Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
China Huarong Asset Management Co., Ltd.
(A joint stock limited liability company incorporated in the People's Republic of China)
(Stock Code: 2799)
INSIDE INFORMATION
This announcement is made by China Huarong Asset Management Co., Ltd. (the "Company") pursuant to Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and the Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
Pursuant to regulatory requirements and regulations such as Measures for the Administration of Interbank Lending (Order of the People's Bank of China [2007] No. 3) (《同業拆借管理辦法》 ( 中國人民銀行令 [2007] 第 3 號 )) and Notice on Disclosure of 2020 Audit Report and Other
Related Reports by Members of the Interbank Lending Market (Zhong Hui Jiao Fa [2021] No. 100) (《關於同業拆借市場成員披露 2020 年度審計報告及其他相關報告的通知》( 中匯交發 [2021] 100 號)), China Huarong Financial Leasing Co., Ltd. ("Huarong Financial Leasing"), a subsidiary
of the Company, published its audited financial statements for the year ended 31 December 2020 ("Huarong Financial Leasing Financial Statements") on the chinamoney.com.cn and ChinaBond. com.cn, and the contents thereof were attached to this announcement. For the avoidance of doubt, the "Company" mentioned in the Huarong Financial Leasing Financial Statements refers to Huarong Financial Leasing.
Huarong Financial Leasing Financial Statements accompanying with this announcement was prepared in accordance with generally accepted PRC accounting standards and has been audited by Ernst & Young Hua Ming (LLP) (the auditor of Huarong Financial Leasing).
Shareholders and potential investors of the Company are advised to exercise caution when dealing in the shares of the Company.
By order of the Board
China Huarong Asset Management Co., Ltd.
WANG Zhanfeng
Chairman
Beijing, the PRC
19 April 2021
As at the date of this announcement, the Board comprises Mr. WANG Zhanfeng and Mr. WANG Wenjie as executive directors; Ms. ZHAO Jiangping, Mr. ZHENG Jiangping, Mr. XU Nuo and Mr. ZHOU Langlang as non-executive directors; Mr. TSE Hau Yin, Mr. SHAO Jingchun, Mr. ZHU Ning and Ms. CHEN Yuanling as independent non-executive directors.
1
China Huarong Financial Leasing Co., Ltd.
Audited Financial Statements
Year ended 31 December 2020
Important Notice
It is always the management's responsibility to prepare and translate the financial statements. This set of translated illustrative financial statements is for reference only. It has been translated from the illustrative financial statements for the general non-listed companies that have adopted the new standards of financial instruments, revenue, and leases under Accounting Standards for Business Enterprises. In the case where the English version does not conform to the Chinese version, the Chinese version shall prevail.
2
CONTENTS
Pages
I. AUDITOR'S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6
-
AUDITED FINANCIAL STATEMENTS
Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . 7-8 Consolidated income statement . . . . . . . . . . . . . . . . . . . . . . . 9-10 Consolidated statement of changes in equity . . . . . . . . . . . . . . . . . . 11 Consolidated statement of cash flows . . . . . . . . . . . . . . . . . . . . 12-13 Company balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15 Company income statement . . . . . . . . . . . . . . . . . . . . . . . . 16-17 Company statement of changes in equity . . . . . . . . . . . . . . . . . . . . 18 Company statement of cash flows . . . . . . . . . . . . . . . . . . . . . . 19-20 Notes to financial statements . . . . . . . . . . . . . . . . . . . . . . . 21-123
3
AUDITOR'S REPORT
Ernst & Young Hua Ming (2021) Shen Zi No. 61274415_B01
China HuaRong Financial Leasing Co., Ltd
To the board of directors of China Huarong Financial Leasing Co., Ltd:
-
Opinion
We have audited the financial statements of China Huarong Financial Leasing Co., Ltd. (the "Company"), and its subsidiaries (the "Group"), which comprise the consolidated and company balance sheets as at 31 December 2020, and the consolidated and company income statements, the consolidated and company statements of changes in equity and the consolidated and company statements of cash flows for the year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the Company's financial position as at 31 December 2020, and the consolidated and the Company's financial performance and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises ("ASBEs").
(II) Basis for opinion
We conducted our audit in accordance with China Standards on Auditing ("CSAs"). 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 in accordance with China Code of Ethics for Certified Public Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
-
Responsibilities of the management and those charged with governance for the financial statements
The management of the Company is responsible for the preparation and fair presentation of the financial statements in accordance with ASBEs, and for designing, implementing and maintaining such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless the management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
4
AUDITOR'S REPORT (CONTINUED)
Ernst & Young Hua Ming (2021) Shen Zi No. 61274415_B01
China HuaRong Financial Leasing Co., Ltd
(IV) Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are generally considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
- Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
5
AUDITOR'S REPORT (CONTINUED)
Ernst & Young Hua Ming (2021) Shen Zi No. 61274415_B01
China HuaRong Financial Leasing Co., Ltd
(IV) Auditor's responsibilities for the audit of the financial statements (continued)
As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (continued)
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. 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, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Ernst & Young Hua Ming LLP | Chinese Certified Public Accountant |
Zhou Ming Jun |
Chinese Certified Public Accountant
Wang Chen Zhou
Beijing, the People's Republic of China | 12 March 2021 |
6
China Huarong Financial Leasing Co., Ltd | |||||
Consolidated balance sheet | |||||
31 December 2020 | Expressed in Renminbi Yuan | ||||
ASSETS | Note VI | 31 December 2020 | 31 December 2019 | ||
Cash and deposits with the central bank | 1 | 20,762,963.28 | 20,776,405.98 | ||
Deposits with other financial institutions | 2 | 15,368,768,350.65 | 15,980,098,121.51 | ||
Notes receivables | 3 | 6,266,858.62 | 48,759,636.96 | ||
Finance lease receivables | 4 | 108,745,242,454.93 | 107,349,601,771.61 | ||
Prepayments | 1,697,567.08 | - | |||
Financial investments: | |||||
Finance assets held for trading | 5 | 99,466,285.55 | 595,709,400.00 | ||
Debt investments | 6 | 475,711,082.38 | 1,024,386,187.34 | ||
Other debt investments | 7 | 1,105,222,322.14 | 96,356,300.00 | ||
Other equity investments | 8 | 239,280,984.10 | 146,647,820.91 | ||
Operating lease assets | 9 | 6,838,004,113.56 | 6,564,585,626.69 | ||
Fixed assets | 10 | 186,255,044.88 | 185,622,803.39 | ||
Construction in progress | 11 | 260,509,778.89 | 232,079,043.73 | ||
Intangible assets | 12 | 730,853,712.16 | 753,388,056.26 | ||
Deferred tax assets | 13 | 681,252,903.10 | 525,565,995.85 | ||
Other assets | 14 | 3,521,112,375.40 | 4,575,752,358.82 | ||
Total assets | 138,280,406,796.72 | 138,099,329,529.05 |
The accompanying notes to financial statements form an integral part of these financial statements
7
China Huarong Financial Leasing Co., Ltd | ||||||
Consolidated balance sheet (continued) | ||||||
31 December 2020 | Expressed in Renminbi Yuan | |||||
LIABILITIES AND EQUITY | Note VI | 31 December 2020 | 31 December 2019 | |||
Liabilities | ||||||
Borrowings | 16 | 84,923,925,647.22 | 90,649,904,789.42 | |||
Placements from banks and | ||||||
other financial institutions | 17 | 1,426,151,613.90 | 502,891,111.11 | |||
Notes payable | 18 | 8,706,157,186.21 | 4,848,381,270.30 | |||
Financial assets sold under | ||||||
repurchase agreements | 19 | 388,138,682.82 | - | |||
Employee benefits payable | 20 | 242,506,081.29 | 236,175,079.01 | |||
Taxes payable | 21 | 371,365,973.55 | 388,101,385.83 | |||
Bonds payable | 22 | 13,923,997,659.17 | 14,130,055,356.10 | |||
Other liabilities | 23 | 11,649,996,637.75 | 11,165,203,832.78 | |||
Total liabilities | 121,632,239,481.91 | 121,920,712,824.55 | ||||
Equity | ||||||
Paid-in capital | 24 | 5,926,760,754.00 | 5,926,760,754.00 | |||
Capital reserves | 25 | 2,410,893,609.31 | 2,410,893,609.31 | |||
Accumulated other | ||||||
comprehensive income | 26 | (199,259,438.20) | (120,259,877.11) | |||
Surplus reserves | 27 | 1,418,856,993.36 | 1,285,408,243.18 | |||
General reserves | 28 | 2,005,588,190.80 | 1,984,993,098.17 | |||
Unappropriated profit | 29 | 5,085,327,205.54 | 4,690,820,876.95 | |||
Total equity | 16,648,167,314.81 | 16,178,616,704.50 | ||||
Total liabilities and equity | 138,280,406,796.72 | 138,099,329,529.05 |
The accompanying notes to financial statements form an integral part of these financial statements
The financial statements have been signed by:
Legal representative:LI Peng Financial controller:SHAO Ligang Accounting supervisor:YE Qiong
8
China Huarong Financial Leasing Co., Ltd | ||||||
Consolidated income statement | ||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |||||
Note VI | 2020 | 2019 | ||||
Operating income | ||||||
Interest income | 30 | 7,375,309,299.00 | 7,581,086,957.45 | |||
Income from leasing operations | 31 | 858,341,406.26 | 709,214,558.05 | |||
Profit arising from changes in fair value | 908,085.55 | - | ||||
Investment income | 32 | 7,298,493.89 | 12,202,754.99 | |||
Foreign exchange gain/ (loss) | (920,563.33) | 266,923.49 | ||||
Other operating income | 3,214,717.09 | 8,498,857.87 | ||||
Profit arising from disposal of assets | 805,660.70 | (206,302.39) | ||||
Other income | 230,917.65 | - | ||||
Total operating income | 8,245,188,016.81 | 8,311,063,749.46 | ||||
Operating expenses | ||||||
Interest expense | 33 | 4,143,584,787.03 | 4,592,513,270.29 | |||
Expenses on leasing operations | 34 | 539,032,870.14 | 428,730,707.15 | |||
Fee and commission expenses | 8,882,160.22 | 4,679,690.84 | ||||
Other operating expenses | 35 | 18,127,084.83 | 20,726,105.20 | |||
Taxes and surcharges | 36 | 30,477,602.64 | 25,949,155.20 | |||
General and administrative expenses | 37 | 293,514,629.13 | 292,527,211.69 | |||
Credit impairment losses | 38 | 1,119,686,350.84 | 667,477,707.06 | |||
Impairment losses/ (reversal) of other | ||||||
assets | 39 | 48,700,464.27 | (854,778.10) | |||
Total operating expenses | 6,202,005,949.10 | 6,031,749,069.33 | ||||
Operating profit | 2,043,182,067.71 | 2,279,314,680.13 | ||||
Add:Non-operating income | ||||||
40 | 7,830,544.54 | 5,160,605.28 | ||||
Less:Non-operating expenses | 41 | 4,538,735.00 | 4,838,387.82 | |||
Profit before income tax | 2,046,473,877.25 | 2,279,636,897.59 | ||||
Less:Income tax expenses | 42 | 486,069,413.73 | 529,220,529.34 | |||
Net profit | 1,560,404,463.52 | 1,750,416,368.25 | ||||
Classified by continuity of operations | ||||||
Profit from continuing operations | 1,560,404,463.52 | 1,750,416,368.25 |
The accompanying notes to financial statements form an integral part of these financial statements.
9
China Huarong Financial Leasing Co., Ltd | |||||
Consolidated income statement (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
Note VI | 2020 | 2019 | |||
Other comprehensive income, net of tax | 26 | (78,999,561.09) | 5,954,083.95 | ||
Other comprehensive income that will not | |||||
be reclassified to profit or loss | |||||
Change in the fair value of other equity | |||||
investments | (42,164,173.15) | 1,309,966.85 | |||
Other comprehensive income that may be | |||||
reclassified to profit or loss | |||||
Change in the fair value of other debt | |||||
investments | (14,480,125.82) | 2,247,825.00 | |||
Exchange differences on translation of | |||||
financial statements in foreign | |||||
currencies | (22,355,262.12) | 2,396,292.10 | |||
Total comprehensive income | 1,481,404,902.43 | 1,756,370,452.20 |
The accompanying notes to financial statements form an integral part of these financial statements
10
China Huarong Financial Leasing Co., Ltd | |||||||||||||||
Consolidated statement of changes in equity | |||||||||||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||||||||||||
For the year ended 31 December 2020 | |||||||||||||||
Accumulated | |||||||||||||||
Paid-in capital | Capital reserves | other | Surplus reserves | General reserves | Unappropriated | Total equity | |||||||||
comprehensive | profit | ||||||||||||||
income | |||||||||||||||
I. | At 1 January 2020 | 5,926,760,754.00 | 2,410,893,609.31 | (120,259,877.11) | 1,285,408,243.18 | 1,984,993,098.17 | 4,690,820,876.95 | 16,178,616,704.50 | |||||||
II. | Changes for the year | ||||||||||||||
1. | Total comprehensive income | - | - | (78,999,561.09) | - | - | 1,560,404,463.52 | 1,481,404,902.43 | |||||||
2. | Profit distribution | ||||||||||||||
(1) | Appropriation to surplus reserves | - | - | - | 133,448,750.18 | - | (133,448,750.18) | - | |||||||
(2) | Appropriation to general reserves | - | - | - | - | 20,595,092.63 | (20,595,092.63) | - | |||||||
(3) | Distribution to owners | - | - | - | - | - | (1,011,854,292.12) | (1,011,854,292.12) | |||||||
III. | At 31 December 2020 | 5,926,760,754.00 | 2,410,893,609.31 | (199,259,438.20) | 1,418,856,993.36 | 2,005,588,190.80 | 5,085,327,205.54 | 16,648,167,314.81 | |||||||
For the year ended 31 December 2019 | |||||||||||||||
Accumulated | |||||||||||||||
Paid-in capital | Capital reserves | other | Surplus reserves | General reserves | Unappropriated | Total equity | |||||||||
comprehensive | profit | ||||||||||||||
income | |||||||||||||||
I. | At 1 January 2019 | 5,926,760,754.00 | 2,410,893,609.31 | (126,213,961.06) | 1,130,296,530.45 | 1,946,586,133.09 | 3,571,823,672.59 | 14,860,146,738.38 | |||||||
II. | Changes for the year | ||||||||||||||
1. | Total comprehensive income | - | - | 5,954,083.95 | - | - | 1,750,416,368.25 | 1,756,370,452.20 | |||||||
2. | Profit distribution | ||||||||||||||
(1) | Appropriation to surplus reserves | - | - | - | 155,111,712.73 | - | (155,111,712.73) | - | |||||||
(2) | Appropriation to general reserves | - | - | - | - | 38,406,965.08 | (38,406,965.08) | - | |||||||
(3) | Distribution to owners | - | - | - | - | - | (437,900,486.08) | (437,900,486.08) | |||||||
III. | At 31 December 2019 | 5,926,760,754.00 | 2,410,893,609.31 | (120,259,877.11) | 1,285,408,243.18 | 1,984,993,098.17 | 4,690,820,876.95 | 16,178,616,704.50 | |||||||
The accompanying notes to financial statements form an integral part of these financial statements
11
China Huarong Financial Leasing Co., Ltd | |||||
Consolidated statement of cash flows | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
Note VI | 2020 | 2019 | |||
I. Cash flows from operating activities | |||||
Net decrease in lease payments | 1,434,551,088.37 | - | |||
Decrease in deposits with the central | |||||
bank and other financial institutions | 1,576,808,833.10 | 426,385,225.13 | |||
Net increase in lease risk fund and | |||||
advance rentals | 440,594,623.82 | 441,243,866.96 | |||
Net increase in borrowings | - | 4,721,603,049.34 | |||
Net decrease in placements with other | |||||
financial institutions | - | 500,000,000.00 | |||
Net increase in placements from other | |||||
financial institutions | 919,000,000.00 | 500,000,000.00 | |||
Cash receipts from rentals and interest | 8,605,524,804.81 | 8,665,121,019.65 | |||
Net increase in financial assets sold | |||||
under repurchase agreements | 386,312,000.00 | - | |||
Net decrease in financial assets | |||||
purchased under resale agreements | - | 500,000,000.00 | |||
Other cash receipts relating to operating | |||||
activities | 880,448,988.75 | 490,091,319.68 | |||
Total cash inflows from operating | |||||
activities | 14,243,240,338.85 | 16,244,444,480.76 | |||
Net increase in lease payments | - | (6,106,912,729.51) | |||
Net decrease in borrowings | (5,458,884,701.45) | - | |||
Cash payment for interest, fee and | |||||
commission | (3,870,382,020.57) | (4,323,915,986.95) | |||
Cash paid to and on behalf of employees | (189,500,179.20) | (164,645,100.42) | |||
Cash paid to acquire operating lease | |||||
assets | (945,195,057.50) | (1,317,532,888.07) | |||
Taxes paid | (758,678,764.51) | (690,428,053.84) | |||
Other cash payments relating to | |||||
operating activities | (149,755,642.06) | (74,916,785.37) | |||
Total cash outflows from operating | |||||
activities | (11,372,396,365.29) | (12,678,351,544.16) | |||
Net cash flows from operating activities | 43 | 2,870,843,973.56 | 3,566,092,936.60 | ||
The accompanying notes to financial statements form an integral part of these financial statements
12
China Huarong Financial Leasing Co., Ltd | ||||||
Consolidated statement of cash flows (continued) | ||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |||||
Note VI | 2020 | 2019 | ||||
II. Cash flows from investing activities | ||||||
Cash receipts from returns of investments | 1,018,646,094.00 | 552,344,193.96 | ||||
Cash receipts from returns on investments | 9,155,771.53 | 10,870,261.74 | ||||
Net cash received from disposal of fixed | ||||||
assets, intangible assets and other | ||||||
long-term assets | 986,369.86 | 3,670.00 | ||||
Total cash inflows from investing activities | 1,028,788,235.39 | 563,218,125.70 | ||||
Cash payments to acquire fixed assets, | ||||||
intangible assets and other long-term | ||||||
assets | (40,713,165.78) | (78,965,034.56) | ||||
Cash payments for investments | (1,028,172,856.57) | (265,709,400.00) | ||||
Total cash outflows from investing activities | (1,068,886,022.35) | (344.674.434.56) | ||||
Net cash flows (used in)/generated from | ||||||
investing activities | (40,097,786.96) | 218,543,691.14 | ||||
III. | Cash flows from financing activities | |||||
Cash received from issuance of bonds | 6,676,147,095.14 | 5,138,657,102.48 | ||||
Total cash inflows from financing activities | 6,676,147,095.14 | 5,138,657,102.48 | ||||
Cash repayments for debts | (6,901,102,556.93) | (2,565,807,582.61) | ||||
Cash payments for distribution of dividends | ||||||
or profit and interest expenses | (1,576,663,423.01) | (950,179,889.22) | ||||
Total cash outflows from financing activities | (8,477,765,979.94) | (3,515,987,471.83) | ||||
Net cash flows (used in)/generated from | ||||||
financing activities | (1,801,618,884.80) | 1,622,669,630.65 | ||||
IV. Effect of foreign exchange rate changes on | ||||||
cash and cash equivalents | (22,355,262.12) | 2,396,292.10 | ||||
Ⅴ. Net increase in cash and cash equivalents | ||||||
1,006,772,039.68 | 5,409,702,550.49 | |||||
Add: Cash and cash equivalents at | ||||||
beginning of the year | 10,793,976,697.62 | 5,384,274,147.13 | ||||
VI. Cash and cash equivalents at end of the | ||||||
year | 44 | 11,800,748,737.30 | 10,793,976,697.62 |
The accompanying notes to financial statements form an integral part of these financial statements
13
China Huarong Financial Leasing Co., Ltd | ||||
Company balance sheet | ||||
31 December 2020 | Expressed in Renminbi Yuan | |||
ASSETS | Note XIV | 31 December 2020 | 31 December 2019 | |
Cash and deposits with the central bank | 1 | 8,129,730.66 | 8,043,559.79 | |
Deposits with other financial institutions | 10,137,820,624.85 | 12,563,043,323.69 | ||
Notes receivables | 6,266,858.62 | 48,759,636.96 | ||
Finance lease receivables | 102,341,045,527.54 | 101,059,609,985.06 | ||
Prepayments | 1,697,567.08 | - | ||
Financial investments: | ||||
Finance assets held for trading | 99,466,285.55 | 595,709,400.00 | ||
Debt investments | 944,041,928.38 | 1,825,273,882.09 | ||
Other debt investments | 1,105,222,322.14 | 96,356,300.00 | ||
Other equity instruments | 239,280,984.10 | 146,647,820.91 | ||
Long-term equity investments | 2 | 1,204,900,000.00 | 904,900,000.00 | |
Operating lease assets | 905,828,426.64 | 1,189,371,470.92 | ||
Fixed assets | 3 | 185,968,182.51 | 185,241,968.19 | |
Construction in progress | 260,509,778.89 | 232,079,043.73 | ||
Intangible assets | 730,853,712.16 | 753,388,056.26 | ||
Deferred tax assets | 652,511,453.00 | 503,484,627.81 | ||
Other assets | 4 | 5,704,631,399.14 | 5,972,642,218.80 | |
Total assets | 124,528,174,781.26 | 126,084,551,294.21 |
The accompanying notes to financial statements form an integral part of these financial statements
14
China Huarong Financial Leasing Co., Ltd | |||||
Company balance sheet (continued) | |||||
31 December 2020 | Expressed in Renminbi Yuan | ||||
LIABILITIES AND EQUITY | Note XIV | 31 December 2020 | 31 December 2019 | ||
Liabilities | |||||
Borrowings | 75,304,228,554.70 | 81,276,709,746.82 | |||
Placements from banks and | |||||
other financial institutions | 1,426,151,613.90 | 502,891,111.11 | |||
Notes payable | 8,706,157,186.21 | 4,848,381,270.30 | |||
Financial assets sold under | |||||
repurchase agreements | 388,138,682.82 | - | |||
Employee benefits payable | 6 | 231,508,260.92 | 226,045,794.64 | ||
Taxes payable | 7 | 356,823,110.30 | 366,791,708.37 | ||
