恒力石化(600346)2022年度财务报表及附注(英文版)(一)
I. Auditor’s Report
To all shareholders of Hengli Petrochemical Co., Ltd.:
I. Opinion
We have audited the financial statements of Hengli Petrochemical Co., Ltd. (hereinafter "theCompany"), which comprise the consolidated and company balance sheets as at 31 December2022, and the consolidated and company income statements, consolidated and company cashflow statements and consolidated and company statements of changes in equity for the year thenended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects,the consolidated and company financial positions as at 31 December 2022, and their financialperformance and their cash flows for the year then ended in accordance with the requirements ofAccounting Standards for Business Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our
responsibilities under those standards are further described in the Auditor's Responsibilities
for the Audit of the Financial Statements section of our report. We are independent of the
Company and have fulfilled our other ethical responsibilities in accordance with the China
Code of Ethics for Certified Public Accountants. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key Audit Matter
Key audit matter is the matter that, in our professional judgment, was of most significance inour audit of the financial statements for the year ended 31 December 2022. This matter wasaddressed in the context of our audit of the financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on this matter.(I) Revenue recognition
Key audit matter Addressed in the context of our audit
Revenue recognition
As mentioned in note to the financial In the audit of the financial statements for the
statements of the Company, the operating year, we have implemented the following
revenue for the period was RMB 222.32 billion. procedures for the matter of revenue
The primary revenue sources and recognition recognition: 1. Evaluate and test the design
criteria are shown in note to the financial and operation effectiveness of key internal
statements of the Company. Since revenue is controls related to revenue recognition of the
one of the key performance indicators of the Company; 2. Understand the various types of
Company, there is an inherent risk that income of the Company and their recognition
management will manipulate revenue conditions, and evaluate whether the income
recognition in order to achieve specific goals recognition policy meets the requirements of
or expectations. Therefore, we recognize the accounting standards; 3. Combined with
revenue recognition as a key audit matter. the comparison of gross profit margins of
companies in the same industry, an analysis
procedure is performed on the Company's
revenue, costs and gross profit margins to
analyze the rationality of the gross profit
margin change trend; 4. Select sample and
inspect the Company's various types of
income related contracts, invoices, income
confirmation documents and other
documents to test the authenticity of income;
5. Perform a sample test on the revenue
recognized around the balance sheet date to
assess whether the sales revenue is
recognized in the appropriate accounting
period; 6. Carry out confirmation procedure
on the income amount of the Company's
major customers and the balances of
receivable.
Provision for decline in value of inventories
As mentioned in note to the financial In the audit of the financial statements for the
statements of the Company, the inventories year, we have implemented the following
balance as of balance sheet date is RMB procedures for the matter of Provision for
40.96 billion and the balance of provision for decline in value of inventories: 1. Evaluate and
decline in value of inventories is RMB 3.13 test the design and operation effectiveness of
billion, with the carrying amount of inventories key internal controls related to provision for
of RMB 37.84 billion. The carrying amount of decline in value of inventories of the Company;
inventories is a material amount. The 2. Check whether the calculation and
Company's inventories are mainly crude oil accounting treatment of provision for decline
and refining-related products, which are in value of inventories is correct, whether
greatly affected by the macroeconomic and provision or write-off for the year is consistent
crude oil market price fluctuations. Whether with the relevant amount of profit and loss
the provision for decline in value of inventories account; 3. Evaluate the estimations used by
is sufficient or not has a significant impact on the management when calculating provision
the financial statements, and the Company's for decline in value, such as the estimated
provision for decline in value of inventories is selling price and expected selling expenses
subject to the judgment of the management and related custom duties, etc., and consider
involved in the determination of the net the possibility of errors or management bias;
realizable value. Therefore, we recognize 4. for inventories on the balance sheet date,
provision for decline in value of inventories as obtain new or further evidence on selling price
a key audit matter. subsequent to year end, and consider its
impact on the net realizable value; 5. Evaluate
the appropriateness of management's
financial statement disclosure of provision for
decline in value of inventories.
IV. Other Information
Management is responsible for the other information. The other information comprises theinformation included in the Company’s 2022 annual report, but does not include the financialstatements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatementof this other information, we are required to report that fact. We have nothing to report in thisregard.
V. Responsibilities of Management and Those Charged with Governance for the FinancialStatements
Management of the Company is responsible for the preparation of the financial statements toachieve fair presentation in accordance with Accounting Standards for Business Enterprises, andfor the design, implementation and maintenance of such internal control as managementdetermine is necessary to enable the preparation of the financial statements that are free frommaterial misstatement, whether due to fraud or error.In preparing the financial statements, management is responsible for assessing theCompany's ability to continue as a going concern, disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unless management eitherintend to liquidate the Company or to cease operations, or have no realistic alternative but todo so.
Those charged with governance are responsible for overseeing the Company's financialreporting process.
VI. Auditor's Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements asa whole are free from material misstatement, whether due to fraud or error, and to issue anauditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but isnot a guarantee that an audit conducted in accordance with auditing standards will always detecta material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these financial statements.As part of an audit in accordance with auditing standards, we exercise professional judgmentand maintain professional skepticism throughout the audit. We also:(1) Identify and assess the risks of material misstatement of the financial statements, whetherdue to fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the overrideof internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances.(3) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.(4) Conclude on the appropriateness of the management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's ability to continueas a going concern. If we conclude that a material uncertainty exists, the auditing standardsrequire us to draw attention to users of the financial statements in our auditor's report to therelated disclosures in the financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However, future events or conditions may cause the Company to cease to continue as agoing concern.
(5) Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.(6) Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Company to express an opinion on the financialstatements. We are responsible for the direction, supervision and performance of the group audit.We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence, and to communicate with them allrelationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with those charged with governance, we determine thosematters that were of most significance in the audit of the financial statements of the current periodand are therefore the key audit matters. We describe these matters in our auditor's report unlesslaw or regulation precludes public disclosure about the matter or when, in extremely rarecircumstances, we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
Zhonghui Certified Public Accountants Chinese Certified Public Accountant: Han Jian
(special general partnership) (Engagement partner)
Chinese Certified Public Accountant: Fang Sai
ChinaHangzhou Report date: 26 April 2023
II. Financial statements
Consolidated Balance Sheet
As at 31/12/2022
Prepared by: Hengli Petrochemical Co., Ltd. Unit: Yuan Currency: RMB
Item Note As at 31/12/2022 As at 31/12/2021Current assets:
Cash and bank balances 28,076,405,879.84 15,986,052,894.48
Settlement reserve
Due from banks and other
financial institutions
Financial assets held for 604,414,444.44 814,371,626.26trading
Derivative financial assets
Notes receivable
Accounts receivable 372,445,926.69 2,643,843,371.51
Receivable financing 2,287,271,229.26 3,419,957,708.03
Prepayments 1,997,468,820.54 2,636,915,914.02
Insurance premium
receivables
Reinsurance premium
receivables
Reserve receivable for
reinsurance
Other receivables 701,520,929.51 851,677,558.80
Including: Interest
receivables
Dividend
receivables
Financial assets purchased
under agreements to resell
Inventories 37,835,511,471.41 33,553,002,801.39
Contract assets
Assets held-for-sale
Non-current assets due
within one year
Other current assets 4,468,726,603.40 5,274,219,295.85
Total current assets 76,343,765,305.09 65,180,041,170.34Non-current assets:
Loans and advances
Debts investment 20,427,397.26
Other debts investment
Long-term receivables
Long-term equity 559,215,493.16
investments
Other equity instruments 199,800,000.00
investment
Other non-current financial
assets
Investment properties 164,271,812.80 170,531,320.40
Fixed assets 118,718,591,050.99 122,731,048,012.02
Construction in progress 27,287,491,499.08 7,782,853,597.20
Productive biological
assets
Oil and gas assets
Right-of-use assets 87,844,283.36 99,832,568.84
Intangible assets 8,924,775,668.34 7,341,732,386.19
Development cost
Goodwill 77,323,123.69 77,323,123.69
Long-term deferred 2,027,293,324.85 2,621,643,788.93
expenses
Deferred tax assets 892,227,246.46 188,827,083.44
Other non-current assets 6,327,248,356.84 3,902,592,546.65
Total non-current assets 165,086,709,256.83 145,116,184,427.36
TOTAL ASSETS 241,430,474,561.92 210,296,225,597.70Current Liabilities:
Short-term loans 69,316,898,813.08 55,590,693,332.04
Borrowings from central
bank
Deposits and placements
from banks and other
financial institutions
Financial liabilities held for 346,020,729.70 296,817,004.51
trading
Derivative financial
liabilities
Notes payable 20,603,775,870.27 16,050,294,580.41
Accounts payable 8,869,309,998.90 10,689,214,747.52
Receipts in advance
Contract liabilities 12,090,983,326.47 6,126,546,843.89
Financial assets sold under
agreements to repurchase
Due to customers and
banks
Securities brokering
Securities underwriting
Employee benefits 476,509,780.18 483,000,867.62
payable
Taxes payable 1,036,013,713.16 1,276,893,624.38
Other payables 382,263,173.05 439,952,644.33
Including: Interest
payables
Dividends payable 4,882,110.00Fees and commissions
payable
Reinsurance premium
payable
Liabilities held-for-sale
Non-current liabilities due 9,349,028,245.01 5,423,226,970.81
within one year
Other current liabilities 3,382,127,557.85 1,399,269,151.61
Total current liabilities 125,852,931,207.67 97,775,909,767.12
Non-current liabilities:
Claims reserve of
insurance contract
Long-term loans 58,347,153,350.72 52,122,314,344.25
Bonds payable
Including: Preferred
shares
Perpetual bonds
Lease liabilities 55,750,879.91 62,777,270.39
Long-term payables 858,833,333.34 21,899,253.29
Long-term employee
benefits payable
Provisions 13,000,000.00
Deferred income 3,376,501,714.84 2,998,678,284.64
Deferred tax liabilities 18,914,506.94 927,466.51
Other non-current
liabilities
Total non-current 62,657,153,785.75 55,219,596,619.08
liabilities
TOTAL LIABILITIES 188,510,084,993.42 152,995,506,386.20Owners’equity (or Shareholders’equity):
Paid-in capital (or Share 7,039,099,786.00 7,039,099,786.00
capital)
Other equity instruments
Including: Preferred
shares
Perpetual bonds
Capital reserve 18,686,516,127.76 18,455,844,491.64
Less: Treasury shares 228,626,593.18
Other comprehensive -50,052,317.06 -150,616,377.30
income
Specific reserve 1,602,239.79 139,116,306.31
Surplus reserve 905,565,700.75 858,111,239.40
General risk reserve
Undistributed profits 26,279,812,029.77 31,118,454,108.29
Total owners’equity (or 52,862,543,567.01
shareholders’equity) 57,231,382,961.16
attributable to the parent
Minority interests 57,846,001.49 69,336,250.34
Total owners’equity (or 52,920,389,568.50 57,300,719,211.50
shareholders’equity)
Total liabilities and 241,430,474,561.92 210,296,225,597.70owners’equity (or
shareholders’equity)
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Parent Company Balance Sheet
As at 31/12/2022
Prepared by: Hengli Petrochemical Co., Ltd. Unit: Yuan Currency: RMB
Item Note As at 31/12/2022 As at 31/12/2021Current assets:
Cash and bank balances 31,980,728.03 54,180,520.50
Financial assets held for
trading
Derivative financial assets
Notes receivable
Accounts receivable
Receivable financing
Prepayments 1,271,836.74 151,294.55
Other receivables 811,162,769.45 1,203,854,808.69
Including: Interest
receivables
Dividend 800,000,000.00 1,200,000,000.00receivables
Inventories
Contract assets
Assets held-for-sale
Non-current assets due
within one year
Other current assets 42,450,791.47 38,321,150.31
Total current assets 886,866,125.69 1,296,507,774.05
Non-current assets:
Debts investment
Other debts investment
Long-term receivables
Long-term equity 44,316,275,704.93 43,317,275,704.93
investments
Other equity instruments
investment
Other non-current financial
assets
Investment properties 37,900,752.88 39,171,412.60
Fixed assets 2,852,515,397.82 1,544,172,730.17
Construction in progress 34,483,864.48 744,990.30
Productive biological
assets
Oil and gas assets
Right-of-use assets
Intangible assets
Development cost
Goodwill
Long-term deferred
expenses
Deferred tax assets
Other non-current assets
Total non-current assets 47,241,175,720.11 44,901,364,838.00
TOTAL ASSETS 48,128,041,845.80 46,197,872,612.05
Current Liabilities:
Short-term loans
Financial liabilities held for
trading
Derivative financial
liabilities
Notes payable 20,337,770.04
Accounts payable 1,001,201.98 460,000.00
Receipts in advance
Contract liabilities 275,393,889.34
Employee benefits 2,400,000.00 2,100,000.00
payable
Taxes payable 7,588,420.83 5,101,190.67
Other payables 6,593,083,472.18 5,552,789,186.72
Including: Interest
payables
Dividends payable
Liabilities held-for-sale
Non-current liabilities due 2,030,618,280.89
within one year
Other current liabilities 35,801,205.61
Total current liabilities 8,655,029,145.92 5,871,645,472.34
Non-current liabilities:
Long-term loans
Bonds payable
Including: Preferred
shares
Perpetual bonds
Lease liabilities
Long-term payables
Long-term employee
benefits payable
Provisions
Deferred income
Deferred tax liabilities
Other non-current
liabilities
Total non-current
liabilities
TOTAL LIABILITIES 8,655,029,145.92 5,871,645,472.34Owners’equity (or Shareholders’equity):
Paid-in capital (or Share 7,039,099,786.00 7,039,099,786.00
capital)
Other equity instruments
Including: Preferred
shares
Perpetual bonds
Capital reserve 24,142,978,843.34 23,989,306,711.37
Less: Treasury shares 228,626,593.18
Other comprehensive
income
Specific reserve
Surplus reserve 2,679,861,592.27 2,092,463,830.38
Undistributed profits 5,611,072,478.27 7,433,983,405.14
Total owners’equity (or 39,473,012,699.88 40,326,227,139.71shareholders’equity)
Total liabilities and 48,128,041,845.80 46,197,872,612.05owners’equity (or
shareholders’equity)
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Consolidated Income Statement
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item Note 2022 2021
I. Total revenue from operations 222,372,593,675.48 197,996,549,201.17
Including: Revenue from operations 222,323,583,969.88 197,970,344,885.30
Interest income 26,648,486.54 11,794,813.84
Premium earned
Fees and commissions 22,361,219.06 14,409,502.03income
II. Total cost of operations 218,462,766,541.73 179,170,933,901.38
Including: Cost of operations 204,077,597,066.45 167,518,086,060.40
Interest expenses
Fees and commissions
expenses
Cash surrender amount
Net expenses of claim
settlement
Net provisions for insurance
contract reserves
Insurance policies dividend
expenses
Reinsurance expenses
Taxes and surcharges 6,631,019,180.66 3,440,428,415.46
Selling expenses 392,769,176.78 291,365,785.46
Administrative expenses 1,889,298,663.76 1,985,395,698.86
Research and development 1,184,711,003.40 1,019,452,366.89expenses
Financial expense 4,287,371,450.68 4,916,205,574.31
Including: Interest expenses 4,632,905,829.96 4,700,106,102.45
Interest income 332,736,566.09 108,112,244.03
Add: Other income 1,595,543,126.20 759,858,866.70
Investment income (”-” for -322,324.78 19,231,050.43loss)
Including: Gains from
investments in associates and joint
ventures
Gain from
derecognition of financial assets at
amortized cost
Foreign exchange gain (”-” for
loss)
Gain from net exposure of
hedging (”-” for loss)
Gains from changes of fair -45,679,570.72 356,140,714.22value (”-” for loss)
Credit impairment loss (”-” for -2,373,806.12 -17,289,998.54loss)
Assets impairment loss (”-” for -3,128,732,830.34 -154,662,546.51loss)
Gain from disposal of assets -3,332,571.69 1,788,290.01(”-” for loss)
III. Operating profit (”-” for loss) 2,324,929,156.30 19,790,681,676.10
Add: Non-operating income 105,330,717.22 58,627,931.62
Less: Non-operating expenses 20,681,258.19 21,252,623.94
IV. Total profit (”-” for loss) 2,409,578,615.33 19,828,056,983.78
Less: Income tax expenses 91,541,665.11 4,289,878,953.49
V. Net profit (”-” for loss) 2,318,036,950.22 15,538,178,030.29
(I) Classified by continuity of operations
1.Net profit from continuing 2,318,036,950.22 15,538,178,030.29operations (”-” for loss)
2.Net profit from discontinued
operations (”-” for loss)
(II) Classified by attribution to ownership
1.Net profit attributable to 2,318,303,166.69
shareholders of the parent (”-” for 15,531,076,723.36
loss)
2.Net profit attributable to -266,216.47 7,101,306.93minority interests (”-” for loss)
VI. Other comprehensive income - 105,052,177.39 -50,897,138.73
after tax
(I) Other comprehensive income - 100,564,060.24 -49,792,414.77
after tax attributable to owners of the
parent
1. Other comprehensive income
not reclassified into profit or loss
subsequently
(1)Changes in remeasurement of
defined benefit plan
(2)Share of other comprehensive
income of the equity method
investments
(3)Changes in fair value of other
equity instruments investment
(4)Changes in fair value of the
Company’s own credit risks
2. Other comprehensive income 100,564,060.24 -49,792,414.77
that will be reclassified into profit or
loss subsequently
(1)Share of other comprehensive
income of associates and joint
ventures under equity method
(2)Changes in the fair value of
other debt investments
(3)Reclassification of financial
assets recognised as other
comprehensive income
(4)Credit impairment loss of other
debt investments
(5)Cash flow hedging reserve -6,398,442.57 -136,689,188.58
(6)Translation of foreign currency 106,962,502.81 86,896,773.81
financial statements
(7)Others
(II) Other comprehensive income - 4,488,117.15 -1,104,723.96
after tax attributable to minority
interests
VII. Total comprehensive income 2,423,089,127.61 15,487,280,891.56
(I) Total comprehensive income 2,418,867,226.93 15,481,284,308.59
attributable to owners of the parent
(II) Total comprehensive income 4,221,900.68 5,996,582.97
attributable to minority interests
VIII. Earnings per share:
(I) Basic earnings per share (RMB 0.33 2.21
per share)
(II) Diluted earnings per share 0.33 2.21
(RMB per share)
For the business combination under common control in this period, the net profit realized by theacquiree before the merger is: 0 yuan, and the net profit realized by the acquiree in the previousperiod is: 0 yuan.
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Parent Company Income Statement
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item Note 2022 2021
I. Revenue from operations 1,633,324.64 2,310,851.89
Less: Cost of operations 1,270,659.72 952,994.79
Taxes and surcharges 22,046,809.69 12,141,530.05
Selling expenses
Administrative expenses 95,862,573.23 130,424,237.24
Research and development 20,952,230.72expenses
Financial expense 33,033,234.46 54,347,063.00
Including: Interest expenses 34,113,823.35 54,706,662.38
Interest income 1,099,802.78 384,375.40
Add: Other income 1,787,238.79 18,043,306.79
Investment income (”-” for 6,022,872,521.63 8,420,000,000.00loss)
Including: Gains from
investments in associates and joint
ventures
Gain from
derecognition of financial assets at
amortized cost
Gain from net exposure of
hedging (”-” for loss)
Gains from changes of fair
value (”-” for loss)
Credit impairment loss (”-” -102,189.08 -465,814.46for loss)
Assets impairment loss (”-”
for loss)
Gain from disposal of assets 35,537.55(”-” for loss)
II. Operating profit (”-” for loss) 5,873,977,618.88 8,221,105,825.97
Add: Non-operating income
Less: Non-operating expenses
III. Total profit (”-” for loss) 5,873,977,618.88 8,221,105,825.97
Less: Income tax expenses
IV. Net profit (”-” for loss) 5,873,977,618.88 8,221,105,825.97
(I) Net profit from continuing 5,873,977,618.88 8,221,105,825.97
operations (”-” for loss)
(II) Net profit from discontinued
operations (”-” for loss)
V. Other comprehensive income -
after tax
(I) Other comprehensive income
not reclassified into profit or loss
subsequently
1.Changes in remeasurement
of defined benefit plan
2.Share of other
comprehensive income of the
equity method investments
3.Changes in fair value of
other equity instruments
investment
4.Changes in fair value of the
Company’s own credit risks
(II) Other comprehensive income
that will be reclassified into profit or
loss subsequently
1.Share of other
comprehensive income of
associates and joint ventures under
equity method
2.Changes in the fair value of
other debt investments
3.Reclassification of financial
assets recognised as other
comprehensive income
4.Credit impairment loss of
other debt investments
5.Cash flow hedging reserve
6.Translation of foreign
currency financial statements
7.Others
VI. Total comprehensive income 5,873,977,618.88 8,221,105,825.97
VII. Earnings per share:
(I) Basic earnings per share
(RMB per share)
(II) Diluted earnings per share
(RMB per share)
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Consolidated Cash Flows Statement
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item Note 2022 2021I. Cash flows from operating activities:
Cash received from sales of 267,426,902,574.47 212,351,925,115.56
goods or rendering of services
Net increase in deposits
from customers and inter-
banks
Net increase in due to
central bank
Net increase in fund
borrowings from other
financial institutes
Cash received from
insurance premium of original
insurance contracts
Net cash received from
reinsurance business
Net increase in insured’s
deposits and investments
Cash received from 52,563,354.96 27,965,319.27
interests, fees and
commissions
Net increase of placement
from banks and other financial
institutions
Net increase in fund of
repurchase business
Net cash received in
securities brokerage agency
Tax refund received 5,562,889,817.74 552,572,461.99
Other cash received relating 5,936,292,171.41 4,719,525,033.29
to operating activities
Sub-total of cash inflows 278,978,647,918.58 217,651,987,930.11
Cash paid for goods and 234,363,054,837.45 181,578,139,486.63
services
Net increase in issued loans
and advance
Net increase in deposits in
central bank and inter-banks
Cash paid for claims of
original insurance contracts
Net increase in due from
banks and other financial
institutions
Cash paid for interest, fees
and commission
Cash paid for policy
dividends
Cash paid to and on behalf 3,736,263,307.53 3,532,628,843.05
of employees
Payments of all types of 11,290,319,184.00 9,820,452,805.72
taxes
Other cash paid relating to 3,635,039,806.17 4,050,593,050.60
operating activities
Sub-total of cash 253,024,677,135.15 198,981,814,186.00
outflows
Net cash flows from 25,953,970,783.43 18,670,173,744.11operating activities
II. Cash flows from investing activities:
Cash received from 2,882,252,002.75 1,438,264,672.10
disposal of investments
Cash received from returns
on investments
Net cash received from 7,064,483.56 8,423,344.25
disposal of fixed assets,
intangible assets and other
long-term assets
Cash received from
disposal of subsidiaries and
other business units
Other cash received relating 347,902,490.45 281,403,186.19
to investing activities
Sub-total of cash inflows 3,237,218,976.76 1,728,091,202.54
Cash paid to acquire fixed 25,714,852,414.63 13,391,395,161.48
assets, intangible assets and
other long-term assets
Cash paid to acquire 2,503,807,796.91 939,228,172.71
investments
Net increase in pledged
loans
Cash paid to acquire
subsidiaries and other
business units
Other cash paid relating to 1,315,628,697.98 495,190,393.63
investing activities
Sub-total of cash 29,534,288,909.52 14,825,813,727.82
outflows
Net cash flows from -26,297,069,932.76 -13,097,722,525.28investing activities
III. Cash flows from financing activities :
Cash received from capital 6,300,000.00
contribution
Including: Cash received 6,300,000.00
from investment by minority
interests of subsidiaries
Cash received from 97,969,621,917.23 72,179,717,682.00
borrowings
Cash received relating to 3,735,166,378.16 10,949,520,513.01
other financing activities
Sub-total of cash inflows 101,711,088,295.39 83,129,238,195.01
Cash repayments of 74,702,848,106.14 67,818,014,305.56
amounts borrowed
Cash payments for interest 12,120,673,280.05 9,984,438,506.54
expenses and distribution of
dividends or profits
Including: Dividend paid to 2,653,648.05
minority interests of
subsidiaries
Other cash payments 4,482,150,476.99 12,714,372,824.46
relating to financing activities
Sub-total of cash 91,305,671,863.18 90,516,825,636.56
outflows
Net cash flows from 10,405,416,432.21 -7,387,587,441.55financing activities
IV. Effect of foreign 671,837,669.76 -89,431,227.90
exchange rate changes on
cash
V. Net increase in cash and 10,734,154,952.64 -1,904,567,450.62
cash equivalents
Add: Opening balance of 9,589,548,876.75 11,494,116,327.37
cash and cash equivalent
VI. Closing balance of cash 20,323,703,829.39 9,589,548,876.75
and cash equivalent
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Parent Company Cash Flows Statement
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item Note 2022 2021I. Cash flows from operating activities:
Cash received from sales of
goods or rendering of services
Tax refund received 65,555,330.97 44,265,082.26
Other cash received relating 993,485,513.95 910,731,814.54
to operating activities
Sub-total of cash inflows 1,059,040,844.92 954,996,896.80
Cash paid for goods and
services
Cash paid to and on behalf of 7,320,727.56 6,422,177.03
employees
Payments of all types of 19,550,279.49 9,320,023.36
taxes
Other cash paid relating to 119,160,048.56 1,736,414,544.10
operating activities
Sub-total of cash outflows 146,031,055.61 1,752,156,744.49
Net cash flows from 913,009,789.31 -797,159,847.69
operating activities
II. Cash flows from investing activities:
Cash received from disposal 577,647.63
of investments
Cash received from returns 6,423,294,874.00 11,569,955,000.00
on investments
Net cash received from 100,000.00
disposal of fixed assets,
intangible assets and other
long-term assets
Cash received from disposal
of subsidiaries and other
business units
Other cash received relating
to investing activities
Sub-total of cash inflows 6,423,872,521.63 11,570,055,000.00
Cash paid to acquire fixed 1,458,394,502.24 718,503,491.24
assets, intangible assets and
other long-term assets
Cash paid to acquire 1,000,000,000.00 405,030,000.00
investments
Cash paid to acquire
subsidiaries and other business
units
Other cash paid relating to
investing activities
Sub-total of cash outflows 2,458,394,502.24 1,123,533,491.24
Net cash flows from 3,965,478,019.39 10,446,521,508.76investing activities
III. Cash flows from financing activities :
Cash received from capital
contribution
Cash received from 1,998,113,207.54
borrowings
Cash received relating to 382,298,725.15 733,671,060.00
other financing activities
Sub-total of cash inflows 2,380,411,932.69 733,671,060.00
Cash repayments of 1,000,000,000.00
amounts borrowed
Cash payments for interest 7,111,099,533.86 5,476,226,684.76
expenses and distribution of
dividends or profits
Other cash payments 170,000,000.00 3,880,275,628.39
relating to financing activities
Sub-total of cash outflows 7,281,099,533.86 10,356,502,313.15
Net cash flows from -4,900,687,601.17 -9,622,831,253.15financing activities
IV. Effect of foreign exchange
rate changes on cash
V. Net increase in cash and -22,199,792.47 26,530,407.92
cash equivalents
Add: Opening balance of 54,180,520.50 27,650,112.58
cash and cash equivalent
VI. Closing balance of cash 31,980,728.03 54,180,520.50
and cash equivalent
Legal representative: Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item 2022
Minority TOTAL
Equity attributable to the parent company interests OWNERS’E
QUITY
Ge
Paid-in Other ner
capital (or Other equity Capital Less: compreh Specific Surplus al Undistribu Ot
Share instruments reserve Treasury ensive reserve reserve risk ted profits her Subtotal
capital) shares income res s
erv
e
Pref Perp
erre etual Ot
d bon her
shar ds s
es
I. 7,039,09 18,455,8 228,62 - 139,116, 858,111, 31,118,45 57,231,38 69,336, 57,300,71
Balance 9,786.00 44,491.6 6,593.1 150,616, 306.31 239.40 4,108.29 2,961.16 250.34 9,211.50
at end 4 8 377.30
of
previou
s year
Add:
Change
s in
account
ing
policies
Co
rrection
of
errors
Bu
siness
combin
ation
under
commo
n
control
Ot
hers
II. 7,039,09 18,455,8 228,62 - 139,116, 858,111, 31,118,45 69,336, 57,300,71
Balance 9,786.00 44,491.6 6,593.1 150,616, 306.31 239.40 4,108.29 250.34 9,211.50
in 4 8 377.30 57,231,38
beginni 2,961.16
ng of
year
III. 230,671, - 100,564 - 47,454, - - - -
Movem 636.12 228,62 ,060.24 137,514, 461.35 4,838,64 4,368,83 11,490, 4,380,32
ent 6,593.1 066.52 2,078.52 9,394.15 248.85 9,643.00
over 8
the year
( “- “for
decrea
se)
(I) Total 100,564 2,318,30 2,418,867 4,221,9 2,423,08
compre ,060.24 3,166.69 ,226.93 00.68 9,127.61
hensive
income
(II) 230,671, - 459,298, - 445,343,
Owner’ 636.12 228,62 229.30 13,954, 306.92
s 6,593.1 922.38
contrib 8
utions
and
decrea
se of
capital
1.
Capital
contrib
ution
from
owner
2.
Increas
e in
owners’
equity
resulte
d from
other
equity
instrum
ents
3. 77,070,0 77,070,0 77,070,04
Increas 49.00 49.00 9.00
e in
owners’
equity
resulte
d from
share-
based
paymen
ts
4. 153,601,5 - 382,228,1 - 368,273,2
Others 87.12 228,62 80.30 13,954, 57.92
6,593.1 922.38
8
(III) 47,454, - - - -
Approp 461.35 7,156,94 7,109,49 1,757,2 7,111,248,
riation 5,245.21 0,783.86 27.15 011.01
of
profits
1. 47,454, - -
Transfe 461.35 47,454,4
r to 61.35
surplus
reserve
2.
Transfe
r to
general
risk
reserve
3. - - - -
Distribu 7,109,49 7,109,49 1,757,2 7,111,248,
tion to 0,783.86 0,783.86 27.15 011.01
owners
(or
shareh
olders)
4.
Others
(IV)
Transfe
r within
equity
1.
Capital
reserve
convert
ing into
share
capital
(or
Share
capital)
2.
Surplus
reserve
convert
ing into
share
capital
(or
Share
capital)
3.
Surplus
reserve
cover
the
deficit
4.
Change
s of
equity
from
the
revaluat
ion of
defined
benefit
plan
5. Other
compre
hensive
income
transfer
to
retaine
d
earning
s
6.
Others
(V) - - -
Specific 137,514, 137,514,0 137,514,0
reserve 066.52 66.52 66.52
1. 268,184 268,184,1 268,184,1
Approp ,171.73 71.73 71.73
riation
for the
year
2. Used 405,69 405,698, 405,698,
in the 8,238.2 238.25 238.25
year 5
(VI)
Others
IV. 7,039,099, 18,686,51 - - 1,602,23 905,56 26,279,8 52,862,5 57,846, 52,920,3
Balance 786.00 6,127.76 50,052, 9.79 5,700.7 12,029.77 43,567.0 001.49 89,568.5
at end 317.06 5 1 0
of year
Item 2021
Minority TOTAL
Equity attributable to the parent company interests OWNERS’
EQUITY
Ge
Paid-in Other ner
capital (or Other equity Capital Less: compreh Specific Surplus al Undistribut Ot
Share instruments reserve Treasury ensive reserve reserve risk ed profits her Subtotal
capital) shares income res s
erv
e
Pref Perp
erre etual Ot
d bon her
shar ds s
es
I. 7,039,09 18,350,11 324,811, - 77,581, 743,268 21,120,64 46,905,0 119,314, 47,024,3
Balance 9,786.00 5,179.65 781.18 100,823 307.23 ,339.04 8,008.95 76,877.16 084.65 90,961.81
at end ,962.53
of
previou
s year
Add: - - -
Change 5,201,03 5,201,038 5,201,03
s in 8.90 .90 8.90
account
ing
policies
Co
rrection
of
errors
Bu
siness
combin
ation
under
commo
n
control
Ot
hers
II. 7,039,09 18,350,11 324,811, - 77,581, 743,268 21,115,44 46,899,8 119,314, 47,019,18
Balance 9,786.00 5,179.65 781.18 100,823 307.23 ,339.04 6,970.05 75,838.26 084.65 9,922.91
in ,962.53
beginni
ng of
year
III. 105,729,3 - - 61,534, 114,842, 10,003,0 10,331,50 - 10,281,52
Movem 11.99 96,185,1 49,792, 999.08 900.36 07,138.24 7,122.90 49,977, 9,288.59
ent 88.00 414.77 834.31
over
the year
( “- “for
decreas
e)
(I) Total - 15,531,07 15,481,28 5,996,5 15,487,28
compre 49,792, 6,723.36 4,308.59 82.97 0,891.56
hensive 414.77
income
(II) 105,729,3 - 201,914,4 - 149,498,
Owner’ 11.99 96,185,1 99.99 52,415, 739.47
s 88.00 760.52
contrib
utions
and
decreas
e of
capital
1.
Capital
contrib
ution
from
owner
2.
Increas
e in
owners’
equity
resulted
from
other
equity
instrum
ents
3. 106,358,1 106,358,1 - 106,321,7
Increas 13.19 13.19 36,361. 51.47
e in 72
owners’
equity
resulted
from
share-
based
paymen
ts
4. - - 95,556,3 - 43,176,9
Others 628,801. 96,185,1 86.80 52,379, 88.00
20 88.00 398.80
(III) 114,842, - - - -
Approp 900.36 5,528,06 5,413,226 3,558,6 5,416,78
riation 9,585.12 ,684.76 56.76 5,341.52
of
profits
1. 114,842, -
Transfe 900.36 114,842,9
r to 00.36
surplus
reserve
2.
Transfe
r to
general
risk
reserve
3. - - - -
Distribu 5,413,226 5,413,226 3,558,6 5,416,78
tion to ,684.76 ,684.76 56.76 5,341.52
owners
(or
shareho
lders)
4.
Others
(IV)
Transfe
r within
equity
1.
Capital
reserve
converti
ng into
share
capital
(or
Share
capital)
2.
Surplus
reserve
converti
ng into
share
capital
(or
Share
capital)
3.
Surplus
reserve
cover
the
deficit
4.
Change
s of
equity
from
the
revaluat
ion of
defined
benefit
plan
5. Other
compre
hensive
income
transfer
to
retaine
d
earning
s
6.
Others
(V) 61,534, 61,534,99 61,534,9
Specific 999.08 9.08 99.08
reserve
1. 171,844, 171,844,6 171,844,6
Approp 652.03 52.03 52.03
riation
for the
year
2. Used 110,309 110,309,6 110,309,6
in the ,652.95 52.95 52.95
year
(VI)
Others
IV. 7,039,09 18,455,8 228,62 - 139,116, 858,111, 31,118,45 69,336, 57,300,71
Balance 9,786.00 44,491.6 6,593.1 150,616, 306.31 239.40 4,108.29 57,231,38 250.34 9,211.50
at end 4 8 377.30 2,961.16
of year
L egal r e present a t i v e : Fan Ho n gwei Person in charge of financial function: Liu Xuefen Prepare d by: Zh eng Minx i a
Parent Company Statement of Changes in Equity
For the year ended 31 December 2022
Unit: Yuan Currency: RMB
Item 2022
Paid-in Less: Other Undistrib TOTAL
capital (or Other equity instruments Capital Treasury compreh Specific Surplus uted OWNERS’
Share reserve shares ensive reserve reserve profits EQUITY
capital) income
Preferred Perpetual Others
shares bonds
I. Balance at end of previous 7,039,09 - - - 23,989,3 228,626, 2,092,4 7,433,9 40,326,2
year 9,786.00 06,711.37 593.18 63,830. 83,405.1 27,139.71
38 4
Add: Changes in accounting
policies
Correction of errors
Others
II. Balance in beginning of 7,039,09 23,989,3 228,626, 2,092,4 7,433,9 40,326,2
year 9,786.00 06,711.37 593.18 63,830. 83,405.1 27,139.71
38 4
III. Movement over the year - - -
( “- “for decrease) 153,672,1 587,397, 1,822,91
- - - - 31.97 228,626, - - 761.89 0,926.8 853,214,
593.18 7 439.83
(I) Total comprehensive 5,873,97 5,873,97
income 7,618.88 7,618.88
(II) Owner’s contributions 153,672,1 - 382,298,
and decrease of capital 31.97 228,626, 725.15
593.18
1. Capital contribution from
owner
2. Increase in owners’equity
resulted from other equity
instruments
3. Increase in owners’equity
resulted from share-based
payments
4. Others 153,672,1 - 382,298,
31.97 228,626, 725.15
593.18
(III) Appropriation of profits 587,397, - -
761.89 7,696,8 7,109,49
88,545. 0,783.86
75
1. Transfer to surplus reserve 587,397, - -
761.89 587,397,
761.89
2. Distribution to owners (or - - -
shareholders) 7,109,49 7,109,49
0,783.8 0,783.86
6
3. Others
(IV) Transfer within equity
1. Capital reserve converting
into share capital (or Share
capital)
2. Surplus reserve
converting into share capital
(or Share capital)
3. Surplus reserve cover the
deficit
4. Changes of equity from
the revaluation of defined
benefit plan
5. Other comprehensive
income transfer to retained
earnings
6. Others
(V) Specific reserve
1. Appropriation for the year
2. Used in the year
(VI) Others
IV. Balance at end of year 7,039,09 - - - 24,142,9 - - - 2,679,86 5,611,07 39,473,0
9,786.00 78,843.3 1,592.27 2,478.27 12,699.8
4 8
Item 2021
Paid-in Less: Other Undistrib TOTAL
capital (or Other equity instruments Capital Treasury compreh Specific Surplus uted OWNERS’
Share reserve shares ensive reserve reserve profits EQUITY
capital) income
Preferred Perpetual Others
shares bonds
I. Balance at end of previous 7,039,09 23,794,7 324,811,7 1,270,35 5,448,21 37,227,6
year 9,786.00 48,212.7 81.18 3,247.78 4,846.5 04,311.8
0 3 3Add: Changes in
accounting policies
Correction of errors
Others
II. Balance in beginning of 7,039,09 23,794,7 324,811,7 1,270,35 5,448,21 37,227,6
year 9,786.00 48,212.7 81.18 3,247.78 4,846.5 04,311.8
0 3 3
III. Movement over the year 194,558, - 822,110, 1,985,76 3,098,6
( “- “for decrease) 498.67 96,185,1 582.60 8,558.61 22,827.8
88.00 8
(I) Total comprehensive 8,221,10 8,221,10
income 5,825.9 5,825.97
7
(II) Owner’s contributions 194,558, - 290,743,
and decrease of capital 498.67 96,185,1 686.67
88.00
1. Capital contribution from
owner
2. Increase in owners’equity
resulted from other equity
instruments
3. Increase in owners’equity 194,558, 194,558,
resulted from share-based 498.67 498.67
payments
4. Others - 96,185,1
96,185,1 88.00
88.00
(III) Appropriation of profits 822,110, - -
582.60 6,235,3 5,413,22
37,267.3 6,684.76
6
1. Transfer to surplus 822,110, -
reserve 582.60 822,110,
582.60
2. Distribution to owners (or - -
shareholders) 5,413,22 5,413,22
6,684.7 6,684.76
6
3. Others
(IV) Transfer within equity
1. Capital reserve
converting into share
capital (or Share capital)
2. Surplus reserve
converting into share
capital (or Share capital)
3. Surplus reserve cover the
deficit
4. Changes of equity from
the revaluation of defined
benefit plan
5. Other comprehensive
income transfer to retained
earnings
6. Others
(V) Specific reserve
1. Appropriation for the year
2. Used in the year
(VI) Others
IV. Balance at end of year 7,039,09 23,989,3 228,626, 2,092,4 7,433,9 40,326,2
9,786.00 06,711.37 593.18 63,830. 83,405.1 27,139.71
38 4
L egal representative : Fan Hongwei Person in charge of financial function: Liu Xuefen Prepared by: Zheng Minxia
III. Company information
1. Company profile
Hengli Petrochemical Co., Ltd. (hereinafter referred to as ”the Company”) is formerly known asDalian Rubber & Plastics Machinery Co., Ltd. (hereinafter referred to as ”DXS”), whose name waschanged 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 address of the Company is OSBL Project-Public WorksOffice Building, No.298 Changsong Road, Lingang Industrial Zone, Changxing Island, Dalian,Liaoning Province. The legal representative is Fan Hongwei. The Company’s registered capital isRMB 7,039,099,786.00 with total number of shares of 7,039,099,786 shares with par value of RMB1 each, including 7,039,099,786 shares of tradable A shares without any restricted conditions.
