YANTAI CHANGYU PIONEER WINECOMPANY LIMITED
Financial Statements and Auditor's ReportFor the year ended 31 December 2018
FINANCIAL STATEMENTS AND AUDITOR'S REPORTFOR THE YEAR ENDED 31 DECEMBER 2018
CONTENTS PAGE
AUDITOR'S REPORT 1 - 5
THE CONSOLIDATED BALANCE SHEET 6 - 8
THE COMPANY'S BALANCE SHEET 9 - 10
THE CONSOLIDATED INCOME STATEMENT 11
THE COMPANY'S INCOME STATEMENT 12
THE CONSOLIDATED CASH FLOW STATEMENT 13
THE COMPANY'S CASH FLOW STATEMENT 14
THE CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 15
THE COMPANY'S STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 16
NOTES TO THE FINANCIAL STATEMENTS 17 - 107
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (19) No. P02452
(Page 1 of 5)
TO THE SHAREHOLDERS OFYANTAI CHANGYU PIONEER WINE COMPANY LIMITED
1. Opinion
We have audited the financial statements of Yantai Changyu Pioneer Wine Company Limited("Yantai Changyu Company"), which comprise the consolidated and Company's balance sheets as at31 December 2018, and the consolidated and Company's income statements, the consolidated andCompany's cash flow statements and the consolidated and Company's statements of changes inowners' equity for the year then ended, and the notes to the financial statements.
In our opinion, the accompanying financial statements of Yantai Changyu Pioneer Wine CompanyLimited is prepared and present fairly, in all material respects, the consolidated and Company'sfinancial position as of 31 December 2018, and the consolidated and the Company's results ofoperations and cash flows for the year then ended in accordance with Accounting Standards forBusiness Enterprises.
2. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities underthose standards are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of Yantai Changyu Company in accordancewith the code of ethics for Chinese Certified Public Accountants, and we have fulfilled our otherethical responsibilities in accordance with the Code. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance inour audit of the financial statements of the current year. These matters were addressed in the contextof our audit of the financial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters. We determine the followings are key audit matters inneed of communication in our report.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 2 of 5)
3. Key Audit Matters - continued
Impairment assessment of certain long-term assets
1. Item description
As stated in Note IV “Impairment of long-term assets”, the Production of Yantai ChangyuPioneer Wine Company Limited Research and Development Co., Ltd. ("R&D Centre"),subsidiary of the Company as well as a new main production base of the Company, accounts formore than 60% of the Group’s production in 2018. As at 31 December 2018, the book values oflong-term assets including fixed assets, construction in progress and intangible of "R&D Centreamounted to RMB 3.5 billion, accounting for 26.6% of the total assets in the consolidatedfinancial statements, which exerts significant influence on the consolidated financial statements.As there is little space for the development of the domestic wine market, the management of theCompany faces great operating pressures with certain risks of impairment of related long-termassets. The management performs the impairment test by determining if the recoverable amount isless than the book value of long-term assets and determines the recoverable amount based on thepresent value of expected future cash flows. In the estimate of the present value of future cashflows, the management is required to make significant judgements in the assumptions includingthe sales growth rate, future selling price, production cost, operating expenses and discount rate.For the above reasons, we identified the valuation of the impairment of long-term assets as a keyaudit matter.
2. How our audit addressed the key audit matter
Our procedures in relation to the key audit matter mainly included:
(1) Test and evaluate the effectiveness of the design and implementation of the internal
control related to the valuation of the impairment of long-term assets;
(2) Review and evaluate the reasonableness of key assumptions and judgements used in the
estimate of the present value of expected future cash flows in the impairment test based onthe historical records of the Company and our understanding of the business and industryin which the Company operates.
(3) Using our internal valuation specialists, reviewing the appropriateness of the future cash
flows discount model prepared by the management and the rationality of the discount rateused;
(4) Performing the recalculation procedure, checking the accuracy of calculations in the
discount future cash flows model.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 3 of 5)
4. Other Information
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for otherinformation. The other information comprises the information included in the Yantai Changyu 2018annual report, but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not expressany form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.
5. Responsibilities of the Management and Those Charged with Governance for the Financial
Statements
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for thepreparation and fair presentation of the financial statements in accordance with Accounting Standardsfor Business Enterprises, and designing, implementing and maintaining internal control that isnecessary to enable the financial statements that are free from material misstatement, whether due tofraud or error.
In preparing the financial statements, the management is responsible for assessing Yantai ChangyuCompany’s ability to continue as a going concern, disclosing, as applicable, matters related to goingconcern and using the going concern basis of accounting unless the management either intends toliquidate Yantai Changyu Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing Yantai Changyu Company’s financialreporting process.
6. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion solely to you. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with China Standards on Auditing will always detecta material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 4 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the internal control.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on Yantai Changyu Company’sability to continue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditor's report to the related disclosures in the financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditor's report. However, futureevents or conditions may cause the Yantai Changyu Company to cease to continue as a goingconcern.
(5) Evaluate the overall presentation, structure and content of the financial statements (including
the disclosures), and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Yantai Changyu Company to express an opinion on thefinancial statements. We are responsible for the direction, supervision and performance of thegroup audit. We remain solely responsible for our audit opinion.
AUDITORS’ REPORT - continued
De Shi Bao (Shen) Zi (19) No. P02452
(Page 5 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,related safeguards.
From the matters communicated with those charged with governance, we determine those matters thatwere of most significance in the audit of the financial statements of the current year and are thereforethe key audit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant: Xie Yanfeng
Shanghai, China (Engagement partner)
Chinese Certified Public Accountant: Li Yangang
18 April 2019
CONSOLIDATED BALANCE SHEETSYEAR ENDED 31 DECEMBER 2018
ASSETS Notes 31/12/2018 31/12/2017RMB RMB
CURRENT ASSETSCash and bank VI-1 1,475,700,477 1,402,522,509Notes and accounts receivable VI-2 530,821,071 508,593,173Including: Notes receivable VI-2.2 288,667,988 244,796,818
Accounts receivable VI-2.3 242,153,083 263,796,355Prepayments VI-3 4,219,949 2,417,931Other receivables VI-4 22,636,086 18,978,422Including: Interest receivable VI-4.2 1,332,681 240,968Inventories VI-5 2,724,591,457 2,473,614,046Non-current assets held for sale - 2,000,197Other current assets VI-6 258,676,396 230,822,759_____________ _____________Total current assets 5,016,645,436 4,638,949,037_____________ _____________NON-CURRENT ASSETSAvailable-for-sale financial assets VI-7 467,251 467,251Investment properties VI-8 31,572,489 18,467,989Fixed assets VI-9 5,749,731,667 5,329,083,969Construction in progress VI-10 759,296,591 1,026,141,569Bearer biological assets VI-11 209,266,373 201,929,888Intangible assets VI-12 655,473,459 655,448,897Goodwill VI-13 165,199,111 128,135,981Long-term prepaid expenses VI-14 244,640,416 230,009,231Deferred tax assets VI-15 285,436,259 308,121,396_____________ _____________Total non-current assets 8,101,083,616 7,897,806,171_____________ _____________Total assets 13,117,729,052 12,536,755,208_____________ __________________________ _____________
CONSOLIDATED BALANCE SHEETSYEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017RMB RMB
CURRENT LIABILITIESShort-term borrowings VI-16 688,002,410 714,434,286Notes and accounts payable VI-17 713,572,881 666,442,879Receipts in advance VI-18 226,075,244 350,894,156Employee benefits payable VI-19 212,304,217 210,824,234Taxes payable VI-20 128,912,790 145,094,156Other payables VI-21 608,479,890 603,735,569Including: Interest payable 712,826 771,250
Other payables VI-21.2 607,767,064 602,964,319Deferred income VI-22 15,860,254 16,878,199Non-current liabilities due within one year VI-23 152,940,788 110,954,827_____________ _____________Total current liabilities 2,746,148,474 2,819,258,306_____________ _____________NON-CURRENT LIABILITIESLong-term borrowings VI-24 156,480,662 156,125,854Long-term payables VI-25 225,000,000 259,000,000Deferred income VI-22 70,367,039 92,918,855Deferred tax liabilities VI-15 22,010,647 24,264,203Other non-current liabilities VI-26 7,234,853 7,209,312_____________ _____________Total non-current liabilities 481,093,201 539,518,224_____________ _____________Total liabilities 3,227,241,675 3,358,776,530_____________ _____________
CONSOLIDATED BALANCE SHEETSYEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017RMB RMBEQUITYShare capital VI-27 685,464,000 685,464,000Capital reserve VI-28 565,955,441 565,955,441Other comprehensive income VI-29 2,965,377 3,109,240Surplus reserve VI-30 342,732,000 342,732,000Retained earnings VI-31 8,008,982,547 7,309,081,618_____________ _____________Equity attributable to shareholdersof the Company 9,606,099,365 8,906,342,299Non-controlling interests 284,388,012 271,636,379_____________ _____________Total equity 9,890,487,377 9,177,978,678_____________ _____________Total liabilities and equity 13,117,729,052 12,536,755,208_____________ __________________________ _____________
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 6 to 107 were signed by the following:
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Legal Representative
| Legal Representative | Person in Charge of the Accounting Body | Chief Accountant |
BALANCE SHEET OF THE COMPANYYEAR ENDED 31 DECEMBER 2018
ASSETS Notes 31/12/2018 31/12/2017RMB RMB
CURRENT ASSETSCash and bank XIV-1 624,588,809 559,174,466Notes and accounts receivable XIV-2 41,333,227 49,450,536Including: Notes receivable XIV-2.2 39,885,254 41,645,203
Accounts receivable XIV-2.3 1,447,973 7,805,333Prepayments 227 99,673Other receivables XIV-3 1,025,643,356 999,846,643Including: Interest receivable 254,088 76,646
Dividend receivables XIV-3.2 500,000,000 407,495,922Inventories XIV- 4 385,154,740 348,042,053Non-current assets held for sale - 2,000,197Other current assets 24,704,844 29,706,058_____________ _____________Total current assets 2,101,425,203 1,988,319,626_____________ _____________NON-CURRENT ASSETSLong-term equity investments XIV- 5 7,420,803,069 4,511,202,204Investment properties VI-8 31,572,489 18,467,989Fixed assets XIV- 6 265,311,274 288,150,901Construction in progress XIV- 7 6,311,701 6,756,349Construction in progress XIV- 8 125,002,793 119,572,539Intangible assets XIV- 9 67,244,066 69,623,219Deferred tax assets XIV- 10 24,194,967 28,787,907Other non-current assets XIV- 11 972,700,000 3,718,674,166_____________ _____________Total non-current assets 8,913,140,359 8,761,235,274_____________ _____________Total assets 11,014,565,562 10,749,554,900_____________ __________________________ _____________
BALANCE SHEET OF THE COMPANYYEAR ENDED 31 DECEMBER 2018 - continued
LIABILITIES AND EQUITY Notes 31/12/2018 31/12/2017RMB RMB
CURRENT LIABILITIESShort-term borrowings XIV- 12 150,000,000 600,000,000Notes and accounts payable XIV- 13 132,704,304 97,833,124Advances from customers - 6,000,000Employee benefits payable XIV- 14 72,345,179 70,108,076Taxes payable XIV- 15 13,111,431 14,569,690Other payables XIV- 16 607,974,519 545,365,672Including: Interest payable 181,250 652,500
Other payables XIV- 16.2 607,793,269 544,713,172Deferred income 3,433,054 3,953,054_____________ _____________Total current liabilities 979,568,487 1,337,829,616_____________ _____________NON-CURRENT LIABILITIESDeferred income 8,910,918 12,628,573Other non-current liabilities XIV- 14 2,710,575 2,577,702_____________ _____________Total non-current liabilities 11,621,493 15,206,275_____________ _____________Total liability 991,189,980 1,353,035,891_____________ _____________EQUITYShare capital VI-27 685,464,000 685,464,000Capital reserve XIV- 17 557,222,454 557,222,454Surplus reserve VI-30 342,732,000 342,732,000Retained earnings 8,437,957,128 7,811,100,555_____________ _____________Total equity 10,023,375,582 9,396,519,009_____________ _____________Total liabilities and equity 11,014,565,562 10,749,554,900_____________ __________________________ _____________
CONSOLIDATED INCOME STATEMENTYEAR ENDED 31 DECEMBER 2018
Notes 2018 2017RMB RMB
I. Revenue VI-32 5,142,244,740 4,932,545,229Less: Cost of sales VI-32 1,901,611,507 1,671,592,279
Taxes and surcharges VI-33 276,491,674 310,252,023Selling expenses VI-34 1,274,599,146 1,272,522,443Administrative expenses VI-35 343,580,651 336,461,133
Research and development expenses 4,784,118 4,320,825
Financial expenses VI-36 35,945,302 18,590,259Including: Interest income 12,086,007 9,168,772
Interest expenses 46,354,902 26,095,487(Reversal of)Impairment loss of assets VI-37 (912,166) 8,293,553Add: Income (loss) from disposal of assets 11,368,355 (222,586)
Other income VI-38 87,281,434 46,038,384____________ ____________II. Operating profit 1,404,794,297 1,356,328,512
Add: Non-operating income VI-39 7,353,309 17,230,727Less: Non-operating expenses VI-40 3,535,908 1,631,476____________ ____________III. Profit before tax 1,408,611,698 1,371,927,763
Less: Income tax VI-41 367,127,522 338,134,245____________ ____________IV. Profit for the year 1,041,484,176 1,033,793,518____________ ____________
(I) Categorized by the nature of continuing operation
1. Net profit from continuing operations 1,041,484,176 1,033,793,518____________ ____________
(II) Categorized by ownership:
1. Profit or loss attributable to non-controlling interests (1,148,753) 2,098,462
2. Net profit attributable to owners of the Company 1,042,632,929 1,031,695,056____________ ____________V. Other comprehensive income (post-tax) (376,524) 9,863,872____________ ____________Other comprehensive income attributableto shareholders of the CompanyOther comprehensive incometo be reclassified to profit and loss
Foreign currency statement translation difference (143,863) 8,368,254
Other comprehensive income attributable
to non-controlling interest (232,661) 1,495,618____________ ____________VI. Total comprehensive income 1,041,107,652 1,043,657,390____________ ____________
Attribute to shareholders of the Company 1,042,489,066 1,040,063,310
Attribute to non-controlling interest of the Company (1,381,414) 3,594,080____________ ________________________ ____________VII. Earnings per share(I) Basic earnings per share VI-42 1.52 1.51____________ ________________________ ____________(II) Diluted earnings per share VI-42 N/A N/A____________ ________________________ ____________
INCOME STATEMENT OF THE COMPANYYEAR ENDED 31 DECEMBER 2018
Notes 2018 2017RMB RMB
I. Revenue XIV-18 876,447,070 1,311,256,854
Less: Cost of sales XIV-18 774,487,031 1,165,953,408
Taxes and surcharges XIV-19 38,346,761 76,570,225Administrative expenses XIV-20 90,505,208 79,119,135Research and development expenses 887,355 1,573,909Financial expenses XIV-21 (20,292,737) 637,568Including: Interest income 41,821,372 18,602,199
Interest expenses 16,075,353 17,414,181Add:Investment income XIV-22 964,128,659 798,877,905
Income (loss) from disposal of assets 12,411,962 (29,625)Other income 4,237,655 5,219,126____________ ____________II. Operating Profit 973,291,728 791,470,015
Add: Non-operating income 1,483,478 686,646Less: Non-operating expenses 593,694 335,237____________ ____________III. Profit before tax 974,181,512 791,821,424
Less: Income tax 4,592,939 (1,776,586)____________ ____________IV. Profit for the year 969,588,573 793,598,010____________ ________________________ ____________
Net profit from continuing operations 969,588,573 793,598,010____________ ____________V. Total comprehensive income 969,588,573 793,598,010____________ ________________________ ____________
CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 DECEMBER 2018
Notes 2018 2017RMB RMBCASH FLOWS FROM OPERATING ACTIVITIESCash receipts from the sale of goodsand the rendering of services 4,950,603,207 4,827,152,526Receipts of tax refunds 57,056,690 53,196,910Other cash receipts relating to operating activities VI-43(1) 72,703,872 85,236,905
___________ ___________
Sub-total of cash inflows from operating activities 5,080,363,769 4,965,586,341
___________ ___________
Cash payments for goods purchased and services received 1,383,945,233 1,143,840,915Cash payments to and on behalf of employees 544,742,974 512,777,815Payment of various types of taxes 1,111,980,499 1,260,813,596Other cash payments relating to operating activities VI-43(2) 1,063,716,317 1,074,910,988
___________ ___________
Sub-total of cash outflows from operating activities 4,104,385,023 3,992,343,314
___________ ___________
Net cash flows from operating activities VI-44(1) 975,978,746 973,243,027
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIESCash receipts from disposals and recovery of investments 400,000,000 205,000,000Proceeds from return on investments 3,445,895 4,084,350Net cash receipts from disposals of fixed assets,intangible assets and other long-term assets 19,967,431 7,594,005
___________ ___________
Sub-total of cash inflows from investing activities 423,413,326 216,678,355
___________ ___________
Cash paid for acquisition of properties, plants and equipment,intangible assets and other long-term assets 347,384,820 435,960,357Cash payments to acquire investments 478,042,400 297,129,216Cash paid for the purchase subsidiaries and other equity VI-43(3) 105,834,655 303,796,543
___________ ___________
Sub-total of cash outflows from investing activities 931,261,875 1,036,886,116
___________ ___________
Net cash flows from investing activities (507,848,549) (820,207,761)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIESCash receipts from capital contributions 2,050,000 48,396,726Including: cash receipts from capital contributionsfrom non-controlling owners of subsidiaries 2,050,000 48,396,726Cash receipts from borrowings 1,049,815,411 963,564,600Other cash received from financing activities VI-43(4) 62,468,259 52,930,804
___________ ___________
Sub-total of cash inflows from financing activities 1,114,333,670 1,064,892,130
___________ ___________
Cash paid for borrowings 1,103,189,409 876,502,273Cash paid for dividends, profits and interests 397,351,813 369,791,284Cash paid for other financing activities VI-43(5) 46,100,000 61,700,000
___________ ___________
Sub-total of cash outflows from financing activities 1,546,641,222 1,307,993,557
___________ ___________
Net cash flows from financing activities (432,307,552) (243,101,427)
___________ ___________
Effect of foreign exchange rate changeson cash and cash equivalents (9,851,585) 14,013,131NET INCREASE (DECREASE) OF CASHAND CASH EQUIVALENTS 25,971,060 (76,053,030)Add: cash and cash equivalents at beginning of the year VI-44(3) 1,180,889,274 1,256,942,304
___________ ___________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR VI-44(3) 1,206,860,334 1,180,889,274
___________ ______________________ ___________
CASH FLOW STATEMENT OF THE COMPANYYEAR ENDED 31 DECEMBER 2018
Notes 2018 2017RMB RMBCASH FLOWS FROM OPERATING ACTIVITIESCash receipts from the sale of goodsand the rendering of services 817,341,175 984,103,489Other cash receipts relating to operating activities 177,786,322 431,983,092
___________ ___________
Sub-total of cash inflows from operating activities 995,127,497 1,416,086,581
___________ ___________
Cash payments for goods purchased and services received 608,241,452 398,827,772Cash payments to and on behalf of employees 107,256,441 89,894,049Payment of various types of taxes 62,066,449 207,917,864Other cash payments relating to operating activities 74,357,324 121,377,127
___________ ___________
Sub-total of cash outflows from operating activities 851,921,666 818,016,812
___________ ___________
Net cash flows from operating activities XIV-23(1) 143,205,831 598,069,769
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIESCash receipts from disposals and recovery of investments 370,000,000 103,000,000Proceeds from return on investments 874,520,633 827,218,467Net cash receipts from disposals of fixed assets,intangible assets and other long-term assets 11,212,195 26,760,929
___________ ___________
Sub-total of cash inflows from investing activities 1,255,732,828 956,979,396
___________ ___________
Cash paid for acquisition of properties, plants and equipment,intangible assets and other long-term assets 28,842,911 22,527,073Cash payments to acquire investments 410,000,000 105,000,000Cash paid for the purchase subsidiaries and other equity 107,194,420 881,056,220
___________ ___________
Sub-total of cash outflows from investing activities 546,037,331 1,008,583,293
___________ ___________
Net cash flows from investing activities 709,695,497 (51,603,897)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIESCash receipts from borrowings 200,000,000 600,000,000
___________ ___________
Sub-total of cash inflows from financing activities 200,000,000 600,000,000
___________ ___________
Cash paid for borrowings 650,000,000 530,339,600Cash paid for dividends, profits and interests 364,085,312 360,560,604
___________ ___________
Sub-total of cash outflows from financing activities 1,014,085,312 890,900,204
___________ ___________
Net cash flows from financing activities (814,085,312) (290,900,204)
___________ ___________
NET INCREASE OF CASHAND CASH EQUIVALENTS 38,816,016 255,565,668Add: cash and cash equivalents at beginning of the year XIV-24 493,568,866 238,003,198
___________ ___________
CASH AND CASH EQUIVALENTS AT ENDOF THE YEAR XIV-24 532,384,882 493,568,866
___________ ______________________ ___________
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITYYEAR ENDED 31 DECEMBER 2018
2018Attributable to shareholders of the CompanyIssued Capital Other comprehensive Surplus Retained Non-controllingcapital surplus income reserve earnings interests TotalRMB RMB RMB RMB RMB RMB RMB
I. 1/1/2018 685,464,000 565,955,441 3,109,240 342,732,000 7,309,081,618 271,636,379 9,177,978,678
_______ _______ _______ ________ ________ _______ ________
II. Changes for the year(I) Total comprehensive income - - (143,863) - 1,042,632,929 (1,381,414) 1,041,107,652(II) Owners’ contributions andreduction in capital
Acquisition ofsubsidiaries (VIII-2) - - - - - 17,532,823 17,532,823(III) Profit distribution
Distributions toshareholders (VI-31, VIII-2 ) - - - - (342,732,000) (3,399,776) (346,131,776)
_______ _______ _______ ________ ________ _______ ________
III. 31/12/2018 685,464,000 565,955,441 2,965,377 342,732,000 8,008,982,547 284,388,012 9,890,487,377
_______ _______ _______ ________ ________ _______ _______________ _______ _______ ________ ________ _______ ________
2017Attributable to shareholders of the CompanyIssued Capital Other comprehensive Surplus Retained Non-controllingcapital surplus income reserve earnings interests TotalRMB RMB RMB RMB RMB RMB RMB
I. 1/1/2017 685,464,000 565,955,441 (5,259,014) 342,732,000 6,620,118,562 190,473,697 8,399,484,686
_______ _______ _______ _______ ________ _______ ________
II. Changes for the year(I) Total comprehensive income - - 8,368,254 - 1,031,695,056 3,594,080 1,043,657,390(II) Owners’ contributions andreduction in capital
Non-controlling interests' capitalcontribution - - - - - 78,236,726 78,236,726(III) Profit distribution
Distributions toshareholders (VI-31) - - - - (342,732,000) (668,124) (343,400,124)
_______ _______ _______ _______ ________ _______ ________
III. 31/12/2017 685,464,000 565,955,441 3,109,240 342,732,000 7,309,081,618 271,636,379 9,177,978,678
_______ _______ _______ _______ ________ _______ _______________ _______ _______ _______ ________ _______ ________
STATEMENT OF CHANGES IN EQUITY OF THE COMPANYYEAR ENDED 31 DECEMBER 2018
2018Issued capital Capital reserve Surplus reserve Retained earnings TotalRMB RMB RMB RMB RMB
I. 1/1/2018 685,464,000 557,222,454 342,732,000 7,811,100,555 9,396,519,009
________ ________ ________ _________ __________
II. Changes for the year(I) Total comprehensive income - - - 969,588,573 969,588,573(II) Profit distributionDistributions to shareholders (VI-31) - - - (342,732,000) (342,732,000)
________ ________ ________ _________ __________
III. 31/12/2018 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582
________ ________ ________ _________ __________________ ________ ________ _________ __________
2017Issued capital Capital reserve Surplus reserve Retained earnings TotalRMB RMB RMB RMB RMB
I. 1/1/2017 685,464,000 557,222,454 342,732,000 7,360,234,545 8,945,652,999
________ ________ ________ _________ _________
II. Changes for the year(I) Total comprehensive income - - - 793,598,010 793,598,010(II) Profit distributionDistributions to shareholders (VI-31) - - - (342,732,000) (342,732,000)
________ ________ ________ _________ _________
III. 31/12/2017 685,464,000 557,222,454 342,732,000 7,811,100,555 9,396,519,009
________ ________ ________ _________ _________________ ________ ________ _________ _________
NOTES TO FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2018
I. CORPORATE INFORMATION
Yantai Changyu Pioneer Wine Co., Ltd. (the "Company") was incorporated as a joint stocklimited company in accordance with the Company Law of the People's Republic of China (the"PRC") in a reorganization carried out by Yantai Changyu Group Co., Ltd. ("Changyu GroupCompany"), in which Changyu Group Company injected certain assets and liabilities in relation tothe brandy, wine, and sparkling wine production and sales businesses to the Company. TheCompany and its subsidiaries (the "Group") are principally engaged in the production and sales ofwine, brandy, sparkling wine, grape growing and acquisition, as well as travel resourcedevelopment, etc. . Registration place of the Company is Yantai, Shandong. Headquarter of theCompany is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong, PRC.
