Auditor'sReportChinaFangdaGroupCo.,Ltd.

RSM[2026]No.510Z0221

RSMChina(SpecialGeneralPartnership)

China·Beijing

TableofContentsNo.

Auditors'Report

RSM[2026]No.510Z0221

TotheshareholdersofChinaFangdaGroupCo.,Ltd.:

1.Auditors'OpinionsWehaveauditedthefinancialstatementsofFangdaGroupCo.,Ltd.(hereinafterreferredtoasFangdagroupcompany),includingtheconsolidatedandparentcompany'sbalancesheetasofDecember31,2025,theconsolidatedandparentcompany'sincomestatement,consolidatedandparentcompany'scashflowstatement,consolidatedandparentcompany'sstatementofchangesinowner'sequityandnotestorelevantfinancialstatementsin2025.WebelievethatFangdaGrouphasbeenfollowingwiththeEnterpriseAccountingStandardinpreparingoftheFinancialStatements.TheFinancialStatementsisreflecting,inallimportantaspects,thefinancialsituationofFangdaGroupasofDecember31,2025,andthebusinessperformanceandcashflowofyear2025.

2.BasisoftheOpinionsWecarriedouttheauditingworkswithcompliancetoChineseCPAAuditingStandard,The"CPA'sResponsibilityforAuditingFinancialStatements"sectionoftheauditreportfurtherelaboratedourresponsibilitiesundertheseguidelines.InaccordancewiththeCodeofProfessionalEthicsforChineseCertifiedPublicAccountantsandtheIndependenceStandardsforChineseCertifiedPublicAccountants,weareindependentofChinaFangdaGroupCo.,Ltd.andhavecompliedwiththeprovisionsoftheindependencestandardsapplicabletoauditsoffinancialstatementsofpublicinterestentities,whilefulfillingourotherethicalresponsibilities.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovidea

basisforourauditopinion.

3.KeyAuditMattersThekeyauditmattersarethemattersthatwebelievearemostimportantfortheauditofthecurrentfinancialstatementsbasedonprofessionaljudgment.Theresponsetothesemattersisbasedontheoverallauditofthefinancialstatementsandtheformationofanauditopinion.Wedonotcommentonthesemattersseparately.(I)IncomerecognitionForrelatedinformationdisclosure,pleaserefertoNoteIII,26,NoteV,43andNoteXV,2ofthefinancialstatements.

1.DescriptionIn2025,theoperatingrevenueofFangdaGroupisRMB3.377billion,ofwhichtherevenueofcurtainwallandmetroplatformscreendooraccountsfor93.76%ofthetotalrevenueoftheGroup.FangdaGroup'sperformanceobligationsrelatedtotheconstructionsubcontractingcontractincludebuildingcurtainwallandmetroplatformscreendoor.AsthecustomercancontrolthecommodityunderconstructionintheprocessofperformanceofFangdagroup,theCompanyregardsitastheperformanceobligationwithinacertainperiodoftime,andrecognizestherevenueaccordingtotheperformanceprogress.TheCompanyshalldeterminetheperformancescheduleofservicesaccordingtotheinputmethod.Theperformancescheduleshallbedeterminedaccordingtotheproportionoftheactualcontractcosttotheestimatedtotalcontractcost.ManagementneedstomakeareasonableestimateoftheinitialtotalcontractrevenueandtotalcontractcostsfortheEngineeringcontractingcontractandcontinuetoassessandreviseitduringthecontractimplementationprocess,whichinvolvessignificantaccountingestimatesofthemanagement.

Therefore,weidentifyrevenuerecognitionrelatedtoconstructioncontractsaskeyauditmatters.

2.AuditresponseOurauditproceduresforrevenuerecognitionrelatedtoconstructionsubcontractingcontractsmainlyinclude:

(1)Understandandevaluatethedesignofinternalcontrolrelatedtomanagementcontractandengineeringsubcontractingcontractbudgetandrevenuerecognition,andtesttheeffectivenessofkeycontrolimplementation.

(2)Obtainedamajorengineeringsubcontractingcontract,verifiedthecontractrevenue,andreviewedkeycontractterms.Checktheengineeringcontractingcontractandcostbudgetinformationonwhichmanagementexpectstotalrevenueandestimatedtotalcost.

(3)Obtaintheconstructionsubcontractingcontractaccountandprojectrevenueandcostsummarytable,carryoutanalyticalreviewonthegrossprofitoftheproject,andrecalculatetheperformanceprogressandrevenueintheconstructionsubcontractingcontractaccounttoverifyitsaccuracy.

(4)Selectsamplestochecktheprojectengineeringdetailsofthemainproject,subcontractedlaborapprovalforms,andtheowner'sproductionvalueapprovaldocumentsandrecordstoverifythecontractcostsincurred.

(5)Selectsamplestocheckiftherelevantcontractcostsarerecordedintheappropriateaccountingperiod.

(6)Selectasampletoconductasiteinspectionoftheprogressoftheprojectimagetoverifythereasonablenessoftheproject'sperformanceschedule.

(II)Measurementoffairvalueofinvestmentrealestate

Forrelatedinformationdisclosure,pleaserefertoNoteIII,17,NoteV,15,NoteV51andNoteXIofthefinancialstatements.

1.Description

AsofWednesday,December31,2025,thebookbalanceoftheinvestmentrealestateofFangdagroupwhichadoptsthefairvaluemodelforsubsequentmeasurement

isRMB5.548billion,accountingfor44.12%ofthetotalassets.TheincomefromchangesinfairvaluerealizedinthecurrentperiodisRMB-281,000,000whichhasagreatimpactonthefinancialindicatorsoftheGroup'sconsolidatedstatements.ThemanagementofFangdaGroupannuallyemploysathird-partyassessmentagencywithrelevantqualificationstoevaluatethefairvalueoftheinvestmentrealestate.Theevaluationadoptsthemarketcomparisonmethodandtheincomemethodtocomprehensivelyanalyzevariousfactorsthataffecttherealestatepriceoftheappraisalsubject.Theassessmentofthefairvalueofinvestmentrealestateinvolvesmanyestimatesandassumptions,suchastheanalysisoftheeconomicenvironmentandfuturetrendsoftherealestatewheretheinvestmentrealestateislocated,discountrates,etc.Thechangesinestimatesandassumptionswillhavebigimpactsonthefairvalueoftheinvestmentrealestateevaluated.Therefore,weidentifythemeasurementoffairvalueofinvestmentrealestateasakeyauditmatter.

2.AuditresponseOurauditproceduresforthemeasurementoffairvalueofinvestmentrealestatemainlyinclude:

(1)Assessthecompetency,professionalquality,independenceandobjectivityofthird-partyassessmentagenciesemployedbythemanagement.

(2)Obtaintheassessmentreport,selectedmajorortypicalsamples,anduseourrealestateappraisalexpertstoreviewandreviewtheassessmentmethodsandassumptionsusedintheassessmentreportandtherationalityoftheselectedkeyassessmentparameters.Checktheaccuracyandrelevanceofthedatausedbythemanagementinvaluation.

(3)Reviewthemeasurement,presentationanddisclosureoffairvalueofinvestmentrealestateinthefinancialstatements.

(III)Measurementofexpectedcreditlossofaccountsreceivableandcontract

assets

Forrelatedinformationdisclosure,pleaserefertoNoteIII,11,NoteV,5,NoteV,

10andNoteV,21ofthefinancialstatements.

1.DescriptionAsofDecember31,2025,theCompany'stotalaccountsreceivableamountedtoRMB1.488billion,withanallowancefordoubtfulaccountsofRMB602million;thetotalcontractassetsamountedtoRMB2.340billion,withanimpairmentprovisionofRMB226million.Thecombinedcarryingamountofaccountsreceivableandcontractassetsrepresented23.85%oftheCompany'stotalassets.DuetothelargeamountofaccountsreceivableandcontractassetsofFangdagroup,themanagementneedstouseimportantaccountingestimationandjudgmentwhendeterminingtheexpectedrecoverableamountofaccountsreceivableandcontractassets,andtheexpectedcreditlossofaccountsreceivableandcontractassetsisimportantforfinancialstatements.Therefore,wedeterminethemeasurementofexpectedcreditlossofaccountsreceivableandcontractassetsasthekeyauditaccountingmatters.

2.Auditresponse

(1)UnderstandandevaluatetheeffectivenessofinternalcontroldesignrelatedtotheprovisionforbaddebtsofaccountsreceivableandprovisionforimpairmentofcontractassetsofFangdaGroup,andtesttheeffectivenessofkeycontroloperation.

(2)Reviewtherelevantconsiderationsandobjectiveevidenceofthemanagement'screditriskassessmentofaccountsreceivableandcontractassets,andevaluatewhetherthemanagementhasproperlyidentifiedthecreditriskcharacteristicsofvariousaccountsreceivable.

(3)Wereviewedmanagement'sprocessforcalculatingtheallowancefordoubtfulaccountsonaccountsreceivableandtheimpairmentprovisiononcontractassets,including:

①Foraccountsreceivableandcontractassetsmeasuredforexpectedcreditlossesonaportfoliobasis,weevaluatedthereasonablenessofmanagement'sgroupingbycreditriskcharacteristics;examinedtheexpectedcreditlossmeasurementmodeland

assessedthereasonablenessofsignificantassumptionsandkeyparameterstherein;obtainedtheagingscheduleofaccountsreceivableandthecorrespondingtableofexpectedcreditlossratesovertheinstruments'lifetimepreparedbymanagement,andtestedtheaccuracyandcompletenessofthedatausedbymanagementaswellasthecorrectnessoftheallowancecalculation;

②Foraccountsreceivableandcontractassetssubjecttoindividualexpectedcreditlossassessment,wereviewedtheaccuracyandreasonablenessoftheinformationandunderlyingassumptionsusedbymanagementinitstestingprocess;andverifiedtheaccuracyofimpairmentprovisionsrecognizedforagedaccountsreceivableandcontractassets,aswellasthoseinvolvedinlitigationmatters.

(4)Accordingtothecharacteristicsandnatureofcustomertransactions,selectsamplestoimplementtheaccountsreceivableconfirmationprocedureandcheckthecollectionaftertheperiod,andevaluatetherationalityoftheprovisionforbaddebtsofaccountsreceivable.

4.Otherinformation

ThemanagementofFangdaGroup(hereinafterreferredtoasmanagement)isresponsibleforotherinformation.TheotherinformationincludestheinformationcoveredinFangdaGroup's2025annualreport,butdoesnotincludethefinancialstatementsandourauditreport.

Ourauditopinionspublishedinthefinancialstatementsdonotcoverotherinformationandwedonotpublishanyformofassuranceconclusiononotherinformation.

Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadotherinformation.Intheprocess,weconsiderwhetherthereisamaterialinconsistencyorothermaterialmisstatementofotherinformationwhetheritisinthefinancialstatementsorwhatwehavelearnedduringtheauditprocess.

Basedontheworkwehaveperformed,ifwedeterminethatthereisamaterial

misstatementofotherinformation,weshouldreportthatfact.Inthisregard,wehavenothingtoreport.

5.Executives'ResponsibilitiesontheFinancialStatements

(1)PreparingthesefinancialstatementsaccordingtotheAccountingStandardsforBusinessEnterprisesandpresentingthemfairly;(2)designing,implementingandmaintainingnecessaryinternalcontroltomakesurethatthesefinancialstatementsarefreefrommaterialmisstatement,whetherduetofraudorerror.Inthepreparationofthefinancialstatements,themanagementisresponsibleforassessingFangdaGroup'sabilitytocontinueasagoingconcern,disclosingissuesrelatedtogoingconcern(ifapplicable),andapplyingthegoingconcernassumptionunlessmanagementplanstoliquidateFangdaGroup,terminateoperationsortherearenootherrealisticchoices.

ThemanagementisresponsibleforoverseeingthefinancialreportingprocessofFangdaGroup.

6.Auditor'sresponsibilityforauditingfinancialstatements

Ourobjectiveistoobtainreasonableassuranceastowhethertheentirefinancialstatementsarefreefrommaterialmisstatementduetofraudorerrorandtoissueanauditreportcontainingauditopinions.Reasonableassuranceisahighlevelofassurance,butitdoesnotguaranteethatanauditperformedinaccordancewithauditingstandardscanalwaysbediscoveredwhenamajormisstatementexists.Thereportmaybeduetofraudormistakes,andifareasonableexpectationofmisstatementaloneoraggregatedmayaffecttheeconomicdecision-makingmadebyusersoffinancialstatementsbasedonthefinancialstatements,themisstatementisgenerallyconsideredtobematerial.

Intheprocessofconductingauditworkinaccordancewithauditingstandards,weuseprofessionaljudgmentandmaintainprofessionalsuspicion.Atthesametime,wealsoperformthefollowingtasks:

(1)Identifyandassessrisksofmaterialmisstatementoffinancialstatementsdue

tofraudorerrors,designandimplementauditprocedurestoaddresstheserisks,andobtainadequateandappropriateauditevidenceasabasisforissuingauditopinions.Asfraudmayinvolvecollusion,forgery,willfulomission,misrepresentationoroverrideofinternalcontrol,theriskofnotdiscoveringamaterialmisstatementduetofraudishigherthantheriskofnotdiscoveringamaterialmisstatementresultingfromamistake.

(2)Understandaudit-relatedinternalcontrolstodesignappropriateauditprocedures.

(3)Evaluatetheappropriatenessofaccountingpoliciesadoptedbythemanagementandthereasonablenessofaccountingestimatesandrelateddisclosures.

(4)Concludeontheappropriatenessofmanagement'suseofcontinuingoperationsassumptions.Atthesametime,basedontheauditevidenceobtained,itconcludesthatwhethertherearemajoruncertaintiesinthemattersorcircumstancesthatmaycausemajordoubtsabouttheabilityoftheCompany'scontinuingoperations.Ifweconcludethattherearesignificantuncertainties,theauditingstandardsrequireustorequesttheusersofthereporttopayattentiontotherelevantdisclosuresinthefinancialstatementsintheauditreport;ifthedisclosureisnotsufficient,weshouldpublishnon-unqualifiedopinions.Ourconclusionsarebasedontheinformationavailableasofthedateoftheauditreport.However,futureeventsorcircumstancesmayresultinFangdaGroup'sinabilitytocontinueoperating.

(5)Evaluatetheoverallpresentation,structure,andcontentofthefinancialstatementsandevaluatewhetherthefinancialstatementsfairlyreflecttherelevanttransactionsandevents.

(6)ObtainsufficientandappropriateauditevidenceonthefinancialinformationofentityorbusinessactivitiesinFangdaGrouptoexpressopinionsonthefinancialstatements.Weareresponsiblefordirecting,supervisingandexecutinggroupauditsandassumefullresponsibilityforauditopinions.

Wecommunicatewiththegovernanceteamonplannedauditscope,timing,and

majorauditfindings,includingcommunicationoftheinternalcontroldeficienciesthatweidentifiedduringtheaudit.Wealsoprovideastatementtothemanagementoncompliancewithethicalrequirementsrelatedtoindependence,andcommunicatewiththemanagementonallrelationshipsandothermattersthatmayreasonablybeconsideredtoaffectourindependence,aswellasrelatedpreventivemeasures(ifapplicable).

Fromthematterspassedwiththemanagement,wedeterminewhichitemsaremostimportantfortheauditofthefinancialstatementsofthecurrentperiodandthusconstitutethekeyauditmatters.Wedescribethesemattersinourauditreport,unlesslawsandregulationsprohibitthepublicdisclosureofthesematters,orinrarecases,ifitisreasonablyexpectedthatthenegativeconsequencesofcommunicatingsomethingintheauditreportwilloutweighthebenefitsinthepublicinterest,wedeterminethatsuchmattershouldnotbecommunicatedintheauditreport.(Notextfollows)(Thispagehasnotext.ItisthesignatureandstamppageofauditreportNo.[2026]510Z0221ofChinaFangdaGroupCo.,Ltd.）

April3,2026

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(6) Translation difference of foreign exchange statementV. 58295,993.10 -769,741.24

-485.72 -3,771.05

7. Total of misc. incomes-512,791,895.55 260,025,731.25

(1) Total of misc. incomes attributable to the owners of the parent company-512,825,064.26 258,674,917.51

(2) Total misc gains attributable to the minor shareholders33,168.71 1,350,813.74

8. Earnings per share

(1) Basic earnings per share (yuan/share)-0.48 0.13

(2) Diluted earnings per share (yuan/share)-0.48 0.13Legal representative: CFO: Accounting firm manager:

Statement of Change in Owners' Equity

2024

Statement of Change in Owners' Equity (Parent Company)

2025

CFO:

CFO:

Total of owners' equity

Statement of Change in Owners' Equity (Parent Company)

2024

CFO:

CFO:

Undistributed profit

ChinaFangdaGroupCo.,Ltd.

NotestoFinancialStatements

2025(Unlessotherwisespecified)I.Company'sprofileChinaFangdaGroupCo.,Ltd.(hereinafterreferredtoas"theCompany"or"theCompany")wasrestructuredandestablishedinOctober1995throughapublicoffering,basedontheformer"ShenzhenFangdaBuildingMaterialsCo.,Ltd.",pursuanttotheapprovaldocumentNo.ShenFuBanHan[1995]No.194issuedbytheGeneralOfficeofShenzhenMunicipalPeople'sGovernment.Theunifiedsocialcreditcodeis:91440300192448589C;registeredaddress:FangdaTechnologyBuilding,KejiSouth12thRoad,SouthDistrict,High-techIndustrialPark,NanshanDistrict,Shenzhen.Mr.XiongJianmingisthelegalrepresentative.

TheCompanyissuedforeigncurrencyshares(Bshares)andlocalcurrencyshares(Ashares)andlistedinNovember1995andApril1996respectivelyinShenzhenStockExchange.TheCompanyreceivedtheReplytotheNon-publicShareIssuanceofFangdaChinaGroupCo.,Ltd.(CSRCLicense[2016]No.825)toallowtheCompanytoconductnon-publicissuanceof32,184,931A-sharesinJune2016.Accordingtotheprofitdistributionplanfor2016approvedbythe2016generalshareholders'meeting,theCompanyissuedfivesharesforeverytensharestoallshareholdersthroughsurpluscapitalizationbasedonthetotal789,094,836sharesonDecember31,2016.Theregisteredcapitalattheendof2017wasRMB1,183,642,254.00.TheCompanyrepurchasedandcancelled28,160,568.00BsharesinAugust2018,32,097,497.00BsharesinJanuary2019,35,105,238.00BsharesinMay2020,14404724.00BsharesinApril2021andcancelledinApril2021.TheexistingregisteredcapitalisRMB1,073,874,227.00yuan.

TheCompanyhasestablishedthecorporategovernancestructureoftheGeneralMeetingofShareholdersandtheBoardofDirectors.Atpresent,ithassetupthePresident'sOffice,theAdministrationDepartment,theHumanResourcesDepartment,theEnterpriseManagementDepartment,theFinanceDepartment,theAuditandSupervisionDepartment,theSecuritiesDepartment,theLegalDepartment,theInformationManagementDepartment,theTechnology

InnovationDepartment,andotherdepartments,andhasShenzhenFangdaConstructionTechnologyGroupCo.,Ltd.(hereinafterreferredtoasFangdaConstructionTechnologyCo.,Ltd.)FangdaZhiyuanTechnologyCo.,Ltd.(hereinafterreferredtoasFangdaZhiyuanTechnologyCo.,Ltd.),FangdaJiangxiNewMaterialsCo.,Ltd.,FangdaRealEstateCo.,Ltd.,FangdaNewEnergyCo.,Ltd.andothersubsidiaries.

ThebusinessnatureandmainbusinessactivitiesoftheCompanyanditssubsidiariesinclude:(1)curtainwalldivision,productionandsalesofcurtainwallmaterials,design,productionandinstallationofbuildingcurtainwalls,andcurtainwalltestingandmaintenanceservices;(2)Railtransitbranch,assemblyandprocessingofsubwayscreendoors,screendoordetectionandmaintenanceservices;(3)Therealestatedivisionisengagedinrealestatedevelopment,operationandpropertyleasingandpropertymanagementservicesonthelandthathaslegallyobtainedtherighttouse;(4)Newenergydivision,photovoltaicpowergenerationandsales;R&D,installationandsalesofphotovoltaicequipment,designandinstallationofphotovoltaicpowerstationproject.Dateoffinancialstatementapproval:ThisfinancialstatementisapprovedbytheBoardofDirectorsoftheCompanyonApril03,2026.II.Basisforthepreparationoffinancialstatements

1.Preparationbasis

TheCompanypreparesthefinancialstatementsbasedoncontinuousoperationandaccordingtoactualtransactionsandevents,withfiguresconfirmedandmeasuredincompliancewiththeAccountingStandardsforBusinessEnterprisesandotherspecificaccountstandards,applicationguideandinterpretations.TheCompanyhasalsodisclosedrelatedfinancialinformationaccordingtotherequirementoftheRegulationsofInformationDisclosureNo.15–GeneralProvisionsforFinancialStatements(Revisedin2023)issuedbytheCSRC.

2.Continuousoperation

TheCompanyassessedthecontinuingoperationscapabilityoftheCompanyforthe12monthsfromtheendofthereportingperiod.NomatterswerefoundthatwouldaffecttheCompany'sabilitytocontinueasagoingconcern.ItisreasonablefortheCompanytopreparefinancialstatementsbasedoncontinuingoperations.

III.SignificantAccountPoliciesandEstimates

Thefollowingmajoraccountingpoliciesandaccountingestimatesshallbeformulatedinaccordancewiththeaccountingstandardsoftheenterprise.Unmentionedoperationsarecarriedoutinaccordancewiththerelevantaccountingpoliciesintheenterpriseaccountingstandards.

1.StatementofCompliancetotheEnterpriseAccountingStandard

ThesefinancialstatementsmeettherequirementsoftheAccountingStandardsforBusinessEnterprisesandtrulyandfullyreflecttheCompany'sfinancialstatus,performanceresult,changesinshareholders'equityandcashflows.

2.FiscalPeriod

TheaccountingperiodoftheCompanyisfromJanuary1toDecember31ofeachcalendaryear.

3.OperationPeriod

Ournormalbusinesscycleisoneyear

4.BookkeepingStandardMoney

TheCompany'sbookkeepingstandardcurrencyisRenminbi,andoverseassubsidiariesarebasedonthecurrencyofthemaineconomicenvironmentinwhichtheyoperate.

5.Methodfordeterminingimportancecriteriaandselectioncriteria

6.AccountingTreatmentoftheEntitiesunderCommonandDifferentControl

(1)Consolidationofentitiesundercommoncontrol

TheassetsandliabilitiesacquiredbytheCompanyinabusinesscombinationaremeasuredatthebookvalueofthecombinedpartyintheconsolidatedfinancialstatementsof

theultimatecontrollingpartyonthedateofcombination.WherethecombinedpartyapplieddifferentaccountingpoliciesandaccountingperiodsfromthoseoftheCompanypriortothebusinesscombination,suchpoliciesandperiodshavebeenharmonizedbasedonthematerialityprinciple—specifically,thecarryingamountsofthecombinedparty'sassetsandliabilitieshavebeenadjustedinaccordancewiththeCompany'saccountingpoliciesandaccountingperiods.IfthereisadifferencebetweenthebookvalueofthenetassetsacquiredbytheCompanyinthebusinesscombinationandthebookvalueoftheconsiderationpaid,firstadjustthebalanceofthecapitalreserve(capitalpremiumorequitypremium),thebalanceofthecapitalreserve(capitalpremiumorequitypremium)Ifitisinsufficienttooffset,thesurplusreserveandundistributedprofitswillbeoffsetinsequence.

SeeNote3,7(6)fortheaccountingtreatmentmethodofbusinesscombinationunderthesamecontrolthroughstep-by-steptransaction.

(2)Consolidationofentitiesunderdifferentcontrol

AllidentifiableassetsandliabilitiesacquiredbytheCompanyduringthemergershallbemeasuredatitsfairvalueonthedateofpurchase.WheretheacquireeapplieddifferentaccountingpoliciesandaccountingperiodsfromthoseoftheCompanypriortothebusinesscombination,suchpoliciesandperiodshavebeenharmonizedbasedonthematerialityprinciple—specifically,thecarryingamountsoftheacquiree'sassetsandliabilitieshavebeenadjustedinaccordancewiththeCompany'saccountingpoliciesandaccountingperiods.ThemergercostoftheCompanyonthedateofpurchaseisgreaterthanthefairvalueoftheassetsandliabilitiesrecognizedbythepurchaserinthemerger,andisrecognizedasgoodwill.Ifthemergercostislessthanthedifferencebetweentheidentifiableassetsandthefairvalueoftheliabilitiesobtainedbythepurchaserintheenterprisemerger,themergercostandthefairvalueoftheidentifiableassetsandtheliabilitiesobtainedbythepurchaserintheenterprisemergerarereviewed,andthemergercostisstilllessthanthefairvalueoftheidentifiableassetsandliabilitiesobtainedbythepurchaserafterthereview,thedifferenceisconsideredastheprofitandlossofthecurrentperiodofthemerger.

SeeNote3,7(6)fortheaccountingtreatmentmethodofbusinesscombinationunderthesamecontrolthroughstep-by-steptransaction.

(3)Treatmentofrelatedtransactionfeeinenterprisemerger

Agencyexpensesandotheradministrativeexpensessuchasauditing,legalconsulting,or

appraisalservicesoccurredrelatingtothemergerofentitiesareaccountedintocurrentincomeaccountwhenoccurred.Thetransactionfeesofequitycertificatesorliabilitycertificatesissuedbythepurchaserforpaymentfortheacquisitionareaccountedattheinitialamountofthecertificates.

7.Judgmentcriteriaforcontrolandpreparationmethodsforconsolidatedfinancialstatements

(1)Determinationofcontrolcriteriaandconsolidationscope

ControlmeansthepowerpossessedbytheCompanyoninvestedentitiestosharevariablereturnsbyparticipatinginrelatedactivitiesoftheinvestedentitiesandtoimpacttheamountofthereturnsbyusingthepower.Thedefinitionofcontrolincludesthreebasicelements:first,theinvestorhasthepowerovertheinvestee;second,enjoysvariablereturnsduetoparticipationintheinvestee'srelatedactivities;andthird,hastheabilitytousethepowerovertheinvesteetoinfluenceitsreturnamount.WhentheCompany'sinvestmentintheinvestedpartymeetstheabovethreeelements,itindicatesthattheCompanycancontroltheinvestedparty.

