2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
TSANN KUEN (CHINA) ENTERPRISE CO., LTD.
2021 Semi-annual Financial Report
(Unaudited)
August 2021
1
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
1. Consolidated Statement of Financial Position as at 30 June 2021
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Item Note 2021/6/30 2020/12/31 Item Note 2021/6/30 2020/12/31
Current assets: Current liabilities
Cash and cash equivalents 5.1 744,754,520.51 707,794,598.20 Short-term borrowings 5.17 29,118,135.68 16,345,141.13
Held-for-trading financial
5.2 552,835,416.66 720,821,900.00 Held-for-trading financial liabilities 5.18 753,600.00
assets
Derivative financial assets - Derivative financial liabilities -
Notes receivable - Notes payable 5.19 7,457,554.16 7,521,531.97
Accounts receivable 5.3 433,529,952.12 431,006,560.62 Accounts payable 5.20 765,690,844.84 874,962,887.93
Accounts receivable
Advances from customers 5.21 7,550,078.36 6,853,100.03
financing
Advances to suppliers 5.4 2,047,006.73 2,622,554.07 Contract liabilities 5.22 18,060,312.71 25,605,755.71
Other receivables 5.5 22,368,439.05 31,938,548.59 Employee benefits payable 5.23 39,961,529.73 51,262,265.67
Including: Interests
- Taxes payable 5.24 15,912,061.50 20,238,247.17
receivable
Dividend
- Other payables 5.25 47,612,534.58 52,803,158.48
receivable
Inventories 5.6 293,499,525.11 255,052,077.36 Including: Interests payables -
Contract assets - Dividend payables -
Assets classified as held for
- Liabilities classified as held for sale -
sale
Non-current assets Non-current liabilities maturing
- 5.26 81,310,298.16
maturing within one year within one year
Other current assets 5.7 30,569,129.13 18,634,037.60 Other current liabilities -
Total current assets 2,079,603,989.31 2,167,870,276.44 Total current liabilities 1,013,426,949.72 1,055,592,088.09
Non-current assets: Non-current liabilities:
Debt investments Long-term borrowings
Other debt investments Bonds payable
Long-term receivables Including: Preference share
Long-term equity
- Perpetual capital securities
investments
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Item Note 2021/6/30 2020/12/31 Item Note 2021/6/30 2020/12/31
Other equity instrument
5.8 40,000.00 40,000.00 Lease liabilities 5.27 517,740,534.06
investment
Other non-current financial
Long-term payables -
assets
Investment properties 5.9 20,712,590.14 21,255,610.91 Long-term employee benefits payable 5.28 339,285.03 312,775.91
Fixed assets 5.10 157,027,732.21 164,338,962.07 Estimated liabilities -
Construction in progress 5.11 4,487,009.02 728,529.68 Deferred income -
Productive biological assets Deferred tax liabilities 5.15 48,657,324.82 51,425,551.57
Oil and gas assets Other non-current liabilities -
Use rights assets 5.12 576,583,323.00 Total non-current liabilities 566,737,143.91 51,738,327.48
Intangible assets 5.13 28,444,399.09 29,346,312.82 Total liabilities 1,580,164,093.63 1,107,330,415.57
Research and development
Owners’ equity
expenditure
Goodwill Share capital 5.29 185,391,680.00 185,391,680.00
Long-term deferred
5.14 11,159,038.26 6,831,730.07 Other equity instruments
expenses
Deferred tax assets 5.15 15,614,091.03 15,590,322.49 Including: Preference shares
Other non-current assets 5.16 796,415.24 2,044,702.30 Perpetual capital securities
Total non-current assets 814,864,597.99 240,176,170.34 Capital reserves 5.30 296,808,965.79 296,808,965.79
Less: Treasury stock
Other comprehensive income 5.31 1,018,244.78 1,823,063.03
Specific reserves
Surplus reserves 5.32 49,087,662.68 49,087,662.68
Retained earnings 5.33 363,527,691.73 330,918,755.61
Total owner’s equity attributable to
895,834,244.98 864,030,127.11
parent company
Non-controlling interests 418,470,248.69 436,685,904.10
Total owners’ equity 1,314,304,493.67 1,300,716,031.21
Total assets 2,894,468,587.30 2,408,046,446.78 Total liabilities and owners' equity 2,894,468,587.30 2,408,046,446.78
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager：Wu Jianhua
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
2. Statement of Financial Position of Parent Company as at 30 June 2021
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Assets Note 2021/6/30 2020/12/31 Liabilities and owners' equity Note 2021/6/30 2020/12/31
Current assets: Current liabilities
Cash and cash equivalents 7,646,590.85 7,767,004.93 Short-term borrowings -
Held-for-trading financial Held-for-trading financial
- -
assets liabilities
Derivative financial assets - Derivative financial liabilities -
Notes receivable - Notes payable -
Accounts receivable 13.1 958,899.44 2,710,138.48 Accounts payable 2,245,441.45 31,990,751.46
Accounts receivable
Advances from customers 1,270,025.37 1,101,005.38
financing
Advances to suppliers 92,154.18 32,124.35 Contract liabilities 1,717,718.61 224,884.11
Other receivables 13.2 2,606,132.25 3,311,425.63 Employee benefits payable 4,561,136.81 7,903,368.21
Including: Interests
- Taxes payable 3,196,382.16 1,896,604.41
receivable
Dividend receivable - Other payables 103,499,264.13 168,453,443.56
Inventories 940,910.34 1,457,947.89 Including: Interests payables -
Contract asset Dividend payables -
Assets classified as held Liabilities classified as held for
- -
for sale sale
Non-current assets Non-current liabilities
- 314,470.64
maturing within one year maturing within one year
Other current assets - Other current liabilities -
Total current assets 12,244,687.06 15,278,641.28 Total current liabilities 116,804,439.17 211,570,057.13
Non-current assets: Non-current liabilities:
Debt investments Long-term borrowings
Other debt investments Bonds payable
Long-term receivables Including: Preference share
Long-term equity Perpetual capital
13.3 923,414,701.56 923,414,701.56
investments securities
Other equity instrument 40,000.00 40,000.00 Lease liabilities 361,647.27
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Assets Note 2021/6/30 2020/12/31 Liabilities and owners' equity Note 2021/6/30 2020/12/31
investment
Other non-current
Long-term payables
financial assets
Long-term employee benefits
Investment properties 24,090,510.39 25,202,712.69
payable
Fixed assets 410,548.83 606,019.76 Estimated liabilities
Construction in progress 348,990.82 Deferred income
Productive biological
Deferred tax liabilities
assets
Oil and gas assets Other non-current liabilities
Use rights assets 669,819.71 Total non-current liabilities 361,647.27 -
Intangible assets - Total liabilities 117,166,086.44 211,570,057.13
Research and
Owners’ equity
development expenditure
Goodwill Share capital 185,391,680.00 185,391,680.00
Long-term deferred
558,082.01 641,932.25 Other equity instruments
expenses
Deferred tax assets 3,708,912.95 3,961,079.97 Including: Preference shares
Perpetual capital
Other non-current assets - -
securities
Total non-current
953,241,566.27 953,866,446.23 Capital reserves 271,490,289.82 271,490,289.82
assets
Less: Treasury stock
Other comprehensive income -
Specific reserves
Surplus reserves 49,087,662.68 49,087,662.68
Retained earnings 342,350,534.39 251,605,397.88
Total owners’ equity 848,320,166.89 757,575,030.38
Total liabilities and owners'
Total assets 965,486,253.33 969,145,087.51 965,486,253.33 969,145,087.51
equity
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager：Wu Jianhua
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
3. Consolidated Statement of Profit or Loss and Other Comprehensive Income
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Same period of
Item Note Reporting period last year
I. Revenue 5.34 1,197,289,007.11 793,014,584.36
Including: operating revenue 5.34 1,197,289,007.11 793,014,584.36
II. Cost of sales 1,129,145,884.69 735,225,257.48
Including: operating cost 5.34 1,014,246,279.69 644,212,379.74
Taxes and surcharges 5.35 4,937,406.14 5,631,036.08
Selling and distribution expenses 5.36 30,803,997.63 22,695,745.52
General and administrative expenses 5.37 35,890,649.41 46,326,432.58
Research and development expenses 5.38 30,305,264.63 30,818,857.76
Finance costs 5.39 12,962,287.19 -14,459,194.20
Including: Interest expense 13,815,268.62 151,742.56
Interest income 8,020,668.61 12,388,999.10
Add: Other income 5.40 1,764,476.00 2,260,574.12
Investment income/(losses) 5.41 35,541,462.36 7,879,887.04
Including: Investment income from associates
- -
and joint ventures
Gains /(losses) from derecognition of financial
- -
assets measured at amortised cost
Income /(losses) from net exposure hedging - -
Gains/(losses) from changes in fair values 5.42 -18,740,083.34 -1,707,089.00
Impairment loss of credit 5.43 1,107,265.88 -1,129,743.77
Impairment loss of asset 5.44 -1,243,755.14 -8,052,144.68
Gains/(losses) from disposal of assets 5.45 996,128.23 279,810.12
III. Profit/(loss) from operations 87,568,616.41 57,320,620.71
Add: Non-operating income 5.46 1,568,968.09 2,794,509.46
Less: Non-operating expenses 5.47 44,565.31 211,771.67
IV. Profit/(loss) before tax 89,093,019.19 59,903,358.50
Less: Income tax expenses 5.48 8,349,548.21 7,827,101.86
V. Net profit/(loss) 80,743,470.98 52,076,256.64
(I) Net profit/(loss) by continuity
Net profit/(loss) from continuing operation 80,743,470.98 52,076,256.64
Net profit/(loss) from discontinued operation
(II) Net profit/(loss) by ownership attribution
Attributable to owners of the parent 60,417,688.12 39,220,703.16
Attributable to non-controlling interests 20,325,782.86 12,855,553.48
VI. Other comprehensive income, after tax 5.49 -1,073,091.00 1,469,795.41
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Reporting period Same period of
Item Note last year
(a) Attributable to owners of the parent 5.49 -804,818.25 1,102,346.56
(i) Items that will not be reclassified subsequently
5.49 67,071.95 -8,394.48
to profit or loss
1.Remeasurement of the net defined benefit
5.49 67,071.95 -8,394.48
liability (asset)
2. Other comprehensive income using the equity
method which will not be reclassified subsequently to
profit and loss
3. Changes in fair value of other equity instrument
investment
4. Changes in fair value of the Company’s own
credit risks
(ii) Items that may be reclassified subsequently to
5.49 -871,890.20 1,110,741.04
profit or loss
1. Other comprehensive income using the equity
method which will be reclassified subsequently to profit
or loss
2. Changes in fair value of other debt instrument
investment
3. Other comprehensive income arising from the
reclassification of financial assets
4. Provision for credit impairment in other debt
investments
5. Reserve for cash flow hedges
6. Exchange differences on translating foreign
5.49 -871,890.20 1,110,741.04
operations
(b) Attributable to non-controlling interests 5.49 -268,272.75 367,448.85
VII. Total comprehensive income 79,670,379.98 53,546,052.05
Attributable to owners of the parent 59,612,869.87 40,323,049.72
Attributable to non-controlling interests 20,057,510.11 13,223,002.33
VIII. Earnings per share:
Basic earnings per share 14.2 0.33 0.21
Diluted earnings per share 14.2 0.33 0.21
Where business mergers under the same control occurred in the Reporting Period, net profit achieved by the merged parties
before the business mergers was CNY 0.00, with the corresponding amount for the same period of last year being CNY 0.00.
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager: Wu Jianhua
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
4. Statement of Profit or Loss and Other Comprehensive Income of Parent Company
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Same period of
Item Note Reporting period last year
I. Revenue 13.4 27,115,177.04 39,381,607.56
Less: Costs of sales 13.4 19,435,107.86 29,743,243.90
Taxes and surcharges 1,215,293.42 1,161,564.08
Selling and distribution expenses 888,228.78 1,462,192.36
Administrative expenses 1,702,372.30 1,845,878.74
Research and development expenses - -
Finance costs -171,196.62 -23,503.87
Including: Interest expense 16,334.28
Interest income 145,184.05 88,362.30
Add: Other income 47,035.22 70,439.12
Investment income/(losses) 13.5 114,819,496.58 79,185,554.77
Including: Investment income from associates
-
and joint ventures
Gains /(losses) from derecognition of financial
-
assets measured at amortised cost
Income /(losses) from net exposure hedging -
Gains/(losses) from changes in fair values - -
Impairment loss of credit -41,444.13 219,385.70
Impairment loss of asset -90,332.22 53,233.39
Gains/(losses) from disposal of assets - -
II. Profit/(loss) from operations 118,780,126.75 84,720,845.33
Add: Non-operating income 51,112.12 115,698.84
Less: Non-operating expenses 25,183.34 -
III. Profit/(loss) before tax 118,806,055.53 84,836,544.17
Less: Income tax expenses 252,167.02 945,365.26
IV. Net profit/(loss) 118,553,888.51 83,891,178.91
Net profit/(loss) from continuing operation 118,553,888.51 83,891,178.91
Net profit/(loss) from discontinued operation
V. Other comprehensive income, after tax - -
(i) Items that will not be reclassified subsequently
- -
to profit or loss
1.Remeasurement of the net defined benefit liability
(asset)
2. Other comprehensive income using the equity
method which will not be reclassified subsequently to
profit and loss
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Reporting period Same period of
Item Note last year
3. Changes in fair value of other equity instrument
investment
4. Changes in fair value of the Company’s own credit
risks
(ii) Items that may be reclassified subsequently to
- -
profit or loss
1. Other comprehensive income using the equity
method which will be reclassified subsequently to profit or
loss
2. Changes in fair value of other debt instrument
investment
3. Other comprehensive income arising from the
reclassification of financial assets
4. Provision for credit impairment in other debt
investments
5. Reserve for cash flow hedges
6. Exchange differences on translating foreign
operations
VI. Total comprehensive income 118,553,888.51 83,891,178.91
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager: Wu Jianhua
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
5. Consolidated Statement of Cash Flows
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Same period of last
Item Note Reporting period
year
I. Cash flows from operating activities
Cash received from the sale of goods and the rendering of
1,154,806,316.74 760,032,384.25
services
Cash received from tax refund 90,888,710.07 57,320,585.80
Other cash received relating to operating activities 5.50 45,360,066.39 36,017,760.78
Subtotal of cash inflows from operating activities 1,291,055,093.20 853,370,730.83
Cash payments for goods purchased and services received 1,076,306,208.51 670,039,827.72
Cash payments to and on behalf of employees 157,026,734.78 123,559,701.92
Payments of taxes 24,640,900.69 22,265,046.50
Other cash payments relating to operating activities 5.50 96,055,708.62 65,518,030.83
Subtotal of cash outflows from operating activities 1,354,029,552.60 881,382,606.97
Net cash flows from operating activities -62,974,459.40 -28,011,876.14
II. Cash flows from investing activities
Cash received from disposal and redemption of investments 439,053,618.34 216,993,732.02
Cash received from returns on investments 9,610,762.65 11,383,180.62
Net cash received from disposals of fixed assets, intangible
1,052,134.14 53,012.94
assets and other long-term assets
Net cash received from disposals of subsidiaries and other
business units
Other cash received relating to investing activities 5.50 170,037,164.75 240,268,714.80
Subtotal of cash inflows from investing activities 619,753,679.88 468,698,640.38
Cash payments to acquire fixed, intangible and other long-term
26,496,062.77 27,331,748.41
assets
Cash payments to acquire investments 267,136,402.90 205,224,443.75
Net cash payments to acquire subsidiaries and other business
units
Other cash payments relating to investing activities 5.50 261,195,424.54 490,025,153.46
Subtotal of cash outflows from investing activities 554,827,890.21 722,581,345.62
Net cash flows from investing activities 64,925,789.67 -253,882,705.24
III. Cash flows from financing activities
Cash received from capital contributions
Including: Cash received from absorbing minority
shareholders' equity investment by subsidiaries
Cash received from borrowings 108,537,961.78 54,522,840.00
Other cash received relating to financing activities 5.50 12,876,842.79 0.00
Subtotal of cash inflows from financing activities 121,414,804.57 54,522,840.00
Cash repayments of debts 95,638,993.48 26,769,860.00
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Same period of last
Item Note Reporting period
year
Cash payments for dividends, distribution of profit and interest
66,366,434.43 45,072,022.49
expenses
Including: Dividends, distribution of profit paid by
38,273,165.52 26,395,184.92
subsidiaries to minority shareholders
Other cash payments relating to financing activities 5.50 16,535,710.31 6,775,024.51
Subtotal of cash outflows from financing activities 178,541,138.22 78,616,907.00
Net cash flows from financing activities -57,126,333.65 -24,094,067.00
IV. Effect of foreign exchange rate changes on cash and cash
-2,599,815.16 1,188,057.91
equivalents
V. Net increase / (decrease) in cash and cash equivalents -57,774,818.54 -304,800,590.47
Plus: Cash and cash equivalents at the beginning of the period 672,801,206.68 639,623,201.98
VI. Cash and cash equivalents at the end of the period 615,026,388.14 334,822,611.51
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager: Wu Jianhua
11
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
6. Statement of Cash Flows of Parent Company
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Same period of last
Item Note Reporting period
year
I. Cash flows from operating activities
Cash received from the sale of goods and the rendering of
6,348,977.40 12,939,282.22
services
Cash received from tax refund 72,898.30
Other cash received relating to operating activities 28,643,896.60 28,295,141.08
Subtotal of cash inflows from operating activities 35,065,772.30 41,234,423.30
Cash payments for goods purchased and services received 32,504,704.59 9,585,274.32
Cash payments to and on behalf of employees 1,035,768.22 970,120.74
Payments of taxes 2,903,294.74 4,249,252.46
Other cash payments relating to operating activities 85,796,694.20 90,604,336.94
Subtotal of cash outflows from operating activities 122,240,461.75 105,408,984.46
Net cash flows from operating activities -87,174,689.45 -64,174,561.16
II. Cash flows from investing activities
Cash received from disposal and redemption of investments
Cash received from returns on investments 114,819,496.58 79,185,554.77
Net cash received from disposals of fixed assets, intangible assets
and other long-term assets
Net cash received from disposals of subsidiaries and other
business units
Other cash received relating to investing activities
Subtotal of cash inflows from investing activities 114,819,496.58 79,185,554.77
Cash payments to acquire fixed, intangible and other long-term
39,162.00 54,985.00
assets
Cash payments to acquire investments
Net cash payments to acquire subsidiaries and other business
units
Other cash payments relating to investing activities
Subtotal of cash outflows from investing activities 39,162.00 54,985.00
Net cash flows from investing activities 114,780,334.58 79,130,569.77
III. Cash flows from financing activities
Cash received from capital contributions
Cash received from borrowings
Other cash received relating to financing activities
Subtotal of cash inflows from financing activities - -
Cash repayments of debts
Cash payments for dividends, distribution of profit and interest
27,808,752.00 18,539,168.00
expenses
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Same period of last
Item Note Reporting period
year
Other cash payments relating to financing activities
Subtotal of cash outflows from financing activities 27,808,752.00 18,539,168.00
Net cash flows from financing activities -27,808,752.00 -18,539,168.00
IV. Effect of foreign exchange rate changes on cash and cash
82,692.79 -14,614.06
equivalents
V. Net increase / (decrease) in cash and cash equivalents -120,414.08 -3,597,773.45
Plus: Cash and cash equivalents at the beginning of the period 7,767,004.93 7,624,622.27
VI. Cash and cash equivalents at the end of the period 7,646,590.85 4,026,848.82
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager: Wu Jianhua
13
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
7. Consolidated Statement of Changes in Shareholders' Equity
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Reporting period
Owners’ equity attributable to the parent company
Item
Other equity instruments Non-controlling Total owners’
Less: Other
Capital Specific Surplus Retained interests equity
Share capital Perpetual Treasury comprehensive Subtotal
Preference reserves reserves reserves earnings
capital Others stock income
shares
securities
I. Balance brought forward 185,391,680.00 296,808,965.79 1,823,063.03 49,087,662.68 330,918,755.61 864,030,127.11 436,685,904.10 1,300,716,031.21
Add：Changes in accounting policy - -
Correction of prior period errors - -
Business combination under common control - -
Others - -
II. Balance as at 1 January 185,391,680.00 - - - 296,808,965.79 - 1,823,063.03 - 49,087,662.68 330,918,755.61 864,030,127.11 436,685,904.10 1,300,716,031.21
III. Changes in equity during the reporting period - - - - - - -804,818.25 - - 32,608,936.12 31,804,117.87 -18,215,655.41 13,588,462.46
(i) Total comprehensive income -804,818.25 60,417,688.12 59,612,869.87 20,057,510.11 79,670,379.98
(ii) Capital contributions or withdrawals by owners - - - - - - - - - - - - -
1. Ordinary shares contributed by shareholders - -
2．Capital contributed by holders of other equity instruments - -
3．Share-based payments recognised in owners’ equity - -
4．Others - -
(iii) Profit distribution - - - - - - - - - -27,808,752.00 -27,808,752.00 -38,273,165.52 -66,081,917.52
1．Withdrawal of surplus reserves - - -
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Reporting period
Owners’ equity attributable to the parent company
Item
Other equity instruments Non-controlling Total owners’
Less: Other
Capital Specific Surplus Retained interests equity
Share capital Perpetual Treasury comprehensive Subtotal
Preference reserves reserves reserves earnings
capital Others stock income
shares
securities
2．Profit distribution to owners (or shareholders) -27,808,752.00 -27,808,752.00 -38,273,165.52 -66,081,917.52
3．Others - -
(iv) Transfer between owners' equity - - - - - - - - - - - - -
1．Capital reserves transfer to share capital - -
2．Surplus reserves transfer to share capital - -
3．Surplus reserves used to cover accumulated deficits - -
4．Defined benefit plan transfer to retained earnings - -
5. Other comprehensive income transfer to retained earnings - -
6. Others - -
(v) Specific reserves - - - - - - - - - - - - -
1．Withdrawal during the reporting period - -
2．Usage during the reporting period - -
(vi) Others - -
IV. Balance carried forward 185,391,680.00 - - - 296,808,965.79 - 1,018,244.78 - 49,087,662.68 363,527,691.73 895,834,244.98 418,470,248.69 1,314,304,493.67
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2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
(Continued)
The same period of last year
Owners’ equity attributable to the parent company
Item
Other equity instruments Specif Non-controlling Total owners’
Less: Other interests equity
ic Surplus Retained
Share capital Prefere Perpetual Capital reserves Treasur comprehensiv Subtotal
reserv reserves earnings
nce capital Others y stock e income
es
shares securities
I. Balance brought forward 185,391,680.00 296,808,965.79 7,514,750.01 40,499,488.55 218,523,906.99 748,738,791.34 418,530,084.22 1,167,268,875.56
Add：Changes in accounting policy
Correction of prior period errors
Business combination under common control
Others
II. Balance as at 1 January 185,391,680.00 296,808,965.79 7,514,750.01 40,499,488.55 218,523,906.99 748,738,791.34 418,530,084.22 1,167,268,875.56
III. Changes in equity during the reporting period 1,102,346.56 20,681,535.16 21,783,881.72 -13,172,182.58 8,611,699.14
(i) Total comprehensive income 1,102,346.56 39,220,703.16 40,323,049.72 13,223,002.33 53,546,052.05
(ii) Capital contributions or withdrawals by owners
1. Ordinary shares contributed by shareholders
2．Capital contributed by holders of other equity
instruments
3．Share-based payments recognised in owners’ equity
4．Others
(iii) Profit distribution -18,539,168.00 -18,539,168.00 -26,395,184.92 -44,934,352.92
1．Withdrawal of surplus reserves
2．Profit distribution to owners (or shareholders) -18,539,168.00 -18,539,168.00 -26,395,184.92 -44,934,352.92
3．Others
16
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
The same period of last year
Owners’ equity attributable to the parent company
Item
Other equity instruments Specif Non-controlling Total owners’
Less: Other interests equity
ic Surplus Retained
Share capital Prefere Perpetual Capital reserves Treasur comprehensiv Subtotal
reserv reserves earnings
nce capital Others y stock e income
es
shares securities
(iv) Transfer between owners' equity
1． Capital reserves transfer to share capital
2．Surplus reserves transfer to share capital
3．Surplus reserves used to cover accumulated deficits
4．Defined benefit plan transfer to retained earnings
5. Other comprehensive income transfer to retained
earnings
6. Others
(v) Specific reserves
1．Withdrawal during the reporting period
2．Usage during the reporting period
(vi) Others 0.01 0.01
IV. Balance carried forward 185,391,680.00 296,808,965.79 8,617,096.57 40,499,488.55 239,205,442.15 770,522,673.06 405,357,901.64 1,175,880,574.70
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager：Wu Jianhua
17
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
8. Statement of Changes in Owners' Equity of Parent Company
Prepared by: TsannKuen (China) Enterprise Co., Ltd Unit：Yuan Currency: CNY
Reporting period
Other equity instruments Specifi
Item Less: Other
Capital c Surplus Retained Total owners’
Share capital Prefer Perpetual Treasury comprehensi
reserves reserv reserves earnings equity
ence capital Others stock ve income
es
shares securities
I. Balance brought forward 185,391,680.00 271,490,289.82 49,087,662.68 251,605,397.88 757,575,030.38
Add：Changes in accounting policy -
Correction of prior period errors -
Others -
II. Balance as at 1 January 185,391,680.00 - - - 271,490,289.82 - - - 49,087,662.68 251,605,397.88 757,575,030.38
III. Changes in equity during the reporting period - - - - - - - - - 90,745,136.51 90,745,136.51
(i) Total comprehensive income - 118,553,888.51 118,553,888.51
(ii) Capital contributions or withdrawals by owners - - - - - - - - - - -
1. Ordinary shares contributed by
-
shareholders
2．Capital contributed by holders of
-
other equity instruments
3．Share-based payments recognised in owners’ equity -
4．Others -
(iii) Profit distribution - - - - - - - - - -27,808,752.00 -27,808,752.00
1．Withdrawal of surplus reserves - -
2．Profit distribution to owners (or shareholders) -27,808,752.00 -27,808,752.00
3．Others -
(iv) Transfer between owners' equity - - - - - - - - - - -
18
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Reporting period
Other equity instruments Specifi
Item Less: Other
Capital c Surplus Retained Total owners’
Share capital Prefer Perpetual Treasury comprehensi
reserves reserv reserves earnings equity
ence capital Others stock ve income
es
shares securities
1． Capital reserves transfer to share capital -
2．Surplus reserves transfer to share capital -
3．Surplus reserves used to cover accumulated deficits -
4．Defined benefit plan transfer to retained earnings -
5. Other comprehensive income transfer to retained
-
earnings
6. Others -
(v) Specific reserves - - - - - - - - - - -
1．Withdrawal during the reporting period -
2．Usage during the reporting period -
(vi) Others -
IV. Balance carried forward 185,391,680.00 - - - 271,490,289.82 - - - 49,087,662.68 342,350,534.39 848,320,166.89
19
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
(Continued)
Same period of last year
Other equity
instruments
Perp Less: Other
Item Pref
etual Treasu compreh Specific Surplus
Share capital eren Capital reserves Retained earnings Total owners’ equity
capit Othe ry ensive reserves reserves
ce
al rs stock income
shar
secu
es
rities
I. Balance brought forward 185,391,680.00 271,490,289.82 40,499,488.55 192,850,998.74 690,232,457.11
Add：Changes in accounting policy
Correction of prior period errors
Others
II. Balance as at 1 January 185,391,680.00 271,490,289.82 40,499,488.55 192,850,998.74 690,232,457.11
III. Changes in equity during the reporting
65,352,010.91 65,352,010.91
period
(i) Total comprehensive income 83,891,178.91 83,891,178.91
(ii) Capital contributions or withdrawals by
owners
1. Ordinary shares contributed by
shareholders
2．Capital contributed by holders of
other equity instruments
3．Share-based payments recognised in
owners’ equity
4．Others
(iii) Profit distribution -18,539,168.00 -18,539,168.00
1．Withdrawal of surplus reserves
2．Profit distribution to owners (or
-18,539,168.00 -18,539,168.00
shareholders)
3．Others
(iv) Transfer between owners' equity
20
2021 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
Same period of last year
Other equity
instruments
Perp Less: Other
Item Pref
etual Treasu compreh Specific Surplus
Share capital eren Capital reserves Retained earnings Total owners’ equity
capit Othe ry ensive reserves reserves
ce
al rs stock income
shar
secu
es
rities
1． Capital reserves transfer to share capital
2．Surplus reserves transfer to share capital
3．Surplus reserves used to cover
accumulated deficits
4．Defined benefit plan transfer to retained
earnings
5. Other comprehensive income transfer to
retained earnings
6. Others
(v) Specific reserves
1．Withdrawal during the reporting period
2．Usage during the reporting period
(vi) Others
IV. Balance carried forward 185,391,680.00 271,490,289.82 40,499,488.55 258,203,009.65 755,584,468.02
Legal Representative: Cai Yuansong Chief Financial Officer：Wu Jianhua Finance Manager：Wu Jianhua
21
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Tsann Kuen (China) Enterprise Co., Ltd.
