Shenzhen Nanshan Power Co., Ltd.
Financial Statement
Semi-Annual Report (ended as 30 June 2019)
1
Consolidated Balance Sheet
In RMB/CNY
Liabilities and owners’
Asset 2019-6-30 2018-12-31 2019-6-30 2018-12-31
equity
Current assets: Current liabilities:
Monetary funds 1,033,453,294.31 925,829,404.44 Short-term loans 1,100,000,000.00 1,000,000,000.00
Notes receivable - Notes payable - -
Accounts receivable 161,302,717.77 132,430,024.97 Accounts payable 35,894,201.87 18,065,898.69
Accounts paid in Accounts received in
44,330,871.23 53,655,777.12 140,760.00 -
advance advance
Other receivables 40,936,219.42 40,133,297.74 Wage payable 46,532,594.17 44,912,599.66
Including: interest
- - Taxes payable 10,994,450.16 16,000,039.55
receivable
Other accounts
Dividend receivable - - 56,349,009.34 63,091,881.43
payable
Total current
Inventories 124,479,548.95 124,758,334.97 1,261,137.48 1,608,290.72
liabilities
Long-term debt
investment due within 1 - - Non-current liabilities: 1,249,911,015.54 1,142,070,419.33
year
Other current assets 379,237,254.12 390,108,844.11 Long-term loans
Total current assets 1,783,739,905.80 1,666,915,683.35 Accrual liabilities 21,940,000.00 25,940,000.00
Non-current assets: Deferred income 26,726,232.38 26,726,232.38
Financial assets Other non-current
- 60,615,000.00 111,700,588.88 75,612,259.33
available for sale liabilities
Long-term equity Total non-current
15,371,492.58 16,049,044.95 - -
investment liabilities
Other equity
60,615,000.00 - Total liabilities 160,366,821.26 128,278,491.71
instruments investment
Investment property 2,499,395.80 2,606,302.71 Owners’ equity: 1,410,277,836.80 1,270,348,911.04
Fixed assets 1,410,660,332.99 1,405,649,989.24 Share capital
Construction in Capital public
67,646,496.22 82,348,008.39 602,762,596.00 602,762,596.00
progress reserve
Other comprehensive
Intangible assets 44,755,155.22 45,987,255.24 362,770,922.10 362,770,922.10
income
Long-term expenses Surplus public
428,427.39 - - -
to be apportioned reserve
Deferred income tax
2,071,324.26 2,071,324.26 Retained profit 332,908,397.60 332,908,397.60
asset
Total owner’s equity
Other non-current
26,220,181.78 24,905,681.78 attributable to parent 654,146,744.99 679,429,935.81
asset
Company
Total non-current
1,630,267,806.24 1,640,232,606.57 Minority interests 1,952,588,660.69 1,977,871,851.51
asset
Total shareholders’
51,141,214.55 58,927,527.37
equity
Total liabilities and
2,003,729,875.24 2,036,799,378.88
shareholders’ equity
Total current
Total assets 3,414,007,712.04 3,307,148,289.92 3,414,007,712.04 3,307,148,289.92
liabilities
2
Balance Sheet of the Company
In RMB/CNY
Liabilities and owners’
Asset 2019-6-30 2018-12-31 2019-6-30 2018-12-31
equity
Current assets: Current liabilities:
Monetary funds 888,912,474.59 766,041,463.01 Short-term loans 760,000,000.00 860,000,000.00
Notes receivable - - Notes payable - -
Accounts receivable 65,350,406.33 50,415,180.20 Accounts payable 19,581,547.99 5,349,562.56
Accounts paid in
28,483,399.23 33,326,061.81 Wage payable 30,820,391.34 26,953,632.92
advance
Other receivables 834,707,247.88 1,048,357,217.53 Taxes payable 1,232,652.74 11,962,377.72
Including: interest Other accounts
- - 170,676,783.52 157,816,358.94
receivable payable
Including: Interest
Inventories 109,110,903.52 111,279,675.08 995,304.15 1,368,932.93
payable
Long-term debt
Total current
investment due within 1 - - 982,311,375.59 1,062,081,932.14
liabilities
year
Other current assets 360,414,164.28 362,678,678.87 Non-current liabilities:
Total current assets 2,286,978,595.83 2,372,098,276.50 Long-term loans - -
Non-current assets: Deferred income 63,726,068.59 41,337,945.14
Financial assets Other non-current
- 60,615,000.00 - -
available for sale liabilities
Long-term equity Total non-current
303,341,165.00 303,341,165.00 63,726,068.59 41,337,945.14
investment liabilities
Other equity
60,615,000.00 - Total liabilities 1,046,037,444.18 1,103,419,877.28
instruments investment
Fixed assets 305,507,990.16 284,572,482.22 Owners’ equity:
Construction in
9,640,479.40 16,490,240.75 Share capital 602,762,596.00 602,762,596.00
progress
Capital public
Intangible assets 922,800.49 1,518,096.75 289,963,039.70 289,963,039.70
reserve
Long-term expenses Other comprehensive
- - - -
to be apportioned income
Deferred income tax Surplus public
- - 332,908,397.60 332,908,397.60
asset reserve
Other non-current
- - Retained profit 695,334,553.40 709,581,350.64
asset
Total non-current Total shareholders’
680,027,435.05 666,536,984.72 1,920,968,586.70 1,935,215,383.94
asset equity
Total liabilities and
Total assets 2,967,006,030.88 3,038,635,261.22 2,967,006,030.88 3,038,635,261.22
shareholders’ equity
Consolidated Profit Statement
In RMB/CNY
Item Jan.-Jun. 2019 Jan.-Jun.2018
3
I. Total operation income 408,124,616.38 1,079,760,214.80
Including: operation income 408,124,616.38 1,079,760,214.80
II. Total operation cost 443,959,972.56 1,045,043,229.77
Including: operation cost 382,997,137.69 969,695,053.03
Operation tax and surcharge 2,825,433.43 4,722,002.73
Sales expense 2,566,269.52 1,650,238.04
Management expense 44,931,864.50 46,681,650.04
Financial expense 10,639,267.42 22,294,285.93
Including: Interest expenses 23,542,971.21 24,038,132.91
Interest income -13,189,605.67 -2,187,166.10
Add: other income 4,962,155.46 4,136,805.38
Investment income (Loss is listed with “-”) -677,552.37 -1,076,904.31
Including: Investment income on affiliated Company and
- -
joint venture
Losses of devaluation of asset (Loss is listed with “-”) - -
Income from assets disposal (Loss is listed with “-”) -417,926.32 -
III. Operating profit (Loss is listed with “-”) -31,968,679.41 37,776,886.10
Add: Non-operating income 103,166.50 4,775.00
Less: Non-operating expense 46,124.97 859,018.73
IV. Total Profit (Loss is listed with “-”) -31,911,637.88 36,922,642.37
Less: Income tax expense 1,157,865.76 8,092,879.62
V. Net profit (Net loss is listed with “-”) -33,069,503.64 28,829,762.75
Net profit attributable to owner’s of parent Company -25,283,190.82 30,012,095.22
Minority shareholders’ gains and losses -7,786,312.82 -1,182,332.47
VI. Net after-tax of other comprehensive income - -
Net after-tax of other comprehensive income attributable to
- -
owners of parent company
Net after-tax of other comprehensive income attributable to
- -
minority shareholders
VII. Total comprehensive income -33,069,503.64 28,829,762.75
Total comprehensive income attributable to owners of parent
-25,283,190.82 30,012,095.22
Company
Total comprehensive income attributable to minority
-7,786,312.82 -1,182,332.47
shareholders
VIII. Earnings per share: - -
(i) Basic earnings per share -0.04 0.05
(ii) Diluted earnings per share -0.04 0.05
4
Profit Statement of the Company
In RMB/CNY
Item Jan.-Jun.2019 Jan.-Jun.2018
I. Operation income 165,514,051.23 406,846,441.84
Less: Operation cost 172,328,135.53 373,230,061.12
Tax and surcharge 1,087,030.23 854,057.24
Sales expense - -
Management expense 24,673,677.93 21,014,208.00
Financial expense -14,339,507.18 -9,527,151.94
Including: interest expenses 22,030,984.10 12,387,120.42
Interest income -36,594,234.59 -22,440,357.89
Add: other income 1,973,036.55 1,424,860.66
Investment income (Loss is listed with “-”) - -
Including: Investment income on affiliated Company and
- -
joint venture
Losses of devaluation of asset (Loss is listed with “-”) - -
Income on disposal of assets (Loss is listed with “-”) -231,373.37 -
II. Operating profit (Loss is listed with “-”) -16,493,622.10 22,700,128.08
Add: Non-operating income 1,775.00
Less: Non-operating expense 759,974.53
III. Total Profit (Loss is listed with “-”) -16,493,622.10 21,941,928.55
Less: Income tax expense -2,246,824.86 5,485,482.14
IV. Net profit (Net loss is listed with “-”) -14,246,797.24 16,456,446.41
V. Other comprehensive income - -
VI. Total comprehensive income -14,246,797.24 16,456,446.41
Consolidated Cash Flow Statement
In RMB/CNY
Item Jan.-Jun.2019 Jan.-Jun.2018
I. Cash flows arising from operating activities:
Cash received from selling commodities and providing labor services 428,898,326.58 1,094,708,553.42
5
Write-back of tax received 1,346,224.12 1,532,247.09
Other cash received concerning operating activities 70,033,512.82 6,010,380.05
Subtotal of cash inflow arising from operating activities 500,278,063.52 1,102,251,180.56
Cash paid for purchasing commodities and receiving labor service 333,819,040.13 900,058,280.99
Cash paid to/for staff and workers 66,444,597.80 72,787,871.66
Taxes paid 17,292,868.12 50,929,658.40
Other cash paid concerning operating activities 26,504,180.58 25,884,735.23
Subtotal of cash outflow arising from operating activities 444,060,686.63 1,049,660,546.28
Net cash flows arising from operating activities 56,217,376.89 52,590,634.28
II. Cash flows arising from investing activities:
Net cash received from disposal of fixed, intangible and other long-term
1,989,560.00 262,500.00
assets
Other cash with investment concerned from disposal subsidiary and other
- -
operational unit
Other cash received concerning investing activities - -
Subtotal of cash inflow from investing activities 1,989,560.00 262,500.00
Cash paid for purchasing fixed, intangible and other long-term assets 22,830,724.69 55,750,360.52
Cash paid for investment - -
Other cash paid for acquiring subsidiary and other operation unit - -
Other cash paid concerning investing activities - -
Subtotal of cash outflow from investing activities 22,830,724.69 55,750,360.52
Net cash flows arising from investing activities -20,841,164.69 -55,487,860.52
III. Cash flows arising from financing activities
Cash received by absorbing investment - -
Cash received from loans 730,000,000.00 910,000,000.00
Other cash received concerning financing activities 7,303,338.86 15,460,000.00
Subtotal of cash inflow from financing activities 737,303,338.86 925,460,000.00
Cash paid for settling debts 634,000,000.00 546,750,000.00
Cash paid for dividend and profit distributing or interest paying 23,755,459.28 23,763,614.59
Other cash paid concerning financing activities - -
Subtotal of cash outflow from financing activities 657,755,459.28 570,513,614.59
Net cash flows arising from financing activities 79,547,879.58 354,946,385.41
IV. Influence on cash due to fluctuation in exchange rate 3,136.95 74,950.99
V. Net increase of cash and cash equivalents 114,927,228.73 352,124,110.16
Add: Balance of cash and cash equivalents at the period-begin 914,956,611.70 411,613,377.07
VI. Balance of cash and cash equivalents at the period-end 1,029,883,840.43 763,737,487.23
Cash Flow Statement of the Company
In RMB/CNY
Item Jan.-Jun.2019 Jan.-Jun.2018
6
I. Cash flows arising from operating activities:
Cash received from selling commodities and providing labor services 179,341,203.60 510,374,571.27
Write-back of tax received - -
Other cash received concerning operating activities 472,584,897.62 311,662,404.45
Subtotal of cash inflow arising from operating activities 651,926,101.22 822,036,975.72
Cash paid for purchasing commodities and receiving labor service 166,269,024.94 340,094,480.46
Cash paid to/for staff and workers 37,380,527.03 44,228,041.55
Taxes paid 9,889,753.49 10,150,486.72
Other cash paid concerning operating activities 180,626,305.78 726,578,528.72
Subtotal of cash outflow arising from operating activities 394,165,611.24 1,121,051,537.45
Net cash flows arising from operating activities 257,760,489.98 -299,014,561.73
II. Cash flows arising from investing activities:
Net cash received from disposal of fixed, intangible and other
1,794,800.00 262,500.00
long-term assets
Other cash received from disposing subsidiary and other operation
- -
unit
Other cash received concerning investing activities -
Subtotal of cash inflow from investing activities 1,794,800.00 262,500.00
Cash paid for purchasing fixed, intangible and other long-term
15,789,275.99 47,402,174.44
assets
Cash paid for investment - -
Net cash received from subsidiaries and other units obtained - -
Other cash paid concerning investing activities - -
Subtotal of cash outflow from investing activities 15,789,275.99 47,402,174.44
Net cash flows arising from investing activities -13,994,475.99 -47,139,674.44
III. Cash flows arising from financing activities
Cash received from absorbing investment - -
Cash received from loans 430,000,000.00 740,000,000.00
Other cash received concerning financing activities - 11,660,000.00
Subtotal of cash inflow from financing activities 430,000,000.00 751,660,000.00
Cash paid for settling debts 530,000,000.00 30,000,000.00
Cash paid for dividend and profit distributing or interest paying 20,895,394.22 10,068,299.31
Other cash paid concerning financing activities - -
Subtotal of cash outflow from financing activities 550,895,394.22 40,068,299.31
Net cash flows arising from financing activities -120,895,394.22 711,591,700.69
IV. Influence on cash due to fluctuation in exchange rate 391.81 262.61
V. Net increase of cash and cash equivalents 122,871,011.58 365,437,727.13
Add: Balance of cash and cash equivalents at the period-begin 766,041,463.01 148,223,551.05
VI. Balance of cash and cash equivalents at the period-end 888,912,474.59 513,661,278.18
7
Consolidated Statement on Changes of Shareholders’ Equity
In RMB/CNY
Jan.-Jun. 2019
Item Equity attributable to Shareholder of parent Company
Minority’s equity Total owners’ equity
Share capital Capital reserve Surplus reserves Retained profit Subtotal
I. Balance at the end of last
602,762,596.00 58,927,527.37
year 362,770,922.10 332,908,397.60 679,429,935.81 1,977,871,851.51 2,036,799,378.88
Add: Changes of accounting
- - -
policy - - - -
II. Balance at the beginning
602,762,596.00 58,927,527.37
of this year 362,770,922.10 332,908,397.60 679,429,935.81 1,977,871,851.51 2,036,799,378.88
III. Increase/ Decrease in this
year - - - -25,283,190.82 -25,283,190.82 -7,786,312.82 -33,069,503.64
(i) Total comprehensive
income - - - -25,283,190.82 -25,283,190.82 -7,786,312.82 -33,069,503.64
(ii) Owners’ devoted and
decreased capital - - - - - - -
1. Owners’ devoted capital
- - - - - - -
2. Other
- - - - - - -
(III) Profit distribution
- - - - - - -
1. Withdrawal of surplus
8
reserves - - - - - - -
2. Distribution for owners (or
shareholders) - - - - - - -
3. Other
- - - - - - -
(IV) Carrying forward
internal owners’ equity - - - - - - -
(V) Other
- - - - - - -
IV. Balance at the end of the
602,762,596.00 51,141,214.55
Period 362,770,922.10 332,908,397.60 654,146,744.99 1,952,588,660.69 2,003,729,875.24
Consolidated Statement on Changes of Shareholders’ Equity (Cont’)
In RMB/CNY
Jan.-Jun. 2018
Item Equity attributable to Shareholder of parent Company
Minority’s equity Total owners’ equity
Share capital Capital reserve Surplus reserves Retained profit Subtotal
I. Balance at the end of last
602,762,596.00 362,770,922.10 332,908,397.60 660,176,169.69 1,958,618,085.39 65,728,468.74 2,024,346,554.13
year
Add: Changes of accounting
- - - - - - -
policy
II. Balance at the beginning
602,762,596.00 362,770,922.10 332,908,397.60 660,176,169.69 1,958,618,085.39 65,728,468.74 2,024,346,554.13
of this year
9
III. Increase/ Decrease in this
- - - 30,012,095.22 30,012,095.22 -1,182,332.47 28,829,762.75
year
(i) Total comprehensive
- - - 30,012,095.22 30,012,095.22 -1,182,332.47 28,829,762.75
income
(ii) Owners’ devoted and
- - - - - - -
decreased capital
1. Owners’ devoted and
- - - - - - -
capital
2. Other - - - - - - -
(III) Profit distribution - - - - - - -
1. Withdrawal of surplus
- - - - - - -
reserves
2. Other - - - - - -
(IV) Carrying forward
- - - - - - -
internal owners’ equity
1. Capital reserves conversed
- - - - - - -
to share capital)
2. Surplus reserves conversed
- - - - - - -
to share capital
(V) Other 602,762,596.00 362,770,922.10 332,908,397.60 690,188,264.91 1,988,630,180.61 64,546,136.27 2,053,176,316.88
Statement on Changes of Shareholders’ Equity of the Company
In RMB/CNY
10
Jan.-Jun. 2019 Jan.-Jun. 2018
Item Capital Surplus Total owners’ Capital Surplus Total owners’
Share capital Retained profit Share capital Retained profit
reserve reserves equity reserve reserves equity
I. Balance at the end of 602,762,596.0 289,963,039. 332,908,397. 1,935,215,383. 602,762,596.0 289,963,039. 332,908,397.6 1,070,119,627. 2,295,753,661.1
709,581,350.64
last year 0 70 60 94 0 70 0 89 9
Add: Changes of
- - - - - - - - - -
accounting policy
II. Balance at the 602,762,596.0 289,963,039. 332,908,397. 1,935,215,383. 602,762,596.0 289,963,039. 332,908,397.6 1,070,119,627. 2,295,753,661.1
709,581,350.64
beginning of this year 0 70 60 94 0 70 0 89 9
III. Increase/ Decrease
- - - -14,246,797.24 -14,246,797.24 - - - 16,456,446.41 16,456,446.41
in this year
(i) Total
- - - -14,246,797.24 -14,246,797.24 - - - 16,456,446.41 16,456,446.41
comprehensive income
(ii) Owners’ devoted
- - - - - - - - - -
and decreased capital
1. Owners’ devoted
- - - - - - - - - -
capital
2. Other - - - - - - - - - -
(III) Profit distribution - - - - - - - - - -
1. Withdrawal of surplus
- - - - - - - - - -
reserves
2. Distribution for
- - - - - - - - - -
owners (or shareholders)
3. Other - - - - - - - - - -
(IV) Carrying forward - - - - - - - - - -
11
internal owners’ equity
(V) Other - - - - - - - - - -
IV. Balance at the end of
- - - - - - - - - -
the Period
I. Balance at the end of 602,762,596.0 289,963,039. 332,908,397. 1,920,968,586. 602,762,596.0 289,963,039. 332,908,397.6 1,086,576,074. 2,312,210,107.6
695,334,553.40
last year 0 70 60 70 0 70 0 30 0
12
Shenzhen Nanshan Power Co., Ltd.
