Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2016CNY (¥)shares | |
Document And Entity Information | |
Entity Registrant Name | EURO TECH HOLDINGS CO LTD |
Entity Central Index Key | 1,026,662 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2016 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Is Entity a Well-known Seasoned Issuer? | No |
Is Entity a Voluntary Filer? | No |
Is Entity's Reporting Status Current? | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Public Float | ¥ | ¥ 0 |
Entity Common Stock, Shares Outstanding | shares | 2,061,909 |
Document Fiscal Period Focus | FY |
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Assets | ||||
Cash and cash equivalents | $ | $ 3,751 | $ 2,480 | ||
Restricted cash | $ | 284 | 475 | ||
Accounts receivable, net | $ | 4,393 | 4,500 | ||
Prepayments and other current assets | $ | 815 | 500 | ||
Inventories | $ | 344 | 557 | ||
Total current assets | $ | 9,587 | 8,512 | ||
Property, plant and equipment, net | $ | 771 | 773 | ||
Interests in affiliates | $ | 11,489 | 10,712 | ||
Goodwill | $ | 1,071 | 1,071 | ||
Deferred tax assets | $ | 186 | 202 | ||
Total assets | $ | 23,104 | 21,270 | ||
Liabilities and shareholders' equity | ||||
Accounts payable | $ | 3,173 | 3,054 | ||
Loans payable | $ | 720 | 0 | ||
Other payables and accrued expenses | $ | 2,258 | 1,626 | ||
Taxes payable | $ | 335 | 134 | ||
Total current liabilities | $ | 6,486 | 4,814 | ||
Commitments and contingencies | $ | ||||
Total liabilities | $ | 6,486 | 4,814 | ||
Shareholders' equity: | ||||
Ordinary shares, 20,000,000 (2015: 20,000,000) shares authorized; 2,229,609 (2015: 2,229,609) shares issued | $ | 123 | 123 | ||
Additional paid-in capital | $ | 9,551 | 9,551 | ||
Treasury stock, 167,700 shares at cost as of December 31, 2016 and 2015, respectively | $ | (786) | (786) | ||
PRC statutory reserves | $ | 352 | 315 | ||
Accumulated other comprehensive income | $ | 857 | 799 | ||
Retained earnings | $ | 5,338 | 5,144 | ||
Equity attributable to shareholders | $ | 15,435 | 15,146 | ||
Non-controlling interest | $ | 1,183 | 1,310 | ||
Total shareholders' equity | $ | 16,618 | 16,456 | ||
Total liabilities and shareholders' equity | $ | $ 23,104 | $ 21,270 | ||
ZHEJIANG TIANLAN | ||||
Assets | ||||
Cash and cash equivalents | ¥ 33,545 | ¥ 35,635 | ||
Accounts receivable, net | 165,100 | 207,907 | ||
Prepayments and other current assets | 111,057 | 119,558 | ||
Other tax receivables | 215 | 5 | ||
Inventories | 13,105 | 12,111 | ||
Total current assets | 323,022 | 375,216 | ||
Property, plant and equipment, net | 149,840 | 161,731 | ||
Intangible asset, net | 1,375 | 1,548 | ||
Land use right, net | 5,747 | 5,896 | ||
Deferred tax assets | 5,864 | 4,527 | ||
Other non-current asset | 17,512 | 0 | ||
Total assets | 503,360 | 548,918 | ||
Liabilities and shareholders' equity | ||||
Short term borrowings | 25,000 | 45,000 | ||
Accounts payable | 117,939 | 176,981 | ||
Other payables and accrued expenses | 51,183 | 40,775 | ||
Other taxes payable | 7,490 | 8,423 | ||
Income tax payable | 3,262 | 994 | ||
Total current liabilities | 204,874 | 272,173 | ||
Long term borrowings | 111,691 | 107,732 | ||
Commitments and contingencies | ||||
Total liabilities | 316,565 | 379,905 | ||
Shareholders' equity: | ||||
Share capital | 81,372 | 80,172 | ||
Capital reserve | 26,480 | 24,217 | ||
PRC statutory reserves | 11,636 | 9,094 | ||
Retained earnings | 65,394 | 53,928 | ||
Equity attributable to shareholders | 184,882 | 167,411 | ||
Non-controlling interest | 1,913 | 1,602 | ||
Total shareholders' equity | 186,795 | 169,013 | ||
Total liabilities and shareholders' equity | 503,360 | 548,918 | ||
ZHEJIANG JIAHUAN | ||||
Assets | ||||
Cash and cash equivalents | 6,595 | 7,303 | ||
Restricted cash | 1,498 | 1,490 | ||
Accounts receivable, net | 91,037 | 99,832 | ||
Prepayments and other current assets | 15,442 | 17,472 | ||
Notes receivables | 11,064 | 700 | ||
Inventories | 28,005 | 21,463 | ||
Total current assets | 153,641 | 148,260 | ||
Property, plant and equipment, net | 21,861 | 23,788 | ||
Intangible asset, net | 242 | 508 | ||
Land use right, net | 6,288 | 6,451 | ||
Long term investment | 69 | 69 | ||
Total assets | 182,101 | 179,076 | ||
Liabilities and shareholders' equity | ||||
Short term borrowings | 28,200 | 39,400 | ||
Note payable | 4,750 | 3,595 | ||
Accounts payable | 27,595 | 27,130 | ||
Other payables and accrued expenses | 13,911 | 10,223 | ||
Income tax payable | 1,466 | 2,892 | ||
Total current liabilities | 75,922 | 83,240 | ||
Other long term liabilities | 5,671 | 5,790 | ||
Shareholders' equity: | ||||
Share capital | 80,000 | 11,250 | ||
Capital reserve | (1,399) | 8,542 | ||
PRC statutory reserves | 3,095 | 20,931 | ||
Accumulated other comprehensive income | 18,812 | 49,323 | ||
Total shareholders' equity | 100,508 | 90,046 | ||
Total liabilities and shareholders' equity | ¥ 182,101 | ¥ 179,076 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares | Dec. 31, 2016 | Dec. 31, 2015 |
Shareholders equity: | ||
Common Stock Authorized | 20,000,000 | 20,000,000 |
Common Stock Issued | 2,229,609 | 2,229,609 |
Treasury stock, shares | 167,700 | 167,700 |
ZHEJIANG TIANLAN | ||
Shareholders equity: | ||
Common Stock Issued | 81,372,000 | 80,172,000 |
ZHEJIANG JIAHUAN | ||
Shareholders equity: | ||
Common Stock Issued | 80,000,000 | 11,250,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/ INCOME ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥)shares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014CNY (¥)shares | Dec. 31, 2014USD ($)$ / sharesshares | |
Revenues | ||||||
Trading and manufacturing | $ | $ 13,721 | $ 12,256 | $ 11,647 | |||
Engineering | $ | 8,757 | 6,046 | 7,175 | |||
Total revenues | $ | 22,478 | 18,302 | 18,822 | |||
Cost of revenues | ||||||
Trading and manufacturing | $ | (11,331) | (9,577) | (9,060) | |||
Engineering | $ | (6,196) | (4,682) | (4,931) | |||
Total cost of revenues | $ | (17,527) | (14,259) | (13,991) | |||
Gross profit | $ | 4,951 | 4,043 | 4,831 | |||
Finance costs | $ | (19) | (4) | 0 | |||
Selling and administrative expenses | $ | (5,602) | (5,997) | (5,802) | |||
Operating (loss) / income | $ | (670) | (1,958) | (971) | |||
Interest income | $ | 18 | 45 | 27 | |||
Other income, net | $ | 5 | 9 | 65 | |||
Gain (Loss) on disposal of fixed assets | $ | 7 | 0 | 0 | |||
(Loss)/profit before income taxes, equity in income of affiliates and non-controlling interests | $ | (640) | (1,904) | (879) | |||
Income taxes (expenses) / credit | $ | (228) | 47 | (18) | |||
Net gain on deemed disposal of affiliate | $ | 24 | 0 | 0 | |||
Equity in income of affiliates | $ | 1,002 | 850 | 605 | |||
Net (loss)/profit for the year | $ | 158 | (1,007) | (292) | |||
Less: net (income)/loss attributable to non-controlling interest | $ | 73 | 391 | 169 | |||
Net profit / (loss) attributable to the Company | $ | 231 | (616) | (123) | |||
Other comprehensive income / (loss) | ||||||
Net profit / (loss) | $ | 158 | (1,007) | (292) | |||
Foreign exchange translation adjustments | $ | 4 | (63) | (15) | |||
Comprehensive income / (loss) | $ | 162 | (1,070) | (307) | |||
Less: Comprehensive (income)/loss attributable to non-controlling interest | $ | 127 | 477 | 176 | |||
Comprehensive income/(loss) attributable to the Company | $ | $ 289 | $ (593) | $ (131) | |||
Net income/(loss) per ordinary share | ||||||
- Basic | $ / shares | $ .11 | $ (0.30) | $ (0.06) | |||
- Diluted | $ / shares | $ .11 | $ (0.30) | $ (0.06) | |||
Weighted average number of ordinary shares outstanding | ||||||
- Basic | shares | 2,061,909 | 2,061,909 | 2,063,738 | 2,063,738 | 2,069,223 | 2,069,223 |
- Diluted | shares | 2,061,909 | 2,061,909 | 2,063,738 | 2,063,738 | 2,069,223 | 2,069,223 |
ZHEJIANG TIANLAN | ||||||
Revenues | ||||||
Total revenues | ¥ 289,086 | ¥ 419,275 | ¥ 396,424 | |||
Cost of revenues | ||||||
Total cost of revenues | (202,869) | (331,875) | (313,776) | |||
Gross profit | 86,217 | 87,400 | 82,648 | |||
Selling and administrative expenses | (60,528) | (60,702) | (66,343) | |||
Operating (loss) / income | 25,689 | 26,698 | 16,305 | |||
Loss on disposal of a subsidiary | (35) | 0 | 0 | |||
Interest income | 70 | 166 | 148 | |||
Interest expenses | (1,577) | (4,710) | (6,272) | |||
Other income, net | 3,456 | 2,773 | 4,595 | |||
(Loss)/profit before income taxes, equity in income of affiliates and non-controlling interests | 27,603 | 24,927 | 14,776 | |||
Income taxes (expenses) / credit | (4,961) | (3,174) | (768) | |||
Net (loss)/profit for the year | 22,642 | 21,753 | 14,008 | |||
Less: net (income)/loss attributable to non-controlling interest | 586 | (82) | (8) | |||
Net profit / (loss) attributable to the Company | 23,228 | 21,671 | 14,000 | |||
Other comprehensive income / (loss) | ||||||
Net profit / (loss) | 22,642 | 21,753 | 14,008 | |||
Comprehensive income / (loss) | 22,642 | 21,753 | 14,008 | |||
Less: Comprehensive (income)/loss attributable to non-controlling interest | 586 | (82) | (8) | |||
Comprehensive income/(loss) attributable to the Company | 23,228 | 21,671 | 14,000 | |||
ZHEJIANG JIAHUAN | ||||||
Revenues | ||||||
Total revenues | 111,585 | 115,515 | 99,908 | |||
Cost of revenues | ||||||
Total cost of revenues | (65,304) | (76,473) | (72,490) | |||
Gross profit | 46,281 | 39,042 | 27,418 | |||
Selling and administrative expenses | (35,671) | (30,792) | (21,090) | |||
Operating (loss) / income | 10,610 | 8,250 | 6,328 | |||
Non-operating income | 922 | 0 | 0 | |||
Non-operating expense | (1,518) | 0 | 0 | |||
Interest expenses | (2,752) | (3,861) | (2,209) | |||
Other income, net | 4,592 | 1,408 | 1,075 | |||
Other expenses, net | (5) | 0 | 0 | |||
(Loss)/profit before income taxes, equity in income of affiliates and non-controlling interests | 11,849 | 5,797 | 5,194 | |||
Income taxes (expenses) / credit | (1,387) | (861) | (484) | |||
Net (loss)/profit for the year | 10,462 | 4,936 | 4,710 | |||
Less: net (income)/loss attributable to non-controlling interest | 0 | 0 | 0 | |||
Net profit / (loss) attributable to the Company | 10,462 | 4,936 | 4,710 | |||
Other comprehensive income / (loss) | ||||||
Net profit / (loss) | 10,462 | 4,936 | 4,710 | |||
Comprehensive income / (loss) | 10,462 | 4,936 | 4,710 | |||
Less: Comprehensive (income)/loss attributable to non-controlling interest | 0 | 0 | 0 | |||
Comprehensive income/(loss) attributable to the Company | ¥ 10,462 | ¥ 4,936 | ¥ 4,710 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Cash flows from operating activities: | ||||||
Net income/(loss) | $ | $ 231 | $ (616) | $ (123) | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation of property, plant and equipment | $ | 55 | 56 | 88 | |||
(Gain)/loss on disposal of property, plant and equipment | $ | (7) | 0 | 0 | |||
Net gain on deemed disposal of affiliate | $ | (24) | 0 | 0 | |||
Stock-based compensation expenses | $ | 0 | 16 | 2 | |||
Non-controlling interest in (loss)/profits of subsidiaries | $ | (73) | (391) | (169) | |||
Equity in profit/loss of affiliates | $ | (1,002) | (850) | (605) | |||
Deferred tax assets | $ | 16 | 25 | 9 | |||
Decrease/(increase) in current assets: | ||||||
Accounts receivable, net | $ | 107 | (232) | (186) | |||
Prepayments and other current assets | $ | (315) | 89 | 695 | |||
Inventories | $ | 213 | (14) | (49) | |||
Increase/(decrease) in current liabilities: | ||||||
Accounts payable | $ | 119 | (507) | 446 | |||
Other payables and accrued expenses | $ | 632 | (475) | (585) | |||
Taxation payable | $ | 201 | (73) | 7 | |||
Net cash provided by / (used in) operating activities | $ | 153 | (2,972) | (470) | |||
Cash flows from investing activities: | ||||||
Purchase of property, plant and equipment | $ | (60) | (21) | (10) | |||
Proceeds on disposal of property, plant and equipment | $ | 10 | 0 | 0 | |||
Dividend received from affiliates | $ | 249 | 292 | 302 | |||
Restricted cash for issuance of bank guarantees | $ | 191 | 404 | (314) | |||
Dividend paid to non-controlling interest | $ | 0 | 0 | (42) | |||
Net cash provided by / (used in) investing activities | $ | 390 | 675 | (64) | |||
Cash flows from financing activities: | ||||||
Increase in loans payable | $ | 720 | 0 | 0 | |||
Purchase of treasury stock | $ | 0 | (20) | 0 | |||
Net cash provided by / (used in) financing activities | $ | 720 | (20) | 0 | |||
Effect of exchange rate changes on cash and cash equivalents | $ | 8 | (60) | (15) | |||
Net increase/(decrease) in cash and cash equivalents | $ | 1,271 | (2,377) | (549) | |||
Cash and cash equivalents, beginning of year | $ | 2,480 | 4,857 | 5,406 | |||
Cash and cash equivalents, end of year | $ | 3,751 | 2,480 | 4,857 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest received | $ | 18 | 45 | 27 | |||
Income taxes paid | $ | 70 | 1 | 3 | |||
Supplemental disclosure of non-cash activities: | ||||||
Net gain on deemed disposal of affiliate | $ | $ 24 | $ 0 | $ 0 | |||
ZHEJIANG TIANLAN | ||||||
Cash flows from operating activities: | ||||||
Net income/(loss) | ¥ 22,642 | ¥ 21,753 | ¥ 14,008 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation of property, plant and equipment | 14,144 | 8,473 | 2,985 | |||
Amortisation of intangible asset | 575 | 193 | 239 | |||
Amortisation of land use right | 149 | 149 | 149 | |||
Written off of motor vehicles | 0 | 5 | 0 | |||
(Gain)/loss on disposal of property, plant and equipment | 15 | 0 | 225 | |||
(Gain)/loss on disposal of intangible asset | 0 | 0 | (150) | |||
Deferred tax assets | (1,337) | (177) | (1,391) | |||
Other non-current asset | (17,512) | 0 | 0 | |||
Decrease/(increase) in current assets: | ||||||
Accounts receivable, net | 42,807 | (51,299) | (9,481) | |||
Prepayments and other current assets | 8,501 | 57,251 | (19,654) | |||
Inventories | (994) | 3,943 | (1,078) | |||
Other tax receivables | (20) | 1,045 | (1,045) | |||
Increase/(decrease) in current liabilities: | ||||||
Accounts payable | (59,042) | (57) | 77,861 | |||
Other payables and accrued expenses | 10,408 | (72,663) | 37,075 | |||
Other taxes payable | (933) | (479) | 1,034 | |||
Income tax payable | 2,268 | 934 | (449) | |||
Net cash provided by / (used in) operating activities | 21,481 | (30,929) | 100,328 | |||
Cash flows from investing activities: | ||||||
Purchase of intangible asset | (402) | 0 | 0 | |||
Purchase of property, plant and equipment | (3,368) | (8,285) | (117,966) | |||
Sales proceed from a subsidiary (note 1) | 1,000 | 0 | 0 | |||
Sales proceeds from intangible assets | 0 | 0 | 420 | |||
Proceeds on disposal of property, plant and equipment | 1,100 | 0 | 923 | |||
Net cash provided by / (used in) investing activities | (1,670) | (8,285) | (116,623) | |||
Cash flows from financing activities: | ||||||
Proceeds from issuance of shares | 3,360 | 0 | 0 | |||
Repayment of bank borrowings | (70,000) | (174,900) | (104,690) | |||
Advance of bank borrowings | 50,000 | 122,000 | 137,900 | |||
Dividend paid to owners | (9,220) | (9,180) | (9,180) | |||
Advance of long term borrowings | 3,959 | 107,732 | 0 | |||
Net cash provided by / (used in) financing activities | (21,901) | 45,652 | 24,030 | |||
Net increase/(decrease) in cash and cash equivalents | (2,090) | 6,438 | 7,735 | |||
Cash and cash equivalents, beginning of year | 35,635 | 29,197 | 21,462 | |||
Cash and cash equivalents, end of year | 33,545 | 35,635 | 29,197 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest received | 70 | 166 | 148 | |||
Interest paid | 1,577 | 6,429 | 6,272 | |||
Income taxes paid | 4,245 | 3,310 | 2,263 | |||
ZHEJIANG JIAHUAN | ||||||
Cash flows from operating activities: | ||||||
Net income/(loss) | 10,462 | 4,936 | 4,710 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation of property, plant and equipment | 2,211 | 2,296 | 2,408 | |||
Written off of property, plant and equipment | 0 | 32 | 0 | |||
Amortisation of intangible asset | 266 | 83 | 0 | |||
Amortisation of land use right | 163 | 163 | 163 | |||
Other gains | 0 | (282) | 0 | |||
(Gain)/loss on disposal of property, plant and equipment | 147 | 0 | 0 | |||
Decrease/(increase) in current assets: | ||||||
Accounts receivable, net | 8,795 | (25,939) | (6,448) | |||
Restricted cash | (8) | (21) | 0 | |||
Note receivables | (10,364) | 5,004 | (322) | |||
Other receivables | 2,030 | (3,072) | (6,074) | |||
Inventories | (6,542) | 10,786 | 5,909 | |||
Increase/(decrease) in current liabilities: | ||||||
Accounts payable | 465 | 2,269 | 1,767 | |||
Note payable | 1,155 | 3,595 | 0 | |||
Other payables and accrued expenses | 3,688 | (3,145) | 2,131 | |||
Income tax payable | (1,426) | 1,121 | 405 | |||
Other long-term liability | (119) | (133) | (73) | |||
Net cash provided by / (used in) operating activities | 10,923 | (2,307) | 4,576 | |||
Cash flows from investing activities: | ||||||
Purchase of intangible asset | 0 | (591) | 0 | |||
Purchase of property, plant and equipment | (613) | (258) | (664) | |||
Proceeds on disposal of property, plant and equipment | 182 | 0 | 0 | |||
Net cash provided by / (used in) investing activities | (431) | (849) | (664) | |||
Cash flows from financing activities: | ||||||
Repayment of bank borrowings | (39,400) | (50,400) | (50,300) | |||
Advance of bank borrowings | 28,200 | 63,200 | 50,100 | |||
(Decrease)/Increase in amount due to shareholders | 0 | (5,470) | (3,200) | |||
Dividend paid to owners | 0 | 0 | (2,250) | |||
Net cash provided by / (used in) financing activities | (11,200) | 7,330 | (5,650) | |||
Net increase/(decrease) in cash and cash equivalents | (708) | 4,174 | (1,738) | |||
Cash and cash equivalents, beginning of year | 7,303 | 3,129 | 4,867 | |||
Cash and cash equivalents, end of year | 6,595 | 7,303 | 3,129 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest received | 54 | 44 | 17 | |||
Interest paid | (2,752) | (3,799) | (2,209) | |||
Income taxes paid | (2,813) | 0 | (79) | |||
Income tax refund | ¥ 0 | ¥ 260 | ¥ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands | Ordinary | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | PRC statutory reserves | Retained Earnings | Noncontrolling Interest | Total |
Beginning Balance, shares at Dec. 31, 2013 | 2,229,609 | |||||||
Beginning Balance, amount at Dec. 31, 2013 | $ 123 | $ 9,533 | $ (766) | $ 784 | $ 315 | $ 5,883 | $ 2,005 | $ 17,877 |
Net income/loss | (123) | (169) | (292) | |||||
Other comprehensive income: Foreign exchange translation adjustment | (8) | (7) | (15) | |||||
Dividend paid/payable to non-controlling interest | (42) | (42) | ||||||
Stock-based compensation expense | 2 | 2 | ||||||
Ending Balance, shares at Dec. 31, 2014 | 2,229,609 | |||||||
Ending Balance, amount at Dec. 31, 2014 | $ 123 | 9,535 | (766) | 776 | 315 | 5,760 | 1,787 | 17,530 |
Net income/loss | (616) | (391) | (1,007) | |||||
Other comprehensive income: Foreign exchange translation adjustment | 23 | (86) | (63) | |||||
Purchase of treasury stock | (20) | (20) | ||||||
Stock-based compensation expense | 16 | 16 | ||||||
Ending Balance, shares at Dec. 31, 2015 | 2,229,609 | |||||||
Ending Balance, amount at Dec. 31, 2015 | $ 123 | 9,551 | (786) | 799 | 315 | 5,144 | 1,310 | 16,456 |
Net income/loss | 231 | (73) | 158 | |||||
