Content
Pages
I. Auditor’s report 1-5
II. Financial Statements 6-17
(1) Consolidated Balance Sheet 6-7
(2) Consolidated Income Statement 8
(3) Consolidated Cash flows Statement 9
(4) Consolidated Statement of Changes in Equity 10-11
(5) Company Balance Sheet 12-13
(6) Company Income Statement 14
(7) Company Cash flows Statement 15
(8) Company Statement of Changes in Equity 16-17III. Notes to Financial Statements 18-176
Auditor’s Report
ZhongHui Shen Zi [2020] No.1530
To all shareholders of Hengli Petrochemical Co., Ltd.：
I. Opinion
We have audited the financial statements of Hengli Petrochemical Co., Ltd. (hereinafter "the Company"),which comprise the consolidated and company balance sheets as at 31 December 2019, and the consolidatedand company income statements, consolidated and company cash flow statements and consolidated andcompany statements of changes in equity for the year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the consoli-dated and company financial positions as at 31 December 2019, and their financial performance and theircash flows for the year then ended in accordance with the requirements of Accounting Standards for BusinessEnterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities un-der those standards are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company and have fulfilled our other ethi-cal responsibilities in accordance with the China Code of Ethics for Certified Public Accountants. Webelieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
III. Key Audit Matter
Key audit matter is the matter that, in our professional judgment, was of most significance in our audit ofthe financial statements for the year ended 31 December 2019. This matter was addressed in the context ofour audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on this matter.
During the course of our audit, we identified the following matters as key audit matter:
(1) Revenue recognitionKey audit matter Addressed in the context of our auditRevenue recognition
As mentioned in Note V(37) of In the audit of the financial statements for the year, wethe financial statements of the Com- have implemented the following procedures for the matter ofpany, the operating revenue for the revenue recognition:
period was RMB 10,078,237,100. The 1. Evaluate and test the design and operation effectiveness
primary revenue sources and recogni- of key internal controls related to revenue recognition of the
tion criteria are shown in Note III(28) Company;
of the financial statements of the
Company. 2. Understand the various types of income of the Company
Since revenue is one of the key and their recognition conditions, and evaluate whether the in-performance indicators of the Com- come recognition policy meets the requirements of the account-pany, there is an inherent risk that ing standards;
management will manipulate revenue 3. Combined with the comparison of gross profit margins of
recognition in order to achieve specif- companies in the same industry, an analysis procedure is per-
ic goals or expectations. Therefore, formed on the Company's revenue, costs and gross profit mar-
we recognize revenue recognition as gins to analyze the rationality of the gross profit margin change
a key audit matter. trend;
4. Select sample and inspect the Company's various typesof income related contracts, invoices, income confirmation doc-uments and other documents to test the authenticity of income;
5. Perform a sample test on the revenue recognizedaround the balance sheet date to assess whether the sales rev-enue is recognized in the appropriate accounting period;
6. Carry out confirmation procedure on the income amountof the Company's major customers and the balances of receiva-ble;
7. Select samples to interview important customers of theCompany to confirm the authenticity of sales.
IV. Other Information
Management is responsible for the other information. The other information comprises the information in-cluded in the Company’s 2019 annual report, but does not include the financial statements and our auditor'sreport thereon.
Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financial statementsor our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
V. Responsibilities of Management and Those Charged with Governance for the Financial State-ments
Management of the Company is responsible for the preparation of the financial statements to achieve fairpresentation in accordance with Accounting Standards for Business Enterprises, and for the design, imple-mentation and maintenance of such internal control as management determine is necessary to enable thepreparation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the goingconcern basis of accounting unless management either intend to liquidate the Company or to cease opera-tions, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting pro-cess.
VI. 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 that in-cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with auditing standards will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,they could reasonably be expected to influence the economic decisions of users taken on the basis of thesefinancial statements.
As part of an audit in accordance with auditing standards, we exercise professional judgment and main-tain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, inten-tional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.
(4) Conclude on the appropriateness of the management’s use of the going concern basis of account-ing and, based on the audit evidence obtained, whether a material uncertainty exists related to events or con-ditions that may cast significant doubt on the Company's ability to continue as a going concern. If we concludethat a material uncertainty exists, the auditing standards require us to draw attention to users of the financialstatements in our auditor's report to the related disclosures in the financial statements or, if such disclosuresare inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However, future events or conditions may cause the Company to cease to contin-ue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in a man-ner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the financial statements. We are responsiblefor the direction, supervision and performance of the group audit. We remain solely responsible for our auditopinion.
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 in internalcontrol 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 and other mat-ters 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 period and are therefore thekey audit matters. We describe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a matter should notbe communicated in our report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.
Zhonghui Certified Public Accountants Auditor’s signature and stamp:
(special general partnership) (Engagement partner)
China·Hangzhou Auditor’s signature and stamp：
Reporting date: 16 April 2020
Financial Statements
Consolidated Balance Sheet
As at 31/12/2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note Asat31/12/2019 Asat31/12/2018
Currentassets:
Cashandbankbalances V(1) 16,508,500,549.53 12,323,055,110.55
Tradingfinancialassets V(2) 2,631,832,271.61
Financialassetsatfairvaluethroughprofitorloss 44,838,556.18
Derivativefinancialassets
Notesreceivable V(3) 17,298,141.71 4,763,827,043.60
Accountsreceivable V(4) 675,399,514.80 483,777,271.90
Receivablefinancing V(5) 3,268,042,426.59
Prepayments V(6) 910,240,990.68 819,456,842.21
Otherreceivables V(7) 1,199,904,102.83 103,961,284.92
Including:Interestreceivable 97,509,534.42
Dividendreceivables
Inventories V(8) 19,464,019,795.14 18,479,143,760.16
Assetsheldforsale
Non-currentassetsduewithinoneyear
Othercurrentassets V(9) 8,618,920,071.40 2,561,325,874.71
Totalcurrentassets 53,294,157,864.29 39,579,385,744.23
Non-currentassets:
Debtsinvestment
Available-for-salefinancialassets
Otherdebtsinvestment
Held-to-maturityinvestments
Long-termreceivables
Long-termequityinvestments
Otherequityinvestmentsinvestment
Othernon-currentfinancialassets
Investmentproperties V(10) 34,250,051.75 35,926,642.10
Fixedassets V(11) 83,075,260,115.62 24,056,286,056.41
Constructioninprogress V(12) 24,290,533,716.62 46,007,545,914.76
Productivebiologicalassets
Oilandgasassets
Intangibleassets V(13) 5,808,154,973.11 4,922,101,800.74
Capitalizeddevelopmentexpenditure
Goodwill
Long-termdeferredexpenses V(14) 2,692,328,032.83 49,110,903.57
Deferredtaxassets V(15) 197,918,927.14 27,288,905.76
Othernon-currentassets V(16) 4,984,936,406.80 10,564,815,911.02
Totalnon-currentassets 121,083,382,223.87 85,663,076,134.36
TOTALASSETS 174,377,540,088.16 125,242,461,878.59
Currentliabilities:
Short-termloans V(17) 47,597,009,933.34 22,990,526,338.94
Tradingfinancialliabilities V(18) 10,220,573.91
Financialliabilitiesatfairvaluethroughprofitorloss 1,009,626.09
Derivativefinancialliabilities
Notespayable V(19) 4,984,424,619.96 10,598,769,315.84
Accountspayable V(20) 18,778,031,313.42 16,347,245,614.61
Receiptsinadvance V(21) 6,024,174,263.73 919,972,893.85
Employeebenefitspayable V(22) 264,272,749.66 170,227,063.62
Taxespayable V(23) 1,577,638,289.00 66,253,445.10
Otherpayables V(24) 187,622,874.29 551,308,898.97
Including:Interestpayable 91,731,944.88
Dividend payable 2,052,998.00 230,000.00
Liabilitiesheldforsale
Non-currentliabilitiesmaturingwithinoneyear V(25) 2,843,879,235.19 2,570,424,651.12
Othercurrentliabilities
Totalcurrentliabilities 82,267,273,852.50 54,215,737,848.14
Non-currentliabilities:
Long-termloans V(26) 51,265,067,528.31 40,066,594,032.00
Bondspayable V(27) 1,011,322,359.12
Including:Preferenceshares
Perpetual bonds
Long-termpayables V(28) 135,875,045.32 42,551,273.01
Long-termemployeebenefits
Provisions
Deferredincome V(29) 2,946,381,733.98 2,998,140,418.29
Deferredtaxliabilities V(15) 12,831,666.49 11,101,938.09
Othernon-currentliabilities
Totalnon-currentliabilities 55,371,478,333.22 43,118,387,661.39
TOTALLIABILITIES 137,638,752,185.72 97,334,125,509.53
Owner'sequity:
Sharecapital V(30) 7,039,099,786.00 5,052,789,925.00
Otherequityinstruments
Including:Preferenceshares
Perpetualbonds
Capitalreserve V(31) 18,272,358,450.99 20,457,672,249.59
Less:Treasuryshares V(32) 224,841,448.45 596,200,729.43
Othercomprehensiveincome V(33) 13,773,146.41 6,637,613.80
Specialreserve V(34) 30,392,119.18
Surplusreserve V(35) 690,326,989.68 579,780,635.33
Undistributedprofits V(36) 10,511,894,102.60 2,086,993,751.18
Totalowner'sequityattributabletotheparent 36,333,003,146.41 27,587,673,445.47
Minorityinterests 405,784,756.03 320,662,923.59
TOTALSHAREHOLDERS'EQUITY 36,738,787,902.44 27,908,336,369.06
TOTALLIABILITIESANDSHAREHOLDERS'EQUITY 174,377,540,088.16 125,242,461,878.59
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Company Balance Sheet
As at 31/12/2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note Asat31/12/2019 Asat31/12/2018
Currentassets:
Cashandbankbalances 82,052,267.79 42,722,298.03
Tradingfinancialassets
Financialassetsatfairvaluethroughprofitorloss
Derivativefinancialassets
Notesreceivable
Accountsreceivable XV(1) 160,298,402.07
Receivablefinancing
Prepayments 294,875.06 385,618.81
Otherreceivables XV(2) 3,172,926,189.18 2,301,096,542.72
Including:Interestreceivable
Dividendreceivables 3,169,967,000.00 2,299,770,000.00
Inventories
Assetsheldforsale
Non-currentassetsduewithinoneyear
Othercurrentassets 1,835,670.60 8,427,783.10
Totalcurrentassets 3,417,407,404.70 2,352,632,242.66
Non-currentassets:
Debtsinvestment
Available-for-salefinancialassets
Otherdebtsinvestment
Held-to-maturityinvestments
Long-termreceivables
Long-termequityinvestments XV(3) 41,722,948,264.76 39,986,726,384.76
Otherequityinvestmentsinvestment
Othernon-currentfinancialassets
Investmentproperties
Fixedassets 809,048.34 1,074,375.48
Constructioninprogress
Productivebiologicalassets
Oilandgasassets
Intangibleassets
Capitalizeddevelopmentexpenditure
Goodwill
Long-termdeferredexpenses
Deferredtaxassets
Othernon-currentassets
Totalnon-currentassets 41,723,757,313.10 39,987,800,760.24
TOTALASSETS 45,141,164,717.80 42,340,433,002.90
Currentliabilities:
Short-termloans
Tradingfinancialliabilities
Financialliabilitiesatfairvaluethroughprofitorloss
Derivativefinancialliabilities
Notespayable
Accountspayable 4,152,906.83 200,048.06
Receiptsinadvance 90,431,164.91
Employeebenefitspayable 917,220.00 750,000.00
Taxespayable 1,678,143.32 1,716,154.23
Otherpayables 9,061,691,346.09 9,748,005,309.70
Including:Interestpayable
Dividend payable
Liabilitiesheldforsale
Non-currentliabilitiesmaturingwithinoneyear
Othercurrentliabilities
Totalcurrentliabilities 9,158,870,781.15 9,750,671,511.99
Non-currentliabilities:
Long-termloans
Bondspayable 1,011,322,359.12
Including:Preferenceshares
Perpetual bonds
Long-termpayables
Long-termemployeebenefits
Provisions
Deferredincome 2,655,451.81
Deferredtaxliabilities
Othernon-currentliabilities
Totalnon-currentliabilities 1,013,977,810.93
TOTALLIABILITIES 10,172,848,592.08 9,750,671,511.99
Owner'sequity:
Sharecapital 7,039,099,786.00 5,052,789,925.00
Otherequityinstruments
Including:Preferenceshares
Perpetual bonds
Capitalreserve 23,759,278,351.37 25,766,635,420.47
Less:Treasuryshares 224,841,448.45 596,200,729.43
Othercomprehensiveincome
Specialreserve
Surplusreserve 757,965,342.25 406,167,846.53
Undistributedprofits 3,636,814,094.55 1,960,369,028.34
TOTALSHAREHOLDERS'EQUITY 34,968,316,125.72 32,589,761,490.91
TOTALLIABILITIESANDSHAREHOLDERS'EQUITY 45,141,164,717.80 42,340,433,002.90
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Consolidated Income Statement
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note 2019 2018
I.Operatingrevenue V(37) 100,782,371,124.23 60,067,255,171.95
II.Totaloperatingcosts 88,550,125,228.69 56,214,238,308.26
Including:Operatingcost V(37) 79,865,827,588.07 52,413,244,453.49
Taxesandsurcharges V(38) 2,120,865,280.45 324,781,309.55
Sellingexpenses V(39) 951,954,772.59 543,399,049.22
Administrativeexpenses V(40) 1,090,266,532.59 620,437,724.18
Researchanddevelopmentexpenses V(41) 958,349,359.47 834,214,470.45
Financialexpense V(42) 3,562,861,695.52 1,478,161,301.37
Including: Interestexpenses 3,254,950,018.16 1,554,529,339.15
Interest income 94,378,144.03 185,483,977.54
Add:Otherincome V(43) 609,853,993.27 204,742,738.12
Investmentgains("-"forloss) V(44) 274,797,798.34 108,199,429.08
Including: Gains from investments in associ-
atesandjointventures
Incomeon derecognitionof financial assets at
amortizedcost
Gainsfromnethedgingexposure("-"forloss)
Gainfromchangesinfairvalue("-"forloss) V(45) 125,232,805.71 10,784,292.22
Creditimpairmentloss("-"forloss) V(46) -12,638,815.68
Assetsimpairmentloss("-"forloss) V(47) -6,365,086.13 -58,926,441.34
Gainfromdisposalofassets("-"forloss) V(48) 185,524.63 1,350,774.25
III.Operatingprofit("-"forloss) 13,223,312,115.68 4,119,167,656.02
Add:Non-operatingincome V(49) 9,602,185.42 25,614,640.23
Less:Non-operatingexpenses V(50) 20,926,819.31 4,701,436.46
IV.Totalprofit("-"forloss) 13,211,987,481.79 4,140,080,859.79
Less:Incometaxexpenses V(51) 3,099,613,956.02 737,614,281.78
V.Netprofit("-"fornetloss) 10,112,373,525.77 3,402,466,578.01
(I)Classifiedbycontinuityofoperations
1．Netprofit from continuing operations ("-" 10,112,373,525.77 3,402,466,578.01
fornetloss)
2．Netprofit from discontinued operation ("-"
fornetloss)
(II)Classifiedbyattributiontoownership
1．Net profit attributable to shareholders of 10,025,179,101.07 3,322,610,860.03
theparent
2．Netprofitattributabletominorityinterests 87,194,424.70 79,855,717.98
VI.Othercomprehensiveincome-aftertax V(52) 7,135,940.35 6,889,278.50
Other comprehensive income - after tax at- 7,135,532.61 6,973,752.80
tributabletoownersoftheparent
(I) Other comprehensive income not reclassi-
fiedintoprofitorlosssubsequently
1．Changes in remeasurement of defined
benefitplan
2．Share of other comprehensive income of
theequitymethodinvestments
3．Changes in fair value of other equity in-
strumentsinvestment
4．ChangesinfairvalueoftheCompany'sowncreditrisks
5．Other
(II) Other comprehensive income that will be 7,135,532.61 6,973,752.80
reclassifiedintoprofitorlosssubsequently
1．Shareofothercomprehensiveincomeoftheequitymethodinvestments
2．Changesin fair valueof receivable financ-
ing
3．Changes in fair value of other debts in-
vestment
4．Gainson changes in fair value of availa-
ble-for-salefinancialassets
5．Resulted amount on reclassification of
financialassetsinothercomprehensiveincome
6．Gainsonreclassificationofheld-to-
maturityinvestmenttoavailable-for-salefinancial
assets
7．Credit impairment reserve of receivable
financing
8．Credit impairment reserve of other debts
investment
9．Reserveforcashflowhedging
10．Translationdifferencesarisingfromtrans- 7,135,532.61 6,973,752.80
lationofforeigncurrencyfinancialstatements
11．Other
Other comprehensive income - after tax at- 407.74 -84,474.30
tributabletominorityinterests
VII.Totalcomprehensiveincomefortheyear("-" for 10,119,509,466.12 3,409,355,856.51
totalcomprehensiveloss)
Total comprehensive income attributable to 10,032,314,633.68 3,329,584,612.83
ownersoftheparent
Total comprehensive income attributable to 87,194,832.44 79,771,243.68
minorityinterests
VIII.Earningspershare XIV(2)
(I)Basicearningspershare(RMB/share) 1.44 0.48
(II)Dilutedearningspershare(RMB/share) 1.44 0.48
For business combination involving enterprises under common control, the net profit realized by the acquirees be-
fore combination date was RMB 754,849.50, and the net profit of acquiree in previous year was RMB 0.00.
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Company Income Statement
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note 2019 2018
I.Operatingrevenue XV(4) 1,044,705,519.93
Less:Operatingcost XV(4) 981,903,887.45
Taxesandsurcharges 1,050,452.15 10,563,867.35
Sellingexpenses
Administrativeexpenses 27,644,641.59 19,914,310.07
Researchanddevelopmentexpenses
Financialexpense 392,435,389.47 179,766,497.41
Including: Interestexpenses 392,601,107.16 182,848,823.23
Interest income 257,762.51 3,095,677.87
Add:Otherincome 7,344,548.19 227,987.64
Investmentgains("-"forloss) XV(5) 3,869,117,000.00 2,919,723,308.33
Including:Gains from investments in associates
andjointventures
Income on derecognition of financial assets at
amortizedcost
Gainsfromnethedgingexposure("-"forloss)
Gainfromchangesinfairvalue("-"forloss)
Creditimpairmentloss("-"forloss) -172,740.23
Assetsimpairmentloss("-"forloss) 1,302,167.93
Gainfromdisposalofassets("-"forloss)
II.Operatingprofit("-"forloss) 3,517,959,957.23 2,711,008,789.07
Add:Non-operatingincome 15,000.00 2,000,000.00
Less:Non-operatingexpenses
III.Totalprofit("-"forloss) 3,517,974,957.23 2,713,008,789.07
Less:Incometaxexpenses
IV.Netprofit("-"fornetloss) 3,517,974,957.23 2,713,008,789.07
(I)Classifiedbycontinuityofoperations 3,517,974,957.23 2,713,008,789.07
(II)Classifiedbyattributiontoownership
V.Othercomprehensiveincome-aftertax
(I)Other comprehensive income not reclassified into
profitorlosssubsequently
1．Changes in remeasurement of defined benefit
plan
2．Shareofothercomprehensiveincomeoftheequi-
tymethodinvestments
3．Changesin fair value of other equity instruments
investment
4．ChangesinfairvalueoftheCompany'sowncredit
risks
5．Other
(II)Other comprehensiveincome that will be reclassi-
fiedintoprofitorlosssubsequently
1．Shareofothercomprehensiveincomeoftheequi-
tymethodinvestments
2．Changesinfairvalueofreceivablefinancing
3．Changesinfairvalueofotherdebtsinvestment
4．Gains on changes in fair value of available-for-
salefinancialassets
5．Resulted amount on reclassification of financial
assetsinothercomprehensiveincome
6．Gains on reclassification of held-to-maturity in-
vestmenttoavailable-for-salefinancialassets
7．Creditimpairmentreserveofreceivablefinancing
8．Credit impairment reserve of other debts invest-
ment
9．Reserveforcashflowhedging
10．Translationdifferencesarisingfromtranslationof
foreigncurrencyfinancialstatements
11．Other
VI. Total comprehensive income for the year ("-" for total 3,517,974,957.23 2,713,008,789.07
comprehensiveloss)
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Consolidated Cash Flows Statement
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note 2019 2018
I. Cashflowsfromoperatingactivities
Cash received from sale of goods or rendering of ser- 110,087,081,260.40 59,843,096,432.33
vices
Taxrefundreceived 152,862,152.10 109,070,683.90
Othercashreceivedrelatingtooperatingactivities V(53) 2,613,043,561.74 2,024,351,898.67
Sub-totalofcashinflows 112,852,986,974.24 61,976,519,014.90
Cashpaidforgoodsandservices 84,137,894,411.20 51,294,524,446.93
Cashpaidtoandonbehalfofemployees 2,159,950,483.33 1,753,453,321.12
Paymentsofalltypesoftaxes 4,572,992,854.76 2,112,512,774.43
Othercashpaidrelatingtooperatingactivities V(53) 5,045,174,988.86 2,684,579,745.59
Sub-totalofcashoutflows 95,916,012,738.15 57,845,070,288.07
Netcashflowsfromoperatingactivities 16,936,974,236.09 4,131,448,726.83
II. Cashflowsfrominvestingactivities
Cashreceivedfromdisposalofinvestments 218,386,980.71
Cashreceivedfromreturnsoninvestments
Net cash received from disposal of fixed assets, intan- 418,824.82 3,159,022.93
gibleassetsandotherlong-termassets
Cashreceivedfromdisposalofsubsidiariesandother
Othercashreceivedrelatingtoinvestingactivities V(53) 12,757,686,262.25 16,198,805,714.39
Sub-totalofcashinflows 12,976,492,067.78 16,201,964,737.32
Cashpaidtoacquirefixedassets,intangibleassetsand 41,774,519,175.83 35,367,175,393.16
otherlong-termassets
Cashpaidtoinvestments 13,972,000.00
Cash paid to acquire subsidiaries and other business
units
Othercashpaidrelatingtoinvestingactivities V(53) 11,100,874,202.03 13,264,989,499.31
Sub-totalofcashoutflows 52,889,365,377.86 48,632,164,892.47
Netcashflowsfrominvestingactivities -39,912,873,310.08 -32,430,200,155.15
III. Cashflowsfromfinancingactivities
Cashreceivedfromcapitalcontribution 7,193,803,175.00
Include: Cash received from investment by minority 26,348,175.00
interests
Cashreceivedfromborrowings 65,698,225,438.73 74,434,277,466.49
Cashreceivedrelatingtootherfinancingactivities V(53) 1,464,503,014.59 678,172,375.33
Sub-totalofcashinflows 67,162,728,453.32 82,306,253,016.82
Cashrepaymentsofamountsborrowed 32,065,116,148.70 42,922,719,760.90
Cashpaymentsforinterestexpensesanddistributionof 6,209,130,480.70 3,876,158,090.22
dividendsorprofits
Include:Dividendpaidtominorityinterestsofsubsid- 250,002.00 137,000.00
iaries
Othercashpaymentsrelatingtofinancingactivities V(53) 3,251,918,307.51 1,202,794,882.19
Sub-totalofcashoutflows 41,526,164,936.91 48,001,672,733.31
Netcashflowsfromfinancingactivities 25,636,563,516.41 34,304,580,283.51
IV. Effectofforeignexchangeratechangesoncash 97,701,709.00 -39,277,290.71
V. Netincreaseincashandcashequivalents 2,758,366,151.42 5,966,551,564.48
Add:Openingbalanceofcashandcashequivalent 8,034,616,575.94 2,068,065,011.46
VI. Closingbalanceofcashandcashequivalent 10,792,982,727.36 8,034,616,575.94
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Company Cash Flows Statement
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
Item Note 2019 2018
I. Cashflowsfromoperatingactivities
Cashreceivedfromsaleofgoodsorrenderingofservices 880,279,185.90
Taxrefundreceived
Othercashreceivedrelatingtooperatingactivities 21,375,772.39 3,663,040.81
Sub-totalofcashinflows 901,654,958.29 3,663,040.81
Cashpaidforgoodsandservices 880,206,318.45
Cashpaidtoandonbehalfofemployees 3,501,573.01 2,863,621.43
Paymentsofalltypesoftaxes 92,821.42 10,563,867.35
Othercashpaidrelatingtooperatingactivities 26,792,582.42 24,444,131.74
Sub-totalofcashoutflows 910,593,295.30 37,871,620.52
Netcashflowsfromoperatingactivities -8,938,337.01 -34,208,579.71
II. Cashflowsfrominvestingactivities
Cashreceivedfromdisposalofinvestments
Cashreceivedfromreturnsoninvestments 2,998,920,000.00 1,469,863,000.00
Net cash received from disposal of fixed assets, intangible
assetsandotherlong-termassets
Cashreceivedfromdisposalofsubsidiariesandother
Othercashreceivedrelatingtoinvestingactivities 192,027,349.98
Sub-totalofcashinflows 2,998,920,000.00 1,661,890,349.98
Cashpaidtoacquirefixedassets,intangibleassetsandother 48,400.00 609,708.93
long-termassets
Cashpaidtoinvestments 1,698,920,000.00 8,968,230,515.82
Cashpaidtoacquiresubsidiariesandotherbusinessunits
Othercashpaidrelatingtoinvestingactivities 49,000,000.00
Sub-totalofcashoutflows 1,698,968,400.00 9,017,840,224.75
Netcashflowsfrominvestingactivities 1,299,951,600.00 -7,355,949,874.77
III. Cashflowsfromfinancingactivities
Cashreceivedfromcapitalcontribution 7,167,455,000.00
Cashreceivedfromborrowings 994,339,622.64
Cashreceivedrelatingtootherfinancingactivities 2,846,586,912.50 2,560,805,253.68
Sub-totalofcashinflows 3,840,926,535.14 9,728,260,253.68
Cashrepaymentsofamountsborrowed
Cash payments for interest expenses and distribution of divi- 1,489,618,401.59 1,261,512,527.02
dendsorprofits
Othercashpaymentsrelatingtofinancingactivities 3,602,991,426.78 1,070,704,153.46
Sub-totalofcashoutflows 5,092,609,828.37 2,332,216,680.48
Netcashflowsfromfinancingactivities -1,251,683,293.23 7,396,043,573.20
IV. Effectofforeignexchangeratechangesoncash
V. Netincrease incashandcashequivalents 39,329,969.76 5,885,118.72
Add:Openingbalanceofcashandcashequivalent 42,722,298.03 36,837,179.31
VI. Closingbalanceofcashandcashequivalent 82,052,267.79 42,722,298.03
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu
Prepared by：Minxia Zheng
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
2019
Equity attributabletotheparent
Item Share mOtehnetrsequity instru- Less: Other Undistrib- Minority Totalown-
capital Prefer- Per- Ot Capital Treasury compre- Special Surplus uted prof- interests ers'equity
ence petual he reserve shares hensive reserve reserve its
shares bonds r income
I. Balance at end of previ- 5,052,789 20,457,672, 596,200,7 6,637,613.8 579,780,63 2,086,993,7 320,662,9 27,908,336,
ousyear ,925.00 249.59 29.43 0 5.33 51.18 23.59 369.06
Add: Changes in account-
ingpolicies
Correctionoferrors
Business combina-
tion under common con-
trol
Others
II.Balance inbeginningof 5,052,789 20,457,672, 596,200,7 6,637,613.8 579,780,63 2,086,993,7 320,662,9 27,908,336,
year ,925.00 249.59 29.43 0 5.33 51.18 23.59 369.06
III. Movement over the 1,986,309 - - 7,135,532.6 30,392,11 110,546,35 8,424,900,3 85,121,83 8,830,451,5
year("-"fordecrease) ,861.00 2,185,313,7 371,359,2 1 9.18 4.35 51.42 2.44 33.38
98.60 80.98
(I)Total comprehensive 7,135,532.6 10,025,179, 87,194,83 10,119,509,
incomefortheyear 1 101.07 2.44 466.12
(II) Shareholders' contri- - - 172,355,34
butions and decrease of 199,003,93 371,359,2 3.38
capital 7.60 80.98
1. Capital contributed by
shareholders
2.Capitalcontributionby
holdersofotherequity
instruments
3.Increaseinshare-
holder'sequityresulted
fromshare-basedpay-
ments
- - 172,355,34
4.Other 199,003,93 371,359,2 3.38
7.60 80.98
(III)Appropriationofprof- 110,546,35 - - -
its 4.35 1,600,278,7 2,073,000 1,491,805,3
49.65 .00 95.30
1.Appropriationtosur- 110,546,35 -
plusreserves 4.35 110,546,35
4.35
2.Distributionsto - - -
shareholders 1,489,732,3 2,073,000 1,491,805,3
95.30 .00 95.30
3.Others
1,986,309 -
(IV)Transferwithinequity ,861.00 1,986,309,8 - -
61.00
1.Capital reserves con- 1,986,309 -
vertingintosharecapital ,861.00 1,986,309,8 - -
61.00
2.Surplus reserves con-
vertingintosharecapital
3.Surplusreservescover
thedeficit
4. Changes in defined
benefits plan transferred
toretainedearnings
5. Other comprehensive
income transferred to
retainedearnings
6.Others
(V)Specialreserve 30,392,11 30,392,119.
9.18 18
1. Appropriation for the 161,427,1 161,427,11
year 11.60 1.60
2.Usedfortheyear 131,034,9 131,034,99
92.42 2.42
(VI)Other - -
IV.Balanceatendofyear 7,039,099 18,272,358, 224,841,4 13,773,146. 30,392,11 690,326,98 10,511,894, 405,784,7 36,738,787,
,786.00 450.99 48.45 41 9.18 9.68 102.60 56.03 902.44
2018
Equity attributabletotheparent
Item Share mOtehnetrsequity instru- Less: Other Undistrib- Minority Total own-
capital Prefer- Per- Ot Capital Treasury compre- Special Surplus uted prof- interests ers'equity
ence petual he reserve shares hensive reserve reserve its
shares bonds r income
I. Balance at end of previ- 2,825,686 15,716,280, - 403,040,04 204,320,96 214,838,2 19,363,830,
ousyear ,942.00 575.33 336,139.00 4.58 3.15 84.38 670.44
Add: Changes in account-
ingpolicies
Correctionoferrors
Business combina-
tion under common con-
trol
Others
II.Balance inbeginningof 2,825,686 15,716,280, - 403,040,04 204,320,96 214,838,2 19,363,830,
year ,942.00 575.33 336,139.00 4.58 3.15 84.38 670.44
III. Movement over the 2,227,102 4,741,391,6 596,200,7 6,973,752.8 176,740,59 1,882,672,7 105,824,6 8,544,505,6
year("-"fordecrease) ,983.00 74.26 29.43 0 0.75 88.03 39.21 98.62
(I)Total comprehensive 6,973,752.8 3,322,610,8 79,771,24 3,409,355,8
incomefortheyear 0 60.03 3.68 56.51
(II) Shareholders' contri- 2,227,102 4,741,391,6 596,200,7 26,335,39 6,398,629,3
butions and decrease of ,983.00 74.26 29.43 5.53 23.36
capital
1. Capital contributed by 2,227,102 16,365,767, 26,348,17 18,619,218,
shareholders ,983.00 685.44 5.00 843.44
2.Capitalcontributionby
holdersofotherequity
instruments
3.Increaseinshare-
holder'sequityresulted
fromshare-basedpay-
ments
- 596,200,7 - -
4.Other 11,624,376, 29.43 12,779.47 12,220,589,
011.18 520.08
(III)Appropriationofprof- 176,740,59 - - -
its 0.75 1,439,938,0 282,000.0 1,263,479,4
72.00 0 81.25
1.Appropriationtosur- 176,740,59 -
plusreserves 0.75 176,740,59
0.75
2.Distributionsto - - -
shareholders 1,263,197,4 282,000.0 1,263,479,4
81.25 0 81.25
3.Others
(IV)Transferwithinequity
1.Capital reserves con-
vertingintosharecapital
2.Surplus reserves con-
vertingintosharecapital
3.Surplusreservescover
thedeficit
4. Changes in defined
benefits plan transferred
toretainedearnings
5. Other comprehensive
income transferred to
retainedearnings
6.Others
(V)Specialreserve
1. Appropriation for the
year
2.Usedfortheyear
(VI)Other
IV.Balanceatendofyear 5,052,789 20,457,672, 596,200,7 6,637,613.8 579,780,63 2,086,993,7 320,662,9 27,908,336,
,925.00 249.59 29.43 0 5.33 51.18 23.59 369.06
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu Prepared by：Minxia Zheng
Company Statement of Changes in Equity
For the year ended 31 December 2019
Prepared by: Hengli Petrochemical Co., Ltd.
Unit: RMB
2019
Equityattributabletotheparent
Item Share Otherequityinstruments Less: Other com- Totalowners'
Prefer- Per- Capital Special Surplus Undistribut- equitycapitalTreasury prehensive
ence petual Other reserve reserve reserve edprofitssharesincome
shares bonds
I. Balance at end of previ- 5,052,789 25,766,63 596,200,72 406,167,84 1,960,369,02 32,589,761,490
ousyear ,925.00 5,420.47 9.43 6.53 8.34 .91
Add: Changes in account-
ingpolicies
Correctionoferrors
Business combina-
tion under common con-
trol
Others 5,052,789 25,766,63 596,200,72 406,167,84 1,960,369,02 32,589,761,490
,925.00 5,420.47 9.43 6.53 8.34 .91
II.Balance inbeginningof 1,986,309 - - 351,797,49 1,676,445,06 2,378,554,634.
year ,861.00 2,007,357 371,359,28 5.72 6.21 81
,069.10 0.98
III. Movement over the 3,517,974,95 3,517,974,957.
year("-"fordecrease) 7.23 23
(I)Total comprehensive - -
incomefortheyear 21,047,20 371,359,28 350,312,072.88
8.10 0.98
(II) Shareholders' contri-
butions and decrease of
capital
1. Capital contributed by
shareholders
2.Capitalcontributionby
holdersofotherequity
instruments
3.Increaseinshare- - -
holder'sequityresulted 21,047,20 371,359,28 350,312,072.88
fromshare-basedpay- 8.10 0.98
ments
351,797,49 - -
4.Other 5.72 1,841,529,89 1,489,732,395.
1.02 30
(III)Appropriationofprof- 351,797,49 -
its 5.72 351,797,495. -
72
1.Appropriationtosur- - -
plusreserves 1,489,732,39 1,489,732,395.
5.30 30
2.Distributionsto
shareholders
1,986,309 -
3.Others ,861.00 1,986,309
,861.00
(IV)Transferwithinequity 1,986,309 -
,861.00 1,986,309
,861.00
1.Capital reserves con-
vertingintosharecapital
2.Surplus reserves con-
vertingintosharecapital
3.Surplusreservescover
thedeficit
4. Changes in defined
benefits plan transferred
toretainedearnings
5. Other comprehensive
income transferred to
retainedearnings
6.Others
(V)Specialreserve
1. Appropriation for the
year
2.Usedfortheyear
(VI)Other 7,039,099 23,759,27 224,841,44 757,965,34 3,636,814,09 34,968,316,125
,786.00 8,351.37 8.45 2.25 4.55 .72
IV.Balanceatendofyear 5,052,789 25,766,63 596,200,72 406,167,84 1,960,369,02 32,589,761,490
,925.00 5,420.47 9.43 6.53 8.34 .91
2018
Equityattributabletotheparent
Item Share Otherequityinstruments Less: Other com- Total own-
Per- Capital Special Surplus Undistribut- ers'equitycapitalPreference Treasury prehensive
shares petual Other reserve shares income reserve reserve edprofits
bonds
I. Balance at end of previ- 2,825,686 8,731,817,3 134,866,96 781,858,599. 12,474,229,
ousyear ,942.00 95.01 7.62 43 904.06
Add: Changes in account-
ingpolicies
Correctionoferrors
Others
II.Balance inbeginningof 2,825,686 8,731,817,3 134,866,96 781,858,599. 12,474,229,
year ,942.00 95.01 7.62 43 904.06
III. Movement over the 2,227,102 17,034,818, 596,200,72 271,300,87 1,178,510,42 20,115,531,
year("-"fordecrease) ,983.00 025.46 9.43 8.91 8.91 586.85
(I)Total comprehensive 2,713,008,78 2,713,008,7
incomefortheyear 9.07 89.07
(II) Shareholders' contri- 2,227,102 17,034,818, 596,200,72 18,665,720,
butions and decrease of ,983.00 025.46 9.43 279.03
capital
1. Capital contributed by 2,227,102 16,365,767, 18,592,870,
shareholders ,983.00 685.44 668.44
2.Capitalcontributionby
holders of other equity
instruments
3.Increaseinshare-
holder'sequityresulted
fromshare-basedpay-
ments
4.Other 669,050,34 596,200,72 72,849,610.
0.02 9.43 59
(III)Appropriationofprof- 271,300,87 - -
its 8.91 1,534,498,36 1,263,197,4
0.16 81.25
1.Appropriationtosur- 271,300,87 -
plusreserves 8.91 271,300,878.
91
2.Distributionsto - -
shareholders 1,263,197,48 1,263,197,4
1.25 81.25
3.Others
(IV)Transferwithinequity
1.Capital reserves con-
vertingintosharecapital
2.Surplus reserves con-
vertingintosharecapital
3.Surplusreservescover
thedeficit
4. Changes in defined
benefits plan transferred
toretainedearnings
5. Other comprehensive
income transferred to
retainedearnings
6.Others
(V)Specialreserve
1. Appropriation for the
year
2.Usedfortheyear
(VI)Other
IV.Balanceatendofyear 5,052,789 25,766,635, 596,200,72 406,167,84 1,960,369,02 32,589,761,
,925.00 420.47 9.43 6.53 8.34 490.91
I. Balance at end of previ- 2,825,686 8,731,817,3 134,866,96 781,858,599. 12,474,229,
ousyear ,942.00 95.01 7.62 43 904.06
Legal representative：Hongwei Fan Person in charge of financial function：Xuefen Liu Prepared by：Minxia Zheng
Notes to the financial statements
For the year ended 31 December 2019
I. Company’s information
(1) Company’s profile
Hengli Petrochemical Co., Ltd. (hereinafter referred to as ”the Company”) is formerly known as Dalian
Rubber & Plastics Machinery Co., Ltd. (hereinafter referred to as ”DXS”), whose name was changed on
27 May 2016. The Company was founded on 9 March 1999. The Company's shares were listed on the
Shanghai Stock Exchange on 20 August 2001 with stock name: Hengli Petrochemical and stock code:
600346. The unified social credit code of the Company is 912102001185762674 and the registered ad-
dress of the Company is OSBL Project-Public Works Office Building, No.298 Changsong Road, Lingang
Industrial Zone, Changxing Island, Dalian, Liaoning Province. The legal representative is Fan Hongwei.
The Company’s registered capital is RMB 7,039,099,786.00 with total number of shares of
7,039,099,786 shares with par value of RMB 1 each, including 2,407,164,176 shares of tradable A
shares with restricted conditions and 4,631,935,610 shares of tradable A shares without any restricted
conditions.
On 27 January 2016, China Securities Regulatory Commission approved the Company’s major asset
restructuring through document “Approval of Dalian Rubber & Plastics Machinery Co., Ltd.’ s major as-
set restructuring and issue shares to Hengli Group Co., Ltd. to raise capital for assets purchasing” (Se-
curities Regulatory approval [2016] No.187). The major asset restructuring includes: (1) DXS’s previous
holding company Dalian State-owned Assets Investment and Operation Group Co., Ltd. (hereinafter
referred to as ”DGJ”) transferred 200,202,495 shares (29.98% of DXS’s total capital) of DXS’s shares to
Hengli Group Co., Ltd. (hereinafter referred to as ”Hengli Group”) with a price of RMB 5.8435 per
share;(2) DXS sold all assets and liabilities as of 30 June, 2015 to Dalian Yinghui Machinery Manufac-
turing Co., Ltd. and received cash as consideration;(3) The Company issued 1,906,327,800 shares by
private placement to acquire 85% shares in Jiangsu Hengli Chemical Fiber Co., Ltd. (hereinafter re-
ferred to as ”Hengli Chemical Fiber”) which were held by Hengli Group, Dechengli International Group
Co. (hereinafter referred to as the ”Dechengli”), Jiangsu Hegao Investment Co., Ltd. (hereinafter re-
ferred to as ”Hegao Investment”) and Hailaide international investment Ltd. (hereinafter referred to
as ”Hailaide”), and paid in cash to acquire 14.99% shares of Hengli Chemical Fiber which were held by
Hegao investment. The issuance of shares mentioned above were verified by Ruihua Certified Public
Accountants (LLP) and issued capital verification reports Ruihua YanZi No.33030006 [2016]. After the
issuance of shares, the number of total outstanding shares of the Company increased to 2,574,114,642
shares;(4) The Company issued 251,572,300 shares by private placement to Jiangsu Soho Investment
Group Co. Ltd., Xiamen Xiangyu Co. ,Ltd. and other six specific investors to raise supporting funds for
this assets purchasing. The issuance of shares in above was verified by Ruihua Certified Public Ac-
countants (LLP) and issued capital verification reports Ruihua Yan Zi No.33030014 [2016]. After the
issuance of shares, the number of total outstanding shares of the Company increased to 2,825,686,942
shares.
On 31 January 2018, according to the ”Approval on Purchase of Assets by issuance of shares to Fan
Hongwei and others, and Raising of Supporting Funds by Hengli Petrochemical Co., Ltd.” (Zheng Jian
Xu Ke [2018] No.235) issued by China Securities Regulatory Commission, the Company implemented
the assets restructuring which included (1) The Company issued 1,719,402,983 shares by private
placement to Fan Hongwei, Hengneng Investment (Dalian) Co., Ltd. (hereinafter referred to
as ”Hengneng Investment”) and Hengfeng Investment (Dalian) Co., Ltd. (hereinafter referred to
as ”Hengfeng Investment”) to acquire 100% shares of Hengli Investment (Dalian) Co., Ltd. (hereinafter
referred to as ”Hengli Investment”) and 100% shares of Hengli Petrochemical (Dalian) Refining Co., Ltd.
(hereinafter referred to as ”Hengli Refining”). The share issuance mentioned above were verified by
Ruihua Certified Public Accountants (LLP) and issued capital verification reports Ruihua YanZi
No.33050001 [2018]. After the issuance of shares, the number of total outstanding shares of the Com-
pany increased to 4,545,089,925 shares; (2) The Company issued 507,700,000 shares by private
placement to Ping An Asset Management Co., Ltd., Beixin Ruifeng Fund Management Co., Ltd., and
other six specific investors to raise supporting funds for this assets purchasing. The share issuance
mentioned above were verified by Ruihua Certified Public Accountants (LLP) and issued capital verifica-
tion reports Ruihua Yan Zi No.33050002 [2018]. After the issuance of shares, the number of total out-
standing shares of the Company increased to 5,052,789,925 shares.
On 30 April 2019, the Company’s annual shareholders meeting of 2018 resolved the ”Proposal of the
Company’s profit distribution and conversion of capital reserve to share capital of 2018”. Based on the
total number of outstanding shares of 4,965,774,651 shares (being total shares of 5,052,789,925 shares
deducted by 87,015,274 share of stock repurchased), capital reserve is converted to share capital by
issuance of 0.4 shares for each share held by all shareholders and the total shares increased by
1,986,309,861 shares. Share registration date was 26 June 2019. After the increment in shares, the
number of total outstanding shares of the Company increased to 7,039,099,786 shares.
The primary organizational structure of the Company: In accordance with the provisions of national laws
and regulations and the Company's articles of association, a standardized multi-level governance struc-
ture consisting of shareholders’ general meeting, the board of directors, the board of supervisors and
the management has been established; the board of directors has strategy committee, audit committee
and remuneration committee, nomination committee and the board office. The Company has sales de-
partment, purchasing department, general manager's office, personnel department, production depart-
ment, quality control department, finance department, securities department and other major functional
departments.
The Company and its subsidiaries are mainly engaged in petrochemical business, producing and selling
petroleum products, intermediate petrochemical products, and synthetic fibers.
The financial statements and notes to the financial statements have been approved to issue by the
Eleventh meeting of Eighth session of Board of Directors on 16 April 2020.
(2) Scope of consolidation
There are total 41 subsidiaries in the scope of consolidation of the Company in 2020. Details refer to
Note VII ”Interests in other entities”. Comparing with previous year, the scope of consolidation of the
Company increased 16 entities and there was no deregistration and transfer of entities, details refer to
Note VI ”Changes in scope of consolidation”.
II. Basis of preparation of financial statements
(1) Basis of preparation
The financial statements of the Company are prepared on going concern basis and in compliance with
Accounting Standards for Business Enterprises and guidelines, interpretations and other related provi-
sions promulgated by the Ministry of Finance (collectively,” Accounting Standards for Business Enter-
prises”). In addition, the Company also discloses relevant financial information according to Information
Disclosures Regulations for Companies that Offering Shares in Public No.15 - General Provision of Pre-
paring Financial Report (revised in 2014) issued announced by China Securities Regulatory Commis-
sion.
(2) Evaluation of ability of going concern
The Company has no events or circumstances that have caused significant doubts about the assump-
tion of going concern within 12 months after the end of the reporting period.
III. Significant accounting policies and accounting estimates
The Company and its subsidiaries determines certain specific accounting policies and accounting esti-
mates for impairment of receivables, depreciation of fixed assets, amortization of intangible assets and
revenue recognition according to the characteristics of the production and operation. Specific account-
ing policies refer to Note III.12, Note III.18, Note III.21 and Note III.28.
(1) Statement of compliance with Accounting Standards for Business Enterprises
The financial statements have been prepared in compliance with the Accounting Standard for Business
Enterprises to truly and completely reflect the Company’s financial positions, operating results and cash
flows.
(2) Accounting period
The financial year of the Company is from 1 January to 31 December of each calendar year.
(3) Operating cycle
The normal business cycle refers to the period from the purchase of assets for processing to the realiza-
tion of cash or cash equivalents. The Company considers 12 months as an operating cycle and apply it
as a standard for the liquidity of assets and liabilities.
(4) Functional currency
The Company and domestic subsidiaries use Renminbi (“RMB”) as functional currency. Overseas sub-
sidiaries of the Company determine its functional currency as US dollar in accordance with its primary
economic environment of the business location and converted into RMB in preparation of consolidated
financial statements.
The financial statements of the Company have been prepared in RMB.
(5) Business combinations
A business combination is a transaction or event that brings together two or more separate entities into
one reporting entity. Business combinations are classified into business combinations involving enter-
prises under common control and business combinations not involving enterprises under common con-
trol.
1. Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which
all of the combining enterprises are ultimately controlled by the same party or parties both before and
after the combination, and that control is not transitory.
Assets acquired and liabilities assumed by acquirer in the business combination are measured at their
carrying amounts of the acquiree in the consolidated financial statements of the ultimate controlling par-
ty at the combination date, except for adjustments due to different accounting policies. The difference
between the carrying amount of the consideration paid for the combination (or total par value of shares
issued) and the carrying amount of the net assets acquired is adjusted to capital reserve. If the capital
reserve is not sufficient to absorb the difference, any excess is adjusted to retained earnings.
