Shenzhen Dawei Innovation Technology Co.Ltd(002213)
Management system for write off of asset impairment provision
Chapter I General Provisions
Article 1 in order to further standardize the management of withdrawal and write off of asset impairment reserves of Shenzhen Dawei Innovation Technology Co.Ltd(002213) (hereinafter referred to as “the company”), ensure that the company’s financial statements truly and accurately reflect the company’s financial situation and operating results, and effectively prevent and resolve the risk of asset loss of the company, according to the accounting standards for Enterprises No. 8 – asset impairment Accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments and Its Application guide and other relevant provisions are formulated in combination with the actual situation of the company.
Article 2 the assets referred to in this system include financial instruments, inventories and long-term assets.
(I) financial instruments refer to the contracts that form the financial assets of one party and the financial liabilities or equity instruments of other parties. Recognize relevant financial assets or financial liabilities when the company becomes a party to the financial instrument contract;
(II) inventories include finished products or commodities held for sale in daily activities, products in progress in the production process, materials and materials consumed in the production process or the provision of labor services, etc. It is specifically divided into raw materials, low value consumables, self-made semi-finished products, products in process, inventory goods, entrusted processing materials, issued goods, etc;
(III) long term assets include long-term equity investment, fixed assets, construction in progress, intangible assets, goodwill and other long-term assets.
Article 3 the asset impairment referred to in this system refers to that the recoverable amount of the asset referred to in Article 2 is lower than its book value, and the asset impairment provision is the impairment provision corresponding to the above assets.
Article 4 this system is applicable to the management of the calculation and write off of asset impairment reserves of the company and its wholly-owned and holding subsidiaries.
Chapter II provision for asset impairment
Section 1 provision for impairment of financial instruments
Article 5 the company shall carry out accounting treatment for impairment of financial instruments on the basis of expected credit losses and recognize loss reserves. Expected credit loss refers to the difference between the weighted flow of credit loss of financial instruments weighted by the risk of default and all cash flows expected to be received, that is, the present value of all cash shortages.
Article 6 the factors reflected in the method of measuring the expected credit loss of financial instruments include: the unbiased probability weighted average amount determined by evaluating a series of possible results; Time value of money; Reasonable and reliable information about past events, current situation and prediction of future economic conditions that can be obtained without unnecessary additional costs or efforts on the balance sheet date. The Group determines the expected credit loss of relevant financial instruments according to the following methods:
(I) for financial assets, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received;
(II) for lease receivables, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received;
(III) for the loan commitment not withdrawn, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received when the loan commitment holder withdraws the corresponding loan. The company’s estimate of the expected credit loss of the loan commitment is consistent with its expectation of the utilization of the loan commitment;
(IV) for the financial guarantee contract, the credit loss is the present value of the difference between the expected payment made by the company to the contract holder for the credit loss incurred by the contract holder and the amount expected to be collected by the company from the contract holder, the debtor or any other party;
(V) for financial assets with credit impairment on the balance sheet date but not purchased or originated, the credit loss is the difference between the book balance of the financial assets and the present value of the estimated future cash flow discounted at the original effective interest rate.
For financial instruments purchased or originated without credit impairment, on each balance sheet date, considering reasonable and reliable information (including forward-looking information), evaluate whether their credit risk has increased significantly since initial recognition, and recognize the expected credit loss according to three stages. If the credit risk does not increase significantly after initial recognition, it is in the first stage, and the loss provision is measured according to the expected credit loss of the financial instrument in the next 12 months; If the credit risk has increased significantly since the initial recognition, but there is no credit impairment, it is in the second stage, and the loss provision is measured according to the expected credit loss of the whole duration of the financial instrument; If the credit impairment has occurred since the initial recognition, it is in the third stage, and the loss provision is measured according to the expected credit loss of the whole duration of the financial instrument. For financial instruments in the first and second stages, the interest income shall be calculated according to their book balance and effective interest rate; For financial instruments in the third stage, the interest income shall be calculated and determined according to their amortized cost and actual interest rate
For the purchased or originated financial assets with credit impairment, on the balance sheet date, only the cumulative changes of expected credit losses in the whole duration after initial recognition are recognized as loss reserves, and its interest income is calculated and determined according to the amortized cost of financial assets and the actual interest rate adjusted by credit.
