| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a) Method
of accounting The
Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated
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 consolidated
financial statements.
(b) Principles
of consolidation The
consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary. All
significant inter-company balances and transactions are eliminated in consolidation. The
following table depicts the identity of the wholly owned subsidiaries:
Place
of Attributable
equity Registered
Name
of subsidiary Incorporation interest
% capital
Yugosu
Investment Ltd. HK 100 HKD
10,000
Guangzhou
Smartfame Co., Ltd. PRC 100 RMB
3,000,000
Yuewin
Trading Ltd PRC 100 RMB
500,000
(c) Use
of estimates The
preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at
the time the estimates are made; however actual results could differ materially from those estimates.
(d) Economic
and political risks The
Company's operation is conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations
may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The
Company's 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 and legal environment
and foreign currency exchange. The Company's 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, remittances abroad, and rates and methods of taxation, among other things.
(e) Property,
plant and equipment Plant
and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using
the straight-line method. Estimated useful lives of the plant and equipment are as follows:
Furniture
and fixtures 5
years
Office
equipment 3
- 5 years
Motor
vehicles 4
years The
cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or
loss is included in the statement of operation.
(f) Accounting
for the impairment of long-lived assets The
Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject
to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360. The
carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in
a similar manner, except that fair market values are reduced for the cost to dispose. During
the reporting years, there was no impairment loss.
(g) Cash
and concentration of risk The
Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
The Group maintains bank accounts in Hong Kong .and maintain bank accounts in the PRC.
(h) Income
taxes The
Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before
the Company is able to realize their benefits, or that future realization is uncertain.
(i) Foreign
currency translation The
accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company
is the Hong Kong Dollar (HK$) and Renminbi (RMB). The consolidated financial statements are translated into United States dollars
from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital
accounts are translated at their historical exchange rates when the capital transactions occurred. The
exchange rates used to translate amounts in HK$ and RMB into USD for the purposes of preparing the consolidated financial statements
were as follows:
2015 2014
Nine
months and Year end HKD: USD exchange rate 7.7577 7.7653
Average
quarterly and yearly HKD : USD exchange rate 7.7547 7.7542
2015 2014
Nine months and
Year end RMB: USD exchange rate 6.1460 6.1541
Average quarterly
and yearly RMB: USD exchange rate 6.1457 6.1481 The
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 USD at the rates used in translation.
In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends
outside the PRC.
(j) Comprehensive income Comprehensive
income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.
Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive
income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial
statements. The Company's current component of comprehensive income is the net income and foreign currency translation adjustment. The
FASB has issued Accounting Standards Update (ASU) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property,
Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The
amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also
addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance
in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued
operations. Those strategic shifts should have a major effect on the organization's operations and financial results. Examples
include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the
new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more
information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure
of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued
operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization's
results from continuing operations. The amendments in this ASU enhance convergence between U.S. GAAP and International Financial
Reporting Standards (IFRS). Part of the new definition of discontinued operation is based on elements of the definition of discontinued
operations in IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations. The Company does not expect the adoption of
2014-08 to have a material effect on its operating results or financial position. Other accounting standards that have been issued
or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to
have a material impact on the Company's financial statements upon adoption. The
FASB has issued Accounting Standards Update ("ASU") No. 2015-01 about Simplifying Income Statement Presentation by Eliminating
the Concept of Extraordinary Items. The objective is to reduce the cost and complexity of income statement presentation by eliminating
the concept of extraordinary items while maintaining or improving the usefulness of the information provided to the users of financial
statements. The extraordinary items must meet two criteria's: unusual nature and infrequency of occurrence. 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. This amendment will be effective for annual periods,
and interim periods within those annual periods, beginning after December 15, 2015. The Board decided to permit early adoption
provided that the guidance is applied from the beginning of the fiscal year of adoption. The
FASB has issued ASU No. 2015-03 about Simplifying the Presentation of Debt Issuance Costs. The objective is to require that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying
amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this Update. For public business entities, the amendments in his Update is effective
for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.
