FIYTA Precision Technology Co., Ltd.
2021 Annual Report
March, 2022
Section 1 Important Notice, Table of Contents and DefinitionThe Board of Directors, the Supervisory Committee, directors, supervisors and senior executives herebyindividually and collectively accept responsibility for the correctness, accuracy and completeness of thecontents of this report and confirm that there are neither material omissions nor errors which would render anystatement misleading.Zhang Xuhua, the Company leader, Song Yaoming, chief financial officer, and Tian Hui, the manager of theaccounting department (treasurer) hereby confirm the authenticity and completeness of the financial reportenclosed in this Annual Report.All the directors attended the board meeting for reviewing the Annual Report.Any perspective description, such as the future plan, development strategy, etc. involved in the Annual Reportshall not constitute the Company’s substantial commitment to the investors and the investors should please payattention to their investment risks.In this report, the Company has described in detail the existing macro-economic risks as well as operation risks.Investors are advised to refer to the contents concerning the Company's future development prospect in Section3 Discussion and Analysis of the Management.The profit distribution preplan reviewed and approved by the Board of Directors is summarized as follows: basedon the number of shares after deducting the shares in the special securities account for repurchase from thetotal number of shares on the equity registration date when the profit distribution plan is implemented in thefuture, the Company is going to distribute cash dividend to all shareholders at the rate of CNY 3.00 (with taxinclusive) for every 10 shares, and 0 bonus shares (with tax inclusive) shall be distributed and no public reserveshall be capitalized.
Table of Contents
Section 1 Important Notice, Table of Contents and DefinitionSection 2 Company Profile and Financial HighlightsSection 3 Discussion and Analysis by the ManagementSection 4 Corporate GovernanceSection 5 Environment and Social ResponsibilitySection 6 Significant EventsSection 7 Change of the Shares and Particulars about ShareholdersSection 8 About the Preferred SharesSection 9 About BondsSection 10 Financial Report
Documents Available for Inspection
I. Financial Statements signed by and under the seal of the legal representative, chief accountant and accountingsupervisors;
II. The original Auditors’ Report affixed with the seal of the accounting firm, signed by and affixed with the seal of thecertified public accountant.
III. Originals of all documents and manuscripts of all the Company’s documents disclosed to the public during thereporting period.
Definitions
| Terms to be defined | Refers to | Definition |
| This Company, the Company or FIYTA | Refers to | FIYTA Precision Technology Co., Ltd. |
| AVIC | Refers to | Aviation Industry Corporation of China, Ltd. |
| AVIC International | Refers to | AVIC International Holding Corporation |
| AVIC International Industrial | Refers to | AVIC International Industrial Holding Co., Ltd. |
| AVIC International Shenzhen | Refers to | AVIC International Shenzhen Co., Ltd. |
| AVIC IHL | Refers to | AVIC International Holding Limited |
| The Sales Co. | Refers to | FIYTA Sales Co., Ltd. |
| Harmony | Refers to | Shenzhen Harmony World Watches Center Co., Ltd. |
| Precision Technology Co. | Refers to | Shenzhen FIYTA Precision Technology Co., Ltd. |
| Science & Technology Development Co. | Refers to | Shenzhen FIYTA Technology Development Co., Ltd. |
| the Hong Kong Co. | Refers to | FIYTA (Hong Kong) Limited |
| SHIYUEHUI | Refers to | Shiyuehui Boutique (Shenzhen) Co., Ltd. |
| Hengdarui | Refers to | Liaoning Hengdarui Commerce & Trade Co., Ltd. |
| Harmony E-Commerce Limited | Refers to | Shenzhen Harmony E-Commerce Limited |
| Xunhang Co. | Refers to | Shenzhen XUNHANG Precision Technology Co., Ltd. |
| HARMONY (Hainan) Co. | Refers to | Harmony World Watches Center (Hainan) Ltd. |
| Shanghai Watch Industry | Refers to | Shanghai Watch Industry Co., Ltd. |
| Rainbow Ltd. | Refers to | Rainbow Digital Commercial Co., Ltd. |
| Shennan Circuit | Refers to | Shennan Circuit Co., Ltd. |
Section 2 Company Profile and Financial HighlightsI. Company Information
| Short form of the stock | FIYTA and FIYTA B | Stock Code | 000026 and 200026 |
| Stock Exchange Listed with | Shenzhen Stock Exchange | ||
| Company Name in Chinese | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company Name in Chinese | 飞亚达公司 | ||
| Company name in English (if any) | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company name in English (if any) | FIYTA | ||
| Legal Representative | Zhang Xuhua | ||
| Registered address: | FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Changes of the Company's Registered Address | On January 30, 1997, the Company’s registered address was changed from "Building 6, CATIC Zone, Shennan Road Central, Shenzhen" to "Building 6, CATIC Zone, Shennan Road Central, Futian District, Shenzhen"; on April 5, 2000, the registered address was changed to "Fiyta Building, 163 Zhenhua Road, Futian District, Shenzhen"; on February 20, 2004, the registered address was changed to "FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen". | ||
| Office Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Website: | www.fiytagroup.com | ||
| E-mail: | investor@fiyta.com.cn | ||
II. Liaison Persons and Communication Information
| Secretary of the Board | Securities Affairs Representative | |
| Names | Song Yaoming (acting ) | Xiong Yaojia |
| Liaison Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | 18th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen |
| Tel. | 0755-86013669 | 0755-86013669 |
| Fax | 0755-83348369 | 0755-83348369 |
| investor@fiyta.com.cn | investor@fiyta.com.cn |
III. Information Disclosure and Place where the Regular Reports are Prepared
| The website of the Stock Exchange on which the Company discloses the Annual Report | http://www.szse.cn |
| Names and websites of the media on which the Company discloses the Annual Report | Securities Times, Hong Kong Commercial Daily, and www.cninfo.com.cn |
| Place where the Company’s Annual Report was prepared and is placed for inquiry | The Planning & Operation Department of the Company |
IV. Changes in Registration
| Organization Code | 91440300192189783K |
| Changes in principal business activities since listing (if any) | No change |
| Changes in the controlling shareholder over the past years (if any) | No change |
V. Other Relevant InformationThe CPAs appointed by the Company
| Name of the CPAs | Da Hua Certified Public Accountants (Special General Partnership) |
| Office address | 1101, Building 7, No. 16 Xisi huanzhong Road, Haidian District, Beijing |
| Names of the CPAs as the authorized signatories | Long Jiao and Wang Dong |
The sponsor performing persistent supervision duties engaged by the Company in the reporting periodInapplicableThe financial advisor performing persistent supervision duties engaged by the Company in the reporting periodInapplicableVI. Summary of Accounting/Financial DataDoes the Company need to make retroactive adjustment or restatement of the accounting data of the previous years?No
| 2021 | 2020 | Increase/decrease in the reporting year over the previous year | 2019 | |
| Turnover in CNY | 5,243,733,540.93 | 4,243,439,952.59 | 23.57% | 3,704,210,734.90 |
| Net profit attributable to the Company’s shareholders, in CNY | 387,840,282.95 | 294,115,156.04 | 31.87% | 215,909,014.15 |
| Net profit attributable to the Company’s | 369,418,754.83 | 269,095,012.41 | 37.28% | 199,678,661.09 |
| shareholders less the non-recurring items, in CNY | ||||
| Net cash flows arising from operating activities, in CNY | 547,249,108.45 | 378,210,505.87 | 44.69% | 444,820,768.61 |
| Basic earning per share (CNY/share) | 0.9036 | 0.6764 | 33.59% | 0.4943 |
| Diluted earning per share (CNY/share) | 0.9036 | 0.6764 | 33.59% | 0.4943 |
| Return on equity, weighted average (%) | 13.39% | 10.78% | 2.61% | 8.21% |
| End of 2021 | End of 2020 | Increase/decrease of the end of the reporting year over the end of the previous year | End of 2019 | |
| Total assets, in CNY | 4,110,579,952.49 | 4,018,712,700.18 | 2.29% | 3,760,923,285.37 |
| Net assets attributable to the Company’s shareholders (owner’s equity attributable to the Company’s shareholders, in CNY) | 3,013,232,642.53 | 2,799,948,388.09 | 7.62% | 2,654,533,766.99 |
The lower of the Company’s net profit before and after the deduction of non-recurring gains and losses in the last threefiscal years is negative, and the auditor's report of the previous year shows that the Company’s going concern ability isuncertain.NoThe lower of the net profit before and after the deduction of the non-recurring gains and losses is negative.NoVII. Discrepancy in accounting data between IAS and CAS
1. Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’sshareholders respectively according to the IAS and the CAS.Inapplicable
2. Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’sshareholders respectively according to the IAS and the CAS.InapplicableVIII. Financial Data Summary based on Quarters
In CNY
| The first quarter | The second quarter | The third quarter | The fourth quarter | |
| Turnover | 1,378,277,735.81 | 1,399,241,785.53 | 1,307,278,222.69 | 1,158,935,796.90 |
| Net profit attributable to the Company’s shareholders | 118,222,042.23 | 115,322,684.32 | 109,034,679.41 | 45,260,876.99 |
| Net profit less the non-recurring profit/loss attributable to the Company’s shareholders | 113,576,505.85 | 110,219,727.57 | 104,537,027.94 | 41,085,493.47 |
| Net cash flows arising from operating activities | 28,711,219.83 | 176,443,344.10 | 163,056,189.37 | 179,038,355.15 |
Are the above financial indicators or their totals significantly different from the financial indicators disclosed by theCompany in the quarterly and semi-annual reports?NoIX. Extraordinary items and amount
In CNY
| Items | Amount in 2021 | Amount in 2020 | Amount in 2019 | Note |
| Gain/loss from disposal of non-current assets, including the part written-off with the provision for impairment of assets. | 730,134.87 | -369,857.30 | -926,118.60 | |
| The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s normal business and conform with the national standard amount or quantity) | 23,476,186.50 | 30,634,128.57 | 18,428,906.18 | |
| Reversal of provision for impairment of accounts receivable that has been separately tested for impairment | 2,225,653.32 | 163,925.30 | ||
| Other non-operating income and expenses other than the aforesaid items | -3,058,731.52 | 1,556,300.78 | 3,353,916.43 | |
| Less: Amount affected by the income tax | 4,951,715.05 | 6,964,353.72 | 4,626,350.95 | |
| Total | 18,421,528.12 | 25,020,143.63 | 16,230,353.06 | -- |
Details of other gains and losses in compliance with the definition of non-recurring gains and losses.InapplicableExplanation of the non-recurring gains and losses listed in the Explanatory Announcement No.1 on Information Disclosurefor Companies Offering their Securities to the Public - Non-recurring Gains and Losses as recurring gains and lossesInapplicable
Section 3 Discussion and Analysis by the Management
I. About the Industry the Company Engages inAs a representative of precision technology, watches bear diversified attributes of function and art. They carry emotionalneeds such as "love" and "beauty" on the wrist, and are gradually becoming a symbolic representation of consumers'pursuit of quality life.
Watch industry in which the Company engages has experienced flourishing for centuries with continuous appearance,technological innovation and profound historical and cultural accumulation. It has formed a relatively stable industrystructure. The high-end luxury watches mainly represented by Swiss watch brands, mid-end and fashion watchescomposed represented by European and American brands, Japanese brands, and domestic brands are facing the broadglobal watch consumer market.
With the economic growth of China, consumption upgrading and the guidance of consumption policies, the continuousexpansion of the domestic watch consumption market has become a consensus. Even after the impact of COVID-19, itsoverall scale has a compound growth rate of more than 6% in the past five years.
What is noticeable that the expansion of high-net-worth individuals and the change of consumption concept havepromoted the continuous popularization and rejuvenation of domestic mid-to-high-end consumption, and the consumptionof mid-to-high-end watches mainly by Swiss watch brands has performed well. According to the statistics of the SwissWatch Industry Federation , the compound growth rate of Swiss watch exports to Mainland China in the past five years isnearly 20%, and it will hit a record high in 2021. At the same time, driven by the overall improvement of domesticmanufacturing level, digital transformation, cultural self-confidence and return of consumption, the rise of national tideculture, domestic brands in the watch industry have also ushered in new development opportunities, and continue toupgrade quality and personalization .
In August 2021, the tenth meeting of the Central Committee for Financial and Economic Affairs made policy arrangementson promoting common prosperity, further clarifying the expansion of the scale of the middle-income group and optimizingthe income structure.
It is true that economic development and policy dividends have provided many development opportunities for the industrywe are in, but also brought about great challenges.
At present, the mid-to-high-end watch brands dominated by the Swiss watch brand are still the main driving force for thegrowth of the industry, and the top brand effect is significant. Domestic watch brands are facing many challenges in termsof operational capabilities and resource integration capabilities. The rapid development has put forward a new topic ofaccelerating digital transformation for offline physical business; the normalization and periodic repetition of COVID-19 hascaused cyclical fluctuations in the consumer market and consumer confidence.
Year 2021 is the first year of the "14th Five-Year Plan". We are now standing on a new level. Looking back at the past 30years, the Company has always been deeply involved in the watch industry, and has grown into a flagship company in
China's watch industry. The "FIYTA" brand has become one of the most well-known watch brands in China after thereform and opening up, and the market share and comprehensive competitive strength of HARMONY watch retailbusiness rank among the forefront of the domestic watch retail industry. In the face of increasing industry competition, weshall adhere to the "empty cup attitude", face up to the challenges, seize opportunities, and take the initiative toconsolidate and enhance core competitiveness to adapt to market changes.
The road is ahead. We believe that time shall witness our growth.II. Main business the Company operated in the reporting periodWith the establishment and development originated from aviation precision manufacturing and material technology, theCompany is mainly carrying out the activities of watch brand management and luxurious watch retails. From theperspective of technical characteristics, the Company is engaged in precision technology industry.
Since its establishment, relying on the advantages in precision manufacturing technology, material technology and talentsof the aviation industry, the Company has been continuously devoting itself to the building of professional watch-makingcapability and brand operation, has successfully built the "FIYTA" brand and established the brand a leading position inthe domestic industry by virtue of the advantages in technology and quality.
In order to grasp the opportunities in the domestic famous brand watch market and accelerate the breakthrough of its ownbrand, the Company began to expand the retail chain business of famous brand watches in 1997, and is committed tobecoming the most outstanding comprehensive service provider of famous brand watches. The Company has alwaysfocused on strengthening the construction of brand resources and channel resources, deepening the cooperativerelationship between international excellent watch brands and domestic high-end retail channels, refined operations, anddigital development. While expanding the Company’s revenue sources, it has also established stable base are for thedevelopment of its own brand.
Under the general background of industrial upgrading and intelligent manufacturing, the Company relies on high-endprecision manufacturing technology and industrial accumulation, based on the development principle of “technology beinghomologous, the industry being same-rooted and value being co-directional”, and extends the development of precisiontechnology business and smart wears business. At present, these two businesses have begun to take shape.
The Company adheres to the original intention of "Big Country Brand", and relies on precision manufacturing technology,brand influence and channel deep cultivation to promote continuous brand breakthroughs. The Company's sales scale isat the forefront of the industry. Over the years, the Company has achieved a favorable industry recognition and reputation.In 2021, the Company was honorably awarded the titles of "International Reputation Brand", "Top 200 Enterprises inChina's Light Industry", "Top 20 Listed Companies in Governance in the Greater Bay Area in 2021", and was granted"Shenzhen R&D and Standardization Synchronization Demonstration Enterprise Grade A", and its wholly-ownedsubsidiary was elected in the List of Key Technologically Advanced Enterprises in Guangdong Province. Accompanied bythe launch of the "Shenzhou 12" manned spacecraft, the Company has once again helped China's manned spaceflightindustry.III. Analysis on Core Competitiveness(I) Adhering to Brand Leadership and Having Accumulated Rich Experience in Brand Management
Since its establishment, FIYTA has always adhered to brand leadership, with building of a flagship brand in the Chinesewatch industry as its development goal, and has achieved multiple industry firsts in brand building, marketingcommunication, product design, etc., and has a solid brand operation foundation. In the 1990s, with the CCTV newsbroadcast announcing "FIYTA Telling Time for you", the Company successfully established the popularity and influence ofthe FIYTA Brand in China; at the beginning of the 21st century, since the Chinese astronauts first entered space, theirprofessional chronographs were all manufactured by FIYTA. “FIYTA” has become one of the world's three biggestaerospace watch brands, and the spirit of professional watchmaking continues to be passed on with the country's mannedaerospace industry. Meanwhile, the Company actively promoted the development of internationalization and byparticipating in the preparation of international standards ,entered BASELWORLD etc., strengthen exchanges andinteractions with outstanding Swiss brands, played an active role on the world watch stage, and persistently increasedglobal influence.
(II) Construction of Deep Ploughed Channel and Creating Excellent Channel Management AbilityFIYTA persistently constructed the deeply ploughed channel, and continuously provided a source of power for branddevelopment with high-quality services and refined operation capability. The Company has formed a globalized salesnetwork centered on the domestic market. FIYTA brand channels have been distributed in more than 30 countries andregions around the world, with more than 3,000 business outlets; HARMONY World Watch Retails have upgraded thedeep ploughed channels with more than 200 business outlets; on the basis of full coverage of cooperation withmainstream e-commerce platforms, the Company focused on promoting the expansion of innovative channels, andstarted trial for the new channels, such as live video, mini programs, etc. The Company has always devoted itself tobuilding the ability of outstanding channel operation, powerful team, excellent services, and providing customers with thebest consumption experience in all aspects. The “Three-Level Marketing”, “Perfect Sales”, “Outstanding Operation” etc.have already been deposited as the core work logic of channel operation.
In recent years, the Company has comprehensively promoted digital construction, made a preliminary result in the digitaltransformation and achieved full coverage of online and offline self-operated stores, and shall provide customers withmore systematic professional services and create more value.
(III) Building the Advantages of the Leading Core technology Based on Precision TechnologyOver more than 30 years, the company has been devoting itself to the building of precision technology research anddevelopment capability, has successively built advanced R & D, production technology and manufacturing technologyplatforms, and has established R & D and production bases in Shenzhen and Switzerland respectively; and hasestablished professional watchmaking capabilities, including self-made driving units of watches and key componentsmanufacturing, space watch research and development and high-end watchmaking techniques, etc., and achievedcontinuous breakthroughs in research and development and application of new materials, new processes and newtechnologies. At present, the Company has 2 national high-tech enterprises, established a national enterprise technologycenter, a national industrial design center, and is a national technological innovation demonstration enterprise. TheCompany has accumulatively applied for 611 patents and been granted 566 patents, including 4 honorable mentions ofthe Chinese patents, 1 gold award of China Design and 5 honorable mentions of China design; the Company has takenlead in preparation of more than 55% of the national watch industry standards and has also actively participated inpreparation of the international industrial standards and took lead and participated in preparation of many internationalstandards.
IV. Analysis on Principal Businesses
1. General
In 2021, the macro economy was full of complexity, and the rebound of consumption gradually slowed down since thethird quarter, and the year-on-year growth rate of total domestic retail sales projected a “high to low” outlook. In the face ofthe complex and changeable consumer market, repeated epidemics in many places and occasional natural disasters andmany other impacts, the Company continued to focus on "Brand Strength, Product Strength, and Channel Strength" onthe premise of strictly preventing and controlling the epidemic and ensuring the health of employees, made every effort topromote high-quality development and the implementation of the strategy of great brand, and cooperated with allemployees to effectively respond to external pressures and challenges, and continued to achieve breakthrough in thebusiness performances. In the reporting period, the Company realized revenue amounting to CNY 5,243.73 million withyear-on-year growth of 23.57% and realized total profit amounting to CNY 502.33 million with a year-on-year growth of
34.51%. The Company realized growth and reached new highs successively for five years. At the same time, theCompany's operational capability and efficiency were further improved. The return on net assets reached 13.39%, anincrease of 2.61 percentage points year-on-year; the inventory turnover rate reached 1.57 times, an increase of 0.22times year-on-year.
(1) Adhered to brand leadership and continued to promote brand building and product operation capabilityDuring the reporting period, the FIYTA brand solidly promoted the integration of products and sales, renewed the brandimage of the terminal, deepened the core DNA of aerospace, and carried out integration of the marketing activities inconjunction with the "Shenzhou 12", "Zhuhai Air Show", "Aerospace Month" and other hot spots. As a result, the revenuefrom aerospace series products increased significantly year-on-year. The Company deeply cultured the core series,optimized the logic of new product development, and significantly improved the success rate of new product development;continued to focus on "excellent operation", "outstanding sales" and CRM system, and solidly promoted refinement inoperation, and achieved an increase in the average unit price per customer by 12% year-on-year. HARMONY continuedto consolidate its operation capability and dig deep into the dimensions of high-quality services, excellent operation, andcustomer research. The average single-store output of the old stores increased by 27.93% year-on-year, the averagecustomer unit price increased by 25.44% year-on-year, and the inventory turnover rate exceeded 2 times.
(2) Accelerated upgrading of channel structure and improved channel layout
During the reporting period, the FIYTA brand steadily promoted the entry of stores in shopping malls, and newly opened100 self-operated stores in shopping malls; deepened online channel operations, and achieved good overall performanceduring the "Double Eleven" period; Harmony steadily promoted high-quality products in the expansion of new stores andthe renovation of old stores with mid-to-high-end channels accounting for more than 55%; actively promoted theinnovative cooperation model of stores, and opened high-end collection stores Time Vallée in cooperation with RichemontGroup in Shenzhen and Dongguan. At the same time, on the basis of the full coverage of the Hainan duty-free system ofits own brand, the Company further improved the strategic layout of Hainan Offshore Duty-free Market by establishing awholly-owned subsidiary in Hainan.
(3) Adhered to innovation-driving, accelerated movement production capacity building and digital transformationDuring the reporting period, the Company continued to promote the watch movement production capacity building, andrealized successful application of some self-developed movements in a series of products such as aerospace watches.The FIYTA brand continued to deepen the operation of the CRM system. Membership recruitment and potential customer
conversion continued to grow steadily, and offline member sales accounted for 94%. The branch cloud store project wasofficially launched, and private domain operations were actively explored. On the basis of the iteration of the digital retailsystem, HARMONY further promoted the integration of online and offline development, and the transaction amount fromrepurchase by regular customers and purchase by potential customers increased significantly, and the total amountaccounted for more than 50% of the overall revenue; new media operations also achieved innovative breakthrough.
(4) Seized market opportunities and accelerated the development of new businessesDuring the reporting period, the Company, on the basis of deep cultivation of optical communications and lasers inprecision technology business, promoted the expansion of new markets and new customers, such as aerospace andmedical equipment in an orderly manner, and some projects entered the stage of batch cooperation; the smart wearablebusiness focused on creating hot-selling products and improving the proportion of self-operated channels. As a result, itsrevenue increased by 70% year-on-year.
Year-on-year Movements of the Key Financial Items are summarized as follows:
Balance sheet items
| Items | Ending balance | Opening balance | Variation proportion | Cause of the movement |
| Monetary capital | 210,254,737.14 | 353,057,285.71 | -40.45% | Mainly due to the impact of short-term loan repayment during the reporting year. |
| Advance payment for goods | 7,946,750.81 | 16,612,773.76 | -52.16% | Mainly due to the decrease of advance payment for purchases in HARMONY World Watch Retail |
| Other non-current assets | 42,680,753.78 | 13,536,307.13 | 215.31% | Mainly due to the increase in advance payments for the purchase of real estate during the reporting year. |
| Short term loans | 265,994,595.43 | 542,673,278.09 | -50.98% | Mainly due to the impact of short-term loan repayment during the reporting year. |
| Notes payable | 21,223.10 | 3,581,360.00 | -99.41% | This was mainly due to the due acceptance of the notes payable of the precision technology business. |
| Dividends payable | 5,015,026.30 | 1,639,513.77 | 205.88% | Mainly due to the increase in dividends payable in the equity incentive during the reporting year. |
| Deferred income | 1,792,833.90 | 2,916,346.43 | -38.52% | Mainly due to the impact of the write-off of deferred income during the reporting year. |
| Deferred income tax liability | 5,236,514.03 | 3,067,834.55 | 70.69% | Mainly due to the influence from the implementation of the new standards for lease during the reporting year. |
| Other comprehensive income | -7,658,346.40 | 976,871.41 | -883.97% | Mainly due to movement of the translation balance of foreign currency statements |
Income statement items from the beginning of the year to the end of the reporting period
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Taxes and surcharges | 37,563,586.80 | 25,444,139.30 | 47.63% | Mainly due to the influence of the revenue growth |
| during the reporting year. | ||||
| Loss from impairment of assets | -25,861,394.56 | -15,426,526.41 | -67.64% | Mainly due to the increase of the provision for price falling of the brand watch inventory in the reporting year. |
| Income from disposal of assets | 730,134.87 | -369,857.30 | 297.41% | Mainly due to the increase in income from disposal of assets related to the implementation of the new lease standards. |
| Non-operating income | 627,435.03 | 3,111,413.64 | -79.83% | Mainly due to the greater impact from the adjustment of the compensation received by stores in the same period of the previous year. |
| Income tax expenses | 114,467,375.88 | 79,338,516.60 | 44.28% | The increase in income tax expenses was mainly due to the increase in profit. |
Cash flow statement items from the beginning of the year to the end of the reporting period
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Various taxes paid | 346,383,502.98 | 222,180,568.75 | 55.90% | Mainly due to the increase in taxes and surcharges due to the increase in income during the reporting year. |
| Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets | 204,422,787.61 | 133,531,954.47 | 53.09% | Mainly due to the increase in expenditure on new store additions and improvements during the reporting year. |
| Cash received from absorbing investment | 58,216,000.00 | - | 100.00% | Mainly due to the subscription money received from the implementation of the 2018 A-share Restricted Stock Incentive Plan (Phase II) during the reporting year. |
| Cash received from loans | 1,155,724,412.23 | 743,213,671.65 | 55.50% | Mainly due to the increase in bank borrowings during the reporting year. |
| Cash paid for debt repayment | 1,386,708,158.95 | 768,247,433.10 | 80.50% | Mainly due to the increase in debt repayment during the reporting year. |
| Cash paid for dividend/profit distribution or repayment of interest | 187,069,913.31 | 106,703,352.70 | 75.32% | Mainly due to increase of the cash dividends during the reporting year. |
| Other fund-raising activity related cash payments | 124,710,390.58 | 72,317,669.93 | 72.45% | Mainly due to the influence from the implementation of the new standards for lease and decrease of payment for repurchase of B-shares during the reporting year. |
Influence of the change ofexchange rate on the cashand cash equivalent
| Influence of the change of exchange rate on the cash and cash equivalent | -1,140,476.33 | -2,810,603.32 | 59.42% | Mainly due to the influence of the change of exchange rate. |
2. Revenue and Costs
(1) Composition of Revenues
In CNY
| 2021 | 2020 | Year-on-year increase/decrease | |||||
| Amount | Proportion in the revenue | Amount | Proportion in the revenue | ||||
| Total operating revenue | 5,243,733,540.93 | 100% | 4,243,439,952.59 | 100% | 23.57% | ||
| Based on sectors | |||||||
| Watches | 4,923,280,724.48 | 93.89% | 3,970,903,426.36 | 93.58% | 23.98% | ||
| Precision technology business | 150,094,350.20 | 2.86% | 138,806,456.76 | 3.27% | 8.13% | ||
| Leases | 151,461,309.62 | 2.89% | 117,282,310.32 | 2.76% | 29.14% | ||
| Others | 18,897,156.63 | 0.36% | 16,447,759.15 | 0.39% | 14.89% | ||
| Based on products | |||||||
| Watch brand business | 1,012,443,357.87 | 19.31% | 970,035,756.22 | 22.86% | 4.37% | ||
| Watch retail and services | 3,910,837,366.61 | 74.58% | 3,000,867,670.14 | 70.72% | 30.32% | ||
| Precision technology business | 150,094,350.20 | 2.86% | 138,806,456.76 | 3.27% | 8.13% | ||
| Leases | 151,461,309.62 | 2.89% | 117,282,310.32 | 2.76% | 29.14% | ||
| Others | 18,897,156.63 | 0.36% | 16,447,759.15 | 0.39% | 14.89% | ||
| Based on regions | |||||||
| South China | 2,685,613,515.77 | 51.21% | 2,198,531,106.33 | 51.81% | 22.15% | ||
| Northwest China | 746,028,947.88 | 14.23% | 601,805,121.89 | 14.18% | 23.97% | ||
| Northeast China | 249,949,686.95 | 4.77% | 198,893,856.16 | 4.69% | 25.67% | ||
| East China | 732,103,484.67 | 13.96% | 561,941,020.36 | 13.24% | 30.28% | ||
| Northeast China | 294,675,252.56 | 5.62% | 233,806,759.67 | 5.51% | 26.03% | ||
| Southwest China | 535,362,653.10 | 10.21% | 448,462,088.18 | 10.57% | 19.38% | ||
| Distribution model | |||||||
| Direct selling | 5,047,771,480.39 | 96.26% | 4,040,253,573.70 | 95.21% | 1.05% | ||
| Distribution | 195,962,060.54 | 3.74% | 203,186,378.89 | 4.79% | -1.05% | ||
(2) Sector(s), Product(s), Region(s) and Sales Models Taking over 10% of the Operating Revenue or OperatingProfit
In CNY
| Turnover | Operating cost | Gross profit rate | Year-on-year increase/decrease of operating revenue over the previous year | Year-on-year increase/decrease of operating costs over the previous year | Year-on-year increase/decrease of gross profit rate over the previous year | ||
| Based on sectors | |||||||
| Watches | 4,923,280,724.48 | 3,117,288,604.21 | 36.68% | 23.98% | 25.77% | -0.90% | |
| Precision technology business | 150,094,350.20 | 123,279,446.44 | 17.87% | 8.13% | 8.38% | -0.19% | |
| Leases | 151,461,309.62 | 42,866,382.31 | 71.70% | 29.14% | 5.66% | 6.29% | |
| Others | 18,897,156.63 | 2,221,796.17 | 88.24% | 14.89% | -65.07% | 26.91% | |
| Based on products | |||||||
| Watch brand business | 1,012,443,357.87 | 287,829,118.76 | 71.57% | 4.37% | 2.80% | 0.43% | |
| Watch retail and services | 3,910,837,366.61 | 2,829,459,485.45 | 27.65% | 30.32% | 28.70% | 0.91% | |
| Precision technology business | 150,094,350.20 | 123,279,446.44 | 17.87% | 8.13% | 8.38% | -0.19% | |
| Leases | 151,461,309.62 | 42,866,382.31 | 71.70% | 29.14% | 5.66% | 6.29% | |
| Others | 18,897,156.63 | 2,221,796.17 | 88.24% | 14.89% | -65.07% | 26.91% | |
| Based on regions | |||||||
| South China | 2,685,613,515.77 | 1,715,184,561.60 | 36.13% | 22.15% | 24.34% | -1.12% | |
| Northwest China | 746,028,947.88 | 461,425,308.95 | 38.15% | 23.97% | 24.78% | -0.40% | |
| Northeast China | 249,949,686.95 | 143,242,438.82 | 42.69% | 25.67% | 23.30% | 1.10% | |
| East China | 732,103,484.67 | 440,933,119.23 | 39.77% | 30.28% | 26.33% | 1.88% | |
| Northeast China | 294,675,252.56 | 203,497,030.88 | 30.94% | 26.03% | 25.90% | 0.08% | |
| Southwest China | 535,362,653.10 | 321,373,769.65 | 39.97% | 19.38% | 22.13% | -1.35% | |
| Distribution model | |||||||
| Direct selling | 5,047,771,480.39 | 3,215,136,567.11 | 36.31% | 24.94% | 25.61% | -0.34% | |
| Distribution | 195,962,060.54 | 70,519,662.02 | 64.01% | -3.56% | -11.49% | 3.23% | |
While adjustment of the statistical caliber for the principal business data took place in the reporting period, the principalbusiness data with the statistical caliber adjusted at the end of the reporting period in the latest year.Inapplicable
(3) Is the physical sales income greater than the service income
Yes
| Classified based on sectors | Items | In CNY | 2021 | 2020 | Year-on-year increase/decrease |
| Brand watches | Sales volume | pcs | 795,178 | 820,987 | -3.14% |
| Output | pcs | 727,091 | 793,206 | -8.34% | |
| Inventory | pcs | 996,794 | 1,064,881 | -6.39% |
Note to the cause of the year-on-year movement of the relevant data by over 30%Inapplicable
(4) Implementation of Important Sale Contracts and Important Purchase Contracts Concluded during theReporting YearInapplicable
(5) Composition of Operating Costs
Classified based on sectors and products
In CNY
| Classified based on sectors | Items | 2021 | 2020 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watches | Goods purchase cost | 2,829,459,485.45 | 86.12% | 2,198,558,391.97 | 83.30% | 28.70% |
| Raw materials | 256,857,016.25 | 7.82% | 250,957,959.33 | 9.51% | 2.35% | |
| Labor costs | 24,624,829.03 | 0.75% | 22,639,961.48 | 0.86% | 8.77% | |
| Depreciation expense | 776,630.56 | 0.02% | 1,290,580.38 | 0.05% | -39.82% | |
| Water and electricity fees | 557,212.31 | 0.02% | 576,614.61 | 0.02% | -3.36% | |
| Rent | 254,302.70 | 0.01% | 198,298.53 | 0.01% | 28.24% | |
| Others | 4,759,127.90 | 0.14% | 4,326,929.11 | 0.16% | 9.99% | |
| Precision | Raw materials | 88,916,323.84 | 2.71% | 89,561,279.27 | 3.39% | -0.72% |
| technology business | Labor costs | 19,308,218.35 | 0.59% | 15,492,911.02 | 0.59% | 24.63% |
| Depreciation expense | 2,929,018.86 | 0.09% | 1,715,869.90 | 0.07% | 70.70% | |
| Water and electricity fees | 1,185,220.49 | 0.04% | 936,944.23 | 0.04% | 26.50% | |
| Rent | 127,758.44 | 0.00% | 111,201.56 | 0.00% | 14.89% | |
| Others | 10,812,906.46 | 0.33% | 5,930,402.44 | 0.22% | 82.33% | |
| Leases | Depreciation expense | 16,068,736.92 | 0.49% | 16,013,313.84 | 0.61% | 0.35% |
| Labor costs | 3,216,088.80 | 0.10% | 2,642,580.58 | 0.10% | 21.70% | |
| Others | 23,581,556.59 | 0.72% | 21,916,045.93 | 0.83% | 7.60% | |
| Others | Purchase of finished products | 2,221,796.17 | 0.07% | 6,360,252.90 | 0.24% | -65.07% |
In CNY
| Classified based on products | Items | 2021 | 2020 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watch brand business | Raw materials | 256,857,016.25 | 7.82% | 250,957,959.33 | 9.51% | 2.35% |
| Labor costs | 24,624,829.03 | 0.75% | 22,639,961.48 | 0.86% | 8.77% | |
| Depreciation expense | 776,630.56 | 0.02% | 1,290,580.38 | 0.05% | -39.82% | |
| Water and electricity fees | 557,212.31 | 0.02% | 576,614.61 | 0.02% | -3.36% | |
| Rent | 254,302.70 | 0.01% | 198,298.53 | 0.01% | 28.24% | |
| Others | 4,759,127.90 | 0.14% | 4,326,929.11 | 0.16% | 9.99% | |
| Watch retail and services | Goods purchase cost | 2,829,459,485.45 | 86.12% | 2,198,558,391.97 | 83.30% | 28.70% |
| Precision technology business | Raw materials | 88,916,323.84 | 2.71% | 89,561,279.27 | 3.39% | -0.72% |
| Labor costs | 19,308,218.35 | 0.59% | 15,492,911.02 | 0.59% | 24.63% | |
| Depreciation expense | 2,929,018.86 | 0.09% | 1,715,869.90 | 0.07% | 70.70% | |
| Water and electricity fees | 1,185,220.49 | 0.04% | 936,944.23 | 0.04% | 26.50% | |
| Rent | 127,758.44 | 0.00% | 111,201.56 | 0.00% | 14.89% | |
| Others | 10,812,906.46 | 0.33% | 5,930,402.44 | 0.22% | 82.33% | |
| Leases | Depreciation expense | 16,068,736.92 | 0.49% | 16,013,313.84 | 0.61% | 0.35% |
| Labor costs | 3,216,088.80 | 0.10% | 2,642,580.58 | 0.10% | 21.70% | |
| Others | 23,581,556.59 | 0.72% | 21,916,045.93 | 0.83% | 7.60% | |
| Others | Purchase of finished products | 2,221,796.17 | 0.07% | 6,360,252.90 | 0.24% | -65.07% |
(6) Is there any change in the consolidation scope in the reporting period
During the reporting period, Shenzhen Xunhang Precision Technology Co., Ltd. and HARMONY World Watch Center(Hainan) Limited, the Company's newly established wholly-owned subsidiaries, were included in the scope of theCompany's consolidated statements; the deregistration of 68 Station Co., Ltd., one of the Company's wholly-ownedsubsidiaries was completed on March 5, 2021, and it has been excluded from the scope of the Company's consolidatedstatements.
(7) Is there any significant change or adjustment related situation taken place in the Company’s business,products or services in the reporting periodInapplicable
(8) Major sales customers and major suppliers
Information about the major sales customers
| Total sales to the top five customers, in CNY | 1,075,275,776.18 |
| Proportion of the total sales to the top five customers in the total sales of the year | 20.50% |
| Proportion of the total sales to the related parties in the top five customers in the total sales of the year | 0.00% |
Information of the top 5 customers
| No. | Customers | Sales (in CNY) | Proportion in the total sales of the year |
| 1. | No. 1 | 401,690,557.55 | 7.66% |
| 2. | No. 2 | 213,674,973.69 | 4.07% |
| 3. | No. 3 | 160,522,193.39 | 3.06% |
| 4. | No. 4 | 152,600,173.29 | 2.91% |
| 5 | No. 5 | 146,787,878.26 | 2.80% |
| Total | -- | 1,075,275,776.18 | 20.50% |
Other Information about the major customersInapplicableMajor suppliers
| Total amount of purchase from top five suppliers, in CNY | 2,442,268,149.63. |
| Proportion of the purchase amount from the top five suppliers in | 71.43% |
| the Company’s total purchase amount | |
| Proportion of the purchase amount from the related parties in the top five suppliers in the Company’s total purchase amount | 0.00% |
Information about the top 5 suppliers
| No. | Suppliers | Purchase amount, in CNY | Proportion in the total purchases of the year (%) |
| 1. | No. 1 | 843,772,178.18 | 24.68% |
| 2. | No. 2 | 649,684,534.95 | 19.00% |
| 3. | No. 3 | 429,363,470.59 | 12.56% |
| 4. | No. 4 | 259,899,372.30 | 7.60% |
| 5 | No. 5 | 259,548,593.61 | 7.59% |
| Total | -- | 2,442,268,149.63 | 71.43% |
Other information about the major suppliersInapplicable
3. Expenses
In CNY
| 2021 | 2020 | Year-on-year increase/decrease | Note to significant changes | |
| Sales costs | 1,049,898,223.28 | 870,713,899.32 | 20.58% | Inapplicable |
| Administrative expenses | 261,626,762.41 | 256,559,127.23 | 1.98% | Inapplicable |
| Financial expenses | 34,677,073.65 | 33,449,276.41 | 3.67% | Inapplicable |
| R & D expenditures | 57,802,569.17 | 51,489,323.49 | 12.26% | Inapplicable |
4. Investment in R & D
| Description of the Main R & D Projects | Project purpose | Project progress | The objective to be reached | Impact on the predicted future development of the Company |
| New series products with the quality of FIYTA Brand | Innovative products with the brand characteristics provided to the market | Fulfillment of the tasks in the very year | Developing multiple series of products with FIYTA brand characteristics, and launching sales as planned | Providing innovative products |
| Developing new product innovation protection structure | Improving new product performances and market competitiveness | Fulfillment of the tasks in the very year | Development of an innovative structure to improve watch protection performance was completed and it has been applied in watch products | Improving new product performances and market competitiveness |
| Development of | Improving new product | In process | According to the needs of brand | Improving new product |
| mechanical watch movements with brand differentiation characteristics | performances and market competitiveness | differentiation, developing mechanical watch movements with special functions and indication methods | performances and market competitiveness | |
| Development of watch for manned spaceflight | Providing special equipment watches for the field of manned spaceflight | Fulfillment of the tasks in the very year | According to the requirements of manned space missions, developed and delivered special equipment watches | Providing special equipment watches for the field of manned spaceflight |
| Smart watch with camera and body sign monitoring | Improving new product performances and market competitiveness | Fulfillment of the tasks in the very year | Development of smart watches with camera function with the capacity of monitoring body sign data which have been launched in the market as planned | Improving new product performances and market competitiveness |
R & D Staff
| 2021 | 2020 | Variation proportion | |
| Number of R & D staff (persons) | 128 | 117 | 9.40% |
| Proportion of R & D staff in total employees | 2.52% | 2.39% | 0.13% |
| Educational background structure of R & D staff | —— | —— | —— |
| Undergraduate | 63 | 64 | -1.56% |
| Master | 22 | 22 | 0.00% |
| Doctor | 3 | 2 | 50.00% |
| Junior college and below | 40 | 29 | 37.93% |
| 研发人员年龄构成 | —— | —— | —— |
| Below 30 | 47 | 46 | 2.17% |
| 30 - 40 | 60 | 46 | 30.43% |
| Over 40 | 21 | 25 | -16.00% |
Investment in R & D
| 2021 | 2020 | Variation proportion | |
| Amount of investment in R & D, in CNY | 57,802,569.17 | 51,489,323.49 | 12.26% |
| Proportion of investment in R & D in operating revenue | 1.10% | 1.21% | -0.11% |
| Amount of capitalized investment in R & D (in CNY) | 0.00. | 0.00. | 0.00% |
| Proportion of capitalized investment in R & D in the total | 0.00% | 0.00% | 0.00% |
investment in R & D
Reasons and effects of major changes in the composition of the Company's R&D personnelInapplicableCause(s) of significant change of the total investment in R & D in the operating revenueInapplicableNote to the cause of significant change in the capitalization rate of investment in R & D and note to the reasonabilityInapplicable
5. Cash Flow
In CNY
| Items | 2021 | 2020 | Year-on-year increase/decrease |
| Subtotal of cash flow in from operating activity | 5,944,580,198.34 | 4,682,489,563.33 | 26.95% |
| Subtotal of cash flow out from operating activity | 5,397,331,089.89 | 4,304,279,057.46 | 25.39% |
| Net cash flow arising from operating activities | 547,249,108.45 | 378,210,505.87 | 44.69% |
| Subtotal of cash flow in from investment activity | 59,657.53 | 150,556.62 | -60.38% |
| Subtotal of cash flow out from investment activity | 204,422,787.61 | 133,531,954.47 | 53.09% |
| Net cash flows arising from investment activities | -204,363,130.08 | -133,381,397.85 | -53.22% |
| Subtotal of cash flow in from fund raising activity | 1,213,940,412.23 | 743,213,671.65 | 63.34% |
| Sub-total cash flow paid for financing activities | 1,698,488,462.84 | 947,268,455.73 | 79.30% |
| Net cash flow arising from capital-raising activities | -484,548,050.61 | -204,054,784.08 | -137.46% |
| Net increase of cash and cash equivalents | -142,802,548.57 | 37,963,720.62 | -476.16% |
Notes to the major influencing factors for the significant change in the relevant year-on-year data
1. During the reporting year, the net cash flow from operating activities was CNY 547,249,108.45, an increase of CNY169,038,602.58 compared with CNY 378,210,505.87 in the same period last year, mainly due to the implementation of thenew lease standards.
2. Net cash flow arising from investment activities amounted to CNY -204,363,130.08 in the reporting year, while it wasCNY -133,381,397.85 in the same period of the previous year with the payment increased by CNY 70,981,732.23, whichwas mainly due to increase of the increase of payments for refurbishment and improvement of the stores during the
reporting period.
3. Net cash flow arising from financing activities amounting to CNY -484,548,050.61 in the reporting year, a year-on-yearincrease of CNY 280,493,266.53 in comparison with the previous year amounting to CNY -204,054,784.08 was mainlydue to increase of the repayment of bank loans, increase of cash dividends and influence from the implementation of thenew lease standards.
Note to the cause of significant difference between the net cash flow arising from the Company's business activities andthe net profit of the reporting year during the reporting period.InapplicableV. Analysis on Non-Principal BusinessesInapplicableVI. Analysis on Assets and Liabilities
1. Significant Changes in Assets Composition
In CNY
| End of 2021 | Beginning of 2021 | Increase/decrease in proportion | Note to significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary fund | 210,254,737.14 | 5.11% | 353,057,285.71 | 8.46% | -3.35% | Inapplicable |
| Accounts receivable | 388,885,601.28 | 9.46% | 475,598,684.88 | 11.39% | -1.93% | Inapplicable |
| Contract assets | 0.00 | 0.00% | 0.00 | 0.00% | 0.00% | Inapplicable |
| Inventories | 2,050,148,750.89 | 49.87% | 1,931,780,185.85 | 46.28% | 3.59% | Inapplicable |
| Investment-oriented real estate | 383,425,916.35 | 9.33% | 398,086,447.78 | 9.54% | -0.21% | Inapplicable |
| Long-term equity investment | 55,155,605.31 | 1.34% | 51,400,665.92 | 1.23% | 0.11% | Inapplicable |
| Fixed assets | 349,495,316.65 | 8.50% | 352,734,280.76 | 8.45% | 0.05% | Inapplicable |
| Construction-in-process | 0.00 | 0.00% | 0.00 | 0.00% | 0.00% | Inapplicable |
| Use right assets | 147,932,475.42 | 3.60% | 163,169,400.44 | 3.91% | -0.31% | Inapplicable |
| Short term loans | 265,994,595.43 | 6.47% | 542,673,278.09 | 13.00% | -6.53% | Inapplicable |
| Contract liabilities | 22,505,426.65 | 0.55% | 18,213,396.49 | 0.44% | 0.11% | Inapplicable |
| Long-term borrowings | 0.00 | 0.00% | 4,070,330.00 | 0.10% | -0.10% | Inapplicable |
| Lease liabilities | 64,918,722.10 | 1.58% | 77,439,579.30 | 1.86% | -0.28% | Inapplicable |
Higher proportion of foreign assets
Inapplicable
2. Assets and liabilities measured based on fair value
Inapplicable
3. Restriction on rights in the assets ended the reporting period
A property owned by Switzerland based Montres Chouriet SA with net value of CNY 11,490,566.65 was used as acollateral for the overseas long term loan amounting to CNY 3,924,900.00.VII. Analysis of Investment Situation
1. General
| Amount of investment in the reporting period (CNY) | Amount of investment in the same period of the previous year (CNY) | Amount of variation |
| 20,000,000.00 | 139,500,000.00 | -85.66% |
Notes: 1. With review and approval of the Company's 23rd Session of the Ninth Board of Directors on December 14, 2020,the Company decided to invest in the establishment of a wholly-owned subsidiary - Shenzhen Xunhang PrecisionTechnology Co., Ltd., with its own capital amounting to CNY10 million. The relevant procedures for establishment andregistration with the authority for industry and commerce were completed on April 7, 2021. For the detail, please refer tothe "Announcement 2021-035 on the Investment and Establishment of Wholly-owned Subsidiaries and Completion ofIndustrial and Commercial Registration" disclosed by the Company on www.cninfo.com.cn；
2. With review and approval of the Company's 29th Session of the Ninth Board of Directors on May 21, 2021, theCompany decided to invest in the establishment of a wholly-owned subsidiary - HARMONY World Watch Center (Hainan)Limited, with its own capital amounting to CNY10 million. The relevant procedures for establishment and registration withthe authority for industry and commerce were completed on June 17, 2021. For the detail, please refer to the"Announcement 2021-058 on the Investment and Establishment of Wholly-owned Subsidiaries and Completion ofIndustrial and Commercial Registration" disclosed by the Company on www.cninfo.com.cn；
2. Significant Equity Investment Acquired in the Reporting Period
Inapplicable
3. Significant non-equity investment in process in the reporting period
Inapplicable
4. Financial assets investment
(1) Portfolio investment
Inapplicable
(2) Investment in derivatives
Inapplicable
5. Application of the raised capital
InapplicableVIII. Sales of Significant Assets and Equity
1. Sales of Significant Assets
Inapplicable
2. Sales of Significant Equity
InapplicableIX. Analysis on Mutual Shareholding CompaniesParticulars about the principal subsidiaries and mutual shareholding companies which may affect the Company’s net profitby over 10%.
In CNY
| Company name | Company type | Principal business | Registered capital | Total assets | Net assets | Turnover | Operating profit | Net profit |
| Shenzhen Harmony World Watches Center Co., Ltd. | Subsidiaries | Purchase & sale and repairing service of watches and components | 600,000,000 | 2,102,556,925.63 | 1,068,121,963.67 | 3,868,319,859.65 | 382,325,720.42 | 289,056,005.29 |
| FIYTA Sales Co., Ltd. | Subsidiary | Design, R & D and sales of watches and components & parts | 450,000,000 | 506,762,746.87 | 392,336,579.87 | 580,635,486.42 | 4,064,580.03 | -233,569.13 |
| Shenzhen | Subsidiary | Manufacture | 100,000,000 | 321,057,850.26 | 169,167,312.11 | 372,362,396.35 | 58,418,500.85 | 53,979,457.58 |
| FIYTA Precision Technology Co., Ltd. | and production of watches and components | |||||||
| Shenzhen FIYTA Technology Development Co., Ltd. | Subsidiary | Production and machining of sophisticated components and parts | 50,000,000 | 188,352,333.30 | 133,415,385.71 | 173,195,343.47 | 13,634,825.72 | 13,094,286.88 |
| FIYTA (Hong Kong) Limited | Subsidiary | Trading of watches and accessories and investment | 137,737,520 | 229,791,419.84 | 202,225,606.14 | 104,597,635.75 | 14,247,097.40 | 12,930,206.75 |
| Emile Chouriet (Shenzhen) Limited | Subsidiary | Design, R & D and sales of watches and components & parts | 41,355,200 | 122,151,707.51 | 59,031,329.02. | 91,239,738.45. | 4,216,166.14 | 3,138,963.28 |
| Shanghai Watch Industry Co., Ltd. | Mutual shareholding company | Production and sales of watches and components & parts | 15,350,000 | 160,904,718.18 | 134,940,325.17 | 150,929,452.87 | 15,094,324.17 | 15,019,757.54 |
Acquisition and disposal of subsidiaries in the reporting period
| Company name | Way of acquisition and disposal of subsidiaries in the reporting period | Impact upon the overall production and operation and performances |
| Shenzhen XUNHANG Precision Technology Co., Ltd. | Newly established | The establishment of a wholly-owned subsidiary is conducive to promoting the business expansion of smart wearables and precision technology, and will have a positive impact on the long-term development and benefit improvement of the Company. |
| Harmony World Watches Center (Hainan) Ltd. | Newly established | The establishment of wholly-owned subsidiaries is conducive to promoting the business development of retail of brand watches, and will have a positive impact on the long-term development and benefit improvement of the Company. |
| 68-Station Limited | Deregistration completed | It does not have a significant impact on the Company's overall production, operation and performance. |
Note to the principal mutual shareholding companiesInapplicableX. Structural Subjects Controlled by the CompanyInapplicableXI. Expectation on future development of the Company(I) External Environment and RisksIn 2022, the global political and economic environment shall remain complex and changeable. The COVID-19 epidemichas entered a stage of normalization, and the economic recovery shall gradually become moderate. China's economicdevelopment shall also face the triple pressures of shrinking demand, supply shocks, and weakening expectations. Theconsumer market shall be confronted with profound changes.
