Special description of inquiry letter
TJH [2022] No. 6-60
Shenzhen Stock Exchange:
We have received the inquiry letter on the annual report of Zhejiang Dun'An Artificial Environment Co.Ltd(002011) 2021 (annual report inquiry letter [2022] No. 70 of the company department, hereinafter referred to as the inquiry letter) from the board of directors of Zhejiang Dun'An Artificial Environment Co.Ltd(002011) (hereinafter referred to as Zhejiang Dun'An Artificial Environment Co.Ltd(002011) or the company). We have carefully verified the financial matters that need to be explained in the inquiry letter, and now report as follows.
1、 According to the annual report, the ending balance of the company's inventory was 1.524 billion yuan, an increase of 18.66% over the beginning of the period. The provision for inventory falling price was 644400 yuan in the reporting period and 16492600 yuan in the same period of last year. Your company reversed or written off the inventory falling price reserves of 2.4159 million yuan during the reporting period.
Please your company:
(1) Explain the category or nature of inventory involved in the reversal of depreciation reserves, the withdrawal time of depreciation reserves and the specific reasons for the reversal in the reporting period. If the inventory depreciation reserves withdrawn in 2020 are reversed in the reporting period, combined with the determination basis of reversal and the difference between the calculation and withdrawal, explain the rationality of the withdrawal of inventory depreciation reserves in the early stage;
(2) Combined with the calculation process of inventory falling price reserves in the reporting period (including inventory category, net realizable value and the main methods and parameters for determination), explain the rationality of the sharp decline in the proportion of inventory falling price reserves under the condition of inventory growth, and explain the rationality and sufficiency of inventory falling price reserves in the reporting period.
The annual audit accountant is requested to check the above problems and give clear opinions. (Article 1 of the inquiry letter)
（1） Explain the category or nature of inventory involved in the reversal of falling price reserves, the withdrawal time of falling price reserves, and the specific reasons for the reversal in the reporting period. If the inventory falling price reserves withdrawn in 2020 are reversed in this reporting period, combined with the determination basis of reversal and the difference between it and the calculation at the time of withdrawal, explain the rationality of the withdrawal of inventory falling price reserves in the early stage
1. Zhejiang Dun'An Artificial Environment Co.Ltd(002011) inventory details
Unit: 10000 yuan (1) details
December 31, 2021 December 31, 2020
project
Book value of book balance depreciation reserves book value of book balance depreciation reserves
Raw materials 3042595 259.8930166062375362 528.892322473
In process 2426390242639016633641663364
Finished products 9697856454673924318387433544458928297462
Entrusted processing materials
Revolving materials 556.02 4.03 551.99 500.18 500.18 materials
Total 15244866481065147638011284743649878112348655
(2) Inventory falling price reserves in 2020
Opening balance of the project withdrawn in the current period and written off other decreased closing balance in the current period
Raw materials 661.49 329.20 461.80 528.89
Finished products 14276041320061008361105357445892
Total 14937531649261054541105357498781
(3) Inventory falling price reserves in 2021
Opening balance of the project withdrawn in the current period and written off at the end of the period
Raw materials 528.89 -42.18 226.81 259.89
Finished products 445892 102.60 14.78454673
Revolving materials 4.03 4.03
Total 498781 64.45 241.59481065
(4) Inventory age at the end of 2021
Stock age raw materials in process inventory commodity revolving materials entrustment plus total
Materials and materials
273774223883668901237 472.62 224.2314097030 within 3 months
3-6 months 151385 380.24155061 83.40352810
6-9 months 717.50122309194059
9-12 months 234.44 350.17 584.61
More than 12 months 582.74484232542506
Total 304259524263909697856 556.02 224.2315244866
2. Recognition basis of inventory falling price reserves
On the balance sheet date, inventories are measured at the lower of cost and net realizable value, and inventory falling price reserves are withdrawn according to the difference between the cost of a single inventory and the net realizable value.
For the inventory directly used for sale, its net realizable value shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes in the normal production and operation process; For inventories that need to be processed, the net realizable value is determined by the estimated selling price of finished products minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes in the normal process of production and operation; On the balance sheet date, if there is a contract price agreement for one part of the same inventory and there is no contract price for other parts, the net realizable value shall be determined respectively, and compared with its corresponding cost to determine the amount of inventory falling price reserves withdrawn or reversed respectively.