On 27 January 2016, China Securities Regulatory Commission approved the Company’s majorasset restructuring through document “Approval of Dalian Rubber & Plastics Machinery Co., Ltd.’ smajor asset restructuring and issue shares to Hengli Group Co., Ltd. to raise capital for assetspurchasing” (Securities Regulatory approval [2016] No.187). The major asset restructuring includes:(1) DXS’s previous holding company Dalian State-owned Assets Investment and Operation GroupCo., Ltd. (hereinafter referred to as ”DGJ”) transferred 200,202,495 shares (29.98% of DXS’s totalcapital) of DXS’s shares to Hengli Group Co., Ltd. (hereinafter referred to as ”Hengli Group”) with aprice of RMB 5.8435 per share;(2) DXS sold all assets and liabilities as of 30 June, 2015 to DalianYinghui Machinery Manufacturing Co., Ltd. and received cash as consideration;(3) The Companyissued 1,906,327,800 shares by private placement to acquire 85% shares in Jiangsu HengliChemical Fiber Co., Ltd. (hereinafter referred to as ”Hengli Chemical Fiber”) which were held byHengli Group, Dechengli International Group Co. (hereinafter referred to as the ”Dechengli”),Jiangsu Hegao Investment Co., Ltd. (hereinafter referred to as ”Hegao Investment”) and Hailaideinternational 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 sharesmentioned above were verified by Ruihua Certified Public Accountants (LLP) and issued capitalverification reports Ruihua YanZi No.33030006 [2016] . After the issuance of shares, the number oftotal outstanding shares of the Company increased to 2,574,114,642 shares;(4) The Companyissued 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 assetspurchasing. The issuance of shares in above was verified by Ruihua Certified Public Accountants(LLP) and issued capital verification reports Ruihua Yan Zi No.33030014 [2016] . After the issuanceof shares, the number of total outstanding shares of the Company increased to 2,825,686,942shares.
On 31 January 2018, according to the ”Approval on Purchase of Assets by issuance of sharesto 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 Companyimplemented the assets restructuring which included (1) The Company issued 1,719,402,983 sharesby private placement to Fan Hongwei, Hengneng Investment (Dalian) Co., Ltd. (hereinafter referredto 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 abovewere verified by Ruihua Certified Public Accountants (LLP) and issued capital verification reportsRuihua YanZi No.33050001 [2018] . After the issuance of shares, the number of total outstandingshares of the Company increased to 4,545,089,925 shares; (2) The Company issued 507,700,000shares by private placement to Ping An Asset Management Co., Ltd., Beixin Ruifeng FundManagement 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 verification reports Ruihua Yan Zi No.33050002 [2018] . Afterthe issuance of shares, the number of total outstanding shares of the Company increased to5,052,789,925 shares.
On 30 April 2019, the Company’s annual shareholders meeting of 2018 resolved the ”Proposalof 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 of5,052,789,925 shares deducted by 87,015,274 share of stock repurchased), capital reserve isconverted to share capital by issuance of 0.4 shares for each share held by all shareholders and thetotal shares increased by 1,986,309,861 shares. Share registration date was 26 June 2019. After theincrement in shares, the number of total outstanding shares of the Company increased to7,039,099,786 shares.
The primary organizational structure of the Company: In accordance with the provisions ofnational laws and regulations and the Company's articles of association, a standardized multi-levelgovernance structure consisting of shareholders’ general meeting, the board of directors, theboard of supervisors and the management has been established; the board of directors hasstrategy committee, audit committee and remuneration committee, nomination committee and theboard office. The Company has sales department, purchasing department, general manager's
office, personnel department, production department, quality control department, finance
department, securities department and other major functional departments.
The Company engages in petrochemical industry. The business scope is: production and salesof chemical fibers (excluding chemical dangerous goods); sales of purified terephthalic acid (PTA);import and export of goods. The main products are oil refining products, chemical products, PTA,polyester chips, polyester fibers and films, etc.
The financial statements and notes to the financial statements have been approved to issueby the Board of Directors on 26 April 2023.
2. Scope of consolidation
There are total 87 subsidiaries in the scope of consolidation of the Company in 2022. Detailsrefer to ”Interests in other entities”. Comparing with previous year, the scope of consolidation of theCompany increased 21 entities and decrease of 7 deregistered entities and there was no transfer ofentities, details refer to ”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 incompliance with Accounting Standards for Business Enterprises and guidelines, interpretationsand other related provisions promulgated by the Ministry of Finance (collectively,” AccountingStandards for Business Enterprises”). In addition, the Company also discloses relevant financialinformation according to Information Disclosures Regulations for Companies that Offering Sharesin Public No.15 - General Provision of Preparing Financial Report (revised in 2014) issued announcedby China Securities Regulatory Commission.
2. Going concern
The Company has no events or circumstances that have caused significant doubts about theassumption of going concern within 12 months after the end of the reporting period.III. Significant accounting policies and accounting estimatesSpecific accounting policies and accounting estimates:
The Company and its subsidiaries determines certain specific accounting policies andaccounting estimates for impairment of receivables, depreciation of fixed assets, amortization ofintangible assets and revenue recognition according to the characteristics of the production andoperation. Specific accounting policies refer to the note to financial statements.1. Statement of compliance with Accounting Standards for Business Enterprises
The financial statements have been prepared in compliance with the Accounting Standard forBusiness Enterprises to truly and completely reflect the Company’s financial positions, operatingresults 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 tothe realization of cash or cash equivalents. The Company considers 12 months as an operatingcycle 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 subsidiaries of the Company determine its functional currency as US dollar inaccordance with its primary economic environment of the business location and converted intoRMB 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 separateentities into one reporting entity. Business combinations are classified into business combinationsinvolving enterprises under common control and business combinations not involving enterprisesunder common control.
1．Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a businesscombination in which all of the combining enterprises are ultimately controlled by the same partyor parties both before and after the combination, and that control is not transitory.
Assets acquired and liabilities assumed by acquirer in the business combination aremeasured at their carrying amounts of the acquiree in the consolidated financial statements of theultimate controlling party at the combination date, except for adjustments due to differentaccounting policies. The difference between the carrying amount of the consideration paid for thecombination (or total par value of shares issued) and the carrying amount of the net assetsacquired is adjusted to capital reserve. If the capital reserve is not sufficient to absorb thedifference, any excess is adjusted to retained earnings.
Business combinations involving entities under common control achieved in stages andinvolved multiple transactions, the difference between the carrying amount of the net assetsacquired and the sum of carrying amount of investment prior to combination date and carryingamount of new considerations paid for the combination at the combination date is adjusted tocapital reserve. If the capital reserve is not sufficient to absorb the difference, any excess isadjusted against retained earnings. The profit or loss, other comprehensive income and changesin other owner’s equity recognized by the acquirer during the period from the later of initialinvestment date and the date that the acquirer and acquiree both under common ultimate controlto the combination date are offset the opening retained earnings or profit for loss for the currentperiod in the comparative statements, except for other comprehensive income arising from theremeasurement 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 businesscombination in which all of the combining enterprises are not ultimately controlled by the sameparty or parties both before and after the business combination.
Where the cost of combination exceeds the acquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference is recognized as goodwill. Where the cost ofcombination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, firstly the acquirer shall reassess the measurement of the fair values of the acquiree’sidentifiable 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 theacquiree’s identifiable net assets after that reassessment, the acquirer shall recognize theremaining difference immediately in profit or loss for the current period.
If, at the date of combination or the end of the current period, due to various factors, the fairvalue of each asset paid as consideration for the combination or the fair value of the identifiableassets and liabilities of the purchased party is obtained during the combination cannot bereasonably determined, the Company calculates the value of business combination based on thetemporarily determinable value. If, within the 12 months after acquisition, additional informationcan prove the existence of related information at acquisition date and the contingentconsideration need to be adjusted, it is deemed to happen on the date of combination andretrospectively adjusted. Any adjustment of consideration for the combination or value ofidentifiable assets or liabilities made after 12 months of combination, the adjustment should followAccounting Standard for Business Enterprise No.28 – Changes in accounting policies, accountingestimates and correction of error.
Where the temporary difference obtained by the acquirer was not recognized due toinconformity with the conditions applied for recognition of deferred income tax, if, within the 12months after acquisition, additional information can prove the existence of related information atacquisition date and the expected economic benefits on the acquisition date arising fromdeductible temporary difference by the acquiree can be achieved, relevant income tax assets canbe recognized, and goodwill can be adjusted accordingly. If the goodwill is not sufficient, thedifference is recognized as profit or loss for the current period. Apart from above, the differencesis taken into profit or loss of the current period if the recognition of deferred income tax assets isrelated to the business combination.
For business combinations involving entities not under common control achieved in stagesthat involves multiple transactions, the Company determine whether the multiple transactionsbelongs to a single transactions in accordance with accounting standards. If the terms, conditionsand economic impact of the disposal comply with any cases as following, the multiple transactionsshould be accounted as if a single transaction. ① These transactions are concludedsimultaneously or affected by each other. ② To reach a complete business results, thesetransactions is as a whole. ③ Whether one transaction happening or not is up to anothertransaction. ④ To assess one transaction separately is not economical but assess along with othertransactions, they are economically justified.
In a business combination achieved in stages and considered as a single transaction, thetransactions should be regard all as one acquisition. For those cannot be considered as a singletransaction, the combination cost is the sum of consideration paid at acquisition date and fair valueof the acquiree's equity investment held prior to acquisition date; the cost of equity of the acquireeheld prior to acquisition date shall be re-measured at the fair value at acquisition date, thedifference between the fair value and the carrying amount shall be recognized as investmentincome or loss for the current period. Other comprehensive income and changes of investmentequity related with acquiree's equity held prior to acquisition date shall be transferred toinvestment profit or loss for current period at acquisition date, besides there is othercomprehensive income incurred by the changes of net assets or net liabilities due to theremeasurement 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 currentperiod when incurred. The transaction costs of equity or debt instruments issued as theconsiderations of business combination are included in the initial recognition amount of the equityor 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. Controlexists when the Company has power over the investee; is exposed, or has rights to variablereturns from its involvement with the investee; and has the ability to use its power to affect itsreturns. A subsidiary is an entity that is controlled by the Company (including enterprise, a portionof an investee as a deemed separate entity, and structured entity controlled by the enterprise).2．Preparation of the consolidated financial statementsThe consolidation scope of consolidated financial statements is determined on the basis ofcontrol, including the financial statements of the Company and all of its subsidiaries. In preparingconsolidated financial statements, subsidiaries adopt the same accounting period and accountingpolicies as those of the Company.
All assets, liabilities, interests, income, fees and cash flows resulting from intra-grouptransactions are eliminated on consolidation in full.Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed tobe included in the consolidated financial statements from the date they are controlled by theultimate controlling party. Their operating results and cash flows are included in the consolidatedincome statement and consolidated cash flow statement respectively from the date they arecontrolled by the ultimate controlling party. During the reporting period, the opening balance ofthe consolidated balance sheet was being adjusted, and the related items of the comparativestatement were being adjusted as if the reporting entity has exercised control since the time whenthe ultimate controlling party began to control.
Where a subsidiary has been acquired through a business combination involving entities notunder common control, the opening balances of the consolidated balance sheet shall not beadjusted for the subsidiary or the business, the subsidiary's revenue, expenses and profit shall beincluded in the consolidated income statement, and cash flows shall be included in theconsolidated 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 ispresented under shareholders’ equity in the consolidated balance sheet as minority interest. Theportion of net profit or loss of subsidiaries for the period attributable to minority interest ispresented in the consolidated income statement under the profit or loss attributable to minorityinterest. When the amount of loss attributable to the minority shareholders of a subsidiary exceedsthe minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary, theexcess amount shall be allocated against minority interest.3．Acquiring minority interests of subsidiary and disposal of interests in subsidiary withoutlosing control
Where the Company acquires a minority interest from a subsidiary’s minority shareholders ordisposes of a portion of an interest in a subsidiary without a change in control, the transaction istreated as equity transaction, and the book value of shareholder’s equity attributed to theCompany and to the minority interest is adjusted to reflect the change in the Company’s interest inthe subsidiaries. The difference between the proportion interests of the subsidiary’s net assetsbeing acquired or disposed and the amount of the consideration paid or received is adjusted tothe capital reserve (share premium) in the consolidated balance sheet, with any excess adjusted toretained earnings.
4．Losing control over the subsidiary
When the Company disposes of a subsidiary, the income, expenses, and profit of thesubsidiary from the beginning of current period to the disposal date are included in theconsolidated income statement; the cash flows of the subsidiary from the beginning of currentperiod to the disposal date is included in the consolidated cash flow statement. For the loss ofcontrol over a subsidiary due to disposal of a portion of the equity investment or other reasons, theremaining equity is measured at fair value on the date when the control is lost. The differencearising from the sum of consideration received for disposal of equity interest and the fair value ofremaining equity interest over the share of net assets of the former subsidiary calculatedcontinuously since the purchase date based on the shareholding percentage before disposal arerecognised as investment income in the period when the control is lost. Other comprehensiveincome related to equity investment in the subsidiary is accounted for on the same accountingtreatment as direct disposal of relevant asset or liability by the acquiree at the time when thecontrol is lost (i. e. to be transferred to investment income, except for the changes arising fromremeasuring net assets or net liabilities of defined benefit plan of the subsidiary using the equitymethod). The remaining equity interests are measured subsequently according to ”AccountingStandard for Business Enterprises No.2 – Long-term Equity Investments” or ”Accounting Standardfor Business Enterprises No.22 – Recognition and Measurement of Financial Instruments”.See ”Long-term equity investments” or ”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 approachwith multiple transactions until the control over the subsidiary is lost, it shall determine whetherthese multiple transactions related to the disposal of equity investment in a subsidiary until thecontrol over the subsidiary is lost belong to ”A single transaction”.
For those arrangements qualified as a single transaction, the carrying amount of long-termequity investments relating to each transaction of disposal is derecognized, the differencebetween the consideration received and the carrying amount of disposed long-term equityinvestments is recognized as other comprehensive income, and finally is recognized in profit orloss for the current period at the date of losing control.
For those arrangements are not regarded as a single transaction, the accounting treatmentshall follow “disposal of interests in subsidiary without losing control” and “for the loss of controlover a subsidiary due to disposal of a portion of the equity investment or other reasons” asappropriate. The difference between each consideration received and the share of carrying valueof net assets in proportion to disposed portion of shareholding percentage in the subsidiary isrecognized in capital reserve as an equity transaction. Capital reserve is not transferred to profit orloss for the current period when losing control.
7. Classification of joint arrangements and accounting treatment of joint operations8. Recognition criteria of cash and cash equivalents
Cash as presented in cash flow statement refers to cash on hand and deposit on demand forpayment. Cash equivalents refer to short-term (generally refers to the expiration within 3 monthsfrom the purchase date), highly liquid investments that can be readily converted to cash and thatare subject to an insignificant risk of changes in value.9. 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 atthe spot exchange rates (as announced by the People’s Bank of China) on the dates of thetransactions. However, the Company’s foreign currency exchange business or transactionsinvolving foreign currency conversion are converted into the amount of the recording currencyaccording to the actual exchange rate.
2．Translation of financial statements prepared in foreign currencies
At the balance sheet date, Items in foreign currencies are translated using the spot exchangerates 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 andconstruction of assets qualified for capitalisation, which are capitalised in accordance with theprinciple of capitalisation of borrowing costs; (2) non-monetary foreign currency items aredesignated as part of the hedge of the Company’s net investment of a foreign operation arerecognised in other comprehensive income until the net investment is disposed of, at which thecumulative amount is reclassified to the profit or loss for the current period; and (3) non-monetaryforeign currency items measured at historical cost shall still be translated at the spot exchangerates prevailing on the transaction dates, while the amounts denominated in the functionalcurrencies do not change.
Non-monetary foreign currency items measured at historical cost shall still be translated atthe spot exchange rates prevailing on the transaction dates, while the amounts denominated inthe functional currencies do not change. Non-monetary foreign currency items measured at fairvalue are translated at the spot exchange rates prevailing on the date on which the fair values aredetermined. The resulting exchange differences are recognised in profit or loss or as othercomprehensive 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 aretranslated to RMB in compliance with the following requirements: assets and liabilities on thebalance sheet are translated at the spot exchange rate prevailing at the balance sheet date;owner’s equity items except for “undistributed profits” are translated at the spot exchange rates atthe dates on which such items arose; income and expenses items in the income statement aretranslated at the average exchange rate for the period in which the transaction occurred. Theundistributed profits brought forward are reported at the prior year’s closing balance; theundistributed profits as at the end of the year are presented after translated the profitappropriation items; differences between the aggregate of asset and liability items and owners’equity items are recognised as ”translation differences arising on the translation of financialstatements denominated in foreign currencies” in other comprehensive income. On disposal offoreign operations and loss of control, exchange differences arising from the translation offinancial statements denominated in foreign currencies related to the disposed foreign operationswhich has been included in owners’ equity in the balance sheet, shall be transferred to profit orloss 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 presentedseparately as ”Effect of changes in exchange rates on cash and cash equivalents” in the cash flowstatement.
10. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one enterprise and afinancial liability or equity instrument of another enterprise. Financial instruments include financialassets, financial 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 theparties under a financial instrument contract. For the purchase or sale of financial assets in aconventional way, the Company recognizes the assets received and liabilities assumed on thetransaction day.
Financial assets and liabilities are measured at fair value upon initial recognition. For financialassets measured at fair value through profit or loss, relevant transaction costs are directlyrecognised 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 receivablewithout significant financing component are initially recognised based on the transaction priceexpected to be entitled by the Company.
(2) Classification and measurement of financial assets
The Company classifies the financial assets according to the business model for managingthe financial assets and characteristics of the contractual cash flows as follows: financial assetsmeasured at amortised cost, financial assets measured at fair value through other comprehensiveincome, 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 Company’s business model for managing such financial assets is to collect contractual cashflows;② The contractual terms of the financial asset stipulate that cash flows generated onspecific 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 usingthe effective interest method. A gain or loss on a financial asset that is measured at amortised costshall be recognised 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 amountadjusted by: (1) after deducting the already paid principal; (2) after multiplying or subtracting theaccumulative amount of amortization incurred from amortizing the balance between the initiallyrecognized amount and the amount of the maturity date by employing the actual interest ratemethod; and (3) after deducting the impairment losses that have actually incurred (applicable tofinancial assets only).
The effective interest method refers to the method whereby the post-amortization costs andthe interest incomes of different installments or interest expenses are calculated according to theeffective interests of the financial asset or financial liabilities (including a set of financial assets orfinancial liabilities). The effective interest refers to the interest rate used to cash the future cashflow of a financial asset or financial liability within the predicted term of existence or within ashorter applicable term into the current carrying amount of the financial asset or financial liability.When determining the effective interest, the future cash flow shall be predicted on the basis oftaking into account all the contractual stipulations concerning the financial asset or financial liability(including the right to repay the loans ahead of schedule, call options, similar options, etc.), but thefuture credit losses shall not be taken into account.The Company recognizes interest income based on the calculation of financial asset bookbalance multiplied by the effective interest rate, except for the following circumstances: ① Forpurchased or originated financial assets that have incurred credit impairment, from the initialrecognition, their interest income is determined on the financial asset amortization costs andcredit-adjusted effective interest rates; ② For the purchased or originated financial assets withoutcredit impairment, but become credit impaired in the subsequent period, the interest income isdetermined according to the amortized cost and effective interest rate of the financial asset. If thefinancial instrument has no credit impairment due to the improvement of its credit risk in thesubsequent period, and this improvement can be objectively related to an event that occurs afterthe application of the above regulations, interest income should be determined by multiplying theeffective interest rate and the financial asset book balance.2) Financial assets measured at fair value through other comprehensive incomeFinancial asset is classified as measured at fair value through other comprehensive income ifit meets both of the following conditions: ①The Company’s business model for managing suchfinancial assets is achieved both by collecting collect contractual cash flows and selling suchfinancial a. ② The contractual terms of the financial asset stipulate that cash flows generated onspecific dates are solely payments of principal and interest on the principal amount outstanding.Subsequent to initial recognition, such financial assets are subsequently measured at fairvalue. Interest calculated using the effective interest method, impairment losses or gains andforeign exchange gains and losses are recognised in profit or loss for the current period, and othergains or losses are recognised in other comprehensive income. On derecognition, the cumulativegain or loss previously recognised in other comprehensive income is reclassified from othercomprehensive income to profit or loss.
For non-trading equity instrument investment, the Company can irrevocably designate thefinancial assets measured at fair value through other comprehensive income. Such designation ismade on individual basis of each non-trading equity instrument investment which also qualified asequity instruments in the issuer’s perspective. Subsequent to such designation, dividend (exceptfor return of portion of investment costs) is recognized as profit or loss for the current period,other gains or losses (including exchange gain or loss) are recognized in other comprehensiveincome. On derecognition, the cumulative gain or loss previously recognised in othercomprehensive income is reclassified from other comprehensive income to profit or loss.3) Financial assets measured at fair value through profit or lossThe Company classifies the financial assets other than those measured at amortised cost andmeasured at fair value through other comprehensive income as financial assets measured at fairvalue through profit or loss. Upon initial recognition, the Company irrevocably designates certainfinancial assets that are required to be measured at amortised cost or at fair value through othercomprehensive income as financial assets measured at fair value through profit or loss in order toeliminate or significantly reduce accounting mismatch.Subsequent to initial recognition, such financial assets are subsequently measured at fairvalue, any differences are gains or losses recorded in profit or loss for the current year.(3) Classification and measurement of financial liabilitiesThe Company’s financial liabilities includes financial liabilities measured at fair value throughprofit or loss, financial liabilities that arise when a transfer of a financial asset does not qualify forderecognition or continuing involvement, financial guarantee contracts and financial liabilities atamortized cost.
1) Financial liabilities measured at fair value through profit or lossFinancial liabilities measured at fair value through profit or loss includes trading financialliabilities (including financial liabilities with embedded derivatives) and designated financialliabilities measured at fair value through profit or loss. In a business combination involvingenterprises not under common control, if the Company, as a buyer, recognizes a financial liabilityfrom the contingent consideration, the financial liability shall be accounted for at fair value throughprofit or loss.
After initial recognition, financial liabilities measured at fair value through profit or loss aresubsequently measured at fair value. Any gains or losses generated are recognized in profit or lossfor the current period.
The amount of change in fair value of designated financial liabilities measured at fair valuethrough profit or loss due to changes in the Company’s own credit risk is included in othercomprehensive income unless the treatment causes or expands accounting mismatches in profitor loss. Other changes in fair value of this financial liability are included in profit or loss for thecurrent period. Upon derecognition, the accumulated gains or losses previously included in othercomprehensive income are transferred out of other comprehensive income and included inretained earnings.
2) Financial liabilities that arise when a transfer of a financial asset does not qualify forderecognition or continuing involvement
Such financial liabilities are measured in according to the accounting policies of Transfer offinancial assets.
3) Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specifiedpayments to reimburse the contract holder for a loss the holder incurs because a specified debtorfails 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 subsequentlymeasured at the higher of the following: ① the amount of loss provision determined according tothe impairment method of financial instruments; ② the balance of the initial recognition amountafter deducting the accumulated amortization amount determined in accordance with the incomerecognition method.
4) Financial liabilities at amortized cost
Apart from the above 1), 2) or 3), the Company classifies the remaining financial liabilities asfinancial liabilities at amortized cost.
Such financial liabilities are measured at amortized cost using the effective interest ratemethod after initial recognition, and the resulting gains or losses are included in profit or loss forthe current period when they are derecognized or amortized in accordance with the effectiveinterest rate method.
(4) Equity instruments
Equity instruments refer to contracts that can prove the ownership of the Company'sremaining equity in assets after deducting all liabilities. The Company issues (includingrefinancing), repurchases, sells or cancels Equity instruments as a change in equity. Transactioncosts related to equity transactions are deducted from equity. The Company's variousdistributions to equity instruments holders (excluding stock dividends) reduce shareholder equity.The Company does not recognise the fair value changes of equity instruments.The distinction between financial liabilities and equity instrumentsFinancial liabilities refer to liabilities that meet one of the following conditions:1) A contractual obligation to deliver cash or other financial assets to other parties.2) A contractual obligation to exchange financial assets or financial liabilities with anotherparty under potentially adverse conditions.
3) A non-derivative contract that has to be settled with or can be settled with the firm's ownequity instruments in the future, under which the firm will deliver a variable number of its ownequity instruments.
4) A derivative contract that has to be settled with or can be settled with the firm's own equityinstruments in the future, except for a derivative contract in which a fixed number of its own equityinstruments are to be exchanged for a fixed amount of cash or other financial assets.If the Company cannot unconditionally avoid fulfilling a contractual obligation by deliveringcash or other financial assets, such contractual obligation meets the definition of a financialliability.If a financial instrument has to be settled with or can be settled with the Company's ownequity instruments in the future, consideration needs to be given to whether the Company's ownequity instruments used to settle the instrument is to be used as a substitute for cash or otherfinancial assets, or to give the holder of the instrument the remaining interest in the issuer's assetsafter deduction of all liabilities. If it is the former, the instrument is a financial liability of theCompany; if it is the latter, the instrument is an equity instrument of the Company.(5) Derivative instruments and embedded derivative instrumentsDerivative financial instruments include forward exchange contract, currency exchange rateswap 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 derivativecontract entered into and subsequently measured at their fair value. Any gains or losses arisingfrom 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 hybrid contract composed of embedded derivatives and the host contract, if the hostcontract is a financial asset, the Company does not split the embedded derivative from the hybridcontract, but applies the hybrid contract as a whole to the Company's accounting policies inclassification of financial assets. If the host contract included in the hybrid contract is not a financialasset and meets the following conditions at the same time, the Company will split the embeddedderivative from the hybrid contract and treat it as a separate derivative:1) The economic characteristics and risks of embedded derivatives are not closely related tothe economic characteristics and risks of the host contract.2) A separate instrument with the same terms as the embedded derivative meets thedefinition of derivative.
3) The hybrid contract is not measured at fair value and its changes are included in profit orloss for the current period for accounting treatment.If the embedded derivative is split from the hybrid contract, the Company will account for thehost contract of the hybrid contract in accordance with the applicable accounting standards. If theCompany cannot reliably measure the fair value of the embedded derivative according to theterms and conditions of the embedded derivative, the fair value of the embedded derivative isdetermined based on the difference between the fair value of the hybrid contract and the fairvalue of the host contract. After using the above method, if the fair value of the embeddedderivative on the acquisition date or the subsequent balance sheet date cannot be measuredseparately, the Company designates the hybrid contract as a whole as financial assets at fair valuethrough profit or loss.
2．Recognition and measurement of transfer of financial assetsTransfer of financial assets refers to the transference or deliverance of financial assets (or itscash flows) to the other party (the transferee) other than the issuer of financial assets. Thederecognition of financial assets means that the Company transfers the previously recognizedfinancial assets from its balance sheet.
The financial assets that meet one of the following conditions will be derecognized by theCompany: (1) the contractual right to receive cash flows of the financial asset is expired; (2) thefinancial asset has been transferred, and almost all risks and rewards of ownership of the financialasset transferred to the transferee; (3) the financial asset has been transferred by the Companyforegone the control of the financial assets although the Company has neither transferred norretained almost all the risks and rewards of ownership of the financial asset.If the Company neither transfers nor retains almost all the risks and rewards of ownership offinancial assets, and retains control of the financial assets, it will continue to recognize the relevantfinancial assets to the extent that they are continuing to be involved in the transferred financialassets and recognises the relevant liabilities. The degree of continuing involvement in thetransferred financial assets refers to the level of risk on the exposed impact in changes in value offinancial asset to the Company.
If the transfer of an entire financial asset satisfies the conditions for derecognition, thedifference between the amounts of the following two items are included in profit or loss: (1) thecarrying amount of the transferred financial asset as of the date of derecognition; (2) the sum ofconsideration received from the transfer of the financial asset, and the accumulative amount of thechanges of the fair value originally included in other comprehensive income proportionate to thetransferred financial asset (financial assets transferred refer to debt instrument investments at fairvalue through other comprehensive income). If the transfer of financial asset partially satisfies theconditions to derecognition, the entire carry amount of the transferred financial asset is, betweenthe portion which is derecognized and the portion which is not, apportioned according to theirrespective relative fair value, and the difference between the amounts of the following two itemsare included into profit or loss: (1) the carrying amount of the portion which is derecognized; (2) thesum of consideration of the portion which is derecognized, and the portion of the accumulativeamount of the changes in the fair value originally included in other comprehensive income which iscorresponding to the portion which is derecognized (financial assets transferred refer to debtinstrument investments at fair value through other comprehensive income). For non-trading equityinstruments designated by the Company to be measured at fair value and whose changes areincluded in other comprehensive income, if the whole or part of the transfer meets the conditionsfor derecognition, the difference calculated according to the above method is included in retainedearnings.
3．Conditions for derecognition of financial liabilitiesIf the current obligation of a financial liability (or part of it) has been discharged, the Companyderecognizes the financial liability (or part of it). If the Company (borrower) and the lender sign anagreement to replace the original financial liability by assuming a new financial liability, and thecontract terms of the new financial liability and the original financial liability are substantiallydifferent, the original financial liability is derecognized and a new financial liability is recognizedsimultaneously. 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 newfinancial 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 differencebetween its book value and the consideration paid (including non-cash assets transferred out orliabilities assumed) into profit or loss for the current period. If the Company repurchases part of itsfinancial liabilities, the book value of the financial liabilities as a whole will be allocated according tothe proportion of their respective fair values at the repurchase date and the total fair value at therepurchase date. The difference between the book value allocated to the derecognized portionand the consideration paid (including non-cash assets transferred out or liabilities assumed) isincluded in profit or loss for the current period.
4. Determination of the fair value of financial instrumentsFor the method for determining the fair value of financial assets and financial liabilities, seenotes to the financial statements.
5. Impairment of financial instruments
The Company accounts for impairment of financial assets at amortised cost, contract assets,debt instrument investment at fair value through other comprehensive income, lease receivablesand financial guarantee contracts as mentioned in this note. ECLs are the weighted average ofcredit losses of financial instruments weighted by the risk of default. Credit losses refer to thedifference between all contractual cash flows receivable according to the contract anddiscounted according to the original effective interest rate and all cash flows expected to bereceived, i. e. the present value of all cash shortages.For purchased or originated financial assets that have suffered credit impairment, theCompany only recognizes the cumulative changes in expected credit losses for the entire durationof the period since initial recognition as loss provisions on the balance sheet date.For the receivables or contract assets and lease receivables arised from transactionsunder ”Accounting Standards for Business Enterprises No.14-Revenue”, the Company uses asimplified measurement method to measure the loss allowance based on the expected credit lossduring the lifetime period.
For receivables or contract assets recognized on transactions under "Accounting Standardsfor Business Enterprises No. 14 - Revenue" without significant financing components, theCompany uses simplified measurement methods to calculate the expected credit loss equivalentto the lifetime period.
For financial instruments other than the above measurement methods, the Companymeasures loss allowance in accordance with the general method and assesses on each balancesheet date whether its credit risk has increased significantly since initial recognition. If the creditrisk has increased significantly since the initial recognition, the Company measures the lossallowance based on the amount of expected credit loss throughout the lifetime; if the credit riskhas not increased significantly since the initial recognition, the Company will predict the credit lossof 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 allpossible default events during the entire expected duration of the financial instrument. Expectedcredit loss in the next 12 months refers to the event of financial instrument default that may occurwithin 12 months after the balance sheet date (if the expected duration of the financial instrumentis less than 12 months, then the expected duration) which is a portion of expected credit losses forthe entire duration.
The Company considers all reasonable and reliable information, including forward-lookinginformation, by comparing the risk of default of a financial instrument on the balance sheet datewith the risk of default on the initial recognition date to determine the relative changes in defaultrisk of the financial instrument during the expected lifetime and to assess whether the credit risk offinancial instruments has increased significantly since initial recognition. For financial instrumentsthat cannot obtain sufficient evidence of a significant increase in credit risk at a reasonable cost atthe level of individual instruments, the Company considers whether the credit risk has increasedsignificantly on a portfolio basis. If the Company determines that a financial instrument has only alow credit risk on the balance sheet date, it is assumed that the credit risk of the financialinstrument has not increased significantly since initial recognition.
The Company remeasures the expected credit losses on each balance sheet date, and theresulting increase or reversal of the loss allowance is included in profit or loss for the currentperiod as an impairment loss or gain. For financial assets measured at amortised cost, the lossallowance offsets the book value of the financial asset presented in the balance sheet; for debtinstrument investments measured at fair value through other comprehensive income, theCompany recognises loss allowance in other comprehensive income and does not offset the bookvalue 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 sheetwhen there is a legally enforceable right to offset the recognized amounts and there is an intentionto 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 allowedto offset.
11. Notes receivables
Recognition and accounting treatment of expected credit loss of notes receivable
The Company determines the expected credit losses of bills receivable according to thesimplified measurement method described in this note and makes accounting treatment. On thebalance sheet date, the Company measures the credit loss of bills receivable based on the presentvalue of the difference between the contractual cash flow that should be received and the cashflow expected to be received. When the expected credit loss information of a single bill receivablecannot be assessed at a reasonable cost, the Company divides the bill receivable into severalgroups based on the characteristics of credit risk. On the basis of referring to historical credit lossexperience, combining the current situation and considering forward-looking information, theCompany estimates the expected credit loss on group basis. The basis for determining the groupsis as follows:
Name of group Determination basis
Bank acceptance bills group Acceptors are banks with low credit risk
Commercial acceptance bills group Acceptors are enterprises with high credit risk
12. Accounts receivable
Determination method and accounting treatment of expected credit loss of accounts
receivable
Determination method and accounting treatment of expected credit loss of accounts receivableThe Company determines the expected credit losses of accounts receivable and makesaccounting treatment in accordance with the simplified measurement method described in thisnote. On the balance sheet date, the Company measures the credit losses of accounts receivablebased on the present value of the difference between the contractual cash flow that should bereceived and the cash flow expected to be received. When the expected credit loss information ofa single accounts receivable cannot be assessed at a reasonable cost, the Company divides theaccounts receivable into several groups based on credit risk characteristics. On the basis ofreferring to historical credit loss experience, combining the current situation and consideringforward-looking information, the Company estimates expected credit losses on group basis. Thebasis 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 Receivables from related parties within the scope of
the scope of consolidation consolidation have similar credit risk characteristics
Group of high credit rating Accounts receivable of Fortune 500 clients within credit term
13. Receivables financing
The Company determines the expected credit losses of receivables financing and makesaccounting treatment in accordance with the general method described in this note. On thebalance sheet date, the Company measures the credit loss of receivables financing based on thepresent value of the difference between the contractual cash flow due and the expected cashflow received. When the expected credit loss information of a single item of receivables financingcannot be assessed at a reasonable cost, the Company divides receivables financing into severalgroups based on the characteristics of credit risk. On the basis of referring to historical credit lossexperience, combining the current situation and considering forward-looking information, theCompany estimates the expected credit losses on group basis. The basis for determining thegroups is as follows:
Name of group Determination basis
Group of low credit Including bank acceptance bills with low credit risk, letters of credit and
risk other receivables financing with low credit risk characteristics
14. Other receivables
Determination method and accounting treatment of expected credit loss of other receivablesThe Company determines the expected credit losses of other receivables and makes accountingtreatment in accordance with the general method described in this note. On the balance sheetdate, the Company measures the credit losses of other receivables based on the present value ofthe difference between the contractual cash flow that should be received and the expected cashflow received. When the expected credit loss information of single other receivables cannot beassessed at a reasonable cost, the Company divides the other receivables into several groupsbased on the characteristics of credit risk. On the basis of referring to the historical credit lossexperience, combining the current situation and considering forward-looking information, theCompany estimates on the expected credit losses on group basis. The basis for determining thegroups is as follows:
Name of group Determination basis
Ageing group Other receivables with similar credit risk characteristics by ageing
Group of related parties Receivables from related parties within the scope of consolidation
in the scope of have similar credit risk characteristics
consolidation
Group of related parties Receivables from related parties outside the scope of consolidation
outside the scope of have similar credit risk characteristics
consolidation
Group of government Other receivables such as government grants receivable and
receivables 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 products in the production process, materials and materials consumed in the productionprocess or the provision of labor services, in-transit materials and subcontracting processingmaterials.
