Central China Securities Co., Ltd. — Regulatory Filings 2018

Mar 29, 2018

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Central China Securities Co., Ltd.

(a joint stock company incorporated in 2002 in Henan Province, the People’s Republic of China with limited liability under the Chinese corporate name “ 中原證券股份有限公司 ” and carrying on business in Hong Kong as “ 中州證券 ”)

(Stock Code: 01375)

ANNOUNCEMENT ON CHANGES IN ACCOUNTING POLICIES

The board of directors (the “ Board ”) of Central China Securities Co., Ltd. (the “ Company ”) hereby announces that the Resolution on the Changes in Accounting Policies of Central China Securities Co., Ltd. (《中原証券股份有限公司關於會計政策變更的議案》) was considered and approved at the 49th meeting of the fifth session of the Board held on 29 March 2018, which approved the change to be made to the accounting policies of the Company. The aforesaid changes in accounting policies are not subject to consideration at the general meeting of the Company.

DETAILS OF THE CHANGES IN ACCOUNTING POLICIES AND THEIR IMPACT ON THE COMPANY

Pursuant to the Accounting Standard for Business Enterprises No. 42 – Non-current Assets and Disposal Groups Held for Sale and Discontinued Operations (the “ Standard No. 42 ”) issued by the Ministry of Finance of the People’s Republic of China (the “ MOF ”) in 2017, and the Accounting Standard for Business Enterprises No. 16 – Government Grants (“ Standard No. 16 ”), the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments” (the “ Standard No. 22 ”), the Accounting Standard for Business Enterprises No. 23 – Transfer of Financial Assets (the “ Standard No. 23 ”), the Accounting Standard for Business Enterprises No. 24 – Hedge Accounting (the “ Standard No. 24 ”), the Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments (the “ Standard No. 37 ”) and the Accounting Standard for Business Enterprises No. 14 – Revenue (the “ Standard No. 14 ”) amended by the MOF in 2017, the Board approved to change the accounting policies of the Company pursuant to the requirements of the above-mentioned accounting standards. The details are as follows:

(I) Changes in Accounting Policies in relation to Non-Current Assets and Disposal Groups Held for Sale and Discontinued Operations

Standard No. 42 specifies the classification conditions and measurement of non-current assets and disposal groups held for sale, and the presentation of discontinued operations. The Company has implemented the above-mentioned standards and notice in 2017, which has no significant impact on the financial positions, operating results and cash flow of the Company.

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(II) Changes in Accounting Policies in relation to Government Grants

Pursuant to the amended Standard No. 16, government grants related to assets can offset the book value of relevant assets; for government grants related to income, government grants related to the daily activities of enterprises shall be accounted as other income or to be offset with relevant cost and expenditure based on the nature of business activities; government grants unrelated to the daily business activities of enterprises shall be recorded to non-operating income or expenses.

The Company has implemented the above-mentioned standards and notice in 2017. The government grants existed on 1 January 2017 are subject to prospective application method and the new government grants received between 1 January 2017 and the date of implementation of this standard will be adjusted pursuant to this standard. These changes have no significant impact on the financial positions, operating results and cash flow of the Company.

(III) Changes in Accounting Policies in relation to Financial Instruments

The MOF has amended four accounting standards in relation to financial instruments, including the Standard No. 22, the Standard No. 23, the Standard No. 24 and the Standard No. 37. The main amendments include: firstly, by using the “business model” for holding the financial assets and “contractual cash flow characteristics of financial assets” as the basis of determination of the classification of financial assets, financial assets shall be classified into three types, namely financial assets measured at amortised cost, financial assets measured at fair value through other comprehensive income and financial asset measured at fair value through profit or loss of the current period; secondly, the accounting for impairment of financial assets is changed from “loss occurred approach” to “loss expected approach”; thirdly, the determination principle and accounting treatment of transfer of financial assets are further clarified; fourthly, in respect of hedge accounting, the scope of qualified hedged items and hedging instruments shall be enlarged, and the quantitative standard for test of effectiveness and the requirement for retrospective test shall be abolished; fifthly, the disclosure requirements for financial instruments are adjusted accordingly.

According to the requirements of the MOF, the enterprises whose shares are listed both domestically and overseas shall implement the above-mentioned amended standards from 1 January 2018. The Company changed its accounting policies at the beginning of year 2018 and will disclose the accounting statements in accordance with the requirements of the above-mentioned amended standards in the 2018 first quarterly results. The Company will adjust the opening balance of retained earnings and other comprehensive income of year 2018 based on the impact of the data instead of restating the comparable data of year 2017. The implementation of the above-mentioned amended standards is expected to have extensive impacts on the financial statements of the Company.

(IV) Changes in Accounting Policies in relation to Revenue

The amendments to the Standard No. 14 by the MOF mainly include: incorporating the current two standards of revenue and construction contract into a unified revenue recognition model; replacing the risk-and-reward transfer method with the transfer-of-control method as the determination criteria for revenue recognition; providing a more specific guidance on accounting treatment of contracts that include multiple trading arrangements and certain specific transactions (or matters).

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According to the requirements of the MOF, the enterprises whose shares are listed both domestically and overseas shall implement the above-mentioned amended standards from 1 January 2018. Based on the assessment, the changes will not have significant impact on the financial statements of the Company.

CONCLUSIVE OPINIONS OF THE INDEPENDENT DIRECTORS AND THE SUPERVISORY COMMITTEE

Both the independent non-executive directors and the supervisory committee of the Company agree with the changes in accounting policies of the Company and are of the view that the changes in accounting policies made by the Company according to the requirements of relevant documents of the MOF are reasonable and in line with the interests of the Company and its shareholders, and can reflect the financial conditions and operating results of the Company in a more objective and fair manner. The decision-making procedures for the changes in accounting policies are in compliance with the requirements of relevant laws and regulations and the Articles of Association of the Company, and are not harmful to the interests of the Company and its shareholders.

By order of the Board of Central China Securities Co., Ltd. Jian Mingjun Chairman

Henan, the PRC 29 March 2018

As at the date of this announcement, the Board comprises executive Director Mr. JIAN Mingjun, non-executive Directors Mr. LI Xingjia, Mr. WANG Lixin, Mr. ZHANG Qiang, Mr. ZHANG Xiaoqi and Mr. YU Zeyang, and independent non-executive Directors Mr. YUAN Dejun, Mr. YUEN Chi Wai, Mr. NING Jincheng and Mr. YU Xugang.

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