The increase or reversal of loss reserves shall be included in the current profits and losses as impairment losses or gains. For the debt instruments held at fair value and whose changes are included in other comprehensive income, the impairment loss or gain shall be included in the current profit and loss, and other comprehensive income shall be adjusted at the same time.
Article 7 withdrawal method of bad debt provision for accounts receivable:
(I) for notes receivable and accounts receivable, no matter whether there is a major financing component or not, the company measures the loss reserves according to the expected credit loss throughout the duration:
When single notes receivable and accounts receivable cannot obtain the information to evaluate the expected credit loss at a reasonable cost, the company divides the notes receivable and accounts receivable into several combinations according to the characteristics of credit risk, and calculates the expected credit loss on the basis of the combination.
For bills receivable divided into portfolios, the company refers to the experience of historical credit loss, combined with the current situation and the prediction of future economic conditions, and calculates the expected credit loss through default risk exposure and the expected credit loss rate for the whole duration. The basis for determining the combination is as follows:
Bills receivable Portfolio 1 commercial acceptance bill
Bills receivable portfolio 2 bank acceptance bill
For the accounts receivable divided into portfolio, the company refers to the historical credit loss experience, combined with the current situation and the prediction of future economic conditions, prepares the comparison table between the aging of accounts receivable and the expected credit loss rate throughout the duration, and calculates the expected credit loss. The basis for determining the combination is as follows:
Accounts receivable Portfolio 1 aging portfolio
Accounts receivable portfolio 2 related party portfolio
(II) when individual other receivables and long-term receivables cannot obtain the information to evaluate the expected credit loss at a reasonable cost, the company divides other receivables and long-term receivables into several combinations according to the characteristics of credit risk, and calculates the expected credit loss on the basis of the combination. The basis for determining the combination is as follows:
Other receivables Portfolio 1 aging portfolio
Other receivables portfolio 2 related party portfolio
Other receivables portfolio 3 deposit reserve portfolio
For lease receivables, the company refers to the historical credit loss experience, combined with the current situation and the prediction of future economic conditions, and calculates the expected credit loss through default risk exposure and the expected credit loss rate for the whole duration.
For other receivables and long-term receivables classified into combinations other than lease receivables, the expected credit loss is calculated through the default risk exposure and the expected credit loss rate in the next 12 months or the whole duration. Article 8 receivables can be recognized as bad debt losses if they meet one of the following conditions:
(I) the bankruptcy announcement of the court and the liquidation documents of bankruptcy liquidation;
(II) the court’s judgment or ruling against the case, or the legal document that wins the case but is terminated (suspended) by the court’s ruling;
(III) certificate of cancellation or revocation issued by the industrial and commercial department;
(IV) administrative decision documents of government departments on cancellation and ordering closure;
(V) death and missing certificates issued by public security and other relevant departments;
(VI) conclusive evidence of being overdue for more than three years and being unable to pay off debts;
(VII) debt restructuring agreement with the debtor and relevant certificates;
(VIII) other relevant certificates.
Article 9 the company and its subsidiaries shall strictly abide by the provisions on the collection policy of accounts receivable in the company’s sales credit management system, select the appropriate collection method according to the length of the customer’s arrears, link the collection of accounts receivable with the performance assessment of the sales department and salesperson, and track the collection of accounts receivable in time.
Article 10 in order to minimize the loss of receivables, the company shall pay attention to the following issues when signing contracts with customers:
(I) the company’s contract management, sales credit and other management systems must be strictly implemented.
(II) credit investigation must be conducted on customers. For customers with good financial condition and high reputation, the installment sales contract can be signed only after necessary creditor’s rights guarantee measures are taken, and the way of credit sales is not allowed for customers with poor credit condition.
(III) in the case of credit sale, the terms of collection must be specified in the contract. In addition to the losses caused by force majeure, the party concerned shall be given corresponding sanctions according to the amount and responsibility. If the circumstances are serious, it shall be transferred to the judicial organ for criminal responsibility.
(IV) in case of financial difficulties of the debtor, the company shall recover part of the money by means of debt restructuring in accordance with the agreement voluntarily reached by both parties or the ruling of the court.
Article 11 after the impairment loss of receivables is recognized, if the company obtains objective evidence indicating that the value of the asset has recovered and is objectively related to the events occurring after the loss is recognized (such as the debtor’s credit rating has been improved, etc.), the originally recognized impairment loss shall be reversed and included in the current profits and losses. However, the book value after the reversal shall not exceed the amortized cost of the asset on the reversal date assuming that no provision for impairment is made.
