YANTAI CHANGYU PIONEER WINE
COMPANY LIMITED
Auditors' Report and Financial Statements
For the year ended 31 December 2013
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
FINANCIAL STATEMENTS AND AUDITOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2013
CONTENTS PAGE
AUDITOR'S REPORT 1-2
THE COMPANY'S AND CONSOLIDATED BALANCE SHEETS 3-6
THE COMPANY AND CONSOLIDATED INCOME STATEMENTS 7-8
THE COMPANY AND CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY 9 - 10
THE COMPANY AND CONSOLIDATED CASH FLOW STATEMENTS 11 - 12
NOTES TO THE FINANCIAL STATEMENTS 13 - 93
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
De Shi Bao (Shen) Zi (14) No. P1493
AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(A joint stock limited company incorporated in the People's Republic of China)
We have audited the accompanying financial statements of Yantai Changyu Pioneer Wine
Company Limited (the "Company") and its subsidiaries (collectively the "Group"), which
comprise the consolidated and company balance sheets as at 31 December 2013, and the
consolidated and company income statements, statements of changes in equity and cash flow
statement for the year then ended, and the notes to the financial statements.
1. Management' responsibility for the financial statements
Management of the Company is responsible for the preparation and fair presentation of these
financial statements. This responsibility includes: (1) preparing the financial statements in
accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the
financial statements; (2) designing, implementing and maintaining internal control which is
necessary to enable that the financial statements are free from material misstatement, whether due
to fraud or error.
2. Auditors' responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit.
We conducted our audit in accordance with China Standards on Auditing. China Standards on
Auditing require that we comply with the Code of Ethics for Chinese Certified Public
Accountants and plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing audit procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, Certified Public Accountants consider the
internal control relevant to the preparation and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
-1-
AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED - continued
(A joint stock limited company incorporated in the People's Republic of China)
Opinion
In our opinion, the financial statements of Yantai Changyu Pioneer Wine Company Limited
present fairly, in all material respects, the company's and consolidated financial position as of 31
December 2013, and the company's and consolidated results of operations and cash flows for the
year then ended in accordance with Accounting Standards for Business Enterprises.
Deloitte Touche Tohmatsu Chinese Certified Public Accountant
Certified Public Accountants LLP Xu Zhao Hui
Shanghai, China Li Xu
24 April 2014
-2-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
YEAR ENDED 31 DECEMBER 2013
ASSETS Notes 2013 2012
RMB RMB
CURRENT ASSETS
Cash and bank VI-1 1,367,818,182 2,227,470,828
Notes receivables VI-2 79,702,753 92,635,701
Trade receivables VI-3 177,109,516 135,217,384
Advances to suppliers VI-4 45,997,863 44,294,482
Interest receivable VI-5 8,417,995 7,215,854
Other receivables VI-6 99,331,794 28,462,945
Inventories VI-7 2,121,117,437
____________ 2,268,621,441
____________
Total current assets 3,899,495,540
____________ 4,803,918,635
____________
NON-CURRENT ASSETS
Long-term equity investments VI-8 - 5,000,000
Property, plant and equipment VI-9 1,917,641,344 1,823,983,721
Construction in progress VI-10 1,423,654,530 832,828,689
Materials for construction of fixed assets 676,539 -
Intangible assets VI-11 296,129,754 278,293,922
Biological assets VI-12 101,794,515 39,681,580
Goodwill VI-13 13,112,525 -
Long-term prepaid expenses VI-14 165,521,803 160,871,860
Deferred tax assets VI-15 158,533,090 150,376,138
Other non-current assets VI-17 24,972,804
____________ 28,180,035
____________
Total non-current assets 4,102,036,904
____________ 3,319,215,945
____________
Total assets 8,001,532,444
____________ 8,123,134,580
____________
-3-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
YEAR ENDED 31 DECEMBER 2013 - continued
LIABILITIES AND EQUITY Notes 2013 2012
RMB RMB
CURRENT LIABILITIES
Short-term borrowings VI-18 243,170,674 -
Notes payable 5,765,694 -
Trade payables VI-19 258,116,331 324,881,168
Advances from customers VI-20 188,651,254 450,172,253
Employee benefits VI-21 134,322,137 140,484,927
Taxes payable VI-22 194,413,430 444,084,576
Other payables VI-23 497,301,630 470,650,111
Interest payable 2,152,059 -
Non-current liability due within 1 year VI-24 - 150,945,000
Other current liabilities VI-25 12,915,801
____________ 8,090,382
____________
Total current liabilities 1,536,809,010
____________ 1,989,308,417
____________
NON-CURRENT LIABILITIES
Deferred tax liability VI-15 5,336,115 5,336,115
Other non-current liabilities VI-26 88,366,835
____________ 69,004,861
____________
Total non-current liabilities 93,702,950
____________ 74,340,976
____________
Total liabilities 1,630,511,960
____________ 2,063,649,393
____________
EQUITY
Share capital VI-27 685,464,000 685,464,000
Capital surplus VI-28 563,139,042 562,139,042
Surplus reserve VI-29 342,732,000 342,732,000
Retained earnings VI-30 4,616,944,663 4,322,769,136
Equity attributable to shareholders
of the Company 6,208,279,705 5,913,104,178
Non-controlling interests 162,740,779
____________ 146,381,009
____________
Total equity 6,371,020,484
____________ 6,059,485,187
____________
Total liabilities and equity 8,001,532,444
____________ 8,123,134,580
____________
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 3 to 93 were signed by the following:
-4-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2013
ASSETS Notes 2013 2012
RMB RMB
CURRENT ASSETS
Cash and bank XII-1 602,444,243 1,090,260,851
Notes receivabless XII-2 32,594,381 1,450,000
Trade receivables XII-3 1,600,968 710,080
Dividend receivable XII-4 752,595,884 993,614,383
Advances to suppliers XII-5 24,824,672 26,131,908
Interest receivable VI-5 8,417,995 7,215,854
Other receivables XII-6 3,709,583,949 2,194,219,753
Inventories XII-7 781,284,189
____________ 893,442,758
____________
Total current assets 5,913,346,281
____________ 5,207,045,587
____________
NON-CURRENT ASSETS
Long-term equity investments XII-8 1,048,208,923 1,006,492,893
Property, plant and equipment XII-9 425,294,116 354,789,743
Construction in progress XII-10 269,802 24,640,660
Intangible assets XII-11 79,139,831 81,512,908
Biological assets XII-12 60,851,409 16,866,437
Deferred tax assets XII-13 22,956,747 19,517,202
Other non-current assets XII-14 2,616,525
____________ 2,502,630
____________
Total non-current assets 1,639,337,353
____________ 1,506,322,473
____________
Total assets 7,552,683,634
____________ 6,713,368,060
____________
-5-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2013 - continued
LIABILITIES AND EQUITY Notes 2013 2012
RMB RMB
CURRENT LIABILITIES
Short-term borrowings VI-18 243,170,674 -
Trade payables XII-15 166,453,563 164,815,117
Employee benefits XII-16 69,032,912 80,144,533
Taxes payable XII-17 37,578,670 17,995,089
Other payables XII-18 1,612,596,521 1,432,464,297
Interest payable 2,152,059 -
Other current liabilities 2,559,227
____________ 1,856,337
____________
Total current liabilities 2,133,543,626
____________ 1,697,275,373
____________
NON-CURRENT LIABILITIES
Other non-current liabilities 22,275,462
____________ 19,905,019
____________
Total non-current liabilities 22,275,462
____________ 19,905,019
____________
Total liability 2,155,819,088
____________ 1,717,180,392
____________
EQUITY
Share capital VI-27 685,464,000 685,464,000
Capital surplus XII-19 557,222,454 557,222,454
Surplus reserve VI-29 342,732,000 342,732,000
Retained earnings 3,811,446,092
____________ 3,410,769,214
____________
Total equity 5,396,864,546
____________ 4,996,187,668
____________
Total liabilities and equity 7,552,683,634
____________ 6,713,368,060
____________
The accompanying notes form an integral part of these financial statements.
-6-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2013
Notes 2013 2012
RMB RMB
Revenue VI-32 4,320,948,572 5,643,530,553
Less: Cost of sales VI-32 1,357,897,999 1,401,088,983
Taxes and surcharges VI-33 236,394,164 318,214,304
Selling expenses VI-34 1,140,836,150 1,449,224,163
Administrative expenses VI-35 245,498,950 254,374,809
Impairment loss of assets VI-36 2,149,438 2,777,648
Add: Financial income VI-37 18,700,357
____________ 19,918,261
____________
Operating profit 1,356,872,228 2,237,768,907
Add: Non-operating income VI-38 42,108,726 35,378,260
Less: Non-operating expenses VI-39 1,874,223 2,971,409
Including: losses on disposal
of non-current assets 678,016
____________ 2,581,199
____________
Profit before tax 1,397,106,731 2,270,175,758
Less: Income tax VI-40 348,920,804
____________ 569,247,641
____________
Profit for the year 1,048,185,927
____________ 1,700,928,117
____________
Attributable to shareholders of the Company 1,048,185,927
____________ 1,700,928,117
____________
Earnings per share
Basic earnings per share VI-41 1.53
____________ 2.48
____________
Diluted earnings per share VI-41 N/A
____________ N/A
____________
Comprehensive income 1,048,185,927
____________ 1,700,928,117
____________
Attributable to shareholders of the Company 1,048,185,927 1,700,928,117
____________ ____________
The accompanying notes form an integral part of these financial statements.
-7-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2013
Notes 2013 2012
RMB RMB
Revenue XII-20 1,730,694,774 1,776,979,032
Less: Cost of sales XII-20 1,473,772,762 1,444,948,143
Taxes and surcharges XII-21 135,046,585 175,240,595
Administrative expenses XII-22 109,664,952 126,120,749
Impairment loss of assets XII-23 4,392,429 -
Add: Financial income XII-24 25,948,141 24,834,687
Investment income XII-25 1,126,019,415
____________ 1,091,018,499
____________
Operating Profit 1,159,785,602 1,146,522,731
Add: Non-operating income 4,266,595 2,141,698
Less: Non-operating expenses 1,019,467
____________ 2,434,516
____________
Profit before tax 1,163,032,730 1,146,229,913
Less: Income tax 8,345,452
____________ 15,334,107
____________
Profit for the year 1,154,687,278
____________ 1,130,895,806
____________
Total comprehensive income 1,154,687,278
____________ 1,130,895,806
____________
The accompanying notes form an integral part of these financial statements.
-8-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2013
2013
Attributable to shareholders of the Company
Issue Capital Surplus Retained Non-controlling
capital surplus reserve earnings Subtotal interests Total
RMB RMB RMB RMB RMB RMB RMB
1January 2013 685,464,000
_______ 562,139,042
_______ 342,732,000 4,322,769,136 5,913,104,178
_______ ________ ________ 146,381,009
_______ 6,059,485,187
________
Profit for the year and
total comprehensive income - - - 1,048,185,927 1,048,185,927 - 1,048,185,927
Shareholders' injection
Injection of non-controlling
interest - - - - - 16,359,770 16,359,770
Proposed final dividend
(Notes VI-30)
Withdrawal of surplus reserve - - - (754,010,400) (754,010,400) - (754,010,400)
Others (Notes VI-28) _______- 1,000,000
_______ _______- ________- ________
1,000,000 _______- 1,000,000
________
31 December 2013 685,464,000 563,139,042 342,732,000 4,616,944,663 6,208,279,705 162,740,779 6,371,020,484
_______ _______ _______ ________ ________ _______ ________
2012
Attributable to shareholders of the Company
Issue Capital Surplus Retained Non-controlling
capital surplus reserve earnings Subtotal interests Total
RMB RMB RMB RMB RMB RMB RMB
1January 2012 527,280,000
_______ 562,139,042
_______ 295,942,630 3,628,279,989 5,013,641,661
_______ ________ ________ 136,318,487
_______ 5,149,960,148
________
Profit for the year and
total comprehensive income - - - 1,700,928,117 1,700,928,117 - 1,700,928,117
Shareholders' injection
Injection of non-controlling
interest - - - - - 10,062,522 10,062,522
Withdrawal of surplus reserve - - 46,789,370 (46,789,370) - - -
Proposed final dividend
(Notes VI-30) - - - (801,465,600) (801,465,600) - (801,465,600)
Others (Notes VI-30) 158,184,000
_______ _______- (158,184,000)
_______- ________ ________- _______- ________-
31 December 2012 685,464,000 562,139,042 342,732,000 4,322,769,136 5,913,104,178 146,381,009 6,059,485,187
_______ _______ _______ ________ ________ _______ ________
The accompanying notes form an integral part of these financial statements.
-9-
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2013
2013
Issued capital Capital surplus Surplus reserve Retained earnings Total
RMB RMB RMB RMB RMB
1 January 2013 685,464,000
________ 557,222,454
________ 342,732,000
________ 3,410,769,214
_________ 4,996,187,668
_________
Profit for the year and
total comprehensive income - - - 1,154,687,278 1,154,687,278
Withdrawal of surplus reserve
Proposed final dividend (Notes VI-30) ________- ________- ________- (754,010,400)
_________ (754,010,400)
_________
31 December 2013 685,464,000
________ 557,222,454
________ 342,732,000
________ 3,811,446,092
_________ 5,396,864,546
_________
2012
Issued capital Capital surplus Surplus reserve Retained earnings Total
RMB RMB RMB RMB RMB
1 January 2012 527,280,000
________ 557,222,454
________ 295,942,630
________ 3,286,312,378
_________ 4,666,757,462
_________
Profit for the year and
total comprehensive income - - - 1,130,895,806 1,130,895,806
Withdrawal of surplus reserve - - 46,789,370 (46,789,370) -
Proposed final dividend (Notes VI-30) ________- ________- ________- (801,465,600)
_________ (801,465,600)
_________
Shareholder equity internal carry forward
Others (Notes VI-30) 158,184,000
________ ________- ________- (158,184,000)
_________ _________-
31 December 2012 685,464,000
________ 557,222,454
________ 342,732,000
________ 3,410,769,214
_________ 4,996,187,668
_________
The accompanying notes form an integral part of these financial statements.
- 10 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2013
Notes 2013 2012
RMB RMB
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering of service 4,766,532,032 6,775,549,780
Cash received form tax refund 22,163,624 14,636,437
Cash received relating to other operating activities VI-42 47,960,711
__________ 40,051,912
__________
Cash inflows from operating activities 4,836,656,367
__________ 6,830,238,129
__________
Cash paid for goods and services (1,293,320,336) (1,997,334,346)
Cash paid to and on behalf of employees (379,880,613) (409,261,052)
Cash paid for all types of taxes (1,368,825,802) (1,768,277,184)
Cash paid relating to other operating activities VI-42 (1,059,555,309)
__________ (1,353,324,225)
__________
Cash outflows from operating activities (4,101,582,060)
__________ (5,528,196,807)
__________
Net cash flows from operating activities VI-43 735,074,307
__________ 1,302,041,322
__________
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in term deposits over 3 months 1,292,524,719 1,273,844,720
Proceeds from return on investments 33,050,471 46,581,313
Proceeds from disposal of property, plant and equipment 1,026,411
__________ 2,094,333
__________
Cash inflows from investing activities 1,326,601,601
__________ 1,322,520,366
__________
Cash paid for acquisition of properties, plants and equipments,
intangible assets and other long-term assets (962,180,456) (870,164,926)
Cash paid for term deposits over 3 months (907,392,728) (662,524,719)
Other cash paid for the purchase of non-controlling interest (16,883,864)
__________ __________ -
Cash outflows from investing activities (1,886,457,048)
__________ (1,532,689,645)
__________
Net cash flows from investing activities (559,855,447)
__________ (210,169,279)
__________
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from Non-controlling interest 16,359,770 10,062,522
Cash receipts from borrowings 243,170,674 -
Cash received from other financing activities __________- 90,000,000
__________
Cash inflows from financing activities 259,530,444
__________ 100,062,522
__________
Dividends paid and interest paid (764,539,398) (805,660,589)
Cash paid from other financing activities VI-42 (275,945,000)
__________ (80,497,823)
__________
Cash outflows from financing activities (1,040,484,398)
__________ (886,158,412)
__________
Net cash flows from financing activities (780,953,954)
__________ (786,095,890)
__________
NET INCREASE OF CASH AND CASH EQUIVALENTS (605,735,094) 305,776,153
ADD: CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR VI-43 1,562,294,026
__________ 1,256,517,873
__________
CASH AND CASH EQUIVALENTS AT END OF YEAR VI-43 956,558,932
__________ 1,562,294,026
__________
The accompanying notes form an integral part of these financial statements.
- 11 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2013
Notes 2013 2012
RMB RMB
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering of service 1,993,219,656 2,190,406,491
Cash received relating to other operating activities 9,194,891
__________ 8,085,071
__________
Cash inflows from operating activities 2,002,414,547
__________ 2,198,491,562
__________
Cash paid for goods and services (1,385,474,499) (1,930,252,146)
Cash paid to and on behalf of employees (162,425,829) (147,607,346)
Cash paid for all types of taxes (206,446,458) (335,467,847)
Cash paid relating to other operating activities (1,459,407,016)
__________ (1,026,816,523)
__________
Cash outflows from operating activities (3,213,753,802)
__________ (3,440,143,862)
__________
Net cash flows from operating activities XII-26 (1,211,339,255)
__________ (1,241,652,300)
__________
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in term deposits over 3 months 1,292,524,719 1,268,844,720
Proceeds from return on investments 1,395,495,286 2,003,196,895
Proceeds from disposals of property, plant and equipment 4,000
__________ 6,647,026
__________
Cash inflows from investing activities 2,688,024,005
__________ 3,278,688,641
__________
Cash paid for acquisition of property, plant and equipment,
intangible assets and other long-term assets (131,396,826) (36,503,683)
Cash paid for term deposits over 3 months (907,392,728) (662,524,719)
Cash paid for subsidiary investment (29,988,530)
__________ (408,193,530)
__________
Cash outflows from investing activities (1,068,778,084)
__________ (1,107,221,932)
__________
Net cash flows from investing activities 1,619,245,921
__________ 2,171,466,709
__________
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from borrowings 243,170,674
__________ -
__________
Cash inflows from financing activities 243,170,674
__________ -
__________
Cash paid for distribution of dividends or profits
and for interest expenses (754,010,400) (801,465,600)
Cash paid from other financing activities (125,000,000)
__________ __________-
Cash outflows from financing activities (879,010,400)
__________ (801,465,600)
__________
Net cash flows from financing activities (635,839,726)
__________ (801,465,600)
__________
INCREASE/(DECREASE) OF CASH
AND CASH EQUIVALENTS (227,933,060)
__________ 128,348,809
__________
ADD: CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR XII-27 425,084,049
__________ 296,735,240
__________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR XII-27 197,150,989 425,084,049
__________
__________
The accompanying notes form an integral part of these financial statements.
- 12 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2013
(I) CORPORATE INFORMATION
Yantai Changyu Pioneer Wine Co., Ltd. (the "Company") was incorporated as a joint stock
limited company in accordance with the Company Law of the People's Republic of China (the
"PRC") in a reorganization carried out by Yantai Changyu Group Co., Ltd. ("Changyu Group
Company"), in which Changyu Group Company injected certain assets and liabilities in relation to
the brandy, wine, and sparkling wine production and sales businesses to the Company. The
Company and its subsidiaries (the "Group") are principally engaged in the production and sales of
wine, brandy, sparkling wine.
Pursuant to the approval from the Government of Shandong Province (Luzheng [1997]119), the
Company was reorganized as a joint stock limited company on 10 April 1997. On 23 September
1997, the Company was approved by China Securities Regulatory Commission (the "CSRC")
([1997] No. 52) to issue 88,000,000 domestically listed foreign investment shares ("B shares") on
Shenzhen Stock Exchange. On 18 September 1997, the Company obtained the business license
with the registered number No. 26718011-9.
