Exhibit 99.1
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019
AND REPORT OF INDEPENDENT AUDITOR
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1
To theBoard of Directors of Shanghai Secco Petrochemical Company Limited
We have audited the accompanying financial statements of Shanghai Secco Petrochemical Company Limited (the “Company”), which comprise the balance sheet as of December 31, 2019, and the related income statement, statements of changes in owners’ equity and cash flows for the year then ended.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China.
Emphasis of Matter
Accounting Standards for Business Enterprises in the People’s Republic of China vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 13 to the financial statements.
Other Matter
The accompanying balance sheets of the Company as of December 31, 2018, and the related income statements, statements of changes in equity and cash flows for the years then ended are presented for purposes of complying with Rule3-09 of SEC RegulationS-X; however, Rule3-09 does not require the 2018 and 2017 financial statements to be audited and they are, therefore, not covered by this report.
/s/PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
April 28, 2020
3
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
BALANCE SHEETS
AS AT 31 DECEMBER 2018* AND 2019
(All amounts in RMB Yuan unless otherwise stated)
ASSETS | Note | 31 December 2018* | 31 December 2019 | |||||||||
Current assets | ||||||||||||
Cash at bank and on hand | 6(1) | 6,817,297,044 | 9,368,483,670 | |||||||||
Notes receivable | 6(2) | 254,641,593 | - | |||||||||
Accounts receivable | 6(3),7(4) | 363,401,901 | 363,786,102 | |||||||||
Financial assets at fair value through other comprehensive income | 6(4) | - | 275,684,637 | |||||||||
Other receivables | 6(5) | 1,577,398 | 1,539,770 | |||||||||
Advances to suppliers | 6(6) | 214,617,842 | 204,393,114 | |||||||||
Inventories | 6(7) | 1,883,646,333 | 1,589,123,859 | |||||||||
Other current assets | 6(8) | 2,171,548 | 55,112,826 | |||||||||
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Total current assets | 9,537,353,659 | 11,858,123,978 | ||||||||||
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Non-current assets | ||||||||||||
Fixed assets | 6(9) | 4,080,410,509 | 3,994,925,579 | |||||||||
Construction in progress | 6(10) | 611,555,581 | 264,025,605 | |||||||||
Right-of-use assets | 6(11) | - | 520,027 | |||||||||
Intangible assets | 6(12) | 650,132,652 | 666,710,315 | |||||||||
Long-term prepaid expenses | 6(13) | 144,089,447 | 94,109,669 | |||||||||
Deferred tax assets | 6(14) | 32,744,412 | - | |||||||||
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Totalnon-current assets | 5,518,932,601 | 5,020,291,195 | ||||||||||
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TOTAL ASSETS | 15,056,286,260 | 16,878,415,173 | ||||||||||
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LIABILITIES AND OWNERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Short-term loan | 6(15) | - | 500,000,000 | |||||||||
Accounts payable | 7(4) | 1,423,460,500 | 1,588,679,065 | |||||||||
Advances from customers | - | - | ||||||||||
Contract liabilities | 413,052,672 | 336,649,764 | ||||||||||
Employee benefits payable | 6(16) | 104,087,842 | 109,858,124 | |||||||||
Taxes payable | 6(17) | 282,137,994 | 645,390,889 | |||||||||
Other payables | 6(18) | 9,844,208 | 15,634,899 | |||||||||
Non-current liabilities maturing within one year | 6(19) | - | 121,509 | |||||||||
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Total current liabilities | 2,232,583,216 | 3,196,334,250 | ||||||||||
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Non-current liabilities | ||||||||||||
Deferred tax liabilities | 6(14) | 933,557 | 12,725,701 | |||||||||
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Total liabilities | 2,233,516,773 | 3,209,059,951 | ||||||||||
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Owners’ equity | ||||||||||||
Paid-in capital | 1 | 7,800,811,272 | 7,800,811,272 | |||||||||
Capital surplus | 6(20) | 1,454,646 | 1,454,646 | |||||||||
Specific reserve | 6(21) | - | - | |||||||||
Surplus reserve | 6(22) | 2,160,544,360 | 2,498,902,933 | |||||||||
Undistributed profits | 6(23) | 2,859,959,209 | 3,368,186,371 | |||||||||
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Total owners’ equity | 12,822,769,487 | 13,669,355,222 | ||||||||||
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TOTAL LIABILITIES AND OWNERS’ EQUITY | 15,056,286,260 | 16,878,415,173 | ||||||||||
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* Not covered by the independent auditor’s report included herein
The accompanying notes form an integral part of these financial statements.
Legal representative: | General manager: | Head of accounting department: | ||
Zhang Minglong | Zhang Minglong | Lu Daoqing |
4
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
INCOME STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017*, 2018* AND 2019
(All amounts in RMB Yuan unless otherwise stated)
Item | Note | 2017* | 2018* | 2019 | ||||||||||||
Revenue | 6(24),7(3) | 29,186,371,242 | 26,319,956,893 | 28,341,032,354 | ||||||||||||
Less: Cost of sales | 6(24),6(26) | (21,075,251,050 | ) | (20,536,534,109 | ) | (22,754,564,625 | ) | |||||||||
Taxes and surcharges | 6(25) | (85,720,346 | ) | (64,795,331 | ) | (127,686,385 | ) | |||||||||
Selling and distribution expenses | 6(27) | (467,186,274 | ) | (456,449,434 | ) | (579,571,851 | ) | |||||||||
General and administrative expenses | 6(27) | (664,374,983 | ) | (1,143,510,786 | ) | (654,455,677 | ) | |||||||||
R&D expenses | 6(27) | (5,760,766 | ) | (7,019,552 | ) | (4,254,778 | ) | |||||||||
Financial income—net | 6(26) | 121,302,303 | 215,287,416 | 292,922,019 | ||||||||||||
Including: Interest expenses | - | (4,737,934 | ) | (11,596,955 | ) | |||||||||||
Interest income | 122,959,926 | 217,571,134 | 304,332,698 | |||||||||||||
Add: Asset impairment losses | 6(28) | (61,182,497 | ) | (38,387,497 | ) | (25,475,861 | ) | |||||||||
Losses on disposal of assets | 6(29) | (19,097,766 | ) | (11,620,416 | ) | (4,973,598 | ) | |||||||||
Other income | 6(30) | 1,839,411 | 29,512,049 | 23,025,485 | ||||||||||||
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Operating profit | 6,930,939,274 | 4,306,439,233 | 4,505,997,083 | |||||||||||||
Add:Non-operating income | 629,887 | 2,891,830 | 2,928,815 | |||||||||||||
Less:Non-operating expenses | (197,709 | ) | (6,782,678 | ) | (1,880,328 | ) | ||||||||||
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Total profit | 6,931,371,452 | 4,302,548,385 | 4,507,045,570 | |||||||||||||
Less: Income tax expenses | 6(31) | (1,731,210,185 | ) | (1,073,866,795 | ) | (1,123,459,835 | ) | |||||||||
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Net profit | 5,200,161,267 | 3,228,681,590 | 3,383,585,735 | |||||||||||||
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Including: Net profit from continuing operations | 5,200,161,267 | 3,228,681,590 | 3,383,585,735 | |||||||||||||
Net profit from discontinued operations | - | - | - | |||||||||||||
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Other comprehensive income | - | - | - | |||||||||||||
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Total comprehensive income | 5,200,161,267 | 3,228,681,590 | 3,383,585,735 | |||||||||||||
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* Not covered by the independent auditor’s report included herein
The accompanying notes form an integral part of these financial statements.
Legal representative: | General manager: | Head of accounting department: | ||
Zhang Minglong | Zhang Minglong | Lu Daoqing |
5
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
CASH FLOW STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017*, 2018* AND 2019
(All amounts in RMB Yuan unless otherwise stated)
Item | Note | 2017* | 2018* | 2019 | ||||||||||||
Cash flows from operating activities | ||||||||||||||||
Cash received from sales of goods or rendering of services | 33,596,973,098 | 31,458,360,162 | 28,004,355,856 | |||||||||||||
Cash received relating to other operating activities | 6(32)(c) | 2,471,252,976 | 59,316,844 | 41,945,698 | ||||||||||||
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Sub-total of cash inflows | 36,068,226,074 | 31,517,677,006 | 28,046,301,554 | |||||||||||||
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Cash paid for goods and services | (24,643,735,173 | ) | (24,294,070,277 | ) | (21,227,092,727 | ) | ||||||||||
Cash paid to and on behalf of employees | (411,355,276 | ) | (447,944,358 | ) | (483,492,318 | ) | ||||||||||
Payments of taxes and surcharges | (1,520,421,434 | ) | (3,126,718,266 | ) | (1,658,917,753 | ) | ||||||||||
Cash paid relating to other operating activities | 6(32)(d) | (2,212,582,852 | ) | (93,491,984 | ) | (75,470,234 | ) | |||||||||
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Sub-total of cash outflows | (28,788,094,735 | ) | (27,962,224,885 | ) | (23,444,973,032 | ) | ||||||||||
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Net cash flows from operating activities | 6(32)(a) | 7,280,131,339 | 3,555,452,121 | 4,601,328,522 | ||||||||||||
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Cash flows used in investing activities | ||||||||||||||||
Cash received from disposal of fixed assets | 430,976 | 286,278 | 1,265,183 | |||||||||||||
Cash received from agreement deposit | 100,000,000 | - | - | |||||||||||||
Cash received from deposit at headquarters | - | 607,666,667 | - | |||||||||||||
Cash received relating to other investing activities | 6(32)(e) | - | 210,338,429 | 304,332,698 | ||||||||||||
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Sub-total of cash inflows | 100,430,976 | 818,291,374 | 305,597,881 | |||||||||||||
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Cash paid to acquire fixed assets, intangible assets and other long-term assets | (309,941,579 | ) | (487,863,649 | ) | (306,686,064 | ) | ||||||||||
Cash paid for deposit at headquarters | - | (600,000,000 | ) | - | ||||||||||||
Cash paid relating to other investing activities | 6(32)(f) | - | - | (90,000,000 | ) | |||||||||||
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Sub-total of cash outflows | (309,941,579 | ) | (1,087,863,649 | ) | (396,686,064 | ) | ||||||||||
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Net cash flows used in investing activities | (209,510,603 | ) | (269,572,275 | ) | (91,088,183 | ) | ||||||||||
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Cash flows used in financing activities | ||||||||||||||||
Cash received from borrowings | - | 10,000,000 | 500,000,000 | |||||||||||||
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Sub-total of cash inflows | - | 10,000,000 | 500,000,000 | |||||||||||||
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Cash repayments of borrowings | - | (10,000,000 | ) | - | ||||||||||||
Cash payments for distribution of profits | 6(23) | (2,105,600,000 | ) | (3,675,839,788 | ) | (2,537,000,000 | ) | |||||||||
Cash payments for interest expenses | - | (1,088 | ) | (6,550,592 | ) | |||||||||||
Cash payments relating to other financing activities | 6(32)(g) | - | - | (6,123,689 | ) | |||||||||||
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Sub-total of cash outflows | (2,105,600,000 | ) | (3,685,840,876 | ) | (2,549,674,281 | ) | ||||||||||
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Net cash flows used in financing activities | (2,105,600,000 | ) | (3,675,840,876 | ) | (2,049,674,281 | ) | ||||||||||
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Effect of foreign exchange rate changes on cash and cash equivalents | (2,264,172 | ) | 1,781,037 | 620,568 | ||||||||||||
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Net increase/(decrease) in cash and cash equivalents | 6(32)(b) | 4,962,756,564 | (388,179,993 | ) | 2,461,186,626 | |||||||||||
Add: Cash and cash equivalents at beginning of year | 2,242,720,473 | 7,205,477,037 | 6,817,297,044 | |||||||||||||
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Cash and cash equivalents at end of year | 6(32)(b) | 7,205,477,037 | 6,817,297,044 | 9,278,483,670 | ||||||||||||
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* Not covered by the independent auditor’s report included herein
The accompanying notes form an integral part of these financial statements.
Legal representative: | General manager: | Head of accounting department: | ||
Zhang Minglong | Zhang Minglong | Lu Daoqing |
6
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
STATEMENTS OF CHANGES IN OWNERS’ EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2017*, 2018* AND 2019
(All amounts in RMB Yuan unless otherwise stated)
Item | Note | Paid-in capital | Capital surplus | Specific reserve | Surplus reserve | Undistributed profits | Total owners’ equity | |||||||||||||||||||||
Balance at 1 January 2017* | 7,800,811,272 | 1,454,646 | - | 225,626,007 | 2,168,380,486 | 10,196,272,411 | ||||||||||||||||||||||
Movements for the year ended 31 December 2017* | ||||||||||||||||||||||||||||
Net profit | 6(23) | - | - | - | - | 5,200,161,267 | 5,200,161,267 | |||||||||||||||||||||
Profit distribution | ||||||||||||||||||||||||||||
Distribution for owners | 6(23) | - | - | - | - | (2,105,600,000 | ) | (2,105,600,000 | ) | |||||||||||||||||||
Appropriation to surplus reserve | 6(22) | - | - | - | 41,811,986 | (41,811,986 | ) | - | ||||||||||||||||||||
Appropriation to employees’ bonus and welfare fund | 6(16) | - | - | - | - | (20,905,993 | ) | (20,905,993 | ) | |||||||||||||||||||
Specific reserve | 6(21) | |||||||||||||||||||||||||||
Accrued | - | - | 31,486,863 | - | - | 31,486,863 | ||||||||||||||||||||||
Utilized | - | - | (31,486,863 | ) | - | - | (31,486,863 | ) | ||||||||||||||||||||
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Balance at 31 December 2017* | 7,800,811,272 | 1,454,646 | - | 267,437,993 | 5,200,223,774 | 13,269,927,685 | ||||||||||||||||||||||
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Balance at 1 January 2018* | 7,800,811,272 | 1,454,646 | - | 267,437,993 | 5,200,223,774 | 13,269,927,685 | ||||||||||||||||||||||
Movements for the year ended 31 December 2018* | ||||||||||||||||||||||||||||
Net profit | 6(23) | - | - | - | - | 3,228,681,590 | 3,228,681,590 | |||||||||||||||||||||
Profit distribution | ||||||||||||||||||||||||||||
Distribution for owners | 6(23) | - | - | - | - | (3,675,839,788 | ) | (3,675,839,788 | ) | |||||||||||||||||||
Appropriation to surplus reserve | 6(22) | - | - | - | 1,893,106,367 | (1,893,106,367 | ) | - | ||||||||||||||||||||
Specific reserve | 6(21) | |||||||||||||||||||||||||||
Accrued | - | - | 40,033,813 | - | - | 40,033,813 | ||||||||||||||||||||||
Utilized | - | - | (40,033,813 | ) | - | - | (40,033,813 | ) | ||||||||||||||||||||
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Balance at 31 December 2018* | 7,800,811,272 | 1,454,646 | - | 2,160,544,360 | 2,859,959,209 | 12,822,769,487 | ||||||||||||||||||||||
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7
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
STATEMENTS OF CHANGES IN OWNERS’ EQUITY (CONTINUED)
FOR THE YEARS ENDED 31 DECEMBER 2017*, 2018* AND 2019
(All amounts in RMB Yuan unless otherwise stated)
Item | Note | Paid-in capital | Capital surplus | Specific reserve | Surplus reserve | Undistributed profits | Total owners’ equity | |||||||||||||||||||||
Balance at 1 January 2019 | 7,800,811,272 | 1,454,646 | - | 2,160,544,360 | 2,859,959,209 | 12,822,769,487 | ||||||||||||||||||||||
Movements for the year ended 31 December 2019 | ||||||||||||||||||||||||||||
Net profit | 6(23) | - | - | - | - | 3,383,585,735 | 3,383,585,735 | |||||||||||||||||||||
Profit distribution | ||||||||||||||||||||||||||||
Distribution for owners | 6(23) | - | - | - | - | (2,537,000,000 | ) | (2,537,000,000 | ) | |||||||||||||||||||
Appropriation to surplus reserve | 6(22) | - | - | - | 338,358,573 | (338,358,573 | ) | - | ||||||||||||||||||||
Specific reserve | 6(21) | |||||||||||||||||||||||||||
Accrued | - | - | 37,018,671 | - | - | 37,018,671 | ||||||||||||||||||||||
Utilized | - | - | (37,018,671 | ) | - | - | (37,018,671 | ) | ||||||||||||||||||||
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Balance at 31 December 2019 | 7,800,811,272 | 1,454,646 | - | 2,498,902,933 | 3,368,186,371 | 13,669,355,222 | ||||||||||||||||||||||
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* Not covered by the independent auditor’s report included herein
The accompanying notes form an integral part of these financial statements.