Theconsolidatedscopeoftheconsolidatedfinancialstatementsisdeterminedonacontrolbasisandincludesnotonlysubsidiariesdeterminedonthebasisofvotingrights(orsimilarvotingrights)themselvesorinconjunctionwithotherarrangements,butalsostructuredsubjectsdeterminedonthebasisofoneormorecontractualarrangements.ThesubsidiarycompanyisthesubjectcontrolledbytheCompany(includingtheenterprise,thedivisiblepartoftheinvestedunitandthestructuredsubjectcontrolledbytheenterprise,etc.).Thestructuredsubjectisthesubjectwhichisnotdesignedtodeterminethecontrollingpartybytakingthevotingrightorsimilarrightasthedecisivefactor.

(2)Specialprovisionsregardingtheparentcompanybeinganinvestmententity

Iftheparentcompanyisaninvestmententity,onlythosesubsidiarycompaniesthatprovideservicesrelatedtoinvestmentactivitiesoftheinvestmententityshallbeincludedintheconsolidationscope.Othersubsidiarycompaniesshallnotbeconsolidatedandtheirequityinvestmentsshallberecognizedasfinancialassetsmeasuredatfairvaluewithchangesinfairvaluerecognizedinprofitorloss.

Theparentcompanyqualifiesasaninvestmententitywhenitsimultaneouslymeetsthe

followingconditions:

①Thecompanyobtainsfundsfromoneormoreinvestorswiththepurposeofprovidinginvestmentmanagementservicestotheinvestors.

②Thesolepurposeofthecompany'soperationsistogeneratereturnsfortheinvestorsthroughcapitalappreciation,investmentincome,orboth.

③Thecompanyevaluatesandassessestheperformanceofalmostallofitsinvestmentsbasedonfairvalue.

Whentheparentcompanychangesfromanon-investmententitytoaninvestmententity,itshallonlyincludethosesubsidiarycompaniesthatproviderelevantservicesforitsinvestmentactivitiesinthepreparationofconsolidatedfinancialstatements.Othersubsidiarycompaniesshallnolongerbeconsolidated,andtheprincipleofrecognizingpartiallydisposedsubsidiarycompanies'equitywhileretainingcontrolshallbeapplied.

Whentheparentcompanychangesfromaninvestmententitytoanon-investmententity,thesubsidiarycompaniesthatwerepreviouslynotincludedintheconsolidationfinancialstatementsshallbeincludedasofthedateofthechange.Thefairvalueofthesesubsidiarycompaniesonthedateofthechangeshallberegardedasthetransactionpriceoftheacquisitionandaccountedforusingtheaccountingtreatmentforbusinesscombinationsundercommoncontrol.

(3)PreparationofConsolidatedFinancialStatements

TheCompanypreparesconsolidatedfinancialstatementsbasedonthefinancialstatementsofitselfanditssubsidiariesandbasedonotherrelevantinformation.

TheCompanycompilesconsolidatedfinancialstatements,regardsthewholeenterprisegroupasanaccountingentity,reflectstheoverallfinancialstatus,operatingresultsandcashflowoftheenterprisegroupaccordingtotheconfirmation,measurementandpresentationrequirementsoftherelevantenterpriseaccountingstandards,andtheunifiedaccountingpolicyandaccountingperiod.

①Mergetheassets,liabilities,owner'srightsandinterests,income,expensesandcashflowofparentcompanyandsubsidiarycompany.

②Offsetthelong-termequityinvestmentoftheparentcompanytothesubsidiary

companyandtheshareoftheparentcompanyintheownershiprightsofthesubsidiarycompany.③Offsettheinfluenceofinternaltransactionbetweenparentcompany,subsidiarycompanyandsubsidiarycompany.Ifaninternaltransactionindicatesthattherelevantassethassufferedanimpairmentloss,thepartofthelossshallbeconfirmedinfull.

④adjustthespecialtransactionfromtheangleofenterprisegroup.

(4)Processingofsubsidiariesduringthereportingperiod

①IncreaseofsubsidiariesorbusinessA.Subsidiaryorbusinessincreasedbybusinesscombinationunderthesamecontrol(A)Whenpreparingtheconsolidatedbalancesheet,adjusttheopeningnumberoftheconsolidatedbalancesheetandadjusttherelateditemsofthecomparativestatement.Thesamereportentityastheconsolidatedbalancesheetwillexistfromthetimeofthefinalcontrolparty.

(B)Whenpreparingtheconsolidatedcashflowstatement,thecashflowsofthesubsidiaryandthebusinesscombinationfromthebeginningofthecurrentperiodtotheendofthereportingperiodareincludedintheconsolidatedcashflowstatement,andtherelateditemsofthecomparativestatementareadjusted,whichisregardedasthecombinedreportbodysincethefinalThecontrollerhasbeentheresincethebeginningofcontrol.

(C)Whenpreparingtheconsolidatedcashflowstatement,thecashflowsofthesubsidiaryandthebusinesscombinationfromthebeginningofthecurrentperiodtotheendofthereportingperiodareincludedintheconsolidatedcashflowstatement,andtherelateditemsofthecomparativestatementareadjusted,whichisregardedasthecombinedreportbodysincethefinalThecontrollerhasbeentheresincethebeginningofcontrol.

B.Subsidiaryorbusinessincreasedbybusinesscombinationunderthesamecontrol

(A)Whenpreparingtheconsolidatedbalancesheet,theopeningnumberoftheconsolidatedbalancesheetisnotadjusted.

(B)Whenpreparingtheconsolidatedprofitstatement,theincome,expenseandprofitofthesubsidiarycompanyandthebusinessPurchasedateandClosingbalanceshallbeincludedintheconsolidatedprofitstatement.

(C)Whentheconsolidatedcashflowstatementisprepared,thecashflowfromthepurchasedateofthesubsidiarytotheendofthereportingperiodisincludedintheconsolidatedcashflowstatement.

②Disposalofsubsidiariesorbusiness

A.Whenpreparingtheconsolidatedbalancesheet,theopeningnumberoftheconsolidatedbalancesheetisnotadjusted.

B.Whenpreparingtheconsolidatedprofitstatement,theincome,expenseandprofitofthesubsidiarycompanyandthebusinessopeninganddisposaldateshallbeincludedintheconsolidatedprofitstatement.

C.Whentheconsolidatedcashflowstatementisprepared,thecashflowfromtheBeginningoftheperiodofthesubsidiarytotheendofthereportingperiodisincludedintheconsolidatedcashflowstatement.

(5)Specialconsiderationsinconsolidationoffsets

①Thelong-termequityinvestmentheldbyasubsidiarycompanyshallberegardedastheinventorysharesofthecompanyasasubtractionoftheowner'srightsandinterests,whichshallbelistedundertheitemof"subtraction:Stockshares"undertheitemofowner'srightsandinterestsintheconsolidatedbalancesheet.

Thelong-termequityinvestmentsheldbythesubsidiariesareoffsetbythesharesoftheshareholdersofthesubsidiaries.

②The"specialreserve"and"generalriskpreparation"projects,becausetheyareneitherrealcapital(orsharecapital)norcapitalreserve,butalsodifferentfromtheretainedincomeandundistributedprofits,arerestoredaccordingtotheownershipoftheparentcompanyafterthelong-termequityinvestmentisoffsetbytheownershiprightsandinterestsofthesubsidiarycompany.

③Ifthereisatemporarydifferencebetweenthebookvalueofassetsandliabilitiesintheconsolidatedbalancesheetandthetaxablebasisofthetaxpayerduetotheoffsetoftheunrealizedinternalsalesgainorloss,thedeferredincometaxassetorthedeferredincometaxliabilityisconfirmedintheconsolidatedbalancesheet,andtheincometaxexpenseintheconsolidatedprofitstatementisadjusted,withtheexceptionofthedeferredincometaxrelatedtothetransactionoreventdirectlyincludedintheowner'sequityandthemergerofthe

enterprise.

④Theunrealizedinternaltransactiongainsandlossesincurredbythecompanyfromsellingassetstosubsidiariesshallbefullyoffsetagainstthe"netprofitattributabletotheownersoftheparentcompany".TheunrealizedinternaltransactiongainsandlossesarisingfromthesaleofassetsbythesubsidiarytotheCompanyshallbeoffsetbetweenthe"netprofitattributabletotheownersoftheparentcompany"andthe"minorityshareholdergainsandlosses"inaccordancewiththeCompany'sdistributionratiotothesubsidiary.Theunrealizedinternaltransactiongainsandlossesarisingfromthesaleofassetsbetweensubsidiariesshallbeoffsetbetweenthe"netprofitattributabletotheownersoftheparentcompany"andthe"minorityshareholders'gainsandlosses"inaccordancewiththeCompany'sdistributionratiototheseller'ssubsidiary.

⑤Ifthecurrentlosssharedbytheminorityshareholdersofthesubsidiaryexceedstheshareoftheminorityshareholdersintheowner'sequityofthesubsidiaryatthebeginningoftheperiod,thebalanceshouldstillbeoffsetagainsttheminorityshareholders'equity.

(6)Accountingtreatmentofspecialtransactions

①Purchaseminorityshareholders'equity

TheCompanypurchasesthesharesofthesubsidiariesownedbytheminorityshareholdersofthesubsidiaries.Intheindividualfinancialstatements,theinvestmentcostsofthenewlyacquiredlong-terminvestmentsoftheminoritysharesshallbemeasuredatthefairvalueofthepricepaid.Intheconsolidatedfinancialstatements,thedifferencebetweenthenewlyacquiredlong-termequityinvestmentduetothepurchaseofminorityequityandtheshareofnetassetsthatshouldbecontinuouslycalculatedbythesubsidiarysincethepurchasedateorthemergerdateshouldbeadjustedaccordingtothenewshareholdingratio.Theproduct(capitalpremiumorequitypremium),ifthecapitalreserveisinsufficienttooffset,thesurplusreserveandundistributedprofitsareoffsetinturn.

②Step-by-stepacquisitionofcontrolofthesubsidiarythroughmultipletransactions

A.Enterprisemergerundercommoncontrolthroughmultipletransactions

Onthedateofthemerger,theCompanydeterminestheinitialinvestmentcostofthelong-termequityinvestmentintheindividualfinancialstatementsbasedontheshareofthesubsidiary'snetassetsthatshouldbeenjoyedafterthemergerinthefinalcontroller's

consolidatedfinancialstatements;theinitialinvestmentcostandtheThedifferencebetweenthebookvalueofthelong-termequityinvestmentbeforethemergerplusthebookvalueoftheconsiderationpaidfornewsharesacquiredonthemergerdate,thecapitalreserve(capitalpremiumorequitypremium)isadjusted,andthecapitalreserve(capitalpremiumorequitypremium)isinsufficienttooffsetReduced,inturnoffsetthesurplusreserveandundistributedprofits.Inconsolidatedfinancialstatements,assetsandliabilitiesobtainedbythemergingpartyfromthemergedpartyshouldbemeasuredatthebookvalueinthefinalcontrollingparty'sconsolidatedfinancialstatementsotherthantheadjustmentmadeduetodifferencesinaccountingpolicies;adjustthecapitalsurplus(sharepremium)accordingtothedifferencebetweentheinitialinvestmentcostandthebookvalueoftheheldinvestmentbeforemergerplusthebookvalueoftheconsiderationpaidonthemergerdate.Wherethecapitalsurplusfallsshort,theretainedincomeshouldbeadjusted.Beforetheacquirerobtainscontroloftheacquiree,anyrecognizedgainsandlosses,othercomprehensiveincome,andchangesinotherowners'equityrelatedtotheequityinvestmentheldbytheacquirerfromthelaterofthedatewhentheoriginalequitywasobtainedorthedatewhenboththeacquirerandtheacquireewereunderthecontrolofthesamepartyuntiltheacquisitiondateshouldbeadjustedagainstthebeginningretainedearningsorthecurrentprofitsandlossesofthecomparativestatementsseparately.

A.EnterprisemergerundercommoncontrolthroughmultipletransactionsOnthemergerday,inindividualfinancialstatements,theinitialinvestmentcostofthelong-termequityinvestmentonthemergerdayisbasedonthebookvalueofthelong-termequityinvestmentpreviouslyheldplusthesumoftheadditionalinvestmentcostsonthemergerday.Intheconsolidatedfinancialstatements,theequityheldintheacquireebeforetheacquisitiondateisremeasuredatitsfairvalueontheacquisitiondate.Iftheequityheldbeforetheacquisitiondateisdesignatedasafinancialassetmeasuredatfairvaluethroughothercomprehensiveincome,thedifferencebetweenthefairvalueanditsbookvalueisincludedinretainedearnings,andthecumulativefairvaluechangespreviouslyincludedinothercomprehensiveincomearetransferredtoretainedearnings.Iftheequityheldbeforetheacquisitiondateisdesignatedasafinancialassetmeasuredatfairvaluethroughprofitorloss

orasalong-termequityinvestmentaccountedforbytheequitymethod,thedifferencebetweenthefairvalueanditsbookvalueisincludedinthecurrentperiod'sinvestmentincome.Forothercomprehensiveincomeandotherchangesinowners'equityundertheequitymethodrelatedtotheequityheldbeforetheacquisitiondate,therelatedothercomprehensiveincomeisaccountedforonthesamebasisasiftheinvesteehaddirectlydisposedoftherelatedassetsorliabilitiesontheacquisitiondate,andtherelatedotherchangesinowners'equityaretransferredtothecurrentperiod'sinvestmentincomeontheacquisitiondate.

(3)TheCompanydisposesoflong-termequityinvestmentinsubsidiarieswithoutlosingcontrolTheparentcompanypartiallydisposesofthelong-termequityinvestmentinthesubsidiarycompanywithoutlosingcontrol.Intheconsolidatedfinancialstatements,thedisposalpricecorrespondstothedisposalofthelong-termequityinvestment.Thedifferencebetweenthesharesisadjustedforthecapitalreserve(capitalpremiumorequitypremium).Ifthecapitalreserveisinsufficienttooffset,theretainedearningsareadjusted.

④Thecompanydisposesoflong-termequityinvestmentinsubsidiariesandlosescontrol

A.Onetransactiondisposition

IftheCompanylosescontrolovertheInvestedPartyduetothedisposalofpartoftheequityinvestment,itshallremeasuretheremainingequityaccordingtoitsfairvalueatthedateoflossofcontrolwhencompilingtheconsolidatedfinancialstatement.Theconsiderationreceivedfromthedisposalofequityplusthefairvalueoftheremainingequity,minustheshareofnetassetsandgoodwillcalculatedbasedontheoriginalshareholdingratiofromtheacquisitiondateorcombinationdatetothedisposaldate,isincludedintheinvestmentincomefortheperiodinwhichcontrolislost.

Othercomprehensiveincomerelatedtoequityinvestmentsinformersubsidiariesisaccountedfor,uponlossofcontrol,onthesamebasisasiftherelatedassetsorliabilitiesoftheformersubsidiaryweredirectlydisposedof.Otherchangesinowners'equityrelatedtoformersubsidiariesthatwerepreviouslyrecognizedundertheequitymethodarereclassifiedtoprofitorlossintheperiodinwhichcontrolislost.

B.Multi-transactionstep-by-stepdisposition

Inconsolidatedfinancialstatements,youshouldfirstdeterminewhetherastep-by-steptransactionisa"blankettransaction".

Ifthestep-by-steptransactiondoesnotbelongtoa"packagedeal",intheindividualfinancialstatements,foreachtransactionbeforethelossofcontrolofthesubsidiary,thebookvalueofthelong-termequityinvestmentcorrespondingtoeachdisposalofequityiscarriedforward,thepricereceivedandthedisposalThedifferencebetweenthebookvalueofthelong-termequityinvestmentisincludedinthecurrentinvestmentincome;intheconsolidatedfinancialstatements,itshouldbehandledinaccordancewiththerelevantprovisionsof"theparentcompanydisposesofthelong-termequityinvestmentinthesubsidiarywithoutlosingcontrol."

Ifastep-by-steptransactionbelongstoa"blankettransaction",thetransactionshallbetreatedasatransactionthatdisposesofthesubsidiaryandlosescontrol;Inindividualfinancialstatements,thedifferencebetweeneachdisposalpricebeforethelossofcontrolandthebookvalueofthelong-termequityinvestmentcorrespondingtotheequitybeingdisposedofisfirstrecognizedasotherconsolidatedgainsandthenconvertedtothecurrentlossofcontrolatthetimeofthelossofcontrol;Intheconsolidatedfinancialstatements,foreachtransactionpriortothelossofcontrol,thedifferencebetweenthedispositionofthepriceandthedispositionoftheinvestmentcorrespondingtotheshareinthenetassetsofthesubsidiaryshallberecognizedasotherconsolidatedgainsandshall,atthetimeofthelossofcontrol,betransferredtothelossofcontrolforthecurrentperiod.

Wheretheterms,conditions,andeconomicimpactofeachtransactionmeetoneormoreofthefollowingconditions,usuallymultipletransactionsaretreatedasa"packagedeal":

(a)Thesetransactionswereconcludedatthesametimeorinconsiderationofmutualinfluence.

(b)Thesetransactionscanonlyachievethebusinessresultasawhole;

(c)Theeffectivenessofonetransactiondependstheoccurrenceofatleastanothertransaction;

(d)Asingletransactionisnoteconomicandiseconomicwhenconsideredtogetherwithothertransactions.

(5)Proportionofminorityshareholdersinfactorcompanieswhoincreasecapitaland

diluteownershipofparentcompanies

ProportionofOthers(minorityshareholdersinfactorcompanieswhoincreasecapital,diluteSubsidiariesofparentcompanies.Intheconsolidatedfinancialstatements,theshareoftheparentcompanyinthenetbookassetsoftheformersubsidiaryofthecapitalincreaseiscalculatedaccordingtotheshareratiooftheparentcompanybeforethecapitalincrease,thedifferencebetweentheshareandthenetbookassetsofthelattersubsidiaryafterthecapitalincreaseiscalculatedaccordingtotheshareratiooftheparentcompany,thecapitalreserve(capitalpremiumorcapitalpremium),thecapitalreserve(capitalpremiumorcapitalpremium)isnotoffset,andtheretainedincomeisadjusted.

8.ClassificationofJointArrangementsandAccountingPoliciesforJointOperations

Ajointarrangementisanarrangementjointlycontrolledbytwoormoreparticipants.TheCompanyclassifiesitsjointarrangementsintojointoperationsandjointventures.

(1)JointOperations

AjointoperationisajointarrangementwherebytheCompanyhasrightstotherelatedassetsandobligationsfortherelatedliabilitiesofthearrangement.

TheCompanyrecognizesthefollowingitemsrelatingtoitsinterestinajointoperationandaccountsfortheminaccordancewiththerelevantenterpriseaccountingstandards:

①Recognizesassetsheldseparately,aswellasitsshareofjointlyheldassets;

②Recognizesliabilitiesborneseparately,aswellasitsshareofjointlyborneliabilities;

③Recognizesrevenuefromthesaleofitsshareofoutputfromthejointoperation;

④Recognizesitsshareofrevenuegeneratedbythejointoperationfromthesaleofoutput;

⑤Recognizesexpensesincurredseparately,aswellasitsshareofexpensesincurredbythejointoperation.

(2)JointVentures

AjointventureisajointarrangementwherebytheCompanyhasrightsonlytothenetassetsofthearrangement.

TheCompanyaccountsforitsinvestmentinjointventuresusingtheequitymethodinaccordancewiththerelevantprovisionsonlong-termequityinvestments.

9.Recognitionofcashandcashequivalents

Cashreferstocashinstockanddepositsthatcanbeusedforpaymentatanytime.Cashequivalentsrefertoinvestmentswithashortholdingperiod(generallyreferringtoexpirywithinthreemonthsfromthedateofpurchase),strongliquidity,easytoconverttoaknownamountofcash,andlittleriskofvaluechange.

10.Foreignexchangebusinessandforeignexchangestatementtranslation

(1)Methodsfordeterminingconversionratesinforeigncurrencytransactions

TheCompanytranslatesforeigncurrencytransactionsintothefunctionalcurrencyattheinitialrecognitionusingthespotexchangerateonthetransactiondateoranapproximateexchangeratethatisdeterminedaccordingtoareasonablemethodandisclosetothespotexchangerateonthetransactiondate.Theresultingamountisrecordedintheaccountingcurrency.

(2)Methodsofconversionofforeigncurrencycurrencycurrencyitemsonbalancesheetdays

Atthebalancesheetdate,foreigncurrencyitemsaretranslatedonthespotexchangerateofthebalancesheetdate.Theexchangedifferencescausedbythedifferenceinexchangeratesonthebalancesheetdateandinitialrecognizingdateorpreviousbalancesheetdateareincludedinthecurrentprofitsandlosses.Fornon-monetaryitemsmeasuredathistoricalcostinforeigncurrencies,theyaretranslatedusingthespotexchangerateonthetransactiondate.Forinventoriesmeasuredatthelowerofcostandnetrealizablevalue,iftheinventorieswerepurchasedinforeigncurrenciesandtheirnetrealizablevalueisreflectedinforeigncurrenciesasofthebalancesheetdate,thenetrealizablevalueisfirsttranslatedintothefunctionalcurrencyatthespotexchangerateonthebalancesheetdate,andthencomparedwiththeinventorycostreflectedinthefunctionalcurrencytodeterminetheendingvalueoftheinventories.Non-monetaryitemsmeasuredatfairvalueinforeigncurrenciesaretranslatedusingthespotexchangerateonthedatethefairvalueisdetermined.Forfinancialassetsmeasuredatfairvaluewithchangesrecognizedinthecurrentperiod'sprofitorloss,thedifferencebetweenthetranslatedamountinthefunctionalcurrencyandtheoriginalamountinthefunctionalcurrencyisrecognizedinthecurrentperiod'sprofitorloss.Fornon-trading

equityinvestmentsdesignatedtobemeasuredatfairvaluewithchangesrecognizedinothercomprehensiveincome,thedifferencebetweenthetranslatedamountinthefunctionalcurrencyandtheoriginalamountinthefunctionalcurrencyisrecognizedinothercomprehensiveincome.

(3)TranslationofforeignexchangestatementsPriortotheconversionofthefinancialstatementsofanenterprise'soverseasoperations,theaccountingperiodandpolicyoftheoverseasoperationsshouldbeadjustedtoconformtotheaccountingperiodandpolicyoftheenterprise.Thefinancialstatementsofthecorrespondingcurrency(otherthanthefunctionalcurrency)shouldbepreparedaccordingtotheadjustedaccountingpolicyandtheaccountingperiod.Thefinancialstatementsoftheoverseasoperationsshouldbeconvertedaccordingtothefollowingmethods:

①Theassetsandliabilitiesitemsinthebalancesheetaretranslatedatthespotexchangerateonthebalancesheetdate.Exceptforthe"undistributedprofits"items,theowner'sequityitemsaretranslatedatthespotexchangeratewhentheyoccur.

②Theincomeandexpenseitemsintheprofitstatementareconvertedatthespotexchangerateonthetransactiondateortheapproximateexchangerateofthespotexchangerate.

③Theforeigncurrencycashflowandtheforeignsubsidiary'scashflowareconvertedusingtheimmediateexchangerateortheapproximateexchangerateatthedateofthecashflow.Theimpactofexchangeratechangesoncashshouldbeusedasanadjustmentitemandpresentedseparatelyinthecashflowstatement.

④Theforeigncurrencytranslationdifferencesarisingarepresentedunderthe"OtherComprehensiveIncome"itemintheshareholders'equitysectionoftheconsolidatedbalancesheetwhenpreparingtheconsolidatedfinancialstatements.

Whenforeignoperationsaredisposedofandthecontrolrightsarelost,thedifferenceinforeigncurrencystatementsrelatedtotheoverseasoperationsthatarelistedintheshareholders'equityitemsinthebalancesheetistransferredtotheprofitorlossforthecurrentperiod,eitherinwholeorinproportiontothedisposaloftheforeignoperations.

11.Financialinstrument

Financialinstrumentreferstoacompany'sfinancialassetsandcontractsthatformother

unitsoffinancialliabilitiesorequityinstruments.

(1)Recognitionandde-recognitionoffinancialinstrumentTheCompanyrecognizesafinancialassetorliabilitywhenitbecomesonepartyinthefinancialinstrumentcontract.Financialassetisderecognizedwhen:

①Thecontractualrighttoreceivethecashflowsofthefinancialassetsisterminated;②Thefinancialassetistransferredandmeetsthefollowingderecognizationcondition.Ifthecurrentobligationofafinancialliability(orpartofit)hasbeendischarged,theCompanyderecognisesthefinancialliability(orpartofthefinancialliability).WhentheCompany(borrower)andlenderenterintoanagreementtoreplacetheoriginalfinancialliabilitiesbyundertakingnewfinancialliabilitiesandthecontracttermsforthenewfinancialliabilitiesareessentiallydifferentfromthosefortheoriginalone,theoriginalfinancialliabilitieswillbederecognizedandnewfinancialliabilitieswillberecognized.WheretheCompanymakessubstantialamendmentstothecontracttermsoftheoriginalfinancialliability(orpartthereof),itshallterminatetheoriginalfinancialliabilityandconfirmanewfinancialliabilityinaccordancewiththeamendedterms.

Financialassettransactionsinregularwaysarerecognizedandde-recognizedonthetransactiondate.Theconventionalsaleoffinancialassetsmeansthedeliveryoffinancialassetsinaccordancewiththecontractualtermsandconditions,atthetimesetoutintheregulationsormarketpractices.TransactiondatereferstothedatewhentheCompanypromisestobuyorsellfinancialassets.

(2)Classificationandsubsequentmeasurementoffinancialassets

Atinitialrecognition,theCompanyclassifiesfinancialassetsintothefollowingthreecategoriesbasedonthebusinessmodelofmanagingfinancialassetsandthecontractualcashflowcharacteristicsoffinancialassets:financialassetsmeasuredatamortizedcostaremeasuredatfairvalueandtheirchangesareincludedinotherfinancialassetswithcurrentprofitandlossandfinancialassetsmeasuredatfairvaluethroughprofitorloss.UnlesstheCompanychangesthebusinessmodelformanagingfinancialassets,inthiscase,allaffectedfinancialassetsarereclassifiedonthefirstdayofthefirstreportingperiodafterthebusinessmodelchanges,otherwisethefinancialassetsmaynotbeinitiallyconfirmed.

Financialassetsaremeasuredatthefairvalueattheinitialrecognition.Forfinancialassetsmeasuredatfairvaluewithvariationsaccountedintocurrentincomeaccount,relatedtransactionexpensesareaccountedintothecurrentincome.Forotherfinancialassets,therelatedtransactionexpensesareaccountedintotheinitialrecognizedamounts.Billsreceivableandaccountsreceivablearisingfromthesaleofcommoditiesortheprovisionoflaborservicesthatdonotcontainordonotconsidersignificantfinancingcomponents,theCompanyperformsinitialmeasurementaccordingtothetransactionpricedefinedbytheincomestandard.

