Alternatively, a timely election to treat us as a qualified electing fund under Section 1295 of the Code could be made to avoid the foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election.
If you own the H shares or ADSs during any year that we are a PFIC and you recognize gain on a disposition or receive a distribution with respect to the H shares or ADSs, or make a reportable election with respect to such H shares or ADSs, you must file Internal Revenue Service, or IRS, Form 8621. You would also be required to file any other information that is required by the United States Treasury Department. We encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H shares or ADSs that would arise if we were considered a PFIC.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in respect of the H shares or ADSs or the proceeds of the sale, exchange, or redemption of the H shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations.recipients. In addition, you may, under some circumstances, be subject to “backup withholding” with respect to dividends paid on the H shares or ADSs or the proceeds of any sale, exchange or transfer of the H shares or ADSs, unless you
fall within various other exempt categories, and, when required, demonstrate this fact; or
| • | | are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or |
|
| • | | provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules. |
provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.
Any amount withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer identification number, you may be subject to penalties imposed by the IRS.
Recent Legislative Developments
Newly enacted legislation requires certain U.S. holders who are individuals, estates or trusts to pay up to an additional 3.8% tax on, among other things, dividends and capital gains for taxable years beginning after December 31, 2012. In addition, for taxable years beginning after March 18, 2010, new legislation requires certainCertain U.S. holders who are individuals that hold certain foreign financial assets (which may include the H shares or ADSs) are required to report information relating to such assets, subject to certain exceptions. You should consult your own tax advisors regarding the effect, if any, of this legislationthese requirements on your ownership and disposition of the H shares or ADSs.
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Hong Kong Taxation
The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H shares or ADSs held by you.
Under current practice, no tax will be payable by you in Hong Kong in respect of dividends paid by us.
Taxation of Capital Gains
No capital gain tax is generally imposed in Hong Kong in respect of capital gains from the sale of shares (such as the H shares). However, if trading gains from the sale of property by persons as part of profit making are regarded as carrying on a trade, profession or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such trade, profession or business, such trading gains will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5% on corporations and at a maximum rate of 15% on unincorporated businesses. Gains from sales of the H shares affected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares realized by persons carrying on a business of trading or dealing in Hong Kong in securities.
There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs (i.e., the profits derived abroad), where purchases and sales of ADSs are effected outside Hong Kong, e.g. on the New York Stock Exchange.
Hong Kong stamp duty will be payable by each of the seller and the purchaser for every sale and purchase, respectively, of the H shares. An ad valorem duty is charged at the rate of 0.2% of the consideration of the fair value of the H shares transferred and the relevant contract notes shall be stamped (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HKD 5 is currently payable on an instrument of transfer of H shares.
The withdrawal of H shares when ADSs are surrendered, and the issuance of ADSs when H shares are deposited, may be subject to Hong Kong stamp duty at the rate described above for sale and purchase transactions, if the withdrawal or deposit results in a change of legal and beneficial ownership under Hong Kong law. The issuance of ADSs for deposited H shares issued directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp duty liability. You are not liable for the Hong Kong stamp duty payable on transfers of ADSs outside of Hong Kong.
Prior to February 11, 2006, estate duty iswas levied on the value of property situated in Hong Kong passing or deemed passing on the death of a person. H shares are regarded as property situated in Hong Kong for estate duty purposes. Estate duty was abolished effective from
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February 11, 2006 and estates of persons who passed away on or after February 11, 2006 are therefore not subject to estate duty.
Item 10F.F. Dividends and Paying Agents
Item 10G.G. Statement by Experts
Item 10H.H. Documents on Display
We filed with SEC in Washington, D.C. a registration statement on Form F-1 (Registration No. 333-3382) under the Securities Act of 1933, as amended, in connection with our global offering in May 1996. The registration statement contains exhibits and schedules. For further information with respect to our Company and our ADSs, please refer to the registration statement and to the exhibits and schedules filed with the registration statement.
Additionally, we are subject to the informational requirements of the Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance with the Exchange Act, we file annual reports on Form 20-F within six months of our fiscal year end, and we will furnish other reports and information under cover of Form 6-K with the SEC. You may review a copy of the registration statement and other information without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also inspect the registration statement and its exhibits and schedules at the office of the New York Stock Exchange, 11 Wall Street, New York, New York 10005. You may also get copies, upon payment of a prescribed fee, of all or a portion of the registration statement from the SEC’s public reference room or by calling the SEC on 1-800-SEC-0330 or visiting the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.
Item 10I.I. Subsidiary Information
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following paragraphs describe the various market risks to which we were exposed as of December 31, 20082010 and 2009.
We mainly operate in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of our Company. RMB is not freely convertible into other foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange control promulgated by the PRC government. Any monetary assets and liabilities denominated in currencies other than RMB would subject our Company to currency risks. In addition, we are required to pay dividends in Hong Kong dollars in the future when dividends are declared.
The monetary assets and liabilities held by us that are denominated in U.S. dollars and Hong Kong dollars as of December 31, 20082010 and 20092011 are set forth below.
| | | | | | | | | | | | | |
| | | | | | | As of December 31, | |
| | | Currency | | | 2008 | | | 2009 | |
| Monetary assets and liabilities | | denomination | | | (RMB thousands) | |
Current assets | | | | | | | | | | | | |
| Cash and cash equivalents | | USD | | | | 3,176 | | | | 455 | |
| Cash and cash equivalents | | HKD | | | | 30,452 | | | | 66,801 | |
| Other receivables | | HKD | | | | 529 | | | | 994 | |
| Trade payables | | USD | | | | (940 | ) | | | (939 | ) |
| | | | | | | | | | | | |
| | | | | | As of December 31, | |
| Monetary assets and liabilities | | Currency | | | 2010 | | | 2011 | |
| | | denomination | | | (RMB thousands) | |
| | | |
Current assets | | | | | | | | | | | | |
Cash and cash equivalents | | | USD | | | | 322 | | | | 261 | |
Cash and cash equivalents | | | HKD | | | | 103,221 | | | | 106,054 | |
Other receivables | | | HKD | | | | 549 | | | | 244 | |
We may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with our deposits. We have not used any means to hedge the exposure to foreign exchange risk.
On July 21, 2005, the PRC government announced that the RMB is to be floated in line with a basket of certain selected currencies and not to be pegged with the U.S. dollar on or after that day. As a result, the RMB appreciated by approximately 2% as compared to the U.S. dollar based on the exchange rate announced on that day and subsequently continued to appreciate throughout the remainder of 2005 through June 2010. As of June 11, 2010, this change in policy has resulted in a more than 20% appreciation of the RMB against the U.S. dollar ever since July 2005. We incurred a foreign exchange loss of RMB 47,0002.8 million for the year ended December 31, 2009.2011. As of December 31, 2009,2011, our assets denominated in Hong Kong dollars and U.S. dollars were translated into RMB at the applicable market exchange rates as of that date and amounted to approximately RMB 68.2106.6 million. If the applicable market exchange rates were to change by 5%, this would result in a change in fair value of approximately RMB 3.45.3 million in these balances.
While our foreign currency deposits are relatively stable, they are insufficient to pay all dividends and operating expenses, therefore, we bear the risk of exchange rate fluctuations when we convert RMB to pay foreign-currency denominated dividends and operating expenses.
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However, our management believes that these contingent exposures relating to foreign exchange rate fluctuations have not had and are not likely to have a material effect on our financial position. As a result, we do not enter into any hedging transactions with respect to our exposure to foreign currency movements. Furthermore, we are not aware of any effective financial hedging products that serve as protection against a possible RMB devaluation or appreciation.
As of December 31, 2009,2011, funds that we do not need in the short term are generally kept as temporary cash deposits in commercial banks in the form of fixed-term deposits. We do not hold any market risk-sensitive instruments for trading purposes. As we have no significant interest-bearing assets (except for deposits held in banks), our income and operating cash flows are not materially affected by the changes of market interest rates. Our interest rate risk arises mainly from the bonds payable in connection with our issuance in December 2009 of RMB 3.5 billion 4.79% fixed rate notes due 2014, which were issued at a fixed interest rate and exposed us to fair value interest rate risk.
The carrying amount of cash and cash equivalents, trade and other receivables (excluding prepayments), short-term deposits, and long-term receivables represent our maximum exposure to credit risk in relation to financial assets.
Cash and short term liquid investments are placed with reputable banks. No significant credit risk is expected.
The majority of our accounts receivable balance relate to the rendering of services or sales of products to third party customers. Our other receivable balances mainly arise from services other than the main railway transportation services. We perform ongoing credit evaluations of our customers/debtors’ financial condition and generally do not require collateral from the customers/debtors’ account on the outstanding balances. Based on the expected reliability and the timing for collection of the outstanding balances, we maintain a provision for doubtful accounts and actual losses incurred have been within management’s expectation.
No other financial assets carry a significant exposure to credit risk.
Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, our Company’s treasury function allows flexibility in funding by maintaining committed credit lines.
We monitor rolling forecasts of our liquidity reserves (comprises undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows). on a regular basis. See Note 3 to our audited consolidated financial statements included elsewhere in this annual report, analyzingwhich analyzes our
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Company’s financial liabilities into relevant maturity groupingsgroups based on the remaining periodperiods at the date of the balance sheet to the contractual maturity date. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
Except as described above and in Note 3 to our audited consolidated financial statements included elsewhere in this annual report, our management believes that as of December 31, 2009,2011, at present and in our normal course of business, we are not subject to any other material market-related risks.
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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
D. American Depositary Shares
JPMorgan Chase Bank, N.A. is the depositary for our ADSs. The Depositary’sdepositary’s office is located at No.13 Building, 4 New York Plaza, New York, NY 10004. On April 25, 2008, JPMorgan Chase Bank, N.A. signed an agreement with Wells Fargo Bank, pursuant to which Wells Fargo Bank will provide the depositary service for our ADSs on behalf of JPMorgan Chase Bank, N.A. Each of our ADRs represents 50 H shares of par value RMB1.00 per share.
In April 2009, we entered into an amendment to our deposit agreement with JPMorgan Chase Bank, N.A., which we initially entered into on May 10, 1996. The revisions include allowing the depositary, in line with the current market practice, to charge the holders of the ADSs a cash distribution fee and an annual administrative fee, the aggregate of which should not exceed US$0.02 per ADS in any calendar year. The amendment of the deposit agreement became effective on May 25, 2009. At such effective date, every holder of our ADSs shall be deemed by holding our ADSs to consent and agree to such amendment and to be bound by the deposit agreement and the American Depositary Receipts as amended by such amendment. For further information, see the Form F-6EF we filed with the SEC on April 24, 2009 and the Form 6-K we furnished on April 28, 2009.
Fees Payable by ADS holders
The Depositary may charge each person, US$5.00 for each 100 ADSs (or portion thereof) for ADRs issued, delivered, reduced, cancelled or surrendered, as the case may be.
The following additional charges may be incurred by holders of our ADSs:
a fee of US$ 1.50 per ADR for transfers of ADRs;
| • | | a fee of US$1.50 per ADR for transfers of ADRs; |
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| • | | a fee of $0.02a fee of US$ 0.02 or less per ADS for any cash distribution made, or the cash distribution fee; |
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| • | | a fee of US$5.00 for each 100 ADSs (or portion thereof) for any security distribution; |
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a fee of US$ 5.00 for each 100 ADSs (or portion thereof) for any security distribution;
an administration fee of US$ 0.02 per ADS per calendar year (or portion thereof), provided, however, that the aggregate amount of such administration fee and the cash distribution fee shall not exceed US$ 0.02 per ADS in any calendar year;
stock transfer or other taxes and other governmental charges;
| • | | an administration fee of $0.02 per ADS per calendar year (or portion thereof), provided, however, that the aggregate amount of such administration fee and the cash distribution fee shall not exceed $0.02 per ADS in any calendar year; |
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| • | | reimbursement of fees and expenses incurred by the depositary and/or its agents in connection with the servicing and delivery of our H shares and compliance with applicable laws; |
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| • | | stock transfer or other taxes and other governmental charges; |
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| • | | cable, telex and facsimile transmission and delivery charges incurred at the request of the ADS holders; |
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| • | | transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and |
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| • | | expenses of the depositary in connection with the conversion of foreign currencies into U.S. dollars. |
cable, telex and facsimile transmission and delivery charges incurred at the request of the ADS holders;
transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and
expenses of the depositary in connection with the conversion of foreign currencies into U.S. dollars.
We will pay all other charges and expenses of the depositary and its agents (except the custodian) pursuant to the agreements between us and the depositary. The fees described above may be amended from time to time.
Payments Received by Foreign Private Issuer
The depositary has agreed to reimburse certain expenses incurred by us in connection with our ADR program. The depositary reimbursed us, or waived its fees and expenses, of $353,820.00approximately US$ 49,511 for the year ended December 31, 2009.
The table below sets forth the types of expenses that the depositary has reimbursed us for the year ended December 31, 2009:
2011: | | | | |
Category of Expenses | | Amount (US$) | |
Investor relations | | | 8,678 | |
Category of Expenses | | Amount (US$) | |
Legal feesBroker reimbursements | | | 875.0040,833 | |
Investor relationsNYSE listing fee | | | 14,969.00— | |
Broker reimbursementsTotal | | | 37,981.0049,511 | |
Total
| | | 53,820.00 | |
| | | |
The depositary has also agreed to waive certain fees for standard costs associated with the administration of our ADS program. The table below sets forth those expenses that the depositary waived in the year ended December 31, 2009:
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In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchange through an initial public offering of shares in order to finance the acquisition of the business and related assets and liabilities associated with the railway transportation business of Guangzhou Railway Group Yangcheng Railway Enterprise Development Company (“Yangcheng Railway Business”), a wholly owned subsidiary of Guangzhou Railway Group which operates a railway line between the cities of Guangzhou and Pingshi in the Southern region of the PRC.The principal activities of the Group are the provision of passenger and freight transportation on railroad. The Group also operates certain other businesses, which principally include services offered in railway stations; and sales of food, beverages and merchandises on board the trains and in the railway stations.
The registered address of the Company is No. 1052 Heping Road, Shenzhen, Guangdong Province, the People’s Republic of China. The business license for the Company will expire until 2056.
As at December 31, 2011, the Company had in total approximately 33,400 employees, representing an increase of 1,200 as compared with that of December 31, 2010.
The financial statements were authorised for issue by the board of directors of the Company on April 26, 2012.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
21 | GENERAL INFORMATION (CONTINUED) |
The English names of all companies listed in the financial statements are direct translations of their registered names in Chinese.
| 2 | PRINCIPAL ACCOUNTING POLICIES |
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
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| 2.1 | | The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. |
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2.1 | | Basis of presentationpreparation |
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| | The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by International Accounting Standards Board (“IASB”). The financial statements have been prepared under the historical cost convention. |
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| | The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. |
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The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
| (a) | | New accounting pronouncements and amendments effective in 2009amended standards adopted by the Group |
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2011:
| • | | IFRS 7 ‘Financial Instruments — Disclosures’ (amendment) — effective January 1, 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share. The Group has made relevant additional disclosures in these financial statements. |
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| • | | IFRS 8, ‘Operating segments’. IFRS 8 replaces IAS 14, ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in change of the reportable segments presented. In addition, the segments are reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker. |
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| | | Goodwill is allocated by management to groups of cash-generating units at a segment level. Goodwill relating to a previous business combination remains in the Company’s Business segment. The change in reportable segments has not resulted in any additional goodwill impairment. |
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| | | Comparatives for 2008 and 2007 in note 5 have been restated. However, such restatement in note disclosure does not have any impact on the balance sheets. |
IAS 24 (Revised), “Related Party Disclosures” is effective for annual periods beginning on or after January 1, 2011. It introduces an exemption from all of the disclosure requirements of IAS 24 for transactions among government related entities and the government.
F-9
Amendment to IFRS1 “Limited exemption from comparative IFRS7 disclosures for first-time adopters”. The amendment is to provide first-time adopters with the same transition provisions as included in the March 2009 amendment to IFRS7 in relation to relief from presenting comparative information that ended before December 31, 2009 for new fair value disclosures requirements. It is effective for annual periods beginning on or after July 1, 2010 but there is no impact on the Company because it is not a first time adopter of IFRS.
Annual improvement project published in 2010 to amend the following standards:IFRS 7 ‘Financial Instruments: Disclosures’
IAS 1 ‘Presentation of Financial Statements’
Transition requirements for amendments arising as a result of IAS 27 ‘Consolidated and Separate Financial Statements’
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
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| 2.1 | | Basis of preparation (continued) |
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| (a) | | New accounting pronouncements and amendments effective in 2009amended standards adopted by the Group (continued) |
IAS 34 ‘Interim Financial Reporting’
| • | | IAS 1 (revised). ‘Presentation of financial statements’ — effective January 1, 2009. The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. The Group has elected to present one performance statement: i.e. the statement of comprehensive income. These financial statements have been prepared under the revised disclosure requirements |
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| • | | IAS 23 (amendment), ‘Borrowing costs’. The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs was removed. The Group adopted the relevant accounting policy consistent with the new requirements under revised IAS 23 in the past and therefore there was no substantial impact arising from this amendment. |
IFRIC – Int 13 ‘Customer Loyalty Programmes’
IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’
IFRS 3 (Revised) ‘Business Combinations’
Except for the improved IFRS1, ‘First-time Adoption of IFRS’ that has been early adopted by the Group in 2010, the amendments do not have significant impact on the Group’s consolidated financial statements.
| (b) | | Accounting interpretations effective in 2009 but not relevant to the Group’s operations |
IFRS 2 (amendment), ‘Share-based payment’ (effective January 1, 2009) deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment.
(c) | | Accounting standards,Standards, amendments and interpretations to existing standards that areeffective in 2011 but not yet effective and have not been early adopted byrelevant to the GroupGroup: |
| • | | IFRS 3 (Revised), ‘Business Combination’ (effective from July 1, 2009). Management will apply IFRS 3 (Revised) for all business combinations to be undertaken. |
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| • | | IAS 27 (Revised), ‘Consolidated and Separate Financial Statements’ (effective from July 1, 2009). Management does not expect the adoption of this new requirement will have a material impact on the Group’s financial statements. |
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| • | | IAS 38 (amendment), ‘Intangible Assets’ (effective from July 1, 2009). The amendment is part of the IASB’s annual improvements project published in April/May 2009 and the Group will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. Management will apply IAS 38 (amendment) to future deals. |
Amendment to IAS 32 “Classification of rights issues” is effective for annual periods beginning on or after February 1, 2010. This is not currently applicable to the Group, as it has not made any rights issue.
F-10
Amendment to IFRIC – Int 14 “Prepayments of a minimum funding requirement” is effective for annual period beginning on or after January 1, 2011. This is not currently relevant to the Group, as it does not have a minimum funding requirement.
IFRIC – Int 19 “Extinguishing financial liabilities with equity instruments” is effective for annual periods beginning on or after July 1, 2010. This is not currently applicable to the Group, as it has no extinguishment of financial liabilities replaced with equity instruments currently.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
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| 2.1 | | Basis of preparation (continued) |
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| (c) | | AccountingThe following new standards, new interpretations and amendments to standards and interpretations to existing standards thathave been issued but are not yet effective for the financial year beginning January 1, 2011 and have not been early adopted by the Group (continued)adopted: |
| • | | IFRS 9 ‘Financial Instruments’ (effective from January 1, 2013). Financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. The expected impact of this new standard is still being assessed in details by management, but management does not anticipate that the application will result in a material impact on the Group’s financial statements. |
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| | • | | IFRIC 17 ‘Distribution of non-cash assets to owners’ (effectiveEffective for annual periods beginning on or after July 1, 2009). The interpretation is part of the IASB’s annual improvements project published in April/May 2009. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The Group will apply IFRIC 17 from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements. |
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| • |
IFRS 1 ‘Severe hyperinflation and removal of fixed dates for first-time adopters’ - Amendment | | IFRS 5 (amendment), ‘Measurement of non-current assets (or disposal groups) classified as held for sale’. The amendment is part of the IASB’s annual improvements project published in April/May 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS | July 1, still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Group will apply IFRS 5 (amendment) from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements.2011 |
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| •IFRS 7 ‘Disclosures - Transfers of financial assets’ - Amendment | | | July 1, 2011 | |
IAS 12 ‘Deferred tax: Recovery of underlying assets’ - Amendment | | | January 1, 2012 | |
IAS 1 (amendment), ‘Presentation of financial statements’. The amendment is part of the IASB’s annual improvements project published in April/May 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The Group will apply IAS - Amendment | | | July 1, (amendment) from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements.2012 |
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| •IFRS 10 ‘Consolidated financial statements’ - Amendment | | | January 1, 2013 | |
IFRS 2 (amendments), ‘group cash-settled share-based payment transactions’ (effective from11 ‘Joint arrangements’ - Amendment | | | January 1, 2013 | |
IFRS 12 ‘Disclosures of interests in other entities’ - Amendment | | | January 2010). In addition to incorporating IFRIC-Int 8, ‘Scope1, 2013 | |
IFRS 13 ‘Fair value measurement’ - Clarification | | | January 1, 2013 | |
IAS 19 ‘Employee benefits’ - Amendment | | | January 1, 2013 | |
IAS 28 ‘Investment in associates and joint ventures’ - Amendment | | | January 1, 2013 | |
IAS 27 (revised 2011) ‘Separate financial statements’ | | | January 1, 2013 | |
IFRS 7 ‘Financial instruments: Disclosures - Offsetting financial assets and financial liabilities’ - Amendment | | | January 1, 2013 | |
IFRIC - Int 20 ‘Stripping costs in the production phase of a surface mine’ | | | January 1, 2013 | |
IAS 32 ‘Financial instruments: Presentation - Offsetting financial assets and financial liabilities’ - Amendment | | | January 1, 2014 | |
IFRS 2’,9, ‘Financial instruments’ - Classification and IFRIC-Int 11, ‘IFRS 2 — groupMeasurement | | | January 1, 2015 | |
IFRS 7 and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by the interpretation. The new guidance is not expected to have a material impact on the Group’s financial statements.IFRS 9 ‘Mandatory effective date and transition disclosures’ - Amendment | | | January 1, 2015 | |
F-11
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.1 | | Basis of preparation (continued) |
|
(c) | | Accounting standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group (continued) |
| 2.2 | • | | IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ (effective from July 1, 2010). A debtor and creditor might renegotiate the terms of a financial liability with the result that the debtor extinguishes the liability fully or partially by issuing equity instruments to the creditor. These transactions are sometimes referred to as ‘debt for equity swaps’. IFRIC 19 provide further guidance for such transactions. The Group will apply IFRIC 19 from July 1, 2010. It is not expected to have a material impact on the Group’s financial statements. |
|
| • | | IFRIC 14 (amendment), ‘Prepayments of a Minimum Funding Requirement’(effective from January 1, 2011). The amendments apply in limited circumstances: when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendments permit such an entity to treat the benefit of such an early payment as an asset. The Group will apply IFRIC 14 from January 1, 2011. It is not expected to have a material impact on the Group’s financial statements. |
|
| • | | IFRS 1 (amendment), ‘Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters’ (effective from July 1, 2010). A first-time adopter may apply the transition provisions in paragraph 44G of IFRS 7. This standard is not relevant to the Group. |
|
| • | | IAS 24 (revised), ‘Related Party Disclosures’ (effective from January 1, 2011). This standard simplifies the definition of a related party, clarifies its intended meaning and eliminates inconsistencies from the definition. This standard also provides a partial exemption from the disclosure requirements for government-related entities. The Group will apply IAS 24 from January 1, 2011. |
|
| • | | The improved IFRS 1, ‘First-time Adoption of IFRS’, IASB’s Annual Improvements Project published in May 2010. According to the improved IFRS 1, the revaluated amount can become deemed costs so long as the revaluation takes place at periods before or during the first-time adoptors’ first set of IFRS financial statements. In addition, the IASB has made a special provision in this IFRS 1 exemption that existing IFRS preparers may also be able to retrospectively apply this. The Group is currently assessing the possible impact arising from the implementation of the improved IFRS 1.Subsidiaries |
F-12
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise from circumstances such as enhanced minority rights or contractual terms between shareholders, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.2 | Subsidiaries (continued) |
2.2 | 2.2.1 | Consolidation (continued) |
|
| (a) | | SubsidiariesBusiness combinations (continued) |
| | Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Details of the Company’s subsidiaries are set out in Note 10. |
|
| | The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the comprehensive income statement. |
|
| | Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. |
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
| (b) | | AssociatesChanges in ownership interests in subsidiaries without change of control |
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
| (c) | | Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholdingDisposal of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss (Note 2.9). Details of the Group’s associates are set out in Note 11. |
|
| | The Group’s share of its associates’ post-acquisition profits or losses is recognised in the comprehensive income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. |
|
| | Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. |
|
| | Dilution gains and losses arising in investments in associates are recognised in the comprehensive income statement.subsidiaries |
F-13
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the comprehensive income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of result of associates’ in the comprehensive income statement.
