THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES (Incorporated in the Socialist Republic of Vietnam)

Transcription

1 THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES (Incorporated in the Socialist Republic of Vietnam) AUDITED CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2014 March 2015

2 36 Tay Thanh, Tay Thanh Ward, Tan Phu District Ho Chi Minh City, S.R. Viet Nam TABLE OF CONTENTS CONTENTS PAGE(S) STATEMENT OF THE BOARD OF DIRECTORS 1 INDEPENDENT AUDITORS REPORT 2 CONSOLIDATED BALANCE SHEET 3 6 CONSOLIDATED INCOME STATEMENT 7 CONSOLIDATED CASH FLOW STATEMENT 8 9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10 39

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5 CONSOLIDATED BALANCE SHEET As at 31 December 2014 FORM B 01-DN/HN Unit: ASSETS Codes Notes 31/12/ /12/2013 A. CURRENT ASSETS ,563,475, ,142,226,503 (100= ) I. Cash and cash equivalents ,749,128, ,096,768, Cash ,049,128,463 75,196,768, Cash equivalents ,700,000,000 42,900,000,000 II. Short-term financial investments 120 4,500,000,000 1,600,000, Short-term investments ,350,301,999 3,450,301, Provision for impairment of short-term investments 129 (1,850,301,999) (1,850,301,999) III. Short-term receivables ,691,656, ,227,713, Trade accounts receivable ,467,703, ,265,054, Advances to suppliers ,189,207,228 25,465,900, Other receivables ,416,462,462 14,518,476, Provision for short-term doubtful debts 139 (2,381,717,467) (2,021,717,467) IV. Inventories ,547,232, ,733,412, Inventories ,309,201, ,038,009, Provision for devaluation of inventories 149 (21,761,969,447) (13,304,597,502) V. Other short-term assets ,075,458,369 33,484,332, Short-term prepayments 151 6,145,585,106 3,572,291, Value added tax deductibles ,748,380,950 26,569,324, Taxes and other receivables from the State budget 154 1,848, Other short-term assets 158 4,179,643,748 3,342,715,460 The notes set out on pages 10 to 39 are an integral part of these consolidated financial statements 3

6 CONSOLIDATED BALANCE SHEET (Continued) As at 31 December 2014 FORM B 01-DN/HN Unit: ASSETS (Continuted) Codes Notes 31/12/ /12/2013 B. NON-CURRENT ASSETS 200 1,065,554,933,518 1,029,149,295,164 (200= ) I. Fixed assets ,787,371, ,802,777, Tangible fixed assets ,158,855, ,128,718,083 - Cost 222 1,275,903,829,147 1,283,700,234,922 - Accumulated depreciation 223 (722,744,973,949) (708,571,516,839) 2. Finance lease assets ,858,326,771 12,014,839,425 - Cost ,341,985,333 13,626,400,555 - Accumulated depreciation 226 (2,483,658,562) (1,611,561,130) 3. Intangible assets ,854,025,226 98,025,750,827 - Cost ,740,833, ,826,350,316 - Accumulated amortisation 229 (14,886,808,536) (11,800,599,489) 4. Construction in progress ,916,163,961 11,633,469,068 II. Investment property ,479,226, ,711,955,901 - Cost ,280,625, ,280,625,580 - Accumulated depreciation 242 (2,801,398,903) (2,568,669,679) III. Long-term financial investments ,937,172, ,909,652, Investments in associates ,084,972, ,223,443, Other long-term investments ,352,050,000 5,352,050, Provision for impairment of long-term financial investments (2,499,850,700) (2,665,840,400) IV. Other long-term assets ,351,163,541 80,724,909, Long-term prepayments ,275,464,954 77,604,523, Deferred tax assets ,040,698,587 1,742,773, Other long-term assets ,000,000 1,377,612,182 TOTAL ASSETS (270= ) 270 2,060,118,408,979 1,989,291,521,667 The notes set out on pages 10 to 39 are an integral part of these consolidated financial statements 4

7 CONSOLIDATED BALANCE SHEET (Continued) As at 31 December 2014 FORM B 01-DN/HN Unit: RESOURCES Codes Notes 31/12/ /12/2013 A. LIABILITIES (300= ) 300 1,246,605,367,379 1,247,052,444,398 I. Current liabilities ,291,360, ,790,507, Short-term loans and liabilities ,902,840, ,921,785, Trade accounts payable ,808,944, ,966,765, Advances from customers ,812,369,982 85,020,997, Taxes and amounts payable to the ,560,236,202 6,705,210,445 State budget 5. Payables to employees ,794,359,604 46,267,535, Accrued expenses ,766,268,840 6,791,105, Other current payables ,035,506,631 3,535,158, Bonus and welfare funds ,610,834, ,949,786 II. Long-term liabilities ,314,006, ,261,937, Other long-term payables ,876,000,000 17,876,000, Long-term loans and liabilities ,826,238, ,374,584, Long-term provisions ,611,767,875 19,011,352,988 B. EQUITY (400=410) ,172,539, ,859,054,730 I. Owners equity ,172,539, ,859,054, Share capital ,999,510, ,999,510, Share premium ,720,075,000 22,720,075, Treasury shares 414 (5,939,990,000) (5,939,990,000) 4. Investment and development fund ,462,726,389 2,110,908, Financial reserve fund ,432,708,944 40,080,890, Other funds ,438,003,113 15,086,185, Retained earnings ,059,505, ,801,475,131 C. NON-CONTROLLING INTERESTS ,340,502,309 6,380,022,539 TOTAL RESOURCES (440= ) 440 2,060,118,408,979 1,989,291,521,667 The notes set out on pages 10 to 39 are an integral part of these consolidated financial statements 5

