On the evening of May 15, the Shenzhen Stock Exchange issued an inquiry letter on the 2023 annual report of Huizhou Intelligent Technology Group Co., Ltd. (hereinafter referred to as "Huizhou Intelligent" or "the Company"). The letter of inquiry requires Huizhou Intelligent to explain the time, amount, time of accrual of impairment provision and the reason, basis and reasonableness of the reversal of the corresponding amount of the impairment provision of accounts receivable that were separately tested for impairment during the reporting period, and whether there is a situation of adjusting profits through impairment provision and reversal.
Screenshot of the inquiry letter of the Shenzhen Stock Exchange
According to the inquiry letter, in the process of reviewing the 2023 annual report of Huizhou Intelligence (hereinafter referred to as the "annual report"), the Shenzhen Stock Exchange paid attention to the following matters:
1. The annual report shows that the amount of government subsidies included in the non-recurring profit and loss of Huizhou Intelligent in the current period and the amount of reversal of the impairment provision for accounts receivable that were separately tested for impairment were 29.0088 million yuan and 80.4008 million yuan respectively. Among them, the government subsidy is mainly obtained by Qizhong CNC Equipment Co., Ltd. (hereinafter referred to as "Qizhong CNC"), accounting for 34% of the net profit attributable to shareholders of listed companies of Huizhou Intelligent in 2022 of 85.1046 million yuan.
Please Huizhou Intelligence:
(1) Explain the nature, basis, arrival time, subsidy period, etc. of the government subsidy obtained by Qizhong CNC, and explain whether the accounting treatment of the current profit or loss is in accordance with the relevant provisions of the accounting standards;
(2) Combined with the amount of government subsidies obtained and the proportion of net profit in 2022, explain the information disclosure performed by Huizhou Intelligent in the previous period, and whether there is any failure to fulfill the information disclosure obligation in a timely manner;
(3) Explain the time, amount, time of provision for impairment and the reason, basis and reasonableness of the reversal of the corresponding amount of the impairment provision for accounts receivable that were separately tested for impairment during the reporting period, and whether there is a situation of adjusting profits through impairment provision and reversal.
The annual audit accountant is requested to verify the matters (1) and (3) and give a clear opinion.
2. The annual report shows that during the reporting period, the operating income of machine tool products was 719.6762 million yuan, a year-on-year increase of 17.51%, and the income of Internet information technology service industry and media industry decreased by 10.20% and 8.04% year-on-year respectively. Among the top five customers, the sales of related parties were 24.7788 million yuan, accounting for 3.09% of the total annual sales. During the reporting period, the company purchased 122.629 million yuan from the top five suppliers, accounting for 22.41% of the annual procurement amount.
Please Huizhou Intelligence:
(1) Explain the significant year-on-year growth in revenue of CNC machine tool products during the reporting period, the main reasons for the year-on-year decline in revenue from Internet technology services and media industry, and explain the reasonableness of the substantial increase in revenue during the reporting period in combination with the changes in the top five customers and the revenue growth of comparable companies;
(2) List the information of major customers/suppliers, including but not limited to basic information, main business, major shareholders, staff size, registered (paid-in) capital, etc., explain the amount of sales/purchases, receipts/payments, and whether there is any related relationship between the company and the main customers/suppliers, and whether there is any material difference between the sales or procurement scale to major customers/suppliers and its basic situation, if so, please explain the specific reasons and reasonableness;
(3) Explain whether the main customer is related to the supplier, if so, please explain the specific situation, reason and reasonableness.
Ask the annual accountant to check and give a clear opinion.
3. The annual report shows that the R&D investment of Huizhou Intelligent during the reporting period was 52.7233 million yuan, a year-on-year decrease of 18.62%, of which the capitalized amount was 12.4295 million yuan, a year-on-year increase of 17.57%, and the capitalized amount accounted for 23.57% of the R&D investment.
Combined with the specific R&D content and progress during the reporting period, Huizhou Intelligent is requested to explain the judgment basis, time point and compliance of accounting treatment of R&D investment, and whether there is a big difference between the capitalization rate of R&D expenditure and that of companies in the same industry.
Ask the annual accountant to check and give a clear opinion.
4. According to the annual report, the book balance of accounts receivable at the end of the period was 312.1675 million yuan, of which the book balance aged for more than three years was 181.3138 million yuan, accounting for 58%. The balance of provision for bad debts at the end of the period was 192.4532 million yuan, and the provision ratio was 61.65%, a decrease of 3 percentage points from the beginning of the period. The company makes full provision for bad debts for accounts receivable aged for more than three years. During the reporting period, Huizhou Intelligent made a provision for bad debts of 7.1852 million yuan, and recovered or reversed the provision for bad debts of 20.2324 million yuan. The total amount of accounts receivable of the top five accounts receivable at the end of the period collected by the debtor was 64.7272 million yuan, of which all the accounts receivable from the top two customers were provided for bad debts. In addition, the closing balance of Huizhou Intelligent notes receivable was 144.1114 million yuan, a significant increase from the opening balance of 5.083 million yuan.
