CHENGDE NANJIANG CO., LTD.
REPORT OF THE AUDITORS
DAHUASHENZI[2014]NO. 005026 (EN)
CHENGDE NANJIANG CO., LTD.
REPORT OF THE AUDIORS & FINANCIAL STATEMENTS
YEAR 2013
CONTENTS PAGES
1、AUDITOR’S REPORT 1-2
2、THE (CONSOLIDATED) FINANCIAL STATEMENTS STATEMENT OF (CONSOLIDATED) FINANCIAL
POSITION 3-4
3、STATEMENT OF (CONSOLIDATED) COMPREHENSIVE INCOME
5-6
4、STATEMENT OF (CONSOLIDATED) CHANGES IN OWNERS’ EQUITY
7-10
5 、STATEMENT OF (CONSOLIDATED) CASH FLOWS
11-12
6、NOTES TO (CONSOLIDATED) FINANCIAL STATEMENTS 13-68
The auditors’ report and the accompanying financial statements are English translations
of the Chinese auditors’ report and financial statements. In case the English version does not conform to the
Chinese version, the Chinese version prevails.
Report Of The Auditors
DAHUASHENZI [2014] NO. 005026 (EN)
To the Shareholders of
CHENGDE NANJIANG CO., LTD. :
We have audited the accompanying statement of (consolidated) financial position of
CHENGDE NANJIANG CO., LTD. as at 31 December 2013, and the statement of
(consolidated) comprehensive income, statement of (consolidated) cash flows, notes
to (consolidated) financial statements for the year ended 31 December 2013.
1．Responsibility of the management
The preparation of the financial statements in accordance with “Accounting
Standards for Business Enterprises” and “China Accounting Systems for Business
Enterprises”, is the responsibility of the management of the company. The
responsibility includes 1) designing, implementing and maintaining the internal
controls over financial reporting, in order to avoid material misstatement due to
fraud or error; 2) selecting and using appropriate accounting principles; and 3)
making logical accounting estimate.
1
2. Responsibility of CPAs
Our responsibility is to express an opinion on these financial statements based
on our audit. We conduct our audit in accordance with Auditing Standards for
Chinese Certified Public Accountants. Those standards require that we abide by
professional ethics, plan and perform the audit to obtain reasonable assurance on
whether the financial statements are free from material misstatement. An audit
includes the consideration of internal control over financial reporting as a basis for
making risk assessment and designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. An audit includes
selecting and performing appropriate audit procedures based on auditors’ judgment
to gather evidence supporting the amounts and disclosures in the financial
statements. An audit also includes an assessment of the accounting principles used
and significant estimates made by management, as well as an evaluation of the
overall financial statement presentation. We believe that our audits provide a
sufficient and reasonable basis for our opinion.
3. Audit opinions
In our opinion based on our examinations, the (consolidated) financial
statements are presented fairly, in all material respects, the (consolidated) financial
position of your company as at 31 December 2013 and the results of its
(consolidated) operations and (consolidated) cash flows for the year ended, in
conformity with the “Accounting Standards for Business Enterprises” and
“Accounting Systems for Business Enterprises” promulgated by the State.
Da Hua Certified Public Accountants Certified Public Accountants:
(Special General Partnership) Certified Public Accountants:
Beijing, P.R.China 23 April 2014
2
DAHUASHENZI [2014] NO. 005026 (EN) Audit Report
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
As at December 31, 2013
Monetary unit:RMB
ASSETS NOTE Dec 31, 2013 Dec 31, 2012
Current assets：
Cash and cash equivalents 1 89,426,891.22 81,546,046.87
Receivables 2 117,180.60 -
Prepayments 3 33,836,310.22 308,292.36
Other receivables 4 4,976,108.67 28,169,019.64
Inventory 5 190,569,964.32 20,490,734.61
Other current assets 6 4,478,158.24 9,000,000.00
Total current assets 323,404,613.27 139,514,093.48
Long-term equity investments 7 6,626,905.49 -
Fixed assets 8 11,296,353.61 24,742,103.60
Construction in progress 9 - 402,587.43
Biological assets 10 258,190.34 -
Intangible assets 11 28,721,653.41 26,705,104.38
Goodwill 12 1,809,762.89 -
Long-term deferred expenses 13 7,811,572.52 734,424.92
Deferred tax assets 14 834,223.19 1,518,810.84
Total non-current assets 57,358,661.45 54,103,031.17
Total assets 380,763,274.72 193,617,124.65
Representative of the legal entity: Person in charge of acounting function:
3
DAHUASHENZI [2014] NO. 005026 (EN) Audit Report
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CONSOLIDATED FINANCIAL POSITION (CONTINUED)
As at December 31, 2013
Monetary unit:RMB
LIABILITIES AND OWNER'S EQUITY NOTE Dec 31, 2013 Dec 31, 2012
Current liabilities：
Notes Payable 16 26,000,000.00 -
Payable 17 3,660,631.16 2,052,001.91
Receivable in advance 18 53,821,113.16 7,120,711.50
Accrued payroll 19 6,205,363.50 6,328,453.28
Tax payable 20 18,026,904.58 11,042,907.39
Other payable 21 36,044,983.70 52,178,378.96
Total current liabilities 143,758,996.10 78,722,453.04
Non-current liabilities
Long-term borrowing - -
Special Payable - -
Total non-current liabilities - -
Total liabilities 143,758,996.10 78,722,453.04
Owner's equity：
Share capital 22 706,320,000.00 706,320,000.00
Capital reserves 23 456,470,250.78 456,470,250.78
Surplus reserves 24 76,791,550.17 76,791,550.17
Retained earnings 25 -1,029,880,318.18 -1,124,687,129.34
Total owner s equity attributable to parent
209,701,482.77 114,894,671.61
company
Minority interest 27,302,795.85 -
Total owner's equity 237,004,278.62 114,894,671.61
Total liabilities and owner's equity 380,763,274.72 193,617,124.65
Representative of the legal entity: Person in charge of acounting function:
4
DAHUASHENZI [2014] NO. 005026 (EN) Audit Report
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
FOR THE YEAR ENDED 2013
Monetary unit:RMB
Items Note 2013 2012
I. Total revenues from main operations 26 363,952,258.89 79,512,004.22
Add: Operationg income 363,952,258.89 79,512,004.22
II. Total costs from main operations 364,595,768.48 86,243,667.29
Less: Cost of main operations 26 339,083,312.47 58,424,002.63
Business tax and surcharge 27 3,135,115.82 4,949,457.23
Marketing expenses 28 3,263,636.58 -
Administrative expenses 28 21,000,380.87 15,939,028.09
Financial expenses 28 616,644.15 2,390,155.66
Asset impairment loss 29 -2,503,321.41 4,541,023.68
Add: Gain from change of fair value
Return on investment 30 164,602.55 15,731.51
III. Profit from main operations -478,907.04 -6,715,931.56
Add: Non-operating income 31 132,325,264.45 109,415,952.53
Less: Non-operating expenses 32 615,794.39 63,261,820.36
IV. Total profit 131,230,563.02 39,438,200.61
Less: Income taxes 33 31,295,705.90 6,543,831.79
VI. Net profit 99,934,857.12 32,894,368.82
Net profit attributed to parement company 94,806,811.16 32,894,368.82
Net profit attributed to minority 5,128,045.96 -
VII. Earnings per share
Basic earnings per share 0.13 0.05
Diluted earning per share 0.13 0.05
VIII. Other comprehensive income - 7,104,364.09
IX. Total comprehensive income 99,934,857.12 39,998,732.91
Total comprehensive income attributed to parent company 94,806,811.16 39,998,732.91
Total comprehensive income attributed to minority 5,128,045.96 -
Representative of the legal entity: Person in charge of acounting function:
5
DAHUASHENZI [2014] NO. 005026 (EN) Audit Report
CHENGDE NANJIANG CO., LTD.
STATEMENT CONSOLIDATED OF CASH FLOWS
December 31, 2013
2013 2012
Items Note RMB RMB
I. Cash Flows From Operating Activities
Cash received from customers 415,792,262.19 56,604,102.70
Cash received from tax refund - -
Cash received from other operation related activities 33 59,481,903.92 66,559,511.34
Cash Inflows 475,274,166.11 123,163,614.04
Cash payments for suppliers 590,408,836.19 33,226,555.77
Cash paid to and on behalf of employees 8,150,877.53 2,357,550.98
Cash paid to taxes and rates 35,021,456.47 24,864,917.67
Cash paid for other operation related activities 33 46,246,028.58 67,101,247.94
Cash Outflows 679,827,198.77 127,550,272.36
Net Cash Flow From Operating Activities -204,553,032.66 -4,386,658.32
II. Cash Flows From Investing Activities
Cash received from withdrawing investment 9,000,000.00 -
Proceeds from return on investment 111,230.13 -
Proceeds from disposal of fixed assets, intangible assets and other
188,233,888.62 101,678,178.10
long-term assets
Cash received from other investing related activities 57,429,714.65 -
Cash Inflows 254,774,833.40 101,678,178.10
Purchase of fixed assets, intangible assets and other long-term
11,010,284.50 1,813,769.26
assets
Cash paid for investment - 9,000,000.00
Cash paid for acquiring subsidiaries - -
Cash Outflows 11,010,284.50 10,813,769.26
Net Cash Flow From Investing Activities 243,764,548.90 90,864,408.84
III. Cash Flows From Financing Activities
Cash received from investment 5,000,000.00 -
Cash Inflows 5,000,000.00 -
Cash paid for settling debts 35,300,000.00 3,090,000.00
Cash paid for dividend and profit distributing or interest paying 1,030,671.89 2,414,358.33
Cash received from other financing related activities 11,445,403.16 -
Cash Outflows 47,776,075.05 5,504,358.33
Net Cash Flow From Financing Activities -42,776,075.05 -5,504,358.33
IV. Effects Of Foreign Exchange Rate Changes - -1.17
V. Net increase of cash and cash equivalents -3,564,558.81 80,973,391.02
Add: Opening balance of cash and cash equivalents 81,546,046.87 572,655.85
VI. Closing balance of cash and cash equivalents 77,981,488.06 81,546,046.87
Representative of the legal entity: Person in charge of acounting function:
6
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CONSOLIDATED CHANGES IN SHAREHOLDER'S EQUITY
December 31, 2013
Currency:RMB
Items Note Total
Share capital Captal reserves Surplus reserves Retained earnings Minority interest shareholders'equity
5 RMB RMB RMB RMB RMB RMB
Balance at December 31, 2012 706,320,000.00 456,470,250.78 76,791,550.17 -1,124,687,129.34 - 114,894,671.61
Add: Change of accounting policies - - - - - -
Prior period error correction - - - - - -
Balance at January 1, 2013 706,320,000.00 456,470,250.78 76,791,550.17 -1,124,687,129.34 - 114,894,671.61
Increase/ Decrease in this year - - 94,806,811.16 27,302,795.85 122,109,607.01
(1) Net profit - - - 94,806,811.16 5,128,045.96 99,934,857.12
(2) Other comprehensive income - - - - - -
Subtotal of (1)and (2) - - - 94,806,811.16 5,128,045.96 99,934,857.12
Owners' devoted and decreased capital - - - 22,174,749.89 22,174,749.89
Owners' devoted capital 5,000,000.00
Other - - - 17,174,749.89 17,174,749.89
Balance at December 31, 2013 706,320,000.00 456,470,250.78 76,791,550.17 -1,029,880,318.18 27,302,795.85 237,004,278.62
Representative of the legal entity: Person in charge of acounting department:
7
DAHUASHENZI [2014] NO. 005026 (EN) Audit Report
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CONSOLIDATED CHANGES IN SHAREHOLDER'S EQUITY
December 31, 2013
Currency:RMB
Items Note Total
Share capital Captal reserves Surplus reserves Retained earnings Minority interest shareholders'equity
5 RMB RMB RMB RMB RMB RMB
Balance at December 31, 2012 706,320,000.00 456,470,250.78 76,791,550.17 -1,124,687,129.34 - 114,894,671.61
Add: Change of accounting policies - - - - - -
Prior period error correction - - - - - -
Balance at January 1, 2013 706,320,000.00 456,470,250.78 76,791,550.17 -1,124,687,129.34 - 114,894,671.61
Increase/ Decrease in this year - - 94,806,811.16 27,302,795.85 122,109,607.01
(1) Net profit - - - 94,806,811.16 5,128,045.96 99,934,857.12
(2) Other comprehensive income - - - - - -
Subtotal of (1)and (2) - - - 94,806,811.16 5,128,045.96 99,934,857.12
Owners' devoted and decreased capital - - - 22,174,749.89 22,174,749.89
Owners' devoted capital 5,000,000.00
Other - - - 17,174,749.89 17,174,749.89
Balance at December 31, 2013 706,320,000.00 456,470,250.78 76,791,550.17 -1,029,880,318.18 27,302,795.85 237,004,278.62
Representative of the legal entity: Person in charge of acounting department:
8
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF FINANCIAL POSITION STATEM
As at December 31, 2013
Monetary unit:RMB
ASSETS NOTE Dec 31, 2013 Dec 31, 2012
Current assets：
Cash and cash equivalents 5,681,141.82 777,456.70
Prepayments 25,000,000.00 -
Other receivables 1 316,143.39 782,244.99
Inventory 161,600,661.40 -
Total current assets 192,597,946.61 1,559,701.69
Long-term equity investments 2 152,284,669.73 103,114,299.73
Fixed assets 1,314,384.81 666,168.02
Intangible assets 15,699,628.36 16,123,971.52
Deferred tax assets 750.00 -
Total non-current assets 169,299,432.90 119,904,439.27
Total assets 361,897,379.51 121,464,140.96
Representative of the legal entity: Person in charge of acounting function:
9
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF FINANCIAL POSITION (CONTINUED)
As at December 31, 2013
Monetary unit:RMB
LIABILITIES AND OWNER'S NOTE Dec 31, 2013 Dec 31, 2012
EQUITY
Current liabilities：
Receivable in advance 40,423,500.00 -
Payable - -
Accrued payroll - 189,016.48
Tax payable -58,959.68 -52,171.87
Other payable 299,169,464.74 99,848,758.92
Total current liabilities 339,534,005.06 99,985,603.53
Non-current liabilities
Special Payable - -
Total non-current liabilities - -
Total liabilities 339,534,005.06 99,985,603.53
Owner's equity：
Share capital 706,320,000.00 706,320,000.00
Capital reserves 449,365,886.69 449,365,886.69
Surplus reserves 76,791,550.17 76,791,550.17
Retained earnings -1,210,114,062.41 -1,210,998,899.43
Total owner's equity 22,363,374.45 21,478,537.43
Total liabilities and owner's equity 361,897,379.51 121,464,140.96
Representative of the legal entity: Person in charge of acounting function:
10
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 2013
Monetary unit:RMB
Items Note 2013 2012
I. Total revenues from main operations 9,631,946.56 -
Add: Operationg income 3 9,631,946.56 -
II. Total costs from main operations 8,760,680.31 14,221,165.70
Less: Cost of main operations 3 28,460.39 -
Business tax and surcharge 528,000.00 -
Marketing expenses 240,503.11 -
Administrative expenses 7,959,458.53 4,274,037.12
Financial expenses 1,258.28 132.00
Asset impairment loss 3,000.00 9,946,996.58
Add: Gain from change of fair value - -
Return on investment - -
III. Profit from main operations 871,266.25 -14,221,165.70
Add: Non-operating income 21,920.77 1,396,018.64
Less: Non-operating expenses 9,100.00 66,230.57
IV. Total profit 884,087.02 -12,891,377.63
Less: Income taxes -750.00 -
VI. Net profit 884,837.02 -12,891,377.63
VII. Earnings per share
Basic earnings per share - -
Diluted earning per share - -
VIII. Other comprehensive income - -
IX. Total comprehensive income 884,837.02 -12,891,377.63
Representative of the legal entity: Person in charge of acounting function:
11
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CASH FLOWS
December 31, 2013
2013 2012
Items Note RMB RMB
I. Cash Flows From Operating Activities
Cash received from customers 9,631,946.56 -
Cash received from tax refund - -
Cash received from other operation related activities 201,813,444.46 11,745,056.16
Cash Inflows 211,445,391.02 11,745,056.16
Cash payments for suppliers 186,629,121.79 -
Cash paid to and on behalf of employees 2,472,138.09 1,097,122.03
Cash paid to taxes and rates 1,621,088.68 161,236.10
Cash paid for other operation related activities 6,302,906.34 9,036,011.24
Cash Outflows 197,025,254.90 10,294,369.37
Net Cash Flow From Operating Activities 14,420,136.12 1,450,686.79
II. Cash Flows From Investing Activities
Proceeds from disposal of fixed assets, intangible assets and
40,423,500.00 -
other long-term assets
Cash Inflows 40,423,500.00 -
Purchase of fixed assets, intangible assets and other long-term
769,581.00 677,248.72
assets
Cash paid for investment 49,170,370.00 -
Cash Outflows 49,939,951.00 677,248.72
Net Cash Flow From Investing Activities -9,516,451.00 -677,248.72
III. Cash Flows From Financing Activities
Cash received from loans - -
Cash Inflows - -
Cash paid for settling debts - -
Cash paid for dividend and profit distributing or interest paying - -
Cash Outflows - -
Net Cash Flow From Financing Activities - -
IV. Effects Of Foreign Exchange Rate Changes - -1.17
V. Net increase of cash and cash equivalents 4,903,685.12 773,436.90
Add: Opening balance of cash and cash equivalents 777,456.70 4,019.80
VI. Closing balance of cash and cash equivalents 5,681,141.82 777,456.70
Representative of the legal entity: Person in charge of acounting function:
12
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
December 31, 2013
Currency:RMB
Total
Share capital Captal reserves Surplus reserves Retained earnings shareholders'equity
RMB RMB RMB RMB RMB
Balance at December 31, 2012 706,320,000.00 449,365,886.69 76,791,550.17 -1,210,998,899.43 21,478,537.43
Add: Change of accounting policies - - - - -
Prior period error correction - - - - -
Balance at January 1, 2013 706,320,000.00 449,365,886.69 76,791,550.17 -1,210,998,899.43 21,478,537.43
Increase/ Decrease in this year - - - 884,837.02 884,837.02
(1) Net profit - - - 884,837.02 884,837.02
(2) Other comprehensive income - - - - -
Subtotal of (1)and (2) - - - 884,837.02 884,837.02
Owners' devoted and decreased capital - - - - -
Other - - - - -
- - - - -
Balance at December 31, 2013 706,320,000.00 449,365,886.69 76,791,550.17 -1,210,114,062.41 22,363,374.45
Representative of the legal entity: Person in charge of acounting department:
13
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
CHENGDE NANJIANG CO., LTD.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
December 31, 2012
Currency:RMB
Total
Share capital Captal reserves Surplus reserves Retained earnings shareholders'equity
RMB RMB RMB RMB RMB
Balance at December 31, 2011 706,320,000.00 449,365,886.69 76,791,550.17 -1,198,107,521.80 34,369,915.06
Add: Change of accounting policies - - - - -
Prior period error correction - - - - -
Balance at January 1, 2012 706,320,000.00 449,365,886.69 76,791,550.17 -1,198,107,521.80 34,369,915.06
Increase/ Decrease in this year - - - -12,891,377.63 -12,891,377.63
(1) Net profit - - - -12,891,377.63 -12,891,377.63
(2) Other comprehensive income - - - - -
Subtotal of (1)and (2) - - - -12,891,377.63 -12,891,377.63
Owners' devoted and decreased capital - - - - -
Other - - - - -
- - - - -
Balance at December 31, 2012 706,320,000.00 449,365,886.69 76,791,550.17 -1,210,998,899.43 21,478,537.43
Representative of the legal entity: Person in charge of acounting department:
14
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
31 DECEMBER 2013
CURRENCY UNIT: RMB
I. General Information
1. Background
The predecessor of ChengDe NanJiang Corporation, Ltd. (“the Company”) was ChengDe DiXian
Textile Corporation, Ltd (“DiXian”). According to the approval of YiGuBan(1999) No.36 issued
by the People’s Government of HeBei Province, DiXian was established in the People’s Republic
of China (the “PRC”) and obtained the Corporate Business License from HeBei Administration
for Industry and Commerce (“CSRC”). The initial registered capital of DiXian was RMB
100,000,000 (divided into 100,000,000 shares, one Yuan per share): ShuXian Wang contributed
RMB 85,100,000, accounting for 85.1% of the total; HeBei province ChengDe County North
Industrial Company contributed RMB 7,564,400, accounting for 7.56% of the total; ZhengSong
Wang contributed RMB 5,444,400, accounting for 5.44% of the total; ChengDe LongFeng
Cosmetic Co., Ltd. contributed RMB 945,600, accounting for 0.95% of the total; Chengde County
Board Town of Red Star plastic products factory contributed RMB 945,600, accounting for 0.95%
of the total.