Legal representative: | General manager: | Head of accounting department: | ||
Zhang Minglong | Zhang Minglong | Lu Daoqing |
8
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
1 | General information |
Shanghai Secco Petrochemical Company Limited (“the Company”) was a Sino-foreign equity joint venture established in Shanghai, the People’s Republic of China (“the PRC”) in 2001 by China Petroleum and Chemical Corporation (“Sinopec Corp.”), Sinopec Shanghai Petrochemical Company Limited (“SPC”) and BP Chemicals East China Investments Limited (“BPCECIL”). The Company obtained an approval certificate (Wai Jing Mao Zi Shen Zi [2001] No. 0099 from the Ministry of Commerce (formerly Ministry of Foreign Trade and EconomicCo-operation) on 13 September 2001, and a business license (Qi He Hu Zong Zi No. 029541 (Shi Ju)) on 29 October 2001 issued by the State Administration of Industry and Commerce of the PRC. The original registered capital andpaid-in capital of the Company both were USD 901,440,964. Sinopec Corp., SPC and BPCECIL held 30%, 20% and 50% equity interest in the Company, respectively. The Company commenced its active operation on 31 March 2005, and the approved period of operation is 50 years.
On 24 October 2013 and 25 November 2013, Sinopec Corp., SPC and BPCECIL amended the Equity Joint Venture Contract and Articles of Association to progressively increase the registered capital of the Company from USD 901,440,964 to USD 1,051,526,582. The total increased registered capital would be contributed by Sinopec Corp., SPC and BPCECIL in proportion to their respective shareholding in the Company by instalments. In February 2014, the Company obtained a reply approval (Hu Shang Wai Zi Pi [2014] No. 292Approval of Secco Petrochemical Company Limited Replenishment by Municipal Commission of Commerce) from Shanghai Municipal Commission of Commerce. On 17 March 2014, the Company obtained a business license (registration No. 310000400279832) issued by the State Administration of Industry and Commerce of the PRC.
In 2013 and 2014, the Company receivedpaid-in capital contributed by Sinopec Corp., SPC and BPCECIL in proportion to their respective shareholding in the Company by instalments, totalling to USD 58,430,374 (equivalent to RMB 357,226,095).
On 27 April 2017, Sinopec Corp. and Sinopec Shanghai Gaoqiao Petrochemical Company Limited (“Gaoqiao Petrochemical”) (subsidiary of Sinopec Corp.) entered into an agreement with BPCECIL, according to which Gaoqiao Petrochemical purchased 50% equity in the Company from BPCECIL. On 26 October 2017, the Company was transformed from a “Sino-foreign joint venture” to an “other limited liability corporation”.
As at 31 December 2019, the registered capital of the Company was USD 1,051,526,582 and thepaid-in capital was USD 959,871,338 (equivalent to RMB 7,800,811,272)(31 December 2018: RMB 7,800,811,272). Among which, Sinopec Corp.’s contribution was USD 287,984,941 (equivalent to RMB 2,340,387,239), representing 30% of thepaid-in capital of the Company; Gaoqiao Petrochemical’s contribution was USD 479,896,436 (equivalent to RMB 3,900,165,871), representing 50% of thepaid-in capital of the Company; SPC’s contribution was USD 191,989,961 (equivalent to RMB 1,560,258,162), representing 20% of thepaid-in capital of the Company.
9
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
1 | General information (Cont’d) |
The Company’s approved scope of business operations mainly comprises the production of ethylene, polyethylene, styrene, polystyrene, propylene, acrylonitrile, polypropylene, butadiene, aromatic hydrocarbons andby-products; sales of these products and purchased raw materials; as well as provision of related after-sales services and technical consultation with respect to such main petrochemical products andby-products; it is also engaged in polymers application development and providing ancillary utilities engineering services to suppliers and processors.
These financial statements were approved for issue by the Company’s responsible persons on 28 April 2020.
2 | Basis of preparation |
The financial statements are prepared in accordance with theAccounting Standards for Business Enterprises—Basic Standard, the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standards for Business Enterprises” or “CAS”).
The financial statements are prepared on a going concern basis.
3 | Statement of compliance with the Accounting Standards for Business Enterprises |
The financial statements of the Company for the years ended 31 December 2017, 2018 and 2019 are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the Company’s financial position of the Company as at 31 December 2017, 2018 and 2019 and its financial performance, cash flows and other information for the years then ended.
4 | Summary of significant accounting policies and accounting estimates |
(1) | Accounting year |
The Company’s accounting year starts on 1 January and ends on 31 December.
(2) | Recording currency |
The Company’s recording currency is Renminbi (RMB). The financial statements are presented in RMB.
10
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(3) | Foreign currency translation |
Foreign currency transactions
Foreign currency transactions are translated into recording currency using the exchange rates prevailing at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translated into recording currency using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognized in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets.Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.
(4) | Cash and cash equivalents |
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand, and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(5) | Financial Instruments |
Financial assets refers to contracts when one side forms a financial asset while the other forms a financial liability or equity instrument. When our Company becomes one side of a financial instrument contract, our Company recognize a financial asset or a financial liability.
(a) | Financial assets |
(i) | Financial assets classification and measurement |
According to the business model of financial assets management and the characteristics of contract cash flow of financial assets, the Company divides financial assets into:(1) financial assets measured by amortized cost;(2) financial assets measured at fair value and recorded into other comprehensive income;(3) financial assets measured at fair value and recorded in current profit and loss.
Financial assets are measured at fair value at the time of initial recognition. For financial assets measured at fair value and whose changes are included in the current profit and loss, relevant transaction costs are directly included in the current profit and loss; For other categories of financial assets, the relevant transaction costs are included in the initial recognition amount. Accounts receivables or notes receivable arising from the sale of products or the provision of services, which do not contain or take no account of material financing elements, shall be initially recognized by the Company in accordance with the amount of consideration to which the Company is entitled to receive as expected.
11
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(5) | Financial Instruments (Cont’d) |
(a) | Financial assets (Cont’d) |
(i) | Financial assets classification and measurement (Cont’d) |
Debt instruments
The debt instruments held by the Company refer to the instruments that meet the definition of financial liabilities from the perspective of the issuer and are measured in the following three ways:
Measured at amortized cost:
The Company’s business model for managing such financial assets is to collect contract cash flow, and the contract cash flow characteristics of such financial assets are consistent with the basic lending arrangement, that is, the cash flow generated on a specific date is only the payment of principal and interest based on the amount of outstanding principal. The Company recognizes interest income for such financial assets in accordance with the real interest rate method. Such financial assets mainly include monetary funds, notes receivable and accounts receivables, other receivables and creditor’s rights investment. The Company shall list the creditor’s rights investment that is due within one year (including one year) from the date of balance sheet asnon-current assets that are due within one year; The creditor’s right investment within one year (including one year) at the time of acquisition is listed as other current assets.
Measured at fair value and recorded into other comprehensive income:
The Company’s business model for managing such financial assets is both to collect contract cash flow and to sell, and the contract cash flow characteristics of such financial assets are consistent with the basic lending arrangements. Such financial assets are measured at fair value and their changes are included in other comprehensive income, but impairment losses or gains, exchange gains and losses and interest income calculated according to the real interest rate method are included in current profit and loss. Such financial assets are listed as other creditor’s rights investments, and other creditor’s rights investments that are due within one year (including one year) from the date of balance sheet are listed asnon-current assets that are due within one year; Other creditor’s rights investments with a maturity of one year (including one year) at the time of acquisition are listed as other current assets.
Measured at fair value and recorded in current profit and loss:
Debt instruments that are held by the Company that are not measured at amortised cost and that are measured at fair value through profit or loss, are measured at fair value through profit or loss. In the initial recognition, in order to eliminate or significantly reduce accounting mismatch, the Company designates certain financial assets as financial assets measured at fair value through profit or loss. If it is more than one year from the balance sheet date and is expected to be held for more than one year, it is listed as othernon-current financial assets.
12
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(5) | Financial Instruments (Cont’d) |
(a) | Financial assets (Cont’d) |
(i) | Financial assets classification and measurement (Cont’d) |
Equity instruments
The Company will measure the equity instrument investment without its control, common control and significant influence according to the fair value and record its changes into the current profit and loss, and list it as a transactional financial asset; The assets that are expected to be held for more than one year from the balance sheet date are listed as othernon-current financial assets.
In addition, the Company has designated somenon-tradable equity instrument investments as financial assets measured at fair value and their changes included in other comprehensive income, and listed them as other equity instrument investments. The relevant dividend income of such financial assets is included in the current profit and loss.
(ii) | Impairment |
The Company recognizes loss provisions on the basis of expected credit losses for financial assets measured at amortized cost, debt instrument investments measured at fair value and their changes included in other comprehensive income.
The Company calculates and confirms expected credit losses, taking into account reasonable and well-founded information on past events, current conditions and projections of future economic conditions.
At each balance sheet date, the Company measures the expected credit losses of financial instruments at different stages. If the credit risk of the financial instrument does not increase significantly after the initial confirmation, it is in the first stage. The Company shall measure the loss reserve according to the expected credit loss in the next 12 months. Where the credit risk of a financial instrument has increased significantly since the initial confirmation but no credit impairment has occurred, it is in the second stage and the Company shall measure the loss reserve in accordance with the expected credit loss of the entire duration of the instrument; Where a credit impairment has occurred since the initial confirmation of the financial instrument, it is in the third stage and the Company shall measure the loss reserve according to the expected credit loss of the entire duration of the instrument.
For financial instruments with low credit risk on the balance sheet date, the Company assumes that the credit risk has not increased significantly since the initial recognition and measures the loss provision according to the expected credit loss in the next 12 months.
For the financial instruments in the first and second stages and with low credit risks, the Company shall calculate the interest income according to the book balance and the actual interest rate before deducting the impairment provisions. For financial instruments in the third stage, the interest income shall be calculated according to the amortized cost and the real interest rate after the book balance is deducted and the provision for impairment is drawn.
13
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(5) | Financial Instruments (Cont’d) |
(a) | Financial assets (Cont’d) |
(ii) | Impairment (Cont’d) |
For notes receivable, accounts receivables and financial assets at fair value through other comprehensive income, whether there is significant financing component or not, the Company shall measure the loss reserve according to the expected credit loss of the whole duration.
For other receivables, the Company calculates the expected credit loss by referring to the experience of historical credit loss, combining the current situation and the forecast of future economic situation, through the default risk exposure and the expected credit loss rate in the next 12 months or the whole duration.
The Company shall record the provision for loss accrued or brought back into the current profit and loss. For the debt instruments held by the Company, which are measured at fair value and whose changes are included in other comprehensive income, the Company shall adjust other comprehensive income when the impairment loss or profit is included in the current profit and loss.
(b) | Financial liabilities |
Financial liabilities are classified into financial liabilities measured at amortised cost and financial liabilities measured at fair value through profit or loss.
The Company’s financial liabilities are mainly financial liabilities measured at amortised cost, including notes payable, accounts payables, other payables and borrowings. Such financial liabilities are initially measured at their fair value less transaction costs and are subsequently measured using the effective interest method. If the term is less than one year (including one year), it shall be listed as current liabilities; if the term is more than one year but expires within one year (including one year) from the balance sheet date, it shall be listed asnon-period within one year. Current liabilities; the rest are presented asnon-current liabilities.
When all or part of the current obligations of a financial liability have been discharged, the Company derecognises the portion of the financial liability or obligation that has been discharged. The difference between the book value of the derecognition portion and the consideration paid is recognized in profit or loss for the current period.
(c) | Determination of the fair value of financial instruments |
A financial instrument with an active market that determines its fair value by quoted prices in an active market. Financial instruments that do not exist in an active market use valuation techniques to determine their fair value. At the time of valuation, the Company adopts valuation techniques that are applicable under current circumstances and that are sufficiently supported by data and other information to be consistent with the characteristics of assets or liabilities considered by market participants in transactions in related assets or liabilities. Enter values and use the relevant observable input values as much as possible. Unobservable input values are used where the relevant observable input values are not available or are not practicable.
14
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(6) | Inventories |
Inventories include raw materials, work in progress and finished goods, and are measured at the lower of cost and net realizable value.
Cost is determined using the weighted average method. The cost of finished goods and semi-finished products comprise raw materials, direct labor and systematically allocated production overhead based on the normal production capacity. Turnover materials include low value consumables and packaging materials, and are expensed when issued.
