Haining China Leather Market Co.Ltd(002344) : the 2021 annual audit report 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 position, operating results, cash flow and other relevant information.
（2） Accounting period
The fiscal year starts on January 1 and ends on December 31 of the Gregorian calendar.
（3） Business cycle
The business cycle of the company’s market operation and management, hotel services, commodity circulation, financing guarantee business and health care business services is relatively short, and 12 months is taken as the liquidity division standard of assets and liabilities; The business cycle of market and other real estate projects is generally more than 12 months from their development and construction to their rental and sale. The specific cycle is determined according to the situation of the project, and its business cycle is used as the liquidity division standard of assets and liabilities.
（4） Recording currency
RMB is adopted as the bookkeeping base currency.
（5） Accounting treatment methods for business combinations under the same control and not under the same control
1. Accounting treatment method of 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 combined party in the consolidated financial statements of the final controller on the combination date. The company adjusts the capital reserve according to the difference between the book value share of the owner’s equity of the merged party in the consolidated financial statements of the final controller and the book value of the merger consideration paid or the total face value of the issued shares; If the capital reserve is insufficient to offset, the retained earnings shall be adjusted.
2. Accounting treatment methods for business combinations not under the same control
On the acquisition date, 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; If the merger cost is less than the fair value of the identifiable net assets of the acquiree obtained in the merger, the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree obtained and the measurement of the merger cost shall be reviewed first. If the merger cost is still less than the fair value of the identifiable net assets of the acquiree obtained in the merger after review, the difference shall be included in the current profit and loss.
（6） Preparation method of consolidated financial statements
The parent company brings all subsidiaries under its control into the consolidation scope of the consolidated financial statements. The consolidated financial statements are prepared by the parent company in accordance with the accounting standards for Business Enterprises No. 33 – consolidated financial statements based on the financial statements of the parent company and its subsidiaries and other relevant materials.
（7） Classification of joint venture arrangement and accounting treatment method of joint operation
1. Joint venture arrangements are divided into joint operation and joint venture.
2. When the company is a joint venture, the following items related to the interest share in the joint operation shall be recognized:
(1) Confirm the assets held separately and jointly held assets according to the holding share;
(2) Recognize the liabilities undertaken individually and jointly according to the holding share;
(3) Recognize the income generated from the sale of the company’s share of joint operation output;
(4) Recognize the income generated from the sale of assets in the joint operation according to the share held by the company;
(5) Confirm the expenses incurred separately and the expenses incurred in joint operation according to the share held by the company.
（8） Criteria for determining cash and cash equivalents
Cash listed in the cash flow statement refers to cash on hand and deposits that can be used for payment at any time. Cash equivalents refer to the short-term, highly liquid investments held by enterprises, which are easy to be converted into known amounts of cash and have little risk of value change. （9） Translation of foreign currency business
When foreign currency transactions are initially recognized, they are translated into RMB at the spot exchange rate on the transaction date or the approximate exchange rate. On the balance sheet date, foreign currency monetary items are translated at the spot exchange rate on the balance sheet date. The exchange difference arising from different exchange rates, in addition to the exchange difference between the principal and interest of foreign currency special borrowings related to the acquisition and construction of assets eligible for capitalization, is included in the current profit and loss; Foreign currency non monetary items measured at historical cost shall still be translated at the spot exchange rate on the transaction date or the approximate exchange rate, without changing their RMB amount; 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, and the difference is included in the current profit and loss or other comprehensive income.
（10） Financial instruments
1. Classification of financial assets and financial liabilities
Financial assets are divided into the following three categories at initial recognition: (1) financial assets measured at amortized cost; (2) Financial assets measured at fair value and whose changes are included in other comprehensive income; (3) Financial assets measured at fair value through profit or loss.
Financial liabilities are divided into the following four categories at initial recognition: (1) financial liabilities measured at fair value and whose changes are included in current profits and losses; (2) The transfer of financial assets does not meet the conditions for derecognition or continues to be involved in the financial liabilities formed by the transferred financial assets; (3) Financial guarantee contracts that do not belong to (1) or (2) above, and loan commitments that do not belong to (1) above and lend at a lower market interest rate; (4) Financial liabilities measured at amortized cost.