Bonds payable | 10,633,079,972.32 | 12,039,050,636.87 | |||
Other liabilities | 8 | 11,432,015,678.98 | 11,040,598,215.71 | ||
Total liabilities | 108,478,103,060.15 | 110,300,468,483.82 | |||
Equity | |||||
Paid-in capital | 5,926,760,754.00 | 5,926,760,754.00 | |||
Capital reserves | 2,410,893,609.31 | 2,410,893,609.31 | |||
Accumulated other | |||||
comprehensive income | (159,375,352.71) | (102,731,053.74) | |||
Surplus reserves | 1,418,856,993.36 | 1,285,408,243.18 | |||
General reserves | 9 | 1,859,676,554.16 | 1,859,676,554.16 | ||
Unappropriated profit | 4,593,259,162.99 | 4,404,074,703.48 | |||
Total equity | 16,050,071,721.11 | 15,784,082,810.39 | |||
Total liabilities and equity | 124,528,174,781.26 | 126,084,551,294.21 | |||
The accompanying notes to financial statements form an integral part of these financial statements
15
China Huarong Financial Leasing Co., Ltd | |||||
Company income statement | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
Operating income | Note XIV | 2020 | 2019 | ||
Interest income | 6,973,929,264.14 | 7,245,757,523.72 | |||
Income from leasing operations | 95,328,786.23 | 110,581,424.06 | |||
Profit or loss arising from changes in | |||||
fair value | 908,085.55 | - | |||
Investment income | 7,298,493.89 | 12,197,946.40 | |||
Foreign exchange gain | - | 5,543.30 | |||
Other operating income | 879,479.16 | 6,203,121.56 | |||
Profit arising from disposal of assets | 805,660.70 | (206,302.39) | |||
Total operating income | 7,079,149,769.67 | 7,374,539,256.65 | |||
Operating expenses | |||||
Interest expenses | 3,752,328,231.16 | 4,228,448,864.73 | |||
Expenses on leasing operations | 92,687,216.39 | 101,834,882.66 | |||
Fee and commission expenses | 8,882,160.22 | 4,679,690.84 | |||
Other operating expenses | 16,351,387.88 | 19,524,971.73 | |||
Taxes and surcharges | 29,997,106.34 | 25,497,807.46 | |||
General and administrative expenses | 10 | 266,596,576.86 | 266,596,923.54 | ||
Credit impairment losses | 1,085,189,902.41 | 658,427,839.72 | |||
Impairment losses of other assets | 48,700,464.27 | - | |||
Total operating expenses | 5,300,733,045.53 | 5,305,010,980.68 | |||
Operating profit | 1,778,416,724.14 | 2,069,528,275.97 | |||
Add:Non-operating income | 4,311,321.20 | 2,091,866.59 | |||
Less:Non-operating expenses | 4,538,735.00 | 4,079,500.00 | |||
Profit before income tax | 1,778,189,310.34 | 2,067,540,642.56 | |||
Less:Income tax expenses | 443,701,808.53 | 516,428,323.88 | |||
Profit | 1,334,487,501.81 | 1,551,112,318.68 | |||
Classified by continuity of operations | |||||
Profit from continuing operations | 1,334,487,501.81 | 1,551,112,318.68 |
The accompanying notes to financial statements form an integral part of these financial statements
16
China Huarong Financial Leasing Co., Ltd | |||
Company income statement (continued) | |||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||
Note XIV | 2020 | 2019 | |
Other comprehensive income, net of tax | (56,644,298.97) | 3,557,791.85 | |
Other comprehensive income that will not be | |||
reclassified to profit or loss | |||
Change in the fair value of other equity | |||
investments | (42,164,173.15) | 1,309,966.85 | |
Other comprehensive income that may be | |||
reclassified to profit or loss | |||
Change in the fair value of other | |||
debt investments | (14,480,125.82) | 2,247,825.00 | |
Total comprehensive income | 1,277,843,202.84 | 1,554,670,110.53 |
The accompanying notes to financial statements form an integral part of these financial statements
17
China Huarong Financial Leasing Co., Ltd | |||||||||||||||
Company statement of changes in equity | |||||||||||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||||||||||||
For the year ended 31 December 2020 | |||||||||||||||
Accumulated | |||||||||||||||
Paid-in capital | Capital reserves | other | Surplus reserves | General reserves | Unappropriated | Total equity | |||||||||
comprehensive | profit | ||||||||||||||
income | |||||||||||||||
I. | At 1 January 2020 | 5,926,760,754.00 | 2,410,893,609.31 | (102,731,053.74) | 1,285,408,243.18 | 1,859,676,554.16 | 4,404,074,703.48 | 15,784,082,810.39 | |||||||
II. | Changes for the year | ||||||||||||||
1. | Total comprehensive income | - | - | (56,644,298.97) | - | - | 1,334,487,501.81 | 1,277,843,202.84 | |||||||
2. | Profit distribution | (133,448,750.18 | |||||||||||||
(1) | Appropriation to surplus reserve | - | - | - | 133,448,750.18 | - | - | ||||||||
(2) | Distribution to owners | - | - | - | - | - | (1,011,854,292.12) | (1,011,854,292.12) | |||||||
III. | At 31 December 2020 | 5,926,760,754.00 | 2,410,893,609.31 | (159,375,352.71) | 1,418,856,993.36 | 1,859,676,554.16 | 4,593,259,162.99 | 16,050,071,721.11 | |||||||
For the year ended 31 December 2019 | |||||||||||||||
Accumulated | |||||||||||||||
Paid-in capital | Capital reserves | other | Surplus reserves | General reserves | Unappropriated | Total equity | |||||||||
comprehensive | profit | ||||||||||||||
income | |||||||||||||||
I. | At 1 January 2019 | 5,926,760,754.00 | 2,410,893,609.31 | (106,288,845.59) | 1,130,296,530.45 | 1,859,676,554.16 | 3,445,974,583.61 | 14,667,313,185.94 | |||||||
II. | Changes for the year | ||||||||||||||
1. | Total comprehensive income | - | - | 3,557,791.85 | - | - | 1,551,112,318.68 | 1,554,670,110.53 | |||||||
2. | Profit distribution | ||||||||||||||
(1) | Appropriation to surplus reserve | - | - | - | 155,111,712.73 | - | (155,111,712.73 | - | |||||||
(2) | Distribution to owners | - | - | - | - | - | (437,900,486.08) | (437,900,486.08) | |||||||
III. | At 31 December 2019 | 5,926,760,754.00 | 2,410,893,609.31 | (102,731,053.74) | 1,285,408,243.18 | 1,859,676,554.16 | 4,404,074,703.48 | 15,784,082,810.39 | |||||||
The accompanying notes to financial statements form an integral part of these financial statements
18
China Huarong Financial Leasing Co., Ltd | |||||
Company statement of cash flows | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
Note XIV | 2020 | 2019 | |||
I. Cash flows from operating activities | |||||
Net decrease in lease payments | 1,546,567,139.32 | - | |||
Decrease in deposits with the central | |||||
bank and other financial institutions | 2,523,652,830.09 | 908,904,894.02 | |||
Net increase in lease risk fund and | |||||
advance rentals | 413,082,241.78 | 405,532,610.12 | |||
Net increase in borrowings | - | 2,317,669,835.43 | |||
Net decrease in placements with other | |||||
financial institutions | - | 500,000,000.00 | |||
Net increase in placements from other | |||||
financial institutions | 919,000,000.00 | 500,000,000.00 | |||
Cash receipts from rentals and interest | 7,478,817,058.22 | 7,771,997,458.79 | |||
Net increase in financial assets sold | |||||
under repurchase agreements | 386,312,000.00 | - | |||
Net decrease in financial assets | |||||
purchased under resale agreements | - | 500,000,000.00 | |||
Other cash receipts relating to operating | |||||
activities | 858,015,062.83 | 652,579,474.11 | |||
Total cash inflows from operating | |||||
activities | 14,125,446,332.24 | 13,556,684,272.47 | |||
Net increase in lease payments | - | (5,414,915,597.94) | |||
Net decrease in borrowings | (5,721,966,151.01) | - | |||
Cash payment for interest, fee and | |||||
commission | (3,600,856,805.11) | (3,965,256,704.82) | |||
Cash paid to and on behalf of | |||||
employees | (180,377,289.20) | (157,954,072.25) | |||
Taxes paid | (700,079,873.70) | (664,957,380.42) | |||
Other cash payments relating to | |||||
operating activities | (930,792,228.76) | (58,748,271.91) | |||
Total cash outflows from operating | |||||
activities | (11,134,072,347.78) | (10,261,832,027.34) | |||
Net cash flows from operating activities | 11 | 2,991,373,984.46 | 3,294,852,245.13 |
The accompanying notes to financial statements form an integral part of these financial statements
19
China Huarong Financial Leasing Co., Ltd | |||||
Company statement of cash flows (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
Note XIV | 2020 | 2019 | |||
II. | Cash flows from investing activities | ||||
Cash receipts from returns of | |||||
investments | 1,360,659,654.71 | 1,195,044,715.75 | |||
Cash receipts from returns on | |||||
investments | 9,155,771.53 | 10,870,261.74 | |||
Net cash received from disposal of fixed | |||||
assets, intangible assets and other | |||||
long-term assets | 986,369.86 | 3,670.00 | |||
Total cash inflows from investing | |||||
activities | 1,370,801,796.10 | 1,205,918,647.49 | |||
Cash payments to acquire fixed assets, | |||||
intangible assets and other long-term | |||||
assets | (40,696,174.63) | (78,734,334.48) | |||
Cash payments for investments | (1,028,172,856.57) | (265,709,400.00) | |||
Cash payments for investments in | |||||
subsidiaries | (300,000,000.00) | - | |||
Total cash outflows from investing | |||||
activities | (1,368,869,031.20) | (344,443,734.48) | |||
Net cash flows from investing activities | 1,932,764.90 | 861,474,913.01 | |||
III. | Cash flows from financing activities |
IV.
Ⅴ.
Cash received from issuance of bonds | 3,011,941,546.56 | 3,013,500,434.42 | |||
Total cash inflows from financing | |||||
activities | 3,011,941,546.56 | 3,013,500,434.42 | |||
Cash repayments for debts | (4,412,035,000.00) | (2,519,374,615.08) | |||
Cash payments for distribution of | |||||
dividends or profit and interest | |||||
expenses | (1,460,151,110.98) | (946,951,210.03) | |||
Total cash outflows from financing | |||||
activities | (5,872,186,110.98) | (3,466,325,825.11) | |||
Net cash flows used in financing | |||||
activities | (2,860,244,564.42) | (452,825,390.69) | |||
Net increase in cash and cash | |||||
equivalents | 133,062,184.94 | 3,703,501,767.45 | |||
Add: Cash and cash equivalents at | |||||
beginning of the year | 8,546,460,933.32 | 4,842,959,165.87 | |||
Cash and cash equivalents at end of the | |||||
year | 12 | 8,679,523,118.26 | 8,546,460,933.32 | ||
The accompanying notes to financial statements form an integral part of these financial statements
20
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- General information
China Huarong Financial Leasing Co., Ltd. ("the Company") is a non-bank financial institution principally engaged in financial leasing business as approved by China Banking and Insurance Regulatory Commission (the "CBIRC"). The company is originally named Zhejiang Financial Leasing Co., Ltd. And its predecessor is Zhejiang Provincial Leasing Co., Ltd. founded in 1986.
The Company has been granted with the financial license by CBIRC, and its institution code is M0010H233010001. The company also possesses Business License for an Enterprise's Legal Person approved and issued by Zhejiang Administration for Industry &Commerce, its Uniform Social Credit Code is 91330000734521665X. Its legal representative is Li Peng, and registered address is 13-22/F Zhujin B Tower, No.60-96 Jiangjin Road, Sijiqing Street, Jianggan District, Hangzhou City, Zhejiang Province.
The Company sets up two subordinate branches, namely Jinhua Branch and Ningbo Branch. The Company and its subsidiaries (the "Group") are principally engaged in financial leasing business and other businesses as approved by CBIRC.
The parent of the Group is China Huarong Asset Management Co., Ltd..
- Basis of preparation
These financial statements have been prepared in accordance with Accounting Standards for Business Enterprises - Basic Standard and specific accounting standards, implementation guidance, interpretations and other relevant provisions issued by the Ministry of Finance (the "MOF") (collectively referred to as "ASBEs").
The financial statements have been prepared on a going concern basis.
The financial statements have been prepared under the historical cost convention, except for certain financial instruments. If the assets are impaired, corresponding provisions for impairment shall be made according to relevant requirements.
Statement of compliance with Accounting Standards for Business Enterprises
The financial statements present truly and completely the financial positions of the Group and the Company as at 31 December 2020, and the financial performance and the cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.
21
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates
The financial information presented in the 2020 annual financial statements of the Company, and its subsidiaries (the "Group"), was prepared based on the following significant accounting policies and estimates under ASBEs.
1. Accounting period
The accounting year of the Group is a calendar year, i.e., from 1 January to 31 December of each year
2. Functional currency
The Company's functional and presentation currency is Renminbi ("RMB"). The currency unit is RMB Yuan unless otherwise stated.
Each subsidiary of the Group determines its own functional currency based on the primary economic environment in which it operates. In preparation of the financial statements, their functional currencies are translated into RMB.
3. Consolidated financial statements
The scope of the consolidated financial statements, which include the financial statements of the Company and all of its subsidiaries, is determined on the basis of control. A subsidiary is an entity that is controlled by the Company (such as an enterprise, a deemed separate entity, or a structured entity controlled by the Company).
In the preparation of the consolidated financial statements, the financial statements of subsidiaries are prepared for the same accounting period as the Company, using consistent accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
The Group reassesses whether or not it controls an investee if any change in facts and circumstances indicates that there are changes to one or more of the three elements of control.
4. Cash and cash equivalents
Cash comprises the Group's cash on hand and bank deposits that can be readily withdrawn on demand; cash equivalents are the Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
22
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
5. Foreign currency transactions and foreign currency translation
The Group translates foreign currency transactions into its functional currency.
Foreign currency transactions are initially recorded, on initial recognition in the functional currency using the spot exchange rates prevailing at the dates of transactions. Monetary items denominated in foreign currencies are translated at the spot exchange rates ruling at the balance sheet date. Differences arising on settlement or translation of monetary items are recognised in profit or loss. Non- monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions, and the amount denominated in the functional currency is not changed. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The resulting exchange differences are recognised in profit or loss or other comprehensive income depending on the nature of the non-monetary items.
For foreign operations, the Group translates their functional currency amounts into RMB when preparing the financial statements as follows: as at the balance sheet date, the assets and liabilities are translated using the spot exchange rate at the balance sheet date, and equity items other than "unappropriated profit" are translated at the spot exchange rates at the dates of transactions; revenue and expense items in profit or loss are translated using the average exchange rates for the period during which the transactions occur. The resulting exchange differences are recognised in other comprehensive income. On disposal of a particular foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss. If the disposal only involves a portion of a particular foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss on a pro-rata basis.
Foreign currency cash flows and the cash flows of foreign subsidiaries are translated using the average exchange rates for the period during which the cash flows occur. The effect of exchange rate changes on cash is separately presented as an adjustment item in the statement of cash flows.
23
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
6. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Recognition and derecognition of financial instrument
The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of a financial instrument.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated balance sheet) when:
- the rights to receive cash flows from the financial asset have expired;
- the Group has transferred its rights to receive cash flows from the financial asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) has transferred substantially all the risks and rewards of the financial asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the financial asset.
A financial liability is derecognised when the obligation under the liability is discharged, or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
Regular way purchases and sales of financial assets are recognised and derecognised using trade date accounting. Regular way purchases or sales are purchases or sales of financial assets that require delivery within the period generally established by regulation or convention in the marketplace. The trade date is the date that the Group committed to purchase or sell a financial asset.
24
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
6. Financial instruments (continued)
Classification and measurement of financial assets
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them: financial assets at fair value through profit or loss, financial assets at amortised cost and financial assets at fair value through other comprehensive income.
Financial assets are measured at fair value on initial recognition, but accounts receivable or notes receivables arising from the sale of goods or rendering of services that do not contain significant financing components or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component due within one year, are initially measured at the transaction price.
For financial assets at fair value through profit or loss, relevant transaction costs are directly recognised in profit or loss, and transaction costs relating to other financial assets are included in the initial recognition amounts.
The subsequent measurement of financial assets depends on their classification as follows:
Debt investments measured at amortised cost
The Group measures financial assets at amortised cost if both of the following conditions are met: the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
25
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
6. Financial instruments (continued)
Classification and measurement of financial assets (continued)
The subsequent measurement of financial assets depends on their classification as follows: (continued)
Debt investments at fair value through other comprehensive income
The Group measures debt investments at fair value through other comprehensive income if both of the following conditions are met: the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income is recognised using the effective interest method. The interest income, impairment losses and foreign exchange revaluation are recognised in profit or loss. The remaining fair value changes are recognised in other comprehensive income. Upon derecognition, the cumulative fair value change recognised in other comprehensive income is recycled to profit or loss.
Equity investments at fair value through other comprehensive income
The Group can elect to classify irrevocably its equity investments which are not held for trading as equity investments designated at fair value through other comprehensive income. Only the relevant dividend income (excluding the dividend income explicitly recovered as part of the investment cost) is recognised in profit or loss. Subsequent changes in the fair value are included in other comprehensive income, and no provision for impairment is made. When the financial asset is derecognised, the accumulated gains or losses previously included in other comprehensive income are transferred from other comprehensive income to retained earnings.
Financial assets at fair value through profit or loss
The financial assets other than the above financial assets measured at amortised cost and financial assets at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Such financial assets are subsequently measured at fair value with net changes in fair value recognised in profit or loss. Those financial assets are presented as finance assets held for trading.
26
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
6. Financial instruments (continued)
Classification and measurement of financial liabilities
The Group's financial liabilities are classified, at initial recognition, as other financial liabilities. Transaction costs relating to other financial liabilities are included in the initial recognition amounts.
The subsequent measurement of financial liabilities depends on their classification as follows:
Other financial liabilities
After initial recognition, such financial liabilities are measured at amortised cost using the effective interest method.