Profits or losses and other comprehensive income resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior executives that make strategic decisions.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.5 | | Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior executives that make strategic decisions. |
|
2.4 | | Foreign currency transactionstransaction |
|
| (a) | | Functional and presentation currency |
|
| | Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Renminbi (“Rmb”), which is the Company’s functional and the Group’s presentation currency. |
|
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Renminbi (“RMB”), which is the Company’s functional and the Group’s presentation currency.
| (b) | | Transactions and balances |
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the comprehensive income statement.
Foreign exchange gains and losses are presented in the consolidated comprehensive income statement within ‘Finance costs’.
Fixed assets are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items (for the case of fixed assets acquired by the Company from Predecessor during the Restructuring, the revaluated amount in the Restructuring was deemed costs).
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the comprehensive income statement during the financial period in which they are incurred.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.6 | Fixed assets (continued) |
Depreciation is calculated using the straight-line method to allocate the cost amount, after taking into account the estimated residual value of not more than 4% of cost, of each asset over its estimated useful life. The estimated useful lives are as follows:
| | |
| | Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the comprehensive income statement. |
|
2.5 | | Fixed assets |
|
| | Fixed assets are stated at cost less accumulated depreciation and impairment losses. Cost represents the purchase price of the assets and other costs incurred to bring the assets into intended use. |
|
| | Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the comprehensive income statement during the financial period in which they are incurred. |
|
| | Depreciation is calculated using the straight-line method to allocate the cost amount, after taking into account the estimated residual value of not more than 4% of cost, of each asset over its estimated useful life. The estimated useful lives are as follows: |
| | | | |
|
| | Buildings (Note a) | | 20 to 40 years |
| | Leasehold improvements | | Shorter of useful life or lease terms |
| | Tracks, bridges and service roads (Note a) | | 16 to 100 years |
| | Locomotives and rolling stock | | 20 years |
| | Communications and signalling systems | | 8 to 20 years |
| | Other machinery and equipment | | 4 to 25 years |
F-14
The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease periods of the respective land use right lease grants (the “Lease Term”); and the initial period of land use right operating leases (the “Operating Lease Term”), on which these assets are located (Notes 2.8 and 37(b)).Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grants, the Group has the right to renew the respective leases up to a period not less than 50 years with additional cost paid. This right can be exercised within one year before the expiry of the initial Lease Term, and can only be denied if such renewals are considered to be detrimental to the public interest. Accordingly, the directors of the Company consider that the approval process to be perfunctory. In addition, based on the provision of the land use right operating lease agreement entered into with the single largest shareholder (details contained in Note 37(b)), the Company can renew the lease at its own discretion upon expiry of the Operating Lease Term. Based on the above considerations, the directors have determined the estimated useful lives of these assets to extend beyond the initial Lease Term as well as the Operating Lease Term.
The assets’ residual values and estimated useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.10).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “other (expense)/income – net”, included in the comprehensive income statement.
When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.7 | Construction-in-progress |
Construction-in-progress represents buildings, tracks, bridges and service roads, mainly includes the construction related costs for the associated facilities of the existing railway line of the Group. Construction-in-progress is stated at cost, which includes all expenditures and other direct costs, site restoration costs, prepayments attributable to the construction and interest charges arising from borrowings used to finance the construction during the construction period, less impairment loss. Construction-in-progress is not depreciated until such assets are completed and ready for their intended use.
2.52.8 | | Fixed assets (continued) |
|
| | Note a: |
|
| | The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease periods of the respective land use right lease grants (the “Lease Term”); and the initial period of land use right operating leases (the “Operating Lease Term”), on which these assets are located (Notes 2.7 and 36(b)). |
|
| | Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grants, the Group has the right to renew the respective leases up to a period not less than 50 years with additional cost paid. This right can be exercised within one year before the expiry of the initial Lease Term, and can only be denied if such renewals are considered to be detrimental to the public interest. Accordingly, the directors of the Company consider that the approval process to be perfunctory. In addition, based on the provision of the land use right operating lease agreement entered into with the substantial shareholder (details contained in Note 36(b)), the Company can renew the lease at its own discretion upon expiry of the Operating Lease Term. Based on the above considerations, the directors have determined the estimated useful lives of these assets to extend beyond the initial Lease Term as well as the Operating Lease Term. |
|
| | The assets’ residual values and estimated useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. |
|
| | An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9). |
|
| | Gains and losses on disposals are determined by comparing the sales proceeds with the carrying amount and are recognised within “other income/(expense) — net”, included in the comprehensive income statement. |
|
2.6 | | Construction-in-progress |
|
| | Construction-in-progress represents buildings, tracks, bridges and service roads, mainly includes the construction related costs for the associated facilities of the existing railway line of the Group. Construction-in-progress is stated at cost, which includes all expenditures and other direct costs, site restoration costs, prepayments attributable to the construction and interest charges arising from borrowings used to finance the construction during the construction period, less impairment loss. Construction-in-progress is not depreciated until such assets are completed and ready for their intended use. |
|
2.7 | | Leasehold land payments |
|
| | All land in the PRC is state-owned and no individual land ownership right exists. The Group acquired the right to use certain parcels of land for certain of its rail lines, stations and other businesses. The premium paid for such leasehold land payments represents pre-paid lease payments, which are amortised over the lease terms of 36.5 to 50 years using the straight-line method. Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grant, the Group has the right to extend and renew the lease for a period not less than 50 years. This right can be exercised within one year before the expiry of the initial Lease Term, and can only be denied if such renewals are considered to be detrimental to public interest. The Group considers the approval process to be perfunctory and the renewal is reasonably assured. |
F-15
Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of identifiable net assets acquired. Goodwill arising from acquisitions of subsidiaries’ business is disclosed separately on the Balance Sheet.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.82.10 | | Goodwill |
|
| | Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill arising from acquisitions of subsidiaries is disclosed separately on the balance sheet. Goodwill is tested for impairment annually or, whenever there is an indication of impairment, and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. |
|
| | Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. |
|
2.9 | | Impairment of investment in subsidiaries, associates and non-financial assets |
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment testing of the investments in subsidiaries or associates is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary or associate in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
|
| 2.11 | | Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. |
|
| | Impairment testing of the investments in subsidiaries or associates is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary or associate in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill. |
|
2.10 | | Financial assets |
|
2.10.1 | 2.11.1 | Classification |
|
| | |
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Other than loans and receivables and available-for-sale financial assets, the Group did not hold any financial assets carried at fair value through profit or loss during the year ended December 31, 2010 and 2011.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “long-term receivables”, “trade and other receivables”, “short term deposits” and “cash and cash equivalents” in the balance sheet (Notes 2.16 and 2.17).
| (b) | Available-for-sale financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Other than loans and receivables and available-for-sale financial assets, the Group did not hold any financial assets carried at fair value through profit or loss during 2009 and 2008. |
F-16
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.102.11 | | Financial assets (continued) |
|
2.10.1 | | Classification (continued) |
|
(a) | | Loans and receivables |
|
| | Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the balance sheet (Notes 2.15 and 2.16). |
|
(b) | | Available-for-sale financial assets |
|
| | Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. |
|
2.10.2 | 2.11.2 | Recognition and measurement |
Regular way purchases and sales of financial assets are recognised on the trade-date—the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Available-for-sale financial assets are subsequently carried at fair value, except for those investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, which shall be measured at cost. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the comprehensive income statement as ‘gains and losses from investment securities’.
Dividends on available-for-sale equity instruments are recognised in the comprehensive income statement as part of other income when the Group’s right to receive payments is established.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group established fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. In case of unlisted equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably determined via valuation techniques, they are measured at cost, subject to impairment review.
|
| 2.12 | | Regular way purchases and sales of financial assets are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs, except for all financial assets carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. |
|
| | Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the comprehensive income statement as ‘gains and losses from investment securities’. |
|
| | Dividends on available-for-sale equity instruments are recognised in the comprehensive income statement as part of other income when the Group’s right to receive payments is established. |
|
| | The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group established fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. In case of unlisted equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably determined via valuation techniques, they are measured at cost, subject to impairment review. |
|
2.11 | | Offsetting financial instruments |
|
| | Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. |
F-17
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.122.13 | | Impairment of financial assets |
|
| (a) | | Assets carried at amortised cost |
|
| | The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. |
|
| | The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
Significant financial difficulty of the issuer or obligor;
| • | | Significant financial difficulty of the issuer or obligor; |
|
| • | | A breach of contract, such as a default or delinquency in interest or principal payments; |
|
| • | | The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; |
|
| • | | It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; |
|
| • | | The disappearance of an active market for that financial asset because of financial difficulties; or |
|
| • | | Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: |
A breach of contract, such as a default or delinquency in interest or principal payments;
The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties; or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
| | (i) | | adverse changes in the payment status of borrowers in the portfolio; |
|
| | (ii) | | national or local economic conditions that correlate with defaults on the assets in the portfolio. |
| | The Group first assesses whether objective evidence of impairment exists. |
|
| | The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the comprehensive income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. |
|
| | If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the comprehensive income statement. |
F-18
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the comprehensive income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the comprehensive income statement.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.122.13 | | Impairment of financial assets (continued) |
|
| (b) | | Assets classified as available for sale |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the separate comprehensive income statement. Impairment losses recognised in the separate comprehensive income statement on equity instruments are not reversed through the separate comprehensive income statement.
| 2.14 | Deferred employee costs |
| | The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group uses the criteria refer to (a) above. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss — is removed from equity and recognised in the separate comprehensive income statement. Impairment losses recognised in the separate comprehensive income statement on equity instruments are not reversed through the separate comprehensive income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the separate comprehensive income statement. |
|
2.13 | | Deferred employee costs from housing benefits |
|
| | |
The Group implemented a scheme (the “Scheme”) for selling staff quarters to its employees in 2000. Under the Scheme, the Group sold certain staff quarters to their employees at preferential prices in the form of housing benefits provided to these employees. The total housing benefits (the “Benefits”), which represent the difference between the net book value of the staff quarters sold and the proceeds collected from the employees, are expected to benefit the Group at least over 15 years, which was determined according to the contractual service period of the employees participating in the Scheme. Upon the implementation of the Scheme in 2000, the Benefits were recorded as deferred employee costs and the balance is then amortised over the contractual service period of the employees participating in the Scheme.
By the end of December 31, 2010, all the deferred employee costs from housing benefits have been recognised in operating expenses (see Note 13).
| (b) | Other long-term deferred employee costs and the balance is then amortised over the contractual service period of the employees participating in the Scheme. |
Other long-term deferred employee costs are amortised over their estimated useful lives.
|
| 2.15 | | At each balance sheet date, the Group reassesses whether there is any indication of impairment, taking into account the remaining service period of the employees and other qualitative factors. If such indication exists, a detailed analysis will be performed in order to assess whether the carrying amount of the deferred employee costs can be recoverable in full. A write-down is made if the carrying amount exceeds the recoverable amount. |
|
2.14 | | Materials and supplies |
|
| | Materials and supplies are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Materials and supplies are charged as fuel costs and repair and maintenance expenses when consumed, or capitalised to fixed assets when the items are installed with the related fixed assets, whichever is appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. |
F-19
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
|
2.152.16 | | Trade and other receivables |
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
|
| 2.17 | | Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. |
|
| | Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. |
|
2.16 | | Cash and cash equivalents |
Cash and cash equivalents include cash in hand; deposits held at call with banks; and other short-term highly liquid investments with original maturities of three months or less.
|
| 2.18 | | Cash and cash equivalents include cash in hand; deposits held at call with banks; and other short-term highly liquid investments with original maturities of three months or less. |
|
2.17 | | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
|
| 2.19 | | Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. |
|
2.18 | | Trade payables |
|
| | Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. |
|
| | Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. |
|
2.19 | | Borrowings |
|
| | Borrowings (including bonds payable) are recognised initially at fair value, net of transaction costs incurred. They are subsequently stated at amortised cost; and any difference between proceeds (net of transaction costs) and the redemption value is recognised in the comprehensive income statement over the period of the borrowings using the effective interest method. |
|
| | Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. |
|
| | Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. |
F-20
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.The Group derecognises financial liability when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Borrowings (including bonds payable) are recognised initially at fair value, net of transaction costs incurred. They are subsequently carried at amortised cost; and any difference between proceeds (net of transaction costs) and the redemption value is recognised in the comprehensive income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
| 2.22 | Current and deferred income tax |
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated comprehensive income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
|
| (a) | | The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. |
|
| | The currentCurrent income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. |
|
| | Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. |
|
| | Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. |
|
| | Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. |
|
| | Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. |
F-21
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.22 | Current and deferred income tax (continued) |
2.21 | | Employee benefits |
|
(a) | | Defined contribution plan |
|
| | The Group pays contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and housing, etc. The Group has no further payment obligations once the contributions have been paid. The contributions to the defined contribution schemes are recognised as staff costs when they are due. |
|
| (b) | | Termination benefits |
|
| | Termination benefits are payable when selected employees who meet certain criteria accept voluntary redundancy in exchange for these benefits, with specific approval granted by management of the Group. The Group recognises retirement benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide retirement benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. |
|
2.22 | | Provisions |
|
| | Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. |
|
| | Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. |
|
| | Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.Deferred income tax |
F-22
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Outside basis differencesDeferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.23 | Employee benefits |
2.23 | | Revenue recognition |
|
| | Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. |
|
| | The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement. |
|
| (a) | | Revenue from railway businessDefined contribution plan |
|
| | Revenue from railway business includes revenue from passenger and freight services and revenue from railway network usage and services. Revenue from railway business is recognised when the services are rendered and revenue can be reliably measured. |
|
The Group pays contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and housing, etc. The Group has no further payment obligations once the contributions have been paid. The contributions to the defined contribution schemes are recognised as staff costs when they are due.
| (b) | | Revenue from other businesses |
|
| | Revenue from other business is recognised once the related services or goods are delivered, the related risks and rewards of ownership have been transferred and revenue can be reliably measured. |
|
(c) | | Interest income |
|
| | Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognised using the original effective interest rate. |
|
(d) | | Dividend income |
|
| | Dividend income is recognised when the right to receive payment is established. |
|
(e) | | Rental income |
|
| | Revenue from operating lease arrangements is recognized on a straight-line basis over the period of the respective leases. |
|
2.24 | | Government grants |
|
| | Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. |
|
| | Government grants relating to the purchase of fixed assets are deducted against the carrying amount of the fixed assets.Termination benefits |
F-23
Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 2 | | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
| 2.25 | Revenue recognition |
2.25 | | Operating leases |
|
| | Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the comprehensive income statement on a straight-line basis over the period of the lease. |
|
2.26 | | Dividend distribution |
|
| | Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. |
|
3 | | FINANCIAL RISK MANAGEMENT |
|
3.1 | | Financial risk factor |
|
| | The Group’s activities expose it to a variety of financial risks: price risk, foreign currency risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk. The Group’s overall risk management strategy seeks to minimise the potential adverse effects on the financial performance of the Group. |
|
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
| (a) | | Price riskRevenue from railway business |
|
| | The Group is exposed to price risk because of investments held by the Group and classified as available-for-sale on the consolidated balance sheet. |
|
| | To manage its price risk arising from investments in equity interests, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. |
|
Revenue from railway business includes revenue from passenger and freight services, revenue from railway network usage and other transportation related services. Other transportation related services include the railway operation service provided to other railway companies and other service provided in relation to passenger and freight transportation. Revenue from railway business is recognised when the services are rendered and revenue can be reliably measured.
| (b) | | Foreign currency risk |
|
| | The Group mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of the Company and its subsidiaries. RMB is not freely convertible intoRevenue from other foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange control promulgated by the PRC government. Any foreign currency denominated monetary assets and liabilities other than in RMB would subject the Group to foreign exchange exposure. |
|
| | The Group’s objective of managing the foreign currency risk is to minimise potential adverse effects arising from foreign transaction movements. Depending on volatility of specific foreign currency exposed, measures are taken by management to manage the foreign currency positions.businesses |
F-24
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognised using the original effective interest rate.
Dividend income is recognised when the right to receive payment is established.
Revenue from operating lease arrangements is recognised on a straight-line basis over the period of the respective leases.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
32 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the comprehensive income statement over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the comprehensive income statement on a straight-line basis over the expected lives of the related assets.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the comprehensive income statement on a straight-line basis over the period of the lease.
| 2.28 | Dividend distribution |
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.
| 3 | FINANCIAL RISK MANAGEMENT |
The Group’s activities expose it to a variety of financial risks: price risk, foreign currency risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk. The Group’s overall risk management strategy seeks to minimise the potential adverse effects on the financial performance of the Group.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
|
| 3.1 | | Financial risk factor (continued) |
The Group is exposed to price risk because of investments held by the Group and classified as available-for-sale on the consolidated balance sheet.
To manage its price risk arising from investments in equity interests, the Group diversifies its portfolio. Diversification of the portfolio is made in accordance with the limits set by the Group.
| (b) | | Foreign currency risk (continued) |
|
| | The following table shows the Group’s exposures to foreign currency rate fluctuation arising from foreign currency denominated monetary assets and liabilities: |
| | | | | | | | | | | | | |
| | | Currency | | | As of December 31, | |
| | | denomination | | | 2008 | | | 2009 | |
| Monetary assets and liabilities | | | | | | (RMB’000) | | | (RMB’000) | |
| Cash and cash equivalents | | USD | | | 3,176 | | | | 455 | |
| Cash and cash equivalents | | HKD | | | 30,452 | | | | 66,801 | |
| Other receivables | | HKD | | | 529 | | | | 994 | |
| Trade payables | | USD | | | (940 | ) | | | (939 | ) |
The Group mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of the Company and its subsidiaries. RMB is not freely convertible into other foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange control promulgated by the PRC government. Any foreign currency denominated monetary assets and liabilities other than in RMB would subject the Group to foreign exchange exposure.
The Group’s objective of managing the foreign currency risk is to minimise potential adverse effects arising from foreign transaction movements. Depending on volatility of specific foreign currency exposed, measures are taken by management to manage the foreign currency positions.
The following table shows the Group’s exposures to foreign currency rate fluctuation arising from foreign currency denominated monetary assets and liabilities:
| | | | | | | | | | |
| | | Currency | | As at December 31, | |
| Monetary assets and liabilities | | denomination | | 2010 | | | 2011 | |
| | | | | RMB’000 | | | RMB’000 | |
| | | |
Cash and cash equivalents | | USD | | | 322 | | | | 261 | |
Cash and cash equivalents | | HKD | | | 103,221 | | | | 106,054 | |
Other receivables | | HKD | | | 549 | | | | 244 | |
The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with monetary assets shown above. The Group has not used any means to hedge the exposure.
As at December 31, 2011, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, profit before tax for the year would have been RMB 5,300,000 (2010: RMB 5,200,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of HKD-denominated cash in banks. The impact of exchange fluctuations of USD is not significant.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
| 3.1 | The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with the deposits and other monetary assets and liabilities shown above. The Group has not used any means to hedge the exposure.Financial risk factor (continued) |
|
| | As at December 31, 2009, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, post-tax profit for the year would have been RMB3,390,000 (2008: RMB1,270,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of HKD-denominated cash in banks. The impact of exchange fluctuations of USD is not significant. |
|
| (c) | | Cash flow and fair value interest rate risk |
Other than deposits held in banks, the Group does not have significant interest-bearing assets. The average interest rate of deposits held in banks in the PRC throughout the year was approximately 2.12% (2009: 1.27% and 2010: 0.87%). Any change in the interest rate promulgated by the People’s Bank of China from time to time is not considered to have a significant impact to the Group.
The Group’s interest rate risk which affects its income and operating cash flows mainly arises from bonds payable. The bonds bear interest at fixed rates, and expose the Group to fair value interest rate risk.
|
| (d) | | Other than deposits held in banks, the Group does not have significant interest-bearing assets. The average interest rate of deposits held in banks in the PRC throughout the year was approximately 1.27% (2008: 1.10%). Any change in the interest rate promulgated by the People’s Bank of China from time to time is not considered to have significant impact to the Group. |
|
| | The Group’s interest rateCredit risk which affects its income and operating cash flows mainly arises from bank borrowings and bonds payable. The Group’s bonds payable were at fixed rates, and expose the Group to fair value interest rate risk. All the Group’s bank borrowings were at floating rates (Note 23). Bank borrowings at floating rates expose the Group to cash flow interest rate risk. As of December 31, 2009, there were no bank borrowings (2008: borrowings of RMB3,900,000,000). |
|
| | As of December 31, 2008, if interest rates on bank borrowings had been 10 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been approximately RMB2,574,800 lower/higher, mainly as a result of higher or lower interest expense. |
F-25
The detailed analysis of credit risk is included in Note 15.There were no other financial assets carrying a significant exposure to credit risk.
Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Management monitors rolling forecasts of the Group’s liquidity reserves(cash and cash equivalents) on the basis of expected cash flows.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 3 | | FINANCIAL RISK MANAGEMENT (CONTINUED) |
|
| 3.1 | | Financial risk factor (continued) |
|
(d) | | Credit risk |
|
| | Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, trade and other receivables (excluding prepayments), short-term deposit, and long-term receivable. |
|
| | Cash and short term liquid investments are placed with reputable banks. There was no recent history of default of cash and cash equivalents and short-term deposits from such financial institutions/authority. The majority of the Group’s trade receivable balances and long term receivable balance are due from third party customers as a result of rendering of services or sales of merchandises. The Group’s other receivable balances mainly arise from services rendered other than the main railway transportation operations. The Group performs ongoing credit evaluations of its customers/debtors’ financial condition and generally does not require collateral from the customers/debtors’ account on the outstanding balances. Based on the expected realisability and timing for collection of the outstanding balances, the Group maintains a provision for doubtful accounts and actual losses incurred have been within management’s expectation. In view of the history of business dealings made with the customers and the sound collection history of the receivables due from them, management believes that there is no material credit risk inherent in the Group’s outstanding receivable balances. |
|
| | There were no other financial assets carrying a significant exposure to credit risk. |
|
| | With the consideration stated of the above and due to the fact that the majority of the Group’s revenue is derived from the railroad businesses which are cash transactions, the directors believe that there is no significant credit risk inherent in the Group’s business during the reporting period. |
|
| (e) | | Liquidity risk |
|
| | Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. |
|
| | Management monitors rolling forecasts of the Group’s liquidity reserves (comprising undrawn borrowing facilities and cash and cash equivalents) on the basis of expected cash flows. |
|
| | The directors are of the view that the following measures would be adequate to contain the Group’s liquidity risk at an acceptable level. (continued) |
| (i) | | Maintain and generate stable operating cash inflow from its profitable operations; |
|
| (ii) | | Undertake close monitoring process to control the magnitude and timing of the expected cash outlays associated with the construction of railway lines and the improvement of the existing operation equipments; and |
|
| (iii) | | Obtain new bank facilities and identify sources of medium term financing in order to finance the expected cash outlays associated with the expected capital expenditures. |
F-26
| | | | | | | | | | | | |
| Group | | Less than 1 year | | | Between 1
and 2 years | | | Between 2
and 5 years | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| | | |
At December 31, 2010 | | | | | | | | | | | | |
Bonds payable (including interests) (Note 25) | | | 167,650 | | | | 167,650 | | | | 3,828,410 | |
Trade and other payables excluding statutory liabilities and advance (Notes 27 and 28) | | | 1,570,044 | | | | — | | | | — | |
Dividends payable | | | 54 | | | | — | | | | — | |
Payables for fixed assets and construction-in-progress | | | 477,806 | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | |
At December 31, 2011 | | | | | | | | | | | | |
Bonds payable (including interests) (Note 25) | | | 167,650 | | | | 167,650 | | | | 3,660,760 | |
Trade and other payables excluding statutory liabilities and advance (Notes 27 and 28) | | | 1,496,980 | | | | — | | | | — | |
Dividends payable | | | 25 | | | | — | | | | — | |
Payables for fixed assets and construction-in-progress | | | 814,129 | | | | — | | | | — | |
| | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 3 | | FINANCIAL RISK MANAGEMENT (CONTINUED) |
|
3.1 | | Financial risk factor (continued) |
|
(d) | | Liquidity risk (continued) |
|
| | The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. |
| | | | | | | | | | | | | |
| | | Less than | | Between 1 and 2 | | Between 2 and 5 |
| | | 1 year | | years | | years |
| | | RMB’000 | | RMB’000 | | RMB’000 |
At December 31, 2009 | | | | | | | | | | | | |
| Bonds payable (including interests) (Note 24) | | | 167,650 | | | | 167,650 | | | | 3,996,642 | |
| Trade and other payables excluding statutory liabilities (Notes 26 and 27) | | | 1,225,037 | | | | — | | | | — | |
| Payables for fixed assets and construction-in-progress | | | 674,652 | | | | — | | | | — | |
| | | |
At December 31, 2008 | | | | | | | | | | | | |
| Borrowings (including interests) (Note 23) | | | 737,185 | | | | 188,704 | | | | 3,559,551 | |
| Trade and other payables excluding statutory liabilities (Notes 26 and 27) | | | 1,189,912 | | | | — | | | | — | |
| Payables for fixed assets and construction-in-progress | | | 764,609 | | | | — | | | | — | |
| | | |
| 3.2 | | Capital risk management |
|
| | The Group’s objectives of managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders; as well as to maintain an optimal capital structure to reduce the cost of capital. |
|
| | In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. |
|
| | The Group monitors capital by regularly reviewing the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current bank borrowings and bonds payable as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt. The gearing ratios as at December 31, 2009 and 2008 were as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Total bank borrowings and bonds payable (Notes 23 and 24) | | | 3,900,000 | | | | 3,465,801 | |
| Less: Cash and cash equivalents (Note 34(c)) | | | (1,560,952 | ) | | | (1,115,651 | ) |
| | | | | | | |
| Net Debt | | | 2,339,048 | | | | 2,350,150 | |
| Total Equity | | | 21,839,155 | | | | 22,636,842 | |
| | | | | | | |
| Total capital | | | 24,178,203 | | | | 24,986,992 | |
| | | | | | | |
| Gearing ratio | | | 10 | % | | | 9 | % |
| | | | | | | |
| | The gearing ratio as at end of 2009 had been maintained consistent as compared with 2008. The directors are of the view that current capital structure is within their expectation. |
F-27
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.The Group monitors capital by regularly reviewing the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total bonds payable less cash and cash equivalents. Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt.
