Hangzhou Hikvision Digital Technology Co., Ltd.
2023 Half Year Report
January to June 2023
August 19, 2023
Hikvision 2023 Half Year Report
Section I Important Notes, Contents and DefinitionsThe Board of Directors, Board of Supervisors, directors, supervisors and senior management ofHangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as the "Company") herebyguarantee that the information presented in this report shall be together be wholly liable for thetruthfulness, accuracy and completeness of its contents and free of any false records, misleadingstatements or material omissions, and will undertake individual and joint legal liabilities.Chen Zongnian, the Company's legal representative, Jin Yan, the person in charge of theaccounting work, and Zhan Junhua, the person in charge of accounting department (accountingsupervisor) hereby declare and warrant that the financial statements in this half year report areauthentic, accurate and complete.All directors of the Company have attended the board meeting to review this report.The half year proposal of profit distribution or share distribution from capital reserve passed upondeliberation at the meeting of the Board of Directors (not applicable): The Company will notdistribute cash dividend, distribute bonus shares, or distribute shares from capital reserve during thecurrent reporting period.
Note:
This document is a translated version of the Chinese version 2023 Half Year Report (“2023年半年度报告”), and the published announcements in the Chinese version shall prevail. The completepublished Chinese 2023 Half Year Report may be obtained at www.cninfo.com.cn.
Hikvision 2023 Half Year Report
Please read the full half year report and pay particular attention to the following risk factors:
(1) Geopolitical environment risk: The current global geopolitical uncertainty has greatly increased, andthe operating environment in certain regions has deteriorated. The Company will adjust its marketingresources based on business opportunities, but if the geopolitical environment get worse, the Company'soperations in certain countries and regions may be adversely affected.
(2) Global economic downside risk: The economic growth of some overseas countries slows down, thepotential risks such as economic fluctuation and debt default in various regions are difficult to eliminate.At the same time, the domestic economy is switching to a new development mode and its pace of recoveryneeds to be further observed. The Company disperses the operation risk of a single region with a widebusiness layout. But the Company's business will also be impacted if there is a global economic recession.
(3) Supply chain risk: The global supply system is being undermined by politics. The Company has beenmaking efforts to build a diversified supply chain and optimize inventory adjustment and control.However, if systemic risks arise in the global supply chain, the Company's operating capabilities may beaffected
(4) Technology upgrading risk: AI, big data, cloud computing, edge computing and other technologiesdevelop rapidly, and the iteration speed of science and technology application is fast. If the update andchange of cutting-edge technology cannot be closely tracked and the innovative development of businesscannot be realized quickly, the uncertainty of the Company's future development will increase.
(5) Legal and compliance risk: The world's multilateral trading system is facing adverse impacts. The lawsand regulations of various regions that need to be complied with for business activities are verycomplicated. The Company constantly strengthens the construction of legal compliance system sinceChina and overseas countries have stricter data supervision and business compliance requirements. If theCompany's legal compliance capabilities cannot keep up with the situation, it will bring adverse impactson the Company's operations.
(6) Risk of exchange rate fluctuation: The Company carries out operations in various countries and regions,mainly settled in non-RMB currency. Exchange rate fluctuations could have impact on foreign exchangeexposures arising out of sales, procurement and financing, which could likely affect the profitability levelof the Company.
Hikvision 2023 Half Year Report
(7) Financial risk caused by the decline of customers' ability to pay: The enterprises' financial liquidity is
negatively impacted by the macroeconomic downturn. The Company has accumulated a certain amountof cash reserves due to its stable business operation, and the financing cost is low. If the overall liquidityrisk of the market increases, it will adversely affect the Company's account receivables due to the paymentcollection speed of the Company may slow down.
(8) Risk of internal management: The continual expansion of business scale, the continuous increase of
new products and new businesses, and the continuous growth in total number of employees lead to asignificant rise of internal management complexity, which brings challenges to the Company'smanagement. The Company's sustainable development will face certain risks if the management levelfails to proportionally address the Company's business expansion.
(9) Risk of cybersecurity: The Company has always attached great importance and taken active measuresto enhance cybersecurity performance of our products and systems. But there is still a possibility ofdeliberate attempts, including computer viruses, malicious software, hacker and others to intentionallyattack our systems or products, causing cybersecurity issues.
(10) Risk of intellectual property (IP) rights: The Company continues to maintain a relatively large scale of
R&D investment, and produces considerable technical milestones. At the same time, the Companyimplements well-organized intellectual property right (IPR) protection measures. However, the risk ofintellectual property disputes and the risk of intellectual property rights violations still exist.
The above notices might not be all-inclusive of all other potential risks. Please pay attention to potentialinvestment risks.
Hikvision 2023 Half Year Report
CONTENTS
Section I Important Notes, Contents and Definitions ...... 1
Section II Corporate Profile & Key Financial Data ...... 7
Section III Management Discussion and Analysis ...... 11
Section IV Corporate Governance ...... 29
Section V Environmental and Social Responsibility ...... 31
Section VI Significant Events ...... 32
Section VII Changes in Shares and Information about Shareholders ...... 48
Section VIII Information of Preferred Shares ...... 61
Section IX Bonds ...... 62
Section X Financial Report ...... 63
Section XI Documents Available for Reference ...... 199
Hikvision 2023 Half Year Report
Definitions
| Term | Definition |
| Reporting Period | From January 1, 2023 to June 30, 2023 |
| Articles of Association | Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd |
| Hikvision, our Company, the Company | Hangzhou Hikvision Digital Technology Co., Ltd |
| CETC | China Electronics Technology Group Ltd., the actual controller of the Company |
| CETHIK | CETHIK Group Co., Ltd., the controlling shareholder of the Company |
| EZVIZ, EZVIZ Network, Smart Home | Hangzhou EZVIZ Network Co., Ltd.(According to the context, also refers to the corresponding business) |
| HikRobot, Robotic business | Hangzhou Hikrobot Technology Co., Ltd. (According to the context, also refers to the corresponding business) |
| HikAuto, Auto electronics business | Hangzhou Hikauto Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikMicro, Micro Sensing, Thermal imaging business | Hangzhou Hikmicro Sensing Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikSemi | Wuhan Hikstorage Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikImaging | Hangzhou Hikimaging Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikFire | Hangzhou Hikfire Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikRayin, Rayin, HikSecurityCheck | Hangzhou Rayin Technology Ltd. (According to the context, also refers to the corresponding business) |
| Chengdu Science and Technology Park | Located in Chengdu, Sichuan Province, the planned use is for R&D, office space and supporting facilities. |
| Xi'an Science and Technology Park | Located in Xi'an, Shaanxi Province, the planned use is for R&D, office space and supporting facilities. |
| Wuhan Intelligence Industrial Park | Located in Wuhan, Hubei Province, the planned use is for production plants, warehouses and supporting facilities. |
| EZVIZ Smart Home Product Industrial Park | Located in Hangzhou, Zhejiang Province, is planned to be used for R&D, office space and supporting facilities of Hangzhou EZVIZ Network Co., Ltd. |
| EZVIZ Intelligent Manufacturing (Chongqing) Base | Located in Chongqing City, the planned use is for production factories, warehouses, logistic centers and supporting facilities of Hangzhou EZVIZ Network Co., Ltd. |
| Security Industrial Base (Tonglu) |
Located in Hangzhou, Zhejiang Province, the planned use is for production factories, warehouses,logistic centers and supporting facilities.
| Shijiazhuang Science and | Located in Shijiazhuang, Hebei Province, the planned use is R&D, office space and supporting |
Hikvision 2023 Half Year Report
| Term | Definition |
| Technology Park | facilities. |
| Chongqing Science and Technology Park | Located in Chongqing City, the planned use is R&D, office space and supporting facilities, etc. |
| Hefei Science and Technology Park | Located in Hefei, Anhui Province, the planned use is R&D, office space and supporting facilities, etc. |
| Zhengzhou Science and Technology Park | Located in Zhengzhou, Henan Province, the planned use is R&D, office space and supporting facilities, etc. |
| Nanchang Science and Technology Park | Located in Nanchang, Anhui Province, the planned use is R&D, office space and supporting facilities, etc. |
| Nanjing Science and Technology Park | Located in Nanjing, Jiangsu Province, the planned use is R&D, office space and supporting facilities, etc. |
| Hikvision Global Warehousing Logistics Center | Located in Hangzhou, Zhejiang Province, the planned use is warehousing and logistics buildings and supporting buildings. |
| Infrared Thermal Imaging Complete Machine Products Industrial Park | Located in Hangzhou, Zhejiang Province, is planned to be used for R&D, office space and supporting facilities of Hangzhou Hikimaging Technology Co., Ltd. |
| Innovative Business | A long investment cycle, business prospects uncertain, has the high risk and uncertainty, in need for direct or indirect investment in exploration, in order for the Company to timely enter into new areas of business. Initially disclosed in Announcement about Management Measures for Core Staff Investment in Innovative Business (《核心员工跟投创新业务管理办法》) (www.cninfo.com.cn). In this report, innovative business also refers to EZVIZ, HikRobot, HikAuto, HikMicro, HikStorage, HikImaging, HikFire, HikRayin and their related products. |
Hikvision 2023 Half Year Report
Section II Corporate Profile & Key Financial DataI. Corporate information
| Stock abbreviation | HIKVISION | Stock code | 002415 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 杭州海康威视数字技术股份有限公司 | ||
| Abbr. of the Company name in Chinese (if any) | 海康威视 | ||
| Name of the Company in English (if any) | HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD | ||
| Abbr. of the Company name in English (if any) | HIKVISION | ||
| Legal representative | Chen Zongnian | ||
II. Contacts and contact information
| Board Secretary | Securities Affairs Representative | |
| Name | Huang Fanghong | |
| Address | No. 518 WuLianWang Street, Binjiang District, Hangzhou | |
| Tel. | 0571-88075998; 0571-89710492 | |
| Fax | 0571-89986895 | |
| hikvision@hikvision.com |
III. Other relevant information
1. Company's contact information
Whether there is any change in the Company's registered address, office address, zip code, company website orcompany email address during the reporting period.
□Applicable √ Inapplicable
There is no change in the Company's registered address, office address, zip code, company website or companyemail address during the reporting period. Please refer to 2022 Annual Report for details.
2. Information disclosure and place of the report
Whether there is alteration in information disclosure and place of the report during the current reporting period.
□ Applicable √ Inapplicable
Hikvision 2023 Half Year Report
The media website and the securities exchange website for the disclosure of the Company Half Year report, andthe place where the Half Year Report is available for inspection remained unchanged during the reporting period.For details, please refer to the 2022 Annual Report.
3. Other relevant information
Whether other relevant information has changed during the current reporting period
□ Applicable √ Inapplicable
IV. Key accounting data and financial indicators
Whether the Company performed a retrospective adjustment or restatement of previous accounting data
√ Yes □ No
Reasons for retroactive adjustment or restatement of the previous accounting data
√Changes in accounting policies
| First half year of 2023 | First half year of 2022 | YoY Change (%) | ||
| Before the adjustment | After the adjustment | After the adjustment | ||
| Revenue (RMB) | 37,570,786,397.89 | 37,257,516,590.62 | 37,257,516,590.62 | 0.84% |
| Net profit attributable to shareholders of the Company (RMB) | 5,337,868,016.88 | 5,759,254,775.26 | 5,758,668,046.56 | -7.31% |
| Net profit attributable to shareholders of the Company excluding non-recurring gains and losses (RMB) | 5,036,128,632.96 | 5,645,859,017.51 | 5,645,272,288.81 | -10.79% |
| Net cash flows from operating activities (RMB) | 1,026,390,862.80 | -2,158,492,209.08 | -2,158,492,209.08 | 147.55% |
| Basic earnings per share (RMB/share) | 0.568 | 0.608 | 0.608 | -6.58% |
| Diluted earnings per share (RMB/share) | 0.568 | 0.608 | 0.608 | -6.58% |
| Weighted average ROE | 7.60% | 8.81% | 8.81% | -1.21% |
| On June 30, 2023 | On December 31, 2022 | Change(%) between December 31, 2022 and June 30, 2023 | ||
| Before the adjustment | After the adjustment | After the adjustment | ||
| Total assets (RMB) | 118,917,248,075.44 | 119,233,282,761.47 | 119,234,602,968.11 | -0.27% |
| Net assets attributable to shareholders of the Company (RMB) | 67,732,333,636.44 | 68,389,154,548.76 | 68,388,671,139.78 | -0.96% |
Reasons for changes in accounting policies and situations of correction of accounting errorsNote:
The Ministry of Finance issued the Interpretation No. 16 of Accounting Standards for Business Enterprises (the"Interpretation No. 16") on November 30, 2022. The scope of the initial recognition exemption for deferred incometax in the Accounting Standards for Business Enterprises No. 18-Income Tax was revised. Making it clear that theprovisions on exemption of initial recognition of deferred income tax liabilities and deferred income tax assets in
Hikvision 2023 Half Year Report
Accounting Standards for Business Enterprises No. 18-Income Taxes shall not be applied if a single transaction isnot a business combination, that affects neither accounting profit nor taxable income (or deductible loss) when thetransaction occurs, and that initially recognized assets and liabilities result in equal taxable temporary differencesand deductible temporary differences. This provision is effective as of January 1, 2023 and may be implemented inadvance. The Group implemented this requirement from January 1, 2023, and accounted for individual transactionsbetween the beginning of the earliest period in which the financial statements are presented and December 31, 2022using the retrospective adjustment method, and restated the financial statements for the comparative period.
The total share capital of the Company as of the previous trading day of the report disclosure:
| The total share capital of the Company as of the previous trading day of the annual report disclosure (share) | 9,330,600,931 |
| Fully diluted earnings per share (RMB/share) calculated with the latest share capital | 0.572 |
V. Differences in accounting data between domestic and overseas accounting standards
1. Difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards and China Accounting Standards
□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards (IFRS) and China Accounting Standards in the reporting period.
2. Difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards
□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards in the reporting period.
3. Explanation of the differences in accounting data under domestic and overseas accounting standards
□ Applicable √ Inapplicable
VI. Items and amounts of non-recurring gains and losses
√ Applicable □ Inapplicable
Unit：RMB
| Item | Amount |
| Profit or loss from disposal of non-current assets (including the write-off for the impairment provision of assets) | -3,226,747.72 |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based | 245,104,357.89 |
Hikvision 2023 Half Year Report
| Item | Amount |
| on standard quota or quantitative continuous application according to the state industrial policy.) | |
| Profits and losses attributed to change in fair value for held-for-trading financial assets and held-for-trading financial liabilities; and investment income from disposal of held for-trading financial assets, held-for-trading financial liabilities, and available-for-sale financial assets, excluding the effective hedging business related to the regular business operation of the Company. | -16,837,465.82 |
| The profit and loss of business combination under different control realized in stages by multiple transactions | 116,433,610.45 |
| Other non-operating income and expenditures except the items mentioned above | 50,494,516.61 |
| Less: Impact of income tax | 29,677,695.82 |
| Impact of the minority interests (after tax) | 60,551,191.67 |
| Total | 301,739,383.92 |
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in the<Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-recurring Gains and Losses>, or classifies any non-recurring gain/loss item mentioned in theaforementioned note as a recurrent gain/loss item.
□ Applicable √ Inapplicable
In the reporting period, the Company did not classify an item as a non-recurring gain/loss according to the definitionin the <Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities tothe Public—Non-recurring Gains and Losses> into a recurrent gain/loss item.
Hikvision 2023 Half Year Report
Section III Management Discussion and AnalysisI. The principal business of the Company during the reporting period
There was no significant change for the principal business of the Company during the current reporting period.Please refer to 2022 Annual Report for details.II. Core competitiveness analysis
There was no significant change in the Company's core competitiveness during the current reporting period. Fordetails, Please refer to 2022 Annual Report.
III. Core business analysisWhether consistent with the Company's core business disclosure during the current reporting period
√Yes □ No
In the first half year of 2023, the global economy fluctuated continuously and the trading environment changedconstantly, bringing continuous challenges to the Company's operation. The domestic economy and the marketdemand is still gradually recovering. Hikvision maintains its strength in a complex and changeable environment,adhere to the business philosophy of "professionalism, honesty, and integrity" and responded to the uncertainties ina proactive and prudent manner. To promote robust development, the Company has firmed its confidence and hasalways focused on the growth of its own capabilities.
During the reporting period, the Company achieved revenue of RMB37.57 billion, with year over year growth of
0.84%; the net profits attributable to shareholders of the Company was RMB5.34 billion, a decrease of 7.31% overthe same period of the previous year.
(1) Maintain inputs in R&D and build differentiated advantages
During the reporting period, the Company focused on the main business channel, guided by strategy, continuouslystrengthened its technical reserves, and consolidated its overall strength and foundation for long-term sustainabledevelopment. In the first half year of 2023, the Company invested RMB5.29 billion in R&D, with year over year
Hikvision 2023 Half Year Report
growth of 13.06%. The Company will continue to maintain investment in R&D, maintain its ability advantages intechnology productization and product commercialization. The Company will also continue to build and enhanceits differentiation advantages, and maintain its leading position in products and solutions, so as to promote theCompany's steady development in the field of AIoT.
(2) Make effective growth and optimize resource investment
During the reporting period, the domestic economy gradually recovered. The Company made great efforts toconsolidate its business foundation, pay attention to the quality of revenue and strive for effective growth. To welladjust to the economic development and geopolitical environment in different regions of overseas markets, theCompany timely adjusted its resources and optimized its business layout to ensure the steady progress of its business.
(3) Optimize and improve internal management to improve operational efficiencyDuring the reporting period, the Company continued to promote business process reform, promote the integrationand mutual improvement of organizational systems, activate the innovation ability of the organization, orderlypromote various changes of the organization and talents, and improve the ability and efficiency of the organization.The Company also continue to improve the construction of the compliance system, effectively control risks andadhere to compliance operations.
(4) Rapidly develop innovative businesses and make development more resilientDuring the reporting period, the revenue of innovative businesses reached RMB8.19 billion, with year over yeargrowth of 16.85%, accounting for 21.80% of the total revenue. The good development of innovative business hasbecome a strong engine for the long-term sustainable development of the company. As the first subsidiary ofHikvision to be successfully spin-off and listed, EZVIZ was listed on Shanghai Stock Exchange's Science andTechnology Innovation Board on December 28, 2022. HikRobot's spin-off and listing plan has been accepted bythe Shenzhen Stock Exchange, and the spin-off of innovative business subsidiaries were progressing steadily andorderly. The main business and innovative business of the Company have formed a relatively resilient businessportfolio, laying a solid foundation for the long-term sustainable development of the Company.
Hikvision 2023 Half Year Report
YoY changes in key financial data
Unit: RMB
| First half year of 2023 | First half year of 2022 | YoY (%) | Note of Change | |
| Revenue | 37,570,786,397.89 | 37,257,516,590.62 | 0.84% | No significant change |
| Total operating costs | 20,594,523,514.10 | 21,182,955,700.93 | -2.78% | No significant change |
| Selling expenses | 4,887,451,798.48 | 4,536,589,939.10 | 7.73% | Continue to increase investment in domestic and overseas marketing networks |
| Administrative expenses | 1,274,582,030.17 | 1,200,010,815.48 | 6.21% | Due to the expansion of the Company's business scale and increased number of employees |
| Financial expenses | -567,373,249.81 | -785,465,257.61 | 27.77% | Affected by fluctuation in foreign exchange rate, decrease in foreign currency exchange gains |
| Income Tax Expenses | 490,214,292.26 | 628,993,865.94 | -22.06% | Decrease in profit before tax |
| R&D investments | 5,285,435,437.59 | 4,675,061,688.81 | 13.06% | Continue to increase R&D investment |
| Net cash flows from Operating Activities | 1,026,390,862.80 | -2,158,492,209.08 | 147.55% | Increase in cash collection |
| Net cash flows from Investment Activities | -2,084,866,544.28 | -1,697,236,516.09 | -22.84% | Increase in long-term asset investment expenditures |
| Net cash flows from Financing Activities | -4,394,856,598.02 | -3,061,978,055.06 | -43.53% | 2021 restricted stock subscription money was received at the same period of last year |
| Net decrease in cash and cash equivalents | -5,292,793,327.44 | -6,845,043,236.57 | 22.68% | Impacted by the increase in cash flow generated by operating activities |
Whether there is significant change in Company's profit structure or profit source during the reporting period
□ Applicable √ Inapplicable
There is no such case during the reporting period.
Revenue structure
Unit：RMB
| First half year of 2023 | First half year of 2022 | YoY Change (%) | |||
| Amount | Proportion to total revenue | Amount | Proportion to total revenue | ||
| Total revenue | 37,570,786,397.89 | 100.00% | 37,257,516,590.62 | 100.00% | 0.84% |
| Classified by industry | |||||
| AIoT products and services | 37,570,786,397.89 | 100.00% | 37,257,516,590.62 | 100.00% | 0.84% |
Hikvision 2023 Half Year Report
| First half year of 2023 | First half year of 2022 | YoY Change (%) | |||
| Amount | Proportion to total revenue | Amount | Proportion to total revenue | ||
| Classified by product/business | |||||
| Products and services for main business1 | 28,634,288,679.38 | 76.21% | 29,365,919,626.68 | 78.82% | -2.49% |
| Constructions for main business | 748,219,037.49 | 1.99% | 883,860,678.27 | 2.37% | -15.35% |
| Subtotal | 29,382,507,716.87 | 78.20% | 30,249,780,304.95 | 81.19% | -2.87% |
| Robotic business | 2,278,447,297.18 | 6.06% | 1,766,179,532.22 | 4.74% | 29.00% |
| Smart home business | 2,183,062,932.81 | 5.81% | 1,959,836,601.63 | 5.26% | 11.39% |
| Thermal imaging business | 1,475,222,288.91 | 3.93% | 1,360,474,051.98 | 3.65% | 8.43% |
| Auto electronics business | 1,001,472,278.41 | 2.67% | 823,757,230.56 | 2.21% | 21.57% |
| Storage business | 792,630,227.93 | 2.11% | 728,160,403.93 | 1.95% | 8.85% |
| Other innovative businesses2 | 457,443,655.78 | 1.22% | 369,328,465.35 | 1.00% | 23.86% |
| Subtotal | 8,188,278,681.02 | 21.80% | 7,007,736,285.67 | 18.81% | 16.85% |
| Classified by region | |||||
| Domestic | 25,503,419,211.78 | 67.88% | 25,544,764,018.60 | 68.56% | -0.16% |
| Overseas | 12,067,367,186.11 | 32.12% | 11,712,752,572.02 | 31.44% | 3.03% |
Revenue structure
Unit: RMB 100mn
| First half year of 2023 | First half year of 2022 | YoY Change (%) | ||
| Domestic main business | PBG | 62.73 | 69.75 | -10.06% |
| EBG | 69.96 | 68.31 | 2.42% | |
| SMBG | 57.52 | 62.86 | -8.50% | |
| Other products and services for main business | 4.53 | 4.72 | -4.03% | |
| Overseas main business | Products and services for main business | 99.09 | 96.86 | 2.30% |
| Innovative businesses4 | 81.88 | 70.08 | 16.85% | |
| Total | 375.71 | 372.58 | 0.84% | |
Main business refers to the business parts other than innovative businesses
Other innovative businesses include the products and services of the innovative business subsidiaries, such as HikFire, Rayin andHikImaging. Same below.
The revenue from domestic main business and overseas main business only include Hikvision's main business's products andservices, excluding revenue from innovative businesses.
Innovative businesses’ revenue includes its domestic and overseas revenue.
Hikvision 2023 Half Year Report
Industries, products or regions accounting for more than 10% of the Company's revenue or operating profit
√ Applicable □ Inapplicable
Unit: RMB
| Revenue | Operating costs | Gross margin | YoY Change (%) of revenue | YoY Change (%) of operating costs | YoY Change (%) of gross margin | |
| Classified by industry | ||||||
| AIoT products and services | 37,570,786,397.89 | 20,594,523,514.10 | 45.18% | 0.84% | -2.78% | 2.04% |
| Classified by product/business | ||||||
| Products and services for main business | 28,634,288,679.38 | 15,155,184,539.95 | 47.07% | -2.49% | -6.83% | 2.46% |
| Constructions for main business | 748,219,037.49 | 565,835,111.46 | 24.38% | -15.35% | -22.37% | 6.85% |
| Innovative businesses | 8,188,278,681.02 | 4,873,503,862.69 | 40.48% | 16.85% | 16.39% | 0.23% |
| Subtotal | 37,570,786,397.89 | 20,594,523,514.10 | 45.18% | 0.84% | -2.78% | 2.04% |
| Classified by region | ||||||
| Domestic | 25,503,419,211.78 | 13,940,702,523.40 | 45.34% | -0.16% | -4.78% | 2.65% |
| Overseas | 12,067,367,186.11 | 6,653,820,990.70 | 44.86% | 3.03% | 1.69% | 0.72% |
When the statistical caliber of the Company's major business data is adjusted during the reporting period, theCompany's major business data would be adjusted according to the end of the reporting period in the most recentperiod.
□Applicable √ Inapplicable
Total operating costs structureClassified by industry
Unit: RMB
| Industry | Item | First half year of 2023 | First half year of 2022 | YoY Change (%) | ||
| Amount | Proportion to operating costs | Amount | Proportion to operating costs | |||
| AIoT products and services | Operating costs | 20,594,523,514.10 | 100.00% | 21,182,955,700.93 | 100.00% | -2.78% |
Classified by product/business
Hikvision 2023 Half Year Report
Unit: RMB
| Product/business | Item | First half year of 2023 | First half year of 2022 | YoY Change (%) | ||
| Amount | Proportion to operating costs | Amount | Proportion to operating costs | |||
| Products and Services for main business | Operating costs | 15,155,184,539.95 | 73.59% | 16,266,758,741.00 | 76.79% | -6.83% |
| Constructions for main business | Operating costs | 565,835,111.46 | 2.75% | 728,908,400.81 | 3.44% | -22.37% |
| Innovative businesses | Operating costs | 4,873,503,862.69 | 23.66% | 4,187,288,559.12 | 19.77% | 16.39% |
| Subtotal | Operating costs | 20,594,523,514.10 | 100.00% | 21,182,955,700.93 | 100.00% | -2.78% |
Explanations on relevant data changed for more than 30% on a year-over-year base
□Applicable √ Inapplicable
IV. Non-core business analysis
□Applicable √ Inapplicable
V. Analysis of assets and liabilities
1. Material changes of asset items
Unit：RMB
| June 30, 2023 | December 31, 2022 | Change between December 31, 2022 and June 30, 2023 | Note of significant change | |||
| Amount | Percentage to total assets | Amount | Percentage to total assets | |||
| Cash and bank balances | 34,670,255,152.86 | 29.15% | 40,011,863,999.94 | 33.56% | -4.41% | Cash dividend distributions lead to a decrease in cash and bank balances |
| Accounts receivable | 31,626,699,148.70 | 26.60% | 29,906,294,410.40 | 25.08% | 1.52% | Due to the increase in revenue |
| Contract assets | 1,872,717,726.22 | 1.57% | 2,118,223,370.98 | 1.78% | -0.21% | No significant change |
| Inventories | 19,597,538,003.71 | 16.48% | 18,998,222,978.81 | 15.93% | 0.55% | No significant change |
Hikvision 2023 Half Year Report
| June 30, 2023 | December 31, 2022 | Change between December 31, 2022 and June 30, 2023 | Note of significant change | |||
| Amount | Percentage to total assets | Amount | Percentage to total assets | |||
| Long-term equity investment | 1,120,713,426.25 | 0.94% | 1,252,033,513.41 | 1.05% | -0.11% | No significant change |
| Fixed assets | 9,885,673,844.45 | 8.31% | 8,539,842,630.68 | 7.16% | 1.15% | Chengdu Science and Technology Park project transferred to fixed assets |
| Construction in process | 3,807,474,388.06 | 3.20% | 3,770,803,300.80 | 3.16% | 0.04% | No significant change |
| Right-of-use assets | 585,503,726.85 | 0.49% | 574,478,326.31 | 0.48% | 0.01% | No significant change |
| Lease liabilities | 300,219,397.39 | 0.25% | 277,255,924.83 | 0.23% | 0.02% | |
| Short-term borrowings | 3,150,804,135.09 | 2.65% | 3,343,071,972.89 | 2.80% | -0.15% | No significant change |
| Contract liabilities | 2,770,165,430.62 | 2.33% | 2,644,496,508.36 | 2.22% | 0.11% | No significant change |
| Long-term borrowings | 9,698,069,194.58 | 8.16% | 7,522,315,341.60 | 6.31% | 1.85% | Increase in demands for long-term working capital |
| Non-current liabilities due within one year | 2,148,355,742.78 | 1.81% | 868,197,272.46 | 0.73% | 1.08% | |
2. Main overseas assets
□ Applicable √ Inapplicable
Hikvision 2023 Half Year Report
3. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
Unit: RMB
| Item | Opening balance | Profit or loss from change in fair value during the current reporting period | Difference on translation of financial statements dominated in foreign currency | Provision for decline in value during the current reporting period | Purchased amount during the period | Sales during the period | Other changes | Closing balance |
| Financial assets | ||||||||
| Derivative financial assets | 12,807,438.36 | -1,858,710.03 | 10,948,728.33 | |||||
| Other non-current financial assets | 423,893,239.94 | 30,092,421.70 | 20,837,425.00 | 474,823,086.64 | ||||
| Receivables for financing | 1,484,218,258.74 | 18,688,719.47 | 1,502,906,978.21 | |||||
| Subtotal of financial assets | 1,920,918,937.04 | 28,233,711.67 | 39,526,144.47 | 1,988,678,793.18 | ||||
| Financial Liabilities | 68,299,685.57 | 18,355,299.29 | 4,593.42 | 49,948,979.70 | ||||
Whether there were any material changes on the measurement attributes of major assets of the Company during the reporting period:
□ Yes √ No
4. Assets right restrictions as of the end of reporting period
Unit: RMB
| Item | Closing book value (RMB) | Reasons for being restricted |
| Cash and bank balance | 147,657,965.73 | Various cash deposits and other restricted funds |
Notes receivable
| Notes receivable | 1,044,866,654.87 | Endorsed to suppliers, discounted to the bank |
| Accounts receivable | 335,127,298.72 | Pledge for long-term borrowings |
Contract assets
| Contract assets | 235,324,648.36 | Pledge for long-term borrowings |
Hikvision 2023 Half Year Report
| Item | Closing book value (RMB) | Reasons for being restricted |
Fixed assets
| Fixed assets | 137,654,210.43 | Fixed assets leased by operating leases |
| Intangible assets | 38,344,908.58 | Pledge and collateral for long-term borrowings |
| Other non-current assets | 1,542,940,336.45 | Pledge for long-term borrowings |
Total
| Total | 3,481,916,023.14 | - |
VI. Analysis of investments
1. Overview
√Applicable □ Inapplicable
| Investment during the first half year of 2023 (RMB) | Investment during the first half year of 2022 (RMB) | YoY (%) |
| 1,920,765,797.38 | 2,343,440,503.77 | -18.04% |
2. Significant equity investment during the current reporting period
□Applicable √ Inapplicable
3. Significant non-equity investment during the current reporting period
√ Applicable □ Inapplicable
Hikvision 2023 Half Year Report
Unit: RMB
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of the current reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| Chengdu Science and Technology Park Project | Self-built | YES | AIoT products and services | 4,687,853.06 | 1,429,368,089.70 | Self-fund | 100.00% | None | September 23, 2017 | Announcement on Investment and Construction of Chengdu Science and Technology Park Project in Chengdu (No. 2017-033) |
| Xi'an Science and Technology Park Project | Self-built | YES | AIoT products and services | 195,528,421.92 | 705,669,450.47 | Self-fund | 41.27% | None | September 23, 2017 | Announcement on Investment and Construction of Xi'an Science and Technology Park in Xi'an (No. 2017-031) |
| Wuhan Intelligence Industrial Park Project | Self-built | YES | AIoT products and services | 195,908,696.98 | 558,403,968.14 | Self-fund | 49.33% | None | September 23, 2017 | Announcement on Investment and Construction of Wuhan Intelligence Industrial Park in Wuhan (No. 2017-036) |
| EZVIZ Smart Home Product Industrial Base Project (Infrastructure Part) | Self-built | YES | AIoT products and services | 156,065,215.88 | 438,190,505.80 | Self-fund /specific loan/ raised fund | 58.19% | None | - | - |
| EZVIZ Intelligent Manufacturing Chongqing Base Project(Infrastructure | Self-built | YES | Smart home | 358,404,151.18 | 430,577,169.38 | Self-fund / raised fund | 36.80% | None | August 11, 2021 | Announcement on Investment and Construction of EZVIZ Intelligent |
Hikvision 2023 Half Year Report
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of the current reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| Part) | Manufacturing Chongqing Base by the holding subsidiary (No. 2021-052) | |||||||||
| Security Industrial Base (Tonglu) Phase III | Self-built | YES | AIoT products and services | 119,474,927.11 | 375,876,041.10 | Self-fund | 60.48% | None | - | - |
| Shijiazhuang Science and Technology Park Project | Self-built | YES | AIoT products and services | 89,995,352.55 | 330,982,988.46 | Self-fund | 45.75% | None | March 22, 2018 | Announcement on Investment and Construction of Shijiazhuang Science and Technology Park in Shijiazhuang (No. 2018-016) |
| Chongqing Science and Technology Park Project Phase III | Self-built | YES | AIoT products and services | 51,309,925.44 | 140,147,442.65 | Self-fund | 38.03% | None | - | - |
| Hefei Science and Technology Park Project | Self-built | YES | AIoT products and services | 41,257,495.99 | 137,581,753.67 | Self-fund | 29.13% | None | - | - |
| Zhengzhou Science and Technology Park Project | Self-built | YES | AIoT products | 38,145,501.95 | 132,040,277.94 | Self-fund | 34.30% | None | - | - |
Hikvision 2023 Half Year Report
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of the current reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| and services | ||||||||||
| Nanchang Science and Technology Park Project | Self-built | YES | AIoT products and services | 26,125,787.16 | 81,425,062.83 | Self-fund | 21.93% | None | - | |
| Nanjing Science and Technology Park Project | Self-built | YES | AIoT products and services | 19,165,549.88 | 78,496,222.18 | Self-fund | 17.15% | None | - | |
| Hikvision Global Warehousing Logistics Center Phase I | Self-built | YES | AIoT products and services | 52,260,379.51 | 74,098,726.64 | Self-fund | 56.94% | None | January 19, 2022 | Announcement on Investment and Construction of Hikvision Global Warehousing Logistics Center (No. 2022-010) |
| Infrared Thermal Imaging Complete Machine Products Industrial Base | Self-built | YES | AIoT products and services | 62,301,460.63 | 62,670,995.69 | Self-fund | 6.98% | None | January 19, 2022 | Announcement on Investment and Construction of Infrared Thermal Imaging Complete Machine Products Industrial Base by the holding subsidiary (No. 2022-008) |
| Total | -- | -- | -- | 1,410,630,719.24 | 4,975,528,694.65 | -- | -- | -- | -- | -- |
Hikvision 2023 Half Year Report
Note 1: In accordance with the Company's Authorization Management System, EZVIZ Smart Home Product Industrial Base Project, Security Industrial Base (Tonglu)Phase III Project, Hefei Science and Technology Park Project, Zhengzhou Science and Technology Park Project, Nanchang Science and Technology Park Project andNanjing Science and Technology Park Project were approved by the chairman of the Board of Directors.Note 2: Chongqing Science and Technology Park Project Phase III was approved by the Strategy Committee of the Board of Directors.
4. Financial asset investment
4.1 Securities Investments
□ Applicable √ Inapplicable
There no such case in the reporting period.
4.2 Derivatives Investments
√ Applicable □ Inapplicable
Unit: 0,000 RMB
| Operation party of derivatives investment | Whether Related party | Whether related transaction | Type of derivatives investment | Initial investment amount of derivatives investment | Initial date | Termination date | Opening investment amount | Purchased amount during the reporting period | Sold amount during the reporting period | Impairment provisions (if any) | Closing investment amount | Proportion of closing investment amount to the Company's net assets at the end of the reporting period | Actual gain or loss during the reporting period |
| Commercial bank | No | No | Foreign exchange contract | 235,153.63 | September 28, 2022 | September 8, 2023 | 235,153.63 | 285,536.90 | 216,225.72 | 3.19% | -6,342.65 | ||
| Total | 235,153.63 | -- | -- | 235,153.63 | 285,536.90 | 216,225.72 | 3.19% | -6,342.65 | |||||
| Capital source of derivatives investment | Company's own fund | ||||||||||||
| Prosecution (if applicable) | Inapplicable | ||||||||||||
| Announcement date for approvals of | April 15, 2023 | ||||||||||||
Hikvision 2023 Half Year Report
| derivatives investment from the Board of Directors (if any) | |
| Announcement date for approvals of derivatives investment from the general meeting of shareholders (if any) | Inapplicable |
| Risk analysis and control measures (including but not limited to, market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) of holding derivatives during the reporting period | For details of the risk analysis and control measures, please refer to the Announcement on Conducting Foreign Exchange Hedging Transactions in 2023 (NO. 2023-016) dated April 15, 2023. |
| Change of market price or fair value of invested derivatives during the reporting period; specific methods, related assumptions and parameter setting of the derivatives' fair value analysis should be disclosed | In accordance with the Accounting Standards for Business Enterprises No.22- Recognition and Measurement of Financial Instruments, the Company recognised and measured a total of RMB16.50 million as profit from changes in the fair value of derivatives. The fair value is determined according to the exchange rate and interest rate provided by banks and other pricing service institutions, and the fair value is measured and recognised on a monthly basis. |
| During the current reporting period, whether there was significant changes of accounting policies and accounting principles of the Company's derivatives comparing to the prior reporting period | Inapplicable |
| Specific opinions on the Company's derivatives investments and risk control from independent directors | The relevant approval procedures for the Company's foreign exchange hedging business comply with the relevant national laws and regulations and the relevant provisions of the Articles of Association. The Company has established a sound process for the organization, business operation, approval for conducting foreign exchange hedging business, and formulated the Foreign Exchange Hedging Management System. The relevant internal control procedures have been improved, and the targeted risk control measures adopted by the Company are feasible and effective. The Company has issued a feasibility analysis report on the proposed foreign exchange hedging business, and it is reasonable and feasible for the Company to carry out hedging business based on avoiding foreign exchange market risks. Under the premise of ensuring normal production and operation, the Company conducts foreign exchange hedging business, which enables the Company to avoid and prevent sharp exchange rate |
Hikvision 2023 Half Year Report
fluctuation and its adverse effects on the Company's operations, and contributes to controlling foreign exchange risks. There is no damage to theinterests of the Company nor of its shareholders, especially minority shareholders.
5. Use of raised funds
□ Applicable √ Inapplicable
During the reporting period, there was no use of raised fundThe details of the use of funds raised by EZVIZ Network, the Company's holding subsidiary, was disclosed on August 5, 2023 in Half Year Report of HangzhouEZVIZ Network Co., Ltd Section VI (12) - Progress of the Use of Funds Raised on the website of Shanghai Stock Exchange ( www.sse.com.cn).
VII. Disposal of significant assets and equity
1. Disposal of significant assets:
□ Applicable √ Inapplicable
There is no disposal of significant assets for the Company during the current reporting period.
2. Sale of significant equity:
□ Applicable √ Inapplicable
Hikvision 2023 Half Year Report
VIII. Analysis of major subsidiaries and holding companies
□Applicable √Inapplicable
The Company has no important holding company information that should be disclosed during the currentreporting period.
Information about obtaining and disposal of subsidiaries during the reporting period
√ Applicable □ Inapplicable
| Company name | Equity acquisition and disposal method during the reporting period | Impact on overall production results |
| Wuhu Sensortech Intelligent Technology Ltd and its subsidiaries | Transfer of equity in cash | Business development |
IX. Structural entities controlled by the Company
□ Applicable √ Inapplicable
X. Risks of the Company and risk response solutions
During the reporting period, there was no material change in the risk exposure of the Company. For details, pleaserefer to Section I - Important Notes. The Company has been striving to identify various risk exposures, andactively adopting countermeasures to avoid and reduce risks:
(1) Geopolitical environment risk: The current global geopolitical uncertainty has greatly increased, and theoperating environment in certain regions has deteriorated. The Company will adjust its marketing resourcesbased on business opportunities, but if the geopolitical environment get worse, the Company's operations incertain countries and regions may be adversely affected.
(2) Global economic downside risk: The economic growth of some overseas countries slows down, the potentialrisks such as economic fluctuation and debt default in various regions are difficult to eliminate. At the sametime, the domestic economy is switching to a new development mode and its pace of recovery needs to befurther observed. The Company disperses the operation risk of a single region with a wide business layout. Butthe Company's business will also be impacted if there is a global economic recession.
(3) Supply chain risk: The global supply system is being undermined by politics. The Company has been making
efforts to build a diversified supply chain and optimize inventory adjustment and control. However, if systemic
Hikvision 2023 Half Year Report
risks arise in the global supply chain, the Company's operating capabilities may be affected
(4) Technology upgrading risk: AI, big data, cloud computing, edge computing and other technologies develop
rapidly, and the iteration speed of science and technology application is fast. If the update and change ofcutting-edge technology cannot be closely tracked and the innovative development of business cannot berealized quickly, the uncertainty of the Company's future development will increase.
(5) Legal and compliance risk: The world's multilateral trading system is facing adverse impacts. The laws and
regulations of various regions that need to be complied with for business activities are very complicated. TheCompany constantly strengthens the construction of legal compliance system since China and overseascountries have stricter data supervision and business compliance requirements. If the Company's legalcompliance capabilities cannot keep up with the situation, it will bring adverse impacts on the Company'soperations.
(6) Risk of exchange rate fluctuation: The Company carries out operations in various countries and regions,
mainly settled in non-RMB currency. Exchange rate fluctuations could have impact on foreign exchangeexposures arising out of sales, procurement and financing, which could likely affect the profitability level ofthe Company.
(7) Financial risk caused by the decline of customers' ability to pay: The enterprises' financial liquidity is
negatively impacted by the macroeconomic downturn. The Company has accumulated a certain amount of cashreserves due to its stable business operation, and the financing cost is low. If the overall liquidity risk of themarket increases, it will adversely affect the Company's account receivables due to the payment collectionspeed of the Company may slow down.
(8) Risk of internal management: The continual expansion of business scale, the continuous increase of newproducts and new businesses, and the continuous growth in total number of employees lead to a significant riseof internal management complexity, which brings challenges to the Company's management. The Company'ssustainable development will face certain risks if the management level fails to proportionally address theCompany's business expansion.
(9) Risk of cybersecurity: The Company has always attached great importance and taken active measures to
enhance cybersecurity performance of our products and systems. But there is still a possibility of deliberateattempts, including computer viruses, malicious software, hacker and others to intentionally attack our systems
Hikvision 2023 Half Year Report
or products, causing cybersecurity issues.
(10) Risk of intellectual property (IP) rights: The Company continues to maintain a relatively large scale of R&Dinvestment, and produces considerable technical milestones. At the same time, the Company implements well-organized intellectual property right (IPR) protection measures. However, the risk of intellectual propertydisputes and the risk of intellectual property rights violations still exist.
Hikvision 2023 Half Year Report
Section IV Corporate Governance
I. Annual General Meeting and Extraordinary General Meetings convened during thereporting Period
1. Annual General Meeting convened during the reporting period
| Meeting | Nature | Proportion of participating investors | Convened date | Disclosure date | Resolution of the meeting |
| 2022 Annual General Meeting | Annual General Meeting | 67.0703 % | May 9, 2023 | May 10, 2023 | 14 proposals including the 2022 Annual Report and Summary were reviewed and voted. For details, please refer to the Company's announcement: No. 2023-025 |
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed votingrights:
□ Applicable √ Inapplicable
II. Changes of directors, supervisors and senior management personnel
□ Applicable √ Inapplicable
There were no changes in the Company's directors, supervisors and senior management during the reporting period.For details, please refer to the 2022 annual report.III. Profit distribution and capitalizing of capital reserves for the current reporting period
□ Applicable √ Inapplicable
The Company did not plan to distribute cash dividends, send bonus shares, or convert capital reserve into sharecapital during the first half of 2023.IV. The implementation of an Equity Incentive Plan, Employee Stock Incentive Plan, or otherincentive plans
√Applicable □ Inapplicable
1. During the reporting period, the Company reviewed and approved The Proposal of Unlocking Conditions for the
Hikvision 2023 Half Year Report
Third Unlocking Period of the 2018 Restricted Stock Plan were not Meet and The Proposal of the Repurchase ofRestricted Shares that have been Granted but not yet Unlocked.
On April 13, 2023 and May 9, 2023, the 17
th meeting of the 5
th
session of the Board of Directors, the 15
thmeetingof the 5
thsession of the Board of Supervisors and 2022 Annual General Meeting reviewed and approved theProposal of Unlocking Conditions for the Third Unlocking Period of the 2018 Restricted Plan were not Meet andthe Proposal of the Repurchase of Restricted Shares that have been Granted but not yet Unlocked. As the Companyperformance did not meet the unlocking conditions for the third unlocking period of the 2018 Restricted Stock Plan(Revised Draft), 33,331,858 restricted shares granted but not unlocked in the current period for all grantees of the2018 Restricted Stock Plan were repurchased and cancelled. And the Company had completed the cancellationprocedures for the above shares at the Shenzhen branch of China Securities Depository and Clearing Ltd. on July 5,2023.
For details, please refer to The Proposal of Unlocking Conditions for the Third Unlocking Period of the 2018Restricted Plan were not Meet and The Proposal of the Repurchase of Restricted Shares that have been Granted butnot yet Unlocked (2023-021) published by the Company on www.cninfo.com.cn on April 15, 2023 and The Proposalof the Completed Cancellation of the Restricted Shares that have been Granted but not yet Unlocked for the ThirdUncloking Period of the 2018 Restricted Plan (2023-028) published by the Company on www.cninfo.com.cn onJuly 7, 2023.
As of the end of the current reporting period, the Company has a total of 130,734,463 granted but unvested shares,accounting for 1.40% of the Company's total share capital at the end of the reporting period.
The Company performs accounting treatments related to restricted share incentive plans in accordance with therequirements of Accounting Standards for Business Enterprises No. 11-Share Payments and other related accountingstandards. The cost of the shares granted by the 2021 restricted share incentive scheme is amortized during thevesting period.
During the reporting period, the amortization cost of the Company's 2021 restricted share incentive scheme had nosignificant impact on the Company's financial status and operating results. For details, please refer to FinancialStatement Note (XI)-Share-based Payment.
Hikvision 2023 Half Year Report
Section V Environmental and Social ResponsibilityI. Significant environmental issues
Whether the Company or any of its subsidiaries should be categorized as a critical pollutant enterprises publishedby national environmental protection department.
□Yes √ No.
II. Social responsibilitiesDuring the reporting period, the Company has not yet carried out poverty alleviation and rural revitalization.
Hikvision 2023 Half Year Report
Section VI Significant EventsI. Complete and incomplete commitments of the Company and its actual controller,shareholders, related parties, acquirers, and other related parties for the commitments duringthe current reporting period.
□ Applicable √ Inapplicable
No such case during the current reporting period.II. The Company's funds used by the controlling shareholder or its related parties for non-operating purposes.
□ Applicable √ Inapplicable
No such case during the current reporting period.III. Illegal provision of guarantees for external parties
□ Applicable √ Inapplicable
No such case in the current reporting period.IV. Engagement and disengagement of the CPA firmHas the half year report been audited?
□ Yes √ No
The Company's half year report has not been audited.
V. Explanation given by the Board of Directors, supervisory committee and independentdirectors (if applicable) regarding the "non-standard auditor's report" issued by the CPA firmfor the current reporting period
□ Applicable √ Inapplicable
VI. Explanation given by the Board of Directors regarding the "non-standard auditor's report"for the prior reporting period
□ Applicable √ Inapplicable
VII. Bankruptcy and restructuring
□ Applicable √ Inapplicable
Hikvision 2023 Half Year Report
No such case during the reporting period.