As at 31 December 2018 the total shares issued by the Company amounts to 685,464,000 shares.Please refer to Note VI-27 in detail.
The holding company of the Group is Changyu Group Company, which is jointly controlled byYantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, InternationalFinance Corporation and Yantai Yuhua Investment and Development Company Limited.
The financial statements have been authorized by the board of directors on 18 April 2019.According to the Company's articles of association, the financial statements will be reviewed byshareholders on the shareholder's meeting.
For consolidation scope of the year, please refer to Note VIII "Equity in other entities" in detail.For detail of changes in consolidation scope of the year, please refer to Note VII "Change inconsolidation scope".
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") issued bythe Ministry of Finance ("MoF"). In addition, the Group has disclosed relevant financialinformation in accordance with Information Disclosure and Presentation Rules for CompaniesOffering Securities to the Public No. 15 - General Provisions on Financial Reporting (Revised in2014).
2. Basis of accounting and principle of measurement
The Group has adopted the accrual basis of accounting. The Group adopts the historical cost asthe principle of measurement in the financial statements. Where assets are impaired, provisionsfor asset impairment are made in accordance with relevant requirements.
Under the historical cost measurement, an asset is measured at the value of cash and cashequivalents or the fair value of consideration paid at the date of the purchase. Liability ismeasured at the value of asset received through taking current obligation, the contract value fortaking current obligation, or the cash and cash equivalents value estimated for repaying debt indaily business activity.
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
2. Basis of accounting and principle of measurement - continued
Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date, regardless of whetherthat price is directly observable or estimated using another valuation technique. Fair value formeasurement and/or disclosure purposes in these consolidated financial statements is determinedon such a basis.
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which theinputs to the fair value measurements are observable and the significance of the inputs to the fairvalue measurement in its entirety, which are described as follows:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
2) Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
3) Level 3 inputs are unobservable inputs for the asset or liability.
3. Going concern
As at 31 December 2018, the Group evaluated the profitability ability in the foreseeable 12months and did not notice any event or circumstance that would constitute significant doubt ongoing concern ability of the Group. Therefore, the financial statements have been prepared on agoing concern basis.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
1. Declaration for implementing CAS
The financial statements are prepared in accordance with CAS, which showing a true and fairview of the financial position on 31 December 2018, financial performance and cash flow in 2018of the Company and the Group.
2. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
3. Business cycle
Business cycle refers to the period from purchasing assets to be processed to receiving cash orcash equivalents by the Company. The business cycle of the Company is 12 months.
4. Reporting currency
Renminbi ("RMB") is the currency of the primary economic environment in which the Companyand its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiarieschoose RMB as their functional currency. Overseas subsidiaries of the Company adopt CurrencyEuro, Chilean Peso and Australian Dollar as their functional currencies on the basis of the primaryeconomic environment in which they operate. The Company adopts RMB to prepare its financialstatements.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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5. Business combination
5.1Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a businesscombination in which all of the combining enterprises are not ultimately controlled by the sameparty or parties before and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assetsgiven, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange forcontrol of the acquiree. The intermediary expenses incurred by the acquirer in respect of auditing,legal services, valuation and consultancy services, etc. and other associated administrativeexpenses attributable to the business combination are recognised in profit or loss when they areincurred.
Qualified identifiable assets, liabilities and contingent liabilities obtained by acquirer in theacquisition are measured using fair value at the acquisition date.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’sidentifiable net assets, the difference is treated as an asset and recognized as goodwill, which ismeasured at cost on initial recognition. Where the cost of combination is less than the acquirer’sinterest in the fair value of the acquiree’s identifiable net assets, the acquirer firstly reassesses themeasurement of the fair values of the acquiree’s identifiable assets, liabilities and contingentliabilities and measurement of the cost of combination. If after that reassessment, the cost ofcombination is still less than the acquirer’s interest in the fair value of the acquiree’s identifiablenet assets, the acquirer recognizes the remaining difference immediately in profit or loss for thecurrent period.
Goodwill arising on a business combination is measured at cost less accumulated impairmentlosses, and is presented separately in the consolidated financial statements.
6. Preparation of consolidated financial statements
6.1 Preparation of consolidated financial statements
The scope of consolidation in the consolidated financial statements is determined on the basis ofcontrol. Control is the power to govern the financial and operating policies of an enterprise so asto obtain benefits from its operating activities. The Group will re-evaluate if changes in relevantfacts and circumstances results in changes in relevant factors involved in the above definition ofcontrol.
Consolidation of subsidiary starts from the control on the subsidiary by the Group and ends at theloss of control on the subsidiary by the Group.
For the subsidiaries through business combination not involving enterprises under commoncontrol, the results of operations and cash flows from the acquisition day were properly includedin the consolidated income statements and consolidated cash flow statements.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
6. Preparation of consolidated financial statements - continued
6.1 Preparation of consolidated financial statements - continued
The significant accounting policies and accounting periods adopted by the subsidiaries aredetermined based on the uniform accounting policies and accounting periods set out by theCompany.
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 non-controlling interests and presented as "non-controlling interests" in the consolidated balance sheetwithin shareholders' equity. The portion of net profits or losses of subsidiaries for the periodattributable to non-controlling interests is presented as "non-controlling interests" in theconsolidated income statement below the net profit line item.
When the amount of loss for the period attributable to the non-controlling shareholders of asubsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners'equity of the subsidiary, the excess amount are still allocated against non-controlling interests.
7. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cashequivalents are the Group's short-term, highly liquid investments that are readily convertible toknown amounts of cash and which are subject to an insignificant risk of changes in value.
8. Translation of transactions and financial statements denominated in foreign currencies
8.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying the spot exchangerate on the date of the transaction.
At the balance sheet date, foreign currency monetary items are translated into RMB using the spotexchange rates at the balance sheet date. Exchange differences arising from the differencesbetween the spot exchange rates prevailing at the balance sheet date and those on initialrecognition or at the previous balance sheet date are recognised in profit or loss for the period,except that (1) exchange differences related to a specific-purpose borrowing denominated inforeign currency that qualify for capitalisation are capitalised as part of the cost of the qualifyingasset during the capitalisation period; (2) exchange differences related to hedging instruments forthe purpose of hedging against foreign currency risks are accounted for using hedge accounting;(3) exchange differences arising from available-for-sale non-monetary items denominated inforeign currencies and changes in the carrying amounts of available-for-sale monetary items arerecognised as other comprehensive income and included in capital reserve.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
8. Translation of transactions and financial statements denominated in foreign currencies - continued
8.2 Translation of financial statements denominated in foreign currencies - continued
For the purpose of preparing the consolidated financial statements, financial statements of aforeign operation are translated from the foreign currency into RMB using the following method:
assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at thebalance sheet date; shareholders' equity items except for retained earnings are translated at thespot exchange rates at the dates on which such items arose; all items in the income statement aswell as items reflecting the distribution of profits are translated at the spot exchange rates on thedates of the transactions; the opening balance of retained earnings is the translated closing balanceof the previous year's retained earnings; the closing balance of retained earnings is calculated andpresented on the basis of each translated income statement and profit distribution item. Thedifference between the translated assets and the aggregate of liabilities and shareholders' equityitems is separately presented as the exchange differences arising on translation of financialstatements denominated in foreign currencies of other comprehensive income under theshareholders' equity in the balance sheet.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreignsubsidiary are translated at the spot exchange rate on the date of the cash flows. The effect ofexchange rate changes on cash and cash equivalents is regarded as a reconciling item andpresented separately in the cash flow statement as "effect of exchange rate changes on cash andcash equivalents".
The opening balances and the comparative figures of previous year are presented at the translatedamounts in the previous year's financial statements.
9. Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to thecontractual provisions of the instrument. Financial assets and financial liabilities are initiallymeasured at fair value. For other financial assets and financial liabilities, transaction costs areincluded in their initial recognised amounts.
9.1 Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or afinancial liability (or a group of financial assets or financial liabilities) and of allocating theinterest income or interest expense over the relevant period, using the effective interest rate. Theeffective interest rate is the rate that exactly discounts estimated future cash flows through theexpected life of the financial asset or financial liability or, where appropriate, a shorter period tothe net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering allcontractual terms of the financial asset or financial liability (without considering future creditlosses), and also considers all fees paid or received between the parties to the contract giving riseto the financial asset and financial liability that are an integral part of the effective interest rate,transaction costs, and premiums or discounts, etc.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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9. Financial instruments - continued
9.2 Classification, recognition and measurement of financial assets
On initial recognition, the Group's financial assets are classified into one of the four categories,including financial assets at fair value through profit or loss, held-to-maturity investments, loansand receivables, and available-for-sale financial assets. All regular way purchases or sales offinancial assets are recognised and derecognised on a trade date basis. The Group's financialassets are bought in a conventional way, and recognized and terminated according to theaccounting transaction date. Financial assets of the Group are loans and receivables and available-for-sale financial assets.
9.2.1 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. Financial assets classified as loans and receivables by theGroup include cash and bank, notes and accounts receivable and other receivables, etc.
Loans and receivables are subsequently measured at amortised cost using the effective interestmethod. Gain or loss arising from derecognition, impairment or amortisation is recognised inprofit or loss.
9.2.2 Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are designated oninitial recognition as available for sale, and financial assets that are not classified as financialassets at fair value through profit or loss, loans and receivables or held-to-maturity investments.
For investments in equity instruments that do not have a quoted market price in an active marketand whose fair value cannot be reliably measured, they are measured at cost.
9.3 Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other thanthose at fair value through profit or loss. If there is objective evidence that a financial asset isimpaired, the Group determines the amount of any impairment loss. Objective evidence that afinancial asset is impaired is evidence that, arising from one or more events that occurred after theinitial recognition of the asset, the estimated future cash flows of the financial asset, which can bereliably measured, have been affected.
Objective evidence that a financial asset is impaired includes the following observable events:
(1) Significant financial difficulty of the issuer or obligor;(2) A breach of contract by the borrower, such as a default or delinquency in interest or
principal payments;(3) The Group, for economic or legal reasons relating to the borrower's financial difficulty,
granting a concession to the borrower;(4) It becoming probable that the borrower will enter bankruptcy or other financial
reorganisations;
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.3 Impairment of financial assets - continued
(5) The disappearance of an active market for that financial asset because of financial
difficulties of the issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that
there is a measurable decrease in the estimated future cash flows from the group offinancial assets since the initial recognition of those assets, although the decrease cannotyet be identified with the individual financial assets in the group. Such observable dataincludes:
- Adverse changes in the payment status of borrower in the group of assets;- Economic conditions in the country or region of the borrower which may lead to a
failure to pay the group of assets;(7) Significant adverse changes in the technological, market, economic or legal environment
in which the issuer operates, indicating that the cost of the investment in the equityinstrument may not be recovered by the investor;(8) A significant or prolonged decline in the fair value of an investment in an equity
instrument below its cost; namely, at the balance sheet date, if the initial cost of an equityinstrument investment is more than 50%(inclusive) in excess of the fair value of suchinvestment, or the period in which the initial cost of an equity instrument investmentexceeds the fair value of such investment is over 12 months(inclusive);(9) Other objective evidence indicating there is an impairment of a financial asset.
- Impairment of financial assets measured at amortised cost
If financial assets carried at amortised cost are impaired, the carrying amounts of the financialassets are reduced to the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset's original effective interestrate. The amount of reduction is recognised as an impairment loss in profit or loss. If, subsequentto the recognition of an impairment loss on financial assets carried at amortised cost, there isobjective evidence of a recovery in value of the financial assets which can be related objectivelyto an event occurring after the impairment is recognised, the previously recognised impairmentloss is reversed. However, the reversal is made to the extent that the carrying amount of thefinancial asset at the date the impairment is reversed does not exceed what the amortised costwould have been had the impairment not been recognised.
For a financial asset that is individually, the Group assesses the asset individually for impairment.
- Impairment of available for sale assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (withouta quoted price in an active market) whose fair value cannot be reliably measured, or on aderivative financial asset that is linked to and must be settled by delivery of such an unquotedequity instrument, the carrying amount of the financial asset is reduced to the present value ofestimated future cash flows discounted at the current market rate of return for a similar financialasset. The amount of reduction is recognised as an impairment loss in profit or loss. Theimpairment loss on such financial asset is not reversed once it is recognised.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.4 Transfer of financial assets
The Group derecognises a financial asset if one of the following conditions is satisfied: (1) thecontractual rights to the cash flows from the financial asset expire; or (2) the financial asset hasbeen transferred and substantially all the risks and rewards of ownership of the financial asset istransferred to the transferee; or (3) although the financial asset has been transferred, the Groupneither transfers nor retains substantially all the risks and rewards of ownership of the financialasset but has not retained control of the financial asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, thedifference between (1) the carrying amount of the financial asset transferred; and (2) the sum ofthe consideration received from the transfer and any cumulative gain or loss that has beenrecognised in other comprehensive income, is recognised in profit or loss.
9.5 Classification, recognition and measurement of financial liabilities
Debt and equity instruments issued by the Group are classified into financial liabilities or equityon the basis of the substance of the contractual arrangements and definitions of financial liabilityand equity instrument.
On initial recognition, financial liabilities are classified into financial liabilities at fair valuethrough profit or loss and other financial liabilities. The financial liabilities in group are otherfinancial liabilities, including short-term borrowings, notes payable, account payables, otherpayables, non-current liabilities due within one year and long-term payables etc.
9.5.1 Other financial liabilities
Other financial liabilities are subsequently measured at amortised cost using the effective interestmethod, with gain or loss arising from derecognition or amortisation recognised in profit or loss.
9.6 Derecognition of financial liabilities
The Group derecognises a financial liability (or part of it) only when the underlying presentobligation (or part of it) is discharged.
When the Group derecognises a financial liability or a part of it, it recognises the differencebetween the carrying amount of the financial liability (or part of the financial liability)derecognised and the consideration paid (including any non-cash assets transferred or newfinancial liabilities assumed) in profit or loss.
9.7 Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognised financialassets and financial liabilities, and intends either to settle on a net basis, or to realise the financialasset and settle the financial liability simultaneously, a financial asset and a financial liability shallbe offset and the net amount is presented in the balance sheet. Except for the above circumstances,financial assets and financial liabilities shall be presented separately in the balance sheet and shallnot be offset.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
9. Financial instruments - continued
9.8 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Groupafter deducting all of its liabilities. The Group does not recognise any changes in the fair value ofequity instruments. The equity instruments transaction expenses deducted from equity.
The Group treats distribution to equity instrument holders as profit distributions. Shareholderequity is not affected by share dividend distributed.
10. Accounts Receivable
The Group believes that the individual receivables are all significant, and the correspondingreceivables are individually tested for impairment, and individual recognition method is used toconfirm bad debt provision.
11. Inventories
11.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress and finished goods.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 presentlocation and condition.
Agricultural products harvested are reported in accordance with the CAS 1 Inventories.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
11.3 Basis for determining net realisable value of inventories and provision methods for decline invalue of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realisable value.If the net realisable value is below the cost of inventories, a provision for decline in value ofinventories is made. Net realisable value is the estimated selling price in the ordinary course ofbusiness less the estimated costs of completion, the estimated costs necessary to make the sale andrelevant taxes. Net realisable value is determined on the basis of clear evidence obtained, andtakes into consideration the purposes of holding inventories and effect of post balance sheetevents.
Provision for decline in value of other inventories is made based on the excess of cost ofinventory over its net realisable value based on categories of inventories.
After the provision for decline in value of inventories is made, if the circumstances thatpreviously caused inventories to be written down below cost no longer exist so that the netrealisable value of inventories is higher than their cost, the original provision for decline in valueis reversed and the reversal is included in profit or loss for the period.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
11. Inventories - continued
11.4 Inventory count system
The perpetual inventory system is maintained for stock system.
11.5 Amortisation method for low cost and short-lived consumable items and packaging materials
Packaging materials and low cost and short-lived consumable items are amortised using theimmediate write-off method.
12. Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale category when the Grouprecovers the book value through a sale (including an exchange of nonmonetary assets that hascommercial substance) rather than continuing use.
Non-current assets or disposal groups classified as held for sale are required to satisfy thefollowing conditions: (1) the asset or disposal group is available for immediate sale in its presentcondition subject only to terms that are usual and customary for sales of such asset or disposalgroup; (2) the sale is highly probable, i.e. the Group has made a resolution about selling plan andobtained a confirmed purchase commitment and the sale is expected to be completed within oneyear.
The Group measures the no-current assets or disposal groups classified as held for sale at thelower of their carrying amount and fair value less costs to sell. Where the carrying amount ishigher than the net amount of fair value less costs to sell, carrying amount should be reduced tothe net amount of fair value less costs to sell, and such reduction is recognized in impairment lossof assets and included in profit or loss for the period. Meanwhile, provision for impairment ofheld-for-sale assets are made. When there is increase in the net amount of fair value of non-current assets held for sale less costs to sell at the balance sheet date, the original deductionshould be reversed in impairment loss of assets recognized after the classification of held-for-salecategory, and the reverse amount is include in profit or loss for the period.
Non-current assets held for sale in non-current assets are not subject to depreciation oramortization.
13. Long term equity investments
13.1 Basis for determining control, joint control and significant influence
Control is the power to govern the financial and operating policies of an entity so as to obtainbenefits from its activities. Joint control is the contractually agreed sharing of control over aneconomic activity, and exists only when the strategic financial and operating policy decisionsrelating to the activity require the unanimous consent of the parties sharing control. Significantinfluence is the power to participate in the financial and operating policy decisions of the investeebut is not control or joint control over those policies. When determining whether an investingenterprise is able to exercise control or significant influence over an investee, the effect ofpotential voting rights of the investee (for example, warrants and convertible debts) held by the
investing enterprises or other parties that are currently exercisable or convertible shall beconsidered.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
13. Long term equity investments - continued
13.2 Determination of initial investment cost
For a long-term equity investment acquired not involving enterprises under common control, theinvestment cost of the long-term equity investment is the cost of acquisition.
Audit fee, legal services, consulting fees and other related management costs in acquisition areexpensed in profits and losses when happened.
Other long-term equity investments acquired from other than acquisitions are recognised usingoriginal cost.
13.3 Subsequent measurement and recognition of profit or loss
13.3.1 Long-term equity investment accounted for using the cost method
The Group accounts for long-term equity investment using the cost method. A subsidiary is aninvestee that is controlled by the Group.
Under the cost method, a long-term equity investment is measured at initial investment cost.Long-term equity investment is adjusted when capital is added or recollected. Investment incomeis recognised in the period in accordance with the attributable share of cash dividends or profitdistributions declared by the investee.
13.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actuallyreceived and receivable and the carrying amount is recognised in profit or loss for the period.
14. Investment properties
Investment property is property held to earn rentals or for capital appreciation or both.
An investment property is measured initially at cost. Subsequent expenditures incurred for suchinvestment property are included in the cost of the investment property if it is probable thateconomic benefits associated with an investment property will flow to the Group and thesubsequent expenditures can be measured reliably. Other subsequent expenditures are recognizedin profit or loss in the period in which they are incurred.
The Group uses the cost model for subsequent measurement of investment property, and adopts adepreciation or amortization policy for the investment property which is consistent with that forbuildings or land use rights.
When an investment property is sold, transferred, retired or damaged, the Group recognizes theamount of any proceeds on disposal net of the carrying amount and related taxes in profit or lossfor the period.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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15. Fixed assets
15.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods orservices, for rental to others, or for administrative purposes, and have useful lives of more thanone accounting year. A fixed asset is recognised only when it is probable that economic benefitsassociated with the asset will flow to the Group and the cost of the asset can be measured reliably.Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset andif it is probable that economic benefits associated with the asset will flow to the Group and thesubsequent expenditures can be measured reliably. Meanwhile the carrying amount of thereplaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in theperiod in which they are incurred.
15.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the monthsubsequent to the one in which it is ready for intended use. The useful life, estimated net residualvalue rate and annual depreciation rate of each category of fixed assets are as follows:
Estimated Estimated Annualuseful life residual rate depreciation rate
Buildings 20-40years 0-5% 2.4%-5.0%Machinery 5-30years 0-5% 3.2%-20.0%Motor Vehicles 4-12years 0-5% 7.9%-25.0%
Estimated net residual value assumes the situation where a fixed asset expire for its estimateduseful life and is in its expected final status. Estimated net residual value is the amount that theGroup can obtain from the disposal less expected disposal fees.
15.3 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated fromits use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retiredor damaged, the amount of any proceeds on disposal of the asset net of the carrying amount andrelated taxes are recognised in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and thedepreciation method applied at least once at each financial year-end, and account for any changeas a change in an accounting estimate.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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16. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include variousconstruction expenditures during the construction period, borrowing costs capitalised before it isready 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 for intended use.
17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifyingasset are capitalised when expenditures for such asset and borrowing costs are incurred andactivities relating to the acquisition, construction or production of the asset that are necessary toprepare the asset for its intended use or sale have commenced. Capitalisation of borrowing costsceases when the qualifying asset being acquired, constructed or produced becomes ready for itsintended use or sale. Other borrowing costs are recognised as an expense in the period in whichthey are incurred.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to becapitalized is the actual interest expense incurred on that borrowing for the period less any bankinterest earned from depositing the borrowed funds before being used on the asset or anyinvestment income on the temporary investment of those funds.
18. Biological assets
The Group's biological assets are bearer biological assets.
18.1 Bearer biological assets
Bearer biological assets are biological assets, for example, held for the production of agriculturalproduce, provision of services or rental, Bearer biological assets in the Group are vines. A bearerbiological asset is initially measured at cost. The cost of a bearer biological asset self-grown orself-bred comprises those costs necessarily incurred and directly attributable to the asset beforethe asset becomes available for its intended production and operating purposes, and anyborrowing cost meeting the capitalisation criteria.
The Group charge deprecation for productive biological assets which satisfy expected production,and record the deprecation in balance sheet and income statement. The Group uses straight linemethod to calculate the deprecation, and details as follows:
Estimated Estimated AnnualCategory useful life residual rate depreciation rate
Vines 20 years - 5.0%
The Group evaluates the useful life and expected net salvage value by considering the normalproducing life of the bearer biological assets.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
18. Biological assets - continued
18.1 Bearer biological assets - continued
The Group reviews the useful life and estimated net residual value of bearer biological assets andthe depreciation method applied at least once at each financial year-end, and account for anychange as a change in an accounting estimate.