Business combinations involving entities under common control achieved in stages and involved multi-
ple transactions, the difference between the carrying amount of the net assets acquired and the sum of
carrying amount of investment prior to combination date and carrying amount of new considerations
paid for the combination at the combination date is adjusted to capital reserve. If the capital reserve is
not sufficient to absorb the difference, any excess is adjusted against retained earnings. The profit or
loss, other comprehensive income and changes in other owner’s equity recognized by the acquirer dur-
ing the period from the later of initial investment date and the date that the acquirer and acquiree both
under common ultimate control to the combination date are offset the opening retained earnings or profit
for loss for the current period in the comparative statements, except for other comprehensive income
arising from the remeasurement of the net benefit or net asset change of the defined benefit plan by the
investee.
2. Business combinations involving enterprises not under common control
A business combination involving enterprises not under common control is a business combination in
which all of the combining enterprises are not ultimately controlled by the same party or parties both
before and after the business combination.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifi-
able net assets, the difference is recognized as goodwill. Where the cost of combination is less than the
acquirer’s interest in the fair value of the acquiree’s identifiable net assets, firstly the acquirer shall reas-
sess the measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent
liabilities and measurement of the cost of combination, and then if the cost of combination is still less
than the acquirer’s interest in the fair values of the acquiree’s identifiable net assets after that reas-
sessment, the acquirer shall recognize the remaining difference immediately in profit or loss for the cur-
rent period.
If, at the date of combination or the end of the current period, due to various factors, the fair value of
each asset paid as consideration for the combination or the fair value of the identifiable assets and lia-
bilities of the purchased party is obtained during the combination cannot be reasonably determined, the
Company calculates the value of business combination based on the temporarily determinable value. If,
within the 12 months after acquisition, additional information can prove the existence of related infor-
mation at acquisition date and the contingent consideration need to be adjusted, it is deemed to happen
on the date of combination and retrospectively adjusted. Any adjustment of consideration for the combi-
nation or value of identifiable assets or liabilities made after 12 months of combination, the adjustment
should follow Accounting Standard for Business Enterprise No.28 – Changes in accounting policies,
accounting estimates and correction of error.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with
the conditions applied for recognition of deferred income tax, if, within the 12 months after acquisition,
additional information can prove the existence of related information at acquisition date and the ex-
pected economic benefits on the acquisition date arising from deductible temporary difference by the
acquiree can be achieved, relevant income tax assets can be recognized, and goodwill can be adjusted
accordingly. If the goodwill is not sufficient, the difference is recognized as profit or loss for the current
period. Apart from above, the differences is taken into profit or loss of the current period if the recogni-
tion of deferred income tax assets is related to the business combination.
For business combinations involving entities not under common control achieved in stages that involves
multiple transactions, the Company determine whether the multiple transactions belongs to a single
transactions in accordance with accounting standards. If the terms, conditions and economic impact of
the disposal comply with any cases as following, the multiple transactions should be accounted as if a
single transaction.① These transactions are concluded simultaneously or affected by each other.②
To reach a complete business results, these transactions is as a whole. ③ Whether one transaction
happening or not is up to another transaction.④ To assess one transaction separately is not economi-
cal but assess along with other transactions, they are economically justified.
In a business combination achieved in stages and considered as a single transaction, the transactions
should be regard all as one acquisition. For those cannot be considered as a single transaction, the
combination cost is the sum of consideration paid at acquisition date and fair value of the acquiree's
equity investment held prior to acquisition date; the cost of equity of the acquiree held prior to acquisi-
tion date shall be re-measured at the fair value at acquisition date, the difference between the fair value
and the carrying amount shall be recognized as investment income or loss for the current period. Other
comprehensive income and changes of investment equity related with acquiree's equity held prior to
acquisition date shall be transferred to investment profit or loss for current period at acquisition date,
besides there is other comprehensive income incurred by the changes of net assets or net liabilities due
to the remeasurement of defined benefit plan.
3. Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services, valuation
advisory, and other administrative expenses, are recorded in profit or loss for the current period when
incurred. The transaction costs of equity or debt instruments issued as the considerations of business
combination are included in the initial recognition amount of the equity or debt instruments.
(6) Basis of preparation of consolidated financial statements
1. Scope of consolidated financial statements
The scope of consolidated financial statements is determined on the basis of control. Control exists
when the Company has power over the investee; is exposed, or has rights to variable returns from its
involvement with the investee; and has the ability to use its power to affect its returns. A subsidiary is an
entity that is controlled by the Company (including enterprise, a portion of an investee as a deemed
separate entity, and structured entity controlled by the enterprise).
2. Preparation of the consolidated financial statements
The consolidation scope of consolidated financial statements is determined on the basis of control, in-
cluding the financial statements of the Company and all of its subsidiaries. In preparing consolidated
financial statements, subsidiaries adopt the same accounting period and accounting policies as those of
the Company.
All assets, liabilities, interests, income, fees and cash flows resulting from intra-group transactions are
eliminated on consolidation in full.
Where a subsidiary or business has been acquired through a business combination involving enterpris-
es under common control in the reporting period, the subsidiary or business is deemed to be included in
the consolidated financial statements from the date they are controlled by the ultimate controlling party.
Their operating results and cash flows are included in the consolidated income statement and consoli-
dated cash flow statement respectively from the date they are controlled by the ultimate controlling party.
During the reporting period, the opening balance of the consolidated balance sheet was being adjusted,
and the related items of the comparative statement were being adjusted as if the reporting entity has
exercised control since the time when the ultimate controlling party began to control.
Where a subsidiary has been acquired through a business combination involving entities not under
common control, the opening balances of the consolidated balance sheet shall not be adjusted for the
subsidiary or the business, the subsidiary's revenue, expenses and profit shall be included in the con-
solidated income statement, and cash flows shall be included in the consolidated cash flow statement
from the acquisition date to the end of the reporting date.
The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under
shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or
loss of subsidiaries for the period attributable to minority interest is presented in the consolidated in-
come statement under the profit or loss attributable to minority interest. When the amount of loss at-
tributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the
opening balance of owners’ equity of the subsidiary, the excess amount shall be allocated against mi-
nority interest.
3. Acquiring minority interests of subsidiary and disposal of interests in subsidiary without losing control
Where the Company acquires a minority interest from a subsidiary’s minority shareholders or disposes
of a portion of an interest in a subsidiary without a change in control, the transaction is treated as equity
transaction, and the book value of shareholder’s equity attributed to the Company and to the minority
interest is adjusted to reflect the change in the Company’s interest in the subsidiaries. The difference
between the proportion interests of the subsidiary’s net assets being acquired or disposed and the
amount of the consideration paid or received is adjusted to the capital reserve (share premium) in the
consolidated balance sheet, with any excess adjusted to retained earnings.
4. Losing control over the subsidiary
When the Company disposes of a subsidiary, the income, expenses, and profit of the subsidiary from
the beginning of current period to the disposal date are included in the consolidated income statement;
the cash flows of the subsidiary from the beginning of current period to the disposal date is included in
the consolidated cash flow statement. For the loss of control over a subsidiary due to disposal of a por-
tion of the equity investment or other reasons, the remaining equity is measured at fair value on the date
when the control is lost. The difference arising from the sum of consideration received for disposal of
equity interest and the fair value of remaining equity interest over the share of net assets of the former
subsidiary calculated continuously since the purchase date based on the shareholding percentage be-
fore disposal are recognised as investment income in the period when the control is lost. Other compre-
hensive income related to equity investment in the subsidiary is accounted for on the same accounting
treatment as direct disposal of relevant asset or liability by the acquiree at the time when the control is
lost (i. e. to be transferred to investment income, except for the changes arising from remeasuring net
assets or net liabilities of defined benefit plan of the subsidiary using the equity method). The remaining
equity interests are measured subsequently according to ”Accounting Standard for Business Enterprises
No.2 – Long-term Equity Investments” or ”Accounting Standard for Business Enterprises No.22 –
Recognition and Measurement of Financial Instruments”. See Note III.16”Long-term equity investments”
or Note III.9”Financial instruments” for details.
5. Disposal of equity investment by stage-up until losing control
When the Company disposes of equity investment in a subsidiary by a stage-up approach with multiple
transactions until the control over the subsidiary is lost, it shall determine whether these multiple trans-
actions related to the disposal of equity investment in a subsidiary until the control over the subsidiary is
lost belong to ”A single transaction”.
For those arrangements qualified as a single transaction, the carrying amount of long-term equity in-
vestments relating to each transaction of disposal is derecognized, the difference between the consid-
eration received and the carrying amount of disposed long-term equity investments is recognized as
other comprehensive income, and finally is recognized in profit or loss for the current period at the date
of losing control.
For those arrangements are not regarded as a single transaction，the accounting treatment shall follow
“disposal of interests in subsidiary without losing control” and “for the loss of control over a subsidiary
due to disposal of a portion of the equity investment or other reasons” as appropriate. The difference
between each consideration received and the share of carrying value of net assets in proportion to dis-
posed portion of shareholding percentage in the subsidiary is recognized in capital reserve as an equity
transaction. Capital reserve is not transferred to profit or loss for the current period when losing control.
(7) Recognition criteria of cash and cash equivalents
Cash as presented in cash flow statement refers to cash on hand and deposit on demand for payment.
Cash equivalents refer to short-term (generally refers to the expiration within 3 months from the pur-
chase date), highly liquid investments that can be readily converted to cash and that are subject to an
insignificant risk of changes in value.
(8) Foreign currency transactions and translation of financial statements prepared in foreign currencies
1. Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company at the spot
exchange rates (as announced by the People’s Bank of China) on the dates of the transactions. How-
ever, the Company’s foreign currency exchange business or transactions involving foreign currency
conversion are converted into the amount of the recording currency according to the actual exchange
rate.
2. Translation of financial statements prepared in foreign currencies
At the balance sheet date, foreign currency monetary items are translated using the spot exchange
rates at the balance sheet date. All the resulting exchange differences are taken to profit or loss, except
for (1) those relating to foreign currency borrowings specifically for acquisition and construction of as-
sets qualified for capitalisation, which are capitalised in accordance with the principle of capitalisation of
borrowing costs; (2) non-monetary foreign currency items are designated as part of the hedge of the
Company’s net investment of a foreign operation are recognised in other comprehensive income until
the net investment is disposed of, at which the cumulative amount is reclassified to the profit or loss for
the current period; and (3) non-monetary foreign currency items measured at historical cost shall still be
translated at the spot exchange rates prevailing on the transaction dates, while the amounts denomi-
nated in the functional currencies do not change.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot ex-
change rates prevailing on the transaction dates, while the amounts denominated in the functional cur-
rencies do not change. Non-monetary foreign currency items measured at fair value are translated at
the spot exchange rates prevailing on the date on which the fair values are determined. The resulting
exchange differences are recognised in profit or loss or as other comprehensive income for the current
period, depending on the nature of the non-monetary item.
3. Translation of foreign currency financial statements
The financial statements denominated in foreign currency of a foreign operation are translated to RMB
in compliance with the following requirements: assets and liabilities on the balance sheet are translated
at the spot exchange rate prevailing at the balance sheet date; owner’s equity items except for “undis-
tributed profits” are translated at the spot exchange rates at the dates on which such items arose; in-
come and expenses items in the income statement are translated at the average exchange rate for the
period in which the transaction occurred. The undistributed profits brought forward are reported at the
prior year’s closing balance; the undistributed profits as at the end of the year are presented after trans-
lated the profit appropriation items; differences between the aggregate of asset and liability items and
owners’ equity items are recognised as ”translation differences arising on the translation of financial
statements denominated in foreign currencies” in other comprehensive income. On disposal of foreign
operations and loss of control, exchange differences arising from the translation of financial statements
denominated in foreign currencies related to the disposed foreign operations which has been included in
owners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in proportionate
share in the period in which the disposal took place.
Items of the cash flow statement are translated using the spot exchange rate when it incurs. Effects
arising from changes of exchange rates on cash and cash equivalents is presented separately as ”Effect
of changes in exchange rates on cash and cash equivalents” in the cash flow statement.
(9) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial
liability or equity instrument of another enterprise. Financial instruments include financial assets, finan-
cial liabilities and equity instruments.
1. Classification, recognition and measurement of financial assets
(1) Recognition and initial measurement of financial assets and liabilities
Financial asset or financial liability will be recognised when the Company became one of the parties
under a financial instrument contract. For the purchase or sale of financial assets in a conventional way,
the Company recognizes the assets received and liabilities assumed on the transaction day, or derec-
ognized the assets sold on the transaction day and recognizes the disposal gains or losses and receiv-
ables from the buyer at the same time.
Financial assets and liabilities are measured at fair value upon initial recognition. For financial assets
measured at fair value through profit or loss, relevant transaction costs are directly recognised in profit
or loss for the period. For other categories of financial assets and liabilities, relevant transaction costs
are included in the amount initially recognised. Accounts receivable without significant financing compo-
nent are initially recognised based on the transaction price expected to be entitled by the Company (see
Note III(28) ).
(2) Classification and measurement of financial assets
The Company classifies the financial assets according to the business model for managing the financial
assets and characteristics of the contractual cash flows as follows: financial assets measured at amor-
tised cost, financial assets measured at fair value through other comprehensive income, and financial
assets measured at fair value through profit or loss. .
1) Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions:①The Com-
pany’s business model for managing such financial assets is to collect contractual cash flows;② The
contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are measured at amortised cost using the effec-
tive interest method. A gain or loss on a financial asset that is measured at amortised cost shall be rec-
ognised in profit or loss for the current period when the financial asset is derecognised, amortised using
the effective interest method or with impairment recognised.
For financial assets at amortized costs, it is recognized on the initially recognized amount adjusted by:
(1) after deducting the already paid principal; (2) after multiplying or subtracting the accumulative
amount of amortization incurred from amortizing the balance between the initially recognized amount
and the amount of the maturity date by employing the actual interest rate method; and (3) after deduct-
ing the impairment losses that have actually incurred (applicable to financial assets only).
The effective interest method refers to the method whereby the post-amortization costs and the interest
incomes of different installments or interest expenses are calculated according to the effective interests
of the financial asset or financial liabilities (including a set of financial assets or financial liabilities). The
effective interest refers to the interest rate used to cash the future cash flow of a financial asset or finan-
cial liability within the predicted term of existence or within a shorter applicable term into the current car-
rying amount of the financial asset or financial liability. When determining the effective interest, the fu-
ture cash flow shall be predicted on the basis of taking into account all the contractual stipulations con-
cerning the financial asset or financial liability (including the right to repay the loans ahead of schedule,
call options, similar options, etc. ), but the future credit losses shall not be taken into account.
The Company recognizes interest income based on the calculation of financial asset book balance mul-
tiplied by the effective interest rate, except for the following circumstances:① For purchased or origi-
nated financial assets that have incurred credit impairment, from the initial recognition, their interest
income is determined on the financial asset amortization costs and credit-adjusted effective interest
rates;② For the purchased or originated financial assets without credit impairment, but become credit
impaired in the subsequent period, the interest income is determined according to the amortized cost
and effective interest rate of the financial asset. If the financial instrument has no credit impairment due
to the improvement of its credit risk in the subsequent period, and this improvement can be objectively
related to an event that occurs after the application of the above regulations, interest income should be
determined by multiplying the effective interest rate and the financial asset book balance.
2) Financial assets measured at fair value through other comprehensive income
financial asset is classified as measured at fair value through other comprehensive income if it meets
both of the following conditions:①The Company’s business model for managing such financial assets
is achieved both by collecting collect contractual cash flows and selling such financial a.② The con-
tractual terms of the financial asset stipulate that cash flows generated on specific dates are solely
payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interest
calculated using the effective interest method, impairment losses or gains and foreign exchange gains
and losses are recognised in profit or loss for the current period, and other gains or losses are recog-
nised in other comprehensive income. On derecognition, the cumulative gain or loss previously recog-
nised in other comprehensive income is reclassified from other comprehensive income to profit or loss.
For non-trading equity instrument investment, the Company can irrevocably designate the financial as-
sets measured at fair value through other comprehensive income. Such designation is made on individ-
ual basis of each non-trading equity instrument investment which also qualified as equity instruments in
the issuer’s perspective. Subsequent to such designation, dividend (except for return of portion of in-
vestment costs) is recognized as profit or loss for the current period, other gains or losses (including
exchange gain or loss) are recognized in other comprehensive income. On derecognition, the cumula-
tive gain or loss previously recognised in other comprehensive income is reclassified from other com-
prehensive income to profit or loss.
3) Financial assets measured at fair value through profit or loss
The Company classifies the financial assets other than those measured at amortised cost and meas-
ured at fair value through other comprehensive income as financial assets measured at fair value
through profit or loss. Upon initial recognition, the Company irrevocably designates certain financial as-
sets that are required to be measured at amortised cost or at fair value through other comprehensive
income as financial assets measured at fair value through profit or loss in order to eliminate or signifi-
cantly reduce accounting mismatch.
Subsequent to initial recognition, such financial assets are subsequently measured at fair value, any
differences are gains or losses recorded in profit or loss for the current year.
(3) Classification and measurement of financial liabilities
The Company’s financial liabilities includes financial liabilities measured at fair value through profit or
loss, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition
or continuing involvement, financial guarantee contracts and financial liabilities at amortized cost.
1) Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss includes trading financial liabilities (in-
cluding financial liabilities with embedded derivatives) and designated financial liabilities measured at
fair value through profit or loss. In a business combination involving enterprises not under common con-
trol, if the Company, as a buyer, recognizes a financial liability from the contingent consideration, the
financial liability shall be accounted for at fair value through profit or loss.
After initial recognition, financial liabilities measured at fair value through profit or loss are subsequently
measured at fair value. Any gains or losses generated are recognized in profit or loss for the current
period.
The amount of change in fair value of designated financial liabilities measured at fair value through profit
or loss due to changes in the Company’s own credit risk is included in other comprehensive income
unless the treatment causes or expands accounting mismatches in profit or loss. Other changes in fair
value of this financial liability are included in profit or loss for the current period. Upon derecognition, the
accumulated gains or losses previously included in other comprehensive income are transferred out of
other comprehensive income and included in retained earnings.
2) Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or
continuing involvement
Such financial liabilities are measured in according to the accounting policies of Note III.9 Transfer of
financial assets.
3) Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reim-
burse the contract holder for a loss the holder incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are not belonging to the above 1) or 2), they are subsequently measured
at the higher of the following:① the amount of loss provision determined according to the impairment
method of financial instruments in Note III. (9) 5;② the balance of the initial recognition amount after
deducting the accumulated amortization amount determined in accordance with the income recognition
method of Note III. (28).
4) Financial liabilities at amortized cost
Apart from the above 1), 2) or 3), the Company classifies the remaining financial liabilities as financial
liabilities at amortized cost.
Such financial liabilities are measured at amortized cost using the effective interest rate method after
initial recognition, and the resulting gains or losses are included in profit or loss for the current period
when they are derecognized or amortized in accordance with the effective interest rate method.
(4) Equity instruments
Equity instruments refer to contracts that can prove the ownership of the Company's remaining equity in
assets after deducting all liabilities. The Company issues (including refinancing), repurchases, sells or
cancels Equity instruments as a change in equity. Transaction costs related to equity transactions are
deducted from equity. The Company's various distributions to equity instruments holders (excluding
stock dividends) reduce shareholder equity. The Company does not recognise the fair value changes of
equity instruments.
(5) Derivative instruments and embedded derivative instruments
Derivative financial instruments include forward exchange contract, currency exchange rate swap
agreement, interest rate swap agreement and foreign currency option contract etc. Derivative financial
instruments are initially measured at the fair value of the date a derivative contract entered into and
subsequently measured at their fair value. Any gains or losses arising from changes in fair value are
directly recognized to profit or loss for the current period.
Embedded derivatives refer to derivatives embedded in non-derivatives (ie, host contracts). For the hy-
brid contract composed of embedded derivatives and the host contract, if the host contract is a financial
asset, the Company does not split the embedded derivative from the hybrid contract, but applies the
hybrid contract as a whole to the Company's accounting policies in classification of financial assets. If
the host contract included in the hybrid contract is not a financial asset and meets the following condi-
tions at the same time, the Company will split the embedded derivative from the hybrid contract and
treat it as a separate derivative:
1) The economic characteristics and risks of embedded derivatives are not closely related to the eco-
nomic characteristics and risks of the host contract.
2) A separate instrument with the same terms as the embedded derivative meets the definition of deriva-
tive.
3) The hybrid contract is not measured at fair value and its changes are included in profit or loss for the
current period for accounting treatment.
If the embedded derivative is split from the hybrid contract, the Company will account for the host con-
tract of the hybrid contract in accordance with the applicable accounting standards. If the Company
cannot reliably measure the fair value of the embedded derivative according to the terms and conditions
of the embedded derivative, the fair value of the embedded derivative is determined based on the differ-
ence between the fair value of the hybrid contract and the fair value of the host contract. After using the
above method, if the fair value of the embedded derivative on the acquisition date or the subsequent
balance sheet date cannot be measured separately, the Company designates the hybrid contract as a
whole as financial assets at fair value through profit or loss.
2. Recognition and measurement of transfer of financial assets
Transfer of financial assets refers to the transference or deliverance of financial assets (or its cash flows)
to the other party (the transferee) other than the issuer of financial assets. The derecognition of financial
assets means that the Company transfers the previously recognized financial assets from its balance
sheet.
The financial assets that meet one of the following conditions will be derecognized by the Company: (1)
the contractual right to receive cash flows of the financial asset is expired; (2) the financial asset has
been transferred, and almost all risks and rewards of ownership of the financial asset transferred to the
transferee; (3) the financial asset has been transferred by the Company foregone the control of the fi-
nancial assets although the Company has neither transferred nor retained almost all the risks and re-
wards of ownership of the financial asset.
If the Company neither transfers nor retains almost all the risks and rewards of ownership of financial
assets, and retains control of the financial assets, it will continue to recognize the relevant financial as-
sets to the extent that they are continuing to be involved in the transferred financial assets and recog-
nises the relevant liabilities. The degree of continuing involvement in the transferred financial assets
refers to the level of risk on the exposed impact in changes in value of financial asset to the Company.
If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference be-
tween the amounts of the following two items are included in profit or loss: (1) the carrying amount of the
transferred financial asset as of the date of derecognition; (2) the sum of consideration received from
the transfer of the financial asset, and the accumulative amount of the changes of the fair value original-
ly included in other comprehensive income proportionate to the transferred financial asset (financial
assets transferred refer to debt instrument investments at fair value through other comprehensive in-
come). If the transfer of financial asset partially satisfies the conditions to derecognition, the entire carry
amount of the transferred financial asset is, between the portion which is derecognized and the portion
which is not, apportioned according to their respective relative fair value, and the difference between the
amounts of the following two items are included into profit or loss: (1) the carrying amount of the portion
which is derecognized; (2) the sum of consideration of the portion which is derecognized, and the por-
tion of the accumulative amount of the changes in the fair value originally included in other comprehen-
sive income which is corresponding to the portion which is derecognized (financial assets transferred
refer to debt instrument investments at fair value through other comprehensive income). For non-trading
equity instruments designated by the Company to be measured at fair value and whose changes are
included in other comprehensive income, if the whole or part of the transfer meets the conditions for
derecognition, the difference calculated according to the above method is included in retained earnings.
3. Conditions for derecognition of financial liabilities
If the current obligation of a financial liability (or part of it) has been discharged, the Company derecog-
nizes the financial liability (or part of it). If the Company (borrower) and the lender sign an agreement to
replace the original financial liability by assuming a new financial liability, and the contract terms of the
new financial liability and the original financial liability are substantially different, the original financial
liability is derecognized and a new financial liability is recognized simultaneously. If the Company makes
substantial amendments to the original financial liabilities (or part of them) contract terms, the original
financial liabilities shall be derecognized, and a new financial liability shall be recognized in accordance
with the revised terms.
If the financial liability (or part of it) is derecognized, the Company shall include the difference between
its book value and the consideration paid (including non-cash assets transferred out or liabilities as-
sumed) into profit or loss for the current period. If the Company repurchases part of its financial liabilities,
the book value of the financial liabilities as a whole will be allocated according to the proportion of their
respective fair values at the repurchase date and the total fair value at the repurchase date. The differ-
ence between the book value allocated to the derecognized portion and the consideration paid (includ-
ing non-cash assets transferred out or liabilities assumed) is included in profit or loss for the current
period.
4. Determination of the fair value of financial instruments
For the method for determining the fair value of financial assets and financial liabilities, see Note III. (10).
5. Impairment of financial instruments
The Company accounts for impairment financial assets at amortised cost, debt instrument investment at
fair value through other comprehensive income, lease receivables and financial guarantee contracts as
mentioned in Note III (9) 1(3) 3. ECLs are the weighted average of credit losses of financial instruments
weighted by the risk of default. Credit losses refer to the difference between all contractual cash flows
receivable according to the contract and discounted according to the original effective interest rate and
all cash flows expected to be received, i. e. the present value of all cash shortages.
For purchased or originated financial assets that have suffered credit impairment, the Company only
recognizes the cumulative changes in expected credit losses for the entire duration of the period since
initial recognition as loss provisions on the balance sheet date.
For purchased or originated financial assets that have suffered credit impairment, the Company only
recognizes the cumulative changes in expected credit losses for the lifetime period since initial recogni-
tion as loss allowance in the balance sheet date.
For the receivables and lease receivables arised from transactions under ”Accounting Standards for
Business Enterprises No.14-Revenue”, the Company uses a simplified measurement method to meas-
ure the loss allowance based on the expected credit loss during the lifetime period.
For financial instruments other than the above measurement methods, the Company measures loss
allowance in accordance with the general method and assesses on each balance sheet date whether its
credit risk has increased significantly since initial recognition. If the credit risk has increased significantly
since the initial recognition, the Company measures the loss allowance based on the amount of ex-
pected credit loss throughout the lifetime; if the credit risk has not increased significantly since the initial
recognition, the Company will predict the credit loss of the financial instruments within the next 12
months and recognize the loss allowance.
The expected credit loss for lifetime period refers to the expected credit loss caused by all possible de-
fault events during the entire expected duration of the financial instrument. Expected credit loss in the
next 12 months refers to the event of financial instrument default that may occur within 12 months after
the balance sheet date (if the expected duration of the financial instrument is less than 12 months, then
the expected duration) which is a portion of expected credit losses for the entire duration.
The Company considers all reasonable and reliable information, including forward-looking information,
by comparing the risk of default of a financial instrument on the balance sheet date with the risk of de-
fault on the initial recognition date to determine the relative changes in default risk of the financial in-
strument during the expected lifetime and to assess whether the credit risk of financial instruments has
increased significantly since initial recognition. For financial instruments that cannot obtain sufficient
evidence of a significant increase in credit risk at a reasonable cost at the level of individual instruments,
the Company considers whether the credit risk has increased significantly on a portfolio basis. If the
Company determines that a financial instrument has only a low credit risk on the balance sheet date, it
is assumed that the credit risk of the financial instrument has not increased significantly since initial
recognition.
The Company remeasures the expected credit losses on each balance sheet date, and the resulting
increase or reversal of the loss allowance is included in profit or loss for the current period as an im-
pairment loss or gain. For financial assets measured at amortised cost, the loss allowance offsets the
book value of the financial asset presented in the balance sheet; for debt instrument investments meas-
ured at fair value through other comprehensive income, the Company recognises loss allowance in oth-
er comprehensive income and does not offset the book value of the financial asset presented in the
balance sheet.
6. Offset of financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is
a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis or realize the asset and settle the liability simultaneously. Otherwise, financial assets and financial
liabilities are separately shown in the balance sheet and not allowed to offset.
(10) Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The Company’s relevant assets and
liabilities are measured at fair value based on the presumption that the orderly transaction to sell the
asset or transfer the liability takes place in the principal market for the relevant asset or liability, or in the
absence of a principal market, in the most advantageous market for the relevant asset or liability. The
principal market (or the most advantageous market) must be accessible by the Company at the meas-
urement date.
The Company uses valuation techniques that are applicable in the current situation and have sufficient
available data and other information to support it, taking into account a market participant’s ability to
generate economic benefits by using the asset in its best use or by selling it to another market partici-
pant that would use the asset in its best use, prioritizes the use of relevant observable input values, and
uses unobservable input values only when observable input values are not available or are not feasible
to obtain.
For assets and liabilities measured or disclosed at fair value in the financial statements, the fair value
hierarchy to which they belong is determined based on the lowest level input value that is important to
fair value measurement as a whole: the Level 1 input value is the unadjusted quoted prices of the same
assets or liabilities obtained in the active market; the Level 2 input value is the directly or indirectly ob-
servable input value of the relevant asset or liability except the Level 1 input value, including: quoted
prices for similar assets or liabilities in active market; quoted prices for identical or similar assets or lia-
bilities in inactive markets; observable input values other than quoted prices, such as observable bene-
fits and yield curves during normal quote intervals; Level 3 input values is the unobservable input value
of the related assets or liabilities, including interest rates that cannot be directly observed or cannot be
verified by observable market data, stock volatility, future cash flows of the disposal obligations under-
taken in the business combination, and finance forecast made using its own data etc. On each balance
sheet date, the Company reassessed the assets and liabilities measured at fair value in the financial
statements to determine whether there is any transfer between different levels of fair value measure-
ment.
(11) Impairment of notes receivables
Determination method and accounting treatment of expected credit loss of bills receivable
The Company determines the expected credit losses of bills receivable according to the simplified
measurement method described in Note III (9) 5 and makes accounting treatment. On the balance
sheet date, the Company measures the credit loss of bills receivable based on the present value of the
difference between the contractual cash flow that should be received and the cash flow expected to be
received. When the expected credit loss information of a single bill receivable cannot be assessed at a
reasonable cost, the Company divides the bill receivable into several groups based on the characteris-
tics of credit risk. On the basis of referring to historical credit loss experience, combining the current
situation and considering forward-looking information, the Company estimates the expected credit loss
on group basis. The basis for determining the groups is as follows:
Name of group Determination basis
Bank acceptance bills group Acceptors are banks with low credit risk
Commercial acceptance bills group Acceptor are enterprises with high credit risk
(12) Impairment of accounts receivable
Determination method and accounting treatment of expected credit loss of accounts receivable
The Company determines the expected credit losses of accounts receivable and makes accounting
treatment in accordance with the simplified measurement method described in Note III(9) 5. On the bal-
ance sheet date, the Company measures the credit losses of accounts receivable based on the present
value of the difference between the contractual cash flow that should be received and the cash flow
expected to be received. When the expected credit loss information of a single accounts receivable
cannot be assessed at a reasonable cost, the Company divides the accounts receivable into several
groups based on credit risk characteristics. On the basis of referring to historical credit loss experience,
combining the current situation and considering forward-looking information, the Company estimates
expected credit losses on group basis. The basis for determining the groups is as follows:
Name of group Determination basis
Ageing group Accounts receivable with similar credit risk characteristics by
ageing
Group of related parties in the Receivables from related parties within the scope of consolida-
scope of consolidation tion have similar credit risk characteristics
Group of high credit rating Accounts receivable of Fortune 500 clients within credit term
(13) Impairment of receivables financing
The Company determines the expected credit losses of receivables financing and makes accounting
treatment in accordance with the general method described in Note III(9) 5. On the balance sheet date,
the Company measures the credit loss of receivables financing based on the present value of the differ-
ence between the contractual cash flow due and the expected cash flow received. When the expected
credit loss information of a single item of receivables financing cannot be assessed at a reasonable cost,
the Company divides receivables financing into several groups based on the characteristics of credit risk.
On the basis of referring to historical credit loss experience, combining the current situation and consid-
ering forward-looking information, the Company estimates the expected credit losses on group basis.
The basis for determining the groups is as follows:
Name of group Determination basis
Including bank acceptance bills with low credit risk, letters of
Group of low credit risk credit and other receivables financing with low credit risk char-
acteristics
(14) Impairment of other receivables
The Company determines the expected credit losses of other receivables and makes accounting treat-
ment in accordance with the general method described in Note III(9) 5. On the balance sheet date, the
Company measures the credit losses of other receivables based on the present value of the difference
between the contractual cash flow that should be received and the expected cash flow received. When
the expected credit loss information of single other receivables cannot be assessed at a reasonable
cost, the Company divides the other receivables into several groups based on the characteristics of
credit risk. On the basis of referring to the historical credit loss experience, combining the current situa-
tion and considering forward-looking information, the Company estimates on the expected credit losses
on group basis. The basis for determining the groups is as follows:
Name of group Determination basis
Ageing group Other receivables with similar credit risk characteristics by
ageing
Group of related parties in the Receivables from related parties within the scope of consolida-
scope of consolidation tion have similar credit risk characteristics
Group of related parties outside the Receivables from related parties outside the scope of consoli-
scope of consolidation dation have similar credit risk characteristics
Group of government receivables Other receivables such as government grants receivable and
various tax refunds have similar credit risk characteristics
(15) Inventories
1. Inventories include finished products or commodities held for sale in daily activities, in-process prod-
ucts in the production process, materials and materials consumed in the production process or the pro-
vision of labor services, in-transit materials and subcontracting processing materials.
2. The inventory obtained by the Company is measured at actual cost. (1) The cost of purchased inven-
tory is the purchase cost of the inventory, and the inventory cost obtained through further processing is
composed of the purchase cost and processing cost. (2) The book value of inventory obtained in settle-
ment under debt restructuring is determined on the fair value of the forfeited creditor's rights and the
relevant taxes and fees that can be directly attributed to the inventory when the inventory reaches the
current position and status. (3) Under the presumption that the exchange of non-monetary assets has
commercial substance and the fair value of the assets swapped in or out can be reliably measured, the
book value of inventory swapped in the exchange of non-monetary assets is usually determined on the
basis of the fair value of the assets swapped out, unless there is strong evidence that the fair value of
the swapped assets is more reliable; for non-monetary asset exchanges that do not meet the above
presumption, the book value of the swapped assets and related taxes payable are used as the cost of
swapped in inventory. (4) The inventory acquired by the combination of enterprises under common con-
trol is determined based on the book value of the acquiree; the inventories acquired by the combination
of enterprises not under common control are determined by the fair value.
3. The cost of inventories issued by enterprises is measured by the weighted average method.
4. Amortization method for low-value consumables and packaging materials
Low-value consumables are one-off amortized when taken for use.
Packaging materials are one-off amortized when taken for use.
5. On the balance sheet date, inventory is measured at the lower of cost and net realizable value. The
net realizable value of inventories is the amount after the estimated selling price of inventories minus the
estimated costs to be incurred to completion, the estimated selling expenses and related taxes. When
determining the net realizable value of inventories, based on the reliable evidence obtained, taking into
account the purpose of holding the inventory and the impact of events after the balance sheet date,
except for clear evidence that the market price on the balance sheet date is abnormal, the net realizable
value of inventory items at the end of the current period is determined on the basis of the market price
on the balance sheet date, of which:
(1) The inventory of finished goods, commodities and materials used for sale, such as commodities di-
rectly used for sale, is determined by the amount of the estimated selling price of the inventory minus
the estimated selling expenses and related taxes during normal production and operation ;
(2) For the inventory of materials that need to be processed, in the normal production and operation
process, the net realizable value is determined based on the estimated selling price of the finished
product minus the estimated cost at the time of completion, the estimated selling expenses and related
taxes. On the balance sheet date, if a part of the same inventory has a contract price agreement and
other parts do not have a contract price, the net realizable value is determined separately and com-
pared with its corresponding cost to determine the amount of provision for or reversal of decline in value
of inventory.
At period end, the provision for decline in value is calculated according to a single inventory item; but for
a large number of inventories with low unit prices, the provision for decline in value is calculated accord-
ing to the inventory category; For the product series produced and sold in the same region, has the
same or similar end user, and difficult to measure the inventory separately from other items, the provi-
sion for the decline in value in inventory is combined.
After accruing the provision for decline in value in inventory, if the factors that previously reduced the
value of the inventory have disappeared and the net realizable value of the inventory is higher than its
book value, it will be reversed within the original provision for decline in value, and reversal amount is
included in profit or loss for the current period.
6. The inventory system is a perpetual inventory system.
(16) Long-term equity investments
Long-term equity investments referred to in this section refer to Long-term equity investments that the
Company has control, joint control or significant influence over the investee, including equity invest-
ments in subsidiaries, joint ventures and associates.
1. Judgment criteria for joint control and significant influence
Joint control refers to the common control of an arrangement in accordance with the relevant agreement,
and related activities of the arrangement must be agreed upon by the parties sharing control rights be-
fore they can make decisions. If the Company and other joint venturers jointly exercise joint control over
the investee and jointly control the investee and have rights to the net assets of the investee, the inves-
tee is a joint venture of the Company. When judging whether there is joint control, the protective rights
enjoyed are not considered.
Significant influence refers to the power to participate in the decision-making of an enterprise's financial
and operating decisions, but it cannot control or jointly control the formulation of these policies with other
parties. If the Company can exert significant influence on the investee, the investee is an associate of
the Company. When determining whether it can exert significant influence on the invested unit, consider
that the investor directly or indirectly holds the voting shares of the invested unit and the current execut-
able potential voting rights held by the investor and other parties are assumed to be converted into the
investee, the impact includes the current convertible warrants, stock options and convertible corporate
bonds issued by the investee.
2. Determination of investment cost of long-term equity investments
(1) If the combination is formed under a business combination under common control, the merger party
pays cash, transfers non-cash assets, assumes debt or issues equity securities as the acquisition con-
sideration, and the share of owner’s equity of the acquiree on the consolidated financial statements of
the ultimate controlling party on the acquisition date as its initial investment cost. The difference be-
tween the initial investment cost of long-term equity investments and the cash paid, non-cash assets
transferred, the book value of the debt assumed or the total face value of the shares issued adjusts the
capital reserve; if the capital reserve is insufficient to offset, the retained earnings are adjusted. Step by
step acquisition of the equity of the acquiree under common control through multiple transactions, and
ultimately forming a business combination under common control, it should be treated separately as
whether ”A single transaction”: if it belongs to a ”A single transaction”, each transaction is treated collec-
tively as a single transactions on obtaining control rights.
If it does not belong to a ”A single transaction”, the initial investment costs of long-term equity invest-
ments is the share of the book value of the owner’s equity in the acquiree’s consolidated financial
statements. The difference between the cost and the book value of long-term equity investments before
the combination plus the book value of the new consideration paid for the shares on the acquisition date
is adjusted to the capital reserve; if the capital reserve is insufficient to offset, the retained earnings are
adjusted. The equity investment held before the acquisition date by equity method or other comprehen-
sive income recognized for other equity instruments investment is temporarily not subject to accounting
treatment.
(2) If a business combination is not formed under common control, the Company determines the combi-
nation cost as the initial investment cost of long-term equity investments according to the purchase date.
The combination cost is the fair value of the assets paid, liabilities incurred or assumed by the purchaser
to obtain control of the purchased party on the purchase date, and the equity securities issued. Over-
head expenses such as auditing, legal services, evaluation and consulting and other related Administra-
tive expenses incurred by the purchaser for the business merger are included in profit or loss for the
current period; The transaction cost of the equity securities or debt securities issued by the purchaser as
the combination consideration is included in the initial recognition amount of equity securities or debt
securities. The Company regards the contingent consideration stipulated in the acquisition agreement
as part of the transfer consideration for the business combination, and it is included in the cost of the
business combination according to its fair value on the date of purchase. For a business combination
not under common control that is realized step-by-step through multiple transactions, it is determined
whether the multiple transactions belong to a ”A single transaction” in accordance with the accounting
standards for the enterprise. In the case of a ”A single transaction”, each transaction is treated as a
whole transaction that obtains control. If it does not belong to a ”A single transaction”, the initial invest-
ment cost of long-term equity investments calculated based on the cost method shall be the sum of the
original holding equity amount of the acquiree’s equity investment plus the newly added investment cost;
If the equity is accounted for using the equity method, the relevant other comprehensive income will not
be accounted for temporarily; if the original equity investment is invested by other equity instruments,
the difference between the fair value and the carrying amount, and the cumulative fairness originally
included in other comprehensive income. The change in value is transferred to profit or loss for the cur-
rent period.
(3) Except for long-term equity investments formed by business combination, other equity investments
are initially measured at cost: if they are obtained by paying cash, the actual purchase price is used as
their initial investment cost; if they are obtained by issuing equity securities, they are stated at the fair
value of equity securities as its initial investment cost. The expenses directly related to the issuance of
equity securities are determined in accordance with the relevant provisions of Accounting Standards for
Enterprises No.37-Presentation of Financial Instruments. On the presumption that the fair value of the
commercial substance and swapped-in assets or swapped-out assets can be reliably measured, the
initial investment cost of long-term equity investments swapped in for non-monetary assets are based
on the fair value of swapped assets and related taxes payable, unless there is solid evidence that the
fair value of the swapped assets is more reliable; for non-monetary asset exchanges that do not meet
the above presumption, the carrying amount of the swapped assets and related taxes payable shall be
used as the Initial investment cost of long-term equity investments. The initial investment cost of long-
term equity investments obtained through debt restructuring is determined on the basis of the fair value
of the waived claims. The expenses, taxes and other necessary expenses directly related to the acquisi-
tion of long-term equity investments are also included in the investment cost.
For the additional investment that can exert significant influence on the invested unit or implement joint
control but does not constitute control, the cost of long-term equity investments is the original holding
determined in accordance with ”Accounting Standards for Business Enterprises No.22-Recognition and
Measurement of Financial Instruments”. The sum of the fair value of equity investment plus the newly
added investment cost is used as the initial investment cost under equity method. If the originally held
equity investment is classified as other equity instruments investment, the difference between its fair
value and carrying amount, and the cumulative fair value change originally included in other compre-
hensive income should be transferred to profit or loss the current period.
3. Subsequent measurement and recognition of profit or loss of long-term equity investments
(1) Long-term equity investments measured at cost
The Company uses the cost method to account for long-term equity investments in subsidiaries. Apart
from the cash dividends or profits declared but not yet paid that included in the acquisition of the in-
vestment, the Company recognizes the investment income in accordance with the cash dividends or
profits declared to be issued by the investee in the current period.
(2) Long-term equity investments under equity method
For long-term equity investments in associates and joint ventures, the equity method is used.
If the initial investment cost of long-term equity investments calculated by the equity method is greater
than the fair value share of the identifiable net assets of the investee when investing, the initial invest-
ment cost of long-term equity investments will not be adjusted; the initial investment cost of long-term
equity investments is less than the fair value share of the investee’s identifiable net assets at the time of
purchase, the difference should be included in profit or loss for the current period, while adjusting the
cost of long-term equity investments.
After acquiring long-term equity investments, if the accounting policy and accounting period adopted by
the investee are inconsistent with the Company, the financial statements of the investee shall be adjust-
ed according to the Company's accounting policies and accounting period, and recognize the invest-
ment gain or loss and other comprehensive income etc. The investment income and other comprehen-
sive income shall be the share of the net profit or loss and other comprehensive income of the investee,
and the carrying amount of long-term equity investments is adjusted; The Company recognizes its share
of the investee’s net profits or losses based on the fair values of the investee’s individual separately
identifiable assets at the time of acquisition, after making appropriate adjustments thereto in conformity
with the accounting policies and accounting periods of the Company.
According to the profits or cash dividends declared to be distributed by the investee, the carrying
amount of long-term equity investments is reduced accordingly; adjust the carrying amount of long-term
equity investments and include in owners' equity. The unrealized internal transaction gains and losses
that occur between the Company and associates and joint ventures are calculated based on the ratio
enjoyed by the Company and are offset, and investment income is recognized on this basis. Unrealized
internal transaction losses with the investee that belong to assets impairment loss are fully recognized.
When the Company confirms that it should share the losses of the investee, it will be processed in the
following order: First, offset the carrying amount of Long-term equity investments. Secondly, if the carry-
ing amount of long-term equity investments is not enough to offset, continue to recognise the investment
loss and offset the carrying amount of long-term receivable items to the limit of carrying amounts of oth-
er long-term equity that substantially constitute net investment in the investee. After the above-
mentioned treatment, if the Company still undertakes additional obligations according to the investment
contract or agreement, the estimated liabilities shall be recognized according to the obligations assumed
and included in the current investment losses. If the investee realizes a net profit in a later period, the
Company resumes the recognition of the profit sharing amount after the income makes up for the un-
recognized loss sharing amount.
During the period of holding the investment, the investee is included in the consolidated financial state-
ments based on the amount attributable to the investee in the consolidated financial statements' net
profit, other comprehensive income and changes in other owners ’equity.
If the Company’s assets invested in joint ventures and associates constitute a business, and the inves-
tor acquires long-term equity investments but does not obtain control, the fair value of the investment
business is used as the initial basis for the new investment cost of long-term equity investments. The
difference between the initial investment cost and the carrying amount of the invested business is in-
cluded in profit or loss for the current period. If the assets sold by the Company to a joint venture or an
associate constitute a business, the difference between the consideration received and the carrying
amount of the business shall be included in profit or loss for the current period. If the assets purchased
by the Company from associates and joint ventures constitute business, they shall be accounted for in
accordance with the provisions of ”Accounting Standards for Business Enterprises No.20-Business
Combinations”, and the profits or losses related to the transaction shall be fully recognised.
4. Disposal of long-term equity investments
For the disposal of Long-term equity investments, the difference between the Carrying amount and the
actual consideration received shall be included in profit or loss for the current period.
(1) Disposal of long-term equity investments under equity method
For long-term equity investments that are accounted for using the equity method, if the remaining equity
after disposal is still accounted for using the equity method, when disposing of the investment, the same
basis as the investee directly disposes of related assets or liabilities shall be used and the relevant
share of other comprehensive income in the accounting treatment. Owners ’equity confirmed by the
investee in addition to changes in net profit and loss, other comprehensive income and profit distribution,
and owners’ equity are carried forward to profit or loss for the current period according to the sharing.
If the joint control or significant influence on the investee is lost due to the disposal of part of the equity
investment, etc., the remaining equity after disposal shall be accounted according to the financial in-
strument recognition and measurement standards. The difference between the fair value and carrying of
the day when the joint control or significant influence is lost the amount is included in profit or loss for
the current period. The other comprehensive income of the original equity investment confirmed by the
equity method of accounting shall be accounted for on the same basis as the investee ’s direct disposal
of related assets or liabilities when the equity method of accounting is terminated. Owners ’equity con-
firmed by the investee in addition to changes in Owners’ equity other than net profit and loss, Other
comprehensive income and profit distribution, all transferred to profit or loss for the current period when
the equity method of accounting is terminated.
When the Company can no longer exercise joint control of or significant influence over an investee due
to partial disposal of equity investment or other reasons, the remaining equity investment on the date of
losing joint control or significant influence is accounted for in accordance with Accounting Standard for
Business Enterprises No.22 - Recognition and Measurement of Financial Instruments and the difference
between the fair value and the carrying amount at the date of the loss of joint control or significant influ-
ence is charged to profit or loss for the current period. When the previously-held equity investment is
accounted for under the equity method, any other comprehensive income previously recognized are
accounted for on the same basis as if the Company directly disposes of the related assets or liabilities
for the current period upon discontinuation of the equity method. Owners’ equity recognized on the in-
vestee in addition to changes in owners’ equity other than net profit and loss, other comprehensive in-
come and profit distribution are transferred to profit or loss for the current period when the equity meth-
od of accounting is terminated.