VIII. Material litigations
Material litigation and arbitration
□ Applicable √ Inapplicable
The Company had no material litigation or arbitration during the current reporting period.Other litigation matters
□ Applicable √ Inapplicable
IX. Punishments and rectifications
□ Applicable √ Inapplicable
No such case during the reporting period.X. Integrity of the Company and its controlling shareholders and actual controllers
□ Applicable √ Inapplicable
XI. Significant related-party transaction
1. Related-party transactions arising from routine daily operations
√ Applicable □ Inapplicable
Hikvision 2023 Half Year Report
| Related party | Relationship | Type of related transaction | Content of related transaction | Pricing principles for related party transactions | Trading amount （0'000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0'000 RMB） | Whether exceed the approved quota | Settlement method | Disclosure date | Disclosure reference |
| Subsidiaries or research institutes of CETC | Under the common control of the Company's actual controller. | Procurement | Procurement, receiving services | Reference market price; Agreed on price | 97,591.20 | 4.96% | 350,000 | No | Payment on delivery | April 15, 2023 | Announcement on the forecast of daily related-party transactions in 2023 (No. 2023-015) |
| Joint ventures | Joint ventures in which the Company holds shares | Procurement | 75.60 | 0.00% | 2,100 | No | Payment on delivery | ||||
| Associated companies | Associated companies in which the Company holds shares | Procurement | 9,858.60 | 0.50% | 73,000 | No | Payment on delivery | ||||
| Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Procurement | 60,230.75 | 3.06% | 220,050 | No | Payment on delivery | ||||
| Subsidiaries or research institutes of CETC | Under the common control of the Company's actual controller. | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 11,761.77 | 0.31% | 70,000 | No | Payment on delivery | April 15, 2023 | Announcement on the forecast of daily related-party transactions in 2023 (No. 2023-015) |
| Joint ventures | Joint ventures in which the Company holds shares | Sales | 1,962.54 | 0.05% | 14,600 | No | Payment on delivery |
Hikvision 2023 Half Year Report
| Related party | Relationship | Type of related transaction | Content of related transaction | Pricing principles for related party transactions | Trading amount （0'000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0'000 RMB） | Whether exceed the approved quota | Settlement method | Disclosure date | Disclosure reference |
| Associated companies | Associated companies in which the Company holds shares | Sales | 2,786.26 | 0.07% | 20,450 | No | Payment on delivery | ||||
| Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Sales | 611.91 | 0.02% | 8,700 | No | Payment on delivery | ||||
| Subsidiaries or research institutes of CETC | Under the common control of the Company's actual controller. | Lease | Renting house from related parties | Reference market price agreed by both parties | 107.65 | 0.86% | 500 | No | Based on contract | April 15, 2023 | Announcement on the forecast of daily related-party transactions in 2023 (No. 2023-015) |
| Total | 184,986.28 | 759,400 | |||||||||
| Details on significant sales return | None | ||||||||||
| Total amount of related transactions projected based on different categories, and the actual performance during the current reporting period (if any) | The above trading quotas include newly increased forecast quota amount of RMB5,000,000 for procurement and receiving services from associated companies, amount of RMB2,000,000 for selling products, commercial goods, and providing services from associated companies, and amount of RMB47,000,000 for selling products, commercial goods, and providing services from enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors. Those forecast quota amount has been approved by the Chairman of the Company according to related regulations and the Company's Management System of Related Transaction. | ||||||||||
Hikvision 2023 Half Year Report
| Related party | Relationship | Type of related transaction | Content of related transaction | Pricing principles for related party transactions | Trading amount （0'000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0'000 RMB） | Whether exceed the approved quota | Settlement method | Disclosure date | Disclosure reference |
| Reasons on significant difference between trading price and market referencing price (if applicable) | Not applicable | ||||||||||
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2. Related-party transactions regarding purchase and disposal of assets or equity
□ Applicable √ Inapplicable
No such case in the reporting period.
3. Significant related-party transactions arising from joint investments on external parties
□ Applicable √ Inapplicable
No such case in the reporting period.
4. Related credit and debt transactions
□ Applicable √ Inapplicable
No related-parties' creditor's rights or debts during the reporting period.
5. Deals with related-party financial companies
√ Applicable □ Inapplicable
Deposit business
| Related party | Relationship | Maximum daily deposit limit (0,000 RMB) | Deposit interest rate range | Opening balance (0,000 RMB) | Amount incurred | Closing balance (0,000 RMB) | |
| Total deposit amount in the current period (0,000 RMB) | Total amount withdrawn in the current period (0,000 RMB) | ||||||
| CETC Finance Co., Ltd. | Under the common control of the Company's ultimate controller | 1,459,403.08 | 0.25%-2.0% | 400,003.35 | 426.87 | 416.60 | 400,013.62 |
Credit or other financial services
| Related party | Relationship | Business type | Total amount (0,000 RMB) | Actual amount incurred (0,000 RMB) |
| CETC Finance Co., Ltd. | Under the common control of the Company's ultimate controller | Other financial services | 600,000.00 | 141,000.00 |
Note: The above occurred amount is the amount of issued entrusted loan to subsidiaries through CETC Finance Co., Ltd. during thereporting period.
Hikvision 2023 Half Year Report
6. Transactions between the financial company controlled by the Company and related parties
□ Applicable √ Inapplicable
7. Other significant related party transactions
□ Applicable √ Inapplicable
No such case in the reporting period.XII. Significant contracts and their execution
1. Trusteeship, contracting and leasing
1.1 Trusteeship
□ Applicable √ Inapplicable
No such case in the reporting period.
1.2 Contracting
□ Applicable √ Inapplicable
No such case in the reporting period.
1.3 Leasing
□ Applicable √ Inapplicable
No such case in the reporting period.
Hikvision 2023 Half Year Report
2. Significant guarantees
√Applicable □ Inapplicable
Unit: 0,000 RMB
| Guarantees provided by the Company to its subsidiaries | ||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Hangzhou Hikvision Technology Ltd. | April 15, 2023 | 1,250,000 | December 1, 2019 | 649,150.78 | Joint guarantee | 2019.12.01-2025.09.25 | No | No |
| Luopu HaiShi Ding Xin Electronic Technology Ltd. | April 15, 2023 | 29,000 | March 26, 2019 | 21,000.00 | Joint guarantee | 2019.03.26-2035.03.26 | No | No |
| Piahan HaiShi Yong An Electronic Technology Ltd. | April 15, 2023 | 28,000 | March 26, 2019 | 20,178.00 | Joint guarantee | 2019.03.26-2040.03.26 | No | No |
| Urumqi HaiShi Xin'An Electronic Technology Ltd | April 15, 2023 | 37,000 | March 26, 2019 | 19,280.29 | Joint guarantee | 2019.03.26-2028.06.20 | No | No |
| Moyu HaiShi Electronic Technology Ltd. | April 15, 2023 | 24,000 | March 26, 2019 | 16,620.00 | Joint guarantee | 2019.03.26-2035.03.26 | No | No |
| Hangzhou Hikvision System Technology Ltd. | April 15, 2023 | 80,000 | March 23, 2021 | 11,830.88 | Joint guarantee | 2021.03.23-2024.04.12 | No | No |
| Yu Tian HaiShi Mei Tian Electronic Technology Ltd. | April 15, 2023 | 30,000 | March 26, 2019 | 9,480.00 | Joint guarantee | 2019.03.26-2034.03.26 | No | No |
| Xi'an Hikvision Digital Technology Ltd | April 15, 2023 | 24,000 | September 29, 2022 | 4,421.14 | Joint guarantee | 2022.09.29-2024.02.23 | No | No |
| Chongqing Hikvision Technology | April 15, 2023 | 27,000 | March 23, | 4,131.14 | Joint guarantee | 2021.03.23-2024.03.30 | ||
Hikvision 2023 Half Year Report
| Ltd. | 2021 | |||||||
| Nanjing Hikvision Digital Technology Ltd. | April 15, 2023 | 12,000 | June 30, 2022 | 3,853.70 | Joint guarantee | 2022.06.28-2025.06.30 | No | No |
| Hangzhou Hikvision Electronics Ltd. | April 15, 2023 | 45,000 | October 12, 2022 | 701.26 | Joint guarantee | 2022.10.12-2024.03.30 | No | No |
| Chongqing Hikvision System Technology Ltd. | April 15, 2023 | 6,000 | March 30, 2023 | 561.85 | Joint guarantee | 2023.03.30-2024.07.24 | No | No |
| Hikvision International Co., Ltd. | April 15, 2023 | 151,200 | Not happened during the reporting period | |||||
| Wuhan Haorong Technology Ltd. | April 15, 2023 | 30,000 | Not happened during the reporting period | |||||
| Hikvision Technology Singapore Pte. Ltd. | April 15, 2023 | 25,000 | Not happened during the reporting period | |||||
| Shijiazhuang Hikvision Technology Ltd. | April 15, 2023 | 12,000 | Not happened during the reporting period | |||||
| Prama Hikvision India Private Limited | April 15, 2023 | 9,000 | Not happened during the reporting period | |||||
| Zhengzhou Hikvision Digital Technology Ltd. | April 15, 2023 | 8,500 | Not happened during the reporting period | |||||
| Chengdu Hikvision Digital Technology Ltd. | April 15, 2023 | 6,000 | Not happened during the reporting period | |||||
| Hefei Hikvision Digital Technology Ltd. | April 15, 2023 | 3,500 | Not happened during the reporting period | |||||
| Hikvision Digital Technology (Shanghai) Ltd. | April 15, 2023 | 3,000 | Not happened during the reporting period | |||||
| Fuzhou Hikvision Digital Technology Ltd. | April 15, 2023 | 2,500 | Not happened during the reporting period | |||||
| Hikvision UK Limited | April 15, 2023 | 2,000 | Not happened during the reporting period | |||||
Hikvision 2023 Half Year Report
| Nanchang Hikvision Digital Technology Ltd. | April 15, 2023 | 2,000 | Not happened during the reporting period | |||||
| Wuhan Hikvision Technique Ltd | April 15, 2023 | 1,000 | Not happened during the reporting period | |||||
| Total guarantee cap for subsidiaries approved during the reporting period (B1) | 1,847,700.00 | Total actual guarantee amount for subsidiaries during the reporting period (B2) | 982,288.18 | |||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period (B3) | 1,847,700.00 | Total actual guarantee balance for subsidiaries at the end of the reporting period (B4) | 761,209.04 | |||||
| Guarantees provided by subsidiaries of the Company to their subsidiaries | ||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Hangzhou Haikang Intelligent Technology Ltd. | April 15, 2023 | 80,000 | March 14, 2022 | 19,835.77 | Joint guarantee | 2022.03.14-2024.03.01 | No | No |
| Wuhu Sensortech Intelligent Technology Ltd. | April 15, 2023 | 6,500 | September 27, 2022 | 4,777.60 | Joint guarantee | 2022.09.27-2024.01.16 | No | No |
| Hangzhou Hikmicro Intelligent Technology Ltd. | April 15, 2023 | 92,000 | November 2, 2022 | 4,327.06 | Joint guarantee | 2022.11.02-2024.04.12 | No | No |
| Sensortech Hebei Technology Ltd. | April 15, 2023 | 12,000 | July 28, 2022 | 11,000.00 | Joint guarantee | 2022.07.28-2023.12.12 | No | No |
| Chongqing EZVIZ Electronic Ltd. | April 15, 2023 | 30,000 | August 18, 2022 | 800.00 | Joint guarantee | 2022.08.18-2023.08.18 | No | No |
| Hangzhou Hikrobot Intelligence Ltd. | April 15, 2023 | 80,000 | June 13, 2023 | 600.00 | Joint guarantee | 2023.06.13-2024.04.12 | No | No |
| Hangzhou Hikmicro Software Ltd. | April 15, 2023 | 10,000 | Not happened during the reporting period | |||||
Hikvision 2023 Half Year Report
| Hangzhou Hikstorage Technology Ltd. | April 15, 2023 | 10,000 | Not happened during the reporting period | ||
| Wuhan Hikfire Technology Ltd | April 15, 2023 | 3,000 | Not happened during the reporting period | ||
| Zhejiang Hikfire Technology Ltd | April 15, 2023 | 3,000 | Not happened during the reporting period | ||
| Total guarantee cap for subsidiaries approved during the reporting period (C1) | 326,500.00 | Total actual guarantee amount for subsidiaries during the reporting period (C2) | 52,044.79 | ||
| Total approved guarantee cap for subsidiaries at the end of the reporting period (C3） | 326,500.00 | Total actual guarantee balance for subsidiaries at the end of the reporting period (C4) | 41,340.43 | ||
| The total amount of Company's guarantees (that is, the total of the first three items) | |||||
| Total guarantee cap approved during the reporting period（A1+B1+C1） | 2,174,200.00 | Total actual guarantee amount during the reporting period（A2+B2+C2） | 1,034,332.97 | ||
| Total approved guarantee cap at the end of reporting period（A3+B3+C3） | 2,174,200.00 | Total actual guarantee balance at the end of the reporting period（A4+B4+C4） | 802,549.47 | ||
| Portion of the total actual guarantee (A4+B4+C4) amount in net assets of the Company | 11.85% | ||||
| Of which: | |||||
| The balance of guarantee for shareholders, actual controllers and their affiliates. (D) | 0 | ||||
| Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset ratio over 70% (E) | 765,545.59 | ||||
| Total amount of guarantee exceeding 50% of net assets (F) | 0 | ||||
| Total guarantee amount of the above-mentioned 3 kinds of guarantees (D+E+F) | 765,545.59 | ||||
Hikvision 2023 Half Year Report
| In the case of unexpired guarantee contracts, a description of the circumstances in which the guarantee liability occurred or there was evidence that possible joint and several liability during the reporting period (if any) | Inapplicable |
| An explanation of the external provision of guarantees in violation of prescribed procedures (if any) | Inapplicable |
Hikvision 2023 Half Year Report
3. Entrusted financial management
□Applicable √Inapplicable
No such case during the reporting period
4. Other significant contracts
□Applicable √ Inapplicable
The Company has no other significant contracts in the reporting period.
XIII. Other significant events
√Applicable □ Inapplicable
1. Repurchase of the Company's Public Shares
On September 15, 2022 and October 10, 2022, the Company held the 13
th meeting of the 5
th
session of the Board ofDirectors and the second extraordinary general meeting of shareholders in 2022 respectively, deliberated andapproved the Proposal on the Plan of Repurchase Part of the Company's Public Shares, approved the Companyusing its own fund to repurchase part of its RMB common shares (A shares) that have been issued domestically bymeans of centralized bidding through the trading system of the SZSE, the aggregate amount of repurchase fundsshall not exceed RMB2.5 billion (inclusive) and not less than RMB2 billion (inclusive), the repurchase price shallnot exceed RMB40 per share (inclusive), the implementation period of the repurchase shall not exceed 12 monthsfrom the date of the general meeting of shareholders of the Company at which the proposal on the plan of repurchasepart of the Company's public shares is reviewed and approved, and the Company will make repurchase decisionsand implement them based on market conditions during the repurchase period. The shares repurchased by theCompany will be cancelled for reducing the registered capital according to law. For details, please refer to theAnnouncement on Resolutions of 13
th
Meeting of the 5
thSession of the Board of Directors (Announcement No.:
2022-049), the Announcement on the Plan of Repurchase Part of the Company's Public Shares (Announcement No.:
2022-050), the Announcement on Resolutions of the Second Extraordinary General Meeting of Shareholders in2022 (Announcement No.: 2022-056), the Report on the Plan of Repurchase Part of the Company's Public Shares(Announcement No.: 2022-057) published by the Company on cninfo website (www.cninfo.com.cn) on September16, 2022 and October 11, 2022. On October 11, 2022, the Company first repurchased 6,820,968 shares of theCompany by means of centralized bidding through a dedicated securities account for the repurchase, accounting for
Hikvision 2023 Half Year Report
0.0723% of the Company's total share capital at that time. The highest transaction price was RMB29.65 per share,the lowest transaction price was RMB28.71 per share, and the total transaction amount was RMB199,981,024.67(excluding transaction fees). For details, please refer to the Announcement on the Initial Repurchase of theCompany's Shares (Announcement No.: 2022-059) published by the Company on cninfo website(www.cninfo.com.cn) on October 12, 2022. During the repurchase period, the Company disclosed the progress ofrepurchase as of the end of last month within the first three trading days each month based on the regulation. Fordetails, please refer to the Announcement on the Progress of Repurchase (Announcement No.: 2022-063)(Announcement No.: 2022-066) published by the Company on cninfo website (www.cninfo.com.cn) on November2, 2022, December 3, 2022, respectively. As of December 30, 2022, the repurchase of shares had been completed,and the actual repurchase date was between October 11, 2022 and December 30, 2022, meet the requirement onimplementation period of repurchase in repurchase plan. As of December 30, 2022, the Company used the dedicatedsecurities account for share repurchase to cumulatively repurchase shares with the total amount of 66,987,835 sharesby means of centralized bidding, accounting for 0.7103% of the Company's total share capital at that time(9,430,920,624 shares). The highest transaction price was RMB35.13 per share, the lowest transaction price wasRMB26.83 per share, and the total transaction amount was RMB2,043,476,488.53 (excluding transaction fees). Thesource of share-repurchase funding was from the Company's own fund, and the price of repurchase did not exceedthe upper limit of the price (RMB40 per share) specified in the repurchase plan. The repurchase complies withrelevant laws, regulations and rules from the disclosed repurchase plan. For details, please refer to theAnnouncement on the Progress and Result of Repurchase of the Company's Shares and Changes in Shares(Announcement No.: 2023-001) published by the Company on cninfo website (www.cninfo.com.cn) on January 4,2023. On January 13, 2023, the Company had completed the cancellation procedures for the above shares at theShenzhen branch of China Securities Depository and Clearing Corporation Ltd., with the total amount of 66,987,835shares, accounting for 0.7103% of the Company's total share capital before the cancellation (9,430,920,624 shares),and the number of cancelled shares is equal to the number of actual repurchased shares. After the completion of therepurchase and cancellation of shares, the Company's total share capital changes from 9,430,920,624 shares to9,363,932,789 shares. For details, please refer to the Announcement on the Completion of the Cancellation of theCompany's Repurchased Shares and Changes in Shares (Announcement No.: 2023-002) published by the Companyon cninfo website (www.cninfo.com.cn) on January 17, 2023.
Hikvision 2023 Half Year Report
2. Matters Relating to Capital Increase and Introduction of Strategic Investors for Wholly-Owned SubsidiaryShijiazhuang Sensortech On February 15, 2023, the Company held the 16
th meeting of the 5
thsession of the Board of Directors, reviewedand approved the Proposal on Capital Increase and Introduction of Strategic Investors for Wholly-OwnedSubsidiary Shijiazhuang Sensortech Intelligent Technology Co., Ltd. (hereinafter referred to as "ShijiazhuangSensortech") and agreed to increase the registered capital of Shijiazhuang Sensortech by RMB2,398,000,000.Hikvision intended to increase the registered capital of Shijiazhuang Sensortech by RMB1,345,200,000 to hold noless than 56.0969% equity in the subsidiary. Meanwhile, Shijiazhuang Sensortech planned to introduce one or morestrategic investors via public listing with a total investment of RMB1,052,800,000 to obtain no more than 43.9031%equity. The final amount of capital increase and shareholding ratios will be subject to the results of the listingsubscription. For details, please refer to the Announcement on Capital Increase and Introduction of StrategicInvestors for Wholly-Owned Subsidiary Shijiazhuang Sensortech Intelligent Technology Co., Ltd. (AnnouncementNo.: 2023-005) published by the Company on cninfo website (www.cninfo.com.cn) on February 16,
2023.On February 24, 2023, the capital increase of Shijiazhuang Sensortech was listed on the China Beijing EquityExchange. Two potential investors were identified for the Shijiazhuang Sensortech Capital Increase Project at theend of the announcement period. They were Hangzhou Qianmo Qinghe Equity Investment Partnership (LimitedPartnership) (hereinafter referred to as "Qianmo Qinghe") and a consortium of two investors: Qin Yi (a naturalperson) and Wuhu Sensi Yingwo Investment Center (Limited Partnership) (hereinafter referred to as "SensiYingwo"). The Company signed the Capital Increase Agreement (hereinafter referred to as "The Agreement") withQianmo Qinghe, Sensi Yingwo and Qin Yi on March 28, 2023. Hikvision intended to use equity to subscribe acapital increase of RMB1,345,200,000 and hold 56.0969% equity in Shijiazhuang Sensortech through an agreement.The strategic investors participated in the capital increase through public delisting on the China Beijing EquityExchange. They subscribed a capital increase of RMB1,052,800,000 to hold 43.9031% equity in ShijiazhuangSensortech. Upon completion of the capital increase, the registered capital of Shijiazhuang Sensortech will increasefrom RMB10,000 to RMB2,398,010,000. Hikvision will hold 56.0969% equity, maintaining a controlling interestin Shijiazhuang Sensortech and shall consolidate the financial statements of this subsidiary. For details, please referto the Announcement on Progress of Capital Increase and Introduction of Strategic Investors for Wholly-OwnedSubsidiary Shijiazhuang Sensortech Intelligent Technology Co., Ltd. (Announcement No.: 2023-009) published bythe Company on cninfo website (www.cninfo.com.cn) on March 29,
2023.
Hikvision 2023 Half Year Report
XIV. Significant events of the Company's subsidiaries
√Applicable □ Inapplicable
Matters Relating to Steady Promotion of the Spin-off of HikRobot to be Listed on the SZSE ChiNext MarketOn March 7, 2023, Hangzhou Hikrobot Co., Ltd. (hereinafter referred to as "HikRobot") received Notice onAccepting the Application Documents for the Initial Public Offering of Shares and Listing on the SZSE ChiNextMarket of Hangzhou Hikrobot Co., Ltd. (SZSE Listing Review [2023] No. 252) issued by Shenzhen Stock Exchange,and SZSE considered that application documents were completed and decided to accept. For details, please refer tothe Announcement on the Application for the Initial Public Offering of Shares and Listing on the SZSE ChiNextMarket of Hangzhou Hikrobot Co., Ltd., a Subsidiary of the Company, is Accepted by the SZSE (AnnouncementNo.: 2023-008) published by the Company on cninfo website (www.cninfo.com.cn) on March 8,
2023. ShenzhenStock Exchange issed the Inquiry Letter on the Review of Application Documents for the Initial Public ShareOffering of Shares and Listing on the SZSE ChiNext Market of Hangzhou Hikrobot Co., Ltd. (Inquiry Letter (2023)No. 010121) on March 30, 2023, and HikRobot has submitted the Reply to the Inquiry Letter on the Review ofApplication Documents for the Initial Public Share Offering of Shares and Listing on the SZSE ChiNext Market ofHangzhou Hikrobot Co., Ltd. on May 17, 2023. Shenzhen Stock Exchange issed the Second Inquiry Letter on theReview of Application Documents for the Initial Public Share Offering of Shares and Listing on the SZSE ChiNextMarket of Hangzhou Hikrobot Co., Ltd. (Inquiry Letter (2023) No. 010218) on June 30, 2023, and HikRobot hassubmitted the Reply to the Second Inquiry Letter on the Review of Application Documents for the Initial PublicShare Offering of Shares and Listing on the SZSE ChiNext Market of Hangzhou Hikrobot Co., Ltd. on July 27, 2023.
Hikvision 2023 Half Year Report
Section VII Changes in Shares and Information about ShareholdersI. Changes in share capital
1. Table of changes in share capital
Unit: Share
| Before the change | Changes in the period (+, -) | After the change | |||||||
| Shares | Ratio | New Shares Issued | Bonus share | Share transferred from capital reserve | Others | Sub-total | Shares | Ratio | |
| 1. Shares subject to conditional restriction(s) | 255,248,506 | 2.71% | 251,025 | 251,025 | 255,499,531 | 2.73% | |||
| 1)State holdings | |||||||||
| 2)Shares held by State-owned corporate | |||||||||
| 3) Other domestic shares | 255,055,236 | 2.70% | 251,025 | 251,025 | 255,306,261 | 2.73% | |||
| Including: held by domestic corporates | |||||||||
| held by domestic natural person | 255,055,236 | 2.70% | 251,025 | 251,025 | 255,306,261 | 2.73% | |||
| 4) Foreign shares | 193,270 | 0.00% | 193,270 | 0.00% | |||||
| Including: held by overseas corporates | |||||||||
| held by overseas natural person | 193,270 | 0.00% | 193,270 | 0.00% | |||||
| 2. Shares without restriction | 9,175,672,118 | 97.29% | -67,238,860 | -67,238,860 | 9,108,433,258 | 97.27% | |||
| 1) RMB common shares | 9,175,672,118 | 97.29% | -67,238,860 | -67,238,860 | 9,108,433,258 | 97.27% | |||
Hikvision 2023 Half Year Report
| Before the change | Changes in the period (+, -) | After the change | |||||||
| Shares | Ratio | New Shares Issued | Bonus share | Share transferred from capital reserve | Others | Sub-total | Shares | Ratio | |
| 2) Domestically listed foreign shares | |||||||||
| 3) Foreign shares listed overseas | |||||||||
| 4) Others | |||||||||
| 3. Total | 9,430,920,624 | 100.00% | -66,987,835 | -66,987,835 | 9,363,932,789 | 100.00% | |||
Reason for the changes in share capital
√Applicable □ Inapplicable
The Completion of Repurchase of the Company's Public SharesOn December 30, 2022, the Company had completed the repurchase of parts of the Company's public shares. The Company used the dedicated securities account forshare repurchase to cumulatively repurchase shares with the total amount of 66,987,835 shares by means of centralized bidding, accounting for 0.7103% of theCompany's total share capital at that time (9,430,920,624 shares). The highest transaction price was RMB35.13 per share, the lowest transaction price was RMB26.83per share, and the total transaction amount was RMB2,043,476,488.53 (excluding transaction fees).
On January 13, 2023, the Company had completed the cancellation procedures for the above shares at the Shenzhen branch of China Securities Depository and ClearingCorporation Limited, with the total amount of 66,987,835 shares, accounting for 0.7103% of the Company's total share capital before the cancellation (9,430,920,624shares), and the number of cancelled shares is equal to the number of actual repurchased shares. After the completion of the repurchase and cancellation of shares, theCompany's total share capital changes from 9,430,920,624 shares to 9,363,932,789 shares.
Approval for changes in share capital
√Applicable □ Inapplicable
On September 15, 2022 and October 10, 2022, the Company held the 13
th
meeting of the 5
thsession of the Board of Directors and the second extraordinary general
Hikvision 2023 Half Year Report
meeting of shareholders in 2022 respectively, deliberated and approved the Proposal on the Plan of Repurchase Part of the Company's Public Shares, approved theCompany using its own fund to repurchase part of its RMB common shares (A shares) that have been issued domestically by means of centralized bidding throughthe trading system of the SZSE, the aggregate amount of repurchase funds shall not exceed RMB2.5 billion (inclusive) and not less than RMB2 billion (inclusive),the repurchase price shall not exceed RMB40 per share (inclusive), the implementation period of the repurchase shall not exceed 12 months from the date of thegeneral meeting of shareholders of the Company at which the proposal on the plan of repurchase part of the Company's public shares is reviewed and approved, andthe Company will make repurchase decisions and implement them based on market conditions during the repurchase period. The shares repurchased by the Companywill be cancelled for reducing the registered capital according to law. For details, please refer to the Announcement on Resolutions of 13th Meeting of the 5th Sessionof the Board of Directors (Announcement No.: 2022-049), the Announcement on the Plan of Repurchase Part of the Company's Public Shares (Announcement No.:
2022-050), the Announcement on Resolutions of the Second Extraordinary General Meeting of Shareholders in 2022 (Announcement No.: 2022-056), the Report onthe Plan of Repurchase Part of the Company's Public Shares (Announcement No.: 2022-057) published by the Company on cninfo website (www.cninfo.com.cn) onSeptember 16, 2022 and October 11, 2022.
Transfer for changes in share capital
√Applicable □ Inapplicable
On January 13, 2023, the Company had completed the cancellation procedures for the above shares at the Shenzhen branch of China Securities Depository andClearing Corporation Limited, with the total amount of 66,987,835 shares, accounting for 0.7103% of the Company's total share capital before the cancellation(9,430,920,624 shares), and the number of cancelled shares is equal to the number of actual repurchased shares. After the completion of the repurchase andcancellation of shares, the Company's total share capital changes from 9,430,920,624 shares to 9,363,932,789 shares.
Information about the implementation of share repurchase
√Applicable □ Inapplicable
On September 15, 2022 and October 10, 2022, the Company held the 13
th meeting of the 5
thsession of the Board of Directors and the second extraordinary generalmeeting of shareholders in 2022 respectively, deliberated and approved the Proposal on the Plan of Repurchase Part of the Company's Public Shares, approved theCompany using its own fund to repurchase part of its RMB common shares (A shares) that have been issued domestically by means of centralized bidding throughthe trading system of the SZSE, the aggregate amount of repurchase funds shall not exceed RMB2.5 billion (inclusive) and not less than RMB2 billion (inclusive),the repurchase price shall not exceed RMB40 per share (inclusive), the implementation period of the repurchase shall not exceed 12 months from the date of thegeneral meeting of shareholders of the Company at which the proposal on the plan of repurchase part of the Company's public shares is reviewed and approved, andthe Company will make repurchase decisions and implement them based on market conditions during the repurchase period. The shares repurchased by the Company
Hikvision 2023 Half Year Report
will be cancelled for reducing the registered capital according to law. For details, please refer to the Announcement on Resolutions of 13th Meeting of the 5th Sessionof the Board of Directors (Announcement No.: 2022-049), the Announcement on the Plan of Repurchase Part of the Company's Public Shares (Announcement No.:
2022-050), the Announcement on Resolutions of the Second Extraordinary General Meeting of Shareholders in 2022 (Announcement No.: 2022-056), the Report onthe Plan of Repurchase Part of the Company's Public Shares (Announcement No.: 2022-057) published by the Company on cninfo website (www.cninfo.com.cn) onSeptember 16, 2022 and October 11, 2022. On October 11,
2022, the Company first repurchased 6,820,968 shares of the Company by means of centralized biddingthrough a dedicated securities account for the repurchase, accounting for 0.0723% of the Company's total share capital at that time. The highest transaction price wasRMB29.65 per share, the lowest transaction price was RMB28.71 per share, and the total transaction amount was RMB199,981,024.67 (excluding transaction fees).For details, please refer to the Announcement on the Initial Repurchase of the Company's Shares (Announcement No.: 2022-059) published by the Company oncninfo website (www.cninfo.com.cn) on October 12,
2022. During the repurchase period, the Company disclosed the progress of repurchase as of the end of lastmonth within the first three trading days each month based on the regulation. For details, please refer to the Announcement on the Progress of Repurchase(Announcement No.: 2022-063) (Announcement No.: 2022-066) published by the Company on cninfo website (www.cninfo.com.cn) on November 2, 2022,December 3, 2022, respectively. As of December 30, 2022, the repurchase of shares had been completed, and the actual repurchase date was between October 11,2022 and December 30, 2022, meet the requirement on implementation period of repurchase in repurchase plan. As of December 30, 2022, the Company used thededicated securities account for share repurchase to cumulatively repurchase shares with the total amount of 66,987,835 shares by means of centralized bidding,accounting for 0.7103% of the Company's total share capital at that time (9,430,920,624 shares). The highest transaction price was RMB35.13 per share, the lowesttransaction price was RMB26.83 per share, and the total transaction amount was RMB2,043,476,488.53 (excluding transaction fees). The source of share-repurchasefunding was from the Company's own fund, and the price of repurchase did not exceed the upper limit of the price (RMB40 per share) specified in the repurchaseplan. The repurchase complies with relevant laws, regulations and rules from the disclosed repurchase plan. For details, please refer to the Announcement on theProgress and Result of Repurchase of the Company's Shares and Changes in Shares (Announcement No.: 2023-001) published by the Company on cninfo website(www.cninfo.com.cn) on January 4,
2023. On January 13, 2023, the Company had completed the cancellation procedures for the above shares at the Shenzhen branchof China Securities Depository and Clearing Corporation Ltd., with the total amount of 66,987,835 shares, accounting for 0.7103% of the Company's total sharecapital before the cancellation (9,430,920,624 shares), and the number of cancelled shares is equal to the number of actual repurchased shares. After the completionof the repurchase and cancellation of shares, the Company's total share capital changes from 9,430,920,624 shares to 9,363,932,789 shares. For details, please refer tothe Announcement on the Completion of the Cancellation of the Company's Repurchased Shares and Changes in Shares (Announcement No.: 2023-002) publishedby the Company on cninfo website (www.cninfo.com.cn) on January 17, 2023.
The implementation progress of reducing and repurchasing shares by centralized bidding
□Applicable √ Inapplicable
Hikvision 2023 Half Year Report
Effects of changes in share capital on the basic earnings per share ("EPS"), diluted EPS, net assets per share attributable to common shareholders of the Company, andother financial indexes over the last year and last period
□Applicable √ Inapplicable
Other contents that the Company considers necessary or required by the securities regulatory authorities to disclose
□ Applicable √ Inapplicable
2. Changes in restricted shares
√ Applicable □ Inapplicable
Unit: Share
| Name of shareholder | Opening restricted shares | Increased in current period | Vested in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Grantees of restricted share incentive plan (consolidated) | 130,734,463 | 0 | 0 | 130,734,463 | Equity Incentive Restricted Shares | Note 3 |
| Qu Liyang | 11,812 | 0 | 0 | 11,812 | Restricted shares for senior executives | According to the relevant provisions of shares management for senior executives |
| Wang Qiuchao | 26,250 | 0 | 0 | 26,250 | Restricted shares for senior executives | |
| Xu Lirong | 227,250 | 0 | 0 | 227,250 | Restricted shares for senior executives | |
| Hu Yangzhong | 116,434,858 | 292,500 | 0 | 116,727,358 | Restricted shares for senior executives |
Hikvision 2023 Half Year Report
| Name of shareholder | Opening restricted shares | Increased in current period | Vested in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Wu Weiqi | 6,473,317 | 41,025 | 0 | 6,514,342 | Restricted shares for senior executives | |
| He Hongli | 248,625 | 0 | 0 | 248,625 | Restricted shares for senior executives | |
| Cai Changyang | 82,125 | 0 | 0 | 82,125 | Restricted shares for senior executives | |
| Xu Ximing | 66,150 | 0 | 0 | 66,150 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Bi Huijuan | 167,850 | 0 | 0 | 167,850 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Pu Shiliang | 169,425 | 0 | 0 | 169,425 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Jin Duo | 82,125 | 0 | 0 | 82,125 | Restricted shares for senior executives | |
| Jin Yan | 180,000 | 0 | 0 | 180,000 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives |
Hikvision 2023 Half Year Report
| Name of shareholder | Opening restricted shares | Increased in current period | Vested in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Huang Fanghon | 248,875 | 0 | 0 | 248,875 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Xu Peng | 1,811 | 0 | 0 | 1,811 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Guo Xudong | 11,070 | 0 | 0 | 11,070 | Restricted shares for senior executives + partial of the unlocked restricted shares turning into restricted shares for senior executives | |
| Total | 255,166,006 | 333,525 | 0 | 255,499,531 | -- | -- |
Note:
1. Executives who are grantees under incentive restricted shares scheme, his/her holding incentive restricted shares are counted within the total incentive restrictedshares (consolidated statistics) on the second row.
2. The directors of the Company, Hu Yangzhong and Wu weiqi, increased their holdings of the Company by 390,000 shares and 54,700 shares, respectively, which werepartially included in the restricted shares for senior executives in accordance with the relevant rules for the restriction of shares for senior executives.
3. The Company actually granted 97,402,605 shares under the 2021 Restricted Share Incentive Scheme, and the grant date was January 18, 2022, which has not yetreached the unlocking date; the process of repurchase and cancellation of the third repurchase of the granted but unvested restricted shares under the 2018 RestrictedShare Incentive Scheme has been completed on July 5, 2023, and cancelled amount of 33,331,858 shares.II. Issuance and listing of securities
□Applicable √ Inapplicable
There were no securities issues during the reporting period
Hikvision 2023 Half Year Report
III. Total number of shareholders and their shareholdings
Unit: Share
| Total number of common shareholders at the end of the reporting period | 382,245 | Total number of preferred shareholders with voting rights restored at the end of the current reporting period (if any) | 0 | ||||||
| Particulars about shares held by common shareholders with a shareholding percentage over 5% or the Top 10 of them | |||||||||
| Name of shareholder | Nature of shareholder | Share- holding percentage (%) | Total common shares held at the end of the reporting period | Increase/ decrease during the reporting period | The number of common shares held with trading restrictions | The number of shares held without trading restrictions | Pledged or frozen | ||
| Shares' Status | Amount | ||||||||
| China Electronics Technology HIK Group Co., Ltd. | State-owned corporation | 36.35% | 3,403,879,509 | - | - | 3,403,879,509 | Pledged | 50,000,000 | |
| Gong Hongjia | Overseas individual | 10.28% | 962,504,814 | - | - | 962,504,814 | Pledged | 136,020,000 | |
| Hangzhou Weixun Equity Investment Partnership (Limited Partnership) | Domestic non-state-owned corporation | 4.81% | 450,795,176 | - | - | 450,795,176 | Pledged | 19,600,000 | |
| Shanghai Perseverance Asset Management Partnership (Limited Partnership) - Perseverance Adjacent Mountain 1 Yuanwang Fund | Other | 4.61% | 432,000,000 | - | - | 432,000,000 | - | - | |
| CETC Investment Holdings Co., Ltd. | State-owned corporation | 2.48% | 232,307,903 | - | - | 232,307,903 | - | ||
Hikvision 2023 Half Year Report
| Hangzhou Pukang Equity Investment Partnership (Limited Partnership) | Domestic non-state-owned corporation | 1.95% | 182,510,174 | - | - | 182,510,174 | Pledged | 48,300,000 | |||
| The 52nd Research Institute at China Electronics Technology Group Corporation | State-owned corporation | 1.93% | 180,775,044 | - | - | 180,775,044 | - | - | |||
| Hu Yangzhong | Domestic Individual | 1.66% | 155,636,477 | 390,000 | 116,727,358 | 38,909,119 | - | - | |||
| Central Huijin Investment Co., Ltd. | State-owned corporation | 0.69% | 64,700,691 | - | - | 64,700,691 | - | - | |||
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | Overseas corporation | 0.56% | 52,015,208 | 551,374 | - | 52,015,208 | - | - | |||
| Explanation on associated relationship or concerted actions among the above-mentioned shareholders: | China Electronics Technology HIK Group Co., Ltd., CETC Investment Holdings Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd. Chen Chunmei, limited partner of Hangzhou Pukang Equity Investment Partnership (Limited Partnership), is the spouse of Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Hangzhou Weixun Equity Investment Partnership (Limited Partnership) and Hangzhou Pukang Equity Investment Partnership (Limited Partnership). Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Administration of the Takeover of Listed Companies Procedures. | ||||||||||
| Particulars about shares held by the Top 10 common shareholders holding shares that are not subject to trading restriction(s) | |||||||||||
| Name of shareholder | Number of common shares without trading restrictions held at the period-end | Type of shares | |||||||||
| Type | Number | ||||||||||
| China Electronics Technology HIK Group Co., Ltd. | 3,403,879,509 | RMB common shares | 3,403,879,509 | ||||||||
| Gong Hongjia | 962,504,814 | RMB common shares | 962,504,814 | ||||||||
| Hangzhou Weixun Equity Investment Partnership (Limited Partnership) | 450,795,176 | RMB common shares | 450,795,176 | ||||||||
Hikvision 2023 Half Year Report
| Shanghai Perseverance Asset Management Partnership (Limited Partnership) - Perseverance Adjacent Mountain 1 Yuanwang Fund | 432,000,000 | RMB common shares | 432,000,000 | |
| CETC Investment Holdings Co., Ltd. | 232,307,903 | RMB common shares | 232,307,903 | |
| Hangzhou Pukang Equity Investment Partnership (Limited Partnership) | 182,510,174 | RMB common shares | 182,510,174 | |
| The 52nd Research Institute at China Electronics Technology Group Co. Ltd. | 180,775,044 | RMB common shares | 180,775,044 | |
| Central Huijin Investment Co., Ltd. | 64,700,691 | RMB common shares | 64,700,691 | |
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | 52,015,208 | RMB common shares | 52,015,208 | |
| Shanghai Chongyang Strategic Investment Ltd. – Chongyang Strategic Intelligence Fund | 39,068,969 | RMB common shares | 39,068,969 | |
| Explanation on associated relationship and concerted actions among top ten common shareholders holding shares without trading restrictions, and among top ten common shareholders and top ten common shareholders holding shares without trading restrictions | China Electronics Technology HIK Group Co., Ltd., CETC Investment Holdings Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd. Chen Chunmei, limited partner of Hangzhou Pukang Equity Investment Partnership (Limited Partnership), is the spouse of Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Hangzhou Weixun Equity Investment Partnership (Limited Partnership) and Hangzhou Pukang Equity Investment Partnership (Limited Partnership). Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Administration of the Takeover of Listed Companies Procedures. | |||
| Information on Top 10 shareholders of ordinary shares participating in margin trading and short selling business | Shanghai Chongyang Strategic Investment Ltd. – Chongyang Strategic Intelligence Fund, a shareholder, held 39,068,969 shares of the Company in a margin account. | |||
Any of the Company's top 10 common shareholders or top 10 non-restricted common shareholders conducted any agreed buy-back in the reporting period?
□ Applicable √ Inapplicable
No such case during the current reporting period.IV. Shareholding changes of directors, supervisors, senior management personnel
√ Applicable □ Inapplicable
Hikvision 2023 Half Year Report
| Name | Title | Tenure status | Shares held at the beginning of the current reporting period (shares) | Shares increased during the current reporting period (shares) | Shares decreased during the current reporting period (shares) | Shares held at the end of the current reporting period (Shares) | Number of restricted stocks held at the beginning of the current reporting period (shares) | Number of restricted stocks granted in the current reporting period (shares) | Number of restricted stocks held at the end of the current reporting period (shares) |
| Chen Zongnian | Chairman | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Qu Liyang | Director | Incumbent | 15,750 | 0 | 0 | 15,750 | 0 | 0 | 0 |
| Wang Qiuchao | Director | Incumbent | 35,000 | 0 | 0 | 35,000 | 0 | 0 | 0 |
| Hu Yangzhong | Director, General Manager (CEO) | Incumbent | 155,246,477 | 390,000 | 0 | 155,636,477 | 0 | 0 | 0 |
| Wu Weiqi | Director, Standing Deputy General Manager | Incumbent | 8,631,089 | 54,700 | 0 | 8,685,789 | 0 | 0 | 0 |
| Wu Xiaobo | Independent Director | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Hu Ruimin | Independent Director | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Li Shuhua | Independent Director | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Guan Qingyou | Independent Director | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Hong Tianfeng | Supervisor Chairman | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Lu Jianzhong | Supervisor | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Xu Lirong | Supervisor | Incumbent | 303,000 | 0 | 0 | 303,000 | 0 | 0 | 0 |
| He Hongli | Senior Deputy General Manager | Incumbent | 331,500 | 0 | 0 | 331,500 | 0 | 0 | 0 |
Hikvision 2023 Half Year Report
| Name | Title | Tenure status | Shares held at the beginning of the current reporting period (shares) | Shares increased during the current reporting period (shares) | Shares decreased during the current reporting period (shares) | Shares held at the end of the current reporting period (Shares) | Number of restricted stocks held at the beginning of the current reporting period (shares) | Number of restricted stocks granted in the current reporting period (shares) | Number of restricted stocks held at the end of the current reporting period (shares) |
| Cai Changyang | Senior Deputy General Manager | Incumbent | 109,500 | 0 | 0 | 109,500 | 0 | 0 | 0 |
| Xu Ximing | Senior Deputy General Manager | Incumbent | 287,000 | 0 | 0 | 287,000 | 149,100 | 0 | 149,100 |
| Bi Huijuan | Senior Deputy General Manager | Incumbent | 273,000 | 0 | 0 | 273,000 | 36,900 | 0 | 36,900 |
| Pu Shiliang | Senior Deputy General Manager | Incumbent | 385,900 | 0 | 0 | 385,900 | 120,000 | 0 | 120,000 |
| Jin Duo | Senior Deputy General Manager | Incumbent | 109,500 | 0 | 0 | 109,500 | 0 | 0 | 0 |
| Jin Yan | Senior Deputy General Manager, Person in charge of finance | Incumbent | 364,000 | 0 | 0 | 364,000 | 113,000 | 0 | 113,000 |
| Huang Fanghong | Senior Deputy General Manager, Board Secretary | Incumbent | 482,500 | 0 | 0 | 482,500 | 113,000 | 0 | 113,000 |
| Chen Junke | Senior Deputy General Manager | Incumbent | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Xu Peng | Senior Deputy General Manager | Incumbent | 147,244 | 0 | 0 | 147,244 | 108,622 | 0 | 108,622 |
Hikvision 2023 Half Year Report
| Name | Title | Tenure status | Shares held at the beginning of the current reporting period (shares) | Shares increased during the current reporting period (shares) | Shares decreased during the current reporting period (shares) | Shares held at the end of the current reporting period (Shares) | Number of restricted stocks held at the beginning of the current reporting period (shares) | Number of restricted stocks granted in the current reporting period (shares) | Number of restricted stocks held at the end of the current reporting period (shares) |
| Guo Xudong | Senior Deputy General Manager | Incumbent | 44,280 | 0 | 1,000 | 43,280 | 22,140 | 0 | 22,140 |
| Total | -- | -- | 166,765,740 | 444,700 | 1,000 | 167,209,440 | 662,762 | 0 | 662,762 |
Note: Number shares held at the beginning of the period, shares increased during the period, shares decreased during the period for directors, supervisors, and seniormanagement personnel above are all shares directly held by them accordingly, including restricted shares.V. Changes in controlling shareholders or actual controllersChange of the controlling shareholder during the reporting period
□ Applicable √ Inapplicable
The Company's controlling shareholder has not changed during the reporting period.
Change of the actual controller during the reporting period
□ Applicable √ Inapplicable
No such change during the reporting period.
Hikvision 2023 Half Year Report
Section VIII Information of Preferred Shares
□ Applicable √ Inapplicable
There is no preferred share existed for the Company during the current reporting period.