Other comprehensive income: Foreign exchange translation adjustment | 58 | (54) | 4 | |||||
Appropriation of reserves | 37 | (37) | 0 | |||||
Ending Balance, shares at Dec. 31, 2016 | 2,229,609 | |||||||
Ending Balance, amount at Dec. 31, 2016 | $ 123 | $ 9,551 | $ (786) | $ 857 | $ 352 | $ 5,338 | $ 1,183 | $ 16,618 |
ZHEJIANG TIANLAN CONSOLIDATED S
ZHEJIANG TIANLAN CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY ¥ in Thousands, $ in Thousands | CNY (¥) | USD ($) | OrdinaryCNY (¥) | Capital reserveCNY (¥) | PRC statutory reservesCNY (¥) | Retained EarningsCNY (¥) | Retained EarningsUSD ($) | Noncontrolling InterestCNY (¥) | Noncontrolling InterestUSD ($) |
Beginning Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2013 | ¥ 151,612 | ¥ 61,200 | ¥ 43,189 | ¥ 5,517 | ¥ 40,194 | ¥ 1,512 | |||
Net profit/loss | ZHEJIANG TIANLAN | 14,008 | 14,000 | 8 | ||||||
Net profit/loss | $ | $ (292) | $ (123) | $ (169) | ||||||
Dividend paid | ZHEJIANG TIANLAN | (9,180) | (9,180) | |||||||
Appropriation of reserves | ZHEJIANG TIANLAN | 0 | 1,304 | (1,304) | ||||||
Deemed disposal of subsidiary | ZHEJIANG TIANLAN | 0 | ||||||||
Ending Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2014 | 156,440 | 61,200 | 43,189 | 6,821 | 43,710 | 1,520 | |||
Net profit/loss | ZHEJIANG TIANLAN | 21,753 | 21,671 | 82 | ||||||
Net profit/loss | $ | (1,007) | (616) | (391) | ||||||
Dividend paid | ZHEJIANG TIANLAN | (9,180) | (9,180) | |||||||
Appropriation of reserves | ZHEJIANG TIANLAN | 0 | 2,273 | (2,273) | ||||||
Issue share capital by transfer from statutory reserves | ZHEJIANG TIANLAN | 0 | 18,972 | (18,972) | ||||||
Deemed disposal of subsidiary | ZHEJIANG TIANLAN | 0 | ||||||||
Ending Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2015 | 169,013 | 80,172 | 24,217 | 9,094 | 53,928 | 1,602 | |||
Net profit/loss | ZHEJIANG TIANLAN | 22,642 | 23,228 | (586) | ||||||
Net profit/loss | $ | 158 | 231 | $ (73) | ||||||
Dividend paid | ZHEJIANG TIANLAN | (9,220) | (9,220) | |||||||
Appropriation of reserves | ZHEJIANG TIANLAN | 0 | 2,542 | (2,542) | ||||||
Appropriation of reserves | $ | $ 0 | $ (37) | |||||||
Deemed disposal of subsidiary | ZHEJIANG TIANLAN | 1,000 | 103 | 897 | ||||||
Issue share capital | ZHEJIANG TIANLAN | 3,360 | 1,200 | 2,160 | ||||||
Ending Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2016 | ¥ 186,795 | ¥ 81,372 | ¥ 26,480 | ¥ 11,636 | ¥ 65,394 | ¥ 1,913 |
ZHEJIANG JIAHUAN ELECTRONIC COM
ZHEJIANG JIAHUAN ELECTRONIC COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY ¥ in Thousands, $ in Thousands | CNY (¥) | USD ($) | Share capitalCNY (¥) | Capital reservesCNY (¥) | PRC statutory reservesCNY (¥) | Retained earningsCNY (¥) | Non controlling interestCNY (¥) |
Beginning Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2013 | ¥ 82,933 | ¥ 11,250 | ¥ 8,542 | ¥ 20,931 | ¥ 41,927 | ¥ 283 | |
Net loss and total comprehensive loss | ZHEJIANG JIAHUAN | 4,710 | 4,710 | |||||
Net loss and total comprehensive loss | $ | $ (131) | ||||||
Dividend paid | ZHEJIANG JIAHUAN | (2,250) | (2,250) | |||||
Ending Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2014 | 85,393 | 11,250 | 8,542 | 20,931 | 44,387 | 283 | |
Net loss and total comprehensive loss | ZHEJIANG JIAHUAN | 4,936 | 4,936 | |||||
Net loss and total comprehensive loss | $ | (593) | ||||||
Disposal of Non-controlling interest | ZHEJIANG JIAHUAN | (283) | (283) | |||||
Ending Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2015 | 90,046 | 11,250 | 8,542 | 20,931 | 49,323 | 0 | |
Issued share | ZHEJIANG JIAHUAN | 0 | 27,777 | (9,941) | (17,836) | |||
Net loss and total comprehensive loss | ZHEJIANG JIAHUAN | 10,462 | 10,462 | |||||
Net loss and total comprehensive loss | $ | $ 289 | ||||||
Dividend paid | ZHEJIANG JIAHUAN | 0 | 40,973 | (40,973) | ||||
Ending Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2016 | ¥ 100,508 | ¥ 80,000 | ¥ (1,399) | ¥ 3,095 | ¥ 18,812 | ¥ 0 |
1. Organisation and principal a
1. Organisation and principal activities | 12 Months Ended |
Dec. 31, 2016 | |
Organisation and principal activities | Euro Tech Holdings Company Limited (the “Company”) was incorporated in the British Virgin Islands on September 30, 1996. Euro Tech (Far East) Limited (“Far East”) is the principal operating subsidiary of the Company. It is principally engaged in the marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems in Hong Kong and in the People’s Republic of China (the “PRC”). Details of the Company’s significant subsidiaries and affiliates are summarised as follows: Name Percentage of equity ownership Place of incorporation Principal activities Subsidiaries: Euro Tech (Far East) Limited 100% Hong Kong Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Euro Tech (China) Limited 100% Hong Kong Inactive Euro Tech Trading (Shanghai) Limited 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Shanghai Euro Tech Limited 100% The PRC Manufacturing of analytical and testing equipment Shanghai Euro Tech Environmental Engineering Company Limited 100% The PRC Undertaking water and waste-water treatment engineering projects Chongqing Euro Tech Rizhi Technology Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Name Percentage of equity ownership Place of incorporation Principal activities Guangzhou Euro Tech Environmental Equipment Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Yixing Pact Environmental Technology Co., Ltd 58% The PRC Design, manufacture and operation of water and waste water treatment machinery and equipment Pact Asia Pacific Limited 58% The British Virgin Islands Selling of environment protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services Affiliates: Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (“Blue Sky”) 19.7% * The PRC Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted Zhejiang Jia Huan Electronic Co. Ltd. 20% The PRC Design and manufacturing automatic control systems and electric voltage control equipment for electrostatic precipitators (air purification equipment) * The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation in both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process. |
ZHEJIANG TIANLAN | |
Organisation and principal activities | Zhejiang Tianlan Environmental Protection Technology Company Limited (the “Company”) was incorporated in Hangzhou City, Zhejiang Province, the People's Republic of China (“PRC”) on May 18, 2000. The Company is a limited company by shares with an operating period up to August 5, 2037. The Company provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000. The Company has recently received approval from the National Equities Exchange and Quotations (“NEEQ”) to list its shares on the New Third Board in the People’s Republic of China (“PRC”) on November 17, 2015. Details of the Company’s subsidiaries are summarised as follows: Name Percentage of equity ownership Place of incorporation Principal activities 2016 2015 Zhejiang Tianlan Environmental Engineering and Design Company Limited 100% 100% PRC Provision of maintenance services of environmental protection equipment Hangzhou Tianlan Environmental Protection Equipments Company Limited 51% 51% PRC Manufacturing and installation services of environmental protection equipment Shihezi Tianlan Environmental Protection Technology Company Limited 100% 100% PRC Provision of maintenance services of environmental protection equipment Da Tong Tianlan Environmental Protection Technology Service Company Limited * -% 100% PRC Provision of maintenance services of environmental protection equipment Hangzhou Tianlian Environmental Testing Technology Company Limited ** 80% 100% PRC Provision of testing services of environmental protection equipment * On April 19, 2016, the board of director approved the de-registration of subsidiary. The subsidiary was closed on August 25, 2016. ** The Company was incorporated on October 28, 2015. On April 17, 2016, the board of director approved the sales of 1,000,000 ordinary shares at a price RMB 1.00 per shares, which in the aggregate amount the gross proceeds of RMB 1,000,000 to the third parties. |
ZHEJIANG JIAHUAN | |
Organisation and principal activities | Zhejiang Jiahuan Electronic Company Limited (the “Company”) was established in the People’s Republic of China (“PRC”) as a limited liability company. The principal activities of the Company are design, manufacturing and sales of automatic control systems and electric voltage control equipment for electrostatic precipitators (air purification equipment). Details of the Company’s subsidiaries are summarised as follows: Name Percentage of equity ownership Place of incorporation Principal activities 2016 2015 Jinhua Jiahuan Puzhau New Energy Technology Co., Ltd* - - PRC Dormant Zhejiang Jiahuan Xinyu Environmental Production Co., Ltd 100% 100% PRC Manufacturing and installation services of environmental production equipment *The Company has been deregistered on September 1, 2015. |
2. Summary of significant accou
2. Summary of significant accounting policies | 12 Months Ended |
Dec. 31, 2016 | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the accounts of Euro Tech Holdings Company Limited and its subsidiaries (the “Group”). The financial statements of variable interest entities (“VIEs”), as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 810-10, Consolidation, are included in the consolidated financial statements, if applicable. All material intercompany balances and transactions have been eliminated on consolidation. The Group identified that a retail shop established in the PRC qualified as variable interest entities as defined in ASC 810-10. This retail shop was principally engaged in the retailing business of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company is the primary beneficiary of this retail shop and, accordingly, consolidated their financial statements. The Company has a controlling financial interest in this retail shop and is subject to a majority of the risk of loss from the retailing activities, and is entitled to receive a majority of the retail shop’s residual returns. Total assets and liabilities of this consolidated VIE total US$9,179 and US$1,626, as of December 31, 2015, respectively. This VIE had ceased operation since October 2016. (b) Subsidiaries and affiliates A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. (c) Revenue Recognition The Group’s main source of revenue is the sale of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company recognises revenue when the product is delivered and the title is transferred. For certain products where installation is necessary, revenue is recognised upon completion of installation. Revenue earned from customer support services, which represents a minor percentage of total revenues, is recognised when such services are provided. Revenues and profits in long term fixed price contracts or engineering income are recognised using the percentage of completion method in accordance with FASB ASC Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. This approach primarily based on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognised in the period they are determined. Revenues recognised in excess of amounts billed are classified as costs and estimated earnings in excess of billings on uncompleted contracts. Essentially all of such amounts are expected to be billed and collected within one year and are classified as current assets. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as current liabilities. When reasonably dependable estimates cannot be made, construction contract revenues are recognised using the completed contract method. (d) Research and Development Costs Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$475,000, US$852,000 and US$631,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses (e) Advertising and promotional expenses Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$13,000, US$17,000 and US$44,000 for the years December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses (f) Taxation The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC 740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. (g) Cash and Cash Equivalents Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. (h) Restricted Cash Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance guarantees to the customers. The amount is expected to be released within one year after the balance sheet date. (i) Receivables and Other Assets Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. (j) Inventories Inventories are stated at the lower of cost, on the first-in, first-out method, or market value. Costs include purchase and related costs incurred in bringing each product to its present location and condition. Market value is calculated based on the estimated normal selling price, less further costs expected to be incurred for disposal. Allowance is made for obsolete, slow moving or defective items, where appropriate. (k) Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Depreciation of property, plant and equipment is computed using the straight-line method over the assets’ estimated useful lives as follows: Office premises 47 to 51 years Leasehold improvements over terms of the leases or the useful lives whichever is less Furniture, fixtures and office equipment 3 to 5 years Motor vehicles 4 years Testing equipment 3 years (l) Impairment The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There was no impairment losses recorded during each of the three years ended December 31, 2016. (m) Operating Leases Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessors are accounted for as operating leases. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases. (n) Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, goodwill is not amortized, but rather is subject to an annual impairment test. Goodwill is tested for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value. The Company performs its annual impairment analysis of goodwill in the fourth quarter of the year, or more often if there are indicators of impairment present. The provisions of ASC 350 require that a two-step impairment test be performed on goodwill at the level of the reporting units. In the first step, or Step 1, the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or Step 2, of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions. (o) Foreign Currency Translation The Company maintains its books and records in United States dollars. Its subsidiaries and affiliates maintain their books and records either in Hong Kong dollars or Chinese Renminbi (“functional currencies”). Foreign currency transactions during the year are translated into the respective functional currencies at the applicable rates of exchange at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currencies using the exchange rates prevailing at the balance sheet dates. Gains or losses from foreign currency transactions are recognised in the consolidated statements of income during the year in which they occur. Translation adjustments on subsidiaries’ equity are included as accumulated comprehensive income or loss. (p) Derivative Instruments and Hedging Activities ASC 815, "Derivatives and Hedging" ("ASC 815"), as amended, requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income (loss). If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The Company uses derivatives to hedge certain cash flow foreign currency exposures in order to further reduce the Group's exposure to foreign currency risks. (q) Fair Value Measurement ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. (r) Comprehensive Income The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income and foreign currency translation adjustments, in the consolidated statement of changes in shareholders’ equity. (s) Ordinary Share On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis. (t) Net income per Ordinary Share Net income per ordinary share is computed in accordance with FASB ASC Subtopic 260-10, Earnings Per Share, by dividing the net income by the weighted average number of shares of ordinary share outstanding during the period. The Company reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding. Outstanding stock options are the only dilutive potential shares of the Company. (u) Stock-based Compensation The Group accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" ("ASC 718"). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of operations. The Group recognizes compensation expenses for the value of its awards, based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. (v) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates. (w) Related Parties Related parties (x) Segment Information The Company’s segment reporting is prepared in accordance with FASB ASC Subtopic 280-10, Segment Reporting. The management approach required by ASC 280-10 designates that the internal reporting structure that is used by management for making operating decisions and assessing performance should be used as the source for presenting the Company’s reportable segments. The Company categorises its operations into two business segments: Trading and manufacturing, and Engineering. (y) Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. |