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10 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2014 FORM B 03-DN/HN Unit: ITEMS Codes I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Profit before tax ,702,866, ,470,305, Adjustments for: - Depreciation and amortisation 02 58,540,985,043 56,058,627,576 - Provisions 03 8,651,382,245 13,194,165,593 - Unrealised foreign exchange loss 04 5,297,189,896 3,408,927,094 - Gain from investing activities 05 (7,651,623,622) (5,885,063,759) - Interest expense 3. Operating profit before movements in working 06 26,965,351,933 44,366,331,463 capital ,506,151, ,613,293,613 - Changes in receivables 09 5,063,911,168 23,769,592,957 - Changes in inventories 10 (21,803,278,362) (15,140,430,875) - Changes in accounts payable 11 17,985,982,621 (12,923,830,403) - Changes in prepaid expenses 12 6,991,516,052 (4,576,452,224) - Interest paid 13 (27,056,771,643) (45,125,885,050) - Corporate income tax paid 14 (16,879,406,443) (2,989,221,298) - Other cash inflows 15 1,476,600,304 16,871,707 - Other cash outflows 16 (8,518,272,018) (7,331,415,575) Net cash from operating activities ,766,433, ,312,522,852 II. CASH FLOWS USED IN INVESTING ACTIVITIES 1. Acquisition and construction of fixed assets 21 (100,352,258,399) (68,803,508,406) 2. Proceeds from sale, disposal of fixed assets 22 3,684,039,796 1,226,733, Cash outflow for lending, buying debt instruments of other entities 23 (2,900,000,000) (1,600,000,000) 4. Cash recovered from lending ,698, Investments in other entities 25 - (200,000,000) 6. Interest earned, dividends and profits received 27 2,468,946,763 2,463,558,416 Net cash used in investing activities 30 (97,099,271,840) (66,763,518,625) The notes set out on pages 10 to 39 are an integral part of these consolidated financial statements 8

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12 1. GENERAL INFORMATION Structure of ownership Thanh Cong Textile Garment Investment Trading Joint Stock Company (the Company ) was incorporated in Vietnam as a joint stock Company under Business Registration Certificate No dated 23 June 2006 issued by the Department of Planning and Investment of Ho Chi Minh City and as amended. According to 13 th amended Business Registration Certificate No dated 2 October 2013 issued by the Department of Planning and Investment of Ho Chi Minh City, the Company's share capital is 491,999,510,000. The Company s main shareholder is E-land Asia Holdings Pte Ltd, incorporated in Singapore. The number of the Company s employees as at 31 December 2014 was 4,577 (31 December 2013: 4,591). Principal activities The principal activities of the Company are manufacture and garment trading, details are as follows: Manufacture and trade cotton, fiber, garment products, footwear, machinery and equipment, spare parts, raw materials, chemicals (excluding strong toxic chemicals), dye, packing for garment and textile industry; Trade cold equipment, air-conditioners, radios and televisions, building materials, and transport vehicles; Provide services of installation and repairs for machinery and equipment; Trade road transport and merchandise transport; Trade real estates, commercial centres; Lease office buildings, factories, freight yard, machinery and equipment; Act as a commercial brokerage; Act as an agent for goods trading and goods consignment; Invest, build, trade, assemble, repair, prepare overall estimates for civil/industrial construction works, infrastructure of industrial parks and tourist area; Short-term accommodation services; Restaurant and foods services; Retails of beverage in the specialised shops; Retails of foods in the specialised shops; Trade of real estate, land use rights owned or leased; and Other retails. Details of Thanh Cong Textile Garment Investment Trading Joint Stock Company's subsidiaries and associates as at 31 December 2014 are as follows: Subsidiaries Name of subsidiaries Thanh Cong Medical Center Joint Stock Company ( Thanh Cong Medical Center ) Thanh Quang Corporation ( Thanh Quang ) Place of incorporation (or registered place) and operation Tan Phu District, Ho Chi Minh City Tan Phu District, Ho Chi Minh City Proportion of ownership (%) Charter capital as at 31/12/2014 Principal activities ,700,000,000 Medical servicing and trading drugs and medical equipment ,000,000,000 Infrastructures, manufacturing and trading fabric 10