(2) Disposal of long-term equity investments under cost method
Long-term equity investments that are accounted for using the cost method, and the remaining equity is
still accounted for using the cost method after disposal. Other comprehensive income recoginsed by
adopting equity method accounting or financial instrument recognition and measurement standard ac-
counting before obtaining control of the investee is treated on the same basis as the invested unit direct-
ly disposes of related assets or liabilities, and is treated according to share of profit or loss for the cur-
rent period. Changes in owners’ equity other than net profit and loss, other comprehensive income and
net profit distribution in the investee’s net assets recognized by the equity method of accounting are
carried forward to profit or loss for the current period according to the share.
When the Company can no longer exercise control over an investee due to dilution of shareholding by
issuance of new shares to other investors by the investee but the Company can still exercise joint con-
trol of or significant influence on the investee, the difference between the Company’s share of the in-
crement of net assets in investee by the new shareholding percentage after new share issuance and the
pro-rata portion of carrying value of long term equity investment for the decreased shareholding per-
centage is recognized in profit or loss in the current period. The remaining equity investment is account-
ed for equity method as if it was acquired since initial acquisition.
When the Company can no longer exercise control over an investee due to partial disposal of equity
investment or other reasons and the remaining equity investment after disposal can exercise joint con-
trol of or significant influence over an investee, the remaining equity investment is accounted for under
equity method and re-measured by equity method as if it has been acquired since date of acquisition.
Where the remaining equity investment can no longer exercise joint control of or significant influence
over an investee, the remaining equity investment is accounted for in accordance with Accounting
Standard for Business Enterprises No.22-Recognization and Measurement of Financial Instruments and
the difference between the fair value and the carrying amount at the date of the loss of control is
charged to profit or loss for the current period.
The Company's control over an investee is lost through multiple disposals and the multiple disposals
shall be viewed as one single transaction, the multiple disposals is accounted for one single transaction
which result in the Company's loss of control over the investee. Each difference between the considera-
tion received and the book value of the investment disposed is recognized in other comprehensive in-
come and reclassified in full to profit or loss at the time when control over the investee is loss.
(17) Investment properties
1. Investment properties refer to real estate held to earn rent or capital appreciation, or both. Including
land use rights that have been leased, land use rights that are held and ready to be transferred after
value-added, leased buildings (including buildings used for rent after self-construction or development
activities are completed, and future use during construction or development of leased buildings).
2. Investment properties are initially measured according to cost, and subsequent measurement is
made using the cost model. For subsequent expenditures related to Investment properties, if the eco-
nomic benefits related to the asset are likely to flow in and their costs can be reliably measured, then
they are included in the cost of Investment properties. Other subsequent expenditures are included in
profit or loss for the current period when they occur.
3. For Investment Properties measured by the cost model, depreciation or amortization is provided us-
ing the same method as fixed assets and intangible assets.
4. When the purpose of Investment properties is changed to self-use, from the date of change, the In-
vestment properties are converted into fixed assets or intangible assets, and the carrying amount before
conversion is used as the credit value after conversion. When the purpose of self-used real estate or
Inventories is changed to earn rent or capital appreciation, from the date of change, the Fixed assets or
Intangible assets are converted into Investment properties and converted into Investment properties
measured by the cost model to the carrying amount before conversion As the booked value after con-
version; when converted to Investment properties measured by fair value model, the fair value on the
conversion date is used as the booked value after conversion.
5. When Investment Properties are disposed of, or permanently withdrawn from use and it is expected
that no financial benefits can be obtained from their disposal, the recognition of the investment proper-
ties is terminated. Investment properties sold, transferred, scrapped or damaged are deducted from
their carrying amount and related taxes and are included in profit or loss for the current period.
(18) Fixed assets
1. Fixed assets recognition conditions
Fixed assets refer to tangible assets fulfill the following characteristics: (1) held for the production of
goods, provision of labor services, lease or operation and (2) the service life exceeds one fiscal year.
Fixed assets are recognized if it meet the following conditions: (1) The economic benefits related to the
fixed assets are likely to flow into the enterprise and (2) The cost of the fixed assets can be measured
reliably. Subsequent expenditures related to fixed assets, if they meet the above recognition conditions,
are included in the cost of fixed assets; those that do not meet the above recognition conditions are in-
cluded in profit or loss for the current period when incurred.
2. Initial measurement of fixed assets
Fixed assets are initially measured at cost.
3. Fixed assets classification and depreciation method
Fixed assets start depreciation when it reaches the predetermined usable state, and cease depreciation
when its derecognised or it is classified as non-current assets held for sale. If the service life of the
components of the fixed assets is different or provides economic benefits to the Company in different
ways, then different depreciation rates and depreciation methods shall be chosen respectively. The de-
preciation period and depreciation rate of various fixed assets are as follows:
Fixed assets cate- Depreciation Useful life Estimate residual Annual depreci-
gory method (years) vale (%) ation rate (%)
Property and build- Straight line 10-30 5-10 3.17-9.50
ings method
Specific equipment Straight line 5-20 5-10 4.50-19.00
method
General equipment Straight line 3-10 5-10 9.00-31.67
method
Transportation Straight line 3-10 5-10 9.00-31.67
equipment method
Ship Straight line 25 Light Displacement*E 3.07
method xpected scrap price
Note:
(1) The renovation costs of the fixed assets that meet the capitalization conditions will be accrued sepa-
rately in the shorter period of the two renovation periods and the useful life of the fixed assets.
(2) For the fixed assets that have been impaired, the cumulative impairment provision of fixed assets
shall be deducted from the calculation of depreciation rate.
(3) The Company shall review the useful life, estimated net residual value and depreciation method of
the fixed assets at least at the end of the year.
4. Identification basis and pricing method of fixed assets under financing lease
When the leased fixed assets of the Company meet one or more of the following criteria, it is recognised
as the fixed assets under financing lease:
(1) When the lease term expires, the ownership of the leased assets is transferred to the Company;
(2) The Company has the option to purchase leased assets, and the purchase price concluded is ex-
pected to be much lower than the fair value of the leased assets when the option is exercised, so it can
be reasonably determined that the Company will exercise this option on the lease start date;
(3) Even if the ownership of the asset is not transferred, the lease period accounts for most of the ser-
vice life;
(4) The present value of the Company's minimum lease payment on the lease start date is almost
equivalent to the fair value of the leased asset on the lease start date; the current value of the lessor's
minimum lease receipt on the lease start date is almost equivalent to the fair value of the leased asset
on the lease start date;
(5) The leased assets are of a special nature and can only be used by our Company without major mod-
ification.
Fixed assets leased under finance leases shall be recorded as the lower of the fair value of the leased
asset on the lease start date and the present value of the minimum lease payment. The minimum lease
payment is taken as the book value of long-term payables, and the difference is taken as unrecognized
financing expenses. The initial direct costs such as handling fees, legal fees, travel expenses, and
stamp duty that occurred during the lease negotiation and signing of the lease contract are included in
the value of the leased asset. Unrecognized financing expenses are allocated using the effective inter-
est rate method in each period of the lease.
Fixed assets under finance lease adopts the same policy in depreciation as those own fixed assets. If it
can be reasonably determined that the ownership of the leased asset will be acquired at the end of the
lease period, depreciation is provided within the useful life of the leased asset; if it cannot be reasonably
determined that the ownership of the leased asset can be acquired at the end of the lease term, depre-
ciation is provided on the shorter of the leasing period and the remaining useful life of leased assets.
5. Other note
(1) Fixed assets that have been suspended for three consecutive months due to insufficient construction
and natural disasters are recognized as idle fixed assets (except for seasonal suspension). Idle fixed
Assets adopts the same depreciation method as other Fixed Assets of the same category.
(2) If the fixed assets are in the state of disposal, or if no economic benefits are expected to be generat-
ed through use or disposal, it is derecognised and its depreciation and impairment are suspended.
(3) The difference between the disposal income of fixed assets sold, transferred, scrapped or damaged
after deducting its book value and related taxes is included in profit or loss for the current period.
(4) The overhaul costs incurred by the Company's regular inspections of fixed assets, and there is con-
clusive evidence that the conditions that meet the recognition conditions of fixed assets are included in
the cost of fixed assets, and those that do not meet the recognition conditions of fixed assets are in-
cluded in profit or loss for the current period. Fixed assets are depreciated during regular maintenance
intervals.
(19) Construction in progress
1. Construction in progress while satisfying economic benefits is likely to flow in, and costs can be relia-
bly measured are recognised. Construction in progress is measured at the actual cost incurred before
the construction of the asset reaches its intended status of uses.
2. When Construction in progress reaches the intended status of uses, it will be transferred to fixed as-
sets according to the actual cost of the project. If it has reached the expected usable status but has not
yet completed the settlement of completion, it will first be transferred to fixed assets at the estimated
value. After the completion of the final settlement, the original provisional valuation will be adjusted ac-
cording to the actual cost, but the original depreciation will not be adjusted.
(20) Borrowing costs
Borrowing costs, including interest on borrowings, amortization of discounts or premiums, other relevant
expenses, and exchange differences due to foreign currency borrowings.
1. Principle of borrowing costs capitalization
Borrowing costs incurred by the Company, which can be directly attributed to the acquisition, construc-
tion or production of assets that meet the capitalization conditions, are capitalized and included in the
cost of related assets. Other Borrowing costs are recognized as expenses based on the amount in-
curred when they occur, and are included in profit or loss for the current period.
2. Capitalization period of borrowing costs
(1) When the following conditions are met at the same time, capitalization begins: 1) Asset expenditure
has occurred; 2) Borrowing costs have occurred; 3) The purchase, construction or production activities
necessary to make the asset reach the intended use or sale state have begun.
(2) Suspension of capitalization: If an asset that meets the conditions of capitalization is abnormally in-
terrupted during the acquisition, construction or production process, and the interruption lasts for more
than 3 months, the capitalization of Borrowing costs is suspended; Borrowing costs incurred during the
interruption are recognized as current expenses, until the purchase or construction of assets or produc-
tion activities restart. If the interruption is the necessary procedure for the acquisition or construction or
production of assets that meet the capitalization conditions to reach the intended status of uses or sta-
tus of sale, borrowing costs will continue to be capitalized.
(3) Cessation of capitalization: Borrowing costs cease to be capitalized when the assets purchased or
constructed or produced that meet the capitalization conditions reach the intended use or sale. When
part of the assets in the acquisition, construction or production of capitalized assets are completed sep-
arately and can be used separately, the capitalization of borrowing costs of the partial assets will be
ceased. If each part of the purchased or constructed asset is completed separately, but it cannot be
used until it is completed or sold externally, the capitalization of borrowing costs shall be ceased when
the asset is completed.
3. Borrowing costs capitalization rate and calculation method of capitalization amount
If specific loans are borrowed for the purchase or construction or production of assets that meet the
capitalization conditions, the interest expenses actually incurred in the current period of the specific
loans (including the amortization of discounts or premiums determined in accordance with the effective
interest rate method), minus the amount of interest income obtained from the bank or the investment
income obtained by making a temporary investment by the unused borrowing loans, is the amount of
interest that should be capitalized; if the general borrowings are occupied for the purchase or construc-
tion or production of assets that meet the capitalization conditions, the weighted average amount of as-
set expenditures on the amount of cumulative asset expenditure exceeding the specific loans is multi-
plied by the capitalization rate (weighted average interest rate) of the general borrowing to calculate and
determine the amount of interest that should be capitalized for the general borrowing. During the capital-
ization period, the amount of interest capitalized in each accounting period shall not exceed the amount
of interest actually incurred by the relevant borrowings in the current period. The exchange differences
on the principal and interest of foreign currency special borrowings shall be capitalized during the capi-
talization period. Other relevant expenses incurred by special borrowings occur before the assets eligi-
ble for capitalization purchased or constructed or produced reach the intended status of use or sale,
they are capitalized; Other relevant expenses incurred in general borrowings are included in profit or
loss for the current period when incurred. If there is a discount or premium on the loans, the amount of
discount or premium that should be amortized in each accounting period is determined according to the
effective interest rate method, and the amount of interest in each period is adjusted.
(21) Intangible assets
1. Initial measurement of intangible assets
Intangible assets are initially measured at cost. The cost of externally purchased intangible assets in-
cludes the purchase price, related taxes and other expenses directly attributable to the asset for its in-
tended use. If the payment for the purchase of intangible assets is delayed beyond the normal credit
conditions and is essentially of a financing nature, the cost of the intangible assets is determined on the
basis of the present value of the purchase price. Debt restructuring acquires the intangible assets used
by the debtor to pay off debts, and the book value is determined on the basis of the fair value of the
waived claims and other costs that can be directly attributed to the tax and other costs incurred in bring-
ing the asset to its intended use.
Intangible assets obtained from debtor to pay off debts under debt restructuring, its book value is deter-
mined on the basis of the fair value of the waived claims and other costs that can be directly attributed
to the tax and other costs incurred in bringing the asset to its intended use. Under the presumption that
the exchange of non-monetary assets has commercial substance and the fair value of the assets ex-
changed in or out can be reliably measured, the intangible assets exchanged in the swap of non-
monetary assets are stated at fair value of the assets swapped and related taxes as the cost of swap-
ping intangible assets, unless there is strong evidence that the fair value of the swapped assets is more
reliable; for non-monetary asset exchanges that do not meet the above presumption, the book value of
the swapped assets and related taxes payable are used as the cost of intangible assets, and there is no
recognition of any profit or loss.
Expenses related to intangible assets are included in the cost of intangible assets if the related econom-
ic benefits are likely to flow into the Company and the costs can be reliably measured. Expenditures for
other items other than these are included in profit or loss for the current period when they occur.
The acquired land use rights are usually accounted for as intangible assets. For self-development and
construction of buildings and other buildings, related land use rights expenditures and building construc-
tion costs are accounted for as intangible assets and fixed assets, respectively. In the case of pur-
chased properties and buildings, the relevant price will be allocated between the land use rights and the
buildings. If it is difficult to allocate them reasonably, all of them will be treated as fixed assets.
2. Intangible asset useful life and amortization
According to the contract rights or other legal rights, industry, history experience, and other relevant
experts to determine a combination of factors, reasonably determine the intangible asset can bring eco-
nomic benefits for the Company, as intangible assets with limited useful life; not Where the intangible
assets are reasonably determined to bring economic benefits to the Company, they are regarded as
intangible assets with uncertain service life.
For intangible assets with a finite useful life, the following factors are usually considered when estimat-
ing the useful life: (1) the usual life cycle of the products produced using the asset and the information
available on the service life of similar assets; (2) technology, process, etc. The current situation of the
country and the estimation of the future development trend; (3) the market demand for the products
produced by the asset or the provision of labor services; (4) the expected actions of current or potential
competitors; (5) the maintenance of the asset Expected maintenance expenditures that bring economic
benefits, and the Company's ability to pay for related expenditures; (6) Relevant legal regulations or
similar restrictions on the asset's control period, such as concession periods, lease periods, etc . ; (7)
There is correlation of the useful life of other assets. The estimated useful life of intangible assets with
finite useful life:
Item Basis of estimated useful Period (years)
life
Software Expected benefit period 5 years
Special technology Expected benefit period 10 years
Land use rights Registered useful life of 50 years
land use rights
Intangible assets with a finite useful life are amortized systematically and rationally within the useful life
according to the expected realization method of the economic benefits related to the intangible asset. If
the expected realization method cannot be reliably determined, the straight-line method is used. Intan-
gible assets with uncertain useful life are not amortized, but the useful life of the intangible assets is
reviewed every year and an impairment test is conducted.
At the end of each year, the Company reviews the useful life and amortization method of intangible as-
sets with a finite useful life. If it is different from the previous estimate, the original estimate is adjusted
and the accounting estimate is changed; it is estimated that an intangible asset can no longer be given if
the enterprise brings future economic benefits, the book value of this intangible asset will be transferred
to profit or loss for the current period.
3. Recognition and measurement of internal research and development project expenditure
The expenditures of internal research and development projects are divided into expenditures in the
research phase and expenditures in the development phase. Criteria for dividing research stage and
development stage: the planned investigation stage for acquiring new technologies and knowledge
should be determined as the research stage, which has the characteristics of planning and exploration;
The application of research results or other knowledge to a plan or design before commercial production
or use to produce new or substantially improved materials, devices, products and other stages should
be determined as the development stage, which is targeted and likely to produce results characteristics.
Expenditures for the research phase of internal research and development projects are included in profit
or loss for the current period when they occur. Expenses during the development phase of an internal
research and development project that meet the following conditions are recognized as intangible as-
sets: (1) it is technically feasible to complete the intangible asset so that it can be used or sold; (2) it is
Intention to use or sell; (3) The way in which intangible assets generate economic benefits, including the
ability to prove that the products produced using the intangible assets exist in the market or the intangi-
ble assets themselves exist in the market, and the intangible assets will be used internally, can prove
their usefulness; (4) sufficient technical, financial resources and other resources support to complete the
development of the intangible asset and the ability to use or sell the intangible asset; (5) The expendi-
ture attributable to the development stage of the intangible asset can be reliably measured. If the above
conditions are not met, it will be included in profit or loss for the current period when it occurs; if there is
no way to distinguish between research phase expenditure and development phase expenditure, all
research and development expenditure incurred will be included in profit or loss for the current period.
(22) Long-term asset impairment
Long-term equity investments, investment property and productive biological assets measured using the
cost model, fixed assets, construction in progress, oil and gas assets, intangible assets, goodwill and
other long-term assets are subject to impairment if there are indication of the following:
1. The market price of assets has fallen sharply in the current period, and the decline is significantly
higher than the expected decline due to the passage of time or normal use;
2. The economic, technical or legal environment in which the enterprise operates and the market in
which the assets are located will undergo major changes in the current period or in the near future,
thereby adversely affecting the enterprise;
3. The market interest rate or other market investment return rate has increased in the current period,
which affects the discount rate of the enterprise's calculation of the present value of the expected future
cash flow, resulting in a substantial reduction in the asset's recoverable amount;
4. There is evidence that the asset has become obsolete or its physical has been damaged;
5. Assets have been or will be idle, terminated or planned to be disposed of in advance;
6. Evidence from internal reports of the Company indicates that the economic performance of the asset
has been or will be lower than expected, such as the net cash flow created by the asset or the realized
operating profit (or loss) is far below (or higher than) the expected amount, etc . ;
7. Other indications that assets may have been impaired.
If there is any indication of impairment of the above-mentioned long-term assets on the balance sheet
date, an impairment test shall be conducted. If the result of the impairment test indicates that the recov-
erable amount of the asset is lower than its book value, the impairment provision shall be made accord-
ing to the difference and included in the impairment loss. The recoverable amount is the higher of the
net value of the asset's fair value minus disposal costs and the present value of the asset's expected
future cash flow. The method for determining the fair value is detailed in Note III (10) ; the disposal ex-
penses include legal expenses related to the disposal of assets, related taxes, handling fees, and direct
expenses incurred to bring the asset to a saleable status; the expected future cash flow of the asset is
determined according to the present value of expected future cash flow generated during the continuous
use of the asset and at the time of final disposal, and an appropriate discount rate is selected to deter-
mine the discounted amount.
The asset impairment provision is calculated and determined on the basis of individual assets. If it is
difficult to estimate the recoverable amount of an individual asset, the asset group to which the asset
group belongs determines the recoverable amount of the asset group. An asset group is the smallest
asset portfolio that can independently generate cash inflows.
The goodwill presented separately in the financial statements will be allocated to the asset group or
combination of asset groups that is expected to benefit from the synergy effect of the business combina-
tion during the impairment test. If the test results indicate that the recoverable amount of the asset
group or combination of asset groups containing the allocated goodwill is lower than its book value, the
corresponding impairment loss is recognized. The amount of impairment loss is offset against the book
value of goodwill allocated to the asset group or combination of asset groups, and then proportionally
based on the proportion of the book value of other assets in the asset group or combination of asset
groups other than goodwill.
Goodwill and intangible assets with indefinite useful life are tested for impairment at least at the end of
each year.
Once assets impairment loss is recognised, it will not be reversed in the future period.
(23) Long-term deferred expenses
Long-term deferred expenses are accounted for based on actual expenditures and amortized evenly
over the benefit period or the prescribed period. If the long-term deferred expense item cannot benefit
the future accounting period, all the amortized value of the item that has not been amortized shall be
transferred to profit or loss for the current period, of which:
The prepaid operating lease rental of fixed assets is amortized evenly over the period specified in the
lease contract.
Leasehold improvement expenditures in operating leases are amortized on the shorter of the remaining
lease period and the useful life of the leased assets.
Renovation costs of the fixed assets leased under financing lease, that meet the capitalization condi-
tions, will be amortized evenly based on the shorter period of the two renovation intervals, the remaining
lease period and the useful life of the fixed asset.
(24) Employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Company in ex-
change for service rendered by employees or for the termination of employment relationship. Employee
benefits include short-term employee benefits, post-employment benefits, termination benefits and other
long-term employee benefits. Benefits provided to the employee’s spouse, children, dependents, family
members of deceased employees, or other beneficiaries are also employee benefits.
According to their liquidities, employee benefits are presented as ”employee benefits payable” and
“long-term employee benefits payable” on the balance sheet.
1. Short-term employee benefits
In the accounting period in which employees have rendered services, the Company recognized the em-
ployee wages, bonus, social security contributions according to regulations such as medical insurance,
work injury insurance and maternity insurance as well as housing funds as liability, and charged to profit
or loss for the current period or cost of relevant assets. If employee benefits are non-monetary benefits,
if they can be measured reliably, they shall be measured at fair value. If the liability is not expected to be
settled wholly in twelve months after the balance sheet date, and the amount is significant, the liability is
measured at the discounted amount.
2. Post-employment benefits
Post-employment benefit plan includes defined contribution plans and defined benefit plans. Defined
contribution plans are post-employment benefit plans under which a corporate pays fixed contributions
into an escrow fund and will have no further obligation. Defined benefit plans are post-employment ben-
efit plans other than defined contribution plans.
(1) Defined contribution plans
The Company pays basic pension insurance and unemployment insurance for employees in accord-
ance with the relevant regulations of the current government. In the accounting periods which employ-
ees rendered services, the amount of defined contribution plan is recognized as liability and charged to
profit or loss for the current period or cost of relevant assets.
3. Accounting treatment of employee termination benefits
Termination benefits is recognized on the earlier of either the Company cannot unilaterally withdraw the
termination benefits provided by the labor relationship cancellation plan or the redundancy proposal,
and the Company recognises the costs or expenses related to the restructuring related to the payment
of the termination benefits. Termination benefits expenses are included in profit or loss for the current
period. However, if the termination benefits are not expected to be fully paid within twelve months after
the end of this reporting period, it is treated as other long-term employee benefits.
Employee internal retirement plans are handled on the same principle as the above dismissal benefits.
The Company will include the salary and social insurance contribution of early retired personnel from
the date when the employee ceases to provide services to the normal retirement date, and shall be in-
cluded in profit or loss for the current period (termination benefits) when the conditions for recognising
the estimated liabilities are met. Financial compensation after the official retirement date (such as the
normal pension pension) will be treated as post-employment benefits.
4. Accounting treatment of other long-term employee benefits
Other long-term employee benefits provided by the Company to the employees satisfied the conditions
for classifying as a defined contributions plan; those benefits are accounted for in accordance with the
above requirements relating to defined contribution plan, but the movement of net liabilities or assets in
re-measurement of defined benefit plan is recorded in profit or loss for the current period or cost of rele-
vant assets.
(25) Provision
A provision is recognized as a liability when an obligation related to a contingency satisfied all of the
following conditions: (1) The obligation is a present obligation of the Company; (2) It is probable that an
outflow of economic benefits will be required to settle the obligation; (3) The amount of the obligation
can be measured reliably.
Provisions are initially measured at the best estimate of the payment to settle the associated obligations
and consider the relevant risk, uncertainty and time value of money. If the impact of time value of money
is significant, the best estimate is determined as its present value of future cash outflow. The Company
reviews the carrying amount of provisions at the balance sheet date and adjusts the carrying amount to
reflect the best estimate.
The best estimates are divided into the following situations: If the required expenditure exists in a con-
tinuous range (or interval), and the probability of various results in the range is the same, the best esti-
mate is based on the middle value of the range: namely The average of the lower limit amount is deter-
mined. The required expenditure does not exist in a continuous range (or interval), or although there is a
continuous range, but the possibility of various results in this range is not the same, if contingencies
involve a single item, the best estimate is based on the amount most likely to occur; if contingencies
involve multiple items, the best estimate is calculated and determined based on various possible results
and related probabilities.
If all or part of the expenses required to pay off the provisions of the Company are expected to be com-
pensated by a third party, when the compensation amount is basically determined to be received, it is
separately recognized as an asset, and the recognized compensation amount does not exceed the car-
rying amount of the provisions.
Carrying amount of the provisions are reviewed on each balance sheet date. If there is solid evidence
that the carrying amount cannot reflect the current best estimate, the carrying amount shall be adjusted
according to the current best estimate.
(26) Share-based payment
1. Category of share-based payment
The Company's share-based payment is a transaction that grants equity instruments or assumes liabili-
ties determined on the basis of equity instruments in order to obtain services provided by employees (or
other parties). Includes Share-based payment settled with equity and Share-based payment settled with
cash.
2. Determination method of fair value of equity instruments
(1) If there is an active market, it shall be determined according to the quoted price the active market; (2)
If there is no active market, it shall be determined by using valuation techniques, including reference to
the prices used in recent market transactions conducted by parties who are familiar with the situation
and voluntarily trade, reference to the current fair value, discounted cash flow method and option pricing
model of other financial instruments that are substantially the same.
3. Basis in determination of best estimate of exercisable equity instruments
On each balance sheet date during the vesting period, the Company makes the best estimate based on
the latest information on the number of employees with exercisable rights and other follow-up infor-
mation, and corrects the number of equity instruments expected to exercise. On the exercise date, the
number of equity instruments expected to be exercised should be consistent with the actual exercisable
amount.
4. Accounting treatment of share-based payment
(1) Share-based payment settled by equity
If the equity-settled share-based payment is exchanged for employees to provide services, and the right
is available immediately after the grant, the relevant cost or expense will be included in the fair value of
equity instruments on the grant date, and the capital reserve will be adjusted accordingly. If the exercise
right is available only after completing the service within the vesting period or meeting the prescribed
performance conditions, on each balance sheet date during the vesting period, based on the best esti-
mate of the number of available rights Equity instruments and the fair value of the equity instruments on
its grant date, the services obtained in the current period are included in the relevant costs or expenses,
and the capital reserve is adjusted accordingly. After the exercisable date, no adjustment will be made to
the recognised costs or expenses and the total owner’s equity.
For the equity-settled Share-based payment is exchanged for the services of the other party, if the fair
value of the services of the other party can be reliably measured, it is measured according to the fair
value of the service of the other party. If the fair value of the other party’s services cannot be measured
reliably but the equity value of equity instruments can be measured reliably, it is measured in accord-
ance with the fair value of equity instruments on the date of service acquisition, included in the relevant
costs or expenses, and the owners ’equity is increased accordingly.
(2) Share-based payment settled in cash
Share-based payment settled in cash in exchange for employee services, and the right to exercise im-
mediately after the grant, the Company’s fair value of the liabilities assumed are included in the relevant
costs or expenses on the grant date, and the liabilities are increased accordingly. Share-based payment
settled in cash that can be exchanged for employee services after completing the services within the
waiting period or meeting the prescribed performance conditions, based on the best estimate of the right
to exercise on each balance sheet date during the vesting period and the fair value of the Company’s
liabilities, the services obtained in the current period are included in the relevant costs or expenses and
corresponding liabilities.
On each balance sheet date and settlement date before the settlement of the relevant liabilities, the fair
value of the liabilities is remeasured, and the changes are included in profit or loss for the current period.
(3) Modify and terminate share-based payment plan
If the modification increases the fair value of equity instruments granted, the Company will recognise the
increase in the cost of services obtained in accordance with the increase in fair value of equity instru-
ments. If the modification increases the number of equity instruments awarded, the Company will rec-
ognize the increase in the fair value of equity instruments accordingly as an increase in access to ser-
vices. If the Company revises the conditions of exercise rights in a manner beneficial to employees, the
Company considers the revised conditions of exercise rights when dealing with the conditions of exer-
cise rights.
If the share-based payment settled by equity is cancelled, it will be treated as an accelerated exercise
on the cancellation date, and the unrecognized amount will be recognised immediately (Amount that
should be recognised in the remaining vesting period is immediately included in profit or loss for the
current period, and capital reserve is also recognised). Employees or other parties can choose to meet
the non-feasible rights conditions but not met within the waiting period, as a cancellation of equity set-
tlement of share-based payment. However, if a new Equity instrument is awarded, and the equity in-
struments granted on the grant date of the new equity instruments are deemed to replace the equity
instruments that were cancelled, then the authorized replacement equity instruments are processed in
the same way as the modification of terms and conditions of the original equity instruments.
5. Accounting treatment of share-based payment transactions involving the Company and its share-
holders or ultimate controllers
Share-based payment transactions involving the Company and the Company's shareholders or ultimate
controllers, one of the settlement company and the service-receiving company is within the Company,
and the other is outside the Company, in the Company's consolidated financial statements in accord-
ance with the following provisions accounting treatment:
(1) If the settlement company settles with its own Equity instruments, the share-based payment transac-
tion will be treated as a share-based payment for equity settlement; otherwise, it will be treated as a
share-based payment for cash settlement.
The settlement company is an investor of the service company, and it is recognized as a long-term equi-
ty investment in the service company according to the fair value of equity instruments on the grant date
or the fair value of the liabilities that should be assumed, and the capital reserve (other capital reserve)
or liability is also recognized.
(2) The service receiving company has no settlement obligations or the employees of the Company are
granted by its own equity instruments, and the Share-based payment transaction is treated as a share-
based payment for equity settlement. If the service receiving enterprise has a settlement obligation and
the employees of the enterprise are not granted to its own Equity instruments, the share-based payment
transaction will be treated as a cash-settled share-based payment. The share-based payment transac-
tion between the companies, the receiving service company and the settlement company are not the
same company, and the confirmation and measurement of the share-based payment transaction in the
individual financial statements of the receiving service company and the settlement company in accord-
ing to the above principles.
(27) Repurchase of shares
If the shares of the Company are acquired due to the reduction of registered capital or the reward of
employees, etc., the Amount actually paid shall be treated as Treasury shares and shall be registered
for future reference. If the repurchased shares are cancelled, the difference between the total face value
of the stock calculated based on the par value of the cancelled shares and the amount paid for the ac-
tual repurchase will be offset against the capital reserve. If the capital reserve is insufficient to offset, the
retained earnings will be offset. If the repurchased shares are awarded to the Company’s employees as
a share-based payment settled by equity, when the employee exercises the right to purchase the Com-
pany’s shares and the price is received, the cost of treasury shares delivered to the employee are trans-
ferred to capital reserve (other capital reserve), and at the same time, sny difference is adjusted to capi-
tal reserve (share capital premium).
(28) Revenue
1. Recognition principle of revenue
(1) Sale of goods
Revenue from the sale of goods is recognized when 1) the Company has transferred to the buyer the
significant risks and rewards of ownership of the goods, 2) the Company retains neither continuing
managerial involvement nor effective control over the goods sold, 3) related income can be measured
reliably, 4) the economic benefits are likely to flow to the Company, and 5) the associated costs can be
measured reliably.
(2) Rendering of services
The results of the labor service transaction can be reliably estimated on the balance sheet date (At the
same time, the amount that meets the income can be reliably measured, the related economic benefits
are likely to flow in, the completion progress of the transaction can be reliably determined, the costs that
have occurred and will occur in the transaction can be reliably measured), using the percentage of com-
pletion method to recognise the income from the provision of labor services, and according to the
measurement results of completed work to determine the completion progress of the service transaction.
If the results of the labor service transaction provided on the balance sheet date cannot be reliably esti-
mated, the following cases are dealt with: If the labor service costs incurred are expected to be com-
pensated, the labor service income is recognized according to the labor cost already incurred and labor
cost is recognized at the same amount. If the labor cost already incurred is not expected to be compen-
sated, the labor cost already incurred is included in profit or loss for the current period, and the income
from the provision of labor is not recognized.
(3) Transfer of the right-of-use assets
Revenue is recognized when the economic benefits associated with the transfer of the right to use as-
sets can flow to the Company and the amount can be measured reliably. The interest income is calcu-
lated and determined according to the time and actual interest rate of others using the Company's cash
and bank balances; the usage fee income is calculated and determined according to the charging peri-
od time and method agreed in the relevant contract or agreement.
(4) Construction contracts
1) Where the outcome of a construction contract can be estimated reliably at the balance sheet date,
revenues and expenses associated are recognized using the percentage of completion method. Where
the outcome of a construction contract cannot be estimated reliably, it is treated either: if contract costs
is recoverable, contract revenue is recognized on actual contract costs that can be recovered and con-
tract costs incurred is regarded as expenses in the current period. If the contract cost incurred is not
recoverable, the contract cost is regarded as expenses and no revenue is recognized.
2) The outcome of a fixed price construction contract can be estimated reliably when all of the following
conditions are satisfied: A) The amount of contract revenue can be measured reliably; B) The associat-
ed economic benefits are likely to flow to the Company; C) The actual contract costs incurred can be
distinguished clearly and measured reliably; D) The completion progress of the contract and the costs
need to be incurred to complete the contract can be measured reliably. The cost-plus contract also sat-
isfies the following conditions, indicating that the results can be reliably estimated: The economic bene-
fits associated with the contract are likely to flow in; the actual contract costs that can be incurred can be
clearly distinguished and reliably measured.
3) The method for determining the contract completion schedule is the actual measured completion
schedule.
4) For the construction contract that is not completed in the current period, the contract revenue is mul-
tiplied by the progress of completion deducting the accumulated revenue recognized in the previous
accounting period, and the current contract revenue is recognised; the current total contract cost is mul-
tiplied by the progress of completion, deducting the accumulated cost of the previous accounting period,
and the current contract is recognized as cost. For construction contracts completed in the current peri-
od, the total contract revenue of the current period is deducted from the accumulated revenue recog-
nized in the previous accounting period to be recognized as the contract revenue of the current period;
the contract costs accrued in the previous period are deducted from the accumulated actual contract
costs incurred to recognise the current contract costs.
5) On the balance sheet date, if the estimated total contract cost exceeds the total contract revenue, the
estimated loss shall be recognized as current expense. Construction contracts under execution are ac-
crued according to their differences is recorded as provision for decline in value of inventories; the dif-
ference in loss contracts to be executed are recognised as provisions.
2. Specific recognition principle of the Company's revenue
According to the actual situation, the Company recognises the income when the following conditions are
met at the same time: The domestic sales revenue is recognized when the Company has delivered or
the Company has completed the delivery procedures and passed the control of the goods to the cus-
tomer, the payment has been recovered or evidence of payment has been obtained and the related
economic benefits are likely to flow, the costs related to the product can be reliably measured. After the
export revenue is shipped according to the customer's requirements, the revenue is recognized by the
export date on the export declaration form of the goods when the payment has been recovered or the
evidence for the payment has been obtained and the related economic benefits are likely to flow in, the
product-related costs can be reliably measured.
(29) Government grants
1. Category of government grants
Government grants refer to the Company's obtain of monetary or non-monetary assets from the gov-
ernment without consideration. It is divided into government grants related to assets and government
grants related to income.
Government grants related to assets refer to government grants acquired by the Company and used to
purchase or construct or form long-term assets, including financial grants for the purchase of fixed as-
sets or intangible assets, and financial discounts for dedicated loans for fixed assets, etc . ; Government
grants related to income refer to government grants other than government grants related to assets.
Government grants should be distinguished between that related to assets and related to income and
apply different accounting treatment. If it is difficult to distinguish, the overall classification is classified
as government grants related to income
The specific standards adopted by the Company in the classification of government grants are:
(1) The grant objects specified in the Government grants document are used to purchase or construct or
form long-term assets, or the expenditures of the subsidies are mainly used to purchase or construct or
form long-term assets, they are classified as government grants related to assets.
(2) The government grants obtained according to the government documents that are all or mainly used
to compensate the expenses or losses in the future period or the government grants that have occurred,
and are classified as government grants related to income.
(3) If the government document does not clearly specify the target of the grant, the Government grants
will be divided into Government grants of Related to assets or Government grants of Related to income
in the following ways: 1) Government documents specify the specific project targeted by the grant, the
expenditure amount is divided by relative ratio of that forming the asset and the expenditure amount
included in the expense according to the budget of this particular project. The ratio needs to be re-
viewed on each balance sheet date and changed if necessary.2) Government documents only use gen-
eral expressions and do not indicate specific items, it is regarded as government grants related to in-
come.
2. Timing of recognition of government grants
The Company usually recognises and measures the government grants according to the actual amount
received when they are actually received. However, for the end of the period, there is solid evidence
that it can meet the relevant conditions stipulated by the financial support policy. It is expected that the
financial support funds can be received, and it is measured according to the Amount receivable. Gov-
ernment grants measured according to Amount receivable should also meet the following conditions:
(1) It is based on the financial support item officially released by the local financial department and pro-
actively disclosed in accordance with the “Government Information Disclosure Regulations” and its fi-
nancial fund administrative methods, and its administrative methods should be inclusive (any enterprise
that meets the prescribed conditions can apply), not specifically for specific enterprises;
(2) The Amount of the subsidy receivable has been confirmed by the authority government department,
or it can be reasonably calculated according to the relevant regulations of the officially released financial
fund management method, and it is expected that there will be no significant uncertainty in its amount;
(3) The relevant grant approval has clearly promised the payment period, and the payment is guaran-
teed by the corresponding financial budget, so it can be reasonably guaranteed that it can be received
within the specified period;
(4) According to the specific situation of the Company and the subsidy, other relevant conditions (if any)
that should be met.
3. Accounting treatment of government grants
Government grants are monetary assets, measured by the amount received or receivable; non-
monetary assets, measured by the fair value; if the fair value of non-monetary assets cannot be reliably
obtained, measured by the nominal amount. Government grants measured in nominal amount are di-
rectly included in profit or loss for the current period.
The Company adopts the gross method for Government grants, the specific accounting treatment is as
follows:
Government grants related to assets are recognized as deferred income, and are included in profit or
loss for the current period in a reasonable and systematic way within the useful life of the relevant as-
sets. When related assets are sold, transferred, scrapped or damaged before the end of the useful life,
the relevant deferred income balance is transferred to the profit and loss of the asset disposal period.
Government grants related to income, which are used to compensate the related cost or loss of the
Company in the future period, are recognized as deferred income, and are included in profit or loss for
the current period during the period when the related cost or loss is recognized. The compensation for
the related costs or losses incurred by the enterprise is directly included in profit or loss for the current
period.
The policy discount loans obtained by the Company are divided into the following two situations and are
separately accounted for:
(1) if the government makes the payment of subsidy to the bank offering the loan, the actual amount of
money received by the loan is recorded as the book amount, and the borrowing costs are calculated
according to the loan principle and the preferential interest rate of the policy.
(2) If the government makes the payment of subsidy directly to the Company, the interest subsidy is
reducing the borrowing costs.
If the recoginsed government grants need to be returned, the returned will be accounted in the current
period for in the following situations:
(1) that initially deducted the carrying amount of the asset, is recognized by increasing the carrying
amount of the asset;
(2) if there exists of the related deferred income balance, then the deferred income balance is reduced
by the amount repayable, any excess is charged to profit or loss for the current period.
(3) In other cases, it is directly included in profit or loss for the current period.
The distinguishing principles of government grants included in different profit and loss items are: Gov-
ernment grants related to the daily activities of the Company, included in other income or offsetting re-
lated costs according to the economic business substance; Government grants not related to the daily
activities of the Company, included in non-operating income and expenses.
(30) Deferred tax assets and deferred tax liabilities
1. Recognition and measurement of deferred tax assets and deferred tax liabilities
The Company uses the balance sheet liability method to recognize deferred income tax based on the
temporary difference between the carrying amount of assets, liabilities, and the balance sheet date and
the tax base. The Company's current income tax and deferred income tax are included in profit or loss
for the current period as income tax expenses or credit, but excluding income tax arising from: (1) busi-
ness combination; (2) transactions or matter recognised directly in owners' equity.
The Company recognizes a deferred tax asset for the carry forward of deductible temporary differences,
deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxa-
ble profits will be available against which the deductible temporary differences, deductible losses and
tax credits can be utilized, except for those incurred in the following transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or
deductible loss) when the transaction occurs;
(2) The deductible temporary differences associated with investments in subsidiaries, associates and
joint ventures, the corresponding deferred tax asset is recognized when both of the following conditions
are satisfied: it is probable that the temporary difference will reverse in the foreseeable future and it is
probable that taxable profits will be available in the future against which the temporary difference can be
utilized.
All the taxable temporary differences are recognized as deferred tax liabilities except for those incurred
in the following transactions:
(1) Initial recognition of goodwill or initial recognition of an asset or liability in a transaction which is nei-
ther a business combination nor affects accounting profit or taxable profit (or deductible loss) when the
transaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, and the Company is able to control the timing of the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the foreseeable future.
The difference between the carrying amount of assets and liabilities and their tax base (If the items that
have not been recognized as assets and liabilities can be determined in accordance with the provisions
of the tax law, the tax base, the difference between the tax base and the book amount), is calculate and
recognized deferred tax assets or deferred tax liabilities according to the applicable tax rate during the
period when the assets are expected to be recovered or the liabilities are paid off.
Deferred tax assets recognsied are limited to the amount of taxable income that is likely to be used to
offset the deductible temporary differences. On the balance sheet date, if there is solid evidence that it
is likely to obtain sufficient taxable income in the future period to offset the deductible temporary differ-
ence, the deferred tax assets that have not been recognized in the previous accounting period are rec-
ognized. The carrying amount of deferred tax assets is reviewed regularly. If it is likely that sufficient
taxable income cannot be obtained in the future to offset the benefits of deferred tax assets, the carrying
amount of deferred tax assets will be written down. When it is likely to obtain sufficient taxable income,
the amount written down will be reversed.
2. When the Company has the legal right to settle on a net basis and intends to settle on a net basis or
acquire assets and settle liabilities simultaneously, the Company's current income tax assets and cur-
rent income tax liabilities are presented in net amounts after offset.
When the Company have the legal right to settle the current income tax assets and current income tax
liabilities in net, and the deferred tax assets and deferred tax liabilities are related to the income tax lev-
ied by the same tax collection department on the same taxpayer or different taxpayers, but in each fu-
ture period of significant deferred tax assets and liabilities reversal, the taxpayer involved intends to
settle the current income tax assets and liabilities in net amount or obtain assets and settle liabilities at
the same time and deferred tax liabilities are presented in net amount after offset.
(31) Leases
1. Category of leases
Leasing is divided into financing lease and operating lease. A financial lease is a lease that substantially
transfers all risks and rewards related to the ownership of an asset, and its ownership may or may not
be transferred eventually. Other leases other than finance leases are operating leases.
The recognition conditions for financing leases are described in Note III(38) 4”Identification Basis and
Pricing Method of Fixed Assets Under Finance Leases”
2. Accounting treatment of operating lease
(1) Lessor: The lease charged by the Company for the lease of assets shall be apportioned on a
straight-line basis over the entire lease period without deducting the rent-free period and recognized as
lease-related income. The initial direct costs paid by the Company related to the lease transaction are
included in the current cost. If the amount is significant, it will be capitalized, and included in the current
income during the lease period based on the same basis as the lease-related revenue recognition.
When the Company has undertaken the lease-related expenses that should be borne by the lessee, the
Company deducts the part of the expenses from the total rental income, and allocates the deducted
rental expenses within the lease period. Contingent rent is included in profit or loss for the current period
when it actually occurs.
(2) Leasee: The lease paid by the Company for renting assets shall be apportioned on the straight-line
method over the entire lease period without deducting the rent-free period and included in the current
expenses. The initial direct costs related to the lease transaction paid by the Company shall be included
in the current expenses. When the asset lessor bears the expenses related to the lease that should be
borne by the Company, the Company deducts the part of the expenses from the total rent, apportions
the deducted rental expenses within the lease period and counts them into the current expenses. Con-
tingent rent is included in profit or loss for the current period when it actually occurs.
3. Accounting treatment of finance lease
Lessor: At the beginning of the lease period, the Company takes the sum of the minimum lease receipt
and the initial direct cost as the accounting value of the financial lease receivable, and also record un-
guaranteed residual value. The difference between the sum of the minimum lease receipt, the initial
direct cost and the unguaranteed residual value and their present value is recognized as unrealized
financing income. Unrealized financing income is calculated and recognized in the current period by
using the effective interest rate method in each period of the lease period. The balance of finance lease
receivables after deduction of unrealized financing income is listed as long-term receivables and long-
term receivables due within one year. Contingent rent is included in profit or loss for the current period
when it actually occurs.
Lessee: At the beginning of the lease period, the Company regards the lower of the fair value of the
leased asset and the present value of the minimum lease payment as the booked value of the leased
asset. The minimum lease payment as the book value of long-term payables, and the difference as un-
recognized financing expenses. The initial direct cost is included in the value of leased assets. Unrec-
ognized financing expenses use the effective interest rate method to calculate and recognise the current
financing expenses in each period of the lease period. The balance of the minimum lease payment after
deducting Unrecognized financing expenses is listed as long-term liabilities and long-term liabilities due
within one year. Contingent rent is included in profit or loss for the current period when it actually occurs.
(32) Hedging
1. Hedging includes fair value hedging / cash flow hedging / overseas operating net investment hedging.
2. For hedging instruments that meet the following conditions, hedging accounting methods are used: (1)
The hedging relationship consists only of eligible hedging instruments and hedged instruments; (2) At
the beginning of hedging, the Company formally designated hedging instrument and hedged items, and
prepared written documents on the hedging relationship and the Company's risk management strategy
and risk management objectives for hedging; (3) The hedging relationship meets the hedging validity
requirement.
When the hedging meets the following conditions at the same time, the Company determines that the
hedging relationship meets the requirements for hedging effectiveness: (1) There is an economic rela-
tionship between the hedged item and the hedging instrument; (2) Among the changes in value caused
by the economic relationship between hedged items and hedging instruments, the impact of credit risk
does not dominate; (3) The hedging ratio of the hedging relationship is equal to the ratio of the actual
number of hedged items of the Company to the actual number of hedging instruments, but does not
reflect the imbalance of the relative weight of the hedged items and hedging instruments.
The Company continuously evaluates whether the hedging relationship meets the requirements of
hedging effectiveness on the hedging start date and later. The hedging relationship no longer meets the
hedging effectiveness requirements due to the hedging ratio, but if the risk management objectives of
the designated hedging relationship have not changed, the Company will rebalance the hedging rela-
tionship.
3. Accounting treatment of hedging
(1) Fair value hedge
1) Gains or losses from hedging instruments are included in profit or loss for the current period. If hedg-
ing instruments are hedged against non-tradable equity instruments (or their components) that are se-
lected to be measured at fair value and whose changes are included in other comprehensive income,
the gains or losses generated by the hedging instruments are included in other comprehensive income.