The gearing ratios as at December 31, 2010 and 2011 were as follows: | | | | | | | | |
| | | As at December 31, 2010 | | | As at December 31, 2011 | |
| | | RMB’000 | | | RMB’000 | |
| | |
Total bonds payable (Notes 25) | | | 3,471,994 | | | | 3,478,568 | |
Less: Cash and cash equivalents (Note 35(c)) | | | (2,659,058 | ) | | | (1,366,757 | ) |
| | | | | | | | |
Net debt | | | 812,936 | | | | 2,111,811 | |
Total equity | | | 24,222,576 | | | | 25,387,408 | |
| | | | | | | | |
Total capital | | | 25,035,512 | | | | 27,499,219 | |
Gearing ratio | | | 3 | % | | | 8 | % |
| | | | | | | | |
The increase in the gearing ratio in 2011 is primarily due to the decrease in cash and cash equivalents, as more cash and cash equivalents were invested in the form of time deposits in 2011.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 3 | | FINANCIAL RISK MANAGEMENT (CONTINUED) |
|
| 3.3 | | Fair value estimation |
|
| | Effective January 1, 2009, the group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: |
According to amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, it requires disclosure of fair value measurements by level of following fair value measurement hierarchy:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
As at December 31, 2010 and 2011, the Group did not have any financial instruments that were measured at fair value.
The fair value of bonds payable for disclosure purposes are estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. As at December 31, 2011, the fair value of bonds payable was approximately RMB 3,405,771,000 (December 31, 2010: RMB 3,422,721,000). The fair values are determined by discounted cash flow method using a discount rate of 5.79% (2010: 5.42%).
As at December 31, 2010 and 2011, the fair values of other financial instruments approximated their carrying values.
| 4 | • | | Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). |
|
| • | | Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). |
|
| • | | Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). |
| | As at December 31, 2008 and 2009, the Group did not have any assets or liabilities that were measured at fair value. |
|
| | The fair values of long-term receivable and long-term bank borrowings and bonds payable for disclosure purposes are estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. |
|
4 | | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
|
| 4.1 | | Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. |
|
4.1 | | Critical accounting estimates and assumptions |
|
| | |
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) |
| 4.1 | Critical accounting estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.(continued) |
|
| (a) | | The estimates of the depreciable lives of fixed assets |
|
| | |
The estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads, was made by the directors with reference to the historical usage of the assets; their expected physical wear and tear; results of recent durability assessment performed; technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets, the right of the Group to renew the land use right grants and the land use right lease on which these assets are located (Notes 2.5 and 36(b)), and service roads, was made by the directors with reference to the following: (1) the historical usage of the assets; (2) their expected physical wear and tear; (3) results of recent durability assessment performed; (4) technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets; (5) the right of the Group to renew the land use right grants and the land use right lease on which these assets are located (Notes 2.8 and 37(b)); (6) the changes in market demand for, or legal or comparable limits imposed on, the use of such fixed assets.
|
| | The current estimated useful lives are stated in Note 2.5. If the estimated depreciable lives of tracks, bridges and service roads had been increased/decreased by 10%, the depreciation of fixed assets would have been decreased/increased by approximately RMB17,832,000 and RMB21,795,000, respectively (2008: RMB15,901,000 and RMB19,435,000, respectively). |
F-28
The current estimated useful lives are stated in Note 2.6. If the estimated depreciable lives of tracks, bridges and service roads had been increased/decreased by 10%, the depreciation expenses of fixed assets for the year ended December 31, 2011 would have been decreased/increased by approximately RMB 18,357,000 and RMB 22,437,000 respectively (2009: RMB 17,832,000 and RMB 21,795,000; 2010: RMB 18,712,000 and RMB 22,870,000 respectively).GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
4 | | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) |
|
4.1 | | Critical accounting estimates and assumptions (continued) |
|
| (b) | | Estimated impairment of goodwill |
|
| | The Group tests whether goodwill has suffered any impairment annually or, whenever there is an indication of impairment, in accordance with the accounting policy stated in Note 2.8. The recoverable amounts of cash-generating units have been determined based on the higher of an asset’s fair value less costs to sell and value in use. These calculations require the use of estimates (Note 9). |
|
The Group tests whether goodwill has suffered any impairment annually or, whenever there is an indication of impairment, in accordance with the accounting policy stated in Note 2.9. The recoverable amounts of cash-generating units have been determined based on the higher of an asset’s fair value less costs to sell and value in use. These calculations require the use of estimates (Note 9).
| (c) | | Estimated impairment of non-financial assets (other than goodwill) |
|
| | |
In determining whether an asset is impaired or the event previously causing the impairment no longer exists, management has to exercise judgement, particularly in assessing: (1) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rate or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test.
|
(d) | | Income taxes |
|
| | The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. |
|
5 | | SEGMENT INFORMATION |
|
| | The chief operating decision-makers have been identified as senior executives. Senior executives review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. |
|
| | Senior executives consider the business from a perspective on revenues and operating results generated from railroad and related business conducted by the Company (“the Company’s Business”). Other segments mainly include provision of on-board catering services, warehousing services, hotel management services and sales of merchandises provided by the subsidiaries of the Group. |
|
| | Senior executives assess the performance of the operating segments based on a measure of the profit before income tax. Other information provided, except as noted below, to senior executives is measured in a manner consistent with that in the financial statements. |
F-29
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 5 | | SEGMENT INFORMATION (CONTINUED) |
|
| | The segment results for 2009 , 2008 and 2007 are as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | All other segments | Total |
| | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 |
| | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
| | | |
| Total revenue (all from external customers) | | | 12,212,031 | | | | 11,530,435 | | | | 10,365,956 | | | | 173,726 | | | | 158,220 | | | | 142,548 | | | | 12,385,757 | | | | 11,688,655 | | | | 10,508,504 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment result | | | 1,690,726 | | | | 1,493,926 | | | | 1,661,254 | | | | 21,653 | | | | 7,736 | | | | 7,297 | | | | 1,712,379 | | | | 1,501,662 | | | | 1,668,551 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Finance costs | | | (236,437 | ) | | | (213,376 | ) | | | (98,597 | ) | | | 150 | | | | (93 | ) | | | (110 | ) | | | (236,287 | ) | | | (213,469 | ) | | | (98,487 | ) |
| Share of results of associates | | | 773 | | | | 128 | | | | 1,830 | | | | — | | | | — | | | | — | | | | 773 | | | | 128 | | | | 1,830 | |
| Depreciation | | | (1,257,432 | ) | | | (1,167,462 | ) | | | (1,012,396 | ) | | | (4,712 | ) | | | (4,580 | ) | | | (4,704 | ) | | | (1,262,144 | ) | | | (1,172,042 | ) | | | (1,017,100 | ) |
| Amortization of leasehold land payments | | | (15,001 | ) | | | (15,001 | ) | | | (15,002 | ) | | | (988 | ) | | | (602 | ) | | | (1,019 | ) | | | (15,989 | ) | | | (15,603 | ) | | | (16,021 | ) |
| Amortization of deferred employee costs | | | (20,048 | ) | | | (31,867 | ) | | | (24,339 | ) | | | (108 | ) | | | (138 | ) | | | — | | | | (20,156 | ) | | | (32,005 | ) | | | (24,339 | ) |
| Recognition of employee benefits obligations | | | — | | | | (76,382 | ) | | | (63,347 | ) | | | (1,200 | ) | | | (9,606 | ) | | | (1,909 | ) | | | (1,200 | ) | | | (85,988 | ) | | | (65,256 | ) |
| Impairment of fixed assets | | | — | | | | — | | | | (6,359 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (6,359 | ) |
| Impairment of construction-in-progress | | | (448 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (448 | ) | | | — | | | | — | |
| Provision/(reversal of provision) for doubtful accounts | | | (299 | ) | | | (2,280 | ) | | | 8,236 | | | | (115 | ) | | | (486 | ) | | | 24 | | | | (414 | ) | | | (2,766 | ) | | | 8,260 | |
| | | |
| | A reconciliation of the segment results to profit of 2009, 2008 and 2007 is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | All other segments | | Total |
| | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 |
| | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
Segment result | | | 1,690,726 | | | | 1,493,926 | | | | 1,661,254 | | | | 21,653 | | | | 7,736 | | | | 7,297 | | | | 1,712,379 | | | | 1,501,662 | | | | 1,668,551 | |
| Income tax expense | | | (343,207 | ) | | | (274,263 | ) | | | (227,876 | ) | | | (5,714 | ) | | | (3,031 | ) | | | (4,473 | ) | | | (348,921 | ) | | | (277,294 | ) | | | (232,349 | ) |
| | | |
Profit for the year | | 1,347,519 | | | 1,219,663 | | | | 1,433,378 | | | | 15,939 | | | | 4,705 | | | | 2,824 | | | | 1,363,458 | | | | 1,224,368 | | | | 1,436,202 | |
| | | |
F-30
Senior executives consider the business from a perspective of revenues and operating results generated from railroad and related business conducted by the Company (“the Company’s Business”). Other segments mainly include provision of on-board catering services, warehousing services, hotel management services and sales of merchandises provided by the subsidiaries of the Group.Senior executives assess the performance of the operating segments based on a measure of the profit before income tax. Other information provided, except as noted below, to senior executives is measured in a manner consistent with that in the financial statements.
The segment results for 2009, 2010 and 2011 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | | All other segments | | | Elimination | | | Total | |
| | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| | | | | | | | | | | | |
Segment revenue | | | 12,212,031 | | | | 13,249,298 | | | | 14,339,356 | | | | 173,726 | | | | 245,977 | | | | 351,479 | | | | — | | | | — | | | | — | | | | 12,385,757 | | | | 13,495,275 | | | | 14,690,835 | |
Inter-segment revenue | | | — | | | | — | | | | — | | | | — | | | | (10,827 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (10,827 | ) | | | — | |
Total revenue | | | 12,212,031 | | | | 13,249,298 | | | | 14,339,356 | | | | 173,726 | | | | 235,150 | | | | 351,479 | | | | — | | | | — | | | | — | | | | 12,385,757 | | | | 13,484,448 | | | | 14,690,835 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Segment result | | | 1,672,227 | | | | 1,921,229 | | | | 2,377,270 | | | | 21,653 | | | | 19,527 | | | | 9,974 | | | | (9,090 | ) | | | (15,449 | ) | | | (8,907 | ) | | | 1,684,790 | | | | 1,925,307 | | | | 2,378,337 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Finance costs | | | (236,437 | ) | | | (186,101 | ) | | | (190,832 | ) | | | 150 | | | | (71 | ) | | | (138 | ) | | | — | | | | — | | | | — | | | | (236,287 | ) | | | (186,172 | ) | | | (190,970 | ) |
Share of results of associates | | | 773 | | | | 1,361 | | | | 5,259 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 773 | | | | 1,361 | | | | 5,259 | |
Depreciation | | | 1,287,978 | | | | 1,344,525 | | | | 1,365,364 | | | | 4,712 | | | | 4,685 | | | | 4,597 | | | | — | | | | — | | | | — | | | | 1,292,690 | | | | 1,349,210 | | | | 1,369,961 | |
Amortization of leasehold land payments | | | 15,001 | | | | 15,001 | | | | 15,001 | | | | 988 | | | | 987 | | | | 987 | | | | — | | | | — | | | | — | | | | 15,989 | | | | 15,988 | | | | 15,988 | |
Write-down and amortization of deferred employee costs | | | 20,048 | | | | 73,804 | | | | 4,286 | | | | 108 | | | | 107 | | | | 23 | | | | — | | | | — | | | | — | | | | 20,156 | | | | 73,911 | | | | 4,309 | |
Recognition of employee benefits obligations | | | — | | | | 97,930 | | | | — | | | | 1,200 | | | | 3,059 | | | | 3,464 | | | | — | | | | — | | | | — | | | | 1,200 | | | | 100,989 | | | | 3,464 | |
Impairment of fixed assets | | | 448 | | | | — | | | | 4,709 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 448 | | | | — | | | | 4,709 | |
| | | | | | | | | | | | |
Impairment of materials and supplies | | | — | | | | — | | | | 21,590 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,590 | |
Provision/(reversal of provision) for doubtful accounts | | | 299 | | | | (1,659 | ) | | | 106 | | | | 115 | | | | (2 | ) | | | — | | | | — | | | | — | | | | — | | | | 414 | | | | (1,661 | ) | | | 106 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 5 | | SEGMENT INFORMATION (CONTINUED) |
|
| | The Group is domiciled in the PRC. All the Group’s revenues were generated in the PRC, and the total assets are also located in the PRC. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | All other segments | | Elimination | | Total |
| | | 2009 | | 2008 | | 2009 | | 2008 | | 2009 | | 2008 | | 2009 | | 2008 |
| | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
Total segment assets | | | 28,605,980 | | | | 28,147,670 | | | | 239,228 | | | | 223,247 | | | | (182,594 | ) | | | (149,091 | ) | | | 28,662,614 | | | | 28,221,826 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total segment assets include: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment in associates | | | 119,547 | | | | 120,705 | | | | — | | | | — | | | | — | | | | — | | | | 119,547 | | | | 120,705 | |
| Acquision of Yangcheng Railway Business | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Additions to non-current assets (other than financial instruments and deferred tax assets) | | | 1,536,507 | | | | 3,479,126 | | | | 6,705 | | | | 1,432 | | | | — | | | | — | | | | 1,543,212 | | | | 3,480,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total segment liabilities | | | 6,048,524 | | | | 6,380,140 | | | | 73,800 | | | | 66,743 | | | | (96,552 | ) | | | (64,212 | ) | | | 6,025,772 | | | | 6,382,671 | |
| | | |
| | There are approximately RMB10,400,548,000 (2008 and 2007: RMB9,776,261,000 and RMB8,884,413,000) of the revenues of the Group which were settled through the Ministry of Railway of the PRC (“MOR”). Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues. |
F-31
A reconciliation of the segment results to profit of 2009, 2010 and 2011 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | | All other segments | | | Elimination | | | Total | |
| | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| | | | | | | | | | | | |
Segment result | | | 1,672,227 | | | | 1,921,229 | | | | 2,377,270 | | | | 21,653 | | | | 19,527 | | | | 9,974 | | | | (9,090 | ) | | | (15,449 | ) | | | (8,907 | ) | | | 1,684,790 | | | | 1,925,307 | | | | 2,378,337 | |
Income tax expense | | | (337,689 | ) | | | (434,752 | ) | | | (571,154 | ) | | | (5,714 | ) | | | (5,637 | ) | | | (4,811 | ) | | | — | | | | — | | | | — | | | | (343,403 | ) | | | (440,389 | ) | | | (575,965 | ) |
Profit for the year | | | 1,334,538 | | | | 1,486,477 | | | | 1,806,116 | | | | 15,939 | | | | 13,890 | | | | 5,163 | | | | (9,090 | ) | | | (15,449 | ) | | | (8,907 | ) | | | 1,341,387 | | | | 1,484,918 | | | | 1,802,372 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Group is domiciled in the PRC. All the Group’s revenues were generated in the PRC, and the total assets are also located in the PRC.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The Company’s Business | | | All other segments | | | Elimination | | | Total | |
| | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | | | 2009 | | | 2010 | | | 2011 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| | | | | | | | | | | | |
Total segment assets | | | 29,370,613 | | | | 30,555,755 | | | | 32,158,429 | | | | 239,228 | | | | 249,132 | | | | 233,638 | | | | (182,594 | ) | | | (200,385 | ) | | | (184,720 | ) | | | 29,427,247 | | | | 30,604,502 | | | | 32,207,347 | |
| | | | | | | | | | | | |
Total segment assets include: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investment in associates | | | 119,547 | | | | 120,661 | | | | 125,920 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 119,547 | | | | 120,661 | | | | 125,920 | |
Additions to non-current assets (other than financial instruments and deferred tax assets) | | | 1,536,779 | | | | 953,938 | | | | 1,274,896 | | | | 6,711 | | | | 4,831 | | | | 2,126 | | | | — | | | | — | | | | — | | | | 1,543,490 | | | | 958,769 | | | | 1,277,022 | |
| | | | | | | | | | | | |
Total segment liabilities | | | 6,145,644 | | | | 6,410,992 | | | | 6,845,068 | | | | 73,800 | | | | 94,864 | | | | 88,895 | | | | (96,552 | ) | | | (123,930 | ) | | | (114,024 | ) | | | 6,122,892 | | | | 6,381,926 | | | | 6,819,939 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues of approximately RMB 12,076,872,000 (2009 and 2010: RMB 10,400,548,000 and RMB 11,520,697,000) of the Group were settled through the Ministry of Railway of the PRC (“MOR”)(Note 39). Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Tracks, | | Locomotives and | | Communications and | | | | |
| | | | | | | Leasehold | | bridges and | | rolling | | signalling | | Other machinery and | | |
| | | Buildings | | improvements | | service roads | | stock | | systems | | equipment | | Total |
| | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
| | | |
At January 1, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | | 3,363,597 | | | | 38,500 | | | | 11,929,430 | | | | 3,859,566 | | | | 1,194,756 | | | | 3,515,465 | | | | 23,901,314 | |
| Accumulated depreciation | | | (495,898 | ) | | | (38,500 | ) | | | (1,109,165 | ) | | | (727,703 | ) | | | (396,834 | ) | | | (1,131,215 | ) | | | (3,899,315 | ) |
| Impairment | | | (6,359 | ) | | | — | | | | — | | | | — | | | | — | | | | (354 | ) | | | (6,713 | ) |
| | | |
| Net book amount | | | 2,861,340 | | | | — | | | | 10,820,265 | | | | 3,131,863 | | | | 797,922 | | | | 2,383,896 | | | | 19,995,286 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 2,861,340 | | | | — | | | | 10,820,265 | | | | 3,131,863 | | | | 797,922 | | | | 2,383,896 | | | | 19,995,286 | |
| Additions | | | 2,425 | | | | — | | | | — | | | | 2,626,286 | | | | 38,421 | | | | 103,836 | | | | 2,770,968 | |
| Transfer from construction-in-progress (Note 7) | | | 326,841 | | | | — | | | | 1,634,785 | | | | 13,363 | | | | 219,002 | | | | 173,079 | | | | 2,367,070 | |
| Government grants received | | | (8,675 | ) | | | — | | | | (5,550 | ) | | | — | | | | — | | | | — | | | | (14,225 | ) |
| Reclassifications | | | (3,774 | ) | | | — | | | | 1,002 | | | | (13 | ) | | | (75,334 | ) | | | 78,119 | | | | — | |
| Disposals | | | (3,867 | ) | | | — | | | | (36,258 | ) | | | — | | | | (1 | ) | | | (2,774 | ) | | | (42,900 | ) |
| Depreciation charges | | | (116,008 | ) | | | — | | | | (174,916 | ) | | | (369,163 | ) | | | (166,678 | ) | | | (345,588 | ) | | | (1,172,353 | ) |
| | | |
| Closing net book amount | | | 3,058,282 | | | | — | | | | 12,239,328 | | | | 5,402,336 | | | | 813,332 | | | | 2,390,568 | | | | 23,903,846 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | | 3,686,870 | | | | — | | | | 13,519,696 | | | | 6,499,176 | | | | 1,364,722 | | | | 3,900,756 | | | | 28,971,220 | |
| Accumulated depreciation | | | (622,229 | ) | | | — | | | | (1,280,368 | ) | | | (1,096,840 | ) | | | (551,390 | ) | | | (1,509,991 | ) | | | (5,060,818 | ) |
| Impairment | | | (6,359 | ) | | | — | | | | — | | | | — | | | | — | | | | (197 | ) | | | (6,556 | ) |
| | | |
| Net book amount | | | 3,058,282 | | | | — | | | | 12,239,328 | | | | 5,402,336 | | | | 813,332 | | | | 2,390,568 | | | | 23,903,846 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 3,058,282 | | | | — | | | | 12,239,328 | | | | 5,402,336 | | | | 813,332 | | | | 2,390,568 | | | | 23,903,846 | |
| Additions | | | 27,802 | | | | — | | | | 102 | | | | 366,342 | | | | 24,262 | | | | 143,204 | | | | 561,712 | |
| Transfer from construction-in-progress (Note 7) | | | 129,520 | | | | — | | | | 261,192 | | | | 41,287 | | | | 60,045 | | | | 423,438 | | | | 915,482 | |
| Reclassifications | | | (16,491 | ) | | | — | | | | — | | | | — | | | | (14 | ) | | | 16,505 | | | | — | |
| Disposals | | | (4,989 | ) | | | — | | | | (62,330 | ) | | | — | | | | — | | | | (2,665 | ) | | | (69,984 | ) |
| Depreciation charges | | | (133,249 | ) | | | — | | | | (196,154 | ) | | | (405,905 | ) | | | (174,958 | ) | | | (352,217 | ) | | | (1,262,483 | ) |
| | | |
| Closing net book amount | | | 3,060,875 | | | | — | | | | 12,242,138 | | | | 5,404,060 | | | | 722,667 | | | | 2,618,833 | | | | 24,048,573 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | | 3,808,046 | | | | — | | | | 13,704,120 | | | | 6,945,305 | | | | 1,449,108 | | | | 4,427,459 | | | | 30,334,038 | |
| Accumulated depreciation | | | (740,812 | ) | | | — | | | | (1,461,982 | ) | | | (1,541,245 | ) | | | (726,441 | ) | | | (1,808,578 | ) | | | (6,279,058 | ) |
| Impairment | | | (6,359 | ) | | | — | | | | — | | | | — | | | | — | | | | (48 | ) | | | (6,407 | ) |
| | | |
| Net book amount | | | 3,060,875 | | | | — | | | | 12,242,138 | | | | 5,404,060 | | | | 722,667 | | | | 2,618,833 | | | | 24,048,573 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Buildings | | | Tracks,
bridges and
service
roads | | | Locomotives
and rolling
stock | | | Communications
and signalling
systems | | | Other
machinery and
equipment | | | Total | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| | | | | | |
At January 1, 2010 | | | | | | | | | | | | | | | | | | | | | | | | |
Cost | | | 4,677,195 | | | | 14,437,512 | | | | 6,945,305 | | | | 1,531,255 | | | | 4,449,452 | | | | 32,040,719 | |
Accumulated depreciation | | | (1,055,968 | ) | | | (1,798,597 | ) | | | (1,542,569 | ) | | | (751,348 | ) | | | (1,855,860 | ) | | | (7,004,342 | ) |
Impairment | | | — | | | | — | | | | — | | | | — | | | | (48 | ) | | | (48 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net book amount | | | 3,621,227 | | | | 12,638,915 | | | | 5,402,736 | | | | 779,907 | | | | 2,593,544 | | | | 25,036,329 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | |
Opening net book amount | | | 3,621,227 | | | | 12,638,915 | | | | 5,402,736 | | | | 779,907 | | | | 2,593,544 | | | | 25,036,329 | |
Additions | | | 4,335 | | | | — | | | | 16,272 | | | | 16,595 | | | | 131,947 | | | | 169,149 | |
Transfer from construction-in-progress (Note 7) | | | 153,588 | | | | 212,188 | | | | 15,914 | | | | 185,468 | | | | 170,126 | | | | 737,284 | |
Reclassifications | | | — | | | | — | | | | (492 | ) | | | 4,709 | | | | (4,217 | ) | | | — | |
Disposals | | | (1,868 | ) | | | (47,478 | ) | | | (64,750 | ) | | | (8,619 | ) | | | (4,290 | ) | | | (127,005 | ) |
Depreciation charges | | | (174,066 | ) | | | (205,829 | ) | | | (417,190 | ) | | | (176,582 | ) | | | (375,960 | ) | | | (1,349,627 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Closing net book amount | | | 3,603,216 | | | | 12,597,796 | | | | 4,952,490 | | | | 801,478 | | | | 2,511,150 | | | | 24,466,130 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
At December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | |
Cost | | | 4,832,566 | | | | 14,593,786 | | | | 6,873,927 | | | | 1,522,555 | | | | 4,716,620 | | | | 32,539,454 | |
Accumulated depreciation | | | (1,229,350 | ) | | | (1,995,990 | ) | | | (1,921,437 | ) | | | (721,077 | ) | | | (2,205,422 | ) | | | (8,073,276 | ) |
Impairment | | | — | | | | — | | | | — | | | | — | | | | (48 | ) | | | (48 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net book amount | | | 3,603,216 | | | | 12,597,796 | | | | 4,952,490 | | | | 801,478 | | | | 2,511,150 | | | | 24,466,130 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Year ended December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | |
Opening net book amount | | | 3,603,216 | | | | 12,597,796 | | | | 4,952,490 | | | | 801,478 | | | | 2,511,150 | | | | 24,466,130 | |
Additions | | | 38,871 | | | | — | | | | 33,804 | | | | 25,799 | | | | 168,866 | | | | 267,340 | |
Transfer from construction-in-progress (Note 7) | | | 200,499 | | | | 345,425 | | | | 10,165 | | | | 65,513 | | | | 209,294 | | | | 830,896 | |
Reclassifications | | | (9,318 | ) | | | 1,549 | | | | — | | | | 85 | | | | 7,684 | | | | — | |
Disposals | | | (1,096 | ) | | | (168,927 | ) | | | (19,140 | ) | | | (4,105 | ) | | | (9,348 | ) | | | (202,616 | ) |
Impairment | | | — | | | | — | | | | (1,957 | ) | | | — | | | | (2,752 | ) | | | (4,709 | ) |
Depreciation charges | | | (182,744 | ) | | | (208,503 | ) | | | (402,186 | ) | | | (169,197 | ) | | | (407,331 | ) | | | (1,369,961 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Closing net book amount | | | 3,649,428 | | | | 12,567,340 | | | | 4,573,176 | | | | 719,573 | | | | 2,477,563 | | | | 23,987,080 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
At December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | |
Cost | | | 5,059,618 | | | | 14,756,797 | | | | 6,874,014 | | | | 1,510,971 | | | | 4,994,334 | | | | 33,195,734 | |
Accumulated depreciation | | | (1,410,190 | ) | | | (2,189,457 | ) | | | (2,298,881 | ) | | | (791,398 | ) | | | (2,513,980 | ) | | | (9,203,906 | ) |
Impairment | | | — | | | | — | | | | (1,957 | ) | | | — | | | | (2,791 | ) | | | (4,748 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net book amount | | | 3,649,428 | | | | 12,567,340 | | | | 4,573,176 | | | | 719,573 | | | | 2,477,563 | | | | 23,987,080 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
As ofat December 31, 2009,2011, the ownership certificates of certain buildings (“Building Ownership Certificates”) of the Group with an aggregate carrying value of approximately RMB1,329,751,000 (2008: RMB2,000,621,000)RMB 992,588,000 (December 31, 2010: RMB 916,538,000) had not been obtained by the Group. After consultation made with the Company’s legal counsel, the directors of the Company consider that there is no legal restriction for the Group to apply for and obtain the Building Ownership Certificates and it should not lead to any significant adverse impact on the operations of the Group.