Changes in the consumer market have driven continuous innovation in the competition pattern of the watch industry. Theindustry structure has been significantly differentiated. The market share of mid-to-high-end brands has further expanded,and continues to sink to younger consumer groups. Light luxury and niche brands emerge one after another to meet theneeds of consumer segmentation, diversified consumer demand, and further intensified competition of the industry.
At the same time, under the guidance of economic growth and policies, the middle-income group corresponding to thewatch industry continues to expand; increasingly personalized consumer demand provides development space for marketsegmentation; cultural confidence drives the rise of the national tide, and domestic watch brands are receiving theopportunity to overtake on a bend; the rapid development of e-commerce platforms promotes the overall digitaltransformation of retail business, and the integration of online and offline channels; the development of tax-free channelsbrings new opportunities for incremental markets.
Crisis and opportunity coexist. In the journey of people's continuous pursuit for a better life, the Company is firmlyoptimistic about the development prospects of the industry, and shall adhere to the original intention and mission of"creating a quality life", continuously consolidate its core competitiveness, and accelerate business transformation andupgrading.
(II) Key Work in 2022In 2022, the Company shall continue to practice the strategy of "big country brand", continue to promote the creation ofproducts and brands that represent Chinese image, Chinese quality, Chinese technology and Chinese culture, with"focusing on the three forces, strengthening professionalism, and systematically enhancing superiority of competition;conduct digital transformation. , build a hard core, and rapidly promote transformation and upgrading" as the annual worktheme, and solidly promote the following work:
1. Focusing on the three forces, strengthening professionalism, and systematically enhancing superiority of competitionTo establish the high-end Chinese watch brand construction as the lead, with aerospace as the support, solidly promotethe integration of products and sales, build an integrated marketing system, systematically enhance the "brand power";continuously improve product operation efficiency, build and strengthen product life cycle operation management, focuson the core series, strive to create high-quality products, improve product quality management system and after-sales
service system, strictly implement the extended warranty policy, improve "product power"; by applying leverage on thetwo main lines of "operation improvement + structure upgrading", deepen the construction of digital retail system, improvethe operation capacity of individual stores, promote the expansion and upgrading of middle and high-end channelsthrough multiple means, continuously improve the market share of each region, and enhance the "channel power".
2. To conduct digital transformation, build a hard core, and rapidly promote transformation and upgradingContinue to adhere to the long-term investment in digitalization, and gradually establish and deepen the digitalmanagement system of "people, goods, stores, customers and finance"; adhere to the leadership of science andtechnology, accelerate the application of home-made products, improve the localization rate of home-made watchmovements, and continue to explore new materials, new technologies and new processes to be applied in makinghigh-end watches.
3. Driven with innovation, to accelerate the development of new business
In respect of precision technology business, continue to strengthen and expand the fields of superiority, including opticalcommunication, lasers, etc., further expand new markets and develop new customers in aerospace, medical equipment,etc., take technology as the lead, constantly improve the complexity of the process, and further improve the overallsolution capacity; in respect of smart wear business, continue to promote technological innovation, strengthentechnological reserves, accelerate the iteration of new products, and constantly improve the construction of outdoor lightentertainment ecosystem. Meanwhile, continue to explore the layout of "active health", "great pension" and other fields.
4.To consolidate management, strengthen coordination and systematically improve team executionFurther exert the "Iron Army" spirit formed by the operation and counterattack during the Anti-COVID-19, continue to forgethe professional ability of the team, take the "Big Country Brand" strategy as the lead, strengthen the synergy between thebusiness and the team, continuously deepen the full coverage of the power mechanism, and further stimulate theenthusiasm and creativity of the core team, and systematically improve the team execution.XII. Reception of Survey, Communications, Interviews, etc. during the Reporting Period
| Reception time | Place of reception | Way of reception | Types of Visitors Received | Visitors Received | Main contents discussed and information provided | Index of Basic Information on the Investigation and Survey |
| March 25, 2021 | Wechat Mini Program Titled “FIYTA Relationship with Investors | Others | Others | Extensive investors’ participation in the Company's 2020 Annual Online Performance Presentation by network remoteness | In order to provide investors with a comprehensive and in-depth understanding of the Company’s situation, the Company held a 2020 Online Performance Briefing and conducted communications and exchange with investors on the Company’s 2020 operating status, development strategy, watch brand management business, brand watch retails, and development of precision technology and smart wearables. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
| April 20, 2021 | 20th Floor, FIYTA Technology Building | Field survey | Institution | TF Securities Co., Ltd., Shanghai Guotai Junan Securities & Assets Management Co., Ltd., Shenzhen Qianhai Shengyao Capital Investment Management Co., Ltd., Shenzhen Qianhai Dengcheng Asset Management Co.,Ltd., Ningbo Deovolente Investment Partnership Enterprise (L.P.), GF Securities Co., Ltd., Rongtong Fund Management Co., Ltd., China Merchants Securities Co., Ltd, Shenzhen Jindou Investment Co., Ltd., Everbright Securities Company Limited, Wanlian Securities Co.,Ltd., China Great Wall Securities Co.,Ltd., Guotai Junan Securities Co.,Ltd., Shenwan Hongyuan | The Company conducted communication on management of watch brands, retail of well-known brand watches, development of precision technology business, etc. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
| Securities Co.Ltd., China International Capital Corporation Limited, Harmony Capital Group, Changjiang Securities Company Limited , ESSENCE SECURITIES Co., Ltd., Penghua Fund Management Co., Ltd., Fullgoal Fund Management Company Limited, Bosera Fund Management Co., Ltd., Hangzhou Mingliang Asset Management Co., Ltd., Shenzhen Haifuling Capital Management Co., Ltd., Shenzhen Qianhai Chengbeile Investment Co., Ltd., Essence Fund Management Co., Ltd. and PA asset | ||||||
| August 20, 2021 | Teleconference | Telephone communication | Institution | TF Securities Co., Wanlian Securities Co.,Ltd., Shenwan Hongyuan Securities Co. Ltd., FOUNDER SECURITIES CO.,LTD., Guolian Securities Co., Ltd., Huatai Securities Co., Ltd., China Merchants Securities Co., Ltd., Soochow Securities Co., Ltd., Guotai Junan Securities Co.,Ltd., China Life Insurance Company Limited, Penghua Fund Management Co., Ltd., China Universal Asset Management Co.，Ltd., Hua An Fund Management Co., Ltd., Tianjin State-owned Capital Investment And Management Co., Ltd., Youngy Investment Holding Group Co. Ltd., Yuancheng Investment Management Co., Ltd. , China International Capital Corporation Limited, Shenzhen Kangrui Capital Management Co., Ltd. , Shanghai Premium Bright Global Captial Co.,Ltd. and Shanghai Tourmaline Asset Management CO.,Ltd. | The Company conducted communication on management of watch brands, retail of well-known brand watches, development of precision technology business, etc. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
Section 4 Corporate GovernanceI. GeneralIn year 2021, the Company kept improving the Company’s corporate governance structure strictly according to the PRCCompany Law, the PRC Securities Law and the regulations of China Securities Regulatory Commission concerninggovernance of listed companies, and tried to enhance construction of modern enterprise system, upgraded the level ofregulatory operation of the Company. As a result, there was no discrepancy between the situation of the Company’scorporate governance and the regulatory documents of China Securities Regulatory Commission concerning governanceof listed companies.
The Company established and improved relatively standardized corporate governance structure and rules of proceduresstrictly according to law, rules and regulations, including the PRC Company Law, and the Articles of Association of theCompany, formed a decision-making and operation management system with the Shareholders’ Meeting, the Board ofDirectors, the Supervisory Committee and the management of the Company as the principal structure. They implementedtheir respective duties according to the PRC Company Law and the Articles of Association.
The General Meeting is the Company’s power organ and has the power of deciding the Company’s operation policy andinvestment plan, reviewing and approving the Company’s annual financial budget scheme, settlement scheme, profitdistribution plan, loss make-up plan, change of the application of the proceeds raised through issuing, the equity incentiveplan, etc., make resolutions on the Company's increase or decrease of registered capital, issuance of corporate bondsand bond-like financing instruments, merger, division, dissolution, liquidation or change of company form, formulate orapprove the Company's articles of association and amendments to the articles of association, elect and replace thedirectors and supervisors serving as employee representatives and decide matters concerning the remuneration ofdirectors and supervisors.
The Board of Directors plays the role of "setting strategies, making decisions, and preventing risks", and is responsible forimplementing the resolutions of the general meetings of shareholders, convening and reporting to the general meeting of
shareholders. Within the authorization from the General Meeting, decides the Company’s external investment, acquisitionand sales of assets, assets pledge, external guarantee, related transactions, etc., decides establishment of theCompany’s internal management organs and branches, engagement and disengagement of the Company’s generalmanager, the Board secretary and other senior executives, etc. The Board of Directors consists of nine directors, includingthree independent directors. The Board of Directors has established three subordinate special committees, namely theStrategy Committee, the Audit Committee and Nomination, Emolument and Assessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of reviewing the Company's regular reports,examining the Company's financial affairs, supervising the directors and senior executives in performing duties accordingto the law and proposes dismissal of any director or senior executive who breaches the law, the administrative rules andregulations, the Articles of Association or resolutions of the General Meeting, etc. The Supervisory Committee consists ofthree supervisors including one staff supervisor.
The management is responsible for "seeking operation, carrying out implementation, and strengthening management".The General Manager is responsible to the Board of Directors, presides over the production, operation and managementof the Company under the leadership of the Board of Directors, organizes the implementation of resolutions of the Boardof Directors, reports work to the Board of Directors, and organizes the implementation of the Company's annualdevelopment plan, operation and management; plans and formulates the Company's investment plan and investmentplan, annual financial budget plan, final account plan, profit distribution plan and loss recovery plan and the Company'splan for increasing or decreasing registered capital, etc.
Whether there is a material difference between the actual situation of corporate governance and laws, administrativeregulations and regulations on the governance of listed companies issued by the China Securities RegulatoryCommission.NoII. Independence in securing the Company's assets, personnel, finance, organization, business, etc. relative tothe controlling shareholder and actual controllerThe Company is independent in business, personnel, assets, organization and finance from its controlling shareholder.The Company has complete and independent business and the ability of autonomous operation.
Business: The Company is mainly engaged in timepiece businesses and has independent production, auxiliary productionsystem and complementary facilities, and possesses its own procurement and sales systems. There exists no competitionin the same sector between the Company and its controlling shareholder.
Personnel: The Company is completely independent in organization and has sound systems in labor, personnel andsalaries management. Except Mr. Xiao Yi, Mr. Xiao Zhanglin, Mr. Li Peiyin and Mr. Deng Jianghu as directors, and Mr.Zheng Qiyuan, the chairman of the Supervisory Committee, and Ms. Cao Zhen as supervisor, none of other seniorexecutives takes any concurrent office in the shareholders and none of the financial staff works concurrently for anyrelated parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Company enjoys the corporateownership over its assets and the assets are completely independent from its controlling shareholder. In addition, the
Company enjoys sole ownership of such trademarks as FIYTA, HARMONY, etc.
Organization: The Board of Directors, the Supervisory Committee and the other internal organs are well established andwork independently. There exist neither subordinate relations between the controlling shareholder/its functionaldepartments nor doing joint office work. The controlling shareholder enjoys its rights and undertakes the correspondingobligations according to the law and has never been involved in any action which directly or indirectly interferes theCompany’s business activities surpassing the authority of the General Meeting.
Finance: The Company has established independent financial department, worked out sound and independent financialand accounting system and financial management system and independently opened bank accounts. The controllingshareholder has never interfered the Company in its financial and accounting activities.III. Horizontal CompetitionsInapplicableIV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period
1. General Meetings
| Sessions | Meeting type | Proportion of attendance of the investors | Meeting date | Date of disclosure | Resolutions of the meetings |
| 2021 1st Extraordinary General Meeting | Extraordinary General Meeting | 38.17% | January 06, 2021 | January 07, 2021 | Announcement on the Resolution of 2021 1st Extraordinary General Meeting, 2021-002 |
| 2021 2nd Extraordinary General Meeting | Extraordinary General Meeting | 40.45% | February 24, 2021 | February 25, 2021 | Announcement on the Resolution of 2021 2nd Extraordinary General Meeting, 2021-023 |
| 2020 Annual General Meeting | Annual General Meeting | 44.48% | May 07, 2021 | May 08, 2021 | Announcement on the Resolution of 2020 Annual General Meeting, 2021-045 |
| 2021 3rd Extraordinary General Meeting | Extraordinary General Meeting | 37.53% | July 01, 2021 | July 02, 2021 | Announcement on the Resolution of 2021 3rd Extraordinary General Meeting, 2021-059 |
| 2021 4th Extraordinary General Meeting | Extraordinary General Meeting | 47.37% | September 08, 2021 | September 09, 2021 | Announcement on the Resolution of 2021 4th Extraordinary General Meeting, 2021-087 |
| 2021 5th Extraordinary General Meeting | Extraordinary General Meeting | 38.41% | November 30, 2021 | December 01, 2021 | Announcement on the Resolution of 2021 5th Extraordinary General Meeting, 2021-101 |
2. Extraordinary general meeting requested for holding by the preferred shareholders with the voting power
recovered.Inapplicable
V. Directors, Supervisors and Senior Executives
1. Basic information
| Name | Title | Office Status | Gender | Age | Starting date of tenure | Expiry date of tenure | Number of shares held at the beginning of the reporting period (shares) | Stock option | Number of restricted shares granted (shares) | Shareholding increased in the reporting period (shares) | Shareholding decreased in the reporting period (shares) | Change of other increase/decrease (shares) | Number of shares held at end of the reporting period (shares) | Cause of increase/decrease of shares |
| Zhang Xuhua | Chairman of the Board | In office | Male | 45 | July 01, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Xiao Yi | Director | In office | Male | 48 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Xiao Zhanglin | Director | In office | Male | 46 | September 20, 2017 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Li Peiyin | Director | In office | Male | 36 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Deng Jianghu | Director | In office | Male | 38 | September 08, 2021 | September 08, 2024 | 33,000 | 0 | 80,000 | 0 | -10,989 | -102,011 | 0 | 1. 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 80,000 restricted shares 2. Before he became a director, he reduced his holdings of A shares by 10,989 shares; 3. After leaving office, 102,011 restricted A shares were repurchased and canceled. |
| Pan Bo | Director | In office | Male | 46 | February 24, 2021 | September 08, 2024 | 130,000 | 0 | 150,000 | 0 | 0 | 0 | 280,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| General Manager | In office | Male | January 15, 2021 | September 08, 2024 | ||||||||||
| Wang Jianxin | Independent Director | In office | Male | 52 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Zhong Hongming | Independent Director | In office | Male | 47 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Tang Xiaofei | Independent Director | In office | Male | 48 | September 11, 2018 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Zheng Qiyuan | Chairman of the Supervisory Committee | In office | Male | 59 | March 08, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Cao Zhen | Supervisor | In office | Female | 51 | February 24, 2021 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Hu Jing | Supervisor | In office | Female | 51 | September 07, 2021 | September 08, 2024 | 9,000 | 0 | 0 | 0 | 0 | 0 | 9,000 | |
| Lu Wanjun | Deputy GM | In office | Male | 55 | August 08, 2014 | September 08, 2024 | 130,000 | 0 | 150,000 | 0 | 0 | 0 | 280,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| Chief Law Adviser | In office | Male | October 25, 2021 | September 08, 2024 | ||||||||||
| Liu Xiaoming | Deputy GM | In office | Male | 51 | October 17, 2016 | September 08, 2024 | 130,000 | 0 | 150,000 | 0 | 0 | 0 | 280,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| Li Ming | Deputy GM | In office | Male | 49 | October 17, 2016 | September 08, 2024 | 130,040 | 0 | 150,000 | 0 | 0 | 0 | 280,040 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| Song Yaoming | Chief Accountant | In office | Male | 55 | February 06, 2022 | September 08, 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Tang Haiyuan | Deputy GM | In office | Male | 49 | September 29, 2019 | September 08, 2024 | 60,000 | 0 | 150,000 | 0 | 0 | 0 | 210,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| Huang Yongfeng | Chairman of the Board | Retired | Male | 48 | September 08, 2017 | June 11, 2021 | 180,000 | 0 | 0 | 0 | 0 | -66,700 | 113,300 | After leaving office, 66,700 restricted A shares were repurchased and canceled. |
| Wang Mingchuan | Director | Retired | Male | 56 | May 21, 2009 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Fu Debin | Director | Retired | Male | 45 | December 09, 2016 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Wang Bo | Director | Retired | Male | 43 | September 20, 2017 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Chen Libin | Director | Retired | Male | 58 | May 31, 2017 | February 02, 2021 | 180,000 | 0 | 180,000 | 0 | 0 | 0 | 360,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 180,000 restricted shares |
| General Manager | Retired | Male | March 08, 2017 | January 15, 2021 | ||||||||||
| Wang Baoying | Chairman of the Supervisory Committee | Retired | Male | 58 | June 02, 2017 | February 24, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Sheng Qing | Supervisor | Retired | Female | 46 | September 11, 2018 | September 07, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Fang Jiasheng | Supervisor | Retired | Male | 36 | April 12, 2019 | February 24, 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Chen Zhuo | Chief Accountant | Retired | Male | 46 | October 17, 2016 | January 28, 2022 | 131,000 | 0 | 150,000 | 0 | 0 | 0 | 281,000 | 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares |
| Secretary of the Board | Retired | Male | January 15, 2021 | January 28, 2022 | ||||||||||
| Xu Chuangyue | Deputy GM | Retired | Male | 43 | September 29, 2019 | February 03, 2021 | 50,000 | 0 | 150,000 | 0 | 0 | -183,350 | 16,650 | 1. 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares 2. After leaving office, 183,350 restricted A shares were repurchased and canceled. |
| Total | -- | -- | -- | -- | -- | -- | 1,163,040 | 0 | 1,310,000 | 0 | -10,989 | -352,061 | 2,109,990 |
During the reporting period, is there any resignation of directors and supervisors and dismissal of senior executivesduring their term of office?In January 2021, the Company received written resignation reports from Mr. Chen Libin, the managing director, and Mr.Pan Bo, the deputy general manager and secretary of the Board of Directors. Mr. Chen Libin resigned from the position ofGeneral Manager of the Company due to work reasons and continued to hold other positions in the Company after hisresignation; Mr. Pan Bo resigned from the positions of deputy General Manager and Board Secretary of the Company dueto work reason, and continued to hold other positions in the Company after his resignation.
In February 2021, the Company received written resignation reports submitted by directors Mr. Wang Mingchuan, Mr. FuDebin, Mr. Wang Bo and Mr. Chen Libin, supervisors Mr. Wang Baoying, Mr. Fang Jiasheng and deputy General ManagerMr. Xu Chuangyue. Mr. Wang Mingchuan, Mr. Fu Debin and Mr. Wang Bo resigned as directors of the Company due towork reason, and no longer hold any positions in the Company after their resignation; Mr. Chen Libin resigned as directorof the Company due to work reason, and continued to hold other positions in the Company after his resignation; Mr. WangBaoying resigned from the positions of supervisor and Chairman of the Supervisory Committee of the Company due towork reason, and no longer holds any positions in the Company after his resignation; Mr. Fang Jiasheng resigned from theposition of supervisor of the Company due to work reason, and continued to hold other positions in the Company afterresignation; Mr. Xu Chuangyue resigned from the position of deputy General Manager of the Company for personalreason and no longer hold any position in the Company after the resignation.
The Company received a written resignation report submitted by Mr. Huang Yongfeng, the Chairman of the Board , inJune 2021. Mr. Huang Yongfeng resigned as director and Chairman of the Company due to work reason, and no longerholds any position in the Company after his resignation.
During the reporting period, the Company has completed the by-election of directors and supervisors and the appointmentof senior executives on schedule in accordance with relevant laws and regulations. The independent directors checkedthe reasons for the resignation of the Chairman and the General Manager, and expressed their independent opinions onthe changes of directors and senior executives.Personnel Change in Directors, Supervisors and Senior Executives
| Name | Office Taken | Type | Date | Cause |
| Zhang Xuhua | Chairman of the Board | Being elected | September 08, 2021 | Appointed as the Chairman of the Board at the 1st session of the Tenth Board of Directors. |
| Chairman of the Board | Being elected | July 01, 2021 | Appointed as the Chairman of the Board at the 31st session of the Ninth Board of Directors. | |
| Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. | |
| Director | Being elected | July 01, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 30th session of the Ninth Board of Directors and the 2021 3rd Extraordinary General Meeting. | |
| Xiao Yi | Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Director | Being elected | February 24, 2021 | Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting. | |
| Xiao Zhanglin | Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Li Peiyin | Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Director | Being elected | February 24, 2021 | Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting. | |
| Deng Jianghu | Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Pan Bo | Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| General Manager | Being appointed | September 08, 2021 | Appointed as the General Manager of the Company at the 1st session of the Tenth Board of Directors. | |
| Director | Being elected | February 24, 2021 | Elected as a director of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting. | |
| General Manager | Being appointed | January 15, 2021 | Appointed as the GM at the 25th session of the Ninth Board of Directors. | |
| Deputy GM and the Secretary of the Board | Termination | January 14, 2021 | resigned as Deputy GM of the Company and the Secretary of the Board due to the work reason. | |
| Wang Jianxin | Independent Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Zhong Hongming | Independent Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Tang Xiaofei | Independent Director | Being elected | September 08, 2021 | Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting. |
| Zheng Qiyuan | Chairman of the Supervisory Committee | Being elected | September 08, 2021 | Appointed as the Chairman of the Supervisory Committee at the 1st session of the Tenth Board of Directors. |
| Supervisor | Being elected | September 08, 2021 | Appointed as a supervisor of the Tenth Supervisory Committee at the 28th session of the Ninth Supervisory Committee and 2021 4th Extraordinary General Meeting. | |
| Chairman of the Supervisory Committee | Being elected | March 08, 2021 | Elected the Chairman of the Ninth Supervisory Committee at the 24th session of the Ninth Supervisory Committee. | |
| Supervisor | Being elected | February 24, 2021 | Appointed as a supervisor of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting. | |
| Cao Zhen | Supervisor | Being elected | September 08, 2021 | Appointed as a supervisor of the Tenth Supervisory Committee at the 28th session of the Ninth Supervisory Committee and 2021 4th Extraordinary General Meeting. |
| Supervisor | Being elected | February 24, 2021 | Appointed as a supervisor of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting. | |
| Hu Jing | Supervisor | Being elected | September 07, 2021 | Elected a staff representative supervisor of the Tenth Supervisory Committee of the Company at 2021 1st Staff Representative Conference. |
| Lu Wanjun | Chief Law Adviser | Being appointed | October 25, 2021 | Appointed as the Chief Law Adviser of the Company at the 2nd session of the Tenth Board of Directors. |
| Deputy GM | Being appointed | September 08, 2021 | Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors. | |
| Liu Xiaoming | Deputy GM | Being appointed | September 08, 2021 | Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors. |
| Li Ming | Deputy GM | Being appointed | September 08, 2021 | Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors. |
| Song Yaoming | Chief Accountant | Being appointed | February 06, 2022 | Appointed as the Chief Accountant of the Company at the 6th session of the Tenth Board of Directors. |
| Tang Haiyuan | Deputy GM | Being appointed | September 08, 2021 | Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors. |
| Huang Yongfeng | Chairman of the Board | Retired | June 11, 2021 | resigned as director and Chairman of the Company due to work reason. |
| Wang | Director | Retired | February 02, 2021 | resigned as a director of the Company due to work reason. |
| Mingchuan | ||||
| Fu Debin | Director | Retired | February 02, 2021 | resigned as a director of the Company due to work reason. |
| Wang Bo | Director | Retired | February 02, 2021 | resigned as a director of the Company due to work reason. |
| Zhang Zhibiao | Director | Retired upon office expiry | September 08, 2021 | Retired upon expiry of the Ninth Board of Directors. |
| Director | Being elected | February 24, 2021 | Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting. | |
| Chen Libin | Director | Retired | February 02, 2021 | resigned as a director of the Company due to work reason. |
| General Manager | Termination | January 15, 2021 | resigned as the GM of the Company due to the work reason. | |
| Wang Baoying | Supervisor and Chairman of the Supervisory Committee | Retired | February 24, 2021 | resigned as a supervisor of the Company and the Chairman of the Supervisory Committee due to work reason. |
| Sheng Qing | Supervisor | Retired upon office expiry | September 07, 2021 | Retired upon expiry of the Ninth Supervisory Committee. |
| Fang Jiasheng | Supervisor | Retired | February 24, 2021 | resigned as a supervisor of the Company due to work reason. |
| Chen Zhuo | Chief Accountant & Secretary of the Board | Being appointed | September 08, 2021 | Appointed as the Chief Accountant and the Board Secretary of the Company at the 1st session of the Tenth Board of Directors. |
| Secretary of the Board | Being appointed | January 15, 2021 | Appointed as the Secretary of the Board at the 25th session of the Ninth Board of Directors. | |
| Xu Chuangyue | Deputy GM | Termination | February 03, 2021 | resigned as deputy GM of the Company due to the personal reason. |
2. Incumbency
Professional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in OfficeMr. Zhang Xuhua, born in March, 1977, holding master degree and EMBA of China Europe International Business School.He is now the Chairman of the Company. Mr. Zhang used to be the managing director, deputy GM, assistant to the GM,GM of the business department of the shopping center of Rainbow Digital Commercial Co.,Ltd., the GM of ChengduCompany, the GM of the business department of the shopping center, the GM of Chengdu Company, the GM of theMerchandise Center, the GM, manager of the procurement department, the supervisor of the merchants department ofDreams-On Department Store; staff of the market department of Vanke Industry Co., Ltd.
Mr. Xiao Yi, male, born in March 1974, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics. Currently, he is a director of the Company, the Director of Organization Department/Human ResourcesDepartment of the CPC Committee of AVIC International Holding Corporation, a director of Tianma Microelectronics Co.,Ltd., a director of Shennan Circuit Co., Ltd., a director of AVIC International Holding (Zhuhai) Co., Ltd., a director of AVICInternational Economic and Trade Development Co., Ltd. He used to be the deputy manager and manager of thecomprehensive management department of AVIC International Holding Corporation.
Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiao Tong University. Mr. Xiao is a director ofthe Company, the chief of the planning and operation department of AVIC International Holding Corporation, a director ofShennan Circuit Co., Ltd. and a director of Rainbow Department Store Co., Ltd. He used to be deputy chief of the strategydevelopment department and deputy chief of the operation and management department of AVIC International HoldingCorporation, the secretary of AVIC International Holding Limited, a director of Tianma Micro-electronics Co., Ltd. and adirector of AVIC Sunda Holding Company Limited.
Mr. Li Peiyin , born in September, 1986, Master of Accounting of Xiamen University, MBA of Missouri State University, CPAand senior accountant. Mr. Xiao is a director of the Company, the deputy chief of the financial management department
of AVIC International Holding Corporation (executive), a director of Shennan Circuit Co., Ltd. and a director of RainbowDepartment Store Co., Ltd. He used to be the business manager, the assistant to the chief and the deputy chief of theFinancial Management Department of AVIC International Holding Corporation.
Mr. Deng Jianghu, born in July 1984, graduated from Northeast Normal University with a master's degree in businessadministration. He is a director of the Company, and deputy manager of the Planning & Development Department of AVICInternational Holding Corporation (executive) and a director of Tianma Micro-electronics Co., Ltd. He used to be deputymanager and manager of the planning and operation department of the Company, director of modern service office ofAVIC International Shenzhen Co., Ltd., senior project manager of the operation management department of AVICInternational Holding Co., Ltd., a commissioner of the strategic management and senior commissioner of the StrategicDevelopment Department of Shennan Circuit Co., Ltd.
Mr. Pan Bo, born in March, 1976, bachelor of electromechanical engineering of Beijing University of Aeronautics &Astronautics, and EMBA of China Europe International Business School. He is the Managing Director of the Company. Mr.Pan used to be a deputy GM, the secretary of the board, and the assistant to the GM of the Company, the GM, deputy GM,the assistant to the GM, manager of the sales department, manager of the logistics department, manager of the after-saleservice department of FIYTA Sales Co., Ltd.
Mr. Zheng Qiyuan, born in July, 1963, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics, MBA of Paris Business School; senior engineer. Mr.Zheng is the Chairman of the Supervisory Committee ofthe Company and and a full-time director and supervisor of AVIC International Holding Corporation. Mr. Zheng used tobe the secretary of the Ministry of Aviation Industry,chief staff of the Planning Department of the Ministry of AviationIndustry, deputy chief and chief of the Planning Department of AVIC Corporation, deputy manager and manager of theBidding Center of AVIC Corporation, deputy manager and manager of AVIC International Economic & Trade DevelopmentLimited, a commissioner of AVIC International Holding Corporation, Chief Business Officer of AVIC International (HK)Group Limited, GM of AVIC International (HK) Trading Limited.
Ms. Cao Zhen, born in October, 1971, EMBA of China Europe International Business School. Ms. Cao is a supervisor ofthe Company, vice-secretary of the Discipline Inspection Commission and the chief of the Discipline InspectionDepartment of AVIC International Holding Corporation. Ms. Cao used to be the chief editor, deputy manager and managerof the administrative management department, the secretary of the Board, the assistant to the GM of AVIC News of AVICInternational Shenzhen Company Limited, the manager of the enterprise culture department of AVIC International HoldingCorporation,the chief of the CPC Construction and Ideological and Political Work Department, the discipline secretary andthe chairman of the trade union of AVIC International Shenzhen Company Limited, deputy leader of the disciplineinspection team and the chief of the discipline inspection, supervision and audit department of AVIC International HoldingCorporation.
Ms. Hu Jing, born in September, 1971, is an intermediate accountant and holds a bachelor's degree in accounting fromJiangxi University of Finance and Economics. He is currently the fund supervisor the financial department and a staffrepresentative supervisor of the Company. She used to be the senior business manager of the audit department and thetax supervisor of the finance department of the Company.
Mr. Lu Wanjun, born in February, 1967, accountant and EMBA of China Europe International Business School. He is nowa deputy GM and chief law adviser of the Company. He used to be the assistant to the GM of the Company, executive
deputy GM and deputy GM, the assistant to the GM and concurrently the manager of the financial department ofShenzhen Harmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University ofAeronautics & Astronautics, and EMBA of China Europe International Business School. He is now a deputy GM of theCompany. He used to be the assistant to the GM of the Company, a deputy GM and the assistant to the GM of ShenzhenHarmony World Watches Center Co., Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBA ofChina Europe International Business School. He is now a deputy GM of the Company. Mr. Li used to be the assistant tothe GM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR department ofShenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of ChinaNetcom Shenzhen; manager of big customer market planning of China Telecom Shenzhen.
Mr. Song Yaoming, born in July, 1967, accountant, master of economics of Shaanxi College of Finance and Economicsand EMBA of China Europe International Business School. He is now the chief accountant of the Company. He used to bethe deputy general manager and chief accountant of Rainbow Digital Commercial Co., Ltd., director of Shenzhen AoxuanInvestment Co., Ltd., director of Shenzhen Aoer Investment Development Co., Ltd., and deputy manager and accountantof the financial department of Shenyang FAW Jinbei Automobile Co., Ltd.
Mr. Tang Haiyuan, born in February, 1973, senior engineer, bachelor of plastic molding technology and equipment of HefeiUniversity of Technology, and EMBA of China Europe International Business School. He is now a deputy GM of theCompany. Mr. Tang used to work for Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd., taking the officesof the GM, a deputy GM, the assistant to the GM, and the manager of its quality department, manager and deputymanager of the engineering and technical department; also work for Shenzhen FIYTA Technology Development Co., Ltd.,taking offices of the assistant to the GM and the manager of the technical department.
Office taking in shareholder companies
| Names of the persons in office | Names of the Shareholders | Titles engaged in the shareholders | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from the shareholder |
| Xiao Yi | AVIC International Holding Corporation | Chief of the CPC Organization Department/Human Resource Department | Yes | ||
| Xiao Zhanglin | AVIC International Holding Corporation | Chief of the Operation and Management Department | Yes | ||
| Li Peiyin | AVIC International Holding Corporation | Deputy chief of the financial management department (presiding the work) | Yes | ||
| Deng Jianghu | AVIC International Holding Corporation | Deputy chief of the planning & development department (executive) | Yes | ||
| Zheng Qiyuan | AVIC International Holding Corporation | Full-time independent supervisor | Yes | ||
| Cao Zhen | AVIC International Holding Corporation | Vice-secretary of the discipline inspection committee and the chief of the discipline inspection department | Yes |
Office taking in other organizations
| Names of the persons in office | Names of the other organizations | Titles engaged in other organizations | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from other organization |
| Xiao Yi | Tianma Micro-electronics Co., Ltd. | Director | February 26, 2021 | No | |
| Shennan Circuit Co., Ltd. | Director | April 06, 2021 | No | ||
| AVIC IHL (Zhuhai) | Director | December 27, 2021 | No | ||
| AVIC International Economic & Trade Development Limited | Director | December 27, 2021 | No | ||
| Xiao Zhanglin | Shennan Circuit Co., Ltd. | Director | June 18, 2015 | No | |
| Rainbow Digital Commercial Co., Ltd. | Director | September 27, 2017 | No | ||
| Li Peiyin | Rainbow Digital Commercial Co., Ltd. | Director | February 24, 2021 | No | |
| Shennan Circuit Co., Ltd. | Director | April 06, 2021 | No | ||
| Deng Jianghu | Tianma Micro-electronics Co., Ltd. | Director | November 29, 2021 | No |
Punishment imposed by the securities regulatory authority on the directors, supervisors and senior executives both inoffice and having left their posts in the reporting period.Inapplicable
3. Remuneration to Directors, Supervisors and Senior Executives
Decision-making procedures, basis for determining the remuneration and actual payment to directors, supervisors andsenior executive to directors, supervisors and senior executives
The Company practiced the annual salary system for its directors and senior executives. The annual salary structureconsists of the basic annual salary and performance based annual salary. The assessment of senior executives isconducted according to the Measures for Administration of the Remuneration to Senior Executives.Remuneration to Directors, Supervisors and Senior Executives during the Reporting Period
In CNY 10,000
| Name | Title | Gender | Age | Office Status | Total pretax remuneration received from the Company | Is the remuneration from one of the Company's related parties |
| Zhang Xuhua | Chairman of the Board | Male | 45 | In office | 42.27 | No |
| Xiao Yi | Director | Male | 48 | In office | 0 | Yes |
| Xiao Zhanglin | Director | Male | 46 | In office | 0 | Yes |
| Li Peiyin | Director | Male | 36 | In office | 0 | Yes |
| Deng Jianghu | Director | Male | 38 | In office | 83.91 | Yes |
| Pan Bo | Managing Director | Male | 46 | In office | 232.22 | No |
| Wang Jianxin | Independent Director | Male | 52 | In office | 9 | No |
| Zhong Hongming | Independent Director | Male | 47 | In office | 9 | No |
| Tang Xiaofei | Independent Director | Male | 48 | In office | 9 | No |
| Zheng Qiyuan | Chairman of the Supervisory Committee | Male | 59 | In office | 0 | Yes |
| Cao Zhen | Supervisor | Female | 51 | In office | 0 | Yes |
| Hu Jing | Supervisor | Female | 51 | In office | 37.24 | No |
| Lu Wanjun | deputy GM and chief law adviser | Male | 55 | In office | 198.94 | No |
| Liu Xiaoming | Deputy GM | Male | 51 | In office | 247.94 | No |
| Li Ming | Deputy GM | Male | 49 | In office | 189.94 | No |
| Tang Haiyuan | Deputy GM | Male | 49 | In office | 201.97 | No |
| Huang Yongfeng | Chairman of the Board | Male | 48 | Retired | 184.75 | Yes |
| Wang Mingchuan | Director | Male | 56 | Retired | 0 | Yes |
| Fu Debin | Director | Male | 45 | Retired | 0 | Yes |
| Wang Bo | Director | Male | 43 | Retired | 0 | Yes |
| Chen Libin | Managing Director | Male | 58 | Retired | 180.5 | No |
| Wang Baoying | Chairman of the Supervisory Committee | Male | 58 | Retired | Yes | |
| Sheng Qing | Supervisor | Female | 46 | Retired | 120.67 | No |
| Fang Jiasheng | Supervisor | Male | 35 | Retired | 49.75 | No |
| Chen Zhuo | Chief Accountant & Secretary of the Board | Male | 46 | Retired | 198.94 | No |
| Xu Chuangyue | Deputy GM | Male | 43 | Retired | 72.68 | No |
| Total | -- | -- | -- | -- | 2,068.72 | -- |
VI. Duty Performance of Directors in the Reporting Period
1. Board Meetings
| Sessions | Meeting date | Date of disclosure | Resolutions of the meetings |
| 25th session of the Ninth Board of Directors. | January 15, 2021 | January 16, 2021 | Announcement on the Resolution of the 25th Session of the Ninth Board of Directors, 2021-006 |
| 26th session of the Ninth Board of Directors. | February 04, 2021 | February 05, 2021 | Announcement on the Resolution of the 26th Session of the Ninth Board of Directors, 2021-015 |
| 27th session of the Ninth Board of Directors | March 08, 2021 | March 10, 2021 | Announcement on the Resolution of the 27th Session of the Ninth Board of Directors, 2021-026 |
| 28th session of the Ninth Board of Directors | April 12, 2021 | April 13, 2021 | Announcement on the Resolution of the 28th Session of the Ninth Board of Directors, 2021-037 |
| 29th session of the Ninth Board of Directors | May 21, 2021 | May 22, 2021 | Announcement on the Resolution of the 29th Session of the Ninth Board of Directors, 2021-048 |
| 30th session of the Ninth Board of Directors | June 11, 2021 | June 15, 2021 | Announcement on the Resolution of the 30th Session of the Ninth Board of Directors, 2021-052 |
| 31st session of the Ninth Board of Directors | July 01, 2021 | July 02, 2021 | Announcement on the Resolution of the 31st Session of the Ninth Board of Directors, 2021-062 |
| 32nd session of the Ninth Board of Directors | August 18, 2021 | August 20, 2021 | Announcement on the Resolution of the 32nd Session of the Ninth Board of Directors, 2021-072 |
| 1st session of the Tenth Board of Directors | September 08, 2021 | September 09, 2021 | Announcement on the Resolution of the 1st Session of the Tenth Board of Directors, 2021-085 |
| 2nd session of the Tenth Board of Directors | October 25, 2021 | October 26, 2021 | Announcement on the Resolution of the 2nd Session of the Tenth Board of Directors, 2021-090 |
| 3rd session of the Tenth Board of Directors | November 12, 2021 | November 13, 2021 | Announcement on the Resolution of the 3rd Session of the Tenth Board of Directors, 2021-097 |
| 4th session of the Tenth Board of Directors | December 28, 2021 | December 29, 2021 | Announcement on the Resolution of the 4th Session of the Tenth Board of Directors, 2021-104 |
2. Attendance of Directors for Board Meetings and General Meetings
| Attendance of Directors for Board Meetings and General Meetings | |||||||
| Names of Directors | Number of Board meetings which should be be attended in the reporting period | Number of Spot Attendances | Number of Meetings Attended by Communication | Number of attendances of board meeting by proxy | Number of absence | Failure to personally attend board meetings successively twice | Number of attendance of the General Meeting |
| Zhang Xuhua | 6 | 1 | 5 | 0 | 0 | No | 1 |
| Xiao Yi | 10 | 2 | 8 | 0 | 0 | No | 0 |
| Xiao Zhanglin | 12 | 2 | 10 | 0 | 0 | No | 0 |
| Li Peiyin | 10 | 2 | 8 | 0 | 0 | No | 0 |
| Deng Jianghu | 4 | 1 | 3 | 0 | 0 | No | 0 |
| Pan Bo | 10 | 2 | 8 | 0 | 0 | No | 5 |
| Wang Jianxin | 12 | 2 | 10 | 0 | 0 | No | 6 |
| Zhong Hongming | 12 | 2 | 10 | 0 | 0 | No | 0 |
| Tang Xiaofei | 12 | 2 | 10 | 0 | 0 | No | 0 |
Note to failure to attend the board meeting successively twiceInapplicable
3. Objection of directors on some relevant issues
Have the directors proposed any objection on the relevant issues of the CompanyNo
4. Other Note to Duty Performance of Directors
Have the directors' recommendations to the Company been acceptedYesExplanation on why the directors' recommendations have been accepted or not been acceptedDuring the reporting period, the Board of Directors gave full play to the role of "setting strategies, making decisions, and
preventing risks". The directors of the Company attended Board Meetings on time in strict accordance with the "CompanyLaw", "Code of Corporate Governance for Listed Companies" and other laws and regulations and the "Articles ofAssociation", diligently and conscientiously performed duties and rights of directors, and fully deliberated, madesuggestions and voted on the resolutions of the Board of Directors. The Company fully considered and adopted theconstructive opinions put forward by directors in terms of business development decision-making, internal systemconstruction, personnel appointment and dismissal, external investment, and implementation of equity incentive plans.VII. Duty Performance of Special Committees under the Board of Directors in the Reporting Period
| Names of Special Committees | About the members | Number of meetings held | Meeting date | Description of meetings | Important comments and suggestions made | Other duty performances | Specific objections (if any) |
| Strategy Committee | Chairman of the committee: Zhang Xuhua Committee members: Xiao Zhanglin, Deng Jianghu, Pan Bo and Tang Xiaofei | 2 | March 08, 2021 | Reviewed and approved 2020 Annual Work Report of the Board of Directors and the Company's 2020 Profit Distribution Proposal. | During the reporting period, the members of the Strategy Committee conducted in-depth discussions and analysis on the Company's operating conditions and development prospects, proposed valuable suggestions and opinions for the Company's development strategy, and provided strong support for the scientific decision-making of the Board of Directors. | ||
| May 21, 2021 | Reviewed and approved the proposal on investing in the establishment of a wholly-owned subsidiary. | ||||||
| Audit Committee | Chairman of the committee: Wang Jianxin; members: Li Peiyin, Xiao Zhanglin and Tang Xiaofei | 4 | March 08, 2021 | Reviewed and approved 2020 Annual Report, 2020 Annual Internal Control Self-assessment Report, the 2020 Annual Internal Audit Work Report, the Changes in Accounting Policies, the Provision for Impairment of | During the reporting period, in line with the principle of diligently performing duties and seeking truth from facts, members of the Audit Committee provided advice and suggestions in guiding internal audit work, supervising and evaluating external audit institutions, and establishing effective |
| Assets and the Write-off of Bad Debts in Year 2020, etc. | internal control mechanisms, and actively safeguarded the interests of the Company and all shareholders. |
April 12, 2021
| April 12, 2021 | Reviewed and approved the Company's 2021 1st Quarter Report and summary, and the 2021 1st Quarter Audit Work Report of the Discipline Inspection and Law Department | ||||||
| August 18, 2021 | Reviewed and approved the Company's 2021 Semi-annual Report and Summary, and such proposals as the change of accounting firm, and the signing of a financial service agreement with AVIC Finance Co., Ltd. | ||||||
| October 25, 2021 | Reviewed and approved the Company's 2021 3rd Quarterly Report and the proposal of repurchase of the Company's partial domestically listed foreign shares (B shares). | ||||||
| Committee of Nomination, Remuneration and | Chairman of the Committee: Zhong Hongming; | 10 | January 15, 2021 | Reviewed and approved the Proposals on | During the reporting period, the members of the Nomination, |
| Assessment of the Board of Directors | members: Xiao Yi, Xiao Zhanglin, Wang Jianxin and Tang Xiaofei | Adjusting the List of Incentive Objects of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase II), the Number of Grants and the Granting of Restricted Shares and the Appointment of the Company's General Manager and Secretary of the Board. | Remuneration and Assessment Committee prudently discussed and judged the qualifications of nominated directors and senior executives, carefully reviewed the implementation of the Company's equity incentive plan and the directors’ remuneration assessment plan, etc., and effectively fulfilled relevant responsibilities. | ||||
| February 04, 2021 | Reviewed and approved the proposal on the proposed change of directors and the repurchase and cancellation of some restricted shares. | ||||||
| March 08, 2021 | Reviewed and approved the proposal on the remuneration of directors and senior executives in 2020 and the adjustment of various special committees of the Board. | ||||||
| April 12, 2021 | Reviewed and approved the proposal on the repurchase and cancellation of some restricted shares. | ||||||
| June 11, 2021 | Reviewed and |
| approved the proposal on the proposed change of directors and the repurchase and cancellation of some restricted shares. | ||||
| July 01, 2021 | Reviewed and approved the proposal on electing the Chairman of the Company, adjusting the members of the Strategy Committee of the Board of Directors, and repurchase and cancellation of some restricted shares. | |||
| August 18, 2021 | Reviewed and approved the proposal on the election of directors for the new Board of Directors and repurchase and cancellation of some restricted shares. | |||
| September 08, 2021 | Reviewed and approved the proposals on the election of the Chairman of the Company, adjusting the members of the strategy committee of the Board, and repurchase and cancellation of |
| some restricted shares. | ||||
| October 25, 2021 | Reviewed and approved the proposal on the appointment of the Chief Law Adviser of the Company. | |||
| December 28, 2021 | Reviewed and approved the proposal on the achievement of the release of restrictions during the second release period of the 2018 A-share Restricted Stock Incentive Plan (Phase I). |
VIII. Work Summary of the Supervisory CommitteeDid the Supervisory Committee find any risk involved in performing the supervision activities in the reporting periodNoIX. Employees
1. Number, Job Composition and Education Background of Employees
| Number of employees working for the parent company at the end of the reporting period (persons) | 129 |
| Number of employees working for the major subsidiaries at the end of the reporting period (persons) | 4,952 |
| Total of employees at the end of the reporting period (persons) | 5,081 |
| Total employees receiving remuneration in the reporting period (persons) | 5,081 |
| Number of the retired employees for whom the parent company and the major subsidiaries need to share the pension (persons) | 0 |
| Job Composition | |
| Job Composition Categories | Number of persons involved in the job composition |
| Production | 372 |
| Sales | 3,745 |
| Technical | 399 |
| Financial | 142 |
| Administrative | 423 |
| Total | 5,081 |
| Education background | |
| Education levels | Number of persons |
| Master's degree or higher | 91 |
| Undergraduate | 731 |
| Junior college | 1,336 |
| Below junior college | 2,923 |
| Total | 5,081 |
2. Remuneration Policy
The Company has worked out its remuneration policy by taking its business development planning and managementpractice into consideration and based on the principles of focusing on the values, creating and sharing core concepts,following hierarchical management, budget control, performance orientation, efficiency priority, fairness, positiveincentives, and long-term attention. The Company has established a remuneration system with the assessment basedannual salary system for medium and senior executives, performance-based salary systems for staff positions, and theproduction & performance jointly related payroll systems for production operators in accordance with the national laws,regulations and policies. The following administrative measures have been taken in implementation of the remunerationpolicy:
Total salary management: the Company has prepared an annual remuneration budget based on the annual businessplanning, adjusted and controlled the total remuneration with such factors as the market remuneration level, organizationefficiency, adjustment of the talent team, etc., and has achieved the management goal of benefit-orientation, positiveincentive, classification management and adjusted distribution;
Classification and grading of the management: The Company has established a differentiated, standardized, andmarket-oriented salary framework system that matches the job sequence and job level according to theprofessional/occupational development system of employees;
With value as the key link, co-creating and sharing: the Company designs the incentive system according to theclosed-loop value chain of value creation, evaluation and distribution. Through the establishment of value evaluationsystem and real-time incentive system consistent with the strategic development goals, the Company has formed acompensation along with the Company's benefits and personal performance, incremental compensation to the core keypositions, excellent talent incentive mechanism.
3. Training Program
(I) Building a team of high-quality professional talents and improve the readiness of talents for key positionsIn respect of training, the Company, relying on FIYTA Training Center, focused on the training of echelon talents, built atalent reserve pool, and improved the organization's talent readiness; created a learning atmosphere within theorganization, and promoted the construction of a professional talent learning system through the projects such as"Outstanding Craftsman Reservoir" and "Lean Six Sigma".
(II) Consolidating the terminal business talent training system, and building a strong terminal professional teamIn terms of terminal business talent training, the Company is building a customer-oriented terminal retail post trainingsystem, has strengthened the training of business personnel through the “bullseye training model”, optimized learningcontents, strengthened learning methods, and used "double excellence" as a starting point to consolidate the businessechelon management and operation ability.
(III) With the project-based talent training system to create sustainable trainingCultivate talents by means of project management method and logic, follow the 721 rules to design training programs,introduce conceptual tools such as experience extraction, action learning, performance improvement, and situationalassessment, and precipitate star training programs such as "Nova Program", "Aerospace Learning Month", "Star Theory",etc.
(IV) Carrying out targeted training in close combination with business strategic prioritiesThe training contents closely match the Company's strategic direction and business focus, and continue to promoteexcellent sales ability improvement training to empower terminals; according to the needs of market development, timelyconduct training such as new media operation training, brand strategic positioning training, etc., to help improve brandmanagement capabilities and strategic transformation innovation.
4. Labor Outsourcing
InapplicableX. Profit Distribution and Reserve CapitalizationPreparation, Implementation or Adjustment of the Policy for Profit Distribution, Especially the Policy for Cash DividendDistribution in the Reporting Period
The Company's 2020 Profit Distribution Plan was reviewed and approved at the 27th session of the Ninth Board ofDirectors held on March 8, 2021 and 2020 Annual General Meeting held on May 7, 2021 for review. It was resolved thatwith the Company’s total share capital as at the date of record for future implementation of the profit distribution plan asthe base, the Company distributed cash dividend at the rate of CNY 4.00 for every 10 shares (with tax inclusive) with thetotal cash dividend distributed not exceeding CNY 174,300,752.40, distribute bonus share at the rate of 0 share for every10 shares to the whole shareholders and capitalized no reserve.
According to relevant laws and regulations, the Company's B shares held by the Company through the special securitiesaccount for repurchase did not have the right to participate in the profit distribution. In accordance with the principle that
the amount of cash dividends remained unchanged, the final implementation plan of the Company's equity distribution in2020 was as follows: with the Company's existing share capital amounting to 426,556,436 shares involved in thedistribution (the total share capital of 435,550,522 shares on the equity registration date deducting the repurchasedshares in the special securities account for repurchase totaling 8,994,086 shares) as the base, the Company distributedthe cash dividend at the rate of CNY 4.084341(with tax inclusive) to all shareholders for every 10 shares, distributed 0bonus shares, and capitalized no reserve.