2. The inventory obtained by the Company is measured at actual cost. (1) The cost ofpurchased inventory is the purchase cost of the inventory, and the inventory cost obtainedthrough further processing is composed of the purchase cost and processing cost. (2) The bookvalue of inventory obtained in settlement under debt restructuring is determined on the fair valueof the forfeited creditor's rights and the relevant taxes and fees that can be directly attributed tothe inventory when the inventory reaches the current position and status. (3) Under thepresumption that the exchange of non-monetary assets has commercial substance and the fairvalue of the assets swapped in or out can be reliably measured, the book value of inventoryswapped in the exchange of non-monetary assets is usually determined on the basis of the fairvalue of the assets swapped out, unless there is strong evidence that the fair value of the swappedassets is more reliable; for non-monetary asset exchanges that do not meet the abovepresumption, the book value of the swapped assets and related taxes payable are used as thecost of swapped in inventory. (4) The inventory acquired by the combination of enterprises undercommon control is determined based on the book value of the acquiree; the inventories acquiredby 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 averagemethod.
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 realizablevalue. The net realizable value of inventories is the amount after the estimated selling price ofinventories minus the estimated costs to be incurred to completion, the estimated sellingexpenses and related taxes. When determining the net realizable value of inventories, based onthe reliable evidence obtained, taking into account the purpose of holding the inventory and theimpact of events after the balance sheet date, except for clear evidence that the market price onthe balance sheet date is abnormal, the net realizable value of inventory items at the end of thecurrent 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 ascommodities directly used for sale, is determined by the amount of the estimated selling price ofthe inventory minus the estimated selling expenses and related taxes during normal productionand operation ;
(2) For the inventory of materials that need to be processed, in the normal production andoperation process, the net realizable value is determined based on the estimated selling price ofthe finished product minus the estimated cost at the time of completion, the estimated sellingexpenses and related taxes. On the balance sheet date, if a part of the same inventory has acontract price agreement and other parts do not have a contract price, the net realizable value isdetermined separately and compared with its corresponding cost to determine the amount ofprovision for or reversal of decline in value of inventory.
At period end, the provision for decline in value is calculated according to a single inventoryitem; but for a large number of inventories with low unit prices, the provision for decline in value iscalculated according to the inventory category; For the product series produced and sold in thesame region, has the same or similar end user, and difficult to measure the inventory separatelyfrom other items, the provision for the decline in value in inventory is combined.
After accruing the provision for decline in value in inventory, if the factors that previouslyreduced the value of the inventory have disappeared and the net realizable value of the inventoryis higher than its book value, it will be reversed within the original provision for decline in value, andreversal amount is included in profit or loss for the current period.
6. The inventory system is a perpetual inventory system.
16. Contract assets
17. Assets held for sale
18. Debt investments
19. Other debt investments
(1). Determination method and accounting treatment of expected credit loss of other debt
investments
Long-term equity investments referred to in this section refer to Long-term equityinvestments that the Company has control, joint control or significant influence over the investee,including equity investments 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 relevantagreement, and related activities of the arrangement must be agreed upon by the parties sharingcontrol rights before they can make decisions. If the Company and other joint venturers jointlyexercise joint control over the investee and jointly control the investee and have rights to the netassets of the investee, the investee is a joint venture of the Company. When judging whether thereis joint control, the protective rights enjoyed are not considered.
Significant influence refers to the power to participate in the decision-making of anenterprise's financial and operating decisions, but it cannot control or jointly control theformulation of these policies with other parties. If the Company can exert significant influence onthe investee, the investee is an associate of the Company. When determining whether it can exertsignificant influence on the invested unit, consider that the investor directly or indirectly holds thevoting shares of the invested unit and the current executable potential voting rights held by theinvestor and other parties are assumed to be converted into the investee, the impact includes thecurrent convertible warrants, stock options and convertible corporate bonds issued by theinvestee.
2. Determination of investment cost of long-term equity investments
(1) If the combination is formed under a business combination under common control, themerger party pays cash, transfers non-cash assets, assumes debt or issues equity securities as theacquisition consideration, and the share of owner’s equity of the acquiree on the consolidatedfinancial statements of the ultimate controlling party on the acquisition date as its initial investmentcost. The difference between the initial investment cost of long-term equity investments and thecash paid, non-cash assets transferred, the book value of the debt assumed or the total face valueof the shares issued adjusts the capital reserve; if the capital reserve is insufficient to offset, theretained earnings are adjusted. Step by step acquisition of the equity of the acquiree undercommon control through multiple transactions, and ultimately forming a business combinationunder common control, it should be treated separately as whether ”single transaction”: if itbelongs to a ” single transaction”, each transaction is treated collectively as a single transactionson obtaining control rights. If it does not belong to a ”single transaction”, the initial investment costsof long-term equity investments is the share of the book value of the owner’s equity in theacquiree’s consolidated financial statements. The difference between the cost and the book valueof long-term equity investments before the combination plus the book value of the newconsideration paid for the shares on the acquisition date is adjusted to the capital reserve; if thecapital reserve is insufficient to offset, the retained earnings are adjusted. The equity investmentheld before the acquisition date by equity method or other comprehensive income recognized forother equity instruments investment is temporarily not subject to accounting treatment.(2) If a business combination is not formed under common control, the Company determinesthe combination cost as the initial investment cost of long-term equity investments according tothe purchase date. The combination cost is the fair value of the assets paid, liabilities incurred orassumed by the purchaser to obtain control of the purchased party on the purchase date, and theequity securities issued. Overhead expenses such as auditing, legal services, evaluation andconsulting and other related Administrative expenses incurred by the purchaser for the businessmerger are included in profit or loss for the current period; The transaction cost of the equitysecurities or debt securities issued by the purchaser as the combination consideration is includedin the initial recognition amount of equity securities or debt securities. The Company regards thecontingent consideration stipulated in the acquisition agreement as part of the transferconsideration for the business combination, and it is included in the cost of the businesscombination according to its fair value on the date of purchase. For a business combination notunder common control that is realized step-by-step through multiple transactions, it is determinedwhether the multiple transactions belong to a ”single transaction” in accordance with theaccounting standards for the enterprise. In the case of a ”single transaction”, each transaction istreated as a whole transaction that obtains control. If it does not belong to a ”single transaction”,the initial investment cost of long-term equity investments calculated based on the cost methodshall be the sum of the original holding equity amount of the acquiree’s equity investment plus thenewly added investment cost; If the equity is accounted for using the equity method, the relevantother comprehensive income will not be accounted for temporarily; if the original equityinvestment is invested by other equity instruments, the difference between the fair value and thecarrying amount, and the cumulative change in fair value originally included in othercomprehensive income, are transferred to directly to retained earnings.(3) Except for long-term equity investments formed by business combination, other equityinvestments are initially measured at cost: if they are obtained by paying cash, the actual purchaseprice is used as their initial investment cost; if they are obtained by issuing equity securities, theyare stated at the fair value of equity securities as its initial investment cost. The expenses directlyrelated to the issuance of equity securities are determined in accordance with the relevantprovisions 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 orswapped-out assets can be reliably measured, the initial investment cost of long-term equityinvestments swapped in for non-monetary assets are based on the fair value of swapped assetsand related taxes payable, unless there is solid evidence that the fair value of the swapped assetsis more reliable; for non-monetary asset exchanges that do not meet the above presumption, thecarrying amount of the swapped assets and related taxes payable shall be used as the Initialinvestment cost of long-term equity investments. The initial investment cost of long-term equityinvestments obtained through debt restructuring is determined on the basis of the fair value of thewaived claims. The expenses, taxes and other necessary expenses directly related to theacquisition 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 orimplement joint control but does not constitute control, the cost of long-term equity investments isthe original holding determined in accordance with ”Accounting Standards for BusinessEnterprises No.22-Recognition and Measurement of Financial Instruments”. The sum of the fairvalue of equity investment plus the newly added investment cost is used as the initial investmentcost under equity method. If the originally held equity investment is classified as other equityinstruments investment, the difference between its fair value and carrying amount, and thecumulative fair value change originally included in other comprehensive income should betransferred to directly to retained earnings.
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 insubsidiaries. Apart from the cash dividends or profits declared but not yet paid that included in theacquisition of the investment, the Company recognizes the investment income in accordance withthe cash dividends or profits declared to be issued by the investee in the current period.(2) Long-term equity investments under equity methodFor 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 methodis greater than the fair value share of the identifiable net assets of the investee when investing, theinitial investment cost of long-term equity investments will not be adjusted; the initial investmentcost of long-term equity investments is less than the fair value share of the investee’s identifiablenet assets at the time of purchase, the difference should be included in profit or loss for the currentperiod, while adjusting the cost of long-term equity investments. After acquiring long-term equityinvestments, if the accounting policy and accounting period adopted by the investee areinconsistent with the Company, the financial statements of the investee shall be adjustedaccording to the Company's accounting policies and accounting period, and recognize theinvestment gain or loss and other comprehensive income etc. The investment income and othercomprehensive income shall be the share of the net profit or loss and other comprehensiveincome of the investee, and the carrying amount of long-term equity investments is adjusted; TheCompany recognizes its share of the investee’s net profits or losses based on the fair values of theinvestee’s individual separately identifiable assets at the time of acquisition, after makingappropriate adjustments thereto in conformity with the accounting policies and accountingperiods of the Company. According to the profits or cash dividends declared to be distributed bythe investee, the carrying amount of long-term equity investments is reduced accordingly; adjustthe carrying amount of long-term equity investments and include in owners' equity. The unrealizedinternal transaction gains and losses that occur between the Company and associates and jointventures are calculated based on the ratio enjoyed by the Company and are offset, andinvestment income is recognized on this basis. Unrealized internal transaction losses with theinvestee that belong to assets impairment loss are fully recognized.When the Company confirms that it should share the losses of the investee, it will beprocessed in the following order: First, offset the carrying amount of Long-term equityinvestments. Secondly, if the carrying amount of long-term equity investments is not enough tooffset, continue to recognise the investment loss and offset the carrying amount of long-termreceivable items to the limit of carrying amounts of other long-term equity that substantiallyconstitute net investment in the investee. After the above-mentioned treatment, if the Companystill undertakes additional obligations according to the investment contract or agreement, theestimated liabilities shall be recognized according to the obligations assumed and included in thecurrent investment losses. If the investee realizes a net profit in a later period, the Companyresumes the recognition of the profit sharing amount after the income makes up for theunrecognized loss sharing amount.
During the period of holding the investment, the investee is included in the consolidatedfinancial statements based on the amount attributable to the investee in the consolidated financialstatements' 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, andthe investor acquires long-term equity investments but does not obtain control, the fair value ofthe investment business is used as the initial basis for the new investment cost of long-term equityinvestments. The difference between the initial investment cost and the carrying amount of theinvested business is included in profit or loss for the current period. If the assets sold by theCompany to a joint venture or an associate constitute a business, the difference between theconsideration received and the carrying amount of the business shall be included in profit or lossfor the current period. If the assets purchased by the Company from associates and joint venturesconstitute business, they shall be accounted for in accordance with the provisions of ”AccountingStandards for Business Enterprises No.20-Business Combinations”, and the profits or lossesrelated 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 Carryingamount and the actual consideration received shall be included in profit or loss for the currentperiod.
(1) Disposal of long-term equity investments under equity methodFor long-term equity investments that are accounted for using the equity method, if theremaining equity after disposal is still accounted for using the equity method, when disposing ofthe investment, the same basis as the investee directly disposes of related assets or liabilities shallbe 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, othercomprehensive income and profit distribution, and owners’ equity are carried forward to profit orloss 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 ofthe equity investment, etc., the remaining equity after disposal shall be accounted according to thefinancial instrument recognition and measurement standards. The difference between the fairvalue and carrying of the day when the joint control or significant influence is lost the amount isincluded in profit or loss for the current period. The other comprehensive income of the originalequity investment confirmed by the equity method of accounting shall be accounted for on thesame basis as the investee ‘s direct disposal of related assets or liabilities when the equity methodof accounting is terminated. Owners ‘equity confirmed by the investee in addition to changes inOwners’ 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 isterminated.
(2) Disposal of long-term equity investments under cost methodLong-term equity investments that are accounted for using the cost method, and theremaining equity is still accounted for using the cost method after disposal. Other comprehensiveincome recoginsed by adopting equity method accounting or financial instrument recognition andmeasurement standard accounting before obtaining control of the investee is treated on the samebasis as the invested unit directly disposes of related assets or liabilities, and is treated accordingto share of profit or loss for the current period. Changes in owners’ equity other than net profit andloss, other comprehensive income and net profit distribution in the investee’s net assetsrecognized by the equity method of accounting are carried forward to profit or loss for the currentperiod according to the share.
When the Company can no longer exercise control over an investee due to dilution ofshareholding by issuance of new shares to other investors by the investee but the Company canstill exercise joint control of or significant influence on the investee, the difference between theCompany’s share of the increment of net assets in investee by the new shareholding percentageafter new share issuance and the pro-rata portion of carrying value of long term equity investmentfor the decreased shareholding percentage is recognized in profit or loss in the current period.The remaining equity investment is accounted for equity method as if it was acquired since initialacquisition.
When the Company can no longer exercise control over an investee due to partial disposal ofequity investment or other reasons and the remaining equity investment after disposal canexercise joint control of or significant influence over an investee, the remaining equity investmentis accounted for under equity method and re-measured by equity method as if it has beenacquired since date of acquisition. Where the remaining equity investment can no longer exercisejoint control of or significant influence over an investee, the remaining equity investment isaccounted for in accordance with Accounting Standard for Business Enterprises No.22-Recognization and Measurement of Financial Instruments and the difference between the fairvalue and the carrying amount at the date of the loss of control is charged to profit or loss for thecurrent period.
The Company's control over an investee is lost through multiple disposals and the multipledisposals shall be viewed as one single transaction, the multiple disposals is accounted for onesingle transaction which result in the Company's loss of control over the investee. Each differencebetween the consideration received and the book value of the investment disposed is recognizedin other comprehensive income and reclassified in full to profit or loss at the time when controlover the investee is loss.
20. Long-term receivables
21. Long-term equity investments
Long-term equity investments referred to in this section refer to Long-term equityinvestments that the Company has control, joint control or significant influence over the investee,including equity investments 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 relevantagreement, and related activities of the arrangement must be agreed upon by the parties sharingcontrol rights before they can make decisions. If the Company and other joint venturers jointlyexercise joint control over the investee and jointly control the investee and have rights to the netassets of the investee, the investee is a joint venture of the Company. When judging whether thereis joint control, the protective rights enjoyed are not considered.Significant influence refers to the power to participate in the decision-making of anenterprise's financial and operating decisions, but it cannot control or jointly control theformulation of these policies with other parties. If the Company can exert significant influence onthe investee, the investee is an associate of the Company. When determining whether it can exertsignificant influence on the invested unit, consider that the investor directly or indirectly holds thevoting shares of the invested unit and the current executable potential voting rights held by theinvestor and other parties are assumed to be converted into the investee, the impact includes thecurrent convertible warrants, stock options and convertible corporate bonds issued by theinvestee.
2. Determination of investment cost of long-term equity investments(1) If the combination is formed under a business combination under common control, themerger party pays cash, transfers non-cash assets, assumes debt or issues equity securities as theacquisition consideration, and the share of owner’s equity of the acquiree on the consolidatedfinancial statements of the ultimate controlling party on the acquisition date as its initial investmentcost. The difference between the initial investment cost of long-term equity investments and thecash paid, non-cash assets transferred, the book value of the debt assumed or the total face valueof the shares issued adjusts the capital reserve; if the capital reserve is insufficient to offset, theretained earnings are adjusted. Step by step acquisition of the equity of the acquiree undercommon control through multiple transactions, and ultimately forming a business combinationunder common control, it should be treated separately as whether ”single transaction”: if itbelongs to a ” single transaction”, each transaction is treated collectively as a single transactionson obtaining control rights. If it does not belong to a ”single transaction”, the initial investment costsof long-term equity investments is the share of the book value of the owner’s equity in theacquiree’s consolidated financial statements. The difference between the cost and the book valueof long-term equity investments before the combination plus the book value of the newconsideration paid for the shares on the acquisition date is adjusted to the capital reserve; if thecapital reserve is insufficient to offset, the retained earnings are adjusted. The equity investmentheld before the acquisition date by equity method or other comprehensive income recognized forother equity instruments investment is temporarily not subject to accounting treatment.(2) If a business combination is not formed under common control, the Company determinesthe combination cost as the initial investment cost of long-term equity investments according tothe purchase date. The combination cost is the fair value of the assets paid, liabilities incurred orassumed by the purchaser to obtain control of the purchased party on the purchase date, and theequity securities issued. Overhead expenses such as auditing, legal services, evaluation andconsulting and other related Administrative expenses incurred by the purchaser for the businessmerger are included in profit or loss for the current period; The transaction cost of the equitysecurities or debt securities issued by the purchaser as the combination consideration is includedin the initial recognition amount of equity securities or debt securities. The Company regards thecontingent consideration stipulated in the acquisition agreement as part of the transferconsideration for the business combination, and it is included in the cost of the businesscombination according to its fair value on the date of purchase. For a business combination notunder common control that is realized step-by-step through multiple transactions, it is determinedwhether the multiple transactions belong to a ”single transaction” in accordance with theaccounting standards for the enterprise. In the case of a ”single transaction”, each transaction istreated as a whole transaction that obtains control. If it does not belong to a ”single transaction”,the initial investment cost of long-term equity investments calculated based on the cost methodshall be the sum of the original holding equity amount of the acquiree’s equity investment plus thenewly added investment cost; If the equity is accounted for using the equity method, the relevantother comprehensive income will not be accounted for temporarily; if the original equityinvestment is invested by other equity instruments, the difference between the fair value and thecarrying amount, and the cumulative change in fair value originally included in othercomprehensive income, are transferred to directly to retained earnings.(3) Except for long-term equity investments formed by business combination, other equityinvestments are initially measured at cost: if they are obtained by paying cash, the actual purchaseprice is used as their initial investment cost; if they are obtained by issuing equity securities, theyare stated at the fair value of equity securities as its initial investment cost. The expenses directlyrelated to the issuance of equity securities are determined in accordance with the relevantprovisions 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 orswapped-out assets can be reliably measured, the initial investment cost of long-term equityinvestments swapped in for non-monetary assets are based on the fair value of swapped assetsand related taxes payable, unless there is solid evidence that the fair value of the swapped assetsis more reliable; for non-monetary asset exchanges that do not meet the above presumption, thecarrying amount of the swapped assets and related taxes payable shall be used as the Initialinvestment cost of long-term equity investments. The initial investment cost of long-term equityinvestments obtained through debt restructuring is determined on the basis of the fair value of thewaived claims. The expenses, taxes and other necessary expenses directly related to theacquisition 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 orimplement joint control but does not constitute control, the cost of long-term equity investments isthe original holding determined in accordance with ”Accounting Standards for BusinessEnterprises No.22-Recognition and Measurement of Financial Instruments”. The sum of the fairvalue of equity investment plus the newly added investment cost is used as the initial investmentcost under equity method. If the originally held equity investment is classified as other equityinstruments investment, the difference between its fair value and carrying amount, and thecumulative fair value change originally included in other comprehensive income should betransferred to directly to retained earnings.
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 insubsidiaries. Apart from the cash dividends or profits declared but not yet paid that included in theacquisition of the investment, the Company recognizes the investment income in accordance withthe cash dividends or profits declared to be issued by the investee in the current period.(2) Long-term equity investments under equity methodFor 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 methodis greater than the fair value share of the identifiable net assets of the investee when investing, theinitial investment cost of long-term equity investments will not be adjusted; the initial investmentcost of long-term equity investments is less than the fair value share of the investee’s identifiablenet assets at the time of purchase, the difference should be included in profit or loss for the currentperiod, while adjusting the cost of long-term equity investments. After acquiring long-term equityinvestments, if the accounting policy and accounting period adopted by the investee areinconsistent with the Company, the financial statements of the investee shall be adjustedaccording to the Company's accounting policies and accounting period, and recognize theinvestment gain or loss and other comprehensive income etc. The investment income and othercomprehensive income shall be the share of the net profit or loss and other comprehensiveincome of the investee, and the carrying amount of long-term equity investments is adjusted; TheCompany recognizes its share of the investee’s net profits or losses based on the fair values of theinvestee’s individual separately identifiable assets at the time of acquisition, after makingappropriate adjustments thereto in conformity with the accounting policies and accountingperiods of the Company. According to the profits or cash dividends declared to be distributed bythe investee, the carrying amount of long-term equity investments is reduced accordingly; adjustthe carrying amount of long-term equity investments and include in owners' equity. The unrealizedinternal transaction gains and losses that occur between the Company and associates and jointventures are calculated based on the ratio enjoyed by the Company and are offset, andinvestment income is recognized on this basis. Unrealized internal transaction losses with theinvestee that belong to assets impairment loss are fully recognized.When the Company confirms that it should share the losses of the investee, it will beprocessed in the following order: First, offset the carrying amount of Long-term equityinvestments. Secondly, if the carrying amount of long-term equity investments is not enough tooffset, continue to recognise the investment loss and offset the carrying amount of long-termreceivable items to the limit of carrying amounts of other long-term equity that substantiallyconstitute net investment in the investee. After the above-mentioned treatment, if the Companystill undertakes additional obligations according to the investment contract or agreement, theestimated liabilities shall be recognized according to the obligations assumed and included in thecurrent investment losses. If the investee realizes a net profit in a later period, the Companyresumes the recognition of the profit sharing amount after the income makes up for theunrecognized loss sharing amount.
During the period of holding the investment, the investee is included in the consolidatedfinancial statements based on the amount attributable to the investee in the consolidated financialstatements' 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, andthe investor acquires long-term equity investments but does not obtain control, the fair value ofthe investment business is used as the initial basis for the new investment cost of long-term equityinvestments. The difference between the initial investment cost and the carrying amount of theinvested business is included in profit or loss for the current period. If the assets sold by theCompany to a joint venture or an associate constitute a business, the difference between theconsideration received and the carrying amount of the business shall be included in profit or lossfor the current period. If the assets purchased by the Company from associates and joint venturesconstitute business, they shall be accounted for in accordance with the provisions of ”AccountingStandards for Business Enterprises No.20-Business Combinations”, and the profits or lossesrelated 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 Carryingamount and the actual consideration received shall be included in profit or loss for the currentperiod.
(1) Disposal of long-term equity investments under equity methodFor long-term equity investments that are accounted for using the equity method, if theremaining equity after disposal is still accounted for using the equity method, when disposing ofthe investment, the same basis as the investee directly disposes of related assets or liabilities shallbe 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, othercomprehensive income and profit distribution, and owners’ equity are carried forward to profit orloss 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 ofthe equity investment, etc., the remaining equity after disposal shall be accounted according to thefinancial instrument recognition and measurement standards. The difference between the fairvalue and carrying of the day when the joint control or significant influence is lost the amount isincluded in profit or loss for the current period. The other comprehensive income of the originalequity investment confirmed by the equity method of accounting shall be accounted for on thesame basis as the investee ‘s direct disposal of related assets or liabilities when the equity methodof accounting is terminated. Owners ‘equity confirmed by the investee in addition to changes inOwners’ 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 isterminated.
(2) Disposal of long-term equity investments under cost methodLong-term equity investments that are accounted for using the cost method, and theremaining equity is still accounted for using the cost method after disposal. Other comprehensiveincome recoginsed by adopting equity method accounting or financial instrument recognition andmeasurement standard accounting before obtaining control of the investee is treated on the samebasis as the invested unit directly disposes of related assets or liabilities, and is treated accordingto share of profit or loss for the current period. Changes in owners’ equity other than net profit andloss, other comprehensive income and net profit distribution in the investee’s net assetsrecognized by the equity method of accounting are carried forward to profit or loss for the currentperiod according to the share.
When the Company can no longer exercise control over an investee due to dilution ofshareholding by issuance of new shares to other investors by the investee but the Company canstill exercise joint control of or significant influence on the investee, the difference between theCompany’s share of the increment of net assets in investee by the new shareholding percentageafter new share issuance and the pro-rata portion of carrying value of long term equity investmentfor the decreased shareholding percentage is recognized in profit or loss in the current period.The remaining equity investment is accounted for equity method as if it was acquired since initialacquisition.
When the Company can no longer exercise control over an investee due to partial disposal ofequity investment or other reasons and the remaining equity investment after disposal canexercise joint control of or significant influence over an investee, the remaining equity investmentis accounted for under equity method and re-measured by equity method as if it has beenacquired since date of acquisition. Where the remaining equity investment can no longer exercisejoint control of or significant influence over an investee, the remaining equity investment isaccounted for in accordance with Accounting Standard for Business Enterprises No.22-Recognization and Measurement of Financial Instruments and the difference between the fairvalue and the carrying amount at the date of the loss of control is charged to profit or loss for thecurrent period.
The Company's control over an investee is lost through multiple disposals and the multipledisposals shall be viewed as one single transaction, the multiple disposals is accounted for onesingle transaction which result in the Company's loss of control over the investee. Each differencebetween the consideration received and the book value of the investment disposed is recognizedin other comprehensive income and reclassified in full to profit or loss at the time when controlover the investee is loss.
22. Investment properties
(1). If the measurement of cost model is adopted:
Depreciation or Amortization Method
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 betransferred after value-added, leased buildings (including buildings used for rent after self-construction or development activities are completed, and future use during construction ordevelopment of leased buildings).
2. Investment properties are initially measured according to cost, and subsequentmeasurement is made using the cost model. For subsequent expenditures related to Investmentproperties, if the economic benefits related to the asset are likely to flow in and their costs can bereliably measured, then they are included in the cost of Investment properties. Other subsequentexpenditures 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 isprovided using the same method as fixed assets and intangible assets.
4. When the purpose of Investment properties is changed to self-use, from the date ofchange, the Investment properties are converted into fixed assets or intangible assets, and thecarrying amount before conversion is used as the credit value after conversion. When the purposeof self-used real estate or Inventories is changed to earn rent or capital appreciation, from the dateof change, the Fixed assets or Intangible assets are converted into Investment properties andconverted into Investment properties measured by the cost model to the carrying amount beforeconversion As the booked value after conversion; when converted to Investment propertiesmeasured by fair value model, the fair value on the conversion date is used as the booked valueafter conversion.
5. When Investment Properties are disposed of, or permanently withdrawn from use and it isexpected that no financial benefits can be obtained from their disposal, the recognition of theinvestment properties is terminated. Investment properties sold, transferred, scrapped ordamaged are deducted from their carrying amount and related taxes and are included in profit orloss for the current period.
23. Fixed assets
(1). Recognition conditions
Fixed assets refer to tangible assets fulfill the following characteristics: (1) held for theproduction of goods, provision of labor services, lease or operation and (2) the service life exceedsone fiscal year.
Fixed assets are recognized if it meet the following conditions: (1) The economic benefitsrelated to the fixed assets are likely to flow into the enterprise and (2) The cost of the fixed assetscan be measured reliably. Subsequent expenditures related to fixed assets, if they meet the aboverecognition conditions, are included in the cost of fixed assets; those that do not meet the aboverecognition conditions are included in profit or loss for the current period when incurred.(2). Depreciation method
Depreciation Estimate residual Annual
Category method Useful life (years) value (%) depreciation rate
(%)
Property and Straight line 10-30 5-10 3.00-9.50
buildings method
Specific Straight line 3-20 5-10 4.50-31.67
equipment method
General Straight line 3-15 5-10 6.00-31.67
equipment method
Transportation Straight line 2-15 5-10 6.00-47.50
equipment method
25 Light 3.07
Straight line Displacement
Ship method Tonnage x
Expected scrap
price
Note:
(1) The renovation costs of the fixed assets that meet the capitalization conditions will beaccrued separately in the shorter period of the two renovation periods and the useful life of thefixed assets.
(2) For the fixed assets that have been impaired, the cumulative impairment provision of fixedassets shall be deducted from the calculation of depreciation rate.
(3) The Company shall review the useful life, estimated net residual value and depreciationmethod of the fixed assets at least at the end of the year.
4. Other note
(1) Fixed assets that have been suspended for three consecutive months due to insufficientconstruction and natural disasters are recognized as idle fixed assets (except for seasonalsuspension). Idle fixed Assets adopts the same depreciation method as other Fixed Assets of thesame category.
(2) If the fixed assets are in the state of disposal, or if no economic benefits are expected to begenerated through use or disposal, it is derecognised and its depreciation and impairment aresuspended.
(3) The difference between the disposal income of fixed assets sold, transferred, scrapped ordamaged after deducting its book value and related taxes is included in profit or loss for thecurrent period.
(4) The overhaul costs incurred by the Company's regular inspections of fixed assets, andthere is conclusive evidence that the conditions that meet the recognition conditions of fixedassets are included in the cost of fixed assets, and those that do not meet the recognitionconditions of fixed assets are included in profit or loss for the current period. Fixed assets aredepreciated during regular maintenance intervals.
(3). Basis for identification, valuation and depreciation methods of fixed assets under financing
lease
24. Construction in progress
1. Construction in progress while satisfying economic benefits is likely to flow in, and costs canbe reliably measured are recognised. Construction in progress is measured at the actual costincurred 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 tofixed assets according to the actual cost of the project. If it has reached the expected usablestatus but has not yet completed the settlement of completion, it will first be transferred to fixedassets at the estimated value. After the completion of the final settlement, the original provisionalvaluation will be adjusted according to the actual cost, but the original depreciation will not beadjusted.
25. 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,construction or production of assets that meet the capitalization conditions, are capitalized andincluded in the cost of related assets. Other Borrowing costs are recognized as expenses basedon the amount incurred 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) Assetexpenditure has occurred; 2) Borrowing costs have occurred; 3) The purchase, construction orproduction 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 isabnormally interrupted during the acquisition, construction or production process, and theinterruption 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 thepurchase or construction of assets or production activities restart. If the interruption is thenecessary procedure for the acquisition or construction or production of assets that meet thecapitalization conditions to reach the intended status of uses or status of sale, borrowing costs willcontinue to be capitalized.
(3) Cessation of capitalization: Borrowing costs cease to be capitalized when the assetspurchased or constructed or produced that meet the capitalization conditions reach the intendeduse or sale. When part of the assets in the acquisition, construction or production of capitalizedassets are completed separately and can be used separately, the capitalization of borrowing costsof the partial assets will be ceased. If each part of the purchased or constructed asset iscompleted separately, but it cannot be used until it is completed or sold externally, thecapitalization 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 thatmeet the capitalization conditions, the interest expenses actually incurred in the current period ofthe specific loans (including the amortization of discounts or premiums determined in accordancewith the effective interest rate method), minus the amount of interest income obtained from thebank or the investment income obtained by making a temporary investment by the unusedborrowing loans, is the amount of interest that should be capitalized; if the general borrowings areoccupied for the purchase or construction or production of assets that meet the capitalizationconditions, the weighted average amount of asset expenditures on the amount of cumulativeasset expenditure exceeding the specific loans is multiplied by the capitalization rate (weightedaverage interest rate) of the general borrowing to calculate and determine the amount of interestthat should be capitalized for the general borrowing. During the capitalization period, the amountof interest capitalized in each accounting period shall not exceed the amount of interest actuallyincurred by the relevant borrowings in the current period. The exchange differences on theprincipal and interest of foreign currency special borrowings shall be capitalized during thecapitalization period. Other relevant expenses incurred by special borrowings occur before theassets eligible for capitalization purchased or constructed or produced reach the intended statusof use or sale, they are capitalized; Other relevant expenses incurred in general borrowings areincluded in profit or loss for the current period when incurred. If there is a discount or premium onthe loans, the amount of discount or premium that should be amortized in each accounting periodis determined according to the effective interest rate method, and the amount of interest in eachperiod is adjusted.
26. Biological assets
27. Oil and gas assets
28. Right-of-use asset
29. Intangible assets
(1). Measurement, useful life, impairment test
1. Initial measurement of intangible assets
Intangible assets are initially measured at cost. The cost of externally purchased intangibleassets includes the purchase price, related taxes and other expenses directly attributable to theasset for its intended use. If the payment for the purchase of intangible assets is delayed beyondthe normal credit conditions and is essentially of a financing nature, the cost of the intangibleassets is determined on the basis of the present value of the purchase price. Debt restructuringacquires the intangible assets used by the debtor to pay off debts, and the book value isdetermined on the basis of the fair value of the waived claims and other costs that can be directlyattributed to the tax and other costs incurred in bringing the asset to its intended use. Intangibleassets obtained from debtor to pay off debts under debt restructuring, its book value isdetermined on the basis of the fair value of the waived claims and other costs that can be directlyattributed to the tax and other costs incurred in bringing the asset to its intended use. Under thepresumption that the exchange of non-monetary assets has commercial substance and the fairvalue of the assets exchanged in or out can be reliably measured, the intangible assets exchangedin the swap of non-monetary assets are stated at fair value of the assets swapped and relatedtaxes as the cost of swapping intangible assets, unless there is strong evidence that the fair valueof the swapped assets is more reliable; for non-monetary asset exchanges that do not meet theabove presumption, the book value of the swapped assets and related taxes payable are used asthe 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 therelated economic benefits are likely to flow into the Company and the costs can be reliablymeasured. Expenditures for other items other than these are included in profit or loss for thecurrent 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 rightsexpenditures and building construction costs are accounted for as intangible assets and fixedassets, respectively. In the case of purchased properties and buildings, the relevant price will beallocated 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 otherrelevant experts to determine a combination of factors, reasonably determine the intangible assetcan bring economic benefits for the Company, as intangible assets with limited useful life; notWhere the intangible assets are reasonably determined to bring economic benefits to theCompany, they are regarded as intangible assets with uncertain service life.For intangible assets with a finite useful life, the following factors are usually considered whenestimating the useful life: (1) the usual life cycle of the products produced using the asset and theinformation available on the service life of similar assets; (2) technology, process, etc. The currentsituation of the country and the estimation of the future development trend; (3) the marketdemand for the products produced by the asset or the provision of labor services; (4) theexpected actions of current or potential competitors; (5) the maintenance of the asset Expectedmaintenance expenditures that bring economic benefits, and the Company's ability to pay forrelated expenditures; (6) Relevant legal regulations or similar restrictions on the asset's controlperiod, such as concession periods, lease periods, etc . ; (7) There is correlation of the useful life ofother 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 theuseful life according to the expected realization method of the economic benefits related to theintangible asset. If the expected realization method cannot be reliably determined, the straight-linemethod is used. Intangible assets with uncertain useful life are not amortized, but the useful life ofthe 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 ofintangible assets with a finite useful life. If it is different from the previous estimate, the originalestimate is adjusted and the accounting estimate is changed; it is estimated that an intangibleasset can no longer be given if the enterprise brings future economic benefits, the book value ofthis intangible asset will be transferred to profit or loss for the current period.(2). Accounting policy for internal research and development expenditures
The expenditures of internal research and development projects are divided intoexpenditures in the research phase and expenditures in the development phase. Criteria fordividing research stage and development stage: the planned investigation stage for acquiringnew technologies and knowledge should be determined as the research stage, which has thecharacteristics of planning and exploration; The application of research results or otherknowledge to a plan or design before commercial production or use to produce new orsubstantially improved materials, devices, products and other stages should be determined as thedevelopment stage, which is targeted and likely to produce results characteristics.
Expenditures for the research phase of internal research and development projects areincluded in profit or loss for the current period when they occur. Expenses during thedevelopment phase of an internal research and development project that meet the followingconditions are recognized as intangible assets: (1) it is technically feasible to complete theintangible asset so that it can be used or sold; (2) it is Intention to use or sell; (3) The way in whichintangible assets generate economic benefits, including the ability to prove that the productsproduced using the intangible assets exist in the market or the intangible assets themselves existin 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 developmentof the intangible asset and the ability to use or sell the intangible asset; (5) The expenditureattributable to the development stage of the intangible asset can be reliably measured. If theabove conditions are not met, it will be included in profit or loss for the current period when itoccurs; if there is no way to distinguish between research phase expenditure and developmentphase expenditure, all research and development expenditure incurred will be included in profit orloss for the current period.