Impairment of financial assets
Based on the expected credit losses ("ECLs"), the Group recognises an allowance for ECLs for the financial assets measured at amortised cost, debt investments at fair value through other comprehensive income, finance lease receivables and loan commitments.
The Group assesses whether the credit risk has increased significantly since initial recognition at each balance sheet date. If the credit risk has not increased significantly since initial recognition (stage 1), the loss allowance is measured at an amount equal to 12-month ECLs by the Group and the interest income is calculated according to the carrying amount and the effective interest rate; if the credit risk has increased significantly since initial recognition but are not credit-impaired (stage 2), the loss allowance is measured at an amount equal to lifetime ECLs by the Group and the interest income is calculated according to the carrying amount and the effective interest rate; if such financial assets are credit-impaired after initial recognition (stage 3), the loss allowance is measured at an amount equal to lifetime ECLs by the Group and the interest income is calculated according to the amortised cost and the effective interest rate.
27
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
6. Financial instruments (continued)
Impairment of financial assets (continued)
At each balance sheet date, the Group assesses whether the credit risk on the relevant financial instruments has increased significantly since initial recognition. The Group compares the risk of a default occurring of a single financial instrument or a group of financial instruments with similar credit risk characteristics as at the balance sheet date with the risk of a default as at the date of initial recognition, to determine changes in the risk of a default occurring of the financial instrument in the expected lifetime.
Refer to Note 11.2 for the disclosure of the Group's assumption about the measurement of ECLs.
When there are one or more events that have adverse effects on the expected future cash flows of a financial asset, the financial asset is credit-impaired.
When the Group no longer reasonably expects to collect all or part of the contractual cash flows of the financial asset, the Group directly writes down the carrying amount of the financial asset.
Transfer of financial assets
A financial asset is derecognised when the Group has transferred substantially all the risks and rewards of the asset to the transferee. A financial asset is not derecognised when the Group retains substantially all the risks and rewards of the financial asset.
When the Group has neither transferred nor retained substantially all the risks and rewards of the financial asset, it either (i) derecognises the financial asset and recognises the assets and liabilities created in the transfer when it has not retained control of the asset; or (ii) continues to recognise the transferred asset to the extent of the Group's continuing involvement, in which case, the Group also recognises an associated liability.
Continuing involvement that takes the form of a guarantee over the transferred financial asset is measured at the lower of the original carrying amount of the financial asset and the guarantee amount. The guarantee amount is the maximum amount of consideration that the Group could be required to repay.
28
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
7. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries. A long-term equity investment is initially measured at its initial investment cost on acquisition.
For a long-term equity investment where the Company can exercise control over the investee, the long-term investment is accounted for using the cost method in the Company's individual financial statements. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Under the cost method, the long-term equity investment is measured at its initial investment cost. When additional investment is made or the investment is recouped, the cost of long-term equity investment is adjusted accordingly. Cash dividends or profit distributions declared by the investee are recognised as investment income in profit or loss.
Upon disposal of a long-term equity investment, the difference between the proceeds actually received and the carrying amount is recognised in profit or loss.
8. Fixed assets
A fixed asset is recognised only when the economic benefits associated with the asset will probably flow into the Group and the cost of the asset can be measured reliably. Subsequent expenditures incurred for a fixed asset that meets the recognition criteria shall be included in the cost of the fixed asset, and the carrying amount of the component of the fixed asset that is replaced shall be derecognised. Otherwise, such expenditures are recognised in profit or loss as incurred.
Fixed assets are initially measured at cost. The cost of a purchased fixed asset comprises the purchase price, relevant taxes and any directly attributable expenditure for bringing the asset to working condition for its intended use. Depreciation is calculated using the straight-line method. The useful lives, estimated residual value rates and annual depreciation rates of each category of the fixed assets are as follows:
Useful life | Estimated residual | Annual depreciation | |
value rate | rate | ||
Office equipment and others | 3-5 years | 5% | 19.00%-31.67% |
Buildings | 10-34 years | 5% | 2.79%-9.50% |
Machinery | 10 years | 5% | 9.50% |
Vehicles | 6-25 years | 0%-5% | 3.80%-16.67% |
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least at each year end and make adjustments if necessary.
29
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
9. Construction in progress
The cost of construction in progress is determined according to the actual expenditures incurred for the construction, including all necessary construction expenditures incurred during the construction period, borrowing costs that shall be capitalised before the construction is ready for its intended use, and other relevant expenditures.
An item of construction in progress is transferred to fixed assets when the asset is ready for its intended use.
10. Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with the borrowing of the funds. Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised. The amounts of other borrowing costs incurred are recognised as an expense in the period in which they are incurred. Qualifying assets are assets (fixed assets, investment properties, inventories, etc.) that necessarily take a substantial period of time of acquisition, construction or production to get ready for their intended use or sale.
The capitalization of borrowing costs commences only when all of the following conditions are satisfied:
- expenditures for the asset have been incurred;
- borrowing costs have been incurred;
- activities that are necessary to acquire, construct or produce the asset for its intended use or sale have been undertaken.
Capitalization of borrowing costs ceases when the qualifying asset being acquired, constructed or produced gets ready for its intended use or sale. Any borrowing costs subsequently incurred are recognised in profit or loss.
During the capitalization period, the amount of interest eligible for capitalization for each accounting period shall be determined as follows:
- Where funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of interest eligible for capitalization is the actual interest costs incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds; or
30
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
10. Borrowing costs (continued)
- Where funds are borrowed generally for the purpose of obtaining a qualifying asset, the amount of interest eligible for capitalization is determined by applying a weighted average interest rate on the general borrowings to the weighted average of the excess of the cumulative expenditures on the asset over the expenditures on the asset funded by the specific borrowings.
Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is suspended abnormally by activities other than those necessary to get the asset ready for its intended use or sale, when the suspension is for a continuous period of more than 3 months. Borrowing costs incurred during these periods are recognised as an expense in profit or loss until the acquisition, construction or production is resumed.
11. Intangible assets
An intangible asset shall be recognised only when it is probable that the economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Intangible assets are measured initially at cost.
The useful life of an intangible asset is determined according to the period over which it is expected to generate economic benefits for the Group. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group.
The useful lives of the intangible assets are as follows: | |
Useful life | |
Land use rights | 38-40 years |
Others | 35 years |
Software | 10 years |
Land use rights that are purchased by the Group are accounted for as intangible assets.
An intangible asset with a finite useful life is amortised using the straight-line method over its useful life. For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at least at each year end and makes adjustment if necessary.
31
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
12. Long-term prepaid expenses
Long-term period expenses represent expenses incurred in the improvements of fixed assets leased under operating leases and expenses incurred that should be borne and amortised over the current and subsequent periods (together of more than one year). Long-term expenses are amortised using the straight-line method over the expected periods in which benefits are derived. Long-term expenses are stated at cost less accumulated amortisation.
13. Impairment of assets
The Group determines the impairment of assets, other than the impairment of financial assets, and deferred tax assets using the following methods:
The Group assesses at the balance sheet date whether there is any indication that an asset may be impaired. If any indication exists that an asset may be impaired, the Group estimates the recoverable amount of the asset and performs impairment testing. Goodwill arising from a business combination and an intangible asset with an indefinite useful life are tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. Intangible assets that have not been ready for their intended use are tested for impairment each year.
The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. The Group estimates the recoverable amount on an individual basis unless it is not possible to estimate the recoverable amount of the individual asset, in which case the recoverable amount is determined for the asset group to which the asset belongs. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups.
When the recoverable amount of an asset or asset group is less than its carrying amount, the carrying amount is reduced to the recoverable amount by the Group. The reduction in the carrying amount is treated as an impairment loss and recognised in profit or loss. A provision for impairment loss of the asset is recognised accordingly.
Once the above impairment loss is recognised, it cannot be reversed in subsequent accounting periods.
32
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
14. Debt-expiated assets
A debt-expiated asset is measured at fair value on initial recognition, and subsequently measured at the lower of the carrying amount and the recoverable amount at the end of the reporting period. If the recoverable amount of a debt- expiated asset is less than its carrying amount, a provision for decline in value is made.
Gains or losses arising from disposal of debt-expiated assets are recoginsed in profit or loss.
Where the debt-expiated asset is transferred to self-used asset, it is carried forward at the carrying amount of such asset at the date of transfer. Where the provision for decline in value has been made, such provision is also carried forward.
15. Employee benefits
Employee benefits refer to all forms of consideration or compensation other than share-based payments given by the Group in exchange for services rendered by employees or for termination of employment. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long- term employee benefits. Benefits given by the Group to an employee's spouse, children and dependents, family members of deceased employees and other beneficiaries are also employee benefits.
Post-employment benefits (defined contribution plan)
The employees of the Group participate in a pension scheme and unemployment insurance managed by the local government, and an enterprise pension fund, the corresponding expenses shall be included in the cost of related assets or profit or loss.
16. Provisions
An obligation related to a contingency shall be recognised by the Group as a provision when all of the following conditions are satisfied:
- the obligation is a present obligation of the Group;
- it is probable that an outflow of economic benefits from the Group will be required to settle the obligation;
- a reliable estimate can be made of the amount of the obligation.
A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money as a whole. Provisions are reviewed at each balance sheet date. Where there is clear evidence that the carrying amount of a provision does not reflect the current best estimate, the carrying amount is adjusted to the current best estimate.
33
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
17. Revenue
Revenue is recognised when it is probable that the associated economic benefits will flow into the Group and when the revenue can be measured reliably, on the following bases:
Income from financing leases
For details of how the Group measures and accounts for the income from financing leases, refer to Note III.19
Income from operating leases
For details of how the Group measures and accounts for the income from operating leases, refer to Note III.19
Interest income
Interest income is recognised on a time proportion basis for which the Group's currency funds are used by others and by the effective interest rate.
18. Income tax
Income tax comprises current and deferred tax. Except for the adjusted goodwill arising from a business combination, income tax is recognised as income or expense in profit or loss, or recognised directly in equity if it arises from a business combination or relates to a transaction or event which is recognised directly in equity.
Current tax liabilities or assets arising from the current and prior periods at the amount expected to be paid by the Group or returned by the tax authority calculated according to related tax laws.
Deferred tax is provided using the balance sheet liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts, and temporary differences between the tax bases and the carrying amounts of the items, which have a tax base according to related tax laws but are not recognised as assets and liabilities.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- when the taxable temporary difference arises from the initial recognition of goodwill, or an asset or liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit or loss; and
- in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future.
34
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
18. Income tax (continued)
Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax losses and any unused tax credits. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax losses and unused tax credits can be utilised, except:
- when the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
- in respect of the deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised in the future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, in accordance with the requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover the assets or settle the liabilities.
The carrying amount of deferred tax assets is reviewed at the balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available in future periods to allow the deferred tax assets to be utilised. Unrecognised deferred tax assets are reassessed at the balance sheet date and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities, and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
35
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
19. Leases
As Lessee
Right-of-use assets
The right-of-use assets of the Group mainly include buildings.
At the commencement date of the lease, the Group recognises a right-of-use asset. The cost of the right-of-use asset comprises: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date of the lease less any lease incentives received; any initial direct cost incurred; and an estimate of costs incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. The right-of-use assets are depreciated on a straight-line basis subsequently by the Group. If the Group is reasonably certain that the ownership of the underlying asset will be transferred to the Group at the end of the lease term, the Group depreciates the asset from the commencement date to the end of the useful life of the asset. Otherwise, the Group depreciates the assets from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term.
The Group remeasures the lease liability at the present value of the changed lease payments and adjusts the carrying amount of the right-of-use assets accordingly, when the carrying amount of the right-of-use asset is reduced to zero, and there is a further reduction in the measurement of the lease liability, the Group recognises the remaining amount of the remeasurement in profit or loss.
Lease Liabilities
At the commencement date of the lease, the Group measures the lease liability at the present value of the lease payments that are not paid at that date, except for short- term leases and leases of low-value assets. In calculating the present value of the lease payments, the Group uses the interest rate implicit in the lease as the discount rate. If that rate cannot be readily determined, the Group uses the lessee's incremental borrowing rate. The Group calculates the interest expenses of the lease liability in each period during the lease term using the constant periodic rate of interest, and recognises such interest expenses in profit or loss, except those in the costs of the related asset as required. Variable lease payments that are not included in the measurement of the lease liabilities are recognised in profit or loss as incurred, except those in the costs of the related asset as required.
After the commencement date of the lease, if there is a change on actual fixed payment, expected payable of guaranteed residual value, the index or rate used to calculate the lease payment, purchase option, the assessment of option to extend the lease, option to terminate the lease or actual option exercise situation, the group will recalculate the lease liabilities at the present value of the lease payments based changes occurred.
36
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
19. Leases (continued)
As Lessee (continued)
Short-term leases and leases of low-value assets
The Group considers a lease that, at the commencement date of the lease, has a lease term of 12 months or less, and does not contains any purchase option as a short-term lease. If the Group subleases an asset, or expects to sublease an asset, the head lease does not qualify as a lease of a low-value asset. The Group does not recognise the right-of-use assets and lease liabilities of buildings for short-term leases. The Group recognises lease payments on short-term leases and leases of low-value assets in the costs of the related asset or profit or loss on a straight-line basis over the lease term.
As Lessor
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset, except that a lease is classified as an operating lease at the inception date. The Group, as an intermediate lessor, classifies the sublease by reference to the right-of-use asset arising from the head lease.
As lessor of a finance lease
At the commencement date of the lease, the Group recognises finance lease receivable and derecognises finance lease assets. The Group presents lease receivable at an amount equal to the net investment in the lease for the initial measurement. The net investment in the lease is the sum of any unguaranteed residual value accruing to the lessor and at the commencement date of the lease the lease payments receivable by a lessor under a finance lease discounted at the interest rate implicit in the lease.
The Group recognises finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the its net investment in the lease. Variable lease payments received by the Group that are not included in the measurement of the net investment in the lease are recognised in profit or loss as incurred.
As lessor of an operating lease
Rent income under an operating lease is recognised on a straight-line basis over the lease term, through profit or loss. Variable lease payments that are not included in the measurement of finance lease receivables are charged to profit or loss as incurred.
37
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
19. Leases (continued)
Sale and leaseback transactions
The Group assess and determine whether the transfer of an asset is accounted for as a sale of that asset.
As lessor
If the transfer of an asset satisfies the requirements to be accounted for as a sale of the asset, the Group, as a lessor, accounts for the purchase of the asset and for the lease applying the accounting requirements set forth; and if the transfer of an asset by the Group does not satisfy the requirements to be accounted for as a sale of the asset, the Group, as a lessor, does not recognise the transferred asset and recognises a financial asset equal to the transfer proceeds. The Group accounts for the financial asset applying Note III.6.
20. Fair value measurement
The Group measures its equity investments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the orderly transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal (or the most advantageous market) must be accessible by the Group at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other information are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
38
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
20. Fair value measurement (continued)
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are measured at fair value in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at each balance sheet date.
21. Significant accounting judgements and estimates
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities at the balance sheet date. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.
Judgements
In the process of applying the Group's accounting policies, management has made the following judgements which have a significant effect on the amounts recognised in the financial statements:
Classification between operating lease and finance lease
Leases are required to be classified as either finance leases (which transfer substantially all the risks and rewards of ownership, and give rise to asset and liability recognition by the lessee and a receivable by the lessor) and operating leases (which result in expenses recognition by the lessee, with the asset remaining recognised by the lessor).
39
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
21. Significant accounting judgements and estimates (continued)
Judgements (continued)
Situations that would normally lead to a lease being classified as a finance lease include the following:
- The lease transfers ownership of the asset to the lessee by the end of the lease term;
- The lessee has the option to purchase the asset at a price which is expected to be sufficiently lower than the fair value at the date the option becomes exercisable and, at the inception of the lease, it is reasonably certain that the option will be exercised;
- The lease term is for the major part of the economic life of the asset, even if title is not transferred;
- At the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset;
- And the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.
Business models
The classification of financial assets at initial recognition depends on the Group's business model for managing financial assets. When determining the business model, the Group considers the methods to include evaluation and report financial asset performance to key management, the risks affecting the performance of financial assets and the risk management, and the manner in which the relevant management receives remuneration. When assessing whether the objective is to collect contractual cash flows, the Group needs to analyse and judge the reason, timing, frequency and value of the sale before the maturity date of the financial assets.
40
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
21. Significant accounting judgements and estimates (continued)
Estimation uncertainty
The following are key assumptions about the future and other key sources of uncertainties of estimates as at the balance sheet date, which may lead to significant adjustments in carrying amounts of assets and liabilities in future accounting periods.
Impairment of non-current assets other than financial assets (other than goodwill) The Group assesses whether there are any indications of impairment for all non- current assets other than financial assets at the balance sheet date. Intangible assets with indefinite useful lives are tested for impairment annually and at other times when such an indication exists. Other non-currentassets other than financial assets are tested for impairment when there are indications that the carrying amounts may not be recoverable. An impairment exists when the carrying amount of an asset or asset group exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from it. The calculation of the fair value less costs of disposal based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the assets. When the calculations of the present value of the future cash flows expected to be derived from an asset or asset group are undertaken, management must estimate the expected future cash flows from the asset or asset group and choose a suitable discount rate in order to calculate the present value of those cash flows.
Impairment of financial instruments
The Group uses the expected credit loss model to evaluate the impairment of financial instruments. Applying the expected credit loss model requires significant judgments and estimates, and all reasonable and reliable information, including forward-looking information, shall be considered. In making these judgments and estimates, the Group deduces expected changes in debtor's credit risk on the basis of historical repayment data coupled with factors such as economic policies, macroeconomic indicators, and industry risks. Different estimates may have different impacts on the provision for impairment, which may not be equal to the amount of losses on impairment incurred in the future.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
41
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Significant accounting policies and estimates (continued)
22. Changes in Accounting Policies
Related party disclosure
According to the requirements of Interpretation No. 13 of the Accounting Standards for Business Enterprises (ASBE), as at 1 January 2020, the associates of investors that have significant influence over the Company will no longer be disclosed as related parties, and the following entities will be regarded as related parties: Joint ventures and their subsidiaries or associates and their subsidiaries of the other members (including parent company and subsidiaries) under the same Group with the Company, the joint ventures and their subsidiaries or associates and their subsidiaries of the entities that have joint control over the Company, the joint ventures and their subsidiaries or associates and their subsidiaries of the entities that have significant influence over the Company.
The Group has disclosed the related parties in accordance with Interpretation No. 13 of ASBE since 1 January 2020. And according to the transitional requirements of the new standards, the comparative data is not retrospectively adjusted.
IV. Taxes
The Group is mainly subject to the following taxes and the respective tax rates of the Group for the current period are as follows:
Value-added tax (VAT)
VAT payable is the balance of output VAT less deductible input VAT. The output VAT is calculated on the taxable basis and at tax rates of 16%,13%,10%,9%,6%,5% and 3%.
Urban maintenance and | It is levied at 7% of taxable basis. |
construction tax | |
Corporate income tax | It is levied at 25% on the taxable profit and its |
subsidiaries are subject to their respective | |
local statutory tax rates. | |
Education surcharge | It is levied at 5% of taxable basis. |
42
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Scope of consolidation
1. Information about subsidiaries
The Information about subsidiaries were as follows:
Place of primary | 2020/12/31 | 2019/12/31 | |||||||
business | Registered | ownership interest | ownership interest | Proportion of | |||||
/registration | capital | Indirect | Direct | Indirect | Direct | voting rights | |||
HUARONG SHIPPING FINANCIAL | |||||||||
LEASING CO., LTD. | Shanghai | RMB 1,200,000,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAWEN LIFTING | |||||||||
EQUIPMENT LEASING CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAWEN SHIP LEASING | |||||||||
CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAJIAN SHIP LEASING | |||||||||
CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUACHUANG SHIP | |||||||||
LEASING CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAJIAN LIFITING | |||||||||
EQUIPMENT LEASING CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAHE SHIP LEASING | |||||||||
CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAXIE SHIP LEASING | |||||||||
CO., LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAFA SHIP LEASING CO., | |||||||||
LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAXIN SHIP LEASING | |||||||||
CO. LTD. | Ningbo | RMB500,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG HUAWEN (TIANJIN) SHIP | |||||||||
LEASING CO., LTD. | Tianjin | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG HUAWEN (ZHOUSHAN) | |||||||||
SHIP LEASING CO., LTD. | Zhoushan | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG HUAJIAN (ZHOUSHAN) | |||||||||
SHIP LEASING CO., LTD. | Zhoushan | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG HUACHUANG | |||||||||
(ZHOUSHAN) SHIP LEASING CO., | |||||||||
LTD. | Zhoushan | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAWEN AIRCRAFT | |||||||||
LEASING CO., LTD. | Ningbo | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUAJIAN AIRCRAFT | |||||||||
LEASING CO., LTD. | Ningbo | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG (NINGBO FREE TRADE | |||||||||
ZONE) HUACHUANG AIRCRAFT | |||||||||
LEASING CO., LTD. | Ningbo | RMB100,000.00 | - | 100% | - | 100% | 100% | ||
HUARONG LEASING MANAGEMENT | |||||||||
HONG KONG COMPANY LIMITED | |||||||||
(note) | Hongkong | HKD50,000.00 | 100% | - | 100% | - | 100% |
Note: Xinlu International Holding Company Limited changed the name to Huarong Leasing management Hong Kong Company Limited on 8 May, 2020.
