Adient plc - FORM 10-K/A - EX-99.1

Attached files

file	filename
EX-32.2 - EX-32.2 - Adient plc	d504927dex322.htm
EX-31.4 - EX-31.4 - Adient plc	d504927dex314.htm
EX-31.3 - EX-31.3 - Adient plc	d504927dex313.htm
EX-23.2 - EX-23.2 - Adient plc	d504927dex232.htm
10-K/A - FORM 10-K/A - Adient plc	d504927d10ka.htm

Exhibit 99.1

YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT AUDITORS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015

Report of Independent Auditors

To the Board of Directors of Yanfeng Adient Seating Co., Ltd.:

We have audited the accompanying consolidated financial statements of Yanfeng Adient Seating Co., Ltd. and its subsidiaries, which comprise the consolidated balance sheet as of 31 December 2016, and the related consolidated statements of income, changes in owners’ equity and cash flows for the year then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yanfeng Adient Seating Co., Ltd. and its subsidiaries as of 31 December 2016, and the results of their operations and their cash flows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises in the People’s Republic of China.

Other Matters

The accompanying consolidated balance sheets of Yanfeng Adient Seating Co., Ltd. as of 31 December 2017 and 2015, and the related consolidated statements of income, changes in owners’ equity and cash flows for the years then ended are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2017 and 2015 financial statements to be audited and they are, therefore, not covered by this report.

Accounting Standards for Business Enterprises in the People’s Republic of China vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 13 to the consolidated financial statements.

/s/ PricewaterhouseCoopers Zhong Tian LLP

PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

20 June 2017

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YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2017, 2016 AND 2015

(AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)


ASSETS	Note			31 December 2017* Consolidated		31 December 2016 Consolidated		31 December 2015* Consolidated
Current assets
Cash at bank and on hand		7	(1)		8,133,672,578		6,469,119,196		3,939,894,113
Notes receivable		7	(2)		1,400,014,717		1,686,686,411		1,198,378,148
Accounts receivable		7	(3(a))		8,172,820,877		5,851,806,068		5,697,029,340
Advances to suppliers		7	(4)		203,060,113		120,306,449		130,127,043
Interest receivable					5,400,938		5,550,044		1,678,489
Dividends receivable					12,872,698		12,071,405		16,336,555
Other receivables		7	(3(b))		828,205,531		315,785,308		228,573,927
Inventories		7	(5)		894,975,575		797,678,665		701,202,676
Other current assets		7	(6)		147,488,522		160,712,360		352,709,670

Total current assets					19,798,511,549		15,419,715,906		12,265,929,961

Non-current assets
Long-term equity investments		7	(7)		210,259,121		190,255,274		158,752,993
Investment properties		7	(8)		42,529,486		—		—
Fixed assets		7	(9)		1,828,614,100		1,719,813,378		1,778,145,645
Construction in progress		7	(10)		278,761,927		442,223,123		334,405,828
Intangible assets		7	(11)		360,392,024		294,578,758		290,139,232
Goodwill		7	(12)		71,566,642		71,566,642		71,566,642
Long-term prepaid expenses		7	(13)		164,414,655		196,028,241		195,116,898
Deferred tax assets		7	(14(a))		1,090,403,831		831,379,541		546,116,880
Other non-current assets		7	(15)		80,605,952		57,461,692		99,787,600

Total non-current assets					4,127,547,738		3,803,306,649		3,474,031,718

TOTAL ASSETS					23,926,059,287		19,223,022,555		15,739,961,679

*	Not covered by the AUDITOR’S report included herein

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He Principal in charge of accounting: Haifeng Mao Head of accounting department: Jianjun Chu

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YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2017, 2016 AND 2015 (CONTINUED)

(AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)


LIABILITIES AND OWNERS’ EQUITY	Note			31 December 2017* Consolidated		31 December 2016 Consolidated		31 December 2015* Consolidated
Current liabilities
Short-term borrowings		7	(16)		551,280,196		408,884,232		75,000,000
Notes payable		7	(17)		653,798,483		666,979,006		457,179,867
Accounts payable		7	(18)		12,797,027,105		9,860,133,825		8,468,879,463
Advances from customers					18,356,209		31,006,431		55,982,936
Employee benefits payable		7	(19)		847,097,224		792,960,721		621,152,813
Taxes payable		7	(20)		656,622,866		709,246,804		560,021,549
Other payables		7	(21)		3,527,012,379		2,354,357,460		1,546,190,411
Current portion of long-term borrowings		7	(22)		3,000,000		5,398,000		5,398,000
Current portion of non-current liabilities					22,770		—		—

Total current liabilities					19,054,217,232		14,828,966,479		11,789,805,039

Non-current liabilities
Long-term borrowings		7	(22)		1,500,000		8,107,000		13,505,000
Provisions					3,371,338		3,937,103		4,206,400
Deferred income		7	(23)		9,117,415		9,995,949		7,402,636
Deferred tax liabilities		7	(14(d))		—		—		241,500

Total non-current liabilities					13,988,753		22,040,052		25,355,536

Total liabilities					19,068,205,985		14,851,006,531		11,815,160,575

Owners’ equity
Paid-in capital					439,853,380		439,853,380		439,853,380
Other comprehensive income/(loss)		7	(36(b))		1,414,254		983,955		(307,041	)
Surplus reserve		7	(24)		441,810,777		376,736,592		329,063,052
Undistributed profits		7	(25)		3,463,983,805		3,005,135,145		2,635,032,872
Total equity attributable to equity owners of the Company					4,347,062,216		3,822,709,072		3,403,642,263
Minority interests					510,791,086		549,306,952		521,158,841

Total owners’ equity					4,857,853,302		4,372,016,024		3,924,801,104

TOTAL LIABILITIES AND OWNERS’ EQUITY					23,926,059,287		19,223,022,555		15,739,961,679

*	Not covered by the AUDITOR’S report included herein

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He Principal in charge of accounting: Haifeng Mao Head of accounting department: Jianjun Chu

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YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015

(AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)


Item		Note			2017* Consolidated			2016 Consolidated			2015* Consolidated
Revenue			7	(26)		32,043,195,882			29,122,501,178			26,572,050,764
Less:	Cost of sales		7	(26)(29)		(26,532,394,041	)		(24,215,383,432	)		(22,023,017,968	)
	Taxes and surcharges		7	(27)		(196,541,376	)		(162,720,549	)		(119,877,553	)
	Selling and distribution expenses		7	(29)		(256,281,872	)		(205,949,433	)		(175,878,437	)
	General and administrative expenses		7	(29)		(2,321,871,291	)		(1,961,292,873	)		(1,838,254,817	)
Add:	Financial income - net		7	(28)		29,127,149			61,250,943			59,098,880
Less:	Asset impairment losses		7	(30)		(2,945,857	)		(63,734,715	)		(9,380,519	)
Add:	Investment income		7	(31)		78,876,757			54,019,531			48,357,857
	Including: Share of profit of associates and joint ventures					78,876,545			54,019,531			40,459,106
Less:	Losses on disposals of assets		7	(32)		(3,021,988	)		(18,381,606	)		(2,992,507	)
Add:	Other income		7	(33)		129,108,171			—			—

Operating profit						2,967,251,534			2,610,309,044			2,510,105,700
Add:	Non-operating income		7	(34(a))		2,346,311			72,527,061			44,142,437
Less:	Non-operating expenses		7	(34(b))		(1,873,547	)		(3,014,728	)		(9,843,767	)

Total profit						2,967,724,298			2,679,821,377			2,544,404,370

Less:	Income tax expenses		7	(35)		(589,007,692	)		(507,528,891	)		(463,389,635	)

Net profit						2,378,716,606			2,172,292,486			2,081,014,735

	Classified by continuity of operations
	Net profit from continuing operations					2,378,716,606			2,172,292,486			2,081,014,735
	Net profit from discontinued operations					—			—			—
	Classified by ownership of the equity
	Attributable to equity owners of the Company					2,083,076,727			1,851,677,150			1,775,435,020
	Minority interests					295,639,879			320,615,336			305,579,715

Other comprehensive income/(loss), net of tax			7	(36(a))		430,299			1,290,996			(275,031	)
	Translation differences on translation of foreign currency financial statements					430,299			1,290,996			(275,031	)

Total comprehensive income						2,379,146,905			2,173,583,482			2,080,739,704

	Attributable to equity owners of the Company					2,083,507,026			1,852,968,146			1,775,159,989
	Attributable to minority interests					295,639,879			320,615,336			305,579,715

*	Not covered by the AUDITOR’S report included herein

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He Principal in charge of accounting: Haifeng Mao Head of accounting department: Jianjun Chu

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YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015

(AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)


Item	Note			2017* Consolidated			2016 Consolidated			2015* Consolidated
Cash flows from operating activities
Cash received from sales of goods or rendering of services					37,188,574,231			34,235,663,913			30,668,864,213
Refund of taxes and surcharges					80,158,334			69,554,852			13,781,018
Cash received relating to other operating activities					184,480,725			124,863,278			74,044,037
Sub-total of cash inflows					37,453,213,290			34,430,082,043			30,756,689,268
Cash paid for goods and services					(26,183,767,105	)		(24,673,063,749	)		(22,770,981,843	)
Cash paid to and on behalf of employees					(2,003,249,397	)		(1,756,520,779	)		(1,553,146,820	)
Payments of taxes and surcharges					(2,679,623,127	)		(1,915,679,241	)		(1,781,651,976	)
Cash paid relating to other operating activities					(2,121,766,998	)		(2,126,466,694	)		(1,653,278,352	)
Sub-total of cash outflows					(32,988,406,627	)		(30,471,730,463	)		(27,759,058,991	)
Net cash flows from operating activities		7	(37(a))		4,464,806,663			3,958,351,580			2,997,630,277

Cash flows from investing activities
Cash received from disposal of investments					279,239,352			475,667,980			50,646,471
Cash received from returns on investments					67,768,049			35,749,485			16,244,436
Net cash received from disposal of fixed assets, intangible assets and other long-term assets					24,565,265			28,354,118			211,692,165
Net cash received from disposal of subsidiaries and other business units					—			21,500,000			13,510,827
Sub-total of cash inflows					371,572,666			561,271,583			292,093,899
Cash paid to acquire fixed assets, intangible assets and other long-term assets					(524,461,586	)		(412,877,178	)		(476,099,495	)
Cash paid to acquire investments					(837,615,093	)		(311,650,522	)		(315,000,000	)
Net cash paid to acquire subsidiaries and other business units					—			—			(62,298,600	)
Sub-total of cash outflows					(1,362,076,679	)		(724,527,700	)		(853,398,095	)
Net cash flows used in investing activities					(990,504,013	)		(163,256,117	)		(561,304,196	)

Cash flows from financing activities
Cash received from borrowings					844,949,190			718,055,869			75,855,064
Sub-total of cash inflows					844,949,190			718,055,869			75,855,064
Cash repayments of borrowings					(711,559,282	)		(390,324,988	)		(105,496,657	)
Cash payments for distribution of profits or interest expenses					(1,848,390,388	)		(1,684,947,936	)		(1,664,108,967	)
Including: Cash payments for profits to minority shareholders of subsidiaries					(333,196,736	)		(291,750,289	)		(250,598,100	)
Sub-total of cash outflows					(2,559,949,670	)		(2,075,272,924	)		(1,769,605,624	)
Net cash flows used in financing activities					(1,715,000,480	)		(1,357,217,055	)		(1,693,750,560	)

Effect of foreign exchange rate changes on cash and cash equivalents					—			—			—

Net increase in cash and cash equivalents		7	(37(b))		1,759,302,170			2,437,878,408			742,575,521
Add: Cash and cash equivalents at beginning of year					6,179,211,510			3,741,333,102			2,998,757,581

Cash and cash equivalents at end of year		7	(37(c))		7,938,513,680			6,179,211,510			3,741,333,102

*	Not covered by the AUDITOR’S report included herein

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He Principal in charge of accounting: Haifeng Mao Head of accounting department: Jianjun Chu

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YANFENG ADIENT SEATING CO., LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY FOR THE YEARS ENDED 31 DECEMBER 2017*, 2016 AND 2015*

(AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE UNAUDITED)

(All amounts in RMB Yuan unless otherwise stated)


				Attributable to equity holders of the Company
Item	Note			Paid-in capital		Surplus reserves		Undistributed profits			Other comprehensive income/(loss)			Minority interests			Total owners’ equity
Balance at 1 January 2015					439,853,380		284,833,010		2,354,813,576			(32,010	)		443,839,605			3,523,307,561

Movements for the year ended 31 December 2015

Total comprehensive income
Net profit					—		—		1,775,435,020			—			305,579,715			2,081,014,735
Other comprehensive loss
Translation differences on translation of foreign currency financial statements		7	(36(a))		—		—		—			(275,031	)		—			(275,031	)
Total comprehensive income for the year					—		—		1,775,435,020			(275,031	)		305,579,715			2,080,739,704
Capital contribution and withdrawal by owners
Disposal of a subsidiary					—		—		—			—			(13,601,251	)		(13,601,251	)
Profit distribution
Appropriation to surplus reserves		7	(24)		—		44,230,042		(44,230,042	)		—			—			—
Profit distribution to equity owners		7	(25)		—		—		(1,406,453,166	)		—			(214,045,114	)		(1,620,498,280	)
Appropriation to staff welfare and incentive funds					—		—		(44,532,516	)		—			(614,114	)		(45,146,630	)

Balance at 31 December 2015					439,853,380		329,063,052		2,635,032,872			(307,041	)		521,158,841			3,924,801,104

Balance at 1 January 2016					439,853,380		329,063,052		2,635,032,872			(307,041	)		521,158,841			3,924,801,104

Movements for the year ended 31 December 2016
Total comprehensive income
Net profit					—		—		1,851,677,150			—			320,615,336			2,172,292,486
Other comprehensive income
Translation differences on translation of foreign currency financial statements		7	(36(a))		—		—		—			1,290,996			—			1,290,996
Total comprehensive income for the year					—		—		1,851,677,150			1,290,996			320,615,336			2,173,583,482
Profit distribution
Appropriation to surplus reserves		7	(24)		—		47,673,540		(47,673,540	)		—			—			—
Profit distribution to equity owners		7	(25)		—		—		(1,385,874,680	)		—			(291,750,289	)		(1,677,624,969	)
Appropriation to staff welfare and incentive funds					—		—		(48,026,657	)		—			(716,936	)		(48,743,593	)

Balance at 31 December 2016					439,853,380		376,736,592		3,005,135,145			983,955			549,306,952			4,372,016,024

Balance at 1 January 2017					439,853,380		376,736,592		3,005,135,145			983,955			549,306,952			4,372,016,024

Movements for the year ended 31 December 2017
Total comprehensive income
Net profit					—		—		2,083,076,727			—			295,639,879			2,378,716,606
Other comprehensive income
Translation differences on translation of foreign currency financial statements		7	(36(a))		—		—		—			430,299			—			430,299
Total comprehensive income for the year					—		—		2,083,076,727			430,299			295,639,879			2,379,146,905
Capital contribution and withdrawal by owners
Disposal of a subsidiary					—		—		—			—			(470,521	)		(470,521	)
Profit distribution
Appropriation to surplus reserves		7	(24)		—		65,074,185		(65,074,185	)		—			—			—
Profit distribution to equity owners		7	(25)		—		—		(1,493,770,914	)		—			(333,196,736	)		(1,826,967,650	)
Appropriation to staff welfare and incentive funds					—		—		(65,382,968	)		—			(488,488	)		(65,871,456	)

Balance at 31 December 2017					439,853,380		441,810,777		3,463,983,805			1,414,254			510,791,086			4,857,853,302

*	Not covered by the AUDITOR’S report included herein

The accompanying notes form an integral part of these consolidated financial statements.