30. Long-term asset impairment
Long-term equity investments, investment property and productive biological assetsmeasured using the cost model, fixed assets, construction in progress, oil and gas assets, right-of-use assets, intangible assets, goodwill and other long-term assets are subject to impairment ifthere are indication of the following:
1. The market price of assets has fallen sharply in the current period, and the decline issignificantly 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 themarket in which the assets are located will undergo major changes in the current period or in thenear future, thereby adversely affecting the enterprise;
3. The market interest rate or other market investment return rate has increased in the currentperiod, which affects the discount rate of the enterprise's calculation of the present value of theexpected 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 performanceof the asset has been or will be lower than expected, such as the net cash flow created by theasset 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 thebalance sheet date, an impairment test shall be conducted. If the result of the impairment testindicates that the recoverable amount of the asset is lower than its book value, the impairmentprovision shall be made according to the difference and included in the impairment loss. Therecoverable amount is the higher of the net value of the asset's fair value minus disposal costs andthe present value of the asset's expected future cash flow. The method for determining the fairvalue is detailed in this note; the disposal expenses include legal expenses related to the disposalof assets, related taxes, handling fees, and direct expenses incurred to bring the asset to asaleable status; the expected future cash flow of the asset is determined according to the presentvalue of expected future cash flow generated during the continuous use of the asset and at thetime of final disposal, and an appropriate discount rate is selected to determine the discountedamount.
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 whichthe asset group belongs determines the recoverable amount of the asset group. An asset group isthe smallest asset portfolio that can independently generate cash inflows.
The goodwill presented separately in the financial statements will be allocated to the assetgroup or combination of asset groups that is expected to benefit from the synergy effect of thebusiness combination during the impairment test. If the test results indicate that the recoverableamount of the asset group or combination of asset groups containing the allocated goodwill islower than its book value, the corresponding impairment loss is recognized. The amount ofimpairment loss is offset against the book value of goodwill allocated to the asset group orcombination of asset groups, and then proportionally based on the proportion of the book value ofother 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 atthe end of each year.
Once assets impairment loss is recognised, it will not be reversed in the future period.
31. Long-term deferred expenses
Long-term deferred expenses are accounted for based on actual expenditures andamortized evenly over the benefit period or the prescribed period. If the long-term deferredexpense item cannot benefit the future accounting period, all the amortized value of the item thathas not been amortized shall be transferred to profit or loss for the current period, of which:
Improvement expenditures incurred on leased fixed assets shall be amortized evenly over theremaining useful life of the leased assets if it can be reasonably determined that the ownership ofthe leased assets will be obtained at the expiration of the lease term. If it cannot be reasonablydetermined that the ownership of the leased asset can be obtained at the expiration of the leaseterm, it shall be amortized equally over the shorter of the remaining lease term and the remaininguseful life of the leased asset.
The decoration costs incurred by the leased fixed assets, if it can be reasonably determinedthat the ownership of the leased assets will be obtained at the expiration of the lease term, shall beamortized equally between the interval between two decorations and the shorter period of theremaining useful life of the leased assets. If it cannot be reasonably determined that the ownershipof the leased asset can be obtained at the expiration of the lease term, the leased asset shall beamortized equally over the shorter of the interval between two decorations, the remaining leaseterm and the remaining useful life of the leased asset.
32. Contract liabilities
(1). Recognition method for contract liabilities
Contract liabilities is the Company's obligation to transfer goods to customers for theconsideration that has been received or receivable from customers. The Company presented thenet amount of contract assets offsetting with contract liabilities when they are aroused in the samecontract.
33. Employee benefits
(1). Accounting treatment of short-term employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Companyin exchange for service rendered by employees or for the termination of employment relationship.Employee benefits include short-term employee benefits, post-employment benefits, terminationbenefits and other long-term employee benefits. Benefits provided to the employee’s spouse,children, dependents, family members of deceased employees, or other beneficiaries are alsoemployee benefits.
According to their liquidities, employee benefits are presented as ”employee benefitspayable” and “long-term employee benefits payable” on the balance sheet.
In the accounting period in which employees have rendered services, the Companyrecognized the employee wages, bonus, social security contributions according to regulationssuch as medical insurance, work injury insurance and maternity insurance as well as housing fundsas liability, and charged to profit or loss for the current period or cost of relevant assets. Ifemployee benefits are non-monetary benefits, if they can be measured reliably, they shall bemeasured at fair value. If the liability is not expected to be settled wholly in twelve months after thebalance sheet date, and the amount is significant, the liability is measured at the discountedamount.
(2). Accounting treatment of 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 fixedcontributions into an escrow fund and will have no further obligation. Defined benefit plans arepost-employment benefit plans other than defined contribution plans.
(1) Defined contribution plans
The Company pays basic pension insurance and unemployment insurance for employees inaccordance with the relevant regulations of the current government. In the accounting periodswhich employees rendered services, the amount of defined contribution plan is recognized asliability 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 unilaterallywithdraw the termination benefits provided by the labor relationship cancellation plan or theredundancy proposal, and the Company recognises the costs or expenses related to therestructuring related to the payment of the termination benefits. Termination benefits expensesare included in profit or loss for the current period. However, if the termination benefits are notexpected to be fully paid within twelve months after the end of this reporting period, it is treated asother long-term employee benefits.
Employee internal retirement plans are handled on the same principle as the above dismissalbenefits. The Company will include the salary and social insurance contribution of early retiredpersonnel from the date when the employee ceases to provide services to the normal retirementdate, and shall be included in profit or loss for the current period (termination benefits) when theconditions for recognising the estimated liabilities are met. Financial compensation after theofficial retirement date (such as the normal pension pension) will be treated as post-employmentbenefits.
(4). Accounting treatment of other long-term employee benefits
Other long-term employee benefits provided by the Company to the employees satisfied theconditions for classifying as a defined contributions plan; those benefits are accounted for inaccordance with the above requirements relating to defined contribution plan, but the movementof net liabilities or assets in re-measurement of defined benefit plan is recorded in profit or loss forthe current period or cost of relevant assets.
34. Lease liabilities
35. Provision of liabilities
A provision is recognized as a liability when an obligation related to a contingency satisfied allof the following conditions: (1) The obligation is a present obligation of the Company; (2) It isprobable that an outflow of economic benefits will be required to settle the obligation; (3) Theamount of the obligation can be measured reliably.
Provisions are initially measured at the best estimate of the payment to settle the associatedobligations and consider the relevant risk, uncertainty and time value of money. If the impact oftime value of money is significant, the best estimate is determined as its present value of futurecash outflow. The Company reviews the carrying amount of provisions at the balance sheet dateand adjusts the carrying amount to reflect the best estimate.
The best estimates are divided into the following situations: If the required expenditure existsin a continuous range (or interval), and the probability of various results in the range is the same,the best estimate is based on the middle value of the range: namely The average of the lower limitamount is determined. 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 thesame, if contingencies involve a single item, the best estimate is based on the amount most likely tooccur; if contingencies involve multiple items, the best estimate is calculated and determinedbased on various possible results and related probabilities.
If all or part of the expenses required to pay off the provisions of the Company are expectedto be compensated by a third party, when the compensation amount is basically determined to bereceived, it is separately recognized as an asset, and the recognized compensation amount doesnot exceed the carrying amount of the provisions.
Carrying amount of the provisions are reviewed on each balance sheet date. If there is solidevidence that the carrying amount cannot reflect the current best estimate, the carrying amountshall be adjusted according to the current best estimate.
36. Share-based payments
1. Category of share-based payment
The Company's share-based payment is a transaction that grants equity instruments orassumes liabilities determined on the basis of equity instruments in order to obtain servicesprovided by employees (or other parties). Includes Share-based payment settled with equity andshare-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 activemarket; (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 arefamiliar with the situation and voluntarily trade, reference to the current fair value, discounted cashflow method and option pricing model of other financial instruments that are substantially thesame.
3. Basis in determination of best estimate of exercisable equity instrumentsOn each balance sheet date during the vesting period, the Company makes the best estimatebased on the latest information on the number of employees with exercisable rights and otherfollow-up information, and corrects the number of equity instruments expected to exercise. Onthe exercise date, the number of equity instruments expected to be exercised should beconsistent 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 includedin the fair value of equity instruments on the grant date, and the capital reserve will be adjustedaccordingly. If the exercise right is available only after completing the service within the vestingperiod or meeting the prescribed performance conditions, on each balance sheet date during thevesting period, based on the best estimate of the number of available rights Equity instrumentsand the fair value of the equity instruments on its grant date, the services obtained in the currentperiod are included in the relevant costs or expenses, and the capital reserve is adjustedaccordingly. After the exercisable date, no adjustment will be made to the recognised costs orexpenses 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 measuredaccording to the fair value of the service of the other party. If the fair value of the other party’sservices cannot be measured reliably but the equity value of equity instruments can be measuredreliably, it is measured in accordance with the fair value of equity instruments on the date ofservice acquisition, included in the relevant costs or expenses, and the owners ‘equity is increasedaccordingly.
(2) Share-based payment settled in cash
Share-based payment settled in cash in exchange for employee services, and the right toexercise immediately after the grant, the Company’s fair value of the liabilities assumed areincluded in the relevant costs or expenses on the grant date, and the liabilities are increasedaccordingly. Share-based payment settled in cash that can be exchanged for employee servicesafter completing the services within the waiting period or meeting the prescribed performanceconditions, based on the best estimate of the right to exercise on each balance sheet date duringthe vesting period and the fair value of the Company’s liabilities, the services obtained in thecurrent period are included in the relevant costs or expenses and corresponding liabilities. Oneach balance sheet date and settlement date before the settlement of the relevant liabilities, thefair value of the liabilities is remeasured, and the changes are included in profit or loss for thecurrent period.
(3) Modify and terminate share-based payment plan
If the modification increases the fair value of equity instruments granted, the Company willrecognise the increase in the cost of services obtained in accordance with the increase in fairvalue of equity instruments. If the modification increases the number of equity instrumentsawarded, the Company will recognize the increase in the fair value of equity instrumentsaccordingly as an increase in access to services. If the Company revises the conditions of exerciserights in a manner beneficial to employees, the Company considers the revised conditions ofexercise rights when dealing with the conditions of exercise rights.
If the modification reduces the fair value of the equity instruments granted, the Companycontinues to recognize the services based on amount of fair value of the equity instruments on thegrant date, regardless of the decrease in the fair value of the equity instruments. If the modificationreduces the number of granted equity instruments, the Company treats the reduction as acancellation of the granted equity instruments. If the vesting conditions are modified in a way thatis unfavorable to the employees, the modified vesting conditions shall not be considered whendealing with the vesting.
If the share-based payment settled by equity is cancelled, it will be treated as an acceleratedexercise 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 inprofit or loss for the current period, and capital reserve is also recognised). Employees or otherparties can choose to meet the non-feasible rights conditions but not met within the waitingperiod, as a cancellation of equity settlement of share-based payment. However, if a new Equityinstrument is awarded, and the equity instruments granted on the grant date of the new equityinstruments are deemed to replace the equity instruments that were cancelled, then theauthorized replacement equity instruments are processed in the same way as the modification ofterms and conditions of the original equity instruments.
5．Involving share-based payment transactions between companies within the scope ofconsolidation of the Company, between the Company and the actual controlling party or othershareholders of the Company, or between the Company and other companies in the group towhich the Company belongs, it is accounted in accordance with the relevant provisions of Article 7of intra-group share-based payment of "Interpretation No. 4 of Accounting Standards forBusiness Enterprises".
37. Preferred shares, perpetual bonds and other financial instruments
38. Revenue
(1). Accounting policies adopted for revenue recognition and measurement
1. General principles of revenue recognition
Under the new revenue standard, the Company determine the timing of revenue recognitionon the basis of transfer of control. The Company recognises revenue when it satisfies aperformance obligation in the contract, i.e. when the customer obtains control of the relevantgoods or services.
If one of the following conditions is fulfilled, the Company performs its performance obligationwithin a certain period; otherwise, it performs its performance obligation at a point of time: (1)when the customer simultaneously receives and consumes the benefits provided by the Companywhen the Company performs its obligations under the contract; (2) when the customer is able tocontrol the goods in progress in the course of performance by the Company under the contract;(3) when the goods produced by the Company under the contract are irreplaceable and theCompany has the right to receive payment for performance completed to date during the wholecontract term.
For performance obligations performed within a certain period, the Company recognisesrevenue by measuring the progress towards complete of that performance obligation within thatcertain period. When the progress of performance cannot be reasonably determined, if the costsincurred by the Company are expected to be compensated, the revenue shall be recognised atthe amount of costs incurred until the progress of performance can be reasonably determined.For performance obligation performed at a point of time, the Company recognises revenue atthe point of time at which the customer obtains control of relevant goods or services. Todetermine whether a customer has obtained control of goods or services, the Company considersthe following indications: (1) the Company has the current right to receive payment for the goods,which is when the customer has the current payment obligations for the goods; (2) the Companyhas transferred the legal title of the goods to the customer, which is when the client possesses thelegal title of the goods; (3) the Company has transferred the physical possession of goods to thecustomer, which is when the customer obtains physical possession of the goods; (4) the Companyhas transferred all of the substantial risks and rewards of ownership of the goods to the customer,which is when the customer obtain all of the substantial risks and rewards of ownership of thegoods to the customer; (5) the customer has accepted the goods; (6) other information indicatesthat the customer has obtained control of the goods.When a contract contains two or more performance obligations, the Company will allocatethe transaction price to each individual performance obligation in accordance with the relativeproportion of the stand-alone selling price of the goods promised by each individual performanceobligation on the commencement date of the contract. Revenue is recognised on the transactionprice allocated to each individual performance obligation. The transaction price is the amount ofconsideration that the Company expects to be entitled to receive due to the transfer of goods tocustomers. The amount collected by the Company on behalf of a third party and the amount thatthe Company expects to return to the customer are accounted for as a liability and not included inthe transaction price. For contracts that contain variable consideration, the Company estimatesthe amount of consideration to which it will be entitled using either the expected value method orthe most likely amount. The estimated amount of variable consideration is included in thetransaction price only to the extent that it is highly probable that such an inclusion will not result in asignificant revenue reversal in the future when the uncertainty associated with the variableconsideration is subsequently resolved. For contracts that contain significant financingcomponents, the Company determines the transaction price based on the amount payable underthe assumption that the customer pays that amount payable in cash when the control of goods orservices is transferred to the customer. The difference between the transaction price and thecontract consideration shall be amortised within the contract period using effective interest rate.For contracts where the period between payment and transfer of the associated goods orservices is less than one year, the Group applies the practical expedient of not adjusting thetransaction price for any significant financing component.
2. Specific revenue recognition principle
Based on actual situation, the Company recognizes revenue when the following conditionsare met:
(1) Sales of product: Domestic sales revenue is recognised when the control of the producthas been transferred to the purchaser, the continued management and control of the product isno longer implemented, the payment has been recovered or the evidence for payment has beenobtained and the relevant economic benefits are likely to flow in, and the cost of the product canbe reliably measured. Export sale revenue is recognised on the export date shown on the exportdeclaration of the goods after the goods are shipped according to the customer's requirements,the payment has been recovered or the receipt of the payment has been obtained and therelevant economic benefits are likely to flow in, the cost of the product can be reliably measured.
(2) Futures brokerage business: The net transaction fee charged by the Company from thecustomers (deducting the transaction fee payable by the Company to exchange company) isrecognized as the net fee income when the daily payment is settled with the customer.(2). Differences in accounting policies for revenue recognition due to the adoption of different
business models for similar businesses
39. Contract cost
40. Government grants
1. Category of government grants
Government grants refer to the Company's obtain of monetary or non-monetary assets fromthe government without consideration. It is divided into government grants related to assets andgovernment grants related to income.
Government grants related to assets refer to government grants acquired by the Companyand used to purchase or construct or form long-term assets, including financial grants for thepurchase of fixed assets or intangible assets, and financial discounts for dedicated loans for fixedassets, etc . ; Government grants related to income refer to government grants other thangovernment grants related to assets. Government grants should be distinguished between thatrelated to assets and related to income and apply different accounting treatment. If it is difficult todistinguish, the overall classification is classified as government grants related to income
The specific standards adopted by the Company in the classification of government grantsare:
(1) The grant objects specified in the Government grants document are used to purchase orconstruct or form long-term assets, or the expenditures of the subsidies are mainly used topurchase or construct or form long-term assets, they are classified as government grants relatedto assets.
(2) The government grants obtained according to the government documents that are all ormainly used to compensate the expenses or losses in the future period or the government grantsthat 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, theGovernment grants will be divided into Government grants of Related to assets or Governmentgrants of Related to income in the following ways: 1) Government documents specify the specificproject targeted by the grant, the expenditure amount is divided by relative ratio of that formingthe asset and the expenditure amount included in the expense according to the budget of thisparticular project. The ratio needs to be reviewed on each balance sheet date and changed ifnecessary.2) Government documents only use general expressions and do not indicate specificitems, it is regarded as government grants related to income.
2. Timing of recognition of government grants
The Company usually recognises and measures the government grants according to theactual amount received when they are actually received. However, for the end of the period, thereis 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 theAmount receivable. Government grants measured according to Amount receivable should alsomeet the following conditions:
(1) It is based on the financial support item officially released by the local financial departmentand proactively disclosed in accordance with the “Government Information DisclosureRegulations” and its financial fund administrative methods, and its administrative methods shouldbe inclusive (any enterprise that meets the prescribed conditions can apply), not specifically forspecific enterprises;
(2) The Amount of the subsidy receivable has been confirmed by the authority governmentdepartment, or it can be reasonably calculated according to the relevant regulations of theofficially released financial fund management method, and it is expected that there will be nosignificant uncertainty in its amount;
(3) The relevant grant approval has clearly promised the payment period, and the payment isguaranteed by the corresponding financial budget, so it can be reasonably guaranteed that it canbe received within the specified period;
(4) According to the specific situation of the Company and the subsidy, other relevantconditions (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 cannotbe reliably obtained, measured by the nominal amount. Government grants measured in nominalamount are directly included in profit or loss for the current period.The Company adopts the gross method for Government grants, the specific accountingtreatment is as follows:
Government grants related to assets are recognized as deferred income, and are included inprofit or loss for the current period in a reasonable and systematic way within the useful life of therelevant assets. When related assets are sold, transferred, scrapped or damaged before the endof the useful life, the relevant deferred income balance is transferred to the profit and loss of theasset disposal period.
Government grants related to income, which are used to compensate the related cost or lossof the Company in the future period, are recognized as deferred income, and are included in profitor loss for the current period during the period when the related cost or loss is recognized. Thecompensation for the related costs or losses incurred by the enterprise is directly included in profitor loss for the current period.
The policy discount loans obtained by the Company are divided into the following twosituations and are separately accounted for:
(1) if the government makes the payment of subsidy to the bank offering the loan, the actualamount of money received by the loan is recorded as the book amount, and the borrowing costsare 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 interestsubsidy is reducing the borrowing costs.
If the recoginsed government grants need to be returned, the returned will be accounted inthe current period for in the following situations:
(1) that initially deducted the carrying amount of the asset, is recognized by increasing thecarrying amount of the asset;
(2) if there exists of the related deferred income balance, then the deferred income balance isreduced 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 itemsare: Government grants related to the daily activities of the Company, included in other income oroffsetting related costs according to the economic business substance; Government grants notrelated to the daily activities of the Company, included in non-operating income and expenses.41. 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 taxbased on the temporary difference between the carrying amount of assets, liabilities, and thebalance sheet date and the tax base. The Company's current income tax and deferred income taxare included in profit or loss for the current period as income tax expenses or credit, but excludingincome tax arising from: (1) business combination; (2) transactions or matter recognised directly inowners' equity; (3) according to the "Accounting Standards for Business Enterprises No. 37 -Presentation of Financial Instruments" and other regulations, the dividend payment of financialinstruments classified as equity instruments can be deducted before corporate income taxaccording to tax policies and the distributed profits come from transactions or matters previouslyrecognized in owners’ equity.
The Company recognizes a deferred tax asset for the carry forward of deductible temporarydifferences, deductible losses and tax credits to subsequent periods, to the extent that it isprobable that future taxable profits will be available against which the deductible temporarydifferences, deductible losses and tax credits can be utilized, except for those incurred in thefollowing transactions:
(1) The transaction is neither a business combination nor affects accounting profit or taxableprofit (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 ofthe following conditions are satisfied: it is probable that the temporary difference will reverse inthe foreseeable future and it is probable that taxable profits will be available in the future againstwhich the temporary difference can be utilized.
All the taxable temporary differences are recognized as deferred tax liabilities except forthose incurred in the following transactions:
(1) Initial recognition of goodwill or initial recognition of an asset or liability in a transactionwhich is neither a business combination nor affects accounting profit or taxable profit (ordeductible loss) when the transaction occurs;
(2) The taxable temporary differences associated with investments in subsidiaries, associatesand joint ventures, and the Company is able to control the timing of the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeablefuture.
The difference between the carrying amount of assets and liabilities and their tax base (If theitems that have not been recognized as assets and liabilities can be determined in accordancewith the provisions of the tax law, the tax base, the difference between the tax base and the bookamount), is calculate and recognized deferred tax assets or deferred tax liabilities according to theapplicable tax rate during the period when the assets are expected to be recovered or theliabilities are paid off.
Deferred tax assets recognsied are limited to the amount of taxable income that is likely to beused to offset the deductible temporary differences. On the balance sheet date, if there is solidevidence that it is likely to obtain sufficient taxable income in the future period to offset thedeductible temporary difference, the deferred tax assets that have not been recognized in theprevious accounting period are recognized. The carrying amount of deferred tax assets isreviewed regularly. If it is likely that sufficient taxable income cannot be obtained in the future tooffset the benefits of deferred tax assets, the carrying amount of deferred tax assets will bewritten down. When it is likely to obtain sufficient taxable income, the amount written down will bereversed.
2. When the Company has the legal right to settle on a net basis and intends to settle on a netbasis or acquire assets and settle liabilities simultaneously, the Company's current income taxassets and current 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 currentincome tax liabilities in net, and the deferred tax assets and deferred tax liabilities are related to theincome tax levied by the same tax collection department on the same taxpayer or differenttaxpayers, but in each future period of significant deferred tax assets and liabilities reversal, thetaxpayer involved intends to settle the current income tax assets and liabilities in net amount orobtain assets and settle liabilities at the same time and deferred tax liabilities are presented in netamount after offset.
42. Leases
(1). Accounting treatment for operating leases
(2). Accounting treatment for financing leases
(3). Determination method and accounting treatment of lease under the new lease standard
A lease is a contract that conveys the right to use an asset for a period of time in exchange forconsideration.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. Acontract is, or contains, a lease if the contract conveys the right to control the use of one or moreidentified asset(s) for a period of time in exchange for consideration.
For a contract that contains multiple separate lease, the Company separates and accounts foreach lease component as a lease separately. For a contract that contains lease and non-leasecomponents, the lessee and lessor separates the lease and non-lease components.1. The Company as a lessee
(1) Right-of-use assets
At the commencement date of lease term, the Company recognizes right-of-use assets forleases (excluding short-term leases and leases of low-value assets). Right-of-use assets aremeasured initially at cost. Such cost comprises: the amount of the initial measurement of leaseliability; lease payments made at or before the inception of the lease less any lease incentivesalready received (if there is a lease incentive); initial direct costs incurred by the Company; thecosts of the Company expected to be incurred for dismantling and removing the leased asset,restoring the site on which the leased asset is located or restoring it to the condition as agreed inthe terms of the lease.
The Company accrues depreciation for the right-of-use assets on straight-line method. Ifthere is reasonable certainty that the Company will obtain the ownership of a leased asset at theend of the lease term, the Company depreciates the right-of-use asset from the commencementdate to the end of the useful life of the underlying asset; otherwise, the Company depreciates theleased asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
(2) Lease liabilities
At the commencement date of lease term, the Company recognizes lease liabilities for leases(excluding short-term leases and leases of low-value assets). Lease liabilities are initially measuredbased on the present value of outstanding lease payment. Lease payment include: fixedpayments (including in-substance fixed payments), less any lease incentives (if there is a leaseincentive); variable lease payment that are based on an index or a rate; amounts expected to bepayable under the guaranteed residual value provided by the Company; the exercise price of apurchase option if the Company is reasonably certain to exercise that option; payments ofpenalties for terminating the lease option, if the lease term reflects that the Company will exercisethat option. The Company adopts the interest rate implicit in the lease as the discount rate. If thatrate cannot be determined reasonably, the Company’s incremental borrowing rate is used.The Company shall calculate the interest expenses of lease liabilities over the lease term atthe fixed periodic interest rate, and include it into profit or loss in the period or cost of relevantassets. Variable lease payments not included in the measurement of lease liabilities are charged toprofit or loss in the period or cost of relevant assets in which they actually arise.After the commencement date of lease term, if the following circumstances occur, theCompany re-measures the lease liability in accordance with the lease payments after modification:when the assessment results of the purchase, extension or termination option or the actualexercise condition changes, or the actual exercise of the lease renewal option or the leasetermination option is inconsistent with the original assessment result; Changes in the expectedpayable amount based on guaranteed residual value; Changes in the index or ratio used todetermine lease payments. For the lease modification that cause the lease liabilities to beremeasured, the Company adjusts the carrying value of the right-of-use assets accordingly. If thecarrying value of the right-of-use asset has been reduced to zero, but the lease liability still needsto be further reduced, the Company will include the remaining amount in the profit or loss for thecurrent period.
(3) Short-term leases and leases of low-value assetsThe right-of-use asset and lease liability are not recognized by the Company for short-termleases and leases of low-value assets, and the relevant lease payments are included in profit orloss in the period or costs of relevant assets in each period of the lease term on a straight-linebasis. Short-term leases are defined as leases with a lease term of not more than 12 months fromthe commencement date and excluding a purchase option. Leases of low-value assets aredefined as leases with underlying low value when new. Where the Company subleases or expectsto sublease a leased asset, the original lease shall not belong to a lease of low-value asse(4) Lease modification
The Company will account for the lease modification as a separate lease if the lease changesand meets the following conditions: the lease change expands the scope of lease by increasingthe rights to use one or more leased assets; the increased consideration and the individual price ofthe expanded part of the lease are equivalent to the amount adjusted for the contract.If the lease change is not accounted for as a separate lease, the Company shall re-allocate theconsideration of a changed contract, re-determine the lease term, and remeasure the leaseliabilities by the present value calculated from the changed lease payments and revised discountrate on the effective date of the lease change.
2. The Company as a lessor
At the commencement date of lease term, the Company classifies leases as financing leasesand operating leases. A financing lease is a lease that transfers substantially all the risks andrewards incidental to ownership of a leased asset, irrespective of whether the ownership of theasset is eventually transferred. An operating lease is a lease other than a finance lease.As a sub-leasing lessor, the Company classifies the sub-leases based on the right-of-useassets of the original leases. If the original lease is a short-term lease and the Company choosesnot to recognize the right-of-use asset and lease liability for the original lease, the Companyclassifies the sublease as an operating lease.
(1) Accounting treatment of operating leases
The lease payments derived from operating leases are recognized as rental income on astraight-line basis over the respective lease terms. Initial direct costs relating to operating leases tobe incurred by the Company shall be capitalized and then included in the current income by stagesat the same base as the recognition of rental income over the lease term. The variable leasepayments not included in the measurement of lease payments shall be recognized in profit or lossin the period in which they are occurred.
(2) Accounting treatment of financing leases
At the commencement date of lease term, the Company recognizes financing leasereceivable and derecognizes the underlying assets. The Company initially measures financinglease receivable in the amount of net investment in the lease. Net investment in the lease is the sumof present value of unguaranteed residual value and the lease payments receivable at thecommencement date of lease term, discounted at the interest rate implicit in the lease.The Company calculates and recognizes interest income in each period during the leaseterm, based on a constant periodic interest rate. The derecognition and impairment losses offinancing lease receivable are accounted for in accordance with this note. Variable leasepayments not included in the measurement of the net investment in the lease are included in profitor loss in the period in which they are occurred.
3. Sale and leaseback transactions
The Company determines whether the asset transfer in the sale and leaseback transaction isa sale in accordance with principles described in this note.
(1) As a lessee
If the asset transfer in the sale and leaseback transaction is a sale, the Company, as a lessee,measures the right-of-use assets formed by the sale and leaseback based on the part of the bookvalue of the original assets related to the use rights obtained from the leaseback, and recognizerelevant gains or losses only for the right to transfer to the lessor; if the transfer of assets in the saleand leaseback transaction is not a sale, the Company, as a lessee, continues to recognize thetransferred assets and recognizes a financial liability equal to the transfer income. For details ofaccounting treatment for financial liabilities, please see this note.
(2) As a lessor
If the transfer of assets in the sale and leaseback transaction is a sale, the Company, as alessor, accounts for asset purchase, and accounts for asset lease in accordance with policies inthe aforementioned “2. The Company as a lessor”; if the transfer of assets in the sale andleaseback transaction is not a sale, the Company, as a lessor, does not recognize the transferredassets, but recognizes a financial asset equal to the transfer income. For details of accountingtreatment for financial assets, please see this note.43. Other significant accounting policies and accounting estimates
(1)Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The Companymeasures related assets or liabilities at fair value assuming the assets or liabilities are exchanged inan orderly transaction in the principal market; in the absence of a principal market, assuming theassets or liabilities are exchanged in an orderly transaction in the most advantageous market.Principal market (or the most advantageous market) is the market that the Company can normallyenter into a transaction on measurement date.
The Company uses valuation techniques that are appropriate in the circumstances and forwhich sufficient data are available to measure fair value, considering the ability of a marketparticipant to generate an economic benefit from the best use of the asset, or the ability togenerate an economic benefit from the sale of the asset to another market participant who canput it to the best use, maximizing the use of relevant observable inputs, and using unobservableinputs only if the observable inputs aren’t available or impractical.
Fair value level for assets and liabilities measured or disclosed at fair value in the financialstatements are determined according to the significant lowest level input to the entiremeasurement: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assetsor liabilities that the Company can access at the measurement date; Level 2 inputs are inputs otherthan quoted prices included within Level 1 that are observable for the assets or liabilities, eitherdirectly or indirectly; Level 3 inputs are unobservable inputs for the assets or liabilities, includinginterest rates that cannot be directly observed or verified by observable market data, stockvolatility, future cash flows of disposal obligations assumed in business combinations, financialforecasts made using own data, etc. On each balance sheet date, the company reassesses theassets and liabilities that are continuously measured at fair value recognized in the financialstatements to determine whether there is a conversion between the fair value measurementlevels.
(2) Share repurchase
If the shares of the company are purchased for reasons such as reducing registered capital orrewarding employees, the actual amount paid shall be treated as treasury shares. If therepurchased shares are canceled, the difference between the total face value of the sharescalculated based on the par value of the canceled shares and the number of canceled shares andthe actual amount paid for the repurchase shall be used to offset the capital reserve, if the capitalreserve is insufficient for offsetting, and offset against retained earnings. If rewarding therepurchased shares to the employees of the company belongs to equity-settled share payment,when the employees exercise their rights to purchase the company's shares and receive the price,the cost of the treasury shares delivered to the employees will be transferred out of the capitalreserve (other capital reserve) cumulative recorded during the waiting period.(3)Hedging
1. Hedging includes fair value hedging / cash flow hedging / overseas operating netinvestment hedging.
2. For hedging instruments that meet the following conditions, hedging accounting methodsare used: (1) The hedging relationship consists only of eligible hedging instruments and hedgedinstruments; (2) At the beginning of hedging, the Company formally designated hedginginstrument and hedged items, and prepared written documents on the hedging relationship andthe Company's risk management strategy and risk management objectives for hedging; (3) Thehedging relationship meets the hedging validity requirement.When the hedging meets the following conditions at the same time, the Company determinesthat the hedging relationship meets the requirements for hedging effectiveness: (1) There is aneconomic relationship between the hedged item and the hedging instrument; (2) Among thechanges in value caused by the economic relationship between hedged items and hedginginstruments, the impact of credit risk does not dominate; (3) The hedging ratio of the hedgingrelationship is equal to the ratio of the actual number of hedged items of the Company to theactual number of hedging instruments, but does not reflect the imbalance of the relative weight ofthe hedged items and hedging instruments.
The Company continuously evaluates whether the hedging relationship meets therequirements of hedging effectiveness on the hedging start date and later. The hedgingrelationship no longer meets the hedging effectiveness requirements due to the hedging ratio, butif the risk management objectives of the designated hedging relationship have not changed, theCompany will rebalance the hedging relationship.
3. Accounting treatment of hedging
(a) Fair value hedge
1) Gains or losses from hedging instruments are included in profit or loss for the currentperiod. If hedging instruments are hedged against non-tradable equity instruments (or theircomponents) that are selected to be measured at fair value and whose changes are included inother comprehensive income, the gains or losses generated by the hedging instruments areincluded in other comprehensive income.
2) Profit or loss for the current period of the hedged item due to risk exposure is calculated asprofit or loss for the current period, while adjusting the carrying amount of the confirmed hedgeditem not measured at fair value. Hedged items are debt instruments (or their components) that aremeasured at fair value and whose changes are included in other comprehensive income. Thegains or losses resulting from the hedged risk exposure are included in profit or loss for thecurrent period, without adjustment its carrying amount; If the hedged item is a non-tradable equityinstrument investment (or its component) measured at fair value and its changes are included inother comprehensive income, the gain or loss resulting from the hedged risk exposure is includedin other comprehensive income, not adjusting its carrying amount.If the hedged item is an unrecognized commitment (or its component), the cumulative changein fair value due to the hedged risk after the hedge relationship is designated is recognized as anasset or liability, and the relevant gains or losses are included profit or loss for each relevantperiod. When fulfilling the definite commitment to obtain assets or assume liabilities, the initialrecognition amount of the asset or liability is adjusted to include the cumulative change in the fairvalue of the confirmed hedged item.
If the hedged item is a financial instrument (or a component thereof) measured at amortizedcost, the adjustment made by the Company to the carrying amount of the hedged item will beamortized at the actual interest rate recalculated on the amortization date and included in profit orloss for the current period. If the hedged item is a debt instrument measured at fair value and itschanges are included in other comprehensive income (components thereof), the accumulatedrecognized hedging gains or losses are amortized in the same manner and included in profit orloss for the current period, but does not adjust the carrying amount of the debt instrument (or itscomponents).
(b) Cash flow hedge
1) The part of the hedging instrument gains or losses that belongs to the effective hedging isincluded in other comprehensive income as a cash flow hedge reserve, and the invalid part isincluded in profit or loss for the current period. The amount of cash flow hedge reserve isrecognised 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 inthe 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 theCompany to subsequently recognize a non-financial asset or non-financial liability, or the expectedtransaction of non-financial assets and non-financial liabilities forms a certain commitmentapplicable to fair value hedge accounting, the Company transfers out the cash flow hedgingreserve amount originally recognized in other comprehensive income and includes it in the initialrecognition amount of the asset or liability.
3) Other cash flow hedges, the amount of cash flow hedge reserves originally included inother comprehensive income, are transferred out during the same period when the hedgedexpected transaction affects profit or loss, and are included in profit or loss for the current period.(c) Net investment hedges for overseas operations
The portion of the gains or losses formed by hedging instruments that are effective hedges isincluded in other comprehensive income, and when disposing of overseas operations, they aretransferred out and included in profit or loss for the current period The part of the loss thatbelongs to the invalid hedge is included in profit or loss for the current period.(4) Treasury shares
Repurchase the Company’s shares for reasons such as reducing registered capital orrewarding employees. Before cancellation or transfer, they are managed as treasury shares. Theamount actually paid is used as the cost of treasury shares, reducing owners ‘equity andconducting registration for reference. If the treasury shares is transferred, the difference betweenthe amount actually received and the amount of treasury shares booked is included in the capitalreserve. If the capital reserve is insufficient to offset, the retained earnings are offset. If the treasuryshares are cancelled, share capital is reduced by the par value of the stock and the number ofshares cancelled, and the capital reserve is offset by the difference between the book balance ofthe cancelled treasury shares and the face value. If the capital reserve is insufficient, the retainedearnings are offset. When repurchasing, transferring or canceling the Company's shares, no gainsor losses are recognized.
(5) Restricted shares
In the equity incentive plan, the Company grants restricted stock to the motivated employee.The motivated employee subscribes for the stock first. If the unlocking conditions specified in theequity incentive plan are not subsequently met, the Company repurchases the stock at the priceagreed in advance. If the restricted stock issued to employees has completed the capital increaseprocedures such as registration according to relevant regulations, on the grant date, the Companywill recognise the share capital and capital reserve (Share capital premium) based on thesubscription paid by the employees. Treasury shares and other payables are recognize for therepurchase obligations.
(6) Significant accounting judgments and estimates
In the process of applying the accounting policy of the Company, due to the inherentuncertainty of the operating activities, the Company needs to make judgments, estimates andassumptions on the carrying amount of the report items that cannot be accurately measured.These judgments, estimates and assumptions are based on the Company's management's pasthistorical experience and made on the basis of considering other relevant factors. Thesejudgments, 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 fromthe current estimates of the Company's management, which will cause significant adjustments tothe carrying amount of assets or liabilities affected in the future. The Company regularly reviewsthe aforementioned judgments, estimates and assumptions on the basis of continuous operation.If the changes in accounting estimates only affect the current period of change, the number ofimpacts will be recognised in the current period of change. If the changes affect both the currentperiod and the future period, the number of impacts will be confirmed in the current period andfuture period of change. As of the balance sheet date, the Company needs to make judgments,estimates and assumptions on the financial statement items as follows:1. Classification of lease
When the company acts as a lessor, according to the provisions of the Accounting Standardsfor Business Enterprises No. 21 - Leases, leases are classified as operating leases and financialleases. When determining the classification, management needs to make analysis and judgmenton whether all risks and rewards related to the ownership of leased assets have been substantiallytransferred to the lessee.