The profit distribution plan was implemented on June 3, 2021. For the detail, please refer to the “Announcement on theImplementation of 2020 Annual Equity Distribution 2021-050”disclosed by the Company on www.cninfo.com.cn.
| Special Note to Cash Dividend Distribution Policy | |
| Does it comply with the Articles of Association or the resolution of the General Meeting? | Yes |
| Are the dividend distribution standard and proportions explicit and clear? | Yes |
| Are the relevant decision-making procedures and mechanism complete? | Yes |
| Have the independent directors done their duties and brought their role into full play? | Yes |
| Do minority shareholders have opportunity to fully express their opinions and claims? Has their legal interest been fully protected? | Yes |
| In case the cash dividend distribution policy has been adjusted or altered, do the conditions and procedures comply with the law and are they transparent? | Inapplicable |
In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders were positivebut no cash dividend distribution proposal has been put forward.InapplicableProfit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period
| Bonus shares distributed at the rate of ___ (share) for every 10 shares | 0 |
| Dividend distributed at the rate of CNY___ for every 10 shares (with tax inclusive) | 3.00 |
| Share capital base for the dividend distribution preplan (shares) | 426,051,015 |
| Total cash dividend distributed (with tax inclusive) | 127,815,304.50 |
| Amount of cash dividend distributed in other way(s) (such as shares repurchased) | 4,653,185.52 |
| Total amount of cash dividend (including other way(s)) (CNY) | 132,468,490.02 |
| Profit available for distribution (CNY) | 834,920,189.09 |
| Proportion of the cash dividend in the total profit available for distribution (with other method inclusive) | 100% |
| Cash Dividend Distribution for the Reporting Year | |
| Others | |
| Detailed information for profit distribution or conversion of capital reserve into share capital preplan | |
| The Company's 2021 Profit Distribution Plan was reviewed and approved at the 6th session of the Tenth Board of Directors held on March 8, 2022. The Company plans to take the number of shares after deduction of the shares in the special securities account for repurchase from the total number of shares on the equity registration date as the base when the profit distribution plan is implemented in the future and distributes cash dividend at rate of CNY 3.00 (with tax inclusive) for every 10 shares to all shareholders, and distribute 0 bonus share, and capitalize no reserve. From the time of disclosing this profit distribution plan to that prior to the implementation, in the event of share repurchase, the Company intends to adjust the total distribution amount in accordance with the principle of fixed distribution ratio. The profit distribution plan is subject to review and approval of the General Meeting before implementation. | |
XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other EmployeeIncentive Measures
1. Equity incentive
1. A-Share Restricted Shares Incentive Plan 2018(Phase 1)
The 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meetingheld on January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Plan (Phase I), which was later onreviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Companyeventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive. These restricted shares wereawarded at price of CNY 4.40/share and were entirely awarded and registered for trading by January 30, 2019, For thedetail, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn. on January 12, 2019. The specific implementation during the reporting period is summarized asfollows:
Reviewed and approved at the 24th session of the Ninth Board of Directors, the conditions for the release of the restrictionfor sales in the first release period of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) weresatisfied, the 1.357641 million A-share restricted shares involved were listed for trading on February 1, 2021. For thedetail, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn. on January 12, 2021.
Reviewed and approved at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting,the Company decided to repurchase and cancel the 51,359 restricted A-shares which were already granted to but with therestriction not yet relieved held by 1 retired and 1 deceased incentive objects. For the detail, refer to the relevantannouncement disclosed in http://www.cninfo.com.cn. respectively on February 5, 2021 and February 25, 2021.
Reviewed and approved at the 28th session of the Ninth Board of Directors and 2020 Annual General Meeting, theCompany decided to repurchase and cancel the 40,020 restricted A-shares which were already granted to but with therestriction not yet relieved held by 2 retired incentive objects. For the detail, refer to the relevant announcement disclosed
in http://www.cninfo.com.cn. respectively on April 13, 2021 and May 8, 2021.
Reviewed and approved at the 30th session of the Ninth Board of Directors and 2021 3rd Extraordinary General Meeting,the Company decided to repurchase and cancel the 33,350 restricted A-shares which were already granted to but with therestriction not yet relieved held by 1 retired incentive objects. For the detail, refer to the relevant announcement disclosedin http://www.cninfo.com.cn. respectively on June 15, 2021 and July 2, 2021.
Reviewed and approved at the 31st session of the Ninth Board of Directors, the 32nd session of the Ninth Board ofDirectors and 2021 4th Extraordinary General Meeting, the Company decided to repurchase and cancel the 102,051restricted A-shares which were already granted to but with the restriction not yet relieved held by 3 retired incentiveobjects. For the detail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. respectively on July 2,2021, August 29, 2021 and September 9, 2021.
Reviewed and approved at the 4th session of the Tenth Board of Directors, the conditions for the release of the restrictionfor sales in the second release period of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) weresatisfied, the 1.244421 million A-share restricted shares involved were listed for trading on February 7, 2022. For thedetail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. on January 28, 2022.
2. A-Share Restricted Shares Incentive Plan 2018(Phase 2)
The 23rd session of the Ninth Board of Directors held on December 4, 2020 and 2021 1st Extraordinary General Meetingheld on January 6, 2021 decided to start 2018 A-Share Restricted Stock Incentive Plan (Phase II), which was later onreviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the Companyeventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. These restricted shares wereawarded at price of CNY 7.60/share and were entirely awarded and registered for trading by January 29, 2021. For thedetail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. on January 16, 2021. The specificimplementation during the reporting period is summarized as follows:
Reviewed and approved at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting,the Company decided to repurchase and cancel the 150,000 restricted A-shares which were already granted to but withthe restriction not yet relieved held by 1 retired incentive object. For the detail, refer to the relevant announcementdisclosed in http://www.cninfo.com.cn. respectively on February 5, 2021 and February 25, 2021.
Reviewed and approved at the 28th session of the Ninth Board of Directors and 2020 Annual General Meeting, theCompany decided to repurchase and cancel the 120,000 restricted A-shares which were already granted to but with therestriction not yet relieved held by 3 retired incentive objects. For the detail, refer to the relevant announcement disclosedin http://www.cninfo.com.cn. respectively on April 13, 2021 and May 8, 2021.
Reviewed and approved at the 30th session of the Ninth Board of Directors and 2021 3rd Extraordinary General Meeting,the Company decided to repurchase and cancel the 100,000 restricted A-shares which were already granted to but withthe restriction not yet relieved held by 1 retired incentive objects. For the detail, refer to the relevant announcementdisclosed in http://www.cninfo.com.cn. respectively on June 15, 2021 and July 2, 2021.
Reviewed and approved at the 32nd session of the Ninth Board of Directors and 2021 4th Extraordinary GeneralMeeting, the Company decided to repurchase and cancel the 110,000 restricted A-shares which were already granted to
but with the restriction not yet relieved held by 2 retired incentive objects. For the detail, refer to the relevantannouncement disclosed in http://www.cninfo.com.cn. respectively on August 20, 2021 and September 9, 2021.
Equity incentive to directors and senior executives of the Company
In shares
| Names | Title | Number of vested shares during the reporting period | Number of strike shares during the reporting period | Strike price and the number of strike shares during the reporting period (CNY/share) | Market price at the end of the reporting period (CNY/share) | Quantity of restricted shares held at the beginning of the reporting period | Quantity of the shares unlocked in the reporting period | Quantity of restricted shares newly granted during the reporting period | Price of the restricted shares granted (CNY/share) | Quantity of restricted shares held at the end of the reporting period |
| Zhang Xuhua | Chairman of the Board | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Xiao Yi | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Xiao Zhanglin | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Li Peiyin | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Deng Jianghu | Director | 0 | 0 | 0 | 33,000 | 10,989 | 80,000 | 7.60 | 0 | |
| Pan Bo | Managing Director | 0 | 0 | 0 | 80,000 | 26,640 | 150,000 | 7.60 | 203,360 | |
| Wang Jianxin | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Zhong Hongming | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Tang Xiaofei | Independent Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Lu Wanjun | deputy GM and chief law adviser | 0 | 0 | 0 | 80,000 | 26,640 | 150,000 | 7.60 | 203,360 | |
| Liu Xiaoming | Deputy GM | 0 | 0 | 0 | 80,000 | 26,640 | 150,000 | 7.60 | 203,360 | |
| Li Ming | Deputy GM | 0 | 0 | 0 | 80,000 | 26,640 | 150,000 | 7.60 | 203,360 | |
| Tang Haiyuan | Deputy GM | 0 | 0 | 0 | 60,000 | 19,980 | 150,000 | 7.60 | 190,020 | |
| Huang Yongfeng (Retired) | Chairman of the Board | 0 | 0 | 0 | 100,000 | 33,300 | 0 | 0 | ||
| Chen Libin (retired) | Managing Director | 0 | 0 | 0 | 100,000 | 33,300 | 180,000 | 7.60 | 246,700 | |
| Chen Zhuo | Chief | 0 | 0 | 0 | 80,000 | 26,640 | 150,000 | 7.60 | 203,360 |
| (retired) | Accountant & Secretary of the Board | |||||||||
| Xu Chuangyue (retired) | Deputy GM | 0 | 0 | 0 | 50,000 | 16,650 | 150,000 | 7.60 | 0 | |
| Total | -- | 0 | 0 | -- | -- | 743,000 | 247,419 | 1,310,000 | -- | 1,453,520 |
| Remarks (If any) | According to the relevant regulations of the Company's equity incentive plan, since Mr. Deng Jianghu, Mr. Huang Yongfeng and Mr. Xu Chuangyue are the original incentive objects who have resigned, the Company has respectively granted but not yet lifted the restrictions on their holdings during the reporting period. The relevant repurchase and cancellation procedures have been completed. | |||||||||
Assessment and Incentive Mechanism for Senior ExecutivesIn order to establish and improve the Company's incentive and restraint mechanism for senior executives, give full play toand mobilize the enthusiasm of the Company's executives, improve the Company's operational capabilities and economicbenefits, and ensure the realization of the company's strategic goals, the Company continuously improved the work oftenure and contractual management of executives. With year/tenure as a period, the Company carried out theassessment of business performance objectives, and continued to promote the implementation of the rigid realization ofrewards and punishments based on the assessment results, reflecting the strong incentives and hard constraints ofremuneration, adhered to performance orientation, and strengthened effective incentives for accurate assessments.
2. Implementation of the Employee Stock Ownership Plan
Inapplicable
3. Other employee incentive measures
InapplicableXII. Construction and Implementation of the Internal Control System during the Reporting Period
1. Construction and Implementation of the Internal Control System
In order to strengthen the Company's internal control, promote the Company's standardized operation and healthydevelopment, and protect the legitimate rights and interests of shareholders, the Company has established and improvedthe Company's internal control system in accordance with the "Company Law", "Securities Law" and other laws andregulations, and has conducted effective implementation.
During the reporting period, the Company continued to promote the work related to the integration and optimization ofinternal control, risk management and compliance management supervision. The Company did not have any significantdefects and shortcomings in the internal control.
2. Particular case found involving material defects in the internal control during the reporting periodNo
XIII. Management and Control of the Subsidiaries during the Reporting PeriodInapplicableXIV. Internal Control Self-assessment Report or Internal Control Audit Report
1. Self-assessment Report of the Internal Control
| Date of disclosing the full text of the internal control assessment report | March 10, 2022 | |
| Index of disclosure of the full text of the internal control assessment report | www.cninfo.com.cn | |
| Proportion of the total assets of the organizations involved in the assessment in the total assets of the Company’s consolidated financial statements | 100.00% | |
| Proportion of the operation revenue of the entitled involved in the assessment in the total operation revenue of the Company’s consolidated financial statements | 100.00% | |
| Criteria for affirming the defects | ||
| Categories | Financial report | Non-financial Report |
| Qualitative criteria | ① The defects involves fraud by directors, supervisors and senior managers; ② Correction of published financial statements; ③ Certified public accountants found that there was a material misstatement in the financial statements of the current period, while internal control failed to find the misstatement in the operation process; ④ The Company’s audit committee and the discipline inspection, audit and law department conducted ineffective supervision over the internal control. | ① Serious violation of national laws, administrative regulations and normative documents; ②”Decision-making of major issues, appointment and removal of important cadres, arrangement of important projects, use of large funds” failed to undergo collective decision-making process; ③Serious loss of key officers and technical personnel; ④ Lack of rules and regulations for control of or expiry of the system of rules and regulations to important businesses of the Company’s production and operation; ⑤ Expiry of the internal control of information disclosure resulted in public censure to the Company by the regulatory authority; ⑥ The result of the assessment of the internal control showed extraordinary defect |
| or serious defect has not be rectified. | ||
| Quantitative criteria | ① Material defect: misstatement ≥ 5% of the pre-tax profit ② Important defect: 1% of the pre-tax profit≤misstatement＜ 5% of the pre-tax profit ③ General defect: misstatement＜1% of pre-tax profit | ① Material defect: misstatement ≥ 5% of the pre-tax profit ② Important defect: 1% of the pre-tax profit≤misstatement＜ 5% of the pre-tax profit ③ General defect: misstatement＜1% of pre-tax profit |
| Number of material defects in financial reports (pcs) | 0 | |
| Number of material defects in non-financial reports (pcs) | 0 | |
| Number of important defects in financial reports (pcs) | 0 | |
| Number of important defects in non-financial reports (pcs) | 0 | |
2. Internal Control Audit Report
| Deliberation Opinions in the Internal Control Audit Report | |
| In our opinion, the Company maintained effective internal control over its financial report in all major aspects in accordance with the Basic Standard for Enterprise Internal Control and other relevant regulations as at December 31, 2021. | |
| Disclosure of the internal control audit report | Disclosed |
| Date of disclosing the full text of the internal control assessment report | March 10, 2022 |
| Index of disclosing the full text of the internal control audit report | www.cninfo.com.cn |
| Type of the onions in the internal control audit report | Standard unqualified auditor’s report |
| Are there any material defects in the non-financial report | No |
Has the CPAs issued a qualified auditor’s report of internal controlNoDoes the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of DirectorsYes
XV. Rectification of the Problems Found in the Self-inspection during the Special Campaign to Improve theGovernance of Listed CompaniesDuring the reporting period, in accordance with the spirit of the CSRC’s “Announcement on Launching Special Campaignto Improve the Governance of Listed Companies” (CSRC Announcement [2020] No. 69) and other documents, theCompany fully completed the special self-inspection work according to the special self-inspection list for governance of alisted company. Through this self-inspection, the Company believes that that the Company complies with therequirements specified in the "Company Law", "Code of Corporate Governance for Listed Companies.", "the Guidelineson the Bylaws of Listed Companies" and other laws and regulations in its overall company governance with quitecomplete governance structure and law-compliance operation.
The two problems existing in the Company and the rectification as following:
1. Some directors, supervisors and senior executives of the Company failed to attend the General Meeting ofShareholders due to work arrangements and failed to implement the regulations for the application for leave.
Rectification: From the end of the self-inspection work to the end of the reporting period, the Company held 4 generalmeetings of shareholders. The directors, supervisors and senior executives who were unable to attend (or attend asnon-voting delegates) the meeting due to work arrangements have all signed the application for leave.
2. There were 8 defects found in the Company's Self-assessment of the Internal Control in 2019 with the defect level asgeneral defects.
Rectification: The Company has completed the rectification of the above 8 general defects in 2020, and there were nomajor defects in the Company's internal control.
Section 5 Environment and Social ResponsibilityI. Significant Issues concerning Environmental ProtectionDoes the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced to the public by theenvironmental protection authority?Yes
| Name of the Company or its Subsidiary | Description of the major pollutants or specific pollutant | Way of discharging | Number of discharging outlets | Distribution of the discharging outlets | Discharging concentration | Pollutant Discharge Standards in Force | Total discharge volume | Total discharge volume verified | Over-discharging |
| Shanghai Watch Industry Co., Ltd. | Nickel and chromium effluent | Intermittent and interruption | 1 | At the port of effluent treatment equipment | Nickel ﹤0.03, chromium ﹤0.01 | Nickel: 0.1; chromium: 0.1 | 406 tons/year | 650 tons/year | None |
Construction and operation of the pollution prevention and control facilitiesShanghai Watch Co., Ltd. reconstructed the waste water treatment facility in 2016 and added 2 sets of equipment in 2018for the purpose of ensuring discharging of nickel and chromium effluent to comply with the Emission Standard ofPollutants for Electroplating during 2018. Up to now, the facility has been operating normally and its emission has neverexceeded the limit as specified by the standard. The Company's online monitoring terminal has been docked with thegovernment monitoring platform for timely testing. It complies with the standard in terms of emission factors.
In order to implement the requirements of the Ministry of Ecology and Environment for energy saving and consumptionreduction, the Company newly added a set of membrane filtration heavy metal device during the reporting year. As aresult, its electroplating wastewater has reached the standard for clean water after the treatment. Therefore, the Companyreuses a part of the water (recycling) , so that the total wastewater discharge last year was reduced by about 244 tons,and the recycling rate was about 37%.
In compliance with the Document of Shanghai Municipal Bureau of Ecology and Environment, HU HUAN GUI (2020) No.6, the primary pollutant wastewater should comply with the general principle of “the water which should be classified mustbe classified; the water which can be classified must be classified”. The Company started to entrust the municipalengineering department to arrange and improve the Company’s existing wastewater pipelines commencing from August,2020, separate, collect and treat the domestic sewage and electroplating effluent.
Environmental impact assessment on construction projects and other environmental protection administrative licensingIn 2018，Yangpu District Bureau of Ecology and Environment of Shanghai organized and held the Clean ProductionAuditing and Assessment Seminar of Shanghai Watch Co., Ltd. where the Company's clean production work wasassessed, audited and approved. Shanghai Watch Co., Ltd.has passed the pollution discharge verification organized byYangpu District Bureau of Ecology and Environment of Shanghai and has received the Pollutant Discharge Permitissued by the said authority at the end of 2019. Since the individual non-heavy pollutant factors originally approved in the"Pollutant Discharge Permit" did not belong to the Company's discharge scope, the Company requested to change the
"Pollutant Discharge Permit", which was now been re-examined by the Yangpu District Bureau of Ecology andEnvironment and was issued on October 20, 2021.
Contingency Plan for Emergent Environmental IncidentsShanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent Environmental Incidents andregularly organizes training and exercise every year. The aforesaid plan has been approved and filed for record byYangpu District Bureau of Ecology and Environment of Shanghai and has been published on the EnvironmentalInformation Disclosure Platform of Enterprises and Institutions of Shanghai.
Environment Self-Monitoring ProgramYangpu District Bureau of Ecology and Environment of Shanghai monitors the Company once a quarter. The Companyentrusted a qualified third-party organization (Shanghai Textile Energy Conservation Center) to monitor and issuemonitoring report every six months. The Company is equipped with online monitoring instruments and communicates withthe district bureau of ecology and environment. The platforms of the bureau and the district government are connected tothe Internet to transmit the concentration data of heavy pollution factors 24 hours a day.
Administrative penalties for environmental issues during the reporting periodInapplicable
Other environment information necessary to be disclosedThe Company has disclosed the concerned information on the Environmental Information Disclosure Platform ofEnterprises and Institutions of Shanghai according to the requirements of the local environmental protection authorities.Website: https://e2.sthj.sh.gov.cn.
Measures taken to reduce carbon emissions during the reporting period and their effectInapplicable
Other information in connection with the environmental protectionInapplicableII. Social ResponsibilitiesFor the detail, please refer to the "2021 Corporate Social Responsibility Report" disclosed by the Company on March 10,2022 on www.cninfo.com.cn.III. Consolidating and Expanding the Achievements of Poverty Alleviation and Rural RevitalizationDuring the reporting period, the Company actively responded to national policies and participated in targeted povertyalleviation and rural revitalization through various means. Through the “LOVE?AVIATION”, the aviation industry lovesupport platform the Company has purchased "LOVE?AVIATION" agricultural products during the Dragon Boat Festival,Mid-Autumn Festival and other traditional Chinese festivals to help poverty-stricken counties in Guizhou etc. in getting ridof poverty; carried out culturally characteristic poverty alleviation activities. On August 3, 2021, the "Children EnjoyingBeautiful Time" Hand-in-Hand Summer Camp jointly organized by Shenzhen Chenghan Public Welfare Foundation and
Gansu Aesthetic Education Promotion Association invited more than 50 teachers and students from Linxia, GansuProvince to enter the Park of FIYTA Clock Building and hold a "Hand-in-Hand Summer Camp" and the “Love being onlyBecause of You" theme public welfare activities were successfully held.
Section 6 Significant EventsI. Implementation of Commitments
1. Commitments made by the Company's actual controller, shareholders, related parties, acquirers, the Companyand other relevant parties fulfilled during the reporting period and not fulfilled as of the end of the reportingperiodInapplicable
2. There existed profit anticipation for the Company’s assets or projects while the reporting period was stillwithin the duration of the profit anticipation. The Company made explanation on whether the assets or projectsreached the anticipated profit and the causeInapplicableII. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its Related PartiesInapplicableIII. Outward guarantee against regulationsInapplicableIV. Explanation of the Board of Directors on the Qualified Auditors' Report for the Latest Period Issued by theCPAsInapplicableV. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors (if any) on the“Qualified Auditor’s Report” issued by the CPAs in the Reporting PeriodInapplicableVI. Explanation of changes in accounting policies, accounting estimates or correction of significant accountingerrors compared with the financial report of the previous yearThe Ministry of Finance revised and issued the "Accounting Standards for Enterprises No. 21-Leases" on December 7,2018. According to the requirement of the Ministry of Finance, a company which is listed both at home and abroad orlisted overseas and prepares its financial statements according to the International Financial Reports Standards or theAccounting Standards for Enterprises started implementing the said accounting standards commencing from January 1,2019; other enterprises implementing the accounting standards for enterprises started the implementation commencingfrom January 1, 2021. The Company as a domestically listed company started implementing the new lease standards
commencing from January 1, 2021 according to the aforesaid standards and circular promulgated by the Ministry ofFinance. For details, please refer to the “Announcement on Change of the Accounting Policies 2021-030” disclosed onthe Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on March 20, 2021.VII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with the FinancialReport of the Previous YearDuring the reporting period, Shenzhen Xunhang Precision Technology Co., Ltd. and HARMONY World Watch Center(Hainan) Limited, the Company's newly established wholly-owned subsidiaries, were included in the scope of theCompany's consolidated statements; the deregistration of 68 Station Co., Ltd., one of the Company's wholly-ownedsubsidiaries, was completed on March 5, 2021, and it has been excluded from the scope of the Company's consolidatedstatements.VIII. Engagement/Disengagement of CPAsCPAs currently engaged by the Company
| Name of the domestic CPAs | Da Hua Certified Public Accountants (Special General Partnership) |
| Remuneration to the domestic CPAs (in CNY 10,000) | 120 |
| Successive years of the domestic CPAs offering auditing services | 1 |
| Name of the certified public accountants from the domestic CPAs | Long Jiao and Wang Dong |
| Successive years of the domestic CPAs offering auditing services | 1 |
Has the CPAs been changed for the reporting period?Yes
Has the CPAs been replaced during the auditing?No
Have the examination and approval procedures been implemented in replacing the CPAsYes
Detailed explanation on the replacement/change of the CPAsThe 32nd Session of the Ninth Board of Directors held on August 18, 2021 and 2021 4th Extraordinary General Meetingheld on September 8, 2021 reviewed and approved the "Proposal on Change of the Accounting Firm". As the employmentterm of Grant Thornton LLP as the Company's auditor expired, the Company decided to employ Da Hua Certified PublicAccountants as the Company's auditor of the financial statements and internal control of year 2021. For details, pleaserefer to the “Announcement on the Change of the CPAs 2021-077” disclosed by the Company onhttp://www.cninfo.com.cn/ on August 20, 2021.
Employment of CPAs, financial consultant or sponsor for auditing the internal controlAfter review and approval at the Company's 4th Extraordinary General Meeting, the Company appointed Da Hua CertifiedPublic Accountants (Special General Partnership) as the auditor of Company's 2021 annual financial statements and
internal control.IX. Delisting Possibly to be Confronted with after Disclosure of the Annual ReportInapplicableX. Matters concerning Bankruptcy ReorganizationInapplicableXI. Significant Lawsuits and ArbitrationsInapplicableXII. Penalty and RectificationInapplicableXIII. Integrity of the Company, its Controlling Shareholder and Actual ControllerInapplicableXIV. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Inapplicable
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Inapplicable
5. Transactions with the finance company with incidence relation
Deposit business
| Related parties | Incidence relation | Maximum deposit limit per | Deposit interest range | Opening balance (CNY 10,000) | Amount incurred in the reporting period | Ending balance (CNY 10,000) |
| day (CNY 10,000) | Total amount deposited during the reporting period (in CNY 10,000) | Total amount withdrawn during the reporting period (in CNY 10,000) | |||||
| AVIC Finance Co., Ltd. | Finance company with incidence relation | 80,000 | 1.665% | 28,353.23 | 313,638.76 | 327,213.39 | 14,778.60 |
Loan business
| Related parties | Incidence relation | Loan amount (CNY 10,000) | Loan interest rate range | Opening balance (CNY 10,000) | Amount incurred in the reporting period | Ending balance (CNY 10,000) | |
| Total loan during the reporting period (in CNY 10,000) | Total repayments during the reporting period (in CNY 10,000) | ||||||
| AVIC Finance Co., Ltd. | Finance company with incidence relation | 30,000 | 3.65% | 0 | 20,000 | 20,000 | 0 |
Credit extension and other financial businessInapplicable
6. Transactions between the finance company controlled by the Company and the related partiesInapplicable
7. Other Significant Related Transactions
The 27th session of the Ninth Board of Directors held on March 18, 2021 and 2020 Annual General Meeting held on May7, 2021 reviewed and approved the Proposal on Prediction of Regular Related Transactions in 2021. For the detail, referto the Announcement on the Resolution of the 27th Session of the Ninth Board of Directors No. 2021-026, theAnnouncement on the Prediction of the Regular Related Transactions in 2021 No. 2021-029 and the Announcement onthe Resolution of 2020 Annual General Meeting No. 2021-045. During the reporting period, the cumulative transactionamount of the Company's related transactions related to its daily operations was within the expected range of the year.
The 32nd Session of the Ninth Board of Directors held on August 18, 2021 and 2021 4th Extraordinary General Meetingheld on September 8, 2021, reviewed and approved the "Proposal for Signing Financial Service Agreement with AVICFinance Co., Ltd. The Company decided to terminate the original contract with the AVIC Finance Ltd. and sign newFinancial Services Agreement. For the detail, refer to the Announcement of the Resolution of the 32nd Session of theNinth Board of Directors No. 2021-072, the Announcement on the Related Transaction in Connection with SigningFinancial Service Agreement with AVIC Finance Co., Ltd. No. 2021-078 and the Announcement on the Resolution of 0214th Extraordinary General Meeting No. 2021-087.
Inquiry on the website for disclosing the provisional report concerning significant related transactions
| Description of the provisional announcements | Date of disclosure | Disclosure website |
| Announcement on the Resolution of the 27th Session of the Ninth Board of Directors, 2021-026 | March 10, 2021 | www.cninfo.com.cn |
| Announcement of the Prediction of the Regular Related Transactions in 2021, 2021-029 | March 10, 2021 | www.cninfo.com.cn |
| Announcement on the Resolution of 2020 Annual General Meeting, 2021-045 | May 08, 2021 | www.cninfo.com.cn |
| Announcement on the Resolution of the 32nd Session of the Ninth Board of Directors, 2021-072 | August 20, 2021 | www.cninfo.com.cn |
the Announcement on the Related Transaction inConnection with Signing Financial Service Agreement withAVIC Finance Co., Ltd. No. 2021-078
| August 20, 2021 | www.cninfo.com.cn | |
| Announcement on the Resolution of 2021 4th Extraordinary General Meeting, 2021-087 | September 09, 2021 | www.cninfo.com.cn |
XV. Important Contracts and Implementation
1. Custody, Contacting and Leases
(1) Custody
Inapplicable
(2) Contracting
Inapplicable
(3) Leases
Inapplicable
2. Significant Guarantees
In CNY 10,000
| Outward guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries) | ||||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||||
| Total amount of outward guarantee approved in the report period (A1) | 0 | Total amount of outward guarantee actually incurred in the report period (A2) | 0 | |||||||
| Total amount of outward guarantee already approved at the end of the report period (A3) | 0 | Total ending balance of outward guarantee at the end of the report period (A4) | 0 | |||||||
| Guarantee to the subsidiaries | ||||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Implementation status | Guarantee to related party? |
| Harmony | March 10, 2021 | 15,000 | December 23, 2021 | 15,000 | Guarantee with joint responsibility | 1 year | No | No | ||
| the Technology Co. | March 10, 2021 | 3,000 | June 23, 2021 | 289 | Guarantee with joint responsibility | 1 year | No | No | ||
| the Technology Co. | March 10, 2021 | 4,000 | April 01, 2021 | 1,284 | Guarantee with joint responsibility | 1 year | No | No | ||
| the Hong Kong Co. | March 10, 2021 | 3,270.4 | 0 | Guarantee with joint responsibility | 1 year | No | No | |||
| Total guarantee quota to the subsidiaries approved in the reporting period (B1) | 25,270.4 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (B2) | 16,573 | |||||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (B3) | 25,270.4 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (B4) | 16,573 | |||||||
| Guarantee among the subsidiaries | ||||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | |||||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (C1) | 0 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (C2) | 0 | ||||||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (C3) | 0 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (C4) | 0 | ||||||||
| Total amount of guarantees (i.e. Total of the previous three major items) | |||||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (A1+B1+C1) | 25,270.4 | Total amount of outward guarantee actually incurred in the report period (A2+B2+C2) | 16,573 | ||||||||
| Total amount of guarantees already approved at the end of the report period (A3+B3+C3) | 25,270.4 | Total ending balance of guarantees at the end of the report period (A4+B4+C4) | 16,573 | ||||||||
| Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4) | 5.50% | ||||||||||
| where | |||||||||||
| Amount of guarantees offered to the shareholders, actual controller and its related parties (D) | 0 | ||||||||||
| Amount of guarantee for liabilities directly or indirectly offered to the guarantees with the asset-liability ratio exceeding 70% (E) | 0 | ||||||||||
| Guarantee with total amount exceeding 50% of the net assets (F) | 0 | ||||||||||
| Total amount of the aforesaid three guarantees (D+E+F) | 0 | ||||||||||
| For the guarantee contract not yet due, guarantee responsibility incurred in the reporting period or there is evidence showing the description of the possible related discharge duty (if any) | Inapplicable | ||||||||||
| Note to the outward guarantee against the established procedures (if any) | Inapplicable | ||||||||||
Description of the guarantee with complex methodInapplicable
3. Entrusting a Third Party to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Other Important Contracts
InapplicableXVI. Notes to Other Significant Events
1. Amendment of the Company's Rules and Regulations
Authorized by 2021 1st Extraordinary General Meeting, the 26th session of the Ninth Board of Directors held on February4, 2021 reviewed and approved the "Proposal on the Amendment of the Articles of Association". For the detail, refer to theAmendment of the Articles of Association disclosed in http://www.cninfo.com.cn. on February 5, 2021.
The 3rd session of the Tenth Board of Directors held on November 12, 2021 and 2021 5th Extraordinary General Meetingheld on November 30, 2021, reviewed and approved the Proposal on the Amendment of the "Articles of Association", " theProposal on the Amendment of the Rules of Procedures for the General Meetings ","the Proposal on the Amendment ofthe Rules of Procedures of Board Meetings ". For the detail, refer to the relevant announcement disclosed inhttp://www.cninfo.com.cn. on November 13, 2021.
2. Repurchase of Partial Domestically Listed Foreign Investment Shares (B-Shares)The Company’s 2nd Session of the Tenth Board of Directors held on October 25, 2021 and 2021 5th ExtraordinaryGeneral Meeting held on November 30, 2021 reviewed and approved the “Proposal for the Repurchase of PartialDomestically Listed Foreign Shares (B-Shares). For the detail, refer to the Report on the Repurchase of PartialDomestically Listed Foreign Shares (B-Shares) No. 2021-102.XVII. Significant Events of the Company's SubsidiariesInapplicable
Section 7 Change of the Shares and Particulars about ShareholdersI. Change of the Shares
1. Change of the Shares
In shares
| Before the change | Increase/decrease (+, -) involved in the change | After the change | |||||||
| Quantity | Proportion | New issuing | Bonus shares | Shares converted from reserve | Others | Sub-total | Quantity | Proportion | |
| I. Restricted shares | 4,457,513 | 1.04% | 7,660,000 | -1,982,029 | 5,677,971 | 10,135,484 | 2.38% | ||
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| 2. State corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| 3. Other domestic shares | 4,457,513 | 1.04% | 7,660,000 | -1,982,029 | 5,677,971 | 10,135,484 | 2.38% | ||
| Including: Domestic corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| Shares held by domestic natural persons | 4,457,513 | 1.04% | 7,660,000 | -1,982,029 | 5,677,971 | 10,135,484 | 2.38% | ||
| 4. Foreign invested shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| Including: Foreign corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| Shares held by foreign natural persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| II. Unrestricted shares | 423,634,368 | 98.96% | 0 | -7,718,837 | -7,718,837 | 415,915,531 | 97.62% | ||
| 1. CNY ordinary shares | 356,716,368 | 83.33% | 0 | 1,275,249 | 1,275,249 | 357,991,617 | 84.03% | ||
| 2. Foreign invested shares listed in Mainland China | 66,918,000 | 15.63% | 0 | -8,994,086 | -8,994,086 | 57,923,914 | 13.60% | ||
| 3. Foreign invested shares listed abroad | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0.00% | ||
| III. Total shares | 428,091,881 | 100.00% | 7,660,000 | -9,700,866 | -2,040,866 | 426,051,015 | 100.00% | ||
Cause of the change of sharesDuring the reporting period, the Company’s 2018 A-share Restricted Stock Incentive Plan (Phase II) was completed ingranting and registered for listing on January 29, 2021. 7,660,000 shares were granted.
As in the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) and 2018 A-share Restricted Stock IncentivePlan (Phase II), 8 original incentive objects resigned and one passed away, they were no longer eligible for incentives.The Company has repurchased and canceled the 706,780 restricted A-shares that it had granted but had not yet lifted therestriction on sales in accordance with the provisions of the incentive plan.
According to the Company’s Proposal for the Repurchase of Partial Domestically Listed Foreign Shares (B-Shares) by theCompany, the Company repurchased 8,994,086 B-shares in total during the period from July 23, 2020 to July 22, 2021.This part of the B-shares were canceled on August 3, 2021.
Due to the above reason, the Company's total shares changed from 428,091,881 shares to 426,051,015 shares.
Approval of the Change of the Shares2021 1st Extraordinary General Meeting held on January 6, 2021 reviewed and approved 2018 Restricted A-ShareIncentive Plan (Phase II) (Draft) and the summary, which was later on reviewed and approved at the 25th session of theNinth Board of Directors held on January 15, 2021, and the Company eventually granted 7.66 million restrictive A-sharesto 135 persons eligible for the incentive.
The Company's 2021 2nd Extraordinary General Meeting held on February 24, 2021 authorized the Board of Directorsof the Company to repurchase and cancel 201,359 A-share restricted shares with the restriction not yet relieved that hadbeen granted to and held by the former incentive objects one of whom had resigned and another of whom had passedaway.
The Company's 2020 Annual General Meeting held on May 7, 2021 authorized the Board of Directors of the Company torepurchase and cancel 160,020 A-share restricted shares with the restriction not yet relieved that had been granted to andheld by the former incentive objects three of whom had resigned and another of whom had passed away.
The Company's 2021 3rd Extraordinary General Meeting held on July 01, 2021 authorized the Board of Directors of theCompany to repurchase and cancel 133,350 A-share restricted shares with the restriction not yet relieved that had beengranted to and held by a retired former incentive object.
The Company's 2021 4th Extraordinary General Meeting held on September 8, 2021 authorized the Board of Directors ofthe Company to repurchase and cancel 212,051 A-share restricted shares with the restriction not yet relieved that hadbeen granted to and held by three retired former incentive object.
The Company held 2020 2nd Extraordinary General Meeting on July 23, 2020, authorized the Company's Board ofDirectors to fully handle matters related to the cancellation of the repurchased shares after the repurchase of somedomestically listed foreign shares (B-shares) was completed.
Transfer of the Shares ChangedVerified by China Securities Depository & Clearing Corporation Limited Shenzhen Branch, the transfer of the Company'sshare changes in the reporting period is as follows:
1. The Company's 2018 A-share Restricted Stock Incentive Plan (Phase II) was completed on January 29, 2021. As aresult, 7,660,000 shares were granted.
2. The Company completed the repurchase and cancellation of A-share restricted shares on April 23, 2021, July 6, 2021,August 24, 2021 and November 3, 2021. Total repurchase logout 706,780 shares A Shares restrictive stock.
3. As at August 3, 2021, the Company completed repurchase and cancellation of 8,994,086 domestically listed foreignshares (B-shares).
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS, net asset valueper share attributable to the common stockholders in the past year and the latest period
| Net return on equity, weighted average (%) | Earnings per share | ||||
| Basic earning per share (CNY/share) | Diluted earning per share (CNY/share) | ||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 |
| 13.39% | 10.78% | 0.9036 | 0.6764 | 0.9036 | 0.6764 |
Other information the Company considers necessary or required by the securities regulatory authority to be disclosed.Inapplicable
2. Change of the Restricted Shares
In shares
| Names of the Shareholders | Number of restricted shares at the beginning of the reporting period | Number of restricted shares increased in the reporting period | Number of restricted shares relieved in the reporting period | Number of restricted shares at the end of the reporting period | Cause of restriction | Date of relieving the restriction |
| Chen Libin (retired) | 160,000 | 180,000 | 33,300 | 306,700 | Locked shares for the retired senior executives | To be unlocked subject to the conditions of the locked shares for the retired senior executives |
| Chen Zhuo (retired) | 118,250 | 156,640 | 26,640 | 248,250 | Locked and not yet unlocked restricted shares held by the senior executives | As of the disclosure date, the Company intended to repurchase 176,720 restricted A-shares in accordance with the regulations, and the remaining shares shall be unlocked according to the conditions for unlocking the locked shares held by the retired senior |
| executives. | ||||||
| Li Ming | 117,530 | 156,640 | 26,640 | 247,530 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Pan Bo | 117,500 | 156,640 | 26,640 | 247,500 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Lu Wanjun | 117,500 | 156,640 | 26,640 | 247,500 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Liu Xiaoming | 117,500 | 156,640 | 26,640 | 247,500 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Tang Haiyuan | 60,000 | 154,980 | 19,980 | 195,000 | Locked and not yet unlocked restricted shares held by the senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the |
| Company’s equity incentive management | ||||||
| Bao Xianyong | 60,000 | 120,000 | 19,980 | 160,020 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Sun Lei | 60,000 | 120,000 | 19,980 | 160,020 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Sheng Li | 60,000 | 120,000 | 19,980 | 160,020 | Not yet unlocked restricted shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Other shareholders | 3,469,233 | 6,264,212 | 1,111,221 | 7,915,444 | Locked and not yet unlocked restricted shares held by the retired senior executives | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Total | 4,457,513 | 7,742,392 | 1,357,641 | 10,135,484 | -- | -- |
II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting period
| Description of the stock and its derivative securities | Date of issuing | Issuing price (or interest rate) | Quantity issued | Date of listing | Quantity approved for being listed for trading | Expiry date of trading | Disclosure index | Date of disclosure |
| Type of stock | ||||||||
| A-shares | January 15, | 7.60 | 7,660,000 | January 29, | http://www.cninfo | January 28, | ||
| 2021 | 2021 | .com.cn/ | 2021 |
Note to issuing of securities (with preferred stock exclusive) in the reporting periodThe 23rd session of the Ninth Board of Directors held on December 4, 2020 and 2021 1st Extraordinary General Meetingheld on January 6, 2021 decided to start 2018 A-Share Restricted Stock Incentive Plan (Phase 2), which was later onreviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the Companyeventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. This part of restricted A-shareswas all granted by January 15, 2021 and registered for listing by January 29, 2021. For the detail, please refer to the"Announcement on Completion of the Grant Involved in the 2018 A-Share Restricted Stock Incentive Plan (Phase II)2021-011” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.
2. Note to changes of the company’s total shares and the structure of shareholders as well as the structure ofassets and liabilitiesSame as the description in “the Cause of the Change of Shares”.
3. Existing Employee Shares
InapplicableIII. Shareholders and Actual Controlling Shareholder
1. Number of Shareholders and Shareholding
In shares
| Total common shareholders at the end of the reporting period | 34,412 | Total common shareholders at the end of the month prior to the date of disclosing the annual report | 34,634 | Total preference shareholders with the voting power recovered at the end of the reporting period (if any) (Refer to Note 8) | 0 | Total preference shareholders with the voting power recovered at the end of the month before the day of disclosing the Annual Report (if any) (Refer to Note 8) | 0 | |||||||
| Shares held by the shareholders holding over 5% shares or the top ten shareholders | ||||||||||||||
| Names of the Shareholders | Nature of the shareholder | Shareholding proportion | Number of shares held at the end of the reporting period | Increase/decrease in the reporting period | Number of the restricted shares held | Quantity of unrestricted shares held | Pledging, marking or freezing | |||||||
| Status of the shares | Quantity | |||||||||||||
| AVIC International Holding Limited | State corporate | 38.25% | 162,977,327 | - | 0 | 162,977,327 | ||||||||
| Guoxin Investment Co., Ltd. | State corporate | 1.82% | 7,739,898 | 7,739,898 | 0 | 7,739,898 | ||
| Construction Bank of China - Penghua Huizhi Optimized Hybrid Securities Investment Fund | Domestic non-state-owned legal person | 1.10% | 4,679,494 | 4,679,494 | 0 | 4,679,494 | ||
| Construction Bank of China - Penghua Value Superiority Hybrid Securities Investment Fund (LOF) | Domestic non-state-owned legal person | 0.60% | 2,556,742 | -4,915,693 | 0 | 2,556,742 | ||
| Qiu Hong | Domestic natural person | 0.54% | 2,300,000 | 700,000 | 0 | 2,300,000 | ||
| China Ifund Asset Management Co., Ltd. - Ifund All-Weather No. 2 Phase G Private Equity Securities Investment Fund | Domestic non-state-owned legal person | 0.43% | 1,841,716 | 1,841,716 | 0 | 1,841,716 | ||
| SOCIETE GENERALE | Foreign corporate | 0.30% | 1,265,800 | 1,024,300 | 0 | 1,265,800 | ||
| Zhang Yinnan | Domestic natural person | 0.28% | 1,195,128 | 1,195,128 | 0 | 1,195,128 | ||
| Chen Hao | Domestic natural person | 0.24% | 1,041,143 | -24,257 | 0 | 1,041,143 | ||
| Chen Chu | Domestic natural person | 0.24% | 1,004,400 | 508,599 | 0 | 1,004,400 | ||
| About the fact that a strategic investor or ordinary corporate became one of the top ten shareholders due to placement of new shares (if any) (Refer to Note 3) | Inapplicable | |||||||
| Explanation on associated relationship or consistent action of the above shareholders | Inapplicable | |||||||
| Note to the aforesaid shareholders involving entrusting/being entrusted with voting power and the waiver of voting power | Among the above shareholders, AVIC International Holding Limited authorized representatives to exercise its voting power on behalf at the Company’s 2021 1st Extraordinary General Meeting, 2021 2nd Extraordinary General Meeting, 2020 Annual General Meeting, 2021 3rd Extraordinary General Meeting, 2021 4th Extraordinary General Meeting and 2021 5th Extraordinary General Meeting with the number of shares they represented was always 162,977,327. For the detail of the result of the aforesaid voting, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. | |||||||
| There is a special repurchase account among the top 10 shareholders (if any) (see Note 10) Special note to the designated repurchase | Inapplicable | |||||||
| account in top 10 shareholders (if any) (Refer to Note 11) | |||
| Shares held by top 10 shareholders of unrestricted shares | |||
| Names of the Shareholders | Quantity of unrestricted shares held at the end of the reporting period | Share type | |
| Share type | Quantity | ||
| AVIC International Holding Limited | 162,977,327 | CNY ordinary shares | 162,977,327 |
| Guoxin Investment Co., Ltd. | 7,739,898 | CNY ordinary shares | 7,739,898 |
| Construction Bank of China - Penghua Huizhi Optimized Hybrid Securities Investment Fund | 4,679,494 | CNY ordinary shares | 4,679,494 |
| Construction Bank of China - Penghua Value Superiority Hybrid Securities Investment Fund (LOF) | 2,556,742 | CNY ordinary shares | 2,556,742 |
| Qiu Hong | 2,300,000 | CNY ordinary shares | 2,300,000 |
| China Ifund Asset Management Co., Ltd. - Ifund All-Weather No. 2 Phase G Private Equity Securities Investment Fund | 1,841,716 | CNY ordinary shares | 1,841,716 |
| SOCIETE GENERALE | 1,265,800 | CNY ordinary shares | 1,265,800 |
| Zhang Yinnan | 1,195,128 | Domestically listed foreign shares | 1,195,128 |
| Chen Hao | 1,041,143 | CNY ordinary shares | 1,041,143 |
| Chen Chu | 1,004,400 | CNY ordinary shares | 1,004,400 |
| Explanation to the associated relationship or consistent action among the top 10 shareholders of non-restricted negotiable shares and that between the top 10 shareholders of non-restricted negotiable shares and top 10 shareholders. | Inapplicable | ||
| Note to the top 10 common shareholders involved in margin financing & securities lending (if any) (Refer to Note 4) | Inapplicable | ||
Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct contractualrepurchase during the reporting period?No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned shareholding directly under the central governmentType of the controlling shareholder: corporate
| Name of the Controlling | Legal Representative | Date of incorporation | Organization Code | Leading business activities |
| Shareholder | /Leader | |||
| AVIC International Holding Limited | Li Bin | June 20, 1997 | 91440300279351229A | Investment in industries (specific projects are subject to application for approval); domestic trade, material supply and distribution (with commodities for exclusive operation, exclusive control and monopoly exclusive); import and export (excluding items prohibited by laws and regulations and the decisions of the State Council; for the above items subject to approval, relevant approval must be obtained prior to operation). |
| Equity in other domestic and foreign listed companies held by the controlling shareholder by means of control and mutual shareholding in the reporting period. | AVIC International Holdings Limited holds 11.86% equity in Tianma Micro-electronics Co., Ltd. (000050.SZ) and 67.05% equity in Shennan Circuits Company Limited (002916.SZ). | |||
Change of the controlling shareholder in the reporting periodInapplicable
3. Actual Controller and its Concerted Parties
Nature of the actual controller: State-owned assets regulatory agency directly under the central governmentType of the actual controller: corporate
| Name of the Actual Controller | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| Aviation Industry Corporation of China, Ltd. | Tan Ruisong | November 06, 2008 | 91110000710935732K | Operating state-owned assets within the scope of authorization of the State Council; military aircraft and engines, guided weapons, military gas turbines, weapons and equipment supporting systems and products research, design, development, testing, production, sales, maintenance, guarantees and services, etc.; investment and management of finance, lease, general aviation services, transportation, medical care, engineering |
| survey and design, engineering contracting and construction, real estate development and other industries; design, research, development, testing, production, sales and maintenance services of civil aircraft and engines, airborne equipment and systems, gas turbines, automobiles and motorcycles and engines (including parts and components), refrigeration equipment, electronic products, environmental protection equipment and new energy equipment; equipment leasing; engineering survey and design; project contracting and construction; real estate development and operation; technology transfer and technical services related to the above businesses; import and export business; technical development and sales of ships; engineering equipment technology development; technology development of new energy products. （The company independently chooses operational projects according to law, carries out business activities; the projects must be approved according to the law by the competent authorities before carrying out business activities based on the approved contents; the company must not engage in any business activities prohibited or restricted by the local market industrial policy.） | ||
| Equity in other domestic and foreign listed companies controlled by the actual controller in the reporting period. | In addition to holding the Company's equity, AVIC, directly or indirectly, holds or controls the shares of domestic and foreign listed companies: holding 50% equity in AVICOPTER PLC (600038.SH), 48% equity in Jiangxi Hongdu Aviation Industry Co., Ltd. (600316.SH), 66% in China Avionics Systems Co., Ltd. (600372.SH), 69% in AVIC Shenyang Aircraft Company Limited (600760.SH), 55% in AVIC Xi’an Aircraft Industry Group Co., Ltd. (000768.SZ), 38% in AVIC Heavy Machinery Co., Ltd. (600765.SH), 52% in AVIC Electromechanical Systems Co., Ltd., (002013.SZ), 46% in Guizhou Guihang Automotive Components Co., Ltd. (600523.SH), 51% in Sichuan Chengfei Integration Technology Corp. Ltd. (002190.SZ), 40% in AVIC Jonhon Optronic Technology Co.,Ltd. (002179.SZ), 54% in AVIC Electronic Measuring Instruments Company Limited (300114.SZ), 50% in AVIC Industry-finance Holdings Co., Ltd. (600705.SH), 64% in Shennan Circuit Co., Ltd. (002916.SZ), 28% in Tianma Microelectronics Co., Ltd. (000050.SZ), 43% in Rainbow Digital Commercial Co., Ltd. (002419.SZ), 40% in Baosheng Science And Technology Innovation Co., Ltd. (600973.SH), 47% in AVIC Forstar S&t Co., Ltd (835640.BJ), 62% in AVICHINA INDUSTRY & TECHNOLOGY COMPANY LIMITED (2357.HK), 46% in Continental Aerospace Technologies Holding Limited (0232.HK), 65% in Nexteer Automotive Group Limited (1316.HK), 89% in KHD Humboldt Wedag | |
International AG (KWG:GR), 55% in FACC AG (AT00000F ACC2), 56% in HEFEI JIANGHANG AIRCRAFT EQUIPMENTCO., LTD. (688586.SH), 45% in AVIC Aviation High-Technology Co., Ltd. (600862.SH).
Note: According to the relevant provisions of Standards for the Contents and Formats of Information Disclosure byCompanies Offering Securities to the Public No. 1—— Prospectus promulgated by the Securities Regulatory Commission,it is believed that the Company's actual controller is traced upstream from AVIC International Holding Corporation toAviation Industry Corporation of China, Ltd. The number and proportion of shares in the Company controlled by AVICInternational Holding Corporation and Aviation Industry Corporation of China, Ltd. remain unchanged.
Change of the actual controller in the reporting periodInapplicable
Block Diagram of the Ownership and Control Relations between the Company and the Actual Controller
100%
91.14% 8.86%
100% 100%
66.07% 33.93%
38.25%
State-owned Assets Supervision and Administration
Commission of the State CouncilAviation Industry Corporation of China
| Aviation Industry Corporation of China | AVIC CCB Aviation Industry Equity Investment (Tianjin) Co., Ltd. |
AVIC International Holding Corporation
AVIC International Holding CorporationAVIC International Shenzhen Company Limited
AVIC International Shenzhen Company Limited
AVIC International Holdings Limited
AVIC International Holdings LimitedFIYTA Precision Technology Co., Ltd.
FIYTA Precision Technology Co., Ltd.AVIC International Industrial Holding Co., Ltd.
