FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
FIYTA Precision Technology Co., Ltd.
2022 Annual Report
March, 2023
1
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
2022 Annual Report
Section 1 Important Notice, Table of Contents and Definition
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives
hereby individually and collectively accept responsibility for the correctness, accuracy and
completeness of the contents of this report and confirm that there are neither material omissions
nor errors which would render any statement misleading.
Zhang Xuhua, the Company leader, Song Yaoming, chief financial officer, and Tian Hui, the
manager of the accounting department (treasurer) hereby confirm the authenticity and
completeness of the financial report enclosed in this Annual Report.
All the directors attended the board meeting for reviewing the Annual Report.
Any perspective description, such as the future plan, development strategy, etc. involved in the
Annual Report shall not constitute the Company’s substantial commitment to the investors and
the investors should please pay attention to their investment risks.
In this report, the Company has described in detail the existing macro-economic risks as well as
operation risks. Investors are advised to refer to the contents concerning the Company's future
development prospect in Section 3 Discussion and Analysis of the Management.
Reviewed and approved by the Board of Directors , the Company's profit distribution preplan is
summarized as follows: based on the total share capital as at the date of record (with the shares
in the special securities account for repurchase deducted) when the profit distribution plan is
implemented in the future, the Company is going to distribute dividend to all the shareholders at
the rate of CNY2.50 for every 10 shares (with the tax inclusive), 0 bonus shares (with the tax
inclusive),and no public reserve shall be converted into share capital.
2
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Table of Contents
Section 1 Important Notice, Table of Contents and Definition
Section 2 Company Profile and Financial Highlights
Section 3 Discussion and Analysis by the Management
Section 4 Corporate Governance
Section 5 Environment and Social Responsibility
Section 6 Significant Events
Section 7 Change of the Shares and Particulars about Shareholders
Section 8 About the Preferred Shares
Section 9 About Bonds
Section 10 Financial Report
3
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Documents Available for Inspection
I. Financial Statements signed by and under the seal of the legal representative, chief accountant and
accounting supervisors;
II. The original Auditors’ Report affixed with the seal of the accounting firm, signed by and affixed with the
seal of the certified public accountant.
III. Originals of all documents and manuscripts of all the Company’s documents disclosed to the public
during the reporting period.
4
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Definitions
Terms to be defined Refers to Definition
This Company, the Company or
Refers to FIYTA Precision Technology Co., Ltd.
FIYTA
AVIC Refers to Aviation Industry Corporation of China, Ltd.
AVIC International Refers to AVIC International Holding Corporation
AVIC IHL Refers to AVIC International Holding Limited
AVIC Finance Refers to AVIC Finance Co., Ltd.
Restricted Stock Incentive Plan
Refers to Restricted A-Share Incentive Plan 2018 (Phase I)
Phase I
Restricted Stock Incentive Plan
Refers to Restricted A-Share Incentive Plan 2018 (Phase II)
Phase II
5
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 2 Company Profile and Financial Highlights
I. Company Information
Short form of the stock FIYTA and FIYTA B Stock Code 000026 and 200026
Stock abbreviation before None
change (if any)
Stock Exchange Listed with Shenzhen Stock Exchange
Company Name in Chinese FIYTA Precision Technology Co., Ltd.
Abbreviation of the 飞亚达公司
Company Name in Chinese
Company name in English (if FIYTA Precision Technology Co., Ltd.
any)
Abbreviation of the
Company name in English (if FIYTA
any)
Legal Representative Zhang Xuhua
Registered address: FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen
Postal Code of the 518057
Registered Address
On January 30, 1997, the Company’s registered address was changed from "Building 6,
CATIC Zone, Shennan Road Central, Shenzhen" to "Building 6, CATIC Zone, Shennan Road
Changes of the Company's Central, Futian District, Shenzhen"; on April 5, 2000, the registered address was changed to
Registered Address "Fiyta Building, 163 Zhenhua Road, Futian District, Shenzhen"; on February 20, 2004, the
registered address was changed to "FIYTA Technology Building, Gaoxin S. Road One,
Nanshan District, Shenzhen".
Office Address 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen
Postal Code of the 518057
Registered Address
Website: www.fiytagroup.com
E-mail: investor@fiyta.com.cn
II. Liaison Persons and Communication Information
Secretary of the Board Securities Affairs Representative
Names Song Yaoming Xiong Yaojia
20th Floor, FIYTA Technology Building, 18th Floor, FIYTA Technology Building,
Liaison Address Gaoxin S. Road One, Nanshan District, Gaoxin S. Road One, Nanshan District,
Shenzhen Shenzhen
Tel. 0755-86013669 0755-86013669
Fax 0755-83348369 0755-83348369
Email investor@fiyta.com.cn investor@fiyta.com.cn
III. Information Disclosure and Place where the Regular Reports are Prepared
The website of the Stock Exchange on which the Company http://www.szse.cn
discloses the Annual Report
Names and websites of the media on which the Company Securities Times, Hong Kong Commercial Daily, and
discloses the Annual Report www.cninfo.com.cn
Place where the Company’s Annual Report was prepared The Planning & Operation Department of the Company
and is placed for inquiry
IV. Changes in Registration
Organization Code 91440300192189783K
Changes in principal business activities since listing (if any) No change
Changes in the controlling shareholder over the past years (if No change
any)
V. Other Relevant Information
The CPAs appointed by the Company
Da Hua Certified Public Accountants (Special General
Name of the CPAs Partnership)
1101, Building 7, No. 16 Xisi huanzhong Road, Haidian
Office address District, Beijing
Names of the CPAs as the authorized signatories Long Jiao and Wang Dong
The sponsor performing persistent supervision duties engaged by the Company in the reporting period
6
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Inapplicable
The financial advisor performing persistent supervision duties engaged by the Company in the reporting
period
Inapplicable
VI. Summary of Accounting/Financial Data
Does the Company need to make retroactive adjustment or restatement of the accounting data of the
previous years?
No
Increase/decrease in
2022 2021 the reporting year 2020
over the previous year
Turnover in CNY 4,354,096,880.36 5,243,733,540.93 -16.97% 4,243,439,952.59
Net profit attributable
to the Company’s 266,681,451.84 387,840,282.95 -31.24% 294,115,156.04
shareholders, in CNY
Net profit attributable
to the Company’s
shareholders less the 249,791,455.73 369,418,754.83 -32.38% 269,095,012.41
non-recurring items, in
CNY
Net cash flows arising
from operating 476,228,776.52 547,249,108.45 -12.98% 378,210,505.87
activities, in CNY
Basic earning per 0.6398 0.9036 -29.19% 0.6764
share (CNY/share)
Diluted earning per 0.6398 0.9036 -29.19% 0.6764
share (CNY/share)
Return on equity, 8.68% 13.39% -4.71% 10.78%
weighted average (%)
Increase/decrease of
the end of the
End of 2022 End of 2021 reporting year over End of 2020
the end of the
previous year
Total assets, in CNY 4,117,143,911.99 4,110,579,952.49 0.16% 4,018,712,700.18
Net assets attributable
to the Company’s
shareholders (owner’s 3,136,423,492.15 3,013,232,642.53 4.09% 2,799,948,388.09
equity attributable to
the Company’s
shareholders, in CNY)
The lower of the Company’s net profit before and after the deduction of non-recurring gains and losses in
the last three fiscal years is negative, and the auditor's report of the previous year shows that the
Company’s going concern ability is uncertain.
No
The lower of the net profit before and after the deduction of the non-recurring gains and losses is
negative.
No
VII. Discrepancy in accounting data between IAS and CAS
1. Differences in the net profit disclosed in the financial report & the net assets attributable to the
Company’s shareholders respectively according to the IAS and the CAS.
Inapplicable
2. Difference of the net profit and net asset in the financial report disclosed respectively
according to the IAS and the CAS.
Inapplicable
7
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
VIII. Financial Data Summary based on Quarters
In CNY
The second
The first quarter The third quarter The fourth quarter
quarter
Turnover 1,173,700,720.94 1,009,870,028.17 1,201,863,621.73 968,662,509.52
Net profit attributable to the 86,354,073.76 54,338,710.53 89,108,590.17 36,880,077.38
Company’s shareholders
Net profit less the non-recurring
profit/loss attributable to the 84,104,404.06 45,827,352.84 86,658,935.58 33,200,763.25
Company’s shareholders
Net cash flows arising from 16,020,422.02 262,365,841.58 122,195,340.18 75,647,172.74
operating activities
Are the above financial indicators or their totals significantly different from the financial indicators
disclosed by the Company in the quarterly and semi-annual reports?
No
IX. Extraordinary items and amount
In CNY
Items Amount in 2022 Amount in 2021 Amount in 2020 Note
Gain/loss from disposal of non-current assets,
including the part written-off with the provision 91,925.06 730,134.87 -369,857.30
for impairment of assets.
The government subsidies included in the
profits and losses of the current period
( (excluding government grants which are 18,648,210.06 23,476,186.50 30,634,128.57
closely related to the Company’s normal
business and conform with the national
standard amount or quantity)
Reversal of provision for impairment of
accounts receivable that has been separately 4,389,902.44 2,225,653.32 163,925.30
tested for impairment
Other non-operating income and expenses with -1,064,064.23 -3,058,731.52 1,556,300.78
the aforesaid items exclusive
Less: Amount affected by the income tax 5,175,977.22 4,951,715.05 6,964,353.72
Total 16,889,996.11 18,421,528.12 25,020,143.63 --
Details of other gains and losses in compliance with the definition of non-recurring gains and losses.
Inapplicable
Explanation of the non-recurring gains and losses listed in the Explanatory Announcement No.1 on
Information Disclosure for Companies Offering Their Securities to the Public as recurring gains and
losses
Inapplicable
8
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 3 Discussion and Analysis by the Management
I. About the Industry the Company Engages in
The watch industry the Company is engaged in has a long history and profound cultural precipitation, and
is one of the representative industries of high-precision manufacturing with the nature of precision
technology. The domestic watch industry closely follows the national light industry modernization
progress, and is flourishing with the Chinese national craftsmanship and self-improvement culture.
According to the strategic deployment of the 20th National Congress of the Communist Party of China
and the "Guiding Opinions on the High-quality Development of Light Industry in the 14th Five-Year Plan"
promulgated by the China Light Industry Federation, light industry, as an important consumer goods
industry, undertakes the mission of providing high-quality consumer products for the people, among
which, watches because of their multiple attributes of function and art, integrate a variety of needs of the
new consumption era such as emotional value and aesthetic experience, and gradually develop in the
direction of quality, fashion and personalization, so as to continuously meet the increasingly upgraded
consumption needs of consumers.
With the improvement of national purchasing power and the growth of consumer demand, the overall
scale of China's consumer market has continued to expand, ranking the second in the world. The
domestic watch consumer market has also continued to grow at a compound growth rate of about 5% in
the past five years. At present, under the guidance of relevant national policies such as "dual circulation"
and "common prosperity", the middle-income group as the target consumer group of watches continues
to expand, and is stimulating the consumption growth of urban clusters and infiltrating the consumption
demand of second- and third-tier cities. With the comprehensive release of travel policies, the offline
passenger flow is gradually restored, and the watch consumption market is expected to continue to
maintain the growth trend.
However, the rapidly growing domestic watch consumption market also shows significant differentiation.
On the one hand, with the differentiation of price ranges, watches in the middle and high-end price
ranges present double growth trend in both amount and quantity. The compound growth rate of the
amount of Swiss watches exported to Chinese Mainland in the past five years has exceeded 10%,
significantly higher than the market average. As a whole, domestic watch brands in the middle and
low-end price ranges are facing greater pressure. On the other hand, with the differentiation of the
competition pattern, the head brand or channel is promoting M & A and integration in the industry and
accelerating the expansion of market share and further enhancing the concentration ratio relying on its
competition advantages in scale, operation management, resources integration and so on. The
increasingly intensified challenge is forcing watch brands, especially domestic watch brands to to make
continuous efforts to improve the price range and market share of the brands, and some domestic watch
brands are rising after fierce competition.
The Company has had long-term prospects on watch industry, has been continuously cultivating and
investing in the core businesses of "FIYTA", the own brand and "Harmony” world watch retails, constantly
consolidating the "brand power, product power and channel power", and has been enjoying a good
market share and industry position foundation. At present, in the face of the opportunities and challenges
embodied in the watch consumption market, the Company shall, as always, maintain a positive attitude,
take customer needs as the guide, adhere to the principle of high-quality development, and promote the
“FIYTA", the self-owned brand, to develop in the direction of high quality and differentiation. "HARMONY"
world watch retail is developing towards professionalization and benchmarking of operations and
services; at the same time, shall continue to promote digital transformation and upgrading, and further
integrate digital concepts and technologies into R&D, design, manufacturing, sales, services and other
links in order to build its digital ability to use data to empower value creation.
II. Main business the Company operated in the reporting period
The Company bases its establishment and development on the aviation precision technology and
material technology, has been adhering to the values of “the leading role of brand, customer orientation,
value creation, cooperation and responsibility, learning and innovation", taking “inheriting of the spirit of
aeronautical patriotism and creating a quality life” as its mission, focusing on the watch industry; the core
watch business has formed the business layout of “Brand + Channel” which consists of the self-owned
brand and retails of world brand watches. In addition, the Company is actively exploring and cultivating
new businesses such as precision technology and smart wearables, which are in the stage of continuous
development.
The Company is deeply involved in the construction of professional watchmaking capabilities and brand
operations, has a number of self-owned brands such as "Fiyta", "Emile Chouriet", "Beijing" and "Jeep",
covering different dimensions of mid-to-high-end, popular professional, fashion and cool and so on. Of
them, the core self-owned brand of "FIYTA" is positioned as "a high-quality Chinese watch brand with
aerospace watch as its characteristic". Relying on technology and quality advantages, the Company has
9
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
continuously provided professional chronograph watches for China's aerospace industry. Through the
idea of taking “the nation” as the core and "fashion" as the form, the Company has developed
differentiated products which match the "aerospace quality", carried out integrated marketing,
continuously expanded brand influence, and gradually established its leading position in the domestic
industry.
In order to seize the opportunities in the domestic brand watch market, promote the long-term
development of its own brands, and expand the retail business of "Harmony" world brand watches,
"Harmony" is committed to "becoming the best comprehensive service provider of famous watches", and
has long-term and in-depth cooperation with many famous watch groups and brands; Relying on its
industry-leading operation management capabilities and customer service capabilities, it shall gradually
become a professional high-end chain commercial brands of famous watches.
In recent years, the Company has relied on high-end precision manufacturing technology and industrial
accumulation, based on the development principle of “technology being homologous, the industry being
same-rooted and value being co-directional”, and extended the development of precision technology
business and smart wearables business. At present, these two businesses have begun to take shape.
III. Analysis on Core Competitiveness
(I) Brand operation and management capabilities of the whole-industry-chain
The Company has been deeply involved in the watch industry. Over the years, it has continued to invest
and accumulate around brand building, technology research and development, product design, product
operation, customer research, membership operations, etc. It has a whole-industry- chain operation
integrating R&D, design, manufacturing, sales, and services, has strong management ability and rich
experience in brand management, and has successfully built its own brand cluster with the "Fiyta" brand
as the core.
(II) Elaborative channel operation and management capabilities
The Company continues to strengthen the construction of channel operation capability, deeply implants
the concepts of "three-tier marketing" and "excellent operation" in the daily work of channel operation,
and provides customers with the highest quality consumption experience in an all-round way. Customer
satisfaction has long been at the forefront of the industry and has been highly recognized by cooperative
brands and channels, and has established a cooperative relationship of in-depth mutual trust. On this
basis, the Company's "Fiyta" self-owned brand and "Harmony" world watch retails have established a
relatively complete and high-quality channel network. Of them, offline channels cover most parts of the
country, consisting of flagship stores, franchise houses, theme stores, collection stores, etc.; online
channels cover mainstream e-commerce platforms, and focus on new media such as live broadcasts,
applets, etc.; online and offline channels are also further integrated through the application of digital retail
systems.
(III) Digital capabilities to empower businesses
The Company continues to take customers as the core and data as the basis, and invest in digital
capacity building for the purpose of improving customer experience and gaining insight into customer
needs and changes. By building CRM system, digital retail system, SAP system and other platforms, the
Company has gradually built data analysis capabilities in the application process, promoted
multi-channel and multi-scenario customer acquisition, tapped the value of the whole life cycle of
customers. As a result, significant improvement has been achieved in number of members and potential
customers, transactions by potential customers, repurchase by old customers, private domain operations
and conversion efficiency.
(IV)Capacity of Core Precision Technology
The Company has been devoting itself to the building of precision technology research and development
capability, has successively built advanced R & D, production technology and manufacturing technology
platforms, and has established R & D and production bases in Shenzhen and Switzerland respectively;
and has established professional watchmaking capabilities, including self-made driving units of watches
and key components manufacturing, space watch research and development and high-end watchmaking
techniques, etc., and achieved continuous breakthroughs in research and development and application
of new materials, new processes and new technologies. At present, the Company has 2 national
high-tech enterprises, established a national enterprise technology center, a national industrial design
center, and is a national technological innovation demonstration enterprise.
(V) Ability of Building Professional Talent Team
The Company attaches great importance to talent team building, continues to improve the "value
creation"-oriented market-based salary distribution mechanism, provides employees with diversified
promotion and development channels, organizes employees to carry out professional learning and
training, and through check of high-potential talents, professional talent development measures such as
10
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
channel construction, the Company has enriched the reserve echelon of talents. At the same time, the
Company implements medium and long-term restricted stock incentive plans for core management and
key teams, closely linking the interests of key talents with the Company's development, and promoting
mutual development of both the Company and employees. At present, the Company has many
outstanding talents of the industry in design, research and development and other core fields, and the
team stability and employee satisfaction are at a high level.
During the reporting period, based on the continuous consolidation of core competitiveness, the "FIYTA"
brand won the "Most Influential Brand of the Year" Award in the Guangdong-Hong Kong-Macao Greater
Bay Area in 2022; the "Fiyta" aerospace watch was launched again with the "Shenzhou 14" and
"Shenzhou 15" manned spacecrafts; and HARMONY was awarded one of “the Top Ten Powers of
Annual Increase in Wholesale and Retail Industry 2021 in Nanshan District, Shenzhen"; the Technology
Development Company was elected "2021 Technologically Advanced Small and Medium-sized
Enterprises in Guangdong Province".
IV. Analysis on Principal Businesses
1. General
In 2022, the global political and economic situation was even more turbulent and in addition, people bore
the pressure persistently in employment and income, and consumption was expected to be weakened.
The total retail sales of consumer goods for the whole year dropped by 0.2% year-on-year. Under
multiple pressures, the overall domestic watch consumption market was in a downturn. According to
statistics, the business revenue of industrial enterprises above designated size in the watch industry fell
by 10.09% year-on-year, and the amount of Swiss watches exported to Mainland China also fell by 13.6%
year-on-year. In the face of the rapidly changing and severe market situation, the Company continued to
adhere to the business strategy of "Stability" and "Defensive counterattack", effectively prevented risks
such as inventory and accounts receivable, strictly controlled various costs and expenses, and actively
seized various business “Counterattack Points”. In the reporting period, the Company realized business
revenue amounting to CNY 4,354.09 million, a year-on-year decrease of 16.97%, an increase of 2.61%
over 2020, and an increase of 17.54% over 2019; realized total profit amounting to CNY 339.12 million, a
year-on-year decrease of 32.49%.
(1) Upgrading the Positioning of the Self-owned Brand, and Taking Multiple Measures to Enhance
Product and Brand Power
During the reporting period, the "FIYTA" Brand defined its positioning as "a high-quality Made-in-China
watch brand featuring aerospace watches", focusing on six core series including "Aerospace", "Clover",
"Heartstring" and "Impression” and increased resource input. The core series increased resource
investment. The total revenue from them accounted for nearly 50% of the revenue from the Brand, of
which the "Aerospace" series accounted for more than 10%. The Company continued to carry out
integrated marketing, and promoted the popularity of individual products through cross-field cooperation,
membership salon, event marketing, etc., and successfully created hot selling products such as J-20,
Xiaokeke, and three-body joint models, which helped the brand AOV to significantly increase and the
brand image to be younger.
(2) Improving channel operation capability and optimizing the structure to promote high-quality
development
During the reporting period, the "Fiyta" Brand offline focused on the "Space Station" concept store,
package store and fashion collection store, explored ecological win-win and reproducible store models,
continued to optimize the channel structure, and actively developed store membership salon activities,
enhanced customer experience and product sales with the innovative theme and form; quickly boosted
breakthrough in new online channels such as TikTok. During the "Double Eleven" period, the Company
achieved positive growth in GMV, and sales on the TikTok platform throughout the year also increased
significantly year-on-year .
"Harmony" World Watch Retail continued to focus on customer research, customer value mining,
customer services and other dimensions to deepen the refined operation of stores, and customer
stickiness continued to increase. Meanwhile, "Harmony" continued to promote channel structure
upgrading and high-quality channel expansion, promoted cooperation with Time Vallée of Richemont
Group, and opened two new Time Vallée collection stores; explored cross-category operations, opened
the first optical store Harmony Optical; actively cooperated with automobiles, Securities, banks, etc. to
carry out cross-field activities.
(3) Adhering to innovation-driving and accelerating digital transformation
During the reporting period, the "Fiyta" Brand continued to optimize the CRM system, and the number of
members and the conversion rate of potential customers continued to grow steadily; the private domain
operation was promoted in an orderly manner, and the cloud store project was fully launched and
11
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
connected with the public account, and thus realized the transition from the public domain to the private
domain. "Harmony” World Watch Retail continued to deepen its membership operations, and the
transaction amount of potential customers and the repurchase amount of old customers accounted for
more than 60%.
(4) Strengthening the Technical Strength of Precision Technology and Promoting the Sustainable
Development of New Business
During the reporting period, the Company accelerated the advancement of watch movement technology
breakthrough and the application of new materials such as aerospace, and achieved positive progress in
the related special project. The Company continued to strengthen cooperation in the fields of optical
communication and lasers in its precision technology business, strove to build a technical team that
matched complex and high-precision aerospace products, improved the processing capabilities of
high-precision products, and tapped new customers in the fields of aerospace and medical equipment.
The Company achieved breakthrough in some key projects, and realized year-on-year increase of both
operating revenue and profit. The Company continued to optimize the channel structure of smart
wearables business, quickly developed the self-run e-commerce channels, accounting for more than 70%
of the revenue. At the same time, the Company focused on promoting the starting amount of its own
brand ADASHER.
Year-on-year Movements of the Key Financial Items are summarized as follows:
Balance sheet items
Percentage
Items Ending balance Opening balance Cause of the change
of change
Mainly due to the liquidation of partially
Notes receivable 32,214,912.10 61,258,145.80 -47.41% discounted notes due during the reporting
year.
Other non-current Mainly due to the conversion of the real estate
11,593,741.57 42,680,753.78 -72.84%
assets in Hainan into fixed assets.
Mainly due to decrease in the account payable
Accounts payable 170,589,456.68 254,588,895.34 -32.99% for procurement of brand watches during the
reporting period.
Mainly due to increase in advance receipts from
Advance receipts 16,960,128.83 11,025,664.72 53.82%
the property business.
Mainly due to the improvement of the store structures
Lease liabilities 41,642,561.58 64,918,722.10 -35.85% and the number of stores thus decreased during the
reporting year.
Other comprehensive Mainly due to movement of the translation
5,739,589.89 -7,658,346.40 174.95%
income balance of foreign currency statements
Income statement items from the beginning of the year to the end of the reporting period
Amount incurred in Amount incurred in Percentage of
Items Cause of the change
the reporting period the previous period change
Mainly due to decrease of the interest expenses and
Financial expenses 21,188,742.11 34,677,073.65 -38.90% thus the exchange earning increased during the
reporting year.
Loss from impairment Mainly due to decrease in the provision for
4,845,379.45 -11,075,001.77 143.75%
of credit accounts receivable during the year.
Mainly due to the increase of the provision for price
Loss from impairment
-37,625,482.96 -25,861,394.56 -45.49% falling of the brand watch inventory in the reporting
of assets
year.
Cash flow statement items from the beginning of the year to the end of the reporting period
Amount incurred in Amount incurred in Percentage of
Items Cause of the change
the reporting period the previous period change
Rebated taxes Mainly due to the increase in VAT retention refunds
7,793,409.24 1,466,381.60 431.47%
received received during the reporting year.
Other operation activity Mainly due to decrease of expenditures during the
324,035,659.54 478,099,748.10 -32.22%
related cash payments reporting year.
Cash paid for
purchase/construction Mainly due to decrease of payments for store
of fixed assets, 114,090,573.97 204,422,787.61 -44.19% refurbishment and improvement during the reporting
Intangible assets and year.
other long term assets
Cash received from Mainly due to the receipt of subscriptions under
investment - 58,216,000.00 -100.00% Phase II restricted stock incentive plan in the
absorption previous year.
Cash paid for debt Mainly due to decrease in the amount of bank loans
794,083,975.00 1,386,708,158.95 -42.74%
repayment repaid during the year.
Cash paid for other
Mainly due to increase of the payment for
financing related 177,477,740.46 124,710,390.58 42.31%
repurchasing B-shares.
activities
12
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
2. Revenue and Costs
(1) Composition of Revenues
In CNY
2022 2021
Year-on-year
Proportion in the Proportion in the increase/decrease
Amount Amount
revenue revenue
Total operating 4,354,096,880.36 5,243,733,540.93 -16.97%
100% 100%
revenue
Based on sectors
Watches 4,044,205,847.74 92.88% 4,923,280,724.48 93.89% -17.86%
Precision
technology 163,114,009.23 3.75% 150,094,350.20 2.86% 8.67%
business
Leases 129,266,616.76 2.97% 151,461,309.62 2.89% -14.65%
Others 17,510,406.63 0.40% 18,897,156.63 0.36% -7.34%
Based on products
Watch brand
725,388,535.22 16.66% 1,012,443,357.87 19.31% -28.35%
business
Watch retail and
3,318,817,312.52 76.22% 3,910,837,366.61 74.58% -15.14%
services
Precision
technology 163,114,009.23 3.75% 150,094,350.20 2.86% 8.67%
business
Leases 129,266,616.76 2.97% 151,461,309.62 2.89% -14.65%
Others 17,510,406.63 0.40% 18,897,156.63 0.36% -7.34%
Based on regions
South China 2,142,082,539.80 49.20% 2,685,613,515.77 51.21% -20.24%
Northwest China 610,765,393.07 14.03% 746,028,947.88 14.23% -18.13%
Northeast China 231,541,393.72 5.32% 249,949,686.95 4.77% -7.36%
East China 572,584,950.61 13.15% 732,103,484.67 13.96% -21.79%
Northeast China 281,347,840.46 6.46% 294,675,252.56 5.62% -4.52%
Southwest China 515,774,762.70 11.84% 535,362,653.10 10.21% -3.66%
Based on Sales Models
Direct Selling 4,196,696,430.85 96.39% 5,047,771,480.39 96.26% -16.86%
Distribution 157,400,449.51 3.61% 195,962,060.54 3.74% -19.68%
(2) Sector(s), Product(s), Region(s) and Sales Models Taking over 10% of the Operating Revenue
or Operating Profit
In CNY
Year-on-year Year-on-year Year-on-year
Gross increase/decreas increase/decreas increase/decreas
Operating
Operating cost profit e of operating e of operating e of gross profit
revenue
rate revenue over the costs over the rate over the
previous year previous year previous year
Based on sectors
4,044,205,847.7 2,556,597,458.4 36.78
Watches -17.86% -17.99% 0.10%
4 6 %
Precision
16.95
technolog 163,114,009.23 135,466,654.66 8.67% 9.89% -0.92%
%
y business
64.39
Leases 129,266,616.76 46,036,416.11 -14.65% 7.40% -7.31%
%
95.02
Others 17,510,406.63 872,261.88 -7.34% -60.74% 6.78%
%
Based on products
Watch
70.54
brand 725,388,535.22 213,729,285.07 -28.35% -25.74% -1.03%
%
business
Watch
3,318,817,312.5 2,342,868,173.3 29.41
retail and -15.14% -17.20% 1.76%
2 9 %
services
Precision
16.95
technolog 163,114,009.23 135,466,654.66 8.67% 9.89% -0.92%
%
y business
64.39
Leases 129,266,616.76 46,036,416.11 -14.65% 7.40% -7.31%
%
13
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
95.02
Others 17,510,406.63 872,261.88 -7.34% -60.74% 6.78%
%
Based on regions
South 2,142,082,539.8 1,319,785,360.3 38.39
-20.24% -23.05% 2.25%
China 0 9 %
Northwest 35.86
610,765,393.07 391,755,839.58 -18.13% -15.10% -2.29%
China %
Northeast 37.93
231,541,393.72 143,727,145.64 -7.36% 0.34% -4.77%
China %
East 35.38
572,584,950.61 370,003,060.69 -21.79% -16.09% -4.39%
China %
Northeast 31.93
281,347,840.46 191,508,963.76 -4.52% -5.89% 0.99%
China %
Southwest 37.53
515,774,762.70 322,192,421.05 -3.66% 0.25% -2.44%
China %
Based on Sales Models
Direct 4,196,696,430.8 2,665,718,744.0 36.48
-16.86% -17.09% 0.17%
Selling 5 4 %
Distributio 53.46
157,400,449.51 73,254,047.07 -19.68% 3.88% -10.55%
n %
While adjustment of the statistical caliber for the principal business data took place in the reporting period,
the principal business data with the statistical caliber adjusted at the end of the reporting period in the
latest year.
Inapplicable
(3) Is the physical sales income greater than the service income
Yes
Classified
Year-on-year
based on Items In CNY 2022 2021
increase/decrease
sectors
Sales volume pcs 771,846.00 795,178.00 -2.93%
Brand
Output pcs 592,041.00 727,091.00 -18.57%
watches
Inventory pcs 816,989.00 996,794.00 -18.04%
Note to the cause of the year-on-year movement of the relevant data by over 30%
Inapplicable
(4) Implementation of Important Sale Contracts and Important Purchase Contracts Concluded
during the Reporting Year
Inapplicable
(5) Composition of Operating Costs
Classified based on sectors and products
In CNY
2022 2021
Classified Proportion
Proportion Year-on-year
based on Items in
Amount Amount in operating increase/decrease
sectors operating
costs
costs
Goods
purchase 2,342,868,173.39 85.54% 2,829,459,485.45 86.12% -17.20%
costs
Raw
191,690,987.81 7.00% 256,857,016.25 7.82% -25.37%
materials
Labor costs 17,406,869.24 0.64% 24,624,829.03 0.75% -29.31%
Watches Depreciation
774,944.08 0.03% 776,630.56 0.02% -0.22%
expense
Water and
electricity 493,392.62 0.02% 557,212.31 0.02% -11.45%
fees
Rent 260,130.07 0.01% 254,302.70 0.01% 2.29%
Others 3,102,961.25 0.11% 4,759,127.90 0.14% -34.80%
Precision Raw
98,488,952.82 3.60% 88,916,323.84 2.71% 10.77%
technology materials
business Labor costs 20,496,222.84 0.75% 19,308,218.35 0.59% 6.15%
14
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Depreciation
2,454,475.24 0.09% 2,929,018.86 0.09% -16.20%
expense
Water and
electricity 1,267,740.58 0.05% 1,185,220.49 0.04% 6.96%
fees
Rent 105,177.92 0.00% 127,758.44 0.00% -17.67%
Others 12,654,085.26 0.46% 10,812,906.46 0.33% 17.03%
Depreciation
15,821,128.29 0.58% 16,068,736.92 0.49% -1.54%
expense
Leases Labor costs 4,216,863.25 0.15% 3,216,088.80 0.10% 31.12%
Others 25,998,424.57 0.95% 23,581,556.59 0.72% 10.25%
Purchase of
Others finished 872,261.88 0.03% 2,221,796.17 0.07% -60.74%
products
In CNY
2022 2021
Classified Proportion
Proportion Year-on-year
based on Items in
Amount Amount in operating increase/decrease
products operating
costs
costs
Raw
191,690,987.81 7.00% 256,857,016.25 7.82% -25.37%
materials
Labor costs 17,406,869.24 0.64% 24,624,829.03 0.75% -29.31%
Depreciation
774,944.08 0.03% 776,630.56 0.02% -0.22%
Watch brand expense
business Water and
electricity 493,392.62 0.02% 557,212.31 0.02% -11.45%
fees
Rent 260,130.07 0.01% 254,302.70 0.01% 2.29%
Others 3,102,961.25 0.11% 4,759,127.90 0.14% -34.80%
Goods
Watch retail
purchase 2,342,868,173.39 85.54% 2,829,459,485.45 86.12% -17.20%
and services
costs
Raw
98,488,952.82 3.60% 88,916,323.84 2.71% 10.77%
materials
Labor costs 20,496,222.84 0.75% 19,308,218.35 0.59% 6.15%
Depreciation
Precision 2,454,475.24 0.09% 2,929,018.86 0.09% -16.20%
expense
technology Water and
business electricity 1,267,740.58 0.05% 1,185,220.49 0.04% 6.96%
fees
Rent 105,177.92 0.00% 127,758.44 0.00% -17.67%
Others 12,654,085.26 0.46% 10,812,906.46 0.33% 17.03%
Depreciation
15,821,128.29 0.58% 16,068,736.92 0.49% -1.54%
expense
Leases Labor costs 4,216,863.25 0.15% 3,216,088.80 0.10% 31.12%
Others 25,998,424.57 0.95% 23,581,556.59 0.72% 10.25%
Purchase of
Others finished 872,261.88 0.03% 2,221,796.17 0.07% -60.74%
products
(6) Is there any change in the consolidation scope in the reporting period
No
(7) Is there any significant change or adjustment related situation taken place in the Company’s
business, products or services in the reporting period
Inapplicable
(8) Major sales customers and major suppliers
Information about the major sales customers
Total sales to the top five customers, in CNY 840,148,872.05
Proportion of the total sales to the top five 19.29%
customers in the total sales of the year
Proportion of the total sales to the related parties in 0.00%
15
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
the top five customers in the total sales of the year
Information of the top 5 customers
Proportion in the total
No. Customers Sales (in CNY)
sales of the year
1 No. 1 234,784,497.82 5.39%
2 No. 2 200,544,447.73 4.61%
3 No. 3 142,759,850.40 3.28%
4 No. 4 133,423,223.98 3.06%
5 No. 5 128,636,852.12 2.95%
Total -- 840,148,872.05 19.29%
Other Information about the major customers
Inapplicable
Major suppliers
Total amount of purchase from top five suppliers, in 2,393,337,201.19
CNY
Proportion of the purchase amount from the top
five suppliers in the Company’s total purchase 84.52%
amount
Proportion of the purchase amount from the
related parties in the top five suppliers in the 0.00%
Company’s total purchase amount
Information about the top 5 suppliers
Proportion in the total
Purchase amount, in
No. Suppliers purchases of the year
CNY
(%)
1 No. 1 937,593,533.96 33.11%
2 No. 2 756,077,714.55 26.70%
3 No. 3 358,538,552.98 12.66%
4 No. 4 188,869,079.60 6.67%
5 No. 5 152,258,320.10 5.38%
Total -- 2,393,337,201.19 84.52%
Other information about the major suppliers
Inapplicable
3. Expenses
In CNY
Year-on-year Note to significant
2022 2021
increase/decrease changes
Sales costs 931,832,830.40 1,049,898,223.28 -11.25% Inapplicable
Administrative 219,014,508.52 261,626,762.41 -16.29% Inapplicable
expenses
Financial 21,188,742.11 34,677,073.65 -38.90% Inapplicable
expenses
R&D 61,088,585.61 57,802,569.17 5.68% Inapplicable
expenditures
4. Investment in R & D
Impact on the
Description of the Main Project The objective to predicted future
Project purpose
R & D Projects progress be reached development of
the Company
With aerospace
Innovative
Continuously industry as the
products with the
New series products promoting theme, developing Providing
brand
with the quality of FIYTA fulfillment of multiple series of innovative
characteristics
Brand the tasks in products with products
provided to the
the very year FIYTA brand
market
characteristics,
16
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
and launching for
sales as planned
According to the
Improving new demand of theme Improving new
Developing new product Fulfillment of new products product
product innovation performances the tasks in development, performances and
structure and market the very year innovating and market
competitiveness developing new competitiveness
products structure
According to the
needs of brand
differentiation,
Development of Improving new Continuously developing Improving new
mechanical watch product promoting mechanical watch product
movements with brand performances fulfillment of movements and performances and
differentiation and market the tasks in the relevant market
characteristics competitiveness the very year critical parts with competitiveness
special functions
and directing
methods
According to the
requirements of
Providing special Providing special
manned space
equipment Fulfillment of equipment
Development of watch missions,
watches for the the tasks in watches for the
for manned spaceflight developed and
field of manned the very year field of manned
delivered special
spaceflight spaceflight
equipment
watches
Developing smart
watches with
functions of
camera and
payment;
developing smart
Smart watches with the Improving new Improving new
watches with
functions of camera, product Fulfillment of product
functions of
payment, sport and performances the tasks in performances and
monitoring
physical signs and market the very year market
physical exercise
monitoring competitiveness competitiveness
status and
physical sign data,
and launch the
products in the
market according
to the plan
R & D Staff
2022 2021 Percentage of change
Number of R & D staff 115 128 -10.16%
(persons)
Proportion of R & D 2.66% 2.52% 0.14%
staff in total employees
Educational background structure of R & D staff
Undergraduate 61 63 -3.17%
Master’s degree 18 22 -18.18%
PhD 2 3 -33.33%
Junior college and
34 40 -15.00%
below
Age composition of R & D staff
Below 30 38 47 -19.15%
30 - 40 51 60 -15.00%
Over 40 26 21 23.81%
Investment in R & D
2022 2021 Percentage of change
Amount of investment in R 61,088,585.61 57,802,569.17 5.68%
17
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
& D, in CNY
Proportion of investment in 1.40% 1.10% 0.30%
R & D in operating revenue
Amount of capitalized
investment in R & D (in 0.00 0.00 0.00%
CNY)
Proportion of capitalized
investment in R & D in the 0.00% 0.00% 0.00%
total investment in R & D
Reasons and effects of major changes in the composition of the Company's R&D personnel
Inapplicable
Cause(s) of significant change of the total investment in R & D in the operating revenue
Inapplicable
Note to the cause of significant change in the capitalization rate of investment in R & D and note to the
reasonability
Inapplicable
5. Cash Flow
In CNY
Year-on-year
Items 2022 2021
increase/decrease
Subtotal of cash flow in from 4,997,924,003.93 5,944,580,198.34 -15.92%
operating activity
Subtotal of cash flow out 4,521,695,227.41 5,397,331,089.89 -16.22%
from operating activity
Net cash flows arising from 476,228,776.52 547,249,108.45 -12.98%
operating activities
Subtotal of cash flow in from 138,721.29 59,657.53 132.53%
investment activity
Subtotal of cash flow out 114,090,573.97 204,422,787.61 -44.19%
from investment activity
Net cash flows arising from -113,951,852.68 -204,363,130.08 44.24%
investment activities
Subtotal of cash flow in from 845,155,704.29 1,213,940,412.23 -30.38%
fund raising activity
Sub-total cash flow paid for 1,106,081,523.22 1,698,488,462.84 -34.88%
financing activities
Net cash flow arising from -260,925,818.93 -484,548,050.61 46.15%
capital-raising activities
Net increase of cash and 103,483,652.50 -142,802,548.57 172.47%
cash equivalents
Note to the major influencing factors for the significant change in the relevant year-on-year data
1. Net cash flow arising from investment activities amounted to CNY -113,951,852.68 in the reporting year,
while it was CNY -204,363,130.08 in the same period of the previous year with the payment decreased by
CNY 90,411,277.40, which was mainly due to the decrease of payments for refurbishment and
improvement of the stores during the reporting year.
2. Net cash flow arising from financing activities amounted to CNY -260,925,818.93 in the reporting year, while
it was CNY -484,548,050.61 in the same period of the previous year, with the payment decreased by CNY
223,622,231.68. It was mainly due to decrease of the bank loans, decrease of cash dividends payment and
increase of the payment for B-shares buy-back.
Note to the cause of significant difference between the net cash flow arising from the Company's
business activities and the net profit of the reporting year during the reporting period.
Inapplicable
V. Analysis on Non-Principal Businesses
Inapplicable
18
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
VI. Analysis on Assets and Liabilities
1. Significant Changes in Assets Composition
In CNY
End of 2022 Beginning of 2022
Note to
Proporti Proporti Increase/decr
significan
on in on in ease in
Amount Amount t
total total proportion
changes
assets assets
313,747,463. 210,254,737. Inapplica
Monetary fund 7.62% 5.11% 2.51%
64 14 ble
Accounts 305,290,959. 388,885,601. Inapplica
7.42% 9.46% -2.04%
receivable 68 28 ble
Inapplica
Contract assets 0.00 0.00% 0.00 0.00% 0.00%
ble
2,141,320,37 2,050,148,75 Inapplica
Inventories 52.01% 49.87% 2.14%
3.67 0.89 ble
Investment-oriente 374,979,494. 383,425,916. Inapplica
9.11% 9.33% -0.22%
d real estate 71 35 ble
Long-term equity 58,182,086.9 55,155,605.3 Inapplica
1.41% 1.34% 0.07%
investment 0 1 ble
364,628,765. 349,495,316. Inapplica
Fixed assets 8.86% 8.50% 0.36%
17 65 ble
Construction-in-pr Inapplica
0.00 0.00% 0.00 0.00% 0.00%
ocess ble
Right-of-use 110,330,512. 147,932,475. Inapplica
2.68% 3.60% -0.92%
assets 03 42 ble
290,237,111.1 265,994,595. Inapplica
Short term loans 7.05% 6.47% 0.58%
1 43 ble
16,844,437.4 22,505,426.6 Inapplica
Contract liabilities 0.41% 0.55% -0.14%
7 5 ble
Long-term Inapplica
0.00 0.00% 0.00 0.00% 0.00%
borrowings ble
41,642,561.5 64,918,722.1 Inapplica
Lease liabilities 1.01% 1.58% -0.57%
8 0 ble
Higher proportion of foreign assets
Inapplicable
2. Assets and liabilities measured based on fair value
Inapplicable
3. Restriction on rights in the assets ended the reporting period
Inapplicable
VII. Analysis of Investment Situation
1. General
Inapplicable
2. Significant Equity Investment Acquired in the Reporting Period
Inapplicable
3. Significant non-equity investment in process in the reporting period
Inapplicable
19
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
4. Financial assets investment
(1) Investment in securities
Inapplicable
(2) Investment in derivatives
Inapplicable
5. Application of the raised capital
Inapplicable
VIII. Sales of Significant Assets and Equity
1. Sales of Significant Assets
Inapplicable
2. Sales of Significant Equity
Inapplicable
20
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
IX. Analysis on the Major Companies in Which the Company has Controlling Shares and Equity Participation
Particulars about the principal subsidiaries and equity participation companies which may affect the Company’s net profit by over 10%.
In CNY
Company name Company type Principal business Registered capital Total assets Net assets Operation revenue Operating profit Net profit
Shenzhen Harmony Purchase & sale and repairing
World Watches Center Subsidiary service of watches and 600,000,000 2,161,382,584.47 1,118,528,035.10 3,278,422,398.34 309,176,857.65 233,439,395.74
Co., Ltd. components
Design, R & D and sales of watches
FIYTA Sales Co., Ltd. Subsidiary 450,000,000 422,716,826.38 335,763,679.35 370,444,152.24 -75,508,139.28 -59,165,687.66
and components & parts
Shenzhen FIYTA
Manufacture and production of
Precision Technology Subsidiary 100,000,000 293,295,862.44 164,907,155.56 290,140,152.23 46,693,091.41 43,033,593.08
watches and components
Co., Ltd.
Shenzhen FIYTA Production and machining of
Technology Development Subsidiary sophisticated components and 50,000,000 190,517,189.95 149,568,017.27 180,965,059.37 15,264,456.62 14,737,012.11
Co., Ltd. parts
FIYTA (Hong Kong) Trading of watches and
Subsidiary 137,737,520 235,725,466.46 225,158,507.30 65,571,419.73 5,651,783.88 5,469,059.43
Limited accessories and investment
Emile Chouriet Design, R & D and sales of watches
Subsidiary 41,355,200 120,344,664.31 53,966,581.14 77,723,111.54 1,153,922.91 822,619.09
(Shenzhen) Limited and components & parts
Mutual
Shanghai Watch Industry Production and sales of watches
shareholding 15,350,000 197,527,401.33 147,046,251.53 141,379,376.32 11,431,815.11 12,105,926.36
Co., Ltd. and components & parts
company
Acquisition and disposal of subsidiaries in the reporting period
Inapplicable
Note to the principal equity participation companies
Inapplicable
21
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
X. Structural Subjects Controlled by the Company
Inapplicable
XI. Expectation on future development of the Company
(I) Trend of External Environment and Risks
At present, the global political and economic environment is intensified in evolution, and the domestic
consumer market is still facing the pressure of demand shrinking and expectation of weakening, and the
competition is becoming increasingly fierce. The continuous diversification and rationalization of
consumer preferences has led to more differentiation and quality-orientation of consumer products; the
explosion of the Internet and digital economy has driven the rapid rise of new media channels, and the
integration of online and offline channels; the upgrading of national manufacturing levels, lifting of
national self-confidence promotes the rise of domestic brands; the full liberalization of consumers'
overseas travel may lead to short-term fluctuations in the domestic luxury watch consumption market; the
rapid development of offshore duty-free channels will bring incremental market opportunities and further
intensify competition of the watch market.