Provision for decline in the value of inventories is determined at the excess amount of the carrying amounts of the inventories over their net realizable value. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.
The Company adopts the perpetual inventory system.
(7) | Fixed assets |
Fixed assets comprise buildings, machinery and equipment, motor vehicles, office equipment and other equipment. Fixed assets purchased or constructed by the Company are initially measured at cost at the time of acquisition.
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Company and the related cost can be reliably measured. The carrying amount of the replaced part is derecognized. All the other subsequent expenditures are recognized in profit or loss for the period in which they are incurred.
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:
Estimated useful lives | Estimated net residual values | Annual depreciation rates | ||||||
Buildings | 4 to 40 years | 3 | % | 2.43% to 24.25% | ||||
Machinery and equipment | 4 to 28 years | 3 | % | 3.46% to 24.25% | ||||
Motor vehicles | 8 to 10 years | 3 | % | 9.7% to 12.13% | ||||
Office equipment and other equipment | 4 to 14 years | 3 | % | 6.93% to 24.25% |
The estimated useful life and the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at eachyear-end.
A fixed asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognized in profit or loss for the current period.
15
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(8) | Construction in progress |
Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation is charged starting from the following month.
(9) | Intangible assets |
Intangible assets include land use rights, patent rights and computer software systems, and are measured at cost.
(a) | Land use rights |
Land use rights are amortized on the straight-line basis over their approved use period of 47 years. If the acquisition costs of the land use rights and the buildings located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the acquisition costs are recognized as fixed assets.
(b) | Patents |
Patents are amortized on a straight-line basis over the patent protection period of 10 years as stipulated by the laws.
(c) | Computer software systems |
Computer software systems are amortized on the straight-line basis over the estimated useful lives of 5 years.
(d) | Periodical review of useful life and amortisation method |
For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at eachyear-end, with adjustment made as appropriate.
(10) | Research and development |
The expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase based on its nature and whether there is material uncertainty that the research and development activities can form an intangible asset at the end of the project.
16
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(10) | Research and development (Cont’d) |
Expenditure on the research phase is recognized in profit or loss in the period in which it is incurred. Expenditure on the development phase is capitalized only if all of the following conditions are satisfied:
• | it is technically feasible to complete the intangible asset so that it will be available for use or sale; |
• | management intends to complete the intangible asset, and use or sell it; |
• | it can be demonstrated how the intangible asset will generate economic benefits; |
• | there are adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and |
• | the expenditure attributable to the intangible asset during its development phase can be reliably measured. |
Other development expenditures that do not meet the conditions above are recognized in profit or loss in the period in which they are incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Capitalized expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.
(11) | Long-term prepaid expenses |
Long-term prepaid expenses mainly include the catalyst expenditures that have been incurred but should be recognized as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortized on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.
Catalysts are amortized on the straight-line basis over their useful lives of 1.5 to 10 years.
(12) | Impairment of long-term assets |
Fixed assets, construction in progress and intangible assets with finite useful lives, are tested for impairment if there is any indication that an asset may be impaired at the balance date, and intangible assets not ready for their intended use are tested at least annually for impairment, irrespective of whether there is any indication that they may be impaired. If the result of the impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized 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 the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognized on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.
Once the above asset impairment loss is recognized, it will not be reversed for the value recovered in the subsequent periods.
17
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(13) | Borrowing costs |
The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset that needs a substantially long period of time for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognized in profit or loss for the current period. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.
(14) | Employee benefits |
Employee benefits refer to all forms of consideration or compensation given by the Company in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits.
(a) | Short-term employee benefits |
Short-term employee benefits include employee wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs. The short-term employee benefits actually occurred are recognized as a liability in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets.Non-monetary benefits are measured at fair value.
(b) | Post-employment benefits |
The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. Defined contribution plans are post-employment benefit plans under which the Company pays fixed contributions into a separate fund and will have no obligation to pay further contributions; and defined benefit plans are post-employment benefit plans other than defined contribution plans. During the reporting period, the Company’s post-employment benefits mainly include the premiums or contributions on basic pensions and unemployment insurance, both of which belong to defined contribution plans.
Basic pensions
The Company’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to prescribed bases and percentages by relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognized as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets.
18
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(14) | Employee benefits (Cont’d) |
(c) | Termination benefits |
The Company provides compensation for terminating the employment relationship with employees before the end of the employment contracts or as an offer to encourage employees to accept voluntary redundancy before the end of the employment contracts. The Company recognises a liability arising from compensation for termination of the employment relationship with employees, with a corresponding charge to profit or loss for the current period at the earlier of the following dates: 1) when the Company cannot unilaterally withdraw an employment termination plan or a curtailment proposal; 2) when the Company recognises costs or expenses for a restructuring that involves the payment of termination benefits.
The termination benefits expected to be settled within one year since the balance sheet date are classified as current liabilities.
(15) | Provisions |
Provisions for product warranties and onerous contracts, are recognized when the Company has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.
A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognized as interest expense.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.
The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.
(16) | Deferred tax assets and deferred tax liabilities |
Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax asset is recognized for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognized for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
Deferred tax assets are only recognized for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilized.
19
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(16) | Deferred tax assets and deferred tax liabilities (Cont’d) |
Deferred tax assets and liabilities are offset when:
• | the deferred tax assets and deferred tax liabilities are related to the same tax payer within the Company and the same taxation authority; and |
• | that tax payer within the Company has a legally enforceable right to offset current tax assets against current tax liabilities. |
(17) | Safety production costs |
According to the decision of the State Council on Further Strengthing the work of production safety (Guofa No.2 2004), Shanghai Municipal Government to implement the State Council on Further Strengthening corporate safety work notice (Hufufa No.35 2010) and Safe production costs extraction and use of management practices (Caiqi No.16 2012) issued by the Ministry of Finance and the national production safety supervision administration on 2 February 2012, The Company extracted safety production costs in a certain percentage of sales revenue from the dangerous goods in previous year, which is used for safety costs.
The safety production costs, accrued in accordance with the above regulations, shall be charged in relevant costs or profit and loss, and in the specific reserve. Safety production costs, which belong to expenses, directly offset the special reserves. If the costs formed into fixed assets, the special reserves shall be offset according to the cost forming into fixed assets, and recognize the same amount of accumulated depreciation. This fixed asset shall no longer accrue depreciation in the following period.
(18) | Revenue recognition |
The Company shall, when the customer acquires control over the relevant goods or services, recognize the income at the amount of consideration to which it is expected to be entitled.
Sales of goods
The Company manufactures and sells ethylene, polyethylene, styrene, polystyrene, propylene, acrylonitrile, polypropylene, butadiene, aromatic hydrocarbons and other chemical products and plastic raw materials to distributors. Sales are recognized when control of the products has transferred, being when the products are delivered to and accepted by the customer. The Company delivers the products to the specific location in accordance with the sales contract, and recognized as revenues when the customer confirms receipt of the products. Revenue excludes value added tax and is after deduction of any estimated trade discounts.
20
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(19) | Government grants |
Government grants refer to the monetary ornon-monetary assets obtained by the Company from the government, including tax return and financial subsidy.
Government grants are recognized when the grants can be received and the Company can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is anon-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount.
Government grants related to assets refer to government grants which are obtained by the Company for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.
Government grants related to assets are either deducted against the carrying amount of the assets, or recorded as deferred income and recognized in profit or loss on a systemic basis over the useful lives of the assets. Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognized in profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government grants related to income that compensate the incurred costs, expenses or losses are recognized in profit or loss, or deducted against related costs, expenses or losses directly in current period. The Company applies the presentation method consistently to the similar government grants in the financial statements.
Government grants that are related to ordinary activities are included in operating profit, otherwise, they are recorded innon-operating income or expenses.
(20) | Leases |
The Company applied the new lease standard as of 1 January 2019.
Lease is a kind of contract whereby, within a certain period of time, the lessor transfers theright-of-use assets to lessee in order to obtain benefits.
The Company as the lessee
The Company recognized theright-of-use assets at the beginning of the lease period and the lease liabilities at the present value of the outstanding lease payments. Lease payments include fixed payments and payments to be made if it is reasonably determined that the option to buy or to terminate the lease option will be exercised. The variable rent, which is determined by a certain percentage of sales, is not included in the lease payment and is recorded into the current profit and loss when it actually occurs. The Company will be paid from the balance sheet date within one year (including one year) of the lease liabilities, as anon-current liabilities due within one year.
21
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(20) | Leases (Cont’d) |
Theright-of-use assets of the Company including leased houses and buildings, plant and machinery equipment, means of transport and others. Theright-of-use assets are initially measured at cost, which includes the initial measurement of the lease liability, the lease payment paid on or before the lease period, the initial direct expenses, etc., and deducts the lease incentive received. Where the Company is able to reasonably determine the ownership of the leased assets upon the expiration of the lease term, depreciation of the leased assets shall be calculated and withdrawn within the remaining service life of the leased assets; If it is not reasonable to determine whether the ownership of the leased asset can be acquired at the end of the lease term, the depreciation shall be calculated within the shorter period between the lease term and the remaining useful life of the leased asset. When the recoverable amount is lower than the book value of the asset, the Company writes down the book value to the recoverable amount.
For short-term leases with a lease term of no more than 12 months, the Company chooses not to recognize theright-of-use assets and lease liabilities, and records the relevant rental expenses into the current profits and losses or related asset costs according to the straight-line method during each period of the lease term.
(21) | Profit distribution |
Proposed profit distribution is recognized as a liability in the period in which it is approved by the Board of Directors.
22
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(22) | Critical accounting estimates and judgements |
The Company continually evaluates the critical accounting estimates and key judgements applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are outlined below:
(a) | Estimated useful lives and net residual values of fixed assets and other long-term assets |
The Company assessed the estimated useful lives of fixed assets and other long-term assets in line with historical experience based on the actual useful lives of assets with similar nature or function. If there are significant changes in estimated useful lives and net residual values, depreciation or amortisation expenses for future periods are adjusted.
(b) | Provision for decline in the value of inventories |
Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for decline in the value of inventories. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes. Management bases the estimates on all available information, including the current market prices of the finished goods and raw materials, costs to completion, costs necessary to make the sale and related taxes. If the actual selling prices are lower or the costs to completion are higher than estimated, the actual allowance for decline in the value of inventories would be higher than estimated.
(c) | Income taxes |
As there are some transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business, significant judgement is required from the Company in determining the provision for income taxes. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
23
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(23) | Significant changes in accounting policies |
In 2018, the Ministry of Finance issued the revised CAS 21 leasing (“the new CAS 21”) and in 2019 issued the “Circular on the Amendment to the Formats of Corporate Financial Statements for the Year of 2019” (Cai Kuai [2019] 06), the revised CAS 7 Exchange ofNon-Monetary Assets (“the revised CAS 7”) and the revised CAS 12 Debt Restructuring (“the revised CAS 12”). The financial statements are prepared in accordance with the above circular and standards. The revised CAS 7 and the revised CAS 12 have no significant impact on the Company. The impact of other amendments on the statements of the Company is listed as follow:
(a) | Changes on general enterprise statement format |
(i) | Impact on company balance sheets is as follows: |
Content and reasons for changes in accounting policies | Impacted items | Impact Amount Increase/(Decrease) | ||||||||
31 December 2018 | 1 December 2018 | |||||||||
The Company divides Notes and accounts receivable into Accounts receivable and Notes receivable. | Accounts receivables | 363,401,901 | 701,231,587 | |||||||
Notes receivable | 254,641,593 | 756,226,789 | ||||||||
Notes and accounts receivables | (618,043,494 | ) | (1,457,458,376 | ) | ||||||
The Company divides Notes and accounts payable into Accounts payable and Notes payable. | Accounts payables | 1,423,460,500 | 1,632,811,189 | |||||||
Notes payable | - | - | ||||||||
Notes and accounts payables | (1,423,460,500 | ) | (1,632,811,189 | ) |
(b) | Leases |
The Company adopted the new CAS 21 retrospectively from 1 January 2019, but has not restated comparatives for the previous reporting periods, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on 1 January 2019.
24
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(23) | Significant changes in accounting policies (Cont’d) |
(b) | Leases (Cont’d) |
(i) | Content and reasons for changes in accounting policies | Impacted items | Impact Amount Increase/ (Decrease) | |||||
1 January 2019 | ||||||||
For the existing operating lease contracts before the first implementation of the new lease criteria, the Company have different linkage methods according to the remaining lease period: | Right-of-use assets Lease liabilities
| | 2,883,438 (122,556 | ) | ||||
For the remaining lease term is more than 12 months, the Company shall recognize the lease liability based on the remaining lease payment and incremental borrowing rate on 1 January 2019, and assume that the new lease criteria shall be adopted on the beginning date of the lease term, and the book value of theright-of-use assets shall be determined based on the incremental borrowing rate on 1 January 2019. | Non-current liabilities maturing within one year |
|
(2,760,882 |
) | ||||
For the remaining lease period does not exceed 12 months, the Company adopt the simplified method and do not confirm theright-of-use assets and lease liabilities, which has no significant impact on the financial statements. | ||||||||
For the operating lease contracts oflow-value assets existing before the first implementation of the new lease standards, the Company adopts a simplified method and does not confirm theright-of-use assets and lease liabilities, which has no significant impact on the financial statements. |
As at 1 January 2019, when the Company measured the lease liability, the same discount rate was adopted for lease contracts with similar characteristics, and the incremental borrowing rates used was 4.65%.
