Securities code: 000671 securities abbreviation: Yango Group Co.Ltd(000671) Announcement No.: 2022-027
Announcement on the reply of Shenzhen Stock Exchange to the letter of concern of the company
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.
Yango Group Co.Ltd(000671) (hereinafter referred to as “the company” or ” Yango Group Co.Ltd(000671) “) received the notice on Yango Group Co.Ltd(000671) issued by Shenzhen Stock Exchange on January 29, 2022 (company Department notice [2022] No. 88) (hereinafter referred to as “the notice”). According to the requirements in the letter of concern, the company timely organized relevant departments and the company’s audit institutions to seriously discuss and analyze the issues raised in the letter of concern. The reply is hereby announced as follows:
Question 1 In combination with the operation of your company, the region where the real estate is located and the sales situation, explain the specific conditions of the main inventory items for which large amount impairment is accrued, the basis and calculation process of impairment, and the main reasons, compliance and rationality of the centralized large amount provision for inventory depreciation in this reporting period compared with the previous years. The annual audit accountant shall check and give opinions.
Company reply:
In 2021, the policy regulation of the real estate industry was upgraded, the market demand fell rapidly, the overall sales of the industry fell seriously, and the market sales price did not meet the expectation. The company took price reduction measures to further promote sales collection; In addition, there are frequent credit risk events in the industry, domestic and foreign rating agencies have successively lowered the company’s rating, the company’s refinancing is blocked, the liquidity of payment collection is greatly limited, the liquidity pressure is obvious, the customer confidence is greatly reduced, the passenger flow is greatly reduced, which has a great impact on the company’s sales, and the future sales situation is not optimistic; Moreover, in the future, the industry still adheres to the basic ideological program of “housing without speculation”, and is committed to establishing a long-term mechanism to promote the healthy development of real estate and exploring new development models. The company believes that the real estate market will still be dominated by stability in 2022 and is cautious about the volume and price expectation of sales. Based on the above reasons, the overall market environment and the company’s own fundamentals showed a cliff decline in 2021, and the company dynamically adjusted the selling price according to the market conditions.
According to the above situation, the company accrues the corresponding inventory falling price reserves based on the principle of prudence. According to the accounting standards, if the future market conditions improve, the inventory falling price reserves can be reversed. According to the preliminary calculation, the company selects the items with a falling price of more than 200 million for analysis:
Table 1: statement of project impairment
Unit: 100 million yuan
Less: (Continued)
Project name and location mainly reduce the estimated cost of production. The variable net stock period inventory decreases the average price in 2021 and the average price in 2020. The sales value of business format + the present value of sales expenses and the end balance price reserve (yuan) (yuan)
+(tax)
A inland residence 86 32 54 56 2 16402 18308
B Beijing Tianjin Hebei residence 40 15 25 27 2 23557 25057
C Fujian residence 22 6 16 19 3 7047 7523
D Fujian residence 19 3 16 20 3 64220 87156
E big Fujian residence 8 0.4 7 11 3 21454 27353
F Yangtze River Delta comprehensive 38 1 37 41 5 88991 119266
G Pearl River Delta residence 42 9 33 39 6 19753 22327
Note 1: if the price drop involves parking spaces, it shall be listed according to yuan / piece;
1. Mainland project a: the surrounding competitive products adopt the price reduction and volume taking strategy. In order to cope with market changes, the company has adopted the way of sales allowance to accelerate the de capitalization and capital withdrawal (from 18300 to 16400). The price can not cover the project cost. According to the lower method of cost and net realizable value (Note 2), the estimated amount of price decline is about 200 million;
2. Beijing Tianjin Hebei B project: the project belongs to the market and is developed in three phases. In 2021, due to the market downturn, the transaction speed slowed down and the trading volume was low. The company reduced the selling price (from 25100 to 23600) in combination with its own situation. According to the lower of cost and net realizable value, it is estimated that the amount of price decline is about 200 million;
3. Greater Fujian C project: the market in the city where the project is located has declined significantly in 2021, and the selling price has continued to decline. Phase I of the project is close to the end of trading, and phase II of the project has been launched in December 2021, and the de commercialization situation is poor. The company reduces the sales price by referring to the surrounding competitive products (from 75000 to 7000). According to the lower of cost and net realizable value, the estimated amount of price decline is about 320 million;
4. Greater Fujian D project: the project has not been opened yet. Since 2021, the market has declined and the price limit is strict. The estimated price can not cover the project cost (from 87200 to 64200). According to the lower of cost and net realizable value, the estimated amount of price decline is about 330 million;
5. Greater Fujian e project: in 2021, affected by the epidemic and the market expectation of the city where the project is located, superimposed on the market expectation of the company’s liquidity risk, the trading volume continued to decline seriously, and the volume of the project’s promotion and price reduction (from 27400 to 21500). The unsold part is accrued according to the actual selling price. According to the lower of cost and net realizable value, the estimated amount of price decline is about 480 million;
6. Yangtze River Delta Project F: the project adopts the strategy of sales promotion allowance to accelerate the de capitalization and capital return (the selling price decreases from 119000 to 89000). According to the lower of cost and net realizable value, the estimated amount of price decline is 460 million;
7. Pearl River Delta G Project: the project is a super market with a total value of more than 15 billion and covers an area of 330000 square meters. It is developed by stages and years.