Hikvision 2023 Half Year Report
Section IX Bonds
□ Applicable √ Inapplicable
Hikvision 2023 Half Year Report
Section X Financial Report
I. Audit reportWhether audit has been performed on the half year report
□ Yes √ No
The Company's 2023 Half Year Report has not been audited
Hikvision 2023 Half Year Report
On June 30, 2023
Consolidated Balance Sheet
Unit: RMB
| Item | Notes | On June 30, 2023 | On December 31, 2022 (Restated) |
| Current Assets: | |||
| Cash and bank balances | (V)1 | 34,670,255,152.86 | 40,011,863,999.94 |
| Held-for-trading financial assets | (V)2 | 10,948,728.33 | 12,807,438.36 |
| Notes receivable | (V)3 | 2,161,899,917.86 | 2,519,988,159.23 |
| Accounts receivable | (V)4 | 31,626,699,148.70 | 29,906,294,410.40 |
| Receivables for financing | (V)5 | 1,502,906,978.21 | 1,484,218,258.74 |
| Prepayments | (V)6 | 1,127,865,721.56 | 534,780,120.52 |
| Other receivables | (V)7 | 1,295,693,306.42 | 516,503,485.58 |
| Inventories | (V)8 | 19,597,538,003.71 | 18,998,222,978.81 |
| Contract assets | (V)9 | 1,872,717,726.22 | 2,118,223,370.98 |
| Non-current assets due within one year | (V)10 | 1,063,928,330.52 | 996,902,343.27 |
| Other current assets | (V)11 | 1,089,875,637.26 | 806,832,941.58 |
| Total Current Assets | 96,020,328,651.65 | 97,906,637,507.41 | |
| Non-current Assets: | |||
| Long-term receivables | (V)12 | 633,775,074.97 | 540,647,965.30 |
| Long-term equity investment | (V)13 | 1,120,713,426.25 | 1,252,033,513.41 |
| Other non-current financial assets | (V)14 | 474,823,086.64 | 423,893,239.94 |
| Fixed assets | (V)15 | 9,885,673,844.45 | 8,539,842,630.68 |
| Construction in progress | (V)16 | 3,807,474,388.06 | 3,770,803,300.80 |
| Right-of-use assets | (V)17 | 585,503,726.85 | 574,478,326.31 |
| Intangible assets | (V)18 | 1,598,118,965.64 | 1,544,933,502.19 |
| Goodwill | (V)19 | 397,931,899.85 | 217,386,531.28 |
| Long-term deferred expenses | (V)20 | 184,406,110.27 | 177,277,742.41 |
| Deferred tax assets | (V)21 | 1,624,110,111.40 | 1,470,966,695.68 |
| Other non-current assets | (V)22 | 2,584,388,789.41 | 2,815,702,012.70 |
| Total Non-current Assets | 22,896,919,423.79 | 21,327,965,460.70 | |
| Total Assets | 118,917,248,075.44 | 119,234,602,968.11 |
Hikvision 2023 Half Year Report
On June 30, 2023
Consolidated Balance Sheet-continued
Unit: RMB
| Item | Notes | On June 30, 2023 | On December 31, 2022 (Restated) |
| Current Liabilities: | |||
| Short-term borrowings | (V)23 | 3,150,804,135.09 | 3,343,071,972.89 |
| Held-for-trading financial liabilities | (V)24 | 49,948,979.70 | 68,299,685.57 |
| Notes payable | (V)25 | 905,757,774.63 | 1,207,756,963.94 |
| Accounts payable | (V)26 | 13,969,435,831.18 | 16,025,563,802.99 |
| Contract liabilities | (V)27 | 2,770,165,430.62 | 2,644,496,508.36 |
| Payroll payable | (V)28 | 3,679,313,269.07 | 4,837,302,455.95 |
| Taxes payable | (V)29 | 1,424,969,912.62 | 1,234,032,138.37 |
| Other payables | (V)30 | 3,148,507,577.98 | 3,203,308,686.31 |
| Non-current liabilities due within one year | (V)31 | 2,148,355,742.78 | 868,197,272.46 |
| Other current liabilities | (V)32 | 1,968,581,909.08 | 923,721,593.78 |
| Total Current Liabilities | 33,215,840,562.75 | 34,355,751,080.62 | |
| Non-current Liabilities: | |||
| Long-term borrowings | (V)33 | 9,698,069,194.58 | 7,522,315,341.60 |
| Lease liabilities | (V)34 | 300,219,397.39 | 277,255,924.83 |
| Long-term payables | (V)35 | 5,906,267.08 | 7,569,934.67 |
| Provisions | (V)36 | 221,416,511.54 | 219,365,227.62 |
| Deferred income | (V)37 | 904,414,704.63 | 933,260,426.12 |
| Deferred tax liabilities | (V)21 | 121,696,057.59 | 117,340,377.75 |
| Other non-current liabilities | (V)38 | 1,670,282,155.16 | 2,831,108,087.59 |
| Total Non-current Liabilities | 12,922,004,287.97 | 11,908,215,320.18 | |
| Total Liabilities | 46,137,844,850.72 | 46,263,966,400.80 | |
| Owners' Equity | |||
| Share capital | (V)39 | 9,363,932,789.00 | 9,430,920,624.00 |
| Capital reserves | (V)40 | 8,533,537,109.48 | 10,141,153,435.32 |
| Less: Treasury shares | (V)41 | 3,180,634,300.79 | 5,316,033,650.24 |
| Other comprehensive income | (V)42 | 57,165,084.66 | (42,587,158.81) |
| Surplus reserves | (V)43 | 4,715,460,312.00 | 4,715,460,312.00 |
| Retained earnings | (V)44 | 48,242,872,642.09 | 49,459,757,577.51 |
| Total owners' equity attributable to owner of the Company | 67,732,333,636.44 | 68,388,671,139.78 | |
| Minority equity | 5,047,069,588.28 | 4,581,965,427.53 | |
| Total Owners' Equity | 72,779,403,224.72 | 72,970,636,567.31 | |
| Total Liabilities and Owners' Equity | 118,917,248,075.44 | 119,234,602,968.11 |
The accompanying notes form part of the financial statements.The financial statements were signed by the following:
Legal Representative: Chen Zongnian；Person in Charge of the Accounting Work: Jin Yan;Person in Charge of the Accounting Department: Zhan Junhua
Hikvision 2023 Half Year Report
On June 30, 2023
Balance Sheet of the Parent Company
Unit: RMB
| Item | Notes | On June 30, 2023 | On December 31, 2022 (Restated) |
| Current Assets: | |||
| Cash and bank balances | 24,035,495,376.63 | 27,826,883,144.97 | |
| Notes receivable | 249,413,853.15 | 291,894,821.88 | |
| Accounts receivable | (XV)1 | 24,674,658,344.34 | 24,375,815,151.52 |
| Receivables for financing | 7,164,244.88 | 1,380,237.21 | |
| Prepayments | 114,527,955.78 | 78,220,424.69 | |
| Other receivables | (XV)2 | 2,449,514,292.50 | 2,409,877,936.73 |
| Inventories | 243,707,644.21 | 287,356,998.22 | |
| Contract assets | 3,825,789.69 | 2,070,526.66 | |
| Non-current assets due within one year | 127,545,857.53 | 145,198,110.49 | |
| Other current assets | 1,368,392,183.63 | 10,325,583.58 | |
| Total Current Assets | 53,274,245,542.34 | 55,429,022,935.95 | |
| Non-current Assets: | |||
| Long-term accounts receivable | 2,663,343,630.25 | 544,335,046.78 | |
| Long-term equity investment | (XV)3 | 8,355,078,832.70 | 7,735,758,795.50 |
| Other non-current financial assets | 369,159,988.22 | 336,896,766.52 | |
| Fixed assets | 3,488,394,696.11 | 3,632,220,781.28 | |
| Construction in progress | 25,900,065.47 | 31,536,529.55 | |
| Right-of-use assets | 142,379,852.03 | 106,886,641.18 | |
| Intangible assets | 99,489,684.18 | 108,027,048.91 | |
| Long-term deferred expenses | 47,361,808.76 | 44,756,196.08 | |
| Deferred tax assets | 181,177,659.12 | 170,615,439.85 | |
| Other non-current assets | 24,963,153.58 | 20,271,638.61 | |
| Total Non-current Assets | 15,397,249,370.42 | 12,731,304,884.26 | |
| Total Assets | 68,671,494,912.76 | 68,160,327,820.21 |
Hikvision 2023 Half Year Report
On June 30, 2023
Balance Sheet of the Parent Company - continued
Unit: RMB
| Item | Notes | On June 30, 2023 | On December 31, 2022 (Restated) |
| Current Liabilities: | |||
| Short-term borrowings | 394,480,791.80 | 371,761,513.12 | |
| Accounts payable | 702,220,008.78 | 871,899,603.98 | |
| Contract liabilities | 251,748,887.13 | 252,386,307.55 | |
| Payroll payable | 2,099,129,675.00 | 2,751,925,304.64 | |
| Taxes payable | 694,176,493.05 | 371,935,883.41 | |
| Other payables | 2,132,435,898.28 | 1,523,785,190.90 | |
| Non-current liabilities due within one year | 647,964,606.02 | 280,431,699.90 | |
| Other current liabilities | 1,578,529,858.24 | 504,448,226.96 | |
| Total Current Liabilities | 8,500,686,218.30 | 6,928,573,730.46 | |
| Non-current Liabilities: | |||
| Long-term borrowings | 3,842,794,000.00 | 1,674,051,800.00 | |
| Lease liabilities | 79,419,540.00 | 51,034,219.65 | |
| Provisions | 108,595,375.05 | 112,936,131.57 | |
| Deferred income | 418,326,711.13 | 463,302,126.80 | |
| Other non-current liabilities | 1,642,792,335.93 | 2,806,169,050.05 | |
| Total Non-current Liabilities | 6,091,927,962.11 | 5,107,493,328.07 | |
| Total Liabilities | 14,592,614,180.41 | 12,036,067,058.53 | |
| Owners' Equity | |||
| Share capital | 9,363,932,789.00 | 9,430,920,624.00 | |
| Capital reserves | 6,554,591,297.88 | 8,264,384,780.30 | |
| Less: Treasury shares | 3,180,634,300.79 | 5,316,033,650.24 | |
| Surplus reserves | 4,715,460,312.00 | 4,715,460,312.00 | |
| Retained earnings | 36,625,530,634.26 | 39,029,528,695.62 | |
| Total Owners' Equity | 54,078,880,732.35 | 56,124,260,761.68 | |
| Total Liabilities and Owners' Equity | 68,671,494,912.76 | 68,160,327,820.21 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Consolidated Income Statement
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period (Restated) |
| I. Total Revenue | (V)45 | 37,570,786,397.89 | 37,257,516,590.62 |
| Less: Total operating costs | (V)45 | 20,594,523,514.10 | 21,182,955,700.93 |
| Business taxes and surcharges | (V)46 | 350,538,039.96 | 259,670,277.01 |
| Selling expenses | 4,887,451,798.48 | 4,536,589,939.10 | |
| Administrative expenses | 1,274,582,030.17 | 1,200,010,815.48 | |
| Research and Development (R&D) expenses | 5,285,435,437.59 | 4,675,061,688.81 | |
| Financial expenses | (V)47 | (567,373,249.81) | (785,465,257.61) |
| Including: Interest expenses | 194,501,879.71 | 140,732,663.66 | |
| Interest income | 493,992,701.34 | 452,305,967.35 | |
| Add: Other income | (V)48 | 1,028,735,937.62 | 993,271,624.47 |
| Investment income | (V)49 | 10,766,562.60 | 185,304,789.30 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | (42,240,571.07) | 46,152,616.54 | |
| Gains (losses) from changes in fair values | (V)50 | 46,589,010.96 | (118,462,092.82) |
| Credit impairment losses | (V)51 | (435,735,151.53) | (372,674,934.04) |
| Impairment losses of assets | (V)52 | (195,555,997.08) | (125,801,550.90) |
| Asset disposal losses | (2,699,436.97) | (10,638,858.24) | |
| II. Operating Profit | 6,197,729,753.00 | 6,739,692,404.67 | |
| Add: Non-operating income | (V)53 | 58,542,916.96 | 36,155,570.95 |
| Less: Non-operating expenses | (V)54 | 9,634,567.46 | 9,248,079.55 |
| III. Total Profit | 6,246,638,102.50 | 6,766,599,896.07 | |
| Less: Income tax expenses | (V)55 | 490,214,292.26 | 628,993,865.94 |
| IV. Net Profit | 5,756,423,810.24 | 6,137,606,030.13 | |
| 4.1 Classification by continuous operation | |||
| (a) Net profit on continuous operation | 5,756,423,810.24 | 6,137,606,030.13 | |
| (b) Net loss on terminated operation | |||
| 4.2 Classification by attribution of ownership | |||
| (a) Profit or loss attributable to minority shareholders | 418,555,793.36 | 378,937,983.57 | |
| (b) Net profit attributable to owners of parent company | 5,337,868,016.88 | 5,758,668,046.56 | |
| V. Other Comprehensive Income, Net of Income Tax | (V)42 | 209,956,944.59 | 52,624,946.63 |
| Other comprehensive income attributable to owners of the Company, net of tax | 99,752,243.47 | 27,792,498.30 | |
| (I) Items that will not be reclassified subsequently to profit or loss | |||
| (II) Other comprehensive income to be reclassified to profit or loss in subsequent periods | 99,752,243.47 | 27,792,498.30 | |
| 1. Exchange differences arising on conversion of financial statements denominated in foreign currencies | 99,752,243.47 | 27,792,498.30 | |
| Other comprehensive income attributable to minority interests, net of tax | 110,204,701.12 | 24,832,448.33 |
Hikvision 2023 Half Year Report
| Item | Notes | Amount for the current period | Amount for the prior period (Restated) |
| VI. Total Comprehensive Income | 5,966,380,754.83 | 6,190,230,976.76 | |
| Total comprehensive income attributable to owners of the parent company | 5,437,620,260.35 | 5,786,460,544.86 | |
| Total comprehensive income attributable to minority shareholders | 528,760,494.48 | 403,770,431.90 | |
| VII. Earnings Per Share | |||
| (I) Basic earnings per share | (XVI)2 | 0.568 | 0.608 |
| (II) Diluted earnings per share | (XVI)2 | 0.568 | 0.608 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Income statement of the parent company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Total Revenue | (XV)4 | 10,893,419,484.81 | 11,764,069,657.55 |
| Less: Total operating costs | (XV)4 | 1,814,681,256.69 | 2,181,526,620.42 |
| Business taxes and surcharges | 135,605,667.88 | 142,850,255.77 | |
| Selling expenses | 1,760,677,203.45 | 1,748,230,784.18 | |
| Administrative expenses | 410,460,246.76 | 387,780,229.37 | |
| Research and Development (R&D) expenses | 3,318,060,585.94 | 3,091,156,108.94 | |
| Financial expenses | (278,123,487.18) | (359,933,229.16) | |
| Including: Interest expenses | 62,806,306.98 | 70,177,106.44 | |
| Interest income | 403,066,666.24 | 372,666,149.98 | |
| Add: Other income | 660,498,375.34 | 766,117,498.53 | |
| Investment income | (XV)5 | 126,146,127.23 | 126,490,621.87 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | (41,007,402.96) | 51,641,039.76 | |
| Gains (losses) from changes in fair values | 30,092,421.70 | (21,359,456.79) | |
| Credit impairment losses | (82,668,082.79) | (71,919,000.56) | |
| Losses on asset impairment | (754,499.20) | (3,171,157.67) | |
| Asset disposal gains (losses) | (2,346,292.25) | 176,984.43 | |
| II. Operating Profit | 4,463,026,061.30 | 5,368,794,377.84 | |
| Add: Non-operating income | 11,925,331.88 | 10,864,676.52 | |
| Less: Non-operating expenses | 346,891.03 | 633,999.67 | |
| III. Total Profit | 4,474,604,502.15 | 5,379,025,054.69 | |
| Less: Income tax expenses | 323,849,611.21 | 365,046,580.47 | |
| IV. Net Profit | 4,150,754,890.94 | 5,013,978,474.22 | |
| V. Other Comprehensive Income, Net of Income Tax | - | - | |
| VI. Total Comprehensive Income | 4,150,754,890.94 | 5,013,978,474.22 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Consolidated Cash Flow Statement
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Cash Flows from Operating Activities: | |||
| Cash received from sale of goods or rendering of services | 40,253,202,797.63 | 37,991,180,761.41 | |
| Receipts of tax refunds | 1,610,889,713.88 | 1,858,427,296.61 | |
| Other cash receipts relating to operating activities | (V)56(1) | 993,431,093.48 | 996,902,818.46 |
| Sub-total of cash inflows from operating activities | 42,857,523,604.99 | 40,846,510,876.48 | |
| Cash payments for goods purchased and services received | 26,311,803,835.94 | 28,517,145,082.71 | |
| Cash paid to and on behalf of employees | 9,874,915,641.33 | 8,854,819,423.45 | |
| Payments of various types of taxes | 2,810,328,190.91 | 2,819,627,091.55 | |
| Other cash payments relating to operating activities | (V)56(2) | 2,834,085,074.01 | 2,813,411,487.85 |
| Sub-total of cash outflows from operating activities | 41,831,132,742.19 | 43,005,003,085.56 | |
| Net Cash Flows from Operating Activities | (V)57(1) | 1,026,390,862.80 | (2,158,492,209.08) |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 2,310,444,356.94 | 3,190,133,666.78 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 5,400,328.59 | 8,886,261.07 | |
| Other cash receipts relating to investing activities | (V)56(3) | 29,888,320.03 | 22,123,969.10 |
| Sub-total of cash inflows from investing activities | 2,345,733,005.56 | 3,221,143,896.95 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 2,010,569,857.72 | 1,827,649,513.03 | |
| Cash paid to acquire investments | 2,376,037,040.30 | 3,090,730,900.01 | |
| Net cash paid to acquire subsidiaries and other business units | (V)57(2) | 43,992,651.82 | - |
| Sub-total of cash outflows from investing activities | 4,430,599,549.84 | 4,918,380,413.04 | |
| Net Cash Flows from Investing Activities | (2,084,866,544.28) | (1,697,236,516.09) | |
| III. Cash Flows from Financing Activities: | |||
| Cash receipts from capital contributions | 1,020,000.00 | 2,893,831,394.55 | |
| Including: Cash receipts from capital contributions from minority owners of subsidiaries | 1,020,000.00 | - | |
| Cash receipts from borrowings | 4,663,907,463.39 | 3,244,389,312.95 | |
| Sub-total of cash inflows from financing activities | 4,664,927,463.39 | 6,138,220,707.50 | |
| Cash repayments of borrowings | 1,541,428,965.29 | 1,139,832,455.64 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 6,729,347,458.52 | 7,954,111,720.49 | |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 127,750,000.00 | 1,000,000.00 | |
| Other cash payments relating to financing activities | (V)56(4) | 789,007,637.60 | 106,254,586.43 |
| Sub-total of cash outflows from financing activities | 9,059,784,061.41 | 9,200,198,762.56 | |
| Net Cash Flows from Financing Activities | (4,394,856,598.02) | (3,061,978,055.06) | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | 160,538,952.06 | 72,663,543.66 | |
| V. Net Decrease in Cash and Cash Equivalents | (V)57(1) | (5,292,793,327.44) | (6,845,043,236.57) |
| Add: Opening balance of cash and cash equivalents | (V)57(1) | 39,815,390,514.57 | 34,603,944,429.20 |
| VI. Closing Balance of Cash and Cash Equivalents | (V)57(3) | 34,522,597,187.13 | 27,758,901,192.63 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Cash Flow Statements of the Parent Company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Cash Flows from Operating Activities:: | |||
| Cash receipts from the sale of goods and the rendering of services | 11,829,923,118.88 | 8,600,130,294.66 | |
| Receipts of tax refunds | 606,043,131.31 | 689,224,260.83 | |
| Other cash receipts relating to operating activities | 446,076,065.24 | 494,552,168.22 | |
| Sub-total of cash inflows from operating activities | 12,882,042,315.43 | 9,783,906,723.71 | |
| Cash payments for goods acquired and services received | 2,126,147,201.65 | 2,616,584,562.58 | |
| Cash payments to and on behalf of employees | 4,702,719,220.93 | 4,226,728,575.81 | |
| Payments of various types of taxes | 1,130,558,774.42 | 1,747,511,934.99 | |
| Other cash payments relating to operating activities | 2,634,043,593.74 | 1,736,522,589.02 | |
| Sub-total of cash outflows from operating activities | 10,593,468,790.74 | 10,327,347,662.40 | |
| Net Cash Flows from Operating Activities | 2,288,573,524.69 | (543,440,938.69) | |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 60,000,000.00 | 30,260,000.00 | |
| Cash receipts from investment income | 147,708,123.70 | 44,492,681.25 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 10,509,290.74 | 23,954,540.31 | |
| Net cash receipts from disposals of subsidiaries and other business units | 15,902,073.63 | - | |
| Other cash receipts relating to investing activities | 32,317,830,897.43 | 34,278,715,825.83 | |
| Sub-total of cash inflows from investing activities | 32,551,950,385.50 | 34,377,423,047.39 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 67,100,494.72 | 339,052,800.88 | |
| Cash payments to acquire investments | 1,951,697,070.00 | 25,320,000.00 | |
| Other cash payments relating to investing activities | 33,595,043,024.46 | 34,274,668,870.73 | |
| Sub-total of cash outflows from investing activities | 35,613,840,589.18 | 34,639,041,671.61 | |
| Net Cash Flows from Investing Activities | (3,061,890,203.68) | (261,618,624.22) | |
| III. Cash Flows from Financing Activities | |||
| Cash receipts from capital contributions | - | 2,893,831,394.55 | |
| Cash receipts from borrowings | 2,480,000,000.00 | 280,000,000.00 | |
| Other cash receipts relating to financing activities | 6,093,399,604.70 | 5,694,943,526.50 | |
| Sub-total of cash inflows from financing activities | 8,573,399,604.70 | 8,868,774,921.05 | |
| Cash repayments of borrowings | 14,436,600.00 | 14,436,600.00 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 6,508,940,764.63 | 7,788,147,750.64 | |
| Other cash payments relating to financing activities | 5,025,058,701.85 | 4,191,920,331.61 | |
| Sub-total of cash outflows from financing activities | 11,548,436,066.48 | 11,994,504,682.25 | |
| Net Cash Flows from Financing Activities | (2,975,036,461.78) | (3,125,729,761.20) | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | 1,467,220.03 | 748,292.11 | |
| V. Net Decrease in Cash and Cash Equivalents | (3,746,885,920.74) | (3,930,041,032.00) | |
| Add: Opening balance of cash and cash equivalents | 27,771,201,246.40 | 26,639,582,696.49 | |
| VI. Closing Balance of Cash and Cash Equivalents | 24,024,315,325.66 | 22,709,541,664.49 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
| Items | Amount for the first half of 2023 | |||||||
| Owner's equity attributable to the parent company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained earnings | |||
| I. Closing Balance of the Prior Year | 9,430,920,624.00 | 10,141,153,435.32 | 5,316,033,650.24 | (42,587,158.81) | 4,715,460,312.00 | 49,460,240,986.49 | 4,580,999,418.82 | 72,970,153,967.58 |
| Add: Changes due to alternation in accounting policies | - | - | - | - | - | (483,408.98) | 966,008.71 | 482,599.73 |
| II. Opening Balance of the Current Period | 9,430,920,624.00 | 10,141,153,435.32 | 5,316,033,650.24 | (42,587,158.81) | 4,715,460,312.00 | 49,459,757,577.51 | 4,581,965,427.53 | 72,970,636,567.31 |
| III. Increase or Decrease in the Current Period | (66,987,835.00) | (1,607,616,325.84) | (2,135,399,349.45) | 99,752,243.47 | - | (1,216,884,935.42) | 465,104,160.75 | (191,233,342.59) |
| (I) Total comprehensive income | - | - | - | 99,752,243.47 | - | 5,337,868,016.88 | 528,760,494.48 | 5,966,380,754.83 |
| (II) Owners' contributions and reduction in capital | (66,987,835.00) | (1,607,616,325.84) | (2,043,885,225.35) | - | - | - | 64,093,666.27 | 433,374,730.78 |
| 1. Capital contribution from shareholders | - | - | - | - | - | - | 1,020,000.00 | 1,020,000.00 |
| 2. Share-based payment recognized in owners' equity | 349,027,199.43 | - | - | - | - | 24,501,363.63 | 373,528,563.06 | |
| 3. Others | (66,987,835.00) | (1,956,643,525.27) | (2,043,885,225.35) | - | - | - | 38,572,302.64 | 58,826,167.72 |
| (III) Profit distribution | - | - | (91,514,124.10) | - | - | (6,554,752,952.30) | (127,750,000.00) | (6,590,988,828.20) |
| 1. Transfer to surplus reserves | - | - | - | - | - | - | - | - |
| 2. Distributions to shareholders | - | - | (91,514,124.10) | - | - | (6,554,752,952.30) | (127,750,000.00) | (6,590,988,828.20) |
| IV. Closing Balance of the Current Period | 9,363,932,789.00 | 8,533,537,109.48 | 3,180,634,300.79 | 57,165,084.66 | 4,715,460,312.00 | 48,242,872,642.09 | 5,047,069,588.28 | 72,779,403,224.72 |
| Items | Amount for the first half of 2022 (restated) | |||||||
| Owner's equity attributable to the parent company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained earnings | |||
| I. Closing Balance of the Prior Year | 9,335,806,114.00 | 5,404,070,600.07 | 1,023,188,723.04 | (77,184,125.29) | 4,672,505,348.00 | 45,148,877,451.52 | 1,933,755,610.62 | 65,394,642,275.88 |
| Add: Changes due to alternation in accounting policies | (942,347.44) | 730,041.84 | (212,305.60) | |||||
| II. Opening Balance of the Current Period | 9,335,806,114.00 | 5,404,070,600.07 | 1,023,188,723.04 | (77,184,125.29) | 4,672,505,348.00 | 45,147,935,104.08 | 1,934,485,652.46 | 65,394,429,970.28 |
| III. Increase or Decrease in the Current Period | 97,402,605.00 | 3,439,307,182.02 | 2,280,947,269.95 | 27,792,498.30 | - | (2,731,219,800.54) | 442,634,185.57 | (1,005,030,599.60) |
| (I) Total comprehensive income | - | - | - | 27,792,498.30 | - | 5,758,668,046.56 | 403,770,431.90 | 6,190,230,976.76 |
| (II) Owners' contributions and reduction in capital | 97,402,605.00 | 3,439,307,182.02 | 2,400,667,572.15 | - | - | - | 39,863,753.67 | 1,175,905,968.54 |
| 1. Capital contribution from | 97,402,605.00 | 2,796,428,789.55 | 2,893,831,394.55 | - | - | - | - | - |
Hikvision 2023 Half Year Report
| shareholders | ||||||||
| 2. Share-based payment recognized in owners' equity | - | 499,737,895.30 | - | - | - | - | 39,863,753.67 | 539,601,648.97 |
| 3. Others | - | 143,140,497.17 | (493,163,822.40) | - | - | - | - | 636,304,319.57 |
| (III) Profit distribution | - | - | (119,720,302.20) | - | - | (8,489,887,847.10) | (1,000,000.00) | (8,371,167,544.90) |
| 1. Transfer to surplus reserves | - | - | - | - | - | - | - | - |
| 2. Distributions to shareholders | - | - | (119,720,302.20) | - | - | (8,489,887,847.10) | (1,000,000.00) | (8,371,167,544.90) |
| IV. Closing Balance of the Current Period (Restated) | 9,433,208,719.00 | 8,843,377,782.09 | 3,304,135,992.99 | (49,391,626.99) | 4,672,505,348.00 | 42,416,715,303.54 | 2,377,119,838.03 | 64,389,399,370.68 |
Hikvision 2023 Half Year Report
For the reporting period from January 1, 2023 to June 30, 2023
Statement of Changes in Owners' Equity of the Parent Company
Unit: RMB
| Item | Amount for the first half of 2023 | ||||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained earnings | Total owners' equity | ||
| I. Closing Balance of the Prior Year | 9,430,920,624.00 | 8,264,384,780.30 | 5,316,033,650.24 | 4,715,460,312.00 | 39,030,437,901.96 | 56,125,169,968.02 | |
| Add: Changes due to alternation in accounting policies | - | - | - | - | (909,206.34) | (909,206.34) | |
| II. Opening Balance of the Current Period | 9,430,920,624.00 | 8,264,384,780.30 | 5,316,033,650.24 | 4,715,460,312.00 | 39,029,528,695.62 | 56,124,260,761.68 | |
| III. Increase or Decrease in the Current Period | (66,987,835.00) | (1,709,793,482.42) | (2,135,399,349.45) | - | (2,403,998,061.36) | (2,045,380,029.33) | |
| (I) Total comprehensive income | - | - | - | - | 4,150,754,890.94 | 4,150,754,890.94 | |
| (II) Owners' contributions and reduction in capital | (66,987,835.00) | (1,709,793,482.42) | (2,043,885,225.35) | - | - | 267,103,907.93 | |
| 1. Capital contribution from shareholders | - | - | - | - | - | - | |
| 2. Share-based payment recognized in owners' equity | - | 330,841,112.32 | - | - | - | 330,841,112.32 | |
| 3. Others | (66,987,835.00) | (2,040,634,594.74) | (2,043,885,225.35) | - | - | (63,737,204.39) | |
| (III) Profit distribution | - | - | (91,514,124.10) | - | (6,554,752,952.30) | (6,463,238,828.20) | |
| 1. Distributions to shareholders | - | - | (91,514,124.10) | - | (6,554,752,952.30) | (6,463,238,828.20) | |
| IV. Closing Balance of the Current Period | 9,363,932,789.00 | 6,554,591,297.88 | 3,180,634,300.79 | 4,715,460,312.00 | 36,625,530,634.26 | 54,078,880,732.35 | |
| Item | Amount for the first half of 2022 (Restated) | ||||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained earnings | Total owners' equity | ||
| I. Closing Balance of the Prior Year | 9,335,806,114.00 | 4,937,523,553.84 | 1,023,188,723.04 | 4,672,505,348.00 | 37,958,561,319.89 | 55,881,207,612.69 | |
| Add: Changes due to alternation in accounting policies | - | - | - | - | (443,175.56) | (443,175.56) | |
| II. Opening Balance of the Current Period | 9,335,806,114.00 | 4,937,523,553.84 | 1,023,188,723.04 | 4,672,505,348.00 | 37,958,118,144.33 | 55,880,764,437.13 | |
| III. Increase or Decrease in the Current Period | 97,402,605.00 | 3,348,359,936.52 | 2,280,947,269.95 | - | (3,475,909,372.88) | (2,311,094,101.31) | |
| (I) Total comprehensive income | - | - | - | - | 5,013,978,474.22 | 5,013,978,474.22 | |
| (II) Owners' contributions and reduction in capital | 97,402,605.00 | 3,348,359,936.52 | 2,400,667,572.15 | - | - | 1,045,094,969.37 | |
| 1. Share-based payment recognized in owners' equity | 97,402,605.00 | 2,796,428,789.55 | 2,893,831,394.55 | - | - | - | |
| 2. Share-based payment recognized in owners' equity | - | 450,746,177.86 | - | - | - | 450,746,177.86 | |
| 3. Others | - | 101,184,969.11 | (493,163,822.40) | - | - | 594,348,791.51 | |
| (III) Profit distribution | - | - | (119,720,302.20) | - | (8,489,887,847.10) | (8,370,167,544.90) | |
| 1. Distributions to shareholders | - | - | (119,720,302.20) | - | (8,489,887,847.10) | (8,370,167,544.90) | |
| IV. Closing Balance of the Current Period (Restated) | 9,433,208,719.00 | 8,285,883,490.36 | 3,304,135,992.99 | 4,672,505,348.00 | 34,482,208,771.45 | 53,569,670,335.82 | |
I. Basic information about the CompanyHangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as "Company" or "the Company" or"Hikvision"), is a Sino-foreign equity joint venture company, formerly known as "Hangzhou Hikvision Digital TechnologyLtd", established on November 30, 2001 in Hangzhou upon the approval letter of Hangzhou High-tech No. 604 [2001]issued by Hangzhou High-tech Industrial Development Zone Management Committee. On June 25, 2008, with approvalof document No. 598 [2008] issued by the MOFCOM (The Ministry of Commerce of the People's Republic of China), theCompany was renamed as "Hangzhou Hikvision Digital Technology Co., Ltd.", headquartered in Hangzhou, and obtainedthe business license of enterprise No.91330000733796106P. On May 28, 2010, the Company was listed on the ShenzhenStock Exchange.
In accordance with the authorization by the Company's second Extraordinary General Meeting in 2018, the resolution bythe 10th meeting of the 5
thsession of the Board of Directors on May 5, 2022, the resolution of the second ExtraordinaryGeneral Meeting in 2022 on October 10, 2021 and the revised Articles of Association, the Company repurchased andcancelled the granted 2,288,095 restricted RMB treasury shares that have not been unlocked by cash. The Companycompleted the deregistration on December 21, 2022 and the share capital was accordingly changed to 9,430,920,624 shares.
In accordance with the resolutions of the 13
th
meeting of the 5
thsession of the Board of Directors on September 15, 2022and the second extraordinary general meeting of shareholders in 2022 on October 10, 2022, the Company used thededicated securities account for share repurchase to cumulatively repurchase shares with the total amount of 66,987,835shares by means of centralized bidding from October 11, 2022 to December 30, 2022. On January 13, 2023, the Companyhad completed the cancellation procedures. The total share capital of the Company was adjusted to 9, 363,932,789 shares.For details of the share capital, please refer to Note (V), 39.
As of June 30, 2023, the Company's total registered capital is RMB9,363,932,789.00, with total capital shares of9,363,932,789 shares (face value RMB1 per share), of which restricted A-shares were 255,499,531 shares, A-shareswithout restriction are 9,108,433,258 shares.
The Company is involved in the sector of other electronic equipment manufacturing of the electronic industry. Businessscope of the Company includes development and production of electronic products (including explosion-proof electricalproducts, tele-communication equipment and its ancillary equipment, multimedia equipment, transmission and displayequipment), fire protection and control products, big data and IoT software and hardware products, aerial vehicles, robots,intelligent equipment and intelligent systems, real-time communication systems, auto parts and accessories, electricalsignal equipment for vehicle, servers and supporting hardware and software products; sales of self-manufactured products;technical service, electronic technology consulting service, training service (excluding class training), electronicequipment installation, design, construction and maintenance of electronic engineering and intelligent system engineering.For details about business scope of the Company and its subsidiaries, please refer to Note (VII) 1.
The Company's and consolidated financial reports were approved for issuance by the 18
th
meeting of the 5
thsession of theBoard of Directors of the Company on August 18, 2023.
For changes in consolidation scope of the financial statements during the current reporting period, please refer to "changesin the consolidation scope" in Note (VI).II. Basis of preparation of financial statementsBasis of preparation of financial statementsThe Company and its subsidiaries (hereinafter referred to as "the Group") have adopted the Accounting Standards forBusiness Enterprises ("ASBE") and relevant provisions issued by the Ministry of Finance ("MoF"). In addition, the Grouphas disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules forCompanies Offering Securities to the Public No. 15－General Provisions on Financial Reporting (revised in 2014).
Going concernThe Group has evaluated its going concern for 12 months going forward starting from June 30, 2023, and there is no factorthat may cast significant doubt on the entity's ability to continue as a going concern. Therefore, the financial statementshave been prepared on a going concern basis.
Bookkeeping base and valuation principlesThe Group measures the accounting elements in accordance with the accrual accounting basis. Except certain financialinstruments are measured by fair value, these financial statements are prepared in accordance with the measurements basisof historical costs. If the asset decreases in value, the provision for impairment of assets should be made according torelevant regulations.
According to the historical cost measurement, the assets shall be measured as per the amount of cash or cash equivalentpaid at the time of purchase, or the fair value of consideration paid for the purchase of such assets. The liabilities shall bemeasured in accordance with the amount of funds or assets actually received when undertaking current obligations, or thecontract amount when undertaking the current obligations, or the amount of cash or cash equivalents required for payingback the debts in daily activities.
The fair value is a price received by the market participants from selling asset or transferring liability during orderlytransaction at the measurement date. No matter the fair value is observable or estimated by using valuation technique, themeasured and disclosed fair value in the financial statement shall be determined on this basis.
When measuring non-financial assets at fair value, the assets shall be measured considering the ability of marketparticipants to use the assets for optimal use to generate economic benefits, or to sell the assets to other market participantsto use the assets for optimal use to generate economic benefits.
For the financial assets measured with transaction price at the initial recognition, and the use of valuation techniquesinvolving unobservable inputs in the subsequent fair value measurement, the valuation technique is corrected in thevaluation process in order to make the initial recognition results confirmed by valuation techniques equal to the transactionprice.
Based on the observable extent of the input value of the fair value, and the importance of such input value to the fair valuemeasurement, the fair value measurement is divided into three levels:
? Level 1: The input value is the unadjusted offer of the same assets or liabilities on active market acquired onmeasurement date;? Level 2: The input value is the input value of relevant assets or liabilities observable directly or indirectly in addition
to level 1 input value;? Level 3: The input value is the non-observable input value of relevant assets or liabilities.III. Significant accounting policies and accounting estimates
1. Statement for compliance with Accounting Standards for Business Enterprises (ASBE)The financial statements of the Company have been prepared in accordance with ASBE, and present the Company's andconsolidated financial position as of June 30, 2023, the Company's and consolidated results of operations, the Company'sand consolidated changes in shareholders' equity, and the Company's and consolidated cash flows for the first half of 2023truly and completely.
2. Accounting period
The Group has adopted the calendar year as its accounting year from January 1 to December 31 each year.
3. Business cycle
The business cycle refers to the period from purchase of assets used for processing to realization of cash or cash equivalents.The Group's business cycle is usually 12 months.
4. Functional currency
Renminbi ("RMB") is the currency in the primary economic environments in which the Company and its domesticsubsidiaries are operated. The Company and its domestic subsidiaries take RMB as their functional currency. Overseas
subsidiaries of the Company determine their functional currency on the basis of the primary economic environment inwhich it operates. The Group adopts RMB to prepare its financial statements.
5. The accounting treatment of business combinations involving enterprises under common control and businesscombinations not involving enterprises under common controlBusiness combinations are classified into business combinations involving enterprises under common control and businesscombinations not involving enterprises under common control.
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of thecombining enterprises are ultimately controlled by the same party or parties both before and after the combination, andthat control is not transitory.
Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entitiesat the date of the combination. The difference between the carrying amount of the net assets obtained and the carryingamount of the consideration paid for the combination is adjusted to the share premium in capital reserve. If the sharepremium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred.
5.2 Business combinations not involving enterprises under common control and goodwillA business combination not involving enterprises under common control is a business combination in which all of thecombining enterprises are not ultimately controlled by the same party or parties before and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurredor assumed, and equity securities issued by the acquirer in exchange for control of the acquiree. If a business combinationnot under the common control is realized in stages through multiple transactions, the cost of the combination is the sumof the consideration paid on the purchase date and the fair value of the equity of the purchase already held before thepurchase date on the purchase date. The intermediary expenses incurred by the acquirer in respect of auditing, legalservices, valuation and consultancy services, etc. and other associated administrative expenses attributable to the businesscombination are recognized in profit or loss when they are incurred.
The acquiree's identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in a business combination,that meet the recognition criteria shall be measured at fair value at the acquisition date.
Where the cost of combination exceeds the acquirer's interest in the fair value of the acquiree's identifiable net assets, thedifference is treated as an asset and recognized as goodwill, which is measured at cost on initial recognition. Where thecost of combination is less than the acquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirerfirstly reassesses the measurement of the fair values of the acquiree's identifiable assets, liabilities and contingent liabilitiesand measurement of the cost of combination. If after that reassessment, the cost of combination is still less than theacquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirer recognizes the remaining differenceimmediately into profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is presentedseparately in the consolidated financial statements.
6. Preparation method of consolidated financial statements
6.1 Preparation method of consolidated financial statements
The scope of consolidated financial statements shall be confirmed based on the control. Control right means that aninvestor may control an investee; the investor may participate in relevant activities of the investee to obtain variablerewards and also be able to use the control rights for the investee to influence its amount of returns. The Group will re-evaluate, if the change of the relevant facts and circumstances leading to the change of the relevant elements involved inthe above definition of control.
The merger of subsidiary starts from the Group obtaining the control power of the subsidiary, and terminates when theGroup loses the control power of the subsidiary.
As for subsidiaries disposed by the Group, operating results and cash flows prior to the disposal date (the date of losingcontrol right) have been properly included in the consolidated profit statement and consolidated cash flow statement.
For a subsidiary acquired through a business combination not involving enterprises under common control, the operatingresults and cash flows from the acquisition date (the date when control is obtained) are included in the consolidated incomestatement and consolidated statement of cash flows.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through a businesscombination involving enterprises under common control are included in the Group's scope of consolidation as if they had
been included in the scope of consolidation from the date when they first came under the common control of the ultimatecontrolling party. Their operating results and cash flows from the beginning of the earliest reporting period are includedin the consolidated income statement and consolidated statement of cash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on theuniform accounting policies and accounting periods set out by the Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interests and presented as"minority equity" in the consolidated balance sheet. The portion of net profits or losses of subsidiaries for the periodattributable to minority interests is presented as "minority interests" in the consolidated income statement below the "netprofit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount is still allocated againstminority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of control over thesubsidiary is accounted for as equity transactions. The carrying amounts of the total owners' equity attributable to ownerof the Company and minority equity are adjusted to reflect the changes in their relative interests in the subsidiary. Thedifference between the amount by which the minority interests are adjusted and the fair value of the consideration paid orreceived is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference,the excess is adjusted against retained earnings.
In the case that the equity of the acquiree is obtained through multiple deals in stages to finally form the businesscombination not under the common control, the business combination shall be handled differently based on whether it is"package deal": where it is package deal, the Company accounts each deal as a deal to obtain the control. If the deal is nota "package deal", a deal where the control is obtained on the acquisition date will be subject to accounting. The acquiree'sequity held before the acquisition date will be re-measured based on the fair value of the equity on the acquisition dateand the difference between the fair value and book value will be included in the profit or loss in the current period. If theacquiree's equity held before the acquisition date involves any changes in the other comprehensive income or in any otherowner's equity accounted by the equity method, such equity changes shall be accounted for on the same basis as the directdisposal of the relevant assets or liabilities by the acquiree.
7. Joint arrangement classification and joint operation accounting
Joint arrangements include joint operations and joint ventures. Such classification is defined based on the rights andobligations of the joint parties in the joint arrangement, taking into account the structure and legal form of sucharrangement and also the contractual provisions. Joint operation refers to a joint arrangement where the joint venture isentitled to assets related to this arrangement and bear liabilities related to this arrangement. Joint ventures mean that jointventure parties are merely entitled to joint venture arrangements of net assets of such arrangements.
The Group's investment in any joint venture is accounted by the equity method. See the details in Note (III) "15.3.2 Long-term equity investment accounted under the equity method".
The Group confirms its assets held separately according to the arrangement of joint operation and those held jointly inproportion to the Group's share; confirms its liabilities held separately and those held jointly in proportion to the Group'sshare; confirms its revenue from the sale of its share of the output arising from the joint operation; confirms its share ofthe revenue from the sale of the output by the joint operation; confirms the expenses incurred by the Group alone and theexpenses incurred by the joint operation corresponding to the share of the Group therein. The assets, liabilities, revenuesand expenses related to the joint operation are accounted and confirmed by the Group in accordance with the regulationsapplicable to specific assets, liabilities, revenues, and expenses.
8. Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group'sshort-term (Generally refers to due within three months from the purchase date), highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
9. Conversion of transactions and financial statements denominated in foreign currencies.
9.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate that approximates theactual spot exchange rate on the date of transaction; The exchange rate that approximates the actual spot exchange rate onthe date of transaction is calculated according to the middle price of market exchange rate at the beginning of the monthin which the transaction happened.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spot exchange rates at thebalance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at thebalance sheet date and those on initial recognition or at the previous balance sheet date are recognized in profit or loss for
the period, except for exchange differences related to a specific-purpose borrowing denominated in foreign currency thatqualifies for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period.
When the consolidated financial statements include foreign operation(s), if there is foreign currency monetary itemconstituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates arerecognized as "exchange differences arising on conversion of financial statements denominated in foreign currencies" inother comprehensive income, and in profit and loss for the period upon disposal of the foreign operation.
Foreign currency non-monetary items measured at historical cost are converted to the amounts in functional currency atthe spot exchange rates on the dates of the transactions. Foreign currency non-monetary items measured at fair value arere-converted at the spot exchange rate on the date the fair value is determined. Difference between the re-convertedfunctional currency amount and the original functional currency amount is treated as changes in fair value (includingchanges of exchange rate) and is recognized in profit and loss or as other comprehensive income.
9.2 Conversion of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation areconverted from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet aretranslated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items are converted at thespot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflectingthe distribution of profits are translated at exchange rates that approximate the actual spot exchange rates on the dates ofthe transactions; The difference between the converted assets and the aggregate of liabilities and shareholders' equity itemsis recognized into other comprehensive income and shareholders' equity.
The foreign currency cash flows and cash flows of overseas subsidiaries adopt the exchange rate similar to the spot rate atthe date of cash flows for conversion. The affected amount of cash and cash equivalents due to the change of exchangerate, as an adjustment item, shall be separately listed as "the impact of cash and cash equivalents due to the change ofexchange rate" in the cash flow statement.
The closing balances of the prior year and the actual amount of the prior year are presented at the converted amounts ofthe prior year's financial statements.
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operation due todisposal of certain interest in it or other reasons, the Group transfers the accumulated exchange differences arising on
conversion of financial statements of this foreign operation attributable to the owners' equity of the Company and presentedunder shareholders' equity, to profit or loss in the period in which the disposal occurs.
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, but only adecrease in proportion of overseas business interests, the proportionate share of accumulated exchange differences arisingon conversion of financial statements are re-attributed to minority interests and are not recognized in profit and loss undercurrent period. For partial disposals of equity interests in foreign operations, which are associates or joint ventures, theproportionate shares of the accumulated exchange differences arising on conversion of financial statements of foreignoperations are reclassified to profit or loss under current period.
10. Financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to a contract of financial instrument.
For the purchase or sale of a financial asset in conventional manner, the asset to be received and the liability to be assumedwill be recognized on the trading day, or the asset sold will be derecognized on the trading day.
Financial assets and financial liabilities are measured by fair value upon initial recognition. For financial assets andfinancial liabilities at fair value through profit and loss, the relevant trading costs will be directly charged to profit and lossof the current period. For other types of financial assets and financial liabilities, the relevant trading costs will be bookedinto the initial recognition amount. Upon initial recognition of accounts receivable which have no material financingcomponents or have not taken into consideration the financing components in contracts with a term not exceeding oneyear according to Accounting Standards for Business Enterprise No. 14 – Revenue ("Revenue Standard"), such initialamount is measured by the transaction price as defined under the Revenue Standard.
Effective interest rate method refers to the method of calculating the amortized cost of financial asset or financial liabilityand apportioning interest income or interest expenses to each accounting period.
Effective interest rate refers to the interest rate used for discounting the estimated future cash flows of a financial asset ora financial liability for an expected subsisting period into the balance of book value of the financial asset or the amortizedcost of the financial liability. When determining the effective interest rate, the expected cash flows are estimated on thebasis of considering all contractual terms of the financial asset or financial liability (such as early repayment, extendedterm, call option or other similar option) but without considering the expected credit loss.
The amortized cost of a financial asset or a financial liability refers to the initial recognition amount of such financial assetor financial liability, less the repaid amount of principal, plus or minus the accrued amortized amount calculated byamortization of the difference between the initial recognition amount and the amount on maturity by using the effectiveinterest rate method, and then deducts the accrued provision for losses (only applicable to financial assets).
10.1 Classification, confirmation and measurement of financial assets
After initial recognition, the Group will adopt amortized cost, fair value through other comprehensive income, or fair valuethrough profit and loss for subsequent measurement depending on different categories of financial assets.
The Group will classify a financial asset into a financial asset measured at amortized cost if the contractual terms of thefinancial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principalamount outstanding and the financial asset is held within a business model whose objective is to hold financial assets inorder to collect contractual cash flows. Financial assets classified by the Group as financial asset measured by amortizedcost include cash and cash equivalents, notes receivables and accounts receivable, other receivables and long-termreceivables.
The Group will classify a financial asset into a financial asset measured by fair value through other comprehensive incomeif the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principaland interest on the principal amount outstanding, and the financial asset is held within a business model whose objectiveis achieved by both collecting contractual cash flows and selling the financial assets. This category of financial assetsmainly includes financial assets with a maturity of more than one year from the date of acquisition and which are presentedunder other debt investments, financial assets maturing within one year (inclusive) from the balance sheet date and whichare presented under non-current assets maturing within one year, as well as the accounts receivable and notes receivableclassified as fair value at the time of acquisition and their changes are included in other comprehensive income are listedin the receivables for financing, and for those have acquisition period within one year (including one year) are listed inother current assets.
At the time of initial recognition, the Group may, on the basis of a single financial asset, irrevocably designate aninvestment in an equity instrument held for non-trading purpose recognized or without consideration in a business mergernot under common control as a financial asset at fair value through other comprehensive income. This type of financialassets is presented as investment in other equity instruments.
Financial assets which have satisfied one of the following conditions indicate that such financial assets are held for tradingpurpose by the Group:
? The purpose of acquiring the relevant financial asset is mainly for sale in recent period.
? At the time of initial recognition, the relevant financial asset is a part of an identifiable portfolio of financialinstruments under collective management, and there is objective evidence showing a recent and actual existence ofshort-term profitable mode.? The relevant financial assets are derivatives, excluding derivatives which satisfy the definition under financial
guarantee contracts and derivatives which are designated as effective hedging instruments.
Financial assets at fair value through profit and loss include financial assets which are classified as financial assets at fairvalue through profit and loss and financial assets designated at fair value through profit and loss:
? Financial assets which do not satisfy the conditions of being classified as financial assets measured at amortized costor as financial assets at fair value through other comprehensive income, they will be classified as financial assets atfair value through profit and loss.? At the time of initial recognition, in order to eliminate or substantially reduce mismatch in accounting, the Groupmay irrevocably designate a financial asset as a financial asset measured at fair value with changes through profitand loss.
Financial assets at fair value through profit and loss will be presented as held-for-trading financial assets. If such financialassets have a maturity of more than one year from the balance sheet date (or without a fixed maturity) and which areexpected to be held for more than one year, they will be presented under other non-current financial assets.
10.1.1 Financial assets measured at amortized cost
Financial assets measured at amortized cost adopt the effective interest rate method for subsequent measurement accordingto amortized cost, the profit or loss when impairment occurs or upon derecognition will be accounted in profit and loss ofthe current period.
The Group recognizes interest income by using effective interest rate method for financial assets measured at amortizedcost. The Group determines interest income by multiplying the balance of book value of financial assets with the effectiveinterest rate except under the following circumstances:
? For acquired or generated financial assets which incurred credit impairment already, their interest income will be
determined by using the amortized cost of such financial asset calculated with the credit adjusted effective interestrate.? For acquired or generated financial assets which have not incurred credit impairment but incur credit impairment in
the subsequent period, the Group will determine their interest income by using the amortized cost of such financialassets multiplied with the effective interest rate in the subsequent period. If such financial asset ceases to have creditimpairment due to improvement in credit risk in the subsequent period, then the Group should change to multiply theeffective interest rate with the balance of book value of such financial asset instead to determine the interest income.
10.1.2 Financial asset at fair value through other comprehensive income
The impairment loss or profit, or interest income calculated by using the effective interest rate method, relating to financialasset at fair value through other comprehensive income should be accounted in the profit and loss of the current period,and other changes in fair value of such financial assets will be accounted in other comprehensive income. The amountcharged by such financial asset to the profit and loss of each period is deemed to be equal to the amount which has beenmeasured by amortized cost and charged to the profit and loss of each period. Upon derecognition of such financial asset,the accumulated profit or loss previously charged to other comprehensive income will be reversed from othercomprehensive income and charged to profit and loss of the current period.
For non-trading equity instrument investment designated at fair value through other comprehensive income, its changesin fair value will be recognized in other comprehensive income. Upon derecognition of such financial asset, theaccumulated profit or loss charged to other comprehensive income will be reversed from other comprehensive income andcharged to retained earnings. During the period when such investment in equity instruments for non-trading purpose areheld by the Group, the right to receive dividends by the Group has been established, and economic benefits related todividends are likely to flow into the Group, and if the amount of dividends may be measured reliably, the dividend incomeis recognized and accounted in the profit and loss of the current period.
10.1.3 Financial asset at fair value through profit and loss
For financial asset at fair value through profit and loss, subsequent measurement will be calculated at fair value, the profitor loss arising from changes in fair value and the dividend and interest income relating to such financial asset will beaccounted in the profit and loss of the current period.