43
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements |
1. Cash and deposits with the central bank
31 December 2020 | 31 December 2019 | ||
Cash | - | 1,932.25 | |
Statutory deposit reserve with the | |||
Central Bank (Note) | 13,556,304.90 | 17,234,007.91 | |
Unrestricted deposits reserve with | |||
the Central Bank | 7,200,895.18 | 3,531,285.61 | |
Add: Interest receivable | 5,763.20 | 9,180.21 | |
Total | 20,762,963.28 | 20,776,405.98 |
Note: Statutory deposit reserve with the Central Bank is the deposit reserve of general deposit contributed by the Group to the People's Bank of China every ten days as per requirements, such reserve may not be used in daily operations. General deposit is a lease deposit from the lessee.
As at 31 December 2020, the Group is subject to the applicable ratio of contribution of RMB deposit reserve of 6% for its domestic operations (31 December 2019: 6%) and 5% for its foreign operations (31 December 2019: 5%), respectively.
2. Deposits with other financial institutions
31 December 2020 | 31 December 2019 | ||
Deposits with domestic bank | 15,321,063,780.70 | 15,891,090,548.43 | |
Add: Interest receivable | 53,175,728.98 | 94,129,299.71 | |
Less: Impairment allowance | 5,471,159.03 | 5,121,726.63 | |
Total | 15,368,768,350.65 | 15,980,098,121.51 |
Note: As at 31 December 2020, RMB 2,450,000,000.00 of deposits with other financial institutions pledged for bank pledging loan by the Group was included in the balance of deposits with other financial institutions (31 December 2019: RMB 4,966,000,000.00), and RMB 139,015,938.58 of bank acceptance bills deposit was included in the balance of deposits with other financial institutions (31 December 2019: RMB 136,147,068.67).
44
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
3. | Notes receivables | ||||
31 December 2020 | 31 December 2019 | ||||
Bank acceptance bills | 6,269,340.14 | 48,782,996.00 | |||
Less: Impairment allowance | 2,481.52 | 23,359.04 | |||
Total | 6,266,858.62 | 48,759,636.96 |
At 31 December 2020 the carrying amount of the notes receivable with restricted ownership as it was pledged for financing was RMB 6,269,340.14, (31 December 2019: RMB 48,782,996.00).
4. | Finance lease receivables | |||
31 December 2020 | 31 December 2019 | |||
Receivables under finance lease | ||||
operations | 46,933,550,837.12 | 78,517,988,428.61 | ||
Receivables under sale and | ||||
leaseback activities | 80,013,764,800.33 | 47,415,354,669.43 | ||
Total | 126,947,315,637.45 | 125,933,343,098.04 | ||
Less: Unearned finance income | 15,050,723,560.89 | 15,832,649,242.45 | ||
Balance of finance lease receivable | 111,896,592,076.56 | 110,100,693,855.59 | ||
Less: Impairment allowance | 3,151,349,621.63 | 2,751,092,083.98 | ||
Finance lease receivables, net | 108,745,242,454.93 | 107,349,601,771.61 |
45
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
4. Finance lease receivables (continued)
4.1 Annual minimum lease receipts for five consecutive accounting years subsequent to the balance sheet date are as follows:
31 December 2020 | 31 December 2019 | ||
Within 1 year (inclusive) | 43,940,848,523.96 | 42,293,568,238.32 | |
1 to 2 years (inclusive) | 32,323,936,542.65 | 32,562,492,401.52 | |
2 to 3 years (inclusive) | 24,450,095,131.63 | 22,087,538,188.14 | |
3 to 4 years (inclusive) | 13,187,948,671.54 | 13,660,300,026.78 | |
4 to 5 years (inclusive) | 5,472,752,928.91 | 7,477,739,589.94 | |
Over 5 years | 7,571,733,838.76 | 7,851,704,653.34 | |
Subtotal | 126,947,315,637.45 | 125,933,343,098.04 | |
Less: Unearned finance income | 15,050,723,560.89 | 15,832,649,242.45 | |
Total | 111,896,592,076.56 | 110,100,693,855.59 |
As at 31 December 2020, the overdue finance lease receivables totalling RMB1,534,215,882.04 is included in the annual minimum lease receipts falling due within one year (inclusive) subsequent to the balance sheet date. (31 December 2019: RMB1,850,250,890.30).
4.2 Movements of impairment allowance are as follows:
31 December 2020
Stage 1 | Stage 2 | Stage 3 | ||||||
12-month | Lifetime | Lifetime | Total | |||||
expected | expected | expected | ||||||
credit losses- | ||||||||
credit losses | credit losses | impaired | ||||||
Opening balance | 810,877,413.87 | 472,883,915.63 | 1,467,330,754.48 | 2,751,092,083.98 | ||||
-Transfer to Stage 2 | (63,711,580.86) | 82,714,232.28 | (19,002,651.42) | - | ||||
-Transfer to Stage 3 | (977,917.44) | (76,854,593.13) | 77,832,510.57 | - | ||||
-Transfer to Stage 1 | 14,401,266.85 | (14,401,266.85) | - | - | ||||
Accrual | 70,489,870.11 | 237,824,842.40 | 729,444,109.76 | 1,037,758,822.27 | ||||
Write-off & reversal | - | - | (642,383,711.57) | (642,383,711.57) | ||||
Recovery of write-offs | ||||||||
in previous years | - | - | 11,896,137.92 | 11,896,137.92 | ||||
Exchange rate difference | (7,013,710.97) | - | - | (7,013,710.97) | ||||
Closing balance | 824,065,341.56 | 702,167,130.33 | 1,625,117,149.74 | 3,151,349,621.63 | ||||
46
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
4. Finance lease receivables (continued)
4.2 Movements of impairment allowance are as follows: (continued)
31 December 2019
Stage 1 | Stage 2 | Stage 3 | Total | |||||
12-month | Lifetime | Lifetime | ||||||
expected | expected | expected | ||||||
credit losses- | ||||||||
credit losses | credit losses | impaired | ||||||
Opening balance | 525,518,772.76 | 599,655,818.22 | 1,205,901,508.59 | 2,331,076,099.57 | ||||
-Transfer to Stage 2 | (14,544,231.34) | 14,544,231.34 | - | - | ||||
-Transfer to Stage 3 | (798,716.02) | (248,739,474.47) | 249,538,190.49 | - | ||||
-Transfer to Stage 1 | 74,765,368.42 | (74,765,368.42) | - | - | ||||
Accrual | 225,380,781.51 | 182,188,708.96 | 158,554,601.31 | 566,124,091.78 | ||||
Write-off & reversal | - | - | (148,010,239.27) | (148,010,239.27) | ||||
Recovery of write-offs | ||||||||
in previous years | - | - | 1,346,693.36 | 1,346,693.36 | ||||
Exchange rate difference | 555,438.54 | - | - | 555,438.54 | ||||
Closing balance | 810,877,413.87 | 472,883,915.63 | 1,467,330,754.48 | 2,751,092,083.98 | ||||
The movement of impairment allowance in this year is mainly due to the regular update of model parameters, including the movement of Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD).
In 2020, the balance of finance lease receivables transferred from Stage 1 to Stage 2 is RMB 2.994 billion (2019: RMB1.626 billion) in the group, and the balance of finance lease receivables transferred from Stage 2 to Stage 3 is RMB1.388 billion (2019: RMB0.383 billion).
47
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
4. Finance lease receivables (continued)
4.3 Finance lease receivables presented by division of stage are as follows:
Stage 1 | Stage 2 | Stage 3 | Total | |||||
31 December 2020 | ||||||||
Balance of finance | ||||||||
lease receivables | 104,100,249,077.04 | 5,411,502,132.13 | 2,384,840,867.39 | 111,896,592,076.56 | ||||
Impairment allowance | ||||||||
of finance lease | ||||||||
receivables | (824,065,341.56) | (702,167,130.33) | (1,625,117,149.74) | (3,151,349,621.63) | ||||
Finance lease | ||||||||
receivables, net | 103,276,183,735.48 | 4,709,335,001.80 | 759,723,717.65 | 108,745,242,454.93 | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||
31 December 2019 | ||||||||
Balance of finance | ||||||||
lease receivables | 103,687,074,193.20 | 4,701,588,439.78 | 1,712,031,222.61 | 110,100,693,855.59 | ||||
Impairment allowance | ||||||||
of finance lease | ||||||||
receivables | (810,877,413.87) | (472,883,915.63) | (1,467,330,754.48) | (2,751,092,083.98) | ||||
Finance lease | 102,876,196,779.33 | |||||||
receivables, net | 4,228,704,524.15 | 244,700,468.13 | 107,349,601,771.61 | |||||
48
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
4. Finance lease receivables (continued)
4.4 Overdue finance lease receivables
31 December 2020 | ||||||||
Overdue for 1 to | Overdue for 91 to | Overdue for 361 to | Overdue for over | |||||
90 days(inclusive) | 360 days(inclusive) | 3 years(inclusive) | 3 years | Total | ||||
Balance of | ||||||||
finance lease | ||||||||
receivables | 1,223,488,485.58 | 528,920,089.96 | 524,210,095.05 | 573,658,368.82 | 2,850,277,039.41 | |||
31 December 2019 | ||||||||
Overdue for 1 to | Overdue for 91 to | Overdue for 361 to | Overdue for over | |||||
90 days(inclusive) | 360 days(inclusive) | 3 years(inclusive) | 3 years | Total | ||||
Balance of | ||||||||
finance lease | ||||||||
receivables | 1,392,697,216.38 | 77,333,602.22 | 1,008,957,301.55 | 383,338,751.25 | 2,862,326,871.40 | |||
As at 31 December 2020, RMB 32,346,725,261.59 of finance lease receivables pledged for bank pledging loan, factoring loan, bank acceptance bills, trust of rights to earnings of finance lease receivables and asset management plans by the Group was included in the balance of finance lease receivables (31 December 2019: RMB 28,559,974,790.62).
As at 31 December 2020, the Group's finance lease receivables which do not qualify the derecognition criteria in asset-backed securities amounting to RMB 1,801,837,361.22 (31 December 2019: RMB 4,758,390,705.62) were included in the balance of finance lease receivables. Relevant liabilities were presented in bonds payable.
49
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
5. Finance assets held for trading
31 December 2020 | 31 December 2019 | |||
Financial assets at fair value through | ||||
profit or loss | ||||
Interbank negotiable certificates of | ||||
deposit | 99,466,285.55 | 595,709,400.00 | ||
6. | Debt investments | |||
31 December 2020 | 31 December 2019 | |||
Rights of return on lease receivables | 519,418,058.66 | 1,041,470,053.39 | ||
Less: Impairment allowance | 43,706,976.28 | 17,083,866.05 | ||
Total | 475,711,082.38 | 1,024,386,187.34 |
Changes in provision for impairment are as follows:
31 December 2020
Stage 1 | Stage 2 | Stage 3 | |||||
12-month | Lifetime | Lifetime | Total | ||||
expected | expected | expected | |||||
credit losses | credit losses | credit losses- | |||||
impaired | |||||||
Opening balance | 4,625,589.28 | 12,458,276.77 | - | 17,083,866.05 | |||
-Transfer to Stage 3 | - | (10,430,919.46) | 10,430,919.46 | - | |||
(Reversal)/Accrual | (1,612,509.82) | (2,027,357.31) | 30,262,977.36 | 26,623,110.23 | |||
Closing balance | 3,013,079.46 | - | 40,693,896.82 | 43,706,976.28 | |||
50
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
6. Debt investments (continued)
31 December 2019
Stage 1 | Stage 2 | Stage 3 | |||||
12-month | Lifetime | Lifetime | Total | ||||
expected | expected | expected | |||||
credit losses | credit losses | credit losses- | |||||
impaired | |||||||
Opening balance | 8,448,369.47 | - | - | 8,448,369.47 | |||
-Transfer to Stage 2 | (841,113.19) | 841,113.19 | - | - | |||
(Reversal)/Accrual | (2,981,667.00) | 11,617,163.58 | - | 8,635,496.58 | |||
Closing balance | 4,625,589.28 | 12,458,276.77 | - | 17,083,866.05 | |||
Note: Rights of return on lease receivables represent creditor's rights and rights of return on lease receivables from investing in lease projects originally launched by other financial leasing companies and of which the management service still provided by the transferor.
As at 31 December 2020, RMB 29,867,497.36 of debt investments pledged for factoring loan was included in the balance of debt investments (31 December 2019: RMB 228,894,758.03).
7. Other debt investments
2020
Opening | Interest | Fair value | Closing | Cost | Accumulated | Accumulated | ||||||
balance | payable | change for | balance | fair value | impairment | |||||||
current year | change | allowance for other | ||||||||||
comprehensive | ||||||||||||
income | ||||||||||||
Government | 96,356,300.00 | 28,172,856.57 | (19,306,834.43) | 1,105,222,322.14 | 1,088,726,464.09 | (11,676,998.52) | - | |||||
bonds | ||||||||||||
2019 | ||||||||||||
Opening | Interest | Fair value | Closing | Cost | Accumulated | Accumulated | ||||||
balance | payable | change for | balance | fair value | Impairment | |||||||
current year | change | allowance for other | ||||||||||
comprehensive | ||||||||||||
income | ||||||||||||
Government | ||||||||||||
bonds | 93,359,200.00 | - | 2,997,100.00 | 96,356,300.00 | 88,726,464.09 | 7,629,835.91 | - | |||||
51
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
8. Other equity investments
31 December 2020
Cost | Accumulated fair value | Fair value | Dividend income for the year | ||||||
changes recorded in | Equity | Equity | |||||||
other comprehensive | instruments | instruments that | |||||||
income | derecognised | are still held | |||||||
Stocks and equity | |||||||||
investment | 440,104,455.85 | (200,823,471.75) | 239,280,984.10 | - | - | ||||
31 December 2019 | |||||||||
Cost | Accumulated fair value | Fair value | Dividend income for the year | ||||||
changes recorded in | Equity | Equity | |||||||
other comprehensive | instruments | instruments that | |||||||
income | derecognised | are still held | |||||||
Stocks and equity | |||||||||
investment | 291,252,395.13 | (144,604,574.22) | 146,647,820.91 | - | - | ||||
For the year ended 31 December 2020, the Group designated its equity instrument as other equity instruments at fair value through other comprehensive income. Other equity instruments at fair value through other comprehensive income include shares and stocks instruments held for strategic purposes.
52
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
9. Operating lease assets
31 December 2020
Buildings | Machinery | Vehicles | Total | |||||
Cost | ||||||||
Opening balance | 102,199,701.17 | 489,189,435.76 | 7,167,395,828.45 | 7,758,784,965.38 | ||||
Purchases or | ||||||||
transfer in | 2,874,980.80 | - | 945,195,057.50 | 948,070,038.30 | ||||
Disposals | (4,727,997.00) | (20,775,978.35) | (222,024,769.57) | (247,528,744.92) | ||||
Closing balance | 100,346,684.97 | 468,413,457.41 | 7,890,566,116.38 | 8,459,326,258.76 | ||||
Accumulated | ||||||||
depreciation | ||||||||
Opening balance | 30,894,606.69 | 99,045,654.16 | 984,257,885.91 | 1,114,198,146.76 | ||||
Depreciation | 4,607,599.00 | 40,260,913.88 | 494,164,357.26 | 539,032,870.14 | ||||
Disposals | (3,079,094.84) | (6,901,090.39) | (57,943,005.84) | (67,923,191.07) | ||||
Exchange difference | - | - | (58,112,127.40) | (58,112,127.40) | ||||
Closing balance | 32,423,110.85 | 132,405,477.65 | 1,362,367,109.93 | 1,527,195,698.43 | ||||
Provision for | ||||||||
impairment | ||||||||
Opening balance | - | 30,616,775.38 | 49,384,416.55 | 80,001,191.93 | ||||
Impairment | - | 14,125,254.84 | - | 14,125,254.84 | ||||
Closing balance | - | 44,742,030.22 | 49,384,416.55 | 94,126,446.77 | ||||
Carrying amount | ||||||||
Closing balance | 67,923,574.12 | 291,265,949.54 | 6,478,814,589.90 | 6,838,004,113.56 | ||||
Opening balance | 71,305,094.48 | 359,527,006.22 | 6,133,753,525.99 | 6,564,585,626.69 | ||||
53
China Huarong Financial Leasing Co., Ltd | ||||||||||
Notes to the financial statements (continued) | ||||||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |||||||||
VI. | Notes to key items of the consolidated financial statements (continued) | |||||||||
9 | Operating lease assets (continued) | |||||||||
31 December 2019 | ||||||||||
Buildings | Machinery | Vehicles | Total | |||||||
Cost | ||||||||||
Opening balance | 87,505,579.97 | 557,796,934.18 | 4,945,068,134.20 | 5,590,370,648.35 | ||||||
Purchases or | ||||||||||
transfer in | 14,694,121.20 | - | 2,222,327,694.25 | 2,237,021,815.45 | ||||||
Disposals | - | (68,607,498.42) | - | (68,607,498.42) | ||||||
Closing balance | 102,199,701.17 | 489,189,435.76 | 7,167,395,828.45 | 7,758,784,965.38 | ||||||
Accumulated | ||||||||||
depreciation | ||||||||||
Opening balance | 26,666,719.83 | 98,979,879.01 | 545,646,128.23 | 671,292,727.07 | ||||||
Depreciation | 4,227,886.86 | 49,802,941.23 | 431,338,135.53 | 485,368,963.62 | ||||||
Disposals | - | (49,737,166.08) | - | (49,737,166.08) | ||||||
Exchange difference | - | - | 7,273,622.15 | 7,273,622.15) | ||||||
Closing balance | 30,894,606.69 | 99,045,654.16 | 984,257,885.91 | 1,114,198,146.76 | ||||||
Provision for | ||||||||||
impairment | ||||||||||
Opening balance | - | 30,616,775.38 | 27,782,894.65 | 58,399,670.03 | ||||||
Impairment | - | - | 21,601,521.90 | 21,601,521.90 | ||||||
Closing balance | - | 30,616,775.38 | 49,384,416.55 | 80,001,191.93 | ||||||
Carrying amount | ||||||||||
Closing balance | 71,305,094.48 | 359,527,006.22 | 6,133,753,525.99 | 6,564,585,626.69 | ||||||
Opening balance | 60,838,860.14 | 428,200,279.79 | 4,371,639,111.32 | 4,860,678,251.25 | ||||||
As at 31 December 2020, the lease term is from 24 to 120 months (31 December 2019: from 6 to 120 months).