ZHEJIANG TIANLAN | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the accounts of Zhejiang Tianlan Environmental Protection Technology Company Limited and its subsidiaries (the “Group”). In preparing the consolidated financial statements presented herewith, all significant intercompany balances and transactions have been eliminated on consolidation. (b) Subsidiaries A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. (c) Revenue Recognition The Group’s main source of revenue is the construction and installation services of environmental protection equipment for flue gas desulphurization, dust removal and flue gas denitration. Revenues are recorded under the percentage of completion method in accordance with FASB ASC Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts. This approach primarily based on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognised in the period they are determined. Revenues recognised in excess of amounts billed are classified as costs and estimated earnings in excess of billings on uncompleted contracts. Essentially all of such amounts are expected to be billed and collected within one year and are classified as current assets. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as current liabilities. When reasonably dependable estimates cannot be made, construction contract revenues are recognised using the completed contract method. (d) Research and Development Costs Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs re included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB13,808,000, RMB18,895,000 and RMB21,796,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. (e) Advertising and promotional expenses Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately RMB58,000, RMB24,000 and RMB11,000 for the years December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. (f) Taxation The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC-740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. (g) Cash and Cash Equivalents Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. (h) Receivables and Other Assets Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. According to construction contracts signed with the customers, an amount ranged from 5%-20% of contract sum will only be receivable one year after the final inspection report issued by relevant department of Ministry of Environmental Protection. As of December 31, 2016, accounts receivable in more than one year amounted to RMB46,624,000 (2015: RMB57,623,000). (i) Inventories Inventories are stated at the lower of cost or market determined using the weighted average method which approximates cost and estimated net realizable value. Cost of work in progress and finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. (j) Property, Plant and Equipment and Land Use Right Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period for time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and classified as land use right. Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows: Land use right Over terms of the leases Office premises 47-50 years, with 5% residual value Leasehold improvements over terms of the leases or the useful lives whichever is less, with 5% residual value Plant and machineries 5 to 10 years, with 5% residual value Furniture, fixtures and office equipment 3 to 5 years, with 5% residual value Motor vehicles 1 to 8 years, with 5% residual value (k) Intangible Assets The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. (l) Impairment The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There were no impairment losses recorded during each of the three years ended December 31, 2016. (m) Government grant income Government grant income consisted of receipt of funds to subsidize the investment cost of information technology system development and market development in China. No present or future obligation arises from the receipt of such amount. Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. (n) Operating Leases Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessors are accounted for as operating leases. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases. (o) Comprehensive Income The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income, in the consolidated statement of changes in shareholders’ equity. (p) Share capital Paid in capital refers to the registered capital paid up by the shareholders of the Company. On December 17, 2015, the Company increased the number of registered shares by 18,972,000 shares. The paid up capital were increased by RMB 18,972,000 transferred from the capital reserves, which is agreed by the shareholders and the board of directors. At the year end of December 31, 2015, there were 80,172,000 shares were issued. On June 2, 2016, the Company increased the number of paid up shares by 1,200,000 at a price RMB 2.80 per shares, which in the aggregative amount the gross proceeds of RMB 3,360,000 to the existing shareholders. At the year end of December 31, 2016, there were 81,372,000 shares were issued. (q) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Group may undertake in the future, actual results may be different from the estimates. (r) Related Parties Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. (s) Fair Value Measurement ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. (t) Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statement In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. |
ZHEJIANG JIAHUAN | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the accounts of Zhejiang Jiahuan Electronic Company Limited and its subsidiaries (the “Group”). In preparing the consolidated financial statements presented herewith, all significant intercompany balances and transactions have been eliminated on consolidation. (b) Subsidiaries A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. (c) Revenue Recognition Revenue from sale of automatic control systems, electric voltage control equipment, environmental equipment, and solar and wind power equipment is recognized when the product is delivered and the title is transferred. For certain products where installation is necessary, revenue is recognized upon completion of installation. (d) Research and Development Costs Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs re included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB8,814,000, RMB6,982,000 and RMB4,981,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. (e) Taxation The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC-740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. (f) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and demand deposits with banks. (g) Investments Investments comprise marketable securities which are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses, et of taxes, reported as a separate component of shareholders’ equity (deficit). The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method, and records such gains and losses as a component of other income (expense), net in the consolidated statement of income. (h) Receivables and Other Assets Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. (i) Inventories Inventories are stated at the lower of cost or market determined using the first-in, first-out method. Costs included purchase and related costs incurred in bringing each product to its present location and condition. Market value is calculated based on the estimated normal selling price, less further costs expected to be incurred for disposal. Provision is made for obsolete, slow moving or defective items, where appropriate. (j) Property, Plant and Equipment and Land Use Right Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period for time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and classified as land use right. Construction in progress is stated at cost less impairment losses. Cost comprises direct costs of construction as well as borrowing costs capitalized during the periods of construction and installation. Capitalisation of these costs creases and the construction in progress is transferred to the appropriate class of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction in progress until it is completed and read for its intended use. Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows: Land use right 50 years Buildings 20 years Plant and machinery 5 to 20 years Office equipment 3 to 10 years Motor vehicles 5 to 10 years (k) Intangible Assets The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. (l) Impairment The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There were no impairment losses recorded during each of the three years ended December 31, 2016, December 31, 2015 and December 31, 2014. (m) Comprehensive Income The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income, in the consolidated statement of changes in shareholders’ equity. (n) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Group may undertake in the future, actual results may be different from the estimates. (o) Related Parties Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. (p) Recent Issue Accounting Standard In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. (q) Fair Value Measurement ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. |
3. Other income, net
3. Other income, net | 12 Months Ended |
Dec. 31, 2016 | |
Other income, net | 2016 2015 2014 US$’000 US$’000 US$’000 Exchange (loss), net (75 ) (75 ) (12 ) Rental income 80 84 77 5 9 65 |
ZHEJIANG TIANLAN | |
Other income, net | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Gain on disposal of intangible asset - - 150 (Loss) / Gain on disposal of property, plant and equipment (15 ) - 7 Subsidy income 3,360 2,617 4,163 Sales of scrapped materials 3 6 6 Investment income 412 - - Others (304 ) 150 269 3,456 2,773 4,595 |
ZHEJIANG JIAHUAN | |
Other income, net | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Government grant 3,115 200 73 Rental income (i) 1,271 901 850 Interest income 54 44 17 Sundry income 152 263 135 4,592 1,408 1,075 (i) Rental income under operating leases is recognized on a straight-line basis over the term of the relevant lease. |
4. Income taxes
4. Income taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income taxes | The Company is exempt from taxation in the British Virgin Islands (“BVI”). Euro Tech (Far East) Limited and Euro Tech (China) Limited provided for Hong Kong profits tax at a rate of 16.5% in year 2016 (2015 and 2014: 16.5%) on the basis of their income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for profits tax purposes. Euro Tech Trading (Shanghai) Limited (“ETTS”), a subsidiary of the Company, provides for PRC Enterprise Income Tax at a rate of 25% (2015 and 2014: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2016, ETTS had an assessable loss carried forward of US$746,808 as agreed by the local tax authority to offset its profit for the forth coming years (2015: US$588,103 and 2014: US$506,117). Such loss will expire in 5 years. Shanghai Euro Tech Limited (“SET”), a subsidiary of the Company, provides for PRC Enterprise Income Tax at a rate of 25% (2015 and 2014: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2016, SET had an assessable loss carried forward of US$256,664 as agreed by the local tax authority to offset its profit for the forth coming years (2015: US$284,173 and 2014: US$390,290). Such loss will expire in 5 years. Shanghai Euro Tech Environmental Engineering Limited (“SETEE”), a subsidiary of the Company, provides for PRC Enterprise Income Tax at a rate of 25% (2015 and 2014: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2016, SETEE had an assessable loss carried forward of US$1,074,609 as agreed by the local tax authority to offset its profit for the forth coming years (2015: US$1,363,392 and 2014: US$1,635,072). Such loss will expire in 5 years. Yixing Pact Environmental Technology Co. (“Yixing), a subsidiary of the Company, provides for PRC Enterprise Income Tax at a rate of 25% (2015 and 2014: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2016, Yixing had an assessable loss carried forward of US$ Nil as agreed by the local tax authority to offset its profit for the forth coming years (2015: US$994,025). Such loss will expire in 5 years. Chongqing Euro Tech Rizhi Technology Co., Ltd (“CQ”), Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd (“RZ”) and Guangzhou Euro Tech Environmental Equipment Co., Ltd (“GZ”) provide for PRC Enterprise Income Tax at a rate of 25%, after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. CQ, RZ and GZ had an assessable loss carried forward of US$124,025, US$60,980 and US$320,545 respectively as agreed by the local tax authority to offset its profit for the forth coming years (2015: US$139,068, US$76,029 and US$385,183). Such loss will expire in 5 years. VIEs of the Group provide for PRC Enterprise Income Tax at a rate of 25% (2015 and 2014: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. Under the New Enterprise Income Tax Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the PRC subsidiaries to foreign holding company are subject to a withholding tax at a rate of 10% unless reduced by tax treaty. Aggregate undistributed earnings of the Company’s subsidiaries located in the PRC that are available for distribution to the Company of approximately US$1.2 million at December 31, 2016 (2015: US$1.1 million and 2014: US$2.2 million) are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to the Company. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax. Loss before income taxes: 2016 2015 2014 US$’000 US$’000 US$’000 The PRC and Hong Kong (640 ) (1,904 ) (879 ) The provision / (credit) for income taxes consist of: 2016 2015 2014 US$’000 US$’000 US$’000 Current tax expenses: The PRC and Hong Kong 212 (72 ) 8 Total current provision / (credit) 212 (72 ) 8 Deferred tax expenses: The PRC and Hong Kong 16 25 10 Total deferred provision 16 25 10 The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows: 2016 2015 2014 US$’000 US$’000 US$’000 Computed tax using respective companies’ statutory tax rates (136 ) (177 ) (194 ) Change in valuation allowances 350 455 93 Under-provision for income tax in prior years - (69 ) - Non-deductible expenses 14 (256 ) 119 Total provision / (credit) for income tax at effective tax rate 228 (47 ) 18 The components of deferred tax assets are as follows: 2016 2015 US$’000 US$’000 Tax losses 838 1,159 Temporary differences (2 ) 1 Less: Valuation allowances (650 ) (958 ) Net deferred tax assets 186 202 |
ZHEJIANG TIANLAN | |
Income taxes | According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates of 15% for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Tianlan Environmental Protection Technology Company Limited and Hangzhou Tianlan Environmental Protection Equipment Company Limited are classified as HNTE which enjoyed a preferential tax rate of 15%. During the year ended December 31, 2016 and 2015, the PRC tax laws and regulations have launched a tax reduction scheme for small enterprises, Hangzhou Tianlan Environmental Engineering and Design Company Limited, Shihezi Tianlan Environmental Protection Technology Company Limited, Da Tong Tianlan Environmental Protection Technology Service Company Limited and Hangzhou Tianlan Environmental Testing Technology Company Limited are entitled to enjoy this tax benefit. It, thus, subjects to Enterprise Income Tax rate of The provision for income taxes consists of: 2016 2015 2014 RMB’000 RMB’000 RMB’000 Current PRC EIT: Domestic 6,298 3,351 2,159 Income taxes 6,298 3,351 2,159 Deferred tax benefit: (1,337 ) (177 ) (1,391 ) Total deferred taxes (1,337 ) (177 ) (1,391 ) The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows: 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income before income taxes 27,603 24,927 14,776 Computed tax using respective companies’ statutory tax rates 4,078 3,767 2,216 (Over)-provision for income tax in prior years 57 - (2,418 ) Permanent difference (82 ) - - Temporary differences (1,337 ) (177 ) 1,575 Tax effect of revenue not subject to tax (901 ) (1,068 ) (695 ) Tax effect of expenses not deductible for tax purposes 2,732 596 90 Tax effect of unused tax losses not recognized 414 56 - Total provision for income tax at effective tax rate 4,961 3,174 768 The components of deferred tax assets are as follows: 2016 2015 RMB’000 RMB’000 Tax losses - - Allowance for doubtful debts 5,864 4,527 Net deferred tax assets 5,864 4,527 |
ZHEJIANG JIAHUAN | |
Income taxes | According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Jiahuan Electronic Company Limitedis classified as HNTE which enjoyed a preferential tax rate of 15%. The provision for income taxes consists of: 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income taxes 1,387 861 484 The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows: 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income before income taxes 11,849 5,797 5,194 Computed tax using respective companies’ statutory tax rates 2,326 1,119 1,299 Tax effect on revenue not subject to tax (930 ) (447 ) (537 ) (Over) / under provision for income tax in prior years (9 ) 189 (278 ) Total provision for income tax at effective tax rate 1,387 861 484 No deferred tax assets or liabilities has been recognized in the financial statements as the Company did not have material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as at 31 December, 2016, and 2015. |
5. Net income per ordinary shar
5. Net income per ordinary share | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Net income per ordinary share | The calculation of the basic and diluted net income per ordinary share is based on the following data: 2016 2015 2014 Number of shares Weighted average number of ordinary shares for the purposes of basic net income per share 2,061,909 2,063,738 2,069,223 Effect of dilutive potential ordinary shares: Stock options - - - Weighted average number of ordinary shares for the purposes of diluted net income per share 2,061,909 2,063,738 2,069,223 |
5A. Other taxes payable
5A. Other taxes payable | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Other taxes payable | Other taxes payable comprises mainly Valued-Added Tax (“VAT”) and Business Tax (“BT”). The Group is subject to output VAT levied at the rate of 17% or 11% of the revenue from sales of equipment. The input VAT paid on purchases of materials and other direct inputs can be used to offset the output VAT levied on operating revenue to determine the net VAT payable or recoverable. BT is charged at a rate of 5% and 3% on the revenue from technique services and installation services respectively. |
6. Accounts receivable, net
6. Accounts receivable, net | 12 Months Ended |
Dec. 31, 2016 | |
Accounts receivable, net | 2016 2015 US$’000 US$’000 Accounts receivable 4,431 4,557 Less: Allowance for doubtful debts (38 ) (57 ) 4,393 4,500 The following is an age analysis of past due account receivables as of December 31, 2016 and 2015: 2016 2015 US$’000 US$’000 Current 1,789 2,762 30-59 days past due 1,072 633 60-89 days past due 852 635 Greater than 90 days 680 470 4,393 4,500 |
ZHEJIANG TIANLAN | |
Accounts receivable, net | 2016 2015 RMB’000 RMB’000 Accounts receivable 204,166 238,325 Less: Allowance for doubtful debts (39,066 ) (30,418 ) 165,100 207,907 The following is an age analysis of past due account receivables as of December 31, 2016 and 2015: 2016 2015 RMB’000 RMB’000 Within 1 year 118,476 150,345 1 year – 2 years 31,340 44,393 2 years – 3 years 9,387 8,588 3 years – 4 years 4,593 3,881 4 years – 5 years 240 700 Greater than 5 years 1,064 - 165,100 207,907 At December 31, 2016, the trade receivables pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB25,474,000 (2015: RMB27,566,000). |
ZHEJIANG JIAHUAN | |
Accounts receivable, net | 2016 2015 RMB’000 RMB’000 Accounts receivable, gross 91,069 99,864 Less: Allowance for doubtful debts (32 ) (32 ) Accounts receivable, net 91,037 99,832 2016 2015 RMB’000 RMB’000 Allowance for doubtful debts: Balance at beginning (32 ) (131 ) Charged to statement of income Recovered - 99 Balance at end (32 ) (32 ) |
6A. Other non-current assets
6A. Other non-current assets | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Other non-current assets | Other non-current assets represent deposits for sales and lease back agreement amounted to approximately to RMB17,512,000 (2015: RMB Nil). |
7. Prepayments and other curren
7. Prepayments and other current assets | 12 Months Ended |
Dec. 31, 2016 | |
Prepayments and other current assets | Prepayment and other current assets mainly represent deposits for purchases and services, rental and utilities deposits, and prepaid expenses. 2016 2015 US$’000 US$’000 Cost & estimated earnings in excess of billings 343 144 Deposit paid 70 57 Prepayment 221 59 Other receivables 156 214 Other tax recoverable 25 26 815 500 |
ZHEJIANG JIAHUAN | |
Prepayments and other current assets | 2016 2015 RMB’000 RMB’000 Prepayments and other receivables 11,994 13,039 Deposits 3,448 4,433 15,442 17,472 |
ZHEJIANG TIANLAN | |
