Securities code: 002456 securities abbreviation: Ofilm Group Co.Ltd(002456) Announcement No.: 2022-018
Announcement on the reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
On February 6, 2022, Ofilm Group Co.Ltd(002456) (hereinafter referred to as ” Ofilm Group Co.Ltd(002456) ” or “the company”) received the notice on Ofilm Group Co.Ltd(002456) from the second Department of management of listed companies of Shenzhen Stock Exchange (company Department notice [2022] No. 110). The company replied as follows:
On January 29, 2022, your company disclosed the performance forecast for 2021. It is estimated that the net profit attributable to the shareholders of the listed company (hereinafter referred to as “net profit”) in 2021 will be a loss of 1.9 billion yuan to 2.7 billion yuan, and the net profit after deduction will be a loss of 1.92 billion yuan to 2.67 billion yuan. According to the announcement, the decline of your company’s performance mainly includes the following reasons: first, the termination of procurement relationship of specific overseas customers and the reduction of smartphone business shipments of H customers, resulting in a sharp year-on-year decline in the shipments of multiple products of the company; Second, the company has conducted a comprehensive inventory and impairment test of various assets, and accrued impairment reserves for assets that may have impairment losses; Third, the company compensated the relevant asset impairment losses of the joint-stock Company Anhui jingzhuo Guangxian Technology Co., Ltd. and its subsidiaries (hereinafter referred to as “Anhui jingzhuo”).
1、 Describe in detail the assets of your company for which impairment provision is made, including but not limited to asset type, impairment basis, calculation process, etc; Verify and explain whether the relevant signs and basis of impairment occurred in 2021, whether there is a one-time provision for large impairment, and whether the provision for impairment of relevant assets in previous years is sufficient.
Company reply:
According to the accounting standards for Business Enterprises No. 8 – asset impairment, an enterprise shall judge whether there is any sign of possible impairment of assets on the balance sheet date. If there is any sign of impairment of assets, its recoverable amount shall be estimated. The recoverable amount shall be determined according to the higher one between the net amount of the fair value of the asset minus the disposal expenses and the present value of the expected future cash flow of the asset. If the recoverable amount of an asset is lower than its book value, the book value of the asset shall be written down to the recoverable amount. The written down amount shall be recognized as asset impairment loss and included in the current profits and losses, and the corresponding asset impairment reserves shall be accrued at the same time.
On the balance sheet date, the company conducts a comprehensive inventory of the assets at the end of the period according to the requirements of the standards and relevant regulations, judges whether there are signs of impairment, and performs impairment test. For assets with signs of impairment, the company recognizes the asset impairment loss according to the principle of the lower of recoverable amount and book value.
According to the evaluation of the company, the assets with provision for impairment in 2021 are as follows:
(I) credit impairment loss of receivables
The company assesses the expected credit loss of financial instruments based on individual and combination. When assessing the expected credit loss, the company considers the reasonable and reliable information about past events, current situation and future economic situation prediction.
Combination name: basis for determining combination and accrual method
Significant single amount and significant single amount after initial recognition
Receivables withdrawn by single account for receivables with credit impairment in single major combination
Independently determine its credit loss;
With reference to the experience of historical credit loss and in combination with the individual withdrawal of bad debts
All receivables other than the pre aging risk portfolio and the provision for future economic conditions
Bad debt reserves are measured in the current period.
A customer of the company has been ordered by the court to enter the bankruptcy liquidation procedure. The company calculates the liquidation rate and estimates the recoverable amount of its receivables according to the phased work report of the bankruptcy administrator obtained in December 2021. The liquidation rate of bankruptcy liquidation is estimated in combination with the realization value of its asset items and taking into account the guarantee creditor’s rights, employee creditor’s rights, taxes and other items that need to be paid first. The company calculates the recoverable amount of the accounts receivable according to the above repayment rate, and withdraws the credit impairment loss of the accounts receivable separately based on the principle of prudence.
When a single financial asset cannot evaluate the information of expected credit loss at a reasonable cost, the company divides the accounts receivable portfolio according to the characteristics of credit risk, and calculates the expected credit loss on the basis of the portfolio.
To sum up, the above events occurred in 2021, and the credit impairment loss is recognized. It is estimated that the impairment amount withdrawn in 2021 is about RMB 60 million to RMB 80 million.