Notes to the Financial Statements for H1 2021
(All amounts are expressed in Renminbi Yuan (“CNY”) unless otherwise stated)
1. BASIC INFORMATION ABOUT THE COMPANY
1.1 Corporate Information
Tsann Kuen (China) Enterprise Co., Ltd. (hereafter “the Company or TKC”) was established
in the People’s Republic of China (“the PRC”) in 1988 as a wholly owned foreign
investment enterprise, the Company named in TsannKuen China (Xiamen) Ltd., firstly,
invested by the Fordchee (Hongkong) Co., Ltd., EUPA Industry Corporation Limited and
Hong Kong Fillman investment Co., Ltd.. On 16 February 1993, with the approval of the
Ministry of Foreign Trade and Economic Co-operation, the Company was reorganized into
an incorporated company and was renamed as TsannKuen (China) Enterprise Co., Ltd. In
June 1993, the Company issued 40,000,000 new shares pursuant to an international placing
and public offer and these new shares (“B shares”) were then listed on the Shenzhen Stock
Exchange on 30 June 1993. According to the “Intended Implementation of Share Reducing
Proposal” of the 5th extraordinary board of director of 2012 and the 3rd extraordinary
shareholders’ general meeting of 2012, obtained the consent from the Investment Promotion
Bureau of Xiamen which is authorized by the Ministry of Commerce and the approval
documents ”The Approval by Investment Promotion Bureau of Xiamen to Consent the
Capital Reduction of TsannKuen (China) Enterprise Co., Ltd”(IPB audit [2012] NO. 698),
as the base 1,112,350,077 shares of the total original share capital, for implementation of
share reducing model that all registered shareholders who was recorded on 28 December
2012 with the proportion 6:1 to reduce the shares. After the implementation of share
reducing model, total share capital was reduced from 1,112,350,077 shares to 185,391,680
shares of the company. Until 30 June 2021, the Company’s share capital is CNY
185,391,680.
Following The Ministry of Commerce of the People’s Republic of China approved (The No.
[2005]3107 “Agreed in Principle to the Ministry of Commerce on TsannKuen (China)
Enterprise Co., Ltd. Shares Traded Sponsor of the Approval”), On 6 December 2006, the
Company received the [2006] No.266 file “The notice of TsannKuen (China) Enterprise Co.,
Ltd, concerning the Approval of non-listed Foreign Shares Traded” from China Securities
Regulatory Commission. The China Securities Regulatory Commission agreed 700,476,830
unlisted shares (account for 62.97% of the share capital) held by the Company’s
22
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
shareholders, EUPA Industry Corporation Limited, Fordchee Development Limited, and
Fillman Investment Limited to transfer into B shares. On 29 November 2007, these B shares
could be listed and exercised on Shenzhen Stock Exchange. Up to 30 June 2021, total B
shares held by the three legal shareholders (EUPA Industry Corporation Limited, Fordchee
Development Limited, and Fillman Investment Limited) are 82,830,966 shares after the
implementation of share reducing model (Accounts for 44.68% of the share capital).
Legal representative: Cai Yuansong
Place of registration: No.88 Xinglong Road, Huli Industrial District, Xiamen, Fujian
Province
The parent: STAR COMGISTIC CAPITAL CO.,LTD.
The Company operates within the electrical machinery and equipment manufacturing
industry.
The industry of the company: electrical machinery and equipment manufacturing.
The Company was involved in the following operating activities: developing, manufacturing
household appliances, electronics, light industrial products, modern office supplies. Design
and manufacture of molds associated with these products in domestic and international sales
of the company's products and after-sales service. Wholesale and retail household
appliances, electronic products, electrical equipment, office supplies, kitchen utensils,
pre-packaged food (limited to branches), import and export related business and provide
after-sales service (the above description do not involve state trading commodity goods,
involving quota license management products are according to the relevant provisions of the
State for the regulations application).
The financial statements approved by the resolution of the Board of Directors on 3 August
2021.
1.2 Scope and changes of consolidated financial statements
10 subsidiaries were included in the scope of consolidation as of 30 June 2021, please see
Note 7 INTEREST IN OTHER ENTITIES for details.
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
2.1 Basis of Preparation
Based on going concern, according to actually occurred transactions and events, the
Company prepares its financial statements in accordance with the Accounting Standards for
Business Enterprises – Basic standards and concrete accounting standards, Accounting
Standards for Business Enterprises – Application Guidelines, Accounting Standards for
23
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Business Enterprises – Interpretations and other relevant provisions (collectively known as
“Accounting Standards for Business Enterprises, issued by Ministry of Finance of PRC”). In
addition, the Company complies with the Compilation Rules for Information Disclosure by
Companies Offering Securities to the Public No.15 – General Provisions on Financial
Reports (2014 Revision) issued by the China Securities Regulatory Commission (CSRC) to
disclose its financial information.
2.2 Going Concern
The Company has assessed its ability to continually operate for the next twelve months from
the end of the reporting period, and no matters that may result in doubt on its ability as a
going concern were noted. Therefore, it is reasonable for the Company to prepare financial
statements on the going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
The following significant accounting policies and accounting estimates of the Company are
formulated in accordance with the Accounting Standards for Business Enterprises.
Businesses not mentioned are complied with relevant accounting policies of the Accounting
Standards for Business Enterprises.
3.1 Statement of Compliance with the Accounting Standards for Business Enterprises
The Company prepares its financial statements in accordance with the requirements of the
Accounting Standards for Business Enterprises, truthfully and completely reflecting the
Company’s financial position as of 30 June 2021, and its operating results, changes in
shareholders' equity, cash flows and other related information for the year then ended.
3.2 Accounting Period
The accounting year of the Company is from January 1 to December 31 in calendar year.
3.3 Operating Cycle
Normal business cycle is realised by the Company as the period starting from the purchase
of processing assets to the realization of cash or cash equivalents. The company has a
12-month operating cycle, and its assets and liabilities as liquidity criteria for the
classification.
3.4 Functional Currency
The Company takes Renminbi Yuan (“CNY”) as the functional currency.
The Company’s overseas subsidiaries choose the currency of the primary economic
environment in which the subsidiaries operate as the functional currency.
3.5Accounting Treatment of Business Combinations under and not under Common
Control
24
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.5.1 Business combinations under common control
The assets and liabilities that the Company obtains in a business combination under
common control shall be measured at their carrying amount of the acquired entity at the
combination date. If the accounting policy adopted by the acquired entity is different from
that adopted by the acquiring entity, the acquiring entity shall, according to accounting
policy it adopts, adjust the relevant items in the financial statements of the acquired party
based on the principal of materiality. As for the difference between the carrying amount of
the net assets obtained by the acquiring entity and the carrying amount of the consideration
paid by it, the capital reserve (capital premium or share premium) shall be adjusted. If the
capital reserve (capital premium or share premium) is not sufficient to absorb the difference,
any excess shall be adjusted against retained earnings.
Refer to Note 3.6 (6) for accounting treatment of business combination under common
control by step acquisitions.
3.5.2 Business combinations not under common control
The assets and liabilities that the Company obtains in a business combination not under
common control shall be measured at their fair value at the acquisition date. If the
accounting policy adopted by the acquired entity is different from that adopted by the
acquiring entity, the acquiring entity shall, according to accounting policy it adopts, adjust
the relevant items in the financial statements of the acquired entity based on the principal of
materiality. The acquiring entity shall recognise the positive balance between the
combination costs and the fair value of the identifiable net assets it obtains from the
acquired entity as goodwill. The acquiring entity shall, pursuant to the following provisions,
treat the negative balance between the combination costs and the fair value of the
identifiable net assets it obtains from the acquired entity:
3.5.2.1 It shall review the measurement of the fair values of the identifiable assets, liabilities
and contingent liabilities it obtains from the acquired entity as well as the combination
costs;
3.5.2.2 If, after the review, the combination costs are still less than the fair value of the
identifiable net assets it obtains from the acquired entity, the balance shall be recognised in
profit or loss of the reporting period.
Refer to Note 3.6.6 or the accounting treatment of business combination under the same
control by step acquisitions.
3.5.3 Treatment of business combination related costs
25
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
The intermediary costs such as audit, legal services and valuation consulting and other
related management costs that are directly attributable to the business combination shall be
charged in profit or loss in the period in which they are incurred. The costs to issue equity or
debt securities for the consideration of business combination shall be recorded as a part of
the value of the respect equity or debt securities upon initial recognition.
3.6 Method of Preparing the Consolidated Financial Statements
3.6.1 Scope of consolidation
The scope of consolidated financial statements shall be determined on the basis of control. It
not only includes subsidiaries determined based on voting power (or similar) or other
arrangement, but also structured entities under one or several contract arrangements.
Control exists when the Company has all the following: power over the investee; exposure,
or rights to variable returns from the Company’s involvement with the investee; and the
ability to use its power over the investee to affect the amount of the investor’s returns.
Subsidiaries are the entities that controlled by the Company (including enterprise, a divisible
part of the investee, and structured entity controlled by the enterprise). A structured entity
(sometimes called a Special Purpose Entity) is an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding who controls the entity.
3.6.2 Special requirement as the parent company is an investment entity
If the parent company is an investment entity, it should measure its investments in particular
subsidiaries as financial assets at fair value through profit or loss instead of consolidating
those subsidiaries in its consolidated and separate financial statements. However, as an
exception to this requirement, if a subsidiary provides investment-related services or
activities to the investment entity, it should be consolidated.
The parent company is defined as investment entity when meets following conditions:
3.6.2.1 Obtains funds from one or more investors for the purpose of providing those
investors with investment management services;
3.6.2.2 Commits to its investors that its business purpose is to invest funds solely for returns
from capital appreciation, investment income or both; and
3.6.2.3 Measures and evaluates the performance of substantially all of its investments on a
fair value basis.
If the parent company becomes an investment entity, it shall cease to consolidate its
subsidiaries at the date of the change in status, except for any subsidiary which provides
investment-related services or activities to the investment entity shall be continued to be
consolidated. The deconsolidation of subsidiaries is accounted for as though the investment
26
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
entity partially disposed subsidiaries without loss of control.
When the parent company previously classified as an investment entity ceases to be an
investment entity, subsidiary that was previously measured at fair value through profit or
loss shall be included in the scope of consolidated financial statements at the date of the
change in status. The fair value of the subsidiary at the date of change represents the
transferred deemed consideration in accordance with the accounting for business
combination not under common control.
3.6.3 Method of preparing the consolidated financial statements
The consolidated financial statements shall be prepared by the Company based on the
financial statements of the Company and its subsidiaries, and using other related
information.
When preparing consolidated financial statements, the Company shall consider the entire
group as an accounting entity, adopt uniform accounting policies and apply the requirements
of Accounting Standard for Business Enterprises related to recognition, measurement and
presentation. The consolidated financial statements shall reflect the overall financial
position, operating results, and cash flows of the group.
3.6.3.1 Like items of assets, liabilities, equity, income, expenses, and cash flows of the
parent are combined with those of the subsidiaries.
3.6.3.2 The carrying amount of the parent’s investment in each subsidiary is eliminated
(off-set) against the parent’s portion of equity of each subsidiary.
3.6.3.3 Eliminate the impact of intragroup transactions between the Company and the
subsidiaries or between subsidiaries, and when intragroup transactions indicate an
impairment of related assets, the losses shall be recognised in full.
3.6.3.4 Adjust special transactions from the perspective of the group.
3.6.4 Method of preparation of the consolidated financial statements when subsidiaries
are acquired or disposed in the reporting period
3.6.4.1 Acquisition of subsidiaries or business
3.6.4.1.1 Subsidiaries or business acquired through business combination under common
control
a. When preparing consolidated statements of financial position, the opening balance of the
consolidated balance sheet shall be adjusted. Related items of comparative financial
statements shall be adjusted as well, deeming that the combined entity has always existed
ever since the ultimate controlling party began to control.
b. Incomes, expenses, and profits of the subsidiary incurred from the beginning of the
27
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
reporting period to the end of the reporting period shall be included into the consolidated
statement of profit or loss. Related items of comparative financial statements shall be
adjusted as well, deeming that the combined entity has always existed ever since the
ultimate controlling party began to control.
c. Cash flows from the beginning of the reporting period to the end of the reporting period
shall be included into the consolidated statement of cash flows. Related items of
comparative financial statements shall be adjusted as well, deeming that the combined entity
has always existed ever since the ultimate controlling party began to control.
3.6.4.1.2 Subsidiaries or business acquired through business combination not under
common control
a. When preparing the consolidated statements of financial position, the opening balance of
the consolidated statements of financial position shall not be adjusted.
b. Incomes, expenses, and profits of the subsidiary incurred from the acquisition date to the
end of the reporting period shall be included into the consolidated statement of profit or
loss.
c. Cash flows from the acquisition date to the end of the reporting period shall be included
into the consolidated statement of cash flows.
3.6.4.3 Disposal of subsidiaries or business
3.6.4.3.1 When preparing the consolidated statements of financial position, the opening
balance of the consolidated statements of financial position shall not be adjusted.
3.6.4.3.2 Incomes, expenses, and profits incurred from the beginning of the subsidiary to the
disposal date shall be included into the consolidated statement of profit or loss.
3.6.4.3.3 Cash flows from the beginning of the subsidiary to the disposal date shall be
included into the consolidated statement of cash flows.
3.6.5 Special consideration in consolidation elimination
3.6.5.1 Long-term equity investment held by the subsidiaries to the Company shall be
recognised as treasury stock of the Company, which offsets with the owner’s equity,
represented as “treasury stock” under “owner’s equity” in the consolidated statement of
financial position.
Long-term equity investment held by subsidiaries between each other is accounted for
taking long-term equity investment held by the Company to its subsidiaries as reference.
That is, the long-term equity investment is eliminated (off- set) against the portion of the
corresponding subsidiary’s equity.
3.6.5.2 Due to not belonging to paid-in capital (or share capital) and capital reserve, and
28
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
being different from retained earnings and undistributed profit, “Specific reserves” and
“General risk provision” shall be recovered based on the proportion attributable to owners
of the parent company after long-term equity investment to the subsidiaries is eliminated
with the subsidiaries’ equity.
3.6.5.3 If temporary timing difference between the book value of the assets and liabilities in
the consolidated statement of financial position and their tax basis is generated as a result of
elimination of unrealized inter-company transaction profit or loss, deferred tax assets of
deferred tax liabilities shall be recognised, and income tax expense in the consolidated
statement of profit or loss shall be adjusted simultaneously, excluding deferred taxes related
to transactions or events directly recognised in owner’s equity or business combination.
3.6.5.4 Unrealised inter-company transactions profit or loss generated from the Company
selling assets to its subsidiaries shall be eliminated against “net profit attributed to the
owners of the parent company” in full. Unrealized inter-company transactions profit or loss
generated from the subsidiaries selling assets to the Company shall be eliminated between
“net profit attributed to the owners of the parent company” and “non-controlling interests”
pursuant to the proportion of the Company in the related subsidiaries. Unrealized
inter-company transactions profit or loss generated from the assets sales between the
subsidiaries shall be eliminated between “net profit attributed to the owners of the parent
company” and “non-controlling interests” pursuant to the proportion of the Company in the
selling subsidiaries.
3.6.5.5 If loss attributed to the minority shareholders of a subsidiary in current period is
more than the proportion of non-controlling interest in this subsidiary at the beginning of the
period, non-controlling interest is still to be written down.
3.6.6 Accounting for Special Transactions
3.6.6.1 Purchasing of non-controlling interests
Where, the Company purchases non-controlling interests of its subsidiary, in the separate
financial statements of the Company, the cost of the long-term equity investment obtained in
purchasing non-controlling interests is measured at the fair value of the consideration paid.
In the consolidated financial statements, difference between the cost of the long-term equity
investment newly obtained in purchasing non-controlling interests and share of the
subsidiary’s net assets from the acquisition date or combination date continuingly calculated
pursuant to the newly acquired shareholding proportion shall be adjusted into capital reserve
(capital premium or share premium). If capital reserve is not enough to be offset, surplus
reserve and undistributed profit shall be offset in turn.
29
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.6.6.2 Gaining control over the subsidiary in stages through multiple transactions
3.6.6.2.1 Business combination under common control in stages through multiple
transactions
On the combination date, in the separate financial statement, initial cost of the long-term
equity investment is determined according to the share of carrying amount of the acquiree’s
net assets in the ultimate controlling entity’s consolidated financial statements after
combination. The difference between the initial cost of the long-term equity investment and
the carrying amount of the long-term investment held prior of control plus book value of
additional consideration paid at acquisition date is adjusted into capital reserve (capital
premium or share premium). If the capital reserve is not enough to absorb the difference,
any excess shall be adjusted against surplus reserve and undistributed profit in turn.
In the consolidated financial statements, the assets and liabilities acquired during the
combination should be recognized at their carrying amount in the ultimate controlling
entity’s consolidated financial statements on the combination date unless any adjustment is
resulted from the difference in accounting policies. The difference between the carrying
amount of the investment held prior of control plus book value of additional consideration
paid on the acquisition date and the net assets acquired through the combination is adjusted
into capital reserve (capital premium or share premium). If the capital reserve is not enough
to absorb the difference, any excess shall be adjusted against retained earnings.
If the acquiring entity holds equity investment in the acquired entity prior to the
combination date and the equity investment is accounted for under the equity method,
related profit or loss, other comprehensive income and other changes in equity which have
been recognised during the period from the later of the date of the Company obtaining
original equity interest and the date of both the acquirer and the acquiree under common
control of the same ultimate controlling party to the combination date should be offset
against the opening balance of retained earnings at the comparative financial statements
period respectively.
3.6.6.2.2 Business combination not under common control in stages through multiple
transactions
On the consolidation date, in the separate financial statements, the initial cost of long-term
equity investment is determined according to the carrying amount of the original long-term
investment plus the cost of new investment.
In the consolidated financial statements, the equity interest of the acquired entity held prior
to the acquisition date shall be re-measured at its fair value on the acquisition date.
30
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Difference between the fair value of the equity interest and its book value is recognised as
investment income. The other comprehensive income related to the equity interest held prior
to the acquisition date calculated through equity method, should be transferred to current
investment income of the acquisition period, excluding other comprehensive income
resulted from the remeasurement of the net assets or net liabilities under defined benefit
plan. The Company shall disclose acquisition-date fair value of the equity interest held prior
to the acquisition date, and the related gains or losses due to the remeasurement based on
fair value.
3.6.6.3 Disposal of investment in subsidiaries without a loss of control
For partial disposal of the long-term equity investment in the subsidiaries without a loss of
control, when the Company prepares consolidated financial statements, difference between
consideration received from the disposal and the corresponding share of subsidiary’s net
assets cumulatively calculated from the acquisition date or combination date shall be
adjusted into capital reserve (capital premium or share premium). If the capital reserve is not
enough to absorb the difference, any excess shall be offset against retained earnings.
3.6.6.4 Disposal of investment in subsidiaries with a loss of control
3.6.6.4.1 Disposal through one transaction
If the Company loses control in an investee through partial disposal of the equity investment,
when the consolidated financial statements are prepared, the retained equity interest should
be re-measured at fair value at the date of loss of control. The difference between i) the fair
value of consideration received from the disposal plus non-controlling interest retained; ii)
share of the former subsidiary’s net assets cumulatively calculated from the acquisition date
or combination date according to the original proportion of equity interest, shall be
recognised in current investment income when control is lost.
Moreover, other comprehensive income and other changes in equity related to the equity
investment in the former subsidiary shall be transferred into current investment income
when control is lost, excluding other comprehensive income resulted from the
remeasurement of the movement of net assets or net liabilities under defined benefit plan.
3.6.6.4.2 Disposal in stages
In the consolidated financial statements, whether the transactions should be accounted for as
“a single transaction” needs to be decided firstly.
If the disposal in stages should not be classified as “a single transaction”, in the separate
financial statements, for transactions prior of the date of loss of control, carrying amount of
each disposal of long-term equity investment need to be recognized, and the difference
between consideration received and the carrying amount of long-term equity investment
31
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
corresponding to the equity interest disposed should be recognized in current investment
income; in the consolidated financial statements, the disposal transaction should be
accounted for according to related policy in “Disposal of long-term equity investment in
subsidiaries without a loss of control”.
If the disposal in stages should be classified as “a single transaction”, these transactions
should be accounted for as a single transaction of disposal of subsidiary resulting in loss of
control. In the separate financial statements, for each transaction prior of the date of loss of
control, difference between consideration received and the carrying amount of long-term
equity investment corresponding to the equity interest disposed should be recognised as
other comprehensive income firstly, and transferred to profit or loss as a whole when control
is lost; in the consolidated financial statements, for each transaction prior of the date of loss
of control, difference between consideration received and proportion of the subsidiary’s net
assets corresponding to the equity interest disposed should be recognised in profit or loss as
a whole when control is lost.
In considering of the terms and conditions of the transactions as well as their economic
impact, the presence of one or more of the following indicators may lead to account for
multiple transactions as a single transaction:
a. The transactions are entered into simultaneously or in contemplation of one another.
b. The transactions form a single transaction designed to achieve an overall commercial
effect.
c. The occurrence of one transaction depends on the occurrence of at least one other
transaction.
d. One transaction, when considered on its own merits, does not make economic sense, but
when considered together with the other transaction or transactions would be considered
economically justifiable.
3.6.6.5Diluting equity share of parent company in its subsidiaries due to additional capital
injection by the subsidiaries’ minority shareholders.
Other shareholders (minority shareholders) of the subsidiaries inject additional capital in the
subsidiaries, which resulted in the dilution of equity interest of parent company in these
subsidiaries. In the consolidated financial statements, difference between share of the
corresponding subsidiaries’ net assets calculated based on the parent’s equity interest before
and after the capital injection shall be adjusted into capital reserve (capital premium or share
premium). If the capital reserve is not enough to absorb the difference, any excess shall be
adjusted against retained earnings.
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.7 Cash and Cash Equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash
equivalents include short-term (generally within three months of maturity at acquisition),
highly liquid investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
3.8 Foreign Currency Transactions and Translation of Foreign Currency Financial
Statements
3.8.1 Determination of the exchange rate for foreign currency transactions
At the time of initial recognition of a foreign currency transaction, the amount in the foreign
currency shall be translated into the amount in the functional currency at the spot exchange
rate of the transaction date, or at an exchange rate which is determined through a systematic
and reasonable method and is approximate to the spot exchange rate of the transaction date
(hereinafter referred to as the approximate exchange rate).
3.8.2 Translation of monetary items denominated in foreign currency on the balance
sheet date
The foreign currency monetary items shall be translated at the spot exchange rate on the
balance sheet date. The balance of exchange arising from the difference between the spot
exchange rate on the balance sheet date and the spot exchange rate at the time of initial
recognition or prior to the balance sheet date shall be recorded into the profits and losses at
the current period. The foreign currency non-monetary items measured at the historical cost
shall still be translated at the spot exchange rate on the transaction date; for the foreign
currency non-monetary items restated to a fair value measurement, shall be translated into
the at the spot exchange rate at the date when the fair value was determined, the difference
between the restated functional currency amount and the original functional currency
amount shall be recorded into the profits and losses at the current period.
3.8.3 Translation of foreign currency financial statements
Before translating the financial statements of foreign operations, the accounting period and
accounting policy shall be adjusted so as to conform to the Company. The adjusted foreign
operation financial statements denominated in foreign currency (other than functional
currency) shall be translated in accordance with the following method:
3.8.3.1 The asset and liability items in the statement of financial position shall be translated
at the spot exchange rates at the date of that statement of financial position. The owners’
equity items except undistributed profit shall be translated at the spot exchange rates when
they are incurred.
33
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.8.3.2The income and expense items in the statement of profit and other comprehensive
income shall be translated at the spot exchange rates or approximate exchange rate at the
date of transaction.
3.8.3.3 Foreign currency cash flows and cash flows of foreign subsidiaries shall be
translated at the spot exchange rate or approximate exchange rate when the cash flows are
incurred. The effect of exchange rate changes on cash is presented separately in the
statement of cash flows as an adjustment item.
3.8.3.4 The differences arising from the translation of foreign currency financial statements
shall be presented separately as “other comprehensive income” under the owners’ equity
items of the consolidated statement of financial position.
When disposing a foreign operation involving loss of control, the cumulative amount of the
exchange differences relating to that foreign operation recognised under other
comprehensive income in the statement of financial position, shall be reclassified into
current profit or loss according to the proportion disposed.
3.9 Financial Instruments
Financial instrument is any contract which gives rise to both a financial asset of one entity
and a financial liability or equity instrument of another entity.
3.9.1 Recognition and derecognition of financial instrument
A financial asset or a financial liability should be recognised in the statement of financial
position when, and only when, an entity becomes party to the contractual provisions of the
instrument.
A financial asset can only be derecognised when meets one of the following conditions:
3.9.1.1 The rights to the contractual cash flows from a financial asset expire
3.9.1.2 The financial asset has been transferred and meets one of the following
derecognition conditions:
Financial liabilities (or part thereof) are derecognised only when the liability is
extinguished—i.e., when the obligation specified in the contract is discharged or cancelled
or expires. An exchange of the Company (borrower) and lender of debt instruments that
carry significantly different terms or a substantial modification of the terms of an existing
liability are both accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability.
Purchase or sale of financial assets in a regular way shall be recognised and derecognised
using trade date accounting. A regular purchase or sale of financial assets is a transaction
under a contract whose terms require delivery of the asset within the time frame established
34
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
generally by regulations or convention in the marketplace concerned. Trade date is the date
at which the entity commits itself to purchase or sell an asset.
3.9.2 Classification and measurement of financial assets
At initial recognition, the Company classified its financial asset based on both the business
model for managing the financial asset and the contractual cash flow characteristics of the
financial asset: financial asset at amortised cost, financial asset at fair value through profit or
loss (FVTPL) and financial asset at fair value through other comprehensive income
(FVTOCI). Reclassification of financial assets is permitted if, and only if, the objective of
the entity’s business model for managing those financial assets changes. In this
circumstance, all affected financial assets shall be reclassified on the first day of the first
reporting period after the changes in business model; otherwise, the financial assets cannot
be reclassified after initial recognition.
Financial assets shall be measured at initial recognition at fair value. For financial assets
measured at FVTPL, transaction costs are recognised in current profit or loss. For financial
assets not measured at FVTPL, transaction costs should be included in the initial
measurement. Notes receivable or accounts receivable that arise from sales of goods or
rendering of services are initially measured at the transaction price defined in the accounting
standard of revenue where the transaction does not include a significant financing
component.
Subsequent measurement of financial assets will be based on their categories:
3.9.2.1 Financial asset at amortised cost
The financial asset at amortised cost category of classification applies when both the
following conditions are met: the financial asset is held within the business model whose
objective is to hold financial assets in order to collect contractual cash flows, and the
contractual term of the financial asset gives rise on specified dates to cash flows that are
solely payment of principal and interest on the principal amount outstanding. These
financial assets are subsequently measured at amortised cost by adopting the effective
interest rate method. Any gain or loss arising from derecognition according to the
amortisation under effective interest rate method or impairment are recognised in current
profit or loss.
3.9.2.2 Financial asset at fair value through other comprehensive income (FVTOCI)
The financial asset at FVTOCI category of classification applies when both the following
conditions are met: the financial asset is held within the business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets, and the
35
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
contractual term of the financial asset gives rise on specified dates to cash flows that are
solely payment of principal and interest on the principal amount outstanding. All changes in
fair value are recognised in other comprehensive income except for gain or loss arising from
impairment or exchange differences, which should be recognised in current profit or loss. At
derecognition, cumulative gain or loss previously recognised under OCI is reclassified to
current profit or loss. However, interest income calculated based on the effective interest
rate is included in current profit or loss.
The Company make an irrevocable decision to designate part of non-trading equity
instrument investments as measured through FVTOCI. All changes in fair value are
recognised in other comprehensive income except for dividend income recognised in current
profit or loss. At derecognition, cumulative gain or loss are reclassified to retained earnings.