The land plots developed in the early stage have reached the settlement time point and contributed profits. The remaining land plots are affected by the continuous “low price delivery” strategy adopted by the developers of surrounding competitive products. In order to reduce the price of competitive products, accelerate cash withdrawal and reduce the selling price, the selling price cannot cover the project cost (from 22300 to 19800), which is calculated according to the lower of cost and net realizable value, It is estimated that the amount of falling price is about 630 million.
Note 2: the company follows the provisions of the accounting standards for business enterprises, and the ending inventory is priced according to the lower of cost and net realizable value. Determination method of net realizable value: for developed products, the net realizable value is determined by the estimated selling price of the product minus the estimated selling expenses and relevant taxes; For the development cost, the net realizable value is determined according to the estimated selling price of the developed project minus the estimated total investment cost, estimated selling expenses and relevant taxes when the project is completed. The estimated total investment cost of the project is dynamically prepared according to the target cost, contract planning, key node plan, etc; The estimated selling price (or estimated average price) shall be determined respectively according to the signed and non signed parts, the signed part shall be determined according to the actual signed amount, and the non signed part shall be determined according to the comparable market selling price, or the selling price of the company’s sold products and the level, orientation, room type and other factors of the developed products; The sales expenses and taxes shall be determined according to the marketing plan of the project and the estimated tax rate.
In 2020, our company made an inventory impairment of about 800 million yuan, and in 2019, we made an inventory impairment of about 500 million yuan. The number of projects with a falling price of more than 100 million yuan is also small, mainly because our company has a good overall expectation of the market environment in 2019 and 2020, and relevant measures such as green smart home and quality tree benchmark have also increased the sales premium, so we are relatively optimistic about the average sales price, Taking the items in Table 1 as an example, the selling price in 2020 is relatively high, there is no large decline in the price of the project, and the company’s own fundamentals are relatively stable, so there is no large provision for inventory decline.
Compared with the previous years, the provision for inventory falling price in this reporting period is made in a large amount, which is mainly due to the steep decline in the overall market environment and the company’s own fundamentals in 2021, resulting in the price reduction of most projects in 2021 to varying degrees, so most projects have signs of impairment (see Table 1 for details), Therefore, the provision amount of inventory falling price reserves in the reporting period increased significantly compared with the same period of last year.
To sum up, due to the steep decline in the overall market environment and the company’s own fundamentals in 2021, the company dynamically adjusts the selling prices of most projects, calculates according to the lower of cost and net realizable value in the accounting standards, and accrues the corresponding inventory falling price reserves based on the principle of prudence.
Accountant’s verification opinion:
During the audit in 2021, we noticed that on the one hand, the overall sales scale and gross profit margin of the company showed a downward trend with the market environment; on the other hand, the company carried out discount promotion for some inventories in order to quickly withdraw funds, resulting in an increase in the amount of inventory falling price reserves in the reporting period.
After verification, in 2020, the provision for inventory falling price of the company was reasonable and sufficient. In 2021, for the provision of inventory falling price reserves, we have implemented the following audit procedures:
(1) Understand the selection and application of accounting policies for the provision of inventory falling price reserves, and evaluate its inertia and comparability;
(2) Sample and observe the inventory project site to understand the project development progress and whether the total investment cost of the project has changed significantly;
(3) Test and evaluate the effectiveness of the company’s key internal control over the preparation of inventory cost budget and dynamic total investment cost.