Please Huizhou Intelligence:
(1) Explain the reasons for the relatively high proportion of accounts receivable balance for more than three years, as well as the basic information of the main debtors, including but not limited to name, place of registration, registered capital, personnel, main business scope, major shareholders, current business status, sales formation time, sales content, basis for revenue recognition in the early stage, main terms of the contract, payment arrangements and the main reasons for the long-term failure to recover the money;
(2) Explain whether there are significant differences between the main business involved in the failure to recover accounts receivable for more than three years and those of comparable companies in the same industry, and explain whether the recognition of sales revenue in the previous period is prudent and reasonable in combination with the company's revenue recognition policy;
(3) Explain the time, amount, time of provision for impairment and the reason, basis and reasonableness of the reversal or recovery of bad debt provision during the reporting period;
(4) Combined with the credit policy and its changes, explain the reasons for the significant year-on-year increase in bills receivable at the end of the reporting period, the sharp increase in the use of bills for settlement, and the impact of the significant increase in bill settlement volume on Huizhou's cash flow.
Ask the annual accountant to check and give a clear opinion.
5. According to the annual report, the closing book balance of other receivables of Huizhou Intelligent was 144.2948 million yuan, of which 89.8756 million yuan was borrowed from Qiqihar Xinhao Runcheng Real Estate Development Co., Ltd., a related party, and the closing balance of bad debt provision was 78.8827 million yuan, with a provision ratio of 62.29%. The closing book balance of $4.3 million was in the category of "Other". The closing book balance of other receivables aged more than three years was 78.9019 million yuan, accounting for 63%. The provision for bad debts at the end of the period for other receivables was 66.82%, an increase of nearly 20 percentage points from the beginning of the period. Among the top five accounts receivable at the end of the period collected by the debtor, the closing book balances of natural persons Jiang Hu, Liu Debin and Cai Rui were 14.2932 million yuan, 11.45 million yuan and 6.8142 million yuan respectively, and the proportion of bad debt provision at the end of the period was 4.97%, 38.86% and 100% respectively, and the nature of the payments was equity transfer money. The closing balance of the natural person Luo Shengqin was 0, and the opening balance was 2.2204 million yuan.
Please Huizhou Intelligence:
(1) Combined with the industry, operating conditions and financial situation of Xinhao Runcheng, explain the possibility of recovering the loan receivable, whether the provision for bad debts is sufficient, whether there is a related relationship, concerted action relationship or other relationships that may cause interest tilt between Xinhao Runcheng and its major shareholders and actual controllers and Huizhou Intelligence, directors, supervisors, senior managers, more than 5% shareholders and controlling shareholders, whether there are other interest arrangements, etc., and whether the aforesaid loans ultimately flow to the controlling shareholders, directors and supervisors of Huizhou Intelligence, senior management and other stakeholders, whether it forms non-operational occupation;
(2) Explain the reasons for the relatively high proportion of other accounts receivable balances for more than three years, as well as the basic information of the main debtors, including but not limited to name, place of registration, registered capital, personnel, main business scope, major shareholders, current business status, sales formation time, content of sales products, basis for revenue recognition in the early stage, main terms of the contract, payment arrangements and the main reasons for the long-term failure to recover the money;
(3) Explain the formation process of the transfer of equity receivables from natural persons Jiang Hu, Liu Debin, Cai Rui, Radio and Television Express Group Co., Ltd., and Luo Shengqin, including the specific content of the equity transfer, the formation time, the collection arrangement, and the reasons for the long-term non-recovery, etc., and explain whether the aforesaid four natural persons have related relationships, concerted action relationships, or other relationships that may cause interest tilt between the aforesaid four natural persons and the company, directors, supervisors, senior managers, more than 5% shareholders and controlling shareholders, and whether there are other interest arrangements, etc. Combined with the financial situation of Jiang Hu, a natural person, it is explained whether the provision for bad debts of the receivables is sufficient.
Ask the annual accountant to check and give a clear opinion.
6. According to the annual report, the closing balance of Huizhou Intelligent Prepayment was 40.2035 million yuan, an increase of 16% from the beginning of the period. The total amount of the top five prepayments at the end of the period collected by prepayment objects was 7.7239 million yuan, accounting for 19.21% of the total closing balance of prepayments.
Please explain the specific content of the prepayment, including the main purpose and nature of the prepayment, the main prepayment objects and basic information, the final flow of the prepaid funds, explain the reasons for the increase in the prepaid investment compared with the beginning of the reporting period, and whether the prepayment is occupied by related parties (disguised).
Ask the annual accountant to check and give a clear opinion.