Legal representative: Mingkang He Principal incharge of accounting: Haifeng Mao Head of accounting department: Jianjun Chu

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

1	General information

Yanfeng Adient Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Seating Co., Ltd.”, “the Company”) is a sino-foreign joint venture company set up by Yanfeng Automotive Trim Systems Co., Ltd. (“Yanfeng Trim” and formerly known as “Yanfeng Visteon Automotive Trim Systems Co., Ltd.”) and Johnson Controls International Inc. (“JCI”) on 18 December 1997. The approved operating period is 25 years and the registered capital is USD 24,770,700.

After several times of equity interest transfer till 8 November 2012, the investors of the Company were changed to Yanfeng Trim and Johnson Controls Asia Holding Co., Ltd., with 50.01% and 49.99% of equity interest respectively. The registered capital of the Company was changed to USD 62,000,000. On 2 February 2017, Johnson Controls Asia Holding Co., Ltd. was renamed as Adient Asia Holding Co., Ltd. (“Adient Asia”). In April 2017, the Company was renamed as “Yanfeng Adient Seating Co., Ltd.”.

The approved scope of business operation of the Company and its subsidiaries (together, “the Group”) is to develop and manufacture automobile seats and their spare parts, provide technical service for automobile seating, and sell its own products.

These financial statements are authorised for issue by the Company’s responsible person on 29 June 2018.

2	Basis of preparation

The financial statements are prepared in accordance with the Accounting Standard for Business Enterprises - Basic Standard, the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standard for Business Enterprises” or “CAS”). In addition, information relating to the nature and effect of significant differences between CAS and accounting principles generally accepted in the United States of America is presented in Note 13 to the consolidated financial statements of the Group.

The financial statements are prepared on a going concern basis.

3	Statement of compliance with the Accounting Standards for Business Enterprises

The financial statements of the Group for the years ended 31 December 2017, 2016 and 2015 are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the consolidated financial position of the Group as at 31 December 2017, 2016 and 2015 and of its financial performance, cash flows and other information for the years then ended.

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates

(1)	Accounting year

The Company’s accounting year starts on 1 January and ends on 31 December.

(2)	Recording currency

The Company’s recording currency is Renminbi (RMB). The recording currency of the Company’s subsidiaries is determined based on the primary economic environment in which they operate. The recording currency of the Company’s domestic subsidiaries is RMB and the recording currency of the Company’s foreign subsidiaries is local currency. The financial statements are presented in RMB.

(3)	Foreign currency translation

(a)	Foreign currency transactions

Foreign currency transactions are translated into recording currency using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currencies are translated into recording currency using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(b)	Translation of foreign currency financial statements

The asset and liability items in the balance sheets for overseas operations are translated at the spot exchange rates on the balance sheet date. Among the owners’ equity items, the items other than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The income and expense items in the income statements of overseas operations are translated at the spot exchange rates of the transaction dates. The differences arising from the above translation are presented in other comprehensive income. The cash flows of overseas operations are translated at the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(4)	Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand, and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

- 9 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(5)	Financial assets

Financial assets are classified into the following categories at initial recognition: financial assets at fair value through profit or loss, receivables, available-for-sale financial assets and held-to-maturity investments. The classification of financial assets depends on the Group’s intention and ability to hold the financial assets. The financial assets held by the Group are mainly receivables.

(a)	Receivables

Receivables, including accounts receivable, other receivables and notes receivable, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (Note 4(6)).

(b)	Recognition and measurement

Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. In the case of financial assets at fair value through profit or loss, the related transaction costs incurred at the time of acquisition are recognised in profit or loss for the current period. For other financial assets, transaction costs that are attributable to acquisition of the financial assets are included in their initially recognised amounts. A financial asset is derecognised when the contractual rights to receive the cash flows from the financial asset have expired, or all the substantial risks and rewards of ownership of the financial asset have been transferred.

Receivables are subsequently measured at amortised cost by using the effective interest method.

(c)	Impairment of financial assets

The Group assesses the carrying amounts of financial assets other than those at fair value through profit or loss at each balance sheet date. If there is objective evidence that a financial asset is impaired, an impairment loss is provided for.

When an impairment loss on a financial asset carried at amortised cost has occurred, the amount of the impairment loss is provided for at the difference between the asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss.

- 10 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(6)	Receivables

Receivables comprise accounts receivable, other receivables and notes receivable. Accounts receivable arising from sale of goods or rendering of services are initially recognised at fair value of the contractual payments from the buyers or service recipients.

Receivables with amounts that are individually significant are subject to separate assessment for impairment. If there exists objective evidence that the Group will not be able to collect the amount under the original terms, a provision for bad debts of that receivable is made at the difference between its carrying amount and the present value of its estimated future cash flows.

Receivables with amounts that are not individually significant and those receivables that have been individually assessed for impairment and have not been found impaired are classified into certain groupings based on their credit risk characteristics. Provision for bad debts is determined based on the historical loss experience for groupings of receivables with similar credit risk characteristics, taking into consideration of the current circumstances.

When the Group transfers the accounts receivable to the financial institutions without recourse, the difference between the proceeds received from the transaction and their carrying amounts and the related taxes is recognised in profit or loss for the current period.

(7)	Inventories

Inventories include raw materials, work in progress and finished goods, and are stated at the lower of cost and net realisable value.

Cost is determined using the weighted average method. The cost of finished goods and work in progress comprise raw materials, direct labour and systematically allocated production overhead based on the normal production capacity.

Provision for decline in the value of inventories is determined at the excess amount of the carrying amounts of the inventories over their net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.

The Group adopts the perpetual inventory system.

- 11 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(8)	Long-term equity investments

Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, and the Group’s long-term equity investments in its joint ventures and associates.

(a)	Subsidiaries

Subsidiaries are the investees over which the Company is able to exercise control.

(b)	Joint ventures and associates

A joint venture is a joint arrangement which is structured through a separate vehicle over which the Group has joint control together with other parties and only has rights to the net assets of the arrangement based on legal forms, contractual terms and other facts and circumstances; An associate is the investee over which the Group has significant influence on its financial and operating policy decisions.

Investments in joint ventures and associates are accounted for using the equity method. Where the initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially measured at that cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is included in profit or loss for the current period and the cost of the long-term equity investment is adjusted upwards accordingly.

Under the equity method of accounting, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group does not recognise further losses when the carrying amounts of the long-term equity investment together with any long-term interests that, in substance, form part of the Group’s net investment in investees are reduced to zero. However, if the Group has obligations for additional losses and the criteria with respect to recognition of provisions are satisfied, the Group continues recognising the investment losses and the provisions at the amount it expects to undertake. The Group’s share of the changes in investee’s owner’s equity other than those arising from the net profit or loss, other comprehensive income and profit distribution is recognised in capital surplus with a corresponding adjustment to the carrying amounts of the long-term equity investment. The carrying amount of the investment is reduced by the Group’s share of the profit distribution or cash dividends declared by the investees. Unrealised gains or losses on transactions between the Group and its investees are eliminated to the extent of the Group’s equity interest in the investees, based on which the investment income or losses are recognised. Any losses resulting from transactions between the Group and its investees, which are attributable to asset impairment losses are not eliminated.

- 12 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(9)	Investment properties

Investment properties, including land use rights that have already been leased out, buildings that are held for the purpose of leasing and buildings that are being constructed or developed for future use for leasing, are measured initially at cost. Subsequent expenditures incurred in relation to an investment property are included in the cost of the investment property when it is probable that the associated economic benefits will flow to the Group and their costs can be reliably measured; otherwise, the expenditures are recognised in profit or loss for the period in which they are incurred.

Investment properties are subsequently measured using the cost model and are depreciated or amortised to their estimated residual values over their estimated useful lives. The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation (amortisation) rates of investment properties are as follows:


	Estimated useful lives		Estimated residual values			Annual depreciation rates
Land use rights		50 years		0	%		2	%
Buildings		20 years		0	%		5	%

When an investment property is transferred to owner-occupied properties, it is reclassified as fixed asset or intangible asset with the carrying amount at the date of the transfer. When an owner-occupied property is transferred out for earning rentals or for capital appreciation, the fixed asset or intangible asset is transferred to investment properties with the carrying amount at the date of the transfer.

The estimated useful life and the estimated residual value of an investment property and the depreciation (amortisation) method applied to the asset are reviewed, and adjusted as appropriate at each year-end.

An investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The net amount of proceeds from sale, transfer, retirement or damage of an investment property after its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

- 13 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(10)	Fixed assets

Fixed assets comprise buildings, machinery and equipment, motor vehicles, computers and electronic equipment and office equipment and tooling. Fixed assets purchased or constructed by the Group are initially measured at cost at the time of acquisition. Fixed assets contributed by the Chinese investor are initially recorded at their approved value upon its contribution to the Company.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Group and the related cost can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss for the period in which they are incurred.

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:


	Estimated useful lives		Estimated residual values		Annual depreciation rates
Buildings		5-20 years		0%-10%		4.5%-20%
Machinery and equipment		3-15 years		0%-5%		6.33%-33.3%
Motor vehicles		3-6 years		0%-5%		15.83%-33.3%
Computers and electronic equipment and office equipment		3-7 years		0%-5%		13.57%-33.3%
Tooling		3-5 years		0%-5%		19%-33.3%

The estimated useful life and the estimated residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at each year-end.

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

- 14 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(11)	Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation is charged starting from the following month.

(12)	Intangible assets

Intangible assets include land use rights, patent rights and non-patented technology and software, and are measured at cost. Intangible assets also include identifiable assets acquired from business combinations involving enterprises not under common control, such as customer relationship, and are measured at fair value at the time of acquisition.

(a)	Land use rights

Land use rights are amortised on the straight-line basis over their estimated useful lives. If the acquisition costs of the land use rights and the buildings located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the acquisition costs are recognised as fixed assets.

(b)	Patent rights and non-patented technology

Patent rights and non-patented technology are amortised on a straight-line basis over the patent protection period as stipulated by the laws.

(c)

Software

Software is amortised on a straight-line basis over the period as stipulated by law.

(d)	Customer relationship

Customer relationship acquired from business combination involving enterprises not under common control are amortised over their beneficial periods.

(e)	Periodical review of useful life and amortisation method

For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at each year-end, with adjustment made as appropriate.

- 15 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(13)	Research and development

The expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase based on its nature and whether there is material uncertainty that the research and development activities can form an intangible asset at the end of the project.

Expenditure on the research phase is recognised in profit or loss in the period in which it is incurred; expenditure on the development phase is capitalised only if all of the following conditions are satisfied:

•

it is technically feasible to complete the intangible asset so that it will be available for use or sale;

•

management intends to complete the intangible asset and use or sell it;

•

it can be demonstrated how the intangible asset will generate economic benefits;

•

there are adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and

•

the expenditure attributable to the intangible asset during its development phase can be reliably measured.

Other development expenditures that do not meet the conditions above are recognised in profit or loss in the period in which they are incurred. Development costs previously recognised as expenses are not recognised as an asset in a subsequent period. Capitalised expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.

(14)

Goodwill

Goodwill is recognised at the excess of the cost of a business combination involving enterprises not under common control over the interest in the fair value of the acquirees’ identifiable net assets acquired in the business combination as at the acquisition date.

(15)	Long-term prepaid expenses

Long-term prepaid expenses include the expenditure for improvements to fixed assets held under operating leases, and other expenditures that have been incurred but should be recognised as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortised on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.

- 16 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(16)	Impairment of long-term assets

Fixed assets, construction in progress, intangible assets with finite useful lives, long-term equity investments in subsidiaries, joint ventures and associates and long-term prepaid expenses are tested for impairment if there is any indication that the assets may be impaired at the balance sheet date; intangible assets that are not yet available for their intended use are tested for impairment at least annually, irrespective of whether there is any indication of impairment. If the result of the impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognised on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

Goodwill that is separately presented in the financial statements is tested at least annually for impairment, irrespective of whether there is any indication that it may be impaired. In conducting the test, the carrying value of goodwill is allocated to the related asset group or groups of asset groups which are expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset group or a group of asset groups, including the allocated goodwill, is lower than its carrying amount, the corresponding impairment loss is recognised. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or group of asset groups, and then deducted from the carrying amounts of other assets within the asset group or group of asset groups in proportion to the carrying amounts of assets other than goodwill.

Once the above asset impairment loss is recognised, it will not be reversed for the value recovered in the subsequent periods.

(17)	Borrowing costs

The borrowing costs that are directly attributable to acquisition and construction of an asset that needs a substantially long period of time for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognised in profit or loss for the current period. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of an asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

- 17 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(18)	Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings of which the period is within one year (inclusive) are classified as the short-term borrowings, and the others are classified as long-term borrowings.

(19)	Employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits and post-employment benefits.

(a)	Short-term employee benefits

Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs, short-term paid absences and etc. The short-term employee benefits actually occurred are recognised as a liability in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. Non-monetary benefits are measured at fair value.

(b)	Post-employment benefits

The Group classifies post-employment benefit plans as defined contribution plans. Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate fund and will have no obligation to pay further contributions. During the reporting period, the Group’s post-employment benefits mainly include the premiums or contributions on basic pensions and unemployment insurance, both of which belong to defined contribution plans.

Basic pensions

The Group’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to the bases and percentage prescribed by the relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognised as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets.

- 18 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(20)	Provisions

Provisions for product warranties and etc. are recognised when the Group has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognised as interest expense.

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.

(21)	Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax asset is recognised for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilised.

- 19 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(21)	Deferred tax assets and deferred tax liabilities (Cont’d)

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries, associates and joint ventures will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilised, the corresponding deferred tax assets are recognised.

Deferred tax assets and liabilities are offset when:

•

the deferred taxes are related to the same tax payer within the Group and the same taxation authority; and,

•

that tax payer within the Group has a legally enforceable right to offset current tax assets against current tax liabilities.

(22)	Revenue recognition

The amount of revenue is determined in accordance with the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is stated net of discounts, rebates and returns.