3.9.2.3 Financial asset at fair value through profit or loss (FVTPL)
Financial asset except for abovementioned financial asset at amortised cost or financial asset
at fair value through other comprehensive income (FVTOCI), should be classified as
financial asset at fair value through profit or loss (FVTPL). These financial assets should be
subsequently measured at fair value. All the changes in fair value are included in current
profit or loss.
3.9.3 Classification and measurement of financial liabilities
The Company classified the financial liabilities as financial liabilities at fair value through
profit or loss (FVTPL), loan commitments at a below-market interest rate and financial
guarantee contracts and financial asset at amortised cost.
Subsequent measurement of financial assets will be based on the classification:
3.9.3.1 Financial liabilities at fair value through profit or loss (FVTPL)
Held-for-trading financial liabilities (including derivatives that are financial liabilities) and
financial liabilities designated at FVTPL are classified as financial liabilities at FVTP. After
initial recognition, any gain or loss (including interest expense) are recognised in current
profit or loss except for those hedge accounting is applied. For financial liability that is
designated as at FVTPL, changes in the fair value of the financial liability that is attributable
to changes in the own credit risk of the issuer shall be presented in other comprehensive
income. At derecognition, cumulative gain or loss previously recognised under OCI is
reclassified to retained earnings.
3.9.3.2 Loan commitments and financial guarantee contracts
Loan commitment is a commitment by the Company to provide a loan to customer under
specified contract terms. The provision of impairment losses of loan commitments shall be
36
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
recognised based on expected credit losses model.
Financial guarantee contract is a contract that requires the Company to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts liability shall be subsequently measured at the higher of: The
amount of the loss allowance recognised according to the impairment principles of financial
instruments; and the amount initially recognised less the cumulative amount of income
recognised in accordance with the revenue principles.
3.9.3.3 Financial liabilities at amortised cost
After initial recognition, the Company measured other financial liabilities at amortised cost
using the effective interest method.
Except for special situation, financial liabilities and equity instrument should be classified in
accordance with the following principles:
3.9.3.3.1 If the Company has no unconditional right to avoid delivering cash or another
financial instrument to fulfill a contractual obligation, this contractual obligation meets the
definition of financial liabilities. Some financial instruments do not comprise terms and
conditions related to obligations of delivering cash or another financial instrument explicitly,
yet they may include contractual obligation indirectly through other terms and conditions.
3.9.3.3.2 If a financial instrument must or may be settled in the Company's own equity
instruments, it should be considered that the Company’s own equity instruments are
alternatives of cash or another financial instrument, or to entitle the holder of the equity
instruments to sharing the remaining rights over the net assets of the issuer. If the former is
the case, the instrument is a liability of the issuer; otherwise, it is an equity instrument of the
issuer. Under some circumstances, it is regulated in the contract that the financial instrument
must or may be settled in the Company's own equity instruments, where the amount of
contractual rights and obligations are calculated by multiplying the number of the equity
instruments to be available or delivered by its fair value upon settlement. Such contracts
shall be classified as financial liabilities, regardless whether the amount of contractual rights
and liabilities is fixed, or fluctuate totally or partially with variables other than market price
of the entity’s own equity instruments (such as interest rate, price of some kind of goods or
some kind of financial instrument).
3.9.4 Derivatives and embedded derivatives
At initial recognition, derivatives shall be measured at fair value at the date of derivative
contracts are signed and subsequently measured at fair value. The derivative with a positive
37
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
fair value shall be recognized as an asset, and with a negative fair value shall be recognised
as a liability.
Gains or losses arising from the changes in fair value of derivatives shall be recognised
directly into current profit or loss except for the effective portion of cash flow hedges which
shall be recognised in other comprehensive income and reclassified into current profit or
loss when the hedged items affect profit or loss.
An embedded derivative is a component of a hybrid contract with a financial asset as a host,
the Company shall apply the requirements of financial asset classification to the entire
hybrid contract. If a host that is not a financial asset and the hybrid contract is not measured
at fair value with changes in fair value recognised in profit or loss, and the economic
characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host, and a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative, the embedded derivative
shall be separated from the hybrid instrument and accounted for as a separate derivative
instrument. If the Company is unable to measure the fair value of the embedded derivative
at the acquisition date or subsequently at the balance sheet date, the entire hybrid contract is
designated as financial assets or financial liabilities at fair value through profit or loss.
3.9.5 Impairment of financial instrument
The Company shall recognise a loss allowance based on expected credit losses for financial
asset that is measured at amortised cost, debt investment at fair value through other
comprehensive income, contract asset, lease receivable, loan commitment, and financial
guarantee contract.
3.9.5.1 Measurement of expected credit losses
Expected credit losses are the weighted average of credit losses of the financial instruments
with the respective risks of a default occurring as the weights. Credit loss is the difference
between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the Company expects to receive, which is all cash
shortfalls, discounted at the original effective interest rate or credit-adjusted effective
interest rate for purchased or originated credit-impaired financial assets.
Lifetime expected credit losses are the expected credit losses that result from all possible
default events over the expected life of a financial instrument.
12-month expected credit losses are the portion of lifetime expected credit losses that
represent the expected credit losses that result from default events on a financial instrument
that are possible within the 12 months after the reporting date (or the expected lifetime if the
38
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
expected life of a financial instrument is less than 12 months).
At each reporting date, the Company classifies financial instruments into three stages and
makes provisions for expected credit losses accordingly. A financial instrument of which the
credit risk has not significantly increased since initial recognition is at stage 1. The
Company shall measure the loss allowance for that financial instrument at an amount equal
to 12-month expected credit losses. A financial instrument with a significant increase in
credit risk since initial recognition but is not considered to be credit-impaired is at stage 2.
The Company shall measure the loss allowance for that financial instrument at an amount
equal to the lifetime expected credit losses. A financial instrument is considered to be credit
impaired as at the end of the reporting period is at stage 3. The Company shall measure the
loss allowance for that financial instrument at an amount equal to the lifetime expected
credit losses.
The Company may assume that the credit risk on a financial instrument has not increased
significantly since initial recognition if the financial instrument is determined to have low
credit risk at the reporting date and measure the loss allowance for that financial instrument
at an amount equal to 12-month expected credit losses.
For financial instruments at stage 1, stage 2 and those have low credit risk, the interest
revenue shall be calculated by applying the effective interest rate to the gross carrying
amount of a financial asset (ie, impairment loss not been deducted). For financial
instruments at stage 3, interest revenue shall be calculated by applying the effective interest
rate to the amortised costs after deducting of impairment loss.
For notes receivable, accounts receivable and accounts receivable financing, no matter it
contains a significant financing component or not, the Company shall measure the loss
allowance at the amount that equals to the lifetime expected credit losses.
3.9.5.1.1 Receivables/Contract Assets
For the notes receivable, accounts receivable, other receivables, accounts receivable
financing, contract assets and long-term receivables which are demonstrated to be impaired
by any objective evidence, or applicable for individual assessment, the Company shall
individually assess for impairment and recognise the loss allowance for expected credit
losses. If the Company determines that no objective evidence of impairment exists for notes
receivable, accounts receivable, other receivables, accounts receivable financing, contract
assets, and long-term receivables, or the expected credit loss of a single financial asset
cannot be assessed at reasonable cost, such notes receivable, accounts receivable, other
receivables, accounts receivable financing, contract assets, and long-term receivables shall
39
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
be divided into several groups based on similar credit risk characteristics and calculate
collectively on the expected credit loss. The determination basis of groups is as following:
a. Notes Receivables
The Company measures the loss impairment in accordance with the amount equivalent to
the lifetime expected credit losses for notes receivables. The notes receivables are divided
into different groups based on credit risk characteristics:
Item Basis for determining the groups
Bank acceptance bill The acceptor is a bank with less credit risk.
Commercial acceptance bill According to the credit risk of the acceptor, it should be the same as
the “accounts receivable” combination.
b. Accounts Receivables
For accounts receivables that do not contain significant financing components, the Company
measures the loss impairment in accordance with the amount equivalent to the expected
credit loss in the whole duration.
For accounts receivables and lease receivables that contain significant financing
components, the Company continuously chooses to measure the loss impairment in
accordance with the amount equivalent to the expected credit loss in the whole duration.
Other than the accounts receivable whose credit risk is assessed individually, the other
accounts receivables are grouped based on their credit risk characteristics:
Group Basis for determining the groups
This group uses the accounts receivables aging as the credit risk
Aging of Accounts Receivables
characteristics.
Related party relationships (except for evidencing that they cannot
Related parties
be received).
c. Other Receivables
The Company assesses whether the credit risk of other receivables has significantly
increased since initial recognition, and utilizes the amount equivalent to the expected credit
loss in the next 12 months or the whole duration to measures the impairment loss
accordingly. Besides the other receivables that have individually assessed credit risk, the
rest of the other receivables are classified into different groups based on their credit risk
characteristics:
Group Basis for determining the groups
Deposit guarantee This group of receivables includes deposit receivables, advances on
40
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Group Basis for determining the groups
behalf of others and quality guarantee deposits to be collected in
daily activities.
This group is the declared export tax refund funds that have not been
Export tax refund
received.
This group uses the age of accounts receivable as the credit risk
Open credits
characteristics.
Related party relationships (except for evidencing that they cannot
Related parties
be covered)
3.9.5.1.2 Debt investment and other debt investment
For debt investment and other debt investment, the Company shall calculate the expected
credit loss through the default exposure and the 12-month or lifetime expected credit loss
rate based on the nature of the investment, counterparty, and the type of risk exposure.
3.9.5.2 Low credit risk
If the financial instrument has a low risk of default, and the borrower has a strong capacity
to meet its contractual cash flow obligations in the near term and adverse changes in
economic and business conditions in the longer term may, but will not necessarily, reduce
the ability of the borrower to fulfill its contractual cash flow obligations, then the financial
instrument is considered to have low credit risk.
3.9.5.3 Significant increase in credit risk
The Company shall assess whether the credit risk on a financial instrument has increased
significantly since initial recognition, using the change in the risk of a default occurring over
the expected life of the financial instrument, through the comparison of the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of initial recognition.
To make that assessment, the Company shall consider reasonable and supportable
information, that is available without undue cost or effort, and that is indicative of
significant increases in credit risk since initial recognition, including forward-looking
information. The information considered by the Company are as following:
a) Significant changes in internal price indicators of credit risk as a result of a change
in credit risk since inception;
b) Existing or forecast adverse change in the business, financial or economic
conditions of the borrower that results in a significant change in the borrower’s
ability to meet its debt obligations;
41
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
c) An actual or expected significant change in the operating results of the borrower;
An actual or expected significant adverse change in the regulatory, economic, or
technological environment of the borrower；
d) Significant changes in the value of the collateral supporting the obligation or in the
quality of third-party guarantees or credit enhancements, which are expected to
reduce the borrower’s economic incentive to make scheduled contractual payments
or to otherwise have an effect on the probability of a default occurring;
e) Significant change that are expected to reduce the borrower’s economic incentive to
make scheduled contractual payments;
f) Expected changes in the loan documentation including an expected breach of
contract that may lead to covenant waivers or amendments, interest payment
holidays, interest rate step-ups, requiring additional collateral or guarantees, or
other changes to the contractual framework of the instrument；
g) Significant changes in the expected performance and behaviour of the borrower；
h) Contractual payments are more than 30 days past due.
Depending on the nature of the financial instruments, the Company shall assess whether the
credit risk has increased significantly since initial recognition on an individual financial
instrument or a group of financial instruments. When assessed based on a group of financial
instruments, the Company can group financial instruments on the basis of shared credit risk
characteristics, for example, past due information and credit risk rating.
Generally, the Company shall determine the credit risk on a financial asset has increased
significantly since initial recognition when contractual payments are more than 30 days past
due. The Company can only rebut this presumption if the Company has reasonable and
supportable information that is available without undue cost or effort, that demonstrates that
the credit risk has not increased significantly since initial recognition even though the
contractual payments are more than 30 days past due.
3.9.5.4 Credit-impaired financial asset
The Company shall assess at each reporting date whether the credit impairment has occurred
for financial asset at amortised cost and debt investment at fair value through other
comprehensive income. A financial asset is credit-impaired when one or more events that
have a detrimental impact on the estimated future cash flows of that financial asset have
occurred. Evidence that a financial asset is credit-impaired include observable data about the
following events:
42
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Significant financial difficulty of the issuer or the borrower; a breach of contract, such as a
default or past due event; the lender(s) of the borrower, for economic or contractual reasons
relating to the borrower’s financial difficulty, having granted to the borrower a concession(s)
that the lender(s) would not otherwise consider；it is becoming probable that the borrower
will enter bankruptcy or other financial reorganization; the disappearance of an active
market for that financial asset because of financial difficulties; the purchase or origination of
a financial asset at a deep discount that reflects the incurred credit losses.
3.9.5.5 Presentation of impairment of expected credit loss
In order to reflect the changes of credit risk of financial instrument since initial recognition,
the Company shall at each reporting date remeasure the expected credit loss and recognise
in profit or loss, as an impairment gain or loss, the amount of expected credit losses or
addition (or reversal). For financial asset at amortised cost, the loss allowance shall reduce
the carrying amount of the financial asset in the statement of financial position; for debt
investment at fair value through other comprehensive income, the loss allowance shall be
recognised in other comprehensive income and shall not reduce the carrying amount of the
financial asset in the statement of financial position.
3.9.5.6 Write-off
The Company shall directly reduce the gross carrying amount of a financial asset when the
Company has no reasonable expectations of recovering the contractual cash flow of a
financial asset in its entirety or a portion thereof. Such write-off constitutes a derecognition
of the financial asset. This circumstance usually occurs when the Company determines that
the debtor has no assets or sources of income that could generate sufficient cash flow to
repay the write-off amount.
Recovery of financial asset written off shall be recognised in profit or loss as reversal of
impairment loss.
3.9.6 Transfer of financial assets
Transfer of financial assets refers to following two situations:
Transfers the contractual rights to receive the cash flows of the financial asset;
Transfers the entire or a part of a financial asset and retains the contractual rights to
receive the cash flows of the financial asset, but assumes a contractual obligation to pay
the cash flows to one or more recipients.
3.9.6.1 Derecognition of transferred assets
If the Company transfers substantially all the risks and rewards of ownership of the financial
asset, or neither transfers nor retains substantially all the risks and rewards of ownership of
43
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
the financial asset but has not retained control of the financial asset, the financial asset shall
be derecognised.
Whether the Company has retained control of the transferred asset depends on the
transferee’s ability to sell the asset. If the transferee has the practical ability to sell the asset
in its entirety to an unrelated third party and is able to exercise that ability unilaterally and
without needing to impose additional restrictions on the transfer, the Company has not
retained control.
The Company judges whether the transfer of financial asset qualifies for derecognition
based on the substance of the transfer.
If the transfer of financial asset qualifies for derecognition in its entirety, the difference
between the following shall be recognised in profit or loss:
The carrying amount of transferred financial asset;
The sum of consideration received and the part derecognised of the cumulative changes
in fair value previously recognised in other comprehensive income (The financial assets
involved in the transfer are classified as financial assets at fair value through other
comprehensive income in accordance with Article 18 of the Accounting Standards for
Business Enterprises - Recognition and Measurement of Financial Instruments).
If the transferred asset is a part of a larger financial asset and the part transferred qualifies
for derecognition, the previous carrying amount of the larger financial asset shall be
allocated between the part that continues to be recognised (For this purpose, a retained
servicing asset shall be treated as a part that continues to be recognised) and the part that is
derecognised, based on the relative fair values of those parts on the date of the transfer. The
difference between following two amounts shall be recognised in profit or loss:
The carrying amount (measured at the date of derecognition) allocated to the part
derecognised；
The sum of the consideration received for the part derecognised and part derecognised
of the cumulative changes in fair value previously recognised in other comprehensive
income (The financial assets involved in the transfer are classified as financial assets at
fair value through other comprehensive income in accordance with Article 18 of the
Accounting Standards for Business Enterprises - Recognition and Measurement of
Financial Instruments).
3.9.6.2 Continuing involvement in transferred assets
If the Company neither transfers nor retains substantially all the risks and rewards of
ownership of a transferred asset, and retains control of the transferred asset, the Company
44
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
shall continue to recognise the transferred asset to the extent of its continuing involvement
and also recognise an associated liability.
The extent of the Company’s continuing involvement in the transferred asset is the extent to
which it is exposed to changes in the value of the transferred asset.
3.9.6.3 Continue to recognise the transferred assets
If the Company retains substantially all the risks and rewards of ownership of the
transferred financial asset, the Company shall continue to recognise the transferred asset in
its entirety and the consideration received shall be recognised as a financial liability.
The financial asset and the associated financial liability shall not be offset. In subsequent
accounting period, the Company shall continuously recognise any income (gain) arising
from the transferred asset and any expense (loss) incurred on the associated liability.
3.9.7 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the statement of
financial position and shall not offset each other. When the following conditions are met,
financial assets and financial liabilities shall be offset and the net amount presented in the
statement of financial position:
The Company currently has a legally enforceable right to set off the recognised amounts.
The Company intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
In accounting for a transfer of a financial asset that does not qualify for derecognition, the
Company shall not offset the transferred asset with the associated liability.
3.9.8 Determination of fair value of financial instruments
Refer to Note 3.10 for determination of financial assets and financial liabilities.
3.10 Fair Value Measurement
Fair value refers to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The Company determines fair value of the related assets and liabilities based on market
value in the principal market, or in the absence of a principal market, in the most
advantageous market price for the related asset or liability. The fair value of an asset or a
liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.
The principal market is the market in which transactions for an asset or liability take place
with the greatest volume and frequency. The most advantageous market is the market which
maximizes the value that could be received from selling the asset and minimizes the value
45
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
which is needed to be paid in order to transfer a liability, considering the effect of transport
costs and transaction costs both.
If the active market of the financial asset or financial liability exists, the Company shall
measure the fair value using the quoted price in the active market. If the active market of the
financial instrument is not available, the Company shall measure the fair value using
valuation techniques.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
3.10.1 Valuation techniques
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, including the market approach, the
income approach, and the cost approach. The Company shall use valuation techniques
consistent with one or more of those approaches to measure fair value. If multiple valuation
techniques are used to measure fair value, the results shall be evaluated considering the
reasonableness of the range of values indicated by those results. A fair value measurement is
the point within that range that is most representative of fair value in the circumstances.
When using the valuation technique, the Company shall give the priority to relevant
observable inputs. The unobservable inputs can only be used when relevant observable
inputs are not available or practically would not be obtained. Observable inputs refer to the
information which is available from market and reflects the assumptions that market
participants would use when pricing the asset or liability. Unobservable Inputs refer to the
information which is not available from market and it has to be developed using the best
information available in the circumstances from the assumptions that market participants
would use when pricing the asset or liability.
3.10.2 Fair value hierarchy
To Company establishes a fair value hierarchy that categorises the inputs to valuation
techniques used to measure fair value into three levels. The fair value hierarchy gives the
highest priority to Level 1 inputs and second to the Level 2 inputs and the lowest priority to
Level 3 inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date. Level 2 inputs are
inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or
liability.
46
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.11 Inventories
3.11.1 Classification of inventories
Inventories are finished goods or products held for sale in the ordinary course of business, in
the process of production for such sale, or in the form of materials or supplies to be
consumed in the production process or in the rendering of services, including raw materials,
work in progress, semi-finished goods, finished goods, low value consumption goods, goods
in transit, etc.
3.11.2 Measurement method of cost of inventories sold or used
The cost of inventories used or sold is determined on the weighted average basis.
3.11.3 Inventory system
The perpetual inventory system is adopted. The inventories should be counted at least once
a year, and surplus or losses of inventory stocktaking shall be included in current profit and
loss.
3.11.4 Provision for impairment of inventory
Inventories are stated at the lower of cost and net realizable value. The excess of cost over
net realizable value of the inventories is recognised as provision for impairment of inventory,
and recognised in current profit or loss.
Net realizable value of the inventory should be determined on the basis of reliable evidence
obtained, and factors such as purpose of holding the inventory and impact of post balance
sheet event shall be considered.
3.11.4.1 The net realizable value of finished goods, products and materials for direct sale is
determined at estimated selling prices less estimated selling expenses and relevant taxes and
surcharges in normal operation process. The net realizable value for inventories held to
execute sales contract or service contract is calculated on the basis of contract price. If the
quantities of inventories specified in sales contracts are less than the quantities held by the
Company, the net realizable value of the excess portion of inventories shall be based on
general selling prices. Net realizable value of materials held for sale shall be measured
based on market price.
3.11.4.2 For materials in stock need to be processed, in the ordinary course of production
and business, net realisable value is determined at the estimated selling price less the
estimated costs of completion, the estimated selling expenses and relevant taxes. If the net
realisable value of the finished products produced by such materials is higher than the cost,
the materials shall be measured at cost; if a decline in the price of materials indicates that
the cost of the finished products exceeds its net realisable value, the materials are measured
47
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
at net realisable value and differences shall be recognised at the provision for impairment.
3.11.4.3 Provisions for inventory impairment are generally determined on an individual
basis. For inventories with large quantity and low unit price, the provisions for inventory
impairment are determined on a category basis.
3.11.4.4 If any factor rendering write-downs of the inventories has been eliminated at the
reporting date, the amounts written down are recovered and reversed to the extent of the
inventory impairment, which has been provided for. The reversal shall be included in profit
or loss.
3.11.5 Amortisation method of low-value consumables
Low-value consumables: One-off writing off method is adopted.
Package material: One-off writing off method is adopted.
3.12 Contract Assets and Contract Liabilities
The Company presents contract assets or contract liabilities in the balance sheet in
accordance with the relationship between performance obligations and customer payments.
The Company has the right to charge for the transfer of goods or services to customers (and
the right depends on factors other than the passage of time) are presented as contract assets.
The company's obligations to transfer goods or provide services to customers for
consideration received or receivable from customers are presented as contract liabilities.
Refer to Note 3.9 for the determination and accounting treatments of the company's
expected credit loss of contract assets.
Contract assets and contract liabilities are presented separately in the balance sheet. Contract
assets and contract liabilities under the same contract are presented as net amount. If the
netted amount has the debit balance, then it is reported as "contract assets" or "other
non-current assets" based on its liquidity; if the netted amount has a credit balance, it is
listed in the item of "contract liabilities" or "other non-current liabilities" based on its
liquidity. Contract assets and contract liabilities under different contracts shall not offset
each other.
3.13 Contract Cost
Contract costs contain contract enforcement costs and contract acquisition costs.
The cost incurred by the Company for the enforcement of the contract is recognized as an
asset as the contract enforcement cost when the following conditions are simultaneously
met:
3.13.1 The cost is directly related to a current or anticipated contract, including direct labor,
direct materials, manufacturing expenses (or similar expenses), costs clearly borne by the
48
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
customer, and other costs incurred solely due to the contract.
3.13.2 The cost increases the company's future resources for fulfilling contract enforcement
obligations.
3.13.3 The cost is expected to be recovered.
The incremental cost incurred by the Company in order to obtain the contract is expected to
be recovered, and shall be recognized as an asset as the cost of obtaining the contract.
Assets related to contract costs are amortised on the same basis as the revenue recognition
of goods or services related to the asset; however, if the amortisation period of contract
acquisition costs does not exceed one year, the Company will include the contract costs in
the current profits and losses at occurrence.
If the book value of the assets related to the contract cost is higher than the difference
between the following two items, the Company will make provision for impairment of the
excess part and recognize it as an asset impairment loss, and further consider whether to
withdraw losses related to the contract estimated liabilities:
3.13.3.1 The remaining consideration expected to be obtained due to the transfer of goods or
services related to the asset;
3.13.3.2 Estimate the cost that will incur for the transfer of the related goods or services.
If the aforementioned asset impairment provision is subsequently reversed, the book value
of the asset after the reversal shall not exceed the book value of the asset on the date of
reversal under the assumption that no impairment provision is made.
For the contract enforcement cost recognized as an asset, the amortisation period shall not
exceed one year or a normal business cycle at initial recognition, and shall be presented in
the "inventory" item. The amortisation period exceeds one year or a normal business cycle
at the initial recognition, shall be presented in “other non-current assets”.
The contract acquisition cost recognized as an asset shall be reported in "other current
assets" when the amortisation period does not exceed one year or one normal business cycle
at the time of initial recognition, and reported in the item of "other non-current assets" when
the amortisation period exceeds one year or one normal business cycle at the time of initial
recognition.
3.14 Long-term Equity Investments
Long-term equity investments refer to equity investments where the Company has control of,
or significant influence over, an investee, as well as equity investments in joint ventures.
Associates of the Company are those entities over which the Company has significant
influence.
49
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.14.1 Determination basis of joint control or significant influence over the investee
Joint control is the relevant agreed sharing of control over an arrangement, and the arranged
relevant activity must be decided under unanimous consent of the parties sharing control. In
assessing whether the Company has joint control of an arrangement, the Company shall
assess first whether all the parties, or a group of the parties, control the arrangement. When
all the parties, or a group of the parties, considered collectively, are able to direct the
activities of the arrangement, the parties control the arrangement collectively. Then the
Company shall assess whether decisions about the relevant activities require the unanimous
consent of the parties that collectively control the arrangement. If two or more groups of the
parties could control the arrangement collectively, it shall not be assessed as have joint
control of the arrangement. When assessing the joint control, the protective rights are not
considered.
Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control of those policies. In determination
of significant influence over an investee, the Company should consider not only the existing
voting rights directly or indirectly held but also the effect of potential voting rights held by
the Company and other entities that could be currently exercised or converted, including the
effect of share warrants, share options and convertible corporate bonds that issued by the
investee and could be converted in current period.
If the Company holds, directly or indirectly 20% or more but less than 50% of the voting
power of the investee, it is presumed that the Company has significant influence of the
investee, unless it can be clearly demonstrated that in such circumstance, the Company
cannot participate in the decision-making in the production and operating of the investee.
3.14.2 Determination of initial investment cost
3.14.2.1 Long-term equity investments generated in business combinations
For a business combination involving enterprises under common control, if the Company
makes payment in cash, transfers non-cash assets, or bears liabilities as the consideration for
the business combination, the share of carrying amount of the owners’ equity of the acquiree
in the consolidated financial statements of the ultimate controlling party is recognised as the
initial cost of the long-term equity investment on the combination date. The difference
between the initial investment cost and the carrying amount of cash paid, non-cash assets
transferred, and liabilities assumed shall be adjusted against the capital reserve; if capital
reserve is not enough to be offset, undistributed profit shall be offset in turn.
For a business combination involving enterprises under common control, if the Company
50
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
issues equity securities as the consideration for the business combination, the share of
carrying amount of the owners’ equity of the acquiree in the consolidated financial
statements of the ultimate controlling party is recognised as the initial cost of the long-term
equity investment on the combination date. The total par value of the shares issued is
recognised as the share capital. The difference between the initial investment cost and the
carrying amount of the total par value of the shares issued shall be adjusted against the
capital reserve; if capital reserve is not enough to be offset, undistributed profit shall be
offset in turn.
For business combination not under common control, the assets paid, liabilities incurred or
assumed, and the fair value of equity securities issued to obtain the control of the acquiree at
the acquisition date shall be determined as the cost of the business combination and
recognised as the initial cost of the long-term equity investment. The audit, legal, valuation
and advisory fees, other intermediary fees, and other relevant general administrative costs
incurred for the business combination, shall be recognised in profit or loss as incurred.
3.14.2.2 For long-term equity investments acquired not through the business combination,
the investment cost shall be determined based on the following requirements:
For long-term equity investments acquired by payments in cash, the initial cost is the
actually paid purchase cost, including the expenses, taxes and other necessary expenditures
directly related to the acquisition of long-term equity investments.
For long-term equity investments acquired through issuance of equity securities, the initial
cost is the fair value of the issued equity securities.
For the long-term equity investments obtained through exchange of non-monetary assets, if
the exchange has commercial substance, and the fair values of assets traded out and traded
in can be measured reliably, the initial cost of long-term equity investment traded in with
non-monetary assets are determined based on the fair values of the assets traded out together
with relevant taxes. Difference between fair value and book value of the assets traded out is
recorded in current profit or loss. If the exchange of non-monetary assets does not meet the
above criterion, the book value of the assets traded out and relevant taxes are recognised as
the initial investment cost.
For long-term equity investment acquired through debt restructuring, the book value is
determined based on the fair value of waived debts and the taxes and other costs directly
attributable to the assets. Difference between fair value and carrying amount of waived
debts shall be recorded in current profit or loss.
3.14.2.3 Subsequent measurement and recognition of profit or loss
51
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Long-term equity investment to an entity over which the Company has ability of control
shall be accounted for at cost method. Long-term equity investment to a joint venture or an
associate shall be accounted for at equity method.