In October 2000, the Company was approved by CSRC to issue 32,000,000 domestically listed
Shares ("A Shares"). The A shares were listed on Shenzhen Stock Exchange on 26 October 2000.
Pursuant to the share reform notices issued by the Company in February 2006, Changyu Group
Company transferred its 13,977,600 shares to the shareholders of A share of the Company. After
the reform, percentage of equity attributable to Changyu Group Company decreased from 53.8%
to 50.4%.
At June 2012, the board of directors proposed an allotment to all shareholders by 3 shares every
10 shares based on the issued shares of 527,280,000, the aggregate number of share dividend is
158,184,000 shares. The total shares issued by the Company amounts to 685,464,000 shares.
Please refer to Notes V-27 in detail.
The holding company of the Group is Changyu Group Company, which is jointly controlled by
Yantai SASAC, ILLVA Saronno Investment Italy, International Finance Corporation and Yantai
Yuhua Investment and Development Company Limited.
The financial statements have been authorized by the board of directors on 24 April 2014.
According to the Company's articles of association, the financial statements will be reviewed by
shareholders on the shareholder's meeting.
- 13 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES
1. Preparation of financial statements
The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") issued by
the Ministry of Finance ("MoF") on 15 February 2006. In addition, the Group has disclosed
relevant financial information in accordance with Information Disclosure and Presentation Rules
for Companies Offering Securities to the Public No. 15 － General Provisions on Financial
Reporting (Revised in 2010).
The financial statements are prepared on a going concern basis.
The Group adopts the historical cost as the principle of measurement in the financial statements.
Where assets are impaired, provisions for asset impairment are made in accordance with relevant
requirements.
2. Declaration for implementing CAS
The financial statements are prepared in accordance with CAS, which showing a true and fair
view of the financial position on 31 December 2013, financial performance and cash flow in 2013
of the Company and the Group.
3. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
4. Reporting currency
Renminbi (“RMB”) is the currency of the primary economic environment in which the Company
and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries
choose RMB as their functional currency. The Company's foreign subsidiary chooses Currency
RMB as its functional currency on the basis of the primary economic environment in which it
operates. The Group adopts RMB to prepare its financial statements.
- 14 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
5. Business combination
Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business
combination in which all of the combining enterprises are not ultimately controlled by the same
party or parties before and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets
given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for
control of the acquiree. The intermediary expenses incurred by the acquirer in respect of auditing,
legal services, valuation and consultancy services, etc. and other associated administrative
expenses attributable to the business combination are recognised in profit or loss when they are
incurred. Where a business combination not involving enterprises under common control is
achieved in stages that involve multiple transactions, the cost of combination is the sum of the
consideration paid at the acquisition date and the fair value at the acquisition date of the acquirer's
previously held interest in the acquiree. The equity interest in the acquiree held before the
acquisition date is remeasured at its fair value at the acquisition date, with any difference between
its fair value and its carrying amount being recognised as investment income. The other
comprehensive income of the acquiree before the acquisition date relating to the previously held
interest in the acquiree is transferred to investment income.
Goodwill arising on a business combination is measured at cost less accumulated impairment
losses, and is presented separately in the consolidated financial statements. It is tested for
impairment at least at the end of each year.
For the purpose of impairment testing, goodwill is considered together with the related assets
group(s), i.e., goodwill is reasonably allocated to the related assets group(s) or each of assets
group(s) expected to benefit from the synergies of the combination. An impairment loss is
recognised if the recoverable amount of the assets group or sets of assets groups (including
goodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the
carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then
to the other assets of the group pro-rata on the basis of the carrying amount of each asset (other
than goodwill) in the group.
The recoverable amount of an asset is the higher of its fair value less costs of disposal and the
present value of the future cash flows expected to be derived from the asset. An asset's fair value
is the price in a sale agreement in an arm's length transaction. If there is no sale agreement but an
asset is traded in an active market, fair value is the current bid price. If there is no sale agreement
or active market for an asset, fair value is assessed based on the best information available. Costs
of disposal include legal costs related to the disposal of the asset, related taxes, costs of removing
the asset and direct costs to bring the asset into condition for its sale. The present value of
expected future cash flows of an asset shall be determined by estimating the future cash flows to
be derived from continuing use of the asset and from its ultimate disposal and applying the
appropriate discount rate to those future cash flows.
The impairment of goodwill is recognised in profit or loss for the period in which it is incurred
and will not be reversed in any subsequent period.
- 15 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
6. Consolidated financial statements
The consolidation scope of consolidated financial statements is determined on the basis of control.
The consolidated financial statements include the financial statements of the Company and its
subsidiaries for the year ended 31 December 2013. The subsidiaries are entities that are
controlled by the Company.
For a subsidiary disposed of by the Group, the operating results and cash flows before the date of
disposal (the date when control is lost) are included in the consolidated income statement and
consolidated statement of cash flows, as appropriate.
For a subsidiary acquired through a business combination not involving enterprises under
common control, the operating results and cash flows from the acquisition date (the date when
control is obtained) are included in the consolidated income statement and consolidated statement
of cash flows, as appropriate, and no adjustment is made to the opening balances and comparative
figures in the consolidated financial statements.
For a subsidiary acquired through a business combination not involving enterprises under
common control, the operating results and cash flows from the acquisition date (the date when
control is obtained) are included in the consolidated income statement and consolidated statement
of cash flows, as appropriate, and no adjustment is made to the opening balances and comparative
figures in the consolidated financial statements.
The significant accounting policies and accounting periods adopted by the subsidiaries are
determined based on the uniform accounting policies and accounting periods set out by the
Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority
interests and presented as "minority interests" in the consolidated balance sheet within
shareholders' equity. The portion of net profits or losses of subsidiaries for the period attributable
to minority interests is presented as "minority interests" in the consolidated income statement
below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary
exceeds the minority shareholders' portion of the opening balance of owners' equity of the
subsidiary, the excess amount are still allocated against minority interests.
- 16 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
7. Cash and cash equivalents
Cash comprises cash on hand and demand deposit. Cash equivalents refers to short-term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.
8. Foreign currency transactions and foreign currencies reporting
8.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange
rate on the date of the transaction.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spot
exchange rates at the balance sheet date. Exchange differences arising from the differences
between the spot exchange rates prevailing at the balance sheet date and those on initial
recognition or at the previous balance sheet date are recognised in profit or loss for the period,
except the exchange differences related to a specific-purpose borrowing denominated in foreign
currency that qualify for capitalisation are capitalised as part of the cost of the qualifying asset
during the capitalisation period.
8.2 Translation of financial statements denominated in foreign currencies
Cash flows arising from a transaction in foreign currency are translated at the spot exchange rate
on the date of the cash flows. The effect of exchange rate changes on cash and cash equivalents is
regarded as a reconciling item and presented separately in the cash flow statement.
For the purpose of preparing the consolidated financial statements, financial statements of a
foreign operation are translated from the foreign currency into RMB using the following method:
assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the
balance sheet date; shareholders' equity items except for retained earnings are translated at the
spot exchange rates at the dates on which such items arose; all items in the income statement as
well as items reflecting the distribution of profits are translated at the spot exchange rates on the
dates of the transactions; the opening balance of retained earnings is the translated closing balance
of the previous year's retained earnings; the closing balance of retained earnings is calculated and
presented on the basis of each translated income statement and profit distribution item. The
difference between the translated assets and the aggregate of liabilities and shareholders' equity
items is separately presented as the exchange differences arising on translation of financial
statements denominated in foreign currencies under the shareholders' equity in the balance sheet.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign
subsidiary are translated at the spot exchange rate on the date of the cash flows. The effect of
exchange rate changes on cash and cash equivalents is regarded as a reconciling item and
presented separately in the cash flow statement as "effect of exchange rate changes on cash and
cash equivalents".
- 17 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
9. Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial assets and financial liabilities are initially
measured at fair value. For financial assets and financial liabilities at fair value through profit or
loss, transaction costs are immediately recognised in profit or loss. For other financial assets and
financial liabilities, transaction costs are included in their initial recognised amounts.
9.1 Determination of fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction. For a financial instrument which
has an active market, the Group uses the quoted price in the active market to establish its fair
value. For a financial instrument which has no active market, 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 and option pricing models.
9.2 Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or a
financial liability (or a group of financial assets or financial liabilities) and of allocating the
interest income or interest expense over the relevant period, using the effective interest rate. The
effective interest rate is the rate that exactly discounts estimated future cash flows through the
expected life of the financial asset or financial liability or, where appropriate, a shorter period to
the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering all
contractual terms of the financial asset or financial liability (without considering future credit
losses), and also considers all fees paid or received between the parties to the contract giving rise
to the financial asset and financial liability that are an integral part of the effective interest rate,
transaction costs, and premiums or discounts, etc.
9.3 Classification, recognition and measurement of financial assets
On initial recognition, the Group’s financial assets are classified into one of the four categories,
including financial assets at fair value through profit or loss, held-to-maturity investments, loans
and receivables, and available-for-sale financial assets. All regular way purchases or sales of
financial assets are recognised and derecognised on a trade date basis.
9.3.1 Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Group's management has the positive intention and
ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortised cost using the effective
interest method. Gain or loss arising from derecognition, impairment or amortisation is recognised
in profit or loss.
- 18 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
9. Financial instruments - continued
9.3 Classification, recognition and measurement of financial assets - continued
9.3.2. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Financial assets classified as loans and receivables by the
Group include notes receivable, accounts receivable, interest receivable, dividends receivable, and
other receivables.
Loans and receivables are subsequently measured at amortised cost using the effective interest
method. Gain or loss arising from derecognition, impairment or amortisation is recognised in
profit or loss.
9.4 Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other than
those at fair value through profit or loss. If there is objective evidence that a financial asset is
impaired, the Group determines the amount of any impairment loss. Objective evidence that a
financial asset is impaired is evidence that, arising from one or more events that occurred after the
initial recognition of the asset, the estimated future cash flows of the financial asset, which can be
reliably measured, have been affected.
Objective evidence that a financial asset is impaired includes the following observable events:
(1) Significant financial difficulty of the issuer or obligor;
(2) A breach of contract by the borrower, such as a default or delinquency in interest or
principal payments;
(3) The Group, for economic or legal reasons relating to the borrower’s financial difficulty,
granting a concession to the borrower;
(4) It becoming probable that the borrower will enter bankruptcy or other financial
reorganisations;
(5) The disappearance of an active market for that financial asset because of financial
difficulties of the issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that
there is a measurable decrease in the estimated future cash flows from the group of
financial assets since the initial recognition of those assets, although the decrease cannot
yet be identified with the individual financial assets in the group. Such observable data
includes:
- Adverse changes in the payment status of borrower in the group of assets;
- Economic conditions in the country or region of the borrower which may lead to a
failure to pay the group of assets;
(7) Significant adverse changes in the technological, market, economic or legal environment
in which the issuer operates, indicating that the cost of the investment in the equity
instrument may not be recovered by the investor;
(8) Other objective evidence indicating there is an impairment of a financial asset.
- 19 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
9. Financial instruments - continued
9.4 Impairment of financial assets - continued
- Impairment of financial assets measured at amortised cost
If financial assets carried at amortised cost are impaired, the carrying amounts of the financial
assets are reduced to the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset's original effective interest
rate. The amount of reduction is recognised as an impairment loss in profit or loss. If, subsequent
to the recognition of an impairment loss on financial assets carried at amortised cost, there is
objective evidence of a recovery in value of the financial assets which can be related objectively
to an event occurring after the impairment is recognised, the previously recognised impairment
loss is reversed. However, the reversal is made to the extent that the carrying amount of the
financial asset at the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
For a financial asset that is individually significant, the Group assesses the asset individually for
impairment. For a financial asset that is not individually significant, the Group assesses the asset
individually for impairment or includes the asset in a group of financial assets with similar credit
risk characteristics and collectively assesses them for impairment. If the Group determines that no
objective evidence of impairment exists for an individually assessed financial asset (whether
significant or not), it includes the asset in a group of financial assets with similar credit risk
characteristics and collectively reassesses them for impairment. Assets for which an impairment
loss is individually recognised are not included in a collective assessment of impairment.
- Impairment of financial assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without
a quoted price in an active market) whose fair value cannot be reliably measured, or on a
derivative financial asset that is linked to and must be settled by delivery of such an unquoted
equity instrument, the carrying amount of the financial asset is reduced to the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial
asset. The amount of reduction is recognised as an impairment loss in profit or loss. The
impairment loss on such financial asset is not reversed once it is recognised.
- 20 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
9. Financial instruments - continued
9.5 Transfer of financial assets
The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the
contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has
been transferred and substantially all the risks and rewards of ownership of the financial asset is
transferred to the transferee; or (3) although the financial asset has been transferred, the Group
neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset but has not retained control of the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a
financial asset, and it retains control of the financial asset, it recognises the financial asset to the
extent of its continuing involvement in the transferred financial asset and recognises an associated
liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to
which it is exposed to changes in the value of the transferred asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the
difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of
the consideration received from the transfer and any cumulative gain or loss that has been
recognised in other comprehensive income, is recognised in profit or loss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the
transferred financial asset is allocated between the part that continues to be recognised and the
part that is derecognised, based on the respective fair values of those parts. The difference
between (1) the carrying amount allocated to the part derecognised; and (2) the sum of the
consideration received for the part derecognised and any cumulative gain or loss allocated to the
part derecognised which has been previously recognised in other comprehensive income, is
recognised in profit or loss.
10. Receivables
10.1 Receivables that are individually significant and for which bad debt provision is individually
assessed
The Group assesses at each balance sheet date whether there is any objective evidence that the
accounts receivable and other receivables, whose individual carrying amount is greater than
RMB3,000,000 is impaired. If there is any evidence indicates that the carrying amount of the
individual asset is lower than the present value of future cash flows, the impairment will be
recognized.
10.2 Receivables for which bad debt provision is collectively assessed on a portfolio basis
The Group classifies the receivables that are not individually significant and those that are
individually significant but are not impaired individually into groups of financial assets according
to the similarity and relevance of credit risk characteristics. These credit risks usually reflect the
debtors' ability to pay the amounts due at maturity under contractual terms of related assets and
are related to the estimation of future cash flows of the assets subject to assessment.
- 21 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
11. Inventories
11.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress and finished goods.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase,
costs of conversion and other expenditures incurred in bringing the inventories to their present
location and condition.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the first-in-first-out method.
Agricultural products harvested are reported in accordance with the CAS 1 Inventories.
11.3 Inventory count system
The perpetual inventory system is maintained for stock system.
11.4 Basis for determining net realisable value of inventories and provision methods for decline in
value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realisable value. If
the net realisable value is below the cost of inventories, a provision for decline in value of
inventories is made. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion, the estimated costs necessary to make the sale and
relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and
takes into consideration the purposes of holding inventories and effect of post balance sheet
events.
After the provision for decline in value of inventories is made, if the circumstances that
previously caused inventories to be written down below cost no longer exist so that the net
realisable value of inventories is higher than their cost, the original provision for decline in value
is reversed and the reversal is included in profit or loss for the period.
- 22 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
12. Long term equity investments
12.1 Determination of investment cost
For a long-term equity investment acquired not involving enterprises under common control, the
investment cost of the long-term equity investment is the cost of acquisition. For a long-term
equity investment acquired through business combination not involving enterprises under
common control and achieved in stages, the investment cost of the long-term equity investment is
the aggregate of the carrying amount of the equity interest held in the acquiree prior to the
acquisition date and the cost of the additional investment at the acquisition date. The long-term
equity investment acquired otherwise than through a business combination is initially measured at
its cost.
12.2 Subsequent measurement and recognition of profit or loss
12.2.1. Long-term equity investment accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An
associate is an entity over which the Group has significant influence and a joint venture is an
entity over which the Group exercises joint control along with other investors.
Under the equity method, where the initial investment cost of a long-term equity investment
exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of
acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost
is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time
of acquisition, the difference is recognised in profit or loss for the period, and the cost of the long-
term equity investment is adjusted accordingly.
Under the equity method, the Group recognises its share of the net profit or loss of the investee for
the period as investment income or loss for the period. The Group recognises its share of the
investee’s net profit or loss based on the fair value of the investee’s individual separately
identifiable assets, etc at the acquisition date after making appropriate adjustments to conform
with the Group's accounting policies and accounting period. Unrealised profits or losses resulting
from the Group's transactions with its associates and joint ventures are recognised as investment
income or loss to the extent that those attributable to the Group's equity interest are eliminated.
However, unrealised losses resulting from the Group's transactions with its associates and joint
ventures which represent impairment losses on the transferred assets are not eliminated. Changes
in owners' equity of the investee other than net profit or loss are correspondingly adjusted to the
carrying amount of the long-term equity investment, and recognised as other comprehensive
income which is included in the capital reserve.
The Group discontinues recognising its share of net losses of the investee after the carrying
amount of the long-term equity investment together with any long-term interests that in substance
form part of its net investment in the investee is reduced to zero. If the Group has incurred
obligations to assume additional losses of the investee, a provision is recognized according to the
expected obligation, and recorded as investment loss for the period. Where net profits are
subsequently made by the investee, the Group resumes recognising its share of those profits only
after its share of the profits exceeds the share of losses previously not recognised.
- 23 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
12. Long term equity investments - continued
12.2 Subsequent measurement and recognition of profit or loss - continued
12.2.2. Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually
received and receivable and the carrying amount is recognised in profit or loss for the period. For
a long-term equity investment accounted for using the equity method, the amount included in the
shareholders' equity attributable to the percentage interest disposed is transferred to profit or loss
for the period.
12.3 Basis for determining joint control and significant influence over investee
Control is the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. Joint control is the contractually agreed sharing of control over an
economic activity, and exists only when the strategic financial and operating policy decisions
relating to the activity require the unanimous consent of the parties sharing control. Significant
influence is the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies. When determining whether an investing
enterprise is able to exercise control or significant influence over an investee, the effect of
potential voting rights of the investee (for example, warrants and convertible debts) held by the
investing enterprises or other parties that are currently exercisable or convertible shall be
considered.
12.4 Methods of impairment assessment and determining the provision for impairment loss
The Group reviews the long-term equity investments at each balance sheet date to determine
whether there is any indication that they have suffered an impairment loss. If an impairment
indication exists, the recoverable amount is estimated. If such recoverable amount is less than its
carrying amount, a provision for impairment losses in respect of the deficit is recognised in profit
or loss for the period.
Once an impairment loss is recognised for a long-term equity investment, it will not be reversed in
any subsequent period.
- 24 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
13. Property, plant and equipment
13.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes, and have useful lives of more than
one accounting year. A fixed asset is recognised only when it is probable that economic benefits
associated with the asset will flow to the Group and the cost of the asset can be measured reliably.
Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and
if it is probable that economic benefits associated with the asset will flow to the Group and the
subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the
replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in the
period in which they are incurred.
13.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month
subsequent to the one in which it is ready for intended use. The useful life, estimated net residual
value rate and annual depreciation rate of each category of fixed assets are as follows:
Estimated Estimated Annual
useful life residual rate depreciation rate
Buildings 20-40years 0-5% 2.4%-5.0%
Machinery 10-20years 0-5% 4.8%-10.0%
Motor Vehicles 4-12years 0-5% 7.9%-25.0%
A variety of depreciation rate can be used for different components of an item of property, plant
and equipment according to its different useful lives or nature.
13.3 Other explanations
The Group evaluates the useful life, expected net residual value, and the depreciation method of
the property, plant and equipment every year, and makes adjustment where necessary.
For details of the impairment test and impairment loss recognition for property, plant and
equipment, please refer to Note II-19.
- 25 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
14. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various
construction expenditures during the construction period, borrowing costs capitalised before it is
ready for intended use and other relevant costs. Construction in progress is not depreciated.