13 Name of subsidiaries Thanh Cong Vinh Long One Member Company Limited ( Thanh Cong Vinh Long ) (*) TC Tower Company Limited ( TC Tower ) (**) Place of incorporation (or registered place) and operation Hoa Phu Commune, Long Ho District, Vinh Long Province Tan Phu District, Ho Chi Minh City Proportion of ownership (%) Charter capital as at 31/12/2014 Principal activities Productions, business, exports, imports of cottons, fiber, threads, cloths, garments, footwear and machines, equipment, parts, auxiliary and raw materials, materials, chemicals (except poisonous chemicals), dye-stuffs, packing Real estate trading (*) Thanh Cong Vinh Long One Member Company Limited ( Thanh Cong Vinh Long ) was established in Vietnam under Business Registration Certificate No dated 6 May 2014 issued by the Department of Planning and Investment of Vinh Long Province. The subsidiary s registered charter capital is 129,000,000,000. As at the date of this report, the Company has not contributed capital to Thanh Cong Vinh Long yet. (**) TC Tower Company Limited ( TC Tower ) was established in Vietnam under Investment Certificate No dated 31 October 2014 issued by People's Committee of Ho Chi Minh City. The subsidiary s registered charter capital is 159,150,000,000, in which Thanh Cong Textile Garment Investment Trading Joint Stock Company shall contribute 135,808,000,000, equivalent 85.33%. As at the date of this report, the Company has not contributed capital to TC Tower yet. Associates Name of associates Thanh Chi Corporation ( Thanh Chi ) Thanh Cong Securities Joint Stock Company ( TCSC ) Thanh Phuc Investment Construction Corporation ( Thanh Phuc ) Place of incorporation (or registered place) and operation Proportion of ownership (%) Charter capital as at 31/12/2014 Principal activities Vung Tau City ,890,000,000 Trading and exploiting sand and stone District 3, Ho Chi Minh City Tan Phu District, Ho Chi Minh City ,000,000,000 Brokerage, self - trading securities, securities guaranty and securities investment consultancy ,000,000,000 Constructing and managing projects 11

14 Name of associates Vung Tau Golf Tourism Joint Stock Company ( Golf Vung Tau ) Place of incorporation (or registered place) and operation Ba Ria, Vung Tau City Proportion of ownership (%) Charter capital as at 31/12/2014 Principal activities ,000,000,000 Providing tourism and entertainment services 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying consolidated financial statements, expressed in Vietnam Dong ( ), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, accounting regime for enterprises and legal regulations relating to financial reporting. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. Financial year The Group s financial year begins on 01 January and ends on 31 December. 3. NEW ACCOUNTING GUIDANCE IN ISSUE NOT YET ADOPTED On 22 December 2014, the Ministry of Finance issued Circular No. 200/2014/TT-BTC ( Circular 200 ) guiding the application of accounting regime for enterprises and Circular No. 202/2014/TT- BTC ( Circular 202 ) guiding the preparation and presentation of consolidated financial statements. These circulars are effective for financial years beginning on or after 1 January Circular 200 will supersede the regulations for accounting regime promulgated under Decision No. 15/2006/QD- BTC dated 20 March 2006 issued by the Ministry of Finance and Circular No. 244/2009/TT-BTC dated 31 December 2009 issued by the Ministry of Finance. Circular 202 will supersede section XIII in Circular No. 161/2007/TT-BTC dated 31 December 2007 of the Ministry of Finance guiding the preparation and presentation of consolidated financial statements in accordance with Vietnamese Accounting Standard No. 25 Consolidated Financial Statements and Accounting for Investments in Subsidiaries. The Board of Directors is considering the extent of impact of the adoption of these circulars on the Company s consolidated financial statements for future accounting periods. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Group in the preparation of these consolidated financial statements, are as follows: Estimates The preparation of consolidated financial statements in conformity with Vietnamese Accounting Standards, accounting regime for enterprises and legal regulations relating to financial reporting requires the Board of Directors to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the financial year. Although these accounting estimates are based on the Board of Directors best knowledge, actual results may differ from those estimates. 12

15 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) up to the end of each reporting period. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprises so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Company. All inter-company transactions and balances between group s enterprises are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Company s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination (see below) and the non-controlling s share of changes in equity since the date of the combination. Losses applicable to the non-controlling in excess of the non-controlling s interest in the subsidiary s equity are allocated against the interests of the Company except to the extent that the non-controlling has a binding obligation and is able to make an additional investment to cover the losses. Financial instruments Initial recognition Financial assets: At the date of initial recognition, financial assets are recognised at cost plus transaction costs that are directly attributable to the acquisition of the financial assets. Financial assets of the Group comprise cash and cash equivalents, trade and other receivables, investments in securities of public and listed companies and deposits. Financial liabilities: At the date of initial recognition financial liabilities are recognised at cost plus transaction costs that are directly attributable to the issue of the financial liabilities. Financial liabilities of the Group comprise obligations under finance leases, borrowings, trade and other payables and accruals. Subsequent measurement after initial recognition Currently, there are no requirements for the subsequent measurement of the financial instruments after initial recognition. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Provision for doubtful debts Provision for doubtful debts is made for receivables that are overdue for six months or more, or when the debtor is in dissolution, in bankruptcy, or is experiencing similar difficulties and so maybe unable to repay the debt. 13