Revenue is recognised when it’s probable that the economic benefits associated with the transaction will flow to the Group, the related revenue can be reliably measured, and the specific criteria of revenue recognition have been met for each type of the Group’s activities as described below:

(a)	Sale of goods

The Group manufactures and sells automobile seating products. Revenue is recognised when the Group has delivered the products to the location specified in the sales contract and the buyer has confirmed the acceptance of the products. Upon delivery of the products, the buyer has the right to sell the products and takes the risks of any obsolescence and loss of the products.

(b)	Rendering of services

Revenue is recognised when service is completed and it is probable that the associated economic benefits will flow to the Group and its total revenue and cost can be reliably measured.

- 20 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(23)	Government grants

Government grants refer to the monetary or non-monetary assets obtained by the Group from the government, including tax return, financial subsidy and etc.

Government grants are recognised when the grants can be received and the Group can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount.

Government grants related to assets refer to government grants which are obtained by the Group for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.

Government grants related to assets are either deducted against the carrying amount of the assets, or recorded as deferred income and recognised in profit or loss on a systemic basis over the useful lives of the assets. Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognised in profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government grants related to income that compensate the incurred costs, expenses or losses are recognised in profit or loss, or deuducted against related costs, expenses or losses directly in current period. The Group applies the presentation method consistently to the similar government grants in the financial statements.

Government grants that are related to ordinary activities are included in operating profit, otherwise, they are recorded in non-operating income or expenses.

(24)

Leases

A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a lease other than a finance lease.

Lease payments under an operating lease are recognised on a straight-line basis over the period of the lease, and are either capitalised as part of the cost of related assets, or charged as an expense for the current period.

Rental income from an operating lease is recognised on a straight-line basis over the period of the lease.

(25)	Profit distribution

Proposed profit distribution is recognised as a liability in the period in which it is approved by the Board of Directors’ meeting.

- 21 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(26)	Preparation of consolidated financial statements

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.

Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a business combination involving enterprises under common control, it is included in the consolidated financial statements from the date when it, together with the Company, comes under common control of the ultimate controlling party. The portion of the net profits realised before the combination date is presented separately in the consolidated income statement.

In preparing the consolidated financial statements, where the accounting policies and the accounting periods of the Company and subsidiaries are inconsistent, the financial statements of the subsidiaries are adjusted in accordance with the accounting policies and the accounting period of the Company. For subsidiaries acquired from business combinations involving enterprises not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date.

All significant intra-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of subsidiaries’ owners’ equity and the portion of subsidiaries’ net profits and losses and comprehensive incomes for the period not attributable to the Company are recognised as minority interests, net profit attributed to minority interests and total comprehensive incomes attributed to minority interests, and presented separately in the consolidated financial statements under owners’ equity, net profits and total comprehensive income respectively. Unrealised profits and losses resulting from the sale of assets by the Company to its subsidiaries are fully eliminated against net profit attributable to owners of the parent. Unrealised profits and losses resulting from the sale of assets by a subsidiary to the Company are eliminated and allocated between net profit attributable to owners of the parent and net profit attributed to minority interests in accordance with the allocation proportion of the parent in the subsidiary. Unrealised profits and losses resulting from the sale of assets by one subsidiary to another are eliminated and allocated between net profit attributable to owners of the parent and net profit attributed to minority interests in accordance with the allocation proportion of the parent in the subsidiary.

If the accounting treatment of a transaction is inconsistent in the financial statements at the Group level and at the Company or its subsidiary level, adjustment will be made from the perspective of the Group.

- 22 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(27)	Critical accounting estimates and judgments

The Group continually evaluates the critical accounting estimates and key judgments applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

(i)	Accounting estimates on impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of asset groups and groups of asset groups is the present value of the future cash flows expected to be derived from them. These calculations require use of estimates (Note 7(12)).

If management revises the gross margin that is used in the calculation of the future cash flows of asset groups and groups of asset groups, and the revised gross margin is lower than the one currently used, the Group would need to recognise further impairment against goodwill.

If management revises the pre-tax discount rate applied to the discounted cash flows, and the revised pre-tax discount rate is higher than the one currently applied, the Group would need to recognise further impairment against goodwill.

If the actual gross margin/pre-tax discount rate is higher/lower than management’s estimates, the impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.

(ii)	Income taxes

The Group is subject to income taxes in numerous jurisdictions. There are some transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement is required from the Group in determining the provision for income taxes in each of these jurisdictions. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

- 23 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

4	Summary of significant accounting policies and accounting estimates (Cont’d)

(28)	Significant changes in accounting policies

In 2017, the Ministry of Finance released the ‘Accounting Standard for Business Enterprises No. 42—Non-current Assets or Disposal Groups Held for Sale and Discontinued Operations’, revised ‘Accounting Standard for Business Enterprises No. 16—Government Grants’ and the ‘Circular on Amendment to Formats of Financial Statements of General Industry’ and its interpretation (Cai Kuai [2017] 30). The financial statements are prepared in accordance with the above standards and circular, and impacts are as follows:


The nature and the reasons of the changes in accounting policies	The line items affected		The amounts affected
			1 January 2017

The Group recorded the tax refund and other fiscal subsidies obtained in 2017 in other income. The comparatives for the years ended 31 December 2016 and 2015 were not restated.	Not applicable		Not applicable

		2016			2015

The Group recorded the gains or losses on disposals of fixed assets occurred in 2017, in losses on disposals of assets. The comparatives for the years ended 31 December 2016 and 2015 were restated accordingly.	Losses on disposals of assets Non-operating income Non-operating expenses		18,381,606 3,695,321 (22,076,927	)		2,992,507 1,676,650 (4,669,157	)

- 24 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

5	Taxation

The main categories and rates of taxes applicable to the Group during the current year are set out below:


Type	Tax rate	Taxable base
Enterprise income tax (a)	25% and 20%	Taxable income

Value added tax (“VAT”) (b)	17%, 11%, 6% and others	Taxable value added amount (Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less deductible VAT input of current period)

City maintenance and construction tax	7%, 5% and 1%	The payment amount of VAT and business tax

(a)	In 2017, 2016 and 2015, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows:

(1)

The Company is a foreign-invested production enterprise set up in Pudong New Area, Shanghai. It was certificated as the hi-technology enterprise by Shanghai Science and Technology Committee in 2014 (valid for 3 years) and 2017 (valid for 3 years), respectively. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2017, 2016 and 2015.

(2)

Shanghai Jixiang Automobile Roof Trimming Co., Ltd. is a domestic enterprise set up in Shanghai. It was certificated as the hi-technology enterprise by Shanghai Science and Technology Committee in 2015 (valid for 3 years). According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2017, 2016 and 2015.

(3)

Guangzhou Dongfeng Adient Automotive Seating Co., Ltd. (formerly known as “Guangzhou Dongfeng Johnson Controls Automotive Seating Co., Ltd.”) is a foreign-invested production enterprise set up in coastal economic development zone. It was certificated as the hi-technology enterprise by Department of Science and Technology of Guangdong Province in 2014. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in year 2016 and 2015.

- 25 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

5	Taxation (Cont’d)

(a)	In 2017, 2016 and 2015, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows (Cont’d):

(4)

Wuhu Adient Yunhe Automotive Seating Co., Ltd. (formerly known as “Wuhu Johnson Controls Yunhe Automotive Seating Co., Ltd.”) is a foreign-invested manufacturing enterprise set up in Wuhu Economic and Technological Development Zone. It was certificated as the hi-technology enterprise by Department of Science and Technology of Anhui Province, Department of Finance of Anhui province, National Tax Bureau of Anhui Province and Local Tax Bureau of Anhui Province on 21 October 2016 (valid for 3 years). According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017 and 2016.

(5)

Hefei Adient Yunhe Automotive Seating Co., Ltd. (formerly known as “Hefei Johnson Controls Yunhe Automotive Seating Co., Ltd.”) is a foreign-invested manufacturing enterprise set up in Hefei Economic and Technological Development Zone. It was certificated as the hi-technology enterprise by Hefei Science and Technology Committee in 2015 (valid for 3 years). According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017, 2016 and 2015.

(6)

Yanfeng Adient (Shenyang) Seating Co., Ltd. (“Shenyang Yanfeng Adient”, formerly known as “Shenyang Yanfeng Johnson Controls Seating Co., Ltd.”) is a domestic enterprise set up in Shenyang. It was certificated as the hi-technology enterprise by Department of Science and Technology of Liaoning Province in 2013 (valid for 3 years) and 2016 (valid for 3 years), respectively. According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017, 2016 and 2015.

(7)

Chongqing Yanfeng Adient Automotive Components Co., Ltd. (“Chongqing Yanfeng Adient”) is a foreign-invested manufacturing enterprise set up in Chongqing. It was certificated as the hi-technology enterprise again through the review in October 2013 (valid until December 2015) and July 2016, respectively. According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017, 2016 and 2015.

- 26 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

5	Taxation (Cont’d)

(a)	In 2017, 2016 and 2015, the enterprise income tax rates applicable to the Company and its subsidiaries are as follows (Cont’d):

(8)

Daqing Yanfeng Adient Automotive Components Co., Ltd. is a domestic enterprise set up in Daqing in 2014. It was certificated as the hi-technology enterprise for the first time in 2015 (valid for 3 years). According to the Guo Shui Han (2009) No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017 and 2016.

(9)

Jiangsu Yueda Yanfeng Adient Automotive Seating Co., Ltd. (formerly known as “Jiangsu Yueda Yanfeng Johnson Controls Automotive Seating Co., Ltd.”) is a domestic enterprise set up in Yancheng. It was certificated as the hi-technology enterprise by Department of Science and Technology of Jiangsu Province on 30 November 2016 (valid for 3 years). According to the Guo Shui Han (2009), No. 203 “The notice on implementing preferential corporate income tax rate of hi-technology enterprises”, the applicable income tax rate is 15% in 2017.

(10)

Chongqing Yanfeng Adient Fengao Automotive Components Co., Ltd. (“Chongqing Fengao”) is a domestic enterprise set up in Chongqing in 2015. Entitled to the preferential policy for development of the west regions, the applicable income tax rate of Chongqing Fengao is 15% in 2016.

(11)

Chengdu Yanfeng Adient Automotive Components Co., Ltd. (“Chengdu Yanfeng Adient”) is a domestic enterprise set up in Chengdu in 2016. Entitled to the preferential policy for development of the west regions, the applicable income tax rate of Chengdu Yanfeng Adient is 15% in 2017 and 2016.

(12)

The applicable income tax rate of other domestic entities is 25% in year 2017, 2016 and 2015. And for Yanfeng (Thailand) Co., Ltd., the applicable income tax is 20% in year 2017, 2016 and 2015.

(b)

Pursuant to the ‘Circular on the Overall Promotion of Pilot Program of Levying VAT in place of Business Tax’ (Cai Shui [2016] 36) jointly issued by the Ministry of Finance and the State Administration of Taxation, revenue from service leasing of the subsidiary of the Group is subject to VAT from 1 May 2016, and the applicable tax rate is 11%, while the business tax was 5% before then.

- 27 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

6	Subsidiaries

(1)	Significant subsidiaries included in the consolidation scope as at 31 December 2017 are as follows:


	Place of registration		Registered capital		Nature of business and principal activities	% interest held by the Company Directly Indirectly			% voting right held by the Company Directly Indirectly
Shenyang Yanfeng Adient		Shenyang		RMB 30,000,000	Develop, produce and sell automotive interior, automotive seating overhead systems and parts production and provide after-sale service. Self-management or agency of import and export of goods and technologies (excluding goods prohibited or restricted by the national authorities).		100	%		100	%

Yanfeng Adient (Yantai) Seating Co., Ltd. (formerly known as “Yantai Yanfeng Johnson Controls Seating Co., Ltd.”)		Yantai		RMB 35,000,000	Production and sales of automotive seating assembly, parts and functional high molecule materials for automobile; import and export of goods and technologies.		100	%		100	%

Nanjing Yanfeng Adient Seating Co., Ltd. (formerly known as “NanjingYanfeng Johnson Controls Seating Co., Ltd.”)		Nanjing		RMB 45,000,000	Produce and sell automotive seating and provide after-sale service; import and export goods and service		60	%		60	%

Yanfeng Adient (Shanghai Jiading) Seating Co., Ltd. (formerly known as “Shanghai Yanfeng Johnson Controls Anting Seating Assembly Co., Ltd.”)		Shanghai		RMB 15,000,000	Design, develop, produce and sell automotive seating and provide after-sale service; import and export goods.		100	%		100	%

Chongqing Yanfeng Adient		Chongqing		USD 7,500,000	Design, produce and sale automotive seating, sunshades, auto roof trims and related parts and provide after-sale service.		50	%		62.50	%

Yanfeng Adient (Wuhan) Seating Co., Ltd. (formerly known as “Wuhan Yanfeng Johnson Controls Seating Co., Ltd.”)		Wuhan		RMB 45,000,000	Design, development, manufacture and sales of automotive seating, auto roof trims, sunshades, trim systems and related parts, provision of technical engineering service, import and export of goods (excluding goods prohibited or restricted by the national authorities).		100	%		100	%

- 28 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

6	Subsidiaries (Cont’d)

(1)	Significant subsidiaries included in the consolidation scope as at 31 December 2017 are as follows (Cont’d):

Place of

registration

Registered

capital

Nature of business and

principal activities

% interest held by

the Company

Directly Indirectly

% voting right held

by the Company

Directly Indirectly

Yanfeng Adient (Ningbo) Seating Co., Ltd. (formerly known as “Ningbo Yanfeng Johnson Controls Seating Co., Ltd.”)

Ningbo

RMB
35,000,000

Design, development, manufacture and provision of technical engineering service of automotive seating, auto roof trims, sunshades, trim systems and related parts, sales of self-manufactured products, import and export of self-run and agent products and technologies (excluding goods and technologies prohibited or restricted by the national authorities).

100%

(a) The newly established subsidiaries of the Group in 2017 included Xiangtan Yanfeng Adient Automotive Components Co., Ltd., Taizhou Yanfeng Adient Automotive Components Co., Ltd. and Yanfeng Adient (Changshu) Seating Co., Ltd. The newly established subsidiaries of the Group in 2016 included Ha’erbin Yanfeng Adient Automotive Components Co., Ltd, Chengdu Yanfeng Adient and Yanfeng Adient Germany Seating GmbH (formerly known as “Yanfeng Johnson Controls Germany Seating GmbH”). The newly established subsidiaries of the Group in 2015 included Yanfeng Adient America Seating Inc. (formerly known as “Yanfeng Johnson Controls America Seating, Inc.”) and Chongqing Fengao.

(b) In 2015, the Company disposed 50% equity interest of its subsidiary, Baoding Yanfeng Johnson Controls Seating Co., Ltd. to Great Wall Automobile Holding Co., Ltd..