The actual controller controls the Company by means of trust or managing the assets in other ways:
Inapplicable
4. The number of shares pledged by the Company's controlling shareholder or the first major shareholder and itspersons acting in concert having accounted for 80% of the shares held by themInapplicable
5. Other Corporate Shareholder Holding over 10% of the Company’s Shares
Inapplicable
6. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, the ReorganizingParty and other Committing PartyInapplicableIV. Specific implementation of the repurchase of shares during the reporting periodProgress of implementation of the stock repurchase
| Proposal disclosure time | Number of shares to be repurchased | Proportion in the total share capital | Amount for the planned repurchase | Duration for the planned repurchase | Purpose of repurchase | Number of shares already repurchased (shares) | Proportion of the number of shares repurchased in the target shares involved in the equity incentive plan (if any) |
| July 07, 2020 | 13.02 million shares to 26.04 million shares | 3.04% to 6.08% | No lower than CNY 80 million but not exceeding CNY 160 million | July 23, 2020 to July 22, 2021 | Canceled according to the law and the registered capital decreased | 8,994,086 | |
| October 27, 2021 | 7.46 million shares to 14.92 million shares | 1.75% to 3.5% | No lower than CNY 50 million but not exceeding CNY 100 million | November 30, 2021 to November 29, 2022 | Canceled according to the law and the registered capital decreased | 0 |
Progress of implementation of reduction of the holding size of the shares repurchased by centralized biddingInapplicable
Section 8 About the Preferred SharesInapplicable
Section 9 About BondsInapplicable
Independent Auditor’s Report
D.H.S.Z.[2022]003511
To the Shareholders of FIYTA Precision Technology Co., Ltd.:
I.Audit Opinion
We have audited the accompanying financial statements of FIYTA Precision TechnologyCo., Ltd. (herein after “FIYTA Ltd.” or the Company) , which comprise the consolidated andthe parent company’s balance sheet as at 31 December 2021, the consolidated and theparent company’s statement of comprehensive income, the consolidated and the parentcompany’s cash flow statements and the consolidated and the parent company’s statementof changes in equity for the year then ended, and notes to the financial statements.In our opinion, the accompanying financial statements present in all material respects inaccordance with the requirements of Accounting Standards for Business Enterprises, andfairly reflect FIYTA Ltd.’s financial position at 31 December 2021 and the financialperformance and cash flows for the year then ended.II.Basis for Audit Opinion
We conducted our audit in accordance with CICPA Standards on Auditing (“CSAs”) . In‘IV. Certified Public Accountant’s Responsibilities for the Audit of FinancialStatements’ of this report, our responsibilities under these standards are described. Thosestandards require that we comply with CICPA professional ethical requirements, that we areindependent from FIYTA Ltd. and have fulfilled all other ethical obligations. We believe thatwe have obtained sufficient and appropriate audit evidence as basis of for our opinion.
III.Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the following key audit matters that need to be communicated inaudit report.
(I) Existence of inventory and its net realizable value
1. Description
As at 31 December 2021, the book balance, provision for decline in value, and carryingamount of inventory were RMB2,162.56 million, RMB112.41 million and RMB2,050.15million respectively. The carrying amount of inventory accounts for 49.87% of the totalassets of the Company.(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and other brandedwatches, the main inventory of FIYTA Ltd are finished watches and watch components. Theinventories are distributed in stores, regional warehouses, resellers’ warehouses and theCompany’s warehouses which caused difficulty in inventory physical observation;(ii) The management of FIYTA Ltd measures inventory at lower of cost and netrealizable value (NRV) at balance sheet date. Where the cost of an inventory exceeds itsNRV, the difference is recognized as provision for decline in value. The determination ofNRV involves significant judgment and estimates by the Management.Inventory value is significant to the Company’s assets and it requires significantjudgement by the Management, as a result, we identified existence of inventory and its netrealizable value as key audit matters.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operating effectiveness ofinternal controls of procurement and payment, production and storage, and the provision fordecline in value of inventory;
(ii) Using the work of experts to conduct IT audit to information system and evaluatingthe authenticity and accuracy of business data which related to financial statements.
(iii) Understanding and evaluating the appropriateness of the Company’s policy inprovision for decline in value;
(iv) Understanding and inquiring the locations of inventory storage, measurementmethod of inventory so as to determining the scope of inventory physical observation;
(v) Discussing physical inventory count status with the Management and attending thephysical inventory count and conducting observation and test count on site to check thequantity of the inventories and observe their condition.
(vi) Obtaining the ageing report of inventory and taking into consideration of inventorycondition in order to perform analytical review on the ageing as well as analyze thereasonableness of provision for decline in value;
(vii) Reviewing and evaluating the appropriateness of significant estimates made by the
Management in determining the NRV of inventory;
(viii) Obtaining the calculation of provision for decline in value of inventory, reviewingwhether the provision was made in compliance with relevant accounting policies andperforming recalculation of provision. Checking the movements of prior year’s provision andanalyzing whether the provision was adequately accrued in prior period.(ix) Tracing samples of large purchases in current period to their correspondingcontracts and tax invoices, and inspecting their purchase requisition form and goods receiptnotes.
Based on audit work conducted above, we believe that the inventory exists and themeasurement is reasonable stated according to the Company’s policies.
(II) Revenue recognition
1. Description
In 2021, the Company’s income from main business was RMB5,243.73 million. TheCompany’s revenue mainly comes from sales of FIYTA brand watches and distribution ofother branded watches. Except for small amount of sales by direct sales and consignmentsales of FIYTA brand watches, most of the sales of FIYTA brand watches and other brandedwatches are sold through shops in department store and on-line shops. Refer to Note IV 31for accounting policy relating to revenue recognition.
Operating revenue represents major line item in income statement and is main sourceof profit, the accuracy and completeness of revenue recognition have significant impact tothe Company’s profit, as a result, we identified revenue recognition as a key audit matter.
2. How our audit addressed the key audit matter
Major audit procedures we have conducted include:
(i) Understanding, evaluating and testing the design and operating effectiveness ofinternal controls relating to revenue recognition;
(ii) Using the work of experts to conduct IT audit to information system and evaluatingthe authenticity and accuracy of business data which related to financial statements.
(iii) Obtaining and understanding accounting policies relating to revenuerecognition, and reviewing and evaluating whether the point in time of control right transfer,measurement of transaction price and accounting for special transactions are complied withthe accounting standards;
(iv) Selecting samples from current year’s transaction records, and tracing them tosupporting documents such as contract, tax invoice and goods dispatch note (if applicable)and courier waybill (if applicable) ;
(v) In connection with audit of accounts receivable, selecting major customers andconfirming corresponding sales in current year and year-end balance;(vi) Conducting cut-off test to revenue recognized before and after the balancesheet date by selecting samples to check supporting documents such as contract, taxinvoice and goods dispatch note (if applicable) and courier waybill (if applicable) to evaluatewhether the revenue was recorded in appropriate accounting period;Based on audit work conducted above, we believe that the Company’s revenuerecognition is in conformity to its revenue recognition policy.IV.Other Information
The management of FIYTA Ltd (the “Management”) are responsible for the OtherInformation. The Other Information comprises all of the information included in theCompany’s annual report other than the financial statements and our auditors’ reportthereon.
Our opinion expressed on the financial statements does not cover the Other Informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read theOther Information and, in doing so, consider whether the Other Information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a materialmisstatement of this Other Information, we are required to report that fact. We have nothingto report in this regard.
V.Responsibilities of the Management and those Charged withGovernance for the Financial Statements
The Management of the Company is responsible for the preparation of the financialstatements that give a fair view in accordance with Accounting Standards for BusinessEnterprises and for the design, implementation and maintenance of such internal controls asthe Management determine is necessary to enable the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless the Managementeither intend to liquidate the Company or to cease operations, or have no realistic alternative
but to do so.Those who charged with governance is responsible for overseeing the Company’sfinancial reporting process.VI.Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud or error,and to issue an auditors’ report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with ChinaStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or inthe aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these financial statements.As part of an audit in accordance with China Standards on Auditing, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Management.
4. Conclude on the appropriateness of the Management’s use of the going concernbasis of accounting and, based on the audit evidence obtained, whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertaintyexists, we are required, according to China Standards on Auditing, to draw attention in ourauditors’ report to the related disclosures in the financial statements or, if such disclosuresare inadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors’ report. However, future events or conditions maycause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within FIYTA Ltd to express an opinion on the financialstatements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, and to communicatewith them all relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determinethose matters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter orwhen, in extremely rare circumstances, we determine that a matter should not becommunicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
| Da Hua Certified Public Accountants (Special General Partnership) | CICPA: | ||
| Beijing, China | Long Jiao | ||
| CICPA | |||
| Wang Dong | |||
| 8 March 2022 | |||
| Consolidated Balance Sheet | ||||||||
| As at 31 December 2021 | ||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||
| [English Translation for Reference Only] | ||||||||
| Assets | Note VI | Closing Balance | Closing Balance of prior period | |||||
| Current assets: | ||||||||
| Monetary funds | note 1 | 210,254,737.14 | 353,057,285.71 | |||||
| Financial assets held for trading | ||||||||
| Derivative financial assets | ||||||||
| Notes receivable | note 2 | 61,258,145.80 | 48,192,442.15 | |||||
| Accounts receivable | note 3 | 388,885,601.28 | 475,598,684.88 | |||||
| Accounts receivable financing | ||||||||
| Prepayments | note 4 | 7,946,750.81 | 16,612,773.76 | |||||
| Other receivables | note 5 | 61,553,267.82 | 52,902,779.63 | |||||
| Inventories | note 6 | 2,050,148,750.89 | 1,931,780,185.85 | |||||
| Contract assets | ||||||||
| Held-for-sale assets | ||||||||
| Current portion of non-current assets | ||||||||
| Other current assets | note 7 | 72,698,692.72 | 75,935,141.76 | |||||
| Total current assets | 2,852,745,946.46 | 2,954,079,293.74 | ||||||
| Non-current assets: | ||||||||
| Debt investments | ||||||||
| Other debt investments | ||||||||
| Long-term receivables | ||||||||
| Long-term equity investments | note 8 | 55,155,605.31 | 51,400,665.92 | |||||
| Investment in other equity instruments | note 9 | 85,000.00 | 85,000.00 | |||||
| Other non-current financial assets | ||||||||
| Investment properties | note 10 | 383,425,916.35 | 398,086,447.78 | |||||
| Fixed assets | note 11 | 349,495,316.65 | 352,734,280.76 | |||||
| Construction in progress | ||||||||
| Right-of-use assets | note 12 | 147,932,475.42 | ||||||
| Intangible assets | note 13 | 34,035,330.43 | 37,859,316.51 | |||||
| Long-term deferred expenses | note 14 | 163,790,333.44 | 130,017,587.99 | |||||
| Deferred tax assets | note 15 | 81,233,274.65 | 80,913,800.35 | |||||
| Other non-current assets | note 16 | 42,680,753.78 | 13,536,307.13 | |||||
| Total non-current assets | 1,257,834,006.03 | 1,064,633,406.44 | ||||||
| Total assets | 4,110,579,952.49 | 4,018,712,700.18 | ||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||
| Consolidated Balance Sheet (Continued) | ||||||||
| As at 31 December 2021 | ||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||
| Liability and Equity | Note VI | Closing Balance | Closing Balance of prior period | |||||
| Current liabilities: | ||||||||
| Short-term borrowings | note 17 | 265,994,595.43 | 542,673,278.09 | |||||
| Financial liabilities held for trading | ||||||||
| Derivative financial liabilities | ||||||||
| Notes payable | note 18 | 21,223.10 | 3,581,360.00 | |||||
| Accounts payable | note 19 | 254,588,895.34 | 301,211,515.39 | |||||
| Payments received in advance | note 20 | 11,025,664.72 | 9,991,850.67 | |||||
| Contract liabilities | note 21 | 22,505,426.65 | 18,213,396.49 | |||||
| Employee benefits payable | note 22 | 145,936,150.06 | 132,853,462.20 | |||||
| Tax payables | note 23 | 67,769,880.01 | 68,925,271.90 | |||||
| Other payables | note 24 | 167,808,759.95 | 128,577,597.94 | |||||
| Held-for-sale liabilities | ||||||||
| Current portion of non-current liabilities | note 25 | 86,949,906.35 | 370,030.00 | |||||
| Other current liabilities | note 26 | 2,798,738.32 | 2,299,755.09 | |||||
| Total current liabilities | 1,025,399,239.93 | 1,208,697,517.77 | ||||||
| Non-current liabilities: | ||||||||
| Long-term borrowings | note 27 | 4,070,330.00 | ||||||
| Bonds payable | ||||||||
| Including: Preferred stock | ||||||||
| Including: Perpetual debt | ||||||||
| Lease liabilities | note 28 | 64,918,722.10 | ||||||
| Long-term payables | ||||||||
| Long-term employee benefits payable | ||||||||
| Provisions | ||||||||
| Deferred income | note 29 | 1,792,833.90 | 2,916,346.43 | |||||
| Deferred tax liabilities | note 15 | 5,236,514.03 | 3,067,834.55 | |||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | 71,948,070.03 | 10,054,510.98 | ||||||
| Total liabilities | 1,097,347,309.96 | 1,218,752,028.75 | ||||||
| Equity: | ||||||||
| Share capital | note 30 | 426,051,015.00 | 428,091,881.00 | |||||
| Other equity instruments | ||||||||
| Including: Preferred stock | ||||||||
| Including: Perpetual debt | ||||||||
| Capital reserves | note 31 | 1,040,908,194.13 | 1,021,490,387.78 | |||||
| Less: Treasury stock | note 32 | 60,585,678.92 | 61,633,530.48 | |||||
| Other comprehensive income | note 33 | -7,658,346.40 | 976,871.41 | |||||
| Special reserves | note 34 | 1,062,731.13 | ||||||
| Surplus reserve | note 35 | 275,010,401.50 | 246,531,866.87 | |||||
| Retained earnings | note 36 | 1,338,444,326.09 | 1,164,490,911.51 | |||||
| Equity attributable to parent company | 3,013,232,642.53 | 2,799,948,388.09 | ||||||
| Non-controlling interests | 12,283.34 | |||||||
| Total owners' equity | 3,013,232,642.53 | 2,799,960,671.43 | ||||||
| Total liabilities and owners' equity | 4,110,579,952.49 | 4,018,712,700.18 | ||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||
| Parent Company's Balance Sheet | ||||||
| As at 31 December 2021 | ||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||
| Assets | Note XVII | Closing Balance | Closing Balance of prior period | |||
| Current assets: | ||||||
| Monetary funds | 171,022,392.92 | 292,055,169.74 | ||||
| Financial assets held for trading | ||||||
| Derivative financial assets | ||||||
| Notes receivable | ||||||
| Accounts receivable | note 1 | 129,880.48 | 1,464,798.79 | |||
| Accounts receivable financing | ||||||
| Prepayments | ||||||
| Other receivables | note 2 | 717,183,139.00 | 621,512,680.69 | |||
| Inventories | ||||||
| Contract assets | ||||||
| Held-for-sale assets | ||||||
| Current portion of non-current assets | ||||||
| Other current assets | 13,389,835.13 | 11,655,617.82 | ||||
| Total current assets | 901,725,247.53 | 926,688,267.04 | ||||
| Non-current assets: | ||||||
| Debt investments | ||||||
| Other debt investments | ||||||
| Long-term receivables | ||||||
| Long-term equity investments | note 3 | 1,542,067,945.03 | 1,529,415,188.28 | |||
| Investment in other equity instruments | 85,000.00 | 85,000.00 | ||||
| Other non-current financial assets | ||||||
| Investment properties | 311,379,234.57 | 323,296,494.84 | ||||
| Fixed assets | 222,462,397.20 | 224,709,747.39 | ||||
| Construction in progress | ||||||
| Productive biological assets | ||||||
| Oil and gas assets | ||||||
| Right-of-use assets | ||||||
| Intangible assets | 23,910,597.39 | 27,347,950.13 | ||||
| Development expenditure | ||||||
| Goodwill | ||||||
| Long-term deferred expenses | 9,966,739.10 | 11,980,697.97 | ||||
| Deferred tax assets | 1,671,761.28 | 1,380,180.94 | ||||
| Other non-current assets | 1,435,800.93 | 473,312.35 | ||||
| Total non-current assets | 2,112,979,475.50 | 2,118,688,571.90 | ||||
| Total assets | 3,014,704,723.03 | 3,045,376,838.94 | ||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO): Song Yaoming | Financial Manager: Tian Hui | ||||
| Parent Company's Balance Sheet (Continued) | ||||||
| As at 31 December 2021 | ||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||
| Liability and Equity | Note XVII | Closing Balance | Closing Balance of prior period | |||
| Current liabilities: | ||||||
| Short-term borrowings | 250,256,666.67 | 400,425,930.05 | ||||
| Financial liabilities held for trading | ||||||
| Derivative financial liabilities | ||||||
| Notes payable | ||||||
| Accounts payable | 1,232,967.42 | 1,481,135.49 | ||||
| Payments received in advance | 11,025,664.72 | 9,991,850.67 | ||||
| Contract liabilities | 37,735.85 | |||||
| Employee benefits payable | 24,758,938.89 | 25,256,531.70 | ||||
| Tax payables | 2,676,682.58 | 2,778,265.84 | ||||
| Other payables | 230,594,166.14 | 240,824,305.37 | ||||
| Held-for-sale liabilities | ||||||
| Current portion of non-current liabilities | ||||||
| Other current liabilities | 2,264.15 | |||||
| Total current liabilities | 520,545,086.42 | 680,798,019.12 | ||||
| Non-current liabilities: | ||||||
| Long-term borrowings | ||||||
| Bonds payable | ||||||
| Including: Preferred stock | ||||||
| Including: Perpetual debt | ||||||
| Lease liabilities | ||||||
| Long-term payables | ||||||
| Long-term employee benefits payable | ||||||
| Provisions | ||||||
| Deferred income | 1,792,833.90 | 2,377,718.35 | ||||
| Deferred tax liabilities | ||||||
| Other non-current liabilities | ||||||
| Total non-current liabilities | 1,792,833.90 | 2,377,718.35 | ||||
| Total liabilities | 522,337,920.32 | 683,175,737.47 | ||||
| Equity: | ||||||
| Share capital | 426,051,015.00 | 428,091,881.00 | ||||
| Other equity instruments | ||||||
| Including: Preferred stock | ||||||
| Including: Perpetual debt | ||||||
| Capital reserves | 1,045,449,410.67 | 1,027,145,928.88 | ||||
| Less: Treasury stock | 60,585,678.92 | 61,633,530.48 | ||||
| Other comprehensive income | ||||||
| Special reserves | ||||||
| Surplus reserve | 275,010,401.50 | 246,531,866.87 | ||||
| Retained earnings | 806,441,654.46 | 722,064,955.20 | ||||
| Total owners' equity | 2,492,366,802.71 | 2,362,201,101.47 | ||||
| Total liabilities and owners' equity | 3,014,704,723.03 | 3,045,376,838.94 | ||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||
| Consolidated Statement of Comprehensive Income | ||||||||||
| For the year ended 31 December 2021 | ||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||||
| Items | Note VI | Current Period | Prior Period | |||||||
| 1. Operating revenue | note 37 | 5,243,733,540.93 | 4,243,439,952.59 | |||||||
| Less: | Operating costs | note 37 | 3,285,656,229.13 | 2,639,229,537.06 | ||||||
| Taxes and surcharges | note 38 | 37,563,586.80 | 25,444,139.30 | |||||||
| Selling expenses | note 39 | 1,049,898,223.28 | 870,713,899.32 | |||||||
| Administrative expenses | note 40 | 261,626,762.41 | 256,559,127.23 | |||||||
| Research and development expenses | note 41 | 57,802,569.17 | 51,489,323.49 | |||||||
| Finance expenses | note 42 | 34,677,073.65 | 33,449,276.41 | |||||||
| Including: Interest expenses | 23,159,963.74 | 21,315,119.78 | ||||||||
| Interest income | 3,589,649.85 | 4,941,334.19 | ||||||||
| Add: | Other income | note 43 | 21,328,673.21 | 25,170,397.09 | ||||||
| Income from investments | note 44 | 3,754,939.39 | 5,072,577.64 | |||||||
| Including: Investment income from associates and joint ventures | 3,754,939.39 | 5,072,577.64 | ||||||||
| Derecognition of financial assets at amortized cost | ||||||||||
| Gains or losses from net exposure hedging | ||||||||||
| Gains or losses from changes in fair values | ||||||||||
| Credit impairment losses | note 45 | -11,075,001.77 | -9,096,922.74 | |||||||
| Impairment losses | note 46 | -25,861,394.56 | -15,426,526.41 | |||||||
| Gains or losses from asset disposals | note 47 | 730,134.87 | -369,857.30 | |||||||
| 2. Operating profit | 505,386,447.63 | 371,904,318.06 | ||||||||
| Add: Non-operating income | note 48 | 627,435.03 | 3,111,413.64 | |||||||
| Less: Non-operating expenses | note 49 | 3,686,166.55 | 1,555,112.86 | |||||||
| 3. Profit before tax | 502,327,716.11 | 373,460,618.84 | ||||||
| Less: Income tax | note 50 | 114,467,375.88 | 79,338,516.60 | |||||
| 4. Net profit | 387,860,340.23 | 294,122,102.24 | ||||||
| Including: Net profit realized before business combinations under common control | ||||||||
| I. Net profit classified by going concern | ||||||||
| Net profit from continuing operations | 387,860,340.23 | 294,122,102.24 | ||||||
| Net profit from discontinuing operations | ||||||||
| II. Net profit classified by ownership | ||||||||
| Net profit attributable to parent company | 387,840,282.95 | 294,115,156.04 | ||||||
| Net profit attributable to non-controlling interests | 20,057.28 | 6,946.20 | ||||||
| 5. Other comprehensive income after tax | -8,635,217.81 | 1,916,506.80 | ||||||
| Other comprehensive income after tax attributable to parent company | -8,635,217.81 | 1,917,080.50 | ||||||
| I. Items of other comprehensive income that will not be reclassified to profit or loss | ||||||||
| i. | Changes in remeasurement of defined benefit plans | |||||||
| ii. | Other comprehensive income that cannot be transferred to profit or loss under the equity method | |||||||
| iii. | Changes in fair value of investments in equity instruments | |||||||
| iv. | Changes in fair value of the Company's own credit risk | |||||||
| II. Items of other comprehensive income that will be reclassified to profit or loss | -8,635,217.81 | 1,917,080.50 | ||||||
| i. | Other comprehensive income that can be transferred to profit or loss under the equity method | |||||||
| ii. | Changes in fair value of other debt investments | |||||||
| iii. | Amount of financial assets reclassified into other comprehensive income | |||||||
| iv. | Provisions for credit impairment of other debt investments | |||||||
| v. | The effective portion of gains or losses arising from cash flow hedging | |||||||
| vi. | Translation differences arising from financial statements in foreign currencies | -8,635,217.81 | 1,917,080.50 | |||||
| Other comprehensive income attributable to non-controlling interests after tax | -573.70 | |||||||
| 6. Total comprehensive income | 379,225,122.42 | 296,038,609.04 | |||||||
| Total comprehensive income attributable to parent company | 379,205,065.14 | 296,032,236.54 | |||||||
| Total comprehensive income attributable to non-controlling interests | 20,057.28 | 6,372.50 | |||||||
| 7. Earnings per share | |||||||||
| I. Basic earnings per share | 0.90 | 0.68 | |||||||
| II. Diluted earnings per share | 0.90 | 0.68 | |||||||
| (Attached notes to statements are part of the consolidated financial statements) | |||||||||
| Legal Representative:Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | |||||||
| Parent Company's Statement of Comprehensive Income | ||||||||
| For the year ended 31 December 2021 | ||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||
| Items | Note XVII | Current Period | Prior Period | |||||
| 1. Operating revenue | note 4 | 179,455,712.71 | 137,381,795.95 | |||||
| Less: | Operating costs | note 4 | 38,852,252.32 | 36,497,097.45 | ||||
| Taxes and surcharges | 7,760,628.42 | 4,435,717.73 | ||||||
| Selling expenses | 6,483,523.47 | 1,579,092.51 | ||||||
| Administrative expenses | 72,514,603.81 | 76,604,523.40 | ||||||
| Research and development expenses | 21,461,359.36 | 19,933,292.70 | ||||||
| Finance expenses | 3,650,109.37 | 3,127,102.39 | ||||||
| Including: Interest expenses | 6,662,862.52 | 6,230,252.39 | ||||||
| Interest income | 3,158,156.74 | 4,609,988.68 | ||||||
| Add: | Other income | 2,603,212.27 | 9,324,872.59 | |||||
| Income from investments | note 5 | 263,673,435.95 | 104,976,828.07 | |||||
| Including: Investment income from associates and joint ventures | 3,754,939.39 | 4,976,828.07 | ||||||
| Derecognition of financial assets at amortized cost | ||||||||
| Gains or losses from net exposure hedging | ||||||||
| Gains or losses from changes in fair values | ||||||||
| Credit impairment losses | 192,081.60 | -158,252.51 | ||||||
| Impairment losses | ||||||||
| Gains or losses from asset disposals | -63,188.36 | -25,000.50 | ||||||
| 2. Operating profit | 295,138,777.42 | 109,323,417.42 | ||||||
| Add: Non-operating income | 41,001.96 | 259,345.80 | ||||||
| Less: Non-operating expenses | 216,805.57 | 15,864.83 | ||||||
| 3. Profit before tax | 294,962,973.81 | 109,566,898.39 | ||||||
| Less: Income tax | 7,887,674.19 | 1,260,031.08 | ||||||
| 4. Net profit | 287,075,299.62 | 108,306,867.31 | ||||||
| Net profit from continuing operations | 287,075,299.62 | 108,306,867.31 | ||||||
| Net profit from discontinuing operations | ||||||||
| 5. Other comprehensive income after tax | ||||||||
| I. Items of other comprehensive income that will not be reclassified to profit or loss | ||||||||
| i. | Changes in remeasurement of defined benefit plans | |||||||
| ii. | Other comprehensive income that cannot be transferred to profit or loss under the equity method | |||||||
| iii. | Changes in fair value of investments in equity instruments | |||||||
| iv. | Changes in fair value of the Company's own credit risk | |||||||
| II. Items of other comprehensive income that will be reclassified to profit or loss | ||||||||
| i. | Other comprehensive income that can be transferred to profit or loss under the equity method | |||||||
| ii. | Changes in fair value of other debt investments | |||||||
| iii. | Amount of financial assets reclassified into other comprehensive income | |||||||
| iv. | Provisions for credit impairment of other debt investments | |||||||
| v. | The effective portion of gains or losses arising from cash flow hedging | |||||||
| vi. | Translation differences arising from financial statements in foreign currencies | |||||||
| 6. Total comprehensive income | 287,075,299.62 | 108,306,867.31 | ||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||
| Consolidated Cash Flows Statement | ||||||
| For the year ended 31 December 2021 | ||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||
| Items | Note VI | Current Period | Prior Period | |||
| 1. Cash flows from operating activities | ||||||
| Cash received from sales and services | 5,857,726,359.18 | 4,602,638,695.31 | ||||
| Tax and surcharge refunds | 1,466,381.60 | 1,849,055.57 | ||||
| Other cash receipts related to operating activities | note 51 | 85,387,457.56 | 78,001,812.45 | |||
| Total cash inflows from operating activities | 5,944,580,198.34 | 4,682,489,563.33 | ||||
| Cash paid for goods and services | 3,862,745,653.01 | 3,046,261,111.48 | ||||
| Cash paid to and for employees | 710,102,185.80 | 578,179,070.15 | ||||
| Taxes and surcharges paid | 346,383,502.98 | 222,180,568.75 | ||||
| Other cash payments related to operating activities | note 51 | 478,099,748.10 | 457,658,307.08 | |||
| Total cash outflows from operating activities | 5,397,331,089.89 | 4,304,279,057.46 | ||||
| Net cash flows from operating activities | 547,249,108.45 | 378,210,505.87 | ||||
| 2. Cash flows from investing activities | ||||||
| Cash received from withdrawal of investments | ||||||
| Cash received from investment income | ||||||
| Net proceeds from disposals of fixed assets, intangible assets and other long-term assets | 59,657.53 | 150,556.62 | ||||
| Net proceeds from disposal of subsidiaries and other business units | ||||||
| Other cash receipts related to investing activities | ||||||
| Total cash inflows from investing activities | 59,657.53 | 150,556.62 | ||||
| Cash paid for fixed assets, intangible assets and other long-term assets | 204,422,787.61 | 133,531,954.47 | ||||
| Cash paid for investments | ||||||
| Net cash paid for acquiring subsidiaries and other business units | ||||||
| Other cash payments related to investing activities | ||||||
| Total cash outflows from investing activities | 204,422,787.61 | 133,531,954.47 | ||||
| Net cash flows from investing activities | -204,363,130.08 | -133,381,397.85 | ||||
| 3. Cash flows from financing activities | ||||||
| Cash received from investments by others | 58,216,000.00 | |||||
| Including: Cash received by subsidiaries from non-controlling investors | ||||||
| Cash received from borrowings | 1,155,724,412.23 | 743,213,671.65 | ||||
| Other cash receipts related to other financing activities | ||||||
| Total cash inflows from financing activities | 1,213,940,412.23 | 743,213,671.65 | ||||
| Cash repayments for debts | 1,386,708,158.95 | 768,247,433.10 | ||||
| Cash paid for distribution of dividends and profit and for interest expenses | 187,069,913.31 | 106,703,352.70 | ||||
| Including: Dividends or profit paid by subsidiaries to non-controlling investors | ||||||
| Other cash payments related to financing activities | note 51 | 124,710,390.58 | 72,317,669.93 | |||
| Total cash outflows from financing activities | 1,698,488,462.84 | 947,268,455.73 | ||||
| Net cash flows from financing activities | -484,548,050.61 | -204,054,784.08 | ||||
| 4. Effect of changes in foreign exchange rates on cash and cash equivalents | -1,140,476.33 | -2,810,603.32 | ||||
| 5. Net increase in cash and cash equivalents | -142,802,548.57 | 37,963,720.62 | ||||
| Add: Opening balance of cash and cash equivalents | 353,057,285.71 | 315,093,565.09 | ||||
| 6. Closing balance of cash and cash equivalents | note 52 | 210,254,737.14 | 353,057,285.71 | |||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||
| Legal Representative:Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tianhui | ||||
| Parent Company's Cash Flows Statement | ||||||
| For the year ended 31 December 2021 | ||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||
| Items | Note XVII | Current Period | Prior Period | |||
| 1. Cash flows from operating activities | ||||||
| Cash received from sales and services | 183,608,762.33 | 178,808,738.19 | ||||
| Tax and surcharge refunds | ||||||
| Other cash receipts related to operating activities | 5,194,227,139.68 | 4,238,779,521.46 | ||||
| Total cash inflows from operating activities | 5,377,835,902.01 | 4,417,588,259.65 | ||||
| Cash paid for goods and services | ||||||
| Cash paid to and for employees | 68,672,552.40 | 61,903,446.81 | ||||
| Taxes and surcharges paid | 22,768,419.51 | 9,345,329.15 | ||||
| Other cash payments related to operating activities | 5,359,975,023.49 | 3,948,860,602.89 | ||||
| Total cash outflows from operating activities | 5,451,415,995.40 | 4,020,109,378.85 | ||||
| Net cash flows from operating activities | -73,580,093.39 | 397,478,880.80 | ||||
| 2. Cash flows from investing activities | ||||||
| Cash received from withdrawal of investments | ||||||
| Cash received from investment income | 259,918,496.56 | 100,000,000.00 | ||||
| Net proceeds from disposals of fixed assets, intangible assets and other long-term assets | 5,740.00 | 1,630.00 | ||||
| Net proceeds from disposal of subsidiaries and other business units | ||||||
| Other cash receipts related to investing activities | ||||||
| Total cash inflows from investing activities | 259,924,236.56 | 100,001,630.00 | ||||
| Cash paid for fixed assets, intangible assets and other long-term assets | 21,039,730.26 | 17,398,218.00 | ||||
| Cash paid for investments | 139,500,000.00 | |||||
| Net cash paid for acquiring subsidiaries and other business units | ||||||
| Other cash payments related to investing activities | ||||||
| Total cash outflows from investing activities | 21,039,730.26 | 156,898,218.00 | ||||
| Net cash flows from investing activities | 238,884,506.30 | -56,896,588.00 | ||||
| 3. Cash flows from financing activities | ||||||
| Cash received from investments by others | 58,216,000.00 | |||||
| Cash received from borrowings | 1,110,000,000.00 | 601,000,000.00 | ||||
| Other cash receipts related to other financing activities | ||||||
| Total cash inflows from financing activities | 1,168,216,000.00 | 601,000,000.00 | ||||
| Cash repayments for debts | 1,260,000,000.00 | 741,000,000.00 | ||||
| Cash paid for distribution of dividends and profit and for interest expenses | 185,045,678.32 | 104,195,155.07 | ||||
| Other cash payments related to financing activities | 9,178,101.51 | 72,317,669.93 | ||||
| Total cash outflows from financing activities | 1,454,223,779.83 | 917,512,825.00 | ||||
| Net cash flows from financing activities | -286,007,779.83 | -316,512,825.00 | ||||
| 4. Effect of changes in foreign exchange rates on cash and cash equivalents | -329,409.90 | -1,112,644.08 | ||||
| 5. Net increase in cash and cash equivalents | -121,032,776.82 | 22,956,823.72 | ||||
| Add: Opening balance of cash and cash equivalents | 292,055,169.74 | 269,098,346.02 | ||||
| 6. Closing balance of cash and cash equivalents | 171,022,392.92 | 292,055,169.74 | ||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO): Song Yaoming | Financial Manager:Tianhui | ||||
| Consolidated Statement of Changes in Equity | ||||||||||||||||||
| For the year ended 31 December 2021 | ||||||||||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||||||||||||
| Items | Current Period | |||||||||||||||||
| Equity attributable to parent company | Non-controlling interests | Total shareholders' equity | ||||||||||||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | ||||||||||||
| 1. Closing balance of last year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,164,490,911.51 | 12,283.34 | 2,799,960,671.43 | ||||||||||
| Add: Increase/decrease due to changes in accounting policies | -11,188,268.01 | -11,188,268.01 | ||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | ||||||||||||||||||
| Business combination under common control | ||||||||||||||||||
| Others | ||||||||||||||||||
| 2. Opening balance of current year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,153,302,643.50 | 12,283.34 | 2,788,772,403.42 | ||||||||||
| 3. Increase/decrease for current year | -2,040,866.00 | 19,417,806.35 | -1,047,851.56 | -8,635,217.81 | 1,062,731.13 | 28,478,534.63 | 185,141,682.59 | -12,283.34 | 224,460,239.11 | |||||||||
| I. Total comprehensive income | -8,635,217.81 | 387,840,282.95 | 20,057.28 | 379,225,122.42 | ||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -2,040,866.00 | 19,417,806.35 | -1,047,851.56 | -32,340.62 | 18,392,451.29 | |||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -8,994,086.00 | -41,132,596.76 | -45,368,941.80 | -4,757,740.96 | ||||||||||||||
| ii. Capital contributed by other equity instruments holders | ||||||||||||||||||
| iii. Share-based payments to owners' equity | 6,953,220.00 | 60,553,780.11 | 44,321,090.24 | 23,185,909.87 | ||||||||||||||
| iv. Others | -3,377.00 | -32,340.62 | -35,717.62 | |||||||||||||||
| III. Profits distribution | 28,478,534.63 | -202,698,600.36 | -174,220,065.73 | |||||||||||||||
| i. Appropriation of surplus reserve | 28,478,534.63 | -28,478,534.63 | ||||||||||||||||
| ii. Distribution to owners | -174,220,065.73 | -174,220,065.73 | ||||||||||||||||
| iii. Others | ||||||||||||||||||
| IV. Transfers within owners' equity | ||||||||||||||||||
| i. Capital reserves transferred to paid-in capital | ||||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | ||||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | ||||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | ||||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | ||||||||||||||||||
| vi. Others | ||||||||||||||||||
| V. Special reserves | 1,062,731.13 | 1,062,731.13 | ||||||||||||||||
| i. Appropriated during current year | 1,421,605.68 | 1,421,605.68 | ||||||||||||||||
| ii. Used during current year | -358,874.55 | -358,874.55 | ||||||||||||||||
| VI. Others | ||||||||||||||||||
| 4. Closing balance of current year | 426,051,015.00 | 1,040,908,194.13 | 60,585,678.92 | -7,658,346.40 | 1,062,731.13 | 275,010,401.50 | 1,338,444,326.09 | 3,013,232,642.53 |
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||||||||||||
| Legal Representative:Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||||||||||||
| Consolidated Statement of Changes in Equity |
| For the year ended 31 December 2021 |
| Items | Prior Period | ||||||||||||||||||||
| Equity attributable to parent company | Non-controlling interests | Total shareholders' equity | |||||||||||||||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | |||||||||||||||
| 1. Closing balance of last year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | 235,701,180.14 | 966,840,818.40 | 5,910.84 | 2,654,539,677.83 | |||||||||||||
| Add: Increase/decrease due to changes in accounting policies | |||||||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | |||||||||||||||||||||
| Business combination under common control | |||||||||||||||||||||
| Others | |||||||||||||||||||||
| 2. Opening balance of current year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | 235,701,180.14 | 966,840,818.40 | 5,910.84 | 2,654,539,677.83 | |||||||||||||
| 3. Increase/decrease for current year | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | 1,917,080.50 | 10,830,686.73 | 197,650,093.11 | 6,372.50 | 145,420,993.60 | |||||||||||||
| I. Total comprehensive income | 1,917,080.50 | 294,115,156.04 | 6,372.50 | 296,038,609.04 | |||||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | -64,983,239.24 | |||||||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -14,877,000.00 | -65,264,104.92 | -8,802,188.30 | -71,338,916.62 | |||||||||||||||||
| ii. Capital contributed by other equity instruments holders | |||||||||||||||||||||
| iii. Share-based payments to owners' equity | 5,570,601.49 | -831,400.00 | 6,402,001.49 | ||||||||||||||||||
| iv. Others | -46,324.11 | -46,324.11 | |||||||||||||||||||
| III. Profits distribution | 10,830,686.73 | -96,465,062.93 | -85,634,376.20 | ||||||||||||||||||
| i. Appropriation of surplus reserve | 10,830,686.73 | -10,830,686.73 | |||||||||||||||||||
| ii. Distribution to owners | -85,634,376.20 | -85,634,376.20 | |||||||||||||||||||
| iii. Others | |||||||||||||||||||||
| IV. Transfers within owners' equity | |||||||||||||||||||||
| i. Capital reserves transferred to paid-in capital | |||||||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | |||||||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | |||||||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | |||||||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | |||||||||||||||||||||
| vi. Others | |||||||||||||||||||||
| V. Special reserves | |||||||||||||||||||||
| i. Appropriated during current year | |||||||||||||||||||||
| ii. Used during current year | |||||||||||||||||||||
| VI. Others | |||||||||||||||||||||
| 4. Closing balance of current year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | 246,531,866.87 | 1,164,490,911.51 | 12,283.34 | 2,799,960,671.43 |
| (Attached notes to statements are part of the consolidated financial statements) | |||||||||||||||||||||
| Legal Representative: Zhang Xuhua Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||||||||||||||||
| Parent Company's Statement of Changes in Equity | ||||||||||||||||
| For the year ended 31 December 2021 | ||||||||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | |||||||||||||||
| Items | Current Period | |||||||||||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Total shareholders' equity | |||||||||
| 1. Closing balance of last year | 428,091,881.00 | 1,027,145,928.88 | 61,633,530.48 | 246,531,866.87 | 722,064,955.20 | 2,362,201,101.47 | ||||||||||
| Add: Increase/decrease due to changes in accounting policies | ||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | ||||||||||||||||
| Others | ||||||||||||||||
| 2. Opening balance of current year | 428,091,881.00 | 1,027,145,928.88 | 61,633,530.48 | 246,531,866.87 | 722,064,955.20 | 2,362,201,101.47 | ||||||||||
| 3. Increase/decrease for current year | -2,040,866.00 | 18,303,481.79 | -1,047,851.56 | 28,478,534.63 | 84,376,699.26 | 130,165,701.24 | ||||||||||
| I. Total comprehensive income | 287,075,299.62 | 287,075,299.62 | ||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -2,040,866.00 | 18,303,481.79 | -1,047,851.56 | 17,310,467.35 | ||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -8,994,086.00 | -41,132,596.76 | -45,368,941.80 | -4,757,740.96 | ||||||||||||
| ii. Capital contributed by other equity instruments holders | ||||||||||||||||
| iii. Share-based payments to owners' equity | 6,953,220.00 | 59,439,455.55 | 44,321,090.24 | 22,071,585.31 | ||||||||||||
| iv. Others | -3,377.00 | -3,377.00 | ||||||||||||||
| III. Profits distribution | 28,478,534.63 | -202,698,600.36 | -174,220,065.73 | |||||||||||||
| i. Appropriation of surplus reserve | 28,478,534.63 | -28,478,534.63 | ||||||||||||||
| ii. Distribution to owners | -174,220,065.73 | -174,220,065.73 | ||||||||||||||
| iii. Others | ||||||||||||||||
| IV. Transfers within owners' equity | ||||||||||||||||
| i. Capital reserves transferred to paid-in capital | ||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | ||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | ||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | ||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | ||||||||||||||||
| vi. Others | ||||||||||||||||
| V. Special reserves | ||||||||||||||||
| i. Appropriated during current year | ||||||||||||||||
| ii. Used during current year | ||||||||||||||||
| VI. Others | ||||||||||||||||
| 4. Closing balance of current year | 426,051,015.00 | 1,045,449,410.67 | 60,585,678.92 | 275,010,401.50 | 806,441,654.46 | 2,492,366,802.71 | ||||||||||
| (Attached notes to statements are part of the consolidated financial statements) | ||||||||||||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | ||||||||||||||
| Parent Company's Statement of Changes in Equity | |||||||||||||||||
| For the year ended 31 December 2021 | |||||||||||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | (Unless otherwise indicated, the currency is expressed in RMB) | ||||||||||||||||
| Items | Prior Period | ||||||||||||||||
| Share capital | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Total shareholders' equity | ||||||||||
| 1. Closing balance of last year | 442,968,881.00 | 1,086,885,756.42 | 71,267,118.78 | 235,701,180.14 | 710,223,150.82 | 1,961,542,968.60 | |||||||||||
| Add: Increase/decrease due to changes in accounting policies | |||||||||||||||||
| Increase/decrease due to corrections of errors in prior period | |||||||||||||||||
| Others | |||||||||||||||||
| 2. Opening balance of current year | 442,968,881.00 | 1,086,885,756.42 | 71,267,118.78 | 235,701,180.14 | 710,223,150.82 | 2,404,511,849.60 | |||||||||||
| 3. Increase/decrease for current year | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | 10,830,686.73 | 11,841,804.38 | -42,310,748.13 | |||||||||||
| I. Total comprehensive income | 108,306,867.31 | 108,306,867.31 | |||||||||||||||
| II. Owner's contributions to and withdrawals of capital | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | -64,983,239.24 | |||||||||||||
| i. Common stock contributed/paid-in capital by shareholders/owners | -14,877,000.00 | -65,264,104.92 | -8,802,188.30 | -71,338,916.62 | |||||||||||||
| ii. Capital contributed by other equity instruments holders | |||||||||||||||||
| iii. Share-based payments to owners' equity | 5,570,601.49 | -831,400.00 | 6,402,001.49 | ||||||||||||||
| iv. Others | -46,324.11 | -46,324.11 | |||||||||||||||
| III. Profits distribution | 10,830,686.73 | -96,465,062.93 | -85,634,376.20 | ||||||||||||||
| i. Appropriation of surplus reserve | 10,830,686.73 | -10,830,686.73 | |||||||||||||||
| ii. Distribution to owners | -85,634,376.20 | -85,634,376.20 | |||||||||||||||
| iii. Others | |||||||||||||||||
| IV. Transfers within owners' equity | |||||||||||||||||
| i. Capital reserves transferred to paid-in capital | |||||||||||||||||
| ii. Surplus reserve transferred to paid-in capital | |||||||||||||||||
| iii. Use of surplus reserve to cover previous losses | |||||||||||||||||
| iv. Changes in remeasurement of defined benefit plans transferred to retained earnings | |||||||||||||||||
| v. Other comprehensive income transferred to retained earnings | |||||||||||||||||
| vi. Others | |||||||||||||||||
| V. Special reserves | |||||||||||||||||
| i. Appropriated during current year | |||||||||||||||||
| ii. Used during current year | |||||||||||||||||
| VI. Others | |||||||||||||||||
| 4. Closing balance of current year | 428,091,881.00 | 1,027,145,928.88 | 61,633,530.48 | 246,531,866.87 | 722,064,955.20 | 2,362,201,101.47 |
| (Attached notes to statements are part of the consolidated financial statements) | |||||||||||||||||
| Legal Representative: Zhang Xuhua | Finance Officer (CFO):Song Yaoming | Financial Manager:Tian Hui | |||||||||||||||
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 114
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
I. Company status
1. Registered place, organization and address of headquarters
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval of Shen FuBan Fu (1992) 1259 issued by the General Office of Shenzhen Municipal Government, through therestructuring of former Shenzhen FIYTA Time Industrial Company by the promoter of China NationalAero-Technology Import and Export Shenzhen Industry & Trade Center (name changed to “ChinaNational Aero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992. On 3 June 1993, both theCompany was listed on Shenzhen Stock Exchange. The Company holds business license with theUnified Social Credit Code of 91440300192189783K.As at 31 December 2021, the outstanding shares issued by the Company was 426.05 million sharesand the registered capital was RMB426.05 million after a series of share dividend, right offering, sharecapital conversion from retained earnings, and issuing of new shares. The Company’s registered addressis FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao, Nanshan District, Shenzhen, Guangdong Province,where the Company’s headquarters locates. The parent company of the Company is CATIC ShenzhenHoldings Limited (CATIC Shenzhen) and the ultimate controlling party of the Company is Aviation IndustryCorporation of China, Ltd. (AVIC) .
2. Nature of the Company’s business and main operating activities
The business nature and main operating activities of the Company and its subsidiaries mainly include:
producing and selling of analogue indication mechanical watches, quartz watches and its movements,components, various timing devices, processing and wholesaling karat gold jewelry watches, intelligentwatches; domestic commercial and material supply and distributing business (excluding goods underexclusive operational rights, special control and exclusive sales) ; property management and leasing;providing design service; research, design, production, sales and technical support for precise watchesand components; import and export business (according to Shen Mao Guan Deng Zheng ZiNo.2007-072) .
3. Authorization for issue
The financial statements have been approved and authorized for issue by the Board of Directors on 8March 2022.
II. Scope of consolidation
There were 13 subsidiaries that are included in the Company’s scope of consolidation for year 2021,see Note VIII for details. Comparing to prior year, the entities that were included in the consolidationincreased by 2 and decreased by 1. The Changes include:
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 115
1. Subsidiaries that were newly included in the consolidation
| Name | Reasons for change |
| Harmony World Watch Center (Hainan) Co., Ltd. | Incorporated by investment |
| Shenzhen Xunhang Precision Technology Co., Ltd. | Incorporated by investment |
2. Subsidiary that was excluded out of the consolidation
| Name | Reasons for change |
| Station 68 Ltd. | Deregistered on 5 March 2021 |
III. Basis of preparation
1. Basis of preparation
The financial statement is prepared in accordance with the requirements of Accounting Standards forBusiness Enterprises and associated application guidance, illustrations to the standards and relatedpronouncements (collectively known as “Accounting Standards for Business Enterprises” or “CAS”) .These financial statements also comply with the disclosure requirements of “Regulation on thePreparation of Information Disclosure of Companies Issuing Public Shares, No. 15: GeneralRequirements for Financial Reports” (revised in 2014) issued by China Securities RegulatoryCommission (CSRC) .
2. Going concern
The Company assesses the going concern ability to the extent of 12 month after the balancesheet date. No issues that would result in significant doubt about the Company’s going concern is noted.As a result, the financial statements of the Company have been prepared on going concern basis.
3. Basis and principles of accounting
Accrual basis is adopted for the Group’s accounting activity. Except for some financial instruments,the financial statements are measured using historical cost. In case of impairment occurred on assets,provisions for impairment are provided for in accordance with related regulations.
IV. Significant accounting policies and accounting estimates
1. Highlight to specific accounting policies and estimates
(1) The Company make specific accounting policies and estimates according to its nature of business.Accounting policies and estimates mainly includes: method of estimated credit loss accrual (Note IV. 12,Note IV. 13 and Note IV. 14) , measurement of inventory (Note IV. 15) , depreciation of investmentproperty and fixed asset and amortization of intangible asset (Note IV. 18, Note IV. 19 and Note IV. 23) ,revenue (Note IV, 31) etc.
(2) Based on historical experience and other factors including reasonable estimation to future events,the Company continues to evaluate significant accounting estimates and key assumptions. If materialchanges to following accounting estimate and key assumption incurred, material impact would happenedto the carrying value of the Company’s assets and liabilities in coming accounting year.
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 116
1) Measurement of Expected Credit Loss of accounts receivable and other receivablesThe management estimates impairment loss provision to accounts receivable and other receivablesbased on the judgments to estimated credit loss of accounts receivable and other receivables. If anyevents occurred that indicated the Company may not be able to recover the balance amount, estimationis needed in provision accrual. If the expected number is different with the estimated figure, the differencewill affect the carrying value of accounts receivable and other receivables and the impairment lossexpenses in corresponding accounting period.
2) Impairment to inventory. The Company recognizes provision for obsolete inventories based on theexcess of the cost of inventory over its net realizable value. In determining the net realizable value ofinventories, the management uses significant judgments to estimate the selling price, cost to finishmanufacturing, and selling expenses and associated taxes. If the management revises estimated sellingprice and cost to finish manufacturing and selling expenses, the NAV estimation would be affected andthe difference would have an effect to the inventory provision.
3) Estimation of long-term asset impairment. When evaluating whether there is impairment tolong-term asset, the management mainly considers the following: (a) whether the events affect the assetimpairment have already incurred; (b) whether the discounted cash flow from continue usage of the assetor disposal is lower than its carrying amount; and (c) whether major assumption used in estimating thefuture cash flow is appropriate.
Changes to related assumption adopted in determining impairment such as profitability, discountingrate and growth rate may have material impact to the present value used in impairment test and result inimpairment to above mentioned long-term assets.
(a) Depreciation and amortization. The estimated residual value and useful life of investment property,fixed asset and intangible asset that used by the Company are based on historical actual useful life andactual residual value of assets with similar nature or functions. In the process of using such assets,estimated useful life and residual value may vary depending on the economic environment, technologicalenvironment and other environment that the assets located. If there is difference between the expectationand previous estimation, proper adjustments will be made by the management.
(b) Share-based payments. The management makes best estimation based on up-to-date number ofemployees who have exercisable shares and adjusting the number of exercisable equity instrument oneach balance sheet date in the vesting period. If there is difference between current year exercisableemployee and previous estimation, proper adjustments will be made by the management.
