Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2017USD ($)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, 2017 |
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 | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Assets | ||||
Cash and cash equivalents | $ | $ 3,380 | $ 3,751 | ||
Restricted cash | $ | 1,072 | 284 | ||
Accounts receivable, net | $ | 3,808 | 4,393 | ||
Prepayments and other current assets | $ | 860 | 815 | ||
Inventories, net | $ | 496 | 344 | ||
Total current assets | $ | 9,616 | 9,587 | ||
Property, plant and equipment, net | $ | 734 | 771 | ||
Interests in affiliates | $ | 12,158 | 11,489 | ||
Goodwill | $ | 1,071 | 1,071 | ||
Deferred tax assets | $ | 158 | 186 | ||
Total non-current assets | $ | 14,121 | 13,517 | ||
Total assets | $ | 23,737 | 23,104 | ||
Liabilities and shareholders' equity | ||||
Accounts payable | $ | 3,680 | 3,173 | ||
Bank borrowings | $ | 97 | 720 | ||
Other payables and accrued expenses | $ | 2,721 | 2,258 | ||
Taxes payable | $ | 132 | 335 | ||
Total current liabilities | $ | 6,630 | 6,486 | ||
Total liabilities | $ | 6,630 | 6,486 | ||
Commitments and contingencies | $ | ||||
Shareholders' equity: | ||||
Ordinary share, 20,000,000 (2016: 20,000,000) shares authorized; 2,229,609 (2016: 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, 2017 and 2016, respectively | $ | (786) | (786) | ||
PRC statutory reserves | $ | 352 | 352 | ||
Accumulated other comprehensive income | $ | 918 | 857 | ||
Retained earnings | $ | 5,811 | 5,338 | ||
Equity attributable to shareholders | $ | 15,969 | 15,435 | ||
Non-controlling interest | $ | 1,138 | 1,183 | ||
Total shareholders' equity | $ | 17,107 | 16,618 | ||
Total liabilities and shareholders' equity | $ | 23,737 | 23,104 | ||
ZHEJIANG TIANLAN | ||||
Assets | ||||
Cash and cash equivalents | ¥ 25,785 | ¥ 33,545 | ||
Accounts receivable, net | 180,518 | 165,100 | ||
Prepayments and other current assets | 149,637 | 111,057 | ||
Other tax receivables | 0 | 215 | ||
Inventories, net | 15,117 | 13,105 | ||
Total current assets | 371,057 | 323,022 | ||
Property, plant and equipment, net | 140,479 | 149,840 | ||
Intangible asset, net | 1,223 | 1,375 | ||
Land use right, net | 5,598 | 5,747 | ||
Deferred tax assets | 6,269 | 5,864 | ||
Other non-current asset | 17,512 | 17,512 | ||
Long term investment | 1,991 | 0 | ||
Total non-current assets | $ | 173,072 | 180,338 | ||
Total assets | 544,129 | 503,360 | ||
Liabilities and shareholders' equity | ||||
Bank borrowings | 33,000 | 25,000 | ||
Accounts payable | 127,429 | 117,939 | ||
Other payables and accrued expenses | 72,450 | 51,183 | ||
Other taxes payable | 11,086 | 7,490 | ||
Borrowings - current portion | $ | 29,438 | 25,076 | ||
Income tax payable | 4,782 | 3,262 | ||
Total current liabilities | 278,185 | 229,950 | ||
Long term borrowings | 54,630 | 86,615 | ||
Total liabilities | 332,815 | 316,565 | ||
Commitments and contingencies | ||||
Shareholders' equity: | ||||
Share capital | 82,572 | 81,372 | ||
Capital reserve | 32,480 | 26,480 | ||
PRC statutory reserves | 14,122 | 11,636 | ||
Retained earnings | 79,646 | 65,394 | ||
Equity attributable to shareholders | 208,820 | 184,882 | ||
Non-controlling interest | 2,494 | 1,913 | ||
Total shareholders' equity | 211,314 | 186,795 | ||
Total liabilities and shareholders' equity | 544,129 | 503,360 | ||
ZHEJIANG JIAHUAN | ||||
Assets | ||||
Cash and cash equivalents | 7,135 | 6,595 | ||
Restricted cash | 1,495 | 1,498 | ||
Accounts receivable, net | 91,853 | 91,037 | ||
Notes receivables | 9,476 | 11,064 | ||
Other receivables | 14,290 | 15,442 | ||
Inventories, net | 15,057 | 28,005 | ||
Tax recoverable | 54 | 0 | ||
Total current assets | 139,360 | 153,641 | ||
Property, plant and equipment, net | 19,962 | 21,861 | ||
Intangible asset, net | 3,645 | 242 | ||
Land use right, net | 6,125 | 6,288 | ||
Long term investment | 69 | 69 | ||
Total non-current assets | $ | $ 29,801 | $ 28,460 | ||
Total assets | 169,161 | 182,101 | ||
Liabilities and shareholders' equity | ||||
Short term bank loans | 27,500 | 28,200 | ||
Note payable | 0 | 4,750 | ||
Accounts payable | 22,997 | 27,595 | ||
Other payables and accrued expenses | 7,916 | 13,911 | ||
Income tax payable | 2,694 | 1,466 | ||
Total current liabilities | 61,107 | 75,922 | ||
Other long term liabilities | 5,495 | 5,671 | ||
Shareholders' equity: | ||||
Share capital | 80,000 | 80,000 | ||
Capital reserve | (1,399) | (1,399) | ||
PRC statutory reserves | 3,095 | 3,095 | ||
Retained earnings | 20,863 | 18,812 | ||
Total shareholders' equity | 102,559 | 100,508 | ||
Total liabilities and shareholders' equity | ¥ 169,161 | ¥ 182,101 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares | Dec. 31, 2017 | Dec. 31, 2016 |
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 | 82,572,000 | 81,372,000 |
ZHEJIANG JIAHUAN | ||
Shareholders equity: | ||
Common stock, issued | 80,000,000 | 80,000,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/ INCOME ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2016CNY (¥)¥ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2015CNY (¥)¥ / sharesshares | |
Revenues | ||||||
Trading and manufacturing | $ | $ 11,001 | $ 13,721 | $ 12,256 | |||
Engineering | $ | 6,349 | 8,757 | 6,046 | |||
Total revenues | $ | 17,350 | 22,478 | 18,302 | |||
Cost of revenues | ||||||
Trading and manufacturing | $ | (8,563) | (11,331) | (9,577) | |||
Engineering | $ | (4,374) | (6,196) | (4,682) | |||
Total cost of revenues | $ | (12,937) | (17,527) | (14,259) | |||
Gross profit | $ | 4,413 | 4,951 | 4,043 | |||
Finance costs | $ | (11) | (19) | (4) | |||
Selling and administrative expenses | $ | (4,976) | (5,602) | (5,997) | |||
Operating (loss) / income | $ | (574) | (670) | (1,958) | |||
Interest income | $ | 24 | 18 | 45 | |||
Other (losses) / income, net | $ | (14) | 5 | 9 | |||
Gain on disposal of property, plant and equipment | $ | 0 | 7 | 0 | |||
(Loss) income before income taxes, equity in income of affiliates and non-controlling interests | $ | (564) | (640) | (1,904) | |||
Income taxes (expense) / credit | $ | (28) | (228) | 47 | |||
Net gain on deemed disposal of affiliate | $ | 128 | 24 | 0 | |||
Equity in income of affiliates | $ | 831 | 1,002 | 850 | |||
Net profit / (loss) for the year | $ | 367 | 158 | (1,007) | |||
Add / less: net loss attributable to non-controlling interest | $ | 106 | 73 | 391 | |||
Net profit / (loss) attributable to the Company | $ | 473 | 231 | (616) | |||
Other comprehensive income / (loss) | ||||||
Net profit / (loss) | $ | 367 | 158 | (1,007) | |||
Foreign exchange translation adjustments | $ | 122 | 4 | (63) | |||
Comprehensive income / (loss) | $ | 489 | 162 | (1,070) | |||
Add / less: Comprehensive loss attributable to non-controlling interest | $ | 45 | 127 | 477 | |||
Comprehensive income / (loss) attributable to the Company | $ | $ 534 | $ 289 | $ (593) | |||
Net income / (loss) per ordinary share | ||||||
- Basic | $ / shares | $ .23 | $ .11 | $ (.30) | |||
- Diluted | $ / shares | $ .23 | $ 0.11 | $ (0.30) | |||
Weighted average number of ordinary shares outstanding | ||||||
- Basic | shares | 2,061,909 | 2,061,909 | 2,061,909 | 2,061,909 | 2,063,738 | 2,063,738 |
- Diluted | shares | 2,061,909 | 2,061,909 | 2,061,909 | 2,061,909 | 2,063,738 | 2,063,738 |
ZHEJIANG TIANLAN | ||||||
Revenues | ||||||
Total revenues | ¥ 422,323 | ¥ 289,086 | ¥ 419,275 | |||
Cost of revenues | ||||||
Total cost of revenues | (339,488) | (202,869) | (331,875) | |||
Gross profit | 82,835 | 86,217 | 87,400 | |||
Selling and administrative expenses | (52,713) | (60,528) | (60,702) | |||
Operating (loss) / income | 30,122 | 25,689 | 26,698 | |||
Loss on disposal of a subsidiary | 0 | (35) | 0 | |||
Interest income | 75 | 70 | 166 | |||
Interest expenses | (2,037) | (1,577) | (4,710) | |||
Other income, net | 1,887 | 3,456 | 2,773 | |||
(Loss) income before income taxes, equity in income of affiliates and non-controlling interests | 30,047 | 27,603 | 24,927 | |||
Income taxes (expense) / credit | (3,832) | (4,961) | (3,174) | |||
Net profit / (loss) for the year | 26,215 | 22,642 | 21,753 | |||
Add / less: net loss attributable to non-controlling interest | 19 | 586 | (82) | |||
Net profit / (loss) attributable to the Company | 26,234 | 23,228 | 21,671 | |||
Other comprehensive income / (loss) | ||||||
Comprehensive income / (loss) | 26,215 | 22,642 | 21,753 | |||
Add / less: Comprehensive loss attributable to non-controlling interest | 19 | 586 | (82) | |||
Comprehensive income / (loss) attributable to the Company | ¥ 26,234 | ¥ 23,228 | ¥ 21,671 | |||
Net income / (loss) per ordinary share | ||||||
- Basic | ¥ / shares | ¥ 0.32 | ¥ 0.29 | ¥ 0.27 | |||
Weighted average number of ordinary shares outstanding | ||||||
- Basic | shares | 82,539,123 | 82,539,123 | 80,744,055 | 80,744,055 | 80,172,000 | 80,172,000 |
ZHEJIANG JIAHUAN | ||||||
Revenues | ||||||
Total revenues | ¥ 110,621 | ¥ 111,585 | ¥ 115,515 | |||
Cost of revenues | ||||||
Total cost of revenues | (76,788) | (65,304) | (76,473) | |||
Gross profit | 33,833 | 46,281 | 39,042 | |||
Selling and administrative expenses | (33,612) | (35,671) | (30,792) | |||
Operating (loss) / income | 221 | 10,610 | 8,250 | |||
Non-operating income | 0 | 922 | 0 | |||
Non-operating expense | (441) | (1,518) | 0 | |||
Interest expenses | (1,310) | (2,752) | (3,861) | |||
Other income, net | 5,846 | 4,592 | 1,408 | |||
Other expenses, net | (2) | (5) | 0 | |||
(Loss) income before income taxes, equity in income of affiliates and non-controlling interests | 4,314 | 11,849 | 5,797 | |||
Income taxes (expense) / credit | (263) | (1,387) | (861) | |||
Net profit / (loss) for the year | 4,051 | 10,462 | 4,936 | |||
Other comprehensive income / (loss) | ||||||
Comprehensive income / (loss) | 4,051 | 10,462 | 4,936 | |||
Comprehensive income / (loss) attributable to the Company | ¥ 4,051 | ¥ 10,462 | ¥ 4,936 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Cash flows from operating activities: | ||||||
Net income / (loss) | $ | $ 473 | $ 231 | $ (616) | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation of property, plant and equipment | $ | 61 | 55 | 56 | |||
Gain (loss) on sale/disposal of property, plant and equipment | $ | 0 | (7) | 0 | |||
Net gain on deemed disposal of affiliate | $ | (128) | (24) | 0 | |||
Stock-based compensation expenses | $ | 0 | 0 | 16 | |||
Non-controlling interest in (loss) of subsidiaries | $ | (106) | (73) | (391) | |||
Equity in profit of affiliates | $ | (831) | (1,002) | (850) | |||
Deferred tax assets | $ | 28 | 16 | 25 | |||
Decrease / (increase) in current assets: | ||||||
Accounts receivable, net | $ | 585 | 107 | (232) | |||
Prepayments and other current assets | $ | (45) | (315) | 89 | |||
Inventories | $ | (152) | 213 | (14) | |||
Increase / (decrease) in current liabilities: | ||||||
Accounts payable | $ | 507 | 119 | (507) | |||
Other payables and accrued expenses | $ | 463 | 632 | (475) | |||
Taxes payable | $ | (203) | 201 | (73) | |||
Net cash provided by / (used in) operating activities | $ | 652 | 153 | (2,972) | |||
Cash flows from investing activities: | ||||||
Purchase of property, plant and equipment | $ | (18) | (60) | (21) | |||
Sales proceeds from property, plant and equipment | $ | 0 | 10 | 0 | |||
Dividend received from affiliates | $ | 290 | 249 | 292 | |||
Net cash provided by investing activities | $ | 272 | 199 | 271 | |||
Cash flows from financing activities: | ||||||
(Decrease) / increase in bank borrowings | $ | (623) | 720 | 0 | |||
Purchase of treasury stock | $ | 0 | 0 | (20) | |||
Net cash (used in) / provided by financing activities | $ | (623) | 720 | (20) | |||
Effect of exchange rate changes on cash and cash equivalents | $ | 116 | 8 | (60) | |||
Net increase / (decrease) in cash, cash equivalents and restricted cash | $ | 417 | 1,080 | (2,781) | |||
Cash, cash equivalents and restricted cash, beginning of year | $ | 4,035 | 2,955 | 5,736 | |||
Cash, cash equivalents and restricted cash, end of year | $ | 4,452 | 4,035 | 2,955 | |||
Cash breakdown | ||||||
Cash and cash equivalents | $ | 3,751 | 3,751 | 2,480 | |||
Cash, cash equivalents and restricted cash, end of year | $ | 4,035 | 4,035 | 2,955 | |||
Cash and cash equivalents, beginning of year | $ | 3,751 | 2,480 | ||||
Cash and cash equivalents, end of year | $ | 3,380 | 3,751 | 2,480 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest paid | $ | 11 | 13 | 4 | |||
Income taxes paid | $ | 203 | 70 | 1 | |||
Supplemental disclosure of non-cash activities: | ||||||
Net gain on deemed disposal of affiliate | $ | $ 128 | $ 24 | $ 0 | |||
ZHEJIANG TIANLAN | ||||||
Cash flows from operating activities: | ||||||
Net income / (loss) | ¥ 26,215 | ¥ 22,642 | ¥ 21,753 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation of property, plant and equipment | 12,647 | 14,144 | 8,473 | |||
Amortisation of intangible asset | 152 | 575 | 193 | |||
Amortisation of land use right | 149 | 149 | 149 | |||
Written off of motor vehicles | 0 | 0 | 5 | |||
Gain (loss) on sale/disposal of property, plant and equipment | 0 | 15 | 0 | |||
Deferred tax assets | (405) | (1,337) | (177) | |||
Other non-current asset | 0 | (17,512) | 0 | |||
Decrease / (increase) in current assets: | ||||||
Accounts receivable, net | (15,418) | 42,807 | (51,299) | |||
Prepayments and other current assets | (38,580) | 8,506 | 57,251 | |||
Other tax receivables | 215 | (215) | 1,045 | |||
Inventories | (2,012) | (994) | 3,943 | |||
Increase / (decrease) in current liabilities: | ||||||
Accounts payable | 9,490 | (59,042) | (57) | |||
Other payables and accrued expenses | 21,267 | 10,408 | (72,663) | |||
Other taxes payable | 3,596 | (933) | (479) | |||
Income tax payable | 1,520 | 2,268 | 934 | |||
Net cash provided by / (used in) operating activities | 18,836 | 21,481 | (30,929) | |||
Cash flows from investing activities: | ||||||
Purchase of intangible asset | 0 | (402) | 0 | |||
Purchase of property, plant and equipment | (3,535) | (3,368) | (8,285) | |||
Payment for long term investments | (1,991) | 0 | 0 | |||
Proceeds from a subsidiary | 0 | 1,000 | 0 | |||
Sales proceeds from property, plant and equipment | 249 | 1,100 | 0 | |||
Net cash provided by investing activities | (5,277) | (1,670) | (8,285) | |||
Cash flows from financing activities: | ||||||
Proceeds from issuance of shares | 7,800 | 3,360 | 0 | |||
(Decrease) / increase in bank borrowings | (48,000) | (70,000) | (174,900) | |||
Proceeds from bank borrowings | 56,000 | 50,000 | 122,000 | |||
Dividend paid to shareholders | (9,496) | (9,220) | (9,180) | |||
(Repayment of) / proceeds from long term borrowings | (27,623) | 3,959 | 107,732 | |||
Net cash (used in) / provided by financing activities | (21,319) | (21,901) | 45,652 | |||
Cash breakdown | ||||||
Cash and cash equivalents | 33,545 | 33,545 | 35,635 | |||
Net (decrease) / increase in cash and cash equivalents | (7,760) | (2,090) | 6,438 | |||
Cash and cash equivalents, beginning of year | 33,545 | 35,635 | 29,197 | |||
Cash and cash equivalents, end of year | 25,785 | 33,545 | 35,635 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest received | 75 | 70 | 166 | |||
Interest paid | 1,966 | 1,577 | 6,429 | |||
Income taxes paid | 4,961 | 4,245 | 3,310 | |||
ZHEJIANG JIAHUAN | ||||||
Cash flows from operating activities: | ||||||
Net income / (loss) | 4,051 | 10,462 | 4,936 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation of property, plant and equipment | 2,093 | 2,211 | 2,296 | |||
Write off of property, plant and equipment | 176 | 0 | 32 | |||
Amortisation of intangible asset | 591 | 266 | 83 | |||
Amortisation of land use right | 163 | 163 | 163 | |||
Gain (loss) on sale/disposal of property, plant and equipment | 0 | 147 | 0 | |||
Other gains | 0 | 0 | (282) | |||
Decrease / (increase) in current assets: | ||||||
Accounts receivable, net | (816) | 8,795 | (25,939) | |||
Note receivables | 1,588 | (10,364) | 5,004 | |||
Other receivables | 1,152 | 2,030 | (3,072) | |||
Inventories | 12,948 | (6,542) | 10,786 | |||
Increase / (decrease) in current liabilities: | ||||||
Accounts payable | (4,598) | 465 | 2,269 | |||
Note payable | (4,750) | 1,155 | 3,595 | |||
Other payables and accrued expenses | (5,995) | 3,688 | (3,145) | |||
Taxes payable | 1,174 | (1,426) | 1,121 | |||
Other long-term liability | (176) | (119) | (133) | |||
Net cash provided by / (used in) operating activities | 7,601 | 10,931 | (2,286) | |||
Cash flows from investing activities: | ||||||
Purchase of intangible asset | (3,994) | 0 | (591) | |||
Purchase of property, plant and equipment | (370) | (613) | (258) | |||
Sales proceeds from property, plant and equipment | 0 | 182 | 0 | |||
Net cash provided by investing activities | (4,364) | (431) | (849) | |||
Cash flows from financing activities: | ||||||
(Decrease) / increase in bank borrowings | (28,200) | (39,400) | (50,400) | |||
Proceeds from bank borrowings | 27,500 | 28,200 | 63,200 | |||
(Decrease)/Increase in amount due to shareholders | 0 | 0 | (5,470) | |||
Dividend paid to shareholders | (2,000) | 0 | 0 | |||
Net cash (used in) / provided by financing activities | (2,700) | (11,200) | 7,330 | |||
Net increase / (decrease) in cash, cash equivalents and restricted cash | 537 | (700) | 4,195 | |||
Cash, cash equivalents and restricted cash, beginning of year | 8,093 | 8,793 | 4,598 | |||
Cash, cash equivalents and restricted cash, end of year | 8,630 | 8,093 | 8,793 | |||
Cash breakdown | ||||||
Cash and cash equivalents | 7,135 | 6,595 | 7,303 | |||
Cash, cash equivalents and restricted cash, end of year | 8,630 | 8,093 | 4,598 | |||
Cash and cash equivalents, beginning of year | 6,595 | 7,303 | ||||