10.2 Impairment of financial assets
For financial assets measured at amortized cost, financial assets that are classified as financial asset at fair value throughother comprehensive income, contract assets, lease receivables, and financial guarantee contracts that do not meet theconditions for termination of recognition due to the transfer of financial assets or continue to be involved in financialliabilities formed by the transferred financial assets, the Group will handle impairment on the basis of expected credit lossand recognize loss provision.
The Group's consideration of contract assets, notes receivable and accounts receivable that are generated by transactionsregulated by revenue standards and do not contain significant financing components or that do not consider financingcomponents in contracts that are not more than one year old, as well as those operating lease receivables formed fromtransactions that are defined by the Accounting Standards for Business Enterprises No. 21-Leasing, the loss reserve shallbe measured based on the amount of the expected credit loss during the entire duration.
For other financial instruments, other than acquired or generated financial assets which have incurred credit impairmentalready, the Group will assess on each balance sheet date the changes in credit risk of the relevant financial instruments
since initial recognition. If the credit risk of such financial asset has significantly increased after initial recognition, theGroup will calculate its loss provision based on the amount equivalent to the expected credit loss for the entire subsistingperiod. If the credit risk of such financial asset since initial recognition has not increased significantly, the Group willcalculate its loss provision according to the expected credit loss amount of such financial asset for the next 12 months.The amount of increase or reversal in the provision for credit loss, apart from financial assets classified as financial assetat fair value through other comprehensive income, is accounted in the profit and loss of the current period. For financialasset classified as measured at fair value through other comprehensive income, the Group will recognize its credit lossprovision in other comprehensive income and charged the impairment loss or gain to the profit and loss of the currentperiod, and will not decrease the book value of such financial asset presented in the balance sheet.
The Group has calculated the loss provision equivalent to the expected credit loss amount for the entire subsisting periodof the financial instrument in the preceding accounting period, but at the balance sheet date of the current period, suchfinancial instrument is no longer under the condition of significant increase in credit risk since initial recognition, theGroup calculates the loss provision for such financial instrument on the balance sheet date of the current period accordingto an amount equivalent to the expected credit loss for the next 12 months, and the resulting loss provision reversal amountwill be counted as impairment gain and booked into the profit and loss of the current period.
10.2.1 Significant increase in credit risk
The Group uses available and reasonable forward-looking information with justification, by comparing the default risk ofthe financial instrument at the balance sheet date with the default risk on the initial recognition date, to confirm whetherthe credit risk of the financial instrument has significantly increased after initial recognition. When using the financialinstrument impairment rules for loan commitment and financial guarantee contracts, the date when the Group becomes aparty of an irrevocable commitment is deemed as the initial recognition date.
The Group considers the following factors when assessing whether the credit risk has significantly increased:
(1) Whether a significant change has been caused to the internal price indicator due to changes in credit risk.
(2) Whether the external credit rating of financial instrument has actual or expected significant changes.
(3) Whether the actual or expected internal credit rating of the debtor has been downgraded.
(4) Whether adverse changes have occurred in the business, finance or economic conditions which are expected to causesignificant changes in the capability of the debtor to perform debt repayment obligations.
(5) Whether actual or expected significant changes have occurred in the operating results of the debtor.
(6) Whether significant adverse changes have occurred in the supervision, economic or technical environment in whichthe debtor operates.
(7) Whether significant changes have occurred in the value of security pledged for the debt or the quality of guaranteeor credit enhancement provided by third parties. Such changes are expected to reduce the debtor's economicmotivation of repayment according to contractual term or influence the probability of default.
(8) Whether significant changes have occurred in the economic motivation which will lower the expectation of
repayment by the borrower according to the contractual term.
(9) Whether significant changes have occurred in the expected performance and repayment behavior of the debtor.
Whether or not the credit risks increase significantly after the foregoing assessments, if any contractual payment for anyfinancial instrument that overdue for over (including) 30 days, it indicates the credit risks of that financial instrument haveincreased significantly.
On the balance sheet date, if the Group determines that the financial instrument only carries low credit risks, then it assumesthat the credit risks of the financial instrument have not increased significantly since the initial recognition. If the risk ofdefault on financial instruments is low, the borrower is highly able to perform its contractual cash flow obligations in theshort term, and even if the economic situation and operating environment are adversely changed over a long period of timebut not necessarily reducing the borrower's performance of its contractual cash obligations, the financial instrument isconsidered as having a lower credit risk.
10.2.2 Financial assets which have incurred credit impairment already
When one or more events which will have adverse effect on the expected future cash flows from the financial asset of theGroup have occurred, such financial asset will become a financial asset which have incurred credit impairment already.The evidence of credit impairment occurred in a financial asset includes the following observable information:
(1) Material financial difficulties have occurred in the issuer or debtor;
(2) Breach of contract by the debtor, such as default or overdue for the payment of interest or repayment of principal;
(3) Due to economic or contractual considerations relating to financial difficulties of the debtor, the creditor has grantedconcession to the debtor under no other circumstances;
(4) The debtor is likely to go bankrupt or carry out other financial restructuring;
(5) The financial difficulties of the issuer or debtor have caused the disappearance of the active market for the financialasset;
(6) The purchase or generation of a financial asset at a large discount, such discount reflects the fact of occurrence of
credit loss.
10.2.3 Confirmation of expected credit loss
The Group's accounts receivable and other receivables, that are individually significant and the debtor has serious financialdifficulties, are determined on the basis of individual for its credit loss. The remaining accounts receivable and contractassets are divided into different portfolios according to the area and target of the business as a common risk characteristicand an impairment matrix is used to determine the credit losses of relevant financial instruments on a portfolio basis. Forthe remaining other receivables and long-term receivables, the credit loss of the relevant financial instrument is determinedon a portfolio basis. Notes receivable and receivables are evaluated on a portfolio basis to determine credit losses byassessing the probability of breach and loss given default based on the credit rating of the acceptor as a common riskcharacteristic.
The Group confirms the expected credit loss of the relevant financial instrument according to the following method:
? In respect of financial assets and lease receivables, the credit loss is the present value of the difference between the
contractual cash flow that the group should receive and the cash flow that it expects to receive.? In respect of a financial guarantee contract (for specific accounting policies, please refer to Note (III), 10.4.1.2.1),the credit loss is the present value of the difference between Group's expected payment amount for the compensationmade to the contract holder due to the occurrence of credit loss and the amount expected to be received by the Groupfrom such contract holder, debtor or any other parties.? In respect of financial assets with credit impairment on the balance sheet date but they are not acquired or generated
financial assets with credit impairment, the credit loss represents the difference between the balance of the book value
of such financial asset and the present value of the estimated future cash flows discounted by the original effective
interest rate.
The factors reflected by the method used for calculating expected credit loss of financial instruments by the Group include:
an unbiased weighted average amount determined by assessing a series of probable outcomes; time value of currency;reasonable and justifiable information relating to past events, prevailing conditions and forecast of future economicconditions obtained on the balance sheet date without incurring unnecessary additional cost or effort.
10.2.4 Write-off on financial asset
When the Group ceases to have reasonable expectation on the possible collection of all or part of the contractual cashflows from the financial asset, the balance of book value of such financial asset will be written off directly. Such a write-off constitutes a derecognition of the relevant financial asset.
10.3 Transfer of financial asset
A financial asset that fulfills one of the following conditions will be de-recognized: (1) termination of contractual rightsto receive cash flows from the financial asset; (2) upon transfer of such financial asset and transfer of substantially all therisks and rewards in respect of the ownership of such financial asset to the transferee; (3) upon transfer of such financialasset, though the Group has not transferred nor retained substantially all the risks and rewards in respect of the ownershipof such financial asset, yet it has not retained the control over such financial asset.
If the Group has not transferred nor retained substantially all the risks and rewards in respect of the ownership of suchfinancial asset, and has retained the control over such financial asset, then such transferred financial asset will continue tobe recognized, and the relevant liabilities will continue to be recognized, according to the level of the Group's continuousinvolvement in such transferred financial asset. The relevant liabilities will be measured by the Group according to thefollowing method:
? If the transferred financial asset is measured by amortized cost, the book value of the relevant liabilities is equivalentto the book value of the transferred asset of continuous involvement less the amortized cost of the rights retained bythe Group (if the Group has retained the relevant rights due to transfer of the financial asset) and plus the amortizedcost of the obligations undertaken by the Group (if the Group has undertaken the relevant obligations due to transferof the financial asset), and the relevant liabilities are not designated as financial liabilities at fair value through profitand loss of the current period.
? If the transferred financial asset is measured by fair value, the book value of the relevant liabilities is equivalent tothe book value of the transferred asset of continuous involvement less the fair value of the rights retained by theGroup (if the Group has retained the relevant rights due to transfer of the financial asset) and plus the fair value ofthe obligations undertaken by the Group (if the Group has undertaken the relevant obligations due to transfer of thefinancial asset), and the fair value of the rights and obligations shall be measured at the fair value on a separate basis.
For full transfer, which satisfies the conditions of derecognition, of the financial assets, the difference between the sum ofthe book value of the transferred financial assets as at the date of derecognition and the consideration received from suchtransfer and the accumulated amount of change in fair value originally included in other comprehensive income, whichcorresponds to the amount in respect of derecognition, shall be recognized in the profit and loss for the current period. Ifthe transfer of the financial assets by the Group is designated as investment in equity instrument held for non-tradingpurpose measured at fair value through other comprehensive income, the accumulated gains or losses previously includedin other comprehensive income shall be transferred out from other comprehensive income and be included in retainedearnings.
For transfer in part, which satisfies the conditions of derecognition, of the financial assets, the book value of the entirefinancial assets before the transfer shall be shared between the derecognized portion and the continuous recognition portionat their respective relative fair value on the date of transfer, and the difference between the sum of the considerationreceived from derecognition and the accumulated amount of change in fair value originally included in othercomprehensive income, which corresponds to the amount in respect of derecognition, and the book value of thederecognized portion as at the date of derecognition shall be included in the profit and loss of the current period. If thetransfer of the financial assets by the Group is designated as investment in equity instrument for non-trading purposemeasured at fair value through other comprehensive income, the accumulated gains or losses previously included in othercomprehensive income shall be transferred out from other comprehensive income and be included in retained earnings.
For full transfer, which does not satisfy the conditions of derecognition, of the financial assets, the Group will continue torecognize the entire financial assets transferred and the consideration received as a result of the asset transfer is recognizedas a liability when received.
10.4 Classification, confirmation and measurement of financial liabilities and equity instrumentsPursuant to the contractual terms of the issued financial instruments and the substantive economic condition as reflected,but not in legal terms only, combined with the definitions of financial liabilities and equity instruments, the Group hasclassified such financial instruments or the components thereof as financial liabilities or equity instruments upon initialrecognition.
10.4.1 Classification, confirmation and measurement of financial liabilities
Financial liabilities are classified into financial liabilities at fair value through profit and loss of the current period andother financial liabilities upon initial recognition.
10.4.1.1 Financial liabilities at fair value through profit and loss of the current periodFinancial liabilities at fair value through profit and loss of the current period comprise of financial liabilities held fortrading purpose (including derivatives of financial liabilities) and financial liabilities designated as measured at fair valuethrough profit and loss of the current period. Except for derivatives of financial liabilities, which are presented separately,financial liabilities at fair value through profit and loss of the current period are presented as financial liabilities held fortrading.
Financial liabilities that fulfill one of the following conditions suggest that the Group assumes such financial liabilities fortrading purpose:
? Assumption of the relevant financial liabilities is mainly for the purpose of the recent repurchases.? The relevant financial liabilities, upon initial recognition, are part of a portfolio of identifiable financial instrumentsunder centralized management, and available objective evidence shows the recent and actual existence of a short-term profit-making model.? The relevant financial liabilities are derivatives, except derivatives which satisfy the definition of financial guarantee
contract and derivatives designated as effective hedging instruments.
Financial liabilities can be designated, upon initial recognition, by the Group as financial liabilities at fair value throughprofit and loss of the current period, provided that they have satisfied one of the following conditions: (1) such designationcan eliminate or substantially reduce accounting mismatches; (2) managing and evaluating the performance of portfoliosof financial liabilities, or portfolios of financial assets and financial liabilities, on fair value basis and reporting internallyto key personnel of the Group on this basis in accordance with the risk management or investment strategies specified informal written documents of the Group; (3) hybrid contracts, with embedded derivatives, have satisfied the conditions.
Financial liabilities held for trading purpose use fair value for subsequent measurement, gains or losses arise from changesin fair value and the dividends or interest expenses relating to such financial liabilities are accounted in the profit and lossof the current period.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
For financial liabilities designated at fair value through profit and loss of the current period, changes in fair value of suchfinancial liabilities caused by changes in the Group's own credit risks shall be included in other comprehensive income,and other changes in fair value shall be included in the profit and loss of the current period. On derecognition of suchfinancial liabilities, the accumulated amount of changes in fair value as a result of changes in our own credit risk includedpreviously in other comprehensive income shall be transferred to retained earnings. Dividends or interest expenses relatingto such financial liabilities shall be included in the profit and loss of the current period. If handling the effect of changesin credit risk of such financial liabilities according to the aforesaid method would cause or magnify the accountingmismatches in profit and loss, the Group will include all gains or losses of those financial liabilities (including the amountaffected by changes in their own credit risk) in the profit and losses of the current period.
10.4.1.2 Other financial liabilities
Excluding transfer of financial assets not complying with derecognition conditions, or financial liabilities as a result ofcontinuous involvement in transferred financial assets, as well as the financial guarantee contracts, the other financialliabilities will be classified as financial liabilities measured at amortized cost, subsequent measurement will be based onamortized cost, gains or losses on derecognition or amortization will be accounted in the profit and loss of the currentperiod.
If the Group and the counterparty have revised or renegotiated the contract, this has not resulted in the derecognition offinancial liabilities measured at amortized cost for subsequent measurement, but has caused changes in the contractualcash flows, then the Group should recalculate the book value of such financial liabilities, and the relevant gains or lossesshall be accounted in the profit and loss of the current period. The recalculated book value of such financial liabilities willbe determined by the Group by discounting the cash flows from the renegotiated or revised contract with the original effectinterest rate of the financial liabilities. All costs or expenses incurred in the revision or renegotiation of the contract willbe reflected in the adjusted book value of financial liabilities after such revision, and will be amortized during theremaining period of the revised financial liabilities.
10.4.1.2.1 Financial guarantee contract
Financial guarantee contract refers to a contract that requests the issuer to provide a specific amount of compensation tothe contract holder who suffers losses when a specific debtor fails to repay the debt on due date according to the initial orrevised terms of the debt instrument. In respect of financial liabilities which are not designated at fair value through profitand loss of the current period, or in respect of financial guarantee contract for financial liabilities arising from transfer offinancial assets not complying with derecognition conditions or continuous involvement in the transferred financial assets,the measurement after initial recognition will be based on the amount of provision for losses, or the balance of initialrecognized amount after deducting the accumulated amortized amount confirmed in accordance with the relevantprovisions of the Revenue Standard, whichever the higher.
10.4.2 Derecognition of financial liabilities
When the existing obligations of a financial liability have been wholly or partially discharged, such financial liability or
such part of it will be derecognized. When the Group (as borrower) and the lender enter into an agreement to undertakenew financial liabilities for replacing the original financial liabilities, if substantive difference exists in the contractualterms between the new financial liabilities and the original financial liabilities, the Group should derecognize the originalfinancial liabilities while at the same time recognizes the new financial liabilities.
When a financial liability is wholly or partially derecognized, the difference between the book value of the derecognizedportion and the consideration paid (including non-cash asset transferred out or new financial liabilities undertaken) willbe accounted in the profit and loss of the current period.
10.4.3 Equity instrument
Equity instrument refers to a contract which can prove the ownership of remainder interest in assets after deducting allliabilities of the Group. The Group issues (including refinances), repurchases, sells or cancels equity instruments fortreatment of changes in equity. The Group will not recognize changes in the fair value of equity instruments. Tradingexpenses relating to equity transactions will be deducted from equity.
The Group's distribution to holder of equity instrument is treated as profit distribution, the share dividends paid out willnot affect the total equity of shareholders.
10.5 Derivatives and embedded derivatives
Derivatives include foreign exchange forward contract, foreign exchange option contract and interest rate swap contract,etc. Derivatives are measured at fair value initially on the date of signing the relevant contract and will be measured at fairvalue for subsequent measurement.
For a hybrid contract constituted by an embedded derivative and a master contract, if the master contract is in respect of afinancial asset, the Group will not split the embedded derivative from the hybrid contract, but will consider such hybridcontract as a whole unit to which the accounting standards and rules for classification of financial assets are applicable.
If the master contract included in the hybrid contract is not in respect of a financial asset, and fulfills the followingconditions at the same time, the Group will split the embedded derivative from the hybrid contract to be treated as aseparate subsisting derivative:
(1) The economic characteristics and risks of the embedded derivative are not closely connected to the economiccharacteristics and risks of the master contract.
(2) A separate instrument containing the same terms as the embedded derivative fits the definition of a derivative.
(3) The hybrid contract is not measured at fair value and changes in fair value are accounted through profit and loss ofthe current period.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
If an embedded derivative is split from the hybrid contract, the accounting treatment adopted by the Group for the mastercontract within the hybrid contract will be in accordance with the applicable accounting standards and rules. If the Groupis unable to measure the fair value of the embedded derivative reliably according to the terms and conditions of theembedded derivative, the fair value of such embedded derivative will be determined by the difference between the fairvalue of the hybrid contract and the fair value of the master contract. After adoption of the above method, if the fair valueof such embedded derivative is still unable to be measured separately on the acquisition date or subsequent balance sheetdate, the Group will designate the entire hybrid contract as a financial instrument measured at fair value through profit andloss of the current period.
10.6 Offsetting between financial assets and financial liabilities
When the Group has legal right to offset the recognized financial assets and financial liabilities, and such legal right isenforceable currently, while at the same time the Group plans to perform netting settlement, or to liquidate the financialasset and repay the financial liability at the same time, the amount after offsetting between the financial asset and financialliability will be presented in the balance sheet. Save as said above, the financial asset and financial liability are presentedseparately in the balance sheet without offsetting each other.
11. Receivables for financing
Among the notes receivable measured at fair value through other comprehensive income, the ones with a term of less than(including) one year since they are acquired will be listed as receivables for financing; the ones with a term of more than(including) one year since they are acquired will be listed as other debt investment. The relevant accounting policy isexplained in Note (III), 10.1, 10.2 and 10.3.
12. Inventories
12.1 Categories of inventories
The Group's inventory mainly includes finished products, products in process, raw materials, and contract performancecosts held in daily activities. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase,costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition.
12.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the moving weighted average method.
12.3 Basis for determining net realizable value of inventories
The inventory is measured according to cost and net realizable value, whichever is lower, on the date of balance sheet.When the net realizable value is lower than cost, withdraw inventory impairment reserves.
The net realizable value refers to the amount derived by deducting the potential cost, estimated selling expense and relativetaxes to the completion date from the estimated sales price of inventory in daily activities. When determining net realizablevalue of inventories, take the obtained conclusive evidence as basis and consider the purposes of holding inventories andinfluence of events after the balance sheet date.
For the low-price stocks in large quantity, provision for the inventory price drops will be made based on the categories ofstocks; for the stocks that are related to the products manufactured and sold in the same region, that have identical orsimilar ultimate use or purpose and that are hard to separate from other items when being measured, they are consolidatedfor provision for the inventory price drops; for other stocks, the provision for the inventory price drops will be made basedon the cost of a single stock item in excess of the net realizable value.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down of inventoryimpairment have disappeared and causing the net realizable value higher than its book value, such inventory impairmentprovision are recovered and reversed, and the reversed amount recorded in profits and losses of the current period.
12.4 Inventory count system
The perpetual inventory system is maintained for stock system.
12.5 Amortization method for low cost and short-lived consumable items and packaging materialsPackaging materials and low cost and short-lived consumable items are amortized using the immediate write-off method.
13. Contract assets
13.1 Method and standard for determination of contract assets
Contract assets refer to the Group's right to consideration in exchange for goods or services that the Group has transferredto a customer when that right is conditioned on something other than the passage of time. The Group's unconditional (i.e.,depending on the passage of time only) right to receive consideration from the customer is separately presented asreceivables.
13.2 Methods for determining and accounting of expected credit loss of contract assetsFor details of methods for determining and accounting of expected credit loss of contract assets, please refer to Note (III)-
10.2 Impairment of financial instruments.
14. Assets held for sale
Non-current assets and disposal groups are classified as held for sale category when the Group recovers the book valuethrough a sale (including an exchange of non-monetary assets that has commercial substance) rather than continuing use.
Non-current assets or disposal groups classified as held for sale are required to satisfy the following conditions at the sametime: (1) the asset or disposal group is available for immediate sale in its present condition subject to terms that are usualand customary for sales of such asset or disposal group; (2) the sale is highly probable, i.e. the Group has made a resolutionabout a selling plan and obtained a confirmed purchase commitment and the sale is expected to be completed within oneyear.
Non-current assets or disposal groups classified as held for sale are measured at the lower of the book value and the netamount of the fair value less the cost of disposal. Where the carrying amount is higher than the net amount of fair valueless the cost of disposal, the carrying amount should be reduced to the net amount of fair value less the cost of disposal,and such reduction is recognized as impairment loss of assets and included in profit or loss for the period. In the meantime,provision for impairment of held-for-sale assets is made. When there is an increase in the net amount of fair value of non-current assets held for sale less the cost of disposal at the subsequent balance sheet date, the original deduction should bereversed from impairment loss of assets recognized after the classification as held for sale, and the reversed amount isincluded in profit or loss for the period. The impairment loss of assets recognized before the classification as held for saleis not reversed.
Non-current assets or non-current assets within disposal groups classified as held for sale are not depreciated or amortized,and the interests and other costs of liabilities of disposal group classified as held for sale continue to be recognized.
All or part of equity investments in an associate or joint venture are classified as held-for-sale assets. For the part that isclassified as held for sale, it is no longer accounted through equity method since the date of the classification.
15. Long-term equity investment
15.1 Basis for determining joint control and significant influence over investee
Control is the power to govern an entity through participating in relevant activities of the investee; the investor is able toobtain variable benefits from its activities, and at same time, to use the control rights on the investee to influence theamount of returns. Joint control means that joint control for certain arrangement in accordance with relevant agreements;
activities relevant to the arrangement cannot be decided until obtaining the unanimous consent of parties sharing controlright. Significant influence is the power to participate in the financial and operating policy decisions of the investee but isnot control or joint control over those policies. When determining whether an investing enterprise is able to exercisecontrol or significant influence over an investee, the effect of potential voting rights of the investee, such as currentconvertible debts, current executable warrants, etc., held by the investing enterprises or other parties shall be considered.
15.2 Determination of initial investment cost
For a long-term equity, investment acquired through a business combination involving enterprises under common control,the shares of merged party's book value of owners' equity in the final controlling party consolidated financial statementsobtained on the merger date shall be considered as the initial investment cost of long-term equity investment. Thedifferences between the initial investment cost of long-term equity investment and the paid cash, the transferred non-cashassets and the book value of the assumed debts are adjusted against the capital surplus; if the capital surplus is not sufficientto be offset, the remaining balance is adjusted against retained earnings. In the case of issued equity securities treated asconsolidation consideration, share of book value of owner's equity of merged party in the final controlling partyconsolidated financial statements is regarded as initial investment cost of long-term equity investments on the date ofconsolidation; capital reserve shall be adjusted in accordance with taking total nominal value of issued share as capitalshare, the difference between the initial investment cost of long-term equity investments and total book value of issuedshares; In case the capital reserve is not enough for writing down, the retained earnings shall be adjusted.
For a long-term equity investment acquired through business combination not involving enterprises under common control,and the merging cost confirmed on the purchased date are regarded as the initial investment cost. In the case that the equityof the acquiree is obtained through multiple deals in stages to finally form the business combination not under the commoncontrol, the business combination shall be handled differently based on whether it is "package deal": where it is packagedeal, the Company accounts each deal as a deal to obtain the control. If the deal is not a "package deal", the sum of thecarrying amount of the equity investment of the acquiree plus the cost of the new investment shall be used as the initialinvestment cost of the long-term equity investment calculated according to the cost method. The equity originally held isaccounted for by the equity method, and the relevant other comprehensive income will not be accounted for the time being.Where the original equity investment is an investment in a non-traded equity instrument designated to be measured at fairvalue and the change in which is included in other comprehensive income, the difference between its fair value andcarrying value, and the cumulative change in fair value originally recognized in other comprehensive income, aretransferred to retained earnings.
The intermediate expenses made by the combining party or purchaser for audit, legal service, assessment and othermanagement related expenses during the business merger should be included into the current profit and loss as it happens.
Long-term equity investment obtained by other means other than long-term equity investment formed by business
combination shall be initially measured at cost.
15.3 Subsequent measurement and recognition of profit or loss
15.3.1 Long-term equity investment accounted for using the cost method
Long-term equity investments in subsidiaries are accounted for using the cost method in the Company's financialstatements. A subsidiary is an investee that is controlled by the Group.
The long-term equity investment accounted by the cost method shall be measured at its initial investment cost. If there areadditional investments or disinvestments, the long-term equity investment cost shall be adjusted. Income from theinvestment in the current period shall be recognized in accordance with the cash dividends or profits declared and issuedby the investee.
15.3.2 Long-term equity investment accounted for using the equity method
Except for investments in associates and joint ventures that are wholly or partly classified as holding assets for sale, theGroup accounts for investment in associates and joint ventures using the equity method. An associate is an entity overwhich the Group has significant influence and a joint venture is an entity over which the Group can only exercise jointcontrol along with other investors on the investee's net assets.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group's share ofthe fair value of the investee's identifiable net assets at the time of acquisition, no adjustment is made to the initialinvestment cost. Where the initial investment cost is less than the Group's share of the fair value of the investee'sidentifiable net assets at the time of acquisition, the difference is recognized in profit or loss for the period, and the cost ofthe long-term equity investment is adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of theinvestee for the period as investment income or loss and comprehensive income for the period, meanwhile, the book valueof the long-term equity investment shall be adjusted; The Group shall accordingly reduce the book value of the long-termequity investment in terms of the part that shall be enjoyed according to the profit or cash dividends declared by theinvested unit to be distributed; For other changes in the owners' equity of the invested unit other than net profits and losses,other comprehensive incomes and the profit distribution, the book value of long-term equity investment shall be adjustedand be included into the capital reserves. The Group shall, on the ground of the fair value of all identifiable assets of theinvested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the investedentity after it adjusts the net profits of the invested entity. If the accounting policies and accounting periods adopted by theinvested unit are different from those adopted by the Group, the adjustment shall be made for the financial statements of
the invested unit in accordance with the accounting policies and accounting periods of the Group to recognize theinvestment income and other comprehensive incomes. For the transaction incurred between the group and associatedenterprises and joint ventures, invested or sold assets don't constitute a business, the part that doesn't achieve internaltransaction profit or loss or belongs to the Group calculated according to the enjoyed ratio will be offset, and the profit orloss on investment will be confirmed on this basis. But for the unrealized loss arising from the internal transaction betweenthe Group and the invested unit, if such transaction loss is defined as the impairment loss of the transferred asset, theycannot be offset.
When the Group determines the net loss of the invested unit that shall be shared, it is necessary to write-down the bookvalue of the long-term equity investment and other long-term equities substantially constituting the net investment of theinvested unit to zero as a limit. Besides, if the Group is obliged to bear extra loss for the invested unit, it shall be necessaryto determine provisions and record them to current investment loss in compliance with obligations expected to be assumed.If the invested unit realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsetsits attributable share of the un-confirmed losses, resume recognizing its attributable share of profits.
15.4 Disposal of long-term equity investments
On disposal of a long-term equity investment, the difference between the proceeds actually received and the carryingamount is recognized in profit or loss for the period.
16. Fixed assets
16.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others,or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized onlywhen it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can bemeasured reliably. Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable thateconomic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measuredreliably. Meanwhile the carrying amount of the replaced part is derecognized. Other subsequent expenditures arerecognized in profit or loss in the period in which they are incurred.
16.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one inwhich it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of each
category of fixed assets are as follows:
| Class | Depreciation period | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings and constructions | 20 years | 10 | 4.5 |
| General-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Special-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Means of transportation | 5 years | 10 | 18.0 |
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposalof the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the conditionexpected at the end of its useful life.
16.3 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, thefixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds ondisposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied atleast once at each financial year-end, and account for any change as a change in an accounting estimate.
17. Construction in process
Construction in progress is measured at its actual costs. The actual costs include various construction expenditures duringthe construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs.Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready forintended use.
18. Borrowing costs
Borrowing costs directly attributable to the acquisition & construction or production of assets eligible for capitalizationshall be capitalized when assets expenditure, borrowing costs and necessary construction or production for bringing assetsto expected conditions for use or marketing have taken place; when construction or production of assets ready forcapitalization reach to expected conditions for use or marketing, capitalization shall be ceased. Other borrowing expensesare recognized as expenses in the current period.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interestexpense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before
being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowedunder general-purpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings byapplying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over theamounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable tothe general-purpose borrowings. During the capitalization period, exchange differences related to a specific-purposeborrowing denominated in foreign currency are all capitalized. Exchange differences in connection with general-purposeborrowings are recognized in profit or loss in the period in which they are incurred.
19. Intangible assets
19.1 Intangible assets valuation method, service life and impairment test
Intangible assets include land use right, intellectual property (IP), application software, and franchise, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available for use, itsoriginal cost is amortized over its estimated useful life using the straight-line method. The useful life and predicted netresidual value of various intangible assets are shown as follows:
| Class | Service life | Salvage value rate (%) |
| Land use right | 40 or 50 years | - |
| IP Right | 10 Years | - |
| Application Software | 5-10 years | - |
| Franchise | Franchised operating period | - |
The fees charged by the Group to those who acquire public products and services during the project operation period donot constitute an unconditional right to receive cash. When the PPP project assets are ready for their intended use, thedifference between the consideration amount of the relevant PPP project assets or the amount of confirmed constructionincome and the amount of cash (or other financial assets) that is entitled to receive a determinable amount will berecognized as intangible assets.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of theperiod, and makes adjustments when necessary.
For the impairment test of intangible assets, please refer to Note (III), 20. Long-term asset impairment.
19.2 Accounting policy for internal research and development expenditure
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.Expenditure during the development phase that meets all of the following conditions at the same time is recognized asintangible asset. Expenditure during development phase that does not meet the following conditions is recognized in profitor loss for the period.
(1) It is technically feasible to complete the intangible asset so that it will be available for use or sale;
(2) The Group has the intention to complete the intangible asset and use or sell it;
(3) The Group can demonstrate the ways in which the intangible asset will generate economic benefits, including theevidence of the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is tobe used internally, the usefulness of the intangible asset;
(4) The availability of adequate technical, financial and other resources to complete the development and the ability to
use or sell the intangible asset; and
(5) The expenditure attributable to the intangible asset during its development phase can be reliably measured.
If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes allof them in profit or loss for the period. The costs of the intangible assets generated by internal development activities onlyinclude the total expenditure incurred from the time point when the capitalization conditions are available to the pointwhen the intangible assets are used for their intended purposes; for the expenditure that already becomes an expenditurein the profit and loss statement before the capitalization conditions are available during development of the same intangibleasset, no adjustment will be made.
20. Long-term assets impairment
The Group assesses at each balance sheet date whether there is any indication that the long-term equity investment, fixedassets, construction in process, and intangible assets with a finite useful life may be impaired. If there is any indicationthat such assets may be impaired, recoverable amounts are estimated for such assets. Intangible assets with indefiniteuseful life and intangible assets not yet available for use are tested for impairment annually, irrespective of whether thereis any indication that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount of anindividual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. The recoverableamount is determined by the higher of 1) net amount of fair value of the asset or asset group deducted by the disposalexpenses; or 2) the present value of the expected future cash flows of the asset or asset group.
If the recoverable amount of an asset or an asset group is less than its carrying amount, the deficit is accounted as animpairment provision and is recognized in profit or loss for the period.
Goodwill impairment test shall be conducted at the end of each year at least. Goodwill impairment test shall be conductedin accordance with the concerned asset group or asset portfolio. That is to allocate the book value of goodwill to the assetgroup or asset portfolio that is expected to benefit from the synergies of the combination in a reasonable way from the dateof purchasing. When recoverable amount of apportion-included asset group or asset portfolio of goodwill is less than bookvalue of goodwill, impairment loss shall be recognized. Firstly, amount of impairment loss shall be apportioned to thebook value of goodwill of the said asset group or asset portfolio, and then book value of other assets, except for goodwill,in asset group or asset portfolio shall be abated in proportion.
Once the impairment loss of such assets is recognized, it cannot be reversed in any subsequent period.
21. Long-term deferred expenses
Long-term deferred expenses are the expenses that are already incurred but will be shared in the current reporting periodand later periods with amortization term of more than one year, mainly for the expenses on betterment of leased fixedassets and employee housing loan deferred interest. Long-term deferred expenses are evenly amortized in installments inthree to five years during the expected benefit period.
22. Contract liabilities
Contract liabilities refer to the obligation of the Group to transfer goods or services to customers for consideration receivedor receivable from customers. Contract assets and contract liabilities under the same contract are presented in net terms.
23. Employee compensation
23.1 Accountant arrangement method of short-term remuneration
During accounting period when the Group's employees provide services, actual short-term remuneration shall berecognized as the liabilities and current profit and loss or relevant asset cost. The Group's employee benefits and welfareare included into current profit and loss or relevant asset cost according to actual amount occurred during the period. Ifthe employee benefits and welfare is non-monetary, it shall be measured according to its fair value.
During the accounting period that the employees service the Group, the Group pays social insurance premiums such asmedical insurance premium, industrial injury insurance premium, maternity insurance premium and housing accumulationfund for its employees, as well as labor union expenditure and employee education expenses calculated and withdrawnaccording to the regulations, corresponding employee remuneration amount shall be calculated and determined in
accordance with specified calculation and withdrawal basis and proportion to recognize corresponding liabilities andincluded into the current profit and loss or relevant asset cost.
23.2 Accountant arrangement method of post-employment benefits
All post-employment benefits shall be considered as the defined contribution plan.
In the accounting period when the employee serves for the Group, the deposited amount calculated based on definedcontribution plan shall be recognized as liabilities and included in the current profit and loss or relevant asset cost.
23.3 Accountant arrangement method of the termination benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by such termination benefitswill be determined as the following date, whichever is earlier, and will be included in the current profit and loss: 1) Whenthe Group cannot unilaterally withdraw the termination benefits provided due to labor relation cancellation plan oremployee lay-off suggestion; or 2）when the Group determines costs or expenses in relation with the restructuring of thepaid termination benefits.
24. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency such as products qualityassurance, etc. And it is probable that an outflow of economic benefits will be required to settle the obligation, and theamount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation atthe balance sheet date, taking into account factors pertaining to a contingency such as the risks, uncertainties and timevalue of money. Where the effect of the time value of money is material, the amount of the provision is determined bydiscounting the related future cash outflows.
25. Share-based payment
Share-based payment refers to a transaction in which the Group grants the equity instruments or undertakes the equity-instrument-based liabilities in return for services from employees. The Group's share-based payment is an equity-settledshare-based payment.
25.1 Equity-settled share-based payments
Equity-settled share-based payments in exchange for services rendered by employees are measured at the fair value of theequity instruments granted to employees at the grant date. Such amount is recognized as related costs or expenses on astraight-line basis over the vesting period, with a corresponding increase in capital reserve.
At each balance sheet date during the vesting period, the Group makes the best estimate according to the subsequent latestinformation of change in the number of employees who are granted with options that may vest, etc. and revises the numberof equity instruments expected to vest. The effect of the above estimate is recognized as related costs or expenses, with acorresponding adjustment to capital reserve.
25.2 Accounting treatment related to implementation, modification and termination of share-based payment arrangementIn case the Group modifies a share-based payment arrangement, if the modification increases the fair value of the equityinstruments granted, the Group will include the incremental fair value of the equity instruments granted in the measurementof the amount recognized for services received. If the modification increases the number of the equity instruments granted,the Group will include the fair value of additional equity instruments granted in the measurement of the amount recognizedfor services received. The increase in the fair value of the equity instruments granted is the difference between fair valueof the equity instruments before and after the modification on the date of the modification. If the Group modifies the termsor conditions of the share-based payment arrangement in a manner that reduces the total fair value of the share-basedpayment arrangement, or is not otherwise beneficial to the employee, the Group will continue to account for the servicesreceived as if that modification had not occurred, other than a cancellation of some or all the equity instruments granted.
If cancellation of the equity instruments granted occurs during the vesting period, the Group will account for thecancellation of the equity instruments granted as an acceleration of vesting, and recognize immediately the amount thatotherwise would have been recognized over the remainder of the vesting period in profit or loss for the period, with acorresponding recognition in capital reserve. When the employee or counterparty can choose whether to meet the non-vesting condition but the condition is not met during the vesting period, the Group treats it as a cancellation of the equityinstruments granted.
26. Revenue
26.1 Accounting policies applied in revenue recognition and measurement
The revenue of the Group is mainly generated from business types as follows:
(1) Revenue from sale of products
Product sales revenue is the revenue from sales of video surveillance products, smart home products, robotics productsand other products of the Group.
(2) Project construction revenue
Project construction revenue is the revenue from constructions related to intelligent security solution projects and PPPprojects provided by the Group.
(3) Cloud service and other service revenue
Revenue from cloud services and other services refers to cloud services such as storage services, video services, andtelephone services provided by the Group, maintenance services related to security projects, and other services, etc.
When (or as) a performance obligation in a contract was satisfied, i.e., when (or as) the customer obtains control of relevantgoods or services, the Group recognizes as revenue the amount of the transaction price that is allocated to that performanceobligation. A performance obligation is the Group's commitment to transfer to a customer a good or service (or a bundleof goods or services) that is distinct, in a contract with the customer. The transaction price is the amount of considerationto which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excludingamounts collected on behalf of third parties and amounts that the Group expects to refund to the customer.
The Group evaluates the contract on the commencement date of the contract, identifies the individual performanceobligations contained in the contract and determines whether each individual performance obligation is to be performedover a certain period of time or at a certain point in time. Revenue is recognized over time by reference to the progresstowards complete satisfaction of the relevant performance obligation if one of the following criteria is met: (1) the customersimultaneously receives and consumes the benefits provided by the Group's performance as the Group performs; (2) theGroup's performance creates or enhances an asset that the customer controls as the Group performs; or (3) the Group'sperformance does not create an asset with an alternative use to the Group and the Group has an enforceable right topayment for performance completed to date. Otherwise, revenue is recognized at a point in time when the customer obtainscontrol of the distinct good or service.
The Group adopts the output method to determine the progress of performance, that is, the progress of contractperformance is determined according to the value of the goods or services that have been transferred to the customer inthe view of the customer. When the performance progress cannot be reasonably determined, and the costs incurred can beexpected to be compensated, the Group recognizes revenue based on the amount of costs incurred until the performanceprogress can be reasonably determined.
If the contract contains two or more performance obligations, the Group allocates the transaction price to each singleperformance obligation on the contract start date in accordance with the relative proportion of the individual selling priceof the goods or services promised by each single performance obligation. However, if there is strong evidence that thecontract discount or variable consideration is only related to one or more (but not all) performance obligations in thecontract, the Group allocates the contract discount or variable consideration to the relevant one or more performancesobligation. Individual selling price refers to the price at which the Group sells goods or services to customers separately.Where the individual selling price cannot be directly observed, the Group comprehensively considers all relevantinformation that can be reasonably obtained, and uses the observable input value to the maximum to estimate the individualselling price.
If there is variable consideration in the contract, the Group determines the best estimate of variable consideration basedon the expected value or the most likely amount. The transaction price including variable consideration shall not exceedthe amount that is likely to cause no significant reversal of accumulated recognized revenue when the relevant uncertaintyis eliminated. At each balance sheet date, the Group re-estimates the amount of variable consideration that should beincluded in the transaction price.
For sales with sales return terms attached, as the customer obtains ownership of related goods, the Group recognizesrevenue in accordance with the consideration (excluding expected refund amounts due to sales returns) that the Group isexpected to receive due to the transfer of goods or services to the customer, and recognizes expected liabilities inaccordance with expected refund amounts due to sales returns. The remaining amount, subsequent to deduction of expectedcosts from collecting the goods (including the decrease in value of the returned goods), is recognized as an asset inaccordance with the carrying amount during the expected transfer of returned goods after deducting the costs of the abovenet assets carried forward.
For sales with quality assurance clauses, if the quality assurance provides a separate service beyond the assurance to thecustomer that the goods or services sold meet established standards, the quality assurance constitutes a single performanceobligation. Otherwise, the Group conducts accounting for quality assurance responsibilities in accordance with theAccounting Standards for Business Enterprises No. 13-Contingencies.
The additional purchase option of customers includes customer reward incentives. With respect to the additional purchaseoption with material rights provided to customers, the Group regards it as a single performance obligation, and recognizesrelevant revenue upon obtaining the control over relevant goods or services by the customers who exercise the purchaseoption in future or upon lapse of such option. If a stand-alone selling price of the additional purchase option of customersis not directly observable, the Group shall consider all relevant information including the difference in discount obtainedwith and without the exercise of such option by customers and the possibility of exercising such option by customersduring estimation.
If there is a significant financing component in the contract, the Group determines the transaction price based on theamount payable in cash when the customer assumes control of the goods or services. The difference between thetransaction price and the contract consideration is amortized using the effective interest rate method during the contractperiod. On the contract commencement date, the Group does not consider the significant financing components in thecontract if the interval between the customer obtaining control of the goods or services and the price being paid by thecustomer is not more than one year.
The Group judges whether the Group's identity is the principal or agent when engaging in transactions based on whetherit has control over the goods or services before transferring the goods or services to customers. If the Group is able tocontrol the goods or services before transferring them to customers, the Group is the principal responsible person, andrevenue is recognized based on the total amount of consideration received or receivable; otherwise, the Group is an agent
and recognizes revenue based on the amount of commissions or fees which the Group is expected to be entitled to charge.The amount of commissions or fees is determined based on the total amount of consideration received or receivable net ofthe amount payable to other parties.
When the Group collects amounts of sold goods or services in advance from the customer, the Group will firstly recognizethe amounts as a liability and then transfer to revenue until satisfying relevant performance obligations. When the advancesfrom customers is non-refundable and the customer may give up all or part of contract right, and the Group is expected tobe entitled to obtain amounts associated with contract rights given up by the customer, the above amounts shall beproportionally recognized as revenue in accordance with the model of exercising contract rights by the customer; otherwise,the Group will transfer the relevant balance of the above liability to revenue only when the probability is extremely lowfor the customer to satisfy remaining performance obligations.
The Group, as a private capital, entered into a PPP project contract with the government and provided construction,operation, maintenance and other services. The Group identifies each individual performance obligation in the contract,and allocates the transaction price to each performance obligation based on the relative proportion of the stand-aloneselling price of each performance obligation. When providing construction services or outsourcing projects to other parties,whether the identity of the Group is the principle or agent is determined, and then accounting for construction revenue toconfirm the contract assets is made. After the PPP project is ready for use, the Group recognizes revenue related tooperation and maintenance services.
27. Cost of contract
27.1 Cost of obtaining a contract
Incremental costs incurred by the Group to obtain a contract (that is, costs that would not have occurred without a contract)and expected to be recovered are recognized as an asset, and amortized using the same basis as revenue recognition forthe goods or services to which the asset relates, and included in current profit or loss. If the amortization period of theasset does not exceed one year, it is included in current profit or loss when it occurs. Other expenses incurred by the Groupin order to obtain the contract shall be included in current profit or loss when incurred, unless it is clearly borne by thecustomer.
27.2 Cost of contract fulfillment
The cost of the Group's performance of a contract that does not fall within the scope of accounting standards other thanthe revenue standard and meets the following conditions is recognized as an asset: (1) The cost is directly related to acurrent or anticipated contract; (2) The cost increases the Group's resources for fulfilling performance obligations in thefuture; (3) The cost is expected to be recovered. The aforesaid assets are amortized on the same basis as the recognitionof income from goods or services related to the assets, and are included in the current profit or loss. The Group's asset in
relation to contract costs are mainly contract performance costs, and they are included in inventories based on their currentnature.
27.3 Impairment losses on assets related to contract costs
In determining impairment losses on assets related to contract costs, impairment losses are first determined for other assetsrecognized in accordance with other relevant ASBEs and related to the contract. Then, for assets related to contract costswhose carrying value is higher than the difference between the following two items, the Group makes provision forimpairment for the excess to be recognized as asset impairment losses: (1) the remaining amount of consideration expectedto be obtained by the Group for the transfer of goods or services related to the asset; (2) the estimated costs to be incurredin connection with the transfer of such relevant goods or services.
After provision for impairment is made for the asset related to contract costs, if the difference between the above two itemsis higher than the carrying value of the asset due to changes in the factors of impairment in previous periods, the originalprovision for impairment of the asset is reversed and included in the current profit or loss, but the carrying value of theasset after the reversal shall not exceed the carrying value of the asset on the reversal date assuming no provision forimpairment is made.
28. Types of governmental subsidies and accounting treatment methods
Government subsidies refer to the monetary and non-monetary assets obtained by the Group from the government for free.Government subsidies are recognized when they can meet the conditions attached to the government subsidies and can bereceived.
If a government subsidy is a monetary asset, it shall be measured at the amount received or receivable.
28.1 Judgment basis and Accountant treatment of government subsidy related to assetsThe government subsidies for Chongqing Manufacture Base construction and etc. are used for constructions and formslong-term assets, and therefore are categorized as government subsidy related to assets.
A government grant related to an asset is recognized as deferred income, and it should be evenly amortized to profit orloss over the useful life of the related asset.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
28.2 Judgment basis and accountant treatment of government subsidy related to incomeThe Group receives government subsidies including subsidies for special projects and Value-Added-Tax refund, etc.,which are used to compensate the group-related costs or losses, and therefore are categorized as government subsidyrelated to income.
For a government grant related to income, if the subsidy is a compensation for related expenses or losses to be incurred insubsequent periods, it is recognized as deferred income, and recognized in profit or loss over the periods in which therelated costs or losses are recognized; If the subsidy, such as VAT refund, is a compensation for related expenses or lossesalready incurred, it is recognized immediately in profit or loss for the period.
For government subsidies related to the Group's daily operations shall be booked into other income; for those not relatedto the Group's daily operations, shall be booked into non-operating income/expense.
29. Deferred tax assets / deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
29.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at theamount expected to be paid (or recovered) according to the requirements of tax laws.
29.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between thenil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determinedaccording to tax laws, deferred tax assets and liabilities are recognized through the balance sheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible temporary differencesare recognized to the extent that it is probable that taxable profits will be available against which the deductible temporarydifferences can be utilized. However, for temporary differences associated with the initial recognition of goodwill and theinitial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither theaccounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability isrecognized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it isprobable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, exceptwhere the Group is able to control the timing of the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporarydifferences associated with such investments are only recognized to the extent that it is probable that there will be taxableprofits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeablefuture.
On the balance sheet date, the deferred income tax assets and deferred income tax liabilities are measured at the applicabletax rates in the period in which the related assets are recovered or the related liabilities are recovered in accordance withthe tax laws.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when they arise fromtransactions or events that are directly recognized in other comprehensive income or in shareholders' equity, in which casethey are recognized in other comprehensive income or in shareholders' equity; and when they arise from businesscombinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probablethat sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Suchreduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.
29.3 Offset of income tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assetsand settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets anddeferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity ordifferent taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realize the assetsand liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities areexpected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
30. Lease
Lease refers to a contract that conveys the right to use an asset for a period of time in exchange for consideration.
The Group assesses whether a contract is, or contains, a lease at the inception date. The Group does not re-assess whether
a contract contains a lease unless the terms and conditions of the contract are changed.
30.1 The Group as the lessee
30.1.1 Separating components of lease
In case the contract contains one or more lease and non-lease components, the Group separates each lease component andnon-lease component, and allocates the consideration to the lease and non-lease components based on the proportion ofrelative stand-alone prices of the components.
30.1.2 Right-of-use assets
The Group recognizes the right-of-use assets for leases on the commencement date of the lease term, except for short-termlease and lease of low-value assets. The commencement date of the lease term refers to the date from which the lessormakes the leased assets available for use by the Group. Right-of-use assets are initially measured at cost. The cost includes:
? Initial measurement amount of lease liabilities;? Amount of lease payment made at or before the commencement date of the lease, less any lease incentives received;? Initial direct costs incurred by the Group;? An estimate of any costs to be incurred by the Group in dismantling and removing the underlying asset, or restoringthe site on which it is located, or restoring the leased assets to the conditions as agreed under the terms of the lease,excluding costs incurred to produce inventories.
The Group calculates depreciation of the right-of-use assets in accordance with the relevant depreciation provisions ofAccounting Standards for Business Enterprises No. 4 - Fixed Assets. The right-of-use asset is depreciated over the shorterof the lease term and the useful life of the right-of-use asset, unless there is a transfer of ownership or purchase optionwhich is reasonably certain to be exercised at the end of the lease term.