Prepayments and other current assets | Prepayment and other current assets mainly represent deposits for bidding projects, deposits for purchases and services and prepaid expenses. 2016 2015 RMB’000 RMB’000 Cost and estimated earnings in excess of billing 70,786 97,640 Prepayment 24,100 13,828 Other receivables 14,851 8,090 Other current assets 1,320 - 111,057 119,558 The other current assets also include cost of estimated earnings in excess of billing. Cost and estimated earnings in excess of billings 2016 2015 RMB’000 RMB’000 Contracts costs incurred plus estimated earnings 389,534 160,634 Less: Progress billings (318,748 ) (62,994 ) Cost and estimated earnings in excess of billings 70,786 97,640 |
7A. Long term investments
7A. Long term investments | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
7A. Long term investments | Gross unrealized Fair Amortized cost Gains Losses Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 2015 Gross unrealized Fair Amortized cost Gains Losses Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 The balance of investments has their market values close to their book balance. |
8. Inventories
8. Inventories | 12 Months Ended |
Dec. 31, 2016 | |
Inventories | 2016 2015 US$’000 US$’000 Raw materials 97 131 Work in progress 29 39 Finished goods 218 387 344 557 Management continuously reviews obsolete and slow moving inventories and assesses the inventory valuation to determine if the provision is deemed appropriate. For the year ended December 31, 2016, and 2015 provision for obsolete and slow moving inventories amounted to US$53,000 and US$5,000, respectively, which were charged to cost of revenue in Consolidated Statements of Income. |
ZHEJIANG JIAHUAN | |
Inventories | 2016 2015 RMB’000 RMB’000 Raw materials 6,529 5,603 Work in progress 11,264 7,840 Finished goods 10,212 8,020 28,005 21,463 |
ZHEJIANG TIANLAN | |
Inventories | 2016 2015 RMB’000 RMB’000 Raw materials 5,606 6,586 Work in progress 7,269 5,525 Finished goods 230 - 13,105 12,111 |
9. Property, plant and equipmen
9. Property, plant and equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property, plant and equipment | 2016 2015 US$’000 US$’000 Office premises 1,866 1,866 Leasehold improvements 155 157 Furniture, fixtures and office equipment 581 635 Motor vehicles 188 155 Testing equipment 30 30 2,820 2,843 Less: Accumulated depreciation (2,049 ) (2,070 ) 771 773 2016 2015 2014 US$’000 US$’000 US$’000 Depreciation charge 55 56 88 |
ZHEJIANG JIAHUAN | |
Property, plant and equipment | 2016 2015 RMB’000 RMB’000 Buildings 34,724 34,493 Plant and machinery 7,014 7,011 Office equipment 1,206 1,148 Motor vehicles 467 979 43,411 43,631 Less: Accumulated depreciation (21,550 ) (19,843 ) 21,861 23,788 2016 2015 2014 RMB’000 RMB’000 RMB’000 Depreciation charge 1,707 2,296 2,408 Buildings with carrying amount of approximately RMB34,724,000 and RMB34,493,000 as of December 31, 2016 and 2015 respectively were pledged, along with the land use right as discussed below, to secure the Company’s short-term bank loans. |
ZHEJIANG TIANLAN | |
Property, plant and equipment | 2016 2015 RMB’000 RMB’000 Building and leasehold improvements 56,665 56,696 Furniture, fixtures and office equipment 9,660 9,919 Motor vehicles 4,451 3,780 Plant and machineries 115,349 114,617 Construction in progress 211 - 186,336 185,012 Less: Accumulated depreciation (36,496 ) (23,281 ) 149,840 161,731 2016 2015 2014 RMB’000 RMB’000 RMB’000 Depreciation charge 14,144 8,473 2,985 At December 31, 2016, the net book value of property, plant and equipment pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB109,041,000 (2015: RMB120,830,000). |
10. Interests in affiliates
10. Interests in affiliates | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Interests in affiliates | Investments in affiliates are accounted for using the equity method of accounting. The Company is holding 19.7% equity interests in Zhejiang Tianlan Environmental Protection Technology Co. Ltd. A company incorporated in the PRC, with total cost of investment US$5,540,000. Blue Sky provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000. Blue Sky has recently received approval from the National Equities Exchange and Quotations (“NEEQ”) to list its shares on the New Third Board in the People’s Republic of China (“PRC”) on November 17, 2015. The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation in both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process. During the year, the Group’s equity in Blue Sky was diluted subsequent to the issuance of new ordinary shares by Blue Sky to other shareholders. A net profit on deemed disposal of an affiliate of USD24,000 had been recognized in the consolidated statement of operations and comprehensive income for that year. A summary of the financial information of the affiliate, Zhejiang Tianlan Environmental Protection Technology Co. Ltd, is set forth below: 2016 2015 Balance Sheet: US$’000 US$’000 Current assets 46,297 57,432 Non-current assets 25,847 26,587 Total assets 72,144 84,019 Total liabilities (45,372 ) (58,149 ) Total shareholders’ equity 26,772 25,870 2016 2015 Operating results: US$’000 US$’000 Net sales 43,226 66,899 Operating income 3,841 4,260 Net income 3,473 3,458 The Company is holding 20% equity interests in Zhejiang Jia Huan Electronic Co. Ltd. (“Jia Huan”), a company incorporated in the PRC, with total cost of investment US$2,486,000. Jia Huan provides a comprehensive service for environmental protection business since 1969 and is based in Jin Hua, Zhejiang. A summary of the financial information of the affiliate, Zhejiang Jia Huan Electronic Co. Ltd, is set forth below: 2016 2015 Balance Sheet: US$’000 US$’000 Current assets 22,021 22,693 Non-current assets 4,079 4,717 Total assets 26,100 27,410 Total liabilities (11,694 ) (13,627 ) Total shareholders’ equity 14,406 13,783 2016 2015 Operating results: US$’000 US$’000 Net sales 16,684 18,481 Operating income 1,586 1,316 Net income 1,564 788 |
11. Other payables and accrued
11. Other payables and accrued expenses | 12 Months Ended |
Dec. 31, 2016 | |
Other payables and accrued expenses | Other payables and accrued expenses mainly represent deposits received from customers and accruals for operating expenses. 2016 2015 US$’000 US$’000 Dividend payables 79 84 Deposit received from customer 1,113 558 Rental deposit received 14 18 Other payables 994 764 Other tax payables 58 202 2,258 1,626 |
ZHEJIANG JIAHUAN | |
Other payables and accrued expenses | 2016 2015 RMB’000 RMB’000 Deposit received from customers 10,979 8,768 Accrued expenses 2,795 1,210 Other payables 137 245 13,911 10,223 |
ZHEJIANG TIANLAN | |
Other payables and accrued expenses | 2016 2015 RMB’000 RMB’000 Deposit received from customers 35,225 26,749 Accrued expenses 10,116 12,104 Other payables 1,227 1,118 Deferred income 4,610 799 Amount due to a related company 5 5 51,183 40,775 |
11A. Intangible assets, net
11A. Intangible assets, net | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Intangible assets, net | 2016 2015 RMB’000 RMB’000 Software 591 591 591 591 Less: Accumulated depreciation (349 ) (83 ) 242 508 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortization expenses 266 83 - |
ZHEJIANG TIANLAN | |
Intangible assets, net | 2016 2015 RMB’000 RMB’000 Patents 2,400 2,400 Others 567 165 2,967 2,565 Less: Accumulated amortisation (1,592 ) (1,017 ) 1,375 1,548 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 575 193 239 The following table represents the total estimated amortization of intangible assets for the five succeeding fiscal years to December 31, 2016: For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2017 172 2018 172 2019 172 2020 172 2021 172 Thereafter 515 1,375 |
12. Ordinary share
12. Ordinary share | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Ordinary share | During the years ended December 31, 2016 and 2015, there was no movement with the Company’s issued ordinary shares and outstanding shares. |
12A. Land use right, net
12A. Land use right, net | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Land use right, net | 2016 2015 RMB’000 RMB’000 Land use right 7,987 7,987 Less: Accumulated amortisation (1,699 ) (1,536 ) 6,288 6,451 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 163 163 163 Land use right with a carrying amount of approximately RMB6,288,000 and RMB6,451,000 as of December 31, 2016 and 2015 was pledged, along with the buildings discussed above, to secure the Company’s short-term bank loans. |
ZHEJIANG TIANLAN | |
Land use right, net | 2016 2015 RMB’000 RMB’000 Land use right 7,361 7,361 Less: Accumulated amortisation (1,614 ) (1,465 ) 5,747 5,896 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 149 149 149 At December 31, 2016, the land use right pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB1,691,000 (2015: RMB1,737,000). |
13. Goodwill
13. Goodwill | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Goodwill | The Company accounts for acquisitions of subsidiaries in accordance with FASB ASC Subtopic 805-10, Business Combinations. Goodwill represents the excess of acquisition cost over the estimated fair value of net assets acquired in relation to the acquisition of Yixing Pact Environmental Technology Co., Ltd and Pact Asia Pacific Limited in 2005. As of December 31, 2016, the Company completed the annual impairment test (i.e. comparing the carrying amount of the net assets, including goodwill, with the fair value of the Company as of December 31, 2016). Based on management’s assessment, the Company determined that there was no impairment of goodwill as of December 31, 2016 and 2015. |
13A. Short term borrowings
13A. Short term borrowings | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Short term borrowings | The short term loans as of December 31, 2016 bear interest at fixed rates ranging from 4.568% to 6.630% per annum with maturity dates from January 11, 2016 to August 6, 2016 and are secured by the Company’s buildings and land use right. Interest paid during the years ended December 31, 2016 and 2015 were approximately RMB2,752,000 and RMB3,861,000 respectively. |
ZHEJIANG TIANLAN | |
Short term borrowings | 2016 2015 RMB’000 RMB’000 Bank loan borrowed by the Company (note i) 20,000 40,000 Bank loan borrowed by a subsidiary of the Company (note ii) 5,000 5,000 25,000 45,000 (i) The bank loan is denominated in Renminbi and repayable within 1 year. The bank loan borrowed by the Company as of December 31, 2016 bear interest at fixed rates 4.57% (2015: 4.62% to 6.47%) per annum. Interest paid during the year ended December 31, 2016 was approximately RMB1,221,000 (2015: RMB3,768,000 and 2014: RMB4,688,000). (ii) The bank loan is denominated in Renminbi and repayable within 1 year. The bank loan borrowed by a subsidiary of the Company as of December 31, 2016 bear interest at fixed rates 5.22% (2015: 7.28%) per annum and are secured by the subsidiary’s office premises and leasehold improvements and land use right. Interest paid during the year ended December 31, 2016 was approximately RMB154,000 (2015: RMB369,000 and 2014: Nil). |
14. Treasury stock
14. Treasury stock | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Treasury stock | The Company authorised a stock buyback program in August 2010 pursuant to which up to 54,546 shares, but not to exceed US$450,000 in value, of the Company’s ordinary share could be purchased in the open market from time to time as market and business conditions warrant. The Company repurchased a total of 6,482 shares of ordinary share during 2010 for considerations of approximately US$49,000. The Company repurchased a total of 16,935 shares of ordinary share during 2011 for total consideration of approximately US$94,000. The Company repurchased a total of 8,639 shares of ordinary share during 2012 for total consideration of approximately US$33,000 . The Company authorised a stock buyback program in January 2015 pursuant to which up to 60,000 shares, but not to exceed US$150,000 in value, of the Company’s ordinary share could be purchased in the open market from time to time as market and business conditions warrant. The Company repurchased a total of 7,314 shares of ordinary share during 2015 for total consideration of approximately US$20,000. |
14A. Dividends to shareholders
14A. Dividends to shareholders | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Dividends to shareholders | In the fiscal year ended December 31, 2016 the Company declared dividend of RMB40,973,000 to the shareholders for increase share capital. (2015: RMBNil) |
15. PRC statutory reserves
15. PRC statutory reserves | 12 Months Ended |
Dec. 31, 2016 | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the PRC subsidiaries are required to appropriate certain percentage of their respective net income to two statutory funds i.e. the statutory reserve fund and the statutory staff welfare fund. The PRC subsidiaries can also appropriate certain amount of their net income to the enterprise expansion fund. (i) Statutory reserve fund Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate at least 10% of the companies’ net income to the statutory reserve fund until such fund reaches 50% of the companies’ registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase registered capital of the companies, provided that such fund be maintained at a minimum of 25% of the companies’ registered capital. Under the PRC laws and regulations, the Company’s PRC subsidiaries are restricted in their ability to transfer certain of their net assets to the Company in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally accepted accounting principles, totaling US$3,520,000 as at December 31, 2016 (2015:US$3,457,000 and 2014: US$3,357,000). (ii) Statutory staff welfare fund Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate certain amount of the companies’ net income to the staff welfare fund determined by the Company. The staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to the companies’ employees. This fund is non-distributable other than upon liquidation of the PRC subsidiaries. (iii) Enterprise expansion fund The expansion fund shall only be used to make up losses, expand the PRC subsidiaries’ production operations, or increase the capital of the subsidiaries. The expansion fund can be utilised upon approval by relevant authorities, to convert into registered capital and issue bonus capital to existing investors, provided that such fund be maintained at a minimum of 25% of the companies’ registered capital. |
ZHEJIANG JIAHUAN | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the Group is required to appropriate certain percentage of their respective net income to two statutory funds, namely the statutory reserve fund and the statutory staff welfare fund. (i) Statutory reserve fund Pursuant to applicable PRC laws and regulations, the Group is required to allocate at least 10% of the companies’ net income to the statutory reserve fund until such fund reaches 50% of the companies’ registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase registered capital of the companies, provided that such fund be maintained at a minimum of 25% of the companies’ registered capital. (ii) Statutory staff welfare fund Pursuant to applicable PRC laws and regulations, the Group is required to allocate certain amount of the companies’ net income to the staff welfare fund determined by the Company. The staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to the companies’ employees. This fund is non-distributable other than upon liquidation of the Group. |
ZHEJIANG TIANLAN | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the Group is required to appropriate certain percentage of their respective net income to two statutory funds, namely the statutory reserve fund and the statutory staff welfare fund. (i) Statutory reserve fund Pursuant to applicable PRC laws and regulations, the Group is required to allocate at least 10% of the companies’ net income to the statutory reserve fund until such fund reaches 50% of the companies’ registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase registered capital of the companies, provided that such fund be maintained at a minimum of 25% of the companies’ registered capital. (ii) Statutory staff welfare fund Pursuant to applicable PRC laws and regulations, the Group is required to allocate certain amount of the companies’ net income to the staff welfare fund determined by the Company. The staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to the companies’ employees. This fund is non-distributable other than upon liquidation of the Group. |
15A. Long Term Borrowing
15A. Long Term Borrowing | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Long Term Borrowing | 2016 2015 RMB’000 RMB’000 Loan borrowed by the Company 111,691 170,732 (i) On May 15, 2015, the Company signed a sales and lease back agreement with lessor A with total principal of RMB 66,700,000 and repayable within 5 years. The third party loan is denominated in Renminbi. The third party loan borrowed by the Company as of December 31, 2016 is bear interest at fixed rates 5.27% (2015: 5.27%) per annum (ii) On December 9, 2015, the Company signed a sales and lease back agreement with lessor B with total principal of RMB 87,560,000 and repayable within 5 years. The third party loan is denominated in Renminbi. The third party loan borrowed by the Company as of December 31, 2016 is bear interest at fixed rates 4.83% (2015: 4.83%) per annum |
15B. Other long term liabilitie
15B. Other long term liabilities | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Other long term liabilities | Other long term liabilities represent accrued staff benefits and subsidies received from the government in relation to an agreement to meet certain profit and turnover targets until the balance can be recognised as reserves of the Group. As the targets are yet to be met, the balance remained in other long term liabilities. |
16. Stock options
