2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)V. EXPLANATORY NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS(continued)4. Trade receivables (continued)As at 31 December 2012, trade receivables of the Group with a book value of RMB950,000,000 (31December 2011: RMB1,105,174,000) were subject to ownership restriction as they were pledged assecurity for short-term loans.As part of its normal business, the Group entered into some trade receivables factoring agreements witha number of banks and transferred certain trade receivables to banks (“Factored Trade Receivables”).Under certain trade receivables factoring agreement, the Group was still exposed, after the transfer ofthe trade receivables, to risks relating to debtor’s default and delayed payments, and therefore retainedsubstantially all risks and rewards relating to the trade receivables and did not qualify for derecognitionof financial assets. The Group continued to recognise assets and liabilities concerned to the extentof the carrying value of the trade receivables. As at 31 December 2012, trade receivables that havebeen transferred but not settled by the debtors amounted to RMB6,412,550,000 (31 December 2011:RMB6,296,335,000).According to some trade receivables factoring agreements, the Group is exposed default risks of certaintrade debtors after the transfer. If the debtor’s default extends beyond a certain period, the Group maybe required to pay interests to the banks in respect of certain delayed repayments. Since the Grouphas neither transferred nor retained substantially all risks and rewards relating to the trade receivables,the assets and liabilities concerned are recognized to the extent of trade receivables transferred undercontinuous involvement. As at 31 December 2012, the carrying value of trade receivables that havebeen transferred but not settled by the debtors amounted to RMB12,619,599,000. The amount of assetsand liabilities under continuous involvement relating to debtor’s default and delayed repayments areset out as follows:Financial assets(at amortised cost)Trade receivablesRMB’000Carrying value of assets under continuous involvement 1,771,448Carrying value of liabilities under continuous involvement 1,774,866Factored Trade Receivables that did not qualify for derecognitoin and Factored Trade Receivablesrecognized according to the extent of continuous involvement were classified as “Factored tradereceivables” or “Long-term factored trade receivables.” As at 31 December 2012, the amount of factoredtrade receivables was RMB8,183,998,000 (31 December 2011: RMB7,779,179,000). Relevant liabilitieswere classified as “Bank advances on factored trade receivables” or “Bank advances on long-term tradereceivables.” As at 31 December 2012, the amount of bank advances on factored trade receivableswas RMB8,187,416,000 (31 December 2011: RMB7,945,814,000).207