3.14.2.3.1 Cost method
For Long-term equity investment at cost method, cost of the long-term equity investment
shall be adjusted when additional amount is invested or a part of it is withdrawn. The
Company recognises its share of cash dividends or profits which have been declared to
distribute by the investee as current investment income.
3.14.2.3.2 Equity method
For Long-term equity investment recognised at equity method, cost of the long-term equity
investment shall be recognized based on the following conditions:
If the initial cost of the investment is in excess of the share of the fair value of the net
identifiable assets in the investee at the date of investment, the difference shall not be
adjusted to the initial cost of long-term equity investment; if the initial cost of the
investment is in short of the share of the fair value of the net identifiable assets in the
investee at the date investment, the difference shall be included in the current profit or loss
and the initial cost of the long-term equity investment shall be adjusted accordingly.
The Company recognises the share of the investee’s net profits or losses, as well as its share
of the investee’s other comprehensive income, as investment income or losses and other
comprehensive income respectively, and adjusts the carrying amount of the investment
accordingly. The carrying amount of the investment shall be reduced by the share of any
profit or cash dividends declared to distribute by the investee. The investor’s share of the
investee’s owners’ equity changes, other than those arising from the investee’s net profit or
loss, other comprehensive income, or profit distribution, shall be recognised in the
investor’s equity, and the carrying amount of the long-term equity investment shall be
adjusted accordingly. The Company recognises its share of the investee’s net profits or
losses after making appropriate adjustments of investee’s net profit based on the fair values
of the investee’s identifiable net assets at the investment date. If the accounting policy and
accounting period adopted by the investee is not in consistency with the Company, the
financial statements of the investee shall be adjusted according to the Company’s
accounting policies and accounting period, based on which, investment income or loss and
other comprehensive income, etc., shall be adjusted. The unrealized profits or losses
resulting from inter-company transactions between the company and its associate or joint
venture are eliminated in proportion to the company’s equity interest in the investee, based
52
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
on which investment income or losses shall be recognised. Any losses resulting from
inter-company transactions between the investor and the investee, which belong to asset
impairment, shall be recognised in full.
Where the Company obtains the power of joint control or significant influence, but not
control, over the investee, due to additional investment or other reason, the relevant
long-term equity investment shall be accounted for by using the equity method, initial cost
of which shall be the fair value of the original investment plus the additional investment.
Where the original investment is classified as other equity instrument investment, the
difference between the fair value and the book value, as well as the accumulated gains or
losses previously recorded in other comprehensive income, shall be transferred out of other
comprehensive income, and recognized into retained earnings in the current period when the
equity method is adopted.
If the Company loses the joint control or significant influence of the investee for some
reasons such as disposal of equity investment, the retained interest shall be measured at fair
value and the difference between the carrying amount and the fair value at the date of loss
the joint control or significant influence shall be recognised in profit or loss. When the
Company discontinues the use of the equity method, the Company shall account for all
amounts previously recognised in other comprehensive income under equity method in
relation to that investment on the same basis as would have been required if the investee had
directly disposed of the related assets or liabilities.
3.14.2.4 Methods of impairment and provision for impairment
The asset impairment method for the investment in subsidiaries, joint ventures and joint
ventures is shown in Note 3.20.
3.15 Investment Property
3.15.1 Classification of investment properties
Investment properties are properties to earn rentals or for capital appreciation or both,
including:
3.15.1.1 Land use right leased out
3.15.1.2 Land held for transfer upon appreciation
3.15.1.3 Buildings leased out
3.15.2 The measurement model of investment property
The Company adopts the cost model for subsequent measurement of investment properties.
Refer to Note 3.20 for provision for impairment.
The Company calculates the depreciation or amortisation based on the net amount of
investment property cost less the accumulated impairment and the net residual value using
53
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
straight-line method. Investment property is depreciated or amortised in accordance with the
policy consistent with that of buildings or land use rights.
3.16 Fixed Assets
Fixed assets refer to the tangible assets with higher unit price held for the purpose of
producing commodities, rendering services, renting or business management with useful
lives exceeding one year.
3.16.1 Recognition criteria of fixed assets
Fixed assets will only be recognised at the actual cost paid when obtaining as all the
following criteria are satisfied:
3.16.1.1 It is probable that the economic benefits relating to the fixed assets will flow into
the Company;
3.16.1.2 The costs of the fixed assets can be measured reliably.
Subsequent expenditure for fixed assets shall be recorded in cost of fixed assets, if
recognition criteria of fixed assets are satisfied, otherwise the expenditure shall be recorded
in current profit or loss when incurred.
3.16.2 Depreciation methods of fixed assets
The Company begins to depreciate the fixed asset from the next month after it is available
for intended use using the straight-line-method. The estimated useful life and annual
depreciation rates which are determined according to the categories, estimated economic
useful lives, and estimated net residual rates of fixed assets are listed as followings:
Depreciation Residual Estimated useful Annual depreciation
Category
method rates (%) life (year) rates (%)
Buildings and
Straight-line method 7.00-10.00 20 4.50-4.65
constructions
Machinery equipment Straight-line method 0.00 5-15 6.67-20.00
Electrical equipment,
Straight-line method 0.00 5-6 16.67-20.00
molde, and other
Vehicles Straight-line method 0.00 6 16.67
Improvement Amortisation shall be made according to
expenditure of leased Straight-line method 0.00 the shorter of benefit period and lease
fixed assets period
For the fixed assets with impairment provided, the impairment provision should be excluded
from the cost when calculating depreciation.
The Company reviews the useful life, estimated net residual value and depreciation method
54
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
of the fixed assets. Estimated useful life of the fixed assets shall be adjusted if it is changed
compared to the original estimation.
3.17 Construction in Progress
3.17.1 Classification of construction in progress
Construction in progress is measured on an individual project basis.
3.17.2 Recognition criteria and timing of transfer from construction in progress to
fixed assets
The initial book values of the fixed assets are stated at total expenditures incurred before
they are ready for their intended use, including construction costs, original price of
machinery equipment, other necessary expenses incurred to bring the construction in
progress to get ready for its intended use and borrowing costs of the specific loan for the
construction or the proportion of the general loan used for the constructions incurred before
they are ready for their intended use. The construction in progress shall be transferred to
fixed asset when the installation or construction is ready for the intended use. For
construction in progress that has been ready for their intended use but relevant budgets for
the completion of projects have not been completed, the estimated values of project budgets,
prices, or actual costs should be included in the costs of relevant fixed assets, and
depreciation should be provided according to relevant policies of the Company when the
fixed assets are ready for intended use. After the completion of budgets needed for the
completion of projects, the estimated values should be substituted by actual costs, but
depreciation already provided is not adjusted.
3.18 Borrowing Costs
3.18.1 Recognition criteria and period for capitalization of borrowing costs
The Company shall capitalize the borrowing costs that are directly attributable to the
acquisition, construction or production of qualifying assets when meet the following
conditions:
2.18.1.1 Expenditures for the asset are being incurred;
2.18.1.2 Borrowing costs are being incurred, and;
2.18.1.3 Acquisition, construction, or production activities that are necessary to prepare the
assets for their intended use or sale are in progress.
Other borrowing cost, discounts or premiums on borrowings and exchange differences on
foreign currency borrowings shall be recognized into current profit or loss when incurred.
Capitalization of borrowing costs is suspended during periods in which the acquisition,
construction or production of a qualifying asset is interrupted abnormally and the
55
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
interruption is for a continuous period of more than 3 months.
Capitalization of such borrowing costs ceases when the qualifying assets being acquired,
constructed, or produced become ready for their intended use or sale. The expenditure
incurred subsequently shall be recognised as expenses when incurred.
3.18.2 Capitalization rate and measurement of capitalized amounts of borrowing costs
When funds are borrowed specifically for purchase, construction, or manufacturing of assets
eligible for capitalization, the Company shall determine the amount of borrowing costs
eligible for capitalisation as the actual borrowing costs incurred on that borrowing during
the period less any interest income on bank deposit or investment income on the temporary
investment of those borrowings.
Where funds allocated for purchase, construction or manufacturing of assets eligible for
capitalization are part of a general borrowing, the eligible amounts are determined by the
weighted-average of the cumulative capital expenditures in excess of the specific borrowing
multiplied by the general borrowing capitalization rate. The capitalization rate will be the
weighted average of the borrowing costs applicable to the general borrowing.
3.19 Intangible Assets
3.19.1 Intangible assets
Intangible asset refers to the identifiable non-monetary assets without physical shape,
possessed or controlled by enterprises.
The intangible assets are initially measured by its cost. Expenses related to intangible assets,
if the economic benefits related to intangible assets are likely to flow into the enterprise and
the cost of intangible assets can be measured reliably, shall be recorded as cost of intangible
assets. The expenses other than this shall be booked in the profit or loss when they occur.
Land use rights purchased by the Company are accounted as intangible assets. Buildings
such as plants that are developed and constructed by the Company, and relevant land use
rights and buildings, are accounted as intangible assets and fixed assets, respectively.
Payments for the land and buildings purchased are allocated between the land use rights and
the buildings; if they cannot be reasonably allocated, all the land use rights and buildings are
accounted as fixed assets.
When intangible assets with definite useful lives are available for use, the original cost less
net residual value and any accumulate impairment losses is amortised over its estimated
useful life using the straight-line method. Intangible assets with indefinite useful life are not
amortised.
For intangible assets with finite useful life, the estimated useful life and amortisation
56
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
method are reviewed annually at the end of each reporting period and adjusted when
necessary. An additional review is also carried out for useful life of the intangible assets
with indefinite useful life. If there is evidence to indicate that the useful lives of those assets
become finite, the useful lives shall be estimated, and the intangible assets shall be
amortised systematically and reasonably within the estimated useful lives.
3.19.2 Research and development costs
The company's internal research and development project expenditures are categorized into
research phase expenditures and development phase expenditures.
Expenditures arising from development phase on internal research and development projects
shall be recognised as intangible assets only if all of the following conditions have been met,
otherwise shall be recognised in profit or loss when incurred:
3.19.2.1 Technical feasibility of completing the intangible assets so that they will be
available for use or sale;
3.19.2.2 Its intention to complete the intangible asset and use or sell it;
3.19.2.3 The method that the intangible assets generate economic benefits, including the
Company can demonstrate the existence of a market for the output of the intangible assets or
the intangible assets themselves or, if it is to be used internally, the usefulness of the
intangible assets;
3.19.2.4 The availability of adequate technical, financial, and other resources to complete
the development and to use or sell the intangible asset;
3.19.2.5 Its ability to measure reliably the expenditure attributable to the intangible asset.
The costs cannot be distinguished into the search phase and the development phase is
recognised in profit or loss for the period in which it incurred.
3.19.3 Impairment of intangible assets
Refer to Note 3.20 for impairment and provisions of intangible assets.
3.20 Impairment of Long-Term Assets
Impairment loss of long-term equity investment in subsidiaries, associates and joint ventures,
investment properties, fixed assets and constructions in progress subsequently measured at
cost, productive biological assets, intangible assets, goodwill, the rights and interests of
proved mining areas of petroleum and natural gas and wells and other relevant facilities
measured at cost (excluding inventories, investment properties measured at fair value,
deferred tax assets, financial assets), shall be determined according to following method:
The Company shall assess at the end of each reporting period whether there is any
indication that an asset may be impaired. If any such indication exists, the Company shall
57
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
estimate the recoverable amount of the asset and test for impairment. Irrespective of
whether there is any indication of impairment, the Company shall test for impairment of
goodwill acquired in a business combination, intangible assets with an indefinite useful life
or intangible assets not yet available for use annually.
The recoverable amounts of the long-term assets are the higher of their fair values less costs
to dispose and the present values of the estimated future cash flows of the long-term assets.
The Company estimate the recoverable amounts on an individual basis. If it is difficult to
estimate the recoverable amount of the individual asset, the Company estimates the
recoverable amount of the groups of assets that the individual asset belongs to.
Identification of a group of asset is based on whether the cash inflows from it are largely
independent of the cash inflows from other assets or groups of assets.
If, and only if, the recoverable amount of an asset or a group of assets is less than its
carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount
and the provision for impairment loss shall be recognised accordingly.
For the purpose of impairment testing, goodwill acquired in a business combination shall,
from the acquisition date, be allocated to relevant group of assets based on reasonable
method; if it is difficult to allocate to relevant group of assets, goodwill shall be allocated to
relevant combination of asset groups. The relevant group of assets or combination of asset
groups is a group of assets or combination of asset groups that is benefit from the synergies
of the business combination and is not larger than the reporting segment determined by the
Company.
When test for impairment, if there is an indication that relevant group of assets or
combination of asset groups may be impaired, impairment testing for group of assets or
combination of asset groups excluding goodwill shall be conducted first, and calculate the
recoverable amount and recognize the impairment loss. Then the group of assets or
combination of asset groups including goodwill shall be tested for impairment, by
comparing the carrying amount with its recoverable amount. If the recoverable amount is
less than the carrying amount, the Company shall recognise the impairment loss.
The mentioned impairment loss will not be reversed in subsequent accounting period once it
had been recognised.
3.21 Long-term Deferred Expenses
Long-term deferred expenses are various expenses already incurred, which shall be
amortised over current and subsequent periods with the amortisation period exceeding one
year. Long-term deferred expenses are amortized on a straight-line basis during the expected
58
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
benefit period.
3.22 Employee Benefits
Employee benefits refer to all forms of consideration or compensation given by the
Company in exchange for service rendered by employees or for the termination of
employment relationship. Employee benefits include short-term employee benefits,
post-employment benefits, termination benefits and other long-term employee benefits.
Benefits provided to an employee's spouse, children, dependents, family members of
decreased employees, or other beneficiaries are also employee benefits.
According to liquidity, employee benefits are presented in the statement of financial position
as “Employee benefits payable” and “Long-term employee benefits payable”.
3.22.1 Short-term employee benefits
3.22.1.1 Employee basic salary (salary, bonus, allowance, subsidy)
The Company recognises, in the accounting period in which an employee provides service,
actually occurred short-term employee benefits as a liability, with a corresponding charge to
current profit except for those recognised as capital expenditure based on the requirement of
accounting standards.
3.22.1.2 Employee welfare
The Company shall recognise the employee welfare based on actual amount when incurred
into current profit or loss or related capital expenditure. Employee welfare shall be
measured at fair value if it is a non-monetary benefits.
3.22.1.3 Social insurance such as medical insurance, work injury insurance and maternity
insurance, housing funds, labor union fund and employee education fund
Payments made by the Company of social insurance for employees, such as medical
insurance, work injury insurance and maternity insurance, payments of housing funds, and
labor union fund and employee education fund accrued in accordance with relevant
requirements, in the accounting period in which employees provide services, is calculated
according to required accrual bases and accrual ratio in determining the amount of employee
benefits and the related liabilities, which shall be recognised in current profit or loss or the
cost of relevant asset.
3.22.1.4 Short-term paid absences
The company shall recognise the related employee benefits arising from accumulating paid
absences when the employees render service that increases their entitlement to future paid
absences. The additional payable amounts shall be measured at the expected additional
payments as a result of the unused entitlement that has accumulated. The Company shall
59
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
recognise relevant employee benefit of non-accumulating paid absences when the absences
actually occurred.
3.22.1.5 Short-term profit-sharing plan
The Company shall recognise the related employee benefits payable under a profit-sharing
plan when both of the following conditions are satisfied:
3.22.1.5.1 The Company has a present legal or constructive obligation to make such
payments as a result of past events;
3.22.1.5.2 A reliable estimate of the amounts of employee benefits obligation arising from
the profit- sharing plan can be made.
3.22.2 Post-employment benefits
3.22.2.1 Defined contribution plans
The Company shall recognise, in the accounting period in which an employee provides
service, the contribution payable to a defined contribution plan as a liability, with a
corresponding charge to the current profit or loss or the cost of a relevant asset.
When contributions to a defined contribution plan are not expected to be settled wholly
before twelve months after the end of the annual reporting period in which the employees
render the related service, they shall be discounted using relevant discount rate (market
yields at the end of the reporting period on high quality corporate bonds in active market or
government bonds with the currency and term which shall be consistent with the currency
and estimated term of the defined contribution obligations) to measure employee benefits
payable.
3.22.2.2 Defined benefit plan
3.22.2.2.1 The present value of defined benefit obligation and current service costs
Based on the expected accumulative welfare unit method, the Company shall make
estimates about demographic variables and financial variables in adopting the unbiased and
consistent actuarial assumptions and measure defined benefit obligation, and determine the
obligation period. The Company shall discount the obligation arising from defined benefit
plan using relevant discount rate (market yields at the end of the reporting period on high
quality corporate bonds in active market or government bonds with the currency and term
which shall be consistent with the currency and estimated term of the defined benefit
obligations) in order to determine the present value of the defined benefit obligation and the
current service cost.
3.22.2.2.2 The net defined benefit liability or asset
The net defined benefit liability or asset is the deficit or surplus recognised as the present
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
value of the defined benefit obligation less the fair value of plan assets.
When the Company has a surplus in a defined benefit plan, it shall measure the net defined
benefit asset at the lower of the surplus in the defined benefit plan and the asset ceiling.
3.22.2.2.3 The amount recognised in the cost of asset or current profit or loss
Service cost comprises current service cost, past service cost and any gain or loss on
settlement. Other service cost shall be recognised in profit or loss unless accounting
standards require or allow the inclusion of current service cost within the cost of assets.
Net interest on the net defined benefit liability or asset comprising interest income on plan
assets, interest cost on the defined benefit obligation and interest on the effect of the asset
ceiling, shall be included in profit or loss.
3.22.2.2.4 The amount recognised in other comprehensive income
Changes in the net liability or asset of the defined benefit plan resulting from the
remeasurements including:
Actuarial gains and losses, which are the changes in the present value of the defined
benefit obligation resulting from experience adjustments or the effects of changes in
actuarial assumptions;
Return on plan assets, excluding amounts included in net interest on the net defined
benefit liability or asset;
Any change in the effect of the asset ceiling, excluding amounts included in net interest
on the net defined benefit liability or asset.
Remeasurements of the net defined benefit liability or asset recognised in other
comprehensive income shall not be reclassified to profit or loss in a subsequent period.
However, the Company may transfer those amounts recognised in other comprehensive
income within equity.
3.22.3 Termination benefits
The Company providing termination benefits to employees shall recognise an employee
benefits liability for termination benefits, with a corresponding charge to the profit or loss of
the reporting period, at the earlier of the following dates:
3.22.3.1 When the Company cannot unilaterally withdraw the offer of termination benefits
because of an employment termination plan or a curtailment proposal.
3.22.3.2 When the Company recognises costs or expenses related to a restructuring that
involves the payment of termination benefits.
If the termination benefits are not expected to be settled wholly before twelve months after
the end of the annual reporting period, the Company shall discount the termination benefits
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
using relevant discount rate (market yields at the end of the reporting period on high quality
corporate bonds in active market or government bonds with the currency and term which
shall be consistent with the currency and estimated term of the defined benefit obligations)
to measure the employee benefits.
3.22.4 Other long-term employee benefits
3.22.4.1 Meet the conditions of the defined contribution plan
When other long-term employee benefits provided by the Company to the employees
satisfies the conditions for classifying as a defined contribution plan, all those benefits
payable shall be accounted for as employee benefits payable at their discounted value.
3.22.4.2 Meet the conditions of the defined benefit plan
At the end of the reporting period, the Company recognised the cost of employee benefit
from other long-term employee benefits as the following components:
Service costs;
Net interest cost for net liability or asset of other long-term employee benefits
Changes resulting from the remeasurements of the net liability or asset of other
long-term employee benefits
In order to simplify the accounting treatment, the net amount of above items shall be
recognised in profit or loss or relevant cost of assets.
3.23 Estimated Liabilities
3.23.1 Recognition criteria of estimated liabilities
The Company recognises the estimated liabilities when obligations related to contingencies
satisfy all the following conditions:
3.23.1.1 That obligation is a current obligation of the Company;
3.23.1.2 It is likely to cause any economic benefit to flow out of the Company as a result of
performance of the obligation; and
3.23.1.3 The amount of the obligation can be measured reliably.
3.23.2 Measurement method of estimated liabilities
The estimated liabilities of the Company are initially measured at the best estimate of
expenses required for the performance of relevant present obligations. The Company, when
determining the best estimate, has had a comprehensive consideration of risks with respect
to contingencies, uncertainties, and the time value of money. The carrying amount of the
estimated liabilities shall be reviewed at the end of every reporting period. If conclusive
evidence indicates that the carrying amount fails to be the best estimate of the estimated
liabilities, the carrying amount shall be adjusted based on the updated best estimate.
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.24 Revenue recognition principle and measurement
3.24.1 General principle
Revenue is the total inflow of economic benefits formed in the company's daily activities
that will increase shareholders' equity and does not relate to the capital invested by
shareholders.
The Company has fulfilled the performance obligation in the contract, that is, the revenue is
recognised when the customer obtains the control right of relevant goods. To obtain the
control right of the relevant commodity means to be able to dominate the use of the
commodity and obtain almost all the economic benefits from it.
If there are two or more performance obligations in the contract, the Company will allocate
the transaction price to each performance obligation based on the relative proportion of the
separate selling price of the goods or services promised by each performance obligation on
the start date of the contract, and measure the income based on the transaction price
allocated to each single performance obligation.
The transaction price refers to the amount of consideration that the Company is expected to
be entitled to receive due to the transfer of goods or services to customers, excluding
payments collected on behalf of third parties. When determining the transaction price of the
contract, the Company determines the transaction price according to the terms of the
contract and in combination with its historical practices. When determining the transaction
price, the Company takes into account the influence of variable considerations, significant
financing elements in the contract, the non-cash considerations, the considerations payable
to customers and other factors. The Company determines the transaction price including
variable consideration at an amount that does not exceed the amount at which the
accumulated recognized income is unlikely to have a significant reversal when the relevant
uncertainty is eliminated. If there is a significant financing component in the contract, the
Company will determine the transaction price based on the amount payable in cash when
the customer obtains the control right of the commodity. The difference between the
transaction price and the contract consideration will be amortised by the effective interest
method during the contract period. If the interval between the control right transfer and the
customer's payment is less than one year, the company will not consider the financing
component.
If one of the following conditions is met, the performance obligation shall be fulfilled within
a certain period of time; otherwise, the performance obligation shall be fulfilled at a certain
point of time:
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
3.24.1.1 The customer obtains and consumes the economic benefits brought by the
Company's fulfillment of contract when the Company performs the obligations;
3.24.1.2 The customer can control the commodities under construction during the
Company's execution of the contract;
3.24.1.3 The commodities produced by the Company during the performance of the contract
have irreplaceable uses, and the Company has the right to collect payment for the
cumulative performance part that has been completed so far during the entire contract
period.
For performance obligations fulfilled within a certain period of time, the Company
recognises revenue in accordance with the performance progress during that period, except
where the performance progress cannot be reasonably determined. The Company
determines the progress of the performance of services in accordance with the input method
(or output method). When the progress of the contract performance cannot be reasonably
determined, if the cost incurred by the Company is expected to be compensated, the revenue
shall be recognised according to the amount of the cost incurred until the progress of the
contract performance can be reasonably determined.
For performance obligations fulfilled at a certain point in time, the Company recognises
revenue at the point when the customer obtains control of the relevant commodities. The
Company considers the following signs when judging whether a customer has obtained
control of goods or services:
3.24.1.4 The Company has the current right to receive payment for the goods or services,
that is, the customer has the current obligation to pay for the goods;
3.24.1.5 The Company has transferred the legal ownership of the goods to the customer, that
is, the customer has the legal ownership of the goods;
3.24.1.6 The Company has transferred the goods in kind to the customer, that is, the
customer has possessed the goods in kind;
3.24.1.7 The company has transferred the main risks and rewards of the ownership of the
goods to the customers, that is, the customers have obtained the main risks and rewards of
the ownership of the goods;
3.24.1.8 The customer has accepted the goods or services.
3.24.2 Specific methods
The specific methods of the Company's revenue recognition are as follows:
3.24.2.1 Commodity sales contract
The sales contract between the Company and the customer includes the performance
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
obligation of transferring the goods, which belongs to the performance obligation at a
certain point in time.
Recognition of exporting revenue must meet the following conditions: The Company
recognizes revenue for exporting goods based on the sales contracts or sales orders,
regardless of the sales model adopted.
The Company has shipped the products according to the contract and gone through the
customs declaration and export procedures; the payment for goods has been recovered or the
receipt has been obtained, and the relevant economic benefits are likely to flow in; the main
risks and rewards of the ownership of the goods have been transferred, and the legal
ownership of the goods has been transferred.
Recognition of domestic sales product revenue must meet the following conditions: the
Company has delivered the products to the customer according to the contract and the
customer has accepted the products; the payment has been recovered or the receipt of
payment has been obtained, and the relevant economic benefits are likely to flow in; the
main risks and rewards of the ownership of the goods have been transferred, and the legal
ownership of the goods has been transferred.
Treatment of sales return: according to the general rules of international trade, the adoption
of FOB and CIF settlement indicates that the buyer has accepted the purchased goods at the
place of shipment, and the relevant risks have been undertaken by the buyer after the
acceptance and shipment. Therefore, the Company does not make provision for the above
matters separately, but directly records them into the profits and losses in the current period.
Processing of product claims: the estimated claim expense rate is calculated based on the
actual claim amount in the past two years (excluding special claims) as a percentage of the
annual sales revenue, and accrued at period end based on the current sales revenue and the
estimated claim expense rate to recognize the claim expenses for products sold in the
current period.
3.24.2.2 Service contract
The performance obligation of the service contract between the Company and the customer.
Since the customer obtains and consumes the economic benefits brought by the Company’s
performance at the same time as the Company fulfills the contract, the Company recognises
it as a performance obligation performed within a certain period of time, and amortized
equally during the service provision period.
3.24.2.3 Construction contract
For the performance obligation of the construction contract between the Company and the
customer, since the customer can control the goods under construction in the process of the
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Company's performance, the Company takes it as the performance obligation to perform in
a certain period of time, and recognizes the income according to the performance progress,
except that the performance progress cannot be reasonably determined. The Company
determines the progress of the performance of providing services in accordance with the
output method. The progress of the performance shall be determined according to the
proportion of the completed contract workload to the expected total contract workload. On
the balance sheet date, the Company re-estimates the progress of completed performance or
completed services to reflect the changes in performance.
3.25 Government Grants
3.25.1 Recognition of government grants
A government grant shall not be recognized until there is reasonable assurance that:
3.25.1.1 The Company will comply with the conditions attaching to them; and
3.25.1.2 The grants will be received.
3.25.2 Measurement of government grants
Monetary grants from the government shall be measured at amount received or receivable.
The non-monetary grants from the government shall be measured at their fair value or at the
nominal value of CNY 1.00 when reliable fair value is not available.
3.25.3 Accounting for government grants
3.25.3.1 Government grants related to assets
Government grants pertinent to assets mean the government grants that are obtained by the
Company used for purchase or construction, or forming the long-term assets by other ways.
The government subsidies related to assets offset the book value of related assets, and shall
be recognised in profit or loss on a systematic basis over the useful lives of the relevant
assets. Grants measured at their nominal value shall be directly recognised in profit or loss
of the period when the grants are received. When the relevant assets are sold, transferred,
written off or damaged before the assets are terminated, the remaining deferred income shall
be transferred into profit or loss of the period of disposing relevant assets.
3.25.3.2 Government grants related to income
Government grants not related to assets are classified as government grants related to
income. Government grants related to income are accounted for in accordance with the
following criteria:
If the government grants related to income are used to compensate the enterprise’s relevant
expenses or losses in future periods, such government grants shall be recognised as deferred
income and included into profit or loss in the same period as the relevant expenses or losses
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
are recognised;
If the government grants related to income are used to compensate the enterprise’s relevant
expenses or losses incurred, such government grants are directly recognised into current
profit or loss (or write down related expenses).
For government grants comprised of part related to assets as well as part related to income,
each part is accounted for separately; if it is difficult to identify different parts, the
government grants are accounted for as government grants related to income as a whole.
Government grants related to daily operation activities are recognised in other income in
accordance with the nature of the activities, and government grants irrelevant to daily
operation activities are recognised in non-operating income.
3.25.3.3 Repayment of the government grants
Repayment of the government grants shall be recorded by increasing the carrying amount of
the asset if the book value of the asset has been written down, or reducing the balance of
relevant deferred income if deferred income balance exists, any excess will be recognised
into current profit or loss; or directly recognised into current profit or loss for other
circumstances.