(II) Key Work in 2023
In 2023, the Company shall continue to implement the big country brand strategy, keep a close eye on
the value creation goal, take "high-quality development" as the guiding principle, adhere to the general
tone of "seeking progress while maintaining stability", and implement the "defense and counterattack"
business strategy, solidly carry forward the following work:
1. Continuing to promote brand upgrading and product enhancement
The "Fiyta" brand shall focus on the positioning of "a high-quality Chinese watch brand with aerospace
watches as the character" and carry out systematic operation in respect of research and development,
design, production, quality, service, image, membership, marketing, operation, channels, etc.,
concentrate on investing resources in the core series and mainstream price segments, focus on the
creation of popular products from the perspective of customers, carry out integrated marketing in
combination with hot events in a joint and cross-field way, optimize communication efficiency, expand
brand communication volume, and promote rejuvenation and mainstreaming of customer groups.
2. Continuing to promote channel operation improvement and structure optimization
The Company shall continue to focus on the improvement of channel operation capabilities and structural
optimization, lay a solid foundation of offline channels for operation and management, improve excellent
operation and customer service capabilities, and flexibly expand diversified channel forms; adhere to the
integration of products and sales for online channels, and actively explore private domain operation;
continue to deepen the application of the digital retail system, and realize the integrated development of
online and offline integration.
3. Continuing to promote transformation and upgrading to build hard core strength
The Company shall insist on long-term investment in digitalization, continue to deepen the application of
digital retail system, promote management digitalization in an orderly manner, carry out refined
membership management based on accumulation of membership data, optimize membership life cycle
management, and promote potential customer transactions, regular customer repurchase and per
customer transaction; accelerate the advancement of movement technology breakthroughs and product
applications, promote the application of new materials and technologies such as aerospace, and create
hard-core capability for the products that match "aerospace quality".
4. Continuing to promote the development of precision technology and new business of smart wearables
In respect of precision technology business, the Company shall continue to strengthen and expand its
advantageous fields such as optical communications and lasers, further expand new markets and new
customers such as aerospace and medical equipment, continuously improve the ability in process
compounding and product overall solution, and enhance new product development for target customers
and importing ability, and continuously improve the ability in process optimization and cost reduction
through lean production.
The Company shall continue to improve its technical strength in the business of smart wearables, strive
to create product differentiation, actively expand key channels and customers, and enlarge business
scale.
XII. Reception of Survey, Communications, Interviews, etc. during the Reporting Period
Types Main
Recep Visitors
Place of Way of of contents
tion Receive Index of Basic Information on the Investigation and Survey
reception reception Visitor discussed
time d
s and
22
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Recei informatio
ved n provided
Soocho
w
Securitie
s Co.,
Ltd.,
Guoyua
n
Securitie
s Co.,
Ltd.,
Shenwa
n
Hongyu
an
Securitie
s Co.,
Ltd.,
Cinda
Securitie
s Co., The
Ltd., Company
Sealand conducted
Securitie communic
s Co., ation on
Ltd., managem
Guotai ent of
Junan watch
Telephon
March Securitie brands,
Teleconferen e Institu http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode
22, s Co., retail of
ce communic tion =000026&orgId=gssz0000026
2022 Ltd., brand
ation
China watches,
Merchan developme
ts nt of
Securitie precision
s Co., technology
Ltd., business
Wanlian and smart
Securitie wearables
s Co.,
Ltd.,
Guolian
Securitie
s Co.,
Ltd.,
Shenzhe
n
Haifuling
Capital
Manage
ment
Co.,
Ltd.,
Yingda
Asset
Manage
ment
Co., Ltd.
In order to
provide
investors
with a
comprehe
nsive and
in-depth
understan
Extensiv ding of the
e Company’
investor s situation,
s’ the
participa Company
tion in held a
Wechat Mini the 2021
Program Compan Online
March
Titled “FIYTA Other y's 2021 Performan http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode
30, Others
Relationship s Annual ce Briefing =000026&orgId=gssz0000026
2022
with Online and
Investors Perform conducted
ance communic
Present ations and
ation by exchange
network with
remoten investors
ess on the
Company’
s 2021
operating
status,
developme
nt strategy,
watch
brand
23
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
managem
ent
business,
brand
watch
retails, and
developme
nt of
precision
technology
and smart
wearables.
Pingan
Fund
Manage
ment
Co.,
Ltd.,
Guotai
Junan The
Securitie Company
s Co., conducted
Ltd., communic
Hangzh ation on
ou managem
Conference Lianhua ent of
Room of Huasha watch
July
Shenzhen Field Institu ng brands, http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode
06,
FIYTA survey tion Group retail of =000026&orgId=gssz0000026
2022
Technology Co., brand
Building Ltd., watches,
Shenzhe developme
n nt of
Huitong precision
Fund technology
Manage business,
ment etc.
Co., Ltd.
and
Penghu
a Fund
Manage
ment
Co., Ltd.
Shenwa
n
Hongyu
an
Securitie
s Co.,
Ltd.,
Huatai
Securitie
s Co.,
Ltd.,
New
China
Fund
Manage
ment
The
Co.,
Company
Ltd.,
conducted
Shangh
communic
ai
ation on
Shangjin
managem
Investm
ent of
ent
Telephon watch
Manage
August Teleconferen e Institu brands, http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode
ment
26, ce communic tion retail of =000026&orgId=gssz0000026
Partners
2022 ation brand
hip
watches,
(Limited
developme
Partners
nt of
hip),
precision
Sunshin
technology
e
business,
Insuranc
etc.
e Group
Corporat
ion
Limited,
Shangh
ai
Whitestr
eam
Fund
Manage
ment
Co.,
Ltd.,
Hangzh
ou
Haoche
24
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
ng
Investm
ent
Manage
ment
Co., Ltd.
and
China
Merchan
ts
Securitie
s Co.,
Ltd.
The
Company
communic
ated with
investors
on the
Company'
Internet
s operating
Remote
conditions,
Participa
developme
tion
nt strategy,
Compan
“https://rs.p5 watch
y
w.net”, brand
Nove Investor
WeChat Other managem http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode
mber Others s at the
public s ent =000026&orgId=gssz0000026
09, 2022
account, business,
2022 Investor
APP luxury
Online
watch
Collectiv
retail
e
business,
Receptio
precision
n Day
technology
business
and smart
wearables
business
developme
nt.
25
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Section 4 Corporate Governance
I. General
In year 2022, the Company kept improving the Company’s corporate governance structure strictly
according to the PRC Company Law, the PRC Securities Law and the regulations of China Securities
Regulatory Commission concerning governance of listed companies, and tried to enhance construction
of modern enterprise system, upgraded the level of regulatory operation of the Company. As a result,
there was no discrepancy between the situation of the Company’s corporate governance and the
regulatory documents of China Securities Regulatory Commission concerning governance of listed
companies.
The Company established and improved relatively standardized corporate governance structure and
rules of procedures strictly according to law, rules and regulations, including the PRC Company Law, and
the Articles of Association of the Company, formed a decision-making and operation management
system with the Shareholders’ Meeting, the Board of Directors, the Supervisory Committee and the
management of the Company as the principal structure. They implemented their respective duties
according to the PRC Company Law and the Articles of Association.
The General Meeting is the Company’s power organ and has the power of deciding the Company’s
operation policy and investment plan, reviewing and approving the Company’s annual financial budget
scheme, settlement scheme, profit distribution plan, loss make-up plan, change of the application of the
proceeds raised through issuing, the equity incentive plan, etc., make resolutions on the Company's
increase or decrease of registered capital, issuance of corporate bonds and bond-like financing
instruments, merger, division, dissolution, liquidation or change of company form, formulate or approve
the Company's articles of association and amendments to the articles of association, elect and replace
the directors and supervisors serving as employee representatives and decide matters concerning the
remuneration of directors and supervisors.
The Board of Directors plays the role of "setting strategies, making decisions, and preventing risks", and
is responsible for implementing the resolutions of the general meetings of shareholders, convening and
reporting to the general meeting of shareholders. Within the authorization from the General Meeting,
decides the Company’s external investment, acquisition and sales of assets, assets pledge, external
guarantee, related transactions, etc., decides establishment of the Company’s internal management
organs and branches, engagement and disengagement of the Company’s general manager, the Board
secretary and other senior executives, etc. The Board of Directors consists of nine directors, including
three independent directors. The Board of Directors has established three subordinate special
committees, namely the Strategy Committee, the Audit Committee and Nomination, Emolument and
Assessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of reviewing the Company's
regular reports, examining the Company's financial affairs, supervising the directors and senior
executives in performing duties according to the law and proposes dismissal of any director or senior
executive who breaches the law, the administrative rules and regulations, the Articles of Association or
resolutions of the General Meeting, etc. The Supervisory Committee consists of three supervisors
including one staff representative supervisor.
The management is responsible for "seeking operation, carrying out implementation, and strengthening
management". The General Manager is responsible to the Board of Directors, presides over the
production, operation and management of the Company under the leadership of the Board of Directors,
organizes the implementation of resolutions of the Board of Directors, reports work to the Board of
Directors, and organizes the implementation of the Company's annual development plan, operation and
management; plans and formulates the Company's investment plan and investment plan, annual
financial budget plan, final account plan, profit distribution plan and loss recovery plan and the
Company's plan for increasing or decreasing registered capital, etc.
Whether there is a material difference between the actual situation of corporate governance and laws,
administrative regulations and regulations on the governance of listed companies issued by the China
Securities Regulatory Commission.
No
II. Independence in securing the Company's assets, personnel, finance, organization, business,
etc. relative to the controlling shareholder and actual controller
The Company is independent in business, personnel, assets, organization and finance from its
controlling shareholder. The Company has complete and independent business and the ability of
autonomous operation.
26
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Business: The Company is mainly engaged in timepiece businesses and has independent production,
auxiliary production system and complementary facilities, and possesses its own procurement and sales
systems. There exists no competition in the same sector between the Company and its controlling
shareholder.
Personnel: The Company is completely independent in organization and has sound systems in labor,
personnel and salaries management. Except Mr. Xiao Yi, Mr. Xiao Zhanglin, Mr. Li Peiyin and Mr. Deng
Jianghu as directors, and Mr. Zheng Qiyuan, the chairman of the Supervisory Committee, and Ms. Cao
Zhen as supervisor, none of other senior executives takes any concurrent office in the shareholders and
none of the financial staff works concurrently for any related parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Company
enjoys the corporate ownership over its assets and the assets are completely independent from its
controlling shareholder. In addition, the Company enjoys sole ownership of such trademarks as FIYTA,
HARMONY, etc.
Organization: The Board of Directors, the Supervisory Committee and the other internal organs are well
established and work independently. There exist neither subordinate relations between the controlling
shareholder/its functional departments nor doing joint office work. The controlling shareholder enjoys its
rights and undertakes the corresponding obligations according to the law and has never been involved in
any action which directly or indirectly interferes the Company’s business activities surpassing the
authority of the General Meeting.
Finance: The Company has established independent financial department, worked out sound and
independent financial and accounting system and financial management system and independently
opened bank accounts. The controlling shareholder has never interfered the Company in its financial and
accounting activities.
III. Horizontal Competitions
Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period
1. General Meetings
Proportion
of
Meeting
Sessions attendance Meeting date Date of disclosure Resolutions of the meetings
type
of the
investors
For the detail, refer to the
2021 Annual Annual "Announcement on the
General General 41.22% May 13, 2022 May 14, 2022 Resolutions of 2021 Annual
Meeting Meeting General Meeting No. 2022-026"
disclosed on www.cninfo.com.cn
2. Extraordinary general meeting requested for holding by the preferred shareholders with the
voting power recovered.
Inapplicable
27
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
V. Directors, Supervisors and Senior Executives
1. Basic information
Number of
Number of
shares
Shareholding Shareholding shares
held at the
increased in decreased in Change of other held at Cause of
Office Starting date of beginning
Name Title Gender Age Expiry date of tenure the reporting the reporting increase/decrease end of the increase/decrease
Status tenure of the
period period (shares) reporting of shares
reporting
(shares) (shares) period
period
(shares)
(shares)
Zhang Chairman of In
Male 46 July 01, 2021 September 08, 2024 0 0 0 0 0
Xuhua the Board office
In
Xiao Yi Director Male 49 February 24, 2021 September 08, 2024 0 0 0 0 0
office
Xiao In
Director Male 47 September 20, 2017 September 08, 2024 0 0 0 0 0
Zhanglin office
In
Li Peiyin Director Male 37 February 24, 2021 September 08, 2024 0 0 0 0 0
office
Deng In
Director Male 39 September 08, 2021 September 08, 2024 0 0 0 0 0
Jianghu office
Director February 24, 2021 September 08, 2024
In
Pan Bo General Male 47 280,000 0 0 0 280,000
office January 15, 2021 September 08, 2024
Manager
Wang Independent In
Male 53 September 11, 2018 September 08, 2024 0 0 0 0 0
Jianxin Director office
Zhong Independent In
Male 48 September 11, 2018 September 08, 2024 0 0 0 0 0
Hongming Director office
Tang Independent In
Male 49 September 11, 2018 September 08, 2024 0 0 0 0 0
Xiaofei Director office
Chairman of
Zheng the In
Male 60 March 08, 2022 September 08, 2024 0 0 0 0 0
Qiyuan Supervisory office
Committee
In
Cao Zhen Supervisor Female 52 February 24, 2021 September 08, 2024 0 0 0 0 0
office
In
Hu Jing Supervisor Female 52 September 07, 2021 September 08, 2024 9,000 0 0 0 9,000
office
In
Deputy GM August 08, 2014 September 08, 2024
Lu office
Male 56 280,000 0 0 0 280,000
Wanjun Chief Law In
October 25, 2021 September 08, 2024
Adviser office
28
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Liu In
Deputy GM Male 52 October 17, 2016 September 08, 2024 280,000 0 0 0 280,000
Xiaoming office
In
Li Ming Deputy GM Male 50 October 17, 2016 September 08, 2024 280,040 0 0 0 280,040
office
Chief In
Male 56 February 06, 2022 September 08, 2024
Accountant office
Song Deputy GM
0 0 0 0 0
Yaoming and the In
Male April 21, 2022 September 08, 2024
Secretary of office
the Board
Tang In
Deputy GM Male 50 September 29, 2019 September 08, 2024 210,000 0 0 0 210,000
Haiyuan office
Chief After his leaving
October 17, 2016 January 28, 2022
Accountant office, 176,720
restricted
A-shares held by
Chen
Retired Male 47 281,000 0 0 -176,720 104,280 him with the
Zhuo Secretary of
January 15, 2021 January 28, 2022 restriction not yet
the Board
lifted were
repurchased and
canceled.
Total -- -- -- -- -- -- 1,620,040 0 0 -176,720 1,443,320 --
29
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
During the reporting period, is there any resignation of directors and supervisors and dismissal of senior executives during
their term of office?
The Company received a written resignation report submitted by Mr. Chen Zhuo, the Chief Accountant and the Secretary of
the Board in January 2022. For work reason, Mr. Chen Zhuo applied for resigning the posts of the Chief Accountant and the
Secretary of the Board of the Company. Mr. Chen no longer holds any position in the Company after his resignation.
Personnel Change in Directors, Supervisors and Senior Executives
Names Office Taken Type Date Cause
Being
Appointed as the Chief Accountant of the Company at the 6th
Chief Accountant appoint February 06, 2022
session of the Tenth Board of Directors.
Song ed
Yaoming Being Appointed as deputy General Manager and the Secretary of
Deputy GM and the
appoint April 21, 2022 the Board of the Company at the 7th session of the Tenth
Secretary of the Board
ed Board of Directors.
For work reason, Mr. Chen Zhuo resigned the posts of the
Chen Chief Accountant & Termin
January 28, 2022 Chief Accountant and the Secretary of the Board of the
Zhuo Secretary of the Board ation
Company.
2. Incumbency
Professional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in Office
Mr. Zhang Xuhua，born in March, 1977, holding MBA of Xi’an Jiaotong University and EMBA of China Europe International
Business School. He is now the Chairman of the Company. Mr. Zhang used to be the managing director, deputy GM,
assistant to the GM, GM of the business department of the shopping center of Rainbow Digital Commercial Co.,Ltd., the
GM of Chengdu Company, the GM of the business department of the Shopping Center, the GM of Chengdu Company, the
GM of the Merchandise Center, the GM, manager of the procurement department, the supervisor of the merchants
department of Dreams-On Department Store; staff of the market department of Vanke Industry Co., Ltd.
Mr. Xiao Yi，born in March 1974, MBA of the Economic Management College of Beijing University of Aeronautics &
Astronautics. Mr. Xiao is now a director of the Company, the Director of Organization Department of the CPC
Committee/Human Resources Department of AVIC International Holding Corporation, a director of Tianma
Microelectronics Co., Ltd., a director of Shennan Circuit Co., Ltd. He used to be a deputy director and the director of the
Comprehensive Management Department, assistant director of the Administration Department, and the Comprehensive
Secretary of the Management Department of AVIC International Holding Corporation, the project manager of the
technology transfer center of Beijing BUAA Assets Management Co., Ltd.
Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiao Tong University. He is currently a
director of the company, a director and the general manager of Rainbow Digital Commercial Co., Ltd., and a director of
Shennan Circuit Co., Ltd. He used to be the assistant manager of the Innovation Design Department of the Company,
deputy chief of the strategy development department and deputy chief and the chief of the operation and management
department, the general manager of the Millimeter Wave Communication Business Department of AVIC International
Holding Corporation, the director of the Planning and Operation Department of AVIC International Shenzhen Co.,Ltd., the
secretary of AVIC International Holding Limited, a director of Tianma Micro-electronics Co., Ltd. and a director of AVIC
Sunda Holding Company Limited.
Mr. Li Peiyin, born in September, 1986, Master of Accounting of Xiamen University, MBA of Missouri State University, CPA
and senior accountant. Mr. Xiao is a director of the Company, the chief of the financial management department of AVIC
International Holding Corporation, a director of Rainbow Digital Commercial Co.,Ltd., a director of Shennan Circuit Co., Ltd.
and a director of Tianma Micro-electronics Co., Ltd. He used to be the deputy chief and assistant chief and business
manager of the financial management department of AVIC International Holding Corporation.
Mr. Deng Jianghu, born in July 1984, holding MBA of Northeast Normal University. Mr. Xiao is a director of the Company,
the deputy chief of the planning and development department and the operation management department of AVIC
International Holding Corporation (executive), a director of Shennan Circuit Co., Ltd. and a director of Rainbow Digital
Commercial Co.,Ltd. He used to be deputy manager and manager of the planning and operation department of the
Company, director of modern service office of AVIC International Shenzhen Co., Ltd., senior project manager of the
operation management department of AVIC International Holding Co., Ltd., a commissioner of the strategic management
and senior commissioner of the Strategic Development Department of Shennan Circuit Co., Ltd.
Mr. Pan Bo，born in March, 1976, bachelor of electromechanical engineering of Beijing University of Aeronautics &
Astronautics, and EMBA of China Europe International Business School. He is the Managing Director of the Company. Mr.
Pan used to be a deputy GM, the secretary of the board, and the assistant to the GM of the Company, the GM, deputy GM,
the assistant to the GM, manager of the sales department, manager of the logistics department, manager of the after-sale
service department of FIYTA Sales Co., Ltd.
30
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Mr. Wang Jianxin, born in June, 1970, a Chinese CPA, holding bachelor of auditing of Zhongnan University of Economics
and Law. Mr. Wang is an independent director of the Company and a partner of ShineWing Certified Public Accountants
(Special General Partnership).
Mr. Zhong Hongming, born in January 1975, PhD of Civil and Commercial Law in Renmin University of China and
post-doctor of Civil and Commercial Law in Southwest University Political Science and Law. He is an independent director
of the Company, an associate research fellow of Law Research Institute of Sichuan Academy of Social Sciences and
concurrently a director of China Commercial Law Society, a director of China Securities Law Research Council, the
Secretary-General of Commercial Law Association of Sichuan Law Society, an independent director of Mango Excellent
Media Co., Ltd., and an independent director of Chengdu Shengbang Seals Co., Ltd.
Mr. Tang Xiaofei, born in May, 1974, PhD of Management of Southwest Jiaotong University. Mr. Tang is an independent
director of the Company, a professor and doctorial tutor of the Business School of Southwest Jiaotong University, director
of Urban Brand Strategy Research Institute of Southwest University of Finance and Economics, enjoying the title of
Outstanding Talent of the New Century granted by the Ministry of Education, a council member of the Chinese Association
of Market Development, and an independent director of Qianhe Condiment and Food Co., Ltd.
Mr. Zheng Qiyuan, born in July, 1963, MBA of the Economic Management College of Beijing University of Aeronautics &
Astronautics, MBA of Paris Business School; senior engineer. Mr.Zheng is the Chairman of the Supervisory Committee of
the Company and and a full-time director and supervisor of AVIC International Holding Corporation. Mr. Zheng used to be
the secretary of the Ministry of Aviation Industry,chief staff of the Planning Department of the Ministry of Aviation Industry,
deputy chief and chief of the Planning Department of AVIC Corporation, deputy manager and manager of the Bidding
Center of AVIC Corporation, deputy manager and manager of AVIC International Economic & Trade Development Limited,
a commissioner of AVIC International Holding Corporation, Chief Business Officer of AVIC International (HK) Group Limited,
GM of AVIC International (HK) Trading Limited.
Ms. Cao Zhen, born in October, 1971, bachelor of literature of Jiangxi Normal University, EMBA of China Europe
International Business School. Ms. Cao is a supervisor of the Company, vice-secretary of the Discipline Inspection
Commission and the chief of the Discipline Inspection Department of AVIC International Holding Corporation. Ms. Cao used
to be the chief editor, deputy manager and manager of the administrative management department, the secretary of the
Board, the assistant to the GM of AVIC News of AVIC International Shenzhen Company Limited, the manager of the
enterprise culture department of AVIC International Holding Corporation, the chief of the CPC Construction and Ideological
and Political Work Department, the discipline secretary and the chairman of the trade union of AVIC International Shenzhen
Company Limited, deputy leader of the discipline inspection team and the chief of the discipline inspection, supervision and
audit department of AVIC International Holding Corporation.
Ms. Hu Jing, born in September, 1971, accountant, bachelor of accounting from Jiangxi University of Finance and
Economics. She is a staff representative supervisor and senior taxation management of the financial department of the
Company. She used to be the senior business manager of the audit department,the tax supervisor and manager of capital
of the finance department of the Company.
Mr. Lu Wanjun, born in February, 1967, accountant and EMBA of China Europe International Business School. He is now
a deputy GM and chief law adviser of the Company. He used to be the assistant to the GM of the Company, executive
deputy GM and deputy GM, the assistant to the GM and concurrently the manager of the financial department of Shenzhen
Harmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University of
Aeronautics & Astronautics, and EMBA of China Europe International Business School. He is now a deputy GM of the
Company. He used to be the assistant to the GM of the Company, a deputy GM and the assistant to the GM of Shenzhen
Harmony World Watches Center Co., Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBA of
China Europe International Business School. He is now a deputy GM of the Company. Mr. Li used to be the assistant to the
GM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR department of
Shenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of China Netcom
Shenzhen; manager of big customers and manager of market planning of China Telecom Shenzhen.
Mr. Song Yaoming, born in July, 1967, accountant, master of economics of Shaanxi College of Finance and Economics
and EMBA of China Europe International Business School. Mr. Song is now the Chief Accountant, Deputy GM and the
Secretary of the Board of the Company. He used to be the deputy general manager and chief accountant of Rainbow
Digital Commercial Co., Ltd., director of Shenzhen Aoxuan Investment Co., Ltd., director of Shenzhen Aoer Investment
Development Co., Ltd., and deputy manager and accountant of the financial department of Shenyang FAW Jinbei
Automobile Co., Ltd.
Mr. Tang Haiyuan, born in February, 1973, senior engineer, bachelor of plastic molding technology and equipment of Hefei
University of Technology, and EMBA of China Europe International Business School. He is now a deputy GM of the
31
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Company. Mr. Tang used to work for Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd., taking the offices
of the GM, a deputy GM, the assistant to the GM, and the manager of its quality department, manager and deputy manager
of the engineering and technical department; also work for Shenzhen FIYTA Technology Development Co., Ltd., taking
offices of the assistant to the GM and the manager of the technical department.
Office taking in shareholder companies
Does he/she receive
Expiry
Names of the Names of the Titles engaged in the remuneration or
Starting date of tenure date of
persons in office Shareholders shareholders allowance from the
tenure
shareholder
Chief of the CPC
Organization
AVIC International
Xiao Yi Department/Human January 18, 2021 Yes
Holding Corporation
Resource
Department
Chief of the
AVIC International Financial and
Li Peiyin February 28, 2022 Yes
Holding Corporation Management
Department
Deputy chief of the
planning &
development
AVIC International department and
Deng Jianghu July 05, 2021 Yes
Holding Corporation operation &
management
department
(executive)
Full-time
AVIC International
Zheng Qiyuan independent December 01, 2019 Yes
Holding Corporation
supervisor
Vice-secretary of the
discipline inspection
AVIC International committee and the December 23, 2019/June 10,
Cao Zhen Yes
Holding Corporation chief of the discipline 2020
inspection
department
Office taking in
shareholder Inapplicable
companies
Office taking in other organizations
Does he/she receive
Names of the Names of the other Titles engaged in Expiry date of remuneration or
Starting date of tenure
persons in office organizations other organizations tenure allowance from other
organization
Tianma
Micro-electronics Director February 26, 2021 No
Xiao Yi Co., Ltd.
Shennan Circuit Co.,
Director April 06, 2021 No
Ltd.
Shennan Circuit Co.,
Director June 18, 2015 No
Ltd.
Rainbow Digital
Commercial Co., Director September 27, 2017 Yes
Xiao Zhanglin
Ltd.
Rainbow Digital
Commercial Co., General Manager April 02, 2022 Yes
Ltd.
Rainbow Digital
Commercial Co., Director February 24, 2021 No
Ltd.
Shennan Circuit Co.,
Li Peiyin Director April 06, 2021 No
Ltd.
Tianma
Micro-electronics Director July 08, 2022 No
Co., Ltd.
Tianma
Micro-electronics Director November 29, 2021 No
Co., Ltd.
Shennan Circuit Co.,
Deng Jianghu Director April 07, 2022 No
Ltd.
Rainbow Digital
Commercial Co., Director September 09, 2022 No
Ltd.
SHINEWING
Wang Jianxin Certified Public Partnership December 01, 2006 Yes
Accountants LLP
Institute of Law of Associate research
Zhong Hongming November 24, 2017 Yes
Sichuan Academy of fellow
32
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Social Sciences
Mango Excellent Independent
June 14, 2017 Yes
Media Co., Ltd. Director
Chengdu
Independent
Shengbang Seals November 17, 2022 Yes
Director
Co., Ltd.
The School of
Business
Administration of Professor and
September 01, 2008 Yes
Southwest doctorial tutor
Tang Xiaofei
University of
Finance Economics
Qianhe Condiment Independent
November 30, 2022 Yes
and Food Co., Ltd. Director
Office taking in other Inapplicable
organizations
Punishment imposed by the securities regulatory authority on the directors, supervisors and senior executives both in office
and having left their posts in the reporting period.
Inapplicable
3. Remuneration to Directors, Supervisors and Senior Executives
Decision-making procedures, basis for determining the remuneration and actual payment to directors, supervisors and
senior executive to directors, supervisors and senior executives
The Company practiced the annual salary system for its directors and senior executives. The annual salary structure
consists of the basic annual salary and performance based annual salary. The assessment of senior executives is
conducted according to the Measures for the Management of the Management Members' Business Performance Appraisal
and the Measures for the Management of the Remuneration to the Management Members.
Remuneration to Directors, Supervisors and Senior Executives during the Reporting Period
In CNY 10,000
Is the
Total pretax
remuneration
remuneration
Names Title Gender Age Office Status from one of the
received from the
Company's
Company
related parties
Zhang Xuhua Chairman of the Board Male 46 In office 180.48 No
Xiao Yi Director Male 49 In office Yes
Xiao Zhanglin Director Male 47 In office Yes
Li Peiyin Director Male 37 In office Yes
Deng Jianghu Director Male 39 In office Yes
Pan Bo Managing Director Male 47 In office 233.8 No
Wang Jianxin Independent Director Male 53 In office 9 No
Zhong Hongming Independent Director Male 48 In office 9 No
Tang Xiaofei Independent Director Male 49 In office 9 No
Chairman of the
Zheng Qiyuan Supervisory Male 60 In office Yes
Committee
Cao Zhen Supervisor Female 52 In office Yes
Hu Jing Supervisor Female 52 In office 30.96 No
deputy GM and chief
Lu Wanjun Male 56 In office 198.33 No
law adviser
Liu Xiaoming Deputy GM Male 52 In office 253.33 No
Li Ming Deputy GM Male 50 In office 189.33 No
Chief Accountant,
Deputy GM and the
Song Yaoming Male 56 In office 74.55 No
Secretary of the Board
of the Company
Tang Haiyuan Deputy GM Male 50 In office 204 No
Chief Accountant &
Chen Zhuo Male 47 Retired 123.08 Yes
Secretary of the Board
Total -- -- -- -- 1,514.86 --
VI. Duty Performance of Directors in the Reporting Period
1. Board Meetings
Sessions Meeting date Date of disclosure Resolutions of the meetings
For details, please refer to the “Announcement on the
5th session of the Tenth Board Resolution of the 5th Session of the Tenth Board of
February 06, 2022 February 07, 2022
of Directors Directors 2022-003”disclosed by the Company on
http://www.cninfo.com.cn/.
33
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
For details, please refer to the “Announcement on the
6th session of the Tenth Board Resolution of the 6th Session of the Tenth Board of
March 08, 2022 March 10, 2022
of Directors Directors 2022-007”disclosed by the Company on
http://www.cninfo.com.cn/.
For details, please refer to the “Announcement on the
7th session of the Tenth Board Resolution of the 7th Session of the Tenth Board of
April 21, 2022 April 23, 2022
of Directors Directors 2022-018”disclosed by the Company on
http://www.cninfo.com.cn/.
For details, please refer to the “Announcement on the
8th session of the Tenth Board Resolution of the 8th Session of the Tenth Board of
August 18, 2022 August 20, 2022
of Directors Directors 2022-035”disclosed by the Company on
http://www.cninfo.com.cn/.
9th session of the Tenth Board The meeting reviewed and approved 2022 Third Quarter
October 24, 2022 October 26, 2022
of Directors Report
For details, please refer to the “Announcement on the
10th session of the Tenth Resolution of the 10th Session of the Tenth Board of
December 20, 2022 December 21, 2022
Board of Directors Directors 2022-046”disclosed by the Company on
http://www.cninfo.com.cn/.
2. Attendance of Directors for Board Meetings and General Meetings
Attendance of Directors for Board Meetings and General Meetings
Number of
Board Failure to
Number of
meetings Number of personally Number of
Number of Meetings
Names of which should attendances of Number of attend board attendance of
Spot Attended by
Directors be be board meeting absence meetings the General
Attendances Communicatio
attended in the by proxy successively Meeting
n
reporting twice
period
Zhang Xuhua 6 2 4 0 0 No 1
Xiao Yi 6 0 6 0 0 No 0
Xiao Zhanglin 6 0 6 0 0 No 0
Li Peiyin 6 0 6 0 0 No 0
Deng Jianghu 6 0 6 0 0 No 0
Pan Bo 6 2 4 0 0 No 1
Wang Jianxin 6 0 6 0 0 No 1
Zhong
6 0 6 0 0 No 0
Hongming
Tang Xiaofei 6 0 6 0 0 No 0
Note to failure to attend the board meeting successively twice
Inapplicable
3. Objection of directors on some relevant issues
Have the directors proposed any objection on the relevant issues of the Company
No
4. Other Note to Duty Performance of Directors
Have the directors' recommendations to the Company been accepted
Yes
Explanation on why the directors' recommendations have been accepted or not been accepted
During the reporting period, the Board of Directors gave full play to the role of "setting strategies, making decisions, and
preventing risks". The directors of the Company attended Board Meetings on time in strict accordance with the "Company
Law", "Code of Corporate Governance for Listed Companies" and other laws and regulations and the "Articles of
Association", diligently and conscientiously performed duties and rights of directors, and fully deliberated, made
suggestions and voted on the resolutions of the Board of Directors. The Company fully considered and adopted the
constructive opinions put forward by directors in terms of business development, revision of the rules and regulations,
implementation of equity incentive plan, etc.
VII. Duty Performance of Special Committees under the Board of Directors in the Reporting Period
Names of Important Specific
Number of Description of Other duty
Special About the members Meeting date comments and objections (if
meetings held meetings performances
Committees suggestions made any)
Chairman of the Reviewed and During the
Strategy committee: Zhang March 08, approved 2021 reporting period,
1
Committee Xuhua 2022 Annual Work members of the
Committee Report of the Board Strategy
34
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
members: Xiao of Directors . Committee
Zhanglin, Deng conducted in-depth
Jianghu, Pan Bo and discussions and
Tang Xiaofei analysis on the
Company's
operating
conditions,
proposed
corresponding
suggestions and
opinions for the
Company's
development, and
provided support
for the scientific
decision-making of
the Board of
Directors.
Reviewed and
approved 2021
Annual Report,
2021 Annual Profit
Distribution, 2021
Annual Internal
March 08,
Control
2022
Self-assessment
Report, the 2021
Annual Internal
Audit Work Report,
and other
During the
proposals.
reporting period,
Reviewed and
members of the
approved the
Audit Committee
Company's 2022
provided advice
1st Quarter Report,
and suggestions in
April 21, and 2022 1st
guiding internal
Chairman of the 2022 Quarter Audit Work
audit work,
committee: Wang Report of the
supervising and
Jianxin Discipline
Audit evaluating external
Members: Li Peiyin, 4 Inspection and Law
Committee audit institutions,
Xiao Zhanglin, Department
and establishing
Zhong Hongming Reviewed and
effective internal
and Tang Xiaofei approved the
control
Company's 2022
mechanisms, and
Semi-annual
actively
August 18, Report and the
safeguarded the
2022 signing of a
interests of the
financial service
Company and all
agreement with
shareholders.
AVIC Finance Co.,
Ltd.
Reviewed and
approved the
Company's 2022
3rd Quarter Report,
October 24, and 2022 3rd
2022 Quarter Audit Work
Report of the
Discipline
Inspection and Law
Department
Reviewed and
approved the
proposal of
During the
appointing the
reporting period,
Company's chief
February 06, the members of the
accountant and
2022 Nomination,
appointing the chief
Remuneration and
accountant to act
Assessment
as the secretary of
Committee
the Board of
prudently
Directors.
discussed and
Reviewed and
judged the
approved the
Committee of Chairman of the qualifications of
proposal on the
Nomination, committee: Zhong nominated
remuneration to
Remuneration Hongming directors and
directors and
and Members: Xiao Yi, 4 March 08, senior executives,
senior executives
Assessment of Xiao Zhanglin, Wang 2022 carefully reviewed
in 2021 and the
the Board of Jianxin and Tang the directors’ and
repurchase and
Directors Xiaofei senior executives’
cancellation of
remuneration
some restricted
assessment plan,
shares.
and the
Reviewed and
implementation of
approved the
the Company's
proposals on the
equity incentive
repurchase and
plan etc., and
April 21, cancellation of
effectively fulfilled
2022 some restricted
relevant
shares and
responsibilities.
appointment of the
Company’s deputy
GM and the
35
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
secretary of the
Board.
Reviewed and
approved the
proposal on the
achievement of the
release of
restrictions during
the third release
period of the
A-share Restricted
December
Stock Incentive
20, 2022
Plan (Phase I) and
the achievement of
the release of
restrictions during
the first release
period of the
A-share Restricted
Stock Incentive
Plan (Phase II).
VIII. Work Summary of the Supervisory Committee
Did the Supervisory Committee find any risk involved in performing the supervision activities in the reporting period
No
IX. Employees
1. Number, Job Composition and Education Background of Employees
Number of employees working for the parent company at the end of 110
the reporting period (persons)
Number of employees working for the major subsidiaries at the end of 4,211
the reporting period (persons)
Total of employees at the end of the reporting period (persons) 4,321
Total employees receiving remuneration in the reporting period 4,321
(persons)
Number of the retired employees for whom the parent company and 0
the major subsidiaries need to share the pension (persons)
Job Composition
Job Composition Categories Number of persons involved in the job composition
Production 331
Sales 3,126
Technical 342
Financial 129
Administrative 393
Total 4,321
Education background
Education levels Number of persons
Master's degree or higher 77
Undergraduate 698
Junior college 1,203
Below junior college 2,343
Total 4,321
2. Remuneration Policy
The Company has worked out its remuneration policy by taking its business development planning and management
practice into consideration and based on the principles of insisting on the values, creating core concepts, following
hierarchical management, budget control, performance orientation, efficiency priority, fairness, positive incentives, and
long-term attention; Successively established and improved a remuneration system with the assessment based annual
salary system for medium and senior executives, performance-based salary systems for staff positions, and the production
& performance jointly related payroll systems for production operators in accordance with the national laws, regulations and
policies. The following administrative measures have been taken in implementation of the remuneration policy:
Total salary management: the Company has prepared an annual remuneration budget based on the annual business
planning, adjusted and controlled the total remuneration with such factors as the market remuneration level, organization
efficiency, adjustment of the talent team, etc., and has achieved the management goal of benefit-orientation, positive
incentive, classification management and adjusted distribution;
36
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Classification and grading management: The Company has established a differentiated, standardized, and market-oriented
salary framework system that matches the job sequence and job level according to the professional/occupational
development system of employees;
With value as the key link, co-creating and sharing: the Company designs the incentive system according to the closed-loop
value chain of value creation, evaluation and distribution. Through the establishment of value evaluation system and
real-time incentive system consistent with the strategic development goals, the Company has formed a compensation
along with the Company's benefits and personal performance, incremental compensation to the core key positions,
excellent talent incentive mechanism.
3. Training Program
(I) Building a team of high-quality professional talents and improve the readiness of talents for key positions
The Company, relying on FIYTA Training Center, focused on the training of echelon talents, built a talent reserve pool, and
improved the organization's talent readiness; enhanced the professional ability learning of key posts, extracted knowledge
and experience of posts, created a learning atmosphere within the organization, and promoted the construction of a
professional talent learning system.
(II) Consolidating the terminal business talent training system, and consolidating the ability of the terminal team
The Company has built a customer-oriented terminal retail post training system, strengthened the training of business
personnel through the “bullseye training model”, optimized learning contents, strengthened learning methods, and used
"double excellence" as a starting point to consolidate the business echelon management and operation ability.
(III) With the project-based talent training system to create outstanding training project
Cultivate talents by means of project management method and logic, introduce conceptual tools such as experience
extraction, action learning, performance improvement, and situational assessment, by combination of online and offline
approaches, and precipitate star training programs such as "Nova Program", "Spring Bamboo Shoot Program", etc.
(IV) Carrying out targeted training in close combination with business priorities
The development of training content closely matches the Company's business priorities, and continues to promote
excellent sales ability improvement training to empower terminals; is timely carried out according to the launching of new
products and key marketing node arrangements, activities such as "Stars Talk" live broadcast, watch knowledge contests,
etc. are carried out in a timely way, to help employees understand the direction of key products and boost achievement of
the sales goals.
4. Labor Outsourcing
Inapplicable
X. Profit Distribution and Conversion of Capital Reserve into Share Capital
Preparation, Implementation or Adjustment of the Policy for Profit Distribution, Especially the Policy for Cash Dividend
Distribution in the Reporting Period
The Company's 2021 Profit Distribution Plan was reviewed and approved at the 6th session of the Tenth Board of Directors
held on March 08, 2022 and 2021 Annual General Meeting held on May 13, 2022. It was resolved that with the Company’s
total share capital as at the date of record for future implementation of the profit distribution plan after deducting the shares
in the special securities account for repurchase as the base, the Company distributed cash dividend at the rate of CNY 3.00
for every 10 shares (with tax inclusive) with the total cash dividend distributed not exceeding CNY 127,815,304.50,
distributed bonus share at the rate of 0 share for every 10 shares to the whole shareholders and capitalized no reserve.
During the period from the disclosure to the implementation of the equity distribution plan, the Company repurchased a total
of 7,987,217 B-shares through the special securities account for repurchase. With the 418,063,798 shares available for
participating in the dividend distribution (the total share capital of 426,051,015 shares as at the date of record less the
7,987,217 repurchased B-shares), the Company distributed cash dividend at the rate of CNY 3.00 (with the tax inclusive)
for every 10 shares to all shareholders. The total amount of the cash dividend distributed was CNY 125,419,139.40.
The profit distribution plan was implemented on June 14, 2022. For the detail, please refer to the “Announcement on the
Implementation of 2021 Annual Equity Distribution 2022-028”disclosed by the Company on www.cninfo.com.cn.
Special Note to Cash Dividend Distribution Policy
Does it comply with the Articles of Association or the Yes
resolution of the General Meeting?
Are the dividend distribution standard and proportions Yes
explicit and clear?
37
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Are the relevant decision-making procedures and Yes
mechanism complete?
Have the independent directors done their duties and Yes
brought their role into full play?
Do minority shareholders have opportunity to fully express
their opinions and claims? Has their legal interest been Yes
fully protected?
In case the cash dividend distribution policy has been
adjusted or altered, do the conditions and procedures Inapplicable
comply with the law and are they transparent?
In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders were positive
but no cash dividend distribution proposal has been put forward.
Inapplicable
Profit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period
Bonus shares distributed at the rate of __ (share) for every 10 shares 0
Dividend distributed at the rate of CNY___ for every 10 shares (with 2.50
tax inclusive)
based on the total share capital as at the date of record (with the
Share capital base for the dividend distribution preplan (shares) shares in the special securities account for repurchase deducted)
Total cash dividend distributed (with tax inclusive) 104,406,990.00
Amount of cash dividend distributed in other way(s) (such as shares 50,252,831.88
repurchased)
Total amount of cash dividend (including other way(s) (CNY) 154,659,821.88
Profit available for distribution (CNY) 943,017,166.88
Proportion of the cash dividend in the total profit available for 100%
distribution
Cash Dividend Distribution for the Reporting Year
Others
Detailed information for profit distribution or conversion of capital reserve into share capital preplan
The Company's 2022 Profit Distribution Plan was reviewed and approved at the 11th session of the Tenth Board of Directors held on March 16,
2023. The Company planned to take the number of shares on the date of record (with the shares in the special securities account for
repurchase deducted) as the base when the profit distribution plan was implemented in the future and distributed cash dividend at rate of CNY
2.50 (with tax inclusive) for every 10 shares to all shareholders, and distribute 0 bonus share, and capitalize no reserve.
From the time of disclosing this profit distribution plan to that prior to the implementation, in case change took place in the total amount of the
share capital, the Company intended to adjust the total distribution amount in accordance with the principle of fixed distribution ratio.
The profit distribution plan is subject to review and approval of the General Meeting before implementation.
XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other Employee
Incentive Measures
1. Equity incentive
(1) Restricted Stock Incentive Plan Phase I
The 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meeting
held on January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I), which was later on
reviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Company
eventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive. The grant price of this part of
the restricted stock was CNY 4.40 per share, which was granted and registered for listing on January 30, 2019. For the
detail, refer to the relevant announcement disclosed on http://www.cninfo.com.cn. on January 12, 2019. The specific
implementation during the reporting period is summarized as follows:
Reviewed and approved at the 4th session of the Tenth Board of Directors, the Company satisfied the conditions for the
release of the restriction for sales in the second release period of the Company's Restricted Stock Incentive Plan (Phase I)
and the 1.244421 million restricted A-shares involved were listed for trading on February 7, 2022. For the detail, refer to the
Company's relevant announcement disclosed on http://www.cninfo.com.cn. on January 28, 2022.
Reviewed and approved at the 6th session of the Tenth Board of Directors, the 7th session of the Tenth Board of Directors
and 2021 Annual General Meeting, the Company decided to repurchase and cancel the 85,838 restricted A-shares which
were already granted to but with the restriction not yet relieved held by 5 retired incentive objects. For the detail, refer to the
Company's relevant announcements disclosed on http://www.cninfo.com.cn. on March 10, 2022, April 23, 2022 and May
14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company satisfied the conditions for the
release of the restriction for sales in the third release period of the Company's Restricted Stock Incentive Plan (Phase I)
38
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
and the 1.162320 million restricted A-shares involved were listed for trading on January 31, 2023. For the detail, refer to the
Company's relevant announcement disclosed on http://www.cninfo.com.cn. on January 19, 2023.
(2) Restricted Stock Incentive Plan Phase II
The 23rd session of the Ninth Board of Directors held on December 04, 2020 and 2021 1st Extraordinary General
Meeting held on January 06, 2021 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase II), which
was later on reviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the
Company eventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. The grant price of this
part of the restricted stock was CNY 7.60 per share, which was granted and registered for listing on January 29, 2021. For
the detail, refer to the relevant announcement disclosed on http://www.cninfo.com.cn. on January 16, 2021. The specific
implementation during the reporting period is summarized as follows:
Reviewed and approved at the 6th session of the Tenth Board of Directors, the 7th session of the Tenth Board of Directors
and 2021 Annual General Meeting, the Company decided to repurchase and cancel the 350,000 restricted A-shares which
were already granted to but with the restriction not yet relieved held by 4 retired incentive objects. For the detail, refer to the
Company's relevant announcements disclosed on http://www.cninfo.com.cn. on March 10, 2022, April 23, 2022 and May
14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company satisfied the conditions for the
release of the restriction for sales in the first release period of the Company's Restricted Stock Incentive Plan (Phase II) and
the 2.27439 million restricted A-shares involved were listed for trading on January 31, 2023. For the detail, refer to the
Company's relevant announcement disclosed on http://www.cninfo.com.cn. on January 19, 2023.
