March 22, 2016
VIA EDGAR
CONFIDENTIAL
Mr. Rufus Decker, Accounting Branch Chief
Ms. Linda Cvrkel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
| Re: | China Xiniya Fashion Limited | |
| Form 20-F for Fiscal Year Ended December 31, 2014 Filed April 28, 2015 Response dated March 10, 2016 File No. 1-34958 |
Dear Mr. Decker and Ms. Cvrkel:
China Xiniya Fashion Limited (the "Company") thanks the staff of the Securities and Exchange Commission (the "Staff") for its letter dated March 10, 2016 and its review of and comments on the Company's annual report on Form 20-F filed on April 28, 2015 (the "2014 Annual Report").
The Company's responses to the Staff's comments are set forth below. The headings and numbered paragraphs below correspond to the headings and numbered paragraphs of the Staff's comment letter, which have been retyped herein in bold for your ease of reference, and the page numbers referenced by the Company's responses relate to the 2014 Annual Report. Capitalized terms not otherwise defined in this letter have the same meanings assigned to them in the 2014 Annual Report.
Form 20-F for the Fiscal Year Ended December 31, 2014
Consolidated Financial Statements
Note 12. Inventories, page F-19
| 1. | We note your response to comment 1. Please explain in greater detail how you determined the amounts of the adjustments to revenue and cost of sales reflected in the table included on page 2 of your response. Also, please provide us with the various components of the adjustments to revenue and cost of sales including the separate amounts related to: (a) the repurchase of inventory, (b) its subsequent resale and (c) the constructive obligation to reacquire inventory from other distributors. If both revenue and cost of sales have not been adjusted for the constructive obligation to reacquire inventory from other distributors, please also revise your adjustments as appropriate. Please clarify how value added taxes were factored into the adjustments made. |
March 22, 2016 | |
Page 2 |
The Company respectfully advises the Staff the following:
The following provides detail as to the proposed revisions to revenue and cost of sales:
| RMB Expressed in Thousands |
| ||
Revenue, as previously reported |
|
| 813,084 |
|
Reclassify sales of repurchased inventory |
|
| 68,499 | (b) |
Reclassify constructive obligation for the inventory to be repurchased |
|
| (249,000 | )(c) |
Revenue, as revised |
|
| 632,583 |
|
|
|
|
|
|
Cost of sales, as previously reported |
|
| (590,189 | ) |
Reclassify write down of repurchased inventory to net realizable value |
|
| (138,066 | )(a) |
Reclassify cost of sales of repurchased inventory |
|
| (68,499 | )(b) |
Reclassify inventory to be repurchased under constructive obligation |
|
| 112,800 | (c) |
Cost of sales, as revised |
|
| (683,954 | ) |
|
|
|
|
|
Loss on inventory buyback, as previously reported |
|
| (274,266 | ) |
Reclassify write down of repurchased inventory to net realizable value |
|
| 138,066 | (a) |
Reclassify constructive obligation for the inventory to be repurchased |
|
| 249,000 | (c) |
Reclassify inventory to be repurchased under constructive obligation |
|
| (112,800 | )(c) |
Reclassify sales of repurchased inventory |
|
| (68,499 | )(b) |
Reclassify cost of sales of repurchased inventory |
|
| 68,499 | (b) |
Loss on inventory buyback, as revised |
|
| - |
|
| (a) | The repurchase of inventory – The inventory repurchased in 2014 for RMB252.4 million was written down by RMB138.1 million to its net realizable value (RMB114.3 million). This write down of inventory has been reclassified above from loss on inventory buyback to cost of sales. | |
| (b) | The subsequent resale – In 2014, the Company sold repurchased inventory (which was adjusted to its net realizable value) for RMB68.5 million. The sale of this repurchased inventory has been reclassified from loss on inventory buyback to revenue, and the cost of this inventory has been reclassified from loss on inventory buyback to cost of sales. | |
| (c) | The constructive obligation to reacquire inventory from other distributors – the provision for liability of RMB136.2 million at December 31, 2015, represented the estimated repurchase price of inventory from other distributors of RMB249.0 million, less the estimated net realizable value of such inventory to be repurchased of RMB112.8 million. RMB249.0 million and RMB112.8 million were reclassified from loss on inventory buyback to revenue and cost of sales, respectively. |
For the repurchase of inventory from certain distributors, input value added tax ("input VAT") was paid to the distributors. Value added tax ("VAT") is a multi-stage consumption tax on goods and services. VAT is levied on the supply of goods and services at each stage of the supply chain from the supplier to the retail stage of the distribution. Even though VAT is imposed at each level of the supply chain, the input VAT paid does not become part of the cost of the product because VAT paid is claimable. The input VAT is used as a credit against the output VAT levied on selling goods. In regards to the transactions outlined above, the input VAT was debited against output VAT in the balance sheet and represents either a net VAT payable or claimable (receivable) from the State Administration of Taxation of China. Hence, the input VAT does not affect the reclassification entries outlined above.
March 22, 2016 | |
Page 3 |
If you have any questions regarding this submission, please contact our compliance counsel, Mr. Alan Seem of Shearman & Sterling LLP, at +1-650-838-3753 or aseem@shearman.com or contact meat ngcheejiong@xiniya.com.
| Very truly yours, |
| |
| By: | /s/ Chee Jiong Ng |
| |
|
| Chee Jiong Ng |
|
|
| Chief Financial Officer |
|
Enclosures
| cc: | Qiming Xu, Chairman and Chief Executive Officer, China Xiniya Fashion Limited |
| Alan Seem, Shearman & Sterling LLP |