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)10. Long-term receivables2012 2011Installment payments for the provision of telecommunicationsystem construction projects 1,291,443 945,923Less: Bad debt provision for long-term receivables 84,801 81,6491,206,642 864,274Please refer to Note V.18 for details of movements in bad debt provision for long-term receivables.For details of the transfer of long-term receivables, please refer to Note V.4. Long-term receivablescomprised factored trade receivables recognized under continuous involvement as described below.In prior year, the Company entered into a telecommunications system project with an Africantelecommunications operator with a total contract amount of USD1.5 billion. The related accountsreceivable is to be settled by promissory notes issued by the telecommunications operator withmaturity dates ranging from 3 to 13 years. Two government strategic banks in the PRC have agreed tofactor these promissory notes pursuant to factored trade receivables agreements. During the financingperiod, the banks will charge interest at 6-month USD LIBOR+1.5% or LIBOR+1.8% which will beshared by the Company and the telecommunications operator at a predetermined portion. If there isany delay in the payment by the telecommunications operator, the Company is not responsible forthe related penalties. If there is default in the payment, the Company would bear the first 20% ofdefault losses on the factored amount unless the Company breaches the Agreements or the factoringconditions are not satisfied. As at 31 December 2012, under the above arrangement, trade receivabledue from the customer amounted to RMB7,745,078,000 (31 December 2011: RMB7,643,736,000)among which RMB6,196,062,000 (31 December 2011: RMB6,114,989,000) has been derecognised fromthe consolidated statement of financial position as these receivables have fulfilled the derecognitionconditions as stipulated in ASBEs No. 23. An associated liability of RMB1,549,016,000 (31 December2011: RMB1,528,747,000) has been recognised in the consolidated statement of financial position tothe extent of the Company’s continuing involvement.In addition, factored finance interest for future periods relating to the derecognition of trade receivablesundertaken by the Company as at 31 December 2012 amounted to RMB446,075,000 (31 December2011: RMB478,818,000), comprising RMB104,356,000 (31 December 2011: RMB101,759,000) duewithin one year and classified as other payables (see Note V. 28) and RMB341,719,000 (31 December2011: RMB377,059,000) due after one year and classified as other non-current liabilities (see Note V. 33).211