3.26 Deferred Tax Assets and Deferred Tax Liabilities
Temporary differences are differences between the carrying amount of an asset or liability
in the statement of financial position and its tax base at the balance sheet date. The
Company recognise and measure the effect of taxable temporary differences and deductible
temporary differences on income tax as deferred tax liabilities or deferred tax assets using
liability method. Deferred tax assets and deferred tax liabilities shall not be discounted.
3.26.1 Recognition of deferred tax assets
Deferred tax assets should be recognised for deductible temporary differences, the
carryforward of unused tax losses and the carryforward of unused tax credits to the extent
that it is probable that taxable profit will be available against which the deductible
temporary differences, the carryforward of unused tax losses and the carryforward of unused
tax credits can be utilised at the tax rates that are expected to apply to the period when the
asset is realized, unless the deferred tax asset arises from the initial recognition of an asset
or liability in a transaction that:
Is not a business combination; and
At the time of the transaction, affects neither accounting profit nor taxable profit
(tax loss)
The Company shall recognise a deferred tax asset for all deductible temporary differences
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
arising from investments in subsidiaries, associates, and joint ventures, only to the extent
that, it is probable that:
The temporary difference will reverse in the foreseeable future; and
Taxable profit will be available against which the deductible temporary difference
can be utilised.
At the end of each reporting period, if there is sufficient evidence that it is probable that
taxable profit will be available against which the deductible temporary difference can be
utilized, the Company recognises a previously unrecognised deferred tax asset.
The carrying amount of a deferred tax asset shall be reviewed at the end of each reporting
period. The Company shall reduce the carrying amount of a deferred tax asset to the extent
that it is no longer probable that sufficient taxable profit will be available to allow the
benefit of part or all of that deferred tax asset to be utilised. Any such reduction shall be
reversed to the extent that it becomes probable that sufficient taxable profit will be
available.
3.26.2 Recognition of deferred tax liabilities
A deferred tax liability shall be recognised for all taxable temporary differences at the tax
rate that are expected to apply to the period when the liability is settled.
3.26.2.1 No deferred tax liability shall be recognised for taxable temporary differences
arising from:
The initial recognition of goodwill; or
The initial recognition of an asset or liability in a transaction which: is not a
business combination; and at the time of the transaction, affects neither accounting
profit nor tax loss.
3.26.2.2 An entity shall recognise a deferred tax liability for all taxable temporary
differences associated with investments in subsidiaries, associates, and joint ventures,
except to the extent that both of the following conditions are satisfied:
The Company is able to control the timing of the reversal of the temporary
difference; and
It is probable that the temporary difference will not reverse in the foreseeable future.
3.26.3 Recognition of deferred tax liabilities or assets involved in special transactions
or events
3.26.3.1 Deferred tax liabilities or assets related to business combination
For the taxable temporary difference or deductible temporary difference arising from a
business combination not under common control, a deferred tax liability or a deferred tax
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
asset shall be recognised, and simultaneously, goodwill recognised in the business
combination shall be adjusted based on relevant deferred tax expense (or income).
3.26.3.2 Items directly recognised in equity
Current tax and deferred tax related to items that are recognised directly in equity shall be
recognised in equity. Such items include: other comprehensive income generated from fair
value fluctuation of available for sale investments; an adjustment to the opening balance of
retained earnings resulting from either a change in accounting policy that is applied
retrospectively or the correction of a prior period (significant) error; amounts arising on
initial recognition of the equity component of a compound financial instrument that contains
both liability and equity component.
3.26.3.3 Unused tax losses and unused tax credits
3.26.3.3.1 Unsused tax losses and unused tax credits generated from daily operation of the
Company itself
Deductible loss refers to the loss calculated and permitted according to the requirement of
tax law that can be offset against taxable income in future periods. The criteria for
recognising deferred tax assets arising from the carryforward of unused tax losses and tax
credits are the same as the criteria for recognising deferred tax assets arising from
deductible temporary differences. The Company recognises a deferred tax asset arising from
unused tax losses or tax credits only to the extent that there is convincing other evidence
that sufficient taxable profit will be available against which the unused tax losses or unused
tax credits can be utilised by the Company. Income taxes in current profit or loss shall be
deducted as well.
3.26.3.3.2 Unsused tax losses and unused tax credits arising from business combination
Under a business combination, the acquiree’s deductible temporary differences which do
not satisfy the criteria at the acquisition date for recognition of deferred tax asset shall not
be recognised. Within 12 months after the acquisition date, if new information regarding the
facts and circumstances exists at the acquisition date and the economic benefit of the
acquiree’s deductible temporary differences at the acquisition is expected to be realised, the
Company shall recognise acquired deferred tax benefits and reduce the carrying amount of
any goodwill related to this acquisition. If goodwill is reduced to zero, any remaining
deferred tax benefits shall be recognised in profit or loss. All other acquired deferred tax
benefits realised shall be recognised in profit or loss.
3.26.3.4 Temporary difference generated in consolidation elimination
When preparing consolidated financial statements, if temporary difference between carrying
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
value of the assets and liabilities in the consolidated financial statements and their taxable
bases is generated from elimination of inter-company unrealized profit or loss, deferred tax
assets or deferred tax liabilities shall be recognised in the consolidated financial statements,
and income taxes expense in current profit or loss shall be adjusted as well except for
deferred tax related to transactions or events recognised directly in equity and business
combination.
3.26.3.5 Share-based payment settled by equity
If tax authority permits tax deduction that relates to share-based payment, during the period
in which the expenses are recognised according to the accounting standards, the Company
estimates the tax base in accordance with available information at the end of the accounting
period and the temporary difference arising from it. Deferred tax shall be recognised when
criteria of recognition are satisfied. If the amount of estimated future tax deduction exceeds
the amount of the cumulative expenses related to share-based payment recognised according
to the accounting standards, the tax effect of the excess amount shall be recognised directly
in equity.
3.27 Leases
3.27.1 Identification of a lease
At inception of a contract, the Company assesses whether the contract is, or contains, a lease.
A contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. To assess whether a
contract conveys the right to control the use of an identified asset for a period of time, the
Company assesses whether, throughout the period of use, the customer has the right to
obtain substantially all of the economic benefits from use of the identified asset, and the
right to direct the use of the identified asset
3.27.2 Identification of separate leases
If a contract contains multiple separate leases, the Company divides the contract and
perform separate accounting treatment for each separate lease. The right to use an identified
asset is a separate lease component if simultaneously:
a) the lessee can benefit from use of the asset either on its own or together with other
resources that are readily available to the lessee; and
b) the asset is neither highly dependent on, nor highly interrelated with, other assets in the
contract.
3.27.3 Accounting treatment of a lease in which the Company is the lessee
On its commencement date, the Company recognizes a lease that has a lease term of 12
months or less and does not contain a purchase option as a short-term lease, and recognizes
a lease for which the underlying asset is of low value when it is brand new as a lease of a
low-value asset. If the Company subleases an asset leased, or expects to sublease an asset
leased, the head lease does not qualify as a lease of a low-value asset.
For short-term leases and leases of a low-value asset, the Company chooses not to recognize
the right-of-use assets and lease liabilities, and to, within the lease term, recognize such
leases in the costs of relevant assets or profit or loss for the current period.
Except for short-term leases and leases of low-value assets, which are treated using a
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
simplified approach, for each lease, the Company recognizes the right-of-use assets and
lease liabilities on the commencement date of the lease term.
a) Right-of-use assets
A right-of-use asset refers to the lessee's right to use the leased asset during the lease term.
On the commencement date of the lease term, a right-of-use asset is initially measured at
cost. The cost comprises:
A. the amount of the initial measurement of the lease liability;
B. any lease payments made on or before the commencement date, less any lease incentives
received;
C. any initial direct costs incurred by the lessee; and
D. an estimate of costs to be incurred by the lessee in dismantling and removing the
underlying asset, restoring the site on which it is located or restoring the underlying asset to
the condition required by the terms and conditions of the lease. The Company recognizes
and measures the costs according to the recognition standard and measurement method
applicable to expected liabilities. Costs that are incurred to produce inventories are included
into the cost of inventories.
A right-of-use asset is depreciated on a straight-line basis. If it is impossible to reasonably
determine that the ownership of the leased asset will be acquired when the lease term
expires, the depreciation life of a right-of-use asset shall be the lease term or the remaining
service life of the leased asset, whichever is shorter.
b) Lease liabilities
Lease liabilities shall be initially measured at the present value of the lease payments which
have not been made by the lease commencement date. Lease payments include:
A. fixed payments and in-substance fixed payments, less any lease incentives receivable;
B. variable lease payments that depend on an index or a rate;
C. the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option;
D. payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising an option to terminate the lease; and
E. amounts expected to be payable under residual value guarantees provided by the lessee.
When the present value of lease payments is calculated, the lease payments are discounted
using the interest rate implicit in the lease, or, if that rate can be determined, using the
Company's incremental borrowing rate / the loan interest rate quoted in the market in the
same period. The difference between the amount of lease payments and their present value
is regarded as unrecognized financing expenses, and interest expenses are recognized using
the discount rate of the recognized present value of lease payments during each period of the
lease term and recognized in profit and loss for the current period. Variable lease payments
not included in the measurement of the lease liability are recognized in profit and loss for
the current period when actually incurred.
After the lease commencement date, the Company remeasures the lease liability at the
changed present value of lease payments and adjusts the book value of the right-of-use asset
when any change occurs in in-substance fixed payments, in amounts expected to be payable
under residual value guarantees, in the index or rate used to determine the lease payments,
or in the result of assessment or actual exercise of the purchase option, renewal option or
termination option.
3.27.4 Accounting treatment of a lease in which the Company is the lessor
On the lease commencement date, the lease amount is recognized in profit or loss for the
current period in stages on a straight-line basis during the lease term.
3.27.5 Accounting treatment of lease modifications
a) Lease modifications accounted for as a separate lease
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
The Company accounts for a lease modification as a separate lease if simultaneously:
A. the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
B. the consideration for the lease increases by an amount commensurate with the
stand-alone price for the increase in scope and any appropriate adjustments to that
stand-alone price.
b) Lease modifications not accounted for as a separate lease
A. The Company is the lessee
On the effective date of the lease modification, the Company re-determines the lease term
and remeasure the lease liability by discounting the revised lease payments after the
modification using a revised discount rate. When the present value of lease payments after
the modification is calculated, the discount rate is determined as the interest rate implicit in
the lease for the remainder of the lease term, or, if that rate can be determined, the
incremental borrowing rate on the effective date of the lease modification.
As for the impact of the said adjustment to the lease liability, accounting treatment shall be
conducted as follows:
The Company decreases the carrying amount of the right-of-use asset for lease
modifications that decrease the scope of the lease or shorten the lease term, and recognize in
profit or loss for the current period any gain or loss relating to the partial or full termination
of the lease;
The Company makes corresponding adjustment to the carrying amount of the right-of-use
asset for all other lease modifications.
B. The Company is the lessor
The Company accounts for a modification to an operating lease as a new lease from the
effective date of the modification, considering any prepaid or accrued lease payments
relating to the original lease as part of the lease payments for the new lease.
3.28 Significant account judgment and estimates
The Company continuously evaluates the important accounting estimates and key
assumptions adopted based on historical experience and other factors, including reasonable
expectations of future events. Important accounting estimates and key assumptions that are
likely to lead to significant adjustment risk of the book value of assets and liabilities in the
next accounting year are listed as follows:
3.28.1 Classification of financial assets
The significant judgments involved in determining the classification of financial assets
include the analysis of business model and contract cash flow characteristics.
The Company determines the business model of managing financial assets at the level of
financial asset portfolio, which considers factors including the price evaluation and the
reporting method of the performance of financial assets to key management personnel, the
risks affecting the performance of financial assets and their management methods, as well as
the method for relevant business management personnel to obtain remuneration, and so on.
When evaluating whether the contractual cash flow of financial assets is consistent with the
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Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
basic lending arrangement, the Company has the following significant judgments: whether
the principal may be due to early repayment and other reasons, which may lead to changes
in the time distribution or amount during the duration; whether the interest only includes the
time value of money, credit risk, other basic borrowing risks, and the consideration of costs
and profits. For example, does the early repayment reflect only the unpaid principal and the
interest based on the unpaid principal, as well as the reasonable compensation paid for early
termination of the contract.
3.28.2 Measurement of expected credit losses of accounts receivable
The company uses accounts receivable default exposure and expected credit loss rate to
calculate the expected credit loss of accounts receivable, and determines the expected credit
loss rate based on the default probability and default loss rate. When determining the
expected credit loss rate, the Company uses internal historical credit loss and other data,
combined with current conditions and forward-looking information to adjust the historical
data. When considering forward-looking information, the indicators used by the Company
include the risk of economic downturn, changes in the external market environment,
technological environment, and customer conditions. The Company regularly monitors and
reviews assumptions related to the calculation of expected credit losses.
3.28.3 Impairment of inventories
The Company measures inventories by the lower of cost and realizable net value according
to the accounting policies in regards of inventories, and makes impairment provision for the
inventories that have higher costs than net realizable value, as well as obsolete and
slow-movement inventories. Inventory impairment to net realizable value is based on
assessing the saleability of inventories and their net realizable value. Appraisal of inventory
impairment requires management to make judgments and estimates on the basis of obtaining
conclusive evidence, and considering the purpose of holding inventory, the impact of post
balance sheet events and other factors. The difference between the actual results and the
original estimates shall have impact on the book value of the inventories and the reversal of
the impairment provisions during the period when the estimates are change.
3.28.4 The fair value of financial instruments
For financial instruments without active trading market, the Company determines their fair
value through various valuation methods. The valuation methods include discounted cash
flow model analysis and other. During the valuation, the Company shall estimate the future
cash flows, credit risks, market volatility and correlation, and select the appropriate discount
rate. Such assumptions are uncertain and their changes shall have impact on the fair value of
73
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
financial instruments. If the equity instrument investment or contract has a public offer, the
Company does not take the cost as the best estimate of its fair value.
3.28.5 Impairment of non-current assets
The Company accesses whether there are signs of possible impairment of non-current assets
other than financial assets on the balance sheet date. For intangible assets with uncertain
service lives, additional impairment tests are carried out in addition to the annual
impairment test when there are signs of impairment. Other non-current assets other than
financial assets shall be tested for impairment when there are indications that their book
value are not recoverable.
Impairment exists when the book value of the asset or asset group is higher than the
recoverable amount, that is, the higher of the net amount of the fair value minus the disposal
expenses and the present value of the estimated future cash flow.
Net value between the difference of fair value and disposal cost is determined by reference
of the price of similar product in a sale agreement in an arm’s length transaction or an
observable market price less the additional cost directly attributable to the disposal of the
asset.
When estimating the present value of future cash flow, significant judgments are made on
the output, selling price, related operating costs of the asset (or asset group) and the discount
rate used in calculating the present value. The Company shall use all relevant information
available, including the forecast of production, selling price and related operating costs
based on reasonable and supportable assumptions to estimate the recoverable amount.
The Company tests for goodwill impairment at least annually. This requires estimations of
the present value of the future cash flow of the asset group or combination of asset groups to
which goodwill is allocated. When predicting the present value of the future cash flows, the
Company needs to predict the cash flows generated by the future asset group or the
combination of asset groups, and select the appropriate discount rate to determine the
present value of the future cash flow.
3.28.6 Depreciation and amortization
The Company shall depreciate or amortise the investment properties, fixed assets and
intangible assets using the straight-line method within their service lives after considering
their residual value. The Company regularly reviews their service lives to determine the
depreciation and amortization expenses charged in each reporting period. The Company
determines the useful lives based on historical experience of similar assets and the estimated
technical update. If there is indication that there has been a significant change in the factor
74
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
used to determine the depreciation or amortization, the depreciation and amortization
expenses will be adjusted in future periods.
3.28.7 Deferred tax assets
The group shall recognise all unused tax losses as deferred tax assets to the extent that it is
probable that future taxable profit will be available against which the unused tax losses and
unused tax credits can be utilized. This requires the management of the Company make a lot
of judgments over the estimation of time period, value and tax planning strategies when
future taxable profit incurs so that the value of deferred tax assets can be determined.
3.28.8 Income tax
In the Company's normal operating activities, there are some transactions where ultimate tax
treatments and calculations are uncertain. Whether there are possible for some items to
make expenditure before tax needs approval from competent tax authorities. If there is any
difference between finalized determination value and their initial estimations value, the
difference shall have the impact on the income tax and deferred income tax of the current
period during the final determination.
3.28.9 Internal retirement benefits and supplementary retirement benefits
The amount of internal retirement benefits and supplementary retirement benefits expenses
and liabilities of the Company is determined based on various assumptions. These
assumptions include discount rates, growth rates for average medical expenses, growth rates
for retired and retired personnel subsidies, and other factors. Differences between the actual
results and assumptions will be confirmed immediately when incurred and included in the
current year's expenses. Although the management believes that reasonable assumptions
have been adopted, changes in actual experience values and assumptions will still affect the
Company's internal retirement benefits and supplementary retirement benefits expenses and
balance of liabilities.
3.29 Changes in Significant Accounting Policies and Accounting Estimates
3.29.1 Significant changes in accounting polices
The Ministry of Finance issued “Accounting Standards for Business Enterprises No. 21 –
Leases” in December 2018, requiring the enterprises listed both at home and aboard and the
enterprises listed overseas with their financial statements prepared in accordance with the
International Financial Reporting Standards or the Accounting Standards for Business
Enterprises to implement it since 1 January 2019, and other enterprises implementing the
Accounting Standards for Business Enterprises to carry out it since 1 January 2021. As
75
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
required by the new lease standards, the Company decides to implement it since 1 January
2021 and adjust relevant contents of accounting policies.
The above accounting policy changes were approved by the Company's first board meeting
of 2021 held on 12 January 2021.
3.29.2 Significant changes in accounting estimates
The Company has no significant changes in accounting estimates for the reporting period.
3.29.3 Adjustments of the financial statements at the beginning of the reporting period
for the first-year adoption of new lease standards.
76
Ts a n n Ku e n ( C h i n a ) E n t e r p r i s e C o . , L t d . Notes to the financial statements
Consolidated Financial Statements
Items 31-Dec-20 1-Jan-21 Adjustment Items 31-Dec-20 1-Jan-21 Adjustment
Current assets: Current liabilities
Cash and cash equivalents 707,794,598.20 707,794,598.20 Short-term borrowings 16,345,141.13 16,345,141.13
Held-for-trading financial assets 720,821,900.00 720,821,900.00 Held-for-trading financial liabilities
Derivative financial assets Derivative financial liabilities
Notes receivable Notes payable 7,521,531.97 7,521,531.97
Accounts receivable 431,006,560.62 431,006,560.62 Accounts payable 874,962,887.93 874,962,887.93
Accounts receivable financing Advances from customers 6,853,100.03 6,853,100.03
Advances to suppliers 2,622,554.07 2,622,554.07 Contract liabilities 25,605,755.71 25,605,755.71
Other receivables 31,938,548.59 31,938,548.59 Employee benefits payable 51,262,265.67 51,262,265.67
Including: Interests receivable Taxes payable 20,238,247.17 20,238,247.17
Dividend receivable Other payables 52,803,158.48 52,803,158.48
Inventories 255,052,077.36 255,052,077.36 Including: Interests payables
Contract assets Dividend payables
Assets classified as held for sale Liabilities classified as held for sale
Non-current assets maturing Non-current liabilities maturing
64,360,133.28 64,360,133.28
within one year within one year
Other current assets 18,634,037.60 18,634,037.60 Other current liabilities
Total current assets 2,167,870,276.44 2,167,870,276.44 0 Total current liabilities 1,055,592,088.09 1,119,952,221.37 64,360,133.28
Non-current assets: Non-current liabilities:
Debt investments Long-term borrowings
Other debt investments Bonds payable
Long-term receivables Including: Preference share
Long-term equity investments Perpetual capital securities
Other equity instrument
40,000.00 40,000.00 Lease liabilities 522,567,850.44 522,567,850.44
investment
Other non-current financial assets Long-term payables
Investment properties 21,255,610.91 21,255,610.91 Long-term employee benefits payable 312,775.91 312,775.91
Fixed assets 164,338,962.07 164,338,962.07 Estimated liabilities
77
Ts a n n Ku e n ( C h i n a ) E n t e r p r i s e C o . , L t d . Notes to the financial statements
Items 31-Dec-20 1-Jan-21 Adjustment Items 31-Dec-20 1-Jan-21 Adjustment
Construction in progress 728,529.68 728,529.68 Deferred income
Productive biological assets Deferred tax liabilities 51,425,551.57 51,425,551.57
Oil and gas assets Other non-current liabilities -
Use rights assets 586,927,983.72 586,927,983.72 Total non-current liabilities 51,738,327.48 574,306,177.92 522,567,850.44
Intangible assets 29,346,312.82 29,346,312.82 Total liabilities 1,107,330,415.57 1,694,258,399.29 586,927,983.72
Research and development
Owners’ equity
expenditure
Goodwill Share capital 185,391,680.00 185,391,680.00
Long-term deferred expenses 6,831,730.07 6,831,730.07 Other equity instruments
Deferred tax assets 15,590,322.49 15,590,322.49 Including: Preference shares
Other non-current assets 2,044,702.30 2,044,702.30 Perpetual capital securities
Total non-current assets 240,176,170.34 827,104,154.06 586,927,983.72 Capital reserves 296,808,965.79 296,808,965.79
Less: Treasury stock
Other comprehensive income 1,823,063.03 1,823,063.03
Specific reserves
Surplus reserves 49,087,662.68 49,087,662.68
Retained earnings 330,918,755.61 330,918,755.61
Total owner’s equity attributable to
864,030,127.11 864,030,127.11
parent company
Non-controlling interests 436,685,904.10 436,685,904.10
Total owners’ equity 1,300,716,031.21 1,300,716,031.21
Total assets 2,408,046,446.78 2,994,974,430.50 586,927,983.72 Total liabilities and owners' equity 2,408,046,446.78 2,994,974,430.50 586,927,983.72
Explanation of adjustment: With the implementation of the new lease standards in 2021, except for short-term leases and low-value assets leases,
as for all leases, the use rights assets and lease liabilities shall be recognized, in addition, the lease liabilities due within one year shall be
reclassified into the item of non-current liabilities due within one year.
78
Ts a n n Ku e n ( C h i n a ) E n t e r p r i s e C o . , L t d . Notes to the financial statements
Financial Statements of Parent Company
Assets 31-Dec-20 1-Jan-21 Adjustment Liabilities and owners’ equity 31-Dec-20 1-Jan-21 Adjustment
Current assets: Current liabilities
Cash and cash equivalents 7,767,004.93 7,767,004.93 Short-term borrowings
Held-for-trading financial assets Held-for-trading financial liabilities
Derivative financial assets Derivative financial liabilities
Notes receivable Notes payable
Accounts receivable 2,710,138.48 2,710,138.48 Accounts payable 31,990,751.46 31,990,751.46
Accounts receivable financing Advances from customers 1,101,005.38 1,101,005.38
Advances to suppliers 32,124.35 32,124.35 Contract liabilities 224,884.11 224,884.11
Other receivables 3,311,425.63 3,311,425.63 Employee benefits payable 7,903,368.21 7,903,368.21
Including: Interests receivable Taxes payable 1,896,604.41 1,896,604.41
Dividend receivable Other payables 168,453,443.56 168,453,443.56
Inventories 1,457,947.89 1,457,947.89 Including: Interests payables
Contract asset Dividend payables
Assets classified as held for sale Liabilities classified as held for sale
Non-current assets maturing within one Non-current liabilities maturing within one
314,470.64 314,470.64
year year
Other current assets Other current liabilities
Total current assets 15,278,641.28 15,278,641.28 Total current liabilities 211,570,057.13 211,884,527.77 314,470.64
Non-current assets: Non-current liabilities:
Debt investments Long-term borrowings
Other debt investments Bonds payable
Long-term receivables Including: Preference share
Long-term equity investments 923,414,701.56 923,414,701.56 Perpetual capital securities
Other equity instrument investment 40,000.00 40,000.00 Lease liabilities 489,312.99 489,312.99
Other non-current financial assets Long-term payables
Investment properties 25,202,712.69 25,202,712.69 Long-term employee benefits payable
Fixed assets 606,019.76 606,019.76 Estimated liabilities
Construction in progress Deferred income
79
Ts a n n Ku e n ( C h i n a ) E n t e r p r i s e C o . , L t d . Notes to the financial statements
Assets 31-Dec-20 1-Jan-21 Adjustment Liabilities and owners’ equity 31-Dec-20 1-Jan-21 Adjustment
Productive biological assets Deferred tax liabilities
Oil and gas assets Other non-current liabilities
Use rights assets 803,783.63 803,783.63 Total non-current liabilities - 489,312.99 489,312.99
Intangible assets Total liabilities 211,570,057.13 212,373,840.76 803,783.63
Research and development expenditure Owners’ equity
Goodwill Share capital 185,391,680.00 185,391,680.00
Long-term deferred expenses 641,932.25 641,932.25 Other equity instruments
Deferred tax assets 3,961,079.97 3,961,079.97 Including: Preference shares
Other non-current assets Perpetual capital securities
Total non-current assets 953,866,446.23 954,670,229.86 803,783.63 Capital reserves 271,490,289.82 271,490,289.82
Less: Treasury stock
Other comprehensive income
Specific reserves
Surplus reserves 49,087,662.68 49,087,662.68
Retained earnings 251,605,397.88 251,605,397.88
Total owners’ equity 757,575,030.38 757,575,030.38
Total assets 969,145,087.51 969,948,871.14 803,783.63 Total liabilities and owners' equity 969,145,087.51 969,948,871.14 803,783.63
Explanation of adjustment: With the implementation of the new lease standards in 2021, except for short-term leases and low-value assets leases, as for all
leases, the use rights assets and lease liabilities shall be recognized, in addition, the lease liabilities due within one year shall be reclassified into the item of
non-current liabilities due within one year.
3.29.4 Retroactive adjustments to comparative data of prior years when first adoption of new lease standards in 2021
The Company has no retroactive adjustments to comparative data of prior years when first adoption of new lease standards.
80
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
4. Taxation
4.1Major Categories of Tax and Tax Rates Applicable to the Company
Categories of tax Basis of tax assessment Tax rate
Calculates output tax based on the tax rate of taxable income,
Value added tax
and calculates the value-added tax based on the difference after 5, 6, 9, 13
(VAT)
deducting the deductible input tax in the current period
Urban maintenance
Payable turnover tax, tax exemption 7
and construction tax
Educational Payable turnover tax, tax exemption
3
surcharge
Local education Payable turnover tax, tax exemption
2
surcharge
Enterprise income
Taxable profits 25
tax
4.2 Tax rates of income tax of different subsidiaries are stated as below:
4.2.1 TsannKuen (Zhangzhou) Enterprise Co., Ltd. (hereafter, TKL)
Categories of tax Basis of tax assessment Tax rate
Calculates output tax based on the tax rate of taxable income,
Value added tax and calculates the value-added tax based on the difference after 0, 5, 6, 9, 13
deducting the deductible input tax in the current period
Urban maintenance
Payable turnover tax, tax exemption 5
and construction tax
Educational
Payable turnover tax, tax exemption 3
surcharge
Local education
Payable turnover tax, tax exemption 2
surcharge
Enterprise income
Taxable profits 15
tax
The export sales of products and raw materials are subject to tax exemption, credit and
refund policies, and the value-added tax rate is 0%.
4.2.2 TsannKuen China (Shanghai) Enterprise Co., Ltd. (hereafter, TKS)
Categories of tax Basis of tax assessment Tax rate
Calculates output tax based on the tax rate of taxable income, and
Value added tax calculates the value-added tax based on the difference after 5, 9, 13
deducting the deductible input tax in the current period
81
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Categories of tax Basis of tax assessment Tax rate
Urban maintenance
Payable turnover tax, tax exemption 5
and construction tax
Educational
Payable turnover tax, tax exemption 3
surcharge
Local education
Payable turnover tax, tax exemption 2
surcharge
Enterprise income
Taxable profits 25
tax
4.2.3 Tsannkuen Edge Intelligence Co., Ltd. (hereafter, TKEI)
Categories of tax Basis of tax assessment Tax rate
Calculates output tax based on the tax rate of taxable income,
Value added tax and calculates the value-added tax based on the difference after 5
deducting the deductible input tax in the current period
Enterprise income
Taxable profits 20
tax
4.2.4 Pt. Star Comgistic Indonesia (hereafter, SCI)
Categories of tax Basis of tax assessment Tax rate
Calculates output tax based on the tax rate of taxable income,
Value added tax and calculates the value-added tax based on the difference after 10
deducting the deductible input tax in the current period
Enterprise income
Taxable profits 25
tax
4.3 Preferential tax policy
According to the principle of “The Notice Regarding to Fujian Province 2020 Second Group
of High Technology Enterprise Review” (Mingkegao No. [2020]29), TKL was identified as
Fujian Province High Technology Enterprise (Certification No. GR202035002032), valid
from the year 2020 to 2022. The enterprise income tax of this period is calculated at 15%.