As at 31 December 2020, the carrying amount of the operating lease assets pledged for general bank borrowings amounted to RMB4,006,110,072.80 (31 December 2019: RMB 3,720,320,206.78)
54
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
9 | Operating lease assets (continued) | ||||
31 December 2020 | 31 December 2019 | ||||
Undiscounted lease receipts: | |||||
The 1st year subsequent to balance | |||||
sheet date | 849,647,593.37 | 750,119,012.78 | |||
The 2nd year subsequent to balance | |||||
sheet date | 756,138,319.51 | 702,871,456.14 | |||
The 3rd year subsequent to balance | |||||
sheet date | 680,566,211.58 | 604,713,233.15 | |||
The 4th year subsequent to balance | |||||
sheet date | 634,907,670.89 | 494,889,142.95 | |||
The 5th year subsequent to balance | |||||
sheet date | 544,200,031.57 | 326,411,381.27 | |||
Subsequent years | 1,501,849,379.34 | 1,194,804,741.61 | |||
Total undiscounted lease receipts | 4,967,309,206.26 | 4,073,808,967.90 |
10. Fixed assets
31 December 2020
Office equipment | ||||||||
Buildings | Vehicles | and others | Total | |||||
Cost | ||||||||
Opening balance | 189,085,826.59 | 8,410,660.66 | 13,516,505.07 | 211,012,992.32 | ||||
Purchases | - | 352,292.04 | 95,027.41 | 447,319.45 | ||||
Transfers from | ||||||||
construction | ||||||||
in progress | - | - | 10,097,562.84 | 10,097,562.84 | ||||
Disposals | - | (2,660,671.38) | (878,507.28) | (3,539,178.66) | ||||
Closing balance | 189,085,826.59 | 6,102,281.32 | 22,830,588.04 | 218,018,695.95 | ||||
Accumulated | ||||||||
depreciation | ||||||||
Opening balance | 8,580,966.53 | 7,805,912.55 | 9,003,309.85 | 25,390,188.93 | ||||
Depreciation | 5,834,066.16 | 212,804.70 | 3,685,060.78 | 9,731,931.64 | ||||
Disposals | - | (2,523,887.58) | (834,581.92) | (3,358,469.50) | ||||
Closing balance | 14,415,032.69 | 5,494,829.67 | 11,853,788.71 | 31,763,651.07 | ||||
Carrying amount | ||||||||
Closing balance | 174,670,793.90 | 607,451.65 | 10,976,799.33 | 186,255,044.88 | ||||
Opening balance | 180,504,860.06 | 604,748.11 | 4,513,195.22 | 185,622,803.39 | ||||
55
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
10. Fixed assets (continued)
31 December 2019
Office equipment | ||||||||
Buildings | Vehicles | and others | Total | |||||
Cost | 50,195,826.59 | 8,410,660.66 | 14,936,951.22 | 73,543,438.47 | ||||
Opening balance | ||||||||
Purchases | - | - | 2,243,524.19 | 2,243,524.19 | ||||
Transfers from | ||||||||
construction | 138,890,000.00 | - | - | 138,890,000.00 | ||||
in progress | ||||||||
Disposals | - | - | (3,663,970.34) | (3,663,970.34) | ||||
Closing balance | 189,085,826.59 | 8,410,660.66 | 13,516,505.07 | 211,012,992.32 | ||||
Accumulated | ||||||||
depreciation | 6,045,537.89 | 7,488,048.57 | 10,925,091.31 | 24,458,677.77 | ||||
Opening balance | ||||||||
Depreciation | 2,535,428.64 | 317,863.98 | 1,520,228.67 | 4,373,521.29 | ||||
Disposals | - | - | (3,442,010.13) | (3,442,010.13) | ||||
Closing balance | 8,580,966.53 | 7,805,912.55 | 9,003,309.85 | 25,390,188.93 | ||||
Carrying amount | ||||||||
180,504,860.06 | 604,748.11 | 4,513,195.22 | 185,622,803.39 | |||||
Closing balance | ||||||||
Opening balance | 44,150,288.70 | 922,612.09 | 4,011,859.91 | 49,084,760.70 | ||||
As at 31 December 2020, the carrying amount of the fixed assets without certificate of ownership amounted to RMB138,890,000.00 (31 December 2019: RMB 138,890,000.00).
56
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
11. Construction in process
Transfer to | |||||||
1 January 2020 | Additions | fixed assets | 31 December 2020 | ||||
Huarong Centre | 8,774,549.32 | 1,323,013.52 | (10,097,562.84) | - | |||
Huarong Financial | |||||||
Centre | 223,304,494.41 | 37,205,284.48 | - | 260,509,778.89 | |||
Total | 232,079,043.73 | 38,528,298.00 | 10,097,562.84 | 260,509,778.89 | |||
Transfer to | |||||||
1 January 2019 | Additions | fixed assets | 31 December 2019 | ||||
Huarong Centre | 107,355,564.34 | 40,308,984.98 | (138,890,000.00) | 8,774,549.32 | |||
Huarong Financial | |||||||
Centre | 186,891,969.02 | 36,412,525.39 | - | 223,304,494.41 | |||
Total | 294,247,533.36 | 76,721,510.37 | (138,890,000.00) | 232,079,043.73 | |||
12. Intangible assets
31 December 2020
Land use rights | Software | Others | Total | ||||
Cost | |||||||
Opening balance | 888,791,072.38 | 2,219,351.72 | 994,500.00 | 892,004,924.10 | |||
Additions | 34,018.90 | - | - | 34,018.90 | |||
Closing balance | 888,825,091.28 | 2,219,351.72 | 994,500.00 | 892,038,943.00 | |||
Accumulated amortisation | |||||||
Opening balance | 137,407,683.86 | 389,740.18 | 681,943.80 | 138,479,367.84 | |||
Amortisation | 22,318,013.60 | 221,935.11 | 28,414.29 | 22,568,363.00 | |||
Closing balance | 159,725,697.46 | 611,675.29 | 710,358.09 | 161,047,730.84 | |||
Provision for impairment | |||||||
Opening balance | - | - | 137,500.00 | 137,500.00 | |||
Closing balance | - | - | 137,500.00 | 137,500.00 | |||
Carrying amount | |||||||
Closing balance | 729,099,393.82 | 1,607,676.43 | 146,641.91 | 730,853,712.16 | |||
Opening balance | 751,383,388.52 | 1,829,611.54 | 175,056.20 | 753,388,056.26 | |||
57
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
12. Intangible assets (continued)
31 December 2019
Land use rights | Software | Others | Total | ||||
Cost | |||||||
Opening balance | 888,791,072.38 | 2,219,351.72 | 994,500.00 | 892,004,924.10 | |||
Closing balance | 888,791,072.38 | 2,219,351.72 | 994,500.00 | 892,004,924.10 | |||
Accumulated amortisation | |||||||
Opening balance | 115,090,647.86 | 167,805.10 | 653,529.48 | 115,911,982.44 | |||
Amortisation | 22,317,036.00 | 221,935.08 | 28,414.32 | 22,567,385.40 | |||
Closing balance | 137,407,683.86 | 389,740.18 | 681,943.80 | 138,479,367.84 | |||
Provision for impairment | |||||||
Opening balance | - | - | 137,500.00 | 137,500.00 | |||
Closing balance | - | - | 137,500.00 | 137,500.00 | |||
Carrying amount | |||||||
Closing balance | 751,383,388.52 | 1,829,611.54 | 175,056.20 | 753,388,056.26 | |||
Opening balance | 773,700,424.52 | 2,051,546.62 | 203,470.52 | 775,955,441.66 | |||
58
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
13. Deferred tax assets
13.1 Analysis by nature
31 December 2020 | 31 December 2019 | |||||||
Deductible temporary | Deferred tax assets | Deductible temporary | Deferred tax assets | |||||
differences | differences | |||||||
Provision for impairment of | ||||||||
assets | 2,417,223,806.01 | 594,427,169.69 | 1,875,422,181.35 | 461,536,900.90 | ||||
Change in the fair value of | ||||||||
other debt investments/ | ||||||||
other equity investments | 212,500,470.27 | 53,125,117.57 | 136,974,738.31 | 34,243,684.58 | ||||
Employee benefits payable | 109,638,725.42 | 27,409,679.05 | 99,197,878.09 | 24,799,469.53 | ||||
Deductible losses | 38,126,889.64 | 6,290,936.79 | 30,217,823.34 | 4,985,940.84 | ||||
Total | 2,777,489,891.34 | 681,252,903.10 | 2,141,812,621.09 | 525,565,995.85 | ||||
13.2 Movements in deferred tax assets
31 December 2020
Opening balance | Total gains | Total gains | Closing balance | ||||
recorded in | recorded in other | ||||||
profit or loss | comprehensive | ||||||
income | |||||||
Provision for impairment of | |||||||
assets | 461,536,900.90 | 132,890,268.79 | - | 594,427,169.69 | |||
Change in the fair value of | |||||||
other debt investments/ | |||||||
other equity investments | 34,243,684.58 | - | 18,881,432.99 | 53,125,117.57 | |||
Employee benefits payable | 24,799,469.53 | 2,610,209.52 | - | 27,409,679.05 | |||
Deductible losses | 4,985,940.84 | 1,304,995.95 | - | 6,290,936.79 | |||
Total | 525,565,995.85 | 136,805,474.26 | 18,881,432.99 | 681,252,903.10 | |||
31 December 2019
Opening balance | Total gains | Total losses | Closing balance | ||||
recorded in | recorded in other | ||||||
profit or loss | comprehensive | ||||||
income | |||||||
Provision for impairment of | |||||||
assets | 366,712,504.61 | 94,824,396.29 | - | 461,536,900.90 | |||
Change in the fair value of | |||||||
other debt investments/ | |||||||
other equity investments | 35,429,615.20 | - | (1,185,930.62) | 34,243,684.58 | |||
Employee benefits payable | 15,808,749.97 | 8,990,719.56 | - | 24,799,469.53 | |||
Depreciation of lease assets | (9,491,989.05) | 9,491,989.05 | - | - | |||
Deductible losses | 218,249.09 | 4,767,691.75 | - | 4,985,940.84 | |||
Total | 408,677,129.82 | 118,074,796.65 | (1,185,930.62) | 525,565,995.85 | |||
59
China Huarong Financial Leasing Co., Ltd | ||||||
Notes to the financial statements (continued) | ||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |||||
VI. | Notes to key items of the consolidated financial statements (continued) | |||||
14. | Other assets | |||||
Note | 31 December 2020 | 31 December 2019 | ||||
Long-term receivables | ||||||
under sub-lease operations | ||||||
of right-of-use assets | 14.1 | 2,300,797,200.07 | 2,888,059,791.88 | |||
Debt-expiated assets | 14.1 | 423,114,651.35 | 419,699,836.97 | |||
Input VAT to be deducted | 257,469,623.27 | 500,883,361.03 | ||||
Long-term receivables | 14.1 | 123,054,953.12 | 240,243,415.71 | |||
Other receivables | 14.1/14.3 | 24,705,578.30 | 38,721,081.53 | |||
Long-term prepaid expenses | 14.2 | 10,080,416.59 | 12,058,124.21 | |||
Right-of-use assets | 14.4 | 5,747,606.25 | 11,987,025.83 | |||
Receivables for co-construction | 3,500,209.32 | 3,081,102.82 | ||||
Others | 372,642,137.13 | 461,018,618.84 | ||||
Total | 3,521,112,375.40 | 4,575,752,358.82 |
14.1 Movement of provision for impairment of other assets
31 December 2020
Recovery of | |||||||||
write-offs in | 31 December | ||||||||
1 January 2020 | Accrual | Write-off | previous years | 2020 | |||||
Long-term receivables under | |||||||||
sub-lease operations of | |||||||||
right-of-use asset | 16,265,558.71 | 745,848.52 | - | - | 17,011,407.23 | ||||
Other receivable | 5,823,480.08 | 4,563,536.63 | (802,271.00) | - | 9,584,745.71 | ||||
Long-term receivables | 108,093,138.32 | 49,666,478.31 | (46,654,719.48) | 2,837,338.33 | 113,942,235.48 | ||||
Debt-expiated assets | - | 34,569,247.08 | (20,399,669.36) | - | 14,169,577.72 | ||||
Total | |||||||||
130,182,177.11 | 89,545,110.54 | (67,856,659.84) | 2,837,338.33 | 154,707,966.14 | |||||
31 December 2019
Recovery of | |||||||||
(Reversal | write-offs in | 31 December | |||||||
1 January 2019 | /Accrual) | Write-off | previous years | 2019 | |||||
Long-term receivables under | |||||||||
sub-lease operations of | |||||||||
right-of-use assets | 18,032,305.85 | (1,766,747.14) | - | - | 16,265,558.71 | ||||
Other receivable | 4,640,142.43 | 1,183,337.65 | - | - | 5,823,480.08 | ||||
Long-term receivables | 69,934,463.01 | 89,078,537.75 | (51,421,598.44) | 501,736.00 | 108,093,138.32 | ||||
Total | |||||||||
92,606,911.29 | 88,495,128.26 | (51,421,598.44) | 501,736.00 | 130,182,177.11 | |||||
60
China Huarong Financial Leasing Co., Ltd | ||
Notes to the financial statements (continued) | ||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |
VI. | Notes to key items of the consolidated financial statements (continued) | |
14 | Other assets (continued) |
14.2 Long-term prepaid expenses
31 December 2020 | 31 December 2019 | |||||
Prepaid financing expenses | 231,632.01 | 825,711.73 | ||||
Others | 9,848,784.58 | 11,232,412.48 | ||||
Total | 10,080,416.59 | 12,058,124.21 | ||||
14.3 Other receivables | ||||||
31 December 2020 | 31 December 2019 | |||||
Trade receivables | 34,290,324.01 | 40,427,844.52 | ||||
Others | - | 4,116,717.09 | ||||
Subtotal | 34,290,324.01 | 44,544,561.61 | ||||
Less: Impairment allowance | 9,584,745.71 | 5,823,480.08 | ||||
Total | 24,705,578.30 | 38,721,081.53 | ||||
An ageing analysis of other receivables is as follows:
31 December 2020 | 31 December 2019 | ||
Within 1 year | 8,682,574.03 | 14,947,697.24 | |
1 to 2 years | 4,776,071.40 | 13,612,456.85 | |
2 to 3 years | 9,149,053.85 | 9,642,096.55 | |
Over 3 years | 11,682,624.73 | 6,342,310.97 | |
Less: Impairment allowance | 9,584,745.71 | 5,823,480.08 | |
24,705,578.30 | 38,721,081.53 |
61
China Huarong Financial Leasing Co., Ltd | ||
Notes to the financial statements (continued) | ||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |
VI. | Notes to key items of the consolidated financial statements (continued) | |
14 | Other assets (continued) |
14.4 Right-of-use assets
31 December 2020 | 31 December 2019 | ||
Buildings | Buildings | ||
Cost | |||
Opening balance | 17,127,578.06 | 8,067,019.93 | |
Addition | - | 9,060,558.13 | |
Closing balance | 17,127,578.06 | 17,127,578.06 | |
Accumulated depreciation | |||
Opening balance | 5,140,552.23 | - | |
Depreciation | 6,239,419.58 | 5,140,552.23 | |
Closing balance | 11,379,971.81 | 5,140,552.23 | |
Carrying amount | |||
Closing balance | 5,747,606.25 | 11,987,025.83 | |
Opening balance | 11,987,025.83 | 8,067,019.93 |
62
China Huarong Financial Leasing Co., Ltd | ||
Notes to the financial statements (continued) | ||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |
VI. | Notes to key items of the consolidated financial statements (continued) | |
14 | Other assets (continued) |
14.4 Right-of-use assets (continued)
The leased assets corresponding to the Group's right-of-use assets under leases are all properties with lease terms of 3 to 5 years (2019: 2 to 5 years).
In the current period, the short-term lease expenses recognised in the profit or loss by the Group using the practical expedient amounted to RMB 1,371,149.04, among which there are no lease expenses relating to the low-value assets (for the year ended 31 December 2019: the short-term lease expenses recognised in profit or loss are RMB 7,989,049.02).
15. Provision for impairment of assets
31 December 2020
Recovery of | |||||||||||
Opening | Accrual | write-offs in | Exchange | Closing | |||||||
balance | /(Reversal) | Write-off | previous years | rate difference | balance | ||||||
Deposits with other | 5,121,726.63 | 349,432.40 | - | - | - | 5,471,159.03 | |||||
financial institutions | |||||||||||
Notes receivables | 23,359.04 | (20,877.52) | - | - | - | 2,481.52 | |||||
Finance lease | |||||||||||
receivables | 2,751,092,083.98 | 1,037,758,822.27 | (642,383,711.57) | 11,896,137.92 | (7,013,710.97) | 3,151,349,621.63 | |||||
Prepayments | - | 5,962.35 | - | - | - | 5,962.35 | |||||
Debt investments | 17,083,866.05 | 26,623,110.23 | - | - | - | 43,706,976.28 | |||||
Operating lease | |||||||||||
assets | 80,001,191.93 | 14,125,254.84 | - | - | - | 94,126,446.77 | |||||
Intangible assets | 137,500.00 | - | - | - | - | 137,500.00 | |||||
Other assets | 130,182,177.11 | 89,545,110.54 | (67,856,659.84) | 2,837,338.33 | - | 154,707,966.14 | |||||
Total | 2,983,641,904.74 | 1,168,386,815.11 | (710,240,371.41) | 14,733,476.25 | (7,013,710.97) | 3,449,508,113.72 | |||||
31 December 2019 | |||||||||||
Recovery of | |||||||||||
Opening | Accrual | write-offs in | Exchange | Closing | |||||||
balance | /(Reversal) | Write-off | previous years | rate difference | balance | ||||||
Deposits with other | 614,923.47 | 4,506,803.16 | - | - | - | 5,121,726.63 | |||||
financial institutions | |||||||||||
Placements with banks | |||||||||||
and other financial | |||||||||||
institutions | 2,867.07 | (2,867.07) | - | - | - | - | |||||
Notes receivables | 304,304.69 | (280,945.65) | - | - | - | 23,359.04 | |||||
Finance lease | 2,331,076,099.57 | 566,124,091.78 | (148,010,239.27) | 1,346,693.36 | 555,438.54 | 2,751,092,083.98 | |||||
receivables | |||||||||||
Prepayments | 22,456,300.00 | (22,456,300.00) | - | - | - | - | |||||
Debt investments | 8,448,369.47 | 8,635,496.58 | - | - | - | 17,083,866.05 | |||||
Operating lease | 58,399,670.03 | 21,601,521.90 | - | - | - | 80,001,191.93 | |||||
assets | |||||||||||
Intangible assets | 137,500.00 | - | - | - | - | 137,500.00 | |||||
Other assets | 92,606,911.29 | 88,495,128.26 | (51,421,598.44) | 501,736.00 | - | 130,182,177.11 | |||||
Total | 2,514,046,945.59 | 666,622,928.96 | (199,431,837.71) | 1,848,429.36 | 555,438.54 | 2,983,641,904.74 | |||||
63
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
16. | Borrowings | ||||
31 December 2020 | 31 December 2019 | ||||
General bank borrowings | 76,003,979,328.48 | 78,422,532,413.52 | |||
Trust and asset management financing | 5,611,765,584.76 | 9,348,911,490.48 | |||
Bank factoring borrowings | 2,795,464,163.05 | 2,127,516,737.24 | |||
Add: Interest payable | 512,716,570.93 | 750,944,148.18 | |||
Total | 84,923,925,647.22 | 90,649,904,789.42 |
17. Placements from banks and other financial institutions
31 December 2020 | 31 December 2019 | |||
Placements with domestic banks | 1,419,000,000.00 | 500,000,000.00 | ||
Add: Interest payable | 7,151,613.90 | 2,891,111.11 | ||
Total | 1,426,151,613.90 | 502,891,111.11 | ||
18. | Notes payable | |||
31 December 2020 | 31 December 2019 | |||
Domestic letter of credit | 8,560,337,313.74 | 4,572,024,728.28 | ||
Bank acceptance bills | 145,819,872.47 | 276,356,542.02 | ||
Total | 8,706,157,186.21 | 4,848,381,270.30 |
As at 31 December 2020 and 31 December 2019, there are no notes payable due and unpaid.