Notes to financial statement for Jan.-Jun. 2019
(The amount unit is RMB unless otherwise stated)
I. Company Profile
Shenzhen Nanshan Power Co., Ltd (hereinafter called as “Company”) was reorganized to be a
joint-stock enterprise from a foreign investment enterprise on 25 November 1993, upon the approval
of General Office of Shenzhen Municipal Government with Document Shen Fu Ban Fu [1993]
No.897.
After approved by Document Shen Zhu Ban Fu [1993] No.897 issued by Shenzhen Securities
Regulatory Office, on 3 January 1994, the Company offered 40,000,000 RMB common shares and
37,000,000 domestically listed foreign shares in and out of China. And the RMB common shares
(A-stock) and domestically listed foreign listed shares (B-stock) were listed in Shenzhen Securities
Exchange successively on July 1, 1994 and Nov. 28, 1994.
Headquarter of the Company located on 16/F, 17/F, Han Tang Building, OCT, Nanshan District,
Shenzhen City, Guangdong Province, P.R.C.
The financial statement was approved and decided by the Broad of the Company on 14 August 2019.
Totally 9 subsidiaries included in consolidate scope for the year of 2019.
The Company together with its subsidiaries is mainly engaged in businesses as production of power
and heat, power plant construction, fuel trading, engineering consulting and sludge drying etc.
II. Preparation basis of Financial Statements
The Group’s financial statements have been prepared based on the going concern assumption and
based on actual transactions and events. In accordance with the Accounting Standards for Business
Enterprises- Basic Norms (Ministry of Finance Order No.33 Issued, Ministry of Finance Order No.76
Revised) promulgated by the Ministry of Finance of PRC on 15 February 2006 and 42 specific
accounting standards, the subsequently promulgated application guidelines of the Accounting
Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards
for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the
“Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No.
15- General Requirements for Financial Reports” (revised in 2014) of China Securities Regulatory
Commission.
The Group’s financial statements have been prepared on an accrual basis in accordance with the
ASBEs. Except for certain financial instruments, the financial statements are prepared under the
historical cost convention. In the event that depreciation of assets occurs, a provision for impairment
is made accordingly in accordance with the relevant regulations.
13
III. Declaration of obedience to corporate accounting principles
The Financial Statements are up to requirements of corporate accounting principles, and also a true
and thorough reflection to the Group together with its financial information as financial position on
30th June 2019, and the Company together with its operation results, and cash flow for the Jan.-Jun. of
2019. In addition, the financial statements of the Group also comply with, in all material respects, the
disclosure requirements of the “Regulation on the Preparation of Information Disclosures of
Companies Issuing Public Shares, No. 15--General Requirements for Financial Reports” revised by
the China Securities Regulatory Commission in 2014 and the notes thereto.
IV. The main accounting policies and accounting estimates
The Company and its subsidiaries are mainly engaged in power and thermal generation, construction
of power plant, fuel trading, engineering technology consultancy and sludge desiccation operation.
According to the actual production and operation characteristics, the Company and its subsidiaries
establish certain specific accounting policies and accounting estimates in respect of their transactions
and matters such as sales revenue recognition pursuant to relevant business accounting principles.
Details are set out in Note 22 Description of revenue items under section IV. For explanation on
material accounting judgment and estimate issued by the management, please refer to Note 28
Material accounting judgment and estimate under section IV.
1. Accounting period
The Group’s accounting year is Gregorian calendar year, namely from 1st January to 31st December.
2. Operating cycle
Normal operating cycle refers to the period from purchase of assets used for processing to realization
of cash or cash equivalents. Our operation cycle is 12 months which is also serving as the standard for
current or non- current assets and liabilities.
3. Bookkeeping standard currency
RMB is the currency in the Group’s main business economic environment and the bookkeeping
standard one, which is adopted in preparation of the financial statements.
4. Accounting treatment on enterprise combine under the same control and under the different
control
Enterprise combination refers to a trading or event that two or over two independent enterprise/s
combined to one reporting body. The combination was divided into enterprise consolidation under the
same control and the one not under the same control.
(1) Consolidation of enterprises under the same control
The enterprises involved in the consolidation are all under the final control of one party or parties and
the control is not temporary. That is the corporate consolidation under the common control. For a
business combination involving enterprises under common control, the party that, on the combination
14
date, obtains control of another enterprise participating in the combination is the absorbing party,
while that other enterprise participating in the combination is a party being absorbed. The
combination date is the date on which one combining enterprise effectively obtains control of the
other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the
combination date as recorded by the party being merged. The difference between the carrying amount
of the net assets obtained and the carrying amount of the consideration paid for the combination (or
the aggregate nominal value of shares issued as consideration) is charged to the capital reserve (share
capital premium). If the capital reserve (share capital premium) is not sufficient to absorb the
difference, any excess shall be adjusted against retained earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be
charged to profit or loss in the period in which they are incurred.
(2) Consolidation of enterprises not under the same control
The enterprises involved in the consolidation are ones not under the same final control of the common
party or parties before and after the consolidation. That is the corporate consolidation under the
different control. For a business combination not involving enterprises under common control, the
party that, on the acquisition date, obtains control of another enterprise participating in the
combination is the acquirer, while that other enterprise participating in the combination is the acquiree.
The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business
combination is the aggregate of the fair values, on the date of acquisition, of assets given, liabilities
incurred or assumed, and equity instruments issued by the acquirer to be paid by the acquirer, in
exchange for control of the acquire plus agency fee such as audit, legal service and evaluation
consultation and other management fees charged to the profit or loss for the period when incurred. As
equity or bond securities are issued by the acquirer as consideration, any attributable transaction cost
is included in their initial costs. Involved or contingent consideration charged to the combination cost
according to its fair value on the date of acquisition, the combined goodwill would be adjusted if new
or additional evidence existed about the condition on the date of acquisition within twelve months
after the acquisition date, which is required to adjust the contingent consideration. The combination
cost incurred by the acquirer and the identifiable net assets acquired from the combination are
measured at their fair values. Where the cost of a business combination exceeds the acquirer’s interest
in the fair value of the acquiree’s identifiable net assets on the acquisition date, the difference is
recognized as goodwill. Where the cost of a business combination is less than the acquirer’s interest in
the fair value of the acquiree’s identifiable net assets, the acquirer shall first reassess the measurement
of the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities and the
measurement of the cost of combination. If after such reassessment the cost of combination is still less
than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is
charged to profit or loss for the period.
15
Where the acquiree’s deductible temporary difference acquired by the acquirer is not yet recognized
as it does not satisfy the recognition conditions of the deferred income tax assets on the acquisition
date, but new or additional information proves that the relevant circumstances have already existed on
the acquisition date within twelve months after the acquisition date, which estimates that the
economic benefits incurred from the deductible temporary difference at the acquisition date of
acquirer can be realized, then the relevant deferred income tax assets will be recognized, and the
goodwill will be reduced at the same time, if the goodwill is not sufficient to be absorbed, any excess
shall be recognized in the profit or loss for the period. Except as disclosed above, the deferred income
tax assets related to the business combination are charged to the profit or loss for the period.
For a business combination not under common control is finished by a stage-up approach with several
transactions, these several transactions will be judged whether they fall within “transactions in a
basket” in accordance with the judgment standards on “transactions in a basket” as set out in the
Notice of the Ministry of Finance on Issuing Accounting Standards for Business Enterprises
Interpretation No. 5 (Cai Kuai [2012] No. 19) and Article 51 of the “Accounting Standards for
Business Enterprise No.33- Consolidated Financial Statement” (see Note IV. 5(2)). If they fall within
“transactions in a basket”, they are accounted for with reference to the descriptions as set out in the
previous paragraphs of this section and Note IV. 12 “Long-term equity investments”, and if they do
not fall within “transactions in a basket”, they are accounted for in separate financial statements and
consolidated financial statements:
In separate financial statement, the sum between carrying value of the equity investment prior to
acquisition date and cost of additional investment made on the acquisition date is deemed to be the
initial investment cost of this investment. Other comprehensive income recognized for equity
investment held prior to combination date under equity method shall be accounted for when the
Company disposes of this investment on the same basis as the investee directly disposes of relevant
assets or liabilities, which means that other than the changes arising from re-measuring the acquiree’s
net liabilities or net assets under defined benefit plan under equity method, it shall be included in
investment income of the current period.
In consolidated financial report, for equity of bought party held before purchasing, re-measured by
fair value on purchased date, and the difference of fair value and its book value should reckoned into
current investment income; Other comprehensive income recognized for equity investment held prior
to combination date under equity method shall be accounted for when the Company disposes of this
investment on the same basis as the investee directly disposes of relevant assets or liabilities, which
means that other than the changes arising from re-measuring the acquiree’s net liabilities or net assets
under defined benefit plan under equity method, it shall be included in investment income of the
current period dated purchasing day.
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5. Preparation methods for corporate consolidated statements
(1) Determining principle for consolidated financial report scope
The scope is determined on the basis of control. Control refers to the Company possess rights over the
investee party, and enjoyed variable return through participate in the relevant activities of the investee
party, and the Company has ability to impact the amount of returns by using the rights over investee
party. The consolidated scope includes the Group and all the subsidiaries. Subsidiary is referring to
the enterprise or the subject controlled by the Company.
Once change of relevant facts and conditions results in change to relevant factors involved in the
above definition, the Company will make further assessment.
(2) Preparation methods for corporate consolidated statements
Subsidiaries are consolidated from the date on which the Group obtains net assets and the effective
control of decision making of production and operation are deconsolidated from the date that such
control ceases. For disposal of subsidiaries, the operating results and cash flows of such subsidiaries
before the date of disposal are properly included in the consolidated income statement and
consolidated cash flow statements; for disposal of subsidiaries during the reporting period, no
adjustment shall be made to the opening balance of the consolidated balance sheet. For those
subsidiaries acquired through business combination not under common control, the operating results
and cash flows after the acquisition date have been properly included in the consolidated income
statements and consolidated cash flow statements. No adjustments shall be made to the opening
balance and the comparative figures of the consolidated financial statements. For those subsidiaries
acquired through business combination under common control and acquiree absorbed through
combination, the operating results and cash flows from the beginning of the consolidation period to
the consolidation date are also presented in the consolidated income statement and the consolidated
cash flow statements. The comparative figures presented in the consolidated financial statements are
also adjusted accordingly.
The financial statements of the subsidiaries are adjusted in accordance with the accounting policies
and accounting period of the Company in the preparation of the consolidated financial statements,
where the accounting policies and the accounting periods are inconsistent between the Company and
the subsidiaries. For subsidiaries acquired from business combination not under common control, the
financial statements of the subsidiaries will be adjusted according to the fair value of the identifiable
net assets at the acquisition date.
All intra-group significant balances, transactions and unrealized profit are eliminated in the
consolidated financial statements.
As for the subsidiary’s shareholders’ equity and the parts that does not owned the Group in current net
gains/losses, listed out independently as minority shareholders’ equity and minority shareholders
gains/losses in item of shareholders’ equity and net profit contained in consolidated financial
statement separately. The amount attributable to minority shareholders’ equity of current net loss/gains
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of subsidiaries is listed in the net profit item of consolidated profit as minority shareholders’ equity.
When the share of losses attributable to the minor shareholders has exceeded their shares in the
owners’ equity at the beginning of term attributable to minority shareholders in the subsidiary, the
balance shall offset the minor shareholders’ equity.
For control rights loss in original subsidiary for partial equity investment disposal or other reasons,
the remained equity should re-measured based on the fair value at date of control losses. The
difference between the net assets of original subsidiary share by proportion held that sustainable
calculated since purchased date and sum of consideration obtained by equity disposal and fair value of
remain equity, reckoned into the current investment income of control rights loss. Other
comprehensive income relating to equity investment in original subsidiary shall be accounted for,
upon lost of control, under the same basis as the acquiree would otherwise adopt when relevant assets
or liabilities are disposed directly by the acquiree, which means that other than the changes arising
from re-measuring the original subsidiary’s net liabilities or net assets under defined benefit plan, it
shall be included in investment income of the current period. The remaining equity interests are
measured subsequently according to “Accounting Standard for Business Enterprises No. 2 –
Long-term Equity Investments” or “Accounting Standard for Business Enterprises No. 22 –
Recognition and Measurement of Financial Instruments”. See Note IV.13 “Long-term equity
investments” or Note IV.9 “Financial instruments” for details.
When the Company disposes of equity investment in a subsidiary by a stage-up approach with several
transactions until the control over the subsidiary is lost, it shall determine whether these several
transactions related to the disposal of equity investment in a subsidiary until the control over the
subsidiary is lost fall within “transactions in a basket”. Usually, these several transactions related to
the disposal of equity investment in a subsidiary are accounted for as transactions in a basket when the
terms, conditions and economic impacts of these several transactions meet the following one or more
conditions: ① these transactions are entered into at the same time or after considering their impacts
on each other; ② these transactions as a whole can reach complete business results; ③ the
occurrence of a transaction depends on at least the occurrence of an other transaction; ④ an
individual transaction is not deemed as economic, but is deemed as economic when considered with
other transactions. If they are not transactions in a basket, each of which are accounted for in
accordance with applicable rules in “partial disposal of long-term equity investment of a subsidiary
without losing control over a subsidiary” (see Note IV. 12 (2) ④) separately, and “the control over a
subsidiary is lost due to partial disposal of equity investment or other reasons” (see the preceding
paragraph). When several transactions related to the disposal of equity investment in a subsidiary until
the control over the subsidiary is lost fall within transactions in a basket, each of which is accounted
for as disposal of a subsidiary with a transaction until the control over a subsidiary is lost; however,
the different between the amount of disposal prior to the loss of control and the net assets of a
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subsidiary attributable to the disposal investment shall be recognized as other comprehensive income
in consolidated financial statements and transferred to profit or loss for the period at the time when the
control is lost.
6. Classification of joint arrangement and accounting treatment on conduct joint operation
Joint arrangement refers to such arrangement as jointly controlled by two or more participators. The
Company classifies joint arrangement into joint operation and joint venture according to the rights it is
entitled to and obligations it assumes. Under joint operation, the Company is entitled to relevant assets
under the arrangement and assumes relevant liabilities under the arrangement. Joint venture refers to
such joint arrangement under which the Company is only entitled to the net assets of the arrangement.
Equity method is adopted for investment in joint ventures, and it is accounted for under the
accounting policies set out in Note 12(2) ② “long term equity investment under equity method”
under section IV.
As a joint party under joint operation, the Company recognizes the assets and liabilities it separately
holds and assumes, the assets and liabilities it jointly holds and assumes under the proportion, the
revenue from disposal of the output which the Company is entitled to under the proportion, the
revenue from disposal of the output under the proportion and the separately occurred expenses as well
as expenses occurred for joint operations under its proportion.
For injection to or disposal of assets of joint operations (other than those assets constituting business
operation) or for purchase of assets from joint operations, gain or loss arising from the transaction is
only recognized to the extent it is attributable to other parties to the joint operation before the joint
operation is sold to any third party. In case that asset occur asset impairment loss under Business
Accounting Principle No.8-Assets Impairment, the Company recognizes this loss in full in connection
with injection to or disposal of assets of joint operations, and recognizes this loss based on the
proportion in connection with purchase of assets from joint operations.
7. Determination criteria of cash and cash equivalent
Cash and cash equivalents of the Group include cash on hand, deposits readily available for payment
purpose and short-term (normally fall due within three months from the date of acquisition) and
highly liquid investments held the Group which are readily convertible into known amounts of cash
and which are subject to insignificant risk of value change.
8. Foreign currency business and foreign currency statement translation
(1) Foreign currency business translation
Foreign currency transactions are translated into the Company’s functional currency at the spot rate on
transaction date (generally refers to the middle rate of prevailing foreign exchange rate released by the
PBOC) when the transactions are initially measured. However, foreign currency exchange business or
transaction involving foreign currency exchange occurred by the Company are translated into
functional currency at the effective exchange rate adopted.
(2) Translation of foreign currency monetary items and foreign currency non-monetary items
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On balance sheet date, foreign currency monetary items are translated at the spot rate as of balance
sheet date, and the exchange difference shall be included in current period gains and losses, except ①
exchange difference arising from foreign currency special borrowings relating to purchasing assets
satisfying capitalization conditions is stated under capitalization principle of borrowing expenses; ②
exchange difference arising from hedge instruments used as effective hedging of net investment in
overseas operation (such difference shall be included in other comprehensive income and recognized
as current period gains and losses when the net investment is disposed); and ③exchange difference
arising from change of carrying balance of available for sale foreign currency monetary items other
than amortized cost is included in other comprehensive income.
When preparing consolidated financial statement involving overseas operation, in case there is foreign
currency monetary items which substantially constitute net investment in overseas operation, the
exchange difference arising from exchange rate fluctuation shall be included in other comprehensive
income; and shall transfer to gains and losses from disposal for the current period when the overseas
operation is disposed of.
Non-monetary items measured in historical cost are still measured by sum on the bookkeeping
standard currency at the current exchange rate. The items measured by the fair value are converted at
the current rate on the fair value recognition day. The difference is dealt as the fair value change and
reckoned into the current loss/gain or recognized as the other consolidated income and reckoned into
the reserve.
(3) Translation of foreign currency financial statement
When preparing consolidated financial statement involving overseas operation, in case there is foreign
currency monetary items which substantially constitute net investment in overseas operation, the
exchange difference arising from exchange rate fluctuation shall be included in other comprehensive
income as “translation difference of foreign currency statement”; and shall transfer to gains and losses
from disposal for the current period when the overseas operation is disposed of.
Foreign currency financial statement for overseas operation is translated into RMB statement by the
following means: assets and liabilities in balance sheet are translated at the spot rate as of balance
sheet date; owner’s equity items (other than undistributed profit) are translated at the spot rate
prevailing on the date of occurrence. Income and expense items in profit statement are translated at
the spot rate prevailing on the date of transactions. Beginning undistributed profit represents the
translated ending undistributed profit of previous year; ending undistributed profit is allocated and
stated as several items upon translation. Upon translation, difference between assets, liabilities and
shareholders’ equity items shall be recorded as foreign currency financial statement translation
difference and recognized as other comprehensive income. In case of disposal of overseas operation
where control is lost, foreign currency financial statement translation difference relating to the
overseas operation as stated under shareholders’ equity in balance sheet shall be transferred to current
gains and losses of disposal in full or under the proportion it disposes.
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Foreign currency cash flow and cash flow of overseas subsidiary are translated at the spot rate
prevailing on the date of occurrence of cash flow. Influence over cash from exchange rate fluctuation
is taken as adjustment items to separately stated in cash flow statement.
The beginning figure and previous year actual figures are stated at the translated figures in previous
year financial statement.
If the Company loses control over overseas operation due to disposal of all the owners’ equity or part
equity investment in the overseas operation or other reasons, foreign currency financial statement
translation difference relating to the overseas operation attributable to owners’ equity of parent
company as stated under shareholders’ equity in balance sheet shall be transferred to current gains and
losses of disposal in full.
If the Company reduces equity proportion while not loses control over overseas operation due to
disposal of part equity investment in the overseas operation or other reasons, foreign currency
financial statement translation difference relating to the disposed part will be vested to minority
interests and will not transfer to current gains and losses. When disposing part equity interests of
overseas operation which is the associate or joint venture, foreign currency financial statement
translation difference relating to the overseas operation shall transfer to current disposal gains and
losses according to the disposed proportion.
9. Financial instruments
Financial asset or financial liability is recognized when the Company becomes a party to financial
instrument contract.