As ofat December 31, 2009,2011, fixed assets of the Group with an aggregate net book value of approximately RMB27,190,000 (2008: RMB26,894,352)RMB 35,482,000 (December 31, 2010: RMB 27,024,000) had been fully depreciated but they were still in use.
F-32
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 7 | | CONSTRUCTION-IN-PROGRESS |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| At January 1 | | | 1,422,635 | | | | 504,775 | |
| Additions | | | 1,449,210 | | | | 1,073,338 | |
| Impairment | | | — | | | | (448 | ) |
| Transfer to fixed assets (Note 6) | | | (2,367,070 | ) | | | (915,482 | ) |
| | | |
| At December 31 | | | 504,775 | | | | 662,183 | |
| | | |
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 662,183 | | | | 752,862 | |
Additions | | | 827,963 | | | | 1,014,201 | |
Disposals | | | — | | | | (24,205 | ) |
Transfer to fixed assets (Note 6) | | | (737,284 | ) | | | (830,896 | ) |
| | | | | | | | |
At December 31 | | | 752,862 | | | | 911,962 | |
| | | | | | | | |
Construction-in-progress as at December 31,2010 and 2011 mainly comprises the construction of new railway stations and improvement on the existing railway equipments in the PRC.
For the year ended December 31, 2011, no interest expenses (2010: Nil) were capitalised in the construction-in-progress balance.
| 8 | | For the year ended December 31, 2009, no interest expenses (2008: RMB13,721,000) were capitalised in the construction-in-progress balance. A capitalisation rate of 6.55% in 2008 per annum was used to determine the amount of borrowing costs eligible for capitalisation. |
| | | | |
| | | RMB’000 | |
| |
At January 1, 20082010 | | | | |
Cost | | | 791,018 | |
Accumulated amortization | | | (183,047 | ) |
| | | |
Net book amount | | | 607,971 | |
| | | |
| | | | |
Year ended December 31, 2008
| | | | |
Opening net book amount | | | 607,971 | |
Amortisation charges | | | (15,603 | ) |
| | | |
Closing net book amount | | | 592,368 | |
| | | |
| | | | |
At December 31, 2008
| | | | |
Cost | | | 791,213 | |
Accumulated amortizationamortisation | | | (198,845214,834 | ) |
| | | | |
Net book amount | | | 592,368 | |
| | | |
| | | | |
Year ended December 31, 2009
| | | | |
Opening net book amount | | | 592,368 | |
Amortisation charges | | | (15,989 | ) |
| | | |
Closing net book amount | | | 576,379 | |
| | | | |
| |
Year ended December 31, 2010 | | | | |
Opening net book amount | | | 576,379 | |
Amortisation charges | | | (15,988 | ) |
| | | | |
At December 31, 2009
Closing net book amount | | | 560,391 | |
| | | | |
| |
At December 31, 2010 | | | | |
Cost | | | 791,213 | |
Accumulated amortizationamortisation | | | (214,834230,822 | ) |
| | | | |
Net book amount | | | 560,391 | |
Net | | | | |
| |
Year ended December 31, 2011 | | | | |
Opening net book amount | | | 576,379560,391 | |
Amortisation charges | | | (15,988 | ) |
As of | | | | |
Closing net book amount | | | 544,403 | |
| | | | |
| |
At December 31, 2009, land use right certificates (“Land Certificates”2011 | | | | |
Cost | | | 791,213 | |
Accumulated amortisation | | | (246,810 | ) of certain parcels of land of the Group with an aggregate area of 1,620,894 square meters (2008: same) had not been obtained. After consultation made with the Company’s legal counsel, the directors consider that there is no legal restriction for the Group to apply for and obtain the Land Certificates and it should not lead to any significant adverse impact on the operations of the Group. |
| | | | |
Net book amount | | | 544,403 | |
| | | | |
F-33
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| | | | |
| | | RMB’000 | |
| |
Year ended December 31, 20082010 and 20092011 | | | | |
Opening net book amount | | | 281,255 | |
Additions | | | — | |
| | | | |
Closing net book amount | | | 281,255 | |
| | | | |
| | | | |
At December 31, 20082010 and 2009 | | | | |
Cost | | | 281,255 | |
Accumulated impairment | | | — | |
| | | | |
Net book amount | | | 281,255 | |
| | | | |
| | The goodwill balance arose from the excess of a purchase consideration paid by the Company over the aggregate fair values of the identifiable assets, liabilities and contingent liabilities of the Yangcheng Railway Business acquired by the Company. |
|
| | Prior to January 1, 2009, the goodwill had been allocated to a cash-generating units (“CGU”) comprising the Yangcheng Railway Business. The recoverable amount of that CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial forecasts prepared by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. |
|
| | No impairment had been recognised by the Group as at December 31, 2008. The key assumptions used for value-in-use calculations as of December 31, 2008 are as follows: |
| | | | |
|
Gross margin | | | 26.85 | % |
Growth rate | | | 2.0 | % |
Discount rate | | | 12.37 | % |
| | | |
| | Management estimated the gross margin and growth rate based on past performance and its expectations for the market development. The growth rate did not exceed the long-term average growth rate for the industry in which the CGU operates and the weighted average growth rate used was consistent with the external sources of information available to management. The discount rate used was pre-tax and reflected specific risks relating to the railroad business segment. |
|
| | On January 1, 2009, the Group integrated the Yangcheng Railway Business with the Group’s railway business in order to improve operation efficiency. As a result, the management considers that the Yangcheng Railway Business and the Group’s remaining railway business (collectively the “Combined Railway Business”) represents the lowest level of cash-generating units within the Group at which goodwill is monitored for internal management purposes. In addition, the Combined Railway Business is not larger than an operating segment determined under with IFRS 8. Therefore, the Group has reallocated the goodwill to the cash generating unit (“CGU”) comprising the Combined Railway Business. |
|
| | The recoverable amount of the CGU is mainly determined based on fair value less costs to sell. The assessment of fair value was performed based on the market price of the Company’s publicly traded shares as of December 31, 2009. |
|
| | Even if the market price of shares of the Company used in the assessment had been 10% lower than the price as of December 31, 2009, the Group still would not be required to recognize any impairment losses against goodwill. |
F-34
Prior to January 1, 2009, the goodwill had been allocated to a cash-generating units (“CGU”) comprising the Yangcheng Railway Business. The recoverable amount of that CGU is determined based on value-in-use calculations and no impairment losses had been recognised prior to January 1, 2009.On January 1, 2009, the Group integrated the Yangcheng Railway Business with the Group’s railway business in order to improve operation efficiency. As a result, the management considers that the Yangcheng Railway Business and the Group’s remaining railway business (collectively the “Combined Railway Business”) represents the lowest level of cash-generating units within the Group at which goodwill is monitored for internal management purposes. In addition, the Combined Railway Business is not larger than an operating segment determined under with IFRS 8. Therefore, the Group has reallocated the goodwill to the cash generating unit (“CGU”) comprising the Combined Railway Business.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated
stated)The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial forecasts prepared by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.
The key assumptions used for value-in-use calculations as at December 31, 2011 are as follows:
| INVESTMENTS IN SUBSIDIARIES |
| | |
| | | Railroad business | |
| |
Gross margin | | | 26.5 | % |
Growth rate | | | 2 | % |
Discount rate | | | 11.21 | % |
| | | | |
Management estimated the gross margin and growth rate based on past performance and its expectations for the market development. The discount rate used is pre-tax and reflect specific risks relating to the railroad business segment.
If the budgeted growth rate used in the value-in-use calculation for the CGU in railroad business had been 10% lower than management’s estimates as at December 31, 2011, the Group would have no impairment recognised against goodwill.
If the estimated pre-tax discount rate applied to the discounted cash flows for the CGU in railroad business had been 1% higher than management’s estimates as at December 31, 2011, the Group would have no impairment recognised against goodwill.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 10 | INVESTMENTS IN SUBSIDIARIES |
| (i) | As ofat December 31, 2009,2011, the Company had direct or indirect interests in the following subsidiaries which are incorporated/established and are operating in the PRC: |
| | | | | | | | | | | | | | | |
| | | Date of | Percentage of equity | | | |
| | | incorporation/ | interest attributable to | | | |
| Name of the entity | | establishment | | the Company | | Paid-in capital | | Principal activities |
| | | | | Directly | | Indirectly | | | | |
| Dongguan Changsheng Enterprise Company | | May 22, 1992 | | | 51 | % | | | — | | | RMB38,000,000 | | Warehousing |
Shenzhen Fu Yuan Enterprise
Development Company(“Fu Yuan”) | | November 1, 1991 | | | 97.3 | % | | | 2.7 | % | | RMB18,500,000 | | Hotel management |
| Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company | | September 11, 1993 | | | 55 | % | | | — | | | RMB10,000,000 | | Cargo loading and unloading, warehousing, freight transportation |
Shenzhen Railway Property
Management Company Limited | | November 13, 2001 | | | — | | | | 100 | % | | RMB3,000,000 | | Property management |
Shenzhen Guangshen Railway Travel
Service Ltd. | | August 16, 1995 | | | 75 | % | | | 25 | % | | RMB2,400,000 | | Travel agency |
Shenzhen Shenhuasheng Storage and
Transportation Company Limited | | January 2, 1985 | | | 41.5 | % | | | 58.5 | % | | RMB2,000,000 | | Warehousing, freight transport and packaging agency services |
Shenzhen Nantie Construction
Supervision Company | | May 8, 1995 | | | 67 | % | | | 9 | % | | RMB3,000,000 | | Supervision of construction projects |
| Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited | | March 7, 2002 | | | — | | | | 100 | % | | RMB2,000,000 | | Catering management |
Shenzhen Railway Station Passenger
Services Company | | December 18, 1986 | | | 100 | % | | | — | | | RMB1,500,000 | | Catering services and sales of merchandise |
Guangshen Railway Station Dongqun
Trade and Commerce Service Company | | November 23, 1992 | | | 100 | % | | | — | | | RMB1,020,000 | | Sales of merchandises |
Guangzhou Tielian Economy
Development Company Limited (“Tielian”) | | December 27, 1994 | | | 50.50 | % | | | — | | | RMB1,000,000 | | Warehousing and freight transport agency services |
Guangzhou Dongqun Advertising
Company Limited | | March 6, 1996 | | | — | | | | 100 | % | | RMB500,000 | | Advertising service |
| Guangzhou Railway Huangpu Service Company | | January 2, 1985 | | | 100 | % | | | — | | | RMB379,000 | | Cargo loading and unloading, warehousing, freight transportation |
| | | | | | | | | | | | | | | | |
Name of the entity | | Date of incorporation/
establishment | | Percentage of equity
interest attributable to
the Company | | | Paid-in capital | | | Principal activities |
| | | | | Directly | | | Indirectly | | | | | | |
| | | | | |
Dongguan Changsheng Enterprise Company Limited | | May 22, 1992 | | | 51 | % | | | — | | | RMB | 38,000,000 | | | Warehousing |
Shenzhen Fu Yuan Enterprise Development Company Limited | | November 1, 1991 | | | 97.3 | % | | | 2.7 | % | | RMB | 18,500,000 | | | Hotel management |
Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited | | September 11, 1993 | | | 55 | % | | | — | | | RMB | 10,000,000 | | | Cargo loading and unloading, warehousing, freight transportation |
Shenzhen Nantie Construction Supervision Company Limited | | May 8, 1995 | | | 67.46 | % | | | 9.2 | % | | RMB | 3,000,000 | | | Supervision of construction projects |
Shenzhen Railway Property Management Company Limited | | November 13, 2001 | | | — | | | | 100 | % | | RMB | 3,000,000 | | | Property management |
Shenzhen Guangshen Railway Travel Service Ltd. | | August 16, 1995 | | | 75 | % | | | 25 | % | | RMB | 2,400,000 | | | Travel agency |
Shenzhen Shenhuasheng Storage and Transportation Company Limited | | January 2, 1985 | | | 41.5 | % | | | 58.5 | % | | RMB | 2,000,000 | | | Warehousing, freight transport and packaging agency services |
Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited | | March 7, 2002 | | | — | | | | 100 | % | | RMB | 2,000,000 | | | Catering management |
Shenzhen Railway Station Passenger Services Company Limited | | December 18, 1986 | | | 100 | % | | | — | | | RMB | 1,500,000 | | | Catering services and sales of merchandise |
Guangshen Railway Station Dongqun Trade and Commerce Service Company Limited | | November 23, 1992 | | | 100 | % | | | — | | | RMB | 1,020,000 | | | Sales of merchandises |
Guangzhou Tielian Economy Development Company Limited | | December 27, 1994 | | | 50.50 | % | | | — | | | RMB | 1,000,000 | | | Warehousing and freight transport agency services |
Guangzhou Railway Huangpu Service Company Limited | | March 15, 1985 | | | 100 | % | | | — | | | RMB | 379,000 | | | Cargo loading and unloading, warehousing, freight transportation |
All the above subsidiaries are limited liability companies.
| (ii) | | All the above subsidiaries are limited liability companies.Subsidiaries disposed |
F-35
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 11 | | INVESTMENTS IN ASSOCIATES |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Share of net assets | | | 150,394 | | | | 149,236 | |
| Less: provision for impairment in value (a) | | | (29,689 | ) | | | (29,689 | ) |
| | | |
| | | | 120,705 | | | | 119,547 | |
| | | |
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Share of net assets | | | 150,350 | | | | 155,609 | |
Less: provision for impairment in value (Note a) | | | (29,689 | ) | | | (29,689 | ) |
| | | | | | | | |
| | | 120,661 | | | | 125,920 | |
| | | | | | | | |
Note a:
The impairment provision at the Group level as at December 31, 20092011 represents provision for full impairment lossesloss in investment in Zengcheng Lihua Stock Company Limited at approximately RMB29,689,000RMB 29,689,000 (December 31, 2010: RMB 29,689,000) made in prior years (“Zengcheng Lihua Provision”).
| | The movement of investments in associates of the Group during the year is as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Beginning of the year | | | 124,350 | | | | 120,705 | |
| Share of results after tax | | | 128 | | | | 773 | |
| Dividends received and receivable from the associates | | | (2,055 | ) | | | (1,931 | ) |
| Reclassifications (Note 16) | | | (1,718 | ) | | | — | |
| | | |
| End of the year | | | 120,705 | | | | 119,547 | |
| | | |
| | As of December 31, 2009, the Group had direct interests in the following companies which are incorporated/established and are operating in the PRC: |
| | | | | | | | | | |
| | | | Percentage of | | | | |
| | Date of | | equity interest | | | | |
| | incorporation/ | | attributable to the | | | | |
Name of the entity | | establishment | | Company | | Paid-in capital | | Principal activities |
|
Shenzhen Guangshen Railway Civil
Engineering Company | | March 1, 1984 | | | 49 | % | | RMB55,000,000 | | Construction of railroad properties |
Zengcheng Lihua | | July 30, 1992 | | | 26.98 | % | | RMB107,054,682 | | Real estate construction, provision of warehousing, cargo uploading and unloading services |
Tiecheng | | May 2, 1995 | | | 49 | % | | RMB543,050,000 | | Properties leasing and trading of merchandise |
| | All the above associates are limited liability companies. |
F-36
The movement of investments in associates of the Group during the year is as follows: | | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
Beginning of the year | | | 119,547 | | | | 120,661 | |
Share of results after tax | | | 1,361 | | | | 5,259 | |
Dividends received and receivable from the associates | | | (247 | ) | | | — | |
| | | | | | | | |
End of the year | | | 120,661 | | | | 125,920 | |
| | | | | | | | |
As at December 31, 2011, the Group had direct interests in the following companies which are incorporated / established and are operating in the PRC:
| | | | | | | | | | | | |
Name of the entity | | Date of incorporation/
establishment | | Percentage of
equity interest
attributable to
the Company | | | Paid-in capital | | | Principal activities |
| | | | |
Shenzhen Guangshen Railway Civil Engineering Company | | March 1, 1984 | | | 49 | % | | RMB | 55,000,000 | | | Construction of railroad properties |
Zengcheng Lihua | | July 30, 1992 | | | 26.98 | % | | RMB | 107,054,682 | | | Real estate construction, provision of warehousing, cargo uploading and unloading services |
Tiecheng | | May 2, 1995 | | | 49 | % | | RMB | 343,050,000 | | | Properties leasing and trading of merchandise |
All the above associates are limited liability companies and they are unlisted companies.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 11 | | INVESTMENTS IN ASSOCIATES (CONTINUED) |
|
| | The Group’s share of the results with its percentage ownership of its principal associates, and its share of the related assets and liabilities, net of applicable impairment provision are as follows: |
| | | | | | | | | | | | | | | | | | | | | |
| | | Assets | | | Liabilities | | | Revenue | | | (Loss)/Profit | | | | |
| | | Rmb’000 | | | Rmb’000 | | | Rmb’000 | | | Rmb’000 | | | % interest held | |
2008 | | | | | | | | | | | | | | | | | | | | |
| Tiecheng (b) | | | 190,783 | | | | 105,051 | | | | 11,158 | | | | (2,018 | ) | | | 49 | % |
| Other associates | | | 172,808 | | | | 137,835 | | | | 128,466 | | | | 2,146 | | | | 27%~49 | % |
| | | | | | | |
| | | | 363,591 | | | | 242,886 | | | | 139,624 | | | | 128 | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
2009 | | | | | | | | | | | | | | | | | | | | |
| Tiecheng (b) | | | 192,703 | | | | 107,732 | | | | 10,813 | | | | (761 | ) | | | 49 | % |
| Other associates | | | 191,666 | | | | 152,229 | | | | 185,668 | | | | 1,534 | | | | 27%~49 | % |
| | | | | | | |
| | | | 384,369 | | | | 259,961 | | | | 196,481 | | | | 773 | | | | | |
| | | | | | | |
The Group’s share of the results with its percentage ownership of its principal associates, and its share of the related assets and liabilities, net of applicable impairment provision are as follows:
| | | | | | | | | | | | | | | | | | |
| | | Assets | | | Liabilities | | | Revenue | | | (Loss)/Profit | | | % interest
held |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | |
| | | | | |
2010 | | | | | | | | | | | | | | | | | | |
Tiecheng | | | 193,651 | | | | 109,526 | | | | 12,045 | | | | (600 | ) | | 49% |
Other associates | | | 207,397 | | | | 210,118 | | | | 302,954 | | | | 1,961 | | | 27%~49% |
| | | | | | | | | | | | | | | | | | |
| | | 401,048 | | | | 319,644 | | | | 314,999 | | | | 1,361 | | | |
| | | | | | | | | | | | | | | | | | |
2011 | | | | | | | | | | | | | | | | | | |
Tiecheng | | | 209,058 | | | | 123,220 | | | | 14,262 | | | | 1,713 | | | 49% |
Other associates | | | 236,145 | | | | 256,137 | | | | 312,093 | | | | 3,546 | | | 27%~49% |
| | | | | | | | | | | | | | | | | | |
| | | 445,203 | | | | 379,357 | | | | 326,355 | | | | 5,259 | | | |
| | | | | | | | | | | | | | | | | | |
| 12 | | Note b: |
|
| | The carrying amount of the Group’s investment in Tiecheng as of December 31, 2009 was approximately RMB84,971,000 (2008: RMB85,732,000). |
|
| | In 1996, Tiecheng and a third party company jointly established a sino-foreign contractual joint venture, Guangzhou Guantian Real Estate Company (“Guangzhou Guantian”), in Guangzhou of the PRC for developing certain properties near a railway station operated by the Group. In 2000, Guangzhou Guantian together with two other parties, namely Guangzhou Guanhua Real Estate Company Limited (“Guangzhou Guanhua”) and Guangzhou Guanyi Real Estate Company Limited (“Guangzhou Guanyi”), undertook to act as joint guarantors (collectively the “Guarantors”) for certain payable balances (the “Payables”) due from Guangdong Guancheng Real Estate Company Limited (“Guangdong Guancheng”) to a third party creditor (the “Creditor”). |
|
| | Due to the fact that Guangdong Guancheng had failed to settle the Payables, as a result, the Guarantors were found to be jointly liable to the Creditor an amount of approximately RMB257,000,000 plus accrued interest (collectively the “Damages”) according to the court verdicts (the “Verdicts”). Guangzhou Guantian made an appeal to overturn the Verdicts. |
|
| | A final judgement on the appeal, which was in favour of Guangzhou Guantian, was obtained from the Supreme People’s Court of the PRC in March 2009. Accordingly, Guangzhou Guantian was not held liable to settle the Damages.DEFERRED TAX ASSETS/(LIABILITIES) |
F-37
| | | | | | | | |
| | | As at
December 31, 2010
RMB’000 | | | As at
December 31, 2011
RMB’000 | |
| | |
Deferred tax assets: | | | | | | | | |
- Deferred tax assets to be recovered after more than 12 months | | | 123,570 | | | | 113,610 | |
- Deferred tax assets to be recovered within 12 months | | | 15,021 | | | | 22,138 | |
| | | | | | | | |
| | | 138,591 | | | | 135,748 | |
| | | | | | | | |
| | |
Deferred tax liabilities: | | | | | | | | |
| | |
- Deferred tax liabilities to crystallise after more than 12 months | | | (25,695 | ) | | | (27,367 | ) |
- Deferred tax liabilities to crystallise within 12 months | | | (275 | ) | | | (302 | ) |
| | | | | | | | |
| | | (25,970 | ) | | | (27,669 | ) |
| | | | | | | | |
| | |
Deferred tax assets (net) | | | 112,621 | | | | 108,079 | |
| | | | | | | | |
The gross movement on the deferred income tax account is as follows:
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 97,307 | | | | 112,621 | |
Charged to the comprehensive income statement (Note 32) | | | 15,314 | | | | (4,542 | ) |
| | | | | | | | |
At December 31 | | | 112,621 | | | | 108,079 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 12 | | DEFERRED TAX ASSETS/LIABILITIES |
|
| | The analysis of deferred tax assets and deferred tax liabilities is as follows:(LIABILITIES) (CONTINUED) |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Deferred tax assets: | | | | | | | | |
| - Deferred tax assets to be recovered after more than 12 months | | | 337,893 | | | | 331,676 | |
| - Deferred tax assets to be recovered within 12 months | | | 18,848 | | | | 14,451 | |
| | | |
| | | | 356,741 | | | | 346,127 | |
| | | |
| | | | | | | | | |
Deferred tax liabilities: | | | | | | | | |
| - Deferred tax liabilities to crystallise after more than 12 months | | | (24,802 | ) | | | (25,435 | ) |
| - Deferred tax liabilities to crystallise within 12 months | | | (201 | ) | | | (262 | ) |
| | | |
| | | | (25,003 | ) | | | (25,697 | ) |
| | | |
| | | | | | | | | |
Deferred tax assets (net) | | | 331,738 | | | | 320,430 | |
| | | |
| | The gross movement on the deferred income tax account is as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| At January 1 | | | 338,921 | | | | 331,738 | |
| Comprehensive income statement charge (Note 31) | | | (7,183 | ) | | | (11,308 | ) |
| | | |
| At December 31 | | | 331,738 | | | | 320,430 | |
| | | |
| | The movement in deferred tax assets and liabilities of the Group during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Charged/ (Credited) | | | | | | | Charged/ (Credited) | | | | |
| | | | | | | to the | | | | | | | to the | | | | |
| | | At January 1, | | | comprehensive | | | | | | | comprehensive | | | | |
| | | 2008 | | | income statement | | | At December 31, 2008 | | | income statement | | | At December 31, 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Deferred tax assets: | | | | | | | | | | | | | | | | | | | | |