- 29 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

6	Subsidiaries (Cont’d)

(2)	Information of non-wholly-owned subsidiaries


Total profit attributable to minority shareholders for the year ended 31 December 2017	Dividends paid to minority interests for the year ended 31 December 2017	Accumulated minority interests as at 31 December 2017

295,639,879	333,196,736	510,791,086

Total profit attributable to minority shareholders for the year ended 31 December 2016	Dividends paid to minority interests for the year ended 31 December 2016	Accumulated minority interests as at 31 December 2016

320,615,336	291,750,289	549,306,952

Total profit attributable to minority shareholders for the year ended 31 December 2015	Dividends paid to minority interests for the year ended 31 December 2015	Accumulated minority interests as at 31 December 2015

305,579,715	214,045,114	521,158,841

There is no individually subsidiary with significant non-wholly-owned interest within the group. Considering all the subsidiaries are automobile industry related companies, their principal activities are production and sale of automotive parts as well as components and they all operate their business in China mainland, the summarised aggregated financial information for all the subsidiaries that have non-wholly-owned interests are set out below:


31 December 2017
Current assets	Non-current assets		Total assets		Current liabilities		Non-current liabilities		Total liabilities
6,613,955,042		1,179,786,779		7,793,741,821		6,658,480,423		11,920,490		6,670,400,913

31 December 2016
Current assets	Non-current assets		Total assets		Current liabilities		Non-current liabilities		Total liabilities
6,094,461,705		1,056,890,738		7,151,352,443		5,884,416,455		18,133,103		5,902,549,558

31 December 2015
Current assets	Non-current assets		Total assets		Current liabilities		Non-current liabilities		Total liabilities
4,885,026,193		885,503,988		5,770,530,181		4,563,721,745		24,041,900		4,587,763,645

- 30 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

6	Subsidiaries (Cont’d)

(2)	Information of non-wholly-owned subsidiaries (Cont’d)


2017
Revenue	Net profit		Total comprehensive income		Cash flows from operating activities
11,589,006,649		626,758,381		626,758,381		1,268,118,975

2016
Revenue	Net profit		Total comprehensive income		Cash flows from operating activities
10,755,375,494		678,043,346		678,043,346		1,156,481,663

2015
Revenue	Net profit		Total comprehensive income		Cash flows from operating activities
10,509,628,494		647,904,303		647,904,303		224,033,364

7	Notes to the consolidated financial statements

(1)	Cash at bank and on hand


	31 December 2017		31 December 2016		31 December 2015
Cash on hand		19,307		21,513		26,270
Cash at bank		7,938,494,373		6,179,189,997		3,741,306,832
Other cash balances (a)		195,158,898		289,907,686		198,561,011

		8,133,672,578		6,469,119,196		3,939,894,113

(a)	As at 31 December 2017, 2016 and 2015, 195,158,898, 289,907,686 and 198,561,011 is pledged as guarantee for the Group to issue notes payable of 237,154,087, 325,076,774 and 228,819,635 (Note 7(17)).

(2)	Notes receivable


	31 December 2017		31 December 2016		31 December 2015
Bank acceptance notes		1,400,014,717		1,686,686,411		1,198,378,148

As at 31 December 2017, 2016 and 2015, notes receivable with amount of 236,414,979, 152,544,483 and 222,124,500 is pledged as guarantee for the Group to issue notes payable of 230,171,732, 152,544,483 and 221,724,500 (Note 7(17)).

- 31 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(3)	Accounts receivable and other receivables

(a)	Accounts receivable


	31 December 2016								31 December 2017
Accounts receivable		5,932,536,523								8,256,708,592

				Increase in the current year			Decrease in the current year
Less: Provision for bad debts		(80,730,455	)		(3,789,237	)		631,977		(83,887,715	)

		5,851,806,068								8,172,820,877


	31 December 2015								31 December 2016
Accounts receivable		5,713,997,765								5,932,536,523

				Increase in the current year			Decrease in the current year
Less: Provision for bad debts		(16,968,425	)		(63,787,666	)		25,636		(80,730,455	)

		5,697,029,340								5,851,806,068


	31 December 2014								31 December 2015
Accounts receivable		4,698,378,707								5,713,997,765

				Increase in the current year			Decrease in the current year
Less: Provision for bad debts		(9,928,095	)		(7,056,982	)		16,652		(16,968,425	)

		4,688,450,612								5,697,029,340

- 32 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(3)	Accounts receivable and other receivables (Cont’d)

(a)	Accounts receivable (Cont’d)

The aging of accounts receivable and related provisions for bad debts are analysed below:


	31 December 2017								31 December 2016								31 December 2015
	Amount		% of total balance			Provision for bad debts			Amount		% of total balance			Provision for bad debts			Amount		% of total balance			Provision for bad debts
Within 1 year		8,179,122,053		99.06	%		(36,085,610	)		5,817,926,740		98.06	%		(19,287,472	)		5,442,373,758		95.25	%		(2,415,833	)
1 to 2 years		27,233,389		0.33	%		(3,128,392	)		28,484,340		0.48	%		(8,404,214	)		244,636,126		4.28	%		(3,379,236	)
2 to 3 years		11,603,363		0.14	%		(5,923,926	)		66,184,420		1.12	%		(33,097,746	)		19,388,759		0.34	%		(3,784,961	)
Over 3 years		38,749,787		0.47	%		(38,749,787	)		19,941,023		0.34	%		(19,941,023	)		7,599,122		0.13	%		(7,388,395	)

		8,256,708,592		100.00	%		(83,887,715	)		5,932,536,523		100.00	%		(80,730,455	)		5,713,997,765		100.00	%		(16,968,425	)

- 33 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(3)	Accounts receivable and other receivables (Cont’d)

(b)	Other receivables


	31 December 2016								31 December 2017
Related party cash pool lending		150,982,542								694,358,284
Receivables for modules paid-on-behalf of others		102,700,877								103,917,630
Deposits		53,632,667								21,922,930
Receivables from sales of fixed assets		653,120								3,037,638
Others		10,944,572								4,981,187

		318,913,778								828,217,669

				Reversal in the current year			Write-off in the current year
Less: Provision for bad debts		(3,128,470	)		2,182,720			933,612		(12,138	)

		315,785,308								828,205,531


	31 December 2015								31 December 2016
Related party cash pool lending		—								150,982,542
Receivables for modules paid-on-behalf of others		147,645,565								102,700,877
Deposits		50,064,467								53,632,667
Receivables from sales of fixed assets		4,226								653,120
Receivables from equity transfer		21,500,000								—
Others		10,305,418								10,944,572

		229,519,676								318,913,778

				Increase in the current year			Decrease in the current year
Less: Provision for bad debts		(945,749	)		(2,182,721	)		—		(3,128,470	)

		228,573,927								315,785,308

- 34 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(3)	Accounts receivable and other receivables (Cont’d)

(b)	Other receivables (Cont’d)


	31 December 2014							31 December 2015
Receivables for modules paid-on-behalf of others		200,755,931							147,645,565
Deposits		32,193,079							50,064,467
Receivables from equity transfer		—							21,500,000
Receivables from sales of fixed assets		160,032,610							4,226
Related party cash pool lending		50,646,471							—
Others		21,779,364							10,305,418

		465,407,455							229,519,676

				Increase in the current year		Decrease in the current year
Less: Provision for bad debts		(946,189	)		—		440		(945,749	)

		464,461,266							228,573,927

- 35 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(3)	Accounts receivable and other receivables (Cont’d)

(b)	Other receivables (Cont’d)

Other receivables and related provisions for bad debts are analysed below:


	31 December 2017								31 December 2016								31 December 2015
	Amount		% of total balance			Provision for bad debts			Amount		% of total balance			Provision for bad debts			Amount		% of total balance			Provision for bad debts
Within 1 year		805,632,588		97.27	%		—			254,354,215		79.76	%		(2,194,859	)		196,262,868		85.51	%		—
1 to 2 years		8,434,324		1.02	%		—			42,589,819		13.35	%		—			24,176,246		10.53	%		(12,138	)
2 to 3 years		3,658,154		0.44	%		—			15,068,384		4.72	%		—			4,745,088		2.07	%		—
Over 3 years		10,492,603		1.27	%		(12,138	)		6,901,360		2.17	%		(933,611	)		4,335,474		1.89	%		(933,611	)

		828,217,669		100.00	%		(12,138	)		318,913,778		100.00	%		(3,128,470	)		229,519,676		100.00	%		(945,749	)

(4)	Advances to suppliers

The ageing of advances to suppliers is analysed as follows:


	31 December 2017					31 December 2016					31 December 2015
	Amount		% of total balance			Amount		% of total balance			Amount		% of total balance
Within 1 year		199,510,957		98.25	%		115,464,553		95.98	%		125,531,008		96.47	%
1 to 2 years		2,313,617		1.14	%		1,769,829		1.47	%		2,941,987		2.26	%
2 to 3 years		360,539		0.18	%		1,516,302		1.26	%		132,283		0.10	%
Over 3 years		875,000		0.43	%		1,555,765		1.29	%		1,521,765		1.17	%

		203,060,113		100.00	%		120,306,449		100.00	%		130,127,043		100.00	%

- 36 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(5)	Inventories


	31 December 2016						31 December 2017
Cost -

Raw materials		552,763,560						602,556,481
Work in progress		36,748,461						17,096,427
Finished goods		234,736,592						299,240,009

		824,248,613						918,892,917

Less: Provision for declines in the value of inventories				(Accrual Reversal in the current year	)/	Write-off in the current year

Raw materials		(23,817,530	)	433,754		2,874,182		(20,509,594	)
Work in progress		(31,664	)	(36,483	)	—		(68,147	)
Finished goods		(2,720,754	)	(1,536,611	)	917,764		(3,339,601	)

		(26,569,948	)	(1,139,340	)	3,791,946		(23,917,342	)

		797,678,665						894,975,575


	31 December 2015					31 December 2016
Cost -

Raw materials		422,758,307					552,763,560
Work in progress		21,343,381					36,748,461
Finished goods		290,728,598					234,736,592

		734,830,286					824,248,613

Less: Provision for declines in the value of inventories				Reversal in the current year	Write-off in the current year

Raw materials		(28,454,633	)	1,030,809	3,606,294		(23,817,530	)
Work in progress		(873,759	)	839,603	2,492		(31,664	)
Finished goods		(4,299,218	)	365,260	1,213,204		(2,720,754	)

		(33,627,610	)	2,235,672	4,821,990		(26,569,948	)

		701,202,676					797,678,665

- 37 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(5)	Inventories (Cont’d)


	31 December 2014							31 December 2015
Cost -

Raw materials		495,782,759							422,758,307
Work in progress		32,424,927							21,343,381
Finished goods		147,067,879							290,728,598

		675,275,565							734,830,286

Less: Provision for declines in the value of inventories				(Accrual Reversal in the current year	)/	Write-off in the current year

Raw materials		(31,190,832	)	(1,708,382	)	4,444,581			(28,454,633	)
Work in progress		(805,118	)	22,032		(90,673	)		(873,759	)
Finished goods		(5,164,390	)	(637,187	)	1,502,359			(4,299,218	)

		(37,160,340	)	(2,323,537	)	5,856,267			(33,627,610	)

		638,115,225							701,202,676

(6)	Other current assets



	31 December 2017		31 December 2016		31 December 2015
Input VAT to be deducted		123,276,797		151,229,616		31,452,580
Related party entrusted loans (Note 8(4(e)))		15,000,000		—		315,000,000
Prepaid income tax		9,121,155		9,441,318		6,094,030
Others		90,570		41,426		163,060

		147,488,522		160,712,360		352,709,670

- 38 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(7)	Long-term equity investments


	31 December 2017		31 December 2016		31 December 2015
Associates (a)		163,821,432		140,094,694		108,432,277
Joint venture (b)		46,437,689		50,160,580		50,320,716

		210,259,121		190,255,274		158,752,993
Less: Provision for impairment of long-term equity investments		—		—		—

		210,259,121		190,255,274		158,752,993

(a)	Associates

Investments in associates are set out below:


31 December 2016	Increase in investment		Share of net profit under equity method		Profit/Cash dividends declared by associates			31 December 2017
140,094,694		—		69,726,738		(46,000,000	)		163,821,432

31 December 2015	Increase in investment		Share of net profit under equity method		Profit/Cash dividends declared by associates			31 December 2016
108,432,277		—		54,179,667		(22,517,250	)		140,094,694

31 December 2014	Increase in investment		Share of net profit under equity method		Profit/Cash dividends declared by associates			31 December 2015
76,331,842		—		40,365,585		(8,265,150	)		108,432,277

- 39 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(7)	Long-term equity investments (Cont’d)

(a)	Associates (Cont’d)

General information of significant associates:

Major
business
location

Place of
registration

Nature of business

Interest
held

Whether
strategic to
the Group’s
activities

Wuhan Taiji Johnson Controls Seating Co., Ltd. (“Wuhan Taiji”) (i)

Wuhan

Design, develop, produce and process auto key parts; sell the produced parts and provide after-sale service

20.00

Yes

Dongfeng Adient Automotive Seating Co., Ltd. (“Dongfeng Adient Seating”, formerly known as “Dongfeng Johnson Automotive Seating Co., Ltd.”)

Wuhan

Design, develop, produce and process auto key parts; sell the produced parts and provide after-sale service

50.00

Yes

(i)	The Company holds 20% of the ownership interesting of, and the decisions on Wuhan Taiji’s relevant activities are made by the Board of Directors. As the Company has the right to designate 1 out of total 7 board members in Wuhan Taiji, the Company has the voting rights of 14.29% in Wuhan Taiji.

(b)	Joint venture

Investments in joint ventures are set out below:


31 December 2016	Increase in investment		Share of net profit under equity method			Profit/Cash dividends declared by associates			31 December 2017
50,160,580		—		9,149,807			(12,872,698	)		46,437,689

31 December 2015	Increase in investment		Share of net profit under equity method			Profit/Cash dividends declared by associates			31 December 2016
50,320,716		—		(160,136	)		—			50,160,580

31 December 2014	Increase in investment		Share of net profit under equity method			Profit/Cash dividends declared by associates			31 December 2015
—		62,298,600		93,521			(12,071,405	)		50,320,716

- 40 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(7)	Long-term equity investments (Cont’d)

(b)	Joint venture (Cont’d)

General information of significant joint venture:

Major

business

location

Place of

registration

Nature of business

Interest
held

Whether
strategic to
the Group’s

activities

CRH Automotive Shenyang Co., Ltd. (“CRH Shenyang”)

Shenyang

Design, develop, manufacture, sell auto seats frame and relevant parts; provide after-sale service; import and export goods (exclude those forbidden by the State or restricted by imports and exports).

50.00%

Yes

On 30 September 2015, the Company acquired 50% of the equity interest of CRH Shenyang from Johnson Controls Solingen Beteiligungs GmbH with the consideration of USD 9,800,000. After the acquisition, the Company owned 50% equity interest of CRH Shenyang, which is treated as a joint venture company.