According to the issue [2000] 121 by the China Securities Regulatory Commission on August 29,
2000, the company issued 100,000,000 foreign capital stocks listed in China (hereinafter referred
to as the " B “) on September 19, 2000 on Shenzhen stock exchange; and excised the
overallotment option to increase issuing 15,000,000 B shares from September 29 to October 29,
2000. The registered capital of the company after the issuance of B shares was RMB 215,000,000,
and was divided into 215,000,000 shares with one Yuan of face value per share.
According to the resolution of the shareholder’s meeting on March 12, 2002, The Company
allotted 43,000,000 bonus shares to all of the shareholders according to the proportion of 2 free
shares for every 10 shares, and meanwhile increased 107500000 shares to all of the shareholding
by transferring from capital reserve according to 5 shares free for every 10 shares. The registered
capital of the company was changed to RMB 365,500,000 after it allotted bonus shares and
increased by transferring.
According to the resolution of the shareholder’s meeting on July 22, 2003, The Company allotted
73,100,000 bonus shares to all of the shareholders according to the proportion of 2 free shares for
every 10 shares, and the registered capital of the company was changed to RMB 438,600,000 after
such bonus shares were allotted.
On March 11, 2004, approved by the Ministry of Commerce of the People's Republic of China,
the company was allowed to be changed to Foreign-Funded Joint Stock Companies Limited.
On July, 2004, the company increased 150,000,000 B shares directionally, during which
91,300,000 shares were subscribed in HK$, and another 58,700,000 shares were subscribed in
15
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
RMB, upon check by China Securities Regulatory Commission with the issue [2004] No.101.
According to the resolution of the shareholder’s meeting on June 8, 2006, The Company allotted
117,720,000 bonus shares to all of the shareholders according to the proportion of 2 free shares for
every 10 shares,
On August 4, 2008, according to the judgment ruled by Shenzhen Intermediate People's court,
112,324,800 sponsor shares held by ShuXian Wang was compensated to Rong Chen for RMB
45,491,544 Yuan, and on August 15, 2008, 96,000,000 sponsor shares held by ShuXian Wang was
compensated to Rong Chen for RMB 38,880,000 Yuan according to the judgment ruled by Dalian
Intermediate People's court.
On November 11, 2009, according to “reply to the approval of capital increase, and change of
share as well as name of Chengde DiXian Knitting Co., Ltd” with No.143 [2009] by Bureau of
Commerce of Hebei Province, it agreed that the company increased 150,000,000 foreign shares
listed in China in 2004 and allotted 2 bonus shares free for every 10 shares in 2006; and it agreed
that 208324800 shares of DiXian stock held by ShuXian Wang. DiXian was changed to Rong
Chen; as well as the name of the company changed to Chengde DaLu Co., Ltd. The total share
capital was 706,320,000 shares and the registered capital of the company was RMB 706,320,000
Yuan after the company increased and allotted, which has been validated by ZhongLei CPA Co.,
Ltd, who provided the capital verification report with [2010] No. 10009.
On 23 Aug 2011, the company renewed its Corporate Business License that was issued by HeBei
Administration for Industry and Commerce. The new registration number was 130000400001225.
Both registered capital and paid-in capital are RMB 706,320,000. The company type was a foreign
joint stock limited company.
On 6 April 2012, an equity transfer agreement was signed between corporate shareholder Rong
Chen and Dong Wang. According to the agreement, Rong Chen transferred 208,324,800 shares,
which occupied 29.49% of the total share capital, to Dong Wang. After the transfer of equity,
Shareholders proportion of capital contribution was: Dong Wang (RMB 208,324,800, accounted
for 29.49%); HeBei province ChengDe County North Industrial Company (RMB 18,517,651,
accounted for 2.62%); ChengDe City LongFeng Cosmetic company (RMB 2,314,829, accounted
for 0.33%); Chengde County Board Town of Red Star plastic products factory (RMB 2,314,829,
accounted for 0.33%), shareholders of domestically listed foreign shares (RMB 461,520,000,
accounted for 65.34%).
On 19 September 2012, with the authorization of HeBei Administration for Industry and
Commerce, the company name was changed from ChengDe DaLu Corporation, Ltd. to ChengDe
NanJiang Corporation, Ltd.
2. Nature of Business
The company major in real estate development and management; Subsidiaries engage in real
estate development、international trading and ecological agriculture planting and breeding.
16
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
3. Business scope
New energy、R&D of new material product、sales and technology promotion、technology
service；R&D of modern agricultural production、technology promotion service, wholesale of
ecological agricultural products; International trading of products and technology; project
HuiJingTianDi (2013-12、2013-13) : the development and construction of common residence and
supporting commercial facilities based on two land、sales and operation; property management.
4. Major products and labour service
Sales of real estate、plastic raw material trading and sales of products of ecological agriculture
planting and breeding.
5. Fundamental structure of the company
The highest authority is board minutes and the company adopts the managerial responsibility
system. According to requirements from the business, the company set up Securities Department,
Administrative Department, Human Resource Department, Financial Department, Auditing
Department, Sales Department, Research and Development Department.
II. Significant accounting policies, accounting estimates
1. Basis for preparation of financial statements
The financial statements of the company have been prepared based on going concern assumption
and actual transactions and events occurred. It is prepared in accordance with the requirements of
“Accounting Standards for Business Enterprises - Basic Standard” and 38 Specific Standard
issued by the Ministry of Finance of 15 February 2006 (revised in 2010), and application
guidance, illustrations to the standards and related pronouncements.
2. Statement of Compliance
The accounts of the Company have been prepared in accordance with the Chinese Accounting
System for Business Enterprises and Chinese Accounting Standard for Business Enterprises.
3. Fiscal Year
The Company has adopted the calendar year as its accounting year, i.e. From 1 January to 31
December.
4. Bookkeeping Currency
The reporting currency of the Company is Renminbi (RMB).
5. Accounting treatments for a business combination involving enterprises under and not
under common control
A business combination is a transaction or event that brings together two or more separate entities
into one reporting entity. Business combinations are classified into business combinations
involving enterprises under common control and business combinations not involving enterprises
17
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
under common control.
(1) Business combination involving entities under common control
A business combination involving enterprises under common control is a business combination in
which all of the combining enterprises are ultimately controlled by the same party or parties both
before and after the combination, and that control is not transitory. For a business combination
involving enterprises under common control, the party that, on the combination 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. Combination date is the
date on which the absorbing party effectively obtains control of the party being absorbed. The
assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise
being combined at the combination date. The difference between the carrying amount of the net
assets obtained and the carrying amount of consideration paid for the combination (or the total
face value of shares issued) is adjusted to the capital premium (or share premium) in the capital
reserve. If the balance of the capital premium (or share premium) is insufficient, any excess is
adjusted to retained earnings. The cost of a combination incurred by the absorbing party includes
any costs directly attributable to the combination shall be recognized as an expense through profit
or loss for the current period when incurred.
(2) Business combination involving entities not under common control
A business combination involving enterprises not under common control is a business
combination in which all of the combining enterprises are not ultimately controlled by the same
party or parties both before and after the business combination. 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. Acquisition date is the date on which the acquirer
effectively obtains control of the acquiree. For a business combination not involving enterprise
under common control, the combination cost including the sum of fair value, at the acquisition
date, of the assets given, liabilities incurred or assumed, and equity securities issued by the
acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services,
valuation and consultancy services etc and other associated administrative expenses attributable to
the business combination are recognized in profit or loss when they are incurred. The transaction
cost arose from issuing of equity securities or liability securities shall be initially recognized as
equity securities or liability securities. The contingent consideration related to the combination
shall be booked as combination cost at the fair value at the acquisition date. If, within the 12
months after acquisition, additional information can prove the existence of related information at
acquisition date and the contingent consideration need to be adjusted, goodwill can be offset.
Combination cost of the acquirer’s interest and identifiable net assets of the acquirer acquired
through the business combination shall be measured by the fair value at the acquisition date.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s
identifiable net assets, the difference shall be recognized as goodwill. Where the cost of
combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net
assets, the difference shall be accounted for according to the following requirements: (i) the
18
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
acquirer shall reassess the measurement of the fair values of the acquiree’s identifiable assets,
liabilities and contingent liabilities and measurement of the cost of combination; (ii) if after that
reassessment, the cost of combination is still less than the acquirer’s interest in the fair values of
the acquiree’s identifiable net assets, the acquirer shall recognize the remaining difference
immediately in profit or loss for the current period. Where the temporary difference obtained by
the acquirer was not recognized due to inconformity with the conditions applied for recognition of
deferred income tax, if, within the 12 months after acquisition, additional information can prove
the existence of related information at acquisition date and the expected economic benefits on the
acquisition date arose from deductible temporary difference by the acquiree can be achieved,
relevant income tax assets can be recognized, and goodwill offset. If the goodwill is not sufficient,
the difference shall be recognized as profit of the current period. Apart from above, the differences
shall be taken into profit or loss of the current period if the recognition of deferred income tax
assets is related to the combination.
For the purpose of the separate financial statements, the cost of acquistion is measured as the sum
of the carrying amount of investment in the investee immediately prior to the acquistion and the
consideration for the addition investment. Cumulative other comprehensive income relevant to the
investment recognised prior to the acquistion is reclassfied to profit or loss as investment income
at the time of acquistion. For the purpose of the consolidated financial statements, the investment
in the investee prior to the acquisition is remeasured by fair value, difference between the
acquistion date fair value of the investment in the investee prior to the acquisition and its carrying
amount is recognised in profit or loss as investment income at the time of acquistion. Cumulative
other comprehensive income relevant to the investment recognised prior to the acquistion is
reclassfied to profit or loss as investment income at the time of acquistion.
6. Consolidated financial statements
The financial statements are prepared on the basis of control, and the scope of the consolidated
financial statements includes the company and all of its subsidiaries.
If the accounting policy or the accounting period is different between the subsidiaries and the
company, it is necessary to adjust the financial statements of the subsidiaries according to the
accounting policy or accounting period of the company at the preparation of the consolidated
financial statements.
For the subsidiaries acquired from the business combination not under the same control, it shall
adjust the individual financial statements based on its fair value of the identifiable net assets at the
acquisition date; for the subsidiaries acquired from the business combination under the same
control, it shall be regarded as the reporting entity formed after combination and continues to exist
integrally from the control by the final controlling party comes into operation, and it shall adjust
the beginning amount of the consolidated balance sheet, as well as the related items of the
comparative financial statements at the same time.
19
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
7. Accounting Principle & Measurement Bases
The company has adopted the accrual basis of accounting. Assets are initially recorded at actual
costs on acquisition and subsequently adjusted for impairment, if any. The accounting principle
and measurement bases for the current fiscal year are consistent with the previous.
8. Cash & Cash Equivalents
Cash and cash equivalents included in cash-flow statement are short-term(within three months of
maturity since purchase date), highly liquid investments that are readily convertible to known
amounts of cash and subject to limited risk on changes in value.
9. Foreign Currency Translation
Transactions denominated in foreign currencies are translated into the reporting currency at the
spot exchange rates prevailing on the day when the transactions take place.
Monetary assets denominated in foreign currency at the balance sheet date are translated at the
spot exchange rate, and the exchange difference arising from the different spot exchange date at
the balance sheet date and at the initial recognition or the previous balance sheet date shall be
recorded into finance expenses; the non-monetary items denominated in foreign currency stated at
its historical cost shall be translated at the spot exchange rate on the day when the transactions
take place; and non-monetary item denominated in foreign currency stated at its fair value shall be
translated at the spot exchange date on the day when the fair value is determined, and the
difference between the amount in reporting currency after translation and the carrying amount in
original reporting currency shall be recorded into current profit and loss as income from changes
in fair value, and the exchange difference related to non-monetary items in foreign currency
available for sale shall be recorded into capital reserves.
10. Translation of financial statements denominated in foreign currencies
Translation of items in foreign currency at the balance sheet date: the assets and liabilities in the
balance sheet shall be translated at the spot exchange rate at the balance sheet, and the items of
owner’s equity except “undistributed profit” shall be translated at the spot exchange rate on
occurrence. The income and expense in the income statement shall be translated at the spot
exchange date on the day when the transactions take place.
When the consolidated financial statement is prepared, the converted difference in foreign
currency statements shall be listed singly as “translation reserve” under the owner’s equity in the
consolidated balance sheet.
11. Financial instruments
"Financial instruments" refers to the financial assets of the business and constitute the financial
liability or equity instruments of other business
(1) Classification of financial instruments
The financial assets and financial liabilities of the company are divided into five types at the initial
recognition: Financial asset measured by fair value and which change is recorded into current
20
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
profit and loss, Held-to-maturity investment, accounts receivable, financial assets available for
sale and other financial liabilities.
(2) Recognition and Measurement of Financial Instruments
The financial assets or financial liabilities are stated at their fair value at initial recognition. For the
financial assets and liabilities measured at their fair values and of which the variation is recorded
into the profits and losses of the current period, the transaction expenses thereof shall be directly
recorded into the profits and losses of the current period, and the related transaction expenses of
other kinds of financial assets or financial liabilities is recorded into its initial recognition amount.
①The financial assets and liabilities measured at their fair values and of which the variation is
recorded into the profits and losses of the current period
The financial assets or liabilities which are measured at their fair values and the variation of which
is recorded into the profits and losses of the current period, including transactional financial assets
and liabilities and the financial assets and liabilities which are measured at their fair values and of
which the variation is included in the current profits and losses; the transactional financial assets
refers to the stock, bonds, fund and the derivative instruments not as effective hedging instrument
or the assumed financial liabilities to be repurchased in the near future; the financial assets and
liabilities which are measured at their fair values and of which the variation is included in the
current profits and losses is mainly designated on the basis of risk management and strategic
investment.
Subsequent measurement shall be carried through for these financial assets or financial liabilities
at their fair value. All realized and unrealized profit and loss of these financial assets or financial
liabilities shall be recorded into current profit and loss except those as effective hedging
instruments.
② Held-to-maturity investment
"Held-to-maturity investment" refers to a non-derivative financial asset with the maturity date
being fixed, the repayment being fixed or confirmed and the company has a clear purpose or is
capable to hold to maturity.
Effective interest method is adapted to measure held-to-maturity investment at the post-
amortization cost during the holding period. The gains and loss arising from the impairment,
amortization or recognition termination of held-to-maturity investment shall be recorded into
current profit and loss. The balance between the price obtained and the carrying amount of the
investment shall be recorded into investment income when held-to-maturity investment is
disposed.
③ Accounts receivable
“Accounts receivable” is the claims of the sale of goods or rendering of service, including
accounts receivable, other receivables and long-term receivables.
The accounts receivable shall be recognized initially at the price stipulated in the contract or
agreement to be received from the purchaser and it is measured at the post-amortization cost using
the effective interest method. The balance between the price obtained and the carrying amount of
the accounts receivable shall be recorded into current profit and loss at recovery and disposal.
④ Financial assets available for sale
Financial assets available for sale refers to the non-derivative financial assets available for sale
designated at initial recognition, and the financial assets except those three kinds of financial
21
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
assets above. Subsequent measurement shall be carried through for such kind of financial assets at
their fair value, and the discount and premium shall be amortized using effective interest method
and recognized as interest income. The change in the fair value of the financial assets available for
sale shall be recognized as the independent part of capital reserve when the said financial assets is
stopped from recognition or is impaired with the exception of the impairment loss and the
exchange difference arising from the monetary financial assets in foreign currency which shall be
recorded into current profit and loss, and the accumulative gains or loss recorded into capital
reserve before shall be transferred into current profit and loss. The dividends or interest income
related to the financial assets available for sale shall be recorded into current profit and loss.
⑤ Other financial liabilities
Other financial liabilities refer to the financial liabilities which isn’t designated to be measured by
fair value and which change is recorded in current profit and loss.
Other liabilities are measured at the post-amortization cost or cost. The gains or loss arising from
the amortization and the recognition termination of the other liabilities shall be recorded into
current profit and loss.
(3) Recognition and measurement for transfer of financial assets
①Where the company has transferred nearly all of the risks and rewards related to the ownership
of the financial asset to the transferee; Or it does not transfer or retain nearly all of the risks and
rewards related to the ownership of a financial asset but gives up its control over the financial
asset, it shall stop recognizing the financial asset.
②If the transfer of an entire financial asset satisfies the conditions for stopping recognition; the
difference between the amounts of the following two items shall be recorded in the profits and
losses of the current period:
A. The book value of the transferred financial asset
B. The sum of consideration received from the transfer and the accumulative amount of the
changes of the fair value originally recorded in the owner's equities.