Construction in progress is transferred to a fixed asset when it is ready for intended use.
The Group assesses at each balance sheet date whether there is any indication that construction in
progress may be impaired. If there is any indication that such assets may be impaired, recoverable
amounts are estimated for such assets. Recoverable amount is estimated on individual basis. If it
is not practical to estimate the recoverable amount of an individual asset, the recoverable amount
of the asset group to which the asset belongs will be estimated. If the recoverable amount of an
asset or an asset group is less than its carrying amount, the deficit is accounted for as an
impairment loss and is recognised in profit or loss for the period.
For details of the impairment test and impairment loss recognition for construction in progress,
please refer to Note II-19.
15. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
asset are capitalised when expenditures for such asset and borrowing costs are incurred and
activities relating to the acquisition, construction or production of the asset that are necessary to
prepare the asset for its intended use or sale have commenced. Capitalisation of borrowing costs
ceases when the qualifying asset being acquired, constructed or produced becomes ready for its
intended use or sale. Capitalisation of borrowing costs is suspended during periods in which the
acquisition, construction or production of a qualifying asset is suspended abnormally and when
the suspension is for a continuous period of more than 3 months. Capitalisation is suspended until
the acquisition, construction or production of the asset is resumed. Other borrowing costs are
recognised as an expense in the period in which they are incurred.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be
capitalised is the actual interest expense incurred on that borrowing for the period less any bank
interest earned from depositing the borrowed funds before being used on the asset or any
investment income on the temporary investment of those funds. Where funds are borrowed under
general-purpose borrowings, the Group determines the amount of interest to be capitalised on
such borrowings by applying a capitalisation rate to the weighted average of the excess of
cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The
capitalisation rate is the weighted average of the interest rates applicable to the general-purpose
borrowings.
- 26 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
16. Biological assets
The biological assets of the Group are vines.
Biological assets should be recognized when and only when:
(i) The Group controls the asset as a result of past events;
(ii) It is probable that future economic benefits associate with the asset will flow to the entity;
and
(iii) The cost of the asset can be measured reliably.
Biological assets are initially measured at its cost.
The Group charge deprecation for productive biological assets which satisfy expected production,
and record the deprecation in balance sheet and income statement. The Group uses straight line
method to calculate the deprecation, and details as follows:
Estimated Estimated Annual
Category useful life residual rate depreciation rate
Vines 20 years - 5%
The Group evaluates the useful life, expected net salvage value, and the depreciation method of
the property, plant and equipment at the end of each year.
Agricultural produce harvested from the entity's biological assets are measured at its weighted-
average book value. The book value comprises all material, labor and other indirect expense
occurred in producing and gathering the agricultural assets. Agricultural produce harvested are
reported in accordance with the CAS 1 Inventories.
When biological assets are sold, lost, dead, or damaged, the carrying amount is recognized in the
income statement after deduction of relevant taxes.
17. Intangible assets
17.1 Intangible assets
Intangible assets include land use rights, patents, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life
is available for use, its original cost less net residual value and any accumulated impairment
losses is amortised over its estimated useful life using the straight-line method. An intangible
asset with an indefinite useful life is not amortised.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation
method at the end of the period, and makes adjustments when necessary.
- 27 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
17. Intangible assets - continued
17.1 Intangible assets - continued
The useful lives of the intangible assets are as follows:
Useful life
Land use rights 40-50 years
Software use rights 5 years
17.2 Methods of impairment assessment and determining the provision for impairment losses of
intangible assets
The Group assesses at each balance sheet date whether there is any indication that the intangible
assets with a finite useful life may be impaired. If there is any indication that such assets may be
impaired, recoverable amounts are estimated for such assets. Recoverable amount is estimated on
individual basis. If it is not practical to estimate the recoverable amount of an individual asset, the
recoverable amount of the asset group to which the asset belongs will be estimated. If the
recoverable amount of an asset or an asset group is less than its carrying amount, the deficit is
accounted for as an impairment loss and is recognised in profit or loss for the period.
Intangible assets with indefinite useful life and intangible assets not yet available for use are
tested for impairment annually, irrespective of whether there is any indication that the assets may
be impaired.
Once the impairment loss of such assets is recognised, it is not be reversed in any subsequent
period.
18. Long term prepaid expenses
Long-term prepaid expenses represent expenses incurred that should be borne and amortised over
the current and subsequent periods (together of more than one year). Long-term prepaid expenses
are amortised using the straight-line method over the expected periods in which benefits are
derived.
Long term prepaid expenses are amortized over the useful economic life on a straight line basis.
Amortization period
Land requisition fee 50 years
Land lease prepayment 50 years
Greening fee 5 years
Others 50 years
- 28 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
19. Revenue
19.1 Revenue from sale of goods
Revenue from sale of goods is recognised when (1) the Group has transferred to the buyer the
significant risks and rewards of ownership of the goods; (2) the Group retains neither continuing
managerial involvement to the degree usually associated with ownership nor effective control
over the goods sold; (3) the amount of revenue can be measured reliably; (4) it is probable that the
associated economic benefits will flow to the Group; and (5) the associated costs incurred or to be
incurred can be measured reliably.
19.2 Revenue from rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably,
revenue associated with the transaction shall be recognized by reference the stage of completion
of the transaction at the reporting date. The outcome of a transaction can be estimated reliably
when all the following conditions are satisfied:
(i) The amount of revenue can be measured reliably;
(ii) It is probable that the economic benefit associated with the transaction will flow to the
entity;
(iii) The stage of completion of the transaction at the reporting date can be measured reliably;
and
(iv) The costs incurred for the transaction and the costs to complete the transaction can be
measured reliably.
20. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessee under operating leases
Operating lease payments are recognised on a straight-line basis over the term of the relevant
lease, and are either included in the cost of related asset or charged to profit or loss for the period.
Initial direct costs incurred are charged to profit or loss for the period. Contingent rents are
charged to profit or loss in the period in which they are actually incurred.
- 29 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
21. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
21.1. Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods
are measured at the amount expected to be paid (or recovered) according to the requirements of
tax laws.
21.2. Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their
tax base, or between the nil carrying amount of those items that are not recognised as assets or
liabilities and their tax base that can be determined according to tax laws, deferred tax assets and
liabilities are recognised using the balance sheet liability method.
Deferred tax is generally recognised for all temporary differences. Deferred tax assets for
deductible temporary differences are recognised to the extent that it is probable that taxable
profits will be available against which the deductible temporary differences can be utilised.
However, for temporary differences associated with the initial recognition of goodwill and the
initial recognition of an asset or liability arising from a transaction (not a business combination)
that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of
transaction, no deferred tax asset or liability is recognised.
For deductible losses and tax credits that can be carried forward, deferred tax assets are
recognised to the extent that it is probable that future taxable profits will be available against
which the deductible losses and tax credits can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the Group
is able to control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be taxable profits against which to utilise
the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates,
according to tax laws, that are expected to apply in the period in which the asset is realised or the
liability is settled.
- 30 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
21. Deferred tax assets/ deferred tax liabilities - continued
21.2. Deferred tax assets and deferred tax liabilities - continued
Current and deferred tax expenses or income are recognised in profit or loss for the period, except
when they arise from transactions or events that are directly recognised in other comprehensive
income or in shareholders' equity, in which case they are recognised in other comprehensive
income or in shareholders' equity; and when they arise from business combinations, in which case
they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it
is no longer probable that sufficient taxable profits will be available in the future to allow the
benefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it becomes
probable that sufficient taxable profits will be available.
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis
or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax
liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and
deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities which intend either to settle
current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously,
in each future period in which significant amounts of deferred tax assets or liabilities are expected to
be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
22. Operating leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases..
22.1 The Group as lessee under operating leases
Operating lease payments are recognised on a straight-line basis over the term of the relevant
lease, and are either included in the cost of related asset or charged to profit or loss for the period.
Initial direct costs incurred are charged to profit or loss for the period. Contingent rents are
charged to profit or loss in the period in which they are actually incurred.
- 31 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES - continued
23. Other significant accounting policies, accounting estimates andpreparation of financial statements
23.1 Employee benefits
In an accounting period in which an employee has rendered service to the Group, the Group
recognises the employee benefits for that service as a liability, except for compensation for
termination of employment relationship with the employees.
The Group participates in the employee social security systems, such as basic pensions, medical
insurance, housing funds and other social securities established by the government in accordance
with relevant requirements. The related expenditures are either included in cost of related assets or
charged to profit or loss in the period when they are incurred.
When the Group terminates the employment relationship with employees before the expiry of the
employment contracts or provides compensation as an offer to encourage employees to accept
voluntary redundancy, if the Group has a formal plan for termination of employment relationship
or has made an offer for voluntary redundancy which will be implemented immediately, and the
Group cannot unilaterally withdraw from the termination plan or the redundancy offer, a
provision for the compensation payable arising from the termination of employment relationship
with employees is recognised with a corresponding charge to the profit or loss for the period.
23.2 Related party relationships
Related party relationships can be defined as the entity is under control, joint control or significant
influence by another entity or two or more than two entities are under the control, joint control by
the same entity.
(III) CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES
In the application of accounting policies as set out in Note II, the Group is required to make
judgment's, estimates and assumptions about the carrying amounts of items in the financial
statements that cannot be measured accurately, due to the internal uncertainties of the operating
activities. These judgments, estimates and assumptions are based on historical experience of the
Group's management as well as other factors that are considered to be relevant. Actual results may
differ from these estimates.
The Group periodically review the judgments, estimates and assumptions above on a going
concern basis. For those changes in accounting policies that only affect current financial
statements, the influences are recognized in current period. For those changes in accounting
policies that affect both current and future financial statements, the influences are recognized in
both current and prospective periods.
- 32 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(III) CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates
The following are key assumptions for after balance sheet date event and other factors of
uncertain estimation. They may cause material adjustment on balance sheet in following
accounting period.
Deferred tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilized. Significant management
judgment is required to determine the amount of deferred tax assets that can be recognized, based
upon the likely timing and level of future taxable profits together with future tax planning
strategies.
Depreciation
As set out in Note II-13, the depreciation is calculated on the straight line basis to write-off the
cost of each item of fixed assets to its residual value over its estimated useful life. The Group's
management determines the estimated useful lives for its property, plant and equipment. This
estimate is based on the historical experience of the actual useful lives of property, plant and
equipment of similar nature and functions. If the previous estimates have significant changes, and
depreciation expenses will be adjusted in the future periods.
Useful life of intangible assets
The estimated useful lives of the intangible assets are determined based on the historical
experience of the actual useful lives of intangible assets of similar nature and functions as well as
considering the contractual rights and statutory rights applicable to the intangible assets.
When the estimated useful lives of finite intangible assets are shortened or extended, the
amortization periods should be adjusted accordingly. When there is evidence indicating the
useful lives of intangible assets with indefinite useful lives becomes finite, the useful lives should
be estimated and the intangible assets should be accounted for in accordance with the standards
for the intangible assets with finite useful lives.
- 33 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(III) CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates - continued
Impairment of non-current assets
The Group assesses whether the recoverable amount is lower than the book value. If there are any
indicators that the book value of non-current assets cannot be fully recoverable, impairment losses
should be recorded.
The recoverable amount is the higher of an asset's fair value less costs to sell and the present value
of the future cash flows expected to be derived from an asset. As it is difficult for the Group to
obtain the quoted market price of the assets (or assts group), the fair value of the assets cannot be
reliably estimated. When the management make estimation on the expected future cash flows
from the asset or cash generating unit, estimates should be made on choosing a suitable
production volume, selling price and related operating costs discount rate in order to calculate the
present value of those cash flows. When recoverable amounts are undertaken, management may
use all available for use information, including the forecast on production volume, selling price
and related operating costs in reasonable and supportable assumptions.
Estimated provision for trade receivables
A provision for impairment of trade receivables is established when there is objective evidence
that the Group will not be able to collect all amounts due according to the original terms of
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy are considered indicators that the trade receivable is impaired. The provision is
reassessed at the end of each year.
Inventory provision based on net realizable value
The inventory are measured on the lower of carrying value and net realizable value, and provision
should be made for impairment on obsolete and slow moving inventories. The group will reassess
whether the net realizable value is lower than the carrying cost at the end of each year.
(IV) TAXES
1. The main taxes and tax rate are as follows:
Value added tax VAT is levied at 17% on the invoiced amount after deduction
of eligible input VAT.
Consumption tax The consumption tax of the group is levied on gross revenue
at rates ranging from 10% to 20%.
Business tax The Group is subject to a business tax of 5% on its taxable revenue.
City development tax Levied at 7% of total business tax payment.
Corporate income tax The Group is subject to a corporate income tax rate of 25%
on its taxable income.
- 34 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(IV) TAXES - continued
2. Tax incentives and relative permit
A subsidiary of the Company, Xinjiang Tianzhu Co., Ltd which is a wine production enterprise
incorporated in Xinjiang Weizu Autonomous. In accordance with (Caishui [2011] No.60) and
(Xinzhengfa [2010] No.105), from the first profit-making year, which is from 2012 to 2015, the
company enjoys a favorable corporate income tax rate of 15% besides the exemption of corporate
income tax which belongs to local government. The corporate income tax applicable for 2012 is
9%.
A subsidiary of the Company, Xinjiang Babao Baron Chateau Co., Ltd. which is a wine
production enterprise incorporated in Xinjiang Weizu Autonomous. In accordance with (Caishui
[2011] No.60) and (Xinzhengfa [2010] No.105), from the first profit-making year, which is from
2011 to 2015, the company enjoys a favorable corporate income tax rate of 15% besides the
exemption of corporate income tax which belongs to local government. The corporate income tax
applicable for 2012 is 9%.
Ningxia Changyu Grape Growing Co., Ltd., a subsidiary of the Group, whose principal activity is
grape growing is incorporated in Ningxia Huizu Autonomous Region. According to clause 27 of
PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for
Implementation, Ningxia Changyu Grape Growing Co., Ltd. enjoys an exemption of corporate
income tax.
(V) SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS
1. Particulars of the subsidiaries
Place and date Legal Business Registered Principle Incorporate
Name of registration representative nature capital activities code
Subsidiary acquired from a business combination: under non-common control
Xinjiang Tianzhu Wine Co., Ltd. 11 April 2006 ZhouHongjiang Manufacturing RMB75,000,000 Production 787 604 261
("Xinjiang Tianzhu") (a) Shihezi, Xinjiang, China and sales of wine
Etablissements Roullet 18 April 1983 ZhouHongjiang Sales EUR2,896,531 Trading, brokerage and N/A
Fransac) ("French Sales") (h) Cognac, France agent sales
Subsidiaries acquired by establishment
Beijing Changyu Sales and 14 July 1998 SunJian Sales RMB1,000,000 Sales of wine 634 377 029
Distribution Co., Ltd. Beijing, China
("Beijing Sales")
Yantai Kylin Packaging Co., 29 September 1999 YangMing Manufacturing RMB15,410,000 Production of 863 052 455
Ltd. ("Kylin Packaging") Yantai, Shandong, China packaging materials
Yantai Changyu-Castel 3 September 2001 SunLiqiang Manufacturing USD5,000,000 Production and 730 682 613
Wine Chateau Co., Ltd. Yantai, Shandong, China sales of wine
("Changyu Chateau") (b)
Changyu (Jingyang) 5 December 2001 WeiBingsheng Manufacturing RMB1,000,000 Production and 732 663 643
Wine Co., Ltd. ("Jingyang Wine") Jingyang, Shanxi, China sales of wine
Yantai Changyu Pioneer Wine 24 December 2001 JiangHua Sales RMB8,000,000 Sales of wine 746 576 380
Sales Co., Ltd. ("Sales Company") Yantai, Shandong, China
- 35 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(V) SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Particulars of the subsidiaries - continued
Place and date Legal Business Registered Principle Incorporate
Name of registration representative nature capital activities code
Langfang Development (c) 1 March 2002 AlanCastel Manufacturing USD6,108,808 Production and 735 624 56X
Zone Castel-Changyu Wine Lanfang, Hebei, China sales of wine
Co., Ltd. ("Langfang Castel")
Changyu (Jingyang) Wine 8 April 2002 WeiBinsheng Sales RMB1,000,000 Sales of wine 735 379 154
Sales Co., Ltd. ("Jingyang Sales") Jingyang, Shanxi, China
Langfang Changyu Pioneer 19 April 2002 LiuWanqiang Sales RMB1,000,000 Sales of wine 737 388 150
Wine Sales Co., Ltd. Langfang, Hebei, China
("Langfang Sales").