39
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Equity incentive to directors and senior executives of the Company
In shares
Strike price
Number of Quantity of Quantity of
and the Number of Quantity of
Number of newly Number of Number of Market price restricted Quantity of restricted Price of the
number of the stock options restricted
stock options granted stock vested exercised at the end of shares held the shares shares newly restricted
exercised held at the shares held
Name Title held at the options shares during shares during the reporting at the unlocked in granted shares
shares during end of the at the end of
beginning of during the the reporting the reporting period beginning of the reporting during the granted
the reporting reporting the reporting
the year reporting period period (CNY/share) the reporting period reporting (CNY/share)
period period period
period period period
(CNY/share)
Chairman of
Zhang Xuhua 0 0 0 0 0 0 0 0 0 0
the Board
Xiao Yi Director 0 0 0 0 0 0 0 0 0 0
Xiao Zhanglin Director 0 0 0 0 0 0 0 0 0 0
Li Peiyin Director 0 0 0 0 0 0 0 0 0 0
Deng
Director 0 0 0 0 0 0 0 0 0 0
Jianghu
Managing
Pan Bo 0 0 0 0 0 0 203,360 26,640 0 176,720
Director
Independent
Wang Jianxin 0 0 0 0 0 0 0 0 0 0
Director
Zhong Independent
0 0 0 0 0 0 0 0 0 0
Hongming Director
Independent
Tang Xiaofei 0 0 0 0 0 0 0 0 0 0
Director
deputy GM
Lu Wanjun and chief law 0 0 0 0 0 0 203,360 26,640 0 176,720
adviser
Liu Xiaoming Deputy GM 0 0 0 0 0 0 203,360 26,640 0 176,720
40
FIYTA Precision Technology Co., Ltd. 2022 Annual Report, Full Text
Li Ming Deputy GM 0 0 0 0 0 0 203,360 26,640 0 176,720
Chief
Accountant,
Song Deputy GM
0 0 0 0 0 0 0 0 0 0
Yaoming and the
Secretary of
the Board
Tang Haiyuan Deputy GM 0 0 0 0 0 0 190,020 19,980 0 170,040
Chief
Chen Zhuo
Accountant &
(who has left 0 0 0 0 0 0 203,360 26,640 0 0
Secretary of
office)
the Board
Total -- 0 0 0 0 -- 0 -- 1,206,820 153,180 0 -- 876,920
According to the relevant regulations of the Company's restricted stock incentive plan, because Mr. Chen Zhuo, one of the former incentive objects, has resigned, the Company has completed the procedures
Remarks (If any)
for the repurchase and cancellation of the restricted shares which have not yet been lifted held by him during the reporting period.
41
Assessment and Incentive Mechanism for Senior Executives
In order to establish and improve the Company's incentive and restraint mechanism for senior executives,
give full play to and mobilize the enthusiasm of the Company's executives, improve the Company's
operational capabilities and economic benefits, and ensure the realization of the company's strategic
goals, the Company continuously improved the work of tenure and contractual management of
executives. With year/tenure as a period, the Company carried out the assessment of business
performance objectives, and continued to promote the implementation of the rigid realization of rewards
and punishments based on the assessment results, reflecting the strong incentives and hard constraints
of remuneration, adhered to performance orientation, and strengthened effective incentives for accurate
assessments.
2. Implementation of the Employee Stock Ownership Plan
Inapplicable
3. Other employee incentive measures
Inapplicable
XII. Construction and Implementation of the Internal Control System during the Reporting Period
1. Construction and Implementation of the Internal Control System
In order to strengthen the Company's internal control, promote the Company's standardized operation
and healthy development, and protect the legitimate rights and interests of shareholders, the Company
has established and improved the Company's internal control system in accordance with the "Company
Law", "Securities Law" and other laws and regulations, and has conducted effective implementation.
During the reporting period, the Company continued to promote the work related to the integration and
optimization of internal control, risk management and compliance management supervision. The
Company did not have any significant defects and shortcomings in the internal control.
2. Particular case found involving material defects in the internal control during the reporting
period
No
XIII. Management and Control of the Subsidiaries during the Reporting Period
Inapplicable
XIV. Internal Control Self-assessment Report or Internal Control Audit Report
1. Self-assessment Report of the Internal Control
Date of disclosing the full text of the March 18, 2023
internal control assessment report
Index of disclosure of the full text of the www.cninfo.com.cn
internal control assessment report
Proportion of the total assets of the
organizations involved in the
assessment in the total assets of the 100.00%
Company’s consolidated financial
statements
Proportion of the operation revenue of
the entitled involved in the assessment
in the total operation revenue of the 100.00%
Company’s consolidated financial
statements
Criteria for affirming the defects
Categories Financial report Non-financial Report
(1) This defect involves the fraud of (1) Serious violation of the national
directors, supervisors and senior laws, administrative regulations and
executives; normative documents;
(2) Correction of the financial (2) Any of “decision on important
Qualitative criteria statements already disclosed; events, appointment and removal of
(3) The CPAs found there existed important officers, arrangement of
material misstatements in the financial important projects and application of
statements of the reporting period, but big amount of fund” did not undergo
the internal control failed to detect the collective decision-making procedure;
42
misstatements during the operation; (3) Serious loss of management
(4) The supervision of the internal personnel and technical personnel of
control conducted by the Company's key positions;
audit committee and the discipline (4) Lack of system control or failure of
inspection, audit and law department the institutional system for important
was proved ineffective. businesses involved in the production
and operation of the Company
(5) The failure of internal control over
information disclosure leading to the
Company being publicly condemned by
the regulatory authorities;
(6) The results of internal control
evaluation, especially major defects or
important defects, have not been
rectified.
(1) Significant defect: misstatement ≥ (1) Significant defect: misstatement ≥
5% of pre-tax profit 5% of pre-tax profit
(2) Important defect: 1% of the pre-tax (2) Important defect: 1% of the pre-tax
Quantitation criteria profit≤ misstatement ＜ 5% of pre-tax profit≤ misstatement ＜ 5% of pre-tax
profit profit
(3) General defect: misstatement ＜ (3) General defect: misstatement ＜
1% of pre-tax profit 1% of pre-tax profit
Number of significant defects in the 0
financial statements (pcs)
Number of significant defects in the 0
non-financial report (pcs)
Number of important defects in the 0
financial report (pcs)
Number of important defects in the 0
non-financial report (pcs)
2. Internal Control Audit Report
Deliberation Opinions in the Internal Control Audit Report
In our opinion, the Company maintained effective internal control over its financial report in all major aspects in accordance
with the Basic Standard for Enterprise Internal Control and other relevant regulations as at December 31, 2022.
Disclosure of the internal control audit report Disclosed
Date of disclosing the full text of the internal control March 18, 2023
assessment report
Index of disclosing the full text of the internal control audit www.cninfo.com.cn
report
Type of the onions in the internal control audit report Standard unqualified auditor’s report
Are there any material defects in the non-financial report No
Has the CPAs issued a qualified auditor’s report of internal control
No
Does the internal control audit report issued by the CPAs agree with the self-assessment report of the
Board of Directors
Yes
XV. Rectification of the Problems Found in the Self-inspection during the Special Campaign to
Improve the Governance of Listed Companies
The Company has fully completed the self-inspection and rectified the problems found in the
self-inspection in accordance with the requirements of the Announcement on Launching a Special
Campaign to Improve the Governance of Listed Companies promulgated by the CSRC. The Company
complies with the requirements specified in the "Company Law", the “Securities Law”, the "Code of
Corporate Governance for Listed Companies.", and other laws and regulations in its overall company
governance with quite complete governance structure and law-compliance operation.
43
Section 5 Environment and Social Responsibility
I. Significant Issues concerning Environmental Protection
Does the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced to
the public by the environmental protection authority?
Yes
Relevant policies and industrial standards for environmental protection
Shanghai Watch Industry Co., Ltd., one of the companies in which the Company has equity participation,
is a key pollutants emission organization announced by the relevant department of environmental
protection in Shanghai. During the production process, it is required to comply with the relevant
provisions of the Emission Standard of Pollutants for Electroplating (GB21900-2008) and the Integrated
Wastewater Discharge Standard (DB31/199-2018).
Environmental protection administrative licensing
In 2018，Yangpu District Bureau of Ecology and Environment of Shanghai organized and held the Clean
Production Auditing and Assessment Seminar of Shanghai Watch Co., Ltd. where the Company's clean
production work was assessed, audited and approved. Shanghai Watch Co., Ltd.has passed the
pollution discharge verification organized by Yangpu District Bureau of Ecology and Environment of
Shanghai and has received the Pollutant Discharge Permit issued by the said authority at the end of
2019.
Since the individual non-heavy pollutant factors originally approved in the "Pollutant Discharge Permit"
did not belong to the emission scope of Shanghai Watch Industry Co., Ltd. Therefore the Company was
requested to renew the "Pollutant Emission Permit". After being re-examined by Yangpu District Bureau
of Ecology and Environment and the renewed “Pollutant Emission Permit” was approved and issued on
October 20, 2021
Industrial emission standard and specific conditions of pollutant emissions involved in production and
operation activities
Major Major
Pollutan
Name pollutan pollutan Distribut
Number Dischar t Total
of the ts and ts and ion of Total
Way of of ging Dischar dischar Over-di
Compa varieties descripti the dischar
dischar dischar concent ge ge schargi
ny or its of on of dischar ge
ging ging ration/in Standar volume ng
Subsidi specific specific ging volume
outlets tensity ds in verified
ary pollutan pollutan outlets
Force
ts ts
At the
Shangh Nickel
Nickel port of
ai Intermitt ﹤0.03, Nickel:
and effluent 290 650
Watch Waste ent and 0.1;
chromiu 1 treatme chromiu tons/ye tons/ye None
Industry water interrupt chromiu
Co.,
m
ion
nt m ﹤ m: 0.1
ar ar
effluent equipm 0.01
Ltd.
ent
Treatment of pollutants
Shanghai Watch Co., Ltd. Complied with the Emission Standard of Pollutants for Electroplating,
reconstructed the waste water treatment facility in 2016 and added 2 sets of equipment in 2018 for the
purpose of ensuring discharging of nickel and chromium effluent within the specified standard. Up to now,
the facility has been operating normally and its emission has never exceeded the limit as specified by the
standard. The Company's online monitoring terminal has been docked with the government monitoring
platform for timely testing. Ensuring the emission factors up to standard.
In compliance with the Document of Shanghai Municipal Bureau of Ecology and Environment, HU HUAN
GUI (2020) No. 6, the primary pollutant wastewater should comply with the general principle of “the water
which should be classified must be classified; the water which can be classified must be classified”.
Shanghai Watch Industry Co., Ltd. started to entrust the municipal engineering department to arrange
and improve the Company’s existing wastewater pipelines commencing from August, 2020, separate,
collect and treat the domestic sewage and electroplating effluent.
In order to implement the requirements of the Ministry of Ecology and Environment for energy saving and
consumption reduction, Shanghai Watch Industry Co., Ltd. newly added a set of membrane filtration
heavy metal device during the reporting year. As a result, its electroplating wastewater has reached the
standard for clean water after the treatment. Therefore, the Company reuses a part of the water
44
(recycling) , so that the total wastewater discharge last year was reduced by about 100 tons, and the
recycling rate was about 37%.
Environment Self-Monitoring Program
Yangpu District Bureau of Ecology and Environment of Shanghai monitors Shanghai Watch Industry Co.,
Ltd. once a quarter. The company entrusted a qualified third-party organization (Shanghai Textile Energy
Conservation Center) to monitor and issue monitoring report every six months. The Company is
equipped with online monitoring instruments and communicates with the district bureau of ecology and
environment. The platforms of the bureau and the district government are connected to the Internet to
transmit the concentration data of heavy pollution factors 24 hours a day. In response to the Shanghai
Municipal Bureau of Ecology and Environment's policy on the reduction of the emission of Category-I
heavy metal pollutants, the Company carried out product optimization and upgrading, and the
electroplating production and processing workshop was closed at the end of December 2022.
Contingency Plan for Emergent Environmental Incidents
Shanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent Environmental
Incidents and regularly organizes training and exercise every year. The aforesaid plan has been
approved and filed for record by Yangpu District Bureau of Ecology and Environment of Shanghai and
has been published on the Environmental Information Disclosure Platform of Enterprises and Institutions
of Shanghai.
Investment in environmental governance and protection and the payment of environmental protection tax
In 2022, Shanghai Watch Industry Co., Ltd. paid a total of CNY 121,200 for environmental governance
and protection.
Measures taken to reduce carbon emissions during the reporting period and their effect
Inapplicable
Administrative penalties for environmental issues during the reporting period
Inapplicable
Other environment information necessary to be disclosed
Shanghai Watch Industry Co., Ltd. has disclosed the concerned information on the Environmental
Information Disclosure Platform of Enterprises and Institutions of Shanghai according to the
requirements of the local environmental protection authorities. Website:https://e2.sthj.sh.gov.cn/.
Other information in connection with the environmental protection
Inapplicable
II. Social Responsibilities
For the detail, please refer to the "2022 Corporate Social Responsibility Report" disclosed by the
Company on www.cninfo.com.cn. on March 18, 2023.
III. Consolidating and Expanding the Achievements of Poverty Alleviation and Rural Revitalization
During the reporting period, the Company purchased "LoveAviation" agricultural products in conjunction
with traditional Chinese festivals such as the Dragon Boat Festival and Mid-Autumn Festival through the
aviation industry consumption assistance platform "LoveAviation", to help poverty-stricken counties such
as Guizhou to get rid of poverty; has continuously cooperated with Shanghai Dream Charitable
Foundation since 2012, built by donation 32 “Dream Centers” in 11 provinces including Guizhou,
Fujian,etc. helping nearly 40,000 children in poverty-stricken areas enjoy high-quality literacy education
courses and made contribution to rural revitalization.
45
Section 6 Significant Events
I. Implementation of Commitments
1. Commitments finished in implementation by the Company, shareholders, actual controller,
acquirer, directors, supervisors, senior executives or other related parties in the reporting period
and commitments unfinished in implementation at the end of the reporting period
Inapplicable
2. There existed profit anticipation for the Company’s assets or projects while the reporting
period was still within the duration of the profit anticipation. The Company made explanation on
whether the assets or projects reached the anticipated profit and the cause
Inapplicable
II. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its
Related Parties
Inapplicable
III. Outward guarantee against regulations
Inapplicable
IV. Explanation of the Board of Directors on the Qualified Auditors' Report for the Latest Period
Issued by the CPAs
Inapplicable
V. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors
(if any) on the “Qualified Auditor’s Report” issued by the CPAs in the Reporting Period
Inapplicable
VI. Explanation of changes in accounting policies, accounting estimates or correction of
significant accounting errors compared with the financial report of the previous year
Inapplicable
VII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with
the Financial Report of the Previous Year
Inapplicable
VIII. Engagement/Disengagement of CPAs
The CPAs currently engaged by the Company
Da Hua Certified Public Accountants (Special
Name of the domestic CPAs General Partnership)
Remuneration to the domestic CPAs (in CNY 120
10,000)
Successive years of the domestic CPAs offering 2
auditing services
Name of the certified public accountants from the Long Jiao and Wang Dong
domestic CPAs
Successive years of the domestic CPAs offering 2
auditing services
Has the CPAs been changed for the reporting period?
No
Employment of CPAs, financial consultant or sponsor for auditing the internal control
After the review and approval at the Company's 2021 Annual General Meeting, the Company appointed
Da Hua Certified Public Accountants (Special General Partnership) as the auditor of Company's 2022
annual financial statements and the internal control.
46
IX. Delisting Possibly to be Confronted with after Disclosure of the Annual Report
Inapplicable
X. Matters concerning Bankruptcy Reorganization
Inapplicable
XI. Significant Lawsuits and Arbitrations
Inapplicable
XII. Penalty and Rectification
Inapplicable
XIII. Integrity of the Company, its Controlling Shareholder and Actual Controller
Inapplicable
XIV. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Inapplicable
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Inapplicable
5. Transactions with the finance company with incidence relation
Deposit business
Amount incurred in the
reporting period
Maximum Total Total
Opening amount amount Ending
deposit limit Deposit
Related Incidence balance deposited withdrawn balance
per day interest
party relation (CNY during the during the (CNY
(CNY range
10,000) reporting reporting 10,000)
10,000)
period (in period (in
CNY CNY
10,000) 10,000)
Finance
company
AVIC
with 80,000 1.665% 14,778.6 374,432.54 362,078.44 27,132.7
Finance
incidence
relation
Loan business
Amount incurred in the
reporting period
Loan Opening Total Ending
Loan Total loan
Related Incidence amount balance repayments balance
interest rate during the
party relation (CNY (CNY during the (CNY
range reporting
10,000) 10,000) reporting 10,000)
period (in
period (in
CNY
CNY
10,000)
10,000)
Finance
company
AVIC
with 80,000 2.7%-3.65% 0 20,000 20,000 0
Finance
incidence
relation
47
Credit extension and other financial business
During the reporting period, the balance of the daily maximum related deposits and loans between the
Company and AVIC Finance did not exceed the above-mentioned limit as specified in the financial
service agreement, and there were no credit grants or other financial services incurred for time being. At
the same time, the Company issued the "Risk Assessment Report on the Related Deposits and Loans
with AVIC Finance Co., Ltd." for the above matters every six months.
6. Transactions between the finance company controlled by the Company and the related parties
Inapplicable
7. Other Significant Related Transactions
The 6th Session of the Tenth Board of Directors held on March 08, 2022 and 2021 Annual General
Meeting held on May 13, 2022 reviewed and approved the Proposal on the Prediction of the Regular
Related Transactions of Year 2022. During the reporting period, the cumulative transaction amount of the
Company's related transactions related to its daily operations was within the expected range of the year.
Inquiry on the website for disclosing the provisional report concerning significant related transactions
Description of the provisional announcements Date of disclosure Disclosure website
Announcement on the Resolution of the 6th Session
March 10, 2022 http://www.cninfo.com.cn/
of the Tenth Board of Directors, 2022-007
Announcement of the Prediction of the Regular
March 10, 2022 http://www.cninfo.com.cn/
Related Transactions in 2022, 2022-010
Announcement on the Resolution of 2021 Annual
May 14, 2022 http://www.cninfo.com.cn/
General Meeting, 2022-026
XV. Important Contracts and Implementation
1. Custody, Contacting and Leases
(1) Custody
Inapplicable
(2) Contracting
Inapplicable
(3) Leases
Inapplicable
2. Significant Guarantees
In CNY 10,000
Outward Guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries)
Date of
the Actual Counte
Names Guaran
announce Date of amoun Type of Collat r Guaran Implement
of Guaran tee to
ment on occurre t of guarante eral (if guaran tee ation
Guarant tee line related
the nce guaran e any) tee (if period status
ees party?
guarantee tee any)
line
Inapplic
able
Total amount of
Total amount of
outward guarantee
outward guarantee 0 0
actually incurred in
approved in the report
the report period
period (A1)
(A2)
Total amount of Total ending
outward guarantee balance of outward
already approved at 0 guarantee at the 0
the end of the report end of the report
period (A3) period (A4)
Guarantee to the subsidiaries
Names Date of Guaran Date of Actual Type of Collat Counte Guaran Implement Guaran
48
of the tee line occurre amoun guarante eral (if r tee ation tee to
Guarant announce nce t of e any) guaran period status related
ees ment on guaran tee (if party?
the tee any)
guarantee
line
Shenzh
en
Harmon Guarant
y ee with
March Decem
World 35,000 15,000 joint 1 year No No
10, 2022 ber 30,
Watch responsi
2022
Limited bility
Compan
y
Total amount of
Total guarantee quota guarantee to the
to the subsidiaries 35,000 subsidiaries 15,000
approved in the actually incurred in
reporting period (B1) the reporting period
(B2)
Total balance of
Total guarantee quota
actual guarantee to
to the subsidiaries
35,000 the subsidiaries at 15,000
approved at the end of
the end of the
the reporting period
reporting period
(B3)
(B4)
Guarantee among the subsidiaries
Date of
the Actual Counte
Names Guaran
announce Date of amoun Type of Collat r Guaran Implement
of Guaran tee to
ment on occurre t of guarante eral (if guaran tee ation
Guarant tee line related
the nce guaran e any) tee (if period status
ees party?
guarantee tee any)
line
Inapplic
able
Total amount of
Total guarantee quota guarantee to the
to the subsidiaries 0 subsidiaries 0
approved in the actually incurred in
reporting period (C1) the reporting period
(C2)
Total balance of
Total guarantee quota
actual guarantee to
to the subsidiaries
0 the subsidiaries at 0
approved at the end of
the end of the
the reporting period
reporting period
(C3)
(C4)
Total amount of guarantees (i.e. Total of the previous three major items)
Total guarantee quota Total amount of
to the subsidiaries outward guarantee
approved in the 35,000 actually incurred in 15,000
reporting period the reporting period
(A1+B1+C1) (A2+B2+C2)
Total amount of Total ending
guarantees already balance of
approved at the end of 35,000 guarantees at the 15,000
the reporting period end of the reporting
(A3+B3+C3) period (A4+B4+C4)
Proportion of the actual guarantees in the 4.78%
Company’s net assets (namely A4+B4 + C4)
Where
Amount of guarantees offered to the
shareholders, actual controller and its related 0
parties (D)
Amount of guarantee for liabilities directly or
indirectly offered to the guarantees with the 0
asset-liability ratio exceeding 70% (E)
Guarantee with total amount exceeding 50% 0
of the net assets (F)
Total amount of the aforesaid three 0
guarantees (D+E+F)
For the guarantee contract not yet due,
guarantee responsibility incurred in the Inapplicable
reporting period or there is evidence showing
49
the description of the possible related
discharge duty (if any)
Note to the outward guarantee against the Inapplicable
established procedures (if any)
Description of the guarantee with complex method
Inapplicable
3. Entrusting a Third Party to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Other Important Contracts
Inapplicable
XVI. Notes to Other Significant Events
1. About the Amendment of the Articles of Association
Reviewed and approved at the 7th session of the Tenth Board of Directors and 2021 Annual General
Meeting, the Company decided to revise partial articles of the Articles of Association of the Company
according to the law and regulations. For detail, please refer to the “Plan for Revising the Articles of
Association” and “Announcement on the Resolution of 2021 Annual General Meeting 2022-026 disclosed
by the Company on http://www.cninfo.com.cn/ on April 23, 2022 and May 14, 2022 respectively.
Reviewed and approved at the 10th session of the Tenth Board of Directors, the Company, based on the
authorization of 2019 1st Extraordinary General Meeting, 2021 1st Extraordinary General Meeting and
2021 5th Extraordinary General Meeting, revised partial articles of the "Articles of Association" . For
details, please refer to the Proposal for the Amendment of the Articles of Association and the
“Announcement on the Resolution of the 10th Session of the Tenth Board of Directors 2022-046”
disclosed by the Company on http://www.cninfo.com.cn/ on December 21, 2022.
2. Repurchase of Partial Domestically Listed Foreign Investment Shares (B-Shares)
The Company’s 2nd Session of the Tenth Board of Directors and 2021 5th Extraordinary General
Meeting reviewed and approved the “Proposal on Repurchase of Partial Domestically Listed Foreign
Shares (B- Shares), and subsequently disclosed the repurchase report and series of progress
announcements in accordance with relevant regulations. Ended November 29, 2022, the repurchase of
the shares was finished in implementation and the relevant shares had been canceled. For the detail,
please refer to the “Announcement on the Expiration and the Implementation Result of the Repurchase of
Partial Domestically Listed Foreign Investment Shares (B-Shares) 2022-045”and the “Announcement of
Completion of the Cancellation of Partial Domestically Listed Foreign Investment Shares (B-Shares) as
Repurchased and Change of the Company’s Shares 2022-045 disclosed in the Securities Times, Hong
Kong Commercial Daily and http://www.cninfo.com.cn respectively on November 30, 2022 and
December 17, 2022.
XVII. Significant Events of the Company's Subsidiaries
Inapplicable
50
Section 7 Change of the Shares and Particulars about Shareholders
I. Change of the Shares
1. Change of the Shares
In shares
Before the change Increase/decrease (+, -) upon the change After the change
Bonu Shares
New
Proportio s converte Proportio
Quantity issuin Others Sub-total Quantity
n share d from n
g
s reserve
I. -1,908,17 -1,908,17
Restricted 10,135,484 2.38% 0 0 0 8,227,310 1.97%
4 4
shares
1.
Shares 0 0.00% 0 0 0 0 0 0 0.00%
held by the
state
2. State
corporate 0 0.00% 0 0 0 0 0 0 0.00%
shares
3. Other -1,908,17 -1,908,17
domestic 10,135,484 2.38% 0 0 0 8,227,310 1.97%
4 4
shares
Includi
ng:
Domestic 0 0.00% 0 0 0 0 0 0 0.00%
corporate
shares
Share
s held by -1,908,17 -1,908,17
domestic 10,135,484 2.38% 0 0 0 8,227,310 1.97%
4 4
natural
persons
4.
Foreign 0 0.00% 0 0 0 0 0 0 0.00%
invested
shares
Includi
ng:
Foreign 0 0.00% 0 0 0 0 0 0 0.00%
corporate
shares
Share
s held by
foreign 0 0.00% 0 0 0 0 0 0 0.00%
natural
persons
II. 415,915,53 -6,514,88 -6,514,88 409,400,65
Unrestricte 97.62% 0 0 0 98.03%
1 1 1 0
d shares
1. CNY 357,991,61 1,472,33 1,472,33 359,463,95
ordinary 84.03% 0 0 0 86.07%
7 6 6 3
shares
2.
Foreign
invested -7,987,21 -7,987,21
shares 57,923,914 13.60% 0 0 0 49,936,697 11.96%
7 7
listed in
Mainland
China
3.
Foreign
invested 0 0.00% 0 0 0 0 0 0 0.00%
shares
listed
abroad
4. 0 0.00% 0 0 0 0 0 0.00%
Others
III. Total 426,051,01 -8,423,05 -8,423,05 417,627,96
100.00% 0 0 0 100.00%
shares 5 5 5 0
Cause of the change of shares
51
1. During the reporting period, the release conditions of the second restriction release period for the
Company’s restricted stock incentive plan (Phase I) were satisfied, and the restricted shares
corresponding to the release were listed for trading and as a result, 1,244,421 shares of the restricted
shares were reduced (converted into circulating shares);
2. During the reporting period, 227,915 restricted shares (converted into tradable shares) were reduced
due to the adjustment of the transferable quota of the senior executives;
3. During the reporting period, due to the resignation of six original incentive objects of the Company's
first and second restricted stock incentive plans, the Company repurchased and canceled 435,838
A-share restricted shares held by them in total, which had been granted but had not been released from
the restrictions, and therefore 435,838 restricted shares were reduced(the Company's share capital was
reduced);
4. During the reporting period, the Company finished the implementation of repurchase of partial
domestically listed foreign shares (B-shares), and finished cancellation of the repurchased B-shares. As
a result, 7,987,217 circulating shares were reduced (the Company’s share capital was reduced).
In view of the aforesaid reason, the Company’s total share capital decreased by 8,423,055 shares, and
the total share capital decreased from 426,051,015 shares to 417,627,960 shares.
Approval of the Change of the Shares
Authorized and approved by 2021 5th Extraordinary General Meeting, the Company canceled 7,987,217
B-shares accumulatively repurchased during the reporting period.
With the approval of the Company's 2021 Annual General Meeting, the Company repurchased and
canceled 435,838 A-share restricted shares that had been granted to 6 former incentive objects but the
restriction had not yet been relieved.
Transfer of the Shares Changed
Verified and confirmed by China Securities Depository & Clearing Corporation Limited Shenzhen Branch,
as at July 11, 2022, the Company completed repurchase and cancellation of 435,838 A-share restricted
stock and finished the cancellation of the 7,987,217 shares of the repurchased B-shares by December 15,
2022.
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS,
net asset value per share attributable to the common stockholders in the past year and the latest period
Earnings per share
Net return on equity, weighted
average (%)
Basic earning per share (CNY/share) Diluted earning per share (CNY/share)
2022 2021 2022 2021 2022 2021
8.68% 13.39% 0.6398 0.9036 0.6398 0.9036
Other information the Company considers necessary or required by the securities regulatory authority to
be disclosed.
Inapplicable
2. Change of the Restricted Shares
In shares
Number of Number of Number of Number of
restricted restricted restricted restricted
Date of
Names of the shares at the shares shares shares at the Cause of
relieving the
Shareholders beginning of increased in relieved in the end of the restriction
restriction
the reporting the reporting reporting reporting
period period period period
To be
unlocked
subject to the
Locked and
conditions of
not yet
the locked
unlocked
shares for
Li Ming 247,530 0 33,280 214,250 restricted
senior
shares held by
executives and
the senior
the measures
executives
for the
Company’s
equity
52
incentive
management
To be
unlocked
subject to the
conditions of
Locked and
the locked
not yet
shares for
unlocked
senior
Pan Bo 247,500 0 33,280 214,220 restricted
executives and
shares held by
the measures
the senior
for the
executives
Company’s
equity
incentive
management
To be
unlocked
subject to the
conditions of
Locked and
the locked
not yet
shares for
unlocked
senior
Lu Wanjun 247,500 0 33,280 214,220 restricted
executives and
shares held by
the measures
the senior
for the
executives
Company’s
equity
incentive
management
To be
unlocked
subject to the
conditions of
Locked and
the locked
not yet
shares for
unlocked
senior
Liu Xiaoming 247,500 0 33,280 214,220 restricted
executives and
shares held by
the measures
the senior
for the
executives
Company’s
equity
incentive
management
To be
unlocked
Not yet subject to the
unlocked measures for
Chen Libin 306,700 0 93,300 213,400
restricted the Company’s
shares equity
incentive
management
To be
unlocked
subject to the
conditions of
Locked and
the locked
not yet
shares for
unlocked
senior
Tang Haiyuan 195,000 0 24,960 170,040 restricted
executives and
shares held by
the measures
the senior
for the
executives
Company’s
equity
incentive
management
To be
unlocked
Not yet subject to the
unlocked measures for
Bao Xianyong 160,020 0 19,980 140,040
restricted the Company’s
shares equity
incentive
management
To be
Not yet unlocked
unlocked subject to the
Sun Lei 160,020 0 19,980 140,040
restricted measures for
shares the Company’s
equity
53
incentive
management
To be
unlocked
Not yet subject to the
unlocked measures for
Sheng Li 160,020 0 19,980 140,040
restricted the Company’s
shares equity
incentive
management
To be
unlocked
subject to the
Locked and conditions of
not yet the locked
unlocked shares for
restricted senior
Others 8,163,694 33,320 1,194,336 6,566,840
shares held by executives and
the retired the measures
senior for the
executives Company’s
equity
incentive
management
Total 10,135,484 33,320 1,505,656 8,227,310 -- --
II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting period
Inapplicable
2. Note to changes of the Company’s total shares and the structure of shareholders as well as the
structure of assets and liabilities
Same as the description in “the Cause of the Change of Shares”.
3. Existing Employee Shares
Inapplicable
III. Shareholders and Actual Controlling Shareholder
1. Number of Shareholders and Shareholding
In shares
Total
preference
shareholder
Total s with the
common voting
Total preference
Total shareholder power
shareholders
common s at the end recovered
with the voting
shareholder of the at the end
31,527 36,789 power recovered 0 0
s at the end month of the
at the end of the
of the before the month
reporting period
reporting date of before the
(if any) (Refer to
period disclosing day of
Note 8)
the annual disclosing
report the Annual
Report (if
any) (Refer
to Note 8)
Shares held by the shareholders holding over 5% shares or the top ten shareholders
Pledging,
Number of marking or
Number freezing
Names of Nature of shares
Increase/decrea of the Quantity of
the the Shareholdin held at the Statu
se in the restricte unrestricted
Shareholder sharehold g proportion end of the s of
reporting period d shares shares held Quantit
s er reporting the
held y
period share
s
54
AVIC
Internationa State 162,977,32 162,977,32
39.02% 0 0
l Holding corporate 7 7
Limited
Domestic
# Wu Jilin natural 4.30% 17,945,614 17,945,614 0 17,945,614
person
Domestic
# Xu
natural 1.26% 5,264,768 4,772,468 0 5,264,768
Guoliang
person
Domestic
Qiu Hong natural 0.57% 2,370,000 70,000 0 2,370,000
person
Domestic
#Zhu Rui natural 0.41% 1,702,600 1,702,600 0 1,702,600
person
Domestic
Li Shuyuan natural 0.33% 1,377,600 1,377,600 0 1,377,600
person
Domestic
# Qu
natural 0.30% 1,266,800 1,266,800 0 1,266,800
Yongjie
person
Domestic
# Zhang
natural 0.29% 1,228,200 1,228,200 0 1,228,200
Mingrong
person
Domestic
Lu
natural 0.28% 1,166,100 566,100 0 1,166,100
Shaowen
person
Domestic
Chen Hao natural 0.26% 1,088,943 47,800 0 1,088,943
person
About the fact that a
strategic investor or
ordinary corporate
became one of the top ten Inapplicable
shareholders due to
placement of new shares
(if any) (Refer to Note 3)
Explanation on associated
relationship or consistent The Company has no idea on whether the above 10 shareholders are associated or are acting
action of the above in concert.
shareholders
Note to the aforesaid Among the above shareholders, AVIC International Holding Limited authorized representatives
shareholders involving to exercise voting rights on their behalf in the Company’s 2021 Annual General Meeting with the
entrusting/being entrusted number of representative shares being 162,977,327 shares. For the result of the voting, refer to
with voting power and the the relevant announcement published by the Company on http://www.cninfo.com.cn.
waiver of voting power
There is a special
repurchase account
among the top 10
shareholders (if any) (see
Note 10) Special note to Inapplicable
the designated
repurchase account in top
10 shareholders (if any)
(Refer to Note 10)
Shares held by top 10 shareholders of unrestricted shares
Names of the Quantity of unrestricted shares held at the end of the Share type
Shareholders reporting period Share type Quantity
AVIC International Holding CNY ordinary
162,977,327 162,977,327
Limited shares
CNY ordinary
# Wu Jilin 17,945,614 17,945,614
shares
CNY ordinary
# Xu Guoliang 5,264,768 5,264,768
shares
CNY ordinary
Qiu Hong 2,370,000 2,370,000
shares
CNY ordinary
#Zhu Rui 1,702,600 1,702,600
shares
CNY ordinary
Li Shuyuan 1,377,600 1,377,600
shares
CNY ordinary
# Qu Yongjie 1,266,800 1,266,800
shares
CNY ordinary
# Zhang Mingrong 1,228,200 1,228,200
shares
CNY ordinary
Lu Shaowen 1,166,100 1,166,100
shares
55
CNY ordinary
Chen Hao 1,088,943 1,088,943
shares
Explanation to the
associated relationship or
consistent action among
the top 10 shareholders
of non-restricted The Company has no idea on whether the above 10 shareholders are associated or are acting
negotiable shares and that in concert.
between the top 10
shareholders of
non-restricted negotiable
shares and top 10
shareholders.
1. In addition to the 11,221,862 shares held through the ordinary securities account, Wu Jilin,
one of the shareholders of the Company, also holds 6,723,752 shares through the credit
transaction guarantee securities account. Therefore, Wu Jilin is actually holding 17,945,614
shares;
2. In addition to the 4,604,568 shares held through the ordinary securities account, Xu Guoliang,
one of the shareholders of the Company, also holds 660,200 shares through the credit
transaction guarantee securities account. Therefore, Xu Guoliang is actually holding 5,264,768
Note to the top 10 shares;
common shareholders
involved in margin 3. In addition to the 107,900 shares held through the ordinary securities account, Zhu Rui, one
financing & securities of the shareholders of the Company, also holds 1,594,700 shares through the credit transaction
lending (if any) (Refer to guarantee securities account. Therefore, Wu Jilin is actually holding 1,702,600 shares;
Note 4)
4. In addition to the 22,800 shares held through the ordinary securities account, Qu Yongjie, one
of the shareholders of the Company, also holds 1,244,000 shares through the credit transaction
guarantee securities account. Therefore, Qu Yongjie is actually holding 1,266,800 shares;
5. In addition to the 0 shares held through the ordinary securities account, Zhang Mingrong, one
of the shareholders of the Company, also holds 1,228,200 shares through the credit transaction
guarantee securities account. Therefore, Zhang Mingrong is actually holding 1,228,200 shares;
Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct
contractual repurchase during the reporting period?
No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned shareholding directly under the central government
Type of the controlling shareholder: corporate
Name of the
Legal Representative Leading business
Controlling Date of incorporation Organization Code
/Leader activities
Shareholder
Investment in
industries (specific
projects are subject to
application for
approval); domestic
AVIC International trade, material supply
Li Bin June 20, 1997 91440300279351229A
Holding Limited and distribution (with
commodities for
exclusive operation,
exclusive control and
monopoly exclusive);
import and export.
Equity in other
domestic and foreign
listed companies held
by the controlling AVIC International Holdings Limited holds 11.86% equity in Tianma Micro-electronics Co., Ltd.
shareholder by means (000050) and 63.97% equity in Shennan Circuits Company Limited (002916).
of control and mutual
shareholding in the
reporting period.
Change of the controlling shareholder in the reporting period
Inapplicable
3. Actual Controller and its Concerted Parties
Nature of the actual controller: State-owned assets regulatory agency directly under the central
government
56
Type of the actual controller: corporate
Name of the Actual Legal Representative Leading business
Date of incorporation Organization Code
Controller /Leader activities
Operating
state-owned assets
within the scope of
authorization of the
State Council; military
aircraft and engines,
guided weapons,
military gas turbines,
weapons and
equipment supporting
systems and products
research, design,
development, testing,
production, sales,
maintenance,
guarantees and
services, etc.;
investment and
management of
finance, lease,
general aviation
services,
transportation,
medical care,
engineering survey
and design,
engineering
contracting and
construction, real
estate development
and other industries;
design, research,
development, testing,
production, sales and
Aviation Industry
maintenance services
Corporation of China, Tan Ruisong November 06, 2008 91110000710935732K
of civil aircraft and
Ltd.
engines, airborne
equipment and
systems, gas turbines,
automobiles and
motorcycles and
engines (including
parts and
components),
refrigeration
equipment, electronic
products,
environmental
protection equipment
and new energy
equipment; equipment
leasing; engineering
survey and design;
project contracting
and construction; real
estate development
and operation;
technology transfer
and technical services
related to the above
businesses; import
and export business;
technical development
and sales of ships;
engineering
equipment technology
development;
technology
development of new
energy products.
In addition to holding the Company's equity, AVIC, directly or indirectly, holds or controls the shares
Equity in other of domestic and foreign listed companies: holding 27.66% equity in Tianma Micro-electronics Co.,
domestic and foreign Ltd. (000050), 51.74% in China Avionics Systems Co., Ltd. (SZ.002013), 37.68% in AVIC Jonhon
listed companies Optronic Technology Co.,Ltd. (SZ.002179), 50.79% in Sichuan Chengfei Integration Technology
controlled by the Corp. Ltd. (SZ.002190), 64.24% in Shennan Circuits Company Ltd. (002916), 53.79% in Zhonghang
actual controller in the Electronic Measuring Instruments Co.,Ltd., (SZ.300114), 49.30% in AVICOPTER PLC
reporting period. (SH.600038), 48.15% in Jiangxi Hongdu Aviation Industry Co., Ltd. (SH.600316), 66.31% in
57
China Avionics Systems Co., Ltd. (SH.600372), 46.29% in Guizhou Guihang Automotive
Components Co., Ltd. (SH.600523), 48.19% in AVIC Industry-finance Holdings Co., Ltd.
(SH.600705), 69.16% in AVIC Shenyang Aircraft Company Limited (SH.600760), 38.15% in AVIC
Heavy Machinery Co., Ltd. (SH.600765), 39.78% in Baosheng Science And Technology Innovation
Co., Ltd. (SH.600973), 46.40% in AVIC International Holding (HK) Limited (HK.0232); 64.94% in
AVIC Forstar S&T Co., Ltd (HK.1316), 62.30% in AVICHINA INDUSTRY & TECHNOLOGY
COMPANY LIMITED (HK.2357), 89% in KHD Humboldt Wedag International AG (KWG:GR), 55% in
FACC AG (AT00000FACC), 54.91% in AVIC Xi’an Aircraft Industry Group Co., Ltd. (SZ.000768),
56.19% in AVIC Hefei Jianghang Aircraft Equipment Corporation Ltd. (SH.688586), 45.21% in
AVIC Aviation High-Technology Co., Ltd. (SH.600862), 46.64% in AVIC FORSTAR Technology Co.,
Ltd. (BJ.835640), and 53.66% in AVIC (CHENGDU) UAS CO., LTD. (688297.SH).
Change of the actual controller in the reporting period
Inapplicable
Block Diagram of the Ownership and Control Relations between the Company and the Actual Controller
The actual controller controls the Company by means of trust or managing the assets in other ways:
Inapplicable
4. The number of shares pledged by the Company's controlling shareholder or the first major
shareholder and its persons acting in concert having accounted for 80% of the shares held by
them
Inapplicable
5. Other Corporate Shareholder Holding over 10% of the Company’s Shares
Inapplicable
6. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, the
Reorganizing Party and other Committing Party
Inapplicable
IV. Specific implementation of the repurchase of shares during the reporting period
Progress of implementation of the stock repurchase
Proposal Number of Proportion Amount for Duration for Number of Proportion
Purpose of
disclosure shares to be in the total the planned the planned shares of the
repurchase
time repurchased share repurchase repurchase already number of
58
(shares) capital (CNY10,000) repurchased shares
(shares) repurchased
in the target
shares
involved in
the equity
incentive
plan (if any)
No lower Canceled
than CNY 50 according to
7.46 million November
million but the law and
October shares to 1.75% to 30, 2021 to
not the 7,987,217
27, 2021 14.92 million 3.5% November
exceeding registered
shares 29, 2022
CNY 100 capital
million decreased
Progress of implementation of reduction of the holding size of the shares repurchased by centralized
bidding
Inapplicable
59
Section 8 About the Preferred Shares
Inapplicable
Section 9 About Bonds
Inapplicable
60
FIYTA Precision Technology Co., Ltd.
Independent Auditor’s Report
D.H.S.Z. [2023]000189
Da Hua Certified Public Accountants（Special General Partnership）
FIYTA Precision Technology Co., Ltd.
Independent Auditor’s Report and Financial Statements
(1 January 2022 to 31 December 2022)
Content Page
I. Independent Auditor’s Report 1-7
II. Audited Financial Statements
Consolidated Balance Sheet 1-2
Consolidated Statement of Comprehensive 3
Income
Consolidated Cash Flow Statement 4
Consolidated Statement of Changes in Equity 5-6
Parent Company’s Balance Sheet 7-8
Parent Company’s Statement of Comprehensive 9
Income
Parent Company’s Cash Flow Statement 10
Parent Company’s Statement of Changes in 11-12
Equity
Notes to Financial Statements 13-118
Da Hua Certified Public Accountants (Special General Partnership)
12th Floor, Building 7, No. 16, Xisihuan Middle Road, Haidian District, Beijing [100039]
Tel: 86 (10) 5835 0011 Fax: 86 (10) 5835 0006
www.dahua-cpa.com
Independent Auditor’s Report
D.H.S.Z.[2023]000189
To the Shareholders of FIYTA Precision Technology Co., Ltd.:
I.Audit Opinion
We have audited the accompanying financial statements of FIYTA Precision
Technology Co., Ltd. (herein after “FIYTA Ltd.” or the Company) , which comprise
the consolidated and the parent company’s balance sheet as at 31 December 2021, the
consolidated and the parent company’s statement of comprehensive income, the
consolidated and the parent company’s cash flow statements and the consolidated and
the parent company’s statement of changes in equity for the year then ended, and
notes to the financial statements.
In our opinion, the accompanying financial statements present in all material
respects in accordance with the requirements of Accounting Standards for Business
Enterprises, and fairly reflect FIYTA Ltd.’s financial position at 31 December 2021
and the financial performance and cash flows for the year then ended.
II.Basis for Audit Opinion
We conducted our audit in accordance with CICPA Standards on Auditing
(“CSAs”) . In ‘Certified Public Accountant’s Responsibilities for the Audit of
Financial Statements’ of this report, our responsibilities under these standards are
described. Those standards require that we comply with CICPA professional ethical
requirements, that we are independent from FIYTA Ltd. and have fulfilled all other
ethical obligations. We believe that we have obtained sufficient and appropriate audit
evidence as basis of for our opinion.
III.Key Audit Matters
Independent Auditor’s Report - Page 1
D.H.S.Z.[2023]000189
Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the financial statements of the current period. These
matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
We have determined the following key audit matters that need to be
communicated in audit report.