2) Profit or loss for the current period of the hedged item due to risk exposure is calculated as profit or
loss for the current period, while adjusting the carrying amount of the confirmed hedged item not meas-
ured at fair value. Hedged items are debt instruments (or their components) that are measured at fair
value and whose changes are included in other comprehensive income. The gains or losses resulting
from the hedged risk exposure are included in profit or loss for the current period, without adjustment its
carrying amount; If the hedged item is a non-tradable equity instrument investment (or its component)
measured at fair value and its changes are included in other comprehensive income, the gain or loss
resulting from the hedged risk exposure is included in other comprehensive income, not adjusting its
carrying amount.
If the hedged item is an unrecognized commitment (or its component), the cumulative change in fair
value due to the hedged risk after the hedge relationship is designated is recognized as an asset or
liability, and the relevant gains or losses are included profit or loss for each relevant period. When ful-
filling the definite commitment to obtain assets or assume liabilities, the initial recognition amount of the
asset or liability is adjusted to include the cumulative change in the fair value of the confirmed hedged
item.
If the hedged item is a financial instrument (or a component thereof) measured at amortized cost, the
adjustment made by the Company to the carrying amount of the hedged item will be amortized at the
actual interest rate recalculated on the amortization date and included in profit or loss for the current
period. If the hedged item is a debt instrument measured at fair value and its changes are included in
other comprehensive income (components thereof), the accumulated recognized hedging gains or loss-
es are amortized in the same manner and included in profit or loss for the current period, but does not
adjust the carrying amount of the debt instrument (or its components).
(2) Cash flow hedge
1) The part of the hedging instrument gains or losses that belongs to the effective hedging is included in
other comprehensive income as a cash flow hedge reserve, and the invalid part is included in profit or
loss for the current period. The amount of cash flow hedge reserve is recognised according to the lower
of the absolute value of the following two items:①Accumulated gains or losses of hedging instruments
since hedging;②The cumulative change in the present value of the expected future cash flow of the
hedged item since hedging.
2) The hedged item is an expected transaction, and the expected transaction causes the Company to
subsequently recognize a non-financial asset or non-financial liability, or the expected transaction of
non-financial assets and non-financial liabilities forms a certain commitment applicable to fair value
hedge accounting, the Company transfers out the cash flow hedging reserve amount originally recog-
nized in other comprehensive income and includes it in the initial recognition amount of the asset or
liability.
3) Other cash flow hedges, the amount of cash flow hedge reserves originally included in other compre-
hensive income, are transferred out during the same period when the hedged expected transaction af-
fects profit or loss, and are included in profit or loss for the current period.
(3) Net investment hedges for overseas operations
The portion of the gains or losses formed by hedging instruments that are effective hedges is included in
other comprehensive income, and when disposing of overseas operations, they are transferred out and
included in profit or loss for the current period The part of the loss that belongs to the invalid hedge is
included in profit or loss for the current period.
(33) Treasury shares
Repurchase the Company’s shares for reasons such as reducing registered capital or rewarding em-
ployees. Before cancellation or transfer, they are managed as treasury shares. The amount actually
paid is used as the cost of treasury shares, reducing owners ’equity and conducting registration for ref-
erence. If the treasury shares is transferred, the difference between the amount actually received and
the amount of treasury shares booked is included in the capital reserve. If the capital reserve is insuffi-
cient to offset, the retained earnings are offset. If the treasury shares are cancelled, share capital is re-
duced by the par value of the stock and the number of shares cancelled, and the capital reserve is offset
by the difference between the book balance of the cancelled treasury shares and the face value. If the
capital reserve is insufficient, the retained earnings are offset. When repurchasing, transferring or can-
celing the Company's shares, no gains or losses are recognized.
(34) Restricted shares
In the equity incentive plan, the Company grants restricted stock to the motivated employee. The moti-
vated employee subscribes for the stock first. If the unlocking conditions specified in the equity incentive
plan are not subsequently met, the Company repurchases the stock at the price agreed in advance. If
the restricted stock issued to employees has completed the capital increase procedures such as regis-
tration according to relevant regulations, on the grant date, the Company will recognise the share capital
and capital reserve (Share capital premium) based on the subscription paid by the employees. Treasury
shares and other payables are recognize for the repurchase obligations.
(35) Significant accounting judgments and estimates
In the process of applying the accounting policy of the Company, due to the inherent uncertainty of the
operating activities, the Company needs to make judgments, estimates and assumptions on the carrying
amount of the report items that cannot be accurately measured. These judgments, estimates and as-
sumptions are based on the Company's management's past historical experience and made on the ba-
sis of considering other relevant factors. These judgments, estimates and assumptions will affect the
reported amount of income, expenses, assets and liabilities and the disclosure of contingent liabilities on
the balance sheet date. However, the actual results caused by the uncertainty of these estimates may
be different from the current estimates of the Company's management, which will cause significant ad-
justments to the carrying amount of assets or liabilities affected in the future. The Company regularly
reviews the aforementioned judgments, estimates and assumptions on the basis of continuous opera-
tion. If the changes in accounting estimates only affect the current period of change, the number of im-
pacts will be recognised in the current period of change. If the changes affect both the current period
and the future period, the number of impacts will be confirmed in the current period and future period of
change. As of the balance sheet date, the Company needs to make judgments, estimates and assump-
tions on the financial statement items as follows:
1. Classification of lease
The Company classifies leases as operating leases and financing leases in accordance with the provi-
sions of ”Accounting Standards for Business Enterprises No.21-Leases”. At the time of classification,
management needs to make analysis and judgment in determining whether all risks and rewards related
to ownership of leased assets have been substantially transferred to the lessee, or whether the Compa-
ny has substantially assumed all risks and rewards related to ownership of leased assets.
2. Impairment of financial instruments
The Company uses the expected credit loss model to assess impairment of receivables and debt in-
vestments measured at amortized cost, receivables financing measured at fair value and changes in-
cluded in other comprehensive income, and other debt investments. The use of the expected credit loss
model involves significant management judgments and estimates. The key parameters of expected
credit loss measurement include default probability, default loss rate and default risk exposure. The
Company considers the quantitative analysis of historical statistical data and forward-looking information
to establish default probability, default loss rate and default risk exposure model. The difference be-
tween the actual financial instrument impairment result and the original estimate will affect the carrying
amount of the financial instrument and the accrual or reversal of credit impairment losses during the
period when the estimate is changed.
3. Provision for decline in value in inventories
According to Inventories accounting policy, the Company measures according to the lower of cost and
net realizable value. For inventories whose cost is higher than net realizable value and obsolete and
unsalable, provision for decline in value of inventories is recognized. Impairment to net realizable value
is based on the assessment of the marketability of Inventories and its net realizable value. Appraisal of
Inventories impairment requires management to make judgments and estimates based on factors such
as the purpose of holding Inventories and the impact of events after the balance sheet date. The differ-
ence between the actual result and the original estimate will affect the carrying amount of Inventories
and the accrual of Inventory Provision for decline in value or return during the period when the estimate
is changed.
4. Impairment of non-financial non-current assets
On the balance sheet date, the Company judges whether there is any sign of possible impairment of
Non-current assets other than financial assets. For intangible assets with uncertain service life, in addi-
tion to the annual impairment test, when there are signs of impairment, an impairment test is also con-
ducted. Non-current assets other than financial assets are tested for impairment when there are signs
that their book amount is not recoverable.
When the carrying amount of an asset or asset group is higher than the recoverable amount, which is
the higher of the fair value minus the disposal cost and the present value of the expected future cash
flow, it indicates that an impairment has occurred.
The net value of fair value minus disposal expenses is determined by referring to the sales agreement
price or observable market price of similar assets in fair transactions, minus the incremental costs that
can be directly attributed to the disposal of the asset. When predicting the present value of future cash
flows, it is necessary to make a significant judgment on the output, selling price, related operating costs
of the asset (or asset group), and the discount rate used in calculating the present value. When estimat-
ing the recoverable amount, the Company will use all relevant information that can be obtained, includ-
ing the prediction of production, selling price and related operating costs based on reasonable and sup-
portable assumptions.
The Company assesses whether goodwill is impaired at least annually and requires an estimate of the
use value of the asset group to which goodwill is allocated. When estimating the value in use, the Com-
pany needs to estimate the future cash flow from the asset group, and at the same time choose an ap-
propriate discount rate to calculate the present value of the future cash flow.
5. Depreciation and amortization
After considering the residual value of the investment properties, fixed assets and Intangible assets, the
Company depreciates and amortizes it according to the straight-line method during the service life. The
Company regularly reviews the service life to determine the amount of depreciation and amortization
expenses to be included in each reporting period. The service life is determined by the Company based
on the previous experience of similar assets and the expected technical update. If the previous esti-
mates change significantly, the depreciation and amortization expenses will be adjusted in the future.
6. Deferred tax assets
To the extent that there is likely to be enough taxable profits to offset losses, the Company recognizes
deferred tax assets for all unutilized tax losses. This requires the Company's management to use a lot
of judgment to estimate the time and amount of future taxable profits, combined with tax planning strat-
egies to determine the amount of deferred tax assets that should be recognised.
7. Income tax
In the normal business activities of the Company, there are certain uncertainties in the final tax treat-
ment and calculation of some transactions. Whether certain items can be paid before taxes requires the
approval of the tax authorities. If the final determination result of these tax matters is different from the
originally estimated amount, the difference will have an impact on the current income tax and deferred
income tax during the final determination period.
8. Fair value measurement
Certain assets and liabilities of the Company are measured at fair value in the financial statements.
When estimating the fair value of an asset or liability, the Company uses the observable market data
available; if the Level 1 input value is not available, a third-party qualified assessment agency is em-
ployed for valuation. The Company's management works closely with it to determine the appropriate
valuation techniques and input values for related models. Relevant information about the valuation
techniques and input values used in the process of determining the fair value of various assets and lia-
bilities are disclosed in Note III (X)”Fair Value”.
(36) Explanation of changes in significant accounting policies and accounting estimates
1. Changes in significant accounting policiesContent and reason of changes in accounting policies Approval procedure NoteThe Ministry of Finance issued ”Accounting Standards for Business Enter-
prises No.22-Recognition and Measurement of Financial Instruments (2017
Revision)” (Caihui [2017] No.7) and ”Accounting Standards for Business
Enterprises No.23-” on March 31, 2017 Transfer of Financial Assets (2017
Revision) (Caihui [2017] No.8), ”Accounting Standards for Business Enter- This change was reviewed
prises No.24-Hedging Accounting (2017 Revision)” (Caihui [2017] No.9), and approved by the 44th [Note 1]
May 2017 On the 2nd, ”Accounting Standards for Business Enterprises meeting of the 7th session of
No.37-Presentation of Financial Instruments (2017 Revision)” (Caihui [2017] the Company.
No.14) (the above standards are hereinafter collectively referred to as ”new
financial instrument standards”), requiring domestic listed companies to The
new financial instruments standards will be implemented from January
2019.
This change was reviewed
Changes in financial statement format requirements and approved by the 6th [Note 2]
board of directors of the 8th
session of the Company.
On 9 May 2019, the Ministry of Finance issued the “Notice on Printing and This change was reviewed
Issuing Amendments to” Accounting Standards for Business Enterprises and approved by the 6th
No.7-Exchange of Non-Monetary Assets” (Caihui [2019] No.8, hereinafter board of directors of the 8th [Note 3]
referred to as ”New Non-Monetary Asset Exchange Standards”“) with effec- session of the Company.
tive on 10 June 2019.
On 16 May 2019, the Ministry of Finance issued the “Notice on Printing and This change was reviewed
Revising the” Accounting Standards for Business Enterprises No.12-Debt and approved by the 6th [Note 4]
Restructuring”“ (Caihui [2019] No.9, hereinafter referred to as ”new debt board of directors of the 8th
restructuring standard”), since 2019 It will take effect on 17 June. session of the Company.
[Note 1] The new financial instrument standard changes the classification and measurement of financial
assets under the original standard, and divides financial assets into three categories: measured at
Amortized cost, measured at fair value and its changes included in other comprehensive income, meas-
ured at fair value and its changes include in profit or loss for the current period. The Company considers
the contractual cash flow characteristics of financial assets and its own business model for managing
financial assets to carry out the above classification. Equity investments need to be measured at fair
value and their changes are included in profit or loss for the current period, but for non-trading equity
investments, at initial recognition, they can choose to be measured at fair value and their changes are
included in other comprehensive income. The cumulative gains or losses from other comprehensive
income to retained earnings when the financial assets are derecognized are not included in profit or loss
for the current period.
The new financial instrument standard changes the measurement of impairment of financial assets from
the “incurred loss model” under the original standard to the “expected credit loss model”, which is appli-
cable to financial assets measured at amortised cost, debt instrument investment at fair value through
other comprehensive income, lease receivables and financial guarantee contracts.
In accordance with the relevant provisions of the new financial instruments standards, the Company
does not adjust the financial statements during the comparison period. The difference between the im-
plementation of the new standards and the original standards on the first implementation date retro-
spectively adjusts the retained earnings or other comprehensive income at the beginning of the report-
ing period. For details of the adjustment, please refer to Note III(36) 3, 4 and 5.
[Note 2] On 30 April 2019, the Ministry of Finance issued the “Notice on Revising and Printing the For-
mat of General Enterprise Financial Statements for 2019” (Caihui [2019] No.6, hereinafter referred to
as ”Newly Revised Financial Statement Format for 2019”). The newly revised financial statement format
in 2019 splits the “Note receivables and Accounts receivable” items into two “Note receivables” and ”Ac-
counts receivable” items, and splits the “Notes payable and Accounts payable” items into “Notes paya-
ble” and” Accounts payable “two items are presented; increase the adjustment requirements for report-
ing items that only implement the new financial instrument standards; supplement the” R & D expens-
es ”Accounting scope, and clarify the” R & D expenses “project also includes amortization of self-
development intangible assets included in administrative expenses; Debt restructuring gains and losses
are removed from the ”non-operating income” and ”non-operating expenses” items. In addition, under
the new financial instrument standards, “Interest receivables” and ”Interest payable” only reflect the in-
terest that the relevant financial instrument has due to receive but has not yet received on the balance
sheet date. Interest should be included in the book balance of the corresponding financial instrument.
On 19 September 2019, the Ministry of Finance issued the “Notice on Revising and Printing Consolidat-
ed Financial Statement Format (2019 Version)” (Caihui [2019] No.16, hereinafter referred to as ”2019
newly revised consolidated financial statement format”. The revised consolidated financial statement
format removes the above “Note receivables and Accounts receivable” and “Notes payable and Ac-
counts payable” items, and deletes “cash received from bond issuance” and “for transaction purposes”
in the original consolidated cash flow statement, and the net increase in financial assets held for trading
and other line items.
The Company retroactively adjusted the above accounting policy changes in accordance with the rele-
vant regulations of the ”Accounting Standards for Business Enterprises No.30-Presentation of Financial
Statements” and other relevant regulations. Restatement of financial statements for comparable periods
for changes in other accounting policies. For the financial statement items that are simply merged and
split in the above report format changes, the Company has directly adjusted in the financial statements,
and no longer specifically lists the reclassification adjustments.
[Note 3] The new non-monetary asset exchange standards provide for the adjustment of non-monetary
asset exchanges that occur between 1 January 2019 and the implementation date of this standard, and
retrospective adjustments are not required for non-monetary asset exchanges that occurred before 1
January 2019.
The Company will implement the new non-monetary asset exchange standards as of June 10, 2019,
and will apply the future applicable method to the non-monetary asset exchange that exists on 1 Janu-
ary 2019.
[Note 4] The New Debt Restructuring Standard stipulates that debt restructuring that occurs between 1
January 2019 and the implementation date of this standard will be adjusted according to this standard,
and retrospective adjustments are not required for debt restructuring that occurred before 1 January
2019.
The Company will implement the new debt restructuring standards as of June 17, 2019, and apply the
future applicable method to the debt restructuring existing in 1 January 2019. There are no reporting
items that are significantly affected in this period.
2. Explanation of changes in accounting estimates
The Company has no changes in accounting estimates in this period.
3. Adjustment of beginning financial statements in initial adoption of new financial instrument standards
(1) Consolidated balance sheet
Item 31 December 2018 1 January 2019 Adjustment
Current assets:
Cash and bank balances 12,323,055,110.55 12,420,564,644.97 97,509,534.42
Trading financial assets Not applicable 2,001,478,556.18 2,001,478,556.18
Financial assets measured at fair 44,838,556.18 Not applicable -44,838,556.18
value through profit or loss
Note receivables 4,763,827,043.60 2,509,474.11 -4,761,317,569.49
Accounts receivable 483,777,271.90 483,777,271.90 -
Receivables financing - 4,761,317,569.49 4,761,317,569.49
Prepayments 819,456,842.21 819,456,842.21 -
Other receivables 103,961,284.92 6,451,750.50 -97,509,534.42
Including: Interest receivables 97,509,534.42 - -97,509,534.42
Dividend receivables - - -
Inventories 18,479,143,760.16 18,479,143,760.16 -
Item 31 December 2018 1 January 2019 Adjustment
Other current assets 2,561,325,874.71 604,685,874.71 -1,956,640,000.00
Total current assets 39,579,385,744.23 39,579,385,744.23 -
Non-current assets:
Investment properties 35,926,642.10 35,926,642.10 -
Fixed assets 24,056,286,056.41 24,056,286,056.41 -
Construction in progress 46,007,545,914.76 46,007,545,914.76 -
Intangible assets 4,922,101,800.74 4,922,101,800.74 -
Long-term deferred expenses 49,110,903.57 49,110,903.57 -
Deferred tax assets 27,288,905.76 27,288,905.76 -
Other non-current assets 10,564,815,911.02 10,564,815,911.02 -
Total non-current assets 85,663,076,134.36 85,663,076,134.36 -
Total assets 125,242,461,878.59 125,242,461,878.59 -
Current liabilities:
Short-term loans 22,990,526,338.94 23,014,404,829.68 23,878,490.74
Trading financial liabilities Not applicable 1,009,626.09 1,009,626.09
Financial liabilities measured at 1,009,626.09 Not applicable -1,009,626.09
fair value through profit or loss
Notes payable 10,598,769,315.84 10,598,769,315.84 -
Accounts payable 16,347,245,614.61 16,347,245,614.61 -
Receipts in advance 919,972,893.85 919,972,893.85 -
Employee benefits payable 170,227,063.62 170,227,063.62 -
Taxes payable 66,253,445.10 66,253,445.10 -
Other payables 551,308,898.97 459,576,954.09 -91,731,944.88
Including: Interest payable 91,731,944.88 - -91,731,944.88
Dividend payable 230,000.00 230,000.00 -
Non-current liabilities due within 2,570,424,651.12 2,574,568,257.77 4,143,606.65
one year
Total current liabilities 54,215,737,848.14 54,152,028,000.65 -63,709,847.49
Non-current liabilities:
Long term loans 40,066,594,032.00 40,130,303,879.49 63,709,847.49
Item 31 December 2018 1 January 2019 Adjustment
Long-term payables 42,551,273.01 42,551,273.01 -
Deferred income 2,998,140,418.29 2,998,140,418.29 -
Deferred tax liabilities 11,101,938.09 11,101,938.09 -
Total non-current liabilities 43,118,387,661.39 43,182,097,508.88 63,709,847.49
Total liabilities 97,334,125,509.53 97,334,125,509.53 -
Owners’ equity:
Share capital 5,052,789,925.00 5,052,789,925.00 -
Capital reserve 20,457,672,249.59 20,457,672,249.59 -
Less: Treasury shares 596,200,729.43 596,200,729.43 -
Other comprehensive income 6,637,613.80 6,637,613.80 -
Surplus reserve 579,780,635.33 579,780,635.33 -
Undistributed profits 2,086,993,751.18 2,086,993,751.18 -
Owners’ equity attributable to par- 27,587,673,445.47 27,587,673,445.47 -
ent company
Minority interests 320,662,923.59 320,662,923.59 -
Total owners’ equity 27,908,336,369.06 27,908,336,369.06 -
Total liabilities and owners’ equity 125,242,461,878.59 125,242,461,878.59 -
(2) Parent Company Balance SheetItem 31 December 2018 1 January 2019 AdjustmentCurrent assets:
Cash and bank balances 42,722,298.03 42,722,298.03 -
Prepayments 385,618.81 385,618.81 -
Other receivables 2,301,096,542.72 2,301,096,542.72 -
Including: Interest receiva- - - -
blesDividend receivables 2,299,770,000.00 2,299,770,000.00 -Other current assets 8,427,783.10 8,427,783.10 -Total current assets 2,352,632,242.66 2,352,632,242.66 -Non-current assets:
Long-term equity investments 39,986,726,384.76 39,986,726,384.76 -
Item 31 December 2018 1 January 2019 Adjustment
Fixed assets 1,074,375.48 1,074,375.48 -
Total non-current assets 39,987,800,760.24 39,987,800,760.24 -
Total assets 42,340,433,002.90 42,340,433,002.90 -
Current liabilities:
Accounts payable 200,048.06 200,048.06 -
Employee benefits payable 750,000.00 750,000.00 -
Taxes payable 1,716,154.23 1,716,154.23 -
Other payables 9,748,005,309.70 9,748,005,309.70 -
Including: Interest payable - - -
Dividend payable - - -
Total current liabilities 9,750,671,511.99 9,750,671,511.99 -
Total liabilities 9,750,671,511.99 9,750,671,511.99 -
Owners’ equity:
Share capital 5,052,789,925.00 5,052,789,925.00 -
Capital reserve 25,766,635,420.47 25,766,635,420.47 -
Less: Treasury shares 596,200,729.43 596,200,729.43 -
Surplus reserve 406,167,846.53 406,167,846.53 -
Undistributed profits 1,960,369,028.34 1,960,369,028.34 -
Total owners’ equity 32,589,761,490.91 32,589,761,490.91 -
Total liabilities and owners’ equity 42,340,433,002.90 42,340,433,002.90 -
4. Information on adjustment of initial adoption of new financial instrument standards
(1) Comparison of classification and measurement of financial assets before and after the initial adop-tion of new financial instrument standards:
Measurement of financial instrument before stand- Measurement of financial instrument after stand-
Financial assets ards revision ards revision
category Measurement category Carrying value Measurement category Carrying value
Cash and bank Amortized cost (Loans 12,323,055,110.55 Amortized cost 12,420,564,644.97
balances and receivables)
Amortized cost 492,738,496.51
Receivables Amortized cost (Loans 5,351,565,600.42 Measured at fair value
and receivables) through other compre- 4,761,317,569.49
hensive income (Standard
Measurement of financial instrument before stand- Measurement of financial instrument after stand-
Financial assets ards revision ards revision
category Measurement category Carrying value Measurement category Carrying value
requirement)
Trading financial Measured at fair value Measured at fair value
assets through profit or loss 44,838,556.18 through profit or loss 44,838,556.18
(trading) (Standard requirement)
Measured at fair value Measured at fair value
Securities invest- through Other compre- through profit or loss for
ment hensive income (Availa- 1,956,640,000.00 the current period (Stand- 1,956,640,000.00
ble-for-sale Equity instru- ard requirement)
ments)
(2) Adjustment table on classification and measurement of the original carrying value of the Company'sfinancial assets to the new carrying value by the revised financial instrument standards on the initial adoptiondate:
Carrying value accord- Carrying value ac-
ing to original financial cording to new fi-
Item instrument standards Reclassification Remeasurement nancial instrument
(31 December 2018) standards
(1 January 2019)
Amortized cost
Cash and bank balances
Balance presented under 12,323,055,110.55
CAS22
Add: transfer from assets
under amortized cost 97,509,534.42
(CAS22)
Balance presented under 12,420,564,644.97
new CAS22
Receivables
Balance presented under 5,351,565,600.42
CAS22
Less: transfer out to amor- -97,509,534.42
tized cost (New CAS22)
Less: transfer to financial
assets at fair value -4,761,317,569.49
through other comprehen-
sive income(New CAS22)
Balance presented under 492,738,496.51
new CAS22
Carrying value accord- Carrying value ac-
ing to original financial cording to new fi-
Item instrument standards Reclassification Remeasurement nancial instrument
(31 December 2018) standards
(1 January 2019)
Securities investment——
Amortized cost
Balance presented under 1,956,640,000.00
CAS22
Less: transfer to measured
at fair value through profit -1,956,640,000.00
or loss (New CAS22)
Balance presented under -
new CAS22
Total financial assets
measured in amortized 19,631,260,710.97 -6,717,957,569.49 - 12,913,303,141.48
cost
Measured at fair value through profit or loss
Trading financial assets
Balance presented under
CAS22 和 Balance pre- 44,838,556.18 44,838,556.18
sented under new CAS22
Securities investment -
measured at fair value
through profit or loss
(mandatory by standards)
Balance presented under
CAS22
Add: transfer from availa- 1,956,640,000.00
ble-for-sale (old CAS22)
Balance presented under 1,956,640,000.00
new CAS22
Total financial assets
measured at fair value 44,838,556.18 1,956,640,000.00 - 2,001,478,556.18
through profit or loss
Carrying value accord- Carrying value ac-
ing to original financial cording to new fi-
Item instrument standards Reclassification Remeasurement nancial instrument
(31 December 2018) standards
(1 January 2019)
Measured at fair value through other comprehensive income
Receivables
Balance presented under
CAS22
Add: transfer from amor- 4,761,317,569.49
tized cost (old CAS22)
Balance presented under 4,761,317,569.49
new CAS22
Total financial assets
measured at fair value - 4,761,317,569.49 - 4,761,317,569.49
through other comprehen-
sive income
IV. Taxation
(1) Major taxes and tax rateTaxes Tax basis Tax rate
The taxable income is calculated at 6%,
9%, 10%, 13%, 16% of the output tax, and
the value-added tax is calculated based on
Value-added tax Value added during sales of goods or provision the difference after deducting the input tax
of taxable services allowed for the current period. Export
goods enjoy the “exemption, credit, refund”
policy, the tax rebate rate of 9%, 13%,
16% [Note 1]
Gas: RMB 1.52 per liter
Fuel oil: RMB 1.52 per liter
Consumption tax Taxable sales quantity Diesel: RMB 1.20 per liter
Aviation kerosene: RMB 1.20 per li-
ter(Suspension of collection)
Urban maintenance Subject to turnover tax 7%, 5%
and construction tax
Educational sur- Subject to turnover tax 3%
charge
Local education sur- Subject to turnover tax 2%
Taxes Tax basis Tax rate
charges
Corporate income tax Taxable profit [Note 2]
[Note 1]: According to the Announcement of the Ministry of Finance, the State Administration of Taxation,
and the General Administration of Customs on Deepening the Reform of Value-added Tax Policies (Min-
istry of Finance, State Administration of Taxation, and General Administration of Customs Announce-
ment No.39 of 2019), as of April 1, 2019 If the taxpayer has value-added tax taxable sales or imported
goods, the original 16% and 10% tax rates are applied, and the tax rates are adjusted to 13% and 9%,
respectively; the original 16% tax rate and export tax rebate rate of 16% for exports. For goods, the ex-
port tax rebate rate is adjusted to 13%; for export goods and cross-border taxable acts that originally
applied a 10% tax rate and an export tax rebate rate of 10%, the export tax rebate rate is adjusted to
9%.
[Note 2]: Description of corporate income tax rates for taxpayers with different tax rates
Name of taxpayer Corporate tax rate
The Company 25%
Jiangsu Hengli Chemical Fiber Co., Ltd. 15%
Jiangsu Deli Chemical Fiber Co., Ltd. 15%
Jiangsu Hengke Advanced Materials Co. Ltd. 15%
Yingkou Kanghui Petrochemical Co., Ltd. 15%
HENGLI PETROCHEMICAL CO., LIMITED 16.5%
HENGLI PETROCHEMICAL INTERNATIONAL PTE. LTD. 10%
HENGLI OILCHEM PTE. LTD. 17%
HENGLI SHIPPING INTERNATIONAL PTE. LTD. 17%
Taxpayers other than the above 25%
(2) Tax incentives and approvalsThe subsidiary, Jiangsu Hengli Chemical Fiber Co., Ltd., holds the “High-tech Enterprise Certificate”(No . : GF201832003953), valid for three years, issued by the Jiangsu Provincial Department of Scienceand Technology, the Jiangsu Provincial Department of Finance, and the Jiangsu State Taxation Bureauon November 28, 2018. The corporate income tax rate for this year is reduced by 15%.
The subsidiary, Jiangsu Hengke Advanced Materials Co. Ltd., holds the “High-tech Enterprise Certifi-
cate” (No. ) issued by the Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial
Department of Finance, Jiangsu State Taxation Bureau, and Jiangsu Local Taxation Bureau on Novem-
ber 30, 2016 : GR201632001488), valid for three years; holds the “High-tech Enterprise Certificate”
(No . : GR201932003945) issued by the Jiangsu Provincial Department of Science and Technology,
Jiangsu Provincial Department of Finance, and the State Administration of Taxation Jiangsu Provincial
Taxation Bureau on November 22, 2019 (number: GR201932003945), valid for three years. The corpo-
rate income tax rate for this year is reduced by 15%.
The subsidiary Jiangsu Deli Chemical Fiber Co., Ltd. holds the “High-tech Enterprise Certificate” issued
by the Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial Department of
Finance, Jiangsu State Taxation Bureau, and Jiangsu Provincial Local Taxation Bureau on November 17,
2017 ( No. : GR201732000802), valid for three years, and the corporate income tax rate for this year is
reduced by 15%.
The subsidiary Yingkou Kanghui Petrochemical Co., Ltd. holds the “High-tech Enterprise Certificate” (No.
GR201821000268) issued by the Liaoning Provincial Department of Science and Technology, Liaoning
Provincial Department of Finance, State Administration of Taxation Liaoning Provincial Taxation Bureau
on October 12, 2018, valid for three years, and the corporate income tax rate for this year is reduced by
15%.
Place of registration of HENGLI PETROCHEMICAL INTERNATIONAL PTE. LTD. is Singapore, the in-
come tax rate is 17%. It was approved to enter the Singapore global trader project on September 1,
2018, and enjoy Income tax rate of 10% from September 1, 2018 to August 31, 2021.
V. Note to items of consolidated financial statementsUnless otherwise specified, the following notes refer to the beginning balance as at 1 January 2019, theclosing balance as at 31 December 2019; the current period refers to year 2019, and the previous yearrefers to year 2018. The unit of amount is RMB.
(1) Cash and bank balances
1. Detail informationItem Closing balance Beginning balanceCash in hand 846,525.35 531,554.99Cash at bank 11,787,898,202.01 10,422,702,740.00Other monetary funds 4,696,059,835.86 1,899,820,815.56Interest receivables not yet due 23,695,986.31 97,509,534.42Total 16,508,500,549.53 12,420,564,644.97Including: Total amount deposited 1,135,854,797.46 182,177,455.50
abroad
As of 31 December 2019, the Company's time deposits with financial institutions were RMB995,762,000.00 (31 December 2018: RMB 2,470,000,000.00).
2. Detail of other monetary fundsItem Closing balance Beginning balanceShort-term loans security deposits 1,923,574,761.86 47,936,102.09Acceptance bills security deposits 105,326,240.23 857,664,240.23Letter of credit security deposits 2,667,158,833.77 911,605,692.21Lett of guarantee security deposits - 1,232,500.08Others - 81,382,280.95Total 4,696,059,835.86 1,899,820,815.56
3. For details of cash and bank balances in foreign currency, please refer to the description of “Items inforeign currencies” in Note V (56).
(2) Trading financial assets
1. Detailed informationItem Closing balance Beginning balanceFinancial assets measured at fair value 2,631,832,271.61 2,001,478,556.18
through profit or loss
Including: Derivative financial assets 75,715,539.31 44,838,556.18
Bank wealth management and 2,556,116,732.30 1,956,640,000.00
structured deposits
Total 2,631,832,271.61 2,001,478,556.18
2. Other note
The Company's derivative financial assets are commodity futures contracts.
(3) Note receivables
1. Detailed informationCategory Closing balance Beginning balanceCommercial acceptance bills 18,208,570.22 2,641,551.70Subtotal of book balance 18,208,570.22 2,641,551.70Less: Provision for bad debts 910,428.51 132,077.59Total carrying value 17,298,141.71 2,509,474.11
2. Classified disclosure according to bad debt provision method
Closing balance
Category Book balance Provision for bad debts
Amount Ratio (%) Amount Provision ratio Carrying amount
(%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on 18,208,570.22 100.00 910,428.51 5.00 17,298,141.71
groups
Total 18,208,570.22 100.00 910,428.51 5.00 17,298,141.71
Continued:
Beginning balance
Category Book balance Provision for bad debts
Amount Ratio (%) Amount Provision Carrying amount
ratio (%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on 2,641,551.70 100.00 132,077.59 0.02 2,509,474.11
groups
Total 2,641,551.70 100.00 132,077.59 0.02 2,509,474.11
3. Detailed information of provision for bad debts
(1) Provision for bad debts on groups of note receivables at year endGroup Book balance Provision for bad debts Provision ratio (%)Commercial acceptance bills 18,208,570.22 910,428.51 5.00
4. Provision, recovery or reversal of provision for bad debts in the year
(1) Provision for bad debts for the year
Beginning bal- Movement in the year
Category Recovery or Closing balanceance Accrual Write-off
reversal
Provision for bad debts 132,077.59 778,350.92 - - 910,428.51
on groups
(4) Accounts receivable
1. Disclosure by ageingAgeing Closing balanceWithin 1 year 637,697,171.00Ageing Closing balance1-2 years 66,623,354.052-3 years 5,763,131.703-4 years 36.224-5 years 227.57Over 5 years 114.58Subtotal of book balance 710,084,035.12Less: Provision for bad debts 34,684,520.32Total carrying amount 675,399,514.80
2. Disclosure by bad debt provision method
Closing balance
Category Book balance Provision for bad debts
Amount Ratio (%) Amount Provision Carrying amount
ratio (%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on 710,084,035.12 100.00 34,684,520.32 4.88 675,399,514.80
groups
Total 710,084,035.12 100.00 34,684,520.32 4.88 675,399,514.80
Continued:
Beginning balance
Category Book balance Provision for bad debts
Amount Ratio (%) Amount Provision Carrying amount
ratio (%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on 511,089,550.32 100.00 27,312,278.42 5.34 483,777,271.90
groups
Total 511,089,550.32 100.00 27,312,278.42 5.34 483,777,271.90
3. Information of provision for bad debts
(1) No provision for bad debts on individual item of accounts receivable at year end
(2) Provision for bad debts on groups of accounts receivable at year endGroup Book balance Provision for bad debts Provision ratio (%)Group of high credit rating 256,611,746.34 - -Ageing analysis group 453,472,288.78 34,684,520.32 7.65Group Book balance Provision for bad debts Provision ratio (%)Subtotal 710,084,035.12 34,684,520.32 4.88
Including: Ageing groupAgeing Book balance Provision for bad debts Provision ratio (%)Within 1 year 381,085,424.66 19,054,271.22 5.001-2 years 66,623,354.05 13,324,670.81 20.002-3 years 5,763,131.70 2,305,252.68 40.003-4 years 36.22 28.97 80.004-5 years 227.57 182.06 80.00Over 5 years 114.58 114.58 100.00Subtotal 453,472,288.78 34,684,520.32 7.65
(3) No loss allowance for significant changes in book balance in the year
4. Provision, recovery or reversal of provision for bad debts in the year
(1) Provision for bad debts in the year
Movement in the year
Category Beginning balance Recovery or Closing balance
Accrual reversal Write-off
Provision for bad 27,312,278.42 7,680,222.90 - 307,981.00 34,684,520.32
debts on groups
5. Accounts receivable actually written off in this periodItem Written-off amountActually written off of Accounts receivable 307,981.00
6. Top 5 accounts receivable at year end
The Company’s top five year-end balances for accounts receivable in total of RMB 404,573,645.07, ac-counting for 56.98% of the total account balance of year-end balances of accounts receivable, and the corre-sponding year-end balance of provision for bad debts is RMB 6,688,429.54.
7. For details of accounts receivable in foreign currency at year end, please refer to the “Items in for-eign currencies” in Note V(56).
(5) Receivables financing
1. Detailed informationItem Closing balance Beginning balanceBank acceptance bills 3,003,185,995.06 4,203,001,057.25Letter of credit 255,456,431.53 549,716,512.24Item Closing balance Beginning balanceLetter of guarantee 9,400,000.00 8,600,000.00Total 3,268,042,426.59 4,761,317,569.49
2. Changes and fair value changes of receivables financingItem Beginning balance Change in cost in the Change in fair value Closing balance
year in the year
Bank acceptance bills 4,203,001,057.25 -1,199,815,062.19 - 3,003,185,995.06
Letter of credit 549,716,512.24 -294,260,080.71 - 255,456,431.53
Letter of guarantee 8,600,000.00 800,000.00 - 9,400,000.00
Total 4,761,317,569.49 -1,493,275,142.90 - 3,268,042,426.59
Continued:
Loss allowance recog-
Item Beginning cost Closing cost Cumulative change in nized as accumulated in
fair value other comprehensive
income
Bank acceptance bills 4,203,001,057.25 3,003,185,995.06 - -
Letter of credit 549,716,512.24 255,456,431.53 - -
Letter of guarantee 8,600,000.00 9,400,000.00 - -
Total 4,761,317,569.49 3,268,042,426.59 - -
Receivables financing of the Company at the end of the period is mainly bank acceptance bills and let-ter of credit, etc. The remaining term is short, and it is mainly used for endorsement payment or due collec-tion, and its book balance is close to the fair value.
3. Information of provision for bad debts
(1) No provision for bad debts on individual item of receivables financing at year end
(2) Provision for bad debts on groups of receivables financing at year endGroup Book balance Provision for bad debts Provision ratio (%)Low risk group 3,268,042,426.59 - -
(3) No loss allowance for significant changes in book balance in the year
4. Pledged receivables financing at year endItem Amount pledged at year endBank acceptance bills 2,344,075,515.01Letter of credit 80,662,184.52Subtotal 2,424,737,699.53
5. Receivables financing that the Company has endorsed or discounted at the end of the period andhas not yet expired on the balance sheet date
Item Derecognised amount at year end Not derecognised amount at year end
Bank acceptance bills 7,829,616,101.90 -
Letter of credit 82,187,020.65
Letter of guarantee 19,850,000.00 -
Subtotal 7,931,653,122.55 -
6. For details of receivables financing in foreign currency at year end, please refer to the “Items in for-eign currencies” in Note V(56).
(6) Prepayments
1. Ageing analysis
Closing balance Beginning balance
Ageing
Amount Ratio (%) Amount Ratio (%)
Within 1 year 907,462,552.47 99.70 817,762,511.97 99.79
1-2 years 1,394,474.91 0.15 329,326.34 0.04
2-3 years 275,326.34 0.03 638,007.68 0.08
Over 3 years 1,108,636.96 0.12 726,996.22 0.09
Total 910,240,990.68 100.00 819,456,842.21 100.00
2. Top 5 prepayments amount
The top five of the Company's prepayments balance at year end is in total of RMB 515,543,576.62,which accounted for 56.64% of the prepayments balance.
3. At the end of the period, there was no significant prepayments with aging over 1 year.
4. At the end of the period, there was no obvious indication of impairment in prepayments, so there wasno provision for impairment.
(7) Other receivables
1. Detailed information
Closing balance Beginning balance
Item Provision for bad Provision for bad
Book balance Carrying amount Book balance Carrying amount
debts debts
Interest receivables - - - - - -
Dividend receivables - - - - - -
Other receivables 1,204,997,020.22 5,092,917.39 1,199,904,102.83 7,398,276.00 946,525.50 6,451,750.50
Total 1,204,997,020.22 5,092,917.39 1,199,904,102.83 7,398,276.00 946,525.50 6,451,750.50
2. Other receivables
(1) Disclosure by ageingAgeing Closing balanceWithin 1 year 1,203,641,930.921-2 years 329,118.152-3 years 411,788.653-4 years 63.484-5 years 600,000.00Over 5 years 14,119.02Subtotal of book balance 1,204,997,020.22Less: Provision for bad debts 5,092,917.39Subtotal of carrying amount 1,199,904,102.83
(2) Disclosure by natureNature Closing balance Beginning balanceDeposits and security deposits 82,087,603.05 2,976,095.40Petty cash 1,343,763.26 595,753.30Tax refund receivable 1,116,277,761.17 719,769.22Current accounts - 21,654.59Others 5,287,892.74 3,085,003.49Subtotal of book balance 1,204,997,020.22 7,398,276.00Less: Provision for bad debts 5,092,917.39 946,525.50Subtotal of carrying amount 1,199,904,102.83 6,451,750.50
(3) Information of provision for bad debts
Stage 1 Stage 2 Stage 3
Expected credit Expected credit
Provision for bad debts Expected credit loss for the lifetime loss for the lifetime Subtotal
losses in the next (no credit impair- (credit impairment
12 months ment occurred) has occurred)
Balance of 1 January 2019 - 946,525.50 - 946,525.50
Balance of 1 January 2019
movement in the year
-- transfer to Stage 2 - - - -
-- transfer to Stage 3 - - - -
-- transfer back to Stage 2 - - - -
-- transfer back to Stage 1 - - - -
Accrual for the year - 4,180,241.86 - 4,146,391.89
Recovery or reversal for the year - - - -
Write-off for the year - 33,849.97 - -
Other movement - - - -
Balance of 31 December 2019 - 5,092,917.39 - 5,092,917.39
Basis in provision for bad debt for the year and evaluation of whether significant increase in credit riskof financial instruments :
The basis, input values, assumptions and other information used to determine the provision for baddebts amount and the assessment of whether the credit risk of financial instruments have increased signifi-cantly since initial confirmation are detailed in Note 8 (2) Credit Risk.
(4) Provision for bad debts on groups of other receivables at year endGroup Book balance Provision for bad debts Provision ratio (%)Ageing group 88,719,259.05 5,092,917.39 5.74Group of government re- 1,116,277,761.17 - -
ceivables
Subtotal 1,204,997,020.22 5,092,917.39 0.42
Including: Ageing groupAgeing Book balance Provision for bad debts Provision ratio (%)Within 1 year 87,364,169.75 4,368,208.50 5.001-2 years 329,118.15 65,823.63 20.002-3 years 411,788.65 164,715.46 40.003-4 years 63.48 50.78 80.004-5 years 600,000.00 480,000.00 80.00Over 5 years 14,119.02 14,119.02 100.00Subtotal 88,719,259.05 5,092,917.39 5.74
(5) Provision, recovery or reversal of provision for bad debts in the year
Provision for bad debts in the year
Movement in the year
Category Beginning balance Recovery or Closing balance
Accrual reversal Write-off
Provision for bad 946,525.50 4,180,241.86 - 33,849.97 5,092,917.39
debts on groups
(6) There are no other receivables actually written off in the year.
(7) Top 5 other receivables amount at the end of the period
The Company’s top five year-end balances of other receivables in total is RMB 1,197,857,650.79, ac-counting for 99.41% of the total year end balance of other receivables, and the corresponding year-end bal-ance of provision for bad debts is RMB 4,078,994.48.
(8) For details of other receivables in foreign currency at year end, please refer to the “Items in foreigncurrencies” in Note V(56).
(8) Inventories
1. Detailed information
Closing balance
Item Provision for decline in
Book balance value Carrying amount
Raw materials 15,131,261,990.55 3,152,547.02 15,128,109,443.53
Semi-finished 2,593,996,073.85 - 2,593,996,073.85
Finished goods 1,497,344,430.00 3,061,563.68 1,494,282,866.32
Issued goods 214,135,290.54 150,975.43 213,984,315.11
Reusable materials 33,647,096.33 - 33,647,096.33
Total 19,470,384,881.27 6,365,086.13 19,464,019,795.14
Continued:
Beginning balance
Item Provision for decline in
Book balance value Carrying amount
Raw materials 15,487,520,635.57 5,891,801.16 15,481,628,834.41
Finished goods 2,998,972,485.50 41,501,139.64 2,957,471,345.86
Issued goods 26,917,253.95 879,849.28 26,037,404.67
Subcontracting materials 2,220,388.02 - 2,220,388.02
Reusable materials 11,785,787.20 - 11,785,787.20
Total 18,527,416,550.24 48,272,790.08 18,479,143,760.16
[Note] At the end of the period, the carrying amount of inventories used for debt guarantee was RMB505,800,000.00.
2. Provision for decline in value of inventories
(1) Movement for the yearCategory Beginning bal- Increase Decrease Closing balance
ance Accrual Other Reversal or written off Other
Raw materials 5,891,801.16 3,152,547.02 - 5,891,801.16 - 3,152,547.02
Finished goods 41,501,139.64 3,061,563.68 - 41,501,139.64 - 3,061,563.68
Issued goods 879,849.28 150,975.43 - 879,849.28 - 150,975.43
Subtotal 48,272,790.08 6,365,086.13 - 48,272,790.08 - 6,365,086.13
(2) Provision or reversal in the yearCategory Specific basis for determining net Reason of reversal in the year Proportion of reversal to the
realizable value total provision (%)
Raw materials Net realizable value is lower than - -
cost
Finished goods Net realizable value is lower than - -
cost
Issued goods Net realizable value is lower than - -
cost
3. No capitalized interest in the Inventories balance at the end of the period.
(9) Other current assets
1. Detailed information
Closing balance Beginning balance
Item Provision for Provision for
Book balance impairment Carrying amount Book balance impairment Carrying amount
Value-added tax 702,615,213.69 - 702,615,213.69 193,691,760.43 - 193,691,760.43
carried forward
Input value-added
tax pending for 407,367,269.55 - 407,367,269.55 256,460,016.26 - 256,460,016.26
verification
Input value-added
tax pending for 7,500,637,614.94 - 7,500,637,614.94 154,145,501.44 - 154,145,501.44
deduction
Consumption tax - - - 388,596.58 - 388,596.58
deductible amount
Prepaid corporate 8,299,973.22 - 8,299,973.22 - - -
income tax
Total 8,618,920,071.40 - 8,618,920,071.40 604,685,874.71 - 604,685,874.71
2. Reason and basis of provision for impairment
At the end of the period, there were no obvious indication of impairment of other current assets, so noprovision for impairment was provided.
(10) Investment properties
1. Detailed informationItem Property and buildings Land use rights Total(1) Book value
Beginning balance 33,017,251.52 8,090,841.84 41,108,093.36Item Property and buildings Land use rights Total
Increase - - -
Decrease - - -
Closing balance 33,017,251.52 8,090,841.84 41,108,093.36(2) Accumulated depreciation / amor-
tization
Beginning balance 4,704,687.85 476,763.41 5,181,451.26
Increase 1,514,773.52 161,816.83 1,676,590.35
1) Charge for the year 1,514,773.52 161,816.83 1,676,590.35
Decrease -
Closing balance 6,219,461.37 638,580.24 6,858,041.61(3) Carrying amount
Beginning balance 28,312,563.67 7,614,078.43 35,926,642.10
Closing balance 26,797,790.15 7,452,261.60 34,250,051.75
2. At the end of the period, there were no obvious indication of impairment of investment properties, sono provision for impairment was provided.
3. At the end of the period, details of investment properties used as mortgage guarantee refer to NoteV(55) of the financial statements.