Shanghai Changyu Sales and 28 April 2003 ZhouHongjiang Sales RMB1,000,000 Sales of wine 749 571 075
Distribution Co., Ltd. Shanghai, China
("Shanghai Sales")
Beijing Changyu AFIP Agriculture 8 November 2011 SunHongbo Sales RMB1,000,000 Planting 585 851 395
Development Co., Ltd. Beijing, China and tourism
("Agriculture Development")
Beijing Changyu AFIP 27 October 2005 SunLiqiang Manufacturing RMB110,000,000 Production and 780 953 469
Wine Chateau Co., Ltd.(d) Beijing, China sales of wine
Yantai("Beijing Chateau") 9 January 2006 JiangHua Sales RMB5,000,000 Sales of wine 783 487 627
Changyu Wine Sales Co., Ltd. Yantai, Shandong, China
("Wines Sales")
Yantai Changyu Pioneer 29 September 2005 ZhouHongjiang Sales RMB5,000,000 Import and technology 780 766 161
International Co., Ltd. Yantai, Shandong, China export of wine and
("Pioneer International")
Hangzhou Changyu 14 June 2006 JiangHua Sales RMB500,000 Whole-sale and retail 788 283 631
Wine Sales Co., Ltd. Hangzhou, Zhejiang, China of packaged food
("Hangzhou Changyu")
Ningxia Changyu 28 April 2006 ShaoChunsheng Planting RMB1,000,000 Plant andpurchase 788 200 410
Grape-Growing Co., Ltd. Yinchuang, Ningxia, China of grape
("Ningxia Growing")
Huanren Changyu National 16 November 2006 LengBin Sales RMB2,000,000 Whole-sale 794 822 179
Wines Sales Co., Ltd. Huanren, Liaoning, China and retail of wine
("National Wines")
Liaoning Changyu Ice 3 April 2003 ZhouHongjiang Manufacturing RMB26,300,000 Production and 747 128 301
Wine Chateau Co., Ltd. Benxi, Liaoning, China sales of ice wine
("Ice Chateau") (e)
Yantai Development Zone 4 December 2006 ZhouHongjiang Sales RMB5,000,000 Whole-sale 796 183 411
Changyu Trading Co., Ltd. Yantai, Shandong, China and retail of wine
("Development Zone Trading")
Shenzhen Changyu 17 July 2007 LinPu Sales RMB500,000 Whole-sale 664 195 20X
Wine Marketing Ltd. Futian, Shenzhen, China and retail of wine
("Shenzhen Marketing")
Yantai Changyu Fushan 27 March 2007 Zhou Hongjiang Sales RMB5,000,000 Whole-sale 660 176 044
Trading Company Yantai, Shandong, China and retail of wine
("Fushan Trading")
Beijing AFIP Meeting Center 4 December 2007 Sun Hongbo Services RMB500,000 Meeting service, 669 926 612
("Meeting Center") (f) Miyun, Beijing, China foods accommodation,
tourism and
sales ofsouvenir,
- 36 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(V) SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Particulars of the subsidiaries - continued
Place and date Legal Business Registered Principle Incorporate
Name of registration representative nature capital activities code
Beijing AFIP Tourism 4 June 2008 Liu Shilu Tourism RMB500,000 Tourism and culture 676 627 372
and Culture Company Miyun, Beijing , China communication,
("AFIP Tourism") (g) development
of tourist resources,
meeting service
Ningxia Changyu 25 April 2008 Li Jiming Manufacturing RMB1,000,000 Manufacturing 670 408 275
Pioneer Wine Co., Ltd. Yinchuan, Ningxia, China and sales of wine,
("Ningxia Wine") packing material,
plant,process
and purchase of grapes
Yantai Changyu 26 November 2008 Liu Quan Sales RMB80,000,000 Packaging of foods 683 222 859
DingLuoTe Chateau. Yantai, Shandong China
("Ding Luo Te Chateau")
Qing Tong Xia Changyu 17 November 2009 Liu Yuquan Sales RMB500,000 Whole-sale 694 334 151
Wine Marketing Ltd. Qing Tong Xia, Ningxia, China and retail of wine
("Qing Tong Xia Sales")
XinJiang BaBao Baron Changyu 2 April 2010 Sun Liqiang Manufacturing RMB150,000,000 Manufacturing 552 414 949
Wine Chateau Co., Ltd. Shihezi, Xinjiang, China and sales of wine
("Shi He Zi Chateau")
Ningxia Moser 15th Changyu 26 April 2010 Zhou Hongjiang Manufacturing RMB2,000,000 Wine/packaging 694 349 740
Wine Chateau Co., Ltd. Yinchuan, Ningxia, China manufacturing,tourism
(" Ningxia Chateau")
Shanxi Changyu Rina 12 April 2010 Sun Liqiang Manufacturing RMB20,000,000 Tourism and 552 180 142
Castle Chateau Co., Ltd. Xianyang, Shanxi, China wine manufacturing
(" Chang'an Chateau")
Yantai Changyu Wine Research 29 March 2010 Sun Liqiang Manufacturing RMB500,000,000 Wine manufacturing 555 235 76X
and Development Co., Ltd. Yantai, Shandong China
("R&D Centre")
Changyu (HuanRen) 2 December 2011 Zhou Hong Jiang Manufacturing RMB5,000,000 Fermatition 587 310 365
Wine Co., Ltd Benxi LiaoNing China project preparation
("Huan Ren Wine")
Xinjiang Changyu Sales Co., Ltd 8 August 2011 Lin Pu Sales RMB10,000,000 Foods wholesales 580 208 296
("Xinjiang Sales") Shihezi Xinjiang China
Xinjiang Changyu Winery Co., Ltd 25 August 2011 Lin Pu Sales RMB10,000,000 Red wine 280 222 610
("Xinjiang Winery") Shihezi Xinjiang China and fruit wine
Ningxia Changyu Trading Co., Ltd 8 November 2012 ZhouHongjiang Sales RMB1,000,000 Whole sale of 054 609 428
("Ningxia Trading") (j) Yinchuan Ningxia China pre-packed foods
Shanxi Changyu Rina Wine 29 October 2012 SunLiqiang Sales RMB3,000,000 Tourism and 056 906 215
Sales Co., Ltd ("Shanxi Sales") (k) Xianyang Shanxi China wine manufacturing
Penglai Changyu Wine Sales 7 September 2012 Leng Bin Sales RMB5,000,000 Sales of red wine 053 429 070
Co., Ltd ("Penglai Sales") (l) Penglai Shandong China
Laizhou Changyu Wine Sales 19 July 2013 Leng Bin Sales RMB1,000,000 Sales of red wine 074 406 41-7
Co., Ltd ("Laizhou Sales") (l) Laizhou Shandong China
- 37 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(V) SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Particulars of the subsidiaries - continued
Equity interest
owned by the company
Paid in capital Consolidate financial Non-controlling
Name at 31 December 2012 Direct Indirect Votingpower statements interes
Subsidiary acquired in business combination: under non-common control
Xinjiang Tianzhu (a) RMB60,000,000 60% - 100% Yes RMB56,093,912
French Sales (h) EUR2,896,531 100% - 100% Yes -
Subsidiaries acquired by establishment:
Beijing Sales RMB1,000,000 100% - 100% Yes -
Kylin Packaging RMB23,176,063 100% - 100% Yes -
Changyu Chateau (b) RMB28,968,100 70% - 100% Yes RMB12,365,016
Jingyang Wine RMB1,000,000 90% - 10% Yes -
Sales Company RMB8,000,000 90% 10% 100% Yes -
Langfang Castel (c) RMB12,142,200 39% 10% 100% Yes RMB22,702,522
Jingyang Sales RMB1,000,000 10% - 90% Yes -
Langfang Sales RMB1,000,000 10% - 90% Yes -
Shanghai Sales RMB1,000,000 30% 70% 100% Yes -
Agriculture Development RMB1,000,000 - 100% 100% Yes -
Beijing Chateau (d) RMB77,000,000 70% - 100% Yes RMB35,293,868
Wines Sales RMB5,000,000 90% 10% 100% Yes -
Pioneer International RMB5,000,000 70% 30% 100% Yes -
Hangzhou Changyu RMB500,000 - 100% 100% Yes -
Ningxia Growing RMB1,000,000 100% - 100% Yes -
National Wines RMB2,000,000 100% - 100% Yes -
Ice Chateau (e) RMB13,413,000 51% - 100% Yes RMB33,319,062
Development Zone Trade RMB5,000,000 - 100% 100% Yes -
Shenzhen Marketing RMB500,000 - 100% 100% Yes -
Fushan Trading RMB5,000,000 - 100% 100% Yes -
Meeting Center (f) RMB500,000 - 100% 100% Yes -
AFIP Tourism (g) RMB350,000 70% - 100% Yes RMB2,966,399
Ningxia Wine RMB1,000,000 100% - 100% Yes -
Ding Luo Te Chateau RMB80,000,000 100% - 100% Yes -
Qing Tong Xia Sales RMB500,000 100% 100% Yes -
Shi He Zi Chateau RMB150,000,000 100% - 100% Yes -
Ningxia Chateau RMB2,000,000 100% - 100% Yes -
Chang'an Chateau RMB20,000,000 100% - 100% Yes -
Research and
Development Centre RMB500,000,000 100% - 100% Yes -
Huan Ren Wine RMB5,000,000 100% - 100% Yes -
Xinjiang Sales RMB10,000,000 - 100% 100% Yes -
Xinjiang Winery RMB10,000,000 - 100% 100% Yes -
Ningxia Trading RMB1,000,000 - 100% 100% Yes -
Shanxi Sales RMB3,000,000 - 100% 100% Yes -
Penglai Wine Sales RMB5,000,000 - 100% 100% Yes -
Laizhou Wine Sales (i) RMB10,000,000 - 100% 100% Yes -
(a) Xinjiang Tianzhu was acquired by the Company in 2009, accounting for 60% of Tianzhu's
equity interest. Pursuant to the operation contract signed by the Company, the Company
is entrusted to manage Tianzhu and therefore has the full power to control its strategic
operating, investing and financing policies by paying the non-controlling party contract
fee. The operation agreement will be terminated on 31 December 2018.
(b) Changyu Chateau is a Sino-foreign joint venture established by the Company and a
foreign investor. Pursuant to an operation contract signed by the Company, and the
foreign investor, the Company is entrusted to manage Changyu Chateau and therefore has
the full power to control its strategic operating, investing and financing policies. The
operation agreement will be terminated on 31 December 2022.
(c) Langfang Castel is a sino-foreign joint venture established by the Company and a foreign
investor. Pursuant to the agreement signed by the Company, Langfang Castel and the
foreign investor, the Company is entrusted to manage Langfang Castel and therefore has
the full power to control its strategic operating, investing and financing policies, therefore
the financial statements of Langfang Castel are consolidated in the Group's consolidated
financial statements. The operation agreement will be terminated on 31 December 2022.
- 38 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(V) SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Particulars of the subsidiaries - continued
(d) Beijing Chateau is a joint venture established by the Company and two investors.
Pursuant to an operation contract signed by the Company and the investors, the Company
is entrusted to manage Beijing Chateau and therefore has the full power to control its
strategic operating, investing and financing policies. The operation agreement will be
terminated on 2 September 2019.
(e) Ice Chateau is a sino-foreign joint venture established by the Company and a foreign
investor. Pursuant to the agreement signed by the Company, Ice Chateau and the foreign
investor, the Company is entrusted to manage Ice Chateau and therefore has the full power
to control its strategic operating, investing and financing policies. The operation
agreement will be terminated on 31 December 2016.
(f) Meeting Centre is a subsidiary of Beijing Chateau.
(g) AFIP Tourism is a joint venture established by the Company and two investors. Pursuant
to an operation contract signed by the Company and the investors, the Company is
entrusted to manage AFIP Tourism and therefore has the full power to control its strategic
operating, investing and financing policies. The operation agreement will be terminated
on 2 September 2019.
(h) Laizhou sales is a limited liability company solely founded by the Company in 2013. Its
paid capital is RMB1, 000,000 which has been fully paid by the end of 2013.
(i) French sales is a limited liability company acquired by the Company in December 2013.
The Company holds its 100 percent shares.
2 Changes in the scope of consolidated financial statement
Except for those newly established subsidiaries, the scope of consolidated financial statements
was same with last year.
3 The entity newly included in the consolidation
The newly included subsidiary is as following:
Net Asset Net profit/(loss)
as at 2013.12.31 up to date
RMB RMB
Laizhou Trading 1,000,000 30,293,187
French Sales 16,876,005
_________ -
_________
- 39 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank
2013 2012
RMB RMB
Cash on hand 772,817 48,894
Cash at bank 1,235,788,080 2,227,421,934
Other monetary assets 131,257,285
____________ -
____________
1,367,818,182
____________ 2,227,470,828
____________
As at 31 December 2013, the balance of restricted cash of the Group is RMB2,609,237(31
December 2012: RMB2,652,083), which is the Group’s housing fund.
As at 31 December 2013, the Group's other monetary assets include security of RMB125,000,000
pledged for a short-term borrowing from HSBC of HKD303,963,343 (translated as
RMB243,170,674), refundable deposit for notes payable of Shi He Zi Chateau of RMB5,965,996,
and company cards deposit guarantee of RMB291,289.
As at 31 December 2013, the Group's overseas cash and bank deposit is RMB13,104,666 (31
December 2012: Nil).
As at 31 December 2013, The Group's term deposits with original maturity of more than three
months when acquired is RMB277,392,728 (31 December 2012: RMB662,524,719) with interest
rates ranging from 2.86%-3.58%, which will mature from 3 months to 1 year.
2. Notes receivable
2013 2012
RMB RMB
Bank acceptance bills 79,702,753
_________ 92,635,701
_________
As of 31 December 2013, there was no pledged notes receivables (31 December 2012: Nil), and
no notes receivables were reclassified as accounts receivable due to the default of drawer (31
December 2012: Nil).
As at 31 December 2013, the top four notes receivables endorsed to third parties but not yet
matured is as follows:
Drawer Issuing date Maturity date Amount
RMB
Better Life Commercial Chain Share Co.,Ltd 12/11/2013 3/11/2014 1,436,400
Jincheng Jinchengyuan Trading Ltd. 11/29/2013 5/29/2014 1,000,000
Jinan Luye Trading Ltd. 9/2/2013 3/2/2014 1,000,000
Wuxi Fanghe Sugar, Cigar and Wine Ltd 9/13/2013 3/13/2014 1,000,000
Fujian Nanan Ruigang Building Materials Ltd 9/26/2013 3/26/2014 1,000,000
________
5,436,400
________
As at 31 December 2013, there was no notes receivable discounted to obtain short-term loan .
- 40 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Trade receivables
2013 2012
Balance Provision Balance Provision
Amoun Amoun Amoun Amoun
RMB % RMB % RMB % RMB %
Individually
significant 72,118,959 40.7 - - 73,711,433 54.5 - -
Individually
insignificant 104,990,557
_______ 59.3
___ ___- ___- 61,505,951
_______ 45.5
___ ___- ___-
177,109,516
_______ 100.0
___ ___- ___- 135,217,384
_______ 100.0
___ ___- ___-
___ ___
The normal credit term is one month, which can be extended to three months for certain major
customers. The trade receivables are interest free.
The Group determines that trade receivable of more than RMB 3,000,000 is considered as
individually significant trade receivable.
The aging analysis is as follows:
2013 2012
RMB RMB
Within 1 year 174,141,205 135,217,384
1 to 2 years 2,968,311
__________ -
__________
177,109,516
__________ 135,217,384
__________
As at 31 December 2013, there was no bad debt provision for trade receivables (31 December
2012: Nil). There was no bad debt provision made, reversed or written-off by management in
2013 (2012: Nil).
As at 31 December 2013, there was no trade receivable due from shareholders with voting rights
of 5% or above (31 December 2012: Nil).
- 41 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Trade receivables - continued
As at 31 December 2013, the top 5 of trade receivables are as follows:
Relationship Percentage of
with the Group Amount Aging total receivables
RMB %
Nonggongshang Supermarket (Group) Co., Ltd Third party 17,306,266 Within 1 year 9.8
Lianhua Supermarket Holdings Co. Ltd. Third party 10,584,587 Within 1 year 6.0
Kangcheng Investment (China) Co., Ltd. Third party 9,911,907 Within 1 year 5.6
Jiangsu Hengxing Wine Co., Ltd Third party 8,118,529 Within 1 year 4.6
Suguo Supermarket Co., Ltd Third party 7,076,116
________ Within 1 year 4.0
___
52,997,405
________ 30.0
___
As at 31 December 2013, trade receivables due from related parties are as following:
Percentage of
Relationship with the Group Amount total receivables
%
Yantai Zhongya
Phamaceutical
tonic wine Co., Ltd Under the control of the same parent company 2,567,129 1.5
Yantai ShenMa
Packing Co., Ltd. Under the control of the same parent company 911,197 0.5
Yantai Changyu
International Window of
the Wine City Co., Ltd. Under the control of the same parent company 42,478
_______ 0.0
___
3,520,804 2.0
_______ ___
As at 31 December 2012, trade receivables due from related parties are as following:
Percentage of
Relationship with the Group Amount total receivables
%
Yantai Zhongya
Phamaceutical
tonic wine Co., Ltd Under the control of the same parent company 1,820,376 1.3
Yantai Changyu
Tourism Co., Ltd Under the control of the same parent company 311,220
_______ 0.3
___
2,131,596
_______ 1.6
___
- 42 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Advances to suppliers
The aging analysis is as follows:
2013 2012
RMB RMB
Within 1 year 45,997,863
__________ 44,294,482
__________
As at 31 December 2013, the top 5 of advances to suppliers are as follows:
Reason Percentage of
Relationship for being total advances
with the Group Amount Aging outstanding to suppliers
RMB %
Xinjiang Yuyuan Wine
Co., Ltd. Third party 20,069,242 Within 1 year goods not received 43.6
Sun Xiaofang Third party 5,350,000 Within 1 year goods not received 11.6
Austria Lawrence
Fine Wines V Co. Ltd Third party 3,364,403 Within 1 year goods not received 7.7
Xinjiang Tianyu Wine
Co., Ltd. Third party 3,200,053 Within 1 year goods not received 7.3
Weifang Qingxin Landscape
Engineering Ltd Third party 1,600,000
________ Within 1 year project not finished 3.5
___
33,583,698
________ 73.0
___
As at 31 December 2013, there was no advance paid to shareholders with voting rights of 5% or
above (31 December 2012: Nil).
5. Interest receivable
2013
Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Interests of term deposits 7,215,854 20,838,161
________ (19,636,020)
________ 8,417,995
_______
_______ ________
As at 31 December 2013, there was no overdue interest receivable (31 December 2012: Nil).
- 43 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables
(1) Disclosure of other receivables by categories
2013 2012
Balance Bad debts provision Balance Bad debts provision
Amoun Amoun Amoun Amoun
RMB % RMB % RMB % RMB %
Individually
significant
and provision 65,272,429 61.2 (7,392,429) 100.0 11,120,600 28.1 (11,120,600) 100.0
Individually
insignificant
and provision 41,451,794
_______ 38.8
____ ______- ____- 28,462,945
_______ 71.9
____ _______- ____-
106,724,223 100.0 (7,392,429) 100.0 39,583,545 100.0 (11,120,600) 100.0
_______ ____ ______ ____ _______ ____ _______ ____
The aging analysis is as follows:
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Amount Proportion Amount Amount Amount
RMB % RMB RMB % RMB RMB RMB
Within 1 year 96,808,614 90.7 - 96,808,614 26,741,541 67.6 26,741,541
1 to 2 years 1,936,191 1.8 - 1,936,191 943,410 2.4 943,410
2 to 3 years 221,072 0.2 - 221,072 376,038 0.9 376,038
Over 3 years 7,758,346
_______ ____7.3 (7,392,429)
_______ 365,917
_______ 11,522,556
_______ 29.1
____ (11,120,600)
_______ _______ 401,956
106,724,223 100.0 (7,392,429) 99,331,794 39,583,545 100.0 (11,120,600) 28,462,945
_______ ____ _______ _______ _______ ____ _______ _______
The movement of provision for other receivables is as follows:
Opeing balance Accrual Reversal Written-off Closing balance
RMB RMB RMB RMB RMB
2013 11,120,600 -
_______ (607,571)
_______ (3,120,600)
________ 7,392,429
________
________
As at 31 December 2013, the bad debt provision for individually significant balance is as follows:
Balance Bad debts provision Percentage Reason for provision
RMB RMB %
The debtor is in the
Tiantong Security Co., Ltd. 7,392,429
________ 7,392,429
________ 100 process of liquidation
________ ________
As at 31 December 2012, the bad debt provision for individually significant balance is as follows:
Balance Bad debts provision Percentage Reason for provision
RMB RMB %
Tiantong Security Co., Ltd. 8,000,000 8,000,000 100 The debtor is in the
process of liquidation
100 The aging is more than
three years and not
Finance Bureau of Jingyang County 3,120,600
________ 3,120,600
________ likely to be recovered
11,120,600
________ 11,120,600
________
- 44 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables - continued
(2) Reversals and collections during the current period
Reasons for Basis of determining Accumulated bad debt Amount of
reversal or the original bad debt provision prior to reversals or
Content of other receivables collections provision reversals or collections collections
RMB RMB
Tiantong Security Co., Ltd. Collected Exceed credit period (8,000,000) 607,571
(3) Other receivables written off in the reporting period
Write off of other receivables in 2013
Reason of Whether are related
Nature Write-off amount write-off party transaction
RMB
Custom of Yantai Government borrowings 3,120,600
_______ Unable to recover No
(4) As at 31 December 2013, there was no other receivable due from shareholders with voting rights
of 5% or above (31 December 2012: Nil).
(5) Top five entities with the largest balances of other receivables
As at 31 December 2013, the top 5 of other receivables are as follows:
Relationship Percentage of total
with the Group Amount Aging other receivable
RMB %
Non-taxing account of Bureau of
Finance of Yantai Economic
Development Zone Third party 52,880,000 Within 1 year 49.5
Tiantong Security Co., Ltd. Third party 7,392,429 Over 3 years 6.9
Construction Union of Yantai
Economic Development Zone Third party 5,000,000 Within 1 year 4.7
Liaoning Administration of
Foreign Experts Affairs Third party 1,894,055 Within 1 year 1.8
Yantai Electronic Company of
Shandong Electronic Power Group Third party 953,200
________ Within 1 year 0.9
___
68,119,684
________ 63.8
___
(6) As at 31 December 2013, there was no other receivable due from related parties (31 December
2012: Nil).
- 45 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Inventories
2013 2012
Net carrying Net carrying
Balance Provision amount Balance Provision amount
RMB RMB RMB RMB RMB RMB
Raw material 85,025,169 - 85,025,169 61,041,026 - 61,041,026
Finished goods 1,119,090,234 (13,135,590) 1,105,954,644 1,051,981,303 (15,378,581) 1,036,602,722
Work in progress 930,137,624
_________ 930,137,624
_______- _________ 1,170,977,693
_________ _______- 1,170,977,693
_________
2,134,253,027 13,135,590 2,142,226,138 2,284,000,022
_______ _________ _________ 15,378,581
_______ 2,268,621,441
_________
_________
Movement of inventory provision is as follows:
2013 Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Finished goods 15,378,581
________ -
_______ (2,242,991)
________ 13,135,590
________
8. Long-term equity investment
2013
Opening
and closing Equity Voting Current year
Initial cost balance interest power Provision provision
RMB RMB % % RMB RMB
Cost method:
Yantai Dingtao
Construction and
Development Co., Ltd.