(1) Classification, recognition and measurement of financial assets
According to the business model of managing financial assets and the contractual cash flow
characteristics of financial assets, the Company classifies the financial assets into the financial assets
measured at amortized cost, the financial assets measured at fair value and whose changes are
included in other comprehensive income, and the financial assets measured at fair value and whose
changes are included in current profit or loss.
Financial assets are measured at fair value on initial recognition. For financial assets measured at fair
value and whose changes are included in current profit or loss, the related transaction expenses are
directly included in current profit or loss. For other types of financial assets, the related transaction
costs are included in the initial recognition amount. For the accounts receivable or notes receivable
arising from the sale of products or the provision of labor services that do not contain or consider the
significant financing components, the Company uses the consideration amount that is expected to be
received as the initial recognition amount.
①Financial assets measured at amortized cost
The Company's business model for managing financial assets measured at amortized cost is to collect
contractual cash flows, and the contractual cash flow characteristics of such financial assets are
consistent with the basic borrowing and lending arrangements, i.e. the cash flows generated on a
21
specific date are only the payment for the principal and the interest based on the outstanding principal
amount. The Company adopts effective interest method for this type of financial assets which are
subsequently measured at amortized cost, the gains or losses arising from amortization or impairment
are included in current profit or loss.
② Financial assets measured at fair value and whose changes are included in other comprehensive
income
The Company's business model for managing such financial assets is to target at both the collection of
contractual cash flows and the sale, and the contractual cash flow characteristics of such financial
assets are consistent with the basic borrowing and lending arrangements. The Company adopts the fair
value measurement for such financial assets and whose changes are included in the current profit and
loss, but the impairment losses or gains, exchange gains and losses and interest income calculated by
using the effective interest method are included in current profit or loss.
In addition, the Company designates part of non-trading equity instrument investments as financial
assets measured at fair value and whose changes are included in other comprehensive income. The
Company's related dividend income of such financial assets is included in the current profit and loss,
and the changes in fair value are included in other comprehensive income. When the financial assets
are derecognized, the accumulated gains or losses previously included in other comprehensive income
are transferred from other comprehensive income to retained earnings, which are not included in
current profit or loss.
③Financial assets carried at fair value through profit or loss for the current period
The Company classifies the financial assets except the above financial assets measured at amortized
cost and the above financial assets measured at fair value and whose changes are included in other
comprehensive income into the financial assets measured at fair value and whose changes are
included in current profit or loss. In addition, at the time of initial recognition, the Company
designates part of financial assets as financial assets measured at fair value and whose changes are
included in current profit or loss in order to eliminate or significantly reduce accounting mismatch.
For such financial assets, the Company adopts fair value for subsequent measurement, and changes in
fair value are included in current profit and loss.
(2) Classification, recognition and measurement of financial liabilities
At initial recognition, financial liabilities are classified into financial liabilities measured by fair value
with changes counted into current gains/losses and other financial liabilities. For financial liabilities
classified as fair value through profit or loss, relevant transaction costs are directly recognized in
profit or loss for the period. For financial liabilities classified as other categories, relevant transaction
costs are included in the amount initially recognized.
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① Financial liabilities at fair value through profit or loss for the period
Financial liabilities measured at fair value and whose changes are included in current profits or losses
include the trading financial liabilities (including derivatives belong to financial liabilities) and the
financial liabilities that are designated as fair value in the initial recognition and whose changes are
included in current profit or loss.
Trading financial liabilities (including derivatives belong to financial liabilities) are subsequently
measured at fair value, in addition to those related to hedge accounting, the changes in fair value are
included in current profit or loss.
A financial liability designated to be measured at fair value and whose changes are included in current
profit or loss, and of which the changes in fair value arising from changes in the Company's own
credit risk are included in other comprehensive income, when the liability is derecognized, its
accumulated amount of changes in fair value included in other comprehensive income and the
changes arising from its own credit risk are transferred to retained earnings. The remaining changes in
fair value are included in the current profit and loss. If the effects of changes in the own credit risk of
these financial liabilities are handled as described above, but the handling causes or expands the
accounting mismatch in the profit or loss, the Company will include all gains or losses of the financial
liabilities (including the amount affected by changes in the credit risk of the enterprise itself) in the
current profit and loss.
② Other financial liabilities
Other financial liabilities, except for the financial liabilities whose transfer of financial assets doesn’t
fit the derecognition condition or continue to be involved in the transferred financial assets, and the
financial guarantee contract, are classified as financial liabilities measured at amortized cost, which
takes follow-up measurement by amortized cost, the gains or losses arising from derecognition or
amortization are included in current profit or loss.
(3) Recognition basis and measurement method for transfer of financial assets
As for the financial assets up to the following conditions, the recognition termination is available: ①
Termination of the contract right to take the cash flow of the financial assets; ② transferred to the
transferring-in part nearly all risk and compensation; ③ all risk and compensation neither transferred
nor retained, and with the give-up of the control over the financial assets.
As for financial assets of almost all risk and compensation neither transferred nor retained, and
without the give-up of the control over the financial assets, it was recognized according to the
extension of the continual entry into the transferred financial assets and relevant liabilities are
correspondingly recognized. The continual entry into the transferred financial assets is risk level
which the enterprise faces up to due to the assets changes.
23
As for the whole transfer of the financial assets up to the recognition termination conditions, the book
value of the transferred assets, together with the difference between the consideration value and the
accumulative total of the fair value change of the other consolidated income, is reckoned into the
current gain/loss.
As for the partial transfer of the financial assets up to the recognition termination conditions, the book
value of the transferred assets is diluted on the relative fair value between the terminated part and the
un-terminated part; and reckoned into the current loss/gain is the difference between the sum of the
consideration value and the accumulative sum of the valuation change ought to be diluted into the
recognition termination part but into the other consolidated income, and the above diluted book value,
is reckoned into the current loss/gain.
For financial assets that are transferred with recourse or endorsement, the Group needs to determine
whether the risk and rewards of ownership of the financial asset have been substantially transferred. If
the risk and rewards of ownership of the financial asset have been substantially transferred, the
financial assets shall be derecognized. If the risk and rewards of ownership of the financial asset have
been retained, the financial assets shall not be derecognized. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership of the financial asset, the Group shall assess
whether the control over the financial asset is retained, and the financial assets shall be accounted for
according to the above paragraphs.
(4) Termination recognition of financial liabilities
Only is released the whole (or part) of the current duties, the termination of the liabilities (or part of it)
is available. The Group (the debtor) signed the agreement with the lender: the original liabilities are
replaced by the bearing of the new liabilities; and the contract terms are fundamentally different of the
new liabilities and the original ones; the termination of the recognition of the original ones is available;
and the recognition of new ones is available.
If the Company makes substantial changes to the contractual terms of the original financial liabilities
(or a part thereof), derecognize the original financial liabilities, and recognize a new financial liability
in accordance with the revised terms.
If the financial liability (or a part thereof) is derecognized, the Company includes the difference
between the book value and the consideration paid (including the transferred non-cash assets or
liabilities assumed) in current profit or loss.
(5) Balance-out between the financial assets and liabilities
As the Group has the legal right to balance out the financial liabilities by the net or liquidation of the
financial assets, the balance-out sum between the financial assets and liabilities is listed in the balance
sheet. In addition, the financial assets and liabilities are listed in the balance sheet without being
balanced out.
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(6) Method for determining the fair value of financial assets and financial liabilities
Fair value refers to the price that a market participant can get by selling an asset or has to pay for
transferring a liability in an orderly transaction that occurs on the measurement date. For a financial
instrument having an active market, the Company uses the quoted prices in the active market to
determine its fair value. Quotations in an active market refer to prices that are readily available from
exchanges, brokers, industry associations, pricing services, etc., and represent the prices of market
transactions that actually occur in an arm's length transaction. If there is no active market for a
financial instrument, the Company uses valuation techniques to determine its fair value. Valuation
techniques include reference to prices used in recent market transactions by parties familiar with the
situation and through voluntary trade, and reference to current fair values of other financial
instruments that are substantially identical, discounted cash flow methods, and option pricing models.
At the time of valuation, the company adopts valuation techniques that are applicable in the current
circumstances and that are sufficiently supported by data and other information, selects the input
value with characteristics consistent with the characteristics of assets or liabilities to be considered in
the transactions of the relevant assets or liabilities of the market participants, and uses the relevant
observable input values as much as possible. Use unallowable input values if the relevant observable
input values are not available or are not practicable.
(7) Equity instrument
The equity instrument is the contract to prove the holding of the surplus stock of the assets with the
deduction of all liabilities in the Group. The Company issues (including refinancing), repurchases,
sells or cancels equity instruments as movement of equity, transaction fees relating to equity
transactions are deducted from equity. No fair value change of equity instrument would be recognized
by the Company.
The Company's equity instruments that distribute dividends during the existence period (including
“interests” generated by instruments classified as equity instruments) are treated as profit distribution.
10. Impairment of financial assets
The financial assets that the Company needs to recognize impairment loss are financial assets
measured at amortized cost, debt instruments investment that are measured at fair value and whose
changes are included in other comprehensive income, and lease receivables, mainly including bills
receivable, account receivables, other receivables, debt investment, other debt investments, long-term
receivables, etc. In addition, for contract assets and some financial guarantee contracts, the
impairment provision is also made and credit impairment losses are recognized in accordance with the
accounting policies described in this section.
(1) Confirmation method of impairment provision
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On the basis of expected credit losses, the Company makes provision for impairment and confirms
credit impairment losses for each of the above items in accordance with its applicable expected credit
loss measurement method (general method or simplified method).
Credit loss refers to the difference between all contractual cash flows that the Company discounts at
the original actual interest rate and are receivable in accordance with contract and all cash flows
expected to be received, that is, the present value of all cash shortages. Among them, for the purchase
or source of financial assets that have suffered credit impairment, the Company discounts the financial
assets at the actual interest rate adjusted by credit.
The general method for measuring the estimated credit loss is that the Company assesses whether the
credit risk of the financial assets (including other applicable items such as contract assets, the same
below) has been significantly increased since the initial recognition on each balance sheet date, if the
credit risk has increased significantly after the initial recognition, the Company shall measure the loss
preparation according to the amount of expected credit loss in the whole duration; if the credit risk has
not increased significantly since the initial recognition, the Company shall measure the loss
preparation according to the amount equivalent to the expected credit loss in the next 12 months. The
Company considers all reasonable and evidenced information, including forward-looking information,
when evaluating expected credit losses.
(2) Judging criteria for whether credit risk has increased significantly since initial recognition
If the probability of default of a financial asset within the estimated duration recognized on the
balance sheet is significantly higher than the probability of default within the estimated duration
decided at the initial recognition, it indicates that the credit risk of the financial asset is significantly
increased. Except for special circumstances, the Company uses the change in default risk occurring
within the next 12 months as a reasonable estimate of the change in default risk throughout the
duration to determine whether the credit risk has increased significantly since the initial recognition.
(3) A combined approach to assessing expected credit risk on a portfolio basis
The Company evaluates credit risk individually for financial assets with significantly different credit
risks. In addition to financial assets that assess credit risk individually, the Company classifies
financial assets into different groups based on common risk characteristics and evaluates credit risk on
a portfolio basis.
(4) Accounting treatment of financial assets impairment
At the end of the period, the Company calculates the estimated credit losses of various financial assets.
If the estimated credit loss is greater than the carrying amount of its current impairment provision, the
26
difference is recognized as the impairment loss; if it is less than the carrying amount of the current
impairment provision, the difference is recognized as an impairment gain.
(5) Methods for determining the credit losses of various financial assets
① Notes receivable
The Company measures the losses for the notes receivable in accordance with the expected credit loss
amount for the entire duration of the period.
② Accounts receivable and contract assets
For receivables and contract assets that do not contain significant financing components, the
Company measures the loss provision based on the amount of expected credit losses equivalent to the
entire duration of the period.
In addition to accounts receivable and contract assets whose credit risk is assessed individually, they
are classified into different combinations based on their credit risk characteristics:
Item Basis
Portfolio 1: low risk Take the account age of receivable as the credit risk characteristics
③Other account receivable
The Company measures the impairment loss based on the amount of expected credit losses in the next
12 months or the entire duration based on whether the credit risk of other receivables has increased
significantly since the initial recognition. In addition to the single assessment of credit risk of other
receivable, we classified into different combinations based on their credit risk characteristics:
Item Basis
Portfolio 1: low risk Take the account age of receivable as the credit risk characteristics
④Creditors’ investment
The creditors’ investment mainly accounts for the bond investment etc measured by amortized costs.
The Company measures the impairment loss based on the amount of expected credit losses in the next
12 months or the entire duration based on whether the credit risk has increased significantly since the
initial recognition.
⑤Other creditors’ investment
Other creditors’ investment mainly accounts for the bond investment etc measured by fair value and
with its variation reckoned into other comprehensive income. The Company measures the impairment
loss based on the amount of expected credit losses in the next 12 months or the entire duration based
on whether the credit risk has increased significantly since the initial recognition.
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⑥Long-term account receivable(including the receivables with major financing components
contained and except for the lease receivable)
The Company measures the impairment loss based on the amount of expected credit losses in the next
12 months or the entire duration based on whether the credit risk has increased significantly since the
initial recognition.
11. Inventory
(1) Categories of inventory
Inventory mainly consists of fuels and raw materials etc
(2) Valuation method of inventory delivered
The inventories are initially measured at cost.Cost of inventories comprises purchase costs,
processing costs and other costs incurred in bringing the inventories to their present location and
condition.
The actual cost of inventories delivered is recognized by the weighted average method.
(3) Recognition of net realizable value of inventory, and accrual methods of preparation for
depreciation
On the balance sheet day, the inventory is measured by the lower one between the cost and the net
realizable value. As the net realizable value is lower than the cost, the inventory depreciation
provision is accrued. The net realizable value is balance of the estimated sale price less the
estimated forthcoming cost upon the completion, the estimated sale expense, and the relevant tax
in the daily activities. Upon the recognition of net realizable value of the inventory, the concrete
evidence is based on and the purpose of holding the inventory and the influence of events after
the balance sheet day are considered.
As for the inventory of large sum and lower price, the inventory depreciation provision is accrued by
the inventory categories. As for the inventory related to the product series produced and sold in the
same district, of the same or similar final use or purpose and impossible to be separated from the other
items, the provision is consolidated and accrued. The provision for other inventory is accrued by the
difference between the cost and net realizable value.
Upon the accrual of the inventory depreciation provision, if the previous influence factors on the
inventory deduction disappeared, which resulted in the net realizable value being higher than its book
value; the accrual is transferred back within the previous accrual of the provision and reckoned into
the current gain/loss.
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(4) The inventory system is perpetual inventory system.
(5) Amortization for low-value consumables and packages
Amortization of low-value consumables and packages are based on one-time amortization method.
12. Long-term equity investments
Long-term equity investments under this section refer to long-term equity investments in which the
Company has control, joint control or significant influence over the investee. Long-term equity
investment without control or joint control or significant influence of the Group is accounted for as
available-for-sale financial assets or financial assets measured at fair value with any change in fair
value charged to profit or loss. Details on its accounting policy please refer to 9. “Financial
instruments” under Note IV.
Joint control is the Company’s contractually agreed sharing of control over an arrangement, which
relevant activities of such arrangement must be decided by unanimously agreement from parties who
share control. Significant influence is the power of the Company to participate in the financial and
operating policy decisions of an investee, but to fail to control or joint control the formulation of such
policies together with other parties.
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises
under common control, the initial investment cost of the long-term equity investment shall be the
absorbing party’s share of the carrying amount of the owner’s equity under the consolidated financial
statements of the ultimate controlling party on the date of combination. The difference between the
initial cost of the long-term equity investment and the cash paid, non-cash assets transferred as well as
the book value of the debts borne by the absorbing party shall offset against the capital reserve. If the
capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the consideration of
the merger is satisfied by issue of equity securities, the initial investment cost of the long-term equity
investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the
consolidated financial statements of the ultimate controlling party on the date of combination. With
the total face value of the shares issued as share capital, the difference between the initial cost of the
long-term equity investment and total face value of the shares issued shall be used to offset against the
capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted.
For business combination resulted in an enterprise under common control by acquiring equity of the
absorbing party under common control through a stage-up approach with several transactions, these
transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to
“transactions in a basket”, these transactions will be accounted for a transaction in obtaining control.
If they are not belong to “transactions in a basket”, the initial investment cost of the long-term equity
investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the
consolidated financial statements of the ultimate controlling party on the date of combination. The
difference between the initial cost of the long-term equity investment and the aggregate of the
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carrying amount of the long-term equity investment before merging and the carrying amount the
additional consideration paid for further share acquisition on the date of combination shall offset
against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be
adjusted. Other comprehensive income recognized as a result of the previously held equity investment
accounted for using equity method on the date of combination or recognized for available-for-sale
financial assets will not be accounted for.
For a long-term equity investment acquired through a business combination involving enterprises not
under common control, the initial investment cost of the long-term equity investment shall be the cost
of combination on the date of acquisition. Cost of combination includes the aggregate fair value of
assets paid by the acquirer, liabilities incurred or borne and equity securities issued. For business
combination resulted in an enterprise not under common control by acquiring equity of the acquiree
under common control through a stage-up approach with several transactions, these transactions will
be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a
basket”, these transactions will be accounted for a transaction in obtaining control. If they are not
belong to “transactions in a basket”, the initial investment cost of the long-term equity investment
accounted for using cost method shall be the aggregate of the carrying amount of equity investment
previously held by the acquiree and the additional investment cost. For previously held equity
accounted for using equity method, relevant other comprehensive income will not be accounted for.
For previously held equity investment classified as available-for-sale financial asset, the difference
between its fair value and carrying amount, as well as the accumulated movement in fair value
previously included in the other comprehensive income shall be transferred to profit or loss for the
current period.
Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service,
and valuation and consultation fees, and other related administration expenses are charged to profit or
loss in the current period at the time such expenses incurred.
The long-term equity investment acquired through means other than a business combination shall be
initially measured at its cost. Such cost is depended upon the acquired means of long-term equity
investments, which is recognized based on the purchase cost actually paid by the Company in cash,
the fair value of equity securities issued by the Group, the agreed value of investment contract or
agreement, the fair value or original carrying amounts of the non-monetary asset exchange transaction
which the asset will be transferred out of the Company, and the fair value of long-term equity
investment itself. The costs, taxes and other necessary expenses that are directly attributable to the
acquisition of the long-term equity investments are also included in the investment cost. For
additional equity investment made in order to obtain significant influence or common control over
investee without resulted in control, the relevant cost for long-term equity investment shall be the
aggregate of fair value of previously held equity investment and additional investment cost
determined according to “Accounting Standard for Business Enterprises No. 22 – Recognition and
measurement of Financial Instruments”.
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(2) Follow-up measurement and gain/loss recognition
As for the long-term equity investment with common control (except for the common operators) over
or significant influence on the invested units, measured by the cost method. In addition, long-term
equity investment to the invested units that control by the Company adopted the cost method for
calculation in financial statement.
① Long-term equity investment checked by the cost
Upon the cost check, the investment is valuated on the initial cost. In addition to the actual prices or
the announced but yet undistributed cash dividend or profit in consideration valuation, the current
investment return is recognized by the announced cash dividend or profit by the invested units.
② Long-term equity investment checked by the equity
When equity basis is adopted, if the initial cost of the long-term equity investment is greater than the
share of fair value of the receiver’s recognizable net asset, the initial investment cost of the long-term
equity investment will not be adjusted; if the initial cost of the long-term equity investment is less
than the share of fair value of the receiver’s recognizable net asset, the balance shall be counted into
current income account, and the cost of long-term equity investment shall be adjusted.