4. Description of investment properties without completed property rights certificate
Reasons for not com- Estimated date to
Item Book value Carrying amount pleted property right complete the title
certificate certificate
Property and 27,390,000.00 22,186,338.24 Application in process Expected in 2020
buildings
Subtotal 27,390,000.00 22,186,338.24 - -
(11) Fixed assets
1. Detailed informationItem Closing balance Beginning balanceFixed assets 83,075,260,115.62 24,056,286,056.41
2. Fixed assets
(1) Detailed information
Transportation
Item Property and buildings Specific equipment General equipment Ship Total
equipment
Transportation
Item Property and buildings Specific equipment General equipment Ship Total
equipment
(1) Book value
Beginning balance 11,741,292,582.98 24,876,854,233.08 310,638,127.60 300,943,678.03 494,014,057.09 37,723,742,678.78
Increase 11,951,053,758.33 51,330,345,751.40 40,364,321.27 84,768,444.48 - 63,406,532,275.48
1) Purchased - 605,752,325.67 40,364,321.27 84,768,444.48 - 730,885,091.42
2) Transfer from
Construction in 11,951,053,758.33 50,724,593,425.73 - - - 62,675,647,184.06
progress
Decrease 12,641,411.78 1,302,585,020.29 305,505.54 3,537,701.00 - 1,319,069,638.61
1) Disposal 12,641,411.78 1,302,585,020.29 305,505.54 3,537,701.00 - 1,319,069,638.61
2) Other - - - - - -
Closing balance 23,679,704,929.53 74,904,614,964.19 350,696,943.33 382,174,421.51 494,014,057.09 99,811,205,315.65(2) Accumulated deprecia-
tion/amortization
Beginning balance 2,526,848,398.45 10,665,399,368.94 209,047,859.75 208,926,598.97 57,234,396.26 13,667,456,622.37
Increase 779,224,275.23 2,796,124,273.51 40,975,390.08 45,217,623.95 14,461,401.41 3,676,002,964.18
1) Charge for the
779,224,275.23 2,796,124,273.51 40,975,390.08 45,217,623.95 14,461,401.41 3,676,002,964.18
year
2) Other - - -
Decrease 3,121,296.65 600,802,216.86 292,576.31 3,298,296.70 607,514,386.52
1) Disposal 3,121,296.65 600,802,216.86 292,576.31 3,298,296.70 607,514,386.52
2) Other - - - - -
Closing balance 3,302,951,377.03 12,860,721,425.59 249,730,673.52 250,845,926.22 71,695,797.67 16,735,945,200.03(3) Carrying amount
Beginning balance 9,214,444,184.53 14,211,454,864.14 101,590,267.85 92,017,079.06 436,779,660.83 24,056,286,056.41
Closing balance 20,376,753,552.50 62,043,893,538.60 100,966,269.81 131,328,495.29 422,318,259.42 83,075,260,115.62
[Note] At the end of the period, fixed assets with cost of RMB 5,377,762,051.19 had been fully depre-ciated and still in use.
(2) At the end of the period, there were no obvious indication of impairment of fixed assets, so no provi-sion for impairment was provided.
(3) Fixed assets under finance leaseCategory Book value Accumulated depreci- Provision for impair- Carrying amount
ation ment
Machinery and 1,284,637,714.18 695,810,245.42 - 588,827,468.76
Category Book value Accumulated depreci- Provision for impair- Carrying amount
ation ment
equipment
Ship 270,023,196.30 42,305,194.38 - 227,718,001.92
Subtotal 1,554,660,910.48 738,115,439.80 - 816,545,470.68
(4) At the end of the period, there was no fixed assets leased out under operating lease.
(5) Description of fixed assets without completed property rights certificate
Reasons for not com- Estimated date to
Item Book value Carrying amount pleted property right complete the title
certificate certificate
Property and build- 11,073,832,960.72 10,750,799,375.96 Application in process Expected in 2020
ings
Subtotal 11,073,832,960.72 10,750,799,375.96
(7) At the end of the period, details of fixed assets used as mortgage guarantee refer to Note V(55) ofthe financial statements.
(12) Construction in progress
1. Detailed information
Closing balance Beginning balance
Item Provision
Provision for
Book balance Carrying amount Book balance for impair- Carrying amount
impairment
ment
Construction in progress 23,716,409,237.09 - 23,716,409,237.09 44,219,631,544.39 - 44,219,631,544.39
Construction materials 574,124,479.53 - 574,124,479.53 1,787,914,370.37 - 1,787,914,370.37
Total 24,290,533,716.62 - 24,290,533,716.62 46,007,545,914.76 - 46,007,545,914.76
2. Construction in progress
(1) Detailed information
Closing balance Beginning balance
Project name Provision
Provision for
Book balance Carrying amount Book balance for impair- Carrying amount
impairment
ment
20 million tons / year
refining and chemical 209,027,802.58 - 209,027,802.58 42,738,950,147.78 - 42,738,950,147.78
integration project
1.5 million tons / year
14,814,636,400.46 - 14,814,636,400.46 566,473,654.81 - 566,473,654.81
ethylene project
PTA-4 project with an
annual output of 2.5 3,488,245,391.22 - 3,488,245,391.22 60,197,096.01 - 60,197,096.01
million tons
PTA-5 project with an
annual output of 2.5 2,139,593,272.27 - 2,139,593,272.27 - - -
million tons
An annual output of 1.35
million tons of multi- 2,401,997,507.47 - 2,401,997,507.47 596,644,401.84 - 596,644,401.84
functional high-quality
Closing balance Beginning balance
Project name Provision
Provision for
Book balance Carrying amount Book balance for impair- Carrying amount
impairment
ment
textile new material
project
Other sundry project 662,908,863.09 - 662,908,863.09 257,366,243.95 - 257,366,243.95
Subtotal 23,716,409,237.09 - 23,716,409,237.09 44,219,631,544.39 - 44,219,631,544.39
(2) Movement of major construction in progress
Transfer to Other
Project name Budget Beginning balance Increase Closing balance
fixed assets decrease
20 million tons / year refining 56.206
42,738,950,147.78 18,511,551,949.90 61,041,474,295.10 - 209,027,802.58
and chemical integration project billion
1.5 million tons / year ethylene 22.090
566,473,654.81 14,248,162,745.65 - - 14,814,636,400.46
project billion
PTA-4 project with an annual 2.908
60,197,096.01 3,428,048,295.21 - - 3,488,245,391.22
output of 2.5 million tons billion
PTA-5 project with an annual 2.988
- 2,139,593,272.27 - - 2,139,593,272.27
output of 2.5 million tons billion
An annual output of 1.35 million
tons of multi-functional high- 12.300
596,644,401.84 3,035,715,348.94 1,230,362,243.31 - 2,401,997,507.47
quality textile new material billion
project
Subtotal - 43,962,265,300.44 41,363,071,611.97 62,271,836,538.41 - 23,053,500,374.00
Continued:
Interest capitaliza-
Proportion of input to Cumulative amount of Including: Interest capital-
Project name tion rate for the Source of funding
the budget (%) interest capitalisation ization in the year
year (%)
20 million tons / year refining Fund raising, self-
108.98 2,661,800,819.23 1,206,638,225.35 4.28
and chemical integration project funding and borrowings
1.5 million tons / year ethylene Self-funding and bor-
67.06 349,201,555.25 344,155,010.22 4.19
project rowings
PTA-4 project with an annual Self-funding and bor-
119.97 73,530,978.89 72,537,235.68 5.78
output of 2.5 million tons rowings
PTA-5 project with an annual Self-funding and bor-
71.62 - - -
output of 2.5 million tons rowings
An annual output of 1.35 million
tons of multi-functional high- Self-funding and bor-
29.53 29,950,367.70 29,950,367.70 4.75
quality textile new material rowings
project
Subtotal 3,114,483,721.07 1,653,280,838.95 -
(3) At the end of the period, there were no obvious indication of impairment of construction in progress,so no provision for impairment was provided.
(4) At the end of the period, details of construction in progress used as mortgage guarantee refer toNote V(55) of the financial statements.
3. Construction materials
(1) Detailed informationItem Closing balance Beginning balanceSpecific materials 488,599,796.18 1,715,586,618.84Item Closing balance Beginning balanceSpecific equipment 85,524,683.35 72,327,751.53Subtotal 574,124,479.53 1,787,914,370.37
(2) At the end of the period, there were no obvious indication of impairment of construction materials,so no provision for impairment was provided.
(13) Intangible assets
1. Detailed informationItem Land use rights Special technology Software Total(1) Book value
Beginning balance 5,230,189,319.82 232,364,562.11 11,193,068.88 5,473,746,950.81
Increase 546,220,499.60 413,477,186.52 78,810,835.31 1,038,508,521.43
1) Purchase 546,220,499.60 413,477,186.52 78,810,835.31 1,038,508,521.43
2) Other - - - -
Decrease - - - -
1) Disposal - - - -
2) Other transfer out - - - -
Closing balance 5,776,409,819.42 645,841,748.63 90,003,904.19 6,512,255,472.24(2) Accumulated deprecia-
tion/amortization
Beginning balance 438,670,519.72 110,488,702.89 2,485,927.46 551,645,150.07
Increase 108,725,926.78 40,406,593.06 3,322,829.22 152,455,349.06
1) Charge for the year 108,725,926.78 40,406,593.06 3,322,829.22 152,455,349.06
2) Other - - - -
Decrease - - - -
1) Disposal - - - -
2) Other transfer out - - - -
Closing balance 547,396,446.50 150,895,295.95 5,808,756.68 704,100,499.13(3) Carrying amount
Beginning balance 4,791,518,800.10 121,875,859.22 8,707,141.42 4,922,101,800.74
Closing balance 5,229,013,372.92 494,946,452.68 84,195,147.51 5,808,154,973.11
2. At the end of the period, there were no obvious indication of impairment of intangible assets, so noprovision for impairment was provided.
3. At the end of the period, details of construction in progress used as intangible assets refer to NoteV(55) of the financial statements.
4. At the end of the period, there was no intangible assets that has incomplete application of ownershipcertificate.
(14) Long-term deferred expenses
Beginning bal- Amortisation for the Other Reason of
Item ance Increase year decrease Closing balance other de-
crease
Catalyst 37,514,964.58 2,919,034,794.80 280,068,787.79 - 2,676,480,971.59 -
Insurance 6,603,773.59 6,656,603.77 8,217,126.22 - 5,043,251.14 -
premium
Renovation 4,871,171.44 10,003,364.96 4,124,909.08 - 10,749,627.32 -
costs
Other 120,993.96 - 66,811.18 - 54,182.78 -
Total 49,110,903.57 2,935,694,763.53 292,477,634.27 - 2,692,328,032.83
(15) Deferred tax assets/Deferred tax liabilities
1. Deferred tax assets before offsetting
Closing balance Beginning balance
Item Deductible temporary Deductible temporary
differences Deferred tax assets differences Deferred tax assets
Provision for bad debts 39,131,803.71 9,046,312.72 29,462,747.91 6,813,300.44
Provision for decline in 6,365,086.13 954,762.93 45,540,804.57 7,073,477.30
value in inventories
Changes (decrease) in
fair value included in 10,220,573.91 1,794,722.85 166,722.18 25,008.33
profit or loss for the
current period
Unused tax losses - - 88,349,488.83 13,302,249.11
Government grants - - 18,750.00 2,812.50
Unrealized profits from 758,553,026.79 186,123,128.64 480,387.22 72,058.08
internal transactions
Total 814,270,490.54 197,918,927.14 164,018,900.71 27,288,905.76
2. Deferred tax liabilities before offsetting
Closing balance Beginning balance
Item Taxable temporary Deferred tax liabil- Taxable temporary Deferred tax
differences ities differences liabilities
Changes (increase) in fair
value included in profit or loss 75,715,539.31 12,831,666.49 44,488,520.63 11,101,938.09
for the current period
3. Details of unrecognized deferred tax assetsItem Closing balance Beginning balanceProvision for bad debts 1,556,062.51 131,212.29Provision for decline in value in invento- - 1,528,906.81
ries
Unused tax losses 743,964,392.26 542,686,621.55
Government grants - 3,600,000.00
Unrealized profits from internal transac- - 284,152,072.31
tions
Subtotal 745,520,454.77 832,098,812.96
4. Unused tax losses of unreognised deferred tax assets that will expire in the following yearsYear Closing balance Beginning balance Note
2019 - 72,237,031.57 -
2020 109,479,803.03 109,488,619.46
2021 299,489.70 36,837,932.60 -
2022 14,714,621.73 54,394,471.91 -
2023 227,542,307.45 269,728,566.01 -
2024 384,548,635.60 - -
No expiry period 7,379,534.75 -
Subtotal 743,964,392.26 542,686,621.55
(16) Other non-current assetsItem Closing balance Beginning balancePrepaid long-term asset purchases 3,717,068,584.61 4,168,280,953.21Value-added tax input tax to be deduct- 1,051,421,559.49 6,339,717,474.75
ed
Item Closing balance Beginning balance
Prepaid long-term asset purchases 3,717,068,584.61 4,168,280,953.21
Unrealized profit on sale and leaseback 216,446,262.70 56,817,483.06
Total 4,984,936,406.80 10,564,815,911.02
(17) Short-term loans
1. Detailed informationCategory fo loans Closing balance Beginning balancePledged loans 5,599,102,694.50 12,523,300,575.61Mortgage loans 1,595,000,000.00 3,257,987,537.61Guaranteed loans 22,541,251,309.29 7,209,238,225.72Unsecured loans 4,980,899,998.44 -Bills factoring letter of credit borrowings 12,825,901,056.79 -Accrued interest 54,854,874.32 23,878,490.74Total 47,597,009,933.34 23,014,404,829.68
2. For details of foreign currency borrowings, please refer to Note V (56)”Items in foreign currencies”.
(18) Trading financial liabilitiesItem Closing balance Beginning balanceTrading financial liabilities 10,220,573.91 1,009,626.09Including: Derivative financial liabilities 10,220,573.91 1,009,626.09Total 10,220,573.91 1,009,626.09
(19) Notes payableCategory Closing balance Beginning balanceBank acceptance bills 383,411,939.72 5,547,338,440.95Commercial acceptance bills 2,873,980,898.63 92,971,055.03Letter of credit 1,727,031,781.61 4,958,459,819.86Total 4,984,424,619.96 10,598,769,315.84
(20) Accounts payable
1. Detailed informationAgeing Closing balance Beginning balanceWithin 1 year 17,575,510,168.31 16,261,185,989.071-2 years 1,150,044,663.01 29,237,808.272-3 years 11,782,055.83 9,382,151.58Over 3 years 40,694,426.27 47,439,665.69Total 18,778,031,313.42 16,347,245,614.61
2. At the end of the period, there are no significant accounts payable aged over 1 year.
3. For details of foreign currency accounts payable, please refer to Note V (56)”Items in foreign curren-cies”.
(21) Receipts in advance
1. Detailed information
Ageing Closing balance Beginning balance
Within 1 year 6,003,180,233.17 903,251,378.98
1-2 years 6,088,947.74 4,235,039.07
2-3 years 3,170,623.65 3,839,576.10
Over 3 years 11,734,459.17 8,646,899.70
Total 6,024,174,263.73 919,972,893.85
2. At the end of the period, there are no significant receipts in advance aged over 1 year.
(22) Employee benefits payable
1. Detailed information
Item Beginning Increase Decrease Closing bal-
balance ance
(1) Short-term wages 170,227,063.62 2,395,459,581.01 2,302,984,530.78 262,702,113.85
(2) Post-employment benefits - - 138,916,287.95 137,345,652.14 1,570,635.81
defined contribution plans
Total 170,227,063.62 2,534,375,868.96 2,440,330,182.92 264,272,749.66
2. Short-term wages
Item Beginning Increase Decrease Closing bal-
balance ance
(1) Salaries, bonus, and allow- 170,227,063.62 2,161,387,570.46 2,068,945,955.87 262,668,678.21
ances
(2) Staff welfare - 108,427,206.85 108,427,206.85 -
(3) Social insurances - 76,144,824.47 76,111,388.83 33,435.64
Including: Medical insurance - 59,899,345.49 59,865,909.85 33,435.64
Work injury insurance - 8,754,909.05 8,754,909.05 -
Maternity insurance - 7,490,569.93 7,490,569.93 -(4) Housing Fund - 42,756,397.32 42,756,397.32 -(5) Union funds and employee - 6,743,581.91 6,743,581.91 -
education
Item Beginning Increase Decrease Closing bal-
balance ance
Subtotal 170,227,063.62 2,395,459,581.01 2,302,984,530.78 262,702,113.85
3. Defined contribution plansItem Beginning balance Increase Decrease Closing balance(1) Basic pension insurance - 134,045,728.53 132,475,092.72 1,570,635.81(2) Unemployment insurance - 4,870,559.42 4,870,559.42 -Subtotal - 138,916,287.95 137,345,652.14 1,570,635.81
4. Other note
The Company participates in pension insurance and unemployment insurance plans established bygovernment agencies in accordance with regulations. In addition, the Company no longer undertakes furtherpayment obligations, and the corresponding expenditures are included in the cost of profit or loss for thecurrent period or related assets when they occur.
(23) Taxes payableItem Closing balance Beginning balanceValue-added tax 55,749,717.09 -Consumption tax 271,253,554.01 -Urban maintenance and construction 22,244,972.65 7,289,099.16
tax
Corporate income tax 1,171,343,306.85 30,555,331.87
Property tax 12,054,965.36 5,914,028.19
Stamp duty 4,659,200.48 4,807,419.10
Land use tax 16,126,740.32 6,735,310.61
Educational surcharge 9,814,393.62 3,123,911.52
Local education surcharges 6,166,705.34 2,082,602.67
Withholding individual income tax 6,468,692.18 4,178,021.51
Environmental protection tax 1,756,041.10 1,567,720.47
Total 1,577,638,289.00 66,253,445.10
(24) Other payables
1. Detailed informationItem Closing balance Beginning balanceInterest payable - -Dividend payable 2,052,998.00 230,000.00Other payables 185,569,876.29 459,346,954.09Total 187,622,874.29 459,576,954.09
2. Dividend payableItem Closing balance Beginning balance Reasons for not paying
for more than 1 year
Dividend payable - Jiangsu Hegao In- 12,998.00 230,000.00 -
vestment Co., Ltd.
Dividend payable - Dalian Henghan In- 2,040,000.00 - -
vestment Co., Ltd.
Subtotal 2,052,998.00 230,000.00
3. Other payables
(1) Detailed informationItem Closing balance Beginning balanceSecurity deposit 120,120,679.50 11,760,959.09Current accounts 35,398,522.44 442,506,623.90Other 30,050,674.35 5,079,371.10Subtotal 185,569,876.29 459,346,954.09
(2) At the end of the period, there is no significant amount of other payables aged over 1 year.
(3) For details of foreign currency other payables, please refer to Note V (56)”Items in foreign curren-cies”.
(25) Non-current liabilities due within one year
1. Detailed informationItem Closing balance Beginning balanceLong term loans due within one year 2,628,765,662.61 2,518,395,040.00Long-term payables due within one 210,892,711.28 52,029,611.12
year
Item Closing balance Beginning balance
Accrued interest 4,220,861.30 4,143,606.65
Total 2,843,879,235.19 2,574,568,257.77
2. Long term loans due within one yearCategory Closing balance Beginning balanceGuaranteed loans 170,000,000.00 500,000,000.00Mortgage loans 2,458,765,662.61 2,018,395,040.00Subtotal 2,628,765,662.61 2,518,395,040.00
(26) Long term loans
1. Detailed informationCategory Closing balance Beginning balancePledged loans 500,000,000.00 -Mortgage loans 48,472,018,500.94 39,766,594,032.00Guaranteed loans 2,215,872,603.00 300,000,000.00Accrued interest 77,176,424.37 63,709,847.49Total 51,265,067,528.31 40,130,303,879.49
2. For details of foreign currency long term loans, please refer to Note V (56)”Items in foreign curren-cies”.
(27) Bonds payable
1. Detailed informationItem Closing balance Beginning balanceFace value of bond 1,000,000,000.00 -Interest adjustment -4,952,640.88 -Accrued interest 16,275,000.00 -Total 1,011,322,359.12 -
2. Changes in bonds payable (excluding other financial instruments such as preferred stocks classifiedas financial liabilities, perpetual bonds, etc. )
Bond name Face value Issue date Bond term Issued amount Beginning bal-
ance
19 Hengli 01 100.00 2019-9-27 3年 994,339,622.64 -
Continued:
Bond name Issued in the year Accrual interest at Premium amor- Repaid in the Closing balance
face value tization year
19 Hengli 01 994,339,622.64 16,275,000.00 707,736.48 - 1,011,322,359.12
(28) Long-term payables
1. Detailed informationItem Closing balance Beginning balanceLong-term payables 135,875,045.32 42,551,273.01Specific payable - -Total 135,875,045.32 42,551,273.01
2. Long-term payablesItem Closing balance Beginning balanceFinance lease payable 374,061,725.37 103,210,186.31Less: Unrecognized financing expenses 27,293,968.77 8,629,302.18Less: Long-term payables due within one year 210,892,711.28 52,029,611.12Subtotal 135,875,045.32 42,551,273.01
(29) Deferred income
1. Detailed informationItem Beginning balance Increase Decrease Closing balance Cause of formationGovernment Receive govern-grants 2,998,140,418.29 97,571,327.00 149,330,011.31 2,946,381,733.98 ment grants relat-
ed to assets
2. Project with government grants
Amortise in the year Related to
Amount of new Other move-
Item Beginning balance Item trans- Closing balance assets / Related
grants in the year Amount ment
ferred to to income
Infrastructure con- Related to
2,307,738,731.84 86,451,827.00 Other income 81,772,653.13 - 2,312,417,905.71
struction subsidies assets
Subsidies for reno-
Related to
vating production 673,831,197.55 - Other income 56,394,104.28 - 617,437,093.27
assets
equipment
Amortise in the year Related to
Amount of new Other move-
Item Beginning balance Item trans- Closing balance assets / Related
grants in the year Amount ment
ferred to to income
Project interest Related to
12,475,000.05 - Offset costs 2,400,000.05 - 10,075,000.00
subsidy assets
Digital Twin Project Related to
- 11,000,000.00 Other income 8,008,265.00 - 2,991,735.00
Subsidy assets
Special fund subsidy
Related to
for flexibility re- 476,738.85 119,500.00 Other income 596,238.85 - -
assets
search project
National Smart
Related to
Manufacturing 3,600,000.00 - Other income 140,000.00 - 3,460,000.00
assets
Special Fund
Special Energy
Saving and Emis- Related to
12,500.00 - Other income 12,500.00 - -
sion Reduction Fund assets
in 2009
High quality body
Related to
polyester filament 6,250.00 - Other income 6,250.00 - -
assets
project
Related to
Subtotal 2,998,140,418.29 97,571,327.00 149,330,011.31 - 2,946,381,733.98
assets
[Note] For the specific situation and allocation method of the items related to Government grants,please refer to the explanation of “Government grants” in Note V (58).
(30) Share capital
1. Detailed information
Movement in the year
Beginning balance Issue Bonus Transfer fro capital Closing balance
in the share reserve Other Subtotal
year
Total capital 5,052,789,925.00 - - 1,986,309,861.00 - - 7,039,099,786.00
2. Explanation of changes in share capital in the current period
In the current period, the Company implemented the 2018 profit distribution and capital reserve conver-sion to Share capital. With the capital reserve, it transferred 0.4 shares per share to all shareholders, for atotal of 1,986,309,861 shares, with a par value of RMB 1 per share. After the conversion, the Company’s totalshare capital was 7,039,099,786 shares.
(31) Capital reserve
1. Detailed informationItem Beginning balance Increase Decrease Closing balanceShare premium 20,457,672,249.59 - 2,185,313,798.60 18,272,358,450.99
2. Explanation of changes in capital reserve in the current period
Capital reserve decreased by RMB 2,185,313,798.60 in the current period, of which (1) Capital reservewas increased to share capital and decreased by RMB 1,986,309,861.00; (2) In this period, the businesscombination of Yuehai Petrochemical (Shenzhen) Co., Ltd. under common control in the current period re-sumes the retained earnings realized by the investee before the business combination and reduce capitalreserve of RMB 754,849.50; (3) In the current period, the Company implemented the third and fourth em-ployee stock ownership plans. The employee stock ownership plan obtained the treasury shares of the Com-pany through repurchase of shares by block trading and non-transaction transfer methods. And capital re-serve decreased by RMB 198,249,088.10.
(32) Treasury shares
1. Detailed informationItem Beginning balance Increase Decrease Closing balanceShare repurchased 596,200,729.43 644,620,537.12 1,015,979,818.10 224,841,448.45
2. Other note
(1) According to the “Proposal on the Proposal on Repurchase of Shares by Centralized Auction Trans-action” reviewed and approved by the 39th meeting of the seventh board of directors of the Company onOctober 28, 2018 and the fourth extraordinary general meeting of 2018 and the 42nd meeting of the 7thBoard of Directors on April 9, 2019 reviewed and approved the “Proposal on Adjusting the Plan for BuyingBack Shares by Centralized Auction Trading”. The Company intends to buy back the shares of the Companythrough the Shanghai Stock Exchange trading system by centralized auctioning. The total amount of repur-chase funds is not less than RMB 1 billion and not more than RMB 2 billion, and the cost of repurchasedshares does not exceed RMB 18 per share. The purpose of repurchasing shares is to implement the em-ployee stock ownership plan. As of November 15, 2019, when the repurchase period expired, the Companyaccumulated repurchased 88,461,914 shares through centralized auction transactions, accounting for 1.26%of the Company’s total share capital. The highest repurchase price was RMB 17.768 per share, with the low-est repurchase The price is RMB 11.23 per share, the average repurchase price is RMB 14.03 per share,and the total capital used is RMB 1,240.7094 million (excluding commissions, transfer fees and other trans-action costs), which accounts for 1.26% of the Company's total share capital Ratio.
(2) According to the ”Hengli Petrochemical Co., Ltd. Phase III Employee Stock Ownership Plan (Draft)(Second Revision)”, the Phase III Employee Stock Ownership Plan obtained shares repurchased by theCompany through non-trading transfers and block trade transactions. Among them, on December 26, 2019,19,814,900 shares were repurchased in a special securities account through block trading, and the transac-tion amount was RMB 261,952,978 (excluding transaction fees), and the average transaction price was RMB13.22 per share; on December 27, 2019 in the form of non-transaction transfer, 2,422,200 shares were re-purchased in the special securities account. In the third phase of employee stock ownership plan, Total22,237,100 shares was acquired in the Company's special securities account, and correspondingly anamount of RMB 311,919,801.70 was transferred out of treasury shares.
(3) According to the “Hengli Petrochemical Co., Ltd. 4th Employee Stock Ownership Plan (Draft)”, the4th Employee Stock Ownership Plan transfers 50,193,200 shares of the special securities account to theCompany through block trading and the transaction amount was RMB 695,677,752.00 (excluding transactionfee), the average transaction price was RMB 13.86 per share, and an amount of RMB 704,060,016.40 wastransferred out of treasury shares.
(33) Other comprehensive income
1. Detailed information
Movement in the year
Item Beginning balance Amount before oLtheesrs:coInmclpurdeehdenin- oLtheesrs:coInmclpurdeehdenin- Less: Income tax Attributable to Attributable to Closing balance
income tax for the sive income in the sive income in the expenses parent company minority interest
current period previous period previous period after tax after tax
(1) Other comprehensive
income not reclassifiable to - - - - - - - -
profit or loss in subsequent
periods
1) Remeasurement of net
assets or net liabilities of - - - - - - - -
defined benefit plans
2) Share of other compre-
hensive income of investees
measured by the equity - - - - - - - -
method not reclassifiable to
profit or loss
3) Fair value changes in
other equity instruments - - - - - - - -
investment
4) Fair value changes in the - - - - - - - -
Company’s own credit risk
5) Other - - - - - - - -
(2) Other comprehensive
income reclassifiable to 6,637,613.80 7,135,940.35 - - - 7,135,532.61 407.74 13,773,146.41
profit or loss in subsequent
periods
1) Share of other compre-
hensive income of investees - - - - - - - -
measured by the equity
method reclassifiable to
Movement in the year
Item Beginning balance Amount before oLtheesrs:coInmclpurdeehdenin- oLtheesrs:coInmclpurdeehdenin- Less: Income tax Attributable to Attributable to Closing balance
income tax for the sive income in the sive income in the expenses parent company minority interest
current period previous period previous period after tax after tax
profit or loss
2) Fair value changes in - - - - - - - -
receivables financing
3) Fair value changes in - - - - - - - -
debt investment
4) Reclassification of finan-
cial assets recognized in - - - - - - - -
other comprehensive in-
come
5) Provision for credit loss of - - - - - - - -
Receivables financing
6) Provision for credit loss of - - - - - - - -
debt investments
7) Cash flow hedge reserve - - - - - - - -
8) Exchange differences on
translation of statements 6,637,613.80 7,135,940.35 - - - 7,135,532.61 407.74 13,773,146.41
denominated in foreign
currencies
9) Other - - - - - - - -
Total 6,637,613.80 7,135,940.35 - - - 7,135,532.61 407.74 13,773,146.41
(34) Special reserveItem Beginning balance Increase Decrease Closing balanceSafety production fee - 161,427,111.60 131,034,992.42 30,392,119.18
(35) Surplus reserve
1. Detailed informationItem Beginning balance Increase Decrease Closing balanceStatutory surplus 579,780,635.33 110,546,354.35 - 690,326,989.68
reserve
2. Explanation of changes in surplus reserve in the current period
The Company appropriates the statutory surplus reserve at 10% of its net profit in accordance with the“Company Law” and the Company's articles of association. If the accumulated amount of the statutory sur-plus reserve reaches more than 50% of the Company's registered capital, the appropriation will cease.
(36) Undistributed profits
1. Detailed informationItem 2019 2018Balance in the beginning of year 2,086,993,751.18 204,320,963.15Add: adjustments on beginning balance - -
of undistributed profits
Beginning balance after adjustment 2,086,993,751.18 204,320,963.15
Add: Net profit for the year attributable 10,025,179,101.07 3,322,610,860.03
to shareholders of parent company
Including: Net profit realized by the
acquire before business 754,849.50 -
combination
Less: Appropriation for statutory surplus 110,546,354.35 176,740,590.75
reserve
Appropriation for dividends 1,489,732,395.30 1,263,197,481.25Closing balance of undistributed profits 10,511,894,102.60 2,086,993,751.18
2. Explanation of profit distribution
According to the 2018 profit distribution plan approved by the Company's 2018 annual shareholdersmeeting on April 30, 2019, the total share capital of 31 December 2018 is 5,052,789,925 shares after deduct-ing 87,015,274 shares that have been bought back. A cash dividend of RMB 3(including tax) was distributed,and total payment of a cash dividend of RMB 1,489,732,395.30; at the same time, the capital reserve wasused to increase Share capital, which was increased by 4 shares for every 10 shares.
For details of the Company's profit distribution plan for 2019, please refer to Note XIII (2)”Explanation ofProfit Distribution on the Balance Sheet Date”.
(37) Operating revenue/Operating cost
1. Detailed information
2019 2018
Item
Revenue Cost Revenue Cost
Primary business 100,068,119,180.82 79,304,170,677.54 59,722,703,323.82 52,239,250,249.99
income
Other business 714,251,943.41 561,656,910.53 344,551,848.13 173,994,203.50
income
Total 100,782,371,124.23 79,865,827,588.07 60,067,255,171.95 52,413,244,453.49
2. Primary business income / Primary business cost (by industry)
2019 2018
Industry
Revenue Cost Revenue Cost
Petrochemical 94,080,540,019.60 73,597,808,809.46 55,728,511,740.93 48,514,291,822.40
industry
Other industries 5,987,579,161.22 5,706,361,868.08 3,994,191,582.89 3,724,958,427.59
Subtotal 100,068,119,180.82 79,304,170,677.54 59,722,703,323.82 52,239,250,249.99
3. Primary business income / Primary business cost (by products)
2019 2018
Products
Revenue Cost Revenue Cost
Refined oil 12,292,678,780.74 8,933,827,767.30 - -
Chemicals 30,319,700,812.55 22,942,076,181.82 - -
PTA 28,636,834,368.36 22,147,608,664.86 31,477,092,757.53 28,807,343,273.04
Polyester products 22,831,326,057.95 19,574,296,195.48 24,251,418,983.40 19,706,948,549.36
Other 5,987,579,161.22 5,706,361,868.08 3,994,191,582.89 3,724,958,427.59
Subtotal 100,068,119,180.82 79,304,170,677.54 59,722,703,323.82 52,239,250,249.99
4. Primary business income / Primary business cost (by region)
2019 2018
Region
Revenue Cost Revenue Cost
Within China 91,531,948,215.10 71,209,712,736.43 52,448,213,596.61 45,753,773,142.12
Overseas 8,536,170,965.72 8,094,457,941.11 7,274,489,727.21 6,485,477,107.87
Subtotal 100,068,119,180.82 79,304,170,677.54 59,722,703,323.82 52,239,250,249.99
5. Operating revenue from the Company's top five customers
The total operating revenue of the top five customers of the Company this year was RMB17,361,570,956.00, which accounted for 17.23% of the total operating revenue.
(38) Taxes and surchargesItem 2019 2018Consumption tax 1,641,650,152.60 -Urban maintenance and construction 161,598,332.67 84,945,872.56
tax
Educational surcharge 69,811,399.48 36,638,216.64
Local education surcharges 45,942,780.23 24,425,436.94
Property tax 54,164,555.46 40,169,020.11
Land use tax 57,839,514.40 60,262,337.52
Stamp duty 65,705,913.36 68,945,249.70
Environmental protection tax 16,035,605.45 6,521,783.18
Disabled security payments 7,696,657.28 2,521,768.06
Other 420,369.52 351,624.84
Total 2,120,865,280.45 324,781,309.55
[Note] Please refer to the explanation of “Taxation” in Note 4 for details of the payment standard.
(39) Selling expensesItem 2019 2018Logistics transportation fee 787,215,006.16 475,588,791.46Staff salaries 50,836,055.43 29,958,349.18Travelling and vehicle fee 15,007,114.64 13,630,544.54Export-related expenses 53,971,263.34 16,134,836.97Business entertainment 2,180,340.28 5,719,762.33Office expenses 37,185,871.41 1,108,952.24Other expenses 5,559,121.33 1,257,812.50Total 951,954,772.59 543,399,049.22
(40) Administrative expensesItem 2019 2018Staff salaries 434,124,406.19 328,000,943.83Depreciation and amortization 248,362,102.82 148,664,685.74Office expenses 312,441,878.56 98,298,707.58Travelling expenses 46,914,652.98 21,260,842.58Business entertainment 22,278,923.53 9,134,451.86Other expenses 26,144,568.51 15,078,092.59Total 1,090,266,532.59 620,437,724.18
(41) Research and development expensesItem 2019 2018Staff salaries 199,205,006.15 155,891,245.81Direct materials 522,311,921.03 478,354,058.19Fuel and power 122,023,627.97 105,758,243.65Depreciation and amortization 62,750,167.72 47,548,686.70Other 52,058,636.60 46,662,236.10Total 958,349,359.47 834,214,470.45
(42) Financial expensesItem 2019 2018Interest expense 4,908,639,111.69 2,964,062,193.58Less: Interest capitalization 1,653,689,093.53 1,409,532,854.43Less: Interest income 94,378,144.03 185,483,977.54Net exchange gains and losses 263,030,478.86 27,859,803.88Bank charges 139,259,342.53 81,256,135.88Total 3,562,861,695.52 1,478,161,301.37
(43) Other income
Related to assets / Amount included in
Item 2019 2018 Related to income non-recurring gains
and losses
Government grants
received in the cur- 462,468,689.63 114,889,491.39 Related to income 462,468,689.63
rent period
Deferred income 146,930,011.26 89,003,557.95 Related to assets 146,930,011.26
Tax withholding fees 455,292.38 849,688.78 Related to income 455,292.38
received
Total 609,853,993.27 204,742,738.12 609,853,993.27
[Note] For details of the government grants included in other income in this period, please refer to theexplanation of “Government grants” in Note V (58) .
(44) Investment income
1. Detailed informationItem 2019 2018Investment income on disposal of financial assets measured at 200,589,432.38 -13,384,499.31
fair value through profit or loss
Investment income from wealth management products and 74,208,365.96 121,583,928.39
structured deposits
Total 274,797,798.34 108,199,429.08
2. The Company does not have any significant restrictions on the return of investment income.
(45) Gains from changes in fair valueItem 2019 2018Trading financial assets 76,014,595.37 11,796,890.43Including: Gains from changes in fair value generated 76,014,595.37 11,796,890.43
by derivative financial instruments
Trading financial liabilities -10,220,573.91 -1,012,598.21
Gains from changes in fair value of wealth management 59,438,784.25
products and structured deposits
Total 125,232,805.71 10,784,292.22
(46) Credit lossItem 2019 2018Bad debt of note receivables -778,350.92 -Bad debt of accounts receivable -7,680,222.90 -Bad debt of other receivables -4,180,241.86 -Total -12,638,815.68 -
(47) Assets impairment lossItem 2019 2018Bad debts - -10,653,651.26Decline in value of inventories -6,365,086.13 -48,272,790.08Total -6,365,086.13 -58,926,441.34
(48) Asset disposal income
Amount includ-
Item 2019 2018 ed in non-recurring
gains and losses
Gain on disposal of non-current assets 185,524.63 1,350,774.25 185,524.63
Including: Fixed assets 185,524.63 1,350,774.25 185,524.63
Total 185,524.63 1,350,774.25 185,524.63
(49) Non-operating income
1. Detailed information
Amount included in non-
Item 2019 2018 recurring gains and
losses
Gain on scrapping of non-current as- 2,941.75 - 2,941.75
sets
Compensation income 4,563,930.69 20,100,000.00 4,563,930.69
Government grants - 2,000,000.00 -
Other 5,035,312.98 3,514,640.23 5,035,312.98
Total 9,602,185.42 25,614,640.23 9,602,185.42
2. Information of government grants included in non-operating incomeItem of grant 2019 2018 Related to assets/Related to
income
2018 corporate listing sub- - 2,000,000.00 Related to income
sidies
Subtotal - 2,000,000.00
(50) Non-operating expensesItem 2019 2018 Amount included in non-
recurring gains and losses
External donation 4,741,799.00 20,000.00 4,741,799.00
Asset retirement and damage 10,502,396.91 63,518.11 10,502,396.91
losses
Penalty 19,572.60 - 19,572.60
Compensation and liquidated 5,403,533.40 2,564,740.10 5,403,533.40
damages
Tax late fee 257,611.42 - 257,611.42
Other 1,905.98 2,053,178.25 1,905.98
Total 20,926,819.31 4,701,436.46 20,926,819.31
(51) Income tax expenses
1. Detailed informationItem 2019 2018Current income tax expenses 3,268,514,248.97 744,191,274.93Deferred income tax expenses -168,900,292.95 -6,576,993.15Total 3,099,613,956.02 737,614,281.78
2. Reconciliation between income tax expenses and accounting profitItem 2019Profits before tax 13,211,987,481.79Expected income tax expenses at applicable tax rates 3,302,996,870.45Effect of different tax rates applied by subsidiaries -172,850,922.94Adjustment for income tax in previous years -9,485,074.04Effect of non-taxable income -19,361,109.48Effect of non-deductible costs, expenses and losses 35,853,408.58Effect of using the deductible temporary differences or deductible losses for which -104,317,605.08
no deferred tax asset was recognized in previous period
Item 2019
Effect of deductible temporary differences or deductible losses for which no deferred 96,137,075.58
tax asset was recognized this year
Super deduction of research and development expenses and disable employees -29,358,687.05
salaries
Income tax expenses 3,099,613,956.02
(52) Other comprehensive income
For details of Other comprehensive income, please refer to the description of “Other comprehensive in-come” in Note V (33).
(53) Notes to consolidated cash flow statement
1. Cash received from other operating activitiesItem 2019 2018Withdraw security deposits from bank 1,760,733,815.52 1,182,592,024.21Interest income received 88,556,243.68 37,368,057.61Revenue from labor services and rental 80,067,811.49 15,383,793.67
services received
Government grants income received 555,632,214.08 773,885,418.38
Receive payments from related parties - 5,000,000.00
Security deposit received 109,610,676.96 -
Receipts of other payments and current 18,442,800.01 10,122,604.80
accounts
Total 2,613,043,561.74 2,024,351,898.67
2. Cash paid for other operating activitiesItem 2019 2018Selling expenses paid in cash 959,345,399.90 580,478,385.67Administrative expenses and research
and development expenses paid in 505,763,803.14 148,974,105.66
cash
Financial expenses paid in cash 139,242,394.48 81,256,135.88
Payment of security deposit to banks 3,417,311,492.08 1,760,733,815.52
Payment of current accounts - 97,310,772.39
Payment of others 23,511,899.26 15,826,530.47
Total 5,045,174,988.86 2,684,579,745.59
3. Cash received from other investing activitiesItem 2019 2018Recovery of principal and income from
investments in wealth management 12,757,686,262.25 15,682,526,547.72
products and time deposits
Recover the principal and interest of
Zhejiang Guxiandao New Material - 516,279,166.67
Funds Loan
Total 12,757,686,262.25 16,198,805,714.39
4. Cash paid for other investing activitiesItem 2019 2018Purchase wealth management products
and time deposit investment paid in 11,045,547,948.05 12,751,605,000.00
cash
Payment of Zhejiang Guxiandao New - 500,000,000.00
Material Fund Borrowing Principal
Payment of Commodity Futures Con- 55,326,253.98 -
tract Security deposit
Cash paid for other investment activities - 13,384,499.31
Total 11,100,874,202.03 13,264,989,499.31
5. Cash received from other financing activitiesItem 2019 2018Received the loan principal of the relat- - 429,000,000.00
ed party
Recovery of foreign exchange purchase - 4,500,000.00
contract Security deposit
Received of sales leaseback financing 500,000,000.00 -
lease
Recover security deposits pledged for 7,916,102.09 221,266,565.96
secured loans
Loss compensation of operation during - 23,405,809.37
the significant assets restructuring
Received employee stock ownership 956,586,912.50 -
plan payments
Total 1,464,503,014.59 678,172,375.33
6. Cash paid for other financing activitiesItem 2019 2018Pay the principal and interest of the 408,183,794.73 278,954,104.90
related party's loan
Pay for the issuance of supporting - 95,518,293.83
funds
Payment of security deposit related to 1,929,554,761.86 47,936,102.09
financing
Payment of finance lease payments 269,559,213.80 56,391,051.94
Pay the consideration for acquiring the - 127,794,600.00
equity of Deya Textile
Repurchase of treasury shares 644,620,537.12 596,200,729.43
Total 3,251,918,307.51 1,202,794,882.19
(54) Supplementary information on cash flow statement
1. Supplement to cash flow statementItem 2019 2018(1) Reconciliation of net profit to cash flows from operating activi-
ties:
Net profit 10,112,373,525.77 3,402,466,578.01
Add: Provisions for impairment of assets 6,365,086.13 58,926,441.34
Credit loss 12,638,815.68 -
Depreciation of fixed assets, depletion of oil and gas assets, 3,670,075,973.69 1,775,728,283.20
and depreciation of productive biological assets
Amortization of intangible assets 121,751,729.02 68,194,166.82
Amortization of long-term deferred expenses 284,260,508.05 38,835,080.37
Losses from disposal of fixed assets, intangible assets, and -185,524.63 -1,350,774.25
other long-term assets (“-” for gains)
Loss from scrapping of fixed assets (“-” for gains) 10,499,455.16 63,518.11
Losses from changes in fair value (“-” for gains) -125,232,805.71 -10,784,292.22
Financial expenses (“-” for income) 3,110,088,700.92 1,259,953,850.61
Losses arising from investment (“-” for gains) -274,797,798.34 -108,199,429.08
Loss on net exposure for hedging (:-” for gains) - -
Decrease in deferred tax assets (“-” for increase) -170,630,021.35 -17,678,931.24
Increase in deferred tax liabilities (“-” for decrease) 1,729,728.40 11,101,938.09
Decrease in gross inventories (“-” for increase) -845,821,207.72 -12,802,690,806.01
Decrease in operating receivables (“-” for increase) -1,305,861,890.36 -1,454,902,393.48
Increase in operating payables (“-” for decrease) 2,329,719,961.38 12,052,950,568.22
Loss on disposal of non-current assets designate as held-for-
sale (except for financial instruments, long-term equity investment - -
and investment properties) or disposal groups(“-” for gains)
Other - -141,165,071.66
Net cash flows from operating activities 16,936,974,236.09 4,131,448,726.83
(2) Investing and financing activities not requiring the use of cash:
Conversion of debt into capital - -
Convertible debts due within one year - -
Acquisition of fixed assets under finance leases - -
Item 2019 2018
(3) Change in cash and cash equivalents:
Cash as at end of the year 10,792,982,727.36 8,034,616,575.94
Less: cash as at beginning of the year 8,034,616,575.94 2,068,065,011.46
Add: cash equivalents as at end of the year - -
Less: cash equivalents as at beginning of the year - -
Net increase in cash and cash equivalents 2,758,366,151.42 5,966,551,564.48
2. Details of cash and cash equivalentsItem Closing balance Beginning balance(1) Cash 10,792,982,727.36 8,034,616,575.94
Including: Cash in hand 846,525.35 531,554.99
Bank deposits available on demand 10,792,136,202.01 7,952,702,740.00
Other monetary funds available on demand - 81,382,280.95
(2) Cash equivalents - -
Including: Bond investments with a maturity of 3 months or - -
less
(3) Cash and cash equivalents as at end of the year 10,792,982,727.36 8,034,616,575.94
Including: Restricted cash and cash equivalents held by the - -
Company or subsidiaries of the Group
[Note] Note of supplementary information of cash flow statement:
The cash closing balance in the 2019 cash flow statement is RMB 10,792,982,727.36, and the closingbalance of cash and bank balances in the balance sheet on December 31, 2019 is RMB 16,508,500,549.53,the difference of RMB 5,715,517,822.17 is the cash closing balance in cash flow statement deducted thosethat do not meet the definition of cash and cash equivalents, including security deposits for loans of RMB1,923,574,761.86, security deposit for bank acceptance bills of RMB 105,326,240.23, security deposit forletter of credit of RMB 2,667,158,833.77, restricted fixed deposits of RMB 995,762,000.00, and accrued in-terest receivables of RMB 23,695,986.31.
The cash closing balance in the 2018 cash flow statement is RMB 8,034,616,575.94, and the closingbalance of cash and bank balances in the balance sheet on December 31, 2019 is RMB 12,420,564,644.97,the difference of RMB 4,385,948,069.03 is the cash closing balance in cash flow statement deducted thosethat do not meet the definition of cash and cash equivalents, including security deposits for loans of RMB47,936,102.09, security deposit for bank acceptance bills of RMB 857,664,240.23, security deposit for letterof credit of RMB 911,605,692.21, security deposit for letter of guarantee of RMB 1,232,500.08, restrictedfixed deposits of RMB 2,470,000,000.00, and accrued interest receivables of RMB 97,509,534.42.