The Group determines whether the right-of-use assets are impaired and accounts for the identified impairment loss inaccordance with the provisions of Accounting Standards for Business Enterprises No. 8 - Impairment of Assets.
30.1.3 Lease liabilities
The Group initially measures the lease liability on the commencement date at an amount equal to the present value of thelease payments during the lease term that are not paid at that date, except short-term lease and lease of low-value assets.In calculating the present value of the lease payments, the Group adopts the interest rate implicit in the lease as the discountrate. The Group uses its incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined.
Lease payments refer to the payments made by the Group to the lessor in connection with the right to use the leased assetduring the lease term, including:
? Fixed payments, including in-substance fixed payments, less any lease incentives receivable;
? The exercise price of a purchase option, if the Group is reasonably certain to exercise that option;? Payments for terminating the lease, if the lease term reflects the lessee exercising the option to terminate the lease;? Amounts expected to be payable by the Group under residual value guarantees.
After the commencement date of the lease term, the Group calculates interest expense of lease liabilities in each period oflease term at fixed periodic rate and recognizes in the current loss and profit or relevant asset costs.
After the commencement date of the lease term, the Group re-measures the lease liability and adjusts the correspondingright-of-use assets under the following circumstances. If the carrying value of the right-of-use assets has been reduced tozero while the lease liability needs to be further reduced, the Group will recognize the difference into the current loss andprofit:
? In case of any change of the lease term or any change in the valuation of the purchase option, the Group re-measures
the lease liability at the present value calculated based on the modified lease payments and the revised discount rate;? In the event of any change in the amount expected to be payable based on the residual value guarantees, the Group
re-measures the lease liability at the present value calculated based on the changed lease payments and the original
discount rate.
30.1.4 Short-term lease and lease of low-value assets
The Group has elected not to recognize the right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. Short-term lease refers to lease with a term no more than 12 months from the commencement date of leaseterm and without purchase option. Lease of low-value assets refers to lease for single lease asset with low value when itis new. The Group recognizes lease payments under short-term leases and leases of low-value assets as the current lossand profit or the relevant asset costs on a straight-line basis over each period during the lease term.
30.1.5 Lease modification
In case of lease modification, the Group makes accounting treatment of such lease change as a separate lease if all of thefollowing conditions are met:
? Such lease modification increases the scope of the lease by adding the right to use one or more lease assets;? The increased consideration is commensurate with the stand-alone price for the increase in scope and any appropriate
adjustments to reflect the circumstances of the particular contract.
Where accounting treatment is not made for lease modification as a separate lease, at the effective date of leasemodification, the Group reallocates the contract consideration after the modification, redetermines the lease term, and re-measures the lease liability based on the present value calculated according to the modified lease payments and the reviseddiscount rate.
In the event that the lease scope is decreased or the lease term is shortened as a result of the lease modification, the Group
reduces the carrying amount of the right-of-use assets, and recognizes the relevant gains or losses relating to the partial orfull termination of the lease in the income statement; for the lease liabilities re-measured due to other lease modifications,the Group adjusts the carrying amount of the right-of-use assets accordingly.
30.1.6 Sale-leaseback transactions
The Group as the seller-lessee
The Group assesses and determines whether the transfer of the asset in sale and leaseback transaction qualifies as a sale inaccordance with the provisions of Accounting Standards for Business Enterprises No. 14 - Revenue. If the transfer doesnot qualify as a sale, the Group continues to recognize the transferred asset and at the same time recognize a financialliability equal to the transfer proceeds and account for the financial liability in accordance with the provisions ofAccounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments. If thetransfer of the asset qualifies as a sale, the Group measures the right-of-use asset arising from the leaseback as theproportion of the previous carrying amount of the asset that relates to the right of use retained. The gain or loss recognizedis limited to the proportion of the total gain or loss that relates to the rights transferred to the lessor.
30.2 The Group as the lessor
30.2.1 Separating components of lease
In case the contract contains both lease and non-lease components, the Group allocates the contract consideration inaccordance with the provisions of Accounting Standards for Business Enterprises No. 14 - Revenue on portion oftransaction prices, based on the respective stand-alone prices of the lease component and the non-lease component.
30.2.2 Classification of lease
Finance lease is a lease that substantially transfers all the risks and rewards of incidental to ownership of an underlyingasset. Operating lease refers to the leases other than finance lease.
30.2.2.1 The Group records the operating lease business as the lessor
The Group recognizes the lease payments from operating leases as rental income on a straight-line basis for all periodsover the lease term. The Group's initial direct costs incurred in connection with operating leases is capitalized as incurred,recognized in the income statement over the lease term on the same basis as the lease income.
30.2.2.2 The Group records the finance lease business as the lessor
On the commencement date of the lease term, the Group uses the net lease investment as the carrying value of the financelease receivables and derecognizes the finance lease assets. Net lease investment is the sum of present value ofunguaranteed residual value and lease payments receivable discounted at the interest rate implicit in lease on the
commencement date of the lease term.
Lease payments receivable, which refer to amounts receivable by the Group from the lessee for conveying the right to usethe leased assets during the lease term, include:
? Fixed payment including in-substance fixed payments by the lessee, less any lease incentives payable;? The exercise price of a purchase option, if the lessee is reasonably certain to exercise that option;? Payments for terminating the lease (if the lease term reflects the lessee exercising the option to terminate the lease;? Residual value guarantees provided to the Group by the lessee, a party related to the lessee, or a third party unrelatedto the lessor that is capable of discharging the obligations under the guarantee.
The Group calculates and recognizes the interest income in each period of the lease term according to the fixed periodicinterest rate.
30.2.3 Lease modification
In case of a medication of the operating lease, the Group accounts for it as a new lease as of the effective date of themodification, any prepaid or accrued lease payments relating to the original lease are considered as payments for the newlease .
In case of modification of finance lease, the Group accounts for the modification of a finance lease as a separate lease ifall of the following conditions are met:
? The modification increases the scope of the lease by adding the right to use one or more lease assets;? The consideration for the lease increases by an amount that is commensurate with the stand-alone price for theincrease in scope, and any appropriate adjustments to that price to reflect the circumstances of the particular contract.
If a modification of finance lease is not accounted for as a separate lease, the Group accounts for the changed lease underthe following circumstances:
? If the modification becomes effective on the commencement date of the lease and the lease is classified as anoperating lease, the Group accounts for it as a new lease from the effective date of the lease modification and measuresas the net lease investment prior to the effective date of the lease modification as the carrying value of the leasedasset.? If the modification becomes effective on the commencement date of the lease and the lease is classified as a financelease, the Group accounts for it in accordance with the provisions of Accounting Standards for Business EnterprisesNo. 22 - Recognition and Measurement of Financial Instruments regarding the modification or renegotiation ofcontracts.
30.2.4 Sale and leaseback transaction
The Group as the buyer-lessor
If the transfer of the asset in a sale and leaseback transaction does not qualify as a sale, the Group does not recognize thetransferred asset, but recognizes a financial asset equal to the transfer proceeds and account for the financial asset inaccordance with the provisions of Accounting Standards for Business Enterprises No. 22 - Recognition and Measurementof Financial Instruments. If the transfer of the asset qualifies as a sale, the Group accounts for the purchase of the asset inaccordance with other applicable Accounting Standards for Business Enterprises and account for the lease of the asset.
31. Important judgments while applying accounting policy, and key assumptions and uncertainty factors appliedfor accounting estimateDuring the process of using accounting policy described in note (III), due to the uncertainty in operation activities, thegroup should judge, estimate and assume the book value of the report items which may not be metered reliably. Thesejudgments, estimates and assumptions are based on the historical experience of the Group's management and other relatedfactors. Differences may exist between the actual results and the Group's estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis of continuous operation. Ifthe changes of accounting estimate only influence current period, the influence amount will be affirmed during thechanging period; if it influences the current period and subsequent periods, the influence amount will be recognized in thecurrent period and future period.
- Key assumptions and uncertainties used in accounting estimateOn balance sheet date, key assumptions and uncertainties for performing accounting estimates on book value of assets andliabilities in subsequent future periods are:
Impairment provision for inventoriesExcept for contract performance costs, inventories are measured at the lower of cost or net realizable value. For rawmaterials, the latest or future actual purchase price is used as the basis for determining the net realizable value; For productsin progress, the actual selling price of the latest or future finished product minus the estimated costs and costs that will beincurred when similar products are completed in the current period, the estimated selling expenses and related taxes to beincurred, is used as the basis for determining the net realizable value; For finished products, the actual selling price of thelatest or future finished product minus the estimated selling expenses and related taxes will be incurred, is used as the basisfor determining the net realizable value. The Group will regularly conduct a comprehensive stocktaking to review theimpairment circumstances on defective, obsoleted or slow-moving inventory if any; in addition, the Group's managementwill regularly review the impairment circumstance of inventory with long storage time according to the inventory aginglist. The review procedure includes the comparison between book value of defective, obsoleted or slow-moving inventoriesand inventory with long storage time and its corresponding net realizable value in order to determine whether to withdraw
provisions on the defective, obsoleted or slow-moving inventory and inventory with long storage time. Based on the aboveprocedure, the Group's management deems that the full provision amounts have been withdrawn for inventory. For details,please refer to Note (V) 8.
Impairment of accounts receivableExcept for accounts receivable whose credit losses are determined on the basis of individual basis, the Group adopts animpairment matrix on a portfolio basis to determine its expected credit loss of the relevant accounts receivable. The Groupdivides the risk characteristics according to the region and object of its business, and divides the relevant accountsreceivable into different portfolios. Based on the historical loss rate and consider reasonable and well-founded forward-looking information in the industry, the Group determines the proportion of corresponding loss reserves for differentportfolios of various types of accounts receivable. As of December 31, 2022, based on the historically loss rate and considerreasonable and well-founded forward-looking information in the industry, the Group determines the correspondingproportion of loss provision for accounts receivable. The amount of the provision for expected credit losses will changeas the estimation of the Group. The details on the provision for expected credit losses of the accounts receivable of theGroup are given in Note (V) 4.
Useful life and predicted net residual value of fixed assetThe Group's estimation of fixed assets useful life is based on the historical experience of actual usable term of fixed assetswith similar properties and functions, the estimation of predicted net residual value is the amount obtained currently bythe Group from the assets after deducting the anticipated disposal expense based on the anticipated status assuming theconditions that fixed assets' predicted useful life expires and fixed assets are at the end of useful life. The Group shallconduct the review on the predicted service life and predicted net residual value of fixed assets at least annually. For thecurrent reporting period, the Group's management did not see signs either indicating a shortened or extended useful life ofthe Group's fixed asset or indicating a change in predicted net residual value.
Accrued liabilities of product quality warrantyAccrued liabilities of product quality assurance are costs and expenses incurred to meet the established standards ofproduct quality assurance obligations to customers in accordance with the product contract; the Group made such anestimation according to the predicted repair and replacement cost of relevant products. The estimation considers theproduct claim rate trend, historic defect rate, industry practice and other major estimations. The management deems thatthe current estimation on accrued liabilities of product quality warranty is reasonable, however, the Group will continueto review the conditions of product repairs, and will conduct adjustment if any sign indicating the need to make adjustmentson accounting estimates.
Deferred tax assets and deferred tax liabilities
Deferred income tax assets and deferred income tax liabilities are measured at the applicable income tax rate during theperiod when the relevant asset is expected to be recovered or the relevant debt is expected to be paid off. The expectedapplicable income tax rate is determined according to the relevant current tax regulations and the actual situation of theGroup. If the estimated income tax rate is different from the original estimate, the management of the Group will adjust it.
The realization of deferred income tax assets mainly depends on the actual future taxable income, taxable temporarydifferences, and the effective tax rate of temporary difference in the future applicable years. If the actual taxable incomeand taxable temporary differences in the future is less than the estimation, or actual tax rate is lower than the estimation,then the confirmed deferred income tax assets will be reversed and confirmed in the income statement during thecorresponding period. If the actual taxable income and taxable temporary differences in the future is more than theestimation, or actual tax rate is higher than the estimation, then the deferred tax assets that are partially unrecognizeddeductible losses and deductible temporary differences will be recognized and confirmed in the income statement duringthe corresponding period.
Goodwill impairmentWhen performing impairment test on goodwill, the predicted present value of future cash flows of relevant asset group orasset group portfolio included the goodwill need to be calculated, the future cash flows of relevant asset group or assetgroup portfolio need to be estimated, and the proper pretax rate that fairly reflects the current market time value of moneyand specific asset risk need to be determined. When the future actual result is different from the original estimation, thegoodwill impairment loss will alter.
Fair value measurement and valuation processHeld-for-trading financial assets, receivables for financing, and other non-current financial assets of the Group aremeasured at fair value in the financial statement. When valuing the fair value of these assets, the Group preferably usesobtainable and observable market data. If no observable data is available, the Group will organize an internal evaluationpanel or hire qualified third-party valuers to conduct valuation. The Finance Department and evaluation panel of the Groupwill work closely with the hired valuers to determine appropriate valuation techniques and the input values of the valuationmodel. The valuation techniques and input values used for valuing the fair value of various assets are disclosed in Note(IX).
32. Alternation in Accounting Policy
32.1 Significant alternation in accounting policy
| The Content and Reason of Alternation in Accounting Policy | Approval Process | Note |
| Interpretation No. 16 of Accounting Standards for Business Enterprises | Such alternation in accounting policies are approved at a meeting | - |
| The Ministry of Finance issued the Interpretation No. 16 of Accounting Standards for Business Enterprises (the "Interpretation No. 16") on November 30, 2022. It specifies the accounting treatment of initial recognition exemptions for deferred income tax related to assets and liabilities arising from single transactions Accounting treatment of initial recognition exemptions for deferred income tax related to assets and liabilities arising from single transaction. The Interpretation No. 16 amends the scope of the initial recognition exemption for deferred income tax in ASBE No. 18 – Income Tax. It clarifies that for single transaction that are not business combinations, where neither accounting profits nor taxable income (or deductible losses) are affected at the time of the transaction, and the assets and liabilities initially recognized result in equal taxable temporary differences and deductible temporary differences do not apply to the provisions of ASBE No. 18 – Income Tax on exemption from initial recognition of deferred tax liabilities and deferred tax assets. This regulation is effective as of January 1, 2023, and can be implemented in advance. The Group implemented this requirement on January 1, 2023 and applied retrospective adjustment to single transactions occurring between the beginning of the earliest period of presentation of the financial statements and December 31, 2022, and restated the financial statements for the comparative period. For details, please refer to Note (III), 32.2. | of the Board of Directors of the Group |
32.2 The impact of the Group's Implement Interpretation No. 16 on the consolidated statement items
(1) The impact on the relevant items of the Group's consolidated balance sheet on January 1, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Deferred tax assets | 1,210,877,575.24 | 758,784.91 | 1,211,636,360.15 |
| Deferred tax liabilities | 93,315,151.17 | 971,090.51 | 94,286,241.68 |
| Retained earnings | 45,148,877,451.52 | (942,347.44) | 45,147,935,104.08 |
| Minority equity | 1,933,755,610.62 | 730,041.84 | 1,934,485,652.46 |
(2) The impact on the relevant items of the Group's consolidated balance sheet on December 31, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Deferred tax assets | 1,469,646,489.04 | 1,320,206.64 | 1,470,966,695.68 |
| Deferred tax liabilities | 116,502,770.84 | 837,606.91 | 117,340,377.75 |
| Retained earnings | 49,460,240,986.49 | (483,408.98) | 49,459,757,577.51 |
| Minority equity | 4,580,999,418.82 | 966,008.71 | 4,581,965,427.53 |
(3) The impact on the relevant items of the Group's 2022 consolidated income statement
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Income tax expenses | 1,297,981,905.54 | (694,905.33) | 1,297,287,000.21 |
| Net profit attributable to owners of parent company | 12,837,342,061.07 | 458,938.46 | 12,837,800,999.53 |
| Profit or loss attributable to minority shareholders | 719,627,660.86 | 235,966.87 | 719,863,627.73 |
(4) The impact on items related to the Group's consolidated income statement for the period from January 1, 2022 to June30, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Income tax expenses | 628,419,906.49 | 573,959.45 | 628,993,865.94 |
| Net profit attributable to owners of parent company | 5,759,254,775.26 | (586,728.70) | 5,758,668,046.56 |
| Profit or loss attributable to minority shareholders | 378,925,214.32 | 12,769.25 | 378,937,983.57 |
(5) The impact on the relevant items of the parent company's balance sheet on January 1, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Deferred tax assets | 281,893,463.93 | (443,175.56) | 281,450,288.37 |
| Retained earnings | 37,958,561,319.89 | (443,175.56) | 37,958,118,144.33 |
(6) The impact on the relevant items of the parent company's balance sheet on December 31, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Deferred tax assets | 171,524,646.19 | (909,206.34) | 170,615,439.85 |
| Retained earnings | 39,030,437,901.96 | (909,206.34) | 39,029,528,695.62 |
(7) The impact on the relevant items of the parent company's 2022 income statement
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Income tax expenses | 527,533,244.69 | 466,030.77 | 527,999,275.46 |
| Net profit | 9,597,855,108.17 | (466,030.77) | 9,597,389,077.40 |
(8) The impact on items related to the parent company's 2022 income statement for the period from January 1, 2022 toJune 30, 2022
Unit: RMB
| Item | Before the restatement | Adjustment | After the restatement |
| Income tax expenses | 363,749,109.56 | 1,297,470.91 | 365,046,580.47 |
| Net profit | 5,015,275,945.13 | (1,297,470.91) | 5,013,978,474.22 |
IV. Taxes
1. Major categories of taxes and tax rates
| Category of tax | Basis of tax computation | Tax rate |
| Enterprise income tax | Taxable income | 25% (Note 1) |
| VAT | For the taxable product sales revenue or taxable labor revenue, the Company and its domestic subsidiaries are ordinary Value-added Tax payers; the VAT payable is the balance of input tax after deducting the deductible output tax. | 6%, 9%, 13% and simple collection rate of 5%, 3% (Note 3) |
| City maintenance and construction tax | Actual payable turnover tax | 7%, 5% |
| Education surcharges | Actual payable turnover tax | 3% |
| Local education surcharges | Actual payable turnover tax | 2% |
Note 1: Except that this Company and subsidiaries in China are applicable to the following tax preference, this Company'sother subsidiaries in China are applicable to 25% of enterprise income tax rate, the overseas subsidiaries are applicable tocorresponding local tax rate.
(1) In accordance with the Letter of Reply on Publishing the List of Identified High-tech Enterprises of Zhejiang Provincein 2020 (Guo Ke Huo Zi [2020] No. 251) issued by the Leading Group Office of National High-tech EnterpriseIdentification Management on December 29, 2020, the Company was identified as the high-tech enterprise with avalid term of 3 years and the preferential tax period is from 2020 to 2022. As of the approval date of this report, TheCompany is still in the process of qualification review and application for high-tech enterprises in 2023. According tothe Announcement of the State Administration of Taxation on Issues Related to the Implementation of the PreferentialIncome Tax Policy for High-tech Enterprises, within the year when the qualification period of a high-tech enterpriseexpires, its enterprise income tax can be temporarily paid at a rate of 15% before it is re-recognized, so the enterpriseincome tax for the current period is reduced by a tax rate of 15%. (2022: 15%)
According to the Announcement on the Enterprise Income Tax Policies for Promoting the High-quality Developmentof Integrated Circuit Industry and Software Industry (Ministry of Finance, State Administration of Taxation, NationalDevelopment and Reform Commission, Ministry of Industry and Information Technology Announcement [2020] No.
45), the Company was approved by the tax authorities in May 2023 to pay the 2022 annual corporate income tax atthe rate of 10%.
(2) In accordance with Finance and Taxation [2011] No. 58 Document of Ministry of Finance, State Administration ofTaxation and General Administration of Customs, the subsidiaries, Chongqing Hikvision Technology Ltd. (hereinafterreferred to as "Chongqing Technology") and Chongqing Hikvision System Technology Ltd. (hereinafter referred to as"Chongqing System"), are qualified to enjoy the west development preferential tax policy from 2011 to 2020.According to the Announcement on Continuation of the Corporate Income Tax Policy for the Western Development(Ministry of Finance, State Administration of Taxation, National Development and Reform CommissionAnnouncement [2020] No.23), the subsidiaries of the Company, Chongqing Technology and Chongqing System willenjoy the preferential policies for the Western Development from 2021 to 2030. The subsidiary of the Company,Chongqing EZVIZ Electronic Ltd. (hereinafter referred to as "Chongqing EZVIZ") will enjoy the preferential policiesfor the Western Development from 2022. Therefore, the current enterprise income tax is calculated and paid on the
basis of a reduced tax rate of 15% in the current reporting period (2022:15%).
(3) In accordance with the Recording List of the First Batch of identified High-tech Enterprises of Zhejiang Province in2021 issued by the Leading Group Office of National High-tech Enterprise Identification Management Work onJanuary 24, 2022, Hangzhou Fuyang Haikang Baotai Surveillance Technology Service Ltd. (hereinafter referred to as"Fuyang Baotai"), a subsidiary of the Company, is identified as a high-tech enterprise, and the validity period of theidentification is 3 years and the preferential tax period is from 2021 to 2023. Therefore, the enterprise income tax iscalculated and paid on the basis of a reduced tax rate of 15% in the current reporting period (2022:15%).
(4) In accordance with the List of High-tech Enterprises Recognized by Zhejiang Provincial Identification Institution in
2022 issued by the leading group office of Zhejiang high-tech enterprise identification management work onDecember 24, 2022, the Company's subsidiaries, Hangzhou Hikvision System Technology Ltd. (hereinafter referredto as "Hangzhou System") and Hangzhou Kuangxin Technology Co., Ltd. (hereinafter referred to as "HangzhouKuangxin") , were recognized as a high-tech enterprise and was valid for 3 years and the preferential tax period isfrom 2022 to 2024. Therefore, the enterprise income tax is calculated and paid on the basis of a reduced tax rate of15% in the current reporting period (2022:15%).
(5) In accordance with the Notice on Publishing the List of Third Batch of Proposed Identified High-tech Enterprises of
Shanghai in 2020 issued by Shanghai High-tech Enterprise Identification Office on November 20, 2020, theCompany's wholly-owned subsidiary, Shanghai Goldway Intelligent Transportation System Ltd. (hereinafter referredto as "Goldway") was identified as the high-tech enterprise with a valid term of 3 years, from 2020 to 2022. As of theapproval date of this report, Goldway is still in the process of qualification review and application for high-techenterprises in 2023. According to the Announcement of the State Administration of Taxation on Issues Related to theImplementation of the Preferential Income Tax Policy for High-tech Enterprises, within the year when the qualificationperiod of a high-tech enterprise expires, its enterprise income tax can be temporarily paid at a rate of 15% before it isre-recognized, so the enterprise income tax for the current period is reduced by a tax rate of 15%. (2022: 15%)
(6) In accordance with the Letter of Reply on Publishing the List of Identified High-tech Enterprises of Zhejiang Provincein 2020 (Guo Ke Huo Zi [2020] No. 251) issued by the Leading Group Office of National High-tech EnterpriseIdentification Management on December 29, 2020, the Company's subsidiaries, Hangzhou Hikrobot Technology Co.,Ltd. (formerly known as Hangzhou Hikrobot Technology Ltd. and hereinafter referred to as "HikRobot"), HangzhouHikauto Software Ltd. (hereinafter referred to as "HikAuto Software") and Hangzhou Hikimaging Technology Ltd.(hereinafter referred to as "HikImaging Technology") were identified as the high-tech enterprises with a valid term of3 years and the preferential tax period is from 2020 to 2022. As of the approval date of this report, HikRobot, HikAutoSoftware, and HikImaging Technology are still in the process of qualification review and application for high-techenterprises in 2023. According to the Announcement of the State Administration of Taxation on Issues Related to theImplementation of the Preferential Income Tax Policy for High-tech Enterprises, within the year when the qualification
period of a high-tech enterprise expires, its enterprise income tax can be temporarily paid at a rate of 15% before it isre-recognized, so the enterprise income tax for the current period is reduced by a tax rate of 15%. (2022: 15%)
(7) In accordance with the Announcement on the Filing of High-tech Enterprises Recognized by Zhejiang Provincial
Identification Institution in 2022 issued by the Leading Group Office of National High-tech Enterprise IdentificationManagement on January 17, 2023, the Company's subsidiary, Hangzhou Hikmicro Sensing Technology Ltd.(hereinafter referred to as "Hikmicro Sensing") was identified as the high-tech enterprises with a valid term of 3 yearsand the preferential tax period is from 2022 to 2024.
According to the Ministry of Industry and Information Technology of the People's Republic of China, the NationalDevelopment and Reform Commission, the Ministry of Finance and the National State Administration of Taxation,No. 9 of 2021 Announcement on the Enterprise Income Tax Policy for Promoting the High-quality Development ofthe Integrated Circuit Industry and Software Industry (Ministry of Finance, State Administration of Taxation, NationalDevelopment and Reform Commission, Ministry of Industry and Information Technology Announcement [2020] No.
45), Notice on Requirements for Formulating Lists of Integrated Circuit Enterprises, Projects and SoftwareEnterprises enjoying Preferential Tax Policies in 2023(Fa Gai Gao Ji [2023] No. 287), Hikmicro Sensing wasidentified as a key integrated circuit design enterprise in May 2023. The qualified enterprise will be exempted fromcorporate income tax for the first year to the fifth year from the profitable year, and levied at a reduced rate of 10% inthe subsequent years. The year of 2023 is the third year of Hikmicro Sensing making profits and is exempt fromenterprise income tax (2022: tax-exempted).
(8) In accordance with the Management Measures of High-tech Enterprise Identification (Guo Ke Fa Huo [2016] No. 32)
and the Management Work Guidance of High-tech Enterprise Identification (Guo Ke Fa Huo [2016] No. 195),Hangzhou Hikmicro Software Ltd. (hereinafter referred to as "Hangzhou Hikmicro Software") was identified as thehigh-tech enterprises with a valid term of 3 years from 2022 to 2024.
In accordance with the Announcement on the Enterprise Income Tax Policies for Promoting the High-qualityDevelopment of Integrated Circuit Industry and Software Industry (Ministry of Finance, State Administration ofTaxation, National Development and Reform Commission, Ministry of Industry and Information TechnologyAnnouncement [2020] No. 45), Hangzhou Hikmicro Software was identified as a key software enterprises in May2023. The qualified enterprise will be exempted from corporate income tax for the first year to the fifth year from theprofitable year, and levied at a reduced rate of 10% in the subsequent years. The year of 2023 is the third year ofHikmicro Sensing making profits and is exempt from enterprise income tax (2022: tax-exempted).
(9) In accordance with the Announcement on Promoting the Income Tax Policies of High-quality Developed Enterprises
in the Integrated Circuit Industry and the Software Industry (Announcement [2020] No. 45 jointly by the MOF, SAT,NDRC and MIIT), enterprises engaging in integrated circuit design, equipment, materials, packaging, testing andsoftware encouraged by the state are entitled to exemption from enterprise income tax in the first and second yearsafter start of profiting and pays enterprise income tax at half of the 25% statutory tax rate in the third to fifth years.
The Company's subsidiary, Hangzhou EZVIZ Software Ltd. (hereinafter referred to as "EZVIZ Software") was aqualified software company and enjoy the preferential enterprise income tax at half of the 25% statutory tax rate (2022:
half of the 25% statutory tax rate).
(10) According to the Recording List of the First Batch of identified High-tech Enterprises of Zhejiang Province in 2021issued by the Leading Group Office of National High-tech Enterprise Identification Management Work on January 24,2022, the Company's subsidiary Hangzhou Hikstorage Technology Ltd. (hereinafter referred as "HikstorageTechnology") was identified as a high-tech enterprise with a validity period of 3 years, from 2021 to 2023. Therefore,the enterprise income tax is calculated and paid on the basis of a reduced tax rate of 15% in the current reportingperiod (2022: 15%).
(11) According to the Recording and Publicity List of the High-tech Enterprises identified in 2022 by Zhejiang ProvincialIdentification Institution issued by the Leading Group Office of National High-tech Enterprise IdentificationManagement Work on December 24, 2022, the Company's subsidiaries Hangzhou Rayin Technology Ltd. (hereinafterreferred as "Hangzhou Rayin Technology"), Hangzhou Hikfire Technology Ltd. (hereinafter referred as "HikFireTechnology"), and Zhejiang Hikfire Technology Ltd. (hereinafter referred as "Zhejiang Hikfire")were identified ashigh-tech enterprises with a validity period of 3 years and the preferential tax period is from 2022 to 2024. Therefore,the enterprise income tax is calculated and paid on the basis of a reduced tax rate of 15% in the current reportingperiod (2022: 15%).
Note 2: In accordance with the requirements of the Notice on Software Product Value-added Tax Policy (Cai Shui [2011]No. 100) promulgated by the Ministry of Finance and the State Administration of Taxation, as for self-developed softwareproducts sales of the Company, Hangzhou System, HikRobot, HikAuto Software, Hangzhou EZVIZ Software, HikstorageTechnology, HikImaging Technology, HikFire Technology. Hangzhou Rayin Technology, Hangzhou Microimage Software,Henan Haikang Hua'an Baoquan Electronics Ltd. (hereinafter referred as "Hua'an Baoquan Electronics"), HangzhouKuangxin, Fuyang Baotai, and Zhejiang Hailai Yunzhi Technology Ltd., the VAT shall be calculated and paid with tax rateof 17% at first, then the portion with actual tax bearing excess 3% shall be refunded after State Administration of Taxationreviews.
Note 3: In accordance with the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform (JointAnnouncement [2019] No. 39) jointly issued by the Ministry of Finance, the State Administration of Taxation and theGeneral Administration of Customs, from April 21, 2019 to December 31, 2021, taxpayers in the production and livingservices industries are allowed to deduct an additional 10% of the current deductible input tax to deduct the tax payable(hereinafter referred as "Additional Deduction Policy"). In accordance with the Several Policies on Promoting theRecovery and Development of Difficult Industries in the Service Industry Document (Fa Gai Cai Jin [2022] No. 271), theservice industry value-added tax deduction policy will continue. In 2022, the current deductible input tax for productionand living services taxpayers will continue to be deducted by 10% and 15% of the tax payable respectively. In accordancewith the Announcement on clarifying policies such as VAT reduction and exemption for small-scale taxpayers (Ministry
of Finance, State Administration of Taxation Announcement [2023] No. 1), In 2023, the current deductible input tax forproduction and living services taxpayers will continue to be deducted by 10% and 15% of the tax payable respectively.The Company's subsidiaries, some branches of Hangzhou Hikvision Technology Ltd., Chongqing System, HangzhouHikvision Security Equipment Leasing Service Ltd., Anhui Hikvision City Operation Service Ltd., some branches ofHangzhou EZVIZ Network Co., Ltd. (hereinafter referred as "Ezviz Network"), Luliang Branch of Zhejiang Haikang CityService Ltd., Luoyang Branch of Henan Hua'an Baoquan Intelligent Development Ltd., Henan Hua'an Security ServicesLtd. and Guizhou Haikang Traffic Big Data Ltd., comply with the provisions of the VAT Additional Deduction Policy andwere still entitled to additional deduction preferential tax policy of input tax in 2023. Meanwhile, some branches of theCompany, subsidiaries such as Urumqi HaiShi Xin'An Electronic Technology Ltd., Chengdu Hikvision Digital TechnologyLtd., Hangzhou EZVIZ Software, Hangzhou branch of Zhejiang Hikfire Technology Ltd., Henan Hua'An Bao QuanIntelligent Development Ltd, Wuhan Hikvision Technology Ltd., and some branches of Hangzhou Haikang IntelligentTechnology Ltd. met the provisions of the VAT Additional Deduction Policy and had already entitled to additionaldeduction preferential tax policy of input tax in 2023.
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount | |
| Cash： | ||||||
| RMB | - | - | 1,768.37 | - | - | 1,710.03 |
| EUR | 58,747.66 | 7.8771 | 462,761.21 | 43,514.50 | 7.4229 | 323,003.75 |
| USD | 5,175.59 | 7.2258 | 37,397.80 | 32,583.86 | 6.9646 | 226,933.53 |
| Other currencies | - | - | 301,745.91 | - | - | 658,417.85 |
| Bank balance： | ||||||
| RMB | 31,031,034,101.61 | - | - | 35,604,295,321.02 | ||
| USD | 291,081,784.42 | 7.2258 | 2,103,298,757.83 | 369,237,191.93 | 6.9646 | 2,571,589,346.94 |
| EUR | 101,036,990.74 | 7.8771 | 795,878,479.76 | 116,323,339.53 | 7.4229 | 863,456,516.97 |
| Other currencies | - | - | 569,005,951.27 | - | - | 568,425,909.28 |
| Other currency funds: | ||||||
| RMB | 125,799,943.92 | - | - | 361,751,169.54 | ||
| USD | 1,841,737.28 | 7.2258 | 13,308,025.24 | 1,623,544.38 | 6.9646 | 11,307,337.16 |
| EUR | 640,664.58 | 7.8771 | 5,046,578.96 | 713,664.81 | 7.4229 | 5,297,462.51 |
| Other currencies | - | - | 26,079,640.98 | - | - | 24,530,871.36 |
| Total | 34,670,255,152.86 | 40,011,863,999.94 | ||||
| Including: deposited in overseas banks | 706,194,307.35 | 589,363,613.39 | ||||
Details of other currency funds:
Unit: RMB
| Closing balance | Opening balance | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Capitals with limitations： | ||||||
| Bank acceptance bills | - | - | 10,334,984.97 | - | - | 9,477,411.92 |
| Deposits for letter of guarantee | - | - | 119,301,196.24 | - | - | 126,434,505.79 |
| Other security deposits | - | - | 18,021,784.52 | - | - | 13,666,564.66 |
| Other capitals with limitations | - | - | - | - | - | 46,895,003.00 |
| Subtotal | 147,657,965.73 | 196,473,485.37 | ||||
| Capitals without limitations: | ||||||
| Deposits in payment instrument provided by third-party and in securities account | - | - | 21,743,875.54 | - | - | 205,579,877.47 |
| Other currency funds in USD | 115,038.13 | 7.2258 | 831,242.52 | 93,664.25 | 6.9646 | 652,334.03 |
| Other currency funds in EUR | 140.32 | 7.8771 | 1,105.31 | 24,403.36 | 7.4229 | 181,143.70 |
| Subtotal | 22,576,223.37 | 206,413,355.20 | ||||
| Total | 170,234,189.10 | 402,886,840.57 |
2. Held-for-trading financial assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Financial assets measured at fair value through current gain and loss | 10,948,728.33 | 12,807,438.36 |
| Including: derivative financial assets | 10,948,728.33 | 12,807,438.36 |
| Total | 10,948,728.33 | 12,807,438.36 |
3. Notes receivable
3.1 Categories of notes receivable
Unit：RMB
| Category | Closing balance | Opening balance |
| Bank acceptance bill | 1,885,560,918.99 | 2,184,776,591.31 |
| Commercial acceptance bill | 276,338,998.87 | 335,211,567.92 |
| Total | 2,161,899,917.86 | 2,519,988,159.23 |
3.2 As of June 30, 2023, the pledged notes receivable by the Group is nil.
3.3 At the end of the current reporting period, notes receivable endorsed or discounted by the Group but not yet due at thebalance sheet day
Unit：RMB
| Category | Amount not derecognized as of June 30. 2023 |
| Bank acceptance bill | 1,036,158,614.97 |
| Commercial acceptance bill | 8,708,039.90 |
| Total | 1,044,866,654.87 |
As of June 30, 2023, the Group gave RMB1,015,747,479.47 (2022: RMB1,182,413,217.20 ) undue notes receivable tosuppliers for endorsement and the Group discounted RMB29,119,175.40 (2022: RMB59,466,804.99) undue notesreceivable to the banks. Since the Group has not transferred almost all the risks and rewards of ownership of financial
assets, the Group has not terminated its confirmation. For details, please refer to Note (V) 23 and Note (V) 30.3.
3.4 As of June 30, 2023, the Group transferred the defaulted notes receivable into accounts receivable.
Unit：RMB
| Category | Amounts transferred into accounts receivable as of June 30, 2023 |
| Commercial Acceptance Bill | 2,829,460.74 |
| Total | 2,829,460.74 |
3.5 Classified disclosure by method of provision for bad debts
Unit：RMB
| Category | Closing balance | ||||
| Carrying amount | Credit loss provision | Book value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for bad debts of notes receivables on a single basis | - | - | - | - | - |
| Provision for bad debts of notes receivables by portfolios | 2,163,804,285.53 | 100.00 | 1,904,367.67 | 0.09 | 2,161,899,917.86 |
| Total | 2,163,804,285.53 | 100.00 | 1,904,367.67 | 0.09 | 2,161,899,917.86 |
| Category | Opening balance | ||||
| Carrying amount | Credit loss provision | Book value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for bad debts of notes receivables on a single basis | - | - | - | - | - |
| Provision for bad debts of notes receivables by portfolios | 2,519,988,159.23 | 100.00 | - | - | 2,519,988,159.23 |
| Total | 2,519,988,159.23 | 100.00 | - | - | 2,519,988,159.23 |
Provision for bad debts of notes receivables by portfolios：
Unit：RMB
| Item | Closing balance | ||
| Carrying amount | provision for bad debts | Proportion (%) | |
| Bank acceptance bill | 1,885,560,918.99 | - | - |
| Commercial acceptance bill | 278,243,366.54 | 1,904,367.67 | 0.68 |
| Total | 2,163,804,285.53 | 1,904,367.67 | 0.09 |
3.6 Provision for bad debts
Unit：RMB
| Category | Opening balance | Amount of changes in the current reporting period | Closing balance | |||
| Provision | Recollect or reverse | Write off | Other | |||
| Commercial acceptance bill | - | 1,904,367.67 | - | - | - | 1,904,367.67 |
| Total | - | 1,904,367.67 | - | - | - | 1,904,367.67 |
4. Accounts receivable
4.1 Disclosure by aging
Unit: RMB
| Aging | Closing balance | Opening balance |
| Within credit period | 17,538,893,195.74 | 17,802,665,327.45 |
| Within 1 year after exceeding credit period | 12,117,350,283.19 | 10,468,264,283.90 |
| 1-2 years after exceeding credit period | 2,398,824,440.36 | 1,906,850,057.03 |
| 2-3 years after exceeding credit period | 939,705,951.42 | 907,553,767.72 |
| 3-4 years after exceeding credit period | 547,588,697.37 | 762,308,314.38 |
| Over 4 years after exceeding credit period | 970,062,214.89 | 557,358,170.53 |
| Accounts receivable | 34,512,424,782.97 | 32,404,999,921.01 |
| Less: Credit impairment provision | 2,885,725,634.27 | 2,498,705,510.61 |
| Carrying amount | 31,626,699,148.70 | 29,906,294,410.40 |
4.2 Classified disclosure of credit loss provision by methods
Unit: RMB
| Category | Closing balance | ||||
| Carrying amount | Credit loss provision | Book value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for credit loss on a single basis | - | - | - | - | - |
| Provision for credit loss by portfolios | 34,512,424,782.97 | 100.00 | 2,885,725,634.27 | 8.36 | 31,626,699,148.70 |
| Total | 34,512,424,782.97 | 100.00 | 2,885,725,634.27 | 8.36 | 31,626,699,148.70 |
| Category | Opening balance | ||||
| Carrying amount | Credit loss provision | Book value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for credit loss on a single basis | - | - | - | - | - |
| Provision for credit loss by portfolios | 32,404,999,921.01 | 100.00 | 2,498,705,510.61 | 7.71 | 29,906,294,410.40 |
| Total | 32,404,999,921.01 | 100.00 | 2,498,705,510.61 | 7.71 | 29,906,294,410.40 |
Provision for credit loss by portfolios for accounts receivable
Unit: RMB
| Customer | Closing balance | ||
| Carrying amount | Credit loss provision | Proportion (%) | |
| Portfolio A | 4,150,096,917.93 | 76,350,684.50 | 1.84 |
| Portfolio B | 23,287,289,728.53 | 2,571,251,591.33 | 11.04 |
| Portfolio C | 7,075,038,136.51 | 238,123,358.44 | 3.37 |
| Total | 34,512,424,782.97 | 2,885,725,634.27 | 8.36 |
Description of credit loss provision by portfolios for accounts receivable:
As part of the Group's credit risk management, the Group uses the aging exceeding credit period of accounts receivable toassess the expected credit losses of accounts receivable formed by domestic and overseas sales business, and divides therisk characteristics into portfolio A, portfolio B and portfolio C, according to the business area and object. These threeportfolios involve a large number of customers with the same risk characteristics. Aging information is able to reflect thesolvency of these three types of customers when the accounts receivable are due.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
As of June 30, 2023 and January 1, 2023, the credit risk and expected credit losses of accounts receivable from portfolio A are as follows:
Unit: RMB
| Aging | Closing balance | Opening balance | ||||||
| Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | |
| Within credit period | 0.03 | 3,188,164,602.63 | 1,106,521.12 | 3,187,058,081.51 | 0.03 | 2,958,550,090.46 | 952,575.87 | 2,957,597,514.59 |
| Within 1 year after exceeding credit period | 1.59 | 875,830,695.93 | 13,900,599.95 | 861,930,095.98 | 2.02 | 672,866,835.07 | 13,604,729.18 | 659,262,105.89 |
| 1-2 years after exceeding credit period | 43.36 | 37,484,226.44 | 16,254,615.22 | 21,229,611.22 | 48.47 | 27,091,133.84 | 13,129,835.35 | 13,961,298.49 |
| 2-3 years after exceeding credit period | 68.30 | 11,131,242.35 | 7,602,797.63 | 3,528,444.72 | 77.48 | 23,880,801.35 | 18,503,703.14 | 5,377,098.21 |
| 3-4 years after exceeding credit period | 100.00 | 23,270,845.32 | 23,270,845.32 | - | 100.00 | 13,340,404.86 | 13,340,404.86 | - |
| Over 4 years after exceeding credit period | 100.00 | 14,215,305.26 | 14,215,305.26 | - | 100.00 | 8,509,701.80 | 8,509,701.80 | - |
| Total | 1.84 | 4,150,096,917.93 | 76,350,684.50 | 4,073,746,233.43 | 1.84 | 3,704,238,967.38 | 68,040,950.20 | 3,636,198,017.18 |
As of June 30, 2023 and January 1, 2023, the credit risk and expected credit losses of accounts receivable from portfolio B are as follows:
Unit: RMB
| Aging | Closing balance | Opening balance | ||||||
| Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | |
| Within credit period | 0.66 | 8,285,412,034.62 | 54,948,530.03 | 8,230,463,504.59 | 0.76 | 8,531,459,822.34 | 65,085,907.08 | 8,466,373,915.26 |
| Within 1 year after exceeding credit period | 4.43 | 10,434,331,051.38 | 462,001,173.44 | 9,972,329,877.94 | 5.30 | 9,133,051,848.20 | 484,083,420.12 | 8,648,968,428.08 |
| 1-2 years after exceeding credit period | 21.79 | 2,316,027,385.63 | 504,588,823.97 | 1,811,438,561.66 | 18.66 | 1,841,980,392.51 | 343,623,789.72 | 1,498,356,602.79 |
| 2-3 years after exceeding credit period | 37.12 | 897,815,685.03 | 333,304,970.46 | 564,510,714.57 | 38.19 | 835,970,994.09 | 319,296,676.54 | 516,674,317.55 |
| 3-4 years after exceeding credit period | 70.69 | 468,480,830.15 | 331,185,351.71 | 137,295,478.44 | 72.52 | 702,886,673.06 | 509,743,109.66 | 193,143,563.40 |
| Over 4 years after exceeding credit period | 100.00 | 885,222,741.72 | 885,222,741.72 | - | 100.00 | 500,527,605.77 | 500,527,605.77 | - |
| Total | 11.04 | 23,287,289,728.53 | 2,571,251,591.33 | 20,716,038,137.20 | 10.31 | 21,545,877,335.97 | 2,222,360,508.89 | 19,323,516,827.08 |
As of June 30, 2023 and January 1, 2023, the credit risk and expected credit losses of accounts receivable from portfolio C are as follows:
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
Unit: RMB
| Aging | Closing balance | Opening balance | ||||||
| Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | Estimated average loss rate (%) | Carrying amount | Credit loss provision | Book value | |
| Within credit period | 0.24 | 6,065,316,558.49 | 14,470,023.97 | 6,050,846,534.52 | 0.25 | 6,312,655,414.65 | 15,648,321.26 | 6,297,007,093.39 |
| Within 1 year after exceeding credit period | 6.25 | 807,188,535.88 | 50,457,671.06 | 756,730,864.82 | 5.72 | 662,345,600.63 | 37,905,044.12 | 624,440,556.51 |
| 1-2 years after exceeding credit period | 47.46 | 45,312,828.29 | 21,504,582.57 | 23,808,245.72 | 48.19 | 37,778,530.68 | 18,205,757.98 | 19,572,772.70 |
| 2-3 years after exceeding credit period | 82.02 | 30,759,024.04 | 25,229,891.03 | 5,529,133.01 | 88.35 | 47,701,972.28 | 42,142,828.74 | 5,559,143.54 |
| 3-4 years after exceeding credit period | 100.00 | 55,837,021.90 | 55,837,021.90 | - | 100.00 | 46,081,236.46 | 46,081,236.46 | - |
| Over 4 years after exceeding credit period | 100.00 | 70,624,167.91 | 70,624,167.91 | - | 100.00 | 48,320,862.96 | 48,320,862.96 | - |
| Total | 3.37 | 7,075,038,136.51 | 238,123,358.44 | 6,836,914,778.07 | 2.91 | 7,154,883,617.66 | 208,304,051.52 | 6,946,579,566.14 |
4.3 Details of credit loss provision
Provision, re-collection, or reverse of the credit loss provision in the current reporting period
Unit: RMB
| Credit loss provision | Total |
| Balance on January 1, 2023 | 2,498,705,510.61 |
| Provision/(reverse) during the current reporting period | 382,111,246.61 |
| Derecognition of financial assets (including direct write-downs) and transfer out | (104,965.71) |
| Difference arised from foreign currency statement translation | 5,013,842.76 |
| Balance on June 30, 2023 | 2,885,725,634.27 |
Actual write-off of accounts receivable during the current reporting period:
In the current reporting period, the amount of actual accounts receivable write-off is RMB104,965.71.
4.4 Top five debtors based on corresponding closing balance of accounts receivable
Unit: RMB
| Name of the Party | Relationship with the Company | Book value balance of accounts receivable | Closing balance for credit loss provision | Proportion (%) of the total balance of accounts receivable at the end of the current reporting period |
| CETC's subsidiary company A (Note) | Related Party | 274,701,791.20 | 219,386,856.60 | 0.80 |
| Third Party A | Third party | 272,403,474.42 | 1,464,483.58 | 0.79 |
| Third Party B | Third party | 231,629,251.58 | 13,606,725.50 | 0.67 |
| Third Party C | Third party | 221,376,957.49 | 46,783,295.86 | 0.64 |
| Third Party D | Third party | 202,410,647.18 | 8,420,282.92 | 0.59 |
| Total | 1,202,522,121.87 | 289,661,644.46 | 3.49 |
Note: A subsidiary of CETC is a subsidiary of China Electronics Technology Group Co., Ltd. (hereinafter referred to as"CETC"), the Company's ultimate controller.
4.5 As of June 30, 2023, there is no termination of accounts receivable booking due to transfer of a financial asset.
4.6 As of June 30, 2023, the Group has no assets/liabilities booked due to transferred accounts receivable that the Groupstill continues to be involved in.
5. Receivables for financing
5.1 Receivables for financing by categories
Unit: RMB
| Item | Closing balance | Opening balance |
| Bank acceptance bill | 1,502,906,978.21 | 1,484,218,258.74 |
| Total- | 1,502,906,978.21 | 1,484,218,258.74 |
5.2 At the end of the current reporting period, the Group had no pledged financing of receivables.
5.3 At the end of the reporting period, receivables for financing endorsed or discounted by the Group that have not yetexpired on the balance sheet date.
Unit: RMB
| Item | Derecognized amount as of June 30, 2023 |
| Bank acceptance bill | 1,532,254,662.29 |
| Total | 1,532,254,662.29 |
5.4 The Group believes that the acceptance bank's credit rating of the bank acceptance bill held is high, and there is nosignificant credit risk, so no loss provision is made.
6. Prepayments
6.1 Prepayments by aging analysis
Unit: RMB
| Aging | Closing balance | Opening balance | ||
| Amount | Proportion (%) | Amount | Proportion (%) | |
| Within 1 year | 1,061,803,845.88 | 94.14 | 467,175,741.37 | 87.36 |
| 1-2 years | 56,939,358.03 | 5.05 | 60,041,088.41 | 11.23 |
| 2-3 years | 4,749,148.93 | 0.42 | 4,732,310.18 | 0.88 |
| Over 3 years | 4,373,368.72 | 0.39 | 2,830,980.56 | 0.53 |
| Total | 1,127,865,721.56 | 100.00 | 534,780,120.52 | 100.00 |
6.2 Details of closing balances of top five prepayments parties
As of June 30, 2023, the Group's top five balances of prepayments amounted to RMB686,414,188.81, accounting for
60.86% of total closing balance of prepayments.
