Huafa Industrial Co.Ltd.Zhuhai(600325)
Notes to financial statements of 2021
1、 Basic information of the company
（1） Company history
Huafa Industrial Co.Ltd.Zhuhai(600325) (hereinafter referred to as “the company” or “the company”) was formerly the Zhuhai Special Economic Zone HUAFA real estate company, a wholly-owned subsidiary of Zhuhai HUAFA Group Co., Ltd. (hereinafter referred to as HUAFA group). On April 20, 1992, the Zhuhai Special Economic Zone HUAFA Real Estate Co., Ltd. was reorganized and established on the basis of Zhuhai Special Economic Zone HUAFA Real Estate Co., Ltd. with the approval of Zhuhai Economic System Reform Commission [1992] No. 50 document. On October 6, 1992, the name was changed to its current name with the approval of Zhuhai Economic System Reform Commission (ztgw) [1992] No. 93) and confirmed by Guangdong Economic System Reform Commission (gtgw [1994] No. 140) on December 30, 1994. Approved by the China Securities Regulatory Commission’s Zheng Jian Fa [2004] No. 7 document, on February 25, 2004, the A shares issued by the company were listed on the Shanghai Stock Exchange, and now holds a business license with a unified social credit code of 9144040019256618xc.
As of December 31, 2021, the registered capital of the company was 211716111600 yuan after the distribution of bonus shares, allotment of new shares, conversion of share capital, additional issuance of new shares and non-public issuance of shares over the years.
Legal representative of the company: Li Guangning. Company headquarters address: No. 155, Changsheng Road, Zhuhai City. Registered address: Zhuhai City. The parent company of the company is Zhuhai HUAFA Group Co., Ltd; The final controller is Zhuhai state owned assets supervision and Administration Commission.
（2） Business scope
Real estate operation; Wholesale and retail, purchasing and selling on a commission basis: building materials, metal materials (excluding gold), building hardware, hardware tools, electronic products and communication equipment (excluding mobile communication terminal equipment), chemical raw materials (excluding dangerous chemicals), hardware and electricity, and chemical industry.
（3） Business nature and main business activities of the company
The company belongs to the real estate development and operation industry. The main products are houses, shops and so on.
（4） Approval and issuance of financial statements
The financial statements were approved and issued by all directors on April 8, 2022.
2、 Scope of consolidated financial statements
A total of 597 subsidiaries and headquarters included in the scope of consolidated financial statements in the current period. See “note VIII, (I) equity in subsidiaries” for details of subsidiaries.
Compared with the previous period, the number of subsidiaries included in the consolidated financial statements in the current period increased by 101 and decreased by 27. For the subsidiaries newly included in the consolidation scope and subsidiaries no longer included in the consolidation scope in the current period, see note VII. Changes in the consolidation scope.
3、 Preparation basis of financial statements
（1） Preparation basis of financial statements
The company recognizes and measures the actual transactions and events in accordance with the accounting standards for business enterprises – Basic Standards and specific accounting standards for business enterprises, the application guide of accounting standards for business enterprises, the interpretation of accounting standards for business enterprises and other relevant provisions (hereinafter collectively referred to as “accounting standards for business enterprises”), The financial statements are prepared in accordance with the provisions of the rules for the preparation of information disclosure of companies offering securities to the public No. 15 – General Provisions on financial reports (revised in 2014) of the China Securities Regulatory Commission.
（2） Going concern
The company has evaluated the continuous operation ability for 12 months since the end of the reporting period, and no events or situations that have major doubts about the continuous operation ability are found. Therefore, the financial statements are prepared on the basis of going concern assumption.
（3） Accounting basis and pricing principle
The accounting of the company is based on the accrual basis. Except that investment real estate and some financial instruments are measured at fair value, the financial statements take historical cost as the measurement basis. If an asset is impaired, the corresponding impairment provision shall be withdrawn in accordance with relevant regulations.
4、 Important accounting policies and accounting estimates
（1） Statement of compliance with accounting standards for business enterprises
The financial statements prepared by the company comply with the requirements of the accounting standards for business enterprises and truly and completely reflect the company’s financial status, operating results, cash flow and other relevant information during the reporting period.
（2） Accounting period
The fiscal year is from January 1 to December 31 of the Gregorian calendar.