Cash and cash equivalents, end of year | 7,135 | 6,595 | 7,303 | |||
Supplemental disclosure of cash flow information: | ||||||
Interest received | 14 | 54 | 44 | |||
Interest paid | (1,311) | (2,752) | (3,861) | |||
Income taxes paid | (114) | (2,813) | 0 | |||
Income tax refund | ¥ 0 | ¥ 0 | ¥ 260 |
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, 2014 | 2,229,609 | |||||||
Beginning 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) | |||||
Purchase of treasury stock | (20) | (20) | ||||||
Other comprehensive income / (loss): Foreign exchange translation adjustment | 23 | (86) | (63) | |||||
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 / (loss): 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 |
Net income / (loss) | 473 | (106) | 367 | |||||
Other comprehensive income / (loss): Foreign exchange translation adjustment | 61 | 61 | 122 | |||||
Ending Balance, shares at Dec. 31, 2017 | 2,229,609 | |||||||
Ending Balance, amount at Dec. 31, 2017 | $ 123 | $ 9,551 | $ (786) | $ 918 | $ 352 | $ 5,811 | $ 1,138 | $ 17,107 |
ZHEJIANG TIANLAN CONSOLIDATED S
ZHEJIANG TIANLAN CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY ¥ in Thousands, $ in Thousands | USD ($) | CNY (¥) | OrdinaryCNY (¥) | Capital reserveCNY (¥) | PRC statutory reservesCNY (¥) | Retained EarningsUSD ($) | Retained EarningsCNY (¥) | Noncontrolling InterestUSD ($) | Noncontrolling InterestCNY (¥) |
Beginning Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2014 | ¥ 156,440 | ¥ 61,200 | ¥ 43,189 | ¥ 6,821 | ¥ 43,710 | ¥ 1,520 | |||
Net income / (loss) | ZHEJIANG TIANLAN | 21,753 | 21,671 | 82 | ||||||
Net income / (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 income / (loss) | ZHEJIANG TIANLAN | 22,642 | 23,228 | (586) | ||||||
Net income / (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 | |||
Net income / (loss) | ZHEJIANG TIANLAN | 26,215 | 26,234 | (19) | ||||||
Net income / (loss) | $ | $ 367 | $ 473 | $ (106) | ||||||
Dividend paid | ZHEJIANG TIANLAN | (9,496) | (9,496) | |||||||
Appropriation of reserves | ZHEJIANG TIANLAN | 0 | 2,486 | (2,486) | ||||||
Deemed disposal of subsidiary | ZHEJIANG TIANLAN | 0 | ||||||||
Issue share capital | ZHEJIANG TIANLAN | 7,800 | 1,200 | 6,000 | 600 | |||||
Ending Balance, amount (ZHEJIANG TIANLAN) at Dec. 31, 2017 | ¥ 211,314 | ¥ 82,572 | ¥ 32,480 | ¥ 14,122 | ¥ 79,646 | ¥ 2,494 |
ZHEJIANG JIAHUAN ELECTRONIC COM
ZHEJIANG JIAHUAN ELECTRONIC COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY ¥ in Thousands, $ in Thousands | USD ($) | CNY (¥) | Share capitalCNY (¥) | Capital reservesCNY (¥) | PRC statutory reservesCNY (¥) | Retained earningsCNY (¥) | Non controlling interestCNY (¥) |
Beginning Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2014 | ¥ 85,393 | ¥ 11,250 | ¥ 8,542 | ¥ 20,931 | ¥ 44,387 | ¥ 283 | |
Net income | ZHEJIANG JIAHUAN | 4,936 | 4,936 | |||||
Net income | $ | $ (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 | |
Capitalization of reserves | ZHEJIANG JIAHUAN | 0 | 27,777 | (9,941) | (17,836) | |||
Net income | ZHEJIANG JIAHUAN | 10,462 | 10,462 | |||||
Net income | $ | 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 | |
Net income | ZHEJIANG JIAHUAN | 4,051 | 4,051 | |||||
Net income | $ | $ 534 | ||||||
Dividend paid | ZHEJIANG JIAHUAN | (2,000) | (2,000) | |||||
Ending Balance, amount (ZHEJIANG JIAHUAN) at Dec. 31, 2017 | ¥ 102,559 | ¥ 80,000 | ¥ (1,399) | ¥ 3,095 | ¥ 20,863 | ¥ 0 |
Organisation and principal acti
Organisation and principal activities | 12 Months Ended |
Dec. 31, 2017 | |
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 2017 2016 Subsidiaries: Euro Tech (Far East) Limited 100% 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% 100% Hong Kong Inactive Euro Tech Trading (Shanghai) Limited 100% 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% 100% The PRC Manufacturing of analytical and testing equipment Shanghai Euro Tech Environmental Engineering Company Limited 100% 100% The PRC Undertaking water and waste-water treatment engineering projects Chongqing Euro Tech Rizhi Technology Co., Ltd 100% 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% 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 2017 2016 Guangzhou Euro Tech Environmental Equipment Co., Ltd 100% 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% 58% The PRC Design, manufacturing and operation of water and waste water treatment machinery and equipment Pact Asia Pacific Limited 58% 58% The British Virgin Islands Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services Affiliates: Zhejiang Jianhuan Environmental Protection Technology Co. Ltd. (“Blue Sky”) 19.4% * 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% 20% The PRC Design and manufacturing of 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 on 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 listed its shares on the New Third Board in the People’s Republic of China (“PRC”) since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018. Details of the Company’s subsidiaries are summarised as follows: Name Percentage of equity ownership Place of incorporation Principal activities 2017 2016 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 Hangzhou Tianlian Environmental Testing Technology Company Limited * 80% 80% PRC Provision of testing services of environmental protection equipment * The company was incorporated on October 28, 2015. On April 17, 2016, the board of directors approved the sales of 1,000,000 ordinary shares to third parties, for aggregate 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 subsidiary are summarised as follows: Name Percentage of equity ownership Place of incorporation Principal activities 2017 2016 Zhejiang Jiahuan Engineering Technology Co., Ltd (Formerly known as Zhejiang Jiahuan Xinyu Environmental Production Co., Ltd) 100% 100% PRC Manufacturing and installation services of environmental production equipment |
Summary of significant accounti
Summary of significant accounting policies | 12 Months Ended |
Dec. 31, 2017 | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the financial statements of Euro Tech Holdings Company Limited and its subsidiaries (the “Group”). The financial statements of variable interest entity (“VIE”), 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 a variable interest entity 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. Investments in companies in which the Group has significant influence (ownership interest of between 20% and 50%) but less than controlling interests, are accounted for by the equity method. Income on intercompany sales, not yet realized outside of the Group, was eliminated. The Group also reviews these investments for impairment whenever events indicate the carrying amount may not be recoverable. In accordance with ASC Topic 323-10-40-1, a change in the Group’s proportionate share of an investee’s equity, resulting from issuance of shares by the investee to third parties, is accounted for as if the Group had sold a proportionate share of its investment. Any gain or loss resulting from an investee’s share issuance is recognized in earnings. Management evaluates investments in affiliated companies, for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances and includes analysis of relevant financial information (e.g. budgets, business plans, financial statements, etc.). During the years ended December 31, 2017 and 2016, no impairment was identified. (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. Revenues are recognized when delivery has occurred and, where applicable, after installation has been completed, there is a persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured and no further obligations exist. In case where delivery has occurred but the required installation has not been performed, the Group does not recognize the revenues until the installation is completed. The Group’s revenues are recognized as follows: 1. Revenues from sales are recognized when title and risk of loss of the product pass to the customer (usually upon delivery) . (d) Research and Development Costs Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$163,000, US$475,000 and US$852,000 for the years ended December 31, 2017, 2016 and 2015 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$13,000 and US$17,000 for the years ended December 31, 2017, 2016 and 2015 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 Group 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 Group recognises interest and/or penalties, if any, related to income tax matters in income tax expense (Nil for the three years ended December 31, 2017, 2016 and 2015). The Group did not have such uncertain tax positions in 2017, 2016 and 2015. The Group is subject to examination of tax authorities in the United States of America (open for audit for 2015 to 2017), Hong Kong (open for audit for 2011 to 2017) and PRC (open for audit for 2015 to 2017). 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 the consolidated statements of operations and comprehensive income / (loss) for the period that includes the enactment date. (g) Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. (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, net Receivables, net 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, 2017. (m) Operating Leases In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. Operating lease expenses are recognised on a straight-line basis over the applicable lease term. The Group leases offices, factories and warehouse under operating lease agreements. (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 Group 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 Group 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 Group is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Group 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 Group uses discounted cash flows. If and when the Group 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 operations and comprehensive income / (loss) during the year in which they occur. Translation adjustments on subsidiaries’ equity are included as accumulated comprehensive income or loss. (p) 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 observable prices that are based on inputs not quoted on active market, but corroborated by market data. 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 and cash equivalents, accounts receivable, net, prepayments and other receivables, bank borrowings, accounts payable, other payables and accrued expenses. The carrying amounts of cash and cash equivalents, accounts receivable, prepayments and other receivables, bank borrowings, accounts payable, bank borrowings, other payables 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. (q) Comprehensive Income The Group adheres to 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. (r) 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 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. (s) 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. (t) Stock-based Compensation The Group accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation.” 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 Group's consolidated statement of operations and comprehensive income / (loss). 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. (u) 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. (v) Related Parties Related parties (w) Segment Information The Group’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 Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering. (x) Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Group does not expect the adoption of ASU 2016-02 to have a material impact on its consolidated financial statements because there are no material operating leases. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which is effective for fiscal years beginning after December 15, 2017. These amendments s require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The Group adopted ASU 2016-18 effective January 1, 2017. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In January 2017, the "FASB" issued ASU 2017-04, "Intangibles – Goodwill and Other – (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 simplifies the accounting for goodwill impairment by removing the requirement to calculate the implied fair value. Instead, it requires that an entity records an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made and goodwill to be derived. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. (y) Concentration of credit risk Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents, and restricted cash were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. Accounts receivable, net, are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. (z) Finance costs Interest relating to loans repaid is expensed in the period the repayment occurs. (aa) Warranties The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis. (ab) Shipping and handling costs Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. |
ZHEJIANG TIANLAN | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the financial statements 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. (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 is 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 and installation services revenues are recognised using the completed contract method. (d) Research and Development Costs Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB12,873,000, RMB13,808,000 and RMB18,895,000 for the years ended December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations. (e) Advertising and promotional expenses Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately RMB4,000, RMB58,000 and RMB24,000 for the years December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations. (f) Taxation The Group accounts for income and deferred tax under the provisions of FASB ASC Subtopic 740-10, Income Taxes, in accordance with 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. In accordance with ASC 740-10, the Group 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 Group recognises interest and/or penalties, if any, related to income tax matter in income tax expense. The Group did not have such uncertain tax positions in 2017. 2016, and 2015. The Group is subject to examination of tax authorities in PRC (open for audit for 2015 to 2017). 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 the consolidated statements of operations 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. There were no cash equivalents as of December 31, 2017 and 2016. (h) Receivables Receivables 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 and installation contracts signed with the customers, an amount range from 5%-20% of contract sum will only be receivable one year after the final inspection report is issued by relevant department of Ministry of Environmental Protection. As of December 31, 2017, accounts receivable in excess of one year amounted to RMB52,105,000 (2016: RMB46,624,000). (i) Inventories, net Inventories are stated at the lower of cost or net realizable value determined using the weighted average method which approximates cost and estimated net 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, net 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 are 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, net The Group amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Group is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. (l) Impairment for long lived assets The Group adheres 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 fair value and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured at the amount by which the carrying amount of the asset exceeds the fair value. 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 its 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, 2017. (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 the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. (n) Operating Leases In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. Operating lease expenses are recognized on a straight-line basis over the applicable lease term. The Group leases offices, factories and warehouse under operating lease agreements. (o) 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 was 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 issued. On June 2, 2016, the Company increased the number of paid up shares by 1,200,000 in the aggregative amount to gross proceeds of RMB 3,360,000 to the existing shareholders. On January 10, 2017, the Company increased the number of paid up shares by 1,200,000 in the aggregative amount to gross proceeds of RMB 7,200,000 to the existing shareholders. At the year end of December 31, 2017, there were 82,572,000 shares (2016: 81,372,000 shares) issued. (p) 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. (q) 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. (r) 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 observable prices that are based on inputs not quoted on active market, but corroborated by market date. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adheres to 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 and cash equivalents, accounts receivable, net, prepayments and other current assets, accounts payable, bank borrowings, other payables, and accrued expenses. The carrying amounts of cash and cash equivalents, accounts receivable, net, prepayments and other current assets, accounts payable, bank borrowings, other payables 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. (s) Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Group does not expect the adoption of ASU 2016-02 to have a material impact on its consolidated financial statements because there are no material operating leases. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. (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 ordinary shares outstanding during the period. (u) Warranties The suppliers of the Group offer a standard one-year warranty to the end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis. (v) Shipping and handling costs Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. (w) Finance costs Interest relating to loans repaid is expensed in the period the repayment occurs. (x) Concentration of credit risk Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, net, and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Accounts receivable are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. |
