Guangdong Great River Smarter Logistics Co.Ltd(002930) : audited financial statements of Longxiang Group Holdings Co., Ltd. (2019, 2020 and the nine months ended September 30, 2021) I Basic information Longxiang Group Holdings Limited (English name is “dragon Crown Group Holdings Limited”, hereinafter referred to as “the company”) was incorporated as an exempted limited company in accordance with the company law of the Cayman Islands on July 16, 2010. The registered office of the company is located in cricketsquare, Hutchins drive, P.O. Box 2681, Grand Cayman ky1-1111, Cayman Islands.
The company made its initial public offering and listing on the main board of the stock exchange of Hong Kong on June 10, 2011. The company listed and issued 1109662000 shares in June 2011 and placed 110966200 new shares in September 2016. The placing shares were issued in accordance with general authorization. As of December 31, 2019, December 31, 2020 and September 30, 2021, the company has issued 1220628000 shares in total. The company and its subsidiaries (“the group”) are one of the comprehensive service providers for storing and processing liquid petrochemical products in China. They operate three liquid petrochemical terminals in Nanjing, Ningbo and Weifang. Their specific businesses include loading and unloading liquid chemicals at the group’s terminals and storing liquid chemicals in the group’s tank area, And use the group’s special pipelines and other wharf infrastructure to deliver relevant products. The ultimate holding company of the company is Lirun Co., Ltd., a limited liability company incorporated in the British Virgin Islands. The consolidation scope of the consolidated financial statements is determined on the basis of control, and there is no change in the consolidation scope during the reporting period.
The financial statements were approved by the board of directors of the group on January 10, 2022.
2、 Preparation basis of financial statements this financial statement is only used by Guangdong Great River Smarter Logistics Co.Ltd(002930) to submit application documents to Shenzhen stock exchange for the proposed comprehensive tender offer to acquire all shares of Longxiang Group Holdings Co., Ltd. this financial statement shall not be used for any other purpose. The financial statements are prepared in accordance with the accounting standards for business enterprises – Basic Standards issued by the Ministry of Finance and the specific accounting standards, application guidelines, interpretations and other relevant provisions issued and revised thereafter (collectively referred to as “accounting standards for business enterprises”). The financial statements are presented on a going concern basis. In the preparation of these financial statements, except for some financial instruments, the valuation principle is historical cost. If an asset is impaired, the corresponding impairment provision shall be withdrawn in accordance with relevant regulations.
Notes to financial statements (Continued) III. important accounting policies and accounting estimates the group has formulated specific accounting policies and accounting estimates according to the actual production and operation characteristics, which are mainly reflected in the provision for bad debts of accounts receivable, inventory valuation method, depreciation of fixed assets, revenue recognition and measurement, etc. 1. Following the statement of the accounting standards for business enterprises, the financial statements comply with the requirements of the accounting standards for business enterprises, and truly and completely reflect the financial position of the company and the group as of December 31, 2019, December 31, 2020 and September 30, 2021, as well as the operating results and cash flows of 2019, 2020 and the nine months ended September 30, 2021. 2. Accounting period
The accounting year of the group is the Gregorian calendar year, i.e. from January 1 to December 31.
3. Bookkeeping base currency the bookkeeping base currency of the company is Hong Kong dollar, and the currency used by the group in preparing the financial statements is RMB. Unless otherwise specified, it is expressed in RMB. Subsidiaries, joint ventures and associated enterprises of the group determine their recording currency according to the main economic environment in which they operate, and convert it into RMB when preparing the financial statements. 4. Business combination business combination not under the same control. If the enterprises participating in the combination are not ultimately controlled by the same party or the same parties before and after the combination, it is a business combination not under the same control. For business combinations not under the same control, the party that obtains control over other enterprises participating in the merger on the acquisition date is the acquirer, and other enterprises participating in the merger are the acquiree. The purchase date refers to the date on which the purchaser actually obtains control over the acquiree. The identifiable assets, liabilities and contingent liabilities of the acquiree obtained in the business combination not under the same control shall be measured at fair value on the acquisition date. The difference between the sum of the fair value of the merger consideration paid (or the fair value of the equity securities issued) and the fair value of the equity of the acquiree held before the acquisition date is greater than the fair value share of the identifiable net assets of the acquiree obtained in the merger is recognized as goodwill and subsequently measured at cost less accumulated impairment losses. If the sum of the fair value of the merger consideration paid (or the fair value of the equity securities issued) and the fair value of the equity of the acquiree held before the acquisition date is less than the fair value share of the identifiable net assets of the acquiree obtained in the merger, the identifiable assets The fair value of liabilities and contingent liabilities, the fair value of merger consideration paid (or the fair value of equity securities issued) and the fair value of equity held by the acquiree before the acquisition date shall be reviewed, If the sum of the fair value of the merger consideration paid after review (or the fair value of the equity securities issued) and the fair value of the equity of the acquiree held before the acquisition date is still less than the fair value share of the identifiable net assets of the acquiree obtained in the merger, the difference shall be included in the current profit and loss.