16. Stock options | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Stock options | 2014 Officers’ Stock Option and Incentive Plan Effective November 22, 2014, the Company entered into a stock option contract with a Business Development Manager of Yixing Pact Environmental Technology Co., Ltd, granting the optionee the right to purchase 20,692 Ordinary Shares, 1% of the Company’s issued and outstanding shares, at an exercise price of $3.44 per share. The exercise price was determined by the average closing price of the Company’s as reported by NASDAQ for a ten day period prior to the end of the Business Development Manager’s probationary period on November 22, 2014, the effective date of the stock option contract. The stock options granted are exercisable three years after the effective date and terminate five years after the effective date. In the event of the optionee’s termination, except for his resignation, the options may be exercisable within three months of the termination. In the event of optionee’s death, retirement or disability, he or his legal representative shall have up to one year to exercise the option. The Company estimate the fair value of the options granted under the Binomial pricing model. Changes in outstanding options under various plans mentioned above were as follows: 2016 2015 2014 Number of options Weighted average exercise price Number of options Weighted average exercise price Number of options Weighted average exercise price US$ US$ US$ Outstanding, beginning of year 20,692 3.44 20,692 3.44 - - Granted - - 20,692 3.44 Cancelled/Expired (20,692 ) (3.44 ) - - - - Exercised - - - - - - Outstanding, end of year - - 20,692 3.44 20,692 3.44 Exercisable, end of year - - - - - - As of December 31, 2016, 2015 and 2014, there was no unrecognised stock-based compensation expense related to unvested stock options. The Group adopted the provisions of ASC 718-10, which requires us to recognise expense related to the fair value of our stock-based compensation awards, including employee stock options. The Binomial option-pricing model is used to estimate the fair value of the options granted. This requires the input of subjective assumptions, including the expected volatility of stock price, expected option term, expected risk-free rate over the expected option term and expected dividend yield rate over the expected option term. Because changes in subjective input assumptions can materially affect the fair value estimate, in directors’ opinion, the existing model may not necessarily provide a realisable measure of the fair value of the stock options. Expected volatility is based on historical volatility in the 180 days prior to the issue of the options. Expected option term and dividend yield rate are based on historical trends. Expected risk-free rate is based on US Treasury securities with similar maturities as the expected terms of the options at the date of grant. |
17. Pension plan
17. Pension plan | 12 Months Ended |
Dec. 31, 2016 | |
Pension plan | Prior to December 1, 2000, the Group had only one defined contribution pension plan for all its Hong Kong employees. Under this plan, all employees were entitled to pension benefits equal to their own contributions plus 50% to 100% of individual fund account balances contributed by the Group, depending on their years of service with the Group. The Group was required to make specific contributions at approximately 10% of the basic salaries of the employees to an independent fund management company. With the introduction of the Mandatory Provident Fund Scheme, a defined contribution scheme managed by an independent trustee on 1st December, 2000, the Group and its employees who joined the Group subsequently make monthly contributions to the scheme at 5% of the employee’s cash income as defined under the Mandatory Provident Fund legislation. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$25,000 or HK$30,000 (effective from 1 June 2015). Contributions to the plan vest immediately. As stipulated by the rules and regulations in the PRC, the Group contributes to state-sponsored retirement plans for its employees in Mainland China. The Group contribution range from 14% to 21% of the basic salaries of its employees, and has no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees. During the years ended December 31, 2016, 2015 and 2014, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately US$314,000, US$458,000 and US$378,000 respectively. |
ZHEJIANG JIAHUAN | |
Pension plan | As stipulated by the rules and regulations in the PRC, the Group contributes to the state-sponsored retirement plans for its employees in Mainland China. The Group contributes approximately 26% of the basic salaries of its employees, and has no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees. During the year ended December 31, 2016 and 2015, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB1,799,000 and RMB1,594,000 respectively. |
ZHEJIANG TIANLAN | |
Pension plan | As stipulated by the rules and regulations in the PRC, the Group contributes to state-sponsored retirement plans for its employees in Mainland China. The Group contributes approximately ranging from 12% to 14% During the years ended December 31, 2016, 2015 and 2014, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB3,905,000, RMB3,850,000 and RMB3,027,000 respectively. |
17A. Capital reserve
17A. Capital reserve | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Capital reserve | Capital reserve represents capital contributions from shareholders in excess of the paid-in capital amount. |
18. Risk factors and Derivative
18. Risk factors and Derivative Instruments | 12 Months Ended |
Dec. 31, 2016 | |
Risk factors and Derivative Instruments | Financial risk factors The Group’s activities expose it to a variety of financial risks: foreign exchange rate risk and credit risk. (i) Credit risk The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group has policies that limit the amount of credit exposure to any customers. Derivative counterparties and cash transactions are limited to high credit quality banks. Financial risk factors (continued) (ii) Foreign exchange risk The Group operates in Hong Kong, the PRC and trades with both local and overseas customers, and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to purchases in, Hong Kong dollar, Renminbi and Euro. Foreign exchange risk arises from committed and unmatched future commercial transactions, such as confirmed import purchase orders and sales orders, recognised assets and liabilities, and net investment in the PRC operations. The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain foreign currency exposures. The Group’s prevailing risk management policy is to hedge the net committed transactions (mainly sales and import purchases) in each major currency. The Company’s policy generally permits the use of derivatives if they are associated with underlying assets or liabilities, forecasted transactions, or legally binding rights or obligations. There were no such derivatives during the years ended December 31, 2016, 2015 and 2014. |
ZHEJIANG JIAHUAN | |
Risk factors and Derivative Instruments | The Group’s activities expose itself mainly to credit risk. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group has policies that limit the amount of credit exposure to any customers. |
ZHEJIANG TIANLAN | |
Risk factors and Derivative Instruments | The Group’s activities expose itself mainly to credit risk. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group has policies that limit the amount of credit exposure to any customers. |
19. Related party transactions
19. Related party transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related party transactions | Other than compensation to directors and stock options available to the directors, there were no transactions with other related parties in the years 2016, 2015 and 2014. |
ZHEJIANG TIANLAN | |
Related party transactions | Amounts due from / (to) owners There were no transactions with related parties in the years 2016 and 2015 other than those disclosed in elsewhere in the financial statements. |
19A. Future Minimum rental rece
19A. Future Minimum rental receivable | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Future Minimum rental receivable | As at the end of the reporting period, the Company’s total future minimum rental under non-cancellable operating leases are receivable as follows:- 2016 2015 RMB’000 RMB’000 Within 1 year 791 750 After 1 year but within 5 years - 785 After 5 years - - 791 1,535 |
20. Commitments and contingenci
20. Commitments and contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and contingencies | (i) Operating leases The Group has various operating lease agreements for office and industrial premises. Rental expenses for the years ended December 31, 2016, 2015 and 2014 were approximately US$297,000, US$297,000 and US$293,000, respectively. Future minimum rental payments as of December 31, 2016, under agreements classified as operating leases with non-cancellable terms amounted to US$341,000 of which US$225,000 are payable in the year 2017 and US$116,000 are payable within years 2018 to 2022. (ii) Banking facilities As at December 31, 2016, 2015 and 2014, the Group had various banking facilities available for overdraft, import and export credits and foreign exchange contracts from which the Group can draw up to approximately US$1,660,000, US$1,660,000 and US$1,660,000 respectively, of which approximately US$956,000, US$85,000 and US$68,000 was utilised for issuance of bank guarantees. (iii) Non-controlling interest put option The Group granted the non-controlling interest of Yixing Pact Environmental Technology Co., Ltd and Pact Asia Pacific Limited a put option, which is effective from 2009, requiring the Group to acquire part or all remaining shares of these two companies at a purchase price per share calculated by 5.2 times of their average net income for the three prior fiscal years divided by total number of shares outstanding at the time of exercise of such option. (iv) Litigation Shanghai Euro Tech Environmental Engineering Limited (“SETEE”) SETEE is a plaintiff in a civil action claiming from the defendant for outstanding debts of approximately of USD 416,000. The litigation has not been concluded, but having taken legal advice, the directors are of the opinion that no provision is required to be made in the consolidated financial statements since based on the evidence that SETEE has a reasonable chance of recovering the whole debts. |
ZHEJIANG JIAHUAN | |
Commitments and contingencies | (i) Operating leases The Group has no rental expense during the year ended December 31, 2016 (2015 and 2014: RMB Nil). As of December 31, 2016, the Group has no future minimum lease payments under non-cancellable operating leases are payable in the year 2016. (ii) Litigation The Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial |
ZHEJIANG TIANLAN | |
Commitments and contingencies | (i) Operating leases The Group has no rental expense during the year ended December 31, 2016 (2015 and 2014: RMB Nil). As of December 31, 2016, the Group has no future minimum lease payments under non-cancellable operating leases are payable in the year 2016. (ii) Litigation The Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial |
21. Fair value of financial ins
21. Fair value of financial instruments | 12 Months Ended |
Dec. 31, 2016 | |
Fair value of financial instruments | The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, bills receivable, bills payable, other payables and balances with related companies approximate their fair values due to the short-term nature of these instruments. |
ZHEJIANG JIAHUAN | |
Fair value of financial instruments | The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, bills receivable, bills payable, other payables and balances with related companies approximate their fair values due to the short-term nature of these instruments. |
22. Segment information
22. Segment information | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Segment information | (i) The Group reports under two segments: Trading and manufacturing, and Engineering. Operating income represents total revenues less operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in each segment’s operations. Intersegment transactions are not significant and have been eliminated to arrive at consolidated totals. 2016 2015 2014 US$’000 US$’000 US$’000 Revenue Trading and manufacturing 13,721 12,256 11,647 Engineering 8,757 6,046 7,175 22,478 18,302 18,822 Operating loss Trading and manufacturing (346 ) (187 ) (214 ) Engineering (209 ) (1,624 ) (640 ) Unallocated corporate expenses (115 ) (147 ) (117 ) (670 ) (1,958 ) (971 ) 2016 2015 2014 US$’000 US$’000 US$’000 Depreciation: Trading and manufacturing 43 46 67 Engineering 12 10 21 55 56 88 Capital Expenditures, Gross Trading and manufacturing 12 11 2 Engineering 48 10 8 60 21 10 2016 2015 US$’000 US$’000 Assets Trading and manufacturing 5,463 5,050 Engineering 17,641 16,220 23,104 21,270 Liabilities Trading and manufacturing 3,208 2,468 Engineering 3,278 2,346 6,486 4,814 (ii) Geographical analysis of revenue by customer location is as follows: 2016 2015 2014 US$’000 US$’000 US$’000 Revenue - The PRC 10,604 9,327 10,950 Hong Kong 11,687 8,726 6,177 Others 187 249 1,695 22,478 18,302 18,822 (iii) Long-lived assets (1) Geographical analysis of long-lived assets is as follows: 2016 2015 US$’000 US$’000 Hong Kong 480 501 The PRC 291 272 771 773 (1) Long-lived assets represent property, plant and equipment, net. (iv) Major suppliers Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows: 2016 2015 2014 Supplier A 63 % 39 % 33 % Supplier B 7 % 11 % 11 % Supplier C 5 % 6 % 6 % Supplier D 5 % 5 % 6 % (v) Major customers Details of individual customers accounting for more than 5% of the Group’s revenue are as follows: 2016 2015 2014 Customer A 13 % 11 % - Customer B 6 % - - Customer C 6 % - - Customer D - 11 % - Customer E - 6 % - Customer F - 5 % - |
23. Subsequent events
23. Subsequent events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent events | The Company has evaluated all events or transactions that occurred through the date the consolidated financial statements were issued, and has determined that there were no material recognizable nor subsequent events or transactions which would require recognition or disclosure in the consolidated financial statements. |
ZHEJIANG JIAHUAN | |
Subsequent events | The Company has evaluated all events or transactions that occurred through the date the consolidated financial statements were issued, and has determined that there were no material recognizable nor subsequent events or transactions which would require recognition or disclosure in the consolidated financial statements. |
ZHEJIANG TIANLAN | |
Subsequent events | On December 22, 2016, the board of director approved the issuance and allotment of 1,200,000 ordinary shares at a price RMB 6.00 per shares, which in the aggregative amount the gross proceeds of RMB 7,200,000 to the existing shareholders. The shares were transferred on New Third Board at March 31, 2017. The share allotment was no material effect to the consolidated financial statement of the Company as at December 31, 2016 On April 19, 2017, the Company reached an agreement to acquire 35% share of a PRC company, the acquisition price is RMB 1 and the Company is requested to invest RMB10,500,000 to the associate. The Company has evaluated all events or transactions that occurred through the date the consolidated financial statements were issued, and has determined that there were no material recognizable nor subsequent events or transactions which would require recognition or disclosure in the consolidated financial statements. |
2. Summary of significant acc43
2. Summary of significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Basis of Consolidation | The consolidated financial statements include the accounts of Euro Tech Holdings Company Limited and its subsidiaries (the “Group”). The financial statements of variable interest entities (“VIEs”), as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 810-10, Consolidation, are included in the consolidated financial statements, if applicable. All material intercompany balances and transactions have been eliminated on consolidation. The Group identified that a retail shop established in the PRC qualified as variable interest entities as defined in ASC 810-10. This retail shop was principally engaged in the retailing business of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company is the primary beneficiary of this retail shop and, accordingly, consolidated their financial statements. The Company has a controlling financial interest in this retail shop and is subject to a majority of the risk of loss from the retailing activities, and is entitled to receive a majority of the retail shop’s residual returns. Total assets and liabilities of this consolidated VIE total US$9,179 and US$1,626, as of December 31, 2015, respectively. This VIE had ceased operation since October 2016. |
Subsidiaries and affiliates | A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. |
Revenue Recognition | The Group’s main source of revenue is the sale of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company recognises revenue when the product is delivered and the title is transferred. For certain products where installation is necessary, revenue is recognised upon completion of installation. Revenue earned from customer support services, which represents a minor percentage of total revenues, is recognised when such services are provided. Revenues and profits in long term fixed price contracts or engineering income are recognised using the percentage of completion method in accordance with FASB ASC Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. This approach primarily based on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognised in the period they are determined. Revenues recognised in excess of amounts billed are classified as costs and estimated earnings in excess of billings on uncompleted contracts. Essentially all of such amounts are expected to be billed and collected within one year and are classified as current assets. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as current liabilities. When reasonably dependable estimates cannot be made, construction contract revenues are recognised using the completed contract method. |
Research and Development Costs | Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$475,000, US$852,000 and US$631,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses |
Advertising and promotional expenses | Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$13,000, US$17,000 and US$44,000 for the years December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses |
Taxation | The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC 740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. |
Cash and Cash Equivalents | Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. |
Restricted Cash | Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance guarantees to the customers. The amount is expected to be released within one year after the balance sheet date. |
Receivables and Other Assets | Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. |
Inventories | Inventories are stated at the lower of cost, on the first-in, first-out method, or market value. Costs include purchase and related costs incurred in bringing each product to its present location and condition. Market value is calculated based on the estimated normal selling price, less further costs expected to be incurred for disposal. Allowance is made for obsolete, slow moving or defective items, where appropriate. |
Property, Plant, and Equipment and Land Use Right | Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Depreciation of property, plant and equipment is computed using the straight-line method over the assets’ estimated useful lives as follows: Office premises 47 to 51 years Leasehold improvements over terms of the leases or the useful lives whichever is less Furniture, fixtures and office equipment 3 to 5 years Motor vehicles 4 years Testing equipment 3 years |