(8)	Investment properties


	Buildings and relevant land use rights
31 December 2016		—
Transfer from construction in progress		42,529,486

31 December 2017		42,529,486

Accumulated depreciation and amortisation
31 December 2016		—
Increase in the current year		—

31 December 2017		—

Provision for impairment loss
31 December 2016 and 2017		—

Carrying amount
31 December 2017		42,529,486

31 December 2016		—

- 41 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(9)	Fixed assets


	Buildings			Machinery and equipment			Motor vehicles			Computers and electronic equipment and office equipment			Tooling			Total
Cost
31 December 2016		765,812,975			1,749,296,461			6,838,925			257,756,641			172,609,872			2,952,314,874
Transfer from construction in progress		58,878,093			355,802,525			5,887,788			32,222,418			69,308,003			522,098,827
Other increases in the current year		93,202			88,572			—			9,286			5,828			196,888
Decrease in the current year		(6,833,018	)		(55,055,220	)		(185,379	)		(30,637,992	)		(27,736,142	)		(120,447,751	)
Transfer to long-term prepaid expenses		—			—			—			(30,086	)		(127,350	)		(157,436	)

31 December 2017		817,951,252			2,050,132,338			12,541,334			259,320,267			214,060,211			3,354,005,402

Accumulated depreciation
31 December 2016		(182,533,783	)		(764,667,167	)		(6,400,178	)		(154,423,773	)		(121,076,895	)		(1,229,101,796	)
Increase in the current year		(46,101,317	)		(246,635,251	)		(1,850,999	)		(42,533,912	)		(49,280,656	)		(386,402,135	)
Decrease in the current year		2,789,225			39,354,577			138,727			30,357,139			19,869,631			92,509,299
Transfer to long-term prepaid expenses		—			—			—			10,029			82,778			92,807

31 December 2017		(225,845,875	)		(971,947,841	)		(8,112,450	)		(166,590,517	)		(150,405,142	)		(1,522,901,825	)

Provision for impairment loss
31 December 2016		—			(3,116,116	)		—			—			(283,584	)		(3,399,700	)
Decrease in the current year		—			856,303			—			—			53,920			910,223

31 December 2017		—			(2,259,813	)		—			—			(229,664	)		(2,489,477	)

Carrying amount 31
December 2017		592,105,377			1,075,924,684			4,428,884			92,729,750			63,425,405			1,828,614,100

- 42 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(9)	Fixed assets (Cont’d)


	Buildings			Machinery and equipment			Motor vehicles			Computers and electronic equipment and office equipment			Tooling			Total
Cost
31 December 2015		806,451,196			1,578,270,298			11,203,963			257,206,427			163,297,902			2,816,429,786
Transfer from construction in progress		34,002,825			223,872,862			1,093,938			—			46,014,855			304,984,480
Other increases in the current year		—			—			—			38,872,721			—			38,872,721
Decrease in the current year		(9,484,015	)		(80,492,536	)		(1,568,282	)		(24,154,674	)		(30,838,177	)		(146,537,684	)
Transfer to long-term prepaid expenses		(20,102,952	)		(1,221,416	)		—			(5,128	)		—			(21,329,496	)
Cost adjustment		(33,346,512	)		(5,408,656	)		—			(1,349,765	)		—			(40,104,933	)
Reclassification		(11,707,567	)		34,275,909			(3,890,694	)		(12,812,940	)		(5,864,708	)		—

31 December 2016		765,812,975			1,749,296,461			6,838,925			257,756,641			172,609,872			2,952,314,874

Accumulated depreciation
31 December 2015		(143,920,692	)		(625,119,801	)		(7,718,351	)		(144,230,691	)		(113,372,889	)		(1,034,362,424	)
Increase in the current year		(49,375,221	)		(183,487,123	)		(1,512,307	)		(40,831,996	)		(35,416,622	)		(310,623,269	)
Decrease in the current year		2,039,813			62,145,418			1,371,317			22,879,917			24,134,045			112,570,510
Transfer to long-term prepaid expenses		3,121,358			190,889			—			1,140			—			3,313,387
Reclassification		5,600,959			(18,396,550	)		1,459,163			7,757,857			3,578,571			—

31 December 2016		(182,533,783	)		(764,667,167	)		(6,400,178	)		(154,423,773	)		(121,076,895	)		(1,229,101,796	)

Provision for impairment loss
31 December 2015		—			(3,168,540	)		—			—			(753,177	)		(3,921,717	)
Decrease in the current year		—			52,424			—			—			469,593			522,017

31 December 2016		—			(3,116,116	)		—			—			(283,584	)		(3,399,700	)

Carrying amount
31 December 2016		583,279,192			981,513,178			438,747			103,332,868			51,249,393			1,719,813,378

- 43 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(9)	Fixed assets (Cont’d)


	Buildings			Machinery and equipment			Motor vehicles			Computers and electronic equipment and office equipment			Tooling			Total
Cost
31 December 2014		664,843,579			1,402,641,847			11,092,134			219,404,616			143,136,647			2,441,118,823
Transfer from construction in progress		141,831,535			306,246,174			1,525,343			61,610,827			40,643,272			551,857,151
Other increases in the current year		53,000			24,471			—			454,101			159,025			690,597
Decrease in the current year		(276,918	)		(105,538,409	)		(1,413,514	)		(21,053,528	)		(20,641,042	)		(148,923,411	)
Transfer to construction in progress		—			(25,103,785	)		—			(3,209,589	)		—			(28,313,374	)

31 December 2015		806,451,196			1,578,270,298			11,203,963			257,206,427			163,297,902			2,816,429,786

Accumulated depreciation
31 December 2014		(103,659,542	)		(556,410,903	)		(6,757,457	)		(126,368,066	)		(106,393,288	)		(899,589,256	)
Increase in the current year		(40,528,317	)		(159,961,886	)		(1,953,950	)		(36,015,268	)		(22,608,860	)		(261,068,281	)
Decrease in the current year		267,167			72,123,397			993,056			17,255,175			15,629,259			106,268,054
Transfer to construction in progress		—			19,129,591			—			897,468			—			20,027,059

31 December 2015		(143,920,692	)		(625,119,801	)		(7,718,351	)		(144,230,691	)		(113,372,889	)		(1,034,362,424	)

Provision for impairment loss
31 December 2014		—			(3,363,932	)		—			—			(1,023,466	)		(4,387,398	)
Decrease in the current year		—			195,392			—			—			270,289			465,681

31 December 2015		—			(3,168,540	)		—			—			(753,177	)		(3,921,717	)

Carrying amount
31 December 2015		662,530,504			949,981,957			3,485,612			112,975,736			49,171,836			1,778,145,645

In 2017, 2016 and 2015, the amount of depreciation expense charged to cost of sales were 313,444,037, 246,862,381 and 213,440,384, respectively.

In 2017, 2016 and 2015, the amount of depreciation expense charged to selling expenses were 25,648, 24,687 and 14,910, respectively.

In 2017, 2016 and 2015, the amount of depreciation expense charged to general and administrative expenses were 72,932,450, 63,736,201 and 47,612,987, respectively.

- 44 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(10)	Construction in progress


Project name	31 December 2016		Increase in the current year			Transfer to fixed assets			Transfer to long-term prepaid expenses			Transfer to intangible assets			Transfer to investment properties			Decrease in the current year			31 December 2017
Building and improvements		153,518,569		28,398,407			(58,878,093	)		(11,276,429	)		—			(42,529,486	)		—			69,232,968
Machinery and equipment		216,942,984		283,936,643			(355,802,525	)		(14,982,963	)		—			—			(200,000	)		129,894,139
Other projects		71,761,570		130,949,613			(107,418,209	)		(3,537,361	)		(12,120,793	)		—			—			79,634,820

		442,223,123		443,284,663			(522,098,827	)		(29,796,753	)		(12,120,793	)		(42,529,486	)		(200,000	)		278,761,927

Including: Capitalised borrowing cost		—		—			—			—			—			—			—			—

Less: Provision for impairment of construction in progress		—		(200,000	)		—			—			—			—			200,000			—

		442,223,123		443,084,663			(522,098,827	)		(29,796,753	)		(12,120,793	)		(42,529,486	)		—			278,761,927


Project name	31 December 2015		Increase in the current year		Transfer to fixed assets			Transfer to long-term prepaid expenses			31 December 2016
Building and improvements		118,710,057		90,173,145		(34,002,825	)		(21,361,808	)		153,518,569
Machinery and equipment		167,382,588		278,237,083		(223,872,862	)		(4,803,825	)		216,942,984
Other projects		48,313,183		70,846,066		(47,108,793	)		(288,886	)		71,761,570

		334,405,828		439,256,294		(304,984,480	)		(26,454,519	)		442,223,123

Including: Capitalised borrowing cost		—		—		—			—			—

Less: Provision for impairment of construction in progress		—		—		—			—			—

		334,405,828		439,256,294		(304,984,480	)		(26,454,519	)		442,223,123

- 45 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(10)	Construction in progress (Cont’d)


Project name	31 December 2014		Increase in the current year		Transfer from fixed assets		Transfer to fixed assets			Transfer to long-term prepaid expenses			Decrease in the current year			31 December 2015
Building and improvements		203,185,882		80,800,335		—		(141,831,535	)		(22,146,220	)		(1,298,405	)		118,710,057
Machinery and equipment		221,606,083		267,408,574		5,974,194		(306,246,174	)		(10,538,111	)		(10,821,978	)		167,382,588
Other projects		60,230,565		89,964,495		2,312,121		(103,779,442	)		(35,100	)		(379,456	)		48,313,183

		485,022,530		438,173,404		8,286,315		(551,857,151	)		(32,719,431	)		(12,499,839	)		334,405,828

Including: Capitalised borrowing cost		—		—		—		—			—			—			—

Less: Provision for impairment of construction in progress		—		—		—		—			—			—			—

		485,022,530		438,173,404		8,286,315		(551,857,151	)		(32,719,431	)		(12,499,839	)		334,405,828

(11)	Intangible assets


	Cost		31 December 2016		Increase in the current year		Amortisation charged in the current year			31 December 2017		Accumulated amortisation
Land use rights		399,694,892		263,218,172		93,105,000		(22,657,180	)		333,665,992		(66,028,900	)
Patents		495,000		298,889		—		(36,167	)		262,722		(232,278	)
Software		160,476,467		31,061,697		17,673,825		(22,272,212	)		26,463,310		(134,013,157	)
Customer relationship		825,411,900		—		—		—			—		(825,411,900	)

		1,386,078,259		294,578,758		110,778,825		(44,965,559	)		360,392,024		(1,025,686,235	)

Less: Provision for impairment of intangible assets				—		—					—

				294,578,758		110,778,825					360,392,024

- 46 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITORS REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(11)	Intangible assets (Cont’d)


	Cost		31 December 2015		Increase in the current year		Decrease in the current year			Amortisation charged in the current year			31 December 2016		Accumulated amortisation
Land use rights		306,589,892		252,203,150		30,335,209		(11,960,599	)		(7,359,588	)		263,218,172		(43,371,720	)
Patents		495,000		335,055		—		—			(36,166	)		298,889		(196,111	)
Software		142,802,642		37,601,027		16,866,097		—			(23,405,427	)		31,061,697		(111,740,945	)
Customer relationship		825,411,900		—		—		—			—			—		(825,411,900	)

		1,275,299,434		290,139,232		47,201,306		(11,960,599	)		(30,801,181	)		294,578,758		(980,720,676	)

Less: Provision for impairment of intangible assets				—		—		—						—

				290,139,232		47,201,306		(11,960,599	)					294,578,758


	Cost		31 December 2014		Increase in the current year		Decrease in the current year			Amortisation charged in the current year			31 December 2015		Accumulated amortisation
Land use rights		289,794,984		258,532,985		—		—			(6,329,835	)		252,203,150		(37,591,834	)
Patents		495,000		375,666		—		—			(40,611	)		335,055		(159,945	)
Software		125,936,545		29,698,801		26,618,345		(69,044	)		(18,647,075	)		37,601,027		(88,335,518	)
Customer relationship		825,411,900		73,663,625		—		—			(73,663,625	)		—		(825,411,900	)

		1,241,638,429		362,271,077		26,618,345		(69,044	)		(98,681,146	)		290,139,232		(951,499,197	)

Less: Provision for impairment of intangible assets				—		—		—						—

				362,271,077		26,618,345		(69,044	)					290,139,232

- 47 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(12)

Goodwill


	31 December 2016		Increase in the current year		Decrease in the current year		31 December 2017
Goodwill		71,566,642		—		—		71,566,642
Less: Provision for impairment		—		—		—		—

		71,566,642		—		—		71,566,642


	31 December 2015		Increase in the current year		Decrease in the current year		31 December 2016
Goodwill		71,566,642		—		—		71,566,642
Less: Provision for impairment		—		—		—		—

		71,566,642		—		—		71,566,642


	31 December 2014		Increase in the current year		Decrease in the current year		31 December 2015
Goodwill		71,566,642		—		—		71,566,642
Less: Provision for impairment		—		—		—		—

		71,566,642		—		—		71,566,642

The recoverable amount of asset groups and groups of asset groups is calculated using the estimated cash flows determined according to the three-year budget approved by management, together with the constant growth rates thereafter. The latter are set out in the following table.

The main assumptions applied in calculating discounted future cash flows are as follows:


Growth rate	12	%
Gross margin	18	%
Discount rate	17	%

The growth rates mentioned above are the weighted average growth rates applied by management to extrapolate cash flows beyond the three-year period, and the growth rates are consistent with those estimated in the industry reports, and do not exceed the long-term average growth rates of each product. Management determines budgeted gross margin based on past experience and forecast on future market development. The discount rates used by management are the pre-tax interest rates that are able to reflect the risks specific to the related asset groups and groups of asset groups. The above assumptions are used to assess the recoverable amount of each asset group and group of asset groups within the corresponding operating segment.