Thesubsequentmeasurementoffinancialassetsdependsontheirclassification:

①Financialassetsmeasuredatamortizedcost

Financialassetsthatmeetthefollowingconditionsatthesametimeareclassifiedasfinancialassetsmeasuredatamortizedcost:TheCompany'sbusinessmodelformanagingthisfinancialassetistocollectcontractualcashflowsasitsgoal;thecontracttermsofthefinancialassetstipulatethatCashflowisonlythepaymentofprincipalandinterestbasedontheoutstandingprincipalamount.Forsuchfinancialassets,theactualinterestratemethodisusedforsubsequentmeasurementaccordingtotheamortizedcost.Thegainsorlossesarisingfromtheterminationofrecognition,amortizationorimpairmentbasedontheactualinterestratemethodareincludedinthecurrentprofitandloss.

②Financialassetsmeasuredatfairvalueandwhosechangesareincludedinothercomprehensiveincome

Financialassetsthatmeetthefollowingconditionsatthesametimeareclassifiedasfinancialassetsmeasuredatfairvalueandtheirchangesareincludedinothercomprehensiveincome:TheCompany'sbusinessmodelformanagingthisfinancialassetistobothtargetthecollectionofcontractualcashflowsandthesaleoffinancialassets.Objective;Thecontractualtermsofthefinancialassetstipulatethatthecashflowgeneratedonaspecificdateisonlyforthepaymentofprincipalandinterestbasedontheoutstandingprincipalamount.Forsuchfinancialassets,fairvalueisusedforsubsequentmeasurement.Exceptforimpairmentlossesorgainsandexchangegainsandlossesrecognizedascurrentgainsandlosses,changesinthefairvalueofsuchfinancialassetsarerecognizedasothercomprehensiveincome.Untilthefinancialassetisderecognized,itsaccumulatedgainsorlossesaretransferredtocurrentgainsandlosses.However,therelevantinterestincomeofthefinancialassetcalculatedbythe

actualinterestratemethodisincludedinthecurrentprofitandloss.

TheCompanyirrevocablychoosestodesignateaportionofnon-tradableequityinstrumentinvestmentasafinancialassetmeasuredatfairvalueandwhosevariationisincludedinotherconsolidatedincome.Onlytherelevantdividendincomeisincludedinthecurrentprofitandloss,andthevariationoffairvalueisrecognizedasotherconsolidatedincome.

③Financialassetsmeasuredatfairvaluewithvariationsaccountedintocurrentincomeaccount

Theabovefinancialassetsmeasuredatamortizedcostandotherfinancialassetsmeasuredatfairvalueandwhosechangesareincludedinothercomprehensiveincomeareclassifiedasfinancialassetsmeasuredatfairvalueandwhosechangesareincludedinthecurrentprofitandloss.Forsuchfinancialassets,fairvalueisusedforsubsequentmeasurement,andallchangesinfairvalueareincludedincurrentprofitandloss.

(3)Classificationandmeasurementoffinancialliabilities

TheCompanyclassifiesfinancialliabilitiesintofinancialliabilitiesmeasuredatfairvalueandtheirchangesincludedinthecurrentprofitandloss,loancommitmentsandfinancialguaranteecontractliabilitiesforloansbelowmarketinterestrates,andfinancialliabilitiesmeasuredatamortizedcost.

Thesubsequentmeasurementoffinancialliabilitiesdependsontheirclassification:

①Financialliabilitiesmeasuredatfairvaluewithvariationsaccountedintocurrentincomeaccount

Suchfinancialliabilitiesincludetransactionalfinancialliabilities(includingderivativesthatarefinancialliabilities)andfinancialliabilitiesdesignatedasatfairvaluethroughprofitorloss.Aftertheinitialrecognition,thefinancialliabilitiesaresubsequentlymeasuredatfairvalue.Exceptforthehedgeaccounting,thegainsorlosses(includinginterestexpenses)arerecognizedinprofitorloss.However,forthefinancialliabilitiesdesignatedasfairvalueandwhosevariationsareincludedintheprofitsandlossesofthecurrentperiod,thevariableamountofthefairvalueofthefinancialliabilityduetothevariationofcreditriskofthefinancialliabilityshallbeincludedintheotherconsolidatedincome.Whenthefinancialliabilityisterminated,thecumulativegainsandlossespreviouslyincludedintheother

consolidatedincomeshallbetransferredoutoftheotherconsolidatedincomeandshallbeincludedintheretainedincome.②LoancommitmentsandfinancialsecuritycontractualliabilitiesAloancommitmentisapromisethattheCompanyprovidestocustomerstoissueloanstocustomerswithestablishedcontracttermswithinthecommitmentperiod.Loancommitmentsareprovidedforimpairmentlossesbasedontheexpectedcreditlossmodel.AfinancialguaranteecontractreferstoacontractthatrequirestheCompanytopayaspecificamountofcompensationtothecontractholderwhosufferedalosswhenaspecificdebtorisunabletorepaythedebtinaccordancewiththeoriginalormodifieddebtinstrumentterms.Financialguaranteecontractliabilitiesaresubsequentlymeasuredbasedonthehigherofthelossreserveamountdeterminedinaccordancewiththeprincipleofimpairmentoffinancialinstrumentsandtheinitialrecognitionamountafterdeductingtheaccumulatedamortizationamountdeterminedinaccordancewiththerevenuerecognitionprinciple.

③FinancialliabilitiesmeasuredatamortizedcostAfterinitialrecognition,otherfinancialliabilitiesaremeasuredatamortizedcostusingtheeffectiveinterestmethod.Exceptinspecialcircumstances,financialliabilitiesandequityinstrumentsaredistinguishedaccordingtothefollowingprinciples:

①IftheCompanycannotunconditionallyavoiddeliveringcashorotherfinancialassetstofulfillacontractualobligation,thecontractualobligationmeetsthedefinitionoffinancialliability.Whilesomefinancialinstrumentsdonotexplicitlycontaintermsandconditionsforthedeliveryofcashorotherfinancialassets,theymayindirectlyformcontractualobligationsthroughothertermsandconditions.IfafinancialinstrumentisrequiredtobesettledwithorcanbesettledwiththeCompany'sownequityinstruments,theCompany'sownequityinstrumentusedtosettletheinstrumentneedstobeconsideredasasubstituteforcashorotherfinancialassetsorfortheholderoftheinstrumenttoenjoytheremainingequityintheassetsafterallliabilitiesarededucted.Ifitistheformer,theinstrumentisthefinancialliabilitiesoftheissuer;ifitisthelatter,theinstrumentistheequityinstrumentoftheissuer.Insomecases,afinancialinstrumentcontractprovidesthattheCompanyshallormayuseitsowninstrumentofinterest,

inwhichtheamountofacontractualrightorobligationisequaltotheamountoftheinstrumentofitsowninterestwhichmaybeacquiredordeliveredmultipliedbyitsfairvalueatthetimeofsettlement,whethertheamountofthecontractualrightorobligationisfixedorisbasedentirelyorinpartonavariationofavariableotherthanthemarketpriceoftheinstrumentofitsowninterest,suchastherateofinterest,thepriceofacommodityorthepriceofafinancialinstrument,thecontractisclassifiedasafinancialliability.

(4)DerivativefinancialinstrumentsandembeddedderivativesDerivativefinancialinstrumentsareinitiallymeasuredatthefairvalueofthedaywhenthederivativetransactioncontractissigned,andaresubsequentlymeasuredattheirfairvalues.Derivativefinancialinstrumentswithapositivefairvaluearerecognizedasasset,andinstrumentswithanegativefairvaluearerecognizedasliabilities.

Thegainsandlossesarisingfromthechangeinfairvalueofderivativesaredirectlyincludedintheprofitsandlossesofthecurrentperiod,exceptthatthepartofthecashflowthatisvalidinthehedgeisincludedintheotherconsolidatedincomeandtransferredoutwhenthehedgeditemaffectsthegainandlossofthecurrentperiod.Forahybridinstrumentcontaininganembeddedderivativeinstrument,iftheprincipalcontractisafinancialasset,thehybridinstrumentasawholeappliestherelevantprovisionsofthefinancialassetclassification.Ifthemaincontractisnotafinancialasset,andthehybridinstrumentisnotmeasuredatfairvalueanditschangesareincludedinthecurrentprofitandlossforaccounting,theembeddedderivativedoesnothaveacloserelationshipwiththemaincontractintermsofeconomiccharacteristicsandrisks,anditisIftheinstrumentswiththesameconditionsandexistseparatelymeetthedefinitionofderivativeinstruments,theembeddedderivativeinstrumentsareseparatedfromthemixedinstrumentsandtreatedasseparatederivativefinancialinstruments.Ifthefairvalueoftheembeddedderivativeontheacquisitiondateorthesubsequentbalancesheetdatecannotbemeasuredseparately,thehybridinstrumentasawholeisdesignatedasafinancialassetorfinancialliabilitymeasuredatfairvalueandwhosechangesareincludedinthecurrentprofitorloss.

(5)FinancialinstrumentLess

TheCompanyshallconfirmthepreparationforlossonthebasisofexpectedcreditlossforfinancialassetsmeasuredatamortizationcosts,creditor'srightsinvestmentsmeasuredatfairvalue,contractualassets,leasingreceivables,loancommitmentsandfinancialguarantee

contracts,etc.

①MeasurementofexpectedcreditlossesofaccountsreceivableTheexpectedcreditlossreferstotheweightedaverageofthecreditlossesoffinancialinstrumentsthatareweightedbytheriskofdefault.CreditlossreferstothedifferencebetweenallcontractualcashflowsreceivablefromthecontractandallcashflowsexpectedtobereceivedbytheCompanyattheoriginalactualinterestrate,thatis,thepresentvalueofallcashshortages.Amongthem,thefinancialassetswhichhavebeenpurchasedorbornbytheCompanyshallbediscountedaccordingtotheactualrateofcreditadjustmentofthefinancialassets.Theexpectedlifetimecreditlossistheexpectedcreditlossduetoallpossibledefaulteventsduringtheentireexpectedlifeofthefinancialinstrument.Expectedcreditlossesinthenext12monthsareexpectedtoresultfrompossibledefaultsinfinancialinstrumentswithin12monthsafterthebalancesheetdate(orestimateddurationoffinancialinstrumentsiftheexpecteddurationislessthan12months)Creditlossesarepartoftheexpectedlifetimecreditloss.Oneachbalancesheetday,theCompanymeasurestheexpectedcreditlossesoffinancialinstrumentsatdifferentstages.Wherethecreditriskhasnotincreasedsignificantlysincetheinitialconfirmationofthefinancialinstrument,itisinthefirststage.TheCompanymeasuresthepreparationforlossaccordingtotheexpectedcreditlossinthenext12months.Wherethecreditriskhasincreasedsignificantlysincetheinitialconfirmationbutthecreditimpairmenthasnotoccurred,thefinancialinstrumentisinthesecondstage.Whereacreditimpairmenthasoccurredsincetheinitialconfirmationofthefinancialinstrument,itshallbeinthethirdstage,andtheCompanyshallprepareformeasuringtheexpectedcreditlossofthewholesurvivalperiodoftheinstrument.

Forfinancialinstrumentswithlowcreditriskonthebalancesheetdate,theCompanyassumesthatthecreditriskhasnotincreasedsignificantlysincetheinitialrecognition,andmeasuresthelossprovisionbasedontheexpectedcreditlossesinthenext12months.Forfinancialinstrumentsthatareinthefirstandsecondstagesandwithlowercreditrisk,theCompanycalculatesinterestincomebasedontheirbookbalancesandactualinterestrateswithoutdeductionforimpairmentprovision.Forfinancialinstrumentsinthethirdstage,interestincomeiscalculatedbasedontheamortizedcostandtheactualinterestrateafterthe

bookbalanceminustheprovisionforimpairment.Regardingbillsreceivable,accountsreceivableandfinancingreceivables,regardlessofwhetherthereisasignificantfinancingcomponent,theCompanymeasuresthelossprovisionbasedontheexpectedcreditlossesthroughouttheduration.Accountsreceivable/contractassetsApplicablefromDecember1,2025Wherethereisobjectiveevidenceofimpairment,aswellasotherreceivableinstruments,receivables,otherreceivables,receivablesfinancingandlong-termreceivablesapplicabletoindividualassessments,separateimpairmenttestsareperformedtoconfirmexpectedcreditlossesandprepareindividualimpairment.Fornotesreceivable,accountsreceivable,otherreceivables,financingofreceivables,long-termreceivables,andcontractassetsforwhichthereisnoobjectiveevidenceofimpairment,orwhenindividualfinancialassetscannotbeassessedatareasonablecost,theCompanydividesbillsreceivable,accountsreceivable,otherreceivables,receivablefinancing,long-termreceivables,andcontractassetsintoseveralcombinationsbasedoncreditriskcharacteristics,andcalculatesexpectedcreditlossesonthebasisofthecombination.Thebasisfordeterminingthecombinationisasfollows:

Thebasisfordeterminingthecombinationofnotesreceivableisasfollows:

Thebasisfordeterminingthecombinationofnotesreceivableisasfollows:

NotesReceivableCombination1CommercialAcceptanceBillNotesReceivableCombination2BankAcceptanceBillForNotesreceivabledividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.Thebasisfordeterminingthecombinationofaccountsreceivableisasfollows:

AccountsReceivablePortfolio1:ReceivablesfromcurtainwallbusinessAccountsReceivablePortfolio2:ReceivablesfromplatformscreendoorbusinessAccountsReceivablePortfolio3:ReceivablesfromnewmaterialsbusinessAccountsReceivablePortfolio4:Receivablesfromnewenergybusiness

AccountsReceivablePortfolio5:ReceivablesfromcommercialrealestateandothersOtherreceivableportfolio6ReceivablesfromrelatedpartieswithinthescopeofconsolidationFortheaccountsreceivabledividedintoacombination,theCompanyreferstothehistoricalcreditlossexperience,combinedwiththecurrentsituationandtheforecastofthefutureeconomicsituation,compilestheaccountreceivableageandthewholeexpectedcreditlossratetable,andcalculatestheexpectedcreditloss.

Thebasisfordeterminingthecombinationofotherreceivablesisasfollows:

Otherreceivableportfolio1InterestreceivablePortfolioofotherreceivables2DividendsreceivableOthercombinationsofreceivables3DepositandmarginreceivableOtherreceivableportfolio4ReceivableadvancesCombinationofotherreceivables5Value-addedtaxreceivableisincreasedandrefundedOtherreceivableportfolio6Receivablesfromrelatedpartieswithinthescopeofconsolidation

Otherreceivablesportfolio7OtherreceivablesForotherreceivablesdividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.Thebasisfordeterminingthecombinationofreceivablesfinancingisasfollows:

Receivablesfinancingportfolio1bankacceptancebillForNotesreceivabledividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.Thebasisfordeterminingtheportfolioofcontractassetsisasfollows:

Contractassetsportfolio1conditionalcollectionrightofsales

Contractassetsportfolio2CompletedandunsettledprojectnotmeetingcollectionconditionsContractassetsportfolio3QualityguaranteedepositnotmeetingcollectionconditionsForcontractassetsdividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.ApplicableonandbeforeNovember30,2025Wherethereisobjectiveevidenceofimpairment,aswellasotherreceivableinstruments,receivables,otherreceivables,receivablesfinancingandlong-termreceivablesapplicabletoindividualassessments,separateimpairmenttestsareperformedtoconfirmexpectedcreditlossesandprepareindividualimpairment.Fornotesreceivable,accountsreceivable,otherreceivables,financingofreceivables,long-termreceivables,andcontractassetsforwhichthereisnoobjectiveevidenceofimpairment,orwhenindividualfinancialassetscannotbeassessedatareasonablecost,theCompanydividesbillsreceivable,accountsreceivable,otherreceivables,receivablefinancing,long-termreceivables,andcontractassetsintoseveralcombinationsbasedoncreditriskcharacteristics,andcalculatesexpectedcreditlossesonthebasisofthecombination.Thebasisfordeterminingthecombinationisasfollows:

Thebasisfordeterminingthecombinationofnotesreceivableisasfollows:

NotesReceivableCombination1CommercialAcceptanceBill

NotesReceivableCombination2BankAcceptanceBill

ForNotesreceivabledividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.

Thebasisfordeterminingthecombinationofaccountsreceivableisasfollows:

Accountsreceivablecombination1Accountsreceivablebusiness

Accountsreceivablecombination2Realestatereceivablebusiness

Accountsreceivablecombination3Othersreceivablebusiness

Otherreceivableportfolio4ReceivablesfromrelatedpartieswithinthescopeofconsolidationFortheaccountsreceivabledividedintoacombination,theCompanyreferstothehistoricalcreditlossexperience,combinedwiththecurrentsituationandtheforecastofthefutureeconomicsituation,compilestheaccountreceivableageandthewholeexpectedcreditlossratetable,andcalculatestheexpectedcreditloss.Thebasisfordeterminingthecombinationofotherreceivablesisasfollows:

Otherreceivableportfolio1Interestreceivable

Portfolioofotherreceivables2Dividendsreceivable

Othercombinationsofreceivables3Depositandmarginreceivable

Otherreceivableportfolio4Receivableadvances

Combinationofotherreceivables5Value-addedtaxreceivableisincreasedandrefunded

Otherreceivableportfolio6Receivablesfromrelatedpartieswithinthescopeofconsolidation

Otherreceivablesportfolio7Otherreceivables

Forotherreceivablesdividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.

Thebasisfordeterminingthecombinationofreceivablesfinancingisasfollows:

Receivablesfinancingportfolio1bankacceptancebill

ForNotesreceivabledividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.

Thebasisfordeterminingtheportfolioofcontractassetsisasfollows:

Contractassetsportfolio1conditionalcollectionrightofsales

Contractassetsportfolio2Completedandunsettledprojectnotmeetingcollection

conditions

Contractassetsportfolio3QualityguaranteedepositnotmeetingcollectionconditionsForcontractassetsdividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.OtherdebtinvestmentForotherreceivablesdividedintoportfolios,theCompanyreferstohistoricalcreditlossexperience,combinedwithcurrentconditionsandpredictionsoffutureeconomicconditions,andcalculatesthroughdefaultriskexposureandexpectedcreditlossratewithinthenext12monthsortheentiredurationExpectedcreditlosses.

②LowercreditriskIftheriskofdefaultonfinancialinstrumentsislow,theborrower'sabilitytomeetitscontractualcashflowobligationsintheshorttermisstrong,andeveniftheeconomicsituationandoperatingenvironmentareadverselychangedoveralongperiodoftime,itmaynotnecessarilyreducethereceivables'performanceoftheircontractualcash.Theabilityoftheflowobligation,thefinancialinstrumentisconsideredtohavealowercreditrisk.

③SignificantincreaseincreditriskTheCompanycomparesthedefaultprobabilityofthefinancialinstrumentduringtheexpectedlifetimedeterminedbythebalancesheetdatewiththedefaultprobabilityoftheexpectedlifetimeduringtheinitialconfirmationtodeterminetherelativeprobabilityofthedefaultprobabilityofthefinancialinstrumentduringtheexpectedlifetimeChangestoassesswhetherthecreditriskoffinancialinstrumentshasincreasedsignificantlysinceinitialrecognition.

Indeterminingwhetherthecreditriskhasincreasedsignificantlysincetheinitialrecognition,theCompanyconsidersreasonableandevidencedinformation,includingforward-lookinginformation,thatcanbeobtainedwithoutunnecessaryadditionalcostsoreffort.TheinformationconsideredbytheCompanyincludes:

A.Significantchangesininternalpriceindicatorsresultingfromchangesincreditrisk;

B.Adversechangesinbusiness,financialoreconomicconditionsthatareexpectedtocausesignificantchangesinthedebtor'sabilitytoperformitsdebtserviceobligations;C.Whethertheactualorexpectedoperatingresultsofthedebtorhavechangedsignificantly;whethertheregulatory,economicortechnicalenvironmentofthedebtorhasundergonesignificantadversechanges;

D.Whetherthereisasignificantchangeinthevalueofthecollateralusedasdebtcollateralortheguaranteeprovidedbyathirdpartyorthequalityofcreditenhancement.Thesechangesareexpectedtoreducethedebtor'seconomicmotivationforrepaymentwithinthetimelimitspecifiedinthecontractoraffecttheprobabilityofdefault;

E.Whetherthereisasignificantchangeintheeconomicmotivationthatisexpectedtoreducethedebtor'srepaymentaccordingtothecontractualdeadline;

F.Anticipatedchangestotheloancontract,includingwhethertheexpectedviolationofthecontractmayresultintheexemptionorrevisionofcontractobligations,grantinginterest-freeperiods,risinginterestrates,requiringadditionalcollateralorguarantees,ormakingotherchangestothecontractualframeworkoffinancialinstrumentschange;

G.Whethertheexpectedperformanceandrepaymentbehaviorofthedebtorhaschangedsignificantly;

H.Whetherthecontractpaymentisoverdueformorethan(including)30days.

Basedonthenatureoffinancialinstruments,theCompanyassesseswhethercreditriskhasincreasedsignificantlyonthebasisofasinglefinancialinstrumentorcombinationoffinancialinstruments.Whenconductinganassessmentbasedonacombinationoffinancialinstruments,theCompanycanclassifyfinancialinstrumentsbasedoncommoncreditriskcharacteristics,suchasoverdueinformationandcreditriskratings.

Iftheoverdueperiodexceeds30days,theCompanyhasdeterminedthatthecreditriskoffinancialinstrumentshasincreasedsignificantly.UnlesstheCompanydoesnothavetopayexcessivecostsoreffortstoobtainreasonableandwarrantedinformation,itprovesthatalthoughithasexceededthetimelimitof30daysagreeduponintheContract,creditriskshavenotincreasedsignificantlysincetheinitialconfirmation.

④Financialassetswithcreditimpairment

TheCompanyassessesonthebalancesheetdatewhetherfinancialassetsmeasuredat

amortizedcostandcreditinvestmentsmeasuredatfairvalueandwhosechangesareincludedinothercomprehensiveincomehaveundergonecreditimpairment.Whenoneormoreeventsthatadverselyaffecttheexpectedfuturecashflowsofafinancialassetoccur,thefinancialassetbecomesafinancialassetthathassufferedacreditimpairment.Evidencethatcreditimpairmenthasoccurredinfinancialassetsincludesthefollowingobservableinformation:

Majorfinancialdifficultieshaveoccurredtotheissuerorthedebtor;Breachofcontractbythedebtor,suchaspaymentofinterestordefaultoroverdueofprincipal;(B)Theconcessionthatthedebtorwouldnotmakeunderanyothercircumstancesforeconomicorcontractualconsiderationsrelatingtothefinancialdifficultiesofthedebtor;Thedebtorislikelytobebankruptorundertakeotherfinancialrestructuring;Thefinancialdifficultiesoftheissuerordebtorleadtothedisappearanceoftheactivemarketforthefinancialasset;Topurchaseorgenerateafinancialassetatasubstantialdiscount,whichreflectsthefactthatacreditlosshasoccurred.

⑤Presentationofexpectedcreditlossmeasurement

Inordertoreflectthechangesinthecreditriskoffinancialinstrumentssincetheinitialrecognition,theCompanyre-measurestheexpectedcreditlossesoneachbalancesheetdate,andtheincreaseorreversalofthelossprovisionresultingtherefromisincludedasanimpairmentlossorgain.Currentprofitandloss.Forfinancialassetsmeasuredatamortizedcost,thelossallowanceoffsetsthebookvalueofthefinancialassetlistedonthebalancesheet;fordebtinvestmentsmeasuredatfairvalueandwhosechangesareincludedinothercomprehensiveincome,theCompanyRecognitionofitslossprovisionsingainsdoesnotoffsetthebookvalueofthefinancialasset.

⑥Cancellation

Ifitisnolongerreasonablyexpectedthatthecontractcashflowofthefinancialassetswillbefullyorpartiallyrecovered,thebookbalanceofthefinancialassetswillbedirectlyreduced.Suchwrite-offconstitutethederecognizationofrelatedfinancialassets.ThisusuallyoccurswhentheCompanydeterminesthatthedebtorhasnoassetsorsourcesofincomethatgeneratesufficientcashflowtocovertheamountthatwillbewrittendown.

Ifthefinancialassetsthathavebeenwrittendownarerecoveredinthefuture,thereversaloftheimpairmentlossisincludedintheprofitorlossofthecurrentperiod.

(6)TransferoffinancialassetsThetransferoffinancialassetsreferstothefollowingtwosituations:

A.Transferthecontractualrighttoreceivecashflowoffinancialassetstoanotherparty;B.Transfersthefinancialassetstotheotherpartyinwholeorinpart,butreservesthecontractualrighttocollectthecashflowofthefinancialassetsandundertakesthecontractualobligationtopaythecollectedcashflowtooneormorerecipients.①De-identificationoftransferredfinancialassetsThosewhohavetransferredalmostallrisksandrewardsintheownershipoffinancialassetstothetransferee,orhaveneithertransferrednorretainedalmostalltherisksandrewardsintheownershipoffinancialassets,buthavegivenupcontrolofthefinancialassets,terminatetheconfirmationThefinancialasset.

Indeterminingwhethercontroloverthetransferredfinancialassethasbeenwaived,theactualcapacityofthetransferortosellthefinancialassetisdetermined.Ifthetransferorisabletosellthetransferredfinancialassetswhollytoathirdpartythatdoesnothavearelationshipwiththem,andhasnoadditionalconditionstolimitthesale,itindicatestheCompanyhaswaivedcontroloverthefinancialassets.

TheCompanypaysattentiontotheessenceoffinancialassettransferwhenjudgingwhetherfinancialassettransfermeetstheconditionoffinancialassettermination.

Iftheoveralltransferoffinancialassetsmeetstheconditionsforterminationofconfirmation,thedifferencebetweenthefollowingtwoamountsisincludedinthecurrentprofitandloss:

A.ContinuingidentificationoftransferredBookvalue；

B.Thesumoftheamountreceivedasaresultofthetransferandtheamountaccruedasaresultofthechangeinthefairvalueofthetransferinrespectoftheterminationrecognizedportionoftheamountpreviouslychargeddirectlytotheotherconsolidatedproceeds(thefinancialassetsinvolvedinthetransferarethoseclassifiedinaccordancewithArticle18ofEnterpriseAccountingStandardNo.22-FinancialInstrumentsRecognitionandMeasurementasmeasuredbythefairvalueandwhosechangeischargedtotheotherconsolidatedproceeds).