Under the equity method, investment gain and other comprehensive income shall be recognized based
on the Group’s share of the net profits or losses and other comprehensive income made by the
investee, respectively. Meanwhile, the carrying amount of long-term equity investment shall be
adjusted. The carrying amount of long-term equity investment shall be reduced based on the Group’s
share of profit or cash dividend distributed by the investee. In respect of the other movement of net
profit or loss, other comprehensive income and profit distribution of investee, the carrying value of
long-term equity investment shall be adjusted and included in the capital reserves. The Group shall
recognize its share of the investee’s net profits or losses based on the fair values of the investee’s
individual separately identifiable assets at the time of acquisition, after making appropriate
adjustments thereto. In the event of inconformity between the accounting policies and accounting
periods of the investee and the Company, the financial statements of the investee shall be adjusted in
conformity with the accounting policies and accounting periods of the Company. Investment gain and
other comprehensive income shall be recognized accordingly. In respect of the transactions between
the Group and its associates and joint ventures in which the assets disposed of or sold are not
classified as operation, the share of unrealized gain or loss arising from inter-group transactions shall
be eliminated by the portion attributable to the Company. Investment gain shall be recognized
accordingly. However, any unrealized loss arising from inter-group transactions between the Group
and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets.
In the event that the Group disposed of an asset classified as operation to its joint ventures or
associates, which resulted in acquisition of long-term equity investment by the investor without
obtaining control, the initial investment cost of additional long-term equity investment shall be the fair
value of disposed operation. The difference between initial investment cost and the carrying value of
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disposed operation will be fully included in profit or loss for the current period. In the event that the
Group sold an asset classified as operation to its associates or joint ventures, the difference between
the carrying value of consideration received and operation shall be fully included in profit or loss for
the current period. In the event that the Company acquired an asset which formed an operation from
its associates or joint ventures, relevant transaction shall be accounted for in accordance with
“Accounting Standards for Business Enterprises No. 20 “Business combination”. All profit or loss
related to the transaction shall be accounted for.
Recognition of the share of net loss by the investment receiver shall be limited to when the book value
of long-term equity investment and other long-term equity forms substantial net investment has been
reduced to zero. Beside, if the Company is responsible for other losses of the investment receiver,
predicted liability shall be recognized upon the prediction of responsibilities and recorded into current
investment loss account. If the receiver realized net profit in the period thereafter, the share of gains is
recovered after making up of share of losses which has not been recognized.
For long equity investment in associate and joint venture held by the Company prior to first
implementation of the new accounting principles on 1 January 2007, equity investment debtor
difference relating to the investment (if any) shall be amortized and included in current gains and
losses against the remaining period under straight line method.
③ Acquisition of minority equity
When preparing consolidated financial statements, the difference between the increase in long-term
equity investment due to acquisition of minority interest of a subsidiary and the share of net asset of
the subsidiary since the acquisition date (or combination date) calculated under the new ownership
ratio shall be adjusted to the capital surplus, when capital surplus is insufficient, the excess shall be
adjusted to retained profits.
④ Disposal of long-term equity investment
In these consolidated financial statements, where the parent company disposes part of its subsidiary
without loss of control, the difference between the consideration received and the share of net asset
for the disposed portion of long-term equity investment shall be recognized in shareholders’ equity;
where the parent company disposes part of its subsidiary with loss of control, the accounting
treatment should be in accordance with the accounting policies stated at Note IV 5 (2) “Preparation of
consolidated financial statements”.
For disposal of long-term equity investment in other situations, the difference between the
considerations received and the carrying amount of the disposed investment shall be recognized in
profit or loss.
In respect of long-term equity investment at equity with the remaining equity interest after disposal
also accounted for using equity method, other comprehensive income previously under owners’ equity
shall be accounted for in accordance with the same accounting treatment for direct disposal of
relevant asset or liability by investee on pro rata basis at the time of disposal. The owners’ equity
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recognized for the movement of other owners’ equity (excluding net profit or loss, other
comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the
current period on pro rata basis.
In respect of long-term equity investment at cost with the remaining equity interest after disposal is
also accounted for at cost, other comprehensive income recognized due to measurement at equity or
recognition and measurement for financial instruments prior to obtaining control over investee shall
be accounted for in accordance with the same accounting treatment for direct disposal of relevant
asset or liability by investee and carried forward to current gains and losses on pro rata basis. The
movement of other owners’ equity (excluding net profit or loss, other comprehensive income and
profit distribution of investee) shall be transferred to profit or loss for the current period on pro rata
basis.
In the event of loss of control over investee due to partial disposal of equity investment by the Group,
in preparing separate financial statements, the remaining equity interest which can apply common
control or impose significant influence over the investee after disposal shall be accounted for using
equity method. Such remaining equity interest shall be treated as accounting for using equity method
since it is obtained and adjustment was made accordingly. For remaining equity interest which cannot
apply common control or impose significant influence over the investee after disposal, it shall be
accounted for using the recognition and measurement standard of financial instruments. The
difference between its fair value and carrying amount as at the date of losing control shall be included
in profit or loss for the current period. In respect of other comprehensive income recognized using
equity method or the recognition and measurement standard of financial instruments before the Group
obtained control over the investee, it shall be accounted for in accordance with the same accounting
treatment for direct disposal of relevant asset or liability by investee at the time when the control over
investee is lost. Movement of other owners’ equity (excluding net profit or loss, other comprehensive
income and profit distribution under net asset of investee accounted for and recognized using equity
method) shall be transferred to profit or loss for the current period at the time when the control over
investee is lost. Of which, for the remaining equity interest after disposal accounted for using equity
method, other comprehensive income and other owners’ equity shall be transferred on pro rata basis.
For the remaining equity interest after disposal accounted for using the recognition and measurement
standard of financial instruments, other comprehensive income and other owners’ equity shall be fully
transferred.
In the event of loss of common control or significant influence over investee due to partial disposal of
equity investment by the Group, the remaining equity interest after disposal shall be accounted for
using the recognition and measurement standard of financial instruments. The difference between its
fair value and carrying amount as at the date of losing common control or significant influence shall
be included in profit or loss for the current period. In respect of other comprehensive income
recognized under previous equity investment using equity method, it shall be accounted for in
accordance with the same accounting treatment for direct disposal of relevant asset or liability by
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investee at the time when equity method was ceased to be used. Movement of other owners’ equity
(excluding net profit or loss, other comprehensive income and profit distribution under net asset of
investee accounted for and recognized using equity method) shall be transferred to profit or loss for
the current period at the time when equity method was ceased to be used.
The Group disposes its equity investment in subsidiary by a stage-up approach with several
transactions until the control over the subsidiary is lost. If the said transactions belong to “transactions
in a basket”, each transaction shall be accounted for as a single transaction of disposing equity
investment of subsidiary and loss of control. The difference between the disposal consideration for
each transaction and the carrying amount of the corresponding long-term equity investment of
disposed equity interest before loss of control shall initially recognized as other comprehensive
income, and subsequently transferred to profit or loss arising from loss of control for the current
period upon loss of control.
13. Investment real estate
Investment real estate is defined as the real estate with the purpose to earn rent or capital appreciation
or both, including the rented land use rights and the land use rights which are held and prepared for
transfer after appreciation, the rented buildings.
Investment real estate is measured according to the initial cost. The follow-up expenses that are
related to investment real estate, if the economic interests related to the assets are is likely to inflow
cost and its costs can be reliably measured, shall be included in the cost of investment real estate. The
other follow-up expense shall be included in the current gains/losses.
The Company adopts the cost model to have follow-up measurements of the investment real estate,
and to conduct depreciation or amortization according to the policies that are in consistent with the
land use rights.
Impairment test method and impairment provision method in relation to investment property is
detailed in Note IV.19 “Long term assets impairment”.
Where property for own use or inventory transfers to investment property, or investment property
transfers to property for own use, carrying value before such transfer shall be taken as book value
after such transfer.
If an investment property is disposed of or if it withdraws permanently from use and no economic
benefit will be obtained from the disposal, the recognition of it as an investment property shall be
terminated. When an investment property is sold, transferred, retired or damaged, the amount of
proceeds on disposal of the property net of the carrying amount and related tax and surcharges is
recognized in profit or loss for the current period.
14. Fixed assets
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(1) Recognition conditions for the fixed assets
Fixed assets is defined as the tangible assets which are held for the purpose of producing goods,
providing services, lease or for operation & management, and have more than one fiscal year of
service life. The fixed assets recognized on the condition of economy benefit probably in-flow into the
Company and the cost should measured reliably only. Initial measurement shall be conducted on fixed
assets according to the actual cost when obtain them and also considering the expected costs for
disposal.
(2) Depreciation of various fixed assets
From the next month since reaching the intended use state, depreciation on fixed assets shall be
accounted by using the method of average life length except the steam turbine generating unit that
accounted by withdrawal the working volume method.
Life expectancy, expected net impairment value and annual depreciation rate of all assets are as
follows:
Item Life expectancy Salvage value rate Annual depreciation rate
Houses and buildings 20 years 10% 4.50%
Equipment (fuel machinery group
15-20 years 10% 4.5%-6%
excluded)
Equipment-fuel machinery group The work quantity
10%
(note) method
Transportation tools 5 years 10% 18%
Other equipment 5 years 10% 18%
Estimated salvage value refers to the amount of value retrieved after deducting of predicted disposal
expense when the expected using life of a fixed asset has expired and in the expected state of
termination.
Note: gas turbine generator set is provided with depreciation under workload method, namely to
determine the depreciation amount per hour of gas turbine generator set based on equipment value,
predicted net remaining value and predicted generation hours. Details are set out as follows:
Depreciation amount
Name of the Company Fixed assets
(RMB/Hour)
1# Generating unit 536.38
The Company 3# Generating unit 599.69
7# Generating unit 4,214.73
Shenzhen New Power Industrial Co.,
10# Generating unit 2,134.37
Ltd.(“New Power ”)
Shen Nan Dian (Zhongshan) Power 1# Generating unit 4,246.00
Co., Ltd.(“Zhongshan Power”) 3# Generating unit 4,160.83
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Shen Nan Dian (Dongguan) Weimei 1# Generating unit 4,490.64
Power Co., Ltd(“Weimei Power ”) 3# Generating unit 4,217.56
(3) Impairment test on fixed asset and providing of impairment provision
Found more in Note IV-19.”Long term assets impairment”.
(4) Recognition basis and measurement method of fixed assets under finance lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. Title may or may not eventually be transferred. The
depreciation policy for fixed asset held under finance lease is consistent with that for its owned fixed
asset. When a leased asset can be reasonably determined that its ownership will be transferred at the
end of the lease term, it is depreciated over the period of expected use; otherwise, the leased asset is
depreciated over the shorter period of the lease term and the period of expected use.
(5) Other remarks
Concerning the follow-up expenses related to fixed assets, if the relevant economy benefit of fixed
assets probably in-flow into the Company and can be measured reliably, reckoned into cost of fixed
assets and terminated the recognition of the book value of the parts that been replaced. Others
follow-up expenses should reckoned into current gains/losses while occurred.
Terminated the recognition of fixed assets that in the status of disposal or pass through the predicted
usage or without any economy benefits arising from disposal. Income from treatment of fixed asset
disposing, transferring, discarding or damage, the balance after deducting of book value and relative
taxes is recorded into current income account.
The Company re-reviews useful life, expected net residual value and depreciation method of fixed
assets at least at each year end. Any change thereof would be recorded as change of accounting
estimates.
15. Construction-in-progress
Cost of construction in process is determined at practical construction expenditures, including all
expenses during the construction, capitalized loan expenses before the construction reaches useful
status, and other relative expenses. It is transferred to fixed asset as soon as the construction reaches
the useful status.
Impairment testing method and accrual method for impairment reserves found in Note IV-19“Long
term assets impairment”
16. Borrowing expenses
Borrowing expenses include interest, amortization of discounts or premiums related to borrowings,
ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences
arising from foreign currency borrowings. Borrowing expenses that can be directly attributed for
purchasing or construction of assets that are complying with capitalizing conditions start to be
36
capitalized when the payment of asset and borrowing expenses have already occurred, and the
purchasing or production activities in purpose of make the asset usable have started; Capitalizing will
be terminated as soon as the asset that complying with capitalizing conditions has reached its usable
or saleable status. The other borrowing expenses are recognized as expenses when occurred.
Interest expenses practically occurred at the current term of a special borrowing are capitalized after
deducting of the bank saving interest of unused borrowed fund or provisional investment gains;
Capitalization amounts of common borrowings are decided by the weighted average of exceeding part
of accumulated asset expenses over the special borrowing assets multiply the capitalizing rate of
common borrowings adopted. Capitalization rates are decided by the weighted average of common
borrowings.
During the capitalization period, exchange differences on a specific purpose borrowing denominated
in foreign currency shall be capitalized. Exchange differences related to general-purpose borrowings
denominated in foreign currency shall be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a
substantial period of time for acquisition, construction or production to get ready for their intended
use or sale.
Capitalization of borrowing costs shall be suspended during periods in which the acquisition,
construction or production of a qualifying asset is interrupted abnormally, when the interruption is for
a continuous period of more than 3 months, until the acquisition, construction or production of the
qualifying asset is resumed.
17. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or
controlled by the Company.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible
asset shall be recognized as cost of the intangible asset only if it is probable that economic benefits
associated with the asset will flow to the Company and the cost of the asset can be measured reliably.
Other expenditures on an item asset shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognized as an intangible asset. Self-constructed
buildings (e.g. plants), related land use right and the buildings shall be separately accounted for as an
intangible asset and fixed asset. For buildings and structures purchased, the purchase consideration
shall be allocated among the land use right and the buildings on a reasonable basis. In case there is
difficulty in making a reasonable allocation, the consideration shall be recognized in full as fixed
assets.
An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and
any accumulated impairment loss provision and amortized using the straight-line method over its
useful life when the asset is available for use. Intangible assets with indefinite life are not amortized.
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The Group shall review the useful life of intangible asset with a finite useful life and the amortization
method applied at least at each financial year-end. A change in the useful life or amortization method
used shall be accounted for as a change in accounting estimate. For an intangible asset with an
indefinite useful life, the Group shall review the useful life of the asset in each accounting period. If
there is evidence indicating that the useful life of that intangible asset is finite, the Company shall
estimate the useful life of that asset and apply the accounting policies accordingly.
(2) Impairment test method of intangible assets & calculation method of depreciation reserve
Found more in Note IV-19“Long term assets impairment”.
18. Long-term expenses to be amortized
Long-term amortizable expenses are those already occurred and amortizable to the current term and
successive terms for over one year. Long-term amortizable expenses are amortized by straight-line
method to the benefit period.
19. Long term assets impairment
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of
non-current non-financial assets such as fixed assets, construction in progress, intangible assets with
an infinite useful life, investment properties measured at cost, and long-term equity investments in
subsidiaries, joint ventures and associates. If there is any evidence indicating that an asset may be
impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with
an indefinite useful life and intangible assets beyond working conditions will be tested for impairment
annually, regardless of whether there is any indication of impairment.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying
amount, the impairment provision will be made according to the difference and recognized as an
impairment loss. The recoverable amount of an asset is the higher of its fair value less costs of
disposal and the present value of the future cash flows expected to be derived from the asset. An
asset’s fair value is the price in a sale agreement in an arm’s length transaction. If there is no sale
agreement but the asset is traded in an active market, fair value shall be determined based on the bid
price. If there is neither sale agreement nor active market for an asset, fair value shall be based on the
best available information. Costs of disposal are expenses attributable to disposal of the asset,
including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to
prepare the asset for its intended sale. The present value of the future cash flows expected to be
derived from the asset over the course of continued use and final disposal is determined as the amount
discounted using an appropriately selected discount rate. Provisions for assets impairment shall be
made and recognized for the individual asset. If it is not possible to estimate the recoverable amount
of the individual asset, the Group shall determine the recoverable amount of the asset group to which
the asset belongs. The asset group is the smallest group of assets capable of generating cash flows
independently.
For the purpose of impairment testing, the carrying amount of goodwill presented separately in the
38
financial statements shall be allocated to the asset groups or group of assets benefiting from synergy
of business combination. If the recoverable amount is less than the carrying amount, the Group shall
recognize an impairment loss. The amount of impairment loss shall first reduce the carrying amount
of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying
amount of other assets (other than goodwill) within the asset group or set of asset groups, pro rata on
the basis of the carrying amount of each asset.
An impairment loss recognized on the aforesaid assets shall not be reversed in a subsequent period in
respect of the restorable value.
20. Staff remuneration
Staff remuneration includes short term staff remuneration, post office benefit, dismissal benefit and
other long term staff benefits, among which:
Short term staff remuneration mainly consists of salary, bonus, allowance and subsidy, staff benefits,
medical insurance, maternity insurance, work related injury insurance, housing funds, labor unit fee
and education fee, non-monetary benefits, etc. short term staff remuneration actually happened during
the accounting period in which staff provides services to the Company is recognized as liability, and
shall be included in current gains and losses or relevant asset cost. Non-monetary benefits are
measured at fair value.
Post office benefits mainly consist of defined withdraw plan and defined benefit plan. Defined
withdraw plan mainly includes basic pension insurance, unemployment insurance and annuity, and the
contribution payable is included in relevant asset cost or current gains and losses when occurs.
When the Company terminates the employment relationship with employees before the end of the
employment contracts or provides compensation as an offer to encourage employees to accept
voluntary redundancy, the Company shall recognize employee compensation liabilities arising from
compensation for staff dismissal and included in profit or loss for the current period, when the
Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labor
relationship plans and employee redundant proposals; and the Company recognize cost and expenses
related to payment of compensation for dismissal and restructuring, whichever is earlier. However, if
the compensation for termination of employment is not expected to be fully paid within 12 months
from the reporting period, it shall be accounted for other long-term staff remuneration.
The early retirement plan shall be accounted for in accordance with the accounting principles for
compensation for termination of employment. The salaries or wages and the social contributions to be
paid for the employees who retire before schedule from the date on which the employees stop
rendering services to the scheduled retirement date, shall be recognized (as compensation for
termination of employment) in the current profit or loss by the Group if the recognition principles for
provisions are satisfied.
For other long-term employee benefits provided by the Company to its employees, if satisfy with the
established withdraw plan, then the benefits are accounted for under the established withdraw plan,
otherwise accounted for under defined benefit scheme.
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21. Accrued liabilities
When responsibilities connected to contingent issues meet the follow conditions at the same time,
than recognized as accrued liability: (1) the liability is the current liability that undertaken by the
Company; (2) the liability has the probability of result in financial benefit outflow; and (3) the
responsibility can be measured reliably for its value.
At balance sheet day, with reference to the risks, uncertainty and periodic value of currency that
connected to the contingent issues, the predicted liabilities are measured according to the best
estimation on the payment to fulfill the current responsibility.
If the expenses for clearing of predictive liability is fully or partially compensated by a third party, and
the compensated amount can be definitely received, it is recognized separated as asset. The
compensated amount shall not be greater than the book value of the predictive liability.
(1) Contact in loss
Contact in loss is identified when the inevitable cost for performance of the contractual obligation
exceeds the inflow of expected economic benefits. When a contract in loss is identified and the
obligations thereunder are qualified by the aforesaid recognition criterion for contingent liability, the
difference of estimated loss under contract over the recognized impairment loss (if any) of the subject
matter of the contract is recognized as contingent liability.
