Month: June 2013
- 2013.06 MASCOTTE HOLD
Company Name: Mascotte Holdings LimitedStock Code: 00136Year end: March 31, 2013
Basis for Disclaimer of Opinion
Included in the consolidated statement of financial position as at 31 March 2013 are an intangible asset and certain property, plant and equipment (collectively referred to as the “Assets”) with carrying amounts of HK$707,168,000 (2012: HK$2,434,796,000) and HK$130,085,000 (2012: HK$242,342,000) respectively, which were principally acquired by the Group through acquisition of 100% equity interest in Sun Mass Energy Limited (“Sun Mass”) by two tranches of 50.1% and 49.9% on 15 July 2011 and 4 January 2012, respectively, during the year ended 31 March 2012. The intangible asset represents technology for manufacturing of solar grade polycrystalline silicon further explained in note 19 to the consolidated financial statements (the “Core Technology”) and property, plant and equipment represents factory premises and machinery purchased for production of solar grade polycrystalline silicon.
During the year, an impairment loss of HK$1,935,391,000 (2012: nil) has been recognised in respect of the Assets. As set out in note 8 to the consolidated financial statements, the directors of the Company determined the recoverable amount of the Assets based on value in use calculations which involve management’s estimations including but not limited to commencement of commercial production in the second half of 2013. Whether the Assets attributable to the Core Technology are able to generate future economic benefits to the Group is dependent on the successful launch of commercial production of solar grade polycrystalline silicon. As Sun Mass repeatedly delayed the commencement of commercial production, and it has been unable to commence commercial production as at the date of issuance of these consolidated financial statements, we are unable to determine whether the Core Technology will generate sufficient future economic benefits to the Group to support the total carrying amounts of the Assets of HK$837,253,000 (2012: HK$2,677,138,000); and whether the impairment losses of HK$1,935,391,000 (2012: nil) recognised during the year ended 31 March 2013 are free from material misstatement. Any adjustments to the carrying amounts of the Assets and impairment losses would affect the net assets of the Group as at 31 March 2013 and 2012 and the losses for the years then ended. This caused us to disclaim our audit opinion on the consolidated financial statements in respect of the year ended 31 March 2012.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2013.06 LISI GP HOLD
Company Name: Lisi Group (Holdings) LimitedStock Code: 00526Year end: March 31, 2013
Basis for qualified opinion
Included in the consolidated statement of financial position is an interest in an associate, Veritas-Msi (China) Company Limited (“Veritas-Msi”). The Group’s share of the results and net assets of Veritas-Msi for the period/year ended 31 March 2012 and 2013 and as at those dates included in the Group’s consolidated financial statements for the years ended 31 March 2012 and 2013 are set out in the consolidated financial statements.
As stated in the independent auditor’s report contained in the 2012 annual report, our opinion was qualified as we were unable to arrange an audit on the management accounts of Veritas-Msi for the period ended 31 March 2012. In the current year’s audit, we have arranged to conduct audit procedures on the management accounts of Veritas-Msi for the period/year ended 31 March 2012 and 2013. However, the evidence available to us was limited. We have not been provided with adequate and persuasive audit evidences to substantiate that revenue of Veritas-Msi had been recognised in the appropriate accounting period. We were therefore unable to ascertain whether the carrying amount of the Group’s interest in Veritas-Msi as at 31 March 2012 and 2013 and the Group’s share of Veritas-Msi’s results for the period/year ended 31 March 2012 and 2013 were fairly stated. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the amounts referred to above were free from material misstatement. Consequently, we were unable to determine whether any adjustments to these amounts were necessary.
Qualified opinion
In our opinion, except for the possible effects of the matter described in the basis for qualified opinion section, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
Emphasis of matter
We draw attention to note 2 to the consolidated financial statements which explains the measures that the directors are currently undertaking and intend to take to generate sufficient liquid funds to finance its operations and, accordingly, that it is appropriate to prepare the consolidated financial statements on a going concern basis. At the end of the reporting period, the Group had net current liabilities of RMB244,739,000. The validity of the going concern basis depends on the Group’s future profitable operation or the effectiveness of the measures as detailed in note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that would result from a failure of these measures to accomplish successful outcome. We consider that appropriate disclosures have been made in this respect. Our opinion is not modified in respect of this matter.
- 2013.06 CHEONG MING INV
Company Name: Cheong Ming Investments LimitedStock Code: 01196Year end: March 31, 2013
Basis for Qualified Opinion
As stated in notes 18(a) and 20 to the consolidated financial statements, the Group had classified the 25% equity interest (the “Interest”) in and the loan (the “Loan”) to an associate, Suntap Enterprises Ltd., as a disposal group (the “Disposal Group”) held for sale in the consolidated statement of financial position as at 31 March 2012 and 31 March 2013 because the vendor of the Interest, Fullpower Investment Holdings Corp. (“Fullpower”) exercised the repurchase option stated in the acquisition agreement to repurchase the Interest together with the Loan at a total consideration of HK$65 million on 30 March 2012 (the “Repurchase”). The carrying amounts before impairment loss of the interest and the Loan were approximately HK$56.4 million and approximately HK$24.6 million, respectively. An impairment loss of approximately HK$16 million was recognised in the consolidated income statement for the year ended 31 March 2012 resulting in a net aggregate carrying amount of the Disposal Group of HK$65 million as at 31 March 2012.