ZHEJIANG JIAHUAN | |
Summary of significant accounting policies | (a) Basis of Consolidation The consolidated financial statements include the financial statements 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 (c) Revenue Recognition Revenue from the sales 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 costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB11,874,000, 8,814,000 and RMB6,982,000 for the years ended December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of operations. (e) Taxation The Group accounts for income and deferred tax under the provisions of FASB ASC Subtopic 740-10, Income Taxes, in accordance with 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. In accordance with ASC 740-10, the Group 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 Group recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. The Group did not have such uncertain tax positions in 2017, 2016, and 2015. The Group is subject to examination of tax authorities in PRC (open for audit for 2015 to 2017). 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 the consolidated staements of operations 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 with original maturities of three months or less. There were no cash equivalents as of December 31, 2017 and 2016. (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, net of taxes, reported as a separate component of shareholders’ equity. 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 operations. (h) Receivables, net Receivables, net 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, net Inventories are stated at the lower of cost or net realizable value determined using the first-in, first-out method. Costs include a purchase and related costs incurred in bringing each product to its present location and condition. Net realizable 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, net 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 are 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 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, net 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 adheres to 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 and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured at the amount by which the carrying amount of the asset exceeds the fair value. 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 its estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to its 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 in the period ended December 31, 2017, 2016 and 2015. (m) Warranties The supplies of the Group offer a standard one-year warranty to each customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis. (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 Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which is effective for fiscal years beginning after December 15, 2017. These amendments s require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The Group adopted ASU 2016-18 effective January 1, 2017. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. (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 observable prices that are based on inputs not quoted on active market, but corroborated by market data. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adheres to 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 and cash equivalents, restricted cash, accounts receivable, net, notes receivables, prepayments and other current assets, short term bank loans, note payable, accounts payable, other payables and accrued expenses. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, net, notes receivables, prepayments and other current assets, short term bank loans, accounts payable, other payables, 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) Shipping and handling costs Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. (s) Restricted Cash Restricted cash represents cash deposits retained with banks in the PRC for staff welfare. The amount is expected to be released within one year after the balance sheet date. (t) Finance costs Interest relating to loans repaid is expensed in the period the repayment occurs. (u) Concentration of credit risk Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable, net, and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents, and restricted cash were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Accounts receivable are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. (v) 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 the 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 the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. |
Other (losses) _ income, net
Other (losses) / income, net | 12 Months Ended |
Dec. 31, 2017 | |
Other (losses) / income, net | 2017 2016 2015 US$’000 US$’000 US$’000 Exchange (loss), net (46) (75) (75) Rental income 32 80 84 (14) 5 9 |
ZHEJIANG TIANLAN | |
Other (losses) / income, net | 2017 2016 2015 RMB’000 RMB’000 RMB’000 (Loss) on disposal of property, plant and equipment - (15) - Subsidy income 2,262 3,360 2,617 Sales of scrapped materials 37 3 6 Investment income (405) 412 Others (7) (304) 150 1,887 3,456 2,773 |
ZHEJIANG JIAHUAN | |
Other (losses) / income, net | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Government grant 4,350 3,115 200 Rental income (i) 1,316 1,271 901 Interest income 4 54 44 Sundry income 176 152 263 5,846 4,592 1,408 (i) Rental income under operating leases is recognized on a straight-line basis over the term of the relevant lease. |
Income taxes
Income taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income taxes | No income tax arose in the United States of America by the Group for the years ended December 31, 2017, 2016, and 2015. The Company and Pact Asia Pacific Limited are exempt from taxation in the British Virgin Islands (“BVI”). Far East and Euro Tech (China) Limited provided for Hong Kong profits tax at a rate of 16.5% in year 2017 (2016 and 2015: 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 Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2016 and 2015: 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, 2017, ETTS had an assessable loss carried forward of US$703,650 as agreed by the local tax authority to offset its profit for the forth coming years (2016: US$746,808 and 2015: US$588,103). Such loss will expire in 5 years. Shanghai Euro Tech Limited (“SET”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2016 and 2015: 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, 2017, SET had an assessable loss carried forward of US$254,265 as agreed by the local tax authority to offset its profit for the forth coming years (2016: US$256,664 and 2015: US$284,173). Such loss will expire in 5 years. Shanghai Euro Tech Environmental Engineering Company Limited (“SETEE”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2016 and 2015: 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, 2017, SETEE had an assessable loss carried forward of US$895,579 as agreed by the local tax authority to offset its profit for the forth coming years (2016: US$1,074,609 and 2015: US$1,363,392). Such loss will expire in 5 years. Yixing Pact Environmental Technology Co. Ltd. (“Yixing), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2016 and 2015: 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, 2017, Yixing had an assessable loss carried forward of US$512,252 as agreed by the local tax authority to offset its profit for the forth coming years (2016: US$ Nil). 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”), subsidiaries of Far East, provide for PRC Enterprise Income Tax at a rate of 25% (2016 and 2015: 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$121,674, US$ Nil and US$298,448 respectively as agreed by the local tax authority to offset its profit for the forth coming years (2016: US$124,025, US$60,980 and US$320,545). Such loss will expire in 5 years. VIE of the Group provide for PRC Enterprise Income Tax at a rate of 25% for years 2016 and 2015, 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 Far East’s subsidiaries located in the PRC that are available for distribution Far East of approximately US$0.5 million at December 31, 2017 (2016: US$1.2 million and 2015: US$1.1 million) are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to Far East. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax. Loss before income taxes: 2017 2016 2015 US$’000 US$’000 US$’000 The PRC and Hong Kong (564) (640) (1,904) The provision / (credit) for income taxes consist of: 2017 2016 2015 US$’000 US$’000 US$’000 Current tax expenses: The PRC and Hong Kong - 212 (72) Total current provision / (credit) - 212 (72) Deferred tax expenses: The PRC and Hong Kong 28 16 25 Total deferred provision 28 16 25 Total provision / (credit) 28 228 (47) The principal reconciling items from income tax computed at the statutory tax rates and at the effective income tax rates are as follows: 2017 2016 2015 US$’000 US$’000 US$’000 Computed tax using respective companies’ statutory tax rates (94) (136) (177) Change in valuation allowances 120 350 455 Under-provision for income tax in prior years - - (69) Non-deductible expenses 2 14 (256) Total provision / (credit) for income tax at effective tax rate 28 228 (47) The components of deferred tax assets are as follows: 2017 2016 US$’000 US$’000 Tax losses 958 838 Temporary differences (6) (2) Less: Valuation allowances (794) (650) Net deferred tax assets 158 186 |
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 enjoys a preferential tax rate of 15%. During the years ended December 31, 2017 and 2016, 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. As such, they are subjects to Enterprise Income Tax rate of The provision for income taxes consists of: 2017 2016 2015 RMB’000 RMB’000 RMB’000 Current PRC EIT: Domestic 4,237 6,298 3,351 Income taxes 4,237 6,298 3,351 Deferred tax benefit: (405) (1,337) (177) Total deferred taxes (405) (1,337) (177) Total 3,832 4,961 3,174 The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows: 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income before income taxes 30,047 27,603 24,927 Computed tax using respective companies’ statutory tax rates 4,548 4,078 3,767 (Over)-provision for income tax in prior years (29) 57 - Permanent difference (459) (82) - Temporary differences (405) (1,337) (177) Tax effect of revenue not subject to tax (1,438) (901) (1,068) Tax effect of expenses not deductible for tax purposes 1,435 2,732 596 Tax effect of unused tax losses not recognized 180 414 56 Total provision for income tax at effective tax rate 3,832 4,961 3,174 The components of deferred tax assets are as follows: 2017 2016 RMB’000 RMB’000 Allowance for doubtful debts 6,269 5,864 Net deferred tax assets 6,269 5,864 |
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. The Company is classified as HNTE which enjoys a preferential tax rate of 15%. The provision for income taxes consists of: 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income taxes 263 1,387 861 The principal reconciling items from income tax computed at the statutory tax rates and at the effective income tax rates are as follows: 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income before income taxes 4,314 11,848 5,797 Computed tax using respective companies’ statutory tax rates 988 2,326 1,119 Tax effect on revenue not subject to tax (752) (930) (447) Under / (over) provision for income tax in prior years 27 (9) 189 Total provision for income tax at effective tax rate 263 1,387 861 No deferred tax assets or liabilities have been recognized in the consolidated financial statements as the Group did not have material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as at December 31, 2017, and 2016. |
Net income per ordinary share
Net income per ordinary share | 12 Months Ended |
Dec. 31, 2017 | |
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: 2017 2016 2015 Number of shares Weighted average number of ordinary shares for the purposes of basic and diluted net income per share 2,061,909 2,061,909 2,063,738 |
Other taxes receivable _ payabl
Other taxes receivable / payable | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Other taxes receivable / payable | Other taxes 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. |
Other non-current assets
Other non-current assets | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Other non-current assets | Other non-current assets represent deposits for sales and leaseback agreement amounted to approximately to RMB17,512,000 (2016: RMB17,512,000). |
Accounts receivable, net
Accounts receivable, net | 12 Months Ended |
Dec. 31, 2017 | |
Accounts receivable, net | 2017 2016 US$’000 US$’000 Accounts receivable 3,917 4,431 Less: Allowance for doubtful debts (109) (38) 3,808 4,393 The following is an aging analysis of past due account receivables as of December 31, 2017 and 2016: 2017 2016 US$’000 US$’000 Current 1,816 1,789 30-59 days 1,076 1,072 60-89 days 288 852 Greater than or equal to 90 days 628 680 3,808 4,393 |
ZHEJIANG TIANLAN | |
Accounts receivable, net | 2017 2016 RMB’000 RMB’000 Accounts receivable 222,279 204,166 Less: Allowance for doubtful debts (41,761) (39,066) 180,518 165,100 The following is an aging analysis of past due account receivables as of December 31, 2017 and 2016: 2017 2016 RMB’000 RMB’000 Within 1 year 128,413 118,476 1 year – 2 years 37,934 31,340 2 years – 3 years 9,158 9,387 3 years – 4 years 4,120 4,593 4 years – 5 years 893 240 Greater than 5 years - 1,064 180,518 165,100 At December 31, 2017, the trade receivables pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB24,363,000 (2016: RMB25,474,000). |
ZHEJIANG JIAHUAN | |
Accounts receivable, net | 2017 2016 RMB’000 RMB’000 Accounts receivable, gross 91,885 91,069 Less: Allowance for doubtful debts (32) (32) Accounts receivable, net 91,853 91,037 2017 2016 RMB’000 RMB’000 Balance at beginning and end of the year (32) (32) |
Prepayments and other current a
Prepayments and other current assets | 12 Months Ended |
Dec. 31, 2017 | |
Prepayments and other current assets | Prepayment and other current assets mainly represent deposits for purchases and services, rental and utilities deposits, and prepaid expenses. 2017 2016 US$’000 US$’000 Cost and estimated earnings in excess of billings 194 343 Deposits paid 85 70 Prepayments 475 221 Other receivables 104 156 Other tax recoverable 2 25 860 815 |
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. 2017 2016 RMB’000 RMB’000 Cost and estimated earnings in excess of billing 119,256 70,786 Prepayments 19,606 24,100 Other receivables 10,775 14,851 Other current assets - 1,320 149,637 111,057 The other current assets also include cost and estimated earnings in excess of billing. Cost and estimated earnings in excess of billings 2017 2016 RMB’000 RMB’000 Contracts costs incurred 330,322 389,534 Less: Progress billings (211,066) (318,748) Cost and estimated earnings in excess of billings 119,256 70,786 |
ZHEJIANG JIAHUAN | |
Prepayments and other current assets | Prepayment and other current assets mainly represent deposits for bidding projects, deposits for purchases and services and prepaid expenses. 2017 2016 RMB’000 RMB’000 Prepayments and other receivables 8,026 11,994 Deposits 6,264 3,448 14,290 15,442 |
Long term investment
Long term investment | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Long term investment | The Group's long-term investments consist of minority ownership interests in two limited liability companies, generally from private equity arrangements. These investments are carried under the equity method of accounting, with changes in the carrying value reported as realized gains or losses in the consolidated financial statements. During the year ended December 31, 2017, the Company and its subsidiary, invested RMB2,373,000 and RMB276,000 (totally RMB2,649,000) into two limited liability companies respectively. The carrying values of these investments approximately RMB1,861,000 and RMB130,000 (totally RMB1,991,000) as at December 31, 2017 (December 31, 2016: Nil). |
ZHEJIANG JIAHUAN | |
Long term investment | 2017 Gross unrealized Amortized cost Gains Losses Fair Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 2016 Gross unrealized Amortized cost Gains Losses Fair Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 Long term investment valued at amortized cost, the fair value of the unlisted investment approximates its book value. |
Inventories, net
Inventories, net | 12 Months Ended |
Dec. 31, 2017 | |