(c) Deferred tax asset. Deferred tax asset of taxable losses shall be recognized to the extent thatthere will have sufficient taxable income to offset. This involves significant judgments to estimate thetiming and amount of future taxable profit and taking into consideration of tax planning so as to determinethe amount of deferred tax asset.
(d) Corporate income tax. The final tax treatment of many transaction and events are with uncertaintyin the normal course of operation. Significant judgments involves in accrual of corporate income tax. If
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 117
there is difference between the final discretion and the amount recorded in books, the difference will affectthe amount of tax in the period of final discretion.
2. Statement of compliance with Accounting Standards for Business EnterprisesThe financial statements of the Company have been prepared in accordance with the requirementsof Accounting Standards for Business Enterprises. These financial statements present truly andcompletely the financial position as at 31 December 2021, the results of operations and the cash flows forthe year then ended of the Company.
3. Accounting period
The accounting period of the Company is the calendar year, i.e. from 1 January to 31 December ofeach year.
4. Operating cycle
The operating cycle refer to the period from purchasing assets for process to realizing cash or cashequivalent. The Company’s operating cycle is 12 months which is also used as standard to determine theliquidity of asset and liabilities.
5. Recording currency
The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recording currency.FIYTA (Hong Kong) Limited (“FIYTA Hong Kong”) , a subsidiary of the Company outside mainland China,and Station 68 Limited (“Station 68”) , a subsidiary of FIYTA Hong Kong, use Hong Kong Dollar (“HKD”)as the recording currency according to the main economic environment where the companies operated in.Montres Chouriet SA, a subsidiary of FIYTA Hong Kong (“Swiss Company”) , uses Swiss Franc as therecording currency according to the main economic environment where the Swiss Company operated in.The recording currencies mentioned above will be translated to Renminbi when preparing financialstatements. The currency used in preparing the Group’s financial statements is Renminbi.
6. Accounting treatment for business combinations involving entities under commoncontrol and not under common control
(1) If a business combination is achieved through multiple steps, of which the terms,condition and economical effect is in line with one or more criteria as followed, the multipletransactions shall be dealt with as one-basket transaction.
1) the transactions were entered into at the same time or by considering each other’s influence;
2) a complete business result can only be achieved by combining all these transactions together;
3) the performing of one transaction is depended on at least one other transaction;
4) a transaction is not economical if it is considered stand along but it will become economical if it isconsidered in combination with other transactions.
(2) Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquired andliabilities assumed are measured based on their carrying amounts in the consolidated financialstatements of the ultimate controlling party at the combination date, except for adjustments due todifferent accounting policies. The difference between the carrying amount of the net assets acquired and
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the consideration paid for the combination (or the total par value of shares issued) is adjusted againstshare premium in the capital reserve, with any excess adjusted against retained earnings.If there is contingent consideration and provision or assets are required to be recognized, thedifference between the provision or assets and the contingent consideration shall adjust the capitalreserve, with any excess adjusted against retained earnings.If business combinations involving entities under common control achieved in stages that involvesmultiple transactions belongs to one-basket transaction, all transactions shall be dealt with as onetransaction. If not, the accounting treatment is as follows: Initial investment cost is the acquirer’s share ofthe carrying amount of the net assets of the acquiree in the consolidated financial statements of theultimate controlling party at the combination date. The difference between the initial investment cost andthe sum of carrying amount of investment prior to combination date and carrying amount of newconsiderations paid for the combination at the combination date is adjusted to capital reserve (sharepremium) . If the capital reserve is not sufficient to absorb the difference, any excess is adjusted againstretained earnings. he difference between the carrying amount of the net assets acquired and the sum ofcarrying amount of investment prior to combination date and carrying amount of new considerations paidfor the combination at the combination date is adjusted to capital reserve (share premium) . If the capitalreserve is not sufficient to absorb the difference, any excess is adjusted against retained earnings. Theprofit or loss, other comprehensive income and changes in other owner’s equity recognized by theacquirer during the period from the later of initial investment date and the date that the acquirer andacquiree both under common ultimate control to the combination date are offset the opening retainedearnings or profit for loss for the current period in the comparative statements.
(3) Business combinations involving entities not under common controlThe purchase date refers to the date that the Company actually acquired control over the acquire i.e.the date when the control over the acquiree’s net assets or decision of business operation has beentransferred to the Company. If the Company fulfills the following conditions at the same time, it isconsidered that the control has been transferred:
① the contract or agreement of business combination has been approved by internal powerdepartment;
② related matters has been approved by state supervisory authorities, if needed;
③ procedures of asset transfer has been completed;
④ the Company has been made majority of payments and has the ability and plan to make theresidual payments;
⑤ the Company is in substances acquired the business and operating policies and enjoyedcorresponding interests and undertaking risks of the acquire.
On the purchase date, assets transferred, liabilities incurred or assumed as the consideration paidshall be measured at fair value. The difference between the fair value and carrying amount shall becharged to current period profit or loss.
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Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’sidentifiable net assets, the difference is recognized as goodwill, and subsequently measured on the basisof its cost less accumulated impairment provisions. Where the combination cost is less than the acquirer’sinterest in the fair value of the acquiree’s identifiable net assets, the difference is recognized in profit orloss for the current period after reassessment.If business combinations involving entities not under common control achieved in stages thatinvolves multiple transactions belong to one-basket transaction, all the transactions shall be treated asone. Otherwise, it shall be treated as follows: In the separate financial statements, the initial investmentcost is the sum of the carrying amount of equity investment of the acquiree held prior to the acquisitiondate and additional investment cost at the acquisition date. When the previously-held equity investmentwhich was accounted for under the e Accounting treatment for business combinations involving entitiesunder common control and not under common control equity method before the acquisition date, anyother comprehensive income previously recognized is not adjusted on acquisition date. When theinvestment is disposed of in later date, the amount that was recognized in other comprehensive income isrecognized on the same basis as would be required if the investee had disposed directly of the relatedassets or liabilities. The owners’ equity recognized as the changes of the investee’s other owners’ equityexcept for net profit or loss, other comprehensive income and profit distribution, are transferred to profit orloss for the current period when disposing the investment. When the previously-held equity investmentwhich was measured at fair value before the acquisition date, the accumulated changes in fair valueincluded in other comprehensive income is transferred to profit or loss for the current period uponcommencement of the cost method.
(4) Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services,valuation advisory, and other administrative expenses, are recorded in profit or loss for the current periodwhen incurred. The transaction costs of equity or debt securities issued as the considerations of businesscombination are included in the initial recognition amount of the equity or debt securities.
7. Consolidated financial statements
(1) Scope of consolidation
The scope of consolidated financial statements is based on control. All subsidiaries (includingstandalone entity that controlled by the Company) are all included in the scope of consolidation.
(2) Procedures of consolidation
The consolidated financial statements are prepared by the Company based on the financialstatements of the Company and its subsidiaries and other relevant information. The whole enterprise isconsidered as one accounting body when preparing consolidated financial statement and reflect thewhole group’s financial position, performance and cash flow according to unified accounting policiesbased on accounting standards.
All subsidiaries that are included in the scope of consolidation adopt same accounting policies, and
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accounting period. If there are differences, the subsidiaries shall adjust its policies and accounting periodaccordingly.
When preparing consolidated financial statements, the accounting policies and accounting periods ofthe subsidiaries should be consistent with those established by the Company, and all significantintra-group balances and transactions are eliminated. If the treatment based on enterprise group angle isdifferent with the angle from subsidiaries’, it shall be treated based on enterprise group angle.
The portion of a subsidiary’s equity that is not attributable to the parent is treated as non-controllinginterests and presented separately in the consolidated balance sheet within shareholders’ equity. Theportion of net profit or loss of subsidiaries for the period attributable to non-controlling interests ispresented separately in the consolidated income statement below the “net profit” line item. When theamount of loss for the current period attributable to the non-controlling shareholders of a subsidiaryexceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, theexcess is still allocated against the non-controlling interests.
Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed to beincluded in the consolidated financial statements from the date they are controlled by the ultimatecontrolling party. Their operating results and cash flows are included in the consolidated incomestatement and consolidated cash flow statement respectively from the date they are controlled by theultimate controlling party.
Where a subsidiary or business has been acquired through a business combination not involvingenterprises under common control in the reporting period, the financial statements of subsidiaries shall beadjusted on the basis of fair value of identifiable net assets on purchase date.
1） Addition of subsidiaries or business operation
Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed to beincluded in the consolidated financial statements from the date they are controlled by the ultimatecontrolling party. Their operating results and cash flows are included in the consolidated incomestatement and consolidated cash flow statement respectively from the date they are controlled by theultimate controlling party.
If the Company can exert control over the investee under common control because of addition ofinvestment, adjustments shall be made as if all the combining party are at the current condition in theangle of ultimate controlled party. Equity investment held before acquired control, profit or loss, othercomprehensive income and other net asset changes that have already recognized between the later ofacquiring original equity and the date under common control, and combination date shall offset openingretained earnings or current period profit or loss respectively.
In the reporting period, if there is subsidiary or business addition involving entities not under commoncontrol, no adjustments shall be made to the consolidated balance sheet. The revenue, expenses and
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profit from the purchasing date to period end shall be included in consolidated income statement. Thecash flows from the purchasing date to period end shall be included in consolidated cash flow statement.Where a subsidiary or business has been acquired through a business combination not involvingenterprises under common control by means of investment addition in the reporting period, equity heldbefore the purchase date shall be re-measured at fair value. Difference between the fair value and thecarrying amount shall be charged to current period investment gain. Changes related to equity methodsuch as other comprehensive income and other equity changes beside net profit, other comprehensiveincome and profit distribution shall be transferred to current period investment gain.
2） Disposal subsidiary or businessa) General principalIn the reporting period, if the Company dispose of subsidiary or business, the subsidiary’s revenue,expenses, profit and cash flows from the beginning of the period to the disposal date shall be included inconsolidated financial statements.When the Company loses control over a subsidiary because of disposing part of equity investment orother reasons, the remaining part of the equity investment is re-measured at fair value at the date whenthe control is lost. A gain or loss is recognized in the current period and is calculated by the aggregate ofconsideration received in disposal and the fair value of remaining part of the equity investment deductingthe share of net assets in proportion to previous shareholding percentage in the former subsidiary sinceacquisition date and the goodwill.
2) Disposal of subsidiary through multiple steps
In the event that the Company losses control over a subsidiary through multiple transactions, if one ormore conditions below are fulfilled, it shall be treated as one-basket transaction:
a) the transactions were entered into at the same time or by considering each other’s influence;
b) a complete business result can only be achieved by combining all these transactions together;
c) the performing of one transaction is depended on at least one other transaction;
d) a transaction is not economical if it is considered stand along but it will become economical if it isconsidered in combination with other transactions.
If the disposal was categorized as one-basket transaction, the Company dealt with all transactions asone transaction that resulted in lost control over subsidiary. But, before losing control, the differencebetween disposal consideration and the portion of net asset of the disposal part shall be recognized inother comprehensive income each time of disposal and charged to income statement in whole in theperiod loss control.
If the disposal does not belong to one-basket transaction, the accounting treatment before lostcontrol shall be in accordance with policies of disposal equity but not losing control. At the time control lost,deal with as normal subsidiary disposal.
3) Acquiring non-controlling interests of subsidiary
Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling
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shareholders, the book value of shareholder’s equity attributed to the Company and to the non-controllinginterest is adjusted to reflect the change in the Company’s interest in the subsidiaries. The differencebetween the proportion interests of the subsidiary’s net assets being acquired or disposed and theamount of the consideration paid or received is adjusted to the capital reserve in the consolidated balancesheet, with any excess adjusted to retained earnings.
8. Joint arrangement classification and accounting treatment for joint operation
(1) Classification
The Company classifies joint arrangements into joint operations and joint ventures based on thestructure, legal form, terms and conditions in the arrangement, and other related facts.Joint operations means joint arrangement that does not realized through independent entity. Jointarrangement that realized through independent entity is normally recognized as joint venture but it alsocan be classified as joint operation if clear evidence showed that one of the following condition is met:
1） The legal form of an joint arrangement showed that the joint parties enjoyed rights over relatedassets and undertake liability respectively;2） The contract showed that the joint parties enjoyed rights over related assets and undertake liabilityrespectively;3） Other facts and situation indicated that the joint parties enjoyed rights over related assets andundertake liability respectively;
(2) Accounting treatment to joint operation
The Company recognizes the following items relating to its interest in a joint operation, and accountfor them in accordance with relevant accounting standards:
1) its solely-held assets, and its share of any assets held jointly;
2) its solely-assumed liabilities, and its share of any liabilities assumed jointly;
3) its revenue from the sale of its share of the output arising from the joint operation;
4) its share of the revenue from the sale of the output by the joint operation; and
5) its solely-incurred expenses, and its share of any expenses incurred jointly.
The Company contribute or disposal of assets (except that asset constitute business) . Before theseassets are sold to third party, the Company only recognizes the portion of profit or losses that attributes tothe other party. If the assets incurred impairment, the Company recognizes losses in full.
For the assets purchased from joint operation (except that constitutes business) , before it is sold tothird party, only the portion that attributable to the other parties. If assets incurred impairment, theCompany recognizes losses based on its share.
The Company does not enjoy joint control to joint operation. If the Company enjoys joint operation’sasset and undertaking related liabilities, the accounting treatment is the same. Otherwise, it shall beaccounted for based on accounting standards.
9. Cash and cash equivalents
When preparing cash flow statement, the Company recognizes cash in hand and bank deposit that
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available for payment as cash. Cash equivalents include short-term, highly liquid investments that arereadily convertible to known amounts of cash and are subject to an insignificant risk of change in value.
10. Foreign currency transactions and translation of foreign currency financial statements
(1) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company, using theexchange rates prevailing at the dates of the transactions.Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchangerate at the balance sheet date. The resulting exchange differences between the spot exchange rate onbalance sheet date and the spot exchange rate on initial recognition or on the previous balance sheetdate are recognized in profit or loss. Non-monetary items that are measured at historical cost in foreigncurrencies are translated to Renminbi using the exchange rate at the transaction date.Non-monetary items that are measured at fair value in foreign currencies are translated using theexchange rate at the date the fair value is determined. The resulting exchange differences are recognizedin profit or loss.
(2) Translation of foreign currency financial statements
When translating the foreign currency financial statements of overseas subsidiaries, assets andliabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheetdate. Equity items, excluding “retained earnings”, are translated to Renminbi at the spot exchange ratesat the transaction dates.
When disposing overseas operations, foreign translation difference that related to the overseasbusiness shall be charged to current period profit or losses from other comprehensive income. If thedisposal resulted in decrease in shareholding but still maintain control, the translation difference will beincluded in non-controlling interest. If the disposal related to associate entity or joint venture entities, thetranslation difference will be included in current period profit or loss.
11. Financial instruments
The Company recognizes financial assets or financial liabilities when the Company become a party ofthe financial instruments.
Effective interest rate method refer to calculating the amortized cost of financial assets or liabilitiesand amortizes interest income or expenses into corresponding accounting period accordingly.
Effective interest rate refers to the interest that is used to discount the estimated future cash flows ofexisting financial assets or financial liabilities to its amortized cost. When determining the effective interestrate, the cash flow is estimated taking consideration of all contractual terms of financial assets or financialliabilities but does not including estimated credit loss.
Amortized cost of financial assets or financial liabilities is the initial recognition amount deductprincipal and add or less accumulated amortization to the difference between initial recognition and theamount at maturity and less accumulated loss provision (for financial assets only) .
(1) Recognition and derecognition of financial instruments
Financial assets are classified into the following three categories depends on the Company’s
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business mode of managing financial assets and cash flow characteristics of financial assets
1) Financial assets measured at amortized cost
2) Financial assets at fair value through other comprehensive income
3) Financial assets at fair value through profit or loss
Financial assets are measured at fair value at initial recognition. But it is recognized using tradingprice for accounts receivable or notes receivable arose from sale of goods or providing of service thatdoes not including material financing component or does not consider financing component within oneyear.For financial assets at fair value through profit or loss, the related transaction costs are directlyrecognized through profit or loss, and the related transaction costs of other types of financial assets areincluded in the initial recognition amounts.Only when the Company changes its business model of managing financial assets, all the financialassets affected shall be reclassified on the first day of the first reporting period after the business modelchanges.1） Financial assets measured at amortized costThe Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets at fair value through profit or loss as financial assets measured atamortized cost: The Company’s business model for managing the financial assets is to collect contractualcash flows; The terms of the financial asset contract stipulate that cash flows generated on a specific dateare only payments of principal and interest based on the amount of outstanding principal. Financial assetsmeasured at amortized cost of the Company includes cash and bank balances, notes receivable,accounts receivables and other receivables.After initial recognition, the effective interest rate method is used to measure the amortized cost ofsuch financial assets. Profits or losses arising from financial assets measured at amortized costs and notpart of any hedging relationship are included in current profit or loss when the recognition is terminated,amortized or impaired according to the effective interest rate.a) for financial assets that already impaired when it is acquired, the Company determines its interestincome using adjusted effective interest rate based on its amortized cost.b) for financial assets that does not impaired when it is acquired but impaired latterly, the Companydetermines its interest income using adjusted effective interest rate based on its amortized cost. If there isno credit impairment in later period due to changes to risk factors, the Company uses effective interestrate times of carrying amount of the financial asset to determine interest income. 2) Financial assets at fairvalue through other comprehensive income
The Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets measured at fair value and whose changes are recorded in current profit orloss as financial assets measured at fair value through other comprehensive income: The Group’sbusiness model for managing the financial assets is both to collect contractual cash flows and to sell the
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financial assets, and the terms of the financial asset contract stipulate that cash flows generated on aspecific date are only payments of principal and interest based on the amount of outstanding principal.
After initial recognition, financial assets are subsequently measured at fair value. Interest, impairmentlosses or gains and exchange gains calculated by the effective interest rate method are recognized inprofit or loss, while other gains or losses are recognized in other comprehensive income. Whenderecognized, the accumulated gains or losses previously recognized in other comprehensive income aretransferred from other comprehensive income and recorded in current profit or loss.
3) Financial assets designated as fair value through other comprehensive income
At initial recognition, the Company may designate non-trading equity instrument investments asfinancial assets at fair value through other comprehensive income, presented as other equity instrumentinvestment, and recognize dividend income when the conditions are met (the designation cannot berevoked once it is made) .
The fair value changes of this kind of financial asset shall be included in other comprehensive incomeand no impairment provision is needed. When de-recognizing the financial asset, accumulated gain orloss in other comprehensive income shall be transferred out of other comprehensive income and chargedto retained earnings. During the investing period when the Company holds equity instruments, theCompany recognizes dividends in current period profit or loss when the right of receiving dividends isconfirmed and the associated economic benefit is probable to flow into the Company and that the amountcan be measured reliably. The Company treated this kind of financial instrument under other equityinvestment.
The designated equity instrument investment does not belong to the following: the purpose ofobtaining the financial asset is mainly for the recent sale; it is part of the identifiable financial assetinstrument combination under centralized management at initial recognition, and there is objectiveevidence that the short-term gain actually exists in the near future; it is a derivative (except for derivativesthat meet the definition of a financial guarantee contract and are designated as effective hedginginstruments) .
4) Financial assets at fair value through profit or loss
The financial assets other than financial assets measured at amortized cost and financial assets atfair value through other comprehensive income are classified as financial assets at fair value throughprofit or loss.
After initial recognition, the financial assets are subsequently measured at fair value, and the profitsor losses generated from which are recognized in profit or loss.
The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.
5) Financial assets designated at fair value through profit or loss.
At initial recognition, if the accounting mismatch can be eliminated or significantly reduced, thefinancial assets can be designated as financial assets at fair value through profit or loss.
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If the hybrid contract includes one or more embedded derivatives and the main contract does notbelong to the above financial assets, the Company may designate the whole as a financial instrument thatis measured at fair value through profit or loss, except in the following cases:
a) Embedded derivatives do not materially change the cash flow of a hybrid contract
b) When it is first determined whether a similar hybrid contract requires a spin-off, there is little needfor analysis to make it clear that the embedded derivatives it contains should not be split. If theprepayment right of the embedded loan allows the holder to repay the loan in advance with an amountclose to the amortized cost, the prepayment right does not need to be split.
After initial recognition, the financial assets are subsequently measured at fair value, and the profitsor losses generated from which are recognized in profit or loss.
The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.
(2) Classification and measurement of financial liabilities
The Company categorizes financial liabilities into financial liabilities and equity instrument based onthe contract terms and economical nature rather than solely on its legal form. Financial liabilities initiallyrecognized as financial liabilities at fair value through profit or loss, other financial liabilities and derivativeinstrument designated as effective hedging instrument.
The financial liabilities of the Company are initially measured at fair value. The related transactioncosts of financial liabilities at fair value through profit or loss are directly recognized in profit or loss. Therelated transaction costs of other categories of financial liabilities are included in the initial recognitionamount.
Subsequent measurement of financial liabilities depends on its category:
1） Financial liabilities at fair value through profit or loss
This category includes financial liabilities held for trade (including derivatives that are financialliabilities) and financial liabilities designated at fair value through profit or loss.
At initial recognition, in order to provide more relevant accounting information, the Companyclassifies financial liabilities that meet one of the following conditions as financial liabilities at fair valuethrough profit or loss (the designation cannot be revoked once it is made) : the aim of undertaking relatedfinancial liabilities is to sell or repurchase in the short run; it is part of identifiable financial instruments andthere is objective evidence indicated that the enterprise adopts short-term profitability mode; belong toderivative instrument except for derivative instrument designated as effective hedging instrument andfinancial guarantee contract. Financial liabilities held for trade are measured at fair value subsequentlyand all fair value changes except for hedging accounting shall be included in current period profit or loss.
At initial recognition, in order to provide more relevant accounting information, the Companyclassifies financial liabilities that meet one of the following conditions as financial liabilities designated atfair value through profit or loss (the designation cannot be revoked once it is made) :
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a) accounting mismatches can be eliminated or significantly reduced.b) management and performance evaluation of financial liability portfolios or combinations of financialassets and financial liabilities based on fair value according to corporate risk management or investmentstrategies as stated in formal written documents, and report to key management personnel on this basis.When the Company initially recognizes a financial liability and designates it at fair value through profitor loss according to stipulations of standards, the changes in the fair value of the financial liability arisingfrom changes in the company’s own credit risk are included in other comprehensive income, and otherchanges in fair value are recognized in profit or loss for the period. However, if the accounting causes orexpands the accounting mismatch in profit or loss, the entire gain or loss of the financial liability (includingthe affected amount from changes in the company’s own credit risk) is included in the current profit orloss.
2) Other financial liabilities
Except for the following items, the Company classifies financial liabilities as financial liabilitiesmeasured at amortized cost:
a) Financial liabilities at fair value through profit or loss.
b) The transfer of financial assets does not meet the conditions for derecognition or financial liabilitiesarising from the continued involvement in the transferred financial assets.
c) Financial guarantee contracts that are not in the first two categories of this article, and loancommitments granted at a rate lower than market interest rates and that are not in the first category of thisarticle
Financial guarantee contracts that are not designated as financial liabilities measured at fair valuethrough profit or loss are initially recognized at fair value. Subsequent to initial recognition, thesubsequent measurement is determined according to the higher loss allowance of contingent liabilitiesunder expected credit loss model and the initial recognition amount deducting by the accumulatedamortization.
(3) Derecognition of financial instruments
1) If a financial asset meets one of the following conditions, it shall be derecognized:
a) The contractual right to receive the cash flow of the financial asset is terminated.
b) The financial asset has been transferred, and the transfer meets the requirements of the“Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” regardingderecognition of financial assets.
2) Conditions of derecognition of financial liabilities
If the current obligation of a financial liability (or a part thereof) has been discharged, the financialliability (or such part of financial liability) is derecognized.
When the Company and the lender sign an agreement to replace the original financial liability with anew financial liability, and the new financial liability is substantially different from the original financialliability, the original financial liability is derecognized and a new financial liability is recognized. The
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difference between the carrying amount and the consideration paid (including the transferred non-cashassets or liabilities assumed) is recognized in profit or lossIf the Company repurchases part of the financial liabilities, the carrying amount of the financialliabilities as a whole is allocated based on the proportion of the fair value of the continuing recognitionportion and the derecognition portion on the repurchase date. The difference between the carryingamount assigned to the derecognition portion and the consideration paid (including the transferrednon-cash assets or liabilities assumed) shall be included in the current profit or loss.
(4) Recognition basis and measurement for transfer of financial assetsIn the event of transfer of financial assets, the Company assesses the extent to which it retains therisks and rewards of ownership of the financial assets and treats them in the following cases:
1) If almost all risks and rewards of ownership of financial assets are transferred, the financial assetsare derecognized and the rights and obligations arising from or retained in the transfer are separatelyrecognized as assets or liabilities.
2) If almost all the risks and rewards of ownership of financial assets are retained, the financial assetsshall continue to be recognized
3) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets
a) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets
b) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets.
When judging whether the transfer of financial assets satisfies the conditions for derecognition above,the principle of substance over form is adopted. The Company divides the transfer of financial assets intothe overall transfer and partial transfer of financial assets:
1) If the overall transfer of financial assets meets the conditions for derecognition, the differencebetween the following is included in the current profit or loss
a) The carrying amount of the transferred financial assets on the date of derecognition.
b) The sum of the consideration received in respect of the transfer of financial assets and the amountcorresponding to the derecognized portion in the accumulated changes in the fair value originally anddirectly recognized in other comprehensive income (the financial assets involved in the transfer aremeasured at fair value through other comprehensive income)
If the transfer of a financial asset does not meet the conditions for derecognition, the financial assetwill continue to be recognized and the consideration received is recognized as a financial liability
(5) Method for determining the fair value of financial assets and financial liabilities
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The fair value of financial assets or financial liabilities with active market is determined by activemarket quotations; active market quotations include quotations that are readily and regularly availablefrom exchanges, dealers, brokers, industry groups, pricing agencies or regulatory authorities for relatedassets or liabilities, and represent actual and frequently occurring market transactions on a fair tradebasis. The fair value of financial assets initially acquired or derived or financial liabilities assumed shallbe determined on the basis of the market transaction price. The fair value of financial assets or financialliabilities without active market is determined using valuation techniques. In valuation, the Companyadopts valuation techniques that are applicable under current circumstances and that are supported byadequate available data and other information, selects inputs with consistent asset or liabilitycharacteristics considered by market participants in trading related asset or liability, and uses relevantobservable inputs where possible. Unobservable inputs are used where the relevant observable inputsare not available or are impracticable.
(6) Provision for impairment of financial assets
Based on the expected credit losses, the Company assesses the expected credit losses of thefinancial assets measured at amortized cost and financial assets at fair value through othercomprehensive income, lease receivables, contract assets, loan commitment and financial liabilities thatare not measured at fair value through profit or loss, and financial guarantee contract etc., and makesimpairment accounting and recognizes loss provisions.
The expected credit loss refers to the weighted average of the credit losses of financial instrumentsthat are weighted by the risk of default. Credit loss refers to the difference between all contractual cashflows discounted at the original effective interest rate and receivable from the contract and all cash flowsexpected to be received by the Company, and the present value of all cash shortages. For financial assetsthat have been purchased or generated with credit impairment, loss provision is recognized only for thecumulative changes in lifetime expected credit losses after the initial recognition on the balance sheetdate.
For accounts receivable, contract assets, and lease receivables, the Company shall always measurethe loss allowance for them at an amount equal to the lifetime expected credit losses.
For financial assets that have been purchased or generated with credit impairment, loss provision isrecognized only for the cumulative changes in lifetime expected credit losses after the initial recognitionon the balance sheet date. On each balance sheet date, the amount of changes in lifetime expectedcredit losses is included in profit or loss as an impairment loss or gain. Even if the lifetime expected creditloss determined on the balance sheet date is less than the expected credit loss reflected in the estimatedcash flow at the initial recognition, the positive change in expected credit loss is also recognized as animpairment gain
Except for the provision for loss of financial instruments in item (3) of this article, the Companyassesses whether the credit risk of the relevant financial instruments has increased significantly since theinitial recognition on each balance sheet date, and separately measures its loss provision, recognizes
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expected credit loss and its changes based on the following circumstances：
a) If the credit risk of the financial instruments has increased significantly since the initial recognition,the loss provision is measured at the amount equivalent to the lifetime expected credit loss of the financialinstruments, regardless of whether the basis the Company assesses the credit losses is on individualfinancial instrument or a combination of financial instruments, and the increase or reversal of the lossprovision resulting therefrom should be included in the current profit or loss as an impairment loss or gain
b) If the credit risk of the financial instruments has not increased significantly since the initialrecognition, the loss provision is measured at the amount equivalent to the expected credit loss of thefinancial instruments in the next 12 months, regardless of whether the basis the Company assesses thecredit loss is on individual financial instrument or the combination of financial instruments, and theincrease or reversal of the loss provision resulting therefrom shall be included in the current profit or lossas an impairment loss or gain.
For financial instruments in the third stage, the Company measures loss provision on the basis oflife-time expected credit loss and calculating interest income according to their book balance minus theimpairment provision and the actual interest rate.
Incremental or reversal of credit loss provision shall be included in current profit or loss as impairmentloss or gain. Except for financial asset at fair value through other comprehensive income, credit lossprovision is to offset the carrying amount of financial assets. For financial assets at fair value throughother comprehensive income, the credit loss provision is recognized in other comprehensive income andwill not offset the financial asset’s carrying amount in balance sheet.
If the Company recognized credit loss provision in prior accounting period in terms of life-time creditloss, but on current period balance sheet date, the associated financial asset does not belong to thesituation of risk increased after the initial recognition, the Company shall accrue credit loss provision forthis financial asset based on the next 12 month expected credit loss. Difference arose from abovechanges shall be included in current period profit or loss as impairment gain.
1） Assessment of significant increase of credit risk
By comparing the default risk of financial instruments on balance sheet day with that on initialrecognition day, the Company determines the relative change of default risk of financial instrumentsduring the expected life of financial instruments, to evaluate whether the credit risk of financialinstruments has increased significantly since the initial recognition.
To determine whether credit risk has increased significantly since the initial recognition, factorsconsidered by the Company includes:
a) Whether there is serious deterioration of the debtor’s operating results that have occurred or are
expected to occur;
b) Changes in the existing or anticipated technological, market, economic or legal environment willhave a significant negative impact on the debtor’s repayment capacity.
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c) Serious deterioration of external or internal credit ratings (if any) of financial instruments thathave occurred or are expected to occur;d) Whether the expected performance and repayment of debtor changes significantly.e) Whether the Company changed the way of managing financial assets.On the balance sheet date, if the Company assesses that the financial instrument only has lowerlevel of credit risk, the Company assumes that the credit risk associated with the financial instrumentdoes not increased after the initial recognition. If the default rate of a financial instrument is low and thedebtor’s ability to fulfill its cash flow liability is strong, the financial instrument will be regarded with lowercredit risk even if there will be adverse changed in economic and operating environment in long-termwhich may not necessarily decrease the debtor’s ability of fulfilling its cash flow liabilities.2） Provision for impairment of financial assetsWhen one or more events that adversely affect the expected future cash flows of a financial assetoccur, the financial asset becomes a financial asset that has suffered credit impairment. Evidence thatcredit impairment has occurred in a financial asset includes the following observable information:
a) significant financial difficulties of the issuer or debtor;b) the debtor breaches the contract, such as failure to pay or delay in the payment of interest orprincipal;
c) the creditor gives the debtor a concession which would not have been made under any othercircumstances for economic or contractual considerations relating to the financial difficulties of the debtor;
d) the debtor is likely to go bankrupt or carry out other financial restructurings;
e) the financial difficulties of the issuer or the debtor cause the active market of the financial asset todisappear;
f) purchase or source a financial asset at a substantial discount that reflects the fact that credit losseshave occurred.
The credit impairment of financial assets may be caused by the joint action of multiple events, andmay not be caused by separately identifiable event
Determining expected credit loss (ECL)
The Company evaluates ECL based on single or portfolio of financial instrument. When evaluatingECL, the Company considers past events, current situation and future economic condition.
The Company categorizes financial instrument into different portfolios based on common credit riskcharacteristics. Common credit risk characteristics includes: types of financial instruments, agingportfolio, settlement period, debtor’s industries etc… Refer to accounting policies of financial instrumentsfor standard for single evaluation and credit risk characteristics.
The Company uses the following way to determine the ECL of financial instruments:
a) For financial assets, credit loss is the present value of difference between all contractual cashflows receivable from the contract and all cash flows expected to be received by the Company.
b) For lease receivable, credit loss is the present value of difference between all contractual cash
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flows receivable from the contract and all cash flows expected to be received by the Company.c) For financial guarantee contract, credit loss is the present value of expected payment amount dueto credit losses happened to the owner of the contract and less any amount that the Company expected toreceive from the contract owner, debtor or other parties.d) For financial assets that already impaired on balance sheet date but not impaired when purchasing,the credit loss is the difference of carrying amount and present value of future cash flows discounted atoriginal effective interest rate.Factors that the Company measures ECL of financial instrument includes: assessing a series ofpossible results and to determine a weighted average amount without bias; time value of money;information of past event, current situation and future economic condition forecast that can be obtainedwithout paying extra cost or efforts on balance sheet date.3） Write offIf the Company no longer reasonably expects that the financial assets contract cash flow can berecovered fully or partially, the financial assets book balance will be reduced directly. Such reductionconstitutes the derecognition of the financial assets.
(7) Offset of financial assets and financial liabilities
Financial assets and financial liabilities are presented separately in the balance sheet and are notoffset. However, if all of the following conditions are met, the net amount offset by each other ispresented in the balance sheet:
1) The Company has a statutory right to offset the recognized amount, and such legal right iscurrently enforceable;
2) The Company plans to settle in net amount or to realize the financial assets and settle the financialliabilities at the same time.
12. Bill receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to bill receivable.
If the Company has sufficient evidence to evaluate the ECL of bill receivable on single basis, it will beassessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the bill receivable into different portfolios. The basis for portfolios is determined as follows:
| Portfolio | Basis | method |
| Risk-free banker’s acceptance note | The issuer has higher level of credit rating and no default in past and has strong ability to fulfil its contractual cash follow obligation | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Business acceptance note | Bill receivables with same aging have similar credit risk characteristics | Based on aging analysis |
13. Accounts receivables
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Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to accounts receivable.If the Company has sufficient evidence to evaluate the ECL of account receivable on single basis, itwill be assessed on single basis.If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the account receivable into different portfolios. The basis for portfolios is determined asfollows:
| Portfolio | Basis | method |
| Receivables for related parties in scope of consolidation | Account receivables for related parties in scope of consolidation have similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Accounts receivables from other parties | Account receivables with same aging have similar credit risk characteristics | Based on aging analysis |
14. Other receivables
Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to other receivables.
If the Company has sufficient evidence to evaluate the ECL of other receivables on single basis, it willbe assessed on single basis.
If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the other receivable into different portfolios. The basis for portfolios is determined as follows:
| Portfolio | Basis | method |
| Receivables of down payment and guarantee | The portfolio has similar credit risk characteristics | Based on aging and ECL rate |
| Petty cash for employees | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Social security payment paid on-behalf of employees | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Receivables from related parties within scope of consolidation | The portfolio has similar credit risk characteristics | Referencing historical impairment experience and taking into consideration of current situation and estimation of future conditions |
| Others | The portfolio has similar credit risk characteristics | Based on aging and ECL rate |
15. Inventory
(1) Classification
Inventory refers to the finished products or commodities that the Company holds for sale in its dailyactivities, semi-products in the production process, materials and consumables used in the production
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process or the provision of labour services. Inventories include raw materials, work in progress, andfinished goods.
(2) Valuation method of inventory
When inventory is acquired, it is initially measured at cost, including procurement costs, processingcosts and other costs. When the inventory is issued, it is measured by the weighted average method(except for branded watches) and specific identification method (for branded watches) .
(3) Basis for determining the net realizable value and method for provision for obsoleteinventories
After the inventory is thoroughly inspected at the end of the period, the provision shall be provided oradjusted at the lower of the cost of the inventory and its net realizable value. The net realizable value ofinventory of goods directly used for sale, such as finished goods, stocked goods and materials for sale inthe normal production and operation process, is determined by the estimated selling price of the inventoryminus the estimated selling expenses and related taxes; net realizable value of inventory of materials thatneed to be processed is determined based on the estimated selling price of the finished productsproduced minus the estimated cost till completion, estimated selling expenses and related taxes and feesin the normal production and operation process; the net realizable value of the inventory held for theexecution of a sales contract or labour contract is calculated on the basis of the contract price. If thequantity of the inventory held exceeds the quantity ordered by the sales contract, the net realizable valueof the excess inventory is calculated based on the general sales price.
The provision is accrued according to the individual inventory project at the end of the period; but fora large number of inventories with lower unit price, the provision is accrued according to the category ofinventory; for those related to the product series produced and sold in the same region, have the same orsimilar end use or purpose and that are difficult to measure separately from other projects, they arecombined for provision for inventory depreciation
If the influencing factors of the write-down of inventory value have disappeared, the amount of writedown will be restored and will be reversed within the amount of the provision for decline in value of theinventory that has been accrued. The amount of the reversal is included in the current profit or loss
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
Low-value consumables and packaging materials are charged to profit or loss when they are used.
16. Contract assets
The Company has the right to receive the consideration for the transfer of goods to the customers. Ifthe right depends on factors other than the passage of time, it is recognized as a contract asset. If theCompany has the right (only depends on passage of time) to receive consideration from client, accountsreceivable shall be recognized.
Refer to Note XI 6 for impairment to contract asset.
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17. Long-term Equity Investment
(1) Determination of investment cost
1) For the long-term equity investment formed by business combination, the specific accountingpolicies are detailed in the accounting treatment of business combination under common control and notunder common control as set out in this Note VI.
2) Long-term equity investment obtained by other means
The initial investment cost of the long-term equity investment obtained by cash payment is the actualpurchase price. The initial investment cost includes expenses directly related to the acquisition oflong-term equity investments, taxes and other necessary expenses
The initial investment cost of the long-term equity investment obtained by issuing equity securities isthe fair value of the issued equity securities; the transaction cost incurred in the issuance or acquisition ofits own equity instruments is deducted from equity if it is directly attributable to equity transactions.
Under the premise that the non-monetary asset exchange has the commercial substance and the fairvalue of the assets received or surrendered can be reliably measured, the initial investment cost of thelong-term equity investment exchanged for non-monetary assets is determined based on the fair value ofthe assets exchanged and relevant taxes payable, unless there is conclusive evidence that the fair valueof the assets transferred is more reliable; for the exchange of non-monetary asset that does not meet theabove premise, the initial investment cost of long-term equity investment is the carrying amount of theassets exchanged and the related taxes and fees payable.
The initial investment cost of a long-term equity investment obtained through debt restructuringincludes the fair value of the waived debt, taxes that can be directly attributable to the asset and othercosts
(2) Subsequent measurement and profit and loss recognition
1) Cost method
The long-term equity investment that the Company can control over the investee is accounted forusing the cost method, and the cost of the long-term equity investment is adjusted by adding orrecovering the investment according to the initial investment cost. Except for the actual payment or thecash dividends or profits included in the consideration that have been announced but not yet paid at thetime of acquiring the investment, the Company recognizes the current investment income according toits share of cash dividends or profits declared to be distributed by the investee.
2) Equity method
The Company’s long-term equity investments in associates and joint ventures are accounted forusing the equity method, and some of the equity investments in associates that are indirectly held byventure capital institutions, mutual funds, trust companies or similar entities including investment-linkedinsurance funds are measured at fair value through profit or loss. When the initial investment cost of along-term equity investment is greater than the investment, the initial investment cost of the long-termequity investment shall not be adjusted by the difference between the fair value of the identifiable net
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assets of the investee; if the initial investment cost is less than the investment, the difference betweenthe fair value of the identifiable net assets of the investee should be included in the current profit or lossAfter obtaining the long-term equity investment, the Company shall recognize the investment incomeand other comprehensive income according to the share of net profit and loss and other comprehensiveincome realized by the investee that is entitled or should be shared respectively, and adjust the carryingamount of the long-term equity investment; and reduces the carrying amount of the long-term equityinvestment based on portion of the profit or cash dividend declared to be distributed by the investee; andfor other changes in the owners’ equity other than the net profit or loss, other comprehensive income andprofit distribution of the investee, the carrying amount of the long-term equity investment is adjusted andincluded in the owners’ equity.
When recognizing the share of the net profit or loss of the investee, the Company shall adjust andrecognize the net profit of the investee based on the fair value of the identifiable assets of the investee atthe time of obtaining the investment. The unrealized internal transaction gains and losses between theCompany and the associates and joint ventures shall be offset against the portion attributable to theCompany in accordance with the proportion to be enjoyed, on the basis of which the investment gainsand losses are recognized.When the Company recognizes the losses incurred by the investee that it should bear, it shall dealwith it in the following order: Firstly, offset the carrying amount of the long-term equity investment.Secondly, if the carrying amount of the long-term equity investment is not enough to be offset, theinvestment loss will continue to be recognized to the extent of carrying amount of other long-term equitythat virtually constitutes a net investment in the investee, and the carrying amount of the long-termreceivables is offset. Finally, after the above-mentioned treatment, if the enterprise still bears additionalobligations in accordance with the investment contract or agreement, the projected liabilities arerecognized according to the estimated obligations and included in the current investment losses. If theinvestee realizes profit in the future period, after deducting the unrecognized loss share, and the reductionof book balance of the recognized projected liabilities and recovery of other long-term equity that virtuallyconstitutes a net investment in the investee and carrying amount of long-term equity investment asopposite to the order above, the Company shall restore the investment income.
(3) Conversion of accounting methods for long-term equity investment
1） Fair value measurement to equity method accounting
If the equity investment originally held by the Company that does not have control, joint control orsignificant influence on the investee, which is accounted for according to the recognition andmeasurement criteria of financial instruments, can exert significant influence on the investee or jointlycontrol but does not constitute control over it due to additional investment and otherwise, its initialinvestment cost shall be the sum of the fair value of the equity investment originally held in accordancewith the “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement ofFinancial Instruments” and new investment cost after being accounted for under the equity method.
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If the initial investment cost accounted for under the equity method is less than the fair value share ofthe identifiable net assets of the investee on the additional investment date determined by the newshareholding ratio after the additional investment, the carrying amount of the long-term equity investmentis adjusted and included in the current non-operating income.
2） Fair value measurement or equity method accounting to cost method accounting
If the equity investment originally held by the Company, that does not have control, joint control orsignificant influence on the investee and which is accounted for in accordance with the financialinstrument recognition and measurement criteria, or the long-term equity investment originally held inassociates or joint venture, can exercise control over the investee not under common control due toadditional investment or otherwise, in the preparation of individual financial statements, the sum of thecarrying amount of the equity investment originally held plus the new investment cost shall be regarded asthe initial investment cost after being accounted for under the cost method.
The other comprehensive income recognized by the equity method in respect of the equityinvestment originally held before the purchase date is accounted for on the same basis as the investeedirectly disposes of the relevant assets or liabilities when the investment is disposed of.
If the equity investment held before the purchase date is accounted for in accordance with therelevant provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments”, the cumulative fair value changes originally included in othercomprehensive income are transferred to current profit or loss when the cost method is adopted.
3） Equity method accounting to fair value measurement
If the Company loses joint control or significant influence on the investee due to the disposal of part ofthe equity investment or otherwise, the remaining equity after disposal shall be accounted for according tothe “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of FinancialInstruments”. The difference between the fair value and the carrying amount on the date of losing jointcontrol or significant impact is recognized in profit or loss.
The other comprehensive income recognized in respect of the original equity investment using theequity method is accounted for on the same basis as the investee directly disposes of the relevant asset
4） Cost method to equity method
Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity after disposalcan exercise joint control or significant influence on the investee, the equity method is adopted foraccounting, and the remaining equity is deemed to be adjusted under the equity method when it isacquired.
5） Cost method to fair value measurement
Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity after disposalcannot jointly control or exert significant influence on the investee, the relevant provisions of the
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“Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of FinancialInstruments” are adopted. The difference between the fair value and the carrying amount on the date ofloss of control is recognized in profit or loss for the current period.
(4) Disposal of long-term equity investment
For the disposal of long-term equity investment, the difference between the carrying amount and theactual purchase price shall be included in the current profit or loss. For the long-term equity investmentaccounted for using the equity method, when the investment is disposed of, the part that is originallyincluded in the other comprehensive income is accounted for in the same proportion based on the samebasis as the investee directly disposes of the relevant assets or liabilities.If the terms, conditions and economic impact of each transaction on disposal of the equity investmentin a subsidiary satisfy one or more of the following cases, the multiple transactions are treated as apackage transaction:
1) The transactions are made simultaneously or with consideration of each other’s influence;
2) The transactions as a whole can achieve a complete business outcome;
3) The occurrence of a transaction depends on the occurrence of at least one other transaction;
4) A transaction is uneconomic alone, but it is economic when considered together with othertransactions
Where the loss of control over the original subsidiary due to disposal of part of the equity investmentor otherwise which is not a package transaction, the individual financial statements and consolidatedfinancial statements shall be classified for relevant accounting treatment:
a) In the individual financial statements, the difference between the carrying amount of the disposedequity and the actual purchase price is included in the current profit or loss. If the remaining equity afterdisposal can exert joint control or significant influence on the investee, it shall be accounted for under theequity method, and the residual equity shall be deemed to be adjusted by equity method when it isacquired; if the remaining equity after disposal cannot exert joint control or significant influence over theinvestee, it shall be accounted for by the relevant provisions of the “Accounting Standards for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments”, and the differencebetween the fair value and the carrying amount on the date of loss of control is included in the currentprofit or loss.
b) In the consolidated financial statements, for each transaction before the loss of control over thesubsidiary, capital reserve (share premium) is adjusted for the difference between the disposal price andthe share of the net assets corresponding to the disposed long-term equity investment that the subsidiaryhas continuously calculated from the date of purchase or the merger date; if the capital reserve isinsufficient to offset, the retained earnings will be adjusted; when the control of the subsidiary is lost, theremaining equity shall be re-measured according to its fair value on the date of loss of control. The sum ofthe consideration for the disposal of the equity and the fair value of the remaining equity, less the share ofthe net assets that that the original subsidiary has continuously calculated from the date of purchase
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calculated based on the original shareholding, is included in the investment income for the period of lossof control, while reducing goodwill. Other comprehensive income related to the original subsidiary’s equityinvestment will be converted into current investment income when control is lost.If each transaction on disposal of the equity investment in a subsidiary until the loss of control is apackage transaction, each transaction is accounted for as a transaction to dispose of the equityinvestment in the subsidiary with loss of control, which is distinguished between individual financialstatements and consolidated financial statements:
a) In the individual financial statements, the difference between each disposal price and the carryingamount of the long-term equity investment corresponding to the disposed equity before the loss of controlis recognized as other comprehensive income, and when the control is lost, it is transferred to profit orloss for the period of the loss of control.
b) In the consolidated financial statements, the difference between each disposal price and thedisposal investment that has the share of the net assets of the subsidiary before the loss of control isrecognized as other comprehensive income, and transferred to profit or loss for the period of the loss ofcontrol.
(5) Judging criteria for joint control and significant influence
If the Company collectively controls an arrangement with other parties in accordance with therelevant agreement, and the activity decision that has a significant impact on the return of thearrangement needs to be unanimously agreed upon by the parties sharing the control, it is consideredthat the Company and other parties jointly control an arrangement, which is a joint arrangement.
If the joint arrangement is reached through a separate entity and it determines that the Company hasrights to the net assets of the separate entity in accordance with the relevant agreement, the separateentity is regarded as a joint venture and is accounted for using the equity method. If it is judged accordingto the relevant agreement that the Company does not have rights to the net assets of the separate entity,the separate entity acts as a joint operation, and the Company recognizes the items related to the shareof the interests of the joint operation and conducts accounting treatment in accordance with the relevantASBEs.
Significant influence refers to the investor’s power to participate in the decision-making of thefinancial and operating policies of the investee, but it cannot control or jointly control the formulation ofthese policies with other parties. The Company has a significant influence on the investee under one ormore of the following situations and taking into account all facts and circumstances: (1) it is representedon the board of directors or similar authorities of the investee; (2) it involves in the formulation of financialand operating policy of the investee; (3) it has important transactions with the investee; (4) it dispatchesmanagement personnel to the investee; (5) it provides key technical information to the investee.
18. Investment Property
Investment property refers to property held for the purpose of earning rent or capital appreciation, orboth, including leased land use rights, land use rights held and prepared for transfer after appreciation,
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and leased buildings. Besides, for empty constructions that the Company held for rent lately but with thewritten resolution from the board stated that it will be used as operating lease and that intention will notbe changed in short-term, it can be treated as investment property.
The Company’s investment property is recorded at its cost, and the cost of purchased investmentproperty includes the purchase price, related taxes and other expenses directly attributable to the asset;the cost of self-built investment property is composed of the necessary expenses incurred before theasset is ready for expected use.
The Company adopts the cost model for subsequent measurement of investment property, anddepreciates or amortizes buildings and land use rights according to their estimated service life and netresidual value. Expected useful life, residual value and annual depreciation rate are as follows:
| Category | Estimated useful life (years) | Residual value rate % | Depreciation rate % |
| Property | 20-35 | 5.00 | 4.80-2.70 |
When the use of investment property is changed to self-use, the Company converts the investmentproperty into fixed assets or intangible assets from the date of change. When the use of self-use propertychanges to rental earning or capital appreciation, the Company converts fixed assets or intangible assetsinto investment property from the date of change. When a conversion occurs, the carrying amount beforeconversion is used as the converted value
The investment property is derecognized when the investment property is disposed of, orpermanently withdrawn from use and is not expected to obtain economic benefits from its disposal. Theamount of disposal income from the sale, transfer, retirement or damage of the investment property afterdeducting its carrying amount and related taxes and expenses is recognized in profit or loss for thecurrent period.
19. Fixed assets
(1) Recognition conditions of fixed assets
Fixed assets refer to tangible assets held for the purpose of producing goods, providing labourservices, renting or operating management, and having a useful life of more than one fiscal year. Fixedassets are recognized when they meet all of the following conditions:
1) the economic benefits associated with the fixed assets are likely to flow into the enterprise;
2) the cost of the fixed assets can be reliably measured.
(2) Initial measurement of fixed assets
The fixed assets of the Company are initially measured at cost.
1) The cost of outsourcing fixed assets includes the purchase price, import duties and other relatedtaxes and fees, as well as other expenses that can be directly attributed to the assets before they reachtheir intended usable state.
2) The cost of self-built fixed assets is determined by the necessary expenditures incurred before theassets reach their expected usable state.
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3) For fixed assets invested by investors, the value agreed in the investment contract or agreement isregarded as the book value, but the value agreed in the contract or agreement is not accounted for at fairvalue.
4) If the payment for the purchase of fixed assets is delayed beyond the normal credit conditions, andis of a financing nature in essence, the cost of fixed assets is determined on the basis of the present valueof the purchase price. The difference between the actual payment and the present value of the purchaseprice is recorded in the current profit or loss during the credit period, except where it should be capitalized.
(3) Subsequent measurement and disposal of fixed assets
1） Depreciation of fixed assets
Depreciation of fixed assets is accrued over the estimated useful life based on its recorded value lessthe estimated net residual value. The fixed assets that have been provided for impairment losses aredepreciated in the future period based on the carrying amount after deducting the impairment provisionand the remaining useful life.