19. Financial assets sold under repurchase agreements
31 December 2020 | 31 December 2019 | ||
Bonds | 386,312,000.00 | - | |
Add: Interests Payable | 1,826,682.82 | - | |
Total | 388,138,682.82 | - |
64
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
20. Employee benefits payable
1 January 2020 | Accrual | Payment | 31 December 2020 | |||||
Salaries, bonuses, allowances and | ||||||||
subsidies | 213,294,299.93 | 142,690,000.00 | 141,886,588.96 | 214,097,710.97 | ||||
Staff welfare | - | 8,638,236.57 | 8,638,236.57 | - | ||||
Social security | 3,121,094.42 | 12,712,486.07 | 9,855,147.10 | 5,978,433.39 | ||||
Including: Medical insurance | 3,121,094.42 | 9,994,845.92 | 7,137,506.95 | 5,978,433.39 | ||||
Work injury insurance | - | 67,340.92 | 67,340.92 | - | ||||
Maternity insurance | - | 53,006.23 | 53,006.23 | - | ||||
Others | - | 2,597,293.00 | 2,597,293.00 | - | ||||
Housing funds | (8,772.00) | 8,170,713.00 | 8,170,713.00 | (8,772.00) | ||||
Union running costs and employee | ||||||||
education costs | 19,682,991.53 | 6,421,050.00 | 3,750,797.73 | 22,353,243.80 | ||||
236,089,613.88 | 178,632,485.64 | 172,301,483.36 | 242,420,616.16 | |||||
Defined Contribution Plans | 85,465.13 | 17,445,333.64 | 17,445,333.64 | 85,465.13 | ||||
Including: Basic pension insurance | 86,490.72 | 4,841,453.29 | 4,841,453.29 | 86,490.72 | ||||
Unemployment insurance | (1,025.59) | 171,925.59 | 171,925.59 | (1,025.59) | ||||
Contribution to pension | ||||||||
fund | - | 12,431,954.76 | 12,431,954.76 | - | ||||
Total | 236,175,079.01 | 196,077,819.28 | 189,746,817.00 | 242,506,081.29 | ||||
1 January 2019 | Accrual | Payment | 31 December 2019 | |||||
Salaries, bonuses, allowances and | ||||||||
subsidies | 187,524,033.10 | 148,380,000.00 | 122,609,733.17 | 213,294,299.93 | ||||
Staff welfare | - | 7,120,172.40 | 7,120,172.40 | - | ||||
Social security | 8,698.42 | 11,918,280.42 | 8,805,884.42 | 3,121,094.42 | ||||
Including: Medical insurance | 8,698.42 | 10,795,518.88 | 7,683,122.88 | 3,121,094.42 | ||||
Work injury insurance | - | 97,645.27 | 97,645.27 | - | ||||
Maternity insurance | - | 533,180.24 | 533,180.24 | - | ||||
Others | - | 491,936.03 | 491,936.03 | - | ||||
Housing funds | - | 8,013,753.20 | 8,022,525.20 | (8,772.00) | ||||
Union running costs and employee | ||||||||
education costs | 16,480,614.84 | 6,677,100.00 | 3,474,723.31 | 19,682,991.53 | ||||
204,013,346.36 | 182,109,306.02 | 150,033,038.50 | 236,089,613.88 | |||||
Defined Contribution Plans | 85,465.13 | 14,690,696.59 | 14,690,696.59 | 85,465.13 | ||||
Including: Basic pension insurance | 86,490.72 | 6,970,159.52 | 6,970,159.52 | 86,490.72 | ||||
Unemployment insurance | (1,025.59) | 247,537.07 | 247,537.07 | (1,025.59) | ||||
Contribution to pension | ||||||||
fund | - | 7,473,000.00 | 7,473,000.00 | - | ||||
Total | 204,098,811.49 | 196,800,002.61 | 164,723,735.09 | 236,175,079.01 | ||||
In 2020, according to the Notice of the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Administration of Taxation on the phased reduction and exemption of enterprise social insurance premium (No.11 [2020] of the Ministry of Human Resources and Social Security) and the Guidance of the State Medical Insurance Bureau, the Ministry of Finance and the State Administration of Taxation on the phased reduction of basic medical insurance premium for employees (No.6 [2020] of the State Medical Insurance Bureau), the group is eligible for social insurance premium reduction and exemption in Hangzhou, Ningbo, Jinhua, Shanghai and other places.
65
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
21. Taxes payable
31 December 2020 | 31 December 2019 | |||
Income tax | 289,865,586.35 | 314,087,594.71 | ||
Value-added Tax | 71,058,104.46 | 70,842,848.60 | ||
Others | 10,442,282.74 | 3,170,942.52 | ||
Total | 371,365,973.55 | 388,101,385.83 | ||
22. | Bonds payable | |||
31 December 2020 | 31 December 2019 | |||
Financial and corporate bonds issued | 13,238,683,132.31 | 12,060,585,652.82 | ||
Asset-backed securities | 388,902,231.07 | 1,791,955,172.35 | ||
Add: Interest payable | 296,412,295.79 | 277,514,530.93 | ||
Total | 13,923,997,659.17 | 14,130,055,356.10 |
As at 31 December 2020, the details of the outstanding bonds payable are as follows:
Coupon | Circulation | Issue | Amortised | ||||||
Name of Bond | Notes | Issue date | Issue price | rate | Value date | Maturity date | date | amount | cost |
17 Huarong Leasing Green Finance 02 | 14/02/2017 | 100.00 | 4.70% | 15/02/2017 | 15/02/2022 | 16/02/2017 | 1,000,000,000.00 | 998,575,334.83 | |
The 2nd series of Ronghui 2017 lease- | 5.30%- | ||||||||
asset-backed securities | 21/11/2017 | 100.00 | 6.00% | 24/11/2017 | 26/07/2027 | 27/11/2017 | 3,830,000,000.00 | 388,902,231.07 | |
18 Huarong Leasing Bond 01 | 13/03/2018 | 100.00 | 5.42% | 15/03/2018 | 15/03/2021 | 16/03/2018 | 600,000,000.00 | 599,857,339.44 | |
18 Huarong Leasing Bond 02 | 27/08/2018 | 100.00 | 4.50% | 29/08/2018 | 29/08/2021 | 30/08/2018 | 2,400,000,000.00 | 2,398,169,516.71 | |
19 Huarong Leasing Bond 01 | 04/03/2019 | 100.00 | 3.87% | 06/03/2019 | 06/03/2022 | 07/03/2019 | 3,000,000,000.00 | 2,995,952,320.58 | |
20 Huarong Leasing Bond 01 | (1) | 22/07/2020 | 100.00 | 3.75% | 23/07/2020 | 23/07/2023 | 24/07/2020 | 3,000,000,000.00 | 2,992,266,928.57 |
HRLM HK N2102 (40160) | (2) | 21/02/2020 | 7,021.00 | 3.10% | 21/02/2020 | 18/02/2021 | 21/02/2020 | 1,404,200,000.00 | 1,304,364,708.46 |
HRLM HK N2107 (40322) | (3) | 23/07/2020 | 6,992.10 | 2.50% | 23/07/2020 | 21/07/2021 | 22/07/2020 | 2,097,630,000.00 | 1,949,496,983.72 |
66
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
22. Bonds Payable (Continued)
As at 31 December 2019, the details of the outstanding bonds payable are as follows:
Coupon | Circulation | Issue | Amortised | ||||||
Name of Bond | Issue date | Issue price | rate | Value date | Maturity date | date | amount | cost | |
15 | Huarong Leasing Bond 03 | 10/12/2015 | 100.00 | 4.00% | 11/12/2015 | 11/12/2020 | 14/12/2015 | 2,000,000,000.00 | 1,997,341,389.66 |
17 | Huarong Leasing Green Finance 01 | 14/02/2017 | 100.00 | 4.45% | 15/02/2017 | 15/02/2020 | 16/02/2017 | 1,000,000,000.00 | 999,857,547.40 |
17 | Huarong Leasing Green Finance 02 | 14/02/2017 | 100.00 | 4.70% | 15/02/2017 | 15/02/2022 | 16/02/2017 | 1,000,000,000.00 | 997,367,491.52 |
The 1st phase of Ronghui 2017 lease-asset- | 4.40%- | ||||||||
backed securities | 21/02/2017 | 100.00 | 5.20% | 24/02/2017 | 20/07/2020 | 27/02/2017 | 4,100,000,000.00 | 476,578,286.12 | |
The 2nd phase of Ronghui 2017 lease- | 5.30%- | ||||||||
asset-backed securities | 21/11/2017 | 100.00 | 6.00% | 24/11/2017 | 26/07/2027 | 27/11/2017 | 3,830,000,000.00 | 1,315,376,886.23 | |
18 | Huarong Leasing Bond 01 | 13/03/2018 | 100.00 | 5.42% | 15/03/2018 | 15/03/2021 | 16/03/2018 | 600,000,000.00 | 599,166,656.06 |
18 | Huarong Leasing Bond 02 | 27/08/2018 | 100.00 | 4.50% | 29/08/2018 | 29/08/2021 | 30/08/2018 | 2,400,000,000.00 | 2,395,483,102.70 |
19 | Huarong Leasing Bond 01 | 04/03/2019 | 100.00 | 3.87% | 06/03/2019 | 06/03/2022 | 07/03/2019 | 3,000,000,000.00 | 2,992,645,764.95 |
The 1st phase of Huarong Shipping Leasing | |||||||||
2019 dollar bond | 28/10/2019 | 7,076.20 | 3.25% | 28/10/2019 | 25/10/2020 | 28/10/2019 | 2,122,860,000.00 | 2,078,723,700.53 |
Notes:
- Approved by the People's Bank of China and Zhejiang Administration of Supervision, CBIRC, the company publicly issued the 1st phase of 2020 China Huarong Financial Leasing Co., Ltd. Financial Bonds of RMB 3,000,000,000.00 in the national inter-bank bond market on 22 July 2022. The bond is issued with a maturity period of 3 years at the fixed interest rate of 3.75%. The interest is paid on a yearly basis and the principal is repaid upon maturity. The redemption by issuer or resale by investors is not permitted.
- On 21 February 2020, Huarong Leasing Management Hong Kong Company Limited (formerly Xinlu International Holding Company Limited) issued USD bonds [HRLM HK N2102 (40160)] amounting to USD 200,000,000.00 (equivalent to RMB 1,404,200,000.00) on the Stock Exchange of Hong Kong Limited, with a maturity period of 1 year at the fixed interest rate of 3.10%. The principal is repaid upon maturity. The redemption by issuer or resale by investors is not permitted.
- On 23 July 2020, Huarong Leasing Management Hong Kong Company Limited (formerly Xinlu International Holding Company Limited) issued USD bonds [HRLM HK N2107 (40322)] amounting to USD 300,000,000.00 (equivalent to RMB 2,097,630,000.00) on the Stock Exchange of Hong Kong Limited, with a maturity period of 1 year at the fixed interest rate of 2.50%. The principal is repaid upon maturity. The redemption by issuer or resale by investors is not permitted.
67
China Huarong Financial Leasing Co., Ltd | ||||||
Notes to the financial statements (continued) | ||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | |||||
VI. | Notes to key items of the consolidated financial statements (continued) | |||||
23. | Other liabilities | |||||
Notes | 31 December 2020 | 31 December 2019 | ||||
Finance lease risk funds | 10,949,776,368.33 | 10,563,768,033.31 | ||||
Other payables | 23.1 | 310,700,983.51 | 180,506,379.94 | |||
Lease deposits | 236,456,634.69 | 300,270,063.28 | ||||
Lease liabilities | 23.2 | 5,946,122.21 | 12,241,907.99 | |||
Others | 147,116,529.01 | 108,417,448.26 | ||||
Total | 11,649,996,637.75 | 11,165,203,832.78 |
23.1 Other payables
31 December 2020 | 31 December 2019 | ||
Trade payables | 159,270,347.58 | 121,499,988.58 | |
Dividends payables | 64,752,407.87 | - | |
Others | 86,678,228.06 | 59,006,391.36 | |
Total | 310,700,983.51 | 180,506,379.94 |
23.2 Lease liabilities
31 December 2020 | 31 December 2019 | ||
Buildings | 5,946,122.21 | 12,241,907.99 |
68
China Huarong Financial Leasing Co., Ltd | |||||||||
Notes to the financial statements (continued) | |||||||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||||||
24. | Paid-in capital | ||||||||
31 December 2020 | 31 December 2019 | ||||||||
Proportion | Proportion | ||||||||
RMB | % | RMB | % | ||||||
CHINA HUARONG ASSET | 4,736,709,379.00 | ||||||||
MANAGEMENT CO., LTD. | 79.92% | 4,736,709,379.00 | 79.92% | ||||||
SHAOXING KEQIAO | |||||||||
TIANSHENG INVESTMENT | |||||||||
MANAGEMENT CO., LTD | 489,540,795.00 | 8.26% | - | - | |||||
ZHEJIANG YONGLI | |||||||||
INDUSTRIAL GROUP CO., | - | - | 489,540,795.00 | 8.26% | |||||
ZHEJIANG ENERGY GROUP | |||||||||
FINANCIAL CO.,LTD. | 160,000,000.00 | 2.70% | 160,000,000.00 | 2.70% | |||||
ZHENGDA INDUSTRIAL | |||||||||
INVESTMENT CO., LTD. | 156,497,851.00 | 2.64% | 156,497,851.00 | 2.64% | |||||
CHINA SHIPBUILDING | |||||||||
INDUSTRY FINANCIAL CO., | |||||||||
LTD. | 128,000,000.00 | 2.16% | 128,000,000.00 | 2.16% | |||||
NINGBO HEYUAN HOLDING | |||||||||
LTD. | 112,000,000.00 | 1.89% | 112,000,000.00 | 1.89% | |||||
GOLDSTONE INVESTMENT | |||||||||
LTD. | 48,000,000.00 | 0.81% | 48,000,000.00 | 0.81% | |||||
ZHEJIANG CHENGRUN | |||||||||
HOLDING GROUP CO., LTD. | 38,011,403.00 | 0.64% | 38,011,403.00 | 0.64% | |||||
BEIJING GUOTONG ASSET | |||||||||
MANAGEMENT CO., LTD. | 32,000,000.00 | 0.54% | 32,000,000.00 | 0.54% | |||||
WEILING GROUP LIMITED | 21,600,000.00 | 0.36% | 21,600,000.00 | 0.36% | |||||
RUIAN STATE-OWNED | |||||||||
INVESTMENT GROUP | |||||||||
LIMITED | 2,963,353.00 | 0.05% | 2,963,353.00 | 0.05% | |||||
C & U GROUP CO., LTD | 1,017,575.00 | 0.02% | 1,017,575.00 | 0.02% | |||||
WENZHOU MODERN SERVICE | |||||||||
INVESTMENT GROUP | |||||||||
LIMITED | 420,398.00 | 0.01% | 420,398.00 | 0.01% | |||||
Total | 5,926,760,754.00 | 100.00% | 5,926,760,754.00 | 100.00% | |||||
Note: In accordance with the Company's Resolutions of the 8th Provisional Shareholders' Meeting held in 2019, the revised Articles of Association and the Approval on China Huarong Financial Leasing Co., Ltd.'s Changes in Registered Capital and Adjustments to Shareholding Structure issued by Zhejiang Supervision Administration of China Banking Regulatory Commission (Zhe Yin Jian Fu [2020] No.34), Shaoxing Keqiao Tiansheng Investment Management Co., Ltd., the shareholder of the Company, has been granted 489,540,795 shares (proportion 8.25984%) from Zhejiang Yongli Industrial Group Limited. Upon transferring, the registered capital of the Company will remain unchanged at RMB 5,926,760,754.00.
Wenzhou Modern Service Investment Group Limited changed its name to Wenzhou Modern Service Development Group Limited on 4 March 2020.
69
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
25. Capital reserves
31 December 2020 | 31 December 2019 | ||
Capital premium | 2,390,099,408.00 | 2,390,099,408.00 | |
Others | 20,794,201.31 | 20,794,201.31 | |
Total | 2,410,893,609.31 | 2,410,893,609.31 | |
26. Accumulated other comprehensive income
Accumulated balance of other comprehensive income in the consolidated balance sheet was as follow:
1/1/2020 | Increase/(Decrease) | 31/12/2020 | ||||
Change in the fair value of other equity investments | (108,453,430.67) | (42,164,173.15) | (150,617,603.82) | |||
Change in the fair value of other debt investments | 5,722,376.93 | (14,480,125.82) | (8,757,748.89) | |||
Exchange differences on translation of financial | ||||||
statements in foreign currencies | (17,528,823.37) | (22,355,262.12) | (39,884,085.49) | |||
Total | (120,259,877.11) | (78,999,561.09) | (199,259,438.20) | |||
1/1/2019 | Increase/(Decrease) | 31/12/2019 | ||||
Change in the fair value of other equity investments | (109,763,397.52) | 1,309,966.85 | (108,453,430.67) | |||
Change in the fair value of other debt investments | 3,474,551.93 | 2,247,825.00 | 5,722,376.93 | |||
Exchange differences on translation of financial | ||||||
statements in foreign currencies | (19,925,115.47) | 2,396,292.10 | (17,528,823.37) | |||
Total | (126,213,961.06) | 5,954,083.95 | (120,259,877.11) | |||
70
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
26. Accumulated other comprehensive income (continued)
Other comprehensive income in the consolidated income statement was as follow:
2020 | Before tax | Less: income tax | After tax | |||
Other comprehensive income that will not be | ||||||
reclassified to profit or loss | ||||||
Change in the fair value of other equity | ||||||
investments | (56,218,897.53) | 14,054,724.38 | (42,164,173.15) | |||
Other comprehensive income that may be | ||||||
reclassified to profit or loss | ||||||
Change in the fair value of other debt | ||||||
investments | (19,306,834.43) | 4,826,708.61 | (14,480,125.82) | |||
Exchange differences on translation of financial | ||||||
statements in foreign currencies | (22,355,262.12) | - | (22,355,262.12) | |||
(97,880,994.08) | 18,881,432.99 | (78,999,561.09) | ||||
2019 | ||||||
Before tax | Less: income tax | After tax | ||||
Other comprehensive income that will not be | ||||||
reclassified to profit or loss | ||||||
Change in the fair value of other equity | 1,746,622.47 | (436,655.62) | 1,309,966.85 | |||
investments | ||||||
Other comprehensive income that may be | ||||||
reclassified to profit or loss | ||||||
Change in the fair value of other debt | 2,997,100.00 | (749,275.00) | 2,247,825.00 | |||
investments | ||||||
Exchange differences on translation of financial | 2,396,292.10 | - | 2,396,292.10 | |||
statements in foreign currencies | ||||||
7,140,014.57 | (1,185,930.62) | 5,954,083.95 | ||||
71
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
27. Surplus reserves
31 December 2020 | 31 December 2019 | ||
Statutory surplus reserve | |||
Opening balance | 1,285,408,243.18 | 1,130,296,530.45 | |
Appropriation | 133,448,750.18 | 155,111,712.73 | |
Closing balance | 1,418,856,993.36 | 1,285,408,243.18 |
Pursuant to the "Company Law of the People's Republic of China" and the articles of association of the Company, the Company is required to set aside 10% of its net profit to the statutory Surplus reserves until the balance reaches 50% of the respective registered capital. Subject to the approval by the shareholders, the discretionary surplus reserve may be used to offset accumulated losses of the Bank, if any, and may be converted into capital. The statutory surplus reserve amount used to increase the share capital is limited to a level where the balance of the statutory surplus reserve after such capitalisation is not less than 25% of the share capital.
28. General reserves
31 December 2020 | 31 December 2019 | ||
Opening balance | 1,984,993,098.17 | 1,946,586,133.09 | |
Appropriation | 20,595,092.63 | 38,406,965.08 | |
Closing balance | 2,005,588,190.80 | 1,984,993,098.17 |
According to the regulation Cai Jin [2012] No. 20 "Financial Institution Provision Measurement Guideline", the general reserve shall be no less than 1.5% of the closing balance or risks assets.
72
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
29. | Unappropriated profit | ||||
31 December 2020 | 31 December 2019 | ||||
Balance at end of the prior year | 4,690,820,876.95 | 3,571,823,672.59 | |||
Net profit for the year | 1,560,404,463.52 | 1,750,416,368.25 | |||
Less: Appropriation to statutory | |||||
surplus reserves | 133,448,750.18 | 155,111,712.73 | |||
Appropriation to general | |||||
reserves | 20,595,092.63 | 38,406,965.08 | |||
Cash dividends declared | 1,011,854,292.12 | 437,900,486.08 | |||
Balance at end of the current year | 5,085,327,205.54 | 4,690,820,876.95 |
According to the proposal of profit appropriation scheme during capital increase transition period approved by the meeting of shareholders on 29 May 2020, the Group plans to distribute the retained unappropriated profit during the transition period of capital increase. The distribution scheme of retained unappropriated profit during the transition period of capital increase is as follows:
It is clearly defined in accordance with the proposal on capital increase and stock expansion plan adopted at the sixth extraordinary general meeting of shareholders in 2014 that: The distributable profit formed from January 1, 2014 to one month prior to the completion of the capital increase and stock expansion(January 2015) shall be enjoyed by the old shareholders in according with the shareholding ratio before the completion of the capital increase and share expansion. The unappropriated profit of RMB 506,710,499.66 was generated during the capital increase transition period.