As of the issuance date of this note, we have implemented review procedures for the estimation of impairment calculation process of projects in Fujian, Zhejiang, Jiangsu and other regions; There are still regional projects in Shanghai, Beijing and Shenzhen. The estimation of inventory impairment calculation process needs to communicate with the management and further obtain supporting documents, such as the estimation of estimated selling price. The accrued amount of inventory impairment has not been recalculated for some items. In the follow-up audit, we will pay close attention to the rationality and sufficiency of the amount of inventory impairment provision in accordance with the provisions of the practice standards for Certified Public Accountants of China, accounting standards for Business Enterprises No. 8 – asset impairment and other relevant laws and regulations, and deal with the inventory depreciation as a key audit matter in the annual report.
Question 2 Explain the trading situation of the company exchanging the equity strategy of Shanghai Sunshine Zhibo life Service Group Co., Ltd. for the shares of everything cloud Space Technology Service Co., Ltd., the recognition time and basis of relevant profits and losses, the calculation process of profit and loss amount and relevant accounting treatment, and whether they comply with the provisions of accounting standards for business enterprises. The annual audit accountant shall check and give opinions.
Company reply:
The company has disclosed the content of Yango Group Co.Ltd(000671) transaction related to everything cloud on September 16, 2021 (see the company’s announcement 2021-171 for details). The confirmation of the transaction profit is due to the purchase of sunshine Zhibo shares, and the relevant shares have been changed.
According to the agreement of both parties on the delivery matters in the investment framework agreement, the equity delivery and the handover of the company’s management authority of sunshine Zhibo have been completed on September 27, 2021. The company has actually lost its control over Shanghai Sunshine Zhibo and completed the disposal of the equity of Shanghai Sunshine Zhibo.
In order to ensure the smooth progress of the transaction, the company collected the equity before the share exchange, and collected the company’s equity in sunshine Zhibo under the name of Hainan Huiyou Investment Co., Ltd., a wholly-owned subsidiary of the company. This step is an internal transaction, and there is no profit or loss in the consolidated statements. After the collection is completed, the company starts to exchange shares. According to the accounting standards for Business Enterprises No. 2 – long term equity investment and accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, the difference between the book value and the actual price shall be included in the current profit and loss. Therefore, the current profit and loss shall be recognized when the disposal is completed in the company’s single statement.
According to the application guidelines of accounting standards for Business Enterprises No. 33 – consolidated financial statements and accounting standards for Business Enterprises No. 33 – consolidated financial statements, if the parent company loses control due to the disposal of long-term equity investment in subsidiaries, the book value of relevant assets, liabilities and goodwill shall be derecognized in the consolidated financial statements, And derecognize the book value of minority shareholders’ equity (including other comprehensive income belonging to minority shareholders). The difference between the consideration obtained from the disposal of equity minus the share of the book value of the net assets of the atomic company continuously calculated from the purchase date calculated according to the original shareholding ratio shall be included in the investment income of the current period when the control right is lost.
In combination with the provisions of the accounting standards for business enterprises, the accounting treatment and calculation process of strategic share exchange of listed companies:
1. Before disposal, Shanghai Sunshine Zhibo was a consolidated subsidiary of a listed company. Due to the loss of control of the listed company due to equity disposal, the listed company has terminated the recognition of relevant assets and liabilities and the recognition of minority shareholders’ equity (including other comprehensive income belonging to minority shareholders).
2. The difference between the consideration obtained from the disposal of equity minus the share of the book value of the net assets of the atomic company continuously calculated from the purchase date calculated according to the original shareholding ratio shall be included in the investment income of the current period when the control right is lost. The share of the book value of the net assets continuously calculated from the purchase date of the subsidiary is the book value of the consolidated statements of Shanghai Sunshine Zhibo at the disposal time point. The disposal consideration is confirmed according to the appraisal report of Minzhong Xinggu Zi (2021) No. ae90001 and Zhongfeng pingbao Zi No. 01260. It is estimated that the price difference between the equity of sunshine Zhibo and the equity of everything cloud is about 3.06 billion.
ZTE’s appraisal is based on June 30, 2021