③If the transfer of partial financial asset satisfies the conditions to stop recognition, the entire
book value of the transferred financial asset shall, between the portion whose recognition has been
stopped and the portion whose recognition has not been stopped, be apportioned according to their
respective relative fair value, and the difference between the amounts of the following two items
shall be included into the profits and losses of the current period:
A. The book value of the portion whose recognition has been stopped;
B. The sum of consideration of the portion whose recognition has been stopped, and the portion of
the accumulative amount of the changes in the fair value originally recorded in the owner's
equities which is corresponding to the portion whose recognition has been stopped
④ If the transfer of the financial asset doesn’t satisfy the condition to stop the recognition, it shall
continue to recognize the financial asset and shall recognize the consideration it receives as a
financial liability.
⑤ If the company is continuously involved in the transferred financial asset, it shall recognize a
financial asset according to the extent of its continuous involvement in the transferred financial
asset, and recognize a financial liability at the same time.
22
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
(4) Recognition for termination of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the
recognition of the financial liability be terminated in all or partly.
(5) Determination method for the fair value of financial assets and financial liabilities
①As for the financial assets or financial liabilities for which there is an active market, the quoted
prices in the active market shall be used to determine the fair values thereof.
②Where there is no active market for a financial instrument; the company shall adopt value
appraisal techniques to determine its fair value.
(6) Provision for impairment of financial assets (except accounts receivable)
The company shall carry out an inspection, on the balance sheet day, on the carrying amount of
the financial assets (except accounts receivable). Where there is any objective evidence proving
that such financial asset has been impaired, an impairment provision shall be made.
①Held-to-maturity investment
The loss on impairment shall be determined according to the balance of the carrying amount and
the present value of the predicted future cash flow. It is accounted for according to the
measurement method for loss impairment of accounts receivable.
If there is any objective evidence proving that the value of the said financial asset has been
restored, and it is objectively related to the events that occur after such loss is recognized, the
impairment loss as originally recognized shall be reversed and be recorded into the profits and
losses of the current period. However, the reversed carrying amount shall not be any more than the
post-amortization costs of the said financial asset on the day of reverse under the assumption that
no provision is made for the impairment.
② Financial assets available for sale
If there is any objective evidence proving that the fair value of the financial assets available for
sale drops significantly or not contemporarily, it can recognize that such financial assets available
for sale has been impaired, and shall recognize loss on impairment. Where the financial asset
available for sale is impaired, the accumulative losses arising from the decrease of the fair value of
the owner’s equity which was directly included shall be transferred out at the same time when the
impairment loss is recognized and recorded into the profits and losses of the current period. The
said accumulative loss transferred out equals the balance of the initial acquisition cost of the
financial asset available for sale deducting the reversed principal, the amortized amount, current
fair value and the impairment loss that has been recorded into profit and loss originally.
As for the sellable debt instruments whose impairment losses have been recognized, if, within the
accounting period thereafter, the fair value has risen and are objectively related to the subsequent
events that occur after the originally impairment losses were recognized, the originally recognized
impairment losses shall be reversed and be recorded into the profits and losses of the current
period. The impairment losses incurred to a sellable equity instrument investment shall not be
reversed through profits and losses.
12. Receivables & Provision for Bad Debts
Accounts receivables comprise related-party receivables and receivables from non-related parties
23
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
(“third-party receivables”). The Company makes specific bad debts provision on an individual
basis for third-party receivables. No provision for bad debts is made for related-party receivables.
(1) Individually significant amounts of accounts receivable accrued bad debt provision
Recognition Criterion for individually significant amounts:
The receivables with more than RMB 1 million shall be recognized as the significant receivables;
The accruing method of the receivables with individually significant amounts:
The Group should make the impairment test separately or in combination and accrue the bad debt
provisions which shall be recorded into current profit or loss at the end of the period. If there is
defined evidence for the receivables not to or not likely to be received, which shall be recognized
as the loss of bad debt and write off the accrued bad debts provisions after going through the
approval procedure of the Group.
(2) Accounts receivable accrued bad debt provision by portfolio
Accounting aging analysis method:
Use the accounting aging of the receivables as the credit risk characteristics to classify the
portfolio.
Accrue the bad debt provision by accounting aging analysis method
Proportion for Provision for bad debt Proportion for Provision for bad debt
Aging
（receivable） ( other receivable)
% %
Within 1 year 5 5
1-2 years 20 20
2-3 years 50 50
Over 3 years 100 100
(3) Individually insignificant amount accounts receivable but accrued bad debt provision
Recognition Criterion for individually insignificant amounts:
Where there are obvious evidences suggesting impairment: debtor has been log-out, bankruptcy,
minus net asset, significant poor cash flow and significant nature disaster leads to discontinue
production and the debtors could not pay for the debts within the foreseeable time.
The accruing method of the receivables with individually insignificant amounts:
The Group should make the impairment test separately or in combination and accrue the bad debt
provisions which shall be recorded into current profit or loss at the end of the period. If there is
defined evidence for the receivables not to or not likely to be received, which shall be recognized
as the loss of bad debt and write off the accrued bad debts provisions after going through the
approval procedure of the Group.
13. Inventories
(1) Classification
Inventory means the materials, Auxiliary Material, spare parts for repair, revolving materials,
24
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
merchandise inventory, work-in-process under production, finished goods, development cost and
products to be developed etc. the development cost includes the land cost, construction cost and
other cost related to real estate development under construction; the product to be developed refers
to the land purchased and prepared to be developed into real estate development.
(2) Cost of inventories transferred out
Cost of inventories transferred out is calculated using the weighted average method. Development
project is adopted specific accounting method.
(3) Basis for determining the net realisable value of inventories and provision methods for decline
in value of inventories
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs
of conversion and other expenditures incurred in bringing the inventories to their present location
and condition. In addition to the purchasing cost of raw materials, work in progress and finished
goods include direct labour costs and an appropriate allocation of production overheads.
At the balance sheet date, inventories are carried at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs to completion and the estimated expenses and related taxes necessary to make the
sale. The net realisable value of materials held for use in the production is measured based on the
net realisable value of the finished goods in which they will be incorporated. The net realisable
value of the quantity of inventory held to satisfy sales or service contracts is measured based on
the contract price. If the quantities held by the Group are more than the quantities of inventories
specified in sales contracts, the net realisable value of the excess portion of inventories is
measured based on general selling prices.
Any excess of the cost over the net realisable value of each category of inventories is recognised
as a provision for diminution in the value of inventories, and is recognised in profit and loss.
(4) Inventory system
The Group maintains a perpetual inventory system.
(5) Amortisation methods for consumables including low-value consumables and packaging
materials
Consumables including low-value consumables and packaging materials are amortised in full
when received for use. The amounts of the amortisations are included in the cost of the related
assets or recognised in profit or loss for the current period.
(6) Relocation Housing: temporary houses for relocated residents, amortised averagely over 50
years
(7) Expense for land development
25
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Projects of land development: their expenses shall be recognized as cost of land development.
Projects of land development and real estate: their expenses are apportioned to cost of commodity
houses according to acreage when cost distribution between land and real estate could be
identified clearly.
(8) Expense for public facilities
Expenses for public facilities without compensable transfers are apportioned to cost of commodity
houses according to the benefits ratio.
For public facilities with compensable transfers: each individual public facility is recognised as
one cost accounting unit. Expenses are allocated to each unit separately.
14. Long-term equity investments
(1) Determination of Investment cost
For a business combination involving enterprises under common control, the initial investment
cost of the long-term equity investment shall be carrying value of the absorbing party’s share of
the shareholder’s equity of the party being absorbed at the date of combination. For a business
combination not involving enterprise under common control, the combination cost including the
sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and
equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in
respect of auditing, legal services, valuation and consultancy services etc and other associated
administrative expenses attributable to the business combination are recognized in profit or loss
when they are incurred. The transaction cost for the equity securities or liability securities issued
by the acquirer in the business combination shall be recognized as initial amount of equity security
or liability. The equity investments other than the long-term equity through combination shall be
initially measured by cost. The cost shall be recognized to the difference in the way of acquisition
of long-term equity investment. Theses ways include the cash purchase price the Companythe
Company actually paid, the fair value of equity security issued by the Companythe Company,
value specified in the investment contract or agreement, the fair value or carrying value of the
asset out in the transaction of non-monetary asset exchanges, and the fair value of the long-term
equity investment. Expenses, taxes and other necessary expenditures directly attributable to the
acquisition of long-term equity investment are taken into investment cost.
(2) Subsequent Measurement
Cost method shall be adopted in a long-term equity investment where the investing enterprise does
not have common control or significant influence over the investee, the investment is not quoted
in an active market and its fair value cannot be measured reliably. Where an investing enterprise
can exercise common control or significant influence over the investee, a long-term investment
shall be accounted for using the equity method. When an investing enterprise can no longer
exercise joint control or common control nor significant influence over the investee, and its fair
value cannot be measured reliably, a long-term investment shall be counted as financial asset
ready-for trade. A long-term equity investment where cost method is adopted in the Company’s
financial statements can exercise controls over the investee.
26
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
1) Cost method of accounting for long-term equity investments
Under the cost method, a long-term equity investment is measured at initial investment cost.
Except for cash dividends or profits declared but not yet paid that are included in the price or
consideration actually paid upon acquisition of the long-term equity investment, investment
income is recognized in the period in accordance with the attributable share of cash dividends or
profit distributions declared by the investee.
2) Equity method of accounting for long-term equity investments
Where the initial investment cost of a long-term equity investment exceeds the investing
enterprise’s interest in the fair values of the investee’s identifiable net assets at the time of
acquisition, no adjustment shall be made to the initial investment cost. Where the initial
investment cost of a long-term equity investment is less than the investing enterprise’s interest in
the fair values of investee’s identifiable net assets at the time of acquisition, the difference shall be
charged to profit or loss for the current period, and the cost of the long-term equity investment
shall adjusted accordingly. Under the equity method, the Company recognizes its share of the net
profit or loss of the investee for the period as investment income or loss for the period. The Group
recognizes it share of the investee’s net profit or loss based on the fair value of the investee’s
individual separately indentible assets, etc at the acquisition date after making appropriate
adjustments to confirm with the Company’s accounting policies and accounting period.
Unrealized profits or losses resulting from the Company’s transactions with its associates and joint
ventures are recognized as investment income or loss to the extent that those attributable to the
Company’s equity interest are eliminated. However, unrealized losses resulting from the
Company’s transactions with its investees on the transferred assets, in accordance with
"Accounting Standards for Enterprises No. 8 - Impairment of Assets", are not eliminated. Changes
in owners’ equity of the investee other than net profit or loss are correspondingly adjusted to the
carrying amount of the long-term equity investment, and recognized as other compressive income
which is included in the capital reserve.
When the investee is recognized net losses, reduce the carrying value of long-term equity
investments and long-term equity of net investment (in substance) in investee to zero. In addition,
the Company has the obligations on additional losses, then the expected obligation as estimated
liabilities and included in the current investment losses. Where the net profit from investee units,
restoration confirm the amount of revenue sharing after offset the amount of unrecognized loss
sharing. For long-term equity investments in associates and joint ventures which had been held by
the Company before its first time adoption of Accounting Standards for Business Enterprises,
where the initial investment cost of a long-term equity investment exceeds the Company’s interest
in the investee’s net assets at the time of acquisition, the excess is amortized and is recognized in
profit or loss on a straight line basis over the original remaining life.
3) Acquisition of minority interest
The difference between newly increased equity investment due to acquisition of minority interests
and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital
reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted
27
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
against returned earnings.
4) Disposal of long-term equity investment
Where the parent company disposes long-term investment in a subsidiary without a change in
control, the difference in the net asset between the amount of disposed long-term investment and
the amount of the consideration paid or received is adjusted to the owner’s equity. On disposal of
a long-term equity investment, the difference between the proceeds actually received and
receivable and the carrying amount is recognized in profit or loss for the period. For along-term
equity investment accounted for using the equity method, the amount included in the owners’
equity attributable to the percentage interest disposed is transferred to profit or loss for the period.
For any retained interest, it shall be subsequently measured according to the related accounting
policies in regard of long-term equity investments or financial assets as described above if its
carrying amount is recognized as long-term equity investments or other related financial assets.
Retroactive adjustment is made on the basis of relevant policies if the retained interests are settled
from cost method to equity method.
(3) Recognition of investee under common control or significant influence
Control is the power to govern the financial and operating policies of an enterprise so as to obtain
benefits from its operating activities. Common control is the contractually agreed sharing of
control over an economic activity, and exists only when the strategic financial and operating
decisions relating to the activity require the unanimous consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies. When determining whether an
investing enterprise is able to exercise control or significant influence over an investee, the effect
of potential voting rights of the investee held be the investing enterprise or other parties that are
currently exercisable or convertible shall be considered.
(4) Impairment testing methods and recognition of impairment provision
The company assesses the long-term equity investment at the balance sheet date whether there is
any indication of impairment. If any indication exists that an asset may be impaired, the enterprise
shall estimate its recoverable value of the asset. If the recoverable value of the asset is less than its
carrying amount, a provision for impairment loss of the asset is recognized accordingly. Once an
impairment loss is recognized, it shall not be reversed in a subsequent period.
15. Investment properties
Investment properties are properties held either to earn rental income or for capital appreciation or
for both. Cost model: investment properties-leasing properties adopt the identical depreciation
accounting policy as fixed assets. Investment properties-leasing rights of land usage adopt the
identical amortization accounting policy as intangible assets. If potential impairment of investment
property exists, estimation of its net realisable value shall be made. Recognizing impairment loss
where net realisable value below its book value. Once an impairment loss is recognised, it is not
reversed in a subsequent period.
28
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Investment properties are depreciated (amortized) using the straight-line method to allocate the
cost of the assets to their estimated useful lives. For the investment properties being provided for
impairment loss, the related depreciation (amortization) charge is prospectively determined based
upon the adjusted carrying amounts over their remaining useful lives. The estimated useful lives,
residual rates and annual depreciation (amortization) rates are as follows:
Annual Depreciation Rates
Items Useful Lives Residual Rates (%)
(%)
land usage rights 50 years 0.00-10.00 1.80
House and Building 20-28 years 0.00-10.00 3.56-4.50
16. Fixed assets
(1) Recognition of fixed assets
Fixed assets are the tangible assets with service life of more than one year held for production of
goods, rendering of service, lease or operating management. Fixed assets shall be confirmed while
following conditions can all be met:
①The economic interest related to the fixed assets will most likely flow into the company；
②The cost of the fixed assets can be measured reliably.
(2) Three classifications of fixed assets: house and building, transportation equipment and other
equipment
(3) Initial cost of fixed assets
The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly
attributable expenditure for bringing the asset to working condition for its intended use.
The book value of the fixed assets acquired as debt assets through the recombination of liabilities
shall be accounted on basis of the fair value of the fixed assets.
Under the conditions that the exchange of non-monetary assets is characterized with business
essence, and the fair value of the assets received or surrendered can be accounted in a reliable
way, the book value of assets received is defined on basis of the fair value of assets surrendered,
except there are conclusive evidences for the stronger reliability of the fair value of assets
received. For the exchange of those non-monetary assets not meeting the above premises, the book
value of assets surrendered and related taxes should be accounted as cost of assets received and
the profits and losses shouldn’t be concluded.
(4) Depreciation of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their
estimated useful lives. For the fixed assets being provided for impairment loss, the related
depreciation charge is prospectively determined based upon the adjusted carrying amounts over
their remaining useful lives.
29
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
The estimated useful lives, residual rates and annual depreciation rates are as follows:
Annual Depreciation Rates
Items Useful Lives Residual Rates (%)
(%)
House and Building 20-28 years 0.00-10.00 3.56-4.50
Machinery equipment 4-5 years 0.00-10.00 18.00-22.04
Transportation equipment 5-20 years 0.00-10.00 6.33-23.75
Other equipment 4.5-5 years 0.00-10.00 18.00-22.04
17. Construction in Progress
(1) Type of construction in progress
The construction in progress refers all necessary expenditure before the fixed assets under
acquisition are ready for their intended use state, including the direct material of project, direct
employee compensation, the equipment to be installed, civil and erection cost, project
management cost and net profit and loss of trial run expenses and the borrowing cost which can be
capitalized etc.
(2) The standard and time point for construction in progress transferred to fixed assets
For construction in progress, the Company shall make all the expenditures for this asset to reach
usable condition as the account value of the fixed assets. For the fixed assets reaching usable
condition but not preparing the final account for completion, the Company shall, since the date of
reaching usable condition, transfer the estimated value into fixed assets according to project
budget and cost or actual cost of the project and appropriate the provision for depreciation
according to the Company's policy for depreciation of fixed assets; after the procedure for final
account for completion has been ended, the Company shall adjust the original temporarily
estimated value as per actual cost, but not adjust the original appropriated provision for
depreciation.
18. Biological Assets
The biological assets in the company are consumptive biological assets and productive biological
assets. Consumptive biological assets include baby breeding and fat breeding. Productive
biological assets are hens.
Biological assets are recognized only when the following criterions are met simultaneously:
(1) The company acquired the biological assets because of past transactions or events.
(2) The potential economic benefits generated by the biological assets may flow into the company
(3) The cost of biological assets can be calculated reliably
The purchase and disposal of biological assets: the costs of biological assets after the transfer of
purpose are same as the book value before the transfer of purpose; When biological assets are
sold, destroyed or have inventory loss, the differences between the proceeds of disposal and the
30
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
book value plus relevant taxes are included in the profit and loss of the current period.
The initial cost of biological assets includes purchase price, transportation cost, insurance cost,
and other cost directly attributed to purchasing the assets. The initial cost of self-breeding
productive biological assets (before the expected condition for use) includes breeding cost, wages
and other indirect costs. Before the expected condition for use, cost of biological assets, including
breeding and protection, are recorded in profits and losses of the current period.
Biological assets are depreciated using the straight-line method to allocate the cost of the assets to
their estimated useful lives. For the biological assets being provided for impairment loss, the
related depreciation charge is prospectively determined based upon the adjusted carrying amounts
over their remaining useful lives. The estimated useful lives, residual rates and annual depreciation
rates are as follows:
Annual Depreciation Rates
Items Useful Lives Residual Rates (%)
(%)
Chicken and Eggs 1 years 5.00 95
At the balance sheet date, if potential impairment of biological assets exists, estimation of its net
realisable value shall be made. Recognizing impairment loss where net realisable value below its
book value. Once an impairment loss is recognised, it is not reversed in a subsequent period.