Ifthepartialtransferoffinancialassetsmeetstheconditionsforderecognization,thebookvalueoftheentiretransferredfinancialassetswillbeincludedinthederecognizedpartandtheunterminatedpart(inthiscase,theretainedserviceassetsareregardedaspartofthecontinuedrecognitionoffinancialassets)Betweenthem,theyareapportionedaccordingtotheirrespectiverelativefairvaluesonthetransferdate,andthedifferencebetweenthefollowingtwoamountsisincludedinthecurrentprofitandloss:

A.Terminationofthebookvalueoftherecognizedportiononthedateofderecognization;

B.Thesumoftheamountreceivedasaresultofthetransferandtheamountaccruedasaresultofthechangeinthefairvalueofthetransferinrespectoftheterminationrecognizedportionoftheamountpreviouslychargedtotheotherconsolidatedproceeds(thefinancialassetsinvolvedinthetransferarethoseclassifiedinaccordancewithArticle18ofEnterpriseAccountingStandardNo.22-FinancialInstrumentsRecognitionandMeasurementasmeasuredbythefairvalueandwhosechangeischargedtotheotherconsolidatedproceeds).

②Continuetobeinvolvedinthetransferredfinancialassets

Ifneithertransfernorretainalmostalltherisksandrewardsoftheownershipoffinancialassets,andhavenotgivenupcontrolofthefinancialassets,therelevantfinancialassetsshouldbeconfirmedaccordingtotheextentoftheircontinuedinvolvementinthetransferredfinancialassets,andtherelevantliabilitiesshouldberecognizedaccordingly.

Theextenttowhichthetransferredfinancialassetscontinuetobeinvolvedreferstotheextenttowhichtheenterpriseundertakestheriskorcompensationofthevaluechangeofthetransferredfinancialassets.

③Continuingidentificationoftransferredfinancialassets

Wherealmostallrisksandremunerationinrelationtoownershipofthetransferredfinancialassetsareretained,thewholeofthetransferredfinancialassetsshallcontinuetoberecognizedandtheconsiderationreceivedshallberecognizedasafinancialliability.

Thefinancialassetandtherecognizedrelatedfinancialliabilitiesshallnotoffseteachother.Inthesubsequentaccountingperiod,theenterpriseshallcontinuetorecognizetheincome(orgain)generatedbythefinancialassetandthecosts(orlosses)incurredbythefinancialliability.

(7)DeductionoffinancialassetsandliabilitiesFinancialassetsandfinancialliabilitiesshouldbelistedseparatelyinthebalancesheet,andcannotbeoffsetagainsteachother.However,ifthefollowingconditionsaremet,thenetamountoffsetbyeachotherislistedinthebalancesheet:

TheCompanyhasastatutoryrighttooffsettheconfirmedamount,andsuchlegalrightiscurrentlyenforceable;TheCompanyplanstosettlethenetassetsorrealizethefinancialassetsandliquidatethefinancialliabilitiesatthesametime.Thetransferringpartyshallnotoffsetthetransferredfinancialassetsandrelatedliabilitiesifitdoesnotmeettheconditionsforterminatingtherecognition.

(8)RecognitionoffairvalueofFinanceinstruments

SeeNoteIII.12fortherecognitionoffairvalueoffinancialassetsandliabilities.

12.Measurementatfairvalue

Fairvaluereferstotheamountofassetexchangeorliabilitiessettlementbybothtransactionpartiesfamiliarwiththesituationinafairdealonavoluntarybasis.

TheCompanymeasuresthefairvalueofrelatedassetsorliabilitiesatthepricesinthemainmarket.Ifthereisnomajormarket,theCompanymeasuresthefairvalueoftherelevantassetsorliabilitiesatthemostfavorablemarketprices.TheGroupusesassumptionsthatmarketparticipantsusetomaximizetheireconomicbenefitswhenpricingtheassetorliability.

Themainmarketreferstothemarketwiththehighesttransactionvolumeandactivityoftherelatedassetsorliabilities.Themostfavorablemarketmeansthemarketthatcanselltherelatedassetsatthehighestamountortransfertherelatedliabilitiesatthelowestamountafterconsideringthetransactioncostandtransportationcost.

Forfinancialassetsorliabilitiesinanactivemarket,TheCompanydeterminestheirfairvaluebasedonquotationsintheactivemarket.Ifthereisnoactivemarket,theCompanyusesevaluationtechniquestodeterminethefairvalue.

Forthemeasurementofnon-financialassetsatfairvalue,theabilityofmarketparticipantstousetheassetsforoptimalpurposestogenerateeconomicbenefits,ortheability

toselltheassetstoothermarketparticipantsthatcanbeusedforoptimalpurposestogenerateeconomicbenefits.①EvaluationtechniquesTheCompanyadoptsvaluationtechniquesthatareapplicableinthecurrentperiodandaresupportedbysufficientdataandotherinformation.Thevaluationtechniquesusedmainlyincludemarketmethod,incomemethodandcostmethod.TheCompanyusesamethodconsistentwithoneormoreofthevaluationtechniquestomeasurefairvalue.Ifmultiplevaluationtechniquesareusedtomeasurefairvalue,thereasonablenessofeachvaluationresultshallbeconsidered,andthefairvalueshallbeselectedasthemostrepresentativeoffairvalueunderthecurrentcircumstances.Theamountofvalueisregardedasfairvalue.

TheTheCompanyequipmentareapplicableinthecurrentcircumstancesandhavesufficientavailabledataandotherinformationtosupporttheuseoftherelevantobservableinputvaluesprioritized.Unobservableinputvaluesareusedonlywhentheobservableinputvaluecannotbeobtainedorisnotfeasible.Observableinputvaluesareinputvaluesthatcanbeobtainedfrommarketdata.TheGroupusesassumptionsthatmarketparticipantsusetomaximizetheireconomicbenefitswhenpricingtheassetorliability.Non-observableinputvaluesareinputvaluesthatcannotbeobtainedfrommarketdata.Theinputvalueisobtainedbasedonthebestinformationavailableonassumptionsusedbymarketparticipantsinpricingtherelevantassetorliability.

②Fairvaluehierarchy

Thiscompanydividestheinputvalueusedinfairvaluemeasurementintothreelevels,andfirstusesthefirstlevelinputvalue,thenusesthesecondlevelinputvalue,andfinallyusesthethirdlevelinputvalue.Firstlevel:quotationofsameassetsorliabilitiesinanactivemarket(unadjusted)Thesecondlevelinputvalueisadirectlyorindirectlyobservableinputvalueoftheassetorliabilityinadditiontothefirstlevelinputvalue.Theinputvalueofthethirdlevelistheunobservableinputvalueoftherelatedassetorliability.

13.Inventory

(1)Classificationofinventories

Inventoriesrefertofinishedgoodsormerchandiseheldforsaleintheordinarycourseofbusiness,work-in-process,andmaterialsandsuppliesconsumedintheproductionprocessor

duringtherenderingofservices,includingrawmaterials,work-in-process,semi-finishedgoods,finishedgoods,merchandiseinventories,andreusablematerials.

(2)PricingofdeliveringinventoryTheCompanymeasuresinventoriesissuedusingtheweightedaveragecostmethod.Theinventoryofrealestatebusinessmainlyincludesinventorymaterials,developmentcosts,developmentproducts,etc.Theactualcostsofdevelopmentproductsincludelandtransferpayment,infrastructureandfacilitycosts,installationengineeringcosts,borrowsbeforecompletionofthedevelopmentandothercostsduringthedevelopmentprocess.Thespecialmaintenancefundscollectedinthefirstperiodareincludedinthedevelopmentoverheads.Whenthecontrolrightofdevelopmentproductsistransferred,theindividualvaluationmethodisusedtodetermineitsactualcost.

(3)InventorysystemTheCompanyinventoryadoptstheperpetualinventorysystem,countingatleastonceayear,theinventoryprofitandlossamountisincludedinthecurrentyear'sprofitandloss.

(4)CriteriaforrecognizingandprovidingforprovisionfordeclineinvalueofinventoriesOnthebalancesheetdate,inventoriesareaccounteddependingonwhichislowerbetweenthecostandthenetrealizablevalue.Ifthecostishigherthanthenetrealizablevalue,theimpairmentprovisionwillbemade.Therealizablenetvalueofinventoryshouldberecognizedbasedonsolidevidencewiththepurposeoftheinventoryandafter-balance-sheet-dateeventstakenintoconsideration.

(1)Inthecourseofnormalproductionandoperation,thenetrealizablevalueoffinishedgoods,commoditiesandmaterialsdirectlyusedforsaleshallbedeterminedbytheestimatedpriceoftheinventoryminustheestimatedcostofsaleandrelatedtaxes.Theinventoryheldfortheexecutionofasalescontractoralaborcontractshallbemeasuredonthebasisofthecontractpriceasitsnetrealizablevalue;Ifthequantityheldisgreaterthanthequantityorderedunderthesalescontract,thenetrealizablevalueoftheexcessinventoryismeasuredonthebasisofthegeneralsalesprice.Formaterialsusedforsale,themarketpriceshallbeusedasthemeasurementbasisforthenetrealizablevalue.

②Inthenormalproductionandoperationprocess,theinventoryofmaterialsthatneedto

beprocessedisdeterminedbytheamountoftheestimatedsellingpriceofthefinishedproductminustheestimatedcosttobeincurredatthetimeofcompletion,estimatedsalesexpensesandrelatedtaxesRealizethenetvalue.Ifthenetrealizablevalueofthefinishedproductproducedbyitishigherthanthecost,thematerialismeasuredatcost;Ifthedecreaseinthepriceofthematerialindicatesthatthenetrealizablevalueofthefinishedproductislowerthanthecost,thematerialismeasuredasthenetrealizablevalueandtheinventoryispreparedforadecreasebasedonitsdifference.

③Ifthefactorsaffectingthepreviouswrite-downofinventoryvaluehavedisappearedonthebalancesheetdate,theamountofthewrite-downwillberestoredandtransferredbackwithintheamountofinventorydepreciationreservethathasbeenaccrued,andtheamountreturnedwillbeincludedinthecurrentprofitandloss.

(5)Methodsofamortizationofswingmaterials

①Low-valueconsumablesareamortizedonon-offamortizationbasisatusing.

②Packagesareamortizedonon-offamortizationbasisatusing.

14.Contractassetsandcontractliabilities

TheCompanypresentscontractassetsorliabilitiesinthebalancesheetaccordingtotherelationshipbetweenperformanceobligationandcustomerpayment.TheconsiderationforwhichtheCompanyisentitledtoreceive(subjecttofactorsotherthanthepassageoftime)forthetransferofgoodsortheprovisionofservicestocustomersislistedascontractassets.TheCompany'sobligationtotransfergoodsorprovideservicestocustomersforconsiderationreceivedorreceivablefromcustomersislistedascontractualliabilities.

TheCompany'sdeterminationmethodandaccountingtreatmentmethodfortheexpectedcreditlossofcontractassetsaredetailedinNoteIII11.

Contractassetsandcontractliabilitiesarelistedseparatelyinthebalancesheet.Contractassetsandcontractliabilitiesunderthesamecontractarelistedinnetamount.Ifthenetamountisthedebitbalance,itshallbelistedin"contractassets"or"othernoncurrentassets"accordingtoitsliquidity;ifthenetamountisthecreditbalance,itshallbelistedin"contractliabilities"or"othernoncurrentliabilities"accordingtoitsliquidity.Contractassetsandcontractliabilitiesunderdifferentcontractscannotoffseteachother.

15.Contractcosts

Contractcostisdividedintocontractperformancecostandcontractacquisitioncost.ThecostincurredbytheCompanyinperformingthecontractshallberecognizedasanassetwhenthefollowingconditionsaremetsimultaneously:

①Thecostisdirectlyrelatedtoacurrentorexpectedcontract,includingdirectlabor,directmaterials,manufacturingexpenses(orsimilarexpenses),clearlybornebythecustomer,andothercostsincurredonlyduetothecontract;

②ThiscostincreasestheCompany'sfutureresourcesforfulfillingitsperformanceobligations.

③Thecostisexpectedtoberecovered.

IftheincrementalcostincurredbytheCompanytoobtainthecontractisexpectedtoberecovered,itshallberecognizedasanassetasthecontractacquisitioncost.

Theassetsrelatedtothecontractcostshallbeamortizedonthesamebasisastheincomefromgoodsorservicesrelatedtotheassets;however,iftheamortizationperiodofthecontractacquisitioncostislessthanoneyear,theCompanyshallincludeitinthecurrentprofitandlosswhenitoccurs.

Ifthebookvalueoftheassetsrelatedtothecontractcostishigherthanthedifferencebetweenthefollowingtwoitems,theCompanywillmakeprovisionforimpairmentfortheexcesspartandrecognizeitasthelossofassetimpairment,andfurtherconsiderwhethertheestimatedliabilitiesrelatedtothelosscontractshouldbemade:

①Theresidualconsiderationexpectedtobeobtainedduetothetransferofgoodsorservicesrelatedtotheasset;

②Theestimatedcosttobeincurredforthetransferoftherelevantgoodsorservices.

Iftheaboveprovisionforimpairmentofassetsissubsequentlyreversed,thebookvalueoftheassetafterreversalshallnotexceedthebookvalueoftheassetonthereversaldatewithoutprovisionforimpairment.

Thecontractperformancecostrecognizedasanassetwithanamortizationperiodofnomorethanoneyearoronenormalbusinesscycleatthetimeofinitialrecognitionshallbelistedinthe"inventory"item,andtheamortizationperiodofnomorethanoneyearoronenormalbusinesscycleatthetimeofinitialrecognitionshallbelistedinthe"othernoncurrent

assets"item.

Thecontractacquisitioncostrecognizedasanassetshallbelistedintheitemof"othercurrentassets"whentheamortizationperioddoesnotexceedoneyearoronenormalbusinesscycleatthetimeofinitialrecognition,andlistedintheitemof"othernoncurrentassets"whentheamortizationperiodexceedsoneyearoronenormalbusinesscycleatthetimeofinitialrecognition.

16.Long-termshareequityinvestment

TheGroup'slong-termequityinvestmentincludescontroloninvestedentitiesandsignificantimpactsonequityinvestment.InvestedentitiesonwhichtheGrouphassignificantimpactsareassociatesoftheGroup.

(1)Basisforrecognitionofcommoncontrolandmajorinfluenceoninvestedentities

Commoncontrolreferstothecommoncontrolofanarrangementinaccordancewiththerelevantagreement,andtherelevantactivitiesofthearrangementmustbeagreeduponbytheparticipantswhosharecontrol.Indeterminingwhetherthereiscommoncontrol,thefirststepistodeterminewhetheralloragroupofparticipantscollectivelycontrolthearrangement,whichisconsideredcollectivecontrolbyalloragroupofparticipantsifalloragroupofparticipantsmustacttogethertodeterminetheactivitiesassociatedwiththearrangement.Secondly,itisjudgedwhetherthedecisiononrelatedactivitiesofthearrangementmustbeagreedbytheparticipantswhocollectivelycontrolthearrangement.Ifthereisacombinationoftwoormorepartiesthatcancollectivelycontrolanarrangement,itdoesnotconstitutejointcontrol.Whenjudgingwhetherthereisjointcontrol,theprotectiverightsenjoyedarenotconsidered.

Majorinfluencereferstothepowertoparticipateindecision-makingoffinancialandoperationpoliciesofacompany,butcannotcontrolorjointlycontrolthemakingofthepolicies.WhenconsideringwhethertheCompanycanimposesignificantimpactsontheinvestedentity,impactsofconversionofshareswithvotingrightshelddirectlyorindirectlybytheinvestorandvotingrightsthatcanbeexecutedinthisperiodheldbytheinvestorandotherpartyintosharesoftheinvestedentityshouldbeconsidered.

IftheCompanydirectlyorthroughsubsidiariesholdsmorethan20%(inclusive)butlessthan50%oftheshareswithvotingrightsoftheinvestedentity,unlessthereisclearevidence

provingthattheCompanycannotparticipatethedecision-makingofproductionandoperationoftheinvestedentity,theCompanyhasmajorinfluenceontheinvestedentity.

(2)Recognitionofinitialinvestmentcosts

①Forlong-termequityinvestmentsformedthroughbusinesscombinations,theinvestmentcostisdeterminedinaccordancewiththefollowingprovisions:

A.Inthecaseofanenterprisemergerunderthesamecontrol,wherethemergingpartymakesavaluationofthemergerbypaymentofcash,transferofnon-cashassetsorundertakingliabilities,theshareofthebookvalueoftheowner'sinterestinthefinalcontrollingparty'sconsolidatedfinancialstatementsastheinitialinvestmentcostofthelong-termequityinvestmentatthedateofthemerger.Thedifferencebetweentheinitialinvestmentcostoflong-termequityinvestmentandthecashpaid,thetransferrednon-cashassetsandthebookvalueofthedebtassumedshallbeadjustedtothecapitalreserve;ifthecapitalreserveisinsufficienttooffset,theretainedearningsshallbeadjusted;

Long-termequityinvestmentgeneratedbyenterprisemerger:forlong-termequityinvestmentobtainedbymergerofenterprisesundercommoncontrol,theobtainedshareofbookvalueoftheinterestsofthemergedparty'sownerintheconsolidatefinancialstatementsonthemergerdateiscosts;forlong-termequityinvestmentobtainedbymergerofenterprisesnotundercommoncontrol,themergercostistheinvestmentcost.Adjustthecapitalreserveaccordingtothedifferencebetweentheinitialinvestmentcostoflong-termequityinvestmentandthetotalfacevalueoftheissuedshares.Ifthecapitalreserveisinsufficienttooffsetorreduce,theretainedincomeshallbeadjusted;

Formergerofentitiesunderdifferentcontrol,themergercostisthefairvalueoftheassetpaid,liabilityundertaken,andequitysecuritiesissuedforexchangingofcontrolpowerovertheentitiesatthedayofacquisition.Agencyexpensesandotheradministrativeexpensessuchasauditing,legalconsulting,orappraisalservicesoccurredrelatingtothemergerofentitiesareaccountedintocurrentincomeaccountwhenoccurred.

②Forlong-termequityinvestmentsacquiredthroughmeansotherthanbusinesscombinations,theinvestmentcostisdeterminedinaccordancewiththefollowingprovisions:

Forlong-termequityinvestmentobtainedbycash,theactuallypaidconsiderationistheinitialinvestmentcost.Initialinvestmentcostsincludeexpenses,taxesandothernecessary

expendituresdirectlyrelatedtotheacquisitionoflong-termequityinvestments;

B.Long-termequityinvestmentsacquiredfromtheissuanceofinterestsecuritiesaretheinitialinvestmentcostsbasedonthefairvalueoftheissueinterestsecurities;

C.Forlong-termequityinvestmentsobtainedthroughnon-monetaryassetexchanges,iftheexchangehascommercialsubstanceandthefairvalueoftheexchangedassetsorexchangedassetscanbereliablymeasured,thefairvalueoftheexchangedassetsandrelevanttaxesshallbeusedastheinitialInvestmentcost,thedifferencebetweenthefairvalueandbookvalueoftheswapped-outassetisincludedinthecurrentprofitandloss;ifthenon-monetaryassetexchangedoesnotmeettheabovetwoconditionsatthesametime,thebookvalueoftheswapped-outassetandrelevanttaxeswillbeusedastheinitialinvestmentcost.

D.Long-termequityinvestmentsacquiredthroughdebtrestructuringdeterminetheirrecordedvalueatthefairvalueofthewaivedclaimsandothercostssuchastaxesdirectlyattributabletotheassetsandaccountforthedifferencebetweenthefairvalueandthebookvalueofthewaivedclaims.

(3)Subsequentmeasurementandrecognitionofgain/loss

TheCompanyusesthecostmethodtomeasurelong-termshareequityinvestmentinwhichtheCompanycancontroltheinvestedentity;andusestheequitymethodtomeasurelong-termshareequityinvestmentinwhichtheCompanyhassubstantialinfluenceontheinvestedentity.

①Costmethod

Forthelong-termequityinvestmentmeasuredonthecostbasis,exceptfortheannouncedcashdividendorprofitincludedinthepracticalcostorpricewhentheinvestmentwasmade,thecashdividendsorprofitdistributedbytheinvestedentityarerecognizedasinvestmentgainsinthecurrentgain/lossaccount.

②Equitymethod

Gainsfromlong-termequityinvestmentmeasuredbyequity

Whentheequitymethodisusedtomeasurelong-termequityinvestment,theinvestmentcostwillnotbeadjustediftheinvestmentcostofthelong-termequityinvestmentislargerthantheshareoffairvalueoftherecognizableassetsoftheinvestedentity.Whenitissmaller

thantheshareoffairvalueoftherecognizableassetsoftheinvestedentity,thebookvaluewillbeadjustedandthedifferenceisincludedinthecurrentgainsoftheinvestment.Whentheequitymethodisused,thecurrentinvestmentgainistheshareofthenetgainrealizedinthecurrentyearthatcanbesharedorborne,recognizedasinvestmentgainandothermisc.income.Thebookvalueofthelong-termequityinvestmentisadjustedaccordingly.Thebookvalueofthelong-termequityinvestmentshouldbeaccordinglydecreasedbasedontheshareofprofitorcashdividendannouncedbytheinvestedentity;accordingtootherchangesintheowner'sequityexceptfornetprofitandloss,othermiscincomeandprofitdistributionoftheinvestedentity,adjustthebookvalueofthelong-termequityinvestmentandrecorditinthecapitalsurplus(othercapitalsurplus).Whentheshareofthenetgainsthatcanbeenjoyedisrecognized,itisrecognizedafterthenetprofitoftheinvestedentityisadjustedbasedonthefairvalueoftherecognizableassetsoftheinvestedentityaccordingtotheCompany'saccountingpoliciesandaccountingperiod.WheretheaccountingpolicyandaccountingperiodadoptedbytheInvestedunitareinconsistentwiththeCompany,thefinancialstatementsoftheInvestedunitshallbeadjustedinaccordancewiththeaccountingpolicyandaccountingperiodoftheCompany,andtheinvestmentincomeandotherconsolidatedincomeshallberecognized.InternaltransactiongainnotrealizedbetweentheCompanyandaffiliatesismeasuredaccordingtotheshareholdingproportionandtheinvestmentgainsisrecognizedafterdeduction.TheunrealizedinternaltransactionlossbetweentheCompanyandtheinvestedentityistheimpairmentlossoftransferredassetsandshouldnotbewrittenoff.Wheresubstantialinfluenceoninvestedentitiesisimposedorjointcontrolisimplementedduetoincreaseininvestment,thesumofthefairvalueoftheoriginalequityandincreasedinvestmentontheconversiondateistheinitialinvestmentcostundertheequitymethod.Iftheequityinvestmentoriginallyheldisclassifiedasotherequityinstrumentinvestment,thedifferencebetweenthefairvalueandthebookvalue,aswellastheaccumulatedgainsorlossesoriginallyincludedinothercomprehensiveincome,shallbetransferredoutofothercomprehensiveincomeandincludedinretainedincomeinthecurrentperiodwhentheequitymethodisadopted.

Wherejointcontrolorsubstantialinfluenceoninvestedentitiesislostduetodisposalofpartofinvestment,theremainingequityafterthedisposalshouldbetreatedaccordingtotheEnterpriseAccountingStandardNo.22–RecognitionandMeasurementofFinancial

Instrumentsfromthedateoflosingthejointcontrolorsubstantialinfluence.Thedifferencebetweenthefairvalueandbookvalueshouldbeaccountedtheprofitandlossofthecurrentperiod.Forothermisc.incomesoforiginalshareequityinvestmentdeterminedusingtheequitymethod,whentheequitymethodisnolongerused,itshouldbetreatedbasedonthesamebasisofthetreatmentofrelatedassetsorliabilityoftheinvestedentities;theotherowners'interestsrelatedtotheoriginalshareequityinvestmentshouldbetransferredtogain/lossofthecurrentperiod.

(4)EquityinvestmentheldforsaleFortheremainingequityinvestmentsnotclassifiedasassetsheldforsale,theequitymethodisadoptedforaccountingtreatment.Equityinvestmentsclassifiedasheldforsaletoassociatesthatarenolongereligibletoholdclassifiedassetsforsaleareretrospectivelyadjustedusingtheequitymethodstartingfromthedatethattheyareclassifiedasheldforsale.Theclassificationisadjustedtoholdthefinancialstatementsfortheperiodtobesold.

(5)ImpairmentexaminationandprovidingofimpairmentprovisionSeeNoteIII.22fortheassetsimpairmentprovisionmethodforinvestmentinsubsidiariesandjointventures.

17.Investmentrealestate

(1)ClassificationofinvestmentrealestateInvestmentrealestatesareheldforrentorcapitalappreciation,orboth.Theseinclude,interalia:

①Leasedlandusingright②therighttousethelandthatistransferredafterholdingandpreparingfortheincrement.③Leasedbuilding

(2)MeasurementofinvestmentrealestateForinvestmentrealestateswithanactiverealestatetransactionmarketandtheCompanycanobtainmarketpriceandotherinformationofsameorsimilarrealestatestoreasonablyestimatetheinvestmentrealestates'fairvalue,theCompanywillusethefairvaluemodeto

measuretheinvestmentrealestatessubsequently.Variationsinfairvalueareaccountedintothecurrentgain/lossaccount.Thefairvalueofinvestmentrealestateisdeterminedwithreferencetothecurrentmarketpricesofsameorsimilarrealestatesinactivemarkets;whennosuchpriceisavailable,withreferencetotherecenttransactionpricesandconsiderationoffactorsincludingtransactionbackground,dateanddistricttoreasonablyestimatethefairvalue;orbasedontheestimatedleasegainsandpresentvalueofrelatedcashflows.

Forinvestmentrealestateunderconstruction(includinginvestmentrealestateunderconstructionforthefirsttime),ifthefairvaluecannotbereliablydeterminedbuttheexpectedfairvalueoftherealestateaftercompletioniscontinuouslyandreliablyobtained,theinvestmentrealestateunderconstructionismeasuredbycost.Whenthefairvaluecanbemeasuredreliablyoraftercompletion(theearlierone),itismeasuredatfairvalue.Foraninvestmentrealestatewhosefairvalueisprovenunabletobeobtainedcontinuouslyandreliablybyobjectiveevidence,therealestatewillbemeasuredatcostbasisuntilitisdisposedandnoresidualvalueremainsasassumed.

18.Fixedassets

Fixedassetsisdefinedasthetangibleassetswhichareheldforthepurposeofproducinggoods,providingservices,leaseorforoperation&management,andhavemorethanoneaccountingyearofservicelife.

(1)Recognitionconditions

Fixedassetsarerecognizedattheactualcostofacquisitionwhenthefollowingconditionsaremet:(1)Theeconomicbenefitsassociatedwiththefixedassetsarelikelytoflowintotheenterprise.

Fixedassetsarerecognizedattheactualcostofacquisitionwhenthefollowingconditionsaremet:(1)Theeconomicbenefitsassociatedwiththefixedassetsarelikelytoflowintotheenterprise.

②Thecostofthefixedassetscanbemeasuredreliably.