On the sale, identification of any shortages during stocktaking, death or damage of biologicalasset, the proceeds on disposal net of the carrying amount and relevant taxes is recognised inprofit or loss for the current period.
19. Intangible assets
Intangible assets include land use rights, software and trademark, etc.
An intangible asset is measured initially at cost method. When an intangible asset with a finiteuseful life is available for use, its original cost less net residual value and any accumulatedimpairment losses is amortised over its estimated useful life using the straight-line method.Intangible assets with indefinite useful lives are not amortized. The useful lives of the intangibleassets are as follows:
AnnualItem Useful life Net residual value amortization rate
Land use rights 40-50 years - 2.0%-2.5%Software 5-10 years - 10.0%-20.0%Trademark 10 years - 10.0%
Except for the above intangible assets with finite useful lives, the Group had also intangible assetswith infinite useful lives including the land use right and trademark. Land use rights with infiniteuseful lives are permanent land use rights with permanent ownership held by the Group under therelevant Chile and Australian laws arising from the Group’s acquisition of Vi?a Indómita, S.A.,Vi?a Dos Andes, S.A., and Bodegas Santa Alicia SPA. (collectively referred to as the "ChileIndomita Wine Group"), and the acquisition of Kilikanoon Estate Pty Ltd.( hereinafter referred toas the "Australia Kilikanoon Estate"), therefore there was no amortization. The right to usetrademark refers to the trademark held by the Group arising from the acquisition of the ChileIndomita Wine Group and the Australia Kilikanoon Estate with infinite useful lives. The valuationof trademark was based on the trends in the market and competitive environment, product cycle,and managing long-term development strategy. Those basis indicated the trademark will providenet cash flows to the Group within an uncertain period. The useful life is indefinite as it was hardto predict the period that the trademark would bring economic benefits to the Group.
For an intangible asset with a definite useful life, the Group reviews the useful life andamortisation method at the end of the period, and makes adjustments when necessary.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
20. Impairment of long-term assets
The Group and the Company review the impairment status of long-term equity investments, fixedassets, investment properties, construction in progress, bearer biological asset and intangibleassets with finite useful life at the end of each year. If there is any indication for impairment, theGroup estimates the recoverable amount of the asset.Intangible assets with indefinite useful lifeand goodwill are tested for impairment annually, irrespective of whether there is any indicationthat the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate therecoverable amount of an individual asset, the recoverable amount of the asset group to which theasset belongs will be estimated. The recoverable amount of an asset is the higher of its fair valueless costs of disposal and the present value of the future cash flows expected to be derived fromthe asset.
If recoverable amount of assets is less than book value, the difference is recognised as impairmentprovision and expensed in current period.
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairmenttesting, goodwill is considered together with the related assets group(s), i.e., goodwill isreasonably allocated to the related assets group(s) or each of assets group(s) expected to benefitfrom the synergies of the combination. An impairment loss is recognised if the recoverableamount of the assets group or sets of assets groups (including goodwill) is less than its carryingamount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwillallocated to such assets group or sets of assets groups, and then to the other assets of the grouppro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group.
The impairment is recognised in profit or loss for the period in which it is incurred and will not bereversed in any subsequent period.
21. Long term prepaid expenses
Long-term prepaid expenses are amortized equally over the period of projected earnings. Theamortization period are as follows:
Amortization period
Land requisition fee 50 yearsLand lease prepayment 50 yearsGreening fee 5-20 yearsLeasehold improvement 3-5yearsOthers 3 years
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
22. Employee benefits
22.1 Short-term employee benefits
In an accounting period in which an employee has rendered service to the Group, the Grouprecognises the actual employee benefits for that service as a liability. The employee benefits ofthe Group are either included in cost of related assets or charged to profit or loss in the periodwhen they are incurred. Non-monetary employee benefits are measured at fair value.
Social insurances such as medical insurance, injury insurance and pregnancy insurance, housingfunds, labor union and employee education fees paid by the Group for employees, are recognisedas relevant liability in the period in which the employees provide service, in accordance with theregulated recognition basis and percentage. The related expenditures are either included in cost ofrelated assets or charged to profit or loss in the period when they are incurred.
22.2 Accounting treatments of retired benefits
Retired benefits of the Group are all predetermined provision plan.
In the period in which the employees provide service, the Group recognise liability in accordancewith the amounts to be paid calculated according to the predetermined provision plan, and therelated expenditures are either included in cost of related assets or charged to profit or loss in theperiod when they are incurred.
22.3 Accounting treatments of termination benefits
When providing termination benefits to employees, the Group recognise employee benefitspayroll resulting from termination benefits at the earlier of: the Group cannot unilaterallywithdraw from the termination plan or the redundancy offer; the Group recognise relevant costsand expenses related to the payment of termination benefits in restructuring.
23. Revenue
23.1 Revenue from sale of goods
Revenue from sale of goods is recognised when the Group has transferred to the buyer thesignificant risks and rewards of ownership of the goods. The Group retains neither continuingmanagerial involvement to the degree usually associated with ownership nor effective controlover the goods sold. The amount of revenue can be measured reliably and it is probable that theassociated economic benefits will flow to the Group. The associated costs incurred or to beincurred can be measured reliably.
23.2 Revenue from rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably,revenue associated with the transaction shall be recognized by reference the stage of completionof the transaction at the reporting date. The outcome of a transaction can be estimated reliably.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
23. Revenue - continued
23.2 Revenue from rendering of services - continued
When the outcome of the transaction involving the rendering of services cannot be estimatedreliably, revenue is recognised only to the extent of the costs incurred that will be recoverable,and the costs incurred are recognised as expenses for the period. When it is not probable that thecosts incurred will be recovered, revenue is not recognised.
24. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the governmentto the Group at no consideration. A government grant is recognised only when the Group cancomply with the conditions attaching to the grant and the Group will receive the grant.
Monetary government grants are measured by the amount received or receivable.
24.1 Government grant related to an asset
A government grant related to an asset is recognised as deferred income, and amortised to profitor loss over the useful life of the related asset on a straight line basis.
24.2 Government grant related to income
For a government grant related to income, if the grant is a compensation for related expenses orlosses to be incurred in subsequent periods, the grant is recognised as deferred income, andrecognised in profit or loss over the periods in which the related costs are recognised. If the grantis a compensation for related expenses or losses already incurred, the grant is recognisedimmediately in profit or loss for the period.
A government grant related to the Group's daily activities is recognized in other income based onthe nature of economic activities; a government grant is not related to the Group's daily activitiesis recognized in non-operating income.
The Company's government loans with below-market rate of interest are directly paid to theCompany, and the related low rate interest will write off related borrowing costs. The governmentloans with below-market rate of interest obtained by other subsidiaries of the Group aregovernment loans, which is provided by local bureau of finance through bank with below-marketrate of interest. The actual amount of the loan received by the Group recognized as borrowings,and the related borrowing costs are calculated according to the principal of the loan and thebelow-market rate.
25. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
25.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periodsare measured at the amount expected to be paid (or recovered) according to the requirements oftax laws.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
25. Deferred tax assets/deferred tax liabilities - continued
25.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and theirtax base, or between the nil carrying amount of those items that are not recognised as assets orliabilities and their tax base that can be determined according to tax laws, deferred tax assets andliabilities are recognised using the balance sheet liability method.
Deferred tax is generally recognised for all temporary differences. Deferred tax assets fordeductible temporary differences are recognised to the extent that it is probable that taxableprofits will be available against which the deductible temporary differences can be utilised.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 the accounting profit nor taxable profits (or deductible losses) at the time oftransaction, no deferred tax asset or liability is recognised.
For deductible losses and tax credits that can be carried forward, deferred tax assets arerecognised to the extent that it is probable that future taxable profits will be available againstwhich the deductible losses and tax credits can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences associated withinvestments in subsidiaries and associates, and interests in joint ventures, except where the Groupis 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 fromdeductible temporary differences associated with such investments and interests are onlyrecognised to the extent that it is probable that there will be taxable profits against which to utilisethe benefits of the temporary differences and they are expected to reverse in the foreseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates,according to tax laws, that are expected to apply in the period in which the asset is realised or theliability is settled.
Current and deferred tax expenses or income are recognised in profit or loss for the period, exceptwhen they arise from transactions or events that are directly recognised in other comprehensiveincome or in shareholders' equity, in which case they are recognised in other comprehensiveincome or in shareholders' equity; and when they arise from business combinations, in which casethey adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if itis no longer probable that sufficient taxable profits will be available in the future to allow thebenefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it becomesprobable that sufficient taxable profits will be available.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
25. Deferred tax assets/deferred tax liabilities - continued
25.3 Net off of income taxes
When the Group has a legal right to settle on a net basis and intends either to settle on a net basisor to realise the assets and settle the liabilities simultaneously, current tax assets and current taxliabilities 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, anddeferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxationauthority on either the same taxable entity or different taxable entities which intend either to settlecurrent tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously,in each future period in which significant amounts of deferred tax assets or liabilities are expected tobe reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
26. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.
26.1. Operating lease accounting methods
26.1.1 The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevantlease, and are either included in the cost of related asset or charged to profit or loss for the period.Initial direct costs incurred are charged to profit or loss for the period.
26.1.2 The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over theterm of the relevant lease. Initial direct costs with more than an insignificant amount arecapitalized when incurred, and are recognized in profit or loss on the same basis as rental incomeover the lease term. Other initial direct costs with an insignificant amount are charged to profit orloss in the period in which they are incurred. Contingent rents are charged to profit or loss in theperiod in which they actually arise.
27. Changes in accounting policies
The Group has adopted the Notice of the Revised Format of Financial Statements for GeneralBusiness Enterprise in 2018 (Cai Kuai (2018) No. 15, hereinafter referred to as the "Cai KuaiNo.15 Document") released by the MoF on 15 June 2018 since the preparation of the financialstatements for 2018.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
- continued
27. Changes in accounting policies - continued
Cai Kuai No.15 Document revised the presentation items on the balance sheet and the incomestatement, which are as follows: add the line items of "notes and accounts receivable", "notes andaccounts payable", "research and development expenses"; revise the presentation of "otherpayables", "fixed assets", "construction in progress", "other payables" , "long-term payables" and"administrative expenses"; less the line items of "notes receivable", "accounts receivable","dividends receivable" and "interest receivable", "disposal of fixed assets", "materials forconstruction of fixed assets", "notes payable", "accounts payable", "dividends payable", and"special payables", add the line items of "including: interest expenses" and "interest income"under the item of "financial expenses"; and adjust the presentation location of certain items in theincome statements.
For changes of the presentation items stated above, the Group has applied retrospectively foraccounting treatments and adjusted the comparable data of the prior year for comparable periods.
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES
In the application of accounting policies as set out in Note III, the Group is required to makejudgments, estimates and assumptions about the carrying amounts of items in the financialstatements that cannot be measured accurately, due to the internal uncertainties of the operatingactivities. These judgments, estimates and assumptions are based on historical experience of theGroup's management as well as other factors that are considered to be relevant. Actual resultsmay differ from these estimates.
The Group periodically review the judgments, estimates and assumptions above on a goingconcern basis. For those changes in accounting policies that only affect current financialstatements, the influences are recognized in current period. For those changes in accountingpolicies that affect both current and future financial statements, the influences are recognized inboth current and prospective periods.
Key assumptions and uncertainties in accounting estimates
The following are the key assumptions and uncertainties in accounting estimates at the end of thereporting period, that may have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities in the future period.
Deferred tax assets recognized for deductible losses
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable thattaxable profit will be available against which the losses can be utilized. Significant managementjudgment is required to determine the amount of deferred tax assets that can be recognized, basedupon the likely timing and level of future taxable profits together with future tax planningstrategies.
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates - continued
Depreciation of fixed assets
As set out in Note III-15, the depreciation is calculated on the straight line basis to write-off thecost of each item of fixed assets to its residual value over its estimated useful life. The Group'smanagement determines the estimated useful lives for its fixed assets. This estimate is based onthe historical experience of the actual useful lives of fixed assets of similar nature and functions.If the previous estimates have significant changes, and depreciation expenses will be adjusted inthe future periods.
Impairment of long-term assets
The Group assesses whether the recoverable amount is lower than the book value. If there are anyindicators that the book value of non-current assets cannot be fully recoverable, impairment lossesshould be recorded.
The recoverable amount is the higher of the fair value of a long-term asset less costs of disposaland the present value of the future cash flows expected to be derived from the asset. As it isdifficult for the Group to obtain the quoted market price of the long-term assets concerned, the fairvalue of the assets cannot be reliably estimated. In assessing the present value of future cash flows,the management of the Group is required to make significant judgements on the assumptionsincluding sales growth rate, future selling price, production cost, operating expenses and discountrate, which are of high uncertainty.
Yantai Changyu Pioneer Wine Company Limited Research and Development Co., Ltd. ("R&DCentre"), subsidiary of the Company started production at the end of 2017 being as a new mainproduction base of the Company. In 2018, the production of R&D Centre accounts for more than60% of the Group’s production. R&D Centre’s total investment budget in its long-term assetsapproximates RMB 4.5 billion, which is a large-scale investment. As at 31 December 2018, thebook values of relevant long-term assets including fixed assets, construction in progress andintangible amounted to RMB 3.5 billion, accounting for 26.6% of the total assets in theconsolidated financial statements, which exerts significant influence on the consolidated financialstatements. As there is little space for the development of the domestic wine market, themanagement of the Company faces great operating pressures to apply the off-take potential of thenew production base in an efficient way. In addition, there are certain risks of impairment for suchlong-term assets. The management performs the impairment test by determining if the recoverableamount is less than the book value of long-term assets and determines the recoverable amountbased on the present value of expected future cash flows. In the assessment of the future cashflows, the management is required to, based on a reasonable and supportable basis, assess the cashflows for the future 5 years (“projecting period”) and cash flows after the projecting period(“subsequent period”) and make significant judgements and accounting estimates in the discountrate, sales growth rate, future selling price, production cost, operating expenses and other keyassumptions.
According to the result of the impairment test, the management believes that as at 31 December2018, the above long-term assets of the Group were not impaired. Therefore, no impairmentprovision is made.
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
Significant accounting judgments and accounting estimates - continued
Inventory provision based on net realizable value
The inventories are measured on the lower of carrying value and net realizable value, andprovision should be made for impairment on obsolete and slow moving inventories. The groupwill reassess whether the net realizable value is lower than the carrying cost at the end of eachyear.
The determination of the fair value of identifiable assets and liabilities associated with businesscombination.
For the cost of business combination, the Group allocates the purchase price based on fair value ofrelatively identifiable assets and liabilities. When the fair value of relatively identifiable assetsand liabilities are evaluated by the present value of its future cash flows, The management needestimate the growth rate of sales based on future market supply and demand to predict cash flows,and considered the proper discount rate for calculating, management need use major accountingestimates and judgments in the progress.
V. TAXES
1. The main taxes and tax rate are as follows:
(1) China
Value added tax VAT is levied at 6%, 10%, 11%, 16% and 17% on the invoiced
amount after deduction of eligible input VAT.Consumption tax The consumption tax of the group is levied on gross revenueat rates ranging from 10% to 20%.City development tax Levied at 7% of total business tax payment.Corporate income tax The Group is subject to a corporate income tax rate of 25%on its taxable income.
(2) France
Value added tax VAT is levied at 20% on the invoiced amount after deductionof eligible input VAT.Corporate income tax The Group is subject to a corporate income tax rate of 33.3%on its taxable income.
(3) Spain
Value added tax VAT is levied at 21% on the invoiced amount after deductionof eligible input VAT.Corporate income tax The Group is subject to a corporate income tax rate of 28%on its taxable income.
(4) Chile
Value added tax VAT is levied at 19% on the invoiced amount after deductionof eligible input VAT.Corporate income tax The Group is subject to a corporate income tax rate of 27%on its taxable income.
(5) Australia
Value added tax VAT is levied at 10% on the invoiced amount after deductionof eligible input VAT.
Corporate income tax The Group is subject to a corporate income tax rate of 30%on its taxable income.
Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2018 and 2017are all stated as above.
V. TAXES - continued
2. Tax incentives and relative permit
Ningxia Changyu Grape Growing Co., Ltd.("Ningxia Growing"), a subsidiary of the Group,whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region.According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate IncomeTax Measures for Implementation, Ningxia Growing enjoys an exemption of corporate incometax.
Yantai Changyu Grape Growing Co., Ltd.(" Grape Growing "), a branch of the Company, whoseprincipal activity is grape growing is incorporated in Zhifu District, Yantai City, ShandongProvince. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC CorporateIncome Tax Measures for Implementation, Grape Growing enjoys an exemption of corporateincome tax.
Xinjiang Tianzhu Co., Ltd ("Xinjiang Tianzhu"), a subsidiary of the Company, is an enterprise ofwine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. Inaccordance with the Notice on Tax Policy Issues concerning Further Implementation of theWestern China Development Strategy (Cai Shui [2011] No.58), Xinjiang Tianzhu is qualified toenjoy preferential taxation policies, which means it can pay corporate income tax at a preferentialrate of 15% for the period from 2015 to 2020.
Xinjiang Babao Baron Chateau Co., Ltd. ("Shihezi Chateau"), a subsidiary of the Company, is anenterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous.In accordance with the Notice on Tax Policy Issues concerning Further Implementation of theWestern China Development Strategy (Cai Shui [2011] No.58), Shihezi Chateau is qualified toenjoy preferential taxation policies, which means it can pay corporate income tax at a preferentialrate of 15% for the period from 2015 to 2020.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank
31/12/2018 31/12/2017RMB RMB
Cash 114,335 136,973Bank balance 1,382,399,749 1,278,397,711Other currency fund 93,186,393 123,987,825____________ ____________
Total 1,475,700,477 1,402,522,509____________ ________________________ ____________
At 31 December 2018, the balance of restricted cash of the Group is as follows:
31/12/2018 31/12/2017
RMB RMB
Home maintenance funds 2,611,350 2,645,410____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Group's other monetary assets is as follows:
31/12/2018 31/12/2017RMB RMB
Research and Development Co., Ltd ("R&D Centre")pledged deposit for long-term payables 46,100,000 61,700,000Deposit for letter of credit 44,540,850 57,946,190Alipay account balance 2,483,816 4,317,635Deposit for Company cards 51,727 14,000Deposit for ICBC platform 10,000 10,000____________ ____________
93,186,393 123,987,825____________ ________________________ ____________
As at 31 December 2018, the Group's term deposits with original maturity of more than three
months when acquired is RMB 173,042,400 with interest rate 1.50%-3.80% (31 December
2017:RMB 95,000,000).
2. Notes and accounts receivable
2.1 Presented by categories
31/12/2018 31/12/2017
RMB RMB
Notes receivable 288,667,988 244,796,818
Accounts receivable 242,153,083 263,796,355____________ ____________
Total 530,821,071 508,593,173____________ ________________________ ____________
2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017
RMB RMB
Bank acceptances 288,667,988 244,796,818____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.2 Notes receivable- continued
(2) Notes receivable which have been pledged as security at the end of the period
As at 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil).
(3) Notes receivable endorsed but are not yet due at the balance sheet date
31/12/2018 31/12/2017RMB RMB
Bank acceptances 182,829,674 188,855,843____________ ________________________ ____________
As at 31 December 2018, notes endorsed by the Group to other parties which are not yet due at
the end of the period is RMB 182,829,674 (31 December 2017: RMB 188,855,843). The notes are
used for payment to suppliers and constructions. The Group believes that due to good reputation
of bank, the risk of notes not accepting by bank on maturity is very low, therefore derecognise the
note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the
relevant laws and regulations of China, the Group would undertake limited liability for the notes.
(4) Notes receivable reclassified to accounts receivable due to the drawers' inability to settle the note
on maturity
As at 31 December 2018, no notes receivable were reclassified as accounts receivable due to the
default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017
Bad debts Carrying Bad debts Carrying
Amount provision amount Amount provision amount
Amount Proportion Amount Ratio Amount Amount Proportion Amount Ratio Amount
RMB % RMB % RMB RMB % RMB % RMB
Accounts receivable for which
bad debt provision has been
assessed individually 242,153,083 100.0 - - 242,153,083 263,796,355 100.0 - - 263,796,355
______ ___ ____ ____ ______ ______ ___ ____ ____ ____________ ___ ____ ____ ______ ______ ___ ____ ____ ______
The normal credit term is one month, which can be extended to one year for certain customers.
The accounts receivable are interest-free.
As at 31 December 2018, ownership restricted accounts receivable is RMB 52,015,032 (31
December 2017: RMB 46,337,062), referring to Note VI-45.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable - continued
2.3 Accounts receivable - continued
(1) Disclosure of accounts receivable by categories - continued
The aging analysis is as follows:
31/12/2018 31/12/2017RMB RMB
Within 1 year 240,312,773 263,112,7141 to 2 years 1,566,622 683,6412 to 3 years 273,688 -____________ ____________
242,153,083 263,796,355____________ ________________________ ____________
(2) Recognitions, collections and reversals during the current year:
As at 31 December 2018, there was no bad debt provision for accounts receivable (31 December
2017: Nil). There was no bad debt provision made, reversed or written-off by management in
2018 (2017: Nil).
(3) Top five entities with the largest balances of accounts receivable:
Relationship Percentage of
Name with the Group Amount Aging total receivables
RMB %
Sainsbury's supermarkets Ltd Third party 17,428,889 Within 1 year 7.2
Nongongshang Supermarket
(Group) Co., Ltd Third party 10,928,458 Within 1 year 4.5
SLIGRO B.V. Third party 6,732,175 Within 1 year 2.8
Vi?edosy Bodegas Las Pircas Third party 6,430,387 Within 1 year 2.7
Suguo Supermarket Co., Ltd. Third party 6,415,505 Within 1 year 2.6
________ ___
47,935,414 19.8
________ ___________ ___
3. Prepayments
(1) The aging analysis is as follows:
31/12/2018 31/12/2017
Amount Ratio Amount Ratio
RMB % RMB %
Within 1 year 4,219,949 100.0 2,417,931 100.0_________ _____ _________ ______________ _____ _________ _____
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3. Prepayments - continued
(2) As at 31 December 2018, the top five of prepayments were as follows:
Reason Percentage ofRelationship for being total advanceswith the Group Amount Aging outstanding to suppliersRMB %
Shanghai BenchuTrade&Development Co., Ltd. Third party 345,600 Within 1 year Goods not received 8.2Carrington Estate T/A Karikari Esta Third party 340,498 Within 1 year Goods not received 8.1DONELLI VINI S.P.A. Third party 304,204 Within 1 year Goods not received 7.2Yantai Economic and TechnologicalDevelopment Zone Thermal Co., Ltd Third party 250,000 Within 1 year Prepaid heating fees 5.9Yantai Cihang International FreightAgent Co., Ltd. Third party 186,392 Within 1 year Prepaid agency fees 4.4
_______ ___
1,426,694 33.8
_______ __________ ___
4. Other receivables
4.1 Presented by categories
31/12/2018 31/12/2017RMB RMB
Interest receivable 1,332,681 240,968Other receivables 21,303,405 18,737,454___________ ___________
Total 22,636,086 18,978,422___________ ______________________ ___________
(1) Categories of interest receivable
31/12/2018 31/12/2017
RMB RMB
Interest receivable on bank deposits 1,332,681 240,968_________ _________________ ________
(2) Overdue interest
As at 31 December 2018, there was no overdue interest receivable (31 December 2017: Nil).