（3） Business cycle
The company’s main business is real estate development. The business cycle of the real estate industry is usually more than 12 months from land purchase to real estate development to sales and realization. The specific cycle is determined according to the development project, and its business cycle is used as the liquidity division standard of assets and liabilities; For other businesses other than the real estate industry, the business cycle is relatively short, and 12 months is taken as the liquidity classification standard of assets and liabilities.
（4） Recording currency
RMB is adopted as the bookkeeping base currency. Overseas subsidiaries take the currency in the main economic environment in which they operate as the bookkeeping base currency and convert it into RMB when preparing financial statements.
（5） Accounting treatment methods for business combinations under the same control and not under the same control
1. If the terms, conditions and economic impact of each transaction in the process of business combination meet one or more of the following conditions, multiple transactions shall be treated as a package deal for accounting
(1) These transactions are concluded at the same time or in consideration of mutual influence;
(2) These transactions as a whole can achieve a complete business result;
(3) The occurrence of one transaction depends on the occurrence of at least one other transaction;
(4) A transaction is uneconomic alone, but it is economical when considered together with other transactions.
2. Business combination under the same control
The assets and liabilities obtained by the company in business combination shall be measured according to the book value of the assets and liabilities of the combined party (including the goodwill formed by the final controller’s acquisition of the combined party) in the consolidated financial statements of the final controller on the combination date. For the difference between the book value of the net assets obtained in the merger and the book value of the merger consideration paid (or the total face value of the issued shares), the capital stock premium in the capital reserve shall be adjusted. If the capital stock premium in the capital reserve is insufficient to be offset, the retained earnings shall be adjusted.
If there is contingent consideration and it is necessary to recognize the estimated liabilities or assets, the difference between the amount of the estimated liabilities or assets and the subsequent settlement amount of contingent consideration shall be adjusted to the capital reserve (capital premium or equity premium). If the capital reserve is insufficient, the retained earnings shall be adjusted. If the business combination is finally realized through multiple transactions and belongs to a package deal, each transaction shall be treated as a transaction that obtains control; If it is not a package deal, the capital reserve shall be adjusted according to the difference between the initial investment cost of the long-term equity investment on the date of obtaining the control right and the sum of the book value of the long-term equity investment before the merger plus the book value of the newly paid consideration for the shares obtained on the merger date; If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For the equity investment held before the merger date, the other comprehensive income recognized due to the accounting of equity method or the accounting of financial instrument recognition and measurement standards will not be subject to accounting treatment until the disposal of the investment is subject to the same basis as the direct disposal of relevant assets or liabilities by the investee; Other changes in owner’s equity other than net profit and loss, other comprehensive income and profit distribution in the net assets of the investee recognized by using the equity method shall not be subject to accounting treatment until the investment is transferred to the current profit and loss when it is disposed of.
3. Business combination not under the same control
The purchase date refers to the date when the company actually obtains the control over the acquiree, that is, the date when the control over the acquiree’s net assets or production and operation decisions is transferred to the company. When the following conditions are met at the same time, the company generally believes that the transfer of control is realized:
① The business merger contract or agreement has been approved by the internal authority of the company.
② Where a business combination needs to be examined and approved by the relevant competent department of the state, it has been approved.
③ The necessary formalities for the transfer of property rights have been handled.
④ The company has paid most of the merger price and has the ability and plan to pay the remaining amount.
⑤ The company has actually controlled the financial and operating policies of the acquiree, enjoyed corresponding benefits and assumed corresponding risks.
On the acquisition date, the company measures the assets paid and liabilities incurred or assumed as the consideration for business combination at fair value, and the difference between the fair value and its book value is included in the current profit and loss.
The company recognizes the difference between the combination cost and the fair value of the identifiable net assets of the acquiree obtained in the combination as goodwill; The difference between the combination cost and the fair value of the identifiable net assets of the acquiree obtained in the combination shall be included in the current profit and loss after review.
If the business combination not under the same control realized step by step through multiple exchange transactions belongs to a package deal, each transaction shall be treated as a transaction that obtains control; If it is not a package deal and the equity investment held before the merger date is accounted by the equity method, the sum of the book value of the equity investment held by the acquiree before the acquisition date and the new investment cost on the acquisition date shall be taken as the initial investment cost of the investment; Other comprehensive income recognized for the equity investment held before the purchase date due to the adoption of the equity method shall be accounted for on the same basis as the investee’s direct disposal of relevant assets or liabilities. If the equity investment held before the merger date is accounted by the recognition and measurement standards of financial instruments, the sum of the fair value of the equity investment on the merger date plus the new investment cost shall be taken as the initial investment cost on the merger date. The difference between the fair value and book value of the originally held equity and the cumulative changes in fair value originally included in other comprehensive income shall be transferred to the current investment income on the merger date.