When biological assets are sold, destroyed or have inventory loss, the difference between the
revenue from disposal and its book value plus relevant taxation are recorded into profits and losses
of the current period.
19. Intangible Assets
(1)Valuation method for intangible assets
① Initial measurement of intangible assets
The Company accounts its intangible assets at their real acquisition cost.
Where the payment of purchase price for intangible assets is delayed beyond the normal credit
conditions, which is of financing intention, the cost of intangible assets shall be determined on the
basis of the current value of the purchase price.
The book value of the intangible assets acquired as debt assets through the recombination of
liabilities shall be accounted on basis of the fair value of the intangible assets；Under the
conditions that the exchange of non-monetary assets is characterized with business essence, and
the fair value of the assets received or surrendered can be accounted in a reliable way, the book
value of assets received is defined on basis of the fair value of assets surrendered, except there are
conclusive evidences for the stronger reliability of the fair value of assets received. For the
exchange of those non-monetary assets not meeting the above premises, the book value of assets
surrendered and related taxes should be accounted as cost of assets received and the profits and
losses shouldn’t be concluded.
② Subsequent measurement of intangible assets
31
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
For the intangible assets with limited service life, the economic benefits should be amortized with
Straight-line method; and the company won’t adopt amortization upon the intangible assets with
indefinite service life. At the end of report period, the Company should recheck the service life
and amortization method of the intangible assets and carry through necessary adjustment.
(2) Estimate of service life for the intangible assets with limited life
As for the intangible assets with limited life, its service life shall be estimated at the year-end
Item Amortisation periods Basis
Less than the period stated at contracts or
Land use rights 50 years
included in other legal rights
Patent, brand, software Less than the period stated at contracts or
5 years
and technology included in other legal rights
(3) The judgment basis of the intangible assets with indefinite life
As for the intangible assets with unlimited life, its service life shall be estimated at the year-end
No service life of intangible assets cannot be confirmed at the year-end.
(4) Criterion for distinguishing cost in research phase and development phase.
Research cost refers to cost arising from inventive activities aimed at obtaining new knowledge.
Research cost is recorded to profit or loss when it is incurred.
Development cost refers to cost arising from activities that result in research phase or other
knowledge in a certain plan or design, to produce new or substantially improved material,
equipment, and products etc. before commercial production or application.
(5) Recondition criterion for capitalization of cost of R&D (Research and development)
An intangible asset arising from the development phase of an internal project shall be recognised
if, and only if, the company can demonstrate all of the following:
(a) The technical feasibility of completing the intangible asset so that it will be available for use or
sale
(b) Its intention to complete the intangible asset and use or sell it
(c) How the intangible asset will generate probable future economic benefits. among other things,
the entity can demonstrate the existence of a market for the output of the intangible asset or the
intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset
(d) The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset
(e) Its ability to measure reliably the expenditure attributable to the intangible asset during its
development.
20. Long Term Deferred Expenses Cost and Amortization Method
For limited benefit periods, long-term deferred expenses are amortised on a straight-line method
within the benefit period; for unlimited benefit periods, Long-term deferred expenses are
amortised on a straight-line method over five years.
32
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
21. Contingent liabilities
(1) Recognition of contingent liabilities
The obligation pertinent to a contingency shall be recognized as an estimated debt when the
following conditions are satisfied simultaneously:
(a) The obligation is a current obligation of the Group;
(b) It is likely to cause any economic benefit to flow out of the Group as a result of performance of
the obligation; and
(c) The amount of the obligation can be measured reliably.
(2) Accounting treatments for contingent liabilities
The estimated debts shall be initially measured in accordance with the best estimate of the
necessary expenses for the performance of the current obligation, and the Group shall take into
full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the
contingencies. If the time value of money is of great significance, the best estimate amounts shall
be determined after discounting the relevant future outflow of cash. The Group shall check the
book value of the estimated debts on the balance sheet date. If there is any exact evidence
indicating that the book value cannot really reflect the current best estimate amounts, the Group
shall adjust the book value in accordance with the current best estimate amounts.
22. Share-based payment and equity instruments
(1) Classification
A share-based payment is a transaction in which the entity receives or acquires goods or services
either as consideration for its equity instruments or by incurring liabilities for amounts based on
the price of the entity's shares or other equity instruments of the entity. The accounting
requirements for the share-based payment depend on how the transaction will be settled, that is, by
the issuance of equity or cash.
(2) Recognition criterion for fair value of equity instruments
In principle, transactions in which goods or services are received as consideration for equity
instruments of the entity should be measured at the fair value of the goods or services received.
Only if the fair value of the goods or services cannot be measured reliably would the fair value of
the equity instruments granted be used.
The fair value of equity instruments granted to be based on market prices, if available, and to take
into account the terms and conditions upon which those equity instruments were granted. In the
absence of market prices, fair value is estimated using a valuation technique to estimate what the
price of those equity instruments would have been on the measurement date in an arm's length
transaction between knowledgeable, willing parties. The standard does not specify which
particular model should be used.
23. Assets transfer with repurchase agreement
If the company sell products or transfer assets with repurchase agreement, it is important to judge
whether this activity meet the criteria of revenue recognition through the agreement. If the nature
33
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
of the agreement is a financing transactions, then revenue recognition is not allowed. If the
repurchase price is higher than the selling price, then the difference are recognized as financial
expense and recorded into profits and losses of the repurchasing period.
24. Capitalisation of Borrowing Cost
(1) Recognition principles on capitalisation of borrowing cost:
The Group should capitalizes the borrowing cost directly attributable to the acquisition,
construction or production of a qualifying asset and record borrowing cost into cost of related
asset. The Group should recognize the other borrowing cost as the current expense and charged it
as profit and loss of current period. A qualifying asset refers to fixed asset, investment property
and inventory need be constructed for so long time to its intended use or sale.
(2) Duration of capitalisation of borrowing cost:
When expenditures and borrowing cost are being incurred, and activities that are necessary to put
the asset available for use or sale are in progress, the capitalisation of borrowing costs as part of
the cost of a qualifying asset should commence.
(3) Measurement of borrowing cost:
As for specifically borrowed loans for the acquisition and construction or production of assets
eligible for capitalization, the to-be-capitalized amount of interests shall be determined as the
difference of the actual cost incurred of the specially borrowed loan at the present period minus
the income of interests earned on the unused borrowing loans as a deposit in the bank or as a
temporary investment. Where a general borrowing is used for the acquisition and construction or
production of assets eligible for capitalization, the Group shall calculate and determine the to-be-
capitalized amount of interests on the general borrowing by multiplying the weighted average
asset disbursement of the part of the accumulative asset disbursements minus the general
borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be
calculated and determined at the weighted average interest rate of the general borrowing.
25. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest
in the fair value of the identifiable net assets of the acquiree under the business combination not
involving enterprise under common control. Goodwill is not amortised and is stated in the balance
sheet at cost less accumulated impairment losses.
The Group estimates the recoverable amounts of goodwill at each year-end, irrespective of
whether there is any indication of impairment. Recognised impairment loss is included in profit or
loss and is not reversed.
26. Payroll
Payroll refers to remuneration in various forms and other relevant expenses being paid to
employees for services they provided during an accounting period. Apart from termination
34
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
benefits, accrued payroll is recognized as liability and included in the cost of assets or profit and
loss in the accounting period that employees provide services for.
27. Revenue Recognition
Revenue is the gross inflow of economic benefit arising in the course of the Group’s ordinary
activities when the inflows result in increase in shareholder’s equity, other than increase relating to
contributions from shareholders. Revenue is recognised in profit or loss when it is probable that
the economic benefits will flow to the Group, the revenue and costs can be measured reliably and
the following respective conditions are met simultaneously:
(1) Recognition for sale of goods
Revenue from the sale of goods is recognized when significant risks and rewards of ownership of
the goods are transferred to the buyer, the Company retains neither continuing managerial
involvement to the degree usually associated with ownership nor effective control over the goods
sold, and it is probable that the economic benefit associated with the transaction will flow to the
Company and the relevant revenue and costs can be measured reliably.
(2) Recognition criterions for sale of real estate:
(a) Real state is 100% completed and housing acceptance is obtained.
(b) Commercial housing pre-sale permit is obtained from Ministry of Land and Resources of the
People’s Republic of China and Housing Administrative Bureau.
(c) Sales contract is signed
(d) Sales contract is verified and recognized by the Real Estate Transaction Registration Center
(e) Payment for the real state is received or proof of payment from the buyer
(f) Procedure for the transfer of commercial housing is completed
(3) Recognition criterions for property rental income
According to the date and amount of payment stated at the contract or protocol signed between the
Group and lease, property rental income is recognized when rent is received or proof of payments
is obtained from the buyer
(4) Recognition criterions for labour income
(a) Labour income can be calculated reliably
(b) Inflow of relevant economic benefits to the Group may occur
(c) The progress of completion for the transaction can be identified reliably
(d) The cost has been occurred and will be occurred in the future during the transaction can be
calculated reliably
(5) Recognition criterions for transfer of asset use right income
(a) Transfer income can be calculated reliably
(b) Inflow of relevant economic benefits to the Group may occur
35
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
28. Government grants
(1) Classification
Government subsidy means that the Company shall get monetary assets or non monetary assets
from the government without consideration, but the government subsidy shall not include the
capital invested by the government as an enterprise owner. It is divided into the one related to
assets and the one related to income.
(2) Accounting method
(a) Confirmation and measurement of government subsidy
The government subsidy meeting attached conditions and actually received by the Company, shall
be confirmed as government subsidy. If the government subsidy is a monetary asset, it shall be
measured as per the amount received or to be received; if the government subsidy is a non-
monetary asset, it shall be measured as per fair value; and if the fair value cannot be obtained
reliably, measured as per nominal amount.
(b) Accounting for government subsidy
The government subsidy related to assets shall be confirmed as deferred income, and allocated
averagely during the service life of the related assets and attributed into the profit and loss of
current period. But the government subsidy measured in nominal amount shall be directly
attributed to profit or loss of current
29. Deferred tax assets and liabilities
Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary
differences respectively, being the differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their tax bases, which include the deductible losses
and tax credits carrying forward to subsequent periods. Deferred tax assets are recognised to the
extent that it is probable that future taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax is not recognised for the temporary differences arising from the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither
accounting profit nor taxable profit (or tax loss). Deferred tax is not recognised for taxable
temporary differences arising from the initial recognition of goodwill.
At the balance sheet date, the amount of deferred tax recognised is measured based on the
expected manner of recovery or settlement of the carrying amount of the assets and liabilities,
using tax rates that are expected to be applied in the period when the asset is recovered or the
liability is settled in accordance with tax laws.
The carrying amount of a deferred tax asset is reviewed at each balance sheet date. The carrying
amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow the benefit of the deferred tax asset to be utilised. Such
reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be
available.
36
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
30. Income Tax
The Company accounts for enterprise and local income taxes using the tax payable method. Tax
expense is recognized based on the current period taxable income and tax rates.
31. Operating and finance leases
A lease is classified as either a finance lease or an operating lease. A finance lease is a lease that
transfers substantially all the risks and rewards incidental to ownership of a leased asset to the
lessee, irrespective of whether the legal title to the asset is eventually transferred. An operating
lease is a lease other than a finance lease.
(1) Operating lease charges
Rental payments under operating leases are recognised as part of the cost of another related asset
or as expenses on a straight-line basis over the lease term.
(2) Assets leased out under operating leases
Income derived from operating leases is recognised in the income statement using the straight-line
method over the lease term. If initial direct costs incurred in respect of the assets leased out are
material, the costs are initially capitalised and subsequently amortised in profit or loss over the
lease term on the same basis as the lease income. Otherwise, the costs are charged to profit or loss
immediately.
(3) Assets acquired under finance leases
When the Group acquires an asset under a finance lease, the asset is measured at an amount equal
to the lower of its fair values and the present value of the minimum lease payments, each
determined at the inception of the lease. At the commencement of the lease term, the minimum
lease payments are recorded as long-term payables. The difference between the value of the leased
assets and the minimum lease payments is recognised as unrecognised finance charges. Initial
direct costs that are attributable to a finance lease incurred by the Group are added to the amounts
recognised for the leased asset.
If there is reasonable certainty that the Group will obtain ownership of a leased asset at the end of
the lease term, the leased asset is depreciated over its estimated useful life. Otherwise, the leased
asset is depreciated over the shorter of the lease term and its estimated useful life.
Unrecognised finance charge under finance lease is amortised using an effective interest method
over the lease term.
At the balance sheet date, long-term payables arising from finance leases, net of the unrecognised
37
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
finance charges, are presented as long-term payables or non-current liabilities due within one year,
respectively in the balance sheet.
32. Other comprehensive income
Other comprehensive income is the difference between net income as in the income statement
(profit or loss account) and comprehensive income, and represents the certain gains and losses of
the enterprise not recognized in the profit or loss account.
33. Profit Distribution
Cash dividends distribution is recognized as a liability in the period in which the dividends are
approved by the Board of Directors.
In accordance with the “Law of the PRC on Foreign-funded enterprise” and the Company’s
Articles of Association, appropriations from net profit should be made to the Reserve Fund, the
Staff and Workers’ Bonus and Welfare Fund, after offsetting accumulated losses from prior years,
and before profit distributions to the investors. The percentages to be appropriated to the Reserve
Fund should not be lower than 10% of the profits after tax. Further appropriation is optional when
the accumulated fund Reserve Fund is 50% or more of registered capital. The percentages to be
appropriated to the Reserve Fund and the Staff and Workers’ Bonus and Welfare Fund are
determined by the Board of Directors of the Company.
34. Changes of significant accounting policies, accounting estimates
(1) Changes of significant accounting policies
Not Applicable.
(2) Changes of significant accounting estimates
Not Applicable.
35. Prior period error correction
(1) Retrospective Restatement
Not Applicable.
(2) Prospective Application
Not Applicable.
III. Taxation
Tax category Tax basis Tax rate
Business tax Housing prepayment; taxable income 5%
Land value-added tax Land VAT or pre-requisitioned Super rate progressive rate
City maintenance and construction tax Transfer tax payable 5%
Education surcharge Transfer tax payable 3%
Local education surcharge Transfer tax payable 2%
Rental income or original value of real
Housing property tax 12% or 1.2%
estate
Corporate income tax Taxable income; 25% of the taxable 25%
38
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Tax category Tax basis Tax rate
income
According to ChengXianGuoShui[2013]No.004, corporate tax relief and exemption are granted to
ChengDe NanJiang Ecological Agriculture Co., Ltd. because of its agricultural activities.
IV. Business combination and consolidated financial statements
Currency Unit: RMB
1. Major Subsidiaries
39
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
(1) Subsidiaries acquired by business combination under common control
Join
the
Balance of other Consol
Subsidiary Subsidiary Business Actual projects which Voting idated
Place of Registered Shareholdin
Company Company Characterist Business Scope investment at forms net Rights Financi
Registration Capital g Ratio (%)
Name Type ics the year end investment on Ratio al
subsidiaries Statem
ents or
not
Chengde Real Estate
ChengDe
Rongyida A wholly Real Estate Development；textile,
County, 10,000,000.00 1.00
owned clothes manufacture, import Yes
Real Estate Developme --- 100% 100%
HeBei
subsidiary CNY & export of clothes, leasing CNY
Developmen Province nt
service
t Co., Ltd.
On February 20 2009, Chengde Rongyida Real Estate Development Co., Ltd was established with registered capital of RMB 10,000,000.00 (Fei Wang contributed
RMB 9,000,000.00, accounted for 90% of the total equity; LiPing Chen contributed RMB 1,000,000.00, accounted for 10% of the total equity). On July 27 2009, Fei
Wang and LiPing Chen transfer 90% and 10% of RongYiDa’s equity to former largest shareholder Rong Chen at the price of RMB 9,000,000.00 and RMB
1,000,000.00 respectively. At the same day, Rong Chen transfer 100% of RongYiDa’s equity to the company at the price of RMB 1.00. After the transfer, the
company held 100% of RongYiDa’s equity.
(2) Subsidiaries acquired by business combination not under common control
40
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Join the
Balance of other
Consolidat
Subsidiary projects which
Subsidiary Place of Business Registered Actual investment Shareholding Voting Rights ed
Company Business Scope forms net
Company Name Registration Characteristics Capital at the year end Ratio (%) Ratio Financial
Type investment on
Statements
subsidiaries
or not
Runhua Rural
International
Water (Tianjin) Holding International 3,000.00 900.00
TianJing trading of plastic Yes
subsidiary --- 30% 53.43%
International trading CNY material CNY
Trade Co., Ltd.
Runhua Rural Water (Tianjin) International Trade Co., Ltd. (“RunHua”) is a limited liability company registered through TianJing BinHai New District
Administration for Industry and Commerce (Runhua’s business license is 120192000028688). The initial registered capital is RMB 30 million, including: Runhua
Rural Water developing Co., Ltd contribute 4 million, accounting for 13.34% of the total registered capital, BaoSheng Yang contribute 1 million, accounting for
3.33% of the total registered capital, QianYing Wang contribute 2 million, accounting for 6.67% of the total registered capital, PeiWen Ren contribute 2.01 million,
accounting for 6.70% of the total registered capital, XiaoFan Zhang contribute 1 million, accounting for 3.33% of the total registered capital, ChunHong Lan
contribute 9.03 million, accounting for 30.10% of the total registered capital, QinHua Zhao contribute 7 million, accounting for 23.33% of the total registered capital,
ZhengHong Jia contribute 3 million, accounting for 10.00% of the total registered capital, Kai Li contribute 0.96 million, accounting for 3.20% of the total registered
capital.