3. Reasons for changes in inventory falling price reserves
The reversal of 4218000 yuan of inventory falling price reserves of raw materials in 2021 is caused by the reversal of inventory falling price reserves of unsold parts of raw materials that have accrued falling price reserves at the beginning of the refrigeration equipment industry at the end of 2021 with the increase of net realizable value; The resale of 2.2681 million yuan was caused by the sale of raw materials with provision for falling price in 2020 by the subsidiary Laiyang Dunan heating Co., Ltd. (hereinafter referred to as Laiyang Dunan).
The provision for finished products in 2021 is 1026000 yuan, which is the provision for falling price of finished products with long storage age at the end of the period (mainly refrigeration accessories industry) according to the difference between net realizable value and book value; The resale of 147800 yuan is caused by the sale of finished products with provision for falling price in 2020.
The provision of 40300 yuan for revolving materials in 2021 is the full provision for falling price of packaging materials that have no use value for the refrigeration accessories industry.
The refrigeration equipment industry has a high degree of customization, and the production mode based on sales is basically adopted; The refrigeration accessories industry arranges production according to orders and prepares goods appropriately according to historical sales in the off-season. Due to the change of market demand, a small number of raw materials in stock have a long stock age. At the end of each reporting period, the company shall make provision for the falling price of these raw materials according to the difference between the estimated selling price of relevant finished products minus the estimated cost to completion, the estimated selling expenses and the book value after relevant taxes. Later, when the company receives the corresponding product order, it recalculates the difference between the net realizable value and the book value of the corresponding raw materials according to the sales price of the product order, and reverses the inventory depreciation reserves accrued for some raw materials whose realizable value rises.
In conclusion, the accounting treatment of Zhejiang Dun'An Artificial Environment Co.Ltd(002011) inventory falling price reserves complies with the relevant provisions of the accounting standards for business enterprises, and the provision of inventory falling price reserves in the early stage is reasonable.
（2） Combined with the calculation process of inventory falling price reserves in the reporting period (including inventory category, net realizable value and the main methods and parameters for determination), explain the rationality of the sharp decline in the proportion of inventory falling price reserves under the condition of inventory growth, and explain the rationality and sufficiency of inventory falling price reserves in the reporting period
1. Inventory structure
Zhejiang Dun'An Artificial Environment Co.Ltd(002011) as of December 31, 2021, inventories mainly include raw materials, finished products and products in process of refrigeration accessories industry and refrigeration equipment industry. Inventory details:
Unit: 10000 yuan
Total project energy saving industry refrigeration accessories industry refrigeration equipment industry
Inventory details
Raw materials 2 Xinjiang Hongtong Natural Gas Co.Ltd(605169) 4374263042595
In process product 22788421475492426391
Finished products 44632988868183647099697856
Entrusted processing materials 224.23 224.23
Revolving materials 548.06 7.97 556.03
Book balance 4463291384805795048015244867
Inventory falling price reserves
Raw materials 192.50 67.39 259.89
In product
Finished products 422881 316.89 1.03454673
Entrusted processing materials
Revolving materials 4.03 4.03
Total inventory falling price reserves 422881 513.42 68.42481065
Zhejiang Dun'An Artificial Environment Co.Ltd(002011) inventories are mainly raw materials, products in process and finished products of refrigeration accessories industry and refrigeration equipment industry. The main raw materials of refrigeration accessories industry are copper and the main raw materials of refrigeration equipment industry are steel.
2. Classification description
(1) Energy saving industry
The inventory of energy-saving industry is customized idle special equipment, and the market transaction activity is very low. At the end of 2021, the company deducted estimated transaction expenses, taxes and other provisions for falling price of 422881 million yuan according to the difference between the market inquiry results and the book value.
(2) Refrigeration accessories industry
The main raw material of refrigeration accessories industry of the company is copper. The price trend of copper in 2021 is as follows:
The average price of copper in 2021 increased by 39.77% compared with that in 2020. The gross profit margin of refrigeration accessories industry in 2021 was 15.86%, with a profit margin of 10.64% after deducting its sales expenses and taxes. At the same time, the company comprehensively used hedging and other tools to reduce the risk of material price fluctuation. December 3, 2021