(I) Existence of inventory and its net realizable value
1. Description
As at 31 December 2022, the book balance, provision for decline in value, and
carrying amount of inventory were RMB2,255.18million, RMB113.86 million and
RMB2,141.32 million respectively. The carrying amount of inventory accounts for
52.01% of the total assets of the Company.
(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and other
branded watches, the main inventory of FIYTA Ltd are finished watches and watch
components. The inventories are distributed in stores, regional warehouses, resellers’
warehouses and the Company’s warehouses which caused difficulty in inventory
physical observation;
(ii) The management of FIYTA Ltd measures inventory at lower of cost and net
realizable value (NRV) at balance sheet date. Where the cost of an inventory exceeds
its NRV, the difference is recognized as provision for decline in value. The
determination of NRV involves significant judgment and estimates by the
Management.
Inventory value is significant to the Company’s assets and it requires significant
judgement by the Management, as a result, we identified existence of inventory and
its net realizable value as key audit matters.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operating effectiveness
of internal controls of procurement and payment, production and storage, and the
provision for decline in value of inventory;
(ii) Using the work of experts to conduct IT audit to information system and
evaluating the authenticity and accuracy of business data which related to financial
Independent Auditor’s Report - Page 2
D.H.S.Z.[2023]000189
statements.
(iii) Understanding and evaluating the appropriateness of the Company’s policy
in provision for decline in value;
(iv) Understanding and inquiring the locations of inventory storage,
measurement method of inventory so as to determining the scope of inventory
physical observation;
(v) Discussing physical inventory count status with the Management and
attending the physical inventory count and conducting observation and test count on
site to check the quantity of the inventories and observe their condition.
(vi) Obtaining the ageing report of inventory and taking into consideration of
inventory condition in order to perform analytical review on the ageing as well as
analyze the reasonableness of provision for decline in value;
(vii) Reviewing and evaluating the appropriateness of significant estimates made
by the Management in determining the NRV of inventory;
(viii) Obtaining the calculation of provision for decline in value of inventory,
reviewing whether the provision was made in compliance with relevant accounting
policies and performing recalculation of provision. Checking the movements of prior
year’s provision and analyzing whether the provision was adequately accrued in prior
period.
(ix) Tracing samples of large purchases in current period to their corresponding
contracts and tax invoices, and inspecting their purchase requisition form and goods
receipt notes.
Based on audit work conducted above, we believe that the inventory exists and
the measurement is reasonable stated according to the Company’s policies.
(II) Revenue recognition
1. Description
In 2022, the Company’s income from main business was RMB4,354.10 million.
The Company’s revenue mainly comes from sales of FIYTA brand watches and
distribution of other branded watches. Except for small amount of sales by direct sales
and consignment sales of FIYTA brand watches, most of the sales of FIYTA brand
watches and other branded watches are sold through shops in department store and
on-line shops. Refer to Note III 31 for accounting policy relating to revenue
recognition.
Independent Auditor’s Report - Page 3
D.H.S.Z.[2023]000189
Operating revenue represents major line item in income statement and is main
source of profit, the accuracy and completeness of revenue recognition have
significant impact to the Company’s profit, as a result, we identified revenue
recognition as a key audit matter.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operating
effectiveness of internal controls relating to revenue recognition;
(ii) Using the work of experts to conduct IT audit to information system and
evaluating the authenticity and accuracy of business data which related to financial
statements.
(iii) Obtaining and understanding accounting policies relating to revenue
recognition, and reviewing and evaluating whether the point in time of control right
transfer, measurement of transaction price and accounting for special transactions are
complied with the accounting standards;
(iv) Selecting samples from current year’s transaction records, and tracing
them to supporting documents such as contract, tax invoice and goods dispatch note
(if applicable) and courier waybill (if applicable) ;
(v) In connection with audit of accounts receivable, selecting major
customers and confirming corresponding sales in current year and year-end balance;
(vi) Conducting cut-off test to revenue recognized before and after the balance
sheet date by selecting samples to check supporting documents such as contract, tax
invoice and goods dispatch note (if applicable) and courier waybill (if applicable) to
evaluate whether the revenue was recorded in appropriate accounting period.
Based on audit work conducted above, we believe that the Company’s revenue
recognition is in conformity to its revenue recognition policy.
IV.Other Information
The management of FIYTA Ltd (the “Management”) are responsible for the
Other Information. The Other Information comprises all of the information included
in the Company’s annual report other than the financial statements and our auditors’
report thereon.
Our opinion expressed on the financial statements does not cover the Other
Information and we do not express any form of assurance conclusion thereon.
Independent Auditor’s Report - Page 4
D.H.S.Z.[2023]000189
In connection with our audit of the financial statements, our responsibility is to
read the Other Information and, in doing so, consider whether the Other Information
is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this Other Information, we are required to report that fact. We have
nothing to report in this regard.
V.Responsibilities of the Management and those Charged with
Governance for the Financial Statements
The Management of the Company is responsible for the preparation of the
financial statements that give a fair view in accordance with Accounting Standards for
Business Enterprises and for the design, implementation and maintenance of such
internal controls as the Management determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Management is responsible for
assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the Management either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Those who charged with governance is responsible for overseeing the
Company’s financial reporting process.
VI.Auditors’ Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with China Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these
Independent Auditor’s Report - Page 5
D.H.S.Z.[2023]000189
financial statements.
As part of an audit in accordance with China Standards on Auditing, we exercise
professional judgment and maintain professional skepticism throughout the audit. We
also:
1. Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
2. Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Management.
4. Conclude on the appropriateness of the Management’s use of the going
concern basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required, according to China Standards on
Auditing, to draw attention in our auditors’ report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements represent
the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within FIYTA Ltd to express an
opinion on the financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit
Independent Auditor’s Report - Page 6
D.H.S.Z.[2023]000189
opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we
determine those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Da Hua Certified Public Accountants
CICPA:
(Special General Partnership)
Engagement partner Long Jiao
Beijing, China CICPA:
Wang Dong
16 March 2023
Independent Auditor’s Report - Page 7
Consolidated Balance Sheet
As at 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Assets NoteV Closing Balance Closing Balance of prior period
Current assets:
Monetary funds note 1 313,747,463.64 210,254,737.14
Financial assets held for trading
Derivative financial assets
Notes receivable note 2 32,214,912.10 61,258,145.80
Accounts receivable note 3 305,290,959.68 388,885,601.28
Accounts receivable financing
Prepayments note 4 8,039,794.97 7,946,750.81
Other receivables note 5 56,918,019.48 61,553,267.82
Inventories note 6 2,141,320,373.67 2,050,148,750.89
Contract assets
Held-for-sale assets
Current portion of non-current
assets
Other current assets note 7 66,339,505.32 72,698,692.72
Total current assets 2,923,871,028.86 2,852,745,946.46
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments note 8 58,182,086.90 55,155,605.31
Investment in other equity
note 9 85,000.00 85,000.00
instruments
Other non-current financial assets
note
Investment properties 374,979,494.71 383,425,916.35
10
note
Fixed assets 364,628,765.17 349,495,316.65
11
Construction in progress
Productive biological assets
Oil and gas assets
note
Right-of-use assets 110,330,512.03 147,932,475.42
12
note
Intangible assets 33,200,218.63 34,035,330.43
13
Development expenditure
Goodwill
note
Long-term deferred expenses 144,488,452.18 163,790,333.44
14
note
Deferred tax assets 95,784,611.94 81,233,274.65
15
note
Other non-current assets 11,593,741.57 42,680,753.78
16
Total non-current assets 1,193,272,883.13 1,257,834,006.03
Total assets 4,117,143,911.99 4,110,579,952.49
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager: Tian Hui
1
Consolidated Balance Sheet (Continued)
As at 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Liability and Equity Note V Closing Balance Closing Balance of prior period
Current liabilities:
Short-term borrowings note 17 290,237,111.11 265,994,595.43
Financial liabilities held for trading
Derivative financial liabilities
Notes payable note 18 2,000,600.00 21,223.10
Accounts payable note 19 170,589,456.67 254,588,895.34
Payments received in advance note 20 16,960,128.83 11,025,664.72
Contract liabilities note 21 16,844,437.47 22,505,426.65
Employee benefits payable note 22 136,587,939.38 145,936,150.06
Tax payables note 23 60,770,168.30 67,769,880.01
Other payables note 24 165,060,122.58 167,808,759.95
Held-for-sale liabilities
Current portion of non-current
note 25 71,546,316.16 86,949,906.35
liabilities
Other current liabilities note 26 1,686,806.01 2,798,738.32
Total current liabilities 932,283,086.51 1,025,399,239.93
Non-current liabilities:
Long-term borrowings note 27
Bonds payable
Including: Preferred stock
Including: Perpetual debt
Lease liabilities note 28 41,642,561.58 64,918,722.10
Long-term payables
Long-term employee benefits
payable
Provisions
Deferred income note 29 1,295,926.80 1,792,833.90
Deferred tax liabilities note 15 5,498,844.95 5,236,514.03
Other non-current liabilities
Total non-current liabilities 48,437,333.33 71,948,070.03
Total liabilities 980,720,419.84 1,097,347,309.96
Equity:
Share capital note 30 417,627,960.00 426,051,015.00
Other equity instruments
Including: Preferred stock
Including: Perpetual debt
Capital reserves note 31 1,007,086,643.48 1,040,908,194.13
Less: Treasury stock note 32 50,759,806.16 60,585,678.92
Other comprehensive income note 33 5,739,589.89 -7,658,346.40
Special reserves note 34 2,012,064.91 1,062,731.13
Surplus reserve note 35 275,010,401.50 275,010,401.50
Retained earnings note 36 1,479,706,638.53 1,338,444,326.09
Equity attributable to parent company 3,136,423,492.15 3,013,232,642.53
Non-controlling interests
Total shareholders' equity 3,136,423,492.15 3,013,232,642.53
Total liabilities and shareholders' equity 4,117,143,911.99 4,110,579,952.49
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
2
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Items Note V Current Period Prior Period
5,243,733,540.
1. Operating revenue note 37 4,354,096,880.36
93
3,285,656,229.
Less: Operating costs note 37 2,738,972,791.11
13
Taxes and surcharges note 38 30,800,199.73 37,563,586.80
1,049,898,223.
Selling expenses note 39 931,832,830.40
28
Administrative expenses note 40 219,014,508.52 261,626,762.41
Research and development expenses note 41 61,088,585.61 57,802,569.17
Finance expenses note 42 21,188,742.11 34,677,073.65
Including: Interest expenses 16,846,749.14 23,159,963.74
Interest income 3,923,999.48 3,589,649.85
Add: Other income note 43 18,648,210.06 21,328,673.21
Income from investments note 44 3,026,481.59 3,754,939.39
Including: Investment income from associates and joint ventures 3,026,481.59 3,754,939.39
Derecognition of financial assets at amortized cost
Gains or losses from net exposure hedging
Gains or losses from changes in fair values
Credit impairment losses note 45 4,845,379.45 -11,075,001.77
Impairment losses note 46 -37,625,482.96 -25,861,394.56
Gains or losses from asset disposals note 47 91,925.06 730,134.87
2. Operating profit 340,185,736.08 505,386,447.63
Add: Non-operating income note 48 1,287,202.08 627,435.03
Less: Non-operating expenses note 49 2,351,266.31 3,686,166.55
3. Profit before tax 339,121,671.85 502,327,716.11
Less: Income tax note 50 72,440,220.01 114,467,375.88
4. Net profit 266,681,451.84 387,860,340.23
Including: Net profit realized before business combinations under common control
I. Net profit classified by going concern
Net profit from continuing operations（"-" for net loss) 266,681,451.84 387,860,340.23
Net profit from discontinuing operations（"-" for net loss)
II. Net profit classified by ownership
Net profit attributable to parent company 266,681,451.84 387,840,282.95
Net profit attributable to non-controlling interests 20,057.28
5. Other comprehensive income after tax 13,397,936.29 -8,635,217.81
Other comprehensive income after tax attributable to parent company 13,397,936.29 -8,635,217.81
I. Items of other comprehensive income that will not be reclassified to profit or
loss
i. Changes in remeasurement of defined benefit plans
Other comprehensive income that cannot be transferred to profit or loss under
ii.
the equity method
iii. Changes in fair value of investments in equity instruments
iv. Changes in fair value of the Company's own credit risk
II. Items of other comprehensive income that will be reclassified to profit or loss 13,397,936.29 -8,635,217.81
Other comprehensive income that can be transferred to profit or loss under the
i.
equity method
ii. Changes in fair value of other debt investments
iii. Amount of financial assets reclassified into other comprehensive income
iv. Provisions for credit impairment of other debt investments
v. The effective portion of gains or losses arising from cash flow hedging
vi. Translation differences arising from financial statements in foreign currencies 13,397,936.29 -8,635,217.81
Other comprehensive income attributable to non-controlling interests after tax
6. Total comprehensive income 280,079,388.13 379,225,122.42
Total comprehensive income attributable to parent company 280,079,388.13 379,205,065.14
Total comprehensive income attributable to non-controlling interests 20,057.28
7. Earnings per share
I. Basic earnings per share 0.6398 0.9036
II. Diluted earnings per share 0.6398 0.9036
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
3
Consolidated Cash Flows Statement
For the year ended 31 December 2022
(Unless otherwise indicated, the
Prepared by: FIYTA Precision Technology Co., Ltd.
currency is expressed in RMB)
Note
Items Current Period Prior Period
V
1. Cash flows from operating activities
Cash received from sales and services 4,910,473,741.41 5,857,726,359.18
Tax and surcharge refunds 7,793,409.24 1,466,381.60
Other cash receipts related to operating note
79,656,853.28 85,387,457.56
activities 51
Total cash inflows from operating activities 4,997,924,003.93 5,944,580,198.34
Cash paid for goods and services 3,266,497,299.47 3,862,745,653.01
Cash paid to and for employees 659,058,385.84 710,102,185.80
Taxes and surcharges paid 272,103,882.56 346,383,502.98
Other cash payments related to operating note
324,035,659.54 478,099,748.10
activities 51
Total cash outflows from operating activities 4,521,695,227.41 5,397,331,089.89
Net cash flows from operating activities 476,228,776.52 547,249,108.45
2. Cash flows from investing activities
Cash received from withdrawal of investments
Cash received from investment income
Net proceeds from disposals of fixed assets,
138,721.29 59,657.53
intangible assets and other long-term assets
Net proceeds from disposal of subsidiaries and
other business units
Other cash receipts related to investing
activities
Total cash inflows from investing activities 138,721.29 59,657.53
Cash paid for fixed assets, intangible assets and other
114,090,573.97 204,422,787.61
long-term assets
Cash paid for investments
Net cash paid for acquiring subsidiaries and
other business units
Other cash payments related to investing
activities
Total cash outflows from investing activities 114,090,573.97 204,422,787.61
Net cash flows from investing activities -113,951,852.68 -204,363,130.08
3. Cash flows from financing activities
Cash received from investments by others 58,216,000.00
Including: Cash received by subsidiaries from non-controlling
investors
Cash received from borrowings 845,155,704.29 1,155,724,412.23
Other cash receipts related to other financing
activities
Total cash inflows from financing activities 845,155,704.29 1,213,940,412.23
Cash repayments for debts 794,083,975.00 1,386,708,158.95
Cash paid for distribution of dividends and profit and for interest
134,519,807.76 187,069,913.31
expenses
Including: Dividends or profit paid by
subsidiaries to non-controlling investors
Other cash payments related to financing note
177,477,740.46 124,710,390.58
activities 51
Total cash outflows from financing activities 1,106,081,523.22 1,698,488,462.84
Net cash flows from financing activities -260,925,818.93 -484,548,050.61
4. Effect of changes in foreign exchange rates on cash and
2,132,547.59 -1,140,476.33
cash equivalents
5. Net increase in cash and cash equivalents 103,483,652.50 -142,802,548.57
Add: Opening balance of cash and cash
210,254,737.14 353,057,285.71
equivalents
note
6. Closing balance of cash and cash equivalents 313,738,389.64 210,254,737.14
52
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
4
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Items Current Period
Equity attributable to parent company
Other Non-controlling Total shareholders'
Less: Special Surplus
Share capital Capital reserves comprehensive Retained earnings interests equity
Treasury stock reserves reserves
income
1. Closing balance of prior year 426,051,015.00 1,040,908,194.13 60,585,678.92 -7,658,346.40 1,062,731.13 275,010,401.50 1,338,444,326.09 3,013,232,642.53
Add: Increase/decrease due to changes in accounting policies
Increase/decrease due to corrections of errors in prior period
Business combination under common control
Others
2. Opening balance of current year 426,051,015.00 1,040,908,194.13 60,585,678.92 -7,658,346.40 1,062,731.13 275,010,401.50 1,338,444,326.09 3,013,232,642.53
3. Increase/decrease for current year -8,423,055.00 -33,821,550.65 -9,825,872.76 13,397,936.29 949,333.78 141,262,312.44 123,190,849.62
I. Total comprehensive income 13,397,936.29 266,681,451.84 280,079,388.13
II. Owner's contributions to and withdrawals of capital -8,423,055.00 -33,821,550.65 -9,825,872.76 -32,418,732.89
i. Common stock contributed/paid-in capital by
-7,987,217.00 -42,265,614.88 -50,252,831.88
shareholders/owners
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity -435,838.00 8,459,107.40 -9,825,872.76 17,849,142.16
iv. Others -15,043.17 -15,043.17
III. Profits distribution -125,419,139.40 -125,419,139.40
i. Appropriation of surplus reserve
ii. Distribution to owners -125,419,139.40 -125,419,139.40
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans transferred
to retained earnings
v. Other comprehensive income transferred to retained earnings
vi. Others
V. Special reserves 949,333.78 949,333.78
i. Appropriated during current year 1,246,390.69 1,246,390.69
ii. Used during current year -297,056.91 -297,056.91
VI. Others
4. Closing balance of current year 417,627,960.00 1,007,086,643.48 50,759,806.16 5,739,589.89 2,012,064.91 275,010,401.50 1,479,706,638.53 3,136,423,492.15
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
5
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Items Prior Period
Equity attributable to parent company
Other Non-controlling
Less: Treasury Special Surplus Total shareholders' equity
Share capital Capital reserves comprehensive Retained earnings interests
stock reserves reserves
income
1. Closing balance of prior year 428,091,881.00 1,021,490,387.78 61,633,530.48 976,871.41 246,531,866.87 1,164,490,911.51 12,283.34 2,799,960,671.43
Add: Increase/decrease due to changes in accounting policies -11,188,268.01 -11,188,268.01
Increase/decrease due to corrections of errors in prior period
Business combination under common control
Others
2. Opening balance of current year 428,091,881.00 1,021,490,387.78 61,633,530.48 976,871.41 246,531,866.87 1,153,302,643.50 12,283.34 2,788,772,403.42
3. Increase/decrease for current year -2,040,866.00 19,417,806.35 -1,047,851.56 -8,635,217.81 1,062,731.13 28,478,534.63 185,141,682.59 -12,283.34 224,460,239.11
I. Total comprehensive income -8,635,217.81 387,840,282.95 20,057.28 379,225,122.42
II. Owner's contributions to and withdrawals of capital -2,040,866.00 19,417,806.35 -1,047,851.56 -32,340.62 18,392,451.29
i. Common stock contributed/paid-in capital by
-8,994,086.00 -41,132,596.76 -45,368,941.80 -4,757,740.96
shareholders/owners
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity 6,953,220.00 60,553,780.11 44,321,090.24 23,185,909.87
iv. Others -3,377.00 -32,340.62 -35,717.62
III. Profits distribution 28,478,534.63 -202,698,600.36 -174,220,065.73
i. Appropriation of surplus reserve 28,478,534.63 -28,478,534.63
ii. Distribution to owners -174,220,065.73 -174,220,065.73
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans
transferred to retained earnings
v. Other comprehensive income transferred to retained
earnings
vi. Others
V. Special reserves 1,062,731.13 1,062,731.13
i. Appropriated during current year 1,421,605.68 1,421,605.68
ii. Used during current year -358,874.55 -358,874.55
VI. Others
4. Closing balance of current year 426,051,015.00 1,040,908,194.13 60,585,678.92 -7,658,346.40 1,062,731.13 275,010,401.50 1,338,444,326.09 3,013,232,642.53
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
6
Parent Company's Balance Sheet
As at 31 December 2022
Prepared by: FIYTA Precision (Unless otherwise indicated, the
Technology Co., Ltd. currency is expressed in RMB)
Assets Note XV Closing Balance Closing Balance of prior period
Current assets:
Monetary funds 274,691,023.16 171,022,392.92
Financial assets held for
trading
Derivative financial assets
Notes receivable
Accounts receivable note 1 603,216.03 129,880.48
Accounts receivable financing
Prepayments
Other receivables note 2 839,782,543.07 717,183,139.00
Inventories
Contract assets
Held-for-sale assets
Current portion of non-current
assets
Other current assets 14,107,604.63 13,389,835.13
Total current assets 1,129,184,386.89 901,725,247.53
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments note 3 1,552,310,486.50 1,542,067,945.03
Investment in other equity
85,000.00 85,000.00
instruments
Other non-current financial
assets
Investment properties 305,676,084.09 311,379,234.57
Fixed assets 209,495,642.59 222,462,397.20
Construction in progress
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets 23,522,355.93 23,910,597.39
Development expenditure
Goodwill
Long-term deferred expenses 8,240,653.62 9,966,739.10
Deferred tax assets 1,904,597.73 1,671,761.28
Other non-current assets 2,051,932.75 1,435,800.93
Total non-current assets 2,103,286,753.21 2,112,979,475.50
Total assets 3,232,471,140.10 3,014,704,723.03
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
7
Parent Company's Balance Sheet (Continued)
As at 31 December 2022
Prepared by: FIYTA Precision Technology (Unless otherwise indicated, the currency is
Co., Ltd. expressed in RMB)
Note
Liability and Equity Closing Balance Closing Balance of prior period
XV
Current liabilities:
Short-term borrowings 290,237,111.11 250,256,666.67
Financial liabilities held for trading
Derivative financial liabilities
Notes payable
Accounts payable 1,048,201.41 1,232,967.42
Payments received in advance 16,960,128.83 11,025,664.72
Contract liabilities
Employee benefits payable 27,139,007.97 24,758,938.89
Tax payables 778,299.01 2,676,682.58
Other payables 299,198,966.56 230,594,166.14
Held-for-sale liabilities
Current portion of non-current
liabilities
Other current liabilities
Total current liabilities 635,361,714.89 520,545,086.42
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preferred stock
Including: Perpetual debt
Lease liabilities
Long-term payables
Long-term employee benefits
payable
Provisions
Deferred income 1,295,926.80 1,792,833.90
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities 1,295,926.80 1,792,833.90
Total liabilities 636,657,641.69 522,337,920.32
Equity:
Share capital 417,627,960.00 426,051,015.00
Other equity instruments
Including: Preferred stock
Including: Perpetual debt
Capital reserves 1,010,917,776.19 1,045,449,410.67
Less: Treasury stock 50,759,806.16 60,585,678.92
Other comprehensive income
Special reserves
Surplus reserve 275,010,401.50 275,010,401.50
Retained earnings 943,017,166.88 806,441,654.46
Total owners' equity 2,595,813,498.41 2,492,366,802.71
Total liabilities and owners' equity 3,232,471,140.10 3,014,704,723.03
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
8
Parent Company's Statement of Comprehensive Income
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated,
the currency is expressed in
RMB)
Items Note Current Period Prior Period
XV
1. Operating revenue note 4 155,284,801.05 179,455,712.71
Less: Operating costs note 4 41,765,441.70 38,852,252.32
Taxes and surcharges 5,984,017.16 7,760,628.42
Selling expenses 4,340,253.59 6,483,523.47
Administrative expenses 64,698,540.45 72,514,603.81
Research and development expenses 16,464,924.76 21,461,359.36
Finance expenses -1,030,335.57 3,650,109.37
Including: Interest expenses 3,264,769.63 6,662,862.52
Interest income 3,699,364.22 3,158,156.74
Add: Other income 1,221,085.39 2,603,212.27
Income from investments note 5 243,622,178.29 263,673,435.95
Including: Investment income from associates and joint ventures 3,026,481.59 3,754,939.39
Derecognition of financial assets at amortized cost
Gains or losses from net exposure hedging
Gains or losses from changes in fair values
Credit impairment losses 108,040.61 192,081.60
Impairment losses
Gains or losses from asset disposals -14,615.44 -63,188.36
2. Operating profit 267,998,647.81 295,138,777.42
Add: Non-operating income 191,981.02 41,001.96
Less: Non-operating expenses 21,262.34 216,805.57
3. Profit before tax 268,169,366.49 294,962,973.81
Less: Income tax 6,174,714.67 7,887,674.19
4. Net profit 261,994,651.82 287,075,299.62
Net profit from continuing operations（"-" for net loss) 261,994,651.82 287,075,299.62
Net profit from discontinuing operations（"-" for net loss)
5. Other comprehensive income after tax
I. Items of other comprehensive income that will not be reclassified
to profit or loss
i. Changes in remeasurement of defined benefit plans
ii. Other comprehensive income that cannot be transferred to profit or
loss under the equity method
iii Changes in fair value of investments in equity instruments
.
iv Changes in fair value of the Company's own credit risk
.
II. Items of other comprehensive income that will be reclassified to
profit or loss
i. Other comprehensive income that can be transferred to profit or loss
under the equity method
ii. Changes in fair value of other debt investments
iii Amount of financial assets reclassified into other comprehensive
. income
iv Provisions for credit impairment of other debt investments
.
v The effective portion of gains or losses arising from cash flow
. hedging
vi Translation differences arising from financial statements in foreign
. currencies
6. Total comprehensive income 261,994,651.82 287,075,299.62
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
9
Parent Company's Cash Flows Statement
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the
currency is expressed in RMB)
Items Note XV Current Period Prior Period
1. Cash flows from operating activities
Cash received from sales and services 166,402,067.64 183,608,762.33
Tax and surcharge refunds 7,647.56
Other cash receipts related to operating activities 4,309,971,160.78 5,194,227,139.68
Total cash inflows from operating activities 4,476,380,875.98 5,377,835,902.01
Cash paid for goods and services
Cash paid to and for employees 59,513,788.17 68,672,552.40
Taxes and surcharges paid 20,686,403.89 22,768,419.51
Other cash payments related to operating activities 4,383,872,472.45 5,359,975,023.49
Total cash outflows from operating activities 4,464,072,664.51 5,451,415,995.40
Net cash flows from operating activities 12,308,211.47 -73,580,093.39
2. Cash flows from investing activities
Cash received from withdrawal of investments
Cash received from investment income 240,595,696.70 259,918,496.56
Net proceeds from disposals of fixed assets, intangible assets and 3,973,887.69 5,740.00
other long-term assets
Net proceeds from disposal of subsidiaries and other
business units
Other cash receipts related to investing activities
Total cash inflows from investing activities 244,569,584.39 259,924,236.56
Cash paid for fixed assets, intangible assets and other 5,810,205.37 21,039,730.26
long-term assets
Cash paid for investments
Net cash paid for acquiring subsidiaries and other
business units
Other cash payments related to investing activities
Total cash outflows from investing activities 5,810,205.37 21,039,730.26
Net cash flows from investing activities 238,759,379.02 238,884,506.30
3. Cash flows from financing activities
Cash received from investments by others 58,216,000.00
Cash received from borrowings 830,000,000.00 1,110,000,000.00
Other cash receipts related to other financing activities
Total cash inflows from financing activities 830,000,000.00 1,168,216,000.00
Cash repayments for debts 790,000,000.00 1,260,000,000.00
Cash paid for distribution of dividends and profit and 134,389,016.01 185,045,678.32
for interest expenses
Other cash payments related to financing activities 53,390,338.09 9,178,101.51
Total cash outflows from financing activities 977,779,354.10 1,454,223,779.83
Net cash flows from financing activities -147,779,354.10 -286,007,779.83
4. Effect of changes in foreign exchange rates on cash and cash 380,393.85 -329,409.90
equivalents
5. Net increase in cash and cash equivalents 103,668,630.24 -121,032,776.82
Add: Opening balance of cash and cash equivalents 171,022,392.92 292,055,169.74
6. Closing balance of cash and cash equivalents 274,691,023.16 171,022,392.92
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
10
Parent Company's Statement of Changes in Equity
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Items Current Period
Share capital Capital reserves Less:Treasury Other Special Surplus Retained Total shareholders' equity
stock comprehensive reserves reserves earnings
income
1. Closing balance of last year 426,051,015.00 1,045,449,410.67 60,585,678.92 275,010,401.50 806,441,654.46 2,492,366,802.71
Add: Increase/decrease due to changes in accounting
policies
Increase/decrease due to corrections of
errors in prior period
Others
2. Opening balance of current year 426,051,015.00 1,045,449,410.67 60,585,678.92 275,010,401.50 806,441,654.46 2,492,366,802.71
3. Increase/decrease for current year -8,423,055.00 -34,531,634.48 -9,825,872.76 136,575,512.42 103,446,695.70
I. Total comprehensive income 261,994,651.82 261,994,651.82
II. Owner's contributions to and withdrawals of capital -8,423,055.00 -34,531,634.48 -9,825,872.76 -33,128,816.72
i. Common stock contributed/paid-in capital by -7,987,217.00 -42,265,614.88 -50,252,831.88
shareholders/owners
ii. Capital contributed by other equity instruments
holders
iii. Share-based payments to owners' equity -435,838.00 7,749,023.57 -9,825,872.76 17,139,058.33
iv. Others -15,043.17 -15,043.17
III. Profits distribution -125,419,139.40 -125,419,139.40
i. Appropriation of surplus reserve
ii. Distribution to owners -125,419,139.40 -125,419,139.40
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit
plans transferred to retained earnings
v. Other comprehensive income transferred to
retained earnings
vi. Others
V. Special reserves
i. Appropriated during current year
ii. Used during current year
VI. Others
4. Closing balance of current year 417,627,960.00 1,010,917,776.19 50,759,806.16 275,010,401.50 943,017,166.88 2,595,813,498.41
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
11
Parent Company's Statement of Changes in Equity
For the year ended 31 December 2022
Prepared by: FIYTA Precision Technology Co., Ltd. (Unless otherwise indicated, the currency is expressed in RMB)
Items Prior Period
Share capital Capital reserves Less: Treasury Other Special Surplus Retained Total shareholders' equity
stock comprehensive reserves reserves earnings
income
1. Closing balance of last year 428,091,881.00 1,027,145,928.88 61,633,530.48 246,531,866.87 722,064,955.20 2,362,201,101.47
Add: Increase/decrease due to changes in
accounting policies
Increase/decrease due to corrections of
errors in prior period
Others
2. Opening balance of current year 428,091,881.00 1,027,145,928.88 61,633,530.48 246,531,866.87 722,064,955.20 2,362,201,101.47
3. Increase/decrease for current year -2,040,866.00 18,303,481.79 -1,047,851.56 28,478,534.63 84,376,699.26 130,165,701.24
I. Total comprehensive income 287,075,299.62 287,075,299.62
II. Owner's contributions to and withdrawals of -2,040,866.00 18,303,481.79 -1,047,851.56 17,310,467.35
capital
i. Common stock contributed/paid-in capital -8,994,086.00 -41,132,596.76 -45,368,941.80 -4,757,740.96
by shareholders/owners
ii. Capital contributed by other equity
instruments holders
iii. Share-based payments to owners' equity 6,953,220.00 59,439,455.55 44,321,090.24 22,071,585.31
iv. Others -3,377.00 -3,377.00
III. Profits distribution 28,478,534.63 -202,698,600.36 -174,220,065.73
i. Appropriation of surplus reserve 28,478,534.63 -28,478,534.63
ii. Distribution to owners -174,220,065.73 -174,220,065.73
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in
capital
ii. Surplus reserve transferred to paid-in
capital
iii. Use of surplus reserve to cover previous
losses
iv. Changes in remeasurement of defined
benefit plans transferred to retained earnings
v. Other comprehensive income transferred to
retained earnings
vi. Others
V. Special reserves
i. Appropriated during current year
ii. Used during current year
VI. Others
4. Closing balance of current year 426,051,015.00 1,045,449,410.67 60,585,678.92 275,010,401.50 806,441,654.46 2,492,366,802.71
Legal Representative:Zhang Xuhua Finance Officer (CFO):Song Yaoming Financial Manager:Tian Hui
12
FIYTA Precision Technology Co., Ltd.
Notes to the Financial Statements
For the year ended 31 December 2022
I. Company status
1. Registered place, organization and address of headquarters
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval
of Shen Fu Ban Fu (1992) 1259 issued by the General Office of Shenzhen Municipal
Government, through the restructuring of former Shenzhen FIYTA Time Industrial Company by
the promoter of China National Aero-Technology Import and Export Shenzhen Industry & Trade
Center (name changed to “China National Aero-Technology Shenzhen Co., Ltd” lately) on 25
December 1992. On 3 June 1993, both the Company was listed on Shenzhen Stock Exchange.
The Company holds business license with the Unified Social Credit Code of
91440300192189783K.
As at 31 December 2022, the outstanding shares issued by the Company was 417.628
million shares and the registered capital was RMB417.628 million after a series of share
dividend, right offering, share capital conversion from retained earnings, and issuing of new
shares. The Company’s registered address is FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao,
Nanshan District, Shenzhen, Guangdong Province, where the Company’s headquarters locates.
The parent company of the Company is CATIC Shenzhen Holdings Limited (CATIC Shenzhen)
and the ultimate controlling party of the Company is Aviation Industry Corporation of China, Ltd.
(AVIC) .
2. Nature of the Company’s business and main operating activities
The business nature and main operating activities of the Company and its subsidiaries
mainly include: producing and selling of analogue indication mechanical watches, quartz
watches and its movements, components, various timing devices, processing and wholesaling
karat gold jewelry watches, intelligent watches; domestic commercial and material supply and
distributing business (excluding goods under exclusive operational rights, special control and
exclusive sales) ; property management and leasing; providing design service; research, design,
production, sales and technical support for precise watches and components; import and export
business (according to Shen Mao Guan Deng Zheng Zi No.2007-072) .
3. Scope of consolidation
There were 12 subsidiaries that are included in the Company’s scope of consolidation for
year 2022, see Note VI for details. The scope of consolidation was the same as last year.
13
4. Authorization for issue
The financial statements have been approved and authorized for issue by the Board of
Directors on 16 March 2023.
II. Basis of preparation
1. Basis of preparation
The financial statement is prepared in accordance with the requirements of Accounting
Standards for Business Enterprises and associated application guidance, illustrations to the
standards and related pronouncements (collectively known as “Accounting Standards for
Business Enterprises” or “CAS”) . These financial statements also comply with the disclosure
requirements of “Regulation on the Preparation of Information Disclosure of Companies Issuing
Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2014) issued by
China Securities Regulatory Commission (CSRC) .
2. Going concern
The Company assesses the going concern ability to the extent of 12 month after
the balance sheet date. No issues that would result in significant doubt about the Company’s
going concern is noted. As a result, the financial statements of the Company have been prepared
on going concern basis.
3. Basis and principles of accounting
Accrual basis is adopted for the Group’s accounting activity. Except for some financial
instruments, the financial statements are measured using historical cost. In case of impairment
occurred on assets, provisions for impairment are provided for in accordance with related
regulations.
III. Significant accounting policies and accounting estimates
1. Highlight to specific accounting policies and estimates
(1) The Company make specific accounting policies and estimates according to its nature of
business. Accounting policies and estimates mainly includes: method of estimated credit loss
accrual (Note III. 12, Note III. 13 and Note III. 14) , measurement of inventory (Note III. 15) ,
depreciation of investment property and fixed asset and amortization of intangible asset (Note III.
18, Note III. 19 and Note III. 23) , revenue (Note III, 31) etc.
(2) Based on historical experience and other factors including reasonable estimation to future
events, the Company continues to evaluate significant accounting estimates and key assumptions.
If material changes to following accounting estimate and key assumption incurred, material impact
would happened to the carrying value of the Company’s assets and liabilities in coming
accounting year.
14
1) Measurement of Expected Credit Loss of accounts receivable and other receivables
The management estimates impairment loss provision to accounts receivable and other
receivables based on the judgments to estimated credit loss of accounts receivable and other
receivables. If any events occurred that indicated the Company may not be able to recover the
balance amount, estimation is needed in provision accrual. If the expected number is different
with the estimated figure, the difference will affect the carrying value of accounts receivable and
other receivables and the impairment loss expenses in corresponding accounting period.
2) Impairment to inventory. The Company recognizes provision for obsolete inventories
based on the excess of the cost of inventory over its net realizable value. In determining the net
realizable value of inventories, the management uses significant judgments to estimate the selling
price, cost to finish manufacturing, and selling expenses and associated taxes. If the management
revises estimated selling price and cost to finish manufacturing and selling expenses, the NAV
estimation would be affected and the difference would have an effect to the inventory provision.
3) Estimation of long-term asset impairment. When evaluating whether there is impairment to
long-term asset, the management mainly considers the following: (a) whether the events affect the
asset impairment have already incurred; (b) whether the discounted cash flow from continue usage
of the asset or disposal is lower than its carrying amount; and (c) whether major assumption used
in estimating the future cash flow is appropriate.
Changes to related assumption adopted in determining impairment such as profitability,
discounting rate and growth rate may have material impact to the present value used in impairment
test and result in impairment to above mentioned long-term assets.
(a) Depreciation and amortization. The estimated residual value and useful life of investment
property, fixed asset and intangible asset that used by the Company are based on historical actual
useful life and actual residual value of assets with similar nature or functions. In the process of
using such assets, estimated useful life and residual value may vary depending on the economic
environment, technological environment and other environment that the assets located. If there is
difference between the expectation and previous estimation, proper adjustments will be made by
the management.
(b) Share-based payments. The management makes best estimation based on up-to-date
number of employees who have exercisable shares and adjusting the number of exercisable equity
instrument on each balance sheet date in the vesting period. If there is difference between current
year exercisable employee and previous estimation, proper adjustments will be made by the
management.
(c) Deferred tax asset. Deferred tax asset of taxable losses shall be recognized to the extent
that there will have sufficient taxable income to offset. This involves significant judgments to
estimate the timing and amount of future taxable profit and taking into consideration of tax
15
planning so as to determine the amount of deferred tax asset.
(d) Corporate income tax. The final tax treatment of many transaction and events are with
uncertainty in the normal course of operation. Significant judgments involves in accrual of
corporate income tax. If there is difference between the final discretion and the amount recorded in
books, the difference will affect the amount of tax in the period of final discretion.
2. Statement of compliance with Accounting Standards for Business Enterprises
The financial statements of the Company have been prepared in accordance with the
requirements of Accounting Standards for Business Enterprises. These financial statements
present truly and completely the financial position as at 31 December 2021, the results of
operations and the cash flows for the year then ended of the Company.
3. Accounting period
The accounting period of the Company is the calendar year, i.e. from 1 January to 31
December of each year.
4. Operating cycle
The operating cycle refer to the period from purchasing assets for process to realizing cash or
cash equivalent. The Company’s operating cycle is 12 months which is also used as standard to
determine the liquidity of asset and liabilities.
5. Recording currency
The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recording
currency. FIYTA (Hong Kong) Limited (“FIYTA Hong Kong”) , a subsidiary of the Company
outside mainland China, and Station 68 Limited (“Station 68”) , a subsidiary of FIYTA Hong
Kong, use Hong Kong Dollar (“HKD”) as the recording currency according to the main economic
environment where the companies operated in. Montres Chouriet SA, a subsidiary of FIYTA Hong
Kong (“Swiss Company”) , uses Swiss Franc as the recording currency according to the main
economic environment where the Swiss Company operated in. The recording currencies
mentioned above will be translated to Renminbi when preparing financial statements. The
currency used in preparing the Group’s financial statements is Renminbi.
6. Accounting treatment for business combinations involving entities under common
control and not under common control
(1) If a business combination is achieved through multiple steps, of which the terms,
condition and economical effect is in line with one or more criteria as followed, the
multiple transactions shall be dealt with as one-basket transaction.
1) the transactions were entered into at the same time or by considering each other’s
influence;
2) a complete business result can only be achieved by combining all these transactions
together;
16
3) the performing of one transaction is depended on at least one other transaction;
4) a transaction is not economical if it is considered stand along but it will become
economical if it is considered in combination with other transactions.
(2) Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquired
and liabilities assumed are measured based on their carrying amounts in the consolidated financial
statements of the ultimate controlling party at the combination date, except for adjustments due to
different accounting policies. The difference between the carrying amount of the net assets
acquired and the consideration paid for the combination (or the total par value of shares issued) is
adjusted against share premium in the capital reserve, with any excess adjusted against retained
earnings.
If there is contingent consideration and provision or assets are required to be recognized, the
difference between the provision or assets and the contingent consideration shall adjust the capital
reserve, with any excess adjusted against retained earnings.
If business combinations involving entities under common control achieved in stages that
involves multiple transactions belongs to one-basket transaction, all transactions shall be dealt
with as one transaction. If not, the accounting treatment is as follows: Initial investment cost is the
acquirer’s share of the carrying amount of the net assets of the acquiree in the consolidated
financial statements of the ultimate controlling party at the combination date. The difference
between the initial investment cost and the sum of carrying amount of investment prior to
combination date and carrying amount of new considerations paid for the combination at the
combination date is adjusted to capital reserve (share premium) . If the capital reserve is not
sufficient to absorb the difference, any excess is adjusted against retained earnings. he difference
between the carrying amount of the net assets acquired and the sum of carrying amount of
investment prior to combination date and carrying amount of new considerations paid for the
combination at the combination date is adjusted to capital reserve (share premium) . If the capital
reserve is not sufficient to absorb the difference, any excess is adjusted against retained earnings.
The profit or loss, other comprehensive income and changes in other owner’s equity recognized by
the acquirer during the period from the later of initial investment date and the date that the
acquirer and acquiree both under common ultimate control to the combination date are offset the
opening retained earnings or profit for loss for the current period in the comparative statements.
(3) Business combinations involving entities not under common control
The purchase date refers to the date that the Company actually acquired control over the
acquire i.e. the date when the control over the acquiree’s net assets or decision of business
operation has been transferred to the Company. If the Company fulfills the following conditions at
the same time, it is considered that the control has been transferred:
17
① the contract or agreement of business combination has been approved by internal power
department;
② related matters has been approved by state supervisory authorities, if needed;
③ procedures of asset transfer has been completed;
④ the Company has been made majority of payments and has the ability and plan to make
the residual payments;
⑤ the Company is in substances acquired the business and operating policies and enjoyed
corresponding interests and undertaking risks of the acquire.
On the purchase date, assets transferred, liabilities incurred or assumed as the consideration
paid shall be measured at fair value. The difference between the fair value and carrying amount
shall be charged to current period profit or loss.
Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’s
identifiable net assets, the difference is recognized as goodwill, and subsequently measured on
the basis of its cost less accumulated impairment provisions. Where the combination cost is less
than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference
is recognized in profit or loss for the current period after reassessment.
If business combinations involving entities not under common control achieved in stages
that involves multiple transactions belong to one-basket transaction, all the transactions shall be
treated as one. Otherwise, it shall be treated as follows: In the separate financial statements, the
initial investment cost is the sum of the carrying amount of equity investment of the acquiree
held prior to the acquisition date and additional investment cost at the acquisition date. When the
previously-held equity investment which was accounted for under the e Accounting treatment for
business combinations involving entities under common control and not under common control
equity method before the acquisition date, any other comprehensive income previously
recognized is not adjusted on acquisition date. When the investment is disposed of in later date,
the amount that was recognized in other comprehensive income is recognized on the same basis
as would be required if the investee had disposed directly of the related assets or liabilities. The
owners’ equity recognized as the changes of the investee’s other owners’ equity except for net
profit or loss, other comprehensive income and profit distribution, are transferred to profit or loss
for the current period when disposing the investment. When the previously-held equity
investment which was measured at fair value before the acquisition date, the accumulated
changes in fair value included in other comprehensive income is transferred to profit or loss for
the current period upon commencement of the cost method.
(4) Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services,
valuation advisory, and other administrative expenses, are recorded in profit or loss for the current
18
period when incurred. The transaction costs of equity or debt securities issued as the
considerations of business combination are included in the initial recognition amount of the equity
or debt securities.
7. Consolidated financial statements
(1) Scope of consolidation
The scope of consolidated financial statements is based on control. All subsidiaries (including
standalone entity that controlled by the Company) are all included in the scope of consolidation.
(2) Procedures of consolidation
The consolidated financial statements are prepared by the Company based on the financial
statements of the Company and its subsidiaries and other relevant information. The whole
enterprise is considered as one accounting body when preparing consolidated financial statement
and reflect the whole group’s financial position, performance and cash flow according to unified
accounting policies based on accounting standards.
All subsidiaries that are included in the scope of consolidation adopt same accounting
policies, and accounting period. If there are differences, the subsidiaries shall adjust its policies
and accounting period accordingly.
When preparing consolidated financial statements, the accounting policies and accounting
periods of the subsidiaries should be consistent with those established by the Company, and all
significant intra-group balances and transactions are eliminated. If the treatment based on
enterprise group angle is different with the angle from subsidiaries’, it shall be treated based on
enterprise group angle.
The portion of a subsidiary’s equity that is not attributable to the parent is treated as
non-controlling interests and presented separately in the consolidated balance sheet within
shareholders’ equity. The portion of net profit or loss of subsidiaries for the period attributable to
non-controlling interests is presented separately in the consolidated income statement below the
“net profit” line item. When the amount of loss for the current period attributable to the
non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ share of
the opening owners’ equity of the subsidiary, the excess is still allocated against the
non-controlling interests.