The Company determines the service life and estimated net residual value of fixed assets based onthe nature and use of fixed assets. At the end of the year, the service life, the estimated net residualvalue and the depreciation method of the fixed assets are reviewed. If there is a difference from theoriginal estimate, corresponding adjustments will be made.
The depreciation method, depreciation period and annual depreciation rate of various fixed assetsare as follows.
| Class | Method of depreciation | Estimated useful life (years) | Residual value rate % | Depreciation rate % |
| Property and plant | Straight-line | 20-35 | 5.00 | 4.80-2.70 |
| Machinery and equipment | Straight-line | 10 | 5.00-10.00 | 9.50-9.00 |
| Electronic equipment | Straight-line | 5 | 5.00 | 19.00 |
| Motor vehicles | Straight-line | 5 | 5.00 | 19.00 |
| Others | Straight-line | 5 | 5.00 | 19.00 |
2) Subsequent expenditures on fixed assets
Subsequent expenditures related to fixed assets that meet the conditions for recognition of fixedassets are included in the cost of fixed assets; those that do not meet the conditions for recognition offixed assets are included in the current profit or loss when they occur.
3) Disposal of fixed assets
When a fixed asset is disposed of or no economic benefit is expected to result from its use or disposal,the fixed asset is derecognized. The amount of disposal income from sale, transfer, retirement ordamage of the fixed asset after deducting its book value and related taxes is included into the currentprofit or loss.
20. Construction in Progress
(1) Initial measurement of construction in progress
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The self-built construction in progress of the Company is measured at the actual cost, which isdetermined by the necessary expenses incurred before the construction of the asset reaches theintended usable condition, including the cost of engineering materials, labour costs and relevant taxespayable, capitalized borrowing costs and indirect costs that should be apportioned. The Company’sconstruction in progress is classified into projects when in accounting
(2) Criteria for and time point of construction in progress to convert into fixed asset
The total expenditure incurred before the construction in progress project is constructed to reach theintended usable condition shall be recorded as the book value of the fixed assets. For the construction inprogress built which has reached the intended usable condition, but has not yet completed the finalaccounts, since the date of reaching expected use condition, according to the project budget, cost oractual project costs, it shall be converted into fixed assets at the estimated value, and fixed assets shallbe depreciated in accordance with the depreciation policy of the Company for fixed assets. After thecompletion of the final accounts, the original estimated value shall be adjusted according to the actualcost, but the original depreciation amount shall not be adjusted.
21. Borrowing Costs
(1) Recognition principle for capitalization of borrowing costs
If the borrowing costs of the Company can be directly attributable to the acquisition and constructionor production of assets eligible for capitalization, it shall start capitalization and be included in the cost ofrelevant assets in the case of eligible for capitalization; other borrowing costs shall be recognized asexpenses at the time of occurrence and shall be included in the current profit or loss.
Assets that are eligible for capitalization are assets that require a long period of time to purchase orproduce activities to achieve fixed assets, investment property and inventory that are available forintended use or sale.
Borrowing costs begin to capitalize when all of the following conditions are met:
1) Assets expenditure has occurred, including expenditure incurred in the form of cash payment,transfer of non-cash assets or assuming of interest-bearing debt for the acquisition and construction orproduction of assets eligible for capitalization;
2) Borrowing costs have already occurred;
3) The purchase and construction or production activities necessary for the assets to reach theintended use or saleable status have started.
(2) Capitalization period of borrowing costs
The period of capitalization refers to the period from the point of time when the borrowing costs arecapitalized to the point of time where the capitalization is stopped, excluding the period during which theborrowing costs are suspended from capitalization.
The borrowing costs shall cease to be capitalized when the assets acquired or produced that meetthe conditions for capitalization are ready for intended use or sale.
When a part of the assets purchased or produced that meet the capitalization conditions are
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completed and can be used alone, such part of the assets shall stop capitalization of borrowing costs.Where each part of the assets purchased or produced is completed separately, but must wait until thewhole is completed or can be sold externally, the capitalization of the borrowing costs shall be stoppedwhen the assets are completed as a whole.
(3) Suspension of capitalization period
If the assets that meet the capitalization conditions are interrupted abnormally during the constructionor production process and the interruption time lasts for more than 3 months, the capitalization ofborrowing costs shall be suspended; the borrowing costs shall continue to be capitalized if the acquisitionor production of assets eligible for capitalization is necessary to meet the required usable status or theavailability of sales. The borrowing costs incurred during the interruption are recognized as profit or lossfor the current period and the borrowing costs continue to be capitalized until the acquisition or productionof assets is resumed.
(4) Calculation for capitalization amount of borrowing costs
Interest charges on special borrowings (excluding interest income on unused borrowings depositedin the bank, or investment income on temporary investment) and their ancillary expenses shall becapitalized before the assets purchased or produced that meet the capitalization conditions are ready forintended use or sale.
The amount of capitalized interest on general borrowings is calculated by the weighted average ofthe excess portion of the accumulative asset expenditures over the special borrowings multiplied by thecapitalization rate of general borrowings. The capitalization rate is determined based on the weightedaverage interest rate of general borrowings.
Where there is a discount or premium in the borrowings, the interest amount shall be adjusted inaccordance with the effective interest rate method to determine the discount or premium amount that shallbe amortized during each accounting period.
22. Right-of-use Assets
The Company initially measures the right-to-use assets at cost, which includes:
(1) initial measurement amount of lease liabilities;
(2) lease payments made before or at the beginning of the lease term, and deduction of therelevant amount of rental incentives if any;
(3) initial direct expenses incurred by the Company;
(4) expected costs to be incurred by the Company for dismantling and removing leased assets,restoring the site of leased assets or restoring leased assets to the state agreed in the lease terms(excluding costs incurred for the production of inventory)After the beginning of the lease term, the Company adopts the cost model for subsequentmeasurement of the right-of-use assetsIf it is reasonably certain to obtain the ownership of the leased assets at the expiration of the leaseterm, the Company shall depreciate the leased assets within the remaining useful life of the leased
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assets. If it is not reasonably certain to obtain the ownership of the leased assets at the expiration of thelease term, the Company shall depreciate the leased assets within the shorter of the lease term and theremaining useful life of the leased assets. For the right-of-use assets with impairment provision,depreciation shall be calculated based on the book value after deduction of impairment provision inaccording with the above principles in future periods.
23. Intangible Assets and Development Expenditure
Intangible assets refer to the identifiable non-monetary assets owned or controlled by the Companywhich have no physical form, including land use rights, software and trademark use rights.
(1) Initial measurement of intangible assets
The cost of externally purchased intangible assets includes the purchase price, relevant taxation andother expenses directly attributable to bringing the assets to expected usage. If payment for the purchaseprice of intangible assets is delayed beyond normal credit conditions and is in fact financing in nature, thecost of the intangible assets is determined based on the present value of the purchase price.
For intangible asset obtained through debt restructuring for offsetting the debt of the debtor, its initialmeasurement cost includes the fair value of the waived creditor’s rights and taxes and other costs directlyattributable to bringing the asset to expected usage. The difference between the fair value of the waivedcreditor’s rights and the carrying amount shall be recognized in profit or loss for the period.
The book value of intangible asset received in exchange for non-monetary asset is based on the fairvalue of the asset surrendered and relevant taxes payable, provided that the exchange of nonmonetaryasset has a commercial substance and the fair value of both the asset received and the assetsurrendered can be reliably measured, except there is definite evidence that the fair value of the assetreceived is more reliable; for exchange of non-monetary asset that cannot satisfy the above conditions,the cost of the intangible asset received is based on the carrying amount of the asset surrendered andrelevant taxes payable, and no profit or loss is recognized.
For intangible asset obtained through business absorption or combination under common control, itsbook value is determined by the carrying amount of the combined party; for intangible asset obtainedthrough business absorption or merger not under common control, its book value is determined by the fairvalue of the intangible asset.
The cost of an internally developed intangible asset includes the materials consumed in developingthe intangible asset, labour costs, registration fees, amortization of other patented rights and licensedrights used during the development process, interest expenses meeting capitalization conditions, andother direct costs for bringing the intangible asset to expected usage.
(2) Subsequent measurement of intangible assets
The Company determines the useful life of intangible assets on acquisition, which are classified asintangible assets with limited useful life and indefinite useful life.
1） Intangible assets with a limited useful life
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Intangible assets with a limited useful life are depreciated using straight line method over the termduring which they bring economic benefits to the Company. The estimated life and basis for the intangibleassets with a limited useful life are as follows:
| Item | Estimated useful life | Amortization method |
| Land use right | 50 | Straight-line |
| Software systems | 5 | Straight-line |
| Right to use the trademark | 5-10 | Straight-line |
The useful life and depreciation method of intangible assets with a limited useful life are reassessedat the end of each period. If there is a difference from the original estimate, corresponding adjustmentswill be made.
Upon re-assessment, there was no difference in the useful life and depreciation method of intangibleassets from the previous estimates at the end of the period.
(3) Specific basis for determining the research stage and developmentstage of internal research and development projects of the Company
Research stage: a stage of scheduled innovative investigations and research activities for theacquisition and understanding of new scientific or technical knowledge.
Development stage: before the commercial production or use, the research results or otherknowledge will be applied to a plan or design to produce new or substantial improvements in materials,devices, products and other activities.
The expenditure of the research stage of the internal research and development project is included inthe current profit or loss at the time of occurrence
(4) Specific standard for capitalization of expenditure in the developmentstage
The expenditure of an internal research and development project in the development stage isrecognized as an intangible asset when meeting all of the following conditions:
1) It is technically feasible to complete the intangible asset so that it can be used or sold;
2) With an intention to complete the intangible asset and to use or sell it;
3) The way the intangible asset generates economic benefits can prove the existence of a market forthe products produced using the intangible asset or a market for the intangible asset itself, and if theintangible asset will be used internally, its usefulness can be proven;
4) Having sufficient technical, financial resources and other resource support to complete thedevelopment of the intangible asset, and having the ability to use or sell the intangible asset;
5) Expenditure attributable to the development stage of the intangible asset can be reliablymeasured.
Expenditures incurred in the development stage that do not meet the above conditions shall beincluded in the current profit or loss at the time of occurrence. The development expenditures which havebeen included in the profit or loss in the previous periods will not be recognized as an asset in the future
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period. The capitalized expenditures in the development phase are shown in the balance sheet asdevelopment expenditures and are converted into intangible assets from the date of the project’s intendeduse.
24. Impairment on Long-term Assets
On the balance sheet date, the Company determines whether there may be a sign of impairment onlong-term assets. If there is a sign of impairment on long-term assets, the recoverable amount isestimated on the basis of a single asset. If it is difficult to estimate the recoverable amount of a singleasset, then determine the recoverable amount of the asset group on the basis of the asset group to whichthe asset belongs.
The estimated recoverable amount of an asset is the higher of its fair value less the cost of disposaland the present value of the expected future cash flow of the asset.
The measurement results of recoverable amount show that when the recoverable amount of anlong-term asset is lower than its book value, the book value of the long-term asset is reduced to itsrecoverable amount. The reduced amount is recognized as an impairment loss on the asset and includedin the current profit or loss, at the same time, asset impairment provision will be made accordingly. Assetimpairment loss shall not be reversed during the subsequent accounting period once recognized.
After the asset impairment loss is recognized, the depreciation or amortization expenses of theimpaired assets will be adjusted accordingly in the future period, so that the assets’ book value afteradjustment (deducting the estimated net residual value) will be systematically apportioned over theremaining useful life of the assets.
No matter whether there is any sign of impairment or not, the impairment test is carried out everyyear for goodwill and intangible assets with an indefinite useful life arising from an enterprise merger.
In the impairment test of goodwill, the book value of goodwill would be apportioned to asset group orportfolio of asset group expected to benefit from the synergy effect of an enterprise merger. When takingan impairment test on the relevant asset group or portfolio of asset group containing goodwill, if there is asign of impairment on the asset group or portfolio of asset group related to the goodwill, the Company firstcalculates the recoverable amount after testing the asset group or portfolio of asset group which does notcontain the goodwill for impairment, and then compares it with the related book value to recognize thecorresponding impairment loss. Next, the Company conducts an impairment test on the asset group orportfolio of asset group which contains the goodwill and compares the book value of the related assetgroup or portfolio of asset group (book value includes the share of goodwill) with the recoverable amount.If the recoverable amount of the related asset group or portfolio of asset group is lower than the bookvalue, the Company will recognize the impairment loss of goodwill.
25. Long-term Deferred Expenses
(1) Amortization method
Long-term deferred expenses refer to expenses that have already been spent by the Company, butshall be apportioned in the current period and the future periods and the benefit period is over 1 year.
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Long-term deferred expenses are amortized in benefit period
(2) Amortization period
| Category | Amortization period | Note |
| Counter fabrication expenses | 2-3 | |
| Decoration expenses | 3-5 | |
| Others | 2-3 |
26. Contract liabilities
The obligation to transfer goods to a customer for which consideration has been received orreceivable is recognized in part as a contract liability
27. Employee Remuneration
Employee remuneration refers to the various forms of remuneration or compensation given by theCompany to obtain the services provided by the employees or to terminate the labour relationship.Employee remuneration includes short-term remuneration, post-employment benefits, terminationbenefits and other long-term employee benefits.
(1) Short-term remuneration
Short-term remuneration refers to the employee compensation other than post-employment benefitsand termination benefits required to be fully paid by the Company within 12 months after the end of theannual reporting period in which the employees render relevant services. During the accounting period inwhich the employees render services, the Company recognizes the short-term remuneration payable asliabilities and includes the same in related asset costs or expenses according to the object which benefitsfrom the services rendered by employees.
(2) Post-employment benefits
Post-employment benefits refer to various forms of remuneration and benefits other than short-termremuneration and termination benefits provided by the Company after the retirement of employees ortermination of labour relationship with the Company in exchange for the services rendered by employees.
The Company’s post-employment benefits is defined contribution plan.
Defined contribution plan of the post-employment benefits mainly refers to the social basicendowment insurance, unemployment insurance, etc. organized and implemented by local labour andsocial security institutions; in addition to social basic endowment insurance and unemployment insurance,employees who retire after 1 January 2009 can voluntarily participate in the Company’s enterprise annuityplan. During the accounting period when employees render services to the Company, amount payablecalculated by the defined contribution plan is recognized as a liability and included in the current profit orloss or related asset costs.
The Company will no longer have any other payment obligations after making the above-mentionedpayments on a regular basis in accordance with the standards and annuity plans prescribed by the State.
(3) Termination benefits
Termination benefits refer to the compensation paid to an employee when the Company terminates
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the employment relationship with the employee before the expiry of the employment contract or providescompensation as an offer to encourage the employee to accept voluntary redundancy. The Companyrecognizes the liabilities arising from the compensation paid to terminate the employment relationshipwith employees and includes the same in the current profit or loss at the earlier date of the following: 1)when the Company cannot reverse the termination benefits due to the plan of cancelling the labourrelationship or the termination benefits provided by the advice of reducing staff; and 2) the Companyrecognizes the cost or expense relative to the payment of termination benefits of restructuring into thecurrent profit or loss.The Company provides internal retirement benefits to employees who accept internal retirementarrangements. The internal retirement benefits refer to the remuneration and the social insurancepremiums paid to the employees who have not reached the retirement age set by the State, andvoluntarily withdrew from the job after approval of the Company’s management. The Company paysinternal retired benefits to an internal retired employee from the day when the internal retirementarrangement begins till the employee reaches the normal retirement age. For internal retirement benefits,the Company conducts accounting treatment in contrast to the termination benefits. When the relatedrecognition conditions of termination benefits are met, the Company will recognize the remuneration andthe social insurance premiums of the internal retired employee to be paid during the period between theemployee’s termination of service and normal retirement date as liabilities and include the same in thecurrent profit or loss in one time. Changes in actuarial assumptions of internal retirement benefits anddifferences arising from the adjustment of welfare standards are included in current profit or loss whenincurred.
(4) Other long-term employee benefits
Other long-term employee benefits refer to all employee benefits except for short-term remuneration,post-employment benefits, and termination benefits. For other long-term employee benefits that meet theconditions of the defined contribution plan, during the accounting period in which the employees provideservices for the Company, the amount that should be paid is recognized as a liability and is included in thecurrent profit or loss or related asset costs. In addition to the above situations, other long-term employeebenefits are actuarially calculated by the independent actuary using the expected cumulative welfare unitmethod on the balance sheet date, and the welfare obligations arising from the defined benefit plans areattributed to the period during which the employees provide services and are included in the current profitor loss or related asset costs.
28. Projected liabilities
(1) Basis for recognition of projected liabilities
The Company will recognize projected liabilities if the obligation relating to contingent matters meetsall of the following conditions:
This obligation is a present obligation assumed by the Company;
The fulfillment of this obligation will probably cause the outflow of economic benefits from the
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Company;The amount of this obligation can be measured reliably.
(2) Measurement method of projected liabilities
The initial measurement of projected liabilities of the Company is based on the best estimate of theexpenditure required for the performance of the related present obligations.
When determining the best estimate, the Company comprehensively considers the risks,uncertainties relating to the contingent matters and time value of currency. If the time value of currencyhas a great influence, the Company determines the best estimate by discounting the related future cashoutflows.
The best estimate is determined in different situations as follow:
If there is a continuous range (or interval) of the required expenditure and the probability of theoccurrence of all the results in the range is the same, the best estimate is determined according to themedian value of the range, which is the average of the upper and lower limit.
Where there is not a continuous range (or interval) of the required expenditure, or there is acontinuous range, but the probability of the occurrence of all the results in the range is different, if thecontingencies involve a single project, the best estimate is determined by the amount which is most likelyto occur; if the contingencies involve a number of projects, the best estimate is determined based onvarious possible results and related probability calculation.
If all or part of the expenses of the Company required to settle projected liabilities are expected to becompensated by a third party and it is basically certain to receive the amount of compensation, it isindependently recognized as an asset. The amount of compensation recognized will not exceed the bookvalue of the projected liabilities.
29. Lease liabilities
The Company initially measures the lease liabilities according to the present value of the unpaidlease payments at the beginning of the lease term. In calculating the present value of lease payments, theCompany adopts the interest rate implicit in the lease as the discount rate. If it is impossible to determinethe interest rate implicit in the lease, the incremental borrowing rate of the Company shall be used as thediscount rate. Lease payments include:
(1) Fixed payments and substantive fixed payments after deducting the relevant amount of leaseincentives;
(2) Variable lease payments depending on an index or rate;
(3) Where the Company reasonably determines that the option will be exercised, the amount of thelease payment includes the exercise price of purchase option;
(4) Where the lease term reflects that the Company will exercise the option to terminate the lease, theamount of the lease payment includes the amount to be paid for the exercise of the option to terminate thelease;
(5) Expected payments based on the guaranteed residual value provided by the Company.
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The Company calculates the interest charges of the lease liabilities for each period of the lease termat a fixed discount rate and includes the same in the profit or loss of the current period or the related assetcosts.Variable lease payments not included in the measurement of lease liabilities shall be included in thecurrent profit or loss or the related asset costs when they actually occur.
30. Share-based payment
(1) Category of share-based payment
The Company’s share-based payments include equity-settled share-based payments and cashsettled share-based payments.
(2) Recognition method of fair value of equity instrument
For options and other equity instruments granted by the Company with an active market, the fairvalue is determined at the active market quotations. For options and other equity instruments granted bythe Company with no active market, option pricing model shall be used to estimate the fair value of theequity instruments. Factors as follows shall be taken into account using option pricing models: theexercise price of the option, the validity of the option, the current price of the target share, the expectedvolatility of the share price, predicted dividend of the share and risk-free rate of the option within thevalidity period.
In determining the fair value of the equity instruments at the date of grant, the Company shallconsider the impact of market conditions in the vesting conditions and non-vesting conditions stated in theshare-based payment agreement. If there are no vesting conditions in the share-based payments, as longas the employees or other parties satisfy the non-market conditions in all of the vesting conditions (suchas term of service) , the Company shall recognize the services rendered as an expense accordingly.
(3) Recognition basis for the best estimate of exercisable equity instruments
On each balance sheet date within the vesting period, the estimated number of exercisable equityinstruments is amended based on the best estimate made by the Company according to the latestavailable subsequent information as to changes in the number of employees with exercisable rights. As atthe exercise date, the final estimated number of exercisable equity instruments should equal the actualnumber of exercisable equity instruments.
(4) Accounting treatment
Equity-settled share-based payments are measured at the fair value of the equity instrumentsgranted to employees. For those exercisable immediately after the grant, they shall be included in therelevant costs or expenses at the fair value of equity instruments at the grant date with an increase incapital reserve accordingly. For those exercisable only after provision of services or satisfaction ofprescribed performance conditions within the vesting period, on each balance sheet date within thevesting period, the Company will recognize the services received in the current period in related costs orexpenses and capital reserves at the fair value of equity instruments on the grant date based on the best
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estimate of the number of exercisable equity instruments. After the vesting period, relevant costs orexpenses and total owners’ equity which have been recognized will not be adjusted.Cash-settled share-based payments are calculated by the fair value of liabilities assumed inaccordance with the Company’s shares or other equity instruments. For those exercisable immediatelyafter the grant, they shall be included in the relevant costs or expenses at the fair value of the liabilitiesassumed by the Company at the grant date with an increase in liabilities accordingly. For cash-settledshare-based payments exercisable only after provision of services or satisfaction of prescribedperformance conditions within the vesting period, on each balance sheet date within the vesting period,the Company will recognize the services received in the current period in costs or expenses andcorresponding liabilities at the amount of fair value of the liabilities assumed by the Company based onthe best estimate of the number of exercisable equity instruments. At each balance sheet date and thesettlement date prior to the settlement of relevant liabilities, the fair value of the liabilities is re-measuredthrough profit or loss.
During the vesting period, if the equity instruments granted are cancelled, the Company will treat thecancelled equity instruments granted as accelerated vesting, and the amount within the remaining periodshould be recognized immediately in profit or loss while recognizing the capital reverse. If employees orother parties can meet non-vesting conditions but do not meet within the vesting period, the Company willtreat it as cancelled equity instruments granted.
31. Revenue
The Company’s revenue mainly come from:
(1) Sales of watch
(2) Precision manufacturing
(3) Property leasing
(1) General principal of revenue recognition
The Group recognizes revenue when the contract performance obligations have been fulfilled i.e. thecustomer has gained control over the relevant goods or services.
Performance obligations means the Company’s commitment to transfer identifiable goods or serviceto clients.
Obtaining control of the relevant goods means that it is able to dominate the use of the goods andderive almost all economic benefits therefrom.
The Company assesses contracts at the beginning date of a contract to identify each performanceobligations contained in a contract and to determine whether each performance obligation is to befinished over a period of time or at a point of time. The Company satisfies a performance obligation overtime if one of the following criteria is met; or otherwise, a performance obligation is satisfied at a certainpoint in time: 1) the customer simultaneously receives and consumes the benefits provided by theCompany’s performance as the Company performs; 2) the customer can control the goods underconstruction during the Company’s performance; 3) the Company’s performance does not create goods
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with an alternative use to it and the Company has a right to payment for performance completed to datethroughout the contract term. Otherwise, the Company recognizes revenue at the point of time.For performance obligation satisfied over time, the Company recognizes revenue over time bymeasuring the progress towards complete satisfaction of that performance obligation. When theoutcome of that performance obligation cannot be measured reasonably, but the Company expects torecover the costs incurred in satisfying the performance obligation, the Company recognizes revenueonly to the extent of the amount of costs incurred until it can reasonably measure the outcome of theperformance obligation
(2) Detailed method for revenue recognition
The Company has three main business sectors: sales of watch, precision manufacturing andproperty leasing. Based on the Company’s business mode and terms of settlement, the Company setdetailed method of revenue recognition method as follows:
1) Sales of watch
Sale of watch belongs to fulfilling performance obligations at a point of time.
① Online sales
Revenue shall be recognized at the point that the goods are dispatched and the customer confirmedreceived the goods.
② Offline sales
Revenue shall be recognized at the point when the goods are delivered and payment by customer iscollected.
③ Consignment sale
The Company recognizes revenue when the Company receives the detail of the sales list fromdistributors and confirms that the control over goods ownership were transferred to the purchaser.
④ Sale of consigned goods from others
Under Sale of consigned goods from others, the Group recognizes revenue in net amount when itdelivered consigned sale goods to customer and confirms that control over the ownership of goods weretransferred to the purchaser.
2) Precision manufacturing
Precision manufacturing business belongs to fulfilling performance obligations at a point of time.Revenue from domestic sales shall be recognized when the goods are delivered and the economicbenefit associated with the goods is probable to flow into the Company. Revenue from export shall berecognized when the following criteria is satisfied: The Company declared the good at custom; obtainedbill of lading; the right of collecting payment is obtained and its probable that the economic benefitassociated with the goods flows into the Company.
3) Property leasing
Refer to Note IV 35. (4) for details.
(3) Revenue treatment principles for specific transactions
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1) Contracts with sales return provisions
When the customer obtains control of the relevant goods, revenue is recognized based on theamount of consideration expected to be received due to the transfer of goods to the customers (exclusiveof the amount expected to be refunded due to the return of sales) , while liability is recognized based onthe amount expected to be refunded due to the return of sales.The carrying amount of goods expected to be returned at sales of goods, after deduction of costsexpected to incur for recovery of such goods (including impairment of value of the returned goods) , willbe accounted for under the item of “Right of return assets”.
2) Contracts with quality assurance provisions
The Company assesses whether a separate service is rendered in respect of the quality assurancebesides guaranteeing the sales of goods to customers are in line with the designated standards. Whenadditional service is provided by the Company, it is considered as a single performance obligation andunder accounting treatment according to the standards on revenue; otherwise, quality assuranceobligations will be under accounting treatment according to the accounting standards on contingentmatters
32. Contract costs
(1) Contract performance cost
The Company recognizes the cost of contract performance as an asset for the cost of performing thecontract as meeting all of the following conditions:
1) The cost is directly related to a current or expected contract, including direct labour, directmaterials, manufacturing expenses (or similar expenses) , costs clearly to be borne by the customer, andother costs incurred solely for the contract;
2) This cost increases the resources that the company will use to fulfill its performance obligations inthe future.
3) The cost is expected to be recovered
The asset will be presented under inventory or other non-current assets based on the length of itsamortization period.
(2) Contract obtainment cost
If the incremental cost of the Company is expected to be recovered, the contract acquisition cost isrecognized as an asset. Incremental cost refers to the cost that the Company will not occur withoutobtaining a contract, such as sales commission. For the amortization period not exceeding one year, it isincluded in the current profit or loss when it occurs.
(3) Amortization of contract costs The Company recognizes the contract performance cost and thecontract acquisition cost on the same basis as the commodity income related to the contract cost asset,and amortizes it at the time when the performance obligation is performed or in accordance with theperformance of the performance obligation, and is included in the current profit or loss.
(4) Contract cost impairment For assets related to contract costs, if the book value is higher than the
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difference between the remaining consideration expected to be received by the Company for transfer ofthe goods related to the assets and the estimated cost of transferring the relevant goods, the excessshould be depreciated and confirmed as an asset impairment loss
If the factors caused impairment changed after impairment provision is accrued, impairment provisionshall be reversed and included in current period profit or loss but the carrying amount of asset after thereversal shall not exceed the carrying amount at the reversal date as if there was no impair.
33. Government Subsidies
1． Classification
Government subsidies refer to monetary and non-monetary assets received from the governmentwithout compensation, however excluding the capital invested by the government as a corporate owner.According to the subsidy objects stipulated in the documents of relevant government, governmentsubsidies are divided into subsidies related to assets and subsidies related to income.
Government subsidies related to assets are obtained by the Company for the purposes of acquiring,constructing or otherwise forming long-term assets. Government subsidies related to income refer to thegovernment subsidies other than those related to assets
2． Recognition of government subsidies
Where evidence shows that the Company complies with relevant conditions of policies for financialsupports and is expected to receive the financial support funds at the end of the period, the amountreceivable is recognized as government subsidies. Otherwise, the government subsidy is recognizedupon actual receipt.
Government subsidies in the form of monetary assets are stated at the amount received orreceivable. Government subsidies in the form of non-monetary assets are measured at fair value; if fairvalue cannot be reliably obtained, a nominal amount (RMB1) is used. Government subsidies that aremeasured at nominal amount shall be recognized in the current profit or loss directly.
3． Accounting treatment
The Company determines whether a government subsidy shall use gross method or net methodbased on its economical substance. In general, only one method is used for one category or similargovernment subsidy and it shall be used in a consistent way.
Government subsidies related to assets are recognized as deferred income, and are recognized,under reasonable and systematic approach, in profit and loss in each period over the useful life of theconstructed or purchased assets;
Government subsidies related to income aiming at compensating for relevant expenses or losses tobe incurred by the enterprise in subsequent periods are recognized as deferred income, and arerecognized in current profit or loss when relevant expenses or losses are recognized. Governmentsubsidies aiming at compensating for relevant expenses or losses of the enterprise that are alreadyincurred are charged to current profit or loss once received.
Government subsidies related to daily activities of enterprises are included in other income;
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government subsidies that are not related to daily activities of enterprises are included in non-operatingincome and expense.Government subsidies related to the discount interest received from policy-related preferential loansoffset the relevant borrowing costs; if the policy-based preferential interest rate loan provided by thelending bank is obtained, the borrowing amount actually received shall be taken as the recording value ofthe borrowings, and borrowing cost should be calculated using the preferential interest rate according tothe loan principal and the policy.When it is required to return recognized government subsidy, if such subsidy is used to write downthe carrying value of relevant assets on initial recognition, the carrying value of the relevant assets shallbe adjusted; if there is balance of relevant deferred income, it shall be written down to the book balance ofrelevant deferred income, and the excess is included in the current profit or loss; where there is norelevant deferred income, it shall be directly included in the current profit or loss
34. Deferred Income Tax Assets and Deferred Income Tax LiabilitiesDeferred income tax assets and deferred income tax liabilities are measured and recognized basedon the difference (temporary difference) between the taxable base of assets and liabilities and book value.On balance sheet date, the deferred income tax assets and deferred income tax liabilities are measuredat the applicable tax rate during the period when it is expected to recover such assets or settle suchliabilities.
(1) Criteria for recognition of deferred income tax assets
The Company recognizes deferred income tax assets arising from deductible temporary difference tothe extent it is probably that future taxable amount will be available against which the deductibletemporary difference can be utilized, and deductible losses and taxes can be carried forward tosubsequent years. However, the deferred income tax assets arising from the initial recognition of assetsor liabilities in a transaction with the following features are not recognized: 1) the transaction is not abusiness combination; 2) neither the accounting profit or the taxable income or deductible losses will beaffected when the transaction occurs.For deductible temporary difference in relation to investment in the associates, correspondingdeferred income tax assets are recognized in the following conditions: the temporary difference isprobably reversed in a foreseeable future and it is likely that taxable income is obtained for deduction ofthe deductible temporary difference in the future.
(2) Criteria for recognition of deferred income tax liabilities
The Company recognizes deferred income tax liabilities on the temporary difference between thetaxable but not yet paid taxation in the current and previous periods, excluding:
1) temporary difference arising from the initial recognition of goodwill;
2) a transaction or event arising from non-business combination, and neither the accounting profit orthe taxable income (or deductible losses) will be affected when the transaction or event occurs;
3) for taxable temporary difference in relation to investment in subsidiaries or associates, the time for
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reversal of the temporary difference can be controlled and the temporary difference is probably notreversed in a foreseeable future
(3) When all of the following conditions are satisfied, deferred income tax assetsand deferred income tax liabilities shall be presented on a net basis
1) An enterprise has the statutory right to settle the current income tax assets and current income taxliabilities at their net amounts;
2) The deferred income tax assets and deferred income tax liabilities relate to income taxes levied bythe same taxation authority on either the same taxable entity or different taxable entities which intendeither to settle current income tax assets and current income tax liabilities on a net basis, or to realize theassets and settle the liabilities simultaneously, in each future period in which significant amounts ofdeferred tax assets or liabilities are expected to be recovered or settled.
35. Lease
On the commencement date of the contract, the Company evaluates whether the contract is a leaseor contains a lease. If one party to a contract gives up the right to control the use of one or moreidentifiable assets for a period of time in exchange for consideration, the contract is a lease or contains alease.
(1) Splitting a lease contract
When the contract contains a number of separate leases, the Company will split the contract intoseparate leases for accounting individually.
When the contract contains both leasing and non-leasing parts, the Company will split the leasingand non-leasing parts. The leasing part shall be accounted for in accordance with the lease standards,and the non-leasing part shall be accounted for in accordance with other applicable accountingstandards for business enterprises
(2) Combination of lease contracts
When two or more lease-containing contracts concluded by the Company with the same trader or itsrelated parties at the same time or at a similar time meet one of the following conditions, the Companyshall merge them into one contract for accounting:
1) Such two or more contracts are concluded for general commercial purposes and constitute apackage of transactions. If these are not considered as a whole, these overall commercial purposescannot be recognized.
2) The amount of consideration for a contract in such two or more contracts depends on the pricing orperformance of other contracts.
3) The right-of-use assets transferred by such two or more contracts together constitute a separatelease
(3) Accounting treatment for the Company as a lessee
On the commencement date of lease term, the Company recognizes right-of-use assets and lease
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 157
liabilities for leases, in addition to short-term leases and low-value asset leases with simplified treatment
(1) Short-term lease and low value lease
Short-term lease refers to a lease that does not include purchase options and has a lease term notexceeding 12 months. Low-value asset lease refers to the lease with lower value when a single leasedasset is a new assetThe Company does not recognize right-of-use assets and lease liabilities for short-term lease and lowvalue lease. The payment of such leases shall be charged to profit or loss using straight-line method orother systematic method.
(2) Refer to Note IV. 22 and Note IV. 29 for accounting policies for right-of-use assets and leaseliabilities.
(4) Accounting treatment for the Company as a lessor
1) Classification of leases
The Company divides leases into financial leases and operating leases on the start date of the lease.Financial lease refers to a lease that essentially transfers almost all of the risks and rewards related tothe ownership of leased assets. Its ownership may or may not be transferred eventually. Operatingleases refer to leases other than financial leases.
If a lease has one or more of the following characteristics, the Company usually classifies it as afinancial lease:
1) At the expiry of the lease term, the ownership of the leased assets is transferred to the lessee.
2) The lessee has the option to purchase the leased assets, and the purchase price set by the lesseeis low enough compared with the expected fair value of the leased assets when exercising the option.Therefore, it can be reasonably determined on the lease start date that the lessee will exercise the option.
3) Although the ownership of the assets is not transferred, the lease term accounts for the majority ofthe life of the leased assets.
4) On the commencement date of the lease, the present value of the lease receipts is almost equal tothe fair value of the leased assets.
5) The nature of leased assets is special. If there is no major transformation, only the lessee can usethem
If one or more of the following conditions exist in a lease, it may also be classified as a financiallease:
1) If the lessee stops the lease, the lessee shall bear the losses caused by the termination of thelease to the lessor.
2) The profits or losses caused by the fluctuation of the fair value of the balance of assets belong tothe lessee.
3) The lessee can continue to lease far below the market level for the next period.
(2) Accounting treatment for financial leases
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 158
On the commencement date of lease term, the Company recognizes the financial lease receivable onthe financial leases and derecognizes the financial lease assets.When the initial measurement of the financial lease receivable is made, the book value of thefinancial lease receivable is the sum of the unsecured balance and the present value of lease receiptsthat have not yet been received at the beginning of the lease term discounted at the interest rate implicit inthe lease. The lease receipts include:
1) Fixed payments and substantive fixed payments after deducting the relevant amount of leaseincentives;
2) Variable lease payments depending on an index or rate;
3) In the case of reasonably determining that the lessee will exercise the purchase option, the leasereceipts include the exercise price of purchase option;
4) If the lease term reflects that the lessee will exercise the option to terminate the lease, the leasereceipts include the amount to be paid by the lessee in exercising the option to terminate the lease;
5) Guarantee residual value provided to the lessor by the lessee, the party concerned with the lesseeand an independent third party with financial capacity to fulfill the guarantee obligation
The Company calculates and recognizes the interest income for each period of the lease term basedon the fixed interest rate implicit in the lease, and the variable lease payments which are obtained and notincluded in the net rental investment amount are included in the profit or loss of the period when theyactually occur.
(3) Accounting treatment for operating leases
The Company adopts the straight line method or other systematic and reasonable method torecognize the lease receipts from operating leases as rental income during each period of the lease term.Capitalization of the initial direct expenses incurred in connection with operating leases shall beapportioned on the same basis as the recognition of rental income during the lease term, and shall berecorded in the profit or loss of the current period. Variable lease payments obtained in connection withoperating leases that are not incorporated in the lease receipts shall be incorporated in the profit or loss ofthe period when they actually occur.
36. Termination of business
The Company recognizes components as termination of business components if one of the followingcondition is met and that the component has already been disposed or classified as held-for-sale assetsand identifiable.
(1) The component represents a stand along major business or a stand along major area inconducting business.
(2) The component is part of plan connecting to disposal of a stand along major business or majorarea of conducting business.
(3) The component is a subsidiary that obtained specifically for resale.
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 159
Operating profit or loss such as the impairment loss and the amount of reversal shall be presented inincome statement as profit or loss from terminated business.
37. Re-purchase of shares
Before written-off or transfer, the shares that the Company re-purchased are dealt as treasury shares.All expenses incurred for the re-purchase are charged in the cost of treasury shares. Consideration andtransaction expenses paid during the share re-purchase shall decrease shareholder’s equity. No gain orlosses shall be recognized during re-purchase, transfer or written-off of the Company’s shares.
If the treasury shares is transferred, the difference between amount actually received and the share’scarrying amount shall be charged to capital reserve, if the capital reserve is not sufficient to offset, surplusreserve and retained earing shall be offset. If the treasury share is to written-off, the share capital shall bedecreased based on the face value of shares and the difference between the carrying amount and its facevalue shall offset the capital reserve. If the capital reserve is not sufficient to offset, deducting surplusreserve and retained earnings.
38. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
| Details of and reasons for the changes in accounting policies | Approval process | Note |
| Accounting Standards for Business Enterprises No. 21 – Leases | Approved by the 27th meeting of the 9th Session of the Board |
Other explanations:
Impact on the Company from the adoption of the new lease standard
The Company adopts Accounting Standards for Business Enterprises No. 21 – Leases from 1January 2021. Refer to Note IV for details of revised accounting policies.
For a contract which has existed before the initial execution date, the Company does not re-evaluatewhether it is a lease or contains a lease at the initial execution date, and does not adopt the accountingpolicies below for the contract which is not identified as containing a lease under the original leasestandards before the initial execution date, and adopts the accounting policies below only for the contractwhich is identified as a lease under the original lease standards before the initial execution date and thecontract whose commencement date is later than the initial execution date
Under the new lease standard, the Company choose to adjust the balance of retained earnings andother related items in the financial statements at the beginning of the year of initial adoption of suchstandard (1 January 2021) based on the cumulative effect of initial adoption of such standard, with noadjustment to the information for the comparable period.
Upon adoption of the new lease standard, related items in the balance sheet as of 1 January 2021are affected as follows:
| Item | 31 December 2020 | Cumulated affect (note) | 1 January 2021 |
| Other current assets | 75,935,141.76 | -8,078,503.09 | 67,856,638.67 |
| Right-of-use assets | 163,169,400.44 | 163,169,400.44 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 160
| Item | 31 December 2020 | Cumulated affect (note) | 1 January 2021 |
| Total assets | 4,018,712,700.18 | 155,090,897.35 | 4,173,803,597.53 |
| Non-current liabilities due within one year | 370,030.00 | 88,839,586.06 | 89,209,616.06 |
| Lease liabilities | 77,439,579.30 | 77,439,579.30 | |
| Total liabilities | 1,218,752,028.75 | 166,279,165.36 | 1,385,031,194.11 |
| Undistributed profit | 1,164,490,911.51 | -11,188,268.01 | 1,153,302,643.50 |
| Total shareholders’ equity | 2,799,960,671.43 | -11,188,268.01 | 2,788,772,403.42 |
Note: Only financial statement items that affected are list in above table, as a result, the figure ofsubtotal and total cannot be calculated based on figures list above.
1) Weighted average incremental loan interest rate for adopted by the Company:
On 1 January 2021, The Company recognized lease liability of RMB166,279,165.36 and right-of-useasset of 163,169,400.44. For operating lease on the adoption date, the Company used the discountedvalue based on incremental loan interest rate to measure lease liabilities. The weighted averageincremental loan interest rate is 4.40%.
a) Difference of present value of minimum lease payment disclosed at the end of prior period andpresent value of lease liabilities on the first adoption date:
The difference of lease liability recognized on 1 January 2021 and material lease commitmentdisclosed in 2020 financial statement is as follows:
| Item | 1 January 2021 | Note |
| 1. Operating lease commitment as at 31 December 2020 | 138,864,123.57 | |
| Lease liability discounted using incremental loan interest on the adoption date | 122,851,148.71 | |
| Plus: option to renew | 44,798,990.43 | |
| Less: exemption – short-term lease | 1,370,973.78 | |
| Lease liability recognized related to previous operating lease | 166,279,165.36 | |
| 2. Lease liabilities at 1 January 2021 | 166,279,165.36 | |
| Including: current liabilities | 88,839,586.06 | |
| Non-current liabilities | 77,439,579.30 |
(2) Changes in accounting estimates
There were no changes in significant accounting estimates during the reporting period.
V. Taxes
1. Main types of taxes and corresponding tax rates
| Tax type | Basis | Tax rate | note |
| VAT | Domestic sales, providing manufacturing and repairing services | 13% | |
| Property leasing | 9% | ||
| Other taxable services | 6% | ||
| Simplified method | 5% |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 161
| Tax type | Basis | Tax rate | note |
| Consumption tax | Luxury watches | 20% | |
| Urban maintenance and construction tax | Turnover tax payable | 7%、5% | |
| Corporate income tax | Taxable income | See below table | |
| Property tax | 70% or 80% of the original cost of property or rental income | 1.2%、12% |
Corporate income tax of different entities:
| Name of entities | CIT rate |
| Shenzhen HARMONY World Watch Center Co., Ltd.(①) | 25% |
| FIYTA Sales Co., Ltd.(①) | 25% |
| Shenzhen FIYTA Precision Technology Co., Ltd.(②③) | 15% |
| Shenzhen FIYTA Technology Development Co., Ltd.(②③) | 15% |
| HARMONY World Watch Center(Hainan) Co., Ltd.(⑥) | 20% |
| Shenzhen Xunhang Precision Technology Co., Ltd. | 25% |
| Emile Choureit Timing (Shenzhen) Ltd. | 25% |
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | 25% |
| EMPORAL (Shenzhen) Co., Ltd. | 25% |
| Shenzhen Harmony E-commerce Co., Ltd.(⑥) | 20% |
| FIYTA (Hong Kong) Ltd.(④) | 16.5% |
| Montres Chouriet SA(⑤) | 30% |
| Station 68(④) | 16.5% |
Note ①:According to the regulations stated in “Interim Administration Method for Levy of CorporateIncome Tax to Enterprise that Operates Cross-regionally”, the head office of the Company and its branchoffices, the head office of HARMONY Company and its branch offices, and the head office of SalesCompany and its branch offices adopt tax submission method of “unified calculation, managing byclasses, pre-paid in its registered place, settlement in total, and adjustment by finance authorities”.Branch offices mentioned above share 50% of the enterprise income tax and prepay locally; and 50% willbe prepaid by the head offices mentioned above.Note ②: According to “Notice of the Ministry of Finance, the State Administration of Taxation andMinistry of Science on Further Perfection of the Pre-tax Super Deduction Ratio of Research andDevelopment Expenses” (Cai Shui (2021) No. 13) , if the research and development costs, which wereincurred for developing new technologies, new products, and new processes by the Company, thePrecision Technology Company and the Technology Company, are not capitalized as intangible assetsbut charged to current profit or loss, all of these entities can enjoy a 100% super deduction on top of the
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 162
R&D expenses that allowed to deduct before income tax since 1 January 2021.
Note ③:The Company enjoyed for “Reduction and Exemption in Corporate Income Tax Rate for Highand New Technology Enterprises that Require Key Support from the State”.Note ④: These companies are registered in Hong Kong and the income tax rate of Hong Kongapplicable is 16.50% this year.Note ⑤: The comprehensive tax rate of 30% is applicable for Swiss Company as it registered inSwitzerland.
Note ⑥ These companies are small and low-profit enterprises, which enjoy 20% tax rate.
2. Preferential treatment and corresponding approval
According to “Proclamation of Ministry of Finance and State Administration of Taxation in ImplementingPreferential Tax Rate to Small and Low Profit Enterprises and Sole-proprietors” (Caishui (2021) No.12) and“Notice of Ministry of Finance and State Administration of Taxation on Implementation of the Inclusive IncomeTax Deduction and Exemption Policies for Small Low-Profit Enterprises” (Cai Shui (2019) No.13) , the portion ofannual taxable income of small low-profit enterprise that is below RMB1,000,000.00 will be included in taxableincome at 12.5% and to be taxed at a rate of 20%; and for annual taxable income that is greater thanRMB1,000,000.00 but not exceeding RMB3,000,000.00, of which 50% will be included in taxable income andto be taxed at 20%.
According to “Notice of Ministry of Finance and State Administration of Taxation in Extending ExpirationPeriod of Utilizing Losses for High-Tech Enterprises and Scientific Oriented Medium and Small Enterprises”(Cai Shui [2018] No. 76) , unutilized losses incurred in prior 5 years before obtaining the status of High andNew Tech Enterprise can be carried forward and utilized in future years. The longest period was extended from5 years to 10 years.
VI. Notes to main items of the consolidated financial statements
(Unless otherwise indicated, the currency unit is Renminbi Yuan and the opening balance refers to thebalance as at 1 January 2021)
Note 1． Monetary funds
| Item | Closing balance | Opening balance |
| Cash on hand | 108,612.08 | 183,759.72 |
| Cash at bank | 188,908,798.10 | 346,055,209.29 |
| Other monetary funds | 21,237,326.96 | 6,818,316.70 |
| Total | 210,254,737.14 | 353,057,285.71 |
| Including: Total overseas deposits | 1,724,651.93 | 3,412,028.94 |
| Including: deposit in finance company | 147,786,041.19 | 283,532,347.79 |
Deposit in finance company mainly deposited with AVIC Finance Co., Ltd.
As at 31 December 2021, the Company does not have balance of cash or other monetary funds thatare restricted because being pledged as security, guaranteed or blocked frozen or overseas balances
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 163
that have restriction on remittance back to the home country.