2. Impairment of financial instruments
The Company uses the expected credit loss model to assess impairment of receivables anddebt investments measured at amortized cost, receivables financing measured at fair value andchanges included in other comprehensive income, and other debt investments. The use of theexpected credit loss model involves significant management judgments and estimates. The keyparameters of expected credit loss measurement include default probability, default loss rate anddefault risk exposure. The Company considers the quantitative analysis of historical statistical dataand forward-looking information to establish default probability, default loss rate and default riskexposure model. The difference between the actual financial instrument impairment result and theoriginal estimate will affect the carrying amount of the financial instrument and the accrual orreversal 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 ofcost and net realizable value. For inventories whose cost is higher than net realizable value andobsolete and unsalable, provision for decline in value of inventories is recognized. Impairment tonet realizable value is based on the assessment of the marketability of Inventories and its netrealizable value. Appraisal of Inventories impairment requires management to make judgmentsand estimates based on factors such as the purpose of holding Inventories and the impact ofevents after the balance sheet date. The difference between the actual result and the originalestimate will affect the carrying amount of Inventories and the accrual of Inventory Provision fordecline 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 possibleimpairment of Non-current assets other than financial assets. For intangible assets with uncertainservice life, in addition to the annual impairment test, when there are signs of impairment, animpairment test is also conducted. Non-current assets other than financial assets are tested forimpairment 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 expectedfuture cash flow, it indicates that an impairment has occurred.
The net value of fair value minus disposal expenses is determined by referring to the salesagreement price or observable market price of similar assets in fair transactions, minus theincremental costs that can be directly attributed to the disposal of the asset. When predicting thepresent 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 incalculating the present value. When estimating the recoverable amount, the Company will use allrelevant information that can be obtained, including the prediction of production, selling price andrelated operating costs based on reasonable and supportable assumptions.
The Company assesses whether goodwill is impaired at least annually and requires anestimate of the use value of the asset group to which goodwill is allocated. When estimating thevalue in use, the Company needs to estimate the future cash flow from the asset group, and at thesame time choose an appropriate discount rate to calculate the present value of the future cashflow.
5. Depreciation and amortization
After considering the residual value of the investment properties measured at cost model,fixed assets and Intangible assets, the Company depreciates and amortizes it according to thestraight-line method during the service life. The Company regularly reviews the service life todetermine the amount of depreciation and amortization expenses to be included in each reportingperiod. The service life is determined by the Company based on the previous experience of similarassets and the expected technical update. If the previous estimates change significantly, thedepreciation 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 Companyrecognizes deferred tax assets for all unutilized tax losses. This requires the Company'smanagement to use a lot of judgment to estimate the time and amount of future taxable profits,combined with tax planning strategies to determine the amount of deferred tax assets that shouldbe recognised.
7. Income tax
In the normal business activities of the Company, there are certain uncertainties in the final taxtreatment and calculation of some transactions. Whether certain items can be paid before taxesrequires the approval of the tax authorities. If the final determination result of these tax matters isdifferent from the originally estimated amount, the difference will have an impact on the currentincome tax and deferred income tax during the final determination period.
8. Provision for liability
Provisions for liability are recognized when the Company has a present obligation as a resultof contingencies such as provision of external guarantee, litigation, product quality warranty, andloss-making contract, and it is very likely that an outflow of economic benefits will be resulted fromsettlement of the obligation, and a reliable estimate of the amount of the obligation can be made.The recognition and measurement of provisions for liability largely depend on the management’sjudgement. In the process of making judgments, the Company needs to evaluate factors such asrisks, uncertainties and time value of money related to these contingencies.
9. Fair value measurement
Certain assets and liabilities of the Company are measured at fair value in the financialstatements. When estimating the fair value of an asset or liability, the Company uses theobservable market data available; if the Level 1 input value is not available, a third-party qualifiedassessment agency is employed for valuation. The Company's management works closely with itto determine the appropriate valuation techniques and input values for related models. Relevantinformation about the valuation techniques and input values used in the process of determiningthe fair value of various assets and liabilities are disclosed in this note.44. Changes in significant accounting policies and accounting estimates(1). Changes in significant accounting policies
Other note
Unless otherwise specified, the figures as shown in this section are in RMB.
1．Changes in significant accounting policies
(1) The Ministry of Finance issued the "Interpretation No. 15 of Accounting Standards forBusiness Enterprises" (Cai Kuai [2021] No. 35, hereinafter referred to as "Interpretation No. 15") on30 December 2021. From January 1, 2022, the company will implement the "AccountingTreatment for External Sales of Products or By-products Produced by Enterprises Before TheirFixed Assets Are Ready for Use or During the Research and Development Process" and"Judgment on Onerous Contracts" .
1) Regarding the accounting treatment of enterprises selling products or by-productsproduced before the fixed assets reach the intended usable state or during the research anddevelopment process (hereinafter collectively referred to as trial operation sales), according toInterpretation No. 15, the revenue and costs related to trial operation sales should be accountedfor separately in accordance with the "Accounting Standards for Business Enterprises No. 14 -Revenue" and "Accounting Standards for Business Enterprises No. 1 - Inventory" and included inthe current profit and loss, the net amount after offsetting relevant costs from sales related to trialoperation shall not be used to offset fixed asset costs or R&D expenditures. Before the relevantproducts or by-products produced in the trial operation are sold externally, those that meet therequirements of the Accounting Standards for Business Enterprises No. 1 - Inventory should berecognized as inventories, and those that meet the relevant asset recognition conditions in otherrelevant accounting standards for business enterprises should be recognized as related assets .From 1 January 2022, the Company adopted Interpretation No. 15 " Accounting Treatment forExternal Sales of Products or By-products Produced by Enterprises Before Their Fixed AssetsAre Ready for Use or During the Research and Development Process". The implementation of thisinterpretation for the first time has no significant impact on the financial statements between thebeginning of the earliest period in which financial statements are presented and theimplementation date of this interpretation.
2) Regarding the judgment of onerous contracts, Interpretation No. 15 stipulates that "coststhat will inevitably occur in fulfilling contractual obligations" are the lower of the cost of fulfilling thecontract and the compensation or penalty for failure to perform the contract. The cost for theCompany to fulfill the contract includes the incremental cost of performing the contract and theallocated amount of other costs directly related to the performance of the contract, of which, theincremental cost of performing the contract includes direct labor, direct materials, etc.; theapportioned amount of other costs directly related to the performance of the contract includesthe apportioned amount of depreciation expenses of fixed assets used to perform the contract,etc. From 1 January 2022, the Company implemented the provisions of "judgment on onerouscontracts" in Interpretation No. 15. The first implementation of this interpretation has no significantimpact on the financial statements between the beginning of the earliest period in which financialstatements are presented and the implementation date of this interpretation.(2) The Ministry of Finance issued the "Interpretation No. 16 of Accounting Standards forBusiness Enterprises" (Cai Kuai [2022] No. 31, hereinafter referred to as "Interpretation No. 16") on30 November 2022. From 30 November 2022, the Company implemented the "AccountingTreatment for Income Tax Effects of Dividends Related to Financial Instruments Classified asEquity Instruments by the Issuer" and "Accounting Treatment of Enterprises Changing Cash-settled Share-based Payments to Equity-settled Share-based Payments".1) Regarding the accounting treatment of the income tax impact of dividends related tofinancial instruments classified as equity instruments by the issuer, Interpretation No. 16 stipulatesthat for financial instruments classified as equity instruments by enterprises in accordance with the"Accounting Standards for Business Enterprises No. 37 - Presentation of Financial Instruments"and other regulations. If relevant dividend payments are deducted before corporate income tax inaccordance with the relevant provisions of the tax policy, the Company shall recognise the incometax impact related to the dividend when recognising the dividend payable. The Company shallinclude the income tax effect of dividends in the current profit and loss or owner's equity items(including other comprehensive income items) in a manner consistent with the accountingtreatment adopted for transactions or events that generated distributable profits in the past. From30 November 2022, the Company implemented the provisions of Interpretation No. 16"Accounting Treatment for Income Tax Effects of Dividends Related to Financial InstrumentsClassified as Equity Instruments by Issuers", and the first implementation of this interpretation hasno significant impact on financial statements.
2) Regarding the accounting treatment of the Company modifying cash-settled share-basedpayments to equity-settled share-based payments, Interpretation No. 16 stipulates that theCompany modify the terms and conditions of cash-settled share-based payment agreements, if itbecomes an equity-settled share-based payment, on the date of modification, the Company shallmeasure the equity-settled share-based payment according to the fair value on the day when theequity instrument is granted; if it becomes an equity-settled share-based payment, on the date ofmodification, the Company shall measure the equity-settled share-based payment according tothe fair value of the equity instrument granted on the date, and recognise the services obtained inthe capital reserve, simultaneously, derecognize the liabilities recognized on the modification dateof the cash-settled share-based payment, and the difference between the two shall be included inthe current profit and loss. Since 30 November 2022, the Company implemented the provisions ofInterpretation No. 16 "Accounting Treatment for Companies Changing Cash-settled Share-basedPayments to Equity-settled Share-Based Payments", which was the first time that thisinterpretation is the first to present financial statements. There is no significant impact on thefinancial statements between the beginning of the period and the implementation date of theinterpretation.
(2). Changes in significant accounting estimates
(3). Initial adoption of new accounting standards or standard interpretations effective in 2022
that will involve adjustments to the financial statements at the beginning of the year of
adoption
45. Others
VI. Taxation
1. Major taxes and their tax rates
Major taxes and their tax rates
Taxes Tax basis Tax rate %
Value-added tax Value-added generated Calculated and paid according to
during the sale of goods or tax rates of 3%, 5%, 6%, 9%, and
provision of taxable services 13%. The export goods implement
the tax policy of "exemption,
credit and refund", and the tax
refund rate is 13%.
Consumption tax taxable sales volume Gasoline: 1.52 yuan/liter
Fuel oil: 1.20 yuan / liter
Diesel: 1.20 yuan / liter
Light cycle oil: 1.52 yuan/liter
Aviation kerosene: 1.20 yuan / liter
(deferred collection)
Naphtha: 1.52 yuan/liter
Urban maintenance and Turnover tax payable 7%, 5%, etc.
construction tax
Education surcharge Turnover tax payable 3%
Local education Turnover tax payable 2%
surcharges
Enterprise income tax Subject to taxable profit Refer to table below
If there are taxpayers with different corporate income tax rates, the disclosure information as inbelow
Entity Income tax rate(%)
Jiangsu Hengli Chemical Fiber Co., Ltd. 15%
Jiangsu Hengke Advanced Materials Co. Ltd. 15%
Jiangsu Deli Chemical Fiber Co., Ltd. 15%
Suqian Deya New Materials Co., Ltd. 20%
Suzhou Hengli Chemical New Material Co., Ltd. 20%
Suzhou Binglin Trading Co., Ltd. 20%
Kanghui New Material Technology Co., Ltd. 15%
Suqian Kanghui New Material Co., Ltd. 20%
Shenzhen Ganghui Trading Co., Ltd. 20%
Hengli Logistics (Dalian) Co., Ltd. 20%
Hengli Petrochemical (Hainan) Co., Ltd. 15%
Hengli Energy (Hainan) Co., Ltd. 15%
Suzhou Hengli Energy Chemical Import & Export 20%
Co., Ltd.
Hengli Aviation Oil Co., Ltd. 20%
Hengli Energy (Jiangsu) Co., Ltd. 20%
Hengli Logistics (Dalian) Co., Ltd. 20%
Dalian Hengzhong Special Materials Co., Ltd. 20%
Suzhou Qianliyan Logistics Technology Co., Ltd. 20%
Suzhou Textile Group Network E-commerce Co., 20%
Ltd.
Suzhou Plastic Group Network E-commerce Co., 20%
Ltd.
Hengli Energy Sales Rudong Co., Ltd. 20%
Hengli Chemical (Suqian) Co., Ltd. 20%
Hengli Oil (Suqian) Co., Ltd. 20%
Hengli Petrochemical Sales (Jiangsu) Co., Ltd. 20%
Hengli Petrochemical Sales (Shanghai) Co., Ltd. 20%
Hengli Tongshang New Energy Co., Ltd. 20%
Hengli Energy Import and Export Co., Ltd. 20%
Hengli New Energy (Shanghai) Co., Ltd. 20%
Hengli Yuanshang Technology (Suzhou) Co., Ltd. 20%
Suzhou Hengli Jinshang Energy Technology Co., 20%
Ltd.
Hengli Petrochemical Sales (Haikou) Co., Ltd. 20%
Hengli Energy Chemical (Sanya) Co., Ltd. 15%
Dalian Henglixing Gemstone Chemical Trading Co., 20%
Ltd.
Dalian Hengli Gaoyuan Sales Co., Ltd. 20%
Hengli Energy Chemical (Shenzhen) Co., Ltd. 20%
Nantong Hengli Maoyuan Petrochemical Trading 20%
Co., Ltd.
Suzhou Hengli New Energy Sales Co., Ltd. 20%
Suzhou Hengli Fine Chemical Sales Co., Ltd. 20%
Hengli Petrochemical Sales (Shenzhen) Co., Ltd. 20%
HENGLI PETROCHEMICAL CO., LIMITED 16.5%
HENGLI PETROCHEMICAL INTERNATIONAL PTE. 5%
LTD.
HENGLI OILCHEM PTE. LTD. 10%
HENGLI SHIPPING INTERNATIONAL PTE. LTD. 0%
Others taxpayers other than the above 25%
2. Tax incentive
1．Consumption tax incentive
According to “Notice on Continuing the Implementation of Part of the Consumption TaxPolicy for Naphtha Fuel Oil” (Cai Shui [2011] No. 87) issued by the Ministry of Finance, the People'sBank of China and the State Administration of Taxation, "Notice on Improving the ConsumptionTax Rebate Policy for the Production of Vinyl Aromatic Chemical Products from Naphtha Fuel Oil"(Cai Shui [2013] No. 2) issued by Ministry of Finance, People's Bank of China, GeneralAdministration of Customs and State Administration of Taxation, "Interim Measures forConsumption Tax Refund (Exemption) for Naphtha and Fuel Oil Used in the Production of Ethyleneand Aromatic Chemical Products" (Announcement of the State Administration of Taxation [2012]No. 36) issued by the State Administration of Taxation, and "Announcement on Consumption TaxRefund of Naphtha Fuel Oil Production of Vinyl Aromatic Chemical Products" (Announcement No.29 [2013] of the State Administration of Taxation and the General Administration of Customs)issued by State Administration of Taxation and General Administration of Customs, productionenterprises that implement the fixed-point direct supply plan, sell naphtha and fuel oil within theplanned quantity limit, and issue a special invoice for the value-added tax of the Chinese characteranti-counterfeiting version with the "DDZG" logo, are exempt from consumption tax. HengliPetrochemical (Dalian) Refining Co., Ltd. is eligible for tax rebate and enjoys the preferential policyof consumption tax rebate paid for the procurement process. At the same time, theimplementation of the fixed-point direct supply plan meets the above conditions and enjoys thepreferential policy of exempting consumption tax from the sales process.
According to the "Notice on Continuing to Increase Consumption Tax of Refined Oils" (CaiShui [2015] No. 11) issued by the Ministry of Finance and the State Administration of Taxation,consumption tax for diesel, aviation kerosene and fuel oil has been increased from RMB 1.1 per literto RMB 1.2 per liter, and aviation kerosene continued to suspend the collection of consumption tax.Hengli Petrochemical (Dalian) Refining Co., Ltd. enjoys the preferential policy of suspending thecollection of consumption tax for the sale of aviation kerosene.
2. Enterprise income tax incentive to high-tech enterprises
Jiangsu Hengli Chemical Fiber Co., Ltd. obtained the "High-tech Enterprise Certificate" (No.:GR202132007328) issued by Jiangsu Provincial Department of Science and Technology, JiangsuProvincial Department of Finance, and Jiangsu Provincial Taxation Bureau of the StateAdministration of Taxation on 30 November 2021. The validity period is three years, and theenterprise income tax rate for the current year is calculated at a reduced rate of 15%.
Jiangsu Hengke Advanced Materials Co. Ltd. obtained the "High-tech Enterprise Certificate"(No.: GR202232005286) issued by the Jiangsu Provincial Department of Science andTechnology, the Jiangsu Provincial Department of Finance, and the Jiangsu Provincial TaxationBureau of the State Administration of Taxation on 22 November 2022. The validity period is threeyears, and the enterprise income tax rate for the current year is calculated at a reduced rate of15%.
Jiangsu Deli Chemical Fiber Co., Ltd. obtained the "High-tech Enterprise Certificate" (No.:GR202032006951) issued by the Jiangsu Provincial Department of Science and Technology, theJiangsu Provincial Department of Finance, and the Jiangsu Provincial Taxation Bureau of the StateAdministration of Taxation on 2 December 2020. The validity period is three years, and theenterprise income tax rate for the current year is calculated at a reduced rate of 15%.
Kanghui New Material Technology Co., Ltd. obtained the "High-tech Enterprise Certificate"(No.: GR202121000541) issued by the Liaoning Provincial Department of Science and Technology,the Liaoning Provincial Department of Finance, and the Liaoning Provincial Taxation Bureau of theState Administration of Taxation on 24 September 2021. The validity period is three years, and theenterprise income tax rate for the current year is calculated at a reduced rate of 15%.
3．Enterprise income tax incentive to small and low-profit enterprises
Suqian Deya New Materials Co., Ltd. and other 32 companies meet the identificationstandards of small low-profit enterprises. The part of the taxable profit not exceeding 1 millionyuan shall be included in the taxable profit at a reduced rate of 12.5%, and the enterprise incometax shall be paid at a tax rate of 20%; The part of the taxable profit exceeding 1 million yuan but notexceeding 3 million yuan shall be included in the taxable profit at a reduced rate of 25%, and theenterprise income tax shall be paid at a rate of 20%.
4．Other enterprise income tax incentive
HENGLI PETROCHEMICAL INTERNATIONAL PTE. LTD. is registered in Singapore, and theincome tax rate is 17%. It was approved to enter the Singapore Global Trader Project on 1September 2018, and enjoys a 5% income tax rate this year.
HENGLI OILCHEM PTE. LTD. is registered in Singapore, and the income tax rate is 17%. It wasapproved to enter the Singapore Global Trader Project on 1 May 2020, and enjoys a 10% incometax rate this year.
HENGLI SHIPPING INTERNATIONAL PTE. LTD. is registered in Singapore, and the incometax rate is 17%. It received a tax incentive called Maritime Sector Incentive (MSI) on 22 January2020, and enjoys a 0% income tax rate for this year.
Hengli Petrochemical (Hainan) Co., Ltd., Hengli Energy (Hainan) Co., Ltd. and Hengli EnergyChemical (Sanya) Co., Ltd. are encouraged industrial enterprises registered and operating inHainan Free Trade Port. According to the "Notice of the Ministry of Finance and the StateAdministration of Taxation on the Preferential Policies for Enterprise Income Tax in Hainan FreeTrade Port" (Cai Shui [2020] No. 31), the enterprise income tax is levied at a reduced tax rate of15% this year.
3. Others
VII. Notes to the items of consolidated financial statements
1. Cash and bank balances
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Cash on hand 1,305,525.78 635,936.65
Cash at bank 19,815,265,793.15 9,204,580,349.21
Other monetary 8,256,950,806.64 6,780,785,866.66
funds
Interest receivables 2,883,754.27 50,741.96
not yet due
Total 28,076,405,879.84 15,986,052,894.48
Including: Total 6,512,853,828.05 3,150,653,685.97
amount of money
deposited abroad
Deposit in financial
company
Other note:
As of 31 December 2022, the Company's time deposits with financial institutions wereRMB858,620,000.00Yuan(31 December 2021: RMB169,900,000.00Yuan)
1．Detailed information of other monetary funds
Item Closing balance Beginning balance
Security deposits of 3,838,471,603.38 3,284,936,253.11
borrowings
Security deposits of 506,369,384.04 853,986,549.44
acceptance bills
Deposits for letter of credit 2,414,021,116.76 1,902,558,705.91
Deposits for letter of 150,000.00 150,000.00
guarantee
Security deposits of open 2,000,000.00 33,622,047.40
interest futures trading
Security deposits of forward 10,586,192.00 31,699,719.91
foreign exchange contract
Deposit investment funds 1,485,313,708.89 673,166,428.88
Others 38,801.57 666,162.01
Total 8,256,950,806.64 6,780,785,866.66
2．For the cash and bank balances used for mortgage security at the end of the period,please refer to the description of “Ownership or using rights of assets subject to restriction” in thisnote.
3．For details of cash and bank balances in foreign currency, please refer to the descriptionof “Items in foreign currencies” in this note.
2. Financial assets held for trading
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Financial assets at fair value through 604,414,444.44 814,371,626.26
profit or loss
Including:
Derivative financial assets 490,430,590.59 696,433,139.56
Debt instruments investment 2,000,000.00
Wealth management products 65,000,000.00 20,000,000.00and structured deposits
Fund trust and asset 46,983,853.85 97,938,486.70management products
Financial assets designated at fair
value through profit or loss
Including:
Total 604,414,444.44 814,371,626.26Other note:
3. Derivative financial assets
4. Notes receivable
(1). Notes receivable by category
(2). Notes receivable pledged by the company at the end of the period(3). At the end of the period, the company has endorsed or discounted notes receivable on the
Balance sheet date Not yet expiry
(4). At the end of the period, the company transferred the notes to accounts receivable due(5). Disclosure by method of provision for bad debts
(6). Provision for bad debts
(7). Notes receivable actually written off in this period
5. Accounts receivable
(1). Disclosure by ageing
Unit: Yuan Currency: RMB
Ageing Book balance at year endWithin one year
Including: Within one year
Within one year 385,851,852.51
Subtotal of within one year 385,851,852.51
1 to 2 years 2,206,917.74
2 to 3 years 178.30
Over 3 years
3 to 4 years 43.09
4 to 5 years 1,398,627.09
Over 5 years 1,935,251.49
Less: Provision for bad debts 18,946,943.53
Total 372,445,926.69(2). Disclosure by method of provision for bad debts
Unit: Yuan Currency: RMB
Cate Closing balance Beginning balance
gory
Provision for Carryin Provision for Carrying
Book balance bad debts g Book balance bad debts amount
amount
Rat Prov Rat Prov
Amoun io Amoun ision Amount io Amoun ision
t (%) t ratio (%) t ratio
(%) (%)
Prov
ision
for
bad
debt
s on
indiv
idual
basi
s
Including:
Prov 391,392 10 18,946, 4.84 372,445 2,666,59 10 22,749, 0.85 2,643,8
ision ,870.22 0.0 943.53 ,926.69 3,358.75 0.0 987.24 43,371.5
for 0 0 1
bad
debt
s on
port
folio
basi
s
Including:
Tota 391,392 10 18,946, 4.84 372,445 2,666,59 10 22,749, 0.85 2,643,8
l ,870.22 0.0 943.53 ,926.69 3,358.75 0.0 987.24 43,371.5
0 0 1Provision for bad debts on individual basis:
Provision for bad debts on portfolio basis:
Provision for bad debts on portfolio basis: Ageing analysis portfolio, High credit rating portfolio
Unit: Yuan Currency: RMB
Name Closing balance
Accounts receivable Provision for bad Provision ratio (%)
debts
Ageing analysis 314,567,038.04 18,946,943.53 6.02
portfolio
High credit rating 76,825,832.18
portfolio
Total 391,392,870.22 18,946,943.53 4.84Confirmation criteria and notes for bad debt provision by portfolio:Provision for bad debts by ageing portfolio is as below:
Ageing Book balance Provision for bad Provision ratio (%)
debts
Within one year 309,026,020.33 15,451,301.03 5.00
1-2 years 2,206,917.74 441,383.54 20.00
2-3 years 178.30 71.32 40.00
3-4 years 43.09 34.47 80.00
4-5 years 1,398,627.09 1,118,901.68 80.00
Over 5 years 1,935,251.49 1,935,251.49 100.00
Subtotal 314,567,038.04 18,946,943.53 6.02
If according to the expected credit loss general model to accrual provision for bad debts, pleaserefer to other receivables disclosure:
(3). Provision for bad debts
Unit: Yuan Currency: RMB
Categor Beginning Movement in the year Closing
y balance balance
Recover Transfe Other
Accrual y or r or movemen
reversal written- t
off
Provision - - - - - -
for bad
debts on
individua
l basis
Provision 22,749,987.2 - - - - 18,946,943.5
for bad 4 3,803,043.7 3
debts on 1
portfolio
basis
Total 22,749,987.2 - 18,946,943.5
4 3,803,043.7 - - - 3
1
Including significant amount of recovery or reversal of provision for bad debts:(4). Accounts receivable written-off during the year
(5). Accounts receivable due from the top five debtors
The Company’s top five year-end balances for accounts receivable in total ofRMB126,589,006.01, accounting for 32.34% of the total account balance of year-end balances ofaccounts receivable, and the corresponding year-end balance of provision for bad debts isRMB4,853,495.97.
Other note
None
(6). Accounts receivable derecognized due to transfer of financial assets(7). Transferred accounts receivable and continuing involvement in the formation of assets
and liabilities
Other note:
For details of accounts receivable in foreign currency at year end, please refer to the “Items inforeign currencies” in this note.
6. Receivables financing
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Bank acceptance bills 2,168,347,608.90 2,248,764,266.83
Letter of credit 118,923,620.36 1,137,793,441.20
Letter of guarantee - 33,400,000.00
Total 2,287,271,229.26 3,419,957,708.03Changes and fair value changes of receivables financing:
Change in cost in Changes in
Item Beginning balance current period Fair value Closing balance
for the year
Bank 2,248,764,266.83
acceptance -80,416,657.93 - 2,168,347,608.90
bills
Letter of credit 1,137,793,441.20 -1,018,869,820.84 - 118,923,620.36
Letter of 33,400,000.00 -33,400,000.00 -
guarantee
Total 3,419,957,708.03 -1,132,686,478.77 - 2,287,271,229.26
Continued
Accumulated
Cumulative loss allowance
Item Cost in beginning Cost at year end fair value recognized in
of year change other
comprehensive
income
Bank 2,248,764,266.83 2,168,347,608.90 - -
acceptance bills
Letter of credit 1,137,793,441.20 118,923,620.36 - -
Letter of 33,400,000.00 - - -
guarantee
Total 3,419,957,708.03 2,287,271,229.26 - -
If according to the expected credit loss general model to accrual provision for bad debts, pleaserefer to other receivables disclosure:
Other note:
1.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 end
Portfolio Book balance Provision for bad Provision ratio (%)
debts
Low risk group 2,287,271,229.26 - -
(3) No loss allowance for significant changes in book balance in the year.2. Pledged receivables financing at year end
Item Amount pledged at year end
Bank acceptance bills 1,469,571,971.78
3. Receivables financing that the Company has endorsed or discounted at the end of the periodand has not yet expired on the balance sheet date
Item Amount derecognized at year Amount not derecognized at
end year end
Bank acceptance bills 4,843,064,345.95 -
Letter of credit 521,156,000.00 -
Subtotal 5,364,220,345.95 -
4. For details of receivables financing in foreign currency at year end, please refer to the “Items inforeign currencies” in this note.
7. Prepayments
(1). Prepayments by ageing
Unit: Yuan Currency: RMB
Ageing Closing balance Beginning balance
Amount Ratio (%) Amount Ratio (%)
Within one 1,995,497,560.96 99.90 2,635,510,708.10 99.95
year
1 to 2 years 914,039.58 0.05 318,885.92 0.01
2 to 3 years 60,900.00 0.00 278,320.00 0.01
Over 3 996,320.00 0.05 808,000.00 0.03
years
Total 1,997,468,820.54 100.00 2,636,915,914.02 100.00Note to significant prepayment was ageing over 1 year but not settled:
At the end of the period, there was no significant prepayments with aging over 1 year.(2). Prepayments due from the top five debtors
The top five of the Company's prepayments balance at year end is in total ofRMB1,289,825,771.47, which accounted for 64.57% of the prepayments balance.Other note
At the end of the period, there was no obvious indication of impairment in prepayments, sothere was no provision for impairment.
8. Other receivables
Presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balanceInterest receivable
Dividends receivable
Other receivables 701,520,929.51 851,677,558.80
Total 701,520,929.51 851,677,558.80
Other receivables
(1). Disclosure by ageing
Unit: Yuan Currency: RMB
Ageing Book balance at year endWithin one year
Including: Within one year
Within a year 165,840,417.30
Subtotal of within one year 165,840,417.30
1 to 2 years 5,246,567.23
2 to 3 years 549,209,336.49
Over 3 years
3 to 4 years 162,125.09
4 to 5 years 61,949.45
Over 5 years 969,186.65
Less: Provision for bad debts 19,968,652.70
Total 701,520,929.51(2). Disclosure by nature
Unit: Yuan Currency: RMB
Nature Book balance at year end Book balance in beginning of
year
Deposits and security deposits 173,905,111.33 237,254,235.39
Petty cash 214,479.92 213,364.13
Tax refund receivable 525,512,156.24 598,905,847.00
Others 21,857,834.72 29,095,915.15
Less: Provision for bad debts -19,968,652.70 -13,791,802.87
Total 701,520,929.51 851,677,558.80
(3). Information of provision for bad debts
Unit: Yuan Currency: RMB
Provision for bad First stage Second stage Third stage Total
debts
Expected Expected credit Expected credit
credit loss loss for lifetime (no loss for lifetime
within next 12 credit impairment (credit impairment
months occurred) has occurred)
Balance of 1 13,791,802.87 13,791,802.87
January 2022
Balance of 1
January 2022
movement in the
year
--transfer to
second stage
--transfer to third
stage
--Reverse to
second stage
--Reverse to first
stage
Provision for the 6,176,849.83 6,176,849.83
year
Reversal in the
year
Transfer in the
year
Write-off in the
year
Other movement
Balance of 31 19,968,652.70 19,968,652.70
December 2022
Basis for accruing bad debt provision for the current period and assessing whether the credit riskof financial instruments has increased significantly:
The basis, input values, assumptions and other information used to determine the provision forbad debts amount and the assessment of whether the credit risk of financial instruments haveincreased significantly since initial confirmation are detailed in the note “Credit Risk”.(4). Provision for bad debts
Unit: Yuan Currency: RMB
Category Beginning Movement in the year Closing
balance balance
Recovery Transfer
Accrual or or Other
reversal written- movement
off
Provision - - - - - -
for bad
debts on
individual
basis
Provision 13,791,802.87 6,176,849.83 - - - 19,968,652.70
for bad
debts on
portfolio
basis
Total 13,791,802.87 6,176,849.83 - - - 19,968,652.70(5). Other receivables due from the top five debtors
The Company’s top five year-end balances of other receivables in total is RMB634,664,760.92,accounting for 87.97% of the total year end balance of other receivables, and the correspondingyear-end balance of provision for bad debts is RMB13,595,130.23.Other note:
For details of other receivables in foreign currency at year end, please refer to the “Items inforeign currencies” in this note.
9. Inventories
(1). Inventories by category
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Provision
Provision for
for decline decline in
in value of value of
inventories inventori
Book / Provision Carrying Book es/ Carrying
balance for amount balance Provision amount
impairmen for
t of impairme
contract nt of
performan contract
ce cost performa
nce cost
Raw 26,646,539, 2,049,373, 24,597,166, 25,739,253, 111,617,39 25,627,635,
materials 686.49 134.60 551.89 039.78 2.02 647.76
Work-in-
progress
Semi- 4,966,032,3 498,854,4 4,467,177,8 2,374,291,0 3,423,93 2,370,867,1
finished 63.76 88.20 75.56 80.05 7.57 42.48
goods
Finished 8,981,114,63 580,505,2 8,400,609, 5,411,106,72 39,621,21 5,371,485,5
goods 6.21 07.54 428.67 6.16 6.92 09.24
Issued 17,047,100.8 - 17,047,100. 125,115,810. 125,115,810.
goods 9 89 39 39
Subcontr 323,903,773 - 323,903,77
acting .78 3.78
processin
g
materials
Reusable 29,606,740. - 29,606,740 57,898,691. 57,898,691.
materials 62 .62 52 52
Consump
tive
biological
assets
Contract
performa
nce cost
Total 40,964,244, 3,128,732,8 37,835,511, 33,707,665, 154,662,5 33,553,002,
301.75 30.34 471.41 347.90 46.51 801.39[Note] At the end of the period, the carrying amount of inventories subject to restriction is nil.(2). Provision for decline in value of inventories and provision for impairment of contract
performance cost
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing
balance balance
Reversal
Accrual Others or written- Others
off
Raw materials 111,617,39 2,049,373 - 111,617,39 - 2,049,373
2.02 ,134.60 2.02 ,134.60Work-in-progress
Finished goods 39,621,21 580,505,2 - 39,621,21 - 580,505,
6.92 07.54 6.92 207.54Reusable
materials
Consumptive
biological assets
Contract
performance cost
Semi-finished 3,423,937 498,854,4 - 3,423,937. - 498,854,
goods .57 88.20 57 488.20
Issued goods
Total 154,662,5 3,128,732, - 154,662,5 - 3,128,732,
46.51 830.34 46.51 830.34Other note
Category Specific basis for Reasons for reversal Reversal amount in
determining net of provision for proportion to closing
realizable value decline in value of balance of inventories
inventories and (%)
impairment of
contract performance
cost
Raw materials The estimated selling - -
price of the product
produced minus the
estimated cost to
completion,
estimated selling
expenses and related
custom duty
Finished goods Estimated selling - -
price minus estimated
selling expenses and
related custom duty
Semi-finished goods The estimated selling - -
price of the product
produced minus the
estimated cost to
completion,
estimated selling
expenses and related
custom duty
10. Contract assets
(1). Information of contract assets
(2). The amount and reasons for major changes in the carrying amount during the reporting
period
(3). Provision for impairment of Contract assets in the period
11. Assets held-for-sale
12. Non-current assets due within one year
13. Other current assets
Unit: Yuan Currency: RMB
Item Closing balance Beginning balanceCosts of obtaining a contract
Receivables of returned goods
VAT carry forward 1,751,009,054.30 4,850,572,181.85
Value-added tax input tax 114,550,349.25 34,361,762.28
pending for verification
Prepaid enterprise income tax 1,784,931,735.30 -
Receivable settlement guarantee 10,049,607.23 10,049,607.08
Receivable of monetary security 702,583,473.71 132,788,646.40
deposits
Receivable of pledged security 88,252,384.00 81,457,112.00
deposits
Treasury bond reverse 17,349,000.00 164,989,986.24
repurchase
Others 999.61
Total 4,468,726,603.40 5,274,219,295.85Other note
At the end of the period, there were no obvious indication of impairment of other currentassets, so no provision for impairment was provided.
14. Debts investment
(1). Information of debts investment
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Provision Carrying Book Provision Carrying
Book balance for amount balance for amount
impairment impairment
Corporate 20,427,397.26 - 20,427,397.26
bonds
Total 20,427,397.26 - 20,427,397.26
15. Other debt investments
16. Long-term receivables
17. Long-term equity investment
Unit: Yuan Currency: RMB
Closi
ng
balan
Begi Closi ce of
Invest nning Movement in the year ng provi
ee balan balan sion
ce ce for
impai
rmen
t
Invest
ment Adju Anno
inco stme unce
Dec me/lo nt of Cha d Provi
Addit reas ss othe nges distri sion
ional e in recog r of butio for Othe
inves inve nized com othe n of impai rs
tmen stm under preh r cash rmen
t ent the ensi equit divid t
equit ve y end
y inco or
meth me profit
od
I. Joint ventures
Subto
tal
II. Associates
Wuxi 559,2 559,2
Xisha 15,49 15,49
ng 3.16 3.16
Bank
Co.,
Ltd.
Subto 559,2 559,2
tal 15,49 15,49
3.16 3.16
559,2 559,2
Total 15,49 15,49
3.16 3.16Other note
At the end of the period, there was no obvious sign of impairment of long-term equityinvestment, so no Provision for impairment.
18. Other equity instruments investment
(1). Information of other equity instruments investment
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Wuxi Xishang Bank Co., Ltd. - 199,800,000.00
Total 199,800,000.00(2). Information of non-trading equity instruments investmentOther note:
The Company's subsidiary, Jiangsu Hengke Advanced Materials Co. Ltd. acquired by openbidding the share capital of RMB280 million of Wuxi Xishang Bank Co., Ltd. pledged by the executorJiangyin Chengxing Industrial Group Co., Ltd. from Nonexi City Intermediate People's Court ofJiangsu Province at a price of RMB280 million. On 29 December 2022, Jiangsu Hengke AdvancedMaterials Co. Ltd. obtained the shareholding confirmation certificate of Wuxi Equity Registrationand Custody Center Company, and its shareholding in Wuxi Xishang Bank Co., Ltd. increased from9.99% to 23.99%, and has significant influence in Wuxi Xishang Bank Co., Ltd.. It is reclassified aslong-term equity investment, and is accounted for using the equity method.