| Impairment provision for receivables | | | 20,363 | | | | 1,088 | | | | 21,451 | | | | 73 | | | | 21,524 | |
| Impairment provision for fixed assets | | | 1,928 | | | | (39 | ) | | | 1,889 | | | | 75 | | | | 1,964 | |
| Impairment provision for interests in associates | | | 7,422 | | | | — | | | | 7,422 | | | | — | | | | 7,422 | |
| Difference in accounting base and tax base of fixed assets | | | 257,384 | | | | (3,925 | ) | | | 253,459 | | | | (6,193 | ) | | | 247,266 | |
| Difference in accounting base and tax base of employee benefits obligations | | | 75,159 | | | | (2,639 | ) | | | 72,520 | | | | (4,594 | ) | | | 67,926 | |
| Other | | | — | | | | — | | | | — | | | | 25 | | | | 25 | |
| | | |
| | | | 362,256 | | | | (5,515 | ) | | | 356,741 | | | | (10,614 | ) | | | 346,127 | |
| | | |
F-38
The movement in deferred tax assets and liabilities of the Group during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: | | | | | | | | | | | | | | | | | | | | |
| | | At January 1,
2010
RMB’000 | | | Charged/
(Credited) to the
comprehensive
income
statement
RMB’000 | | | At December 31,
2010 RMB’000 | | | Charged/
(Credited) to the
comprehensive
income
statement
RMB’000 | | | At December 31,
2011 RMB’000 | |
| | | | | |
Deferred tax assets: | | | | | | | | | | | | | | | | | | | | |
Impairment provision for receivables | | | 21,524 | | | | (418 | ) | | | 21,106 | | | | (668 | ) | | | 20,438 | |
Impairment provision for fixed assets and construction-in-progress | | | 1,964 | | | | — | | | | 1,964 | | | | 1,075 | | | | 3,039 | |
Impairment provision for interests in associates | | | 7,422 | | | | — | | | | 7,422 | | | | — | | | | 7,422 | |
Impairment provision for materials and supplies | | | — | | | | — | | | | — | | | | 5,398 | | | | 5,398 | |
Difference in accounting base and tax base in the recognition of fixed assets | | | 24,143 | | | | (703 | ) | | | 23,440 | | | | (727 | ) | | | 22,713 | |
Difference in accounting base and tax base of employee benefits obligations | | | 67,926 | | | | 16,683 | | | | 84,609 | | | | (10,836 | ) | | | 73,773 | |
Loss on disposal of fixed assets | | | — | | | | — | | | | — | | | | 2,915 | | | | 2,915 | |
Other | | | 25 | | | | 25 | | | | 50 | | | | — | | | | 50 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 123,004 | | | | 15,587 | | | | 138,591 | | | | (2,843 | ) | | | 135,748 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | At January 1,
2010
RMB’000 | | | (Credited)/
Charged to the
comprehensive
income
statement
RMB’000 | | | At December 31,
2010 RMB’000 | | | (Credited)/
Charged to the
comprehensive
income
statement
RMB’000 | | | At December 31,
2011 RMB’000 | |
| | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | |
Difference in accounting base and tax base of fixed assets | | | 19,644 | | | | (409 | ) | | | 19,235 | | | | (4 | ) | | | 19,231 | |
Others | | | 6,053 | | | | 682 | | | | 6,735 | | | | 1,703 | | | | 8,438 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 25,697 | | | | 273 | | | | 25,970 | | | | 1,699 | | | | 27,669 | |
| | | | | | | | | | | | | | | | | | | | |
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 12 | | DEFERRED TAX ASSETS/LIABILITIES(LIABILITIES) (CONTINUED) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | (Credited)/ Charged | | | | | | | (Credited)/ Charged | | | | |
| | | | | | | to the | | | | | | | to the | | | | |
| | | At January 1, | | | comprehensive | | | | | | | comprehensive | | | At December | |
| | | 2008 | | | income statement | | | At December 31, 2008 | | | income statement | | | 31, 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | |
| Difference in accounting base and tax base of fixed assets | | | 20,074 | | | | (229 | ) | | | 19,845 | | | | (201 | ) | | | 19,644 | |
| Others | | | 3,261 | | | | 1,897 | | | | 5,158 | | | | 895 | | | | 6,053 | |
| | | |
| | | | 23,335 | | | | 1,668 | | | | 25,003 | | | | 694 | | | | 25,697 | |
| | | |
13 | | DEFERRED EMPLOYEE COSTS |
|
| | As disclosed in Note 2.13, the Group implemented a scheme (the “Scheme”) for selling staff quarters to its employees in 2000. The movement of deferred employee costs is set forth as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
At January 1 | | | | | | | | |
| Cost | | | 271,369 | | | | 243,102 | |
| Accumulated amortization | | | (129,978 | ) | | | (143,488 | ) |
| | | | | | | |
| Net book amount | | | 141,391 | | | | 99,614 | |
| | | | | | | |
| | | | | | | | | |
Year ended December 31 | | | | | | | | |
| Opening net book amount | | | 141,391 | | | | 99,614 | |
| Additions | | | 16,733 | | | | 278 | |
| Amortization (Note 28) | | | (32,005 | ) | | | (20,156 | ) |
| Offset against employee benefits obligation provision (Note 25) | | | (26,505 | ) | | | — | |
| | | | | | | |
| Closing net book amount | | | 99,614 | | | | 79,736 | |
| | | | | | | |
| | | | | | | | | |
At December 31 | | | | | | | | |
| Cost | | | 243,102 | | | | 243,380 | |
| Accumulated amortization | | | (143,488 | ) | | | (163,644 | ) |
| | | | | | | |
| Net book amount | | | 99,614 | | | | 79,736 | |
| | | | | | | |
F-39
Deferred income tax assets are recognised for tax loss carry-forwards and other temporary difference to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of tax losses and other temporary difference amounting to RMB 8,499,000 (December 31, 2010: RMB 5,911,000) that can be carried forward against future taxable income as follows: | | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Tax losses can be carried forward (Note a) | | | 2,271 | | | | 4,728 | |
Deductible temporary differences | | | 3,640 | | | | 3,771 | |
| | | | | | | | |
| | | 5,911 | | | | 8,499 | |
| | | | | | | | |
Note a:
The tax loss carry-forwards in which no deferred income tax assets were recognised amounting to RMB 18,911,000 (2010: RMB 9,872,000) will expire in the following years: | | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at December 31, 2011
RMB’000 | |
| | |
2013 | | | 1,924 | | | | — | |
2014 | | | 3,877 | | | | 3,521 | |
2015 | | | 4,071 | | | | 4,071 | |
2016 | | | — | | | | 11,319 | |
| | | | | | | | |
| | | 9,872 | | | | 18,911 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
1413 | DEFERRED EMPLOYEE COSTS |
The Group implemented a scheme for selling staff quarters to its employees in 2000. The movement of deferred employee costs is set forth as follows:
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
At January 1 | | | | | | | | |
Cost | | | 243,380 | | | | 17,043 | |
Accumulated amortisation | | | (163,644 | ) | | | (11,079 | ) |
| | | | | | | | |
Net book amount | | | 79,736 | | | | 5,964 | |
| | | | | | | | |
| | |
Year ended December 31 | | | | | | | | |
Opening net book amount | | | 79,736 | | | | 5,964 | |
Additions | | | 139 | | | | 145 | |
Write-down (Note a) | | | (69,828 | ) | | | — | |
Amortisation (Note 29) | | | (4,083 | ) | | | (4,309 | ) |
| | | | | | | | |
Closing net book amount | | | 5,964 | | | | 1,800 | |
| | | | | | | | |
| | |
At December 31 | | | | | | | | |
Cost | | | 17,043 | | | | 17,188 | |
Accumulated amortisation | | | (11,079 | ) | | | (15,388 | ) |
| | | | | | | | |
Net book amount | | | 5,964 | | | | 1,800 | |
| | | | | | | | |
Note a:
During the year ended December 31, 2010, the Group conducted an organizational structure reform suggested by the MOR where certain employees were transferred either to different departments of the Group or other railway companies outside the Group. As a result of the reform, the Group considers that it is no longer feasible to keep track of the service records of the employees participating in the housing benefit scheme. Therefore, the Group has decided to eliminate the service period restriction relating to the entire employee’s housing benefit scheme and accordingly wrote down the remaining deferred employee costs during the year ended December 31, 2010.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 14 | FINANCIAL INSTRUMENTS BY CATEGORY |
| | | | | | | | | | | | |
| | | Loans and
receivables
RMB’000 | | | Available- for-sale
RMB’000 | | | Total
RMB’000 | |
Assets as per consolidated balance sheet | | | | | | | | | | | | |
As at December 31, 2010: | | | | | | | | | | | | |
Available-for-sale investments (Note 16) | | | — | | | | 53,826 | | | | 53,826 | |
Long term receivable (Note 17) | | | 35,122 | | | | — | | | | 35,122 | |
Trade and other receivables excluding prepayments (Notes 19 and 20) | | | 662,399 | | | | — | | | | 662,399 | |
Short-term deposits (Note 21) | | | 608,500 | | | | — | | | | 608,500 | |
Cash and cash equivalents (Note 21) | | | 2,659,058 | | | | — | | | | 2,659,058 | |
| | | | | | | | | | | | |
Total | | | 3,965,079 | | | | 53,826 | | | | 4,018,905 | |
| | | | | | | | | | | | |
| | | |
As at December 31, 2011: | | | | | | | | | | | | |
Available-for-sale investments (Note 16) | | | — | | | | 53,826 | | | | 53,826 | |
Long-term receivable (Note 17) | | | 34,108 | | | | — | | | | 34,108 | |
Trade and other receivables excluding prepayments (Notes 19 and 20) | | | 733,419 | | | | — | | | | 733,419 | |
Short-term deposits (Note 21) | | | 3,686,000 | | | | — | | | | 3,686,000 | |
Cash and cash equivalents (Note 21) | | | 1,366,757 | | | | — | | | | 1,366,757 | |
| | | | | | | | | | | | |
Total | | | 5,820,284 | | | | 53,826 | | | | 5,874,110 | |
| | | | | | | | | | | | |
| | | | |
| | | The accounting policies for Other
financial instruments have been applied to the items tabulated below: |
| | | | | | | | | | | | | |
| | | Loans and | | | Available- | | | | |
| | | receivables | | | for-sale investment | | | Total | |
Assets as per consolidated balance sheet | | | | | | | | | | | | |
As at December 31, 2009: | | | | | | | | | | | | |
| Available-for-sale investments (Note 16) | | | — | | | | 53,826 | | | | 53,826 | |
| Long-term receivable (Note 17) | | | 44,229 | | | | — | | | | 44,229 | |
| Trade and other receivables excluding prepayments (Notes 19 and 20) | | | 527,210 | | | | — | | | | 527,210 | |
| Short-term deposits | | | 514,000 | | | | — | | | | 514,000 | |
| Cash and cash equivalents (Note 34(c)) | | | 1,115,651 | | | | — | | | | 1,115,651 | |
| | | |
Total | | | 2,201,090 | | | | 53,826 | | | | 2,254,916 | |
| | | |
| | | | | | | | | | | | | |
As at December 31, 2008: | | | | | | | | | | | | |
| Available-for-sale investments (Note 16) | | | — | | | | 48,326 | | | | 48,326 | |
| Long term receivable (Note 17) | | | 48,136 | | | | — | | | | 48,136 | |
| Trade and other receivables excluding prepayments(Notes 19 and 20) | | | 337,920 | | | | — | | | | 337,920 | |
| Short-term deposits | | | 7,300 | | | | — | | | | 7,300 | |
| Cash and cash equivalents (Note 34(c)) | | | 1,560,952 | | | | — | | | | 1,560,952 | |
| | | |
Total | | | 1,954,308 | | | | 48,326 | | | | 2,002,634 | |
| | | |
| | |
liabilities
RMB’000 | |
| | Other financial | |
| | liabilities | |
Liabilities as per consolidated balance sheet | | | | |
As at December 31, 2009:2010: | | | | |
Bonds payable (Note 25) | | | 3,471,994 | |
Bonds payable (Note 24) | | | 3,465,801 | |
Trade and other payables excluding statutory liabilities (Notes 2627 and 27)28) | | | 1,225,0371,570,044 | |
Dividends payable | | | 54 | |
Payables for fixed assets and construction-in-progress | | | 674,652477,806 | |
| | | | |
Total | | | |
Total
| | | 5,365,4905,519,898 | |
| | | | |
| | | | |
As at December 31, 2008:2011: | | | | |
Bonds payable (Note 25) | | | 3,478,568 | |
Bank borrowings (Note 23) | | | 3,900,000 | |
Trade and other payables excluding statutory liabilities (Notes 2627 and 27)28) | | | 1,189,9121,496,980 | |
Dividends payable | | | 25 | |
Payables for fixed assets and construction-in-progress | | | 764,609814,129 | |
| | | | |
Total | | | |
Total
| | | 5,854,5215,789,702 | |
| | | | |
F-40
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 15 | | CREDIT QUALITY OF FINANCIAL ASSETS |
|
| | The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Trade receivables | | | | | | | | |
| Due from MOR | | | 53,048 | | | | 273,300 | |
| Due from related parties | | | 165,576 | | | | 121,354 | |
| Due from third parties | | | 53,427 | | | | 88,564 | |
| | | |
| | | | 272,051 | | | | 483,218 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Other receivables excluding prepayments | | | | | | | | |
| Due from related parties | | | 8,292 | | | | 7,185 | |
| Due from third parties | | | 57,577 | | | | 36,807 | |
| | | |
| | | | 65,869 | | | | 43,992 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Long-term receivable | | | | | | | | |
| Due from third parties | | | 44,229 | | | | 48,136 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Cash at bank and short-term bank deposits | | | | | | | | |
| Balance placed in listed banks | | | 1,568,098 | | | | 1,629,575 | |
| Balance placed in unlisted banks | | | 104 | | | | 42 | |
| | | |
| | | | 1,568,202 | | | | 1,629,617 | |
| | | |
| | None of the financial assets that are fully performing has been renegotiated in the last year. |
F-41
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at
December 31,
2011
RMB’000 | |
Trade receivables | | | | | | | | |
Due from MOR | | | 24,805 | | | | 18,017 | |
Due from related parties | | | 302,810 | | | | 475,643 | |
Due from third parties | | | 238,631 | | | | 103,120 | |
| | | | | | | | |
| | | 566,246 | | | | 596,780 | |
| | | | | | | | |
| | |
Other receivables excluding prepayments | | | | | | | | |
Due from related parties | | | 3,599 | | | | 13,897 | |
Due from third parties | | | 48,987 | | | | 66,801 | |
| | | | | | | | |
| | | 52,586 | | | | 80,698 | |
| | | | | | | | |
| | |
Long-term receivable | | | | | | | | |
Due from third parties | | | 35,122 | | | | 34,108 | |
| | | | | | | | |
For trade and other receivables, management performs ongoing credit evaluations of its customers/debtors’ financial condition and generally does not require collateral from the customers/debtors.
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31, 2011
RMB’000 | |
| | |
Cash at bank and short-term bank deposits | | | | | | | | |
Placed in listed banks in the PRC | | | 3,264,849 | | | | 5,052,672 | |
Placed in unlisted banks in the PRC | | | 2,647 | | | | 35 | |
| | | | | | | | |
| | | 3,267,496 | | | | 5,052,707 | |
| | | | | | | | |
Cash and short term liquid investments are placed with reputable banks. There was no recent history of default of cash and cash equivalents and short-term deposits from such financial institutions.
None of the financial assets that are fully performing has been renegotiated in the last year.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 16 | | AVAILABLE-FOR-SALE INVESTMENTS |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Beginning of the year | | | 46,608 | | | | 48,326 | |
| Additions | | | — | | | | 7,500 | |
| Disposal | | | — | | | | (2,000 | ) |
| Reclassifications (Note 11) | | | 1,718 | | | | — | |
| | | |
| End of the year | | | 48,326 | | | | 53,826 | |
| | | |
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
Beginning and the end of the year | | | 53,826 | | | | 53,826 | |
| | | | | | | | |
The equity interests held by the Group and Company in each of these investments are all less than 10%. The directors of the Company are of the opinion that no quoted market price in an active market was available for these investments and their fair values could not be reliably measured by alternative valuation methods. In accordance with the provisions under IFRS, the above non-current available-for-sale investments are carried at cost subject to review for impairment loss. As at December 31, 2010 and 2011, no impairment provision was considered necessary by the directors.
| 17 | | The Group’s equity ownership in each of these investments is less than 10%. The directors of the Company are of the opinion that no quoted market price in an active market was available for these investments and their fair values could not be reliably measured by alternative valuation methods. In accordance with the provisions under IFRS, the above non-current available-for-sale investments are carried at cost subject to review for impairment loss. As of December 31, 2009 and 2008, no impairment provision was considered necessary by the directors to write down the carrying amounts of these investments. |
|
17 | | LONG-TERM RECEIVABLE |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Opening net book amount | | | 48,547 | | | | 48,136 | |
| Release of accrued interest (Note 29) | | | 7,589 | | | | 4,093 | |
| Repayment received | | | (8,000 | ) | | | (8,000 | ) |
| | | | | | | |
| Closing net book amount | | | 48,136 | | | | 44,229 | |
| | | | | | | |
| | The long-term receivable balance represents freight service fees receivable from a third party customer which was acquired from Yangcheng Railway Business (as mentioned in Note 1). The original gross value of the receivable is RMB140,400,000. | | | | | | | | | | | | 2010
RMB’000 | | | 2011
RMB’000 | | | | | Opening net book amount | | | 44,229 | | | | 35,122 | | Unwinding of interest accrued (Note 30) | | | 2,893 | | | | 6,986 | | Repayment received | | | (12,000 | ) | | | (8,000 | ) | | | | | | | | | | Closing net book amount | | | 35,122 | | | | 34,108 | | | | | | | | | | |
The long-term receivable balance represents freight service fees receivable from a third party customer which was acquired from Yangcheng Railway Business. On the acquisition date of Yangcheng Railway Business, it was remeasured at its then fair value, which was assessed by the discounted cash flow method, by making reference to the repayment schedule agreed by both parties. |
|
| | The balance is subsequently carried at amortised cost using an average effective interest rate of 6.54%. |
|
| | The balance approximated its fair value as of December 31, 2009 and 2008. |
F-42
The balance is subsequently carried at amortised cost using an average effective interest rate of 6.54%.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Raw materials | | | 139,497 | | | | 137,328 | |
| Accessories | | | 52,794 | | | | 75,108 | |
| Reuseable rail-line track materials | | | 5,741 | | | | 15,277 | |
| Retailing Materials | | | 3,891 | | | | 3,397 | |
| | | |
| | | | 201,923 | | | | 231,110 | |
| | | |
| | The costs of materials and supplies consumed by the Group during the year were recognised as ‘operating expenses’ in the amount of approximately RMB1,713,456,000 (2008: RMB1,733,302,000) | | | | | | | | | | | | As at December 31,
2010
RMB’000 | | | As at
December 31,
2011
RMB’000 | | | | | Raw materials | | | 147,220 | | | | 167,556 | | Accessories | | | 80,764 | | | | 84,540 | | Reusable rail-line track materials | | | 22,645 | | | | 74,148 | | Retailing consumables | | | 4,450 | | | | 4,492 | | | | | | | | | | | | | | 255,079 | | | | 330,736 | | | | | | | | | | |
The costs of materials and supplies consumed by the Group during the year were recognised as ‘operating expenses’ in the amount of approximately RMB 1,922,332,000 (2009: RMB 1,713,456,000 and 2010: RMB 1,792,270,000). As of December 31, 2009 and 2008, there were no inventories stated at net realisable value. |
|
19 | | TRADE RECEIVABLES, NET |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Trade receivables | | | 281,193 | | | | 492,369 | |
| | | |
| Including: receivables from related parties | | | 165,580 | | | | 121,467 | |
| | | |
| Less: Provision for impairment of receivables | | | (9,142 | ) | | | (9,151 | ) |
| | | |
| | | | 272,051 | | | | 483,218 | |
| | | |
| | As of December 31, 2009 and 2008, the Group’s trade receivables are all denominated in RMB. |
|
| | The passenger railroad services are usually transacted on cash basis. The Group does not have formal contractual credit terms agreed with its customers for freight services but the trade receivables are usually settled within a period less than one year. As a result, the Group regards any receivable balance within a one-year credit period being not overdue. As of December 31, 2009 and 2008, the ageing analysis of the outstanding trade receivables was as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Within 1 year | | | 255,961 | | | | 445,668 | |
| Over 1 year but within 2 years | | | 6,333 | | | | 23,241 | |
| Over 2 years but within 3 years | | | 9,445 | | | | 4,931 | |
| Over 3 years | | | 312 | | | | 9,378 | |
| | | |
| | | | 272,051 | | | | 483,218 | |
| | | |
| | As of December 31, 2009 the Group’s trade receivables of approximately RMB35,971,000 (2008: RMB13,378,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: |
F-43
For the year ended December 31, 2011, the Group made provision for write-down of materials and supplies to net realizable values of approximately RMB 21,590,000 (2009 and 2010: Nil). Fair value less costs to sell of these materials and supplies was RMB 1,000,000. The provision had been included in “operating expenses” in the consolidated comprehensive income statement.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 19 | | TRADE RECEIVABLES NET (CONTINUED) |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Over 1 year but within 2 years | | | 3,888 | | | | 21,840 | |
| Over 2 year but within 3 years | | | 9,445 | | | | 4,863 | |
| Over 3 years | | | 45 | | | | 9,268 | |
| | | |
| | | | 13,378 | | | | 35,971 | |
| | | |
| | As of December 31, 2009, the Group’s trade receivables of approximately RMB33,487,000 (2008: RMB11,924,000) had been impaired and provided for. The amount of the provision was approximately RMB9,151,000 as of December 31, 2009 (2008: RMB9,142,000). The impaired receivable balances were mainly related to the provision of freight transportation services. The related customers are in unexpected difficult financial conditions. Nevertheless, it was assessed that a portion of the carrying amount of the receivables would be recovered. The ageing analysis of these receivables is as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Within 1 year | | | 629 | | | | 23,100 | |
| Over 1 year but within 2 years | | | 2,565 | | | | 1,475 | |
| Over 2 years but within 3 years | | | — | | | | 76 | |
| Over 3 years | | | 8,730 | | | | 8,836 | |
| | | |
| | | | 11,924 | | | | 33,487 | |
| | | |
| | Movements on the provision for impairment of trade receivables are as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
At January 1 | | | 6,767 | | | | 9,142 | |
| Provision for impairment loss | | | 2,630 | | | | 368 | |
| Reversal of impairment loss provision | | | (255 | ) | | | (359 | ) |
| | | |
At December 31 | | | 9,142 | | | | 9,151 | |
| | | |
| | The creation and release of provision for impaired receivables have been included in utility and office expenses in the comprehensive income statement. Amounts charged to the allowance account are generally written off against the gross accounts receivable balances when there is no expectation of recovering additional cash. |
|
| | Concentration of credit risk with respect to trade receivables is low due to the fact that the Group has a large number of customers, which are widely dispersed. Accordingly, the directors of the Company believe that there was no additional significant credit risk beyond the amount that had already been provided for impairment losses as at December 31, 2009 and 2008. |
|
| | As of December 31, 2009 and 2008, the carrying amounts of the above trade receivables approximated their fair values. |
F-44
| | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at
December 31, 2011
RMB’000 | |
| | |
Trade receivables | | | 600,070 | | | | 619,243 | |
| | | | | | | | |
Including: receivables from related parties | | | 319,208 | | | | 487,679 | |
| | | | | | | | |
Less: Provision for impairment of receivables | | | (7,251 | ) | | | (5,244 | ) |
| | | | | | | | |
| | | 592,819 | | | | 613,999 | |
| | | | | | | | |
As at December 31, 2010 and 2011, the Group’s trade receivables are all denominated in RMB.