("Yantai Dingtao") 10,000,000
_______ 5,000,000
______ ___18 ___18 10,000,000
_______ 5,000,000
______
- 46 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Property, plant and equipment
2013 Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Cost
Buildings 1,376,818,737 97,296,111 (9,468,040) 1,464,646,808
Machineries and equipment 1,110,690,952 128,413,628 (2,912,455) 1,236,192,125
Motor vehicles 22,278,132
__________ 2,753,815
_________ (706,458)
________ 24,325,489
__________
2,509,787,821
__________ 228,463,554
_________ (13,086,953)
________ 2,725,164,422
__________
________
Accumulated depreciation
Buildings 184,409,573 39,161,069 (1,137,624) 222,433,018
Machineries and equipment 484,127,864 83,721,184 (2,190,053) 565,658,995
Motor vehicles 17,266,663
__________ 2,821,311
_________ (656,909)
________ 19,431,065
__________
685,804,100
__________ 125,703,564
_________ (3,984,586)
________ 807,523,078
__________
Net carrying amount
Buildings 1,192,409,164 1,242,213,790
Machineries and equipment 626,563,088 670,533,130
Motor vehicles 5,011,469
__________ 4,894,424
__________
1,823,983,721
__________ 1,917,641,344
__________
The increase of accumulated depreciation for 2013 is RMB125,703,564(2012: RMB125,261,510).
The amount of transfer from construction in progress to property, plant and equipment for 2013 is
RMB133,150,604 (2012: RMB208,080,554). The amount of property, plant and equipment
purchased is RMB 87,479,584 and the amount disposed of is RMB5,253,586.
As at 31 December 2013, there was no property, plant and equipment with ownership restricted
(31 December 2012: Nil).
As at 31 December 2013, buildings without property certificate are as follows:
Reason for not Expected
Amount receiving receiving date
RMB
Beijing Chateau European town, main, service building 215,934,181 Processing 2014
Ning Xia Wine production factory and office buildin 91,102,463 Processing 2014
Jingyang factory Fermentation building 66,476,601 Processing 2014
Xinjiang Tianzhu fermentations and storage warehouse 20,255,624 Processing 2014
Ice Wine Chateau office building and packing workshop 10,666,305 Processing 2014
Sales Company office buildings 5,259,058 Processing 2014
Kylin Packaging finished goods warehouse and workshop 2,843,788 Processing 2014
Fermentation/Experiment centre and workshop 2,061,465
_________ Processing 2014
_________
As at 31 December 2013, the Group has no temporary idle fixed assets, fixed assets held for sale,
fixed assets leased in under finance leases and fixed assets leased out under operating leases (2012:
RMB: Nil).
As at 31 December 2013, there was no property, plant and equipment
- 47 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Construction in progress
2013 2012
RMB RMB
The Company's reconstruction project 269,802 24,640,660
Xinjiang Tianzhu workshop reconstruction project 1,018,309 4,479,084
Kylin Packing production line project 19,800 -
Yantai Chateau vineyard project 10,619,000 3,300,000
Ningxia Chateau road project 600,000 -
Beijing Chateau construction project - 11,731
Sales Company construction project 66,682,027 62,842,601
Langfang Castor workshop project - 7,633,319
Jingyang Wine fermentation workshop
reconstruction project 158,569 -
Ningxia united workshop 1,464,202 1,556,490
Shi He Zi Chateau construction project 152,871,244 156,451,724
Ningxia Chateau construction project 92,062,210 41,367,789
Xianyang Chateau construction project 403,657,745 261,525,502
Research, development and manufacturing center
Construction Project 558,716,989 169,912,227
Ding Luo Te Chateau Project 119,074,949 91,790,388
Huanren factory construction project 16,439,684
____________ 7,317,174
__________
1,423,654,530
____________ 832,828,689
__________
Accumulated
expenditure
2013 Budget Opening balance Addition Transfer to PPE Closing balance Financed by /budget
RMB RMB RMB RMB RMB %
The Company's reonstruction project 201,440,000 24,640,660 32,254,029 (56,624,887) 269,802 Self-raised 90.2
Xinjiang Tianzhu Workshop
Reconstruction Project 37,570,000 4,479,084 - (4,479,084) - Self-raised 100.0
Xinjiang Tianzhu technology
innovation and reconstruction project 3,500,000 - 1,225,437 (207,128) 1,018,309 Self-raised 35.0
Kylin Packing production line project 6,200,000 - 99,250 (79,450) 19,800 Self-raised 86.9
Yantai Chateau vineyard project 30,000,000 3,300,000 7,319,000 - Self-raised 35.4
Ningxia Chateau road project 600,000 - 600,000 - 600,000 Self-raised 100.0
Beijing Chateau construction project 268,565 11,731 10,464,327 (10,476,058) - Self-raised 99.4
AFIP Wine grape trellis project 21,000,000 - 268,565 (268,565) - Self-raised 100.0
Sales Company construction project 106,350,000 62,842,601 4,309,633 (470,207) 66,682,027 Self-raised 116.9
Langfang Castor workshop project 19,727,000 7,633,319 5,809,469 (13,442,788) - Self-raised 69.0
Jingyang ferment project 26,000,000 - 158,569 - 158,569 Self-raised 72.8
Ningxia United Workshop 58,700,000 1,556,490 187,028 (279,316) 1,464,202 Self-raised 98.0
Shihezi Chateau
Construction Project 750,000,000 156,451,724 43,242,641 (46,823,121) 152,871,244 Self-raised 75.0
Ningxia Chateau
Construction Project 284,150,000 41,367,789 50,694,421 - 92,062,210 Self-raised 104.4
Xianyang Chateau
Construction Project 440,740,000 261,525,502 142,132,243 - 403,657,745 Self-raised 91.6
Research, development and
manufacturing center
Construction Project 1,693,970,000 169,912,227 384,413,763 - 554,325,990 Self-raised 37.4
Ding Luo Te Chateau project 152,400,000 91,790,388 27,284,561 - 119,074,948 Self-raised 78.1
Huanren factory construction project 15,000,000 ______
7,317,174 ______ _______ _______
9,122,510 - 16,439,684 Self-raised 109.6
832,828,689 723,976,445 (133,150,604) 1,419,263,530
______ ______ _______ _______
There was no interest capitalized in construction in progress in 2013.
As at 31 December 2013, there was no provision was made for the construction in process.
- 48 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Intangible assets
2013 Opening balance Increase Closing balance
RMB RMB RMB
Cost
Land use right 299,710,962 1,332,053 301,043,015
Software use right 3,780,000
__________ 23,343,447
_________ 27,123,447
__________
303,490,962
__________ 24,675,500
_________ 328,166,462
__________
Accumulated amortization
Land use right 21,717,040 5,970,876 27,687,916
Software use right 3,480,000
__________ 868,792
_________ 4,348,792
__________
25,197,040
__________ 6,839,668
_________ 32,036,708
__________
Net carrying amount
Land use right 277,993,922 273,355,099
Software use right 300,000
__________ 22,774,655
__________
278,293,922
__________ 296,129,754
__________
The amortisation of 2013 is RMB6,839,668.
As at 31 December 2013, there was no intangible asset with restricted ownership.
12. Biological assets
2013
RMB
Opening balance 39,681,580
Addition 62,959,555
Amortization (846,620)
__________
Closing balance 101,794,515
__________
As at 31 December 2013, there is no biological asset with ownership restricted. As at 31
December 2013, the Group's accumulated depreciation of biological assets is RMB8,795,165
(2012: RMB7,948,545).
As at 31 December 2013, there is no indication that biological assets may be impaired, and no
provision was made.
- 49 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Goodwill
2013 Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
French sales - 13,112,525
________ -
______ 13,112,525
________
______
As mentioned above in Note XI-1, in order to determine the fair value of assets and liabilities of
French Sales at the acquisition date, a valuation institution is to be hired to determine the fair
value of the assets and liabilities of the company. As the valuation has not been commenced till
the issue of financial statements of 2013, the Group temporarily recognised the book value of
assets and liabilities of French Sales as its fair value at the acquisition date. Therefore, the Group
recognised a goodwill of RMB13,112,525 in regard to the acquisition. The valuation is expected
to be finished in 2014 and the book value of assets, liabilities and goodwill above will also be
adjusted according to the valuation result.
14. Long-term prepaid expenses
2013 Opening balance Increase Amortization Closing balance
RMB RMB RMB RMB
Land lease prepayments 63,541,467 2,936,860 (3,977,253) 62,501,074
Land requisition fee 50,849,948 - (2,458,948) 48,391,000
Greening fee 44,747,706 10,218,601 (11,273,043) 43,693,264
Others 1,732,739
_________ 9,275,455
________ (71,729)
________ 10,936,465
_________
160,871,860
_________ 22,430,916
________ (17,780,973)
________ 165,521,803
_________
________
15. Deferred tax assets/liabilities
Deferred tax assets and liabilities are presented separately:
Deferred tax assets and liabilities recognized are as follows:
2013 2012
RMB RMB
Deferred tax assets
Unrealized profit from intra-company transactions 84,493,108 98,817,513
Unpaid bonus 19,635,738 20,873,113
Retirement benefit 4,877,490 6,178,176
Asset impairment provision 7,632,005 7,874,795
Deductable losses 24,346,814 10,064,437
Deferred income 17,547,935
__________ 6,568,104
__________
158,533,090
__________ 150,376,138
__________
Deferred tax liabilities
Fair value adjustment in business combination under
non-common control 5,336,115
__________ 5,336,115
__________
- 50 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Deferred tax assets/liabilities - continued
Deferred tax assets and liabilities not recognized:
2013 2012
RMB RMB
Deductable losses 20,440,916
_________ 20,505,913
_________
Deductable losses not recognized as deferred tax assets will expire in:
2013 2012
RMB RMB
2013 - 64,997
2014 19,077,494 19,077,494
2015 1,363,422
_________ 1,363,422
_________
20,440,916
_________ 20,505,913
_________
Temporary differences from assets and liabilities that resulting in such differences are as follows:
2013 2012
RMB RMB
Deductible temporary difference
Unrealized profit from intra-company transactions 337,972,438 395,270,055
Unpaid bonus 78,542,951 83,492,454
Early retirement benefit 19,509,959 24,712,704
Provision for impairment 30,528,019 31,499,181
Deductible losses 97,387,257 40,257,750
Deferred income 96,526,843
__________ 40,465,889
__________
660,467,467
__________ 615,698,033
__________
2013 2012
RMB RMB
Taxable temporary difference
Fair value adjustment in business
combination under non-common control 21,344,460
_________ 21,344,460
_________
- 51 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Provision for impairment of assets
2013
Opeing balance Accrual Reversal Written-off Closing balance
RMB RMB RMB RMB RMB
Bad debt provision 11,120,600 - (607,571) (3,120,600) 7,392,429
Inventory provision 15,378,581 - (2,242,991) - 13,135,590
5,000,000
Investment of long-term investment ________ 5,000,000
_______ _______- ________- 10,000,000
________
31,499,181
________ 5,000,000
_______ (2,850,562)
_______ (3,120,600)
________ 30,528,019
________
_______
17. Other non-current assets
2013 2012
RMB RMB
Ningxia Growing's biological assets 21,370,902 24,898,903
Unrecognised finance charge 3,601,902
__________ 3,281,132
__________
24,972,804
__________ 28,180,035
__________
18. Short-term borrowings
2013 2012
RMB RMB
Secured loans with securities under the custody of lenders 243,170,674
__________ -
______
As at 31 December 2013, secured loans with securities under the custody of lenders is the amount
borrowed by the Company from Qingdao Branch of HSBC with the bank deposit of RMB
125,000,000 as custody. The borrowing amount is HKD303,963,343 with annual interest rate of
1.8% and borrowing period from 5 July 2013 to 4 July 2014.
- 52 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Trade payables
The trade payables are interest free with a credit period no more than three months from its
suppliers normally.
2013 2012
RMB RMB
Within 1 year 258,116,331
__________ 324,881,168
__________
As at 31 December 2013, there are no payables to the shareholders with voting rights of 5%, the
Group's outstanding balance payable to related parties are as following:
2013 2012
RMB RMB
Accounts payables to related party
Yantai ShenMa Packing Co., Ltd. 46,370,178 43,366,087
Yantai Zhongya Pharmaceutical Tonic Wine Co., Ltd. 4,520,101 7,972,184
Yantai Changyu Wine Culture Museum Limited 177,526
_________ -
_________
51,067,805
_________ 51,338,271
_________
20. Advances from customers
2013 2012
RMB RMB
Within 1 year 182,757,182 450,172,253
1 to 2 years 5,894,072
__________ -
__________
188,651,254
__________ 450,172,253
__________
As at 31 December 2013, the Group had no outstanding balance payable to the related parties or
shareholders with voting rights of 5% or above (31 December 2012: Nil).
- 53 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Employee benefit
31 December 2013
Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Salaries and bonus 87,598,216 308,001,166 (309,061,233) 86,538,149
Staff benefit - 8,499,785 (8,499,785) -
Staff welfare 262,293 42,937,485 (43,022,516) 177,262
Includes:
Medical insurance 57,516 8,998,978 (8,902,904) 153,590
Pension 202,487 30,598,636 (30,777,674) 23,449
Unemployment insurance 2,148 1,637,364 (1,639,289) 223
Injury insurance 142 929,453 (929,595) -
Maternity insurance - 773,054 (773,054) -
Housing fund 294,914 7,795,836 (8,080,818) 9,932
Union fee and education fee 2,018,390 4,684,475 (4,320,864) 2,382,001
Termination benefits 27,993,831 1,799,076 (6,684,987) 23,107,920
Other allowances 22,317,283
_________ _________- (210,410)
_________ 22,106,873
_________
140,484,927 373,717,823
_________ (379,880,613)
_________ 134,322,137
_________
_________
As at 31 December 2013, the Group had no overdue employee benefit payable (31 December
2012: Nil).
22. Taxes payable
2013 2012
RMB RMB
Value added tax 862,414 (21,005,478)
Consumption tax 26,658,283 33,478,543
Business tax 4,348,055 1,041,384
Corporation income tax 142,079,369 405,075,954
Urban land use tax 878,982 1,180,572
Individual income tax 6,824,553 6,091,205
City construction tax 6,016,703 8,872,888
Property tax 655,545 1,904,752
Others 6,016,703
__________ 7,444,756
__________
194,413,430
__________ 444,084,576
__________
- 54 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Other payables
2013 2012
RMB RMB
Deposit from distributors 215,888,735 210,775,654
Royalty fee 78,986,198 99,943,588
Payables for equipment and construction 63,133,029 51,846,156
Advertising costs 51,854,647 20,434,958
Deposits from suppliers 2,565,206 2,370,702
Others 84,873,815
__________ 85,279,053
__________
497,301,630
__________ 470,650,111
__________
The balance due to the shareholders with voting right of 5% or above is as follows:
2013 2012
RMB RMB
Royalty fee 78,986,198 99,943,588
Yantai ShenMa Packing Co., Ltd. 165,230 -
Yantai Zhongya Pharmaceutical Tonic Wine Co., Ltd. 52,760
_________ -
_________
79,204,188
_________ 99,943,588
_________
As at 31 December 2013, significant outstanding balance aged over than one year is as follows:
Reasons for
Amount payable outstanding
RMB
Economical cooperative society East Baiyan Street Unpaid
Juge District Miyun County 5,390,354
________ Land Rental
There was no repayment of the above balances after the balance sheet date.
- 55 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
24. Non-current liabilities due within one year
2013 2012
RMB RMB
Trust scheme due within one year - 142,785,000
Interest payable -
______ 8,160,000
__________
-
______ 150,945,000
__________
In October 2012, the Company and Shangdong Province International Trust Co., Ltd.("Shandong
Trust") entered into a profit transfer agreement ("October 2012 trust scheme"), pursuant to which
the Company agreed to transfer its right to the profit generated by certain type of wine to a special
trust fund established by Shandong Trust and received RMB90,000,000 with annual interest rate
of 8.5%. The specified profit right includes the following benefits: (1) The gains generated in the
delivery of packed wine according to the delivering instruction by Shandong Trust; (2) The
disposal gain of the target assets in any case; and (3) Any other gains generated by the target
assets. According to the contract, the Company paid interest to Shandong Trust at an interest rate
of 8.5% and returned the amount of the trust option not exercised of target assets when the
arrangement expires. The October 2012 trust scheme has expired on 5 November 2013. As no
option is exercised by Shandong Trust, the Company liquidated the trust scheme in cash on 15
November 2013 in accordance with the agreement.
In July 2011, the Company and Zhonghai Trust Co., Ltd.("Zhonghai Trust") entered into a profit
transfer agreement ("July 2011 trust scheme"), pursuant to which the Company agreed to transfer
its right to the profit generated by certain type of wine to a special trust fund established by
Zhonghai Trust and received RMB52,785,000 with annual interest rate of 7%. The specified
profit right includes the following benefits: (1) The gains generated in the delivery of packed wine
according to the delivering instruction by Zhonghai Trust; (2) The disposal gain of the target
assets in any case; and (3) Any other gains generated by the target assets. The July 2011 trust
scheme has expired on 20 February 2013. As no option is exercised by Zhonghai Trust, the
Company liquidated the trust scheme in cash on 21 February 2013 in accordance with the
agreement.
25. Other current liabilities
2013 2012
RMB RMB
Deferred income 12,915,801
_________ 8,090,382
________
- 56 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
25. Other current liabilities - continued
Details of deferred income:
2013 2012
RMB RMB
Government grant related with assets
Fund to support major constructing projects 4,403,000 2,404,874
Fund to support emerging and key industries 3,159,227 2,300,808
Others 5,353,574
_________ 3,384,700
________
12,915,801
_________ 8,090,382
________
26. Other non-current liabilities
2013 2012
RMB RMB
Employee benefit (1) 4,755,794 7,856,000
Deferred income (2) 83,611,041
_________ 61,148,861
_________
88,366,835
_________ 69,004,861
_________
(1) Employee benefit represents bonus accrued for management. According to the bonus
payment schedule of 2013, the bonus is expected to be paid during 2015 to 2016.