19. Other non-current financial assets
20. Investment properties
Investment properties measurement model
(1). Investment properties measured at cost model
Unit: Yuan Currency: RMB
Item Housing and Land use Construction Total
buildings rights in progress
I. Book value
1.Beginning balance 177,216,482.55 35,150,693.56 212,367,176.11
2.Increase 7,499,992.32 - 7,499,992.32
(1)Purchase
(2)Inventories\Fixed 7,499,992.32 7,499,992.32assets\Transfer from
construction in progress
(3)Addition by
business combination
3.Decrease 5,627,251.52 352,968.00 5,980,219.52
(1)Disposal
(2)Other decrease 5,627,251.52 352,968.00 5,980,219.52
4.Closing balance 179,089,223.35 34,797,725.56 213,886,948.91II. Accumulated depreciation and amortisation
1.Beginning balance 35,642,068.44 6,193,787.27 41,835,855.71
2.Increase 8,599,199.90 695,954.71 9,295,154.61
(1)Amortisation for the 7,800,460.68 695,954.71 8,496,415.39year
(2)Inventories/Fixed 798,739.22 - 798,739.22assets/Transfer from
construction in progress
3.Decrease 1,443,515.77 72,358.44 1,515,874.21
(1)Disposal
(2)Other decrease 1,443,515.77 72,358.44 1,515,874.21
4.Closing balance 42,797,752.57 6,817,383.54 49,615,136.11III. Provision for impairment
1.Beginning balance
2.Increase
(1) Provision
3.Decrease
(1)Disposal
(2)Other decrease
4.Closing balance
IV. Carrying amount
1.Carrying value at year 136,291,470.78 27,980,342.02 164,271,812.80end
2.Carrying value at 141,574,414.11 28,956,906.29 170,531,320.40beginning of year
(2). Information of investment properties without property certificate
Unit: Yuan Currency: RMB
Item Carrying amount Reasons for pending title
certificate
Housing and buildings 36,566,870.88 Still in application process
Other note
1．At the end of the period, there were no obvious indication of impairment of investmentproperties, so no provision for impairment was provided.2．At the end of the period, there was no investment properties used for guarantee.
21. Fixed assets
Presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Fixed assets 118,718,591,050.99 122,731,048,012.02
Fixed assets for disposal
Total 118,718,591,050.99 122,731,048,012.02Fixed assets
(1). Details of fixed assets
Unit: Yuan Currency: RMB
Machi
Housing nery Special Transpo General
Item and and equipment rtation equipm Ship Total
buildings equip tools ent
ment
I. Book value:
1.Begi 30,105,873 121,814,471, 480,321, 487,621, 559,634, 153,447,92
nning ,780.82 109.90 108.03 826.53 194.27 2,019.55
balance
2.Incr 2,981,269, 2,237,608, 22,269,0 78,450,4 5,319,597,
ease 234.58 834.50 06.78 91.10 566.96
(1)P 1,514,268,1 156,943,9 22,171,62 77,368,3 1,770,752,1
urchase 84.62 45.41 9.10 76.91 36.04
(2)
Transfer
from 1,467,001, 1,296,880, 2,763,881,
constructi 049.96 622.09 672.05
on in
progress
(3)
Addition
by
business
combinati
on
(4) 783,784,2 97,377.6 1,082,114 784,963,7
Others 67.00 8 .19 58.87
3.Dec 786,746.2 65,824,167 10,449,7 13,942,0 91,002,73
rease 0 .78 55.43 60.98 0.39
(1) 786,746.2 65,824,167 10,449,7 13,942,0 91,002,73
Disposal 0 .78 55.43 60.98 0.39
or scrap
(2)
Others
4.Clo 33,086,35 123,986,25 492,140, 552,130, 559,634, 158,676,51
sing 6,269.20 5,776.62 359.38 256.65 194.27 6,856.12
balance
II. Accumulated depreciation
1.Begi 5,604,020, 24,354,241 293,884, 347,108, 117,618,3 30,716,874
nning 520.55 ,746.33 913.38 499.18 28.09 ,007.53
balance
2.Incr 1,361,160,0 7,832,762, 54,611,4 50,367,5 17,192,43 9,316,093,
ease 05.51 493.33 24.93 37.12 6.22 897.11
(1) 1,361,160,0 7,112,139,4 54,537,8 49,831,9 17,192,43 8,594,861,
Provision 05.51 01.89 25.54 47.46 6.22 616.62
2)B
usiness
combinati
on
3) 720,623,0 73,599.3 535,589 721,232,28
Others 91.44 9 .66 0.49
3.Dec 131,138.03 52,866,25 9,558,98 12,485,7 75,042,09
rease 8.21 4.45 18.82 9.51
(1) 52,866,25 9,558,98 12,485,7 75,042,09
Disposal 131,138.03 8.21 4.45 18.82 9.51
or scrap
(2)
Others
4.Clo 6,965,049, 32,134,137, 338,937, 384,990 134,810,7 39,957,92
sing 388.03 981.45 353.86 ,317.48 64.31 5,805.13
balance
III. Provision for impairment
1.Begi
nning
balance
2.Incr
ease
(1)
Provision
3.Dec
rease
(1)
Disposal
or scrap
4.Clo
sing
balance
IV. Carrying amount
1.Carr
ying value 26,121,306, 91,852,117, 153,203, 167,139, 424,823, 118,718,591
at year 881.17 795.17 005.52 939.17 429.96 ,050.99
end
2.Car 24,501,85 97,460,22 186,436, 140,513, 442,015, 122,731,04
rying 3,260.27 9,363.57 194.65 327.35 866.18 8,012.02
value at
beginning
of year
[Note ] At the end of the period, fixed assets with cost of RMB7,606,692,807.57 had been fullydepreciated and still in use.
(2). Fixed assets with temporary idle
(3). Fixed assets held under finance leases
Unit: Yuan Currency: RMB
Item Book value Accumulated Provision for Carrying amount
depreciation impairment
Machinery and 460,861,113.27 201,878,121.46 - 258,982,991.81
equipment
General 292,252.96 258,890.89 - 33,362.07
equipment
Transportation 3,846,633.77 2,366,878.82 - 1,479,754.95
equipment
(4). Fixed assets held under finance leases
Unit: Yuan Currency: RMB
Item Carrying value at year end
Housing and buildings 4,193,707.67
(5). Fixed assets without property certificate
Unit: Yuan Currency: RMB
Item Carrying amount Reasons for not completing
the certificate of title
Housing and buildings 857,349,977.23 Still in application process
22. Construction in progress
Presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Construction in progress 25,624,425,938.86 7,237,988,378.63
Construction materials 1,663,065,560.22 544,865,218.57
Total 27,287,491,499.08 7,782,853,597.20Construction in progress
(1). Information of construction in progress
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
P P
ro ro
vi vi
si si
o o
n n
fo fo
Book balance r Carrying Book balance r Carrying amount
i amount i
m m
p p
ai ai
r r
m m
e e
nt nt
Annual 5,424,195,784.6 - 5,424,195,784. 1,333,014,615.1 - 1,333,014,615.12
output of 3 63 2
1.5 million
tons of
green
multi-
functional
textile new
materials
project
Annual 1,368,039,931.4 - 1,368,039,931. 2,867,985.23 - 2,867,985.23
output of 0 40
1.6 million
tons of
high-
performan
ce resin
and new
material
projects
250,000 572,374,214.47 - 572,374,214.47 427,789,851.7 - 427,789,851.74
tons of 4
simulated
deformed
fiber
technical
transform
ation
project
Annual 8,624,681,423.3 - 8,624,681,423. 2,848,836,293 - 2,848,836,293.2
output of 5 3 33 .22 2
million
tons of
PTA
project
Project 2,241,399,332.7 - 2,241,399,332. 236,665,897.3 - 236,665,897.37
with an 2 72 7
annual
output of
450,000
tons of
PBS
biodegrad
able
plastics
An annual 2,161,792,673.5 - 2,161,792,673. 1,642,327,636. - 1,642,327,636.8
output of 7 57 82 2
1.35 million
tons of
multi-
functional
high-
quality
textile new
material
project
High- 105,645,500.26 - 105,645,500.2 2,171,287.14 - 2,171,287.14
performan 6
ce
polyester
project
with an
annual
output of
2.6 million
tons
High- 1,219,769,581.3 - 1,219,769,581.3 95,947,933.40 - 95,947,933.40
performan 0 0
ce
industrial
yarn
project
with an
annual
output of
400,000
tons
Project 1,769,790,066.8 - 1,769,790,066. 176,825,999.2 - 176,825,999.27
with an 4 84 7
annual
output of
800,000
tons of
functional
polyester
film and
functional
plastics
Annual 157,195,108.43 - 157,195,108.43 - - -
productio
n of
600,000
tons of
functional
polyester
film,
functional
film and 3
billion
square
meters of
lithium
battery
diaphrag
m project
Other 1,979,542,321.91 - 1,979,542,321. 471,540,879.3 - 471,540,879.32
sundry 91 2
projects
25,624,425,938 - 25,624,425,93 7,237,988,378. 7,237,988,378.6
Total .86 8.86 63 3(2). Changes in significant construction in progress
Unit: Yuan Currency: RMB
Pr
o C
p a
or pi
ti ta
o li
n z
O of at S
t c io o
h u Cumul Includ n u
e m Pr ative ing: r r
B Beg Trans r Closi ul o amoun intere at c
ud inni Increas fer to d ng at gr t of st e e
Item ge ng e fixed e bala iv e interes capita f o
t bala asset c nce e ss t lised o f
nce s r in % capital in the r f
e p isation year th u
a ut e n
s to y d
e b e
u a
d r
g (
et %
( )
%
)
Annual 9. 1,333 5,072,4 981,2 - 5,42 6 Pr 261,85 259,0 4. S
output of 1.5 43 ,014, 67,657. 86,48 4,195 9. oj 9,470. 39,63 2 el
million tons bil 615.1 04 7.53 ,784. 2 e 07 6.73 3 f-
of green lio 2 63 4 ct fi
multi- n c n
functional o a
textile new n n
materials st ci
project ru n
ct g
io a
n n
s d
L
o
a
n
s
Annual 19. 2,86 1,365,1 - 1,368 6. Pr 2,152,7 2,152, 4. S
output of 1.6 9 7,98 71,946. ,039, 8 oj 50.00 750.0 5 el
million tons 9 5.23 17 931.4 4 e 0 0 f-
of high- bil 0 ct fi
performance lio c n
resin and n o a
new material n n
projects st ci
ru n
ct g
io a
n n
s d
L
o
a
n
s
250,000 1.6 427,7 174,46 29,87 - 572, 3 Pr - - - S
tons of 2 89,8 2,982.7 8,620 374, 7. oj el
simulated bil 51.74 3 .00 214.4 18 e f-
deformed lio 7 ct fi
fiber n c n
technical o a
transformati n n
on project st ci
ru n
ct g
io a
n n
s d
L
o
a
n
s
Annual 11. 2,84 5,775,8 - 8,62 7 Pr 102,02 96,72 4. S
output of 5 45 8,83 45,130. 4,681 5. oj 0,680. 1,491.7 5 el
million tons bil 6,29 11 ,423. 3 e 69 4 1 f-
of PTA lio 3.22 33 2 ct fi
project n c n
o a
n n
st ci
ru n
ct g
io a
n n
s d
L
o
a
n
s
Project with 2.1 236, 2,004,7 - 2,241 10 Tr 9,797, 9,797, 4. S
an annual 5 665, 33,435. ,399, 4. ial 456.91 456.9 0 el
output of bil 897. 35 332. 3 pr 1 5 f-
450,000 lio 37 72 5 o fi
tons of PBS n d n
biodegradab u a
le plastics ct n
io ci
n n
g
a
n
d
L
o
a
n
s
Annual 12. 1,642 945,12 423,4 2, 2,161, 6 Pr 4. S
output of 3 ,327, 6,713.9 31,175 2 792, 2. oj 8 el
1.35 million 0 636. 8 .69 3 673. 3 e 0 f-
tons of multi- bil 82 0, 57 3 ct fi
functional lio 5 c n
high-quality n 01 o a
textile new .5 n n
materials 4 st 532,47 103,4 ci
project ru 4,295. 50,115 n
ct 83 .58 g
io a
n n
s d
L
o
a
n
s
High- 4. 2,171, 103,47 - 105, 2. Pr - - - S
performance 0 287.1 4,213.1 645, 6 eli el
polyester 0 4 2 500. 4 m f-
project with bil 26 in fi
an annual lio ar n
output of 2.6 n y a
million tons pr n
e ci
p n
ar g
at a
io n
n d
L
o
a
n
s
High- 3. 95,9 1,159,51 35,69 - 1,219, 3 Pr 47,357 40,121 3. S
performance 20 47,9 2,911.8 1,263. 769, 9. oj ,637.4 ,713.3 5 el
industrial bil 33.4 5 95 581.3 2 e 6 6 0 f-
yarn project lio 0 0 3 ct fi
with an n c n
annual o a
output of n n
400,000 st ci
tons ru n
ct g
io a
n n
s d
L
o
a
n
s
Project with 11. 176,8 1,592,9 - - 1,769 15 Pr 27,59 26,36 3. S
an annual 13 25,9 64,067. ,790, .9 oj 6,505. 3,967. 8 el
output of bil 99.2 57 066. 9 e 86 46 2 f-
800,000 lio 7 84 ct fi
tons of n c n
functional o a
polyester n n
film and st ci
functional ru n
plastics ct g
io a
n n
s d
L
o
a
n
s
Annual 12. - 157,195 - - 157,1 1. Pr 413,33 413,3 3. S
production 4 ,108.43 95,1 2 oj 3.34 33.34 2 el
of 600,000 9 08.4 6 e 0 f-
tons of bil 3 ct fi
functional lio c n
polyester n o a
film, n n
functional st ci
film and 3 ru n
billion square ct g
meters of io a
lithium n n
battery s d
diaphragm L
project o
a
n
s
87 6,76 18,350, 1,470, 2, 23,6 / / 983,6 538,0 / /
.7 6,44 954,16 287,5 2 44,8 72,130. 60,46
6 7,49 6.35 47.17 3 83,61 16 5.12
Total bil 9.31 0, 6.95
lio 5
n 01
.5
4
(3). Provision for impairment of construction in progress
Other note
At the end of the period, there were no obvious indication of impairment of construction inprogress, so no provision for impairment was provided.
Construction materials
(4). Information of construction materials
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Provisio Provisio
Book balance n for Carrying Book n for Carrying
impairm amount balance impairm amount
ent ent
Special 1,662,714,399 1,662,714,399 544,478,391 544,478,391
material .07 .07 .92 .92
s
Special 351,161.15 351,161.15 386,826.65 386,826.65
equipm
ent
Total 1,663,065,56 1,663,065,56 544,865,21 544,865,21
0.22 0.22 8.57 8.57
23. Productive biological assets
24. Oil and gas assets
25. Right-of-use assets
Unit: Yuan Currency: RMB
Item Housing and Others Total
buildings
I. Book value
1.Beginning balance 148,127,517.54 148,127,517.54
2.Increase 23,989,063.18 7,106,282.50 31,095,345.68
Leases 20,057,982.66 7,106,282.50 27,164,265.16
Others 3,931,080.52 3,931,080.52
3.Decrease 10,343,208.09 10,343,208.09
Disposal 10,343,208.09 10,343,208.09
Others
4.Closing balance 161,773,372.63 7,106,282.50 168,879,655.13II. Accumulated
depreciation
1.Beginning balance 48,294,948.70 48,294,948.70
2.Increase 35,425,554.66 177,657.06 35,603,211.72
(1) Provision 32,765,006.79 177,657.06 32,942,663.85
(2)Others 2,660,547.86 2,660,547.87
3.Decrease 2,862,788.64 2,862,788.64
(1)Disposal 2,862,788.64 2,862,788.64
4.Closing balance 80,857,714.71 177,657.06 81,035,371.77III. Provision for impairment
1.Beginning balance
2.Increase
(1) Provision
3.Decrease
(1)Disposal
4.Closing balance
IV. Carrying amount
1.Carrying value at year 80,915,657.92 6,928,625.44 87,844,283.36end
2.Carrying value at 99,832,568.84 99,832,568.84beginning of year
26. Intangible assets
(1). Details of intangible assets
Unit: Yuan Currency: RMB
Pate Non-
Land use nt patent Non- Software
Item rights right ed patent usage rights Total
s techn technology
ology
I. Book value
1.Beginning 7,122,352,019 1,258,382, 185,405,037 8,566,139,126.
balance .05 069.76 .58 39
2.Increase 1,851,055,557 39,554,05 3,636,084.2 1,894,245,698
.63 7.00 5 .88
(1)Purch 1,850,702,58 39,554,05 3,561,293.9 1,893,817,940.
ase 9.63 7.00 5 58
(2)In-
house research
and
development
(3)Additi
on by business
combination
(4)Other 352,968.00 74,790.30 427,758.30s
3.Decrease 559,829.08 559,829.08
(1)Dispos 559,829.08 559,829.08al
4.Closing 8,973,407,57 1,297,936,1 188,481,292. 10,459,824,99
balance 6.68 26.76 75 6.19
II. Accumulated amortisation
1.Beginning 809,721,906. 346,783,3 67,901,507.7 1,224,406,740
balance 31 26.10 9 .20
2.Increase 164,346,629. 113,273,414 33,582,372. 311,202,416.73
67 .98 08
(1) 164,274,271.2 113,273,414 33,562,757. 311,110,443.78
Provision 3 .98 57
(2)Other 72,358.44 19,614.51 91,972.95s
3.Decrease 559,829.08 559,829.08
559,829.08 559,829.08
(1)Disposal
(2)Transf
er to Investment
properties
(3)Other
s
4.Closing 974,068,535. 460,056,7 100,924,050 1,535,049,327
balance 98 41.08 .79 .85
III. Provision for impairment
1.Beginning
balance
2.Increase
(1)
Provision
3.Decrease
(1)Dispos
al
4.Closing
balance
IV. Carrying amount
1.Carrying 7,999,339,04 837,879,38 87,557,241.9 8,924,775,668
value at year 0.70 5.68 6 .34
end
2.Carrying 6,312,630,112. 911,598,74 117,503,529. 7,341,732,386.
value at 74 3.66 79 19
beginning of
year
At the end of the period, the intangible assets formed through the Company's internal researchand development accounted for 0% of the balance of intangible assets.(2). Land use rights pending for ownership certificates
Other note:
1．At the end of the period, there were no obvious indication of impairment of intangible assets, sono provision for impairment was provided.
2．Intangible assets used for mortgage or guarantee at the end of the period, see thenote“Ownership or using rights of assets subject to restriction”.
27. Development costs
28. Goodwill
(1). Book value of goodwill
Unit: Yuan Currency: RMB
Investee or Beginning Closing
matters formed balance Increase Decrease balance
the goodwill
Formation
by
business Others Disposal Others
combinati
on
Hengli Futures 77,323,12 77,323,12
Co., Ltd. 3.69 3.69
Total 77,323,12 77,323,12
3.69 3.69(2). Provision for impairment of goodwill
(3). Information about goodwill's Assets group or Assets group Portfolio
Item Hengli Futures Co., Ltd.
Composition of assets group or assets group Assets related to the formation of goodwill by
Portfolio Hengli Futures Co., Ltd., including working
capital, debts investment, fixed assets,
intangible assets, long-term deferred
expenses, other non-current assets and
goodwill
Carrying amount of assets group or assets 667,957,452.17
group portfolio
Determination method of assets group or Hengli Futures Co., Ltd. is mainly engaged in
assets group portfolio futures brokerage business, and there is an
active market which can bring independent
cash flow and can be identified as a separate
assets group.
Whether the assets group or the assets group Yes
portfolio is consistent with the assets group or
the assets group portfolio determined on the
date of purchase and during the goodwill
impairment test of the previous year
(4). Note Goodwill impairment test process, key parameters (such as forecast period growth
rate, stable period growth rate, profit rate, discount rate, forecast period, etc., if applicable)
and confirmation of Impairment loss of goodwill method
(1) Goodwill impairment test situation:
Item Hengli Futures Co., Ltd.
Carrying amount of goodwill ① 77,323,123.69
Balance of provision for impairment of -
goodwill②
Carrying amount of goodwill ③＝①-② 77,323,123.69
Value of goodwill attributable to minority -
interests not recognised ④
Goodwill that not include the value attributable 77,323,123.69
to minority interests not recognised ⑤=④+③
Goodwill that not include the value attributable
to minority interests not recognized 77,323,123.69
apportioned to each assets group ⑥
Carrying amount of the assets group⑦ 590,634,328.48
Carrying amount of the Assets group that 667,957,452.17
contains the overall Goodwill ⑧=⑥+⑦
Recoverable amount of assets group or assets 695,650,000.00
group portfolio ⑨
Impairment loss of goodwill(⑩ is larger than -
zero)⑩=⑧-⑨
Impairment loss of goodwill attributable to the -
Company
(2) Determination method and basis of recoverable amount
The recoverable amount of assets group of Hengli Futures Co., Ltd. refers to the AssetsAppraisal Report issued by Tianyuan Assets Evaluation Co., Ltd. on 21 April 2023 (TYPZ [2023] No.0274), It is determined according to the fair value of the goodwill-related assets group portfolio(including goodwill) formed by Hengli Futures Co., Ltd., which is evaluated by the market method.
1) Important assumptions and basis
①Assumption of relatively stable macroeconomic environment: The value of any asset isdirectly related to its macroeconomic environment. In this evaluation, it is assumed that the socialindustrial policy, tax policy and macro environment remain relatively stable, and there are no majorchanges in interest rates and exchange rates, so as to ensure that the evaluation conclusion has areasonable period of use.
②Continuing operation assumption; it is assumed that the operating business of the assetsgroup portfolio business entity is legal and can maintain its continuous operation status in thefuture.
③It is assumed that the equipment assets included in the assessment scope are used in situand continue to be used.
④Assuming that the property rights trading market is a fair, just, open and effective market,the transaction price has fully reflected the market participants' expectations of the targetcompany's operating performance, expected income and other basic factors and risk factors thataffect the transaction price.
⑤Assuming that the current and future operators of the assets group portfolio businessentity are responsible, and their company management has the ability to assume their duties,steadily promote the company's development plan, and maintain a good business situation.⑥Assuming that the technical team and senior management personnel of the Assets GroupPortfolio business entity remain relatively stable, there will be no major loss of core professionalsand management personnel.
⑦Assume that the relevant basic information and financial information of the assets groupportfolio business entity and comparable companies in the same industry on which theassessment is based are true, accurate and complete, and there are no undisclosed events thathave a significant impact on its value near the base date.
2) Method selection and model of market approach
Since it is difficult to collect data related to transaction cases, and it is impossible to knowwhether there are non-fair value factors, so the transaction case comparison method is notsuitable for this valuation; There are mature listed companies in the futures industry in China, whichcan include selecting comparable companies for analysis and comparison, so the comparisonmethod of listed companies can be used.
Specifically, the listed company comparison method generally first selects listed companiesthat are in the same industry as the assets group portfolio and that are actively traded ascomparable companies, and then calculate the market value of the comparable companies basedon the trading stock prices. Secondly, select one or several value ratio parameters of comparablecompanies (usually including profitability, assets, revenue and other specific parameters) as"analysis parameters", Then calculate the Ratio relationship between the Market price value ofcomparable companies and the selected analysis parameters - called the ratio multiplier(Multiples). The ratio multiplier needs to be adjusted before being applied to the correspondinganalysis parameters of the Assets group portfolio to reflect the difference between thecomparable company and the assets group portfolio. Apply the above-mentioned adjusted ratiomultiplier to the corresponding analysis parameters of the assets group portfolio to obtain the fairvalue of the evaluation object. Expressed in the formula as follows:Fair value of assets group portfolio＝Analysis Parameters × Modified Ratio Multiplier
Including: Adjusted ratio multiplier = ratio multiplier of comparable companies ×comprehensive correction factor
(5). Impact of the Goodwill impairment test
29. Long-term deferred expenses
Unit: Yuan Currency: RMB
Item Beginning Increase Amortization Other Closing balance
balance Decrease
Catalyst 2,601,919,212.90 544,345,265.96 672,546,183.47 467,471,307.55 2,006,246,987.84
Renovation 14,108,576.43 5,268,451.66 6,118,188.56 - 13,258,839.53
costs
Others 5,615,999.60 6,839,182.05 4,667,684.17 - 7,787,497.48
Total 2,621,643,788.93 556,452,899.67 683,332,056.20 467,471,307.55 2,027,293,324.85
30. Deferred tax assets/ Deferred tax liabilities
(1). Deferred tax assets before offsetting
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Deductible Deferred Deductible Deferred
temporary income tax temporary income tax
differences Assets differences Assets
Provision for
impairment of
assets
Unrealized profit 409,148,379.92 82,162,633.20 775,909,868.10 137,481,321.24of internal
transactions
Deductible tax
loss
Provision for bad 37,255,045.83 6,467,483.08 35,386,977.78 4,001,263.49
debts
Provision for 3,098,438,279.83 771,996,515.83 154,662,546.51 37,942,715.18
decline in value of
inventories
Changes in fair 35,555,513.32 5,428,978.62 1,410,435.00 211,565.25
value included in
current profit and
loss (decrease)
Non-deducted tax 102,511,722.17 15,376,758.33 - -
losses
Government grants 62,610,844.67 10,218,626.70 58,750,856.67 8,812,628.50
Lease contracts 3,329,728.88 576,250.70 1,600,482.28 377,589.78
Total 3,748,849,514.62 892,227,246.46 1,027,721,166.34 188,827,083.44(2). Deferred tax liabilities before offsetting
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Taxable Deferred Taxable Deferred
temporary income tax temporary income tax
difference liabilities difference liabilitiesIncrease in value by
assets appraisal of
business combination
not under common
contract
Changes in fair value of
other debt investments
Changes in fair value of
other equity
instrument
investments
Changes in fair value 1,275,910.00 144,415.50 6,061,828.49 927,466.51
included in current
profit and loss
(increase)
Initial investment cost 79,415,493.16 11,912,323.97 - -
of long-term equity
investment calculated
by equity method is
less than the share of
the owner's equity of
the investee
Fixed assets 27,431,069.87 6,857,767.47 - -
accelerated
depreciation
Total 108,122,473.03 18,914,506.94 6,061,828.49 927,466.51(3). Net amount of deferred tax assets or liabilities after offsetting(4). Details of unrecognized deferred tax assets
Unit: Yuan Currency: RMB
Item Closing balance Beginning balanceDeductible temporary
differences
Deductible tax loss
Provision for bad debts 1,660,550.40 1,154,812.33
Provision for decline in value 30,294,550.51
of inventories
Changes in fair value 2,211,972.77 111,926.32
included in current profit and
loss (decrease)
Non-deducted tax losses 635,564,183.92 1,226,783,951.22
Provisions - 13,000,000.00
Lease contracts 169,949.22 88,798.46
Total 669,901,206.82 1,241,139,488.33(5). Deductible tax loss of unrecognized deferred income tax assets will expire in the following
year
Unit: Yuan Currency: RMB
Year Amount at year end Amount in Note
beginning of year
2022 - 12,637,256.49
2023 3,756,883.17 211,724,059.02
2024 7,265,192.25 352,143,919.96
2025 4,822,065.73 156,761,650.66
2026 305,271,327.23 493,517,065.09
2027 201,662,394.07
2032 112,786,321.47
Total 635,564,183.92 1,226,783,951.22 /
31. Other non-current assets
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Book balance Pr Book balance Pr
o o
vi vi
si si
o o
n n
fo Carrying amount fo Carrying amount
r r
i i
m m
p p
ai ai
r r
m m
e e
nt nt
Cost
s of
obtai
ning
a
contr
act
Cont
ract
perfo
rman
ce
cost
Retu
rn
cost
recei
vable
Cont
ract
asset
s
Prep 6,212,936,138.56 - 6,212,936,138.56 3,676,058,288.93 3,676,058,288.93
ayme
nt
for
purc
hase
of
long-
term
asset
s
Unre 112,912,218.28 - 112,912,218.28 225,134,257.72 225,134,257.72
alize
d
gains
and
losse
s on
sale
and
lease
back
Futur 1,400,000.00 - 1,400,000.00 1,400,000.00 1,400,000.00
es
mem
bers
hip
Inves
tmen
t
Total 6,327,248,356.84 - 6,327,248,356.84 3,902,592,546.65 3,902,592,546.65
32. Short-term loans
(1). Short-term loans by category
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Pledge loans 1,199,495,332.00 4,067,887,659.56
Mortgage loans 5,128,000,000.00 6,107,000,000.00
Guaranteed loans 24,717,456,740.25 23,649,772,389.15
Unsecured loans 4,994,522,402.75 2,000,000,000.00
Accrued interest 93,285,304.88 106,685,293.38
Discount of commercial 33,184,139,033.20 19,659,347,989.95
acceptance bills
Total 69,316,898,813.08 55,590,693,332.04
(2). Short-term loans that have been overdue and not repaid
Other note
For details of loans in foreign currencies, see the note “Items in foreign currencies”.
33. Financial liabilities held for trading
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing
balance balance
Financial liabilities held 296,817,004.51 346,020,729.70 296,817,004.51 346,020,729.70
for trading
Including:
Derivative 296,817,004.51 346,020,729.70 296,817,004.51 346,020,729.70
financial liabilities
Designated as
financial liabilities at
fair value through
profit or loss
Including:
Total 296,817,004.51 346,020,729.70 296,817,004.51 346,020,729.70
34. Derivative financial liabilities
35. Notes payable
(1). Notes payable presented by item
Unit: Yuan Currency: RMB
Category Closing balance Beginning balance
Commercial 8,848,668,508.73 6,700,925,209.94
acceptance bills
Bank acceptance bills 1,250,537,334.72 2,070,998,744.63
Letter of credit 10,504,570,026.82 7,278,370,625.84
Total 20,603,775,870.27 16,050,294,580.41Bills payable overdue but still unpaid at year end is RMB 0.
36. Accounts payable
(1). Accounts payable presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Within 1 year 7,538,599,735.57 8,906,745,914.22
1 to 2 years 574,101,327.24 1,116,292,228.85
2 to 3 years 404,729,363.36 553,983,917.53
Over 3 years 351,879,572.73 112,192,686.92
Total 8,869,309,998.90 10,689,214,747.52(2). Significant accounts payable aging over 1 year
Other note
For details of accounts payable in foreign currencies, see the note “Items in foreigncurrencies”.
37. Advances from customers
(1). Advance from customers presented by item
(2). Significant advance from customers with ageing over one year
38. Contract liabilities
(1). Information of contract liabilities
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Within 1 year 12,042,290,821.83 6,097,462,402.73
1 to 2 years 34,506,243.07 15,026,974.87
2 to 3 years 11,816,872.03 2,447,292.07
Over 3 years 2,369,389.54 11,610,174.22
Total 12,090,983,326.47 6,126,546,843.89(2). The amount and reasons for major changes in the carrying amount during the reporting
period
39. Employee benefits payables
(1). Employee benefits payable
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing
balance balance
I. Short-term employee 482,853,444.7 4,237,186,079. 4,244,850,115. 475,189,408.7
benefits 3 43 43 3
II. Post-employment 147,422.89 245,628,032.9 244,455,084.3 1,320,371.45
benefits -Defined 0 4
contribution plans
III. Termination benefits
IV. Others benefits due
within one year
Total 483,000,867. 4,482,814,112.3 4,489,305,199 476,509,780.1
62 3 .77 8
(2). Short-term employee benefits
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing
balance balance
I. Salaries, bonus and 482,267,127.8 3,901,842,022. 3,909,309,38 474,799,762.21
allowances 0 98 8.57
II. Staff welfare 77,600,618.55 77,570,905.06 29,713.49
III. Social insurances 79,377.97 140,170,317.76 139,990,277.8 259,417.88
5
Including: Medical 60,678.39 112,534,721.57 112,358,637.03 236,762.93
insurance
Work injury 10,082.08 16,183,303.82 16,181,271.28 12,114.62insurance
Maternity 8,617.50 11,452,292.37 11,450,369.54 10,540.33insurance
IV. Housing fund 499,845.65 84,826,353.01 85,244,742.66 81,456.00
V. Union funds and staff 7,093.31 32,064,226.17 32,052,260.33 19,059.15
education
VI. Vocation leave
VII. Short-term profit
sharing plan
VIII. Compensation for 643,695.96 643,695.96
termination of labor
relations
IX. Others 38,845.00 38,845.00
Total 482,853,444.7 4,237,186,079. 4,244,850,115. 475,189,408.7
3 43 43 3
(3). Defined contribution plans
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing
balance balance
1.Basic pension insurance 147,251.84 237,283,306.8 236,155,046.5 1,275,512.09
2 7
2.Unemployment 171.05 8,344,726.08 8,300,037.77 44,859.36
insurance
3.Corporate annuity plan
Total 147,422.89 245,628,032.9 244,455,084.3 1,320,371.45
0 4
Other note:
The Company participates in the pension insurance and unemployment insurance plansestablished by government agencies in accordance with the regulations. Apart from this, theCompany no longer undertakes further payment obligations, and the corresponding expendituresare included in the current profit and loss or the cost of related assets when incurred.40. Taxes payable
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Value-added tax 12,771,830.29
Consumption tax 709,805,522.32 251,035,969.16
Business tax
Enterprise income tax 106,928,407.84 898,674,310.10
Individual income Tax
Urban maintenance and 49,277,199.63 23,012,479.76
construction tax
Property tax 31,071,196.33 25,524,692.05
Stamp duty 59,377,203.13 32,696,037.05
Land use tax 16,817,664.16 14,876,432.35
Education surcharge 21,118,876.28 9,936,123.99
Local education surcharges 14,079,250.85 6,623,903.41
Withholding individual 11,736,272.81 10,147,486.32
income Tax
Withholding value-added tax - 1,127.64
Environmental protection tax 3,030,289.52 4,365,062.55
Total 1,036,013,713.16 1,276,893,624.38
41. Other payables
Presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Interest payable
Dividends payable 4,882,110.00
Other payables 382,263,173.05 435,070,534.33
Total 382,263,173.05 439,952,644.33
Interest payable
(1). Presented by category
Dividends payable
(2). Presented by category
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Common shares dividend
Dividends on preferred
shares\perpetual bonds
classified as equity
instruments
Dividend of preference
shares\Perpetual bonds-XXX
Dividend of preference
shares\Perpetual bonds-XXX
Dividends payable-Jiangsu 100,010.00
Hegao Investment Co., Ltd.
Dividends payable-Dalian 4,782,100.00
Henghan Investment Co., Ltd.
Total 4,882,110.00
Other payables
(1). Other payables by nature
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Security deposits 135,894,155.27 179,826,101.61
Current accounts 223,906,378.05 245,894,092.52
Others 22,462,639.73 9,350,340.20
Total 382,263,173.05 435,070,534.33(2). Significant other payables aging over 1 year
Other note:
1. At the end of the period, there is no large amount of other payables with an aging of more than 1year.
2. For details of other payables in foreign currencies, see the note “Items in foreign currencies”.
42. Liabilities held-for-sale
43. Non-current liabilities due within one year
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Long-term loans due within 7,054,740,475.94 5,171,165,160.28
one year
Bonds payable due within 2,030,618,280.89
one year
Long-term payables due 228,838,610.93 214,238,505.75
within one year
Lease liabilities due within 34,830,877.25 37,823,304.78
one year
Total 9,349,028,245.01 5,423,226,970.81Other note:
1．Long-term loans due within one year
Category Closing balance Beginning balance
Unsecured loans 894,162,223.22 142,124,068.62
Guaranteed loans 510,600,000.00 780,000,000.00
Mortgage loans 5,544,272,629.78 4,136,488,702.00
Pledge loans - 105,000,000.00
Accrued interest 105,705,622.94 7,552,389.66
Subtotal 7,054,740,475.94 5,171,165,160.28
2．Bonds payable due within one year
Bond Face value Issua Ter Issuance Begi Accrue Inte Clos Closing
name nce m amount nning d rest ing balance
date balan interest pai bala
ce of for the d nce
intere current for of
st period the inter
paya curr est
bles ent pay
peri able
od
22 1,000,000 2022/ 1 1,000,000 - 18,225,3 - - 1,017,281,
Hengli ,000.00 6/1 year ,000.00 14.45 918.22
Petroch afte
emical r
CP001 bala
nce
she
et
dat
e
22 1,000,000 2022/ 1 1,000,000 - 14,279,7 - - 1,013,336,
Hengli ,000.00 7/25 year ,000.00 58.90 362.67
Petroch afte
emical r
CP002 bala
nce
she
et
dat
e
Subtota 2,000,00 2,000,00 - 32,505, - - 2,030,618
l 0,000.00 0,000.00 073.35 ,280.89
3．Long-term payables due within one year
Item Closing balance Beginning balance
Lease payment 267,373,159.72 224,944,807.83
Less: Unrecognized financing 38,534,548.79 10,706,302.08
expenses
Subtotal 228,838,610.93 214,238,505.75
4．Lease liabilities due within one year
Item Closing balance Beginning balance
Lease payment 38,365,988.90 41,429,815.39
Less: Unrecognized financing 3,535,111.65 3,606,510.61
expenses
Subtotal 34,830,877.25 37,823,304.78
5．For details of non-current liabilities in foreign currencies, see the note “Items in foreigncurrencies”.