82
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.1 Cash and Cash Equivalents
Items 30 June 2021 1 January 2021
Cash on hand 897,767.56 875,000.35
Cash in bank 699,975,880.58 671,926,206.33
Other monetary funds 43,880,872.37 34,993,391.52
Total 744,754,520.51 707,794,598.20
Including：The total amount deposited overseas 33,258,376.76 11,312,975.48
The total amount with restricted use rights due to
38,652,259.04 34,993,391.52
mortgage, pledge or freeze
5.2 Held-for-trading financial assets
Items 30 June 2021 1 January 2021
Financial assets measured at fair value through Profit or 552,835,416.66 720,821,900.00
Loss
1,956,500.00 20,821,900.00
Including: Derivative financial assets
550,878,916.66 700,000,000.00
Structured Deposit Investment
552,835,416.66 720,821,900.00
Total
Note: Derivative financial is forward foreign exchange settlement and sale contracts signed by the
Company with financial institutions.
5.3 Accounts Receivables
5.3.1 Accounts receivable by aging
Aging
30 June 2021 1 January 2021
436,835,095.64 435,535,426.84
Within one year
422,215,413.52 384,591,893.80
Including: Within 90 days
14,175,793.87 50,777,968.04
91 – 180 days
350,863.78 165,565.00
181 – 270 days
93,024.47
271 – 365 days
1-2 years
2-3 years
Over 3 years 5,000.00 5,000.00
436,840,095.64 435,540,426.84
Subtotal
3,310,143.52 4,533,866.22
Less: provision for bad debt
433,529,952.12 431,006,560.62
Total
5.3.2 Accounts receivable by bad debt provision method
83
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
30 June 2021
Book balance Provision for bad debt
Category Carrying
Provision ratio
Amount Proportion (%) Amount amount
(%)
Provision for bad debt recognised 0.00 0.00 0.00 0.00 0.00
individually
Provision for bad debt recognized 436,840,095.64 100.00 3,310,143.52 0.76 433,529,952.12
collectively
434,765,097.31 99.52 3,310,143.52 0.76 431,454,953.79
Including: Portfolio by age
2,074,998.33 0.48 0.00 0.00 2,074,998.33
Portfolio by related parties
436,840,095.64 100.00 3,310,143.52 0.76 433,529,952.12
Total
(Continued)
1 January 2021
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Provision for bad debt recognised 0.00 0.00 0.00 0.00 0.00
individually
Provision for bad debt recognized 435,540,426.84 100.00 4,533,866.22 1.04 431,006,560.62
collectively
433,328,896.48 99.49 4,533,866.22 1.05 428,795,030.26
Including: Portfolio by age
2,211,530.36 0.51 0.00 0.00 2,211,530.36
Portfolio by related parties
435,540,426.84 100.00 4,533,866.22 1.04 431,006,560.62
Total
Specific instructions for provision for bad debts:
Accounts receivables with bad debt provision are recognised by portfolio by age
30 June 2021
Aging
Book balance Provision for bad debt Provision ratio (%)
Not overdue 410,663,477.87 2,052,837.79 0.50
Overdue 1 – 30 days 23,505,499.54 1,057,747.47 4.50
492,310.44 98,462.08 20.00
Overdue 31 – 60 days
Overdue 61 – 90 days 4,933.24 2,219.96 45.00
Overdue more than 90 days 98,876.22 98,876.22 100.00
Total 434,765,097.31 3,310,143.52 0.76
(Continued)
84
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
1 January 2021
Aging
Book balance Provision for bad debt Provision ratio (%)
Not overdue 392,745,091.77 1,963,725.46 0.50
36,596,667.51 1,646,850.01 4.50
Overdue 1 – 30 days
Overdue 31 – 60 days 3,638,927.08 727,785.43 20.00
Overdue 61 – 90 days 277,645.12 124,940.32 45.00
Overdue more than 90 days 70,565.00 70,565.00 100.00
Total 433,328,896.48 4,533,866.22 1.05
Accounts receivables with bad debt provision are recognised by portfolio by related parties
30 June 2021
Accounts Receivables Provision for bad debt Provision ratio (%) Reason for
Book balance
provision
Portfolio by related 2,074,998.33 0.00 0.00
parties
2,074,998.33 0.00 0.00
Total
(Continued)
1 January 2021
Accounts Receivables Provision for bad debt Provision ratio (%) Reason for
Book balance
provision
Portfolio by related
2,211,530.36 0.00 0.00
parties
Total 2,211,530.36 0.00 0.00
Basis for the amount of bad debt provision in the current period:
Refer to Note 3.9 for the recognition criteria and explanation of the provision for bad debts
based on groups.
5.3.3 Changes of provision for bad debt during the reporting period
Changes during the reporting period
Category 1 January 2021 Recovery or 30 June 2021
Provision Write-off Other
reversal
Provision for bad
4,533,866.22 0.00 1,208,617.28 0.00 15,105.42 3,310,143.52
debt by group
Total 4,533,866.22 0.00 1,208,617.28 0.00 15,105.42 3,310,143.52
5.3.4 There is no accounts receivable write-off during the reporting period
5.3.5 Top five closing balances by entity
85
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Entity Accounts receivable Proportion (%) Bad debt provision
No. 1 151,203,936.30 34.61 1,013,080.41
No. 2 92,505,999.90 21.18 542,917.39
No. 3 62,257,060.87 14.25 290,399.35
No. 4 33,083,881.43 7.57 209,266.53
No. 5 20,951,358.32 4.80 104,469.81
Total 360,002,236.82 82.41 2,160,133.49
5.4 Advances to Suppliers
5.4.1 Advances to suppliers by aging
Aging 30 June 2021 1 January 2021
Amount Proportion (%) Amount Proportion (%)
Within one year 2,047,006.73 100.00 2,622,554.07 100.00
Total 2,047,006.73 100.00 2,622,554.07 100.00
5.4.2 Top five closing balances by entity
The total amount of the top five vendors with the largest prepaid amounts by the Company
at the end of the reporting period is CNY 1,422,293.17, accounting for 69.48% of the total
amount of the prepayment at the end of the reporting period.
5.5 Other Receivables
5.5.1 Other receivables by category
Items
30 June 2021 1 January 2021
0.00 0.00
Interest receivable
0.00 0.00
Dividend receivable
22,368,439.05 31,938,548.59
Other receivables
22,368,439.05 31,938,548.59
Total
5.5.2 Interest receivable
None
5.5.3 Dividends receivable
None
5.5.4 Other Receivables
5.5.4.1 Other receivables by aging
Aging
30 June 2021 1 January 2021
21,081,832.84 30,566,672.96
Within one year
20,696,232.84 30,331,697.53
Including: Within 90 days
260,000.00 86,800.00
91 – 180 days
56,800.00 87,375.43
181 – 270 days
86
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Aging
30 June 2021 1 January 2021
68,800.00 60,800.00
271 – 365 days
137,502.00 62,600.00
1-2 years
0.00 364,556.15
2-3 years
1,440,237.22 1,134,501.09
Over 3 years
22,659,572.06 32,128,330.20
Subtotal
291,133.01 189,781.61
Less: provision for bad debt
22,368,439.05 31,938,548.59
Total
5.5.4.2 Other receivables by nature
Nature
30 June 2021 1 January 2021
14,500,000.00 25,064,584.54
Export tax refund
6,795,525.84 5,625,222.17
Other open credits
1,159,263.05 1,236,358.34
Deposit
204,783.17 202,165.15
Due from related parties
22,659,572.06 32,128,330.20
Subtotal
291,133.01 189,781.61
Less: Provision for bad debt
22,368,439.05 31,938,548.59
Total
5.5.4.3 Other receivables by provision for bad debt
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Expected credit
Provision for bad debt for the whole duration for the whole duration Total
loss for the next
(no credit (Credit impairment
12 months
impairment) has occurred)
189,781.61 0.00 0.00 189,781.61
Closing balance as of 1/1/2021
Carrying amount of other
—— —— —— ——
receivables in current period on
1/1/2021
0.00 0.00 0.00 0.00
Turn to stage 2
0.00 0.00 0.00 0.00
Turn to stage 3
0.00 0.00 0.00 0.00
Turn back to stage 2
0.00 0.00 0.00 0.00
Turn back to stage 1
101,351.40 0.00 0.00 101,351.40
Recognition
0.00 0.00 0.00 0.00
Reversal
0.00 0.00 0.00 0.00
Used
87
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Stage 1 Stage 2 Stage 3
Expected credit loss Expected credit loss
Expected credit
Provision for bad debt for the whole duration for the whole duration Total
loss for the next
(no credit (Credit impairment
12 months
impairment) has occurred)
0.00 0.00 0.00 0.00
Written off
0.00 0.00 0.00 0.00
Other movements
291,133.01 0.00 0.00 291,133.01
Closing balance as of 30/6/2021
5.5.4.4 Provision for bad debt recognized, recovered or reversed
Changes during the reporting period
1 January
Category Recovery or 30 June 2021
2021
Provision Write-off Other
reversal
Provision for bad debt
0.00 0.00 0.00 0.00 0.00 0.00
recognised individually
Provision for bad debt
189,781.61 101,351.40 0.00 0.00 0.00 291,133.01
recognized by portfolio
Total 189,781.61 101,351.40 0.00 0.00 0.00 291,133.01
5.5.4.5 There are no other receivables write-off during the reporting period
5.5.4.6 Top five closing balances by entity
Proportion of the
Provisio
Balance at 30 June balance to the total
Entity name Nature Aging n for
2021 other receivables
bad debt
(%)
Zhangzhou Taiwan Investment
Export tax refund 14,500,000.00 1-90 days 63.99
zone Tax Bureau of SAT
State Grid Fujian Longhai
Electric charge 3,444,792.85 1-90 days 15.20
Power Supply Co., Ltd.
Store Bound LLC Ocean freight 651,515.40 1-90 days 2.88
China Export & Credit
Insurance Corporation Fujian Deposit 648,450.00 Over 3 years 2.86
Branch
PT.PLN(PER SERO) Deposit 410,813.05 Over 3 years 1.81
Total 19,655,571.30 86.74 0.00
5.6 Inventories
5.6.1 Inventories by category
88
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
30 June 2021 1 January 2021
Items Provision for Carrying Provision for Carrying
Book balance Book balance
impairment amount impairment amount
118,908,667.03 11,491,860.71 107,416,806.32 100,787,147.78 14,006,349.34 86,780,798.44
Raw materials
3,689,086.86 0.00 3,689,086.86 21,018,640.91 21,018,640.91
Work in process
Consigned
14,430,662.08 0.00 14,430,662.08 0.00
processing material
Self-manufactured 39,171,573.53 1,000,088.39 38,171,485.14 20,946,038.00 1,000,088.39 19,945,949.61
semi-finished goods
137,700,148.80 10,791,783.28 126,908,365.52 134,905,753.88 11,506,798.79 123,398,955.09
Finished goods
Consigned finished
0.00 0.00 0.00 0.00
goods
Low-value 618,568.45 0.00 618,568.45 837,653.40 837,653.40
consumables
2,264,550.74 0.00 2,264,550.74 3,070,079.91 0.00 3,070,079.91
Materials in transit
316,783,257.49 23,283,732.38 293,499,525.11 281,565,313.88 26,513,236.52 255,052,077.36
Total
5.6.2 Provision for impairment
Increase in Decrease in
31 December 2020
current year current year
Item 1 January 2021 30 June 2021
Impact of changes Recovered or Impact of changes in
Accrual exchange rates
in exchange rates Written off
Raw material 14,006,349.34 0.00 198.22 2,493,798.05 20,888.80 11,491,860.71
Self-manufacture
d semi-finished 1,000,088.39 0.00 0.00 0.00 0.00 1,000,088.39
goods
Finished goods 11,506,798.79 90,332.22 0.00 798,755.36 6,592.37 10,791,783.28
Total 26,513,236.52 90,332.22 198.22 3,292,553.41 27,481.17 23,283,732.38
5.7 Other Current Assets
Items 30 June 2021 1 January 2021
9,782,096.97 7,818,199.72
Input tax to be deducted
20,787,032.16 10,815,837.88
Financial investment
Total 30,569,129.13 18,634,037.60
Note: Financial investments are mainly bank financial products purchased by Company with idle funds.
5.8 Other equity instrument investment
5.8.1 General information of other equity instrument investment
Items 30 June 2021 1 January 2021
40,000.00 40,000.00
Non-trading equity instrument investment
89
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
40,000.00 40,000.00
Total
5.9 Investment Properties
5.9.1 Investment properties accounted for using cost model
Building and Land use rights Construction
Items Total
in progress
plants
Initial cost:
Balance on 1 January 2021 64,309,127.61 29,260,577.51 0.00 93,569,705.12
Increase during the reporting period 337,666.76 0.00 0.00 337,666.76
1. Acquisition 0.00 0.00 0.00 0.00
2. Transfer from inventories /fixed
337,666.76 0.00 0.00 337,666.76
assets /construction in progress
3. Impact of changes in exchange rate 0.00 0.00 0.00 0.00
Decrease during the reporting period 0.00 0.00 0.00 0.00
1. Disposal 0.00 0.00 0.00 0.00
2. Other transferred out 0.00 0.00 0.00 0.00
3. Impact of changes in exchange rate 0.00 0.00 0.00 0.00
Balance on 30 June 2021 64,646,794.37 29,260,577.51 0.00 93,907,371.88
Accumulated depreciation and
amortisation:
Balance on 1 January 2021 56,773,556.57 15,540,537.64 0.00 72,314,094.21
Increase during the reporting period 569,631.63 311,055.90 0.00 880,687.53
1. Accrual or amortization 268,551.89 311,055.90 0.00 579,607.79
2. Transfer from fixed assets 301,079.74 0.00 0.00 301,079.74
3. Impact of changes in exchange rate 0.00 0.00 0.00 0.00
Decrease during the reporting period 0.00 0.00 0.00 0.00
1. Disposal 0.00 0.00 0.00 0.00
2. Other transferred out 0.00 0.00 0.00 0.00
3. Impact of changes in exchange rate
Balance on 30 June 2021 57,343,188.20 15,851,593.54 0.00 73,194,781.74
Provision for impairment:
Balance on 1 January 2021 0.00 0.00 0.00 0.00
Increase during the reporting period 0.00 0.00 0.00 0.00
1. Accrual or amortization 0.00 0.00 0.00 0.00
Decrease during the reporting period 0.00 0.00 0.00 0.00
90
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Building and Land use rights Construction
Items Total
in progress
plants
1. Disposal 0.00 0.00 0.00 0.00
2. Other 0.00 0.00 0.00 0.00
Balance on 30 June 2021 0.00 0.00 0.00 0.00
Carrying amount:
Balance on 30 June 2021 7,303,606.17 13,408,983.97 0.00 20,712,590.14
Balance on 1 January 2021 7,535,571.04 13,720,039.87 0.00 21,255,610.91
5.9.2 Investment properties without certificate of title
Item Carrying amount Reason
Lvyuan three country villa 678,284.65
Note: Lvyuan three country villa is the houses with limited property rights purchased by the TsannKuen
China (Shanghai) Enterprise Co., Ltd. which is the subsidiary of the Company from Shanghai Lvsheng
Real Estate Development Co., Ltd. in 1999, and there has no land expropriation. Shanghai Lvsheng Real
Estate Development Co., Ltd. and Shanghai Jiading district, Huangdu town Lvyuan community residents'
committees issued the certificate jointly to prove the right of this property belongs to TsannKuen China
(Shanghai) Enterprise Co., Ltd. in January 2006.
5.10 Fixed Assets
5.10.1 Fixed assets by category
Items 30 June 2021 1 January 2021
157,027,732.21 164,338,962.07
Fixed assets
0.00 0.00
Disposal of fixed assets
157,027,732.21 164,338,962.07
Total
91
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.10.2 Fixed assets
5.10.2.1 General information of fixed assets
Electronic devices, Improvement expense
Items Houses and buildings Machineries Vehicles Total
modules and others of leased fixed assets
Initial cost:
93,647,826.29 161,565,309.12 869,881,721.37 19,026,933.04 57,061,893.94 1,201,183,683.76
Balance on 1 January 2021
Increase during the reporting period -223,420.01 610,057.39 14,474,271.37 -30,532.85 -55,412.62 14,774,963.28
(i) Acquisition 0.00 899,405.14 14,734,847.42 10,852.97 0.00 15,645,105.53
0.00 0.00 0.00 0.00 0.00 0.00
(ii) Transfer from construction in progress
(iii) Transfer from investment properties 0.00 0.00 0.00 0.00 0.00 0.00
-223,420.01 -289,347.75 -260,576.05 -41,385.82 -55,412.62 -870,142.25
(iii) Impact of changes in exchange rates
Decrease during the reporting period 516,984.46 289,249.63 52,791,926.09 0.00 0.00 53,598,160.18
(i) Disposal 179,317.70 289,249.63 52,791,926.09 0.00 0.00 53,260,493.42
(ii) Transfer to investment properties 337,666.76 0.00 0.00 0.00 0.00 337,666.76
(iii) Impact of changes in exchange rates 0.00 0.00 0.00 0.00 0.00 0.00
92,907,421.82 161,886,116.88 831,564,066.65 18,996,400.19 57,006,481.32 1,162,360,486.86
Balance on 30 June 2021
Accumulated depreciation:
Balance on 1 January 2021 55,486,006.84 92,998,389.56 776,255,543.11 15,758,307.09 55,431,456.07 995,929,702.67
1,696,690.67 3,271,840.42 14,355,210.50 516,852.30 481,804.06 20,322,397.95
Increase during the reporting period
(i) Provision 1,820,824.42 3,447,819.88 14,526,471.41 543,072.30 535,470.10 20,873,658.11
(ii) Transfer from investment properties 0.00 0.00 0.00 0.00 0.00 0.00
(iii) Impact of changes in exchange rates -124,133.75 -175,979.46 -171,260.91 -26,220.00 -53,666.04 -551,260.16
92
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Electronic devices, Improvement expense
Items Houses and buildings Machineries Vehicles Total
modules and others of leased fixed assets
Decrease during the reporting period 323,270.28 451,389.40 49,203,459.63 6,503.32 0.00 49,984,622.63
22,190.54 451,389.34 49,203,459.63 6,503.32 0.00 49,683,542.83
(i) Disposal
(ii) Transfer from investment properties 301,079.74 0.00 0.00 0.00 0.00 301,079.74
0.00 0.06 0.00 0.00 0.00 0.06
(iii) Impact of changes in exchange rates
Balance on 30 June 2021 56,859,427.23 95,818,840.58 741,407,293.98 16,268,656.07 55,913,260.13 966,267,477.99
Provision for impairment:
0.00 20,150,939.56 20,720,129.36 6,382.26 37,567.84 40,915,019.02
Balance on 1 January 2021
Increase during the reporting period 0.00 1,011,098.73 93,702.89 3,764.71 -101.16 1,108,465.17
(i) Provision 0.00 1,041,598.63 108,007.27 3,817.02 0.00 1,153,422.92
0.00 -30,499.90 -14,304.38 -52.31 -101.16 -44,957.75
(iii) Impact of changes in exchange rates
Decrease during the reporting period 0.00 11,291.17 2,946,916.36 0.00 0.00 2,958,207.53
(i) Disposal 0.00 11,291.17 2,946,916.36 0.00 0.00 2,958,207.53
0.00 21,150,747.12 17,866,915.89 10,146.97 37,466.68 39,065,276.66
Balance on 30 June 2021
Carrying amount:
Balance on 30 June 2021 36,047,994.59 44,916,529.18 72,289,856.78 2,717,597.15 1,055,754.51 157,027,732.21
38,161,819.45 48,415,980.00 72,906,048.90 3,262,243.69 1,592,870.03 164,338,962.07
Balance on 1 January 2021
93
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.10.2.2 Idle fixed assets
Accumulated Provision for Carrying
Item Initial cost
depreciation impairment amount
Machineries 45,886,586.22 27,997,561.94 17,889,024.28 0.00
Electronic device, 133,200,801.93 123,172,238.06 9,978,448.14 50,115.73
modules, and others
Vehicles 98,548.53 93,616.49 4,932.04 0.00
Improvement expense of 2,448,321.34 2,420,939.46 27,381.88 0.00
fixed assets
Total 181,634,258.02 153,684,355.95 27,899,786.34 50,115.73
5.10.2.3 Fixed assets without certificate of title
Items Carrying amount Reason
Lvyuan three country villa 161,496.34
Qingying garden 119,284.52 Legal procedures in process
Note: Lvyuan three country villa is the houses with limited property rights purchased by the TsannKuen
China (Shanghai) Enterprise Co., Ltd. which is the subsidiary of the Company from Shanghai Lvsheng
Real Estate Development Co., Ltd. in 1999, and there has no land expropriation. Shanghai Lvsheng Real
Estate Development Co., Ltd. and Shanghai Jiading district, Huangdu town Lvyuan community residents'
committees issued the certificate jointly to prove the right of this property belongs to TsannKuen China
(Shanghai) Enterprise Co., Ltd. in January 2006.
5.11 Construction in Progress
5.11.1 Construction in progress by category
Items 30 June 2021 1 January 2021
4,487,009.02 728,529.68
Construction in progress
Construction materials 0.00 0.00
4,487,009.02 728,529.68
Total
5.11.2 Construction in progress
5.11.2.1 General information of construction in progress
Items 30 June 2021 1 January 2021
Provision
Provision for Carrying Book Carrying
Book balance for
impairment amount balance amount
impairment
Sporadic 4,487,009.02 0.00 4,487,009.02 728,529.68 728,529.68
project
4,487,009.02 0.00 4,487,009.02 728,529.68 0.00 728,529.68
Total
94
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.12 Use Rights Assets
Houses and buildings Vehicles Total
Items
Initial cost:
Balance on 1 January 2021 586,022,598.38 905,385.35 586,927,983.73
Increase during the reporting period 41,847.20 386.86 42,234.06
(i) Leases 0.00 0.00 0.00
(ii) Impact of changes in exchange rates 41,847.20 386.86 42,234.06
Decrease during the reporting period 0.00 0.00 0.00
(i) Disposal 0.00 0.00 0.00
(ii) Impact of changes in exchange rates 0.00 0.00 0.00
Balance on 30 June 2021 586,064,445.58 905,772.21 586,970,217.79
Accumulated depreciation:
Balance on 1 January 2021 0.00 0.00 0.00
Increase during the reporting period 9,931,097.22 455,797.57 10,386,894.79
(i) Provision 9,926,858.94 455,775.01 10,382,633.95
(ii) Impact of changes in exchange rates 4,238.28 22.56 4,260.84
Decrease during the reporting period 0.00 0.00 0.00
(i) Disposal 0.00 0.00 0.00
(ii) Impact of changes in exchange rates 0.00 0.00 0.00
Balance on 30 June 2021 9,931,097.22 455,797.57 10,386,894.79
Provision for impairment:
Balance on 1 January 2021 0.00 0.00 0.00
Increase during the reporting period 0.00 0.00 0.00
(i) Provision 0.00 0.00 0.00
(ii) Impact of changes in exchange rates 0.00 0.00 0.00
Decrease during the reporting period 0.00 0.00 0.00
(i) Disposal 0.00 0.00 0.00
(ii) Impact of changes in exchange rates 0.00 0.00 0.00
Balance on 30 June 2021 0.00 0.00 0.00
Carrying amount:
Balance on 30 June 2021 576,133,348.37 449,974.63 576,583,323.00
Balance on 1 January 2021 586,022,598.38 905,385.35 586,927,983.73
5.13 Intangible Assets
5.13.1 General information of intangible assets
95
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Land use rights Software Total
Initial cost:
18,282,356.61 50,077,949.73 68,360,306.34
Balance on 1 January 2021
0.00 3,552,093.44 3,552,093.44
Increase during the reporting period
0.00 3,552,000.00 3,552,000.00
1. Acquisition
0.00 93.44 93.44
2. Impact of changes in exchange rate
280,036.08 0.00 280,036.08
Decrease during the reporting period
0.00 0.00 0.00
1. Disposal
280,036.08 0.00 280,036.08
2. Impact of changes in exchange rate
18,002,320.53 53,630,043.17 71,632,363.70
Balance on 30 June 2021
Accumulated depreciation and amortisation:
4,664,431.31 34,349,562.21 39,013,993.52
Balance on 1 January 2021
308,138.85 3,939,414.33 4,247,553.18
Increase during the reporting period
308,138.85 3,939,353.61 4,247,492.46
1. Accrual
0.00 60.72 60.72
2. Impact of changes in exchange rate
73,582.09 0.00 73,582.09
Decrease during the reporting period
0.00 0.00 0.00
1. Disposal
73,582.09 0.00 73,582.09
2. Impact of changes in exchange rate
4,898,988.07 38,288,976.54 43,187,964.61
Balance on 30 June 2021
Provision for impairment:
0.00 0.00 0.00
Balance on 1 January 2021
0.00 0.00 0.00
Increase during the reporting period
0.00 0.00 0.00
1. Accrual
0.00 0.00 0.00
2. Impact of changes in exchange rate
0.00 0.00 0.00
Decrease during the reporting period
0.00 0.00 0.00
1. Disposal
0.00 0.00 0.00
2. Impact of changes in exchange rate
0.00 0.00 0.00
Balance on 30 June 2021
Carrying amount:
Balance on 30 June 2021 13,103,332.46 15,341,066.63 28,444,399.09
Balance on 1 January 2021 13,617,925.30 15,728,387.52 29,346,312.82
96
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.14 Long-term Deferred Expenses
Increase during the Other 30 June 2021
Items 1 January 2021 Amortisation
reporting period decrease
Telecommunications
48,643.06 66,037.74 10,418.46 0.00 104,262.34
project expenses
Houses and buildings
6,683,390.42 6,123,221.46 1,820,049.35 0.00 10,986,562.53
renovation expenses
Wall projects of 3
99,696.59 0.00 31,483.20 0.00 68,213.39
phases
Total 6,831,730.07 6,189,259.20 1,861,951.01 0.00 11,159,038.26
5.15 Deferred Tax Assets and Deferred Tax Liabilities
5.15.1 Deferred tax assets before offsetting
30 June 2021 1 January 2021
Deductible Deferred tax Deductible Deferred tax
Items
temporary assets temporary assets
differences differences
Provision for asset 55,827,945.62 9,365,068.92 59,565,618.38 9,996,562.15
impairment
Provision for credit 2,503,335.05 386,598.29 3,144,069.54 478,564.04
impairment
Use rights assets 5,150,395.75 772,559.36
Unrealized intragroup 298,001.44 74,500.36 284,635.52 71,158.88
profit
11,086,492.25 1,797,096.24 12,221,158.78 2,001,465.13
Accrued expenses
276,092.12 55,218.42 272,562.30 54,512.47
Payroll liability
3,474,676.80 3,050,009.44 11,952,239.29 2,988,059.82
Undistributed deficit
Financial liabilities held 753,600.00 113,040.00 0.00 0.00
for trading
79,370,539.03 15,614,091.03 87,440,283.81 15,590,322.49
Total
5.15.2 Deferred tax liabilities before offsetting
30 June 2021 1 January 2021
Deductible Deferred tax Deductible Deferred tax
Items
temporary liabilities temporary liabilities
differences differences
193,170,474.36 48,292,618.59 193,170,474.36 48,292,618.59
Policy relocation
97
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
30 June 2021 1 January 2021
Deductible Deferred tax Deductible Deferred tax
Items
temporary liabilities temporary liabilities
differences differences
Financial assets held 2,366,222.22 354,933.33 20,821,900.00 3,123,285.00
for trading
48,864.33 9,772.90 48,239.76 9,647.98
Others
195,585,560.91 48,657,324.82 214,040,614.12 51,425,551.57
Total
5.15.3 Unrecognized deferred tax assets
Items 30 June 2021 1 January 2021
6,521,063.42 7,862,637.16
Provision for asset impairment
1,097,941.48 1,579,578.29
Provision for credit impairment
14,539,054.59 15,032,275.03
Accrued expenses
3,035,370.92 9,600,380.92
Payroll liability
64,800,849.60 125,592,039.85
Undistributed deficit
89,994,280.01 159,666,911.25
Total
Note: The list above is not recognized as deductible temporary differences and recoverable losses due to
the uncertainty of whether sufficient taxable income will be obtained in the future.