(2) Government grants:
Recognized in
non-operating Other Related to
Liability Items Opening Addition income movements Closing Assets/Income
RMB RMB RMB RMB RMB
Luxury wine culture industry
construction specific funds - 3,000,000 (480,000) - 2,520,000 Income
Miyun Propaganda Department transfer 4,444,725 - - - 4,444,725 Assets
Grape base project specific funds - 1,480,000 (740,000) - 740,000 Assets
Ningxia industry revitalization and
technology reconstruction funds 9,400,000 5,900,000 (940,000) - 14,360,000 Assets
Industry revitalization and technology
reconstruction specific funds - 21,330,000 - - 21,330,000 Assets
Wine base liquor brewage project 11,913,864 - (1,434,874) - 10,478,990 Assets
Innovation supporting funds 1,000,000 - - (1,000,000) - Assets
WuYouYiXin industrial cluster
specific funds 240,000 - (60,000) - 180,000 Assets
Changyu chateau project funds 23,677,300 - (3,858,700) - 19,818,600 Assets
Wine electronic tracking system
specific funds 7,633,354 - (1,772,827) - 5,860,527 Assets
Wine industry specific funds 930,000 - - - 930,000 Assets
Shandong Peninsula Blue Economic
Area construction funds 10,000,000 - - - 10,000,000 Assets
863 Program subsidy funds
for scientific research - 64,000 - - 64,000 Assets
Information system construction
project technology funds ______- ______
5,800,000 ______- ______- _______
5,800,000 Assets
Total ______ ______
69,239,243 37,574,000 ______
(9,286,401) ______
(1,000,000) _______
96,526,842
Less: Non-current liabilities due
within one year ______
(8,090,382) _______
(12,915,801)
Other non-current liabilities 61,148,861 83,611,041
______ _______
- 57 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
27. Share capital
Unrestricted
2013 Opening balance in 2013 Closing balance
RMB RMB RMB
Unrestricted shares
A Shares 453,460,800 - 453,460,800
B Shares 232,003,200
__________ -
_______ 232,003,200
__________
Total of unrestricted shares 685,464,000
__________ -
_______ 685,464,000
__________
Total shares 685,464,000
__________ -
_______ 685,464,000
__________
Unrestricted
2012 Opening balance in 2012 Closing balance
RMB RMB RMB
Unrestricted shares
A Shares 348,816,000 104,644,800 453,460,800
B Shares 178,464,000
__________ 53,539,200
__________ 232,003,200
__________
Total of unrestricted shares 527,280,000
__________ 158,184,000
__________ 685,464,000
__________
Total shares 527,280,000
__________ 158,184,000
__________ 685,464,000
__________
On 15 May 2012, the board of the directors of the Company proposed a cash dividend of
RMB15.2 every 10 shares in respect of 2011 based on the issued shares of 527,280,000. The
aggregate amount of cash dividend is RMB 801,465,600. Meanwhile, the board of the directors
proposed an allotment to all shareholders by 3 shares every 10 shares based on the issued shares
of 527,280,000. The aggregate amount of share dividend transferred to share capital is
RMB158,184,000.
28. Capital surplus
2013 Opening balance Addition Closing balance
RMB RMB RMB
Share premium 557,222,454 - 557,222,454
Other 4,916,588
__________ 1,000,000
________ 5,916,588
__________
562,139,042
__________ 1,000,000
________ 563,139,042
__________
According to Xing Cai (Qi) Fa [2009]1160, Ningxia Wine recognised government grant of
RMB1,000,000 into capital reserve. The grant was previously recognised in deferred income and
was due within 2013.
- 58 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Capital surplus - continued
2012 Opening balance Addition Closing balance
RMB RMB RMB
Share premium 557,222,454 - 557,222,454
Other 4,916,588
__________ -
______ 4,916,588
__________
562,139,042
__________ -
______ 562,139,042
__________
29. Surplus reserve
In accordance with the Company Law of the People's Republic of China and the Articles of
Association of the Company, the Company is required to appropriate 10% of the net profit to the
statutory surplus reserve until the accumulated balance of the statutory surplus reserve reaches
50% of the registered share capital. As the Company's surplus reserve has reached 50% of the
share capital, the Company does not appropriate net profit to the surplus reserve in 2013.
The Company can appropriate discretionary surplus reserve after appropriation of the statutory
surplus reserve. Discretionary surplus reserve can be utilized to offset the deficit or increase the
share capital after approval.
30. Retained earnings
2013 2012
RMB RMB
Retained earnings brought forward 4,322,769,136 3,628,279,989
Add: profit attributable to shareholders of the Company 1,048,185,927 1,700,928,117
Less: Dividends paid in respect prior year's profit - (801,465,600)
Withdrawal of legal surplus (754,010,400) (46,789,370)
Conversion of ordinary share dividends ____________- (158,184,000)
____________
Retained earnings carried forward 4,616,944,663 4,322,769,136
____________
____________
In accordance with the Articles of Association of the Company, the Company is required to
appropriate 10% of the net profit to the statutory surplus reserve until the accumulated balance of
the statutory surplus reserve reaches 50% of the registered share capital.
As at 31 December 2013, the balance of the Group's unappropriated profits include appropriation
to surplus reserve by subsidiaries amounting to RMB37,554,671 (31 December 2012:
RMB33,838,221).
According to the board of the directors resolution raised on 24 April 2014, the Company proposed
a cash dividend of RMB5 (tax inclusive) for every 10 shares in respect of 2013 based on the
issued shares of 685,464,000. The aggregate amount of cash dividend is RMB342,732,000. The
resolution is to be approved by the annual general meeting.
- 59 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Assets with restriction of ownership
2013 Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Cash at bank 2,652,083 131,257,285 (42,846) 133,866,522
Inventory 25,726,686
________ _________- (25,726,686)
________ -
_________
28,378,769 131,257,285
_________ (25,769,532)
________ 133,866,522
_________
________ ________
As at 31 December 2013, cash and bank balances with restriction of ownership include: the
Group's housing fund of RMB2,609,237, security of RMB125,000,000 pledged for a short-term
borrowing from HSBC of HKD303,963,343 (translated as RMB243,170,674), refundable deposit
for notes payable of Shi He Zi Chateau of RMB5,965,996, and company cards deposit guarantee
of RMB291,289.
As at 31 December 2012, the profit transfer trust scheme set on 2012 expired and the restriction
on inventory removed, therefore there is no inventory with restriction of ownership.
32. Operating income and costs
Operating income is analyzed as follows:
2013 2012
RMB RMB
Principal operating income 4,273,801,693 5,556,442,502
Other operating income 47,146,879
____________ 87,088,051
____________
4,320,948,572 5,643,530,553
____________
____________
Operating cost is analyzed as follows:
2013 2012
RMB RMB
Principal operating income 1,336,631,197 1,359,873,644
Other operating income 21,266,802
____________ 41,215,339
____________
1,357,897,999 1,401,088,983
____________
____________
The operating income for the group is mainly from the sales of wine, brandy and sparkling wine.
Over 99% of the sales generated in PRC.
- 60 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
32. Operating income and costs - continued
Operating income from top five customers in 2013 is as follows:
Percentage of total
Amount operating incomes
RMB %
Foshan Nanhai Dali Qianxingrong wine house 38,543,431 0.9
Guangzhou Baiyun Huimingxin liquor store 35,388,051 0.8
Fuzhou Shengshi Hanggang Trading Co. Ltd. 26,095,961 0.6
Fugang Shijiao Liang's store 25,359,599 0.6
Hui'an Luocheng Quanxing liquor store 24,904,311
__________ 0.6
___
150,291,353
__________ 3.5
___
Operating income is analyzed as follows:
2013 2012
RMB RMB
Sale of goods 4,273,801,693 5,556,442,502
Rendering of services 47,146,879
____________ 87,088,051
____________
4,320,948,572 5,643,530,553
____________
____________
33. Taxes and surcharges
2013 2012
RMB RMB
Consumption tax 150,438,896 198,061,661
Business Tax 2,595,076 4,490,563
City construction tax 44,937,923 61,248,671
Education fee and surcharges 31,426,897 45,595,614
Others 6,995,372
__________ 8,817,794
__________
236,394,164
__________ 318,214,304
__________
For detail standards of tax rate please refer to Notes IV Tax.
- 61 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
34. Selling expenses
2013 2012
RMB RMB
Advertising costs 577,727,845 832,290,075
Freight 126,085,723 136,710,184
Salary and employee benefit 196,790,695 191,099,359
Trademark fee 78,986,198 99,943,588
Warehouse leasing expenses 37,714,861 36,959,537
Travelling expenses 20,927,235 23,177,961
Commission 13,828,552 12,314,338
Expenses incurred for Wine festival 1,211,634 29,711,497
Others 87,563,407
____________ 87,017,624
____________
1,140,836,150
____________ 1,449,224,163
____________
35. General and administrative expense
2013 2012
RMB RMB
Salary and employee benefit 39,539,807 55,908,211
Insurance fee 29,625,036 30,024,891
Leasing expenses 7,337,569 8,943,367
Depreciation 24,694,962 23,715,321
Amortization 8,396,636 5,793,090
Administrative expenses 13,706,767 14,546,769
Travelling expenses 6,604,787 6,379,358
Entertainment fee 3,964,265 5,296,737
Property tax, stamp duty and other taxes 11,118,372 13,619,934
Maintenance fee 15,723,166 14,716,086
Management fee 23,545,171 11,745,536
Others 61,242,412
__________ 63,685,509
__________
245,498,950
__________ 254,374,809
__________
36. Loss on impairment of assets
2013 2012
RMB RMB
Impairment loss (607,571) -
Inventory provision (2,242,991) 2,777,648
Bad debts provision 5,000,000
_________ -
________
2,149,438
_________ 2,777,648
________
- 62 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
37. Financial income
2013 2012
RMB RMB
Interest income 34,252,612 38,033,736
Less: interest expenses (12,681,058) (8,493,989)
Bank charges (2,871,197)
__________ (9,621,486)
_________
18,700,357
__________ 19,918,261
_________
38. Non-operation income
2013 2012
RMB RMB
Gains on disposal of non-current assets 271,989 4,379,454
Including: gain on disposal of plant property
and equipments 271,989 640,939
Government grants 36,659,754 23,393,756
Penalty income 210,757 373,987
Others 4,966,226
_________ 7,231,063
_________
42,108,726
_________ 35,378,260
_________
Government grants recognized in the income statement is as follows:
2013 2012
RMB RMB
Major projects support fund 1,680,000 1,483,193
Small and medium enterprises support fund 3,902,827 646,646
Tax refund 22,163,624 14,636,437
Others 8,913,303
_________ 6,627,480
_________
36,659,754
_________ 23,393,756
_________
39. Non-operation expenses
2013 2012
RMB RMB
Loss on disposal of non-current assets 678,016 2,581,199
Including: loss on disposal of property,
plant and equipment 678,016 2,581,199
Donation 291,729 221,106
Others 904,478
________ 169,104
________
1,874,223
________ 2,971,409
________
- 63 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
40. Income tax
2013 2012
RMB RMB
Current income tax 357,077,756 554,519,329
Deferred income tax (8,156,952)
__________ 25,152,800
__________
348,920,804
__________ 569,247,641
__________
Reconciliation between income tax expenses and profits is as follows:
2013 2012
RMB RMB
Profit before tax 1,397,106,731 2,270,175,758
Income tax expense at statutory tax rate 25% 349,276,683 567,543,940
Effect of different tax rates applied by certain subsidiaries (2,677,153) (2,746,040)
Non-taxable income (131,500) (380,412)
Non-deductible expenses 2,452,774
____________ 4,830,153
____________
Income tax expenses at the Group's effective tax rate 348,920,804
____________ 569,247,641
____________
41. Earnings per share
The calculation of basic earnings per share is based on the consolidated profit attributable to
ordinary shareholders of the Company during the year and the weighted average number of
outstanding ordinary shares.
2013 2012
RMB RMB
Earnings
Consolidated profit attributable to
ordinary shareholders of the Company 1,048,185,927
____________ 1,700,928,117
____________
Shares
Weighted average number of outstanding
ordinary shares (i) 685,464,000
____________ 685,464,000
____________
Basic earnings per share 1.53
____________ 2.48
____________
The company does not have potential dilutive ordinary shares.
Note1: In June 2012, the Company allotted share dividend of 158,184,000 shares, after which the
issued ordinary share became 685,464,000. Thus, the basic earnings per share is based on
the adjusted number of shares.
From the balance sheet date to the date of approval of this report, there are no subsequent events
which would affect the numbers of the weighted average number of outstanding of ordinary
shares.
- 64 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Notes to consolidated cash flow statement
Cash received relating to other operating activities:
2013 2012
RMB RMB
Government grants 42,783,729 30,555,824
Others 5,176,982
_________ 9,496,088
_________
47,960,711
_________ 40,051,912
_________
Cash paid relating to other operating activities:
2013 2012
RMB RMB
Selling expenses 944,945,796 1,233,262,732
General and administrative expenses 102,626,714 110,485,877
Others 11,982,799
____________ 9,575,616
____________
1,059,555,309
____________ 1,353,324,225
____________
Cash paid relating to other financing activities:
2013 2012
RMB RMB
Cash liquidation of trust scheme 150,945,000 80,497,823
Pledged security of short-term borrowing 125,000,000
__________ -
__________
275,945,000
__________ 80,497,823
__________
- 65 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
43. Supplementary information to consolidated cash flow statement
(i) Supplementary information to consolidated cash flow statement
Cash flows from operating activities calculated by adjusting the net profit:
2013 2012
RMB RMB
Net profit 1,048,185,927
____________ 1,700,928,117
____________
Add: Loss for impairment of assets 2,149,438 2,777,648
Depreciation 125,540,127 125,261,510
Amortization of intangible assets 6,839,668 5,113,916
Amortization of Biological assets 846,620 795,539
Amortization of long-term prepaid expenses 17,780,973 14,130,153
Losses/(gain) on disposal of property,
plant and equipment 406,027 1,940,260
Finance income (21,571,554) (26,261,924)
Decrease/(increase) in deferred tax assets (8,156,952) 25,152,800
Decrease/(increase) in inventories 149,746,995 (515,434,507)
Decrease/(increase) in operating receivables (49,235,221) 32,246,207
Increase/(decrease) in operating payables (537,457,741)
____________ (64,608,397)
____________
Net cash flows from operating activities 735,074,307
____________ 1,302,041,322
____________
(ii) Cash and cash equivalent
2013 2012
RMB RMB
Closing balance 1,367,818,182 2,227,470,828
Including:
restricted bank deposits 2,609,237 2,652,083
restricted other monetary funds 131,257,285 -
deposit with a period of over three months 277,392,728
____________ 662,524,719
____________
Closing balance of cash and cash equivalents 956,558,932
____________ 1,562,294,026
____________
2013 2012
RMB RMB
Cash 956,558,932 1,562,294,026
Including:
Cash on hand 772,817 48,894
Bank deposits on demand 955,786,115
____________ 1,562,245,132
____________
Closing balance of cash and cash equivalents 956,558,932
____________ 1,562,294,026
____________
- 66 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VII) RELATED PARTY AND RELATED PARTY TRANSACTIONS
1. Parent company
Name of Type of Place of Legal Scope Registered Percentage Percentage Incorporate
parent company enterprise registration representative of business capital of shares of voting rights Code
RMB % %
Cotrolling Company Limited Company Yantai SunLiqiang Manufacturing 50,000,000 50.4 50.4 265645824
During the year ended 31 December 2013, there is no change in parent company's registered
capital, shares holding or voting power.
2. Subsidiaries: Please refer to Note V-1.
3. Other related parties
Nature of related parties Incorporate code
Yantai Changyu Travelling Co., Ltd. subs Controlled by the 258258654
same parent company
Yantai Changyu International Controlled by the 672208146
Window of the Wine City Co., Ltd. same parent company
Yantai ShenMa Packing Co., Ltd. e Co Controlled by the 553393350
same parent company
Yantai Zhongya Pharmaceutical Controlled by the 726203923
Tonic Wine Co., Ltd. same parent company
4. Significant related party transactions
(1) Purchases from and sales to related parties
Purchase from related parties
2013 2012
RMB RMB
Yantai ShenMa Packing Co., Ltd 194,648,978 206,438,932
Yantai Zhongya Pharmaceutical tonic Wine Co., Ltd. 7,960,294 7,821,383
Yantai Changyu Travelling Co. Ltd. 2,618,189 118,886
Yantai Changyu International Window
of the Wine City Co., Ltd 100,246
__________ 725,996
__________
205,327,707
__________ 215,105,197
__________
All related party transactions are based on the negotiated price.
In 2013, purchases from related parties accounted for less than 11.9% of the Group's total
purchase (2012: 12.0%)
- 67 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VII) RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(1) Purchases from and sales to related parties - continued
Sales to related parties
2013 2012
RMB RMB
Yantai Changyu Wine Culture Museum Limited 5,495,959 4,382,547
Yantai Changyu International Window
of the Wine City Co., Ltd. 2,524,559 4,450,553
Yantai Zhongya Pharmaceutical tonic Wine Co., Ltd 1,890,313 512,551
Yantai ShenMa Packing Co., Ltd. 1,492,538
_________ -
________
11,403,369
_________ 9,345,651
________
All related party transactions are based on the negotiated price.
In 2013, sales to related parties accounted for less than 1% of the Group's total sales (2012: less
than 1%).
(2) Property leased from a related party
2013 Note Assets leased Beginning date Ending date Rental expense
Changyu Group Company (a) Warehouse and office building 2012/1/1 2016/12/31 5,858,000
______
______
(a) Pursuant to the lease agreement entered into between the Company and Changyu Group
Company on 1 January 2012, starting from 1 January 2012, the Company rented properties
from Changyu Group Company for operation purposes at a basic annual rental of
RMB5,858,000, and till 31 December 2016. For the year ended 31 December 2013, the
rental payable to Changyu Group Company amounted to RMB5,858,000.
- 68 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VII) RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(3) Other significant related party transactions
Note 2013 2012
RMB RMB
Royalty fee (a) 78,986,198 99,943,588
Patents fee (b) 50,000
_________ 50,000
_________
All related party transactions are based on the negotiated price.
(a) Royalty fee
Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, the
Company may use certain trademarks of Changyu Group Company, which have been
registered with the PRC Trademark Office. An annual royalty fee at 2% of the Group's
annual sales is payable to Changyu Group Company. The license is effective until the
expiry of the registration of the trademarks.
During 2013, royalty fee paid to related company accounted for 100% of the Group (2012:
100%).
(b) Patents fee
Pursuant to a patents implementation license dated 18 May 1997, starting from 18
September 1997, the Company may use the patents of Changyu Group Company. The
annual patents usage fee payable by the Company to Changyu Group Company was
RMB50,000. The contract was expired on 20 December 2005. The Company renewed
the contract on 20 August 2006 for 10 years. The annual patents usage fee payable by the
Company to Changyu Group Company remained RMB50,000. For the year ended 31
December 2013, the patents usage fee payable to Changyu Group Company amounted to
RMB50,000 (2012: RMB50,000).
During 2013, patent fee paid to related company accounted for 100% of the Group (2012:
100%).
(4) Remuneration of the management
2013 2012
RMB RMB
Remuneration of the management 8,292,000
_________ 10,804,108
_________
- 69 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VII) RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
5. Balance due from/ to related parties
(1) Balance due from related parties
2013 2012
Trade receivables Balance Provision Balance Provision
RMB RMB RMB RMB
Yantai Zhongya Pharmaceutical
tonic Wine Co., Ltd. 2,567,129 - 1,820,376 -
Yantai Shen Ma Packing Co. Ltd. 911,197 - - -
Yantai Changyu International
Window of the Wine City Co., Ltd. 42,478 - - -
Yantai Changyu Travelling Co. Ltd. _______- -
_____ 311,220
_______ -
_____
3,520,804 -
_____ 2,131,596
_______ -
_____
_______
The above amounts due from related parties are unsecured, interest-free and have no fixed terms
of repayment.
(2) Balance due to related parties
2013 2012
RMB RMB
Trade payable
Yantai Shen Ma Packing Co, Ltd. 46,370,178 43,366,087
Yantai Zhongya Pharmaceutical tonic Wine Co., Ltd. 4,520,101 7,972,184
Yantai Changyu Wine Culture Museum Limited 177,526
_________ -
_________
Total 51,067,805 51,338,271
_________ _________
Other payable
Royalty fee payable to parent company 78,986,198 99,943,588
Yantai Zhongya Co., 165,230 -
Yantai LtdShenMa Packing Co.,Ltd 52,760
_________ -
_________
Total 79,204,188
_________ 99,943,588
_________
The above amounts due to related parties are unsecured, interest-free and have no fixed terms of
repayment.
- 70 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(VIII) CONTINGENT LIABILITIES
The Group and the Company did not have any significant contingent liabilities as at balance sheet
date.
