Leshan Giantstar Farming&Husbandry Corporation Limited(603477)
And
Huaxi Securities Co.Ltd(002926)
about
Reply to the notification letter on preparations for the meeting of the issuance and Examination Committee of public convertible corporate bonds
Sponsor (lead underwriter)
January 2002
China Securities Regulatory Commission:
According to the requirements of the letter on making preparations for the Leshan Giantstar Farming&Husbandry Corporation Limited(603477) public issuance examination committee meeting (hereinafter referred to as the “notification letter”) issued by your association on December 14, 2021, Leshan Giantstar Farming&Husbandry Corporation Limited(603477) (hereinafter referred to as the “company”, “issuer”, “603477}”), Huaxi Securities Co.Ltd(002926) (hereinafter referred to as the “sponsor” or ” Huaxi Securities Co.Ltd(002926) “) Beijing Guofeng law firm (hereinafter referred to as the “issuer’s lawyer” or “lawyer”) and Sichuan Huaxin (Group) Certified Public Accountants (special limited partnership) (hereinafter referred to as the “issuer’s accountant” or “accountant”) have carefully implemented the issues raised in the notification letter. According to the relevant requirements of the notification letter, the specific instructions are as follows:
The abbreviation in this reply has the same meaning as the abbreviation in the Leshan Giantstar Farming&Husbandry Corporation Limited(603477) prospectus for public issuance of convertible corporate bonds.
Question one
About the return on net assets. The weighted average return on net assets of the applicant from January to September in 2019, 2020 and 2021 are 4.58%, 7.91% and 7.05% respectively (the lower before and after deduction), with an average of 6.51%. In the third quarter, the sales price of fat pigs decreased significantly, with a gross profit margin of – 24.05% and a net profit of 85.94 million yuan. It is estimated that the weighted average return on net assets in the three fiscal years from 2019 to 2021 will be 7.75% (the lower before and after deduction). Acquired 100% equity of superstar Co., Ltd. and recognized core goodwill of RMB 605 million. The inventory amount at the end of the most recent period was 1.23 billion yuan, mainly composed of expendable biological assets. There is a risk of performance decline or even loss disclosed in the prospectus.
Please explain: (1) the reasons for the formation of superstar limited goodwill, whether the acquisition consideration is allocated to identifiable tangible and intangible assets, whether the recognition of various assets is different from the evaluation report, if so, explain the reasons and Rationality: whether the initial recognition of goodwill complies with the provisions of accounting standards, Whether the identifiable intangible assets have been reasonably amortized according to the requirements of accounting standards: (2) in combination with the sharp decline of pig price and in comparison with various assumptions in the acquisition evaluation report, analyze whether the provision for impairment of goodwill should be made and calculated, and whether the relevant risks are fully disclosed: (3) the provision for inventory depreciation at the end of the third quarter and its calculation basis, whether the provision is reasonable and prudent, Whether the depreciation provision of productive biological assets is accurate, whether there is a large difference and the rationality of the difference with comparable companies: (4) calculate the performance in the fourth quarter of 2021 in combination with the recent situation and the above, and further explain whether it continues to meet the conditions for issuing convertible bonds in 2021 and whether there is a risk of 50% decline in operating profit in 2022 in combination with the performance express or annual report in 2021.
The recommendation institution and the reporting accountant shall explain the verification basis and process, and express clear verification opinions.
[reply]
1、 Reasons for the formation of superstar limited goodwill, whether the acquisition consideration is allocated to identifiable tangible and intangible assets, whether there is any difference between the recognition of various assets and the evaluation report, if any, explain the reasons and Rationality: whether the initial recognition of goodwill meets the provisions of accounting standards, and whether identifiable intangible assets have been reasonably allocated according to the requirements of accounting standards
(I) reasons for the formation of superstar limited goodwill
The company purchases 100% equity of superstar Co., Ltd. held by 41 counterparties such as superstar group by issuing shares and paying cash; The overall equity value of the restructured party superstar Co., Ltd. and its subsidiaries has been evaluated by Zhonglian Asset Evaluation Group Co., Ltd. and issued the asset evaluation report (Zhonglian pingbao Zi [2020] No. 222), with an evaluation value of 182.12248 million yuan. Through negotiation between both parties, the total price of 100% shares of superstar Co., Ltd. is 1820 million yuan; The acquisition of superstar limited equity is a business merger not under the same control. The difference between the acquisition consideration and the fair value of identifiable net assets under the asset-based method on the benchmark date of June 30, 2020 is recognized as core goodwill of 604954499.37 yuan. The net assets reduced due to the recognition of deferred income tax liabilities in the consolidated statements due to the assessment of value-added are recognized as non core goodwill of 7941611.70 yuan, The total recognized goodwill is 612896111.07 yuan.