4. Relevant expenses incurred for merger
The intermediary expenses such as audit, legal services, evaluation and consultation and other directly related expenses incurred for business combination shall be included in the current profit and loss when incurred; The transaction costs of issuing equity securities for business combination can be deducted from equity if they are directly attributable to equity transactions.
（6） Preparation method of consolidated financial statements
1. Consolidation scope
The consolidation scope of the company’s consolidated financial statements is determined on the basis of control, and all subsidiaries (including individual entities controlled by the company) are included in the consolidated financial statements.
2. Merger procedure
The company prepares consolidated financial statements based on the financial statements of itself and its subsidiaries and other relevant materials. In preparing consolidated financial statements, the company regards the whole enterprise group as an accounting entity, and reflects the overall financial status, operating results and cash flow of the enterprise group in accordance with the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and unified accounting policies.
If the accounting policies of the subsidiary company and the consolidated financial statements are not consistent with the accounting policies of the company, the consolidated financial statements shall be adjusted according to the accounting period of the subsidiary company.
The consolidated financial statements offset the impact of internal transactions between the company and its subsidiaries and between subsidiaries on the consolidated balance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in shareholders’ equity. If the recognition of the same transaction from the perspective of the consolidated financial statements of the enterprise group is different from that with the company or subsidiaries as the accounting entity, the transaction shall be adjusted from the perspective of the enterprise group.
The shares belonging to minority shareholders in the owner’s equity, current net profit and loss and current comprehensive income of subsidiaries are separately listed under the owner’s equity item in the consolidated balance sheet, the net profit item and the total comprehensive income item in the consolidated income statement. If the current loss shared by the minority shareholders of a subsidiary exceeds the share of the minority shareholders in the owner’s equity of the subsidiary at the beginning of the period, the balance shall be offset against the minority shareholders’ equity.
For a subsidiary acquired through business combination under the same control, its financial statements shall be adjusted based on the book value of its assets and liabilities (including the goodwill formed by the final controller’s acquisition of the subsidiary) in the financial statements of the final controller.
For subsidiaries acquired through business combination not under the same control, the financial statements shall be adjusted based on the fair value of identifiable net assets on the acquisition date
(1) Increase subsidiaries or businesses
During the reporting period, if subsidiaries or businesses are added due to business combination under the same control, the opening balance of the consolidated balance sheet shall be adjusted; Incorporate the income, expenses and profits of subsidiaries or businesses from the beginning of the current period to the end of the reporting period into the consolidated income statement; The cash flows of subsidiaries or businesses from the beginning of the current period to the end of the reporting period are included in the consolidated cash flow statement, and the relevant items of the comparative statements are adjusted. It is deemed that the consolidated reporting entity has existed since the time when the final controller began to control.
If the investee under the same control can be controlled due to additional investment and other reasons, it is deemed that the parties involved in the merger exist in the current state when the final controller begins to control. For the equity investment held before obtaining the control of the combined party, the changes in relevant profits and losses, other comprehensive income and other net assets have been recognized from the later of the date of obtaining the original equity and the date of the same control of the combining party and the combined party to the date of combination, and the beginning retained earnings or current profits and losses of the reporting period are offset respectively.
During the reporting period, if subsidiaries or businesses are added due to business combinations not under the same control, the opening balance of the consolidated balance sheet will not be adjusted; Incorporate the income, expenses and profits of the subsidiary or business from the purchase date to the end of the reporting period into the consolidated income statement; The cash flow of the subsidiary or business from the purchase date to the end of the reporting period is included in the consolidated cash flow statement.
If the investee not under the same control can be controlled due to additional investment and other reasons, the equity of the acquiree held before the acquisition date shall be re measured by the company according to the fair value of the equity on the acquisition date, and the difference between the fair value and its book value shall be included in the current investment income. If the equity of the acquiree held before the acquisition date involves other comprehensive income calculated by the equity method and other changes in owner’s equity other than net profit and loss, other comprehensive income and profit distribution, the related changes in other comprehensive income and other owner’s equity are transferred to the current investment income on the acquisition date, which is generated due to the change in net liabilities or net assets of the investee’s remeasurement of the defined benefit plan