(13)	Long-term prepaid expenses


	31 December 2017		31 December 2016		31 December 2015
Improvements to fixed assets held under operating leases		156,879,052		182,621,388		179,174,199
Software		—		147,650		584,334
Others		7,535,603		13,259,203		15,358,365

		164,414,655		196,028,241		195,116,898

- 48 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(14)	Deferred tax assets and deferred tax liabilities

(a)	Deferred tax assets


	31 December 2017				31 December 2016				31 December 2015
	Deferred tax assets		Deductible temporary difference		Deferred tax assets		Deductible temporary difference		Deferred tax assets		Deductible temporary difference
Provisions for asset impairment		20,633,379		111,836,540		19,481,023		113,203,687		9,560,137		55,463,501
Depreciation of fixed assets		1,295,205		9,981,627		3,190,153		17,038,480		4,477,205		21,513,376
Amortisation of long-term prepaid expenses		2,254,799		15,031,991		—		—		—		—
Accrued expenses and accounts payable		1,053,271,240		5,348,617,949		778,137,801		3,919,738,157		502,335,531		2,486,895,028
Accrued payroll		5,690,242		34,712,085		27,160,131		168,946,288		19,049,565		119,149,427
Deferred income		1,962,772		7,851,089		1,770,896		7,083,583		1,719,295		7,402,636
Deductible losses		5,296,194		21,184,773		1,639,537		6,558,148		8,975,147		35,900,585

		1,090,403,831		5,549,216,054		831,379,541		4,232,568,343		546,116,880		2,726,324,553

Including:
Expected to be recovered within one year (inclusive)						1,085,568,850		827,442,771		538,515,249
Expected to be recovered after one year						4,834,981		3,936,770		7,601,631

						1,090,403,831		831,379,541		546,116,880

(b)	Deductible temporary differences and deductible losses that are not recognised as deferred tax assets are analysed as follows:


	31 December 2017		31 December 2016		31 December 2015
Deductible temporary differences		—		28,817,623		—
Deductible losses		46,742,064		16,702,985		4,495,525

		46,742,064		45,520,608		4,495,525

- 49 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(14)	Deferred tax assets and deferred tax liabilities (Cont’d)

(c)	Deductible losses that are not recognised as deferred tax assets will be expired as follows:


	31 December 2017		31 December 2016		31 December 2015
Within 1 year		—		—		4,495,525
Between 1 to 2 years		—		—		—
Between 2 to 3 years		—		—		—
Between 3 to 4 years		5,240,533		—		—
Over 4 years		41,501,531		16,702,985		—

		46,742,064		16,702,985		4,495,525

(d)	Deferred tax liabilities



	31 December 2017				31 December 2016				31 December 2015
	Deferred tax liabilities		Taxable temporary difference		Deferred tax liabilities		Taxable temporary difference		Deferred tax liabilities		Taxable temporary difference
Depreciation of fixed assets		—		—		—		—		241,500		965,999

Including:
Expected to be recovered within one year (inclusive)		—				—				241,500
Expected to be recovered after one year		—				—				—

		—				—				241,500

- 50 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(15)	Other non-current assets


	31 December 2017		31 December 2016		31 December 2015
Prepayment for equipment		64,819,673		39,899,868		50,533,076
Rental deposits		15,786,279		17,561,824		19,798,915
Prepayment for land use right		—		—		29,455,609

		80,605,952		57,461,692		99,787,600

(16)	Short-term borrowings

Currency

31 December 2017

31 December 2016

31 December 2015

Unsecured

RMB

551,280,196

408,884,232

75,000,000

As at 31 December 2017, 2016 and 2015, the weighted average interest rate of short-term borrowings is 4.40%, 4.38% and 6.02% per annum, respectively.

(17)	Notes payable


	31 December 2017		31 December 2016		31 December 2015
Bank acceptance notes		653,798,483		666,979,006		457,179,867

As at 31 December 2017, 2016 and 2015, bank acceptance notes of 237,154,087, 325,076,774 and 228,819,635 were secured with bank deposits of 195,158,898, 289,907,686 and 198,561,011 (Note 7(1)).

As at 31 December 2017, 2016 and 2015, bank acceptance notes of 230,171,732, 152,544,483 and 221,724,500 were secured with notes receivable of 236,414,979, 152,544,483 and 222,124,500 (Note 7(2)).

(18)	Accounts payable


	31 December 2017		31 December 2016		31 December 2015
Within 1 year		12,681,476,125		9,748,879,362		8,346,912,180
1 to 2 years		89,826,663		85,196,150		108,949,525
2 to 3 years		25,658,428		22,907,089		9,008,700
Over 3 years		65,889		3,151,224		4,009,058

		12,797,027,105		9,860,133,825		8,468,879,463

- 51 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(19)	Employee benefits payable


	31 December 2017		31 December 2016		31 December 2015
Short-term employee benefits payable (a)		831,474,529		771,593,541		606,859,311
Defined contribution plans payable (b)		15,622,695		21,367,180		14,293,502

		847,097,224		792,960,721		621,152,813

(a)	Short-term employee benefits payable


	31 December 2016		Increase in the current year		Decrease in the current year			31 December 2017
Wages and salaries, bonus, allowances and subsidies		411,675,946		1,489,660,689		(1,486,063,018	)		415,273,617
Staff welfare		—		141,248,778		(140,954,342	)		294,436
Social security contributions		9,463,619		84,333,102		(81,620,023	)		12,176,698

Including: Medical insurance		7,296,574		69,361,143		(68,648,524	)		8,009,193
Work injury insurance		759,177		6,369,010		(6,019,878	)		1,108,309
Maternity insurance		1,407,868		8,602,949		(6,951,621	)		3,059,196

Housing funds		11,402,998		83,767,222		(81,903,063	)		13,267,157
Labour union funds and employee education funds		22,226,096		23,487,067		(25,990,750	)		19,722,413
Other short-term employee benefits		709,841		1,202,100		(1,081,323	)		830,618
Staff welfare and incentive funds		316,115,041		65,871,456		(12,076,907	)		369,909,590

		771,593,541		1,889,570,414		(1,829,689,426	)		831,474,529


	31 December 2015		Increase in the current year		Decrease in the current year			31 December 2016
Wages and salaries, bonus, allowances and subsidies		295,220,972		1,431,467,945		(1,315,012,971	)		411,675,946
Staff welfare		—		114,470,992		(114,470,992	)		—
Social security contributions		9,116,375		66,392,937		(66,045,693	)		9,463,619

Including: Medical insurance		4,891,372		58,270,190		(55,864,988	)		7,296,574
Work injury insurance		665,975		5,273,526		(5,180,324	)		759,177
Maternity insurance		3,559,028		2,849,221		(5,000,381	)		1,407,868

Housing funds		7,865,810		80,420,576		(76,883,388	)		11,402,998
Labour union funds and employee education funds		17,081,193		29,525,357		(24,380,454	)		22,226,096
Other short-term employee benefits		318,558		1,037,775		(646,492	)		709,841
Staff welfare and incentive funds		277,256,403		48,743,593		(9,884,955	)		316,115,041

		606,859,311		1,772,059,175		(1,607,324,945	)		771,593,541

- 52 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(19)	Employee benefits payable (Cont’d)

(a)	Short-term employee benefits payable (Cont’d)


	31 December 2014		Increase in the current year		Decrease in the current year			31 December 2015
Wages and salaries, bonus, allowances and subsidies		260,619,279		1,132,303,027		(1,097,701,334	)		295,220,972
Staff welfare		—		87,717,100		(87,717,100	)		—
Social security contributions		14,377,485		83,877,705		(89,138,815	)		9,116,375

Including: Medical insurance		7,372,363		71,839,820		(74,320,811	)		4,891,372
Work injury insurance		2,255,176		4,984,132		(6,573,333	)		665,975
Maternity insurance		4,749,946		7,053,753		(8,244,671	)		3,559,028

Housing funds		9,213,678		95,555,097		(96,902,965	)		7,865,810
Labour union funds and employee education funds		16,874,496		25,619,638		(25,412,941	)		17,081,193
Other short-term employee benefits		1,086,076		3,157,495		(3,925,013	)		318,558
Staff welfare and incentive funds		236,466,741		45,146,630		(4,356,968	)		277,256,403

		538,637,755		1,473,376,692		(1,405,155,136	)		606,859,311

In accordance with the Circular on Accounting Treatment of Enterprises Following the Implementation of the Company Law (Cai Qi [2006]67) issued by the Ministry of Finance on 15 March 2006, if the board of directors determines to continue the accrual for the staff welfare and incentive fund, the Company should specify the purposes of the fund, and the conditions and procedures for using the fund. The fund should be managed as a liability.

(b)	Defined contribution plans payable


	2017
	Amount payable		Ending balance
Basic pensions		169,528,098		14,558,763
Unemployment insurance		5,459,505		1,063,932

		174,987,603		15,622,695


	2016
	Amount payable		Ending balance
Basic pensions		147,378,646		19,608,691
Unemployment insurance		7,715,280		1,758,489

		155,093,926		21,367,180


	2015
	Amount payable		Ending balance
Basic pensions		151,997,339		13,380,326
Unemployment insurance		10,391,553		913,176

		162,388,892		14,293,502

- 53 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(20)	Taxes payable


	31 December 2017		31 December 2016		31 December 2015
Enterprise income tax payable		416,057,834		439,098,114		302,092,879
Unpaid VAT		200,453,088		237,394,873		223,572,378
Withholding individual income tax payable		15,867,945		8,695,828		9,871,414
Others		24,243,999		24,057,989		24,484,878

		656,622,866		709,246,804		560,021,549

(21)	Other payables


	31 December 2017		31 December 2016		31 December 2015
Accrued expenses		2,897,471,960		1,945,410,740		1,270,897,055
Modules fee payables		314,966,958		202,794,863		88,193,425
Payables for purchase of long-term assets		133,318,793		84,347,957		40,303,467
Service fee payables		63,833,732		50,534,097		62,195,223
Transportation fee payables		30,867,845		10,582,666		2,809,094
Other payables paid-on-behalf of the Group by others		18,811,831		18,096,164		33,294,050
Others		67,741,260		42,590,973		48,498,097

		3,527,012,379		2,354,357,460		1,546,190,411

(22)	Long-term borrowings


	31 December 2017			31 December 2016			31 December 2015
Unsecured		4,500,000			13,505,000			18,903,000
Less: Current portion of long-term borrowings		(3,000,000	)		(5,398,000	)		(5,398,000	)

		1,500,000			8,107,000			13,505,000

As at 31 December 2017, 2016 and 2015, the weighted average interest rate of long-term borrowings is 4.55%, 5.15% and 6.15% per annum, respectively.

(23)	Deferred income


	31 December 2017		31 December 2016		31 December 2015
Government grants (a)		9,117,415		9,995,949		7,402,636

- 54 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(23)	Deferred income (Cont’d)

(a)	Government grants


	31 December 2016		Increase in the current year		Charged to other income			31 December 2017		Asset related/ Income related
Enterprise Development Special Fund		6,089,000		—		—			6,089,000		Asset related
Other asset-related subsidies		3,906,949		1,164,730		(2,153,264	)		2,918,415		Asset related
Other income-related subsidies		—		110,000		—			110,000		Income related

		9,995,949		1,274,730		(2,153,264	)		9,117,415

The government grants recognised in profit or loss or deducted against related expenses in the current year are set out as follows:


Government grants	Nature	Amount		Presentation items
Information intelligence subsidies	Fiscal subsidies (hi-technology subsidies)		1,733,270		Other income
Other fiscal subsidies	Fiscal subsidies		419,994		Other income

			2,153,264

- 55 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(23)	Deferred income (Cont’d)

(a)	Government grants (Cont’d)


	31 December 2015		Increase in the current year		Charged to non-operating income			31 December 2016		Asset related/ Income related
Enterprise Development Special Fund		6,089,000		—		—			6,089,000		Asset related
Other asset-related subsidies		1,313,636		2,765,583		(172,270	)		3,906,949		Asset related

		7,402,636		2,765,583		(172,270	)		9,995,949

The government grants recognised in profit or loss or deducted against related expenses in the current year are set out as follows:

Government grants

Nature

Amount

Presentation items

Information intelligence subsidies

Fiscal subsidies (hi-technology subsidies)

172,270

Non-operating income

- 56 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(23)	Deferred income (Cont’d)

(a)	Government grants (Cont’d)


	31 December 2014		Increase in the current year		Charged to non-operating income			31 December 2015		Asset related/ Income related
Enterprise Development Special Fund		5,440,000		649,000		—			6,089,000		Asset related
Other asset-related subsidies		—		2,800,000		(1,486,364	)		1,313,636		Asset related

		5,440,000		3,449,000		(1,486,364	)		7,402,636

The government grants recognised in profit or loss or deducted against related expenses in the current year are set out as follows:

Government grants

Nature

Amount

Presentation items

Information intelligence subsidies

Fiscal subsidies (hi-technology subsidies)

1,486,364

Non-operating
income

- 57 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(24)	Surplus reserve


	31 December 2016		Increase in the current year		Decrease in the current year		31 December 2017
Reserve Fund		146,820,596		21,691,395		—		168,511,991
Enterprise Expansion Fund		229,915,996		43,382,790		—		273,298,786

		376,736,592		65,074,185		—		441,810,777


	31 December 2015		Increase in the current year		Decrease in the current year		31 December 2016
Reserve Fund		130,929,416		15,891,180		—		146,820,596
Enterprise Expansion Fund		198,133,636		31,782,360		—		229,915,996

		329,063,052		47,673,540		—		376,736,592


	31 December 2014		Increase in the current year		Decrease in the current year		31 December 2015
Reserve Fund		116,186,069		14,743,347		—		130,929,416
Enterprise Expansion Fund		168,646,941		29,486,695		—		198,133,636

		284,833,010		44,230,042		—		329,063,052

In accordance with the Law of the PRC on Chinese Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated 21,691,395, 15,891,180 and 14,743,347 to Reserve Fund for the years of 2017, 2016 and 2015, respectively, and 43,382,790, 31,782,360 and 29,486,695 to the Enterprise Expansion Fund for the years of 2017, 2016 and 2015, respectively.

(25)	Undistributed profits

In accordance with the resolution at the Board of Directors’ meeting dated on 8 May 2017, 5 May 2016, and 7 August 2015, the Company proposed a dividend in the amount of 1,493,770,914, 1,385,874,680 and 1,406,453,166 to the investors, respectively.

- 58 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(26)	Revenue and cost of sales


	2017					2016					2015
	Revenue		Cost of sales			Revenue		Cost of sales			Revenue		Cost of sales
Revenue from main operations
- sales of automotive spare parts		31,247,431,443		(26,011,033,680	)		28,543,605,353		(23,910,736,255	)		25,946,688,824		(21,576,248,882	)
Revenue from other operations
- service income		388,691,895		(302,641,103	)		191,903,654		(81,143,480	)		265,741,206		(120,826,588	)
- sales of raw materials		359,516,400		(195,735,293	)		366,746,804		(215,932,018	)		332,415,663		(307,126,311	)
- others		47,556,144		(22,983,965	)		20,245,367		(7,571,679	)		27,205,071		(18,816,187	)

		32,043,195,882		(26,532,394,041	)		29,122,501,178		(24,215,383,432	)		26,572,050,764		(22,023,017,968	)

(27)	Taxes and surcharges


	2017		2016		2015
City maintenance and construction tax		81,994,619		69,269,617		59,994,242
Educational surcharge		80,752,122		62,249,763		53,004,452
Others		33,794,635		31,201,169		6,878,859

		196,541,376		162,720,549		119,877,553

(28)	Financial income - net


	2017			2016			2015
Interest income		86,808,732			67,827,500			68,066,033
Interest costs - borrowings		(20,952,425	)		(6,316,721	)		(7,057,701	)
Charges for discounted notes receivable		(8,902,309	)		(173,065	)		(92,465	)
Exchange (losses)/gains - net		(25,419,145	)		4,911,656			2,633,550
Others		(2,407,704	)		(4,998,427	)		(4,450,537	)

		29,127,149			61,250,943			59,098,880

- 59 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(29)	Expenses by nature

The cost of sales, selling expenses, general and administrative expenses in the income statements are listed as follows by nature:


	2017			2016		2015
Changes in inventories of finished goods and work in progress		(44,851,383	)		40,586,926		(132,579,173	)
Consumed raw materials and low value consumables, etc.		24,184,797,504			22,059,980,339		20,489,628,165
Employee benefits expenses		1,998,686,561			1,878,409,508		1,590,618,954
Research and development expenses		506,250,624			391,857,460		266,918,928
Depreciation and amortisation expenses		496,272,154			391,254,028		398,139,629
Rental expenses		233,653,070			209,235,385		170,677,949
Transportation and logistics fee		221,398,652			181,107,054		181,461,700
Utilities		126,211,508			121,804,031		145,971,042
Other expenses		1,388,128,514			1,108,391,007		926,314,028

		29,110,547,204			26,382,625,738		24,037,151,222

(30)	Asset impairment losses


	2017		2016			2015
Bad debts provision		1,606,517		65,970,387			7,056,982
Decline in/(Reversal of) the value of inventories		1,139,340		(2,235,672	)		2,323,537
Impairment of construction in progress		200,000		—			—

		2,945,857		63,734,715			9,380,519

(31)	Investment income


	2017		2016		2015
Share of net profit of investees under equity method		78,876,545		54,019,531		40,459,106
Gains on disposal of long-term equity Investments (a)		212		—		7,898,751

		78,876,757		54,019,531		48,357,857

(a)	Gain on disposal of long-term equity investments in 2015 attributes to the disposal of 50% equity interest of Baoding Yanfeng Johnson Automotive Seating Co., Ltd. in 2015.