Impairment | The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There was no impairment losses recorded during each of the three years ended December 31, 2016. |
Operating leases | Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessors are accounted for as operating leases. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases. |
Goodwill | Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, goodwill is not amortized, but rather is subject to an annual impairment test. Goodwill is tested for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value. The Company performs its annual impairment analysis of goodwill in the fourth quarter of the year, or more often if there are indicators of impairment present. The provisions of ASC 350 require that a two-step impairment test be performed on goodwill at the level of the reporting units. In the first step, or Step 1, the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or Step 2, of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions. |
Foreign Currency Translation | The Company maintains its books and records in United States dollars. Its subsidiaries and affiliates maintain their books and records either in Hong Kong dollars or Chinese Renminbi (“functional currencies”). Foreign currency transactions during the year are translated into the respective functional currencies at the applicable rates of exchange at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currencies using the exchange rates prevailing at the balance sheet dates. Gains or losses from foreign currency transactions are recognised in the consolidated statements of income during the year in which they occur. Translation adjustments on subsidiaries’ equity are included as accumulated comprehensive income or loss. |
Derivative Instruments and Hedging Activities | ASC 815, "Derivatives and Hedging" ("ASC 815"), as amended, requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income (loss). If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The Company uses derivatives to hedge certain cash flow foreign currency exposures in order to further reduce the Group's exposure to foreign currency risks. |
Fair Value Measurement | ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. |
Comprehensive Income | The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income and foreign currency translation adjustments, in the consolidated statement of changes in shareholders’ equity. |
Ordinary Share | On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis. |
Net income per Ordinary Share | Net income per ordinary share is computed in accordance with FASB ASC Subtopic 260-10, Earnings Per Share, by dividing the net income by the weighted average number of shares of ordinary share outstanding during the period. The Company reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding. Outstanding stock options are the only dilutive potential shares of the Company. |
Stock-based Compensation | The Group accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" ("ASC 718"). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of operations. The Group recognizes compensation expenses for the value of its awards, based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates. |
Related parties | Related parties |
Segment Information | The Company’s segment reporting is prepared in accordance with FASB ASC Subtopic 280-10, Segment Reporting. The management approach required by ASC 280-10 designates that the internal reporting structure that is used by management for making operating decisions and assessing performance should be used as the source for presenting the Company’s reportable segments. The Company categorises its operations into two business segments: Trading and manufacturing, and Engineering. |
Recent Accounting Pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. |
ZHEJIANG TIANLAN | |
Basis of Consolidation | The consolidated financial statements include the accounts of Zhejiang Tianlan Environmental Protection Technology Company Limited and its subsidiaries (the “Group”). In preparing the consolidated financial statements presented herewith, all significant intercompany balances and transactions have been eliminated on consolidation. |
Subsidiaries and affiliates | A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. |
Revenue Recognition | The Group’s main source of revenue is the construction and installation services of environmental protection equipment for flue gas desulphurization, dust removal and flue gas denitration. Revenues are recorded under the percentage of completion method in accordance with FASB ASC Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts. This approach primarily based on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognised in the period they are determined. Revenues recognised in excess of amounts billed are classified as costs and estimated earnings in excess of billings on uncompleted contracts. Essentially all of such amounts are expected to be billed and collected within one year and are classified as current assets. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as current liabilities. When reasonably dependable estimates cannot be made, construction contract revenues are recognised using the completed contract method. |
Research and Development Costs | Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs re included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB13,808,000, RMB18,895,000 and RMB21,796,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. |
Advertising and promotional expenses | Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately RMB58,000, RMB24,000 and RMB11,000 for the years December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. |
Taxation | The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC-740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. |
Cash and Cash Equivalents | Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. |
Receivables and Other Assets | Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. According to construction contracts signed with the customers, an amount ranged from 5%-20% of contract sum will only be receivable one year after the final inspection report issued by relevant department of Ministry of Environmental Protection. As of December 31, 2016, accounts receivable in more than one year amounted to RMB46,624,000 (2015: RMB57,623,000). |
Inventories | Inventories are stated at the lower of cost or market determined using the weighted average method which approximates cost and estimated net realizable value. Cost of work in progress and finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. |
Property, Plant, and Equipment and Land Use Right | Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period for time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and classified as land use right. Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows: Land use right Over terms of the leases Office premises 47-50 years, with 5% residual value Leasehold improvements over terms of the leases or the useful lives whichever is less, with 5% residual value Plant and machineries 5 to 10 years, with 5% residual value Furniture, fixtures and office equipment 3 to 5 years, with 5% residual value Motor vehicles 1 to 8 years, with 5% residual value |
Intangible Assets | The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. |
Impairment | The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There were no impairment losses recorded during each of the three years ended December 31, 2016. |
Government grant income | Government grant income consisted of receipt of funds to subsidize the investment cost of information technology system development and market development in China. No present or future obligation arises from the receipt of such amount. Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. |
Operating leases | Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessors are accounted for as operating leases. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases. |
Fair Value Measurement | ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. |
Comprehensive Income | The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income, in the consolidated statement of changes in shareholders’ equity. |
Share capital | Paid in capital refers to the registered capital paid up by the shareholders of the Company. On December 17, 2015, the Company increased the number of registered shares by 18,972,000 shares. The paid up capital were increased by RMB 18,972,000 transferred from the capital reserves, which is agreed by the shareholders and the board of directors. At the year end of December 31, 2015, there were 80,172,000 shares were issued. On June 2, 2016, the Company increased the number of paid up shares by 1,200,000 at a price RMB 2.80 per shares, which in the aggregative amount the gross proceeds of RMB 3,360,000 to the existing shareholders. At the year end of December 31, 2016, there were 81,372,000 shares were issued. |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Group may undertake in the future, actual results may be different from the estimates. |
Related parties | Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
Recent Accounting Pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statement In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. |
ZHEJIANG JIAHUAN | |
Basis of Consolidation | The consolidated financial statements include the accounts of Zhejiang Jiahuan Electronic Company Limited and its subsidiaries (the “Group”). In preparing the consolidated financial statements presented herewith, all significant intercompany balances and transactions have been eliminated on consolidation. |
Subsidiaries and affiliates | A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders An investment in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting. |
Revenue Recognition | Revenue from sale of automatic control systems, electric voltage control equipment, environmental equipment, and solar and wind power equipment is recognized when the product is delivered and the title is transferred. For certain products where installation is necessary, revenue is recognized upon completion of installation. |
Research and Development Costs | Research and development expenses include payroll, employee benefits and other related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Such costs re included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized to the cost of revenue over the estimated lives of the products. Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB8,814,000, RMB6,982,000 and RMB4,981,000 for the years ended December 31, 2016, 2015 and 2014 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income. |
Taxation | The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time. In accordance with ASC-740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2016, 2015 and 2014. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date. |
Cash and Cash Equivalents | Cash and cash equivalents include cash on hand and demand deposits with banks. |
Investments | Investments comprise marketable securities which are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses, et of taxes, reported as a separate component of shareholders’ equity (deficit). The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method, and records such gains and losses as a component of other income (expense), net in the consolidated statement of income. |
Receivables and Other Assets | Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. |
Inventories | Inventories are stated at the lower of cost or market determined using the first-in, first-out method. Costs included purchase and related costs incurred in bringing each product to its present location and condition. Market value is calculated based on the estimated normal selling price, less further costs expected to be incurred for disposal. Provision is made for obsolete, slow moving or defective items, where appropriate. |
Property, Plant, and Equipment and Land Use Right | Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period for time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and classified as land use right. Construction in progress is stated at cost less impairment losses. Cost comprises direct costs of construction as well as borrowing costs capitalized during the periods of construction and installation. Capitalisation of these costs creases and the construction in progress is transferred to the appropriate class of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction in progress until it is completed and read for its intended use. Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows: Land use right 50 years Buildings 20 years Plant and machinery 5 to 20 years Office equipment 3 to 10 years Motor vehicles 5 to 10 years |
Intangible Assets | The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. |
Impairment | The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There were no impairment losses recorded during each of the three years ended December 31, 2016, December 31, 2015 and December 31, 2014. |
Fair Value Measurement | ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adopted ASC 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Financial instruments include cash, accounts receivable, prepayments and other receivables, short-term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and accrued expenses approximate their fair value due to the short term maturities of these instruments. The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts. |
Comprehensive Income | The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income, in the consolidated statement of changes in shareholders’ equity. |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Group may undertake in the future, actual results may be different from the estimates. |
Related parties | Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
Recent Accounting Pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, issued by the FASB in August 2015, and this new accounting guidance will be effective for the interim and annual period beginning after December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt liability. This new accounting guidance will be effective for interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In April 2015, the FASB issued ASU 2015-05, Customers' Accounting for Fees Paid in a Cloud Computing Arrangement, which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. This new accounting guidance will be effective for the interim and annual period beginning after December 31, 2017. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated and Combined Financial Statements. In January 2016, the FASB has issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information. |
1. Organisation and principal44
1. Organisation and principal activities (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities Subsidiaries: Euro Tech (Far East) Limited 100% Hong Kong Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Euro Tech (China) Limited 100% Hong Kong Inactive Euro Tech Trading (Shanghai) Limited 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Shanghai Euro Tech Limited 100% The PRC Manufacturing of analytical and testing equipment Shanghai Euro Tech Environmental Engineering Company Limited 100% The PRC Undertaking water and waste-water treatment engineering projects Chongqing Euro Tech Rizhi Technology Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Name Percentage of equity ownership Place of incorporation Principal activities Guangzhou Euro Tech Environmental Equipment Co., Ltd 100% The PRC Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems Yixing Pact Environmental Technology Co., Ltd 58% The PRC Design, manufacture and operation of water and waste water treatment machinery and equipment Pact Asia Pacific Limited 58% The British Virgin Islands Selling of environment protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services Affiliates: Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (“Blue Sky”) 19.7% * The PRC Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted Zhejiang Jia Huan Electronic Co. Ltd. 20% The PRC Design and manufacturing automatic control systems and electric voltage control equipment for electrostatic precipitators (air purification equipment) * The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation in both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process. |
ZHEJIANG JIAHUAN | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities 2016 2015 Jinhua Jiahuan Puzhau New Energy Technology Co., Ltd* - - PRC Dormant Zhejiang Jiahuan Xinyu Environmental Production Co., Ltd 100% 100% PRC Manufacturing and installation services of environmental production equipment *The Company has been deregistered on September 1, 2015. |
ZHEJIANG TIANLAN | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities 2016 2015 Zhejiang Tianlan Environmental Engineering and Design Company Limited 100% 100% PRC Provision of maintenance services of environmental protection equipment Hangzhou Tianlan Environmental Protection Equipments Company Limited 51% 51% PRC Manufacturing and installation services of environmental protection equipment Shihezi Tianlan Environmental Protection Technology Company Limited 100% 100% PRC Provision of maintenance services of environmental protection equipment Da Tong Tianlan Environmental Protection Technology Service Company Limited * -% 100% PRC Provision of maintenance services of environmental protection equipment Hangzhou Tianlian Environmental Testing Technology Company Limited ** 80% 100% PRC Provision of testing services of environmental protection equipment * On April 19, 2016, the board of director approved the de-registration of subsidiary. The subsidiary was closed on August 25, 2016. ** The Company was incorporated on October 28, 2015. On April 17, 2016, the board of director approved the sales of 1,000,000 ordinary shares at a price RMB 1.00 per shares, which in the aggregate amount the gross proceeds of RMB 1,000,000 to the third parties. |
2. Summary of significant acc45
2. Summary of significant accounting policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment | Office premises 47 to 51 years Leasehold improvements over terms of the leases or the useful lives whichever is less Furniture, fixtures and office equipment 3 to 5 years Motor vehicles 4 years Testing equipment 3 years |
ZHEJIANG JIAHUAN | |
Property, Plant and Equipment | Land use right 50 years Buildings 20 years Plant and machinery 5 to 20 years Office equipment 3 to 10 years Motor vehicles 5 to 10 years |
ZHEJIANG TIANLAN | |
Property, Plant and Equipment | Land use right Over terms of the leases Office premises 47-50 years, with 5% residual value Leasehold improvements over terms of the leases or the useful lives whichever is less, with 5% residual value Plant and machineries 5 to 10 years, with 5% residual value Furniture, fixtures and office equipment 3 to 5 years, with 5% residual value Motor vehicles 1 to 8 years, with 5% residual value |