16 Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. The evaluation of necessary provision for inventory obsolescence follows current prevailing accounting regulations which allow provisions to be made for obsolete, damaged, or sub-standard inventories and for those which have book value higher than net realisable value as at the balance sheet date. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The cost of purchased tangible fixed assets comprises its purchase price and any directly attributable costs of bringing the assets to its working condition and location for its intended use. The costs of self-constructed or manufactured assets are the actual construction or manufacturing cost plus installation and test running costs. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows: Years Buildings and structures Machinery and equipment 7-15 Motor vehicles 10 Office equipment 7-15 Others 7-22 Intangible assets and amortisation Intangible assets represent land use rights, patents and software. Intangible assets are stated at cost less accumulated amortisation and are amortised on the straight-line basis over their estimated useful lives. Definite land use rights are carried at cost and amortised on the straight-line basis over their estimate useful lives from years. Indefinite land use rights are carried at cost and not amortised. Patents and software are amortised on the straight-line basis over their estimate useful lives from 4-10 years. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group s general policy on borrowing costs. Leases where substantially all the rewards and risks of ownership of assets remain with the leasing Group are accounted for as operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Assets held by the Group under finance leases are machinery which depreciated over the period of years. 14

17 Construction in progress Properties in the course of construction for production, rental or administrative purposes, or for the purposes not yet determined, are carried at cost. Cost includes professional fees, and for qualifying assets, borrowing costs dealt with in accordance with the Group s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Investment property Investment properties, which are composed of land use rights and buildings and structures held by the Group to earn rentals or for capital appreciation or both, are stated at cost less accumulated depreciation. The cost of purchased investment properties comprises its purchase price and any directly attributable expenditures, such as professional fees for legal services, property transfer taxes and other related transaction costs. The costs of self-constructed investment properties are the finally accounted construction or directly attributable costs of the properties. Buildings and structures are depreciated using the straight-line method over their estimated useful lives of 50 years. Definite land use rights are amortised using the straight-line method over number of years in accordance with the terms indicated in each land use right certificate. Land use rights which are granted for an indefinite term are carried at cost and not amortised. Investments in associates An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Interests in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Company s share of the net assets of the associate. Losses of an associate in excess of the Company's interest in that associate (which includes any long-term interests that, in substance, form part of the Company's net investment in the associate) are not recognised. Where a group entity transacts with an associate of the Company, unrealised profits and losses are eliminated to the extent of the Company s interest in the relevant associate. Goodwill Goodwill represents the excess of the cost of acquisition over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of associate entity at the date of acquisition. Goodwill is amortised on the straight-line basis over its estimated period of benefit of 10 years. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal. Other long-term investments Other long-term investments include investments in securities and investments in companies with the proportion of ownership interest less than 20%. Other long-term investments are recognised on a trade date basis and are initially measured at cost including directly attributable transaction costs. At the subsequent reporting dates, other long-term investments are measured at cost, less the amount of impairment of investments. Provision for impairment of other long-term investments is made in accordance with current prevailing accounting regulations. 15

18 Long-term prepayments Long-term prepayments comprise prepaid land rentals at Xuyen A Industrial Zone Long An Province, Nhi Xuan Industrial Zone Hoc Mon District, Ho Chi Minh City and Trang Bang Industrial Zone Tay Ninh Province, and other prepayments (allocated within 2 years). Prepaid land rentals are charged to income statement using the straight-line method over the lease term from 45 to 58 years. Revenue recognition Revenue from the sale of goods is recognised when all five (5) following conditions are satisfied: (a) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the Group; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue of a transaction involving the rendering of services is recognised when the outcome of such transactions can be measured reliably. Where a transaction involving the rendering of services is attributable to several periods, revenue is recognised in each period by reference to the percentage of completion of the transaction at the balance sheet date of that period. The outcome of a transaction can be measured reliably when all four (4) following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the Group; (c) the percentage of completion of the transaction at the balance sheet date can be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable interest rate. Dividend income from investments is recognised when the Group s right to receive payment has been established. Foreign currencies The Group applies the method of recording foreign exchange differences in accordance with Vietnamese Accounting Standard No. 10 (VAS 10) Effects of changes in foreign exchange rates and Circular No. 179/2012/TT-BTC dated 24 October 2012 issued by the Ministry of Finance providing guidance on recognition, measurement and treatment of foreign exchange differences in enterprises. Accordingly, transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. The balances of monetary items denominated in foreign currencies as at the balance sheet date are retranslated at the exchange rates on the same date. Exchange differences arising from the translation of these accounts are recognised in the income statement. Unrealised exchange gains as at the balance sheet date are not treated as part of distributable profit to shareholders. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets. All other borrowing costs are recognised in the income statement when incurred. 16