The passenger railroad services are usually transacted on a cash basis. The Group does not have formal contractual credit terms agreed with its customers for freight services but the trade receivables are usually settled within a period less than one year. As a result, the Group regards any receivable balance within a one-year credit period being not overdue. As at December 31, 2010 and 2011, the aging analysis of the outstanding trade receivables is as follows: | | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at
December 31, 2011
RMB’000 | |
| | |
Within 1 year | | | 566,246 | | | | 596,780 | |
Over 1 year but within 2 years | | | 6,417 | | | | 7,245 | |
Over 2 years but within 3 years | | | 6,595 | | | | 1,607 | |
Over 3 years | | | 20,812 | | | | 13,611 | |
| | | | | | | | |
| | | 600,070 | | | | 619,243 | |
| | | | | | | | |
As at December 31, 2011, the Group’s trade receivables of approximately RMB 17,219,000 (December 31, 2010: RMB 26,463,000) were past due but not impaired. These relate to a number of independent customers for whom there is no significant financial difficulty and based on past experience, the overdue amounts can be recovered. The aging analysis of these trade receivables is as follows:
| | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at
December 31, 2011
RMB’000 | |
| | |
Over 1 year but within 2 years | | | 6,270 | | | | 7,245 | |
Over 2 year but within 3 years | | | 6,550 | | | | 1,607 | |
Over 3 years | | | 13,643 | | | | 8,367 | |
| | | | | | | | |
| | | 26,463 | | | | 17,219 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2019 | TRADE RECEIVABLES (CONTINUED) |
As at December 31, 2011, the Group’s trade receivables of approximately RMB 5,244,000 (December 31, 2010: RMB 7,361,000) had been impaired and provided for. The amount of the provision was approximately RMB 5,244,000 as at December 31, 2011 (December 31, 2010: RMB 7,251,000). The impaired receivable balances were mainly related to the provision of freight transportation services. The impaired receivable balances were mainly related to the provision of freight transportation services. The related customers were in unexpected difficult financial conditions. The aging analysis of these receivables is as follows:
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Over 1 year but within 2 years | | | 147 | | | | — | |
Over 2 years but within 3 years | | | 45 | | | | — | |
Over 3 years | | | 7,169 | | | | 5,244 | |
| | | | | | | | |
| | | 7,361 | | | | 5,244 | |
| | | | | | | | |
Movements on the provision for impairment of trade receivables are as follows:
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 9,151 | | | | 7,251 | |
Provision for impairment loss | | | 90 | | | | 110 | |
Reversal of impairment loss provision | | | (1,978 | ) | | | — | |
Receivables written off during the year as uncollectible | | | (12 | ) | | | (2,117 | ) |
| | | | | | | | |
At December 31 | | | 7,251 | | | | 5,244 | |
| | | | | | | | |
The creation and release of provision for impaired receivables have been included in operating expenses in the comprehensive income statement. Amounts charged to the allowance account are generally written off against the gross accounts receivable balances when there is no expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the carrying value mentioned above. The Group does not hold any collateral as security.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 20 | PREPAYMENTS AND OTHER RECEIVABLES NET |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Receivables from third parties | | | 88,573 | | | | 50,457 | |
| Receivables from related parties | | | 8,292 | | | | 21,886 | |
| | | |
| | | | 96,865 | | | | 72,343 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Other receivables | | | 132,461 | | | | 110,983 | |
| Less: Provision for impairment loss (Note a) | | | (66,592 | ) | | | (66,991 | ) |
| | | |
| Other receivables, net | | | 65,869 | | | | 43,992 | |
| Prepayments | | | 30,996 | | | | 28,351 | |
| | | |
| | | | 96,865 | | | | 72,343 | |
| | | |
Note a: Included in the balance was a doubtful debt provision of approximately RMB31,365,000 set up by the Group in prior years, against the principal balance of a deposit (“the Deposit”) placed with a deposit-taking agency, Zeng Cheng City Li Cheng Credit Cooperative (“Li Cheng”). The Group has been unable to recover the Deposit from Li Cheng upon maturity and the Group has initiated several legal proceedings against Li Cheng to enforce the recovery but without success.
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at
December 31,
2011
RMB’000 | |
| | |
Due from third parties | | | 63,273 | | | | 84,977 | |
Due from related parties | | | 15,291 | | | | 59,459 | |
| | | | | | | | |
| | | 78,564 | | | | 144,436 | |
| | | | | | | | |
| | |
| | | As at December 31,
2010
RMB’000 | | | As at
December 31,
2011
RMB’000 | |
| | |
Other receivables | | | 136,798 | | | | 186,634 | |
Less: Provision for impairment loss (Note a) | | | (67,218 | ) | | | (67,214 | ) |
| | | | | | | | |
Other receivables, net (Note b) | | | 69,580 | | | | 119,420 | |
Prepayments (Note c) | | | 8,984 | | | | 25,016 | |
| | | | | | | | |
| | | 78,564 | | | | 144,436 | |
| | | | | | | | |
| (a) | Included in the amount was a provision of approximately RMB 31,365,000 set up by the Group in prior years, against the principal balance of a deposit placed with a deposit-taking agency, Zeng Cheng City Li Cheng Credit Cooperative (“Li Cheng”). The Group has been unable to recover the deposit from Li Cheng upon maturity and the Group has initiated several legal proceedings against Li Cheng in order to enforce recovery but without success. |
| (b) | Other receivables mainly represent miscellaneous deposits and receivables arising during the course of the provision of non-railway transportation services by the Group. |
| (c) | Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operating expenses of the Group. |
|
| | As of December 31, 2009 and 2008, there were no significant balances of other receivables that were past due after the credit period that are not impaired. Provision for impairment loss of approximately RMB405,000 (2008: RMB391,000) has been included in the consolidated comprehensive income statement. |
|
| | Movements on the provision for impairment of other receivables are as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
At January 1 | | | 66,248 | | | | 66,592 | |
| Provision for impairment loss | | | 553 | | | | 498 | |
| Reversal of impairment loss provision | | | (162 | ) | | | (93 | ) |
| Receivables written off during the year as uncollectible | | | (47 | ) | | | (6 | ) |
| | | |
At December 31 | | | 66,592 | | | | 66,991 | |
| | | |
F-45
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 20 | | PREPAYMENTS AND OTHER RECEIVABLES NET (CONTINUED) |
Movements on the provision for impairment of other receivables are as follows:
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 66,991 | | | | 67,218 | |
Provision for impairment loss | | | 234 | | | | — | |
Reversal of impairment loss provision | | | (7 | ) | | | (4 | ) |
| | | | | | | | |
At December 31 | | | 67,218 | | | | 67,214 | |
| | | | | | | | |
The carrying amounts of the Group’s prepayment and other receivables are denominated in the following currencies:
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| RMB | | | 96,336 | | | | 71,349 | |
| HKD | | | 529 | | | | 994 | |
| | | | | | | |
| | | | 96,865 | | | | 72,343 | |
| | | | | | | |
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
RMB | | | 78,015 | | | | 144,192 | |
HKD | | | 549 | | | | 244 | |
| | | | | | | | |
| | | 78,564 | | | | 144,436 | |
| | | | | | | | |
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.
| 21 | | SHARE CAPITAL |
|
| | As of December 31, 2009, the total authorised number of ordinary shares is 7,083,537,000 shares (2008: 7,083,537,000 shares) with a par value of RMB1.00 per share (2008: RMB1.00 per share). These shares are divided into A shares and H shares. Apart from certain A shares held by state-own legal person and legal persons which have sale restrictions (see details below), they rank pari passu against each other.CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS |
| | | | | | | | | | | | | |
| | | Opening | | | | | | | Closing | |
| | | balance at | | | | | | | balance at | |
| | | January 1, | | | | | | | December 31, | |
| | | 2008 | | | Transfers | | | 2008 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Authorised, issued and fully paid: | | | | | | | | | | | | |
| A shares subject to sale restrictions | | | | | | | | | | | | |
| - shares held by state-owned legal person (Note a) | | | 2,904,250 | | | | — | | | | 2,904,250 | |
| | | |
| Listed shares | | | | | | | | | | | | |
| - H shares | | | 1,431,300 | | | | — | | | | 1,431,300 | |
| - A shares | | | 2,747,987 | | | | — | | | | 2,747,987 | |
| | | |
| | | | 4,179,287 | | | | — | | | | 4,179,287 | |
| | | |
| Total | | | 7,083,537 | | | | — | | | | 7,083,537 | |
| | | |
| | | | | | | | | | | | | |
| | | Opening | | | | | | | Closing | |
| | | balance at | | | | | | | balance at | |
| | | January 1, | | | | | | | December 31, | |
| | | 2009 | | | Transfers | | | 2009 | |
| | | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Authorised, issued and fully paid: | | | | | | | | | | | | |
| A shares subject to sale restrictions | | | | | | | | | | | | |
| - shares held by state-owned legal person (Note a) | | | 2,904,250 | | | | (2,904,250 | ) | | | — | |
| - shares held by the National Council for Social Security Fund of the PRC (Note a) | | | — | | | | 274,799 | | | | 274,799 | |
| | | |
| | | | 2,904,250 | | | | (2,629,451 | ) | | | 274,799 | |
| | | |
| Listed shares | | | | | | | | | | | | |
| - H shares | | | 1,431,300 | | | | — | | | | 1,431,300 | |
| - A shares | | | 2,747,987 | | | | 2,629,451 | | | | 5,377,438 | |
| | | |
| | | | 4,179,287 | | | | 2,629,451 | | | | 6,808,738 | |
| | | |
| Total | | | 7,083,537 | | | | — | | | | 7,083,537 | |
| | | |
F-46
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Cash on hand | | | 62 | | | | 50 | |
Cash at bank | | | 2,658,996 | | | | 1,366,707 | |
Term deposits with initial term of over three months (Note a) | | | 608,500 | | | | 3,686,000 | |
| | | | | | | | |
| | | 3,267,558 | | | | 5,052,757 | |
| | | | | | | | |
Note a: The original effective interest rate of time deposits was 3.1% (2010: 1.98%).
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 21 | CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS (CONTINUED) |
The carrying amounts of the cash and cash equivalents and short-term deposits are denominated in the following currencies:
| | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at December 31, 2011
RMB’000 | |
| | |
USD | | | 322 | | | | 261 | |
HKD | | | 103,221 | | | | 106,054 | |
RMB | | | 3,164,015 | | | | 4,946,442 | |
| | | | | | | | |
| | | 3,267,558 | | | | 5,052,757 | |
| | | | | | | | |
| 22 | SHARE CAPITAL (CONTINUED) |
As at December 31, 2011, the total authorised number of ordinary shares is 7,083,537,000 shares (December 31, 2010: 7,083,537,000 shares) with a par value of RMB 1.00 per share (December 31, 2010: RMB 1.00 per share). These shares are divided into A shares and H shares. Apart from certain A shares held by state-own legal person and legal persons which have sale restrictions (see details below), they rank pari passu against each other.
| | | | |
| | | Note a:RMB’000 |
| |
As at December 31, 2010 and 2011 | | In December 2006, the Company | | |
| |
Authorised, issued 2,747,987,000 and fully paid: | | | | |
A shares on the Shanghai Stock Exchange through an initial public offering, among which 1,480,944,000 A shares held by state-owned legal persons were subject to a sale and transfer restriction period of 3-months or one year; In addition, at the time of this A shares offering, Guangzhou Railway Group also undertook to have its 2,904,250,000 A shares be subject to a 3-year sale and transfer restriction period. As of December 31, 2008, the number of shares that were subject to sale and transfer restriction was 2,904,250,000. |
|
| restrictions | | On September 22, 2009, Guangzhou Railway Group transferred 274,798,700 A | | |
- shares held by it to the National Council for Social Security Fund inof the PRC (“SSF”) according to regulations issued by the relevant PRC authorities. Upon this transfer, SSF has voluntarily agreed to extend the transfer restriction period associated with these shares for another three years. Thus, the shares that are still subject to sale and transfer restriction were 274,798,700 as of December 31, 2009. |
|
22 | | OTHER RESERVES |
|
| | | According to the provisions of the articles of association of the Company, the Company shall first set aside 10% of its profit after tax attributable to shareholders as indicated in the Company’s statutory financial statements for the statutory surplus reserve (except where the reserve has reached 50% of the Company’s registered share capital) in each year. The Company may also make appropriations from its profit attributable to shareholders to a discretionary surplus reserve, provided that it is approved by a resolution passed in a shareholders’ general meeting. These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends without the prior approval obtained from the shareholders in a shareholders’ general meeting under specific circumstances.274,799 |
| |
| |
Listed shares | | | | |
- H shares | | | When the statutory surplus reserve is not sufficient to make good for any losses of the Company in previous years, the current year profit attributable to shareholders shall be used to make good the losses before any allocations are set aside for the statutory surplus reserve.1,431,300 |
| |
- A shares | | | The statutory surplus reserve, the discretionary surplus reserve and the share premium account could be converted into share capital of the Company provided it is approved by a resolution passed in a shareholders’ general meeting with the provision that the ending balance of the statutory surplus reserve does not fall below 25% of the registered share capital amount. The Company may either allot newly created shares to the shareholders at the same proportion of the existing number of shares held by these shareholders, or it may increase the par value of each share.5,377,438 |
| |
| | | | |
| | | For the years ended December 31, 2009, 2008 and 2007, the directors proposed the following appropriations to reserves of the Company:6,808,738 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | Percentage | | | RMB’000 | | | Percentage | | | RMB’000 | | | Percentage | | | RMB’000 | |
| Statutory surplus reserve | | | 10 | % | | | 139,778 | | | | 10 | % | | | 121,444 | | | | 10 | % | | | 134,902 | |
| | | | | | | |
| | | | |
Total | | | Because of a change in the rules governing appropriations of statutory reserves of enterprises in the PRC effective from 2008, the Group had made appropriate changes to the reserve balances brought forward from 2007 and before during the year ended 31 December 2008.7,083,537 | |
| | | | |
F-47
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2223 | | OTHER RESERVES (CONTINUED) |
|
| | In accordance with the provisions of the articles of association of the Company, the profit after appropriation to reserves and available for distribution to shareholders shall be the lower of the retained earnings determined under (a) PRC GAAP, (b) IFRS and (c) the accounting standards of the countries in which its shares are listed. Due to the fact that the statutory financial statements of the Company have been prepared in accordance with PRC GAAP, the retained earnings so reported may be different from those reported in the statement of changes in shareholders’ equity prepared under IFRS contained in these financial statements. |
|
23 | | BORROWINGS |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
Non current | | | | | | | | |
| Unsecured bank borrowings | | | 3,390,000 | | | | — | |
| | | | | | | |
| | | | | | | | | |
Current | | | | | | | | |
| Unsecured bank borrowings | | | 510,000 | | | | — | |
| | | | | | | |
Total borrowings | | | 3,900,000 | | | | — | |
| | | | | | | |
| | The borrowings in 2008 were mainly obtained for the financing of settlement of construction related costs of the fourth rail-line of the Group and purchase of locomotives of the Group. The carrying amounts of the Group’s borrowings are all denominated in RMB. |
|
| | The maturity of these borrowings is as follows: |
| | | | | | | | |
| | | 2008 | | 2009 | |
| | | RMB’000 | | RMB’000 | |
| Within one year | | | 510,000 | | | — | |
| Within 1 to 2 years | | | 10,000 | | | — | |
| Within 2 to 5 years | | | 3,380,000 | | | — | |
| | | | | | | | |
| | | | 3,900,000 | | | — | |
| | | | | | | | |
| | The interest rate exposure of the borrowings of the Group is as follows: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | Rmb’000 | | | Rmb’000 | |
| At floating rates (at relevant prevailing interest rates with a maximum range of downward adjustment up to 10%) | | | 3,900,000 | | | | — | |
| | | |
| | The effective interest rate of the bank borrowings for the year ended December 31, 2009 was 5.91% (2008: 6.44%). The carrying amounts of the Group’s borrowings approximated their fair values as all the borrowings are at floating interest rates. |
|
| | As of December 31, 2009, the Group had unutilized banking facilities granted by various financial institutions amounting to approximately RMB1,500,000,000 (2008: RMB9,000,000,000). |
F-48
When the statutory surplus reserve is not sufficient to make good for any losses of the Company in previous years, the current year profit attributable to shareholders shall be used to make good the losses before any allocations are set aside for the statutory surplus reserve.The statutory surplus reserve, the discretionary surplus reserve and the share premium account could be converted into share capital of the Company provided it is approved by a resolution passed in a shareholders’ general meeting with the provision that the ending balance of the statutory surplus reserve does not fall below 25% of the registered share capital amount. The Company may either allot newly created shares to the shareholders at the same proportion of the existing number of shares held by these shareholders, or it may increase the par value of each share.
For the years ended December 31, 2010 and 2011, the directors proposed the following appropriations to reserves of the Company: | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2011 | |
| | | Percentage | | | RMB’000 | | | Percentage | | | RMB’000 | |
| | | | |
Statutory surplus reserve | | | 10 | % | | | 155,826 | | | | 10 | % | | | 181,138 | |
| | | | | | | | | | | | | | | | |
In accordance with the provisions of the articles of association of the Company, the profit after appropriation to reserves and available for distribution to shareholders shall be the lower of the retained earnings determined under (a) PRC GAAP or (b) IFRS. Due to the fact that the statutory financial statements of the Company have been prepared in accordance with PRC GAAP, the retained earnings so reported may be different from those reported in the statement of changes in shareholders’ equity prepared under IFRS contained in these financial statements. As a result, the appropriations to reserves were made based on the retained earnings determined under IFRS in 2010 and 2011, as the amount of retained earnings under IFRS was lower. The main difference between the retained earnings of the Company determined under PRC GAAP and those determined under IFRS was relating to accounting policies in respect of investment in associate adopted under PRC GAAP and IFRS.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 24 | DEFERRED INCOME RELATED TO GOVERNMENT GRANTS |
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 97,120 | | | | 95,093 | |
Additions | | | 1,361 | | | | 4,100 | |
Amortisation | | | (3,388 | ) | | | (3,171 | ) |
| | | | | | | | |
At December 31 | | | 95,093 | | | | 96,022 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | At 1 January | | | | | | | | | | | At 31 December | |
| | | 2009 | | | Addition | | | Amortisation | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| 09 Guangshen Tie MTN1 | | | — | | | | 3,465,476 | | | | 325 | | | | 3,465,801 | |
| | | |
| | The Company issued 3,500,000,000 bonds of medium terms at a nominal value of RMB3,500,000,000 on December 17, 2009. The bonds will reach maturity five years from the issue date at their nominal value of RMB3,500,000,000 and bear an annual interest rate with 4.79%. |
|
| | On the issue dates, the bonds are recognised based on the residual amounts of the principals after deduction of issuance costs of approximately RMB34,524,000. The bonds are subsequently carried at amortised cost using an average effective interest rate of 5.018%. |
|
| | As of December 31, 2009, the fair value of bonds payable approximates to their carrying amount. |
|
25 | | EMPLOYEE BENEFITS OBLIGATIONS |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| At January 1 | | | 377,409 | | | | 288,541 | |
| Additions (Note 28) | | | 85,988 | | | | 1,200 | |
| Interest unwound | | | 3,417 | | | | 6,510 | |
| Payment | | | (151,768 | ) | | | (64,312 | ) |
| Offset against deferred employee costs (Note 13) | | | (26,505 | ) | | | — | |
| | | |
| At December 31 | | | 288,541 | | | | 231,939 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Employee benefits obligations | | | 288,541 | | | | 231,939 | |
| Less: current portion included in accruals and other payables (Note 27) | | | (51,119 | ) | | | (57,172 | ) |
| | | |
| | | | 237,422 | | | | 174,767 | |
| | | |
| | Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had met certain specified criteria and accepted voluntary redundancy were provided with an offer of early retirement benefits, up to their official age of retirement. Such arrangements required specific approval granted by management of the Group. |
|
| | With the acquisition of the Yangcheng Railway Business in 2007, the Group has also assumed certain retirement and termination benefits obligations associated with the operations of Yangcheng Railway Business. The amount mainly includes the redundancy termination benefits similar to those mentioned above, as well as the obligation for funding post-retirement medical insurance premiums of retired employees before the acquisition. |
F-49
| | | | | | | | | | | | | | | | |
| | | At January 1,
2011
RMB’000 | | | Addition
RMB’000 | | | Amortisation
RMB’000 | | | At December 31,
2011 RMB’000 | |
| | | | |
09 Guangshen Tie MTN1 | | | 3,471,994 | | | | — | | | | 6,574 | | | | 3,478,568 | |
| | | | | | | | | | | | | | | | |
The Company issued 3,500,000,000 bonds of medium terms at a nominal value of RMB 3,500,000,000 on December 17, 2009. The bonds will be matured in five years from the issue date at their nominal value of RMB 3,500,000,000 and bear a coupon interest rate with 4.79% per annum.
On the issue date, the bonds were recognised based on the residual amounts of the principal after deduction of issuance costs of approximately RMB 34,524,000. The bonds are subsequently carried at amortised cost using an average effective interest rate of 5.018% per annum.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2526 | | EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED) |
| | | | | | | | |
| | | As at December 31, 2010
RMB’000 | | | As at December 31, 2011
RMB’000 | |
| | |
Employee benefits obligations | | | 269,180 | | | | 237,613 | |
Less: current portion included in accruals and other payables (Note 28) | | | (71,794 | ) | | | (69,337 | ) |
| | | | | | | | |
| | | 197,386 | | | | 168,276 | |
| | | | | | | | |
Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had met certain specified criteria and accepted voluntary redundancy were provided with an offer of early retirement benefits, up to their official age of retirement. Such arrangements required specific approval granted by management of the Group.
With the acquisition of the Yangcheng Railway Business in 2007, the Group has also assumed certain retirement and termination benefits obligations associated with the operations of Yangcheng Railway Business. These obligations mainly include the redundancy termination benefits similar to those mentioned above, as well as the obligation for funding post-retirement medical insurance premiums of retired employees before the acquisition.
The employee benefits obligations have been provided for by the Group at amounts equal to the total expected benefit payments. Where the obligation does not fall due within twelve months, the obligation payable has been discounted using a pre-tax rate that reflects management’s current market assessment of the time value of money and risk specific to the obligation (the discount rate was determined with reference to market yields at the balance sheet date on high quality investments in the PRC).