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables
(1) Disclosure of other receivables by categories
31/12/2018 31/12/2017Bad debts Carrying Bad debts CarryingAmount provision amount Amount provision amountAmount Proportion Amount Ratio Amount Amount Proportion Amount Ratio AmountRMB % RMB % RMB RMB % RMB % RMB
Other receivable for whichbad debt provision has beenassessed individually 21,303,405 100.0 - - 21,303,405 18,737,454 100.0 - - 18,737,454
______ ___ _____ ___ ______ ______ ___ _____ ___ ____________ ___ _____ ___ ______ ______ ___ _____ ___ ______
The aging analysis is as follows：
31/12/2018 31/12/2017Bad debts Carrying Bad debts CarryingAmount provision amount Amount provision amountAmount Proportion Amount Amount Amount Proportion Amount AmountRMB % RMB RMB RMB % RMB RMB
Within 1 year 11,293,908 53.0 - 11,293,908 13,214,301 70.5 - 13,214,3011 to 2 years 6,693,702 31.5 - 6,693,702 1,937,961 10.3 - 1,937,9612 to 3 years 1,922,998 9.0 - 1,922,998 2,273,591 12.2 - 2,273,591Over 3 years 1,392,797 6.5 - 1,392,797 1,311,601 7.0 - 1,311,601
_______ ____ ______ _______ _______ ____ ______ _______
21,303,405 100.0 - 21,303,405 18,737,454 100.0 - 18,737,454
_______ ____ ______ _______ _______ ____ ______ ______________ ____ ______ _______ _______ ____ ______ _______
(2) Accrual, reversal and written-off during the current year
As at 31 December 2018, no bad debt provision was made for other receivables (2017: RMB354,805).
(3) Other receivables written off in the current year
As at 31 December 2018, the Group has no other receivables written off (31 December 2017:
RMB 354,805).
(4) Disclosure of other receivables by categories
31/12/2018 31/12/2017RMB RMB
Deposit 10,453,624 10,075,901Petty cash receivable 2,274,038 2,215,146Investment fund - 2,050,000Refund of consumption tax, real estate tax 6,273,882 2,451,188Others 2,301,861 1,945,219____________ ____________
21,303,405 18,737,454____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Other receivables- continued
4.2 Other receivables- continued
(5) Five entities with the largest balances of other receivables
As at 31 December 2018, the top five of other receivables are as follows:
Percentage of total Bad debtNature Amount Aging other receivables Closing balanceRMB % RMB
Yantai Development ZoneConstruction Industry Association Construction deposit 7,709,477 Within 3 years 36.1 -Zhejiang Tmall Technology Co., Ltd. Shop deposits 867,426 Within 1 year 4.1 -Yantai Shenma Packaging Co., Ltd.("Shenma Packaging") Lease receivables 813,440 Within 1 year 3.8 -Yantai Development ZonePower Company Deposit 140,000 Within 3 years 0.7 -Yantai Development ZoneHeat Company Deposit 130,000 Within 3 years 0.6 -
_________ ____ _________
9,660,343 45.3 -
_________ ____ __________________ ____ _________
5. Inventories
(1) Disclosure of inventories by categories
31/12/2018 31/12/2017Net carrying Net carryingBalance Provision amount Balance Provision amountRMB RMB RMB RMB RMB RMB
Raw material 67,267,035 - 67,267,035 66,881,090 - 66,881,090Work in progress 1,787,819,923 - 1,787,819,923 1,568,230,851 - 1,568,230,851Finished goods 894,187,725 (24,683,226) 869,504,499 864,097,497 (25,595,392) 838,502,105
_________ ________ _________ _________ ________ _________
2,749,274,683 (24,683,226) 2,724,591,457 2,499,209,438 (25,595,392) 2,473,614,046
_________ ________ _________ _________ ________ __________________ ________ _________ _________ ________ _________
(2) Inventory provision
Opening balance Recognized Reversal Written off Closing balanceRMB RMB RMB RMB RMB
Provision for decline invalue of inventories 25,595,392 749,134 (1,661,300) - 24,683,226
_________ ________ ________ ________ __________________ ________ ________ ________ _________
6. Other current assets
31/12/2018 31/12/2017RMB RMB
Prepaid taxes 24,077,323 22,911,298Pending deduct VAT on purchase 233,087,707 206,529,504Prepaid rent 1,511,366 1,381,957___________ ____________
258,676,396 230,822,759
___________ _______________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Available-for-sale financial assets
(1) Available-for-sale financial assets
31/12/2018 31/12/2017Amount Impairment Carrying amount Amount Impairment Carrying amountRMB RMB RMB RMB RMB RMB
Available-for-saleequity instrumentsmeasured at cost 467,251 - 467,251 467,251 - 467,251
_______ _______ ______ _______ _______ _____________ _______ ______ _______ _______ ______
(2) Available-for-sale financial assets measured at cost
Carrying amount Provision for impairment losses Proportion of Cashvoting power dividendin the for theInvestee Opening Increase Decrease Closing Opening Increase Decrease Closing investee periodRMB RMB RMB RMB RMB RMB RMB RMB (%) RMB
Other 467,251 - - 467,251 - - - -
____ ____ ____ ____ ____ ____ ____ ____ ____ ________ ____ ____ ____ ____ ____ ____ ____ ____ ____
The Group holding equity ratios of investment companies are less than 1%. Investment companiesare all unlisted companies, and their fair value cannot be measured reliably, therefore, the Groupuses cost method to measure these available-for-sale financial assets.
8. Investment properties
Investment properties measured by cost method
BuildingsRMB
Total original carrying amount31/12/2017 38,347,283IncreaseTransfer from fixed assets 32,606,762____________
31/12/2018 70,954,045____________
Total accumulated depreciation
31/12/2017 19,879,294
Increase
Transfer from fixed assets 17,644,360
Additions 1,857,902____________
31/12/2018 39,381,556____________
Total carrying amount
31/12/2018 31,572,489________________________
31/12/2017 18,467,989________________________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets
(1) Details of fixed assets
Buildings Machinery Motor Vehicles TotalRMB RMB RMB RMB
Total original carrying amount31/12/2017 4,508,868,684 2,247,350,293 28,689,415 6,784,908,392IncreasePurchase 4,490,675 235,607,780 923,222 241,021,677Transfer from CIP 252,035,224 202,251,634 1,708,803 455,995,661Acquisition increase (VII-1) 33,048,307 15,981,692 - 49,029,999DecreaseDisposal (4,409,703) (35,392,585) (4,740,801) (44,543,089)Transfer to Investmentproperties (VI-8) (32,606,762) - - (32,606,762)
__________ __________ ________ __________
31/12/2018 4,761,426,425 2,665,798,814 26,580,639 7,453,805,878
__________ __________ ________ __________
Total accumulated depreciation31/12/2017 512,643,486 922,944,520 20,236,417 1,455,824,423IncreaseAdditions 126,510,348 168,695,471 2,632,539 297,838,358DecreaseDisposal (242,705) (29,575,754) (2,125,751) (31,944,210)Transfer to Investmentproperties (VI-8) (17,644,360) - - (17,644,360)
__________ __________ ________ __________
31/12/2018 621,266,769 1,062,064,237 20,743,205 1,704,074,211
__________ __________ ________ __________
Total carrying amount31/12/2018 4,140,159,656 1,603,734,577 5,837,434 5,749,731,667
__________ __________ ________ ____________________ __________ ________ __________
31/12/2017 3,996,225,198 1,324,405,773 8,452,998 5,329,083,969
__________ __________ ________ ____________________ __________ ________ __________
As at 31 December 2018, fixed assets with ownership restricted are RMB 412,006,421 (31December 2017: RMB 145,009,923). Please refer to Note VI-45 in detail.
As at 31 December 2018, the Group has net fixed assets that are temporarily idle of RMB59,718,155(31 December 2017: Nil). The Group has no fixed assets acquired under finance leasesor fixed assets classified as held for sale (31 December 2017: RMB 2,000,197).
(2) Fixed assets through operating lease
AmountRMB
Machinery 134,111______________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
9. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, buildings without property certificate are as follows:
Reasons why certificatesAmount of title have not been obtainedRMB
Research and Development Co, LtdIndustry Production Centre 1,755,472,791 ProcessingChangan Chateau Dormitory building, main building 284,890,228 ProcessingBeijing Chateau European town, main, service building 187,565,493 ProcessingDing Luo Te Chateau main building 83,218,432 ProcessingXinjiang Tianzhu fermentations and storage warehouse 17,768,840 ProcessingIce Wine Chateau office building and packing workshop 9,198,373 ProcessingJingyang factory fermentation building 4,171,918 ProcessingFermentation centre office, experiment building and workshop 3,653,494 ProcessingKylin Packaging finished goods warehouse and workshop 2,396,850 ProcessingSales Company office buildings 1,123,984 Processing
__________
2,349,460,403
____________________
The buildings without property certificate above have no significant influence on the group'smanagement.
10. Construction in progress
(1) Construction in progress:
31/12/2018 31/12/2017RMB RMBR&D Centre ("Changyu Wine integrationalConstruction") Project 608,553,617 883,731,540Changan Chateau Construction Project 39,793,893 53,290,036Ningxia Chateau Construction Project 47,163,863 35,711,269Shihezi Chateau Construction Project 23,664,124 25,463,724Sales Company construction project 17,985,882 11,355,685Other companies construction Project 22,135,212 16,589,315____________ ____________
759,296,591 1,026,141,569____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Construction in progress- continued
(2) Changes in significant construction in progress:
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
| Budget | 31/12/2017 | Addition | Transfer to PPE | Transfer to | 31/12/2018 | Status | Total accumulated Capitalizing interest | Capitalizing interest for this period | Interest capitalization rate | Financed by | |
| Lone-term prepaid expense | |||||||||||
| RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | % | |||
| Changyu Wine integrational Construction" | 4,505,780,000 | 883,731,540 | 118,142,779 | (372,914,273) | (20,406,429) | 608,553,617 | 74.3 | 14,271,837 | 5,843,872 | 1.2%及4.3% | Loans from financial institutions and Self-raised |
| Changan Chateau Construction Project | 620,740,000 | 53,290,036 | 12,149,197 | (25,645,340) | - | 39,793,893 | 108.7 | - | - | - | Self-raised |
| Shihezi Chateau Construction Project | 780,000,000 | 25,463,724 | 37,629,835 | (39,429,435) | - | 23,664,124 | 96.3 | - | - | - | Self-raised |
| Ningxia Chateau Construction Project | 414,150,000 | 35,711,269 | 14,307,265 | (2,854,671) | - | 47,163,863 | 102.1 | - | - | - | Self-raised |
| Sales Company construction project | 161,350,000 | 11,355,685 | 6,893,191 | (262,994) | - | 17,985,882 | 97.7 | - | - | - | Self-raised |
The interest capitalized in construction in progress is RMB 5,843,872 in 2018(2017: RMB 6,138,242).
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Bearer biological assets
Bearer biological assets are Vines, which measured in cost method
Immature Mature
biological assets biological assets TotalRMB RMB RMB
Total original carrying amount31/12/2017 12,175,000 217,537,353 229,712,353IncreaseCultivated increase 19,371,297 - 19,371,297Transfer to mature assets (17,708,689) 17,708,689 -__________ ___________ ___________
31/12/2018 13,837,608 235,246,042 249,083,650__________ ___________ ___________
Total accumulated depreciation
31/12/2017 - 27,782,465 27,782,465
Increase
Additions - 12,034,812 12,034,812__________ ___________ ___________
31/12/2018 - 39,817,277 39,817,277__________ ___________ ___________
Total net carrying amount
31/12/2018 13,837,608 195,428,765 209,266,373__________ ___________ _____________________ ___________ ___________
31/12/2017 12,175,000 189,754,888 201,929,888__________ ___________ _____________________ ___________ ___________
As at 31 December 2018, there is no biological asset with ownership restricted. (31 December
2017:Nil)
As at 31 December 2018, there is no indication that biological assets may be impaired, and no
provision is made. (31 December 2017:Nil)
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets
(1) Intangible assets
Land use rights Software use rights Trademark TotalRMB RMB RMB RMB
Total original carrying amount31/12/2017 521,731,139 73,666,754 159,702,508 755,100,401IncreasePurchase 1,596,780 922,809 105,827 2,625,416Acquisition increase(VII-1) 4,924,992 1,232,494 10,260,400 16,417,886
__________ __________ _________ __________
31/12/2018 528,252,911 75,822,057 170,068,735 774,143,703
__________ __________ _________ __________
Total accumulated depreciation31/12/2017 67,547,772 21,516,741 10,586,991 99,651,504Increase
Additions 10,523,138 5,206,074 3,289,528 19,018,740
__________ __________ _________ __________
31/12/2018 78,070,910 26,722,815 13,876,519 118,670,244
__________ __________ _________ __________
Total carrying amount31/12/2018 450,182,001 49,099,242 156,192,216 655,473,459
__________ __________ _________ ____________________ __________ _________ __________
31/12/2017 454,183,367 52,150,013 149,115,517 655,448,897
__________ __________ _________ ____________________ __________ _________ __________
(2) Land use right's location and years are as follows:
Item 31/12/2018 31/12/2017RMB RMB
In the PRC( within 50 years) 419,300,592 428,226,950Out of the PRC (more than 50 years) 30,881,409 25,956,417___________ ____________
450,182,001 454,183,367___________ _______________________ ____________
As at 31 December 2018, the Group has land use right with infinite useful lives of RMB
30,881,409( 31 December 2017: RMB 25,956,417), representing the freehold land held by Chile
Indomita Wine Group and Australia Kilikanoon Estate under relevant Chile and Australia laws,
on which the amortization is not required.
As at 31 December 2018, the Group has trademark with infinite useful lives of RMB 154,150,933
(31 December 2017: 143,890,533), which is held by Chile Indomita Wine Group and Australia
Kilikanoon Estate. The recoverable amount of the trademark is determined according to the
present value of the expected future cash flows generated from the asset group to which the single
assets of trademark right belongs. The management prepares the cash flow projection for future 5
years (the "projecting period") based on the latest financial budget assumption, and estimates the
cash flows after the future 5 years (the "subsequent period"). The pretax discount rates used in the
cash flow projections are 12.3% and 14.4%, respectively. A key assumption in the estimate of
future cash flows is the revenue growth rate in the projecting period. Such revenue growth rate is
determined based on the industry and the expected growth rate of Chile Indomita Wine Group and
Australia Kilikanoon Estate. The revenue growth rates in the subsequent period are 3.0% and
2.5%, respectively.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Intangible assets - continued
(2) Land use right's location and years are as follows:- continued
The Group recognizes the trademark with infinite useful lives as intangible assets, the impairmentassessment of which is made at the end of each reporting year. The management believes that anyreasonable change of the above assumptions will not result in the total book value of the assetgroup to which the single assets of trademark right belongs exceeding its recoverable amount.
According to the result of impairment assessment, by the end of 31 December 2018, themanagement believes there is no impairment loss on those trademark with infinite useful lives ofthe Group.
As at 31 December 2018, the intangible asset with restricted ownership is RMB 218,070,414(December 31, 2017:RMB 164,051,996), Please refer to Note VI-45 in detail.
13. Goodwill
Investee 31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Etablissements Roullet Fransac("Fransac Sales") 13,112,525 - - 13,112,525Dicot Partners, S.L(" Dicot") 92,391,901 - - 92,391,901Societe Civile Argricole Du ChateauDe Mirefleurs ("Mirefleurs") 15,761,440 - - 15,761,440Indomita Wine 6,870,115 - - 6,870,115Australia Kilikanoon Estate - 37,063,130 - 37,063,130
_________ ________ ______ _________
Total 128,135,981 37,063,130 - 165,199,111
_________ ________ ______ __________________ ________ ______ _________
The Group acquired Fransac Sales, Dicot and Mirefleurs and Chile Indomita Wine Group inDecember 2013, September 2015 January 2016 and July 2017 respectively, resulting in respectivegoodwill amounting to RMB 13,112,525, RMB 92,391,901, RMB 15,761,440 and RMB6,870,115. The Group acquired Australia Kilikanoon Estate in January 2018, resulting goodwillamounting to RMB 37,063,130, which have been allocated to corresponding asset groups forimpairment testing.
The recoverable amount of the group of assets is determined by the present value of its future cashflows. Future cash flow projections are made based on the recently financial budgets for the future5 years period (projecting period) and presume that cash flows after the projecting period(subsequent period). The pretax discount rate used in calculating the recoverable amounts ofFransac Sales, Dicot Mirefleurs, Indomita Wine and Australia Kilikanoon Estate are 16.6%,12.4%, 16.6 %, 12.3% and 13.1%(2017: 15.4%, 11.8%, 15.4%, 13.2% and N/A) respectively. Onekey assumption in projecting future cash flows is the growth rate of sales in projecting period,which is computed based on the expected growth rate of the industry and each group of assets.Growth rate of sales in subsequent period of Fransac Sales, Dicot, Mirefleurs, Indomita Wine andAustralia Kilikanoon Estate is 2.0%, 2.0%, 2.0%, 3.0%,2.5% (2017: 2%, 2%, 2%, 3% andN/A)respectively. Management of the Group believes that any reasonable changes in the aboveassumptions will not cause book values of these subsidiaries exceeds their recoverable amounts.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Goodwill- continued
According to the assessment, the Group believes that no impairment provision need to be madefor goodwill in the reporting period.
14. Long-term prepaid expenses
31/12/2017 Increase Amortization 31/12/2018RMB RMB RMB RMB
Land lease prepayments 56,365,385 - (2,147,622) 54,217,763Land requisition fee 43,976,036 - (548,297) 43,427,739Greening fee 125,628,334 24,511,623 (8,915,485) 141,224,472Leasehold improvement 873,263 3,306 (100,922) 775,647Others 3,166,213 2,198,373 (369,791) 4,994,795
__________ _________ _________ __________
230,009,231 26,713,302 (12,082,117) 244,640,416
__________ _________ _________ ____________________ _________ _________ __________
Note: The greening fee transferred from CIP to long-term prepaid expenses amounted to RMB20,406,429, refer to Note VI-10 for details.
15. Deferred tax assets/liabilities
Deferred tax assets and deferred tax liabilities are not related to income tax of the same taxauthorities of the same tax subjects, thus not presented with the net amount after netting.
(1) Deferred tax assets:
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
| 31/12/2018 | 31/12/2017 | |||
| Temporary differences | Deferred tax assets | Temporary differences | Deferred tax assets | |
| RMB | RMB | RMB | RMB | |
| Unrealized profit from intra - company transactions | 602,476,583 | 150,619,145 | 618,591,681 | 154,647,920 |
| Unpaid bonus | 141,808,257 | 35,485,814 | 94,462,722 | 23,671,611 |
| Retirement benefit | 26,186,243 | 6,546,561 | 27,980,857 | 6,995,214 |
| Asset impairment provision | 24,683,226 | 6,170,807 | 25,595,392 | 6,398,848 |
| Deductible losses | 262,937,999 | 67,566,387 | 345,639,059 | 88,584,337 |
| Deferred income | 86,227,293 | 18,868,963 | 109,797,054 | 24,285,203 |
| Assets impairment loss | 661,415 | 178,582 | 684,622 | 184,848 |
| Accrued rebate | - | - | 13,413,655 | 3,353,415 |
| 1,144,981,016 | 285,436,259 | 1,236,165,042 | 308,121,396 | |
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Deferred tax assets/liabilities - continued
(2) Deferred tax liabilities
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Item
| Item | 31/12/2018 | 31/12/2017 | ||
| Taxable temporary difference | Deferred tax liability | Taxable temporary difference | Deferred tax liability | |
| RMB | RMB | RMB | RMB | |
| Revaluation surplus in business combination not under common control | 81,338,130 | 22,010,647 | 89,316,823 | 24,264,203 |
(3) Deferred tax assets and liabilities not recognized
31/12/2018 31/12/2017RMB RMB
Deductible losses 171,430,831 150,320,039___________ _______________________ ____________
(4) Deductible losses not recognized as deferred tax assets will expire in:
31/12/2018 31/12/2017
RMB RMB
2018 - -
2019 7,311,273 7,311,273
2020 45,960,766 45,960,766
2021 82,685,213 82,685,213
2022 14,362,787 14,362,787
2023 21,110,792 -____________ ____________
171,430,831 150,320,039____________ ________________________ ____________
16. Short-term borrowings
31/12/2018 31/12/2017
RMB RMB
Credit loans 605,202,708 648,494,624
Mortgaged loans 79,467,832 65,939,662
Guaranteed loan 3,331,870 -____________ ____________
688,002,410 714,434,286____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Short-term borrowings - continued
As at 31 December 2018, short-term borrowings detail were as follows:
Nature of Interest rate Year endedLoans amount Exchange rate RMB interest in contract Interest rate% %
Credit loans (RMB) 400,000,000 1.0000 400,000,000 Floating 1 year LPR- 0.04(Note 1) 4.35Credit loans (RMB) 150,000,000 1.0000 150,000,000 Floating Annual benchmark rate 4.35Credit loans (EUR) 912,455 7.8473 7,160,308 Fixed 0.86~2.53 0.86~2.53Credit loans (USD) 7,000,000 6.8632 48,042,400 Fixed 3.97~4.90 3.97~4.90Mortgaged loans (EUR) 6,628,399 7.8473 52,015,032 Fixed 0.35~0.95 0.35~0.95Mortgaged loans (USD) 4,000,000 6.8632 27,452,800 Fixed 4.22~4.38 4.22~4.38Guaranteed loan(AUD) 690,543 4.8250 3,331,870 Fixed 3.00 3.00
_________
688,002,410_________
_________
Note 1: LPR is the basic interest rate of the People's Bank of China.
As at 31 December 2018, mortgaged loans were Hacienda y Vinedos Marques del Atrio, S.L.U ("
Atrio ") factoring of accounts receivable from Banco de Sabadell, S.A. etc. EUR 6,628,399
(translated as RMB 52,015,032)(31 December 2017:RMB 46,337,062). Mortgaged loans were
Indomita Wine mortgaged Chilean peso 7,642,470,000 (translated as RMB 75,601,849 ) fixed
assets from BBVA bank USD 4,000,000 (translated as RMB 27,452,800 )( December 31, 2017:
RMB 19,602,600 ). Australia Kilikanoon Estate has guaranteed loans of 690,543 Australian
dollars (equivalent to RMB 3,331,870)(31 December 2017: Nil).
17. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017
RMB RMB
Within 1 year 710,208,269 664,020,176
1 to 2 years 3,091,659 2,051,592
2 to 3 years 121,598 371,111
Over 3 years 151,355 -____________ ____________
713,572,881 666,442,879____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Advances from customers
The aging analysis of advances from customers are as follows
31/12/2018 31/12/2017RMB RMB
Within 1 year 221,022,547 340,025,6901 to 2 years 1,155,555 7,072,2542 to 3 years 1,032,609 381,463Over 3 years 2,864,533 3,414,749____________ ____________
226,075,244 350,894,156____________ ________________________ ____________
19. Employee benefits payable
(1) Employee benefits payable as follows:
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Short-term payroll 182,545,284 481,042,461 (477,694,636) 185,893,109
Post-demission benefits
- predetermined provision plan 298,093 51,503,280 (51,576,508) 224,865
Termination benefits 27,980,857 13,677,216 (15,471,830) 26,186,243
_________ _________ _________ _________
210,824,234 546,222,957 (544,742,974) 212,304,217
_________ _________ _________ __________________ _________ _________ _________
(2) Employee benefits payable:
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Salaries and bonus 185,014,318 428,052,734 (425,381,062) 187,685,990
Staff benefit 2,116,475 17,783,378 (16,885,565) 3,014,288
Staff welfare 524,316 20,677,314 (20,740,535) 461,095
Includes:
Medical insurance 524,316 19,045,528 (19,109,404) 460,440Injury insurance - 895,750 (895,095) 655Maternity insurance - 736,036 (736,036) -
Housing fund 39,256 10,444,925 (10,431,671) 52,510
Union fee and education fee 2,060,231 4,109,651 (4,255,803) 1,914,079
_________ _________ _________ _________
Total 189,754,596 481,068,002 (477,694,636) 193,127,962
_________ _________ _________ _________
Less: Non-current liabilities 7,209,312 7,234,853
_________ _________
Short-term payroll 182,545,284 185,893,109
_________ __________________ _________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Employee benefits payable - continued
(3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Pension 297,591 50,534,986 (50,608,044) 224,533Unemployment insurance 502 968,294 (968,464) 332
_______ __________ __________ _______
298,093 51,503,280 (51,576,508) 224,865
_______ __________ __________ ______________ __________ __________ _______
The Group participates in pension insurance and unemployment insurance plans established bygovernment institution. According to those plans, the Group pays pension and unemploymentinsurance each month on the basis of 12%-32% and 0.5%-3% last period salary respectively.Apart from these monthly expenses, the Group does not bear any further payment obligation. Thisyear the Group should pay RMB 50,534,986 and RMB 968,294 (2017: RMB 48,834,066 andRMB 1,141,605 ) respectively into pension insurance and unemployment insurance. As at 31December 2018, the Group has unpaid pension and unemployment insurance of RMB 224,533and RMB 332 respectively (31 December 2017: RMB 297,591 and RMB 502 ), which is due tothe pension insurance and unemployment insurance plan at the end of the reporting period. Thesepayments have been paid after the end of the reporting period.