Section II inventory falling price reserves
Article 12 the ending inventory of the company shall be valued according to the principle of the lower of cost and net realizable value. The inventory falling price reserves of inventory commodities and bulk raw materials shall be withdrawn according to the difference between the cost of a single inventory item and its net realizable value. For other raw and auxiliary materials with large quantity and low unit price, the inventory falling price reserves shall be withdrawn according to categories.
Article 13 net realizable value refers to the amount determined in the normal process of production and operation after the estimated selling price of inventory minus the estimated costs, selling expenses and relevant taxes to be incurred at the time of completion. The net realizable value of inventories shall be determined according to the following principles:
(I) in the normal process of production and operation, the net realizable value of merchandise inventories directly for sale, such as goods in stock and materials for sale, shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes.
(II) for the inventory of materials that need to be processed, in the normal process of production and operation, its net realizable value shall be determined by the estimated selling price of the finished products minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes.
(III) the net realizable value of inventories held for the execution of sales contracts or labor contracts shall be calculated based on the contract price; If the quantity of inventory held is more than the quantity ordered in the sales contract, the net realizable value of the excess inventory shall be calculated on the basis of the general market sales price.
Article 14 since some of the company’s inventories are processed parts and the purpose is professional and special, so it is difficult to obtain the fair net realizable value from the active market, the technical competent department of the company shall evaluate and classify the use value of such inventories, and withdraw the inventory falling price reserves in full for the inventories that do not have the use value at all.
Article 15 under any of the following circumstances, the inventory can be recognized as inventory loss:
(I) moldy and deteriorated inventory;
(II) expired inventory with no transfer value;
(III) inventories that are no longer needed in production and have no use value and transfer value;
(IV) other inventories sufficient to prove that they have no use value and transfer value.
Article 16 in case of inventory damage to the company, the amount of disposal income after deducting the book value and relevant taxes shall be included in the current profits and losses. The book value of inventory is the amount after deducting the accumulated depreciation reserves from the inventory cost.
Article 17 on the balance sheet date, the company shall determine the net realizable value of inventories. If the factors affecting the previous write down of inventory value have disappeared, the amount of write down shall be restored and reversed from the amount of inventory falling price reserves that have been withdrawn, and the reversed amount shall be included in the current profits and losses.
Article 18 for the production, requisition and sale of inventories with provision for falling price, the company shall carry forward the provision for falling price of inventories at the same time when carrying forward the sales cost; The inventory transferred out due to debt restructuring and non monetary asset exchange shall also carry forward the accrued inventory falling price reserves at the same time. If the provision for inventory falling price is made according to the category of inventory, the corresponding provision for inventory falling price shall be carried forward according to the proportion of the cost of the transferred out inventory in the cost of the category of inventory before the transfer out of the inventory due to sales, debt restructuring, non monetary asset exchange, etc.
Article 19 in order to reduce inventory losses, the company shall strengthen procurement management, production management, sales management and warehouse management, minimize inventory backlog, and establish a complete warehouse storage system. If losses are caused due to improper storage, relevant personnel will be investigated for responsibility.
Section III provision for impairment of long-term equity investment
Article 20 at the end of the period, long-term equity investment shall be valued according to the book value or recoverable amount, whichever is lower. If the recoverable amount of various long-term equity investments in the book at the end of the period is lower than the book value due to the continuous decline of market price or the deterioration of the operating condition of the invested unit, the provision for impairment of long-term equity investment shall be withdrawn. 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 estimated future cash flow.
Article 21 at the end of the period, the long-term equity investment shall be inspected item by item, and the impairment provision shall be withdrawn according to the difference between the recoverable amount and the book value, and shall be withdrawn according to the single asset. Once the impairment is withdrawn, it shall not be reversed.
Article 22 the wholly-owned and holding subsidiaries of the company shall not make foreign long-term equity investment (including the establishment of extension enterprises, associated enterprises, investment participation, etc.) without the approval or authorization of the company’s authorized person specified in the articles of association and relevant internal systems. If the company invests in or disposes of long-term equity investment, the relevant departments of the company shall make a written report detailing the reasons for the investment (or disposal), the situation of the invested unit, the amount of investment, equity proportion and term