The movement in the employee benefits obligation over the year is as follows:
| | | | | | | | |
| | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | |
At January 1 | | | 231,939 | | | | 269,180 | |
Additions (Note 29) | | | 100,989 | | | | 3,464 | |
Unwinding of interest (Note 31) | | | 7,609 | | | | 12,066 | |
Payment | | | (71,357 | ) | | | (47,097 | ) |
| | | | | | | | |
At December 31 | | | 269,180 | | | | 237,613 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
|
| 27 | | These obligations have been provided for by the Group at amounts equal to the total expected benefit payments. Where the obligation does not fall due within twelve months, the obligation payable has been discounted using a pre-tax rate that reflects management’s current market assessment of the time value of money and risk specific to the obligation (the discount rate was determined with reference to market yields at the balance sheet date on high quality investments in the PRC). |
|
26 | | TRADE PAYABLES |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Payables to third parties | | | 416,226 | | | | 563,211 | |
| Payables to related parties | | | 224,630 | | | | 228,144 | |
| | | |
| | | | 640,856 | | | | 791,355 | |
| | | |
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Payables to third parties | | | 1,028,951 | | | | 864,413 | |
Payables to related parties | | | 145,693 | | | | 200,328 | |
| | | | | | | | |
| | | 1,174,644 | | | | 1,064,741 | |
| | | | | | | | |
The aging analysis of trade payables was as follows:
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Within 1 year | | | 628,405 | | | | 782,594 | |
| Over 1 year but within 2 years | | | 10,565 | | | | 7,589 | |
| Over 2 years but within 3 years | | | 66 | | | | 211 | |
| Over 3 years | | | 1,820 | | | | 961 | |
| | | |
| | | | 640,856 | | | | 791,355 | |
| | | |
27 | | ACCRUALS AND OTHER PAYABLES |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Payables to third parties | | | 652,857 | | | | 728,070 | |
| Payables to related parties | | | 137,903 | | | | 75,046 | |
| | | |
| | | | 790,760 | | | | 803,116 | |
| | | |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Deposits received for construction projects | | | 264,922 | | | | 155,030 | |
| Other taxes payable | | | 44,256 | | | | 152,763 | |
| Salary and welfare payables | | | 70,806 | | | | 80,388 | |
| Other deposits received | | | 43,688 | | | | 68,124 | |
| Advance received from customers | | | 58,237 | | | | 61,934 | |
| Deposits received from ticketing agencies | | | 50,297 | | | | 22,441 | |
| Employee benefits obligations (Note 25) | | | 51,119 | | | | 57,172 | |
| Housing maintenance fund | | | 17,286 | | | | 17,177 | |
| Other payables | | | 190,149 | | | | 188,087 | |
| | | |
| | | | 790,760 | | | | 803,116 | |
| | | |
F-50
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Within 1 year | | | 1,164,732 | | | | 979,116 | |
Over 1 year but within 2 years | | | 8,343 | | | | 83,080 | |
Over 2 years but within 3 years | | | 554 | | | | 1,093 | |
Over 3 years | | | 1,015 | | | | 1,452 | |
| | | | | | | | |
| | | 1,174,644 | | | | 1,064,741 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| 28 | | LABOURACCRUALS AND BENEFITSOTHER PAYABLES |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | Rmb’000 | | | Rmb’000 | |
| Wages and salaries | | | 1,388,342 | | | | 1,661,325 | | | | 1,835,560 | |
| Provision for medical and other employee benefits | | | 325,438 | | | | 306,282 | | | | 326,018 | |
| Contributions to a defined contribution pension scheme (a) | | | 220,856 | | | | 260,014 | | | | 316,640 | |
| Contributions to the housing scheme (b) | | | 75,861 | | | | 92,095 | | | | 125,325 | |
| Amortisation of deferred staff cost (Note 13) | | | 24,339 | | | | 32,005 | | | | 20,156 | |
| Retirement benefit obligations (Note 25) | | | 65,256 | | | | 85,988 | | | | 1,200 | |
| | | |
| | | | 2,100,092 | | | | 2,437,709 | | | | 2,624,899 | |
| | | |
(a) | | Pension scheme |
|
| | All the full-time employees of the Group are entitled to join a statutory pension scheme. The employees would receive pension payments equal to their basic salaries payable upon their retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are to be made monthly to a government agency based on 26% of the standard salary set by the provincial government, of which 18% is borne by the Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency is responsible for the pension liabilities due to the employees upon their retirement. The Group accounts for these contributions on an accrual basis and charges the related contributions to income in the year to which the contributions relate. |
|
(b) | | Housing scheme |
|
| | In accordance with the PRC housing reform regulations, the Group is required to make contributions to a State-sponsored Housing Fund at 7% or 13% of the salaries of the employees. At the same time, the employees are also required to make a contribution at 7% or 13% of the salaries out of their payroll. The employees are entitled to claim the entire sum of the fund under certain specified withdrawal circumstances. The Group have no further legal or constructive obligation for housing benefits of these employees beyond the above contributions made. |
|
29 | | OTHER INCOME, NET |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Interest income from bank | | | 61,063 | | | | 24,321 | | | | 24,440 | |
| Unwinding of interest accrued on long-term receivable (Note 17) | | | — | | | | 7,589 | | | | 4,093 | |
| Write-back of long outstanding payables | | | — | | | | 21,562 | | | | 1,932 | |
| Loss on disposal of fixed assets | | | (3,335 | ) | | | (31,542 | ) | | | (41,635 | ) |
| Loss on disposal of subsidiaries | | | (1,063 | ) | | | (188 | ) | | | — | |
| Dividends income on available-for-sale investments | | | — | | | | (2,420 | ) | | | (3,000 | ) |
| Others | | | (6,849 | ) | | | (1,619 | ) | | | (5,595 | ) |
| | | |
| | | | 49,816 | | | | 17,703 | | | | (19,765 | ) |
| | | |
F-51
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Due to third parties | | | 745,256 | | | | 851,099 | |
Due to related parties | | | 38,228 | | | | 30,348 | |
| | | | | | | | |
| | | 783,484 | | | | 881,447 | |
| | | | | | | | |
| | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Deposits received for construction projects | | | 153,634 | | | | 124,258 | |
Other taxes payable | | | 162,072 | | | | 166,930 | |
Salary and welfare payables | | | 86,130 | | | | 104,612 | |
Other deposits received | | | 96,848 | | | | 126,549 | |
Advances received from customers | | | 68,085 | | | | 108,329 | |
Deposits received from ticketing agencies | | | 23,338 | | | | 30,006 | |
Employee benefits obligations (Note 26) | | | 71,794 | | | | 69,337 | |
Housing maintenance fund | | | 15,927 | | | | 16,089 | |
Other payables | | | 105,656 | | | | 135,337 | |
| | | | | | | | |
| | | 783,484 | | | | 881,447 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
3029 | | FINANCE COSTSLABOUR AND BENEFITS |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Interest expenses | | | 173,515 | | | | 221,488 | | | | 227,178 | |
| Less: interest capitalized in construction-in-progress (Note 7) | | | (79,438 | ) | | | (13,721 | ) | | | — | |
| Amortization of bonds payable (Note 24) | | | — | | | | — | | | | 325 | |
| Interest unwound for employee benefit obligations (Note 25) | | | (1,988 | ) | | | 3,417 | | | | 6,510 | |
| Bank charges | | | 3,930 | | | | 2,311 | | | | 2,227 | |
| Net foreign exchange losses | | | 2,468 | | | | (26 | ) | | | 47 | |
| | | |
| | | | 98,487 | | | | 213,469 | | | | 236,287 | |
| | | |
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Wages and salaries | | | 1,835,560 | | | | 2,004,467 | | | | 2,399,028 | |
Provision for medical and other employee benefits | | | 326,018 | | | | 365,689 | | | | 447,283 | |
Contributions to a defined contribution pension scheme (a) | | | 316,640 | | | | 342,002 | | | | 373,200 | |
Contributions to the housing scheme (b) | | | 125,325 | | | | 148,661 | | | | 160,571 | |
Write-down and amortisation of deferred employee costs (Note 13) | | | 20,156 | | | | 73,911 | | | | 4,309 | |
Employee benefits obligations (Note 26) | | | 1,200 | | | | 100,989 | | | | 3,464 | |
| | | | | | | | | | | | |
| | | 2,624,899 | | | | 3,035,719 | | | | 3,387,855 | |
| | | | | | | | | | | | |
31(a) | | INCOME TAX EXPENSE |
|
| | Before 2008, enterprises established in the Shenzhen Special Economic Zone of the PRC were subject to income tax at a reduced preferential rate of 15% as compared with the standard income tax rate for PRC companies of 33%. The Company and the subsidiaries located in Shenzhen were subject to income tax rate of 15%, while those subsidiaries located outside Shenzhen were subject to income tax rate of 33%. |
|
| | On March 16, 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”), which became effective on January 1, 2008. Under the new CIT Law, the enterprise income tax rate was changed from 33% to 25% from January 1, 2008 onwards. While the enterprise income tax rate applicable to the Company and the subsidiaries located in Shenzhen would increase gradually to 25% within 5 years from 2008 to 2012. In 2009, 2008 and 2007, the applicable income tax rate is 20%, 18% and 15% respectively. |
|
| | An analysis of the current year taxation charges is as follows:Pension scheme |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Current income tax | | | 255,749 | | | | 270,111 | | | | 337,613 | |
| Deferred income tax (Note 12) | | | (23,400 | ) | | | 7,183 | | | | 11,308 | |
| | | |
| | | | 232,349 | | | | 277,294 | | | | 348,921 | |
| | | |
All the full-time employees of the Group are entitled to join a statutory pension scheme. The employees would receive pension payments equal to their basic salaries payable upon their retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are to be made monthly to a government agency based on 26% of the standard salary set by the provincial government, of which 18% is borne by the Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency is responsible for the pension liabilities due to the employees upon their retirement. The Group accounts for these contributions on an accrual basis and charges the related contributions to expense in the year to which the contributions relate.
| (b) | | The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:Housing scheme |
F-52
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
3130 | | INCOME TAX EXPENSE (CONTINUED)OTHER EXPENSES, NET |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Profit before tax | | | 1,668,551 | | | | 1,501,662 | | | | 1,712,379 | |
| | | |
| | | | | | | | | | | | | |
| Tax calculated at the statutory rate of 20% (2008 and 2007: 18% and 15%) | | | 250,283 | | | | 270,299 | | | | 342,476 | |
| Effect of change of income tax rate on deferred taxation previously recognised (Note a) | | | (30,413 | ) | | | — | | | | — | |
| Effect of tax rates differentials | | | 1,137 | | | | (3,652 | ) | | | (996 | ) |
| Effect of share of results of associates | | | (275 | ) | | | (23 | ) | | | (155 | ) |
| Effect of expenses not deductible for tax purposes | | | 5,462 | | | | 10,686 | | | | 7,411 | |
| Effect of income not subject to tax | | | — | | | | (436 | ) | | | (590 | ) |
| Tax losses for which no deferred tax asset was recognized | | | 380 | | | | 420 | | | | 775 | |
| Reversal of deferred tax assets due to changes in tax law | | | 5,775 | | | | — | | | | — | |
| | | |
| Income tax expense | | | 232,349 | | | | 277,294 | | | | 348,921 | |
| | | |
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Loss on disposal of fixed assets and construction-in-progress | | | 42,053 | | | | 95,849 | | | | 129,153 | |
Interest income from banks | | | (24,440 | ) | | | (41,510 | ) | | | (95,612 | ) |
Dividend income on available-for-sale investments | | | (3,000 | ) | | | (3,853 | ) | | | (4,263 | ) |
Amortisation of government grants | | | (3,375 | ) | | | (3,388 | ) | | | (3,171 | ) |
Unwinding of interest accrued on long-term receivable (Note 17) | | | (4,093 | ) | | | (2,893 | ) | | | (6,986 | ) |
Write-back of long outstanding payables | | | (1,932 | ) | | | (537 | ) | | | (66 | ) |
Others | | | 11,595 | | | | 3,392 | | | | 6,731 | |
| | | | | | | | | | | | |
| | | 16,808 | | | | 47,060 | | | | 25,786 | |
| | | | | | | | | | | | |
| 31 | Note a: | | As explained above, the corporate income tax rate for enterprises in the PRC was changed with effect from January 1, 2008. As a result of such a change in enacted tax rate, additional deferred tax assets at approximately RMB30,413,000 was recognized by the Group in the comprehensive income statement within “income tax expenses” for the year ended December 31, 2007. |
|
| | | In addition, additional deferred tax asset at approximately RMB92,021,000 arising from the change in enacted tax rate was recognized in the share premium by the Group for the year ended December 31, 2007 due to temporary differences arising from fixed assets contributed by GEDC into the Group during the Restructuring of the Group (see Note 1).FINANCE COSTS |
| | The effective tax rate was 20.4% (2008 and 2007: 18.5% and 13.9%). The increase was mainly caused by the increase in statutory tax rate as explained above. |
32 | | EARNINGS PER SHARE |
|
| | The calculation of basic earnings per share is based on the net profit for the year attributable to ordinary shareholders of approximately RMB1,364,521,000 (2008 and 2007: RMB1,224,129,000 and RMB1,431,415,000), divided by the weighted average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2008 and 2007: 7,083,537,000 shares). There were no dilutive potential ordinary shares during both years. |
F-53
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Interest expenses | | | 227,178 | | | | 167,650 | | | | 167,650 | |
Unwinding of interest for employee benefit obligations (Note 26) | | | 6,510 | | | | 7,609 | | | | 12,066 | |
Amortisation of bonds payable (Note 25) | | | 325 | | | | 6,193 | | | | 6,574 | |
Bank charges | | | 2,227 | | | | 2,325 | | | | 1,901 | |
Net foreign exchange losses | | | 47 | | | | 2,395 | | | | 2,779 | |
| | | | | | | | | | | | |
| | | 236,287 | | | | 186,172 | | | | 190,970 | |
| | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
3332 | | DIVIDENDS |
|
| | The dividends paid in 2009, 2008 and 2007 were RMB566,685,000 (RMB 0.08 per share), RMB566,683,000 (RMB 0.08 per share) and RMB566,711,000 respectively.INCOME TAX EXPENSE |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Final, proposed, of RMB0.08 (2007 and 2008: RMB0.08) per ordinary share | | | 566,683 | | | | 566,683 | | | | 566,683 | |
| | | |
Before 2008, enterprises established in the Shenzhen Special Economic Zone of the PRC were subject to income tax at a reduced preferential rate of 15% as compared with the standard income tax rate for PRC companies of 33%. The Company and the subsidiaries located in Shenzhen were subject to income tax rate of 15%, while those subsidiaries located outside Shenzhen were subject to income tax rate of 33%.
On March 16, 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”), which became effective on January 1, 2009. Under the new CIT Law, the enterprise income tax rate was changed from 33% to 25% from January 1, 2009 onwards. While the enterprise income tax rate applicable to the Company and the subsidiaries located in Shenzhen would increase gradually to 25% within 5 years from 2009 to 2012. In 2009, 2010 and 2011, the applicable income tax rate was 20%, 22% and 24% respectively.
An analysis of the current year taxation charges is as follows:
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Current income tax | | | 337,613 | | | | 455,703 | | | | 571,423 | |
Deferred income tax (Note 12) | | | 5,790 | | | | (15,314 | ) | | | 4,542 | |
| | | | | | | | | | | | |
| | | 343,403 | | | | 440,389 | | | | 575,965 | |
| | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 32 | INCOME TAX EXPENSE (CONTINUED) |
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Profit before tax | | | 1,684,790 | | | | 1,925,307 | | | | 2,378,337 | |
| | | | | | | | | | | | |
| | | |
Tax calculated at the statutory rate of 24% (2009 and 2010: 20% and 22%) | | | 336,958 | | | | 423,567 | | | | 570,801 | |
Effect of tax rates differentials | | | (996 | ) | | | 118 | | | | 42 | |
Effect of income not subject to tax | | | (745 | ) | | | (1,147 | ) | | | (2,285 | ) |
Effect of expenses not deductible for tax purposes | | | 7,411 | | | | 16,955 | | | | 5,237 | |
Tax losses for which no deferred tax asset was recognised | | | 775 | | | | 896 | | | | 2,717 | |
Utilisation of previously unrecognised tax losses | | | — | | | | — | | | | (547 | ) |
| | | | | | | | | | | | |
Income tax expense | | | 343,403 | | | | 440,389 | | | | 575,965 | |
| | | | | | | | | | | | |
The effective tax rate was 24.2% (2009 and 2010: 20.4% and 22.9%). The increase was mainly caused by the increase in statutory tax rate as explained above.
The calculation of basic earnings per share is based on the net profit for the year attributable to equity holders of approximately RMB 1,804,107,000 (2009 and 2010: RMB 1,342,450,000 and RMB 1,486,062,000), divided by the weighted average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2009 and 2010: 7,083,537,000 shares). There were no dilutive potential ordinary shares during both years.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
The dividends paid to the ordinary shareholders of the Group in 2009, 2010 and 2011 were, RMB 566,683,000 (RMB 0.08 per share), RMB 566,683,000 (RMB 0.08 per share) and RMB 637,518,000 (RMB 0.09 per share) respectively.
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Final, proposed, of RMB 0.10 (2009: RMB 0.08 2010: RMB 0.09) per ordinary share | | | 566,683 | | | | 637,518 | | | | 708,354 | |
| | | | | | | | | | | | |
At a meeting of the directors held on April 22, 2010,March 27, 2012, the directors proposed a final dividend of RMB0.08RMB 0.10 per ordinary share for the year ended December 31, 2009,2011, which is subject to the approval by the shareholders in general meeting. This proposed dividend has not been reflected as a dividend payable in the financial statements, but will be reflected as an appropriation of retained earnings for the year ending December 31, 2009.
2012.GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3435 | | CASH FLOW GENERATED FROM OPERATIONS |
| (a) | | Reconciliation from profit attributable to shareholders to cash generated from operations: |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
| Profit before income tax: | | | 1,668,551 | | | | 1,501,662 | | | | 1,712,379 | |
| Adjustments for: | | | | | | | | | | | | |
| Depreciation of fixed assets | | | 1,017,100 | | | | 1,172,042 | | | | 1,262,144 | |
| Impairment of fixed assets and construction-in-progress | | | 6,359 | | | | — | | | | 448 | |
| Amortization of leasehold land payments (Note 8) | | | 16,021 | | | | 15,603 | | | | 15,989 | |
| Loss on disposal of fixed assets (Note 29) | | | 3,335 | | | | 31,542 | | | | 41,635 | |
| Amortization of deferred employee costs (Note 13) | | | 24,339 | | | | 32,005 | | | | 20,156 | |
| Recognition of employee benefits obligations (Note 25) | | | 65,256 | | | | 85,988 | | | | 1,200 | |
| Interest unwound for employee benefit obligations (Note 25) | | | (1,988 | ) | | | 3,417 | | | | 6,510 | |
| Share of results of associates (Note 11) | | | (1,830 | ) | | | (128 | ) | | | (773 | ) |
| Loss on disposal of subsidiaries (Note 29) | | | 1,063 | | | | 188 | | | | — | |
| Dividend income on available-for-sale investment (Note 29) | | | — | | | | (2,420 | ) | | | (3,000 | ) |
| (Reversal of provision)/provision for doubtful accounts | | | (8,260 | ) | | | 2,766 | | | | 414 | |
| Write-back of long outstanding of payables (Note 29) | | | — | | | | (21,562 | ) | | | (1,932 | ) |
| Amortization of bonds payable (Note 24) | | | — | | | | — | | | | 325 | |
| Interest expenses (Note 30) | | | 173,515 | | | | 207,767 | | | | 227,178 | |
| Interest income (Note 29) | | | (61,063 | ) | | | (31,910 | ) | | | (28,533 | ) |
| | | |
| | | | | | | | | | | | | |
| Operating profit before working capital changes | | | 2,902,398 | | | | 2,996,960 | | | | 3,254,140 | |
| Increase/(decrease) in trade receivables | | | 115,407 | | | | (143,200 | ) | | | (211,176 | ) |
| Increase in materials and supplies | | | (31,637 | ) | | | (48,249 | ) | | | (29,187 | ) |
| Decrease/(increase) in prepayments and other receivables | | | (46,175 | ) | | | 51,335 | | | | 24,117 | |
| Decrease in long-term receivable | | | 6,000 | | | | 8,000 | | | | 8,000 | |
| (Decrease)/increase in trade payables | | | (174,639 | ) | | | 95,438 | | | | 150,499 | |
| Decrease in employee benefits obligations | | | (112,526 | ) | | | (126,179 | ) | | | (64,312 | ) |
| Decrease in accrued expenses and other payables | | | (228,139 | ) | | | (660,420 | ) | | | (23,706 | ) |
| | | |
| Cash generated from operations | | | 2,430,689 | | | | 2,173,685 | | | | 3,108,375 | |
| | | |
F-54
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Profit before income tax: | | | 1,684,790 | | | | 1,925,307 | | | | 2,378,337 | |
Adjustments for: | | | | | | | | | | | | |
Depreciation of fixed assets (Note 6) | | | 1,292,690 | | | | 1,349,210 | | | | 1,369,961 | |
Impairment of fixed assets | | | 448 | | | | — | | | | 4,709 | |
Impairment of materials and supplies | | | — | | | | — | | | | 21,590 | |
Amortisation of leasehold land payments (Note 8) | | | 15,989 | | | | 15,988 | | | | 15,988 | |
Loss on disposal of fixed assets and construction-in-progress (Note 30) | | | 42,053 | | | | 95,849 | | | | 129,153 | |
Write-down and amortisation of deferred employee costs (Note 13) | | | 20,156 | | | | 73,911 | | | | 4,309 | |
Recognition of employee benefits obligations (Note 26) | | | 1,200 | | | | 100,989 | | | | 3,464 | |
Unwinding of interest for employee benefit obligations (Note 26) | | | 6,510 | | | | 7,609 | | | | 12,066 | |
Share of results of associates (Note 11) | | | (773 | ) | | | (1,361 | ) | | | (5,259 | ) |
Dividend income on available-for-sale investments (Note 30) | | | (3,000 | ) | | | (3,853 | ) | | | (4,263 | ) |
Provision (reversal of provision) for doubtful accounts | | | 414 | | | | (1,661 | ) | | | 106 | |
Write-back of long outstanding of payables (Note 30) | | | (1,932 | ) | | | (537 | ) | | | (66 | ) |
Amortisation of bonds payable (Note 25) | | | 325 | | | | (6,193 | ) | | | 6,574 | |
Amortisation of government grants (Note 24) | | | (3,375 | ) | | | (3,388 | ) | | | (3,171 | ) |
Interest expenses | | | 227,178 | | | | 167,650 | | | | 167,650 | |
Interest income | | | (28,533 | ) | | | (44,403 | ) | | | (67,955 | ) |
| | | | | | | | | | | | |
| | | |
Operating profit before working capital changes | | | 3,254,140 | | | | 3,675,117 | | | | 4,033,193 | |
Increase in trade receivables | | | (211,176 | ) | | | (107,701 | ) | | | (9,599 | ) |
Increase in materials and supplies | | | (29,187 | ) | | | (23,969 | ) | | | (28,976 | ) |
Decrease/(increase) in prepayments and other receivables | | | 24,117 | | | | (6,448 | ) | | | (24 | ) |
Decrease in long-term receivable | | | 8,000 | | | | 12,000 | | | | 8,000 | |
Increase/(decrease) in trade payables | | | 150,499 | | | | 383,289 | | | | (113,660 | ) |
Decrease in employee benefits obligations | | | (64,312 | ) | | | (71,357 | ) | | | (44,785 | ) |
(Decrease)/increase in accrued expenses and other payables | | | (23,706 | ) | | | 28,451 | | | | 88,934 | |
| | | | | | | | | | | | |
Cash generated from operations | | | 3,108,375 | | | | 3,889,382 | | | | 3,933,083 | |
| | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
3435 | | CASH FLOW GENERATED FROM OPERATIONS (CONTINUED) |
|
| (b) | | In the cash flow statement, proceeds from disposal of property, plantfixed assets and equipmentconstruction-in-progress comprise: |
| | | | | | | | | | | | | |
| | | | 2007 | | | | 2008 | | | | 2009 | |
| | | | RMB’000 | | | | RMB’000 | | | | RMB’000 | |
| Net book amount (Note 6) | | | 113,236 | | | | 42,900 | | | | 69,984 | |
| Receivable arising from disposal of property, plant and equipment | | | (26,200 | ) | | | — | | | | — | |
| Loss on disposal of fixed assets | | | (3,335 | ) | | | (31,542 | ) | | | (41,635 | ) |
| | | |
| Proceeds from disposal of fixed assets | | | 83,701 | | | | 11,358 | | | | 28,349 | |
| | | |
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Net book amount (Note 6 and Note 7) | | | 70,402 | | | | 127,005 | | | | 226,821 | |
Receivable arising from disposal of fixed assets | | | — | | | | — | | | | (28,913 | ) |
Transfer to inventories | | | — | | | | — | | | | (68,198 | ) |
Loss on disposal of fixed assets and construction-in-progress | | | (42,053 | ) | | | (95,849 | ) | | | (129,153 | ) |
| | | | | | | | | | | | |
Proceeds from disposal of fixed assets and construction-in-progress | | | 28,349 | | | | 31,156 | | | | 557 | |
| | | | | | | | | | | | |
| (c) | | Analysis of the balance of cash and cash equivalents: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Cash at bank and in hand | | | 618,877 | | | | 432,651 | |
| Short-term deposits with original maturities no more than three months (Note a) | | | 942,075 | | | | 683,000 | |
| | | |
| | | | 1,560,952 | | | | 1,115,651 | |
| | | |
| | | | | | | | | | | | |
| | | As at
December 31,
2009
RMB’000 | | | As at
December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | | |
Cash at bank and in hand | | | 432,651 | | | | 729,058 | | | | 1,076,757 | |
Short-term deposits with original maturities no more than three months | | | 683,000 | | | | 1,930,000 | | | | 290,000 | |
| | | | | | | | | | | | |
| | | 1,115,651 | | | | 2,659,058 | | | | 1,366,757 | |
| | | | | | | | | | | | |
| 36 | Note a: | Short term time deposits with maturities of no more than three months consist of deposits denominated in RMB. The original effective interest rate of RMB deposits is 1.35% (2008: 1.35%).CONTINGENCY |
35 | | CONTINGENCY |
|
| | There were no significant contingent liabilities as at the date of approval of these financial statements. |
|
36 | | COMMITMENTS |
|
(a) | | Capital commitments |
|
| | As of December 31, 2009 and 2008, the Group had the following capital commitments which are authorized but not contracted for, and contracted but not provided for: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Authorised but not contracted for | | | 2,530,325 | | | | 1,357,620 | |
| | | |
| | | | | | | | | |
| Contracted but not provided for | | | 390,691 | | | | 248,630 | |
| | | |
| | A substantial amount of these commitments as of December 31, 2009 is related to the reform of stations or facilities relating to the existing railway line of the Group. The related financing would be from self generated operating cash flow and bank facilities. |
F-55
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
| (a) | COMMITMENTS (CONTINUED)Capital commitments |
|
As at December 31, 2010 and 2011, the Group had the following capital commitments which are authorized but not contracted for, and contracted but not provided for:
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Authorised but not contracted for | | | 1,744,503 | | | | 1,717,800 | |
| | | | | | | | |
| | |
Contracted but not provided for | | | 99,313 | | | | 283,880 | |
| | | | | | | | |
A substantial amount of these commitments is related to the reform of stations or facilities relating to the existing railway line of the Company. The related financing would be from self generated operating cash flow.
| (b) | | Operating lease commitments |
In connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement on November 15, 2004 with Guangzhou Railway Group for leasing the land use rights associated with the land on which the acquired assets of Yangcheng Railway Business are located. The agreement became effective upon the completion of the acquisition on January 1, 2007 and the remaining lease term is 20 years, renewable at the discretion of the Company. According to the terms of the agreement, the rental for such lease would be agreed by both parties every year with a maximum amount not exceeding RMB 74,000,000 per year. During the year ended December 31, 2011, the related lease rental paid and payable was RMB 53,600,000 (2009 and 2010: RMB 51,200,000 and RMB 52,400,000).