(32)	Losses on disposals of assets


	2017		2016		2015
Losses on disposals of fixed assets, net		2,524,116		18,381,606		2,992,507
Others		497,872		—		—

		3,021,988		18,381,606		2,992,507

- 60 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(33)	Other income


	2017		2016		2015		Asset related/ Income related
Tax refund		78,342,922		—		—		Income related
Special fiscal subsidies		47,135,626		—		—		Income related
Other asset-related subsidies		2,153,264		—		—		Asset related
Other income-related subsidies		1,476,359		—		—		Income related

		129,108,171		—		—

(34)	Non-operating income and expenses

(a)	Non-operating income


	2017		2016		2015
Government grant		—		70,847,989		34,676,251
Others		2,346,311		1,679,072		9,466,186

		2,346,311		72,527,061		44,142,437

(b)	Non-operating expenses


	2017		2016		2015
Others		1,873,547		3,014,728		9,843,767

(35)	Income tax expenses


	2017			2016			2015
Current income tax		848,031,982			793,033,052			692,032,499
Deferred income tax		(259,024,290	)		(285,504,161	)		(228,642,864	)

		589,007,692			507,528,891			463,389,635

- 61 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(35)	Income tax expenses (Cont’d)

The reconciliation from income tax calculated based on the applicable tax rates and total profit presented in the consolidated financial statements to the income tax expenses is listed below:


	2017			2016			2015
Total profit		2,967,724,298			2,679,821,377			2,544,404,370

Income tax expenses calculated at applicable tax rates		741,931,075			669,955,344			636,101,093
Investment income under equity method		(11,831,513	)		(8,102,930	)		(6,068,866	)
Effect of favourable tax rates		(146,106,657	)		(131,879,937	)		(146,627,863	)
Additional deduction of research and development expenses		(12,071,490	)		(6,179,545	)		(9,984,951	)
Effect of change in the tax rates		(628,102	)		1,190,062			1,336,323
Costs, expenses and losses not deductible for tax purposes		7,450,807			3,035,020			17,797,833
Deductible losses and deductible temporary differences for which no deferred income tax asset was recognised		10,375,383			6,541,466			—
Reversal of previously recognised/(Utilisation of previously unrecognised) deductible losses and deductible temporary differences		1,687,064			10,873,546			(52,862,590	)
Prior year income tax reconciliation differences		(1,798,875	)		(37,904,135	)		23,698,656

Income tax expenses		589,007,692			507,528,891			463,389,635

(36)	Other comprehensive income/(loss)

(a)	Items of other comprehensive income/(loss) with the related income tax effect and the amount reclassified to profit or loss


	2017
	Amount before tax		Income tax		Net amount after tax
Other comprehensive income items which will be reclassified subsequently to profit or loss
Differences arising from translation of foreign currency financial statements		430,299		—		430,299
Less: Reclassification of previous other comprehensive income to profit or loss		—		—		—

		430,299		—		430,299

- 62 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(36)	Other comprehensive income/(loss) (Cont’d)

(a)	Items of other comprehensive income/(loss) with the related income tax effect and the amount reclassified to profit or loss (Cont’d)


	2016
	Amount before tax			Income tax		Net amount after tax
Other comprehensive income items which will be reclassified subsequently to profit or loss Differences arising from translation of foreign currency financial statements		1,290,996			—		1,290,996
Less: Reclassification of previous other comprehensive income to profit or loss		—			—		—

		1,290,996			—		1,290,996


	2015
	Amount before tax			Income tax		Net amount after tax
Other comprehensive loss items which will be reclassified subsequently to profit or loss Differences arising from translation of foreign currency financial statements		(275,031	)		—		(275,031	)
Less: Reclassification of previous other comprehensive income to profit or loss		—			—		—

		(275,031	)		—		(275,031	)

(b)	Reconciliation of other comprehensive income/(loss)


	Attributable to equity owners of the Company						Minority interests		Total
	Differences arising from translation of foreign currency financial statements			Sub-total
31 December 2014		(32,010	)		(32,010	)		—		(32,010	)
Movements for the year ended 31 December 2015		(275,031	)		(275,031	)		—		(275,031	)

31 December 2015		(307,041	)		(307,041	)		—		(307,041	)

Movements for the year ended 31 December 2016		1,290,996			1,290,996			—		1,290,996

31 December 2016		983,955			983,955			—		983,955

Movements for the year ended 31 December 2017		430,299			430,299			—		430,299

31 December 2017		1,414,254			1,414,254			—		1,414,254

- 63 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

7	Notes to the consolidated financial statements (Cont’d)

(37)	Notes to the consolidated cash flow statements

(a)	Reconciliation from net profit to cash flows from operating activities


	2017			2016			2015
Net profit		2,378,716,606			2,172,292,486			2,081,014,735
Add: Provisions for asset impairment		2,945,857			63,734,715			9,380,519
Depreciation of fixed assets		386,402,135			310,623,269			261,068,281
Amortisation of intangible assets		44,965,559			30,801,181			98,681,146
Amortisation of long-term prepaid expenses		64,904,460			49,829,578			38,390,202
Losses on disposal of fixed assets, intangible assets and other long-term assets		3,021,988			18,381,606			2,992,507
Financial expenses/(income)		9,654,911			(3,032,122	)		(4,983,235	)
Investment income		(78,876,757	)		(54,019,531	)		(48,357,857	)
Increase in deferred tax assets		(259,024,290	)		(285,262,661	)		(210,718,377	)
Decrease in deferred tax liabilities		—			(241,500	)		(18,358,393	)
Increase in inventories		(98,436,250	)		(94,240,317	)		(65,755,469	)
Increase in operating receivables		(1,958,865,113	)		(871,936,802	)		(1,261,835,070	)
Increase in operating payables		3,969,397,557			2,621,421,678			2,116,111,288

Net cash flows from operating activities		4,464,806,663			3,958,351,580			2,997,630,277

(b)	Net increase in cash and cash equivalents


	2017			2016			2015
Cash and cash equivalents at the end of the year		7,938,513,680			6,179,211,510			3,741,333,102
Less: Cash and cash equivalents at the beginning of the year		(6,179,211,510	)		(3,741,333,102	)		(2,998,757,581	)

Net increase in cash and cash equivalents		1,759,302,170			2,437,878,408			742,575,521

(c)	Cash and cash equivalents


	31 December 2017			31 December 2016			31 December 2015
Cash at bank and on hand (Note 7(1))		8,133,672,578			6,469,119,196			3,939,894,113
Less: Other restricted cash balances		(195,158,898	)		(289,907,686	)		(198,561,011	)

Cash and cash equivalents at the end of the year		7,938,513,680			6,179,211,510			3,741,333,102

- 64 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions

(1)	The parent company and subsidiaries

The general information and other related information of the subsidiaries is set out in Note 6.

(a)	General information of the parent company

Place of

registration

Nature of business

Yanfeng Trim

Shanghai, China

Development and production of plastic and decorating products used for automobiles, trucks and motorcycles, moulds, stamping parts, standard fasteners; sales of self-produced products, import and export of products and technologies, industrial investment; technical development, transfer, consultancy and service, and business information consultancy in the special area of auto parts; and self-owned house leasing.

The parent company is Yanfeng Trim and the ultimate holding company is Shanghai Automotive Industry Corporation.

(b)	Registered capital and changes in registered capital of the parent company

31 December

2016

Current year

changes

31 December

2017

RMB

Yanfeng Trim

1,078,947,853

—

1,078,947,853

31 December

2015

Current year

changes

31 December

2016

RMB

Yanfeng Trim

1,078,947,853

—

1,078,947,853

31 December

2014

Current year
changes

31 December

2015

RMB

Yanfeng Trim

1,078,947,853

—

1,078,947,853

(c)	The proportion of interests and voting rights in the Company held by the parent company


	31 December 2017						31 December 2016						31 December 2015
	Share holding			Voting rights			Share holding			Voting rights			Share holding			Voting rights
Yanfeng Trim		50.01	%		50.00	%		50.01	%		50.00	%		50.01	%		50.00	%

- 65 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions (Cont’d)

(2)	Related parties that do not control or are not controlled by the Company


		Relationship with the Group
Dongfeng Adient Seating (ii)		Associate
Wuhan Taiji (ii)		Associate
CRH Shenyang (ii)		Joint venture
Shanghai Yanfeng Jinqiao Automotive Trim Systems Co., Ltd. (iii)		Subsidiary of the parent company
Yanfeng Automotive Trim Systems Liuzhou Co., Ltd. (iii)		Subsidiary of the parent company
Yanfeng Automotive Trim Systems Guangzhou Co., Ltd. (iii)		Subsidiary of the parent company
Shanghai Songjiang Chunshen Plastic Products Co., Ltd. (iii)		Subsidiary of the parent company
Yanfeng Automotive Interior Systems (Shanghai) Co., Ltd. (iii)		Subsidiary of the parent company
Yanfeng Hainachuan Automotive Trim Systems Co., Ltd. (iii)		Subsidiary of the parent company
Yanfeng Visteon Automotive Electronics Co., Ltd. (iii)		Associate of the parent company
Yanfeng Key (Shanghai) Automotive Safety Systems Co., Ltd. (iii)		Joint venture of the parent company
Adient Yanfeng Seating Mechanism Co., Ltd. (formerly known as “Yanfeng Johnson Controls Automotive Seating Mechanical Parts Co., Ltd.”) (iii)		Joint venture of the parent company
Shanghai Key Automotive Plastic Component Co., Ltd. (iii)		Joint venture of the parent company
Dongfeng Automotive Trim Systems Co., Ltd. (iii)		Joint venture of the parent company
SAIC General Motors Sales Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC Finance Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC Motor Corporation Limited (iii)		Subsidiary of the ultimate holding company
Jiangsu ANJI Logistics Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Shanghai ANJI-CEVA Automotive Logistics Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Shanghai Sanhuan Spring Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Nanjing Automobile (Group) Corporation (iii)		Subsidiary of the ultimate holding company
Donghua Automotive Industrial Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC GM Wuling Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC Activity Centre Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC Maxus Vehicle Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC Volkswagen Sales Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Shanghai Haitong International Automotive Logistics Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Chongqing Zhonghai Spring Co., Ltd. (iii)		Subsidiary of the ultimate holding company
SAIC (Yantai) Industrial Co., Ltd. (iii)		Subsidiary of the ultimate holding company
Shanghai International Automotive City Development Co., Ltd. (iii)		Associate of the ultimate holding company
Shanghai Boze Auto Parts Co., Ltd. (iii)		Associate of the ultimate holding company
Shanghai LEAR STEC Automotive Parts Co., Ltd. (iii)		Associate of the ultimate holding company
SAIC Volkswagen Automotive Co., Ltd. (iii)		Joint venture of the ultimate holding company
SAIC General Motors Co., Ltd (iii)		Joint venture of the ultimate holding company
Shanghai GM (Shenyang) Norsom Motors Co., Ltd. (iii)		Joint venture of the ultimate holding company
SAIC GM Dong Yue Motors Co., Ltd. (iii)		Joint venture of the ultimate holding company
Shanghai TRW Automotive Safety Systems Co., Ltd. (iii)		Joint venture of the ultimate holding company
Nanjing Iveco Automobile Co., Ltd. (iii)		Joint venture of the ultimate holding company
Pan Asia Technical Automotive Center Co., Ltd. (iii)		Joint venture of the ultimate holding company
Shanghai Koito Automotive Lamp Co., Ltd. (iii)		Joint venture of the ultimate holding company

- 66 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions (Cont’d)

(2)	Related parties that do not control or are not controlled by the Company (Cont’d)


		Relationship with the Group
Adient plc (i) (iv)		Ultimate holding company of Adient Asia
Johnson Controls Automotive Interior Investment Co., Limited (i) (iv)		Subsidiary of Johnson Controls International plc
Anhui Adient Xinnangang Automobile Trim Co., Ltd. (iv)		Subsidiary of Adient plc
Adient Bochum Ltd. & Co. KG (iv)		Subsidiary of Adient plc
Adient Hungary Kft. (iv)		Subsidiary of Adient plc
Kinryo Kogyo Co., Ltd. (iv)		Subsidiary of Adient plc
Guangzhou Adient Automotive Seating Co., Ltd. (formerly known as “Guangzhou Johnson Controls Automotive Interior Systems Co., Ltd.”) (iv)		Joint venture of Adient plc
Changsha Adient Auto Parts Co., Ltd. (formerly known as “Changsha Guangzhou Automobile Johnson Controls Automotive Interior Systems Co., Ltd.”) (iv)		Joint venture of Adient plc
Other subsidiaries of Adient plc (iv)		Subsidiary of Adient plc

(i)

In 2016, Johnson Controls International plc, the former ultimate holding company of the Company’s investor Adient Asia, spin off its automotive seating business and interiors business including Adient Asia and established an independent company Adient plc which was listed in NYSE on 31 October 2016. Accordingly, Johnson Controls International plc and its subsidiaries are no longer related parties of Adient plc and its subsidiaries.

(ii)	The related parties are collectively referred to as “Associates and Joint ventures”.

(iii)

The related parties are collectively referred to as “SAIC, its subsidiaries, associates and joint ventures”.

(iv)	The related parties are collectively referred to as “Adient and JCI, its subsidiaries and joint ventures”.

(3)	Related party transactions

(a)	Pricing policies

The Group’s pricing on products sold to related parties, purchased from related parties, rendering of services and lease payments are negotiated by both parties and by making reference to the market price.

