| 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 March 31, 2016, 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 British Virgin Islands 100 % $ 50,000
Silver Channel Industrial Limited Hong Kong 100 % -
Heyuan Image Equipment Import Export Co., Ltd. P.R.C. 100 % 515,849
Guangzhou Image Agricultural Technology Co., Ltd. P.R.C. 100 % 1,636,902
Yunnan Image Tea Industry Co., Ltd. P.R.C. 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 December 31, 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 March 31, 2016, 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.
(j) 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) Customer advance Customer advance was received
from customers in connection with orders of products to be delivered in future periods.
(m) 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.
(n) 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.
(o) Selling Expenses Selling expenses are comprised
of salaries for the sales force, client entertainment, commissions, advertising, and travel and lodging expenses.
(p) 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.
(q) 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 3/31/2016 12/31/2015 3/31/2015
Period/Year end RMB : US$ exchange rate 6.4479 6.4907 6.1091
Average period/year RMB : US$ exchange rate 6.5395 6.2175 6.1358
Period/Year end HKD : US$ exchange rate 7.7544 7.7504 7.7542
Average period/year HKD : US$ exchange rate 7.7734 7.7521 7.7553 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.
(r) 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.
(s) 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.
(t) 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 March 31, 2016:
Carrying amount
Level 1 Level 2 Level 3 Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents $ 62,673 $ - $ - $ 62,673 As of December
31, 2015
Carrying amount
Level 1 Level 2 Level 3 Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents $ 78,753 $ - $ - $ 78,753
(u) 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.
(v) Business combination Business combinations are
accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations.
(w) Recent Accounting Pronouncements On January 5, 2016, the FASB
issued ASU 2016-01 Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments.
Although the ASU retains many current requirements, it significantly revises an entitys accounting related to (1) the classification
and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities
measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments.
The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. On February 25, 2016, the
FASB issued ASU 2016-02 Leases (Topic 842), its new standard on accounting for leases. ASU 2016-02 introduces a lessee
model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor
model with those in ASC 606, the FASBs new revenue recognition standard (e.g., those related to evaluating when profit can
be recognized). Furthermore, the ASU addresses
other concerns related to the current leases model. For example, the ASU eliminates the requirement in current U.S. GAAP for an
entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase the transparency
of their exposure to changes in value of their residual assets and how they manage that exposure. The new model represents a wholesale
change to lease accounting. As a result, entities will face significant implementation challenges during the transition period
and beyond, such as those related to:
● Applying judgment and estimating.
● Managing the complexities of data collection, storage, and maintenance.
● Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting requirements.
● Refining internal controls and other business processes related to leases.
● Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
● Addressing any income tax implications. The new guidance will be effective
for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar periods beginning on January
1, 2019), and interim periods therein. On March 15, 2016, the FASB
issued ASU 2016-07 InvestmentsEquity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity
Method of Accounting, which simplifies the equity method of accounting by eliminating the requirement to retrospectively
apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level
of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity method (as a result of
an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional interest in the investee
would be added to the current basis of the investors previously held interest and the equity method would be applied subsequently
from the date on which the investor obtains the ability to exercise significant influence over the investee. The ASU further requires
that unrealized holding gains or losses in accumulated other comprehensive income related to an available-for-sale security that
becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity
method. The guidance in the ASU is
effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years;
early adoption is permitted for all entities. Entities are required to apply the guidance prospectively to increases in the level
of ownership interest or degree of influence occurring after the ASUs effective date. Additional transition disclosures
are not required upon adoption. On March 17, 2016, the FASB
issued ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue
Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in the Boards
new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders, including those
related to (1) determining the appropriate unit of account under the revenue standards principal-versus-agent guidance and
(2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standards control
principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent for each
specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service is a
distinct good or service (or a distinct bundle of goods or services) to be provided to the customer. Therefore, for contracts
involving more than one specified good or service, the entity may be the principal for one or more specified goods or services
and the agent for others. The ASU has the same effective
date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition,
entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. On March 30, 2016, the FASB
issued ASU 2016-09 CompensationStock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,
which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic
entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification
in the statement of cash flows. The ASU is effective for annual
reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. As of March 31, 2016, there
are no other recently issued accounting standards not yet adopted that would or could have a material effect on the Companys
consolidated financial statements.
(x) 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. |