20. Taxes payable
31/12/2018 31/12/2017RMB RMB
Value added tax 36,442,868 35,681,696Consumption tax 28,636,646 44,961,022Corporation income tax 40,869,507 38,834,293Urban land use tax 2,476,527 2,645,687Individual income tax 5,669,099 7,805,917City construction tax 4,337,712 5,669,280Property tax 5,165,128 4,647,644Others 5,315,303 4,848,617____________ ____________
128,912,790 145,094,156____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Other payables
21.1 Presented by categories
31/12/2018 31/12/2017RMB RMB
Interest payable 712,826 771,250Other payables 607,767,064 602,964,319____________ ____________
608,479,890 603,735,569____________ ________________________ ____________
21.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017
RMB RMB
Payable to dealer deposit 159,191,138 139,710,963
Payables for equipment and construction 152,825,734 130,706,777
Payables for transportation 38,867,725 27,847,092
Royalty fee 78,414,978 77,208,929
Advertising costs 80,715,461 118,834,960
Withholding promotion costs 15,714,400 13,413,655
Employee deposit 2,806,766 13,327,132
Deposits from suppliers 15,901,210 3,082,595
Payables for contracting fee 27,070,584 38,070,571
Others 36,259,068 40,761,645____________ ____________
607,767,064 602,964,319____________ ________________________ ____________
(2) Description of significant other payables aged more than one year
Company Amount Reasons
RMB
Beijing Qinglang Agriculture Science
and Technology Development Limited
Company ("Beijing Qinglang") 9,493,506 Payables for contracting fee
VASF Company 4,878,866 Payables for contracting fee
_________
14,372,372
__________________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
22. Deferred income
31/12/2018 31/12/2017RMB RMB
Government grantsCurrent liabilities 15,860,254 16,878,199Non-current liabilities 70,367,039 92,918,855____________ ____________
86,227,293 109,797,054____________ ________________________ ____________
Government grants:
Recognized in Related to
Opening Addition non-operating income Closing Assets/Income
/other income
RMB RMB RMB RMB RMB
Wine base liquor brewage project 4,739,400 - (1,434,900) 3,304,500 Assets
Shihezi chateau project funds 9,276,600 - (2,280,000) 6,996,600 Assets
Xinjiang Industrial Rejuvenation and
Technological Reconstruction Project 17,064,000 - (1,422,000) 15,642,000 Assets
Special support for infrastructure facilities 5,300,000 - (1,060,000) 4,240,000 Assets
Ningxia industry revitalization and
technology reconstruction funds 1,086,000 - (1,086,000) - Assets
Tourism Development Fund Subsidy Project 500,000 - - 500,000 Income
Support enterprise development special funds 10,200,000 - (10,200,000) - Income
(Huanren) wine production construction funds 3,600,000 - (400,000) 3,200,000 Assets
Wine electronic tracking system
specific funds 3,192,311 - (667,054) 2,525,257 Assets
Miyun Propaganda Department transfer 888,945 - (888,945) - Assets
Wine industry specific funds 744,000 - (186,000) 558,000 Assets
Shandong Peninsula Blue Economic
Area construction funds 8,000,000 - (2,000,000) 6,000,000 Assets
Information system construction
project technology funds 3,480,000 - (580,000) 2,900,000 Assets
Cross-border e-Business projects subsidies 702,615 300,000 (122,359) 880,256 Income
Red wine phenolics research projects funds 284,601 - (284,601) - Income
Grape base construction project 520,000 - (520,000) - Assets
Water pollution abatement project 320,132 - (113,602) 206,530 Income
Infrastructure construction project 1,843,750 - (125,000) 1,718,750 Assets
Industrial development support project 36,900,000 - (4,100,000) 32,800,000 Assets
Subsidy for updating of economic and
energy-saving technology 1,154,700 - (128,300) 1,026,400 Assets
Special funds for efficient water saving
irrigation project - 1,720,000 (81,000) 1,639,000 Assets
Guidance funds for service industry development - 2,000,000 - 2,000,000 Income
Relocation allowance for boiler renovation - 100,000 (10,000) 90,000 Income
_______ _______ _______ _______
Total 109,797,054 4,120,000 (27,689,761) 86,227,293
_______ _______ _______ ______________ _______ _______ _______
Less: Non-current liabilities due within one year 16,878,199 15,860,254
_______ _______
Other non-current liabilities 92,918,855 70,367,039
_______ ______________ _______
As at 31 December 2018, the Group recognise current liability for deferred income to be
accounted in profit or loss within one year, and recognise non-current liability for deferred income
to be accounted in profit or loss over one year.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Non-current liabilities due within one year
31/12/2018 31/12/2017RMB RMB
Long-term borrowings due within one year 118,940,788 76,954,827Long-term payables due within one year 34,000,000 34,000,000____________ ____________
152,940,788 110,954,827____________ ________________________ ____________
As at 31 December 2018, Long-term borrowings due within one year refers to Note VI-24, Long-
term payables due within one year refers to Note VI-25.
24. Long-term borrowings
31/12/2018 31/12/2017
RMB RMB
Credit loan 41,805,746 68,182,310
Mortgaged loan 3,924,916 6,693,544
Guaranteed loan 110,750,000 81,250,000____________ ____________
156,480,662 156,125,854____________ ________________________ ____________
As at 31 December 2018, loans detail is as follows:
Nature Year-end Due within Due over
Loans amount Exchange rate Amount of interest Interest rate borrowing rate one year one year
RMB % %
Guaranteed loan (RMB) (Note) 81,250,000 1.0000 81,250,000 Floating 5 year LPR- 0.9 4.275 18,750,000 62,500,000
Credit loan (EUR) 17,734,954 7.8473 139,171,506 Fixed 1.00-2.53 1.00-2.53 97,365,760 41,805,746
Mortgaged loan (EUR)(Note) 860,161 7.8473 6,749,944 Fixed 1.80 1.80 2,825,028 3,924,916
Guaranteed loan(AUD)(Note) 10,000,000 4.8250 48,250,000 Fixed 3.00 3.00 - 48,250,000
_______ _______ _______
275,421,450 118,940,788 156,480,662
_______ _______ ______________ _______ _______
Note: As at 31 December 2018, The secured loan is the long-term loan borrowed by the
company for R&D Centre credit guarantee, RMB 81,250,000 (31 December 2017: RMB
100,000,000), mortgaged loans were Atrio using fixed assets EUR 4,264,170 (translated as RMB
33,462,225) as collateral for loans from Popular Espa?ol, EUR 860,161 (translated as RMB
6,749,944), (31 December 2017: RMB 9,502,372).The guaranteed loan(AUD) is the loan of AUD
10,000,000 borrowed by Australia Kilikanoon Estate from Australia & New Zealand
banking( translated as RMB 48,250,000)(31 December 2017:Nil), which was guaranteed by the
Company.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
25. Long-term payables
31/12/2018 31/12/2017RMB RMB
Agricultural DevelopmentFund of China ("CADF") 225,000,000 259,000,000____________ ________________________ ____________
In 2016, RMB 305,000,000 from CADF was invested in R&D Centre, CADF accounted for37.9% of the registered capital. According to the investment agreement, CADF will recoveryinvestment funds over 10 years, the investment income received equal to 1.2% of the remainingunpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy otherprofits or bear the loss of R&D Centre .Therefore although the investment in R&D Centre,nominally equity investment, is actually a debt investment (Financial discount loan). The grouptake this investment as long-term payables, which measured in amortized cost. The Grouprepays the principal of RMB 34,000,000 in 2018. Refer to Note VI-45 for details of mortgagedand pledged assets.
Long-term Termination date Mortgagedpayables Yield rate Investment date of repayment Due within 1 year Due after 1 year and pledged assetsRMB RMB RMB
67,000,000 1.2% 12 January 2016 24 December 2025 10,000,000 57,000,000 Cash and Bank
Intangible assets
176,000,000 1.2% 29 February 2016 28 February 2026 22,000,000 154,000,000 Fixed assets and intangible assets16,000,000 1.2% 16 June 2016 22 May 2026 2,000,000 14,000,000 Cash and bank___________ __________ ___________
259,000,000 34,000,000 225,000,000___________ __________ ______________________ __________ ___________
26. Other non-current liabilities
31/12/2018 31/12/2017
RMB RMB
Employee benefit 7,234,853 7,209,312_________ __________________ _________
As at 31 December 2018, employee benefit represents deposit from bonus accrued for managers
and above. According to the bonus payment schedule of 2018, the bonus is expected to be paid
during 2020 to 2022.
27. Share capital
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Unrestricted shares
A shares 453,460,800 - - 453,460,800
B shares 232,003,200 - - 232,003,200
__________ ______ ______ __________
Total of unrestricted shares
and total shares 685,464,000 - - 685,464,000
__________ ______ ______ ____________________ ______ ______ __________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Capital reserve
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Share premium 560,038,853 - - 560,038,853Other 5,916,588 - - 5,916,588
__________ ______ ______ __________
Total 565,955,441 - - 565,955,441
__________ ______ ______ ____________________ ______ ______ __________
29. Other comprehensive income
20182018 Less: last year other Post-tax Post-taxOpening Before-tax comprehensive income Less: attributable attributable Closingbalance amount in P/L current year tax expense to parent to NCI balance
Other comprehensiveincome to be reclassifiedto profit and loss 3,109,240 (376,524) - - (143,863) (232,661) 2,965,377Foreign currency statementtranslation difference 3,109,240 (376,524) - - (143,863) (232,661) 2,965,377
______ _____ ____ ____ _____ _____ ____________ _____ ____ ____ _____ _____ ______
30. Surplus reserve
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Statutory surplus reserve 342,732,000 - - 342,732,000
__________ ______ ______ ____________________ ______ ______ __________
In accordance with the Company Law of the People's Republic of China and the Articles ofAssociation of the Company, the Company is required to appropriate 10% of the net profit to thestatutory surplus reserve until the accumulated balance of the statutory surplus reserve reaches 50%of the registered share capital. The Company does not appropriate net profit to the surplus reservein 2018.
The Company can appropriate discretionary surplus reserve after appropriation of the statutorysurplus reserve. Discretionary surplus reserve can be utilized to offset the deficit or increase theshare capital after approval.
31. Retained earnings
31/12/2018 31/12/2017RMB RMB
Retained earnings brought forward 7,309,081,618 6,620,118,562Profit attributable to shareholders of the Company 1,042,632,929 1,031,695,056Less: Dividends paid in respect prior year's profit (342,732,000) (342,732,000)____________ ____________
Retained earnings carried forward 8,008,982,547 7,309,081,618____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Retained earnings - continued
(1) Appropriation to surplus reserve by subsidiaries
As at 31 December 2018, the balance of the Group's unappropriated profits include appropriationto surplus reserve by subsidiaries amounting to RMB 54,336,543 (31 December 2017: RMB51,994,942).
(2) Cash dividends approved by general meeting
According to the annual general meeting on 25 May 2018, dividends distribution plan has beenmade. On the basis of 685,464,000 issued share capital, RMB 5.0 (including taxes) for every 10shares was distributed to shareholders, in total RMB 342,732,000 cash dividends.
(3) Profit distribution decided after the balance sheet date
According to a proposal of the board of directors approved on 18 April 2019, on the basis of685,464,000 issued shares in 2018, cash dividends of RMB 6.0 (including taxes) for every 10 sharewill be distributed to all the shareholders. The aggregate amount of cash dividend is RMB411,278,400. The above proposal regarding dividends distribution is yet to be approved in ashareholders' meeting.
32. Revenue and costs
Revenue is analysed as follows:
2018 2017
RMB RMB
Principal Revenue 5,066,265,044 4,856,168,699Other Revenue 75,979,696 76,376,530____________ ____________
5,142,244,740 4,932,545,229____________ ________________________ ____________
Operating cost is analysed as follows:
2018 2017
RMB RMB
Principal operating cost 1,872,991,039 1,645,690,616
Other operating cost 28,620,468 25,901,663____________ ____________
1,901,611,507 1,671,592,279____________ ________________________ ____________
The Revenue for the Group is mainly from the sales of wine, brandy and sparkling wine. In 2018,
Over 87% (2017: over 91%) of the sales generated in PRC.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
33. Taxes and surcharges
2018 2017
RMB RMB
Consumption tax 157,037,382 177,879,324City construction tax 39,655,738 52,247,915Education fee and surcharges 28,762,507 35,831,575Property tax 31,461,708 23,113,211Land use tax 12,098,790 11,874,984Stamp tax 4,507,785 3,945,731Others 2,967,764 5,359,283____________ ____________
276,491,674 310,252,023____________ ________________________ ____________
For detail standards of tax rate please refer to Note V.
34. Selling expenses
2018 2017
RMB RMB
Marketing expenses 386,519,123 428,828,931
Salary and employee benefit 297,489,665 272,148,620
Freight 141,756,007 139,218,637
Trademark fee 73,976,395 72,838,612
Labor fee 72,036,252 67,860,856
Warehouse leasing expenses 45,668,613 53,075,132
Depreciation cost 41,410,740 34,963,089
Advertising fees 35,857,276 34,753,090
Conference expenses 32,731,215 31,609,123
Design cost 29,437,757 27,226,277
Travelling expenses 27,176,277 27,709,534
Security and sanitation fee 12,896,986 12,659,228
Water and electricity fee 11,297,244 11,247,163
Office allowance 9,707,518 6,165,561
Packing cost 8,195,160 7,163,930
Taxes 7,113,764 6,771,337
Amortization of low-value consumables 5,756,602 4,028,573
Business entertainment 5,665,336 4,403,750
Others 29,907,216 29,851,000____________ ____________
1,274,599,146 1,272,522,443____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Administrative expense
2018 2017
RMB RMB
Salary and employee benefit 114,473,209 106,342,126Depreciation 71,978,485 71,558,307Maintenance fee 25,189,384 21,665,024Administrative expenses 23,766,176 22,173,925Amortization 18,187,049 22,438,364Greening fee amortization 14,730,804 10,667,941Contracting fee 13,364,835 21,162,623Rental fees 13,012,167 12,414,249Safe production cost 9,692,574 7,840,215Security and sanitation fee 8,659,405 6,317,723Service fee 6,556,258 12,118,257Entertainment fee 5,300,526 5,470,001Travelling expenses 3,630,225 4,747,256Others 15,039,554 11,545,122____________ ____________
343,580,651 336,461,133____________ ________________________ ____________
36. Financial expense
2018 2017
RMB RMB
Interest income (12,086,007) (9,168,772)
Exchange income (666,323) (182,610)
Interest expenses 52,198,774 32,233,729
Less: Capitalization of interests 5,843,872 6,138,242
Bank charges 2,342,730 1,846,154____________ ____________
35,945,302 18,590,259____________ ________________________ ____________
37. (Reversal of)Impairment loss of assets
2018 2017
RMB RMB
(Reversal of) Inventory impairment (912,166) 7,938,748
Impairment losses from other receivables - 354,805________ __________
(912,166) 8,293,553
________ __________________ __________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
38. Other income
2018 2017 Assets/income related
Project Subsidy RMB RMB
Tax refund 6,587,773 17,765,560 IncomeSpecial funds for manufacturing industry 4,750,000 4,100,000 IncomeIndustrial development support project 4,100,000 - AssetsNingxia industry revitalization andtechnology reconstruction funds 1,086,000 3,295,000 AssetsProject funds 2,280,000 2,280,000 AssetsShandong Peninsula Blue EconomicArea construction funds 2,000,000 2,000,000 AssetsSpecial funds for the developmentof enterprises 42,953,900 - IncomeOthers 7,493,199 6,352,199 AssetsOthers 16,030,562 10,245,625 Income__________ __________
87,281,434 46,038,384__________ ____________________ __________
39. Non-operation income
Recognized in
extraordinary
2018 2017 profit and loss
RMB RMB RMB
Government grants - 1,600,000 -
Penalty income 1,901,530 7,993,571 1,901,530
Others 5,451,779 7,637,156 5,451,779__________ __________ __________
7,353,309 17,230,727 7,353,309__________ __________ ____________________ __________ __________
40. Non-operation expenses
Recognized in
extraordinary
2018 2017 profit and loss
RMB RMB RMB
Compensation and penalty loss 2,576,838 347,528 2,576,838
Donation 293,819 294,899 293,819
Others 665,251 989,049 665,251__________ __________ __________
3,535,908 1,631,476 3,535,908__________ __________ ____________________ __________ __________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
41. Income tax
2018 2017
RMB RMB
Current income tax 352,598,370 330,784,002Deferred income tax 14,529,152 7,350,243____________ ____________
367,127,522 338,134,245____________ ________________________ ____________
Reconciliation between income tax expenses and profits is as follows:
2018 2017
RMB RMB
Profit before tax 1,408,611,698 1,371,927,763
Income tax expense at statutory tax rate 25% (2017:25%) 352,152,925 342,981,941
Effect of different tax rates applied by certain subsidiaries (949,634) (9,600,821)
Changes in opening balances of deferred tax
liabilities due to tax rate adjustment - (1,342,916)
Unrecognised Deductible loss 4,642,727 3,590,697
Utilization of Deductible losses which were not
recognized previously - (6,157,735)
Non-deductible expenses 5,496,292 7,550,095
Write-off of deferred tax assets 5,785,212 1,112,984____________ ____________
Income tax expenses 367,127,522 338,134,245____________ ________________________ ____________
42. Basic and dilutive earnings per share
The calculation of basic earnings per share is based on the consolidated profit attributable to
ordinary shareholders of the Company during the year and the weighted average number of
outstanding ordinary shares.
2018 2017
RMB RMB
Earnings
Consolidated profit attributable to ordinary
shareholders of the Company 1,042,632,929 1,031,695,056____________ ____________
Shares
Weighted average number of outstanding
ordinary shares 685,464,000 685,464,000____________ ____________
Basic earnings per share 1.52 1.51____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Basic and dilutive earnings per share - continued
The Company does not have potential dilutive ordinary shares.
From the balance sheet date to the date of approval of this report, there are no subsequent eventswhich would affect the numbers of the weighted average number of outstanding of ordinaryshares.
43. Notes to consolidated cash flow statement
(1) Cash received relating to other operating activities:
2018 2017
RMB RMB
Government grants 57,123,900 20,930,752Interest income 7,871,853 3,839,079Penalty income 1,901,530 7,993,571Refundable deposits of notes payable - 46,900,000Others 5,806,589 5,573,503____________ ____________
72,703,872 85,236,905____________ ________________________ ____________
(2) Cash paid relating to other operating activities:
2018 2017
RMB RMB
Selling expenses 918,966,855 956,902,163
General and administrative expenses 140,112,380 107,905,766
Refundable deposits of notes payable - 8,000,000
Others 4,637,082 2,103,059____________ ____________
1,063,716,317 1,074,910,988____________ ________________________ ____________
(3) Cash paid for the purchase subsidiaries and other equity:
2018 2017
RMB RMB
Cash paid for acquisition of Australia Kilikanoon Estate 107,194,420 -
Less: Cash and bank for Australia Kilikanoon Estate
at acquisition date 1,359,765 -
Cash paid for acquisition of Indomita Wine - 318,867,650
Less: Cash and bank for Indomita
Wine at acquisition date - 15,071,107____________ ____________
105,834,655 303,796,543____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
43. Notes to consolidated cash flow statement - continued
(4) Cash received relating to other financing activities:
2018 2017
RMB RMB
Received government grants related to assets - 5,800,000R&D Centre long-term payables pledged time deposit 61,700,000 46,100,000Interest income from R&D Centre long-term payablespledged time deposit 768,259 1,030,804____________ ____________
62,468,259 52,930,804____________ ________________________ ____________
(5) Cash paid relating to other financing activities:
2018 2017
RMB RMB
R&D Centre long-term payables pledged time deposit 46,100,000 61,700,000__________ ____________________ __________
44. Supplementary information to consolidated cash flow statement
(1) Supplementary information to consolidated cash flow statement
2018 2017
RMB RMB
Cash flows from operating activities
calculated by adjusting the net profit:
Net profit 1,041,484,176 1,033,793,518
Add:Loss for (reversal of) impairment of assets (912,166) 8,293,553
Depreciation of investment properties 1,857,902 590,610Depreciation of fixed assets 297,838,358 250,264,403Amortization of intangible assets 19,018,740 24,098,781Depreciation of biological assets 12,034,812 10,160,981Amortization of long-term prepaid expenses 12,082,117 13,911,581(Gains) losses on disposal of assets (11,368,355) 222,586Finance expense 45,855,744 22,381,504Decrease in deferred tax assets 22,685,137 13,315,979Decrease in deferred tax liabilities (8,155,985) (5,965,736)Increase in inventories (180,452,933) (138,995,031)Increase in operating receivables (137,899,294) (180,593,570)Decrease in operating payables (138,089,507) (78,236,132)____________ ____________
Net cash flows from operating activities 975,978,746 973,243,027____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Supplementary information to consolidated cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments.
2018 2017
RMB RMB
Payment of intangible assets and otherlong-term assets by bank acceptances 109,378,598 140,493,507____________ ________________________ ____________
(3) Cash and cash equivalents
31/12/2018 31/12/2017RMB RMB
Closing balance of Cash and bank 1,475,700,477 1,402,522,509Less:
Restricted bank deposits 2,611,350 2,645,410
Restricted other monetary funds 93,186,393 123,987,825Deposit with a period of over three months 173,042,400 95,000,000____________ ____________
Closing balance of cash and cash equivalents 1,206,860,334 1,180,889,274____________ ________________________ ____________
31/12/2018 31/12/2017
RMB RMB
Cash 1,206,860,334 1,180,889,274
Including: Cash on hand 114,335 136,973
Bank deposits on demand 1,206,745,999 1,180,752,301____________ ____________
Closing balance of cash and cash equivalents 1,206,860,334 1,180,889,274____________ ________________________ ____________
45. Assets with restriction of ownership
31/12/2018 31/12/2017
RMB RMB
Cash and bank 95,797,743 126,633,235
Account receivable 52,015,032 46,337,062
Fixed assets 412,006,421 145,009,923
Intangible assets 218,070,414 164,051,996____________ ________________________ ____________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Cash and bank with restriction of ownership as follows:
31/12/2018 31/12/2017RMB RMB
R&D Centre long-term payables pledged time deposit 46,100,000 61,700,000Refundable deposits of letter of credit 44,540,850 57,946,190Balance in Alipay account 2,483,816 4,317,635Home maintenance funds 2,611,350 2,645,410Margin for entity card 51,727 14,000Deposit for ICBC platform 10,000 10,000____________ ____________
Total 95,797,743 126,633,235____________ ________________________ ____________
Among the aforementioned items, the amount of RMB 2,483,816 which is the blocked balances
of goods payment in Alipay account can be unlocked after 15 days.