It is clearly defined in accordance with the proposal on capital increase and stock expansion plan adopted at the 12th extraordinary general meeting of shareholders in 2016 that: The distributable profit formed from January 1, 2016 to one month prior to the completion of the capital increase and stock expansion(January 2017) shall be enjoyed by the old shareholders in according with the shareholding ratio before the completion of the capital increase and stock expansion. The unappropriated profit of RMB 505,143,792.46 was generated during the capital increase transition period.
73
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
30. | Interest income | ||||
2020 | 2019 | ||||
Income from finance lease activities (Note) | 6,976,318,890.62 | 7,097,504,734.41 | |||
Interest income from bank deposits | 331,844,929.80 | 373,384,576.48 | |||
Interest income from debt investments | 44,193,912.28 | 82,026,914.22 | |||
Interest income from placements with | |||||
other financial institutions | 5,958,854.19 | 12,654,663.86 | |||
Interest income from financial assets | |||||
purchased under resale agreements | 4,432,329.74 | 12,616,068.48 | |||
Interest income from other debt | |||||
investments | 12,560,382.37 | 2,900,000.00 | |||
Total | 7,375,309,299.00 | 7,581,086,957.45 |
Note: Including income from additional sale and leaseback transactions since 1 January 2019.
31. Income from operating lease activities
2020 | 2019 | |||
Income from operating lease activities | 858,341,406.26 | 709,214,558.05 | ||
32. | Investment income | |||
2020 | 2019 | |||
Investment income from financial assets | 7,298,493.89 | 12,202,754.99 | ||
held for trading |
74
China Huarong Financial Leasing Co., Ltd | |||||
Notes to the financial statements (continued) | |||||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||||
VI. | Notes to key items of the consolidated financial statements (continued) | ||||
33. | Interest expenses | ||||
2020 | 2019 | ||||
Interest expenses on borrowings | 3,212,446,404.64 | 3,912,459,405.34 | |||
Bond interest expenses | 648,488,514.28 | 596,964,084.75 | |||
Lease liabilities | 343,013.56 | 323,504.24 | |||
Other interest expenses | 282,306,854.55 | 82,766,275.96 | |||
Total | 4,143,584,787.03 | 4,592,513,270.29 |
34. Expenses on leasing operations
2020 | 2019 | |||
Depreciation of operating lease assets | 539,032,870.14 | 428,730,707.15 | ||
35. | Other operating expenses | |||
2020 | 2019 | |||
Insurance expenses for lease equipment | 15,587,604.80 | 18,382,451.77 | ||
Others | 2,539,480.03 | 2,343,653.43 | ||
Total | 18,127,084.83 | 20,726,105.20 | ||
36. | Taxes and surcharges | |||
2020 | 2019 | |||
Education surcharges | 7,117,068.09 | 5,283,839.53 | ||
Urban maintenance and construction tax | 9,825,213.75 | 7,283,150.30 | ||
Stamp tax | 6,677,390.52 | 6,584,422.46 | ||
Others | 6,857,930.28 | 6,797,742.91 | ||
Total | 30,477,602.64 | 25,949,155.20 |
75
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
37. General and administrative expenses
2020 | 2019 | ||||
Employee benefits | 196,077,819.28 | 196,800,002.61 | |||
Depreciation and amortization | 38,601,654.12 | 31,823,571.41 | |||
Expenses on water, electricity and housing | |||||
rentals | 7,815,895.54 | 12,834,812.04 | |||
Travel expenses | 10,456,960.56 | 15,001,123.58 | |||
Litigation attorney fee | 13,148,112.99 | 9,996,736.04 | |||
Consultation fee | 9,800,419.48 | 7,205,610.33 | |||
Others | 17,613,767.16 | 18,865,355.68 | |||
Total | 293,514,629.13 | 292,527,211.69 | |||
38. | Credit impairment losses | ||||
2020 | 2019 | ||||
Impairment losses of deposits with other | |||||
financial institutions | 349,432.40 | 4,506,803.16 | |||
Reversal of impairment losses of | |||||
placements with banks and other | |||||
financial institutions | - | (2,867.07) | |||
Reversal of impairment losses of notes | |||||
receivables | (20,877.52) | (280,945.65) | |||
Impairment losses of finance lease | |||||
receivables | 1,037,758,822.27 | 566,124,091.78 | |||
Impairment losses of debt investments | 26,623,110.23 | 8,635,496.58 | |||
Impairment losses of other financial assets | 54,975,863.46 | 88,495,128.26 | |||
Total | 1,119,686,350.84 | 667,477,707.06 | |||
76
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
39. Impairment losses/ (reversal) of other assets
2020 | 2019 | ||||
Impairment losses/ (reversal) of | 5,962.35 | ||||
prepayments | (22,456,300.00) | ||||
Impairment losses of debt-expiated assets | 34,569,247.08 | - | |||
Impairment losses of operating lease | |||||
assets | 14,125,254.84 | 21,601,521.90 | |||
Total | 48,700,464.27 | (854,778.10) | |||
40. | Non-operating income | ||||
2020 | 2019 | ||||
Government grants not related to daily | |||||
operating activities (note) | 5,468,072.58 | 4,968,738.69 | |||
Others | 2,362,471.96 | 191,866.59 | |||
Total | 7,830,544.54 | 5,160,605.28 | |||
Note: For the year ended 31 December 2020, according to the Circular of People's Government of Pudong New area (Pu Fu No. [2012] 202) on Issuing the Notice of the People's Government of Pudong on Issuing the Financial Support Method of Pudong New Area for Contributing Development of the Financial Industry, the Group has received a fiscal subsidy of RMB2,100,000.00 (2019: RMB2,280,000.00).
According to the Policy on the Settlement of Ningbo Branch of Huarong Financial Leasing Co., Ltd. of Ningbo Jiandong People's Government Office, key enterprise support reward of RMB 2,051,900.00 was received from Jiangdong District of Ningbo City. (2019: RMB1,900,000.00).
According to the Notice (Yong Bonded Administration [2019] No.25 Document) on the Allocation of 6th Special Fund for the Development of Inclusive Finance in 2019, Huarong Financial Leasing Co.,Ltd has received a fiscal subsidy of RMB 511,095.67 (2019: RMB660,000.00).
77
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
40. Non-operating income (continued)
Note: (continued)
According to the Report on Huarong Financial Leasing Co.Ltd. Establishing Project Companies in Tianjin Dongjiang Bonded Port Area to Carry Out Financial Leasing Business and the Response, as for the great support of Huarong Financial Leasing Co.,Ltd. to Dongjiang Bonded Port Area, the fiscal subsidy of RMB29,276.91 was granted to Huarong Financial Leasing Co.,Ltd. preferred by national policies on the relevant industries and development advantages of regional industries (for the year ended 2019: RMB128,738.69).
According to the Notice of Jindong District People's Government Office in Jinhua City on Several Opinions on Supporting Financial Institution Cluster in Jindong District, a financial support amounting to RMB775,800 for financial service institutions was received.
41. Non-operating expenses
2020 | 2019 | ||
Donation expenses (note) | 4,500,000.00 | 4,079,500.00 | |
Others | 38,735.00 | 758,887.82 | |
Total | 4,538,735.00 | 4,838,387.82 |
Note: In 2020, Huarong Financial Leasing Co., Ltd. donated RMB3,000,000.00 to support poverty alleviation and RMB 1,500,000 to fight against the COVID-19 pandemic.
In 2019, Huarong Financial Leasing Co., Ltd. donated RMB4,000,000.00 to support poverty alleviation, RMB50,000.00 for important sports activities for the disabled in Zhejiang Province, and RMB29,500.00 for Charitable donation of school bags for students.
78
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
42. Income tax expenses
2020 | 2019 | |||
Current tax expenses | 624,284,267.34 | 647,811,010.96 | ||
Deferred tax expenses | (138,214,853.61) | (118,590,481.62) | ||
Total | 486,069,413.73 | 529,220,529.34 | ||
The reconciliation between income tax expenses and profit before income taxes is as follows:
2020 | 2019 | ||||
Profit before income tax | 2,046,473,877.25 | 2,279,632,089.59 | |||
Tax at the statutory tax rate | 511,618,469.31 | 569,909,224.40 | |||
Income not subject to tax | (22,882,798.46) | (30,495,248.84) | |||
Effect of different tax rates for some | |||||
subsidiaries | (16,347,892.93) | (9,478,573.20) | |||
Adjustments in respect of current tax of | |||||
previous periods | 12,838,778.91 | - | |||
Expenses not deductible for tax | 2,494,525.96 | 1,592,020.36 | |||
Tax losses utilised from previous periods | (3,209,265.72) | (3,161,107.41) | |||
Unrecognised deductible temporary | |||||
differences and tax losses | 1,557,596.66 | 854,214.03 | |||
Tax charge at the Group's effective tax | 529,220,529.34 | ||||
rate | 486,069,413.73 |
79
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VI. | Notes to key items of the consolidated financial statements (continued) |
43. Cash flows from operating activities
Reconciliation of net profit to net cash flows from operating activities:
2020 | 2019 | |||
Net profit | 1,560,404,463.52 | 1,750,416,368.25 | ||
Add: Credit impairment losses | 1,119,686,350.84 | 667,477,707.06 | ||
Impairment losses/ (reversal) of other | ||||
assets | 48,700,464.27 | (854,778.10) | ||
Bond interest expenses | 648,488,514.28 | 596,964,084.75 | ||
Depreciation of fixed assets | 9,731,931.64 | 4,373,521.29 | ||
Depreciation of operating lease | ||||
assets | 539,032,870.14 | 428,730,707.15 | ||
Depreciation of right-of-use assets | 6,239,419.58 | 5,140,552.23 | ||
Amortization of intangible assets | 22,568,363.00 | 22,567,385.40 | ||
Profit or loss arising from changes in | ||||
fair value | (908,085.55) | - | ||
Investment income | (7,298,493.89) | (12,202,754.99) | ||
Profit arising from disposal of assets | (805,660.70) | 206,302.39 | ||
Increase in deferred tax assets | (136,805,474.26) | (118,074,796.65) | ||
Increase in operating receivables | (799,418,191.05) | (9,706,045,954.73) | ||
(Decrease) / Increase in operating | ||||
payables | (138,772,498.26) | 9,927,394,592.55 | ||
Net cash flows from operating activities | 2,870,843,973.56 | 3,566,092,936.60 | ||
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China Huarong Financial Leasing Co., Ltd | |||
Notes to the financial statements (continued) | |||
For the year ended 31 December 2020 | Expressed in Renminbi Yuan | ||
VI. | Notes to key items of the consolidated financial statements (continued) | ||
44. | Cash and cash equivalents | ||
31 December 2020 | 31 December 2019 | ||
Cash and cash equivalents | 11,800,748,737.30 | 10,793,976,697.62 | |
Including: Cash on hand | - | 1,932.25 | |
Unrestricted deposits reserve with the | |||
Central Bank | 7,200,895.18 | 3,531,285.61 | |
Deposits with other financial institutions | 11,793,547,842.12 | 10,790,443,479.76 | |
Balance of cash and cash equivalents | 11,800,748,737.30 | 10,793,976,697.62 |
VII. Segment reporting
The Group's business is principally associated with lease operations; therefore, business segment information is not required.
The Group is not managed on the geographic basis; therefore, presentation of more detailed geographic segment information is not required.
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China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions
1. Definition of related parties
If a party has the power to control, jointly control or exercise significant influence over another party, they are regarded as related parties. Two or more parties are also regarded as related parties if they are subject to control, joint control or significant influence of the same party.
The following parties are the related parties of the Company:
- Parent of the Company;
- Subsidiaries of the Company;
- Other entities controlled by the parent of the Company;
- Investors that have joint control over the Company;
- Investors that have significant influence over the Company;
- Joint ventures of the Group;
- Associates of the Group;
- Principal individual investors of the Company and close family members of such individuals;
- Key management personnel of the Company or of the parent and close family members of such individuals;
- Other entities controlled or jointly controlled by the Company's principal individual investors, key management personnel or close family members of such individuals;
- Joint ventures or associates of the other members (including parent company and subsidiaries) under the same Group with the company;
- Joint ventures or associates of the entities that have joint control over the Company;
- Joint ventures or associates of the entities that have significant influence over the Company; and
- Enterprise pension funds established by the Company.
Entities are not regarded as related parties simply because they are merely under common control from the State without other related party relationships between them.
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China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
2. Parent and subsidiaries
Proportion of | Proportion of | ||||
Registered | Nature of | ownership interest | voting power in the | ||
Name of the parent | address | business | in the Company | Company | Registered capital |
China Huarong Asset | Finance | (%) | (%) | RMB'0,000 | |
Management Co., Ltd. | Beijing | Industry | 79.92071 | 79.92071 | 473,670.94 |
The Company is ultimately controlled by the Ministry of Finance of the People's Republic of China. Refer to Note V.1 for information about major subsidiaries.
3. | Other related parties | |
Name of related parties | Relationship with the Company | |
Huarong Zhiyuan Investment & Management Co., Ltd. | Subsidiary under the common control of the parent | |
Huarong Xiangjiang Bank Co., Ltd. | Subsidiary under the common control of the parent | |
Huarong Securities Co., Ltd | Subsidiary under the common control of the parent | |
Huarong Rongtong (Beijing) Technology Co., Ltd. | Subsidiary under the common control of the parent | |
Huarong ZOL NPL Trading Centre Co., Ltd | Subsidiary under the common control of the parent | |
Zhejiang Yongli Warp Knitting Co., Ltd.(note) | Controlled by shareholders having significant | |
influence on the Company | ||
Zhejiang Shaoxing Yongli Warp Knitting Co., Ltd. (note) | Controlled by shareholders having significant | |
influence on the Company | ||
Zhejiang Yonghe Building Material Co., Ltd. (note) | Controlled by shareholders having significant | |
influence on the Company |
Note: Since 17 January 2020, according to equity transfer mentioned in VI. 24, Zhejiang Yongli Warp Knitting Co., Ltd., Zhejiang Shaoxing Yongli Warp Knitting Co., Ltd. and Zhejiang Yonghe Building Material Co., Ltd. are no longer related parties.
83
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
4. Significant transactions between the Group and its related parties
4.1 Related party transactions between the Company and its subsidiaries
(1) | Interest income | |||
Name of related parties | 2020 | 2019 | ||
Huarong Shipping Financial Leasing | ||||
Co., Ltd. | 11,936,124.99 | 31,690,958.32 | ||
Huarong (Ningbo Free Trade Zone) | ||||
Huafa Ship Leasing Co., Ltd. | 6,540,722.22 | 10,634,555.56 | ||
Total | 18,476,847.21 | 42,325,513.88 |
4.2 Related party transactions between the Group and other related parties
(1) | Interest income | |||
Name of related parties | 2020 | 2019 | ||
Zhejiang Yongli Warp Knitting Co., Ltd. | 118,961.36 | 2,591,234.48 | ||
Zhejiang Shaoxing Yongli Warp Knitting | ||||
Co., Ltd. | 379,740.44 | 8,204,812.54 | ||
Zhejiang Yonghe Building Material Co., | ||||
Ltd. | 55,232.07 | 1,042,854.45 | ||
Total. | 553,933.87 | 11,838,901.47 |
- Interest expense - lease liabilities
Name of related parties | 2020 | 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 98,417.45 | 202,599.17 |
84
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
4. Significant transactions between the Group and its related parties (continued)
4.2 Related party transactions between the Group and other related parties (continued)
- Fee and commission expenses
Name of related parties | 2020 | 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 336,300.00 | 448,400.00 |
- General and administrative expenses
Name of related parties | 2020 | 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 2,871,547.68 | 2,871,547.68 | |
Huarong Zhiyuan Investment & | |||
Management Co., Ltd. | 258,415.55 | 576,519.30 | |
Huarong Rongtong (Beijing) Technology | 115,660.38 | 1,265,660.38 | |
Co., Ltd. | |||
Huarong ZOL NPL Trading Centre | - | 47,169.81 | |
Co., Ltd | |||
Total | 3,245,623.61 | 4,760,897.17 |
- For the year ended 31 December 2020, the Group paid the bond underwriting fee of RMB 300,000.00 to Huarong Securities Co., Ltd. (For the year ended 31 December 2019: RMB 1,250,000.00).
85
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
5. Amounts due from/to related parties
5.1 Inter-company transactions between the Company and its subsidiaries
(1) | Other Assets-other receivables | |||
Name of related parties | 31 December 2020 | 31 December 2019 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huafa Ship Leasing Co., Ltd | 425,512,812.29 | 554,841,590.07 | ||
Huarong Huajian (Zhoushan) Ship | ||||
Leasing Co., Ltd | 219,201,200.00 | 230,501,200.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huachuang Ship Leasing Co., Ltd | 205,653,200.00 | 205,653,200.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huajian Ship Leasing Co., Ltd | 187,123,120.71 | 187,123,120.71 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huawen Ship Leasing Co., Ltd | 1,076,301,097.61 | 146,700,000.00 | ||
Huarong Huawen (Zhoushan) Ship | ||||
Leasing Co., Ltd | 62,312,100.00 | 75,412,100.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huajian Lifting Equipment Leasing | ||||
Co., Ltd | 18,498,885.43 | 18,079,326.53 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huawen Lifting Equipment Leasing | ||||
Co., Ltd | 16,138,787.14 | 15,839,216.61 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huaxin Ship Leasing Co., Ltd | 12,231,230.00 | 12,231,230.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huawen Aircraft Leasing Co., Ltd | 9,823,120.00 | 9,823,120.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huaxie Ship Leasing Co., Ltd | 2,258,400.00 | 2,258,400.00 | ||
Huarong Huawen (Tianjin) Ship | ||||
Leasing Co., Ltd | 1,809,205.00 | 1,808,705.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huahe Ship Leasing Co., Ltd | 1,778,400.00 | 1,778,400.00 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huachuang Aircraft Leasing Co., Ltd | 1,752,597.61 | 1,752,597.61 | ||
Huarong (Ninbo Free Trade Zone) | ||||
Huajian Aircraft Leasing Co., Ltd | 1,752,557.61 | 1,752,557.61 | ||
Huarong Huachuang (Zhoushan) | ||||
Ship Leasing Co., Ltd | 11,200.00 | 11,200.00 | ||
Total | 2,242,157,913.40 | 1,465,565,964.14 |
86
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
5. Amounts due from/to related parties (continued)
5.1 Inter-company transactions between the Company and its subsidiaries (continued)
- Other liabilities - other payables
Name of related parties | 31 December 2020 | 31 December 2019 | |
Huarong (Ninbo Free Trade Zone) | |||
Huachuang Ship Leasing Co., Ltd | 74,289,600.00 | 59,989,600.00 | |
Huarong (Ninbo Free Trade Zone) | |||
Huajian Ship Leasing Co., Ltd | 54,386,226.70 | 43,386,226.70 | |
Huarong (Ninbo Free Trade Zone) | |||
Huawen Ship Leasing Co., Ltd | - | 6,798,902.39 | |
Huarong (Ninbo Free Trade Zone) | |||
Huaxin Ship Leasing Co., Ltd | 9,897,032.21 | 8,093,258.27 | |
Huarong (Ninbo Free Trade Zone) | |||
Huafa Ship Leasing Co., Ltd | - | 110,369,500.00 | |
Huarong (Ninbo Free Trade Zone) | |||
Huawen Aircraft Leasing Co., Ltd.. | 1,500,000.00 | - | |
Total | 140,072,858.91 | 228,637,487.36 |
5.2 Intra-group transactions between the Group and other related parties
- Deposits with other financial institutions
Name of related party | 31 December 2020 | 31 December 2019 | ||
Huarong Xiangjiang Bank Co., Ltd. | 26.74 | 125.99 | ||
(2) | Finance lease receivables | |||
Name of related parties | 31 December 2020 | 31 December 2019 | ||
Zhejiang Yongli Warp Knitting | ||||
Co., Ltd. | - | 42,275,532.93 | ||
Zhejiang Shaoxing Yongli Warp | ||||
Knitting Co., Ltd. | - | 134,949,530.06 | ||
Zhejiang Yonghe Building Material | ||||
Co., Ltd. | - | 19,597,617.98 | ||
Total | - | 196,822,680.97 |
87
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
VIII. Related party relationships and transactions (continued)
5. Amounts due from/to related parties (continued)
5.2 Intra-group transactions between the Group and other related parties (continued)
- Other assets - right-of-use assets
Name of related party | 31 December 2020 | 31 December 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 1,435,773.84 | 4,307,321.52 |
- Other liabilities-other payables
Name of related party | 31 December 2020 | 31 December 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 4,000,000.00 | 4,000,000.00 |
- Other liabilities - lease liabilities
Name of related party | 31 December 2020 | 31 December 2019 | |
China Huarong Asset Management | |||
Co., Ltd. | 1,551,972.88 | 4,490,595.77 |
- Other liabilities - Finance lease risk funds
Name of related party | 31 December 2020 | 31 December 2019 | |
Zhejiang Shaoxing Yongli Warp | |||
Knitting Co., Ltd. | - | 17,876,000.00 | |
Zhejiang Yonghe Building Material | |||
Co., Ltd. | - | 2,600,000.00 | |
Total | - | 20,476,000.00 |
88
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
IX. Commitments
1. Capital expenditure commitments
As at the balance sheet date, Capital expenditure commitments that the Group has signed but not required to be presented in the balance sheet are as follows:
31 December 2020 | 31 December 2019 | ||
Acquisition and construction of | |||
long-term assets | 126,417,506.76 | 149,374,952.94 |
2. Finance lease commitments
31 December 2020 | 31 December 2019 | ||
Finance lease commitments | 163,764,479.16 | 202,289,929.70 |
X. Financial instruments and related risks
1. Transfer of financial assets
The Group has entered into a factoring arrangement (the "Arrangement") with the bank regarding partial the finance lease receivables for the purpose of financing. Under the Arrangement, if the lessee delays the payment of rentals due, the Group must repay corresponding losses on rentals to the bank. Since the Group still retains the risk and rewards of finance lease receivables, the Group does not derecognise the above finance lease receivables and recognise the factoring loans received as a financial liability. As at 31 December 2020, the carrying amount of the unpaid transferred finance lease receivables is RMB 3,551,818,007.53 (31 December 2019: RMB 2,507,660,302.69). The carrying amount of underlying financial liabilities is RMB 2,795,464,163.05 (31 December 2019: RMB 2,127,516,737.24).