(2) Restructuring obligations
For detailed, official and publicly announced restructuring plan, the direct expenses attributable to the
restructuring are recognized as contingent liabilities, provided that the aforesaid recognition criterion
for contingent liability is met. For restructuring obligations arising from disposal of part business, the
Company will recognize the obligations relating to restructuring only when it undertakes to dispose
part business (namely entering into finalized disposal agreement).
22. Income
When significant risks and rewards of ownership of goods have been transferred to buyer, no
continuous management right regularly related to ownership is retained, no effective control is
conducted on goods sold, moreover, amount of income may be measured in a reliable way, relevant
economic profit may have flown into enterprise and relevant incurred cost or to be incurred may be
measured in a reliable way, implementation of goods sales revenue will be confirmed. Detail
recognization according to specific revenue:
(1) Power sales revenue
The Group generates electricity by thermal power, and realizes sales through incorporation into
Guangdong power grid. As for power sales, the Group realizes revenue when it produces electricity
and obtains the grid power statistics table confirmed by the power bureau.
(2) Revenue from providing labor service
Under the condition of service providing business can be estimated in a reliable way, relevant
economic benefit is likely to flow into enterprise, completion degree of business may be estimated in
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a reliable way and relevant incurred cost and to be incurred may be measured in a reliable way, the
revenue from labor service providing recognized. Relevant service revenue may be confirmed by the
Company as percentage-of-completion method on balance sheet date. Completion degree of service
business will be determined as share of incurred service cost in estimated general cost.
If result of service providing business can’t be estimated in a reliable way, service revenue should be
confirmed as amount of incurred service cost expected to be compensated, where incurred service cost
is taken as period charge. If no compensation is expected for incurred service cost, income won’t be
confirmed.
(1) Specific criteria for revenue recognition of environmental protection companies
At the end of each month, the company confirms the monthly income based on the initially confirmed
sludge transportation volume and sludge treatment price, and revises the revenue confirmed last
month after checking with the relevant units in the next month, and the correction proportion is
relatively small.
(2) Specific standards for revenue recognition of engineering companies
① Debugging projects: When the debugging is successful, obtain the confirmation of successful
debugging, and confirm the income according to the contract;
② Operation and maintenance and management projects: Temporarily estimate and confirm the
income every month according to the attendance time and labor service price of attendance staff, and
adjust the temporarily estimated income after obtaining the monthly settlement statement sealed and
signed by suppliers, the confirmation of progress, and the attendance form.
23. Government subsidy
Government subsidy refers to the monetary asset and non-monetary asset that the Company obtains
from the government free of charge, excluding the capital that the government invests as an investor
and enjoys the corresponding owner's equity. Government subsidies are divided into the asset-related
government subsidy and the income-related government subsidy.
If the government subsidy is a monetary asset, it shall be measured according to the received or
receivable amount. If the government subsidy is a non-monetary asset, it shall be measured at fair
value. If the fair value cannot be obtained reliably, it shall be measured according to the nominal
amount. Government subsidy measured by nominal amount is directly included in the current profits
and losses.
The government subsidy related to the assets is recognized as deferred income and is recorded into the
current profits and losses or the book value of the relevant assets in a reasonable and systematic
manner within the useful life of the relevant assets. Revenue-related government grants are used to
compensate for the related costs or losses incurred during the subsequent period and are recognized as
deferred income and are recognized in the current profit or loss or related expenses during the period
of recognition of the relevant cost expense or loss; Incurred costs or losses incurred, directly included
in the current profits and losses or offset the relevant costs.
41
For the government subsidy containing both asset-related parts and income-related parts at the same
time, distinguish the different parts and make the accounting treatment, classify the parts which are
difficult to be distinguished as the income-related government subsidy.
The government subsidy related to the Company’s daily activities is included in other incomes or
offsets related costs in accordance with the essence of economic business; while the government
subsidy unrelated to the Company’s daily activities is included in non-operating income and
expenditure.
When the recognized government subsidy needs to be refunded or has balance of related deferred
income, offset the book balance of related deferred income, and include the excess parts in the current
profits and losses or (the asset-related government subsidy for offsetting the book value of underlying
assets in initial recognition) adjust the book value of assets; directly include these belong to other
situations in the current profits and losses.
24. Deferred income tax asset/ deferred income tax liability
(1) Current income tax
On balance sheet date, current income tax liability (or asset) formed during and before current period
will be measured as amount of income tax payable (or repayable) as specified by tax law. Assessable
income on which current income expense is based represents the profit before tax for the year upon
adjustment against relevant tax rules.
(2) Deferred income tax asset & deferred income tax liability
For balance of book value of some asset/liability item and its tax base, or temporary difference
derived from balance of book value and tax base of the item, which is not confirmed as asset or
liability but tax base can be fixed as specified by tax law, deferred income tax asset & deferred
income tax liability will be confirmed in balance sheet liability approach.
Deferred income tax liabilities are not recognized for taxable temporary differences related to: the
initial recognition of goodwill; and the initial recognition of an asset or liability in a transaction which
is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) at
the time of the transaction. In addition, the Group recognizes the corresponding deferred income tax
liability for taxable temporary differences associated with investments in subsidiaries, associates and
joint ventures, except when both of the following conditions are satisfied: the Company able to
control the timing of the reversal of the temporary difference; and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred income tax assets are not recognized for deductible temporary differences related to the
initial recognition of an asset or liability in a transaction which is neither a business combination nor
affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In addition,
the Group recognizes the corresponding deferred income tax asset for deductible temporary
differences associated with investments in subsidiaries, associates and joint ventures to the extent that
it is probable that taxable profits will be available against which the deductible temporary differences
42
can be utilized, except when both of the following conditions are satisfied: it is not probable that the
temporary difference will reverse in the foreseeable future; and it is not probable that taxable profits
will be available in the future, against which the temporary difference can be utilized.
For deductible loss and taxation decrease which can be carried over to following fiscal year, relevant
deferred income tax asset may be confirmed subject to amount of taxable income which is likely to be
acquired to deduct deductible loss and taxation decrease in the future.
On balance sheet day, those deferred income tax assets and income tax liabilities, according to the tax
law, calculation will be on tax rate applicable to retrieving period of assets or clearing of liabilities.
On balance sheet day, verification will be performed on the book value of differed income tax assets.
If it is not possible to obtain enough taxable income to neutralize the benefit of differed income tax
assets, then the book value of the differed income tax assets shall be reduced. Whenever obtaining of
taxable income became possible, the reduced amount shall be restored.
(3) Income tax expenses
Income tax expense includes current income tax and deferred income tax.
Current deferred income tax and deferred income tax expenses or income shall reckoned into current
gains/losses other that those current income tax and deferred income tax with transactions and events
concerned, that reckoned into shareholder’s equity directly while recognized as other comprehensive
income; and the book value of the goodwill adjusted for deferred income tax arising from enterprise
combination.
(4) Offset of income tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to
realize the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities
are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred
tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities which intend either to settle current tax
assets and liabilities on a net basis or to realize the assets and liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets or liabilities are expected to be reversed,
deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
25. Leasing
Finance lease is too virtually transfer all risks and rewards related to ownership of asset, the
ownership is may transfer ultimately or not. Leases other than finance lease are operating leases.
(1) Lease business with the Company as the rentee
The rental is reckoned into the relevant assets cost or the current loss/gain in the straight-line method.
The initial direct expenses are reckoned into the current gain/loss, or the actual rental into the current
loss/gain.
(2) Lease business with the Company as the renter
43
The rental is reckoned into the relevant assets cost or the current loss/gain in the linear way. The
initial direct substantive expenses are capitalized and reckoned into the current gain/loss, or the actual
rental into the current loss/gain. The initial direct small expenses are reckoned into the current actual
gain/loss, or the actual rental into the current loss/gain.
(3) Financing lease business with the Group recorded as lessee
On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair
value of the leased asset and the present value of minimum lease payment at the beginning date of the
lease. Minimum lease payment shall be the entry value of long-term accounts payable, with difference
recognized as unrecognized financing expenses. In addition, initial direct costs attributable to leased
items incurred during the process of lease negotiation and signing of lease agreement shall be
included in the value of leased assets. The balance of minimum lease payment after deducting
unrecognized financing expenses shall be accounted for long-term liability and long-term liability due
within one year.
Unrecognized financing expenses shall be recognized as financing expenses for the current period
using effective interest method during the leasing period. Contingent rent shall be included in profit or
loss for the current period at the time it incurred.
(4) Financing lease business with the Group recorded as lessor
On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of
minimum lease receivable and initial direct costs at the beginning date of the lease. The unsecured
balance shall be recorded. The aggregate of minimum lease receivable, initial direct costs and
unsecured balance and the different between their present values shall be recognized as unrealised
financing income. The balance of lease receivable after deducting unrecognized financing income
shall be accounted for long-term debt and long-term debt due within one year.
Unrecognized financing income shall be recognized as financing income for the current period using
effective interest method during the leasing period. Contingent rent shall be included in profit or loss
for the current period.
26. Other main accounting policies and estimations
The discontinued operation refers to the component that meets one of following conditions and has
been disposed by the Company or classified as held-for-sale and can be individually distinguished
when operating and preparing the financial statements: ① the component represents an independent
main Business or a major operating area; ② the component is a parts that intends to dispose or
arrange an independent main business or a major operating area; ③ the component is a subsidiary
obtained only for re-sale.
27. Changes in significant accounting policies and accounting estimates
(1) Changes in accounting policies
44
①Changes in accounting policies for execution of the new financial instrument standards
On March 31, 2017, the Ministry of Finance revised and issued the Accounting Standards for
Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments (Revised in
2017) (CK [2017] No. 7) and Accounting Standards for Business Enterprises No. 23 - Transfer of
Financial Assets (Revised in 2017) (CK [2017] No. 8), Accounting Standards for Business Enterprises
No. 24 - Hedge Accounting (Revised in 2017) (CK [2017] No. 9), and issued and revised the
Accounting Standards for Business Enterprises No. 37 – Financial Instruments Presentation (Revised
in 2017) (CK [2017] No. 14) on May 2, 2017 (the above-mentioned four standards are collectively
referred to as the “New Financial Instruments Standards”), relevant accounting policy are adjusted
correspondingly. On 15 June 2018, the Notice on Revising and Printing the Format of Financial
Statements for General Enterprises in 2018 was issued, revising the format of financial statements for
general enterprises. In accordance with the above mentioned requirement, the Company needs to
adjust relevant contents with accounting policy concerned.
On 14 August 2019, the Resolution of Implementation of New Financial Instrument Standards is
deliberated and approved by 5th session of 8th BOD and 5th session of 8th Supervisory Committee,
agrees to carry out the above mentioned new financial instrument standards since 1 Jan. 2019
All recognized financial assets under the new financial instrument standard are subsequently
measured at amortized cost or fair value. On the implementation date of the new financial instrument
standard, the business model of managing financial assets is evaluated based on the facts and
circumstances of the Company on the day, and the contractual cash flow characteristics of the
financial assets are evaluated based on the facts and circumstances at the initial recognition of the
financial assets. Financial assets are classified into three categories: those measured at amortized cost,
those measured at fair value and the changes are included in other comprehensive income, and those
measured at fair value and the changes are included in current profit or loss. Among them, for the
equity instrument investment measured at fair value and whose changes are included in other
comprehensive income, when the financial asset is derecognized, the accumulated gain or loss
previously included in other comprehensive income shall be transferred from other comprehensive
income to retained earnings, but not included in the current profit and loss.
Under the new financial instrument standard, the Company makes the impairment provision and
confirms the credit impairment losses for financial assets measured at amortized cost, debt instrument
investments measured at fair value and whose changes are included in other comprehensive income,
lease receivables, contract assets and the financial guarantee contracts based on expected credit losses.
Main changes and influences of the Company for implementing the new financial instrument
standards:
45
①Category and measuring contrast of the financial instrument after/before the date when initially
implementation
2018-12-31（before ） 2019-1-1（after）
Measurement Measurement
Item Book value Item Book value
category category
Measured by fair
Available-f value and with its
measured by cost Other equity
or-sale variation reckoned
(equity 60,615,000.00 instrument 60,615,000.00
financial into other
instrument) investment
assets comprehensive
income
②On first implementation day, adjustment statement of the category and measurement for former
financial instrument and those adjusted with new financial instrument standards
Item 2018-12-31（before） Re-classified 2019-1-1（after）
Measured by fair value and with its
variation reckoned into other
comprehensive income:
Available-for-sale financial assets
60,615,000.00
(former standard)
Less: transfer to other equity instrument
60,615,000.00
investment
Balance under new financial instrument
standard
Other equity instrument investment
Add: transfer in from available-for-sale
60,615,000.00
financial assets (former standard)
Balance under new financial instrument
60,615,000.00
standard
(2) Change of accounting estimate
No changes of accounting estimate in the period
28. Material accounting judgment and estimate
When using the accounting policies discussed in note IV, the Group needs to made judgment,
estimation and assumption for carrying value of certain items which cannot be measured adequately
due to inherent uncertainty of economic activities. Such judgment, estimation and assumption are
46
based on historical experiences of the Group’s management, together with consideration of other
relevant factors. These judgments, estimations and assumption would affect the reported amount of
income, expense, asset and liability and disclosure of contingent liabilities on balance sheet date.
However, actual results resulting from the uncertainty of these estimates may differ from the current
estimation made by management of the Company, which would in turn lead to material adjustments to
the carrying value of assets or liabilities which will be affected in future.
The Group conducts regular re-review on the aforesaid judgment, estimation and assumption on a
continued operation basis. If the change of accounting estimation only affect current period, the
affected amount is recognized in the period when change occurs. If the change affects current and
future periods both, the affected amount is recognized in the period when change occurs and future
periods.
On balance sheet date, major aspects in the statement need to judge, estimate and consumption by the
Company are as:
(1) Fixed assets are provided for depreciation by output method
The Group recognizes depreciation for unit electricity based on values of power generation machine
sets, projected power sales volume and projected net remaining value, and provides for depreciation
according to depreciation of unit electricity and actual power sales volume. Taking into account the
prevailing industry policies, technologies, consumption, allocation method of power management
authorities and past experiences, and the Group management believes that it is adequate for utilization
life of such power generation machine sets, projected power sales volume, projected net remaining
value and provision method for depreciation. If the future actual power sales volume differs
substantially from the projected one, the Group would make adjustment to unit electricity depreciation,
which would bring affects to the depreciation expenses included in profit and loss for the current and
future periods.
(2) Provision for bad debts
The Group use allowance method to state bad debt losses according to the accounting policies of
accounts receivable. Impairment of receivables is based on the assessment of the recoverability of
accounts receivable. Identification of impairment of receivables requires management judgments and
estimates. The differences between actual results and the original estimate will affect the book value
of accounts receivable as well as the recognition or reversal of provision for bad debts in the period in
which the estimate is changed.
(3) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realizable
value, the Group makes allowance for inventories that have costs higher than net realizable value or
become obsolete and slow moving. Write-down of inventories to their net realizable values is based
on the salability of the evaluated inventory and their net realizable values. Identification of inventories
requires management to make judgments and estimates on the basis of obtaining conclusive evidence,
47
and considering the purpose of holding inventory and the events after balance sheet date. The
differences between actual results and the original estimate will affect the book value of inventories as
well as the recognition or reversal of provision for inventories in the period in which the estimate is
changed.
(4) provision for long term assets impairment
The Company makes judgment on each balance sheet date on whether there is indication of
impairment in respect of non-current assets other than financial assets. Intangible assets with
indefinite useful life shall also be further tested for impairment when there is indication of impairment,
in addition to the annual impairment test. Other non-current assets other than financial assets would
be test for impairment when there is indication showing its carrying value in not likely to be
recovered.
Impairment exists when carrying value of asset or assets group is higher than recoverable amount,
namely the higher of fair value less disposal cost and present value of expected future cash flow.
The calculation of the fair value less costs of disposal is based on available data from binding sales
transactions in an arm’s length transaction of similar assets or observable market prices less
incremental costs for disposing of the asset.
In assessing value in use, significant judgments are exercised over the asset’s production, selling price,
related operating expenses and discount rate to calculate the present value. All relevant materials
which can be obtained are used for estimation of the recoverable amount, including the estimation of
the production, selling price and related operating expenses based on reasonable and supportable
assumptions.
The Group determines whether goodwill is impaired at least on an annual basis. This requires an
estimation of the value in use of the cash-generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an estimate of the expected future cash flows
from the cash-generating units and also to choose a suitable discount rate in order to calculate the
present value of those cash flows.
(5) Depreciation and amortization
Assets such as investment real estate, fixed assets and intangible assets are depreciated and amortized
over their useful lives under straight line method after taking into account residual value. The
estimated useful lives of the assets are regularly reviewed to determine the depreciation and
amortization costs charged in each reporting period. The useful lives of the assets are determined
based on historical experience of similar assets and the estimated technical changes. If there have
been significant changes in the factors used to determine the depreciation or amortization, the rate of
depreciation or amortization is revised prospectively.
(6) Deferred income tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Significant management judgment is
48
required to determine the amount of deferred income tax assets that can be recognized, based upon the
likely timing and level of future taxable profits together with future tax planning strategies.
(7) Accrued liabilities
Provision for product quality guarantee, estimated onerous contracts, and delay delivery penalties
shall be recognized in terms of contract, current knowledge and historical experience. If the
contingent event has formed a practical obligation which probably results in outflow of economic
benefits from the Group, a accrued liabilities shall be recognized on the basis of the best estimate of
the expenditures to settle relevant practical obligation. Recognition and measurement of the accrued
liabilities significantly rely on the management’s judgments inconsideration of the assessment of
relevant risks, uncertainties, time value of money and other factors related to the contingent events.
In addition, the Company would project liabilities for after-sale quality maintenance commitment
provided to customers in respect of goods sold, maintained and reconstructed by the Company. Recent
maintenance experience of the Company has been considered when projecting liabilities, while the
recent maintenance experience may not reflect the future maintenance. Any increase or decrease of
this provision may affect profit or loss for future years.
V. Taxes
1. Main taxation items and its tax rate
Taxation items Tax rate
Output tax calculated based on the 5%, 6%, 9% or 13% of the taxable
VAT
income, VAT based on the difference after deducted the current input tax
City maintenance tax Taxed by 5% and 7% of the turnover tax actually paid
Education surtax Taxed by 3% of the turnover tax actually paid
Local education surtax Taxed by 2% of the turnover tax actually paid
Enterprise income tax Taxed by 16.5% to 25% of the taxable income amount
As for the taxed by residual value, paid with the 1.2% of the residual value
Real estate tax after original value deducted 30%; as for the taxed by house rental, taxed
with 12% of the rental income
2 Yuan ~ 8 Yuan per square meter of the actual occupied are for the
industrial land located in Nanshan District, Shenzhen City;
1 Yuan ~ 5 Yuan per square meter of the actual occupied are for the
Urban land use tax
industrial land located in Dongguan City;
1 Yuan per square meter of the actual occupied are for the industrial land
located in Zhongshan City;
Tax by the Value-added amount from transferring state-owned land use right,
Land VAT landing construction and its affiliates with four super-rate progressive tax
rate
49
Rate for the income tax for the Company and subsidiaries as:
Taxpaying body Rate of income tax
Shenzhen Nanshan Power Co., Ltd. (“The Company”) 25%
Shenzhen New Power Industrial Co., Ltd. (“New Power ”) 25%
Shenzhen Shennandian Turbine Engineering Technology Co., Ltd.(“Engineering
25%
Company”)
Shenzhen Server Petrochemical Supplying Co., Ltd. (“Shenzhen Server”) 25%
Shenzhen Shennandian Environment Protection Co., Ltd.(“Environment Protection
25%
Company”)
Shen Nan Dian (Zhongshan) Electric Power Co., Ltd. (“Zhongshan Power”) 25%
Shen Nan Dian (Dongguan) Weimei Power Co., Ltd (“Weimei Power ”) 25%
Shen Nan Energy (Singapore) Co., Ltd.(“Singapore Company”) 17%
Zhongshan Shennandian Storage Co., Ltd.(“Shen Storage”) 25%
Hong Kong Syndisome Co., Ltd.(“Syndisome ”) 16.50%
2. Taxes preferential and approvals
Name of Approval
the Relevant regulation and Approval document Exemption Period of
Tax company policies basis institution s range validity
” Notice of adjustment and
Environm
perfection on resources
ent Not Not VAT free for Not
VAT comprehensive usage and
Protection applicable applicable sludge treatment applicable
labor VAT policy”(CS
Company
No.115[2011])
Notice on "contents of
Shenzhen
Environm products with comprehensive SGSQHB Resource 1 Aug.