As at 31 December 2018, the amount of accounts receivable with restricted ownership is EUR
6,628,399 (translated as RMB 52,015,032) , which refers to accounts receivable Atrio conducted
for factoring from Banco de Sabadell, S.A. etc.
As at 31 December 2018, fixed assets with restriction of ownership as follows:
Restricted reasons 31/12/2018
Company RMB
The Company Long-term payable collateral from R&D Centre 34,246,887
Sales Company Long-term payable collateral from R&D Centre 39,557,304
Atrio Company Long-term borrowings collateral 33,462,225
Indomita Wine Short-term borrowings collateral 75,601,849
Ningxia Moser 15th Changyu
Wine Chateau Co., Ltd.
(" Ningxia Chateau") Long-term payable collateral from R&D Centre 184,678,629
Ningxia Wine Co.Ltd.
("Ningxia Wine"). Long-term payable collateral from R&D Centre 44,459,527
___________
Total 412,006,421______________________
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
45 Assets with restriction of ownership - continued
As at 31 December 2018, Intangible assets with restriction of ownership as follows:
Restricted reasons 31/12/2018Company RMB
The Company Long-term payable collateral from R&D Centre 50,902,950R&D Centre Long-term payable collateral from R&D Centre 108,913,538Ningxia Chateau Long-term payable collateral from R&D Centre 8,906,611Ningxia Wine Long-term payable collateral from R&D Centre 49,347,315
___________
Total 218,070,414______________________
46. Foreign monetary items
(1) Foreign monetary items
The foreign monetary items located within China are as follows:
Closing foreign Exchange Closing translated
currency balance rate RMB balance
Cash and bank
EUR 127 7.8473 997HKD 213 0.8762 187USD 7,196,107 6.8632 49,388,322__________ ______ _____________________ ______ ___________
(2) Overseas business entities
The Company’s overseas subsidiaries determine bookkeeping currency based on the primary
economic environment. The bookkeeping base currency of Atrio and Francs Champs
Participations SAS ("Francs Champs") are all in Euro, and the bookkeeping base currency of
Indomita Wine is Chilean peso. The functional currency of Australia Kilikanoon Estate is AUD.
The foreign monetary assets and liabilities of the overseas subsidiaries are as follows:
Closing foreign Exchange Closing translated
currency balance rate RMB balance
Cash and bank
EUR 25,328 7.8473 198,756USD 276,196 6.8632 1,895,588
Short-term borrowings
USD 11,000,000 6.8632 75,495,200__________ ______ _____________________ ______ ___________
VII. CHANGE IN CONSOLIDATION SCOPE
1. Business combination under different control
(1) Business combination under different control in current period
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name of acquisitioncompany
| Name of acquisition company | Equity acquisition date | Equity acquisition cost | Equity acquisition ratio (%) | Equity acquisition method | Acquisition date | Basis of acquisition date | Revenue from acquisition date to year end | Net profit from acquisition date to year end |
| RMB | RMB | |||||||
| Australia Kilikanoon Estate | 18 January 2018 | AUD 20,860,825 | 80% | Purchase | 18 January 2018 | Finish payment and acquire equity | 57,648,905 | 217,869 |
Other detail information:
Pursuant to the Agreement on the delivery of transferred equities entered into between theshareholders of the Company and Australia Kilikanoon Estate on 5 December 2017, the Companyacquired 80% equity interests of Australia Kilikanoon Estate at the consideration of AUD20,860,825( translated as RMB 107,194,420). The Company completed the equity transfer on 18January 2018 and obtained the control of financial and operating policies over AustraliaKilikanoon Estate.
(2) Consideration and Goodwill
Consideration
Australia Kilikanoon EstateRMB
Cash 107,194,420Total consideration 107,194,420Less: acquired provisional value of net assets 70,131,290___________
Goodwill 37,063,130______________________
(3) Recognised assets and liabilities of mergee at acquisition date
Australia Kilikanoon Estate
Fair value Book value
at acquisition date at acquisition date
RMB RMB
Assets
Cash and bank 1,359,765 1,359,765
Accounts receivable 10,366,281 10,366,281
Prepayment 237,174 237,174
Other receivables 187,720 187,720
Inventories 69,612,312 57,946,312
Fixed assets 49,029,999 38,696,709
Intangible assets 16,417,886 7,461,624____________ ____________
Total assets 147,211,137 116,255,585____________ ________________________ ____________
VII. CHANGE IN CONSOLIDATION SCOPE - continued
1. Business combination under different control - continued
(3) Recognised assets and liabilities of acquiree at acquisition date- continued
Australia Kilikanoon Estate
Fair value Book valueat acquisition date at acquisition dateRMB RMBLiabilitiesShort-term borrowings 1,282,550 1,282,550Accounts payable 6,198,846 6,198,846Employee benefits payable 876,987 876,987Taxes payable 1,789,093 1,789,093Long-term borrowings 43,497,119 43,497,119Deferred tax liabilities 5,902,429 -____________ ____________
Total liabilities 59,547,024 53,644,595____________ ________________________ ____________
Net assets 87,664,113 62,610,990
Less：Non-controlling interests 17,532,823 12,522,198____________ ____________
Acquired net assets 70,131,290 50,088,792____________ ________________________ ____________
VIII. INTERESTS IN OTHER ENTITIES
1. Structure of the Group
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name
| Name | Address | Place of registration | Nature | Equity interest owned by the company | Acquisition method | |
| Direct | Indirect | |||||
| Xinjiang Tianzhu (a) | Shihezi, Xinjiang, China | Shihezi, Xinjiang, China | Manufacturing | 60% | - | Subsidiary acquired in business combination under non-common control |
| Fransac Sales | Cognac, France | Cognac, France | Trading | - | 100% | Subsidiary acquired in business combination under non-common control |
| Mirefleurs | Bordeaux, France | Bordeaux, France | Trading | - | 100% | Subsidiary acquired in business combination under non-common control |
| Atrio | Navarra, Spain | Navarra, Spain | Sales | 75% | - | Subsidiary acquired in business combination under non-common control |
| IWCC | Santiago, Chile | Santiago, Chile | Sales | 85% | - | Subsidiaries acquired by establishment |
| Australia Kilikanoon Estate | Adelaide Australia | Adelaide Australia | Sales | 80% | - | Subsidiary acquired in business combination under non-common control |
| Beijing Changyu Sales and distribution Co., Ltd ("Beijing Sales") | Beijing, China | Beijing, China | Sales | 100% | - | Subsidiaries acquired by establishment |
| Yantai Kylin Packaging Co., Ltd. ("Kylin Packaging") | Yantai, Shandong, China | Yantai, Shandong, China | Manufacturing | 100% | - | Subsidiaries acquired by establishment |
| Yantai Changyu-Castel Wine Chateau Co., Ltd ("Changyu Chateau") (b) | Yantai, Shandong, China | Yantai, Shandong, China | Manufacturing | 70% | - | Subsidiaries acquired by establishment |
| Changyu (Jingyang) Wine Co., Ltd. ("Jingyang Wine") | Xianyang, Shanxi, China | Xianyang, Shanxi, China | Manufacturing | 90% | 10% | Subsidiaries acquired by establishment |
| Yantai Changyu Pioneer Wine Sales Co., Ltd. ("Sales Company") | Yantai, Shandong, China | Yantai, Shandong, China | Sales | 100% | - | Subsidiaries acquired by establishment |
| Langfang Development Zone Castel-Changyu Wine Co., Ltd ("Langfang Castel") (c) | Lanfang, Hebei, China | Lanfang, Hebei, China | Manufacturing | 39% | 10% | Subsidiaries acquired by establishment |
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name
| Name | Address | Place of registration | Nature | Equity interest owned by the company | Acquisition method | |
| Direct | Indirect | |||||
| Changyu (Jingyang) Wine Sales Co., Ltd. ("Jingyang Sales") | Xianyang, Shanxi, China | Xianyang, Shanxi, China | Sales | 10% | 90% | Subsidiaries acquired by establishment |
| Langfang Changyu Pioneer Wine Sales Co., Ltd ("Langfang Sales") | Lanfang, Hebei, China | Lanfang, Hebei, China | Sales | 10% | 90% | Subsidiaries acquired by establishment |
| Shanghai Changyu Sales and distribution Co., Ltd. ("Shanghai Sales") | Shanghai, China | Shanghai, China | Sales | 30% | 70% | Subsidiaries acquired by establishment |
| Beijing Changyu AFIP Agriculture development Co., Ltd ("Agriculture Development") | Miyun, Beijing, China | Miyun, Beijing, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Beijing Chateau (d) | Beijing, China | Beijing, China | Manufacturing | 90% | - | Subsidiaries acquired by establishment |
| Yantai ("Beijing Chateau") Changyu Wine Sales Co., Ltd. ("Wines Sales") | Yantai, Shandong, China | Yantai, Shandong, China | Sales | 90% | 10% | Subsidiaries acquired by establishment |
| Yantai Changyu Pioneer International Co., Ltd. ("Pioneer International") | Yantai, Shandong, China | Yantai, Shandong, China | Sales | 70% | 30% | Subsidiaries acquired by establishment |
| Hangzhou Changyu Wine Sales Co., Ltd. ("Hangzhou Changyu") | Hangzhou, Zhejiang, China | Hangzhou, Zhejiang, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Ningxia Growing | Yinchuang, Ningxia, China | Yinchuang, Ningxia, China | Planting | 100% | - | Subsidiaries acquired by establishment |
| Huanren Changyu National Wines Sales Co., Ltd. ("National Wines") | Benxi, Liaoning, China | Benxi, Liaoning, China | Sales | 100% | - | Subsidiaries acquired by establishment |
| Liaoning Changyu Ice Wine Chateau Co., Ltd. ("Ice Chateau") (e) | Benxi, Liaoning, China | Benxi, Liaoning, China | Manufacturing | 51% | - | Subsidiaries acquired by establishment |
| Yantai Development Zone Changyu Trading Co., Ltd ("Development Zone Trading") | Yantai, Shandong, China | Yantai, Shandong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shenzhen Changyu Wine Marketing Ltd. ("Shenzhen Marketing") | Shenzhen, Guangdong, China | Shenzhen, Guangdong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Yantai Changyu Fushan Trading Company("Fushan Trading") | Yantai, Shandong, China | Yantai, Shandong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Beijing AFIP Meeting Center ("Meeting Center") | Miyun, Beijing, China | Miyun, Beijing, China | Service | - | 100% | Subsidiaries acquired by establishment |
| Beijing AFIP Tourism and Culture ("AFIP Tourism") | Miyun, Beijing, China | Miyun, Beijing, China | Tourism | - | 100% | Subsidiaries acquired by establishment |
| Ningxia Wine | Yinchuan, Ningxia, China | Yinchuan, Ningxia, China | Manufacturing | 100% | - | Subsidiaries acquired by establishment |
| Yantai Changyu DingLuoTe Chateau. ("Ding Luo Te Chateau") | Yantai, Shandong China | Yantai, Shandong China | Retail and Sales | 65% | 35% | Subsidiaries acquired by establishment |
| Qing Tong Xia Changyu Wine Marketing Ltd("Qing Tong Xia Sales") | Qing Tong Xia, Ningxia, China | Qing Tong Xia, Ningxia, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shihezi Chateau | Shihezi, Xinjiang, China | Shihezi, Xinjiang, China | Manufacturing | 100% | - | Subsidiaries acquired by establishment |
| Ningxia Chateau | Yinchuan, Ningxia, China | Yinchuan, Ningxia, China | Manufacturing | 100% | - | Subsidiaries acquired by establishment |
| Shanxi Changyu Rina Castle Chateau Co., Ltd. (" Chang'an Chateau") | Xianyang, Shanxi, China | Xianyang, Shanxi, China | Manufacturing | 100% | - | Subsidiaries acquired by establishment |
| R&D Centre (f) | Yantai, Shandong China | Yantai, Shandong China | Manufacturing | 72% | - | Subsidiaries acquired by establishment |
| Changyu (HuanRen) Wine Co., Ltd ("Huan Ren Wine") | Benxi LiaoNing China | Benxi LiaoNing China | Wine production Projecting | 100% | - | Subsidiaries acquired by establishment |
| Xinjiang Changyu Sales Co., Ltd ("Xinjiang Sales") | Shihezi Xinjiang China | Shihezi Xinjiang China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Ningxia Changyu Trading Co., Ltd ("Ningxia Trading") | Yinchuan Ningxia China | Yinchuan Ningxia China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shanxi Changyu Rina Wine Sales Co., Ltd ("Shanxi Sales") | Xianyang Shanxi China | Xianyang Shanxi China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Penglai Changyu Wine Sales Co., Ltd ("Penglai Sales") | Penglai Shandong China | Penglai Shandong China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Laizhou Changyu Wine Sales Co., Ltd ("Laizhou Sales") | Laizhou Shandong China | Laizhou Shandong China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Francs Champs | Cognac, France | Cognac, France | Investment and trading | 100% | - | Subsidiaries acquired by establishment |
| Lanzhou Changyu Wine Sales Co., Ltd ("Lanzhou Sales") | Lanzhou Gansu, China | Lanzhou Gansu, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Beijing Retailing Co. Ltd("Beijing Retailing") | Beijing, China | Beijing, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Tianjin Changyu Pioneer Sales Co., Ltd ("Tianjin Pioneer") | Tianjin, China | Tianjin, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") | Fuzhou Fujian, China | Fuzhou Fujian, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Nanjing Changyu Pioneer Sales Co., Ltd ("Nanjing Pioneer") | Nanjing, Jiangsu, China | Nanjing, Jiangsu, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Xianyang Changyu Pioneer Sales Co., Ltd ("Xianyang Pioneer") | Xianyang, Shanxi, China | Xianyang, Shanxi, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shenyang Changyu Pioneer Sales Co., Ltd ("Shenyang Pioneer") | Shenyang, Liaoning, China | Shenyang, Liaoning, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Jinan Changyu Pioneer Sales Co., Ltd ("Jinan Pioneer") | Jinan, Shandong, China | Jinan, Shandong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shanghai Changyu Pioneer Sales Co., Ltd ("Shanghai Pioneer") | Shanghai, China | Shanghai, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Fuzhou Changyu Pioneer Sales Co., Ltd ("Fuzhou Pioneer") | Fuzhou, Jiangxi, China | Fuzhou, Jiangxi, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Shijiazhuang Changyu Pioneer Sales Co., Ltd ("Shijiazhuang Pioneer") | Shijiazhuang, Hebei, China | Shijiazhuang, Hebei, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Hangzhou Yuzefeng Sales Co., Ltd ("Hangzhou Yuzefeng") | Hangzhou, Zhejiang, China | Hangzhou, Zhejiang, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Jilin Changyu Pioneer Sales Co., Ltd ("Jilin Pioneer") | Changchun, Jilin, China | Changchun, Jilin, China | Sales | - | 100% | Subsidiaries acquired by establishment |
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name
| Name | Address | Place of registration | Nature | Equity interest owned by the company | Acquisition method | |
| Direct | Indirect | |||||
| Beijing Changyu Pioneer Sales Co., Ltd ("Beijing Pioneer") | Beijing, China | Beijing, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Harbin Changyu Pioneer Sales Co., Ltd ("Harbin Pioneer") | Harbin, Heilongjiang, China | Harbin, Heilongjiang, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Hunan Changyu Pioneer Sales Co., Ltd ("Hunan Pioneer") | Changsha, Hunan, China | Changsha, Hunan, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Yinchuan Changyu Pioneer Sales Co., Ltd ("Yinchuan Pioneer") | Yinchuan, Ningxia, China | Yinchuan, Ningxia, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Kunming Changyu Pioneer Sales Co., Ltd ("Kunming Pioneer") | Kunming, Yunnan, China | Kunming, Yunnan, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Chongqing Changyu Pioneer Sales Co., Ltd ("Chongqing Pioneer") | Chongqing, China | Chongqing, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Wuhan Changyu Pioneer Sales Co., Ltd ("Wuhan Pioneer") | Wuhan, Hubei, China | Wuhan, Hubei, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Hohhot Changyu Pioneer Sales Co., Ltd ("Hohhot Pioneer") | Hohhot Inner Mongolia, China | Hohhot Inner Mongolia, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Chengdu Changyu Pioneer Sales Co., Ltd ("Chengdu Pioneer") | Chengdu, Sichuan, China | Chengdu, Sichuan, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Nanning Changyu Pioneer Sales Co., Ltd ("Nanning Pioneer") | Nanning, Guangxi, China | Nanning, Guangxi, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Lanzhou Changyu Pioneer Sales Co., Ltd ("Lanzhou Pioneer") | Lanzhou Gansu, China | Lanzhou Gansu, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Yantai Fulangduo | Yantai Shandong, China | Yantai Shandong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Hefei Changyu Pioneer Sales Co., Ltd ("Hefei Pioneer") | Hefei, Anhui, China | Hefei, Anhui, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Urumchi Changyu Pioneer Sales Co., Ltd ("Urumchi Pioneer") | Urumchi Xinjiang, China | Urumchi Xinjiang, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Guangzhou Changyu Pioneer Sales Co., Ltd ("Guangzhou Pioneer") | Guangzhou Guangdong, China | Guangzhou Guangdong, China | Sales | - | 100% | Subsidiaries acquired by establishment |
| Grape Wine Marketing Ltd. | Yantai Shandong China | Yantai Shandong China | Sales | 100% | - | Subsidiaries acquired by establishment |
Explanation in difference between holding interests and voting rights in subsidiaries:
(a) Xinjiang Tianzhu was acquired by the Company, accounting for 60% of Xinjiang Tianzhu's equity
interest. Through agreement arrangement, the Company has the full power to control XinjiangTianzhu's strategic operating, investing and financing policies. The agreement arrangement willbe terminated on 6 August 2017. Upon the expiry of the agreement arrangement, the non-controlling interests of Xinjiang Tianzhu will normally enjoy/commit all the rights and obligationsof the shareholders as stipulated in the Articles of Association.
(b) Changyu Chateau is a Sino-foreign joint venture established by the Company and a foreign
investor, accounting for 70% of Changyu Chateau's equity interest. Through agreementarrangement, the Company has the full power to control Changyu Chateau's strategic operating,investing and financing policies. The agreement arrangement will be terminated on 31 December2022.
(c) Langfang Chateau is a Sino-foreign joint venture established by the Company and a foreign
investor, accounting for 49% of Langfang Chateau's equity interest by the Company andsubsidiaries. Through agreement arrangement, the Company has the full power to controlLangfang Chateau's strategic operating, investing and financing policies. The agreementarrangement was terminated on 31 December 2017. Non-controlling shareholders of LangfangChateau will be entitled to/abided by the rights/obligations of the shareholders as agreed in theArticles of Association upon the due date of the agreement arrangement.
(d) Beijing Chateau is a joint venture established by the Company, Yantai De'an and Beijing
Qinglang, and the Company increases the capital contribution RMB 502,910,000 in this period,Yantai De'an and Beijing Qinglang together increase the capital contribution RMB29,840,000.Beijing Chateau has compelled the business registration on 22 December 2017. After capitalcontribution increased, the Company is accounting for 90% of Beijing Chateau's equity interest.The Company gets the control over operation, investment, and financial decision of BeijingChateau through agreement arrangement, which will terminate on 2 September 2019.
VIII. INTERESTS IN OTHER ENTITIES - continued
1. Structure of the Group - continued
(e) Ice Chateau is a Sino-foreign joint venture established by the Company and a foreign investor,
accounting for 51% of Ice Chateau's equity interest. Through agreement arrangement, theCompany has the full power to control Ice Chateau's strategic operating, investing and financingpolicies. The agreement arrangement will be terminated on 31 December 2021.
(f) R&D Centre is a joint venture established by the Company and CADF, accounting for 72% of
R&D Centre's equity interest at 31 December 2018. The Company has complete control over theoperation, investment and financial policies of the R&D Centre subject to the contractarrangement as described in Note VI-25. The contract arrangement will expire on 22 May 2026.As at 31 December 2018, the remaining investment of IFAD accounted for 28% of the registeredcapital.
2. Non-wholly owned subsidiaries
Profit and loss belongs 31/12/2018Non-controlling to non-controlling Distributions to Assimilate non-controllingName interest shareholder ratio interest shareholders non-controlling interest interest
Xinjiang Tianzhu 40% (2,760,804) - - 50,612,648Atrio 25% 844,190 (744,149) - 31,726,931Changyu Chateau 30% - - - 12,365,016Langfang Castel 51% (1,774,541) - - 20,927,981Beijing Chateau 10% - - - 65,133,868Ice Chateau 49% - - - 33,319,062IWCC 15% 2,619,885 (2,655,627) - 53,079,827Australia Kilikanoon Estate 20% (310,144) - 17,532,823 17,222,679
_________ _________ _________ _________
(1,381,414) (3,399,776) 17,532,823 284,388,012
_________ _________ _________ __________________ _________ _________ _________
VIII. INTERESTS IN OTHER ENTITIES - continued
3. Key financial information of important non-wholly owned subsidiaries
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name
| Name | 31/12/2018 | 31/12/2017 | ||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | |
| Xinjiang Tianzhu | 27,390,495 | 66,486,795 | 93,877,290 | - | 5,336,114 | 5,336,114 | 30,264,441 | 71,323,940 | 101,588,381 | 809,080 | 5,336,114 | 6,145,194 |
| Changyu Chateau | 141,298,023 | 114,694,168 | 255,992,191 | 171,869,662 | - | 171,869,662 | 140,038,021 | 115,435,985 | 255,474,006 | 175,061,601 | - | 175,061,601 |
| Langfang Castel | 17,659,511 | 16,001,682 | 33,661,193 | 3,358,322 | - | 3,358,322 | 22,728,536 | 17,973,719 | 40,702,255 | 6,133,909 | - | 6,133,909 |
| Beijing Chateau | 219,973,582 | 461,115,089 | 681,088,671 | 62,598,545 | - | 62,598,545 | 214,079,274 | 481,668,050 | 695,747,324 | 73,963,043 | - | 73,963,043 |
| Ice Chateau | 45,194,591 | 23,920,890 | 69,115,481 | 14,974,458 | 100,000 | 15,074,458 | 38,657,358 | 25,484,359 | 64,141,717 | 10,871,695 | 100,000 | 10,971,695 |
| Atrio | 464,421,130 | 99,080,668 | 563,501,798 | 381,659,315 | 54,520,937 | 436,180,252 | 398,835,959 | 116,299,504 | 515,135,463 | 299,030,002 | 89,336,338 | 388,366,340 |
| IWCC | 214,784,490 | 300,969,342 | 515,753,832 | 148,359,328 | 4,976,161 | 153,335,489 | 175,669,256 | 305,664,706 | 481,333,962 | 122,023,764 | 5,206,406 | 127,230,170 |
| Australia Kilikanoon Estate | 87,634,707 | 63,759,866 | 151,394,573 | 13,387,942 | 51,893,171 | 65,281,113 | N/A | N/A | N/A | N/A | N/A | N/A |
| Name | 2018 | 2017 | ||||||
| Revenue | Net profit (loss) | Total comprehensive income | Operating activities cash flows | Revenue | Net profit (loss) | Total comprehensive income | Operating activities cash flows | |
| Xinjiang Tianzhu | 18,803 | (6,902,010) | (6,902,010) | 43,112 | 116,555,588 | 15,531,513 | 15,531,513 | 32,224,800 |
| Changyu Chateau | 121,235,278 | 3,710,124 | 3,710,124 | 16,096,447 | 68,964,230 | 985,910 | 985,910 | 19,629,212 |
| Langfang Castel | 5,038,281 | (3,479,492) | (3,479,492) | 673,422 | 39,165,527 | (1,616,638) | (1,616,638) | (1,554,380) |
| Beijing Chateau | 159,369,783 | 16,555,846 | 16,555,846 | 19,627,933 | 145,103,200 | 17,475,647 | 17,475,647 | 49,964,881 |
| Ice Chateau | 57,290,490 | 870,994 | 870,994 | 289,782 | 49,643,396 | 1,241,699 | 1,241,699 | (1,748,535) |
| Atrio | 327,550,545 | 3,811,465 | 3,376,761 | 6,129,923 | 281,007,167 | 2,000,682 | 7,701,416 | (32,148,326) |
| IWCC | 262,104,563 | 15,934,347 | 17,465,900 | 3,584,648 | 157,953,467 | 28,791,684 | 31,458,952 | 16,482,765 |
| Australia Kilikanoon Estate | 57,648,905 | 217,869 | (1,550,720) | (1,522,151) | N/A | N/A | N/A | N/A |
* This is amount incurred in the period between acquisition date and 31 December 2018.