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
|
| 38 | | In connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement on November 15, 2004 with Guangzhou Railway Group for leasing the land use rights associated with the land on which the acquired assets of Yangcheng Railway Business are located. The agreement became effective upon the completion of the acquisition on January 1, 2007 and the remaining lease term is 20 years, renewable at the discretion of the Company. According to the terms of the agreement, the rental for such lease would be agreed by both parties every year with a maximum amount not exceeding RMB74,000,000 per year. During the year ended December 31, 2009, the related lease rental paid and payable was RMB51,200,000 (2008: 50,000,000). |
|
37 | | RELATED PARTY TRANSACTIONS |
|
| | Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. |
|
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
| (a) | | Related parties that control the Company or are controlled by the Company: |
|
| | See Note 10 for the subsidiaries. |
|
| | None of the shareholders is the controlling entity of the Company. |
|
See Note 10 for the subsidiaries.
None of the shareholders is the controlling entity of the Company.
| (b) | | Nature of the principal related parties that do not control/are not controlled by the Company: |
| | |
| Name of related parties | | Relationship with the CompanyGroup |
Substantial
| |
Single largest shareholder and fellowits subsidiaries | | |
Guangzhou Railway Group | | SubstantialSingle largest shareholder |
Guangmeishan Railway Company Limited | | Subsidiary of the single largest shareholder |
Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company (“GEDC”) | | Subsidiary of the single largest shareholder |
Guangzhou Railway Group YangCheng Railway Enterprise Development
Company (“Yangcheng Railway”) | | Subsidiary of the substantialsingle largest shareholder |
GuangmeishanGuangzhou Railway Material Supply Company Limited (“Guangmeishan”) | | Subsidiary of the substantialsingle largest shareholder |
Guangzhou Railway (Group) Guangshen RailwayEngineer Construction Enterprise
Development Company (“GEDC”) | | Subsidiary of the substantialsingle largest shareholder |
GuangzhouYangcheng Construction Company of YangCheng Railway Material SupplyEnterprise Development Company | | Subsidiary of the substantialsingle largest shareholder |
Guangzhou Railway EngineerReal Estate Construction Enterprise Development
Company (“Engineer Construction Enterprise”) | | Subsidiary of the substantialsingle largest shareholder |
Yuehai Railway Company Limited | | Subsidiary of the substantialsingle largest shareholder |
Shichang Railway Company Limited | | Subsidiary of the substantialsingle largest shareholder |
CYTS GuangdongGuangzhou Railway Shenzhen Co., Ltd. (“CYTS”)Station Service Centre | | Subsidiary of the substantialsingle largest shareholder |
Changsha Railway Construction Company Limited | | Subsidiary of the substantialsingle largest shareholder |
Guangdong Pearl River Delta Inter-citySanmao Railway Traffic Co., Ltd.Company Limited | | Subsidiary of the substantialsingle largest shareholder |
Guangdong Sanmao Enterprise DevelopmentGuangzhou Qingda Transportation Company Limited | | Subsidiary of the substantialsingle largest shareholder |
Guangzhou Qingda TransportationYuetie Operational Development Company Limited | | Subsidiary of the substantialsingle largest shareholder |
Yangcheng Construction Company of YangChengGuangzhou Railway Rolling Stock Works | | Subsidiary of the substantialsingle largest shareholder |
Guangzhou Yuetie Operational Development Company | | Subsidiary of the substantial shareholder |
Guangzhou Railway Real Estate Construction Company | | Subsidiary of the substantial shareholder |
Guangzhou Railway Group Diversified Management Development Center | | Subsidiary of the substantial shareholder |
Guangzhou Railway Rolling Stock Works | | Subsidiary of the substantial shareholder |
Foreign Economic & Trade Development Corporation of Guangzhou Railway group | | Subsidiary of the substantialsingle largest shareholder |
Shenzhen Guangshen Railway Living Service Centre | | Subsidiary of the single largest shareholder |
Guangzhou Yangcheng Living Service Centre | | Subsidiary of the single largest shareholder |
Pajiangkou Stone Pit | | Subsidiary of the single largest shareholder |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 38 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| (b) | Nature of the principal related parties that do not control/are not controlled by the Company (continued): |
| | |
| Name of related parties | | Relationship with the Group |
| |
Guangdong Tieqing International Travel Agency Company Limited | | Subsidiary of the single largest shareholder |
Guangdong Sanmao Enterprise Development Company Limited | | Subsidiary of the single largest shareholder |
Guangdong Guangzhu Intercity Rail Transportation Company Limited | | Subsidiary of the single largest shareholder |
Guangshengang Passenger Special Line Company Limited | | Subsidiary of the single largest shareholder |
| |
Associates of the Group | | |
Guangzhou Tiecheng EnterpriseZengcheng Lihua Stock Company Limited | | Associate of the Group |
Zengcheng Lihua StockGuangzhou Tiecheng Enterprise Company Limited | | Associate of the Group |
Shenzhen Guangshen Railway Civil Engineering Company | | Associate of the Group |
F-56
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
37 | |
Other related party | | RELATED PARTY TRANSACTIONS (CONTINUED) |
Guangzhu Railway Company Limited | | Entity supervised by the chairman of the Company |
| (c) | | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with related parties: |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Provide Services | | | | | | | | | | | | |
| Revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (i) (Note 38) | | | (1,005,505 | ) | | | (1,038,611 | ) | | | (1,069,053 | ) |
| Provision of repairing services for cargo trucks of Guangzhou Railway Group and its subsidiaries (ii) | | | (175,284 | ) | | | (148,322 | ) | | | (220,000 | ) |
| Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (iii) | | | (183,989 | ) | | | (265,998 | ) | | | (208,860 | ) |
| | | |
| | | | | | | | | | | | | |
Receive Services | | | | | | | | | | | | |
| Cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (i) (Note 38) | | | 1,105,890 | | | | 1,218,138 | | | | 1,530,479 | |
| Provision of train transportation services provided by Guangzhou Railway Group and its subsidiaries (iv) | | | 213,388 | | | | 235,303 | | | | 347,969 | |
| Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway (v) | | | 429,655 | | | | 440,602 | | | | 369,257 | |
| Provision of construction services of Guangzhou Railway Group and its subsidiaries (ii) | | | 61,950 | | | | 259,787 | | | | 241,753 | |
| Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iii) | | | 104,111 | | | | 115,568 | | | | 115,455 | |
| Provision of turnkey service by CYTS (vi) | | | 50,569 | | | | 15,280 | | | | — | |
| | | |
| | | | | | | | | | | | | |
Purchase | | | | | | | | | | | | |
| Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (vii) | | | 577,352 | | | | 398,230 | | | | 631,149 | |
| | | |
| | | | | | | | | | | | | |
Others | | | | | | | | | | | | |
| Payment for the acquisition of net assets of Yangcheng Railway Business | | | 4,873,332 | | | | — | | | | — | |
| Operating lease rental paid to Guangzhou Railway Group for the leasing of land use rights (Note 36(b)) | | | 50,000 | | | | 50,000 | | | | 51,200 | |
| | | |
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
Provide Services | | | | | | | | | | | | |
Revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (i) (Note 39) | | | 1,069,053 | | | | 1,115,028 | | | | 1,155,391 | |
Revenue collected through Guangzhou Railway Group for provision of repairing services for cargo trucks ((ii) and (vii)) | | | 220,000 | | | | 191,369 | | | | — | |
| | | | | | | | | | | | |
- For Guangzhou Railway Group and its subsidiaries | | | 17,984 | | | | 6,173 | | | | — | |
- For other companies | | | 202,016 | | | | 185,196 | | | | — | |
| | | | | | | | | | | | |
Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (ii) | | | 208,860 | | | | 347,849 | | | | 407,220 | |
Revenue from railway operation service provided to Guangzhou Railway Group’s subsidiaries (iv) | | | — | | | | — | | | | 273,460 | |
| | | | | | | | | | | | |
| | | |
Receive Services | | | | | | | | | | | | |
Cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (i) (Note 39) | | | 1,530,479 | | | | 1,367,444 | | | | 1,488,224 | |
Provision of train transportation services by Guangzhou Railway Group and its subsidiaries (iii) | | | 347,969 | | | | 428,288 | | | | 637,099 | |
Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (ii) | | | 115,455 | | | | 171,154 | | | | 260,118 | |
Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway (iv) | | | 369,257 | | | | 144,750 | | | | 115,190 | |
Provision of construction services by Guangzhou Railway Group and its subsidiaries (ii) | | | 241,753 | | | | 115,075 | | | | 224,892 | |
| | | | | | | | | | | | |
| | | |
Purchase | | | | | | | | | | | | |
Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (vi) | | | 631,149 | | | | 431,988 | | | | 709,014 | |
| | | | | | | | | | | | |
| | | |
Sales | | | | | | | | | | | | |
Sales of materials and supplies to Guangzhou Railway Group and its subsidiaries (v) | | | 2,520 | | | | 17,827 | | | | 23,696 | |
| | | | | | | | | | | | |
| | | |
Others | | | | | | | | | | | | |
Operating lease rental paid to Guangzhou Railway Group for the leasing of land use rights (Note 37(b)) | | | 51,200 | | | | 52,400 | | | | 53,600 | |
Compensation of loss on construction-in-progress from Guangzhu Railway Company Limited | | | — | | | | — | | | | 17,039 | |
| | | | | | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 38 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| (c) | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with related parties (continued): |
(i) | (i) | Such revenues/charges are determined by the MOR based on its standard charges applied on a nationwide basis. |
| |
| (ii) | | The service charges are determined based on a pricing scheme set by the MOR or by reference to current market prices with guidance provided by the MOR. |
|
(iii) | | The service charges are determined based on a pricing scheme set by the MOR or based on negotiation between the contracting parties with reference to full cost principle. |
| |
(iv) | (iii) | The service charges are determined based on negotiation between the contracting parties with reference to full cost principle. |
| |
(v) | (iv) | The service charges are levied based on contract prices determined based on cost plus a profit margin and explicitly agreed between both contract parties. |
| |
(vi) | | The prices are determined based on mutual negotiation between the contracting parties. |
|
(vii) | (v) | The prices are determined based on mutual negotiation between the contracting parties with reference to full cost principle. |
| (vi) | The prices are determined based on mutual negotiation between the contracting parties with reference to purchase price plus a management fee. |
| (vii) | Such revenue collected through Guangzhou Railway Group for provision of repairing services for cargo trucks was collected through MOR from 2011. |
| (d) | On December 31, 2011, the Company acquired certain assets and liabilities from Guangzhou Railway Group and three subsidiaries of it (namely Yangcheng Railway Enterprise Development Company, Shenzhen Guangshen Railway Living Service Centre and Guangzhou Yangcheng Living Service Centre) with a total consideration of RMB 14,920,000. |
| (e) | Key management compensation |
|
| | Key management includes directors (executive and non-executive), general manager and vice general managers, assistant of general manager, chief financial officer and the company Secretary. During the year ended December 31, 2009 and 2008, the compensation paid or payable to key management for employee services is RMB3,562,597 and RMB3,340,844 |
Key management includes directors (executive and non-executive), general manager and vice general managers, assistant of general manager, chief financial officer and the company Secretary. During the year ended December 31, 2009, 2010 and 2011, the compensation paid or payable to key management for employee services is RMB 3,562,597, RMB 4,093,000 and RMB 4,140,000 respectively.
F-57
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
3738 | | RELATED PARTY TRANSACTIONS (CONTINUED) |
|
(e) | (f) | As ofat December 31, 20092010 and 2008,2011, the Group had the following material balances maintained with related parties: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Due from Guangzhou Railway Group | | | 155,034 | | | | 113,195 | |
| | | |
| — Trade receivables (i) | | | 150,066 | | | | 108,341 | |
| — Other receivables | | | 4,968 | | | | 4,854 | |
| | | |
| | | | | | | | | |
| Due to Guangzhou Railway Group | | | (35,209 | ) | | | (63,396 | ) |
| | | |
| — Trade receivables (i) | | | (25,787 | ) | | | (53,955 | ) |
| — Other payables (iii) | | | (9,422 | ) | | | (9,441 | ) |
| | | |
| | | | | | | | | |
| Due from subsidiaries of Guangzhou Railway Group | | | 16,815 | | | | 28,733 | |
| | | |
| — Trade receivables | | | 15,354 | | | | 13,126 | |
| Less: impairment provision | | | (4 | ) | | | (113 | ) |
| — Other receivables | | | 1,465 | | | | 15,720 | |
| | | |
| | | | | | | | | |
| Due to subsidiaries of Guangzhou Railway Group | | | (302,206 | ) | | | (230,260 | ) |
| | | |
| — Trade payables (ii) | | | (198,843 | ) | | | (174,054 | ) |
| — Other payables (iii) | | | (103,363 | ) | | | (56,206 | ) |
| | | |
| | | | | | | | | |
| Due from an associate | | | 2,019 | | | | 1,312 | |
| | | |
| — Trade receivables | | | 160 | | | | — | |
| — Other receivables | | | 14,171 | | | | 13,624 | |
| Less: impairment provision (v) | | | (12,312 | ) | | | (12,312 | ) |
| | | |
| | | | | | | | | |
| Due to an associate | | | (25,118 | ) | | | (9,534 | ) |
| | | |
| — Trade payables | | | — | | | | (135 | ) |
| — Other payables (iv) | | | (25,118 | ) | | | (9,399 | ) |
| | | |
| | | | | | | | | |
| Prepayment for fixed assets and construction-in-progress | | | 31,012 | | | | — | |
| | | |
| — Guangzhou Railway Group and its subsidiaries | | | 31,012 | | | | — | |
| | | |
| | | | | | | | | |
| Payables for fixed assets and construction-in-progress | | | (125,487 | ) | | | (101,316 | ) |
| | | |
| — Guangzhou Railway Group and its subsidiaries | | | (95,498 | ) | | | (101,316 | ) |
| — Associates | | | (29,989 | ) | | | — | |
| | | |
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Due from Guangzhou Railway Group | | | 299,400 | | | | 309,159 | |
| | | | | | | | |
- Trade receivables (i) | | | 292,504 | | | | 296,449 | |
- Prepayments and other receivables | | | 6,896 | | | | 12,710 | |
| | | | | | | | |
| | |
Due to Guangzhou Railway Group | | | 18,408 | | | | 37,374 | |
| | | | | | | | |
- Trade payables (i) | | | 9,694 | | | | 36,105 | |
- Other payables | | | 8,714 | | | | 1,269 | |
| | | | | | | | |
| | |
Due from subsidiaries of Guangzhou Railway Group | | | 33,629 | | | | 219,188 | |
| | | | | | | | |
- Trade receivables | | | 26,682 | | | | 191,230 | |
Less: impairment provision | | | (19 | ) | | | (19 | ) |
- Prepayments and other receivables | | | 6,966 | | | | 27,977 | |
| | | | | | | | |
| | |
Due to subsidiaries of Guangzhou Railway Group | | | 158,522 | | | | 187,499 | |
| | | | | | | | |
- Trade payables (ii) | | | 135,999 | | | | 164,221 | |
- Other payables (iii) | | | 22,523 | | | | 23,278 | |
| | | | | | | | |
| | |
Due from an associate | | | 1,451 | | | | 1,733 | |
| | | | | | | | |
- Trade receivables | | | 22 | | | | — | |
- Prepayments and other receivables | | | 13,741 | | | | 14,045 | |
Less: impairment provision (v) | | | (12,312 | ) | | | (12,312 | ) |
| | | | | | | | |
| | |
Due to an associate | | | 6,991 | | | | 5,803 | |
| | | | | | | | |
- Trade payables | | | — | | | | 2 | |
- Other payables (iv) | | | 6,991 | | | | 5,801 | |
| | | | | | | | |
| | |
Due from Guangzhu Railway Company Limited | | | — | | | | 17,039 | |
| | | | | | | | |
- Prepayments and other receivables | | | — | | | | 17,039 | |
| | | | | | | | |
| | |
Payables for fixed assets and construction-in-progress | | | 96,328 | | | | 145,416 | |
| | | | | | | | |
- Guangzhou Railway Group and its subsidiaries | | | 77,423 | | | | 123,107 | |
- Associates | | | 18,905 | | | | 22,309 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 38 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| (f) | As at December 31, 2010 and 2011, the Group had the following material balances maintained with related parties (continued): |
(i) | (i) | The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou Railway Group mainly represented service fees and charges payable and receivable balances arising from the provision of passenger transportation and cargo forwarding businesses jointly with these related parties within the PRC as described in 37(c)38(c)(i). |
| |
| (ii) | | The trade balances due to subsidiaries of Guangzhou Railway Group mainly represent payables arising from unsettled fees for purchase of materials and provision of other services according to various service agreements entered into between the Group and the related parties (see Note 37(c)38(c) above). |
F-58
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
37 | | RELATED PARTY TRANSACTIONS (CONTINUED) |
|
(e) | | As of December 31, 2009 and 2008, the Group had the following material balances maintained with related parties (continued): |
| | (iii) | | The non-trade balances due to subsidiaries of Guangzhou Railway Group mainly represent the deposits of related parties maintained in the deposit-taking centre of the Company. |
|
| | (iv) | | The non-trade balance due to an associate mainly represents the payable balance arising from unsettled balance for the construction project services undertaken by an associate. |
|
| | (v) | | Full impairmentImpairment loss provision set up against a receivable balance due from Zengcheng Lihua, which was brought forward from prior years. |
As at December 31, 2010 and 2011, all the balances maintained with related parties are unsecured, non-interest bearing and are repayable on demand.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
| 39 | | As of December 31, 2009 and 2008, all the balances maintained with related parties are unsecured, non-interest bearing and are repayable on demand. |
|
38 | | TRANSACTIONS WITH MOR |
|
| | MOR is the controlling entity of the Company’s substantial shareholder (i.e. Guangzhou Railway Group). In addition, it is the government authority which governs and monitors the railway business centrally within the PRC. The Company works in cooperation with the MOR and other railway companies owned and controlled by the MOR for the operation of certain long distance passenger train and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger and freight transportation businesses are collected and settled by the MOR according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also instructed by the MOR and settled by the MOR based on its systems. |
|
MOR is the controlling entity of the Company’s single shareholder (i.e. Guangzhou Railway Group). In addition, it is the government authority which governs and monitors the railway business centrally within the PRC. The Company works in cooperation with the MOR and other railway companies owned and controlled by the MOR for the operation of certain long distance passenger train and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger and freight transportation businesses are collected and settled by the MOR according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also instructed by the MOR and settled by the MOR based on its systems.
| (a) | | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with MOR: |
| | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Recurring Transactions: | | | | | | | | | | | | |
Income | | | | | | | | | | | | |
| Revenue collected from the MOR, including revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (Note 37(c)) | | | | | | | | | | | | |
| — Passenger transportation | | | (5,318,369 | ) | | | (6,196,596 | ) | | | (6,542,333 | ) |
| — Freight transportation | | | (906,516 | ) | | | (841,240 | ) | | | (752,561 | ) |
| — Railway network usage and services | | | (2,659,529 | ) | | | (2,738,425 | ) | | | (3,105,654 | ) |
| | | |
| | | | | | | | | | | | | |
Charges and Payments | | | | | | | | | | | | |
| Services charges allocated from the MOR, including cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (Note 37(c)) | | | 1,990,297 | | | | 2,179,407 | | | | 2,404,966 | |
| Operating lease rentals paid/payable to the MOR | | | 156,628 | | | | 176,880 | | | | 162,651 | |
| | | |
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
Recurring Transactions: | | | | | | | | | | | | |
Income | | | | | | | | | | | | |
Revenue collected from the MOR | | | | | | | | | | | | |
- Passenger transportation | | | 6,542,333 | | | | 7,569,570 | | | | 7,769,115 | |
- Freight transportation | | | 752,561 | | | | 835,216 | | | | 831,860 | |
- Railway network usage and services | | | 3,105,654 | | | | 3,115,911 | | | | 3,254,511 | |
- Repairing services for cargo trucks(i) | | | — | | | | — | | | | 221,386 | |
| | | | | | | | | | | | |
| | | |
Charges and Payments | | | | | | | | | | | | |
Services charges allocated from the MOR for equipment lease and services | | | 2,404,966 | | | | 2,487,995 | | | | 2,721,039 | |
Operating lease rentals paid/payable to the MOR | | | 162,651 | | | | 178,917 | | | | 200,693 | |
| | | | | | | | | | | | |
| (i) | | The service charges are determined based on a pricing scheme set by the MOR or by reference to current market prices with guidance provided by theSuch revenue was collected through Guangzhou Railway Group before 2011. Starting 2011, such revenue was collected through MOR. |
F-59
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
38 | | TRANSACTIONS WITH MOR (CONTINUED) |
|
| (b) | | As ofat December 31, 20092010 and 2008,2011, the Group had the following material balances maintained with MOR: |
| | | | | | | | | |
| | | 2008 | | | 2009 | |
| | | RMB’000 | | | RMB’000 | |
| Due from MOR | | | | | | | | |
| — Trade receivables | | | 53,048 | | | | 273,300 | |
| | | |
| | | | | | | | |
| | | As at December 31,
2010
RMB’000 | | | As at December 31,
2011
RMB’000 | |
| | |
Due from MOR | | | | | | | | |
- Trade receivables | | | 24,805 | | | | 18,017 | |
| | |
Due to MOR | | | | | | | | |
- Trade payables | | | 166,271 | | | | 193,856 | |
| | | | | | | | |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
Save as already disclosed in the notes to the financial statements, the Group had no other significant subsequent event.
With the change of industry practice due to the revised guidance issued by MOR, management revisited the presentation of the sub-categories of revenue in 2011, which resulted in a change in classification of sub-category items of revenue shown on the comprehensive income statement. Accordingly, certain 2009 and 2010 comparative figures have been reclassified to conform to the current year presentation. Details of the reclassifications are set forth below:
| | | Save as already disclosed in the notes to the financial statements, the Group had no other significant subsequent event. |
|
40 | | COMPARATIVE FIGURES |
|
| | Certain 2008 comparative figures have been reclassified as follows: |
|
| (a) | | Amount due from/Revenue arising from provision of services provided to related parties which were separately disclosedother railway companies in prior year have beenrelation to passenger transportation (railway operation services and etc.) was recorded within the “Trade receivables, net”, amounting“Passenger” category of revenue in the prior years; such revenue has been reclassified to RMB165,576,000, “Prepaymentsthe “Railway network usage and other receivables, net”, amountingtransportation related services” category of revenue. |
| (b) | Revenue arising from provision of services provided to RMB8,292,000, “Trade payables”, amountingother railway companies in relation to RMB224,630,000 and “Accrualsthose cargo trucks previously unscheduled was recorded within the “Freight” category of revenue in the prior years; such revenue has been reclassified to the “Railway network usage and other payables” , amounting to RMB137,903,000 respectively on balance sheet in order to conform with current year presentation.transportation related services” category of revenue. |
| |
(b)(c) | | Amount of equity which were recorded within “Other Reserve” in prior year haveThe category “Railway network usage and services” has been disclosed separatelyrenamed as “Share premium”, “Other reserves”,“Railway network usage and “Retained earnings” onother transportation related services” to properly include the balance sheet in order to conform with current year presentation.new activities resulted from the above re-classifications. |
F-60The effect of the change is tabulated below:
| | | | | | | | | | | | |
| | | 2009
RMB’000 | | | 2010
RMB’000 | | | 2011
RMB’000 | |
| | | |
Decrease in passenger revenue | | | 354,058 | | | | 726,981 | | | | 955,563 | |
Decrease in freight revenue | | | 45,267 | | | | 45,475 | | | | 45,921 | |
Increase in railway network usage and other transportation related services revenue | | | (399,325 | ) | | | (772,456 | ) | | | (1,001,484 | ) |
| | | | | | | | | | | | |
Management considered that the above reclassifications would enhance the comparability of the 2009 and 2010 financial statements with that of the current year. As the reclassifications have no effect on the earliest balance sheets, management considered that it would be sufficient for the Group merely to disclose the fact.
F-75