25
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
4 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(23) | Significant changes in accounting policies (Cont’d) |
(b) | Leases (Cont’d) |
As at 1 January 2019, the Company adjusted the unpaid minimum operating lease payments disclosed under the original lease criteria to the adjustment schedules for lease liabilities recognized under the new lease criteria as follows:
2019 | ||||
Operating lease commitments disclosed as at 31 December 2018 | 5,786,607 | |||
Discounted using the lessee’s incremental borrowing rate of at the date of initial application | 5,393,652 | |||
(Less): Short-term leases recognized on a straight-line basis as expense | (2,063,690 | ) | ||
The present value of the payment of a lease contract with a lower value when a single leased asset is new | (446,524 | ) | ||
|
| |||
Lease liability recognized as at 1 January 2019 (includingnon-current liabilities maturing within one year) (Note 4(23)(b)(i)) | 2,883,438 | |||
|
|
26
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
5 | Taxation |
The main categories and rates of taxes applicable to the Company are set out below:
Category | Tax rate/amount | Tax base | ||
Enterprise income tax(a) | 25% | Taxable income | ||
Value-added tax (“VAT”)(b) | 6%, 9%, 10%, 13%, 16% | Taxable value-added amount (Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less deductible VAT input of the current period) | ||
City maintenance and construction tax | 1% | VAT paid | ||
Educational surcharge | 3% | VAT paid | ||
Local educational surcharge | 2%, 1% | VAT paid | ||
Consumption tax | Naphtha: RMB 2,105 per ton | Amount of taxable imported Naphtha | ||
Environmental tax | RMB 1.20, RMB 6.65, RMB 7.60, RMB 8.55 | Taxable pollutant volume |
(a) | Pursuant to the “Circular on Enterprise Income Tax Policy concerning Deductions for Equipment and Appliances”(Cai Shui [2018] 54) issued by the State Administration of Taxation, during the period from 1 January 2018 to 31 December 2020, the cost of newly purchased equipment with the original cost less than RMB 5 million can be fully deducted against taxable profit in the next month after the asset is put into use, instead of being depreciated annually for tax filing. |
(b) | Pursuant to the “Ministry of Finance, State Administration of Taxation, General Administration of Customs, Announcement on Deepening the Policies Related to Value-Added Tax Reform”(Caishui[2019] 39) jointly issued by the Ministry of Finance and the State Administration of Taxation, the applicable VAT rate of taxable sales behaviour, importing of goods is 13% from 1 April 2019, while it was 16% before then. |
27
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements |
(1) | Cash at bank and on hand |
31 December 2018 | 31 December 2019 | |||||||
Cash at bank - RMB | 6,780,029,549 | 9,239,983,712 | ||||||
- USD (translated into RMB) | 37,267,495 | 38,499,958 | ||||||
Other cash balances (a) | - | 90,000,000 | ||||||
|
|
|
| |||||
6,817,297,044 | 9,368,483,670 | |||||||
|
|
|
|
(a) | Other cash balances RMB 90,000,000 is the margin deposit which deposited by the Company in applying to the bank for issuing unconditional and irrevocable guarantee of RMB 300,000,000. |
(2) | Notes receivable |
31 December 2018 | 31 December 2019 | |||||||
Bank acceptance notes | 254,641,593 | - | ||||||
|
|
|
|
As at 31 December 2018 and 2019, the Company had no discounted bank acceptance notes which were still undue.
(3) | Accounts receivable |
31 December 2017 | 31 December 2018 | |||||||||||||||
Receivables due from related parties (Note 7(4)) | 490,680,228 | 205,314,585 | ||||||||||||||
Accounts receivable from third parties | 219,348,637 | 166,884,594 | ||||||||||||||
|
|
|
| |||||||||||||
710,028,865 | 372,199,179 | |||||||||||||||
|
|
|
| |||||||||||||
Increase in the current year | Decrease in the current year | |||||||||||||||
Less: Provision for bad debts (i) | (8,797,278 | ) | - | - | (8,797,278 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
701,231,587 | 363,401,901 | |||||||||||||||
|
|
|
|
28
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(3) | Accounts receivable (Cont’d) |
31 December 2018 | 31 December 2019 | |||||||||||||||
Receivables due from related parties (Note 7(4)) | 205,314,585 | 174,939,409 | ||||||||||||||
Accounts receivable from third parties | 166,884,594 | 197,643,971 | ||||||||||||||
|
|
|
| |||||||||||||
372,199,179 | 372,583,380 | |||||||||||||||
|
|
|
| |||||||||||||
Increase in the current year | Decrease in the current year | |||||||||||||||
Less: Provision for bad debts (i) | (8,797,278 | ) | - | - | (8,797,278 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
363,401,901 | 363,786,102 | |||||||||||||||
|
|
|
|
The aging of accounts receivable and related provisions for bad debts are analyzed below:
31 December 2018 | 31 December 2019 | |||||||
Within 1 year | 363,401,901 | 363,786,102 | ||||||
1 to 3 years | - | - | ||||||
Over 3 years | 8,797,278 | 8,797,278 | ||||||
|
|
|
| |||||
372,199,179 | 372,583,380 | |||||||
|
|
|
|
(i) | Provision |
31 December 2018 | 31 December 2019 | |||||||
Provision of Acconuts receivable | 8,797,278 | 8,797,278 | ||||||
|
|
|
|
As at 31 December 2018 and 2019, the Company had no accounts receivable of single provision for bad debts.
For accounts receivable, whether or not there is significant financing component, the Company shall measure the loss reserve according to the expected credit loss of the whole duration.
29
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(4) | Financial assets at fair value through other comprehensive income |
31 December 2018 | 31 December 2019 | |||||||
Financial assets at fair value through other comprehensive income | - | 275,684,637 | ||||||
|
|
|
|
(a) | As at 31 December 2019, notes receivable were classified to financial assets at fair value through other comprehensive income, as the Company’s business model is achieved both by collecting contractual cash flows and selling of these assets (31 December 2018: Nil). |
(b) | The Company has no single provision for impairment of the bank acceptance notes, with all provision was accured by their expected credit loss. As at December 31 2018 and 2019, the Company considers that no bank acceptance notes has significant credit risk, and will not suffer significant loss due to the violation of banks. |
(c) | As at 31 December 2019, unmatured notes receivable that have been endorsed or discounted by the Company is as follows: |
Derecognized | Not derecognized | |||||||
Bank acceptance notes | 695,442,650 | - | ||||||
|
|
|
|
(5) | Other receivables |
31 December 2018 | 31 December 2019 | |||||||
Property rental deposits | 1,478,970 | 1,478,970 | ||||||
Others | 98,428 | 60,800 | ||||||
|
|
|
| |||||
1,577,398 | 1,539,770 | |||||||
|
|
|
|
As at 31 December 2018 and 2019, all other receivables were aged within one year except for property rental deposits. No other receivables were past due but unimpaired. Provision for bad debts was not required as assessed by management of the Company.
(6) | Advances to suppliers |
31 December 2018 | 31 December 2019 | |||||||
Advances to suppliers | 214,617,842 | 204,393,114 | ||||||
|
|
|
|
As at 31 December 2018 and 2019, the Company’s advances to suppliers were mainly refers to the prepayment of third-party naphtha and tax deposits, the aging of advances to suppliers were within one year.
30
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(7) | Inventories |
31 December 2017 | 31 December 2018 | |||||||||||||||
Cost - | ||||||||||||||||
Raw materials | 1,247,277,942 | 1,171,622,449 | ||||||||||||||
Semi-finished products | 334,501,268 | 381,896,490 | ||||||||||||||
Finished goods | 418,717,996 | 438,814,573 | ||||||||||||||
|
|
|
| |||||||||||||
2,000,497,206 | 1,992,333,512 | |||||||||||||||
|
|
|
| |||||||||||||
Increase in the current year | Decrease in the current year | |||||||||||||||
Less: Provision for decline in the value of inventories - | ||||||||||||||||
Raw materials | (87,561,232 | ) | (6,333,924 | ) | 16,629,643 | (77,265,513 | ) | |||||||||
Semi-finished products | (6,703,751 | ) | (12,053,900 | ) | 6,711,162 | (12,046,489 | ) | |||||||||
Finished goods | - | (19,999,673 | ) | 624,496 | (19,375,177 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(94,264,983 | ) | (38,387,497 | ) | 23,965,301 | (108,687,179 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1,906,232,223 | 1,883,646,333 | |||||||||||||||
|
|
|
| |||||||||||||
31 December 2018 | 31 December 2019 | |||||||||||||||
Cost - | ||||||||||||||||
Raw materials | 1,171,622,449 | 946,272,489 | ||||||||||||||
Semi-finished products | 381,896,490 | 331,525,309 | ||||||||||||||
Finished goods | 438,814,573 | 393,976,969 | ||||||||||||||
|
|
|
| |||||||||||||
1,992,333,512 | 1,671,774,767 | |||||||||||||||
|
|
|
| |||||||||||||
Increase in the current year | Decrease in the current year | |||||||||||||||
Less: Provision for decline in the value of inventories - | ||||||||||||||||
Raw materials | (77,265,513 | ) | (2,042,798 | ) | 3,915,674 | (75,392,637 | ) | |||||||||
Semi-finished products | (12,046,489 | ) | (4,834,980 | ) | 12,046,490 | (4,834,979 | ) | |||||||||
Finished goods | (19,375,177 | ) | (2,423,291 | ) | 19,375,176 | (2,423,292 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
(108,687,179 | ) | (9,301,069 | ) | 35,337,340 | (82,650,908 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1,883,646,333 | 1,589,123,859 | |||||||||||||||
|
|
|
|
31
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d |
(8) | Other current assets |
31 December 2018 | 31 December 2019 | |||||||
Refund of consumption tax (a) | - | 52,941,279 | ||||||
Others | 2,171,548 | 2,171,547 | ||||||
|
|
|
| |||||
2,171,548 | 55,112,826 | |||||||
|
|
|
|
(a) | According to regulations of theInterim Measures for Consumption Tax Refunding (Exempting) on Naphtha and Fuel Used in Production of Ethylene and Arene Chemical Products issued by the State Administration of Taxation, eligible enterprises, which use naphtha and fuel to produce ethylene and arene chemical products, can enjoy tax rebate for consumption tax. As at 31 December 2019, the Company had made a tax refund application to the local tax bureau and confirmed that the consumption tax refund of RMB 52,941,279 would be received (31 December 2018: Nil). |
(9) | Fixed assets |
Plant and buildings | Machinery and equipment | Motor vehicles | Office and other equipment | Total | ||||||||||||||||
Cost | ||||||||||||||||||||
31 December 2017 | 1,349,566,890 | 19,576,161,766 | 11,278,183 | 169,149,839 | 21,106,156,678 | |||||||||||||||
Transferred from construction in progress (Note 6(10)) | 2,155,065 | 36,253,369 | - | 7,666,311 | 46,074,745 | |||||||||||||||
Other increases in the current year | - | 1,261,075 | 2,689,892 | 13,829,693 | 17,780,660 | |||||||||||||||
Disposal in the current year | - | (127,184,022 | ) | (845,603 | ) | (3,775,287 | ) | (131,804,912 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2018 | 1,351,721,955 | 19,486,492,188 | 13,122,472 | 186,870,556 | 21,038,207,171 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Accumulated depreciation | ||||||||||||||||||||
31 December 2017 | (821,410,390 | ) | (15,381,963,255 | ) | (4,969,477 | ) | (112,979,155 | ) | (16,321,322,277 | ) | ||||||||||
Provision in the current year | (48,713,169 | ) | (686,650,718 | ) | (928,181 | ) | (15,635,021 | ) | (751,927,089 | ) | ||||||||||
Disposal in the current year | - | 111,172,539 | 615,996 | 3,664,169 | 115,452,704 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2018 | (870,123,559 | ) | (15,957,441,434 | ) | (5,281,662 | ) | (124,950,007 | ) | (16,957,796,662 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Carrying amount | ||||||||||||||||||||
31 December 2018 | 481,598,396 | 3,529,050,754 | 7,840,810 | 61,920,549 | 4,080,410,509 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2017 | 528,156,500 | 4,194,198,511 | 6,308,706 | 56,170,684 | 4,784,834,401 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
32
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(9) | Fixed assets (Cont’d) |
Plant and buildings | Machinery and equipment | Motor vehicles | Office and other equipment | Total | ||||||||||||||||
Cost | ||||||||||||||||||||
31 December 2018 | 1,351,721,955 | 19,486,492,188 | 13,122,472 | 186,870,556 | 21,038,207,171 | |||||||||||||||
Transferred from construction in progress (Note 6(10)) | 5,049,789 | 481,272,068 | - | 20,924,357 | 507,246,214 | |||||||||||||||
Other increases in the current year | 124,080 | 11,772,318 | 442,016 | 24,359,155 | 36,697,569 | |||||||||||||||
Disposal in the current year | - | (90,654,093 | ) | (1,600,684 | ) | (16,291,671 | ) | (108,546,448 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2019 | 1,356,895,824 | 19,888,882,481 | 11,963,804 | 215,862,397 | 21,473,604,506 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Accumulated depreciation | ||||||||||||||||||||
31 December 2018 | (870,123,559 | ) | (15,957,441,434 | ) | (5,281,662 | ) | (124,950,007 | ) | (16,957,796,662 | ) | ||||||||||
Provision in the current year | (48,918,859 | ) | (554,058,969 | ) | (1,088,933 | ) | (19,153,200 | ) | (623,219,961 | ) | ||||||||||
Disposal in the current year | - | 85,189,857 | 1,350,451 | 15,797,388 | 102,337,696 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2019 | (919,042,418 | ) | (16,426,310,546 | ) | (5,020,144 | ) | (128,305,819 | ) | (17,478,678,927 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Carrying amount | ||||||||||||||||||||
31 December 2019 | 437,853,406 | 3,462,571,935 | 6,943,660 | 87,556,578 | 3,994,925,579 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2018 | 481,598,396 | 3,529,050,754 | 7,840,810 | 61,920,549 | 4,080,410,509 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
In 2019, the amounts of depreciation expenses charged cost of sales, selling and distribution expenses, general and administrative expenses and research and development expenses were RMB 609,665,198, RMB 1,067,539, RMB 12,461,713 and RMB 25,511 (2017: RMB 911,939,273, RMB 1,355,686, RMB 11,875,589 and RMB 32,832; 2018: RMB 737,043,438, RMB 1,043,503, RMB 13,779,979 and RMB 60,169), respectively.
33
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(10) | Construction in progress |
31 December 2017 | Increase in (Note 6(28)) | Current year transfer to fixed assets (Note 6(9)) | Current year transfer to intangible assets (Note 6(12)) | Written-off in the current year | 31 December 2018 | |||||||||||||||||||
Construction in progress | 243,189,492 | 439,736,534 | (46,074,745 | ) | (25,295,700 | ) | - | 611,555,581 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less: Provision for impairment of construction in progress | - | - | - | - | - | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
243,189,492 | 611,555,581 | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
31 December 2018 | Increase in (Note 6(28)) | Current year (Note 6(9)) | Current year transferred to intangible assets (Note 6(12)) | Written-off in the current year | 31 December 2019 | |||||||||||||||||||
Construction in progress | 611,555,581 | 238,898,156 | (507,246,214 | ) | (63,007,126 | ) | (16,174,792 | ) | 264,025,605 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less: Provision for impairment of construction in progress | - | (16,174,792 | ) | - | - | 16,174,792 | - | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
611,555,581 | 264,025,605 | |||||||||||||||||||||||
|
|
|
|
The construction in progress balance of the Company is mainly production and environmental protection equipment installation programs.