In accordance with Hong Kong Financial Reporting Standard 5 “Non-current Assets Held for Sale and Discontinued Operations” (“HKFRS 5”), the Interest of the Disposal Group classified as held for sale should be recognised at the lower of its carrying amount and its fair value less costs to sell whereas the Loan of the Disposal Group classified as held for sale should be measured at its amortised cost less impairment following the measurement requirements of Hong Kong Accounting Standard 39 “Financial Instruments: Recognition and Measurement” (“HKAS 39”).
The carrying amount of the Disposal Group as at 31 March 2013 was brought forward from the consolidated financial statements for the year ended 31 March 2012 and was determined based on the agreed repurchase consideration of HK$65 million. The repurchase consideration was negotiated as part of the original acquisition agreement dated 26 March 2011. It equals the cash portion of the consideration paid by the Group to Fullpower in exchange for the Interest and the Loan advanced by the Group to the associate after the acquisition but excludes the value of the share portion of the consideration for the acquisition. The completion of the Repurchase (including the settlement of the repurchase consideration) was outstanding as at 31 March 2013.
Fullpower informed the Company that the operations of the associate remained at an early stage of exploration as at 31 March 2013 which was essentially similar to that as at 31 March 2012. On 17 September 2012, a legal demand letter has been presented to Fullpower to urge the completion of the Repurchase by effecting payment of the repurchase consideration of HK$65 million. The Company was of the view that although the Repurchase had been delayed, Fullpower was actively seeking a source of finance and remained committed to complete the Repurchase. Subsequently, the Repurchase was completed on 26 April 2013. The total consideration of HK$65 million has been settled as to (i) the payment of HK$25 million in cash by Fullpower and (ii) the remaining balance of the consideration of HK$40 million was funded by way of a loan to Fullpower by the Group. As such, the directors of the Company considered that the repurchase consideration of HK$65 million closely approximates the fair value of the Disposal Group as at 31 March 2012 and 31 March 2013, and the costs to complete the sale were immaterial. Therefore, the Company concluded that no adjustment to the carrying amount of the Disposal Group was necessary as at 31 March 2012 and 31 March 2013.
However, we were unable to verify the management’s assessment that the repurchase consideration of HK$65 million closely approximates the fair value of the Disposal Group as at 31 March 2012 and 31 March 2013. The repurchase consideration was predetermined more than two years ago from 31 March 2013 (one year ago from 31 March 2012). It might not be representative of the fair value of the Disposal Group as at 31 March 2012 and 31 March 2013. There was no alternative evidence available to determine the fair value of the Disposal Group as the operations of the associate were at an early stage of exploration.
Accordingly, we were unable to determine whether the carrying amount of the Disposal Group in the consolidated statement of financial position of HK$65 million as at 31 March 2013 was free from material misstatement. Any adjustment found to be necessary would reduce the Group’s net assets as at 31 March 2013 and the Group’s net result for the year then ended, and would have consequential effect on the related disclosures thereof in the consolidated financial statements for the year ended 31 March 2013. We also qualified our audit opinion on the consolidated financial statements for the year ended 31 March 2012 on the same basis.
Qualified Opinion Arising from Limitation of Scope
In our opinion, except for the possible effects of the matters described in the basis for qualified opinion paragraphs, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2013.06 OP FIN INV
Company Name: OP Financial Investments LimitedStock Code: 01140Year end: March 31, 2013
BASIS FOR QUALIFIED OPINION
As explained in notes 17 and 18 to the consolidated financial statements, as at 31 March 2011 and 1 April 2011, the Company had investment in Crown Honor Holdings Ltd. (“Crown Honor”), an investee, comprising ordinary shares, non-voting preference shares and the profit guarantee of Crown Honor which were stated at fair value of HK$230,545, HK$95,529,850 and HK$6,860,388. We were unable to obtain sufficient appropriate audit evidence or to carry out alternative audit procedures that we considered necessary to assess the fair value of the investment in Crown Honor as at 31 March 2011 and 1 April 2011 and we were unable to determine whether adjustments to the consolidated statement of comprehensive income for the year ended 31 March 2012 might be necessary. Our audit opinion on the consolidated financial statements for the year ended 31 March 2013 was modified because of the possible effect of this matter on the comparability of the consolidated statements of comprehensive income between the current financial year and corresponding financial year.
QUALIFIED OPINION
In our opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013, and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
EXTRACT OF NOTES 17, AND 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS
The audit of the consolidated financial statements of CHHL for the year ended 31 December 2010 was not yet finalized as of the date of the annual report for the year ended 31 March 2011. After taking into account the relevant financial information of CHHL, the directors consider the valuation result as recognized in the interim report as of 30 September 2010 that was based on an independent valuation report still represents the best estimated fair value of the CHHL-related financial assets as at 31 March 2011 and 1 April 2011.
