD: Xu Liuping General Manager: Zhang Baolin
Chongqing Changan Automobile Co., Ltd
Aug.30, 2010