(b)	Purchase of goods


	2017		2016		2015
SAIC, its subsidiaries, associates and joint ventures		6,956,914,161		6,498,294,883		6,040,834,033
Associates and Joint ventures		633,584,983		324,582,271		186,911,048
Adient and JCI, its subsidiaries and joint ventures		497,208,601		109,494,707		120,581,231

		8,087,707,745		6,932,371,861		6,348,326,312

- 67 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions (Cont’d)

(3)	Related party transactions (Cont’d)

(c)	Sale of goods


	2017		2016		2015
SAIC, its subsidiaries, associates and joint ventures		19,826,281,099		18,688,195,185		16,507,946,364
Adient and JCI, its subsidiaries and joint ventures		803,593,799		629,760,415		630,717,292
Associates and Joint ventures		101,654,541		83,612,859		177,185,654

		20,731,529,439		19,401,568,459		17,315,849,310

(d)	Technical service fee


	2017		2016		2015
SAIC, its subsidiaries, associates and joint ventures		70,139,730		—		—
Adient and JCI, its subsidiaries and joint ventures		31,344,660		54,457,867		11,094,631

		101,484,390		54,457,867		11,094,631

(e)	Increase/(Decrease) on entrusted loans and cash pool - net


	2017		2016			2015
SAIC, its subsidiaries, associates and joint ventures		443,761,187		(149,017,458	)		300,000,000
Associates and Joint ventures		114,615,610		(15,000,000	)		(35,646,471	)

		558,376,797		(164,017,458	)		264,353,529

(f)	Interest income from entrusted loans and cash pool


	2017		2016		2015
SAIC, its subsidiaries, associates and joint ventures		9,636,399		8,782,308		11,903,333
Associates and Joint ventures		1,661,115		566,535		137,603

		11,297,514		9,348,843		12,040,936

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions (Cont’d)

(4)	Receivables from and payables to related parties

(a)	Accounts receivable


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		6,773,882,081		3,573,100,002		3,535,400,441
Adient and JCI, its subsidiaries and joint ventures		313,213,838		160,191,396		254,272,885
Associates and Joint ventures		84,559,064		68,419,242		67,727,656

		7,171,654,983		3,801,710,640		3,857,400,982

(b)	Notes receivable


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		81,970,500		80,319,000		198,155,751
Associates and Joint ventures		—		—		11,764,000

		81,970,500		80,319,000		209,919,751

(c)	Advances to suppliers


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		2,243,546		2,693,546		2,700,000

(d)	Other receivables


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		594,743,730		154,655,835		40,933,096
Associates and Joint ventures		99,614,554		—		—

		694,358,284		154,655,835		40,933,096

(e)	Other current assets


	31 December 2017		31 December 2016		31 December 2015
Associates and Joint ventures		15,000,000		—		15,000,000
SAIC, its subsidiaries, associates and joint ventures		—		—		300,000,000

		15,000,000		—		315,000,000

(f)	Dividends receivable


	31 December 2017		31 December 2016		31 December 2015
Associates and Joint ventures		12,872,698		12,071,405		16,336,555

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

8	Related parties and related party transactions (Cont’d)

(4)	Receivables from and payables to related parties (Cont’d)

(g)	Cash at bank - deposit in SAIC, its subsidiaries, associates and joint ventures


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		2,326,653,158		1,509,271,765		385,533,629

(h)	Accounts payable


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		4,243,653,215		1,633,962,197		1,355,522,304
Associates and Joint ventures		262,329,935		109,748,062		76,470,959
Adient and JCI, its subsidiaries and joint ventures		110,414,579		32,727,281		22,165,380

		4,616,397,729		1,776,437,540		1,454,158,643

(i)	Notes payable


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		41,630,000		89,010,000		21,133,578

(j)	Other payables


	31 December 2017		31 December 2016		31 December 2015
SAIC, its subsidiaries, associates and joint ventures		2,623,882		4,535,939		—
Adient and JCI, its subsidiaries and joint ventures		1,918,956		—		—

		4,542,838		4,535,939		—

(5)	Commitments in relation to related parties

The commitments in relation to related parties contracted for by the Group but not yet necessary to be recognised on the balance sheet as at the balance sheet date are as follows:

(a)

Leases

31 December 2017

31 December 2016

31 December 2015

- Lessee

SAIC, its subsidiaries, associates and joint ventures

90,558,920

49,120,982

36,939,538

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

9	Commitments

(1)	Capital commitments

Capital expenditures contracted for by the Group but are not yet necessary to be recognised on the balance sheet as at the balance sheet date are as follows:


	31 December 2017		31 December 2016		31 December 2015
Buildings, machinery and equipment		108,938,923		117,327,496		16,596,507

(2)	Operating lease commitments

The future minimum lease payments due under the signed irrevocable operating leases contracts are summarised as follows:


	31 December 2017		31 December 2016		31 December 2015
Within 1 year		140,700,650		140,730,559		132,460,943
1 and 2 years		116,925,255		108,597,927		120,530,998
2 and 3 years		111,404,872		98,372,305		114,024,576
Over 3 years		343,124,106		294,351,515		361,243,744

		712,154,883		642,052,306		728,260,261

10	Financial risk

The Group’s activities expose it to a variety of financial risks: market risk (primarily including currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(1)	Market risk

(a)	Foreign exchange risk

The Group’s major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. The Group is exposed to foreign exchange risk arising from the recognised assets and liabilities, and future transactions denominated in foreign currencies, primarily with respect to US dollars. The Group’s finance department at its headquarters is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies to minimise the foreign exchange risk. Therefore, the Group may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk.

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

10	Financial risk (Cont’d)

(1)	Market risk (Cont’d)

(a)	Foreign exchange risk (Cont’d)

The financial assets and the financial liabilities denominated in foreign currencies, which are held by the subsidiaries of the Group, whose recording currencies are RMB, are expressed in RMB as at 31 December 2017, 2016 and 2015 as follows:


	31 December 2017
	USD		Others		Total
Financial assets denominated in foreign currency -
Cash at bank and on hand		16,064,657		15,968,386		32,033,043
Receivables		156,009,983		214,098,674		370,108,657

		172,074,640		230,067,060		402,141,700

Financial liabilities denominated in foreign currency -
Payables		38,254,620		129,818,845		168,073,465


	31 December 2016
	USD		Others		Total
Financial assets denominated in foreign currency -
Cash at bank and on hand		24,397,693		25,997,605		50,395,298
Receivables		158,187,444		259,685,501		417,872,945

		182,585,137		285,683,106		468,268,243

Financial liabilities denominated in foreign currency -
Payables		56,922,242		116,890,582		173,812,824


	31 December 2015
	USD		Others		Total
Financial assets denominated in foreign currency -
Cash at bank and on hand		43,742,685		21,370,564		65,113,249
Receivables		173,800,678		250,854,243		424,654,921

		217,543,363		272,224,807		489,768,170

Financial liabilities denominated in foreign currency -
Payables		48,819,672		121,748,654		170,568,326

As at 31 December 2017, 2016 and 2015, if the RMB had strengthened/weakened by 10% against the USD while all other variables had been held constant, the Group’s profit after tax for the years would have been approximately 10,705,602, 12,566,290 and 16,872,369 lower/higher for various financial assets and liabilities denominated in USD.

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

10	Financial risk (Cont’d)

(1)	Market risk (Cont’d)

(b)	Interest rate risk

The Group’s interest rate risk mainly arises from related party entrusted loans and interest-bearing bank borrowings. Financial liabilities issued at floating rates expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Group to fair value interest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions. As at 31 December 2017, 2016 and 2015, the Group’s long-term interest bearing borrowings were RMB-denominated with floating rates, amounting to 1,500,000, 8,107,000 and 13,505,000 (Note 7(22)).

The Group’s finance department at its headquarters continuously monitors the interest rate position of the Group. Increases in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group’s financial performance. The Group makes adjustments timely with reference to the latest market conditions and may enter into interest rate swap agreements to mitigate its exposure to interest rate risk. During 2017, 2016 and 2015, the Group did not enter into any interest rate swap agreements.

As at 31 December 2017, 2016 and 2015, if interest rates on the floating rate borrowings had risen/fallen by 50 basis points while all other variables had been held constant, the Group’s total profit would have decreased/increased by approximately 7,500, 40,535 and 67,525, respectively.

(2)	Credit risk

Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bank, accounts receivable, other receivables and notes receivable etc.

The Group expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks, other medium or large size listed banks and related party. As at 31 December 2017, 2016 and 2015, cash deposited at state-owned banks, other medium or large size listed banks and related party were approximately 8,132 million, 6,468 million and 3,934 million, respectively. Management does not expect that there will be any significant losses from non-performance by these counterparties.

In addition, the Group has policies to limit the credit exposure on accounts receivable, other receivables and notes receivable. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

10	Financial risk (Cont’d)

(3)	Liquidity risk

Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the Group’s finance department in its headquarters. The Group’s finance department at its headquarters monitors rolling forecasts of the Group’s short-term and long-term liquidity requirements to ensure it has sufficient cash that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institution so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

The financial liabilities of the Group at the balance sheet date are analysed by their maturity date below at their undiscounted contractual cash flow:


	31 December 2017
	Within 1 year		1 to 5 years		Over 5 years		Total
Short-term borrowings		551,280,196		—		—		551,280,196
Notes payable		653,798,483		—		—		653,798,483
Accounts payable		12,797,027,105		—		—		12,797,027,105
Interest payable		13,353,335		6,125		—		13,359,460
Other payables		3,527,012,379		—		—		3,527,012,379
Long-term borrowings		3,000,000		1,500,000		—		4,500,000

		17,545,471,498		1,506,125		—		17,546,977,623


	31 December 2016
	Within 1 year		1 to 5 years		Over 5 years		Total
Short-term borrowings		408,884,232		—		—		408,884,232
Notes payable		666,979,006		—		—		666,979,006
Accounts payable		9,860,133,825		—		—		9,860,133,825
Interest payable		12,410,831		231,970		—		12,642,801
Other payables		2,354,357,460		—		—		2,354,357,460
Long-term borrowings		5,398,000		8,107,000		—		13,505,000

		13,308,163,354		8,338,970		—		13,316,502,324


	31 December 2015
	Within 1 year		1 to 5 years		Over 5 years		Total
Short-term borrowings		75,000,000		—		—		75,000,000
Notes payable		457,179,867		—		—		457,179,867
Accounts payable		8,468,879,463		—		—		8,468,879,463
Interest payable		4,678,717		900,386		—		5,579,103
Other payables		275,293,356		—		—		275,293,356
Long-term borrowings		5,398,000		13,505,000		—		18,903,000

		9,286,429,403		14,405,386		—		9,300,834,789

- 74 -

YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

11	Fair value estimates

(1)	Financial assets and liabilities not measured at fair value

Financial assets and liabilities measured at amortised cost mainly include receivables, short-term borrowings, payables and long-term borrowings etc.

The carrying amount of the financial assets and liabilities not measured at fair value is a reasonable approximation of their fair value.

12	Capital management

The Group’s capital management policies aim to safeguard the Group’s ability to continue as a going concern in order to provide returns for investors and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to investors, refund capital to investors or sell assets to reduce debts.

The Group’s total capital is calculated as ‘owners’ equity’ as shown in the consolidated balance sheets. The Group is not subject to external mandatory capital requirements.

13	Reconciliation to United States generally accepted accounting principles

The financial statements have been prepared in accordance with Accounting Standards for Business Enterprises in the People’s Republic of China (“PRC GAAP”), which differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences are described in the reconciliation tables below. Other differences do not have a significant effect on either net profit or owners’ equity. The effects of the significant adjustments to net profit for the years ended 31 December 2017, 2016 and 2015 which would be required if U.S. GAAP were to be applied instead of PRC GAAP are summarized as follows:


	2017			2016			2015
Net profit under PRC GAAP		2,378,716,606			2,172,292,486			2,081,014,735
Adjustments:
Inventory impairment reversals (a)		2,694,821			(2,965,596	)		618,444
Staff Welfare and Incentive Fund (b)		(12,076,907	)		(9,884,955	)		(4,356,968	)
Tax effect of the reconciling items (c)		(404,223	)		444,839			(92,767	)

Net profit under U.S. GAAP		2,368,930,297			2,159,886,774			2,077,183,444

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YANFENG ADIENT SEATING CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017, 2016 AND 2015 (AMOUNTS AS OF AND FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2015 ARE NOT COVERED BY THE AUDITOR’S REPORT INCLUDED HEREIN)

(All amounts in RMB Yuan unless otherwise stated)

13	Reconciliation to United States generally accepted accounting principles (Cont’d)

The effects of the significant adjustments to owners’ equity for the years ended 31 December 2017, 2016 and 2015 which would be required if U.S. GAAP were to be applied instead of PRC GAAP are summarized as follows:


	31 December 2017			31 December 2016			31 December 2015
Owners’ equity under PRC GAAP		4,857,853,302			4,372,016,024			3,924,801,104
Adjustments:
Inventory impairment reversals (a)		(435,759	)		(3,130,580	)		618,444
Staff Welfare and Incentive Fund (b)		369,909,590			316,115,041			277,256,403
Tax effect of the reconciling items (c)		65,364			469,587			(92,767	)

Owners’ equity under U.S. GAAP		5,227,392,497			4,685,470,072			4,202,583,184

(a)	Inventory impairment reversals

Under PRC GAAP, reversals of inventory impairment charges (limited to the amounts of the original impairment) are required for subsequent recoveries. Impairments and any subsequent reversals are included in a separate profit and loss line item - “Asset impairment losses”, which is outside of cost of goods sold. Under U.S. GAAP, reversals of impairments are prohibited, as a write-down of inventories to the lower of cost or market creates a new cost basis that subsequently cannot be reversed.

(b)	Staff Welfare and Incentive Fund

In accordance with the Law of the PRC on Chinese-Foreign Equity Joint Ventures and the Company’s Articles of Association, the Company appropriated the Staff Welfare and Incentive Fund of net profit after setting off accumulated losses of previous years and before profit distributions to the investors. The Staff Welfare and Incentive Fund is restricted to fund payments of special bonus to employees and for the collective welfare of employees. None of it is allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor can it be distributed except under liquidation.

Under PRC GAAP, appropriation of the Staff Welfare and Incentive Fund is a liability in nature and accounted for as a transfer from retained earnings to Staff Welfare and Incentive Fund, a liability account. Subsequent payments is accounted for as a release of the Company’s liability.

Under U.S. GAAP, appropriation to the Staff Welfare and Incentive Fund is accounted for as a transfer from retained earnings to the statutory reserves. Subsequent payment is accounted for as expenses or assets based on the usage of the payment, and proportionate retained earnings and the statutory reserves are reversed concurrently.

(c)	Tax effect of the reconciling items

The applicable statutory tax rate used to calculate the tax effect of the reconciling items on the net profit reconciliation between PRC GAAP and U.S. GAAP for the year ended December 31, 2017, 2016 and 2015 was 15%.

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Adient plc - FORM 10-K/A - EX-99.1 - June 29, 2018

Attached files

Adient plc Reports