Securities abbreviation: St panda securities code: 600599 No.: lin2022-010 Panda Financial Holding Corp.Ltd(600599)
Matters related to the company’s performance forecast of Shanghai Stock Exchange
Announcement of reply to inquiry letter
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
Panda Financial Holding Corp.Ltd(600599) (hereinafter referred to as “panda financial holding” and “the company”) received the inquiry letter on matters related to the performance forecast of St Panda (SSE Gong Han [2022] No. 0090) from Shanghai Stock Exchange on January 28, 2022. Now the reply to relevant questions is announced as follows:
1、 According to the company’s announcement, as of May 31, 2021, the number of remaining lenders of yinhu.com, a wholly-owned subsidiary of the company, was 26561, the cashed amount was 1.352 billion yuan, and the balance to be cashed was 2.111 billion yuan. Please explain whether the company needs to bear joint and several liability, whether to make provision for impairment, and whether the relevant accounting treatment complies with the provisions of the accounting standards for business enterprises in combination with the cashing of the lender and the accounting treatment of comparable businesses in the same industry.
Company reply: yinhu.com mainly adopts the financial mode of P2P online loan, completes the investment and loan behavior on the platform by matching investors and borrowers, and charges a certain proportion of service fee. August 2016 CBRC The Interim Measures for the management of business activities of online lending information intermediaries jointly issued by the Ministry of industry and information technology clearly requires “Borrowers and lenders should follow the principles of voluntary lending, honesty and trustworthiness, self responsibility and risk bearing. Online lending information intermediaries should bear the responsibility of objective, true, comprehensive and timely information disclosure, and do not bear the risk of loan default.” According to the guidance on promoting the healthy development of Internet Finance issued by the people’s Bank of China and other ten departments on July 18, 2015, “(VIII) online lending. Online lending includes individual online lending (i.e. P2P network lending) And online microfinance. Individual online lending refers to the direct lending between individuals through the Internet platform. Direct lending on individual online lending platforms belongs to the category of private lending and is regulated by laws and regulations such as contract law, general principles of civil law and relevant judicial interpretations of the Supreme People’s court. Individual online lending should adhere to the platform function and provide investors and financiers with intermediary services such as information interaction, matching and credit evaluation. Individual online lending institutions shall clarify the nature of information intermediary, mainly provide information services for direct lending between borrowers and borrowers, and shall not provide credit enhancement services or illegally raise funds. Internet micro loan refers to the micro loan provided by Internet enterprises to customers through their controlled micro loan companies. Online microfinance should comply with the existing regulatory provisions of microfinance companies, give full play to the advantages of online loans and strive to reduce customer financing costs. The online lending business shall be supervised by the CBRC. ” Among them, credit enhancement services include but are not limited to making promises;
Since the frequent “explosion” of P2P network lending industry in 2018, Silver Lake network has also been affected and issued a debt processing plan in April 2019. According to the promotion of the treatment scheme, as of December 21, 2021, there were 21553 remaining lenders of Yinhu network, with the cashed amount of RMB 1.583 billion and the balance to be cashed of RMB 1.88 billion. The cashing capital sources include but are not limited to the borrower’s due repayment funds, collection funds, etc. The company has not provided any support for cashing funds, nor has it made any deep commitment to the platform lender.
Due to the small number of Listed Companies in the P2P industry and the occurrence of the thunder wave in 2018, listed companies involved in related businesses have successively stripped or disposed of P2P businesses accordingly. The company failed to query the accounting treatment of comparable businesses in the same industry from the public information. Since the establishment of yinhu.com, the company has insisted on cutting the business funds from the company’s funds. The investment and financial management funds of users are deposited (deposited) by a third party. The investment, payment collection, creditor’s rights transfer and other behaviors need to be carried out through the opened Depository (deposit) account. The above business funds do not flow through our bank account, Our company cannot withdraw, dispose and use the above funds in any form. The loans and investment funds of the platform do not meet the recognition of “assets” and “liabilities” in the accounting standards for business enterprises. Our company has not carried out accounting for relevant business data.
To sum up, the company does not need to bear joint and several liability for the loan of the platform lender, and does not need to make provision for impairment. The relevant accounting treatment is in line with the provisions of the accounting standards for business enterprises.
Accountant’s opinion:
After verification, we believe that panda financial holding company does not need to bear joint and several liability for the loan of the platform lender, and does not need to withdraw the provision for impairment. The relevant accounting treatment is in line with the provisions of the accounting standards for business enterprises.