(55) Assets with restricted ownership or use rightsItem Carrying amount at year end Restricted reasonCash and bank balances 4,696,059,835.86 The Company pledged Cash and bank
balances to obtain financing facilities
Item Carrying amount at year end Restricted reason
from financial institution
Time deposits held by the Company for
Cash and bank balances 1,019,457,986.31 investment purposes and unearned
interest
The Company pledges Note receiva-
Receivables financing 2,424,737,699.53 bles to obtain financing facilities from
financial institution
The Company pledges Inventories to
Inventories 505,800,000.00 obtain financing facilities from financial
institution
The Company mortgage Investment
Investment properties 286,479.40 properties to obtain financing facilities
from financial institution
The Company mortgage Fixed assets
Fixed assets 67,290,652,137.56 to obtain financing facilities from finan-
cial institution
Fixed assets 816,545,470.68 Fixed assets obtained by the Company
through financial leasing
Construction in progress to obtain fi-
Construction in progress 15,023,664,203.04 nancing facilities from financial institu-
tion
Intangible assets 3,794,795,908.64 Intangible assets to obtain financing
facilities from financial institution
Total 95,571,999,721.02
(56) Items in foreign currencies
1. Detailed informationItem Foreign currency balance Converted exchange rate Converted RMB balance at
at the end of the period the end of the period
Cash and bank balances
Including: US dollar 565,805,338.57 6.9762 3,947,171,202.90
Euro 772,771.40 7.8155 6,039,594.87
HK dollar 2,459,653.31 0.8958 2,203,308.24
Singapore dollar 2,305,319.89 5.1739 11,927,494.58
Japanese Yen 177,281.00 0.0641 11,361.23
Korean Won 200,600.00 0.0060 1,210.22
British Pound 72.21 9.1501 660.73
Swiss franc 0.09 7.2028 0.65
Note receivables
Including: US dollar 28,729,037.68 6.9762 200,419,512.69
Accounts receivable
Item Foreign currency balance Converted exchange rate Converted RMB balance at
at the end of the period the end of the period
Including: US dollar 43,894,777.88 6.9762 306,218,749.47
Euro 38,111.84 7.8155 297,863.09
Receivables financing
Including: US dollar 28,729,037.68 6.9762 200,419,512.66
Short-term loans - - -
Including: US dollar 625,267,871.74 6.9762 4,361,993,726.86
Japanese Yen 1,219,500,000.00 0.0641 78,152,877.00
Accounts payable
Including: US dollar 1,179,757,462.92 6.9762 8,230,224,012.80
Euro 33,980,786.43 7.8155 265,576,836.32
Japanese Yen 2,111,924,843.02 0.0641 135,345,005.22
Swiss franc 57,270.80 7.2028 412,510.12
British Pound 6,412.98 9.1501 58,679.41
Long term loans
Including: US dollar 1,252,386,471.28 6.9762 8,736,898,500.94
Euro 14,826,000.00 7.8155 115,872,603.00
Notes payable
Including: US dollar 115,379,251.12 6.9762 804,908,731.66
(57) Government grants
Recorded in profit or loss for the current
Item of grant Initial Initial recognition Item pre- period
year amount sented Item Amount
Carry forward the remaining Deferred
allowance of the flexibility 2019 105,770,000.00 income Other income 51,481,862.60
project
Equipment subsidy 2013 382,911,023.00 Deferred Other income 34,522,063.32
income
Infrastructure construction 2018 982,670,000.00 Deferred Other income 28,570,532.08
subsidies income
Subsidies for renovating 2016 994,278,505.80 Deferred Other income 10,785,702.33
production equipment income
Digital Twin Project Subsidy 2019 11,400,000.00 Deferred Other income 8,408,265.00
income
Infrastructure construction 2018 120,000,000.00 Deferred Other income 3,500,000.00
subsidies income
Recorded in profit or loss for the current
Item of grant Initial Initial recognition Item pre- period
year amount sented Item Amount
Project interest subsidy 2014 24,000,000.00 Deferred Offset costs 2,400,000.05
income
Infrastructure construction 2013 20,000,000.00 Deferred Other income 2,000,000.04
subsidies income
Infrastructure construction 2018 180,000,000.00 Deferred Other income 5,250,000.01
subsidies income
Infrastructure construction 2019 30,905,893.00 Deferred Other income 901,421.88
subsidies income
Special subsidies for flexible 2016 2,700,000.00 Deferred Other income 596,238.85
research items income
Infrastructure construction 2018 39,606,005.00 Deferred Other income 1,155,175.15
subsidies income
National Smart Manufactur- 2018 3,600,000.00 Deferred Other income 140,000.00
ing Special Fund income
Infrastructure construction 2009 1,100,000.00 Deferred Other income 18,750.00
subsidies income
Land financial subsidies 2019 4,081,632.60 Deferred Other income 0
income
Infrastructure construction 2019 2,610,464.00 Deferred Other income 0
subsidies income
2017-2018 tax subsidies 2019 371,341,939.00 Other income Other income 371,341,939.00
Fiscal tax refund 2019 50,848,970.60 Other income Other income 50,848,970.60
2018 Wujiang District Indus-
trial Quality Development 2019 6,840,900.00 Other income Other income 6,840,900.00
Support Fund
Subsidy funds for smart
manufacturing technological 2019 6,000,000.00 Other income Other income 6,000,000.00
transformation
Special fund for county 2019 3,000,000.00 Other income Other income 3,000,000.00
economic development
Sludge incineration Value- 2019 2,463,094.88 Other income Other income 2,463,094.88
added tax refund
High-tech Zone on 2018
Wujiang Shengze acceler- 2019 2,216,000.00 Other income Other income 2,216,000.00
ate the development of
high-quality award
2019 Liaoning Province
Science and Technology 2019 1,500,000.00 Other income Other income 1,500,000.00
Major Special Item Fund
Industrial enterprise struc-
tural adjustment subsidy 2019 1,480,000.00 Other income Other income 1,480,000.00
funds
Shengze Comprehensive
Law Enforcement No.2
Brigade Desulfurization and 2019 1,407,771.00 Other income Other income 1,407,771.00
Denitrification Emission
Reduction Reward
Enterprise subsidies for
processing trade special 2019 1,000,000.00 Other income Other income 1,000,000.00
fund loans in 2019
Shengze Comprehensive
Law Enforcement Second 2019 975,000.00 Other income Other income 975,000.00
Team New Pollution Pre-
vention Measures Reward
2018 Sucheng District High-
quality Development Spe- 2019 969,500.00 Other income Other income 969,500.00
cial Guidance Funds
Recorded in profit or loss for the current
Item of grant Initial Initial recognition Item pre- period
year amount sented Item Amount
2018 Municipal Industry
Development Guidance 2019 960,000.00 Other income Other income 960,000.00
Fund
2018 Wujiang District Busi-
ness Development Award 2019 946,900.00 Other income Other income 946,900.00
Fund
Employment stability subsi- 2019 724,807.89 Other income Other income 724,807.89
dies
2018 National Intellectual
Property Demonstration
Enterprise and Advanta- 2019 700,000.00 Other income Other income 700,000.00
geous Enterprise Title En-
terprise Award Fund
Incentive fee for entering 2019 618,393.00 Other income Other income 618,393.00
the Expo
2018 Municipal Industry
Development Guidance 2019 600,000.00 Other income Other income 600,000.00
Fund
Subsidies for thousands of
graduates and job place- 2019 491,600.00 Other income Other income 491,600.00
ments
Tax refund of individual 2019 455,292.38 Other income Other income 455,292.38
income tax
2019 thirteenth batch of
science and technology
development plan (technol- 2019 450,000.00 Other income Other income 450,000.00
ogy infrastructure) Item
funds
2018 Wujiang District se-
cond batch of special funds 2019 448,680.00 Other income Other income 448,680.00
for patent funds
Unemployment insurance 2019 361,230.60 Other income Other income 361,230.60
fund stabilization subsidies
Tongzhou fiscal subsidy 2019 348,883.00 Other income Other income 348,883.00
Import Enterprise Subsidies 2019 322,485.50 Other income Other income 322,485.50
2019 The first batch of
special funding for patents 2019 321,500.00 Other income Other income 321,500.00
in Wujiang District
2017 High Value Patent
Cultivation Plan Item Fol- 2019 300,000.00 Other income Other income 300,000.00
low-up Fund
2019 Suzhou City-level
Special Fund for Building 2019 300,000.00 Other income Other income 300,000.00
Advanced Manufacturing
Base
Financial aid for science 2019 300,000.00 Other income Other income 300,000.00
and technology
2018 Excellent Enterprise 2019 200,000.00 Other income Other income 200,000.00
Award
2018 Changxingdao Excel-
lent Enterprise Contribution 2019 200,000.00 Other income Other income 200,000.00
Award
2018 province fully open 2019 200,000.00 Other income Other income 200,000.00
special funds
2018 Suzhou High-skilled
Talent Public Training Base 2019 200,000.00 Other income Other income 200,000.00
Award Fund
Recorded in profit or loss for the current
Item of grant Initial Initial recognition Item pre- period
year amount sented Item Amount
2018 Wujiang High-tech
Zone High-quality Devel- 2019 200,000.00 Other income Other income 200,000.00
opment Award
2019 Suzhou High-skilled
Talents Public Training
Base Examination and 2019 200,000.00 Other income Other income 200,000.00
Evaluation Outstanding
Award Fund
Technology innovation 2019 200,000.00 Other income Other income 200,000.00
voucher cash reward
Subsidies for the integration 2019 200,000.00 Other income Other income 200,000.00
Foreign trade import and
export contribution awards 2019 165,000.00 Other income Other income 165,000.00
for the first three quarters of
2018
Employee stability subsidies 2019 149,277.16 Other income Other income 149,277.16
Special funds for business
development in 2019 (first 2019 129,700.00 Other income Other income 129,700.00
batch)
Donghua University Fourth 2019 120,000.00 Other income Other income 120,000.00
Special Funding
2018 Shengze High-quality 2019 100,000.00 Other income Other income 100,000.00
Development Item Award
2018 implementation of
trademark strategy and the 2019 100,000.00 Other income Other income 100,000.00
construction of strong quali-
ty zones
Reward of the 20th China
Patent Award Suzhou Win- 2019 100,000.00 Other income Other income 100,000.00
ning Item
Subsidies for post-doctoral 2019 100,000.00 Other income Other income 100,000.00
station establishments
2018 Wujiang District Se-
cond Batch of Patent Spe- 2019 94,650.00 Other income Other income 94,650.00
cial Funding
2018 Suzhou City 27th
Batch of Science and Tech- 2019 93,600.00 Other income Other income 93,600.00
nology Development Plan
Item Funding
Jiangsu Wujiang China
Oriental Silk Market Man- 2019 92,600.00 Other income Other income 92,600.00
agement Office Awards
Special funds for business 2019 89,800.00 Other income Other income 89,800.00
development in 2018
Intellectual Property Subsi- 2019 88,960.00 Other income Other income 88,960.00
dy
Incentive subsidies for
national high-tech enter- 2019 87,232.80 Other income Other income 87,232.80
prises in 2018
Special support fund for
industrial economy of 2019 80,000.00 Other income Other income 80,000.00
Tongzhou District in 2018
Input tax super-deduction 2019 54,108.43 Other income Other income 54,108.43
for logistics enterprises
2017 Employment Intern- 2019 51,900.00 Other income Other income 51,900.00
ship Subsidy
Recorded in profit or loss for the current
Item of grant Initial Initial recognition Item pre- period
year amount sented Item Amount
2017 Technology Innovation 2019 50,000.00 Other income Other income 50,000.00
Voucher Award
Relevant incentive funds for
high-tech enterprises in 2019 50,000.00 Other income Other income 50,000.00
2018
The sixth batch of national
intellectual property operat- 2019 40,000.00 Other income Other income 40,000.00
ing funds in 2018
2018 PCT Patent Funding 2019 40,000.00 Other income Other income 40,000.00
in Wujiang District
Vocational training subsi- 2019 38,400.00 Other income Other income 38,400.00
dies
2018 patent grant bonus 2019 38,000.00 Other income Other income 38,000.00
Subsidies and incentives for 2019 37,727.00 Other income Other income 37,727.00
purchasers of the Expo
Unemployment insurance
premiums for stable jobs in 2019 34,804.90 Other income Other income 34,804.90
2018
Employment stable subsidy 2019 31,207.97 Other income Other income 31,207.97
The sixth batch of special
funds for business devel- 2019 30,900.00 Other income Other income 30,900.00
opment
2019 Wujiang District se-
cond batch of patent special 2019 27,500.00 Other income Other income 27,500.00
funding
January-June 2019 Labor 2019 23,375.00 Other income Other income 23,375.00
Employment Subsidy
Suzhou City's 2018 fifth
batch of national intellectual
property operation funds 2019 22,000.00 Other income Other income 22,000.00
(high quality creation) Item
funds
Special funds for business 2019 20,800.00 Other income Other income 20,800.00
development in 2018
The fifth batch of special
funds for business devel- 2019 20,800.00 Other income Other income 20,800.00
opment
Other 2019 28,690.90 Other income Other income 28,690.90
Total - 612,253,993.32
VI. Changes in scope of consolidation
(1) Business combinations under common control
1. Business combinations under common control during the period
Ratio acquired in The basis of the business Basis for determining
Acquiree business combination composition under com- Combination date the combination date
mon control
Yuehai Petrochemical Controlled by the ultimate July 31, 2019
(Shenzhen) Co., Ltd. 100% controller and the control [Note 1] Gained control
is not temporary
Continued:
Revenue of ac- Net profit of ac-
Ultimate control- quires from begin- quires from be- Revenue of ac- Net profit of ac-
Acquiree ler under com- ning of the period ginning of the quire in compara- quire in compara-
mon control to date of combina- period to date of ble period ble period
tion combination
Yuehai Petro- The couple of
chemical (Shen- Chen Jianhua 128,624,014.97 754,849.50 - -
zhen) Co., Ltd. and Fan
Hongwei
[Note 1] According to Petrochemical Sales Co., Ltd. and Shenzhen Gangrui Trading Co., Ltd. signedthe “Equity Transfer Agreement” on July 20, 2019, Petrochemical Sales Co., Ltd. was transferred to Shen-zhen Gangrui Trading Co. for RMB 754,849.50 Ltd. holds 100% equity of Yuehai Petrochemical (Shenzhen)Co., Ltd. Since Petrochemical Sales Co., Ltd. and Yuehai Petrochemical (Shenzhen) Co., Ltd. are undercommon control of Chen Jianhua and Fan Hongwei and the control is not temporary, the merger is a busi-ness combination under common control. The above equity transfer matter Yuehai Petrochemical (Shenzhen)Co., Ltd. has completed the industrial and commercial change registration procedures on August 1, 2019. Asof July 31, 2019, it already has substantial control of the Company, so July 31, 2019 is determined as thecombination date. In the current period, the Company included it in the scope of consolidated financialstatements, and adjusted the comparative data of the consolidated financial statements accordingly in ac-cordance with the provisions of ”Accounting Standards for Business Enterprises No.20-Business Combina-tion”.
2. Combination costCombination cost Yuehai Petrochemical (Shenzhen) Co., Ltd.-- Cash 754,849.50-- Carrying amount of non-cash assets. --- Carrying amount of debt issued or assumed --- Face value of equity securities issued --- Contingent consideration -
Other note: As of December 31, 2019, the subsidiary Hengli Petrochemical Sales Co., Ltd. had not paidthe equity transfer payment. However, under the current situation, the risk of cancellation or reversal of thetransaction is extremely small, and the failure to pay the equity transfer payment does not affect the determi-nation of the transfer of control and the date of combination.
3. Assets and liabilities of acquiree
Yuehai Petrochemical (Shenzhen) Co., Ltd.
Combination date At end of previous year
Cash and bank balances 2,895,021.48 -
Other receivables 11,200.00 -
Other current assets 1,848,628.02 -
Less: Other payables 4,000,000.00 -
Net assets 754,849.50 -
Less: Minority interests - -
Net assets acquired 754,849.50 -
(2) Changes in the scope of consolidation caused by Other
1. Subsidiaries added by direct establishment or investment (Refers to the increase of subsidiariesthrough non-merger acquisitions such as new establishments and spin-off)
In December 2019, the subsidiary Jiangsu Hengke Advanced Materials Co. Ltd. invested in the estab-lishment of Jiangsu Xuanda Polymer Material Co., Ltd. The entity completed the industrial and commercialregistration on December 30, 2019, with a registered capital of RMB 50 million. Jiangsu Hengke AdvancedMaterials Co. Ltd. subscribed capital of RMB 50 million, accounting for 100% of its registered capital andobtained substantial control, so from the date of establishment of the entity, it was included in the scope ofconsolidated financial statements. As of December 31, 2019, Jiangsu Xuanda Polymer Material Co., Ltd. 'snet assets was RMB 0.00, and the net profit from the establishment date to the end of the period was RMB0.00.
In November 2019, the subsidiary Jiangsu Deli Chemical Fiber Co., Ltd. invested in the establishmentof Suqian Deya New Materials Co., Ltd. The entity completed the industrial and commercial establishmentregistration on November 7, 2019, with a registered capital of RMB 200 million. Jiangsu Deli Chemical FiberCo., Ltd. subscribed capital of RMB 200 million, accounting for 100% of its registered capital and obtainedsubstantial control of the company, so from the date of establishment of the entity, it was included in thescope of consolidated financial statements. As of December 31, 2019, Suqian Deya New Materials Co., Ltd.had net assets of RMB 0.00, and Net profit from the establishment date to the end of the period was RMB0.00.
In November 2019, the subsidiary Jiangsu Hengli Chemical Fiber Co., Ltd. funded the establishment ofSichuan Hengli New Material Co., Ltd. The entity completed the industrial and commercial registration onNovember 13, 2019, with a registered capital of RMB 100 million. Jiangsu Hengli Chemical Fiber Co., Ltd.subscribed capital of RMB 100 million, accounting for 100% of its registered capital and obtained substantialcontrol of the company, so from the date of establishment of the entity, it was included in the scope of consol-idated financial statements. As of December 31, 2019, Sichuan Hengli New Material Co., Ltd. 's net assetswere RMB 0.00, and the net profit from the establishment date to the end of the period was RMB 0.00.
In July 2019, Hengli Petrochemical International Pte. Ltd., a subsidiary, invested in the establishment ofHengli Shipping International Pte. Ltd. The entity completed the establishment registration on July 26, 2019,with a registered capital of US$ 500,000. Hengli Petrochemical International Pte. Ltd. invested US$ 500,000.Therefore, from the date of establishment of the company, it was included in the scope of consolidated finan-cial statements. As of December 31, 2019, Hengli Shipping International Pte. Ltd. had net assets ofUS$ 1,453,680.44, and net profit from the date of establishment to the end of the period wasUS$ 953,680.44.
In September 2019, Hengli Refining Products Sales (Dalian) Co., Ltd. and CNOOC East China SalesCo., Ltd. jointly established Hengli Haiyou Petrochemical Co., Ltd. The entity completed the industrial andcommercial establishment registration on September 23, 2019, with a registered capital of RMB 103.60 mil-lion. Hengli Refining Products Sales (Dalian) Co., Ltd. subscribed capital of RMB 52.836 million, accountingfor 51% of its registered capital and obtained substantial control over it, so it was included in the consolidatedfinancial statements since the entity was established. As of December 31, 2019, Hengli Haiyou Petrochemi-cal Co., Ltd. 's net assets were RMB 102,484.41, and the net profit from the establishment date to the end ofthe period was RMB 102,484.41.
In April 2019, Hengli Petrochemical (Dalian) Refining Co., Ltd., a subsidiary, invested in the establish-ment of Hengli Aviation Oil Co., Ltd. The entity completed the industrial and commercial establishment regis-tration on April 9, 2019, with a registered capital of RMB 10 million. Hengli Petrochemical (Dalian) RefiningCo., Ltd. subscribed capital of RMB 10 million, accounting for 100% of its registered capital. Since it has sub-stantial control over it, it has been included in the scope of the consolidated financial statements since thecompany was established. As of December 31, 2019, Hengli Aviation Oil Co., Ltd. had net assets of RMB0.00, and net profit from the date of establishment to the end of the period was RMB 0.00.
In November 2019, the subsidiary Hengli Petrochemical (Dalian) Refining Co., Ltd. invested in the es-tablishment of Hengli Oilchem (Suzhou) Co., Ltd. The entity completed the industrial and commercial estab-lishment registration on November 14, 2019, with a registered capital of RMB 10 million. Hengli Petrochemi-cal (Dalian) Refining Co., Ltd. subscribed capital of RMB 10 million, accounting for 100% of its registeredcapital. Since it has substantial control over it, it has been included in the scope of the consolidated financialstatements since the company was established. As of December 31, 2019, Hengli Oilchem (Suzhou) Co.,Ltd. 's net assets were RMB 38,969.33, and the net profit from the establishment date to the end of the peri-od was RMB 38,969.33.
In November 2019, the subsidiary Hengli Petrochemical (Dalian) Refining Co., Ltd. invested to establishHengli Energy (Suzhou) Co., Ltd. The entity completed the industrial and commercial establishment registra-tion on November 14, 2019, with a registered capital of RMB 10 million. Hengli Petrochemical (Dalian) Refin-ing Co., Ltd. subscribed capital of RMB 10 million, accounting for 100% of its registered capital. Since it hassubstantial control over it, it has been included in the scope of the consolidated financial statements since thecompany was established. As of December 31, 2019, Hengli Energy (Suzhou) Co., Ltd. had a net asset ofRMB 16,865.64 and a net profit of RMB 16,865.64 from the establishment date to the end of the period.
In December 2019, the subsidiary Hengli Petrochemical (Dalian) Refining Co., Ltd. invested in the es-tablishment of Hengli Energy (Jiangsu) Co., Ltd. The entity completed the industrial and commercial estab-lishment registration on December 11, 2019, with a registered capital of RMB 20 million. Hengli Petrochemi-cal (Dalian) Refining Co., Ltd. subscribed capital of RMB 20 million, accounting for 100% of its registeredcapital. Since it has substantial control over it, it has been included in the scope of the consolidated financialstatements since the company was established. As of December 31, 2019, Hengli Energy (Jiangsu) Co., Ltd.had net assets of RMB 0.00, and net profit from the date of establishment to the end of the period was RMB0.00.
In December 2019, the subsidiary Hengli Petrochemical (Dalian) Refining Co., Ltd. invested in the es-tablishment of Hengli Logistics (Dalian) Co., Ltd. The entity completed the industrial and commercial estab-lishment registration on December 11, 2019, with a registered capital of RMB 5 million. Hengli Petrochemical(Dalian) Refining Co., Ltd. subscribed capital of RMB 5 million, accounting for 100% of its registered capital.Since it has substantial control over it, it has been included in the scope of the consolidated financial state-ments since the company was established. As of December 31, 2019, Hengli Logistics (Dalian) Co., Ltd. hadnet assets of RMB 0.00, and Net profit from the date of establishment to the end of the period was RMB0.00.
In January 2019, the parent company Hengli Petrochemical Co., Ltd. funded the establishment ofHengli Petrochemical Sales Co., Ltd. The entity completed the industrial and commercial establishment reg-istration on January 16, 2019, with a registered capital of RMB 50 million. Hengli Petrochemical Co., Ltd.subscribed capital RMB 50 million, accounting for 100% of its registered capital and obtained substantialcontrol over it, so it was included in the scope of the consolidated financial statements since the companywas established. As of December 31, 2019, Hengli Petrochemical Sales Co., Ltd. 's net assets were RMB19,135,572.25, and the net profit from the establishment date to the end of the period was RMB19,135,572.25.
In August 2019, Hengli Petrochemical Sales Co., Ltd., a subsidiary, invested in the establishment ofHengli (Eastern China) Petrochemical Sales Co., Ltd. The entity completed the industrial and commercialestablishment registration on August 9, 2019, with a registered capital of RMB 50 million. Hengli Petrochemi-cal Co., Ltd. subscribed capital of RMB 50 million, accounting for 100% of its registered capital, and obtainedsubstantive control over it. Therefore, from the date of establishment of the company, it was included in thescope of consolidated financial statements. As of December 31, 2019, the net assets of Hengli (Eastern Chi-na) Petrochemical Sales Co., Ltd. were RMB 70,969,193.42, and the net profit from the establishment dateto the end of the period was RMB 70,969,193.42.
In April 2019, the subsidiary Hengli Petrochemical Sales Co., Ltd. invested in the establishment ofHengli (Southern China) Petrochemical Sales Co., Ltd. The entity completed the industrial and commercialestablishment registration on April 26, 2019, with a registered capital of RMB 200 million. Hengli Petrochemi-cal Co., Ltd. subscribed capital of RMB 200 million, accounting for 100% of its registered capital, and ob-tained substantive control over it. Therefore, from the date of establishment of the company, it was includedin the scope of consolidated financial statements. As of December 31, 2019, Hengli (Southern China) Petro-chemical Sales Co., Ltd. had a net asset of RMB 1,809,011.66 and a net profit of RMB 1,809,011.66 from theestablishment date to the end of the period.
In June 2019, Hengli Petrochemical Sales Co., Ltd., a subsidiary, invested in the establishment ofHengli (Northern China) Petrochemical Sales Co., Ltd. The entity completed the industrial and commercialestablishment registration on June 11, 2019, with a registered capital of RMB 50 million. Hengli Petrochemi-cal Co., Ltd. subscribed capital of RMB 50 million, accounting for 100% of its registered capital, and obtainedsubstantive control over it. Therefore, from the date of establishment of the company, it was included in thescope of consolidated financial statements. As of December 31, 2019, Hengli (Northern China) Petrochemi-cal Sales Co., Ltd. had a net asset of RMB 4,876,651.78 and a net profit of RMB 4,876,651.78 from the es-tablishment date to the end of the period.
In July 2019, the parent company Hengli Petrochemical Co., Ltd. invested in the establishment ofHengli Petrochemical Sales (Jiangsu) Co., Ltd. The entity completed the industrial and commercial estab-lishment registration on July 31, 2019, with a registered capital of RMB 50 million. Hengli Petrochemical Co.,Ltd. subscribed capital of RMB 50 million, accounting for 100% of its registered capital, and obtained sub-stantial control over it. Therefore, from the date of establishment of the company, it will be included in thescope of consolidated financial statements. As of December 31, 2019, Hengli Petrochemical Sales (Jiangsu)Co., Ltd. had net assets of RMB 0.00, and Net profit from the establishment date to the end of the period wasRMB 0.00.
VII. Interests in other entities
Unless otherwise specified, the data listed in this section is in units of RMB ten thousand.
(1) Interests in subsidiaries
1. Composition of the Group
Shareholding ratio
Name of subsidi- Level Place of Place of registration Nature of (%) Mode of acqui-
ary business business Direct Indirect sition
Jiangsu Hengli No.1 Hengli Road, Business com-
Chemical Fiber 1 China Nanma Industrial Zone, Manufacturing 99.99 binations not
Co., Ltd. Shengze Town, Wujiang under common
City, Jiangsu Province control
Hengli Textile New Business com-
Jiangsu Hengke Material Industrial Park, binations under
Advanced Materi- 2 China Binjiang New District Manufacturing 99.99 common con-
als Co. Ltd. (Wujie Town), trol
Tongzhou, Nantong
Nantong Teng’an No.1 Kaisha Road, Transportation Investment
Logistics Co., Ltd. 3 China Binjiang New District, industry 99.99 establishment
Tongzhou, Nantong
Jiangsu Xuanda No.11 Dongsha Ave-
Polymer Material 3 China nue, Wujie Town, Wholesale and 99.99 Investment
Co., Ltd. Tongzhou District, Nan- retail establishment
tong City
Jiangsu Deli No.599 South Huanghe Business com-
Chemical Fiber 2 China Road, Sucheng Eco- Manufacturing 99.99 binations not
Co., Ltd. nomic Development under common
Zone, Suqian City control
Hengli Industrial Park,
Suqian Deya New 3 China Sucheng District, Wholesale and 99.99 Investment
Materials Co., Ltd. Suqian City, Southern retail establishment
District
Suzhou Susheng Business com-
Thermal Power 2 China Tanqiu Village, Shengze Manufacturing 99.99 binations under
Co., Ltd. Town, Wujiang common con-
trol
Xiyang Village, Temple Business com-
Suzhou Deya 2 China of Shengze Town, Manufacturing 99.99 binations under
Textile Co., Ltd. Wujiang District (Nanma common con-
Industrial Zone) trol
Wenzhou Business
Suzhou Binglin 2 China District, Eastern Market, Wholesale and 99.99 Investment
Trading Co., Ltd. Shengze Town, Wujiang retail establishment
District, Suzhou
Sichuan Hengli No.10, Section 2,
New Material Co., 2 China Lingang Avenue, South Wholesale and 99.99 Investment
Ltd. Lingang Area, Sichuan retail establishment
Free Trade Zone
Yingkou Kanghui Business com-
Petrochemical 1 China Yingkou Xianrendao Manufacturing 75.00 binations under
Co., Ltd. Energy Chemical Zone common con-
trol
No.1, Hengli Road,
Lijin (Suzhou) 2 China Nanma Industrial Zone, Wholesale and 75.00 Investment
Trading Co., Ltd. Shengze Town, Wujiang retail establishment
District
Original Xingang Prima- Business com-
Hengli Investment ry School, Xingang Industrial binations under
(Dalian) Co., Ltd. 1 China Village, Changxingdao Investment 100.00 common con-
Economic Zone, Dalian, trol
Liaoning Province
Formerly Xingang Pri-
Hengli Petro- mary School, Xingang Investment
chemical (Dalian) 2 China Village, Changxingdao Manufacturing 99.83 establishment
Co., Ltd. Economic Zone, Dalian,
Liaoning Province
Shareholding ratio
Name of subsidi- Level Place of Place of registration Nature of (%) Mode of acqui-
ary business business Direct Indirect sition
Xingang Village,Changxingdao Econom- Business com-Hengli Shipping 3 China ic Zone, Dalian, Liao- Transportation 99.83 binations not(Dalian) Co., Ltd. ning Province (formerly industry under common
Xingang Primary control
School)
Hengli Petro- China Flat 1906, 19/F, Har-
chemical Co., 3 Hong bour Centre, 25 Harbour Wholesale and 99.83 Investment
Limited Kong Road, Wanchai, Hong retail establishment
Kong
Unit 6101-03, Block A,
Shenzhen Kingkey 100 Building, Business com-
Ganghui Trading 3 China No.5016 Shennan East Transportation 99.83 binations under
Co., Ltd. Road, Guiyuan Street, industry common con-
Luohu District, Shen- trol
zhen
No.298 Changsong
Hengli Logistics 2 China Road, Changxingdao Transportation 100.00 Investment
(Dalian) Co., Ltd. Economic Zone, Dalian, industry establishment
Liaoning Province
Xingang Village,Changxingdao Econom- Business com-Hengli Concrete 2 China ic Zone, Dalian, Liao- Manufacturing 100.00 binations under(Dalian) Co., Ltd. ning Province (formerly common con-
Xingang Primary trol
School)
Hengli Petro- No.298 Changsong Business com-
chemical (Dalian) 1 China Road, Changxingdao Manufacturing 100.00 binations under
Refining Co., Ltd. Economic Zone, Dalian, common con-
Liaoning Province trol
Hengli Petro- 9 STRAITS VIEW #08-
chemical Interna- 2 Singa- 11 MARINA ONE Wholesale and 100.00 Investment
tional Pte. Ltd. pore WEST TOWER retail establishment
SINGAPORE(018937)
9 STRAITS VIEW #08-
Hengli Oilchem 3 Singa- 11 MARINA ONE Wholesale and 79.00 Investment
Pte. Ltd. pore WEST TOWER retail establishment
SINGAPORE(018937)
Hengli Shipping 9 STRAITS VIEW #08-
International Pte. 3 Singa- 11 MARINA ONE Transportation 100.00 Investment
Ltd. pore WEST TOWER industry establishment
SINGAPORE(018937)
Shenzhen No.5016, Shennan East Business com-
Shengang Trad- 2 China Road, Guiyuan Street, Wholesale and 100.00 binations under
ing Co., Ltd. Luohu District, Shen- retail common con-
zhen trol
OSBLItem-Work Office
Hengli Refining Building, No.298
Products Sales 2 China Changsong Road, Wholesale and 100.00 Investment
(Dalian) Co., Ltd. Changxingdao Econom- retail establishment
ic Zone, Dalian, Liao-
ning Province
Hengli Haiyou No.558 Fenhu Avenue, Wholesale and Investment
Petrochemical 3 China Lili Town, Wujiang Dis- retail 51.00 establishment
Co., Ltd. trict, Suzhou
No.298 Changsong
Hengli Aviation Oil 2 China Road, Changxingdao Wholesale and 100.00 Investment
Co., Ltd. Economic Zone, Dalian, retail establishment
Liaoning Province
Hengli Oilchem 2302, Building 88, Su- Wholesale and Investment
(Suzhou) Co., Ltd. 2 China zhou Central Plaza, retail 100.00 establishment
Suzhou Industrial Park,
Shareholding ratio
Name of subsidi- Level Place of Place of registration Nature of (%) Mode of acqui-
ary business business Direct Indirect sition
Suzhou Industrial Zone,
China (Jiangsu) Free
Trade Zone
2301, Building 88, Su-
zhou Central Square,
Hengli Energy 2 China Suzhou Industrial Park, Wholesale and 100.00 Investment
(Suzhou) Co., Ltd. Suzhou Area, China retail establishment
(Jiangsu) Free Trade
Zone
Hengli Energy No.186 Yanjiang Road, Wholesale and Investment
(Jiangsu) Co., 2 China Changjiang Town, retail 100.00 establishment
Ltd. Rugao City
Comprehensive Build-
Hengli Logistics ing, No.298 Changsong Transportation Investment
(Dalian) Co., Ltd. 2 China Road, Changxingdao industry 100.00 establishment
Economic Zone, Dalian,
Liaoning Province
Hengli Petro- No.298 Changsong
chemical (Dalian) 1 China Road, Changxingdao Manufacturing 100.00 Investment
Chemical Co., Economic Zone, Dalian, establishment
Ltd. Liaoning Province
Suzhou Qianliyan Suzhou No.1, Hengli
Logistics Tech- 1 China Road, Nanma Industrial Transportation 100.00 Investment
nology Co., Ltd. Zone, Shengze Town, industry establishment
Wujiang District
Suzhou Textile No.1, Hengli Road,
Group Network E- 1 China Nanma Industrial Zone, Wholesale and 100.00 Investment
commerce Co., Shengze Town, Wujiang retail establishment
Ltd. District
Suzhou Plastic Suzhou No.1, Hengli Software and
Group Network E- 1 China Road, Nanma Industrial Information 100.00 Investment
commerce Co., Zone, Shengze Town, Technology establishment
Ltd. Wujiang District Services
Hengli Petro- Room 1688, Building 2,
chemical Sales 1 China No.215 Lianhe North Wholesale and 100.00 Investment
Co., Ltd. Road, Fengxian District, retail establishment
Shanghai
Hengli (Eastern 2401, No.3099
China) Petro- 2 China Chang'an Road, Wholesale and 100.00 Investment
chemical Sales Songling Town, Wujiang retail establishment
Co., Ltd. District, Suzhou
Luohu Business Center
Hengli (Southern 3202, No.2028 Shennan
China) Petro- 2 China East Road, Chengdong Wholesale and 100.00 Investment
chemical Sales Community, Dongmen retail establishment
Co., Ltd. Street, Luohu District,
Shenzhen
Window 1 on the west
Hengli (Northern side of the approval hall
China) Petro- of the R & D building of Wholesale and Investment
chemical Sales 2 China Xianrendao Economic retail 100.00 establishment
Co., Ltd. Development Zone,
Yingkou, Liaoning Prov-
ince
14th Floor-14053, Main
Yuehai Petro- Tower, Maritime Center, Business com-
chemical (Shen- 2 China 59 Linhai Avenue, Wholesale and 100.00 binations not
zhen) Co., Ltd. Qianhai Shenzhen- retail under common
Hong Kong Cooperation control
Zone, Shenzhen
Hengli Petro- 2 China Office 204, Building 1, Wholesale and 100.00 Investment
chemical Sales No.15, Yinxing Road, retail establishment
Shareholding ratio
Name of subsidi- Level Place of Place of registration Nature of (%) Mode of acqui-
ary business business Direct Indirect sition
(Jiangsu) Co., Xitong Technology
Ltd. Industrial Park,
Tongzhou District, Nan-
tong City
(1) Reason of difference between shareholding ratio and voting right ratio in the subsidiary
There are no subsidiaries with a shareholding ratio different from the voting right ratio.
(2) Basis for holding half or less of the voting rights but still controlling the investee
There were no subsidiaries in the current period that the parent company had half or less of the votingrights and was included in the scope of the consolidated financial statements.
(3) Basis of control in structured entity included in the scope of the consolidation
There are no important structured entity included in the scope of the consolidation in this period.
(4) Other note
In this period, there was no equity investment in which the parent company had more than half of thevoting rights but failed to exercise control.
2. Important non-wholly owned subsidiary
Shareholding ratio of Profits and losses Dividends paid to Balance of minority
Name of subsidiary minority interests (%) attributed to minorities minorities interests in interests at the end of
interests the current period the period
Jiangsu Hengli Chem-
ical Fiber Co., Ltd. 0.01 92,269.26 33,000.00 460,067.62
[Note 1]
Yingkou Kanghui
Petrochemical Co., 25.00 52,768,843.70 - 328,745,235.79
Ltd. [Note 2]
Hengli Petrochemical
(Dalian) Co., Ltd. 0.17 5,208,415.44 2,040,000.00 21,274,081.07
[Note 3]
3. Key financial information of important non-wholly owned subsidiaries
(1) Financial Information
Closing balance
Name of subsidiary
Current assets Non-current assets Total assets
Jiangsu Hengli Chemical Fiber 9,540,910,224.51 9,958,247,163.48 19,499,157,387.99
Co., Ltd. [Note 1]
Yingkou Kanghui Petrochemical 1,145,261,731.55 3,660,239,670.19 4,805,501,401.74
Co., Ltd. [Note 2]
Hengli Petrochemical (Dalian) Co., 17,591,438,832.69 21,334,187,363.36 38,925,626,196.05
Ltd. [Note 3]
Continued:
Closing balance
Name of subsidiary
Current liabilities Non-current liabilities Total liabilities
Jiangsu Hengli Chemical Fiber 13,020,385,834.11 1,878,095,322.21 14,898,481,156.32
Co., Ltd. [Note 1]
Yingkou Kanghui Petrochemical 3,356,885,358.74 133,635,099.82 3,490,520,458.56
Co., Ltd. [Note 2]
Hengli Petrochemical (Dalian) Co., 20,757,175,379.27 5,636,457,071.52 26,393,632,450.79
Ltd. [Note 3]
Continued:
Beginning balance
Name of subsidiary
Current assets Non-current assets Total assets
Jiangsu Hengli Chemical Fiber 12,428,474,011.74 7,789,708,922.98 20,218,182,934.72
Co., Ltd. [Note 1]
Yingkou Kanghui Petrochemical 1,314,892,406.63 3,285,896,503.97 4,600,788,910.60
Co., Ltd. [Note 2]
Hengli Petrochemical (Dalian) Co., 20,277,849,203.70 15,764,820,874.29 36,042,670,077.99
Ltd. [Note 3]
Continued:
Beginning balance
Name of subsidiary
Current liabilities Non-current liabilities Total liabilities
Jiangsu Hengli Chemical Fiber 15,104,431,980.67 1,105,767,310.63 16,210,199,291.30
Co., Ltd. [Note 1]
Yingkou Kanghui Petrochemical 3,304,447,822.29 192,435,519.92 3,496,883,342.21
Co., Ltd. [Note 2]
Hengli Petrochemical (Dalian) Co., 19,511,260,457.17 5,867,412,727.60 25,378,673,184.77
Ltd. [Note 3]
Continued:
2019
Name of subsidiary Total comprehensive Cash flow from oper-
Operating revenue Net profit income ating activities
Jiangsu Hengli
Chemical Fiber Co., 19,096,275,921.38 923,066,089.09 923,066,089.09 4,891,395,727.98
Ltd. [Note 1]
Yingkou Kanghui
Petrochemical Co., 4,979,531,775.81 211,075,374.79 211,075,374.79 1,073,317,632.52
Ltd. [Note 2]
Hengli Petrochemi-
cal (Dalian) Co., Ltd. 39,074,972,544.38 3,071,958,571.58 3,072,198,730.29 7,957,015,277.55
[Note 3]
Continued:
2018
Name of subsidiary Total comprehensive Cash flow from operat-
Operating revenue Net profit income ing activities
Jiangsu Hengli
Chemical Fiber Co., 20,155,608,489.73 1,387,285,069.02 1,387,285,069.02 4,603,594,110.77
Ltd. [Note 1]
Yingkou Kanghui
Petrochemical Co., 5,218,464,052.65 305,317,248.76 305,317,248.76 702,949,761.29
Ltd. [Note 2]
Hengli Petrochemi-
cal (Dalian) Co., Ltd. 43,140,086,424.24 1,943,119,022.78 1,943,976,505.21 5,146,025,591.67
[Note 3]
[Note 1] Jiangsu Hengli Chemical Fiber Co., Ltd. includes its subsidiaries Jiangsu Hengke AdvancedMaterials Co. Ltd., Nantong Teng'an Logistics Co., Ltd., Jiangsu Xuanda Polymer Material Co., Ltd., JiangsuDeli Chemical Fiber Co., Ltd., Suqian Deya New Materials Co., Ltd., Suzhou Susheng Thermal Power Co.,Ltd., Suzhou Deya Textile Co., Ltd., Suzhou Binglin Trading Co., Ltd., Sichuan Hengli New Material Co., Ltd. .
[Note 2] Yingkou Kanghui Petrochemical Co., Ltd. includes its subsidiary Lijin (Suzhou) Trading Co.,Ltd.
[Note 3] Hengli Petrochemical (Dalian) Co., Ltd. includes its subsidiaries Hengli Shipping (Dalian) Co.,Ltd., Hengli Petrochemical Co., Limited, Shenzhen Ganghui Trading Co., Ltd.
4. Significant restrictions on the use of enterprise group assets and the settlement of enterprise groupdebts
There are no major restrictions on the use of enterprise group assets and the settlement of enter-prise group debts in this period.
5. Financial support or other support to structured entities included in the scope of consolidated fi-nancial statements
There is no financial support or other support provided to structured entities included in the scope ofconsolidated financial statements in this period.
6. Other note
None.
VIII. Risk of financial instruments
The Company faces risks of various financial instruments in its daily activities, mainly including creditrisk, market risk and liquidity risk. The Company's main financial instruments include cash and bank balances,loans, accounts receivable, accounts payable, etc. For details of each financial instrument, please refer tothe relevant items in this Note V. The risks associated with these financial instruments and the risk manage-ment policies adopted by the Company to reduce these risks are as follows:
The board of directors is responsible for planning and establishing the Company's risk managementstructure, formulating the Company's risk management policies and related guidelines, and supervising theimplementation of risk management measures. The Company has formulated risk management policies toidentify and analyze the risks faced by the Company. These risk management policies specify specific risksand cover many aspects such as market risk, credit risk and liquidity risk management. The Company regu-larly assesses changes in the market environment and the Company's operating activities to determinewhether to update risk management policies and systems. The Company's risk management is carried out bythe risk management committee in accordance with the policies approved by the board of directors. The RiskManagement Committee identifies, evaluates and avoids related risks through close cooperation with theCompany’s other business departments. The Company's internal audit department conducts regular auditson risk management controls and procedures, and reports the audit results to the Company's audit commit-tee.
The Company diversifies the risk of financial instruments through appropriate diversified investmentsand business portfolios, and reduces risk concentrated on a single industry, a specific region, or a specificcounterparty by formulating appropriate risk management policies.
(1) Market risk
Market risk of financial instruments refers to the risk that the fair value or future cash flow of financialinstruments will fluctuate due to changes in market price, including foreign exchange rate risk, interest raterisk and other price risk.
1. Foreign exchange rate risk
The Company's main operations are located in China, Hong Kong, Singapore, domestic business issettled in RMB, export business is mainly settled in US dollar, and overseas operating companies are settledin US dollar, so the Company's determined foreign currency assets and liabilities and future foreign currencytransactions (Foreign currency assets and liabilities and foreign currency transactions are mainly denominat-ed in US dollar.) were exposed to foreign exchange rate risk. Related foreign currency assets and foreigncurrency liabilities include: Cash and bank balances, Accounts receivable, Other receivables, Accounts pay-able, Other payables, Short-term loans which are denominated in foreign currencies. Amount of financialassets and foreign currency financial liabilities dominated in foreign currency and converted into RMB can befound in Note V (56)”Items in foreign currencies”.
The Company pays close attention to the impact of exchange rate changes on the Company's ex-change rate risk, and matches foreign currency income with foreign currency expenditure as much as possi-ble to reduce foreign exchange risk. In addition, the Company also signed forward foreign exchange con-tracts to prevent the exchange risk of the Company's revenue settled in US dollars. At the end of the currentperiod, the foreign exchange risks faced by the Company mainly originated from financial assets and liabili-ties denominated in US dollar. Amount of foreign currency financial assets and foreign currency financialliabilities converted into RMB is shown in Note V (56)”Items in foreign currencies”.
In the case where all other variables remain unchanged, if the RMB appreciates or depreciates by 5%against the US dollar, the impact on the Company's net profit is as follows:
Impact on net profit (RMB ten thousand)
Exchange rate changes
2019 2018
Up 5% -39,806.09 -62,073.38
Down 5% 39,806.09 62,073.38
Management believes that 5% reasonably reflects the reasonable range of possible changes in RMBagainst the US dollar.
2. Interest rate risk
Interest rate risk refers to the risk that the fair value of financial instruments or future cash flows willfluctuate due to changes in market interest rates. The risks faced by the Company in changing market inter-est rates are mainly related to the Company's borrowings with floating interest rates. The Company's interestrate risk mainly arises from long-term interest-bearing debts such as long-term bank loans. Floating interestrate financial liabilities expose the Company to cash flow interest rate risk, while fixed interest rate financialliabilities expose the Company to fair value interest rate risk. The Company determines the relative ratio offixed rate and floating rate contracts according to the market environment at that time, and maintains an ap-propriate combination of fixed and variable rate instruments through regular review and monitoring.
In the case where the Other variable remains unchanged, if the borrowing rate calculated by the float-ing rate rises or falls by 100/50 basis points, the impact on the Company's net profit is as follows:
Impact on net profit (RMB ten thousand)
Interest rate changes
2019 2018
Up 100/50 basis points -28,503.69 -25,380.51
Down 100/50 basis points 28,503.69 25,380.51
Management believes that the 100/50 basis point reasonably reflects the reasonable range in which in-terest rates may change in the next year.
3. Other price risks
The Company does not hold equity investments in other listed companies, and there is no other pricerisk.
(2) Credit risk
Credit risk refers to the risk that the counterparty of a transaction fails to perform its contractual obliga-tions, resulting in financial losses to the Company. The Company's credit risk mainly arises from Cash atbank and Receivables.
The Company's cash at bank is mainly deposited in state-owned banks and other large and medium-sized listed banks. The Company does not expect cash at bank to have significant credit risk.