Overhaulcostgeneratedbyregularexaminationonfixedassetsisrecognizedasfixedassetscostswhenthereisevidenceprovingthatitmeetsfixassetsrecognitionconditions.Ifnot,itwillbeaccountedintothecurrentgain/lossaccount.

(2)DepreciationoffixedassetsThetypesofinvestmentrealestate,estimatedeconomicusefullifeandestimatednetresidualvalueratearedeterminedasfollows:

Forfixedassetsforwhichdepreciationprovisionismade,thedepreciationratewillbedeterminedaftertheaccumulativedepreciationprovisionamountisdeducted.Atendofeachfiscalyear,verificationwillbemadeontheusefullife,predictedretainedvalue,anddepreciationbasis.Theusefullifewillbeadjustediftheusefullifeisdifferentfromthepredictedone;thenetresidualvaluewillbeadjustedifthenetresidualvalueisdifferentfromthepredictedone.

19.Constructioninprocess

(1)Constructioninprogressisaccountedforbyprojectclassification.

(2)Standardandtimingfortransferringconstructioninprocessintofixedassets

Thefullexpenditureincurredontheconstruction-in-progressprojectasafixedassetisrecordedasthevalueoftheassetbeforetheassetisconstructedtotheintendedusablestate.Thisincludesconstructioncosts,theoriginalcostofequipment,othernecessaryexpendituresincurredinordertoenabletheconstructionworkstoreachtheintendedusablestatusandtheborrowingcostsincurredforthespecificborrowingoftheprojectandthegeneralborrowingexpensesincurredbeforetheassetsreachtheintendedusablestatus.Constructioninprocesswillbetransferredtofixedassetswhenitreachesthepresetservicecondition.Thefixedassetsthathavereachedtheintendedusablestatebuthavenotbeencompletedshallbetransferredtothefixedassetsaccordingtotheestimatedvalueaccordingtotheestimatedvalueaccordingtotheestimatedvalueaccordingtotheprojectbudget,costoractualprojectcost,etc.ThedepreciationofthefixedassetsshallbeaccruedaccordingtotheCompany'sfixedassetsdepreciationpolicy.Theoriginalestimatedvalueshallbeadjustedaccordingto

theactualcostafterthecompletion.

20.Borrowingexpenses

(1)RecognitionprinciplesforcapitalizationofborrowingexpensesBorrowingexpensesoccurredtotheCompanythatcanbeaccountedaspurchasingorproductionofassetsatisfyingtheconditionsofcapitalizing,arecapitalizedandaccountedascostofrelatedasset.①Assetexpenditurehasoccurred;

②Borrowingcostshaveoccurred;

③Purchasingorproductionactivity,whichisnecessaryfortheassettoreachtheusefulstatus,hasalreadystarted.

Otherinterestonloans,discountsorpremiumsandexchangedifferencesareincludedintheincomeandlossincurredinthecurrentperiod.

Iftheconstructionorproductionofassetssatisfyingthecapitalizingconditionsissuspendedabnormallyforover3months,capitalizingofborrowingexpensesshallbesuspended.Duringthenormalsuspensionperiod,borrowingexpenseswillbecapitalizedcontinuously.

Whentheassetsatisfyingthecapitalizingconditionshasreacheditsusableorsellablestatus,capitalizingofborrowingexpensesshallbeterminated.

(2)Calculationofthecapitalizationamountofborrowingexpense

Interestexpensesgeneratedbyspecialborrowingslesstheinterestsincomeobtainedfromthedepositofunusedborrowingsorinvestmentgainsfromtemporaryinvestmentiscapitalized;thecapitalizationamountforgeneralborrowingisdeterminedbasedonthecapitalizationratewhichistheexceedingpartoftheaccumulativeassetsexpenseoverweightedaverageoftheassetsexpenseofthespecialborrowing/usedgeneralborrowing.

Iftheassetsthatareconstructedorproducedundertheconditionofcapitalizationoccupythegeneralborrowing,theinterestamounttobecapitalizedinthegeneralborrowingshallbecalculatedanddeterminedbymultiplyingthecapitalrateofthegeneralborrowingbytheweightedaverageoftheassetexpenditureoftheaccumulatedassetswhoseexpenditureexceedsthatofthespecializedborrowing.Thecapitalizationratioistheweightedaverage

interestrateofgeneralborrowings.

21.Intangibleassets

(1)PricingofintangibleassetsRecordedattheactualcostofacquisition.

(2)Amortizationofintangibleassets

①Usefullifeofintangibleassetswithlimitedusefullife

Attheendofeachyear,theCompanywillreexaminetheusefullifeandamortizationbasisofintangibleassetswithlimitedusefullife.Uponreview,theservicelifeandamortizationmethodsofintangibleassetsattheendoftheperiodarenotdifferentfromthosepreviouslyestimated.

(2)Intangibleassetswhichcannotbeforeseeabletobringeconomicbenefitstoenterprisesshallberegardedasintangibleassetswhoseusefullifeisuncertain.Forintangibleassetswithuncertainservicelife,theCompanyreviewstheservicelifeofintangibleassetswithuncertainservicelifeattheendofeachyear.Ifitisstilluncertainafterrechecking,itshallconductanimpairmenttestonthebalancesheetdate.

③Amortizationofintangibleassets

Forintangibleassetswithfiniteusefullives,theCompanydeterminestheirusefullifeuponacquisitionandsystematicallyamortizesthemusingthestraight-linemethodovertheirusefullife.Theamortizationamountisincludedinthecurrentprofitorlossofthebenefitingprojectoraddedtothecostoftherelatedasset.Thespecificamortizationamountistheamountafterthecostisdeductedfromtheestimatedresidualvalue.Forfixedassetsforwhichdepreciationprovisionismade,thedepreciationratewillbedeterminedaftertheaccumulativedepreciationprovisionamountisdeducted.Theresidualvalueofanintangibleassetwithlimitedusefullifeistreatedaszero,exceptwhereathirdpartyundertakesto

purchasetheintangibleassetattheendofitsusefullifeortoobtainexpectedresidualvalueinformationbasedontheactivemarket,whichislikelytoexistattheendofitsusefullife.Intangibleassetswithuncertainservicelifewillnotbeamortized.Attheendofeachyear,theusefullifeofintangibleassetswithuncertainusefullifeisreviewed,andifthereisevidencethattheusefullifeofintangibleassetsislimited,theusefullifeisestimatedandthesystemisreasonablyamortizedwithintheexpectedusefullife.SpecificstandardfordistinguishbetweenresearchanddevelopmentstageThecompanytakestheinformationandrelatedpreparatoryactivitiesforfurtherdevelopmentactivitiesastheresearchstage,andtheintangibleassetsexpenditureintheresearchstageisincludedinthecurrentprofitandlossperiod.

(2)Thedevelopmentactivitiescarriedoutafterthecompanyhascompletedtheresearchstageasthedevelopmentstage.

(4)Specificconditionsforcapitalizationofexpendituresinthedevelopmentphase

Expendituresinthedevelopmentphasecanberecognizedasintangibleassetsonlywhenthefollowingconditionsaremet:

A.Itistechnicallyfeasibletocompletetheintangibleassetsothatitcanbeusedorsold;

B.Havetheintentiontocompletetheintangibleassetanduseorsellit;

C.Thewayintangibleassetsgenerateeconomicbenefits,includingtheabilitytoprovethattheproductsproducedbytheintangibleassetsexistinthemarketortheintangibleassetsthemselvesexistinthemarket,andtheintangibleassetswillbeusedinternally,whichcanprovetheirusefulness;

D.Havesufficienttechnical,financialandotherresourcesupporttocompletethedevelopmentoftheintangibleasset,andhavetheabilitytouseorselltheintangibleasset;

E.Theexpenditureattributabletothedevelopmentstageoftheintangibleassetcanbereliablymeasured.

22.Assetsimpairment

TheGroupusesthecostmodetocontinuemeasuringtheassetsimpairmenttoinvestmentrealestate,fixedassetsconstructioninprogress,intangibleassetsandgoodwill(exceptfortheinventories,investmentrealestatemeasuredbythefairvaluemode,deferred

incometaxassetsandfinancialassets).Themethodisdeterminedasfollows:

TheCompanyjudgeswhetherthereisasignofimpairmenttoassetsonthebalancesheetday.Ifsuchsignexists,theCompanyestimatestherecoverableamountandconductstheimpairmenttest.Impairmenttestisconductedannuallyforgoodwillgeneratedbymergersandintangibleassetsthathavenotreachedtheusefulconditionnomatterwhethertheimpairmentsignexists.

Therecoverableamountisdeterminedbythehigherofthenetoffairvalueminusdisposalexpenseandthepresentvalueofthepredictedfuturecashflow.TheCompanyestimatestherecoverableamountontheindividualassetitembasis;whetheritishardtoestimatetherecoverableamountontheindividualassetitembasis,determinetherecoverableamountbasedontheassetgroupthattheassetsbelongto.TheassetsgroupisdeterminedbywhetherthemaincashflowgeneratedbytheGroupisindependentfromthosegeneratedbyotherassetsorassetsgroups.

Whentherecoverableamountoftheassetsorassetsgroupislowerthanitsbookvalue,theCompanywritesdownthebookvaluetotherecoverableamount,thewrite-downamountisaccountedintothecurrentincomeaccountandtheassetsimpairmentprovisionismade.

Forgoodwillimpairmenttest,thebookvalueofgoodwillgeneratedbymergersisamortizedthroughreasonablemeasuressincethepurchasedaytorelatedassetgroups;thosecannotbeamortizedtorelatedassetsgroupsareamortizedtorelatedcombinationofassetgroups.TherelatedassetgroupsorcombinationofassetgroupsrefertothosethatcanbenefitfromthesynergisticeffectofmergersandmustnotexceedtothereportingrangedeterminedbytheCompany.

Whentheimpairmenttestisconducted,ifthereissignofimpairmenttotheassetgrouporcombinationofassetgroupsrelatedtogoodwill,firstperformimpairtestforassetgrouporcombinationofassetgroupswithoutgoodwillandcalculatetherecoverableamountandrecognizetherelatedimpairmentloss.Thenconductimpairmenttestonthosewithgoodwill,comparethebookvaluewithrecoverableamount.Iftherecoverableamountislowerthanthebookvalue,recognizetheimpairmentlossofthegoodwill.

Oncerecognized,theassetimpairmentlosscannotbewrittenbackinsubsequentaccountingperiod.

23.Long-termamortizableexpenses

Thelong-termdeferredexpensesshallbeusedtocalculatetheexpensesthathaveoccurredbutshouldbebornebytheCompanyinthecurrentandsubsequentperiodswithaamortizationperiodofmorethanoneyear.TheCompany'slong-termdeferredexpensesareamortizedaveragelyduringthebenefitperiod.

24.Staffremuneration

Staffremunerationisthecompensationpaidbytheemployertothestafffortheservicestheyprovideorforterminationoftheworkingrelationship.Staffremunerationincludesshort-termremunerationandpost-employmentwelfare.ThebenefitsprovidedbytheCompanytothespouses,children,dependants,survivorsandotherbeneficiariesofthestaffarealsotheremunerationofthestaff.

Accordingtoliquidity,employeecompensationislistedinthe"employeecompensationpayable"and"long-termemployeecompensationpayable"itemsofthebalancesheetrespectively.

(1)Accountingofoperationalleasing

①Basicsalaryofemployees(salary,bonus,allowance,subsidy)

Intheaccountingperiodforwhichthestaffandworkersprovideservices,theCompanyshallconfirmtheactualshort-termremunerationasliabilitiesandshallaccountforthecurrentincomeandloss,exceptasrequiredorpermittedbyotheraccountingstandards.

②Employeewelfare

TheemployeebenefitsincurredbytheCompanyshallbeincludedinthecurrentprofitandlossorrelatedassetcostsaccordingtotheactualamountincurred.Wheretheemployee'sbenefitisnon-monetary,itshallbemeasuredonthebasisoffairvalue.

③Socialinsurancepremiumsandhousingaccumulationfundssuchashealthinsurancepremiums,workinjurypremiums,birthinsurancepremiums,tradeunionfundsandstaffandeducationfunds

TheCompanypaysthemedicalinsurancepremiums,workinjuryinsurancepremiums,birthinsurancepremiums,etc.socialinsurancepremiumsandhousingaccumulationfundsforthestaffandworkers,aswellastheunionfundsandthestaffandworkerseducationfundsaccordingtotheregulations,intheaccountingperiodforwhichthestaffandworkersprovide

services,thecorrespondingsalaryamountofthestaffandworkers,andconfirmsthecorrespondingliabilities,whichareincludedinthecurrentprofitandlossorrelatedassetcosts.

④Short-termpaidleaveTheCompanyaccumulatesthesalaryoftheemployeeswhoareabsentfromworkwithpaywhentheemployeesprovideservice,thusincreasingtheirfuturerightofabsencewithpay.TheCompanyconfirmsthesalaryoftheemployeerelatedtotheabsenceofnon-cumulativesalaryduringtheactualabsenceaccountingperiod.⑤Short-termprofitshareprogramIftheprofit-sharingplanmeetsthefollowingconditionsatthesametime,theCompanyshallconfirmthesalarypayabletothestaffandworkers:

A.Thelegalorpresumptiveobligationoftheenterprisetopaytheremunerationofitsemployeesasaresultofpastmatters;B.Theamountofemployeecompensationobligationsduetotheprofitsharingplancanbereliablyestimated.

(2)Accountingofpost-employmentwelfare

TheCompany'spost-employmentbenefitplanisdefinedcontributionplan.Definedcontributionplansincludebasicendowmentinsurance,unemploymentinsurance,etc.Duringtheaccountingperiodwhenemployeesprovideservicesforthem,theCompanyshallrecognizethedepositamountcalculatedaccordingtothedefineddepositplanasliabilitiesandincludeitinthecurrentprofitsandlossesorrelatedassetcosts.

(3)Accountingofdismisswelfare

IftheCompanyprovidesterminationbenefitstoemployees,theemployeecompensationliabilitiesarisingfromtheterminationbenefitsshallberecognizedattheearliestofthefollowingtwoandshallbeincludedinthecurrentprofitandloss:

(1)Anenterprisemaynotunilaterallywithdrawtheresignationbenefitsprovidedforbythedismissalplanorreductionproposal;

(2)Whentheenterpriserecognizesthecostsorexpensesrelatedtothereorganizationinvolvingthepaymentofresignationbenefits.

25.Anticipatedliabilities

(1)RecognitionstandardsofanticipatedliabilitiesWhenresponsibilitiesoccurredinconnectiontocontingentissues,andallofthefollowingconditionsaresatisfied,theyarerecognizedasexpectableliabilityinthebalancesheet:

①ThisresponsibilityisacurrentresponsibilityundertakenbytheCompany;②ExecutionofthisresponsibilitymaycausefinancialbenefitoutflowfromtheCompany;

③Amountoftheliabilitycanbereliablymeasured.

(2)MeasurementofanticipatedliabilitiesExpectedliabilitiesareinitiallymeasuredatthebestestimationontheexpensestoexercisethecurrentresponsibility,andwithconsiderationstotherelativerisks,uncertainty,andperiodicvalueofcurrency.Oneachbalancesheetdate,reviewthebookvalueoftheestimatedliabilities.Wherethereisconclusiveevidencethatthebookvaluedoesnotreflectthecurrentbestestimate,thebookvalueisadjustedtothecurrentbestestimate.

26.Revenuetheprincipleofrevenuerecognitionandmeasurementmethods

(1)GeneralprinciplesIncomeisthetotalinflowofeconomicbenefitsformedinthedailyactivitiesoftheCompany,whichwillleadtotheincreaseofshareholders'equityandhasnothingtodowiththecapitalinvestedbyshareholders.TheCompanyhasfulfilledtheperformanceobligationinthecontract,thatis,therevenueisrecognizedwhenthecustomerobtainsthecontrolrightofrelevantgoods.Toobtainthecontrolrightoftherelevantcommoditymeanstobeabletodominatetheuseofthecommodityandobtainalmostalltheeconomicbenefitsfromit.

Iftherearetwoormoreperformanceobligationsinthecontract,theCompanywillallocatethetransactionpricetoeachsingleperformanceobligationaccordingtotherelativeproportionoftheseparatesellingpriceofthegoodsorservicespromisedbyeachsingleperformanceobligationonthestartdateofthecontract,andmeasuretheincomeaccordingtothetransactionpriceallocatedtoeachsingleperformanceobligation.

ThetransactionpricereferstotheamountofconsiderationthattheCompanyisexpectedtobeentitledtoreceiveduetothetransferofgoodsorservicestocustomers,excludingtheamountcollectedonbehalfofathirdparty.Whendeterminingthecontracttransactionprice,ifthereisavariableconsideration,theCompanyshalldeterminethebestestimateofthevariableconsiderationaccordingtotheexpectedvalueorthemostlikelyamount,andincludeitinthetransactionpricewiththeamountnotexceedingtheaccumulatedrecognizedincomewhentherelevantuncertaintyiseliminated,whichismostlikelynottohaveasignificantreversal.Ifthereisasignificantfinancingcomponentinthecontract,theCompanywilldeterminethetransactionpriceaccordingtotheamountpayableincashwhenthecustomerobtainsthecontrolrightofthecommodity.Thedifferencebetweenthetransactionpriceandthecontractconsiderationwillbeamortizedbytheeffectiveinterestmethodduringthecontractperiod.Iftheintervalbetweenthecontrolrighttransferandthecustomer'spaymentislessthanoneyear,theCompanywillnotconsiderthefinancingcomponentPoints.Ifoneofthefollowingconditionsismet,theperformanceobligationshallbeperformedwithinacertainperiodoftime;otherwise,theperformanceobligationshallbeperformedatacertainpointoftime:

①WhenthecustomerperformsthecontractintheCompany,heobtainsandconsumestheeconomicbenefitsbroughtbytheCompany'sperformance;

②Customerscancontrolthegoodsunderconstructionduringtheperformanceofthecontract;

③ThegoodsproducedbytheCompanyintheprocessofperformancehaveirreplaceableuses,andtheCompanyhastherighttocollectmoneyfortheperformancepartthathasbeencompletedsofarduringthewholecontractperiod.

Fortheperformanceobligationsperformedwithinacertainperiodoftime,theCompanyshallrecognizetherevenueaccordingtotheperformanceprogresswithinthatperiod,exceptthattheperformanceprogresscannotbereasonablydetermined.TheCompanydeterminestheprogressofperformancefortheprovisionofservicesonthebasisoftheinput(oroutput)method.Whentheprogressofperformancecannotbereasonablydetermined,ifthecostincurredbytheCompanyisexpectedtobecompensated,therevenueshallberecognizedaccordingtotheamountofcostincurreduntiltheprogressofperformancecanbereasonablydetermined.

Fortheperformanceobligationperformedatacertaintimepoint,theCompanyrecognizestherevenueatthetimepointwhenthecustomerobtainsthecontrolrightofrelevantgoods.Indeterminingwhetheracustomerhasacquiredcontrolofgoodsorservices,theCompanywillconsiderthefollowingsigns:

①TheCompanyhastherighttoreceivepaymentforthegoodsorservices,thatis,thecustomerhastheobligationtopayforthegoods;

②TheCompanyhastransferredthelegalownershipofthegoodstothecustomer,thatis,thecustomerhasthelegalownershipofthegoods;

③TheCompanyhastransferredthegoodsinkindtothecustomer,thatis,thecustomerhaspossessedthegoodsinkind;

④TheCompanyhastransferredthemainrisksandrewardsoftheownershipofthegoodstothecustomer,thatis,thecustomerhasobtainedthemainrisksandrewardsoftheownershipofthegoods;

⑤Theproducthasbeenacceptedbythecustomer.

Salesreturnclause

Forthesaleswithsalesreturnclauses,whenthecustomerobtainsthecontrolrightoftherelevantgoods,theCompanyshallrecognizetherevenueaccordingtotheamountofconsiderationitisentitledtoobtainduetothetransferofthegoodstothecustomer,andrecognizetheamountexpectedtobereturnedduetothesalesreturnastheestimatedliability;atthesametime,theCompanyshalldeducttheestimatedcostofrecoveringthegoodsaccordingtothebookvalueoftheexpectedreturnedgoodsatthetimeoftransfer(Thebalanceafterdeductingthevalueofthereturnedgoodsisrecognizedasanasset,thatis,thecostofreturnreceivable,whichiscarriedforwardbydeductingthenetcostoftheaboveassetsaccordingtothebookvalueofthetransferredgoodsatthetimeoftransfer.Oneachbalancesheetdate,theCompanyreestimatesthereturnoffuturesalesandremeasurestheaboveassetsandliabilities.

Warrantyobligations

Accordingtothecontractandlegalprovisions,theCompanyprovidesqualityassuranceforthegoodssoldandtheprojectsconstructed.Fortheguaranteequalityassurancetoensure

thatthegoodssoldmeettheestablishedstandards,theCompanyconductsaccountingtreatmentinaccordancewiththeaccountingstandardsforBusinessEnterprisesNo.13-contingencies.Fortheservicequalityassurancewhichprovidesaseparateserviceinadditiontoguaranteeingthatthegoodssoldmeettheestablishedstandards,theCompanytakesitasasingleperformanceobligation,allocatespartofthetransactionpricetotheservicequalityassuranceaccordingtotherelativeproportionoftheseparatesellingpriceofthegoodsandservicequalityassurance,andrecognizestherevenuewhenthecustomerobtainstheservicecontrolright.Whenevaluatingwhetherthequalityassuranceprovidesaseparateserviceinadditiontoassuringcustomersthatthegoodssoldmeettheestablishedstandards,theCompanyconsiderswhetherthequalityassuranceisastatutoryrequirement,thequalityassuranceperiod,andthenatureoftheCompany'scommitmenttoperformthetask.

CustomerconsiderationpayableIfthereisconsiderationpayabletothecustomerinthecontract,unlesstheconsiderationistoobtainotherclearlydistinguishablegoodsorservicesfromthecustomer,theCompanywilloffsetthetransactionpricewiththeconsiderationpayable,andoffsetthecurrentincomeatthelatertimeofconfirmingtherelevantincomeorpaying(orpromisingtopay)thecustomer'sconsideration.

ContractualrightsnotexercisedbycustomersIftheCompanyadvancessalesofgoodsorservicestocustomers,theamountshallberecognizedasliabilitiesfirst,andthenconvertedintoincomewhenrelevantperformanceobligationsarefulfilled.WhentheCompanydoesnotneedtoreturntheadvancepaymentandthecustomermaygiveupallorpartofthecontractrights,iftheCompanyexpectstohavetherighttoobtaintheamountrelatedtothecontractrightsgivenupbythecustomer,theaboveamountshallberecognizedasincomeinproportionaccordingtothemodeofthecustomerexercisingthecontractrights;otherwise,theCompanyonlyhastheverylowpossibilityofthecustomerrequiringtoperformtheremainingperformanceobligationsTherelevantbalanceoftheaboveliabilitiesisconvertedintoincome.ContractchangeWhentheconstructioncontractbetweentheCompanyandthecustomerischanged:

①Ifthecontractchangeincreasestheclearlydistinguishableconstructionserviceandcontractprice,andthenewcontractpricereflectstheseparatepriceofthenewconstruction

service,theCompanywilltreatthecontractchangeasaseparatecontractforaccounting;

②Ifthecontractchangedoesnotbelongtotheabove-mentionedsituation(1),andthereisacleardistinctionbetweenthetransferredconstructionserviceandthenontransferredconstructionserviceonthedateofcontractchange,theCompanywillregarditastheterminationoftheoriginalcontract,andatthesametime,combinethenonperformancepartoftheoriginalcontractandthecontractchangepartintoanewcontractforaccountingtreatment;

③Ifthecontractchangedoesnotbelongtotheabovesituation(1),andthereisnocleardistinctionbetweenthetransferredconstructionservicesandthenontransferredconstructionservicesonthedateofcontractchange,theCompanywilltakethecontractchangepartasanintegralpartoftheoriginalcontractforaccountingtreatment,andtheresultingimpactontherecognizedincomewillbeadjustedtothecurrentincomeonthedateofcontractchange.

(2)Specificmethods

ThespecificmethodsofrevenuerecognitionoftheCompanyareasfollows:

①Commoditysalescontract

Thecommoditysalescontractbetweenthecompanyandthecustomerincludestheperformanceobligationoftransferringcurtainwallmaterials,screendoormaterials,electricenergy,etc.,whichbelongstotheperformanceobligationatacertaintimepoint.

Revenuefromdomesticsalesofproductsisrecognizedatthetimewhenthecustomerobtainstherightofcontrolofthegoodsonthebasisofcomprehensiveconsiderationofthefollowingfactors:theCompanyhasdeliveredtheproductstothecustomeraccordingtothecontract,thecustomerhasacceptedthegoods,thepaymentforgoodshasbeenrecoveredorthereceipthasbeenobtained,andtherelevanteconomicbenefitsarelikelytoflowin,themainrisksandrewardsoftheownershipofthegoodshavebeentransferred,thelegalownershiphasbeentransferred;

Thefollowingconditionsshouldbemetfortherecognitionofexportproductrevenue:

theCompanyhasdeclaredtheproductaccordingtothecontract,obtainedthebilloflading,collectedthepaymentforgoodsorobtainedthereceiptcertificate,andtherelevanteconomicbenefitsarelikelytoflowin,themainrisksandrewardsoftheownershipofgoodshavebeentransferred,andthelegalownershipofgoodshasbeentransferred.

②ServicecontractTheservicecontractbetweentheCompanyanditscustomersincludestheperformanceobligationsofmetroplatformscreendooroperationmaintenance,curtainwallmaintenanceandpropertyservices.AstheCompany'sperformanceatthesametime,thecustomersobtainandconsumetheeconomicbenefitsbroughtbytheCompany'sperformance,theCompanytakesitastheperformanceobligationwithinacertainperiodoftimeandallocatesitequallyduringtheserviceprovisionperiod.

③EngineeringcontractTheprojectcontractbetweentheCompanyandthecustomerincludestheperformanceobligationsofcurtainwallprojectandmetroplatformscreendoorprojectconstruction.AsthecustomercancontrolthegoodsunderconstructionintheprocessoftheCompany'sperformance,theCompanytakesthemastheperformanceobligationswithinacertainperiodoftime,andrecognizestheincomeaccordingtotheperformanceprogress,exceptthattheperformanceprogresscannotbereasonablydetermined.TheCompanydeterminestheperformancescheduleofprovidingconstructionservicesaccordingtotheinputmethod.Theperformancescheduleshallbedeterminedaccordingtotheproportionoftheactualcontractcosttotheestimatedtotalcontractcost.