19 Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Board of Directors best estimate of the expenditure required to settle the obligation as at the balance sheet date. Severance allowance payable The severance allowance for employees is accrued at the end of each reporting period for all employees having worked at the Group for more than 12 months as of 31 December 2008 with the allowance made for each year of service up to 31 December 2008 equaling to a half of an average monthly salary under the Vietnamese Labour Code, Social Insurance Code and relevant guiding documents. The average monthly salary used for calculation of severance allowance shall be adjusted to be the average of the 6 consecutive months nearest to the date of the financial statements at the end of each reporting period. The increase or decrease in the accrued amount shall be recorded in the income statement. Tax Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is recognised on significant differences between carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using balance sheet liability method. Deferred tax liabilities are generally recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The determination of the current tax payable and deferred tax is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities examinations. Other taxes are paid in accordance with the prevailing tax laws in Vietnam. Appropriation of funds and dividend distribution Dividend distribution to the Group s shareholders is recognised as a liability in the Group s consolidated financial statements in the year in which the dividends are approved by the Group s shareholders. Net profit after tax is available for appropriation to shareholders after approval by the shareholders at the Annual General Shareholders Meeting, and after making appropriation to reserve funds in accordance with the Group's Charter and Vietnamese regulatory requirements. 17

20 Treasury shares Treasury shares are shares issued and bought-back by the Company, but they are not cancelled and shall be re-issued in the period which complies with law on securities. Treasury shares are hold by the Company will have no dividend, no right for election or join to share assets when the Company is dissolved. When distributing dividend for shares, treasury shares hold by the Company shall be considered as not yet sold. Value of treasury shares is reflected as prices actually bought-back including buying-back prices and expenses directly related to buying-back of shares, such as expenses of transaction, information. 5. CASH AND CASH EQUIVALENTS 31/12/ /12/2013 Cash on hand 461,814,575 1,198,171,013 Cash in bank 93,587,313,888 73,998,597,275 Cash equivalents 46,700,000,000 42,900,000, ,749,128, ,096,768,288 Cash equivalents represent short-term bank deposits with an original maturity from 3 weeks to 3 months. These fixed term deposits earn average interest rate of 1% - 5.5% per annum (2013: 7% per annum). 6. SHORT-TERM INVESTMENTS Short-term investments represent a loan to third party in This investment has been fully provided provision as at 31 December 2014 in according to the Group s accounting policy. 7. OTHER RECEIVABLES 31/12/ /12/2013 Third parties 10,814,087,462 11,363,424,845 Related parties 2,602,375,000 3,155,051,432 13,416,462,462 14,518,476,277 18

21 8. INVENTORIES 31/12/ /12/2013 Goods in transit 66,541,684,138 64,137,681,048 Raw materials 200,233,929, ,386,896,846 Tools and supplies 7,723,197 47,720,334 Work in progress 126,716,300, ,486,384,981 Finished goods 245,498,821, ,429,443,446 Merchandise 2,909,398,049 3,748,946,526 Goods on consignment 4,401,345,739 7,800,936, ,309,201, ,038,009,854 Provision for devaluation of inventories (21,761,969,447) (13,304,597,502) Net realisable value 624,547,232, ,733,412,352 Movement of provision for devaluation of inventories during the year as follow: At the beginning of the year 13,304,597, ,906,308 Provision for the year 14,264,840,890 13,156,239,442 Reversal in the year (5,807,468,945) (565,548,248) At the end of the year 21,761,969,447 13,304,597,502 19

22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 9. TANGIBLE FIXED ASSETS Buildings Machinery Motor Office and structures and equipment vehicles equipment Others Total COST As at 01/01/ ,059,990, ,820,031,964 17,171,524,210 12,683,133, ,965,554,394 1,283,700,234,922 - Additions 2,302,563,070 6,011,357, ,683,636 1,313,071,000 3,636,404,279 14,018,079,097 - Transfer from construction 237,740,000 5,937,616,815-38,545,455-6,213,902,270 in progress - Transferred from finance - 13,626,400, ,626,400,555 lease assets - Disposals (1,106,000,000) (20,472,004,743) (176,039,720) - (19,777,644,803) (41,531,689,266) - Other adjustments (123,098,431) - (123,098,431) As at 31/12/ ,494,293, ,923,401,703 17,750,168,126 13,911,652, ,824,313,870 1,275,903,829,147 ACCUMULATED DEPRECIATION As at 01/01/ ,003,269, ,278,725,271 8,157,153,699 9,005,210, ,127,157, ,571,516,839 - Charge for the year 5,598,430,315 37,570,217,451 1,620,010, ,150,157 6,303,103,958 51,901,912,040 - Transferred from finance - 2,448,037, lease assets 2,448,037,300 - Disposals (1,106,000,000) (19,774,024,433) (146,699,770) - (19,026,669,596) (40,053,393,799) - Other adjustments (123,098,431) - (123,098,431) As at 31/12/ ,495,700, ,522,955,589 9,630,464,088 9,692,262,390 87,403,591, ,744,973,949 NET BOOK VALUE As at 31/12/ ,998,593, ,400,446,114 8,119,704,038 4,219,389,625 31,420,722, ,158,855,198 As at 31/12/ ,056,720, ,541,306,693 9,014,370,511 3,677,923,327 34,838,396, ,128,718,083 As noted further in Note 18 and 22, the Group has pledged its buildings and machinery, equipment, which has a carrying value of approximately billion as at 31 December 2014 (31 December 2013: 442 billion), to secure banking facilities granted to the Group. The cost of the Group s tangible fixed assets includes 380 billion which have been fully depreciated but which are still in use (31 December 2013: 413 billion). 20

