| Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Method of Accounting The Company maintains its
general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and
notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles
in the United States of America and have been consistently applied in the presentation of financial statements.
(b) Basis of Presentation The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(US GAAP).
(c) Principles of Consolidation The consolidated financial
statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary. All significant
inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities,
and net income or loss of those wholly-owned subsidiaries. As of September 30, 2015,
the detailed identities of the consolidating subsidiaries are as follows:
Name of company Place of incorporation Attributable equity interest % Registered capital
Fortune Delight Holdings Group Limited BVI 100 % 50,000
Silver Channel Industrial Limited Hong Kong 100 % $ -
Heiyuan Image Equipment Import Export Co., Ltd. PRC 100 % 515,849
Guangzhou Image Agricultural Technology Co., Ltd. PRC 100 % 1,636,902
Yunnan Image Tea Industry Co., Ltd. PRC 100 % 491,071
(d) Economic and Political Risks The Companys operations
in the PRC are subject to special considerations and significant risks not typically associated with companies in North America
and Western Europe. These include risks associated with, among others, the political, economic, legal environment and foreign currency
exchange. The Companys results may be adversely affected by changes in the political and social conditions in the PRC, and
by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, restriction
on international remittances, and rates and methods of taxation, among other things.
(e) Use of Estimates In preparing financial statements
in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and expenses during the reporting years. These accounts and
estimates include, but are not limited to, the estimation on useful lives of property, plant and equipment. Actual results could
differ from those estimates.
(f) Cash and Cash Equivalents Cash and cash equivalents
include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities
of three months or less. As of September 30, 2015, cash and cash equivalents were mainly denominated in RMB and were placed with
banks in the PRC. These cash and cash equivalents may not be freely convertible into foreign currencies and the remittance of these
funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.
(g) Accounts Receivable The Company maintains allowances
for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical
bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns
to evaluate the adequacy of these allowances. Terms of sales vary. Allowances are recorded primarily on a specific identification
basis. As of September 30, 2015,
no provision for allowance for doubtful accounts was provided.
(h) Other receivables Other receivables are recognized
and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is
made when recovery of the full amount is doubtful.
(i) Inventories Inventories are stated at
the lower of cost or market value. Cost is computed using the first-in, first-out method and includes all costs of purchase and
other costs incurred in bringing the inventories to their present location and condition. Market value is determined by reference
to the sales proceeds of items sold in the ordinary course of business or estimates based on prevailing market conditions.
(i) Property, plant and equipment Property and equipment are
stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment
is provided using the straight-line method for substantially all assets with estimated lives of:
Building 20 years
Computer 3 years
Motor vehicles 4 years
(k) Accounting for Impairment of Long-Lived Assets The Company adopts Accounting
Standards Codification (ASC) 360, Accounting for the Impairment or Disposal of Long-Live Assets, which
addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates
the carrying value of long-lived assets to be held and used in accordance with ASC 360 which requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the
amount by which the carrying amount exceeds the fair market value of the long-lived assets. The long-lived assets held
and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or
other industry changes. Recoverability of assets to be held and used is determined by comparing the carrying amount of an asset
to future net undiscounted cash flows to be generated by the assets. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to
sell. During the reporting periods, there was no impairment loss.
(l) Revenue Recognition The Companys revenue
recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104, included in the Codification as
ASC 605, Revenue Recognition The Company does not allow
its customers to return products. The Companys customers can exchange products only if they are damaged in transportation. Revenue reported
is net of value added tax.
(m) Cost of Sales The Companys cost of
sales is comprised of the inbound acquisition cost of packaged finished goods for resale, inbound shipping, value added tax and
business taxes recognized upon sales of goods.
(n) Selling Expenses Selling expenses are comprised
of salaries for the sales force, client entertainment, commissions, advertising, and travel and lodging expenses.
(o) General & Administrative Expenses General and administrative
expenses include executive compensation, general overhead such as the finance department and administrative staff, depreciation,
office rental and utilities.
(p) Foreign Currency Translation The Company maintains its
financial statements in the functional currencies on Chinese Renminbi (RMB) and Hong Kong Dollars (HKD). Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or
losses arising from foreign currency transactions are included in the determination of net income for the respective periods. For financial reporting purposes,
the financial statements of the Company, which are prepared using the functional currency, have been translated into United States
dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated
at the average exchange rates and stockholders equity is translated at historical exchange rates. Translation adjustments
are not included in determining net loss but are included in foreign exchange adjustment to other comprehensive loss, a component
of stockholders equity.
Exchange Rates 9/30/2015 12/31/2014 9/30/2014
Period end RMB : US$ exchange rate 6.3468 6.1385 6.1517
Average period RMB : US$ exchange rate 6.1614 6.1432 6.1459
Period end HKD : US$ exchange rate 7.7499 7.7574 7.7540
Average period HKD : US$ exchange rate 7.7527 7.7544 7.7649 RMB is not freely convertible
into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation. The HKD is freely
convertible into other foreign currencies.