Notes to financial statements (Continued) III. important accounting policies and accounting estimates (Continued) 5 Consolidated financial statements the consolidation scope of consolidated financial statements is determined on the basis of control, including the financial statements of the company and all subsidiaries. Subsidiary refers to the entity controlled by the company. When preparing the consolidated financial statements, the accounting policies of subsidiaries that may be inconsistent with the company have been adjusted in accordance with the accounting policies of the company. The accounting periods of subsidiaries that may be inconsistent with the company have been adjusted according to the accounting period of the company. Assets, liabilities, equity, income, expenses and cash flows arising from all transactions between companies within the group are fully offset at the time of consolidation. If the current loss shared by minority shareholders of a subsidiary exceeds the share of minority shareholders in the opening shareholders’ equity of the subsidiary, the balance shall still be offset against the reduced shareholders’ equity. For subsidiaries acquired through business combination not under the same control, the operating results and cash flows of the acquiree shall be included in the consolidated financial statements from the date when the group obtains control until the group terminates its control. When preparing the consolidated financial statements, the financial statements of subsidiaries shall be adjusted on the basis of the fair value of all identifiable assets, liabilities and contingent liabilities determined on the acquisition date. If changes in relevant facts and circumstances lead to changes in one or more of the control elements, the group reassesses whether to control the investee. 6. Classification of joint venture arrangements joint venture arrangements are divided into joint operation and joint venture.
Joint operation refers to the joint arrangement in which the joint venture party enjoys the relevant assets of the arrangement and bears the relevant liabilities of the arrangement. A joint venture refers to a joint arrangement in which the joint venture party has rights only to the net assets of the arrangement. According to the articles of association of the group, the group and other joint venture parties jointly control the joint venture, which is the basis for determining the joint venture. 7. Cash and cash equivalents refer to the group’s 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 the group, which are easy to be converted into known amounts of cash and have little risk of value change. 8. Translation of foreign currency transactions and foreign currency statements the group converts the amount of foreign currency into the amount of functional currency for foreign currency transactions. When a foreign currency transaction is initially recognized, the foreign currency amount is converted into the bookkeeping functional currency amount using the exchange rate at the end of the month in which the transaction occurs. On the balance sheet date, foreign currency monetary items are translated at the spot exchange rate on the balance sheet date. The resulting differences in settlement and translation of monetary items are included in the current profits and losses, except for the differences arising from special foreign currency borrowings related to the acquisition and construction of assets eligible for capitalization, which are treated in accordance with the principle of capitalization of borrowing costs. Foreign currency non monetary items measured at historical cost shall still be translated at the exchange rate at the end of the month in which the transaction occurs, and the amount in functional currency shall not be changed. 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 resulting difference is included in the current profit and loss or other comprehensive income according to the nature of non monetary items. For overseas operations, the group converts its recording currency into RMB when preparing the financial statements: the asset and liability items in the balance sheet are translated at the spot exchange rate on the balance sheet date, and the shareholders’ equity items, except the “undistributed profit” item, are translated at the spot exchange rate at the time of occurrence; The income and expense items in the income statement are translated at the average exchange rate of the current period when the transaction occurs. The translation difference of foreign currency financial statements arising from the above translation is recognized as other comprehensive income. When disposing of an overseas operation, other comprehensive income related to the overseas operation shall be transferred to the current profits and losses of the disposal, and part of the disposal shall be calculated according to the disposal proportion.