(IX) COMMITMENT
1. Capital commitments
2013 2012
RMB'000 RMB'000
Capital commitments
Authorized, but not contracted 1,253,880
____________ 1,605,664
____________
2. Operating lease commitment
As lessee
Significant operating lease: the Company has total future minimal lease payments under non-
cancelable contract with lessor are as follow:
2013 2012
RMB'000 RMB'000
Within one year 23,612 14,334
One year to two years 11,208 8,560
Two years to three years 9,726 6,512
Three years and above 28,390
_________ 20,279
_________
72,936 49,685
_________ _________
(X) POST BALANCE SHEET DATE EVENT
According to the board of the directors resolution raised on 24 April 2014, the Company proposed
a cash dividend of RMB5 (tax inclusive) for every 10 shares in respect of 2013 based on the
issued shares of 685,464,000. The aggregate amount of cash dividend is RMB342,732,000. The
resolution is to be approved by the annual general meeting.
- 71 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS
1. Business Consolidation
The group is the buyer in a business combination not under common control.
The basic information of the combination is as follows:
(1) Basic information of the acquiree:
French Sales is a limited company founded by Mr. Georges Roullet and Mr. Charles Tavernier in
Sant, French in 31 March 1983. The Company acquired 100% share of French Sales at the
consideration of EUR 3,575,000 (RMB29,988,530). After the acquisition, the Company holds
100% share of French Sales.
(2) Primary financial information of the acquiree:
31 December 2013
Closing Balance
RMB
Primary financial information of the acquiree：
Identifiable assets
Cash and bank balances 13,104,666
Accounts receivable 1,502,386
Prepayments 15,844
Other receivables 297,601
Inventories 2,671,923
Fixed assets 1,550,012
Intangible assets 61,197
_________
Sub-total 19,203,629
_________
Identifiable liabilities
Accounts payable 1,928,669
Other payables 157,854
Employee benefits payable 215,238
Taxes payable 25,863
_________
Sub-total 2,327,624
_________
Total net assets 16,876,005
_________
Less: Minority interests -
Equity attributable to the Company's shareholders 16,876,005
Less: Acquisition consideration 29,988,530
_________
Goodwill 13,112,525
_________
- 72 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS - continued
1. Business Consolidation - continued
(2) Primary financial information of the acquiree: - continued
According to the agreement of
signed on 16 October 2013, the Group acquired French Sales in 2013 December. In order to
determine the fair value of assets and liabilities of French Sales at the acquisition date, a
valuation institution is to be hired to determine the fair value of the assets and liabilities of
the company. As the valuation has not been commenced till the issue of financial statements
of 2013, the Group temporarily recognised the book value of assets and liabilities of French
Sales as its fair value at the acquisition date. Therefore, the Group recognised a goodwill of
RMB13,112,525 in regard to the acquisition. The valuation is expected to be finished in
2014 and the book value of assets, liabilities and goodwill above will also be adjusted
according to the valuation result.
The acquisition consideration is satisfied by cash. The cash and cash equivalent paid in the
acquisition of French Sales are:
Amount
RMB
Cash and cash equivalent as acquisition consideration 29,988,530
Less: cash and cash equivalents of the acquiree 13,104,666
_________
Net cash and cash equivalents paid in the acquisition of subsidiary 16,883,864
_________
2. Segment report
The Group is principally engaged in the production and sales of wine, brandy, sparkling
wine. In accordance with the Group's internal organisation structure, management
requirements and internal reporting system, the Group's operation determines only one
operation segment and reporting segment engaged in the production and sales within China.
Therefore the Group does not need to disclose additional segment report information.
- 73 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS - continued
3. Financial instrument and risk management
The Group's major financial instruments include cash and bank, notes receivabless, accounts
receivables, interest receivables, other receivables, other non-current assets, short-term
borrowings, notes payables, trade payables, payroll payables, interest payables, other payables
and other non-current liabilities. Details of these financial instruments are disclosed in Note VI.
The risks associated with these financial instruments and the policies on how to mitigate these
risks are set out below. Management manages and monitors these exposures to ensure the risks
are monitored at a certain level.
(1) Risk management objectives and policies
Market risk
(a) Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. The
Group's exposure to the currency risk is primarily associated with HKD. The balance of the
Group's assets and liabilities are both denominated in RMB except the short term loan of HKD
303,963,343(RMB 243,170,674). Currency risk arising from the assets and liabilities denominated
in foreign currencies may have impact on the Group's performance.
(b) Interest rate risk - risk of changes in fair value
The Group's fair value interest rate risk of financial instruments relates primarily to fixed-rate
bank borrowings (see Note VI-18 for details). The Company is of the view that the Group has no
significant interest rate risks, and no interest rate swaps are designated to hedge against interest
rate risks.
Credit risk
Credit risk is the risk of financial loss on one party of a financial instrument due to the failure of
another party to meet its obligations.
The Group trades only with recognized and creditworthy third parties. It is the Group's policy that
all customers who wish to trade on credit terms are subject to credit verification procedures. In
addition, receivable balances are monitored on an ongoing basis to ensure that the Group's
exposure to bad debts is not significant. For transactions that are not denominated in the
functional currency of the relevant operating unit, the Group does not offer credit terms without
the specific approval of the Department of Credit Control in the Group.
The credit risk of the Group's other financial assets, which comprise cash and bank, notes
receivables, interests receivable and other receivables,, arises from default of the counterparty,
with a maximum exposure equal to the carrying amounts of these instruments.
Since the Group trades only with recognized and creditworthy third parties, there is no
requirement for collateral. Concentrations of credit risk are managed by customer/counterparty,
by geographical region and by industry sector. As at 31 December 2013, 30.0% of trade
receivables of the Group are due from the top 5 customers (31 December 2012: 41.4%). There is
no collateral or other credit enhancement on the balance of the trade receivables of the Group.
- 74 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS - continued
3. Financial instrument and risk management - continued
(1) Risk management objectives and policies - continued
Liquidity risk
Liquidity risk is the risk that an enterprise may encounter deficiency of funds in meeting
obligations associated with financial liabilities.
The Group monitors its risk of deficiency of funds using a recurring liquidity planning tool. This
tool considers the maturity of both its financial instruments and expected cash flows from the
Group’s operations.
The Group’s financial liabilities mainly consist of trade payables and other payables (except for
deposits) arose from principal activities and amount received from trust scheme. The fair value of
the financial liabilities is equal to their book value. The Group is of the view that the cash flow
from the above financial assets is adequate to cover all financial liabilities whereby the Group has
no significant liquidity risk.
The table below summarizes the maturity profile of the Group's financial assets and liabilities as
at the balance sheet date, based on the undiscounted contractual cash flows:
2013
Financial assets
1 to 3 months 3 to 12 months Over 1 year Total
RMB RMB RMB RMB
Cash and bank 956,559,232 424,501,488 - 1,381,060,720
Notes receivabless 53,438,752 26,264,001 - 79,702,753
Trade receivable 149,110,510 27,999,006 - 177,109,516
Interest receivables 8,417,995 - - 8,417,995
Other receivables 99,331,794 - - 99,331,794
Other non-current assets __________- _________ - 21,370,902
________ 21,370,902
__________
1,266,857,983 478,764,495 21,370,902
________ 1,766,993,380
__________
__________ _________
Financial liabilities
1 to 3 months 3 to 12 months Over 1 year Total
RMB RMB RMB RMB
Short-term borrowings - 247,547,746 - 247,547,746
Notes payables - 5,765,694 - 5,765,694
Trade payables 225,248,499 32,867,832 - 258,116,331
Other payables 99,136,105 398,165,525 - 497,301,630
Interest payables 2,152,059 - - 2,152,059
Other non-current liabilities __________- _________ - 4,755,794
________ 4,755,794
__________
326,536,663
__________ 684,346,797
_________ 4,755,794
________ 1,015,639,254
__________
- 75 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS - continued
3. Financial instrument and risk management - continued
(2) Fair value
Fair values of the financial assets and financial liabilities are determined as follows:
The fair value of financial assets and financial liabilities with standard terms and
conditions and traded on active markets are determined with reference to quoted market
bid prices and ask prices respectively;
The fair value of other financial assets and financial liabilities (excluding derivative
instruments) are determined in accordance with generally accepted pricing models based
on discounted cash flow analysis or using prices from observable current market
transactions;
The management considers that the carrying amounts of financial assets and financial liabilities in
the financial statements approximate their fair values.
(3) Sensitivity analysis
The Group adopts sensitivity analysis technique to analyse how the profit and loss for the period
and shareholders' equity would have been affected by reasonably possible changes in the relevant
risk variables. As it is unlikely that risk variables will change in an isolated manner, and the
interdependence among risk variables will have significant effect on the amount ultimately
influenced by the changes in a single risk variable, the following are based on the assumption that
the change in each risk variable is on a stand-alone basis.
Currency risk
Where all other variables are held constant, the reasonably possible changes in the foreign
exchange rate may have the following pre-tax effect on the profit or loss for the period and
shareholders' equity:
Current year Prior year
Effect on Effect on
shareholders' shareholders'
Item Change in exchange rate Effect on profit equity Effect on profit equity
RMB RMB RMB RMB
Liability: HKD 5% increase (121,892) (121,892) - -
Liability: HKD 5% decrease 121,892 121,892 - -
- 76 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XI) OTHER SIGNIFICANT EVENTS - continued
3. Financial instrument and risk management - continued
(3) Sensitivity analysis - continued
Interest rate risk
The Group has no floating-rate borrowings, and management of the Group considers the
fluctuation in interest rates of bank balances and pledged deposits is insignificant. Therefore, no
sensitivity analysis on interest rates for bank balances and pledged deposits is presented.
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS
1. Cash and bank
2013 2012
RMB RMB
Cash on hand 12,479 11,916
Cash at bank 477,140,475 1,090,248,935
Other monetary assets 125,291,289
____________ ____________-
602,444,243
____________ 1,090,260,851
____________
As at 31 December 2013, the balance of restricted cash of the Group is RMB 2,609,237 (31
December 2012: RMB2,652,083), which is composed of the Group’s housing fund.
As at 31 December 2013, cash and bank balances with restriction of ownership include: security
of RMB125,000,000 pledged for a short-term borrowing from HSBC of HKD303,963,343
(translated as RMB243,170,674), and company cards deposit guarantee of RMB291,289.
As at 31 December 2013, The Group's term deposits with original maturity of more than three
months when acquired is RMB277,392,728 (31 December 2012: RMB662,524,719) with interest
rates ranging from 2.86%-3.58%, which will mature from 3 months to 1 year.
- 77 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
2. Note receivable
2013 2012
RMB RMB
Bank acceptances 32,594,381
_________ 1,450,000
_________
As of 31 December 2013, there was no pledged notes receivables (31 December 2012: Nil), and
no notes receivables were reclassified as accounts receivable due to the default of drawer (31
December 2012: Nil).
On 31 December 2013, the Company's pledged notes receivable is RMB16,727,830, the top five
largest amounts are:
Date of issue Date of issue Maturity date Amount
RMB
Suzhou Zhenwu Trading Co., Ltd. 22/9/2013 22/3/2014 1,000,000
Tai'an Mingyin Co., Ltd. 14/8/2013 13/2/2014 1,000,000
Jinan Luye Trading Co., Ltd. 2/9/2013 2/3/2014 1,000,000
Wuxi Fanghe Sugar alcohol Co., Ltd. 13/9/2013 13/3/2014 1,000,000
Fujian Nan'an Ruigang Co., Ltd. 26/9/2013 26/3/2014 1,000,000
_______
5,000,000
_______
As at 31 December 2013, there was no notes receivable discounted to obtain short-term loan.
3. Trade receivables
2013 2012
Carrying Amount Provision Carrying Amount Provision
Amount Amount Amount Amount
RMB % RMB % RMB % RMB %
Individually significant
and provision 1,600,968 100
___ ___- ___- 710,080
_____ 100.0
___ ___- ___-
______
The normal credit term of trade receivables is one month, which can be extended to three months
for certain major customers. The trade receivables are interest free.
The Group determines that trade receivable of more than RMB 3,000,000 is considered as
individually significant trade receivable.
2013 2012
RMB RMB
Within 1 year 1,600,968 710,080
_________ _________
- 78 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Trade receivables - continued
As at 31 December 2013, there was no provision provided for trade receivables (31 December
2012: Nil). The Company did not provide, reverse or write off any provision during 2013 (31
December 2012: Nil)
As at 31 December 2013, there was no account receivable due from the Company's shareholders
with voting rights of 5% or above (31 December 2012: Nil).
As at 31 December 2013, the particulars of top 1 account receivables amount are as follows:
Ratio of total
Relationship with the Company Amount receivables
RMB %
Under common control 1,600,968 100.0
_______ ____
As at 31 December 2012, the particulars of top 1 account receivables amount are as follows:
Ratio of total
Relationship with the Company Amount receivables
RMB %
Under common control 710,080
______ 100.0
____
4. Dividend receivables
Aging Opening balance Increase Increase Closing balance
RMB RMB RMB RMB
Within 1 year
Including: Sales Company 980,000,000 970,000,000 (1,211,018,499) 738,981,501
AFIP Tourism - 68,000,000 (68,000,000) -
Kylin Packaging - 24,469,867 (24,469,867) -
AFIP Wine Chateau - 32,000,000 (32,000,000) -
Wines Sales - 11,140,442 (11,140,442) -
Ice Chateau - 5,458,011 (5,458,011) -
Shihezi Chateam - 5,265,269 (5,265,269) -
Langfang Castel - 5,162,898 (5,162,898) -
Jingyang Sales - 3,522,928 (3,522,928) -
Xinjiang Tianzhu - 1,000,000 (1,000,000) -
Over 1 year
Including: Pioneer International 13,614,383
__________ -
__________ __________- 13,614,383
_________
Total 993,614,383 1,126,019,415 (1,367,037,914)
__________ 752,595,884
_________
__________ __________ __________
- 79 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
5. Advances from customers
The aging analysis is as follows:
2013 2012
RMB RMB
Within 1 year 24,824,672
_________ 26,131,908
_________
As at 31 December 2013, advances from customers are as follows:
Percentage of
Relationship Reason for being total advances
with the Group Amount Aging outstanding to suppliers
RMB %
Xinjiang Yuyuan Wine Co., Ltd. Third party 20,069,242 Within 1 year goods not received 80.8
Xinjiang Tianyu Wine Co., Ltd. Third party 3,200,053 Within 1 year goods not received 12.9
Shandong Electric Power Group Third party 863,325 Within 1 year electric fee 3.5
Shandong Taihe Construction
Management Co. Ltd. Third party 376,300 Within 1 year service not received 1.5
Shandong Yantai Brewery Co., Ltd.
Liquan wine branch Third party 137,229
_______ Within 1 year goods not received 0.6
___
24,646,149
_______ 99.3
___
As at 31 December 2013, there was no advance paid to shareholders with voting rights of 5% or
above (31 December 2012: Nil).
6. Other receivables
Closing balance Opening balance
Carrying amount Bad debts provision Carrying amount Bad debts provision
Amount Proportion Amount Proportion Amount Proportion Amount Proportion
RMB % RMB % RMB % RMB %
Individually significant
and provision 3,683,374,031 99.1 (7,392,429) 100.0 11,120,600 0.5 (11,120,600) 100.0
Individually insignificant
and provision 33,602,347
________ 99.8
___ ______- ___- 2,194,219,753 99.5
________ ___ _______- ____-
3,716,976,378 100.0 (7,392,429) 100.0
________ ___ ______ ___ ________ 100.0 _______
2,205,340,353
___ (11,120,600) 100.0
____
The Group determines that other receivable of more than RMB 3,000,000 is considered as
individually significant other receivable.
- 80 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Other receivables - continued
The aging analysis is as follows:
Closing balance Opening balance
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Amount Amount Proportion Amount Amount
RMB % RMB RMB RMB % RMB RMB
Within 1 year 3,709,472,668 99.8 - 3,709,472,668 2,194,000,959 99.5 - 2,194,000,959
1 to 2 years 111,281 - - 111,281 191,603 - - 191,603
2 to 3 years - - - - 27,191 - - 27,191
Over 3 years 7,392,429
________ ____0.2 7,392,429
_______ ________- 11,120,600
________ ____0.5 11,120,600
______ ________-
3,716,976,378 100.0 7,392,429 3,709,583,949 2,205,340,353 100.0
________ ____ _______ ________ ________ ____ 11,120,600 ______________ 2,194,219,753
The movement of provision for other receivables is as follows:
Opening Balance Accrued Reversed Write-off Closing Balance
RMB RMB RMB RMB RMB
2013 11,120,600
________ -
_____ (607,571)
______ (3,120,600)
________ 7,392,429
________
As at 31 December 2013, other receivable that are individually significant at the end of the period
but for which bad debt provision has been assessed individually:
Bad debt
Balance provision Percentage Reason for provision
RMB RMB %
The debtor is in
Tiantong Security Co.,Ltd. 7,392,429
_______ 7,392,429
_______ 100 the process of liquidation
_______ _______
As at 31 December 2012, other receivable that are individually significant at the end of the period
but for which bad debt provision has been assessed individually:
Bad debt
Balance provision Percentage Reason for provision
RMB RMB %
The debtor is in the
Tiantong Security Co.,Ltd. 8,000,000 8,000,000 100 process of liquidation
Aging over 3 years and
Finance Bureau of Jingyang 3,120,600
________ 3,120,600
________ 100 low recovering possibilities
11,120,600
________ 11,120,600
________
- 81 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Other receivables - continued
Reversals and collections during the current period:
Basis of determining Accumulated bad debt
Reasons for the original bad debt provision prior to Amount of reversal
Cotent reversal or collections provison reversals or collections or collections
RMB RMB
Tiantong Security Co.,Ltd. Collected Exceed credit period (8,000,000)
_______ 607,571
_______ ______
Accounts receivable written off in the reporting period
Whether arising from
related party
Nature Amount Reason for write off transactions
RMB
Finance Bureau of Jingyang Government borrowing 3,120,600
_______ Unable to collect No
As at 31 December 2013, there was no other receivable due from the shareholders with voting
rights of 5% or above. (31 December 2012: Nil)
As at 31 December 2013, the particulars of top 5 other receivables are as follows:
Relationship Percentage of total
with the Group Amount Aging advances to suppliers
RMB %
Sales Company Subsidiary 701,689,111 Within 1 year 18.9
Shihezi Chateau Subsidiary 574,116,402 Within 1 year 15.4
Changan Chateau Subsidiary 568,947,758 Within 1 year 15.3
Beijing Chateau Subsidiary 534,672,348 Within 1 year 14.4
Ningxia Wine Subsidiary 305,630,061
__________ Within 1 year 8.2
___
2,685,055,680
__________ 72.2
___
At 31 December 2013, the balance of other receivables from related parties is RMB3,691,961,808,
approximately 99.3% of total other receivables. These were all from subsidiaries of the Company
(2012: the balance of other receivable from related parties is RMB2,163,251,044, approximately
98.1% of total other receivables).