7. Other receivables
7.1 Other receivables by aging
Unit: RMB
| Aging | Closing balance | Opening balance |
| Within contract period | 1,194,834,634.37 | 435,726,390.34 |
| Within 1 year | 80,941,553.40 | 74,536,873.66 |
| 1-2 years | 24,516,577.88 | 6,501,889.62 |
| 2-3 years | 3,721,978.22 | 5,758,160.62 |
| 3-4 years | 3,025,152.94 | 8,938,449.42 |
| Over 4 years | 21,362,303.51 | 15,094,368.40 |
| Other receivables | 1,328,402,200.32 | 546,556,132.06 |
| Less: Credit impairment provision | 32,708,893.90 | 30,052,646.48 |
| Carrying amount | 1,295,693,306.42 | 516,503,485.58 |
7.2 Details of other receivables by nature of the payment
Unit: RMB
| Item | Closing balance | Opening balance |
| Repurchase payments for restricted share | 693,632,312.71 | 80,136,229.12 |
| Guarantee deposits | 262,700,477.45 | 262,305,393.59 |
| Item | Closing balance | Opening balance |
| Temporary payments for receivables | 126,233,782.64 | 73,826,738.9 |
| Tax rebates | 149,838,649.77 | 2,166,013.19 |
| Others | 95,996,977.75 | 128,121,757.26 |
| Total | 1,328,402,200.32 | 546,556,132.06 |
7.3 Details of provision for credit loss
Unit: RMB
Changes in credit loss provisions for other receivables
Unit: RMB
| Provision for credit loss | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit losses in the next 12 months | Expected credit loss for the entire duration (credit impairment has not incurred) | Expected credit loss for the entire duration (credit impairment has occurred) | ||
| Balance on January 1, 2023 | 2,647,306.22 | 4,248,324.22 | 23,157,016.04 | 30,052,646.48 |
| The book balance of other receivables on January 1, 2023 in the current reporting period | ||||
| --Transfer into stage 2 | (493,743.48) | 493,743.48 | - | - |
| --Transfer into stage 3 | - | (658,045.75) | 658,045.75 | - |
| --Provision/(reverse) in the current reporting period | (768,186.35) | 1,764,099.57 | 921,807.04 | 1,917,720.26 |
| --Derecognition of financial assets (including direct write-down) and transfer out | - | - | (23,687.58) | (23,687.58) |
| Other changes | 762,214.74 | - | - | 762,214.74 |
| Balance on June 30, 2023 | 2,147,591.13 | 5,848,121.52 | 24,713,181.25 | 32,708,893.90 |
Category
| Category | Opening balance | Amount of changes in the current reporting period | Difference resulted from foreign currency statements conversion | Closing balance | ||
| Provision | Recollect or reverse | Resell or write off | ||||
| Other receivables | 30,052,646.48 | 3,090,987.68 | (1,173,267.42) | (23,687.58) | 762,214.74 | 32,708,893.90 |
| Total | 30,052,646.48 | 3,090,987.68 | (1,173,267.42) | (23,687.58) | 762,214.74 | 32,708,893.90 |
7.4 Actual write-off of other receivables during the current reporting period
The actual write off of other receivables during the current reporting period is RMB23,687.58.
7.5 Top five debtors based on corresponding closing balance of other receivables
Unit: RMB
| Entities | Nature | Closing balance | Aging | Proportion of total closing balance for other receivables (%) | Closing balance for credit loss provision |
| Third party E | Tax refund | 149,311,974.06 | Within contract period | 11.24 | - |
| Third party F | Guarantee deposits | 17,848,880.00 | Within 1 year | 1.34 | 742,513.41 |
| Third party G | Temporary payments for receivables | 11,511,485.80 | Within contract period | 0.87 | 71,371.21 |
| Third party H | Guarantee deposits | 9,313,977.75 | 1-2 years | 0.70 | 1,612,249.55 |
| Third party I | Guarantee deposits | 7,428,988.00 | Within contract period | 0.56 | 46,059.73 |
| Total | 195,415,305.61 | 14.71 | 2,472,193.90 |
7.6 As of June 30, 2023, the Group does not have other receivables related to government subsidies.
7.7 As of June 30, 2023, there is no termination of other receivables booking due to transfer of a financial asset.
7.8 As of June 30, 2023, the Group has no assets/liabilities booked due to any transferred other receivable that the Group continues to be involved in.
8. Inventories
8.1 Categories of inventories
Unit: RMB
| Category | Closing balance | Opening balance | ||||
| Carrying amount | Provision for decline in value of inventories/ Impairment provision for contract performance cost | Book value | Carrying amount | Provision for decline in value of inventories/ Impairment provision for contract performance cost | Book value | |
| Raw materials | 8,744,962,436.06 | 387,353,356.56 | 8,357,609,079.50 | 8,590,579,068.82 | 405,402,336.01 | 8,185,176,732.81 |
| Work-in-progress | 685,756,292.11 | - | 685,756,292.11 | 413,355,134.81 | - | 413,355,134.81 |
| Finished goods | 11,016,056,851.01 | 836,298,431.35 | 10,179,758,419.66 | 10,955,174,807.28 | 839,876,008.09 | 10,115,298,799.19 |
| Contract performance cost | 381,009,958.20 | 6,595,745.76 | 374,414,212.44 | 290,988,057.76 | 6,595,745.76 | 284,392,312.00 |
| Total | 20,827,785,537.38 | 1,230,247,533.67 | 19,597,538,003.71 | 20,250,097,068.67 | 1,251,874,089.86 | 18,998,222,978.81 |
8.2 Provision for decline in value of inventories
Unit: RMB
| Category | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Effect on conversion of financial statements denominated in foreign currencies | Closing balance | |
| Reversals | Write-off | |||||
| Raw materials | 405,402,336.01 | 99,604,441.83 | 117,653,421.28 | - | - | 387,353,356.56 |
| Finished goods | 839,876,008.09 | 115,989,712.68 | 159,743,862.16 | 40,176,572.74 | 836,298,431.35 | |
| Contract performance cost | 6,595,745.76 | - | - | - | - | 6,595,745.76 |
| Subtotal | 1,251,874,089.86 | 215,594,154.51 | 277,397,283.44 | - | 40,176,572.74 | 1,230,247,533.67 |
The write-offs of provision for inventories in the current reporting period are due to use or sale of inventories.
9. Contract assets
9.1 Details of contract assets
Unit: RMB
| Items | Closing balance | Opening balance | ||||
| Carrying amount | Provisions for impairment | Book value | Carrying amount | Provisions for impairment | Book value | |
| Constructions | 1,645,606,055.38 | 8,397,080.02 | 1,637,208,975.36 | 1,859,628,746.45 | 10,664,372.98 | 1,848,964,373.47 |
| Maintenance services | 236,988,330.56 | 1,479,579.70 | 235,508,750.86 | 270,901,478.31 | 1,642,480.80 | 269,258,997.51 |
| Total | 1,882,594,385.94 | 9,876,659.72 | 1,872,717,726.22 | 2,130,530,224.76 | 12,306,853.78 | 2,118,223,370.98 |
9.2 The classification and disclosure of the method of provision for impairment of contract assets during the currentreporting period:
Unit: RMB
| Items | Closing balance | ||||
| Carrying amount | Provisions for impairment | Book value | |||
| Amount | Proportion (%) | Amount | Provision proportion (%) | Amount | |
| Provision for impairment on a single item | - | - | - | - | - |
| Provision for impairment by portfolio | 1,882,594,385.94 | 100.00 | 9,876,659.72 | 0.52 | 1,872,717,726.22 |
| Total | 1,882,594,385.94 | 100.00 | 9,876,659.72 | 0.52 | 1,872,717,726.22 |
Provision for impairment of contract assets in the current reporting period:
Unit: RMB
| Credit loss provision | Total |
| Balance on January 1, 2023 | 12,306,853.78 |
| Provision (reverse) during the current reporting period | (2,430,194.06) |
| Balance on June 30, 2023 | 9,876,659.72 |
Contract assets arise from the Group's construction works business as well as maintenance services relating to securityprojects. The Group provides construction works and maintenance services based on contracts with customers, andrecognizes revenue based on the performance progress during the term of the contracts. The Group's customers makemilestone payments for the construction works and maintenance services of the Group as provided in the contracts. Forthe portion where the Group has obtained an unconditional right to the payment, it will be recognized as accountsreceivable, while the remaining portion will be recognized as contract assets; where the contract price received orreceivable by the Group exceeds the performance obligation completed to date, the excess portion will be recognized ascontract liabilities. The Group presents contract assets and contract liabilities under the same contract on a net basis.
10. Non-current assets due within one year
Unit: RMB
| Item | Closing balance | Opening balance |
| Long-term receivables due within one year (Note (V) 12) | 1,063,928,330.52 | 996,902,343.27 |
| Total | 1,063,928,330.52 | 996,902,343.27 |
11. Other current assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Deductible VAT input | 856,594,690.30 | 670,250,077.42 |
| Prepaid corporate income tax | 125,367,739.62 | 61,808,729.93 |
| Prepaid tariff | 35,980,607.13 | 17,113,351.36 |
| Others | 71,932,600.21 | 57,660,782.87 |
| Total | 1,089,875,637.26 | 806,832,941.58 |
12. Long-term receivables
12.1 Details of long-term receivables
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision for credit loss | Book value | Carrying amount | Provision for credit loss | Book value | |
| Financial leases receivables | 302,586,268.80 | 47,690,096.81 | 254,896,171.99 | 294,708,514.70 | 41,885,999.65 | 252,822,515.05 |
| Including: Unrealized income from financing | 7,424,453.53 | - | 7,424,453.53 | 8,548,939.32 | - | 8,548,939.32 |
| Installments business | 1,153,472,611.36 | 169,835,964.42 | 983,636,646.94 | 916,676,013.71 | 125,838,244.59 | 790,837,769.12 |
| Including: Unrealized income from financing | 32,405,464.02 | - | 32,405,464.02 | 32,175,399.92 | - | 32,175,399.92 |
| Employee housing loan | 459,170,586.56 | - | 459,170,586.56 | 493,890,024.40 | - | 493,890,024.40 |
| Including: Unrealized income from financing | 48,688,877.44 | - | 48,688,877.44 | 44,084,149.81 | - | 44,084,149.81 |
| Less: Non-current assets due within one year (Note (V) 10) | 1,279,626,216.92 | 215,697,886.40 | 1,063,928,330.52 | 1,163,050,529.25 | 166,148,185.98 | 996,902,343.27 |
| Total | 635,603,249.80 | 1,828,174.83 | 633,775,074.97 | 542,224,023.56 | 1,576,058.26 | 540,647,965.30 |
12.2 Credit loss provision
The Group believes that the employees corresponding to the long-term receivable employee housing loans held by the Group all have labor relations with the Group and the Groupassesses that the relevant debtors have good credit records, and the Group believes that there is no significant credit risk and therefore loss of provision is made.
As of June 30, 2023, the credit risk and expected credit losses of long-term receivables are as follows:
Unit: RMB
| Aging | Closing balance | ||
| Amounts | Credit loss provision | Estimated average loss rate (%) | |
| Within credit period | 616,295,250.95 | 3,821,272.41 | 0.62 |
| Within 1 year after exceeding credit period | 321,081,042.56 | 13,356,971.37 | 4.16 |
| 1-2 years after exceeding credit period | 227,628,913.02 | 39,402,564.84 | 17.31 |
| 2-3 years after exceeding credit period | 149,821,656.42 | 55,853,513.52 | 37.28 |
| 3-4 years after exceeding credit period | 102,963,755.32 | 66,823,477.20 | 64.90 |
| Over 4 years after exceeding credit period | 38,268,261.89 | 38,268,261.89 | 100.00 |
| Total | 1,456,058,880.16 | 217,526,061.23 | 14.94 |
The changes in the Group's long-term receivables' expected credit loss provision for the current reporting period are as follows:
Unit: RMB
| Credit loss provision | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit losses in the next 12 months | Expected credit losses for the entire duration (No credit impairment occurred) | Expected credit losses for the entire duration (Credit impairment has occurred) | ||
| Balance on January 1, 2023 | 3,014,883.93 | 48,189,847.34 | 116,519,512.97 | 167,724,244.24 |
| On January 1, 2023, the book balance of long-term accounts receivable in the current reporting period | ||||
| Transfer into stage 2 | (2,119,134.88) | 2,119,134.88 | - | - |
| Transfer into stage 3 | - | (26,383,593.70) | 26,383,593.70 | - |
| Provision/(reverse) during the current reporting period | 2,925,523.36 | 28,834,147.69 | 18,042,145.94 | 49,801,816.99 |
| Balance on June 30, 2023 | 3,821,272.41 | 52,759,536.21 | 160,945,252.61 | 217,526,061.23 |
12.3 As of June 30, 2023, there is no termination of long-term receivables booking due to transfer of a financial asset.
12.4 As of June 30, 2023, the Group has no assets/liabilities booked due to any transferred long-term receivable that the Group continue to be involved in.
13. Long-term equity investment
Unit: RMB
| The invested entity | Opening Balance | Increase/Decrease in the current reporting period | Closing Balance | Closing balance for impairment provision | |||||||
| Additional Investments | Investment reduction | Investment Profit (Loss) recognized under the equity Method | Adjustment: Other comprehensive income | Other Changes in equity | Declaration of cash dividends or profit distribution | Impairment provision | others | ||||
| 1. Joint venture companies | |||||||||||
| Hangzhou Haikang Intelligent Industrial Equity Investment Fund Partnership (L.P.) | 829,825,387.60 | - | - | (32,069,650.91) | - | 4,103,623.46 | - | - | - | 801,859,360.15 | - |
| Zhejiang City Digital Technology Ltd. | 26,341,510.80 | - | - | 800,625.28 | - | - | - | - | - | 27,142,136.08 | - |
| Zhejiang Haishi Huayue Digital Technology Ltd. | 13,382,016.23 | - | - | (34,812.41) | - | - | - | - | - | 13,347,203.82 | - |
| Guangxi Haishi Urban Operation Management Ltd. | 13,059,993.97 | - | - | 260,727.19 | - | - | - | - | - | 13,320,721.16 | - |
| Xuzhou Kangbo Urban Operation Management Service Ltd. | 10,385,566.88 | - | - | (43,315.31) | - | - | - | - | - | 10,342,251.57 | - |
| Yunnan Yinghai Parking Service Ltd. | 5,077,998.04 | - | - | (146,686.51) | - | - | - | - | - | 4,931,311.53 | - |
| Shenzhen Haishi Urban Service Operatio Ltd. | 1,674,806.73 | - | - | (1,106,775.95) | - | - | - | - | - | 568,030.78 | - |
| Subtotal | 899,747,280.25 | - | - | (32,339,888.62) | - | 4,103,623.46 | - | - | - | 871,511,015.09 | - |
| 2. Associated Companies | |||||||||||
| The invested entity | Opening Balance | Increase/Decrease in the current reporting period | Closing Balance | Closing balance for impairment provision | |||||||
| Additional Investments | Investment reduction | Investment Profit (Loss) recognized under the equity Method | Adjustment: Other comprehensive income | Other Changes in equity | Declaration of cash dividends or profit distribution | Impairment provision | others | ||||
| Maxio Technology (Hangzhou) Co., Ltd. | 143,900,081.27 | - | - | (3,158,580.74) | - | - | - | - | - | 140,741,500.53 | - |
| Wuhu Sensortech Intelligent Technology Ltd. (Note 1) | 98,094,380.52 | - | - | (4,911,240.97) | - | - | - | - | (93,183,139.55) | - | - |
| Beijing Taifang Techology LLC | 39,695,050.60 | - | - | (2,347,336.65) | - | - | - | - | - | 37,347,713.95 | - |
| Jiaxin Haishi JiaAn Zhicheng Technology Ltd. | 24,348,699.37 | - | - | 2,959,588.28 | - | - | - | - | - | 27,308,287.65 | - |
| Zhiguang Hailian Big Data Technology Ltd. | 22,425,370.08 | - | - | (1,954,393.50) | - | - | - | - | - | 20,470,976.58 | - |
| Terapark (Nanjing) Ltd. | 19,603,125.69 | - | - | (657,897.02) | - | - | - | - | - | 18,945,228.67 | - |
| Sanmenxia Xiaoyun Vision Technology Ltd. | 2,628,242.87 | - | - | 249,437.69 | - | - | - | - | - | 2,877,680.56 | - |
| Zhejiang Changyun Haibao Technology Ltd. | 1,591,282.76 | - | - | (80,259.54) | - | - | - | - | - | 1,511,023.22 | - |
| Subtotal | 352,286,233.16 | - | - | (9,900,682.45) | - | - | - | - | (93,183,139.55) | 249,202,411.16 | - |
| Total | 1,252,033,513.41 | - | - | (42,240,571.07) | - | 4,103,623.46 | - | - | (93,183,139.55) | 1,120,713,426.25 | - |
Note 1: In the current period, the Group included Wuhu Sensortech Intelligent Technology Ltd. in the scope of consolidated financial statements and no longer accounted for it as anassociated enterprise. For details, please refer to Note (VI) 1.
14. Other non-current financial assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Investments in equity instruments (Note) | 474,823,086.64 | 423,893,239.94 |
| Total | 474,823,086.64 | 423,893,239.94 |
Note: It refers to the Group's equity investments of private companies. The Group has no control, joint control or significantinfluence over the invested company. During the current reporting period, the Company did not receive cash dividendfrom such investee enterprises (2022 half year: RMB51,892,209.92) and recognized it as current profit and loss. Pleaserefer to Note (V) 49 for details.
15. Fixed Assets
15.1 Details of fixed assets
Unit: RMB
| Items | Building and construction | General-purpose equipment | Special-purpose equipment | Transportation vehicles | Total |
| I. Original carrying amount | |||||
| 1. Opening balance | 7,452,114,917.55 | 1,795,698,464.97 | 2,966,436,208.66 | 101,263,567.44 | 12,315,513,158.62 |
| 2. Increase in the current reporting period | 1,448,500,932.27 | 92,718,281.38 | 321,133,920.23 | 5,357,561.93 | 1,867,710,695.81 |
| 1) purchase | 1,320,730.35 | 85,789,824.89 | 196,422,075.44 | 3,173,998.15 | 286,706,628.83 |
| 2) transferred from construction in progress | 1,447,180,201.92 | 237,627.24 | 48,583,642.93 | - | 1,496,001,472.09 |
| 3) transferred from inventory | - | - | 5,715,228.87 | - | 5,715,228.87 |
| 4) increase in business combinations under non-common control | - | 6,690,829.25 | 70,412,972.99 | 2,183,563.78 | 79,287,366.02 |
| 3. Decrease in the current reporting period | - | 21,073,959.10 | 16,223,189.82 | 2,627,039.12 | 39,924,188.04 |
| 1) disposal or write-off | - | 21,073,959.10 | 16,223,189.82 | 2,627,039.12 | 39,924,188.04 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | 29,466,613.46 | 24,052,237.44 | 5,764,911.33 | 1,986,632.56 | 61,270,394.79 |
| 5. Closing balance | 8,930,082,463.28 | 1,891,395,024.69 | 3,277,111,850.40 | 105,980,722.81 | 14,204,570,061.18 |
| II. Accumulated depreciation | |||||
| 1. Opening balance | 1,509,685,892.00 | 760,815,155.19 | 1,440,166,642.10 | 65,002,838.65 | 3,775,670,527.94 |
| 2. Increase in the current reporting period | 184,058,550.08 | 149,442,074.34 | 216,133,368.66 | 6,334,976.70 | 555,968,969.78 |
| 1) accrual | 184,058,550.08 | 149,442,074.34 | 216,133,368.66 | 6,334,976.70 | 555,968,969.78 |
| 3. Decrease in the current reporting period | - | 15,847,312.44 | 13,055,245.44 | 2,403,495.45 | 31,306,053.33 |
| 1) disposal or write-off | - | 15,847,312.44 | 13,055,245.44 | 2,403,495.45 | 31,306,053.33 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | 2,774,336.04 | 11,504,342.60 | 3,565,979.76 | 718,113.94 | 18,562,772.34 |
| Items | Building and construction | General-purpose equipment | Special-purpose equipment | Transportation vehicles | Total |
| 5. Closing balance | 1,696,518,778.12 | 905,914,259.69 | 1,646,810,745.08 | 69,652,433.84 | 4,318,896,216.73 |
| III. Total book value | |||||
| Closing balance on book value | 7,233,563,685.16 | 985,480,765.00 | 1,630,301,105.32 | 36,328,288.97 | 9,885,673,844.45 |
| Opening balance on book value | 5,942,429,025.55 | 1,034,883,309.78 | 1,526,269,566.56 | 36,260,728.79 | 8,539,842,630.68 |
15.2 As of June 30, 2023, the Group did not have any significant idle fixed assets.
15.3 As of June 30, 2023, the carrying amount of fixed assets leased by the Group through operating leases is RMB137,654,210.43
15.4 Fixed assets of which certificates of title have not been granted as of June 30, 2023 are as follows:
Unit: RMB
| Item | Carrying amount | Reason for certificates of title not granted |
| Office building for branches | 12,357,672.13 | In the process of obtaining the real estate certificates |
| Hangzhou Innovation Industrial Park | 769,750,794.06 | In the process of obtaining the real estate certificates |
| Total | 782,108,466.19 |
16. Construction in progress
16.1 Details of construction in progress
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Xi'an Science and Technology Park Project | 705,669,450.47 | - | 705,669,450.47 | 510,141,028.55 | - | 510,141,028.55 |
| Wuhan Intelligence Industrial Park | 558,403,968.14 | - | 558,403,968.14 | 362,495,271.16 | - | 362,495,271.16 |
| EZVIZ Smart Home Products Industrial Base Project (Infrastructure Part) | 438,190,505.80 | - | 438,190,505.80 | 282,125,289.92 | - | 282,125,289.92 |
| EZVIZ Intelligent Manufacturing Chongqing Base Project (Infrastructure Part) | 430,577,169.38 | - | 430,577,169.38 | 72,173,018.20 | - | 72,173,018.20 |
| Security Industrial Base (Tonglu) Phase III | 375,876,041.10 | - | 375,876,041.10 | 256,401,113.99 | - | 256,401,113.99 |
| Shijiazhuang Science and Technology Park Project | 330,982,988.46 | - | 330,982,988.46 | 240,987,635.91 | - | 240,987,635.91 |
| Chongqing Science and Technology Park Project Phase III | 140,147,442.65 | - | 140,147,442.65 | 88,837,517.21 | - | 88,837,517.21 |
| Hefei Science and Technology Park Project | 137,581,753.67 | - | 137,581,753.67 | 96,324,257.68 | - | 96,324,257.68 |
| Zhengzhou Science and Technology Park Project | 132,040,277.94 | - | 132,040,277.94 | 93,894,775.99 | - | 93,894,775.99 |
| Nanchang Science and Technology Park Project | 81,425,062.83 | - | 81,425,062.83 | 55,299,275.67 | - | 55,299,275.67 |
| Nanjing Science and Technology Park Project | 78,496,222.18 | - | 78,496,222.18 | 59,330,672.30 | - | 59,330,672.30 |
| Hikvision Global Warehousing Logistics Center (Phase I) | 74,098,726.64 | - | 74,098,726.64 | 21,838,347.13 | - | 21,838,347.13 |
| Infrared Thermal Imaging Complete Machine Products Industrial Base | 62,670,995.69 | - | 62,670,995.69 | 369,535.06 | - | 369,535.06 |
| Chengdu Science and Technology Park Project | - | - | - | 1,424,680,236.64 | - | 1,424,680,236.64 |
| Others | 261,313,783.11 | - | 261,313,783.11 | 205,905,325.39 | - | 205,905,325.39 |
| Total | 3,807,474,388.06 | - | 3,807,474,388.06 | 3,770,803,300.80 | - | 3,770,803,300.80 |
16.2 Changes in significant construction in progress during the current reporting period
Unit: RMB
| Item | Budget (RMB0,000) | Opening balance | Increase in the current reporting period | Transferred to fixed assets during the current reporting period | Effect on conversion of financial statements denominated in foreign currencies | Other Reductions (Note 1) | Closing balance | Amount invested as proportion of budget amount (%) | Construction in Progress (%) | Accumulated capitalized interest and profit/loss on exchange (Note 2) | Including: capitalized interest and profit/loss on exchange for the current reporting period | Capitalization rate for interest in the current reporting period | Source of funds |
| Chengdu Science and Technology Park Project | 144,925.00 | 1,424,680,236.64 | 4,687,853.06 | (1,429,368,089.70) | - | - | - | 98.63% | 100.00% | - | - | - | Self-fund |
| Xi'an Science and Technology Park Project | 170,989.00 | 510,141,028.55 | 195,528,421.92 | - | - | - | 705,669,450.47 | 41.27% | 41.27% | - | - | - | Self-fund |
| Wuhan Intelligence Industrial Park Project | 113,204.00 | 362,495,271.16 | 195,908,696.98 | - | - | - | 558,403,968.14 | 49.33% | 49.33% | - | - | - | Self-fund |
| EZVIZ Smart Home Products Industrial Base Project (Infrastructure Part) | 75,300.00 | 282,125,289.92 | 156,065,215.88 | - | - | - | 438,190,505.80 | 58.19% | 58.19% | 8,254,631.80 | 4,421,395.72 | 3.65% | Self-fund /specific loan/ raised fund |
| EZVIZ Intelligent Manufacturing Chongqing Base Project (Infrastructure Part) | 117,000.00 | 72,173,018.20 | 358,404,151.18 | - | - | - | 430,577,169.38 | 36.80% | 36.80% | - | - | - | Self-fund/ raised fund |
| Security Industrial Base (Tonglu) Phase III | 62,153.00 | 256,401,113.99 | 119,474,927.11 | - | - | - | 375,876,041.10 | 60.48% | 60.48% | - | - | - | Self-fund |
| Shijiazhuang Science and Technology Park Project | 72,345.00 | 240,987,635.91 | 89,995,352.55 | - | - | - | 330,982,988.46 | 45.75% | 45.75% | - | - | - | Self-fund |
| Chongqing Science and Technology Park Project Phase III | 36,855.00 | 88,837,517.21 | 51,309,925.44 | - | - | - | 140,147,442.65 | 38.03% | 38.03% | - | - | - | Self-fund |
| Hefei Science and Technology Park Project | 47,229.00 | 96,324,257.68 | 41,257,495.99 | - | - | - | 137,581,753.67 | 29.13% | 29.13% | - | - | - | Self-fund |
| Zhengzhou Science and Technology Park Project | 38,493.00 | 93,894,775.99 | 38,145,501.95 | - | - | - | 132,040,277.94 | 34.30% | 34.30% | - | - | - | Self-fund |
| Nanchang Science and Technology Park Project | 37,128.00 | 55,299,275.67 | 26,125,787.16 | - | - | - | 81,425,062.83 | 21.93% | 21.93% | - | - | - | Self-fund |
Note 1: Other reductions during the current reporting period were the completed decoration project that transferred to the long-term deferred expenses.
Note 2: This amount is calculated by interest expense for specific foreign currency borrowings, less interest income for unused borrowing fund and profit/loss on exchange rate difference.
As of June 30, 2023, the Group did not have any sign of impairment of projects under construction; therefore, no provision for impairment loss was booked.
17. Right-of-use assets
Unit: RMB
| Items | Houses and Buildings | General Equipment | Special-purpose equipment | Transportation vehicles | Total |
| I. Original carrying amount | |||||
| 1. Opening balance | 861,163,145.37 | 298,882.81 | 91,934,144.20 | 24,869,131.92 | 978,265,304.30 |
| 2. Increased | 139,904,660.02 | - | - | 606,834.39 | 140,511,494.41 |
| (1) New Lease | 135,613,285.45 | - | - | 606,834.39 | 136,220,119.84 |
| (2) Increase in business combinations under non-common control | 4,291,374.57 | - | - | - | 4,291,374.57 |
| 3. Decreased | 57,804,656.70 | - | - | 1,531,702.65 | 59,336,359.35 |
| (1) The lease contract expires or terminates early | 57,804,656.70 | - | - | 1,531,702.65 | 59,336,359.35 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | 18,392,109.21 | 6,113.78 | - | 1,494,426.07 | 19,892,649.06 |
| 5. Ending balance | 961,655,257.90 | 304,996.59 | 91,934,144.20 | 25,438,689.73 | 1,079,333,088.42 |
| II. Accumulated depreciation | |||||
| 1. Opening balance | 309,924,850.37 | 226,559.76 | 82,732,047.46 | 10,903,520.40 | 403,786,977.99 |
Nanjing Scienceand TechnologyPark Project
| Nanjing Science and Technology Park Project | 45,773.00 | 59,330,672.30 | 19,165,549.88 | - | - | - | 78,496,222.18 | 17.15% | 17.15% | - | - | - | Self-fund |
| Hikvision Global Warehousing Logistics Center (Phase I) | 13,013.00 | 21,838,347.13 | 52,260,379.51 | - | - | - | 74,098,726.64 | 56.94% | 56.94% | - | - | - | Self-fund |
| Infrared Thermal Imaging Complete Machine Products Industrial Base | 89,817.00 | 369,535.06 | 62,301,460.63 | - | - | - | 62,670,995.69 | 6.98% | 6.98% | - | - | - | Self-fund |
| Others | 205,905,325.39 | 136,402,354.03 | (66,633,382.39) | 1,723,338.65 | (16,083,852.57) | 261,313,783.11 | - | - | - | - | - | Self-fund | |
| Total | 1,064,224.00 | 3,770,803,300.80 | 1,547,033,073.27 | (1,496,001,472.09) | 1,723,338.65 | (16,083,852.57) | 3,807,474,388.06 | - | - | 8,254,631.80 | 4,421,395.72 |
| Items | Houses and Buildings | General Equipment | Special-purpose equipment | Transportation vehicles | Total |
| 2. Increased | 131,190,708.07 | 40,808.66 | 3,894,603.07 | 3,070,717.25 | 138,196,837.05 |
| (1) Provisions | 131,190,708.07 | 40,808.66 | 3,894,603.07 | 3,070,717.25 | 138,196,837.05 |
| 3. Decreased | 54,434,803.32 | - | - | 1,529,855.99 | 55,964,659.31 |
| (1) The lease contract expires or terminates early | 54,434,803.32 | - | - | 1,529,855.99 | 55,964,659.31 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | 7,091,625.18 | 3,585.60 | - | 714,995.06 | 7,810,205.84 |
| 5. Ending balance | 393,772,380.30 | 270,954.02 | 86,626,650.53 | 13,159,376.72 | 493,829,361.57 |
| III. Total book value | |||||
| 1. Closing balance on book value | 567,882,877.60 | 34,042.57 | 5,307,493.67 | 12,279,313.01 | 585,503,726.85 |
| 2. Opening balance on book value | 551,238,295.00 | 72,323.05 | 9,202,096.74 | 13,965,611.52 | 574,478,326.31 |
Note: The Group leases a number of assets, including houses and buildings, general equipment, special-purpose equipment and transportation vehicles, for lease terms ranging from 1month to 13 years. The above right-of use assets cannot be used for purposes including borrowing, mortgage, and guarantee, etc.
In the current reporting period, the short-term lease and low-value asset lease expenses that the Group included in the current profit and loss with simplified processing wereRMB65,275,536.47 (2022 half year: RMB35,566,397.42).
In the current reporting period, the Group's total cash outflow related to leases was RMB190,387,090.48 (2022 half year: RMB137,599,374.23).
As of June 30, 2023, the short-term lease portfolio committed by the Group is consistent with the short-term lease corresponding to the above lease fees.
18. Intangible assets
18.1 Details of intangible assets
Unit: RMB
| Item | Land use right | Intellectual property right | Application software | Franchise | Total |
| I. Original carrying amount | |||||
| 1. Opening balance | 1,582,307,939.63 | 70,012,763.87 | 397,648,996.73 | 103,241,971.57 | 2,153,211,671.80 |
| 2. Increased | 74,559,348.02 | 565,119.39 | 9,218,634.24 | 4,233,254.63 | 88,576,356.28 |
| Item | Land use right | Intellectual property right | Application software | Franchise | Total |
| (1) Purchase | 74,559,348.02 | 565,119.39 | 5,497,573.24 | 4,233,254.63 | 84,855,295.28 |
| (2) Increase in business combinations under non-common control | - | - | 3,721,061.00 | - | 3,721,061.00 |
| 3. Decreased | - | - | 729,319.68 | - | 729,319.68 |
| (1) Disposal or write-off | - | - | 729,319.68 | - | 729,319.68 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | - | 115,061.61 | 2,487,408.04 | (14,977.25) | 2,587,492.40 |
| 5. Closing balance | 1,656,867,287.65 | 70,692,944.87 | 408,625,719.33 | 107,460,248.95 | 2,243,646,200.80 |
| II. Total accumulated amortization | |||||
| 1.Opening balance | 135,271,377.29 | 68,378,497.22 | 342,499,507.53 | 20,094,724.08 | 566,244,106.12 |
| 2. Increased | 17,312,948.86 | 678,244.89 | 15,261,812.42 | 2,193,196.36 | 35,446,202.53 |
| (1) Accrual | 17,312,948.86 | 678,244.89 | 15,261,812.42 | 2,193,196.36 | 35,446,202.53 |
| 3. Decreased | - | - | 712,385.42 | - | 712,385.42 |
| (1) Disposal or write-off | - | - | 712,385.42 | - | 712,385.42 |
| 4. Effect on conversion of financial statements denominated in foreign currencies | - | 103,784.07 | 2,422,057.27 | (10,592.90) | 2,515,248.44 |
| 5. Closing balance | 152,584,326.15 | 69,160,526.18 | 359,470,991.80 | 22,277,327.54 | 603,493,171.67 |
| III. Impairment provision | |||||
| 1. Opening balance | - | - | - | 42,034,063.49 | 42,034,063.49 |
| 2. Increased | - | - | - | - | - |
| 3. Decreased | - | - | - | - | - |
| 4. Closing balance | - | - | - | 42,034,063.49 | 42,034,063.49 |
| VI. Total book value | |||||
| 1. Closing balance on book value | 1,504,282,961.50 | 1,532,418.69 | 49,154,727.53 | 43,148,857.92 | 1,598,118,965.64 |
| 2. Opening balance on book value | 1,447,036,562.34 | 1,634,266.65 | 55,149,489.20 | 41,113,184.00 | 1,544,933,502.19 |
18.2 At the end of the current reporting period, the intangible asset of the Group that has not completed the title certificate is nil.
19. Goodwill
19.1 Goodwill book value
Unit: RMB
| The name of the investee or the matter that forming a goodwill | Opening balance | Increased | Decreased | Effect on conversion of financial statements denominated in foreign currencies | Closing balance |
| Business combination not involving enterprises under common control | Liquidation & cancellation | ||||
| SISTEMAS Y SERVICIOS DE COMUNICACI?N, S.A. DE C.V. | 79,881,823.62 | - | - | 2,995,883.80 | 82,877,707.42 |
| HuaAn Baoquan Intelligence and its subsidiaries | 61,322,871.63 | - | - | - | 61,322,871.63 |
| Hangzhou Kuangxin Technology Ltd. | 59,060,454.06 | - | - | - | 59,060,454.06 |
| Zhejiang Zhiyuan Fire Safety Engineering Co., Ltd. | 8,199,253.77 | - | - | - | 8,199,253.77 |
| BK EESTI AKTSIASELTS | 4,464,161.60 | - | - | 272,778.62 | 4,736,940.22 |
| SIA "BK Latvia" | 4,457,966.60 | - | - | 273,157.69 | 4,731,124.29 |
| Wuhu Sensortech Intelligent Technology Ltd. and its subsidiaries | - | 177,003,548.46 | - | - | 177,003,548.46 |
| Total | 217,386,531.28 | 177,003,548.46 | - | 3,541,820.11 | 397,931,899.85 |
Note 1: The Group acquired Wuhu Sensortech in February 2023, resulting in a goodwill of RMB177,003,548.46, see Note(VI), 1.
20. Long-term deferred expenses
Unit: RMB
| Invested unit | Opening balance | Increased | Amortized | Other decreased | Difference of foreign currency translation | Closing balance |
| Improvement expenditure for leased fixed asset | 133,193,592.60 | 32,859,440.85 | 32,013,790.75 | - | 1,677,990.13 | 135,717,232.83 |
| Employee housing loan deferred interest | 44,084,149.81 | 14,658,920.50 | 9,662,651.17 | 391,541.70 | - | 48,688,877.44 |
| Total | 177,277,742.41 | 47,518,361.35 | 41,676,441.92 | 391,541.70 | 1,677,990.13 | 184,406,110.27 |
21. Deferred tax assets/deferred tax liabilities
21.1 Deferred tax assets that are not presented on net off basis
Unit: RMB
| Item | Closing balance | Opening balance (Restated) | ||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Provision for impairment losses of assets | 1,248,998,391.30 | 306,340,770.25 | 1,244,117,898.85 | 303,398,701.08 |
| Provision for credit loss | 2,999,015,578.71 | 615,920,114.81 | 2,592,933,147.29 | 539,409,348.22 |
| Payroll payables | 1,301,429,661.25 | 200,924,480.80 | 866,731,426.46 | 135,343,862.92 |
| Share-based payment | 148,354,879.15 | 24,861,519.00 | 102,865,533.19 | 18,154,808.30 |
| Provisions | 136,404,994.03 | 21,675,833.36 | 159,335,457.04 | 26,406,150.70 |
| Accrued unliquidated liabilities | 440,708,488.78 | 104,801,465.49 | 416,294,075.36 | 80,952,178.12 |
| Unrealized profit from inter-group | 2,627,236,308.30 | 390,015,349.71 | 2,407,578,813.30 | 361,136,821.99 |
transactions
| transactions | ||||
| Changes in the fair value of derivative financial instruments | 49,653,855.30 | 12,413,463.83 | 68,299,685.57 | 17,074,921.39 |
| Deferred income | 856,809,234.61 | 102,625,417.20 | 913,846,162.56 | 108,383,170.93 |
| Changes in the fair value of other non-current financial assets | 2,608,839.78 | 391,325.97 | 32,701,261.48 | 4,905,189.22 |
| Depreciation difference of fixed assets and amortization difference of intangible assets | 296,580,298.84 | 16,619,640.03 | 305,795,669.55 | 13,305,393.19 |
| Lease liabilities | 570,156,121.91 | 101,390,691.09 | 575,799,161.83 | 105,171,791.45 |
| Recoverable loss | 287,344,433.30 | 41,295,043.22 | 294,467,968.83 | 39,179,829.21 |
| Total | 10,965,301,085.26 | 1,939,275,114.76 | 9,980,766,261.31 | 1,752,822,166.72 |
21.2 Deferred tax liabilities that are not presented on net off basis
Unit: RMB
| Item | Closing balance | Opening balance (Restated) | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Depreciation difference of fixed assets and amortization difference of intangible assets | 1,654,539,548.85 | 297,026,923.65 | 1,439,877,224.17 | 256,804,768.33 |
| Right-of-use assets | 579,537,837.53 | 102,651,394.94 | 574,478,326.31 | 104,689,191.72 |
| Long term investment – partnership (L.P.) accounted by the equity method | 201,859,360.15 | 30,278,904.02 | 230,000,194.33 | 34,500,029.15 |
| Changes in the fair value of derivative financial instruments | 10,948,728.33 | 2,737,182.09 | 12,807,438.36 | 3,201,859.59 |
| Changes in fair value of other non-current financial assets | 16,666,625.00 | 4,166,656.25 | - | - |
| Total | 2,463,552,099.86 | 436,861,060.95 | 2,257,163,183.17 | 399,195,848.79 |
21.3 Deferred tax assets or deferred tax liabilities that are presented at the net amount after offset
Unit: RMB
| Item | Closing balance | Opening balance (Restated) | ||
| Offset amount at the end of the reporting period | Deferred tax assets or liabilities at the net amount after offset | Offset amount at the beginning of the reporting period | Deferred tax assets or liabilities at the net amount after offset | |
| Deferred tax assets | 315,165,003.36 | 1,624,110,111.40 | 281,855,471.04 | 1,470,966,695.68 |
| Deferred tax liabilities | 315,165,003.36 | 121,696,057.59 | 281,855,471.04 | 117,340,377.75 |
22. Other non-current assets
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Impairment provision | Book value | Carrying amount | Impairment provision | Book value | |
| Contract assets | 2,076,416,569.11 | 13,713,549.97 | 2,062,703,019.14 | 2,229,022,015.47 | 15,524,799.08 | 2,213,497,216.39 |
| Prepayments for real estate | 363,836,643.94 | - | 363,836,643.94 | 363,341,827.45 | - | 363,341,827.45 |
| Prepayments for acquisition of land | 56,305,350.25 | - | 56,305,350.25 | 127,079,348.02 | - | 127,079,348.02 |
| Prepayments for equipment | 81,723,895.56 | - | 81,723,895.56 | 70,134,950.70 | - | 70,134,950.70 |
| Prepayments for infrastructure | 17,638,822.56 | - | 17,638,822.56 | 39,467,612.18 | - | 39,467,612.18 |
| Others | 2,181,057.96 | - | 2,181,057.96 | 2,181,057.96 | - | 2,181,057.96 |
| Total | 2,598,102,339.38 | 13,713,549.97 | 2,584,388,789.41 | 2,831,226,811.78 | 15,524,799.08 | 2,815,702,012.70 |
23. Short-term borrowings
23.1 Categories of short-term borrowings
Unit: RMB
| Item | Closing balance | Opening balance |
| Fiduciary loan | 3,121,684,959.69 | 3,283,605,167.90 |
| Discounted but not expired notes | 29,119,175.40 | 59,466,804.99 |
| Total | 3,150,804,135.09 | 3,343,071,972.89 |
23.2 As of June 30, 2023, the Group did not have any overdue short-term loans that were failed to repay.
24. Held-for-trading financial liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Financial liabilities measured at fair value through current profits and losses | 49,948,979.70 | 68,299,685.57 |
| Including: derivative financial liabilities | 49,948,979.70 | 68,299,685.57 |
| total | 49,948,979.70 | 68,299,685.57 |
25. Notes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Bank acceptance bill | 905,757,774.63 | 1,207,756,963.94 |
| Total | 905,757,774.63 | 1,207,756,963.94 |
As of June 30, 2023, the Group did not have any unpaid matured notes payable.
26. Accounts payable
26.1 List of accounts payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Payments for goods | 13,630,723,366.87 | 15,803,616,247.96 |
| Payables on equipment | 338,712,464.31 | 221,947,555.03 |
| Total | 13,969,435,831.18 | 16,025,563,802.99 |
26.2 As of June 30, 2023, the Group did not have any significant accounts payable with aging above one year.
27. Contract liabilities
27.1 List of contract liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Advanced receipts from sales of products | 2,146,038,997.27 | 2,177,001,350.72 |
| Advanced receipts for construction settlement payment | 350,229,990.35 | 216,246,689.72 |
| Advanced receipts from services | 301,386,262.23 | 276,187,505.46 |
| Subtotal | 2,797,655,249.85 | 2,669,435,545.90 |
| Less: contract liabilities included in other non-current liabilities (Note (V),38) | 27,489,819.23 | 24,939,037.54 |
| Total | 2,770,165,430.62 | 2,644,496,508.36 |
27.2 Qualitative and quantitative analysis on the above contract liabilities:
Advanced receipts for product sales include prepayments for goods by customers and sales rebates provided to distributors.Product sales revenue of the Group is recognized when the control of such product is transferred to the customers. Duringthe transaction, prepayments for goods by customers are recognized as a contract liability till the goods are shipped ordelivered to the customers. Sales rebates to distributors of the Group may be accumulated when they purchase productsfrom the Group, and are deductible for payments for goods to be purchased in the future. Such sales rebates enabledistributors to enjoy discounts in their future purchase of goods, which are not available to the same type of customers.Therefore, the commitment to offer such discounts to distributors on their future purchase prices is a separate performanceobligation. Such commitment is recognized as a contract liability based on the transaction price allocated on the basis ofthe fair value of rebates when the sales transaction takes place, and is recognized as revenue when distributors use thesales rebates for deduction of purchase prices.
The Group provides construction works and maintenance services based on the construction works and maintenanceservice contracts with customers, and recognizes revenue based on the performance progress during the term of thecontracts. The Group's customers make milestone payments for the construction works and maintenance services of theGroup as provided in the contracts. For the portion where the Group has obtained an unconditional right to the payment,it will be recognized as accounts receivable, while the remaining portion will be recognized as contract assets; where thecontract price received or receivable by the Group exceeds the performance obligation completed to date, the excessportion will be recognized as contract liabilities. The Group presents contract assets and contract liabilities under the samecontract on a net basis.
The Group provides cloud services including storage service, video service, and telephone service to its customers. Suchservices are performance obligations to be satisfied during a period of time, and revenue is recognized based on theperformance progress over the period in which such services are rendered. As customers have prepaid for cloud services
at the time of purchase, at the time of transaction, the Group recognizes as a contract liability for the payments that wouldbe received for cloud services, and recognizes revenue based on the performance progress over the period in which suchservices are rendered.
28. Payroll payable
28.1 Details of payroll payable
Unit: RMB
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1. Short-term remuneration | 4,709,892,590.60 | 8,107,664,493.77 | 9,218,467,567.37 | 3,599,089,517.00 |
| 2. Termination benefits – defined contribution scheme | 127,409,865.35 | 585,687,748.90 | 632,873,862.18 | 80,223,752.07 |
| Total | 4,837,302,455.95 | 8,693,352,242.67 | 9,851,341,429.55 | 3,679,313,269.07 |
28.2 List of short-term remuneration
Unit: RMB
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1. Wages or salaries, bonuses, allowances and subsidies | 4,364,544,911.02 | 7,129,864,853.58 | 8,279,583,333.80 | 3,214,826,430.80 |
| 2. Staff welfare | - | 149,302,556.06 | 149,143,769.82 | 158,786.24 |
| 3. Social insurance contributions | 67,666,467.66 | 311,665,173.78 | 341,787,906.43 | 37,543,735.01 |
| Including: Medical insurance | 64,600,517.79 | 297,168,493.08 | 325,920,370.71 | 35,848,640.16 |
| Injury insurance | 2,577,031.70 | 11,547,395.34 | 12,568,359.45 | 1,556,067.59 |
| Maternity insurance | 488,918.17 | 2,949,285.36 | 3,299,176.27 | 139,027.26 |
| 4. Housing funds | 3,892,614.17 | 390,093,649.17 | 393,986,263.34 | - |
| 5. Labor union and education fund | 273,788,597.75 | 126,738,261.18 | 53,966,293.98 | 346,560,564.95 |
| Subtotal | 4,709,892,590.60 | 8,107,664,493.77 | 9,218,467,567.37 | 3,599,089,517.00 |
28.3 Defined contribution plan
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| 1. Basic pension insurance | 125,140,923.68 | 565,893,572.53 | 611,475,544.74 | 79,558,951.47 |
| 2. Unemployment insurance | 2,268,941.67 | 19,794,176.37 | 21,398,317.44 | 664,800.60 |
| Subtotal | 127,409,865.35 | 585,687,748.90 | 632,873,862.18 | 80,223,752.07 |
Note: The Group participates in pension insurance and unemployment insurance plans established by government agenciesin accordance with regulations. According to these plans, the Group pays monthly fees to these plans in proportion to thepayment base. The Group has no other material obligation for the payment of pension benefits beyond the contributionsdescribed above, and corresponding expenses were booked into current profits and losses or corresponding assets.