23 10. FINANCE LEASE ASSETS Machinery, equipment COST As at 01/01/ ,626,400,555 Additions 71,341,985,333 Transfer to tangible fixed asset (13,626,400,555) As at 31/12/ ,341,985,333 ACCUMULATED DEPRECIATION As at 01/01/2014 1,611,561,130 Charge for the year 3,320,134,732 Transfer to tangible fixed asset (2,448,037,300) As at 31/12/2014 2,483,658,562 NET BOOK VALUE As at 31/12/ ,858,326,771 As at 31/12/ ,014,839, INTANGIBLE ASSETS Land use rights Patents Software Total COST As at 01/01/ ,334,416,604 2,705,995,847 10,785,937, ,826,350,316 Additions - 1,236,900, ,583,446 1,914,483,446 As at 31/12/ ,334,416,604 3,942,895,847 11,463,521, ,740,833,762 ACCUMULATED AMORTISATION As at 01/01/2014 8,703,705,228 1,453,539,402 1,643,354,859 11,800,599,489 Charge for the year 630,663,842 1,104,472,825 1,351,072,380 3,086,209,047 As at 31/12/2014 9,334,369,070 2,558,012,227 2,994,427,239 14,886,808,536 NET BOOK VALUE As at 31/12/ ,000,047,534 1,384,883,620 8,469,094,072 96,854,025,226 As at 31/12/ ,630,711,376 1,252,456,445 9,142,583,006 98,025,750,827 As noted further in Note 18 and 22, the Group has pledged land use rights with a carrying value of approximately 9.7 billion as at 31 December 2014 (31 December 2013: 48 billion) to secure banking facilities granted to the Group. 21

24 12. CONSTRUCTION IN PROGRESS As at 1 January 11,633,469,068 13,310,248,891 Additions 87,933,559,412 61,928,962,470 Transfer to tangible fixed assets (6,213,902,270) (57,869,818,022) Transfer to finance lease assets (71,341,985,333) - Transfer to intangible assets - (5,491,630,030) Other transfers (1,094,976,916) (244,294,241) As at 31 December 20,916,163,961 11,633,469,068 The total interest expense which had been capitalised into the cost of construction in progress during the year was 1,285,030,254 (2013: 1,202,891,832). As at 31 December 2014, construction in progress comprises the following major projects: 31/12/ /12/2013 Thanh Cong Tower 1 12,400,477,320 11,115,447,067 Others 8,515,686, ,022,001 20,916,163,961 11,633,469, INVESTMENT PROPERTY Buildings for lease Land use rights Total COST As at 01/01/2014 & 31/12/ ,620,896, ,659,728, ,280,625,580 ACCUMULATED DEPRECIATION As at 01/01/2014 2,568,669,679-2,568,669,679 Charge for the year 232,729, ,729,224 As at 31/12/2014 2,801,398,903-2,801,398,903 NET BOOK VALUE As at 31/12/2014 8,819,497, ,659,728, ,479,226,677 As at 31/12/2013 9,052,226, ,659,728, ,711,955,901 As noted further in Note 18 and 22, the Group has pledged investment property with a carrying value of approximately 110 billion as at 31 December 2014 (31 December 2013: 110 billion) to secure banking facilities granted to the Group. As at 31 December 2014, the Group s Board of Directors has not determined fair value of the investment property due to the intention of holding for a long-term and there is no basis for determination. 22