5.15.4 Deductible losses not recognised as deferred tax assets will expire in the
following periods:
Items 30 June 2021 1 January 2021
0.00 59,954,740.54
Year 2021
4,779,439.07 4,828,378.89
Year 2022
15,427,022.83 16,003,668.47
Year 2023
14,603,168.32 14,837,857.89
Year 2024
Year 2025 493,480.77 2,056,451.61
Year 2026 to 2031 29,497,738.61 27,910,942.45
Total 64,800,849.60 125,592,039.85
Note: The annual loss of Tsannkuen Edge Intelligence Co., Ltd. continues to make up for a maximum
period of 10 years.
98
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.16 Other Non-current Assets
30 June 2021 1 January 2021
Items Book Provision for Carrying Provision for Carrying
Book balance
balance impairment amount impairment amount
Prepaid mold fee 5,025.64 0.00 5,025.64 46,275.64 0.00 46,275.64
Prepaid equipment fee 791,389.60 0.00 791,389.60 1,998,426.66 0.00 1,998,426.66
796,415.24 0.00 796,415.24 2,044,702.30 0.00 2,044,702.30
Total
5.17 Short-term Borrowings
5.17.1 Disclosure of short-term borrowings by category
Items 30 June 2021 1 January 2021
Pledged loan 0.00 16,345,141.13
Credit loan 29,118,135.68 0.00
Total 29,118,135.68 16,345,141.13
5.18 Held-for-Trading Financial Liabilities
Items 30 June 2021 1 January 2021
Held-for-trading financial liabilities 753,600.00 0.00
Including: Derivative financial liabilities 753,600.00 0.00
753,600.00 0.00
Total
Note: Derivative financial liabilities are forward foreign exchange settlement/sale contracts signed by the
Company with the financial institutions.
5.19 Notes Payable
Items 30 June 2021 1 January 2021
Bank acceptance bills 7,457,554.16 7,521,531.97
Total 7,457,554.16 7,521,531.97
Note: There are no expired notes payable that have not been paid as at the end of current year.
5.20 Accounts Payable
5.20.1 Accounts payable by nature
Items 30 June 2021 1 January 2021
761,316,284.29 871,081,181.47
Within 1 year
4,374,560.55 3,881,706.46
Over 1 year
Total 765,690,844.84 874,962,887.93
99
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.20.2 Significant accounts payable with aging of over one year
Items 30 June 2021 Reason
Ningbo Chaochao Electrical
500,237.01 Quality disputes
Equipment Co., Ltd.
Total 500,237.01
5.21 Advances from Customers
5.21.1 Details of advances from customers
Items 30 June 2021 1 January 2021
4,008,246.69 3,404,910.00
Within 1 year
Over 1 year 3,541,831.67 3,448,190.03
Total 7,550,078.36 6,853,100.03
5.22 Contract Liabilities
5.22.1 Details of contract liabilities
Items 30 June 2021 1 January 2021
16,881,535.32 25,605,755.71
Within 1 year
1,178,777.39 0.00
Over 1 year
18,060,312.71 25,605,755.71
Total
5.23 Employee Benefits Payable
5.23.1 Details of employee benefits payable
Increase during the Decrease during the 30 June 2021
Items 1 January 2021
reporting period reporting period
Short-term employee 51,114,418.96 143,647,312.26 154,954,266.01 39,807,465.21
benefits
Post-employment
benefits-defined 147,846.71 5,810,476.88 5,804,259.07 154,064.52
contribution plans
Termination benefits 0.00 0.00 0.00 0.00
Other benefits due 0.00 0.00 0.00 0.00
within one year
Total 51,262,265.67 149,457,789.14 160,758,525.08 39,961,529.73
5.23.2 Short-term employee benefits
Decrease during
Increase during the 30 June 2021
Items 1 January 2021 the reporting
reporting period
period
Salaries, bonuses,
38,769,148.35 129,509,504.03 140,158,174.17 28,120,478.21
allowances and
subsidies
0.00 5,911,440.48 5,911,440.48 0.00
Employee benefits
553,971.19 5,516,270.82 5,478,578.43 591,663.58
Social insurance
523,734.07 4,053,242.88 4,016,585.01 560,391.94
Including: Health
100
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Decrease during
Increase during the 30 June 2021
Items 1 January 2021 the reporting
reporting period
period
insurance
0.00 1,210,801.91 1,210,547.11 254.80
Injury insurance
30,237.12 252,226.03 251,446.31 31,016.84
Birth insurance
Housing 9,604,605.92 2,787,300.44 2,842,460.88 9,549,445.48
accumulation fund
Labour union funds
0.00 405,148.90 405,148.90 0.00
and employee
education funds
Short-term absence 2,186,693.50 -482,352.41 158,463.15 1,545,877.94
pay
Other short-term 0.00 0.00 0.00 0.00
employee benefits
51,114,418.96 143,647,312.26 154,954,266.01 39,807,465.21
Total
5.23.3 Defined contribution plans
1 January Increase during the Decrease during the 30 June 2021
Items
2021 reporting period reporting period
Basic endowment 147,835.21 5,648,021.65 5,642,060.74 153,796.12
insurance
Unemployment 11.50 162,455.23 162,198.33 268.40
insurance
0.00 0.00 0.00 0.00
Enterprise annuity
147,846.71 5,810,476.88 5,804,259.07 154,064.52
Total
Note: The Company participates in the endowment insurance and unemployment insurance plan
established by the government, according to these plans, the Company pays planed fees to the Company’s
location. In addition to the monthly fee deposit, the Company no longer bears further payment
obligations. Corresponding expenses are expensed as incurred or costs related assets.
101
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.24 Taxes Payable
Items 30 June 2021 1 January 2021
Enterprise income tax 11,093,239.69 16,319,231.37
Value added tax (VAT) 296,457.90 180,939.30
Individual income tax 714,027.85 797,007.65
Educational surcharge 557,401.60 729,009.84
City construction tax 557,401.44 729,009.73
2,693,533.02 1,483,049.28
Other
15,912,061.50 20,238,247.17
Total
5.25 Other Payables
5.25.1 Other payables by category
Items 30 June 2021 1 January 2021
0.00 0.00
Interest payable
0.00 0.00
Dividend payable
47,612,534.58 52,803,158.48
Other payable
47,612,534.58 52,803,158.48
Total
5.25.2 Other payables
5.25.2.1 Other payables by nature
Items 30 June 2021 1 January 2021
34,756,422.63 39,088,143.93
Within 1 year
12,856,111.95 13,715,014.55
Over 1 year
47,612,534.58 52,803,158.48
Total
5.25.2.2 Significant other payables with aging over one year
Items 30 June 2021 Reason
10,001,683.97
Deposit Return upon termination of contract
10,001,683.97
Total
5.26 Non-current Liabilities Maturing within One Year
Items 30 June 2021 1 January 2021
Lease liabilities maturing within one year 81,310,298.16 64,360,133.28
Total 81,310,298.16 64,360,133.28
5.27 Lease Liabilities
Items 30 June 2021 1 January 2021
Lease liabilities 517,740,534.06 522,567,850.44
Total 517,740,534.06 522,567,850.44
5.28 Long-term Employee Benefits Payable
102
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.28.1 General information of long-term employee benefits payable
Items 30 June 2021 1 January 2021
Post-employment benefits-net 339,285.03 312,775.91
liability under defined benefit plans
339,285.03 312,775.91
Total
5.28.2 Changes in defined benefit plans
Present value of the defined benefit obligation:
Items 30 June 2021 1 January 2021
Balance at the beginning of the reporting 312,775.91 425,896.17
period
Cost recognised in current profit or loss 26,309.07 19,118.67
Cost recognised in other comprehensive -93,635.32
income
Other changes: 200.05 -38,603.61
(i) Consideration paid in settlements
(ii) Payment of benefits -3,850.39 -12,498.64
(iii) Others 4,050.44 -26,104.97
339,285.03 312,775.91
Balance at the end of the reporting period
5.29 Share Capital
Changes during the reporting period (+,-)
Item 1 January 2021 Bonus Capitalisation 30 June 2021
New issues Others Subtotal
issues of reserves
Number of
185,391,680.00 185,391,680.00
total shares
5.30 Capital Reserves
Increase during Decrease during
Item 1 January 2021 the reporting the reporting 30 June 2021
period period
Capital premium 210,045,659.80 0.00 0.00 210,045,659.80
(share premium)
Other capital 86,763,305.99 0.00 0.00 86,763,305.99
reserves
296,808,965.79 0.00 0.00 296,808,965.79
Total
103
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.31 Other Comprehensive Income
Current year
Less: previously Less: previously
After tax
recognised in other recognised in other After tax
Item 1 January 2021 Amount for the year Less: Income attributable to 30 June 2021
comprehensive income comprehensive income attributable to the
before tax tax expense minority
transferred into profit transferred into parent company
shareholders
or loss retained earnings
1. Other comprehensive
income will not be
31,583.27 107,315.12 0.00 0.00 17,885.85 67,071.95 22,357.32 98,655.22
reclassified to profit or
loss
Including: Changes of
remeasurement of the 31,583.27 107,315.12 17,885.85 67,071.95 22,357.32 98,655.22
defined benefit plan
Other comprehensive
income will not be
reclassified into profit
or loss under equity
method
2. Items will be
reclassified to profit or 1,791,479.76 -1,162,520.27 0.00 0.00 0.00 -871,890.20 -290,630.07 919,589.56
loss
104
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Including: Other
comprehensive income
will be reclassified into
profit or loss under
equity method
The gains/(losses) on
changes in fair value of
financial assets
classified as held for
sale
The gains/(losses) on
reclassification of
held-to-maturity
investments into
financial assets held for
sale
The effective portion of
the gains /(losses) on
cash flow hedge
Exchange differences
on translating foreign 1,791,479.76 -1,162,520.27 0.00 0.00 0.00 -871,890.20 -290,630.07 919,589.56
operations
Total 1,823,063.03 -1,055,205.15 0.00 0.00 17,885.85 -804,818.25 -268,272.75 1,018,244.78
105
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.32 Surplus Reserves
Increase during the Decrease during the
Item 1 January 2021 30 June 2021
reporting period reporting period
Statutory surplus 49,087,662.68 0.00 49,087,662.68
0.00
reserves
Total 49,087,662.68 0.00 0.00 49,087,662.68
Note: Pursuant to the Company Law of the People's Republic of China and Articles of Association, the
Company appropriates 10% of net profit to the statutory surplus reserves. If the accumulated amount of
the statutory surplus reserve reaches more than 50% of the registered capital of the Company, it shall not
be withdrawn.
After the Company accrues the statutory surplus reserve, the Company can accrue any surplus reserve
fund. Upon approval, the discretionary surplus reserve fund may be used to cover future losses or
increase in share capital.
5.33 Retained Earnings
Same period of
Items Reporting period
last year
Balance at the end of last period before adjustments 330,918,755.61 218,523,906.99
Adjustments for the opening balance (increase /(decrease)) 0.00 0.00
Balance at the beginning of the reporting period after adjustments 330,918,755.61 218,523,906.99
Add: net profit attributable to owners of the parent company for 60,417,688.12 139,522,190.75
the reporting period
Less: appropriation to statutory surplus reserves 0.00 8,588,174.13
Appropriation to discretionary surplus reserves 0.00 0.00
Provision for general risk reserves 0.00 0.00
Payment of ordinary share dividends 27,808,752.00 18,539,168.00
Common stock dividends converted to share capital 0.00 0.00
Balance at the end of the reporting period 363,527,691.73 330,918,755.61
5.34 Revenue and Cost of Sales
Reporting period Same period of last year
Items
Revenue Costs of sales Revenue Costs of sales
Principal activities 1,158,460,531.19 1,001,472,212.98 757,335,293.08 629,443,740.55
Other activities 38,828,475.92 12,774,066.71 35,679,291.28 14,768,639.19
Total 1,197,289,007.11 1,014,246,279.69 793,014,584.36 644,212,379.74
106
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.34.1 Revenue from principal activities (by industry or business)
Industry (business) Reporting period Same period of last year
Revenue Costs of sales Revenue Costs of sales
Household 1,158,460,531.19 1,001,472,212.98 757,335,293.08 629,443,740.55
appliances industry
1,158,460,531.19 1,001,472,212.98 757,335,293.08 629,443,740.55
Total
5.34.2 Revenue from principal activities (by product)
Industry (business) Reporting period Same period of last year
Revenue Costs of sales Revenue Costs of sales
849,986,846.00 737,816,873.51 500,877,565.26 420,064,627.39
Catering and Cooking
205,547,120.00 183,542,832.34 184,127,407.97 155,260,103.89
Home helper
85,696,036.63 71,774,401.71 61,420,124.34 49,375,486.17
Tea/Coffee makers
17,230,528.56 8,338,105.42 10,910,195.51 4,743,523.10
Others
1,158,460,531.19 1,001,472,212.98 757,335,293.08 629,443,740.55
Total
5.34.3 Revenue from principal activities (by region)
Region Reporting period Same period of last year
Revenue Costs of sales Revenue Costs of sales
38,902,178.40 33,221,857.34 28,906,788.68 22,885,334.91
Australia
7,248,920.64 6,224,631.25 7,955,700.50 6,226,660.31
Africa
648,414,462.43 562,093,573.29 356,754,688.62 299,305,059.17
America
246,816,658.92 214,191,136.16 188,723,058.75 154,324,305.81
Europe
217,078,310.80 185,741,014.94 174,995,056.53 146,702,380.35
Asia
1,158,460,531.19 1,001,472,212.98 757,335,293.08 629,443,740.55
Total
5.35 Taxes and Surcharges
Items Reporting period Same period of last year
1,595,326.72 2,137,451.88
City construction tax
1,567,618.73 2,096,333.38
Educational surcharge
1,004,553.58 819,140.23
Property tax
199,423.38 195,373.38
Land use tax
564,148.83 369,698.25
Stamp duty
6,334.90 13,038.96
Other
4,937,406.14 5,631,036.08
Total
5.36 Selling and Distribution Expenses
107
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items
Reporting period Same period of last year
20,473,444.99 11,010,454.87
Export expenses
6,642,171.48 6,507,450.80
Employee remunerations
821,073.40 2,140,389.33
Claims experiment expenses
Sales commission and after sales service fees 1,641,846.46 1,388,868.34
Rental expenses 54,825.80 230,514.71
Travel expenses 139,505.66 280,735.87
Advertisements charges and sales promotion 596,489.79 631,856.12
Administrative expenses 84,232.60 78,301.91
Transportation expenses 33,780.54 78,416.80
Others 316,626.91 348,756.77
Total 30,803,997.63 22,695,745.52
5.37 General and Administrative Expenses
Items
Reporting period Same period of last year
Employee remunerations 15,742,532.34 26,155,163.04
Depreciation and amortization of assets 6,980,910.30 3,656,458.29
Rental expenses 151,555.16 6,307,423.07
Insurance expenses 3,646,458.57 1,169,009.36
Administrative expenses 537,963.60 663,709.80
Travel expenses 1,315,546.62 1,362,500.23
Consultant fees 1,435,672.10 1,788,301.33
Maintenance expenses 2,381,801.65 1,763,412.45
Others 3,698,209.07 3,460,455.01
Total 35,890,649.41 46,326,432.58
5.38 Research and Development Expenses
Items
Reporting period Same period of last year
Employee remunerations 18,442,982.42 18,255,109.89
Test expenses 2,712,303.71 3,053,587.41
Depreciation and amortization of assets 5,039,131.13 3,979,176.22
Certification expenses 714,345.41 1,227,419.06
Rental expenses 515,862.86 849,333.70
Patent expenses 1,027,396.70 1,503,219.91
Travel expenses 63,637.52 215,272.89
Maintenance expenses 230,366.47 264,882.64
Consultant fees 668,013.80 404,256.48
Others 891,224.61 1,066,599.56
Total 30,305,264.63 30,818,857.76
108
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.39 Finance Expenses
Items
Reporting period Same period of last year
384,699.22 151,742.56
Interest expenses
8,020,668.61 12,388,999.10
Less: Interest income
6,270,272.90 -2,810,752.26
Foreign exchange losses
897,414.28 588,814.60
Bank charges
Unrecognized financing expenses 13,430,569.40 0.00
Total 12,962,287.19 -14,459,194.20
5.40 Other Income
Items Same period Related to assets
Reporting period
of last year /income
1. Government grant recognised in other income 1,764,476.00 2,260,574.12 Related to income
Including: Government grant related to deferred
income
Government grant related to deferred income
Government grant directly recognised in current
1,764,476.00 2,260,574.12 Related to income
profit or loss
2. Others related to daily operation activities
and recognised in other income
Including: Charges of withholding individual
income tax
Additional deduction of input tax
Income from debt restructuring
Total 1,764,476.00 2,260,574.12
Details of government grant recognised in other income:
Recognized in current
Items extraordinary gains and
Reporting period Same period of last year
losses
Export credit insurance
0.00 436,989.00 0.00
subsidy
Patent subsidies 0.00 100,000.00 0.00
Exhibition subsidies 0.00 37,000.00 0.00
Employment
8,189.19 134,445.12 8,189.19
stabilization subsidies
Enterprise R&D
1,714,500.00 1,552,140.00 1,714,500.00
investment subsidies
109
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Recognized in current
Items extraordinary gains and
Reporting period Same period of last year
losses
Commissions on the
three authorized tax 41,786.81 0.00 41,786.81
collection commissions
Total 1,764,476.00 2,260,574.12 1,764,476.00
5.41 Investment Income
Items
Reporting period Same period of last year
Investment income from disposal of
26,859,400.00 1,339,489.00
held-for-trading financial assets
Investment income from financial products 8,682,062.36 6,540,398.04
35,541,462.36 7,879,887.04
Total
5.42 Gains on Changes in Fair Values
Sources of gains on changes in fair value
Reporting period Same period of last year
-17,986,483.34 -2,301,689.00
Held-for-trading financial assets
-18,865,400.00 -2,301,689.00
Including: changes in fair value of derivatives
Structural deposits 878,916.66
-753,600.00 594,600.00
Held-for-trading financial liabilities
-18,740,083.34 -1,707,089.00
Total
5.43 Impairment Loss of Credit
Items
Reporting period Same period of last year
Bad debt of accounts receivables 1,208,617.28 -1,438,633.36
Bad debt of other receivables -101,351.40 308,889.59
1,107,265.88 -1,129,743.77
Total
5.44 Impairment Loss of Assets
Items
Reporting period Same period of last year
Impairment of inventories -90,332.22 -6,037,359.61
Impairment of fixed assets -1,153,422.92 -2,014,785.07
-1,243,755.14 -8,052,144.68
Total
5.45 Gains from Disposal of Assets
Recognized in current
Items Same period of
Reporting period extraordinary gains and losses
last year
Gains from disposal of
996,128.23 279,810.12 996,128.23
fixed assets
Total 996,128.23 279,810.12 996,128.23
110
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.46 Non-operating Income
5.46.1 Details of non-operating income
Recognized in current
Items
Reporting period Same period of last year extraordinary gains and losses
Other 1,568,968.09 2,794,509.46 1,568,968.09
1,568,968.09 2,794,509.46 1,568,968.09
Total
5.47 Non-operating Expenses
Recognized
in current
Items Reporting Same period of last
extraordinar
period year
y gains and
losses
Loss from damage or scrapping of non-current
53.90 216.93 53.90
assets
Including: fixed assets 53.90 216.93 53.90
Intangible assets 0.00 0.00 0.00
Donations 19,328.07 0.00 19,328.07
25,183.34 0.00 25,183.34
Fines
0.00 211,554.74 0.00
Others
44,565.31 211,771.67 44,565.31
Total
5.48 Income Tax Expenses
5.48.1 Details of income tax expenses
Items
Reporting period Same period of last year
11,140,962.47 6,299,170.64
Current tax expenses
-2,791,414.26 1,527,931.22
Deferred tax expenses
8,349,548.21 7,827,101.86
Total
5.48.2 Reconciliation of accounting profit and income tax expenses
Items Same period of
Reporting period
last year
89,093,019.19 59,903,358.50
Profit before tax
22,278,558.11 8,428,492.30
Income tax expense at the statutory /applicable tax rate
-7,580,913.71 -7,332,687.87
Effect of different tax rate of subsidiaries
-508,460.84 -1,306,289.59
Adjustments of impact from prior period income tax
Effect of income that is exempt from taxation
-5,334.05 131,796.54
Effect of non-deductible costs, expenses or losses
111
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Same period of
Reporting period
last year
Effect of previously unrecognized deductible losses -1,868,038.05
recognised as deferred tax assets
Effect of deductible temporary differences and deductible -1,296,427.43 10,047,895.35
losses not recognised as deferred tax assets
Changes in balance of the beginning of the year deferred tax
asset/liabilities due to tax rate adjustment
-2,669,835.82 -2,142,104.87
R&D expenses plus deduction
8,349,548.21 7,827,101.86
Income tax expenses
5.49 Other Comprehensive Income
For details of the other comprehensive income and related tax effect, transfer to profit or
loss and adjustment of other comprehensive income, refer to Note 5.31 Other
Comprehensive Income.
5.50 Notes to the Statement of Cash Flow
5.50.1 Other cash received relating to operating activities
Items
Reporting period Same period of last year
1,792,695.78 2,260,574.12
Government grants
Interests income 1,925,400.37 1,244,863.72
29,544,466.49 28,367,596.27
Rent income
12,097,503.75 4,144,726.67
Funds in current account and others
45,360,066.39 36,017,760.78
Total
5.50.2 Other cash payments relating to operating activities
Items Reporting period Same period of last year
Penalties and donations 44,569.79 0.00
Bank charges 897,414.28 588,814.60
Sales expenses, general and administrative expenses,
89,966,081.05 60,358,993.42
and research and development expenses paid by cash
Current accounts and others 5,147,643.50 4,570,222.81
Total 96,055,708.62 65,518,030.83
5.50.3 Other cash received relating to investing activities
Items
Reporting period Same period of last year
Time deposits recovered after maturity for the purpose 170,037,164.75 240,268,714.80
to earn interest income in financial institutions
170,037,164.75 240,268,714.80
Total
112
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
5.50.4 Other cash payments relating to investing activities
Items
Reporting period Same period of last year
Time deposits in financial institutions for the purpose 261,195,424.54 490,025,153.46
of earning interest income
Total 261,195,424.54 490,025,153.46
5.50.5 Other cash received relating to financing activities
Items
Reporting period Same period of last year
12,876,842.79 0.00
Security deposit of L/C
Total 12,876,842.79 0.00
5.50.6 Other cash payments relating to financing activities
Items
Reporting period Same period of last year
Security deposit of L/C 16,535,710.31 6,775,024.51
Total 16,535,710.31 6,775,024.51
5.51 Supplementary Information to the Statement of Cash Flows
5.51.1 Supplementary information to the statement of cash flows
Supplementary information Same period of
Reporting period
last year
1. Adjustments of net profit to cash flows from operating
activities:
Net profit 80,743,470.98 52,076,256.64
Add: Provisions for impairment of assets -1,243,755.14 8,052,144.68
Impairment loss of credit 1,107,265.88 1,129,743.77
Depreciation of fixed assets, oil and gas asset and productive
21,453,265.90 25,227,353.40
biological assets
Depreciation of use rights assets 10,382,633.95 0.00
Amortisation of intangible assets 4,247,492.46 3,562,674.32
Amortisation of long-term deferred expenses 1,861,951.01 1,365,412.08
Gains on disposal of fixed assets, intangible assets, and other
-996,128.23 -279,810.12
long-term assets
Loss on scrapping of fixed assets 53.90 216.93
Gains on changes in fair value 18,740,083.34 1,707,089.00
Finance income -5,646,924.11 -4,562,969.14
Investment income -35,541,462.36 -7,879,887.04
Decreases in deferred tax assets -23,768.54 1,861,637.41
113
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Supplementary information Same period of
Reporting period
last year
Increases in deferred tax liabilities -2,768,226.75 -340,258.34
Increases in inventories -35,217,943.61 50,826,332.09
Increases in operating receivables 7,622,265.38 -23,651,070.40
Increases in operating payables -127,694,733.46 -137,106,741.42
Others 0.00 0.00
Net cash flows from operating activities -62,974,459.40 -28,011,876.14
2. Significant investing and financing activities not
involving cash receipts and payments:
Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under finance leases
3. Net increases in cash and cash equivalents:
Cash equivalents at the end of the reporting period 615,026,388.14 334,822,611.51
Less: Cash equivalents at the beginning of the reporting
672,801,206.68 639,623,201.98
period
Add: Cash equivalents at the end of the reporting period
Less: Cash equivalents at the beginning of the reporting
period
Net increase in cash and cash equivalents -57,774,818.54 -304,800,590.47
5.51.2 The components of cash and cash equivalents
Items Reporting Same period of last
period year
615,026,388.14 334,822,611.51
1. Cash
897,767.56 961,400.21
Including: Cash on hand
614,128,620.58 333,861,211.30
Cash in bank available for immediate use
0.00 0.00
Other monetary funds available for immediate use
Deposit in the central banks available for immediate 0.00 0.00
use
0.00 0.00
Deposit in peer firms
0.00 0.00
Loan to peer firms
0.00 0.00
2. Cash equivalents
0.00 0.00
Including: Bond investments maturing within three months
114
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Reporting Same period of last
period year
3. Cash and cash equivalents at the end of the reporting 615,026,388.14 334,822,611.51
period
Note 1: Cash and cash equivalents exclude the restricted cash and cash equivalents in parent company or
subsidiary.
Note 2: On 30 June 2021, the amount of cash and cash equivalents in the statement of cash flows was
CNY 615,026,388.14, and the balance of monetary funds of balance sheet was CNY 744,754,520.51. The
difference of CNY 129,728,132.37 was caused by deducting the security deposit of pledge loan of CNY
22,750,000.00, the deposit for letter of credit of CNY 15,902,259.04 from the cash and cash equivalents
in the statement of cash flows and the time deposits in financial institutions for the purpose of earning
interest income belonging to bank deposits.