29. Taxes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Enterprise income tax | 667,539,511.57 | 648,624,680.00 |
| Value-added tax | 598,680,177.80 | 380,413,435.90 |
| City construction and maintenance tax | 31,367,873.34 | 29,362,098.03 |
| Education surcharges | 14,465,999.70 | 13,048,855.45 |
| Local education surcharges | 9,956,544.21 | 9,328,597.02 |
| Others | 102,959,806.00 | 153,254,471.97 |
| Total | 1,424,969,912.62 | 1,234,032,138.37 |
30. Other payables
30.1 By categories
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividend payable | 412,151,566.73 | 300,150,894.34 |
| Other payables | 2,736,356,011.25 | 2,903,157,791.97 |
| Total | 3,148,507,577.98 | 3,203,308,686.31 |
30.2 Dividends payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividends of incentive restricted shares | 279,172,042.60 | 187,657,918.50 |
| Dividends payable to minority shareholders | 132,979,524.13 | 112,492,975.84 |
| Total | 412,151,566.73 | 300,150,894.34 |
30.3 Other payables
30.3.1 List of other payables according to the nature of the payment
Unit: RMB
| Item | Closing balance | Opening balance |
| Unexpired commercial acceptance bills that were endorsed (Note (V)-3) | 1,015,747,479.47 | 1,182,413,217.20 |
| Accrued expenses | 815,591,307.32 | 988,937,734.54 |
| Guarantee and deposit fees | 459,739,291.14 | 401,628,843.74 |
| Collection and payment on behalf | 293,066,890.37 | 236,839,241.37 |
| Other expense payable | 152,211,042.95 | 93,338,755.12 |
| Total | 2,736,356,011.25 | 2,903,157,791.97 |
30.3.2 As of June 30, 2023, the Group did not have any significant other payables aging over one year.
31. Non-current liabilities due within one year
Unit：RMB
| Item | Closing balance | Opening balance |
| Long-term borrowings due within one year (Note (V) 33) | 1,863,536,560.83 | 562,906,197.43 |
| Lease liabilities due within one year (Note (V), 34) | 282,664,695.56 | 303,328,658.06 |
| Long-term payables due within one year (Note (V) 35) | 2,154,486.39 | 1,962,416.97 |
| Total | 2,148,355,742.78 | 868,197,272.46 |
32. Other current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Repurchase obligation of restricted shares | 1,537,841,964.86 | 465,979,374.84 |
| Output VAT to be transferred | 430,739,944.22 | 457,742,218.94 |
| Total | 1,968,581,909.08 | 923,721,593.78 |
33. Long-term borrowings
Unit: RMB
| Item | Closing balance | Opening balance |
| Pledged loan (Note 1) | 1,312,168,859.17 | 1,363,216,974.37 |
| Mortgage loan (Note 2) | 281,412,830.03 | 229,070,200.25 |
| Fiduciary loan (Note 3) | 9,926,024,066.21 | 6,315,934,364.41 |
| Other borrowing (Note 4) | 42,000,000.00 | 177,000,000.00 |
| Less：Long-term loans due within one year (Note (V) 31) | 1,863,536,560.83 | 562,906,197.43 |
| Total | 9,698,069,194.58 | 7,522,315,341.60 |
Note 1: As of June 30, 2023, the pledged loan was obtained by the Group with all the rights and benefits under related PPPprojects pledged. The maturity date interval is from June 20, 2028 to March 26, 2040, and the annual interest rate of theabove loans is floating interest rate, which ranges from 3.895% to 4.195%.
Note 2: As of June 30, 2023, the mortgage loan was obtained by the Group with the use right of land as the mortgage. Thematurity date is on August, 13, 2026 with the annual interest rate of 1-year LPR rate, which is adjusted each 12 months.
Note 3: At the end of the reporting period, the maturity period of credit loan is from September 27, 2023 to December 1,2027, and the annual interest rate ranges from 0.8% to 3.85%
Note 4: During 2016, the Group and CDB Development Fund Ltd. (CDBDF) jointly inject capital into HikvisionElectronics Co., Ltd. ("Hangzhou Electronics"), a subsidiary of the Group. Pursuant to the capital injection agreement,CDBDF would not participate in senior management personnel such as directors, and it would either take part in decision-making or make significant influence on Hangzhou Electronics. The Group shall pay a 1.2% annualized return to CDBDFthrough dividends or interest payments, and the Group is required to redeem the CDBDF's equity investment in the currentreporting period by installments each year from 2021 to 2024. Therefore, the capital injection by CDBDF is treated as along-term loan. The Group paid RMB135,000,000.00 to redeem the 20.23% equity interest in Hangzhou ElectronicsCompany held by CDBDF in the current period. As of June 30, 2023, the balance of the loan is 42 million (December 31,2022: RMB177 million).
34. Lease liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Lease liabilities | 582,884,092.95 | 580,584,582.89 |
| Less: Lease liabilities due within one year (Note (V), 31) | 282,664,695.56 | 303,328,658.06 |
| Total | 300,219,397.39 | 277,255,924.83 |
35. Long-term payables
Unit: RMB
| Item | Closing balance | Opening balance |
| Purchase goods in installments | 8,060,753.47 | 9,532,351.64 |
| Less: Long-term payables due within one year (Note (V), 31) | 2,154,486.39 | 1,962,416.97 |
| Total | 5,906,267.08 | 7,569,934.67 |
36. Provisions
Unit: RMB
| Item | Closing balance | Opening balance |
| Product quality warranty | 204,944,862.47 | 205,095,341.94 |
| Return payment payable | 16,471,649.07 | 14,269,885.68 |
| Total | 221,416,511.54 | 219,365,227.62 |
37. Deferred income
Unit: RMB
| Item | Opening balance | Increase in current reporting period | Decrease in current reporting period | Closing balance | Details |
| Government Subsidies | 933,260,426.12 | 90,679,392.75 | 119,525,114.24 | 904,414,704.63 | Note |
| Total | 933,260,426.12 | 90,679,392.75 | 119,525,114.24 | 904,414,704.63 |
As of June 30, 2023, the projects involving government subsidies were as follows:
Unit: RMB
| Liability Items | Opening balance | Increase in current reporting period | Amounts booked into other income during the current reporting period | Other changes | Closing balance | Related to assets/related to incomes |
| Chongqing Manufacture Park construction | 38,298,809.18 | - | 1,209,436.08 | - | 37,089,373.10 | Related to assets |
| Other special subsidies | 621,290,248.87 | 36,737,592.75 | 32,087,457.97 | - | 625,940,383.65 | Related to assets |
| Other special subsidies | 273,671,368.07 | 53,941,800.00 | 86,228,220.19 | - | 241,384,947.88 | Related to incomes |
| Subtotal | 933,260,426.12 | 90,679,392.75 | 119,525,114.24 | - | 904,414,704.63 |
Note: Refer to government subsidies received by the Group for projects such as Chongqing Manufacture Park constructionand other special projects; actual expenses occurred in the current reporting period for other special subsidies related toincomes were recognized in other income; and relevant assets for Chongqing Manufacture Park construction and otherspecial subsidies related to assets were amortized averagely in other income within the assets' useful lives.
38. Other non-current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Repurchase obligation for restricted stocks | 1,642,792,335.93 | 2,806,169,050.05 |
| Contract liabilities (Note (V), 27) | 27,489,819.23 | 24,939,037.54 |
| Total | 1,670,282,155.16 | 2,831,108,087.59 |
39. Share capital
Unit: RMB
| Opening balance | Changes for the current reporting period | Closing balance | |||||
| New issue of shares | Bonus issue | Transfer from Capital Reserve | Others (Note) | Subtotal | |||
| 2023.06.30 | |||||||
| Total shares | 9,430,920,624.00 | - | - | - | (66,987,835.00) | (66,987,835.00) | 9,363,932,789.00 |
Note: Pursuant to the resolutions of the 13
th
meeting of the 5
thsession of the Board of Directors of the Company on 15September 2022 and the 2022 second extraordinary general meeting of the Company on October 10, 2022, from October11, 2022 to December 30, 2022, the Company accumulatively repurchased 66,987,835 outstanding shares of the Companythrough the special securities account for share repurchase by means of centralized competitive bidding transaction. Thecapital stock is reduced by RMB66,987,835.00, and the capital reserve is reduced by RMB1,976,897,390.35. TheCompany completed deregistration on January 13, 2023.
40. Capital reserves
Unit: RMB
| Item | Opening balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (Note 2) | Closing balance |
| 2023.06.30 | ||||
| Share premium | 9,289,814,942.29 | 34,559,200.83 | 2,003,803,854.97 | 7,320,570,288.15 |
| Other capital reserves | 851,338,493.03 | 361,628,328.30 | - | 1,212,966,821.33 |
| Total | 10,141,153,435.32 | 396,187,529.13 | 2,003,803,854.97 | 8,533,537,109.48 |
Note 1: The increase in share premium of RMB6,300,234.68 in the current period is due to the transfer of the asset portfolioof the business department of the Company to its subsidiary, Hangzhou Micro Sensing; RMB28,258,966.15 is formed bythe Company increasing the capital of its subsidiary Shijiazhuang Sensortech Intelligent Technology Co., Ltd.("Shijiazhuang Sensortech") at the price of 60.00% equity of Hangzhou Hikauto Technology Co., Ltd. ("AutomotiveTechnology"), a subsidiary of Wuhu Sensortech, and 44.40% of the equity of Wuhu Sensortech. Upon completion of thecapital increase, the Company's direct shareholding in Shijiazhuang Sensortech was diluted from 100% to 56.0969%, theCompany's direct shareholding in HikAuto was changed from 60.00% to 56.0969%, and the Company's directshareholding in Wuhu Sensortech was changed from 44.40% to 56.0969%, please refer to Note (VII), 2.
The increase in other capital reserves in the current reporting period of RMB358,140,248.45 is due to the equity-settledshare-based payment included in the capital reserve, please refer to Note (XI); RMB3,488,079.85 was due to changes inother equity of the investee in the long-term equity investment.
Note 2: The decrease in share premium of RMB1,976,897,390.35 in the current reporting period is due to the repurchaseand cancellation of 66,987,835 outstanding shares by the Company, please refer to Note (V).39 for details;RMB9,113,049.02 is the part of the equity-settled share-based payment shared by minority shareholders.RMB17,793,415.60 is the difference between the consideration paid for the acquisition of a 20.00% minority interest in
Hangzhou Kuangxin Technology Co., Ltd. ("Kuangxin Technology"), a subsidiary of the Company, and the share of netassets payable on a scale of the new shareholding, please refer to Note (VII). 2 for details.
41. Treasury shares
Unit: RMB
| Item | Opening balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (Note 2) | Closing balance |
| 2023.06.30 | ||||
| Restricted shares incentive scheme | 3,272,148,424.89 | - | 91,514,124.10 | 3,180,634,300.79 |
| Outstanding shares | 2,043,885,225.35 | - | 2,043,885,225.35 | - |
| Total | 5,316,033,650.24 | - | 2,135,399,349.45 | 3,180,634,300.79 |
Note 1: During the current reporting period, due to the company repurchased and cancelled 66,987,835 outstanding shares,reduced treasury shares by RMB2,043,885,225.35, please refer to Note(V).39; Due to the Company's provision ofrestricted stock cash dividends, treasury shares were reduced by RMB91,514,124.10.
42. Other comprehensive income
Unit: RMB
| Item | Opening balance | Amounts occurred in the current reporting period | Closing balance | ||||
| The before-income-tax amount incurred during the current reporting period | Less: transfer to current period P/L from previous other comprehensive income | Less: income tax expense | Attributable to owner of the parent company (after tax) | Attributable to minority shareholders (after tax) | |||
| 2023.06.30 | |||||||
| Other incomes that may be reclassified subsequently to profit or loss | (42,587,158.81) | 209,956,944.59 | - | - | 99,752,243.47 | 110,204,701.12 | 57,165,084.66 |
| Included: Effect on conversion of financial statements denominated in foreign currencies | (42,587,158.81) | 209,956,944.59 | - | - | 99,752,243.47 | 110,204,701.12 | 57,165,084.66 |
| Other comprehensive income | (42,587,158.81) | 209,956,944.59 | - | - | 99,752,243.47 | 110,204,701.12 | 57,165,084.66 |
43. Surplus reserves
Unit: RMB
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 2023.06.30 | ||||
| Statutory surplus reserves (Note) | 4,715,460,312.00 | - | - | 4,715,460,312.00 |
| Total | 4,715,460,312.00 | - | - | 4,715,460,312.00 |
Note: According to the Company Law of the People's Republic of China and the Company's Articles of Association, theCompany shall withdraw the statutory surplus reserve fund at 10% of the annual net profit, and when the accumulated
amount of the statutory surplus reserve fund reaches more than 50% of the registered capital, it may not be withdrew. Asof June 30, 2023, the accumulated amount of the Company's statutory surplus reserve reached 50% of the Company'sshare capital, so no subsequent statutory surplus reserve will be accrued in the current reporting period.
The statutory surplus reserve can be used to make up for losses or increase the share capital after approval.
44. Retained earnings
Unit: RMB
| Item | First half year of 2023 | First half year of 2022 (Restated) |
| Retained Earnings at the close of the prior reporting period before adjustment | 49,460,240,986.49 | 45,148,877,451.52 |
| Add: Impact of changes in accounting policies | (483,408.98) | (942,347.44) |
| Undistributed profit at beginning of period after adjustment | 49,459,757,577.51 | 45,147,935,104.08 |
| Add: Net profit attributable to the parent company for the current reporting period | 5,337,868,016.88 | 5,758,668,046.56 |
| Less: Withdrawal of statutory surplus reserve | - | - |
| Dividends payable on common shares (Note) | 6,554,752,952.30 | 8,489,887,847.10 |
| Retained earnings at the end of the current reporting period | 48,242,872,642.09 | 42,416,715,303.54 |
Note：According to the resolution of 2022 Annual General Meeting held on May 10, 2023, based upon the total capitalshare of the Company on the equity distribution date, for each 10 common shares, the Company distributed cashdividends of RMB7 (tax inclusive), the rest of retained earnings were all carried forward for future distributions.
45. Revenue/operating costs
45.1 Revenue and operating cost
Unit: RMB
| Item | First half year of 2023 | First half year of 2022 | ||
| Revenue | Cost | Revenue | Cost | |
| Major business | 37,300,729,580.38 | 20,483,188,439.76 | 36,969,461,995.42 | 20,997,985,934.97 |
| Other business | 270,056,817.51 | 111,335,074.34 | 288,054,595.20 | 184,969,765.96 |
| Total | 37,570,786,397.89 | 20,594,523,514.10 | 37,257,516,590.62 | 21,182,955,700.93 |
45.2 Revenue (By product or business type)
| Item | First half year of 2023 | First half year of 2022 |
| Products and services for main business (Note) | 28,634,288,679.38 | 29,365,919,626.68 |
| Constructions of main business | 748,219,037.49 | 883,860,678.27 |
| Innovative businesses | 8,188,278,681.02 | 7,007,736,285.67 |
| Including: Robotic business | 2,278,447,297.18 | 1,766,179,532.22 |
| Smart home business | 2,183,062,932.81 | 1,959,836,601.63 |
| Thermal imaging business | 1,475,222,288.91 | 1,360,474,051.98 |
| Auto electronics business | 1,001,472,278.41 | 823,757,230.56 |
| Storage business | 792,630,227.93 | 728,160,403.93 |
| Other innovative businesses | 457,443,655.78 | 369,328,465.35 |
| Total | 37,570,786,397.89 | 37,257,516,590.62 |
Note: Main business refers to the business parts other than the innovative businesses.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
45.3 Major business (by business type)
Unit: RMB
| Item | First half year of 2023 | |
| Revenue | Cost | |
| Product sales | 35,716,798,726.12 | 19,651,761,673.32 |
| Construction contract | 748,219,037.49 | 565,835,111.46 |
| Provide services | 835,711,816.77 | 265,591,654.98 |
| Total | 37,300,729,580.38 | 20,483,188,439.76 |
45.4 Major business (by the time of revenue recognition)
Unit: RMB
| Item | First half year of 2023 | |
| Revenue | Cost | |
| Recognized at a point in time | 35,716,798,726.12 | 19,651,761,673.32 |
| Recognized over time | 1,583,930,854.26 | 831,426,766.44 |
| Total | 37,300,729,580.38 | 20,483,188,439.76 |
Descriptions of performance obligations:
The Group sells video surveillance and other main business products, smart home products, robotic products, thermalimaging products, auto electronics products, storage products and other innovative businesses' products and relatedservices. For sales of goods to customers, the Group recognizes revenue when the control of the goods is transferred, i.e.when the goods are delivered to the location designated by other party, or delivered to the carrier designated by other party,or delivered to the other party for acceptance. Since the delivery of the goods to the customer represents the right tounconditionally receive the contract consideration, and the maturity of the payment only depends on the passage of time,the Group recognizes a receivable when the goods are delivered to the customer. When the customer prepays for the goods,the Group recognizes the transaction amount received as a contract liability, and recognizes revenue until the goods aredelivered to the customer.
For projects constructed for customers, since the customers could control the assets under construction during theperformance of the Group, the Group recognizes revenue according to the performance progress by treating them as theobligations within certain period, except that the performance progress cannot be reasonably determined. The Groupapplies the output method to determine the performance progress, which is based on the value to the customers of thegoods or services that have been transferred to them. Where the performance progress cannot be reasonably determined,and the costs incurred by the Group are expected to be compensated, the revenue shall be recognized according to theamount of the costs already incurred until the performance progress can be reasonably determined. The customers of theGroup pay the Group for the construction works by milestone payments in accordance with the contract. For the portionwhere the Group has obtained an unconditional right to the payment, it will be recognized as accounts receivable, whilethe remaining portion will be recognized as contract assets; where the contract price received or receivable by the Groupexceeds the performance obligation completed to date, the excess portion will be recognized as contract liabilities. TheGroup presents contract assets and contract liabilities under the same contract on a net basis.
The Group provides customers with operation and maintenance services. Since customers obtain and consume theeconomic benefits generated by the performance of the Group at the same time when the Group performs its obligations,the Group recognizes revenue according to the performance progress by treating them as the obligations within certainperiod.
The customers of the Group pay the Group for the maintenance services by milestone payments in accordance with thecontract. For the portion where the Group has obtained an unconditional right to the payment, it will be recognized asaccounts receivable, while the remaining portion will be recognized as contract assets; where the contract price receivedor receivable by the Group exceeds the performance obligation completed to date, the excess portion will be recognizedas contract liabilities. The Group presents contract assets and contract liabilities under the same contract on a net basis.
According to the project contract, the Group provides both project asset construction services and post-constructionoperation services and maintenance services. The Group identifies construction services, operation services andmaintenance services as individual performance obligations, and allocates the transaction price to each performanceobligation based on the relative proportion of the stand-alone selling price of each performance obligation.
The Group provides cloud services including storage service, video service, and telephone service to its customers. Suchservices are performance obligations to be satisfied during a period of time, and revenue is recognized based on theperformance progress over the period in which such services are rendered. As customers have prepaid for cloud servicesat the time of purchase, the Group recognizes the payments for cloud services received at the time of transaction as acontract liability, and recognizes revenue based on the performance progress over the period in which such services arerendered.
Sales rebates to distributors of the Group may be accumulated when they purchase products from the Group, and aredeductible for payments for goods to be purchased in the future. Such sales rebates enable distributors to enjoy discountsin their future purchase of goods, which are not available to the same type of customers. Therefore, the commitment tooffer such discounts to distributors on their future purchase prices is a separate performance obligation. Such commitmentis recognized as a contract liability based on the transaction price allocated on the basis of the fair value of rebates whenthe sales transaction takes place, and is recognized as revenue when distributors use the sales rebates for deduction ofpurchase prices.
The Group provides quality assurance for the sold video surveillance products, smart home products, robotic products andother products and related accessories, as well as the assets constructed. The quality assurance related to the products soldby the Group cannot be purchased separately, and is a guarantee to customers that the products sold meet the establishedstandards, therefore, the Group conducts accounting treatment in accordance with the Accounting Standards for BusinessEnterprises No. 13 - Contingencies, please refer to Note (III), 24 and Note (V), 36 for details.
46. Business Taxes and Surcharges
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| City construction and maintenance tax | 156,223,720.16 | 115,474,391.40 |
| Education surcharges | 67,679,309.37 | 50,676,365.58 |
| Local education surcharges | 45,119,539.57 | 33,784,436.59 |
| Real estate tax | 40,573,777.76 | 28,463,726.55 |
| Stamp duty | 35,735,215.66 | 27,070,763.30 |
| Tax on use of land | 4,058,891.61 | 3,565,327.53 |
| Vehicle and vessel tax | 90,406.44 | 86,691.53 |
| Others | 1,057,179.39 | 548,574.53 |
| Total | 350,538,039.96 | 259,670,277.01 |
47. Financial Expenses
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| Interest expenses | 189,625,292.12 | 132,611,236.17 |
| Interest expense on lease liabilities | 9,297,983.31 | 10,337,503.94 |
| Less: Interest income | 493,992,701.34 | 452,305,967.35 |
| Foreign exchange gains | (285,146,313.96) | (499,135,620.25) |
| Less: Capitalized specific loan interests and foreign exchange differences on specific loan | 4,421,395.72 | (5,122,147.93) |
| Others | 17,263,885.78 | 17,905,441.95 |
| Total | (567,373,249.81) | (785,465,257.61) |
48. Other income
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| VAT refund | 782,559,408.82 | 828,593,505.82 |
| Special subsidies | 228,252,374.13 | 144,644,000.16 |
| Tax relief | 16,499,949.35 | 17,399,591.10 |
| Value-added tax reduction | 1,424,205.32 | 2,634,527.39 |
| Total | 1,028,735,937.62 | 993,271,624.47 |
49. Investment income
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| Long-term equity investment income (losses) based on equity method | (42,240,571.07) | 46,152,616.54 |
| Investment income (losses) from disposal of held-for-trading financial assets | (63,426,476.78) | 82,624,092.42 |
| Investment income from other non-current financial assets during the holding period | - | 51,892,209.92 |
| Investment income from disposal of subsidiaries and other business units | - | 3,375,870.42 |
| Investment income from disposal of other non-current financial assets | - | 1,260,000.00 |
| The profit of business combination under different control realized in stages by multiple transactions | 116,433,610.45 | - |
| Total | 10,766,562.60 | 185,304,789.30 |
50. Gains (Losses) from changes in fair values
Unit: RMB
| Sources of gains (losses) from changes in fair values | First half year of 2023 | First half year of 2022 |
| Held-for-trading financial assets | (1,858,710.03) | 13,688,362.53 |
| Including: gains and losses on the changes in fair value of derivative financial instruments | (1,858,710.03) | 13,688,362.53 |
| Gains (losses) from changes in fair value of other non-current financial assets | 30,092,421.70 | (26,448,715.78) |
| Held-for-trading financial liabilities | 18,355,299.29 | (105,701,739.57) |
| Including: gains (losses) on the changes in fair value of derivative financial instruments | 18,355,299.29 | (105,701,739.57) |
| Total | 46,589,010.96 | (118,462,092.82) |
51. Credit impairment loss
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| Credit impairment losses of accounts receivable | (382,111,246.61) | (348,840,630.65) |
| Credit impairment losses of notes receivable | (1,904,367.67) | - |
| Credit impairment (losses) of other receivables | (1,917,720.26) | (3,564,338.48) |
| Credit impairment losses of long-term receivables | (49,801,816.99) | (20,269,964.91) |
| Total | (435,735,151.53) | (372,674,934.04) |
52. Impairment losses of assets
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| Losses on inventory devaluation | (199,797,440.25) | (125,852,762.39) |
| Contract assets impairment reverses | 4,241,443.17 | 51,211.49 |
| Total | (195,555,997.08) | (125,801,550.90) |
53. Non-operating income
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 | The amount booked into current period non-recurring profits and looses |
| Fines and confiscations | 51,204,267.88 | 22,811,897.19 | 51,204,267.88 |
| Special subsidies | 352,034.41 | 413,760.04 | 352,034.41 |
| Others | 6,986,614.67 | 12,929,913.72 | 6,986,614.67 |
| Total | 58,542,916.96 | 36,155,570.95 | 58,542,916.96 |
54. Non-operating expenses
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 | The amount booked into current period non-recurring profits and looses |
| Local water conservancy construction fund | 1,410,890.77 | 1,286,929.67 | 1,410,890.77 |
| Others | 8,223,676.69 | 7,961,149.88 | 8,223,676.69 |
| Total | 9,634,567.46 | 9,248,079.55 | 9,634,567.46 |
55. Income tax expenses
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 (Restated) |
| Income tax for the current reporting period | 1,030,881,689.99 | 1,148,346,797.29 |
| Deferred income tax expenses | (143,004,387.17) | (159,534,539.63) |
| Differences in filing and payment of income tax in previous reporting years | (397,663,010.56) | (359,818,391.72) |
| Total | 490,214,292.26 | 628,993,865.94 |
56. Notes to consolidated cash flow statement items
56.1 Other cash receipts relating to operating activities
Unit: RMB
| Items | First half year of 2023 | First half year of 2022 |
| Interest income | 433,297,201.84 | 389,350,124.38 |
| Government subsidies | 170,623,695.43 | 183,059,552.14 |
| Others | 389,510,196.21 | 424,493,141.94 |
| Total | 993,431,093.48 | 996,902,818.46 |
56.2 Other cash payments relating to operating activities
Unit: RMB
| Item | First half year of 2023 | First half year of 2022 |
| Office expenses and business expenses | 797,192,324.36 | 590,969,162.07 |
| R&D expenses | 659,721,480.90 | 711,626,778.29 |
| Advertising and Selling services | 606,833,876.02 | 677,292,677.34 |
| Travelling expenses | 339,884,727.61 | 199,375,690.87 |
| Shipping and transportation expenses | 226,255,040.46 | 200,108,194.48 |
| Rental expenses | 58,070,114.51 | 31,344,787.80 |
Item
| Item | First half year of 2023 | First half year of 2022 |
| Others | 146,127,510.15 | 402,694,197.00 |
| Total | 2,834,085,074.01 | 2,813,411,487.85 |
56.3 Other cash receipts relating to investing activities
Unit: RMB
| Item | First half year of 2023 | First half year of 2022 |
| Receipts of financing lease payments | 29,888,320.03 | 21,941,152.14 |
| Cash received from acquisition of subsidiaries | - | 182,816.96 |
| Total | 29,888,320.03 | 22,123,969.10 |
56.4 Other cash payments relating to financing activities
Unit: RMB
| Item | First half year of 2023 | First half year of 2022 |
| Repurchase of restricted shares | 613,496,083.59 | - |
| Repayment of lease liabilities | 125,111,554.01 | 106,254,586.43 |
| Consideration paid for acquisition of minority interests | 50,400,000.00 | - |
| Total | 789,007,637.60 | 106,254,586.43 |
57. Supplementary information about cash flow statement
57.1 Supplementary information about cash flow statement
Unit: RMB
| Supplementary information | First half year of 2023 | First half year of 2022 |
| 1. Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 5,756,423,810.24 | 6,137,606,030.13 |
| Add: Impairment of assets | 195,555,997.08 | 125,801,550.90 |
| Provision for credit losses | 435,735,151.53 | 372,674,934.04 |
| Fixed assets depreciation | 555,968,969.78 | 483,474,642.69 |
| Amortization of intangible assets | 35,446,202.53 | 38,851,810.72 |
| Right-of-use assets depreciation | 138,196,837.05 | 116,600,040.59 |
| Long-term deferred expenses amortization | 41,676,441.92 | 50,684,862.57 |
| Losses on disposal of fixed assets, intangible assets and other long-term assets | 2,699,436.97 | 10,638,858.24 |
| Obsolescence losses of fixed assets, intangible assets and other long-term assets | 527,310.75 | 674,414.12 |
| Losses (gains) from changes in fair value | (46,589,010.96) | 118,462,092.82 |
| Financial expenses | 109,325,790.05 | (11,336,256.06) |
| Investment income | (10,766,562.60) | (185,304,789.30) |
| Share-based payment based on equity settlement | 373,528,563.06 | 539,601,648.97 |
| Decrease (increase) of restricted funds | 53,835,939.99 | (149,925,859.57) |
| Increase in deferred income tax assets | (153,758,959.24) | (143,545,250.53) |
| Increase (decrease) in deferred income tax liabilities | 1,208,557.08 | (17,314,320.14) |
| Increase in inventories | (541,945,868.02) | (2,769,881,190.63) |
| Increase in operating receivables | (2,393,337,294.55) | (3,327,600,966.39) |
Supplementary information
| Supplementary information | First half year of 2023 | First half year of 2022 |
| Decrease in operating payables | (3,469,359,736.75) | (3,586,743,181.54) |
| Increase (decrease) in deferred income | (57,980,713.11) | 38,088,719.29 |
| Net cash flows from operating activities | 1,026,390,862.80 | (2,158,492,209.08) |
| 2. Significant investing and financing activities not involving cash receipts and payments: | ||
| 3. Net changes in cash and cash equivalents: | ||
| Closing balance of cash | 34,522,597,187.13 | 27,758,901,192.63 |
| Less: Opening balance of cash | 39,815,390,514.57 | 34,603,944,429.20 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net decrease in cash and cash equivalents | (5,292,793,327.44) | (6,845,043,236.57) |
57.2 Net cash paid to acquire subsidiaries in the current period
Unit: RMB
| Amount | |
| Cash or cash equivalents paid in the current period for business combination | 56,297,070.00 |
| Including: Sensortech | 56,297,070.00 |
| Less: Cash and cash equivalents held by the Company on the date of purchase | 12,304,418.18 |
| Including: Sensortech | 12,304,418.18 |
| Net cash paid to acquire the subsidiary | 43,992,651.82 |
57.3 Constituents of cash and cash equivalents
Unit: RMB
| Item | Closing balance | Opening balance |
| Cash | 34,522,597,187.13 | 39,815,390,514.57 |
| Including: Cash on hand | 803,673.29 | 1,210,065.16 |
| Bank deposit for payment at any time | 34,499,217,290.47 | 39,607,767,094.21 |
| Other monetary capital for payment at any time | 22,576,223.37 | 206,413,355.20 |
| Cash equivalents | - | - |
| Closing balance of cash and cash equivalents | 34,522,597,187.13 | 39,815,390,514.57 |
Among the total balance of RMB170,234,189.10 of the other cash and bank balances at the end of the reporting period(December 31, 2022: RMB402,886,840.57), RMB147,657,965.73 are various guarantee deposits and other restrictedfunds, etc. (December 31, 2022: RMB196,473,485.37), not cash and cash equivalents.
58. Assets with restriction in ownership or use rights
Unit: RMB
| Item | Book value at the end of the current reporting period | Cause of restriction |
| Cash and bank balances | 147,657,965.73 | Various guarantee deposits and other restricted funds |
| Notes receivable | 1,044,866,654.87 | Endorsed to suppliers, Discounted to bank |
| Accounts receivable | 335,127,298.72 | Pledged for long-term borrowings |
| Contract assets | 235,324,648.36 | Pledged for long-term borrowings |
| Fixed assets | 137,654,210.43 | Fixed assets leased out under operating leases |
| Intangible assets | 38,344,908.58 | Pledged and mortgage for long-term borrowings |
| Other non-current assets | 1,542,940,336.45 | Pledged for long-term borrowings |
| Total | 3,481,916,023.14 |
59. Monetary items of foreign currencies
59.1 Foreign currencies
Unit: RMB
| Items | Balance in foreign currency at the end of the reporting period | Exchange rate for conversion | Balance of RMB converted at the end of the reporting period |
| Cash and bank balances | |||
| Including: USD | 288,168,109.67 | 7.2258 | 2,082,245,126.86 |
| EUR | 86,007,404.67 | 7.8771 | 677,488,927.33 |
| Accounts receivable | |||
| Including: EUR | 292,636,645.38 | 7.8771 | 2,305,128,119.32 |
| USD | 109,823,014.80 | 7.2258 | 793,559,140.34 |
| Short-term borrowings | |||
| Including: EUR | 150,136,155.54 | 7.8771 | 1,182,637,510.80 |
| USD | 24,970,081.98 | 7.2258 | 180,428,818.36 |
| Accounts payable | |||
| Including: USD | 37,180,310.83 | 7.2258 | 268,657,490.00 |
| EUR | 242,997.49 | 7.8771 | 1,914,115.53 |
| Long-term borrowings | |||
| Including: EUR | 140,000,000.00 | 7.8771 | 1,102,794,000.00 |
| Non-current liabilities due within one year - long-term borrowings | |||
| Including: EUR | 4,032,000.00 | 7.8771 | 31,760,467.20 |
60. Government Subsidies
60.1 By categories
Unit: RMB
| Category | Amount | Financial Report Items | Amount booked in current profit and loss |
| VAT rebate | 782,559,408.82 | Other Income | 782,559,408.82 |
| Special subsidies | 170,623,695.43 | 228,604,408.54 | |
| Including: Other special subsidies | 170,623,695.43 | Deferred income / Other income/ Non-operating income | 227,394,972.46 |
| Chongqing Manufacture Park construction subsidies | - | Deferred income / Other income | 1,209,436.08 |
| Total | 953,183,104.25 |
60.2 There was no refund of government subsidies during the current reporting period.
VI. Changes in consolidation scope
1. Business combination of enterprises not under the same control
1.1 Business combination of enterprises not under the same control
Wuhu Sensortech Intelligent Technology Ltd. ("Wuhu Sensortech")
In December 2016, the Company acquired 35% equity of Wuhu Sensortech for RMB35,000,000.00, and Wuhu Sensortechbecame the Company's associated company. In January 2023, the Company and the original shareholder of WuhuSensortech signed the Equity Acquisition Agreement, agreed to acquire 9.40% equity of Wuhu Sensortech held by theoriginal shareholder for RMB56,297,070.00. On February 28, 2023, the delivery of Wuhu Sensortech Equity wascompleted and the Group has acquired 44.40% equity of Wuhu Sensortech and has obtained the control of WuhuSensortech. Therefore, the Group has taken February 28, 2023 as the acquisition date and has included it in the scope ofconsolidation statement from the acquisition date. As of June 30, 2023, the Group has completed the payment of equitytransfer.
Unit: RMB
| Name of the acquiree | Time of equity acquisition | Equity acquisition cost | Equity acquisition ratio (%) | Equity acquisition method | Date of acquisition | Basis for determining the acquisition date | Income of acquiree from acquisition data to the end of the reporting period | Net profit (loss) of acquiree from acquisition data to the end of the reporting period |
| Wuhu Sensortech | February 2023 | 56,297,070.00 | 9.40 | Cash Payments | February 28, 2023 | Equity delivery date for obtaining control of the purchased party | 222,475,852.86 | (22,608,562.54) |
1.2 Cost of business combination and goodwill
Unit: RMB
| Cost of business combination | Wuhu Sensortech |
| - Cash | 56,297,070.00 |
| - The fair value of the equity held before the acquisition date at the acquisition date | 209,616,750.00 |
| Total cost of business combination | 265,913,820.00 |
| Less: The fair value of identifiable net assets obtained | 88,910,271.54 |
| Goodwill | 177,003,548.46 |
1.3 Acquiree's book value of assets and liabilities at the date of acquisition
Unit: RMB
| Wuhu Sensortech (Note) | ||
| Book value on the date of acquisition | Fair value on the date of acquisition | |
| Assets: | ||
| Cash and bank balances | 17,324,838.53 | 17,324,838.53 |
| Notes receivable | 33,920,858.51 | 33,920,858.51 |
| Accounts receivable | 445,730,934.47 | 445,730,934.47 |
| Prepayments | 6,061,869.66 | 6,061,869.66 |
| Other receivables | 40,599,296.61 | 40,599,296.61 |
| Inventories | 303,058,398.74 | 303,058,398.74 |
| Other current assets | 24,974,849.27 | 24,974,849.27 |
| Wuhu Sensortech (Note) | ||
| Book value on the date of acquisition | Fair value on the date of acquisition | |
| Other non-current financial assets | 18,666,625.00 | 18,666,625.00 |
| Fixed assets | 79,287,366.02 | 79,287,366.02 |
| Construction in progress | 3,191,074.02 | 3,191,074.02 |
| Intangible assets | 3,721,061.00 | 3,721,061.00 |
| Right-of-use asset | 4,291,374.57 | 4,291,374.57 |
| Long-term deferred expenses | 2,215,794.17 | 2,215,794.17 |
| Other non-current assets | 5,115,243.10 | 5,115,243.10 |
| Liabilities: | ||
| Accounts payable | 340,340,391.41 | 340,340,391.41 |
| Notes payable | 24,850,000.00 | 24,850,000.00 |
| Contract liabilities | 1,039,132.78 | 1,039,132.78 |
| Taxes payable | 4,377,557.95 | 4,377,557.95 |
| Payroll payable | 11,689,495.44 | 11,689,495.44 |
| Other payables | 42,060,116.80 | 42,060,116.80 |
| Short-term borrowings | 327,277,293.17 | 327,277,293.17 |
| Non-current liabilities due within one year | 1,740,061.74 | 1,740,061.74 |
| Other current liabilities | 134,494.95 | 134,494.95 |
| Lease liabilities | 2,120,565.73 | 2,120,565.73 |
| Deferred income | 29,134,991.62 | 29,134,991.62 |
| Deferred income tax liabilities | 3,147,122.76 | 3,147,122.76 |
| Net assets acquired | 200,248,359.32 | 200,248,359.32 |
| Less: Minority interests | 111,338,087.78 | 111,338,087.78 |
| Net assets acquired | 88,910,271.54 | 88,910,271.54 |
Note: In order to confirm the fair value of Wuhu Sensortech, which is not a business under common control, the Group has engaged
independent valuers to assess the fair value of its net identifiable assets. As of the reporting date of the financial statements, the related appraisalwork has not been completed. The management of the Group temporarily made the financial statements based on the book value of itsidentifiable net assets. The Group will also make adjustments according to the final assessment results, and the amount of goodwill will alsobe adjusted accordingly.
1.4 Gains or losses arising from the re-measurement of equity held before the acquisition date at fair value
| Name of the acquiree | The book value of the original equity held before the purchase date on the purchase date | The fair value of the original equity held before the purchase date on the purchase date | Gains or losses arising from the re-measurement of equity held before the acquisition date at fair value | The method and main assumptions for determining the fair value of the original equity held before the purchase date on the purchase date | The amount of other comprehensive income related to the original shareholding transferred to investment income before the purchase date |
| Wuhu Sensortech | 93,183,139.55 | 209,616,750.00 | 116,433,610.45 | Calculated at the fair value of the newly increased shareholding ratio | - |
VII. Interest in other entities
1. Equity in subsidiaries
Composition of major subsidiaries of the Group
| Name | Location of operation | Place of registration | Nature of business | Acquisition method |
| Hangzhou Hikvision System Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | System integration, Technology development | Establishment |
| Hangzhou Hikvision Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Manufacture | Establishment |
| Hangzhou EZVIZ Network Co., Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | Establishment |
| Hangzhou EZVIZ Software Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | Establishment |
| Hangzhou Hikrobot Co., Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | Establishment |
| Hangzhou Haikang Intelligent Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | Establishment |
2. Changes in the share of owners' equity in subsidiaries and still controls the transactions of subsidiaries.
(1) Description of the change in the share of owners' equity in subsidiaries
Capital increase for Shijiazhuang Sensortech
On March 28, 2023, the Company entered into the Capital Increase Agreement with external strategic investors. It is agreed that Shijiazhuang Sensortech, a subsidiary of the Company,will increase the registered capital by RMB2,398,000,000, in which the Company will increase the capital by RMB1,078,800,000 with 60.00% equity of HikAuto, a subsidiary of theCompany, and RMB266,400,000 with 44.40% equity of Wuhu Sensortech, a subsidiary of the Company, with a total equity price of RMB1,345,200,000. Upon completion of the capitalincrease, the Company's direct shareholding in Shijiazhuang Sensortech was diluted from 100% to 56.0969%, the Company's direct shareholding in HikAuto was changed from 60.00%to 56.0969%, and the Company's direct holding of Wuhu Sensortech changed from 44.40% to indirect holding of 56.0969%.The Group's control over the three subsidiaries remainsunchanged.
Unit: RMB
| Shijiazhuang Sensortech | Wuhu Sensortech | HikAuto | |
| Cost of acquisition/Disposal consideration | |||
| Less: Net assets of subsidiaries according to the proportion of equity acquired/disposed | 259,000.35 | 22,497,280.64 | 5,502,685.16 |
| Balance adjusted capital surplus | (259,000.35) | (22,497,280.64) | (5,502,685.16) |
Acquisition of a minority stake of Hangzhou Kuangxin.
On May 22, 2023, the Company and the former minority shareholders of its subsidiary, Hangzhou Kuangxin, signed the Equity Transfer Agreement in respect of Hangzhou KuangxinTechnology Co., Ltd. It is agreed to purchase 20.00% minority equity of Hangzhou Kuangxin held by the original shareholder at RMB56 million. On June 30, 2023, the equity deliveryof Hangzhou Kuangxin completed, and the Company held 100% equity of Hangzhou Kuangxin in total. As of June 30, 2023, the Company has paid RMB50.4 million for equity transfer.
Unit: RMB
| Hangzhou Kuangxin | |
| Purchase consideration | 56,000,000.00 |
| Less: Net assets of subsidiaries according to the proportion of equity acquired | 38,206,584.40 |
| Balance adjusted capital surplus | 17,793,415.60 |
3. Equity in joint ventures or associates
3.1 Aggregated financial information of insignificant joint-ventures and associates
Unit：RMB
| Closing balance / Amount for the first half of 2023 | Opening balance / Amount for the first half of 2022 | |
| Associates： | ||
| The aggregate carrying amount of investments in associates | 249,202,411.16 | 352,286,233.16 |
| The aggregate amount of the following items calculated based on the Company's equity share percentage of the associates | ||
| - Net income (loss) | (9,900,682.45) | (5,965,866.51) |
| - Other comprehensive income | - | - |
| - Net income (loss) and total comprehensive income (loss) | (9,900,682.45) | (5,965,866.51) |
| Joint Ventures: | ||
| Total investment book value | 871,511,015.09 | 899,747,280.25 |
| The sum of the following items calculated according to the shareholding ratio | ||
| - Net income (loss) | (32,339,888.62) | 52,118,483.05 |
| - Other comprehensive income | - | - |
| - Net income (loss) and total comprehensive income (loss) | (32,339,888.62) | 52,118,483.05 |
The Group uses the equity method to account for the aforementioned associates and joint ventures.
3.2 There are no significant restrictions on the ability of the joint ventures or associates to transfer funds to the Group.
3.3 No excess losses were incurred by the joint ventures or associates.
3.4 Unrecognized commitments related to investment in joint ventures
Unit：000 RMB
| Joint venture | Capital commitment (Note) |
| Shenzhen Hikvision Urban Service Operation Ltd. | 10,500.00 |
| Guangxi Haishi Urban Operation Management Ltd. | 2,440.00 |
Note: The above capital commitments are the capital amounts that the Group has subscribed but not paid in to the above joint ventures.
3.5 The Group has no contingent liabilities related to investments in joint ventures or associates.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
VIII. Risks associated with financial instrumentThe Group's principal financial instruments include cash and bank balances, other non-current financial assets, notesreceivable, accounts receivable, receivables for financing, other receivables, long-term receivables, some of other non-current assets, borrowings, notes payable, accounts payable, other payables, some of other non-current liabilities, part ofthe other current liabilities, long-term payables, derivative financial instruments, etc. Details of these financial instrumentsare set out in Note (V). Below are the risks associated with such financial instruments and the risk management policiesadopted by the Group to mitigate such risks. The management of the Group manages and monitors such risk exposures toensure such risks are contained within a prescribed scope.
1. Classification of financial instruments
Unit: RMB
| Items | Closing balance of the current reporting period | Ending balance of the prior year (on December 31, 2022) |
| Financial assets： | ||
| Measured at fair value through current profit and loss | ||
| Held –for-trading financial assets | 10,948,728.33 | 12,807,438.36 |
| Other non-current financial assets | 474,823,086.64 | 423,893,239.94 |
| Measured at fair value through other comprehensive income | ||
| Receivables for financing | 1,502,906,978.21 | 1,484,218,258.74 |
| Measured at amortized cost | ||
| Cash and bank balances | 34,670,255,152.86 | 40,011,863,999.94 |
| Notes receivable | 2,161,899,917.86 | 2,519,988,159.23 |
| Accounts receivable | 31,626,699,148.70 | 29,906,294,410.40 |
| Other receivables | 1,295,693,306.42 | 516,503,485.58 |
| Other non-current assets | 2,181,057.96 | 2,181,057.96 |
| Long-term receivables (including those due within one year) | 1,697,703,405.49 | 1,537,550,308.57 |
Unit: RMB
| Items | Closing balance of the current reporting period | Ending balance of the prior year (on December31, 2022) |
| Financial liabilities | ||
| Measured at fair value through current profit and loss | ||
| Held-for-trading financial liabilities | 49,948,979.70 | 68,299,685.57 |
| Measured at amortized cost | ||
| Short-term borrowings | 3,150,804,135.09 | 3,343,071,972.89 |
| Notes payable | 905,757,774.63 | 1,207,756,963.94 |
| Accounts payable | 13,969,435,831.18 | 16,025,563,802.99 |
| Other payables | 3,148,507,577.98 | 3,203,308,686.31 |
| Other current liabilities | 1,537,841,964.86 | 465,979,374.84 |
| Long-term borrowings (including those due within one year) | 11,561,605,755.41 | 8,085,221,539.03 |
| Long-term payables (including those due within one year) | 8,060,753.47 | 9,532,351.64 |
| Other non-current liabilities | 1,642,792,335.93 | 2,806,169,050.05 |
The Group adopts sensitivity analysis techniques to analyze the possible effects of rational and probable changes in riskvariables to profit or loss for the period or to the interests of shareholders. Since risk variables seldom change on a stand-alone basis, while the correlation between variables may have significant influence to the ultimate amount of changeeffected by the change in a single risk variable, the analysis below is based on the assumption that the changes in eachvariable occurred separately.
2. Objectives and policies of risk management
The Group engages in risk management with the aim of achieving an appropriate balance between risk and return, wherethe negative effects of risks against the Group's operating results are minimized, in order to maximize the benefits ofshareholders and other stakeholders. Based on such objective in risk management, the underlying strategy of the Group'srisk management is to ascertain and analyze all types of risks exposures of the Group, establish appropriate risk tolerancethresholds, carry out risk management procedures and perform risk monitoring on all kinds of risks in a timely and reliablemanner, thus containing risk exposures within a prescribed scope.
2.1 Market risks
2.1.1 Foreign exchange risks
Foreign exchange risks refer to the risk that losses will occur because of changes in foreign exchange rates. The Companyis primarily exposed to risks relating to the currencies such as USD, EUR and etc. The Group's subsidiaries in the mainlandof China whose procurement, sales and financing are denominated in RMB, USD and EUR, other principal activities aresettled in RMB. The Group's subsidiaries in China Hong Kong and outside China are principally engaged in procurement,sales, financing and other major business activities in local currencies such as USD, EUR and etc.
As of June 30
th2023, except for monetary items of foreign currencies set out in Note (V) 59, the Group mainly adoptedthe functional currency of each of its subsidiary to present the balance of its assets and liabilities. The foreign exchangerisks arising from assets and liabilities denominated in EUR and USD (which has been converted into RMB) as followsmay generate significant impact on the operating results of the Group.
Unit: RMB
| Currencies | Assets | Liabilities | ||
| Closing balance | Opening balance | Closing balance | Opening balance | |
| EUR | 2,982,617,046.65 | 2,951,284,991.71 | 2,319,106,093.53 | 2,200,890,176.03 |
| USD | 2,875,804,267.20 | 3,241,969,531.76 | 449,086,308.36 | 655,023,052.11 |
The Group has been paying close attention to the effect of fluctuation in exchange rate on the foreign exchange risks ofthe Group, and has purchased various financial derivative instruments, such as forward foreign exchange contracts andetc., to mitigate the foreign exchange risk exposure.
Sensitivity analysis on exchange rate riskThe sensitivity analysis of the Group's foreign exchange risk includes only monetary items denominated in foreigncurrencies and does not consider the impact of the purchased derivative financial instruments.With other variables unchanged, the exchange rate might float within a reasonable range, and has the following before-tax effect on profit or loss and shareholders' equity for the current period:
Unit: RMB
| Change in foreign exchange rates | First half year of 2023 | First half year of 2022 | ||
| Effect on profit | Effect on shareholders' equity | Effect on profit | Effect on shareholders' equity | |
| 5% appreciation of EUR against RMB | 33,175,547.66 | 33,175,547.66 | 20,053,966.09 | 20,053,966.09 |
| 5% depreciation of EUR against RMB | (33,175,547.66) | (33,175,547.66) | (20,053,966.09) | (20,053,966.09) |
| 5% appreciation of USD against RMB | 121,335,897.94 | 121,335,897.94 | 48,151,444.79 | 48,151,444.79 |
| 5% depreciation of USD against RMB | (121,335,897.94) | (121,335,897.94) | (48,151,444.79) | (48,151,444.79) |
2.1.2. Interest rate risk
The risk of changes in cash flow of financial instruments due to changes in interest rates exposed to the Group are primarilyrelated to bank borrowings bearing floating interest rate (please refer to Note (V) 33) and bank deposits bearing floatinginterest rate. The Group's risks of changes in the fair value of financial instruments due to changes in interest rates arerelated to fixed-rate bank borrowings (please refer to Note (V) 23 and Note (V) 33) and fixed-rate bank deposits.
The Group determines the relative proportion of fixed interest rate contracts and floating interest rate contracts based onthe prevailing market environment. On June 30, 2023, the Group's total long-term and short-term interest-bearing debtsbearing fixed interest rates amounted to RMB12,861,421,548.20 (December 31, 2022: RMB9,106,539,532.31) (Note (V)23 and Note (V) 33). The total amount of long-term and short-term interest-bearing debts bearing floating interest rates isRMB1,850,988,342.30 (December 31, 2022: RMB2,262,287,174.62) (Note (V) 33).
The Group expects that the exposure to cash flow risk arising from floating-rate bank deposits and the exposure to changesin fair value arising from fixed-rate bank deposits are not significant.
2.1.3. Other price risks
The Group's price risk mainly arises from investments in held-for-trading equity instruments and derivative financialinstruments. Held-for-trading equity instrument investments are all investments in unlisted held-for-trading equityinstruments.
