Sichuan Shuangma Cement Co.Ltd(000935) ( Sichuan Shuangma Cement Co.Ltd(000935) . SZ) announced on March 26 that as the subsidiary of the company, harmony Jinfeng Holding Co., Ltd. (hereinafter referred to as “harmony Jinfeng”) no longer has the right to appoint a director to the board of directors of huixuanzhang Cayman holding Inc. (hereinafter referred to as “huisuanjiang Cayman company”), the company will change the accounting method of its equity accordingly. The change of accounting method will increase the current investment income of the company by about 250 million yuan.
According to the announcement issued by Sichuan Shuangma Cement Co.Ltd(000935) on October 12, 2021, Tibet Jinchuan Venture Capital Management Co., Ltd., a wholly-owned subsidiary of Sichuan Shuangma Cement Co.Ltd(000935) participated in the investment of Beijing Gongjin Technology Co., Ltd. (hereinafter referred to as “Beijing Gongjin”), and all shareholders of Beijing Gongjin (or its related subjects) indirectly held all the rights and interests of Beijing Gongjin and its subsidiaries through the vie agreement by holding the shares of Huisuan Cayman company registered in the Cayman Islands.
In order to realize the overall business and capital market planning, Beijing Gongjin plans to restructure its structure and business. In this reorganization, Sichuan Shuangma Cement Co.Ltd(000935) involved in the transaction is mainly the full capital reduction of Beijing Gongjin by the wholly-owned subsidiary Tibet Jinchuan Venture Capital Management Co., Ltd. (hereinafter referred to as “Tibet Jinchuan”), Subsequently, HeXie Jinfeng Holdings Limited (harmonious Jinfeng Holding Co., Ltd., hereinafter referred to as “harmonious Jinfeng”) an overseas investment entity subordinate to Tibet Jinchuan invested in new Cayman company (i.e. the subsidiary established by Huisuan Cayman company in Cayman Islands, the same below) with the capital reduction. After the completion of the transaction, Tibet Jinchuan No longer directly holds the equity of Beijing Gongjin, but holds 107121% equity of new Cayman through harmonious Jinfeng. Before and after the transaction, Sichuan Shuangma Cement Co.Ltd(000935) has no substantial change in the entity equity, and the governance structure of Huisuan Cayman and new Cayman remains unchanged.
As of March 17, harmony Jinfeng held 107121% of the issued shares of Huisuan Cayman company, and has appointed a director to Huisuan Cayman company, and has the right to vote on specific operation matters in accordance with the articles of association and shareholders’ agreement of Huisuan Cayman company.
However, Sichuan Shuangma Cement Co.Ltd(000935) based on the company’s management and overall arrangement of investment enterprises, harmony Jinfeng plans to gradually reduce the shareholding ratio of Huisuan Cayman company and new Cayman company, and has recently signed a partial equity transaction agreement.
On March 24, all shareholders of Huisuan Cayman company approved the revised and restated articles of association of Huisuan Cayman company and signed the revised shareholders’ agreement. Harmony Jinfeng no longer has the right to appoint a director to the board of directors of Huisuan Cayman company. At the same time, the board of shareholders and the board of directors of Huisuan Cayman company removed Mr. Xie Jianping, the incumbent director appointed by harmony Jinfeng. Harmony Jinfeng will not have a board seat in the new Cayman company.
Therefore, according to the accounting standards, the accounting method of Sichuan Shuangma Cement Co.Ltd(000935) Huisuan Cayman company was also changed from long-term equity investment to financial assets measured at fair value through current profit and loss on March 24, 2022.
Before this change, the company listed the equity of Huisuan Cayman company as long-term equity investment and accounted according to the equity method. After this change, the equity accounting method of Huisuan Cayman company is the financial assets measured at fair value and whose changes are included in the current profit and loss, which are presented in “other non current financial assets” and subsequently measured according to the fair value.
Sichuan Shuangma Cement Co.Ltd(000935) said that the change of accounting method will reduce the long-term equity investment of Sichuan Shuangma Cement Co.Ltd(000935) consolidated balance sheet by 173.5 million yuan and increase other non current financial assets by 358.8 million yuan. This accounting method change will increase Sichuan Shuangma Cement Co.Ltd(000935) current investment income by about 250 million yuan, and the final affected amount will be affected by the book value of long-term equity investment on the date of actual accounting change and its fair value on that day (subject to the audit data of the audit institution in 2022).