Inventories, net | 2017 2016 US$’000 US$’000 Raw materials 132 115 Work in progress 48 29 Finished goods 748 554 928 698 Provision for obsolete and slow moving inventories (432) (354) 496 344 Movements in the provision for obsolete and slow moving inventories are as follows: 2017 2016 US$’000 US$’000 At January 1 354 318 Provision during the year 68 43 Exchange differences 10 (7) At December 31 432 354 Management continuously reviews obsolete and slow moving inventories and assesses the inventory valuation to determine if the provision is deemed appropriate. For the years ended December 31, 2017, and 2016 provision for obsolete and slow moving inventories amounted to US$68,000 and US$43,000, respectively, which were charged to cost of revenue in consolidated statements of operations and comprehensive income / (loss). |
ZHEJIANG TIANLAN | |
Inventories, net | 2017 2016 RMB’000 RMB’000 Raw materials 4,741 5,606 Work in progress 6,452 7,269 Finished goods 3,924 230 15,117 13,105 |
ZHEJIANG JIAHUAN | |
Inventories, net | 2017 2016 RMB’000 RMB’000 Raw materials 1,764 6,529 Work in progress 11,316 11,264 Finished goods 1,977 10,212 15,057 28,005 |
Property, plant and equipment,
Property, plant and equipment, net | 12 Months Ended |
Dec. 31, 2017 | |
Property, plant and equipment | 2017 2016 US$’000 US$’000 Office premises* 1,866 1,866 Leasehold improvements 157 155 Furniture, fixtures and office equipment 612 581 Motor vehicles 191 188 Testing equipment 37 30 2,863 2,820 Less: Accumulated depreciation (2,129) (2,049) 734 771 *Far East earns rental income from a property in Beijing, PRC for which it does not hold the title. Far East is investigating various ways in which to obtain the title but has not formulated a specific plan as of the date of issuance of this consolidated financial statements. The net book value of the property at December 31, 2017 is approximately US$104,000 (2016: US$108,000). 2017 2016 2015 US$’000 US$’000 US$’000 Depreciation charge 61 55 56 |
ZHEJIANG TIANLAN | |
Property, plant and equipment | 2017 2016 RMB’000 RMB’000 Building and leasehold improvements 56,665 56,665 Furniture, fixtures and office equipment 10,911 9,660 Motor vehicles 4,410 4,451 Plant and machineries 115,349 115,349 Construction in progress - 211 187,335 186,336 Less: Accumulated depreciation (46,856) (36,496) 140,479 149,840 2017 2016 2015 RMB’000 RMB’000 RMB’000 Depreciation charge 12,647 14,144 8,473 At December 31, 2017, 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 RMB99,406,000 (2016: RMB109,041,000). |
ZHEJIANG JIAHUAN | |
Property, plant and equipment | 2017 2016 RMB’000 RMB’000 Buildings 34,724 34,724 Plant and machinery 5,813 7,014 Office equipment 1,252 1,206 Motor vehicles 467 467 42,256 43,411 Less: Accumulated depreciation (22,294) (21,550) 19,962 21,861 2017 2016 2015 RMB’000 RMB’000 RMB’000 Depreciation charge 2,093 2,211 2,296 Buildings with carrying amount of approximately RMB34,724,000 and RMB34,724,000 as of December 31, 2017 and 2016 respectively were pledged, along with the land use right as discussed below, to secure the Company’s short-term bank loans. |
Interests in affiliates
Interests in affiliates | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Interests in affiliates | Investments in affiliates are accounted for using the equity method of accounting. Far East is holding 19.4% (2016: 19.7%) equity interests in Blue Sky, 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 listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018. The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on 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 US$128,000 (2016: US$24,000) had been recognized in the consolidated statement of operations and comprehensive income / (loss) for that year. A summary of the financial information of the affiliate, Blue Sky, is set forth below: 2017 2016 Balance Sheet: US$’000 US$’000 Current assets 56,911 46,297 Non-current assets 26,544 25,847 Total assets 83,455 72,144 Total liabilities (36,948) (45,372) Total shareholders’ equity 46,507 26,772 2017 2016 Operating results: US$’000 US$’000 Net sales 62,234 43,226 Operating income 4,439 3,841 Net income 3,863 3,473 Far East 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$2,486,000. Jia Huan provides a comprehensive service for environmental protection business since 1969 and is based in Jin Hua, Zhejiang. A summary of the financial information of the affiliate, Jia Huan, is set forth below: 2017 2016 Balance Sheet: US$’000 US$’000 Current assets 21,374 22,021 Non-current assets 4,570 4,079 Total assets 25,944 26,100 Total liabilities (10,215) (11,694) Total shareholders’ equity 15,729 14,406 2017 2016 Operating results: US$’000 US$’000 Net sales 16,301 16,684 Operating income 32 1,586 Net income 597 1,564 |
Intangible assets, net
Intangible assets, net | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Intangible assets, net | 2017 2016 RMB’000 RMB’000 Patents 2,400 2,400 Others 567 567 2,967 2,967 Less: Accumulated amortisation (1,744) (1,592) 1,223 1,375 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 152 575 193 The useful lives of intangible assets, net of the Group are normally 10-20 years. The following table represents the total estimated amortization of intangible assets, net for the five succeeding fiscal years to December 31, 2017: For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2018 152 2019 152 2020 152 2021 152 2022 152 Thereafter 463 1,223 |
ZHEJIANG JIAHUAN | |
Intangible assets, net | 2017 2016 RMB’000 RMB’000 Software 4,688 591 4,688 591 Less: Accumulated amortization (1,043) (349) 3,645 242 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortization expenses 591 266 83 The useful lives of intangible assets, net of the Group are normally 5-20 years. The following table represents the total estimated amortization of intangible assets, net for the five succeeding fiscal years to December 31, 2017: For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2018 591 2019 591 2020 591 2021 591 2022 591 Thereafter 690 3,645 |
Land use right, net
Land use right, net | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Land use right, net | 2017 2016 RMB’000 RMB’000 Land use right 7,361 7,361 Less: Accumulated amortisation (1,763) (1,614) 5,598 5,747 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 149 149 149 At December 31, 2017, the land use right pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB1,645,000 (2016: RMB1,691,000). The following table represents the total estimated amortization of land use right, net for the five succeeding fiscal years to December 31, 2017: Estimated Amortization For the Twelve Months Ending December 31, Expenses RMB '0000 2018 149 2019 149 2020 149 2021 149 2022 149 Thereafter 4,853 5,598 |
ZHEJIANG JIAHUAN | |
Land use right, net | 2017 2016 RMB’000 RMB’000 Land use right 7,987 7,987 Less: Accumulated amortisation (1,862) (1,699) 6,125 6,288 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 163 163 163 Land use right, net with a carrying amount of approximately RMB6,125,000 and RMB6,288,000 as of December 31, 2017 and 2016 was pledged, along with the buildings discussed above, to secure the Company’s short-term bank loans. The following table represents the total estimated amortization of land use right, net for the five succeeding fiscal years to December 31, 2017: Estimated Amortization For the Twelve Months Ending December 31, Expenses RMB '0000 2018 163 2019 163 2020 163 2021 163 2022 163 Thereafter 5,310 6,125 |
Bank borrowings
Bank borrowings | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Short term borrowings | 2017 2016 RMB’000 RMB’000 Bank loan borrowed by the Company (note i) 28,000 20,000 Bank loan borrowed by a subsidiary of the Company (note ii) 5,000 5,000 33,000 25,000 (i) The bank loan is denominated in Renminbi and is repayable within 1 year. The bank loan borrowed by the Company as of December 31, 2017 bears interest at fixed rates 4.87% and 5.22% (2016: 4.57%) per annum. Interest paid during the year ended December 31, 2017 was approximately RMB1,720,000 (2016: RMB1,221,000 and 2015: RMB3,768,000). (ii) The bank loan is denominated in Renminbi and is repayable within 1 year. The bank loan borrowed by a subsidiary of the Company as of December 31, 2017 bears interest at fixed rates 5.39% (2016: 5.22%) per annum and is secured by the subsidiary’s office premises and leasehold improvements and land use right. Interest paid during the year ended December 31, 2017 was approximately RMB272,000 (2016: RMB154,000 and 2015: RMB369,000). |
ZHEJIANG JIAHUAN | |
Short term borrowings | The short term loans as of December 31, 2017 bear interest at fixed rates ranging from 4.9% to 5.655% per annum with maturity dates from March 2, 2018 to December 17, 2018 and are secured by the Company’s buildings and land use right. Interest paid during the years ended December 31, 2017 and 2016 were approximately RMB1,310,000 and RMB2,752,000 respectively. |
Other payables and accrued expe
Other payables and accrued expenses | 12 Months Ended |
Dec. 31, 2017 | |
Other payables and accrued expenses | Other payables and accrued expenses mainly represent deposits received from customers and accruals for operating expenses. 2017 2016 US$’000 US$’000 Dividend payables 84 79 Deposits received from customers 1,877 1,113 Rental deposit received 7 14 Amount due to related parties 20 - Other payables 723 994 Other tax payables 10 58 2,721 2,258 |
ZHEJIANG TIANLAN | |
Other payables and accrued expenses | 2017 2016 RMB’000 RMB’000 Deposits received from customers 52,777 35,225 Accrued expenses 10,751 10,116 Other payables 1,076 1,227 Deferred income 7,846 4,610 Amount due to a related company - 5 72,450 51,183 |
ZHEJIANG JIAHUAN | |
Other payables and accrued expenses | 2017 2016 RMB’000 RMB’000 Deposits received from customers 4,938 10,979 Accrued expenses 2,909 2,795 Other payables 69 137 7,916 13,911 |
Ordinary share
Ordinary share | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Ordinary share | During the years ended December 31, 2017 and 2016, there was no movement with the Company’s issued ordinary shares and outstanding shares. Number of outstanding shares at years end of: 2017 2016 Shares issued 2,229,609 2,229,609 Less: shares under treasury stock (167,700 ) (167,700 ) 2,061,909 2,061,909 |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Goodwill | The Group 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, 2017, the Group completed the annual impairment test (i.e. comparing the carrying amount of the net assets, including goodwill, with the fair value of Yixing Pact Environmental Technology Co., Ltd and Pact Asia Pacific Limited as of December 31, 2017). Based on management’s assessment, the Group determined that there was no impairment of goodwill as of December 31, 2017 and 2016. |
Treasury stock
Treasury stock | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Treasury stock | 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. |
Dividends to shareholders
Dividends to shareholders | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG JIAHUAN | |
Dividends to shareholders | In the fiscal year ended December 31, 2017 the Company declared and paid a dividend of RMB2,000,000 to the shareholders (2016: declared RMB40,973,000). |
Other long term liabilities
Other long term liabilities | 12 Months Ended |
Dec. 31, 2017 | |
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. |
Borrowings
Borrowings | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Borrowings | 2017 2016 RMB’000 RMB’000 Loan borrowed by the Company 84,068 111,691 (i) (ii) |
PRC statutory reserves
PRC statutory reserves | 12 Months Ended |
Dec. 31, 2017 | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the PRC subsidiaries are required to appropriate a certain percentage of its 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 its 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 it’s net income to the statutory reserve fund until such fund reaches 50% of it’s 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, provided that such fund be maintained at a minimum of 25% of it’s registered capital. Under the PRC laws and regulations, PRC subsidiaries are restricted in their ability to transfer certain of its net assets 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, 2017 (2016: US$3,520,000 and 2015:US$3,457,000). (ii) Statutory staff welfare fund Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate certain amount of it’s net income to the statutory staff welfare fund determined by it. The statutory staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to it’s employees. This fund is non-distributable other than upon liquidation of the PRC subsidiaries. (iii) Enterprise expansion fund The enterprise expansion fund shall only be used to make up losses, expand the PRC subsidiaries’ production operations, or increase the capital of the subsidiaries. The enterprise 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 its registered capital. |
ZHEJIANG TIANLAN | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the Group is required to appropriate a certain percentage of its 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 its 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, 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 statutory staff welfare fund determined by them. The statutory staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to its employees. This fund is non-distributable other than upon liquidation of the Group. |
ZHEJIANG JIAHUAN | |
PRC statutory reserves | Under the relevant PRC laws and regulations, the Group is required to appropriate a certain percentage of its 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 its registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase its registered capital, provided that such fund be maintained at a minimum of 25% of its registered capital. (ii) Statutory staff welfare fund Pursuant to applicable PRC laws and regulations, the Group is required to allocate certain amount of its net income to the statutory staff welfare fund determined by it. The staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to its employees. This fund is non-distributable other than upon liquidation of the Group. |
Stock options
Stock options | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Stock options | 2014 Officers’ Stock Option and Incentive Plan Effective on 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 $3.44 per share. The exercise price was determined by the average closing price of the Company’s ordinary shares as reported by NASDAQ for a ten day period prior to the end of the Business Development Manager’s probationary period on November 22, 2014, the effective date of the stock option contract. The stock options granted are exercisable three years after the effective date and terminate five years after the effective date. In the event of the optionee’s termination, except for his resignation, the options may be exercisable within three months of the termination. In the event of optionee’s death, retirement or disability, he or his legal representative shall have up to one year to exercise the option. The Company estimate the fair value of the options granted under the Binomial pricing model. Changes in outstanding stock option under various plans mentioned above were as follows: 2017 2016 2015 Number of options Weighted average exercise price Number of options Weighted average exercise price Number of options Weighted average exercise price US$ US$ US$ Outstanding, beginning of year - - 20,692 3.44 20,692 3.44 Cancelled - - (20,692) (3.44) - - Outstanding, end of year - - - - 20,692 3.44 Exercisable, end of year - - - - - - As of December 31, 2017, 2016 and 2015, there was no unrecognised stock-based compensation expense related to unvested stock options. The Group adheres to the provisions of ASC 718-10, which requires to recognise expense related to the fair value of 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. |
Capital reserve
Capital reserve | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Capital reserve | Capital reserve represents capital contributions from shareholders in excess of the paid-in capital amount. |
Pension plan
Pension plan | 12 Months Ended |
Dec. 31, 2017 | |
Pension plan | Prior to December 1, 2000, Fer East 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 Far East, depending on their years of service with Far East. Far East 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 (“MPF Scheme”), a defined contribution scheme managed by an independent trustee on December 1, 2000, Far East and its employees who joined Far East subsequently make monthly contributions to the scheme at 5% of the employee’s cash income as defined under the Mandatory Provident Fund Schemes Ordinance. 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$30,000. Contributions to the plan vest immediately. As stipulated by the rules and regulations in the PRC, PRC’s subsidiaries contributes to state-sponsored retirement plans for its employees in Mainland China. PRC’s subsidiaries contributions range from 14% to 20% 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, 2017, 2016 and 2015, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately US$281,000, US$314,000 and US$458,000 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 12% to 14% During the years ended December 31, 2017, 2016 and 2015, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB4,298,000, RMB3,905,000 and RMB3,850,000 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, 2017 and 2016, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB1,317,000 and RMB1,799,000 respectively. |
Risk factors and Derivative Ins
Risk factors and Derivative Instruments | 12 Months Ended |