The Group is exposed to price risk due to the holding of financial assets measured at fair value. The fair value of certainfinancial instruments is determined by the general pricing model based on discounted future cash flow method or othervaluation techniques, while the valuation techniques are based on certain valuation assumptions. Therefore, the valuationresults are highly sensitive to valuation assumptions. However, at the end of the current reporting period, the amount ofinvestment in held-for-trading equity instruments and derivative financial instruments is not significant, and the riskexposure due to changes in price of financial instruments as a result of change in valuation assumptions is low, accordingly,no sensitivity analysis is conducted.
2.2 Credit Risk
As of June 30, 2023, the largest credit risk exposure that may result in financial losses of the Group is mainly due to theloss of the Group's financial assets arising from the failure of the counterparty to perform its obligations, including: cashand bank balance (Note (V). 1), notes receivable (Note (V). 3), accounts receivable (Note (V). 4), receivables for financing(Note (V). 5), other receivables (Note (V). 7), contract assets (Note (V). 9), other non-current assets (Note (V). 22), non-current assets due within one year (Note (V). 10), long-term receivables (Note (V). 12), etc., and derivative financial assetsthat are not included in the scope of impairment assessment and are measured at fair value through current profit or loss(Note (V). 2). As of the balance sheet date, the book value of the Group's financial assets represents its maximum creditrisk exposure.
In order to reduce credit risk, the Group has formed a team to determine the credit limit, conduct credit approval, andimplement other monitoring procedures to ensure that necessary measures are taken to recover over-due debt. In addition,the Group reviews the recovery of financial assets on each balance sheet date to ensure that sufficient credit loss provisionsare made for relevant financial assets. Therefore, the management of the Group believes that the credit risk exposure ofthe Group has been reduced significantly.
The credit risk on cash and bank balances of the Group is low as they are deposited with banks with high credit ratings.
For notes receivable – commercial acceptance notes, accounts receivable, contract assets and long-term receivables, theGroup has put in place relevant policies to control credit risk exposure. The Group assesses credit quality of customersand sets corresponding credit period based on the customer's financial status, the possibility of obtaining guarantees fromthird parties, credit history and other factors such as current market conditions. The Group will regularly monitor the credithistory of its customers. For customers with poor credit history, the Group takes various measures, such as written paymentreminders, shorten or cancel the credit period, to ensure that the overall credit risk of the Group is maintained in acontrollable range. For notes receivable - commercial acceptance notes, accounts receivable and contract assets, the Group
uses a simplified method, that is, to measure the loss provision based on the amount equivalent to the expected credit lossfor the entire duration. For details of the relevant expected credit loss measurement, see (Note (V). 3, (Note (V). 4 & Note(V)-9. For long-term receivables, the Group calculates the expected credit losses based on the expected credit loss rate inthe next 12 months or the entire duration based on the default risk exposure. For details of the related expected credit lossmeasurement, see Note (V). 12.
The Group's notes receivable - bank acceptance notes and receivables for financing are mainly bank acceptance notes withhigh credit ratings of the counterparties, which the Group does not consider to be subject to significant credit risk and willnot incur any material loss due to default by the counterparties.
For other receivables, the Group regularly monitors the debtor's credit history. For debtors with poor credit history, theGroup takes various measures such as written payment reminders to ensure that the Group's overall credit risk ismaintained in a controllable range. For other receivables, the Group calculates the expected credit loss based on theexpected credit loss ratio in the next 12 months or the entire duration based on the default risk exposure. For details of therelevant expected credit loss measurement, see Note (V). 7.
The Group's risk exposure is distributed among multiple contractors and multiple customers, so the Group has nosignificant credit concentration risk.
2.3. Liquidity risk
The Group maintains and monitors a level of cash and cash equivalents deemed adequate by the management to meet theoperation needs of the Group and to reduce the effect of cash flow movements when managing liquidity risk. Themanagement of the Group monitors the usage of bank borrowings, and ensures compliance with borrowing agreements.
According to the term to maturity of non-discounted and remaining contract obligations, the financial liabilities held bythe Group are analyzed as below:
Unit：RMB
| June 30, 2023 | ||||
| Within one year | 1-5 years | More than five years | Total | |
| Non-derivative financial liabilities | ||||
| Short-term borrowings | 3,191,804,403.01 | - | - | 3,191,804,403.01 |
| Notes payable | 905,757,774.63 | - | - | 905,757,774.63 |
| Accounts payable | 13,969,435,831.18 | - | - | 13,969,435,831.18 |
| Other payables | 3,148,507,577.98 | - | - | 3,148,507,577.98 |
| Other current liabilities | 1,537,841,964.86 | - | - | 1,537,841,964.86 |
| Other non-current liabilities | - | 1,642,792,335.93 | 1,642,792,335.93 | |
| Long-term borrowings (including those due within one year) | 2,169,190,668.43 | 9,247,241,382.74 | 842,000,134.23 | 12,258,432,185.40 |
| Long-term payables (including those due within one year) | 2,415,726.42 | 6,200,000.00 | - | 8,615,726.42 |
| Derivative financial instruments | ||||
| Forward foreign exchange contracts - settled in the gross amount | ||||
| - Cash inflow | 2,162,257,215.54 | - | - | 2,162,257,215.54 |
| - Cash outflow | 2,201,257,467.49 | - | - | 2,201,257,467.49 |
| - Net cash outflow | 39,000,251.96 | - | - | 39,000,251.96 |
IX. Fair value disclosure
1. The financial assets and financial liabilities measured at fair value at the end of the reporting period
Unit：RMB
| Items | Closing fair value | |||
| Level 1 | Level 2 | Level 3 | Total | |
| I. Continuous fair value measurement | - | 1,463,906,726.84 | 474,823,086.64 | 1,938,729,813.48 |
| (I) Financial assets measured at fair value through profit and loss | - | 10,948,728.33 | 474,823,086.64 | 485,771,814.97 |
| 1. Held-for-trading Financial Assets | - | 10,948,728.33 | - | 10,948,728.33 |
| -- Derivative financial assets | - | 10,948,728.33 | - | 10,948,728.33 |
| 2. Other non-current financial assets | - | - | 474,823,086.64 | 474,823,086.64 |
| (II) Receivables for financing | - | 1,502,906,978.21 | 1,502,906,978.21 | |
| Total assets measured continuously at fair value | - | 1,513,855,706.54 | 474,823,086.64 | 1,988,678,793.18 |
| (III) Financial liabilities measured at fair value through profit and loss | - | 49,948,979.70 | - | 49,948,979.70 |
| 1. Held-for-trading Financial Liabilities | - | 49,948,979.70 | - | 49,948,979.70 |
| -- Derivative financial liabilities | - | 49,948,979.70 | - | 49,948,979.70 |
| Total liabilities measured continuously at fair value | - | 49,948,979.70 | - | 49,948,979.70 |
2. The valuation techniques and important parameters used for the Level 2 fair value measurement item
Unit: RMB
| Fair value at June 30, 2023 | Estimation technique | Inputs | |
| Forward foreign exchange contracts (Assets) | 10,948,728.33 | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparty |
| Forward foreign exchange contracts (Liabilities) | (49,948,979.70) | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparty |
| Receivables for financing | 1,502,906,978.21 | Discounted cash flow approach | Discounted rate that reflects the credit risk of counterparty |
3. The valuation techniques and important parameters used for the Level 3 fair value measurement item
Unit: RMB
| Items | Fair value at June 30, 2023 | Valuation techniques | Inputs |
| Other non-current financial assets-- Investment in equity instruments of private companies | 474,823,086.64 | Market approach/Income approach | Comparable public companies' PB (price/book value) ratio within the same industry/Future cash flows, Discount rate |
4. The adjustment information between the opening and closing book value of the Level 3 fair value measurementitem
Unit: RMB
| Other non-current financial assets | Amount |
| Book value on January 1, 2023 | 423,893,239.94 |
| Increase in the current reporting period | 20,837,425.00 |
| Decrease in the current reporting period | - |
| Changes in fair value booked into profit and loss during the current reporting period | 30,092,421.70 |
| Book value on June 30, 2023 | 474,823,086.64 |
The total amount included in profit or loss in the first half of 2023 includes unrealized gains of RMB30,092,421.70 (June
30, 2022: RMB26,448,715.78) related to financial assets measured at fair value at the end of the current reporting period,and such gains or losses are included in the gains or losses from changes in fair value; There was no realized gains offinancial assets measured at fair value at the end of the current reporting period which were included in investment income(June 30, 2022: RMB51,892,209.92).
5. Items measured at continuous fair value. There were no transfers between levels for the current reporting period.There was no estimation technique change for the current reporting period
6. Fair values of financial assets and financial liabilities that not measured at fair valueThe Group's management team believes that financial assets and financial liabilities measured at amortized cost mainlyinclude monetary fund, notes receivable, accounts receivable, other receivables, non-current assets due within one year,long-term receivables, short-term borrowings, notes payable, accounts payable, other payables, some of other currentliabilities, non-current liabilities due within one year, long-term borrowings, long-term payables and some of other non-current liabilities, etc., carrying value of which approximates to its fair value.X. Related party relationships and transactions
1. Information on parent company of the Company
| Name | Place of registration | Nature of business | Registered capital | Shareholding ratio of parent company in the Company (%) | Percentage of voting rights of parent company to the Company (%) |
| China Electronics Technology HIK Group Co., Ltd. (CETHIK) | Hangzhou, Zhejiang | Industrial investment | RMB660 million | 36.35 | 36.35 |
The ultimate controlling party of the Company is China Electronics Technology Group Co., Ltd. ("CETC").
2. Information on the subsidiaries of the Company
For details of the subsidiaries of the Company, see Note (VII).
3. Information on the joint ventures and associated companies of the CompanyJoint ventures and associates that had related party transactions with the Group in the current reporting period, or in theprior periods and formed balances are as follows:
| Name of the associates or joint ventures | Relationship with the Company |
| Wuhu Sensortech Intelligent Technology Ltd. and its subsidiaries (Note 1)(Note 3) | Associated company |
| Maxio Technology (Hangzhou) Co., Ltd. and its subsidiaries (Note 1) | Associated company |
| Zhiguang Hailian Big Data Technology Ltd. and its subsidiaries (Note 1) | Associated company |
| Jiaxin Haishi JiaAn Zhicheng Technology Ltd. (Note 1) | Associated company |
| Sanmenxia Xiaoyun Vision Technology Ltd. (Note 1) | Associated company |
| Beijing Taifang Technology LLC. and its subsidiaries (Note 1) | Associated company |
| Guangxi Haishi City Operation Management Ltd. and its subsidiaries (Note 2) | Joint venture |
| Shenzhen Haishi City Service Operation Ltd. and its subsidiaries (Note 2) | Joint venture |
| Xuzhou Kangbo City Operation Management Service Ltd. (Note 2) | Joint venture |
| Yunnan Yinghai Parking Service Ltd. (Note 2) | Joint venture |
| Zhejiang City Digital Technology Ltd. (Note 2) | Joint venture |
Name of the associates or joint ventures
| Name of the associates or joint ventures | Relationship with the Company |
| Zhejiang Haishi Huayue Digital Technology Ltd. (Note 2) | Joint venture |
Note 1: Those companies are collectively referred to as "associated companies" in the following disclosures of relatedparty transactions, receivables from related parties, and payable from related parties.
Note 2: hose companies are collectively referred to as "joint ventures" in the following disclosures of related partytransactions, receivables from related parties, and payable from related parties.
Note 3: During the period from December 2016 to February 2023, Sensortech is an associated company of the Company.On February 28, 2023, the Company included Sensortech in the scope of the consolidated financial statements. During theperiod from January 2023 to February 2023, this company is a related party of the Group.
4. Information on other related parties
Other related parties that have related party transactions with the Group in the current period, or related party transactionswith the Group in the previous period and formed a balance are as follows:
| Name (Note 1) | Relationship |
| Shanghai Fullhan Microelectronics Co., Ltd. and its subsidiaries (Note 2) | Shareholder(s) that hold(s) more than 5% shares of the Company was(were) the director(s) of this company |
| Shenzhen Guoteng'an vocational education Technology Ltd. | Shareholder(s) that hold(s) more than 5% shares of the Company serve(s) as the director(s) of this company |
| Confirmware Technology (Hangzhou) Co., Ltd. | The Group's senior management serve(s) as director(s) of this company |
| Zhejiang Fast Line data fusion Information Technology Co., Ltd. and its subsidiaries | The Group's senior management serve(s) as director(s) of this company |
| Chengdu Guoshengtianfeng Network Technology Ltd. and its subsidiaries | The Group's senior management serve(s) as director(s) of this company |
| Ningbo Industrial Internet Research Institute Ltd. | The Group's independent director(s) serve(s) as director(s) of this company |
| INESA (Group) Ltd. and its subsidiaries | The Group's supervisor(s) serve(s) as director(s) of this company |
| Bank of Tianjing Co., Ltd. and its subsidiaries | The Group's supervisor(s) serve(s) as independent director(s) of this company |
| Aurotek CORP. and its subsidiaries (Note 3) | The Group's former independent director(s) serve(s) as director(s) of this company (Note 1) |
| Shenzhen Zhongtu Instrument Co., Ltd. (Note 4） | The Group's chairman(chairmen) of Board of the Supervisors was(were) he director(s) of this company |
| Suzhou Ximeng Technology Co., Ltd. | The Group's chairman(chairmen) of Board of the Supervisors was(were) he director(s) of this company |
| Subsidiaries of CETC (Note 5) | Under common control of the ultimate controlling party of the Company |
Note 1: Those companies (excluding subsidiaries of CETC) are collectively referred to as "Enterprises with directors,supervisors, senior executives and related natural persons of the Company serving as directors" in the following disclosuresof related party transactions, receivables from related parties, and payable from related parties.
Note 2: Gong Hongjia, a shareholder holding more than 5% shares of the Company, departed the Company in December2022. Therefore, this company was recognized as a related party of the Group in 2022 and 2023.
Note 3: Cheng Tianzong, a former independent director of the Group, once served as a director of the Company, anddeparted the Company in March 2021. Therefore, this company was recognized as a related party of the Group duringJanuary 2022 to March 2022.
Note 4: Hong Tianfeng, the chairman of Board of the Supervisors of the Group, once served as a director of the Company.Hong Tianfeng departed the Company in April 2022. Therefore, this company was still recognized as a related party ofthe Company during January 2023 to April 2023.
Note 5: Subsidiaries of CETC, excluding Hikvision and its subsidiaries.
5. Related party transactions
5.1 Related party transactions regarding sales and purchases of goods, provision of services and receiving servicesPurchase of commodities / receiving of services:
Unit: RMB
| Related party | Transaction type | Amount occurred in the first half of 2023 | Amount occurred in the first half of 2022 |
| Subsidiaries of CETC | Purchase of materials and receiving of services | 975,912,021.92 | 1,053,890,910.70 |
| Joint ventures | Purchase of materials and receiving of services | 755,956.76 | 337,281.30 |
| Associated companies | Purchase of materials and receiving of services | 98,585,985.58 | 229,107,731.02 |
| Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Purchase of materials and receiving of services | 602,307,517.40 | 916,297,997.14 |
| Total | 1,677,561,481.66 | 2,199,633,920.16 |
Sales of commodities / rendering of services:
Unit: RMB
| Related party | Transaction content | Amount occurred in the first half of 2023 | Amount occurred in the first half of 2022 |
| Subsidiaries of CETC | Sales of products and rendering of services | 117,617,666.95 | 168,042,187.48 |
| Joint ventures | Sales of products and rendering of services | 19,625,412.30 | 33,132,355.91 |
| Associated companies | Sales of products and rendering of services | 27,862,625.23 | 39,739,875.36 |
| Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | Sales of products and rendering of services | 6,119,099.86 | 4,016,002.60 |
| Total | 171,224,804.34 | 244,930,421.35 |
5.2 Related party lease
| Lessor | Type of leased assets | Rental fee confirmed in the first half of 2023 | Rental fee confirmed in the first half of 2022 |
| Subsidiaries of CETC | Equipment | 6,764,242.38 | 10,354,580.73 |
| Subsidiaries of CETC | House | 1,076,516.38 | - |
| Joint ventures | House | - | 542,554.11 |
| Total | 7,840,758.76 | 10,897,134.84 |
Statement of capital deposits:
Unit: RMB
| Related Party (Note) | Content of related party transaction | Amount occurred in the first half of 2023 | Balance at the end of the current reporting period | Amount occurred in the first half of 2022 | Opening balance |
| Subsidiaries of CETC | Deposit into (withdraw from) current deposits | 200,102,712.94 | 200,136,231.62 | (499,974,692.98) | 33,518.68 |
| Subsidiaries of CETC | Deposit into fixed deposits | (200,000,000.00) | 3,800,000,000.00 | - | 4,000,000,000.00 |
| Total | 102,712.94 | 4,000,136,231.62 | (499,974,692.98) | 4,000,033,518.68 |
Note: For the deposits that the Group deposited into China Electronic Technology Finance Co., Ltd., the interest incomeon deposits during the reporting period was RMB4, 026,455.23.
Information on notes discounted:
At the end of the current reporting period, there was no bank acceptance bill discounted by the Group to China ElectronicsTechnology Finance Co., Ltd. (June 30, 2022: RMB33,564,209.39). There was no expired bank acceptance billsdiscounted to China Electronics Technology Finance Co., Ltd. (June 30, 2022: RMB33,564,209.39). There was no interestexpense arising from discounting the notes (June 30, 2022: RMB241,747.39).
Information on entrusted loan:
During the current reporting period, the Group issued entrusted loans of RMB1,410.00 million to its subsidiaries throughChina Electronic Technology Finance Company Limited
6. Receivables from related parties and payables to related parties
6.1 Receivables from related parties
Unit: RMB
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Credit loss provision | Carrying balance | Credit loss provision | ||
| Accounts receivable | Subsidiaries of CETC | 695,632,587.99 | 348,117,348.37 | 703,246,712.68 | 226,247,765.93 |
| Accounts receivable | Joint ventures | 33,323,349.60 | 1,275,155.05 | 33,380,436.75 | 1,573,681.64 |
| Accounts receivable | Associated companies | 84,345,319.45 | 7,231,621.02 | 101,753,693.78 | 5,670,312.45 |
| Accounts receivable | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 4,995,363.57 | 163,216.06 | 3,849,485.72 | 79,488.44 |
| Total | 818,296,620.61 | 356,787,340.50 | 842,230,328.93 | 233,571,248.46 | |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Credit loss provision | Carrying balance | Credit loss provision | ||
| Notes receivable | Subsidiaries of CETC | 92,421,461.45 | 523,430.01 | 170,543,239.65 | - |
| Notes receivable | Joint ventures | 742,656.67 | - | 2,500,000.00 | - |
| Notes receivable | Associated companies | 18,922,205.50 | - | 2,358,308.70 | - |
| Notes receivable | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 1,322,276.00 | - | 281,113.19 | - |
| Total | 113,408,599.62 | 523,430.01 | 175,682,661.54 | - | |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Credit loss provision | Carrying balance | Credit loss provision | ||
| Other receivables | Subsidiaries of CETC | 1,827,031.50 | 374,018.27 | 1,720,917.15 | 240,722.93 |
| Other receivables | Joint ventures | 464,994.50 | 7,838.96 | 374,619.85 | 2,472.49 |
| Total | 2,292,026.00 | 381,857.23 | 2,095,537.00 | 243,195.42 | |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Credit loss provision | Carrying balance | Credit loss provision | ||
| Long-term receivables (including those due within one year) | Subsidiaries of CETC | 187,594.83 | 1,163.09 | 300,478.44 | 1,983.16 |
| Long-term receivables (including those due within one year) | Joint ventures | 39,676,363.54 | 1,095,799.66 | 43,800,876.33 | 973,106.36 |
| Total | 39,863,958.37 | 1,096,962.75 | 44,101,354.77 | 975,089.52 | |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Prepayments | Subsidiaries of CETC | 5,077,483.26 | 6,707,516.94 |
| Prepayments | Companies in which directors, supervisors, senior management, and related natural persons of the Company serve as directors | 34,008,794.39 | - |
| Total | 39,086,277.65 | 6,707,516.94 |
6.2 Payables to related parties
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Accounts payable | Subsidiaries of CETC | 529,989,851.88 | 759,760,264.93 |
| Accounts payable | Joint ventures | 3,984,905.66 | 966,037.73 |
| Accounts payable | Associated companies | 28,401,177.89 | 88,750,828.96 |
| Accounts payable | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 311,726,530.97 | 240,030,055.22 |
| Total | 874,102,466.40 | 1,089,507,186.84 |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Notes Payable | Subsidiaries of CETC | 17,262,113.18 | 7,561,539.70 |
| Notes Payable | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 12,989,302.80 | 31,994,311.07 |
| Total | 30,251,415.98 | 39,555,850.77 |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Contract liabilities | Subsidiaries of CETC | 8,159,399.04 | 8,673,665.99 |
| Contract liabilities | Joint ventures | 3,033,007.18 | 2,558,659.59 |
| Contract liabilities | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 91,187.19 | - |
| Total | 11,283,593.41 | 11,232,325.58 |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Other payables | Subsidiaries of CETC | 52,790,103.01 | 56,652,471.09 |
Other payables
| Other payables | Joint ventures | 10,000.00 | 10,000.00 |
| Other payables | Associated companies | 409,990.00 | 236,000.00 |
| Other payables | Enterprises with directors, supervisors, senior executives and related natural persons of the Company serving as directors | 820,000.00 | 250,000.00 |
| Total | 54,030,093.01 | 57,148,471.09 |
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Lease liabilities (including those due within one year) | Subsidiaries of CETC | 9,425,191.09 | 16,863,126.87 |
| Total | 9,425,191.09 | 16,863,126.87 |
XI. Share-based payments
1. Overview of share-based payments
Restrictive Share Incentive Scheme
According to the Approval of the Implementation of the Restrictive Share Incentive Scheme of Hangzhou Hikvision DigitalTechnology Co., Ltd. (Guo Zi Fen Pei [2012] No. 426) issued by the State-owned Assets Supervision and AdministrationCommission of the State Council and the Opinion the Restrictive Share Incentive Scheme of Hangzhou Hikvision DigitalTechnology Co., Ltd. (Shang Shi Bu Han [2012] No. 353) issued by China Securities Regulatory Commission, theCompany convened the ninth meeting of the second session of the Board of Directors on July 25, 2012 and the firstextraordinary general meeting for 2012 on August 13, 2012, whereat the Proposal Relating to the Restrictive Share Scheme(Amendments to the Draft) of the Company and Highlights was reviewed and passed. The purpose of the Share IncentiveScheme is to: further improve the Company's governance structure to establish a good and balanced value allocationsystem; establish a profit-sharing and restriction mechanism among shareholders, the Company and its employees, so asto provide shareholders with sustainable return; fully mobilize the positivity of core employees to support the Companyin realizing its strategies and long-term sustainable development; attract and retain core employees to ensure theCompany's long-term development.
The Scheme shall be effective for a term of 10 years commencing from the date of approval by general meeting of theCompany, during which the Company may grant restricted shares to grantees under the Scheme. In principle, each grantshould be at an interval of two years. After the expiry of the Scheme, no restricted shares could be granted to granteesunder the Scheme. However, all the provisions of the Scheme remain valid to the restricted shares granted under theScheme.
Each batch of restricted shares shall not be unlocked unless fulfilling, each time, by the Company its unlock performancecriteria (including net asset yield, revenue growth rate and economic value added), and by grantees' individual performancecriteria simultaneously. Where, during the unlocking period, any one or more unlock criteria for the Company orindividuals is or are not fulfilled, such portion of subject shares shall be cancelled. The cancelled restricted shares will berepurchased by the Company at the relevant provisions of this plan.
On December 20, 2018, authorized by the 2
ndextraordinary general meeting of 2018 and reviewed by the Board ofDirectors, the Company granted 121,195,458 restricted shares to grantees at a grant price of RMB16.98 per share ("2018Share Incentive Scheme"). The lock-up period of the subject shares shall last for a period of 24 months commencing onthe grant date, during which the subject shares granted to grantees under the scheme shall be subject to lock-up and arenot transferable. The vesting period shall be the 24 to 60 months following the grant of restricted shares (including lock-up period), during which grantees may, subject to unlocking conditions stipulated by the scheme being satisfied, apply forunlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months following the grant date and the number
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
of shares to be unlocked shall be 40% of the aggregate number of the subject shares granted; the second unlocking periodshall be the 36 to 48 months following the grant date and the number of shares to be unlocked shall be 30% of the aggregatenumber of the subject shares granted; the third unlocking period shall be the 48 to 60 months following the grant date andthe number of shares to be unlocked shall be 30% of the aggregate number of the subject shares granted. The Companyhas completed the equity registration work in January 2019.
In accordance with the authorization by the Company's second Extraordinary General Meeting in 2018, the resolution bythe 10th meeting of the 5
thsession of the Board of Directors on April 13, 2023, the resolution of the second ExtraordinaryGeneral Meeting in 2022 on May 9, 2023 and the revised Articles of Association, the Company repurchased and cancelledthe granted 33,331,858 restricted RMB treasury shares that have not been unlocked by cash. The Company completedderegistration on July 5, 2023 and the implementation of the 2018 Restricted Share Incentive Scheme was completed.
On January 18
th
2022, authorized by the 1
st
extraordinary general meeting of 2022, and reviewed and approved by theBoard of Directors, the Company granted 97,402,605 restricted shares to grantees at a grant price of RMB29.71 per share("2021 Share Incentive Scheme"). The lock-up period of the subject shares shall last for a period of 24 months commencingon the grant date, during which the subject shares granted to grantees under the scheme shall be subject to lock-up and arenot transferable. The Unlocking Period shall be the 24 to 60 months following the grant of restricted shares (includinglock-up period), during which grantees may, subject to unlocking conditions stipulated by the scheme being satisfied,apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months following the grant date and thenumber of shares to be unlocked shall be 40% of the aggregate number of the subject shares granted; the second unlockingperiod shall be the 36 to 48 months following the grant date and the number of shares to be unlocked shall be 30% of theaggregate number of the subject shares granted; the third unlocking period shall be the 48 to 60 months following the grantdate and the number of shares to be unlocked shall be 30% of the aggregate number of the subject shares granted. Thecompany will complete the equity registration work in February 2022.
Unit: share
| 2021 Share Incentive Scheme | First half year of 2023 | 2022 |
| Total of equity instruments outstanding at the beginning of the reporting period | 97,402,605 | - |
| Total of equity instruments granted (share dividend) during the current reporting period | - | 97,402,605 |
| Total of equity instruments vested during the current reporting period | - | - |
| Total of equity instruments forfeited during the current reporting period | - | - |
| Total of equity instruments outstanding at the end of the reporting period | 97,402,605 | 97,402,605 |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | RMB29.71/share & 42 months | RMB29.71/share & 48 months |
Share Incentive Scheme of Staff Co-Investment in Innovative BusinessesOn October 22, 2015, Hikvision considered and approved Management Measures for Core Staff Co-Investment inInnovative Businesses (Draft) (hereafter referred to as "Management Measures") at the 2
ndextraordinary general meeting.On March 7, 2016, representative congress of labor union of Hikvision passed Implementation Provisions for ManagementMeasures for Core Staff Investment in Innovative Businesses (hereafter referred to as "Provisions"), to initiate andimplement the incentive mechanism of staff co-investment (hereafter referred to as "Staff Co-Investment Plan") ininnovative business subsidiaries. Staff who participate in the Staff Co-Investment Plan (hereafter referred to as "Co-Investment Staff") signed an Entrusted Investment Agreement with the labor union committee of Hikvision (hereafterreferred to as "Hikvision Labor Union"), to entrust Hikvision Labor Union to make investments. Hikvision Labor Union,as a principal, shall cooperate with a trust company, which shall be a limited partner (LP) of a partnership enterprise, toestablish a trust plan, and to invest trust funds into innovative business subsidiaries. (Investment form described above isreferred to as "Co-Investment Platform").
Staff Investment Plan is classified as plan A and plan B according to applicable grantees. Grantees of plan A are comprisedof medium-and-senior level management personnel and core competent staff from Hikvision, its branches and subsidiaries,
and are able to invest in all innovative businesses. Grantees of plan B are comprised of core and full-time staff frominnovative business subsidiaries and its branches and subsidiaries, and could participate in investment on innovativebusiness subsidiaries where they serve. The Co-Investment Platform will increase capitals annually, the correspondingincreased equity of which will be distributed to core staff who meets investment conditions pursuant to particular rules.The waiting period shall be five years after equity of Co-Investment Platform is held by the staff. Within the waiting period,if the labor relationship between the grantees and the Company or its subsidiaries is released or terminated, equity of Co-Investment Platform held by the grantees shall be refunded and settled by the labor union at an agreed price pursuant tothe Provisions.
The Co-Investment Platform grants Co-Investment Staff additional equity annually. The Group determines whether share-based payment shall be constituted based on the fair value of equity instruments newly obtained by the Group's staff inCo-Investment Platform on each granting date.
In December 2020, Co-Investment Staff signed a Supplemental Agreement of Entrusted Investment Agreement (hereafterreferred to as "Supplemental Agreement") with Hikvision Labor Union. On December 25, 2020, Hikvision held the 20
th
meeting of the 4
thsession of the Board of Directors and reviewed and approved the Proposal on Amending the ManagementMeasures for Core Staff Co-Investment in Innovative Businesses. The new version of the Management Measures for CoreStaff Co-Investment in Innovative Business (hereinafter referred to as the "new version of the Management Measures")added the confirmation of the shares held by employees in the co-investment plan and the rights and interests indirectlyheld by employees in innovative business subsidiaries, clarified the approach of the co-investment shares after theemployees lost or cancelled the co-investment qualification, and added the Management Committee and other systems.
On December 31, 2020, the Executive Management Committee of the Co-investment Plan adopted the ImplementationRules for the Management Measures for Core Staff Co-Investment in Innovative Businesses (hereinafter referred to as the"new version of the Rules"). According to the new version of the Management Measures and the new version of the Rules,for the confirmed shares of plan A, the waiting period is the fifth anniversary of the employee's work in the Company orits subsidiaries. For the confirmed shares of plan B, the waiting period is the fifth anniversary of the employee's work inthe innovative business subsidiary or its subordinate subsidiary company corresponding to the Plan B.
2. Information of the share-based payment through equity settlements
Restrictive Share Incentive Scheme
Unit: RMB
| 2021 Share Incentive Scheme | |
| Method of determine the fair value of equity instruments at the grant date | Determined based on stock price at the grant date and the costs of restricted shares during lock-up period |
| Recognition basis of the number of the equity instruments qualified for vesting | Determined based on the results estimation of each vesting period |
| Reasons of the significant difference between the estimates of the current reporting period with that of the prior year | None |
| Accumulative amount of share-based payment through equity settlement and further included in the capital reserve | 937,877,313.52 |
| Total amount of the expenses recognized according to share-based payment through equity settlement in the current reporting period | 318,256,904.02 |
Share Incentive Scheme of Staff Co-Investment in Innovative Businesses
Unit：RMB
| Share Incentive Scheme of Staff Co-Investment in Innovative Businesses | |
| Method of determining the fair value of equity instruments at the grant date | Evaluated and determined based on income method at the grant date |
| Recognition basis of the number of the equity instruments qualified for vesting | Estimated and determined based on the performance result conditions of each vesting period |
| Accumulative amount of share-based payment through equity settlement and further included in the capital reserve | 522,289,848.03 |
Total amount of the expenses recognized according to share-based paymentthrough equity settlement in the current reporting period
| Total amount of the expenses recognized according to share-based payment through equity settlement in the current reporting period | 55,271,659.04 |
Among total amount of the expenses recognized according to share-based payment through equity settlement during thecurrent reporting period, amount of RMB24,501,363.63 was due to share distributions to minority shareholders.
3. There is no share-based payment through cash settlements
4. There is no modification or termination of share-based payment during the current reporting period.XII. Commitments and contingencies
1. Significant commitments
1.1 Capital commitments
Unit: 000 RMB
| Closing balance | Opening balance | |
| Contracted but not yet recognized in financial statements | ||
| - Commitment on construction of long-term assets | 11,947,262 | 16,521,850 |
| - Commitment on external investments | 12,940 | 12,940 |
| Total | 11,960,202 | 16,534,790 |
1.2 As of June 30, 2023, the Group had no other important commitments that need to be disclosed.
2. Contingencies
The Group has no significant contingencies to be disclosed.
XIII. Events after the balance sheet date
1. Significant unadjusted events
As of August 18, 2023, the Company has no significant events after the balance sheet date that need to be disclosedXIV. Other significant events
1. Segment information
1.1 Report segment determining and accounting policy
According to the Group's internal organization structure, management requirements and internal report principles, theGroup has only one operating segment, which is the research and development, production and sales of AIoT productsand services.
1.2 Segment financial reporting
External revenue by geographical area & non-current assets by geographical location
Unit: RMB
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
Item
| Item | First half year of 2023 | First half year of 2022 |
| External revenue generated in domestic area | 25,503,419,211.78 | 25,544,764,018.60 |
| External revenue generated in overseas area | 12,067,367,186.11 | 11,712,752,572.02 |
| Total | 37,570,786,397.89 | 37,257,516,590.62 |
Unit: RMB
| Item (Note) | On June 30, 2023 | On January 1, 2023 |
| Non-current assets in domestic area | 18,157,812,759.13 | 16,808,935,279.10 |
| Non-current assets in overseas area | 885,684,965.40 | 831,488,767.27 |
| Total | 18,157,812,759.13 | 17,640,424,046.37 |
Note: the non-current assets above did not include other non-current financial assets, long-term receivables, long-termequity investment, and deferred tax assets.
XV. Notes to major items of financial statements of the parent company
1. Accounts receivable
1.1 Disclosure by age
Unit: RMB
| Aging | Closing balance | ||
| Accounts receivable | Credit loss provision | Proportion (%) | |
| Within credit period | 7,876,696,931.58 | 6,720,405.82 | 0.09 |
| Within 1 year after exceeding credit period | 16,221,228,287.49 | 80,217,559.70 | 0.49 |
| 1-2 years after exceeding credit period | 517,978,907.99 | 110,683,686.18 | 21.37 |
| 2-3 years after exceeding credit period | 316,311,621.51 | 124,374,494.33 | 39.32 |
| 3-4 years after exceeding credit period | 185,097,974.70 | 120,659,232.90 | 65.19 |
| Over 4 years after exceeding credit period | 232,610,854.93 | 232,610,854.93 | 100.00 |
| Subtotal | 25,349,924,578.20 | 675,266,233.86 | 2.66 |
1.2 Classification and disclosure of by credit loss provision methods
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Carrying balance | Credit loss provision | Book value | Carrying balance | Credit loss provision | Book value | |||||
| Amount | Percentage (%) | Amount | Percentage (%) | Amount | Amount | Percentage (%) | Amount | Percentage (%) | Amount | |
| Provision for credit loss on a single basis | - | - | - | - | - | - | - | - | - | - |
| Provision for credit loss by portfolios | 25,349,924,578.20 | 100.00 | 675,266,233.86 | 2.66 | 24,674,658,344.34 | 24,967,758,597.12 | 100.00 | 591,943,445.60 | 2.37 | 24,375,815,151.52 |
| Total | 25,349,924,578.20 | 100.00 | 675,266,233.86 | 2.66 | 24,674,658,344.34 | 24,967,758,597.12 | 100.00 | 591,943,445.60 | 2.37 | 24,375,815,151.52 |
Accounts receivable provision for credit loss by portfolios
Unit: RMB
| Customer | Closing balance | ||
| Carrying balance | Credit loss provision | Proportion (%) | |
| Subsidiaries' customers | 21,313,139,422.98 | - | - |
| Portfolio A | 926,296.36 | 312,737.44 | 33.76 |
| Portfolio B | 4,035,631,152.24 | 674,725,789.80 | 16.72 |
| Portfolio C | 227,706.62 | 227,706.62 | 100.00 |
| Total | 25,349,924,578.20 | 675,266,233.86 | 2.66 |
Description of accounts receivable for credit loss provision by portfolios:
As part of the Company's credit risk management, the Company uses the ageing of accounts receivable to assess the expected credit losses of accounts receivableformed by domestic and overseas sales businesses, and the risk characteristics are divided according to different business area and target into portfolio A, portfolio Band portfolio C. For the accounts receivable generated by the Group's related parties, because the payment time is arranged by the Group according to the cash flow ofthe companies in the Group, the Company believes that the credit risk is low and no provision for credit loss is required. The aging information can reflect the solvencyof these three types of customers when the accounts receivable are due.
1.3 Credit loss provision
The provision for credit loss in the current reporting period is RMB83,319,596.26.
The actual write-off of accounts receivable for the current reporting period is nil. The write-off of accounts receivable in previous years was recollected in the currentperiod of RMB3,192.00.
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
1.4 Top five debtors based on corresponding closing balance of accounts receivable
Unit: RMB
| Name of the Party | Relationship with the Company | Book value balance of accounts receivable | Closing balance for credit loss provision | Proportion (%) of the total balance of accounts receivable at the end of the current reporting period |
| Subsidiary A | Subsidiary | 21,160,804,548.12 | - | 83.47 |
| CETC's subsidiary company A | Related party | 120,213,834.14 | 58,673,681.45 | 0.47 |
| Third party J | Third party | 87,724,307.40 | 3,460,963.85 | 0.35 |
| Third party K | Third party | 65,212,459.79 | 2,167,853.00 | 0.26 |
| Third party L | Third party | 32,179,382.19 | 7,185,691.53 | 0.13 |
| Total | 21,466,134,531.64 | 71,488,189.83 | 84.68 |
1.5 As of June 30, 2023, there is no termination of accounts receivable booking due to transfer of a financial asset.
1.6 As of June 30, 2023, the Company has no assets/liabilities booked due to transferred accounts receivable that the Company still continue to be involved in.
2. Other receivables
2.1 By categories
Unit：RMB
| Category | Closing balance | Opening balance |
| Dividends receivable | - | 85,323,007.51 |
| Other receivables | 2,449,514,292.50 | 2,324,554,929.22 |
| Total | 2,449,514,292.50 | 2,409,877,936.73 |
2.2 Dividends receivable
Unit：RMB
| Investees | Closing balance | Opening balance |
| Subsidiaries of Hikvision | - | 85,323,007.51 |
| Total | - | 85,323,007.51 |
2.3 Other receivables
2.3.1 Other receivables by aging
Unit: RMB
| Item | Closing balance | Opening balance |
| Within contract period | 2,388,619,523.18 | 2,291,096,654.42 |
| Within 1 year | 56,812,812.10 | 33,503,835.61 |
1-2 years
| 1-2 years | 5,292,356.11 | 2,112,945.32 |
| 2-3 years | 629,090.84 | 341,396.88 |
| 3-4 years | 187,088.10 | 946,880.46 |
| Over 4 years | 1,033,250.95 | 646,571.70 |
| Other receivables | 2,452,574,121.28 | 2,328,648,284.39 |
| Less: Credit impairment reserve | 3,059,828.78 | 4,093,355.17 |
| Book value | 2,449,514,292.50 | 2,324,554,929.22 |
2.3.2 Other receivables by nature of the payment
Unit: RMB
| Nature | Closing balance | Opening balance |
| Payments by related parties within the Group | 1,603,639,393.44 | 2,137,185,066.96 |
| Restricted stock repurchase funds | 693,632,312.71 | 80,136,229.12 |
| Temporary payments for receivables | 67,562,096.44 | 29,809,325.81 |
| Guarantee deposit | 63,424,311.40 | 69,392,171.01 |
| Others | 24,316,007.29 | 12,125,491.49 |
| Total | 2,452,574,121.28 | 2,328,648,284.39 |
2.3.3 Provision for credit losses
The amount of credit loss provision reversed in the current period was RMB1,033,526.39.
2.3.4 The actual write-off of other receivables in the current reporting period was nil.
2.3.5 Top 5 debtors of other receivables in terms of closing balance
Unit：RMB
| The name of entity | Relationship with the Company | Nature | Closing balance | Aging | Percentage to total other receivables (%) | Closing balance for credit loss provision |
| Subsidiary B | Subsidiary | Internal Payment | 524,681,230.77 | Within contract period | 21.39 | - |
| Subsidiary C | Subsidiary | Internal Payment | 220,166,191.97 | Within contract period | 8.98 | - |
| Subsidiary D | Subsidiary | Internal Payment | 156,749,344.47 | Within contract period | 6.39 | - |
| Subsidiary E | Subsidiary | Internal Payment | 138,294,808.29 | Within contract period | 5.64 | - |
| Subsidiary F | Subsidiary | Internal Payment | 91,631,025.06 | Within contract period | 3.74 | - |
| Total | 1,131,522,600.56 | 46.14 | - |
2.3.6 At the end of the current reporting period, the Company had no other receivables involving government subsidies.
2.3.7 At the end of the current reporting period, there were no other receivables derecognized due to the transfer of financial assets.
2.3.8 At the end of the current reporting period, there were no assets or liabilities formed by continuing involvement in transferred other receivables
3. Long-term equity investment
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying Balance | Provisions | Book Value | Carrying Balance | Provisions | Book Value | |
| Investment in subsidiaries | 7,378,499,186.79 | - | 7,378,499,186.79 | 6,629,092,230.54 | - | 6,629,092,230.54 |
| Investments in associated enterprises and joint ventures | 976,579,645.91 | - | 976,579,645.91 | 1,106,666,564.96 | - | 1,106,666,564.96 |
| Total | 8,355,078,832.70 | - | 8,355,078,832.70 | 7,735,758,795.50 | - | 7,735,758,795.50 |
3.1 Investment in subsidiaries
Unit：RMB
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Balance of impairment loss provision at the end of the current reporting period |
| Hangzhou Hikvision System Technology Ltd. | 873,470,130.37 | 17,701,842.20 | - | 891,171,972.57 | - | - |
| Hangzhou Hikvision Technology Ltd. | 1,099,649,009.63 | 18,477,361.32 | - | 1,118,126,370.95 | - | |
| Hangzhou EZVIZ Network Co., Ltd. | 60,631,166.55 | 51,645.76 | - | 60,682,812.31 | - | - |
| Hangzhou EZVIZ Software Ltd. | 32,365,508.28 | 115,145.58 | - | 32,480,653.86 | - | |
| Hangzhou Hikrobot Technology Ltd. | 137,606,813.93 | 451,915.72 | - | 138,058,729.65 | - | - |
| Hangzhou Haikang Intelligent Technology Ltd. | 8,398,458.69 | 484,706.51 | - | 8,883,165.20 | - |
3.2 Investments in associated enterprises and joint ventures
Unit：RMB
| Name of investee | Opening balance | Increase/Decrease during the current reporting period | Closing balance | Balance of impairment loss provision at the end of the current reporting period | |||||||
| Additional Investments | Reduced Investments | Investment income (losses) recognized under the equity method | Other comprehensive income adjustment | Other changes in equity | Declared cash dividends or profit distribution | Provision for impairment | Others | ||||
| 1. Joint Ventures | |||||||||||
| Hangzhou Haikang Intelligent Industrial Equity Investment Fund Partnership (L.P.) | 829,825,387.60 | - | - | (32,069,650.91) | - | 4,103,623.46 | - | - | 801,859,360.15 | - | |
| Zhejiang City Digital Technology Ltd. | 26,341,510.80 | - | - | 800,625.28 | - | - | - | - | 27,142,136.08 | - | |
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
Note 1: During the current reporting period, the Group included Wuhu Sensortech Intelligent Technology Ltd. in the scope of consolidated financial statements and nolonger accounted for it as an associate, see Note (VI). 1 for details.
3.3 As of June 30, 2023, there were no restrictions on the capability of transferring fund to the Company from investees in which the Company held long-term equityinvestment.
| Zhejiang Haishi Huayue Digital Technology Ltd. | 13,382,016.23 | - | - | (34,812.41) | - | - | - | - | 13,347,203.82 | - | |
| Guangxi Haishi City Operation Management Ltd. | 13,059,993.97 | - | - | 260,727.19 | - | - | - | - | 13,320,721.16 | - | |
| Xuzhou Kangbo City Operation Management Service Ltd | 10,385,566.88 | - | - | (43,315.31) | - | - | - | - | 10,342,251.57 | - | |
| Yunnan Yinghai Parking Service Ltd. | 5,077,998.04 | - | - | (146,686.51) | - | - | - | - | 4,931,311.53 | - | |
| Shenzhen Haishi Urban Service Operation Ltd. | 1,674,806.73 | - | - | (1,106,775.95) | - | - | - | - | 568,030.78 | - | |
| Subtotal | 899,747,280.25 | - | - | (32,339,888.62) | - | 4,103,623.46 | - | - | 871,511,015.09 | - | |
| 2. Associated Companies | |||||||||||
| Wuhu Sensortech Intelligent Technology Ltd. (Note 1) | 98,094,380.52 | - | - | (4,911,240.97) | - | - | - | - | (93,183,139.55) | - | - |
| Maxio Technology (Hangzhou) Co., Ltd. | 86,399,534.11 | - | - | (1,801,879.87) | - | - | - | - | - | 84,597,654.24 | - |
| Zhiguang Hailian Big Data Technology Ltd. | 22,425,370.08 | - | - | (1,954,393.50) | - | - | - | - | - | 20,470,976.58 | - |
| Subtotal | 206,919,284.71 | - | - | (8,667,514.34) | - | - | - | - | (93,183,139.55) | 105,068,630.82 | - |
| Total | 1,106,666,564.96 | - | - | (41,007,402.96) | - | 4,103,623.46 | - | - | (93,183,139.55) | 976,579,645.91 | - |
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
4. Revenue and operating costs
Unit：RMB
| Item | First half year of 2023 | First half year of 2022 | ||
| Revenue | Cost | Revenue | Cost | |
| Major business | 9,370,837,249.86 | 1,733,392,550.35 | 10,333,485,585.25 | 2,123,002,343.03 |
| Other business | 1,522,582,234.95 | 81,288,706.34 | 1,430,584,072.30 | 58,524,277.39 |
| Total | 10,893,419,484.81 | 1,814,681,256.69 | 11,764,069,657.55 | 2,181,526,620.42 |
5. Investment income
Details of investment income
Unit：RMB
| Item | First half year of 2023 | First half year of 2022 |
| Long-term equity investment income calculated by cost method | 141,000,000.00 | 22,171,425.49 |
| Long-term equity investment income(losses) measured by equity method | (41,007,402.96) | 51,641,039.76 |
| Investment income from disposal of asset portfolio | 15,902,073.63 | - |
| Investment income from holding debt investment | 10,251,456.56 | - |
| Investment income from disposal of other non-current financial assets | - | 1,260,000.00 |
| Investment income of other non-current financial assets during the holding period | - | 51,892,209.92 |
| Investment losses from disposal of held of trading financial assets | - | (474,053.30) |
| Total | 126,146,127.23 | 126,490,621.87 |
XVI. Supplementary information
1. Details of current non-recurring gains and losses
Unit：RMB
| Item | Amount | Description |
| Profit or loss from disposal of non-current assets | (3,226,747.72) | / |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based on standard quota or quantitative continuous enjoyment according to the state industrial policy) | 245,104,357.89 | / |
| In addition to the Company's normal business related to the effective hedging business, gains and losses on changes in fair value arising from holding derivative financial assets, derivative financial liabilities, other non-current financial assets, and investment gains from the disposal of the above-mentioned financial assets/financial liabilities and receivables financing | (16,837,465.82) | / |
| The profit and loss of business combination under different control realized in stages by multiple transactions | 116,433,610.45 | |
| Other non-operating income and expense except the items mentioned above | 50,494,516.61 | / |
| Impact of income tax | (29,677,695.82) | / |
Hikvision 2023 Half Year Report
Notes to Financial StatementsFor the reporting period from January 1, 2023 to June 30, 2023
| Item | Amount | Description |
| The impact of minority equity | (60,551,191.67) | / |
| Total | 301,739,383.92 | / |
2. Return on net assets and earnings per share
The return on net assets and earnings per share have been prepared by Hangzhou Hikvision Digital Technology Co.,Ltd. in accordance with the Information Disclosure and Presentation Rules for Companies Making Public Offeringof Securities No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (Revised in 2010)issued by China Securities Regulatory Commission.
Unit：RMB
| Profit for the reporting period | Weighted average return on net assets (%) | Earnings per share | |
| Basic earnings per share | Diluted earnings per share | ||
| Net profit attributable to ordinary shareholders of the Company | 7.60% | 0.568 | 0.568 |
| Net profit excluding non-recurring items of profit or loss attributable to ordinary shareholders of the Company | 7.17% | 0.568 | 0.568 |
Hikvision 2023 Half Year Report
Section XI Documents Available for Reference
1. The half year report was signed by the Company's legal representative.
2. The financial report was signed and sealed by the person in charge of the Company, the person incharge of accounting work and person in charge of accounting organization.
3. Original copy of all the Company's documents and announcements were published on thenewspapers designated by CSRC within the reporting period.
The above documents are completely placed at the Company's Board of Directors' office.
Hangzhou Hikvision Digital Technology Co., Ltd.
Chairman: Chen Zongnian
August 19, 2023
Note:
This document is a translated version of the Chinese version 2023 Half Year Report (“2023年半年度报告”), and the published announcements in the Chinese version shall prevail. The completepublished Chinese 2023 Half Year Report may be obtained at www.cninfo.com.cn.