Cash with restricted usage is as follows:
| Item | Closing balance | Opening balance |
| Overseas deposit with restrictions remitting back | 1,724,651.93 | 3,412,028.94 |
Note 2． Bill receivable1． Presented by category
| Item | Closing balance | Opening balance |
| Bank acceptance bills | 2,989,331.70 | 16,813,464.36 |
| Commercial acceptance bills | 58,268,814.10 | 31,378,977.79 |
| Total | 61,258,145.80 | 48,192,442.15 |
2． Presented by ECL types
| Type | Closing balance | ||||
| Carrying amount | Provision | Book value | |||
| Amount | Percentage (%) | Amount | Percentage (%) | ||
| Notes receivable that provided expected credit losses on single basis | |||||
| Notes receivable that provided expected credit losses on single basis | 64,324,925.49 | 100.00 | 3,066,779.69 | 4.77 | 61,258,145.80 |
| Including: Commercial acceptance bills | 61,335,593.79 | 95.35 | 3,066,779.69 | 5.00 | 58,268,814.10 |
| Risk-free Bank acceptance bills | 2,989,331.70 | 4.65 | 2,989,331.70 | ||
| Total | 64,324,925.49 | 100.00 | 3,066,779.69 | 4.77 | 61,258,145.80 |
Continued
| Type | Opening balance | ||||
| Carrying amount | Provision | Book value | |||
| Amount | Percentage (%) | Amount | Percentage (%) | ||
| Notes receivable that provided expected credit losses on single basis | |||||
| Notes receivable that provided expected credit losses on single basis | 49,843,967.32 | 100.00 | 1,651,525.17 | 3.31 | 48,192,442.15 |
| Including: Commercial acceptance bills | 33,030,502.96 | 66.27 | 1,651,525.17 | 5.00 | 31,378,977.79 |
| Risk-free Bank acceptance bills | 16,813,464.36 | 33.73 | - | - | 16,813,464.36 |
| Total | 49,843,967.32 | 100.00 | 1,651,525.17 | 3.31 | 48,192,442.15 |
3． Notes receivable with expected credit loss provided based on credit risk characteristicportfolio
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 164
| Portfolio | Closing balance | ||
| Carrying amount | Provision | Percentage (%) | |
| Bank acceptance bills | 61,335,593.79 | 3,066,779.69 | 5.00 |
| Commercial acceptance bills | 2,989,331.70 | ||
| Total | 64,324,925.49 | 3,066,779.69 | 4.77 |
4． Bad debt movements in current period
| Types | Opening balance | Movements | Closing balance | |||
| Accrual | Received or reversal | Written-off | Other changes | |||
| Notes receivable that provided expected credit losses on single basis | ||||||
| Notes receivable that provided expected credit losses on single basis | 1,651,525.17 | 1,415,254.52 | 3,066,779.69 | |||
| Including: Commercial acceptance bills | 1,651,525.17 | 1,415,254.52 | 3,066,779.69 | |||
| Risk-free Bank acceptance bills | ||||||
| Total | 1,651,525.17 | 1,415,254.52 | 3,066,779.69 | |||
5． Bills have been endorsed but not yet due at the end of the period.
| Item | Amount de-recognized | Amount not de-recognized |
| Bank acceptance bills | 3,064,791.21 | |
| Commercial acceptance bills | 15,737,928.76 | |
| Total | 3,064,791.21 | 15,737,928.76 |
6． Bill receivable that transferred to receivables due to issuer’s default at the end of theperiod
| Item | Amount transferred to accounts receivable |
| Commercial acceptance bills | 918,150.83 |
Note 3． Accounts receivable1． Presentation by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 411,327,173.23 | 489,913,393.98 |
| 1-2 years | 4,211,418.24 | 10,509,894.86 |
| 2-3 years | 7,582,641.50 | 6,142,706.69 |
| Over 3 years | 8,867,120.13 | 2,882,615.92 |
| Subtotal | 431,988,353.10 | 509,448,611.45 |
| Less: provision for bad debt | 43,102,751.82 | 33,849,926.57 |
| Total | 388,885,601.28 | 475,598,684.88 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 165
2． Presentation by method of providing bad debt
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | 41,742,982.67 | 9.66 | 32,056,051.67 | 76.79 | 9,686,931.00 |
| Accounts receivable that provided expected credit losses on portfolio basis` | 390,245,370.43 | 90.34 | 11,046,700.15 | 2.83 | 379,198,670.28 |
| Including: Receivable from other customers | 390,245,370.43 | 90.34 | 11,046,700.15 | 2.83 | 379,198,670.28 |
| Total | 431,988,353.10 | 100.00 | 43,102,751.82 | 9.98 | 388,885,601.28 |
Continued
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | 21,208,447.13 | 4.16 | 19,133,975.43 | 90.22 | 2,074,471.70 |
| Accounts receivable that provided expected credit losses on portfolio basis` | 488,240,164.32 | 95.84 | 14,715,951.14 | 3.01 | 473,524,213.18 |
| Including: Receivable from other customers | 488,240,164.32 | 95.84 | 14,715,951.14 | 3.01 | 473,524,213.18 |
| Total | 509,448,611.45 | 100.00 | 33,849,926.57 | 6.64 | 475,598,684.88 |
3． Accounts receivable that provided expected credit losses on single basisincluded in the closing balance
| Name | Closing balance | |||
| Carrying amount | Bad debt provision | ECL rate (%) | Reasons | |
| Receivable from other customers | 41,742,982.67 | 32,056,051.67 | 76.79 | Chances of recovery is remote |
4． In the portfolio, accounts receivable with expected credit loss provided based oncredit risk characteristic portfolioPortfolio of receivable from other customers
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 388,921,400.94 | 10,135,084.14 | 2.61 |
| 1-2 years | 215,868.25 | 21,586.83 | 10.00 |
| 2-3 years | 439,498.81 | 221,426.75 | 50.38 |
| Over 3 years | 668,602.43 | 668,602.43 | 100.00 |
| Total | 390,245,370.43 | 11,046,700.15 | 2.83 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 166
5． Movements of provision during the period
| Types | Opening balance | Movements during the period | Closing balance | |||
| Accrual | Recovered or reversed | Written-off | Other movements | |||
| Accounts receivable that provided expected credit losses on single basis | 19,133,975.43 | 14,695,144.56 | 1,773,068.32 | 32,056,051.67 | ||
| Accounts receivable that provided expected credit losses on portfolio basis` | 14,715,951.14 | 259,752.80 | 3,906,028.92 | -22,974.87 | 11,046,700.15 | |
| Including: Receivable from other customers | 14,715,951.14 | 259,752.80 | 3,906,028.92 | -22,974.87 | 11,046,700.15 | |
| Total | 33,849,926.57 | 14,954,897.36 | 5,679,097.24 | -22,974.87 | 43,102,751.82 | |
Including: main recovery of bad debt provision in current period:
| Name | Amount | Way of recovery | Note |
| Hunan Chongsheng Jingzhu Group Co., Ltd. | 1,063,041.16 | Bank transfer |
6． No actual write-off of accounts receivable during the current period7． Top 5 receivable accounts
| Name | Closing balance | Proportion in total closing balance of accounts receivable (%) | Bad debt provision |
| Top 5 receivables accounts in total | 153,286,032.19 | 35.48 | 17,111,402.62 |
Note 4． Prepayments1． Presentation of prepayments by aging
| Aging | Closing balance | Opening balance | ||
| Amount | Percentage (%) | Amount | Percentage (%) | |
| Within one year | 7,946,750.81 | 100.00 | 16,612,773.76 | 100.00 |
2． Top 5 prepayments
| Name | Closing balance | Proportion in total closing balance of prepayments (%) |
| Top 5 prepayments in total | 3,930,082.16 | 49.46 |
Note 5． Other receivables
1． Presentation of other receivables by aging
| Aging | Closing balance | Opening balance |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 167
| Aging | Closing balance | Opening balance |
| Within one year | 64,697,975.58 | 55,677,698.47 |
| 1 - 2 years | 655,341.52 | 662,641.27 |
| 2- 3 years | 484,750.05 | 11,101.80 |
| Over 3 years | 135,480.00 | 588,065.00 |
| Subtotal | 65,973,547.15 | 56,939,506.54 |
| Less: bad debt provision | 4,420,279.33 | 4,036,726.91 |
| Total | 61,553,267.82 | 52,902,779.63 |
2． Presented by nature
| Nature | Closing balance | Opening balance |
| Security deposit | 55,467,644.12 | 45,500,721.00 |
| Petty cash | 2,556,673.37 | 2,438,803.09 |
| Others | 7,949,229.66 | 8,999,982.45 |
| Total | 65,973,547.15 | 56,939,506.54 |
3． Presented according to three stages of financial assets impairment
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | Carrying amount | Bad debt provision | Book value | |
| First stage | 64,508,342.25 | 3,055,122.43 | 61,453,219.82 | 55,271,836.64 | 2,369,057.01 | 52,902,779.63 |
| Second stage | ||||||
| Third stage | 1,465,204.90 | 1,365,156.90 | 100,048.00 | 1,667,669.90 | 1,667,669.90 | |
| Total | 65,973,547.15 | 4,420,279.33 | 61,553,267.82 | 56,939,506.54 | 4,036,726.91 | 52,902,779.63 |
4． Presented by bad debt provision method
| category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | 1,465,204.90 | 2.22 | 1,365,156.90 | 93.17 | 100,048.00 |
| Other receivables that provided expected credit losses on portfolio basis | 64,508,342.25 | 97.78 | 3,055,122.43 | 4.74 | 61,453,219.82 |
| Including: Security deposit portfolio | 55,467,644.12 | 84.08 | 2,781,540.05 | 5.01 | 52,686,104.07 |
| Petty cash portfolio | 2,556,673.37 | 3.88 | - | - | 2,556,673.37 |
| Social security payment on-behalf portfolio | 483,396.42 | 0.73 | - | - | 483,396.42 |
| Portfolio of others | 6,000,628.34 | 9.09 | 273,582.38 | 4.56 | 5,727,045.96 |
| Total | 65,973,547.15 | 100.00 | 4,420,279.33 | 6.70 | 61,553,267.82 |
Continued
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 168
| Category | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | 1,667,669.90 | 2.93 | 1,667,669.90 | 100.00 | |
| Other receivables that provided expected credit losses on portfolio basis | 55,271,836.64 | 97.07 | 2,369,057.01 | 4.29 | 52,902,779.63 |
| Including: Security deposit portfolio | 45,500,721.00 | 79.91 | 2,281,728.51 | 5.01 | 43,218,992.49 |
| Petty cash portfolio | 2,438,803.09 | 4.28 | 2,438,803.09 | ||
| Social security payment on-behalf portfolio | 792,711.42 | 1.39 | 792,711.42 | ||
| Portfolio of others | 6,539,601.13 | 11.49 | 87,328.50 | 1.34 | 6,452,272.63 |
| Total | 56,939,506.54 | 100.00 | 4,036,726.91 | 7.09 | 52,902,779.63 |
5． Other receivables that provided expected credit losses on single basis included in the
closing balance
| Name | Closing balance | |||
| Carrying amount | Bad debt provision | ECL rate (%) | Reason | |
| Receivable from others | 1,465,204.90 | 1,365,156.90 | 93.17 | Chances of recovery is remote |
6． In the portfolio, other receivables with expected credit loss provided based oncredit risk characteristic portfolio
(1) Security deposit portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 55,427,594.12 | 2,741,490.05 | 4.95 |
| 1 - 2 years | |||
| 2- 3 years | |||
| Over 3 years | 40,050.00 | 40,050.00 | 100.00 |
| Total | 55,467,644.12 | 2,781,540.05 | 5.01 |
(2) Petty cash portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 2,536,236.70 | ||
| 1 - 2 years | 6,311.62 | ||
| 2- 3 years | 14,125.05 | ||
| Over 3 years | |||
| Total | 2,556,673.37 | ||
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 169
(3) Social security payment on-behalf portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 483,396.42 | ||
(4) Portfolio of others
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 6,000,628.34 | 273,582.38 | 4.56 |
7． Bad debt provision status
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit losses over the next 12 months | Lifetime expected credit losses (no credit impairment occurred) | Lifetime expected credit losses (credit impairment occurred) | ||
| Opening balance | 2,369,057.01 | 1,667,669.90 | 4,036,726.91 | |
| Opening balance movements in current period | -12,506.00 | 12,506.00 | ||
| —Transfer into the second stage | ||||
| —Transfer into the third stage | -12,506.00 | 12,506.00 | ||
| —Reverse back to the second stage | ||||
| —Reverse back to the first stage | ||||
| Accrual during the period | 781,582.86 | 137,566.00 | 919,148.86 | |
| Reversed during the period | 82,616.73 | 452,585.00 | 535,201.73 | |
| Recovered during the period | ||||
| Written-off during the period | ||||
| Other movements | -394.71 | -394.71 | ||
| Closing balance | 3,055,122.43 | 1,365,156.90 | 4,420,279.33 |
8． No other receivables were written-off during the period.9． Top 5 other receivable accounts
| Name | Closing balance | Proportion to closing balance of other receivables (%) | Closing balance of bad debts provision |
| Top 5 other receivables in total | 22,453,594.72 | 34.03 | 1,125,982.07 |
Note 6． Inventory1． Classification
| Item | Closing balance | Opening balance |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 170
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Raw material | 181,764,220.90 | 17,693,135.85 | 164,071,085.05 | 179,270,879.56 | 19,017,726.57 | 160,253,152.99 |
| WIP | 20,682,530.58 | 20,682,530.58 | 12,570,005.95 | 12,570,005.95 | ||
| Stored goods | 1,960,110,199.48 | 94,715,064.22 | 1,865,395,135.26 | 1,837,664,688.01 | 78,707,661.10 | 1,758,957,026.91 |
| Total | 2,162,556,950.96 | 112,408,200.07 | 2,050,148,750.89 | 2,029,505,573.52 | 97,725,387.67 | 1,931,780,185.85 |
2． Provision for inventory
| Item | Opening balance | Increase in current period | Decrease in current period | Closing balance | |||
| Accrual | Other | Reversed | Realized | Others | |||
| Raw material | 19,017,726.57 | 132,907.16 | 1,088,930.94 | 368,566.94 | 17,693,135.85 | ||
| Stored goods | 78,707,661.10 | 26,817,418.34 | 10,775,684.06 | 34,331.16 | 94,715,064.22 | ||
| Total | 97,725,387.67 | 26,950,325.50 | 1,088,930.94 | 10,775,684.06 | 402,898.10 | 112,408,200.07 | |
Notes to provision for inventory
| Item | Evidence of determine NRV and future selling cost | Reason for reversal or realized |
| Raw material | Estimated selling price less estimated cost to complete and selling and distribution expenses and associated taxes | Factors that caused impairment has been disappeared and the NAV is higher than its carrying amount |
| Stored goods | Estimated selling price less estimated selling and distributing expenses and associated taxes | Inventory that already provided for was sold or used in current period. |
Note 7． Other current assets
| Item | Closing balance | Opening balance |
| Input VAT | 20,468,630.65 | 15,817,909.96 |
| Input VAT not yet certified | 41,895,970.19 | 43,400,801.73 |
| Prepaid corporate income tax | 2,459,142.75 | 25,684.51 |
| Others | 7,874,949.13 | 8,612,242.47 |
| Total | 72,698,692.72 | 67,856,638.67 |
Note 8． Long-term equity investment
| Investee | Opening balance | Movements during the period | |||
| Addition/new investment | Withdrawn | Investment gains and losses recognized by equity method | Adjustment of other comprehensive income | ||
| Associate | |||||
| Shanghai Watch Co., Ltd. (Shanghai Watch) | 51,400,665.92 | 3,754,939.39 | |||
Continued
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 171
| Investee | Movements during the period | Closing balance | Closing balance of inventory | |||
| Changes in other equity | Cash dividend declared | Impairment provision | Others | |||
| Associate | ||||||
| Shanghai Watch | 55,155,605.31 | |||||
Note 9． Other equity instrument investments
1. Details of other equity instrument investments
| Item | Closing balance | Opening balance |
| Xi’an Tangcheng Limited | 85,000.00 | 85,000.00 |
Note 10． Investment property1． Details of investment property
| Item | Property |
| I. Original cost | |
| 1． Opening balance | 609,605,406.79 |
| 2． Addition | 1,281,008.88 |
| Purchase | |
| Transferred from fixed assets | 1,281,008.88 |
| Other reasons | |
| 3． Decrease | |
| Disposal | |
| Other reasons | |
| 4． Closing balance | 610,886,415.67 |
| II. Accumulated depreciation | |
| 1． Opening balance | 211,518,959.01 |
| 2． Increased in current period | 15,941,540.31 |
| Accrual | 15,941,540.31 |
| Transferred from fixed assets | |
| Other reasons | |
| 3． Decreased in current period | |
| Disposal | |
| Other reasons | |
| 4． Closing balance | 227,460,499.32 |
| III. Impairment provision | |
| 1． Opening balance | |
| 2． Increased in current period | |
| Accrual |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 172
| Item | Property |
| Transferred from fixed assets | |
| Other reasons | |
| 3． Decreased in current period | |
| Disposal | |
| Other reasons | |
| 4． Closing balance | |
| IV. Book value | |
| 1． Carrying amount at end of the period | 383,425,916.35 |
| 2． Carrying amount at opening of the period | 398,086,447.78 |
2． Notes to investment propertyDuring the reporting period, certain self-use property of the Company were changed to lease out andthey were transferred from fixed assets to investment properties measured at cost model.
Note 11． Fixed assets
1． Status of fixed assets
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| I. Original cost | ||||||
| 1． Opening balance | 399,020,198.97 | 101,896,803.98 | 15,166,013.42 | 45,435,251.53 | 45,782,206.31 | 607,300,474.21 |
| 2． Increased in current period | 13,096,971.22 | 7,074,376.88 | 678,419.96 | 3,474,487.12 | 2,202,046.67 | 26,526,301.85 |
| Re-classification | ||||||
| Purchased | 13,096,971.22 | 7,074,376.88 | 678,419.96 | 3,474,487.12 | 2,202,046.67 | 26,526,301.85 |
| Transferred from CIP | ||||||
| Translation difference | ||||||
| Other increase | ||||||
| 3． Decrease in current period | 3,929,461.13 | 1,503,080.00 | 1,063,923.00 | 2,592,290.12 | 1,096,983.04 | 10,185,737.29 |
| Disposal or retired | 210,534.00 | 1,063,923.00 | 2,549,005.02 | 981,082.28 | 4,804,544.30 | |
| Transferred to investment property | 1,281,008.88 | 1,281,008.88 | ||||
| Translation difference | 2,648,452.25 | 1,292,546.00 | 43,285.10 | 115,900.76 | 4,100,184.11 | |
| Other decrease | ||||||
| 4． Closing balance | 408,187,709.06 | 107,468,100.86 | 14,780,510.38 | 46,317,448.53 | 46,887,269.94 | 623,641,038.77 |
| II. Accumulated depreciation | ||||||
| 1． Opening balance | 111,755,686.24 | 56,383,949.04 | 13,429,376.63 | 34,165,037.86 | 38,832,143.68 | 254,566,193.45 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 173
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| 2． Increased in current period | 11,861,411.82 | 7,755,938.59 | 428,821.03 | 4,106,119.29 | 2,310,544.40 | 26,462,835.13 |
| Re-classification | ||||||
| Accrual | 11,861,411.82 | 7,755,938.59 | 428,821.03 | 4,106,119.29 | 2,310,544.40 | 26,462,835.13 |
| Translation difference | ||||||
| Other increase | ||||||
| 3． Decrease in current period | 1,467,532.88 | 1,100,152.51 | 1,010,726.85 | 2,374,651.49 | 930,242.73 | 6,883,306.46 |
| Disposal or retired | 199,668.69 | 1,010,726.85 | 2,345,731.03 | 826,766.35 | 4,382,892.92 | |
| Transferred to investment property | ||||||
| Translation difference | 1,467,532.88 | 900,483.82 | 28,920.46 | 103,476.38 | 2,500,413.54 | |
| Other decrease | ||||||
| 4． Closing balance | 122,149,565.18 | 63,039,735.12 | 12,847,470.81 | 35,896,505.66 | 40,212,445.35 | 274,145,722.12 |
| III. Impairment provision | ||||||
| 1． Opening balance | ||||||
| 2． Increase in current period | ||||||
| Re-classification | ||||||
| Accrual | ||||||
| Other increase | ||||||
| 3． Decrease in current period | ||||||
| Disposal or retired | ||||||
| Transferred into investment property | ||||||
| Other decrease | ||||||
| 4． Closing balance | ||||||
| IV. Book value | ||||||
| 1． Carrying amount at end of period | 286,038,143.88 | 44,428,365.74 | 1,933,039.57 | 10,420,942.87 | 6,674,824.59 | 349,495,316.65 |
| 2． Carrying amount at beginning of period | 287,264,512.73 | 45,512,854.94 | 1,736,636.79 | 11,270,213.67 | 6,950,062.63 | 352,734,280.76 |
Note: As of the period, fixed assets used to pledge for the Company’s loan amounted to
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 174
RMB11,490,566.65.
2． Fixed assets that do not have certificate for property right
| Item | Book value | Reason for not having certificate for property rights |
| Property | 255,135.96 | Issues relating to property right |
| Property | 3,067,640.30 | Not yet completed |
Note 12． Right-of-use assets
| Item | Property |
| I. Original cost | |
| 1． Opening balance | 250,970,274.22 |
| 2． Increase in current period | 98,622,544.53 |
| Re-classification | |
| Lease | 98,622,544.53 |
| Other increase | |
| 3． Decrease in current period | 36,014,185.11 |
| Maturity of lease term | |
| Other decrease | 36,014,185.11 |
| 4． Closing balance | 313,578,633.64 |
| II. Accumulated depreciation | |
| 1． Opening balance | 87,800,873.78 |
| 2． Increase in the period | 100,275,414.73 |
| Reclassification | |
| Accrual | 100,275,414.73 |
| Other increase | |
| 3． Decrease in the period | 22,430,130.29 |
| Maturity of lease term | |
| Other decrease | 22,430,130.29 |
| 4． Closing balance | 165,646,158.22 |
| III. Impairment provision | |
| 1． Opening balance | |
| 2． Increase in the period | |
| Reclassification | |
| Accrual | |
| Other increase | |
| 3． Decrease in the period | |
| Maturity of lease term | |
| Other decrease | |
| 4． Closing balance |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 175
| Item | Property |
| IV. Book value | |
| 1． Carrying amount at end of period | 147,932,475.42 |
| 2． Carrying amount at beginning of period | 163,169,400.44 |
Note 13． Intangible assets1． Status
| Item | Land-use right | Software system | Right to use trademarks | Total |
| I. Original cost | ||||
| 1． Opening balance | 34,933,822.40 | 29,134,692.80 | 14,068,906.86 | 78,137,422.06 |
| 2． Increase in the period | 1,151,727.41 | 1,186,718.72 | 2,338,446.13 | |
| Purchase | 1,151,727.41 | 1,186,718.72 | 2,338,446.13 | |
| Internal R&D | ||||
| Other source | ||||
| 3． Decrease in the period | ||||
| Disposal | ||||
| Other reasons | ||||
| 4． Closing balance | 34,933,822.40 | 30,286,420.21 | 15,255,625.58 | 80,475,868.19 |
| II. Accumulated amortization | ||||
| 1． Opening balance | 15,048,815.45 | 18,612,740.91 | 6,616,549.19 | 40,278,105.55 |
| 2． Increase in the period | 733,553.28 | 4,165,730.97 | 1,263,147.96 | 6,162,432.21 |
| Accrual | 733,553.28 | 4,165,730.97 | 1,263,147.96 | 6,162,432.21 |
| Other reasons | ||||
| 3． Decrease in the period | ||||
| Disposal | ||||
| Other reasons | ||||
| 4． Closing balance | 15,782,368.73 | 22,778,471.88 | 7,879,697.15 | 46,440,537.76 |
| III. Impairment provision | ||||
| 1． Opening balance | ||||
| 2． Increase in the period | ||||
| Accrual | ||||
| Other reasons | ||||
| 3． Decrease in the period | ||||
| Transfer | ||||
| Other reasons |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 176
| Item | Land-use right | Software system | Right to use trademarks | Total |
| Other transfer | ||||
| 4． Closing balance | ||||
| IV. Book value | ||||
| 1． Book value at end of the period | 19,151,453.67 | 7,507,948.33 | 7,375,928.43 | 34,035,330.43 |
| 2． Book value at beginning of the period | 19,885,006.95 | 10,521,951.89 | 7,452,357.67 | 37,859,316.51 |
Note 14． Long-term deferred expenses
| Item | Opening balance | Increase | Amortized | Other decrease | Closing balance |
| Counter fabrication expenses | 25,146,766.71 | 37,577,009.80 | 34,160,604.79 | 28,563,171.72 | |
| Renovation expenses | 98,681,716.46 | 83,147,472.60 | 61,133,283.16 | 120,695,905.90 | |
| Others | 6,189,104.82 | 16,981,131.74 | 8,638,980.74 | 14,531,255.82 | |
| Total | 130,017,587.99 | 137,705,614.14 | 103,932,868.69 | 163,790,333.44 |
Note 15． Deferred tax assets and deferred tax liabilities1． Detail of deferred tax assets before offsetting
| Item | Closing balance | Opening balance | ||
| Deductible temporary difference | Deferred tax assets | Deductible temporary difference | Deferred tax assets | |
| Impairment provision | 148,079,831.14 | 31,562,627.52 | 122,763,597.44 | 24,130,990.19 |
| Unrealized profit for related party transactions | 96,716,186.61 | 24,021,244.01 | 135,402,764.86 | 33,674,974.92 |
| Deductible losses | 62,781,216.23 | 15,188,881.56 | 64,27s2,084.42 | 15,216,766.23 |
| Restricted shares | 17,502,152.62 | 4,121,326.77 | 10,011,227.40 | 2,398,201.09 |
| Advertisement expenses that allowed to deduct in future years | 11,503,471.12 | 2,219,622.49 | 18,840,253.36 | 3,378,321.23 |
| Lease liabilities | 147,888,578.26 | 36,972,144.57 | ||
| Others | 9,993,278.10 | 2,498,319.53 | 8,458,186.73 | 2,114,546.69 |
| Total | 494,464,714.08 | 116,584,166.45 | 359,748,114.21 | 80,913,800.35 |
2． Detail of deferred tax liabilities before offsetting
| Item | Closing balance | Opening balance | ||
| taxable temporary difference | Deferred tax liabilities | Taxable temporary difference | Deferred tax liabilities | |
| One-off deduction of fixed asset before Corporate income tax | 24,113,302.98 | 3,616,995.45 | 20,452,230.39 | 3,067,834.55 |
| Right-of-use asset | 147,881,641.51 | 36,970,410.38 | ||
| Total | 171,994,944.49 | 40,587,405.83 | 20,452,230.39 | 3,067,834.55 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 177
3． Net-off of deferred tax asset or liabilities
| Item | Amount off-set at current period | Closing balance of deferred tax asset or liability after off-set | Amount off-set at prior period | Opening balance of deferred tax asset or liability after off-set |
| deferred tax asset | 35,350,891.80 | 81,233,274.65 | 80,913,800.35 | |
| deferred tax liabilities | 35,350,891.80 | 5,236,514.03 | 3,067,834.55 |
4． Details of deductible temporary difference and deductible losses that does not
recognize as deferred income tax asset
| Item | Closing balance | Opening balance |
| Impairment provision | 15,218,179.77 | 14,790,427.78 |
| Deductible losses | 54,139,145.45 | 61,104,363.07 |
| Total | 69,357,325.22 | 75,894,790.85 |
Note: Deductible losses of Swiss Company, which are subsidiaries of the Company, is not recognized asdeferred income tax asset as it’s uncertain that the companies can get sufficient taxable income in future. HongKong Company, a subsidiary of the Company, does not need to recognize the deferred income tax assets forimpairment provision according to the local tax policy.
5． Deductible losses that are not recognized as deferred tax asset will due in thefollowing years：
| Year | Closing balance | Opening balance | Note |
| 2021 | |||
| 2022 | |||
| 2023 | 149,750.18 | 7,114,967.80 | |
| 2024 | 11,684,299.22 | 11,684,299.22 | |
| 2025 | 18,449,678.50 | 18,449,678.50 | |
| 2026 | 23,855,417.55 | 23,855,417.55 | |
| Total | 54,139,145.45 | 61,104,363.07 |
Note 16． Other non-current assets
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Prepayment for construction and equipment | 42,680,753.78 | 42,680,753.78 | 13,536,307.13 | 13,536,307.13 | ||
Note 17． Short-term loan
| Item | Closing balance | Opening balance |
| Guaranteed loans | 15,737,928.76 | 142,195,227.88 |
| Credit loans | 250,000,000.00 | 400,000,000.00 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 178
| Item | Closing balance | Opening balance |
| Accrued interest payable | 256,666.67 | 478,050.21 |
| Total | 265,994,595.43 | 542,673,278.09 |
Note 18． Notes payable
| Types | Closing balance | Opening balance |
| Commercial bills payable | 21,223.10 | 3,581,360.00 |
Note 19． Account payables
| Item | Closing balance | Opening balance |
| Trade payables | 232,841,934.81 | 284,050,848.79 |
| Payables for material purchased | 20,513,993.11 | 15,679,531.11 |
| Payables for project | 1,232,967.42 | 1,481,135.49 |
| Total | 254,588,895.34 | 301,211,515.39 |
Note 20． Advances from customer
| Item | Closing balance | Opening balance |
| Rental received in advance | 11,025,664.72 | 9,991,850.67 |
Note 21． Contract liabilities
| Item | Closing balance | Opening balance |
| Advances for goods received | 22,505,426.65 | 18,213,396.49 |
Note 22． Employee remuneration payable1． Status
| Item | Opening balance | Increase | Decrease | Closing balance |
| Short-term employee benefits | 125,981,238.62 | 671,171,231.14 | 662,456,183.27 | 134,696,286.49 |
| Post-employment benefits - defined contribution plans | 6,767,477.58 | 48,794,359.96 | 46,097,963.35 | 9,463,874.19 |
| Termination benefits | 104,746.00 | 3,396,691.07 | 1,725,447.69 | 1,775,989.38 |
| Total | 132,853,462.20 | 723,362,282.17 | 710,279,594.31 | 145,936,150.06 |
2． Short-term employee benefits
| Item | Opening balance | Increase | Decrease | Closing balance |
| Salaries, bonus, allowances | 125,136,477.65 | 608,818,494.84 | 600,136,279.73 | 133,818,692.76 |
| Staff welfare | 3,805.46 | 11,377,936.46 | 11,381,033.12 | 708.80 |
| Social insurances | 22,210,707.38 | 22,190,086.72 | 20,620.66 | |
| Including:1.Medical insurance | 20,788,454.25 | 20,767,833.59 | 20,620.66 | |
| 2. Supplementary medical insurance | 26,898.00 | 26,898.00 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 179
| 3.Work-related injury insurance | 782,748.63 | 782,748.63 | ||
| 4.Maternity insurance | 612,606.50 | 612,606.50 | ||
| Housing Fund | 2,932.00 | 19,839,787.30 | 19,815,615.30 | 27,104.00 |
| Labor union fees and education fee | 838,023.51 | 8,924,305.16 | 8,933,168.40 | 829,160.27 |
| Short-term paid absences | ||||
| Other short-term employee benefits | ||||
| Total | 125,981,238.62 | 671,171,231.14 | 662,456,183.27 | 134,696,286.49 |
3． Defined contribution plans
| Item | Opening balance | Increase | Decrease | Closing balance |
| Basic pension insurance | 295,976.45 | 40,964,893.15 | 41,034,054.05 | 226,815.55 |
| Unemployment insurance | 437.76 | 1,210,037.85 | 1,210,475.61 | |
| Annuity | 6,471,063.37 | 6,619,428.96 | 3,853,433.69 | 9,237,058.64 |
| Total | 6,767,477.58 | 48,794,359.96 | 46,097,963.35 | 9,463,874.19 |
Note 23． Taxes payable
| Item | Closing balance | Opening balance |
| VAT | 46,711,341.16 | 36,028,888.63 |
| Corporate income tax | 15,663,227.68 | 29,488,177.68 |
| Individual income tax | 1,568,912.16 | 1,609,420.04 |
| Urban maintenance and construction tax | 1,624,353.62 | 631,469.18 |
| Educational surcharges | 1,161,292.58 | 450,946.60 |
| Others | 1,040,752.81 | 716,369.77 |
| Total | 67,769,880.01 | 68,925,271.90 |
Note 24． Other payables
| Item | Closing balance | Opening balance |
| Dividends payable | 5,015,026.30 | 1,639,513.77 |
| Other payables | 162,793,733.65 | 126,938,084.17 |
| Total | 167,808,759.95 | 128,577,597.94 |
Note: Other payables in above table refers to other payables excluding interest payable anddividends payable.
1. Dividends payable
| Item | Closing balance | Opening balance | Reasons for not being paid |
| Dividends for ordinary shares | 5,015,026.30 | 1,639,513.77 | unlock |
2. Other payables
(1) Other payables by nature
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 180
| Nature | Closing balance | Opening balance |
| Security deposit | 33,536,237.44 | 46,419,944.64 |
| Shop activity fund | 19,208,694.86 | 21,861,578.14 |
| Decoration expenses | 10,201,524.91 | 7,481,768.84 |
| Repurchase liability for restricted shares | 60,585,678.92 | 16,299,166.73 |
| Other | 39,261,597.52 | 34,875,625.82 |
| Total | 162,793,733.65 | 126,938,084.17 |
(2) Material other receivables with aging over 1 year
| Name | Closing balance | Reasons for not being paid |
| Huazhu Hotel Management Co., Ltd | 4,600,000.00 | Undue |
| Shenzhen Coman Medical Equipment Co., Ltd. | 1,676,337.60 | Undue |
| Bilin Venture Capital (Shenzhen) Partnership LLP | 1,442,275.27 | Undue |
| Yading (Shenzhen) Industrial Co., Ltd. | 1,332,652.89 | Undue |
| Total | 9,051,265.76 |
Note 25． Non-current liabilities due within one year
| Item | Closing balance | Opening balance |
| Long-term loan due within one year | 3,924,900.00 | 370,030.00 |
| Lease liabilities due in one year | 83,025,006.35 | 88,839,586.06 |
| Total | 86,949,906.35 | 89,209,616.06 |
Note 26． Other current liabilities
| Item | Closing balance | Opening balance |
| Output VAT not yet realized | 2,798,738.32 | 2,299,755.09 |
Note 27． Long-term loan
| Category | Closing balance | Opening balance |
| Mortgage loans | 3,924,900.00 | 4,440,360.00 |
| Less: Long-term loan due within one year | 3,924,900.00 | 370,030.00 |
| Total | 4,070,330.00 |
As of 31 December 2021, the carrying amount of fixed assets used in mortgage for the Company’s loanamounted to RMB11,490,566.65.
Note 28． Lease liabilities
| Residual lease term | Closing balance | Opening balance |
| Within 1 year | 87,412,539.35 | 94,225,765.63 |
| 1 - 2 years | 45,978,062.22 | 60,405,317.90 |
| 2 - 3 years | 13,813,526.70 | 16,268,969.19 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 181
| Over 3 years | 7,720,317.07 | 2,896,760.13 |
| Total lease payables | 154,924,445.34 | 173,796,812.85 |
| Less: financing expense not realized | 6,980,716.89 | 7,517,647.49 |
| PV of lease payables | 147,943,728.45 | 166,279,165.36 |
| Less: lease liabilities due in one year | 83,025,006.35 | 88,839,586.06 |
| Total | 64,918,722.10 | 77,439,579.30 |
Interest expenses for lease liabilities recognized in current period was RMB6,486,982.37.
Note 29． Deferred income
| Item | Opening balance | Increase | Decrease | Closing balance | Reason |
| Asset related government subsidy | 2,377,718.35 | 584,884.45 | 1,792,833.90 | See below table | |
| income related government subsidy | 538,628.08 | 538,628.08 | See below table | ||
| Total | 2,916,346.43 | 1,123,512.53 | 1,792,833.90 |
1． Deferred income related to government subsidy
Note 30． Share capital
| Item | Opening balance | Movements: increase(+) , decrease(－) | Closing balance | ||||
| Newly issued | Bonus share | Capitalization of capital reserves | Others | Subtotal | |||
| Total shares | 428,091,881 | 7,660,000 | -9,700,866 | -2,040,866 | 426,051,015 | ||
Notes to movements:
1. On 15 December 2020, pursuant to the examination and approval given by AVIC under “Reply toExamination and approval of Implementation of Second Phase of Restricted Share Incentive plan of
| Item | Opening balance | Addition | Include in non-operating income in current period | Include in other gains in current period | Offsetting expense or cost | Closing balance | Related to asset /income |
| Special fund for Shenzhen industrial design industry development | 551,309.04 | 161,185.89 | 390,123.15 | Asset related | |||
| Funding project for construction of National Enterprise Technology Center | 925,127.45 | 293,147.06 | 631,980.39 | Asset related | |||
| Provincial Specialized Fund for Industrial and Information | 901,281.86 | 130,551.50 | 770,730.36 | Asset related | |||
| Others | 538,628.08 | 538,628.08 | - | Income related | |||
| Total | 2,916,346.43 | 1,123,512.53 | 1,792,833.90 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 182
FIYTA Precision Technology Co., Ltd.” (Ren Zi [2020] No. 35) , and approved by the board of directorsand shareholder’s general meeting, the Company implemented the incentive plan. On 15 January 2021,the restricted share incentive plan (second phase) had granted restricted A-shares of 7,660,000 sharesto 135 incentive individuals.
2. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted sharesauthorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of““Proposal of repurchase and de-registration part of restricted shares authorized under 2018 A-shareRestricted Share Incentive Plan (Second Phase) ”, the Company repurchased and de-registered, in 2021,706,780 A-share restricted shares that had been authorized but still under restriction period. Thoseshares were owned by 9 former incentive object that are resigned.
3. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany was authorized to repurchase B Shares, using the Company’s fund, to reduce the registeredcapital. On 3 August 2021, confirmed by China Securities Depository and Clearing Co., Ltd ShenzhenBranch, the Company de-registered 8,994,086 B-shares.
Note 31． Capital reserve
| Item | Opening balance | Increase | Decrease | Closing balance |
| Share premium | 996,986,711.73 | 54,257,795.84 | 41,135,973.76 | 1,010,108,533.81 |
| Other capital reserve | 24,503,676.05 | 13,667,981.68 | 7,371,997.41 | 30,799,660.32 |
| Total | 1,021,490,387.78 | 67,925,777.52 | 48,507,971.17 | 1,040,908,194.13 |
Notes to capital reserve
1. On 15 December 2020, pursuant to the examination and approval given by AVIC under “Reply toExamination and approval of Implementation of Second Phase of Restricted Share Incentive plan ofFIYTA Precision Technology Co., Ltd.” (Ren Zi [2020] No. 35) , and approved by the board of directorsand shareholder’s general meeting, the Company implemented the incentive plan. On 15 January 2021,the restricted share incentive plan (second phase) had granted restricted A-shares of 7,660,000 sharesto 135 incentive individuals. The Company received share purchase payment of RMB58,216,000.00.Amongst, share capital increase by RMB7,660,000, and capital reserve increased by 50,556,000.00. Atthe same time, recognized share repurchase obligation in other payables amounting toRMB58,216,000.00 and corresponding treasury shares of RMB58,216,000.00. In 2021, the Companycharged RMB12,106,904.32 into cost or expenses in change of incentive personnel’s service andincreased the capital reserve by the same amount accordingly.
2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany was authorized to repurchase B Shares, using the Company’s fund, to reduce the registeredcapital. On 3 August 2021, confirmed by China Securities Depository and Clearing Co., Ltd ShenzhenBranch, the Company de-registered 8,994,086 B-shares, which in turn decreased the capital reserve by
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 183
RMB41,132,596.76.
3. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted sharesauthorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of““Proposal of repurchase and de-registration part of restricted shares authorized under 2018 A-shareRestricted Share Incentive Plan (Second Phase) ”, the Company repurchased and de-registered, in 2021,706,780 A-share restricted shares that had been authorized but still under restriction period. Thoseshares were owned by 9 former incentive object that are resigned. Capital reserve of RMB3,670,201.57was deducted accordingly.
4. Differences, caused by fair value different when unlock the restricted shares, between CITdeducted amount and cost or expenses recognized in vesting period increased the capital reserve byRMB1,561,077.36.
5. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany incurred transaction cost of RMB 3,377 for the repurchase. The expenses of RMB3,377 wasdeducted from capital reserve.
Note 32． Treasury shares
| Item | Opening balance | Increase | Decrease | Closing balance |
| Share repurchase | 45,368,941.80 | 4,757,740.96 | 50,126,682.76 | |
| Share based payment | 16,264,588.68 | 58,216,000.00 | 13,894,909.76 | 60,585,678.92 |
| Total | 61,633,530.48 | 62,973,740.96 | 64,021,592.52 | 60,585,678.92 |
Notes to treasury shares:
1. As described in Note VI. 31. 1, the treasury shares increased by RMB58,216,000.00 due to issueof restricted shares.
2. As described in Note VI. 31. 2, the treasury shares decreased by RMB50,126,682.76 due tore-purchase of B-share.
3. As described in Note VI. 31. 3, the treasury shares decreased by RMB4,376,981.57 due tore-purchase of restricted shares. And cash dividend to the remaining restricted shares decreasedtreasury shares by RMB4,088,467.68.
4. In 2021, the Company re-purchased B-share of 847,685 shares. Consideration paid wasHKD5,691,273.88 (excluding trading fee) , equivalent to RMB4,757,740.96. The treasury shareincreased by 4,757,740.96.
5. On 29 December 2021, Pursuant to the “Resolution of Fulfilling Unlocking Condition for the 2018A-Share Restricted Share Incentive Plan (First Phase) ” passed on the 24th meeting of the 9th Board,the first unlocking condition was met. Based on the authorization of the General Meeting, the Board liftedrestriction for 122 incentive individuals. The corresponding shares can be traded on 1 February 2021, ofwhich the cash dividend decreased treasury shares by RMB5,429,460.51.
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 184
Note 33． Other Comprehensive income
| Item | Opening balance | Amount in current period | Closing balance | ||||||||
| Pre-tax amount | Less: recorded in OCI in prior period and transferred to profit or loss in current period | Less: recorded in OCI in prior period and transferred to financial assets at amortized cost | Less: reserve of hedging transferred to related assets or liabilities | Less: CIT | Attribute to parent company after tax | Attribute to non-controlling shareholders after tax | Less: movements of defied benefit plan | Less: recorded in OCI in prior period and transferred to retained earnings in current period | |||
| I. Other comprehensive income items which will not be reclassified subsequently to profit or loss | |||||||||||
| II. Other comprehensive income items which may be reclassified subsequently to profit or loss | |||||||||||
| translation difference | 976,871.41 | -8,635,217.81 | -8,635,217.81 | -7,658,346.40 | |||||||
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 185
Note 34． Specific reserve
| Item | Opening balance | Increase | Decrease | Closing balance |
| Safety production fee | 1,421,605.68 | 358,874.55 | 1,062,731.13 |
Note 35． Surplus reserve
| Item | Opening balance | Increase | Decrease | Closing balance |
| Statutory surplus reserve | 184,546,972.87 | 28,478,534.63 | 213,025,507.50 | |
| Discretionary surplus reserve | 61,984,894.00 | 61,984,894.00 | ||
| Total | 246,531,866.87 | 28,478,534.63 | 275,010,401.50 |
Notes to surplus reserve:
Note: According to the Company Law and Articles of Association, the Company draws statutorysurplus reserve at 10% of net profit. If the statutory surplus reserve is over 50% of the Company’sregistered capital, drawing of statutory surplus reserve will be stopped.The Company can draw discretionary surplus reserve after drawing statutory surplus reserve. Ifapproved, discretionary surplus reserve can be used to make up for losses in previous years or increaseshare capital.
Note 36． Undistributed profit
| Item | Current period | Prior period |
| Undistributed profit at the end of prior year before adjustments | 1,164,490,911.51 | 966,840,818.40 |
| Adjustments to undistributed profit at the beginning of year (“+” for increase and “-“ for decrease) | -11,188,268.01 | |
| Undistributed profit at the beginning of year after adjustment | 1,153,302,643.50 | 966,840,818.40 |
| Plus: Net profit attributable to the owner of the parent company for the year | 387,840,282.95 | 294,115,156.04 |
| Less: statutory surplus reserve drawn | 28,478,534.63 | 10,830,686.73 |
| Dividends payable to ordinary shares | 174,220,065.73 | 85,634,376.20 |
| Undistributed profit at the end of year | 1,338,444,326.09 | 1,164,490,911.51 |
Notes to adjusting undistributed profit at the beginning of year
Opening undistributed profit was adjusted by -11,188,268.01 because of change in accountingpolicies. Refer to Note IV. 38 for details.
Note 37． Operating income and operating cost
1．Operatingincome and operatingcost
| Item | Amount in current period | Amount in prior period |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 186
| Item | Amount in current period | Amount in prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Main business | 5,224,836,384.30 | 3,283,434,432.96 | 4,226,992,193.44 | 2,632,869,284.16 |
| Other business | 18,897,156.63 | 2,221,796.17 | 16,447,759.15 | 6,360,252.90 |
2．Revenuegenerated bycontract
| Types of contract | Amount in current period | Amount in prior period |
| I. Types of goods | ||
| Watch business | 4,923,280,724.48 | 3,970,903,426.36 |
| Precision manufacturing | 150,094,350.20 | 138,806,456.76 |
| Other business | 18,897,156.63 | 16,447,759.15 |
| II. Categorized based on timing of goods transfer | ||
| At a point of time | 5,078,899,659.72 | 4,115,090,762.09 |
| During a period of time | 13,372,571.59 | 11,066,880.18 |
Note: revenue generated by contract does not include lease income of RMB151,461,309.62 which isregulated under “CAS No.21 – Lease”.
Note 38． Tax and surcharges
| Item | Amount in current period | Amount in prior period |
| Urban maintenance and construction tax | 13,898,225.16 | 10,068,664.42 |
| Educational surcharge | 5,907,693.68 | 4,314,874.91 |
| Local education surcharges | 3,923,712.57 | 2,840,421.94 |
| Property tax | 7,224,965.66 | 4,094,171.89 |
| Stamp duty | 4,156,804.98 | 3,347,384.62 |
| Others | 2,452,184.75 | 778,621.52 |
| Total | 37,563,586.80 | 25,444,139.30 |
Note 39． Selling and distribution expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 433,505,654.18 | 359,485,012.85 |
| Department store expense and rental | 189,748,898.49 | 225,399,141.62 |
| Market promotion expenses | 161,389,740.20 | 129,846,038.05 |
| Depreciation and amortization | 191,787,912.35 | 93,520,422.84 |
| Packaging expenses | 8,739,319.16 | 8,931,806.05 |
| Utilities and property management expenses | 22,588,777.26 | 19,596,237.03 |
| Shipping fees | 8,530,775.41 | 5,316,601.90 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 187
| Item | Amount in current period | Amount in prior period |
| Office expenses | 7,446,024.76 | 5,894,271.36 |
| Travel expenses | 7,279,500.39 | 6,384,080.73 |
| Entertainment expenses | 4,046,655.86 | 3,437,118.33 |
| Others | 14,834,965.22 | 12,903,168.56 |
| Total | 1,049,898,223.28 | 870,713,899.32 |
Note 40． Administrative expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 202,675,218.51 | 196,350,562.99 |
| Depreciation and amortization | 24,544,056.69 | 25,865,228.70 |
| Travel expenses | 3,980,000.38 | 3,537,267.52 |
| Office expenses | 5,390,287.09 | 4,446,219.38 |
| Agents fees | 3,342,562.00 | 5,371,712.37 |
| Rental and utilities | 852,555.31 | 1,007,513.11 |
| Entertainment expenses | 1,494,588.12 | 1,269,440.44 |
| Vehicle and transportation expenses | 1,718,083.11 | 1,781,896.05 |
| Telecommunication expenses | 983,910.06 | 1,009,390.54 |
| Others | 16,645,501.14 | 15,919,896.13 |
| Total | 261,626,762.41 | 256,559,127.23 |
Note 41． R&D expenses
| Item | Amount in current period | Amount in prior period |
| Salary | 40,498,469.51 | 32,217,390.03 |
| Sample and material expenses | 1,557,455.43 | 1,561,063.66 |
| Molding expenses | 744,578.81 | 986,988.83 |
| Depreciation and amortization | 6,048,741.96 | 6,397,967.06 |
| Technical cooperation fee | 2,480,127.69 | 4,768,053.72 |
| Others | 6,473,195.77 | 5,557,860.19 |
| Total | 57,802,569.17 | 51,489,323.49 |
Note 42． Financial expenses
| Item | Amount in current period | Amount in prior period |
| Interest expenses | 23,159,963.74 | 21,315,119.78 |
| Less: Interest income | 3,589,649.85 | 4,941,334.19 |
| Exchange gain or losses | 634,406.96 | 3,896,579.87 |
| Bank charges | 14,472,352.80 | 13,178,910.95 |
| Total | 34,677,073.65 | 33,449,276.41 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 188
Note 43． Other income1． Details
| Sources of other income | Amount in current period | Amount in prior period |
| Government subsidy | 21,328,673.21 | 25,170,397.09 |
2． Government subsidy included in other income
| Item | Amount in current period | Amount in prior period | Asset or income related |
| Quality and Branding Promotion Subsidy for 2020 Technique Multiplication Subsidy Plan | 1,960,000.00 | 2,400,000.00 | Income related |
| Provincial industry and information special subsidy | 130,551.50 | 130,551.48 | Asset related |
| Subsidy to promote consumption | 420,000.00 | Income related | |
| High precision watch technology innovation project | -160,000.00 | Income related | |
| Commission on IIT payment | 502,644.31 | 370,789.08 | Income related |
| Guangming District specific subsidy for online market expanding | 200,000.00 | Income related | |
| State certified R&D center | 293,147.06 | 293,147.06 | Asset related |
| Other subsidies | 711,026.01 | 813,731.50 | Income related |
| R&D project subsidy | 378,000.00 | 355,000.00 | Income related |
| 2019 Shenzhen Standard Special Fund | 836,705.00 | 979,160.00 | Income related |
| Shenzhen post-doctoral subsidy | 550,000.00 | Income related | |
| Special fund for Shenzhen industrial designing | 161,185.89 | 178,635.97 | Asset related |
| Corporate Research and Development Funding | 756,000.00 | 571,000.00 | Income related |
| Special fund of Nanshan district to support self-innovation industry development | 4,913,900.00 | 4,526,600.00 | Income related |
| Subsidy to assist high quality development of fashion industry | 3,730,000.00 | Income related | |
| Subsidy for stabilizing job position | 833,013.44 | 3,743,398.00 | Income related |
| Subsidy to support sales promotion | 3,500,000.00 | 1,000,000.00 | Income related |
| Government subsidy for R&D project | 200,000.00 | Income related | |
| Training subsidy | 322,500.00 | 611,500.00 | Income related |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project | 1,090,000.00 | 677,000.00 | Income related |
| 2019 Nanshan District self-innovation industry development subsidy | 209,500.00 | Income related | |
| Subsidy for SME to expanding market | 176,920.00 | Income related | |
| Plan to subsidy industrial internet development | 520,000.00 | Income related | |
| Guangdong Provincial Science and Technology Innovation Strategy Fund | 1,000,000.00 | Income related | |
| Nanshan Industrial and Information Bureau subsidy for rental | 100,000.00 | Income related | |
| Social insurance subsidy | 101,300.00 | Income related |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 189
| Headquarters enterprise award | 2,872,900.00 | Income related | |
| Special fund of Nanshan district Industrial and Information Bureau to support trading industry | 2,592,300.00 | Income related | |
| Special subsidy to Shenzhen intelligence property right area | 300,000.00 | Income related | |
| Associate subsidy to China patent excellence award | 200,000.00 | Income related | |
| Central government foreign trade development special fund | 446,964.00 | Income related | |
| Total | 21,328,673.21 | 25,170,397.09 |
Note 44． Investment gain
| Item | Amount in current period | Amount in prior period |
| Gain from long-term equity investments accounted for using equity method | 3,754,939.39 | 5,072,577.64 |
Note 45． Credit impairment loss
| Item | Amount in current period | Amount in prior period |
| Bad debt loss | -11,075,001.77 | -9,096,922.74 |
Note 46． Asset impairment loss
| Item | Amount in current period | Amount in prior period |
| Inventory decline in value | -25,861,394.56 | -15,426,526.41 |
Note 47． Gains from assets disposal
| Item | Amount in current period | Amount in prior period |
| Gains (losses) from assets disposal | -134,543.49 | -369,857.30 |
| Gains (losses) from right-of-use assets disposal | 864,678.36 | |
| Total | 730,134.87 | -369,857.30 |
Note 48． Non-operating income
| Item | Amount in current period | Amount in prior period | Amount included in non-recurring gains or losses in current period |
| Compensation | 113,138.61 | 1,769,663.80 | 113,138.61 |
| Payables cannot be paid | 383,893.25 | 633,022.50 | 383,893.25 |
| Others | 130,403.17 | 708,727.34 | 130,403.17 |
| Total | 627,435.03 | 3,111,413.64 | 627,435.03 |
Note 49． Non-operating expense
| Item | Amount in current period | Amount in prior period | Amount included in non-recurring gains or losses in current period |
| Donation | 300,000.00 | 300,000.00 | |
| Fine and penalty for late payment | 698,864.04 | 1,032.09 | 698,864.04 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 190
| Item | Amount in current period | Amount in prior period | Amount included in non-recurring gains or losses in current period |
| Payment for breach of agreement | 2,507,649.06 | 331,373.75 | 2,507,649.06 |
| Others | 179,653.45 | 1,222,707.02 | 179,653.45 |
| Total | 3,686,166.55 | 1,555,112.86 | 3,686,166.55 |
Note 50． CIT expenses1． Details
| Item | Amount in current period | Amount in prior period |
| Current tax expense for the year based on tax law and regulations | 112,084,704.70 | 82,548,458.59 |
| Changes in deferred tax assets/liabilities | 2,382,671.18 | -3,209,941.99 |
| Total | 114,467,375.88 | 79,338,516.60 |
2． Reconciliation between income tax expenses and accounting profit is as follows:
| Item | Amount in current period |
| Profits before tax | 502,327,716.11 |
| Income tax calculated based on statutory tax rate | 125,581,929.05 |
| Effect of different tax rates applied by subsidiaries | -7,919,551.34 |
| Adjustment to income tax of previous years | 765,383.02 |
| Effect of non-taxable income | -946,628.62 |
| Effect of non-deductible costs, expenses and losses | 4,388,679.47 |
| Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in prior period | -604,278.27 |
| Effect of deductible temporary differences or deductible losses for which no deferred tax asset was recognized this year | |
| Effect of research and development expenses super deduction | -6,798,157.43 |
| Others | |
| Income tax expenses | 114,467,375.88 |
Note 51． Notes to cash flow statement1． Cash received from other operating activities
| Item | Amount in current period | Amount in prior period |
| Security deposit | 12,286,247.59 | 16,369,729.33 |
| Government subsidy | 22,985,857.32 | 29,643,860.40 |
| Promotion expenses | 13,582,651.81 | 12,486,890.27 |
| Interest income | 3,589,649.85 | 4,941,334.19 |
| Return of petty cash | 7,070,953.20 | 5,503,961.77 |
| Others | 25,872,097.79 | 9,056,036.49 |
| Total | 85,387,457.56 | 78,001,812.45 |
2． Cash paid for other operating activities
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 191
| Item | Amount in current period | Amount in prior period |
| Security deposit | 27,774,098.01 | 13,371,641.24 |
| Petty cash advanced to employee | 11,532,694.33 | 8,618,216.90 |
| Current period expenses | 436,157,747.82 | 433,410,006.32 |
| Others | 2,635,207.94 | 2,258,442.62 |
| Total | 478,099,748.10 | 457,658,307.08 |
3． Cash paid for other financing activities
| Item | Amount in current period | Amount in prior period |
| Lease payment | 115,532,289.07 | |
| Cash paid for re-purchase of shares | 9,178,101.51 | 72,317,669.93 |
| Total | 124,710,390.58 | 72,317,669.93 |
Note 52． Supplement information to cash flow statement1． Supplement to cash flow statement
| Item | Amount in current period | Amount in prior period |
| 1. Reconciliation of net profit/loss to cash flows from operating activities： | ||
| Net profit | 387,860,340.23 | 294,122,102.24 |
| Add: Credit impairment loss | 11,075,001.77 | 9,096,922.74 |
| Impairment for assets | 25,861,394.56 | 15,426,526.41 |
| Depreciation of fixed assets, and investment property | 42,404,375.44 | 42,147,350.05 |
| Depreciation of right-of-use assets | 100,275,414.73 | |
| Intangible asset amortization | 6,162,432.21 | 8,011,446.67 |
| Amortization of long-term deferred expenses | 103,932,868.69 | 107,402,300.57 |
| Loss on disposal of fixed assets, intangible assets, and other long-term assets (“-“ for gain) | -730,134.87 | 369,857.30 |
| Loss on scrap of fixed assets (“-“ for gain) | ||
| Loss on changes of fair value (“-“ for gain) | ||
| Financial expenses (“-“ for income) | 23,159,963.74 | 21,315,119.78 |
| Investment loss (“-“ for gain) | -3,754,939.39 | -5,072,577.64 |
| Decrease in deferred tax assets (“-“ for increase) | -319,474.30 | 2,825,583.02 |
| Increase in deferred tax liabilities (“-“ for decrease) | 2,168,679.48 | 1,811,592.06 |
| Decrease in inventories (“-“ for increase) | -133,051,377.44 | -137,479,263.64 |
| Decrease in operating receivables (“-“ for increase) | 59,770,087.01 | -137,884,765.44 |
| Increase in operating payables (“-“ for decrease) | -77,565,523.41 | 156,118,311.75 |
| Others | ||
| Net cash flows from operating activities | 547,249,108.45 | 378,210,505.87 |
| 2. Significant investment or financing activities not involving cash: |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 192
| Item | Amount in current period | Amount in prior period |
| Debts converted to capital | ||
| Convertible debts mature within one year | ||
| Fixed assets acquired under finance leases | ||
| 3. Net changes in cash and cash equivalents: | ||
| Cash at end of year | 210,254,737.14 | 353,057,285.71 |
| Less: cash at beginning of year | 353,057,285.71 | 315,093,565.09 |
| Plus: cash equivalents at end of year | ||
| Less: cash equivalents at beginning of year | ||
| Net increase in cash and cash equivalents | -142,802,548.57 | 37,963,720.62 |
2． Total cash outflows related to leaseTotal cash outflows related to lease amounted to RMB115,532,289.07.