2. Recognition basis, measurement method and derecognition conditions of financial assets and financial liabilities
(1) Recognition basis and initial measurement method of financial assets and financial liabilities
A financial asset or financial liability is recognized when the company becomes a party to the financial instrument contract. When financial assets or financial liabilities are initially recognized, they are measured at fair value; For the financial assets and financial liabilities measured at fair value and whose changes are included in the current profit and loss, the relevant transaction costs are directly included in the current profit and loss; For other types of financial assets or financial liabilities, relevant transaction costs are included in the initially recognized amount. However, if the accounts receivable initially recognized by the company does not contain significant financing components or the company does not consider the financing components in the contract less than one year, the initial measurement shall be carried out according to the transaction price defined in the accounting standards for Business Enterprises No. 14 – income.
(2) Subsequent measurement methods of financial assets
1) Financial assets measured at amortized cost
The effective interest rate method is adopted for subsequent measurement according to the amortized cost. The gains or losses arising from financial assets measured at amortized cost and not part of any hedging relationship shall be included in the current profit and loss when they are derecognized, reclassified, amortized according to the effective interest rate method or recognized as impaired.
2) Debt instrument investment measured at fair value with changes included in other comprehensive income
Fair value is adopted for subsequent measurement. The interest, impairment loss or gain and exchange gain and loss calculated by the effective interest rate method are included in the current profit and loss, and other gains or losses are included in other comprehensive income. At the time of derecognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in the current profit and loss.
3) Equity instrument investment measured at fair value with changes included in other comprehensive income
Fair value is adopted for subsequent measurement. The dividends obtained (except those belonging to the recovery part of investment costs) are included in the current profits and losses, and other gains or losses are included in other comprehensive income. Upon derecognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in retained earnings.
4) Financial assets measured at fair value through profit or loss
The fair value is adopted for subsequent measurement, and the resulting gains or losses (including interest and dividend income) are included in the current profit and loss, unless the financial asset is part of the hedging relationship.
(3) Subsequent measurement method of financial liabilities
1) Financial liabilities measured at fair value through profit or loss
Such financial liabilities include trading financial liabilities (including derivatives belonging to financial liabilities) and financial liabilities designated to be measured at fair value and whose changes are included in the current profit and loss. Such financial liabilities are subsequently measured at fair value. The amount of changes in the fair value of financial liabilities designated to be measured at fair value through profit or loss due to changes in the company’s own credit risk shall be included in other comprehensive income, unless the treatment will cause or expand the accounting mismatch in profit or loss. Other gains or losses arising from such financial liabilities (including interest expenses, except for changes in fair value caused by changes in the company’s own credit risk) are included in the current profits and losses, unless the financial liabilities are part of the hedging relationship. Upon derecognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in retained earnings.
2) The transfer of financial assets does not meet the conditions for derecognition or continues to be involved in the financial liabilities formed by the transferred financial assets
It shall be measured in accordance with the relevant provisions of the accounting standards for Business Enterprises No. 23 – transfer of financial assets.
3) Financial guarantee contracts that do not belong to 1) or 2) above, and loan commitments that do not belong to 1) above and lend at a lower market interest rate
After initial recognition, subsequent measurement shall be made according to the higher of the following two amounts: ① the amount of loss reserves determined according to the impairment provisions of financial instruments; ② The balance of the initially recognized amount after deducting the accumulated amortization determined in accordance with the relevant provisions of the accounting standards for Business Enterprises No. 14 – income.
4) Financial liabilities measured at amortized cost
It is measured at amortized cost using the effective interest method. The gains or losses arising from financial liabilities measured at amortized cost and not part of any hedging relationship shall be included in the current profit and loss when they are derecognized and amortized according to the effective interest rate method.
