Sirio Pharma Co.Ltd(300791) : notes to financial statements of 2021 annual financial report
(the following amounts are in RMB unless otherwise specified)
1、 Basic information of the company
(I) Company Profile
Registered address and headquarters office address: No. 83, Taishan Road, Shantou City, Guangdong Province
Main business activities: the company is mainly engaged in the R & D, production and sales of nutritional and health food
Approval date of financial statements: April 8, 2022
(II) scope and changes of consolidated financial statements
There are 14 subsidiaries included in the consolidated financial statements of the company in the current period. See note VII, “rights and interests in other entities” for details, including 2 new subsidiaries; The changes in the scope of the company’s consolidated statements in the current period are detailed in note VI, “changes in the scope of consolidation”.
2、 Preparation basis of financial statements
(I) preparation basis
On the basis of going concern, the company recognizes and measures the actual transactions and events in accordance with the accounting standards for business enterprises – Basic Standards and other specific accounting standards, application guidelines, standard interpretation and other relevant provisions (hereinafter collectively referred to as the accounting standards for business enterprises), On this basis, the financial statements are prepared in combination 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.
(II) going concern
The company has the ability of sustainable operation for at least 12 months from the end of the reporting period, and there are no major events affecting the ability of sustainable operation.
3、 Important accounting policies and accounting estimates
Tips on specific accounting policies and accounting estimates:
According to the actual production and operation characteristics and the provisions of relevant accounting standards for business enterprises, the company has formulated specific accounting policies and accounting estimates for transactions or events such as depreciation of fixed assets, amortization of intangible assets and revenue recognition.
(I) 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, changes in shareholders’ equity, cash flow and other relevant information.
(II) accounting period
The accounting year of the company starts from January 1 to December 31 of the Gregorian calendar.
(III) business cycle
The company takes 12 months as a business cycle.
(IV) recording currency
The company takes RMB as the bookkeeping base currency.
(V) accounting treatment methods for business combinations under the same control and not under the same control
1. Business combination under the same control: the assets and liabilities obtained by the company in business combination are 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. The difference between the book value of the issued capital or the premium paid to the retained capital in the total book value of the adjusted capital reserve or the balance between the paid in capital and the net capital reserve, or the premium paid to the capital stock.
2. Business combination not under the same control: on the acquisition date, the company measures the assets paid and liabilities incurred or assumed as the consideration of 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, the fair value of the assets and liabilities obtained in the combination, the non cash assets as the consideration of the combination or the issued equity securities shall be reviewed, and the review results show that the determination of the fair value of the identifiable assets and liabilities is appropriate, The difference between the cost of business combination and the fair value of the identifiable net assets obtained from the acquiree shall be included in the non operating income of the current period of combination.
The business combination not under the same control is realized step by step through multiple transactions. The combination cost is the sum of the consideration paid on the purchase date and the fair value of the equity of the acquiree held before the purchase date on the purchase date; The equity of the acquiree held before the acquisition date shall be remeasured according to the fair value on the acquisition date, and the difference between the fair value and its book value shall be included in the current investment income. The other comprehensive income of the long-term equity investment of the acquiree held before the acquisition date under the equity method shall be accounted for on the same basis as the direct disposal of relevant assets or liabilities by the investee. Other changes in shareholders’ equity other than net profit and loss, other comprehensive income and profit distribution shall be transferred to the current profit and loss on the acquisition date. For other equity instrument investments held by the acquiree before the acquisition date, the changes in the fair value of the equity instrument investment accumulated in other comprehensive income before the acquisition date are transferred to retained profits and losses.
3. Treatment of relevant expenses in business combination: Intermediary expenses such as audit, legal services, evaluation and consultation and other relevant management expenses incurred in business combination shall be included in the current profit and loss when incurred; The transaction expenses of equity securities or debt securities issued as merger consideration shall be included in the initial recognition amount of equity securities or debt securities.