Provincial
ent utilization of resources and A comprehensive 2015 to
VAT Office, SAT
Protection value-added tax privilege of No.[2015 utilization of 31 Jul.
(Qianhai
Company labor service" (CS No. [2015] ]0002 VAT refund 2021
SAT)
78)
Shen Guo
No enterprise
State Tax Sui Nan
Enterpri income tax
“Enterprise Income Tax Law Bureau of Kou Jiao
se Syndisom should pay for Not
of People’s Republic of Nanshan Bei Zi
income e the dividend applicable
China” Distinct No.:
tax before 31
Shenzhen [2011]001
December 2007
1
Note: "Notice about adjusting and improving the products with comprehensive utilization of resources and value-added
tax policy of labor service" (CS No. [2011] 115) has been abolished since July 1, 2015, the preferential policy of
50
exempting environmental companies from added-value tax of labor services for sludge treatment has been abolished
since August 2015, and environmental companies enjoy the drawback policy of added-value tax for comprehensive
utilization of resources in accordance with the notice about printing and distributing "contents of products with
comprehensive utilization of resources and value-added tax privilege of labor service" (CS No. [2015] 78).
51
VI. Annotation of the items in consolidate financial statement
With respect to the notes item (including Main item annotations of Financial Statements) disclosed
below, unless otherwise specified, “year-begin” refers to 1 January 2019
1. Monetary fund
Item 30 June 2019 Balance at year-begin
Cash on hand 58,460.53 75,645.92
Bank savings 1,029,751,703.59 574,808,236.06
Other monetary fund 3,643,130.19 350,945,522.46
Total 1,033,453,294.31 925,829,404.44
Including: total amount saving aboard 6,207,117.62 6,240,695.02
Note: among the above other monetary capital, there are totally 3,569,453.88 Yuan guarantee draft margin and
guarantee deposit included (on 31 December 2018: 10,872,792.74 Yuan).
2. Account receivable
(1) Age analysis
Account age 30 June 2019
Within one year 160,734,145.01
1 to 2 years -
2 to 3 years -
3 to 4 years -
4 to 5 years -
Over 5 years 5,766,640.84
Subtotal 166,500,785.85
Less: Bad debt provision 5,198,068.08
Total 161,302,717.77
(2) According to accrual method for bad debts
30 June 2019
Book balance Bad debt provision Book value
Category Accrual
Proporti
Amount Amount proportion
on (%)
(%)
- 52 -
Account receivable with single
5,766,640.84 3.46 5,198,068.08 90.14 568,572.76
provision for bad debts
Including: Shenzhen
Petrochemical Products Bonded 3,474,613.06 2.09 3,474,613.06 100.00 -
Trading Co., Ltd.
Project receivable 1,937,145.51 1.16 1,368,572.75 70.65 568,572.76
Oil-sales receivable 146,915.10 0.09 146,915.10 100.00 -
Dry mud-sales receivable
69,900.10 0.04 69,900.10 100.00 -
Dry mud-sales receivable
Gas-supply income 138,067.07 0.08 138,067.07 100.00 -
Account receivable with bad
debt provision accrual based on 160,734,145.01 96.54 - - 160,734,145.01
portfolio
Including: low risk 160,734,145.01 96.54 - - 160,734,145.01
Total 166,500,785.85 100.00 5,198,068.08 3.12 161,302,717.77
(Continued)
Amount at year-begin
Book balance Bad debt provision
Category
Proporti Proportion Book value
Amount Amount
on (%) (%)
Account receivable with individual
major amount and withdrawal bad 3,474,613.06 2.52 3,474,613.06 100.00 -
debt provision independently
Account receivable with bad debt
provision accrual based on similar
131,861,452.21 95.81 - - 131,861,452.21
credit risk characteristics of a
portfolio
Account receivable with individual
minor amount but withdrawal bad 2,292,027.78 1.67 1,723,455.02 75.19 568,572.76
debt provision independently
Total 137,628,093.05 100.00 5,198,068.08 3.78 132,430,024.97
①Account receivable with single provision for bad debts at period-end
Account receivable (by unit) Book amount Bad debt provision Accrual Causes
- 53 -
proportion (%)
Shenzhen Petrochemical Products
3,474,613.06 3,474,613.06 100.00 Uncollectible
Bonded Trading Co., Ltd.
Project receivable 1,937,145.51 1,368,572.75 70.65 Uncollectible
Oil-sales receivable 146,915.10 146,915.10 100.00 Uncollectible
Dry mud-sales receivable 69,900.10 69,900.10 100.00 Uncollectible
Gas-supply income 138,067.07 138,067.07 100.00 Uncollectible
Total 5,766,640.84 5,198,068.08 90.14
(3) Bad debt provision
Current amount changed Ending balance
Balance at
Category Collected or Rewrite or
year-begin Accrual
switch back write-off
Withdrawal bad debt
provision 5,198,068.08 - - - 5,198,068.08
independently
Withdrawal bad debt
- - - -
provision by portfolio -
Total 5,198,068.08 - - - 5,198,068.08
(4) Balance of top five receivables in debtors at end of the period
Total balance of the top five receivables in debtors dated 30 June 2019 amounted as 161,006,738.13 Yuan, takes 96.7%
in total numbers of balance of receivables at period-end.
3. Account paid in advance
(1) Age analysis
30 June 2019 Amount at year-begin
Account age Proportion Proportion
Amount Amount
(%) (%)
Within one year 40,114,784.29 90.49 53,317,190.18 99.37
1 to 2 years 4,122,500.00 9.30 277,000.00 0.52
2 to 3 years 32,000.00 0.07 - -
Over 3 years 61,586.94 0.14 61,586.94 0.11
Total 44,330,871.23 100.00 53,655,777.12 100.00
(2) Top five account paid in advance by collector at end of the period
Total top five account paid in advance by collector on 30 June 2019 amount to 40,897,225.19 Yuan, a
92.25% in total year-end account paid in advance
- 54 -
4. Other account receivable
Item 30 June 2019 Amount at year-begin
Interest receivable
- -
Dividend receivable
- -
Other account receivable 40,936,219.42 40,133,297.74
Total 40,936,219.42 40,133,297.74
(1) Other account receivable
①Age analysis
Account age 30 June 2019
Within one year 9,264,979.97
1 to 2 years 1,843,924.80
2 to 3 years 1,591,782.90
3 to 4 years 3,000.00
4 to 5 years 4,540,284.01
Over 5 years 55,536,668.18
Subtotal 72,780,639.86
Less: Bad debt provision 31,844,420.44
Total 40,936,219.42
② Category of nature
Nature 30 June 2019 Amount at year-begin
Current payments with related party 22,909,878.94 23,138,899.40
Other current payments 49,870,760.92 48,838,818.78
Subtotal 72,780,639.86 71,977,718.18
Less: Bad debt provision 31,844,420.44 31,844,420.44
Total 40,936,219.42 40,133,297.74
③Accrual of bad debt provision
Phases I Phases II Phases III
Expected credit Expected
Expected credit
Bad debt provision losses for the credit losses Total
losses over next
entire duration for the entire
12 months
(without credit duration (with
- 55 -
impairment credit
occurred) impairment
occurred)
Balance on Jan. 1, 2019 - 31,844,420.44 - 31,844,420.44
Book balance of other account
- - - -
receivable dated 1 Jan. 2019:
——Turn to phase II - - - -
——Turn to phase III - - - -
——Return to Phase II - - - -
——Return to Phase I - - - -
Current accrual - - - -
Current switch back - - - -
Rewrite in the period - - - -
Write-off in the period - - - -
Other changes - - - -
Balance on Jun. 30, 2019 - 31,844,420.44 - 31,844,420.44
④Bad debt provision
Current amount changed
Balance at
Category Collected or Rewrite or 30 June 2019
year-begin Accrual
switch back write-off
Withdrawal bad debt
31,844,420.44 - - - 31,844,420.44
provision independently
Low risk - - - - -
Total 31,844,420.44 - - - 31,844,420.44
⑤Top five other account receivables at year-end balance listed by arrears party
Proportio
n in total
Year-end
Account other
Name of the company Nature Amount balance of bad
age account
debt provision
receivable
(%)
Huidong Server Harbor
Intercourse Over 5
Comprehensive Development 23,101,965.85 31.74 -
funds years
Company
Huiyang Kangtai Industrial Intercourse Over 5
14,311,626.70 19.66 14,311,626.70
Company funds years
- 56 -
Intercourse Over 5
Personal funds 7,498,997.87 10.30 7,498,997.87
funds years
China National Machinery Intercourse
4,540,284.01 4-5 years 6.24 -
Equipment Engineering Ltd. funds
Shandong Jinan Generation Intercourse Over 5
3,560,000.00 4.89 3,560,000.00
Equipment Plant funds years
Total 53,012,874.43 72.84 25,370,624.57
5. Inventory
(1) Category
30 June 2019 Amount at year-begin
Item Depreciation Depreciation
Book balance Book value Book balance Book value
provision provision
Raw 177,022,079.4 52,542,530.4 124,479,548.9 177,479,127.9 52,720,793.0 124,758,334.9
materials 4 9 5 7 0 7
177,022,079.4 52,542,530.4 124,479,548.9 177,479,127.9 52,720,793.0 124,758,334.9
Total
4 9 5 7 0 7
(2) Depreciation provision of inventory
Book balance at Accrual in Decreased in the year Book balance on 30
Category
year-begin the year Switch back Written-off Jun. 2019
Raw materials 52,720,793.00 - - 178,262.51 52,542,530.49
Total 52,720,793.00 - - 178,262.51 52,542,530.49
(3) Accrual basis and reasons for switch back or written-off
Reasons for
Item Specific basis Reasons for switch back
written-off
Cost higher than the net realizable Raw materials on
Raw materials Not applicable
value sale
6. Other current assets
Item 30 June 2019 Balance at year-begin
VAT input tax deductible 372,624,164.14
383,495,754.13
Enterprise income tax deductible 6,583,089.98
6,583,089.98
- 57 -
Other 30,000.00
30,000.00
Total 379,237,254.12
390,108,844.11
7. Financial assets available for sale
Balance at year-begin
Item Depreciation
Book balance Book value
reserves
Equity instrument available for sale 63,115,000.00 2,500,000.00 60,615,000.00
Including: measured by cost 63,115,000.00 2,500,000.00 60,615,000.00
Total 63,115,000.00 2,500,000.00 60,615,000.00
8. Long-term equity investments
Changes in the year (+,-)
Balance of
Investment
Balance at Balance on Jun. depreciation
Invested enterprise gains/losses
year-begin Other 30, 2019 reserves on
recognized by
Jun. 30, 2019
equity method
I. Joint venture
Huidong Server 16,049,044.95 -677,552.37 - 15,371,492.58 -
Total 16,049,044.95 -677,552.37 - 15,371,492.58 -
9. Other equity instrument investment
Item 30 June 2019
CPI Jiangxi Nuclear Power Company
60,615,000.00
Shenzhen Petrochemical Products Bonded Trading Co.,
Ltd. -
Total
60,615,000.00
10. Investment real estate
Item House, buildings Land use Constructio Total
- 58 -
right n-in-progre
ss
I. Original book value
1. Balance at year-begin 9,708,014.96 - - 9,708,014.96
2. Current increased - - - -
3. Current decreased - - - -
4. Balance on Jun. 30, 2019 9,708,014.96 - - 9,708,014.96
II. accumulated depreciation and
-
accumulated amortization
1. Balance at year-begin 7,101,712.25 - - 7,101,712.25
2. Current increased 106,906.91 - - 106,906.91
(1) Accrual or amortization 106,906.91 - - 106,906.91
3. Current decreased - - - -
4. Balance on Jun. 30, 2019 7,208,619.16 - - 7,208,619.16
III. Depreciation reserves -
1. Balance at year-begin - - - -
2. Current increased - - - -
3. Current decreased - - - -
4. Balance on Jun. 30, 2019 - - - -
IV. Book value -
1. Balance on Jun. 30, 2019 2,499,395.80 - - 2,499,395.80
2. Book value at year-begin 2,606,302.71 - - 2,606,302.71
11. Fixed assets
Item 30 June 2019 Balance at year-begin
Fixed assets 1,410,659,018.39 1,405,648,674.64
Disposal of fixed assets 1,314.60 1,314.60
Total 1,410,660,332.99 1,405,649,989.24
(1) Fixed assets
①Fixed assets
Houses and Machinery Transportation Other
Item Total
buildings equipment tools equipment
I. Original book
value
- 59 -
1. Balance at
493,659,821.94 4,011,690,503.45 21,694,643.51 50,934,529.40 4,577,979,498.30
year-begin
2. Current increased -5,085.48 50,023,583.20 1,176,173.87 2,342,373.23 53,537,044.82
(1) Purchase -5,085.48 2,447,858.64 1,104,622.15 734,665.10 4,282,060.41
(2) Construction in
- 47,575,724.56 71,551.72 1,607,708.13 49,254,984.41
process transfer-in
(3) Increased by
enterprise - - - - -
combination
3. Current decreased 1,505,808.74 - 8,651,158.68 0.00 10,156,967.42
(1) Disposal or scrap 1,505,808.74 - 8,651,158.68 0.00 10,156,967.42
4. Balance on Jun.
492,148,927.72 4,061,714,086.65 14,219,658.70 53,276,902.63 4,621,359,575.70
30, 2019
II. Accumulated
depreciation
1. Balance at
295,042,092.71 2,680,198,815.48 14,840,509.71 41,115,495.64 3,031,196,913.54
year-begin
2. Current increased 6,958,177.29 36,322,306.31 708,187.24 813,158.11 44,801,828.95
(1) Accrual 6,958,177.29 36,322,306.31 708,187.24 813,158.11 44,801,828.95
3. Current decreased - - 6,432,095.30 - 6,432,095.30
(1) Disposal or scrap - - 6,432,095.30 - 6,432,095.30
4. Balance on Jun.
302,000,270.00 2,716,521,121.79 9,116,601.65 41,928,653.75 3,069,566,647.19
30, 2019
III. Depreciation
reserves
1. Balance at
14,860,025.13 126,273,884.99 141,133,910.12
year-begin
2. Current increased
(1) Accrual - - - - -
3. Current decreased
(1) Disposal or scrap - - - - -
4. Balance on Jun.
14,860,025.13 126,273,884.99 0.00 0.00 141,133,910.12
30, 2019
IV. Book value
1. Balance on Jun.
175,288,632.59 1,218,919,079.87 5,103,057.05 11,348,248.88 1,410,659,018.39
30, 2019
- 60 -
2. Book value at
183,757,704.10 1,205,217,802.98 6,854,133.80 9,819,033.76 1,405,648,674.64
year-begin
②Idle fixed assets temporary
Accumulated Depreciation
Item Original book value Book value Note
depreciation reserves
Wharf, processing
Houses and
137,799,917.53 101,022,772.20 19,008,224.87 17,768,920.46 workshop of heavy
buildings
oil
Processing
Machinery equipment of
589,641,126.12 495,741,446.98 53,700,282.66 40,199,396.48
equipment heavy oil and
generation unit
Transportation
256,300.00 230,670.00 - 25,630.00 Idle vehicles
tools
Total 727,697,343.65 596,994,889.18 72,708,507.53 57,993,946.94
③Fixed assets without property license obtained
Item Book value Reasons
Booster station 5,567,100.88 Procedures uncompleted
Steam turbine workshop 2,014,811.08 Procedures uncompleted
Chemical water tower 3,327,665.86 Procedures uncompleted
Treatment shop for heavy oil 650,123.93 Procedures uncompleted
Start-up boiler house 146,191.99 Procedures uncompleted
Fire pump room 339,374.37 Procedures uncompleted
Circulating water pump house 2,134,592.90 Procedures uncompleted
Comprehensive building 3,557,285.99 Procedures uncompleted
Production and inspection building 5,745,308.85 Procedures uncompleted
Administrative building 5,907,084.49 Procedures uncompleted
Mail room of the main entrance 239,379.05 Procedures uncompleted
Turbine building and annex building 10,745,357.65 Procedures uncompleted
Plant’s ventilating system 558,407.71 Procedures uncompleted
Office building 5,375,147.82 Procedures uncompleted
Comprehensive building 1,192,940.72 Procedures uncompleted
- 61 -
Draft cooling tower 3,452,423.42 Procedures uncompleted
Chemical water workshop and foundation of water
1,640,829.43 Procedures uncompleted
tank
Industry pool and industry pump house 720,128.52 Procedures uncompleted
Start-up boiler house 120,327.67 Procedures uncompleted
Oil treatment room and oil un-loading platform 337,538.98 Procedures uncompleted
Comprehensive building canteen 314,580.33 Procedures uncompleted
Total
54,086,601.64
(2) Fixed assets disposal
Item 30 June 2019 Balance at year-begin
Fixed assets ready for disposal
1,314.60 1,314.60
Total
1,314.60 1,314.60
- 62 -
12. Construction-in-progress
(1) Construction-in-progress:
30 June 2019 Amount at year-begin
Depreciati Depreciati
Item Net book Book Net book
Book balance on on
value balance value
reserves reserves
Cogeneration of heat and 53,684,64 64,754,943. 64,754,943.
53,684,645.10 -
electricity Project 5.10 63 63
32,871,60 32,871,600. 32,871,60
Oil to Gas Works 32,871,600.26 -
0.26 26 0.26
Cogeneration of heat and 13,045,27 17,021,868. 17,021,868.
13,045,279.00 -
electricity Project 9.00 33 33
Other technical innovation 916,572.1
916,572.12 - 571,196.43 571,196.43
project 2
100,518,096.4 32,871,60 67,646,49 115,219,608 32,871,60 82,348,008.
Total
8 0.26 6.22 .65 0.26 39
(2) Changes of significant projects in construction in the year
Amount
Increase Transferred
at Other 30 June
Item Budget in the fixed assets
year-begi decrease 2019
year in this year
n
Cogeneration of heat and 120,000,000.0 64,754,94 4,734,970 15,805,268. 53,684,645.
-
electricity Project 0 3.63 .23 76 10
32,871,60 32,871,600.