On June 25 2013, according to the equity’s transfer agreement, ChunHong Lan and QinHua Zhao transfer 6.67% and 23.33% of share capital respectively to
NanJiang. After the transfer, Nanjiang contribute 9 million, accounting for 30% of the total share capital. After the transfer, the capital ratio is: Runhua Rural Water
developing Co., Ltd contribute 4 million, accounting for 13.34% of the total registered capital, BaoSheng Yang contribute 1 million, accounting for 3.33% of the total
registered capital, QianYing Wang contribute 2 million, accounting for 6.67% of the total registered capital, PeiWen Ren contribute 2.01 million, accounting for
6.70% of the total registered capital, XiaoFan Zhang contribute 1 million, accounting for 3.33% of the total registered capital, ChunHong Lan contribute 7.03 million,
accounting for 23.43% of the total registered capital, ZhengHong Jia contribute 3 million, accounting for 10.00% of the total registered capital, Kai Li contribute 0.96
41
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
million, accounting for 3.20% of the total registered capital, Nanjiang contribute 9 million, accounting for 30% of the total share capital
(3) Subsidiaries acquired not through business combinations
Unit: ten thousand
Balance of
other Join the
Subsidiar projects Consolidat
Place of Actual Sharehol Voting
Subsidiary y Business Registered which forms ed
Registrati Business Scope investment at ding Rights
Company Name Company Characteristics Capital net Financial
on the year end Ratio (%) Ratio
Type investment Statements
on or not
subsidiaries
Investment of new energy, new material,
ChengDe mining industry, modern agriculture project,
ChengDe NanJiang A wholly
County, 9,000 Real Estate, construction project; investment 9,000
owned Yes
Investment Co., Investment management, investment consultancy, trade of --- 100% 100%
subsidiary HeBei
CNY CNY
import and export
Ltd.*1 Province
ChengDe NanJiang ChengDe
A wholly Ecological Production of coarse cereals and edible fungus;
Ecological County, Agriculture 1,000 1,000
owned Planting of fruit、 vegetable and Chinese Yes
Planting and --- 100% 100%
Agriculture Co., subsidiary HeBei
Breeding CNY medical herbs CNY
Ltd. *2 Province
ChengDe
ChengDe XingYe Holding County, 25,000 Production and marketing of high-grade coated 7,500
Paper Production Yes
subsidiary paper and kraft liner board paper series --- 100% 100%
HeBei
Paper Co., Ltd. *3 USD USD
Province
42
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
NanJiang Asia A wholly HongKon
2,000
owned g, Trading International investment and trading Yes
Investment Co., 0.00 --- 100% 100%
subsidiary USD
China
Ltd.*4
Chengde Research, development, sales, technical
ChengDe
marketing and technical services of grapheme
Morsh Holding County, Energy Research 5,000 5,000
and and its application materials, power batteries Yes
subsidiary --- 90% 90%
HeBei Development and battery materials, high performance
Technology CNY USD
Province membrane materials, nano-materials
Co., Ltd.*5
ChengDe
Chengde HuiJing
Holding County, Property 50 50
management Property management service Yes
property Co., subsidiary --- 100% 100%
HeBei service
CNY CNY
Ltd.*6 Province
43
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
*1 On October 9 2012, ChengDe NanJiang Investment Co., Ltd. was established and invested by
Chengde Rongyida Real Estate Development Co., Ltd. The registered capital was RMB
50,000,000.00 and RongYiDa accounted for 100% of NanJiang Investment’s equity. On
December 21 2012, RongYiDa transfer 100% of NanJiang Investment’s equity to the company at
the price of RMB 50,000,000.00. After the transfer, the company held 100% of NanJiang
Investment’s equity. On January 6 2013, NanJiang increase share capital of NanJiang Investment
by RMB 40,000,000.00. After the increment, the registered capital of NanJiang Investment reach
RMB 90,000,000.00.
*2 On October 24 2012, ChengDe NanJiang Ecological Agriculture Co., Ltd. established and
invested by ChengDe NanJiang Investment Co., Ltd. The registered capital was RMB
5,000,000.00 and NanJiang Investment held 100% of Ecological Agriculture’s equity. On April 18
2013, NanJiang Investment increase share capital of NanJiang Ecological Agriculture by RMB
5,000,000.00. After the increment, the registered capital of NanJiang Ecological Agriculture reach
RMB 10,000,000.00.
*3 On October 26 2001, Chengde XingYe Paper Limited company was established by the
company together with (Hong Kong) Zhanxi International Group Co., Ltd. the registered capital of
Chengde XingYe Paper Limited company was 250 million U.S. dollars，the paid-in capital was
$100,000,000.00, Shareholders' contribution accounted for 40% of the registered capital, and in
which the company invested 75,000,000.00 dollar ( accounting for 75%), (Hong Kong)Zhanxi
invested 25,000,000.00 dollar ( proportion 25%).On October 28, 2002, according to the regulation
of “ reply to investment increase of joint ventures of Chengde XingYe Paper Limited company”
approved by the people's Republic of China Ministry of foreign trade and Economic Cooperation (
the former of the Ministry of Commerce ) with the issuance of No.[2001]969, the registered
capital was increased to $ 250 million from $ 10,000 million, The new registered capital had been
paid by the two sides in accordance with the contract, articles of agreement within three years
from the date of the business license renewal. The registered capital of Chengde XingYe Paper
Limited Company was not paid fully within the prescribed period. Chengde XingYe Paper
Limited company had been shut down completely suffered from December 2006 serious loss since
the original largest shareholder Wang Shuxian and senior executives involved in smuggling effect,
On December 8, 2008, Hebei province Chengde City Intermediate People's Court issued the No
(2008)13 Chengde Civil Award and confirmed the bankruptcy liquidation of the application of
Chengde XingYe Paper Limited company. On March 11, 2009, Hebei province Chengde City
Intermediate People's Court approved the settlement request of Chengde XingYe Paper Limited
Company according to the Civil Award with No. (2008)13. On May 10, 2009, Hebei province
Chengde City Intermediate People's Court confirmed the settlement agreement reached on May 8,
2009 between Chengde XingYe Paper Limited Company and the creditors and terminated the
reconciliation procedure. On April 23, 2009, the Hebei Provincial Higher People's Court issued
No.(2009) 44 Hebei ”criminal Award” and confirmed that Chengde XingYe Paper Limited
company was a false foreign investment enterprise which was registered in the name of the Hong
Kong ZhanXi by the company's original shareholders of Wang Shuxian. In October 2012, the
company received civil conciliation No.[2011]76 from ChengDe Intermediate People's court. The
44
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
civil conciliation confirmed the dispute settlement between the company and ShuXian Wang:
ShuXian Wang was responsible for coordinating minority of ChengDe XingYe Paper Co., Ltd to
abandon their equity, assisting the company to complete the liquidation and cancellation of
XingYe. After the above works were done, the company agreed to transfer 20% equity of Suning
Banhe Chemical Fiber Facsimile Fabric Co., Ltd, land of industrial park (34.03 acre), factory
(25596.87 square meter) and land of No.131 (44.4 acre) to ShuXian Wang.
*4 On November 14, 2013, NanJiang Asia Investment Co., Ltd. (“NanJiang Asia”) was invested
by NanJiang, with the register capital of USD 20 million. Paid-in share capital is USD 0.00 and
the register place is Hong Kong.
*5 On January 24, 2013, Chengde Morsh Technology Co., Ltd. (“Morsh Technology”) was
invested by NanJiang and Morsh (NingBo) Technology Co., Ltd, with the register capital of RMB
50,000,000.00: NanJiang contribute RMB 45,000,000.00, accounting for 90% of the total share
capital; Morsh (NingBo) Technology contribute RMB 5,000,000.00, accounting for 10% of the
total share capital.
*6 On November 18, 2013, Chengde HuiJing property Co., Ltd (“HuiJing Property”) was invested
by NanJiang Investment, with the register capital of RMB 500,000.00. NanJiang Investment
contributes RMB 500,000.00, accounting for 100% of share capital.
2. Special purposes entity or operation entity where controlling right is formed under
entrusted operation or leasing
Not Applicable.
3. Subsidiaries are in the consolidation scope where the Company only owns 50% or below
50% of their equity and explanation for why they are in the consolidation scope
On June 25, 2013, NanJiang acquired RMB 9,000,000.00 of RunHua’s equity, accounting for 30%
of its total share capital and become the largest shareholder. RunHua reach a consensus to
restructuring its board: five members of board of directors and three of them assigned by
NanJiang. ChunHong Lan, who contribute 7.03 million, accounting for 23.43% of the total
registered capital, agree to delegate her voting right (except dividend right and transfer right) to
NanJiang, making NanJiang owning 53.43% voting right at the board.
According to Accounting Standards for Business Enterprises No.33 - Consolidated financial
statement rule No.8: if one of the following conditions are met, Subsidiaries are in the
consolidation scope where the Company only owns 50% or below 50% of their equity (except
there is evidence proving that subsidiaries are not under control).
(1) There is a delegation agreement with other investors in the invested entity increasing voting
right to more than half.
(2) According to Company Article or other agreement, can substantially influence financial and
operational strategies of the entity.
(3) Having rights to appoint and dismiss members on the board.
45
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
(4) Having voting right more than 50% on the board.
After the acquisition,
(1) five members on the board of RunHua, three assigned by NanJiang
(2) NanJiang will also assign the production and operational manager to RunHua
(3) There is a delegation agreement between NanJiang and ChunHong Lan, making NanJiang
owning 53.43% voting right at the board
It is obvious that NanJiang meet the requirement of (1)There is a delegation agreement with other
investors in the invested entity, increasing voting right to more than half. (3)Having rights to
appoint and dismiss members on the board. Therefore, RunHua are in the consolidation scope.
4. Subsidiaries are not under control where the Company held above 50% of their equity
and explanation for why they are not under control
Not Applicable.
5. Explanation for changes in consolidation scope
New subsidiaries that are in consolidation scope during the reporting period are listed below:
Net profit from
Net assets as
the year-begin
Subsidiary Company Name Explanation for changes at the
to the disposal
disposal date
date
Runhua Rural Water
(Tianjin) International share acquisition 3,189.15 735.61
Trade Co., Ltd.
Chengde Morsh
new incorporation 4,978.75 -21.25
Technology Co., Ltd.
Chengde HuiJing property
new incorporation 49.81 -0.19
Co., Ltd.
NanJiang Asia Investment
new incorporation 0.00 0.00
Co., Ltd
Total 8,217.71 714.17
On August 28, 2008, Runhua Rural Water (Tianjin) International Trade Co., Ltd. (“RunHua”)
(limited liability) registered through TianJing BinHai New District Administration for Industry
and Commerce. On June, 2013, NanJiang acquired 30% of RunHua’s share capital. Therefore,
RunHua’s Income statement and cash flow between 2013-6-25 and 2013-12-31 are in
consolidation scope.
6. Business combination under the common control during the reporting period
Not Applicable.
7. Business combination not under the common control during the reporting period
Subsidiary Company Name Goodwill Accounting treatment of goodwill
46
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Subsidiary Company Name Goodwill Accounting treatment of goodwill
Runhua Rural Water (Tianjin) International
1,809,762.89 *
Trade Co., Ltd.
On June 25, 2013, through business combination not under the common control, NanJiang
acquired 30% of RunHua’s equity and control the company. The consideration of the acquisition
is based on the market price of identifiable assets and liabilities (Walker (Beijing) international
assets evaluation co., LTD issue [2012]No.0283 evaluation report to confirm the evaluated price).
The acquisition is based on both party’s voluntary and they both are familiar with the markets,
therefore, identifiable assets and liabilities are at the fair value. The difference between the initial
cost of the parent’s long term investment and the deserved share of the parent in identifiable assets
and liabilities confirmed as goodwill. The acquisition confirm the relationship of parent and
subsidiary between NanJiang and RunHua. When it comes to preparing the consolidated financial
statement, Runhua’s financial statements are adjust based on the fair value of identifiable assets
and liabilities on the acquisition date (evaluation price plus net profit produced from evaluation
date to consolidation date).
On January 9, 2013, NanJiang signed an acquisition agreement with original shareholder of
RunHua, acquiring 30% of RunHua’s equity with the consideration of RMB 9170.37 thousand.
The consideration is based on [2012]No.0283 evaluation report issued by Walker (Beijing)
international assets evaluation co., LTD. The date of shareholders’ resolution is January 9, 2013.
Acquisition payment date is June 25, 2013, the Industrial and commercial registration date of
change is June 24, 2013, and the acquision date confirm at June 25, 2013.
8. Loss of subsidiaries due to disposal of equity interests without controlling rights during
the reporting period
Not Applicable.
9. Counter purchase occurred during the reporting period
Not Applicable.
10. Absorption consolidation occurred during the reporting period
Not Applicable.
11. Minority interests of major subsidiaries
Item Closing BalanceOpening Balance
Minority interests
Runhua Rural Water (Tianjin) International Trade Co., Ltd. 2,232.40 ---
Chengde Morsh Technology Co., Ltd. 497.88 ---
Total 2,730.28 ---
(1) Amount in minority interest available to offset minority gains and losses
Not Applicable.
47
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
(2) Balance between the owners’ equity in parent offsetting the current losses attributable to
minority shareholders of subsidiaries
Not Applicable.
12. Translation exchange rates for items in major statements of overseas operating entities
Not Applicable.
V. Notes to the financial statements
1. Cash at bank and in hand
Closing Balance Opening Balance
Items Currency Original Exchange RMB Original Exchange RMB
Currency rate Translation Currency rate Translation
Cash
RMB 19,146.58 1.000 19,146.58 72,492.38 1.000 72,492.38
Sub-total 19,146.58 19,146.58 72,492.38 72,492.38
Bank
RMB 75,093,993.26 1.000 75,093,993.26 81,440,569.01 1.000 81,440,569.01
JPY --- --- --- ---
EUR --- --- --- ---
HKD --- --- --- ---
USD 470,460.11 6.0969 2,868,348.22 5,247.80 6.2855 32,985.48
Sub-total --- 77,962,341.48 --- 81,473,554.49
Other cash and
cash equivalents
RMB 11,445,403.16 1.000 11,445,403.16 --- 1.000 ---
Sub-total 11,445,403.16 11,445,403.16 --- ---
Total --- 89,426,891.22 --- 81,546,046.87
(1) restricted cash at bank and in hand during the reporting period are shown below:
Item Closing Balance Opening Balance
guaranteed deposit for individual mortgages 1,045,403.16 ---
deposit for notes payable 10,400,000.00 ---
Total 11,445,403.16 ---
Deposit for notes payable RMB 10,400,000.00 belong to RunHua, the opening balance in
consolidation date is RMB 0.00.
(2) Compared to the opening balance, the closing balance of cash at bank and in hand increased by
RMB 7,880,844.35, with the growth rate of 9.66%. The major explanations for the increase were:
New subsidiary RunHua are in the consolidated scope.
48
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
2. Receivables
(1) Classification
Closing Balance Opening Balance
Categories Bad debt Bad debt
Amount Rate Amount Rate
provision provision
1 Individually significant
amounts of accounts
--- --- --- --- --- ---
receivable accrued bad debt
provision
3 Accounts receivable
accrued bad debt provision 123,348.00 100.00% 6,167.40 --- --- ---
by portfolio
Total 123,348.00 100.00% 6,167.40 --- --- ---
(a) accounts receivable accrued bad debt provision by aging analyze method
Closing Balance Opening Balance
Aging
Rate in total Bad debt Rate in total Bad debt
Amount (%) provision Amount (%) provision
123,348.00 100.00% 6,167.40 --- --- ---
Within 1 year
--- --- --- --- --- ---
1-2 years
--- --- --- --- --- ---
2-3 years
--- --- --- --- --- ---
Over 3 years
Total 123,348.00 100.00% 6,167.40 --- --- ---
(b) accounts receivable accrued bad debt provision by balance percentage method
Name of Portfolio Book Value Accrue ratio (%) Bad Debt provision
Accruing bad debt through portfolio 123,348.00 5.00% 6,167.40
Total 123,348.00 --- 6,167.40
(2) No account receivables are written off in the current reporting period
(3) By the end of the current reporting period, there are no accounts receivable due from any
shareholders held over 5%
3. Prepayment
(1) The aging analysis
Closing Balance Opening Balance
Aging
Amount Rate in Total (%) Amount Rate in Total (%)
With in 1 year 28,533,344.69 84.33% 308,292.36 100.00%
49
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
1-2 years 101,600.00 0.30% --- ---
2-3 years 5,201,365.53 15.37% --- ---
Over 3 years --- --- --- ---
Total 33,836,310.22 100.00% 308,292.36 100.00%
(2) During the reporting period, the company have prepayment with an aging above 1 year
Company Name Relationship Amount Aging Reason for unsettlement
ChengDe residence guarantee Co., Ltd. Non-Related Party 101,600.00 1-2year Residence purchaser’s loan unsettle
JinSang (TianJin) Investment Co., Ltd. Non-Related Party 5,201,365.53 2-3year Residence under construction
Total --- 5,302,965.53 --- ---
(3) During the reporting period, there are no prepayments due from any shareholders held over 5%
(4) The top five prepayment accounts
Debtors Ranking Relationship Amount Aging Nature
JinShang (TianJin) Investment Co., Ltd. Non-Related Party 5,201,365.53 2-3 year Project prepayment
ShaBo basis (Shanghai) trading Co., Ltd Non-Related Party 2,425,514.01 Within 1 year Purchase Goods
MinFeng (TianJin) Material industry
Non-Related Party 1,945,944.00 Within 1 year
chemical industry Co.Ltd Purchase Goods
HaiChao Zheng Non-Related Party 790,000.00 Within 1 year Purchase Goods
HaiYi (Shanghai) trading Co., Ltd Non-Related Party 335,362.50 Within 1 year Project prepayment
Total 10,698,186.04 --- ---
(5) Compared to the opening balance, the closing balance of prepayment increasd by RMB
33,528,017.86, with the increase rate of 10875.00%. The major explanations for the increase were:
new subsidiary RunHua are in the consolidated scope.
4. Other receivables
(1) Disclosure of other receivables by category
Closing Balance Opening Balance
Categories Bad debt Bad debt
Amount Rate Amount Rate
provision provision
1 Individually significant
amounts of accounts
1,209,273.00 14.42% 1,209,273.00 1,209,273.00 3.51% 1,209,273.00
receivable accrued bad debt
provision
2 Individually insignificant
amounts of accounts
1,857,951.91 22.16% 1,857,951.91 31,752,727.33 92.12% 3,583,707.69
receivable accrued bad debt
provision
3 Accounts receivable
accrued bad debt provision 5,318,030.55 63.42% 341,921.88 1,504,762.66 4.37% 1,504,762.66
by portfolio
Total 8,385,255.46 100.00% 3,409,146.79 34,466,762.99 100.00% 6,297,743.35
50
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Explanation for three types of other receivables:
(a) The receivables with more than RMB 1 million are recognized as the significant receivables.
After the identification of the significant receivables, the creditor’s right, which was acquired by
auction in 2009 and worth RMB 1,209,273.00, was confirmed as individually significant amounts.
The creditor’s right was confirmed to be irrecoverable and it was accrued full bad debt provision.