(4) Derecognition of financial assets and financial liabilities
1) Financial assets are derecognized when one of the following conditions is met:
① The contractual right to receive cash flows from financial assets has been terminated;
② Financial assets have been transferred, and the transfer meets the provisions on derecognition of financial assets in accounting standards for Business Enterprises No. 23 – transfer of financial assets.
2) When the current obligations of financial liabilities (or part thereof) have been relieved, the recognition of such financial liabilities (or part thereof) shall be terminated accordingly.
3. Recognition basis and measurement method of financial asset transfer
If the company transfers almost all the risks and rewards in the ownership of financial assets, the financial assets shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities; If almost all the risks and rewards of the ownership of financial assets are retained, the transferred financial assets shall continue to be recognized. If the company neither transfers nor retains almost all the risks and rewards of the ownership of financial assets, it shall be treated as follows: (1) if it does not retain control over the financial assets, the financial assets shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities; (2) If the control over the financial assets is retained, the relevant financial assets shall be recognized according to the degree of continued involvement in the transferred financial assets, and the relevant liabilities shall be recognized accordingly.
If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall be included in the current profits and losses: (1) the book value of the transferred financial assets on the date of derecognition; (2) The sum of the consideration received from the transfer of financial assets and the amount of the corresponding derecognized part of the accumulative amount of changes in fair value originally directly included in other comprehensive income (the financial assets involved in the transfer are debt instrument investments measured at fair value and whose changes are included in other comprehensive income). If a part of a financial asset is transferred and the transferred part meets the conditions for derecognition as a whole, the book value of the whole financial asset before the transfer shall be apportioned between the derecognized part and the continuously recognized part according to their respective relative fair values on the transfer date, and the difference between the following two amounts shall be included in the current profits and losses: (1) the book value of the derecognized part; (2) The sum of the consideration of the derecognized part and the amount of the corresponding derecognized part in the cumulative amount of changes in fair value originally directly included in other comprehensive income (the financial assets involved in the transfer are debt instrument investments measured at fair value and whose changes are included in other comprehensive income).
4. Determination method of fair value of financial assets and financial liabilities
The company adopts valuation techniques that are applicable in the current situation and supported by sufficient available data and other information to determine the fair value of relevant financial assets and financial liabilities. The company divides the input value used in the valuation technology into the following levels and uses them in turn: (1) the input value of the first level is the unadjusted quotation of the same assets or liabilities that can be obtained on the measurement date in the active market;
(2) The second level input value is the directly or indirectly observable input value of relevant assets or liabilities in addition to the first level input value, including: the quotation of similar assets or liabilities in the active market; Quotation of the same or similar assets or liabilities in the inactive market; Other observable input values other than quotation, such as observable interest rate and yield curve during normal quotation interval; Input value of market verification, etc;
(3) The third level input value is the unobservable input value of relevant assets or liabilities, including interest rates that cannot be directly observed or verified by observable market data, stock volatility, future cash flow of abandonment obligations undertaken in business merger, financial forecasts made using their own data, etc.
5. Impairment of financial instruments
(1) Impairment measurement and accounting treatment of financial instruments
On the basis of expected credit loss, the company makes loan commitments other than financial assets measured at amortized cost, debt instrument investments measured at fair value with changes included in other comprehensive income, contract assets, lease receivables, and financial liabilities classified as financial liabilities measured at fair value with changes included in current profits and losses For financial liabilities that are not measured at fair value and whose changes are included in the current profits and losses, or financial guarantee contracts that are not financial liabilities formed by the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets, impairment treatment shall be carried out and loss reserves shall be recognized.
Expected credit loss refers to the weighted average value of credit loss of financial instruments weighted by the risk of default. Credit loss refers to the difference between all contract cash flows receivable according to the contract and all cash flows expected to be received by the company discounted at the original effective interest rate, that is, the present value of all cash shortages. Among them, the financial assets purchased or originated by the company with credit impairment shall be discounted according to the actual interest rate adjusted by the credit of the financial assets.
For financial assets purchased or generated with credit impairment