Dec. 31, 2017 | |
Risk factors and Derivative Instruments | Financial risk factors The Group’s activities expose it to a variety of financial risks: credit risk and foreign exchange rate risk. (i) Credit risk The Group has no significant concentration of credit risk, cash in banks in Hong Kong is insured under the Hong Deposit Protection Board with limit of approximately US$64,000 per bank per each depositor. Far East hold uninsured balance of approximately US$187,000 (2016: approximately US$335,000) in banks in Hong Kong. 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. Cash transactions are limited to hight credit quality banks. There is no policy for requiring collateral for the credit risk of financial instruments by the Group (2016: Nil). (ii) Foreign exchange rate risk The Group operates in Hong Kong, the PRC and trades with both local and overseas customers, and suppliers 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. |
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. |
ZHEJIANG JIAHUAN | |
Risk factors and Derivative Instruments | The Group’s activities expose it 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. Cash in banks is not insured in PRC. There is no policy for requiring collateral for the credit risk of financial instruments by the Group. (2016: Nil). |
Related party transactions
Related party transactions | 12 Months Ended |
Dec. 31, 2017 | |
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 2017, 2016 and 2015. |
ZHEJIANG TIANLAN | |
Related party transactions | Amounts due from / (to) owners There were insignificant transactions with related parties in the years 2017 and 2016 other than those disclosed elsewhere in the consolidated financial statements. |
Commitments and contingencies
Commitments and contingencies | 12 Months Ended |
Dec. 31, 2017 | |
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, 2017, 2016 and 2015 were approximately US$324,000, US$297,000 and US$297,000, respectively. Future minimum rental payments as of December 31, 2017, under agreements classified as operating leases with non-cancellable terms amounted to US$193,000 of which US$157,000 are payable in the year 2018 and US$36,000 are payable within years 2019 to 2023. (ii) Banking facilities As at December 31, 2017 and 2016, the Group had various banking facilities available for overdraft and import and export credits and from which the Group can draw up to approximately US$897,000 and US$897,000 respectively, of which approximately US$230,000 and US$863,000 was utilised for issuance of bank guarantees as security for the performance of various contracts with customers and import loans. The various banking facilities are secured by a property located in Hong Kong and various blanket counter indmnities and counter indemnities. The weighted average interest rate for import lans as at December 31, 2017 was 4% per annum (December 31, 2016: 4% per annum). For the years ended December 31, 2017 and 2016, the average dollar amount of the bank borrowings was approximately US$302,000 and US$441,000 respectively and average interest rates were approximately 4% per annum for the years ended December 31, 2017 and 2016. (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 Company Limited is a plaintiff in a civil action claiming from the defendant for outstanding debts of approximately of US$416,000. The litigation has not been concluded, but having taken legal advice, the directors are of the opinion that sufficient provision was made in the consolidated financial statements |
ZHEJIANG TIANLAN | |
Commitments and contingencies | (i) Operating leases The Group has no rental expense during the year ended December 31, 2017 (2016 and 2015: RMB Nil). As of December 31, 2017, the Group has no future minimum lease payments under non-cancellable operating leases. (ii) Litigation The Group 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 conditions or results of operations. |
ZHEJIANG JIAHUAN | |
Commitments and contingencies | (i) Operating leases The Group has no rental expense during the year ended December 31, 2017 (2016 and 2015: RMB Nil). As of December 31, 2017, the Group has no future minimum lease payments under non-cancellable operating leases. (ii) Litigation The Group 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 condition or results of operations. |
Future Minimum rental receivabl
Future Minimum rental receivable | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG JIAHUAN | |
Future Minimum rental receivable | The Company entered into two separate tenancy agreements with two third parties with lease term from August 15, 2016 to August 14, 2019 with monthly rental income of RMB48,972 for the period from August 15, 2016 to August 14, 2018 and RMB 51,420 for the period from August 15, 2018 to August 14, 2019 and with lease term from May 15, 2017 to May 14, 2019 with monthly rental income of RMB20,880 for the period from May 15, 2017 to May 14, 2018 and RMB21,924 for the period from May 15, 2018 to May 14, 2019, respectively. At the end of the reporting period, the Company’s total future minimum rental receivable under non-cancellable operating leases is as follows:- 2017 2016 RMB’000 RMB’000 Within 1 year 859 791 After 1 year but within 5 years 447 - 1,306 791 |
Fair value of financial instrum
Fair value of financial instruments | 12 Months Ended |
Dec. 31, 2017 | |
Fair value of financial instruments | The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, bank borrowings, other payables and balances with related companies approximate their fair values due to the short-term nature of these instruments. |
Segment information
Segment information | 12 Months Ended |
Dec. 31, 2017 | |
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. 2017 2016 2015 US$’000 US$’000 US$’000 Revenue Trading and manufacturing 11,001 13,721 12,256 Engineering 6,349 8,757 6,046 17,350 22,478 18,302 Operating loss Trading and manufacturing (153) (346) (187) Engineering (306) (209) (1,624) Unallocated corporate expenses (115) (115) (147) (574) (670) (1,958) 2017 2016 2015 US$’000 US$’000 US$’000 Depreciation: Trading and manufacturing 41 43 46 Engineering 20 12 10 61 55 56 Capital Expenditures, Gross Trading and manufacturing 13 12 11 Engineering 5 48 10 18 60 21 2017 2016 US$’000 US$’000 Assets Trading and manufacturing 5,049 5,463 Engineering 18,688 17,641 23,737 23,104 Liabilities Trading and manufacturing 2,806 3,208 Engineering 3,824 3,278 6,630 6,486 (ii) Geographical analysis of revenue by customer location is as follows: 2017 2016 2015 US$’000 US$’000 US$’000 Revenue - The PRC 7,740 10,604 9,327 Hong Kong 9,270 11,687 8,726 Others 340 187 249 17,350 22,478 18,302 (iii) Long-lived assets (1) Geographical analysis of long-lived assets is as follows: 2017 2016 US$’000 US$’000 Hong Kong 460 480 The PRC 274 291 734 771 (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: 2017 2016 2015 Supplier A 45% 63% 39% Supplier B 10% 7% 11% Supplier C 9% 5% 6% Supplier D 4% 5% 5% (v) Major customers Details of individual customers accounting for more than 5% of the Group’s revenue are as follows: 2017 2016 2015 Customer A 10% 13% 11% Customer B 7% - - Customer C 5% - - Customer D 5% - - Customer E - 6% - Customer F - 6% - Customer G - - 11% Customer H - - 6% Customer I - - 5% |
Subsequent events
Subsequent events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent events | On March 5, 2018, Far East entered into an Equity Transfer Agreement to sell its 20% equity stake of Jia Huan to Ms. Jin Lijuan. The completion of the transaction is subject to completion of all closing formalities, including the need to obtain approval and registration with the relevant governmental authorities. |
ZHEJIANG TIANLAN | |
Subsequent events | On January 25, 2018, the shareholders approved the transfer of Hangzhou Tianlian Environmental Testing Technology Company Limited’s shares of RMB6,400,000, with shareholding of 80% from the Company to Wu Zhongbiao, Jin Ruiben and Li Jun amounting to RMB5,040,000, RMB600,000 and RMB760,000, respectively. Upon the completion of the transfer, the Company will no longer hold any shares of Hangzhou Tianlian Environmental Testing Technology Company Limited. Meanwhile, Wu Zhongbiao will be appointed as the chairperson and is considered as a related party. On January 25, 2018, the shareholders approved the transfer of 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 events or transactions which would require recognition or disclosure in the consolidated financial statements. |
Summary of significant accoun43
Summary of significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Basis of Consolidation | The consolidated financial statements include the financial statements of Euro Tech Holdings Company Limited and its subsidiaries (the “Group”). The financial statements of variable interest entity (“VIE”), 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 a variable interest entity 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. Investments in companies in which the Group has significant influence (ownership interest of between 20% and 50%) but less than controlling interests, are accounted for by the equity method. Income on intercompany sales, not yet realized outside of the Group, was eliminated. The Group also reviews these investments for impairment whenever events indicate the carrying amount may not be recoverable. In accordance with ASC Topic 323-10-40-1, a change in the Group’s proportionate share of an investee’s equity, resulting from issuance of shares by the investee to third parties, is accounted for as if the Group had sold a proportionate share of its investment. Any gain or loss resulting from an investee’s share issuance is recognized in earnings. Management evaluates investments in affiliated companies, for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances and includes analysis of relevant financial information (e.g. budgets, business plans, financial statements, etc.). During the years ended December 31, 2017 and 2016, no impairment was identified. |
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. Revenues are recognized when delivery has occurred and, where applicable, after installation has been completed, there is a persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured and no further obligations exist. In case where delivery has occurred but the required installation has not been performed, the Group does not recognize the revenues until the installation is completed. The Group’s revenues are recognized as follows: 1. Revenues from sales are recognized when title and risk of loss of the product pass to the customer (usually upon delivery) . |
Research and Development Costs | Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$163,000, US$475,000 and US$852,000 for the years ended December 31, 2017, 2016 and 2015 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$13,000 and US$17,000 for the years ended December 31, 2017, 2016 and 2015 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 Group 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 Group recognises interest and/or penalties, if any, related to income tax matters in income tax expense (Nil for the three years ended December 31, 2017, 2016 and 2015). The Group did not have such uncertain tax positions in 2017, 2016 and 2015. The Group is subject to examination of tax authorities in the United States of America (open for audit for 2015 to 2017), Hong Kong (open for audit for 2011 to 2017) and PRC (open for audit for 2015 to 2017). 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 the consolidated statements of operations and comprehensive income / (loss) for the period that includes the enactment date. |
Cash and Cash Equivalents | Cash and cash equivalents consist of cash on hand, bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. |
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, net | Receivables, net 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, net | 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, net | 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, 2017. |
Operating leases | In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. Operating lease expenses are recognised on a straight-line basis over the applicable lease term. The Group leases offices, factories and warehouse under operating lease agreements. |
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 Group 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 Group 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 Group is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Group 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 Group uses discounted cash flows. If and when the Group 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 operations and comprehensive income / (loss) during the year in which they occur. Translation adjustments on subsidiaries’ equity are included as accumulated comprehensive income or loss. |
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 observable prices that are based on inputs not quoted on active market, but corroborated by market data. 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 and cash equivalents, accounts receivable, net, prepayments and other receivables, bank borrowings, accounts payable, other payables and accrued expenses. The carrying amounts of cash and cash equivalents, accounts receivable, prepayments and other receivables, bank borrowings, accounts payable, bank borrowings, other payables 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 adheres to 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 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 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 Group's consolidated statement of operations and comprehensive income / (loss). 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 Group may undertake in the future, actual results may be different from the estimates. |
Related Parties | Related parties |
Segment Information | The Group’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 Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering. |
Recent Issued Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Group does not expect the adoption of ASU 2016-02 to have a material impact on its consolidated financial statements because there are no material operating leases. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which is effective for fiscal years beginning after December 15, 2017. These amendments s require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The Group adopted ASU 2016-18 effective January 1, 2017. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In January 2017, the "FASB" issued ASU 2017-04, "Intangibles – Goodwill and Other – (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 simplifies the accounting for goodwill impairment by removing the requirement to calculate the implied fair value. Instead, it requires that an entity records an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made and goodwill to be derived. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. |
Concentration of credit risk | Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents, and restricted cash were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. Accounts receivable, net, are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. |
Finance costs | Interest relating to loans repaid is expensed in the period the repayment occurs. |
Warranties | The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis. |
Shipping and handling costs | Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. |
ZHEJIANG TIANLAN | |
Basis of Consolidation | The consolidated financial statements include the financial statements 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. |
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 is 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 and installation services revenues are recognised using the completed contract method. |
Research and Development Costs | Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB12,873,000, RMB13,808,000 and RMB18,895,000 for the years ended December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss). |
Advertising and promotional expenses | Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately RMB4,000, RMB58,000 and RMB24,000 for the years December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss). |
Taxation | The Group accounts for income and deferred tax under the provisions of FASB ASC Subtopic 740-10, Income Taxes, in accordance with 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. In accordance with ASC 740-10, the Group 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 Group recognises interest and/or penalties, if any, related to income tax matter in income tax expense. The Group did not have such uncertain tax positions in 2017. 2016, and 2015. The Group is subject to examination of tax authorities in PRC (open for audit for 2015 to 2017). 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 the consolidated statements of operations 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. There were no cash equivalents as of December 31, 2017 and 2016. |
Receivables, net | Receivables 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 and installation contracts signed with the customers, an amount range from 5%-20% of contract sum will only be receivable one year after the final inspection report is issued by relevant department of Ministry of Environmental Protection. As of December 31, 2017, accounts receivable in excess of one year amounted to RMB52,105,000 (2016: RMB46,624,000). |