Notes to financial statements (Continued) III. important accounting policies and accounting estimates (Continued) 8 Translation of foreign currency businesses and foreign currency statements (Continued) foreign currency cash flows and cash flows of overseas subsidiaries are translated at the average exchange rate of the current period in which the cash flows occur. The impact of exchange rate changes on cash is presented separately in the cash flow statement as a reconciliation item. 9. Financial instruments financial instruments refer to the contracts that form the financial assets of an enterprise and form the financial liabilities or equity instruments of other units. Recognition and derecognition of financial instruments the Group recognizes a financial asset or financial liability when it becomes a party to the financial instrument contract. If the following conditions are met, the recognition of financial assets (or part of financial assets, or part of a group of similar financial assets) shall be terminated, that is, it shall be written off from its account and balance sheet: (1) the right to receive cash flow of financial assets expires; (2) Transferred the right to receive the cash flow of financial assets, or assumed the obligation to timely pay the full amount of the received cash flow to a third party under the “transfer agreement”, and (a) substantially transferred almost all the risks and rewards of the ownership of financial assets, Or (b) abandoning control over the financial asset, although it has neither transferred nor retained virtually all the risks and rewards of the ownership of the financial asset.
If the liability for financial liabilities has been fulfilled, revoked or expired, the financial liabilities shall be derecognized. If the existing financial liabilities are replaced by another financial liability with substantially different terms by the same creditor, or the terms of the existing liabilities are substantially modified, such replacement or modification shall be treated as derecognition of the original liabilities and recognition of new liabilities, and the difference shall be included in the current profits and losses. Financial assets bought and sold in a conventional way shall be recognized and derecognized according to the accounting on the transaction date. Buying and selling financial assets by conventional means refers to receiving or delivering financial assets within the time limit specified by laws and regulations or common practices in accordance with the terms of the contract. Transaction date refers to the date on which the group promises to buy or sell financial assets. Classification and measurement of financial assets at the time of initial recognition, the financial assets of the group are classified into financial assets measured at fair value through profit or loss and financial assets measured at amortized cost according to the business model of financial assets managed by the group and the contractual cash flow characteristics of financial assets. Financial assets are measured at fair value at the time of initial recognition, but if the accounts receivable arising from the sale of goods or the provision of services do not contain significant financing components or do not consider the financing components of no more than one year, the initial measurement shall be carried out according to the transaction price. For the financial assets 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, and the relevant transaction costs of other types of financial assets are included in their initial recognition amount.
Notes to financial statements (Continued) III. important accounting policies and accounting estimates (Continued) 9 Financial instruments (Continued) classification and measurement of financial assets (Continued) subsequent measurement of financial assets depends on their classification: debt instruments measured at amortized cost invest in financial assets that meet the following conditions at the same time, they are classified as financial assets measured at amortized cost: the business model for managing the financial assets is to collect contract cash flow; The contractual terms of the financial asset stipulate that the cash flow generated on a specific date is only the payment of principal and interest based on the outstanding principal amount. The interest income of such financial assets is recognized by the effective interest rate method, and the gains or losses arising from the derecognition, modification or impairment are included in the current profit and loss. Financial assets measured at fair value with changes included in current profits and losses, financial assets other than the above financial assets measured at amortized cost and financial assets measured at fair value with changes included in other comprehensive income, are classified as financial assets measured at fair value with changes included in current profits and losses. Such financial assets are subsequently measured at fair value, and all changes in fair value are included in current profits and losses. Classification and measurement of financial liabilities the group’s financial liabilities are classified as other financial liabilities at initial recognition. The relevant transaction costs of other financial liabilities are included in their initial recognition amount. The subsequent measurement of financial liabilities depends on their classification: for other financial liabilities, the effective interest rate method is adopted for the subsequent measurement according to the amortized cost. Impairment of financial assets based on expected credit loss, the group carries out impairment treatment on financial assets measured at amortized cost and recognizes loss reserves. For accounts receivable without significant financing components, the group uses a simplified measurement method to measure the loss reserves according to the expected credit loss amount equivalent to the whole duration. For financial assets other than the above simplified measurement methods, the Group assesses whether their credit risk has increased significantly since initial recognition on each balance sheet date. If the credit risk has not increased significantly since initial recognition and is in the first stage, the group measures the loss reserve according to the amount equivalent to the expected credit loss in the next 12 months, And calculate the interest income according to the book balance and the effective interest rate; If the credit risk has increased significantly since the initial recognition, but there is no credit impairment, in the second stage, the group measures the loss provision according to the amount equivalent to the expected credit loss in the whole duration, and calculates the interest income according to the book balance and the effective interest rate; If credit impairment occurs after initial recognition, in the third stage, the group measures the loss provision according to the amount equivalent to the expected credit loss in the whole duration, and according to the amortized cost and effective interest rate