(b) According to the business characteristic of the company, the irrecoverable risks are high for
the other accounts receivable with an aging of over 3 years. Therefore, other accounts receivable
which are less than RMB 1 million and with an aging of over 3 years are considered as
individually insignificant amounts of accounts receivable accrued bad debt provision
(2) accrued bad debt provision
(a) Other accounts receivable which are individually significant and perform impairment test
separately at the year-end
Accounts Receivable Book Amount Bad debt provision Rate Reasons for Accrual
Creditor’s right from auctions 1,209,273.00 1,209,273.00 100% More than 3 years
Total 1,209,273.00 1,209,273.00
(b) Other accounts receivable which are individually insignificant and perform impairment test
separately at the year-end
Accounts Receivable Book Amount Bad debt provision Aging Accrued Rate Reasons for Accrual
Expected
AnSheng Wang 141,000.00 141,000.00 1-2 year 100
irrecoverable
Expected
DeGang Bao 356,838.00 356,838.00 1-3 year 100
irrecoverable
Expected
QiZhong Yan 200,000.00 200,000.00 1-2 year 100
irrecoverable
Expected
ChengQuan Liu 300,000.00 300,000.00 1-2 year 100
irrecoverable
Expected
TianHong Li 217,424.66 217,424.66 2-3 year 100
irrecoverable
Expected
HaiHong Zhou 642,689.25 642,689.25 Whin one year 100
irrecoverable
Total 1,857,951.91 1,857,951.91 --- --- ---
(c) Other accounts receivable accrued bad debt provision by portfolio
51
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Closing Balance Opening Balance
Aging
Rate in total Bad debt Rate in total Bad debt
Amount (%) provision Amount (%) provision
Within 1 year 5,085,113.76 95.62% 242,138.52 26,483,385.17 83.40% 1,324,169.26
1-2 years 228,916.79 4.30% 97,783.36 1,250,442.16 3.94% 250,088.43
2-3 years 4,000.00 0.08% 2,000.00 4,018,900.00 12.66% 2,009,450.00
Over 3 years --- --- --- --- --- ---
Total 5,318,030.55 100.00% 341,921.88 31,752,727.33 100.00% 3,583,707.69
(3) By the end of the current reporting period, there are no other accounts receivable due from any
shareholders held over 5%
(4) The top five other accounts receivable
Debtors Ranking Relationships Amounts due Aging Nature
Delegation
China International Futures Co., Ltd. Non-Related Party
2,267,885.00 Within 1 year investment
BeiDa FangZheng Material Industry Group Non-Related Party 682,636.00 Within 1 year Delegation expense
MinFeng (TianJin) Material Industry
Related Party
Chemical Trading Co., Ltd. 670,000.00 Within 1 year Interest
Indivdual taxable
HaiHong Zhou Non-Related Party
642,689.25 Within 1 year income
Tax relating to
TianJin Custom Non-Related Party
601,277.95 Within 1 year import
On Dec 21 2012, Runhua Rural Water (Tianjin) International Trade Co., Ltd. delegate ZhuoZhong
(ShanXi) Trading CO., Ltd. to make futures investment, profit and loss are sufferred by
ZhuoZhong (ShanXi) Trading CO., Ltd.
(5) Reversal or recovery of other receivables in this fiscal year
Amount of bad debt
Reasons for reversal Original Method for Amount of reversal or
Name of Debtor before reversal or
or recovery accruing bad debt recovery
recovery
BanHe Administrator Revovery Aging analyses method 2,009,450.00 1,447,846.06
Other small debtor Revovery Aging analyses method 956,828.70 956,828.70
Total --- --- 2,966,278.70 2,404,674.76
(6) Other receivables written off during the reporting period
52
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Name of Debtor Nature Amount written off Book value Bad debt Accrued Reason for written off
irrecoverable due to
BanHe Administrator Current account 561,603.94 4,018,900.00 2,009,450.00
liquidation
Total --- 561,603.94 4,018,900.00 2,009,450.00
(7) Compared to the opening balance, the closing balance of other receivables decreased by RMB
23,192,910.97, with the decrease rate of 82.33%. The major explanations for the decrease were:
the receivables account - ChengDe Land Reserve Center and BanHe Administrator are recovered
5. Inventories
(1) Inventories Classification
Closing Balance Opening Balance
Items
Book Balance Provision Net Book Balance Book Balance Provision Net Book Balance
Raw
836,393.84 --- 836,393.84 --- --- ---
Material
Circulation
18,498.40 --- 18,498.40 --- --- ---
materials
Finished
15,270,790.02 --- 15,270,790.02 200,929.00 --- 200,929.00
goods
Development
163,568,661.40 --- 163,568,661.40 9,926,226.12 --- 9,926,226.12
costs
Product
7,642,776.18 --- 7,642,776.18 10,165,279.49 --- 10,165,279.49
development
Consumptive
biological 2,113,905.42 --- 2,113,905.42 198,300.00 --- 198,300.00
assets
Cost of
1,118,939.06 --- 1,118,939.06 --- --- ---
production
Total 190,569,964.32 --- 190,569,964.32 20,490,734.61 --- 20,490,734.61
The company did not have any guaranteed inventories during the reporting period.
The company did not have any secured inventories during the reporting period.
(a) Development Cost
Estimation of
Time for Estimation of total Closing
Item time for Opening Balance
commencement investment amount Balance
completion
HuiJingTianDi 2013 December 2014 5.7 hundred million 161,600,661.40 ---
Products
intended to --- --- --- 1,968,000.00 9,926,226.12
develop
53
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Total 163,568,661.40 9,926,226.12
(b) Product development
Time for Opening Increase during the current Decrease during the Closing
Item
completion Balance accounting period current accounting period Balance
Qian
December
Yuan 10,165,279.49 20,937,297.30 23,459,800.61 7,642,776.18
2012
Area
Total 10,165,279.49 20,937,297.30 23,459,800.61 7,642,776.18
(c) Consumptive biological assets
Item Opening Balance Closing Balance
Chick 254,001.43 18,000.00
Hybrid boar 1,078,535.97 180,300.00
Dual boar 637,621.37 ---
Boer goat 143,746.65 ---
Total 2,113,905.42 198,300.00
(2) Provision for inventory
Decrease during the current
Opening Increase during the accounting period
Category Closing Balance
Balance current accounting period Reversal Written off
Raw Material --- --- --- --- ---
Circulation --- --- --- --- ---
materials
Finished goods --- --- --- --- ---
Development costs --- --- --- --- ---
Product --- --- --- --- ---
development
Consumptive --- --- --- --- ---
biological
Cost of production --- --- --- --- ---
Total --- --- --- --- ---
(3) No capitalized borrowing cost included in inventory during the current accounting period.
(4) Compared to the opening balance, the closing balance of inventories increased by RMB
170,079,229.71, with the increase rate of 830.03%. The major explanations for the increase were:
new land were purchased for the new project HuiJingTianDi and ecological agriculture Co., Ltd.
expand the scale of production.
54
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
6. Other Current Assets
Items Closing Balance Opening Balance
Deductible input VAT 3,362,445.37 ---
Land VAT (prepayment) 1,115,712.87 ---
The ICBC financial product --- 9,000,000.00
Total 4,478,158.24 9,000,000.00
7. Long-term equity investments
Increase,decrease in
Accounting Investment Opening Closing
Invested Company this period(decrease
method at cost Balance Balance
-)
RunHua (TianJin)
Equity 2,000,000.0 2,185,406.0
Water Saving Tech 2,010,830.52 174,575.52
method 0 4
Co., Ltd.
MinFeng (TianJin)
Material Industry Equity 4,410,000.0 4,441,499.4
4,410,000.00 31,499.45
Chemical Trading method 0 5
Co., Ltd.
6,410,000.0 6,626,905.4
Total --- 6,420,830.52 206,074.97
0 9
Voting Cash
Stake Increase in this
Invested Company right Provision Dividend in
ratio（%） period
ratio（%） this period
RunHua (TianJin)
Water Saving Tech 31.746 31.746 --- --- ---
Co., Ltd.
MinFeng (TianJin)
Material Industry
49.00 49.00 --- --- ---
Chemical Trading
Co., Ltd.
Total --- --- --- --- ---
(1) On October 14 2011, RunHua (TianJin) Water Saving Tech Co., Ltd. was established and
obtained the business liscence, with the registered capital of RMB 6300 thousand, including
RunHua developing Co., Ltd. Contribute RMB 3000 thousand, accounting for 47.619% of the
total share capital, subsidiary RunHua contribute RMB 2000 thousand, accounting for 31.746% of
the total share capital, LangFang ChunYuan irrigating prject Co., Ltd contribute RMB 1000
thousand, accounting for 15.873% of total share capital, HePing Zhang contribute RMB 300
thousand, accounting for 4.7619% of total share capital.
(2) On December 21 2012, MinFeng (TianJin) Material Industry Chemical Trading Co., Ltd. was
established, with the registered capital of RMB 9000 thousand, including MinFeng (ShanXi)
55
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Material Industry Chemical Trading Co., Ltd contribute 459 thousand, accounting for 51% of the
total share capital, subsidiary RunHua contribute RMB 4410 thousand, accounting for 49% of the
total share capital.
8. Fixed assets and depreciation
(1) Fixed assets
Opening Decrease in this Closing
Items Increase in this period
Balance period Balance
1 Total original book
27,920,093.42 4,487,895.72 18,551,360.24 13,856,628.90
vale:
Including：buildings 26,592,797.32 --- 18,497,360.24 8,095,437.08
and constructions
Machinery 10,500.00 1,198,315.43 --- 1,208,815.43
equipment
Transportation 1,233,161.91 2,603,156.23 --- 3,836,318.14
vehicles
Other equipment 83,634.19 686,424.06 54,000.00 716,058.25
New in this Accrue in this
— — —
period period
2 Total accumulated
3,177,989.82 1,862,953.93 1,862,953.93 2,480,668.46 3,177,989.82
depreciation
Including: buildings
3,031,578.44 659,076.42 659,076.42 2,460,148.46 3,031,578.44
and constructions
Machinery --- 52,877.32 52,877.32 --- ---
equipment
Transportation 133,127.47 940,020.60 940,020.60 --- 133,127.47
vehicles
Other equipment 13,283.91 210,979.59 210,979.59 20,520.00 13,283.91
3 Total net book
24,742,103.60 — — 11,296,353.61
value of fixed assets
Including: buildings
23,561,218.88 — — 6,864,930.68
and constructions
Machinery
10,500.00 — — 1,155,938.11
equipment
Transportation
1,100,034.44 — — 2,763,170.07
vehicles
Other equipment 70,350.28 — — 512,314.75
4 Total impairment --- ---
— —
provision
Including: buildings --- ---
— —
and constructions
Machinery --- ---
— —
equipment
Transportation --- ---
— —
vehicles
Other equipment --- — — ---
5 Total book value of
24,742,103.60 — — 11,296,353.61
fixed assets
Including: buildings
23,561,218.88 — — 6,864,930.68
and constructions
Machinery
10,500.00 — — 1,155,938.11
equipment
Transportation
1,100,034.44 — — 2,763,170.07
vehicles
Other equipment 70,350.28 — — 512,314.75
The total accumulated depreciation for the current accounting period is RMB 1,862,953.93.
56
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
The original book value of fixed assets charged from construction in progress is RMB 402,587.43.
The book value of secured or guaranteed fixed assets is RMB 0.
(2) No temporary idle fixed assets at the year-end
(3) No fixed assets with application of certificate for property right still in process
(4) Fixed assets rent out thorugh operating lease
Item Book Value
House and Buildings 1,236,210.15
Total 1,236,210.15
(5) No held-for-sale fixed assets in this period.
(6)Fixed assets without certificates of ownership at the year-end
Estimated time for
Reason for without certificates of
Item Book Value acquiring the cerificates
ownership
of ownership
All the assets pledged to lift, transfer
House and Buildings 6,864,930.68 Unpredictable
procedures have not yet completed
Total 6,864,930.68 --- ---
(7) Explanation for fixed assets
Fixed assets had been transferred to Chengde Rongyida Real Estate Development Co., Ltd in 2009
during the bankruptcy reorganization. But due to release of pledge is still under progress so that
the property transfer cannot be done. Information has been issued by Hebei Chengde intermediate
people's court to Chengde housing construction Bureau to ask for the assistance of execute
property certificate ChengXian Fang ZI No.000196 and 000108 to complete the property transfer.
Our company has rented out those temporarily idle houses (certificates for property right:
ChengDe No.000196), venues and received the rental fee of RMB 81,200.00. Due to no
calculation on the square meter of the rental areas, it is hard to get the rental cost, considering the
amount is relatively small, our company decided not to transfer those part of amount from fix
assets to investment property.
9. Construction in Progress
Closing Balance Opening Balance
Item Book Net Book Book Net Book
Provision Provision
Value Value Value Value
Factory --- --- --- 26,925.00 --- 26,925.00
Machinery Equiment --- --- --- 338,927.43 --- 338,927.43
Well and other
--- --- --- 15,535.00 --- 15,535.00
accessories
57
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Closing Balance Opening Balance
Item Book Net Book Book Net Book
Provision Provision
Value Value Value Value
Wages --- --- --- 21,200.00 --- 21,200.00
Total --- --- --- 402,587.43 --- 402,587.43
10. Productive Biological Assets
Increase in this Decrease in this
Item Opening Balance Closing Balance
period period
Livestock --- --- --- ---
Egg and Chick --- 392,756.47 248,745.76 144,010.71
Hens --- 167,092.15 52,912.52 114,179.63
Total --- 559,848.62 301,658.28 258,190.34
11. Intangible assets
Increase in this Decrease in this
Items Opening Balance Closing Balance
period period
1 Total of original value 28,976,579.45 2,878,877.77 --- 31,855,457.22
(1) Land use right 28,976,579.45 2,650,877.77 --- 31,627,457.22
(2) Software --- 228,000.00 --- 228,000.00
2 Total accumulated
2,271,475.07 862,328.74 --- 3,133,803.81
amortization
(1) Land use right 2,271,475.07 719,328.74 --- 2,990,803.81
(2) Software --- 143,000.00 --- 143,000.00
3 Total net book value 26,705,104.38 2,878,877.77 862,328.74 28,721,653.41
(1) Land use right 26,705,104.38 2,650,877.77 719,328.74 28,636,653.41
(2) Software --- 228,000.00 143,000.00 85,000.00
4 Total impairment --- --- --- ---
(1) Land use right --- --- --- ---
(2) Software --- --- --- ---
4 Total of intangible asset book
26,705,104.38 2,878,877.77 862,328.74 28,721,653.41
value
(1) Land use right 26,705,104.38 2,650,877.77 719,328.74 28,636,653.41
58
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Increase in this Decrease in this
Items Opening Balance Closing Balance
period period
(2) Software --- 228,000.00 143,000.00 85,000.00
Amortization in this period is RMB 862,328.74
No secured intangible assets at the year-end.
(1) The company has rented out those temporarily idle land (Cheng Xian TuGuo Yong(2005) Zi
No.63) and received the rental fee of RMB 300,000.00. Due to no calculation on the square meter
of the rental areas, it is hard to get the rental cost, considering the amount is relatively small, our
company decided not to transfer those part of amount from fix assets to investment property.
(2) Lands Cheng Xian Guo Yong(2005) Zi No.63) were acquired by RongYiDa by auction from
former ChengDe DiXian Textile Corporation. The procedures for transferring ownership (from
DiXian to RongYiDa) of these lands were unsettled.
12. Goodwill
Opening Increase in this Decrease in
Item Reason Closing Balance
balance period this perido
Consolidated
Acquire subsidiary --- 1,809,762.89 --- 1,809,762.89
goodwill
Total --- 1,809,762.89 --- 1,809,762.89
On June 25, 2013, through business combination not under the common control, NanJiang
acquired 30% of RunHua’s equity and control the company. The consideration of the acquisition
is based on the market price of identifiable assets and liabilities (Walker (Beijing) international
assets evaluation co., LTD issue [2012]No.0283 evaluation report to confirm the evaluated price).
The acquisition is based on both party’s voluntary and they both are familiar with the markets,
therefore, identifiable assets and liabilities are at the fair value. The difference between the initial
cost of the parent’s long term investment and the deserved share of the parent in identifiable assets
and liabilities confirmed as goodwill in the consolidated financial statements.
On December 31, 2013, net asset of RunHua is increased, so there is no evidence of impairment.
13. Long Term Deferred Expenses
Items Opening Balance Increase in this period Decrease in this period Closing Balance
Decoration fee 734,424.92 7,741,676.63 664,529.03 7,811,572.52
Total 734,424.92 7,741,676.63 664,529.03 7,811,572.52
14. Deferred tax assets
(1) Deferred tax assets which have been confirmed
Item Closing Balance Opening Balance
59
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
deductible temporary deductible temporary
Deferred tax Deferred tax
differences differences
Bad debt provision 3,336,892.77 834,223.19 6,075,243.36 1,518,810.84
Total 3,336,892.77 834,223.19 6,075,243.36 1,518,810.84
(2) Deferred tax assets which have not been confirmed
Items Closing balance Opening balance
1 Deductible temporary differences 72,254.02 222,499.99
2 Deductible loss 137,486,697.69 440,162,868.08
Total 137,558,951.71 440,385,368.07
As whether could acquire sufficient taxable income was uncertain in the future, the above deferred
tax assets (generated by deductible loss and temporary differences) of the company and its
subsidiaries, such as XingYe, were not confirmed.
(3) Deferred tax assets (generated by deductible loss) were expired in periods shown blow:
Items(year) Closing balance Opening balance Notes
2013 --- 302,676,170.39
2014 114,543,457.05 114,543,457.05
2015 --- ---
2016 --- ---
2017 22,943,240.64 22,943,240.64
2018 --- ---
Total 137,486,697.69 440,162,868.08
15. Impairment of assets
Increase in Decrease in this period
Items Opening Balance Closing Balance
this period Reversal Written off
Bad debt provision 6,297,743.35 240,542.63 --- 3,122,971.79 3,415,314.19
Provision for long-term
--- --- --- --- ---
equity
Impairment provision for
--- --- --- --- ---
fixed assets
Total 6,297,743.35 240,542.63 --- 3,122,971.79 3,415,314.19
16. Notes Payable
Classification Closing Balance Opening Balance
banker's acceptance bill 26,000,000.00 ---
60
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Classification Closing Balance Opening Balance
Total 26,000,000.00 ---
Compared to opening balance, closing balance of notes payable are increased by 26,000,000.00,
the major reason for the increase is new subsidiary RunHua in the consolidation scope.
17. Payable
Closing Balance Opening Balnace
Aging
Amount Rate in total Amount Rate in total
Within 1 year 3,361,499.82 91.83% 2,039,628.36 99.40%
1-2 years 286,757.79 7.83% 100.00 0.00%
2-3 years 100.00 0.00% --- ---
Over 3 years 12,273.55 0.34% 12,273.55 0.60%
Total 3,660,631.16 100.00% 2,052,001.91 100.00%
(1) At the year-end of the reporting period, there are no payable due from any shareholders held
over 5%.
(2) At the year-end of the reporting period, there is no amount due from related party.