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT
The Group's major financial instruments include cash and bank, notes and account receivable,other receivables, available-for-sale financial assets, other non-current assets, short-termborrowings, accounts payable, other payables, interest payables, and long-term borrowings.Details of these financial instruments are disclosed in Note VI. The risks associated with thesefinancial instruments and the policies on how to mitigate these risks are set out below.Management manages and monitors these exposures to ensure the risks are monitored at a certainlevel.
The Group adopts sensitivity analysis technique to analyse how the profit and loss for the periodand shareholders' equity would have been affected by reasonably possible changes in the relevantrisk variables. As it is unlikely that risk variables will change in an isolated manner, and theinterdependence among risk variables will have significant effect on the amount ultimatelyinfluenced by the changes in a single risk variable, the following are based on the assumption thatthe change in each risk variable is on a stand-alone basis.
The Group's risk management objectives are to achieve a proper balance between risks and yield,minimise the adverse impacts of risks on the Group's operation performance, and maximise thebenefits of the shareholders and other stakeholders. Based on these risk management objectives,the Group's basic risk management strategy is to identify and analyse the Group's exposure tovarious risks, establish an appropriate maximum tolerance to risk, implement risk management,and monitors regularly and effectively these exposures to ensure the risks are monitored at acertain level.
1. Risk management objectives and policies
1.1 Market risk
1.1.1 Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. TheGroup's exposure to the currency risk is primarily associated with EUR and USD. Several of theGroup's subsidiaries have purchases and sales denominated in EUR, Chilean peso and Australiadollar, borrowings denominated in USD, while the Group's other principal activities aredenominated and settled in RMB.As at 31 December 2018, except that the assets and liabilitiesstated in the table below are foreign currency deposits or excess of borrowings, the assets andliabilities of each entity of the Group are settled in their respective functional currencies.
31/12/2018 31/12/2017RMB RMB
Bank and cash (EUR) 199,753 1,190,459Bank and cash (USD) 51,283,910 34,843,968Short-term borrowings (USD) 75,495,200 58,807,800____________ ________________________ ____________
Currency risk arising from the assets and liabilities denominated in foreign currencies may haveimpact on the Group's performance. The Group closely monitors the effects of changes in theforeign exchange rates on the Group's currency risk exposures. The Group currently does not takeany measures to hedge currency risk exposures.
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
1.1.1 Currency risk - continued
Sensitivity analysis on currency risk
Where all other variables are held constant, the reasonably possible changes in the foreignexchange rate may have the following pre-tax effect on the profit or loss for the period andshareholders' equity:
Domestic entities:
Current year Prior yearEffect on Effect onshareholders' shareholders'Change in exchange rate Effect on profit equity Effect on profit equityRMB RMB RMB RMB
EUR 5% increase against RMB 50 50 50 50EUR 5% decrease against RMB (50) (50) (50) (50)USD 5% increase against RMB 2,469,416 2,469,416 1,456,525 1,456,525USD 5% increase against RMB (2,469,416) (2,469,416) (1,456,525) (1,456,525)
_________ ________ ________ _________________ ________ ________ ________
Overseas entities:
Current year Prior yearEffect on Effect onshareholders' shareholders'Change in exchange rate Effect on profit equity Effect on profit equityRMB RMB RMB RMB
USD 5% increase against EUR 900 900 52,695 52,695USD 5% decrease against EUR (900) (900) (52,695) (52,695)USD 15% increase against Chile Peso (11,042,641) (11,042,641) (5,275,651) (5,275,651)USD 15% decrease against Chile Peso 11,042,641 11,042,641 5,275,651 5,275,651EUR 10% increase against Chile Peso 19,876 19,876 58,350 58,350EUR 10% decrease against Chile Peso (19,876) (19,876) (58,350) (58,350)
_________ ________ ________ _________________ ________ ________ ________
Note: As at 31 December 2018, the Group's management anticipated a change of 5% in
exchange rate for USD to EUR, 10% in exchange rate for EUR to Chilean Peso and 15%in exchange rate for USD to Chilean Peso.
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.1 Market risk- continued
1.1.2 Interest rate risk - risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-ratebank borrowings (Refer to Note VI-1, Note VI-16 and Note VI-24 for details). It is the Group'spolicy to keep its borrowings at floating rate of interests so as to eliminate the fair value interestrate risk.
The sensitivity analysis on interest rate risk
The sensitivity analysis on interest rate risk is based on the changes in the market interest rate mayinfluence the interest income or expense of the variable rate financial instruments.
Management of the Group believes interest rate risk on bank deposit is not significant, thereforedoes not disclose sensitivity analysis for interest rate risk.
Where all other variables are held constant, the reasonably possible changes in the interest ratemay have the following pre-tax effect on the profit or loss for the period and shareholders' equity
Current year Prior yearEffect on Effect onshareholders' shareholders'Change in interest rate Effect on profit equity Effect on profit equity
Bank borrowings 50 bps increase (2,016,667) (2,016,667) (2,046,646) (2,046,646)Bank borrowings 50 bps decrease 2,016,667 2,016,667 2,046,646 2,046,646
________ ________ ________ ________________ ________ ________ ________
Note: As at 13 December 2018, the Group's management anticipated a change of 50 basis points
in the bank's variable interest rate.
1.2 Credit risk
As at 31 December 2018, the Group's maximum exposure to credit risk which will cause afinancial loss to the Group due to failure to discharge an obligation by the counterparties.
In order to minimise the credit risk, the Group has adopted a policy to ensure that all salescustomers have good credit records. The Group has delegated a team responsible fordetermination of credit limits, credit approvals and other monitoring procedures to ensure thatfollow-up action is taken to recover overdue debts. For transactions that are not denominated inthe functional currency of the relevant operating unit, the Group does not offer credit termswithout the specific approval of the Department of Credit Control in the Group. In addition, theGroup reviews the recoverable amount of each individual trade debt at each balance sheet date toensure that adequate impairment losses are made for irrecoverable amounts. In this regard, themanagement of the Group considers that the Group's credit risk is significantly reduced.
IX. FINANCIAL INSTRUMENT AND RISK MANAGEMENT - continued
1. Risk management objectives and policies - continued
1.2 Credit risk - continued
Since the Group trades only with recognized and creditworthy third parties, there is norequirement for collateral. Concentrations of credit risk are managed by customer/counterparty, bygeographical region and by industry sector. As at 31 December 2018, 19.8% of the Group tradereceivables are due from top five customers (31 December 2017: 20.7%). There is no collateral orother credit enhancement on the balance of the trade receivables of the Group.
1.3 Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash andcash equivalents deemed adequate by the management to finance the Group's operations andmitigate the effects of fluctuations in cash flows. The management monitors the utilisation ofbank borrowings and ensures compliance with loan covenants.
The following is the maturity analysis for financial assets and financial liabilities held by theGroup which is based on undiscounted remaining contractual obligations:
Non-derivative financial liabilities
Less than one month 1-3 months 3-12 months 1-5 years More than five years TotalRMB RMB RMB RMB RMB RMB
Short-term borrowings 2,338,698 57,691,463 641,831,131 - - 701,861,292Accounts payable 163,879,578 327,759,156 221,934,147 - - 713,572,881Other payables 155,842,255 179,896,318 256,314,091 - - 592,052,664Interest payable 712,826 - - - - 712,826Long-term borrowings 8,382,996 31,970,170 85,822,835 168,574,037 - 294,750,038Long-term payables - 22,762,934 14,158,433 143,555,433 90,356,300 270,833,100
_________ ________ _________ _________ ________ _________
331,156,353 620,080,041 1,220,060,637 312,129,470 90,356,300 2,573,782,801
_________ ________ _________ _________ ________ __________________ ________ _________ _________ ________ _________
1.4 Fair value disclosure - Financial assets and liabilities not measured using fair value
Fair valueCarrying amount Level 1 Level 2 Level 3 Totalof fair value of fair value of fair value
Long-term payables measuredat amortized cost 259,000,000 - 223,263,886 - 223,263,886
________ _______ ________ ________ ________________ _______ ________ ________ ________
As at 31 December 2018, The management of the Group believes that, apart from theaforementioned long-term payables, the carrying amounts of other financial assets and financialliabilities measured at amortised cost in the financial statements are close to the fair values ofthese assets and liabilities.
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS
1. Parent company
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Name of
| Name of | Type of | Place of | Legal | Scope | Registered | Percentage | Percentage | Incorporate | |
| parent company | Relation | enterprise | registration | representative | of business | capital | of shares | of voting rights | Code |
| RMB | % | % | |||||||
| Changyu Group Company | Parent Company | Limited Company | Yantai | Zhou Hongjiang | Manufacturing | 50,000,000 | 50.4 | 50.4 | 265645824 |
During the year ended 31 December 2018, there is no change in parent company's registeredcapital, shares holding or voting power.
2. Subsidiaries: Please refer to Note VIII.
3. Other related parties
Name of related parities Nature of related parties Incorporate code
Yantai Changyu Wine Culture Museum Company controlled 913706007582586548Co., Ltd.("Wine Culture Museum") by the same parentYantai Changyu International Window of the Company controlled 91370600672208146XWine City Co., Ltd.("Window of the Wine City) by the same parentYantai ShenMa Packing Co., Ltd. Company controlled 91370600553393350J("ShenMa Packing") by the same parentYantai Zhongya Pharmaceutical Tonic Company controlled 91370600726203923MWine Co., Ltd.("Zhongya Pharmaceutical") by the same parentYantai Changyu Culture Tourism Production Company controlled 91370602MA3N7A877PSales Co., Ltd.(" Culture Sales") by the same parentYantai Changyu Culture Tourism Development Company controlled 91370602MA3N59J300Co., Ltd.(" Culture Development ") by the same parent
4. Significant related party transactions
(1) Purchases from and sales to related parties
Purchase from related parties
The content of related 2018 2017
party transactions RMB RMB
ShenMa Packing product purchase 173,238,289 145,872,001Zhongya Pharmaceutical product purchase 15,690,930 9,279,380Wine Culture Museum product purchase 16,784,711 6,336,832Window of the Wine City product purchase 7,913,342 2,756,050Culture Sales product purchase 35,857___________ ___________
213,663,129 164,244,263___________ ______________________ ___________
All related party transactions are based on the negotiated price.
In 2018, purchases from related parties accounted for 11.2% of the Group's total purchase (2016:
10.9%)
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(1) Purchases from and sales to related parties- continued
Sales to related parties
The content of related 2018 2017
party transactions RMB RMB
Wine Culture Museum goods sales 23,515,379 8,235,520Window of the Wine City goods sales 13,821,555 12,205,247Zhongya Pharmaceutical goods sales 4,552,269 2,035,003Culture Sales goods sales 2,914,686 -ShenMa Packing goods sales 348,247 1,634,883___________ ___________
45,152,136 24,110,653___________ ______________________ ___________
All related party transactions are based on the negotiated price. In 2018, sales to related parties
accounted for less than 1% of the Group's total sales (2017: less than 1%).
(2) Property leased from a related party
The Group as Lessee
2018 Assets leased Beginning date Ending date Rental expense
RMB
Changyu Group Company office building 1 January 2016 31 December 2020 1,538,840
Changyu Group Company office building and factory 1 January 2017 31 December 2021 1,331,364
Changyu Group Company office building and factory 1 January 2017 31 December 2021 3,994,091
_______
6,864,295
______________
All related party transactions are based on the negotiated price.
The Group as Lessor
2018 Assets leased Beginning date Ending date Rental incomeRMB
ShenMa Packing office building and factory 1 July 2017 30 June 2022 1,478,982Zhongya Pharmaceutical office building and factory 1 January 2018 31 December 2018 518,182
_______
1,997,164
______________
All related party transactions are based on the negotiated price.
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
4. Significant related party transactions - continued
(3) Other significant related party transactions
The content of relatedparty transactions Note 2018 2017RMB RMB
Changyu Group Company Royalty fee (a) 73,976,395 72,838,612Changyu Group Company Patents fee (b) 50,000 50,000__________ ____________________ __________
All related party transactions are based on the negotiated price.
(a) Royalty fee
Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, theCompany may use certain trademarks of Changyu Group Company, which have beenregistered with the PRC Trademark Office. An annual royalty fee at 2% of the Group'sannual sales is payable to Changyu Group Company. The license is effective until theexpiry of the registration of the trademarks.
During 2018, royalty fee paid to related company accounted for 100% of the Group (2017:
100%).
(b) Patents fee
The Company renewed the contract on 20 August 2016 for 10 years. The annual patentsusage fee payable by the Company to Changyu Group Company remained RMB50,000.For the year ended 31 December 2018, the patents usage fee payable to ChangyuGroup Company is amounted to RMB 50,000(2017:RMB 50,000).
During 2018, patent fee paid to related company accounted for 100% of the Group (2017:
100%).
(4) Remuneration of the management
2018 2017RMB RMB
Remuneration of the management 13,102,005 10,309,409____________ ________________________ ____________
X. RELATED PARTY AND RELATED PARTY TRANSACTIONS - continued
5. Balance due from/to related parties
(1) Balance due from related parties
31/12/2018 31/12/2017Accounts receivable Balance Provision Balance ProvisionRMB RMB RMB RMB
Zhongya Pharmaceutical 2,768,391 - 8,134,150 -Shen Ma Packing. 17,137 - 1,342,348 -Window of the Wine City 1,911,157 - 3,196,095 -Wine Culture Museum - - 34,280 -
_________ ________ _________ ________
4,696,685 - 12,706,873 -
_________ ________ _________ _________________ ________ _________ ________
31/12/2018 31/12/2017Other receivable Balance Provision Balance ProvisionRMB RMB RMB RMB
Shen Ma Packing. 813,440 - 813,440 -
_________ _______ ________ ________________ _______ ________ _______
(2) Balance due to related parties
Accounts payable 31/12/2018 31/12/2017RMB RMB
Shen Ma Packing. 55,366,785 52,403,056Zhongya Pharmaceutical 6,722,667 2,051,991Wine Culture Museum 4,646,731 2,040,860Window of the Wine City 4,789,600 1,485,766____________ ____________
71,525,783 57,981,673____________ ________________________ ____________
Other payable 31/12/2018 31/12/2017
RMB RMB
Shen Ma Packing. 450,000 -
Changyu Group Company 78,414,978 77,208,929____________ ____________
78,864,978 77,208,929____________ ________________________ ____________
The above amounts due to related parties are unsecured and interest-free.
XI. COMMITMENT
1. Important commitments
(1) Capital commitments
31/12/2018 31/12/2017RMB'000 RMB'000
Capital commitment forpurchasing non-current assets 996,675 1,246,506____________ ________________________ ____________
(2) Operating lease commitment
As lessee
Significant operating lease: Total future minimal lease payments under non-cancelable contractwith lessor are as follow:
31/12/2018 31/12/2017RMB'000 RMB'000
Within 1 year 20,576 32,2361 to 2 years 11,757 19,1162 to 3 years 10,064 11,9433 years and above 84,095 95,342____________ ____________
126,492 158,637____________ ________________________ ____________
2. Contingent liability
The Group do not have any significant contingent liabilities as at balance sheet date.
XII. POST BALANCE SHEET DATE EVENT
1. Profit appropriation
According to the board of the director resolution raised on 18 April 2019, the Company proposed
a cash dividend of RMB 6.0 (including taxes) for every 10 shares in respect of 2018 based on the
issued shares of 685,464,000. The aggregate amount of cash dividend is RMB 411,278,400. The
resolution is to be approved by the annual general meeting.
XIII. OTHER SIGNIFICANT EVENTS
Capital management
The main target of the capital management of the group is to ensure the continuous operation ofthe group, optimize the portfolio structure of equity financing and debt financing, so as to achievethe goal of maximizing shareholder benefits. The capital structure of the group consists of thefollowing parts:
(1) Cash and cash equivalents
(2) Share capital, capital reserve, surplus reserve and retained earnings
The management reviews the group's capital structure according to the interim or year-endfinancial reports and considers the cost of capital and the corresponding risks of various capitaltypes. Based on the choice of the management, the group optimizes the overall capital structure byissuing additional shares and borrowing or repaying loans.
Segment report
The Group is principally engaged in the production and sales of wine, brandy, and champagne inChina, France, Spain, Chile and Australia. In accordance with the Group's internal organizationstructure, management requirements and internal reporting system, the Group's operation isdivided into four parts: China, Spain, France, Chile and Australia. The management periodicallyevaluates segment results, in order to allocate resources and evaluate performances. In 2018, morethan 87% revenue and more than 99% profit derived from China, and more than 92% non-currentassets are located in China. Therefore the Group does not need to disclose additional segmentreport information.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS
1. Cash and bank
31/12/2018 31/12/2017RMB RMB
Cash 3,177 5,280Bank balance 579,993,055 501,208,996Other currency fund 44,592,577 57,960,190____________ ____________
Total 624,588,809 559,174,466____________ ________________________ ____________
As at 31 December 2018, the balance of restricted cash of the Company is RMB 2,611,350 (31
December 2017: RMB 2,645,410), which is home maintenance funds.
As at 31 December 2018, other currency fund of the Company include: deposit of RMB
44,540,850 for letter of credit (31 December 2017: RMB 57,946,190) and deposit of RMB 51,727
for entity card (31 December 2017: RMB 14,000).
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
1. Cash and bank - continued
As at 31 December 2018, the Company's time deposits include the short-term deposits withoriginal maturity from six months to twelve months amounting to RMB 45,000,000 (31 December2017: RMB 5,000,000 ) with interest rate ranging from 1.55% to 2.03%.
2. Notes and account receivable
2.1 Presented by categories
31/12/2018 31/12/2017RMB RMB
Notes receivable 39,885,254 41,645,203Accounts receivable 1,447,973 7,805,333____________ ____________
Total 41,333,227 49,450,536____________ ________________________ ____________
2.2 Notes receivable
(1) Categories of notes receivable
31/12/2018 31/12/2017RMB RMB
Bank acceptances 39,885,254 41,645,203____________ ________________________ ____________
(2) Pledged notes receivable
As of 31 December 2018, there was no pledged notes receivable (31 December 2017: Nil).
(3) Notes endorsed by the Group to other parties which are not yet due at the end of the period
31/12/2018 31/12/2017RMB RMB
Bank acceptances 94,755,124 72,316,589____________ ________________________ ____________
As at 31 December 2018, notes endorsed by the Company to other parties which are not yet due at
the end of the period is RMB 94,755,124 (31 December 2017: RMB 72,316,589). It is for the
payment to suppliers. The Company believes that due to bank good reputation, the risk of
maturity cannot be cashed is very low, therefore confirm the termination of the endorsement notes
receivable. If bank is unable to settle the notes on maturity, according to the relevant laws and
regulations of China, the Group would undertake limited liability for the notes.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
2. Notes and accounts receivable- continued
2.2 Notes receivable - continued
(4) Notes receivable were reclassified as accounts receivable due to the default of drawer
As at 31 December 2018, there was no notes receivable were reclassified as accounts receivabledue to the default of drawer (31 December 2017: Nil).
2.3 Accounts receivable
(1) Disclosure of accounts receivable by categories:
31/12/2018 31/12/2017Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying AmountAmount Proportion Amount Proportion Amount Amount Proportion Amount Proportion AmountRMB (%) RMB (%) RMB RMB (%) RMB (%) RMB
Accounts receivablefor which bad debtprovision has beenassessed individually 1,447,973 100.0 - - 1,447,973 7,805,333 100.0 - - 7,805,333
______ ___ ____ ____ ______ ______ ___ ____ ____ ____________ ___ ____ ____ ______ ______ ___ ____ ____ ______
The normal credit term of trade receivables is one month. The trade receivables are interest free.
The aging analysis is as follows:
31/12/2018 31/12/2017RMB RMB
Within 1 year 1,447,973 7,805,333____________ ________________________ ____________
(2) Provision, reversals and collections during the current period:
As at 31 December 2018, there was no provision provided for trade receivables (31 December
2017: Nil). The Company did not provide, reverse or write off any provision during 2018 (31
December 2017: Nil).
(3) The balance of accounts receivable at the end of the year
Relationship Proportion of
with the Group Amount Aging total receivables
Zhongya Pharmaceutical Other related parties 1,447,973 Within 1 year 100.0
_________ ______________ _____
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables
3.1 Presented by categories
31/12/2018 31/12/2017RMB RMB
Interest receivable 254,088 76,646Dividend receivables 500,000,000 407,495,922Other receivables 525,389,268 592,274,075____________ ____________
Total 1,025,643,356 999,846,643____________ ________________________ ____________
3.2 Dividend receivables
31/12/2017 Increase Decrease 31/12/2018
RMB RMB RMB RMB
Within 1 year
Including: Sales Company 402,595,884 867,404,116 (770,000,000) 500,000,000
Wines Sales - 30,000,000 (30,000,000) -Langfang Castel - 785,986 (785,986) -Beijing Chateau - 19,850,000 (19,850,000) -Shihezi Chateau 4,900,038 15,531,228 (20,431,266) -National Wines - 20,000,000 (20,000,000) -Langfang sales - 1,981,410 (1,981,410) -Atrio - 2,080,191 (2,080,191) -Chile IndomitaWine Group - 6,495,728 (6,495,728) -
_________ __________ __________ _________
Total 407,495,922 964,128,659 (871,624,581) 500,000,000
_________ __________ __________ __________________ __________ __________ _________
3.3 Other receivables
(1) Disclosure of other receivables by categories:
31/12/2018 31/12/2017
Balance Bad debts provisions Carrying Amount Balance Bad debts provisions Carrying Amount
Amount Proportion Amount Proportion Amount Amount Proportion Amount Proportion Amount
RMB (%) RMB (%) RMB RMB (%) RMB (%) RMB
Other receivables for
which bad debt
provision has been
assessed individually 525,389,268 100.0 - - 525,389,268 592,274,075 100.0 - - 592,274,075
_____ ___ ____ ___ _____ _____ ___ _____ ___ __________ ___ ____ ___ _____ _____ ___ _____ ___ _____
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
3. Other receivables - continued
3.3 Other receivables - continued
(1) Disclosure of other receivables by categories: - continued
The aging analysis is as follows:
31/12/2018 31/12/2017Bad debts Carrying Bad debts CarryingBalance provision amount Balance provision amountAmount Proportion Amount Amount Amount Proportion Amount AmountRMB % RMB RMB RMB % RMB RMB
Within 1 year 491,483,881 93.5 - 491,483,881 589,011,103 99.5 - 589,011,1031 to 2 years 33,897,084 6.5 - 33,897,084 3,006,488 0.5 - 3,006,4882 to 3 years 8,303 - - 8,303 53,794 - - 53,794Over 3 years - - - - 202,690 - - 202,690
________ ____ _______ ________ ________ ____ ______ ________
525,389,268 100.0 - 525,389,268 592,274,075 100.0 - 592,274,075
________ ____ _______ ________ ________ ____ ______ ________________ ____ _______ ________ ________ ____ ______ ________
(2) Accrual, reversal and written-off during the current period
No bad debt accrued or reversed in 2018 (2017:Nil.).
