Xinxiang Richful Lube Additive Co.Ltd(300910)
2021 annual audit report
Floors 5-8, 12 and 23, block a, UDC times building, No. 8 Xinye Road, Qianjiang New Town, Hangzhou, China www.zhcpa.com cn. Floors5-8,12and23,BlockA,UDC Times Building,No.8 Xinye Road，Qianjiang New City,Hangzhou
Tel.057188879999 Fax. 057188879000
catalogue
Page
1、 Audit report 1-7
2、 Financial statements 8-19
（1） Consolidated balance sheet 8-9
（2） Consolidated income statement 10
（3） Consolidated cash flow statement 11
（4） Consolidated statement of changes in owner’s equity 12-13
（5） Balance sheet of parent company 14-15
（6） Income statement of parent company 16
（7） Cash flow statement of parent company 17
（8） Statement of changes in owner’s equity of parent company 18-19
3、 Notes to financial statements 20-121
Floors 5-8, 12 and 23, block a, UDC times building, No. 8 Xinye Road, Qianjiang New Town, Hangzhou, China www.zhcpa.com cn. Floors5-8,12and23,BlockA,UDC Times Building,No.8 Xinye Road，Qianjiang New City,Hangzhou
Tel.057188879999 Fax. 057188879000
Audit report
Zhonghui kuaishan [2022] No. 1612 Xinxiang Richful Lube Additive Co.Ltd(300910) all shareholders:
1、 Audit opinion
We have audited the financial statements of Xinxiang Richful Lube Additive Co.Ltd(300910) (hereinafter referred to as Xinxiang Richful Lube Additive Co.Ltd(300910) 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 owner’s equity and notes to 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 Xinxiang Richful Lube Additive Co.Ltd(300910) 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 Xinxiang Richful Lube Additive Co.Ltd(300910) 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. We confirm that the following matters are the key audit matters that need to be communicated in the audit report.
Floors 5-8, 12 and 23, block a, UDC times building, No. 8 Xinye Road, Qianjiang New Town, Hangzhou, China www.zhcpa.com cn. Floors5-8,12and23,BlockA,UDC Times Building,No.8 Xinye Road，Qianjiang New City,Hangzhou
Tel.057188879999 Fax. 057188879000
（1） Revenue recognition
1. Event description
Xinxiang Richful Lube Additive Co.Ltd(300910) company mainly produces and sells color developing agents, oil additives and other products. The main business income in 2021 was 107038855870 yuan.
As stated in note III (XXVII) to the financial statements, Xinxiang Richful Lube Additive Co.Ltd(300910) company’s business is divided into three types: product sales business, entrusted processing business and service business The specific method of revenue recognition of Xinxiang Richful Lube Additive Co.Ltd(300910) company is as follows:
Xinxiang Richful Lube Additive Co.Ltd(300910) company’s sales business of Chinese products is mainly divided into two transaction modes: delivery of goods to the place designated by the buyer and self delivery by the buyer. Revenue is recognized when the goods are delivered to the place designated by the buyer and signed by customers (some customers sign when receiving) or when the buyer picks up and signs from Xinxiang Richful Lube Additive Co.Ltd(300910) company, the amount of product sales revenue has been determined, and the cost related to products can be reliably measured.
Xinxiang Richful Lube Additive Co.Ltd(300910) company has two types of foreign sales business. One is that Chinese companies export products directly to customers, mainly by means of FOB, CIF and CFR trade. When the goods have been loaded and declared, the amount of product sales revenue has been determined, and the cost related to products can be measured reliably, the revenue is recognized.
The other is that the overseas third-party warehouse that keeps the inventory for the company delivers the goods to the customer. After receiving the payment from the customer, the Xinxiang Richful Lube Additive Co.Ltd(300910) company issues the release note and delivers it to the customer, and the amount of product sales revenue has been determined, and the cost related to the product can be reliably measured, the revenue is recognized.
Xinxiang Richful Lube Additive Co.Ltd(300910) company recognizes the revenue from the entrusted processing business as follows: after the entrusted materials are processed, they are delivered to the customer, and the revenue is recognized after the customer signs.
Xinxiang Richful Lube Additive Co.Ltd(300910) company recognizes revenue from service business as follows: revenue is recognized after service is completed and settled and confirmed by both parties.
As revenue is one of the key indicators of Xinxiang Richful Lube Additive Co.Ltd(300910) company, the management may have significant risk of misstatement in revenue recognition, so we regard revenue recognition as a key audit matter.
