Changgao Electric Group Co.Ltd(002452) : Announcement on correction and retroactive adjustment of accounting errors in the previous period

Stock Code: 002452 stock abbreviation: Changgao Electric Group Co.Ltd(002452) Announcement No.: 2022-07 Changgao Electric Group Co.Ltd(002452)

Announcement on correction and retroactive adjustment of accounting errors in the previous period

The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.

The 18th meeting of the 5th board of directors of Changgao Electric Group Co.Ltd(002452) (hereinafter referred to as “the company”) deliberated and adopted the proposal on correction and retroactive adjustment of accounting errors in the previous period. The company found the following corrections of accounting errors in comparison with the analysis of cases of listed companies implementing accounting standards for business enterprises (2020) of China Securities Regulatory Commission, In accordance with the relevant provisions and requirements of the accounting standards for Business Enterprises No. 28 – changes in accounting policies and accounting estimates and correction of errors, and the rules for the preparation of information disclosure of companies offering securities to the public No. 19 – correction and related disclosure of financial information of the CSRC, the company corrected the accounting errors in the previous period and retroactively adjusted the relevant financial data. The specific matters of this accounting error correction are hereby announced as follows:

1、 Summary and reason explanation of correction of accounting errors in the previous period

As of December 31, 2020, the company holds 12.43% equity of Zhejiang Fute Technology Co., Ltd. (hereinafter referred to as “Fute technology”). According to the articles of association of Fute technology, the company appoints one of the nine directors of the board of directors of Fute technology. According to the accounting standards for Business Enterprises No. 2 – long term equity investment (Application Guide) (revised in 2014): “… in practice, the more common significant influence is reflected in the representation in the board of directors or similar authority of the invested entity, which exerts significant influence through the voice in the formulation of the financial and operating policies of the invested entity. When the investing enterprise directly or indirectly owns more than 20% but less than 50% of the voting rights of the invested entity through its subsidiaries, it is generally considered to be beneficial to the invested entity Unless there is clear evidence that the invested entity cannot participate in the production and operation decisions of the invested entity under such circumstances and will not have a significant impact, the company judges the equity of Fute technology as “not having a significant impact”, and in accordance with the accounting standards for Business Enterprises No. 2 – long term equity investment According to the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, the equity investment of Fute technology is classified as “financial assets (equity instruments) measured at fair value and whose changes are included in other comprehensive income”, which is presented in the “investment in other equity instruments” in the financial statements.

After careful comparison with the judgment standard of “significant impact” in the case analysis of listed companies implementing accounting standards for business enterprises (2020) of China Securities Regulatory Commission, the company found that the principle solution was inaccurate. According to the case analysis on the implementation of accounting standards for business enterprises by listed companies (2020) of China Securities Regulatory Commission: “the judgment of significant impact by the standards is different from that of control. The core of the judgment of significant impact is to analyze whether the investor has substantive participation rights rather than decision-making rights”; “The judgment standard for significant influence is that the company has the right to send directors to the invested unit, that is, the core of judgment should be whether the investor has the right to participate in and exert significant influence, and whether the investor is actually exercising this power is not the key to judgment”. In order to further standardize accounting business processing and improve the quality of accounting information disclosure, In accordance with the accounting standards for Business Enterprises No. 2 – long term equity investment, the company corrected the accounting errors in the treatment of Fute technology equity investment, which was changed from the original accounting as “investment in other equity instruments” to “long-term equity investment” and accounted with the equity method.

2、 Impact of correction of accounting errors in the previous period on the company’s financial data

The correction of accounting errors in the previous period has an impact on the financial figures of the company in 2020 and the first three quarters of 2021

According to the following: (monetary unit: RMB)

(I) impact on 2020 financial statements

1. Impact on the consolidated balance sheet as of December 31, 2020