Guangzhou Yuexiu Financial Holdings Group Co., Ltd. annual financial report for 2021
Unqualified opinion of audit opinion type standard
Signing date of audit report: April 1, 2022
Name of audit institution: Zhitong Certified Public Accountants (special general partnership)
Audit Report No.: ztsz (2022) No. 440a006533
Name of certified public accountant: Li Jiming, Liu Guoping
Stock abbreviation: Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) / Stock Code: Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987)
April 2022
audit report
Zhi Tong Shen Zi (2022) No. 440a006533 Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) all shareholders:
1、 Audit opinion
We have audited the financial statements of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) (hereinafter referred to as Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company), including the consolidated and parent company’s balance sheet as of December 31, 2021, the consolidated and parent company’s income statement, consolidated and parent company’s cash flow statement, consolidated and parent company’s statement of changes in shareholders’ equity and notes to relevant financial statements in 2021.
In our opinion, the attached financial statements are prepared in accordance with the provisions of the accounting standards for business enterprises in all material aspects and fairly reflect the consolidated and parent company’s financial position of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company as of December 31, 2021 and the consolidated and parent company’s operating results and cash flow in 2021.
2、 Basis for forming audit opinions
We conducted our audit in accordance with the auditing standards for Chinese certified public accountants. The “responsibilities of certified public accountants for the audit of financial statements” in the audit report further expounds our responsibilities under these standards. In accordance with the code of professional ethics for Chinese certified public accountants, we are independent of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company and have fulfilled other responsibilities in terms of professional ethics. We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a basis for our audit opinion.
3、 Key audit matters
The key audit matters are the most important matters that we consider to audit the current financial statements according to our professional judgment. The response to these matters is based on the overall audit of the financial statements and the formation of audit opinions. We will not express separate opinions on these matters.
(I) recognition of expected credit loss of debt investment and long-term receivables
See note iii-10, note iii-34, note V-12 and note v-14 of the financial statements for relevant information disclosure.
1. Item description
The credit impairment loss of debt investment and long-term receivables reflects the best estimation of the expected credit loss made by the management of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company (hereinafter referred to as the management) on the balance sheet date using the expected credit loss model of accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments. As of December 31, 2021, the book balance of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company’s debt investment (including debt investment due within one year) was RMB 11.810 billion, and the impairment provision was RMB 3.3 billion 6.3 billion yuan; The balance of finance lease receivables (including long-term receivables due within one year) is 64.885 billion yuan, the unrealized financing income is 7.552 billion yuan, the interest receivable is 548 million yuan, the balance of bad debt reserves is 768 million yuan, and the net amount of long-term receivables is 57.713 billion yuan.
Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) in the measurement of credit impairment of debt investment and long-term receivables, the use of expected credit loss model involves significant estimation and judgment, including judging whether the credit risk of debt investment and long-term receivables has increased significantly since initial recognition, determining the loss proportion of principal and interest of credit assets and capital allocation compensation funds when the debtor has credit impairment, and making forward-looking adjustment to the expected credit loss rate.
The measurement of expected credit loss uses complex models, a large number of parameters and data, and involves the estimation and judgment of the management. At the same time, due to the significant book value and loss reserves related to debt investment and long-term receivables, we recognize the expected credit loss of debt investment and long-term receivables as key audit matters.
2. Audit response
For the confirmation of creditor’s rights investment and expected credit loss of long-term receivables of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company, we have implemented the following main audit procedures:
(1) Evaluate and test the effectiveness of the internal control design and operation related to the measurement of expected credit loss, including the methodology, models and assumptions used by the management to determine the expected credit loss;
(2) Reviewed the measurement methodology of expected credit loss model, and evaluated the rationality of portfolio division, model selection, key parameters, major judgments and assumptions;
(3) For the creditor’s rights investment and long-term receivables with credit impairment, check and evaluate the management’s bias towards the amount and time of future cash flow based on the customer’s operating performance and the realization of collateral;
(4) For the debt investment and long-term receivables for which bad debt reserves are accrued in combination, we reviewed whether the parameters in the management’s expected credit loss model are appropriate, and recalculated the impairment test results;
(5) For large amount of debt investment and long-term receivables, send letters to the debtor, confirm the contract amount and balance of receivables, and implement alternative procedures for non reply;
(6) Examined the adequacy and appropriateness of the disclosure of credit impairment losses.
(II) valuation of financial assets measured at fair value and classified as the third level
See note III-11, note iii-34, note v-3 and note IX to the financial statements for relevant information disclosure.
1. Item description
Financial assets measured at fair value and classified as the third level are important assets of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company. As of December 31, 2021, the book value is 30.279 billion yuan, accounting for 19.75% of the total assets. When estimating the fair value of financial assets at the third level, Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) the valuation methods used include market method, discounted future cash flow method, market multiplier method, income method, etc.
The key assumptions involved in these methods include discount rate and market multiplier. For some financial assets involving complex valuation, Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) hired an independent external appraiser to issue an evaluation report on the fair value. The evaluation of the fair value of financial assets measured at fair value and classified as the third level is complex, and significant management judgment and estimation will be involved in determining the input value used in the valuation model. Therefore, we will identify the valuation of financial assets measured at fair value and classified as the third level as a key audit matter.