(II) inventory falling price reserves
According to the relevant provisions of accounting standards for Business Enterprises No. 1 – inventory, the inventory on the balance sheet date is measured at the lower of cost and net realizable value, and the inventory falling price reserves are withdrawn according to the difference between the cost of a single inventory and the net realizable value. For the inventory directly used for sale, its net realizable value shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes in the normal production and operation process; For inventories that need to be processed, the net realizable value is determined by the estimated selling price of finished products minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes in the normal process of production and operation;
Whether there are signs of impairment of inventories can be judged by the following analysis:
(1) The market price of the inventory continues to fall, and there is no hope of recovery in the foreseeable future.
(2) The cost of the product produced by the enterprise using this raw material is greater than the sales price of the product.
(3) Due to the renewal of products, the original inventory of raw materials can no longer meet the needs of new products, and the market price of the raw materials is lower than its book cost.
(4) The market demand changes due to the outdated goods or services provided by enterprises or the change of consumer preferences, resulting in the gradual decline of market prices.
(5) Other circumstances sufficient to prove that the inventory has been substantially impaired.
The company’s operating revenue in 2021 decreased significantly year-on-year, and some equipment was idle, resulting in an increase in unit cost. On the balance sheet date, the company comprehensively checked the ending inventory according to the requirements of the standards and relevant regulations, judged whether there were signs of impairment, and carried out impairment test.
Based on the selling price of the latest order of the product, the net realizable value is determined by deducting the processing expenses and sales expenses processed into the final product and sold, and the inventory impairment loss is accrued. The above impairment signs occurred in 2021, and the impairment amount is expected to be about 130 million yuan to 400 million yuan in 2021.
(III) provision for impairment of fixed assets
According to the accounting standards for Business Enterprises No. 8 – asset impairment, the following signs indicate that the asset may be impaired.
(1) The economic, technical or legal environment in which the enterprise operates and the market in which the assets are located will undergo significant changes in the current period or in the near future, which will have an adverse impact on the enterprise.
(2) There is evidence that the asset has become obsolete or its entity has been damaged.
(3) Assets have been or will be idle, terminated or planned to be disposed in advance.
According to the requirements of the standards and relevant regulations, the company conducts a comprehensive inventory of fixed assets at the end of the period, re estimates the recoverable amount of relevant assets by using the market method or income method, and carries out impairment test.
The net amount of the fair value of an asset minus the disposal expenses shall be determined according to the sales agreement price in fair transactions minus the amount directly attributable to the disposal expenses of the asset. If there is no sales agreement but there is an active market for assets, it shall be determined according to the amount of the market price of the assets minus the disposal expenses. The market price of an asset should usually be determined according to the bid of the buyer of the asset. In the absence of a sales agreement and an active asset market, the net amount of the fair value of the asset minus the disposal expenses shall be estimated on the basis of the best available information. The net amount can be estimated with reference to the recent transaction prices or results of similar assets in the same industry.
If it is still impossible to reliably estimate the net amount of the fair value of the asset minus the disposal expenses according to the above provisions, the present value of the expected future cash flow of the asset shall be taken as its recoverable amount.
In March 2021, affected by the termination of procurement relationship by specific overseas customers, the company recognized the asset impairment loss of the company’s machinery and equipment related to specific overseas customers based on the principle of prudence and the evaluation report issued by guozhonglian asset appraisal Land Real Estate Appraisal Co., Ltd. according to the lower of recoverable amount and book value, In 2020, the provision for impairment was 2.355 billion yuan.
In April 2021, the company transferred / sold its 100% equity of Guangzhou delta Imaging Technology Co., Ltd. and its subsidiary Jiangxi Jingrun optics Co., Ltd. in relation to the supply of cameras to specific overseas customers to Wingtech Technology Co.Ltd(600745) at the price of 170 million yuan and 72 million yuan respectively. For details, please refer to the announcement on selling equity and assets of subsidiaries (Announcement No.: 2021-032) disclosed by the company on March 30, 2021.
In October 2021, Jiangxi zhanyao Microelectronics Co., Ltd., a subsidiary of the company, transferred its control over some operating assets held by the company related to the touch business of specific overseas customers by selling the equity of its subsidiaries and waiving the right to increase capital in the same proportion. For details, please refer to the announcement on selling the equity of subsidiaries and waiving the right to increase capital in the same proportion and related party transactions disclosed by the company on October 14, 2021 (Announcement No.: 2021-101).