74,400,000.00 - - -
Oil to Gas Works 0.26 26
Cogeneration of heat and 17,021,86 29,381,37 33,357,961. 13,045,279.
electricity Project 8.33 1.90 23 00
Technological 571,196.4 437,130.1
91,754.42 - 916,572.12
transformation project 3 1
194,400,000.0 115,219,6 34,553,47 49,254,984. 100,518,096
-
Total 0 08.65 2.24 41 .48
(3) Depreciation reserves for construction-in-progress
Amount at Increase in Decreased Reasons of
Item 30 June 2019
year-begin the year in the year accrual
In idle
Oil to Gas Works 32,871,600.26 - - 32,871,600.26
condition
63
13. Intangible assets
Item Land use right Software Total
I. Original book value
1. Balance at year-begin 91,253,625.27 3,678,109.85 94,931,735.12
2. Current increased -
(1) Purchase - -
3. Current decreased -
(1) Disposal - - -
4. Balance on Jun. 30, 2019 91,253,625.27 3,678,109.85 94,931,735.12
II. Accumulated amortization
1. Balance at year-begin 45,923,214.98 3,021,264.90 48,944,479.88
2. Current increased 1,099,623.06 132,476.96 1,232,100.02
(1) Accrual 1,099,623.06 132,476.96 1,232,100.02
3. Current decreased -
(1) Disposal - - -
4. Balance on Jun. 30, 2019 47,022,838.04 3,153,741.86 50,176,579.90
III. Depreciation reserves
1. Balance at year-begin - - -
2. Current increased
(1) Accrual - - -
3. Current decreased
(1) Disposal - - -
4. Balance on Jun. 30, 2019 - - -
IV. Book value
1. Balance on Jun. 30, 2019 44,230,787.23 524,367.99 44,755,155.22
2. Book value at year-begin 45,330,410.29 656,844.95 45,987,255.24
14. Deferred income tax assets
Item 30 June 2019 Amount at year-begin
Deferred income tax assets:
Bad debt provision of account receivable 1,265,000.26 1,265,000.26
Bad debt provision of other account
180,896.25 180,896.25
receivable
Depreciation reserves of financial assets 625,000.00 625,000.00
64
available for sale
Other 427.75 427.75
Total 2,071,324.26 2,071,324.26
15. Other non-current assets
Item 30 June 2019 Amount at year-begin
Project of LNG(Note) 22,882,181.78 22,882,181.78
Account for engineering and equipment paid in advance 3,338,000.00 2,023,500.00
Total 26,220,181.78 24,905,681.78
Note: the project was jointly constructed by Weimei Power Company and Guangdong Dapeng Liquid Natural Gas Co.,
Ltd.(hereinafter referred to as Dapeng LNG). According to the contract signed between the two parties, before the
project involved by this construction acquired approval from the relevant national authorities, the ownership belongs to
both parties. After such approval, Dapeng LNG will acquire LNG project. Thus, Weimei Power Company recorded it
under the item of “other non-current assets”.
16. Short-term loans
Item 30 June 2019 Amount at year-begin
Guarantee loans 760,000,000.00 860,000,000.00
Credit loans 340,000,000.00 140,000,000.00
Total 1,100,000,000.00 1,000,000,000.00
17. Account payable
(1) Account payable
Item 30 June 2019 Balance at year-begin
Materials 22,387,785.64 8,545,427.20
Electricity 1,664,364.58 906,278.78
Other 11,842,051.65 8,614,192.71
Total 35,894,201.87 18,065,898.69
(2) There is no major amount payable with over one year age at end of the period
18. Account received in advance
(1) Account received in advance
65
Item 30 June 2019 Balance at year-begin
Rent of Dapeng received in advance 140,760.00 -
Total 140,760.00 -
(2) There is no major amount payable with over one year age at end of the period in account received
in advance
19. Wages payable
(1) Wages payable
Balance at Increase in the Decreased in
Item 30 June 2019
year-begin year the year
I. Short-term remuneration 44,673,492.37 62,726,004.44 63,834,377.62 43,565,119.19
II. Post-employment welfare-defined
239,107.29 10,835,597.40 8,107,229.71 2,967,474.98
contribution plans
III. Severance Pay - - - -
IV. Other welfare due within one year - - - -
Total 44,912,599.66 73,561,601.84 71,941,607.33 46,532,594.17
(2) Short-term remuneration
Balance at Increase in the Decreased in the
Item 30 June 2019
year-begin year year
1. Wages, bonuses, allowances and
43,587,594.10 50,771,826.23 52,207,776.49 42,151,643.84
subsidies
2. Welfare for employee - 459,636.70 459,636.70 -
3. Social insurance 123,634.93 3,208,080.84 3,079,435.61 252,280.16
Including: Medical insurance 102,720.39 3,067,841.08 2,955,570.63 214,990.84
Work injury insurance 11,021.84 51,781.91 48,287.01 14,516.74
Maternity insurance 9,892.70 88,457.85 75,577.97 22,772.58
Wages in arrears - - - -
4. Housing provident fund 503,857.94 7,633,455.56 7,377,201.60 760,111.90
5.Union funds and staff education
458,405.40 653,005.11 710,327.22 401,083.29
expenses
Total 44,673,492.37 62,726,004.44 63,834,377.62 43,565,119.19
(3) Defined contribution plans
Item Balance at Increase in the Decreased in the 30 June 2019
66
year-begin year year
1. Basic Endowment insurance 231,340.48 8,315,832.00 8,028,779.05 518,393.43
2. Unemployment insurance 7,907.83 84,865.38 78,450.66 14,322.55
3. Enterprise annuities -141.02 2,434,900.02 - 2,434,759.00
Total 239,107.29 10,835,597.40 8,107,229.71 2,967,474.98
20. Taxes payable
Item 30 June 2019 Amount at year-begin
Enterprise income tax 3,071,495.66 11,215,405.89
Real estate tax 2,327,866.88 2,211,605.38
Individual income tax 1,020,866.44 1,251,539.31
Urban land use tax 566,975.54 603,884.89
VAT 3,753,007.01 508,589.03
Other 254,238.63 209,015.05
Total 10,994,450.16 16,000,039.55
21. Other account payable
Item 30 June 2019 Amount at year-begin
Interest payable 1,261,137.48 1,608,290.72
Other account payable 55,087,871.86 61,483,590.71
Total 56,349,009.34 63,091,881.43
(1) Interest payable
Item 30 June 2019 Amount at year-begin
Amortization of long-term loan’s interest and repayment of
80,362.25 50,826.19
principal at maturity
Interest payable for short-term loans 1,180,775.23 1,557,464.53
Total 1,261,137.48 1,608,290.72
(2) Other account payable
① By nature
Item 30 June 2019 Amount at year-begin
67
Project expense 30,042,087.84 30,866,827.67
Quality guarantee deposit 3,130,808.23 8,285,192.04
Accrued expenses 376,016.39 6,867,153.90
Material amount 2,053,923.88 5,453,034.68
Equipment amount 3,191,309.24 457,760.33
Land use right charge 219,349.98 348,534.19
Other 16,074,376.30 9,205,087.90
Total 55,087,871.86 61,483,590.71
②Major other account payable with account age over one year
Reasons for unpaid or
Item 30 June 2019
carried over
Interest on overdue payments 6,892,178.73 Un-liquidated
Guangdong Industrial Equipment Installation Company 1,038,545.90 Un-liquidated
Zhongshan Nanlang Construction Development Company 860,190.12 Un-liquidated
Harbin Steam Turbine Auxiliary Engine Co., Ltd. 400,000.00 Un-liquidated
Total 9,190,914.75 ——
22. Long-term loans
Item 30 June 2019 Amount at year-begin
Guarantee loans 21,940,000.00 25,940,000.00
Credit loans - -
Less: Long-term loans due within one year - -
Total 21,940,000.00 25,940,000.00
23. Accrued liabilities
Item 30 June 2019 Amount at year-begin Reason
Offering guarantee outside 26,726,232.38 26,726,232.38 Note
Note: On 29 November 2013, Shenzhen Server and Jiahua Building Products (Shenzhen) Co., Ltd. (Jiahua Building)
signed a supplementary term aiming at equity transfer over equity attribution and division of Yapojiao Dock, which
belongs to Shenzhen Server, Huidong Server, and Huidong Nianshan Town Government as well as its subordinate
Nianshan Group. In order to solve this remaining historic problem, Shenzhen Server saved RMB 12,500,000.00 in
condominium deposit account as guarantee. In addition, Server pledged its 20% of equity holding from Huidong
Server to Jiahua Architecture with pledge duration of 2 years. The amount of collateral on loans could not exceed RMB
15,000,000.00. Relevant losses with the event concerned predicted amounting to RMB 27,500,000.00. In concerned
68
with the attorney fees for deal with problems left over from history, totally 773,767.62 Yuan costs from 2014 to 30 June
2019, the ending balance amounted as 26,726,232.38 Yuan
24. Deferred income
Increase in the Decreased in the
Item Amount at year-begin 30 June 2019
year year
Government subsidy 75,612,259.33 38,097,273.00 2,008,943.45 111,700,588.88
Including, items with government subsidy involved:
Decreased in the year
Assets
Balance at Increase in Amount
Liability Other 30 June 2019 /income
year-begin the year reckoned in
decrease related
other income
Subsidy for
low-nitrogen 25,687,642.10 - 251,403.55 - 25,436,238.55 Assets related
transformation
Information
147,843.08 - 30,588.24 - 117,254.84 Assets related
construction
Support fund of
recycling economy 8,098,276.87 - 323,501.46 - 7,774,775.41 Assets related
for sludge drying
Treasury subsidies
3,081,250.00 - 127,500.00 - 2,953,750.00 Assets related
for sludge drying
Special funds for
energy conservation
798,260.62 - 57,018.66 - 741,241.96 Assets related
and emission
reduction
Funded of energy
efficiency
436,320.00 - 17,280.00 - 419,040.00 Assets related
improvement for
electric machine
Subsidy for quality
promotion of the air
32,732,666.66 38,097,273.00 1,201,651.54 - 69,628,288.12 Assets related
environment in
Shenzhen
Cogeneration of
heat and electricity 4,630,000.00 - - - 4,630,000.00 Assets related
Project
Total 75,612,259.33 38,097,273.00 2,008,943.45 - 111,700,588.88
69
25. Share capital
Changes in the year (+,-)
Shares
Balance at New transferr Balance on Jun.
Item Bonus
year-begin shares ed from Other Subtotal 30, 2019
share
issued capital
reserve
Total shares 602,762,596.00 - - - - - 602,762,596.00
26. Capital reserve
Increase in the Decreased
Item Balance at year-begin 30 June 2019
year in the year
Capital premium 233,035,439.62 - - 233,035,439.62
Other capital reserve 129,735,482.48 - - 129,735,482.48
Total 362,770,922.10 - - 362,770,922.10
27. Surplus reserves
Increase in the Decreased
Item Balance at year-begin 30 June 2019
year in the year
Statutory surplus reserve 310,158,957.87 - - 310,158,957.87
Discretionary surplus reserves 22,749,439.73 - - 22,749,439.73
Total 332,908,397.60 - - 332,908,397.60
28. Retained profit
Item 30 June 2019 Balance at year-begin
Retained profit of last year before adjusted 679,429,935.81 660,176,169.69
Total retained profit adjusted (increased with +,
-
decreased with -)
Retained profit at beginning of the year after adjusted 679,429,935.81 660,176,169.69
Add: net profit attributable to shareholders of parent
-25,283,190.82 19,253,766.12
company
Retained profit at year-end 654,146,744.99 679,429,935.81
29. Operating income and operating cost
70
Jan. – Jun. 2019 Jan. – Jun. 2018
Item
Income Cost Income Cost
Main business 407,283,308.09 382,899,068.89 1,078,030,178.26 968,719,412.92
Other business 841,308.29 98,068.80 1,730,036.54 975,640.11
Total 408,124,616.38 382,997,137.69 1,079,760,214.80 969,695,053.03
30. Tax and surcharge
Item Jan. – Jun. 2019 Jan. – Jun. 2018
City maintenance tax 347,935.14 2,286,803.77
Real estate tax 1,299,068.45 1,275,543.49
Stamp tax 223,246.10 520,484.00
Education surtax 239,773.87 572,820.01
Land use tax 622,976.03 50,960.52
Vehicle and vessel use tax 21,056.56 15,390.94
Environmental protection tax 71,377.28 -
Total 2,825,433.43 4,722,002.73
31. Sales expense
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Salary, welfare and social insurance 211,222.62 350,272.34
Communication charge 3,600.00 1,800.00
Entertainment expense 115,344.00 57,273.00
Vehicles expenses 15,559.00 7,500.00
Inspection charges 5,707.55 6,509.45
Labor insurance fee 10,530.68 6,682.10
Rental fee 14,400.00 3,600.00
Property insurance 49,130.74 50,318.44
Agency engagement fee 37,735.85 37,735.85
Sludge treatment costs 2,091,758.08 1,125,046.86
Other 11,281.00 3,500.00
Total 2,566,269.52 1,650,238.04
32. Administration expense
Item Jan. – Jun. 2019 Jan. – Jun. 2018
71
Staff remuneration 23,892,967.48 27,925,808.57
Rental fee 3,288,377.42 3,092,069.50
Social expenses 1,532,058.32 1,558,869.52
Agency fee 1,231,759.70 646,103.90
Fleet cost 1,007,200.26 1,861,732.77
Board charges 588,713.32 546,064.70
Depreciation 2,735,952.70 1,987,153.39
Amortization of intangible assets 924,080.54 935,811.89
Specific expenses 14,584.43
-
Environmental expense 985,970.24 874,452.57
Sundry expenses 1,636,173.21 1,387,173.86
Expenses for enterprise culture 416,397.26 103,725.00
Property management expense 473,682.63 455,396.71
Office expenses 351,693.34 346,790.68
Communication charge 555,998.52 647,596.16
Business traveling charge 309,115.10 259,624.12
Stock charge 86,822.94 29,929.33
Labor union dues 303,547.56 290,467.56
Personnel education fund 55,175.25 61,044.53
Other 4,556,178.71 3,657,250.85
Total 44,931,864.50 46,681,650.04
33. Financial expenses
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Interest expenditure 23,542,971.21 24,038,132.91
Less : interest income 13,189,605.67 2,187,166.10
Exchange gains/losses -6,301.58 -73,770.20
Other 292,203.46 517,089.32
Total 10,639,267.42 22,294,285.93
34. Other income
Item Jan. – Jun. 2019 Jan. – Jun. 2018 Amount reckoned into
72
current non-recurring
gain/loss
Specific subsidy for quality promotion of the air
1,201,651.54 - 1,201,651.54
environment in Shenzhen
Subsidy for low-nitrogen transformation 251,403.55 1,276,992.42 251,403.55
Enterprise information construction subsidy 30,588.24 30,588.24 30,588.24
Subsidy for transformation of energy-saving
57,018.66 247,005.52 57,018.66
technology
Treasury subsidies for sludge drying 127,500.00 127,500.00 127,500.00
Support fund of recycling economy for sludge drying 323,501.46 323,501.46 323,501.46
Funded of energy efficiency improvement for electric
17,280.00 17,280.00 17,280.00
machine
VAT rebates 1,753,212.01 2,013,937.74 -
Special funds for the development of independent
- 100,000.00 -
innovation industries
Supporting funds of office occupancy for listed
1,000,000.00 - 1,000,000.00
companies
Reward to encouraging small and medium-sized
200,000.00 - 200,000.00
enterprise to growth as a scale-sized company
Total 4,962,155.46 4,136,805.38 3,208,943.45
35. Investment income
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Long-term equity investment income by equity -677,552.37 -1,076,904.31
Investment income from disposal of long-term
- -
equity investments
Subtotal -677,552.37 -1,076,904.31
36. Gains from assets disposal
Amount reckoned
into current
Item Jan. – Jun. 2019 Jan. – Jun. 2018
non-recurring
gain/loss
Gain/loss from fixed assets disposal -417,926.32 - -417,926.32
Total -417,926.32 - -417,926.32
73
37. Non-operating revenue
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Gains from damage and scrap of the non-current
98,666.50 -
assets
Other 4,500.00 4,775.00
Total 103,166.50 4,775.00
38. Non-operating expense
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Expenses from external donation - -
Losses from damage and scrap of the non-current
- 849,018.73
assets
Other 46,124.97 10,000.00
Total 46,124.97 859,018.73
39. Income tax expenses
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Current income tax measured by tax law and
1,157,865.76 8,092,879.62
relevant regulation
40. Cash flow statement
(1) Cash received with other operating activities concerned
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Subsidy received 39,297,273.00 -
Deposit of natural gas collected 13,431,789.29 -
Interest income 12,982,668.91 2,166,649.41
Other 4,321,781.62 3,843,730.64
Total 70,033,512.82 6,010,380.05
(2) Cash paid for other operating activities
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Expense on agency appointment 1,231,759.70 646,103.90
Fund for the Board 588,713.32 546,064.70
Leasing expense 3,762,060.05 3,547,466.21
Entertainment expense 1,532,058.32 1,558,869.52
74
Vehicles expense 1,007,200.26 1,861,732.77
Enterprise culture 416,397.26 103,725.00
Communication fee 555,998.52 647,596.16
Environment protection fee 985,970.24 874,452.57
Other 16,424,022.91 16,098,724.40
Total 26,504,180.58 25,884,735.23
(3) Cash received with financing activities concerned
Item Jan. – Jun. 2019 Jan. – Jun. 2018
Deposit received 7,303,338.86 15,460,000.00
41. Supplementary information on cash flow statement
(1) Regulate the net profit into the cash flow of operating activities
Supplementary information Jan. – Jun. 2019 Jan. – Jun. 2018
1. Regulate the net profit into the cash flow of
operating activities
Net profit -33,069,503.64 28,829,762.75
Add: Asset impairment provision - -
Depreciation of fixed assets 44,801,828.95 64,478,013.54
Amortization of intangible assets 1,232,100.02 1,243,831.37
Amortization of long-term deferred expenses 22,548.81 -
Loss (gain) from disposing fixed assets, intangible
417,926.32 -
assets and other long-term assets
Abandonment loss from fixed assets - 849,018.73
Financial expenses(gain) 23,542,971.21 24,038,132.91
Investment loss(gain) 677,552.37 1,076,904.31
Decrease (increase) of deferred income tax assets - -
Decrease (increase)of inventory 278,786.02 8,118,805.74
Decrease (increase) of receivable operating items 4,043,360.79 -60,023,522.47
Increase (decrease) of payable operating items 14,269,806.04 -16,020,312.60
Net cash flow from operation activities 56,217,376.89 52,590,634.28
2. Major investment and financing activities not
involving cash income and expenditure:
Debt capitalization - -
Convertible company bond due within one year - -
75
Fixed assets acquired under finance leases - -
3. Net change of cash and cash equivalents:
Ending balance of cash and cash equivalent 1,029,883,840.43 763,737,487.23
Less: Balance of cash and cash equivalent at
914,956,611.70 411,613,377.07
period-begin
Net increase of cash and cash equivalents 114,927,228.73 352,124,110.16
(2) Composition of cash and cash equivalent
Item Jan. – Jun. 2019 Jan. – Jun. 2018
I. Cash 1,029,883,840.43 763,737,487.23
Including: Cash on hand 58,460.53 142,604.63
Bank savings available for payment needed 1,026,182,249.71 430,415,610.30
Other monetary capital available for payment needed 3,643,130.19 333,179,272.30
II. Cash equivalent
III. Balance of cash and cash equivalent at period-end 1,029,883,840.43 763,737,487.23
42. Assets of ownership or use right restricted
Item 30 June 2019 Restricted reason
Monetary Fund Deposit
3,569,453.88
Total 3,569,453.88
43. Foreign currency
Foreign currency balance Conversion
Item RMB converted
on 30 June 2019 rate
Monetary fund
Including: USD 845,823.77 6.8747 5,814,787.00
Euro 976.71 7.8170 7,634.94
HKD 541,541.36 0.8797 476,404.20
SGD 4,784.81 5.0805 24,309.23
VII. Change of consolidate scope
No change of consolidate scope in the year.