3. Other income, net (Tables)
3. Other income, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Other income | 2016 2015 2014 US$’000 US$’000 US$’000 Exchange (loss), net (75 ) (75 ) (12 ) Rental income 80 84 77 5 9 65 |
ZHEJIANG JIAHUAN | |
Other income | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Government grant 3,115 200 73 Rental income (i) 1,271 901 850 Interest income 54 44 17 Sundry income 152 263 135 4,592 1,408 1,075 |
ZHEJIANG TIANLAN | |
Other income | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Gain on disposal of intangible asset - - 150 (Loss) / Gain on disposal of property, plant and equipment (15 ) - 7 Subsidy income 3,360 2,617 4,163 Sales of scrapped materials 3 6 6 Investment income 412 - - Others (304 ) 150 269 3,456 2,773 4,595 |
4. Income taxes (Tables)
4. Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Components of provision for income taxes | Loss before income taxes: 2016 2015 2014 US$’000 US$’000 US$’000 The PRC and Hong Kong (640 ) (1,904 ) (879 ) The provision / (credit) for income taxes consist of: 2016 2015 2014 US$’000 US$’000 US$’000 Current tax expenses: The PRC and Hong Kong 212 (72 ) 8 Total current provision / (credit) 212 (72 ) 8 Deferred tax expenses: The PRC and Hong Kong 16 25 10 Total deferred provision 16 25 10 |
Reconciling items from income tax | 2016 2015 2014 US$’000 US$’000 US$’000 Computed tax using respective companies’ statutory tax rates (136 ) (177 ) (194 ) Change in valuation allowances 350 455 93 Under-provision for income tax in prior years - (69 ) - Non-deductible expenses 14 (256 ) 119 Total provision / (credit) for income tax at effective tax rate 228 (47 ) 18 |
Components of deferred tax assets | 2016 2015 US$’000 US$’000 Tax losses 838 1,159 Temporary differences (2 ) 1 Less: Valuation allowances (650 ) (958 ) Net deferred tax assets 186 202 |
ZHEJIANG JIAHUAN | |
Components of provision for income taxes | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income taxes 1,387 861 484 |
Reconciling items from income tax | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income before income taxes 11,849 5,797 5,194 Computed tax using respective companies’ statutory tax rates 2,326 1,119 1,299 Tax effect on revenue not subject to tax (930 ) (447 ) (537 ) (Over) / under provision for income tax in prior years (9 ) 189 (278 ) Total provision for income tax at effective tax rate 1,387 861 484 |
ZHEJIANG TIANLAN | |
Components of provision for income taxes | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Current PRC EIT: Domestic 6,298 3,351 2,159 Income taxes 6,298 3,351 2,159 Deferred tax benefit: (1,337 ) (177 ) (1,391 ) Total deferred taxes (1,337 ) (177 ) (1,391 ) |
Reconciling items from income tax | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Income before income taxes 27,603 24,927 14,776 Computed tax using respective companies’ statutory tax rates 4,078 3,767 2,216 (Over)-provision for income tax in prior years 57 - (2,418 ) Permanent difference (82 ) - - Temporary differences (1,337 ) (177 ) 1,575 Tax effect of revenue not subject to tax (901 ) (1,068 ) (695 ) Tax effect of expenses not deductible for tax purposes 2,732 596 90 Tax effect of unused tax losses not recognized 414 56 - Total provision for income tax at effective tax rate 4,961 3,174 768 |
Components of deferred tax assets | 2016 2015 RMB’000 RMB’000 Tax losses - - Allowance for doubtful debts 5,864 4,527 Net deferred tax assets 5,864 4,527 |
5. Net income per ordinary sh48
5. Net income per ordinary share (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Net Income Per Ordinary Share Tables | |
Basic and diluted number of shares | 2016 2015 2014 Number of shares Weighted average number of ordinary shares for the purposes of basic net income per share 2,061,909 2,063,738 2,069,223 Effect of dilutive potential ordinary shares: Stock options - - - Weighted average number of ordinary shares for the purposes of diluted net income per share 2,061,909 2,063,738 2,069,223 |
6. Accounts receivable, net (Ta
6. Accounts receivable, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounts receivable, net | 2016 2015 US$’000 US$’000 Accounts receivable 4,431 4,557 Less: Allowance for doubtful debts (38 ) (57 ) 4,393 4,500 |
Age analysis of past due account receivables | 2016 2015 US$’000 US$’000 Current 1,789 2,762 30-59 days past due 1,072 633 60-89 days past due 852 635 Greater than 90 days 680 470 4,393 4,500 |
ZHEJIANG JIAHUAN | |
Accounts receivable, net | 2016 2015 RMB’000 RMB’000 Accounts receivable, gross 91,069 99,864 Less: Allowance for doubtful debts (32 ) (32 ) Accounts receivable, net 91,037 99,832 2016 2015 RMB’000 RMB’000 Allowance for doubtful debts: Balance at beginning (32 ) (131 ) Charged to statement of income Recovered - 99 Balance at end (32 ) (32 ) |
ZHEJIANG TIANLAN | |
Accounts receivable, net | 2016 2015 RMB’000 RMB’000 Accounts receivable 204,166 238,325 Less: Allowance for doubtful debts (39,066 ) (30,418 ) 165,100 207,907 |
Age analysis of past due account receivables | 2016 2015 RMB’000 RMB’000 Within 1 year 118,476 150,345 1 year – 2 years 31,340 44,393 2 years – 3 years 9,387 8,588 3 years – 4 years 4,593 3,881 4 years – 5 years 240 700 Greater than 5 years 1,064 - 165,100 207,907 |
7. Prepayments and other curr50
7. Prepayments and other current assets (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Cost and estimated earnings in excess of billings | 2016 2015 US$’000 US$’000 Cost & estimated earnings in excess of billings 343 144 Deposit paid 70 57 Prepayment 221 59 Other receivables 156 214 Other tax recoverable 25 26 815 500 |
ZHEJIANG JIAHUAN | |
Cost and estimated earnings in excess of billings | 2016 2015 RMB’000 RMB’000 Prepayments and other receivables 11,994 13,039 Deposits 3,448 4,433 15,442 17,472 |
ZHEJIANG TIANLAN | |
Cost and estimated earnings in excess of billings | 2016 2015 RMB’000 RMB’000 Cost and estimated earnings in excess of billing 70,786 97,640 Prepayment 24,100 13,828 Other receivables 14,851 8,090 Other current assets 1,320 - 111,057 119,558 Cost and estimated earnings in excess of billings 2016 2015 RMB’000 RMB’000 Contracts costs incurred plus estimated earnings 389,534 160,634 Less: Progress billings (318,748 ) (62,994 ) Cost and estimated earnings in excess of billings 70,786 97,640 |
7A. Long term investments (Tabl
7A. Long term investments (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Long term investments | Gross unrealized Fair Amortized cost Gains Losses Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 2015 Gross unrealized Fair Amortized cost Gains Losses Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 |
8. Inventories (Tables)
8. Inventories (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Inventories | 2016 2015 US$’000 US$’000 Raw materials 97 131 Work in progress 29 39 Finished goods 218 387 344 557 |
ZHEJIANG JIAHUAN | |
Inventories | 2016 2015 RMB’000 RMB’000 Raw materials 6,529 5,603 Work in progress 11,264 7,840 Finished goods 10,212 8,020 28,005 21,463 |
ZHEJIANG TIANLAN | |
Inventories | 2016 2015 RMB’000 RMB’000 Raw materials 5,606 6,586 Work in progress 7,269 5,525 Finished goods 230 - 13,105 12,111 |
9. Property, plant and equipm53
9. Property, plant and equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, plant and equipment | 2016 2015 US$’000 US$’000 Office premises 1,866 1,866 Leasehold improvements 155 157 Furniture, fixtures and office equipment 581 635 Motor vehicles 188 155 Testing equipment 30 30 2,820 2,843 Less: Accumulated depreciation (2,049 ) (2,070 ) 771 773 |
Depreciation expense | 2016 2015 2014 US$’000 US$’000 US$’000 Depreciation charge 55 56 88 |
ZHEJIANG JIAHUAN | |
Property, plant and equipment | 2016 2015 RMB’000 RMB’000 Buildings 34,724 34,493 Plant and machinery 7,014 7,011 Office equipment 1,206 1,148 Motor vehicles 467 979 43,411 43,631 Less: Accumulated depreciation (21,550 ) (19,843 ) 21,861 23,788 |
Depreciation expense | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Depreciation charge 1,707 2,296 2,408 |
ZHEJIANG TIANLAN | |
Property, plant and equipment | 2016 2015 RMB’000 RMB’000 Building and leasehold improvements 56,665 56,696 Furniture, fixtures and office equipment 9,660 9,919 Motor vehicles 4,451 3,780 Plant and machineries 115,349 114,617 Construction in progress 211 - 186,336 185,012 Less: Accumulated depreciation (36,496 ) (23,281 ) 149,840 161,731 |
Depreciation expense | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Depreciation charge 14,144 8,473 2,985 |
10. Interests in affiliates (Ta
10. Interests in affiliates (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Interests In Affiliates Tables | |
Schedule of Investments in affiliates | A summary of the financial information of the affiliate, Zhejiang Tianlan Environmental Protection Technology Co. Ltd, is set forth below: 2016 2015 Balance Sheet: US$’000 US$’000 Current assets 46,297 57,432 Non-current assets 25,847 26,587 Total assets 72,144 84,019 Total liabilities (45,372 ) (58,149 ) Total shareholders’ equity 26,772 25,870 2016 2015 Operating results: US$’000 US$’000 Net sales 43,226 66,899 Operating income 3,841 4,260 Net income 3,473 3,458 A summary of the financial information of the affiliate, Zhejiang Jia Huan Electronic Co. Ltd, is set forth below: 2016 2015 Balance Sheet: US$’000 US$’000 Current assets 22,021 22,693 Non-current assets 4,079 4,717 Total assets 26,100 27,410 Total liabilities (11,694 ) (13,627 ) Total shareholders’ equity 14,406 13,783 2016 2015 Operating results: US$’000 US$’000 Net sales 16,684 18,481 Operating income 1,586 1,316 Net income 1,564 788 |
11. Other payables and accrue55
11. Other payables and accrued expenses (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Other payables and accrued expenses | 2016 2015 US$’000 US$’000 Dividend payables 79 84 Deposit received from customer 1,113 558 Rental deposit received 14 18 Other payables 994 764 Other tax payables 58 202 2,258 1,626 |
ZHEJIANG TIANLAN | |
Other payables and accrued expenses | 2016 2015 RMB’000 RMB’000 Deposit received from customers 35,225 26,749 Accrued expenses 10,116 12,104 Other payables 1,227 1,118 Deferred income 4,610 799 Amount due to a related company 5 5 51,183 40,775 |
ZHEJIANG JIAHUAN | |
Other payables and accrued expenses | 2016 2015 RMB’000 RMB’000 Deposit received from customers 10,979 8,768 Accrued expenses 2,795 1,210 Other payables 137 245 13,911 10,223 |
11A. Intangible assets, net (Ta
11A. Intangible assets, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Intangible assets, net | 2016 2015 RMB’000 RMB’000 Software 591 591 591 591 Less: Accumulated depreciation (349 ) (83 ) 242 508 |
Amortization expense | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortization expenses 266 83 - |
ZHEJIANG TIANLAN | |
Intangible assets, net | 2016 2015 RMB’000 RMB’000 Patents 2,400 2,400 Others 567 165 2,967 2,565 Less: Accumulated amortisation (1,592 ) (1,017 ) 1,375 1,548 |
Amortization expense | 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 575 193 239 The following table represents the total estimated amortization of intangible assets for the five succeeding fiscal years to December 31, 2016: For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2017 172 2018 172 2019 172 2020 172 2021 172 Thereafter 515 1,375 |
12A. Land use right, net (Table
12A. Land use right, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Schedule Land use right | 2016 2015 RMB’000 RMB’000 Land use right 7,987 7,987 Less: Accumulated amortisation (1,699 ) (1,536 ) 6,288 6,451 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 163 163 163 |
ZHEJIANG TIANLAN | |
Schedule Land use right | 2016 2015 RMB’000 RMB’000 Land use right 7,361 7,361 Less: Accumulated amortisation (1,614 ) (1,465 ) 5,747 5,896 2016 2015 2014 RMB’000 RMB’000 RMB’000 Amortisation expense 149 149 149 |
13A. Short term borrowings (Tab
13A. Short term borrowings (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Short term borrowings | 2016 2015 RMB’000 RMB’000 Bank loan borrowed by the Company (note i) 20,000 40,000 Bank loan borrowed by a subsidiary of the Company (note ii) 5,000 5,000 25,000 45,000 |
15A. Long Term Borrowing (Table
15A. Long Term Borrowing (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG TIANLAN | |
Long Term Borrowing | 2016 2015 RMB’000 RMB’000 Loan borrowed by the Company 111,691 170,732 |
16. Stock options (Tables)
16. Stock options (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Options Tables | |
Schedule stock option activity | 2016 2015 2014 Number of options Weighted average exercise price Number of options Weighted average exercise price Number of options Weighted average exercise price US$ US$ US$ Outstanding, beginning of year 20,692 3.44 20,692 3.44 - - Granted - - 20,692 3.44 Cancelled/Expired (20,692 ) (3.44 ) - - - - Exercised - - - - - - Outstanding, end of year - - 20,692 3.44 20,692 3.44 Exercisable, end of year - - - - - - |
19A. Future Minimum rental re61
19A. Future Minimum rental receivable (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ZHEJIANG JIAHUAN | |
Schedule of future minimum operating leases | 2016 2015 RMB’000 RMB’000 Within 1 year 791 750 After 1 year but within 5 years - 785 After 5 years - - 791 1,535 |
22. Segment information (Tables
22. Segment information (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Information Tables | |
Segment information | 2016 2015 2014 US$’000 US$’000 US$’000 Revenue Trading and manufacturing 13,721 12,256 11,647 Engineering 8,757 6,046 7,175 22,478 18,302 18,822 Operating loss Trading and manufacturing (346 ) (187 ) (214 ) Engineering (209 ) (1,624 ) (640 ) Unallocated corporate expenses (115 ) (147 ) (117 ) (670 ) (1,958 ) (971 ) 2016 2015 2014 US$’000 US$’000 US$’000 Depreciation: Trading and manufacturing 43 46 67 Engineering 12 10 21 55 56 88 Capital Expenditures, Gross Trading and manufacturing 12 11 2 Engineering 48 10 8 60 21 10 2016 2015 US$’000 US$’000 Assets Trading and manufacturing 5,463 5,050 Engineering 17,641 16,220 23,104 21,270 Liabilities Trading and manufacturing 3,208 2,468 Engineering 3,278 2,346 6,486 4,814 |
Geographical analysis of revenue | Geographical analysis of revenue by customer location is as follows: 2016 2015 2014 US$’000 US$’000 US$’000 Revenue - The PRC 10,604 9,327 10,950 Hong Kong 11,687 8,726 6,177 Others 187 249 1,695 22,478 18,302 18,822 Geographical analysis of long-lived assets is as follows: 2016 2015 US$’000 US$’000 Hong Kong 480 501 The PRC 291 272 771 773 (1) Long-lived assets represent property, plant and equipment, net. |
Major suppliers | Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows: 2016 2015 2014 Supplier A 63 % 39 % 33 % Supplier B 7 % 11 % 11 % Supplier C 5 % 6 % 6 % Supplier D 5 % 5 % 6 % Details of individual customers accounting for more than 5% of the Group’s revenue are as follows: 2016 2015 2014 Customer A 13 % 11 % - Customer B 6 % - - Customer C 6 % - - Customer D - 11 % - Customer E - 6 % - Customer F - 5 % - |
1. Organisation and principal63
1. Organisation and principal activities (Details) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | ||
Euro Tech (Far East) Limited | |||
Percentage of equity ownership | 100.00% | ||
Euro Tech (China) Limited | |||
Percentage of equity ownership | 100.00% | ||
Euro Tech Trading (Shanghai) Limited | |||
Percentage of equity ownership | 100.00% | ||
Shanghai Euro Tech Limited | |||
Percentage of equity ownership | 100.00% | ||
Shanghai Euro Tech Environmental Engineering Company Limited | |||
Percentage of equity ownership | 100.00% | ||
Chongqing Euro Tech Rizhi Technology Co., Ltd | |||
Percentage of equity ownership | 100.00% | ||
Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd | |||
Percentage of equity ownership | 100.00% | ||
Guangzhou Euro Tech Environmental Equipment Co., Ltd | |||
Percentage of equity ownership | 100.00% | ||
Yixing Pact Environmental Technology Co., Ltd | |||
Percentage of equity ownership | 58.00% | ||
Pact Asia Pacific Limited | |||
Percentage of equity ownership | 58.00% | ||
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. | |||
Percentage of equity ownership | [1] | 19.70% | |
Zhejaing Jia Huan Electronic Co. Ltd | |||
Percentage of equity ownership | 20.00% | ||
Zhejiang Tianlan Environmental Engineering and Design Company Limited | ZHEJIANG TIANLAN | |||
Percentage of equity ownership | 100.00% | 100.00% | |
Hangzhou Tianlan Environmental Protection Equipments Company Limited | ZHEJIANG TIANLAN | |||
Percentage of equity ownership | 51.00% | 51.00% | |
Shihezi Tianlan Environmental Protection Technology Company Limited | ZHEJIANG TIANLAN | |||
Percentage of equity ownership | 100.00% | 100.00% | |
Da Tong Tianlan Environmental Protection Technology Service | ZHEJIANG TIANLAN | |||
Percentage of equity ownership | [2] | 0.00% | 100.00% |
Hangzhou Tianlian Environmental Testing Technology Company Limited | ZHEJIANG TIANLAN | |||
Percentage of equity ownership | [3] | 80.00% | 100.00% |
Jinhua Jiahuan Puzhau | ZHEJIANG JIAHUAN | |||
Percentage of equity ownership | [4] | 0.00% | 0.00% |
Zhejiang Jiahuan Xinyu Environmental | ZHEJIANG JIAHUAN | |||
Percentage of equity ownership | 100.00% | 100.00% | |
[1] | The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation in both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process | ||
[2] | On April 19, 2016, the board of director approved the de-registration of subsidiary. The subsidiary was closed on August 25, 2016. | ||
[3] | The Company was incorporated on October 28, 2015. On April 17, 2016, the board of director approved the sales of 1,000,000 ordinary shares at a price RMB 1.00 per shares, which in the aggregate amount the gross proceeds of RMB 1,000,000 to the third parties. | ||
[4] | The Company has been deregistered on September 1, 2015. |
2. Summary of significant acc64
2. Summary of significant accounting policies (Details) | 12 Months Ended |
Dec. 31, 2016 | |
Office premises | |
Useful lives | 47 to 51 years |
Leasehold improvements | |
Useful lives | over terms of the leases or the useful lives whichever is less |
Furniture, fixtures and office equipment | |
Useful lives | 3 to 5 years |
Motor Vehicles | |
Useful lives | 4 years |
Testing Equipment | |
Useful lives | 3 years |
ZHEJIANG TIANLAN Land Use Right | |
Useful lives | Over terms of the leases |
ZHEJIANG TIANLAN Office Premises | |
Useful lives | 47-50 years, with 5% residual value |
ZHEJIANG TIANLAN Leasehold improvements | |
Useful lives | over terms of the leases or the useful lives whichever is less, with 5% residual value |
ZHEJIANG TIANLAN Plant and machineries | |
Useful lives | 5 to 10 years, with 5% residual value |
ZHEJIANG TIANLAN Furniture, fixtures and office equipment | |
Useful lives | 3 to 5 years, with 5% residual value |
ZHEJIANG TIANLAN Motor vehicles | |
Useful lives | 1 to 8 years, with 5% residual value |
ZHEJIANG JIAHUAN Land use right | |
Useful lives | 50 years |
ZHEJIANG JIAHUAN Buildings | |
Useful lives | 20 years |
ZHEJIANG JIAHUAN Plant and machinery | |
Useful lives | 5 to 20 years |
ZHEJIANG JIAHUAN Office equipment | |
Useful lives | 3 to 10 years |