5.52 Restricted Assets
Item Carrying amount on 30 June 2021 Reason
Other monetary funds 22,750,000.00 Security deposit of pledge loan
Other monetary funds 15,902,259.04 Security deposit for letter of credit
Other monetary funds 5,228,613.33 Time deposits over 90 days
Bank deposits 85,847,260.00 Time deposits over 90 days
Total 129,728,132.37
5.53 Foreign Currency Monetary Items
5.53.1 Details for foreign currency monetary items:
Carrying amount in foreign currency Exchange Carrying amount in CNY on
Items
on 30 June 2021 rate 30 June 2021
Cash and cash
equivalents
Including: USD 26,025,130.17 6.460100 168,124,943.43
JPY 75,527,438.42 0.058428 4,412,917.17
IDR 12,378,230,166.76 0.000445 5,512,281.56
EUR 297,496.16 7.686200 2,286,614.99
GBP 9,419.63 8.941000 84,220.91
HKD 35,449.72 0.832080 29,497.01
HUF 81,016.00 0.021866 1,771.50
Total 180,452,246.57
Short-term
borrowings
Including: USD 4,500,000.00 6.460100 29,070,450.00
115
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Carrying amount in foreign currency Exchange Carrying amount in CNY on
Items
on 30 June 2021 rate 30 June 2021
Total 29,070,450.00
Accounts
receivables
Including: USD 66,771,409.49 6.460100 431,349,982.45
IDR 728,630,636.00 0.000445 324,474.27
JPY 46,481,496.00 0.058428 2,715,820.85
Total 434,390,277.57
Accounts payables
Including: USD 19,528,354.18 6.460100 126,155,120.84
EUR 327,857.17 7.686200 2,519,975.78
HKD 257,993.01 0.832080 214,670.82
JPY 11,275,641.65 0.058428 658,813.19
IDR 1,114,181,563.08 0.000445 496,168.06
Total 130,044,748.69
Other receivables
Including: USD 108,650.00 6.460100 701,889.87
IDR 1,432,839,164.00 0.000445 638,072.87
NTD 1,154,086.00 0.231938 267,676.40
Total 1,607,639.14
Other payables
Including: USD 436,702.93 6.460100 2,821,144.60
IDR 539,643,550.43 0.000445 240,314.42
Total 3,061,459.02
5.54 Government Grants
5.54.1 Government grants related to assets
116
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Recognised in current profit or loss or Presented items that
presented in directly as deduct of related cost recognised in current
Item Amount the statement profit or loss or
Same period
of financial Reporting period directly as deduct of
of last year
position related cost
Equipment
investment Fixed assets 37,281.82 37,281.82 Cost of sales
subsidies
5.54.2 Government grants related to income
Recognised in current profit or loss Presented
or directly as deduct of related cost items that
Items presented recognised in
in the statement current profit
Items Amounts
of financial Same period or loss or
Reporting period
position of last year directly as
deduct of
related cost
Patent subsidy 0.00 0.00 100,000.00
Other income Other income
Exhibition subsidy 0.00 0.00 37,000.00
Other income Other income
Employment
stabilization 10,292.73 Other income 10,292.73 134,445.12 Other income
subsidies
Export credit
insurance 0.00 Other income 0.00 436,989.00 Other income
subsidies
R&D expenses
1,714,500.00 Other income 1,714,500.00 1,552,140.00 Other income
subsidies
Commissions on
the three
authorized tax 39,683.27 39,683.27 0.00
Other income Other income
collection
commissions
Total 1,764,476.00 1,764,476.00 2,260,574.12
6. CHANGES IN THE SCOPE OF CONSOLIDATION
None
117
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
7. INTERESTS IN OTHER ENTITIES
7.1 Interests in Subsidiaries
7.1.1 Composition of corporate group
Percentage of equity
Principal place Registered interests by the
Name of subsidiary Nature of business Methods of acquisition
of business City Company (%)
Direct Indirect
Manufactures
TsannKuen (Zhangzhou) Acquired through
Zhangzhou Zhangzhou home electronic 75.00 75.00
Enterprise Co., Ltd.(TKL) establishment
appliance
Manufactures Acquired through
TsannKuen China (Shanghai)
Shanghai Shanghai home electronic 46.875 62.50 business combination
Enterprise Co., Ltd. (TKS)
appliance under common control
TsannKuen (Zhangzhou) Manufactures
Acquired through
South Port Electronics Zhangzhou Zhangzhou home electronic 56.25 75.00
establishment
Enterprise Co., Ltd. (TKN) appliance
Shanghai Canxing Trading Sales of home Acquired through
Shanghai Shanghai 56.25 100.00
Co.,Ltd (STD) electronic establishment
Xiamen Tsannkuen Property Acquired through
Xiamen Xiamen Property services 100.00 100.00
Services Co., Ltd. (TKW) establishment
Acquired through
East Sino Development Investment,
Hong Kong Hong Kong 75.00 100.00 business combination
Limited. (East Sino) Trading
under common control
Manufactures Acquired through
Pt.Star Comgistic Indonesia
Indonesia Indonesia home electronic 75.00 100.00 business combination
(SCI)
appliance under common control
Pt.Star Comgistic Property
Real estate Acquired through
Development Indonesia Indonesia Indonesia 75.00 100.00
development establishment
(SCPDI)
Acquired through
Orient Star Investments Investment, business
Hong Kong Hong Kong 75.00 100.00
Limited (OSI) Trading combination not under
common control
Tsannkuen Edge Intelligence Acquired through
Taiwan Taiwan Industrial design 75.00 100.00
Co., Ltd. (TKEI) business combination
118
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Percentage of equity
Principal place Registered interests by the
Name of subsidiary Nature of business Methods of acquisition
of business City Company (%)
Direct Indirect
under common control
7.1.2 Significant non-wholly owned subsidiaries
Dividends
Proportion of Profit or loss declared to Non-controlling
ownership attributable to non- distribute to interests at the
Name of subsidiary interest held by controlling interests non-controlling end of the
non- controlling during the reporting interests during reporting
interests period the reporting period
period
TKL 25.00 16,812,899.35 38,273,165.52 335,961,939.55
TKS 53.13 2,284,884.42 125,984,461.25
SCI 25.00 1,045,203.29 37,213,484.95
TKEI 25.00 222,151.92 4,721,928.94
7.1.3 Main financial information of significant non-wholly owned subsidiaries
30 June 2021
Name of
Current Non-current
subsidiary Current assets Non-current assets Total assets Total liabilities
liabilities liabilities
TKL 1,731,031,145.72 1,080,305,918.96 2,811,337,064.68 946,677,748.02 520,811,558.46 1,467,489,306.48
TKS 279,010,974.61 8,775,092.05 287,786,066.66 2,346,226.89 48,292,618.59 50,638,845.48
SCI 149,305,074.30 68,348,464.72 217,653,539.02 68,799,599.21 - 68,799,599.21
TKEI 20,454,877.90 4,847,680.48 25,302,558.38 4,593,622.54 1,821,220.09 6,414,842.63
(Continued)
1 January 2021
Name of
Non-current Current Non-current
subsidiary Current assets Total assets Total liabilities
assets liabilities liabilities
TKL 1,940,114,137.32 461,271,522.51 2,401,385,659.83 968,573,551.91 3,123,285.00 971,696,836.91
TKS 274,648,848.79 8,783,159.66 283,432,008.45 2,293,127.59 48,292,618.59 50,585,746.18
SCI 140,047,331.70 67,251,146.96 207,298,478.66 100,318,398.62 100,318,398.62
TKEI 18,999,605.00 2,456,721.00 21,456,326.00 3,371,583.52 322,423.88 3,694,007.40
119
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
(Continued)
Reporting period
Name of Total
Net cash flows from
subsidiary Revenue Net profit/(loss) comprehensive
operating activities
income
TKL 1,058,761,873.20 67,251,597.38 - 14,397,993.13
TKS 443,045.44 4,300,958.91 - -623,006.04
SCI 147,750,531.08 4,180,813.15 - 8,819,500.58
TKEI 5,245,258.15 888,607.66 - 1,440,343.11
(Continued)
The same period of last year
Name of Total
Net cash flows from
subsidiary Revenue Net profit/(loss) comprehensive
operating activities
income
TKL 715,492,117.08 45,608,044.19 40,240,655.81
TKS 475,388.40 3,251,209.60 3,537,815.91
SCI 83,292,609.62 -1,142,763.48 -6,414,480.36
TKEI 5,077,370.67 -34,300.74 -900,971.02
7.2 Transactions which Resulted in Change of Equity Interests in a Subsidiary without
Loss of Control
None
8. RISKS RELATED TO FINANCIAL INSTRUMENTS
The main financial instruments of the Company include equity investments, debt
investments, loans, accounts receivable, accounts payable and etc., please see Note 5 for
detail of related items. The risks associated with financial instruments and the risk
management policies which the Company uses to reduce these risks are described below.
The management of the Company manages and supervises the risks to ensure that the risks
can be controlled within a limited range.
The Company uses sensitivity analysis techniques to analyze the possible impact of
reasonable and possible changes in risk variables on current profits and losses or
shareholder equity. Since any risk variable rarely changes in isolation, and the correlation
between variables will have a significant effect on the final impact of the change of a certain
risk variable, the following contents are based on the assumption that the change of each
120
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
variable is carried out independently.
8.1 The targets and policies of risks management
The target of the Company's risk management is to achieve an appropriate balance between
risks and returns, reduce the negative impact of risks on the Company's operating
performance to the lowest level, and maximize the interests of shareholders and other equity
investors. Based on this risk management objective, the basic strategy of the Company’s risk
management is to determine and analyze the various risks faced by the Company, to
establish suitable risk tolerance baseline and conduct risk management, and to supervise
various risks timely and reliably, so the risks are controlled within a limited range.
8.1.1 Market risk
8.1.1.1 Foreign exchange risk
The main exchange rate risk of the Company comes from the foreign currency assets and
liabilities held by the Company and its subsidiaries that are not denominated in its
functional currency. The Company bears the foreign exchange risk primarily concerned with
USD, JPY, IDR, EUR, HKD and NTD. Three of the Company’s subsidiaries use foreign
currencies for purchasing and sales, including SCI uses USD for purchasing and sales,
SCPDI uses IDR for purchasing and sales, TKEI uses NTD for purchasing and sale. Other
than the three subsidiaries mentioned above, other major business activities of the Company
are priced and settled in CNY.
8.1.1.1.1 As of 30 June 2021, the main foreign exchange exposure of the Company’s foreign
currency assets and liabilities are as follows (For presentation purpose, the exposures are
presented in CNY and transferred at the spot rate of the balance sheet date):
Items 30 June 2021 1 January 2021
Cash and cash equivalent 180,452,246.57 184,142,487.23
Accounts receivable 434,390,277.57 462,881,138.22
Other receivables 1,607,639.14 812,189.04
Short-term loan 29,070,450.00 16,345,141.13
Accounts payable 130,044,748.69 102,150,272.47
Other payables 3,061,459.02 3,506,599.56
The Group purchases foreign currency forward contracts to reduce the foreign exchange risk,
and foreign currency forward contracts shall be based on the amount of foreign currency
assets.
121
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
8.2 Credit Risk
On 30 June 2021, the maximum credit risk exposure that may cause financial loss of the
Company mainly comes from the loss of financial assets of the company caused by the
failure of the other party to perform its obligations and the financial guarantee undertaken
by the Company, including:
The book amount of financial assets recognized in the consolidated balance sheet; for
financial instruments at fair value, the book value reflects their risk exposure, but not the
maximum risk exposure, and the maximum risk exposure will change as their fair value
changes in the future.
To reduce credit risks, the Company has established a team responsible for determining the
credit limit, conducting credit approval, and implementing other monitoring procedures to
ensure that necessary measures are taken to recover overdue claims. In addition, the
Company reviews the recovery of each single receivable on each balance sheet date to
ensure that adequate provision for bad debt is made for uncollectible amounts. As a result of
the implemented procedures, the management of the Company believes that the credit risk
assumed by the company has been greatly reduced.
The Company's circulating funds are deposited in banks with higher credit ratings, so the
credit risk of circulating funds is low.
8.2.1 Aging analysis of financial assets that are overdue and not impaired
The Company does not have any financial assets that are overdue and not impaired.
8.2.2 Analysis of financial assets that have suffered an individual impairment
The Company does not have any single impairment financial assets.
8.3 Liquidity Risk
When managing liquidity risk, the Company’s management believes that maintaining
adequate cash and cash equivalents, and monitoring that at the same time, in order to meet
the needs of operation of the Company, and to reduce the impact of fluctuations in cash
flows. The management of the Company monitors the use of bank borrowings and ensures
to abide by the loan agreements.
9. FAIR VALUE DISCLOSURES
The inputs used in the fair value measurement in its entirety are to be classified in the level
of the hierarchy in which the lowest level input that is significant to the measurement is
122
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
classified.
Level 1: Inputs consist of unadjusted quoted prices in active markets for identical assets
or liabilities
Level 2: Inputs for the assets or liabilities (other than those included in Level 1) that are
either directly or indirectly observable.
Level 3: Inputs are unobservable inputs for the assets or liabilities
9.1 Assets and Liabilities Measured at Fair Value at 30 June 2021
Fair value at 30 June 2021
Items
Level 1 Level 2 Level 3 Total
Recurring fair value measurements
(a) Held-for-trading financial assets
(i) Financial assets at fair value
552,835,416.66 552,835,416.66
through profit or loss
Debt instruments 550,000,000.00 550,000,000.00
Equity instruments
Derivatives 2,835,416.66 2,835,416.66
(b) Other investments in equity
instruments
(c) Other non-current financial
assets
Total assets measured at fair value
552,835,416.66 552,835,416.66
on a recurring basis
(d) Held-for-trading financial
liabilities
(i) Financial liabilities at fair value
753,600.00 753,600.00
through profit or loss
Including: held-for-trading bonds
753,600.00 753,600.00
Derivatives
Others
Total liabilities measured at fair
753,600.00 753,600.00
value on a recurring basis
9.2 Determination for the Quoted Prices of Fair Value Measurement in Level 1 on a
Recurring or Nonrecurring Basis
The fair value measurement is based on the valuation provided by the bank where the
unsettled forward foreign exchange is located on the balance sheet date.
123
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
10. RELATED PARTIES AND RELATED PARTY TRANSACTIONS
10.1 General Information of the Parent Company
Percentage of
Registered Voting rights in
Registered Nature of the equity interests
Name of the parent capital (NTD ten the Company
address business in the
thousand) (%)
Company (%)
Manufactures
STAR COMGISTIC and sales 300,000.00 42.90 44.68
Taiwan
CAPITAL CO., LTD. electrical
equipment
Note: The ultimate controlling party of the Company is STAR COMGISTIC CAPITAL CO., LTD.
10.2 General Information of Subsidiaries
Refer to Notes 7 INTERESTS IN OTHER ENTITIES for details of the subsidiaries.
10.3 Other Related Parties of the Company
Name Relationship with the Company
Thermaster Electronic (Xiamen) Ltd. The company is directly controlled by the key management
and closed family members
TsannKuen Enterprise Co., Ltd. Same actual controller
Gold mine chain enterprise Co., Ltd Same actual controller
Xiamen Wuhuama Restaurant Ultimate holding company have equity
Management Co., Ltd.
Canxing International Travel Service Same actual controller
Co., Ltd
10.4 Related Party Transactions
10.4.1 Purchases or sales of goods, rendering or receiving of services
Purchases of goods, receiving of services:
Whether
Content Reporting Approval Same period
Related parties exceed trade
of transaction period trade credit of last year
credit or not
Thermaster Electronic Purchase of 22,612,282.43 40,000,000.00 No 14,049,564.67
(Xiamen) Ltd. goods
TsannKuen Enterprise Purchase of 2,423.83 0.00 Yes 2,630.42
Co., Ltd. goods
438.48 0.00 Yes 210.75
Gold mine chain Purchase of
124
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Whether
Content Reporting Approval Same period
Related parties exceed trade
of transaction period trade credit of last year
credit or not
enterprise Co., Ltd goods
STAR COMGISTIC Purchase of 0.00 0.00 No 223.21
CAPITAL CO., LTD. goods
22,615,144.74 40,000,000.00 14,052,629.05
Total
Sales of goods and rendering of services:
Content
Related parties Reporting period Same period of last year
of transaction
Sales of 5,515,612.66 2,901,040.95
STAR COMGISTIC CAPITAL CO., LTD.
goods
Total 5,515,612.66 2,901,040.95
10.4.2 Leases
The Company as lessor:
The lessee Type of Lease rental Lease rental
assets recognized in recognized in
current period prior period
0.00 21,588.89
Xiamen Wuhuama Restaurant Management Co., Ltd. Property
0.00 21,588.89
Total
The Company as lessee
The lessor Type of Lease rental Lease rental
assets recognized in recognized in prior
current period period
STAR COMGISTIC CAPITAL CO., LTD. Property 581,987.16 592,801.84
581,987.16 592,801.84
Total
10.4.3 Transfers of assets and debt restructuring
None
10.4.4 Key management personnel compensation
Currency: Ten thousand yuan
Item Reporting period Same period of last year
Key management personnel
182.76 154.55
compensation
10.4.5 Other related party transactions
125
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Content of Same period of
Reporting
Related parties period last year
transaction
Quality claim 808,795.31 0.00
STAR COMGISTIC CAPITAL CO., LTD.
payment
Canxing International Travel Service Co., Ltd Accept service 0.00 18,072.06
Gold mine chain enterprise Co., Ltd Provide labor service 0.00 26,795.39
Total 808,795.31 44,867.45
10.5 Receivables and Payables with Related Parties
10.5.1 Receivables
30 June 2021 1 January 2021
Items Book Bad debt Book Bad debt
balance provision balance provision
Accounts receivable
STAR COMGISTIC CAPITAL CO., LTD. 2,074,998.33 2,211,530.36
Total 2,074,998.33 2,211,530.36
Other receivables
STAR COMGISTIC CAPITAL CO., LTD. 204,783.17 202,165.15
Total 204,783.17 202,165.15
10.5.2 Payables
Items 30 June 2021 1 January 2021
Accounts payable
Thermaster Electronic (Xiamen) Ltd 12,629,840.28 14,561,684.71
Total 12,629,840.28 14,561,684.71
Other payables
TsannKuen Enterprise Co., Ltd. 0.00 1,521.28
STAR COMGISTIC CAPITAL CO., LTD. 0.00 533,432.11
Total 0.00 534,953.39
11. COMMITMENTS AND CONTINGENCIES
11.1 Significant Commitments
126
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
11.1.1 Lease commitments:
Items 30 June 2021 1 January 2021
Minimum lease payments under non-cancellable operating
leases：
3,638.00 3,638.00
Within 1 year
3,638.00 3,638.00
1-2 years
3,638.00 3,638.00
2-3 years
109,133.00 109,133.00
Subsequent years
120,047.00 120,047.00
Total
11.1.2 Other commitments
None
11.2 Contingencies
Significant contingencies existing at the balance sheet date:
As of 30 June 2021, The Company has no significant contingencies need to be disclosed.
12. EVENTS AFTER THE REPORTING PERIOD
None
13. NOTES TO THE MAIN ITEMS OF THE FINANCIAL STATEMENTS OF THE
PARENT COMPANY
13.1 Accounts Receivable
13.1.1 Accounts receivable by aging
30 June 2021 1 January 2021
Aging
978,177.70 2,748,224.01
Within 1 year
961,088.54 2,397,992.02
Including: 1 – 90 days
6,348.64 250,231.99
91 – 180 days
5,740.53 100,000.00
181 – 270 days
4,999.99
271 – 365 days
1-2 years
2-3 years
5,000.00 5,000.00
Over 3 years
983,177.70 2,753,224.01
Subtotal
24,278.26 43,085.53
Less: Provision for bad debt
958,899.44 2,710,138.48
Total
127
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
13.1.2 Accounts receivable by bad debt provision method
30 June 2021
Book balance Provision for bad debt
Category Proport Carrying
Provision
Amount ion Amount amount
ratio (%)
(%)
Provision for bad debt
recognised individually
Provision for bad debt 983,177.70 100 24,278.26 2.47 958,899.44
recognised collectively
983,177.70 100 24,278.26 2.47 958,899.44
Including: Portfolio by age
Portfolio by related parties
983,177.70 100 24,278.26 2.47 958,899.44
Total
(Continued)
1 January 2021
Book balance Provision for bad debt
Category Carrying
Proporti Provision
Amount Amount amount
on (%) ratio (%)
Provision for bad debt recognised
individually
Provision for bad debt recognised 2,753,224.01 100 43,085.53 1.56 2,710,138.48
collectively
2,708,902.92 98.39 43,085.53 1.59 2,665,817.39
Including: Portfolio by age
44,321.09 1.61 44,321.09
Portfolio by related parties
2,753,224.01 100 43,085.53 1.56 2,710,138.48
Total
Specific instructions for provision for bad debts: accounts receivable with bad debt
provision recognised collectively by aging
30 June 2021
Aging
Book balance Provision for bad debt Provision ratio (%)
957,759.62 4,236.60 0.44
Not overdue
0.00
Overdue 1 – 30 days
3,328.92 665.78 20.00
Overdue 31 – 60 days
4,933.24 2,219.96 45.00
Overdue 61 – 90 days
17,155.92 17,155.92 100.00
Overdue more than 90 days
983,177.70 24,278.26 2.47
Total
128
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
(Continued)
1 January 2021
Aging
Book balance Provision for bad debt Provision ratio (%)
2,089,752.42 10,448.76 0.50
Not overdue
614,150.50 27,636.77 4.50
Overdue 1 – 30 days
0.00
Overdue 31 – 60 days
0.00
Overdue 61 – 90 days
5,000.00 5,000.00 100.00
Overdue more than 90 days
2,708,902.92 43,085.53 1.59
Total
Accounts receivable with bad debt provision recognised collectively by related parties
1 January 2021
Accounts receivable
Reason
Book balance Provision for bad debt Provision ratio (%)
44,321.09 0.00 0.00
Portfolio by related parties
44,321.09 0.00 0.00
Total
Refer to Note 3.9 for the recognition criteria and explanation of the provision for bad debts
collectively by groups.
13.1.3 Bad debt provision recognized, recovered or reversed during the reporting
period
Changes during the reporting period
1 January 30 June
Category Recovery or
2021 Others 2021
Provision Write-off
reversal
Provision for bad debt 43,085.53 18,807.27 24,278.26
recognised collectively
43,085.53 0.00 18,807.27 0.00 0.00 24,278.26
Total
13.1.4 On 30 June 2021, top five closing balances by entity
Proportion of the balance to the total
Entity name Balance at 30 June 2021 Provision for bad debt
accounts receivable (%)
No. 1 559,534.50 56.91 2,797.67
No. 2 209,790.12 21.34 1,048.95
No. 3 100,000.00 10.17 500.00
No. 4 58,985.00 6.00 294.93
No. 5 29,450.00 3.00 147.25
Total 957,759.62 97.42 4,788.80
13.2 Other Receivables
129
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
13.2.1 Other receivables by category
Items 30 June 2021 1 January 2021
Interest receivable
Dividend receivable
2,606,132.25 3,311,425.63
Other receivables
2,606,132.25 3,311,425.63
Total
13.2.2 Interest receivable
None
13.2.3 Dividends receivable
None
13.2.4 Other receivables
13.2.4.1 Other receivables by aging
Aging 30 June 2021 1 January 2021
Within 1 year 2,528,832.25 3,235,576.23
Including: 1 – 90 days 2,457,032.25 3,135,074.23
91 – 180 days 33,000.00 38,800.00
181 – 270 days 0.00 52,902.00
271 – 365 days 38,800.00 8,800.00
1-2 years 61,702.00
2-3 years 0.00 102,300.00
Over 3 years 102,300.00
Subtotal 2,692,834.25 3,337,876.23
Less: Provision for bad debt 86,702.00 26,450.60
Total 2,606,132.25 3,311,425.63
13.2.4.2 Other receivables by nature
Nature 30 June 2021 1 January 2021
Other open credits 729,594.75 428,739.55
Deposit 100,000.00 100,000.00
Due from related parties 1,863,239.50 2,809,136.68
Subtotal 2,692,834.25 3,337,876.23
Less: Provisions for bad debt 86,702.00 26,450.60
Total 2,606,132.25 3,311,425.63
130
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
13.2.4.3 Bad debt provision
Stage 1 Stage 2 Stage 3
Lifetime
Lifetime
expected
Bad debt provision 12-month expected
credit losses Total
expected credit credit losses
(not
losses (credit-impair
credit-impair
ed)
ed)
26,450.60 26,450.60
Balance at 1 January 2021
Balance at 1 January 2021 recognised in —— —— —— ——
the reporting period
0.00
Transfer to stage 2
0.00
Transfer to stage 3
0.00
Transfer back to stage 2
0.00
Transfer back to stage 1
60,251.40 60,251.40
Provision
0.00
Recovery
0.00
Reversal
0.00
Write-off
0.00
Other changes
86,702.00 0.00 0.00 86,702.00
Balance on 30 June 2021
13.2.4.4 Bad debt provision recognized, recovered or reversed during the
reporting period
Changes during the reporting period
1 January 30 June
Category Recovery or
2021 Others 2021
Provision Write-off
reversal
Provision for bad debt 0.00
recognised individually
Accounts receivable with
26,450.60 60,251.40 86,702.00
provision for bad debt
recognised collectively
Total 26,450.60 60,251.40 0.00 0.00 0.00 86,702.00
131
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
13.2.4.5 Other receivables write-off during the reporting period
Proportion of
Balance as of the balance to
Entity name Nature Aging
30 June 2021 the total other
receivables (%)
HARRIS｜BRICKEN｜
Litigation 52,902.00 1 – 2 years 1.96
MCVAY SLIWOSKI,LLP
50,000.00 Over 5 years 1.86
Alipay Deposit
Xiamen TsannKuen Flagship 50,000.00 4 – 5 years 1.86
Deposit
Store Alipay
Guangzhou Intellectual 20,000.00 270 – 365 days 0.74
Litigation
Property Court
Ningbo Intermediate People’s
Litigation 18,800.00 270 – 365 days 0.70
Court
Total 191,702.00 7.12
13.3 Long-term Equity Investments
30 June 2021 1 January 2021
Provision Provision
Items Book Carrying
for Carrying amount Book balance for
balance amount
impairment impairment
923,414,701.56 923,414,701.56 923,414,701.56 923,414,701.56
Subsidiaries
Joint ventures
and
associates
923,414,701.56 923,414,701.56 923,414,701.56 923,414,701.56
Total
132
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
13.3.1 Investments in subsidiaries
Provision
Provision
Increase Decrease for
for
during the during the impairment
Investees 1 January 2021 30 June 2021 impairment
reporting reporting during the
at 30 June
period period reporting
2021
period
TsannKuen (Zhangzhou)
921,914,701.56 921,914,701.56
Enterprise Co., Ltd.(TKL)
Xiamen Tsannkuen
Property Services Co., Ltd. 1,500,000.00 1,500,000.00
(“TKW”)
Total 923,414,701.56 923,414,701.56
13.4 Revenue and Cost of Sales
The Reporting period The same period of last year
Items
Revenue Costs of sales Revenue Costs of sales
4,468,620.54 3,254,215.03 14,652,175.88 12,982,449.80
Principal activities
22,646,556.50 16,180,892.83 24,729,431.68 16,760,794.10
Other activities
27,115,177.04 19,435,107.86 39,381,607.56 29,743,243.90
Total
13.5 Investment Income
Items The Reporting period The same period of last year
Investment income from long-term equity 114,819,496.58 79,185,554.77
investments under equity method
114,819,496.58 79,185,554.77
Total
14. SUPPLEMENTARY INFORMATION
14.1 Extraordinary Gains or Losses
Items Amount Description
Losses on disposal of non-current assets (inclusive of
996,128.23
impairment allowance write-offs)
Tax refunds or reductions with ultra vires approval or
without official approval documents
Government grants recognised in current profit or loss
(except government grants that is closely related to 1,764,476.00
operations and determined based on a fixed scale
133
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Amount Description
according to the national unified standard)
Funds occupation fee recognised in current profit or loss
from non-financial companies
The excess of attributable fair value of net identifiable
assets over the consideration paid for subsidiaries,
associates, or joint ventures recognised by the
Company
Gains/(losses) generated from non-monetary asset
exchange
Gains /(losses) on entrusted investments or asset
managements
Provision for impairment of each asset due to force
majeure such as a natural disaster
Gains /(losses) on debt restructuring
Corporate restructuring charge, such as expenditure for
staff resettlement and integration cost
Gains /(losses) from excess of fair value in non-arm’s
length transactions
Net gains /(losses) of subsidiaries arising from business
combination under common control from the
beginning of the reporting period till the combination
date
Gains /(losses) arising from contingencies other than
those related to principal activities of the Company
Gains /(losses) arising from changes in fair value of
held-for-trading financial assets, derivative financial
Mainly investment
assets, held-for-trading financial liabilities and derivative income from sale of
financial liabilities during the holding period and forward foreign
16,801,379.02 exchange contracts,
investment income arising from disposal of gains on changes of
fair value and income
held-for-trading financial assets, derivative financial of financial products
assets, held-for-trading financial liabilities, derivative
financial liabilities and other debt investment except
134
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
Items Amount Description
effective hedging transactions related to the Company's
principal activities
Reversal of provision for impairment of contract assets
and accounts receivable tested for impairment
individually
Gains /(losses) arising from entrusted loans to other
entities
Gains /(losses) arising from changes in fair value of
investment properties adopting fair value model for
subsequent measurement
Impact of one-off adjustment to current profit or loss
based on the requirements of taxation and accounting
laws and regulations
Custody fee income from entrusted operations
Other non-operating income/expenses except for items
1,524,402.78
mentioned above
Other extraordinary gains/(losses) defined
Total extraordinary gains/(losses) 21,086,386.03
Less: tax effect 3,543,149.21
Net extraordinary gains/(losses) 17,543,236.82
Less: net extraordinary gains/(losses) attributable to
5,159,529.30
non-controlling interest
Net extraordinary gains/(losses) attributable to ordinary
12,383,707.52
shareholders
Note: The symbol"+" in the non-recurring profit and loss item represents income, and "-" represents loss
or expenditure.
The Company recognised the extraordinary gains or losses in accordance with the Explanatory
Announcement regarding Information Disclosure by Publicly Listed Company No. 1 - Non-recurring
Profit and Loss (CSRC announcement [2008] No.43).
135
Tsann Kuen (China) Enterprise Co., Ltd. Notes to the financial statements
14.2 Return on Net Assets and Earnings Per Share (‘EPS’)
Weighted average EPS
Profit for the reporting period return on net assets Diluted (Yuan per
Basic (Yuan per share)
(%) share)
Net profit attributable to ordinary
6.76 0.33 0.33
shareholders
Net profit attributable to ordinary
shareholders after extraordinary 5.41 0.26 0.26
gains and losses
14.3 Supplementary Information on Changes in Accounting Policies
Please see Note 3.29 “Changes in Significant Accounting Policies and Accounting
Estimates” for details.
Name of the Company: TsannKuen (China) Enterprise Co., Ltd.
Date: 3 August 2021
136