3． Cash and cash equivalents
| Item | Closing balance | Opening balance |
| I. Cash | 210,254,737.14 | 353,057,285.71 |
| Incl. Cash on hand | 108,612.08 | 183,759.72 |
| Bank deposit available for immediate payment | 188,908,798.10 | 346,055,209.29 |
| Other monetary funds available for immediate payment | 21,237,326.96 | 6,818,316.70 |
| II. Cash equivalents | ||
| Including Bond investment due in three months | ||
| III. Cash and cash equivalents at the end of year | 210,254,737.14 | 353,057,285.71 |
| Including Restricted cash and cash equivalents for the Company and its subsidiaries | 1,724,651.93 | 3,412,028.94 |
Note 53． Assets with restricted ownership or usage rights
| Item | Balance | Reasons |
| Bill receivables | 15,737,928.76 | Bill discounted |
| Fixed asset | 11,490,566.65 | Pledged |
| Total | 27,228,495.41 |
Note 54． Monetary items denominated in foreign currency
1． Monetary items denominated in foreign currency
| Item | Balance denominated in foreign currency as at 31 Dec 2021 | Exchange rate | Balance translated in RMB as at 31 Dec 2021 |
| Monetary fund | 8,514,180.39 | ||
| HKD | 218.63 | 0.8176 | 178.75 |
| USD | 1,019,499.31 | 6.3757 | 6,500,021.75 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 193
| Item | Balance denominated in foreign currency as at 31 Dec 2021 | Exchange rate | Balance translated in RMB as at 31 Dec 2021 |
| EUR | 277,768.92 | 7.2197 | 2,005,408.28 |
| CHF | 1,226.15 | 6.9776 | 8,571.61 |
| Accounts receivable | 6,478,102.53 | ||
| HKD | 1,321,668.61 | 0.8176 | 1,080,596.26 |
| USD | 727,349.65 | 6.3757 | 4,637,364.76 |
| EUR | 91,897.19 | 7.2197 | 663,470.14 |
| CHF | 13,854.53 | 6.9776 | 96,671.37 |
| Other receivables | 98,186.34 | ||
| HKD | 120,090.92 | 0.8176 | 98,186.34 |
| Accounts payable | 1,232,833.10 | ||
| HKD | 459,366.53 | 0.8176 | 375,578.07 |
| CHF | 122,858.15 | 6.9776 | 857,255.03 |
| Other payables | 232,536.98 | ||
| HID | 284,414.11 | 0.8176 | 232,536.98 |
| Long-term loan (including due in one year) | 3,924,900.00 | ||
| CHF | 562,500.00 | 6.9776 | 3,924,900.00 |
2． Overseas operational entity
For main business location and recording currency of important overseas operating entities, refer to NoteIV. 5.
Note 55． Government subsidy1． Status
| Types of government subsidy | Amount in current period | Amount included in current period profit or loss | note |
| Subsidy included in deferred income | 1,123,512.53 | Note VI 29 |
Subsidy included in other income
| Subsidy included in other income | 20,365,160.68 | 20,365,160.68 | Note VI 43 |
| Subsidy used to offset cost or expenses | 2,620,696.64 | 2,620,696.64 | Note 2 below |
| Less: subsidy returned | 633,183.35 | 633,183.35 | Note 3 below |
Total
| Total | 22,352,673.97 | 23,476,186.50 |
2． Subsidy used to offset cost or expenses
| Item | Type | Amount in current period | Amount in prior period | Cost or expenses offset |
| subsidized interest | State treasury | 2,170,134.64 | 4,603,207.48 | Financial expenses |
Subsidy for electricity expenses
| Subsidy for electricity expenses | State treasury | 450,562.00 | 860,524.00 | Administrative expenses |
| Total | 2,620,696.64 | 5,463,731.48 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 194
3． Subsidy returned
| Item | Type | Amount in current period | Amount in prior period | Reasons for return |
Over disbursement of subsidy andits interest
| Over disbursement of subsidy and its interest | Income related | 160,000.00 | Over disbursement |
Subsidized interest
| Subsidized interest | Income related | 473,183.35 | Not qualified | |
| Total | 633,183.35 |
VII. Changes to the scope of consolidationRefer to Note II Scope of consolidation for information about entities that newly included or excludedin the consolidation scope.VIII. Interests in other entities
1. Equity in subsidiary
(1) Composition of enterprise group
| Name | Place of operation | Place of registration | Nature of business | Shareholding ratio (%) | Ways acquired | |
| Direct | Indirect | |||||
| Shenzhen Harmony World Watch Center Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| FIYTA Sales Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Shenzhen | Shenzhen | Commerce | 90.00 | 10.00 | incorporated or investment |
| Shenzhen FIYTA Technology Development Co., Ltd. | Shenzhen | Shenzhen | manufacturing | 100.00 | incorporated or investment | |
| Harmony World Watch Center (Hainan) Co., Ltd. | Sanya | Sanya | Commerce | 100.00 | incorporated or investment | |
| Shenzhen Xunhang Precision Technology Co., Ltd. | Shenzhen | Shenzhen | manufacturing | 100.00 | incorporated or investment | |
| Emile Choureit Timing (Shenzhen) Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | Shenyang | Shenyang | Commerce | 100.00 | Business combination under common control | |
| TEMPORAL (Shenzhen) Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| Shenzhen Harmony E-commerce Co., Ltd. | Shenzhen | Shenzhen | Commerce | 100.00 | incorporated or investment | |
| FIYTA (Hong Kong) Ltd. | Hong Kong | Hong Kong | Commerce | 100.00 | incorporated or investment | |
| Montres Chouriet SA | Swiss | Swiss | manufacturing | 100.00 | Business combination not under common control | |
| Station 68 | Hong Kong | Hong Kong | Commerce | 60.00 | incorporated or investment | |
2. Equity in joint arrangement or associates
(1) Significant associates
| Name | Place of operation | Place of registration | Nature of business | Shareholding ratio (%) | Accounting treatment | |
| Direct | Indirect | |||||
| Shanghai Watch Co., Ltd. | Shanghai | Shanghai | Commercial | 25% | Equity method | |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 195
(2) Principal financial information of significant associate company
| Item | Closing balance/Amount in current period | Opening balance/Amount in prior period |
| Current assets | 143,367,298.98 | 142,137,359.85 |
| Non-current assets | 17,537,419.20 | 13,783,021.02 |
| Total assets | 160,904,718.18 | 155,920,380.87 |
| Current liabilities | 24,124,925.22 | 35,999,813.24 |
| Non-current liabilities | 1,839,467.79 | |
| Total liabilities | 25,964,393.01 | 35,999,813.24 |
| Non-controlling interest | ||
| Equity attributable to parent company | 134,940,325.17 | 119,920,567.63 |
| Portion of net asset calculated based on shareholding | 33,735,081.29 | 29,980,141.91 |
| Adjustment matters | 21,420,524.02 | 21,420,524.01 |
| - Goodwill | 21,420,524.02 | 21,420,524.01 |
| - Unrealized profit or losses from internal transaction | ||
| - Others | ||
| Carrying value of investment to associates | 55,155,605.31 | 51,400,665.92 |
| Fair value of equity investment that has public quotation | ||
| Operating income | 150,929,452.87 | 96,146,565.15 |
| Net profit | 15,019,757.54 | 19,907,312.29 |
| Net profit from discontinued operation | ||
| Other comprehensive income | ||
| Total comprehensive income | 15,019,757.54 | 19,907,312.29 |
| Dividends received from associated company during the year |
IX. Risk disclosure related to financial instrumentThe major financial instruments of the Company primarily include cash at bank and on hand, equityinvestments, borrowings, accounts receivable, accounts payables and bond payables. The Company isexposed to risks from various financial instruments in day-to-day operation, mainly including credit risk,liquidity risk and market risk. The risks in connection with such financial instruments and the riskmanagement policies adopted by the Company to mitigate such risks are summarized as follows:
The board of directors is responsible for planning and establishing the risk management structure forthe Company, developing risk management policies and the related guidelines across the Company, andsupervising the performance of risk management measures. The Company has developed riskmanagement policies to identify and analyse risks exposed by the Company. These risk managementpolicies have clear regulations over specific risks, covering various aspects of market risk, credit risk andliquidity risk management. The Company will evaluate the market environment and changes of theCompany’s operating activities on a regular basis to decide whether to update the risk managementpolicies and systems. Risk management of the Company is carried out by the Risk Management
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 196
Committee based on the policies as approved by the board of directors. Risk Management Committeeidentifies, evaluates and mitigates related risks by working closely with other business divisions of theCompany. Internal Audit Department of the Company will review the risk management control andprocess regularly, and submit the review results to Audit Committee of the Company. The Companyspreads the risks of financial instruments through appropriate diversified investment and businessportfolio, and mitigates the risk of focusing on any single industry, specific regions or counterparties byway of formulating the corresponding policies for risk management.
1. Credit risk
Credit risk refers to the risk of financial losses to the Company as a result of the failure ofperformance of contractual obligations by the counterparties. The management has developed propercredit policies and continuously monitors credit risk exposures.The Company has adopted the policy of transacting with creditworthy counterparties only. In addition,the Company evaluates the credit qualification of customers and sets up corresponding credit term basedon the financial status of customers, the possibility of obtaining guarantees from third parties, creditrecords and other factors such as current market conditions. The Company monitors the balances andrecovery of bills and accounts receivable, and contract assets on a continual basis. As for bad creditcustomers, the Company will use the written reminders, shorten the credit term or cancel the credit termto ensure that the Company is free from material credit losses. In addition, the Company reviews therecovery of financial assets on each balance sheet date to ensure adequate expected credit lossprovision is made for relevant financial assets.。The Company’s other financial assets include currency funds and other receivables. The credit riskrelating to these financial assets arises from the default of counterparties, but the maximum exposure tocredit risk is the carrying amount of each financial asset in the balance sheet. The Company does notprovide any other guarantee that may expose the Company to credit risk.The monetary funds held by the Company are mainly deposited with financial institutions such asstate-owned banks and other large and medium-sized commercial banks. The management believes thatthese commercial banks have a higher reputation and assets, so there is no major credit risk and theCompany would not have any significant losses caused by the default by these institutions. TheCompany’s policy is to control the amount deposited with these famous financial institutions based ontheir market reputation, operating size and financial background, to limit the credit risk amount of anysingle financial institution.
As a part of its credit risk asset management, the Company assesses the credit loss of receivablesusing aging. The Company’s receivable and other receivables involve large amount of customers. Aginginformation can reflect the ability to repay and risk of bad debt of these customers. The Companydetermined expected loss rate by calculating historical bad debt rate for receivables with different agingbased on historical data and also taking forecast of future economic condition into consideration such asGDP growth rate, state currency policy etc... For long-term receivables, the Company assesses expected
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 197
credit loss reasonably by considering settlement period, contracted payment terms, debtor’s financialsituation and the economic situation of the debtor’s industry.
As at 31 December 2021, the carrying amount of related assets and corresponding ECL is as follows:
| Aging | Carrying amount | Provision |
| Bill receivable | 64,324,925.49 | 3,066,779.69 |
| Accounts receivable | 431,988,353.10 | 43,102,751.82 |
| Other receivable | 65,973,547.15 | 4,420,279.33 |
| Total | 562,286,825.74 | 50,589,810.84 |
As the Company’s customer base is large, no material credit concentration risk.As at 31 December 2021, the balance of top 5 receivable accounts accounted for 35.48% of totalaccounts receivables (2020: 31.28%) .
2. Liquidity risk
Liquidity risk refers to the risk of short of funds when the company performs its obligation of cashpayment or settlement by other financial assets. The Company’s subordinate member companies areresponsible for their respective cash flow projections. Based on the results thereof, the subordinatefinancial management department continually monitors its short-term and long-term capital needs at thecompany level to ensure adequate cash reserves; in the meantime, continually monitors the compliancewith loan agreements and secures undertakings for sufficient reserve funds from major financialinstitutions, to address its short-term and long-term capital needs. Besides, the Company mainly signsfinancing agreements with banks that have business transactions to provide support to fulfill commercialbill obligation. As at 31 December 2021, the Company has financing facilities from several banksamounting to RMB1,112.53 million. Amongst, RMB419.58 million has already been used.As at 31 December 2021, the discounted contractual cash flows for financial liabilities andoff-balance sheet guarantee that presented in maturity are as follows:
| Item | Closing balance in ten thousands yuan | |||||
| Within 1 year | 1 - 2 years | 2 - 3 years | Over 3 years | Total | ||
| Short term loan | 26,846.35 | 26,846.35 | ||||
| Bills payable | 2.12 | 2.12 | ||||
| Accounts payable | 25,458.89 | 25,458.89 | ||||
| Other payables | 16,380.23 | 200.79 | 99.93 | 99.93 | 16,780.88 | |
| Non-current liabilities due in one year | 392.49 | 392.49 | ||||
| Total | 69,080.08 | 200.79 | 99.93 | 99.93 | 69,480.73 | |
3. Market risk
(1) Exchange rate risk
Except that the Company’s subsidiary in Hong Kong uses HKD as settlement currency andsub-subsidiary in Swiss used CHF as settlement currency, the principal places of operations of the
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 198
Company are located in China and the major businesses are settled in RMB. However, the Company’srecognized foreign currency assets and liabilities as well as the foreign currency transactions in the future(the functional currencies of foreign assets and liabilities as well as the transactions are mainly HKD andCHF) remain exposed to exchange rate riskAs at 31 December 2021, the RMB equivalent of financial assets and financial liabilities denominatedin foreign currencies are as follows:
| Item | Closing balance | ||||
| HKD | USD | EUR | CHF | Total | |
| Financial asset denominated in foreign currency: | |||||
| Monetary fund | 178.75 | 6,500,021.75 | 2,005,408.28 | 8,571.61 | 8,514,180.39 |
| Accounts receivable | 1,080,596.26 | 4,637,364.76 | 663,470.14 | 96,671.37 | 6,478,102.53 |
| Other receivables | 98,186.34 | 98,186.34 | |||
| Subtotal | 1,178,961.35 | 11,137,386.51 | 2,668,878.42 | 105,242.98 | 15,090,469.26 |
| Financial liabilities denominated in foreign currency: | |||||
| Accounts payables | 375,578.07 | 857,255.03 | 1,232,833.10 | ||
| Other payables | 232,536.98 | 232,536.98 | |||
| Non-current liabilities due in one year | 3,924,900.00 | 3,924,900.00 | |||
| Subtotal | 608,115.05 | 4,782,155.03 | 5,390,270.08 | ||
Sensitivity analysis
As at 31 December 2021, for financial assets and financial liabilities that denominated in foreign currency, ifRenminbi appreciate or depreciate of 5% to foreign currency and other factors remain unchanged, the net profitwill decrease or increase about RMB 485,000 (31 Dec 2020:RMB 2.55 million) .
(2) Interest rate risk
The interest rate risk of the Company mainly associates with bank borrowings, bonds payable, etc.Floating rate financial liabilities expose the Company to cash-flow interest rate risk, while fixed ratefinancial liabilities expose the Company to fair-value interest rate risk. The Company determines thecomparative proportion of fixed rate contracts and floating rate contracts based on the then marketconditions.The interest rate risk of the Company mainly associates with bank borrowings, bonds payable, etc.Floating rate financial liabilities expose the Company to cash-flow interest rate risk, while fixed ratefinancial liabilities expose the Company to fair-value interest rate risk. The Company determines thecomparative proportion of fixed rate contracts and floating rate contracts based on the then marketconditions.Sensitivity analysis:
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 199
As at 31 December 2021, it is estimated that a general increase or decrease 50 basis points in theborrowings with floating interest rates, with all other variables held constant, the Company’s net profit andshareholder’s equity for the year will decrease or increase by approximately RMB1,000,000.00 (2020:
RMB 1,250,000.00) .
The above sensitivity analysis assumes that interest rate changed on the balance sheet date andapplicable to all loans with floating interest rate terms.
X. Fair value
1. Financial instruments measured at fair value
As at 31 December 2021, the Company does not have financial instruments measured at fair value.
2. Status of financial assets and financial liabilities not measured at fair value
Financial assets and financial liabilities not measured at fair value include: accounts receivable,short-term loans, accounts payable, long-term loans due within one year, and equity instrumentinvestment that does not have public quotation in an active market and its fair value cannot be measuredreliably.
The difference between fair value and carrying amount of the above financial assets and liabilitiesthat not measured at fair value is insignificant.
XI. Related party and related transaction
1. The parent company of the Company
| Name | Registration place | Type of business | Registered capital (in ten thousand RMB) | Shareholding ratio of parent company to the Company % | Ratio of vote right of parent company to the Company% |
| CATIC Shenzhen | Shenzhen | Commercial | 116,616.20 | 38.25 | 38.25 |
(1) Notes to the parent company
CATIC Shenzhen is a subsidiary that 100% held, indirectly, by AVIC International, and AVIC directly holds
91.91% of the equity of AVIC International.
(2) The ultimate controlling party of the Company is AVIC.
2. Refer to Note VIII. 1 for information about the Company’s subsidiaries
3. Refer to Note VIII. 2 for information about the Company’s material associates
4. Other related parties
| Name of other related parties | Relationship |
| Shenzhen CATIC Property Management Limited (CATIC Property Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Building Equipment Co., Ltd. (CATIC Building Company) | Associate company of the controlling shareholder |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 200
| Name of other related parties | Relationship |
| Shenzhen CATIC Nanguang Elevator Engineering Co., Ltd. (CATIC Nanguang) | Associate company of the controlling shareholder |
| China Merchants Property Operation & Service Co., Ltd (China Merchants Property OS) | Associate company of the controlling shareholder |
| CATIC Guanlan Property Development Co., Ltd. (CATIC Guanlan Property) | Associate company of the controlling shareholder |
| China Merchants Jiufang Asset Management Limited (CATIC Jiufang Asset Mgmt Company) | Associate company of the controlling shareholder |
| Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment) | Associate company of the controlling shareholder |
| Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company) | Associate company of the controlling shareholder |
| CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company) | Associate company of the controlling shareholder |
| Shenzhen AVIC Security Service Co., Ltd (AVIC Security Service) | Associate company of the controlling shareholder |
| Jiujiang 9 Square Business Management Co., Ltd (Jiujiang 9 Square Business Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Property Development Co., Ltd (CATIC Property) | Associate company of the controlling shareholder |
| AVIC Shanxi Bocheng Aviation Instrument Co., Ltd. (AVIC Baocheng) | Controlled by the same party |
| Rainbow Digital Science Co., Ltd. and its associated companies (Rainbow Company) | Controlled by the same party |
| Shennan Circuits Co., Ltd. and its associated companies (Shennan Circuits) | Controlled by the same party |
| AVIC Lutong Co., Ltd.(AVIC Lutong) | Controlled by the same party |
| AVIC International Aero-Development Corporation(AVIC Int’l Aero Development) | Controlled by the same party |
| AVIC Huadong Photoelectric Co., Ltd.(AVIC Huadong Photoelectric) | Controlled by the same party |
| AVIC Xi’an Flight Automatic Control Research Institute(AVIC Xi’an Flight Institute) | Controlled by the same party |
| AVIC Jincheng Nanjing Engineering Institute of Aircraft System(AVIC Jincheng Nanjing Institute) | Controlled by the same party |
| AVIC Supply and Distribution Co., Ltd.(AVIC Supply and Distribution) | Controlled by the same party |
| Hubei AVIC Ye Steel Special Steel Sales Co., Ltd.(Hubei AVIC Ye Steel) | Controlled by the same party |
| AVIC (Chengdu) Drone System Co., Ltd. (AVIC Drone) | Controlled by the same party |
| AVIC Harbin Aircraft Industry Group Co., Ltd.(Harbin Aircraft) | Controlled by the same party |
| Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel Management Company) | Controlled by the same party |
| Tianma Micro-electronics Co., Ltd. (Tianma) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities Company) | Controlled by the same party |
| AVIC Training Center | Controlled by the same party |
| AVIC Finance Co., Ltd. (AVIC Finance Company) | Controlled by the same party |
| Gongqingcheng CATIC Culture Investment Co., Ltd (Gongqingcheng CATIC Culture Investment Company) | Controlled by the same party |
| China National Aero-Technology Shenzhen Co., Ltd. ( | Controlled by the same party |
| Beijing Hangtou Real-Estate Co., Ltd. (Beijing Hangtou) | Controlled by the same party |
| Avic Jonhon Optronic Technology Co., Ltd.(AVIC Jonhon) | Controlled by the same party |
| China Aviation International Simulation Technology Services Co., Ltd. (China Aviation International Simulation ) | Controlled by the same party |
| AVIC International Holdings (Zhuhai) Co., Ltd. (AVIC Zhuhai) | Controlled by the same party |
| China National Aero-technology Import & Export Corporation (CATIC) | Controlled by the same party |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 201
| Name of other related parties | Relationship |
| China Aviation Industry General Aircraft Co., Ltd.(CAIGA) | Controlled by the same party |
| AVIC Capital Co., Ltd. (AVIC Capital) | Controlled by the same party |
| Company directors, managers, CFO, and secretary of the board | Key management member |
5. Related party transactions
(1) Related transaction between subsidiaries and between parent companyand subsidiaries which are in the scope of consolidation have already beenoffset.
(2) Purchase good and receiving service
| Purchase good and receiving service | Purchase good and receiving service | Amount in current period | Amount in prior period |
| CATIC Property Management | Property management | 10,672,790.93 | 11,112,069.09 |
| Rainbow Company | Department store expenses/ Commodity purchase | 4,964,647.21 | 4,841,752.49 |
| AVIC Training Center | Training fee | 147,652.13 | 150,000.00 |
| Ganzhou 9 Square Company | Department store expense | 178,484.53 | 182,754.97 |
| CATIC City Estate (Kunshan) Company | Department store expense | 64,060.80 | 50,277.87 |
| Jiufang Business Management | Department store expense | 86,305.01 | 84,262.98 |
| Tianma | Purchase of goods | 538,699.11 | |
| CATIC Building Company | Renovation | 82,276.21 | 114,002.02 |
| CATIC Shenzhen Company | Purchase of goods | 451,327.43 | |
| AVIC Nanguang Company | Elevator maintenance | 463,226.05 | 245,660.40 |
| AVIC Jonhon | Purchase of goods | 76,667.61 | |
| Gongqingcheng CATIC Culture Investment Company | Departmental store expense | 31,544.56 | |
| Total | 16,767,655.04 | 17,770,806.36 |
Notes: All amount listed above exclude tax
(3) sale of goods and providing services
| Related party | Nature of transaction | Amount in current period | Amount in prior period |
| Beijing Hangtou | Sale of product | 3,504.42 | |
| Ganzhou 9 Square | Product and service | 23,850.44 | |
| Gongqingcheng CATIC Culture Investment Company | Sale of product | 461,064.03 | 398,249.10 |
| 9 Square Business Management | Sale of product | 2,648.00 | 45,374.42 |
| Shennan Circuit | Sale of material and providing | 2,179,951.09 | 13,308,898.52 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 202
| service | |||
| Grand Skylight Hotel Management Company | Sale of product | 17,610.62 | 17,610.62 |
| Grand Skylight Hotel | Others | 2,180.53 | 2,180.53 |
| Rainbow Company | Product and service | 79,467,519.77 | 75,021,802.86 |
| AVIC International | Sale of product | 28,237.17 | 87,484.05 |
| AVIC Jonhon | Sale of product | 383,989.41 | |
| China Aviation International Simulation | Sale of product | 60,530.97 | |
| AVIC Zhuhai | Sale of product | 31,831.86 | |
| CATIC | Sale of product | 105,929.20 | |
| CAIGA | Sale of product | 1,319,881.42 | |
| AVIC Capital | Sale of product | 8,681.42 | |
| CATIC Property Management | Share of Utilities and management fee | 3,372,087.78 | 3,406,116.73 |
| Shanghai Watch | Sale of product | 1,839,880.53 | |
| Harbin Aircraft | Sale of product | 36,398.23 | |
| AVIC | Sale of product | 84,132.74 | |
| Hubei AVIC Ye Steel | Sale of product | 17,212.39 | |
| AVIC Huadong Photoelectric | Sale of product | 266,371.68 | |
| AVIC Supply and Distribution | Sale of product | 41,504.42 | |
| AVIC Int’l Aero Development | Sale of product | 140,884.96 | |
| AVIC Lutong | Sale of product | 14,123.89 | |
| AVIC Jincheng Nanjing Institute | Sale of product | 176,991.15 | |
| AVIC Drone | Sale of product | 33,021.24 | |
| AVIC Xi’an Flight Institute | Sale of product | 7,061.95 | |
| Total | 87,469,498.13 | 94,945,300.01 |
Notes: All amount listed above exclude tax
(4) Related party lease
1） The Company as lessor
| Lessee | Type of leased assets | Recognized rental income in current year | Recognized rental income in prior year |
| CATIC Property Management | Property | 7,876,636.32 | 6,864,598.93 |
| China Merchants Property OS | Property | 1,981,713.13 | |
| CATIC City Investment | Property | 285,138.58 | |
| AVIC Securities Company | Property | 1,377,399.99 | 1,328,714.31 |
| Rainbow Company | Property | 931,939.92 | 1,428,372.22 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 203
| Lessee | Type of leased assets | Recognized rental income in current year | Recognized rental income in prior year |
| CATIC 9 Square Asset Mgmt Company | Property | 1,829,906.11 | |
| AVIC Security Service | Property | 799,448.76 | 902,359.45 |
| CATIC Guanlan Property | Property | 142,569.29 | |
| CATIC Property | Property | 286,326.66 | |
| Total | 10,985,424.99 | 15,049,698.68 |
2） The Company as lessee
| Lessor | Type of leased assets | Rental expenses charged in current year | Rental expenses charged in prior year |
| Ganzhou 9 Square Company | Property | 951,348.60 | 913,674.48 |
| Jiufang Business Management | Property | 508,577.07 | 431,504.72 |
| Kunshan Company | Property | 137,142.84 | 111,047.63 |
| Total | 1,597,068.51 | 1,456,226.83 |
(5) Related party fund lending and borrowing
1） Borrowings from related parties
| Related Party | Amount | starting date | Expiring date | Note |
| AVIC Finance Company | 100,000,000.00 | 15 July 2021 | 27 July 2021 | |
| AVIC Finance Company | 100,000,000.00 | 14 December 2021 | 30 December 2021 | |
| Total | 200,000,000.00 |
Note:
The Company paid interest to AVIC Finance Company amounted to RMB283,888.89 during the year.
(6) Remuneration to key management
| Item | Amount in current period | Amount in prior period |
| Remuneration to key management | 18,610,600.00 | 17,150,200.00 |
(7) Other related transactions
The year-end balance of the Company’s cash that is deposited with AVIC Finance Company isRMB147,786,041.19. Interests received from the deposit during the year were RMB393,082.29.
(8) Receivables from and payables to related parties
1) Receivables from related parties
| Item | Related party | Closing balance | Opening balance | ||
| Carrying amount | Bad debt provision | Carrying amount | Bad debt provision | ||
| Monetary fund | |||||
| AVIC Finance | 147,786,041.19 | 283,532,347.79 | |||
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 204
| Item | Related party | Closing balance | Opening balance | ||
| Carrying amount | Bad debt provision | Carrying amount | Bad debt provision | ||
| Company | |||||
| Accounts receivable | |||||
| Ganzhou 9 Square | 6,000.00 | 300.00 | |||
| Gongqingcheng CATIC Culture Investment Company | 10,536.96 | 303.21 | 58,834.76 | ||
| Shennan Circuit | 161,653.56 | 8,082.68 | 1,370,425.31 | 41,249.80 | |
| Rainbow Company | 3,958,751.41 | 244,056.19 | 9,489,446.66 | 285,632.34 | |
| AVIC Jonhon | 44,718.38 | 2,235.92 | |||
| CAIGA | 1,471,466.00 | 73,573.30 | |||
| CATIC Property Management | 0.30 | 40,947.74 | |||
| AVIC Security Service | 0.27 | 0.01 | |||
| Harbin Aircraft | 20,130.00 | 605.91 | |||
| Bill receivable | |||||
| Shennan Circuit | 308,698.46 | 15,434.92 | 5,083,025.01 | 0.00 | |
| AVIC Jonhon | 187,090.69 | 9,354.53 | |||
| Shanxi Bocheng | 50,000.00 | 2,500.00 | |||
| Other receivables | |||||
| Ganzhou 9 Square Company | 192,064.00 | 9,603.20 | 189,432.77 | 8,126.67 | |
| Gongqingcheng CATIC Culture Investment Company | 5,500.00 | 275.00 | 7,462.00 | 320.12 | |
| Jiufang Business Management | 50,000.00 | 2,500.00 | 50,000.00 | 2,145.00 | |
| Rainbow Company | 1,051,020.00 | 52,551.00 | 1,064,073.00 | 45,648.73 | |
| Kunshan Company | 56,000.00 | 2,800.00 | 40,000.00 | 1,716.00 | |
| AVIC | 49.32 | 2.47 | 11,101.80 | 476.27 | |
| AVIC Training Center | 2,464.00 | 74.17 | |||
2) Payables to related parties
| Item | Related party | Closing balance | Opening balance |
| Accounts payable | |||
| CATIC Building Company | 41,283.89 | ||
| Advances from customer | |||
| Rainbow Company | 16,537.50 | ||
| AVIC Securities Company | 123,540.00 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 205
| Item | Related party | Closing balance | Opening balance |
| AVIC Huadong Photoelectric | 10,500.00 | ||
| Other payables: | |||
| Rainbow Company | 198,661.82 | 257,490.98 | |
| AVIC International | 3,600.00 | ||
| CATIC Property Management | 2,307,322.31 | 1,717,018.14 | |
| AVIC Securities Company | 247,080.00 | 238,560.00 | |
| CATIC Nanguang | 34,430.13 | ||
| CATIC Building Company | 31,270.67 | 47,732.93 | |
| AVIC Security Service | 226,603.44 | 226,603.44 | |
| China Merchants Property OS | 442,407.92 | ||
| CATIC City Investment | 309,732.00 | ||
| CATIC Property | 51,014.88 | ||
| CATIC Guanlan Property | 25,401.60 |
XII. Share-based payments
1. General information about share-based payments
| Total equity instrument granted during current period | 7,660,000.00 |
| Total equity instrument exercised during current period | 1,357,641.00 |
| Total equity instruments voided in current period | |
| Scope of outstanding share option exercise price and remaining contract term | Not applicable |
| Scope of outstanding other equity instrument exercise price and remaining contract term. |
2. Equity settled share-based payment
| Method of determining fair value of equity instrument on grant date | Close price of share on grant date |
| Evidence to determine the number of exercisable equity instrument | Term of employee service, status of target completion, and personal performance assessment |
| Reasons for significant difference between current period estimation and prior period estimation | Nil |
| Accumulated amount charged to capital reserve for equity settled share-based payment | 22,118,131.72 |
| Total expenses for equity settled share-based payment recognized in current period | 12,106,904.32 |
XIII. Commitment and contingencies
1. Significant commitments
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 206
(1) Lease contract that already signed or prepared to fulfil and its financialeffectRefer to Note XV for details.
2. Contingencies on balance sheet date
The Company does not have material contingent events that need to be disclosedXIV. Post balance sheet date events
1. Profit distribution
| Profit distributions or dividends proposed | Cash dividend of RMB3.00 (tax inclusive) for every 10 shares held |
2. Other events after the balance sheet date
(1) Share repurchase
Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 2ndmeeting of the 10th Board of Directors on 25 October 2021 and the 5th extraordinary shareholder’smeeting of 2021 on 30 November 2021, the Company repurchased B Shares in total of 3,176,824 sharesas of 8 March 2022, accounted for 0.75% of the Company’s total shares. Total consideration paid wasHKD 24,370,456.90 (excluding stamp duty and commission) .
(2) Financing and guarantee after the balance sheet date
1) On 8 March 2022, pursuant to approval by the 6th meeting the 10th Board of directors, the Companyproposed to apply for financing facility of no more than RMB1,200 million by means of credit, pledge andmortgage in 2022. The resolution is pending for approval by the shareholder’s meeting.
2) On 8 March 2022, pursuant to approval by the 6th meeting the 10th Board of directors, the Companyproposed to provide guarantee for the Company’s wholly-owned subsidiary to borrow from banks of no morethan RMB600 million in 2022. The credit line is included in the actual usage limit of RMB1,200 millionmentioned above. The resolution is waiting approval from the shareholder’s meeting.
(3) Others
As at 8 March 2022, the Company does not have other post-balance sheet events that need to bedisclosed.
XV. Disclosure regarding lease
The Company as a lessor:
1. Lease activities
All lease of the Company is property lease, including short-term lease and other leased thatrecognized right-of-use asset and lease liabilities.
2. Short-term lease
Short-term leases are treated using simplified method. Short-term leases include lease term that isshorter than 12 month and no renew options attached, and leases that will be matured in 12 month afterfirst adoption of CAS 21 – Lease. Short-term lease expenses charged to profit or loss wasRMB1,370,973.78.
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 207
3. Future potential cash outflows that does not included in lease liabilities
(1) Variable lease payment
The lessee leased a lot of retail shops which contains variable lease payment terms in connectionwith sales.Many of the Company’s property lease contain variable lease payment terms in connection with sales.In most circumstances, the Company uses these terms to matches lease payment to shops that cangenerate more cash flows lease payment. For standalone shops, variable can reach 100% of all leasepayment at most and that the scope of percentage of sales used is quite large. In some circumstances,variable payment terms include annual bottom payment and upper limit.In 2021, the amount of variable lease payments included in the current profit and loss was122,274,272.28 yuan.
(2) Option to renew
Many lease contracts entered by the Company has option to renew. The Company has alreadyestimated the option to renew reasonably when determining lease terms in measuring lease liabilities.
(3) Option to discontinue lease
Some of the lease contract entered by the Company has option to discontinue. The Company hasalready estimated the option to discontinue reasonably when determining lease terms in measuring leaseliabilities.
(4) Residual value guarantee
The Company’s lease does not involve residual value guarantee.
(5) Lease that the lessee has already made commitment but not yet started
The Company does not have lease that has already made commitment but not yet started.
Disclosure as a lessor:
1. Lease activities
The Company’s leases are all properties.
2. Risk management strategy of retaining rights over lease assets
To reduce risks of lease, the Company normally asks lessee to pay rental in advance and collects 1-3months rental as deposit.
XVI. Other material information
1. Segments
Operating segments of the Company are identified on the basis of internal organization structure,management requirements and internal reporting system. An operating segment represents a componentof the Company that satisfied the following criteria simultaneously:
(1) Its business activities are engaged to earn revenue and incur expenses;
(2) Its operating results are regularly reviewed by the Company’s management to make decisions onresources allocation and performance assessment;
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 208
(3) Its financial conditions, operating results, cash flow and related accounting information areavailable to the Company.
The Company determines the reporting segment based on the operating segment, and the operatingsegment that meets any of the following conditions is determined as the reporting segment:
(1) The segment income of the operating segment accounts for 10.00% or more of total income of allsegments;
(2) The absolute amount of profits (losses) of the segment account for 10.00% or more of the higherof the absolute amount of total profits of the profiting segment and the absolute amount of total losses ofthe unprofitable segment.
The Company’s business is simple. The business mainly involves manufacturing and sales of watch.The management considers the business as a whole in implementing management and assessing itsperformance. As a result, no segment information is disclosed in this financial statement.
2. Other material events
As at 31 December 2021, the Company does not have other significant matters that require todisclose.
XVII. . Notes to the parent company’s financial statement
Note 1． Accounts receivables1． Presented by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 132,980.92 | 1,633,186.27 |
| Over 1 year | 3,942.90 | 143,415.84 |
| Subtotal | 136,923.82 | 1,776,602.11 |
| Less: bad debt provision | 7,043.34 | 311,803.32 |
| Total | 129,880.48 | 1,464,798.79 |
2． Presentation by method of providing bad debt
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | |||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 136,923.82 | 100.00 | 7,043.34 | 5.14 | 129,880.48 |
| Including: Receivable from other customers | 136,923.82 | 100.00 | 7,043.34 | 5.14 | 129,880.48 |
Continued
| Category | Opening balance | ||
| Carrying amount | Bad debt provision | Book value | |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 209
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Accounts receivable that provided expected credit losses on single basis | |||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 1,776,602.11 | 100.00 | 311,803.32 | 17.55 | 1,464,798.79 |
| Including: Receivable from other customers | 1,776,602.11 | 100.00 | 311,803.32 | 17.55 | 1,464,798.79 |
3． In the portfolio, accounts receivable with expected credit loss provided based on credit
risk characteristic portfolio
(1) Portfolio of receivable from other customer
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 132,980.92 | 6,649.05 | 5.00 |
| Over 1 year | 3,942.90 | 394.29 | 10.00 |
| Total | 136,923.82 | 7,043.34 | 5.14 |
4． Movements of provision during the period
| Category | Opening balance | Movements during the period | Closing balance | |||
| Accrual | Recovered or reversed | Written-off | Other movements | |||
| Accounts receivable that provided expected credit losses on single basis | ||||||
| Accounts receivable that provided expected credit losses on portfolio basis` | 311,803.32 | 304,759.98 | 7,043.34 | |||
| Including: Receivable from other customers | 311,803.32 | 304,759.98 | 7,043.34 | |||
5． No actual write-off of accounts receivable during the current period.6． Top 5 receivable accounts
| Name | Closing balance | Proportion in total closing balance of accounts receivable (%) | Bad debt provision |
| Top 5 receivables accounts in total | 107,840.25 | 78.76 | 5,557.26 |
Note 2． Other receivables1． Presentation of other receivables by aging
| Aging | Closing balance | Opening balance |
| Within 1 year | 717,341,673.50 | 621,369,363.48 |
| 1 - 2 years | 177,475.90 | |
| 2- 3 years | 11,697.43 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 210
| Aging | Closing balance | Opening balance |
| Over 3 years | 40,050.00 | 40,050.00 |
| Subtotal | 717,381,723.50 | 621,598,586.81 |
| Less: bad debt provision | 198,584.50 | 85,906.12 |
| Total | 717,183,139.00 | 621,512,680.69 |
2． Presented by nature
| Nature | Closing balance | Opening balance |
| Related party in scope of consolidation | 713,813,300.99 | 620,792,324.27 |
| Security deposit | 3,117,526.90 | 217,525.90 |
| Others | 450,895.61 | 588,736.64 |
| Total | 717,381,723.50 | 621,598,586.81 |
3． Presented according to three stages of financial assets impairment
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Bad debt provision | Book value | Carrying amount | Bad debt provision | Book value | |
| First stage | 717,381,723.50 | 198,584.50 | 717,183,139.00 | 621,598,586.81 | 85,906.12 | 621,512,680.69 |
| Second stage | ||||||
| Third stage | ||||||
| Total | 717,381,723.50 | 198,584.50 | 717,183,139.00 | 621,598,586.81 | 85,906.12 | 621,512,680.69 |
4． Presented by bad debt provision method
| Category | Closing balance | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | |||||
| Other receivables that provided expected credit losses on portfolio basis | 717,381,723.50 | 100.00 | 198,584.50 | 0.03 | 717,183,139.00 |
| Including: Security deposit portfolio | 3,117,526.90 | 0.44 | 193,923.85 | 6.22 | 2,923,603.05 |
| Social security payment on-behalf portfolio | 357,682.66 | 0.05 | 357,682.66 | ||
| Receivables from related parties within scope of consolidation | 713,813,300.99 | 99.50 | 713,813,300.99 | ||
| Portfolio of others | 93,212.95 | 0.01 | 4,660.65 | 5.00 | 88,552.30 |
| Total | 717,381,723.50 | 100.00 | 198,584.50 | 0.03 | 717,183,139.00 |
Continued
| Category | Opening balance | ||
| Carrying amount | Bad debt provision | Book value | |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 211
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Other receivables that provided expected credit losses on single basis | |||||
| Other receivables that provided expected credit losses on portfolio basis | 621,598,586.81 | 100.00 | 85,906.12 | 0.01 | 621,512,680.69 |
| Including: Security deposit portfolio | 217,525.90 | 0.03 | 45,116.69 | 20.74 | 172,409.21 |
| Social security payment on-behalf portfolio | 392,074.21 | 0.06 | 392,074.21 | ||
| Receivables from related parties within scope of consolidation | 620,792,324.27 | 99.88 | 620,792,324.27 | ||
| Portfolio of others | 196,662.43 | 0.03 | 40,789.43 | 20.74 | 155,873.00 |
| Total | 621,598,586.81 | 100.00 | 85,906.12 | 0.01 | 621,512,680.69 |
5． In the portfolio, other receivables with expected credit loss provided based oncredit risk characteristic portfolio
(1) Security deposit portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 3,077,476.90 | 153,873.85 | 5.00 |
| 1 - 2 years | |||
| 2- 3 years | |||
| Over 3 years | 40,050.00 | 40,050.00 | 100.00 |
| Total | 3,117,526.90 | 193,923.85 | |
(2) Social security payment on-behalf portfolio
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 357,682.66 | ||
(3) Receivables from related parties within scope of consolidation
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 713,813,300.99 | ||
(4) Portfolio of others
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | ECL rate (%) | |
| Within 1 year | 93,212.95 | 4,660.65 | 5.00 |
6． Bad debt provision status
| Bad debt provision | First stage | Second stage | Third stage | Total |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 212
| Expected credit losses over the next 12 months | Lifetime expected credit losses (no credit impairment occurred) | Lifetime expected credit losses (credit impairment occurred) | ||
| Opening balance | 85,906.12 | 85,906.12 | ||
| Opening balance movements in current period | ||||
| —Transfer into the second stage | ||||
| —Transfer into the third stage | ||||
| —Reverse back to the second stage | ||||
| —Reverse back to the first stage | ||||
| Accrual during the period | 148,807.16 | 148,807.16 | ||
| Reversed during the period | 36,128.78 | 36,128.78 | ||
| Recovered during the period | ||||
| Written-off during the period | ||||
| Other movements | ||||
| Closing balance | 198,584.50 | 198,584.50 |
7． No other receivables were written-off during the period.8． Top 5 other receivable accounts
| Name | Closing balance | Proportion to closing balance of other receivables (%) | Bad debt provision Closing balance |
| Top 5 other receivables in total | 713,813,300.99 | 99.50 |
Note 3． Long-term equity investment
| Nature | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Investment in subsidiaries | 1,486,912,339.72 | 1,486,912,339.72 | 1,478,014,522.36 | 1,478,014,522.36 | ||
| Investment in associates | 55,155,605.31 | 55,155,605.31 | 51,400,665.92 | 51,400,665.92 | ||
| Total | 1,542,067,945.03 | 1,542,067,945.03 | 1,529,415,188.28 | 1,529,415,188.28 | ||
1． Investment in subsidiaries
| Investee | Opening balance | Addition/new investment | Withdrawn | Closing balance | Provision accrued in current period | Closing balance of provision |
| Shenzhen Harmony World Watch Center Co., Ltd. | 604,067,211.20 | 3,617,300.95 | 607,684,512.15 | |||
| Shenzhen Harmony E-commerce Co., Ltd. | 11,684,484.39 | 11,684,484.39 | ||||
| Shenzhen FIYTA Precision Technology | 99,800,505.05 | 1,448,702.83 | 101,249,207.88 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 213
| Investee | Opening balance | Addition/new investment | Withdrawn | Closing balance | Provision accrued in current period | Closing balance of provision |
| Co., Ltd. | ||||||
| Shenzhen FIYTA Technology Development Co., Ltd. | 50,245,552.53 | 529,670.23 | 50,775,222.76 | |||
| FIYTA (Hong Kong) Ltd. | 137,737,520.00 | 137,737,520.00 | ||||
| TEMPORAL (Shenzhen) Co., Ltd. | 5,000,000.00 | 5,000,000.00 | ||||
| FIYTA Sales Co., Ltd. | 453,130,819.72 | 2,660,752.60 | 455,791,572.32 | |||
| Liaoning Hengdarui Commercial & Trade Co., Ltd. | 36,867,843.96 | 36,867,843.96 | ||||
| Emile Choureit Timing (Shenzhen) Ltd. | 79,480,585.51 | 641,390.75 | 80,121,976.26 | |||
| Total | 1,478,014,522.36 | 8,897,817.36 | 1,486,912,339.72 |
2． Investment in associates
| Investee | Opening balance | Movements in current period | |||
| Addition/new investment | Withdrawn | Investment gain recognized under equity method | Adjustment to OCI | ||
| Associates | |||||
| Shanghai Watch | 51,400,665.92 | 3,754,939.39 | |||
Continued
| Investee | Movements in current period | Closing balance | Closing balance of provision | |||
| Other equity movements | Cash dividends declared or distribution of profit | Impairment provision accrual | Others | |||
| Associates | ||||||
| Shanghai Watch | 55,155,605.31 | |||||
Note 4． Operating income and operating cost
| Item | Amount in current period | Amount in prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Main business | 175,936,431.09 | 38,852,252.32 | 134,821,552.25 | 36,497,097.45 |
| Other business | 3,519,281.62 | 2,560,243.70 | ||
Note 5． Investment gain
| Item | Amount in current period | Amount in prior period |
| Gain from long-term equity investments accounted for using equity method | 3,754,939.39 | 4,976,828.07 |
| Gain from long-term equity investments accounted for using cost method | 259,918,496.56 | 100,000,000.00 |
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 214
| Item | Amount in current period | Amount in prior period |
| Total | 263,673,435.95 | 104,976,828.07 |
XVIII. Supplementary information
1. Details of non-recurring gain or loss for the year
| Item | Amount | Note |
| Disposal gain or loss of non-current assets | 730,134.87 | |
| Overridden approval, or without official approval document, or incidental tax return or exemption | ||
| Government grants included in current profit or loss (except for the fixed or quantitative government grants, enjoyed in a consecutive way, which closely related to the enterprise businesses and according to nation policies) | 23,476,186.50 | |
| Charges for the possessions of funds collected from non-monetary enterprises | ||
| Gain from investment in subsidiaries, joint venture and cooperative enterprises when cost of investment is less than the profit incurred in identifiable net asset fair value of invested unit when investment | ||
| Profit and loss of non-monetary assets exchange | ||
| Profit and loss from entrusting others to invest or manage assets | ||
| Asset impairment provision accrued due to force majeure such as natural disasters | ||
| Profit and loss of debt restructuring | ||
| Enterprise restructuring expenses, such as expenses for arranging employees, integrating cost | ||
| Profit and loss over fair value part accrued in transactions of unreasonable transaction price | ||
| Current net profit and loss of subsidiaries from business combination under common control from the opening period to combination date | ||
| Profit and loss incurred contingent matters unrelated to normal operating business | ||
| Except for effective hedging business related to normal operating business, profit and loss from changes in fair value incurred in financial assets and financial liabilities, and the investment gain from disposal of financial assets, financial liabilities and available-for-sale financial assets | ||
| Impairment provision reversal of accounts receivable under standalone impairment test | 2,225,653.32 | |
| Profit and loss obtained in external entrusting loans | ||
| Profit and loss incurred in fair value change of investment property subsequently measured in fair value mode | ||
| Influence on current profit and loss caused by one-off adjustment according to requirements of laws and regulations about taxation and accounting | ||
| Income from trustee fee obtained by trusting operation | ||
| Other non-operating income and expenses other than the above items | -3,058,731.52 | |
| Profit and loss items pursuant to the definition of non-recurring profit and loss | ||
| Effect of income tax of non-recurring profit or loss | 4,951,715.05 | |
| Less: Effect of non-recurring profit or losses attributable to minority shareholders (after tax) | ||
| Total | 18,421,528.12 |
2. Return on Equity (ROE) and Earnings per share (EPS)
| Profit of the reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021
Notes to the financial statements – Page 215
| Profit of the reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 13.39 | 0.90 | 0.90 |
| Net profit attributable to ordinary shareholders of the Company after deducting non-recurring profit or loss | 12.76 | 0.86 | 0.86 |
FIYTA Precision Technology Co., Ltd.
Board of DirectorsMarch 10, 2022