④RealestatesalescontractTheincomeoftheCompany'srealestatedevelopmentbusinessisrecognizedwhenthecontrolofthepropertyistransferredtothecustomer.TheincomeisrecognizedwhenthecustomerobtainsthephysicalownershiporlegalownershipofthecompletedpropertyandtheCompanyhasobtainedthecurrentrightofcollectionandislikelytorecovertheconsideration.Whenconfirmingthecontracttransactionprice,ifthefinancingcomponentissignificant,theCompanywilladjustthecontractcommitmentconsiderationaccordingtothefinancingcomponentofthecontract.

27.Governmentsubsidy

(1)GovernmentsubsidyGovernmentsubsidiesarerecognizedwhenthefollowingconditionsaremet:

①Requirementsattachedtogovernmentsubsidies;

②Thecompanycanreceivegovernmentsubsidies.

(2)GovernmentsubsidyWhenagovernmentsubsidyismonetarycapital,itismeasuredatthereceivedorreceivableamount.Nonemonetarycapitalaremeasuredatfairvalue;ifnoreliablefairvalueavailable,recognizedatRMB1.

(3)Recognitionofgovernmentsubsidies①Assets-relatedGovernmentsubsidiesrelatedtoassetsareobtainedbytheCompanytopurchase,buildorformulateinothermannerslong-termassets;orsubsidiesrelatedtobenefits.Iftheasset-relatedgovernmentsubsidyisrecognizedasdeferredgain,shouldberecordedingainandlossintheservicelife.Governmentsubsidymeasuredatthenominalamountisaccountedintocurrentincomeaccount.Iftherelevantassetsaresold,transferred,scrappedordamagedbeforetheendoftheirusefullife,theunallocatedrelevantdeferredincomebalanceshallbetransferredtotheprofitandlossofthecurrentperiodofdispositionoftheassets.

②Gain-relatedgovernmentsubsidyshouldbeaccountedasfollows:

TheCompanydividesgovernmentsubsidiesintoassets-relatedandearnings-relatedgovernmentsubsidies.Gain-relatedgovernmentsubsidyshouldbeaccountedasfollows:

Subsidythatwillbeusedtocompensaterelatedfuturecostsorlossesshouldberecognizedasdeferredgainandrecordedinthegainandlossofthecurrentreportandoffsetrelatedcost;

Subsidythatisusedtocompensateexistingcostorlossshouldberecordedinthegainandlossofthecurrentperiodoroffsetrelatedcost.

Forgovernmentsubsidiesthatincludebothasset-relatedandincome-relatedparts,separatedifferentpartsforaccountingtreatment;Itisdifficulttodistinguishbetweentheoverallclassificationofgovernmentsubsidiesrelatedtobenefits.

Governmentsubsidyrelatedtoroutineoperationsshouldberecordedinothergainsoroffsetrelatedcost.Governmentsubsidynotrelatedtoroutineoperationsshouldberecordedinnon-operatingincomeorexpense.

③Policypreferentialloandiscount

Thepolicy-basedpreferentialloanobtainedhasinterestsubsidy.Ifthegovernmentallocatestheinterest-subsidyfundstothelendingbank,theloanamountactuallyreceivedwillbeusedastheentryvalueoftheloan,andtheborrowingcostwillbecalculatedbasedontheloanprincipalandpolicy-basedpreferentialinterestrate.Ifthegovernmentallocatestheinterest-bearingfundsdirectlytotheGroup,discountinterestwilloffsettheborrowingcosts.④GovernmentsubsidyrefundWhenaconfirmedgovernmentsubsidyneedstobereturned,thebookvalueoftheassetisadjustedagainstthebookvalueoftherelevantassetatinitialrecognition.Ifthereisarelateddeferredincomebalance,thebookbalanceoftherelateddeferredincomeiswrittenoffandtheexcessiscreditedtothecurrentprofitorloss;Inothercases,itisdirectlyincludedinthecurrentprofitandloss.

28.Differedincometaxassetsanddifferedincometaxliabilities

TheCompanyusesthetemporarydifferencebetweenthebookvalueoftheassetsandliabilitiesonthebalancesheetdayandthetaxbaseandtheliabilitiesmethodtorecognizethedeferredincometax.26.Deferredincometaxassetsanddeferredincometaxliabilities

(1)Deferredincometaxassets

Fordeductibletemporarydiscrepancies,deductiblelossesandtaxoffsetsthatcanbecarriedforwardforfutureyears,theimpactonincometaxiscalculatedattheestimatedincometaxrateforthetransfer-backperiodandtheimpactisrecognizedasdeferredincometaxassets,providedthattheCompanyislikelytoobtainfuturetaxableincomefordeductibletemporarydiscrepancies,deductiblelossesandtaxoffsets.

Atthesametime,theimpactonincometaxofdeductibletemporarydiscrepanciesresultingfromtheinitialrecognitionofassetsorliabilitiesintransactionsormatterswiththefollowingcharacteristicsisinconclusiveasdeferredincometaxassets:

A.Thetransactionisnotabusinesscombination;

B.thetransactionisnotamergerandthetransactiondoesnotaffecttheaccountingprofitortaxableproceeds;

However,forindividualtransactionsthatsimultaneouslymeettheabovetwoconditions

andresultinequaltaxabletemporarydifferencesanddeductibletemporarydifferencesuponinitialrecognitionofassetsandliabilities,theexemptionfrominitialrecognitionofdeferredtaxliabilitiesanddeferredtaxassetsdoesnotapply.Fortaxabletemporarydifferencesanddeductibletemporarydifferencesarisingfromtheinitialrecognitionofassetsandliabilitiesinsuchtransactions,theCompanyrecognizesthecorrespondingdeferredtaxliabilitiesanddeferredtaxassetsatthetimeofthetransaction.

Intheeventoftemporarydiscrepancyofdeductibleinvestmentrelatedtosubsidiaries,jointventuresandjointventures,andmeetingthefollowingtwoconditions,theamountofimpact(talent)onincometaxshallbedeemedasdeferredincometaxassets:

A.Temporarydiscrepanciesarelikelytobereversedintheforeseeablefuture;

B.Inthefuture,itislikelytoobtaintaxableincomethatcanbeusedtooffsetthedeductibletemporarydifferences;

Onthebalancesheetdate,ifthereisconclusiveevidencethatsufficienttaxableincomeislikelytobeobtainedinthefuturetooffsetthedeductibletemporarydifferences,thedeferredincometaxassetsthathavenotbeenrecognizedinthepreviousperiodarerecognized.

Onthebalancesheetday,theCompanyre-examinesthebookvalueofthedeferredincometaxassets.Ifitisunlikelytohaveadequatetaxableproceedstoreducethebenefitsofthedeferredincometaxassets,lessthedeferredincometaxassets'bookvalue.Whenthereisadequatetaxableproceeds,thelessenedamountwillbereversed.

(2)Deferredincometaxassets

AllprovisionaldifferencesintaxableincomeoftheCompanyshallbemeasuredonthebasisoftheestimatedincometaxratefortheperiodoftransfer-backandshallberecognizedasdeferredincometaxliabilities,exceptthat:

Atthesametime,theimpactonincometaxofdeductibletemporarydiscrepanciesresultingtheinitialrecognitionofassetsorliabilitiesintransactionsormatterswiththefollowingcharacteristicsisinconclusiveasdeferredincometaxLiabilities:

A.Initialrecognitionofgoodwill;

B.Initialrecognitionofgoodwill,orofassetsorliabilitiesgeneratedintransactionswiththefollowingfeatures:thetransactionisnotamergerandthetransactiondoesnotaffectthe

accountingprofitortaxableproceeds;

②Intheeventoftemporarydiscrepancyofdeductibleinvestmentrelatedtosubsidiaries,Jointventurejointventures,andmeetingthetwoconditions,theamountofimpact(talent)onincometaxshallbedeemedasdeferredincometaxassets:

A.TheCompanyisabletocontrolthetimeoftemporarydiscrepancytransfers;

BTemporarydiscrepanciesarelikelytobereversedintheforeseeablefuture;

(3)Deferredincometaxassets

(1)Deferredincometaxliabilitiesorassetsassociatedwithenterpriseconsolidation

Temporarydifferenceoftaxabletaxordeductibletemporarydifferencegeneratedbyenterprisemergerundernon-samecontrol.Whendeferredincometaxliabilityordeferredincometaxassetisrecognized,relateddeferredincometaxexpense(orincome)isusuallyadjustedasrecognizedgoodwillinenterprisemerger.

②Amountofsharespaidandaccountedasowners'equity

Exceptfortheadjustmentgoodwillgeneratedbymergersordeferredincometaxrelatedtotransactionsoreventsdirectlyaccountedintotheowners'equity,incometaxisaccountedasincometaxexpenseintothecurrentgain/lossaccount.Theeffectsoftemporarydiscrepancyonincometaxincludethefollowing:Otherintegratedbenefitssuchasfairvaluechangeoffinancialassetsavailableforsale,retroactiveadjustmentofaccountingpolicychangesorretroactiverestatementofaccountingerrorcorrectiondiscrepancytoadjusttheinitialretainedincome,andmixedfinancialinstrumentsincludingliabilitiesandequity.

(3)Compensationforlossesandtaxdeductions

A.CompensablelossesandtaxdeductionsfromtheCompany'sownoperations

Deductiblelossesrefertothelossescalculatedanddeterminedinaccordancewiththeprovisionsofthetaxlawthatareallowedtobemadeupwiththetaxableincomeofsubsequentyears.Theuncoveredlosses(deductiblelosses)andtaxdeductionsthatcanbecarriedforwardinaccordancewiththetaxlawaretreatedasdeductibletemporarydifferences.Whenitisexpectedthatsufficienttaxableincomeislikelytobeobtainedinthefutureperiodwhenitisexpectedtobeavailabletomakeupforlossesortaxdeductions,thecorrespondingdeferredincometaxassetsarerecognizedwithinthelimitofthetaxableincomethatislikely

tobeobtained,whilereducingthecurrentperiodIncometaxexpenseintheincomestatement.B.CompensableuncoveredlossesofthemergedcompanyduetobusinessmergerInabusinesscombination,iftheCompanyobtainsthedeductibletemporarydifferenceofthepurchasedpartyanddoesnotmeetthedeferredincometaxassetrecognitionconditionsonthepurchasedate,itshallnotberecognized.Within12monthsafterthepurchasedate,ifneworfurtherinformationisobtainedindicatingthattherelevantconditionsonthepurchasedatealreadyexist,andtheeconomicbenefitsbroughtaboutbythetemporarydifferenceareexpectedtobedeductedonthepurchasedate,confirmtherelevantdelivery.Deferredincometaxassets,whilereducinggoodwill,ifthegoodwillisnotenoughtooffset,thedifferenceisrecognizedasthecurrentprofitandloss;exceptfortheabovecircumstances,thedeferredtaxassetsrelatedtothebusinesscombinationarerecognizedandincludedinthecurrentprofitandloss.④TemporarydifferencecausedbymergeroffsetIfthereisatemporarydifferencebetweenthebookvalueofassetsandliabilitiesintheconsolidatedbalancesheetandthetaxablebasisofthetaxpayerduetotheoffsetoftheunrealizedinternalsalesgainorloss,thedeferredincometaxassetorthedeferredincometaxliabilityisconfirmedintheconsolidatedbalancesheet,andtheincometaxexpenseintheconsolidatedprofitstatementisadjusted,withtheexceptionofthedeferredincometaxrelatedtothetransactionoreventdirectlyincludedintheowner'sequityandthemergeroftheenterprise.

⑤SharepaymentsettledbyequityIfthetaxlawprovidesforallowableper-taxdeductionofexpensesrelatedtosharepayment,withintheperiodforwhichthecostandexpensearerecognizedinaccordancewiththeaccountingstandards,theCompanyshallcalculatethetaxbasisandtemporarydiscrepancybasedontheestimatedper-taxdeductionamountattheendoftheaccountingperiodandconfirmtherelevantdeferredincometaxifitmeetstheconditionsforconfirmation.Ofthese,theamountthatcanbedeductedbeforetaxinthefutureexceedsthecostrelatedtosharepaymentrecognizedinaccordancewiththeaccountingstandards,andtheexcessincometaxshallbedirectlyincludedintheowner'sequity.

⑥Dividendsrelatedtofinancialinstrumentsclassifiedasequityinstruments

ForfinancialinstrumentsclassifiedasequityinstrumentswheretheCompanyistheissuer,anydividendexpenditurethatisdeductibleforcorporateincometaxpurposesaccordingtotaxpolicyisrecognizedforitsincometaximpactwhenthedividendspayablearerecognized.Ifthedistributedprofitsoriginatefromtransactionsoreventspreviouslyaffectingprofitorloss,theincometaximpactofsuchdividendsisincludedinthecurrentprofitorloss.Ifthedistributedprofitsoriginatefromtransactionsoreventspreviouslyrecognizedinequity,theincometaximpactofsuchdividendsisincludedinequityitems.

(4)Basisforpresentationofdeferredtaxassetsanddeferredtaxliabilitiesonanetbasis

Thedeferredincometaxassetsanddeferredincometaxliabilitiesofthecompanyarepresentedasanetamountafteroffsettingwhenthefollowingconditionsaremetsimultaneously:

①TheCompanyhasalegalrighttooffsetcurrentincometaxassetsagainstcurrentincometaxliabilitiesonanetbasis;

②Deferredincometaxassetsanddeferredincometaxliabilitiesrelateeithertoincometaxesleviedbythesametaxauthorityonthesametaxableentity,ortodifferenttaxableentities,providedthatineachmaterialfutureperiodwhenthesedeferredtaxassetsandliabilitiesareexpectedtoreverse,theentitiesinvolvedintendeithertosettlecurrentincometaxassetsandliabilitiesonanetbasisortorealizetheassetsandsettletheliabilitiessimultaneously.

29.Lease

(1)Identificationoflease

Onthecommencementdateofthecontract,thecompanyevaluateswhetherthecontractisaleaseorincludesalease.Ifonepartyinthecontracttransferstherighttocontroltheuseofoneormoreidentifiedassetswithinacertainperiodinexchangeforconsideration,thecontractisaleaseorincludesalease.Inordertodeterminewhetherthecontracttransferstherighttocontroltheuseoftheidentifiedassetswithinacertainperiod,thecompanyevaluateswhetherthecustomersinthecontracthavetherighttoobtainalmostalltheeconomicbenefitsarisingfromtheuseoftheidentifiedassetsduringtheuseperiod,andhavetherighttodominatetheuseoftheidentifiedassetsduringtheuseperiod.

(2)SeparateidentificationofleaseIfthecontractincludesmultipleseparateleasesatthesametime,thecompanywillsplitthecontractandconductaccountingtreatmentforeachseparatelease.Ifthefollowingconditionsaremetatthesametime,therighttousetheidentifiedassetconstitutesaseparateleaseinthecontract:

①thelesseecanprofitfromusingtheassetaloneortogetherwithothereasilyavailableresources;②Theassetisnothighlydependentorhighlyrelatedtootherassetsinthecontract.

(3)AccountingtreatmentmethodoftheCompanyaslesseeOnthebeginningdateoftheleaseterm,theCompanyrecognizestheleasewithaleasetermofnomorethan12monthsandexcludingthepurchaseoptionasashort-termlease;Whenasingleleasedassetisabrand-newasset,theleasewithlowervalueisrecognizedasalowvalueassetlease.IftheCompanysubletsorexpectstosublettheleasedassets,theoriginalleaseisnotrecognizedasalowvalueassetlease.Forallshort-termleasesandlowvalueassetleases,theCompanywillrecordtheleasepaymentamountintotherelevantassetcostorcurrentprofitandlossaccordingtothestraight-linemethod(orothersystematicandreasonablemethods)ineachperiodoftheleaseterm.Inadditiontotheaboveshort-termleasesandlowvalueassetleaseswithsimplifiedtreatment,theCompanyrecognizestherighttouseassetsandleaseliabilitiesfortheleaseonthebeginningdateoftheleaseterm.

①UserightassetsTheterm"righttouseassets"referstotherightofthelesseetousetheleasedassetsduringtheleaseterm.Atthebeginningoftheleaseterm,therightofuseassetsareinitiallymeasuredatcost.Thiscostincludes:

?Theinitialmeasurementamountofleaseliabilities;?Fortheleasepaymentpaidonorbeforethebeginningoftheleaseterm,ifthereis

leaseincentive,therelevantamountofleaseincentiveenjoyedshallbededucted;?Initialdirectexpensesincurredbythelessee;

?Theestimatedcostincurredbythelesseefordismantlingandremovingtheleasedassets,restoringthesitewheretheleasedassetsarelocatedorrestoringtheleasedassetstothestateagreedintheleaseterms.TheCompanyrecognizesandmeasuresthecostaccordingtotherecognitionstandardandmeasurementmethodofestimatedliabilities.SeeNoteIII25fordetails.Iftheabovecostsareincurredfortheproductionofinventories,theywillbeincludedinthecostofinventories.Depreciationofrightofuseassetsisaccruedbyusingthestraight-linemethod.Ifitcanbereasonablydeterminedthattheownershipoftheleasedassetwillbeobtainedattheexpirationoftheleaseterm,thedepreciationrateshallbedeterminedaccordingtotheassetcategoryoftherighttouseandtheestimatednetresidualvalueratewithintheexpectedremainingservicelifeoftheleasedasset;Ifitisimpossibletoreasonablydeterminethattheownershipoftheleasedassetwillbeobtainedattheexpirationoftheleaseterm,thedepreciationrateshallbedeterminedaccordingtotheassetcategoryoftherightofusewithintheshorteroftheleasetermandtheremainingservicelifeoftheleasedasset.

②LeaseliabilitiesTheleaseliabilitiesareinitiallymeasuredCompanyshallaccordingtothepresentvalueoftheunpaidleasepaymentsatthebeginningoftheleaseterm.Theleasepaymentincludesthefollowingfiveitems:

?Fixedpaymentamountandsubstantialfixedpaymentamount.Ifthereisleaseincentive,therelevantamountofleaseincentiveshallbededucted;?Variableleasepaymentsdependingonindexorratio;?Theexercisepriceofthepurchaseoption,providedthatthelesseereasonably

determinesthattheoptionwillbeexercised;?Theamounttobepaidforexercisingtheoptiontoterminatethelease,providedthat

theleasetermreflectsthatthelesseewillexercisetheoptiontoterminatethelease;?Theamountexpectedtobepaidaccordingtotheresidualvalueoftheguarantee

providedbythelessee.Whencalculatingthepresentvalueofleasepayments,theimplicitinterestrateoftheleaseisusedasthediscountrate.Iftheimplicitinterestrateoftheleasecannotbedetermined,

theincrementalborrowinginterestrateofthecompanyisusedasthediscountrate.Thedifferencebetweentheleasepaymentamountanditspresentvalueisregardedasunrecognizedfinancingexpenses,andtheinterestexpensesarerecognizedaccordingtothediscountrateofthepresentvalueoftheleasepaymentamountduringeachperiodoftheleasetermandincludedinthecurrentprofitandloss.Theamountofvariableleasepaymentsnotincludedinthemeasurementofleaseliabilitiesshallbeincludedinthecurrentprofitandlosswhenactuallyincurred.Afterthebeginningdateoftheleaseterm,whentheactualfixedpaymentamountchanges,theexpectedpayableamountoftheguaranteedresidualvaluechanges,theindexorratiousedtodeterminetheleasepaymentamountchanges,theevaluationresultsoractualexerciseofthepurchaseoption,renewaloptionorterminationoptionchanges,theCompanyremeasurestheleaseliabilityaccordingtothepresentvalueofthechangedleasepaymentamount,Andadjustthebookvalueoftherighttouseassetsaccordingly.

(4)AccountingtreatmentmethodoftheCompanyaslessorOntheleasecommencementdate,theCompanyclassifiesleasesthathavesubstantiallytransferredalmostalltherisksandrewardsrelatedtotheownershipoftheleasedassetsasfinancialleases,andallotherleasesareoperatingleases.OperatingleaseDuringeachperiodoftheleaseterm,theCompanyrecognizestheleasereceiptsasrentalincomeaccordingtothestraight-linemethod,andtheinitialdirectexpensesincurredarecapitalized,amortizedonthesamebasisastherecognitionofrentalincome,andincludedinthecurrentprofitandlossbystages.ThevariableleasepaymentsobtainedbytheCompanyrelatedtooperatingleasesthatarenotincludedintheleasereceiptsareincludedinthecurrentprofitsandlosseswhenactuallyincurred.

FinanceleaseOntheleasebeginningdate,theCompanyrecognizesthefinancialleasereceivablesaccordingtothenetamountoftheleaseinvestment(thesumoftheunsecuredresidualvalueandthepresentvalueoftheleasereceiptsnotreceivedontheleasebeginningdatediscountedaccordingtotheleaseembeddedinterestrate),andterminatestherecognitionofthefinancialleaseassets.Duringeachperiodoftheleaseterm,theCompanycalculatesandrecognizestheinterestincomeaccordingtotheinterestrateembeddedinthelease.

TheamountofvariableleasepaymentsobtainedbytheCompanythatarenotincludedinthemeasurementofnetleaseinvestmentshallbeincludedinthecurrentprofitandlosswhenactuallyincurred.

(5)Accountingtreatmentofleasechange

①Changeofleaseasaseparatelease

Iftheleasechangesandmeetsthefollowingconditionsatthesametime,theCompanywilltreattheleasechangeasaseparateleaseforaccounting:a.theleasechangeexpandstheleasescopebyincreasingtheuserightofoneormoreleasedassets;B.Theincreasedconsiderationisequivalenttotheamountadjustedaccordingtotheconditionsofthecontractattheseparatepriceformostoftheexpansionoftheleasescope.

②Theleasechangeisnottreatedasaseparatelease

A.TheCompanyaslessee

Ontheeffectivedateoftheleasechange,theCompanyreconfirmedtheleasetermanddiscountedthechangedleasepaymentatthereviseddiscountratetore-measuretheleaseliability.Whencalculatingthepresentvalueoftheleasepaymentafterthechange,theimplicitinterestrateoftheleaseduringtheremainingleaseperiodshallbeusedasthediscountrate;Ifitisimpossibletodeterminetheimplicitinterestrateoftheleasefortheremainingleaseperiod,theincrementalloaninterestrateontheeffectivedateoftheleasechangeshallbeusedasthediscountrate.

Theimpactoftheaboveleaseliabilityadjustmentshallbeaccountedforaccordingtothefollowingcircumstances:

?Iftheleasescopeisreducedortheleasetermisshortenedduetotheleasechange,

thebookvalueoftherighttouseassetsshallbereduced,andtherelevantgainsorlossesofpartialorcompleteterminationoftheleaseshallbeincludedinthecurrentprofitsandlosses;

?Forotherleasechanges,thebookvalueoftherighttouseassetsshallbeadjustedaccordingly.

TheCompanyasleasor

Iftheoperatingleaseischanged,theCompanywilltreatitasanewleaseforaccounting

fromtheeffectivedateofthechange,andtheamountofleasereceiptsreceivedinadvanceorreceivablerelatedtotheleasebeforethechangeisregardedastheamountofnewleasereceipts.Ifthechangeoffinancialleaseisnotaccountedforasaseparatelease,theCompanywilldealwiththechangedleaseunderthefollowingcircumstances:ifthechangeofleasetakeseffectontheleasecommencementdateandtheleasewillbeclassifiedasanoperatinglease,theCompanywillaccountforitasanewleasefromtheeffectivedateofleasechange,andtakethenetleaseinvestmentbeforetheeffectivedateofleasechangeasthebookvalueofleasedassets;Iftheleasechangetakeseffectontheleasecommencementdate,theleasewillbeclassifiedasafinanciallease,andtheCompanywillconductaccountingtreatmentinaccordancewiththeprovisionsonmodifyingorrenegotiatingthecontract.

(6)Saleandlease-backThecompanyevaluatesanddetermineswhethertheassettransferinthesaleandleasebacktransactionisasaleinaccordancewiththeprovisionsofNoteIII26.①TheCompanyasseller(lessee)Iftheassettransferinthesaleandleasebacktransactiondoesnotbelongtosales,theCompanywillcontinuetorecognizethetransferredasset,recognizeafinancialliabilityequaltothetransferincome,andconductaccountingtreatmentforthefinancialliabilityinaccordancewithNoteIII11.Iftheassettransferbelongstosales,theCompanymeasurestherighttouseassetsformedbysaleandleasebackaccordingtothepartofthebookvalueoftheoriginalassetsrelatedtotherighttouseobtainedbyleaseback,andonlyrecognizestherelevantgainsorlossesontherightstransferredtothelessor.

②TheCompanyasbuyer(lessor)Iftheassettransferinthesaleandleasebacktransactionisnotsales,thecompanydoesnotrecognizethetransferredasset,butrecognizesafinancialassetequaltothetransferincome,andcarriesoutaccountingtreatmentforthefinancialassetinaccordancewithNoteIII11.Iftheassettransferbelongstosales,theCompanyshallconductaccountingtreatmentforassetpurchaseandassetleaseinaccordancewithotherapplicableaccountingstandardsforbusinessenterprises.

30.Accountingofhedging

(1)ClassificationofinventoriesTheCompanydividesitshedgingstrategiesintofairvaluehedges,cashflowhedges,andnetinvestmenthedges.

①Fairvaluehedge.Itreferstohedgingactivitiesconductedtomitigatetheriskofchangesinthefairvalueofrecognizedassetsorliabilities,unrecognizedfirmcommitments,orcomponentsoftheaforementioneditems.ThefairvaluechangesarecausedbyspecificrisksthatwillimpacttheCompany'sprofitorothercomprehensiveincome.

①Cashflowhedgingreferstothehedgingofcashflowrisk.Thechangeincashflowisderivedfromspecificrisksassociatedwithrecognizedassetsorliabilities,expectedtransactionsthatarelikelytooccur,orwithrespecttothecomponentsoftheabove-mentionedprojectandwillaffecttheprofitsandlossesoftheenterprise.

③Netinvestmenthedgeforoverseasoperationsreferstohedgingactivitiesconductedtomitigatetheforeignexchangeriskexposureofthenetinvestmentinoverseasoperations.Thehedgedriskinthenetinvestmenthedgeisthetranslationdifferencebetweenthefunctionalcurrencyoftheoverseasoperationsandthereportingcurrencyoftheparentcompany.

(2)Hedgingtoolsandhedgedprojects

HedgingmeansafinancialinstrumentdesignatedbytheCompanyforthepurposeofhedging,whosefairvalueorcashflowvariationisexpectedtooffsetthefairvalueorcashflowvariationofthehedgeditem,including:

①FinancialliabilitiesmeasuredatfairvaluewithvariationsaccountedintocurrentincomeaccountCheck-outoptionscanonlybeusedasahedgingtooliftheoptionishedged,includingthoseembeddedinahybridcontract.Derivativesembeddedinahybridcontractbutnotsplitcannotbeusedasseparatehedgingtools.