44. Other current liabilities
Information of other current liabilities
Unit: Yuan Currency: RMB
Item Closing balance Beginning balanceShort-term bonds payable
Payables of returned goods
Output VAT pending for 1,564,174,590.75 750,359,165.17
transfer
Notes receivable not
derecognised
Payable of monetary 1,714,584,516.80 553,414,804.05
security deposits
Payable of pledged 88,252,384.00 81,457,112.00
security deposits
Futures risk reserve 15,076,976.64 14,018,941.87
Payable of Futures Investor 39,089.66 19,128.52
Protection Fund
Total 3,382,127,557.85 1,399,269,151.6145. Long term loans
(1). Long term loans by category
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Pledge loans - 490,000,000.00
Mortgage loans 46,526,719,607.47 46,798,918,880.75
Guaranteed loans 5,344,182,213.19 2,017,973,412.87
Unsecured loans 6,476,251,530.06 2,740,611,419.44
Accrued interest - 74,810,631.19
Total 58,347,153,350.72 52,122,314,344.25Note to long term loans by category:
For details of long term loans in foreign currencies, see the note “Items in foreign currencies”.46. Bonds payable
47. Lease liabilities
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Lease payment 100,679,544.18 107,951,752.97
Less: Unrecognized financing -10,097,787.02 -7,351,177.80
expenses
Less: Lease liabilities due within -34,830,877.25 -37,823,304.78
one year
Total 55,750,879.91 62,777,270.3948. Long-term payables
Presented by item
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Long-term payables 852,833,333.34 17,899,253.29
Specific payables 6,000,000.00 4,000,000.00
Total 858,833,333.34 21,899,253.29
Long-term payables
(1). Long-term payables by nature
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
Finance lease payables 1,163,373,159.72 243,274,222.22
Less: Unrecognized financing -81,701,215.45 -11,136,463.18
expenses
Less: Long-term payables due -228,838,610.93 -214,238,505.75
within one year
Subtotal 852,833,333.34 17,899,253.29
Specific payables
(2). Specific payables by nature
Unit: Yuan Currency: RMB
Item Beginning Increase Decreas Closing Reason of
balance e balance formation
R&D and 4,000,000.0 2,000,000.0 - 6,000,000.0 Funds
industrializatio 0 0 0 appropriate
n of ultra-high- d by the
strength government
creep- need to be
resistant confirmed
polyester after
industrial acceptance
fibers
Total 4,000,000.0 2,000,000.0 - 6,000,000.0 /
0 0 0
49. Long-term employee benefits payable
50. Provision for liabilities
Unit: Yuan Currency: RMB
Item Beginning balance Closing balance Reason of formationExternal guarantee
Pending litigations 13,000,000.00 -
Product quality
warranties
Restructuring
obligations
Pending loss
contract
Payables of
returned goods
Others
Total 13,000,000.00 - /51. Deferred income
Deferred income
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing Reason of
balance balance formation
Governme
nt grants
received
Governme 2,998,678,284. 694,992,517.5 317,169,087.3 3,376,501,714. relating to
nt grants 64 0 0 84 assets or
relating to
future
earnings
Total 2,998,678,284. 694,992,517.5 317,169,087.3 3,376,501,714. /
64 0 0 84
Projects Involving Government Grants:
Unit: Yuan Currency: RMB
Liability Beginning Additions Non- Other Other Closing Related
item balance during opera income moveme balance to
the year ting included nt assets/R
incom in current elated to
e period income
includ
ed in
curre
nt
perio
d
Infrastru 2,195,992, 684,992, 173,191,16 2,707,794, Related
cture 654.95 517.50 5.60 006.85 to assets
construc
tion
subsidies
Subsidy 463,896,18 10,000,0 140,063,4 333,832,7 Related
to 1.79 00.00 73.80 07.99 to assets
update
and
transfor
m
producti
on
equipme
nt
Project 5,275,000. 2,400,0 2,875,000. Related
interest 00 00.00 00 to assets
subsidy
Digital 336,283.19 336,283.1 - Related
twin 9 to
project income
subsidy
National 1,178,164.71 1,178,164. - Related
Smart 71 to
Manufac income
turing
Special
Fund
Special 332,000,0 332,000,0 Related
industry 00.00 00.00 to assets
support
funds
Other note:
Please refer to the description of "Government Subsidy" for details of the projects involvinggovernment subsidy and the apportionment method.
52. Other non-current liabilities
53. Share capital
Unit: Yuan Currency: RMB
Beginning Increase or decrease (+, -) Closing balance
balance
Issuanc Bonu Capital
e s reserve Other Subtot
New share converte s al
shares s d to
shares
Total 7,039,099,786.0 7,039,099,786.0
share 0 0
s
54. Other equity instruments
55. Capital reserve
Unit: Yuan Currency: RMB
Item Beginning balance Increase Decrease Closing balance
Capital 18,344,944,996.9 260,011,171.12 - 18,604,956,168.0
premium(Capita 6 8
l premium)
Other capital 110,899,494.68 77,070,049.00 106,409,584.0 81,559,959.68
reserve 0
Total 18,455,844,491.64 337,081,220.1 106,409,584.0 18,686,516,127.76
2 0
Other note, including the increase and decrease in the current period, and the reason for thechange:
Explanation on the reasons and basis for the increase and decrease of capital reserve
In this period, due to the recognition of share payment expenses in the employee stockownership plan, the company increased the capital reserve by RMB77,070,049.00. Concurrently,as the fourth employee stock ownership plan was complete and expired in the current period, thecumulative recognized share-based payment expenses were transferred from other capitalreserves to share premium.
The Company implemented the fifth phase of the employee stock option plan in the currentperiod. The employee stock option plan obtained the treasury shares repurchased by theCompany in the form of block transactions and non-transaction transfer. The difference betweenthe transfer price and the repurchase price reduced the capital reserve by RMB153,672,131.97.
In the current period, the Company acquired the equity held by minority shareholders of its’ssubsidiary Hengli Petrochemical (Dalian) Co., Ltd. The difference between the cost of newlyacquired equity and the share of net assets of the shareholding portion acquired since the date ofpurchase or merger calculated till the acquisition date is reduced the capital reserve byRMB70,544.85.
56. Treasury shares
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing balance
balance
Share 228,626,593.18 2,000,239,525.27 2,228,866,118.45 -
repurchase
Total 228,626,593.18 2,000,239,525.27 2,228,866,118.45 -Other note , including the increase and decrease in the current period, and the reason for thechange:
According to the "Proposal on Repurchasing Shares through Centralized BiddingTransactions" deliberated and approved at the twenty-second meeting of the eighth session ofthe Board of Directors of the Company and the "Proposal on the Fourth Phase Repurchase Reportof Shares Repurchased by Centralized Bidding Transactions" deliberated and approved at thetwenty-seventh meeting of the eighth session of the Board of Directors, a total of 83,684,459shares was repurchased in 2022, accounting for 1.19% of the Company's total share capital.
According to the "Hengli Petrochemical Inc. Sixth Employee Stock Ownership Plan (Draft)"and related matters reviewed and approved by the Company's third extraordinary generalmeeting in 2022, the Company had repurchased a total of 100,444,277 shares, accounting for1.43% of the Company's total share capital, all of which are used for the implementation of theCompany's sixth employee stock ownership plan.
57. Other comprehensive income
Unit: Yuan Currency: RMB
Item Beginning Movement during the period Closing
balance balance
Less: Included
in other
Less: comprehensive Amount Amount
transferred income in the Less: attributable to attributable
Amount before to profit or previous Income parent to minority
tax loss in period and tax company after interests
current transferred to expenses tax after tax
year retained
earnings in the
current period
I. Other
comprehensive
income not
reclassified into
profit or loss
subsequently
Including:
Changes in
amount on
remeasurement
of defined benefit
plan
Other
comprehensive
income not
reclassified to
profit or loss
under equity
method
Changes in fair
value of other
equity instrument
investments
Changes in the
fair value of the
enterprise’s own
credit risk
II. Other -150,616,377.30 105,052,177.39 100,564,060.24 4,488,117.15 -50,052,317.06
comprehensive
income that will
be reclassified
into profit or loss
subsequently
Including: Other
comprehensive
income that will
be transferred to
profit or loss
under equity
method
Changes in fair
value of other
debt investments
Reclassification
of financial assets
recognized in
other
comprehensive
income
Provision for
credit loss of
other debt
investments
Cash flows -47,664,201.75 -6,398,442.57 -6,398,442.57 - -
hedge reserve 54,062,644.32
Translation -102,952,175.55 111,450,619.96 106,962,502.81 4,488,117.15 4,010,327.26
difference of
foreign currency
financial
statements
Total other -150,616,377.30 105,052,177.39 100,564,060.24 4,488,117.15 -50,052,317.06
comprehensive
income
Other note, including the adjustment of the initial recognition amount of the hedged item for the effective part of the cash flow hedging profit and loss:Beginning balance and closing balance of other comprehensive income in the balance sheet. Beginning balance + Other comprehensive income =Closing balance attributable to the parent company after tax. Amount incurred before income tax for the current period - Other comprehensive income ofprevious period and transferred to profit or loss in the current year - Other comprehensive income of previous year and transferred directly to retainedearnings in the current year - Income tax expenses = Other comprehensive income attributable to the parent company after tax + Other comprehensiveincome attributable to the minority interests.
58. Special reserve
Unit: Yuan Currency: RMB
Item Beginning Increase Decrease Closing balance
balance
Safety 139,116,306.31 268,184,171.73 405,698,238.25 1,602,239.79
production fee
Total 139,116,306.31 268,184,171.73 405,698,238.25 1,602,239.7959. Surplus reserve
Unit: Yuan Currency: RMB
Item Beginning balance Increase Decrease Closing balance
Statutory surplus 858,111,239.40 47,454,461.35 - 905,565,700.75
reserve
Discretionary
surplus reserve
Reserve funds
Enterprise
expansion fund
Others
Total 858,111,239.40 47,454,461.35 - 905,565,700.75Note , including the increase and decrease in the current period, and the reason for the change:
The Company appropriates the statutory surplus reserve at 10% of its net profit in accordancewith the “Company Law” and the Company's articles of association. If the accumulated amount ofthe statutory surplus reserve reaches more than 50% of the Company's registered capital, theappropriation will cease.
60. Undistributed profits
Unit: Yuan Currency: RMB
Item Current year Prior year
Closing balance of prior year 31,118,454,108.29 21,120,648,008.95
Add: adjustments on beginning -5,201,038.90
balance of undistributed profits
Beginning balance after 31,118,454,108.29 21,115,446,970.05
adjustment
Add: Net profit attributable to
parent company for the current 2,318,303,166.69 15,531,076,723.36
year
Less: Appropriation of statutory 47,454,461.35 114,842,900.36
surplus reserve
Appropriation of discretionary
surplus reserve
Appropriation of general risk
reserve
Appropriation for dividends to 7,109,490,783.86 5,413,226,684.76ordinary shares
Dividend to ordinary shares
converted to share capital
Closing balance of undistributed 26,279,812,029.77 31,118,454,108.29
profits
Adjustment of undistributed profits at the beginning of the period:1.Due to the retroactive adjustment of the "Accounting Standards for Business Enterprises" and itsrelated new regulations, the Undistributed profits at the beginning of the period was affectedRMB0.
2.Due to changes in accounting policies, the undistributed profit at the beginning of the period wasaffected RMB 0.
3. Due to the correction of major accounting errors, the undistributed profit at the beginning of theperiod was affected RMB 0.
4.Changes in the scope of consolidation under common control, affecting the undistributed profitat the beginning of the period RMB 0.
5.Total impact of other adjustments on undistributed profit at the beginning of the period RMB 0.
61. Operating income and operating cost
(1). Operating income and operating cost
Unit: Yuan Currency: RMB
Item Current year Prior year
Revenue Cost Revenue Cost
Primary 221,683,819,060.46 203,871,767,587.67 197,217,862,664.27 167,223,076,543.28
operations
Other 639,764,909.42 205,829,478.78 752,482,221.03 295,009,517.12
operations
Total 222,323,583,969.88 204,077,597,066.45 197,970,344,885.30 167,518,086,060.40(2).Revenue from contracts
Unit: Yuan Currency: RMB
Contract classification Current year TotalProduct type
Refining products 123,675,336,325.47 123,675,336,325.47
PTA 56,635,858,203.96 56,635,858,203.96
Polyester products 29,136,125,000.36 29,136,125,000.36
Others 12,236,499,530.67 12,236,499,530.67Classified by geographical region
Domestic 204,494,583,953.00 204,494,583,953.00
Overseas 17,189,235,107.46 17,189,235,107.46
Total 221,683,819,060.46 221,683,819,060.46(3). Note on performance obligations
(4). Description of apportionment to remaining performance obligationsOther note:
1. The total operating revenue of the top five customers of the Company this year wasRMB28,201,276,359.97, which accounted for 12.68% of the total operating revenue.2. Relevant revenue and cost of trial sales
Product name Revenue Cost
Polyester products 233,567,379.29 225,609,758.15
Chemical products 81,538,027.66 57,547,244.04
The trial operation sales in this period are the external sales of products before the fixed assetsreach the intended usable state.
62. Taxes and surcharges
Unit: Yuan Currency: RMB
Item Current year Prior year
Consumption tax 5,424,150,546.27 2,706,754,050.77
Business tax
Urban maintenance and 418,477,747.17 212,698,887.54
construction tax
Education surcharge 179,555,517.95 92,062,226.28
Resource tax
Property tax 130,772,143.92 104,760,826.00
Land use tax 72,788,042.28 65,885,155.48
Vehicle and vessel use tax
Stamp duty 271,455,396.57 175,123,364.88
Local education surcharge 119,701,395.73 61,374,810.80
Environmental protection 13,321,650.94 19,232,134.25
tax
Security for the disabled
Others 796,739.83 2,536,959.46
Total 6,631,019,180.66 3,440,428,415.46Other note:
Please refer to the explanation of “Taxation” for details of the payment standard.63. Selling expenses
Unit: Yuan Currency: RMB
Item Current year Prior yearLogistics transportation fee
Staff salaries 177,239,467.21 128,661,172.53
Travel expenses 4,163,862.29 4,431,436.04
Warehousing related costs 180,463,279.95 137,326,438.75
Business entertainment 1,227,474.04 851,198.91
expenses
Office expenses 22,468,241.55 13,551,948.30
Other expenses 7,206,851.74 6,543,590.93
Total 392,769,176.78 291,365,785.4664. Administrative expenses
Unit: Yuan Currency: RMB
Item Current year Prior year
Staff salaries 849,247,603.21 938,932,278.11
Depreciation and amortization 587,247,400.89 531,643,131.54
Office expenses 368,450,540.43 430,535,357.48
Travel expenses 39,577,984.82 40,023,217.84
Business entertainment expenses 18,400,622.78 11,044,706.78
Other expenses 26,374,511.63 33,217,007.11
Total 1,889,298,663.76 1,985,395,698.8665. Research and development expenses
Unit: Yuan Currency: RMB
Item Current year Prior year
Staff salaries 383,500,164.71 321,151,501.82
Direct materials 512,323,117.51 443,501,007.41
Fuel and power 137,112,098.62 124,768,304.49
Depreciation and amortization 112,721,585.17 82,278,626.66
Others 39,054,037.39 47,752,926.51
Total 1,184,711,003.40 1,019,452,366.8966. Financial expenses
Unit: Yuan Currency: RMB
Item Current year Prior year
Interest expenses 5,182,887,891.00 4,975,639,908.53
Less: Interest capitalized -549,982,061.04 -275,533,806.08
Less: Interest income -332,736,566.09 -108,112,244.03
Less: Fiscal interest discount -920,070.16
Net exchange gain or loss -333,939,778.59 58,757,355.29
Handling fees and others 321,141,965.40 266,374,430.76
Total 4,287,371,450.68 4,916,205,574.3167. Other income
Unit: Yuan Currency: RMB
Item Current year Prior year
Government grants received 1,277,081,247.00 445,571,671.54
in current period
Amortization of deferred 314,769,087.30 311,678,754.12
income
Receive Tax Withholding Fee 3,692,791.90 2,608,441.04
Total 1,595,543,126.20 759,858,866.70Other note:
For details of the government grants included in other income in this period, please refer tothe explanation of “Government grants” in this note.
68. Investment income
Unit: Yuan Currency: RMB
Item Current year Prior yearIncome from long-term equity
investment by equity method
Gain from disposal of long-term
equity investment
Investment income of financial 4,875.68
assets held for trading during the
holding period
Investment income of other equity
investment instruments during the
holding period
Interest income from debts
investment during the holding period
Interest income from other debt
investments during the holding
period
Gain from disposal of Financial -322,324.78 19,226,174.75
assets held for trading
Investment income from disposal of
other equity instruments investment
Gains from disposal of debts
investment
Gain from disposal of other debt
investments
Gains from debt restructuring
Investment income from financial
products and structured deposits
Total -322,324.78 19,231,050.43Other note:
The Company does not have any significant restrictions on the return of investment income.69. Gain from net exposure of hedging
70. Gains from changes in fair value
Unit: Yuan Currency: RMB
Source of gains from changes in Current year Prior year
fair value
Financial assets held for trading 454,544,350.02 729,682,505.00
Including: Gains from changes in 456,756,322.79 729,748,893.98
fair value arising from derivative
financial instruments
Gains from changes in fair -2,211,972.77 -66,388.98value of non-derivative financial
instruments
Financial liabilities held for trading -500,223,920.74 -373,541,790.78
Investment properties measured
at fair value
Total -45,679,570.72 356,140,714.2271. Credit impairment loss
Unit: Yuan Currency: RMB
Item Current year Prior year
Bad debts of notes receivable 228,126.47
Bad debts of accounts receivable 3,803,043.71 -15,529,424.02
Bad debts of other receivables -6,176,849.83 -1,988,700.99
Impairment loss of debts investment
Impairment loss of other debt
investments
Bad debt of long-term receivables
Impairment loss of contract assets
Total -2,373,806.12 -17,289,998.54
72. Assets impairment loss
Unit: Yuan Currency: RMB
Item Current year Prior year
I. Bad debt loss
II. Impairment loss on decline in -3,128,732,830.34 -154,662,546.51
value of inventories and contract
performance cost
III. Impairment loss of long-term
equity investment
IV. Impairment loss of investment
properties
V. Impairment loss of fixed assets
VI. Impairment loss of
construction materials
VII. Impairment loss of
construction in progress
VIII. Impairment loss of productive
biological assets
IX. Impairment loss of oil and gas
assets
X. Impairment loss of intangible
assets
XI. Impairment loss of goodwill
XII. Others
Total -3,128,732,830.34 -154,662,546.51
73. Gains from disposal of assets
Unit: Yuan Currency: RMB
Item Current year Prior year
Gains from disposal of non- -3,332,571.69 1,788,290.01
current assets not classified
as held for sale
Including: Fixed assets -3,494,458.02 1,788,290.01
Right-of-use assets 161,886.33
Intangible assets
Total -3,332,571.69 1,788,290.0174. Non-operating income
Information of non-operating income
Unit: Yuan Currency: RMB
Amount included in
Item Current year Prior year non-recurring gains
and losses
Total gains on 2,016,853.08 687.90 2,016,853.08
disposal of non-
current assets
Including: Gain 2,016,853.08 687.90 2,016,853.08
from disposal of
fixed assets
Gain from
disposal of
intangible assets
Gains on barter
trade of non-
monetary assets
Accept donation
Government grants
Indemnity income 10,523,745.24 9,215,275.53 10,523,745.24
Carbon emissions 42,472,036.25
trading revenue
Initial investment 79,415,493.16 79,415,493.16
cost of the long-
term equity
investment
calculated by the
equity method is
less than the share
of the owner's
equity of the
investee
Others 13,374,625.74 6,939,931.94 13,374,625.74
Total 105,330,717.22 58,627,931.62 105,330,717.2275. Non-operating expenses
Unit: Yuan Currency: RMB
Amount included in
Item Current year Prior year non-recurring gains
and losses
Total losses on 7,478,374.56 4,815,936.41 7,478,374.56
disposal of non-
current assets
Including: Loss on 7,478,374.56 4,815,936.41 7,478,374.56
disposal of fixed
assets
Loss on
disposal of
intangible assets
Losses on barter
trade of non-
monetary assets
External donation 939,000.00 505,200.00 939,000.00
Fines payment 14,125.81 200,000.00 14,125.81
Compensation, 306,000.00 420,973.63 306,000.00
liquidated
damages
Tax late fee 9,966,608.00 2,294,161.35 9,966,608.00
Provision for 13,000,000.00
litigation losses
Others 1,977,149.82 16,352.55 1,977,149.82
Total 20,681,258.19 21,252,623.94 20,681,258.19
76. Income tax expenses
(1). Income tax expenses
Unit: Yuan Currency: RMB
Item Current year Prior year
Current income tax 776,954,787.70 4,377,533,825.14
Deferred income tax -685,413,122.59 -87,654,871.65
Total 91,541,665.11 4,289,878,953.49(2). Reconciliation between income tax expenses and accounting profit
Unit: Yuan Currency: RMB
Item Current year
Profits before tax 2,409,578,615.33
Expected income tax expenses at applicable 602,394,653.86
tax rates
Effect of different tax rates applied by -301,459,522.27
subsidiaries
Adjustment for income tax in previous years -6,423,051.56
Effect of non-taxable income -45,740,265.38
Effect of non-deductible costs, expenses 98,698,640.09
and losses
Effect of using the deductible temporary -6,224,180.18
differences or deductible losses for which
no deferred tax asset was recognized in
previous period
Effect of deductible temporary differences 106,507,644.78
or deductible losses for which no deferred
tax asset was recognized this year
Super deduction of expenses -87,298,154.00
Income tax credit for environmental -268,914,100.23
protection, energy and water conservation,
and purchase of production safety
equipment
Income tax expenses 91,541,665.11
77. Other comprehensive income
For details of other comprehensive income, please refer to the description of “Other
comprehensive income” in this note.
78. Notes to cash flow statement
(1). Cash received from other operating activities
Unit: Yuan Currency: RMB
Item Current year Prior year
Recover of bank security deposits 2,717,429,397.12 3,325,694,179.27
Interest income received 329,903,553.79 108,187,935.45
Revenue from labor services and
rental services received 82,592,034.32 154,058,305.42
Government grants income
received 1,974,073,764.50 584,042,623.70
Security deposit received 155,476,221.27 54,695,544.28
Receive the customer’s futures 622,380,717.69
transaction reserve fund 376,128,694.20
Net amount received from others 54,436,482.72
payments and current accounts 116,717,750.97
Total 5,936,292,171.41 4,719,525,033.29(2). Cash paid for other operating activities
Unit: Yuan Currency: RMB
Item Current year Prior year
Payment of security deposit to 2,487,038,979.97 2,717,429,397.12
banks
Expenses paid in cash 1,067,439,713.14 981,641,434.92
Payment of security deposits 39,943,686.24 189,845,957.99
Net amount paid for others 40,617,426.82 161,676,260.57
payments and current accounts
Total 3,635,039,806.17 4,050,593,050.60(3). Cash received from other investing activities
Unit: Yuan Currency: RMB
Item Current year Prior year
Recover of bank security deposits 273,421,460.73 28,128,985.93
Receipts of margin deposit for
futures contract 65,358,947.08 238,453,905.34
Net amount received from others
payments and current accounts 9,122,082.64 14,820,294.92
Total 347,902,490.45 281,403,186.19(4). Cash paid for other investing activities
Unit: Yuan Currency: RMB
Item Current year Prior yearPayment for margin deposits for
futures contract 129,114,882.39 89,832,448.92
Payment of bank security
deposits 1,165,527,839.07 320,087,625.54
Net amount paid for others
payments and current accounts 20,985,976.52 85,270,319.17
Total 1,315,628,697.98 495,190,393.63(5). Cash received for other financing activities
Unit: Yuan Currency: RMB
Item Current year Prior year
Recover of bank security deposits 3,352,867,653.01 1,723,399,353.01
Recover security deposits of
financing leases - 25,000,000.00
Received borrowings from Hengli
Group - 9,067,450,100.00
Net amount of cash received from
the sale of treasury shares 382,298,725.15 133,671,060.00
Total 3,735,166,378.16 10,949,520,513.01(6). Cash paid for other financing activities
Unit: Yuan Currency: RMB
Item Current year Prior yearPayment of principal and interest
of Hengli Group’s borrowings 170,000,000.00 8,897,450,100.00
Payment of security deposit to
banks 4,118,655,079.75 3,358,936,253.11
Payment related to leases 193,495,397.24 398,636,981.00
Buying minority interests in
subsidiaries - 53,008,200.00
Cash paid for other financing
activities - 6,341,290.35
Total 4,482,150,476.99 12,714,372,824.46
79. Supplement to cash flow statement
(1). Supplement to cash flow statement
Unit: Yuan Currency: RMB
Supplement information Current year Prior year1．Reconciliation of net profit to cash flow from operating activities:
Net profit 2,318,036,950.22 15,538,178,030.29
Add: Provision for impairment of 3,128,732,830.34 154,662,546.51
assets
Credit impairment loss 2,373,806.12 17,289,998.54
Depreciation of fixed assets, 8,567,512,312.81 8,006,027,632.06
depletion of oil and gas assets, and
depreciation of productive
biological assets
Amortization of right-of-use assets 33,675,038.15 30,020,084.22
Amortization of intangible assets 261,164,423.95 262,239,757.35
Long-term prepaid expenses 680,489,913.08 724,448,769.07
amortization
Losses on disposal of fixed assets, 3,332,571.69 -1,788,290.01
intangible assets and other long-
term assets (Gain as in “-”)
Loss on retirement of fixed assets 5,461,521.48 4,815,248.51
(Gain as in “-”)
Losses on changes in fair value 45,679,570.72 -356,140,714.22
(Gain as in “-”)
Financial expenses (Gain as in “-”) 4,444,197,476.00 4,125,955,698.78
Investment losses (Gain as in “-”) 322,324.78 -19,231,050.43
Decrease in deferred tax assets -703,400,163.02 -79,122,394.94
(Increase as in “-”)
Increase in deferred tax liabilities 17,987,040.43 -8,532,476.71
(Decrease as in “-”)
Decrease in inventories (Increase -7,090,734,574.98 -14,016,541,917.09
as in “-”)
Decrease in operating receivables 5,237,905,008.94 -3,704,780,539.23
(Increase as in “-”)
Increase in operating payables 9,119,876,604.91 7,816,954,831.10
(Decrease as in “-”)
Others -118,641,872.19 175,718,530.31
Net cash flows from operating 25,953,970,783.43 18,670,173,744.11
activities
2．Significant investment or finance activities not involving cash:Conversion of debt into capital
Convertible bonds mature within
one year
Fixed assets acquired under 27,164,265.16 434,581,141.81
finance leases
3．Net increase / (decrease) in cash and cash equivalents:
Cash and bank balance as at end 20,323,703,829.39 9,589,548,876.75
of year
Less: cash and bank balance at 9,589,548,876.75 11,494,116,327.37
beginning of year
Add: cash equivalents at end of
year
Less: cash equivalents at
beginning of year
Net increase in cash and cash 10,734,154,952.64 -1,904,567,450.62
equivalents
(2). Net cash paid for acquisition of subsidiaries during the year(3). Net cash received from disposal of subsidiaries during the year(4). Details of cash and cash equivalents
Unit: Yuan Currency: RMB
Item Closing balance Beginning balance
I. Cash 20,323,703,829.39 9,589,548,876.75
Including: Cash on hand 1,305,525.78 635,936.65
Cash at bank readily available 18,837,045,793.15 8,915,080,349.21for payment
Other monetary fund readily 1,485,352,510.46 673,832,590.89available for payment
Cash at central bank
available on demand
Amounts due from banks
Interbank lending
II. Cash equivalents
Including: bonds investment
mature within 3 months
III. Cash and cash equivalents as at 20,323,703,829.39 9,589,548,876.75
closing balance
Including: Restricted cash and
cash equivalents held by the
Company or subsidiaries of the
Group
Other note:
Closing balance of cash in cash flows statement in 2022 is RMB20,323,703,829.39, and closing
balance of cash and bank balances in the balance sheet on 31 December 2022 is
RMB28,076,405,879.84, the difference is RMB7,752,702,050.45. It is because the closing balanceof cash in cash flows statement deducted those items which do not meet the standard of cash andcash equivalents, including security deposits for loans of RMB 3,838,471,603.38, deposits for bankacceptance bills of RMB 506,369,384.04, deposits for letter of credit of RMB 2,414,021,116.76,deposits for letter of guarantee of RMB 150,000.00, security deposits of forward foreign exchange
contracts of RMB 10,586,192.00, restricted security deposits for futures trading of RMB
2,000,000.00, restricted time deposit certificate of RMB 858,620,000.00, other restricted cash atbank of RMB 119,600,000.00, and accrued interest receivable of RMB 2,883,754.27.
Closing balance of cash in cash flows statement in 2021 is RMB 9,589,548,876.75, and closing
balance of cash and bank balances in the balance sheet on 31 December 2021 is RMB
15,986,052,894.48, the difference is RMB 6,396,504,017.73. It is because the closing balance ofcash in cash flows statement deducted those items which do not meet the standard of cash andcash equivalents, including security deposits for loans of RMB 3,284,936,253.11, deposits for bankacceptance bills of RMB 853,986,549.44, deposits for letter of credit of RMB 1,902,558,705.91,deposits for letter of guarantee of RMB 150,000.00, security deposits of forward foreign exchange
contracts of RMB 31,699,719.91, restricted security deposits for futures trading of RMB
33,622,047.40, restricted time deposit certificate of RMB 169,900,000.00, other restricted cash atbank of RMB 119,600,000.00, and accrued interest receivable of RMB 50,741.96.80. Notes to Items in the Statement of Changes in Owner's Equity81. Ownership or using rights of assets subject to restriction
Unit: Yuan Currency: RMB
Item Carrying value at year end Reason of restriction
Cash and bank balances 7,617,632,104.18 Pledge cash and bank
balances to obtain
financing credit from
financial institutions
Cash and bank balances 12,586,192.00 Security deposits for
trading in futures and
financial derivatives
Cash and bank balances 119,600,000.00 Freezing funds involved in
litigation
Financial assets held for trading 10,000,000.00 Pledge financial assets
held for trading to obtain
financing credit from
financial institutions
Receivables financing 1,469,571,971.78 Pledge notes receivable to
obtain financing credit
from financial institutions
Fixed assets 85,436,371,528.20 Mortgage fixed assets to
obtain financing credit
from financial institutions
Fixed assets 1,546,266,735.52 Mortgage is used to
provide security for the
sale and leaseback
contract
Intangible assets 3,781,381,873.08 Mortgage intangible
assets to obtain financing
credit from financial
institutions
Construction in progress 675,737,980.77 Mortgage construction in
progress to obtain
financing credit from
financial institutions
Total 100,669,148,385.53 /
82. Items in foreign currencies
(1). Items in foreign currencies
Unit: Yuan
Closing balance in Converted into
Item foreign currency Conversion rate RMB at year end
balance
Cash and bank balances - -
Including: Singapore dollar 7,452,079.52 5.1831 38,624,873.36
Japanese Yen 4,909.00 0.0524 257.23
Euro 354,998.58 7.4229 2,635,118.96
Hong Kong Dollar 2,240,357.98 0.8933 2,001,311.78
US Dollar 902,243,934.17 6.9646 6,283,768,103.92
British pounds 72.21 8.3941 606.14
Accounts receivable - -
Including: US Dollar 22,703,649.22 6.9646 158,121,835.36
Euro 24.36 7.4229 180.82
Receivables financing - -
Including: US Dollar 16,956,346.62 6.9646 118,094,171.67
Other receivables - -
Including: US Dollar 19,938,650.82 6.9646 138,864,727.50
Short-term loans
Including: Euro 2,605,573.96 7.4229 19,340,914.95
Notes payable - -
Including: US Dollar 1,366,689,626.12 6.9646 9,518,446,570.08
Euro 111,400,050.00 7.4229 826,911,431.15
Singapore dollar 3,277,698.00 5.1831 16,988,636.50
Japanese Yen 1,613,653,960.00 0.0524 84,555,467.50
Accounts payable - -
Including: Japanese Yen 3,693,293,781.00 0.0524 193,528,594.12
Euro 18,778,592.65 7.4229 139,391,615.38
Swiss Franc 160,006.00 7.5432 1,206,957.26
US Dollar 156,781,013.74 6.9646 1,091,917,048.29
British pounds 6,412.98 8.3941 53,831.20
Other payables - -
Including: US Dollar 26,325,583.34 6.9646 183,347,157.73
Non-current liabilities due - -
within one year
Including: US Dollar 79,883,103.58 6.9646 556,353,863.19
Euro 5,699,597.06 7.4229 42,307,539.02
Long term loans - -
Including: US Dollar 1,050,000,000.00 6.9646 7,312,830,000.00
Euro 39,595,882.64 7.4229 293,916,277.25(2). Explanation of overseas operating entities, including for important overseas operating
entities, the main overseas business location, bookkeeping functional currency and
selection basis should be disclosed, and the reasons for changes in bookkeeping
functional currency should also be disclosed
Name Place of business Reporting currency Selection basis
HENGLI China Hong Kong US Dollar The currency of the
PETROCHEMICAL primary economic
CO., LIMITED environment in which
the business operates
is US Dollar
HENGLI Singapore US Dollar The currency of the
PETROCHEMICAL primary economic
INTERNATIONAL environment in which
PTE. LTD. the business operates
is US Dollar
HENGLI OILCHEM Singapore US Dollar The currency of the
PTE. LTD. primary economic
environment in which
the business operates
is US Dollar
HENGLI SHIPPING Singapore US Dollar The currency of the
INTERNATIONAL primary economic
PTE. LTD. environment in which
the business operates
is US Dollar
83. Hedging
84. Government grants
(1). Information of government grants
Unit: Yuan Currency: RMB
Recorded in profit or
Category Amount Item presented loss for the current
period
Infrastructure 20,000,000.00 Deferred income 2,000,000.00
construction subsidy
Infrastructure 382,911,023.00 Deferred income 34,522,063.32
construction subsidy
Infrastructure 1,611,887,368.00 Deferred income 106,649,301.68
construction subsidy
Infrastructure 547,827,957.32 Deferred income 27,391,397.88
construction subsidy
Infrastructure 116,674,429.50 Deferred income 2,628,402.72
construction subsidy
Infrastructure 555,846,065.00 Deferred income -
construction subsidy
Infrastructure 20,876,452.50 Deferred income -
construction subsidy
Subsidy to update
and transform 840,458,335.80 Deferred income 134,730,140.52
production
equipment
Subsidy to update 40,000,000.00 Deferred income 3,333,333.36
and transform
production
equipment
Subsidy to update
and transform 10,000,000.00 Deferred income 1,999,999.92
production
equipment
Special industry 332,000,000.00 Deferred income -
support funds
Special industry 108,270,000.00 Deferred income -
support funds
Project interest 24,000,000.00 Deferred income 2,400,000.00
subsidy
National Smart 1,500,000.00 Deferred income
Manufacturing 1,178,164.71
Special Fund
Digital twin project 400,000.00 Deferred income 90,265.49
grants
Digital twin project 600,000.00 Deferred income 246,017.70
grants
"Stay in Wu excellent 293,400.00 Other income
technology" project- 293,400.00
based training
subsidy
2020 Entrepreneur 50,000.00 Other income 50,000.00
Conference Awards
2020 Suzhou Special
Fund for Business
Development - Import 49,700.00 Other income 49,700.00
and Export Credit
Insurance Fund
Project
2020 Yingkou City
enterprise R & D 200,000.00 Other income 200,000.00
investment subsidy
funds
2020 Excellent 200,000.00 Other income 200,000.00
Enterprise Award
2020 Incentives for
High-skilled 200,000.00 Other income 200,000.00
Personnel Cultivation
Units in Shortage
2020 Overnight 62,200.00 Other income 62,200.00
Holiday Subsidy
2020 Shengze Town
High Quality
Development Award 50,000.00 Other income 50,000.00
(Industry-University-
Research)
2020 Shengze Town
High-quality
Development Award 491,500.00 Other income 491,500.00
(High-skilled Talent
Training Base
Training Subsidy)
2020 Shengze Town
High Quality 80,000.00 Other income 80,000.00
Development Award
(National Standard)
2020 Shengze Town
High-Quality
Development Award 200,000.00 Other income 200,000.00
(Integrated Two
Industries)
2021 Advanced
Safety Production 2,000.00 Other income 2,000.00
Enterprise
The second batch of
Intellectual property 60,000.00 Other income 60,000.00
awards in 2021
2021 high-tech
enterprise awards 200,000.00 Other income 200,000.00
and subsidy funds
2021 high-tech
enterprise district- 100,000.00 Other income 100,000.00
level certification
incentive funds
2021 Green Finance 5,440.00 Other income 5,440.00
Award and Subsidy
2021 Financial
Incentive Funds for 500,000.00 Other income 500,000.00
Enterprise R&D
Investment
Supporting incentive
funds for high-skilled
talent bases above 500,000.00 Other income 500,000.00
the provincial level in
2021
2021 Implementation
of trademark strategy
and technical
standard strategy and 1,188,000.00 Other income 1,188,000.00
reward funds for
construction projects
of strong quality
districts
2021 Municipal
Industrial
Development
Guidance Fund 700,000.00 Other income 700,000.00
(Industrial
Agglomeration) First
Batch of Item Subsidy
Funds
2021 The first batch of
project funds for
municipal industry
development 100,000.00 Other income 100,000.00
guidance funds
(industrial
agglomeration)
Incentive funds for
research and
development 404,700.00 Other income 404,700.00
expenses of Suzhou
enterprises in 2021
2021 special guidance
funds for promoting
scientific and
technological
innovation and 800,000.00 Other income 800,000.00
leading high-quality
development (R&D
investment, R&D
outstanding
contribution award)
2021 Funding for
Industry-University-
Research Item and 100,000.00 Other income 100,000.00
Carrier Project in
Wujiang District
2021 Wujiang District 700,000.00 Other income 700,000.00
Industrial High Quality
Development Fund
2021 Yingkou City
enterprise R & D 500,000.00 Other income 500,000.00
investment subsidy
funds
2021 Provincial
Special Fund for 22,000.00 Other income 22,000.00
Business
Development
2021 Wujiang District
Skill Master Studio 100,000.00 Other income 100,000.00
Award Funding
2021Employment 12,000.00 Other income 12,000.00
subsidy
2021 Yingkou City Key
Technology Research 300,000.00 Other income 300,000.00
Project Bonus
2021 Foreign
Economic and Trade
Development Special 312,000.00 Other income 312,000.00
Export Credit
Insurance Subsidy
2021 Special Loan
interest subsidy for 2,269,500.00 Other income 2,269,500.00
foreign economic and
trade development
2022 export credit
insurance premium 412,300.00 Other income 412,300.00
subsidy
2022 Individual
champion enterprise 1,000,000.00 Other income 1,000,000.00
(product) subsidy
funds
2022 Green Finance
Award and Subsidy 4,135.00 Other income 4,135.00
Fund Subsidy
2022 Annual Energy
Consumption Online
Monitoring System 40,000.00 Other income 40,000.00
Construction Project
Fund Subsidy
2022 District High 200,000.00 Other income 200,000.00
Quality Award
The fourth batch of
special funds for
industrial 50,000.00 Other income 50,000.00
transformation and
upgrading in urban
areas in 2022
2022 Suzhou
Municipal Special
Fund for Building an 2,040,000.00 Other income 2,040,000.00
Advanced
Manufacturing Base
Special funds for
2022 provincial
awards and 1,000,000.00 Other income 1,000,000.00
supplements for
strong quality
2022 Liaoning
Provincial
Department of
Science and 200,000.00 Other income 200,000.00
Technology Subsidy
after Transformation
of Achievements
2022 Liaoning
Provincial Natural 100,000.00 Other income 100,000.00
Science Foundation
of China
2022 Special Fund for
Business
Development (Third 63,100.00 Other income 63,100.00
Batch) - Export Credit
Insurance
2022 Business
Assistance Business 1,000,000.00 Other income 1,000,000.00
Relief Project Subsidy
2022 Provincial
"Unveiling the List" 2,500,000.00 Other income 2,500,000.00
Project Funding
2022 Provincial
Special Fund for
Business 684,500.00 Other income 684,500.00
Development (Fourth
Batch)
2022 Provincial 2,000,000.00 Specific payables -
Science and
Technology
Achievement
Transformation Plan
(First Batch) Projects
and Funds
2022 Special Fund for
High-quality
Development of
Industrial Policy and
Science and 100,000.00 Other income 100,000.00
Technology in
Wujiang District,
Suzhou City (Echelon
Cultivation of R&D
Institutions)
VOCs Volatile Organic
Compounds 700,000.00 Other income 700,000.00
Remediation Project
Subsidy
Finance, Industry and
Trade Department 100,000.00 Other income 100,000.00
Four-star Cloud
Migration Reward
Industrial
Development 20,000,000.00 Other income 20,000,000.00
Subsidy
Reward for
production and 9,889,754.63 Other income 9,889,754.63
performance
Subsidies for highly 50,000.00 Other income 50,000.00
skilled personnel
Industrial Internet
Innovation 1,850,000.00 Other income 1,850,000.00
Development Project
Subsidy
Haikou City Supports
Several Policy
Awards for 15,606,475.97 Other income 15,606,475.97
Headquarters
Economic
Development
Hengli 400,000 tons 18,000,000.00 Other income 18,000,000.00
of high-performance
special industrial yarn
intelligent production
project incentive
funds
Hengli Torch Power
Distribution Project 2,000,000.00 Other income 2,000,000.00
Subsidy
Skills training subsidy 3,390,400.00 Other income 3,390,400.00
Coal Reduction 362,700.00 Other income 362,700.00
Bonus Fund
Super-deduction of 215,620.64 Other income 215,620.64
input tax credit
High-quality
economic 120,000.00 Other income 120,000.00
development support
reward
Employment trainee 2,209,534.00 Other income 2,209,534.00
subsidy
Expansion subsidy 1,031,500.00 Other income 1,031,500.00
Job retention subsidy 32,280.00 Other income 32,280.00
Job training subsidies 23,250.00 Other income 23,250.00
Matching subsidies 1,030,000.00 Other income 1,030,000.00
Wholesale industry
key enterprise 1,192,870.60 Other income 1,192,870.60
incentives
Pudong New Area 3,000,000.00 Other income 3,000,000.00
Financial Subsidy
Pudong New Area 1,500,000.00 Other income 1,500,000.00
Financial Support
Entrepreneur 50,000.00 Other income 50,000.00
Conference Award
New Apprenticeship
Subsidies for 519,000.00 Other income 519,000.00
Enterprises
Enterprise R & D 500,000.00 Other income 500,000.00
investment incentives
Enterprise
Employment 210,000.00 Other income 210,000.00
Incentives and
Subsidies
Subsidy for job skill
improvement of 451,750.00 Other income 451,750.00
enterprise employees
Talent funding- 220,000.00 Other income 220,000.00
postdoctoral living
allowance and
scientific research
funding
Sanya City Promoting
Headquarters 11,324,430.00 Other income 11,324,430.00
Economic
Development Award
Business and trade
enterprise 200,000.00 Other income 200,000.00
management
incentives
Shengze
Comprehensive Law
Enforcement Second 1,713,933.00 Other income 1,713,933.00
Brigade Emission
Reduction Award
Job training 105,300.00 Other income 105,300.00
Job training subsidy 177,600.00 Other income 177,600.00
First batch of reward
funds for the high-
quality development
policy of producer
service industry in 200,000.00 Other income 200,000.00
Wujiang District and
preferential policies
for service industry
agglomeration area in
2021
Special Fund for
Digital Liaoning 500,000.00 Other income 500,000.00
Manufacturing
Powerful Province
Tax incentives 3,906,063.06 Other income 3,906,063.06
Funding for the 21st
Batch of Science and
Technology
Development Plan of
Suzhou City in 2022 150,000.00 Other income 150,000.00
(Performance
Subsidy for Municipal
Enterprise R&D
Institutions)
Suzhou City 2022 50,000.00 Other income 50,000.00
Fifth Batch of Science
and Technology
Development Plan
(High-tech Enterprise
Recognition Rewards
and Subsidies) Funds
Suzhou government 480,000.00 Other income 480,000.00
subsidy
Job stabilization 7,474,245.95 Other income 7,474,245.95
subsidy
Steady growth 8,350,000.00 Other income 8,350,000.00
reward
Value-added tax
rebate for sludge 938,655.43 Other income 938,655.43
incineration
Singapore 1,221,016.35 Other income 1,221,016.35
government grants
New Apprenticeship 243,000.00 Other income 243,000.00
Training Subsidy
Subsidies for training 968,640.00 Other income 968,640.00
by work
Silver Award Grant 943,396.23 Other income 943,396.23
Funding
Emergency
Management Flood 45,000.00 Other income 45,000.00
Prevention Subsidy
Award for Advanced
Enterprises in Risk
Identification and 13,000.00 Other income 13,000.00
Control of Emergency
Management Bureau
Online metering 19,500.00 Other income 19,500.00
grants
Government Support 6,371,856.14 Other income 6,371,856.14
Fund
Government Quality 300,000.00 Other income 300,000.00
Award
Support the fight
against the new
crown to help 1,000.00 Other income 1,000.00
companies bail out
subsidies
Intellectual property 50,000.00 Other income 50,000.00
standard outstanding
unit award
Vocational skills 12,000.00 Other income 12,000.00
competition subsidy
Smart Factory Grants 2,000,000.00 Other income 2,000,000.00
Special Funding for 3,241,000.00 Other income 3,241,000.00
Patents
Tax subsidies 1,121,680,000.00 Other income 1,121,680,000.00
(2). Return of government grants
85. Others
VIII. Changes in scope of consolidation Income of the merged party from the beginning of the
current consolidation period to the merger date
1. Business combination not under common control
2. Business combination under common control
(1). Business combination under common control during the period
Unit: Yuan Currency: RMB
Revenu Net
Basis e of the profit of
for acquire the
Equity constitu e from acquire Revenu net
ratio ting the e from e of the profit of
Name acquire busines Basis for beginnin the acquire the
of d in a s Combin determin g of the beginnin e during acquire
acquire busines combin ation ation of current g of the the e during
e s ation date combina consolid current compar the
combin under tion date ation consolid ative compar
ation commo period ation period ative
n to the period period
control combina to the
tion date combina
tion date
Kangh 100% Under 25 Complet - - - -
ui the March e the
Nanton control 2022 registrati
g New of both [Note 1] on of
Materia Chen change
l Jianhua of equity
Techno and Fan transfer
logy Hongw
Co., ei
Ltd. before
and
after
the
transac
tion,
and the
control
was not
tempor
ary.
