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Chinese Translation Samples > Finance Chinese to English Translation Sample

Notes to the Accounting Statements_English Translation

Notes to the Accounting Statements
Shanghai XXXXX New Composite Materials Co., Ltd
 (Except otherwise indicated, the following amounts are all in RMB Yuan)

I. Background of the Company:
Shanghai XXXXX New Composite Materials Co., Ltd. was established on March 25, 1997 jointly by Shanghai XXXXX Joint Stock Co., Ltd. and Taiwan Hongli Industrial Co., Ltd. after approved by Shanghai Municipal Government through the FETSHQPJV [1997] No.0050 approval license and got its corporate business license [EJVSHG No.023370 (Qingpu)]. It has a total investment of USD 6.54 million, a registered capital of USD6.54 million, and a major scope of business covering: producing various aluminum composite products and related building materials, selling the Company’s self-made products, and rendering product post-sale services (subject to license where a license if required).
II. Main accounting policies and accounting estimates adopted by the Company:
(I) Implemented accounting systems: the Company implements Enterprise Accounting Rules, Enterprise Accounting System and its supplementary provisions.
(II) Accounting period: an accounting year from January 1 to December 31.
(III) Recording currency and accounting methods of foreign currency: RMB is the recording currency.
The economic business involving foreign currency within the accounting year will be booked by converting into RMB according to the market exchange rate (middle price) publicized by the PBOC at the beginning of the month in which the transactions took place and the cross rate provided by the State Administration of Foreign Exchange. The balance of foreign currency in the foreign currency account at the end of month will be adjusted according to the market exchange rate (middle price) and the cross rate at the end of month, any deficiency (profit or loss) incurred and the part of principal and interest for fixed assets purchases-related foreign currency special-purpose borrowings incurred before the purchased fixed assets attains the predicated usable state will be capitalized, the part attributed to the organization period will be debited into the long-term deferred and prepaid expenses, and the other part will be debited into the current expenses.
(IV) Accounting basis and pricing principle: accounting on the accrual basis, and pricing on a history cost basis.
(V) Accounting methods for accounts receivable and provisions for bad debts:
1. The accounts receivable from goods purchasers or service takers due to sales of goods or products, and the services rendered are usually priced and booked according to the actual amount incurred.
2. The standard for recognition of bad debts: the accounts receivable affirmed unrecoverable after undergoing legal liquidation procedures due to revocation or bankruptcy of debtors; the accounts receivable affirmed unrecoverable due to death of debtors but without to-be-liquidated estates or obligation undertakers; and the accounts receivable affirmed unrecoverable with unambiguous evidence due to debtors’ failing to duly fulfill repayment obligations will bee written off after approved by the Company’s administrative authority.
3. Accounting methods for bad debt loss: accounting according to the allowance method.
4. Method and proportion of provision for bad debts: providing according to 5% of the balance of accounts receivable (except current accounts between related parties) at the end of period and item-by-item analysis.
(VI) Inventory accounting principle and pricing method:
1. Pricing method for acquisition and dispatching:
Day-to-day accounting will be priced according to the actual cost at the time of acquisition; and priced according to the weighted average method at the time of dispatching.
2. Amortization method for low value consumables: take the one-off amortization method.
3. Inventory taking system: take the perpetual inventory system.
4. Method of provision for inventory impairments:
At the end of year, after a full check is made on inventories, inventory impairments will be provided or adjusted according to the lower one of cost and net realizable value of inventories. The inventory impairments will be provided according to single inventory items.
(VII) Accounting method for long-term investments:
1. The cost acquired will be determined according to the actual cost incurred, including relevant taxes, commissions etc.
2. Accounting method for long-term equity investments
Those on which the invested party has no control, joint control or material effect will be accounted according to the cost method; and those on which the invested party can exert control, joint control or material effect will be accounted according to the equity method.
3. Amortization method for long-term equity investment difference:
The debit balance of equity investment recognized in accounting of long-term equity investments according to the equity method will be averagely amortized according to the investment period if the contract provides for an investment period; or averagely amortized in 10 years if the contract provides for no investment period.
4. Provision of long-term investment impairments:
At the end of year, long-term investment impairments will be provided item by item according to the difference of the predicted amount recoverable lower than the book value of long-term investments.
(VIII) Method for pricing and deprecation of fixed assets, estimated service life and depreciation ratio.
Houses and buildings, machinery equipment, office equipment, transport equipment and other production and operation-related equipment, apparatus, tools with a service life beyond one year, and major non-operating equipment and articles with an unit value of RMB2000 Yuan or above and with a service life beyond 2 years will be taken as fixed assets, and the fixed assets will be priced according to the actual cost at the time of acquisition, and the depreciation will be calculated according to the average year method.

Class Predicted service life Predicted net residual ratio Annual depreciation ratio
Houses and buildings 15 10% 6%
Machinery equipment  10 10% 9%
Transport equipment 6 10% 15%
Other equipment  5 10% 18%
The method of provision for fixed assets impairments: at the end of year, if the recoverable amount is lower than the book value due to continuous drops of market price, technical obsolescence, damages, being long-term left unused or other reasons, fixed assets impairments will be provided item by time according to the difference of the predicted recoverable amount lower than the book value.
(IX) Accounting method for construction in progress:
The actual cost incurred for a construction accounted by class of projects when the constructed engineering project attains the intended usable state will be transferred into the fixed assets for accounting, and those having not finished the final settlement yet will be transferred according to an estimated value, and be adjusted after the final settlement procedures are finished.
The method of provision for construction-in-progress impairments: at the end of year, the construction in progress having discontinued for a long term and expected not to resume within three years, or been laggard in performance or technology and brought a big uncertainty to the enterprise in terms of economic interests will be provided construction-in-progress impairments.
(X) Accounting method for long-term deferred and prepaid expenses: averagely amortized during the benefit period.

(XI) Accounting method for borrowing expenses:
The auxiliary expenses for special-purpose borrowings will be capitalized before the purchased or constructed assets attain the predicted usable state and will be directly debited into the current profit or loss if the amount is small.
The expenses for common borrowings and the expanses for special-purpose borrowings failing to meet the provisions for capitalization will both debited into the current profit or loss incurred.
(XII) Revenue recognition principle:
1. Sales of goods: where the Company has transferred material risks and benefits in proprietary rights of goods to the purchaser; where the Company no longer exercises the continual management right and actual control right on these goods, and transaction-related economic benefits can be flowed into the enterprise; and where relevant income and cost can be dependably measured, the realization of business revenue will be recognized.
2. Delivery of services: where the services are started and completed within the same one year, the realization of service revenue will be recognized when the services are rendered, the payments are received or the basis for collection of payments is acquired; if the services are started and completed in different accounting years respectively, on the condition that the result of service rendering transaction can be dependably estimated, the relevant service revenue will be recognized on the balance sheet day according to the percentage of completion method.

III. Taxes:
Applicable rate of the Company: VAT                    Tax rate 17%
Enterprise income tax      Tax rate 27%
Period for income tax deduction and exemption: the Company is a productive foreign-invested enterprises registered in the old urban district of a city in the coastal economic development zone, pays an enterprise income tax and local surcharge according to a rate of 27%, and enjoys the tax preferential policies of enterprise income tax exempted for the first 2 years and half reduced for the latter 3 years.

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