For Receivables, the Company sets relevant policies to control credit risk exposure in accordance withthe concentration of customer management credit risk. The Company evaluates the debtor's credit qualifica-tions based on the debtor's financial status, external ratings, possibility of obtaining guarantees from thirdparties, credit history and other factors such as current market conditions, and sets the corresponding ar-rearage amount and credit period. The Company will regularly monitor the credit history of the debtor. Fordebtors with poor credit records, the Company will use written reminders, shorten the credit period or cancelthe credit period to ensure that the Company's overall credit risk is within control. Since the Company's Re-ceivables customers are widely dispersed in different regions and industries, there is no significant concen-tration of credit risk in the Company.
The Company does not provide any other guarantees that may subject the Company to credit risk. Thelargest credit risk exposure undertaken by the Company is the carrying amount of each financial asset in thebalance sheet.
1. Judgment basis for significant increase in credit risk
The Company assesses on each balance sheet date whether the credit risk of relevant financial instru-ments has increased significantly since initial recognition. When determining whether the credit risk has in-creased significantly since the initial recognition, the Company considers that it can obtain reasonable andevidence-based information without unnecessary extra cost or effort, including qualitative and quantitativeanalysis based on the Company's historical data, external credit risk rating and forward-looking information.When one or more of the following quantitative and qualitative standards are met, the Company believes thatcredit risk has increased significantly:
(1) The contract payment has been overdue for more than 30 days.
(2) According to the results of external public credit ratings, the debtor’s credit rating dropped signifi-cantly.
(3) There are serious problems in the debtor's production or operation, and the actual or expected re-sults of the operation have dropped significantly.
(4) Significantly adverse changes have occurred in the debtor’s regulatory, economic or technologicalenvironment.
(5) It is expected that the debtor’s business, financial or economic conditions that will meet its debt-servicing capacity will undergo significant adverse changes.
(6) Other objective evidence shows that financial assets have significantly increased credit risk.
2. Basis of credit impairment
When evaluating whether the debtor has suffered credit impairment, the Company mainly considers thefollowing factors:
(1) The issuer or debtor has significant financial difficulties.
(2) The debtor violates the contract, such as interest payment or principal default or overdue, etc.
(3) Due to economic or contractual considerations related to the debtor’s financial difficulties, the credi-tor gives the debtor a concession that would not be made under any other circumstances.
(4) The debtor is likely to go bankrupt or undergo other financial restructuring.
(5) The issuer or debtor's financial difficulties caused the active market for the financial asset to disap-pear.
(6) Purchase or source a financial asset at a substantial discount, the discount reflects the fact thatcredit losses have occurred.
3. Parameters of measurement of expected credit loss
The parameters of expected credit loss measurement are based on whether there has been a signifi-cant increase in credit risk and whether credit impairment has occurred. The Company measures the lossprovision for different assets with 12 months or the expected lifetime of the entire credit period. The key pa-rameters of expected credit loss measurement include default probability, default loss rate and default riskexposure. The Company considers the quantitative analysis of historical statistical data and forward-lookinginformation to establish default probability, default loss rate and default risk exposure model. The relevantdefinitions are as follows:
(1) The probability of default refers to the possibility that the debtor will not be able to meet its repay-ment obligations in the next 12 months or throughout the remaining duration.
(2) The default risk exposure refers to the amount that the Company should be reimbursed when a de-fault occurs in the next 12 months or throughout the remaining duration.
(3) The default loss rate refers to the Company's expectation of the degree of loss in default exposure.Depending on the type of counterparty, the method and priority of recourse, and the availability of collateralor other credit support, the rate of default loss varies.
The Company determines the expected credit loss by predicting the default probability, default loss rateand default risk exposure of individual exposures or asset portfolios in the coming months. During the report-ing period, there have been no major changes in the expected credit loss estimation techniques or key as-sumptions.
4. Forward-looking information included in the expected credit loss model
The assessment of a significant increase in credit risk and the calculation of expected credit losses in-volve forward-looking information. Through historical data analysis, the Company has identified relevant in-formation that affects the credit risk and expected credit losses of each asset portfolio, such as GDP growthrate and other macroeconomic conditions, and industry development stages such as industry cycle stage.The Company predicts the impact of this information on the probability of default and the rate of default losson the basis of considering changes in the Company's future sales strategy or credit policy.
(3) Liquidity risk
Liquidity risk refers to the risk of a shortage of funds when an enterprise performs its obligation to settlecash or other financial assets. Liquidity risk is centrally controlled by the Company's financial department.The finance department monitors cash balances, securities that can be cashed at any time, and rolling fore-casts of cash flows over the next 12 months to ensure that the Company has sufficient funds to repay debtsunder all reasonable forecasts, meet the Company’s operating needs, and reduce the impact of cash flowfluctuations.
The financial liabilities and off-balance sheet items held by the Company are analyzed according to thematurity period of the undiscounted remaining contractual cash flow (unit: RMB ten thousand):
Closing balance
Item
Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total
Short-term loans 4,828,315.76 - - - 4,828,315.76
Trading financial 1,022.06 - - - 1,022.06
liabilities
Notes payable 498,442.46 - - - 498,442.46
Accounts payable 1,877,803.16 - - - 1,877,803.16
Other payables 18,556.99 - - - 18,556.99
Non-current liabilities 295,805.27 - - - 295,805.27
due within one year
Long term loans 275,395.23 690,615.20 737,885.69 5,370,888.68 7,074,784.79
Bonds payable 6,300.00 6,300.00 106,300.00 - 118,900.00
Long-term payables - 14,768.11 - - 14,768.11
Total financial liabili-
ties and contingen- 7,801,640.92 711,683.31 844,185.69 5,370,888.68 14,728,398.60
cies
Continued:
Beginning balance
Item
Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total
Short-term loans 2,386,602.79 - - - 2,386,602.79
Trading financial 100.96 - - - 100.96
liabilities
Notes payable 1,059,876.93 - - - 1,059,876.93
Accounts payable 1,634,724.56 - - - 1,634,724.56
Other payables 45,934.70 - - - 45,934.70
Non-current liabilities 267,746.84 - - - 267,746.84
due within one year
Long term loans 215,620.46 417,823.33 527,359.20 4,476,926.24 5,637,729.23
Beginning balance
Item
Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total
Long-term payables - 4,562.89 - - 4,562.89
Total financial liabili-
ties and contingen- 5,610,607.24 422,386.22 527,359.20 4,476,926.24 11,037,278.89
cies
The financial liability Amount disclosed in the above table is the undiscounted contractual cash flow,and therefore may be different from the book Amount in the balance sheet.
(4) Capital management
The goal of the Company's capital management policy is to ensure that the Company can continue tooperate, so as to provide returns for shareholders and benefit other stakeholders, while maintaining the opti-mal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, theCompany may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue newshares or sell assets to reduce debt. The Company monitors the capital structure on the basis of the asset-liability ratio (ie total liabilities divided by total assets). As of December 31, 2019, the Company's asset-liability ratio was 78.93% (31 December 2018: 77.72%).
IX. Disclosure of fair value
(1) Fair value of assets and liabilities measured at fair value at the end of the period
Fair value at the end of the period
Item First level Second level Third level
Fair value meas- Fair value meas- Fair value meas- Total
urement urement urement
1. Continuous fair value
measurement
(1) Trading financial assets 75,715,539.31 2,556,116,732.30 - 2,631,832,271.61
1) Financial assets meas-
ured at fair value with 75,715,539.31 2,556,116,732.30 - 2,631,832,271.61
changes included in profit or
loss for the current period
①Debt instrument invest- - - - -
ment
②Equity instruments in- - - - -
vestment
③Derivative financial as- 75,715,539.31 - - 75,715,538.75
sets
④Wealth management
products and structured - 2,556,116,732.30 - 2,556,116,732.30
deposits
2) Designated financial as-
sets measured at fair value - - - -
through profit or loss
①Debt instrument invest- - - - -
ment
②Equity instruments in- - - - -
vestment
(2) Receivables financing - - 3,268,042,426.59 3,268,042,426.59
Total assets continuously 75,715,539.31 2,556,116,732.30 3,268,042,426.59 5,899,874,698.20
measured at fair value
(3) Trading financial liabilities 10,220,573.91 - - 10,220,573.91
Fair value at the end of the period
Item First level Second level Third level
Fair value meas- Fair value meas- Fair value meas- Total
urement urement urement
1) Financial liabilities meas-
ured at fair value and chang- 10,220,573.91 - - 10,220,573.91
es included in profit or loss
for the current period
①Issued trading bonds - - - -
②Derivative financial liabili- 10,220,573.91 - - 10,220,573.91
ties
③Other - - - -
2) Designated Financial
liabilities measured at fair - - - -
value through profit or loss
Total liabilities continuous- 10,220,573.91 - - 10,220,573.91
ly measured at fair value
(2) The basis for determining the market value of the continuous and non-continuous Level 1fair value measurement
For futures contracts with an active market price, the fair value is determined based on the quotation onthe balance sheet date.
(3) Continuous and non-continuous Level 2 fair value measurement using valuation techniquesand qualitative and quantitative information on important parameters
For the wealth management products and structured deposits held by the Company, valuation tech-niques are used to determine their fair value. The valuation model used is a discounted cash flow model,which predicts future cash flows with an expected rate of return.
(4) Continuous and non-continuous Level 3 fair value measurement using valuation techniquesand qualitative and quantitative information on important parameters
For receivables financing that is not traded in an active market, the carrying amount is similar to the fairvalue, and the carrying amount is used as the fair value.
(5) Fair value of financial assets and financial liabilities not measured at fair value
The Company's financial assets and financial liabilities measured at amortised cost mainly include:Cash and bank balances, Note receivables, Accounts receivable, Other receivables, Short-term loans, Notespayable, Accounts payable, Other payables, Non-current liabilities due within one year, Long term loans,bonds payable, etc. The difference between the carrying amount of the financial assets and financial liabili-ties that the Company does not measure at fair value and their fair value are immaterial.
X. Related parties relationship and transactions
Unless otherwise specified, the data listed in this section is in RMB.
(1) Related parties relationship
1. The Company's parent company
Registered capital Shareholding ratio Parent company's
Parent company Nature of busi- Place of registra- (RMB ten thou- of parent compa- voting right ratio
ness tion sand) ny to the Compa- (%)
ny (%)
Hengli Group Co., Industrial In- Wujiang, Jiangsu 200,200 30.11% 30.11%
Ltd. vestment
The Company’s ultimate controlling party is the couple of Chen Jianhua and Fan Hongwe. ChenJianhua and Fan Hongwei directly held 12.59% shares of the Company and through Hengli Group Co., Ltd.and other 5 companies to hold 63.75% of shares of the Company, and totally held 76.34% of shares of theCompany.
2. The Company's subsidiaries
For details of the Company's subsidiaries, please refer to Note VII (1)”Equity in Subsidiaries”.
3. The Company's joint ventures and associates
The Company has no joint ventures or joint ventures.
4. The Company's other related partiesName of other related party Relationship with the CompanyJiangsu Hegao Investment Co., Ltd. The company controlled by the ultimate controller of the Com-
pany and the shareholders of the Company
Jiangsu Boyada Textile Co., Ltd. Entity controlled by our parent company
Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. Entity controlled by our parent company
Wujiang Sunan Rural Microfinance Co., Ltd. Entity controlled by our parent company
Hengli Import and Export Co., Ltd. Entity controlled by our parent company
Wujiang Huajun Textile Co., Ltd. Entity controlled by our parent company
Dalian Henghan Investment Co., Ltd. Entity controlled by the ultimate controller of the Company
Wujiang Chemical Fiber Weaving Factory Co., Ltd. Entity controlled by the ultimate controller of the Company
Jiangsu Deshun Textile Co., Ltd. Entity controlled by the ultimate controller of the Company
Jiangsu Dehua Textile Co., Ltd. Entity controlled by the ultimate controller of the Company
Jiangsu Changshun Textile Co., Ltd. Entity controlled by the ultimate controller of the Company
Hengli Real Estate (Dalian) Co., Ltd. Entity controlled by the ultimate controller of the Company
Suqian Lishun Property Co., Ltd. Entity controlled by the ultimate controller of the Company
Dalian Lida Real Estate Co., Ltd. Entity controlled by the ultimate controller of the Company
Yingkou Kanghui Concrete Co., Ltd. Entity controlled by the ultimate controller of the Company
Suzhou Hengli Intelligent Technology Co., Ltd. Entity controlled by the ultimate controller of the Company
Suzhou Taihu Brewing Co., Ltd. Entity controlled by the ultimate controller of the Company
Suzhou Tongli Red Wine Co., Ltd. Entity controlled by the ultimate controller of the Company
Nantong Deji Concrete Co., Ltd. Entity controlled by the ultimate controller of the Company
Nantong Jinchuan Logistics Co., Ltd. Entity controlled by the ultimate controller of the Company
Shanghai Brewing Wine Co., Ltd. Entity controlled by the ultimate controller of the Company
Dalian Kangjia Property Service Co., Ltd. Entity controlled by the ultimate controller of the Company
Suqian Bailong Garden Technology Co., Ltd. Entity controlled by the ultimate controller of the Company
Shenzhen Gangrui Trading Co., Ltd. Entity controlled by the ultimate controller of the Company
(2) Related party transactions
1. Purchase and sale of goods, acceptance and provision of labor services
(1) Procurement of goods / acceptance of labor servicesName of related party Content of related Pricing policy 2019 2018
party transaction
Jiangsu Boyada Textile Co., Packaging materials market price 345,633.40 449,982.89
Ltd.
Suzhou Wujiang Tongli Lake Other market price 364,794.34 91,360.38
Tourist Resort Co., Ltd.
Wujiang Chemical Fiber Packaging materials market price 146,022.01 164,077.58
Weaving Factory Co., Ltd.
Wujiang Chemical Fiber Other market price - 931.03
Weaving Factory Co., Ltd.
Jiangsu Deshun Textile Co., Packaging materials market price 820,688.94 729,482.68
Ltd.
Jiangsu Deshun Textile Co., Other market price 313,030.60 131,341.56
Ltd.
Nantong Deji Concrete Co., Concrete market price 177,080,392.28 29,661,076.86
Ltd.
Jiangsu Dehua Textile Co., Packaging materials market price 784,665.46 483,724.38
Ltd.
Jiangsu Changshun Textile Packaging materials market price 179,570.10 191,078.30
Co., Ltd.
Nantong Jinchuan Logistics Logistics services market price 4,616,984.14 1,863,202.16
Co., Ltd.
Suzhou Hengli Intelligent Other market price 10,120,997.80 6,911,181.08
Technology Co., Ltd.
Suzhou Taihu Brewing Co., Other market price 2,398,109.70 527,842.83
Ltd.
Suzhou Tongli Red Wine Other market price 542,875.59 162,000.00
Co., Ltd.
Shanghai Brewing Wine Other market price 130,944.00 -
Co., Ltd.
Hengli Import and Export Other market price 101,831.85 -
Co., Ltd.
Dalian Kangjia Property Other market price 3,925,076.49 -
Service Co., Ltd.
Suqian Lishun Property Co., Other market price 238,100.94 253,505.52
Ltd.
Total 206,337,286.56 41,620,787.25
(2) Sales of goods / provision of servicesName of related party Content of related Pricing policy 2019 2018
party transaction
Hengli Group Co., Ltd. Other market price - 57,020.60
Jiangsu Boyada Textile Co., Polyester market price 70,653,029.19 75,458,553.79
Ltd.
Jiangsu Boyada Textile Co., Steam market price 2,704,792.35 2,862,656.58
Ltd.
Jiangsu Boyada Textile Co., Other market price 33,085.84 -
Ltd.
Wujiang Chemical Fiber Polyester market price 34,617,341.21 23,213,829.01
Weaving Factory Co., Ltd.
Wujiang Chemical Fiber Other market price 150,345.59 35,622.22
Weaving Factory Co., Ltd.
Jiangsu Deshun Textile Co., Polyester market price 198,067,324.82 213,994,244.29
Ltd.
Name of related party Content of related Pricing policy 2019 2018
party transaction
Jiangsu Deshun Textile Co., Other market price 325,877.40 273,978.08
Ltd.
Jiangsu Dehua Textile Co., Polyester market price 118,806,055.69 135,787,262.42
Ltd.
Jiangsu Dehua Textile Co., Other market price 87,169.56 59,345.76
Ltd.
Jiangsu Changshun Textile Polyester market price 20,146,708.91 21,013,945.02
Co., Ltd.
Wujiang Huajun Textile Co., Polyester market price 4,883,713.45 1,483,354.78
Ltd.
Wujiang Huajun Textile Co., Steam market price 640,568.82 634,641.37
Ltd.
Suqian Bailong Garden Other market price - 200.00
Technology Co., Ltd.
Total 451,116,012.83 474,874,653.92
2. Leases with related parties
(1) Information of the Company’s as lessorTenant Category of lease assets Rental income recognized in Rental income recognized in
the current period the previous period
Nantong Jinchuan Logistics Transportation equipment 740,415.52 581,000.00
Co., Ltd.
(2) Information of the Company’s as leaseeLandlord Category of lease assets Rental expenses recognized Rental expenses recognized
in the current period in the previous period
Jiangsu Deshun Textile Co., Property and buildings 120,000.00 120,000.00
Ltd.
Dalian Lida Real Estate Co., Property and buildings - 2,670,597.38
Ltd.
Yingkou Kanghui Concrete Specific equipment, Trans- 1,752,799.80 1,561,400.00
Co., Ltd. portation equipment
Nantong Deji Concrete Co., Transportation equipment 1,100,000.00 3,549,935.48
Ltd.
Total 2,972,799.80 7,901,932.863. Guarantee with related parties (Unit: ten thousand RMB)
Guarantee
Guarantor Guarantee Guaranteed Amount Start date Expiry date fulfilled
completely
Chen Jianhua, Fan Hongwei The Com- CNY793,387.28 2019/1/10 2020/9/29 No
pany
Chen Jianhua, Fan Hongwei The Com- USD41.80 2019/7/22 2020/3/12 No
pany
Chen Jianhua, Fan Hongwei The Com- CNY25,000.00 [Note 1] 2019/8/5 2020/10/14 No
pany
Chen Jianhua, Fan Hongwei The Com- CNY788,958.63 [Note 2] 2019/4/18 2019/7/10 No
pany
Chen Jianhua, Fan Hongwei The Com- USD7,402.31 [Note 3] 2019/9/27 2020/2/19 No
pany
Chen Jianhua, Fan Hongwei,
Dalian Lida Real Estate Co., The Com- CNY250,000.00 2019/12/16 2020/12/16 No
Ltd., Dalian Henghan Invest- pany
ment Co., Ltd.
Chen Jianhua, Fan Hongwei,
Jiangsu Boyada Textile Co.,
Ltd., Jiangsu Deshun Textile The Com- CNY574,500.00 [Note 4] 2019/12/19 2034/12/19 No
Co., Ltd., Jiangsu Dehua Tex- pany
tile Co., Ltd., Wujiang Chemical
Fiber Weaving Factory Co., Ltd.
Guarantee
Guarantor Guarantee Guaranteed Amount Start date Expiry date fulfilled
completely
Hengli Group Co., Ltd. The Com- CNY140,819.90 2019/4/30 2020/11/22 No
pany
Hengli Group Co., Ltd. The Com- CNY233,518.00 [Note 5] 2019/3/1 2025/4/23 No
pany
Hengli Group Co., Ltd. The Com- CNY79,769.17 [Note 6] 2019/8/26 2020/6/12 No
pany
Hengli Group Co., Ltd. The Com- CNY14,200.00 [Note 7] 2019/7/10 2020/1/10 No
pany
Hengli Group Co., Ltd. The Com- USD491.35 [Note 8] 2019/10/25 2020/2/14 No
pany
Hengli Group Co., Ltd., Chen The Com- CNY1,150,196.28 2018/12/11 2024/12/11 No
Jianhua, Fan Hongwei pany
Hengli Group Co., Ltd., Chen The Com- USD45.02 2019/10/15 2020/2/17 No
Jianhua, Fan Hongwei pany
Hengli Group Co., Ltd., Chen The Com- CNY26,000.00 [Note 9] 2014/3/21 2020/12/30 No
Jianhua, Fan Hongwei pany
Hengli Group Co., Ltd., Chen The Com- CNY629,533.08 [Note 10] 2019/1/22 2020/8/17 No
Jianhua, Fan Hongwei pany
Hengli Group Co., Ltd., Chen The Com- USD756.94 [Note 11] 2019/12/9 2020/3/16 No
Jianhua, Fan Hongwei pany
Hengli Group Co., Ltd., Chen
Jianhua, Fan Hongwei, Jiangsu
Boyada Textile Co., Ltd., Jiang- The Com-
su Deshun Textile Co., Ltd., pany CNY3,360,000.00 [Note 12] 2012/3/21 2033/5/2 No
Jiangsu Dehua Textile Co.,
Ltd., Wujiang Chemical Fiber
Weaving Factory Co., Ltd.
Hengli Group Co., Ltd., Chen
Jianhua, Fan Hongwei, Jiangsu
Boyada Textile Co., Ltd., Jiang- The Com-
su Deshun Textile Co., Ltd., pany USD127,326.00 [Note 12] 2012/8/1 2033/5/2 No
Jiangsu Dehua Textile Co.,
Ltd., Wujiang Chemical Fiber
Weaving Factory Co., Ltd.
Hengli Group Co., Ltd., Wujiang The Com-
Chemical Fiber Weaving Facto- pany CNY6,700.00 [Note 13] 2019/3/7 2020/3/10 No
ry Co., Ltd.
Hengli Group Co., Ltd., Wujiang The Com-
Chemical Fiber Weaving Facto- pany USD550.34 [Note 13] 2019/9/26 2020/3/16 No
ry Co., Ltd.
Hengli Group Co., Ltd., Wujiang
Chemical Fiber Weaving Facto- The Com- CNY64,000.00 [Note 14] 2019/1/28 2020/5/16 No
ry Co., Ltd., Chen Jianhua, Fan pany
Hongwei
Jiangsu Boyada Textile Co., The Com-
Ltd., Wujiang Chemical Fiber pany CNY7,900.00 [Note 15] 2019/12/12 2020/6/12 No
Weaving Factory Co., Ltd.
Jiangsu Boyada Textile Co., The Com-
Ltd., Wujiang Chemical Fiber pany CNY1,645.54 [Note 15] 2019/6/24 2020/3/23 No
Weaving Factory Co., Ltd.
Jiangsu Deshun Textile Co., The Com-
Ltd., Chen Jianhua, Fan pany CNY22,300.00 2019/2/1 2020/11/14 No
Hongwei
Jiangsu Deshun Textile Co., The Com-
Ltd., Chen Jianhua, Fan pany USD43.63 2019/5/30 2020/4/10 No
Hongwei
Wujiang Chemical Fiber Weav- The Com- CNY3,771.22 [Note 16] 2019/4/26 2021/1/26 No
ing Factory Co., Ltd. pany
Wujiang Chemical Fiber Weav- The Com- USD39,000.00 [Note 17] 2019/3/29 2020/11/16 No
ing Factory Co., Ltd. pany
[Note 1]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings and machinery and equipment.
[Note 2]: The Company also provided security deposits as pledge guarantee.
[Note 3]: The Company also provided security deposits as pledge guarantee.
[Note 4]: The Company also provides mortgage guarantees with Land use rights and Construction inprogress.
[Note 5]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings.
[Note 6]: The Company also provides pledge guarantees with Inventories.
[Note 7]: The Company also provided security deposits as pledge guarantee.
[Note 8]: The Company also provided security deposits as pledge guarantee.
[Note 9]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings and machinery and equipment.
[Note 10]: The Company also provided security deposits as pledge guarantee.
[Note 11]: The Company also provided security deposits as pledge guarantee.
[Note 12]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings and machinery and equipment.
[Note 13]: The Company also provides mortgage guarantees for machinery and equipment, and de-posits to provide pledge guarantees.
[Note 14]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings and machinery and equipment.
[Note 15]: The Company also provided security deposits as pledge guarantee.
[Note 16]: The Company also provides mortgage guarantees with Land use rights, Property and build-ings.
[Note 17]: The Company also provided security deposits as pledge guarantee.
4. Loans and borrowings with related parties
(1) Borrowings from related partiesName of related 2018party Borrowings prin- Repayment of Interest charge Interest paid Closing balance
ciple principle
Hengli Group Co., 749,000,000.00 320,000,000.00 3,123,662.50 - 432,123,662.50
Ltd.
Continued:Name of related 2019party Borrowings prin- Repayment of Interest charge Interest paid Closing balance
ciple principle
Hengli Group Co., - 400,000,000.00 3,274,859.94 - 35,398,522.44
Ltd.
(2) Loans to related parties
There was no loans to related parties in the reporting period.
5. Assets transfer and debt restructuring with related parties
(1) Related parties transfer long-term assets to the Company
Name of related party Transaction content 2019 2018
Dalian Lida Real Estate Co., Ltd. Property and buildings 1,152,613,500.00 1,031,091,100.00
Transportation equip-
Hengli Real Estate (Dalian) Co., Ltd. - 460,000.00
ment
Suzhou Hengli Intelligent Technology Co., Machinery and equip-
4,875,074.60 -
Ltd. ment
Total 1,157,488,574.60 1,031,551,100.00
6. Key management personnel compensationReporting period 2019 2018Number of key management personnel 15 17Number of people receiving remuneration in the Company 14 13Total remuneration (RMB ten thousand) 748.08 469.98
7. Other related parties transactions
(1) The Company purchases and sells for related parties
Name of related party Transaction content 2019 2018
Wujiang Chemical Fiber Weaving Factory
Electricity, Steam 21,189,205.96 20,697,039.23
Co., Ltd.
Jiangsu Deshun Textile Co., Ltd. Electricity 91,599,964.50 81,529,759.55
Total 112,789,170.46 102,226,798.78
(2) Related parties purchase and sell for the Company
Related parties purchase and sell for the Company
Name of related party Transaction content
2019 2018
Jiangsu Deshun Textile Co., Ltd. Steam, Water 1,993,231.60 1,504,005.40
(3) Receivables and payables with related parties
1. Receivables from related parties
Name of related Closing balance Beginning balance
Item party Provision for bad Provision for bad
Book balance debts Book balance debts
(1) Accounts
receivable
Jiangsu Boyada 4,793.92 239.70
Textile Co., Ltd.
Jiangsu Deshun 8,715,228.62 435,761.43
Textile Co., Ltd.
Wujiang Huajun 77,330.00 3,866.50 68,059.61 3,402.98
Textile Co., Ltd.
Suqian Bailong
Garden Technology - - 232.00 11.60
Co., Ltd.
Total 8,797,352.54 439,867.63 68,291.61 3,414.58(2) Prepay-
ments
Yingkou Kanghui 305,000.20
Concrete Co., Ltd.
Jiangsu Deshun - - 95,082.28 -
Textile Co., Ltd.
Total 305,000.20 95,082.28(3) Other re-
ceivables
Yingkou Kanghui - - 525.84 5.24
Concrete Co., Ltd.
Wujiang Chemical
Fiber Weaving - - 497.30 4.97
Factory Co., Ltd.
Name of related Closing balance Beginning balance
Item party Provision for bad Provision for bad
Book balance debts Book balance debts
Total - - 1,023.14 10.21
2. Payables to related partiesItem Name of related party Closing balance Beginning balance(1) Accounts payable
Wujiang Chemical Fiber Weaving - 4,855.15
Factory Co., Ltd.
Yingkou Kanghui Concrete Co., Ltd. 3,338,514.40 3,033,792.91
Suzhou Taihu Brewing Co., Ltd. 275,700.00 -
Nantong Jinchuan Logistics Co., 435,562.20 -
Ltd.
Jiangsu Changshun Textile Co., 134,513.48 102,243.76
Ltd.
Jiangsu Deshun Textile Co., Ltd. 374,406.75 -
Jiangsu Dehua Textile Co., Ltd. 711,298.90 -
Jiangsu Boyada Textile Co., Ltd. - 13,908.48
Suzhou Wujiang Tongli Lake Tour- 64,098.00 54,474.00
ist Resort Co., Ltd.
Suzhou Hengli Intelligent Technol- 5,934,009.03 1,121,589.48
ogy Co., Ltd.
Total 11,268,102.76 4,330,863.78
(2) Dividend payable - -
Jiangsu Hegao Investment Co., Ltd. 12,998.00 230,000.00
Dalian Henghan Investment Co., 2,040,000.00 --
Ltd.
Total 2,052,998.00 230,000.00
(3) Receipts in ad-
vance
Jiangsu Boyada Textile Co., Ltd. 805,052.06 2,604,699.35
Jiangsu Changshun Textile Co., 5,060.43 -
Ltd.
Wujiang Huajun Textile Co., Ltd. 3,432.13 -
Wujiang Chemical Fiber Weaving 257,005.42 760,992.96
Factory Co., Ltd.
Jiangsu Dehua Textile Co., Ltd. 1,340,992.29 156,205.34
Jiangsu Deshun Textile Co., Ltd. 1,496,619.26 4,359,515.90
Total 3,908,161.59 7,881,413.55
(4) Other payables
Fan Hongwei - 11,430.00
Shenzhen Gangrui Trading Co., 754,849.50 -
Ltd.
Hengli Group Co., Ltd. 35,398,522.44 442,506,623.90
Item Name of related party Closing balance Beginning balance
Total 36,153,371.94 442,518,053.90
XI. Share-based payment
Unless otherwise specified, the data listed in this section is in RMB.
(1) Basic situation of share-based payment
1. According to ”Hengli Petrochemical Co., Ltd. Phase III Employee Stock Ownership Plan (Draft) (Se-cond Revision)”, Phase III Employee Stock Ownership Plan obtained the Company's repurchased sharesthrough non-tradable transfer and block trade transactions. The Company has entrusted Shaanxi Interna-tional Trust Co., Ltd. to set up the ”Shaanxi International Investment. Hengli Petrochemical Phase III Em-ployee Shareholding Collective Fund Trust Plan”. The trust plan has been repurchased the Company’sshares of 19,814,900 shares through block trading on December 26, 2019 in a dedicated securities account,accounting for 0.28% of the Company’s total share capital, with a transaction amount of RMB 261,952,978(excluding transaction fees), an average transaction price of RMB 13.22 per share, and a stock lock-up peri-od of 12 months since the date of transfer (December 26, 2019). On December 27, 2019, the third phase ofthe employee stock ownership plan obtained the Company’s non-tradable shares through repurchase of2,422,200 shares by the Company in the dedicated securities account, accounting for 0.03% of the Compa-ny’s total share capital. The stock lock-up period was 60 months since the transfer day (December 27, 2019).
2. According to “Hengli Petrochemical Co., Ltd. Phase IV Employee Stock Ownership Plan (Draft)”,Phase IV Employee Stock Ownership Plan obtained the Company's repurchased shares through block tradetransactions. The Company has entrusted Tibet Trust Co., Ltd. to establish the “Tibet Trust-Hengli Petro-chemical Phase IV Employee Shareholding Collective Fund Trust Plan” (hereinafter referred to as ”TrustPlan”). As of December 30, 2019, the trust plan transfers 50,193,200 shares of the Company to the dedicat-ed securities account through the block trade transaction, accounting for 0.71% of the Company's total sharecapital, an average transaction price of RMB 13.86 per share, the stock lock-up period is 12 months sincethe date of transfer (December 30, 2019).
(2) General information of share-based paymentsThe total amount of equity instruments awarded The third-stage employee shareholding platform: 22,237,100 sharesby the Company in this period The forth-stage employee shareholding platform: 50,193,200 sharesTotal equity instruments exercised in this period Not applicable
Total equity instruments lapsed in this period Not applicable
The range of exercise price and remaining con-
Not applicable
tract period of outstanding share options
The range of exercise price and remaining con-
Not applicable
tract period of other equity instruments
[Note] Information of share-based payments
(3) Equity-settled share-based paymentDetermination method of fair value of equity instruments on
Stock price
grant date
It is expected that the on-the-job employees will eventually
The method of determining the best estimate of the number of
obtain the corresponding benefits of the employee share
exercisable equity instruments
incentive plan
Reasons for the significant difference between the current
Not applicable
estimate and the previous estimate
Cumulative amount of equity-settled share-based payment in
-
Capital reserve
The total amount of expenses recognised by equity-settled
-
share-based payment in this period
XII. Commitments and contingencies
(1) Significant commitment
1. Signed foreign investment contracts and related financial expenditures that have not been performedor have not been fully performed
Item Closing balance
Long-term assets capital commitment 2,266,182,835.66
2. Other major financial commitments
(1) For details of the property mortgage and pledge guarantees between companies within the scope ofconsolidation, please refer to the explanation in Note XII(2) 1”Guarantee between companies within thescope of consolidation of the Company” in this financial statement.
(2) Mortgage of assets and guarantees of the companies within the scope of consolidation for their ownexternal loans, letter of credit and letter of guarantee (unit: RMB ten thousand)
Party obtained the Mortgaged Cost of mort- Carrying Guaranteed Financing due
Guarantor Mortgage property gaged property amount of financing bal- date
mortgaged ance
property
Property and
Agricultural Bank of buildings
China Wujiang Land use 194,353.22 27,291.67 25,000.00 2020/10/14
Nanma Sub-branch rights [Note 1]
Machinery and
equipment
Property and
Jiangsu Bank of China buildings
Hengli Limited Wujiang Land use 102,866.27 13,600.98 58,000.00 2020/5/16
Chemical Branch rights [Note 2]
Fiber Co., Machinery and
Ltd. equipment
Industrial and Com- Property and
mercial Bank of buildings 10,239.89 5,938.04 28,500.00 2020/2/28
China Limited Land use [Note 3]
Wujiang Branch rights
China Construction Property and 12,700.00
Bank Corporation buildings 142,509.19 35,414.44 USD550.34 2020/3/16
Wujiang Shengze Land use [Note 4]
Sub-branch rights
Party obtained the Mortgaged Cost of mort- Carrying Guaranteed Financing due
Guarantor Mortgage property gaged property amount of financing bal- date
mortgaged ance
property
Machinery and
equipment
Jiangsu Branch of Property and
the Export-Import buildings 23,685.29 11,039.76 USD3,771.22 2021/1/26
Bank of China Land use [Note 5]
rightsProperty andJiangsu buildingsDeli Chem- Bank of China Land use 52,181.48 18,004.52 9,000.00 2020/11/17ical Fiber Suqian Branch rights [Note 6]Co., Ltd. Machinery and
equipment
Jiangsu
Hengke Bank of Jiangsu Co., Land use 50,000.00
Advanced Ltd. Nantong HSBC rights 7,792.01 6,766.06 USD561.00 2024/3/21
Materials Sub-branch [Note 7]
Co. Ltd.
Yingkou Bank of China Property and
Kanghui Limited Yingkou buildings
Petro- Economic and Land use 210,176.63 151,630.09 17,000.00 2020/12/30
chemical Technological De- rights [Note 8]
Co., Ltd. velopment Zone Machinery and
Sub-branch equipment
Agricultural Bank of
China Co., Ltd.
Dalian Property and 42,188.00 2022/3/20
Changxingdao Sub- buildings
Hengli Bbraannkchof China Co., Land use
Petro- rights 972,916.15 680,616.43Ltd. Dalian
chemical Machinery and 33,750.00 2022/3/20Changxingdao Sub-
(Dalian) equipmentbranch
Co., Ltd. Dalian Branch of [Note 9]
China Development 184,062.00 2022/3/20
Bank USD7,326.00
Industrial Bank Co., Land use 17,075.75 13,916.74 205,018.00 2025/4/23
Ltd. Dalian Branch rights
Industrial and Com-
mercial Bank of
China Dalian 300,000.00 2033/5/2
Changxingdao Sub-
branch
Guangdong Devel-
opment Bank Co.,
Ltd. Dalian Property and 90,000.00 2033/5/2
Changxingdao Sub- buildings
Hengli branch Land use
Petro- Dalian Branch of rights 1,000,000.00
chemical China Development Machinery and 6,321,549.17 6,124,464.46 USD110,000.00 2033/5/2
(Dalian) Bank equipment
Refining China Construction Construction in
Co., Ltd. Bank Corporation progress
Dalian [Note 10] 250,000.00 2033/5/2
Changxingdao Sub-
branch
Bank of Communi-
cations Co., Ltd. 200,000.00 2033/5/2
Dalian Branch
Agricultural Bank of
China Co., Ltd. 180,000.00 2033/5/2
Dalian
Party obtained the Mortgaged Cost of mort- Carrying Guaranteed Financing due
Guarantor Mortgage property gaged property amount of financing bal- date
mortgaged ance
property
Changxingdao Sub-
branch
Agricultural Bank of
China Wujiang 270,000.00 2033/5/2
Nanma Sub-branch
Liaoning Province
Branch Export- 360,000.00 2033/5/2
Import Bank of USD10,000.00
China
Jiangsu Branch of
the Export-Import 100,000.00 2033/5/2
Bank of China
Bank of China Co.,
Ltd. Dalian 200,000.00 2033/5/2
Changxingdao Sub-
branch
Bank of China
Suzhou Wuyue Sub- 150,000.00 2033/5/2
branch
China Development 200,000.00 2034/12/19
Bank Dalian Branch
Industrial and Com-
mercial Bank of
China Dalian 119,800.00 2034/12/19
Changxingdao Sub-
branch
China Postal Sav-
ings Bank Dalian 119,800.00 2034/12/19
High-tech Park Sub-
Hengli branch
Petro- Agricultural Bank of Land use
chemical China Co., Ltd. rights
Dalian Construction in 1,523,899.57 1,522,256.69(Dalian) 37,500.00 2034/12/19
Changxingdao Sub- progressChemical
branch [Note 11]Co., Ltd.
Bank of China Co.,
Ltd. Dalian 35,940.00 2034/12/19
Changxingdao Sub-
branch
Bank of China
Limited Wujiang 23,960.00 2034/12/19
Branch Business
Division
Agricultural Bank of
China Wujiang 37,500.00 2034/12/19
Nanma Sub-branch
Subtotal 9,579,244.62 8,610,939.87 4,339,718.00
USD132,208.56
[Note 1]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 2]: Hengli Group Co., Ltd., Wujiang Chemical Fiber Weaving Factory Co., Ltd., Chen Jianhua,Fan Hongwei also provide guarantees.
[Note 3]: Hengli Group Co., Ltd. provides a guarantee.
[Note 4]: Hengli Group Co., Ltd., Wujiang Chemical Fiber Weaving Factory Co., Ltd., Chen Jianhua,Fan Hongwei provide a guarantee, and the Company provides security deposits as pledge guarantee.
[Note 5]: Wujiang Chemical Fiber Weaving Factory Co., Ltd. provides a guarantee.
[Note 6]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 7]: The Company provides security deposits as pledge guarantee.
[Note 8]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 9]: The financing is a syndicated loans, and the collateral is collateralized to all the mortgagee inthe syndicate, Hengli Group Co., Ltd., Wujiang Chemical Fiber Weaving Factory Co., Ltd., Chen Jianhua,Fan Hongwei, Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., Jiangsu Boyada Textile Co.,Ltd. provide guarantees.
[Note 10]: The financing is a syndicated loans, and the collateral is collateralized to all the mortgageein the syndicate, Hengli Group Co., Ltd., Wujiang Chemical Fiber Weaving Factory Co., Ltd., Chen Jianhua,Fan Hongwei, Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., Jiangsu Boyada Textile Co.,Ltd. provide guarantees.
[Note 11]: The financing is a syndicated loans, and the collateral is collateralized to all the mortgageein the syndicate, Hengli Group Co., Ltd., Wujiang Chemical Fiber Weaving Factory Co., Ltd., Chen Jianhua,Fan Hongwei, Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., Jiangsu Boyada Textile Co.,Ltd. provide guarantees.
(3) Pledge of assets and guarantees of the companies within the scope of consolidation for their ownexternal loans, letter of credit and letter of guarantee (unit: RMB ten thousand)
Party obtained the Pledged Cost of pledged Carrying amount Guaranteed Financing
Guarantor pledge property property of pledged prop- financing bal- due date
erty ance
Jiangsu Branch of Inventories
the Export-Import [Note 1] 50,580.00 50,580.00 118,769.17 2020/11/16
Bank of China
Bank of Jiangsu
Co., Ltd. Suzhou Bank ac- 3,250.40 3,250.40 2,900.00 2020/1/24
Shengze Sub- ceptance bills
branch
Agricultural Bank of Bank ac-
China Limited ceptance bills 59,953.88 59,953.88 59,630.00 2020/7/22
Nanma Sub-branch [Note 2]
China Construction Security
Bank Corporation deposit 13,429.20 13,429.20 43,900.00 2020/6/18
Shengze Sub- [Note 3] USD550.34
branch
Jiangsu Hengli WofujiPaundgoSnugb-bDreavneclh- Security
Chemical Fiber 8,600.00 8,600.00 28,600.00 2020/4/15opment Bank Co., deposit
Co., Ltd. Ltd.
Zheshang Bank Co., Bank ac-
Ltd. Suzhou ceptance bills 110,930.74 110,930.74 110,290.00 2020/6/23
Wujiang Sub-branch
Bank of China Bank ac-
Limited Wujiang ceptance bills 2,360.15 2,360.15 2,360.00 2020/5/5
Sub-branch
Guangdong Devel- Security
opment Bank Co., deposit 4,200.00 4,200.00 14,000.00 2020/1/10
Ltd. Suzhou Branch [Note 4]
Bohai Bank Co., Security 4,000.00 4,000.00 14,000.00 2020/1/10
Ltd. Suzhou Branch deposit
Huaxia Bank Co., Security 7,900.00
Ltd. Suzhou Branch deposit 3,430.50 3,430.50 USD1,645.54 2020/6/12
[Note 5]
Party obtained the Pledged Cost of pledged Carrying amount Guaranteed Financing
Guarantor pledge property property of pledged prop- financing bal- due date
erty ance
China Merchants Security
Bank Co., Ltd. deposit 638.00 638.00 USD491.35 2020/2/14
Wujiang Sub-branch [Note 6]
China Everbright Security
Bank Co., Ltd. deposit 8,960.40 8,960.40 EUR29,868.00 2020/6/12
Suzhou Branch [Note 7]
Security
Bank of Jiangsu deposit 70,000.00
Co., Ltd. Nantong Financial 5,096.08 5,096.08 JPY58,980.00 2024/3/21
HSBC Sub-branch products USD886.00
[Note 8]
Bank of China
Limited Nantong Fixed deposit 4,600.00 4,600.00 JPY62,970.00 2020/7/10
Jiangsu Hengke Tongzhou Sub-
Advanced Mate- branch
rials Co. Ltd. Agricultural Bank of Security
China Limited deposit 27,017.35 27,017.35 27,000.00 2020/3/19
Wujiang Nanma Bank ac-
Branch ceptance bills
Zheshang Bank Co., Security
Ltd. Suzhou deposit 6,539.44 6,539.44 6,100.00 2020/2/7
Wujiang Sub-branch Bank ac-
ceptance bills
Zheshang Bank Co., Bank ac-
Ltd. Suzhou ceptance bills 1,501.70 1,501.70 1,481.70 2020/01/23
Wujiang Sub-branch
Bank of Ningbo Co.,
Jiangsu Deli Ltd. Wujiang High- Bank ac- 1,810.00 1,810.00 1,810.00 2020/02/16
Chemical Fiber tech Industrial Park ceptance bills
Co., Ltd. Sub-branch
Agricultural Bank of Security
China Suqian deposit USD32.00 USD32.00 USD32.00 2020/4/10
Sucheng Sub- [Note 9]
branch
Everbright Bank Security 4,093.56 4,093.56
Dalian Shahekou deposit USD1,000.00 USD1,000.00 20,403.19 2020/06/18
District Sub-branch Fixed deposit EUR11.10 EUR11.10
[Note 10]
Huaxia Bank
Yingkou Kanghui Yingkou Economic Security
Petrochemical and Technological deposit 7,500.00 7,500.00 25,000.00 2020/05/04
Co., Ltd. Development Zone [Note 11]
Sub-branch
Security
Shanghai Pudong deposit
Development Bank Bank ac- 6,203.09 6,203.09 14,600.29 2020/06/17
Yingkou Branch ceptance bills
[Note 12]
China Construction
Bank Corporation Security
Dalian deposit 13,335.78 13,335.78 238,815.79 2020/7/26
Changxingdao Sub- [Note 13]
branch
Hengli Petro- Bank of Jiangsu
chemical (Dalian) Co., Ltd. Suzhou Financial 30,000.00 30,000.00 30,000.00 2020/1/14
Co., Ltd. Shengze Sub- products
branch
Guangdong Devel-
opment Bank Co., Security
Ltd. Dalian deposit 7,617.29 7,617.29 62,175.83 2020/3/24
Changxingdao Sub- [Note 14]
branch
Party obtained the Pledged Cost of pledged Carrying amount Guaranteed Financing
Guarantor pledge property property of pledged prop- financing bal- due date
erty ance
Industrial Bank Co., Security 50,442.48
Ltd. Dalian Branch deposit 11,893.75 11,893.75 USD827.81 2020/7/5
[Note 15]
Agricultural Bank of
China Co., Ltd. Security
Dalian deposit 4,962.33 4,962.33 29,620.29 2020/3/19
Changxingdao Sub- [Note 16]
branch
Shengjing Bank Co., Security
Ltd. Dalian deposit 24,411.64 24,411.64 122,018.97 2020/8/17
Wafangdian Sub- [Note 17]
branch
China Construction
Bank Corporation Fixed deposit 28,000.00 28,000.00 28,000.00 2020/5/18
Wujiang Shengze
Sub-branch
Harbin Bank Co., Security
Ltd. Dalian Branch deposit 5,861.00 5,861.00 17,282.77 2020/6/23
[Note 18]
China CITIC Bank Security
Corporation Wujiang deposit 4,760.00 4,760.00 USD2,291.73 2020/3/25
Shengze Sub- [Note 19]
branch
China Minsheng Security 44,633.59
Banking Corporation deposit 5,334.08 5,334.08 USD756.94 2020/6/8
Suzhou Branch [Note 20]
Dalian Bank Co., Security
Ltd. Fourth Center deposit 5,407.00 5,407.00 41,745.90 2020/2/3
Sub-branch [Note 21]
Huaxia Bank Co.,
Ltd. Dalian Devel- Security 4,032.00 4,032.00 39,323.36 2020/4/16
opment Zone Sub- deposit
branch
Nanyang Commer- Security
cial Bank (China) deposit 13,772.85 13,772.85 68,210.98 2020/5/8
Co., Ltd. Dalian [Note 22]
Branch
Ping An Bank Co., Security
Ltd. Dalian Branch deposit 8,102.09 8,102.09 78,253.22 2020/5/19
[Note 23]
Bohai Bank Co., Security 4,161.15 4,161.15 20,364.02 2020/1/30
Ltd. Suzhou Branch deposit
Bank of China Co., Security
Ltd. Dalian deposit 1,972.43 1,972.43 19,706.92 2020/1/20
Changxingdao Sub- [Note 24]
branch
China Construction
Bank Dalian Fixed deposit 2.00 2.00 200,000.00 2020/9/29
Changxingdao Sub- [Note 25]
branch
Liaoning Province
Branch Export- Security 59,940.00 59,940.00 83,123.56 2020/1/23
Hengli Petro- CImhpinoart Bank of deposit
chemical (Dalian) Agricultural Bank of Security
Refining Co., Ltd. China Wujiang deposit 6,502.00 6,502.00 10,000.00 2020/1/22
Nanma Sub-branch [Note 26]
Industrial Bank Co., Security
Ltd. Dalian Branch deposit 22,561.91 22,561.91 103,910.01 2020/3/2
[Note 27]
Bank of China Co., Security 11,109.88 11,109.88 98,677.86 2020/2/27
Ltd. Dalian deposit
Party obtained the Pledged Cost of pledged Carrying amount Guaranteed Financing
Guarantor pledge property property of pledged prop- financing bal- due date
erty ance
Changxingdao Sub- [Note 28]
branch
Bank of China Security
Suzhou Wuyue deposit 10,490.00 10,490.00 91,341.15 2020/2/12
Sub-branch
China CITIC Bank Security
Corporation Wujiang deposit 45,340.00 45,340.00 182,961.10 2020/2/17
Shengze Sub- [Note 29]
branch
Bohai Bank Co., Security
Ltd. Dalian Shenghe deposit 6,271.54 6,271.54 4,437.56 2020/2/18
Sub-branch [Note 30]
Guangdong Devel-
opment Bank Co., Security
Ltd. Dalian deposit 13,500.00 13,500.00 92,212.30 2020/1/28
Changxingdao Sub- [Note 31]
branch
Shanghai Pudong Security
Development Bank deposit 17,900.00 17,900.00 89,555.43 2020/2/4
Co., Ltd. Dalian [Note 32]
Branch
Shengjing Bank Co., Security
Ltd. Wafangdian deposit 21,942.55 21,942.55 - -
Sub-branch [Note 33]
Agricultural Bank of
China Co., Ltd. Security
Dalian deposit 8,800.00 8,800.00 - -
Changxingdao Sub- [Note 34]
branch
Industrial and
Commercial Bank of Security
China Dalian deposit 11,790.00 11,790.00 - -
Changxingdao Sub-
branch
Hengli Petro- Agricultural Bank of Financial
chemical (Dalian) China Dalian products 50,000.00 50,000.00 49,000.00 2020/5/19
Chemical Co., Changxingdao Sub- Bank ac-
Ltd. branch ceptance bills
HENGLI Agricultural Bank of Letter of
PETROCHEMIC China Limited Hong credit USD1,204.42 USD1,204.42 USD1,204.42 2020/3/11
AL CO., LIMITED Kong Branch
794,467.73 794,467.73 2,460,274.66
Subtotal USD2,236.42 USD2,236.42 USD12,980.52
EUR11.10 EUR11.10 EUR29,868.00
JPY121,950.00
[Note 1]: Hengli Group Co., Ltd. and Wujiang Chemical Fiber Weaving Factory Co., Ltd. provide guar-antee.