Inventories, net | Inventories are stated at the lower of cost or net realizable value determined using the weighted average method which approximates cost and estimated net 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, net | 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 are 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 Group amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Group is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between five to twenty years. |
Impairment | The Group adheres 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 fair value and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured at the amount by which the carrying amount of the asset exceeds the fair value. 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 its 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, 2017. |
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 the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. |
Operating leases | In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. Operating lease expenses are recognized on a straight-line basis over the applicable lease term. The Group leases offices, factories and warehouse under operating lease agreements. |
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 observable prices that are based on inputs not quoted on active market, but corroborated by market date. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adheres to 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 and cash equivalents, accounts receivable, net, prepayments and other current assets, accounts payable, bank borrowings, other payables, and accrued expenses. The carrying amounts of cash and cash equivalents, accounts receivable, net, prepayments and other current assets, accounts payable, bank borrowings, other payables 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. |
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 ordinary shares outstanding during the period. |
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 was 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 issued. On June 2, 2016, the Company increased the number of paid up shares by 1,200,000 in the aggregative amount to gross proceeds of RMB 3,360,000 to the existing shareholders. On January 10, 2017, the Company increased the number of paid up shares by 1,200,000 in the aggregative amount to gross proceeds of RMB 7,200,000 to the existing shareholders. At the year end of December 31, 2017, there were 82,572,000 shares (2016: 81,372,000 shares) 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 Issued Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Group does not expect the adoption of ASU 2016-02 to have a material impact on its consolidated financial statements because there are no material operating leases. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. |
Concentration of credit risk | Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, net, and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Accounts receivable are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. |
Finance costs | Interest relating to loans repaid is expensed in the period the repayment occurs. |
Warranties | The suppliers of the Group offer a standard one-year warranty to the end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis. |
Shipping and handling costs | Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. |
ZHEJIANG JIAHUAN | |
Basis of Consolidation | The consolidated financial statements include the financial statements 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 |
Revenue Recognition | Revenue from the sales 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 costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB11,874,000, 8,814,000 and RMB6,982,000 for the years ended December 31, 2017, 2016 and 2015 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of operations. |
Taxation | The Group accounts for income and deferred tax under the provisions of FASB ASC Subtopic 740-10, Income Taxes, in accordance with 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. In accordance with ASC 740-10, the Group 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 Group recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. The Group did not have such uncertain tax positions in 2017, 2016, and 2015. The Group is subject to examination of tax authorities in PRC (open for audit for 2015 to 2017). 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 the consolidated staements of operations 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 with original maturities of three months or less. There were no cash equivalents as of December 31, 2017 and 2016. |
Investments | Investments comprise marketable securities which are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses, net of taxes, reported as a separate component of shareholders’ equity. 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 operations. |
Restricted Cash | Restricted cash represents cash deposits retained with banks in the PRC for staff welfare. The amount is expected to be released within one year after the balance sheet date. |
Receivables, net | Receivables, net 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, net | Inventories are stated at the lower of cost or net realizable value determined using the first-in, first-out method. Costs include a purchase and related costs incurred in bringing each product to its present location and condition. Net realizable 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, net | 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 are 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 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 adheres to 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 and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured at the amount by which the carrying amount of the asset exceeds the fair value. 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 its estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to its 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 in the period ended December 31, 2017, 2016 and 2015. |
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 the 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 the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses. |
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 observable prices that are based on inputs not quoted on active market, but corroborated by market data. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Group adheres to 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 and cash equivalents, restricted cash, accounts receivable, net, notes receivables, prepayments and other current assets, short term bank loans, note payable, accounts payable, other payables and accrued expenses. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, net, notes receivables, prepayments and other current assets, short term bank loans, accounts payable, other payables, 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. |
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 Issued Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09, "Revenue from Contracts with Customers", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. 1. Identify the contract(s) with a customer. 2. 2. Identify the performance obligation in the contract. 3. 3. Determine the transaction price. 4. 4. Allocate the transaction price to the performance obligations in the contract. 5. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Since May, 2014, a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Group established an implementation approach to assess the impact of the new revenue guidance on its operations, consolidated financial statements and related disclosures. This assessment included (1) performing contract analyses for each revenue stream identified, (2) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (3) performing detailed analyses of contracts with large customers, and (4) performing transaction level testing for consistency with contract provisions that affect revenue recognition. The Group evaluated the potential impacts of the new standard on its existing revenue recognition policies and procedures during the fiscal year ended December 31, 2017, and determined that the Group’s performance obligations are met at goods/service delivery point, with no other material obligations. The Group further determined that its warranty terms are consistent. The Group also determined that there were no incremental disaggregated revenue disclosures required in our consolidated financial statements. Based on the results of the evaluation, adoption of the new standard will not have a material impact on our consolidated financial statements. The New Revenue Standard became effective for us on January 1, 2018 and was applied on a retrospective basis, with no cumulative effect of adoption to any of the consolidated financial statement line items. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)". ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU 2016-01 will result in a cumulative effect adjustment to the Group's retained earnings as of the beginning of the year of adoption. The Group does not expect the adoption of ASU 2016-01 to have a material impact on its consolidated financial statements because there are no material investments in certain equity investments and financial liabilities measured at fair value. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:, which is effective for fiscal years beginning after December 15, 2019. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Group does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements because there are no material expected credit losses for financial assets, no available-for-sale debt securities and no purchased financial assets with credit deterioration. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments". ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Group does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements because for distributions received from equity method Investees, it is already using the nature of the distribution approach. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which is effective for fiscal years beginning after December 15, 2017. These amendments s require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The Group adopted ASU 2016-18 effective January 1, 2017. The adoption of this guidance did not have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which is effective for fiscal years beginning after December 15, 2017. These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Group does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements because no planned business combination is to be made. In March 2017, the FASB issued ASU 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which is effective for fiscal years beginning after December 15, 2017. The amendments apply to all entities that offer employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). The Group does not expect the adoption of ASU 2017-07 to have a material impact on its consolidated financial statements because no material employees defined benefit pension plans. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements. |
Concentration of credit risk | Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable, net, and prepayments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and 2016, all of the Group’s cash and cash equivalents, and restricted cash were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Accounts receivable are typically unsecured and are derived from revenue earned from the customers. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring of outstanding balances. Prepayments made to suppliers are typically unsecured and arise from deposits paid in advance for future purchases. Due to the Group’s concentration of prepayments made to a limited number of suppliers and the significant prepayments that are made to them, any negative events or deterioration in financial strength with respect to the Group’s suppliers may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The risk with respect to prepayments made to suppliers is mitigated by credit evaluations that the Group performs on its suppliers prior to making any prepayments and the ongoing monitoring of its suppliers’ performance. |
Finance costs | Interest relating to loans repaid is expensed in the period the repayment occurs. |
Shipping and handling costs | Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues. |
Organisation and principal ac44
Organisation and principal activities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities 2017 2016 Subsidiaries: Euro Tech (Far East) Limited 100% 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% 100% Hong Kong Inactive Euro Tech Trading (Shanghai) Limited 100% 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% 100% The PRC Manufacturing of analytical and testing equipment Shanghai Euro Tech Environmental Engineering Company Limited 100% 100% The PRC Undertaking water and waste-water treatment engineering projects Chongqing Euro Tech Rizhi Technology Co., Ltd 100% 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% 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 2017 2016 Guangzhou Euro Tech Environmental Equipment Co., Ltd 100% 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% 58% The PRC Design, manufacturing and operation of water and waste water treatment machinery and equipment Pact Asia Pacific Limited 58% 58% The British Virgin Islands Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services Affiliates: Zhejiang Jiahuan Environmental Protection Technology Co. Ltd. (“Blue Sky”) 19.4% * 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% 20% The PRC Design and manufacturing of 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 on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process. |
ZHEJIANG TIANLAN | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities 2017 2016 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 Hangzhou Tianlian Environmental Testing Technology Company Limited * 80% 80% PRC Provision of testing services of environmental protection equipment * 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 to third parties, for aggregate proceeds of RMB 1,000,000 to the third parties. |
ZHEJIANG JIAHUAN | |
Schedule of significant subsidiaries | Name Percentage of equity ownership Place of incorporation Principal activities 2017 2016 Zhejiang Jiahuan Engineering Technology Co., Ltd (Formerly known as Zhejiang Jiahuan Xinyu Environmental Production Co., Ltd) 100% 100% PRC Manufacturing and installation services of environmental production equipment |
Summary of significant accoun45
Summary of significant accounting policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
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 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 |
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 |
Other (losses) _ income, net (T
Other (losses) / income, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other (losses) / income, net | 2017 2016 2015 US$’000 US$’000 US$’000 Exchange (loss), net (46) (75) (75) Rental income 32 80 84 (14) 5 9 |
ZHEJIANG TIANLAN | |
Other (losses) / income, net | 2017 2016 2015 RMB’000 RMB’000 RMB’000 (Loss) on disposal of property, plant and equipment - (15) - Subsidy income 2,262 3,360 2,617 Sales of scrapped materials 37 3 6 Investment income (405) 412 Others (7) (304) 150 1,887 3,456 2,773 |
ZHEJIANG JIAHUAN | |
Other (losses) / income, net | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Government grant 4,350 3,115 200 Rental income (i) 1,316 1,271 901 Interest income 4 54 44 Sundry income 176 152 263 5,846 4,592 1,408 (i) Rental income under operating leases is recognized on a straight-line basis over the term of the relevant lease. |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Components of provision for income taxes | 2017 2016 2015 US$’000 US$’000 US$’000 The PRC and Hong Kong (564) (640) (1,904) 2017 2016 2015 US$’000 US$’000 US$’000 Current tax expenses: The PRC and Hong Kong - 212 (72) Total current provision / (credit) - 212 (72) Deferred tax expenses: The PRC and Hong Kong 28 16 25 Total deferred provision 28 16 25 Total provision / (credit) 28 228 (47) |
Reconciling items from income tax | 2017 2016 2015 US$’000 US$’000 US$’000 Computed tax using respective companies’ statutory tax rates (94) (136) (177) Change in valuation allowances 120 350 455 Under-provision for income tax in prior years - - (69) Non-deductible expenses 2 14 (256) Total provision / (credit) for income tax at effective tax rate 28 228 (47) |
Components of deferred tax assets | 2017 2016 US$’000 US$’000 Tax losses 958 838 Temporary differences (6) (2) Less: Valuation allowances (794) (650) Net deferred tax assets 158 186 |
ZHEJIANG TIANLAN | |
Components of provision for income taxes | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Current PRC EIT: Domestic 4,237 6,298 3,351 Income taxes 4,237 6,298 3,351 Deferred tax benefit: (405) (1,337) (177) Total deferred taxes (405) (1,337) (177) Total 3,832 4,961 3,174 |
Reconciling items from income tax | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income before income taxes 30,047 27,603 24,927 Computed tax using respective companies’ statutory tax rates 4,548 4,078 3,767 (Over)-provision for income tax in prior years (29) 57 - Permanent difference (459) (82) - Temporary differences (405) (1,337) (177) Tax effect of revenue not subject to tax (1,438) (901) (1,068) Tax effect of expenses not deductible for tax purposes 1,435 2,732 596 Tax effect of unused tax losses not recognized 180 414 56 Total provision for income tax at effective tax rate 3,832 4,961 3,174 |