Where a subsidiary or business has been acquired through a business combination involving
enterprises under common control in the reporting period, the subsidiary or business is deemed
to be included in the consolidated financial statements from the date they are controlled by the
ultimate controlling party. Their operating results and cash flows are included in the consolidated
income statement and consolidated cash flow statement respectively from the date they are
controlled by the ultimate controlling party.
Where a subsidiary or business has been acquired through a business combination not
19
involving enterprises under common control in the reporting period, the financial statements of
subsidiaries shall be adjusted on the basis of fair value of identifiable net assets on purchase date.
1) Addition of subsidiaries or business operation
Where a subsidiary or business has been acquired through a business combination involving
enterprises under common control in the reporting period, the subsidiary or business is deemed to
be included in the consolidated financial statements from the date they are controlled by the
ultimate controlling party. Their operating results and cash flows are included in the consolidated
income statement and consolidated cash flow statement respectively from the date they are
controlled by the ultimate controlling party.
If the Company can exert control over the investee under common control because of
addition of investment, adjustments shall be made as if all the combining party are at the current
condition in the angle of ultimate controlled party. Equity investment held before acquired control,
profit or loss, other comprehensive income and other net asset changes that have already
recognized between the later of acquiring original equity and the date under common control, and
combination date shall offset opening retained earnings or current period profit or loss
respectively.
In the reporting period, if there is subsidiary or business addition involving entities not under
common control, no adjustments shall be made to the consolidated balance sheet. The revenue,
expenses and profit from the purchasing date to period end shall be included in consolidated
income statement. The cash flows from the purchasing date to period end shall be included in
consolidated cash flow statement.
Where a subsidiary or business has been acquired through a business combination not
involving enterprises under common control by means of investment addition in the reporting
period, equity held before the purchase date shall be re-measured at fair value. Difference between
the fair value and the carrying amount shall be charged to current period investment gain. Changes
related to equity method such as other comprehensive income and other equity changes beside net
profit, other comprehensive income and profit distribution shall be transferred to current period
investment gain.
2) Disposal subsidiary or business
a) General principal
In the reporting period, if the Company dispose of subsidiary or business, the subsidiary’s
revenue, expenses, profit and cash flows from the beginning of the period to the disposal date shall
be included in consolidated financial statements.
When the Company loses control over a subsidiary because of disposing part of equity
investment or other reasons, the remaining part of the equity investment is re-measured at fair
value at the date when the control is lost. A gain or loss is recognized in the current period and is
20
calculated by the aggregate of consideration received in disposal and the fair value of remaining
part of the equity investment deducting the share of net assets in proportion to previous
shareholding percentage in the former subsidiary since acquisition date and the goodwill.
b) Disposal of subsidiary through multiple steps
In the event that the Company losses control over a subsidiary through multiple transactions,
if one or more conditions below are fulfilled, it shall be treated as one-basket transaction:
i) the transactions were entered into at the same time or by considering each other’s
influence;
ii) a complete business result can only be achieved by combining all these transactions
together;
iii) the performing of one transaction is depended on at least one other transaction;
iv) a transaction is not economical if it is considered stand along but it will become
economical if it is considered in combination with other transactions.
If the disposal was categorized as one-basket transaction, the Company dealt with all
transactions as one transaction that resulted in lost control over subsidiary. But, before losing
control, the difference between disposal consideration and the portion of net asset of the disposal
part shall be recognized in other comprehensive income each time of disposal and charged to
income statement in whole in the period loss control.
If the disposal does not belong to one-basket transaction, the accounting treatment before lost
control shall be in accordance with policies of disposal equity but not losing control. At the time
control lost, deal with as normal subsidiary disposal.
3) Acquiring non-controlling interests of subsidiary
Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling
shareholders, the book value of shareholder’s equity attributed to the Company and to the
non-controlling interest is adjusted to reflect the change in the Company’s interest in the
subsidiaries. The difference between the proportion interests of the subsidiary’s net assets being
acquired or disposed and the amount of the consideration paid or received is adjusted to the capital
reserve in the consolidated balance sheet, with any excess adjusted to retained earnings.
4) Partially disposal subsidiary equity without losing control
The difference between the consideration received from partial disposal of the long-term
equity investment in the subsidiary without losing control and the share of net assets of the
subsidiary that is continuously calculated from the purchase date or the merger date corresponding
to the disposal of the long-term equity investment , to adjust the share premium in the capital
reserve in the consolidated balance sheet, if the share premium in the capital reserve is insufficient
to offset, adjust the retained earnings.
8. Joint arrangement classification and accounting treatment for joint operation
21
(1) Classification
The Company classifies joint arrangements into joint operations and joint ventures based on
the structure, legal form, terms and conditions in the arrangement, and other related facts.
Joint operations means joint arrangement that does not realized through independent entity.
Joint arrangement that realized through independent entity is normally recognized as joint
venture but it also can be classified as joint operation if clear evidence showed that one of the
following condition is met:
1) The legal form of an joint arrangement showed that the joint parties enjoyed rights over
related assets and undertake liability respectively;
2) The contract showed that the joint parties enjoyed rights over related assets and undertake
liability respectively;
3) Other facts and situation indicated that the joint parties enjoyed rights over related assets
and undertake liability respectively;
(2) Accounting treatment to joint operation
The Company recognizes the following items relating to its interest in a joint operation, and
account for them in accordance with relevant accounting standards:
1) its solely-held assets, and its share of any assets held jointly;
2) its solely-assumed liabilities, and its share of any liabilities assumed jointly;
3) its revenue from the sale of its share of the output arising from the joint operation;
4) its share of the revenue from the sale of the output by the joint operation; and
5) its solely-incurred expenses, and its share of any expenses incurred jointly.
The Company contribute or disposal of assets (except that asset constitute business) . Before
these assets are sold to third party, the Company only recognizes the portion of profit or losses
that attributes to the other party. If the assets incurred impairment (meets the requirements of the
"Accounting Standards for Business Enterprises No. 8 - Impairment of Assets"), the Company
recognizes losses in full.
For the assets purchased from joint operation (except that constitutes business) , before it is
sold to third party, only the portion that attributable to the other parties. If assets incurred
impairment (meets the requirements of the "Accounting Standards for Business Enterprises No.
8 - Impairment of Assets"), the Company recognizes losses based on its share.
The Company does not enjoy joint control to joint operation. If the Company enjoys joint
operation’s asset and undertaking related liabilities, the accounting treatment is the same.
Otherwise, it shall be accounted for based on accounting standards.
9. Cash and cash equivalents
When preparing cash flow statement, the Company recognizes cash in hand and bank
22
deposit that available for payment as cash. Cash equivalents include short-term (generally
expires within three months from the date of purchase),highly liquid investments that are readily
convertible to known amounts of cash and are subject to an insignificant risk of change in value.
10. Foreign currency transactions and translation of foreign currency financial
statements
(1) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company,
using the exchange rates prevailing at the dates of the transactions.
Monetary items denominated in foreign currencies are translated to Renminbi at the spot
exchange rate at the balance sheet date. The resulting exchange differences between the spot
exchange rate on balance sheet date and the spot exchange rate on initial recognition or on the
previous balance sheet date are recognized in profit or loss. Non-monetary items that are
measured at historical cost in foreign currencies are translated to Renminbi using the exchange
rate at the transaction date.
Non-monetary items that are measured at fair value in foreign currencies are translated using
the exchange rate at the date the fair value is determined. The resulting exchange differences are
recognized in profit or loss or other comprehensive income.
(2) Translation of foreign currency financial statements
When translating the foreign currency financial statements of overseas subsidiaries, assets
and liabilities of foreign operation are translated to Renminbi at the spot exchange rate at the
balance sheet date. Equity items, excluding “retained earnings”, are translated to Renminbi at the
spot exchange rates at the transaction dates.
When disposing overseas operations, foreign translation difference that related to the
overseas business shall be charged to current period profit or losses from other comprehensive
income. If the disposal resulted in decrease in shareholding but still maintain control, the
translation difference will be included in non-controlling interest. If the disposal related to
associate entity or joint venture entities, the translation difference will be included in current
period profit or loss.
11. Financial instruments
The Company recognizes financial assets or financial liabilities when the Company become a
party of the financial instruments.
Effective interest rate method refer to calculating the amortized cost of financial assets or
liabilities and amortizes interest income or expenses into corresponding accounting period
accordingly.
Effective interest rate refers to the interest that is used to discount the estimated future cash
23
flows of existing financial assets or financial liabilities to its amortized cost. When determining
the effective interest rate, the cash flow is estimated taking consideration of all contractual terms
of financial assets or financial liabilities but does not including estimated credit loss.
Amortized cost of financial assets or financial liabilities is the initial recognition amount
deduct principal and add or less accumulated amortization to the difference between initial
recognition and the amount at maturity and less accumulated loss provision (for financial assets
only) .
(1) Recognition and derecognition of financial instruments
Financial assets are classified into the following three categories depends on the Company’s
business mode of managing financial assets and cash flow characteristics of financial assets
1) Financial assets measured at amortized cost
2) Financial assets at fair value through other comprehensive income
3) Financial assets at fair value through profit or loss
Financial assets are measured at fair value at initial recognition. But it is recognized using
trading price for accounts receivable or notes receivable arose from sale of goods or providing of
service that does not including material financing component or does not consider financing
component within one year.
For financial assets at fair value through profit or loss, the related transaction costs are
directly recognized through profit or loss, and the related transaction costs of other types of
financial assets are included in the initial recognition amounts.
Only when the Company changes its business model of managing financial assets, all the
financial assets affected shall be reclassified on the first day of the first reporting period after the
business model changes.
1) Financial assets measured at amortized cost
The Company shall classify financial assets that meet the following conditions and are not
designated as financial assets at fair value through profit or loss as financial assets measured at
amortized cost: The Company’s business model for managing the financial assets is to collect
contractual cash flows; The terms of the financial asset contract stipulate that cash flows generated
on a specific date are only payments of principal and interest based on the amount of outstanding
principal. Financial assets measured at amortized cost of the Company includes cash and bank
balances, notes receivable, accounts receivables and other receivables.
After initial recognition, the effective interest rate method is used to measure the amortized
cost of such financial assets. Profits or losses arising from financial assets measured at amortized
costs and not part of any hedging relationship are included in current profit or loss when the
recognition is terminated, amortized or impaired according to the effective interest rate.
a) for financial assets that already impaired when it is acquired, the Company determines its
24
interest income using adjusted effective interest rate based on its amortized cost.
b) for financial assets that does not impaired when it is acquired but impaired latterly, the
Company determines its interest income using adjusted effective interest rate based on its
amortized cost. If there is no credit impairment in later period due to changes to risk factors, the
Company uses effective interest rate times of carrying amount of the financial asset to determine
interest income.
2) Financial assets at fair value through other comprehensive income
The Company shall classify financial assets that meet the following conditions and are not
designated as financial assets measured at fair value and whose changes are recorded in current
profit or loss as financial assets measured at fair value through other comprehensive income: The
Group’s business model for managing the financial assets is both to collect contractual cash flows
and to sell the financial assets, and the terms of the financial asset contract stipulate that cash
flows generated on a specific date are only payments of principal and interest based on the amount
of outstanding principal.
After initial recognition, financial assets are subsequently measured at fair value. Interest,
impairment losses or gains and exchange gains calculated by the effective interest rate method are
recognized in profit or loss, while other gains or losses are recognized in other comprehensive
income. When derecognized, the accumulated gains or losses previously recognized in other
comprehensive income are transferred from other comprehensive income and recorded in current
profit or loss.
Notes receivable and accounts receivable measured at fair value through other comprehensive
income are listed as receivables financing, and other such financial assets are listed as other debt
investments, of which: one year from the balance sheet date Other debt investments due within
one year are listed as non-current assets due within one year, and other debt investments with an
original maturity date within one year are listed as other current assets.
3) Financial assets designated as fair value through other comprehensive income
At initial recognition, the Company may designate non-trading equity instrument investments
as financial assets at fair value through other comprehensive income, presented as other equity
instrument investment, and recognize dividend income when the conditions are met (the
designation cannot be revoked once it is made) .
The fair value changes of this kind of financial asset shall be included in other comprehensive
income and no impairment provision is needed. When de-recognizing the financial asset,
accumulated gain or loss in other comprehensive income shall be transferred out of other
comprehensive income and charged to retained earnings. During the investing period when the
Company holds equity instruments, the Company recognizes dividends in current period profit or
loss when the right of receiving dividends is confirmed and the associated economic benefit is
25
probable to flow into the Company and that the amount can be measured reliably. The Company
treated this kind of financial instrument under other equity investment.
The designated equity instrument investment does not belong to the following: the purpose of
obtaining the financial asset is mainly for the recent sale; it is part of the identifiable financial
asset instrument combination under centralized management at initial recognition, and there is
objective evidence that the short-term gain actually exists in the near future; it is a derivative
(except for derivatives that meet the definition of a financial guarantee contract and are designated
as effective hedging instruments) .
4) Financial assets at fair value through profit or loss
The financial assets other than financial assets measured at amortized cost and financial
assets at fair value through other comprehensive income are classified as financial assets at fair
value through profit or loss.
After initial recognition, the financial assets are subsequently measured at fair value, and the
profits or losses generated from which are recognized in profit or loss.
The Company present the financial assets as financial asset held for trade, other non-current
financial assets.
5) Financial assets designated at fair value through profit or loss.
At initial recognition, if the accounting mismatch can be eliminated or significantly reduced,
the financial assets can be designated as financial assets at fair value through profit or loss.
If the hybrid contract includes one or more embedded derivatives and the main contract does
not belong to the above financial assets, the Company may designate the whole as a financial
instrument that is measured at fair value through profit or loss, except in the following cases:
a) Embedded derivatives do not materially change the cash flow of a hybrid contract
b) When it is first determined whether a similar hybrid contract requires a spin-off, there is
little need for analysis to make it clear that the embedded derivatives it contains should not be split.
If the prepayment right of the embedded loan allows the holder to repay the loan in advance with
an amount close to the amortized cost, the prepayment right does not need to be split.
After initial recognition, the financial assets are subsequently measured at fair value, and the
profits or losses generated from which are recognized in profit or loss.
The Company present the financial assets as financial asset held for trade, other non-current
financial assets.
(2) Classification and measurement of financial liabilities
The Company categorizes financial liabilities into financial liabilities and equity instrument
based on the contract terms and economical nature rather than solely on its legal form. Financial
liabilities initially recognized as financial liabilities at fair value through profit or loss, other
financial liabilities and derivative instrument designated as effective hedging instrument.
The financial liabilities of the Company are initially measured at fair value. The related
26
transaction costs of financial liabilities at fair value through profit or loss are directly recognized
in profit or loss. The related transaction costs of other categories of financial liabilities are
included in the initial recognition amount.
Subsequent measurement of financial liabilities depends on its category:
1) Financial liabilities at fair value through profit or loss
This category includes financial liabilities held for trade (including derivatives that are
financial liabilities) and financial liabilities designated at fair value through profit or loss.
At initial recognition, in order to provide more relevant accounting information, the
Company classifies financial liabilities that meet one of the following conditions as financial
liabilities at fair value through profit or loss (the designation cannot be revoked once it is made) :
the aim of undertaking related financial liabilities is to sell or repurchase in the short run; it is part
of identifiable financial instruments and there is objective evidence indicated that the enterprise
adopts short-term profitability mode; belong to derivative instrument except for derivative
instrument designated as effective hedging instrument and financial guarantee contract. Financial
liabilities held for trade are measured at fair value subsequently and all fair value changes except
for hedging accounting shall be included in current period profit or loss.
At initial recognition, in order to provide more relevant accounting information, the
Company classifies financial liabilities that meet one of the following conditions as financial
liabilities designated at fair value through profit or loss (the designation cannot be revoked once it
is made) :
a) accounting mismatches can be eliminated or significantly reduced.
b) management and performance evaluation of financial liability portfolios or combinations
of financial assets and financial liabilities based on fair value according to corporate risk
management or investment strategies as stated in formal written documents, and report to key
management personnel on this basis.
When the Company initially recognizes a financial liability and designates it at fair value
through profit or loss according to stipulations of standards, the changes in the fair value of the
financial liability arising from changes in the company’s own credit risk are included in other
comprehensive income, and other changes in fair value are recognized in profit or loss for the
period. However, if the accounting causes or expands the accounting mismatch in profit or loss,
the entire gain or loss of the financial liability (including the affected amount from changes in the
company’s own credit risk) is included in the current profit or loss.
2）Other financial liabilities
Except for the following items, the Company classifies financial liabilities as financial
liabilities measured at amortized cost:
a) Financial liabilities at fair value through profit or loss.
27
b) The transfer of financial assets does not meet the conditions for derecognition or financial
liabilities arising from the continued involvement in the transferred financial assets.
c) Financial guarantee contracts that are not in the first two categories of this article, and loan
commitments granted at a rate lower than market interest rates and that are not in the first category
of this article
Financial guarantee contracts that are not designated as financial liabilities measured at fair
value through profit or loss are initially recognized at fair value. Subsequent to initial recognition,
the subsequent measurement is determined according to the higher loss allowance of contingent
liabilities under expected credit loss model and the initial recognition amount deducting by the
accumulated amortization.
(3) Derecognition of financial instruments
1）If a financial asset meets one of the following conditions, it shall be derecognized:
a) The contractual right to receive the cash flow of the financial asset is terminated.
b) The financial asset has been transferred, and the transfer meets the requirements of the
“Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” regarding
derecognition of financial assets.
2) Conditions of derecognition of financial liabilities
If the current obligation of a financial liability (or a part thereof) has been discharged, the
financial liability (or such part of financial liability) is derecognized.
When the Company and the lender sign an agreement to replace the original financial liability
with a new financial liability, and the new financial liability is substantially different from the
original financial liability, the original financial liability is derecognized and a new financial
liability is recognized. The difference between the carrying amount and the consideration paid
(including the transferred non-cash assets or liabilities assumed) is recognized in profit or loss
If the Company repurchases part of the financial liabilities, the carrying amount of the
financial liabilities as a whole is allocated based on the proportion of the fair value of the
continuing recognition portion and the derecognition portion on the repurchase date. The
difference between the carrying amount assigned to the derecognition portion and the
consideration paid (including the transferred non-cash assets or liabilities assumed) shall be
included in the current profit or loss.
(4) Recognition basis and measurement for transfer of financial assets
In the event of transfer of financial assets, the Company assesses the extent to which it retains
the risks and rewards of ownership of the financial assets and treats them in the following cases:
1) If almost all risks and rewards of ownership of financial assets are transferred, the
financial assets are derecognized and the rights and obligations arising from or retained in the
transfer are separately recognized as assets or liabilities.
28
2) If almost all the risks and rewards of ownership of financial assets are retained, the
financial assets shall continue to be recognized
3) If there is neither transfer nor retention of almost all risks and rewards of ownership of
financial assets (i.e., other than (1) and (2) of this article) , then depending on whether or not they
retain control over financial assets
a) If control over the financial asset is not retained, the financial asset shall be derecognized,
and the rights and obligations arising or retained during the transfer shall be separately recognized
as assets or liabilities.
b) If the control over the financial asset is retained, the relevant financial asset shall be
continuously recognized according to the degree of its continuous involvement in the transferred
financial asset, and the relevant liabilities shall be recognized accordingly. The degree of
continued involvement in the transferred financial assets refers to the degree to which the
company bears the risk or reward of the value change of the transferred financial assets
When judging whether the transfer of financial assets satisfies the conditions for
derecognition above, the principle of substance over form is adopted. The Company divides the
transfer of financial assets into the overall transfer and partial transfer of financial assets:
1) If the overall transfer of financial assets meets the conditions for derecognition, the
difference between the following is included in the current profit or loss:
a) The carrying amount of the transferred financial assets on the date of derecognition.
b) The sum of the consideration received in respect of the transfer of financial assets and the
amount corresponding to the derecognized portion in the accumulated changes in the fair value
originally and directly recognized in other comprehensive income (the financial assets involved in
the transfer are measured at fair value through other comprehensive income)
If the transfer of a financial asset does not meet the conditions for derecognition, the financial
asset will continue to be recognized and the consideration received is recognized as a financial
liability
(5) Method for determining the fair value of financial assets and financial liabilities
The fair value of financial assets or financial liabilities with active market is determined by
active market quotations; active market quotations include quotations that are readily and
regularly available from exchanges, dealers, brokers, industry groups, pricing agencies or
regulatory authorities for related assets or liabilities, and represent actual and frequently
occurring market transactions on a fair trade basis.
The fair value of financial assets initially acquired or derived or financial liabilities assumed
shall be determined on the basis of the market transaction price.
The fair value of financial assets or financial liabilities without active market is determined
using valuation techniques. In valuation, the Company adopts valuation techniques that are
29
applicable under current circumstances and that are supported by adequate available data and
other information, selects inputs with consistent asset or liability characteristics considered by
market participants in trading related asset or liability, and uses relevant observable inputs where
possible. Unobservable inputs are used where the relevant observable inputs are not available or
are impracticable.
(6) Provision for impairment of financial assets
Based on the expected credit losses, the Company assesses the expected credit losses of the
financial assets measured at amortized cost and financial assets at fair value through other
comprehensive income, lease receivables, contract assets, loan commitment and financial
liabilities that are not measured at fair value through profit or loss, and financial guarantee
contract etc., and makes impairment accounting and recognizes loss provisions.
The expected credit loss refers to the weighted average of the credit losses of financial
instruments that are weighted by the risk of default. Credit loss refers to the difference between all
contractual cash flows discounted at the original effective interest rate and receivable from the
contract and all cash flows expected to be received by the Company, and the present value of all
cash shortages. For financial assets that have been purchased or generated with credit impairment,
loss provision is recognized only for the cumulative changes in lifetime expected credit losses
after the initial recognition on the balance sheet date.
For accounts receivable, contract assets, and lease receivables, the Company shall always
measure the loss allowance for them at an amount equal to the lifetime expected credit losses.
For financial assets that have been purchased or generated with credit impairment, loss
provision is recognized only for the cumulative changes in lifetime expected credit losses after
the initial recognition on the balance sheet date. On each balance sheet date, the amount of
changes in lifetime expected credit losses is included in profit or loss as an impairment loss or
gain. Even if the lifetime expected credit loss determined on the balance sheet date is less than
the expected credit loss reflected in the estimated cash flow at the initial recognition, the positive
change in expected credit loss is also recognized as an impairment gain
Except for the above-mentioned simplified measurement methods and purchased or
originated credit-impaired assets, the Company assesses whether the credit risk of the other
financial assets has increased significantly since the initial recognition on each balance sheet date,
and separately measures its loss provision, recognizes expected credit loss and its changes based
on the following circumstances：
a) If the credit risk of the financial instruments has not increased significantly since the initial
recognition, the loss provision is measured at the amount equivalent to the expected credit loss of
the financial instruments in the next 12 months, regardless of whether the basis the Company
30
assesses the credit loss is on individual financial instrument or the combination of financial
instruments, and the increase or reversal of the loss provision resulting therefrom shall be included
in the current profit or loss as an impairment loss or gain.
b) If the credit risk of the financial instruments has increased significantly since the initial
recognition but no impairment has occurred, the loss provision is measured at the amount
equivalent to the lifetime expected credit loss of the financial instruments, regardless of whether
the basis the Company assesses the credit losses is on individual financial instrument or a
combination of financial instruments, and the increase or reversal of the loss provision resulting
therefrom should be included in the current profit or loss as an impairment loss or gain.
c) For financial instruments in the third stage which the financial instrument has been
impaired since initial recognition, the Company measures loss provision on the basis of life-time
expected credit loss and calculating interest income according to their book balance minus the
impairment provision and the actual interest rate.
Incremental or reversal of credit loss provision shall be included in current profit or loss as
impairment loss or gain. Except for financial asset at fair value through other comprehensive
income, credit loss provision is to offset the carrying amount of financial assets. For financial
assets at fair value through other comprehensive income, the credit loss provision is recognized
in other comprehensive income and will not offset the financial asset’s carrying amount in
balance sheet.
If the Company recognized credit loss provision in prior accounting period in terms of
life-time credit loss, but on current period balance sheet date, the associated financial asset does
not belong to the situation of risk increased after the initial recognition, the Company shall
accrue credit loss provision for this financial asset based on the next 12 month expected credit
loss. Difference arose from above changes shall be included in current period profit or loss as
impairment gain.
1) Assessment of significant increase of credit risk
By comparing the default risk of financial instruments on balance sheet day with that on
initial recognition day, the Company determines the relative change of default risk of financial
instruments during the expected life of financial instruments, to evaluate whether the credit risk of
financial instruments has increased significantly since the initial recognition.
To determine whether credit risk has increased significantly since the initial recognition,
factors considered by the Company includes:
a) Whether there is serious deterioration of the debtor’s operating results that have occurred
or are expected to occur;
31
b) Changes in the existing or anticipated technological, market, economic or legal
environment will have a significant negative impact on the debtor’s repayment capacity.
c) Serious deterioration of external or internal credit ratings (if any) of financial instruments
that have occurred or are expected to occur;
d) Whether the expected performance and repayment of debtor changes significantly.
e) Whether the Company changed the way of managing financial assets.
On the balance sheet date, if the Company assesses that the financial instrument only has
lower level of credit risk, the Company assumes that the credit risk associated with the financial
instrument does not increased after the initial recognition. If the default rate of a financial
instrument is low and the debtor’s ability to fulfill its cash flow liability is strong, the financial
instrument will be regarded with lower credit risk even if there will be adverse changed in
economic and operating environment in long-term which may not necessarily decrease the
debtor’s ability of fulfilling its cash flow liabilities.
2) Provision for impairment of financial assets
When one or more events that adversely affect the expected future cash flows of a financial
asset occur, the financial asset becomes a financial asset that has suffered credit impairment.
Evidence that credit impairment has occurred in a financial asset includes the following
observable information:
a) significant financial difficulties of the issuer or debtor;
b) the debtor breaches the contract, such as failure to pay or delay in the payment of interest
or principal;
c) the creditor gives the debtor a concession which would not have been made under any
other circumstances for economic or contractual considerations relating to the financial difficulties
of the debtor;
d) the debtor is likely to go bankrupt or carry out other financial restructurings;
e) the financial difficulties of the issuer or the debtor cause the active market of the financial
asset to disappear;
f) purchase or source a financial asset at a substantial discount that reflects the fact that credit
losses have occurred.
The credit impairment of financial assets may be caused by the joint action of multiple events,
and may not be caused by separately identifiable event
3) Determining expected credit loss (ECL)
The Company evaluates ECL based on single or portfolio of financial instrument. When
evaluating ECL, the Company considers past events, current situation and future economic
condition.
The Company categorizes financial instrument into different portfolios based on common
32
credit risk characteristics. Common credit risk characteristics includes: types of financial
instruments, aging portfolio, settlement period, debtor’s industries etc… Refer to accounting
policies of financial instruments for standard for single evaluation and credit risk characteristics.
The Company uses the following way to determine the ECL of financial instruments:
a) For financial assets, credit loss is the present value of difference between all contractual
cash flows receivable from the contract and all cash flows expected to be received by the
Company.
b) For lease receivable, credit loss is the present value of difference between all contractual
cash flows receivable from the contract and all cash flows expected to be received by the
Company.
c) For financial guarantee contract, credit loss is the present value of expected payment
amount due to credit losses happened to the owner of the contract and less any amount that the
Company expected to receive from the contract owner, debtor or other parties.
d) For financial assets that already impaired on balance sheet date but not impaired when
purchasing, the credit loss is the difference of carrying amount and present value of future cash
flows discounted at original effective interest rate.
Factors that the Company measures ECL of financial instrument includes: assessing a series
of possible results and to determine a weighted average amount without bias; time value of money;
information of past event, current situation and future economic condition forecast that can be
obtained without paying extra cost or efforts on balance sheet date.
4) Write off
If the Company no longer reasonably expects that the financial assets contract cash flow can
be recovered fully or partially, the financial assets book balance will be reduced directly. Such
reduction constitutes the derecognition of the financial assets.
(7) Offset of financial assets and financial liabilities
Financial assets and financial liabilities are presented separately in the balance sheet and are
not offset. However, if all of the following conditions are met, the net amount offset by each
other is presented in the balance sheet:
1) The Company has a statutory right to offset the recognized amount, and such legal right is
currently enforceable;
2) The Company plans to settle in net amount or to realize the financial assets and settle the
financial liabilities at the same time.
12. Bill receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and
accounting method to bill receivable.
33
If the Company has sufficient evidence to evaluate the ECL of bill receivable on single basis,
it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make
judgment based on historical loss experience, current situation and future economic situation, and
classifying the bill receivable into different portfolios. The basis for portfolios is determined as
follows:
Portfolio Basis method
Risk-free
The issuer has higher level of credit rating and Referencing historical impairment experience
banker’s
no default in past and has strong ability to and taking into consideration of current
acceptance
fulfil its contractual cash follow obligation situation and estimation of future conditions
note
Business
Bill receivables with same aging have similar
acceptance Based on aging analysis
credit risk characteristics
note
13. Accounts receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and
accounting method to accounts receivable.
If the Company has sufficient evidence to evaluate the ECL of account receivable on single
basis, it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make
judgment based on historical loss experience, current situation and future economic situation, and
classifying the account receivable into different portfolios. The basis for portfolios is determined
as follows:
Portfolio Basis method
Referencing historical impairment
Receivables for related Account receivables for related parties in
experience and taking into
parties in scope of scope of consolidation have similar credit
consideration of current situation and
consolidation risk characteristics
estimation of future conditions
Accounts receivables Account receivables with same aging have
Based on aging analysis
from other parties similar credit risk characteristics
14. Other receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and
accounting method to other receivables.
If the Company has sufficient evidence to evaluate the ECL of other receivables on single
basis, it will be assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will make
judgment based on historical loss experience, current situation and future economic situation, and
classifying the other receivable into different portfolios. The basis for portfolios is determined as
follows:
34
Portfolio Basis method
Receivables of down payment The portfolio has similar
Based on aging and ECL rate
and guarantee credit risk characteristics
The portfolio has similar Referencing historical impairment experience
Petty cash for employees credit risk characteristics and taking into consideration of current situation
and estimation of future conditions
The portfolio has similar Referencing historical impairment experience
Social security payment paid
credit risk characteristics and taking into consideration of current situation
on-behalf of employees
and estimation of future conditions
Receivables from related The portfolio has similar Referencing historical impairment experience
parties within scope of credit risk characteristics and taking into consideration of current situation
consolidation and estimation of future conditions
The portfolio has similar
Others Based on aging and ECL rate
credit risk characteristics
15. Inventory
(1) Classification
Inventory refers to the finished products or commodities that the Company holds for sale in
its daily activities, semi-products in the production process, materials and consumables used in
the production process or the provision of labour services. Inventories include raw materials,
work in progress, and finished goods.
(2) Valuation method of inventory
When inventory is acquired, it is initially measured at cost, including procurement costs,
processing costs and other costs. When the inventory is issued, it is measured by the weighted
average method (except for branded watches) and specific identification method (for branded
watches) .
(3) Basis for determining the net realizable value and method for provision for obsolete inventories
After the inventory is thoroughly inspected at the end of the period, the provision shall be
provided or adjusted at the lower of the cost of the inventory and its net realizable value. The net
realizable value of inventory of goods directly used for sale, such as finished goods, stocked goods
and materials for sale in the normal production and operation process, is determined by the
estimated selling price of the inventory minus the estimated selling expenses and related taxes; net
realizable value of inventory of materials that need to be processed is determined based on the
estimated selling price of the finished products produced minus the estimated cost till completion,
estimated selling expenses and related taxes and fees in the normal production and operation
process; the net realizable value of the inventory held for the execution of a sales contract or
labour contract is calculated on the basis of the contract price. If the quantity of the inventory held
exceeds the quantity ordered by the sales contract, the net realizable value of the excess inventory
is calculated based on the general sales price.
The provision is accrued according to the individual inventory project at the end of the period;
but for a large number of inventories with lower unit price, the provision is accrued according to
35
the category of inventory; for those related to the product series produced and sold in the same
region, have the same or similar end use or purpose and that are difficult to measure separately
from other projects, they are combined for provision for inventory depreciation
If the influencing factors of the write-down of inventory value have disappeared, the amount
of write down will be restored and will be reversed within the amount of the provision for decline
in value of the inventory that has been accrued. The amount of the reversal is included in the
current profit or loss
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
Low-value consumables and packaging materials are charged to profit or loss when they are
used.
16. Contract assets
The Company has the right to receive the consideration for the transfer of goods to the
customers. If the right depends on factors other than the passage of time, it is recognized as a
contract asset. If the Company has the right (only depends on passage of time) to receive
consideration from client, accounts receivable shall be recognized.
Refer to Note XI 6 for impairment to contract asset.
17. Long-term Equity Investment
(1) Determination of investment cost
1) For the long-term equity investment formed by business combination, the specific
accounting policies are detailed in the accounting treatment of business combination under
common control and not under common control as set out in this Note VI.
2) Long-term equity investment obtained by other means
The initial investment cost of the long-term equity investment obtained by cash payment is
the actual purchase price. The initial investment cost includes expenses directly related to the
acquisition of long-term equity investments, taxes and other necessary expenses
The initial investment cost of the long-term equity investment obtained by issuing equity
securities is the fair value of the issued equity securities; the transaction cost incurred in the
issuance or acquisition of its own equity instruments is deducted from equity if it is directly
attributable to equity transactions.
Under the premise that the non-monetary asset exchange has the commercial substance and
the fair value of the assets received or surrendered can be reliably measured, the initial
investment cost of the long-term equity investment exchanged for non-monetary assets is
determined based on the fair value of the assets exchanged and relevant taxes payable, unless
there is conclusive evidence that the fair value of the assets transferred is more reliable; for the
36
exchange of non-monetary asset that does not meet the above premise, the initial investment cost
of long-term equity investment is the carrying amount of the assets exchanged and the related
taxes and fees payable.
The initial investment cost of a long-term equity investment obtained through debt
restructuring includes the fair value of the waived debt, taxes that can be directly attributable to
the asset and other costs
(2) Subsequent measurement and profit and loss recognition
1) Cost method
The long-term equity investment that the Company can control over the investee is accounted
for using the cost method, and the cost of the long-term equity investment is adjusted by adding
or recovering the investment according to the initial investment cost. Except for the actual
payment or the cash dividends or profits included in the consideration that have been announced
but not yet paid at the time of acquiring the investment, the Company recognizes the current
investment income according to its share of cash dividends or profits declared to be distributed
by the investee.
2) Equity method
The Company’s long-term equity investments in associates and joint ventures are accounted
for using the equity method, and some of the equity investments in associates that are indirectly
held by venture capital institutions, mutual funds, trust companies or similar entities including
investment-linked insurance funds are measured at fair value through profit or loss.
When the initial investment cost of a long-term equity investment is greater than the
investment, the initial investment cost of the long-term equity investment shall not be adjusted by
the difference between the fair value of the identifiable net assets of the investee; if the initial
investment cost is less than the investment, the difference between the fair value of the
identifiable net assets of the investee should be included in the current profit or loss
After obtaining the long-term equity investment, the Company shall recognize the investment
income and other comprehensive income according to the share of net profit and loss and other
comprehensive income realized by the investee that is entitled or should be shared respectively,
and adjust the carrying amount of the long-term equity investment; and reduces the carrying
amount of the long-term equity investment based on portion of the profit or cash dividend
declared to be distributed by the investee; and for other changes in the owners’ equity other than
the net profit or loss, other comprehensive income and profit distribution of the investee, the
carrying amount of the long-term equity investment is adjusted and included in the owners’
equity.
When recognizing the share of the net profit or loss of the investee, the Company shall adjust
and recognize the net profit of the investee based on the fair value of the identifiable assets of the
37
investee at the time of obtaining the investment. The unrealized internal transaction gains and
losses between the Company and the associates and joint ventures shall be offset against the
portion attributable to the Company in accordance with the proportion to be enjoyed, on the basis
of which the investment gains and losses are recognized.
When the Company recognizes the losses incurred by the investee that it should bear, it shall
deal with it in the following order: Firstly, offset the carrying amount of the long-term equity
investment. Secondly, if the carrying amount of the long-term equity investment is not enough to
be offset, the investment loss will continue to be recognized to the extent of carrying amount of
other long-term equity that virtually constitutes a net investment in the investee, and the carrying
amount of the long-term receivables is offset. Finally, after the above-mentioned treatment, if the
enterprise still bears additional obligations in accordance with the investment contract or
agreement, the projected liabilities are recognized according to the estimated obligations and
included in the current investment losses.
If the investee realizes profit in the future period, after deducting the unrecognized loss share,
and the reduction of book balance of the recognized projected liabilities and recovery of other
long-term equity that virtually constitutes a net investment in the investee and carrying amount of
long-term equity investment as opposite to the order above, the Company shall restore the
investment income.
(3) Conversion of accounting methods for long-term equity investment
1) Fair value measurement to equity method accounting
If the equity investment originally held by the Company that does not have control, joint
control or significant influence on the investee, which is accounted for according to the
recognition and measurement criteria of financial instruments, can exert significant influence on
the investee or jointly control but does not constitute control over it due to additional investment
and otherwise, its initial investment cost shall be the sum of the fair value of the equity investment
originally held in accordance with the “Accounting Standards for Business Enterprises No. 22 –
Recognition and Measurement of Financial Instruments” and new investment cost after being
accounted for under the equity method.
If the initial investment cost accounted for under the equity method is less than the fair value
share of the identifiable net assets of the investee on the additional investment date determined by
the new shareholding ratio after the additional investment, the carrying amount of the long-term
equity investment is adjusted and included in the current non-operating income.
2) Fair value measurement or equity method accounting to cost method accounting
If the equity investment originally held by the Company, that does not have control, joint
control or significant influence on the investee and which is accounted for in accordance with the
financial instrument recognition and measurement criteria, or the long-term equity investment
38
originally held in associates or joint venture, can exercise control over the investee not under
common control due to additional investment or otherwise, in the preparation of individual
financial statements, the sum of the carrying amount of the equity investment originally held plus
the new investment cost shall be regarded as the initial investment cost after being accounted for
under the cost method.
The other comprehensive income recognized by the equity method in respect of the equity
investment originally held before the purchase date is accounted for on the same basis as the
investee directly disposes of the relevant assets or liabilities when the investment is disposed of.
If the equity investment held before the purchase date is accounted for in accordance with the
relevant provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition
and Measurement of Financial Instruments”, the cumulative fair value changes originally included
in other comprehensive income are transferred to current profit or loss when the cost method is
adopted.
3) Equity method accounting to fair value measurement
If the Company loses joint control or significant influence on the investee due to the disposal
of part of the equity investment or otherwise, the remaining equity after disposal shall be
accounted for according to the “Accounting Standards for Business Enterprises No. 22 –
Recognition and Measurement of Financial Instruments”. The difference between the fair value
and the carrying amount on the date of losing joint control or significant impact is recognized in
profit or loss.
The other comprehensive income recognized in respect of the original equity investment
using the equity method is accounted for on the same basis as the investee directly disposes of the
relevant asset
4) Cost method to equity method
Where the Company loses control over the investee due to the disposal of part of the equity
investment, etc., in the preparation of individual financial statements, if the remaining equity after
disposal can exercise joint control or significant influence on the investee, the equity method is
adopted for accounting, and the remaining equity is deemed to be adjusted under the equity
method when it is acquired.
5) Cost method to fair value measurement
Where the Company loses control over the investee due to the disposal of part of the equity
investment, etc., in the preparation of individual financial statements, if the remaining equity after
disposal cannot jointly control or exert significant influence on the investee, the relevant
provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments” are adopted. The difference between the fair value and the
carrying amount on the date of loss of control is recognized in profit or loss for the current period.
39
(4) Disposal of long-term equity investment
For the disposal of long-term equity investment, the difference between the carrying amount
and the actual purchase price shall be included in the current profit or loss. For the long-term
equity investment accounted for using the equity method, when the investment is disposed of, the
part that is originally included in the other comprehensive income is accounted for in the same
proportion based on the same basis as the investee directly disposes of the relevant assets or
liabilities.
If the terms, conditions and economic impact of each transaction on disposal of the equity
investment in a subsidiary satisfy one or more of the following cases, the multiple transactions are
treated as a package transaction:
1) The transactions are made simultaneously or with consideration of each other’s influence;
2) The transactions as a whole can achieve a complete business outcome;
3) The occurrence of a transaction depends on the occurrence of at least one other
transaction;
4) A transaction is uneconomic alone, but it is economic when considered together with other
transactions
Where the loss of control over the original subsidiary due to disposal of part of the equity
investment or otherwise which is not a package transaction, the individual financial statements and
consolidated financial statements shall be classified for relevant accounting treatment:
a) In the individual financial statements, the difference between the carrying amount of the
disposed equity and the actual purchase price is included in the current profit or loss. If the
remaining equity after disposal can exert joint control or significant influence on the investee, it
shall be accounted for under the equity method, and the residual equity shall be deemed to be
adjusted by equity method when it is acquired; if the remaining equity after disposal cannot exert
joint control or significant influence over the investee, it shall be accounted for by the relevant
provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments”, and the difference between the fair value and the carrying
amount on the date of loss of control is included in the current profit or loss.
b) In the consolidated financial statements, for each transaction before the loss of control over
the subsidiary, capital reserve (share premium) is adjusted for the difference between the disposal
price and the share of the net assets corresponding to the disposed long-term equity investment
that the subsidiary has continuously calculated from the date of purchase or the merger date; if the
capital reserve is insufficient to offset, the retained earnings will be adjusted; when the control of
the subsidiary is lost, the remaining equity shall be re-measured according to its fair value on the
date of loss of control. The sum of the consideration for the disposal of the equity and the fair
value of the remaining equity, less the share of the net assets that that the original subsidiary has
40
continuously calculated from the date of purchase calculated based on the original shareholding, is
included in the investment income for the period of loss of control, while reducing goodwill. Other
comprehensive income related to the original subsidiary’s equity investment will be converted into
current investment income when control is lost.
If each transaction on disposal of the equity investment in a subsidiary until the loss of
control is a package transaction, each transaction is accounted for as a transaction to dispose of the
equity investment in the subsidiary with loss of control, which is distinguished between individual
financial statements and consolidated financial statements:
a) In the individual financial statements, the difference between each disposal price and the
carrying amount of the long-term equity investment corresponding to the disposed equity before
the loss of control is recognized as other comprehensive income, and when the control is lost, it is
transferred to profit or loss for the period of the loss of control.
b) In the consolidated financial statements, the difference between each disposal price and the
disposal investment that has the share of the net assets of the subsidiary before the loss of control
is recognized as other comprehensive income, and transferred to profit or loss for the period of the
loss of control.
(5) Judging criteria for joint control and significant influence
If the Company collectively controls an arrangement with other parties in accordance with
the relevant agreement, and the activity decision that has a significant impact on the return of the
arrangement needs to be unanimously agreed upon by the parties sharing the control, it is
considered that the Company and other parties jointly control an arrangement, which is a joint
arrangement.
If the joint arrangement is reached through a separate entity and it determines that the
Company has rights to the net assets of the separate entity in accordance with the relevant
agreement, the separate entity is regarded as a joint venture and is accounted for using the equity
method. If it is judged according to the relevant agreement that the Company does not have rights
to the net assets of the separate entity, the separate entity acts as a joint operation, and the
Company recognizes the items related to the share of the interests of the joint operation and
conducts accounting treatment in accordance with the relevant ASBEs.
Significant influence refers to the investor’s power to participate in the decision-making of
the financial and operating policies of the investee, but it cannot control or jointly control the
formulation of these policies with other parties. The Company has a significant influence on the
investee under one or more of the following situations and taking into account all facts and
circumstances: (1) it is represented on the board of directors or similar authorities of the investee;
(2) it involves in the formulation of financial and operating policy of the investee; (3) it has
important transactions with the investee; (4) it dispatches management personnel to the investee;
41
(5) it provides key technical information to the investee.
18. Investment Property
Investment property refers to property held for the purpose of earning rent or capital
appreciation, or both, including leased land use rights, land use rights held and prepared for
transfer after appreciation, and leased buildings. Besides, for empty constructions that the
Company held for rent lately but with the written resolution from the board stated that it will be
used as operating lease and that intention will not be changed in short-term, it can be treated as
investment property.
The Company’s investment property is recorded at its cost, and the cost of purchased
investment property includes the purchase price, related taxes and other expenses directly
attributable to the asset; the cost of self-built investment property is composed of the necessary
expenses incurred before the asset is ready for expected use.
The Company adopts the cost model for subsequent measurement of investment property, and
depreciates or amortizes buildings and land use rights according to their estimated service life
and net residual value. Expected useful life, residual value and annual depreciation rate are as
follows:
Estimated useful life
Category Residual value rate % Depreciation rate %
(years)
Property 20-35 5.00 4.80-2.70
When the use of investment property is changed to self-use, the Company converts the
investment property into fixed assets or intangible assets from the date of change. When the use
of self-use property changes to rental earning or capital appreciation, the Company converts
fixed assets or intangible assets into investment property from the date of change. When a
conversion occurs, the carrying amount before conversion is used as the converted value
The investment property is derecognized when the investment property is disposed of, or
permanently withdrawn from use and is not expected to obtain economic benefits from its
disposal. The amount of disposal income from the sale, transfer, retirement or damage of the
investment property after deducting its carrying amount and related taxes and expenses is
recognized in profit or loss for the current period.