The Group has entrusted the trust company or assets management company with rights to rental earnings of partial finance lease receivables, and the trust company or assets management company then issues trust products or special assets management plan to investors. Through credit enhancement, the Group still retains the risk and rewards of finance lease receivables, and the group does not derecognise the above finance lease receivables and recognise the consideration received as a financial liability. As at 31 December 2020, the carrying amount of finance lease receivables not derecognised by the Group is RMB7,220,689,288.06 (31 December 2019: RMB 12,920,853,652.64). The carrying amount of underlying financial liabilities is RMB 5,611,765,584.76 (31 December 2019: RMB9,348,911,490.48).
89
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
1. Transfer of financial assets (continued)
The Group has carried out the securitization of assets by selling the finance lease receivables to special-purpose trust, who is going to issue asset-backed securities to investors. The Group holds all the secondary investments in the transfer of finance lease receivables and therefore the Group retains almost all the risk and rewards of finance lease receivables. The Group does not derecognise the transferred finance lease receivables and recognise the consideration received as a financial liability on the net basis after deducting portion subscribed by the Group. As at 31 December 2020, the carrying amount of finance lease receivables transferred but not derecognised is RMB 1,801,837,361.22 (31 December 2019: RMB 4,758,390,705.62). The carrying amount of underlying financial liabilities is RMB 388,902,231.07 (31 December 2019: RMB 1,791,955,172.35).
2. Risks of financial instruments
The Group's main financial instruments includes cash, deposits with the central bank, deposit with other financial institutions, notes receivables, finance lease receivables, finance assets held for trading, debt investments, other debt investments, other equity investments, other financial assets, borrowings, placements from banks and other financial institutions, notes payable, bonds payable, financial assets sold under repurchase agreements, other financial liabilities and etc., are directly related to the various business of the group.
The main risks arising from the Group's financial instruments are credit risk, liquidity risk and market risk. The Group has established a programmatic document on risk management-theOutline of Comprehensive Risk Management and relevant bylaws and determined the overall object and assignment of responsibility for the comprehensive risk management. In 2020, the Group further strengthened the responsibility on risk identification, risk measurement, risk assessment and monitoring etc. for business department, fund department, projects approval department, legal & regulatory department, operation and management department, inspection and review department, risk management department and management support department.
The Group's risk management strategy is outlined below.
2.1 Credit risk
Credit risk is the risk of loss arising from lessee's or counterparty's inability to meet its obligations as and when they fall due.
90
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
2. Risks of financial instruments (continued)
2.1 Credit risk (continued)
The Group only transact with authorised third parties that have good reputations. According to the Group's policies, the Group regulates each circulation procedure for links including lease project investigation, review, approval, launch and late-period management, and specifies responsibility and authorization for each department and each position.
As for creditor's rights or rights to earnings in regard of finance lease projects accepted by the Group, the Group established relatively comprehensive project management process including project selection, credit approval, signing of contract and late-period management, as well as risk management system involving cooperation of the fund department, the Law and Compliance Department and risk management department.
Measurement of ECLs
According to the changes of credit risk of financial instruments since initial recognition, the Group identifies three stages to calculate the ECL:
Stage 1: The financial instruments without significant increases in credit risk after initial recognition are included in Stage 1 to calculate their impairment allowance at an amount equivalent to the ECL of the financial instrument for the next 12 months;
Stage 2: Financial instruments that have had a significant increase in credit risk since initial recognition but have no objective evidence of impairment are included in Stage 2, with their impairment allowance measured at an amount equivalent to the ECL over the lifetime of the financial instruments ;
Stage 3: Financial assets with objective evidence of impairment at the financial reporting date are included in Stage 3, with their impairment allowance measured at the amount equivalent to the ECL for the lifetime of the financial instruments.
The Group also considers to take qualitative measures to assist in the judgement of division of phases according to the needs of actual business, for example, adjustment of customer list, that is, adjust a customer from Stage 1 to Stage 2 if the Group believes that its credit risk is significantly increased.
91
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
2 Risks of financial instruments (continued)
2.1 Credit risk (continued)
Measurement of ECLs (continued)
For the previous accounting period, the impairment allowance has been measured at the amount equivalent to the ECL over the entire lifetime of the financial instrument. However, at the financial reporting date of the current period, if the financial instrument no longer belongs to the situation of there being a significant increase in credit risk since initial recognition, the Group will measure the impairment allowance of the financial instruments at the financial reporting date of the current period according to the ECL in the next 12 months.
When measuring the ECL, an entity need not necessarily identify every possible scenario. However, the Group shall consider the risk or probability that a credit loss occurs by reflecting the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of the occurrence a credit loss is very low.
The Group conducts an assessment of ECLs according to forward-looking information and uses complex models and assumptions in its expected measurement of credit losses. These models and assumptions relate to the future macroeconomic conditions and borrower's creditworthiness (e.g., the likelihood of default by customers and the corresponding losses). The Group adopts judgement, assumptions and estimation techniques in order to measure ECLs according to the requirements of accounting standards such as:
- Criteria for judging a significant increase in credit risk
- Definition of credit-impaired financial asset
- Parameters for measuring ECL
- Forward-lookinginformation
Judgment criteria of significant increase in credit risk
On each balance sheet date, the Group assesses whether credit risks of relevant financial instruments have increased significantly since initial recognition. When determining whether credit risks have increased significantly since initial recognition, the Group takes into account information that is reasonable and reliable and can be obtained without unnecessary extra costs or efforts, including qualitative and quantitative analysis based on the Group's historical data, external credit risk rating, and forward-looking information. Based on individual financial instrument or grouped financial instruments with similar credit risk characteristics, the Group compares the risk of default on financial instruments as of the balance sheet date with the risk of default on financial instruments as of the initial recognition date, to determine the changes in the risk of default on financial instruments in their anticipated lifetime.
92
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
2 Risks of financial instruments (continued)
2.1 Credit risk (continued)
Judgment criteria of significant increase in credit risk (continued)
The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following quantitative, qualitative or backstop criteria have been met:
Upper limit criteria:
- Debtor's contract payment (including principal and interest) are overdue for more than 30 days
Other criteria:
- The operating or financial condition of the debtor which leads to significant adverse effects
Definition of credit-impaired assets
When determining credit impairment, the Group aligns the criteria with the objectives of internal credit risk management and takes quantitative and qualitative indicators into account. When assessing whether a debtor is credit-impaired, the Group mainly considers the following factors:
- The lessee has major financial difficulties;
- Any principal and interest are overdue for more than 90 days.
- The lessor for economic or legal reasons related to the lessee's financial difficulties grants a concession to the lessee that it would not otherwise consider;
- The lessee is likely to go bankrupt or undergo other financial restructuring; and
- The lessee experiences financial difficulties, causing the unavailability of pricing information for the financial assets in active markets.
Credit impairment of financial assets may be caused by multiple events in combination, instead of by a single identifiable event.
93
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
2 Risks of financial instruments (continued)
2.1 Credit risk (continued)
Parameters of ECL measurement
Depending on whether there is a significant increase in credit risk and whether there is an impairment of assets, the Group measures the impairment loss for different assets with ECLs of 12 months or the entire lifetime respectively. The key measuring parameters of ECLs include the PD, LGD and EAD. the Group takes into account the quantitative analysis of historical statistics (such as ratings of counterparties, manners of guarantees and types of collateral and repayments) and forward-looking information in order to establish the model of PD, LGD and EAD.
Relative definitions are listed as follows:
- Probability of default means the possibility that a debtor fails to fulfill its repayment obligations in the next 12 months or the remaining life of the exposure. The Group has concluded and optimised a series of default-related financial factors and other factors based on the collection, statistics and analysis of risk characteristics appeared before historical default of customers/debts, and has established an internal rating model of PD and LGD on such basis. The principle of logistic regression is mainly used in the internal rating model to forecast a customer's PD and LGD, and the calculated PD value and LGD value are mapped to the corresponding level according to the Group's main benchmarks of internal rating, so as to obtain the internal rating of the customer's credit risk. Otherwise, the Group takes into account the forward-looking information to reflect the debtor's PD under the current macroeconomic environment;
- Loss given default means the Group's anticipated extent of losses incurred in exposure to default risk. Loss given default varies with the type of counterparty, means and priority of recourse, and type of collateral. Loss given default is the percentage of risk exposure loss at the time of default, which calculated on the basis of the next 12 months or the entire life of the exposure;
- Risk exposure at default means the amount that the Group should be reimbursed when default occurs in the next 12 months or the entire life of the exposure.
94
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
3 Risks of financial instruments (continued)
2.1 Credit risk (continued)
Forward-looking information
The assessment of a significant increase in credit risk and the calculation of ECLs both involve forward-looking information. Through the analysis of historical data, the Group identifies the key economic indicators that affect the credit risk and ECLs of various business types.
The impact of these economic indicators on the PD and the LGD varies according to different types of business. In this process, the Group mainly applies the experts' judgement. According to the experts' judgement, the Group predicts economic indicators such as monthly balance of trade, total retail sales of consumer goods and investment in fixed assets and also determines the impact of these economic indicators on the PD and the LGD by conducting regression analysis.
In addition to providing a baseline economic scenario, the Group combines statistical analysis and experts' judgement to determine the weight of other possible scenarios based on the baseline economic scenario. The Group measures the weighted average ECL of 12 months (stage 1) or lifetime (stage 2 and stage 3). The weighted average credit loss above is calculated by multiplying the ECLs for each scenario by the weight of the corresponding scenario. As at 31 December 2020, the group's benchmark scenario weight is slightly higher than the sum of other scenarios.
During the 2020 financial year, the Group reassessed the ECL modelling and took an additional impairment allowance for the areas that impacted by the COVID-19, which is a relatively immaterial amount compared to the whole of the impairment allowance. This took account of the COVID-19 pandemic and the related macroeconomic disruptions, enhancing the ability of risk compensation.
95
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
X. Financial instruments and related risks (continued)
4 Risks of financial instruments (continued)
2.1 Credit risk (continued)
Forward-looking information(continued)
The table below summarises the maximum credit exposure to balance sheet items, contingent liabilities and commitments without taking account of any collateral and other credit enhancements.
31 December 2020 | 31 December 2019 | ||
Deposits with the central bank | 20,762,963.28 | 20,776,405.98 | |
Deposits with other financial institutions | 15,368,768,350.65 | 15,980,098,121.51 | |
Notes receivables | 6,266,858.62 | 48,759,636.96 | |
Finance lease receivables | 108,745,242,454.93 | 107,349,601,771.61 | |
Finance assets held for trading | 99,466,285.55 | 595,709,400.00 | |
Debt investments | 475,711,082.38 | 1,024,386,187.34 | |
Other debt investments | 1,105,222,322.14 | 96,356,300.00 | |
Other assets | 2,452,057,940.81 | 3,171,962,669.58 | |
Total maximum credit risk exposure | 128,273,498,258.36 | 128,287,650,492.98 |
The other assets listed in the above table are the financial assets of the Group bearing credit risks.
96
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Financial instruments and related risks (continued)
2. Risks of financial instruments (continued)
2.1 Credit risk (continued)
2.1.1 Industry concentration
If the lessee is excessively concentrated in a single industry or region or has similar economic characteristics, the credit risk will usually increase correspondingly. The lessee of the Group's financial leasing business includes enterprises in different industries, and the distribution of the main industries is as follows:
31 December 2020 | 31 December 2019 | ||
Water conservancy, environment and | |||
public facilities management | 48,247,653,300.48 | 40,818,005,152.62 | |
Production and supply of electricity, | |||
gas and water | 17,901,285,538.39 | 19,232,871,235.00 | |
Manufacturing industry | 16,584,491,051.35 | 20,002,647,387.68 | |
Transportation, storage and postal | |||
services | 11,505,154,576.03 | 12,511,702,912.68 | |
Construction | 5,742,118,286.27 | 6,828,579,578.57 | |
Leasing and business services | 7,296,712,489.97 | 4,643,804,957.82 | |
Mining | 1,967,538,541.30 | 3,160,832,543.02 | |
Information transmission, software | |||
and information technology services | 423,946,339.49 | 852,185,505.10 | |
Culture, sports, and entertainment | 504,054,218.23 | 969,911,152.13 | |
Others | 1,723,637,735.05 | 1,080,153,430.97 | |
Total | 111,896,592,076.56 | 110,100,693,855.59 |
97
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Financial instruments and related risks (continued)
2. Risks of financial instruments (continued)
2.1 Credit risk (continued)
2.1.2 Credit quality analysis
As at 31 December 2020, the division of risk stages for the Group's financial assets (impairment not deducted) is as follows:
Carrying amount | Total | ||||||
Stage 1 | Stage 2 | Stage 3 | |||||
12-month expected | Lifetime expected | Credit-impaired | |||||
credit losses | credit losses | financial assets | |||||
(Lifetime expected | |||||||
credit losses) | |||||||
Deposits with other | |||||||
financial institutions | 15,374,239,509.68 | - | - | 15,374,239,509.68 | |||
Notes receivables | 6,269,340.14 | - | - | 6,269,340.14 | |||
Finance lease | |||||||
receivables | 104,100,249,077.04 | 5,411,502,132.13 | 2,384,840,867.39 | 111,896,592,076.56 | |||
Debt investments | 434,162,675.05 | - | 85,255,383.61 | 519,418,058.66 | |||
Other debt investments | 1,105,222,322.14 | - | - | 1,105,222,322.14 | |||
Other assets | 2,374,074,866.14 | 90,728,016.56 | 127,793,446.53 | 2,592,596,329.23 | |||
Total | 123,394,217,790.19 | 5,502,230,148.69 | 2,597,889,697.53 | 131,494,337,636.41 | |||
As at 31 December 2019, the division of risk stages for the Group's financial assets (impairment not deducted) is as follows:
Carrying amount | Total | ||||||
Stage 1 | Stage 2 | Stage 3 | |||||
12-month expected | Lifetime expected | Credit-impaired | |||||
credit losses | credit losses | financial assets | |||||
(Lifetime expected | |||||||
credit losses) | |||||||
Deposits with other | |||||||
financial institutions | 15,985,219,848.14 | - | - | 15,985,219,848.14 | |||
Notes receivables | 48,782,996.00 | - | - | 48,782,996.00 | |||
Finance lease | |||||||
receivables | 103,687,074,193.20 | 4,701,588,439.78 | 1,712,031,222.61 | 110,100,693,855.59 | |||
Debt investments | 921,492,469.31 | 119,977,584.08 | - | 1,041,470,053.39 | |||
Other debt investments | 96,356,300.00 | - | - | 96,356,300.00 | |||
Other assets | 3,030,474,298.41 | 133,010,219.65 | 138,660,328.63 | 3,302,144,846.69 | |||
Total | 123,769,400,105.06 | 4,954,576,243.51 | 1,850,691,551.24 | 130,574,667,899.81 | |||
98
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Financial instruments and related risks (continued)
2. Risks of financial instruments (continued)
2.1 Credit risk (continued)
2.1.2 Credit quality analysis (continued)
According to the definition of finance lease and the risk mitigation measures of the Group for above assets, the ownership and security interest of the lease assets corresponding to the above assets are all owned by the Group during the lease period. In addition, the Group will increase collateral, real estate mortgage, equity pledge and charge right pledge as appropriate based on the credit risk assessment of the counterparty.
In 2020, the Group renegotiated with the lessee for amendments on the terms and the cash flow for part of the overdue lease agreements. As at 31 December 2020, the balance of the finance lease receivable for this part is RMB 1,438,502,716.67 (31 December 2019: RMB 4,628,012,022.20)
In 2020, the Group renegotiated and amended the terms of rental payment plan in the lease agreement with the lessee impacted by COVID-19 pandemic. As at 31 December 2020, the balance of financial lease receivable for this part is RMB 2,230,190,536.09 (31 December 2019: nil).
99
China Huarong Financial Leasing Co., Ltd | |
Notes to the financial statements (continued) | |
For the year ended 31 December 2020 | Expressed in Renminbi Yuan |
- Financial instruments and related risks (continued)
2. Risks of financial instruments (continued)
2.2 Liquidity risk
Liquidity risk is the risk that capital will not be sufficient or funds will not be raised at reasonable cost in a timely manner for the growth of assets or the repayment of debts. This may arise from mismatches of amount or maturity between assets and liabilities.
Risk management department of the Group is responsible for identification, measurement, monitoring and control of liquidity risk, as well as management and reporting of liquidity risk limit. The Group implements monitoring of liquidity risk index and liquidity risk pressure test by formulation of new management methods and contingency plans for liquidity risk, and proposes multiple measures including liquidity management contingency plan to strengthen the identification and monitoring of liquidity risk.
In the Groups' existing loan structure, loans and bonds are mainly based on the leasing project, of which the matching between liability structures and leasing assets is basically reasonable, and the liquidity risk caused by mismatching of assets and liabilities is within the Company's control. With the expansion of operation scale, lease assets ration corresponding to the Company's equity will decline step by step and meanwhile medium and long term projects will increase, the mismatch of asset- liability ratio will still exist. Therefore, the Group puts forward the multiple measures to address the liquidity risk, which includes to improve capital structure and increase financing channels and varieties on the existing basis, promote the strategic transformation of financing securitization and asset securitization, raise the financing ratio of the Company's financial liabilities and marketised financing including asset securitization, proportion of structured financing and financing based on lease projects, increase the proportion of medium and long term financing, intensify management and risk control and improve the rate of rent return.
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China Huarong Asset Management Co. Ltd. published this content on 19 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 April 2021 00:17:08 UTC.