Components of deferred tax assets | 2017 2016 RMB’000 RMB’000 Allowance for doubtful debts 6,269 5,864 Net deferred tax assets 6,269 5,864 |
ZHEJIANG JIAHUAN | |
Components of provision for income taxes | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income taxes 263 1,387 861 |
Reconciling items from income tax | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Income before income taxes 4,314 11,848 5,797 Computed tax using respective companies’ statutory tax rates 988 2,326 1,119 Tax effect on revenue not subject to tax (752) (930) (447) Under / (over) provision for income tax in prior years 27 (9) 189 Total provision for income tax at effective tax rate 263 1,387 861 |
Net income per ordinary share (
Net income per ordinary share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Net Income Per Ordinary Share Tables | |
Basic and diluted number of shares | 2017 2016 2015 Number of shares Weighted average number of ordinary shares for the purposes of basic and diluted net income per share 2,061,909 2,061,909 2,063,738 |
Accounts receivable, net (Table
Accounts receivable, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounts receivable, net | 2017 2016 US$’000 US$’000 Accounts receivable 3,917 4,431 Less: Allowance for doubtful debts (109) (38) 3,808 4,393 |
Age analysis of past due account receivables | 2017 2016 US$’000 US$’000 Current 1,816 1,789 30-59 days 1,076 1,072 60-89 days 288 852 Greater than or equal to 90 days 628 680 3,808 4,393 |
ZHEJIANG TIANLAN | |
Accounts receivable, net | 2017 2016 RMB’000 RMB’000 Accounts receivable 222,279 204,166 Less: Allowance for doubtful debts (41,761) (39,066) 180,518 165,100 |
Age analysis of past due account receivables | 2017 2016 RMB’000 RMB’000 Within 1 year 128,413 118,476 1 year – 2 years 37,934 31,340 2 years – 3 years 9,158 9,387 3 years – 4 years 4,120 4,593 4 years – 5 years 893 240 Greater than 5 years - 1,064 180,518 165,100 |
ZHEJIANG JIAHUAN | |
Accounts receivable, net | 2017 2016 RMB’000 RMB’000 Accounts receivable, gross 91,885 91,069 Less: Allowance for doubtful debts (32) (32) Accounts receivable, net 91,853 91,037 |
Age analysis of past due account receivables | 2017 2016 RMB’000 RMB’000 Balance at beginning and end of the year (32) (32) |
Prepayments and other current50
Prepayments and other current assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Cost and estimated earnings in excess of billings | 2017 2016 US$’000 US$’000 Cost and estimated earnings in excess of billings 194 343 Deposits paid 85 70 Prepayments 475 221 Other receivables 104 156 Other tax recoverable 2 25 860 815 |
ZHEJIANG TIANLAN | |
Cost and estimated earnings in excess of billings | 2017 2016 RMB’000 RMB’000 Cost and estimated earnings in excess of billing 119,256 70,786 Prepayments 19,606 24,100 Other receivables 10,775 14,851 Other current assets - 1,320 149,637 111,057 2017 2016 RMB’000 RMB’000 Contracts costs incurred 330,322 389,534 Less: Progress billings (211,066) (318,748) Cost and estimated earnings in excess of billings 119,256 70,786 |
ZHEJIANG JIAHUAN | |
Cost and estimated earnings in excess of billings | 2017 2016 RMB’000 RMB’000 Prepayments and other receivables 8,026 11,994 Deposits 6,264 3,448 14,290 15,442 |
Long term investment (Tables)
Long term investment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG JIAHUAN | |
Long term investments | 2017 Gross unrealized Amortized cost Gains Losses Fair Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 2016 Gross unrealized Amortized cost Gains Losses Fair Value RMB’000 RMB’000 RMB’000 RMB’000 Long term investment: Unlisted investment 69 - - 69 |
Inventories, net (Tables)
Inventories, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventories | 2017 2016 US$’000 US$’000 Raw materials 132 115 Work in progress 48 29 Finished goods 748 554 928 698 Provision for obsolete and slow moving inventories (432) (354) 496 344 |
Provision for obsolete and slow moving inventories | 2017 2016 US$’000 US$’000 At January 1 354 318 Provision during the year 68 43 Exchange differences 10 (7) At December 31 432 354 |
ZHEJIANG TIANLAN | |
Inventories | 2017 2016 RMB’000 RMB’000 Raw materials 4,741 5,606 Work in progress 6,452 7,269 Finished goods 3,924 230 15,117 13,105 |
ZHEJIANG JIAHUAN | |
Inventories | 2017 2016 RMB’000 RMB’000 Raw materials 1,764 6,529 Work in progress 11,316 11,264 Finished goods 1,977 10,212 15,057 28,005 |
Property, plant and equipment53
Property, plant and equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, plant and equipment | 2017 2016 US$’000 US$’000 Office premises* 1,866 1,866 Leasehold improvements 157 155 Furniture, fixtures and office equipment 612 581 Motor vehicles 191 188 Testing equipment 37 30 2,863 2,820 Less: Accumulated depreciation (2,129) (2,049) 734 771 |
Depreciation expense | 2017 2016 2015 US$’000 US$’000 US$’000 Depreciation charge 61 55 56 |
ZHEJIANG TIANLAN | |
Property, plant and equipment | 2017 2016 RMB’000 RMB’000 Building and leasehold improvements 56,665 56,665 Furniture, fixtures and office equipment 10,911 9,660 Motor vehicles 4,410 4,451 Plant and machineries 115,349 115,349 Construction in progress - 211 187,335 186,336 Less: Accumulated depreciation (46,856) (36,496) 140,479 149,840 |
Depreciation expense | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Depreciation charge 12,647 14,144 8,473 |
ZHEJIANG JIAHUAN | |
Property, plant and equipment | 2017 2016 RMB’000 RMB’000 Buildings 34,724 34,724 Plant and machinery 5,813 7,014 Office equipment 1,252 1,206 Motor vehicles 467 467 42,256 43,411 Less: Accumulated depreciation (22,294) (21,550) 19,962 21,861 |
Depreciation expense | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Depreciation charge 2,093 2,211 2,296 |
Interests in affiliates (Tables
Interests in affiliates (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Interests In Affiliates Tables | |
Schedule of investments in affiliates | A summary of the financial information of the affiliate, Blue Sky, is set forth below: 2017 2016 Balance Sheet: US$’000 US$’000 Current assets 56,911 46,297 Non-current assets 26,544 25,847 Total assets 83,455 72,144 Total liabilities (36,948) (45,372) Total shareholders’ equity 46,507 26,772 2017 2016 Operating results: US$’000 US$’000 Net sales 62,234 43,226 Operating income 4,439 3,841 Net income 3,863 3,473 A summary of the financial information of the affiliate, Jia Huan, is set forth below: 2017 2016 Balance Sheet: US$’000 US$’000 Current assets 21,374 22,021 Non-current assets 4,570 4,079 Total assets 25,944 26,100 Total liabilities (10,215) (11,694) Total shareholders’ equity 15,729 14,406 2017 2016 Operating results: US$’000 US$’000 Net sales 16,301 16,684 Operating income 32 1,586 Net income 597 1,564 |
Intangible assets, net (Tables)
Intangible assets, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Intangible assets, net | 2017 2016 RMB’000 RMB’000 Patents 2,400 2,400 Others 567 567 2,967 2,967 Less: Accumulated amortisation (1,744) (1,592) 1,223 1,375 |
Amortization expense | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 152 575 193 For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2018 152 2019 152 2020 152 2021 152 2022 152 Thereafter 463 1,223 |
ZHEJIANG JIAHUAN | |
Intangible assets, net | 2017 2016 RMB’000 RMB’000 Software 4,688 591 4,688 591 Less: Accumulated amortization (1,043) (349) 3,645 242 |
Amortization expense | 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortization expenses 591 266 83 For the Twelve Months Ending December 31, Estimated Amortization Expenses RMB’000 2018 591 2019 591 2020 591 2021 591 2022 591 Thereafter 690 3,645 |
Land use right, net (Tables)
Land use right, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Schedule Land use right | 2017 2016 RMB’000 RMB’000 Land use right 7,361 7,361 Less: Accumulated amortisation (1,763) (1,614) 5,598 5,747 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 149 149 149 |
Amortization expense | Estimated Amortization For the Twelve Months Ending December 31, Expenses RMB '0000 2018 149 2019 149 2020 149 2021 149 2022 149 Thereafter 4,853 5,598 |
ZHEJIANG JIAHUAN | |
Schedule Land use right | 2017 2016 RMB’000 RMB’000 Land use right 7,987 7,987 Less: Accumulated amortisation (1,862) (1,699) 6,125 6,288 2017 2016 2015 RMB’000 RMB’000 RMB’000 Amortisation expense 163 163 163 |
Amortization expense | Estimated Amortization For the Twelve Months Ending December 31, Expenses RMB '0000 2018 163 2019 163 2020 163 2021 163 2022 163 Thereafter 5,310 6,125 |
Short term borrowings (Tables)
Short term borrowings (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Short term borrowings | 2017 2016 RMB’000 RMB’000 Bank loan borrowed by the Company (note i) 28,000 20,000 Bank loan borrowed by a subsidiary of the Company (note ii) 5,000 5,000 33,000 25,000 |
Other payables and accrued ex58
Other payables and accrued expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other payables and accrued expenses | 2017 2016 US$’000 US$’000 Dividend payables 84 79 Deposits received from customers 1,877 1,113 Rental deposit received 7 14 Amount due to related parties 20 - Other payables 723 994 Other tax payables 10 58 2,721 2,258 |
ZHEJIANG TIANLAN | |
Other payables and accrued expenses | 2017 2016 RMB’000 RMB’000 Deposits received from customers 52,777 35,225 Accrued expenses 10,751 10,116 Other payables 1,076 1,227 Deferred income 7,846 4,610 Amount due to a related company - 5 72,450 51,183 |
ZHEJIANG JIAHUAN | |
Other payables and accrued expenses | 2017 2016 RMB’000 RMB’000 Deposits received from customers 4,938 10,979 Accrued expenses 2,909 2,795 Other payables 69 137 7,916 13,911 |
Ordinary share (Tables)
Ordinary share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Ordinary Share Tables | |
Shares outstanding | 2017 2016 Shares issued 2,229,609 2,229,609 Less: shares under treasury stock (167,700 ) (167,700 ) 2,061,909 2,061,909 |
Long term borrowing (Tables)
Long term borrowing (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG TIANLAN | |
Long Term Borrowing | 2017 2016 RMB’000 RMB’000 Loan borrowed by the Company 84,068 111,691 |
Stock options (Tables)
Stock options (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stock Options Tables | |
Schedule stock option activity | 2017 2016 2015 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 Cancelled - - (20,692) (3.44) - - Outstanding, end of year - - - - 20,692 3.44 Exercisable, end of year - - - - - - |
Future Minimum rental receiva62
Future Minimum rental receivable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ZHEJIANG JIAHUAN | |
Schedule of future minimum operating leases | 2017 2016 RMB’000 RMB’000 Within 1 year 859 791 After 1 year but within 5 years 447 - 1,306 791 |
Segment information (Tables)
Segment information (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Segment Information Tables | |
Segment information | 2017 2016 2015 US$’000 US$’000 US$’000 Revenue Trading and manufacturing 11,001 13,721 12,256 Engineering 6,349 8,757 6,046 17,350 22,478 18,302 Operating loss Trading and manufacturing (153) (346) (187) Engineering (306) (209) (1,624) Unallocated corporate expenses (115) (115) (147) (574) (670) (1,958) 2017 2016 2015 US$’000 US$’000 US$’000 Depreciation: Trading and manufacturing 41 43 46 Engineering 20 12 10 61 55 56 Capital Expenditures, Gross Trading and manufacturing 13 12 11 Engineering 5 48 10 18 60 21 2017 2016 US$’000 US$’000 Assets Trading and manufacturing 5,049 5,463 Engineering 18,688 17,641 23,737 23,104 Liabilities Trading and manufacturing 2,806 3,208 Engineering 3,824 3,278 6,630 6,486 |
Geographical analysis of revenue and assets | Geographical analysis of revenue by customer location is as follows: 2017 2016 2015 US$’000 US$’000 US$’000 Revenue - The PRC 7,740 10,604 9,327 Hong Kong 9,270 11,687 8,726 Others 340 187 249 17,350 22,478 18,302 Geographical analysis of long-lived assets is as follows: 2017 2016 US$’000 US$’000 Hong Kong 460 480 The PRC 274 291 734 771 (1) Long-lived assets represent property, plant and equipment, net. |
Major suppliers abd customers | 2017 2016 2015 Supplier A 45% 63% 39% Supplier B 10% 7% 11% Supplier C 9% 5% 6% Supplier D 4% 5% 5% 2017 2016 2015 Customer A 10% 13% 11% Customer B 7% - - Customer C 5% - - Customer D 5% - - Customer E - 6% - Customer F - 6% - Customer G - - 11% Customer H - - 6% Customer I - - 5% |
Organisation and principal ac64
Organisation and principal activities (Details) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | |||
Euro Tech (Far East) Limited | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Euro Tech (China) Limited | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Euro Tech Trading (Shanghai) Limited | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Shanghai Euro Tech Limited | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Shanghai Euro Tech Environmental Engineering Company Limited | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Chongqing Euro Tech Rizhi Technology Co., Ltd | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Guangzhou Euro Tech Environmental Equipment Co., Ltd | ||||
Percentage of equity ownership | 100.00% | 100.00% | ||
Yixing Pact Environmental Technology Co., Ltd | ||||
Percentage of equity ownership | 58.00% | 58.00% | ||
Pact Asia Pacific Limited | ||||
Percentage of equity ownership | 58.00% | 58.00% | ||
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. | ||||
Percentage of equity ownership | 19.40% | [1] | 19.70% | |
Zhejaing Jia Huan Electronic Co. Ltd | ||||
Percentage of equity ownership | 20.00% | 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% | ||
Hangzhou Tianlian Environmental Testing Technology Company Limited | ZHEJIANG TIANLAN | ||||
Percentage of equity ownership | [2] | 80.00% | 80.00% | |
Jinhua Jiahuan Puzhau | ZHEJIANG JIAHUAN | ||||
Percentage of equity ownership | [3] | 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] | 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. | |||
[3] | The Company has been deregistered on September 1, 2015. |
Summary of significant accoun65
Summary of significant accounting policies (Details) | 12 Months Ended |
Dec. 31, 2017 | |
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 |
Summary of significant accoun66
Summary of significant accounting policies (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Research and development costs | $ | $ 163 | $ 475 | $ 852 | |||
Advertising and promotional expenses | $ | $ 13 | $ 13 | $ 17 | |||
ZHEJIANG TIANLAN | ||||||
Research and development costs | ¥ 12,873 | ¥ 13,808 | ¥ 18,895 | |||
Advertising and promotional expenses | 4 | 58 | 24 | |||
ZHEJIANG JIAHUAN | ||||||
Research and development costs | ¥ 11,874 | ¥ 8,814 | ¥ 6,982 |
Other (losses) _ income, net (D
Other (losses) / income, net (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | ||
Exchange (loss), net | $ | $ (46) | $ (75) | $ (75) | ||||
Rental income | $ | 32 | 80 | 84 | ||||
Total | $ | $ (14) | $ 5 | $ 9 | ||||
ZHEJIANG TIANLAN | |||||||
(Loss) on disposal of property, plant and equipment | ¥ 0 | ¥ (15) | ¥ 0 | ||||
Subsidy income | 2,262 | 3,360 | 2,617 | ||||
Sales of scrapped materials | 37 | 3 | 6 | ||||
Investment income | (405) | 412 | 0 | ||||
Others | (7) | (304) | 150 | ||||
Other income, net | 1,887 | 3,456 | 2,773 | ||||
ZHEJIANG JIAHUAN | |||||||
Government grant | 4,350 | 3,115 | 200 | ||||
Rental income | [1] | 1,316 | 1,271 | 901 | |||
Interest income | 4 | 54 | 44 | ||||
Sundry income | 176 | 152 | 263 | ||||
Other income, net | ¥ 5,846 | ¥ 4,592 | ¥ 1,408 | ||||
[1] | Rental income under operating leases is recognized on a straight-line basis over the term of the relevant lease. |
Income taxes (Details)
Income taxes (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Profit/(loss before) income taxes/(benefit): The PRC and Hong Kong | $ | $ (564) | $ (640) | $ (1,904) | |||
The provision / (credit) for income taxes consist of: | ||||||
Current tax expenses: The PRC and Hong Kong | $ | 0 | 212 | (72) | |||
Total current provision / (credit) | $ | 0 | 212 | (72) | |||
Deferred tax expenses: The PRC and Hong Kong | $ | 28 | 16 | 25 | |||
Total deferred provision | $ | 28 | 16 | 25 | |||
Income taxes (expense) / credit | $ | $ 28 | $ 228 | $ (47) | |||
ZHEJIANG TIANLAN | ||||||
Profit/(loss before) income taxes/(benefit): The PRC and Hong Kong | ¥ 30,047 | ¥ 27,603 | ¥ 24,927 | |||
The provision / (credit) for income taxes consist of: | ||||||
Current PRC EIT Domestic | 4,237 | 6,298 | 3,351 | |||
Total current provision / (credit) | 4,237 | 6,298 | 3,351 | |||
Deferred tax benefit | (405) | (1,337) | (177) | |||
Total deferred provision | (405) | (1,337) | (177) | |||
Income taxes (expense) / credit | 3,832 | 4,961 | 3,174 | |||
ZHEJIANG JIAHUAN | ||||||
Profit/(loss before) income taxes/(benefit): The PRC and Hong Kong | 4,314 | 11,848 | 5,797 | |||
The provision / (credit) for income taxes consist of: | ||||||
Income taxes (expense) / credit | ¥ 263 | ¥ 1,387 | ¥ 861 |
Income taxes (Details 1)
Income taxes (Details 1) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Income before income taxes | $ | $ (564) | $ (640) | $ (1,904) | |||
Computed tax using respective companies’ statutory tax rates | $ | (94) | (136) | (177) | |||
Change in valuation allowances | $ | 120 | 350 | 455 | |||
Under / (over) provision for income tax in prior years | $ | 0 | 0 | (69) | |||