- 2012.06 OP FIN INV
Company Name: OP Financial Investments LimitedStock Code: 01140Year end: March 31, 2012
BASIS FOR QUALIFIED OPINION
As explained in note 17 and 18 to the consolidated financial statements, as at 31 March 2011, the Company had investment in Crown Honor Holdings Ltd. (“Crown Honor”), an investee, comprising ordinary shares, non-voting preference shares and the profit guarantee of Crown Honor which were stated at fair value of HK$230,545, HK$95,529,850 and HK$6,860,388, respectively. We were unable to obtain sufficient appropriate audit evidence or to carry out alternative audit procedures that we considered necessary to assess the fair value of the investment in Crown Honor as at 31 March 2011 and 1 April 2011 and the related impact on the Group’s result attributable to the equity holders for the year ended 31 March 2012 and 31 March 2011. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. Any adjustments found to be necessary to the opening balances as at 1 April 2011 may materially affect the Group’s result attributable to the equity holders for the year ended 31 March 2012 and the related disclosures in the consolidated financial statements with respect to investment in Crown Honor.
QUALIFIED OPINION
In our opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2012 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
EXTRACT OF NOTE 17, 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS
The audit of the consolidated financial statements of CHHL for the year ended 31 December 2010 is not yet finalised as of the date of the annual report for the year ended 31 March 2011. After taking into account the relevant financial information of CHHL, the directors consider the valuation result as recognised in the interim report as of 30 September 2010 that was based on an independent valuation report still represents the best estimated fair value of the CHHL-related financial assets as at 31 March 2011.
- 2013.03 CCOE
Company Name: Shanxi Changcheng Microlight Equipment Co. LtdStock Code: 08286Year end: December 31, 2012
Basis for Disclaimer of Opinion
(a) Going concern
The Company incurred a net loss of approximately RMB26,406,000 and net operating cash outflow of approximately RMB1,497,000 during the year ended 31 December 2012 and, as of that date, the Company’s current liabilities exceeded its current assets by approximately RMB7,902,000. In addition, the Company had outstanding bank loan amounting to RMB12,000,000 which would be due for repayment within the next twelve months and an amount due to a shareholder amounting to RMB12,400,000 which is repayable on demand. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern and therefore the Company may be unable to realise its assets and discharge its liabilities in the normal course of business.
The validity of the going concern assumption on which the financial statements are prepared is dependent on the favourable outcomes of the steps being taken by the directors of the Company. The financial statements have been prepared on the assumption that the Company will continue as a going concern and therefore do not include any adjustments relating to the realisation and classification of non-current assets that may be necessary if the Company is unable to continue as a going concern. Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised at other than the amounts at which they are currently recorded in the statement of financial position. In addition, the Company may have to provide for further liabilities that might arise, and to reclassify non-current assets as current assets.
In the absence of sufficient documentary evidence, we were unable to ascertain whether the assumptions made by the directors of the Company in the preparation of the financial statements on a going concern basis were fair and reasonable. Accordingly, we were unable to satisfy ourselves that the use of the going concern assumption was appropriate. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the appropriateness of the use of the going concern assumption, which might have a consequential significant effect on the net assets of the Company as at 31 December 2012 and the loss of the Company for the year then ended, and the related disclosures thereof in the financial statements.
(b) Impairment of property, plant and equipment
Included in the property, plant and equipment on the statement of financial position of the Company as at 31 December 2012 were plant and machinery with carrying amount of approximately RMB26,073,000. The fact that the Company incurred net losses and net operating cash outflow for two consecutive years, may, in our opinion, constitute an indicator of impairment. However, no impairment loss was recognised for the year ended 31 December 2012. We were unable to satisfy ourselves as to the appropriateness of the assumptions made by the directors of the Company in assessing the recoverable amount of the aforesaid item of property, plant and equipment as at 31 December 2012, and whether any impairment loss should be recognised in accordance with Hong Kong Accounting Standard 36 ‘‘Impairment of Assets’’. Any adjustment that might have been found to be necessary in respect of the above would have a consequential significant effect on the net assets of the Company as at 31 December 2012 and the loss of the Company for the year then ended, and the related disclosures thereof in the financial statements.
(c) Amounts due from a shareholder/a former related company
Included in current assets on the statement of financial position of the Company as at 31 December 2012 were amounts due from a shareholder and a former related company of approximately RMB593,000 and RMB4,283,000 respectively, which were unsecured and remained outstanding up to the date of this report. We were unable to obtain sufficient reliable audit evidence to satisfy ourselves as to the ability of the shareholder and the former related company to settle the aforesaid receivables. Accordingly, we were unable to assess whether the carrying amounts of the aforesaid receivables as at 31 December 2012 were fairly stated and whether any impairment loss should be recognised. Any adjustment that might have been found to be necessary in respect of the above would have a consequential significant effect on the net assets of the Company as at 31 December 2012 and the loss of the Company for the year then ended, and the related disclosures thereof in the financial statements.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements as to whether they give a true and fair view of the state of affairs of the Company as at 31 December 2012 and of the loss and cash flows of the Company for the year then ended in accordance with Hong Kong Financial Reporting Standards and as to whether the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
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