(3) Aging of accounts payable over one year
Reason for
Company Name Amount Remark
unsettle
ChengDe LiCheng Construction Project final
281,157.79 ---
and installation project Co., Ltd. payment
18. Receivable in advance
Aging Closing Balance Opening Balance
Within 1 year 53,821,113.16 7,120,711.50
1-2 years --- ---
2-3 years --- ---
Over 3years --- ---
Total 53,821,113.16 7,120,711.50
(1) At the year-end of the reporting period, there are no receivable in advance due from any
shareholders held over 5%.
(2) At the year-end of the reporting period, there is no related-party receivable in advance
(3) Compared to the opening balance, the closing balance of receivable in advance increased by
RMB 46,700,401.66, with the increase rate of 655.84%. The major explanations for the increase
were revenue from land received in advance: sell ChengXianGuoYong [2013]No.31 obtain
revenue of RMB 9,800,700.00; sell ChengXianGuoYong [2013]No.33 obtain revenue of RMB
30,622,800.00.
19. Payroll
61
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Increase in this Decrease in this
Item Opening Blance Closing Balance
period period
1 Wage, bonus, allowance and subsidy 180,374.00 6,726,463.38 6,829,887.38 76,950.00
2、Employee welfare --- 221,000.53 221,000.53 ---
Including：non-monetary welfare --- --- --- ---
3、Social insurance charges 49,592.68 780,159.38 799,065.16 30,686.90
Including：a.Essential medical insurance
15,840.00 181,055.40 176,471.20 20,424.20
charges
b.Supplement medical insurance charges --- --- --- ---
c.Essential endowment insurance 32,933.00 508,158.70 532,044.20 9,047.50
d. Supplement endowment insurance --- --- --- ---
e.Unemployment insurance 819.68 49,582.18 49,802.06 599.80
f.Industrial injury insurance --- 26,180.09 25,964.59 215.50
g. Maternity insurance --- 15,183.01 14,783.11 399.90
4、Housing fund --- 269,115.16 269,115.16 ---
5、Trade union and education fee 1,000.00 31,049.30 31,809.30 240.00
6、Termination welfare --- --- --- ---
Including：（1）welfare from terminating a
--- --- --- ---
labor contract
（2）Predicting termination cost --- --- --- ---
7、Other 6,097,486.60 --- --- 6,097,486.60
Including：share payment by cash --- --- --- ---
Totoal 6,328,453.28 8,027,787.75 8,150,877.53 6,205,363.50
Other is accrued by the subsidiary: ChengDe XingYe Paper Co., Ltd. for settling down employees.
20. Tax payable
Items Closing Balance Opening Balance
VAT 132,688.59 -50,248.40
Business tax 67,762.28 355,481.28
Urban construction tax 19,182.58 -112,371.20
Land VAT --- -1,178,375.52
Corporate income tax 12,078,983.62 6,197,695.00
Land use tax 2,753,192.71 2,993,193.92
Individual taxable income 35,510.93 1,048.30
Education surcharge 7,871.26 -67,073.88
Stamp tax 34,936.86 21,257.53
Local education surcharge 5,247.55 -5,949.81
Housing property tax 2,888,250.17 2,888,250.17
River defense fare 3,278.03 ---
Total 18,026,904.58 11,042,907.39
Compared to the opening balance, the closing balance of tax payable increase by RMB
6,983,997.19, with the increase rate of 63.24%. The major reason is corporate income tax
62
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
increasing significantly in this period.
21. Other payable
Closing Balance Opening Balance
Aging Amount Rate in Total Amount Rate in Total
Within 1 year 35,447,066.13 98.34% 4,320,266.25 8.28%
1-2 years 119,168.49 0.33% 17,199,106.20 32.96%
2-3 years 47,779.91 0.13% 2,932,027.94 5.62%
Over 3 years 430,969.17 1.20% 27,726,978.57 53.14%
Total 36,044,983.70 100.00% 52,178,378.96 100.00%
(1) At the year-end of the reporting period, there are no other payable due from any shareholders
held over 5%.
(2) At the year-end of the reporting period, the other accounts payable are significant and with an
aging of over 1 years
Name Amount Nature or content
QiZHan Cai 633.20 immature borrowing
ChengDe XinNong Costume Co., Ltd. 62,525.90 immature borrowing
Security (ShenZhen) newspaper Co., Ltd. 430,000.00 immature borrowing
(3) At the year-end of the reporting period, the other accounts payable in significant amount
Name Amount Nature or content
DaHua Certified Public Accounts 500,000.00 immature borrowing
ChengDe YongWang Construction
100,000.00 immature borrowing
project Co., Ltd.
ChengDe LiCheng Construction and
200,000.00 immature borrowing
installation project Co., Ltd.
MinFeng (TianJin) Material industry
31,000,000.00 Internal borrowing
chemical industry Co.Ltd
ZhuoZhong (ShanXi) Trading CO., Ltd. 1,319,199.72 Agent future investment
63
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
22. Share capital
Increase (+) and decrease (-) in this period
Items Opening Balance Reserves transfer to Closing Balance
Issue new shares Share bonus Other Sub-total
shares
1 limited shares
(1)shares held by government --- --- --- --- --- --- ---
(2)shares held by State-own
--- --- --- --- --- --- ---
Legal-person
(3)shares held by other domestic
--- --- --- --- --- --- ---
capital
Including: shares held by Legal
23,147,309.00 --- --- --- --- --- 23,147,309.00
person
Shares held by
221,652,691.00 --- --- --- --- --- 221,652,691.00
natural person
(4)shares held by foreign capital --- --- --- --- --- --- ---
Including: shares held by foreign
--- --- --- --- --- --- ---
Legal person
shares held by foreign
--- --- --- --- --- --- ---
nature person
(5) Other --- --- --- --- --- --- ---
Sub-total for limited shares 244,800,000.00 --- --- --- --- --- 244,800,000.00
2．Unlimited shares ---
(1) Ordinary shares in RMB --- --- --- --- --- --- ---
(2) Domestic listed foreign shares 461,520,000.00 --- --- --- --- --- 461,520,000.00
(3) Foreign listed foreign shares --- --- --- --- --- --- ---
(4) Other --- --- --- --- --- --- ---
Sub-total for unlimited shares 461,520,000.00 --- --- --- --- --- 461,520,000.00
Total 706,320,000.00 --- --- --- --- --- 706,320,000.00
64
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
23. Capital reserves
Opening Increase in this Decrease in
Items Closing Balance
Balance period this period
1 Capital premium (share capital premium) --- --- --- ---
(1) Capital from investors 390,597,031.55 --- --- 390,597,031.55
(2) Effect of business combination under
the common control --- --- --- ---
Sub-total 390,597,031.55 --- --- 390,597,031.55
2.Other capital reserve* 65,873,219.23 --- --- 65,873,219.23
Total 456,470,250.78 --- --- 456,470,250.78
24. Surplus reserves
Items Opening Balance Increase in this period Decrease in this period Closing Balance
Statutory surplus reserves 76,791,550.17 --- --- 76,791,550.17
Total 76,791,550.17 --- --- 76,791,550.17
25. Undistributed profits
Withdrawal or
Items Closing Balance Opening Balance
allocation proportion
Closing Balance (2011) -1,124,687,129.34 -1,157,581,498.16 ---
Add: Change of accounting policy --- --- ---
Prior period error correction --- --- ---
Opening Balance (2012) -1,124,687,129.34 -1,157,581,498.16 ---
Add: net profits belong to the parent in this ---
94,806,811.16 32,894,368.82
period
Less: Statutory surplus reserves --- 10%
Discretionary surplus reserve --- --- ---
Dividends of ordinary shares payable --- --- ---
Dividends of ordinary shares transferred
--- --- ---
into share capital
Add: Other transfer --- --- ---
Less: surplus reserves for recovery of loss --- --- ---
Closing Balance -1,029,880,318.18 -1,124,687,129.34 ---
26. Operating income and operating cost
(1) Classification of operating income and operating cost
This period Last Period
Items
Income Cost Income Cost
65
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Business income 363,952,258.89 79,512,004.22 363,952,258.89 79,512,004.22
Principal business income 359,002,258.47 78,707,333.42 359,002,258.47 78,707,333.42
Other business income 4,950,000.42 804,670.80 4,950,000.42 804,670.80
Business cost 339,083,312.47 58,424,002.63 339,083,312.47 58,424,002.63
Principal business cost 339,054,852.08 58,327,874.54 339,054,852.08 58,327,874.54
Other business cost 28,460.39 96,128.09 28,460.39 96,128.09
(2) Principal business income and cost (by industry)
This period Last Period
Industry
Income Cost Income Cost
Agriculture 1,112,907.68 1,583,798.68 --- ---
Commerce 324,167,497.71 314,011,252.79 --- ---
Real Estate industry 33,721,853.08 23,459,800.61 78,707,333.42 58,327,874.54
Tourism and restaurant --- --- --- ---
(3) Principal business income and cost (by products)
This period Last Period
Product
Income Cost Income Cost
Agriculture product 1,112,907.68 1,583,798.68 --- ---
Chemical Material 324,167,497.71 314,011,252.79 --- ---
Real Estate 33,721,853.08 23,459,800.61 78,707,333.42 58,327,874.54
Including: QianYuan 33,721,853.08 23,459,800.61 78,707,333.42 58,327,874.54
Total 359,002,258.47 339,054,852.08 78,707,333.42 58,327,874.54
(4) Principal business income and cost (by district)
This period Last Period
District
Income Cost Income Cost
ChengDe District 34,834,760.76 25,043,599.29 78,707,333.42 58,327,874.54
TianJin 305,957,864.92 294,429,536.61 --- ---
ShangHai 18,209,632.79 19,581,716.18 --- ---
Total 359,002,258.47 339,054,852.08 78,707,333.42 58,327,874.54
(5) The operating income of the top five customers of the Company
Customer name or ranking Principal business income Rate in total
MinFeng (TianJin) Material industry chemical
38,248,888.89 10.51
industry Co.Ltd
66
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Customer name or ranking Principal business income Rate in total
NuoMao trading (ShangHai) Co., Ltd. 9,048,675.33 2.49
BoLv (BeiJing) Tech Co., Ltd. 8,654,017.09 2.38
HaiLi (SuZhou) electrical equipment Co., Ltd. 8,371,111.17 2.30
QianChengShiHua (ZheJiang) Co., Ltd. 7,358,547.01 2.02
Compared to the opening balance, the closing balance of operating income increased by RMB
284,440,254.67, with the growth rate of 357.73%. The major explanations for the increase were:
new subsidiary RunHua in the consolidation scope increase income by RMB 324,167,497.71 and
income from QianYuan is reduced in this period.
27. Business tax and surcharges
Items Tax rate This Period Last Period
Business tax 5% 2,202,625.14 4,062,139.11
Urban maintenance and
5% 128,301.80 203,106.96
construction tax
Education surcharge 3% 71,528.75 121,864.18
Local education surcharge 2% 33,002.90 81,242.78
Land VAT Super rate progressive rate 677,398.08 481,104.20
Housing property tax 12% 14,784.67 ---
Others --- 7,474.48 ---
Total 3,135,115.82 4,949,457.23
Compared to the opening balance, the closing balance of business tax and surcharges reduced by
RMB 1,814,341.41, with the reduction rate of 36.66%. The major explanations for the decrease
were: decrease of sales volume.
28. Marketing, Administrative and financial expenses
(1) Marketing expense
Item This Period Last Period
Printing expense 5,211.00 ---
Repair expense 5,743.00 ---
Warehouse expense 29,628.91 ---
Wages 49,747.11 ---
Advertise expense 85,850.00 ---
Harbor expense 136,407.10 ---
Manufacturing expense for unfolded plank 196,800.00 ---
67
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Item This Period Last Period
Contract fee 583,744.05 ---
Transportation expense 2,159,063.23 ---
Others 11,442.18 ---
Total 3,263,636.58 ---
Compared to the opening balance, the closing balance of marketing expense increased by RMB
3,263,636.58,the major reasons are new subsidiary RunHua in the consolidation scope and the
increase of revenue.
(2)Administrative expense
Items This Period Last Period
Wages 4,903,021.63 1,802,580.12
Intermediary fees 2,976,882.80 2,383,227.64
Others 2,520,836.27 917,319.58
Land use tax 2,516,106.83 3,492,305.64
Business entertainment 1,929,370.81 780,240.29
Accumulated amortization 1,874,911.87 3,908,762.70
Travel expense 986,898.70 542,265.86
Welfare 764,976.35 239,031.96
Office expense 735,452.79 394,117.40
Insurance 638,962.59 196,539.38
Stamp tax 294,649.56 71,080.15
Transportation 242,707.83 125,927.20
Low-valued consumption goods 235,481.00 54,481.50
Housing provident fund 186,872.76 47,636.48
Long-term deferred expenses 79,296.00 71,992.00
Initial expenditure 78,580.00 33,010.00
Housing property tax 29,424.08 870,046.19
Union fees 5,949.00 8,464.00
Total 21,000,380.87 15,939,028.09
Compared to the opening balance, the closing balance of administrative expense increased by
RMB 5,061,352.78, with the growth rate of 31.75%, the major reason is new subsidiary RunHua
68
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
in the consolidation scope.
(3) Financial expense
Items This Period Last Period
Interest expense 1,030,671.89 2,403,071.69
Less: interest income 662,129.17 101,723.22
Exchange gain or loss 47,786.16 1.17
Bank charges 200,315.27 88,806.02
Total 616,644.15 2,390,155.66
Compared to the opening balance, the closing balance of financial expense decreased by RMB
1,773,511.51, with the reduction rate of 74.20%. Major reasons were: reduction of borrowing
interest expense.
29. Asset impairment loss
Items This Period Last Period
Provision for bad debt -2,503,321.41 4,541,023.68
Total -2,503,321.41 4,541,023.68
30. Return on investment
Items This Period Last Period
1.Financial assets (return on investment) 111,230.13 15,731.51
Bank financial products in this period (return on investment) 111,230.13 15,731.51
2.Long-term equity (return on investment) --- ---
Long-term equity (return on investment based on cost
53,372.42 ---
accounting)
Total 164,602.55 15,731.51
31. Non-operating income
Items This Period Last Period Amount in non-recurring profit and loss
Disposal of non-current assets 131,918,787.19 108,799,222.07 131,918,787.19
Profit from disposal of fixed assets 26,318,307.45 779,288.18 26,318,307.45
Profit from disposal of intangible assets 105,600,479.74 108,019,933.89 105,600,479.74
Government grant 195,101.01 --- 195,101.01
Receive of donation --- ---
Other 211,376.25 616,730.46 211,376.25
Total 132,325,264.45 109,415,952.53 132,325,264.45
(1) Government grant
Relevant to
Project name This period Last period
assets/earnings
69
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Relevant to
Project name This period Last period
assets/earnings
Scientific test demonstration expense 100,000.00 --- 100,000.00
Technology: three item expense 50,000.00 --- 50,000.00
Developing area (refund of duty) subsidy 9,859.00 --- 9,859.00
VAT revenue relief 33,742.01 --- 33,742.01
Others 1,500.00 --- 1,500.00
Total 195,101.01 --- 195,101.01
Compared to the opening balance, the closing balance of non-operating income increased by RMB
22,909,311.92, with the growth rate of 20.94%. The major reasons were:
a) The transfer of land (Cheng Xian TuGuo Yong(2013) Zi No.019) from the company to the
government, which created net profits of RMB 126,173,267.96.
b) Equipment auction create net profit of RMB 5,745,519.23.
c) the total non-current assets disposal net profit is RMB 131,918,787.19.
32. Non-operating expense
Relevant to
Items This period Last period
assets/earnings
Disposal of non-current assets --- 58,856,083.88 ---
Including: Disposal of fixed assets --- 58,856,083.88 ---
Disposal of intangible assets --- --- ---
Loss on debt restructuring --- --- ---
Loss on exchange of non-monetary assets --- --- ---
Donations contributed 2,000.00 --- 2,000.00
Including: Public welfare donations
--- --- ---
contributed
Compensation and Tax penalty 76,473.85 --- 76,473.85
Inventory loss 33,480.00 --- 33,480.00
Other 503,840.54 4,405,736.48 503,840.54
Total 615,794.39 63,261,820.36 615,794.39
Compared to the opening balance, the closing balance of non-operating expense decrease by RMB
62,646,025.97, with the reduction rate of 99.03%. The major reasons were: loss from disposal of
fixed assets and other loss.
33. Income tax expense
Items This period Last period
Current income tax calculated based on tax law and relevant rules 30,539,586.74 7,561,259.04
70
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Items This period Last period
Deferred income tax adjustment 756,119.16 -1,017,427.25
Total 31,295,705.90 6,543,831.79
Compared to the opening balance, the closing balance of income tax expense increase by RMB
24,751,874.11, with the increase rate of 378.625%. The major reasons were: revenue produced by
transferring land to the government.
34. Calculation of Earnings per share (EPS) and diluted earnings per share
Basic earngings per share is calculated by dividing net profit attributable to shareholders of the
parent by the weighted average number of issued shares. The start date of ordinary shares issued
in the period for the purpose of calculation of basic earnings per share is the date on which
subscription becomes receivable per contract of issuance.
Diluted earnings per share is calculated by dividing the results of adjustment of net profit
attributable to shareholders of the parent for the interest expense for the dilutive convertible
instruments, the expected gain or expense at the time of conversion and their related income tax
implication by the sum of the weighted average number of issued shares for calculation of baisc
earnings per shares and the weighted average number of potential shares from convertible
instruments.
For the purpose of calculation of the weighted average number of potential shares from
convertible instruments, the conversion date for dilutive conventible instruments issued in prior
period and dilutive convertible instruments issued in the period is the the 1st date of the period and
the issue date respectively.