②Non-derivativefinancialassetsornon-derivativefinancialliabilitiesthataremeasuredatfairvalueandwhosechangesareincludedinthecurrentprofitandloss,butdesignatedasfairvalueandwhosechangesareincludedinthecurrentprofitandloss,andtheirowncreditriskchangescausedbychangesinfairvalueexceptforfinancialliabilitiesincludedinothercomprehensiveincome.

Ownequityinstrumentsarenotfinancialassetsorfinancialliabilitiesandcannotbeusedashedginginstruments.AhedgeditemreferstoanitemthatexposestheCompanytotheriskofchangesinfairvalueorcashflowandisdesignatedasthehedgedobjectandcanbereliablymeasured.TheCompanydesignatesthefollowingindividualprojects,projectportfoliosortheircomponentsashedgedprojects:

①Confirmedassetsorliabilities.

②Confirmedcommitmentsthathavenotyetbeenconfirmed.Confirmedcommitmentreferstoalegallybindingagreementtoexchangeaspecificamountofresourcesatanagreedpriceonaspecificdateorperiodinthefuture.

③Expectedtransactionsthatarelikelytooccur.Anticipatedtransactionsrefertotransactionsthathavenotyetbeencommittedbutareexpectedtooccur.

④Netinvestmentinoverseasoperations.

Theabove-mentionedprojectcomponentsrefertothepartsthatarelessthantheoverallfairvalueorcashflowchangesoftheproject.TheCompanydesignatesthefollowingprojectcomponentsortheircombinationsashedgeditems:

①Thepartofthechangeinfairvalueorcashflow(riskcomponent)thatisonlycausedbyoneormorespecificrisksintheoverallfairvalueorcashflowchangesoftheproject.Accordingtotheassessmentinaspecificmarketenvironment,theriskcomponentshouldbeabletobeindividuallyidentifiedandreliablymeasured.Theriskcomponentalsoincludesthepartwherethefairvalueorcashflowofthehedgeditemchangesonlyaboveorbelowaspecificpriceorothervariables.

②Oneormoreselectedcontractualcashflows.

③Thecomponentofthenominalamountoftheproject,thatis,thespecificpartofthewholeamountorquantityoftheproject,maybeacertainproportionofthewholeproject,ormaybeacertainlevelofthewholeproject.Ifacertainlevelincludesearlyrepaymentrightsandthefairvalueoftheearlyrepaymentrightsisaffectedbychangesintheriskofthehedge,thelevelshallnotbedesignatedasthehedgeditemofthefairvaluehedge,butinthemeasurementofthehedgeditemexceptwhenthefairvaluehasincludedtheinfluenceofthe

prepaymentright.

(3)EvaluationofhedgingrelationshipWhenthehedgingrelationshipisinitiallyspecified,theGroupofficiallyspecifiestherelatedhedgingrelationshipswithofficialdocumentsrecordingthehedgingrelationships,riskmanagementtargetsandhedgingstrategies.Thisdocumentsetsoutthehedgingtools,hedgeditems,thenatureofhedgedrisks,andtheCompany'sassessmentofhedgedeffectiveness.HedgingmeansafinancialinstrumentdesignatedbytheCompanyforthepurposeofhedging,whosefairvalueorcashflowvariationisoffsetthefairvalueorcashflowvariationofthehedgeditem,including:Suchhedgesarecontinuouslyevaluatedonandaftertheinitialspecifieddatetomeettherequirementsforhedgingvalidity.

Ifthehedginginstrumenthasexpired,beensold,thecontractisterminatedorexercised(buttheextensionorreplacementaspartofthehedgingstrategyisnottreatedasexpiredorcontracttermination),ortheriskmanagementobjectivechanges,resultinginhedgingTherelationshipnolongermeetstheriskmanagementobjectives,ortheeconomicrelationshipbetweenthehedgeditemandthehedginginstrumentnolongerexists,ortheimpactofcreditriskbeginstodominateinthevaluechangescausedbytheeconomicrelationshipbetweenthehedgeditemandthehedginginstrument,orwhenthehedgenolongermeetstheotherconditionsofthehedgeaccountingmethod,theCompanyterminatestheuseofhedgeaccounting.

Ifthehedgingrelationshipnolongermeetstherequirementsforhedgingeffectivenessduetothehedgingratio,buttheriskmanagementobjectiveofthedesignatedhedgingrelationshiphasnotchanged,theCompanyshallrebalancethehedgingrelationship.

(4)Revenuetheofrevenuerecognitionandmeasurement

Iftheconditionsforapplyinghedgeaccountingmethodaremet,itshallbehandledaccordingtothefollowingmethods:

①Fairvaluehedging

Gainsorlossesarisingfromhedginginstrumentsarerecognizedinthecurrentperiod'sincomestatement.Ifthehedgingisconductedforspecifiednon-derivativeequityinvestments(orcomponentsthereof)measuredatfairvaluewithchangesinfairvaluerecognizedinothercomprehensiveincome,gainsorlossesfromthehedginginstrumentsarerecognizedinother

comprehensiveincome.Gainsorlossesarisingfromthehedgeditemsduetothehedgingriskexposurearerecognizedintheincomestatement.Atthesametime,thecarryingamountofthedesignatedhedgeditemsthatarenotmeasuredatfairvalueisadjusted.Ifthehedgeditemisaspecifiednon-derivativeequityinvestment(orcomponentthereof)measuredatfairvaluewithchangesinfairvaluerecognizedinothercomprehensiveincome,gainsorlossesresultingfromthehedgingriskexposurearerecognizedinothercomprehensiveincome,andthecarryingamountofthehedgeditemhasalreadybeenmeasuredatfairvalueanddoesnotrequireadjustment.Regardingfairvaluehedgesrelatedtofinancialinstruments(orcomponentsthereof)measuredatamortizedcost,anyadjustmentsmadetothecarryingamountofthehedgeditemareamortizedusingtheeffectiveinterestraterecalculatedfromthedateofthecommencementofamortizationandrecognizedintheincomestatement.Theamortizationdateforadjustmentsshouldbeginfromtheadjustmentdateandshouldnotbelaterthanthepointatwhichhedginggainsandlossesareadjusteduponterminationofthehedgeditem.Forhedgeditemsthatarefinancialassets(orcomponentsthereof)measuredatfairvaluewithchangesinfairvaluerecognizedinothercomprehensiveincome,theaccumulatedhedginggainsorlossesshouldbeamortizedinthesamemannerandrecognizedintheincomestatement.However,thecarryingamountofthefinancialassets(orcomponentsthereof)shouldnotbeadjusted.

Forhedgeditemsthatareunrecognizedfirmcommitments(orcomponentsthereof),thecumulativefairvaluechangescausedbythehedgingriskafterthehedgingrelationshipisdesignatedshouldberecognizedasanassetorliability.Therelatedgainsorlossesshouldberecognizedintheincomestatement.Whenfulfillingafirmcommitmentandacquiringanassetorassumingaliability,theinitialrecognizedamountoftheassetorliabilityshouldbeadjustedtoincludethecumulativefairvaluechangesofthedesignatedhedgeditemthathavebeenrecognized.

②Cashflowhedging

Thepartofhedgingtoolgainsorlossesthatisvalidforhedgingisrecognizedasothercomprehensiveincomeasacashflowhedgingreserve,andthepartthatisinvalidforhedging(thatis,othergainsorlossesafterdeductingothercomprehensiveincome),arecountedIntothecurrentprofitandloss.Theamountofcashflowhedgingreserveisdeterminedaccording

totheloweroftheabsoluteamountsofthefollowingtwoitems:①accumulatedgainsorlossesofhedginginstrumentssincethehedging.Theamountintheeffectivearbitrageisrecognizedbytheaccumulativegainsorlossesfromthestartingofarbitrageandaccumulativechangestothecurrentvalueoffutureforecastcashflowsfromthestartofarbitrage.Iftheexpectedtransactionofthehedgedassetissubsequentlyrecognizedasanon-financialassetornon-financialliability,oriftheexpectedtransactionofthenon-financialassetornon-financialliabilityformsadefinedcommitmenttotheapplicablefairvaluehedgeaccounting,theamountofthecashflowhedgereserveoriginallyrecognizedintheotherconsolidatedincomeistransferredouttoaccountfortheinitialrecognizedamountoftheassetorliability.Fortheremainingcashflowhedges,duringthesameperiodwhentheexpectedcashflowtobehedgedaffectstheprofitandloss,iftheexpectedsalesoccur,thecashflowhedgereserverecognizedinothercomprehensiveincomeistransferredoutandincludedinthecurrentprofitandloss.③NetinvestmentinoverseasoperationshedgeForhedgingofforeignoperationnetinvestments,theportionofgainsorlossesfromthehedginginstrumentsthatqualifyaseffectivehedgesisdirectlyrecognizedinothercomprehensiveincome.Theportionofgainsorlossesfromthehedginginstrumentsthatdonotqualifyaseffectivehedgesisrecognizedintheincomestatement.Upondisposaloftheforeignoperation,thepreviouslyrecognizedgainsorlossesfromthehedginginstrumentsreflectedinothercomprehensiveincomearereclassifiedtotheincomestatement.

31.SignificantaccountingjudgmentandestimateTheCompanycontinuouslyreviewssignificantaccountingjudgmentandestimateadoptedforthereasonableforecastoffutureeventsbasedonitshistoricalexperienceandotherfactors.Significantaccountingjudgmentandassumptionsthatmayleadtomajoradjustmentofthebookvalueofassetsandliabilitiesinthenextaccountingyeararelistedasfollows:

ClassificationoffinancialassetsThemajorjudgmentsinvolvedintheclassificationoffinancialassetsincludetheanalysisofbusinessmodelandcontractcashflowcharacteristics.

Thecompanydeterminesthebusinessmodeofmanagingfinancialassetsattheleveloffinancialassetportfolio,takingintoaccountsuchfactorsashowtoevaluateandreportfinancialassetperformancetokeymanagers,therisksthataffectfinancialassetperformanceandhowtomanageit,andhowtoobtainremunerationforrelatedbusinessmanagers.Whenthecompanyassesseswhetherthecontractualcashflowoffinancialassetsisconsistentwiththebasicborrowingarrangement,therearethefollowingmainjudgments:

whethertheprincipalmaychangeduetoearlyrepaymentandotherreasonsduringthedurationoftheperiodortheamountofchange;whethertheinterestIncludingthetimevalueofmoney,creditrisk,otherbasicborrowingrisks,andconsiderationofcostsandprofits.Forexample,doestheamountpaidinadvancereflectonlytheunpaidprincipalandtheinterestbasedontheunpaidprincipal,aswellasthereasonablecompensationpaidforearlyterminationofthecontract.

Measurementofexpectedcreditlossesofaccountsreceivable

TheCompanycalculatestheexpectedcreditlossofaccountsreceivablethroughtheriskexposureofaccountsreceivabledefaultandtheexpectedcreditlossrate,anddeterminestheexpectedcreditlossratebasedonthedefaultprobabilityandthedefaultlossrate.Whendeterminingtheexpectedcreditlossrate,theCompanyusesinternalhistoricalcreditlossexperienceandotherdata,combinedwithcurrentconditionsandforward-lookinginformationtoadjustthehistoricaldata.Whenconsideringforward-lookinginformation,theindicatorsusedbytheCompanyincludetherisksofeconomicdownturn,changesintheexternalmarketenvironment,technologicalenvironment,andcustomerconditions.TheCompanyregularlymonitorsandreviewsassumptionsrelatedtothecalculationofexpectedcreditlosses.

Deferredincometaxassets

Ifthereisadequatetaxableprofittodeducttheloss,thedeferredincometaxassetsshouldberecognizedbyalltheunusedtaxloss.Thisrequiresthemanagementtomakealotofjudgmenttoforecastthetimeandamountoffuturetaxableprofitanddeterminetheamountofthedeferredtaxassetsbasedonthetaxationstrategy.

Incomerecognition

TheCompany'srevenuefromprovidingcurtainwallconstructionandmetroplatformscreendoorinstallationservicesisrecognizedoveraperiodoftime.TherecognitionoftheincomeandprofitofsuchengineeringinstallationservicesdependsontheCompany's

estimationofthecontractresultsandperformanceprogress.Iftheactualamountoftotalrevenueandtotalcostishigherorlowerthantheestimatedvalueofthemanagement,itwillaffecttheamountofrevenueandprofitrecognitionoftheCompanyinthefuture.EngineeringcontractThemanagementshallmakerelevantjudgmenttoconfirmtheincomeandexpensesofprojectcontractingbusinessaccordingtotheperformanceprogress.Iflossesareexpectedtooccurintheprojectcontract,suchlossesshallberecognizedascurrentexpenses.ThemanagementoftheCompanyestimatesthepossiblelossesaccordingtothebudgetoftheprojectcontract.TheCompanydeterminesthetransactionpriceaccordingtothetermsofthecontractandincombinationwithpreviouscustomarypractices,andconsiderstheinfluenceofvariableconsideration,majorfinancingcomponentsinthecontractandotherfactors.Duringtheperformanceofthecontract,theCompanycontinuouslyreviewstheestimatedtotalcontractrevenueandtheestimatedtotalcontractcost.Whentheinitialestimatechanges,suchascontractchanges,claimsandawards,theestimatedtotalcontractrevenueandtheestimatedtotalcontractcostarerevised.Whentheestimatedtotalcontractcostexceedsthetotalcontractrevenue,themainbusinesscostandestimatedliabilitiesshallberecognizedaccordingtothelosscontracttobeexecuted.

EstimateoffairvalueTheCompanyusesfairvaluetomeasureinvestmentrealestateandneedstoestimatethefairvalueofinvestmentrealestateatleastquarterly.Thisrequiresthemanagementtoreasonablyestimatethefairvalueoftheinvestmentrealestatewiththehelpofvaluationexperts.DevelopmentcostForpropertythathasbeenhandedoverwithincomerecognized,butwhosepublicfacilitieshavenotbeenconstructedornotbeencompleted,themanagementwillestimatethedevelopmentcostforthepartthathasnotbeenstartedaccordingtothebudgettoreflecttheoperationresultofthepropertysales.

32.Majorchangesinaccountingpoliciesandestimates

(1)ChangesinaccountingpoliciesDuringthecurrentreportingperiod,theCompanydidnoteffectanysignificantchanges

inaccountingpolicies.

(2)Changesinmajoraccountingestimates

Note:OnApril3,2026,theCompanyconvenedthe14thmeetingoftheAuditCommitteeofthe10thBoardofDirectorsandthe16thmeetingofthe10thBoardofDirectors,whichreviewedandapprovedtheproposalregardingthecurrentchangeinaccountingestimate,andresolvedtoimplementthechangeeffectiveDecember1,2025.IV.Taxation

1.Majortaxesandtaxrates

ExistenceofdifferentcorporateincometaxratesfortheCompany'ssubsidiaries

2.Taxpreference

(1)OnDecember26,2024,thesubsidiaryFangdaConstructionTechnologyobtainedthecertificateofhigh-techenterprisejointlyissuedbytheIndustryandInformationTechnologyBureauofShenzhenMunicipality,ShenzhenFinanceBureau,StateAdministrationofTaxationandShenzhenTaxationBureau.ThecertificatenumberisGR202444207062.Withinthreeyearsafterobtainingthequalificationofhigh-techenterprise(from2024to2026),theincometaxwillbeleviedat15%.

(2)OnDecember26,2024,thesubsidiaryFangdaZhiyuanTechnologyCo.,Ltd.obtainedthecertificateofhightechenterprisejointlyissuedbytheIndustryandInformationTechnologyBureauofShenzhenMunicipality,ShenzhenFinanceBureau,StateAdministrationofTaxationandShenzhenTaxationBureau.ThecertificatenumberisGR202444201506.Withinthreeyearsafterobtainingthequalificationofhightechenterprise

(from2024to2026),theincometaxwillbeleviedat15%.

(3)OnOctober16,2023,thesubsidiaryFangdaChengduTechnologyobtainedthecertificateofhightechenterpriseNo.GR202351000927jointlyissuedbytheDepartmentofScienceandTechnologyofSichuanProvince,theDepartmentofFinanceofSichuanProvince,theStateAdministrationofTaxationandtheSichuanProvincialTaxationBureau.Withinthreeyearsafterobtainingthequalificationofhightechenterprise(2023-2025),theincometaxwillcontinuetobeleviedat15%.

(4)OnNovember15,2023,thesubsidiaryFangdaShanghaiZhijianobtainedthecertificateofhightechenterpriseGR202331002267jointlyissuedbyShanghaiScienceandTechnologyCommission,ShanghaiFinanceBureauandShanghaiTaxationBureau.Withinthreeyears(from2023to2025)afterobtainingthequalificationofhightechenterprise,theincometaxwillcontinuetobechargedat15%.

(5)OnNovember15,2023,thesubsidiaryFangdaYunzhuCo.,Ltd.obtainedthecertificateofhightechenterprisejointlyissuedbyShenzhenScienceandTechnologyInnovationCommission,ShenzhenFinanceBureau,StateAdministrationofTaxationandShenzhenTaxationBureau.ThecertificatenumberisGR202344205791.Withinthreeyearsafterobtainingthequalificationofhightechenterprise(from2023to2025),theincometaxwillbeleviedat15%.

(6)ThesubsidiaryKechuangyuanSoftwareisanenterpriselocatedinQianhaiShenzhenHongKongModernServiceIndustryCooperationZone.ItsmainbusinessmeetstheconditionsofPreferentialCatalogueofEnterpriseIncomeTaxinQianhaiShenzhenHongKongModernServiceIndustryCooperationZone(2021)(theRegulationshallbeimplementedfromJanuary1,2021toDecember31,2026),andtheincometaxisleviedat15%.

(7)Pursuanttothe"AnnouncementoftheMinistryofFinanceandtheStateTaxationAdministrationonFurtherImplementationofIncomeTaxPreferentialPoliciesforSmallandMicro-sizedEnterprises"(AnnouncementNo.13of2022),the"AnnouncementonIncomeTaxPreferentialPoliciesforSmallandMicro-sizedEnterprisesandSelf-employedBusinesses"(AnnouncementNo.6of2023),andthe"AnnouncementoftheMinistryofFinanceandtheStateTaxationAdministrationonFurtherSupportingtheDevelopmentofSmallandMicro-sizedEnterprisesandSelf-employedBusinesseswithRespecttoRelevant

TaxPolicies"(AnnouncementNo.12of2023),certainsubsidiariesqualifiedassmallandmicro-sizedenterprisesin2025andaresubjecttoenterpriseincometaxinaccordancewiththeaforementionedannouncements.

V.Notestotheconsolidatedfinancialstatements

1.Monetarycapital

Note:(1)Oftheclosingbalanceofbankdeposits,RMB44,021,919.51wasrestrictedinuse,comprisingjudiciallyfrozenfundsofRMB10,494,858.12,interestontimedepositsofRMB58,081.29,regulatedfundsdesignatedforspecificpurposesamountingtoRMB29,840,625.90,andotherrestrictedfundstotalingRMB3,628,354.20.Oftheclosingbalanceofothermonetaryfunds,RMB266,304,635.32wasrestrictedinuse,primarilyconsistingofbankers'acceptancedepositguarantees,interimguaranteedeposits,letterofguaranteeissuancedeposits,andfundsintransit.Inthepreparationofthecashflowstatement,theabove-mentioneddepositsandotherrestricteddepositsarenotusedascashandcashequivalents.

(2)Inaddition,therearenootherfundsinthemonetaryfundsattheendoftheperiodthathaverestrictionsonuseandpotentialrecoveryrisksduetomortgages,pledgesorfreezing.

2.Transactionalfinancialassets

3.Derivativefinancialassets

4.Notesreceivable

(1)Classificationofnotesreceivable

(2)TheCompanyhasnoendorsedordiscountedunmaturereceivablenotesattheendoftheperiod.

Note:Thebank-acceptedbillsdiscountedorendorsedareacceptedbybankswithlowercreditratings.Discountingorendorsementdoesnotaffecttherightofrecourse,andtherelatedcreditriskanddeferredpaymentriskofthebillshavenotbeentransferred;therefore,derecognitionhasnotbeenmade.

(3)Disclosurebybaddebtaccrualmethod

(Continued)

(4)Changesinbaddebtprovision

5.Accountreceivable

(1)Accountage

(2)Disclosurebybaddebtaccrualmethod

(Continued)

Methodofbaddebtprovision：

①AsofDecember31,2025,explanationforallowancefordoubtfulaccountsprovidedonanindividualbasis:

AsofDecember31,2024,explanationforallowancefordoubtfulaccountsprovidedonanindividualbasis:

Name

Note:Duetocertaincustomersexperiencingprolongednon-payment,materialdebtdefaults,bankruptcyreorganization,orsimilarcircumstances,theCompanyhasdeterminedthatfullrecoveryofreceivablesfromthesecustomersisuncertain.Inaccordancewiththeprudenceprinciple,theCompanyhasindividuallyprovidedforimpairmentlossesontheseaccountsreceivable.

②AsofDecember31,2025,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio1–CurtainWallBusinessReceivables

AsofDecember31,2025,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio2–PlatformScreenDoorBusinessReceivables

AsofDecember31,2024,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio1–EngineeringBusinessReceivables

③AsofDecember31,2025,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio3–NewMaterialsBusinessReceivables

AsofDecember31,2025,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio4–NewEnergyBusinessReceivables

AsofDecember31,2024,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio3–OtherBusinessReceivables

④AsofDecember31,2025,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio5–CommercialRealEstateandOtherReceivables

AsofDecember31,2024,accountsreceivableforwhichallowancefordoubtfulaccountsisprovidedbasedonPortfolio2–RealEstateBusinessReceivables

Provisionforbaddebtsbycombination:11.

(3)Changesinbaddebtprovision

(4)Written-offaccountreceivableduringtheperiod

(5)Accountsreceivableandcontractassetswiththefivelargestoutstandingbalancesby

debtorasofthereportingdate

Theaggregateamountofthefivelargestaccountsreceivable(includingcontractassets)bydebtorasofthereportingdateinthecurrentperiodisRMB460,203,390.85,representing

12.02%ofthetotalaccountsreceivable(includingcontractassets)asofthereportingdate.ThecorrespondingaggregateallowancefordoubtfulaccountsasofthereportingdateamountstoRMB118,166,624.28.

6.Receivablefinancing

(1)Classificationofnotesreceivable

(2)Tradereceivablesfinancingthathavebeenendorsedordiscountedbutnotyetmaturedasofthereportingdate

7.Prepayment

(1)Accountageofprepayments

Note:Attheendoftheperiod,thereisnosignificantprepaymentwithanagingofmorethanoneyear.

(2)Balanceoftop5prepaymentsattheendoftheperiod

Thetotaloftop5prepaymentsintermsoftheprepaidentitiesintheperiodisRMB5,261,681.15,accountingfor25.78%ofthetotalprepaymentsattheendoftheperiod.

8.Otherreceivables

(1)Classificationofnotesreceivable

(2)Otherreceivables

(1)Disclosurebyage

(2)Classificationbynatureoffunds

③MethodofbaddebtDisclosedA.TheprovisionforbaddebtsasatWednesday,December31,2025isbasedonthethree-phasemodelasfollows:

AsatWednesday,December31,2025,thefirstphaseoftheprovisionforbaddebts:

AsatWednesday,December31,2025,thesecondphaseoftheprovisionforbaddebts:

AsatWednesday,December31,2025,thethirdphaseoftheprovisionforbaddebts:

B.TheprovisionforbaddebtsasatDecember31,2024isbasedonthethree-phasemodelasfollows:

AsatTuesday,December31,2024,thefirstphaseoftheprovisionforbaddebts:

AsatTuesday,December31,2024,thesecondphaseoftheprovisionforbaddebts:

AsatTuesday,December31,2024,thethirdphaseoftheprovisionforbaddebts:

TheamountofthebaddebtprovisionisBasis：

Provisionforbaddebtsbycombination:11.④Changesinbaddebtprovision

⑤Otherreceivablesactuallywrittenoffinthecurrentperiod

⑥Balanceoftop5otherreceivablesattheendoftheperiod

9.Inventory

(1)Classificationofinventories

(2)Provisionforinventorydepreciationorcontractperformancecostimpairmentprovision

(3)Descriptionofendinginventorybalanceincludingcapitalizationamountofborrowingcosts:

AsofDecember31,2025,thecapitalizedborrowingcostsincludedininventorybalancesamountedtoRMB4,470,824.99.ThecalculationbasisandcriteriaforborrowingcostsaredisclosedinNoteIII.20.

(4)Developmentcost

Note:OnNovember6,2017,FangdaPropertyCo.,Ltd.,asubsidiaryoftheCompany,enteredintothe"Co-DevelopmentAgreementfortheFangdaBangshenIndustrialPark(provisionalname)UrbanRenewalProject"withBangshenElectronics(Shenzhen)Co.,Ltd.,agreeingtojointlyadvancethis"industrial-to-industrial"urbanrenewalprojectunderaco-developmentmodel.Duringprojectimplementation,objectivefactors—includingpolicyadjustmentsrelatedtothe"LixinLakeAreaIntegratedPlanning"inBao'anDistrict,Shenzhen,andchangesinthemarketenvironment—continuouslyimpededprogress,makingitimpossibletoproceedasoriginallyplanned.Afteramicablenegotiations,bothpartiesformallysignedaterminationagreementonNovember10,2025,mutuallyagreeingtoterminatetheaforementionedco-developmentagreement.Effectivefromthedateofeffectivenessoftheterminationagreement,FangdaPropertyCo.,Ltd.willnolongerparticipateinthesubsequentdevelopmentorrelatedoperationsoftheFangdaBangshenIndustrialParkproject.

(5)Developmentproducts

10.Contractassets

(1)Contractassets

(2)Disclosurebyimpairmentmethod

(Continued)

Note:Duetocertaincustomers'prolongednon-payment,materialdebtdefaults,andbankruptcyreorganizationproceedings,theCompanyhasdeterminedthatthereisuncertaintyregardingthefullrecoveryofreceivablesfromthesecustomers.Inaccordancewiththeprudenceprinciple,theCompanyhasindividuallyrecognizedimpairmentallowancesoncontractassetsrelatedtothesecustomers.

(3)Changeinprovisionforimpairment

Note:The"Otherchanges"inthecurrentperiodprimarilyresultfromthereclassificationofcontractassetspreviouslysubjecttoindividualimpairmentassessmentsintoaccountsreceivableforaccountingpurposes.