34
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(11) | Right-of-use assets |
Buildings | Vehicles and other equipments | Total | ||||||||||
Cost | ||||||||||||
31 December 2018 | — | — | — | |||||||||
Changes in accounting policies | 2,543,217 | 340,221 | 2,883,438 | |||||||||
|
|
|
|
|
| |||||||
1 January 2019 | 2,543,217 | 340,221 | 2,883,438 | |||||||||
|
|
|
|
|
| |||||||
Increase | 2,927,139 | - | 2,927,139 | |||||||||
Alteration of contracts | - | 800 | 800 | |||||||||
Expiration of contracts | (719,965 | ) | - | (719,965 | ) | |||||||
|
|
|
|
|
| |||||||
31 December 2019 | 4,750,391 | 341,021 | 5,091,412 | |||||||||
|
|
|
|
|
| |||||||
Accumulated depreciation | ||||||||||||
31 December 2018 | — | — | — | |||||||||
Changes in accounting policies | - | - | - | |||||||||
|
|
|
|
|
| |||||||
1 January 2019 | - | - | - | |||||||||
|
|
|
|
|
| |||||||
Increase | (5,064,003 | ) | (227,347 | ) | (5,291,350 | ) | ||||||
Expiration of contracts | 719,965 | - | 719,965 | |||||||||
|
|
|
|
|
| |||||||
31 December 2019 | (4,344,038 | ) | (227,347 | ) | (4,571,385 | ) | ||||||
|
|
|
|
|
| |||||||
Carrying amount | ||||||||||||
31 December 2019 | 406,353 | 113,674 | 520,027 | |||||||||
|
|
|
|
|
| |||||||
31 December 2018 | — | — | — | |||||||||
|
|
|
|
|
|
Right-of-use assets of the Company including rented buildings and vehicles and other equipments.
35
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(12) | Intangible assets |
Land use rights | Patents | Software | Total | |||||||||||||
Cost | ||||||||||||||||
31 December 2017 | 770,966,668 | 1,006,324,394 | 110,678,925 | 1,887,969,987 | ||||||||||||
Increase in the current year | - | - | 1,618,928 | 1,618,928 | ||||||||||||
Transferred from construction in progress | - | 1,970,000 | 23,325,700 | 25,295,700 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | 770,966,668 | 1,008,294,394 | 135,623,553 | 1,914,884,615 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Accumulated amortisation | ||||||||||||||||
31 December 2017 | (212,111,668 | ) | (937,979,862 | ) | (70,417,172 | ) | (1,220,508,702 | ) | ||||||||
Provision in the current year | (16,670,141 | ) | (12,692,140 | ) | (14,880,980 | ) | (44,243,261 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | (228,781,809 | ) | (950,672,002 | ) | (85,298,152 | ) | (1,264,751,963 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Carrying amount | ||||||||||||||||
31 December 2018 | 542,184,859 | 57,622,392 | 50,325,401 | 650,132,652 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2017 | 558,855,000 | 68,344,532 | 40,261,753 | 667,461,285 | ||||||||||||
|
|
|
|
|
|
|
|
36
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(12) | Intangible assets (Cont’d) |
Land use rights | Patents | Software | Total | |||||||||||||
Cost | ||||||||||||||||
31 December 2018 | 770,966,668 | 1,008,294,394 | 135,623,553 | 1,914,884,615 | ||||||||||||
Increase in the current year | - | - | 2,317,486 | 2,317,486 | ||||||||||||
Transferred from construction in progress | - | 15,243,671 | 47,763,455 | 63,007,126 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2019 | 770,966,668 | 1,023,538,065 | 185,704,494 | 1,980,209,227 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Accumulated amortisation | ||||||||||||||||
31 December 2018 | (228,781,809 | ) | (950,672,002 | ) | (85,298,152 | ) | (1,264,751,963 | ) | ||||||||
Provision in the current year | (16,429,844 | ) | (11,630,621 | ) | (20,686,484 | ) | (48,746,949 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2019 | (245,211,653 | ) | (962,302,623 | ) | (105,984,636 | ) | (1,313,498,912 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Carrying amount | ||||||||||||||||
31 December 2019 | 525,755,015 | 61,235,442 | 79,719,858 | 666,710,315 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | 542,184,859 | 57,622,392 | 50,325,401 | 650,132,652 | ||||||||||||
|
|
|
|
|
|
|
|
In 2019, the amortisation of intangible assets was RMB 48,746,949 (2017: RMB 37,939,184, 2018: RMB 44,243,261).
37
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(13) | Long-term prepaid expenses |
31 December 2017 | Increase in the current year | Amortisation charged in the current year | 31 December 2018 | |||||||||||||
Catalyst | 105,834,397 | 94,741,314 | (59,601,791 | ) | 140,973,920 | |||||||||||
Improvements to fixed assets held under operating leases | 4,154,036 | - | (1,038,509 | ) | 3,115,527 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
109,988,433 | 94,741,314 | (60,640,300 | ) | 144,089,447 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | Increase in the current year | Amortisation charged in the current year | 31 December 2019 | |||||||||||||
Catalyst | 140,973,920 | 12,933,061 | (61,874,330 | ) | 92,032,651 | |||||||||||
Improvements to fixed assets held under operating leases | 3,115,527 | - | (1,038,509 | ) | 2,077,018 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
144,089,447 | 12,933,061 | (62,912,839 | ) | 94,109,669 | ||||||||||||
|
|
|
|
|
|
|
|
38
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(14) | Deferred tax assets and liabilities |
Deferred tax assets and liabilities before offsetting of certain debit and credit balances are set out as follows:
(a) | Deferred tax assets before offsetting of certain debit and credit balances |
31 December 2018 | 31 December 2019 | |||||||||||||||
Deferred tax assets | Deductible temporary differences | Deferred tax assets | Deductible temporary differences | |||||||||||||
Provision for asset impairment | 29,371,114 | 117,484,458 | 22,862,047 | 91,448,186 | ||||||||||||
Accrued environmental tax | - | - | 15,909,685 | 63,638,741 | ||||||||||||
Salescut-off adjustment | - | - | 2,673,234 | 10,692,934 | ||||||||||||
Undeclared assets disposal | - | - | 1,572,249 | 6,288,995 | ||||||||||||
Difference in amortization of long-term prepaid expenses | - | - | 1,075,218 | 4,300,873 | ||||||||||||
Difference in amortization of intangible assets | - | - | - | - | ||||||||||||
Difference in depreciation of fixed assets | 3,373,298 | 13,493,190 | 45,857 | 183,429 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
32,744,412 | 130,977,648 | 44,138,290 | 176,553,158 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Including: |
| |||||||||||||||
Expected to be recovered within one year (inclusive) | 32,744,412 | 130,977,648 | 25,134,426 | 100,537,704 | ||||||||||||
Expected to be recovered after one year | - | - | 19,003,864 | 76,015,454 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
32,744,412 | 130,977,648 | 44,138,290 | 176,553,158 | |||||||||||||
|
|
|
|
|
|
|
|
As at 31 December 2019, the deferred tax assets were recognized for deductible temporary differences to the extent that the taxable income will be available against which the deductible temporary differences can be utilized as assessed by management of the Company.
39
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(14) | Deferred tax assets and deferred tax liabilities (Cont’d) |
(b) | Deferred tax liabilities before offsetting |
31 December 2018 | 31 December 2019 | |||||||||||||||
Deferred tax liabilities | Deductible temporary differences | Deferred tax liabilities | Deductible temporary differences | |||||||||||||
Difference in depreciation of fixed assets | - | - | (56,863,991 | ) | (227,455,962 | ) | ||||||||||
Salescut-off adjustment | (933,557 | ) | (3,734,230 | ) | - | - | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(933,557 | ) | (3,734,230 | ) | (56,863,991 | ) | (227,455,962 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Including: |
| |||||||||||||||
Expected to be recovered within one year (inclusive) | (933,557 | ) | (3,734,230 | ) | (5,853,022 | ) | (23,412,088 | ) | ||||||||
Expected to be recovered after one year | - | - | (51,010,969 | ) | (204,043,874 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(933,557 | ) | (3,734,230 | ) | (56,863,991 | ) | (227,455,962 | ) | |||||||||
|
|
|
|
|
|
|
|
(c) | Deductible temporary differences that are not recognized as deferred tax assets are as follows: |
31 December 2018 | 31 December 2019 | |||||||
Difference in depreciation of fixed assets | 88,689,795 | 77,658,121 | ||||||
Difference in amortization of intangible assets | 552,912 | - | ||||||
|
|
|
| |||||
89,242,707 | 77,658,121 | |||||||
|
|
|
|
(d) | The net balance of deferred tax assets and liabilities after offsetting is as follows: |
31 December 2018 | 31 December 2019 | |||||||
Deferred tax assets—net | 31,810,855 | - | ||||||
Deferred tax liabilities—net | - | (12,725,701 | ) |
(15) | Short-term loan |
31 December 2018 | 31 December 2019 | |||||||
Unsecured (a) | - | 500,000,000 | ||||||
|
|
|
|
(a) | In July 2019, the Company borrowed aone-year short-term loan of RMB 500 million from Export-Import Bank of China, with fixed annual interest rate of 3.298% (2018: Nil) and quarterly interest. |
40
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(16) | Employee benefits payable |
31 December 2018 | 31 December 2019 | |||||||
Short-term employee benefits payable (a) | 95,020,020 | 100,184,193 | ||||||
Defined contribution plans payable (b) | 9,067,822 | 9,673,931 | ||||||
|
|
|
| |||||
104,087,842 | 109,858,124 | |||||||
|
|
|
|
(a) | Short-term employee benefits |
31 December 2017 | Increase in the current year | Decrease in the current year | 31 December 2018 | |||||||||||||
Wages and salaries, bonus, allowances and subsidies | 15,000,001 | 306,175,749 | (306,175,751 | ) | 14,999,999 | |||||||||||
Employees’ bonus and welfare fund | 77,331,821 | - | (400,000 | ) | 76,931,821 | |||||||||||
Social security contributions | 2,346,578 | 23,335,181 | (23,082,581 | ) | 2,599,178 | |||||||||||
Including: Medical insurance | 1,902,774 | 20,118,292 | (19,951,811 | ) | 2,069,255 | |||||||||||
Work injury insurance | 170,157 | 1,233,374 | (1,200,355 | ) | 203,176 | |||||||||||
Maternity insurance | 273,647 | 1,983,515 | (1,930,415 | ) | 326,747 | |||||||||||
Housing funds | 33,374 | 24,743,327 | (24,776,701 | ) | - | |||||||||||
Labor union funds | 322,153 | 6,052,385 | (5,926,081 | ) | 448,457 | |||||||||||
Employee education funds | - | 4,031,680 | (4,031,680 | ) | - | |||||||||||
Staff welfare | 645,619 | 18,627,803 | (19,232,857 | ) | 40,565 | |||||||||||
Termination benefits | - | 657,675 | (657,675 | ) | - | |||||||||||
|
|
|
|
|
|
|
| |||||||||
95,679,546 | 383,623,800 | (384,283,326 | ) | 95,020,020 | ||||||||||||
|
|
|
|
|
|
|
|
41
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(16) | Employee benefits payable (Cont’d) |
(a) | Short-term employee benefits (Cont’d) |
31 December 2018 | Increase in the current year | Decrease in the current year | 31 December 2019 | |||||||||||||
Wages and salaries, bonus, allowances and subsidies | 14,999,999 | 336,699,759 | (331,699,758 | ) | 20,000,000 | |||||||||||
Employees’ bonus and welfare fund | 76,931,821 | - | (500,000 | ) | 76,431,821 | |||||||||||
Social security contributions | 2,599,178 | 29,525,995 | (28,876,961 | ) | 3,248,212 | |||||||||||
Including: Medical insurance | 2,069,255 | 25,433,357 | (25,172,620 | ) | 2,329,992 | |||||||||||
Work injury insurance | 203,176 | 1,724,213 | (1,510,381 | ) | 417,008 | |||||||||||
Maternity insurance | 326,747 | 2,368,425 | (2,193,960 | ) | 501,212 | |||||||||||
Housing funds | - | 28,297,965 | (28,297,965 | ) | - | |||||||||||
Labor union funds | 448,457 | 6,500,555 | (6,444,852 | ) | 504,160 | |||||||||||
Employee education funds | - | 5,428,097 | (5,428,097 | ) | - | |||||||||||
Staff welfare | 40,565 | 11,617,802 | (11,658,367 | ) | - | |||||||||||
Termination benefits | - | 983,606 | (983,606 | ) | - | |||||||||||
|
|
|
|
|
|
|
| |||||||||
95,020,020 | 419,053,779 | (413,889,606 | ) | 100,184,193 | ||||||||||||
|
|
|
|
|
|
|
|
(b) | Defined contribution plans payable |
2018 | 2019 | |||||||||||||||
Amount payable | Ending balance | Amount payable | Ending balance | |||||||||||||
Basic pensions | 45,036,329 | 7,418,894 | 41,052,696 | 8,019,397 | ||||||||||||
Supplementary pensions | 20,511,273 | 1,472,186 | 23,155,744 | 1,455,103 | ||||||||||||
Unemployment insurance | 1,058,250 | 176,742 | 1,190,407 | 199,431 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
66,605,852 | 9,067,822 | 65,398,847 | 9,673,931 | |||||||||||||
|
|
|
|
|
|
|
|
42
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(17) | Taxes payable |
31 December 2018 | 31 December 2019 | |||||||
Unpaid VAT | 94,149,633 | 281,438,340 | ||||||
Enterprise income tax payable | 177,286,357 | 277,746,095 | ||||||
Environmental tax payable | 328,109 | 65,444,149 | ||||||
Educational surcharge payable | 6,498,191 | 14,071,917 | ||||||
City maintenance and construction tax payable | 1,624,932 | 2,814,383 | ||||||
Individual income tax payable | 2,250,772 | 2,376,039 | ||||||
Land use tax payable | - | 1,499,966 | ||||||
|
|
|
| |||||
282,137,994 | 645,390,889 | |||||||
|
|
|
|
(18) | Other payables |
31 December 2018 | 31 December 2019 | |||||||
Deposits | 9,701,000 | 13,770,000 | ||||||
Interests payable | - | 503,892 | ||||||
Pollutants disposing charges | - | - | ||||||
Others | 143,208 | 1,361,007 | ||||||
|
|
|
| |||||
9,844,208 | 15,634,899 | |||||||
|
|
|
|
(19) | Non-current liabilities maturing within one year |
31 December 2018 | 31 December 2019 | |||||||
Lease liabilities maturing within one year (a) | — | 121,509 | ||||||
|
|
|
|
(a) | As at 31 December 2019, events will lead to future potential cash outflows but not in lease liabilities of the Company including: |
(i) As at 31 December 2019, the amount of lease payment related to the lease contract signed but not yet executed by the Company is RMB 11,778,768 (Note 9(3)).