ZHEJIANG JIAHUAN Motor vehicles | |
Useful lives | 5 to 10 years |
2. Summary of significant acc65
2. Summary of significant accounting policies (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Research and Development Costs | $ | $ 475 | $ 852 | $ 631 | |||
Advertising and promotional expenses | $ | $ 13 | $ 17 | $ 44 | |||
ZHEJIANG JIAHUAN | ||||||
Research and Development Costs | ¥ 8,814 | ¥ 6,982 | ¥ 4,981 | |||
ZHEJIANG TIANLAN | ||||||
Research and Development Costs | 13,808 | 18,895 | 21,796 | |||
Advertising and promotional expenses | ¥ 58 | ¥ 24 | ¥ 11 |
3. Other income, net (Details)
3. Other income, net (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | ||
Exchange (loss)/gain, net | $ | $ (75) | $ (75) | $ (12) | ||||
Rental income | $ | 80 | 84 | 77 | ||||
Other income, net | $ | 5 | 9 | 65 | ||||
Total | $ | $ 5 | $ 9 | $ 65 | ||||
ZHEJIANG JIAHUAN | |||||||
Government grant | ¥ 3,115 | ¥ 200 | ¥ 73 | ||||
Rental income | [1] | 1,271 | 901 | 850 | |||
Interest income | 54 | 44 | 17 | ||||
Sundry income | 152 | 263 | 135 | ||||
Other income, net | 4,592 | 1,408 | 1,075 | ||||
Total | 4,592 | 1,408 | 1,075 | ||||
ZHEJIANG TIANLAN | |||||||
Gain on disposal of intangible asset | 0 | 0 | 150 | ||||
(Loss) / Gain on disposal of property, plant and equipment | (15) | 0 | 7 | ||||
Subsidy income | 3,360 | 2,617 | 4,163 | ||||
Sales of scrapped materials | 3 | 6 | 6 | ||||
Investment income | 412 | 0 | 0 | ||||
Others | (304) | 150 | 269 | ||||
Total | ¥ 3,456 | ¥ 2,773 | ¥ 4,595 | ||||
[1] | Rental income under operating leases is recognized on a straight-line basis over the term of the relevant lease. |
4. Income taxes (Details)
4. Income taxes (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Profit/(loss before) income taxes/(benefit): The PRC and Hong Kong | $ (640) | $ (1,904) | $ (879) | |||
The provision / (credit) for income taxes consist of: | ||||||
Current tax expenses: The PRC and Hong Kong | 212 | (72) | 8 | |||
Total current provision / (credit) | 212 | (72) | 8 | |||
Deferred tax expenses: The PRC and Hong Kong | 16 | 25 | 10 | |||
Total deferred provision | $ 16 | $ 25 | $ 10 | |||
ZHEJIANG TIANLAN | ||||||
The provision / (credit) for income taxes consist of: | ||||||
Current PRC EIT Domestic | ¥ | ¥ 6,298 | ¥ 3,351 | ¥ 3,950 | |||
Total current provision / (credit) | ¥ | 6,298 | 3,351 | 3,950 | |||
Deferred tax benefit: | ¥ | (1,337) | (177) | (1,391) | |||
Total deferred provision | ¥ | ¥ (1,337) | ¥ (177) | ¥ (1,391) |
4. Income taxes (Details 1)
4. Income taxes (Details 1) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Income before income taxes | $ | $ (640) | $ (1,904) | $ (879) | |||
Computed tax using respective companies’ statutory tax rates | $ | (136) | (177) | (194) | |||
Change in valuation allowances | $ | 350 | 455 | 93 | |||
Under (Over) - provision for income tax in prior years | $ | 0 | (69) | 0 | |||
Non deductible expenses | $ | 14 | (256) | 119 | |||
Total provision / (credit) for income tax at effective tax rate | $ | $ 228 | $ (47) | $ 18 | |||
ZHEJIANG JIAHUAN | ||||||
Income before income taxes | ¥ 11,849 | ¥ 5,797 | ¥ 5,194 | |||
Computed tax using respective companies’ statutory tax rates | 2,326 | 1,119 | 1,299 | |||
Under (Over) - provision for income tax in prior years | (9) | 189 | (278) | |||
Tax effect on revenue not subject to tax | (930) | (447) | (537) | |||
Non deductible expenses | 0 | 0 | ||||
Others | 0 | 0 | ||||
Total provision / (credit) for income tax at effective tax rate | 1,387 | 861 | 484 | |||
ZHEJIANG TIANLAN | ||||||
Income before income taxes | 27,603 | 24,927 | 14,776 | |||
Computed tax using respective companies’ statutory tax rates | 4,078 | 3,767 | 2,216 | |||
Under (Over) - provision for income tax in prior years | 57 | 0 | (2,418) | |||
Permanent difference | (82) | 0 | 0 | |||
Temporary differences | (1,337) | (177) | 1,575 | |||
Tax effect on revenue not subject to tax | (901) | (1,068) | (695) | |||
Non deductible expenses | 2,732 | 596 | 90 | |||
Tax effect of unused tax losses not recognized | 414 | 56 | 0 | |||
Total provision / (credit) for income tax at effective tax rate | ¥ 4,961 | ¥ 3,174 | ¥ 768 |
4. Income taxes (Details 2)
4. Income taxes (Details 2) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
The components of deferred tax assets are as follows: | ||||
Tax losses | $ 838 | $ 1,159 | ||
Temporary differences | (2) | 1 | ||
Less: Valuation allowances | (650) | (958) | ||
Net deferred tax assets | $ 186 | $ 202 | ||
ZHEJIANG TIANLAN | ||||
The components of deferred tax assets are as follows: | ||||
Tax losses | ¥ | ¥ 0 | ¥ 0 | ||
Allowance for doubtful debts | ¥ | 5,864 | 4,527 | ||
Net deferred tax assets | ¥ | ¥ 5,864 | ¥ 4,527 |
4. Income taxes (Details 3)
4. Income taxes (Details 3) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Income taxes | $ | $ 228 | $ (47) | $ 18 | |||
ZHEJIANG JIAHUAN | ||||||
Income taxes | ¥ | ¥ 1,387 | ¥ 861 | ¥ 484 |
5. Net income per ordinary sh71
5. Net income per ordinary share (Details) - shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Net Income Per Ordinary Share Tables | |||
Weighted average number of ordinary shares for the purposes of basic net income per share | 2,061,909 | 2,063,738 | 2,069,223 |
Effect of dilutive potential ordinary shares: Stock options | 0 | 0 | 0 |
Weighted average number of ordinary shares for the purposes of diluted net income per share | 2,061,909 | 2,063,738 | 2,069,223 |
6. Accounts receivable, net (De
6. Accounts receivable, net (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Accounts receivable | $ | $ 4,431 | $ 4,557 | |||
Less: Allowance for doubtful debts | $ | (38) | (57) | |||
Net | $ | $ 4,393 | $ 4,500 | |||
ZHEJIANG JIAHUAN | |||||
Accounts receivable | ¥ 91,069 | ¥ 99,864 | |||
Less: Allowance for doubtful debts | (32) | (32) | ¥ (131) | ||
Net | 91,037 | 99,832 | |||
ZHEJIANG TIANLAN | |||||
Accounts receivable | 204,166 | 238,325 | |||
Less: Allowance for doubtful debts | (39,066) | (30,418) | |||
Net | ¥ 165,100 | ¥ 207,907 |
6. Accounts receivable, net (73
6. Accounts receivable, net (Details 1) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Accounts receivable | $ | $ 4,393 | $ 4,500 | ||
ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ 165,100 | ¥ 207,907 | ||
Current | ||||
Accounts receivable | $ | 1,789 | 2,762 | ||
30 - 59 days past due | ||||
Accounts receivable | $ | 1,072 | 633 | ||
60 - 89 days past due | ||||
Accounts receivable | $ | 852 | 635 | ||
Greater than 90 days past due | ||||
Accounts receivable | $ | $ 680 | $ 470 | ||
Within 1 year | ZHEJIANG TIANLAN | ||||
Accounts receivable | 118,476 | 150,345 | ||
1 year 2 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 31,340 | 44,393 | ||
2 years 3 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 9,387 | 8,588 | ||
3 years 4 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 4,593 | 3,881 | ||
4 years 5 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 240 | 700 | ||
Greater than 5 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ 1,064 | ¥ 0 |
6. Accounts receivable, net (74
6. Accounts receivable, net (Details 2) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | |
Allowance for doubtful debts: Balance at beginning | $ | $ (57) | ||
Balance at end | $ | $ (38) | ||
ZHEJIANG JIAHUAN | |||
Allowance for doubtful debts: Balance at beginning | ¥ (32) | ¥ (131) | |
Recovered | 0 | 99 | |
Balance at end | ¥ (32) | ¥ (32) |
7. Prepayments and other curr75
7. Prepayments and other current assets (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Cost and estimated earnings in excess of billings | $ | $ 343 | $ 144 | ||
Deposits paid | $ | 70 | 57 | ||
Prepayment | $ | 221 | 59 | ||
Other receivables | $ | 156 | 214 | ||
Other tax recoverable | $ | 25 | 26 | ||
Prepayments and other current assets | $ | $ 815 | $ 500 | ||
ZHEJIANG JIAHUAN | ||||
Prepayments and other receivables | ¥ 11,994 | ¥ 13,039 | ||
Deposits paid | 3,448 | 4,433 | ||
Prepayments and other current assets | 15,442 | 17,472 | ||
ZHEJIANG TIANLAN | ||||
Contracts costs incurred plus estimated earnings | 389,534 | 160,634 | ||
Less: Progress billings | (318,748) | (62,994) | ||
Cost and estimated earnings in excess of billings | 70,786 | 97,640 | ||
Prepayment | 24,100 | 13,828 | ||
Other receivables | 14,851 | 8,090 | ||
Other current assets | 1,320 | 0 | ||
Prepayments and other current assets | ¥ 111,057 | ¥ 119,558 |
7A. Long term investments (Deta
7A. Long term investments (Details) - ZHEJIANG JIAHUAN - CNY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Long term investment: Unlisted investment Amortized cost | ¥ 69 | ¥ 69 |
Gains Gross unrealized | 0 | 0 |
Losses Gross unrealized | 0 | 0 |
Long term investment: Unlisted investment Fair Value | ¥ 69 | ¥ 69 |
8. Inventories (Details)
8. Inventories (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Raw materials | $ | $ 97 | $ 131 | ||
Work in progress | $ | 29 | 39 | ||
Finished goods | $ | 218 | 387 | ||
Inventory | $ | $ 344 | $ 557 | ||
ZHEJIANG JIAHUAN | ||||
Raw materials | ¥ 6,529 | ¥ 5,603 | ||
Work in progress | 11,264 | 7,840 | ||
Finished goods | 10,212 | 8,020 | ||
Inventory | 28,005 | 21,463 | ||
ZHEJIANG TIANLAN | ||||
Raw materials | 5,606 | 6,586 | ||
Work in progress | 7,269 | 5,525 | ||
Finished goods | 230 | 0 | ||
Inventory | ¥ 13,105 | ¥ 12,111 |
8. Inventories (Details Narrati
8. Inventories (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Inventories Details Narrative | ||
Provision for obsolete and slow moving inventories | $ 53 | $ 5 |
9. Property, plant and equipm79
9. Property, plant and equipment (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Building and leasehold improvements | $ | $ 1,866 | $ 1,866 | ||
Leasehold improvements | $ | 155 | 157 | ||
Furniture, fixtures and office equipment | $ | 581 | 635 | ||
Motor vehicles | $ | 188 | 155 | ||
Testing equipment | $ | 30 | 30 | ||
Gross | $ | 2,820 | 2,843 | ||
Less: Accumulated depreciation | $ | (2,049) | (2,070) | ||
Net | $ | $ 771 | $ 773 | ||
ZHEJIANG JIAHUAN | ||||
Motor vehicles | ¥ 467 | ¥ 979 | ||
Buildings | 34,724 | 34,493 | ||
Plant and machineries | 7,014 | 7,011 | ||
Office equipment | 1,206 | 1,148 | ||
Gross | 43,411 | 43,631 | ||
Less: Accumulated depreciation | (21,550) | (19,843) | ||
Net | 21,861 | 23,788 | ||
ZHEJIANG TIANLAN | ||||
Building and leasehold improvements | 56,665 | 56,696 | ||
Furniture, fixtures and office equipment | 9,660 | 9,919 | ||
Motor vehicles | 4,451 | 3,780 | ||
Plant and machineries | 115,349 | 114,617 | ||
Construction in progress | 211 | 0 | ||
Gross | 186,336 | 185,012 | ||
Less: Accumulated depreciation | (36,496) | (23,281) | ||
Net | ¥ 149,840 | ¥ 161,731 |
9. Property, plant and equipm80
9. Property, plant and equipment (Details 1) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Depreciation charge | $ | $ 55 | $ 56 | $ 88 | |||
ZHEJIANG JIAHUAN | ||||||
Depreciation charge | ¥ 1,707 | ¥ 2,296 | ¥ 2,408 | |||
ZHEJIANG TIANLAN | ||||||
Depreciation charge | ¥ 14,144 | ¥ 8,473 | ¥ 2,985 |
10. Interests in affiliates (De
10. Interests in affiliates (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Balance Sheet: | |||
Current assets | $ 9,587 | $ 8,512 | |
Total assets | 23,104 | 21,270 | |
Total liabilities | (6,486) | (4,814) | |
Total shareholders’ equity | 15,435 | 15,146 | |
Operating results: | |||
Operating profits | (670) | (1,958) | $ (971) |
Net (loss)/profits | 231 | (616) | $ (123) |
Jia Huan | |||
Balance Sheet: | |||
Current assets | 22,021 | 22,693 | |
Non-current assets | 4,079 | 4,717 | |
Total assets | 26,100 | 27,410 | |
Total liabilities | (11,694) | (13,627) | |
Total shareholders’ equity | 14,406 | 13,783 | |
Operating results: | |||
Net sales | 16,684 | 18,481 | |
Operating profits | 1,586 | 1,316 | |
Net (loss)/profits | 1,564 | 788 | |
Tianlan | |||
Balance Sheet: | |||
Current assets | 46,297 | 57,432 | |
Non-current assets | 25,847 | 26,587 | |
Total assets | 72,144 | 84,019 | |
Total liabilities | (45,372) | (58,149) | |
Total shareholders’ equity | 26,772 | 25,870 | |
Operating results: | |||
Net sales | 43,226 | 66,899 | |
Operating profits | 3,841 | 4,260 | |
Net (loss)/profits | $ 3,473 | $ 3,458 |
11. Other payables and accrue82
11. Other payables and accrued expenses (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) |
Dividend payables | $ | $ 79 | $ 84 | ||
Deposit received from customers | $ | 1,113 | 558 | ||
Rental deposit received | $ | 14 | 18 | ||
Other payables | $ | 994 | 764 | ||
Other tax payables | $ | 58 | 202 | ||
Other payables and accrued expenses | $ | $ 2,258 | $ 1,626 | ||
ZHEJIANG TIANLAN | ||||
Deposit received from customers | ¥ 35,225 | ¥ 26,749 | ||
Accrued expenses | 10,116 | 12,104 | ||
Other payables | 1,227 | 1,118 | ||
Deferred income | 1,610 | 799 | ||
Amount due to a related company | 5 | 5 | ||
Other payables and accrued expenses | 51,183 | 40,775 | ||
ZHEJIANG JIAHUAN | ||||
Deposit received from customers | 10,979 | 8,768 | ||
Accrued expenses | 2,795 | 1,210 | ||
Other payables | 137 | 245 | ||
Other payables and accrued expenses | ¥ 13,911 | ¥ 10,223 |
11A. Intangible assets, net (De
11A. Intangible assets, net (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
ZHEJIANG JIAHUAN | |||
Software | ¥ 591 | ¥ 591 | |
Gross | 591 | 591 | |
Less: Accumulated amortisation | (349) | (83) | |
Net | 242 | 508 | |
Amortisation expense | 266 | 83 | ¥ 0 |
Total | 242 | 508 | |
ZHEJIANG TIANLAN | |||
Patents | 2,400 | 2,400 | |
Others | 567 | 165 | |
Gross | 2,967 | 2,565 | |
Less: Accumulated amortisation | (1,592) | (1,017) | |
Net | 1,375 | 1,548 | |
Amortisation expense | 575 | 193 | ¥ 239 |
2,017 | 172 | ||
2,018 | 172 | ||
2,019 | 172 | ||
2,020 | 172 | ||
2,021 | 172 | ||
Thereafter | 515 | ||
Total | ¥ 1,375 | ¥ 1,548 |
12A. Land use right, net (Detai
12A. Land use right, net (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
ZHEJIANG JIAHUAN | |||
Land use right | ¥ 7,987 | ¥ 7,987 | |
Less: Accumulated amortisation | (1,699) | (1,536) | |
Net | 6,288 | 6,451 | |
Amortisation expense | 163 | 163 | ¥ 163 |
ZHEJIANG TIANLAN | |||
Land use right | 7,361 | 7,361 | |
Less: Accumulated amortisation | (1,614) | (1,465) | |
Net | 5,747 | 5,896 | |
Amortisation expense | ¥ 149 | ¥ 149 | ¥ 149 |
13A. Short term borrowings (Det
13A. Short term borrowings (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
ZHEJIANG TIANLAN | ||
Bank loan | ¥ 25,000 | ¥ 45,000 |
ZHEIJIANG Bank loan borrowed by the Company | ||
Bank loan | 20,000 | 40,000 |
ZHEIJIANG Bank loan borrowed by a subsidiary of the Company | ||
Bank loan | ¥ 5,000 | ¥ 5,000 |
15A. Long Term Borrowing (Detai
15A. Long Term Borrowing (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
ZHEJIANG TIANLAN | ||
Loan borrowed by the Company | ¥ 111,691 | ¥ 170,732 |
16. Stock options (Details)
16. Stock options (Details) - Stock Options - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number of options | |||
Outstanding, beginning of year | 20,692 | 20,692 | 0 |
Granted | 0 | 0 | 20,692 |
Cancelled/Expired | (20,692) | 0 | 0 |
Exercised | 0 | 0 | 0 |
Outstanding, end of year | 0 | 20,692 | 20,692 |
Exercisable, end of year | 0 | 0 | 0 |
Weighted average exercise price | |||
Options Outstanding, Beginning | $ 3.44 | $ 3.44 | $ 0 |
Options Granted | 0 | 0 | 3.44 |
Options cancelled/ expired | (3.44) | 0 | 0 |
Options Exercised | 0 | 0 | 0 |
Options Outstanding, Ending | 0 | 3.44 | 3.44 |
Options Exercisable, Ending | $ 0 | $ 0 | $ 0 |
17. Pension plan (Details Narra
17. Pension plan (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Aggregate contributions to pension plans and retirement benefit schemes | $ | $ 314 | $ 458 | $ 378 | |||
ZHEJIANG JIAHUAN | ||||||
Aggregate contributions to pension plans and retirement benefit schemes | ¥ 1,799 | ¥ 1,594 | ||||
ZHEJIANG TIANLAN | ||||||
Aggregate contributions to pension plans and retirement benefit schemes | ¥ 3,905 | ¥ 3,850 | ¥ 3,027 |
19A. Future Minimum rental re89
19A. Future Minimum rental receivable (Details) - ZHEJIANG JIAHUAN - CNY (¥) ¥ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Within 1 year | ¥ 791 | ¥ 750 |
After 1 year but within 5 years | 0 | 785 |
After 5 years | 0 | 0 |
Total | ¥ 791 | ¥ 1,535 |
20. Commitments and contingen90
20. Commitments and contingencies (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | |
Rental expenses | $ | $ 297 | $ 297 | $ 293 | |||
ZHEJIANG TIANLAN | ||||||
Rental expenses | ¥ 0 | ¥ 0 | ¥ 0 | |||
ZHEJIANG JIAHUAN | ||||||
Rental expenses | ¥ 0 | ¥ 0 | ¥ 0 |
22. Segment information (Detail
22. Segment information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Revenue | |||
Trading and manufacturing | $ 13,721 | $ 12,256 | $ 11,647 |
Engineering | 8,757 | 6,046 | 7,175 |
Revenue | 22,478 | 18,302 | 18,822 |
Operating (loss) | |||
Trading and manufacturing | (346) | (187) | (214) |
Engineering | (209) | (1,624) | (640) |
Unallocated corporate expenses | (115) | (147) | (117) |
Operating expenses | (670) | (1,958) | (971) |
Depreciation: | |||
Trading and manufacturing | 43 | 46 | 67 |
Engineering | 12 | 10 | 21 |
Depreciation | 55 | 56 | 88 |
Capital Expenditures, Gross | |||
Trading and manufacturing | 12 | 11 | 2 |
Engineering | 48 | 10 | 8 |
Total | 60 | 21 | $ 10 |
Assets | |||
Trading and manufacturing | 5,463 | 5,050 | |
Engineering | 17,641 | 16,220 | |
Total assets | 23,104 | 21,270 | |
Liabilities | |||
Trading and manufacturing | 3,208 | 2,468 | |
Engineering | 3,278 | 2,346 | |
Total | $ 6,486 | $ 4,814 |
22. Segment information (Deta92
22. Segment information (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Revenue | $ 22,478 | $ 18,302 | $ 18,822 |
Geographical analysis of long-lived assets | 771 | 773 | |
The PRC | |||
Revenue | 10,604 | 9,327 | 10,950 |
Geographical analysis of long-lived assets | 291 | 272 | |
Hong Kong | |||
Revenue | 11,687 | 8,726 | 6,177 |
Geographical analysis of long-lived assets | 480 | 501 | |
Others | |||
Revenue | $ 187 | $ 249 | $ 1,695 |
22. Segment information (Deta93
22. Segment information (Details 2) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Supplier A | |||
Supplier accounting for more than 5% of Group's purchases | 63% | 39% | 33% |
Supplier B | |||
Supplier accounting for more than 5% of Group's purchases | 7% | 11% | 11% |
Supplier C | |||
Supplier accounting for more than 5% of Group's purchases | 5% | 6% | 6% |
Supplier D | |||
Supplier accounting for more than 5% of Group's purchases | 5% | 5% | 6% |
22. Segment information (Deta94
22. Segment information (Details 3) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Customer A | |||
Customers accounting for more than 5% of the Group’s revenue | 13% | 11% | 0% |
Customer B | |||
Customers accounting for more than 5% of the Group’s revenue | 6% | 0% | 0% |
Customer C | |||
Customers accounting for more than 5% of the Group’s revenue | 6% | 0% | 0% |
Customer D | |||
Customers accounting for more than 5% of the Group’s revenue | 0% | 11% | 0% |
Customer E | |||
Customers accounting for more than 5% of the Group’s revenue | 0% | 6% | 0% |
Customer F | |||
Customers accounting for more than 5% of the Group’s revenue | 0% | 5% | 0% |