2. Audit response
Our audit procedures mainly include:
① Understand and evaluate the management’s key internal control design related to revenue recognition, and select samples to test whether the control is implemented;
② Select samples to check the sales contract, identify the contract terms and conditions related to the transfer of commodity control, and evaluate whether the revenue recognition policy of Xinxiang Richful Lube Additive Co.Ltd(300910) company meets the requirements of accounting standards for business enterprises;
③ Obtain the annual sales list, select samples, check the sales contract, invoice, release note, bill of lading, payment receipt and other supporting documents, and evaluate the authenticity of relevant income and whether it complies with accounting policies;
④ Implement analytical procedures for revenue and cost, including the fluctuation analysis of revenue, cost and gross profit margin of each month in the current period, and the analysis of revenue, cost and gross profit margin of main products, so as to evaluate the accuracy and rationality of revenue recognition; ⑤ Select important customers to implement the letter confirmation procedure for the ending balance of accounts receivable and the amount recognized in the current period, and strictly control the letter confirmation process;
⑥ For the revenue recognized before and after the balance sheet date, select a certain sample and check the supporting documents such as delivery order, customer receipt, customs declaration, etc. to determine whether the revenue is recorded in the appropriate accounting period.
（2） Bad debt provision for accounts receivable
1. Event description
The book balance of accounts receivable of Xinxiang Richful Lube Additive Co.Ltd(300910) company on December 31, 2021 was 17310373362 yuan, the bad debt provision was 876067274 yuan, and the book value was 16434306088 yuan Xinxiang Richful Lube Additive Co.Ltd(300910) company measures the credit loss of accounts receivable according to the present value of the difference between the contract cash flow receivable and the expected cash flow received. When it is impossible to evaluate the information of expected credit loss of individual accounts receivable at a reasonable cost, Xinxiang Richful Lube Additive Co.Ltd(300910) company divides the accounts receivable into several combinations according to the characteristics of credit risk, and estimates the expected credit loss on the basis of combination with reference to the experience of historical credit loss, combined with the current situation and considering the forward-looking information. Because the amount of accounts receivable is significant and the determination of the recoverable amount of accounts receivable requires the judgment and estimation of the management. Therefore, we regard the rationality of the provision for bad debts of accounts receivable as the key audit matter.
2. Audit response
Our audit procedures mainly include:
① Evaluate the effectiveness of the design and operation of the internal control system related to the management of receivables;
② Review the withdrawal process of bad debt provision for receivables of Xinxiang Richful Lube Additive Co.Ltd(300910) company and its subsidiaries, including the bad debt provision withdrawn by combination and individual;
③ Understand and evaluate whether the accounting estimation of the provision for bad debts of receivables of the management is reasonable by consulting the sales contract, comparing the recovery of previous payments, communicating with the management and other procedures;
④ Select a sample of the ending balance of accounts receivable and implement the independent confirmation procedure.
⑤ Focus on checking the accounts receivable beyond the settlement period, find out the reasons for overdue, consider whether the provision for bad debts is sufficient, and check the collection after the period;
⑥ Obtain necessary external basis and review the rationality of bad debt provision.
（3） Inventory falling price reserves
1. Event description
Xinxiang Richful Lube Additive Co.Ltd(300910) company on December 31, 2021, the book balance of inventory is 28986508496 yuan, the depreciation reserve is 0.00 yuan, and the book value is 28986508496 yuan. As stated in note III (XV) to the financial statements, inventories are measured at the lower of cost and net realizable value on the balance sheet date. The net realizable value is determined according to the estimated selling price of the products produced minus the estimated cost to be incurred at the time of completion, the estimated selling expenses and relevant taxes. The management needs to make major judgments and assumptions in the forecast, especially the future sales price, production cost, sales expenses and relevant taxes. Moreover, the amount of inventory is significant, and whether the provision for inventory falling price is accurate or not has a great impact on the financial statements, so we determine it as a key audit event.
2. Audit response
Our audit procedures mainly include:
① Evaluate the design and operation effectiveness of the inventory related internal control system of Xinxiang Richful Lube Additive Co.Ltd(300910) company;
② Supervise the inventory of Xinxiang Richful Lube Additive Co.Ltd(300910) company and check the quantity and condition of inventory;
③ Obtain the ending inventory age list of the inventory of Xinxiang Richful Lube Additive Co.Ltd(300910) company, analyze and review the inventory age, and analyze whether the inventory falling price reserves are reasonable;
④ Obtain the calculation table of inventory falling price reserves, review the estimated selling price, production costs, sales expenses and relevant taxes estimated by the management, compare them with the actual selling price after the balance sheet date, and evaluate the accuracy of inventory falling price reserves.
4、 Other information
The management of Xinxiang Richful Lube Additive Co.Ltd(300910) company (hereinafter referred to as the management) is responsible for other information. Other information includes the information covered in the 2021 annual report, 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
The management 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 caused by fraud or error.
When preparing the financial statements, the management is responsible for evaluating the sustainable operation ability of Xinxiang Richful Lube Additive Co.Ltd(300910) company, disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless the management plans to liquidate Xinxiang Richful Lube Additive Co.Ltd(300910) company, terminate operation or have no other realistic choice.
Xinxiang Richful Lube Additive Co.Ltd(300910) corporate governance (hereinafter referred to as governance) is responsible for supervising the financial reporting process of Xinxiang Richful Lube Additive Co.Ltd(300910) 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,
