Annual Report 2012 - TodayIR.com

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Lonking Holdings Limited Annual Report 2012 Notes to the Consolidated Financial Statements For the year ended 31 December 2012 39. RELATED PARTY TRANSACTIONS (Continued) (a) (Continued) Notes: (Continued) note d: Established in March 2011, Lonking (Xinjiang) Mechanical & Technical Service Co., Ltd is a joint venture company invested by Xinjiang Junqi Construction Machinery Co., Ltd and Lonking (China) Machinery Sales Co., Ltd. (i) The sales to the associates and related parties were made according to the published prices and conditions offered to the major customers of the Group. (ii) The purchases from the associates and related parties were made according to the published prices and conditions offered by the associates to their major customers. All the amounts are unsecured, non-interest-bearing and repayable on demand or based on the agreed credit term of approximately 90 days. (b) Compensation of key management personnel of the Group: 2012 2011 RMB’000 RMB’000 Short-term employee benefits 16,568 17,939 Pension scheme contributions 34 22 Total compensation paid to key management personnel 16,602 17,961 123
Lonking Holdings Limited Annual Report 2012 Notes to the Consolidated Financial Statements For the year ended 31 December 2012 40. TRANSFERS OF FINANCIAL ASSETS a. Financial assets that are not derecognised in their entirety During the year ended 2012, the Group served as the sales agencies’ guarantor for bank acceptance bills payable which could only be issued to the Group and for factoring arrangement between the sales agencies and certain banks. At 31 December 2012, the Group endorsed the related bills receivable (the “Endorsed Bills”) with a carrying amount of RMB205,882,000 (2011: RMB305,250,000) (after deduction of the security deposit undertaken by sales agencies) to certain of its suppliers in order to settle the trade payables due to such suppliers (the “Endorsement”). The Endorsed Bills have a maturity from one to six months at the end of the reporting period. In addition, as at 31 December 2012, the Group also provided guarantees for the sales agencies’ factored accounts receivable amounting to RMB158,904,000 (31 December 2011: Nil). The Group will execute the guarantor’s liabilities if the sales agencies could not repay the money to the banks. In the opinion of the directors, the Group has retained the substantial risks and rewards, which include default risks relating to such Endorsed Bills and accounts receivable, and accordingly, it continued to recognise the full carrying amounts of the Endorsed Bills, accounts receivable and the associated trade payables settled. Subsequent to the Endorsement, the Group does not retain any rights on the use of the Endorsed Bills, including sale, transfer or pledge of the Endorsed Bills to any other third parties. The aggregate carrying amount of the associated liabilities included in other payables is RMB364,786,000 (2011: RMB305,250,000) as at 31 December 2012. b. Financial assets that are derecognised in their entirety At 31 December 2012, the Group endorsed certain bills receivable accepted by banks in the PRC (the “Derecognised Bills”), to certain of its suppliers in order to settle the trade payables due to such suppliers with a carrying amount in aggregate of RMB1,327,423,000 (2011: RMB300,000,000). The Derecognised Bills have a maturity from one to six months at the end of the reporting period. In accordance with the Law of Negotiable Instruments in the PRC, the holders of the Derecognised Bills have a right of recourse against the Group if the PRC banks default (the “Continuing Involvement”). In the opinion of the directors, the Group has transferred substantially all risks and rewards relating to the Derecognised Bills. Accordingly, it has derecognised the full carrying amounts of the Derecognised Bills and the associated trade payables. The maximum exposure to loss from the Group's Continuing Involvement in the Derecognised Bills and the undiscounted cash flows to repurchase these Derecognised Bills equal to their carrying amounts. In the opinion of the directors, the fair values of the Group’s Continuing Involvement in the Derecognised Bills are not significant. During the Relevant Periods, the Group has not recognised any gain or loss on the date of transfer of the Derecognised Bills. No gains or losses were recognised from the continuing involvement, both during the year or cumulatively. The Endorsement has been made evenly throughout the Relevant Periods. 124
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