(II) whether the purchase consideration is allocated to identifiable tangible and intangible assets, whether there is any difference between the recognition of various assets and the evaluation report, and if so, explain the reasons and rationality
The acquisition of superstar Co., Ltd. by the company is a business combination not under the same control. The combination cost shall be allocated on the acquisition date, and the fair value of various identifiable assets, liabilities and contingent liabilities of the acquiree superstar Co., Ltd. shall be recognized. 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 calculation process of goodwill is as follows:
Unit: 10000 yuan
Project amount
Consolidated cost 182000.00
Less: share of fair value of identifiable net assets obtained 120710.39
Goodwill 61289.61
The fair value of identifiable assets and liabilities of the acquiree as of June 30, 2020 is as follows:
Unit: 10000 yuan
Project book value fair value premium apportionment amount on the purchase date
Monetary Fund 25600.23 25600.23
Trading financial assets 14.53 14.53
Accounts receivable 7140.97 7140.97
Advance payment 1684.05
Other receivables 1669.76
Inventory 26624.05 31606.57 4982.52
Other current assets 1.18 1.18
Long term equity investment 315.38
Other equity instruments 1350.59 1350.59
Fixed assets 59559.32 68441.00 8881.68
Construction in progress 29003.95 28996.15 -7.80
Productive biological assets 11533.59 12480.51 946.92
Intangible assets 3222.57 7725.88 4503.32
Long term deferred expenses 1132.05
Deferred income tax assets 616.45
Other non current assets 202.61 202.61
Total assets 169671.28 188977.90 19306.64
Total liabilities 67617.37 66762.54 -854.83
Owner of parent company
Total equity (or shareholders’ equity) 100707.52 120710.39 20002.87
Minority equity 1346.38 1504.98 158.60
The fair value share of identifiable net assets obtained by the company from the acquiree superstar Co., Ltd. on June 30, 2020 is 1207.1039 million yuan.
To sum up, the company has allocated the acquisition consideration to identifiable tangible and intangible assets, and there is no difference between the recognition of various assets and the evaluation report.
(III) whether the initial recognition of goodwill complies with the provisions of accounting standards
According to the accounting standards for Business Enterprises No. 20 – business combination, “in business combination not under the same control, the difference between the combination cost and the fair value of the identifiable net assets obtained by the acquiree on the acquisition date shall be recognized as goodwill”.
As shown in the above table, the initial recognition of goodwill is formed by the difference of 612.8961 million yuan after the merger cost of 1820 million yuan minus the fair value of 1207.1039 million yuan of the identifiable net assets of the acquiree, which is in line with the provisions of the accounting standards for business enterprises.
(IV) whether the identifiable intangible assets have been reasonably amortized according to the requirements of accounting standards
According to Article 14 of the accounting standards for Business Enterprises No. 20 – business combination, if the fair value of the intangible assets obtained in the combination can be measured reliably, they shall be separately recognized as intangible assets and measured according to the fair value.
The identifiable intangible assets obtained from the acquisition of superstar Co., Ltd. are mainly land use rights, computer software and patented technology. The main composition of intangible assets is listed as follows:
Unit: 10000 yuan
No. item fair value increment amount, of which: to be scrapped, including: allowable increment of fair value of public sale to be amortized
1 intangible assets 4503.32 0.00 4503.32
1.1 land use right 1554.27 0.00 1554.27
1.2 other intangible assets 2949.05 0.00 2949.05
The company has reasonably apportioned the identifiable intangible assets in accordance with the requirements of the accounting standards for business enterprises.
2、 In combination with the sharp decline of pig price and other conditions, and in comparison with various assumptions in the acquisition evaluation report, analyze whether the provision for impairment of goodwill should be made and calculated, and whether the relevant risks are fully disclosed
(I) analyze whether the provision for impairment of goodwill should be withdrawn and calculate
1. Explain whether there is any sign of impairment of goodwill in combination with the limited operating status of superstar
The operating performance of superstar Co., Ltd. in 2021 is as follows:
Unit: 10000 yuan
Sequence project 1st quarter 2021 2nd quarter 2021