[Note 2]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantee, and the Companyprovides mortgage guarantee with Land use rights, Property and buildings.
[Note 3]: Hengli Group Co., Ltd. and Wujiang Chemical Fiber Weaving Factory Co., Ltd. provide guar-antee, and our Company provides guarantee with Machinery and equipment.
[Note 4]: Hengli Group Co., Ltd. provides a guarantee.
[Note 5]: Wujiang Chemical Fiber Weaving Factory Co., Ltd. and Jiangsu Boyada Textile Co., Ltd. pro-vide guarantee.
[Note 6]: Hengli Group Co., Ltd. provides a guarantee.
[Note 7]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 8]: The Company also provides mortgage guarantee with Land use rights.
[Note 9]: Jiangsu Deshun Textile Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees.
[Note 10]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 11]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 12]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 13]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 14]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 15]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 16]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 17]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 18]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 19]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 20]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 21]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 22]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 23]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 24]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 25]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 26]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 27]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 28]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 29]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 30]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 31]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 32]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 33]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 34]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
(2) Contingencies
1. Guarantees between companies within the scope of the Company's consolidation
(1) As of December 31, 2019, the situation of guarantees between companies within the scope of theCompany's consolidation (unit: RMB ten thousand)
Party provided Party being guaran- Financial institutes Guaranteed Financing Note
guarantee teed financing balance due date
Bohai Bank Co., Ltd. Dalian 20,000.00 2020/4/16 [Note 1]
Branch
Industrial and Commercial
Bank of China Dalian 82,041.57 2020/9/1
Changxingdao Sub-branch
China Construction Bank
Corporation Dalian 200,000.00 2020/9/29 [Note 2]
Changxingdao Sub-branch
Ping An Bank Co., Ltd. Da- 150,196.28 2020/6/2 [Note 3]
lian Branch
Agricultural Bank of China
Co., Ltd. Dalian 90,000.00 2020/10/15 [Note 4]
Changxingdao Sub-branch
China Merchants Bank Co., 50,000.00 2020/2/5 [Note 5]
Ltd. Dalian Branch
Agricultural Bank of China 110,000.00 2020/11/6 [Note 6]
Hengli Petro- Wujiang Nanma Sub-branch
chemical Co., Liaoning Province Branch
Ltd. 83,123.56 2020/1/23 [Note 7]Export-Import Bank of China
Industrial Bank Co., Ltd. 103,910.01 2019/11/28 [Note 8]
Dalian Branch
Bank of China Co., Ltd.
Dalian Changxingdao Sub- 98,677.86 2020/2/27 [Note 9]
branch
China CITIC Bank Corpora-
Hengli Petrochemi- tion Wujiang Shengze Sub- 182,961.10 2020/2/17 [Note 10]
cal (Dalian) Refin- branch
ing Co., Ltd. Bohai Bank Co., Ltd. Dalian 4,437.56 2020/2/18 [Note 11]
Shenghe Sub-branch
Guangdong Development
Bank Co., Ltd. Dalian 92,212.30 2020/1/28 [Note 12]
Changxingdao Sub-branch
Shanghai Pudong Develop-
ment Bank Co., Ltd. Dalian 89,555.43 2020/2/4 [Note 13]
Branch
Hengli Petro-
chemical Co.,
Ltd. Dalian Branch of China 300,000.00 2020/2/26 [Note 14]
Jiangsu Hengli Development Bank USD30,000.00
Chemical Fiber
Co., Ltd.
Hengli Petro- Industrial and Commercial
chemical Co., Bank of China Dalian 300,000.00
Ltd. Changxingdao Sub-branch
Jiangsu Hengli Guangdong Development
Chemical Fiber Bank Co., Ltd. Dalian 90,000.00
Co., Ltd. Changxingdao Sub-branch
Jiangsu Deli Dalian Branch of China 1,000,000.00 2033/5/2 [Note 15]
Chemical Fiber Development Bank USD110,000.00
Co., Ltd. China Construction Bank
Jiangsu Hengke Corporation Dalian 250,000.00
Advanced Mate- Changxingdao Sub-branch
rials Co. Ltd. Bank of Communications
Suzhou Susheng 200,000.00Co., Ltd. Dalian Branch
Party provided Party being guaran- Financial institutes Guaranteed Financing Note
guarantee teed financing balance due date
Thermal Power Agricultural Bank of China
Co., Ltd. Co., Ltd. Dalian 180,000.00
Changxingdao Sub-branch
Agricultural Bank of China 270,000.00
Wujiang Nanma Sub-branch
Liaoning Province Branch 360,000.00
Export-Import Bank of China USD10,000.00
Jiangsu Branch of the Ex- 100,000.00
port-Import Bank of China
Bank of China Co., Ltd.
Dalian Changxingdao Sub- 200,000.00
branch
Bank of China Suzhou 150,000.00
Wuyue Sub-branch
Hengli Petro- Suzhou Branch of China
chemical (Da- Development Bank USD5,500.00 2020/12/25
lian) Co., Ltd.
Hengli Petro- Jiangsu Hengli Bohai Bank Co., Ltd. Su-
chemical Co., Chemical Fiber Co., zhou Branch 14,000.00 2020/1/10 [Note 16]
Ltd. Ltd.
Suzhou Susheng China Export-Import Bank of 39,000.00
Thermal Power Jiangsu Branch USD3,771.22 2021/1/26 [Note 17]
Co., Ltd.
Hengli Petro- Bank of Jiangsu Co., Ltd. 70,000.00
chemical Co., Nantong HSBC Sub-branch USD561.00 2024/3/21 [Note 18]
Ltd.
Jiangsu Hengke LAigmriicteudlturNaal nBtoanngk ToofngCzhhinoau 13,300.00 2020/4/11 [Note 19]
Jiangsu Hengli Advanced Materials Sub-branch
Chemical Fiber Co. Ltd. Jiangsu Nantong Rural 20,000.00 2020/10/17
Co., Ltd. Commercial Bank Co., Ltd.
Agricultural Bank of China USD41.80 2020/3/12 [Note 20]
Wujiang Nanma Sub-branch
Hengli Petro- Dalian Branch of China
chemical Co., Development Bank 200,000.00 2020/9/29 [Note 21]
Ltd.
Dalian Branch of China 200,000.00
Development Bank
Hengli Petro- Industrial and Commercial
chemical Co., Bank of China Dalian 119,800.00
Ltd. Changxingdao Sub-branch
Jiangsu Hengli China Postal Savings Bank
Chemical Fiber Hengli Petrochemi- Co., Ltd. Dalian High-tech 119,800.00
Co., Ltd. cal (Dalian) Chemi- Park Sub-branch
Jiangsu Deli cal Co., Ltd. Agricultural Bank of China
Chemical Fiber Co., Ltd. Dalian 37,500.00 2034/12/19 [Note 22]
Co., Ltd. Changxingdao Sub-branch
Jiangsu Hengke Bank of China Co., Ltd.
Advanced Mate- Dalian Changxingdao Sub- 35,940.00
rials Co. Ltd. branch
Suzhou Susheng Bank of China Limited
Thermal Power Wujiang Branch Business 23,960.00
Co., Ltd. Division
Agricultural Bank of China 37,500.00
Wujiang Nanma Sub-branch
Liaoning Province Branch 40,000.00 2020/6/20
Hengli Petro- Yingkou Kanghui Export-Import Bank of China
chemical Co., Petrochemical Co., Huaxia Bank Co., Ltd.
Ltd. Ltd. YTeincghknooulogicEacl onDoemveiclopmaenndt 25,000.00 2020/05/04 [Note 23]
Zone Sub-branch
Party provided Party being guaran- Financial institutes Guaranteed Financing Note
guarantee teed financing balance due date
Shanghai Pudong Develop-
ment Bank Co., Ltd. Yingkou 14,600.29 2020/06/17 [Note 24]
Branch
Everbright Bank Co., Ltd. EUR1,482.60 2022/9/29
Shahekou Sub-branch
China Construction Bank
Corporation Dalian 248,815.79 2020/12/6 [Note 25]
Changxingdao Sub-branch
Bank of China Co., Ltd.
Dalian Changxingdao Sub- 99,706.92 2020/11/13 [Note 26]
branch
Dalian Branch of China 250,000.00 2020/12/16 [Note 27]
Development Bank
Liaoning Province Branch 91,000.00 2020/9/4 [Note 28]
Export-Import Bank of China USD9,400.00
Guangdong Development
Bank Co., Ltd. Dalian 62,175.83 2020/3/24 [Note 29]
Changxingdao Sub-branch
Shengjing Bank Co., Ltd.
Dalian Wafangdian Sub- 122,018.97 2020/8/17 [Note 30]
branch
Harbin Bank Co., Ltd. Dalian 13,000.00 2020/6/23 [Note 31]
Hengli Petro- CBrhainnachCITIC Bank Corpora- USD4,282.77
chemical Co., tion Wujiang Shengze Sub- USD2,291.73 2020/3/25 [Note 32]
Ltd. branch
Hengli Petrochemi- IDnadluiasntriBarlanBcahnk Co., Ltd. U3S0D,844272..4818 2020/7/5 [Note 33]
cal (Dalian) Co.,
Ltd. CCohrinpaoratMioinnsShueznhgou BBarannkcinhg U2S44D,765363..9549 2024/12/11 [Note 34]
Huaxia Bank Co., Ltd. Da-
lian Development Zone Sub- 39,323.36 2020/4/16 [Note 35]
branch
Nanyang Commercial Bank
(China) Co., Ltd. Dalian 68,210.98 2020/5/8 [Note 36]
Branch
Agricultural Bank of China
Co., Ltd. Dalian 9,620.29 2020/1/6 [Note 37]
Changxingdao Sub-branch
Ping An Bank Co., Ltd. Da- 78,253.22 2020/5/19 [Note 38]
lian Branch
Bohai Bank Co., Ltd. Su- 20,364.02 2020/1/30 [Note 39]
zhou Branch
Agricultural Bank of China
Co., Ltd. Dalian 42,188.00
Jiangsu Hengli CBahnakngxoinf gdCahoinSaubC-bor.a,ncLhtd.
Chemical Fiber Dalian Changxingdao Sub- 33,750.00 2022/3/20 [Note 40]
Co., Ltd. branch
Dalian Branch of China 184,062.00
Development Bank USD7,326.00
7,405,081.41
Subtotal USD184,759.26
EUR1,482.60
[Note 1]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 2]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 3]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 4]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 5]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 6]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 7]: The Company provides security deposits as pledge guarantee.
[Note 8]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security depos-its as pledge guarantee.
[Note 9]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 10]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 11]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 12]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 13]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 14]: The Company provides security deposits as pledge guarantee.
[Note 15]: The financing is a syndicated loans, Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei,Jiangsu Boyada Textile Co., Ltd., Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., WujiangChemical Fiber Weaving Factory Co., Ltd. provide guarantee and the Company mortgaged land use rights,Property and buildings, Machinery and equipment and Construction in progress as guarantee.
[Note 16]: The Company also provided security deposits as pledge guarantee.
[Note 17]: Wujiang Chemical Fiber Weaving Factory Co., Ltd. provides guarantee, the Company pro-vides mortgage guarantee with Land use rights, and pledge guarantee with Inventories.
[Note 18]: The Company also uses Land use rights to provide mortgage guarantees, and deposits inSecurity deposits to provide pledge guarantees. .
[Note 19]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 20]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 21]: Chen Jianhua and Fan Hongwei also provide guarantees.
[Note 22]: The financing is a syndicated loans, Chen Jianhua, Fan Hongwei, Jiangsu Boyada TextileCo., Ltd., Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., Wujiang Chemical Fiber Weav-ing Factory Co., Ltd. provide guarantee and the Company mortgaged of Land use rights and Construction inprogress as pledge guarantee.
[Note 23]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 24]: Chen Jianhua, Fan Hongwei provide guarantee and the Company provides pledge guaran-tee with Security deposit and Bank acceptance bills.
[Note 25]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 26]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 27]: Chen Jianhua, Fan Hongwei, Dalian Lida Real Estate Co., Ltd., Hengli Investment (Dalian)Co., Ltd., Dalian Henghan Investment Co., Ltd. provide guarantees.
[Note 28]: Hengli Group Co., Ltd., Chen Jianhua and Fan Hongwei provide guarantees.
[Note 29]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 30]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 31]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 32]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 33]: Chen Jianhua, Fan Hongwei provide guarantees and the Company provides security de-posits as pledge guarantee.
[Note 34]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 35]: The Company provides security deposits as pledge guarantee.
[Note 36]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 37]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 38]: Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei provide guarantees and the Companyprovides security deposits as pledge guarantee.
[Note 39]: The Company provides security deposits as pledge guarantee.
[Note 40]: The financing is a syndicated loans, Hengli Group Co., Ltd., Chen Jianhua, Fan Hongwei,Jiangsu Boyada Textile Co., Ltd., Jiangsu Deshun Textile Co., Ltd., Jiangsu Dehua Textile Co., Ltd., WujiangChemical Fiber Weaving Factory Co., Ltd. provide guarantees and the Company provides mortgage guaran-tee with Land use rights, Property and buildings and Machinery and equipment.
2. Other contingent liabilities and their financial impact
For bank acceptance bills that have been discounted or endorsed and have not yet expired on the bal-ance sheet date, please refer to the description of “Receivables financing” in Note V (5).
XIII. Non-adjusting events after the balance sheet date
Unless otherwise specified, the data listed in this section is in RMB.
(1) Important non-adjustment matters
Due to the postponement of the Spring Festival holiday due to the new coronavirus pneumonia out-break in January 2020, the production and operation of the Company and major domestic customers andmajor suppliers have been affected to a certain extent. The Company actively responded to the epidemicsituation and arranged various measures for the prevention and control of the epidemic situation in a timelymanner to protect the lives and health of employees and promote the production and operation in a safe,stable and orderly manner. Since the Company, major customers and suppliers are not in Hubei, the mainepidemic area, and the proportion of export sales is also relatively small, the epidemic situation has no signif-icant adverse impact on the Company's procurement, production and sales.
At the same time, due to the impact of the new coronavirus pneumonia epidemic and the breakdown ofOPEC's production cut negotiations, international crude oil prices fell sharply in March 2020, which posed amajor challenge to the Company's production and operation.
The new coronavirus pneumonia epidemic and the decline in crude oil are events that occur after thebalance sheet date and are non-adjustable events after the balance sheet date. The Company will continueto pay close attention to the epidemic situation and future changes in oil prices, and take relevant measuresto assess its impact on the Company's financial status and operating results. As of the reporting date, thisassessment is still in progress.
(2) Profit distribution after balance sheet date
On 16 April 2020, the 11th meeting of the 8th board of directors of the Company reviewed and ap-proved the 2019 profit distribution plan. The Company plans to implement the distribution based on the totalshare capital registered on the registration date, and a cash dividend of RMB 4.00 (including tax) for every 10shares will be distributed to all shareholders. The above dividend distribution plan must be submitted to the2019 Annual General Meeting of Shareholders for approval before implementation.
XIV. Other significant events
Unless otherwise specified, the data listed in this section is in RMB.
(1) Lease
1. Financing lease
(1) Financing lease-in
1) Unrecognized financing expensesItem and content Closing balance Beginning balance Amortisation in the yearMachinery and equipment under 25,649,260.25 - 24,066,596.24
sale and lease back
Ship under finance lease 1,644,708.50 8,629,302.18 6,984,593.68
2) Other financial leasing information
For the book value and accumulated depreciation amount of the financial leased fixed assets at the endof the period, please refer to the description of “Fixed leased fixed assets” in Note V (11) 2 (3).
3) Minimum lease payments to be paid in subsequent yearsItem Closing balance Beginning balanceFirst year after balance sheet date 226,380,591.08 57,581,331.33Second year after balance sheet date 147,681,134.29 45,628,854.98Total 374,061,725.37 103,210,186.31
2. Explanation of important terms in the sale and leaseback transaction and sale and leaseback con-tract
On January 11, 2019, the Company sold a batch of machinery and equipment with a carrying amountof RMB 700 million to CCB Financial Leasing Co., Ltd. at a total price of RMB 500 million, and signed a leaseagreement to lease back the batch of machinery and equipment for a three-year lease period . The terms ofthe contract stipulate that the lease cost is the actual transfer price paid, the lease interest rate is the bench-mark interest rate of the RMB loan for one to five years announced by the People's Bank of China, and therent is calculated on the basis of the lease cost and the lease interest rate. The rent is paid in equal install-ment and payable in six installments.
(2) Segment information
1. Basis for determining the reporting segment and accounting policies
According to the Company's internal organizational structure, management requirements and internalreporting system, the Company mainly operates in three business segments: petrochemical business seg-ment, polyester business segment, headquarters and other business segments, the Company's managementevaluate the operating results of these segments to determine the allocation of resources and evaluate theirperformance.
Segment report information is disclosed based on the accounting policies and measurement standardsadopted by each segment when reporting to management. These measurement bases are consistent withthe accounting and measurement bases used in the preparation of financial statements.
2. Reporting of segment information
Year 2019: (Unit: RMB ten thousand)
Petrochemical Headquarters and
Item segment Polyester segment Other business Elimination Total
segment
Petrochemical Headquarters and
Item segment Polyester segment Other business Elimination Total
segment
Segment revenue 8,682,499.84 2,379,656.24 1,278,598.08 -2,262,517.05 10,078,237.11
Including: External revenue 6,685,075.68 2,375,324.28 1,017,837.15 - 10,078,237.11
Inter-segment transaction 1,997,424.16 4,331.96 260,760.93 -2,262,517.05 -
revenue
Segment cost 6,912,185.30 2,075,450.73 1,250,892.95 -2,251,946.22 7,986,582.76
Segment profit (loss) 925,594.36 111,242.58 365,130.20 -399,449.23 1,002,517.91
Total assets 16,101,977.60 2,255,114.73 4,848,534.88 -5,767,873.20 17,437,754.01
Total liabilities 12,334,221.12 1,665,683.23 1,338,574.99 -1,574,604.12 13,763,875.22
Year 2018:
Petrochemical Headquarters and
Item segment Polyester segment Other business Elimination Total
segment
Segment revenue 4,651,782.25 2,521,347.84 90.03 -1,166,494.60 6,006,725.52
Including: External revenue 3,488,244.61 2,518,479.59 1.32 - 6,006,725.52
Inter-segment transaction 1,163,537.64 2,868.25 88.71 -1,166,494.60 -
revenue
Segment cost 4,266,886.33 2,139,919.37 86.77 -1,165,568.02 5,241,324.45
Segment profit (loss) 198,658.75 170,012.29 271,276.85 -307,686.80 332,261.09
Total assets 11,244,009.77 2,308,677.19 4,233,923.92 -5,262,364.69 12,524,246.19
Total liabilities 8,224,792.98 1,797,488.27 975,076.72 -1,263,945.42 9,733,412.55
(3) Other important matters that affect the decision-making of users of financial statements
1. Pledge of the Company’s shares by the parent Company and the ultimate controller Chen Jianhua,Fan Hongwei
Owner of pledge Beneficiary of pledge Term of pledge Number of shares under
pledge
Shanghai Pudong Develop-
Hengli Group Co., Ltd. ment Co., Ltd. Wujiang Sub- 2017/12/27- 2020/10/14 105,000,000.00
branch
Hengli Group Co., Ltd. Guangdong Yuecai Trust Co., 2018/4/24- 2020/4/24 168,000,000.00
Ltd.
Hengli Group Co., Ltd. Southwest Securities Co., 2019/4/9- 2020/3/26 224,000,000.00
Ltd.
Wujiang Rural Commercial
Hengli Group Co., Ltd. Bank Co., Ltd. Nanma Sub- 2019/7/12- 2021/7/12 84,000,000.00
branch
Hengli Group Co., Ltd. Jiangsu International Trust 2019/7/31- 2020/7/30 90,000,000.00
Co., Ltd.
Hengli Group Co., Ltd. Huaxia Bank Co., Ltd. Su- 2019/10/24-2020/10/20 128,570,000.00
zhou Branch
Hengli Group Co., Ltd. Chongqing International Trust 2019/11/26-2020/11/25 49,700,000.00
Co., Ltd.
Dechengli International Group Jiangsu International Trust 2019/5/28-2020/8/27 207,515,000.00
Co. Ltd. Co., Ltd.
Dechengli International Group Ping An Trust Co., Ltd. 2019/6/5-2020/12/31 154,000,000.00
Co. Ltd.
Dechengli International Group Xingye International Trust 2019/7/10-2020/7/10 105,000,000.00
Co. Ltd. Co., Ltd.
2. Performance Commitment Status
In 2018, the Company purchased 100.00% equity of Hengli Investment (Dalian) Co., Ltd. by issuingshares to purchase assets. According to the “Profit Compensation Agreement” signed by Fan Hongwei andHengneng Investment (Dalian) Co., Ltd. and the counterparties of this major asset reorganization transaction,the profit compensation period of this transaction is 2017, 2018, 2019 and 2020.
Fan Hongwei and Hengneng Investment (Dalian) Co., Ltd. promised that Hengli Investment (Dalian)Co., Ltd. 's net profit estimates for 2017, 2018, 2019 and 2020 are not less than RMB 600 million, RMB800,000 million, RMB 1,000 million and RMB 1,000 million respectively. Based on this estimate, Hengli In-vestment (Dalian) Co., Ltd. has a cumulative net profit forecast of not less than RMB 600 million at the end of2017, and a cumulative net profit forecast of not less than RMB 1,400 million as of the end of 2018, and acumulative net profit forecast of not less than RMB 2,400 million as of the end of 2019, and a cumulative netprofit forecast is not less than RMB 3,400 million as of the end of 2020. The net profit forecast refers to thenet profit attributable to shareholders of the parent company after deducting non-recurring gains and lossesunder the consolidated financial statement in any fiscal year during the profit compensation period.
As of year ended 31 December 2019, Hengli Investment (Dalian) Co., Ltd. ’s performance commitmentwas completed as follows: (Unit: RMB ten thousand)
Actual figure Committed figure Difference Completion rate
Net profit attributable to the owner of
the parent company after deducting 125,898.39 60,000.00 65,898.39 209.83%
non-recurring gains and losses as of
the end of 2017
Net profit attributable to the owner of
the parent company after deducting 310,241.06 140,000.00 170,241.06 221.60%
non-recurring gains and losses as of
the end of 2018
Net profit attributable to the owner of
the parent company after deducting 567,806.79 240,000.00 327,806.79 236.59%
non-recurring gains and losses as of
the end of 2019
XV. Notes on important items of parent company's financial statements
Unless otherwise specified, the following notes refer to the beginning balance as at 1 January2019, the closing balance as at 31 December 2019; the current period refers to year 2019, and the pre-vious year refers to year 2018. The unit of amount is RMB.
(1) Accounts receivable
1. Disclosure by ageingAgeing Closing balanceWithin 1 year 160,298,402.071-2 years -2-3 years -3-4 years -4-5 years -Over 5 years -Subtotal of book balance 160,298,402.07Less: Provision for bad debts -Total carrying amount 160,298,402.07
2. Disclosure by bad debt provision method
Closing balance
Category Book balance Provision for bad debts
Provision Carrying amount
Amount Ratio (%) Amount ratio (%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on 160,298,402.07 100.00 - - 160,298,402.07
groups
Total 160,298,402.07 100.00 - - 160,298,402.07
Continued:
Beginning balance
Category Book balance Provision for bad debts
Provision Carrying amount
Amount Ratio (%) Amount ratio (%)
Provision for bad debts on - - - - -
individual item
Provision for bad debts on - - - - -
groups
Total - - - - -
3. Information of provision for bad debts
(1) Provision for bad debts on groups of accounts receivable at year endGroup Book balance Provision for bad debts Provision ratio (%)Group of related parties 160,298,402.07 - -Subtotal 160,298,402.07 - -
4. Provision, recovery or reversal of provision for bad debts in the year
(1) Provision for bad debts in the year
Movement in the year
Category Beginning balance Recovery or Closing balance
Accrual reversal Write-off
Provision for bad
debts on individual - - - - -
item
Provision for bad - - - - -
debts on groups
Subtotal - - - - -
5. Top 5 accounts receivable at year end
The Company’s top five year-end balances for accounts receivable in total of RMB 160,298,402.07, ac-counting for 100.00% of the total account balance of year-end balances of accounts receivable, and the cor-responding year-end balance of provision for bad debts is RMB 0.
6. Receivables with related partiesName of entity Relationship with the Closing balance Proportion to total accounts
Company receivables (%)
Jiangsu Hengli Chemical Fiber Co., Subsidiary 160,298,402.07 100.00
Ltd.
Subtotal 160,298,402.07 100.00
(2) Other receivables
1. Detailed information
Closing balance Beginning balance
Item Provision Provision
Book balance for bad debts Carrying amount Book balance for bad debts Carrying amount
Interest receiv- - - - - - -
ables
Dividend re- 3,169,967,000.00 - 3,169,967,000.00 2,299,770,000.00 - 2,299,770,000.00
ceivables
Other receiva- 3,258,911.66 299,722.48 2,959,189.18 1,453,524.97 126,982.25 1,326,542.72
bles
Total 3,173,225,911.66 299,722.48 3,172,926,189.18 2,301,223,524.97 126,982.25 2,301,096,542.72
2. Dividend receivablesItem Closing balance Beginning balanceSubtotal of book balance 3,169,967,000.00 2,299,770,000.00Less: Provision for bad debts - -Subtotal of carrying amount 3,169,967,000.00 2,299,770,000.00
3. Other receivables
(1) Disclosure by ageingAgeing Closing balanceWithin 1 year 2,829,785.711-2 years 67,085.952-3 years 362,040.003-4 years -4-5 years -Over 5 years -Subtotal of book balance 3,258,911.66Less: Provision for bad debts 299,722.48Subtotal of carrying amount 2,959,189.18
(2) Disclosure by natureNature Closing balance Beginning balanceDeposits and security deposits 614,981.40 439,425.95Other 2,643,930.26 1,014,099.02Subtotal of book balance 3,258,911.66 1,453,524.97Less: Provision for bad debts 299,722.48 126,982.25Subtotal of carrying amount 2,959,189.18 1,326,542.72
(3) Information of provision for bad debts
Stage 1 Stage 2 Stage 3
Provision for bad debts Expected credit Efoxrpetchteed lifcerteimdiet lo(nsos fEoxrpecttehde creldifiet tliomses Subtotal
losses in the next credit impairment (credit impairment
12 months occurred) has occurred)
Balance of 1 January 2019 - 126,982.25 - 126,982.25
Balance of 1 January 2019
during the period
-- transfer to Stage 2 - - - -
-- transfer to Stage 3 - - - -
-- transfer back to Stage 2 - - - -
-- transfer back to Stage 1 - - - -
Accrual for the year - 172,740.23 - 172,740.23
Recovery or reversal for the year - - - -
Write-off for the year - - - -
Stage 1 Stage 2 Stage 3
Provision for bad debts Expected credit Efoxrpetchteed lifcerteimdiet lo(nsos fEoxrpecttehde creldifiet tliomses Subtotal
losses in the next credit impairment (credit impairment
12 months occurred) has occurred)
Other movement - - - -
Balance of 31 December 2019 - 299,722.48 - 299,722.48
(4) Provision for bad debts on groups of other receivables at year endGroup Book balance Provision for bad debts Provision ratio (%)Ageing group 3,258,911.66 299,722.48 9.20Subtotal 3,258,911.66 299,722.48 9.20
Including: Ageing groupAgeing Book balance Provision for bad debts Provision ratio (%)Within 1 year 2,829,785.71 141,489.29 5.001-2 years 67,085.95 13,417.19 20.002-3 years 362,040.00 144,816.00 40.00Subtotal 3,258,911.66 299,722.48 9.20
(5) Provision, recovery or reversal of provision for bad debts in the year
1) Provision for bad debts in the year
Movement in the year
Category Beginning balance Recovery or Closing balance
Accrual reversal Write-off
Provision for bad 126,982.25 172,740.23 - - 299,722.48
debts on groups
Subtotal 126,982.25 172,740.23 - - 299,722.48
(6) Top 5 other receivables amount at the end of the period
The Company’s top five year-end balances of other receivables in total is RMB 3,187,587.04, account-ing for 97.80% of the total year end balance of other receivables, and the corresponding year-end balance ofprovision for bad debts is RMB 294,425.41.
(3) Long-term equity investments
1. Detailed information
Closing balance Beginning balance
Item Provision Provision
Book balance for impair- Carrying amount Book balance for impair- Carrying amount
ment ment
Investment
in subsidiar- 41,722,948,264.76 - 41,722,948,264.76 39,986,726,384.76 - 39,986,726,384.76
ies
Total 41,722,948,264.76 - 41,722,948,264.76 39,986,726,384.76 - 39,986,726,384.76
2. Information of subsidiariesName of investee Beginning balance Increase DecreaseName of investee Beginning balance Increase DecreaseJiangsu Hengli Chemical Fiber Co., Ltd. 10,808,919,000.00
Yingkou Kanghui Petrochemical Co., Ltd. 584,436,528.92
Suzhou Qianliyan Logistics Technology Co., 1,000,000.00
Ltd.
Suzhou Textile Group Network E-commerce 2,000,000.00
Co., Ltd.
Hengli Petrochemical (Dalian) Chemical Co., 1,770,999,723.90 1,698,920,000.00
Ltd.
Hengli Petrochemical (Dalian) Refining Co., 17,479,170,213.22 37,301,880.00
Ltd.
Hengli Investment (Dalian) Co., Ltd. 9,340,200,918.72
Subtotal 39,986,726,384.76 1,736,221,880.00
(Continued)
Provision for impair- Closing balance of
Name of investee Closing balance ment in the year provision for impair-
ment
Jiangsu Hengli Chemical Fiber Co., Ltd. 10,808,919,000.00 - -
Yingkou Kanghui Petrochemical Co., Ltd. 584,436,528.92 - -
Suzhou Qianliyan Logistics Technology Co., 1,000,000.00
Ltd.
Suzhou Textile Group Network E-commerce 2,000,000.00
Co., Ltd.
Hengli Petrochemical (Dalian) Chemical Co., 3,469,919,723.90
Ltd.
Hengli Petrochemical (Dalian) Refining Co., 17,516,472,093.22
Ltd.
Hengli Investment (Dalian) Co., Ltd. 9,340,200,918.72
Subtotal 41,722,948,264.76 - -
(4) Operating revenue/Operating cost
1. Detailed information
2019 2018
Item
Revenue Cost Revenue Cost
Primary business 1,044,702,689.73 981,903,887.45 - -
income
Other business in- 2,830.20
come
Total 1,044,705,519.93 981,903,887.45 - -
2. Primary business income / Primary business cost (by products)
2019 2018
Products
Revenue Cost Revenue Cost
2019 2018
Products
Revenue Cost Revenue Cost
PTA 1,044,702,689.73 981,903,887.45 - -
3. Primary business income / Primary business cost (by region)
2019 2018
Region
Revenue Cost Revenue Cost
Within China 1,044,702,689.73 981,903,887.45 - -
4. Operating revenue from the Company's top five customers
The total operating revenue of the top five customers of the Company this year was RMB1,044,705,519.93, which accounted for 100.00% of the total operating revenue.
(5) Investment income
1. Detailed informationItem 2019 2018Long-term equity investment accounted by cost method 3,869,117,000.00 2,919,718,000.00Other investment income 5,308.33Total 3,869,117,000.00 2,919,723,308.33
2. Long-term equity investment accounted by cost method
Reasons for changes in the
Name of investee 2019 2018 current period compared to the
previous year
Hengli Petrochemical (Da- 2,890,000,000.00 - Amount changes in subsidiary
lian) Refining Co., Ltd. dividend
Hengli Investment (Dalian) 649,150,000.00 100,000,000.00 Amount changes in subsidiary
Co., Ltd. dividend
Jiangsu Hengli Chemical 329,967,000.00 2,819,718,000.00 Amount changes in subsidiary
Fiber Co., Ltd. dividend
Subtotal 3,869,117,000.00 2,919,718,000.00
3. The Company does not have any significant restrictions on the return of investment income.
XVI. Supplementary information
(1) Non-recurring gain or loss
1. Details of non-recurring gain or loss for the year
According to the provisions of the “Interpretative Announcement No.1 on Information Disclosure byCompanies Offering Securities to the Public-Non-recurring Gains and Losses (2008)” issued by the ChinaSecurities Regulatory Commission, the Company's non-recurring gains and losses for the current period areas follows :
Item Amount Note
Item Amount Note
Gain or loss on disposal of non-current assets -10,313,930.53 -
Overridden approval, or without official approval document, or incidental tax - -
return or exemption
Government grants included in profit or loss for the current period (except
for government grants that are closely related to the business of the enter- 612,253,993.32 -
prise, and are fixed or quantified according to the national unified standard)
The capital occupation fee charged to non-financial enterprises included in - -
profit or loss for the current period
Gain on investment costs in acquisition of subsidiaries, associates and joint - -
venture less than the fair value of identifiable net assets of the investees
Gain or loss from exchanging non-monetary assets - -
Gain or loss from entrusting others to invest or manage assets 133,647,150.21 -
Provision for impairment arising from force majeure such as natural disas- - -
ters
Gain or loss on debt restructuring - -
Enterprise restructuring costs, such as the cost of relocating employees, - -
integration costs, etc.
Profits and losses in excess of fair value from transactions where the trans- - -
action price is clearly unfair
Net profit of subsidiaries for the period from beginning of the year to date of 754,849.50 -
acquisition by business combination under common control
Gain or loss arising from contingencies that is unrelated to normal business - -
of the Group
In addition to the effective hedging business related to the Company's
normal business operations, income from the holding of trading financial
assets, Derivative financial assets, Trading financial liabilities, and deriva-
tive financial liabilities generates changes in fair value gains and losses, 266,383,453.84 -
and the disposal of Trading financial assets, Derivative financial assets,
Trading Investment income from financial liabilities, derivative financial
liabilities and other debt investments
Reversal of provision of impairment of receivables tested for impairment - -
individually
Gain on entrusted loans to external parties - -
Gain or loss from fluctuation in fair value of investment property which is - -
measured at fair value
Effects on current gain or loss from one-off adjustment on current gain or - -
loss according requirements in laws and regulations of tax or accounting
Trustee fee income acquired from entrusted business - -
Other non-operating income/(expenses), net -825,178.73 -
Other gain or loss items met the definition of non-recurring item - -
Subtotal 1,001,900,337.61 -
Less: effects of income tax on non-recurring items 206,150,432.59 -
Item Amount Note
Net amount of non-recurring items 795,749,905.02 -
Less: effects of non-recurring items attributable to minority shareholders of 749,572,381.62 -
the Group(after tax )
Non-recurring items attributable to the shareholders of the Company 46,177,523.40 -
2. The Company's recognition of the non-recurring profit and loss item is implemented in accordancewith the provisions of “Interpretative Announcement No.1 of Information Disclosure of Companies PubliclyOffering Securities-Non-recurring Profit and Loss” (CSRC Announcement [2008] No.43).
(2) Return on equity and earnings per share
1. Detailed information
According to the provisions of the China Securities Regulatory Commission’s “Public Issuance of Secu-rities Companies Information Compilation Rules No.9-Calculation and Disclosure of Return on Net Assetsand Earnings Per Share” (revised in 2010), the Company’s current weighted average return on net assetsand basic earnings per share and diluted earnings per share are as follows:
Weighted average Earnings per share
Profit in report period return on equity (%) Basic earnings per Diluted earnings per
share share
Net profit attributable to the shareholders of the 31.77% 1.44 1.44
Company
Net profit attributable to the shareholders of the 29.41% 1.33 1.33
Company, excluding non-recurring items
2. Calculation process
(1) The calculation process of weighted average return on net assetsItem No. 2019Net profit attributable to the Company's common shareholders 1 10,025,179,101.07Non-recurring gains and losses 2 749,572,381.62Net profit attributable to ordinary shareholders of the Company after deducting non- 3=1-2 9,275,606,719.45
recurring gains and losses
Net assets attributable to shareholders of the Company at the beginning of year 4 27,587,673,445.47
Net assets attributable to shareholders of the Company such as new shares issued 5 -
or debt-to-equity swaps during the reporting period
Cumulative months from the next month of newly added net assets to the end of the 6 -
reporting period
Net assets attributable to shareholders of the Company that decreased during the 7 2,134,352,932.42
reporting period, such as repurchase or cash dividends
Reduce the cumulative number of months from the next month of net assets to the 8 6.00
end of the reporting period
Changes in net assets due to other transactions or events1 9 817,730,730.00
The cumulative number of months from the next month when the change in other 10 -
net assets occurs to the end of the reporting period
Changes in net assets due to other transactions or events 2 11 36,772,802.29
The cumulative number of months from the next month when the change in other 12 6.00
net assets occurs to the end of the reporting period
Item No. 2019
Number of months in the reporting period 13 12.00
Weighted average net assets 14 [Note] 31,551,472,930.94
Weighted average return on net assets 15=1/14 31.77%
[Note]14=4+1*0.5+5*6/13-7*8/13± 9*10/13± 11*12/13
The calculation process of the weighted average return on net assets after deducting non-recurringgains and losses
Item No. 2019
Net profit attributable to ordinary shareholders of the Company after deducting 1 9,275,606,719.45
non-recurring gains and losses
Weighted average net assets 2 31,551,472,930.94
Net assets of investee in beginning of year under business combinations un- 3 -
der common control
Net profit of investee in the year under business combinations under common 4 36,665,565.68
control
Net profit of investee from combination date to year end under business com- 5 35,910,716.18
binations under common control
Net assets of investee on combination date under Business combinations 6 754,849.50
under common control
Number of months from the combination day to the end of the period 7 5.00
Number of months in the reporting period 8 12.00
Business combinations under common control weighted average net assets 9=2-3-
during the reporting period 4*0.5+(5*0.5+6) 31,540,936,067.93
*7/8
Weighted average return on net assets after deducting non-recurring gains 10=1/9 29.41%
and losses
(2) Calculation process of basic earning per shareItem No. 2019Net profit attributable to the Company's shareholders 1 10,025,179,101.07Non-recurring gains and losses 2 749,572,381.62Net profit attributable to ordinary shareholders of the Company after deducting non- 3=1-2 9,275,606,719.45
recurring gains and losses
Total shares at the beginning of the period 4 5,009,125,380.00
During the reporting period, the number of shares increased due to the conversion 5 1,986,309,861.00
of capital reserve to share capital or stock dividend distribution
Increased number of shares during the reporting period due to new shares or debt- 6 -
to-equity swaps
Increase the cumulative number of months from the next month of shares to the end 7 -
of the reporting period
Reduced number of shares during the reporting period due to repurchases 8 44,797,369.00
Item No. 2019
Reduce the cumulative number of months from the next month of shares to the end 9 6.00
of the reporting period
Changes in shares caused by other matters 10 72,430,300.00
The number of months from the change of Other shares from the next month to the 11 -
end of the reporting period
Number of shares reduced during the reporting period 12 -
Number of months in the reporting period 13 12.00
Weighted average number of ordinary shares outstanding 14 6,973,036,556.50
Basic earnings per share 15=1/14 1.44
Basic earnings per share after deducting non-recurring gains and losses 16=3/14 1.33
[Note]14=4+5+6× 7/13-8× 9/13+10*11/13-12
(3) Diluted earnings per share calculation process
The calculation process of diluted earnings per share is the same as that of basic earnings per share.
(3) Abnormalities and causes of the Company's main financial statements
1. Items in consolidated balance sheetFinancial statements item Magnitude of change between Reason of changes
closing and beginning amount
Mainly due to the annual output of 20 million tons of integrat-
Cash and bank balances Increase of 32.91% ed refining and chemical integration projects, the increase in
working capital requirements, the Company increased work-
ing capital loans.
Trading financial assets Decrease of 31.49% Mainly due to increased liquidity demand, the Company
Decrease purchased financial products.
Mainly due to the substantial increase in Operating revenue
Accounts receivable Increase of 39.61% in this period, the corresponding Accounts receivable also
increased.
Mainly Decrease pledge small ticket for large ticket business,
Receivables financing Decrease of 31.36% the corresponding Note receivables and Notes payable are
reduced.
Other receivables Increase of 18,498.12% Mainly due to the newly added Consumption tax rebate in
this period.
It is mainly due to the annual output of 20 million tons of
integrated refining and chemical integrated items. The value-
Other current assets Increase of 1,325.35% added tax corresponding to the item is expected to be de-
ducted in one business cycle, and transferred from Other
non-current assets to other current assets.
Mainly due to the annual output of 20 million tons of integrat-
Fixed assets Increase of 245.34% ed refining and chemical integrated items put into operation
carried over Fixed assets
Construction in progress Decrease of 47.20% Mainly due to the annual production of 20 million tons of
integrated refining and chemical integration items.
Mainly due to the annual production of 20 million tons of
Long-term deferred ex- Increase of 5,382.14% integrated refining and chemical integrated items, and the
penses corresponding catalyst expenditures are transferred to Long-
term deferred expenses.
Mainly due to the increase in Deferred tax assets corre-
Deferred tax assets Increase of 625.27% sponding to the unrealized gross profit of transactions within
the scope of consolidation.
Mainly due to the advance payment and settlement of
Other non-current assets Decrease of 52.82% equipment related to refining and chemical integration Item
related to the annual output of 20 million tons is transferred to
Fixed assets.
Financial statements item Magnitude of change between Reason of changes
closing and beginning amount
Mainly due to the annual output of 20 million tons of integrat-
Short-term loans Increase of 106.81% ed refining and chemical integration projects, the increase in
working capital requirements, the Company increased work-
ing capital loans.
Mainly due to decrease of pledge small ticket for large ticket
Notes payable Decrease of 52.97% business, the corresponding note receivables and notes
payable are reduced.
The production and sales scale of the Company has in-
Receipts in advance Increase of 554.82% creased significantly in this period, and the sales policy has
been mainly paid to delivery, which will increase Receipts in
advance accordingly.
It is mainly due to the annual production of 20 million tons of
Employee benefits payable Increase of 55.25% integrated refining and chemical integration projects, and
corresponding increase in labor compensation expenses.
Taxes payable Increase of 2,281.22% Mainly due to the substantial increase in profits in the current
period, the corresponding increase in payable income tax.
Other payables Decrease of 59.17% This is mainly due to the return of Hengli Group Co., Ltd. 's
loan.
Long-term payables Increase of 219.32% Mainly due to the new sale and leaseback financial leasing
business in this period.
Share capital Increase of 39.31% This is mainly due to the implementation of Capital reserve in
this period to increase share capital.
This is mainly due to the implementation of the third and
Treasury shares Decrease of 62.29% fourth employee stock ownership plans to purchase the
Company’s treasury shares.
Undistributed profits Increase of 403.69% Mainly due to the substantial increase in Net profit in this
period.
2. Items in consolidated income statementFinancial statements item Magnitude of change between Reason of changes
closing and beginning amount
Mainly due to the annual production of 20 million tons of
Operating revenue Increase of 67.78% integrated refining and chemical integration items, and in-
creased sales.
Mainly due to the annual production of 20 million tons of
Operating cost Increase of 52.38% integrated refining and chemical integration items, the in-
crease in sales corresponds to the carry-over costs.
Taxes and surcharges Increase of 553.01% This is mainly due to the newly added Consumption tax.
Mainly due to the annual output of 20 million tons of integrat-
Selling expenses Increase of 75.19% ed refining and chemical integration items, Operating reve-
nue increased significantly, and the corresponding freight rate
also increased significantly.
Mainly due to the annual output of 20 million tons of integrat-
Administrative expenses Increase of 75.73% ed refining and chemical integration projects, the correspond-
ing staff salaries, office expenses and other items increased.
Mainly due to the annual output of 20 million tons of integrat-
Financial expenses Increase of 141.03% ed refining and chemical integration projects, the relevant
special loans are no longer capitalized and are included in
the current financial expenses.
Other income Increase of 197.86% Mainly due to the receipt of tax subsidies of RMB 370 million
in 2017-2018.
Investment income Increase of 153.97% The main reason is that the current crude oil commodity
futures income increased.
Financial statements item Magnitude of change between Reason of changes
closing and beginning amount
Gains from changes in fair Increase of 1061.25% Mainly due to the increase in crude oil commodity futures and
value structured deposits in the current period.
The main reason is that the prices of crude oil and related
Assets impairment loss Decrease of 89.20% downstream chemicals dropped sharply in the fourth quarter
of last year, and accrual provision for decline in value of
inventories is increased.
The profit in this period has increased significantly, and the
Income tax expenses Increase of 320.22% corresponding taxable income has also increased significant-
ly.
Hengli Petrochemical Co., Ltd.
16 April 2020
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