19. Fixed assets
(1) Recognition conditions of fixed assets
Fixed assets refer to tangible assets held for the purpose of producing goods, providing labour
services, renting or operating management, and having a useful life of more than one fiscal year.
Fixed assets are recognized when they meet all of the following conditions:
1) the economic benefits associated with the fixed assets are likely to flow into the enterprise;
2) the cost of the fixed assets can be reliably measured.
(2) Initial measurement of fixed assets
42
The fixed assets of the Company are initially measured at cost.
1) The cost of outsourcing fixed assets includes the purchase price, import duties and other
related taxes and fees, as well as other expenses that can be directly attributed to the assets before
they reach their intended usable state.
2) The cost of self-built fixed assets is determined by the necessary expenditures incurred
before the assets reach their expected usable state.
3) For fixed assets invested by investors, the value agreed in the investment contract or
agreement is regarded as the book value, but the value agreed in the contract or agreement is not
accounted for at fair value.
4) If the payment for the purchase of fixed assets is delayed beyond the normal credit
conditions, and is of a financing nature in essence, the cost of fixed assets is determined on the
basis of the present value of the purchase price. The difference between the actual payment and
the present value of the purchase price is recorded in the current profit or loss during the credit
period, except where it should be capitalized.
(3) Subsequent measurement and disposal of fixed assets
1) Depreciation of fixed assets
Depreciation of fixed assets is accrued over the estimated useful life based on its recorded
value less the estimated net residual value. The fixed assets that have been provided for
impairment losses are depreciated in the future period based on the carrying amount after
deducting the impairment provision and the remaining useful life.
The Company determines the service life and estimated net residual value of fixed assets
based on the nature and use of fixed assets. At the end of the year, the service life, the estimated
net residual value and the depreciation method of the fixed assets are reviewed. If there is a
difference from the original estimate, corresponding adjustments will be made.
The depreciation method, depreciation period and annual depreciation rate of various fixed
assets are as follows.
Estimated useful
Residual value Depreciation
Class Method of depreciation life
rate % rate %
(years)
Property and plant Straight-line 20-35 5.00 4.80-2.70
Machinery and Straight-line
10 5.00-10.00 9.50-9.00
equipment
Electronic equipment Straight-line 5 5.00 19.00
Motor vehicles Straight-line 5 5.00 19.00
Others Straight-line 5 5.00 19.00
2) Subsequent expenditures on fixed assets
43
Subsequent expenditures related to fixed assets that meet the conditions for recognition of
fixed assets are included in the cost of fixed assets; those that do not meet the conditions for
recognition of fixed assets are included in the current profit or loss when they occur.
3) Disposal of fixed assets
When a fixed asset is disposed of or no economic benefit is expected to result from its use or
disposal, the fixed asset is derecognized. The amount of disposal income from sale, transfer,
retirement or damage of the fixed asset after deducting its book value and related taxes is
included into the current profit or loss.
20. Construction in Progress
(1) Initial measurement of construction in progress
The self-built construction in progress of the Company is measured at the actual cost, which
is determined by the necessary expenses incurred before the construction of the asset reaches the
intended usable condition, including the cost of engineering materials, labour costs and relevant
taxes payable, capitalized borrowing costs and indirect costs that should be apportioned. The
Company’s construction in progress is classified into projects when in accounting
(2) Criteria for and time point of construction in progress to convert into fixed asset
The total expenditure incurred before the construction in progress project is constructed to
reach the intended usable condition shall be recorded as the book value of the fixed assets. For
the construction in progress built which has reached the intended usable condition, but has not
yet completed the final accounts, since the date of reaching expected use condition, according to
the project budget, cost or actual project costs, it shall be converted into fixed assets at the
estimated value, and fixed assets shall be depreciated in accordance with the depreciation policy
of the Company for fixed assets. After the completion of the final accounts, the original estimated
value shall be adjusted according to the actual cost, but the original depreciation amount shall not
be adjusted.
21. Borrowing Costs
(1) Recognition principle for capitalization of borrowing costs
If the borrowing costs of the Company can be directly attributable to the acquisition and
construction or production of assets eligible for capitalization, it shall start capitalization and be
included in the cost of relevant assets in the case of eligible for capitalization; other borrowing
costs shall be recognized as expenses at the time of occurrence and shall be included in the
current profit or loss.
Assets that are eligible for capitalization are assets that require a long period of time to
purchase or produce activities to achieve fixed assets, investment property and inventory that are
available for intended use or sale.
Borrowing costs begin to capitalize when all of the following conditions are met:
44
1) Assets expenditure has occurred, including expenditure incurred in the form of cash
payment, transfer of non-cash assets or assuming of interest-bearing debt for the acquisition and
construction or production of assets eligible for capitalization;
2) Borrowing costs have already occurred;
3) The purchase and construction or production activities necessary for the assets to reach the
intended use or saleable status have started.
(2) Capitalization period of borrowing costs
The period of capitalization refers to the period from the point of time when the borrowing
costs are capitalized to the point of time where the capitalization is stopped, excluding the period
during which the borrowing costs are suspended from capitalization.
The borrowing costs shall cease to be capitalized when the assets acquired or produced that
meet the conditions for capitalization are ready for intended use or sale.
When a part of the assets purchased or produced that meet the capitalization conditions are
completed and can be used alone, such part of the assets shall stop capitalization of borrowing
costs.
Where each part of the assets purchased or produced is completed separately, but must wait
until the whole is completed or can be sold externally, the capitalization of the borrowing costs
shall be stopped when the assets are completed as a whole.
(3) Suspension of capitalization period
If the assets that meet the capitalization conditions are interrupted abnormally during the
construction or production process and the interruption time lasts for more than 3 months, the
capitalization of borrowing costs shall be suspended; the borrowing costs shall continue to be
capitalized if the acquisition or production of assets eligible for capitalization is necessary to meet
the required usable status or the availability of sales. The borrowing costs incurred during the
interruption are recognized as profit or loss for the current period and the borrowing costs continue
to be capitalized until the acquisition or production of assets is resumed.
(4) Calculation for capitalization amount of borrowing costs
Interest charges on special borrowings (excluding interest income on unused borrowings
deposited in the bank, or investment income on temporary investment) and their ancillary
expenses shall be capitalized before the assets purchased or produced that meet the capitalization
conditions are ready for intended use or sale.
The amount of capitalized interest on general borrowings is calculated by the weighted
average of the excess portion of the accumulative asset expenditures over the special borrowings
multiplied by the capitalization rate of general borrowings. The capitalization rate is determined
based on the weighted average interest rate of general borrowings.
Where there is a discount or premium in the borrowings, the interest amount shall be adjusted
45
in accordance with the effective interest rate method to determine the discount or premium amount
that shall be amortized during each accounting period.
22. Right-of-use Assets
The Company initially measures the right-to-use assets at cost, which includes:
(1) initial measurement amount of lease liabilities;
(2) lease payments made before or at the beginning of the lease term, and deduction of the
relevant amount of rental incentives if any;
(3) initial direct expenses incurred by the Company;
(4) expected costs to be incurred by the Company for dismantling and removing leased
assets, restoring the site of leased assets or restoring leased assets to the state agreed in the lease
terms (excluding costs incurred for the production of inventory)
After the beginning of the lease term, the Company adopts the cost model for subsequent
measurement of the right-of-use assets
If it is reasonably certain to obtain the ownership of the leased assets at the expiration of the
lease term, the Company shall depreciate the leased assets within the remaining useful life of the
leased assets. If it is not reasonably certain to obtain the ownership of the leased assets at the
expiration of the lease term, the Company shall depreciate the leased assets within the shorter of
the lease term and the remaining useful life of the leased assets. For the right-of-use assets with
impairment provision, depreciation shall be calculated based on the book value after deduction of
impairment provision in according with the above principles in future periods.
23. Intangible Assets and Development Expenditure
Intangible assets refer to the identifiable non-monetary assets owned or controlled by the
Company which have no physical form, including land use rights, software and trademark use
rights.
(1) Initial measurement of intangible assets
The cost of externally purchased intangible assets includes the purchase price, relevant
taxation and other expenses directly attributable to bringing the assets to expected usage. If
payment for the purchase price of intangible assets is delayed beyond normal credit conditions and
is in fact financing in nature, the cost of the intangible assets is determined based on the present
value of the purchase price.
For intangible asset obtained through debt restructuring for offsetting the debt of the debtor,
its initial measurement cost includes the fair value of the waived creditor’s rights and taxes and
other costs directly attributable to bringing the asset to expected usage. The difference between the
fair value of the waived creditor’s rights and the carrying amount shall be recognized in profit or
loss for the period.
The book value of intangible asset received in exchange for non-monetary asset is based on
46
the fair value of the asset surrendered and relevant taxes payable, provided that the exchange of
nonmonetary asset has a commercial substance and the fair value of both the asset received and
the asset surrendered can be reliably measured, except there is definite evidence that the fair value
of the asset received is more reliable; for exchange of non-monetary asset that cannot satisfy the
above conditions, the cost of the intangible asset received is based on the carrying amount of the
asset surrendered and relevant taxes payable, and no profit or loss is recognized.
For intangible asset obtained through business absorption or combination under common
control, its book value is determined by the carrying amount of the combined party; for intangible
asset obtained through business absorption or merger not under common control, its book value is
determined by the fair value of the intangible asset.
The cost of an internally developed intangible asset includes the materials consumed in
developing the intangible asset, labour costs, registration fees, amortization of other patented
rights and licensed rights used during the development process, interest expenses meeting
capitalization conditions, and other direct costs for bringing the intangible asset to expected usage.
(2) Subsequent measurement of intangible assets
The Company determines the useful life of intangible assets on acquisition, which are
classified as intangible assets with limited useful life and indefinite useful life.
1) Intangible assets with a limited useful life
Intangible assets with a limited useful life are depreciated using straight line method over the
term during which they bring economic benefits to the Company. The estimated life and basis for
the intangible assets with a limited useful life are as follows:
Item Estimated useful life Amortization method
Land use right 50 Straight-line
Software systems 5 Straight-line
Right to use the trademark 5-10 Straight-line
The useful life and depreciation method of intangible assets with a limited useful life are
reassessed at the end of each period. If there is a difference from the original estimate,
corresponding adjustments will be made.
Upon re-assessment, there was no difference in the useful life and depreciation method of
intangible assets from the previous estimates at the end of the period.
(3) Specific basis for determining the research stage and development stage of internal
research and development projects of the Company
Research stage: a stage of scheduled innovative investigations and research activities for the
acquisition and understanding of new scientific or technical knowledge.
Development stage: before the commercial production or use, the research results or other
knowledge will be applied to a plan or design to produce new or substantial improvements in
47
materials, devices, products and other activities.
The expenditure of the research stage of the internal research and development project is
included in the current profit or loss at the time of occurrence
(4) Specific standard for capitalization of expenditure in the development stage
The expenditure of an internal research and development project in the development stage is
recognized as an intangible asset when meeting all of the following conditions:
1) It is technically feasible to complete the intangible asset so that it can be used or sold;
2) With an intention to complete the intangible asset and to use or sell it;
3) The way the intangible asset generates economic benefits can prove the existence of a
market for the products produced using the intangible asset or a market for the intangible asset
itself, and if the intangible asset will be used internally, its usefulness can be proven;
4) Having sufficient technical, financial resources and other resource support to complete the
development of the intangible asset, and having the ability to use or sell the intangible asset;
5) Expenditure attributable to the development stage of the intangible asset can be reliably
measured.
Expenditures incurred in the development stage that do not meet the above conditions shall
be included in the current profit or loss at the time of occurrence. The development expenditures
which have been included in the profit or loss in the previous periods will not be recognized as an
asset in the future period. The capitalized expenditures in the development phase are shown in the
balance sheet as development expenditures and are converted into intangible assets from the date
of the project’s intended use.
24. Impairment on Long-term Assets
On the balance sheet date, the Company determines whether there may be a sign of
impairment on long-term assets. If there is a sign of impairment on long-term assets, the
recoverable amount is estimated on the basis of a single asset. If it is difficult to estimate the
recoverable amount of a single asset, then determine the recoverable amount of the asset group on
the basis of the asset group to which the asset belongs.
The estimated recoverable amount of an asset is the higher of its fair value less the cost of
disposal and the present value of the expected future cash flow of the asset.
The measurement results of recoverable amount show that when the recoverable amount of
an long-term asset is lower than its book value, the book value of the long-term asset is reduced to
its recoverable amount. The reduced amount is recognized as an impairment loss on the asset and
included in the current profit or loss, at the same time, asset impairment provision will be made
accordingly. Asset impairment loss shall not be reversed during the subsequent accounting period
once recognized.
After the asset impairment loss is recognized, the depreciation or amortization expenses of
48
the impaired assets will be adjusted accordingly in the future period, so that the assets’ book value
after adjustment (deducting the estimated net residual value) will be systematically apportioned
over the remaining useful life of the assets.
No matter whether there is any sign of impairment or not, the impairment test is carried out
every year for goodwill and intangible assets with an indefinite useful life arising from an
enterprise merger.
In the impairment test of goodwill, the book value of goodwill would be apportioned to asset
group or portfolio of asset group expected to benefit from the synergy effect of an enterprise
merger. When taking an impairment test on the relevant asset group or portfolio of asset group
containing goodwill, if there is a sign of impairment on the asset group or portfolio of asset group
related to the goodwill, the Company first calculates the recoverable amount after testing the asset
group or portfolio of asset group which does not contain the goodwill for impairment, and then
compares it with the related book value to recognize the corresponding impairment loss. Next, the
Company conducts an impairment test on the asset group or portfolio of asset group which
contains the goodwill and compares the book value of the related asset group or portfolio of asset
group (book value includes the share of goodwill) with the recoverable amount. If the recoverable
amount of the related asset group or portfolio of asset group is lower than the book value, the
Company will recognize the impairment loss of goodwill.
25. Long-term Deferred Expenses
(1) Amortization method
Long-term deferred expenses refer to expenses that have already been spent by the Company,
but shall be apportioned in the current period and the future periods and the benefit period is over
1 year. Long-term deferred expenses are amortized in benefit period
(2) Amortization period
Category Amortization period Note
Counter fabrication expenses 2-3
Decoration expenses 3-5
Others 2-3
26. Contract liabilities
The obligation to transfer goods to a customer for which consideration has been received or
receivable is recognized in part as a contract liability
27. Employee Remuneration
Employee remuneration refers to the various forms of remuneration or compensation given
by the Company to obtain the services provided by the employees or to terminate the labour
relationship. Employee remuneration includes short-term remuneration, post-employment benefits,
termination benefits and other long-term employee benefits.
49
(1) Short-term remuneration
Short-term remuneration refers to the employee compensation other than post-employment
benefits and termination benefits required to be fully paid by the Company within 12 months
after the end of the annual reporting period in which the employees render relevant services.
During the accounting period in which the employees render services, the Company recognizes
the short-term remuneration payable as liabilities and includes the same in related asset costs or
expenses according to the object which benefits from the services rendered by employees.
(2) Post-employment benefits
Post-employment benefits refer to various forms of remuneration and benefits other than
short-term remuneration and termination benefits provided by the Company after the retirement
of employees or termination of labour relationship with the Company in exchange for the
services rendered by employees.
The Company’s post-employment benefits is defined contribution plan.
Defined contribution plan of the post-employment benefits mainly refers to the social basic
endowment insurance, unemployment insurance, etc. organized and implemented by local labour
and social security institutions; During the accounting period when employees render services to
the Company, amount payable calculated by the defined contribution plan is recognized as a
liability and included in the current profit or loss or related asset costs.
The Company will no longer have any other payment obligations after making the
above-mentioned payments on a regular basis in accordance with the standards and annuity plans
prescribed by the State.
(3) Termination benefits
Termination benefits refer to the compensation paid to an employee when the Company
terminates the employment relationship with the employee before the expiry of the employment
contract or provides compensation as an offer to encourage the employee to accept voluntary
redundancy. The Company recognizes the liabilities arising from the compensation paid to
terminate the employment relationship with employees and includes the same in the current
profit or loss at the earlier date of the following: 1) when the Company cannot reverse the
termination benefits due to the plan of cancelling the labour relationship or the termination
benefits provided by the advice of reducing staff; and 2) the Company recognizes the cost or
expense relative to the payment of termination benefits of restructuring into the current profit or
loss.
The Company provides internal retirement benefits to employees who accept internal
retirement arrangements. The internal retirement benefits refer to the remuneration and the social
insurance premiums paid to the employees who have not reached the retirement age set by the
State, and voluntarily withdrew from the job after approval of the Company’s management. The
50
Company pays internal retired benefits to an internal retired employee from the day when the
internal retirement arrangement begins till the employee reaches the normal retirement age. For
internal retirement benefits, the Company conducts accounting treatment in contrast to the
termination benefits. When the related recognition conditions of termination benefits are met, the
Company will recognize the remuneration and the social insurance premiums of the internal
retired employee to be paid during the period between the employee’s termination of service and
normal retirement date as liabilities and include the same in the current profit or loss in one time.
Changes in actuarial assumptions of internal retirement benefits and differences arising from the
adjustment of welfare standards are included in current profit or loss when incurred.
(4) Other long-term employee benefits
Other long-term employee benefits refer to all employee benefits except for short-term
remuneration, post-employment benefits, and termination benefits. For other long-term employee
benefits that meet the conditions of the defined contribution plan, during the accounting period in
which the employees provide services for the Company, the amount that should be paid is
recognized as a liability and is included in the current profit or loss or related asset costs. In
addition to the above situations, other long-term employee benefits are actuarially calculated by
the independent actuary using the expected cumulative welfare unit method on the balance sheet
date, and the welfare obligations arising from the defined benefit plans are attributed to the
period during which the employees provide services and are included in the current profit or loss
or related asset costs.
28. Projected liabilities
(1) Basis for recognition of projected liabilities
The Company will recognize projected liabilities if the obligation relating to contingent
matters meets all of the following conditions:
This obligation is a present obligation assumed by the Company;
The fulfillment of this obligation will probably cause the outflow of economic benefits from
the Company;
The amount of this obligation can be measured reliably.
(2) Measurement method of projected liabilities
The initial measurement of projected liabilities of the Company is based on the best estimate
of the expenditure required for the performance of the related present obligations.
When determining the best estimate, the Company comprehensively considers the risks,
uncertainties relating to the contingent matters and time value of currency. If the time value of
currency has a great influence, the Company determines the best estimate by discounting the
related future cash outflows.
The best estimate is determined in different situations as follow:
51
If there is a continuous range (or interval) of the required expenditure and the probability of
the occurrence of all the results in the range is the same, the best estimate is determined according
to the median value of the range, which is the average of the upper and lower limit.
Where there is not a continuous range (or interval) of the required expenditure, or there is a
continuous range, but the probability of the occurrence of all the results in the range is different, if
the contingencies involve a single project, the best estimate is determined by the amount which is
most likely to occur; if the contingencies involve a number of projects, the best estimate is
determined based on various possible results and related probability calculation.
If all or part of the expenses of the Company required to settle projected liabilities are
expected to be compensated by a third party and it is basically certain to receive the amount of
compensation, it is independently recognized as an asset. The amount of compensation recognized
will not exceed the book value of the projected liabilities.
29. Lease liabilities
The Company initially measures the lease liabilities according to the present value of the
unpaid lease payments at the beginning of the lease term. In calculating the present value of lease
payments, the Company adopts the interest rate implicit in the lease as the discount rate. If it is
impossible to determine the interest rate implicit in the lease, the incremental borrowing rate of
the Company shall be used as the discount rate. Lease payments include:
(1) Fixed payments and substantive fixed payments after deducting the relevant amount of
lease incentives;
(2) Variable lease payments depending on an index or rate;
(3) Where the Company reasonably determines that the option will be exercised, the amount
of the lease payment includes the exercise price of purchase option;
(4) Where the lease term reflects that the Company will exercise the option to terminate the
lease, the amount of the lease payment includes the amount to be paid for the exercise of the
option to terminate the lease;
(5) Expected payments based on the guaranteed residual value provided by the Company.
The Company calculates the interest charges of the lease liabilities for each period of the
lease term at a fixed discount rate and includes the same in the profit or loss of the current period
or the related asset costs.
Variable lease payments not included in the measurement of lease liabilities shall be
included in the current profit or loss or the related asset costs when they actually occur.
30. Share-based payment
(1) Category of share-based payment
The Company’s share-based payments include equity-settled share-based payments and cash
settled share-based payments.
52
(2) Recognition method of fair value of equity instrument
For options and other equity instruments granted by the Company with an active market, the
fair value is determined at the active market quotations. For options and other equity instruments
granted by the Company with no active market, option pricing model shall be used to estimate the
fair value of the equity instruments. Factors as follows shall be taken into account using option
pricing models: 1) the exercise price of the option, 2) the validity of the option, 3) the current price
of the target share, 4) the expected volatility of the share price, 5) predicted dividend of the share,
6) risk-free rate of the option within the validity period.
In determining the fair value of the equity instruments at the date of grant, the Company shall
consider the impact of market conditions in the vesting conditions and non-vesting conditions
stated in the share-based payment agreement. If there are no vesting conditions in the share-based
payments, as long as the employees or other parties satisfy the non-market conditions in all of the
vesting conditions (such as term of service) , the Company shall recognize the services rendered as
an expense accordingly.
(3) Recognition basis for the best estimate of exercisable equity instruments
On each balance sheet date within the vesting period, the estimated number of exercisable
equity instruments is amended based on the best estimate made by the Company according to the
latest available subsequent information as to changes in the number of employees with exercisable
rights. As at the exercise date, the final estimated number of exercisable equity instruments should
equal the actual number of exercisable equity instruments.
(4) Accounting treatment
Equity-settled share-based payments are measured at the fair value of the equity instruments
granted to employees. For those exercisable immediately after the grant, they shall be included in
the relevant costs or expenses at the fair value of equity instruments at the grant date with an
increase in capital reserve accordingly. For those exercisable only after provision of services or
satisfaction of prescribed performance conditions within the vesting period, on each balance sheet
date within the vesting period, the Company will recognize the services received in the current
period in related costs or expenses and capital reserves at the fair value of equity instruments on
the grant date based on the best estimate of the number of exercisable equity instruments. After the
vesting period, relevant costs or expenses and total owners’ equity which have been recognized
will not be adjusted.
Cash-settled share-based payments are calculated by the fair value of liabilities assumed in
accordance with the Company’s shares or other equity instruments. For those exercisable
immediately after the grant, they shall be included in the relevant costs or expenses at the fair
value of the liabilities assumed by the Company at the grant date with an increase in liabilities
53
accordingly. For cash-settled share-based payments exercisable only after provision of services or
satisfaction of prescribed performance conditions within the vesting period, on each balance sheet
date within the vesting period, the Company will recognize the services received in the current
period in costs or expenses and corresponding liabilities at the amount of fair value of the
liabilities assumed by the Company based on the best estimate of the number of exercisable equity
instruments. At each balance sheet date and the settlement date prior to the settlement of relevant
liabilities, the fair value of the liabilities is re-measured through profit or loss.
During the vesting period, if the equity instruments granted are cancelled, the Company will
treat the cancelled equity instruments granted as accelerated vesting, and the amount within the
remaining period should be recognized immediately in profit or loss while recognizing the capital
reverse. If employees or other parties can meet non-vesting conditions but do not meet within the
vesting period, the Company will treat it as cancelled equity instruments granted.
31. Revenue
The Company’s revenue mainly come from:
1) Sales of watch
2) Precision manufacturing
3) Property leasing
(1) General principal of revenue recognition
The Group recognizes revenue when the contract performance obligations have been fulfilled
i.e. the customer has gained control over the relevant goods or services.
Performance obligations means the Company’s commitment to transfer identifiable goods or
service to clients.
Obtaining control of the relevant goods means that it is able to dominate the use of the goods
and derive almost all economic benefits therefrom.
The Company assesses contracts at the beginning date of a contract to identify each
performance obligations contained in a contract and to determine whether each performance
obligation is to be finished over a period of time or at a point of time. The Company satisfies a
performance obligation over time if one of the following criteria is met; or otherwise, a
performance obligation is satisfied at a certain point in time: 1) the customer simultaneously
receives and consumes the benefits provided by the Company’s performance as the Company
performs; 2) the customer can control the goods under construction during the Company’s
performance; 3) the Company’s performance does not create goods with an alternative use to it
and the Company has a right to payment for performance completed to date throughout the
contract term. Otherwise, the Company recognizes revenue at the point of time.
For performance obligation satisfied over time, the Company recognizes revenue over time
by measuring the progress towards complete satisfaction of that performance obligation. When
54
the outcome of that performance obligation cannot be measured reasonably, but the Company
expects to recover the costs incurred in satisfying the performance obligation, the Company
recognizes revenue only to the extent of the amount of costs incurred until it can reasonably
measure the outcome of the performance obligation
(2) Detailed method for revenue recognition
The Company has three main business sectors: sales of watch, precision manufacturing and
property leasing. Based on the Company’s business mode and terms of settlement, the Company
set detailed method of revenue recognition method as follows:
1) Sales of watch
Sale of watch belongs to fulfilling performance obligations at a point of time.
① Online sales
Revenue shall be recognized at the point that the goods are dispatched and the customer
confirmed received the goods.
② Offline sales
Revenue shall be recognized at the point when the goods are delivered and payment by
customer is collected.
③ Consignment sale
The Company recognizes revenue when the Company receives the detail of the sales list from
distributors and confirms that the control over goods ownership were transferred to the purchaser.
④ Sale of consigned goods from others
Under Sale of consigned goods from others, the Group recognizes revenue in net amount
when it delivered consigned sale goods to customer and confirms that control over the ownership
of goods were transferred to the purchaser.
2) Precision manufacturing
Precision manufacturing business belongs to fulfilling performance obligations at a point of
time. Revenue from domestic sales shall be recognized when the goods are delivered and the
economic benefit associated with the goods is probable to flow into the Company. Revenue from
export shall be recognized when the following criteria is satisfied: The Company declared the
good at custom; obtained bill of lading; the right of collecting payment is obtained and its
probable that the economic benefit associated with the goods flows into the Company.
3) Property leasing
Refer to Note III 35. (4) for details.
(3) Revenue treatment principles for specific transactions
1) Contracts with sales return provisions
When the customer obtains control of the relevant goods, revenue is recognized based on the
amount of consideration expected to be received due to the transfer of goods to the customers
55
(exclusive of the amount expected to be refunded due to the return of sales) , while liability is
recognized based on the amount expected to be refunded due to the return of sales.
The carrying amount of goods expected to be returned at sales of goods, after deduction of
costs expected to incur for recovery of such goods (including impairment of value of the returned
goods) , will be accounted for under the item of “Right of return assets”.
2) Contracts with quality assurance provisions
The Company assesses whether a separate service is rendered in respect of the quality
assurance besides guaranteeing the sales of goods to customers are in line with the designated
standards. When additional service is provided by the Company, it is considered as a single
performance obligation and under accounting treatment according to the standards on revenue;
otherwise, quality assurance obligations will be under accounting treatment according to the
accounting standards on contingent matters
32. Contract costs
(1) Contract performance cost
The Company recognizes the cost of contract performance as an asset for the cost of
performing the contract as meeting all of the following conditions:
1) The cost is directly related to a current or expected contract, including direct labour, direct
materials, manufacturing expenses (or similar expenses) , costs clearly to be borne by the customer,
and other costs incurred solely for the contract;
2) This cost increases the resources that the company will use to fulfill its performance
obligations in the future.
3) The cost is expected to be recovered
The asset will be presented under inventory or other non-current assets based on the length of
its amortization period.
(2) Contract obtainment cost
If the incremental cost of the Company is expected to be recovered, the contract acquisition
cost is recognized as an asset. Incremental cost refers to the cost that the Company will not occur
without obtaining a contract, such as sales commission. For the amortization period not exceeding
one year, it is included in the current profit or loss when it occurs.
(3) Amortization of contract costs
The Company recognizes the contract performance cost and the contract acquisition cost on
the same basis as the commodity income related to the contract cost asset, and amortizes it at the
time when the performance obligation is performed or in accordance with the performance of the
performance obligation, and is included in the current profit or loss.
(4) Contract cost impairment
For assets related to contract costs, if the book value is higher than the difference between the
56
remaining consideration expected to be received by the Company for transfer of the goods related
to the assets and the estimated cost of transferring the relevant goods, the excess should be
depreciated and confirmed as an asset impairment loss
If the factors caused impairment changed after impairment provision is accrued, impairment
provision shall be reversed and included in current period profit or loss but the carrying amount
of asset after the reversal shall not exceed the carrying amount at the reversal date as if there was
no impair.
33. Government Subsidies
(1) Classification
Government subsidies refer to monetary and non-monetary assets received from the
government without compensation, however excluding the capital invested by the government as a
corporate owner. According to the subsidy objects stipulated in the documents of relevant
government, government subsidies are divided into subsidies related to assets and subsidies related
to income.
Government subsidies related to assets are obtained by the Company for the purposes of
acquiring, constructing or otherwise forming long-term assets. Government subsidies related to
income refer to the government subsidies other than those related to assets
(2) Recognition of government subsidies
Where evidence shows that the Company complies with relevant conditions of policies for
financial supports and is expected to receive the financial support funds at the end of the period,
the amount receivable is recognized as government subsidies. Otherwise, the government subsidy
is recognized upon actual receipt.
Government subsidies in the form of monetary assets are stated at the amount received or
receivable. Government subsidies in the form of non-monetary assets are measured at fair value; if
fair value cannot be reliably obtained, a nominal amount (RMB1) is used. Government subsidies
that are measured at nominal amount shall be recognized in the current profit or loss directly.
(3) Accounting treatment
The Company determines whether a government subsidy shall use gross method or net
method based on its economical substance. In general, only one method is used for one category
or similar government subsidy and it shall be used in a consistent way.
Government subsidies related to assets are recognized as deferred income, and are recognized,
under reasonable and systematic approach, in profit and loss in each period over the useful life of
the constructed or purchased assets;
Government subsidies related to income aiming at compensating for relevant expenses or
losses to be incurred by the enterprise in subsequent periods are recognized as deferred income,
and are recognized in current profit or loss when relevant expenses or losses are recognized.
57
Government subsidies aiming at compensating for relevant expenses or losses of the enterprise
that are already incurred are charged to current profit or loss once received.
Government subsidies related to daily activities of enterprises are included in other income;
government subsidies that are not related to daily activities of enterprises are included in
non-operating income and expense.
Government subsidies related to the discount interest received from policy-related
preferential loans offset the relevant borrowing costs; if the policy-based preferential interest rate
loan provided by the lending bank is obtained, the borrowing amount actually received shall be
taken as the recording value of the borrowings, and borrowing cost should be calculated using the
preferential interest rate according to the loan principal and the policy.
When it is required to return recognized government subsidy, if such subsidy is used to write
down the carrying value of relevant assets on initial recognition, the carrying value of the relevant
assets shall be adjusted; if there is balance of relevant deferred income, it shall be written down to
the book balance of relevant deferred income, and the excess is included in the current profit or
loss; where there is no relevant deferred income, it shall be directly included in the current profit
or loss
34. Deferred Income Tax Assets and Deferred Income Tax Liabilities
Deferred income tax assets and deferred income tax liabilities are measured and recognized
based on the difference (temporary difference) between the taxable base of assets and liabilities
and book value. On balance sheet date, the deferred income tax assets and deferred income tax
liabilities are measured at the applicable tax rate during the period when it is expected to recover
such assets or settle such liabilities.
(1) Criteria for recognition of deferred income tax assets
The Company recognizes deferred income tax assets arising from deductible temporary
difference to the extent it is probably that future taxable amount will be available against which
the deductible temporary difference can be utilized, and deductible losses and taxes can be carried
forward to subsequent years. However, the deferred income tax assets arising from the initial
recognition of assets or liabilities in a transaction with the following features are not recognized: 1)
the transaction is not a business combination; 2) neither the accounting profit or the taxable
income or deductible losses will be affected when the transaction occurs.
For deductible temporary difference in relation to investment in the associates, corresponding
deferred income tax assets are recognized in the following conditions: the temporary difference is
probably reversed in a foreseeable future and it is likely that taxable income is obtained for
deduction of the deductible temporary difference in the future.
(2) Criteria for recognition of deferred income tax liabilities
The Company recognizes deferred income tax liabilities on the temporary difference between
58
the taxable but not yet paid taxation in the current and previous periods, excluding:
1) temporary difference arising from the initial recognition of goodwill;
2) a transaction or event arising from non-business combination, and neither the accounting
profit or the taxable income (or deductible losses) will be affected when the transaction or event
occurs;
3) for taxable temporary difference in relation to investment in subsidiaries or associates, the
time for reversal of the temporary difference can be controlled and the temporary difference is
probably not reversed in a foreseeable future
(3) When all of the following conditions are satisfied, deferred income tax assets and
deferred income tax liabilities shall be presented on a net basis
1) An enterprise has the statutory right to settle the current income tax assets and current
income tax liabilities at their net amounts;
2) The deferred income tax assets and deferred income 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 income tax assets and current income tax liabilities on a net
basis, or to realize the assets and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax assets or liabilities are expected to be recovered or
settled.
35. Lease
On the commencement date of the contract, the Company evaluates whether the contract is
a lease or contains a lease. If one party to a contract gives up the right to control the use of one or
more identifiable assets for a period of time in exchange for consideration, the contract is a lease
or contains a lease.
(1) Splitting a lease contract
When the contract contains a number of separate leases, the Company will split the contract
into separate leases for accounting individually.
When the contract contains both leasing and non-leasing parts, the Company will split the
leasing and non-leasing parts. The leasing part shall be accounted for in accordance with the
lease standards, and the non-leasing part shall be accounted for in accordance with other
applicable accounting standards for business enterprises.
(2) Combination of lease contracts
When two or more lease-containing contracts concluded by the Company with the same
trader or its related parties at the same time or at a similar time meet one of the following
conditions, the Company shall merge them into one contract for accounting:
59
1) Such two or more contracts are concluded for general commercial purposes and
constitute a package of transactions. If these are not considered as a whole, these overall
commercial purposes cannot be recognized.
2) The amount of consideration for a contract in such two or more contracts depends on the
pricing or performance of other contracts.
3) The right-of-use assets transferred by such two or more contracts together constitute a
separate lease.
(3) Accounting treatment for the Company as a lessee
On the commencement date of lease term, the Company recognizes right-of-use assets and
lease liabilities for leases, in addition to short-term leases and low-value asset leases with
simplified treatment.
1) Short-term lease and low value lease
Short-term lease refers to a lease that does not include purchase options and has a lease term
not exceeding 12 months. Low-value asset lease refers to the lease with lower value when a
single leased asset is a new asset.
The Company does not recognize right-of-use assets and lease liabilities for short-term lease
and low value lease. The payment of such leases shall be charged to profit or loss using
straight-line method or other systematic method.
2) Refer to Note III. 22 and Note III. 29 for accounting policies for right-of-use assets and
lease liabilities.
(4) Accounting treatment for the Company as a lessor
1) Classification of leases
The Company divides leases into financial leases and operating leases on the start date of the
lease. Financial lease refers to a lease that essentially transfers almost all of the risks and rewards
related to the ownership of leased assets. Its ownership may or may not be transferred eventually.
Operating leases refer to leases other than financial leases.
If a lease has one or more of the following characteristics, the Company usually classifies it
as a financial lease:
① At the expiry of the lease term, the ownership of the leased assets is transferred to the
lessee.
② The lessee has the option to purchase the leased assets, and the purchase price set by the
lessee is low enough compared with the expected fair value of the leased assets when exercising
the option. Therefore, it can be reasonably determined on the lease start date that the lessee will
exercise the option.
③ Although the ownership of the assets is not transferred, the lease term accounts for the
majority of the life of the leased assets.
60
④ On the commencement date of the lease, the present value of the lease receipts is almost
equal to the fair value of the leased assets.
⑤ The nature of leased assets is special. If there is no major transformation, only the lessee
can use them.
If one or more of the following conditions exist in a lease, it may also be classified as a
financial lease:
① If the lessee stops the lease, the lessee shall bear the losses caused by the termination of
the lease to the lessor.
② The profits or losses caused by the fluctuation of the fair value of the balance of assets
belong to the lessee.
③ The lessee can continue to lease far below the market level for the next period.
2) Accounting treatment for financial leases
On the commencement date of lease term, the Company recognizes the financial lease
receivable on the financial leases and derecognizes the financial lease assets.
When the initial measurement of the financial lease receivable is made, the book value of
the financial lease receivable is the sum of the unsecured balance and the present value of lease
receipts that have not yet been received at the beginning of the lease term discounted at the
interest rate implicit in the lease. The lease receipts include:
① Fixed payments and substantive fixed payments after deducting the relevant amount of
lease incentives;
② Variable lease payments depending on an index or rate;
③ In the case of reasonably determining that the lessee will exercise the purchase option,
the lease receipts include the exercise price of purchase option;
④ If the lease term reflects that the lessee will exercise the option to terminate the lease,
the lease receipts include the amount to be paid by the lessee in exercising the option to
terminate the lease;
⑤ Guarantee residual value provided to the lessor by the lessee, the party concerned with
the lessee and an independent third party with financial capacity to fulfill the guarantee
obligation.
The Company calculates and recognizes the interest income for each period of the lease
term based on the fixed interest rate implicit in the lease, and the variable lease payments which
are obtained and not included in the net rental investment amount are included in the profit or
loss of the period when they actually occur.
3) Accounting treatment for operating leases
61
The Company adopts the straight line method or other systematic and reasonable method to
recognize the lease receipts from operating leases as rental income during each period of the
lease term. Capitalization of the initial direct expenses incurred in connection with operating
leases shall be apportioned on the same basis as the recognition of rental income during the lease
term, and shall be recorded in the profit or loss of the current period. Variable lease payments
obtained in connection with operating leases that are not incorporated in the lease receipts shall
be incorporated in the profit or loss of the period when they actually occur.
36. Termination of business
The Company recognizes components as termination of business components if one of the
following condition is met and that the component has already been disposed or classified as
held-for-sale assets and identifiable.
(1) The component represents a stand along major business or a stand along major area in
conducting business.
(2) The component is part of plan connecting to disposal of a stand along major business or
major area of conducting business.
(3) The component is a subsidiary that obtained specifically for resale.
Operating profit or loss such as the impairment loss and the amount of reversal shall be
presented in income statement as profit or loss from terminated business.
37. Re-purchase of shares
Before written-off or transfer, the shares that the Company re-purchased are dealt as treasury
shares. All expenses incurred for the re-purchase are charged in the cost of treasury shares.
Consideration and transaction expenses paid during the share re-purchase shall decrease
shareholder’s equity. No gain or losses shall be recognized during re-purchase, transfer or
written-off of the Company’s shares.
If the treasury shares is transferred, the difference between amount actually received and the
share’s carrying amount shall be charged to capital reserve, if the capital reserve is not sufficient to
offset, surplus reserve and retained earing shall be offset. If the treasury share is to written-off, the
share capital shall be decreased based on the face value of shares and the difference between the
carrying amount and its face value shall offset the capital reserve. If the capital reserve is not
sufficient to offset, deducting surplus reserve and retained earnings.
38. Safety production fee
The safety production fee is accrued by the Company in accordance with national regulations
and is included in the cost of related products or current profit or loss, and is also recorded in the
"specific reserve" item. When using the safety production fee, if it is an expense expenditure, it
shall be directly offset against the special reserve. If the fixed assets are formed, the expenses
incurred through the collection of "construction in progress" will be recognized as fixed assets
62
when the safety project is completed and reach the intended usable state; at the same time, the cost
of forming fixed assets will be offset against the special reserve, and recognize the accumulated
depreciation of the same amount. The fixed assets will not be depreciated in the subsequent
period.
39. Significant changes in accounting policies and estimates
(1) Changes in accounting policies
1) effect of adopting Interpretation of China Accounting Standards for Business Enterprises
No. 15
The Company has adopted the regulations about “accounting for sales of products or
by-products produced by fixed assets before intended use or during the R&D process” and
“judgment on onerous contract” as stipulated the “Interpretation of China Accounting Standards
for Business Enterprises No. 15” issued by the Ministry of Finance since January 1, 2022. Such
change in accounting policies has no impact on the Company’s financial statements.
2) effect of adopting Interpretation of China Accounting Standards for Business Enterprises
No. 16
The Company has adopted the regulations about “accounting for deferred tax related to assets
and liabilities arising from a single transaction to which the initial recognition exemption does not
apply” and “accounting for income tax consequences of dividends on a financial instrument
classified by the issuer as an equity instrument” in the “Interpretation of China Accounting
Standards for Business Enterprises No. 16” issued by the Ministry of Finance since 2022. Such
change in accounting policies has no impact on the Company’s financial statements.
(2)Significant changes in accounting estimates
There was no significant changes in accounting estimates during the year.
IV. Taxes
1. Main types of taxes and corresponding tax rates
Tax type Basis Tax rate note
Domestic sales, providing manufacturing
13%
and repairing services
VAT Property leasing 9%
Other taxable services 6%
Simplified method 5%
Consumption tax Luxury watches 20%
Urban
maintenance and Turnover tax payable 7%、5%
construction tax
Corporate income Taxable income See below table
63
Tax type Basis Tax rate note
tax
70% or 80% of the original cost of property
Property tax 1.2%、12%
or rental income
Corporate income tax of different entities:
Name of entities CIT rate
Shenzhen HARMONY World Watch Center Co.,
25%
Ltd.(①)
FIYTA Sales Co., Ltd.(①) 25%
Shenzhen FIYTA Precision Technology Co., Ltd.(②
15%
③)
Shenzhen FIYTA Technology Development Co.,
15%
Ltd.(②③)
HARMONY World Watch Center(Hainan) Co.,
20%
Ltd.(⑥)
Shenzhen Xunhang Precision Technology Co., Ltd. 20%
Emile Choureit Timing (Shenzhen) Ltd. 25%
Liaoning Hengdarui Commercial & Trade Co., Ltd. 25%
EMPORAL (Shenzhen) Co., Ltd. 25%
Shenzhen Harmony E-commerce Co., Ltd.(⑥) 20%
FIYTA (Hong Kong) Ltd.(④) 16.5%
Montres Chouriet SA(⑤) 30%
Note ①:According to the regulations stated in “Interim Administration Method for Levy of
Corporate Income Tax to Enterprise that Operates Cross-regionally”, the head office of the
Company and its branch offices, the head office of HARMONY Company and its branch offices,
and the head office of Sales Company and its branch offices adopt tax submission method of
“unified calculation, managing by classes, pre-paid in its registered place, settlement in total, and
adjustment by finance authorities”. Branch offices mentioned above share 50% of the enterprise
income tax and prepay locally; and 50% will be prepaid by the head offices mentioned above.
Note ②: According to “Notice of the Ministry of Finance, the State Administration of
Taxation and Ministry of Science on Further Perfection of the Pre-tax Super Deduction Ratio of
Research and Development Expenses” (Cai Shui (2021) No. 13) , if the research and
development costs, which were incurred for developing new technologies, new products, and
new processes by the Company, the Precision Technology Company and the Technology
Company, are not capitalized as intangible assets but charged to current profit or loss, all of these
entities can enjoy a 100% super deduction on top of the R&D expenses that allowed to deduct
before income tax since 1 January 2022.
Note ③:The Company enjoyed for “Reduction and Exemption in Corporate Income Tax
Rate for High and New Technology Enterprises that Require Key Support from the State”.
64
Note ④: These companies are registered in Hong Kong and the income tax rate of Hong
Kong applicable is 16.50% this year.
Note ⑤: The comprehensive tax rate of 30% is applicable for Swiss Company as it
registered in Switzerland.
Note ⑥: These companies are small and low-profit enterprises, which enjoy 20% tax rate.
2. Preferential treatment and corresponding approval
According to “Proclamation of Ministry of Finance and State Administration of Taxation in
Implementing Preferential Tax Rate to Small and Low Profit Enterprises and Sole-proprietors” (Caishui
(2022) No.13) and “Notice of Ministry of Finance and State Administration of Taxation on
Implementation of the Inclusive Income Tax Deduction and Exemption Policies for Small Low-Profit
Enterprises” (Cai Shui (2021) No.12) , the portion of annual taxable income of small low-profit
enterprise that is below RMB1,000,000.00 will be included in taxable income at 12.5% and to be taxed
at a rate of 20%; and for annual taxable income that is greater than RMB1,000,000.00 but not
exceeding RMB3,000,000.00, of which 25% will be included in taxable income and to be taxed at
20%.
According to “Notice of Ministry of Finance and State Administration of Taxation in Extending
Expiration Period of Utilizing Losses for High-Tech Enterprises and Scientific Oriented Medium and
Small Enterprises” (Cai Shui [2018] No. 76) , starting from January 1, 2018.，unutilized losses
incurred in prior 5 years before obtaining the status of High and New Tech Enterprise can be carried
forward and utilized in future years. The longest period was extended from 5 years to 10 years.
According to the "Notice of the Ministry of Finance, the State Administration of Taxation, and the
Ministry of Science and Technology on Increasing Support for Pre-tax Deductions for Scientific and
Technological Innovation" (Cai Shui [2022] No. 28), high-tech enterprises will purchase new products
from October 1, 2022 to December 31, 2022. The equipment and utensils are allowed to be deducted in
one lump sum when calculating taxable income, and 100% additional deduction is allowed before tax.