In 2021, for other assets related to the business of specific overseas customers, the company continues to actively seek measures such as external transfer and internal comprehensive utilization to reduce actual losses. Up to now, the company has sold some remaining relevant assets (for details, please refer to the announcement on the stock assets of subsidiaries to be sold disclosed by the company on September 16, 2021, Announcement No.: 2021-101), but affected by the complexity of production line matching, customer processing demand, budget and changes in relevant markets, The company failed to reach a transaction with the original intention party on some of the remaining equipment and other assets related to specific overseas customers. The company hired guozhonglian asset appraisal Land Real Estate Appraisal Co., Ltd. to conduct impairment test and evaluation on this part of equipment again.
The above impairment signs occurred in 2021. The asset impairment loss is recognized according to the principle of the lower of the recoverable amount and the book value. It is estimated that the impairment amount is about 420 million yuan to 570 million yuan in 2021.
(IV) provision for impairment of intangible assets
In 2021, due to great changes in the market environment, the shipments of several products of the company decreased significantly year-on-year. The company conducted a comprehensive inventory of intangible assets at the end of the period in accordance with the standards and relevant regulations. According to the company’s evaluation, there are signs of impairment of patents and know-how corresponding to relevant products.
Since there is no sales agreement or active asset market, and there is no recent transaction price or result of similar assets in the same industry for reference, the company takes the present value of the expected future cash flow of the asset as its recoverable amount for impairment test.
Combined with the industry environment, technology development trend, production and operation, specific content of intangible assets, product structure type, process optimization and other factors, after comprehensive evaluation with the company’s R & D department and patent department, it is expected that this part of patents and proprietary technologies will not bring net cash inflow to the company in the future.
The above impairment signs occurred in 2021. The asset impairment loss is recognized according to the principle of the lower of the recoverable amount and the book value. It is estimated that the impairment amount in 2021 is about RMB 90 million to RMB 250 million.
To sum up, the above signs and basis of asset impairment occurred in 2021, which is a reasonable judgment made by the company based on its own asset status, can more objectively and truly reflect the value of assets, and is in line with the actual situation of the company. The company strictly checks the status of various assets every year, and in combination with market dynamics, the actual situation of the company, the expected recoverable amount and other relevant factors, takes prudence as the principle, carries out impairment test on various assets of the company and accrues relevant asset impairment. The provision for relevant asset impairment in this year and previous years is sufficient and reasonable, which is in line with the relevant provisions of the accounting standards for business enterprises.
Up to now, the impairment test of various assets of the company in 2021 has not been completed, and the final result will be determined after evaluation and audit by the evaluation institution and accounting firm hired by the company.
2、 In combination with the arrangement of the agreement, the time and progress of the review procedures for the signing and performance of the agreement related to your company’s compensation for Anhui jingzhuo’s asset impairment loss, explain in detail the rationality of the relevant compensation loss included in 2021 and whether it complies with the relevant provisions of the accounting standards for business enterprises.
Company reply:
(I) overview of early progress
1. The company held a general manager’s office meeting on October 11, 2019, which approved the establishment of a wholly-owned subsidiary Anhui jingzhuo Guangxian Technology Co., Ltd. in Shucheng County, Lu’an City, Anhui Province, with a registered capital of 10 million yuan.
2. On October 23, 2019, the company held the 27th (Interim) meeting of the Fourth Board of directors, which approved the company’s plan to increase the capital of Anhui jingzhuo Guangxian Technology Co., Ltd. by 720 million with its own funds. At the same time, the company’s wholly-owned subsidiary Nanchang Ofilm Group Co.Ltd(002456) Technology Co., Ltd Nanchang Ofilm Group Co.Ltd(002456) Technology Co., Ltd., a holding subsidiary, and Nanchang Oufei Touch Technology Co., Ltd., a holding subsidiary, plan to increase the capital of Anhui jingzhuo Guangxian Technology Co., Ltd. by 2.688 billion yuan with operating assets. After the above capital increase is completed, the registered capital of Anhui jingzhuo Guangxian Technology Co., Ltd. will increase from 10 million yuan to 3.418 billion yuan.
For details, please refer to the announcement on capital increase of wholly-owned subsidiaries (Announcement No.: 2019) disclosed by the company on October 24, 2019-