(20) | Capital surplus |
31 December 2018 and 2019 | ||||
Foreign currency capital translation difference | (509,354 | ) | ||
Other capital surplus - | ||||
Transferred from special payable | 1,964,000 | |||
|
| |||
1,454,646 | ||||
|
|
43
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(21) | Specific reserve |
31 December 2017 | Increase in the current year | Decrease in the current year | 31 December 2018 | |||||||||||||
Work safety fund | - | 40,033,813 | (40,033,813 | ) | - | |||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | Increase in the current year | Decrease in the current year | 31 December 2019 | |||||||||||||
Work safety fund | - | 37,018,671 | (37,018,671 | ) | - | |||||||||||
|
|
|
|
|
|
|
|
(22) | Surplus reserve |
31 December 2017 | Increase in the current year | Decrease in the current year | 31 December 2018 | |||||||||||||
Statutory surplus reserve | - | 842,884,286 | - | 842,884,286 | ||||||||||||
Free surplus reserves | - | 1,050,222,081 | - | 1,050,222,081 | ||||||||||||
Reserve fund | 133,718,997 | - | - | 133,718,997 | ||||||||||||
Enterprise expansion fund | 133,718,996 | - | - | 133,718,996 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
267,437,993 | 1,893,106,367 | - | 2,160,544,360 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
31 December 2018 | Increase in the current year | Decrease in the current year | 31 December 2019 | |||||||||||||
Reserve fund | 133,718,997 | - | - | 133,718,997 | ||||||||||||
Enterprise expansion fund | 133,718,996 | - | - | 133,718,996 | ||||||||||||
Statutory surplus reserve | 842,884,286 | 338,358,573 | - | 1,181,242,859 | ||||||||||||
Free surplus reserves | 1,050,222,081 | - | - | 1,050,222,081 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2,160,544,360 | 338,358,573 | - | 2,498,902,933 | |||||||||||||
|
|
|
|
|
|
|
|
In accordance with the Company Law and the Company’s Articles of Association, the Company should appropriate 10% of net profit for the year to the statutory surplus reserve, and the Company can cease appropriation when the statutory surplus reserve accumulated to more than 50% of the registered capital. The statutory surplus reserve can be used to make up for the loss or increase the share capital after approval from the appropriate authorities. The Company appropriate RMB 338,358,573 according to 10% of the net profit of 2019 (2017: RMB 20,905,993 to the reserve fund and RMB 20,905,993 to the enterprise expansion fund; 2018: RMB 842,884,286 to the legal surplus and RMB 1,050,222,081 to the discretionary surplus reserve).
44
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(23) | Undistributed profits |
2018 | 2019 | |||||||
Undistributed profits at beginning of year | 5,200,223,774 | 2,859,959,209 | ||||||
Add: Net profit for the current year | 3,228,681,590 | 3,383,585,735 | ||||||
Less: Profit distribution | ||||||||
—Profit distribution to equity owners | (3,675,839,788 | ) | (2,537,000,000 | ) | ||||
—Appropriation to statutory surplus reserves | (1,050,222,081 | ) | - | |||||
—Appropriation to free surplus reserves | (842,884,286 | ) | (338,358,573 | ) | ||||
—Appropriation to reserve fund | - | - | ||||||
—Appropriation to enterprise expansion fund | - | - | ||||||
—Appropriation to employees’ bonus and welfare fund | - | - | ||||||
|
|
|
| |||||
Undistributed profits at end of year | 2,859,959,209 | 3,368,186,371 | ||||||
|
|
|
|
In accordance with the resolution on the 18th Meeting of the Board of Directors dated 10 December 2019, the Company proposed a dividend at the amount of RMB 2,537,000,000 (2017: RMB 2,105,600,000; 2018: RMB 3,675,839,788) to shareholders.
45
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
(24) | Revenue and cost of sales |
2017 | 2018 | 2019 | ||||||||||||||||||||||
Revenue | Cost of sales | Revenue | Cost of sales | Revenue | Cost of sales | |||||||||||||||||||
Main operations | ||||||||||||||||||||||||
—Sales of acrylonitrile | 6,149,666,466 | (4,533,617,851 | ) | 6,492,852,229 | (4,475,358,906 | ) | 6,655,183,631 | (4,884,698,483 | ) | |||||||||||||||
—Sales of olefin | 7,459,451,230 | (5,188,059,341 | ) | 6,020,401,785 | (4,832,567,077 | ) | 6,841,570,930 | (5,681,433,226 | ) | |||||||||||||||
—Sales of polyethylene | 6,017,288,086 | (4,349,160,226 | ) | 5,300,398,384 | (4,419,385,650 | ) | 5,573,911,137 | (4,915,433,797 | ) | |||||||||||||||
—Sales of styrene | 4,057,788,576 | (2,860,155,930 | ) | 3,646,081,578 | (2,807,399,056 | ) | 3,671,395,008 | (2,935,667,971 | ) | |||||||||||||||
—Sales of polystyrene | 3,233,749,895 | (2,223,460,730 | ) | 2,779,729,256 | (2,081,118,474 | ) | 3,058,814,520 | (2,229,600,357 | ) | |||||||||||||||
—Sales of polypropylene | 2,088,848,069 | (1,741,704,869 | ) | 1,917,916,549 | (1,754,228,634 | ) | 2,360,998,975 | (1,956,936,950 | ) | |||||||||||||||
Other operations | 179,578,920 | (179,092,103 | ) | 162,577,112 | (166,476,312 | ) | 179,158,153 | (150,793,841 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
29,186,371,242 | (21,075,251,050 | ) | 26,319,956,893 | (20,536,534,109 | ) | 28,341,032,354 | (22,754,564,625 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(25) | Taxes and surcharges |
2017 | 2018 | 2019 | ||||||||||
Environmental tax | - | 9,884,596 | 74,468,532 | |||||||||
Educational surcharge | 57,110,199 | 29,548,689 | 31,297,279 | |||||||||
Stamp tax | 12,406,452 | 11,457,263 | 11,977,922 | |||||||||
City maintenance and construction tax | 11,422,040 | 6,396,986 | 6,941,519 | |||||||||
Urban land utilisation tax | 4,499,899 | 7,499,831 | 2,999,933 | |||||||||
Others | 281,756 | 7,966 | 1,200 | |||||||||
|
|
|
|
|
| |||||||
85,720,346 | 64,795,331 | 127,686,385 | ||||||||||
|
|
|
|
|
|
46
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(26) | Financial income—net |
2017 | 2018 | 2019 | ||||||||||
Interest expense | - | (4,737,934 | ) | (11,596,955 | ) | |||||||
Less: Interest income | 122,959,926 | 217,571,134 | 304,332,698 | |||||||||
Exchange (gains)/losses net | (1,369,420 | ) | 2,731,109 | 616,344 | ||||||||
Others | (288,203 | ) | (276,893 | ) | (430,068 | ) | ||||||
|
|
|
|
|
| |||||||
121,302,303 | 215,287,416 | 292,922,019 | ||||||||||
|
|
|
|
|
|
(27) | Expenses by nature |
The cost of sales, selling and administrative expenses, general and administrative expenses and R&D expenses in the income statements are listed as follows by nature:
2017 | 2018 | 2019 | ||||||||||
Consumed raw materials and low value consumables, etc. | 19,731,419,752 | 19,377,659,623 | 21,582,322,285 | |||||||||
Changes in inventories of finished goods and semi-finished products | (113,501,087 | ) | (74,827,458 | ) | 63,787,119 | |||||||
Depreciation and amortisation expenses | 1,033,701,113 | 856,810,650 | 740,171,099 | |||||||||
Employee benefits | 396,356,247 | 450,229,652 | 484,452,626 | |||||||||
Transportation costs | 363,097,609 | 341,936,880 | 434,826,733 | |||||||||
Repairs and maintenance expenses | 291,724,961 | 743,006,955 | 257,022,582 | |||||||||
Environment related cost | 124,087,000 | 92,363,868 | 85,668,630 | |||||||||
Insurance expense | 24,054,917 | 22,686,670 | 29,031,272 | |||||||||
Commodity storage fees | 21,136,571 | 20,009,925 | 24,999,282 | |||||||||
Vehicle usage fees | 11,797,551 | 16,147,726 | 16,022,232 | |||||||||
Others | 328,698,439 | 297,489,390 | 274,543,071 | |||||||||
|
|
|
|
|
| |||||||
22,212,573,073 | 22,143,513,881 | 23,992,846,931 | ||||||||||
|
|
|
|
|
|
(28) | Asset impairment losses |
2017 | 2018 | 2019 | ||||||||||
Provision for decline in the value of construction in progress (Note 6(10)) | - | - | 16,174,792 | |||||||||
Provision for decline in the value of inventories (Note 6(7)) | 61,182,497 | 38,387,497 | 9,301,069 | |||||||||
|
|
|
|
|
| |||||||
61,182,497 | 38,387,497 | 25,475,861 | ||||||||||
|
|
|
|
|
|
47
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(29) | Losses on disposal of assets |
2017 | 2018 | 2019 | ||||||||||
Losses on disposal of fixed assets | 19,097,766 | 11,620,416 | 4,973,598 | |||||||||
|
|
|
|
|
|
(30) | Other income |
2017 | 2018 | 2019 | Asset-related/ Income-related | |||||||||||
Government subsidies | ||||||||||||||
—Subsidies for research programs | - | 27,401,000 | 12,294,000 | Income-related | ||||||||||
—Special support for chemical industry zone | - | - | 9,959,000 | Income-related | ||||||||||
—Tax refund | - | 1,858,659 | 591,329 | Income-related | ||||||||||
—Subsidies for Enterprises’ Pollution Abatement Projects Regarding Emission Reduction of Industrial VOCs | 1,505,870 | - | - | Income-related | ||||||||||
Others | 333,541 | 252,390 | 181,156 | Income-related | ||||||||||
|
|
|
|
|
| |||||||||
1,839,411 | 29,512,049 | 23,025,485 | ||||||||||||
|
|
|
|
|
|
(31) | Income tax expenses |
2017 | 2018 | 2019 | ||||||||||
Current income tax | 1,748,554,810 | 1,069,032,954 | 1,078,923,279 | |||||||||
Deferred income tax | (17,344,625 | ) | 4,833,841 | 44,536,556 | ||||||||
|
|
|
|
|
| |||||||
1,731,210,185 | 1,073,866,795 | 1,123,459,835 | ||||||||||
|
|
|
|
|
|
The reconciliation from income tax calculated based on the applicable tax rates and total profit presented in the income statement to the income tax expenses is listed below:
2017 | 2018 | 2019 | ||||||||||
Total profit | 6,931,371,452 | 4,302,548,385 | 4,507,045,570 | |||||||||
Income tax expenses calculated at applicable tax rates | 1,732,842,863 | 1,075,637,096 | 1,126,761,393 | |||||||||
Income not subject to tax | (634,484 | ) | (1,974,401 | ) | (2,375,101 | ) | ||||||
Costs, expenses and losses not deductible for tax purposes | 2,184,515 | 2,005,038 | 1,581,459 | |||||||||
Deductible temporary differences for which no deferred tax asset was recognized | (3,148,604 | ) | (3,582,158 | ) | (2,896,147 | ) | ||||||
True up for final settlement of enterprise income tax in respect of previous year | (34,105 | ) | 1,781,220 | 388,231 | ||||||||
|
|
|
|
|
| |||||||
Income tax expenses | 1,731,210,185 | 1,073,866,795 | 1,123,459,835 | |||||||||
|
|
|
|
|
|
48
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(32) | Notes to the cash flow statements |
(a) | Reconciliation from net profit to cash flows from operating activities |
2017 | 2018 | 2019 | ||||||||||
Net profit | 5,200,161,267 | 3,228,681,590 | 3,383,585,735 | |||||||||
Add: Losses on provision for decline in the value of inventories | 61,182,497 | 38,387,497 | 9,301,069 | |||||||||
Impairment loss of construction in progress | - | - | 16,174,792 | |||||||||
Depreciation of fixed assets | 925,203,380 | 751,927,089 | 623,219,961 | |||||||||
Depreciation ofright-of-use assets | — | — | 5,291,350 | |||||||||
Amortisation of intangible assets | 37,939,184 | 44,243,261 | 48,746,949 | |||||||||
Amortisation of long-term prepaid expenses | 70,558,549 | 60,640,300 | 62,912,839 | |||||||||
Losses on disposal of fixed assets | 19,097,766 | 11,620,416 | 4,973,598 | |||||||||
Loss on retirement of fixed assets | - | 5,083,441 | - | |||||||||
Financial expenses /(income)—net | 2,264,172 | (212,119,466 | ) | (297,898,782 | ) | |||||||
(Increase)/decrease in deferred tax assets | (17,344,625 | ) | 3,900,284 | 32,744,412 | ||||||||
Increase in deferred tax liabilities | - | 933,557 | 11,792,144 | |||||||||
(Increase)/decrease in inventories | (324,658,041 | ) | (15,801,607 | ) | 285,221,405 | |||||||
(Increase)/decrease in operating receivables | (878,989,540 | ) | 1,653,673,735 | (65,067,135 | ) | |||||||
Increase/(decrease) in operating payables | 2,184,716,730 | (2,015,717,976 | ) | 480,330,185 | ||||||||
|
|
|
|
|
| |||||||
Net cash flows from operating activities | 7,280,131,339 | 3,555,452,121 | 4,601,328,522 | |||||||||
|
|
|
|
|
|
(b) | Net increase/(decrease) in cash and cash equivalents |
2017 | 2018 | 2019 | ||||||||||
Cash and cash equivalents at the end of year | 7,205,477,037 | 6,817,297,044 | 9,278,483,670 | |||||||||
Less: cash and cash equivalents at the beginning of year | (2,242,720,473 | ) | (7,205,477,037 | ) | (6,817,297,044 | ) | ||||||
|
|
|
|
|
| |||||||
Net increase/(decrease) in cash and cash equivalents | 4,962,756,564 | (388,179,993 | ) | 2,461,186,626 | ||||||||
|
|
|
|
|
|
49
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(32) | Notes to the cash flow statements (Cont’d) |
(c) | Cash received relating to other operating activities |
Cash received relating to other operating activities in the cash flow statement mainly includes:
2017 | 2018 | 2019 | ||||||||||
Subsidies received | - | 27,401,000 | 22,434,156 | |||||||||
Refund received from consumption tax on imported naphtha | 2,313,156,965 | - | - | |||||||||
Interests received | 122,959,926 | - | - | |||||||||
Others | 35,136,085 | 31,915,844 | 19,511,542 | |||||||||
|
| |||||||||||
2,471,252,976 | 59,316,844 | 41,945,698 | ||||||||||
|
|
|
|
|
|
(d) | Cash paid relating to other operating activities |
Cash paid relating to other operating activities in the cash flow statement mainly includes:
2017 | 2018 | 2019 | ||||||||||
Consumption tax on imported naphtha | 2,133,652,890 | - | - | |||||||||
Vehicle usage fees | 11,797,551 | 16,604,440 | 16,022,232 | |||||||||
Information system operation and maintenance costs | 7,017,379 | 11,207,649 | 12,254,033 | |||||||||
Rental expenses | 6,642,335 | 8,182,891 | 2,283,060 | |||||||||
Books and data costs | 6,147,849 | 6,015,164 | 7,580,753 | |||||||||
Conference fees | 5,079,207 | 5,243,079 | 4,295,784 | |||||||||
Consulting fees | 4,001,537 | 5,161,723 | 4,706,609 | |||||||||
Communication expenses | 3,956,580 | 4,294,365 | 5,167,141 | |||||||||
Travelling expenses | 3,920,638 | 3,934,829 | 4,261,722 | |||||||||
Business entertainment expenses | 3,509,872 | 3,422,558 | 2,996,163 | |||||||||
General office expenses | 1,743,720 | 2,386,871 | 1,819,937 | |||||||||
Environment protection expenses | 1,302,124 | 2,109,806 | 1,586,667 | |||||||||
Audit fees | 1,041,509 | 900,000 | 992,925 | |||||||||
Utilities | 825,086 | 737,018 | 754,548 | |||||||||
Others | 21,944,575 | 23,291,591 | 10,748,660 | |||||||||
|
|
|
|
|
| |||||||
2,212,582,852 | 93,491,984 | 75,470,234 | ||||||||||
|
|
|
|
|
|
50
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
6 | Notes to the financial statements (Cont’d) |
(32) | Notes to the cash flow statements (Cont’d) |
(e) | Cash received relating to other investing activities |
2017 | 2018 | 2019 | ||||||||||
Interest income | - | 210,338,429 | 304,332,698 | |||||||||
|
|
|
|
|
|
(f) | Cash paid relating to other investing activities |
2017 | 2018 | 2019 | ||||||||||
Bank guarantee letter deposit (Note 6(1)) | - | - | 90,000,000 | |||||||||
|
|
|
|
|
|
(g) | Cash payments relating to other financing activities |
2017 | 2018 | 2019 | ||||||||||
Cash paid for lease liabilities | — | — | 6,123,689 | |||||||||
|
|
|
|
|
|
The total cash outflow for leases in 2019 was RMB 8,406,749, except for the amount of cash paid for lease liabilities, the remaining cash outflow was recognized in operating activities.