(q) Income Taxes The Company adopts SFAS No.
109, Accounting for Income Taxes, included in the Codification as ASC 740, Income Taxes, On January 1, 2007, The Company
adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), included
in the Codification as ASC 740, Income Taxes.
(r) Statutory Reserve Statutory reserve refers to
the amount appropriated from the net income in accordance with PRC laws or regulations, which can be used to recover losses and
increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that an enterprise operating
at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve to be used for future
company development. Such an appropriation is made until the reserve reaches a maximum equal to 50% of the enterprises registered
capital.
(s) Fair Value of Financial Instruments For certain of the Companys
financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities
and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, Fair
Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company.
ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures
of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance
sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair
values because of the short period of time between the origination of such instruments and their expected realization and their
current market rate of interest. The three levels of valuation hierarchy are defined as follows:
● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company analyzes all financial
instruments with features of both liabilities and equity under ASC 480, Distinguishing Liabilities from Equity, and
ASC 815. The Companys financial
instruments include cash and equivalents, accounts receivable, and accounts payable. Cash and cash equivalents consist deposits
financial institutions with original maturities of three months or less. Management estimates the carrying amounts of the non-related
party financial instruments approximate their fair values due to their short-term nature. The following is table of
the Companys financial instruments: As of September 30, 2015
Carrying amount
Level 1 Level 2 Level 3 Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents $ 136,150 $ - $ - $ 136,150 As of December 31, 2014
Carrying amount
Level 1 Level 2 Level 3 Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents $ 70,107 $ - $ - $ 70,107
(t) Other Comprehensive Income The Companys functional
currency is the Renminbi (RMB). For financial reporting purposes, RMB were translated into United States Dollars
(USD or $) as the reporting currency. Assets and liabilities are translated at the exchange rate in
effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting
period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component
of stockholders equity as Accumulated other comprehensive income. Gains and losses resulting from foreign
currency transactions are included in income. The Company uses FASB ASC
Topic 220, Reporting Comprehensive Income. Comprehensive loss is comprised of net loss and all changes to the statements
of stockholders equity, except for changes in paid-in capital and distributions to stockholders due to investments by stockholders.
(u) Business combination Business combinations are
accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations.
(v) Recent Accounting Pronouncements In August 2014, the FASB issued
ASU No. 2014-15, Disclosure of Uncertainties About an Entitys Ability to Continue as a Going Concern (ASU
2014-15), which requires management to perform interim and annual assessments of an entitys ability to continue as
a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how
to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise
to substantial doubt about an entitys ability to continue as a going concern. ASU 2014-15 applies to all entities and is
effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company does
not expect that the adoption of this standard will have a material effect on the Companys financial statements. In November 2014, FASB issued
Accounting Standards Update No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid
Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task
Force).The amendments permit the use of the Fed Funds Effective Swap Rate (also referred to as the Overnight Index Swap Rate, or
OIS) as a benchmark interest rate for hedge accounting purposes. Public business entities are required to implement the new requirements
in fiscal years (and interim periods within those fiscal years) beginning after December 15, 2015. All other types of entities
are required to implement the new requirements in fiscal years beginning after December 15, 2015, and interim periods beginning
after December 15, 2016. The Company does not expect the adoption of ASU 2014-16 to have material impact on the Companys
financial statement. In January 2015, The FASB
issued ASU No. 2015-01, Income StatementExtraordinary and Unusual Items (Subtopic 225-20).This Update eliminates
from GAAP the concept of extraordinary items. Subtopic 225-20, Income StatementExtraordinary and Unusual Items, required
that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction
is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as
an extraordinary item. Paragraph 225-20-45-2 contains the following criteria that must both be met for extraordinary classification:
1. Unusual nature. The underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity, taking into account the environment in which the entity operates.
2. Infrequency of occurrence. The underlying event or transaction should be of a type that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the entity operates. If an event or transaction
meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results
of ordinary operations and show the item separately in the income statement, net of tax after income from continuing operations.
The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable
to the extraordinary item. The amendments in this Update
are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity
may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented
in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal
year of adoption. The effective date is the same for both public business entities and all other entities. In September 2015, the FASB
issued ASU 2015-16, the guidance eliminates the requirement to restate prior period financial statements for measurement period
adjustments following a business combination. The new guidance requires that the cumulative impact of a measurement period adjustment
(including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior
period impact of the adjustment should be either presented separately on the face of the income statement or disclosed in the notes.
The Company is currently evaluating the impact the pronouncement will have on the Companys consolidated financial statements.
(w) Contingencies Certain conditions may exist
as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only
be resolved when one or more future events occur or fail to occur. The Companys management assesses such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that
are pending against the Company or un-asserted claims that may result in such proceedings, the Companys management evaluates
the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought. If the assessment of a contingency
indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Companys consolidated financial statements. If the assessment indicates that
a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would
be disclosed. Loss contingencies considered
to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. |