Other note:
[Note 1] According to the resolution of the shareholder meeting of the subsidiary KanghuiNantong New Material Technology Co., Ltd., the Company and Hengli Group Co., Ltd. signed the"Equity Transfer Agreement" on 22 March 2022, and the Company was received the 100% equityof Kanghui Nantong New Material Technology Co., Ltd. transferred from Hengli Group Co., Ltd.Since Hengli Group Co., Ltd. has not yet paid in its capital contribution, the transfer price is RMB nil.Since the Company and Hengli Group Co., Ltd. are both ultimately controlled by Chen Jianhua andFan Hongwei and the control is not temporary, this merger is a business combination undercommon control. Kanghui Nantong New Material Technology Co., Ltd. has completed the industrialand commercial change registration procedures on 25 March 2022. The Company has alreadyobtained the actual control, so the combination is determined at 25 March 2022. During the period,the Company included it in the scope of the consolidated financial statements, and adjusted thecomparative data of the consolidated financial statements accordingly in accordance with theprovisions of "Accounting Standards for Business Enterprises No. 20 - Business Combinations".(2). Combination cost
Unit: Yuan Currency: RMB
Combination cost Kanghui Nantong New Material Technology
Co., Ltd.
--Cash -
-- Carrying amount of non-monetary assets -
--Carrying amount of debt issued or assumed -
--Face value of issued equity securities -
--Contingent consideration -
(3). The book value of assets and liabilities of the acquiree on the combination dateOther note:
As of the combination date, Kanghui Nantong New Material Technology Co., Ltd. has zeroassets and liabilities because Hengli Group Co., Ltd. has not yet paid in its capital contribution.
3. Reverse acquisition
4. Disposal of subsidiaries
Whether there is a situation where a single disposal of investment in subsidiaries results in loss ofcontrol
5. Changes in the scope of consolidation for other reasonsExplain the changes in the scope of consolidation caused by other reasons (such as theestablishment of new subsidiaries, liquidation of subsidiaries, etc.) and related situations:1． Increase in scope of consolidation
Unit: ten thousand yuan
Company name Mode of Equity acquisition Contribution Contribution
acquisition date amount ratio
of equity
Suzhou Hengli Chemical New 2022-2-11 10,000 100%
New Material Co., Ltd. established
Suzhou Hengli Energy New 2022-8-8 US Dollar 100%
Chemical Import & Export established 50.00 million
Co., Ltd.
Hengli Petrochemical New 2022-3-7 30,000 100%
Utilities (Dalian) Co., Ltd. established
Dalian Hengzhong Special New 2022-11-2 1,170 65%
Materials Co., Ltd. established
Hengli New Energy New 2022-1-4 10,000 100%
(Shanghai) Co., Ltd. established
Hengli Yuanshang New 2022-4-13 10,000 100%
Technology (Suzhou) Co., established
Ltd.
Suzhou Hengli Jinshang New 2022-4-14 10,000 100%
Energy Technology Co., Ltd. established
Dalian Hengli Fine Chemical New 2022-6-17 10,000 100%
Sales Co., Ltd. established
Hengli Petrochemical Sales New 2022-6-22 10,000 100%
(Haikou) Co., Ltd. established
Hengli Energy Chemical New 2022-6-22 10,000 100%
(Sanya) Co., Ltd. established
Dalian Hengli Petrochemical New 2022-6-23 10,000 100%
Sales Co., Ltd. established
Dalian Hengli Gold New 2022-7-13 10,000 100%
Merchant Sales Co., Ltd. established
Dalian Hengli New Energy New 2022-7-13 10,000 100%
Sales Co., Ltd. established
Dalian Henglixing New 2022-9-26 10,000 100%
Gemstone Chemical established
Trading Co., Ltd.
Dalian Hengli Gaoyuan New 2022-9-28 10,000 100%
Sales Co., Ltd. established
Hengli Energy Chemical New 2022-10-10 10,000 100%
(Shenzhen) Co., Ltd. established
Nantong Hengli Maoyuan New 2022-10-18 1,000 100%
Petrochemical Trading Co., established
Ltd.
Suzhou Hengli New Energy New 2022-11-08 10,000 100%
Sales Co., Ltd. established
Suzhou Hengli Fine New 2022-11-18 10,000 100%
Chemical Sales Co., Ltd. established
Hengli Petrochemical Sales New 2022-12-2 10,000 100%
(Shenzhen) Co., Ltd. established
2. Decrease in scope of consolidation
Unit: ten thousand yuan
Company name Disposal Disposal date Net assets Net profit from
method of equity on disposal the beginning of
date the period to
date of disposal
Hengli Energy (Jiangsu) Co., Deregistered 2022-8-30 - -0.07
Ltd.
Suzhou Qianliyan Logistics Deregistered 2022-8-31 - -31.50
Technology Co., Ltd.
Suzhou Plastic Group Deregistered 2022-5-17
Network E-commerce Co., - -
Ltd.
Hengli Energy Sales Deregistered 2022-11-21 - 23.33
Rudong Co., Ltd.
Hengli Petrochemical Sales Deregistered 2022-9-1 - 0.86
(Shanghai) Co., Ltd.
Suqian Deya New Materials Deregistered 2022-6-28 - 0.17
Co., Ltd.
Hengli Petrochemical Sales Deregistered 2022-6-15 - -0.14
(Jiangsu) Co., Ltd.
6. Others
IX. Interests in other entities
1. Interests in subsidiaries
(1). Group structure
Name of Place of Place of Nature of Shareholding Acquisition
subsidiary business registration business (%) method
Direct Indirec
t
Jiangsu No. 1, Hengli Road, Manufacturin 99.99 0.01 Business
Hengli Nanma Industrial g combinatio
Chemical China Zone, Shengze n not
Fiber Co., Town, Wujiang City, under
Ltd. Jiangsu Province common
control
Jiangsu Hengli Textile New Manufacturin 100.0 Business
Hengke Material Industrial g 0 combinatio
Advanced China Park, Binjiang New n under
Materials Co. District (Wuji common
Ltd. Town), Tongzhou control
City, Nantong City
Nantong No. 1, Kaisha Road, Transportati 100.0 Establishe
Teng’an China Binjiang New on industry 0 d by
Logistics Co., District, Tongzhou investment
Ltd. City, Nantong City
Jiangsu Textile New Manufacturin 100.0 Establishe
Xuanda Material Industrial g 0 d by
Polymer China Park, Wujie Town, investment
Material Co., Tongzhou District,
Ltd. Nantong City
Jiangsu Deli No. 599, Huanghe Manufacturin 100.0 Business
Chemical South Road, g 0 combinatio
Fiber Co., China Sucheng Economic n not
Ltd. Development under
Zone, Suqian City common
control
Hengli 02, 03, 04, Floor 7, Other 100.0 Business
Futures Co., No. 308, Jinkang financial 0 combinatio
Ltd. China Road, China industry n not
(Shanghai) Pilot under
Free Trade Zone common
control
Hengli Floor 7, No. 308, Wholesale 100.0 Establishe
Hengxin China Jinkang Road, and retail 0 d by
Industry and China (Shanghai) investment
Trade Pilot Free Trade
(Shanghai) Zone (nominal
Co., Ltd. floor, actual floor
6th floor) 01
Suzhou Manufacturin 100.0 Business
Susheng Tanqiu Village, g 0 combinatio
Thermal China Shengze Town, n under
Power Co., Wujiang common
Ltd. control
Suzhou Room 202, Building Wholesale 100.0 Establishe
Binglin 8, No. 1, Hengli and retail 0 d by
Trading Co., Road, Nanma investment
Ltd. China Industrial Zone,
Shengze Town,
Wujiang District,
Suzhou
Sichuan No. 10, Section 2, Manufacturin 100.0 Establishe
Hengli New Lingang Avenue, g 0 d by
Material Co., China South Sichuan investment
Ltd. Lingang Area,
Sichuan Free Trade
Zone
Hengli New No. 88, Gangcheng Manufacturin 100.0 Establishe
Materials China Road, Yangbei g 0 d by
(Suqian) Co., Street, Sucheng investment
Ltd. District, Suqian City
Suzhou Room 203, Building Wholesale 100.0 Establishe
Hengli 8, No. 1, Hengli industry 0 d by
Chemical Road, Nanma investment
New Material China Industrial Zone,
Co., Ltd. Shengze Town,
Wujiang District,
Suzhou City,
Jiangsu Province
Kanghui Yingkou Manufacturin 66.33 33.67 Business
New Material Xianrendao Energy g combinatio
Technology China and Chemical n under
Co., Ltd. Industry Zone common
control
Comfort Room 201, Building Wholesale 100.0 Establishe
International 8, No. 1, Hengli and retail 0 d by
Trade China Road, Nanma investment
(Jiangsu) Industrial Zone,
Co., Ltd.
Shengze Town,
Wujiang District
Suqian Shop 125, Property Manufacturin 100.0 Establishe
Kanghui 77, Huaihai g 0 d by
New Material Property Material investment
Co., Ltd. China Decoration City,
Suqian Economic
and Technological
Development Zone
Kanghui 1st Floor, Room 4, Manufacturin 100.0 Establishe
Kunshan No. 232 Yuanfeng g 0 d by
New Material China Road, Yushan investment
Technology Town, Kunshan
Co., Ltd. City
Kanghui Complex Building Manufacturin 100.0 Establishe
Dalian New No. 298, g 0 d by
Material Changsong Road, investment
Technology China Changxing IsLand
Co., Ltd. Economic Zone,
Dalian, Liaoning
Province
Jiangsu The Yangtze River Manufacturin 100.0 Establishe
Kanghui Delta Ecological g 0 d by
New Material Green Integration investment
Technology Development
Co., Ltd. China Demonstration
Zone (No.558
Fenhu Avenue, Lili
Town, Wujiang
District, Suzhou
City)
Kanghui Hengli Textile New Manufacturin 100.0 Business
Nantong Material Industrial g 0 combinatio
New Material China Park, Wujie Town, n under
Technology Tongzhou District, common
Co., Ltd. Nantong City control
Hengli Former Xingang Industrial 100.0 Business
Investment Primary School, Investment 0 combinatio
(Dalian) Co., Xingang Village, n under
Ltd. China Changxing IsLand common
Economic Zone, control
Dalian, Liaoning
Province
Hengli Former Xingang Manufacturin 100.0 Establishe
Petrochemic Primary School, g 0 d by
al (Dalian) Xingang Village, investment
Co., Ltd. China Changxing IsLand
Economic Zone,
Dalian, Liaoning
Province
Hengli Xingang Village, Transportati 100.0 Business
Shipping Changxing IsLand on industry 0 combinatio
(Dalian) Co., Economic Zone, n not
Ltd. China Dalian, Liaoning under
Province (formerly common
Xingang Primary control
School)
Hengli Flat 1906, 19/F, Wholesale 100.0 Establishe
Petrochemic China Harbour Centre, 25 and retail 0 d by
al Hong Harbour Road, investment
Co.,Limited Kong Wanchai, Hong
Kong
Shenzhen Unit 6101-03, Block Wholesale 100.0 Business
Ganghui A, Kingkey 100 and retail 0 combinatio
Trading Co., Property, 5016 n under
Ltd. China Shennan East common
Road, Guiyuan control
Street, Luohu
District, Shenzhen
Hengli No. 298, Transportati 100.0 Establishe
Logistics Changsong Road, on industry 0 d by
(Dalian) Co., China Changxing IsLand investment
Ltd. Economic Zone,
Dalian, Liaoning
Province
Hengli Xingang Village, Manufacturin 100.0 Business
Concrete Changxing IsLand g 0 combinatio
(Dalian) Co., Economic Zone, n under
Ltd. China Dalian, Liaoning common
Province (formerly control
Xingang Primary
School)
Hengli No. 26, Xiayong Manufacturin 100.0 Establishe
Petrochemic Petrochemical g 0 d by
al (Huizhou) China Avenue Middle, investment
Co., Ltd. Daya Bay, Huizhou
(Plant No. 2 (R&D))
Hengli No. 298, Manufacturin 100.0 Business
Petrochemic Changsong Road, g 0 combinatio
al (Dalian) China Changxing IsLand n under
Refining Co., Economic Zone, common
Ltd. Dalian, Liaoning control
Province
Hengli 9 STRAITS VIEW Wholesale 100.0 Establishe
Petrochemic #08-11 MARINA and retail 0 d by
al Singapor ONE WEST investment
International e TOWER
Pte. Ltd. SINGAPORE(0189
37)
Hengli 9 STRAITS VIEW Wholesale 79.00 Establishe
Oilchem Pte. #08-11 MARINA and retail d by
Ltd. Singapor ONE WEST investment
e TOWER
SINGAPORE(0189
37)
Hengli 9 STRAITS VIEW Transportati 100.0 Establishe
Shipping #08-11 MARINA on industry 0 d by
International Singapor ONE WEST investment
Pte. Ltd. e TOWER
SINGAPORE(0189
37)
Hengli Room 801, Building Wholesale 100.0 Establishe
Energy A, Sunshine and retail 0 d by
(Hainan) Co., China Financial Plaza, investment
Ltd. Jiyang District,
Sanya City, Hainan
Province
Hengli Room 205-1328, Wholesale 100.0 Establishe
Petrochemic No.181 Xingyang and retail 0 d by
al (Hainan) China Avenue, Jiangdong investment
Co., Ltd. New District,
Haikou City, Hainan
Province
Suzhou No. 1801, Pangjin Wholesale 100.0 Establishe
Hengli Road, Wujiang and retail 0 d by
Chemical Economic and investment
Import & China Technological
Export Co., Development
Ltd. Zone, Suzhou City,
Jiangsu Province
Suzhou Wholesale 100.0 Establishe
Hengli Room 301, Building and retail 0 d by
Energy 5, No. 1518, Linhu investment
Chemical China Avenue, Lili Town,
Import & Wujiang District,
Export Co., Suzhou City
Ltd.
Shenzhen No. 5016, Shennan Wholesale 100.0 Business
Shengang East Road, Guiyuan and retail 0 combinatio
Trading Co., Street, Luohu n under
Ltd. China District, common
Shenzhen ,Unit control
6101-03B, Block A,
Kingkey 100
Building
Hengli OSBL Project - Wholesale 100.0 Establishe
Refining Public Works and retail 0 d by
Products Office Building No. investment
Sales China 298, Changsong
(Dalian) Co., Road, Changxing
Ltd. IsLand Economic
Zone, Dalian,
Liaoning Province
Hengli No. 298, Wholesale 100.0 Establishe
Aviation Oil Changsong Road, and retail 0 d by
Co., Ltd. China Changxing IsLand investment
Economic Zone,
Dalian, Liaoning
Province
Hengli 2302, Property 88, Wholesale 100.0 Establishe
Oilchem Suzhou Central and retail 0 d by
(Suzhou) Co., Plaza, Suzhou investment
Ltd. China Industrial Park,
Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Hengli Room 2301, Wholesale 100.0 Establishe
Energy Property 88, and retail 0 d by
(Suzhou) Co., Suzhou Central investment
Ltd. China Plaza, Suzhou
Industrial Park,
Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Hengli Complex Building Transportati 100.0 Establishe
Logistics No. 298, on industry 0 d by
(Dalian) Co., Changsong Road, investment
Ltd. China Changxing IsLand
Economic Zone,
Dalian, Liaoning
Province
Suzhou East side of East Wholesale 100.0 Establishe
Hengli Bridge, Lili Town, and retail 0 d by
Chemical China Wujiang District, investment
Polymer Co., Suzhou City
Ltd.
Hengli No. 298, Manufacturin 100.0 Establishe
Petrochemic Changsong Road, g 0 d by
al (Dalian) China Changxing IsLand investment
Chemical Economic Zone,
Co., Ltd. Dalian, Liaoning
Province
Hengli Complex Building Manufacturin 100.0 Establishe
Petrochemic No. 298, g 0 d by
al (Dalian) Changsong Road, investment
New Material China Changxing IsLand
Technology Economic Zone,
Co., Ltd. Dalian, Liaoning
Province
Hengli Complex Building Manufacturin 100.0 Establishe
Petrochemic No. 298, g 0 d by
al Utilities Changsong Road, investment
(Dalian) Co., China Changxing IsLand
Ltd. Economic Zone,
Dalian, Liaoning
Province
Dalian Dispatching Manufacturin 65.00 Establishe
Hengzhong Center, No. 3 g d by
Special Renshan Street, investment
Materials China Changxing Island
Co., Ltd. Economic Zone,
Dalian, Liaoning
Province
Suzhou No. 1, Hengli Road, Wholesale 100.0 Establishe
Textile Nanma Industrial and retail 0 d by
Group China Zone, Shengze investment
Network E- Town, Wujiang
District
commerce
Co., Ltd.
Hengli Room 1688, Wholesale 100.0 Establishe
Petrochemic Property 2, No. 215, and retail 0 d by
al Sales Co., China Lianhe North Road, investment
Ltd. Fengxian District,
Shanghai
Hengli 2401, No. 3099, Wholesale 100.0 Establishe
(Eastern Chang’an Road, and retail 0 d by
China) China Songling Town, investment
Petrochemic Wujiang District,
al Sales Co., Suzhou City
Ltd.
Hengli No. 1 Yangfan Wholesale 100.0 Establishe
Chemical China Avenue, Yangbei and retail 0 d by
(Suqian) Co., Town, Sucheng investment
Ltd. District, Suqian City
Hengli Oil No. 1 Yangfan Wholesale 100.0 Establishe
(Suqian) Co., China Avenue, Yangbei and retail 0 d by
Ltd. Town, Sucheng investment
District, Suqian City
Hengli 3202, Luohu Wholesale 100.0 Establishe
(Southern Business Center, and retail 0 d by
China) 2028 Shennan East investment
Petrochemic China Road, Chengdong
al Sales Co., Community,
Ltd. Dongmen Street,
Luohu District,
Shenzhen
Hengli Window 1, West Wholesale 100.0 Establishe
(Northern Side of the and retail 0 d by
China) Approval Hall, R&D investment
Petrochemic Property,
al Sales Co., China Xianrendao
Ltd. Economic
Development
Zone, Yingkou,
Liaoning Province
Yuehai Room 1401, Main Wholesale 100.0 Business
Petrochemic Tower Building, and retail 0 combinatio
al China Ocean Shipping n not
(Shenzhen) Center, No. 59, under
Co., Ltd. Linhai Avenue, common
Nanshan Street, control
Qianhai Shenzhen-
Hong Kong
Cooperation Zone,
Shenzhen 14002-
14003
Hengli Oil 2303, Property 88, Wholesale 100.0 Establishe
Sales Suzhou Central and retail 0 d by
(Suzhou) Co., Plaza, Suzhou investment
Ltd. China Industrial Park,
Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Hengli 2304, Property 88, Wholesale 100.0 Establishe
Chemical Suzhou Central and retail 0 d by
Sales Plaza, Suzhou investment
(Suzhou) Co., China Industrial Park,
Ltd. Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Suzhou Wholesale 100.0 Establishe
Baocheng 558 Fenhu Avenue, and retail 0 d by
Weiye China Lili Town, Wujiang investment
Petrochemic District, Suzhou
al Trading City
Co., Ltd.
Suzhou No. 1801, Pangjin Wholesale 100.0 Establishe
Jinzhan Road, Wujiang and retail 0 d by
Hengyuan China Economic and investment
Petrochemic Technological
al Trading Development Zone
Co., Ltd.
Hengli North No. 3, Unit 1, 21st Wholesale 100.0 Establishe
Energy Sales Floor, Office and retail 0 d by
Co., Ltd. Property B, Victoria investment
China Plaza, No.56
Gangxing Road,
Zhongshan District,
Dalian City,
Liaoning Province
Hengli Room 813, Free Wholesale 100.0 Establishe
Tongshang Trade Building, and retail 0 d by
New Energy China Dalian Free Trade investment
Co., Ltd. Zone, Liaoning
Province
Hengli Service Apartment, Wholesale 100.0 Establishe
Tongshang Building 14, Suzhou and retail 0 d by
New Material Bay View Garden, investment
Co., Ltd. No. 777, Fengqing
China Street, East Taihu
Lake Ecotourism
Resort (Taihu New
Town), Wujiang
District, Suzhou
City
Hengli Room F1-A-1026, Wholesale 100.0 Establishe
Energy Building A2, No. 8, and retail 0 d by
Import and China Qicun Road, investment
Export Co., Suzhou Area, China
Ltd. (Jiangsu) Pilot Free
Trade Zone
Hengli Room 702-7, No. Wholesale 100.0 Establishe
Nenghua 719 Shengui Road, and retail 0 d by
(Shanghai) China Minhang District, investment
Trading Co., Shanghai
Ltd.
Hengli Room 101, Floor 1, Wholesale 100.0 Establishe
Hengyuan Building 1, No. 99, and retail 0 d by
Supply Chain Shuanghui Road, investment
(Shanghai) China Lingang New Area,
Co., Ltd. China (Shanghai)
Pilot Free Trade
Zone
Hengli New Room 502, No. 99, Wholesale 100.0 Establishe
Energy China Huangpu Road, and retail 0 d by
(Shanghai) Hongkou District, investment
Co., Ltd. Shanghai
Hengli Room 2507, Wholesale 100.0 Establishe
Yuanshang Building 88, and retail 0 d by
Technology Suzhou Central investment
(Suzhou) Co., China Plaza, Suzhou
Ltd. Industrial Park,
Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Suzhou Room 2506, Wholesale 100.0 Establishe
Hengli China Building 88, and retail 0 d by
Jinshang Suzhou Center investment
Energy Plaza, Suzhou
Technology Industrial Park,
Co., Ltd. Suzhou Area, China
(Jiangsu) Pilot Free
Trade Zone
Dalian Hengli No. 5, 21st Floor, Wholesale 100.0 Establishe
Fine No. 52, Gangxing and retail 0 d by
Chemical China Road, Zhongshan investment
Sales Co., District, Dalian City,
Ltd. Liaoning Province
Hengli Hefeng Homeland, Wholesale 100.0 Establishe
Petrochemic Meilan District, and retail 0 d by
al Sales Haikou City, No. 63- investment
(Haikou) Co., China 1, Qiongshan
Ltd. Avenue, Jiangdong
New District,
Haikou City, Hainan
Province-5449
Hengli Room 805, Building Wholesale 100.0 Establishe
Energy A, Yahua Xiangxie, and retail 0 d by
Chemical China Sanya Bay Road, investment
(Sanya) Co., Tianya District,
Ltd. Sanya City, Hainan
Province
Dalian Hengli No. 4, 21st Floor, Wholesale 100.0 Establishe
Petrochemic No. 52, Gangxing and retail 0 d by
al Sales Co., China Road, Zhongshan investment
Ltd. District, Dalian City,
Liaoning Province
Dalian Hengli No. 62, Changxing Wholesale 100.0 Establishe
Gold Road, Changxing and retail 0 d by
Merchant China Island Economic investment
Sales Co., Zone, Dalian,
Ltd. Liaoning Province
Dalian Hengli No. 62, Changxing Wholesale 100.0 Establishe
New Energy Road, Changxing and retail 0 d by
Sales Co., China Island Economic investment
Ltd. Zone, Dalian,
Liaoning Province
Dalian No. 6, 21st Floor, Wholesale 100.0 Establishe
Henglixing No. 52, Gangxing and retail 0 d by
Gemstone China Road, Zhongshan investment
Chemical District, Dalian City,
Trading Co., Liaoning Province
Ltd.
Dalian Hengli Office Dormitory Wholesale 100.0 Establishe
Gaoyuan Building, No. 6, No. and retail 0 d by
Sales Co., 76, Jinghai Street, investment
Ltd. China Changxing Island
Economic Zone,
Dalian, Liaoning
Province
Hengli Room 3201, Luohu Wholesale 100.0 Establishe
Energy Business Center, and retail 0 d by
Chemical No. 2028, Shennan investment
(Shenzhen) East Road,
Co., Ltd. China Chengdong
Community,
Dongmen Street,
Luohu District,
Shenzhen
Nantong Room 101, Building Wholesale 100.0 Establishe
Hengli 5, Kaisha Village, and retail 0 d by
Maoyuan China Wujie Town, investment
Petrochemic Tongzhou District,
al Trading Nantong City,
Co., Ltd. Jiangsu Province
Suzhou Room 501-04, Wholesale 100.0 Establishe
Hengli New Building A, Building and retail 0 d by
Energy Sales 1, Taihu East Bank investment
Co., Ltd. Business Center,
China No. 4088 Kaiping
Road, Wujiang
District, Suzhou
City, Jiangsu
Province
Suzhou Room 501-3, Wholesale 100.0 Establishe
Hengli Fine Building A, Building and retail 0 d by
Chemical 1, Taihu East Bank investment
Sales Co., Business Center,
Ltd. No. 4088 Kaiping
China Road, East Taihu
Lake Eco-tourism
Resort (Taihu New
Town), Wujiang
District, Suzhou
City
Hengli No. 1406, Main Wholesale 100.0 Establishe
Petrochemic Tower, Ocean and retail 0 d by
al Sales Shipping Center, investment
(Shenzhen) No. 59, Linhai
Co., Ltd. China Avenue, Nanshan
Street, Qianhai
Shenzhen-Hong
Kong Cooperation
Zone, Shenzhen-
14057, 14058
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.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 thevoting rights and was included in the scope of the consolidated financial statements.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.Basis for determining whether a company is an agent or a principal: NoneOther note:
In this period, there was no equity investment in which the parent company had more than half ofthe voting rights but failed to exercise control.
2. Transactions in which the share of ownership interest in a subsidiary changes and the
subsidiary is still controlled
3. Interests in joint ventures or associates
4. Significant joint venture
5. Interests in structured entities not included in the scope of consolidated financial
statements
Explanation on structured entities not included in the scope of consolidated financial statements:
On 31 December 2022, the structured entities related to the Company but not included in thescope of this financial statement are mainly engaged in asset management business, manageclient assets and provide clients with investment management services for securities, futures andother financial products. The total assets of such structured entities on 31 December 2022 wereRMB227.29 million.
6. Others
(1) The Company's wholly-owned subsidiary, Suzhou Textile Group Network E-commerceCo., Ltd. and Jiangsu Hegao Investment Co., Ltd. signed the "Jiangsu Hengli Chemical Fiber Co.,Ltd. Equity Transfer Agreement" on 12 April 2022. Suzhou Textile Group Network E-commerceCo., Ltd. acquired 0.01% of the equity of Jiangsu Hengli Chemical Fiber Co., Ltd. held by JiangsuHegao Investment Co., Ltd., and the transfer price was RMB575,467.23. On 12 April 2022, JiangsuHengli Chemical Fiber Co., Ltd. completed the industrial and commercial registration proceduresfor the above-mentioned equity transfer. After the completion of this equity transfer, JiangsuHengli Chemical Fiber Co., Ltd. became a wholly-owned subsidiary of the Company.
(2) The Company's wholly-owned subsidiary, Hengli Investment (Dalian) Co., Ltd. and DalianHenghan Investment Co., Ltd. signed the "Hengli Petrochemical (Dalian) Co., Ltd. Equity TransferAgreement" on 27 April 2022. Hengli Investment (Dalian) Co., Ltd. acquired 0.16978% equity ofHengli Petrochemical (Dalian) Co., Ltd. held by Dalian Henghan Investment Co., Ltd., and thetransfer price was RMB19.75 million. Hengli Petrochemical (Dalian) Co., Ltd. has completed theindustrial and commercial registration procedures for the above equity transfer on 28 April 2022.After the completion of this equity transfer, Hengli Petrochemical (Dalian) Co., Ltd. became theCompany's wholly-owned subsidiary.
X. Risk of financial instruments
The Company faces risks of various financial instruments in its daily activities, mainly includingcredit risk, market risk and liquidity risk. The Company's main financial instruments include cashand bank balances, equity investment, debt investment, loans, accounts receivable, accountspayable, etc. For details of each financial instrument, please refer to the relevant items in this Note.The risks associated with these financial instruments and the risk management policies adoptedby the Company to reduce these risks are as follows:
The board of directors is responsible for planning and establishing the Company's riskmanagement structure, formulating the Company's risk management policies and relatedguidelines, and supervising the implementation of risk management measures. The Company hasformulated risk management policies to identify and analyze the risks faced by the Company.These risk management policies specify specific risks and cover many aspects such as marketrisk, credit risk and liquidity risk management. The Company regularly assesses changes in themarket environment and the Company's operating activities to determine whether to update riskmanagement policies and systems. The Company's risk management is carried out by the riskmanagement committee in accordance with the policies approved by the board of directors. TheRisk Management Committee identifies, evaluates and avoids related risks through closecooperation with the Company’s other business departments. The Company's internal auditdepartment conducts regular audits on risk management controls and procedures, and reportsthe audit results to the Company's audit committee.
The Company diversifies the risk of financial instruments through appropriate diversifiedinvestments and business portfolios, and reduces risk concentrated on a single industry, a specificregion, or a specific counterparty by formulating appropriate risk management policies.
(I) Market risk
Market risk of financial instruments refers to the risk that the fair value or future cash flow offinancial instruments will fluctuate due to changes in market price, including foreign exchange raterisk, interest rate risk and other price risk.
1. Foreign exchange rate risk
Exchange rate risk refers to the risk that the fair value of financial instruments or future cashflows will fluctuate due to changes in foreign exchange rates