7 | Related parties and related party transactions |
(1) | The investors |
(a) | General information of the investors |
Investors | Place of registration | Nature of business | ||
Sinopec Corp. | Beijing, the PRC | Oil and gas exploration, development, production and marketing, crude oil processing, oil products production, trading and distribution | ||
SPC | Shanghai, the PRC | Crude oil processing, petroleum products, chemical products and synthetic fibres, etc. | ||
Gaoqiao Petrochemical | Shanghai, the PRC | Crude oil processing, petroleum products, chemical products and storage, etc. |
(b) | The percentages of shareholding and voting rights in the Company held by the investors |
31 December 2018 | 31 December 2019 | |||||||
Shareholding (%) | Shareholding (%) | |||||||
Sinopec Corp. | 30 | % | 30 | % | ||||
SPC | 20 | % | 20 | % | ||||
Gaoqiao Petrochemical | 50 | % | 50 | % | ||||
|
|
|
|
51
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(2) | Nature of related parties that do not control or are not controlled by the Company |
Relationship with the Company | ||
China Jinshan Associated Trading Corporation | Subsidiary of SPC | |
Shanghai Jinshan Trading Corporation | Subsidiary of SPC | |
Zhejiang Jin Yong Acrylic Fiber Company Limited | Former subsidiary of SPC until August 2019 | |
China International United Petroleum and Chemical Company Limited | Subsidiary of Sinopec Corp. | |
China Petrochemical International Company Limited | Subsidiary of Sinopec Corp. | |
China petrochemical International Enterprise Company Limited Ningbo Bidding Center | Subsidiary of Sinopec Corp. | |
China Petrochemical International Tianjin Company Limited | Subsidiary of Sinopec Corp. | |
China Petrochemical Technology Company Limited | Subsidiary of Sinopec Corp. | |
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries | Subsidiary of Sinopec Corp. | |
China Petroleum and Chemical Corporation Beijing Yanshan Branch | Subsidiary of Sinopec Corp. | |
China Petroleum and Chemical Corporation Guangzhou Branch | Subsidiary of Sinopec Corp. | |
China Petroleum and Chemical Corporation Jinling Branch | Subsidiary of Sinopec Corp. | |
China Petroleum and Chemical Corporation Zhenhai Refining Branch | Subsidiary of Sinopec Corp. | |
China Sinopec Corporation Qingdao Institute of Safety Engineering | Subsidiary of Sinopec Corp. | |
Hangzhou Petrochemical Company Limited | Subsidiary of Sinopec Corp. | |
Nanjing Yangzi Petrochemical Refining Company Limited | Subsidiary of Sinopec Corp. | |
Petrochemical Engineering Quality Supervision General Station | Subsidiary of Sinopec Corp. | |
Petro-Cyber Works Information Technology Company Limited | Subsidiary of Sinopec Corp. | |
Shanghai Construction Company Limited | Subsidiary of Sinopec Corp. | |
Shanghai Petrochemical Machinery Manufacturing Company Limited | Subsidiary of Sinopec Corp. | |
Shanghai Leader Catalyst Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Assets Management Corporation Baling Petrochemical Branch | Subsidiary of Sinopec Corp. | |
Sinopec Beijing Catalyst Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Catalyst Company Limited Beijing AUDA Branch | Subsidiary of Sinopec Corp. | |
Sinopec Catalyst Company Limited Shanghai Branch | Subsidiary of Sinopec Corp. | |
Sinopec Chemical Commercial Holding Company Limited Huabei Branch | Subsidiary of Sinopec Corp. | |
Sinopec Chemical Commercial Holding Company Limited Huadong Branch | Subsidiary of Sinopec Corp. |
52
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(2) | Nature of related parties that do not control or are not controlled by the Company (Cont’d) |
Relationship with the Company | ||
Sinopec Chemical Commercial Holding Company Limited Qilu Business Department | Subsidiary of Sinopec Corp. | |
Sinopec Consulting Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Engineering Incorporation | Subsidiary of Sinopec Corp. | |
Sinopec Engineering Quality Monitoring Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Europa Handels GmbH | Subsidiary of Sinopec Corp. | |
Sinopec Guangzhou Company | Subsidiary of Sinopec Corp. | |
Sinopec Huadong Sales Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Huadong Supplies and Equipment Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Jiangsu Sales Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Nanjing Engineering Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Ningbo Engineering Company Limited Shanghai Jinshan Branch | Subsidiary of Sinopec Corp. | |
Sinopec Ningbo Engineering Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Shanghai Engineering Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Shanghai Pharmaceutical Industrial Design & Research Institute Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Shanghai Sales Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Technology Development Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Tendering Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Qingdao Refining&Chemical Company Limited | Subsidiary of Sinopec Corp. | |
Sinopec Qingdao Safety Engineering Institute | Subsidiary of Sinopec Corp. | |
The Fifth Construction Company of Sinopec | Subsidiary of Sinopec Corp. | |
Yihua Bona Fabric Company Limited | Joint venture of Sinopec Corp. | |
Shanghai Huayi Information Technology Company Limited | Joint venture of Sinopec Corp. | |
Shanghai Sinopec Mitsui elastomer Company Limited | Associated Company of Gaoqiao Petrochemical | |
Basf Gaoqiao Specialty Chemicals (Shanghai) Company Limited | Associated Company of Gaoqiao Petrochemical | |
BASF-YPC. Shanghai Company Limited | Joint venture of Gaoqiao Petrochemical | |
Shanghai Chemical Industry Park Logistics Company Limited | Joint venture of SPC | |
BP Singapore Pte Limited | Non-related party from 2018 |
53
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(3) | Significant related party transactions |
(a) | Pricing policies |
The Company’s pricing on products sold to related parties and raw materials purchased from related parties is negotiated by both parties.
(b) | Purchase of goods |
2017 | 2018 | 2019 | ||||||||||
China Petroleum and Chemical Corporation Zhenhai Refining Branch | 3,230,022,673 | 3,052,932,406 | 3,304,883,614 | |||||||||
Gaoqiao Petrochemical | 2,440,156,304 | 2,747,621,763 | 2,910,396,011 | |||||||||
SPC | 1,334,558,457 | 1,657,079,871 | 1,907,624,450 | |||||||||
China Petroleum and Chemical Corporation Jinling Branch | 1,601,281,956 | 1,783,036,327 | 1,506,898,808 | |||||||||
Sinopec Huadong Sales Company Limited | 350,545,876 | 630,897,698 | 1,458,417,305 | |||||||||
China International United Petroleum and Chemical Company Limited | 3,933,127,788 | 2,443,415,922 | 1,172,266,702 | |||||||||
Sinopec Guangzhou Company | 669,178,018 | 863,583,269 | 1,025,342,177 | |||||||||
China Jinshan Associated Trading Corporation | 729,417,712 | 1,618,230,602 | 760,261,652 | |||||||||
Sinopec Qingdao Petrochemical Company Limited | 326,273,558 | 321,035,789 | 234,080,117 | |||||||||
Shanghai Leader Catalyst Company Limited | 33,637,641 | 28,858,316 | 36,235,654 | |||||||||
Sinopec Catalyst Shanghai Company | 34,161,538 | 35,966,432 | 33,933,647 | |||||||||
Shanghai Jinshan Trading Corporation | 427,265,041 | 387,977,830 | 32,366,400 | |||||||||
Sinopec Chemical Commercial Holding Company Limited Qilu Business Department | 24,110,443 | - | - | |||||||||
Hangzhou Petrochemical Company Limited | 4,331,106 | - | - | |||||||||
Sinopec Huadong Supplies and Equipment Company Limited | 100,056 | - | - | |||||||||
China Petroleum and Chemical Corporation Beijing Yanshan Branch | - | - | 16,357,331 | |||||||||
Nanjing Yangzi Petrochemical Refining Company Limited | 8,577,345 | 17,617,842 | 13,018,804 | |||||||||
Sinopec Catalyst Company Beijing AUDA Branch | 8,232,949 | 9,699,487 | 12,932,621 | |||||||||
Basf Gaoqiao Specialty Chemicals (Shanghai) Company Limited | - | 3,601,879 | 7,814,924 | |||||||||
Sinopec Catalyst Company | - | 11,141,981 | 5,898,896 | |||||||||
China Petroleum&Chemical Corporation Shanghai Petroleum Branch | 212,821 | 182,685 | - | |||||||||
|
|
|
|
|
| |||||||
15,155,191,282 | 15,612,880,099 | 14,438,729,113 | ||||||||||
|
|
|
|
|
|
54
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(3) | Significant related party transactions (Cont’d) |
(c) | Sales of goods |
2017 | 2018 | 2019 | ||||||||||
SPC | 2,017,721,399 | 2,307,052,507 | 3,264,999,401 | |||||||||
Gaoqiao Petrochemical | 2,120,059,363 | 2,126,304,877 | 2,092,647,270 | |||||||||
Shanghai Sinopec Mitsui Elastomers Company Limited | 357,904,028 | 423,696,356 | 424,750,545 | |||||||||
China Jinshan Associated Trading Corporation | 1,572,857,855 | 948,134,109 | 369,403,703 | |||||||||
Sinopec Huadong Sales Company Limited | 88,036,870 | 86,682,059 | 187,725,566 | |||||||||
China Petrochemical International Tianjin Company Limited | - | 29,479,434 | 68,242,405 | |||||||||
Yihua Bona Fabric Company Limited | - | 21,811,776 | 19,537,977 | |||||||||
Sinopec Jiangsu Sales Company Limited | 139,170,902 | - | - | |||||||||
Sinopec Assets Management Corporation Baling Petrochemical Branch | 33,219,547 | - | - | |||||||||
Sinopec Chemical Commercial Holding Company Limited Huabei Branch | 48,187,411 | - | - | |||||||||
|
|
|
|
|
| |||||||
6,377,157,375 | 5,943,161,118 | 6,427,306,867 | ||||||||||
|
|
|
|
|
|
(d) | Purchasing engineering construction and maintenance services |
2017 | 2018 | 2019 | ||||||||||
Sinopec Shanghai Engineering Company Limited | 3,809,155 | 87,706,548 | 70,204,357 | |||||||||
Sinopec Ningbo Engineering Company Limited Jinshan Branch | 10,024,391 | 26,751,464 | 18,939,059 | |||||||||
Sinopec Engineering Incorporation | - | 8,466,981 | 9,435,934 | |||||||||
Sinopec Nanjing Engineering Company Limited | 8,228,154 | 904,198 | 1,220,197 | |||||||||
Sinopec Consulting Company Limited | - | - | 754,717 | |||||||||
Sinopec Ningbo Engineering Company Limited | 951,671 | 921,970 | 329,079 | |||||||||
Shanghai Petrochemical Machinery Manufacturing Company Limited | 462,991 | 17,722,627 | 150,094 | |||||||||
Sinopec Engineering Quality Monitoring Company Limited | - | - | 72,075 | |||||||||
The Fifth Construction Company of Sinopec | 3,049,574 | - | - | |||||||||
Sinopec Technology Development Company Limited | - | 591,000 | - | |||||||||
Sinopec Europa Handels GmbH | - | 18,823 | - | |||||||||
|
|
|
|
|
| |||||||
26,525,936 | 143,083,611 | 101,105,512 | ||||||||||
|
|
|
|
|
|
(e) | Rental expenses |
2017 | 2018 | 2019 | ||||||||||
SPC | 2,042,369 | 3,973,630 | 2,050,914 | |||||||||
|
|
|
|
|
|
55
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(3) | Significant related party transactions (Cont’d) |
(f) | Consulting service fee |
2017 | 2018 | 2019 | ||||||||||
Shanghai Huayi Information Technology Company Limited | - | 1,697,676 | 7,390,272 | |||||||||
Petro-CyberWorks Information Technology Company Limited | 1,782,547 | 966,145 | 3,101,213 | |||||||||
Sinopec Qingdao Safety Engineering Institute | 553,525 | 3,945,283 | 2,800,853 | |||||||||
China Petroleum and Chemical Corporation Beijing Research Institute of Chemical Industries | 591,000 | 62,736 | 1,603,774 | |||||||||
Shanghai Chemical Industry Park Logistics Company Limited | - | - | 939,881 | |||||||||
Petrochemical Engineering Quality Supervision General Station | - | 924,854 | - | |||||||||
Sinopec Shanghai Pharmaceutical Industry Design & Research Institute Company Limited | - | 469,811 | - | |||||||||
Sinopec Tending Company Limited | - | 51,887 | - | |||||||||
China International United Petroleum & Chemicals Company Limited | - | 41,400 | - | |||||||||
Sinopec Engineering Incorporation | 2,792,453 | - | - | |||||||||
BP Singapore Pte Limited(Non-related party from 2018) | 147,661 | - | - | |||||||||
|
|
|
|
|
| |||||||
5,867,186 | 8,159,792 | 15,835,993 | ||||||||||
|
|
|
|
|
|
(g) | Transportation service fee |
2017 | 2018 | 2019 | ||||||||||
Shanghai Chemical Industry Park Logistics Company Limited | 114,377,980 | 88,258,799 | 109,660,856 | |||||||||
BP Singapore Pte Limited(Non-related party from 2018) | 293,167 | - | - | |||||||||
|
|
|
|
|
| |||||||
114,671,147 | 88,258,799 | 109,660,856 | ||||||||||
|
|
|
|
|
|
(4) | Receivables from and payables to related parties |
(a) | Accounts receivable |
31 December 2018 | 31 December 2019 | |||||||
SPC | 116,142,876 | 74,760,722 | ||||||
China Jinshan Associated Trading Corporation | 53,956,263 | 51,017,834 | ||||||
Sinopec Chemical Commercial Holding Company Limited Huadong Branch | - | 23,980,942 | ||||||
Shanghai Sinopec Mitsui Elastomers Company Limited | 23,168,735 | 18,967,241 | ||||||
China Petrochemical International Tianjin Company Limited | 3,249,433 | 6,212,670 | ||||||
Zhejiang Jin Yong Acrylic Fibre Company Limited | 8,797,278 | - | ||||||
|
|
|
| |||||
205,314,585 | 174,939,409 | |||||||
|
|
|
|
56
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
7 | Related parties and related party transactions (Cont’d) |
(4) | Receivables from and payables to related parties (Cont’d) |
(b) | Accounts payable |
31 December 2018 | 31 December 2019 | |||||||
China International United Petroleum and Chemical Company Limited | - | 274,787,922 | ||||||
Sinopec Huadong Sales Company Limited | 2,726,258 | 131,183,675 | ||||||
China Petroleum and Chemical Corporation Zhenhai Refining Branch | 125,225,852 | 109,001,735 | ||||||