(VI) preparation method of consolidated financial statements
1. Preparation scope of consolidated statements
The consolidation scope of consolidated financial statements is determined on the basis of control, including not only subsidiaries determined according to voting rights (or similar rights) itself or in combination with other arrangements, but also structured entities determined based on one or more contractual arrangements. Control means that the investor has the power over the investee, enjoys variable returns through participating in relevant activities of the investee, and is able to use the power over the investee to affect its return amount.
2. Merger procedure
The consolidated financial statements are prepared on the basis of the financial statements of the company and its subsidiaries and in accordance with other relevant information.
The company unifies the accounting policies and accounting periods adopted by subsidiaries to make the accounting policies and accounting periods adopted by subsidiaries consistent with the company. When preparing the consolidated financial statements, follow the principle of materiality to offset the internal transactions, internal transactions and equity investment projects between the parent company and subsidiaries and between subsidiaries.
The equity and profit and loss attributable to minority shareholders of subsidiaries are separately listed under the owner’s equity item in the consolidated balance sheet and the net profit 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.
(1) Increase subsidiaries and businesses
For subsidiaries and businesses increased due to business combination under the same control during the reporting period, the opening amount of the consolidated balance sheet shall be adjusted when preparing the consolidated balance sheet; When preparing the income statement, the income, expenses and profits of the subsidiary and business combination from the beginning of the current period to the end of the reporting period shall be included in the consolidated income statement; When consolidating the cash flow statement, the cash flow of the subsidiary and business from the beginning of the current period to the end of the reporting period shall be included in the consolidated cash flow statement; At the same time, the relevant items of the comparative statements shall be adjusted. It is deemed that the consolidated reporting entity has existed since the time point when the final controller began to control.
For subsidiaries and businesses increased due to business combination or other means not under the same control during the reporting period, the opening amount of the consolidated balance sheet shall not be adjusted when preparing the consolidated balance sheet.
When preparing the income statement, the income, expenses and profits of the subsidiary and the business from the date of purchase to the end of the reporting period shall be included in the consolidated income statement. When preparing the cash flow statement, the cash flow of the subsidiary from the purchase date to the end of the reporting period shall be included in the consolidated cash flow statement.
The company prepares the consolidated financial statements based on the amount of identifiable assets, liabilities and contingent liabilities determined on the basis of the fair value on the acquisition date reflected in the individual financial statements of subsidiaries on the balance sheet date of the current period. The difference between the combination cost and the fair value of the identifiable net assets of the acquiree obtained in the combination is recognized 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 is realized step by step through multiple transactions, in the consolidated financial statements, the equity of the acquiree held before the acquisition date shall be re measured 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. The other comprehensive income of the long-term equity investment of the acquiree held before the acquisition date under the equity method shall be accounted for on the same basis as the direct disposal of relevant assets or liabilities by the investee. Other changes in shareholders’ equity other than net profit and loss, other comprehensive income and profit distribution shall be transferred to the current profit and loss on the acquisition date. For other equity instrument investments held by the acquiree before the acquisition date, the changes in the fair value of the equity instrument investment accumulated in other comprehensive income before the acquisition date are transferred to retained earnings.
(2) Disposal of subsidiaries and businesses
A. General treatment method
During the reporting period, if the company disposes of subsidiaries and businesses, the income, expenses and profits of the subsidiaries and businesses from the beginning of the period to the date of disposal shall be included in the consolidated income statement; The cash flows of the subsidiary and the business from the beginning of the period to the disposal date are included in the consolidated cash flow statement.
If the company loses its control over the original subsidiary due to the disposal of some equity investments, in the consolidated financial statements, the remaining equity shall be re measured according to its fair value on the date of loss of control. The difference between the sum of the consideration obtained from the disposal of equity and the fair value of the remaining equity minus the share of the net assets of the original subsidiary continuously calculated from the purchase date or the merger 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, and the goodwill shall be offset at the same time. Other comprehensive income related to the equity investment of the original subsidiary shall be accounted for on the same basis as the direct disposal of relevant assets or liabilities by the subsidiary when the control right is lost.