V. Notes to main items of the consolidated financial statements
(Unless otherwise indicated, the currency unit is Renminbi Yuan, the end of the period refers to
December 31,2022,the beginning of the period refers to January 1, 2022, and the end of the last period
refers to December 31, 2021)
Note 1. Monetary funds
Item Closing balance Opening balance
Cash on hand 173,368.68 108,612.08
Cash at bank 312,433,893.29 188,908,798.10
Other monetary funds 1,140,201.67 21,237,326.96
65
Item Closing balance Opening balance
Total 313,747,463.64 210,254,737.14
Including: Total overseas deposits 716,733.44 1,724,651.93
Including: deposit in finance
271,327,031.83 147,786,041.19
company
Deposit in finance company mainly deposited with AVIC Finance Co., Ltd.
As of December 31, 2022, RMB 9,074.00 was frozen due to bank account that is being
included in as long-term immobile bank account.
Cash with restricted usage is as follows
Item Closing balance Opening balance
Overseas deposit with restrictions remitting
716,733.44 1,724,651.93
back
Note 2. Bill receivable
1． Presented by category
Item Closing balance Opening balance
Bank acceptance bills 10,690,221.03 2,989,331.70
Commercial acceptance bills 21,524,691.07 58,268,814.10
Total 32,214,912.10 61,258,145.80
2． Presented by ECL types
Closing balance
Type Carrying amount Provision
Percentage Percentage Book value
Amount Amount
(%) (%)
Notes receivable that
provided expected credit
losses on single basis
Notes receivable that
provided expected credit 33,347,790.58 100.00 1,132,878.48 3.40 32,214,912.10
losses on single basis
Including: Commercial
22,657,569.55 67.94 1,132,878.48 5.00 21,524,691.07
acceptance bills
Risk-free Bank
10,690,221.03 32.06 10,690,221.03
acceptance bills
Total 33,347,790.58 100.00 1,132,878.48 3.40 32,214,912.10
Continued：
Opening balance
Type Carrying amount Provision
Percentage Percentage Book value
Amount Amount
(%) (%)
Notes receivable that
provided expected credit
66
Opening balance
Type Carrying amount Provision
Percentage Percentage Book value
Amount Amount
(%) (%)
losses on single basis
Notes receivable that
provided expected credit 64,324,925.49 100.00 3,066,779.69 4.77 61,258,145.80
losses on single basis
Including: Commercial
61,335,593.79 95.35 3,066,779.69 5.00 58,268,814.10
acceptance bills
Risk-free Bank
2,989,331.70 4.65 2,989,331.70
acceptance bills
Total 64,324,925.49 100.00 3,066,779.69 4.77 61,258,145.80
3． Notes receivable with expected credit loss provided based on credit risk
characteristic portfolio
Closing balance
Portfolio
Carrying amount Provision Percentage (%)
Bank acceptance bills 22,657,569.55 1,132,878.48 5.00
Commercial acceptance bills 10,690,221.03
Total 33,347,790.58 1,132,878.48 3.40
4． Bad debt movements in current period
Movements
Opening Closing
Types Received or Other
balance Accrual Written-off balance
reversal changes
Notes receivable
that provided
expected credit
losses on single
basis
Notes receivable
that provided
expected credit 3,066,779.69 1,933,901.21 1,132,878.48
losses on single
basis
Including:
Commercial 3,066,779.69 1,933,901.21 1,132,878.48
acceptance bills
Risk-free
Bank acceptance
bills
Total 3,066,779.69 1,933,901.21 1,132,878.48
5． Bills have been endorsed but not yet due at the end of the period.
Item Amount de-recognized Amount not de-recognized
Bank acceptance bills 30,350,443.25
67
Note 3. Accounts receivable
1． Presentation by aging
Aging Closing balance Opening balance
Within 1 year 311,934,503.90 411,327,173.23
1-2 years 14,972,671.61 4,211,418.24
2-3 years 2,781,542.85 7,582,641.50
Over 3 years 16,064,539.96 8,867,120.13
Subtotal 345,753,258.32 431,988,353.10
Less: provision for bad debt 40,462,298.64 43,102,751.82
Total 305,290,959.68 388,885,601.28
2． Presentation by method of providing bad debt
Closing balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Accounts receivable that
provided expected credit 34,982,967.68 10.12 29,705,797.13 84.92 5,277,170.55
losses on single basis
Accounts receivable that
provided expected credit 310,770,290.64 89.88 10,756,501.51 3.46 300,013,789.13
losses on portfolio basis`
Including: Receivable from
310,770,290.64 89.88 10,756,501.51 3.46 300,013,789.13
other customers
Total 345,753,258.32 100.00 40,462,298.64 11.70 305,290,959.68
Continued：
Opening balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Accounts receivable that
provided expected credit 41,742,982.67 9.66 32,056,051.67 76.79 9,686,931.00
losses on single basis
Accounts receivable that
provided expected credit 390,245,370.43 90.34 11,046,700.15 2.83 379,198,670.28
losses on portfolio basis`
Including: Receivable from
390,245,370.43 90.34 11,046,700.15 2.83 379,198,670.28
other customers
Total 431,988,353.10 100.00 43,102,751.82 9.98 388,885,601.28
3． Accounts receivable that provided expected credit losses on single basis
included in the closing balance
Closing balance
Name Bad debt ECL rate
Carrying amount Reasons
provision (%)
68
Closing balance
Name Bad debt ECL rate
Carrying amount Reasons
provision (%)
Receivable from other Chances of recovery is
34,982,967.68 29,705,797.13 84.92
customers remote
4． In the portfolio, accounts receivable with expected credit loss provided
based on credit risk characteristic portfolio
Portfolio of receivable from other customers
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 309,196,675.71 9,547,976.11 3.09
1-2 years 251,098.70 25,109.87 10.00
2-3 years 244,533.54 105,432.84 43.12
Over 3 years 1,077,982.69 1,077,982.69 100.00
Total 310,770,290.64 10,756,501.51 3.46
5． Movements of provision during the period
Movements during the period
Opening
Types Recovered or Written-o Other Closing balance
balance Accrual
reversed ff movements
Accounts
receivable that
provided expected 32,056,051.67 1,920,661.90 4,371,302.44 -100,386.00 29,705,797.13
credit losses on
single basis
Accounts
receivable that
provided expected 11,046,700.15 395,343.70 700,099.94 -14,557.60 10,756,501.51
credit losses on
portfolio basis`
Including:
Receivable from 11,046,700.15 395,343.70 700,099.94 -14,557.60 10,756,501.51
other customers
Total 43,102,751.82 2,316,005.60 5,071,402.38 -114,943.60 40,462,298.64
Including：main recovery of bad debt provision in current period:
Name Amount Way of recovery Note
Shanghai Pudong Suning e-buy Business
1,827,135.74 Bank transfer
Management Co., Ltd.
Hefei Swan Lake Suning Department
763,751.84 Bank transfer
Store Co., Ltd.
6． No actual write-off of accounts receivable during the current period
7． Top 5 receivable accounts
69
Proportion in total
closing balance of
Name Closing balance Bad debt provision
accounts
receivable (%)
Top 5 receivables accounts in total 113,261,096.28 32.76 15,232,226.34
Note 4. Prepayments
1． Presentation of prepayments by aging
Closing balance Opening balance
Aging Percentage Percentage
Amount Amount
(%) (%)
Within one year 8,039,794.97 100.00 7,946,750.81 100.00
2． Top 5 prepayments
Proportion in total closing
Name Closing balance
balance of prepayments (%)
Top 5 prepayments in total 4,261,286.17 53.00
Note 5. Other receivable
1． Presentation of other receivables by aging
Aging Closing balance Opening balance
Within one year 59,711,314.91 64,697,975.58
1 - 2 years 216,120.00 655,341.52
2- 3 years 649,029.90 484,750.05
Over 3 years 606,105.00 135,480.00
Subtotal 61,182,569.81 65,973,547.15
Less: bad debt provision 4,264,550.33 4,420,279.33
Total 56,918,019.48 61,553,267.82
2． Presented by nature
Nature Closing balance Opening balance
Security deposit 49,430,408.24 55,467,644.12
Petty cash 2,841,915.70 2,556,673.37
Others 8,910,245.87 7,949,229.66
Subtotal 61,182,569.81 65,973,547.15
Less: bad debt provision 4,264,550.33 4,420,279.33
Total 56,918,019.48 61,553,267.82
3． Presented according to three stages of financial assets impairment
Item Closing balance Opening balance
70
Carrying Bad debt Carrying Bad debt
Book value Book value
amount provision amount provision
First stage 59,703,389.91 2,850,206.43 56,853,183.48 64,508,342.25 3,055,122.43 61,453,219.82
Second stage
Third stage 1,479,179.90 1,414,343.90 64,836.00 1,465,204.90 1,365,156.90 100,048.00
Total 61,182,569.81 4,264,550.33 56,918,019.48 65,973,547.15 4,420,279.33 61,553,267.82
4． Presented by bad debt provision method
Closing balance
category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Other receivables that provided
expected credit losses on single 1,479,179.90 2.42 1,414,343.90 95.62 64,836.00
basis
Other receivables that provided
expected credit losses on 59,703,389.91 97.58 2,850,206.43 4.77 56,853,183.48
portfolio basis
Including: Security deposit
48,600,258.24 79.43 2,476,810.04 5.10 46,123,448.20
portfolio
Petty cash portfolio 2,841,915.70 4.64 2,841,915.70
Social security payment
279,769.98 0.46 279,769.98
on-behalf portfolio
Portfolio of others 7,981,445.99 13.05 373,396.39 4.68 7,608,049.60
Total 61,182,569.81 100.00 4,264,550.33 6.97 56,918,019.48
Continued
Opening balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Other receivables that provided
expected credit losses on single 1,465,204.90 2.22 1,365,156.90 93.17 100,048.00
basis
Other receivables that provided
expected credit losses on 64,508,342.25 97.78 3,055,122.43 4.74 61,453,219.82
portfolio basis
Including: Security deposit
55,467,644.12 84.08 2,781,540.05 5.01 52,686,104.07
portfolio
Petty cash portfolio 2,556,673.37 3.88 2,556,673.37
Social security payment
483,396.42 0.73 483,396.42
on-behalf portfolio
Portfolio of others 6,000,628.34 9.09 273,582.38 4.56 5,727,045.96
Total 65,973,547.15 100.00 4,420,279.33 6.70 61,553,267.82
5． Other receivables that provided expected credit losses on single basis included in the
closing balance
71
Closing balance
Name Bad debt ECL rate
Carrying amount Reason
provision (%)
Chances of recovery is
Receivable from others 1,479,179.90 1,414,343.90 95.62
remote
6． In the portfolio, other receivables with expected credit loss provided
based on credit risk characteristic portfolio
（1）Security deposit portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 48,560,208.24 2,436,760.04 5.02
1 - 2 years
2- 3 years
Over 3 years 40,050.00 40,050.00 100.00
Total 48,600,258.24 2,476,810.04 5.10
（2）Petty cash portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 2,841,915.70
（3）Social security payment on-behalf portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 279,769.98
（4）Portfolio of others
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 7,981,445.99 373,396.39 4.68
7． Provision for bad debts of other receivables
First stage Second stage Third stage
Lifetime expected Lifetime expected
Bad debt provision Expected credit Total
credit losses (no credit losses (credit
losses over the next
credit impairment impairment
12 months
occurred) occurred)
Opening balance 3,055,122.43 1,365,156.90 4,420,279.33
Opening balance
movements in current —— —— —— ——
period
72
First stage Second stage Third stage
Lifetime expected Lifetime expected
Bad debt provision Expected credit Total
credit losses (no credit losses (credit
losses over the next
credit impairment impairment
12 months
occurred) occurred)
—Transfer into the
second stage
—Transfer into the
-2,398.75 2,398.75
third stage
—Reverse back to
the second stage
—Reverse back to
the first stage
Accrual during the
86,177.11 65,388.25 151,565.36
period
Reversed during the
289,046.82 18,600.00 307,646.82
period
Recovered during the
period
Written-off during the
period
Other movements 352.46 352.46
Closing balance 2,850,206.43 1,414,343.90 4,264,550.33
8． No other receivables were written-off during the period.
9． Top 5 other receivable accounts
Proportion to
Closing balance
closing balance of
Name Closing balance of bad debts
other receivables
provision
(%)
Top 5 other receivables in total 21,733,290.84 35.52 1,086,664.54
Note 6. Inventory
1． Classification
Closing balance Opening balance
Item Carrying
Provision Book value Carrying amount Provision Book value
amount
Raw
162,338,704.65 17,241,512.65 145,097,192.00 181,764,220.90 17,693,135.85 164,071,085.05
material
WIP 7,204,699.11 7,204,699.11 20,682,530.58 20,682,530.58
Stored
2,085,640,712.37 96,622,229.81 1,989,018,482.56 1,960,110,199.48 94,715,064.22 1,865,395,135.26
goods
Total 2,255,184,116.13 113,863,742.46 2,141,320,373.67 2,162,556,950.96 112,408,200.07 2,050,148,750.89
2． Provision for inventory
Opening Increase in current Closing
Item Decrease in current period
balance period balance
73
Accrual Other Reversed Realized Others
Raw
17,693,135.85 164,122.95 1,621,613.03 154,260.44 -1,160,127.32 17,241,512.65
material
Stored
94,715,064.22 39,082,973.04 37,296,014.80 -120,207.35 96,622,229.81
goods
Total 112,408,200.07 39,247,095.99 1,621,613.03 37,450,275.24 -1,280,334.67 113,863,742.46
Notes to provision for inventory
Item Evidence of determine NRV and future selling cost Reason for reversal or realized
Estimated selling price less estimated cost to Factors that caused impairment has been
Raw
complete and selling and distribution expenses and disappeared and the NAV is higher than its
material
associated taxes carrying amount
Estimated selling price less estimated selling and Inventory that already provided for was sold or
Stored goods
distributing expenses and associated taxes used in current period.
Note 7. Other current assets
Item Closing balance Opening balance
Input VAT 12,967,188.47 20,468,630.65
Input VAT not yet certified 39,454,283.19 41,895,970.19
Prepaid corporate income tax 3,419,026.38 2,459,142.75
Others 10,499,007.28 7,874,949.13
Total 66,339,505.32 72,698,692.72
Note 8. Long-term equity investment
Movements during the period
Investment
Opening Adjustment of
Investee Addition/new gains and
balance other
investment Withdrawn losses
comprehensive
recognized by
income
equity method
Associate
Shanghai Watch Co., Ltd.
55,155,605.31 3,026,481.59
(Shanghai Watch)
Continued
Movements during the period Closing
Cash balance of
Investee Changes in Impairmen Closing balance
dividend Others impairmen
other equity t provision t provision
declared
Associate
Shanghai Watch 58,182,086.90
74
Note 9. Other equity instrument investments
Item Closing balance Opening balance
Xi’an Tangcheng Limited 85,000.00 85,000.00
Note 10. Investment property
1. Details of investment property
Item Property
I. Original cost
1． Opening balance 610,886,415.67
2． Addition 8,876,202.69
Purchase
Transferred from fixed assets 8,876,202.69
Other reasons
3． Decrease
Disposal
Other reasons
4． Closing balance 619,762,618.36
II. Accumulated depreciation
1． Opening balance 227,460,499.32
2． Increased in current period 17,322,624.33
Accrual 15,436,537.44
Transferred from fixed assets 1,886,086.89
Other reasons
3． Decreased in current period
Disposal
Other reasons
4． Closing balance 244,783,123.65
III. Impairment provision
1． Opening balance
2． Increased in current period
Accrual
Transferred from fixed assets
Other reasons
3． Decreased in current period
Disposal
Other reasons
4． Closing balance
75
Item Property
IV. Book value
1． Carrying amount at end of the period 374,979,494.71
2． Carrying amount at opening of the period 383,425,916.35
2. Notes to investment property
During the reporting period, certain self-use property of the Company were changed to lease
out and they were transferred from fixed assets to investment properties measured at cost model.
Note 11. Fixed assets
1. Status of fixed assets
Property and Transportation Electronic Other
Item Machinery Total
buildings vehicles devices equipment
I.Original cost
1. Opening
408,187,709.06 107,468,100.86 14,780,510.38 46,317,448.53 46,887,269.94 623,641,038.77
balance
2. Increased in
37,009,440.83 10,535,309.18 2,901,332.68 1,468,735.41 51,914,818.10
current period
Re-classification
Purchased 33,325,717.80 8,934,592.37 2,808,299.86 1,163,182.48 46,231,792.51
Translation
3,683,723.03 1,600,716.81 93,032.82 305,552.93 5,683,025.59
difference
Other
increase
3. Decrease in
8,876,202.69 450,600.66 308,000.00 1,618,430.56 2,897,202.38 14,150,436.29
current period
Disposal or
450,600.66 308,000.00 1,618,430.56 2,897,202.38 5,274,233.60
retired
Transferred to
investment 8,876,202.69 8,876,202.69
property
Translation
difference
Other
decrease
4. Closing
436,320,947.20 117,552,809.38 14,472,510.38 47,600,350.65 45,458,802.97 661,405,420.58
balance
II. Accumulated
depreciation
1. Opening
122,149,565.18 63,039,735.12 12,847,470.81 35,896,505.66 40,212,445.35 274,145,722.12
balance
2. Increased in
15,125,262.69 8,788,140.30 346,250.08 2,666,771.95 2,025,385.02 28,951,810.04
current period
Re-classification
Accrual 12,857,763.74 7,479,521.06 346,250.08 2,620,234.71 1,784,335.34 25,088,104.93
Translation
2,267,498.95 1,308,619.24 46,537.24 241,049.68 3,863,705.11
difference
Other
increase
3. Decrease in
1,886,086.89 361,550.68 292,600.00 1,396,127.01 2,384,512.17 6,320,876.75
current period
76
Property and Transportation Electronic Other
Item Machinery Total
buildings vehicles devices equipment
Disposal or
361,550.68 292,600.00 1,396,127.01 2,384,512.17 4,434,789.86
retired
Transferred to
investment 1,886,086.89 1,886,086.89
property
Translation
difference
Other
decrease
4. Closing
135,388,740.98 71,466,324.74 12,901,120.89 37,167,150.60 39,853,318.20 296,776,655.41
balance
III. Impairment
provision
1. Opening
balance
2. Increase in
current period
Re-classification
Accrual
Translation
difference
Other
increase
3. Decrease in
current period
Disposal or
retired
Transferred
into
investment
property
Translation
difference
Other
decrease
4. Closing
balance
IV. Book value
1. Carrying
amount at end of 300,932,206.22 46,086,484.64 1,571,389.49 10,433,200.05 5,605,484.77 364,628,765.17
period
2. Carrying
amount at
286,038,143.88 44,428,365.74 1,933,039.57 10,420,942.87 6,674,824.59 349,495,316.65
beginning of
period
2. Fixed assets that do not have certificate for property right
Item Book value Reason for not having certificate for property rights
Property 206,821.17 Issues relating to property right
Property 33,318,636.37 Not yet completed
Note 12. Right-of-use assets
Item Property
77
Item Property
I. Original cost
1． Opening balance 313,578,633.64
2． Increase in current period 84,622,611.32
Re-classification
Lease 84,599,774.43
Translation difference 22,836.89
Other increase
3． Decrease in current period 35,784,166.11
Maturity of lease term 6,898,304.78
Translation difference
Other decrease 28,885,861.33
4． Closing balance 362,417,078.85
II. Accumulated depreciation
1． Opening balance 165,646,158.22
2． Increase in the period 110,667,667.15
Reclassification
Accrual 110,464,700.15
Translation difference 202,967.00
Other increase
3． Decrease in the period 24,227,258.55
Maturity of lease term 6,898,304.78
Translation difference
Other decrease 17,328,953.77
4． Closing balance 252,086,566.82
III. Impairment provision
1． Opening balance
2． Increase in the period
Reclassification
Accrual
Translation difference
Other increase
3． Decrease in the period
Maturity of lease term
Translation difference
Other decrease
4． Closing balance
78
Item Property
IV. Book value
1． Carrying amount at end of period 110,330,512.03
2． Carrying amount at beginning of period 147,932,475.42
Note 13. Intangible asset
1． Status
Right to use
Item Land-use right Software system Total
trademarks
I. Original cost
1． Opening
34,933,822.40 30,286,420.21 15,255,625.58 80,475,868.19
balance
2． Increase in
2,911,272.30 1,262,964.71 4,174,237.01
the period
Purchase 2,911,272.30 1,262,964.71 4,174,237.01
Internal R&D
Other source
3． Decrease in
the period
Disposal
Other reasons
4． Closing
34,933,822.40 33,197,692.51 16,518,590.29 84,650,105.20
balance
II. Accumulated
amortization
1． Opening
15,782,368.73 22,778,471.88 7,879,697.15 46,440,537.76
balance
2． Increase in
733,553.28 3,125,436.27 1,150,359.26 5,009,348.81
the period
Accrual 733,553.28 3,125,436.27 1,150,359.26 5,009,348.81
Other reasons
3． Decrease in
the period
Disposal
Other reasons
4． Closing
16,515,922.01 25,903,908.15 9,030,056.41 51,449,886.57
balance
III. Impairment
provision
1． Opening
balance
2． Increase in
the period
Accrual
Other reasons
3． Decrease in
the period
Transfer
79
Right to use
Item Land-use right Software system Total
trademarks
Other reasons
Other transfer
4． Closing
balance
IV. Book value
1． Book value at
end of the 18,417,900.39 7,293,784.36 7,488,533.88 33,200,218.63
period
2． Book value at
beginning of 19,151,453.67 7,507,948.33 7,375,928.43 34,035,330.43
the period
Note 14. Long-term deferred expenses
Other
Item Opening balance Increase Amortized Closing balance
decrease
Counter fabrication
28,563,171.72 30,477,977.80 36,794,079.35 22,247,070.17
expenses
Renovation expenses 120,695,905.90 60,604,305.97 65,269,888.26 116,030,323.61
Others 14,531,255.82 50,849.06 8,371,046.48 6,211,058.40
Total 163,790,333.44 91,133,132.83 110,435,014.09 144,488,452.18
Note 15. Deferred tax assets and deferred tax liabilities
1． Detail of deferred tax assets before offsetting
Closing balance Opening balance
Item Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
difference difference
Impairment provision 143,503,292.94 30,225,885.07 148,079,831.14 31,562,627.52
Unrealized profit for related
75,781,866.09 18,681,772.44 96,716,186.61 24,021,244.01
party transactions
Deductible losses 157,860,317.75 37,779,977.71 62,781,216.23 15,188,881.56
Restricted shares 23,141,270.85 5,411,762.47 17,502,152.62 4,121,326.77
Advertisement expenses that
515,068.99 128,767.25 11,503,471.12 2,219,622.49
allowed to deduct in future years
Lease liabilities 113,136,916.00 28,284,229.00 147,888,578.26 36,972,144.57
Others 7,295,926.80 1,823,981.80 9,993,278.10 2,498,319.53
Total 521,234,659.42 122,336,375.74 494,464,714.08 116,584,166.45
2． Detail of deferred tax liabilities before offsetting
Closing balance Opening balance
Item taxable temporary Deferred tax Taxable temporary Deferred tax
difference liabilities difference liabilities
One-off deduction of fixed asset
29,872,344.91 4,480,851.74 24,113,302.98 3,616,995.45
before Corporate income tax
Right-of-use asset 110,279,028.02 27,569,757.01 147,881,641.51 36,970,410.38
80
Closing balance Opening balance
Item taxable temporary Deferred tax Taxable temporary Deferred tax
difference liabilities difference liabilities
Total 140,151,372.93 32,050,608.75 171,994,944.49 40,587,405.83
3． Net-off of deferred tax asset or liabilities
Closing balance of Opening balance of
Amount off-set at Amount off-set at
Item deferred tax asset or deferred tax asset or
current period prior period
liability after off-set liability after off-set
deferred tax asset 26,551,763.80 95,784,611.94 35,350,891.80 81,233,274.65
deferred tax liabilities 26,551,763.80 5,498,844.95 35,350,891.80 5,236,514.03
4． Details of deductible temporary difference and deductible losses that
does not recognize as deferred income tax asset
Item Closing balance Opening balance
Impairment provision 16,220,176.97 15,218,179.77
Deductible losses 50,761,915.00 54,139,145.45
Total 66,982,091.97 69,357,325.22
Deductible losses of Montres Chouriet SA, which are sub-subsidiary of the Company, is not
recognized as deferred income tax asset as it’s uncertain that the companies can get sufficient taxable
income in future. FIYTA （Hong Kong) Ltd, a subsidiary of the Company, does not need to recognize
the deferred income tax assets for impairment provision according to the local tax policy.
5． Deductible losses that are not recognized as deferred tax asset will due in
the following years：
Year Closing balance Opening balance Note
2022
2023 149,750.18
2024 8,456,818.95 11,684,299.22
2025 18,449,678.50 18,449,678.50
2026 23,855,417.55 23,855,417.55
Total 50,761,915.00 54,139,145.45
Note 16. Other non-current assets
Closing balance Opening balance
Item Carrying
Provision Book value Carrying amount Provision Book value
amount
Prepayment for
construction and 11,593,741.57 11,593,741.57 42,680,753.78 42,680,753.78
equipment
81
Note 17. Short-term loan
Item Closing balance Opening balance
Guaranteed loans 15,737,928.76
Credit loans 290,000,000.00 250,000,000.00
Accrued interest payable 237,111.11 256,666.67
Total 290,237,111.11 265,994,595.43
Note 18. Notes payable
Types Closing balance Opening balance
Commercial bills payable 2,000,600.00 21,223.10
Note 19. Account payables
Item Closing balance Opening balance
Trade payables 149,811,781.06 232,841,934.81
Payables for material purchased 19,729,474.20 20,513,993.11
Payables for project 1,048,201.41 1,232,967.42
Total 170,589,456.67 254,588,895.34
Note 20. Advances from customer
Item Closing balance Opening balance
Rental received in advance 16,960,128.83 11,025,664.72
Note 21. Contract liabilities
Item Closing balance Opening balance
Advances for goods received 16,844,437.47 22,505,426.65
Note 22. Employee remuneration payable
1． Status
Item Opening balance Increase Decrease Closing balance
Short-term employee benefits 134,696,286.49 589,665,061.23 601,971,744.25 122,389,603.47
Post-employment benefits -
9,463,874.19 47,055,374.87 47,236,557.06 9,282,692.00
defined contribution plans
Termination benefits 1,775,989.38 12,171,724.72 9,032,070.19 4,915,643.91
Total 145,936,150.06 648,892,160.82 658,240,371.50 136,587,939.38
2． Short-term employee benefits
Item Opening balance Increase Decrease Closing balance
Salaries, bonus, allowances 133,818,692.76 527,003,225.07 539,652,871.30 121,169,046.53
Staff welfare 708.80 10,278,373.02 10,268,438.54 10,643.28
Social insurances 20,620.66 24,553,180.40 24,169,772.77 404,028.29
82
Including:1.Medical
20,620.66 22,974,776.23 22,591,368.60 404,028.29
insurance
2. Supplementary
20,383.00 20,383.00
medical insurance
3.Work-related injury
847,053.99 847,053.99
insurance
4.Maternity insurance 710,967.18 710,967.18
Housing Fund 27,104.00 20,489,164.92 20,347,147.92 169,121.00
Labor union fees and
829,160.27 7,341,117.82 7,533,513.72 636,764.37
education fee
Total 134,696,286.49 589,665,061.23 601,971,744.25 122,389,603.47
3． Defined contribution plans
Item Opening balance Increase Decrease Closing balance
Basic pension insurance 226,815.55 43,565,311.09 43,501,344.69 290,781.95
Unemployment insurance 1,225,920.84 1,225,339.16 581.68
Annuity 9,237,058.64 2,264,142.94 2,509,873.21 8,991,328.37
Total 9,463,874.19 47,055,374.87 47,236,557.06 9,282,692.00
Note 23. Taxes payable
Item Closing balance Opening balance
VAT 39,086,878.23 46,711,341.16
Corporate income tax 16,751,872.66 15,663,227.68
Individual income tax 1,070,872.15 1,568,912.16
Urban maintenance and
1,353,097.21 1,624,353.62
construction tax
Educational surcharges 966,809.02 1,161,292.58
Others 1,540,639.03 1,040,752.81
Total 60,770,168.30 67,769,880.01
Note 24. Other payables
Item Closing balance Opening balance
Dividends payable 6,324,013.97 5,015,026.30
Other payables 158,736,108.61 162,793,733.65
Total 165,060,122.58 167,808,759.95
Note: Other payables in above table refers to other payables excluding interest payable and
dividends payable.
1. Dividends payable
Reasons for not being
Item Closing balance Opening balance
paid
Dividends for ordinary shares 6,324,013.97 5,015,026.30 unlock
83
2. Other payables
(1) Other payables by nature
Nature Closing balance Opening balance
Security deposit 38,319,837.05 33,536,237.44
Shop activity fund 16,105,216.84 19,208,694.86
Decoration expenses 12,827,532.03 10,201,524.91
Repurchase liability for restricted shares 50,759,806.16 60,585,678.92
Other 40,723,716.53 39,261,597.52
Total 158,736,108.61 162,793,733.65
(2) Material other receivables with aging over 1 year
Name Closing balance Reasons for not being paid
Company A 4,600,000.00 Undue
Company B 1,676,337.60 Undue
Company C 1,442,275.27 Undue
Company D 1,332,652.89 Undue
Total 9,051,265.76
Note 25. Non-current liabilities due within one year
Item Closing balance Opening balance
Long-term loan due within one year 3,924,900.00
Lease liabilities due in one year 71,546,316.16 83,025,006.35
Total 71,546,316.16 86,949,906.35
Note 26. Other current liabilities
Item Closing balance Opening balance
Output VAT not yet realized 1,686,806.01 2,798,738.32
Note 27. Long-term loan
Category Closing balance Opening balance
Mortgage loans 3,924,900.00
Less: Long-term loan due within
3,924,900.00
one year
Total
Note 28. Lease liabilities
Item Closing balance Opening balance
Buildings and Structures 113,188,877.74 147,943,728.45
Less: lease liabilities due in one year 71,546,316.16 83,025,006.35
84
Total 41,642,561.58 64,918,722.10
Interest expenses for lease liabilities recognized in current period was RMB7,115,049.25.
Note 29. Deferred income
Opening Closing
Item Increase Decrease Reason
balance balance
Asset related
1,792,833.90 496,907.10 1,295,926.80 See below table 1
government subsidy
1． Deferred income related to government subsidy
Include in
non-operat Include in Offsettin Related to
Opening Additi ing other gains g Closing
Item asset
balance on income in in current expense balance
current period or cost /income
period
Special fund for
Shenzhen Asset
industrial design 390,123.15 75,583.79 314,539.36 related
industry
development
Funding project
for construction
of National
631,980.39 293,147.06 338,833.33 Asset related
Enterprise
Technology
Center
Provincial
Specialized Fund
770,730.36 128,176.25 642,554.11 Asset related
for Industrial and
Information
Total 1,792,833.90 496,907.10 1,295,926.80
Note 30. Share capital
Movements: increase(+) , decrease(－)
Opening Capitalization
Item Newly Bonus Closing balance
balance of capital Others Subtotal
issued share
reserves
Total shares 426,051,015 -8,423,055 -8,423,055 417,627,960
Notes to movements：
1. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted
shares authorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the
resolution of ““Proposal of repurchase and de-registration part of restricted shares authorized
under 2018 A-share Restricted Share Incentive Plan (Second Phase) ”, the Company repurchased
and de-registered, in 2022, 435,838 A-share restricted shares that had been authorized but still
under restriction period. Those shares were owned by 6 former incentive object that are resigned.
85
2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the
2nd meeting of the 10th Board of Directors and the 5th extraordinary shareholder’s meeting of
2021, the Company was authorized to repurchase B Shares, using the Company’s fund, to reduce
the registered capital. On 15 December 2022, confirmed by China Securities Depository and
Clearing Co., Ltd Shenzhen Branch, the Company de-registered 7,987,217 B-shares.
Note 31. Capital reserve
Opening
Item Item Increase Decrease
balance
Share premium 1,010,108,533.81 4,231,031.40 44,673,836.85 969,665,728.36
Other capital reserve 30,799,660.32 10,852,286.20 4,231,031.40 37,420,915.12
Total 1,040,908,194.13 15,083,317.60 48,904,868.25 1,007,086,643.48
Notes to capital reserve
1. Pursuant to the resolution of “Proposal of granting part of restricted shares authorized
under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of
““Proposal of granting part of restricted shares authorized under 2018 A-share Restricted Share
Incentive Plan (Second Phase) ”. In 2022, the Company charged RMB9,870,150.33 into cost or
expenses in change of incentive personnel’s service and increased the capital reserve by the same
amount accordingly.
2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the
2nd meeting of the 10th Board of Directors on 25th October 2021 and the 5th extraordinary
shareholder’s meeting of 2021 on 30th November 2021, the Company was authorized to
repurchase B Shares, using the Company’s fund, to reduce the registered capital. On 15th
December 2022, confirmed by China Securities Depository and Clearing Co., Ltd Shenzhen
Branch, the Company de-registered 7,987,217 B-shares, which in turn decreased the capital
reserve by RMB42,265,614.88
3. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the
2nd meeting of the 10th Board of Directors and the 5th extraordinary shareholder’s meeting of
2021, the Company incurred transaction cost of RMB15,043.17 for the repurchase in 2022. The
expenses of RMB15,043.17 was deducted from capital reserve.
4. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted
shares authorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the
resolution of ““Proposal of repurchase and de-registration part of restricted shares authorized
under 2018 A-share Restricted Share Incentive Plan (Second Phase) ”, the Company repurchased
and de-registered, in 2022, 435,838 A-share restricted shares that had been authorized but still
under restriction period. Those shares were owned by 6 former incentive object that are resigned.
Capital reserve of RMB2,393,178.80 was deducted accordingly.
86
5. Differences, caused by fair value different when unlock the restricted shares, between
CIT deducted amount and cost or expenses recognized in vesting period increased the capital
reserve by RMB982,135.87.
Note 32. Treasury shares
Item Opening balance Increase Decrease Closing balance
Share repurchase 50,252,831.88 50,252,831.88
Share based payment 60,585,678.92 9,825,872.76 50,759,806.16
Total 60,585,678.92 50,252,831.88 60,078,704.64 50,759,806.16
Notes to treasury shares:
1. In 2022, the Company re-purchased B-share of 7,987,217 shares through the Shenzhen
Stock Exchange. Consideration paid was HKD61,438,781.55 (excluding trading fee) , equivalent
to RMB50,252,831.88. The treasury share increased by 50,252,831.88.
2. As described in Note V. 31. 2, the treasury shares decreased by RMB50,252,831.88 due to
re-purchase of B-share.
3. As described in Note V. 31. 4, the treasury shares decreased by RMB2,829,016.80 due to
re-purchase of restricted shares. And cash dividend to the remaining restricted shares decreased
treasury shares by RMB2,528,447.40.
4. On 28 December 2021, Pursuant to the “Resolution of Fulfilling Unlocking Condition for
the 2018 A-Share Restricted Share Incentive Plan (First Phase) ” passed on the 4th meeting of the
10th Board, the first unlocking condition was met. Based on the authorization of the General
Meeting, the Board lifted restriction for 114 incentive individuals. The corresponding shares can
be traded on 7th February 2022, of which the cash dividend decreased treasury shares by
RMB4,468,408.56.
87
Note 33. Other Comprehensive income
Amount in current period
Less:
recorded in Less:
Less: recorded in OCI in prior reserve of Less: Less: recorded in OCI in
Opening Attribute to Attribute to Closing
Item OCI in prior period period and hedging movements prior period and
balance Pre-tax Less: parent non-controlling balance
and transferred to transferred transferred of defied transferred to retained
amount CIT company shareholders
profit or loss in to financial to related benefit earnings in current
after tax after tax
current period assets at assets or plan period
amortized liabilities
cost
I. Other
comprehensive
income items which
will not be
reclassified
subsequently to profit
or loss
II. Other
comprehensive
income items which
may be reclassified
subsequently to profit
or loss
translation
-7,658,346.40 13,397,936.29 13,397,936.29 5,739,589.89
difference
88
Note 34. Specific reserve
Item Opening balance Increase Decrease Closing balance
Safety production fee 1,062,731.13 1,246,390.69 297,056.91 2,012,064.91
Note 35. Surplus reserve
Item Opening balance Increase Decrease Closing balance
Statutory surplus reserve 213,025,507.50 213,025,507.50
Discretionary surplus
61,984,894.00 61,984,894.00
reserve
Total 275,010,401.50 275,010,401.50
Notes to surplus reserve:
Note: According to the Company Law and Articles of Association, the Company draws
statutory surplus reserve at 10% of net profit. If the statutory surplus reserve is over 50% of the
Company’s registered capital, drawing of statutory surplus reserve will be stopped.
The Company can draw discretionary surplus reserve after drawing statutory surplus reserve.
If approved, discretionary surplus reserve can be used to make up for losses in previous years or
increase share capital.
Note 36. Undistributed profit
Item Current period Prior period
Undistributed profit at the end of prior year before
1,338,444,326.09 1,164,490,911.51
adjustments
Adjustments to undistributed profit at the
beginning of year (“+” for increase and “-“ for -11,188,268.01
decrease)
Undistributed profit at the beginning of year after
1,338,444,326.09 1,153,302,643.50
adjustment
Plus: Net profit attributable to the owner of the
266,681,451.84 387,840,282.95
parent company for the year
Less: statutory surplus reserve drawn 28,478,534.63
Dividends payable to ordinary shares 125,419,139.40 174,220,065.73
Undistributed profit at the end of year 1,479,706,638.53 1,338,444,326.09
Note 37. Operating income and operating cost
1． O
peratin
g
income
and
operati
ng cost
Item Amount in current period Amount in prior period
89
Item Amount in current period Amount in prior period
Revenue Cost Revenue Cost
Main business 4,336,586,473.74 2,738,100,529.23 5,224,836,384.30 3,283,434,432.96
Other business 17,510,406.62 872,261.88 18,897,156.63 2,221,796.17
2． R
evenue
genera
ted by
contra
ct
Types of contract Amount in current period Amount in prior period
I. Types of goods
Watch
4,044,205,847.75 4,923,280,724.48
business
Precision
163,114,009.23 150,094,350.20
manufacturing
Other business 17,510,406.62 18,897,156.63
II. Categorized
based on timing
of goods transfer
At a point of
4,212,548,175.21 5,078,899,659.72
time
During a
12,282,088.39 13,372,571.59
period of time
Note: revenue generated by contract does not include lease income of RMB129,266,616.76
which is regulated under “CAS No.21 – Lease”.
Note 38. Tax and surcharges
Item Amount in current period Amount in prior period
Consumption tax 10,509,059.81 13,898,225.16
Urban maintenance and
4,483,205.18 5,907,693.68
construction tax
Educational surcharge 2,988,250.62 3,923,712.57
Property tax 5,824,577.36 7,224,965.66
Stamp duty 3,814,124.17 4,156,804.98
Others 3,180,982.59 2,452,184.75
Total 30,800,199.73 37,563,586.80
Note 39. Selling and distribution expenses
Item Amount in current period Amount in prior period
Salary 390,723,066.47 433,505,654.18
Department store expense and rental 154,977,256.13 189,748,898.49
Market promotion expenses 114,559,488.13 161,389,740.20
90
Item Amount in current period Amount in prior period
Depreciation and amortization 210,324,656.21 191,787,912.35
Packaging expenses 8,210,424.75 8,739,319.16
Utilities and property management expenses 22,115,070.79 22,588,777.26
Shipping fees 5,928,120.89 8,530,775.41
Office expenses 5,617,713.76 7,446,024.76
Travel expenses 4,533,814.79 7,279,500.39
Entertainment expenses 3,081,324.66 4,046,655.86
Others 11,761,893.82 14,834,965.22
Total 931,832,830.40 1,049,898,223.28
Note 40. Administrative expenses
Item Amount in current period Amount in prior period
Salary 169,831,180.19 202,675,218.51
Depreciation and amortization 23,584,581.61 24,544,056.69
Travel expenses 1,651,207.39 3,980,000.38
Office expenses 3,967,189.58 5,390,287.09
Agents fees 1,764,355.96 3,342,562.00
Rental and utilities 941,300.03 852,555.31
Entertainment expenses 764,414.05 1,494,588.12
Vehicle and transportation expenses 1,528,304.66 1,718,083.11
Telecommunication expenses 825,712.63 983,910.06
Others 14,156,262.42 16,645,501.14
Total 219,014,508.52 261,626,762.41
Note 41. R&D expenses
Item Amount in current period Amount in prior period
Salary 47,534,889.46 40,498,469.51
Sample and material expenses 1,964,204.63 1,557,455.43
Molding expenses 853,056.11 744,578.81
Depreciation and amortization 4,852,325.18 6,048,741.96
Technical cooperation fee 217,203.80 2,480,127.69
Others 5,666,906.43 6,473,195.77
Total 61,088,585.61 57,802,569.17
Note 42. Financial expenses
Item Amount in current period Amount in prior period
Interest expenses 16,846,749.14 23,159,963.74
Less: Interest income 3,923,999.48 3,589,649.85
Exchange gain or losses -3,053,760.78 634,406.96
91
Item Amount in current period Amount in prior period
Bank charges 11,319,753.23 14,472,352.80
Total 21,188,742.11 34,677,073.65
Note 43. Other income
1． Details
Sources of other income Amount in current period Amount in prior period
Government subsidy 18,648,210.06 21,328,673.21
2． Government subsidy included in other income
Amount in current Amount in prior Asset or
Item
period period income related
Subsidy to promote consumption 7,920,500.00 420,000.00 Income related
Trade and Distribution Industry Funding Projects 2,579,700.00 Income related
Quality and Branding Promotion Multiplication
1,180,000.00 1,960,000.00 Income related
Subsidy
Relief Policy Subsidy 1,058,150.00 Income related
Shenzhen Special Fund for Technology Research 1,000,000.00 Income related
Training subsidy 953,220.00 322,500.00 Income related
Subsidy for stabilizing job position 819,833.38 833,013.44 Income related
Subsidy to Foster High and New Technology
700,000.00 Income related
Enterprise
Commission on IIT payment 730,811.84 502,644.31 Income related
Other subsidies 624,893.74 711,026.01 Income related
Shenzhen Standard Special Fund 550,694.00 836,705.00 Income related
Shenzhen E-commerce Innovation and
330,000.00 Income related
Development Support Program Subsidy
Professional, Specialize,Unique and New" SME
200,000.00 Income related
Development Subsidy
State certified R&D center 293,147.06 293,147.06 Asset related
Provincial industry and information special
128,176.25 130,551.50 Asset related
subsidy
Special fund for Shenzhen industrial designing 75,583.79 161,185.89 Asset related
2019 Headquarters Economic Contribution
-496,500.00 Income related
Award
Special fund of Nanshan district to support
4,913,900.00 Income related
self-innovation industry development
Subsidy to assist high quality development of
3,730,000.00 Income related
fashion industry
Subsidy to support sales promotion 3,500,000.00 Income related
Economic development special fund of
Guangming District to support intellectual
1,090,000.00 Income related
property right, standardization certification
project
Corporate Research and Development Funding 756,000.00 Income related
Shenzhen post-doctoral subsidy 550,000.00 Income related
R&D project subsidy 378,000.00 Income related
Guangming District specific subsidy for online
200,000.00 Income related
market expanding
92
Government subsidy for R&D project 200,000.00 Income related
High precision watch technology innovation
-160,000.00 Income related
project
Total 18,648,210.06 21,328,673.21
Note 44. Investment gain
Item Amount in current period Amount in prior period
Gain from long-term equity investments
3,026,481.59 3,754,939.39
accounted for using equity method
Note 45. Credit impairment loss
Item Amount in current period Amount in prior period
Bad debt loss 4,845,379.45 -11,075,001.77
Note 46. Asset impairment loss
Item Amount in current period Amount in prior period
Inventory decline in value -37,625,482.96 -25,861,394.56
Note 47. Gains from assets disposal
Item Amount in current period Amount in prior period
Gains (losses) from assets disposal -203,932.45 -134,543.49
Gains (losses) from right-of-use
295,857.51 864,678.36
assets disposal
Total 91,925.06 730,134.87
Note 48. Non-operating income
Amount included in
Amount in current
Item Amount in prior period non-recurring gains or
period
losses in current period
Payables cannot be paid 305,066.79 383,893.25 305,066.79
Compensation 860,904.01 113,138.61 860,904.01
Others 121,231.28 130,403.17 121,231.28
Total 1,287,202.08 627,435.03 1,287,202.08
Note 49. Non-operating expense
Amount included in
Amount in current Amount in prior non-recurring gains or
Item
period period losses in current
period
Donation 78,860.00 300,000.00 78,860.00
Fine and penalty for late payment 403,084.07 698,864.04 403,084.07
Payment for breach of agreement 1,412,548.66 2,507,649.06 1,412,548.66
Others 456,773.58 179,653.45 456,773.58
Total 2,351,266.31 3,686,166.55 2,351,266.31
Note 50. CIT expenses
1． Details
93
Item Amount in current period Amount in prior period
Current tax expense for the year
86,356,685.06 112,084,704.70
based on tax law and regulations
Changes in deferred tax
-13,916,465.05 2,382,671.18
assets/liabilities
Total 72,440,220.01 114,467,375.88
2． Reconciliation between income tax expenses and accounting profit is as
follows:
Item Amount in current period
Profits before tax 339,121,671.85
Income tax calculated based on statutory tax rate 84,780,417.96
Effect of different tax rates applied by subsidiaries -6,456,358.40
Adjustment to income tax of previous years -1,354,677.99
Effect of non-taxable income -756,620.39
Effect of non-deductible costs, expenses and losses 2,294,175.14
Effect of using the deductible temporary differences or deductible losses
-224,619.68
for which no deferred tax asset was recognized in prior period
Effect of deductible temporary differences or deductible losses for which
no deferred tax asset was recognized this year
Effect of research and development expenses super deduction -5,842,096.63
Others
Income tax expenses 72,440,220.01
Note 51. Notes to cash flow statement
1. Cash received from other operating activities
Item Amount in current period Amount in prior period
Security deposit 15,956,047.24 12,286,247.59
Government subsidy 18,151,302.96 22,985,857.32
Promotion expenses 12,201,925.26 13,582,651.81
Interest income 3,923,999.48 3,589,649.85
Return of petty cash 8,030,966.63 7,070,953.20
Others 21,392,611.71 25,872,097.79
Total 79,656,853.28 85,387,457.56
2. Cash paid for other operating activities
Item Amount in current period Amount in prior period
Security deposit 24,008,323.15 27,774,098.01
Petty cash advanced to employee 11,049,894.11 11,532,694.33
Current period expenses 288,360,173.00 436,157,747.82
Others 617,269.28 2,635,207.94
Total 324,035,659.54 478,099,748.10
94
3. Cash paid for other financing activities
Item Amount in current period Amount in prior period
Lease payment 124,087,402.37 115,532,289.07
Cash paid for re-purchase of shares 53,390,338.09 9,178,101.51
Total 177,477,740.46 124,710,390.58
Note 52. Supplement information to cash flow statement
1. Supplement to cash flow statement
Amount in current
Item Amount in prior period
period
1. Reconciliation of net profit/loss to cash flows from
operating activities：
Net profit 266,681,451.84 387,860,340.23
Add: Credit impairment loss -4,845,379.45 11,075,001.77
Impairment for assets 37,625,482.96 25,861,394.56
Depreciation of fixed assets、oil and gas assets and
40,524,642.37 42,404,375.44
productive biological assets
Depreciation of right-of-use assets 110,464,700.15 100,275,414.73
Intangible asset amortization 5,009,348.81 6,162,432.21
Amortization of long-term deferred expenses 110,435,014.09 103,932,868.69
Loss on disposal of fixed assets, intangible assets, and
-91,925.06 -730,134.87
other long-term assets (“-“ for gain)
Loss on scrap of fixed assets (“-“ for gain)
Loss on changes of fair value (“-“ for gain)
Financial expenses (“-“ for income) 16,846,749.14 23,159,963.74
Investment loss (“-“ for gain) -3,026,481.59 -3,754,939.39
Decrease in deferred tax assets (“-“ for increase) -14,551,337.29 -319,474.30
Increase in deferred tax liabilities (“-“ for decrease) 262,330.92 2,168,679.48
Decrease in inventories (“-“ for increase) -92,627,165.17 -133,051,377.44
Decrease in operating receivables (“-“ for increase) 121,164,749.65 59,770,087.01
Increase in operating payables (“-“ for decrease) -117,643,404.85 -77,565,523.41
Others
Net cash flows from operating activities 476,228,776.52 547,249,108.45
2. Significant investment or financing activities not
involving cash:
Debts converted to capital
Convertible debts mature within one year
Added right-of-use assets in the current period
3．Net changes in cash and cash equivalents:
Cash at end of year 313,738,389.64 210,254,737.14
Less: cash at beginning of year 210,254,737.14 353,057,285.71
Plus: cash equivalents at end of year
Less: cash equivalents at beginning of year
95
Amount in current
Item Amount in prior period
period
Net increase in cash and cash equivalents 103,483,652.50 -142,802,548.57
2. Total cash outflows related to lease
Total cash outflows related to lease amounted to RMB124,087,402.37.（Prior period：
RMB115,532,289.07）
3. Cash and cash equivalents
Item Closing balance Opening balance
I. Cash 313,738,389.64 210,254,737.14
Incl. Cash on hand 173,368.68 108,612.08
Bank deposit available for immediate payment 312,433,893.29 188,908,798.10
Other monetary funds available for immediate
1,131,127.67 21,237,326.96
payment
II. Cash equivalents
Including Bond investment due in three months
III. Cash and cash equivalents at the end of year 313,738,389.64 210,254,737.14
Including Restricted cash and cash equivalents for the
716,733.44 1,724,651.93
Company and its subsidiaries
As of December 31, 2022, the company has been frozen at RMB 9,074.00 due to being
included in a long-term immobile bank account.