(3) Other receivables written off current year
No other receivables written off in 2018 (2017:Nil.).
(4) Disclosure of other receivables by nature
31/12/2018 31/12/2017RMB RMB
Receivable from subsidiary 523,579,831 589,897,407Receivable deposit 12,500 2,500Others 1,796,937 2,374,168____________ ____________
525,389,268 592,274,075____________ ________________________ ____________
(5) Top five entities with the largest balances of other receivables
As at 31 December 2018, the particulars of top five other receivables are as follows:
Proportion of total
Nature Amount Aging prepayments
RMB %
Sales Company Internal balance 369,060,579 Within 1 year 70.2
R&D Centre Internal balance 120,589,826 Within 1 year 23.0
Changyu Chateau Internal balance 12,404,563 Within 1 year 2.4
Pioneer International Internal balance 10,704,391 Within 1 year 2.0
Ningxia Chateau Internal balance 7,085,540 Within 1 year 1.3
_________ ___
519,844,899 98.9
_________ ____________ ___
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
4. Inventories
31/12/2018 31/12/2017Net carrying Net carryingBalance Provision amount Balance Provision amountRMB RMB RMB RMB RMB RMB
Raw material 1,200,528 - 1,200,528 1,841,216 - 1,841,216Work in progress 358,230,774 - 358,230,774 307,104,357 - 307,104,357Finished goods 25,723,438 - 25,723,438 39,096,480 - 39,096,480
_________ _______ _________ _________ _______ _________
385,154,740 - 385,154,740 348,042,053 - 348,042,053
_________ _______ _________ _________ _______ __________________ _______ _________ _________ _______ _________
5. Long-term equity investments
2018 Cost 31/12/2017 for the year 31/12/2018 Share holding Voting power for the yearRMB RMB RMB RMB % % RMB
Cost MethodXinjiang Tianzhu (a) 60,000,000 60,000,000 - 60,000,000 60 100 -Kylin Packaging 23,176,063 23,176,063 - 23,176,063 100 100 -Changyu Chateau (a) 28,968,100 28,968,100 - 28,968,100 70 100 -Changyu Chateau (a) 3,500,000 3,500,000 - 3,500,000 70 100 -Ningxia Growing 36,573,247 36,573,247 - 36,573,247 100 100 -National Wines 2,000,000 2,000,000 - 2,000,000 100 100 20,000,000Ice Chateau (a) 30,440,500 30,440,500 - 30,440,500 51 100 -Beijing Chateau (a) 579,910,000 579,910,000 - 579,910,000 90 100 19,850,000Sales Company 7,200,000 7,200,000 - 7,200,000 100 100 867,404,116Langfang Sales (b) 100,000 100,000 - 100,000 10 100 1,981,410Langfang Castel(a) 19,835,730 19,835,730 - 19,835,730 39 100 785,986Wine Sales 4,500,000 4,500,000 - 4,500,000 100 100 30,000,000Shanghai Sales(b) 300,000 300,000 - 300,000 30 100 -Beijing Sales 850,000 850,000 - 850,000 100 100 -Jingyang Sales (b) 100,000 100,000 - 100,000 10 100 -Jingyang Wine (b) 900,000 900,000 - 900,000 90 100 -Ningxia Wine 222,309,388 222,309,388 - 222,309,388 100 100 -Ningxia Chateau 443,463,500 443,463,500 10,000,000 453,463,500 100 100 -Dingluote Chateau (b) 212,039,586 212,039,586 - 212,039,586 65 100 -Shihezi Chateau 809,019,770 809,019,770 3,000,000 812,019,770 100 100 15,531,228Changan Chateau 803,892,258 803,892,258 - 803,892,258 100 100 -R&D Centre (a) 500,000,000 500,000,000 2,788,906,445 3,288,906,445 72 100 -Huanren Wine 21,700,000 21,700,000 500,000 22,200,000 100 100 -Grape Wine Sales Co., 5,000,000 - - - - 100 -Francs Champs 236,025,404 236,025,404 - 236,025,404 100 100 -Atrio 190,150,544 190,150,544 - 190,150,544 75 75 2,080,191IWCC 274,248,114 274,248,114 - 274,248,114 85 85 6,495,728Australia KilikanoonEstate - - 107,194,420 107,194,420 80 80 -
_______ _______ _______ _______ _______
4,516,202,204 4,511,202,204 2,909,600,865 7,420,803,069 964,128,659
_______ _______ _______ _______ ______________ _______ _______ _______ _______
(a) The Company has 100% voting power of those subsidiaries by the way of indirect
controlling, referring to Note VIII-1.
(b) The Company has 100% voting power of these subsidiaries by the way of indirect
controlling through wholly owned subsidiaries.
During 2018, there was no significant restriction on the remittance of fund from the investees tothe Company.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Fixed assets
(1) Fixed assets
Buildings Machinery Motor vehicles TotalRMB RMB RMB RMB
Total original carrying amount31/12/2017 265,340,049 475,569,634 10,129,313 751,038,996IncreasePurchase - 9,345,433 - 9,345,433CIP transfer 8,887,802 139,665 - 9,027,467DecreaseDisposal - (13,137,771) (3,479,487) (16,617,258)Transfer to Investmentproperty (VI-8) (32,606,762) - - (32,606,762)
_________ _________ _________ _________
31/12/2018 241,621,089 471,916,961 6,649,826 720,187,876
_________ _________ _________ _________
Total accumulated depreciation31/12/2017 111,607,494 346,413,532 4,867,069 462,888,095IncreaseAdditions 7,784,794 15,133,656 531,639 23,450,089DecreaseDisposal (227,951) (12,642,520) (946,751) (13,817,222)Transfer to Investmentproperty (VI-8) (17,644,360) - - (17,644,360)
_________ _________ _________ _________
31/12/2018 101,519,977 348,904,668 4,451,957 454,876,602
_________ _________ _________ _________
Total net carrying amount31/12/2018 140,101,112 123,012,293 2,197,869 265,311,274
_________ _________ _________ __________________ _________ _________ _________
31/12/2017 153,732,555 129,156,102 5,262,244 288,150,901
_________ _________ _________ __________________ _________ _________ _________
As at 31 December 2018, fixed assets with restricted ownership is RMB 34,246,887 (December31, 2017:RMB 36,349,289 ), referring to Note VI-45 for details.
As at 31 December 2018, the Company has no fixed assets classified as held for sale ( 31December 2017:RMB 2,000,197), and the Company has no temporary idle fixed assets and fixedassets under finance leases.
(2) Fixed assets through operating lease
AmountRMB
Machinery 134,111
________________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
6. Fixed assets - continued
(3) Fixed assets of which certificates of title have not been obtained
As at 31 December 2018, buildings without property certificate are as follows：
Reasons whycertificates of title haveAmount not been obtainedRMB
Fermentation centre office,experiment building and workshop 3,653,494 Processing____________________
7. Construction in progress
(1) Construction in progress
31/12/2018 31/12/2017RMB RMB
Reconstruction of boiler heating systems - 3,556,349Drainage project - 3,200,000Non-dry sticker labeling machine project 4,105,264 -Others 2,206,437 -____________ ____________
6,311,701 6,756,349____________ ________________________ ____________
(2) Current year movement on important construction:
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
| Budget | 31/12/2017 | Addition | Transfer to PPE | 31/12/2018 | Accumulated expenditure/ budget | The progress of construction | Financed by | |
| RMB | RMB | RMB | RMB | RMB | % | |||
| Reconstruction of boiler heating systems | 13,000,000 | 3,556,349 | - | (3,556,349) | - | 100.0 | 100.0 | Self-raised |
| Non-dry sticker labeling machine project | 6,920,000 | - | 5,431,516 | (1,326,252) | 4,105,264 | 78.5 | 78.5 | Self-raised |
There was no interest capitalized in construction in progress in 2018.
(3) As at 31 December 2018, there was no provision was made for the construction in process, and no
provision was made (31 December 2017:Nil).
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
8 Bearer biological assets
Bearer biological assets are grape trees，which measured in cost method.
Immature Mature
biological assets biological assets TotalRMB RMB RMB
Total original carrying amount31/12/2017 6,306,963 130,929,124 137,236,087IncreaseCultivated increase 12,930,423 - 12,930,423Transfer to mature assetsfrom immature assets (9,802,191) 9,802,191 -__________ ___________ __________
31/12/2018 9,435,195 140,731,315 150,166,510__________ ___________ __________
Total accumulated depreciation
31/12/2017 - 17,663,548 17,663,548
Increase
Additions - 7,500,169 7,500,169__________ ___________ __________
31/12/2018 - 25,163,717 25,163,717__________ ___________ __________
Total net carrying amount
31/12/2018 9,435,195 115,567,598 125,002,793__________ ___________ ____________________ ___________ __________
31/12/2017 6,306,963 113,265,576 119,572,539__________ ___________ ____________________ ___________ __________
As at 31 December 2018, there is no biological asset with ownership restricted (31 December
2017: Nil).
As at 31 December 2018, there is no indication that biological assets may be impaired, and no
provision was made. (31 December 2017: Nil).
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
9. Intangible assets
Intangible assetsLand use rightRMB
Total original carrying amount31/12/2017 and 31/12/2018 96,594,766__________
Total accumulated depreciation31/12/2017 26,971,547IncreaseAdditions 2,379,153__________
31/12/2018 29,350,700__________
Total net carrying amount
31/12/2018 67,244,066____________________
31/12/2017 69,623,219____________________
As at 31 December 2018, Intangible assets with restricted ownership are RMB 50,902,950
(December 31, 2017: RMB 52,720,912), Please refer to Note VI-45 in detail.
10. Deferred tax assets
Recognised deferred tax assets not presented at the net amount after offset
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Item
| Item | 31/12/2018 | 31/12/2017 | ||
| Deductible temporary difference RMB | Deferred tax assets RMB | Deductible temporary difference RMB | Deferred tax assets RMB | |
| Unrealized profit from intra - company transactions | 5,897,436 | 1,474,359 | 7,163,828 | 1,790,957 |
| Unpaid bonus | 37,973,000 | 9,493,249 | 35,822,735 | 8,955,683 |
| Retirement benefit | 10,143,950 | 2,535,988 | 10,057,113 | 2,514,278 |
| Deductible losses | 30,421,511 | 7,605,378 | 45,526,327 | 11,381,582 |
| Deferred income | 12,343,972 | 3,085,993 | 16,581,627 | 4,145,407 |
| 96,779,869 | 24,194,967 | 115,151,630 | 28,787,907 | |
11. Other non-current assets
31/12/2018 31/12/2017RMB RMB
Receivables from subsidiaries 972,700,000 3,718,674,166____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
12. Short-term borrowings
31/12/2018 31/12/2017RMB RMB
Credit loans 150,000,000 600,000,000____________ ________________________ ____________
As at 31 December 2018, credit loans detail are as follows:
Loan bank Loans amount Loan term Interest rate in contract Interest rat
RMB % %
ICBC Yantai branch 150,000,000 24 May 2018 – 24 May 2019 Annual benchmark rate 4.35
__________________
13. Notes and accounts payable
The aging analysis of accounts payable are as follows
31/12/2018 31/12/2017RMB RMB
Within 1 year 132,664,195 97,036,146
1 to 2 years - 556,883
2 to 3 years 395 240,095
Over 3 years 39,714 -____________ ____________
132,704,304 97,833,124____________ ________________________ ____________
14. Employee benefits payable
(1) Employee benefits payable
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Short-term salaries and welfare 60,050,963 97,491,895 (95,341,628) 62,201,230
Post-demission benefits
- predetermined provision plan - 6,785,401 (6,785,401) -
Termination benefit 10,057,113 5,216,248 (5,129,412) 10,143,949
_________ _________ _________ _________
70,108,076 109,493,544 (107,256,441) 72,345,179
_________ _________ _________ __________________ _________ _________ _________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
14. Employee benefits payable - continued
(2) Short-term salaries and welfare
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Salaries and bonus 60,694,620 83,892,951 (81,609,810) 62,977,761Staff benefit 37,173 6,191,811 (6,191,811) 37,173Staff welfare - 4,004,223 (4,004,223) -Includes:
Medical insurance - 3,476,931 (3,476,931) -Injury insurance - 289,904 (289,904) -Maternity insurance - 237,388 (237,388) -Housing fund - 3,005,993 (3,005,993) -Union fee and education fee 1,896,872 529,790 (529,791) 1,896,871
_________ _________ _________ _________
Total 62,628,665 97,624,768 (95,341,628) 64,911,805
_________ _________ _________ _________
Less: Non-current liabilities 2,577,702 2,710,575
_________ _________
Short-term salaries and welfare 60,050,963 62,201,230
_________ __________________ _________
(3) Predetermined provision plan
31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Pension - 6,534,445 (6,534,445) -Unemployment insurance - 250,956 (250,956) -
_____ _________ _________ _____
- 6,785,401 (6,785,401) -
_____ _________ _________ __________ _________ _________ _____
The Company participates in pension insurance and unemployment insurance plans established bygovernment institution. According to those plans, the Company pays pension and unemploymentinsurance each month on the basis of 18% and 0.7% last period salary respectively. Apart fromthese monthly expenses, the Company does not bear any further payment obligation. This year theCompany should pay RMB 6,534,445 and RMB 250,956 (2017: RMB 8,595,215 and RMB323,852) respectively into pension insurance and unemployment insurance. As at 31 December2018, the Company does not have unpaid pension and unemployment insurance (31 December2017: Nil) which is due to the pension insurance and unemployment insurance plan and not paidat the end of the reporting period.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
15. Taxes payable
31/12/2018 31/12/2017RMB RMB
Value added tax 1,686,599 -Consumption tax 3,902,791 6,450,962Corporation income tax - 26,069Urban land use tax 685,626 784,627Individual income tax 6,316,001 6,630,393City construction tax 36,314 345,138Property tax 243,814 82,669Others 240,286 249,832____________ ____________
13,111,431 14,569,690____________ ________________________ ____________
16. Other payables
16.1 Presented by categories
31/12/2018 31/12/2017RMB RMB
Interest payable 181,250 652,500
Other payables 607,793,269 544,713,172____________ ____________
607,974,519 545,365,672____________ ________________________ ____________
16.2 Other payables
(1) Natures of other payables are as follows
31/12/2018 31/12/2017RMB RMB
Payable to subsidiaries 585,044,038 534,530,323
Payables for equipment and construction 10,554,451 8,538,687
Deposits from suppliers 5,982,500 183,000
Others 6,212,280 1,461,162____________ ____________
607,793,269 544,713,172____________ ________________________ ____________
(2) As at 31 December 2018, there were no significant outstanding balance aged over than one year.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
17. Capital reserve
2018 31/12/2017 Increase Decrease 31/12/2018RMB RMB RMB RMB
Share premium 557,222,454 - - 557,222,454
___________ ______ ______ ______________________ ______ ______ ___________
18. Revenue and costs
Revenue is analysed as follows:
2018 2017RMB RMB
Principal revenue 874,292,088 1,310,443,414Other revenue 2,154,982 813,440____________ ____________
876,447,070 1,311,256,854____________ ________________________ ____________
Operating cost is analysed as follows:
2018 2017
RMB RMB
Principal operating cost 772,497,769 1,165,362,798
Other operating cost 1,989,262 590,610____________ ____________
774,487,031 1,165,953,408____________ ________________________ ____________
19. Taxes and surcharges
2018 2017
RMB RMB
Consumption tax 27,262,209 53,236,697
City construction tax 3,214,543 10,190,867
Education fee and surcharges 2,159,612 5,817,116
Property tax 1,854,486 2,267,901
Land use tax 3,168,559 3,168,559
Stamp tax 310,835 603,461
Others 376,517 1,285,624____________ ____________
38,346,761 76,570,225____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
20. General and administrative expense
2018 2017RMB RMB
Salary and employee benefit 55,580,888 38,430,904Maintenance fee 8,396,432 6,192,525Office fee 3,641,210 3,881,091Service fee 3,495,328 9,194,005Depreciation 3,375,180 4,286,164Property insurance fees 2,961,742 3,080,521Leasing expenses 2,790,358 2,276,896Amortization 2,379,153 2,695,110Shuttle bus 1,442,340 1,719,660Security and sanitation fee 763,792 941,434Travelling expenses 324,566 527,464Greening fee amortization 312,080 394,604Others 5,042,139 5,498,757____________ ____________
90,505,208 79,119,135____________ ________________________ ____________
21. Financial Expense
2018 2017
RMB RMB
Interest income (41,821,372) (18,602,199)
Exchange loss 4,443,175 1,040,832
Interest expenses 16,075,353 17,414,181
Bank charges 1,010,107 784,754____________ ____________
(20,292,737) 637,568
____________ ________________________ ____________
22. Investment income
2018 2017
RMB RMB
Long-term equity investment income accounted
for by using the cost method 964,128,659 798,877,905____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
22. Investment income - continued
Among the long-term equity investment income accounted for by using cost method, the investeeswith investment income accounting for more than 5% of the Company's total profit before tax areas follows:
Investees 2018 2017RMB RMB
Sales Company 867,404,116 577,813,022Beijing Chateau - 87,000,000Wine Sales - 53,461,029Xinjiang Tianzhu - 48,620,373____________ ____________
867,404,116 766,894,424____________ ________________________ ____________
As at 31 December 2018 and at 31 December 2017, there are no significant restriction on the
remittance of investment income to the Company.
23. Supplement to cash flow statement
2018 2017
RMB RMB
(1) Cash flows from operating activities calculated by
adjusting the net profit:
Net profit 969,588,573 793,598,010
Add: Depreciation of investment properties 1,857,902 590,610
Depreciation of fixed assets 23,450,089 32,201,177Amortization of intangible assets 2,379,153 2,379,153Depreciation of biological assets 7,500,169 6,781,447(Gains)Losses on disposal of assets (12,411,962) 29,625Finance expenses 17,808,569 18,614,396Investment income (964,128,659) (798,877,905)Decrease/(increase) in deferred tax assets 4,592,940 (1,802,655)Increase / (decrease) in inventories (37,112,687) 444,690,365Decrease in trade receivables 37,072,169 103,406,898Increase / (decrease) in trade payables 92,609,575 (3,541,352)____________ ____________
Net cash flows from operating activities 143,205,831 598,069,769____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
23. Supplement to cash flow statement - continued
(2) Significant investing and financing activities not involving cash receipts and payments
2018 2017RMB RMB
Change the claim on subsidiaries into Long-termequity investments 2,802,406,445 2,386,907,749Increase the investment in subsidiarieswith bank acceptances - 96,345,678Recover the investment in subsidiarieswith bank acceptances - (96,345,678)____________ ____________
2,802,406,445 2,386,907,749____________ ________________________ ____________
24. Cash and cash equivalents
2018 2017
RMB RMB
Closing balance of Cash and bank 624,588,809 559,174,466
Less:
Restricted bank deposits 2,611,350 2,645,410Restricted other monetary assets 44,592,577 57,960,190Deposit with a period of over three months 45,000,000 5,000,000____________ ____________
Closing balance of cash and cash equivalents 532,384,882 493,568,866____________ ________________________ ____________
2018 2017
RMB RMB
Cash and bank 532,384,882 493,568,866
Including: Cash and bank 3,177 5,280
Bank deposits on demand 532,381,705 493,563,586____________ ____________
Closing balance of cash and cash equivalents 532,384,882 493,568,866____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions
(1) Purchase of materials
2018 2017RMB RMB
Subsidiaries 209,808,816 352,495,622Other related parties 88,897,126 82,394,392____________ ____________
298,705,942 434,890,014____________ ________________________ ____________
(2) Sales of goods
2018 2017
RMB RMB
Subsidiaries 867,995,960 1,302,056,254
Other related parties 8,451,110 9,200,600____________ ____________
876,447,070 1,311,256,854____________ ________________________ ____________
(3) Sales of Fixed assets
2018 2017
RMB RMB
Subsidiaries 134,445 47,843,203
Other related parties - 3,934,643____________ ____________
134,445 51,777,846____________ ________________________ ____________
(4) Interest income from occupation of funds
2018 2017
RMB RMB
Subsidiaries 35,823,556 14,912,649____________ ________________________ ____________
(5) Lease income
2018 2017
RMB RMB
Subsidiaries 1,997,164 739,491____________ ________________________ ____________
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
25. Related party transactions - continued
(6) Guarantees
Whetherguarantees areGuaranteed party Currency Amount Beginning date Due date fulfilled completely
R&D Center RMB 500,000,000 8 March 2017 8 March 2022 NoAustralian KilikanoonEstate AUD 17,000,000 13 December 2018 13 December 2023 No
26. Receivables and payables to related parties
(1) Trade receivables
Trade receivables 31/12/2018 31/12/2017Bad debts Bad debtsBalance provision Balance provisionRMB RMB RMB RMB
Other related parties 1,447,973 - 7,805,333 -__________ _______ __________ _________________ _______ __________ _______
Other receivables 31/12/2018 31/12/2017
Bad debts Bad debts
Balance provision Balance provision
RMB RMB RMB RMB
Subsidiaries 523,579,831 - 589,897,407 -
Other related parties 813,440 - 813,440 -__________ _______ __________ _______524,393,271 - 590,710,847 -__________ _______ __________ _________________ _______ __________ _______
Other non-current assets 31/12/2018 31/12/2017
Bad debts Bad debts
Balance provision Balance provision
RMB RMB RMB RMB
Subsidiaries 972,700,000 - 3,718,674,166 -
__________ _______ __________ _________________ _______ __________ _______
The above receivables due from related parties are unsecured, have no interest or fixed date of
repayment.
XIV. NOTES TO COMPANY FINANCIAL STATEMENTS - continued
26. Receivables and payables to related parties - continued
(2) Trade payables
Trade payables 31/12/2018 31/12/2017RMB RMB
Other related parties 28,892,583 29,145,914____________ ________________________ ____________
Other payables 31/12/2018 31/12/2017
RMB RMB
Subsidiaries 585,044,038 534,530,323
Other related parties 450,000 -____________ ____________
585,494,038 534,530,323____________ ________________________ ____________
The above payables due to related parties are unsecured, have no interest or fixed date of
repayment.
APPENDIX I SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2018
I. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2018RMB
Corporate income tax effect 11,368,355Government grants credited in profit and loss(except for those recurring government grantsthat are closely related to the Group's operationand have proper basis of calculation) 87,281,434Other non-operating income and expense 3,817,401Corporate income tax effect (25,157,188)The impact of non-controlling interests' equity (103,311)__________
77,206,691____________________
The Company's extraordinary profit and loss items are recognized in accordance with the
regulations of the "public offering of securities of the Company Disclosure Explanatory Notice
No. 1 - non-recurring profit and losses" (SFC [2008] No. 43).
II. RETRUN ON EQUITY ("ROE") AND EARNINGS PRE SHARE ("EPS")
The Company's ROE and EPS are calculated in accordance with the CSRC regulations of the
"Information Preparing and Disclosure Rules of Public Company No. 9 - calculation and
disclosure of ROE and EPS" (Revised 2010).
Weighted average
2018 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 11.23 1.52
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 10.40 1.41_____ _________ ____
The Company did not have any potential dilutive shares.
Weighted average
2017 ROE Basic EPS
% RMB
Net profit attributable to shareholders of the Company 12.14 1.51
Net profit attributable to shareholders
of the Company deducting extraordinary profit and loss 11.60 1.44_____ _________ ____
The Company did not have any potential dilutive shares.