2、 The company is requested to explain the reasons and rationality of the substantial increase in net profit in 2021, whether it conforms to the laws of the industry, and explain the recognition policies and basis of various incomes in combination with the business model, operation, terms of sales contracts, actual sales quantity and price of various products of fireworks export, microfinance and other businesses, Whether there is a case of recognizing revenue without meeting the conditions for revenue recognition, whether there is a case of recognizing revenue with the total amount method instead of the net amount method, and whether it is in line with the provisions of the accounting standards for business enterprises.
Company reply:
(I) reasons and rationality for the substantial increase in net profit in 2021
1. Fireworks export business: the main market of the company’s fireworks and firecrackers export trade is the United States, and its main export products include customer OEM and independent brand. The main business model of customer OEM business is to find suitable fireworks and firecracker manufacturers in China after receiving customer orders, purchase, follow up the production process, carry out quality inspection, arrange transportation and export customs declaration procedures; The main business model of independent brand business is to develop a full range of independent brand product lines, entrust fireworks and firecracker manufacturers to produce, and then distribute goods intensively and sell them directly to foreign wholesalers and retailers.
Our fireworks export business has been precipitated for more than 30 years, and the supplier system, product system and customer relationship are good and stable. Under the impact of the epidemic, although the fireworks and firecrackers markets in Europe, South America and Southeast Asia have been severely hit, the U.S. market has shown unprecedented explosive growth in two consecutive sales seasons in 2020 and 2021. Whether wholesale or retail, the market inventory is almost sold out, and the orders are explosive growth. This is mainly due to: first, the epidemic has made it impossible for residents to celebrate their holidays in other ways such as travel, and setting off fireworks and firecrackers at home has become a way for more people to celebrate; 2、 Under the epidemic, the US government has adopted a large number of stimulus and subsidy policies for enterprises and residents. The cash flow of channel customers and consumers is very sufficient, and they have money to purchase and consume; 3、 The epidemic has led to many challenges in the global supply chain, such as lack of containers, lack of shipping space and port congestion. The inventory of fireworks and firecrackers in the market is far from meeting the demand. Channel customers have turned to mature and reliable export suppliers to ensure the receipt of goods.
As an old exporter, our relatively reliable delivery has also won many new customers for the company.
The company’s fireworks export business mainly adopts FOB (FOB). According to the actual situation of customers, the settlement methods include prepayment, document release and payment, and different account periods. All businesses with account periods have purchased export credit insurance, and the risk is controllable. In the past two years, the market demand exceeds the supply, and more customers choose to pay in advance or release documents to get the goods earlier. The cash flow of the company is relatively stable.
In 2021, our company actually exported 1037482 boxes of fireworks and firecrackers, about 1005 40 foot HC containers. Affected by the appreciation of RMB and the rise of raw materials in the second half of the year, the procurement cost of fireworks and firecrackers has increased, the export price has increased to a certain extent, and the gross profit margin has decreased.
The assets of fireworks export trade business are relatively light, and the rapid growth of business volume does not require a large amount of additional fixed cost growth. Therefore, although the gross profit margin has decreased, the net profit of export business has increased significantly.
2. Small loan business: the registered capital of the two small loan companies under the listed company is 300 million yuan. According to the regulatory requirements, they can carry out business within twice the financing leverage. That is, the total loan ceiling is 600 million yuan. The business model of the two small loan companies is to grant loans to enterprises or individuals, and realize income by recovering the loan principal and interest. The interest rate range is 8% – 12%, and the loan term is one year. The business model has not been significantly adjusted in three consecutive business years.
The interest income of small loan companies is determined by multiplying the amount of loans issued by the agreed interest rate and the number of days occupied by loans in the reporting period. Since the loan interest rate in 2021 has no change compared with that in 2020, the average daily stock of loans is the main factor affecting the annual interest income. The stock at the beginning of 2020 is 138.83 million and the stock at the end of 2020 is 533 million; Beginning stock in 2021
533 million yuan, and the ending stock is about 376 million yuan (subject to the data of 2021 annual report). The small loan business has been relatively stable since it reached the lending scale of about 500 million in 2020. Although the loan stock at the end of 2021 decreased slightly compared with the beginning of the period, the average daily loan stock in 2021 increased significantly compared with 2020, resulting in a significant increase in interest income in 2021 compared with 2020. Due to the relatively fixed operating costs of small loan companies, The substantial increase of interest income will not lead to the simultaneous increase of costs, so the net profit will increase significantly in 2021.