China Petroleum and Chemical Corporation Guangzhou Branch | - | 87,194,228 | ||||||
Gaoqiao Petrochemical | 11,309,680 | 61,237,298 | ||||||
Sinopec Qingdao Refining&Chemical Company Limited | - | 52,233,605 | ||||||
China Jinshan Associated Trading Corporation | 119,682,143 | 32,589,711 | ||||||
SPC | 179,455 | 24,476,990 | ||||||
Sinopec Catalyst Company Limited Shanghai Branch | 6,462,737 | 11,631,821 | ||||||
Shanghai Chemical Industry Park Logistics Company Limited | 2,310,919 | 6,639,847 | ||||||
Shanghai Huayi Infromation Technology Company Limited | - | 5,397,116 | ||||||
Shanghai Leader Catalyst Company Limited | - | 5,373,541 | ||||||
Petro-Cyber Works Information Technology Company Limited | - | 806,000 | ||||||
Sinopec Nanjing Engineering Company Limited | 68,698 | 378,410 | ||||||
BASF-YPC. Shanghai Company Limited | 240,804 | 371,200 | ||||||
China Petroleum and Chemical Corporation Jinling Branch | 18,747,780 | 371,127 | ||||||
Sinopec Ningbo Engineering Company Limited Jinshan Branch | 3,341,650 | 199,776 | ||||||
Shanghai Petrochemical Machinery Manufacturing Company Limited | 6,478,197 | - | ||||||
The Fifth Construction Company of Sinopec | 229,894 | - | ||||||
Sinopec Ningbo Engineering Company Limited | 36,221 | - | ||||||
|
|
|
| |||||
297,040,288 | 803,874,002 | |||||||
|
|
|
|
57
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
8 | Commitments |
(1) | Capital commitments |
Capital expenditures contracted for by the Company at the balance sheet date but are not yet necessary to be recognized on the balance sheet are as follows:
31 December 2018 | 31 December 2019 | |||||||
Buildings, machinery and equipment | 50,791,998 | 82,201,314 | ||||||
|
|
|
|
9 | Financial instrument and risk |
The Company’s activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance.
(1) | Market risk |
(a) | Foreign exchange risk |
The Company’s major operational activities are carried out in Mainland China. Sales transactions are mainly denominated in RMB while purchase transactions are mainly denominated in USD and RMB. The Company is exposed to foreign exchange risk arising from the recognized assets and liabilities, and future transactions denominated in foreign currencies, primarily with respect to US dollars. The Company’s finance department is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies to minimise the foreign exchange risk. Therefore, the Company may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk. During 2018 and 2019, the Company did not enter into any forward exchange contracts or currency swap contracts.
The financial assets and the financial liabilities denominated in foreign currencies, which are held by the Company, whose recording currencies are RMB, are expressed in RMB as at 31 December 2018 and 2019 as follows:
31 December 2018 | 31 December 2019 | |||||||
Financial assets denominated in foreign currency - | ||||||||
Cash at bank and on hand | 37,267,495 | 38,499,958 | ||||||
|
|
|
| |||||
Financial liabilities denominated in foreign currency - | ||||||||
Payables | (1,354,167 | ) | (799,980 | ) | ||||
|
|
|
|
As at 31 December 2019, if the currency had strengthened/weakened by 10% against the USD while all other variables had been held constant, the Company’s net profit for the year would have been approximately RMB 2,827,498 lower/higher (31 December 2018: approximately RMB 3,591,333 higher/lower) for various financial assets and liabilities denominated in USD.
58
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
9 | Financial instruments and risk (Cont’d) |
(b) | Interest rate risk |
The interest rate risk of the Company is mainly generated by short-term loan. Financial liabilities with floating interest rate make the Company face interest rate risk of cash flow, while financial liabilities with fixed interest rate make the Company face interest rate risk of fair value. The Company determines the relative proportions of fixed and floating rate contracts in accordance with prevailing market conditions. As at 31 December 2019, the total amount of the floating rate contract in the Company’s borrowing is RMB 500,000,000 (31 December 2018: Nil).
The financial department of the Company headquarters continuously monitors the interest rate level of the Company. Higher interest rates would increase the cost of the new interest-bearing debt and the Company has not yet been paid to the floating interest at apre-determined rate of interest-bearing debt payments, and our Company ‘s financial performance have a significant adverse impact, management is on the basis of the latest market situation to adjust in time, the adjustment of interest rate swap arrangements may be carried out to reduce the interest rate risk. There is no interest rate swap arrangement for the Company in 2017, 2018 and 2019.
(2) | Credit risk |
Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bank, accounts receivable, other receivables and notes receivable.
The Company expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses fromnon-performance by these counterparties.
In addition, the Company has policies to limit the credit exposure on accounts receivable, other receivables and notes receivable. The Company assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Company. In respect of customers with a poor credit history, the Company will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Company is limited to a controllable extent.
As at 31 December 2018 and 2019, the Company has no collateral or other credit enhancement held as a result of a material debtor’s mortgage.
59
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
9 | Financial instruments and risk (Cont’d) |
(3) | Liquidity risk |
Cash flow forecasting is performed by the Company. The Company monitors the Company’s short-term and long-term liquidity requirements to ensure it has sufficient cash and securities that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institutions so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.
The financial liabilities of the Company at the balance sheet date are analyzed by their maturity dates below at their undiscounted contractual cash flows:
31 December 2018 | ||||||||||||||||||||
Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||||||||||||
Accounts payable | (1,423,460,500 | ) | - | - | - | (1,423,460,500 | ) | |||||||||||||
Other payables | (9,844,208 | ) | - | - | - | (9,844,208 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(1,433,304,708 | ) | - | - | - | (1,433,304,708 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
31 December 2019 | ||||||||||||||||||||
Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||||||||||||
Accounts payable | (1,588,679,065 | ) | - | - | - | (1,588,679,065 | ) | |||||||||||||
Short-term loan | (500,000,000 | ) | - | - | - | (500,000,000 | ) | |||||||||||||
Other payables | (25,117,224 | ) | - | - | - | (25,117,224 | ) | |||||||||||||
Non-current liabilities mature within one year | (121,509 | ) | - | - | - | (121,509 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(2,113,917,798 | ) | - | - | - | (2,113,917,798 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
60
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
10 | Fair value estimation |
The level in which fair value measurement is categorised is determined by the level of the fair value hierarchy of the lowest level input that is significant to the entire fair value measurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
(1) | Financial assets measured at fair value |
As at 31 December 2019, continuing assets and liabilities measured at fair value are presented in the above three levels as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through other comprehensive income — | ||||||||||||||||
Notes receivable | - | 275,684,637 | - | 275,684,637 | ||||||||||||
|
|
|
|
|
|
|
|
As at December 31 2018, there had no assets and liabilities continuously measured at fair value.
In the year of 2019, there is no transition between levels of the Company (2017 and 2018: Nil).
(2) | Assets and liabilities not measured at fair value but for which the fair value is disclosed |
The Company’s financial assets and liabilities measured at amortized cost mainly include notes receivable, receivables, other current assets and payables.
As at 31 December 2018 and 2019, the carrying amount of the financial assets and liabilities not measured at fair value is a reasonable approximation of their fair value.
61
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
11 | Capital management |
The Company’s capital management policies aim to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, or sell assets to reduce debts.
The Company’s total capital is calculated as ‘owners’ equity’ as shown in the balance sheet. The Company is not subject to external mandatory capital requirements, and monitors capital on the basis of gearing ratio.
As at 31 December 2018 and 2019, the gearing ratios of the Company were as follows:
31 December 2018 | 31 December 2019 | |||||||
Gearing ratio | 14.83 | % | 19.01 | % | ||||
|
|
|
|
12 | Subsequent event |
Following the outbreak of Coronavirus Disease 2019 (“theCOVID-19 outbreak”) in early 2020, a series of precautionary and control measures have been and continued to be implemented across the country, including extension of the Chinese New Year holiday nationwide, postponement of work resumption after the Chinese New Year holiday in some regions, certain level of restrictions and controls over the travelling of people and traffic arrangements, quarantine of certain residents, heightening of hygiene and epidemic prevention requirements in factories and offices and encouraged social distancing, etc
Due to the outbreak ofCOVID-19 and the relevant precautionary and control measures taken place, amount of the Company’s production has declined compared with the same period last year. Up to the date on which this set of financial statements were authorised for issue, the impacts of theCOVID-19 outbreak on the Company’s customers’ financial positions and the macro-economic conditions as a whole are still uncertain, the Company is unable to quantify the related financial effects. The Company will pay close attention to the development of theCOVID-19 outbreak, perform further assessment of its impact and take relevant measures
62
SHANGHAI SECCO PETROCHEMICAL COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017, 2018 AND 2019(AMOUNTS AS OF 31 DECEMBER 2018 AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2018 ARE NOT COVERED BY THE INDEPENDENT AUDITOR’S REPORT INCLUDED HEREIN)
(All amounts in RMB Yuan unless otherwise stated)
13 | Reconciliation to United States generally accepted accounting principles |
The financial statements have been prepared in accordance with Accounting Standards for Business Enterprises in the People’s Republic of China (“CAS”), which differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences are described in the reconciliation tables below. Other differences do not have a significant effect on either net profit or owners’ equity. The effects of the significant adjustments to net profit for the years ended 31 December 2017, 2018 and 2019 which would be required if U.S. GAAP were to be applied instead of CAS are summarized as follows:
2017 | 2018 | 2019 | ||||||||||
Net profit under CAS | 5,200,161,267 | 3,228,681,590 | 3,383,585,735 | |||||||||
Adjustments: | ||||||||||||
Employees’ bonus and welfare fund (a) | (17,026,931 | ) | (400,000 | ) | (500,000 | ) | ||||||
|
|
|
|
|
| |||||||
Net profit under U.S. GAAP | 5,183,134,336 | 3,228,281,590 | 3,383,085,735 | |||||||||
|
|
|
|
|
|
The effects of the significant adjustments to owners’ equity as at 31 December 2018 and 2019 which would be required if U.S. GAAP were to be applied instead of CAS are summarized as follows:
31 December 2018 | 31 December 2019 | |||||||
Owners’ equity under CAS | 12,822,769,487 | 13,669,355,222 | ||||||
Adjustments: | ||||||||
Employees’ bonus and welfare fund (a) | 76,931,821 | 76,431,821 | ||||||
|
|
|
| |||||
Owners’ equity under U.S. GAAP | 12,899,701,308 | 13,745,787,043 | ||||||
|
|
|
|
(a) | Employees’ bonus and welfare fund |
In accordance with the Law of the PRC on Chinese-Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated the employees’ bonus and welfare fund of net profit after setting off accumulated losses of previous years and before profit distributions to the investors. The employees’ bonus and welfare fund is restricted to fund payments of special bonus to employees and for the collective welfare of employees. None of it is allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor can it be distributed except under liquidation.
Under CAS, appropriation of the employees’ bonus and welfare fund is a liability in nature and accounted for as a transfer from retained earnings to employees’ bonus and welfare fund, a liability account. Subsequent payments is accounted for as a release of the Company’s liability.
Under U.S. GAAP, appropriation to the employees’ bonus and welfare fund is accounted for as a transfer from retained earnings to the statutory reserves. Subsequent payment is accounted for as expenses or assets based on the usage of the payment, and proportionate retained earnings and the statutory reserves are reversed concurrently.
63