25 14. INVESTMENTS IN ASSOCIATES 31/12/ /12/2013 Cost of investment in associates 113,046,152, ,046,152,000 Share of post-acquisition profits, net of dividends received 19,038,820,844 17,177,291, ,084,972, ,223,443,101 Goodwill (6,384,523,879) (7,525,298,143) Company s share of associates net assets 125,700,448, ,698,144,958 Total assets 518,236,356, ,281,384,150 Total liabilities (82,750,449,284) (81,455,052,702) Net assets 435,485,907, ,826,331,448 Company s share of associates net assets 125,700,448, ,698,144, Net profit 10,690,654,731 11,896,327,413 Company s share of associates net profit 3,002,304,007 3,509,105, OTHER LONG-TERM INVESTMENTS 31/12/ /12/2013 Viet Thang Textile Joint Stock Company 125,000, ,000,000 Thang Loi Textile and Garment Company 1,576,000,000 1,576,000,000 Hue Garment and Textile Company 318,000, ,000,000 SY Vina Joint Stock Company 883,450, ,450,000 Vietcombank 2,449,600,000 2,449,600,000 5,352,050,000 5,352,050,000 Provision for other long-term investments (2,499,850,700) (2,665,840,400) Net other long-term investments 2,852,199,300 2,686,209,600 During the year, the Group reversed the provision for other long-term investments with the amount of 165,989,700 (2013: 86,827,600). 23

26 16. LONG-TERM PREPAYMENTS At the beginning of the year 77,604,523,018 80,467,811,140 Additions 118,243,000 7,431,629,168 Transfer from tangible fixed assets - 3,174,784,636 Transfer from intangible assets - 6,728,889 Transfer to intangible assets - (10,242,009,629) Allocated to expenses during the year - (3,219,053,107) Others (7,447,301,064) (15,368,079) At the end of the year 70,275,464,954 77,604,523,018 Details of long-term prepayments are as follows: 31/12/ /12/2013 Land rental expenses 68,548,112,642 73,032,304,088 Others 1,727,352,312 4,572,218,930 70,275,464,954 77,604,523, DEFERRED TAX ASSET The followings are the major deferred tax liabilities and assets recognized by the Group, and the movements thereon, during the current year and prior year: Foreign Provisions and accruals exchange difference Tax loss Total As at 01 January ,556,320,957 19,451,312 2,114,685,442 3,690,457,711 Credit/(charge) to profit for the year 184,604,624 (17,602,934) (2,114,685,442) (1,947,683,752) As at 31 December ,740,925,581 1,848,378-1,742,773,959 Credit/(charge) to profit for the year 298,817,410 (892,782) - 297,924,628 As at 31 December ,039,742, ,596-2,040,698,587 Deferred tax liabilities and assets have been offset in accordance with the Group's accounting policy for financial reporting purposes as follows: 31/12/ /12/2013 Deferred tax liabilities (11,388,456) (13,291,317) Deferred tax assets 2,052,087,043 1,756,065,276 2,040,698,587 1,742,773,959 24

27 18. SHORT-TERM LOANS AND LIABILITIES 31/12/ /12/2013 Short-term borrowings 575,867,679, ,635,544,753 - Far East National Bank Ho Chi Minh City 19,116,176,001 26,705,819,228 Branch - Vietcombank Ho Chi Minh City Branch 242,026,816, ,014,492,442 - Standard Charterd Bank 26,263,067,743 24,295,964,168 - BIDV - Ho Chi Minh City Branch 82,110,253, ,988,561,268 - HSBC Bank (Vietnam) Ltd 58,847,224,637 21,923,266,191 - Vietinbank - Ho Chi Minh City Branch 132,847,740, ,707,441,456 - Vietnam International Bank - Ho Chi Minh City 14,656,400,883 - Current portion 71,035,161,716 64,286,240,312 - Current portion of long-term loans 52,283,552,000 59,389,035,896 - Current portion of long-term obligations under finance lease 18,751,609,716 4,897,204, ,902,840, ,921,785,065 The short-term loans from local banks obtained by the Group are details as follows: Lenders Credit limit Credit term Interest rates Secured by Far East National Bank Ho Chi Minh City Branch Vietcombank- Ho Chi Minh City Branch USD 3,000,000 1 year LIBOR % p.a Inventories 450,000,000,000 1 years Floating rate Fixed assets Standard Chartered Bank USD 10,000,000 5 years LIBOR 3 months + 2.7% p.a BIDV - Ho Chi Minh City Branch Letter of Credit from E-land Asia Holdings Pte Ltd 280,000,000,000 1 year Floating rate Inventories HSBC Bank (Vietnam) Ltd USD 5,000,000 1 year LIBOR 3 months + 1.5% p.a Vietinbank - Ho Chi Minh 200,000,000,000 Less than 1 Floating rate City Branch year Vietnam International Bank Ho Chi Minh City Branch Inventories Inventories 50,000,000,000 1 year Floating rate Inventories 19. TAXES AND AMOUNTS PAYABLE TO THE STATE BUDGET 31/12/ /12/2013 Corporate income tax 2,777,360,029 6,016,868,689 Personal income tax 782,876, ,341,756 3,560,236,202 6,705,210,445 25