Note 53. Monetary items denominated in foreign currency
1． Monetary items denominated in foreign currency
Balance denominated in
Balance translated in
Item foreign currency as at 31 Exchange rate
RMB as at 31 Dec 2022
Dec 2022
Monetary fund 24,163,612.98
USD 2,954,765.31 6.9646 20,578,758.48
EUR 337,623.94 7.4229 2,506,148.74
HKD 501,707.26 0.8932 448,160.04
CHF 83,603.65 7.5432 630,545.72
Accounts receivable 4,753,372.10
USD 466,956.15 6.9646 3,252,162.80
EUR 73,533.12 7.4229 545,829.00
HKD 674,663.15 0.8932 602,656.35
CHF 46,760.52 7.5432 352,723.95
Other receivables 104,397.30
HKD 116,870.93 0.8932 104,397.30
96
Balance denominated in
Balance translated in
Item foreign currency as at 31 Exchange rate
RMB as at 31 Dec 2022
Dec 2022
Accounts payable 473,247.09
HKD 241,027.73 0.8932 215,302.84
CHF 34,195.60 7.5432 257,944.25
Other payables 168,702.98
USD 5,588.86 6.9646 38,924.17
EUR 490.28 7.4229 3,639.30
HKD 11,588.20 0.8932 10,351.39
CHF 15,350.00 7.5432 115,788.12
2． Overseas operational entity
For main business location and recording currency of important overseas operating entities, refer
to Note III. 5.
Note 54. Government subsidy
1． Status
Amount included in
Amount in current
Types of government subsidy current period profit or note
period
loss
Subsidy included in deferred income 496,907.10 Note V 29
Subsidy included in other income 18,647,802.96 18,647,802.96 Note V 43
Less: subsidy returned 496,500.00 496,500.00 Note 2 below
Total 18,151,302.96 18,648,210.06
2． Subsidy returned
Amount in Amount in prior
Item Type Reasons for return
current period period
Over disbursement of subsidy and its
Income related 496,500.00 Not qualified
interest
VI. Interests in other entities
1. Equity in subsidiary
(1) Composition of enterprise group
Place of Shareholding ratio
Place of Nature of (%)
Name registratio Ways acquired
operation business
n Direct Indirect
Shenzhen Harmony World incorporated or
Shenzhen Shenzhen Commerce 100.00
Watch Center Co., Ltd. investment
incorporated or
FIYTA Sales Co., Ltd. Shenzhen Shenzhen Commerce 100.00
investment
Shenzhen FIYTA Precision incorporated or
Shenzhen Shenzhen Manufacturing 99.00 1.00
Technology Co., Ltd. investment
Shenzhen FIYTA incorporated or
Shenzhen Shenzhen Manufacturing 100.00
Technology Development investment
97
Place of Place of Nature of Shareholding ratio
Name Ways acquired
operation registratio business (%)
Co., Ltd. n
Harmony World Watch incorporated or
Sanya Sanya Commerce 100.00
Center (Hainan) Co., Ltd. investment
Shenzhen Xunhang
incorporated or
Precision Technology Co., Shenzhen Shenzhen Manufacturing 100.00
investment
Ltd.
Emile Choureit Timing incorporated or
Shenzhen Shenzhen Commerce 100.00
(Shenzhen) Ltd. investment
Business
Liaoning Hengdarui
combination
Commercial & Trade Co., Shenyang Shenyang Commerce 100.00
under common
Ltd.
control
TEMPORAL (Shenzhen) incorporated or
Shenzhen Shenzhen Commerce 100.00
Co., Ltd. investment
Shenzhen Harmony incorporated or
Shenzhen Shenzhen Commerce 100.00
E-commerce Co., Ltd. investment
Hong Hong incorporated or
FIYTA (Hong Kong) Ltd. Commerce 100.00
Kong Kong investment
Business
combination
Montres Chouriet SA Swiss Swiss Manufacturing 100.00 not under
common
control
2. Equity in joint arrangement or associates
(1) Significant associates
Place of Shareholding ratio
Place of Nature of (%) Accounting
Name registrati
operation business treatment
on Direct Indirect
Commer
Shanghai Watch Co., Ltd. Shanghai Shanghai 25% Equity method
cial
(2) Principal financial information of significant associate company
Closing balance/Amount in Opening balance/Amount in
Item
current period prior period
Current assets 175,890,077.66 143,367,298.98
Non-current assets 21,637,323.67 17,537,419.20
Total assets 197,527,401.33 160,904,718.18
Current liabilities 44,595,566.75 24,124,925.22
Non-current liabilities 5,885,583.05 1,839,467.79
Total liabilities 50,481,149.80 25,964,393.01
Non-controlling interest
Equity attributable to parent company 147,046,251.53 134,940,325.17
Portion of net asset calculated based on
36,761,562.88 33,735,081.29
shareholding
Adjustment matters 21,420,524.02 21,420,524.02
- Goodwill 21,420,524.02 21,420,524.02
- Unrealized profit or losses from
internal transaction
- Others
98
Closing balance/Amount in Opening balance/Amount in
Item
current period prior period
Carrying value of investment to associates 58,182,086.90 55,155,605.31
Fair value of equity investment that has
public quotation
Operating income 141,379,376.32 150,929,452.87
Net profit 12,105,926.36 15,019,757.54
Net profit from discontinued operation
Other comprehensive income
Total comprehensive income 12,105,926.36 15,019,757.54
Dividends received from associated
company during the year
VII. Risk disclosure related to financial instrument
The major financial instruments of the Company primarily include cash at bank and on hand,
equity investments, borrowings, accounts receivable, accounts payables and bond payables. The
Company is exposed to risks from various financial instruments in day-to-day operation, mainly
including credit risk, liquidity risk and market risk. The risks in connection with such financial
instruments and the risk management policies adopted by the Company to mitigate such risks are
summarized as follows:
The board of directors is responsible for planning and establishing the risk management
structure for the Company, developing risk management policies and the related guidelines across
the Company, and supervising the performance of risk management measures. The Company has
developed risk management policies to identify and analyse risks exposed by the Company. These
risk management policies have clear regulations over specific risks, covering various aspects of
market risk, credit risk and liquidity risk management. The Company will evaluate the market
environment and changes of the Company’s operating activities on a regular basis to decide
whether to update the risk management policies and systems. Risk management of the Company is
carried out by the Risk Management Committee based on the policies as approved by the board of
directors. Risk Management Committee identifies, evaluates and mitigates related risks by
working closely with other business divisions of the Company. Internal Audit Department of the
Company will review the risk management control and process regularly, and submit the review
results to Audit Committee of the Company. The Company spreads the risks of financial
instruments through appropriate diversified investment and business portfolio, and mitigates the
risk of focusing on any single industry, specific regions or counterparties by way of formulating
the corresponding policies for risk management.
1. Credit risk
Credit risk refers to the risk of financial losses to the Company as a result of the failure of
performance of contractual obligations by the counterparties. The management has developed
proper credit policies and continuously monitors credit risk exposures.
The Company has adopted the policy of transacting with creditworthy counterparties only. In
addition, the Company evaluates the credit qualification of customers and sets up corresponding
99
credit term based on the financial status of customers, the possibility of obtaining guarantees from
third parties, credit records and other factors such as current market conditions. The Company
monitors the balances and recovery of bills and accounts receivable, and contract assets on a
continual basis. As for bad credit customers, the Company will use the written reminders, shorten
the credit term or cancel the credit term to ensure that the Company is free from material credit
losses. In addition, the Company reviews the recovery of financial assets on each balance sheet
date to ensure adequate expected credit loss provision is made for relevant financial assets.
The Company’s other financial assets include currency funds and other receivables. The
credit risk relating to these financial assets arises from the default of counterparties, but the
maximum exposure to credit risk is the carrying amount of each financial asset in the balance
sheet. The Company does not provide any other guarantee that may expose the Company to credit
risk.
The monetary funds held by the Company are mainly deposited with financial institutions
such as state-owned banks and other large and medium-sized commercial banks. The management
believes that these commercial banks have a higher reputation and assets, so there is no major
credit risk and the Company would not have any significant losses caused by the default by these
institutions. The Company’s policy is to control the amount deposited with these famous financial
institutions based on their market reputation, operating size and financial background, to limit the
credit risk amount of any single financial institution.
As a part of its credit risk asset management, the Company assesses the credit loss of
receivables using aging. The Company’s receivable and other receivables involve large amount of
customers. Aging information can reflect the ability to repay and risk of bad debt of these
customers. The Company determined expected loss rate by calculating historical bad debt rate for
receivables with different aging based on historical data and also taking forecast of future
economic condition into consideration such as GDP growth rate, state currency policy etc... For
long-term receivables, the Company assesses expected credit loss reasonably by considering
settlement period, contracted payment terms, debtor’s financial situation and the economic
situation of the debtor’s industry.
As at 31 December 2022, the carrying amount of related assets and corresponding ECL is as
follows:
Aging Carrying amount Provision
Bill receivable 33,347,790.58 1,132,878.48
Accounts receivable 345,753,258.32 40,462,298.64
Other receivable 61,182,569.81 4,264,550.33
Total 440,283,618.71 45,859,727.45
As the Company’s customer base is large, no material credit concentration risk.
As at 31 December 2022, the balance of top 5 receivable accounts accounted for 32.76% of
total accounts receivables (2021: 35.48%) .
100
2. Liquidity risk
Liquidity risk refers to the risk of short of funds when the company performs its obligation of
cash payment or settlement by other financial assets. The Company’s subordinate member
companies are responsible for their respective cash flow projections. Based on the results thereof,
the subordinate financial management department continually monitors its short-term and
long-term capital needs at the company level to ensure adequate cash reserves; in the meantime,
continually monitors the compliance with loan agreements and secures undertakings for sufficient
reserve funds from major financial institutions, to address its short-term and long-term capital
needs. Besides, the Company mainly signs financing agreements with banks that have business
transactions to provide support to fulfill commercial bill obligation. As at 31 December 2022, the
Company has financing facilities from several banks amounting to RMB2,127.16 million.
Amongst, RMB467.16 million has already been used.
As at 31 December 2022, the discounted contractual cash flows for financial liabilities and
off-balance sheet guarantee that presented in maturity are as follows:
Closing balance in ten thousands yuan
Item
Within 1 year 1 - 2 years 2 - 3 years Over 3 years Total
Short term loan 29,353.84 29,353.84
Bills payable 200.06 200.06
Accounts payable 17,058.95 17,058.95
Other payables 15,873.61 231.76 200.79 199.85 16,506.01
Total 62,486.46 231.76 200.79 199.85 63,118.86
3. Market risk
(1) Exchange rate risk
Except that the Company’s subsidiary in Hong Kong uses HKD as settlement currency and
sub-subsidiary in Swiss used CHF as settlement currency, the principal places of operations of the
Company are located in China and the major businesses are settled in RMB. However, the
Company’s recognized foreign currency assets and liabilities as well as the foreign currency
transactions in the future (the functional currencies of foreign assets and liabilities as well as the
transactions are mainly HKD and CHF) remain exposed to exchange rate risk
As at 31 December 2022, the RMB equivalent of financial assets and financial liabilities
denominated in foreign currencies are as follows:
Closing balance
Item
HKD USD EUR CHF Total
Financial asset
denominated in
foreign currency:
Monetary fund 448,160.04 20,578,758.48 2,506,148.74 630,545.72 24,163,612.98
Accounts receivable 602,656.35 3,252,162.80 545,829.00 352,723.95 4,753,372.10
101
Closing balance
Item
HKD USD EUR CHF Total
Other receivables 104,397.30 104,397.30
Subtotal 1,155,213.69 23,830,921.28 3,051,977.74 983,269.67 29,021,382.38
Financial liabilities
denominated in
foreign currency:
Accounts payables 215,302.84 257,944.25 473,247.09
Other payables 10,351.39 38,924.17 3,639.30 115,788.12 168,702.98
Total 225,654.23 38,924.17 3,639.30 373,732.37 641,950.07
Sensitivity analysis
As at 31 December 2022, for financial assets and financial liabilities that denominated in foreign
currency, if Renminbi appreciate or depreciate of 5% to foreign currency and other factors remain
unchanged, the net profit will decrease or increase about RMB 1.419 million(31 Dec 2021:RMB
485,000) .
(2) Interest rate risk
The interest rate risk of the Company mainly associates with bank borrowings, bonds payable,
etc. Floating rate financial liabilities expose the Company to cash-flow interest rate risk, while
fixed rate financial liabilities expose the Company to fair-value interest rate risk. The Company
determines the comparative proportion of fixed rate contracts and floating rate contracts based on
the then market conditions.
The interest rate risk of the Company mainly associates with bank borrowings, bonds payable,
etc. Floating rate financial liabilities expose the Company to cash-flow interest rate risk, while
fixed rate financial liabilities expose the Company to fair-value interest rate risk. The Company
determines the comparative proportion of fixed rate contracts and floating rate contracts based on
the latest market conditions.
Sensitivity analysis:
As at 31 December 2022, it is estimated that a general increase or decrease 50 basis points in
the borrowings with floating interest rates, with all other variables held constant, the Company’s
net profit and shareholder’s equity for the year will decrease or increase by approximately
RMB1,200,000.00 (2021: RMB 1,000,000.00) .
The above sensitivity analysis assumes that interest rate changed on the balance sheet date
and applicable to all loans with floating interest rate terms.
VIII. Fair value
1. Financial instruments measured at fair value
As at 31 December 2022, the Company does not have financial instruments measured at fair
value.
102
2. Status of financial assets and financial liabilities not measured at fair value
Financial assets and financial liabilities not measured at fair value include: accounts
receivable, short-term loans, accounts payable, long-term loans due within one year, and equity
instrument investment that does not have public quotation in an active market and its fair value
cannot be measured reliably.
The difference between fair value and carrying amount of the above financial assets and
liabilities that not measured at fair value is insignificant.
IX. Related party and related transaction
1. The parent company of the Company
Shareholdin Ratio of vote
Registered
g ratio of right of
capital
Registration (in ten parent parent
Name Type of business
place thousand company to company to
RMB) the the
Company % Company%
CATIC Shenzhen Shenzhen Commercial 116,616.20 39.02 39.02
(1) Notes to the parent company
CATIC Shenzhen is a subsidiary that 100% held, indirectly, by AVIC International, and AVIC
directly holds 91.14% of the equity of AVIC International.
(2) The ultimate controlling party of the Company is AVIC.
2. Refer to Note VI. 1 for information about the Company’s subsidiaries
3. Refer to Note VI. 2 for information about the Company’s material associates
4. Other related parties
Name of other related parties Relationship
Associate company of the
Shenzhen CATIC Property Management Limited (CATIC Property Management)
controlling shareholder
Associate company of the
Shenzhen CATIC Building Equipment Co., Ltd. (CATIC Building Company)
controlling shareholder
Associate company of the
Shenzhen CATIC Nanguang Elevator Engineering Co., Ltd. (CATIC Nanguang)
controlling shareholder
China Merchants Property Operation & Service Co., Ltd (China Merchants Property Associate company of the
OS) controlling shareholder
Associate company of the
Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment)
controlling shareholder
Associate company of the
Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company)
controlling shareholder
Associate company of the
CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company)
controlling shareholder
Associate company of the
Shenzhen AVIC Security Service Co., Ltd (AVIC Security Service)
controlling shareholder
Jiujiang 9 Square Business Management Co., Ltd (Jiujiang 9 Square Business Associate company of the
Management) controlling shareholder
Rainbow Digital Science Co., Ltd. and its associated companies (Rainbow Company Controlled by the same party
Shennan Circuits Co., Ltd. and its associated companies (Shennan Circuits) Controlled by the same party
103
Name of other related parties Relationship
AVIC Lutong Co., Ltd.(AVIC Lutong) Controlled by the same party
AVIC International Aero-Development Corporation(AVIC Int’l Aero Development) Controlled by the same party
AVIC Huadong Photoelectric Co., Ltd.(AVIC Huadong Photoelectric) Controlled by the same party
AVIC Xi’an Flight Automatic Control Research Institute(AVIC Xi’an Flight Institute) Controlled by the same party
Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel
Controlled by the same party
Management Company)
AVIC Securities Co., Ltd. (AVIC Securities Company) Controlled by the same party
AVIC Training Center Controlled by the same party
AVIC Finance Co., Ltd. (AVIC Finance Company) Controlled by the same party
Gongqingcheng CATIC Culture Investment Co., Ltd (Gongqingcheng CATIC
Controlled by the same party
Culture Investment Company)
China National Aero-Technology Shenzhen Co., Ltd. Controlled by the same party
Beijing Hangtou Real-Estate Co., Ltd. (Beijing Hangtou) Controlled by the same party
Avic Jonhon Optronic Technology Co., Ltd.(AVIC Jonhon) Controlled by the same party
China Aviation International Simulation Technology Services Co., Ltd. (China
Controlled by the same party
Aviation International Simulation )
AVIC International Holdings (Zhuhai) Co., Ltd. (AVIC Zhuhai) Controlled by the same party
China National Aero-technology Import & Export Corporation (CATIC) Controlled by the same party
China Aviation Industry General Aircraft Co., Ltd.(CAIGA) Controlled by the same party
AVIC Capital Co., Ltd. (AVIC Capital) Controlled by the same party
Guizhou HUAYANG Electronics Co., Ltd. Controlled by the same party
Zhuhai Pilot Composite Material Technology Co., Ltd. Controlled by the same party
Guangdong International Mansion Industrial Co., Ltd. (Guangdong International
Controlled by the same party
Mansion)
Shenzhen Zhonghang Technology Checking & Measuring Institute (Shenzhen
Controlled by the same party
ZHTCMI)
Company directors, managers, CFO, and secretary of the board Key management member
5. Related party transactions
(1) Related transaction between subsidiaries and between parent company and
subsidiaries which are in the scope of consolidation have already been offset.
(2) Purchase good and receiving service
Related parties Related transaction Amount in current Amount in prior
content period period
CATIC Property Management Property management 11,539,094.22 10,672,790.93
Department store
Rainbow Company expenses/ Commodity 4,184,883.88 4,964,647.21
purchase
AVIC Training Center Training fee 147,652.13
Department store
Ganzhou 9 Square Company 74,815.04 178,484.53
expense
CATIC City Estate (Kunshan) Department store
63,779.35 64,060.80
Company expense
Department store
Jiufang Business Management 90,606.52 86,305.01
expense
CATIC Building Company Renovation 19,200.60 82,276.21
104
AVIC Nanguang Company Elevator maintenance 46,660.32 463,226.05
AVIC Jonhon Purchase of goods 238,755.07 76,667.61
Gongqingcheng CATIC Culture Departmental store
25,733.73 31,544.56
Investment Company expense
Grand Skylight Hotel
Purchase of goods 3,855.65
Management Company -
Guangdong International
Property management 18,157.71
Mansion
Shenzhen ZHTCM Accept labour 6,590.00
AVIC Xi’an Flight Automatic
Control Research Institute(AVIC Accept labour 179,245.28
Xi’an Flight Institute)
Total 16,491,377.37 16,767,655.04
Notes: All amount listed above exclude tax
(3) Sale of goods and providing services
Nature of Amount in current Amount in prior
Related party period period
transaction
Beijing Hangtou Sale of product 3,504.42
Ganzhou 9 Square Product and service 16,327.43 23,850.44
Gongqingcheng CATIC Culture
Investment Company
Sale of product 310,404.70 461,064.03
9 Square Business Management Sale of product 45,548.67 2,648.00
Sale of material and
Shennan Circuit 335,070.20 2,179,951.09
providing service
Grand Skylight Hotel Management
Company
Sale of product 17,610.62
AVIC Training Center Others 2,453.10 2,180.53
Rainbow Company Product and service 53,197,052.19 79,467,519.77
AVIC International Sale of product 28,237.17
AVIC Jonhon Sale of product 1,252,054.56 383,989.41
China Aviation International
Simulation
Sale of product 60,530.97
AVIC Zhuhai Sale of product 8,800.00 31,831.86
CATIC Sale of product 105,929.20
CAIGA Sale of product 1,319,881.42
AVIC Capital Sale of product 8,681.42
Share of Utilities
CATIC Property Management 3,236,626.25 3,372,087.78
and management fee
Guizhou HUAYANG Electronics
Co., Ltd.
Sale of product 87,263.71
AVIC Huadong
PHOTOELECTRIC
Sale of product 21,238.94
Zhuhai Pilot Composite Material
Technology Co., Ltd.
Sale of product 1,805,929.20
Total 60,318,768.95 87,469,498.13
Notes: All amount listed above exclude tax
(4) Related party lease
1) The Company as lessor
105
Recognized rental Recognized rental income
Lessee Type of leased assets
income in current year in prior year
CATIC Property Management Property 4,040,909.78 7,876,636.32
AVIC Securities Company Property 1,411,885.68 1,377,399.99
Rainbow Company Property 437,897.82 931,939.92
AVIC Security Service Property 906,404.52 799,448.76
Total 6,797,097.80 10,985,424.99
2) The Company as lessee
Variable lease payments
Interest payment of lease Addition of right-of-use
that are not included in Rental payment
liabilities asset
Lessor Type lease liabilities
Current Prior Current Current Prior Current Prior
Prior period
period period period period period period period
Guangdong
International
Mansion Property 40,527.84 3,572.58 51,030.81
Industrial Co.,
Ltd.
Kunshan
Property 94,596.41 105,759.65 5,615.80 8,266.43 138,708.90 123,534.02
Company
Rainbow
Property 417,268.91 594,532.47 14,378.80 31,093.92 247,505.55 622,708.60
Company
Ganzhou 9
Square Property 396,395.25 951,348.60 8,974.33 43,131.68
Company
Jiufang
Business Property 60,513.53 260,384.38 320,485.10 508,577.07 14,747.54 14,547.95
Management
Total 60,513.53 260,384.38 1,269,273.51 2,160,217.79 47,289.05 97,039.98 437,245.26 746,242.62
(5) Related party fund lending and borrowing
1) Borrowings from related parties
Related Party Amount starting date Expiring date Note
AVIC Finance Company 100,000,000.00 14 January 2022 9 February 2022
AVIC Finance Company 100,000,000.00 18 February 2022 25 February 2022
Total 200,000,000.00
Note:
The Company paid interest to AVIC Finance Company amounted to RMB324,444.44 during
the year.
(6) Remuneration to key management
Item Amount in current period Amount in prior period
Remuneration to key management 15,148,600.00 18,610,600.00
(7) Other related transactions
The year-end balance of the Company’s cash that is deposited with AVIC Finance Company
is RMB271,327,031.83. Interests received from the deposit during the year were RMB425,324.08.
(8) Receivables from and payables to related parties
1) Receivables from related parties
Item Related party Closing balance Opening balance
106
Carrying Bad debt Carrying Bad debt
amount provision amount provision
Monetary
fund
AVIC Finance Company 271,327,031.83 147,786,041.19
Accounts
receivable
Ganzhou 9 Square 6,000.00 300.00
Gongqingcheng CATIC
Culture Investment 27,297.28 1,364.88 10,536.96 303.21
Company
Shennan Circuit 7,255.14 544.14 161,653.56 8,082.68
Rainbow Company 3,808,470.31 219,873.20 3,958,751.41 244,056.19
AVIC Jonhon 649,797.16 48,734.79 44,718.38 2,235.92
CAIGA 1,471,466.00 73,573.30
CATIC Property
55,910.00 2,795.50 0.30
Management
Guizhou HUAYANG
59,528.00 4,464.60
Electronics Co., Ltd.
Zhuhai Pilot Composite
Material Technology Co., 1,412,045.00 105,903.38
Ltd.
AVIC Training Center 2,772.00 207.90
Jiufang Business
45,762.00 2,288.10
Management
Bill
receivable
Shennan Circuit 308,698.46 15,434.92
AVIC Jonhon 262,429.22 187,090.69 9,354.53
Other
receivables
Ganzhou 9 Square Company 192,064.00 9,603.20
Gongqingcheng CATIC
Culture Investment 6,500.00 325.00 5,500.00 275.00
Company
Jiufang Business
50,000.00 2,500.00 50,000.00 2,500.00
Management
Rainbow Company 1,055,557.43 52,777.87 1,051,020.00 52,551.00
Kunshan Company 73,000.00 2,800.00 56,000.00 2,800.00
AVIC 49.32 2.47 49.32 2.47
2）Payables to related parties
Item Related party Closing balance Opening balance
Accounts
payable
CATIC Building Company 32,992.35 41,283.89
107
Item Related party Closing balance Opening balance
AVIC Jonhon 19,411.27
Other
payables:
Rainbow Company 108,186.52 198,661.82
AVIC International 3,600.00
CATIC Property Management 2,375,070.47 2,307,322.31
AVIC Securities Company 247,080.00 247,080.00
CATIC Nanguang 23,432.43 34,430.13
CATIC Building Company 31,270.67
AVIC Security Service 158,620.80 226,603.44
Advance
received
Rainbow Company 162,324.03 16,537.50
AVIC Securities Company 123,540.00
X. Share-based payments
1.General information about share-based payments
Total equity instrument granted during
current period
Total equity instrument exercised
1,244,421.00
during current period
Total equity instruments voided in
current period
Scope of outstanding share option
exercise price and remaining Not applicable
contract term
Scope of outstanding other equity
instrument exercise price and
remaining contract term.
2.Equity settled share-based payment
Method of determining fair value of equity
Close price of share on grant date
instrument on grant date
Evidence to determine the number of Term of employee service, status of target completion,
exercisable equity instrument and personal performance assessment
Reasons for significant difference between
current period estimation and prior period Nil
estimation
Accumulated amount charged to capital reserve
31,988,282.05
for equity settled share-based payment
Total expenses for equity settled share-based
9,870,150.33
payment recognized in current period
XI. Commitment and contingencies
1. Significant commitments
108
(1) Lease contract that already signed or prepared to fulfil and its financial effect
Refer to Note XIII for details.
2.Contingencies on balance sheet date
The Company does not have material contingent events that need to be disclosed
XII. Post balance sheet date events
1. Profit distribution
Cash dividend of RMB2.50 (tax inclusive) for
Profit distributions or dividends proposed
every 10 shares held
2.Other events after the balance sheet date
(1) Financing and guarantee after the balance sheet date
1) On 16 March 2023, pursuant to approval by the 11th meeting of the 10th Board of directors, the
Company proposed to apply for financing facility of no more than RMB 1,200 million by means of
credit, pledge and mortgage in 2023. The resolution is pending for approval by the shareholder’s
meeting.
2) On 16 March 2023, pursuant to approval by the 11th meeting of the 10th Board of directors, the
Company proposed to provide guarantee for the Company’s wholly-owned subsidiary to borrow from
banks of no more than RMB 600 million in 2023. The credit line is included in the actual usage limit of
RMB1,200 million mentioned above. The resolution is waiting approval from the shareholder’s
meeting.
(2) Others
As at 16 March 2023, the Company does not have other post-balance sheet events that need
to be disclosed.
XIII. Disclosure regarding lease
The Company as a lessor:
1. Lease activities
All lease of the Company is property lease, including short-term lease and other leased that
recognized right-of-use asset and lease liabilities.
2. Short-term lease
Short-term leases are treated using simplified method. Short-term leases include lease term
that is shorter than 12 month and no renew options attached, and leases that will be matured in 12
month after first adoption of CAS 21 – Lease. Short-term lease expenses charged to profit or loss
was RMB407,454.71.
109
3.Future potential cash outflows that does not included in lease liabilities
(1) Variable lease payment
The lessee leased a lot of retail shops which contains variable lease payment terms in
connection with sales.
Many of the Company’s property lease contain variable lease payment terms in connection
with sales. In most circumstances, the Company uses these terms to matches lease payment to
shops that can generate more cash flows lease payment. For standalone shops, variable can reach
100% of all lease payment at most and that the scope of percentage of sales used is quite large. In
some circumstances, variable payment terms include annual bottom payment and upper limit.
In 2022, the variable lease payment included in the current profit and loss is RMB
85,618,040.29.
(2) Option to renew
Many lease contracts entered by the Company has option to renew. The Company has
already estimated the option to renew reasonably when determining lease terms in measuring lease
liabilities.
(3) Option to discontinue lease
Some of the lease contract entered by the Company has option to discontinue. The Company
has already estimated the option to discontinue reasonably when determining lease terms in
measuring lease liabilities.
(4) Residual value guarantee
The Company’s lease does not involve residual value guarantee.
(5) Lease that the lessee has already made commitment but not yet started
The Company does not have lease that has already made commitment but not yet started.
Disclosure as a lessor:
1. Lease activities
The Company’s leases are all properties.
2. Risk management strategy of retaining rights over lease assets
To reduce risks of lease, the Company normally asks lessee to pay rental in advance and
collects 1-3 months rental as deposit.
XIV. Other material information
1. Segments
110
Operating segments of the Company are identified on the basis of internal organization
structure, management requirements and internal reporting system. An operating segment
represents a component of the Company that satisfied the following criteria simultaneously:
(1) Its business activities are engaged to earn revenue and incur expenses;
(2) Its operating results are regularly reviewed by the Company’s management to make
decisions on resources allocation and performance assessment;
(3) Its financial conditions, operating results, cash flow and related accounting information
are available to the Company.
The Company determines the reporting segment based on the operating segment, and the
operating segment that meets any of the following conditions is determined as the reporting
segment:
(1) The segment income of the operating segment accounts for 10.00% or more of total
income of all segments;
(2) The absolute amount of profits (losses) of the segment account for 10.00% or more of the
higher of the absolute amount of total profits of the profiting segment and the absolute amount of
total losses of the unprofitable segment.
The Company’s business is simple. The business mainly involves manufacturing and sales of
watch. The management considers the business as a whole in implementing management and
assessing its performance. As a result, no segment information is disclosed in this financial
statement.
2. Other material events
As at 31 December 2022, the Company does not have other significant matters that require to
disclose.
XV. Notes to the parent company’s financial statement
Note 1. Accounts receivables
1. Presented by aging
Aging Closing balance Opening balance
Within 1 year 635,132.16 132,980.92
Over 1 year 3,942.90
Subtotal 635,132.16 136,923.82
Less: bad debt provision 31,916.13 7,043.34
Total 603,216.03 129,880.48
2. Presentation by method of providing bad debt
Closing balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Accounts receivable that
provided expected credit
111
Closing balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
losses on single basis
Accounts receivable that
provided expected credit 635,132.16 100.00 31,916.13 5.03 603,216.03
losses on portfolio basis`
Including: Receivable from
635,132.16 100.00 31,916.13 5.03 603,216.03
other customers
Continued
Opening balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Accounts receivable that
provided expected credit
losses on single basis
Accounts receivable that
provided expected credit 136,923.82 100.00 7,043.34 5.14 129,880.48
losses on portfolio basis`
Including: Receivable from
136,923.82 100.00 7,043.34 5.14 129,880.48
other customers
3. In the portfolio, accounts receivable with expected credit loss provided based on credit
risk characteristic portfolio
(1) Portfolio of receivable from other customer
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 635,132.16 31,916.13 5.03
4. Movements of provision during the period
Movements during the period
Opening Closing
Category Recovered or Other
balance Accrual Written-off balance
reversed movements
Accounts receivable
that provided
expected credit
losses on single
basis
Accounts receivable
that provided
expected credit 7,043.34 24,872.79 31,916.13
losses on portfolio
basis`
Including:
Receivable from 7,043.34 24,872.79 31,916.13
other customers
5. No actual write-off of accounts receivable during the current period.
6. Top 5 receivable accounts
112
Proportion in
total closing
Name Closing balance balance of Bad debt provision
accounts
receivable (%)
Top 5 receivables accounts in total 571,032.93 89.91 28,551.65
Note 2. Other receivables
1． Presentation of other receivables by aging
Aging Closing balance Opening balance
Within 1 year 839,808,164.17 717,341,673.50
1 - 2 years
2- 3 years
Over 3 years 40,050.00 40,050.00
Subtotal 839,848,214.17 717,381,723.50
Less: bad debt provision 65,671.10 198,584.50
Total 839,782,543.07 717,183,139.00
2． Presented by nature
Nature Closing balance Opening balance
Related party in scope of
839,174,096.87 713,813,300.99
consolidation
Security deposit 537,615.90 3,117,526.90
Petty cash 24,542.88
Others 111,958.52 450,895.61
Total 839,848,214.17 717,381,723.50
Less: bad debt provision 65,671.10 198,584.50
Total 839,782,543.07 717,183,139.00
3． Presented according to three stages of financial assets impairment
Closing balance Opening balance
Item Carrying Bad debt Bad debt
Book value Carrying amount Book value
amount provision provision
First stage 839,848,214.17 65,671.10 839,782,543.07 717,381,723.50 198,584.50 717,183,139.00
Second stage
Third stage
Total 839,848,214.17 65,671.10 839,782,543.07 717,381,723.50 198,584.50 717,183,139.00
4． Presented by bad debt provision method
Closing balance
Category
Carrying amount Bad debt provision Book value
113
Percentage ECL rate
Amount Amount
(%) (%)
Other receivables that provided expected
credit losses on single basis
Other receivables that provided expected
839,848,214.17 100.00 65,671.10 0.01 839,782,543.07
credit losses on portfolio basis
Including: Security deposit portfolio 537,615.90 0.06 64,928.30 12.08 472,687.60
Petty cash portfolio 24,542.88 0.01 24,542.88
Social security payment on-behalf
97,102.57 0.01 97,102.57
portfolio
Receivables from related parties
839,174,096.87 99.92 839,174,096.87
within scope of consolidation
Portfolio of others 14,855.95 0.00 742.80 5.00 14,113.15
Total 839,848,214.17 100.00 65,671.10 0.01 839,782,543.07
Continued
Opening balance
Category Carrying amount Bad debt provision
Percentage ECL rate Book value
Amount Amount
(%) (%)
Other receivables that provided expected
credit losses on single basis
Other receivables that provided expected
717,381,723.50 100.00 198,584.50 0.03 717,183,139.00
credit losses on portfolio basis
Including: Security deposit portfolio 3,117,526.90 0.44 193,923.85 6.22 2,923,603.05
Petty cash portfolio
Social security payment on-behalf
357,682.66 0.05 357,682.66
portfolio
Receivables from related parties
713,813,300.99 99.50 713,813,300.99
within scope of consolidation
Portfolio of others 93,212.95 0.01 4,660.65 5.00 88,552.30
Total 717,381,723.50 100.00 198,584.50 0.03 717,183,139.00
5． In the portfolio, other receivables with expected credit loss provided
based on credit risk characteristic portfolio
(1) Security deposit portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 497,565.90 24,878.30 5.00
1 - 2 years
2- 3 years
Over 3 years 40,050.00 40,050.00 100.00
Total 537,615.90 64,928.30 12.08
(2) Petty cash portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 24,542.88
114
(3) Social security payment on-behalf portfolio
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 97,102.57
(4) Receivables from related parties within scope of consolidation
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 839,174,096.87
(5) Portfolio of others
Closing balance
Aging
Carrying amount Bad debt provision ECL rate (%)
Within 1 year 14,855.95 742.80 5.00
6． Bad debt provision status
First stage Second stage Third stage
Lifetime expected Lifetime expected
Bad debt provision Expected credit Total
credit losses (no credit losses (credit
losses over the next
credit impairment impairment
12 months
occurred) occurred)
Opening balance 198,584.50 198,584.50
Opening balance —— —— —— ——
movements in current
period
—Transfer into the
second stage
—Transfer into the
third stage
—Reverse back to
the second stage
—Reverse back to
the first stage
Accrual during the
period
Reversed during the
132,913.40 132,913.40
period
Recovered during the
period
Written-off during the
period
Other movements
Closing balance 65,671.10 65,671.10
7． No other receivables were written-off during the period.
8． Top 5 other receivable accounts
115
Proportion to
closing balance of Bad debt provision
Name Closing balance
other receivables Closing balance
(%)
Top 5 other receivables in total 839,174,096.87 99.92
Note 3. Long-term equity investment
Closing balance Opening balance
Nature
Carrying amount Provision Book value Carrying amount Provision Book value
Investment in
1,494,128,399.60 1,494,128,399.60 1,486,912,339.72 1,486,912,339.72
subsidiaries
Investment in
58,182,086.90 58,182,086.90 55,155,605.31 55,155,605.31
associates
Total 1,552,310,486.50 1,552,310,486.50 1,542,067,945.03 1,542,067,945.03
1． Investment in subsidiaries
Provision
Addition/new Withdr Closing
Opening Closing accrued in
Investee investment balance of
balance awn balance current
provision
period
Shenzhen Harmony World
607,684,512.15 2,669,885.19 610,354,397.34
Watch Center Co.,
Shenzhen Harmony
11,684,484.39 11,684,484.39
E-commerce Co., Ltd.
Shenzhen FIYTA Precision
101,249,207.88 1,232,861.88 102,482,069.76
Technology Co., Ltd.
Shenzhen FIYTA Technology
50,775,222.76 449,752.22 51,224,974.98
Development Co., Ltd.
FIYTA (Hong Kong) Ltd. 137,737,520.00 137,737,520.00
TEMPORAL (Shenzhen) Co.,
5,000,000.00 5,000,000.00
Ltd.
FIYTA Sales Co., Ltd. 455,791,572.32 2,291,679.57 458,083,251.89
Liaoning Hengdarui
Commercial & Trade Co., 36,867,843.96 36,867,843.96
Ltd.
Emile Choureit Timing
80,121,976.26 571,881.02 80,693,857.28
(Shenzhen) Ltd.
Total 1,486,912,339.72 7,216,059.88 1,494,128,399.60
2． Investment in associates
Movements in current period
Investment
Investee Opening balance Addition/new gain
Adjustment to
investment Withdrawn recognized
OCI
under equity
method
Associates
Shanghai Watch 55,155,605.31 3,026,481.59
Continued
Investee Movements in current period Closing balance Closing
116
Cash dividends balance of
Impairment
Other equity declared or provision
provision Others
movements distribution of
accrual
profit
Associates
Shanghai Watch 58,182,086.90
Note 4. Operating income and operating cost
Amount in current period Amount in prior period
Item
Revenue Cost Revenue Cost
Main business 148,557,095.50 41,765,441.70 175,936,431.09 38,852,252.32
Other business 6,727,705.55 3,519,281.62
Note 5. Investment gain
Amount in current
Item Amount in prior period
period
Gain from long-term equity investments accounted for
3,026,481.59 3,754,939.39
using equity method
Gain from long-term equity investments accounted for
240,595,696.70 259,918,496.56
using cost method
Total 243,622,178.29 263,673,435.95
XVI. Supplementary information
1. Details of non-recurring gain or loss for the year
Item Amount Note
Disposal gain or loss of non-current assets 91,925.06
Overridden approval, or without official approval document, or incidental
tax return or exemption
Government grants included in current profit or loss (except for the fixed
or quantitative government grants, enjoyed in a consecutive way, which
18,648,210.06
closely related to the enterprise businesses and according to nation
policies)
Charges for the possessions of funds collected from non-monetary
enterprises
Gain from investment in subsidiaries, joint venture and cooperative
enterprises when cost of investment is less than the profit incurred in
identifiable net asset fair value of invested unit when investment
Profit and loss of non-monetary assets exchange
Profit and loss from entrusting others to invest or manage assets
Asset impairment provision accrued due to force majeure such as natural
disasters
Profit and loss of debt restructuring
Enterprise restructuring expenses, such as expenses for arranging
employees, integrating cost
Profit and loss over fair value part accrued in transactions of unreasonable
transaction price
Current net profit and loss of subsidiaries from business combination
under common control from the opening period to combination date
Profit and loss incurred contingent matters unrelated to normal operating
business
Except for effective hedging business related to normal operating
business, profit and loss from changes in fair value incurred in financial
assets and financial liabilities, and the investment gain from disposal of
financial assets, financial liabilities and available-for-sale financial assets
Impairment provision reversal of accounts receivable under standalone 4,389,902.44
117
Item Amount Note
impairment test
Profit and loss obtained in external entrusting loans
Profit and loss incurred in fair value change of investment property
subsequently measured in fair value mode
Influence on current profit and loss caused by one-off adjustment
according to requirements of laws and regulations about taxation and
accounting
Income from trustee fee obtained by trusting operation
Other non-operating income and expenses other than the above items -1,064,064.23
Profit and loss items pursuant to the definition of non-recurring profit and
loss
Less：Effect of income tax of non-recurring profit or loss 5,175,977.22
Effect of non-recurring profit or losses attributable to minority
shareholders (after tax)
Total 16,889,996.11
2. Return on Equity (ROE) and Earnings per share (EPS)
EPS
Profit of the reporting period Weighted average ROE %
Basic EPS Diluted EPS
Net profit attributable to ordinary
8.68 0.6398 0.6398
shareholders of the Company
Net profit attributable to ordinary
shareholders of the Company after 8.13 0.5989 0.5989
deducting non-recurring profit or loss
FIYTA Precision Technology Co., Ltd.
Board of Directors
18 March 2023
118