7. According to the annual report, the book value of Huizhou Intelligent Inventory at the end of the period was 802.6537 million yuan, an increase of 22% from the beginning of the period, and the provision ratio for inventory decline at the end of the period was 12.95%, a decrease of 3 percentage points from the beginning of the period. In the inventory at the end of the period, the book value of products and issued commodities was 294.6229 million yuan and 266.6517 million yuan respectively, accounting for 37% and 33% respectively.
Please Huizhou Intelligence:
(1) Explain the main composition of the company's ending inventory by product, and explain the reasons and reasonableness of the decrease in the proportion of provision for price decline at the end of the period when the ending inventory increases significantly;
(2) Explain the names of the top five customers who issued the goods, the time and amount of the contract signed, the time when the products were issued, the acceptance and collection arrangements, the current carry-over situation, etc., as well as the main reasons for the large amount of the goods issued;
(3) Explain the reasons why the issued goods do not meet the conditions for revenue recognition, and explain whether there is a risk that the issued goods cannot generate revenue in combination with factors such as historical sales returns, and whether Huizhou Intelligent can effectively control the issued goods;
(4) Explain the main composition and age of the product inventory, and explain the process and basis, rationality and adequacy of the provision for inventory price decline in combination with the development of the industry, market demand, inventory price, cost changes and orders in hand.
Ask the annual accountant to check and give a clear opinion.
8. According to the annual report, the book value of the long-term equity investment at the end of the period was 822.2127 million yuan, and the balance of impairment provision at the end of the period was 234.1948 million yuan, of which the balance of the impairment provision for the investment in Jinhua Hand Speed Information Technology Co., Ltd. (hereinafter referred to as "Jinhua Hand Speed") was 218.6111 million yuan. During the reporting period, Huizhou Intelligent invested 40.95 million yuan in four companies including Yixun Times Huaxing Technology (Beijing) Co., Ltd. During the reporting period, the long-term equity investment income accounted for by the equity method was 64.2244 million yuan, of which the investment in Hainan Qiji Technology Co., Ltd., Shandong Zhonghong Information Technology Co., Ltd. and Ningbo Shouke Yanyuan Kangtai Venture Capital Partnership (Limited Partnership) recognized 38.1269 million yuan, 12.6321 million yuan and 9.975 million yuan respectively.
Please Huizhou Intelligence:
(1) Explain the basic situation of the new investment in the four companies including Yixun Times Huaxing Technology (Beijing) Co., Ltd., including the investment time, investment amount, shareholding ratio, pricing basis, main business and financial status of the target, whether there is any connection, etc.
(2) Explain the basic situation of the investment in Jinhua Hand Speed in the early stage, and the operation of Jinhua Hand Speed after the investment, explain the specific time point when the investment in Jinhua Hand Speed shows signs of impairment, the main reason and basis for the provision of large impairment, and on this basis, explain whether the relevant investment decisions of Huizhou Intelligent Investment are prudent and whether the directors of the company are diligent and conscientious;
(3) Combined with the operation of Hainan Qiji and other companies, explain whether the basis for Huizhou Intelligence's recognition of large investment income is sufficient, especially the fundamental reasons for the significant improvement in its business scale and income after Huizhou Intelligence lost control of Hainan Qiji, and whether Huizhou Intelligence's decision to give up its control was reasonable.
9. The annual report shows that the closing balance of financial assets measured at fair value and the changes of which are included in the profit or loss of the current period are 557.1294 million yuan, and the fair value change income is 83.2707 million yuan during the reporting period.
Please explain the main contents of other non-current financial assets, including the investment target, investment time, investment amount, operating conditions, etc., and explain the specific calculation basis and process of fair value change income.
Ask the annual accountant to check and give a clear opinion.
10. According to the annual report, among the other payables of Huizhou Intelligence, the closing balances of the two categories of funds payable by project were 38.859 million yuan and 32.9715 million yuan respectively, of which the balance of the company's capital loans decreased by 53% compared with the beginning of the period.
Please explain the formation process of the loan and the main content of the "other" category in the payables.
Ask the annual accountant to check and give a clear opinion.
11. According to the annual report, Chengdu Tianma Precision Machinery Co., Ltd., Beijing Tianma Bearing Co., Ltd. and Zhejiang Tianma Bearing Group Co., Ltd. are subsidiaries of the company's original shareholders holding more than 5% of the shares and are related parties of the company. During the reporting period, the company's purchase and sales amounts to the aforementioned companies were 570,000 yuan and 46.824 million yuan, respectively.
Please explain the specific content of the procurement and sales in the above-mentioned related party transactions, and on this basis, explain the reasons, reasonableness and necessity of Huizhou Intelligent purchasing from related parties and selling to them at the same time, and explain the fairness of the pricing of the aforesaid related party transactions in combination with the market comparable prices.
Ask the annual accountant to check and give a clear opinion.
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Review: Sun Shijian