2. Audit response
For the valuation of financial assets of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company measured at fair value and classified as the third level, we have implemented the following main audit procedures:
(1) Understand and evaluate Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) the valuation process and relevant internal control of financial assets measured at the third level fair value, and test whether it has been operated effectively.
(2) Based on the understanding of industry practices, the rationality of the model used by the management in the valuation of the third level financial instruments is evaluated.
(3) For those involving the valuation by external experts hired by the management, obtain the asset evaluation report issued by the external appraisers hired by the management, evaluate the competence, professional quality and objectivity of the third-party valuation experts and enterprise valuation personnel hired by the management, review the appropriateness of the valuation results as audit evidence, and evaluate whether the valuation procedures and results comply with industry guidelines and industry practices.
(4) With the assistance of Certified Public Accountants’ valuation experts, evaluate the rationality of the valuation methods and valuation assumptions adopted by Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company based on industry knowledge and information of comparable companies, and test the accuracy of mathematical calculations used in the valuation model; It also evaluates the competence, professional quality and independence of Certified Public Accountants’ valuation experts.
(5) Reviewed the appropriateness of the relevant disclosure of financial assets measured at the third level fair value made by the management in the notes to the financial statements.
4、 Other information
Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) the management of the company is responsible for other information. Other information includes the information covered in the 2021 annual report of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company, but does not include the financial statements and our audit report.
Our audit opinion on the financial statements does not cover other information, and we will not issue any form of assurance conclusion on other information.
In combination with our audit of the financial statements, our responsibility is to read other information and consider whether other information is materially inconsistent with the financial statements or the information we have learned in the audit process, or there seems to be material misstatement.
Based on the work we have performed, if we determine that there is a material misstatement in other information, we should report that fact. In this regard, we have nothing to report.
5、 Responsibilities of management and governance for financial statements
Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) the management of the company is responsible for preparing the financial statements in accordance with the provisions of the accounting standards for business enterprises to achieve a fair reflection, and designing, implementing and maintaining necessary internal control so that the financial statements are free from material misstatement due to fraud or error.
When preparing the financial statements, the management is responsible for evaluating the going concern ability of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company, disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company, terminate operation or have no other realistic choice.
The management is responsible for supervising the financial reporting process of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company.
6、 Responsibilities of certified public accountants for the audit of financial statements
Our goal is to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement due to fraud or error, and issue an audit report containing audit opinions. Reasonable assurance is a high-level assurance, but it does not guarantee that the audit performed in accordance with the audit standards will always be found when a major misstatement exists. Misstatement may be caused by fraud or error. If it is reasonably expected that the misstatement alone or in summary may affect the economic decisions made by the users of the financial statements based on the financial statements, the misstatement is generally considered to be significant.
In the process of carrying out the audit work in accordance with the audit standards, we use professional judgment and maintain professional doubt. At the same time, we also carry out the following work:
(1) Identify and assess the risks of material misstatement of financial statements due to fraud or error, design and implement audit procedures to deal with these risks, and obtain sufficient and appropriate audit evidence as the basis for issuing audit opinions. Since fraud may involve collusion, forgery, intentional omission, misrepresentation or override of internal control, the risk of failing to find major misstatement caused by fraud is higher than that caused by error.
(2) Understand the internal control related to audit to design appropriate audit procedures.
(3) Evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
(4) Draw conclusions on the appropriateness of management’s use of going concern assumptions. At the same time, according to the audit evidence obtained, draw a conclusion on whether there are major uncertainties in the matters or circumstances that may lead to major doubts about the sustainable operation ability of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company. If we conclude that there is significant uncertainty, the auditing standards require us to draw the attention of statement users to the relevant disclosures in the financial statements in the audit report; If the disclosure is insufficient, we should express a non unqualified opinion. Our conclusions are based on the information available as of the date of the audit report. However, future events or circumstances may lead to the inability of Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company to continue its business.
(5) Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
(6) Obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) company, so as to express an audit opinion on the financial statements. We are responsible for guiding, supervising and implementing the group audit, and take full responsibility for the audit opinions.
We communicated with the management on the planned audit scope, schedule and major audit findings, including the internal control defects that we identified in the audit.
We also provide a statement to the management that we have complied with the professional ethics requirements related to independence, and communicate with the management all relationships and other matters that may reasonably be considered to affect our independence, as well as relevant preventive measures (if applicable). From the matters communicated with the management, we determine which matters are the most important for the audit of the current financial statements, thus constituting key audit matters. We describe these matters in the audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if the negative consequences of communicating a matter in the audit report are reasonably expected to exceed the benefits in the public interest, we determine that we should not communicate the matter in the audit report.
Zhitong certified public accountants China Certified Public Accountants
(special general partnership) (project partner) Li Jiming
Chinese certified public accountant Liu Guoping
Beijing, China April 1, 2002
The unit of the statement in the financial notes to the financial statements is: yuan 1. The preparation unit of the consolidated balance sheet: Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987)
Unit: Yuan
project