11.Othercurrentassets

12.Long-termshareequityinvestment

(1)Long-termshareequityinvestment

(Continued)

13.Othernon-currentfinancialassets

14.Investmentrealestate

(1)Investmentrealestatemeasuredatfairvalue

Notes:

①Theprimarybasisfordeterminingthefairvalueofinvestmentpropertiesisthe"RealEstateAppraisalReports"issuedbyShenzhenGuoyuAppraisalCo.,Ltd.,RealEstateandLandValuationConsultants,withreportnumbers"ShenGuoyuPingZi(2026)No.01017-1","ShenGuoyuPingZi(2026)No.01017-2","ShenGuoyuPingZi(2026)No.01015","ShenGuoyuPingZi(2026)No.01016","ShenGuoyuPingZi(2026)No.01017-3","ShenGuoyuPingZi(2026)No.01014","ShenGuoyuPingZi(2026)No.01017-4","ShenGuoyuPingZi(2026)No.01017-5",and"ShenGuoyuPingZi(2026)No.01017-6".

②AsofDecember31,2025,certainrealestatepropertieswithinFangdaTownhavebeenpledgedtoChinaPostSavingsBankCo.,Ltd.ascollateralforloans.Theseloanshavenotyetmaturedandthepledgehasnotbeenreleased.ThefairvalueofthesepledgedpropertiesamountstoRMB33,494,907,000.

(2)Investmentrealestatewithoutownershipcertificate

15.Fixedassets

(1)Classificationofnotesreceivable

(2)Fixedassets

(1)Fixedassets

Note:The"Otherincreasesanddecreases"areprimarilyduetoexchangeratefluctuations.

②Fixedassetswithoutownershipcertificate

16.Constructioninprocess

(1)Classificationofnotesreceivable

2.Constructioninprocess

(1)Constructioninprogress

Explanation:AsofDecember31,2025,theCompany'sconstructioninprogressshowednoindicationofimpairment.

17.Userightassets

(1)Right-to-useassets

(2)Impairmenttestingofright-of-useassetsAsofDecember31,2025,therewasnoindicationofimpairmentoftheCompany'sright-of-useassets.

18.Intangibleassets

(1)Intangibleassets

(2)FailuretoobtainthelanduserightcertificatesAttheendoftheperiod,theCompanyhadnolanduserightwithoutthepropertyrightcertificate.

19.Long-termamortizableexpenses

20.Differedincometaxassetsanddifferedincometaxliabilities

(1)Non-deducteddeferredincometaxassets

(2)Non-deducteddeferredincometaxliabilities

(3)Netdeferredincometaxassetsorliabilitieslisted

(4)Detailsofunrecognizeddeferredincometaxassets

(5)Deductiblelossesoftheun-recognizeddeferredincometaxassetwillexpireinthefollowingyears

21.Othernon-currentassets

22.Assetswithrestrictedownershiporuserights

(Continued)

23.Short-termloans

(1)Classificationofshort-termborrowings

Notes:

①Asofthereportingdate,amongguaranteedborrowings:

RMB62,045,333.34andRMB605,125,916.77wereguaranteedbytheCompanyforitssubsidiariesFangdaZhiyuanTechnologyCo.,Ltd.andShenzhenFangdaConstructionTechnologyGroupCo.,Ltd.,respectively;RMB6,019,002.78wasguaranteedbytheCompanyforitssubsidiaryShenzhenFangdaYunchuTechnologyCo.,Ltd.;RMB1,030,274.69wasguaranteedbytheCompanyforitssubsidiaryFangdaNewMaterials(Jiangxi)Co.,Ltd.RMB1,030,274.69wasguaranteedbytheCompanyforitssubsidiaryFangdaNewMaterials(Jiangxi)Co.,Ltd.Amongguaranteedborrowings,internalfactoringloansamountedtoRMB194,900,000.

②Attheendoftheperiod,amongtheguaranteedandpledgedborrowings:

RMB49,047,775.00wasguaranteedbytheCompanyforitssubsidiaryShenzhenFangdaConstructionTechnologyGroupCo.,Ltd.,withthesubsidiaryfurtherprovidingapledgeofintellectualpropertyrightsoveritspatentsforan"AutomaticSensingCurtainWallEnergy-SavingWindowSystem"andan"IntelligentShadingSystem";RMB40,027,777.78wasguaranteedbytheCompanyforitssubsidiaryShenzhenFangdaConstruction

TechnologyGroupCo.,Ltd.,withthesubsidiaryadditionallypledgingitspatentfora"ModularFrameCurtainWallSystem"asintellectualpropertycollateral;RMB50,038,194.45wasguaranteedbytheCompanyforShenzhenFangdaConstructionTechnologyGroupCo.,Ltd.,withthesubsidiarypledgingitspatentsfora"ConnectingStructureforaThrough-Ventilation-TypeBoxCurtainWall"anda"Copper-AluminumCompositePanelEnergy-SavingCurtainWallStructure"asintellectualpropertycollateral;RMB342,580,000.00wasguaranteedandpledgedbytheCompanyforitssubsidiaryShenzhenFangdaConstructionTechnologyGroupCo.,Ltd.Amongguaranteedandpledgedborrowings,internal

factoringloansamountedtoRMB40,580,000.00.

24.Derivativefinancialliabilities

25.Notespayable

26.Accountpayable

(1)Bynature

(2)Therewerenomaterialaccountspayableagedoveroneyearasoftheperiodend.

27.Prepaymentreceived

28.Contractliabilities

(1)Contractliabilitiesstatus

29.Employees'wagepayable

(1)Employees'wagepayable

(2)Short-termremuneration

(3)Definedcontributionplan

30.Taxespayable

31.Otherpayables

(1)Classificationofnotesreceivable

(2)Otherpayables

①Otherpayablespresentedbynature

②Otherimportantaccountspayablewithanagingofmorethanoneyearattheendoftheperiod

32.Non-currentliabilitiesduein1year

33.Othercurrentliabilities

34.Long-termloans

(1)Classificationoflong-termborrowings

Note:Amongtheaforementionedguaranteed,mortgaged,andpledgedborrowings:

BorrowingsofRMB1,081,171,500.00weresecuredbypledgesof100%equityinterestsintheCompany'ssubsidiaryFangdaPropertyHoldingsCompany(helddirectlyandindirectlybyChinaFangdaGroupCo.,Ltd.)andreceivablerentalincomefromtheCompany'sself-heldFangdaCityleasedproperties;BorrowingsofRMB280,247,333.34wereguaranteedbyChinaFangdaGroupCo.,Ltd.foritssubsidiaryFangdaIntelligentManufacturingCompany,withadditionalcollateralprovidedbythesubsidiaryintheformofitsproperty,plantandequipmentandindustriallanduserights;BorrowingsofRMB297,268,950.00wereguaranteedbyChinaFangdaGroupCo.,Ltd.foritssubsidiary

FangdaConstructionTechnologyCompany.

35.Leaseliabilities

36.Anticipatedliabilities

37.Deferredearning

38.Sharecapital

39.Capitalreserves

40.Othermiscellaneousincome

41.Surplusreserve

42.Undistributedprofit

43.Operationalrevenueandcosts

(1)Revenuedisaggregationinformation

In2025,theinformationofoperatingrevenuebrokendownbyrevenuerecognitiontimeisasfollows:

(2)PerformanceobligationForcurtainwallmaterials,realestateandothercommoditysalestransactions,theCompanycompletestheperformanceobligationswhenthecustomerobtainsthecontroloftherelevantcommodities;forprovidingbuildingcurtainwall,Metroscreendoordesign,productionandinstallationandotherservicetransactions,theCompanyconfirmsthecompletedperformanceobligationsaccordingtotheperformanceprogressduringthewholeserviceperiod.ThecontractpriceoftheCompanyisusuallyduewithinoneyear,andthereisnosignificantfinancingcomponent.

(3)InformationrelatedtoremainingperformanceobligationsAsofDecember31,2025,theCompany'sremainingcontractualobligationsaremainlyrelatedtotheCompany'sengineeringcontracts,andtheremainingcontractualobligationsareexpectedtoberecognizedasrevenueaccordingtotheperformanceprogressinthefutureperformanceperiodofthecorrespondingengineeringcontracts.

44.Taxesandsurcharges

45.Salesexpense

46.Administrativeexpense

47.R&Dcost

48.Financialexpenses

49.Othergains

50.Investmentincome

51.Gaincausedbychangesinfairvalue

52.Creditimpairmentloss

53.Assetimpairmentloss

54.Assetsdisposalgains

55.Non-operatingrevenue

56.Non-businessexpenses

Note:"Other"includesalossofRMB16,000,000.00arisingfromtheterminationoftheBangshenproject;seeNoteV.9—Inventoriesfordetails.

57.Incometaxexpenses

(1)Compositionofincometaxexpenses

(2)Adjustmentprocessofaccountingprofitandincometaxexpense

58.OthermiscellaneousincomeSeeNoteV.40Othercomprehensiveincomefordetailsofeachitemofothercomprehensiveincomeanditsincometaxeffectandtransfertoprofitorloss,aswellasareconciliationofeachitemofothercomprehensiveincome.

59.Notestocashflowstatementitems

(1)CashinflowrelatedtooperationOthercashreceivedfrombusinessoperations

Othercashpaidforbusinessoperations

(2)CashrelatedtoinvestmentactivitiesSignificantcashpaymentsrelatedtoinvestingactivities

Othercashpaidforinvestment

(3)CashrelatedtofinancingOthercashreceivedfromfinancingactivities

Othercashpaidrelatedtofinancingactivities

Changesinliabilitiesarisingfromfinancingactivities

60.Supplementarydataofcashflowstatement

(1)Supplementarydataofcashflowstatement

Note:Duringthecurrentperiod,theamountofRMB180,124,519.21receivedfromtheendorsementandtransferofreceivablenoteswasincludedincashreceivedfromsalesofgoodsandrenderingofservices.

(2)Compositionofcashandcashequivalents

(3)SupplierFinancingArrangements

①TermsandConditionsofSupplierFinancingArrangements

Supplierfinancingarrangement1:TheCompanyutilizesthe"eXintong"supplychainfinancialserviceplatform,jointlyprovidedbyBeijingYuehanTechnologyCo.,Ltd.andShenzhenBranchofChinaConstructionBankCorporation(hereinafterreferredtoas"CCB"),toconductreversefactoringtransactions,offeringservicestosuppliersholdingelectronicreceivableinstrumentsonthe"eXintong"platformthatarepayablebytheCompanyuponmaturity.SupplierstransfertheiraccountsreceivableundertheCompany'selectronicdebtcertificatestoCCBandapplyfor"e-Xintong"businessservicesfromCCB.Afteranalysisandevaluation,CCBprovides"e-Xintong"businessservicestosuppliersifconditionsaremet.TheCompany'sobligationtofulfillpaymentundertheelectronicdebtcertificatesis

unconditionalandirrevocable,unaffectedbyanycommercialdisputesamongpartiesinvolvedinthetransferoftheelectronicdebtcertificates.TheCompanywillnotclaimoffsetsordefensesregardingthispaymentobligation.TheCompanywilltransferanamountequaltotheamountundertheelectronicdebtcertificatesonthecommittedpaymentdateaccordingtothe"e-Xintong"platformbusinessrules.SupplierFinancingArrangement2:TheCompanyhandlesreversefactoringbusinessthroughthe"e-Zhangtong"supplychainfinancialserviceplatformprovidedbyAgriculturalBankofChinaLimitedShenzhenOverseasChineseTownBranch(hereinafterreferredtoas"ABC"),offeringservicestosuppliersholdingelectronicdebtcertificatesonthe"e-Zhangtong"platformwithpaymentsduefromtheCompany.SupplierstransfertheiraccountsreceivableundertheCompany'selectronicdebtcertificatestoABCandapplyfor"e-Zhangtong"businessservicesfromABC.Afteranalysisandevaluation,ABCprovides"e-Zhangtong"businessservicestosuppliersifconditionsaremet.TheCompany'sobligationtofulfillpaymentundertheelectronicdebtcertificatesisunconditionalandirrevocable,unaffectedbyanycommercialdisputesamongpartiesinvolvedinthetransferoftheelectronicdebtcertificates.TheCompanywillnotclaimoffsetsordefensesregardingthispaymentobligation.TheCompanywilltransferanamountequaltotheamountundertheelectronicdebtcertificatesonthecommittedpaymentdateaccordingtothe"e-Zhangtong"platformbusinessrules.

SupplierFinancingArrangement3:TheCompanyhassigneda"PaymentAgencyCooperationAgreement"withChinaMerchantsBankCo.,Ltd.ShenzhenBranch,authorizingthebanktodeductpaymentsfromthepaymentaccountonthedatesspecifiedinthe"DetailedPaymentAgencyList"providedbytheGroup.Whensuppliersinitiatefinancingapplications,ChinaMerchantsBankCo.,Ltd.ShenzhenBranchusestheCompany'screditlinetohandledomesticfactoringforsuppliers.Afterthefactoringmatures,theCompanyonlyneedstopaythefactoringfinancingamounttoChinaMerchantsBankCo.,Ltd.ShenzhenBranch,withoutinterest.SupplierFinancingArrangement4:TheCompanyhandlesreversefactoring(EasyCredit)businessthroughthesupplychainfinancialserviceplatformprovidedbyBankofChinaShenzhenFutianBranch(hereinafterreferredtoas"BOC"),offeringservicestosuppliersholdingelectronicdebtcertificateswithpaymentscommittedbytheCompany.SupplierstransfertheiraccountsreceivableundertheCompany'selectronicdebtcertificatestoBOCand

applyforEasyCreditbusinessservicesfromBOC.Afteranalysisandevaluation,BOCprovidesEasyCreditbusinessservicestosuppliersifconditionsaremet.TheCompany'sobligationtofulfillpaymentundertheelectronicdebtcertificatesisunconditionalandirrevocable,unaffectedbyanycommercialdisputesamongpartiesinvolvedinthetransferoftheelectronicdebtcertificates.TheCompanywillnotclaimoffsetsordefensesregardingthispaymentobligation.TheCompanywilltransferanamountequaltotheamountundertheelectronicdebtcertificatesonthecommittedpaymentdateaccordingtothesupplychainfinancialserviceplatformbusinessrules.Supplierfinancingarrangement5:TheCompanyhasenteredintorelevantagreementswithBankofShanghaiCo.,Ltd.,authorizingBankofShanghaito,basedonfinancingdetailsprovidedbytheCompanyandviathe"Shanghange-Chain"platform,allowsupplierstoinitiatefinancingapplicationsandexecutefactoringtransactionsagainsttheCompany'screditlinewithBankofShanghai.Uponmaturityofthefactoringfacility,theCompanyisonlyrequiredtorepaytheprincipalamountofthefactoringfinancingtoBankofShanghai,whiletherelatedinterestisbornebythedesignatedpartyasagreed.

②Financialliabilitiesundersupplierfinancingarrangementspresentedinthebalancesheetandthecarryingamount,aswellastheamountsreceivedbysuppliersfromfinancingproviders

③Paymentduedaterangeforfinancialliabilitiesundersupplierfinancingarrangements

61.Foreigncurrencymonetaryitems

(1)Foreigncurrencymonetaryitems:

62.Lease

(1)TheCompanyasleaseeCurrentgainsandlossesandcashflowsrelatedtoleases

(2)TheCompanyistheleasorOperatingleaseA.Rentalincome

B.Undiscountedleasereceiptstobereceivedineachofthefiveconsecutivefiscalyears

afterthebalancesheetdate,andthetotalundiscountedleasereceiptstobereceivedintheremainingyears

VI.R&Dexpenses

1.Byexpensenature

VII.ChangetoConsolidationScopeDuringthecurrentperiod,thescopeofconsolidationchangedwiththeadditionoftwonewsubsidiariesestablishedbyincorporation:FangdaFacadeContractingL.L.CandFangdaFacade(NSW)PtyLtd.VIII.EquityinOtherEntities

1.Interestsinsubsidiaries

(1)GroupComposition

(2)Majornonwholly-ownedsubsidiaries

(3)Financialhighlightsofmajornonwhollyownedsubsidiaries

(Continued)

Company

(Continued)

2.Interestsinjointventuresorassociates

(1)Financialsummaryofinsignificantjointventuresandassociates

IX.Governmentsubsidy

1.GovernmentalsubsidyrecognizedasreceivableattheendoftheperiodAsofDecember31,2025,thebalanceofgovernmentgrantsreceivableisRMB527,217.36.

2.Liabilitiesinvolvinggovernmentsubsidies

3.Governmentsubsidiesaccountedintocurrentprofitorloss

X.RisksofFinancialToolsTherisksassociatedwiththefinancialinstrumentsoftheCompanyarisefromthevariousfinancialassetsandliabilitiesrecognizedbytheCompanyinthecourseofitsoperations,includingcreditrisks,liquidityrisksandmarketrisks.ThemanagementobjectivesandpoliciesofvariousrisksrelatedtofinancialinstrumentsaregovernedbythemanagementoftheCompany.Theoperatingmanagementisresponsiblefordailyriskmanagementthroughfunctionaldepartments(forexample,theCompany'screditmanagementdepartmentreviewstheCompany'screditsalesonacase-by-casebasis).TheinternalauditdepartmentoftheCompanyconductsdailysupervisionoftheimplementationoftheCompany'sriskmanagementpoliciesandprocedures,andreportsrelevantfindingstotheCompany'sauditcommitteeinatimelymanner.

TheoverallgoaloftheCompany'sriskmanagementistoformulateriskmanagementpoliciesthatminimizetherisksassociatedwithvariousfinancialinstrumentswithoutexcessivelyaffectingtheCompany'scompetitivenessandresilience.

1.Creditrisk

Creditriskiscausedbythefailureofonepartyofafinancialinstrumentinperformingitsobligations,causingtheriskoffinanciallossfortheotherparty.ThecreditriskoftheCompanymainlycomesfrommonetarycapital,notesreceivable,accountsreceivable,otherreceivables,receivablesfinancing,contractassets,etc.Thecreditriskofthesefinancialassetscomesfromthedefaultofthecounterparties,andthemaximumriskexposureisequaltothebookamountoftheseinstruments.

TheCompany'smoneyandfundsaremainlydepositedinthecommercialbanksandotherfinancialinstitutions.TheCompanybelievesthatthesecommercialbankshavehigherreputationandassetstatusandhavelowercreditrisk.

Fornotesreceivable,accountsreceivable,otherreceivables,receivablesfinancingand

contractassets,theCompanysetsrelevantpoliciestocontrolcreditriskexposure.TheGroupsetthecreditlineandtermfordebtorsaccordingtotheirfinancialstatus,externalrating,andpossibilityofgettingthird-partyguarantee,creditrecordandotherfactors.TheGroupregularlymonitorsdebtors'creditrecord.Forthosewithpoorcreditrecord,theGroupwillsendwrittenpaymentreminders,shortenorcancelcredittermtolowerthegeneralcreditrisk.

(1)SignificantincreasesincreditriskThecreditriskofthefinancialinstrumenthasnotincreasedsignificantlysincetheinitialconfirmation.Indeterminingwhetherthecreditriskhasincreasedsignificantlysincetheinitialrecognition,theCompanyconsidersreasonableandevidencedinformation,includingforward-lookinginformation,thatcanbeobtainedwithoutunnecessaryadditionalcostsoreffort.TheCompanydeterminestherelativeriskofdefaultriskofthefinancialinstrumentbycomparingtheriskofdefaultofthefinancialinstrumentonthebalancesheetdatewiththeriskofdefaultontheinitialrecognitiondatetoassessthecreditriskofthefinancialinstrumentfrominitialrecognition.

Whenoneormoreofthefollowingquantitativeandqualitativecriteriaaretriggered,theCompanybelievesthatthecreditriskoffinancialinstrumentshasincreasedsignificantly:thequantitativecriteriaaremainlytheprobabilityofdefaultintheremaininglifeofthereportingdateincreasedbymorethanacertainproportioncomparedwiththeinitialrecognition;thequalitativecriteriaarethemajoradversechangesintheoperationorfinancialsituationofthemajordebtors,theearlywarningofcustomerlist,etc.

(2)Definitionofassetswherecreditimpairmenthasoccurred

Inordertodeterminewhetherornotcreditimpairmentoccurs,thestandardadoptedbyourcompanyisconsistentwiththecreditriskmanagementtargetforrelatedfinancialinstruments,andquantitativeandqualitativeindicatorsareconsidered.

Majorfinancialdifficultieshaveoccurredtotheissuerorthedebtor;Breachofcontractbythedebtor,suchaspaymentofinterestordefaultoroverdueofprincipal;(B)Theconcessionthatthedebtorwouldnotmakeunderanyothercircumstancesforeconomicorcontractualconsiderationsrelatingtothefinancialdifficultiesofthedebtor;Thedebtorislikelytobebankruptorundertakeotherfinancialrestructuring;Thefinancialdifficultiesoftheissuerordebtorleadtothedisappearanceoftheactivemarketforthefinancialasset;Topurchaseorgenerateafinancialassetatasubstantialdiscount,whichreflectsthefactthata

creditlosshasoccurred.Creditimpairmentinfinancialassetsmaybecausedbyacombinationofmultipleevents,notnecessarilybyeventsthatcanbeidentifiedseparately.

(3)ExpectedcreditlossmeasurementDependingonwhetherthereisasignificantincreaseincreditriskandwhetheracreditimpairmenthasoccurred,theCompanypreparesdifferentassetsfora12-monthorfullexpectedcreditloss.Thekeyparametersofexpectedcreditlossmeasurementincludedefaultprobability,defaultlossrateanddefaultriskexposure.Takingintoaccountthequantitativeanalysisandforward-lookinginformationofhistoricalstatistics(suchascounterpartyratings,guarantymethods,collateralcategories,repaymentmethods,etc.),theCompanyestablishesthedefaultprobability,defaultlossrateanddefaultriskexposuremodel.Definition:

Theprobabilityofdefaultreferstothepossibilitythatthedebtorwillnotbeabletofulfilitsobligationtopayinthenext12monthsorthroughouttheremainingperiod.BreachLossRatemeanstheextentoflossexpectedbytheCompanyforbreachriskexposure.Dependingonthetypeofcounterparty,themannerandpriorityofrecourse,andthedifferentcollateral,thedefaultlossrateisalsodifferent.Thedefaultlossrateisthepercentageoftheriskexposurelossatthetimeofthedefault,calculatedonthebasisofthenext12monthsortheentirelifetime.

ExposuretodefaultistheamountpayabletotheCompanyatthetimeofdefaultinthenext12monthsorthroughouttheremaininglife.Theassessmentofsignificantincreasesincreditriskandthecalculationofexpectedcreditlossesbothinvolveforward-lookinginformation.Throughtheanalysisofhistoricaldata,theCompanyhasidentifiedthekeyeconomicindexesthataffectthecreditriskofeachbusinesstypeandtheexpectedcreditloss.

ThelargestcreditriskfacingtheGroupisthebookvalueofeachfinancialassetonthebalancesheet.TheGroupmakesnoguaranteethatmaycausetheGroupcreditrisks.AmongtheCompany'saccountsreceivable,theaccountsreceivable(includingcontractassets)fromthetopfivecustomersaccountedfor12.02%ofthetotalaccountsreceivable(priorperiod:

11.01%).AmongtheCompany'sotherreceivables,theotherreceivablesfromthetopfivecounterpartiesbyamountaccountedfor70.50%ofthetotalotherreceivables(priorperiod:

71.82%).

2.LiquidityriskLiquidityriskistheriskofcapitalshortagewhentheGroupneedstopaycashorsettledwithotherfinancialassets.TheCompanyisresponsibleforthecashmanagementofitssubsidiaries,includingshort-terminvestmentsincashsurplusesandloanstomeetprojectedcashrequirements.TheCompany'spolicyistoregularlymonitorshortandlong-termliquidityrequirementsandcompliancewithborrowingagreementstoensureadequatecashreservesandreadilyavailablesecurities.

AsofDecember31,2025,thematurityoftheCompany'sfinancialliabilitiesisasfollows:

InRMB10,000

(Continued)

3.Marketrisk

(1)CreditrisksTheexchangerateriskoftheCompanymainlycomesfromtheassetsandliabilitiesoftheCompanyanditssubsidiariesinforeigncurrencynotdenominatedinitsfunctionalcurrency.ExceptfortheCompany'ssubsidiariesestablishedintheHongKongSpecialAdministrativeRegionofthePeople'sRepublicofChinaandotheroverseasjurisdictions,whichuseHongKongDollars,U.S.Dollars,AustralianDollars,VietnameseDong,Euros,IndianRupees,UAEDirhams,orSingaporeDollarsforpricingandsettlement,theCompany'sotherprincipaloperationsarepricedandsettledinRMB.

AsofWednesday,December31,2025,theforeigncurrencyfinancialassetsandforeigncurrencyfinancialliabilitiesoftheCompanyattheendoftheperiodarelistedinthedescriptionofforeigncurrencymonetaryitemsinNoteV,61.

TheCompanypayscloseattentiontotheimpactofexchangeratechangesontheCompany'sexchangeraterisk.TheCompanycontinuouslymonitorsthescaleofforeigncurrencytransactionsandforeigncurrencyassetsandliabilitiestominimizeforeignexchangerisks.Tothisend,theCompanymayavoidforeignexchangerisksbysigningforwardforeignexchangecontractsorcurrencyswapcontracts.

(2)Exchangeraterisk

TheGroup'sinterestrateriskmainlyarisesfromlong-terminterest-bearingdebtssuchaslong-termbankloans.FinancialliabilitieswithfloatinginterestratecausecashflowinterestrateriskfortheGroup.FinancialliabilitieswithfixedinterestratecausefairvalueinterestrateriskfortheGroup.TheGroupdecidestheproportionbetweenfixedinterestrateandfloatinginterestrateaccordingtothemarketenvironmentandregularlyreviewsandmonitorsthecombinationoffixedandfloatinginterestrateinstruments.

TheFinanceDepartmentattheCompany'sheadofficemonitorstheleveloftheGroup's

interestratesonanongoingbasis.Therisinginterestratewillincreasethecostofthenewinterest-bearingdebtandtheinterestexpenditureoninterest-bearingdebtwhichhasnotyetbeenpaidbytheCompanyatthefloatingrate,andwillhaveasignificantadverseeffectontheCompany'sfinancialperformance.Managementwillmakeadjustmentsintimeaccordingtothelatestmarketconditions.FortheperiodendedDecember31,2025,assumingallotherriskvariablesremainunchanged,iftheinterestrateonborrowingscalculatedatfloatingratesweretoincreaseordecreaseby50basispoints,theCompany'snetprofitfortheyearwoulddecreaseorincreasebyRMB6,502,300(priorperiod:RMB4,800,000).

4.Hedging

(1)Riskmanagementofhedgingoperations

(2)Eligiblehedgingoperationsandapplicationofhedgeaccounting

Derivativefinancialassets:

RMB1,459,950.00Othercomprehensiveincome:

RMB1,240,957.50Deferredtaxliabilities:

RMB218,992.50Financecosts:

RMB97,537.72

5.Transferoffinancialassets

(1)Classificationoffinancialassetsbymethodoftransfer