- 82 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
7. Inventories
2013 2012
Net carrying Net carrying
Balance Provision amount Balance Provision amount
RMB RMB RMB RMB RMB RMB
Raw material 5,328,866 - 5,328,866 17,696,041 - 17,696,041
Finished goods 90,565,059 - 90,565,059 194,847,237 - 194,847,237
Work in progress 685,390,264
_________ -
_______ 685,390,264
_________ 680,899,480
_________ -
_______ 680,899,480
_________
781,284,189
_________ -
_______ 781,284,189
_________ 893,442,758
_________ -
_______ 893,442,758
_________
8. Long-term equity investments
Movement Cash Dividends
2013 Cost Opening balance for the year Closing balance Share holding Voting power for the year
RMB RMB RMB RMB % % RMB
Cost Method:
Xinjiang Tianzhu (a) 60,000,000 60,000,000 - 60,000,000 60 100 1,000,000
Vehicular Transportation 300,000 300,000 (300,000) - 100 100 -
Kylin Packaging 23,176,063 23,176,063 - 23,176,063 100 100 24,469,867
Changyu Chateau (a) 28,968,100 28,968,100 - 28,968,100 70 100 -
AFIP Tourism (a) 350,000 350,000 - 350,000 70 100 68,000,000
Pioneer International 3,500,000 3,500,000 - 3,500,000 70 100 -
Ningxia Growing 1,000,000 1,000,000 - 1,000,000 100 100 -
National Wines 2,000,000 2,000,000 - 2,000,000 100 100 -
Ice Chateau (a) 30,440,500 13,413,000 17,027,500 30,440,500 51 100 5,458,011
Beijing Chateau (a) 77,000,000 77,000,000 - 77,000,000 70 100 32,000,000
Sales Company 7,200,000 7,200,000 - 7,200,000 90 100 970,000,000
Langfang Sales (b) 100,000 100,000 - 100,000 10 100 -
Langfang Castel (a) 19,835,730 19,835,730 - 19,835,730 39 100 5,162,898
Wines Sales 4,500,000 4,500,000 - 4,500,000 90 100 11,140,442
Shanghai Sales (b) 300,000 300,000 - 300,000 30 100 -
Beijing Sales 850,000 8500,000 - 850,000 100 100 -
Jingyang Sales (b) 100,000 100,000 - 100,000 10 100 3,522,928
Jingyang Wine 900,000 900,000 - 900,000 90 100 -
Ningxia Wine 1,000,000 1,000,000 - 1,000,000 100 100 -
Ningxia Chateau 2,000,000 2,000,000 - 2,000,000 100 100 -
Dingluote Chateau 80,000,000 80,000,000 - 80,000,000 100 100 -
Shihezi Chateau 150,000,000 150,000,000 - 150,000,000 100 100 5,265,269
Xianyang Chateau 20,000,000 20,000,000 - 20,000,000 100 100 -
Development Centre 500,000,000 500,000,000 - 500,000,000 100 100 -
Huanren Wine 5,000,000 5,000,000 - 5,000,000 100 100 -
Yaitan Dingtao 10,000,000 5,000,000 (5,000,000) - 18 18 -
French Sales _______
29,988,530 _______ - ______
29,988,530 _______
29,988,530 100 100 _______ -
1,058,508,923 1,006,492,893 41,716,030 1,048,208,923 1,126,019,415
_______ _______ ______ _______ _______
(a) The Group is entrusted to manage these non-wholly owned subsidiaries whereby the
Group owned the entire operating results of these subsidiaries deducting fixed fees paid to
the non-controlling interests' holders. Please refer to Note V-1 for details.
(b) The Group has 100% voting power of those subsidiaries by the way of indirect controlling.
During 2013, there was no significant restriction on the remittance of fund from the investees to
the Company.
As at 31 December 2013, the impairment provision of RMB10, 000,000 was provided for Yantai
Dingtao (31 December 2012: RMB5,000,000).
- 83 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Property, plant and equipment
2013 Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Cost
Buildings 234,177,475 67,758,962 (1,634,674) 300,301,763
Machineries and equipment 545,496,056 37,536,827 (199,534) 582,833,349
Motor vehicles 12,111,522
__________ 489,814
_________ ________- 12,601,336
__________
791,785,053
__________ 105,785,603
_________ (1,834,208)
________ 895,736,448
__________
Accumulated depreciation
Buildings 91,881,381 2,453,339 (974,185) 93,360,535
Machineries and equipment 336,171,488 31,532,761 (193,831) 367,510,418
Motor vehicles 8,942,441
__________ 628,938
_________ ________- 9,571,379
__________
436,995,310
__________ 34,615,038
_________ (1,168,016)
________ 470,442,332
__________
Net carrying amount
Buildings 142,296,094 206,941,228
Machineries and equipment 209,324,568 215,322,931
Motor vehicles 3,169,081
__________ 3,029,957
__________
354,789,743
__________ 425,294,116
__________
The increase of accumulated depreciation for 2013 is RMB34,615,038.
The amount of transfer from construction in progress to property, plant and equipment for 2013 is
RMB56,624,887. The amount of property, plant and equipment purchased is RMB49,160,716 and
the amount disposed of is RMB1,834,208.
As at 31 December 2013, the Group has no temporary idle fixed assets, fixed assets held for sale,
fixed assets leased in under finance leases and fixed assets leased out under operating leases (2012:
RMB: Nil).
10. Construction in progress
2013 2012
RMB RMB
The Company's reconstruction project 269,802 24,640,660
__________
__________
Accumulated
expenditure
2013 Budget Opening balance Addition Transfer to PPE Closing balance Financed by /budget
RMB RMB RMB RMB RMB %
The Company's reconstruction project 201,440,000 24,640,660 32,254,029 (56,624,887) 269,802 Self-raised 90.2
There was no interest capitalized in construction in progress in 2013.
As at 31 December 2013, there was no provision was made for the construction in process.
- 84 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
11. Intangible assets
2013 Opening balance Increase Closing balance
RMB RMB RMB
Cost
Land use right 96,594,766 - 96,594,766
Software use right 3,480,000
__________ -
_________ 3,480,000
__________
100,074,766
__________ -
_________ 100,074,766
__________
Accumulated amortization
Land use right 15,081,858 2,373,077 17,454,935
Software use right 3,480,000
__________ -
_________ 3,480,000
__________
18,561,858
__________ 2,373,077
_________ 20,934,935
__________
Net carrying amount
Land use right 81,512,908 79,139,831
Software use right -
__________ -
__________
81,512,908
__________ 79,139,831
__________
The amortisation of 2013 is RMB2,373,077.
As at 31 December 2013, there was no intangible asset with restricted ownership.
12. Biological asset
2013
RMB
Opening balance 16,866,437
Addition 44,571,877
Amortization (586,905)
__________
Closing balance 60,851,409
__________
As at 31 December 2013, there is no biological asset with ownership restricted.
As at 31 December 2013, the Company's accumulated depreciation of biological assets is
RMB6,450,905 (2012: RMB5,864,000).
As at 31 December 2013, there is no indication that biological assets may be impaired, and no
provision was made.
- 85 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
13. Deferred tax assets and liabilities
Deferred tax assets and liabilities are presented separately:
(1) Deferred tax assets and liabilities recognized are as follows:
2013 2012
RMB RMB
Deferred tax assets
Unrealized profit from intra-company transactions 1,948,776 1,948,776
Unpaid bonus 7,392,095 8,629,470
Retirement benefit 3,604,137 4,676,306
Asset impairment provision 4,348,107 4,030,150
Deferred income 5,663,632
__________ 232,500
__________
22,956,747
__________ 19,517,202
__________
(2) Taxable and deductible temporary differences are as follows:
2013 2012
RMB RMB
Deductible temporary difference
Unrealized profit from intra-company transactions 7,795,104 7,795,104
Unpaid bonus 29,568,378 34,517,881
Early retirement benefit 14,416,547 18,705,224
Provision for impairment 17,392,429 16,120,600
Deferred income 22,654,527
__________ 930,000
__________
91,826,985
__________ 78,068,809
__________
14. Other non-current assets
2013 2012
RMB RMB
Unacknowledged financial changes 2,616,525
__________ 2,502,630
__________
- 86 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
15. Trade payables
The trade payables are interest free with a credit period no more than three months from its
suppliers normally.
2013 2012
RMB RMB
Within 1 year 166,453,563
__________ 164,815,117
__________
As at 31 December 2013, the Group had no significant outstanding balance aged more than one
year.
As at 31 December 2013, there was no trade payable due to the shareholders with voting rights of
5% or above.
The Company's outstanding balance payable to related parties are as following:
Proportion of
Relationship with the Company Amount account receivable
RMB %
Subsidiaries 9,497,134 6.0
Other related parties 33,518,567
_________ 20.0
____
Other related parties 43,015,701
_________ 26.0
____
16. Employee benefit
31 December 2013
Opening balance Increase Decrease Closing balance
RMB RMB RMB RMB
Salaries and bonus 34,558,166 125,619,021 (132,720,851) 27,456,336
Staff benefit - 5,915,306 (5,915,306) -
Staff welfare - 14,025,829 (14,025,829) -
Includes:
Medical insurance - 3,154,579 (3,154,579) -
Pension - 9,217,726 (9,217,726) -
Unemployment insurance - 682,538 (682,538) -
Injury insurance - 540,746 (540,746) -
Maternity insurance - 430,240 (430,240) -
Housing fund - 3,588,257 (3,588,257 ) -
Union fee and education fee 1,925,482 1,287,267 (932,352) 2,380,397
Termination benefits 21,343,603 878,528 (5,053,311) 17,168,820
Other allowances 22,317,282
_________ _________- (189,923)
_________ 22,127,359
_________
80,144,533 151,314,208
_________ (162,425,829)
_________ 69,032,912
_________
_________
As at 31 December 2013, the Company had no overdue employee benefit payable.
- 87 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
17. Taxes payable
2013 2012
RMB RMB
Value added tax 3,289,792 (26,594,363)
Consumption tax 19,900,332 24,372,563
Corporation income tax 3,348,032 6,152,331
Urban land use tax 421,924 421,924
Individual income tax 6,275,760 6,267,584
City construction tax 2,319,867 3,383,809
Property tax 127,674 1,693,654
Others 1,895,289
__________ 2,297,587
__________
37,578,670
__________ 17,995,089
__________
18. Other payables
2013 2012
RMB RMB
Payable to subsidiaries 1,585,656,605 1,419,678,135
Payables for equipment, construction and transportation 15,029,366 6,267,120
Deposits from suppliers 277,430 75,193
Others 11,633,120
____________ 6,443,849
____________
1,612,596,521
____________ 1,432,464,297
____________
As at 31 December 2013, there were no significant outstanding balance aged over than one year.
The Company's outstanding balance payable to related parties are as following:
Proportion of
Relationship with the Company Amount account receivable
RMB %
Subsidiaries 1,558,942,200 97.0
Other related parties 3,906
____________ 0.0
____
Other related parties 1,558,946,106
____________ 97.0
____
19. Capital reserve
As at 31 December 2013 and 31 December 2012, the balance of capital reserve represented
capital premium.
- 88 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
20. Revenue and cost of sales
Revenue is as follows:
2013 2012
RMB RMB
Income from principal activities 1,730,694,774
____________ 1,776,979,032
____________
Cost of sales is as follows:
2013 2012
RMB RMB
Cost from principal activities 1,473,772,762
____________ 1,444,948,143
____________
In 2013, revenue derived from top 5 customers is as follows:
Percentage of
Amount total revenue
RMB %
Sales Company 1,257,744,394 72.7
Penglai Wine Sales 55,541,941 3.2
Changyu Chateau 33,074,752 1.9
Wines Sales 26,171,524 1.5
Pioneer International 15,834,736
____________ 0.9
____
1,388,367,347
____________ 80.2
____
In 2013, top 5 customers of the Company are all subsidiaries.
Revenue is as follows:
2013 2012
RMB RMB
Sales of good 1,730,694,774
____________ 1,776,979,032
____________
- 89 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
21. Tax and surcharges
2013 2012
RMB RMB
Consumption tax 112,191,992 149,442,375
City construction tax 12,054,335 13,521,752
Education fee and surcharges 8,897,690 10,001,707
Others 1,902,568
__________ 2,274,761
__________
135,046,585
__________ 175,240,595
__________
22. General and administrative expense
2013 2012
RMB RMB
Salary and employee benefit 26,777,563 43,527,397
Insurance fee 21,246,591 20,951,998
Leasing expenses 6,048,896 6,480,996
Depreciation 3,718,349 4,384,313
Amortization 2,373,076 2,939,080
Administrative expenses 8,489,998 9,644,535
Travelling expenses 4,127,300 3,867,717
Entertainment fee 288,524 329,739
Property tax, stamp duty and other taxes 3,942,998 4,166,506
Maintenance fee 10,416,751 7,130,541
Others 22,234,906
__________ 22,697,927
__________
109,664,952
__________ 126,120,749
__________
23. Loss on impairment of assets
2013 2012
RMB RMB
Long-term investment provision 5,000,000 -
Bad debts provision (607,571)
________ -
______
4,392,429 -
________ ______
- 90 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
24. Financial income
2013 2012
RMB RMB
Interest income 29,773,409 30,599,023
Less: Interest expenses 2,174,286 3,953,834
Bank charges 1,650,982
_________ 1,810,502
_________
25,948,141
_________ 24,834,687
_________
25. Investment income
2013 2012
RMB RMB
Long-term equity investment income accounted
for by using the cost method 1,126,019,415
____________ 1,091,018,499
____________
Among the long-term equity investment income accounted for by using cost method, the investees
with investment income accounting for more than 5% of the Company's total profit before tax are
as follows:
Investees 2013 2012
RMB RMB
Sales Company 970,000,000 980,000,000
AFIP Tourism 68,000,000
__________ -
__________
As at 31 December 2013 and at 31 December 2012, there was no significant restriction on the
remittance of investment income to the Company.
- 91 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
26. Supplement to cash flow statement
Cash flows from operating activities calculated by adjusting the net profit:
2013 2012
RMB RMB
Net profit 1,154,687,278 1,130,895,806
Add: Impairment provision 4,392,429 -
Depreciation 34,615,038 47,318,392
Amortization of intangible assets 2,373,077 4,291,247
Amortization of Biological assets 586,905 586,905
Losses/(gains) on disposal of property,
plant and equipments 662,192 2,354,433
Finance costs (29,773,409) (30,599,023)
Investment income (1,126,019,415) (1,091,018,499)
Increase/(decrease) in deferred tax assets (3,439,545) 11,820,627
Increase in inventories 112,158,569 (313,990,373)
Increase in trade receivables (1,562,373,091) (475,386,959)
Increase/(decrease) in trade payables 200,790,717
____________ (527,924,856)
____________
Net cash flows from operating activities (1,211,339,255)
____________ (1,241,652,300)
____________
27. Cash and cash equivalents
2013 2012
RMB RMB
Closing balance 602,444,243 1,090,260,851
Including:
restricted bank deposits 2,609,237 2,652,083
restricted other monetary assets 125,291,289
deposit with a period of over three months 277,392,728
__________ 662,524,719
____________
Closing balance of cash and cash equivalents 197,150,989 425,084,049
____________
__________
2013 2012
RMB RMB
Cash and bank 197,150,989 425,084,049
Including: Cash on hand 12,479 11,916
Bank deposits on demand 197,138,510
__________ 425,072,133
__________
197,150,989
__________ 425,084,049
__________
- 92 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
(XII) NOTES TO COMPANY FINANCIAL STATEMENTS - continued
28. Related party transactions
(1) Purchase of materials
2013 2012
RMB RMB
Subsidiaries 230,279,590 362,864,737
Other related parties 135,903,876
__________ 110,901,395
__________
366,183,466
__________ 473,766,132
__________
(2) Sales of goods
2013 2012
RMB RMB
Subsidiaries 1,723,774,566 1,770,544,843
Other related parties 6,920,208
____________ 6,434,189
____________
1,730,694,774 1,776,979,032
____________
____________
- 93 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2013
I. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2013
RMB
Loss on disposal of non-current assets, including
reversal of accrued impairment provision (271,989)
Government grants credited in profit and loss
(except for those recurring government grants
that are closely related to the Group's operation,
in line with related regulations and have proper basis of calculation) (36,659,754)
Other non-operating income and expense (3,302,760)
Reversal of bad debt provision of receivables tested individually 607,571
Corporate income tax effect 9,396,861
__________
(30,837,642)
__________
The Group's extraordinary profit and loss items are recognized in accordance with the regulations
of the "public offering of securities of the Company Disclosure Explanatory Notice No. 1 - non-
recurring profit and losses" (SFC [2008] No. 43).
All non-operation income and non-operation expenses are non-operating profit in 2013.Please
refer to Note VI-38 and VI-39.
II. RETRUN ON EQUITY ("ROE") AND EARNINGS PRE SHARE ("EPS")
Weighted average
2013 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 17.30 1.53
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 16.78
_____ 1.48
____
The Company did not have any potential dilutive shares.
Weighted average
2012 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 31.13 2.48
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 30.68
_____ 2.44
____
The Company did not have any potential dilutive shares.
- 94 -
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. VARIANCE ANALYSIS
Analysis on items with fluctuation more than 30% (inclusive) in consolidated financial statements
or balance greater than 5% (inclusive) of the total assets at the balance sheet date or amount
greater than 10% (inclusive ) of gross profit of the reporting period.
1. The balance of cash and bank as at 31 December 2013 was RMB1,367,818,182, decreasing by
39% compared with 2012. The decrease is mainly due to the cash outflow of the financing and
investing activities.
2. The balance of trade receivables at 31 December 2013 is RMB177,109,516, increasing by 31%
compared with 2012, which was mainly due to the increase of direct supply of stores and
supermarkets in 2013.
3. The balance of other receivables at 31 December 2013 is RMB99,331,794, increasing by 249%
compared with 2012, which was due to the significant increase of deposits made for bid of land.
4. The balance of inventory as at 31 December 2013 was RMB2,121,117,437, decreasing by 7%
compared with 2012, which is mainly because the Company bases its production on sales
prospects. Since the sales revenue of 2013 decreased by 23% compared with 2012, the balance of
inventory also decreased.
5. The balance of long-term equity investments as at 31 December 2013 was zero, decreasing by
100% compared with 2012, which was due to the provision of RMB5,000,000 for the investments
of Yantai Dingtao.
6. The balance of property, plant and equipment as at 31 December 2013 was RMB1,917,641,344,
increasing by 5% compared with 2012, which was mainly due to the transfers from construction
in process to property, plant and equipment and the purchase of new equipment and company.
7. The balance of construction in progress as at 31 December 2013 was RMB1,423,654,530,
increasing by 71% compared with 2012, which was mainly due to the construction of newly
established chateau. Meanwhile improvement project on the production lines also contributed to
the increase of construction in progress.
8. The balance of advance from customer was RMB188,651,254 as at 31 December 2013,
decreasing by 58% compared with 2012. The decrease was mainly due to the significant decrease
of sales revenue under the poor market condition.
9. The balance of other payables as at 31 December 2013 was RMB 497,301,630, decreasing by 6%
compared with 2012 which was mainly due to the increase of unpaid advertisement expense.
10. The balance of tax payables as at 31 December 2013 was RMB194,413,430, decreasing by 56%
compared with 2012 due to the settlement of the unpayable advertising fee and related income tax.
11. The balance of non-current liability due within 1 year as at 31 December 2013 was zero,
decreasing by 100% compared with 2012, which is due to the expiration and settlement of prior
trust schemes.
12. The balance of capital surplus was RMB563,139,042 as at 31 December 2013, increasing by
RMB1,000,000 compared to 2012 mainly due to the recognize of government grant of RMB
10,000,000, which was recorded in deferred income in prior year, according to the local
government article .
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
III. VARIANCE ANALYSIS - continued
13. The balance of retained earnings was RMB4,616,944,663 as at 31 December 2013, increasing by
7% compared with 2012, which was due to the Group's profit in 2013 and the distribution of
profit for the year 2012.
14. The revenue of 2013 was RMB4,320,948,572, decreasing by 23% compared with 2012. The cost
of 2013 was RMB1,357,897,999, decreasing by 3% compared with 2012. The decrease was
mainly due to the decrease of sales volume under current poor market condition.
15. The selling expense for 2013 was RMB1,140,836,150, decreasing by 21% compared with
2012.The decrease was mainly due to the decrease of promotion and advertisement expenses.
16. The other revenue was RMB42,108,726 in 2013, increasing by 19% compared with 2012. The
increase was mainly due to government grant received in 2013. The other expense was
RMB1,874,223 in 2013, decreasing by 37% compared with 2012 which was mainly due to the
loss of disposal of non-current asset.
17. The income tax expense for 2013 was RMB348,920,804, decreasing by 39% compared with 2012.
The decrease was in line with the decrease of taxable income of the Group caused by the decrease
of revenue.