(1) Calculation results
This period Last period
Profits during the reporting period Diluted
Basic EPS Basic EPS Diluted EPS
EPS
Net profit attributable to ordinary shareholders 0.13 0.13 0.05 0.05
Recurring profit or loss attributable to ordinary -0.01 -0.01 0.05 0.05
shareholders
(2) The calculation of EPS
Item No. This period Last Period
Net profit attributed to ordinary
1 94,806,811.16 32,894,368.82
shareholder in current reporting period
Non-operating profit and loss attributed to
ordinary shareholder in current 2 100,421,297.03 34,615,599.13
reporting period
Net proft after deducting non-operating
3=1-2 -5,614,485.87 -1,721,230.31
profit and loss attributed to ordinary
71
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Item No. This period Last Period
shareholder in current reporting period
Opening balance of share capital 4 706,320,000.00 706,320,000.00
Share capital increased due to new issued
5 --- ---
share or convertible bond
6 --- ---
Share capital increased due to new issued
6 --- ---
share or convertible bond
6 --- ---
Number of months from the next month of 7 --- ---
increased share capital to the end of the 7 --- ---
current reporting period 7 --- ---
Share capital reduced due to repurchase in
8 --- ---
the current reporting period
Number of months from the next month
of decreased share capital to the end of the 9 --- ---
current reporting period
Number of split shares in the current
10 --- ---
reporting period
Number of months in the current reporting
11 12 12
period
Weighted average of issued ordinary 12=4+5+6×7
706,320,000.00 706,320,000.00
share（Ⅱ） ÷11-8×9÷11-10
Weighted average of issued ordinary share
13 706,320,000.00 706,320,000.00
are adjust due to common control（Ⅰ）
14=1÷13 0.13 0.05
Basic EPS（Ⅰ）
15=3÷12 -0.01 0.05
Basic EPS（Ⅱ）
Interest of iluted potential ordinary share
that confirmed as expense and other 16 --- ---
factors
Income tax rate 17 --- ---
Converting fee 18 --- ---
increased Weighted average of issued
ordinary share due to stock warrant and 19 --- ---
share option
20=[1+(16-18)×
(100%- 0.13 0.05
Diluted EPS（Ⅰ）
17)]÷(13+19)
21=[3+(16-18)
×(100%- -0.01 0.05
Diluted EPS（Ⅱ）
17)]÷(12+19)
72
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
35. Notes for statement of cash flow
(1) Other cash receive from operating activities
Items This Period Last Period
Interest income 662,129.17 101,723.22
Current accounts received 58,186,692.98 66,131,098.75
Subsidy income 195,101.01 ---
Other 437，980.76 326,689.37
Total 59,481,903.92 66,559,511.34
(2) Other cash paid to operating activities
Items This Period Last Period
Expenditure 16,469,710.73 13,951,977.39
Donation expense 2,000.00 ---
Current accounts paid 28,541,969.74 52,220,305.21
other 1,232,348.11 928,965.34
Total 46,246,028.58 67,101,247.94
(3) Restricted cash at bank and in hand
Items This Period Last Period
Restricted cash at bank and in hand 11,445,403.16 ---
Total 11,445,403.16 ---
(4) Supplemental information for statement of cash flow
Supplemental information This Period Last Period
1.Adjustments to reconcile net profit to net cash provided by
operating activities:
Net profit 99,934,857.12 32,894,368.82
Add: impairment provision for assets -2,503,321.41 4,541,023.68
Depreciation of fixed assets, consumption & depreciation of fuel
and gas, depreciation of productive biological assets 2,164,612.21 2,713,205.49
Amortization for intangible assets 862,328.74 1,201,305.51
Amortization for long-term prepayment 664,529.03 79,496.69
Loss on disposal of fixed assets, intangible assets and other
long-term assets --- -108,799,222.07
Loss upon rejection of fixed assets --- ---
Loss on variance of fair value --- ---
Finance cost 1,030,671.89 2,313,423.11
Loss in investment 164,602.55 ---
Decrease of deferred tax assets 756,119.16 -1,080,358.92
73
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Supplemental information This Period Last Period
Increase of deferred tax liability --- ---
Decrease of inventories -159,047,494.46 19,208,065.66
Decrease of operating receivable account items -132,862,220.52 -12,694,833.50
Increase of operating payable account items -15,717,716.97 55,252,598.72
Other --- ---
Net cash flow from operating activities -204,553,032.66 -4,386,658.32
2 Significant investing and financing activities for non-cash items
Liabilities capitalized --- ---
Convertible bonds payable mature in one year --- ---
Financing leased fixed assets --- ---
3. Net increase (decrease) for cash and cash equivalents
Closing balance for cash 77,981,488.06 81,546,046.87
Less: opening balance for cash 81,546,046.87 572,655.85
Add: closing balance for cash equivalent --- ---
less：opening balance for cash equivalent --- ---
Net increase (decrease) for cash and cash equivalents -3,564,558.81 80,973,391.02
(5) Details for acquiring or disposing subsidiary
Item This Period Last Period
1．Details for acquiring or disposing subsidiary： --- ---
(1).Consideration for acquiring subsidiaries 9,170,370.00 ---
(2). cash and cash equivalent payment for acquiring the
9,170,370.00 ---
subsidiaries
Deduct: cash and cash equivalent held by subsidiaries 66,600,084.65 ---
(3).Net cash payment for acquiring the subsidiaries -57,429,714.65 ---
(4).Net assets of subsidiaries. 24,535,357.00 ---
Current Assets 136,306,683.22 ---
Non-current Assets 7,050,969.77 ---
Current liabilities 112,608,254.82 ---
Non-current liabilities 0.00 ---
(5) Details for cash and cash equivalent
Items This period Last period
1 Cash 77,981,488.06 81,546,046.87
Including: Cash in hand 19,146.58 72,492.38
Cash at bank 77,962,341.48 81,473,554.49
74
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Items This period Last period
Other cash and cash equivalents --- ---
2 Cash equivalent --- ---
Including: Bond matured within three months --- ---
3 Closing balance for cash and cash equivalents 77,981,488.06 81,546,046.87
VI. Related parties and related transactions
1. Related parties
(1) Related parties which control the company
The company has no parent company. The related parties with controlling relationship of the
Company refer to Mr. Rong Chen, who held 29.49% equity of the Company.
(2) Subsidiaries of the company
Votin
Place of Shareh g Organiz
Subsidiaries Nature of Type of Legal Business Registered
registratio olding right ational
Name subsidiary subsidiary representative nature Capital
n （%） （% code
）
Chengde
HeBei
Rongyida Real A wholly
Limited Province YongSheng Real Estate 10,000,000.00 6843423
Estate owned 100 100
Liability ChengDe Zhao development RMB 5-0
Development subsidiary
city
Co., Ltd.
Runhua Rural
Water (Tianjin) Holding Limited TianJin International 30,000,000.00 6794145
XiangKun Shi 30 53.43
International subsidiary Liability city trading RMB 6-7
Trade Co., Ltd.
NanJiang Asia A wholly
Limited International 20,000,000.00
owned HongKong --- 100 100 ---
Investment Co.,
Liability investment USD
subsidiary
Ltd.
Chengde HeBei
Grapheme
Holding Limited Province YongSheng 50,000,000.00 0633512
Morsh
producer 90 90
subsidiary Liability ChengDe Zhao RMB 4-6
Technology and seller
city
Co., Ltd.
HeBei
Chengde A wholly
Limited Province YongSheng Property 500,000.00 0826971
owned 100 100
HuiJing
Liability ChengDe Zhao management RMB 6-2
subsidiary
property Co., city
75
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Votin
Place of Shareh g Organiz
Subsidiaries Nature of Type of Legal Business Registered
registratio olding right ational
Name subsidiary subsidiary representative nature Capital
n （%） （% code
）
Ltd.
HeBei
ChengDe A wholly
Limited Province ShuXian Paper 250,000,000.00 6012521
XingYe Paper owned 100 100
Liability ChengDe Wang production USD 1-5
Co., Ltd. subsidiary
city
ChengDe
HeBei Ecological
NanJiang A wholly
Limited Province YongSheng Agriculture 10,000,000.00 0554956
Ecological owned 100 100
Liability ChengDe Zhao Planting and RMB 2-9
Agriculture Co., subsidiary
city Breeding
Ltd.
ChengDe HeBei
A wholly
NanJiang Limited Province YongSheng 90,000,000.00 0554553
owned investment 100 100
Investment Co., Liability ChengDe Zhao RMB 2-8
subsidiary
Ltd. city
(3) Other related parties of the company
Name of other related parties Relationship Organizational Code
MinFeng (TianJin) Material industry chemical industry Co.Ltd Joint venture 05874083-7
2. Related transactions
(1) The related transactions between parent and subsidiaries that are in consolidation scope,
among subsidiaries that are in consolidation scope, have been offset in the consolidated financial
statement.
(2) Purchase of commodities and receipt of labors
Not Applicable.
(3) Sales of commodities and receipt of labors
Not Applicable.
(4) Related custody
Not Applicable.
(5) Related contracting
Not Applicable.
(6) Related lease
76
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Not Applicable.
(7) Related Guarantee
Not Applicable.
(8) Borrowing of related party funds
Not Applicable.
(9) Transfer of related party assets and debt reorganization
Not Applicable.
(10) Other related transactions
Name Position 2013 2012
LiXin Lin Chairman of the Board (has been transferred) Wage has not been paid Wage has not been paid
Director, General Manager, Financial Director,
YongSheng Zhao 14.21 1.8
secretary (on behalf)
Dong Wang Director Wage has not been paid Wage has not been paid
WeiHuan Chen Director Wage has not been paid Wage has not been paid
DuCai Cheng Director Wage has not been paid Wage has not been paid
HuiBin Guo Outside Director 6.00 3
ZhiYong Zhang Outside Director 6.00 3
GuoHua Cao Outside Director 6.00 4.5
Yu Xie Chairman of the board of Supervisory Wage has not been paid Wage has not been paid
Lei Wei Supervisor Wage has not been paid Wage has not been paid
GuangXin Hao Employee Supervisor 8.41 3.86
XiaShu Wang Vice General Manager 8.46 4.37
HongWei Xun Assistant of General Manager 7.61 3.54
Total 56.69 24.07
(11) Related receivables and payables
Name Related party Closing Balance Opening Balance
Other receivable
MinFeng (TianJin) Material industry
670,000.00
chemical industry Co.Ltd
77
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Total 670,000.00
Other payable
MinFeng (TianJin) Material industry
31,000,000.00 ---
chemical industry Co.Ltd
Total 31,000,000.00 ---
VII. Contingency
Not Applicable.
VIII. Other significant events
CSRC decided to investigate the company due to prior error correction made in the year 2012.
These prior error corrections should be disclosed before 2012, but the former shareholder and
directors are not. On April 6, 2012, there is a share transfer agreement between original
shareholder and Dong Wang. Original shareholder transfer share capital of RMB 208,324,800 to
Dong Wang, accounting for 29.49% of the total share capital. The company then reformed the
board and the new board made the prior error corrections. Due to the new board had made the
corrections and the original shareholders and directors already left the company, it is highly
probable that the investigation will not have influence on the company.
IX. Commitment
Not Applicable.
X. Events after the Balance Sheet Date
(1) On March 18 2014, according to ChengDeXianJiYao[2014]No.10, ChengDeXian government
retrieve 26.0464 mu of land included in the land certificate - ChengDeGuoYong[2013]No.19
from subsidiary RongYiDa. The government transfer the land to WenTiGuangDianJu for the
purpose of constructing a center of literature, art and sports in that area. On December 31
2013, the book value of the land is RMB 821,343.02.
(2) On April 09 2014, Chengde Morsh Technology Co., Ltd. acquire ChengXian Tu
GuaGaoZi[2014] No.03 land certificate through the land certificate selling activity held by
ChengDeXian Land and Resources Bureau. The acquired land locate at LiuGou town,
BeiShui spring, PingTai village, 35953.42 square meters, industry land, the final deal price is
RMB 6480 thousand.
XI. Notes to material events of parent company financial statement
1. Other receivable
(1) Disclosure of other receivables by category
Closing Balance Opening Balance
Categories Bad debt Bad Debt
Amount Ratio provision Amount Ratio provision
1 Individually significant
--- --- --- --- --- ---
amounts of accounts
78
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
receivable accrued bad debt
provision
2 Accounts receivable accrued
bad debt provision by 320,143.39 82.06 4,000.00 783,244.99 91.80 1,000.00
portfolio
3 Individually insignificant
amounts of accounts
70,000.00 17.94 70,000.00 70,000.00 8.20 70,000.00
receivable accrued bad debt
provision
Total 390,143.39 100.00 74,000.00 853,244.99 100.00 71,000.00
Explanation for types of other receivables:
(1) Other accounts receivable accrued bad debt provision by portfolio
Closing Balance Opening Balance
Aging Ratio in Bad debt Ratio in Bad debt
Amount Amount
total provision total provision
Within 1 year 300,143.39 93.75 --- 384,175.74 100.00 1,000.00
1-2 years 20,000.00 6.25 4,000.00 --- --- ---
Total 320,143.39 100.00 4,000.00 384,175.74 100.00 1,000.00
(2) Other accounts receivable accrued bad debt through individual impairment testing
Bad debt
Name Book Value Accure ratio (%) Reaons
accured
Expected
QiZhong Yan 70,000.00 70,000.00 100%
irrecoverable
Total 70,000.00 70,000.00 100%
(3) No other receivables are written off in the current accounting period.
(4) By the end of the current reporting period, there are no other accounts receivable due from any
shareholders held over 5%
(5) At the year-end of the reporting period, the other accounts receivable in significant amount
Amount Ratio
Debtor Relationship Nature Aging
due from in total
YongSheng Zhao related party Petty cash 179,190.08 1-3year 45.93%
Within 1
QiZhong Yan Non-related party Borrowing 70,000.00 17.94%
year
ChengDe ShiYou Co., Within 1
Non-related party Borrowing 60,000.00 15.38%
Ltd. year
79
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
GuangXin Hao related party Petty cash 47,887.00 1-3 year 12.27%
DaGeEr (ZhengZhou)
Non-related party Deposit for purchase vehicle 20,000.00 1-3 year 5.13%
Co., Ltd.
(6) No other receivables are from related party.
(7) No other receivables not meet the recognition criterion
(8) No other receivables are prepared to be convert to security assets
(9) No other receivables relating to government grant
2. Long-term equity investments
Accounting Initial Opening Increase/decreas
Invested Company Closing Balance
method investment cost Balance e(-)
RongYiDa Cost 53,114,299.73 53,114,299.73 --- 53,114,299.73
NanJiang Investment Cost 90,000,000.00 50,000,000.00 40,000,000.00 90,000,000.00
XingYe Paper Cost 626,567,328.03 626,567,328.03 --- 626,567,328.03
RunHua Water Cost 9,170,370.00 --- 9,170,370.00 9,170,370.00
Asia Investmen Cost --- --- --- ---
Total 778,851,997.76 729,681,627.76 49,170,370.00 778,851,997.76
Continue
Stake ratio Impairment accrued Cash Dividend
Invested Company Voting right (%) Impairment
(%) in this peirod in this period
RongYiDa 100.00 100.00 --- --- ---
NanJiang Investment 100.00 100.00 --- --- ---
XingYe Paper 100.00 100.00 --- --- ---
RunHua Water 30.00 53.43 --- --- ---
Asia Investmen 100.00 100.00 --- --- ---
Total --- --- --- --- ---
3. Operating income and operating cost
(1) Classification of operating income and operating cost
Item This period Last Period
Business income 9,631,946.56 ---
Other business income 9,631,946.56 ---
Business cost 28,460.39 ---
Other business cost 28,460.39 ---
(2) Principal business income and cost (by industry)
This period Last Period
Items
80
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Income Cost Income Cost
Commerce 9,631,946.56 28,460.39 --- ---
Total 9,631,946.56 28,460.39 --- ---
(3) Principal business income and cost (by products)
This period Last Period
Items
Income Cost Income Cost
electric income 31,946.56 28,460.39 --- ---
Service income 9,600,000.00 --- --- ---
Total 9,631,946.56 28,460.39 --- ---
(4) Principal business income and cost (by district)
This period Last Period
District
Income Cost Income Cost
ChengDe District 9,631,946.56 28,460.39 --- ---
Total 9,631,946.56 28,460.39 --- ---
(5) The operating income of the top five customers of the Company
Customer name or ranking Principal business income Rate in total (%)
RongYiDa 9,600,000.00 99.67
Chengde housing construction Bureau 31,946.56 3.33
Total 9,631,946.56 100.00
4. Supplemental information for statement of cash flow
Supplemental information This period Last Period
1.Adjustments to reconcile net profit to net cash provided by
operating activities:
Net profit 884,837.02 (12,891,377.63)
Add: impairment provision for assets 3,000.00 9,946,996.58
Depreciation of fixed assets, consumption & depreciation of fuel
121,364.21 11,080.70
and gas, depreciation of productive biological assets
Amortization for intangible assets 424,343.16 407,618.99
Amortization for long-term prepayment --- ---
Loss on disposal of fixed assets, intangible assets and other
--- ---
long-term assets
Loss upon rejection of fixed assets --- ---
Loss on variance of fair value --- ---
Finance cost --- 1.17
81
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Supplemental information This period Last Period
Loss in investment --- ---
Decrease of deferred tax assets (750.00) ---
Increase of deferred tax liability --- ---
Decrease of inventories (161,600,661.40) ---
Decrease of operating receivable account items 463,101.60 (717,750.67)
Increase of operating payable account items 174,124,901.53 4,694,117.65
Other
Net cash flow from operating activities 14,420,136.12 1,450,686.79
2 Significant investing and financing activities for non-cash items --- ---
Liabilities capitalized --- ---
Convertible bonds payable mature in one year --- ---
Financing leased fixed assets --- ---
3. Net increase (decrease) for cash and cash equivalents --- ---
Closing balance for cash 5,681,141.82 777,456.70
Less: opening balance for cash 777,456.70 4,019.80
Add: closing balance for cash equivalent --- ---
less：opening balance for cash equivalent --- ---
Net increase (decrease) for cash and cash equivalents 4,903,685.12 773,436.90
XII. Supplemental information
1. Non-recurring gains and losses
Items 2013 2012
1 Losses/gains on disposal of non-current assets 131,918,787.19 49,163,850.01
2. Government subsidies included in the current profits and
losses (government subsidies which are closely related to
193,601.01 ---
the Company’s business and received at national statutory
standard and amount are excluded)
3. Gains or loss from delegation investment 111,230.13 ---
4. Other non- recurring loss and profits other than the above -514,148.27 (3,009,717.84)
5. Effect of minority interest on non-recurring losses or gains 2,185,592.65 ---
6. Effect of income tax on non-recurring losses and gains (33,473,765.68) (11,538,533.04)
82
CHENGDE NANJIANG CO., LTD.
Year 2013
Notes to Financial Statements
Items 2013 2012
Total 100,421,297.03 34,615,599.13
Notes: All non-recurring items are disclosed before taxation.
2. Return on equity and earnings per share
Earning per share
Weighted average of
Profit in the reporting period
Return on equity（%） Basic earnings Diluted earnings
per share per share
Net profit attributable to shareholders holding
58.42% 0.13 0.13
ordinary shares of the Company
Net profit attributable to shareholders holding
ordinary shares of the Company after -4.82% -0.01 -0.01
deducting non-recurring gains and losses
XIII. Approval for issuance of financial statements
These financial statements have been approved by all directors on April 23, 2014.
Chengde NanJiang Co., Ltd.
April 23, 2014
83