For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption of the amendments
in this Update is permitted for financial statements that have not been previously issued. The
FASB has issued ASU No. 2015-06 about Topic 260, Earnings Per Share, which contains guidance that addresses master limited partnerships
that originated from Emerging Issues Task Force (EITF) Issue No. 07-4. This amendment in this Update specify that for purposes
of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before
the date of a dropdown transaction should be allocated entirely to the general partner. In that circumstance, the previously reported
earnings per unit of the limited partners (which is typically the earnings per unit measure presented in the financial statements)
would not change as a result of the dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses)
differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method
also are required. The amendments in this Update are effective for fiscal years beginning after December 15, 2015, and interim
periods within those fiscal years. Earlier application is permitted. The
FASB has issued ASU No. 2015-07 about Topic 820, Fair Value Measurement, which permits a reporting entity, as a practical expedient,
to measure the fair value of certain investments using the net asset value per share of the
investment. The amendments in this Update remove the requirement to categorize within the fair value hierarchy all investments
for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement
to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share
practical expedient. Rather, those disclosures are limited to investments for which the
entity has elected to measure the fair value using that practical expedient. The amendments in this Update apply to reporting
entities that elect to measure the fair value of an investment within the related scope by using the net asset value per share
(or its equivalent) practical expedient. Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption
until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.
(l) Accounts receivable The
Company is operating retail outlet stores in a cash or credit environment which rent space from various shopping malls controlling
by the shopping mall owners. All customers pay for their purchases at the cashier counters operating by the owners. Upon confirmation
of the transaction by the shopping mall, the shopping mall deducts the sales tax due to the government, the sales portion due
to the shopping mall and remits the balance to the Company. It typically takes the shopping mall approximately 30 to 45 days to
confirm the transaction, and settles net proceeds within the next 45 days. The Company's accounts receivable are the receivables
due from the shopping malls for the sale of the products for which the shopping mall owner collected the payments from the customers
and are holding to remit to the Company. Accounts
receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance
for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables
are past due, significant one-time events and historical experience. Bad debts are written off as incurred. During the reporting
years, there were no bad debts. Outstanding
accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables.
Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.
(m) Inventories Inventories
primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories
is calculated on the weighted average basis which approximates cost. Management
regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or
obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has
not historically experienced significant occurrences of obsolescence. Inventory
shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical
inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout
the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical
inventory date through the reporting date. These
reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic
conditions, consumer demand and competitive environments differ from expectations.
(n) Revenue recognition The
Company earns revenue by selling merchandise through self-managed retail stores inside shopping malls, franchise stores and wholesale
agent. Revenue
from self-managed retail stores inside shopping malls is recognized when merchandise is purchased by and delivered to the customer,
confirmed, fixed and reconciled with the shopping malls and collectability is reasonably assured. Revenue
from franchised stores is recognized after goods delivered and cash collected (normally cash on delivery) from the franchise retail
stores. Revenue
from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured. All
revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based
upon historical experience. The
Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC
605, Revenue Recognition.
(o) Costs of sales Cost
of sales includes the cost of merchandise, collecting and handling charges based on store sales deducted by landlord, related
cost of packaging and shipping cost and the distribution center costs.
(p) Operating lease rental The
Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified
as an operating lease. Operating lease rental payments included in general and administrative expenses for the quarter ended September
30, 2015 and year ended December 31, 2014 were $25,625 and $32,802, respectively.
(q) Selling expenses Selling
expenses include store-related expense, other than store occupancy costs, as well as advertising, depreciation and amortization,
and certain expenses associated with operating the Company's corporate headquarters.
(r) Advertising costs Advertising
costs are expensed as incurred. Advertising expense, net of reimbursement from suppliers, amounted to $0 and $4,840 for the nine
months ended September 30, 2015 and year ended 2014, respectively. Advertising expense is included in selling expense in the accompanying
consolidated statements of income.
(s) Concentration of Credit Risk The
Company maintains cash in bank deposit accounts in Hong Kong and PRC. The Company performs ongoing evaluations of this institution
to limit its concentration risk exposure. The
Company operates retail stores located in the PRC. Because of this, the Company is subject to regional risks, such as the economy,
regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the
region in which the Company operates.
(t) Retirement Benefit Plans Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain
pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations
require the Company to make contributions to the government for these benefits based on certain percentages of the employees'
salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the
guidance of ASC 715, CompensationRetirement Benefits. The
total amounts for such employee benefits which were expensed were $29,769 and $33,093 for the years ended September 30, 2015 and
2014, respectively.
(u) Segment In
accordance with ASC 280-10, Segment Reporting
(v)
Product Warranty The company is the legal obligor for the warranties
of the products sold to customers but believed that the likelihood that we would not recover all warranty costs from the manufacturer
to be remote based on our past operating history, manufacturers' cooperation and their reputation and history of honoring all
their warranty obligations. Since our inception to present, we have not incurred any direct warranty expenses and accordingly,
the accrual and associated expenses recognized in the financial statements has been recorded as zero. |