(II) revenue recognition policy and basis
1. Revenue recognition principle
On the contract commencement date, the company evaluates the contract, identifies each individual performance obligation contained in the contract, and determines whether each individual performance obligation is performed within a certain period of time or at a certain point in time.
The company has fulfilled the performance obligation in the contract, that is, the revenue is recognized when the customer obtains the control of relevant goods or services. Obtaining control over relevant goods or services means being able to dominate the use of such goods or services and obtain almost all economic benefits therefrom. If the contract contains two or more performance obligations, the company will allocate the transaction price to each individual performance obligation according to the relative proportion of the individual selling price of the goods or services promised by each individual performance obligation on the commencement date of the contract. The company measures the income according to the transaction price apportioned to each individual performance obligation.
Transaction price refers to the amount of consideration that the company is expected to be entitled to receive due to the transfer of goods or services to customers, excluding the amount collected on behalf of a third party and the amount expected to be returned to customers. The company determines the transaction price according to the contract terms and in combination with its previous customary practices, and considers the influence of variable consideration, major financing components in the contract, non cash consideration, consideration payable to customers and other factors when determining the transaction price. The company determines the transaction price including variable consideration at an amount that does not exceed the amount that is likely not to be significantly reversed when the relevant uncertainty is eliminated. If there are significant financing components in the contract, the company determines the transaction price according to the amount payable assuming that the customer will pay in cash when obtaining the control of goods or services, and amortizes the difference between the transaction price and the contract consideration by using the effective interest rate method during the contract period.
If one of the following conditions is met, the performance obligation shall be performed within a certain period of time; otherwise, the performance obligation shall be performed at a certain point in time:
While the company performs the contract, the customer obtains and consumes the economic benefits brought by the company’s performance.
The customer can control the goods under construction during the performance of the contract.
The commodities produced during the performance of the contract by the company have irreplaceable uses, and the company has the right to collect payment for the performance part that has been completed so far in the whole contract period. For the performance obligations performed within a certain period of time, the company shall recognize the revenue according to the performance progress within that period, except that the performance progress cannot be reasonably determined. Considering the nature of goods or services, the company adopts the output method or input method to determine the performance progress. When the performance schedule cannot be reasonably determined and the costs incurred are expected to be compensated, the company recognizes the revenue according to the amount of costs incurred until the performance schedule can be reasonably determined. For the performance obligations performed at a certain point in time, the company recognizes the revenue when the customer obtains the control of relevant goods or services. When judging whether the customer has obtained the control of goods or services, the company considers the following signs:
The company has the current right to receive payment for the goods or services, that is, the customer has the current payment obligation for the goods or services.
The company has transferred the legal ownership of the commodity to the customer, that is, the customer has the legal ownership of the commodity.
The company has transferred the goods in kind to the customer, that is, the customer has possessed the goods in kind.
The company transfers the ownership and risk of the goods to the customer.
The customer has accepted the goods or services.
2. Revenue measurement principle
(1) The company measures the income according to the transaction price apportioned to each individual performance obligation. The transaction price refers to the amount of consideration that the company is expected to be entitled to receive due to the transfer of goods or services to customers, excluding the amount collected on behalf of a third party and the amount expected to be returned to customers.
(2) If there is a variable consideration in the contract, the company shall determine the best estimate of the variable consideration according to the expected value or the most likely amount, but the transaction price including the variable consideration shall not exceed the amount that is unlikely to be significantly reversed when the relevant uncertainty is eliminated.
(3) If there is a significant financing component in the contract, the company shall determine the transaction price according to the payable amount assumed to be paid in cash when the customer obtains the control over the goods or services. The difference between the transaction price and the contract consideration shall be amortized by the effective interest rate method during the contract period. On the commencement date of the contract, if the company expects that the interval between the customer’s acquisition of control over the goods or services and the customer’s payment of the price is no more than one year, the major financing components in the contract will not be considered.
(4) If the contract contains two or more performance obligations, the company will allocate the transaction price to each individual performance obligation on the contract commencement date according to the relative proportion of the individual selling price of the goods promised by each individual performance obligation.
3. Method of revenue recognition
The company’s revenue mainly includes fireworks export sales business and microfinance business
(1) Fireworks export sales business
If the income recognition standard of the company’s export sales business is settled by FOB price, the financial department of the company shall recognize the income according to the goods export declaration form verified by the customs. The amount of operating revenue is recognized on an FOB basis. If CIF price is adopted for settlement, the financial department of the company shall confirm the income according to the goods export declaration form and the customer’s receipt bill of lading verified by the customs. The amount of operating revenue is based on CIF
