The annual report of the automotive industry company frequently asked for impairment to become the focus

The annual report inquiry supervision is still in full swing. The Securities Times reporter noted that the equity and goodwill are not impaired, and the impact of industrial policies has become the focus of the 2017 annual report of the Shanghai and Shenzhen Stock Exchanges for listed companies in the automotive industry. Specifically, the Exchange is concerned that the companies participating in the merger or the target companies for mergers and acquisitions are not doing well but they do not do depreciation treatment, the changes in new energy vehicle policies and the impact of overseas trade on the company’s revenue. There are still a few automotive companies that have problems with deducting non-profit giant losses year after year. This is also one of the focuses.

Is operating loss not impaired reasonably?

The automotive industry is undergoing epoch-making innovations and has repeatedly staged mergers and acquisitions and restructuring of the industry chain. Among them, it is the focus of the exchanges and investors that the goodwill of the company that bought the target company or the equity investment of the participating company needs to be impaired.

Jingwei Co., Ltd. had 3 loss-making companies, but no provision for impairment was made in the 2017 annual report. The Shenzhen Stock Exchange requires the company to specify the reasons for loss, as well as the long-term equity investment impairment testing process, and the reason and reasonableness of not making provision for impairment. The announcement showed that Jingwei’s shares in Shenzhen Wuzhoulong Automobile Co., Ltd. and Jiangsu Cardwell Automotive Industry Co., Ltd. incurred losses for two consecutive years from 2016 to 2017, and Changchun New Energy Automobile Co., Ltd. suffered a loss of RMB 53,422.20 million in 2017. Net profit decreased by 328% from the same period last year.

The reporter noted that Beijing Weiwei has identified the three companies as an asset group, taking the current value of the estimated future cash flows of the equity shares as its recoverable amount, and the evaluation value obtained exceeds the book value of the equity. At the same time, the first two companies recently had investment institutions to subscribe for shares, Jingwei shares as a valuation standard. However, Jingwei shares mentioned in explaining the reasons for the loss, the impact of the traditional replacement of the fuel truck segment by the product, the subsidy policy of the new energy auto industry retreat caused the industry market downturn.

The announcement shows that there are seven important assumptions for the impairment test, including the financial budget for the next five years set by the company's management, a reasonable forecast for the future based on the current market conditions, and changes in the country's macroeconomic policies. Take Wuzhoulong Automobile as an example, Jingwei Co., Ltd. assessed the book value of RMB 870 million, and the appraisal value of recoverable amount was RMB 1.4 billion. The reporter did not see the specific evaluation calculation process mentioned in the announcement.

Foton Motors is another case where its main business is deducting huge losses for several consecutive years. The Shanghai Stock Exchange queried that the company’s main operating business had suffered losses for many consecutive years. The net profits after deducting non-recurring gains and losses from 2014 to 2017 were -550 million yuan, -6.72 billion yuan, -3.77 billion yuan, -828 million yuan, requiring Foton Motors to analyze The main business problems.

Foton Motor explained that none of the construction machinery, pickup trucks, and VAN products have achieved profitability. On the other hand, the commercial vehicle sector has covered the entire product line and started to invest in research and development of the passenger vehicle business. However, the related products are still in the incubation period and have not been converted into profits. At the same time, part of the business investment is in the period of market promotion and has not contributed to the company's profits.

Industrial policy changes geometry

Changes in overseas trade and new energy automobile policies are affecting the profitability of auto parts and auto parts companies. However, each company faces different situations, and some companies can still deal with it safely.

The Exchange also asked a number of companies about the amount and type of government subsidy for new energy vehicles in 2017 and their changes from 2016, as well as the conditions for subsequent subsidy payments actually received and the risk of failing to receive subsidy payments.

The reporter noted that accounting firms generally recognize new energy vehicle development expenditures as well as amortization and impairment of intangible assets as key audit matters. In response, the Exchange also paid considerable attention. In terms of specific concerns, the intangible assets resulting from development expenditures related to new energy vehicles will undergo annual impairment testing of capitalized and new energy vehicles that have not yet reached the state of use. The impairment test involves Estimated amount of recoverable money. Among them, how should the company consider the impact of the future development of the new energy automobile industry and policy changes on the output, price, and operating performance of the company's products?