VIII. Equity in other entity
76
1. Equity in subsidiaries
(1) Composition of the Group
Main operation Business Shareholding ratio
Subsidiary Registration Acquired by
place nature (%)
place
Shenzhen Server(note) Shenzhen Shenzhen Trading 50 Establishment
Power
New Power Shenzhen Shenzhen 100 Establishment
generation
Power
Zhongshan Power Zhongshan Zhongshan 80 Establishment
generation
Engineering
Engineering Company Shenzhen Shenzhen 100 Establishment
consulting
Power
Weimei Power Dongguan Dongguan 70 Establishment
generation
Environment Protection
Shenzhen Shenzhen Engineering 100 Establishment
Company
Singapore Company Singapore Singapore Trading 100 Establishment
Shen Storage Zhongshan Zhongshan Storage 80 Establishment
Import & Not under the
Syndisome Hong Kong Hong Kong 100
export trading same control
Note : The Company holds 50% equity of Shenzhen Server, and takes majority voting rights in Shenzhen Server, thus,
the Company owes substantial control; Shenzhen Server included in the consolidate scope of the financial statement.
(2) Important non-wholly-owned subsidiary
Gains/losses Dividend announced
Share-holding ratio of attributable to to distribute for Ending equity of
Subsidiary
minority (%) minority in the minority in the minority
Period Period
Zhongshan Power 20 -2,397,448.01 - -21,396,423.11
Weimei Power 30 -4,483,812.65 - 25,033,607.53
(3) Main finance of the important non-wholly-owned subsidiary
Balance on Jun. 30, 2019
Subsidiary Non-current Non-current
Current assets Total assets Current liability Total liability
assets liability
Zhongsha
76,433,540.69 542,534,051.94 618,967,592.63 698,273,292.30 27,676,415.86 725,949,708.16
n Power
Weimei
93,251,765.60 484,993,052.23 578,244,817.83 490,169,459.37 4,630,000.00 494,799,459.37
Power
77
(Continued)
Balance at year-begin
Subsidiary Non-current Non-current
Current assets Total assets Current liability Total liability
assets liability
Zhongsha
98,062,301.06 554,996,045.40 653,058,346.46 716,297,767.96 31,755,453.99 748,053,221.95
n Power
Weimei
96,642,222.01 496,340,540.51 592,982,762.52 489,961,361.90 4,630,000.00 494,591,361.90
Power
(Continued)
Current period
Subsidiary Total comprehensive Cash flow from
Operation Income Net profit
income operation activity
Zhongshan Power 66,364,051.74 -11,987,240.04 -11,987,240.04 30,421,274.57
Weimei Power 110,328,414.74 -14,946,042.16 -14,946,042.16 13,837,122.59
(Continued)
Last period
Subsidiary Total comprehensive Cash flow from
Operation Income Net profit
income operation activity
Zhongshan Power 239,056,530.40 1,968,342.26 1,968,342.26 130,078,167.14
Weimei Power 249,516,171.77 -1,065,959.31 -1,065,959.31 28,275,188.27
2. Equity in joint venture and cooperative enterprise
(1) Joint venture or cooperative enterprise
Joint venture and Shareholding ratio (%)
cooperative Main operation Registrati Business
Accounting treatment
enterprise place on place nature
Directly Indirectly
Huidong Server Huizhou Huizhou Wharf 40 Equity method
(2) Financial information for minor joint venture and cooperative enterprise
Ending balance/amount in Balance at year-begin/amount in
Item
the year last year
Joint venture
Total investment book value 15,371,492.58 16,049,044.95
Total of the follow counted by share-holding ratio
—Net profit -677,552.37 -1,076,904.31
78
—Other comprehensive benefits
—Total comprehensive income -677,552.37 -1,076,904.31
Note: The 60% equity of Huidong Server, held by controlling subsidiary Shenzhen Server are transferred on 9
December 2013, the other 40% equity will re-measured by appraisal value when losing the controlling right.
IX. Risks associated with financial instruments
The Company's main financial instruments include equity investment, borrowings, accounts
receivable, accounts payable, etc., see details of each financial instrument in related items of this
annotation xi. The risks associated with these financial instruments and the risk management policies
adopted by the Company to reduce these risks are described as below. The management of the
Company manages and monitors these risk exposures to ensure that the above risks are controlled
within the limit range.
The Company uses the sensitivity analysis technique to analyze the possible impact of the risk
variable on the current profit and loss or the shareholders' equity. Since any risk variable rarely
changes in isolation, and the correlation existing among the variables shall have a significant effect on
the final amount of changes about a certain risk variable, therefore, the following proceeds by
assuming that the change in each variable is independent.
(i) Risk management objectives and policies
The objective of the Company's risk management is to gain a proper balance between risks and profits,
minimize the negative impact of risks on the Company's operating results, and maximize the benefits
of shareholders and other equity investors. Based on the risk management objective, the basic strategy
of the Company's risk management is to identify and analyze the risks faced by the Company,
establish appropriate bottom line to bear the risks and carry out risk management, and timely and
reliably supervise the risks so as to control the risks within the limit range.
1 Market risk
(1) Foreign exchange risk
Foreign exchange risk refers to the risk of losses due to exchange rate changes. The Company’s
foreign exchange risk is mainly related to the US dollar. On June 30, 2019, except for the balance of
foreign currency monetary items under VI-44 foreign currency, the assets and liabilities of the
Company are RMB balance. The foreign exchange risk arising from the assets and liabilities of such
foreign currency balances may have an impact on the Company's operating results.
(2) Interest rate risk - cash flow change risk
The Company's cash flow change risk of financial instruments arising from interest rate change is
mainly related to the floating interest rate bank loans (see details in annotation xi, 16, annotation xi,
22).
79
Interest rate risk sensitivity analysis:
The interest rate risk sensitivity analysis is based on the following assumptions:
Changes in market interest rates affect the interest income or expense of financial instruments with
variable interest rate;
For financial instruments with fixed rate by fair value measurement, the changes in market interest
rates only affect their interest income or expense;
For derivative financial instruments designated as hedging instruments, the changes in market
interest rates affect their fair value, and all interest rate hedging prediction is highly effective;
Calculate the changes in fair value of derivative financial instruments and other financial assets and
liabilities by using the cash flow discount method at the market interest rate at the balance sheet date.
On the basis of above assumptions, in case that other variables keep unchanged, the pre-tax effect of
possible reasonable changes in interest rates on current profits and losses and shareholders' equity is
as follows:
The period Last period
Rate changes Impact on shareholders’ Impact on shareholders’
Impact on profit Impact on profit
equity equity
5% increased -1,177,083.56 -1,139,067.58 -1,180,390.92 -1,019,303.74
5% decreased 1,177,083.56 1,139,067.58 1,180,390.92 1,019,303.74
2. Credit risk
On June 30, 2019, the maximum credit risk exposure that could cause financial loss to the Company is
mainly due to the failure of the other party to fulfill the obligations, resulting in losses to the
Company's financial assets, including:
The book value of financial assets confirmed in the consolidated balance sheet; for the financial
instrument measured by fair value, the book value reflects its risk exposure but not the maximum risk
exposure, and its maximum risk exposure will change with the changes in future fair value.
To reduce the credit risk, the Company has set up a team to determine the credit lines, examine and
approve the credit, and perform other monitoring procedures to ensure that necessary measures are
taken to recover the expired claims. In addition, the Company reviews the recovery of each account
receivable at each balance sheet date to ensure that sufficient provision for bad debts is made for
uncollectible funds. As a result, the Company's management believes that the Company's credit risk
has been greatly reduced.
The company's working capital is deposited in banks with high credit ratings, so the credit risk of
working capital is rather low.
3. Liquidity risk
In managing the liquidity risk, the Company keeps the cash and cash equivalents that the management
considers to be sufficient and supervise them so as to meet the Company's operating needs and reduce
80
the impact of fluctuations in cash flows. The Company’s management monitors the use of bank loans
and ensures to comply with the loan agreement.
The Company uses bank loans as the main source of funds.
X. Related party and related transactions
1. Parent company of the Group
Share holding proportion of any shareholder of the Company didn't reach 50%, and couldn't form a
holding relationship of the Company through any methods. The Company has no parent company.
2. Subsidiaries of the Company
Found more in 1. Subsidiary in Note VIII
3. Joint venture and affiliated enterprise of the Group
Found more in 2. Equity in joint venture or affiliate business in Note VIII
4. Other related party
Other related party Relationship with the Group
Shareholders have major influence on the
Shenzhen Energy Group Co., Ltd.(” Energy Group”) Company
Dongguan Weimei Ceramics Industrial Park Co., Ltd.(”Weimei Ceramics”) Minority shareholders of the subsidiaries
Zhongshan Xingzhong Group Co., Ltd.(“Xingzhong Group”) Minority shareholders of the subsidiaries
Subsidiary of ultimate controller of Energy
Shenzhen Mawan Power Co., Ltd. (“Mawan Power Company”) Group
Subsidiary of ultimate controller of Energy
Shenzhen Moon Bay Oil Harbor Co., Ltd. (“Moon Bay Oil Company”) Group
Subsidiary of ultimate controller of Energy
Shenzhen Energy Group Holding Co., Ltd. (” Energy Holding”) Group
Subsidiary of ultimate controller of Energy
Shenzhen Energy Gas Investment Holding Co., Ltd.
Group
Subsidiary of ultimate controller of Energy
Fuel Branch of Shenzhen Energy Group Co., Ltd.
Group
Director of the Company and other senior executives Key management staff
5. Account payable/receivable from related parties
(1) Account receivable
30 June 2019 Balance at year-begin
Item Bad debt Bad debt
Book balance Book balance
provision provision
Other account receivable:
81
Huidong Server 10,032,761.42 - 10,205,161.44 -
Huidong Server managed account 13,069,204.43 - 12,933,737.96 -
Total 23,101,965.85 - 23,138,899.40 -
(2) payable items
30 June 2019 Balance at year-begin
Item Bad debt Bad debt
Book balance Book balance
provision provision
Account payable:
Shenzhen Energy Gas Investment Holding
9,152,657.73 - - -
Co., Ltd.
Fuel Branch of Shenzhen Energy Group
5,371,135.54 - - -
Co., Ltd.
Total 14,523,793.27 - - -
XI. Commitment
1. Major commitment
Till the balance sheet day, the condition of irrevocable operating lease contract the Group externally
signed is as follow:
Item 30 June 2019 Amount at year-begin
Minimum lease payments of irrevocable operating lease:
The first year after balance sheet day 1,557,680.33 1,557,680.33
The second year after balance sheet day 1,557,680.33 1,557,680.33
The third year after balance sheet day 1,557,680.33 1,557,680.33
Subsequent years 55,834,580.91 56,613,421.07
Total 60,507,621.90 61,286,462.06
2. Contingency
Up to 30 June 2019, the Company has no major contingency that need to released.
XII. Events Occurring after the Balance Sheet Date
Up to 30 June 2019, the Company has no events occurring after the balance sheet date that need to
released.
XIII. Other important events
1. Segment information
82
(1) Determining basis and accounting policies of reportable segments
According to the Group's internal organization structure, management requirements and internal
reporting system, the Group's business is divided into three operating segments including power and
heat supply, fuel oil trade and other business, the Group's management periodically evaluates the
operating results of these segments so as to determine the allocation of resources and assess their
performances.
Segmental reporting information is disclosed in accordance with the accounting policies and
measurement standards adopted by each segment for reporting to the management, the measurement
basis keep pace with the accounting and measurement basis used for preparing financial statements.
(2) Financial information of reportable segment
Power supply and Offset between
Item Fuel oil trade Other Total
heat supply segments
Main business
347,598,428.46 - 59,684,879.63 - 407,283,308.09
income
Main business
375,590,956.77 40,208,692.21 32,900,580.09 382,899,068.89
cost
Total assets 4,364,697,648.99 126,129,193.89 351,202,391.86 1,428,021,522.70 3,414,007,712.04
Total liabilities 2,310,979,970.27 29,504,654.49 54,090,179.39 984,296,967.35 1,410,277,836.80
2. Other events
Nil
XIV. Note to main items of financial statements of the Parent Company
1. Account receivable
(1) Age analysis
Account age 30 June 2019
Within one year 65,350,406.33
1 to 2 years -
2 to 3 years -
3 to 4 years -
4 to 5 years -
Over 5 years -
Subtotal 65,350,406.33
Less: Bad debt provision -
Total 65,350,406.33
83
(2) According to accrual method for bad debts
30 June 2019
Book balance Bad debt provision Book value
Category Accrual
Proporti
Amount Amount proportion
on (%)
(%)
Account receivable with single
- - - - -
provision for bad debts
Including: - - - - -
Account receivable with bad debt
65,350,406.33 100.00 - - 65,350,406.33
provision accrual based on portfolio
Including: Portfolio 1: low risk 65,350,406.33 100.00 - - 65,350,406.33
Total 65,350,406.33 100.00 - - 65,350,406.33
(Continued)
Amount at year-begin
Book balance Bad debt provision
Category
Proportio Proportion Book value
Amount Amount
n (%) (%)
Account receivable with individual
major amount and withdrawal bad debt - - - - -
provision independently
Account receivable with bad debt
provision accrual based on similar 50,415,180.20 100.00 - - 50,415,180.20
credit risk characteristics of a portfolio
Account receivable with individual
minor amount but withdrawal bad debt - - - - -
provision independently
Total 50,415,180.20 100.00 - - 50,415,180.20
(3) Balance of top five receivables in debtors at end of the period
The total amount of the Company’s top 5 balance of receivables on 30 June 2019 collected by debtors is
65,350,406.33 Yuan, accounting for 100% of the total amount of year end balance of receivables
2. Other account receivable
84
Item 30 June 2019 Amount at year-begin
Interest receivable
-
Dividend receivable
-
Other account receivable 834,707,247.88 1,048,357,217.53
Total 834,707,247.88 1,048,357,217.53
(1) Other account receivable
①Age analysis
Account age 30 June 2019
Within one year 97,885,481.41
1 to 2 years 188,885,190.40
2 to 3 years 137,045,561.62
3 to 4 years 36,000,000.00
4 to 5 years -
Over 5 years 402,220,657.89
Subtotal 862,036,891.32
Less: Bad debt provision 27,329,643.44
Total 834,707,247.88
②By nature
Nature 30 June 2019 Amount at year-begin
Intercourse funds between subsidiary 831,083,348.18 1,046,559,260.31
Other Intercourse funds 30,953,543.14
29,127,600.66
Subtotal 862,036,891.32 1,075,686,860.97
Less: Bad debt provision 27,329,643.44
27,329,643.44
Total 834,707,247.88 1,048,357,217.53
③Accrual of bad debt provision
Phases I Phases II Phases III
Expected credit Expected credit
Expected credit
Bad debt provision losses for the entire losses for the Total
losses over next
duration (without entire duration
12 months
credit impairment (with credit
85
occurred) impairment
occurred)
Balance on Jan. 1, 2019 - 27,329,643.44 - 27,329,643.44
Book balance of other account receivable
dated 1 Jan. 2019:
——Turn to phase II
——Turn to phase III
——Return to Phase II
——Return to Phase I
Current accrual
Current switch back
Rewrite in the period
Write-off in the period
Other changes
Balance on Jun. 30, 2019 - 27,329,643.44 - 27,329,643.44
④Bad debt provision
Current amount changed
Balance at
Category Collected or Rewrite or 30 June 2019
year-begin Accrual
switch back write-off
Withdrawal bad debt
27,329,643.44 - - - 27,329,643.44
provision independently
Portfolio 1:low risk - - - - -
Total 27,329,643.44 - - - 27,329,643.44
⑤Top five other account receivables at year-end balance listed by arrears party
Proportion in total other
Relationship with
Name of the company Amount Account age account receivable
the Company
(%)
Within one year
Zhongshan Power Subsidiary 681,691,632.20 79.11
to Over 5 years
Weimei Power Subsidiary 135,307,227.35 1-2 years 15.70
Engineering Company Subsidiary 7,917,625.70 Within one year 0.92
Environment Protection
Subsidiary 4,644,990.94 Within one year 0.54
Company
Singapore Subsidiary 1,521,871.99 Over 5 years 0.18
86
Total 831,083,348.18 96.45
3. Long-term investment
(1) Long-term equity investments
30 June 2019 Balance at year-begin
Item Depreciation Depreciation
Book balance Book value Book balance Book value
reserves reserves
Investment to
691,982,849.76 388,641,684.76 303,341,165.00 691,982,849.76 388,641,684.76 303,341,165.00
subsidiary
Investment to
joint venture and - - - - - -
affiliate enterprise
Total 691,982,849.76 388,641,684.76 303,341,165.00 691,982,849.76 388,641,684.76 303,341,165.00
(2) Investment to subsidiary
Impairmen
Year-end balance
Invested Balance at Increase in Decreased t provision
30 June 2019 of depreciation
enterprise year-begin the year in the year accrual in
reserves
the Year
Shenzhen Server 26,650,000.00 - - 26,650,000.00 - -
New Power 71,270,000.00 - - 71,270,000.00 - -
Zhongshan
62,994,965.00 - - 62,994,965.00 - 347,745,035.00
Power
Engineering
6,000,000.00 - - 6,000,000.00 - -
Company
Weimei Power 74,422,400.00 - - 74,422,400.00 - 40,896,649.76
Singapore
6,703,800.00 - - 6,703,800.00 - -
Company
Environment
Protection 55,300,000.00 - - 55,300,000.00 - -
Company
Total 303,341,165.00 - - 303,341,165.00 - 388,641,684.76
4. Operation income/operation cost
Jan. – Jun. 2019 Jan. – Jun. 2018
Item
Income Cost Income Cost
87
Main business 127,282,753.58 166,390,507.99 337,240,114.89 361,394,602.84
Other business 38,231,297.65 5,937,627.54 69,606,326.95 11,835,458.28
Total 165,514,051.23 172,328,135.53 406,846,441.84 373,230,061.12
XV. Supplementary information
1. Statement of non-recurring gains/losses
Item Jan. – Jun. 2019
Gains/losses from the disposal of non-current asset
-417,926.32
Governmental subsidy calculated into current gains and losses, with closely
related with the normal business of the Company, excluding the fixed-amount
or fixed-proportion governmental subsidy according to the unified national 3,208,943.45
standard)
Gain/loss of debt reorganization
-
Switch-back of the impairment reserves of receivables that has impairment test
independently -
Natural gas import VAT refund
-
Other non-operating income and expenditure except for the aforementioned
items 57,041.53
Subtotal
2,848,058.66
Impact on income tax -58,568.53
Impact on minority shareholders’ equity (post-tax) 33,829.87
Total
2,823,320.00
2. ROE and EPS
Weighted average EPS
Profit in the Period
ROE (%) Basic EPS Diluted EPS
Net profit attributable to shareholders of the listed
-1.29% -0.04 -0.04
company
88
Net profit attributable to shareholders of the listed
company after deducting non-recurring gains and -1.43% -0.05 -0.05
losses
89