Tax effect of expenses not deductible for tax purposes | $ | 2 | 14 | (256) | |||
Total provision / (credit) for income tax at effective tax rate | $ | $ 28 | $ 228 | $ (47) | |||
ZHEJIANG TIANLAN | ||||||
Income before income taxes | ¥ 30,047 | ¥ 27,603 | ¥ 24,927 | |||
Computed tax using respective companies’ statutory tax rates | 4,548 | 4,078 | 3,767 | |||
Under / (over) provision for income tax in prior years | (29) | 57 | 0 | |||
Permanent difference | (459) | (82) | 0 | |||
Temporary differences | (405) | (1,337) | (177) | |||
Tax effect on revenue not subject to tax | (1,438) | (901) | (1,068) | |||
Tax effect of expenses not deductible for tax purposes | 1,435 | 2,732 | 596 | |||
Tax effect of unused tax losses not recognized | 180 | 414 | 56 | |||
Total provision / (credit) for income tax at effective tax rate | 3,832 | 4,961 | 3,174 | |||
ZHEJIANG JIAHUAN | ||||||
Income before income taxes | 4,314 | 11,848 | 5,797 | |||
Computed tax using respective companies’ statutory tax rates | 988 | 2,326 | 1,119 | |||
Under / (over) provision for income tax in prior years | 27 | (9) | 189 | |||
Tax effect on revenue not subject to tax | (752) | (930) | (447) | |||
Total provision / (credit) for income tax at effective tax rate | ¥ 263 | ¥ 1,387 | ¥ 861 |
Income taxes (Details 2)
Income taxes (Details 2) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Tax losses | $ 958 | $ 838 | ||
Temporary differences | (6) | (2) | ||
Less: valuation allowances | (794) | (650) | ||
Net deferred tax assets | $ 158 | $ 186 | ||
ZHEJIANG TIANLAN | ||||
Tax losses | ¥ | ¥ 0 | ¥ 0 | ||
Allowance for doubtful debts | ¥ | 6,269 | 5,864 | ||
Net deferred tax assets | ¥ | ¥ 6,269 | ¥ 5,864 |
Net income per ordinary share71
Net income per ordinary share (Details) - shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net Income Per Ordinary Share Tables | |||
Weighted average number of ordinary shares for the purposes of diluted net income per share | 2,061,909 | 2,061,909 | 2,063,738 |
Accounts receivable, net (Detai
Accounts receivable, net (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Accounts receivable | $ | $ 3,917 | $ 4,431 | ||
Less: allowance for doubtful debts | $ | (109) | (38) | ||
Net | $ | $ 3,808 | $ 4,393 | ||
ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ 222,279 | ¥ 204,166 | ||
Less: allowance for doubtful debts | (41,761) | (39,066) | ||
Net | 180,518 | 165,100 | ||
ZHEJIANG JIAHUAN | ||||
Accounts receivable | 91,885 | 91,069 | ||
Less: allowance for doubtful debts | (32) | (32) | ||
Net | ¥ 91,853 | ¥ 91,037 |
Accounts receivable, net (Det73
Accounts receivable, net (Details 1) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Accounts receivable | $ | $ 3,808 | $ 4,393 | ||
ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ 180,518 | ¥ 165,100 | ||
Current | ||||
Accounts receivable | $ | 1,816 | 1,789 | ||
30 - 59 days past due | ||||
Accounts receivable | $ | 1,076 | 1,072 | ||
60 - 89 days past due | ||||
Accounts receivable | $ | 288 | 852 | ||
Greater than 90 days past due | ||||
Accounts receivable | $ | $ 628 | $ 680 | ||
Within 1 year | ZHEJIANG TIANLAN | ||||
Accounts receivable | 128,413 | 118,476 | ||
1 year 2 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 37,934 | 31,340 | ||
2 years 3 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 9,158 | 9,387 | ||
3 years 4 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 2,270 | 4,593 | ||
4 years 5 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | 893 | 240 | ||
Greater than 5 years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ 1,850 | ¥ 1,064 |
Accounts receivable, net (Det74
Accounts receivable, net (Details 2) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Accounts Receivable Net Details 2 | ||
[us-gaap:AllowanceForDoubtfulAccountsReceivable] | $ 109 | $ 38 |
Prepayments and other current75
Prepayments and other current assets (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Cost and estimated earnings in excess of billings | $ | $ 194 | $ 343 | ||
Deposits | $ | 85 | 70 | ||
Prepayments | $ | 457 | 221 | ||
Other receivables | $ | 104 | 156 | ||
Other tax recoverable | $ | 2 | 25 | ||
Prepayments and other current assets | $ | $ 860 | $ 815 | ||
ZHEJIANG TIANLAN | ||||
Contracts costs incurred plus estimated earnings | ¥ 330,322 | ¥ 389,534 | ||
Less: Progress billings | (211,066) | (318,748) | ||
Cost and estimated earnings in excess of billings | 119,256 | 70,786 | ||
Prepayments | 19,606 | 24,100 | ||
Other receivables | 10,775 | 14,851 | ||
Other current assets | 0 | 1,320 | ||
Prepayments and other current assets | 149,637 | 111,057 | ||
ZHEJIANG JIAHUAN | ||||
Prepayments and other receivables | 8,026 | 11,994 | ||
Deposits | 6,264 | 3,448 | ||
Prepayments and other current assets | ¥ 14,290 | ¥ 15,442 |
Long term investment (Details)
Long term investment (Details) - ZHEJIANG JIAHUAN - CNY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Long term investment: unlisted investment amortized cost | ¥ 69 | ¥ 69 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | 0 |
Long term investment: unlisted investment fair value | ¥ 69 | ¥ 69 |
Inventories, net (Details)
Inventories, net (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) |
Raw materials | $ | $ 132 | $ 115 | |||
Work in progress | $ | 48 | 29 | |||
Finished goods | $ | 748 | 554 | |||
Inventory, gross | $ | 928 | 698 | |||
Provision for obsolete and slow moving inventories | $ | (432) | (354) | $ (318) | ||
Inventory, net | $ | $ 496 | $ 344 | |||
ZHEJIANG TIANLAN | |||||
Raw materials | ¥ 4,741 | ¥ 5,606 | |||
Work in progress | 6,452 | 7,269 | |||
Finished goods | 3,924 | 230 | |||
Inventory, net | 15,117 | 13,105 | |||
ZHEJIANG JIAHUAN | |||||
Raw materials | 1,764 | 6,529 | |||
Work in progress | 11,316 | 11,264 | |||
Finished goods | 1,977 | 10,212 | |||
Inventory, net | ¥ 15,057 | ¥ 28,005 |
Inventories, net (Details 1)
Inventories, net (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventories Net Details 1 | ||
Provision for obsolete and slow moving inventories, beginning | $ 354 | $ 318 |
Provision during the year | 68 | 43 |
Exchange differences | 10 | (7) |
Provision for obsolete and slow moving inventories, ending | $ 432 | $ 354 |
Inventories, net (Details Narra
Inventories, net (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventories Net Details Narrative | ||
Provision for obsolete and slow moving inventories | $ 68 | $ 43 |
Property, plant and equipment80
Property, plant and equipment, net (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Buildings | $ | $ 1,866 | $ 1,866 | ||
Leasehold improvements | $ | 157 | 155 | ||
Furniture, fixtures and office equipment | $ | 612 | 581 | ||
Motor vehicles | $ | 191 | 188 | ||
Testing equipment | $ | 37 | 30 | ||
Gross | $ | 2,863 | 2,820 | ||
Less: accumulated depreciation | $ | (2,129) | (2,049) | ||
Net | $ | $ 734 | $ 771 | ||
ZHEJIANG TIANLAN | ||||
Building and leasehold improvements | ¥ 56,665 | ¥ 56,665 | ||
Furniture, fixtures and office equipment | 10,911 | 9,660 | ||
Motor vehicles | 4,410 | 4,451 | ||
Plant and machineries | 115,349 | 115,349 | ||
Construction in progress | 0 | 211 | ||
Gross | 187,335 | 186,336 | ||
Less: accumulated depreciation | (46,856) | (36,496) | ||
Net | 140,479 | 149,840 | ||
ZHEJIANG JIAHUAN | ||||
Buildings | 34,724 | 34,724 | ||
Office equipment | 1,252 | 1,206 | ||
Motor vehicles | 467 | 467 | ||
Plant and machineries | 5,813 | 7,014 | ||
Gross | 42,256 | 43,411 | ||
Less: accumulated depreciation | (22,294) | (21,550) | ||
Net | ¥ 19,962 | ¥ 21,861 |
Property, plant and equipment81
Property, plant and equipment, net (Details 1) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Depreciation charge | $ | $ 61 | $ 55 | $ 56 | |||
ZHEJIANG TIANLAN | ||||||
Depreciation charge | ¥ 12,647 | ¥ 14,144 | ¥ 8,473 | |||
ZHEJIANG JIAHUAN | ||||||
Depreciation charge | ¥ 2,093 | ¥ 2,211 | ¥ 2,296 |
Interests in affiliates (Detail
Interests in affiliates (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Balance Sheet: | |||
Current assets | $ 9,616 | $ 9,587 | |
Non-current assets | 14,121 | 13,517 | |
Total assets | 23,737 | 23,104 | |
Total liabilities | (6,630) | (6,486) | |
Total shareholders’ equity | 15,969 | 15,435 | |
Operating results: | |||
Operating income | (574) | (670) | $ (1,958) |
Net income | 473 | 231 | $ (616) |
Blue Sky | |||
Balance Sheet: | |||
Current assets | 56,911 | 46,297 | |
Non-current assets | 26,544 | 25,847 | |
Total assets | 83,455 | 72,144 | |
Total liabilities | (36,948) | (45,372) | |
Total shareholders’ equity | 46,507 | 26,772 | |
Operating results: | |||
Net sales | 62,234 | 43,226 | |
Operating income | 4,439 | 3,841 | |
Net income | 3,863 | 3,473 | |
Jia Huan | |||
Balance Sheet: | |||
Current assets | 21,374 | 22,021 | |
Non-current assets | 4,570 | 2,079 | |
Total assets | 25,944 | 26,100 | |
Total liabilities | (10,215) | (11,694) | |
Total shareholders’ equity | 15,729 | 14,406 | |
Operating results: | |||
Net sales | 16,301 | 16,684 | |
Operating income | 32 | 1,586 | |
Net income | $ 597 | $ 1,564 |
Intangible assets, net (Details
Intangible assets, net (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | |
ZHEJIANG TIANLAN | |||||
Patents | ¥ 2,400 | ¥ 2,400 | |||
Others | 567 | 567 | |||
Gross | 2,967 | 2,967 | |||
Less: Accumulated amortisation | (1,592) | (1,744) | |||
Net | 1,375 | 1,223 | |||
Amortisation expense | ¥ 152 | 193 | ¥ 575 | ||
2,018 | 152 | ||||
2,019 | 152 | ||||
2,020 | 152 | ||||
2,021 | 152 | ||||
2,022 | 152 | ||||
Thereafter | 463 | ||||
Total | 1,375 | 1,223 | |||
ZHEJIANG JIAHUAN | |||||
Software | 591 | 4,688 | |||
Gross | 591 | 4,688 | |||
Less: Accumulated amortisation | (349) | (1,043) | |||
Net | 242 | 3,645 | |||
Amortisation expense | ¥ 591 | 266 | ¥ 833 | ||
2018 | $ | $ 591 | ||||
2019 | $ | 591 | ||||
2020 | $ | 591 | ||||
2021 | $ | 591 | ||||
2022 | $ | 591 | ||||
Thereafter | $ | $ 690 | ||||
Total | ¥ 242 | ¥ 3,645 |
Land use right, net (Details)
Land use right, net (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
ZHEJIANG TIANLAN | |||
Land use right | ¥ 7,361 | ¥ 7,361 | |
Less: Accumulated amortisation | (1,763) | (1,614) | |
Net | 5,598 | 5,747 | |
Amortisation expense | 149 | 149 | ¥ 149 |
ZHEJIANG JIAHUAN | |||
Land use right | 7,987 | 7,987 | |
Less: Accumulated amortisation | (1,862) | (1,699) | |
Net | 6,125 | 6,288 | |
Amortisation expense | ¥ 163 | ¥ 163 | ¥ 163 |
Land use right, net (Details 1)
Land use right, net (Details 1) - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ZHEJIANG TIANLAN | ||
2,018 | ¥ 149 | |
2,019 | 149 | |
2,020 | 149 | |
2,021 | 149 | |
2,022 | 149 | |
Thereafter | 4,853 | |
Total | 5,598 | ¥ 5,747 |
ZHEJIANG JIAHUAN | ||
2,018 | 163 | |
2,019 | 163 | |
2,020 | 163 | |
2,021 | 163 | |
2,022 | 163 | |
Thereafter | 5,310 | |
Total | ¥ 6,125 | ¥ 6,288 |
Short term borrowings (Details)
Short term borrowings (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ZHEJIANG TIANLAN | ||
Bank loan | ¥ 33,000 | ¥ 25,000 |
ZHEIJIANG Bank loan borrowed by the Company | ||
Bank loan | 28,000 | 20,000 |
ZHEIJIANG Bank loan borrowed by a subsidiary of the Company | ||
Bank loan | ¥ 5,000 | ¥ 5,000 |
Other payables and accrued ex87
Other payables and accrued expenses (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) |
Dividend payables | $ | $ 84 | $ 79 | ||
Deposit received from customers | $ | 1,877 | 1,113 | ||
Rental deposit received | $ | 7 | 14 | ||
Amount due to related parties | $ | 20 | 0 | ||
Other payables | $ | 723 | 994 | ||
Other tax payables | $ | 10 | 58 | ||
Other payables and accrued expenses | $ | $ 2,721 | $ 2,258 | ||
ZHEJIANG TIANLAN | ||||
Deposit received from customers | ¥ 5,277 | ¥ 35,225 | ||
Accrued expenses | 10,751 | 10,116 | ||
Amount due to related parties | 0 | 5 | ||
Other payables | 1,076 | 1,227 | ||
Deferred income | 7,546 | 4,610 | ||
Other payables and accrued expenses | 72,450 | 51,183 | ||
ZHEJIANG JIAHUAN | ||||
Deposit received from customers | 4,938 | 10,979 | ||
Accrued expenses | 2,909 | 2,795 | ||
Other payables | 69 | 137 | ||
Other payables and accrued expenses | ¥ 7,916 | ¥ 13,911 |
Ordinary share (Details)
Ordinary share (Details) - shares | Dec. 31, 2017 | Dec. 31, 2016 |
Ordinary Share Details | ||
Shares outstanding | 2,229,609 | 2,229,609 |
Less: shares under treasury stock | 167,700 | 167,700 |
Total | 2,061,909 | 2,061,909 |
Long term borrowing (Details)
Long term borrowing (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ZHEJIANG TIANLAN | ||
Loan borrowed by the Company | ¥ 84,068 | ¥ 111,691 |
Stock options (Details)
Stock options (Details) - Stock Options - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Number of options | |||
Outstanding, beginning of year | 0 | 20,692 | 20,692 |
Cancelled | 0 | (20,692) | 0 |
Outstanding, end of year | 0 | 0 | 20,692 |
Exercisable, end of year | 0 | 0 | 0 |
Weighted average exercise price | |||
Options Outstanding, Beginning | $ 0 | $ 3.44 | $ 3.44 |
Options Cancelled | 0 | (3.44) | (.00) |
Options Outstanding, Ending | 0 | 0 | 3.44 |
Options Exercisable, Ending | $ 0 | $ 0 | $ 0 |
Pension plan (Details Narrative
Pension plan (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Aggregate contributions to pension plans and retirement benefit schemes | $ | $ 281 | $ 314 | $ 458 | |||
ZHEJIANG TIANLAN | ||||||
Aggregate contributions to pension plans and retirement benefit schemes | ¥ 4,298 | ¥ 3,905 | ¥ 3,850 | |||
ZHEJIANG JIAHUAN | ||||||
Aggregate contributions to pension plans and retirement benefit schemes | ¥ 1,317 | ¥ 1,799 |
Commitments and contingencies (
Commitments and contingencies (Details Narrative) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
Rental expenses | $ | $ 324 | $ 297 | $ 297 | |||
ZHEJIANG TIANLAN | ||||||
Rental expenses | ¥ 0 | ¥ 0 | ¥ 0 | |||
ZHEJIANG JIAHUAN | ||||||
Rental expenses | ¥ 0 | ¥ 0 | ¥ 0 |
Future Minimum rental receiva93
Future Minimum rental receivable (Details) - ZHEJIANG JIAHUAN - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Within 1 year | ¥ 859 | ¥ 791 |
After 1 year but within 5 years | 447 | 0 |
Total | ¥ 1,306 | ¥ 791 |
Segment information (Details)
Segment information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue | |||
Trading and manufacturing | $ 11,001 | $ 13,721 | $ 12,256 |
Engineering | 6,349 | 8,757 | 6,046 |
Revenue | 17,350 | 22,478 | 18,302 |
Operating loss | |||
Trading and manufacturing | (153) | (346) | (187) |
Engineering | (306) | (209) | (1,624) |
Unallocated corporate expenses | (115) | (115) | (147) |
Operating expenses | (574) | (670) | (1,958) |
Depreciation: | |||
Trading and manufacturing | 41 | 43 | 46 |
Engineering | 20 | 12 | 10 |
Depreciation | 61 | 55 | 56 |
Capital Expenditures, Gross | |||
Trading and manufacturing | 13 | 12 | 11 |
Engineering | 5 | 48 | 10 |
Total | 18 | 60 | $ 21 |
Assets | |||
Trading and manufacturing | 5,049 | 5,463 | |
Engineering | 18,688 | 17,641 | |
Total assets | 23,737 | 23,104 | |
Liabilities | |||
Trading and manufacturing | 2,806 | 3,208 | |
Engineering | 3,824 | 3,278 | |
Total | $ 6,630 | $ 6,486 |
Segment information (Details 1)
Segment information (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||
Revenue | $ 17,350 | $ 22,478 | $ 18,302 | |
Geographical analysis of long-lived assets | [1] | 734 | 771 | |
The PRC | ||||
Revenue | 7,740 | 10,604 | 9,327 | |
Geographical analysis of long-lived assets | [1] | 274 | 291 | |
Hong Kong | ||||
Revenue | 9,270 | 11,687 | 8,726 | |
Geographical analysis of long-lived assets | [1] | 460 | 480 | |
Others | ||||
Revenue | $ 340 | $ 187 | $ 249 | |
[1] | Long-lived assets represent property, plant and equipment, net. |
Segment information (Details 2)
Segment information (Details 2) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Supplier A | |||
Supplier accounting for more than 5% of Group's purchases | 45% | 63% | 39% |
Supplier B | |||
Supplier accounting for more than 5% of Group's purchases | 10% | 7% | 11% |
Supplier C | |||
Supplier accounting for more than 5% of Group's purchases | 9% | 5% | 6% |
Supplier D | |||
Supplier accounting for more than 5% of Group's purchases | 4% | 5% | 5% |
Segment information (Details 3)
Segment information (Details 3) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Customer A | |||
Customers accounting for more than 5% of the Group’s revenue | 10% | 13% | 11% |
Customer B | |||
Customers accounting for more than 5% of the Group’s revenue | 7% | - | - |
Customer C | |||
Customers accounting for more than 5% of the Group’s revenue | 5% | - | - |
Customer D | |||
Customers accounting for more than 5% of the Group’s revenue | 5% | - | - |
Customer E | |||
Customers accounting for more than 5% of the Group’s revenue | - | 6% | - |
Customer F | |||
Customers accounting for more than 5% of the Group’s revenue | - | 6% | - |
Customer G | |||
Customers accounting for more than 5% of the Group’s revenue | - | - | 11% |
Customer H | |||
Customers accounting for more than 5% of the Group’s revenue | - | - | 6% |
Customer I | |||
Customers accounting for more than 5% of the Group’s revenue | - | - | 5% |
Uncategorized Items - clwt-2017
Label | Element | Value |
Restricted Cash [Default Label] | us-gaap_RestrictedCash | $ 284,000 |
Restricted Cash [Default Label] | us-gaap_RestrictedCash | 475,000 |
Restricted Cash [Default Label] | us-gaap_RestrictedCash | $ 1,072,000 |
ZHEJIANG JIAHUAN | ||
Restricted Cash [Default Label] | us-gaap_RestrictedCash | $ 1,495,000 |
Restricted Cash [Default Label] | us-gaap_RestrictedCash | 1,498,000 |
Restricted Cash [Default Label] | us-gaap_RestrictedCash | $ 1,490,000 |