B. Step by step disposal of equity to loss of control
Where an enterprise disposes of its equity investment in a subsidiary step by step through multiple transactions until it loses control, if the transactions of disposing of its equity investment in a subsidiary until it loses control belong to a package deal, each transaction shall be accounted for as a transaction of disposing of a subsidiary and losing control; However, before the loss of control, the difference between each disposal price and the share of the subsidiary’s net assets corresponding to the disposal of investment shall be recognized as other comprehensive income in the consolidated financial statements, and shall be transferred to the profit and loss of the current period when the control is lost.
The terms, conditions and economic impact of various transactions for the disposal of equity investment in subsidiaries meet one or more of the following conditions, which usually indicates that multiple transactions should be accounted for as a package deal:
(A) These transactions are concluded at the same time or in consideration of mutual influence;
(B) These transactions as a whole can achieve a complete business result;
(C) The occurrence of one transaction depends on the occurrence of at least one other transaction;
(D) A transaction is uneconomical when considered alone, but it is economical when considered together with other transactions.
(3) Purchase of minority interests in subsidiaries
For the difference between the long-term equity investment newly obtained by the company due to the purchase of minority shares and the identifiable net assets of the subsidiary calculated according to the newly increased shareholding ratio from the purchase date (or merger date), adjust the capital premium or share capital premium in the capital reserve in the consolidated balance sheet. If the capital premium or share capital premium in the capital reserve is insufficient to be offset, adjust the retained earnings.
(4) Partial disposal of equity investment in subsidiaries without losing control
Without losing control, the difference between the disposal price obtained from the partial disposal of long-term equity investment in subsidiaries and the share of net assets of subsidiaries continuously calculated from the purchase date or merger date corresponding to the disposal of long-term equity investment shall be adjusted to the capital premium or share capital premium in the capital reserve in the consolidated balance sheet. If the capital premium or share capital premium in the capital reserve is insufficient to be offset, the retained earnings shall be adjusted.
(VII) classification of joint venture arrangement and accounting treatment method of joint operation
Joint venture arrangement refers to an arrangement jointly controlled by two or more participants. Joint venture arrangements are divided into joint ventures and joint ventures.
1. Joint operation refers to the joint venture arrangement in which the company enjoys the relevant assets of the arrangement and undertakes the relevant liabilities of the arrangement. The company confirms the following items related to the share of interests in joint operation:
(1) Recognize the assets held separately and jointly held assets according to their shares;
(2) Recognize the liabilities undertaken individually and jointly according to their shares;
(3) Recognize the income generated from the sale of its share of joint operation output;
(4) Recognize the income generated from the sale of output in the joint operation according to its share;
(5) Recognize the expenses incurred separately and the expenses incurred in joint operation according to their share.
2. Joint venture refers to the joint venture arrangement in which the company has rights only to the net assets of the arrangement. The company carries out accounting treatment for the investment of joint ventures in accordance with the provisions of equity method accounting related to long-term equity investment.
(VIII) determination criteria of cash and cash equivalents
When preparing the cash flow statement, the company recognizes the cash on hand and deposits that can be used for payment at any time as cash. Investments with short term (generally due within three months from the date of purchase), strong liquidity, easy to be converted into known amount of cash and low risk of value change are determined as cash equivalents. Restricted bank deposits are not regarded as cash and cash equivalents in the cash flow statement.
(IX) foreign currency business and translation of foreign currency statements
1. Foreign currency business
In case of foreign currency business, the foreign currency amount shall be converted into RMB at the exchange rate similar to the spot exchange rate on the transaction date. At the end of the period, the foreign currency monetary items and foreign currency non monetary items shall be treated according to the following methods:
(1) Foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate on the initial recognition or the previous balance sheet date shall be included in the current profit and loss.
(2) Foreign currency non monetary items measured at historical cost shall still be translated at the spot exchange rate on the transaction date without changing the amount in the functional currency.
(3) Foreign currency non monetary items measured at fair value are translated at the spot exchange rate on the date when the fair value is determined. The difference between the amount of recording currency after conversion and the amount of original recording currency is included in the current profit and loss or other comprehensive income according to the nature of non monetary items