28 20. OTHER CURRENT PAYABLES 31/12/ /12/2013 Union fee 1,074,125, ,526,485 Dividends payable 29,566,537,650 97,278,800 Others 1,394,843,017 2,595,352, OTHER LONG-TERM PAYABLES 32,035,506,631 3,535,158,017 Other long-term payables represent the amount payable to State Treasury for the increase in value of a number of land lots which were granted to the Company or leased when it was equitized in In accordance with the asset revaluation report dated 28 September 2005, among other land lots, there were 5 land lots with the total areas of 36,716 sqm were revalued. The amount will be paid once the Company completes the transfer of title of the land use rights to the Company s name. 22. LONG-TERM LOANS AND LIABILITIES 31/12/ /12/2013 Long-term loans 192,622,942, ,558,385,643 - Vietcombank - Ho Chi Minh City Branch 15,048,120,000 31,927,722,800 - E-Land Asia Holdings Pte Ltd 149,520,000, ,560,000,000 - Vietnam Development Bank - Ho Chi Minh City Branch 672,342,843 2,736,342,843 - Shinhan Bank Vietnam Limited 27,382,480,000 81,334,320,000 Long-term obligations under finance leases 29,203,295, ,198,628 - Kexim Vietnam Leasing Co., Ltd - 816,198,628 - Vietcombank Leasing Co., Ltd. 29,203,295, ,826,238, ,374,584,271 26

29 The long-term loans are from local banks and shareholders obtained by the Group, details are as follows: Lenders Contract No. Credit limits Credit term Interest rates E-land Asia Holdings 04/2010 USD 1,000,000 3 years 0.99% p.a Pte Ltd E-land Asia Holdings 01/2011 USD 6,000,000 3 years 0.78% p.a Pte Ltd Vietcombank /DTDA/13CD 23,830,000,000 5 years Floating rate Ho Chi Minh City Branch Vietcombank /DTDA/13CD USD 927,359 5 years Floating Rate Ho Chi Minh City Branch Vietnam Development Bank - Ho Chi Minh City Branch 46/HĐTD TW 22,000,000, years 3% p.a Shinhan Bank Vietnam Limited ,200,000,000 3 years LIBOR 3 months + 4% p.a for USD loan and MFC 3 months % p.a for loan Vietcombank Leasing Co., Ltd /CTTC USD 615,200 3 years /CTTC USD 324,960 3 years 5.3% p.a for the first 6 month then applying basic interest rate of VCBL + 1% p.a /CTTC USD 483,000 3 years /CTTC USD 555,555 3 years /CTTC USD 669,000 3 years /CTTC USD 297,402 3 years 4.2% p.a for the first 3 month then applying basic interest rate of VCBL + 1% p.a These loans are secured by fixed assets financed by the loans. Long-term loans are repayable as follows: 31/12/ /12/2013 On demand or within one year 52,283,552,000 59,389,035,896 In the second year 33,847,654,843 59,679,880,000 In the third to fifth year inclusive 158,775,288, ,878,505, ,906,494, ,947,421,539 Less: Amount due for settlement within 12 months (shown under current liabilities) 52,283,552,000 59,389,035,896 Amount due for settlement after 12 months 192,622,942, ,558,385,643 27

30 Long-term obligations under finance leases represent machinery finance leases from Vietcombank Leasing Co., Ltd. Details of obligations under finance lease are as follows: Present value of Minimum lease payments minimum lease payments 31/12/ /12/ /12/ /12/2013 Amounts payable under finance leases: 51,767,456,611 5,865,165,264 51,562,391,617 5,862,341,249 Within one year 21,080,595,995 5,044,630,584 21,012,358,580 5,042,006,218 In the second to fifth year inclusive 30,686,860, ,534,680 30,550,033, ,335,031 Less: Future finance charges 3,812,551, ,762,220 3,607,486, ,938,205 Present value of lease obligations 47,954,905,382 5,713,403,044 47,954,905,382 5,713,403,044 Less: Amount due for settlement within 12 months (shown under current liabilities) 18,751,609,716 4,897,204,416 Amount due for settlement after 12 months 29,203,295, ,198, LONG-TERM PROVISIONS Long-term provisions represent for the severance allowance made in accordance with the Group s policies. 24. OWNER S EQUITY The list of main shareholders of the Company who are holding 5% of share or more and other shareholders have been fixed as at 22 December 2014 and 10 February 2014 by Ho Chi Minh Stock Exchange ( HOSE ) as follows: As at 22/12/2014 As at 10/02/2014 Shares % Shares % E-Land Asia Holdings Pte Ltd 21,270, ,707,990,000 21,270, ,707,990,000 Vinatex (*) 9-90, ,000 irect Securities Corporation , ,000 Others 27,828, ,286,780,000 27,828, ,286,880,000 Treasury shares 100, ,004,500, , ,004,500,000 (*) Vinatex is the State shareholder 49,199, ,999,510,000 49,199, ,999,510,000 Shares 31/12/ /12/2013 Number of shares issued to public 49,199,951 49,199,951 Number of treasury shares 100, ,450 Number of outstanding shares in circulation 49,099,501 49,099,501 The Company has one class of ordinary share which carry no right to receive any fixed dividend with the par value of 10,000/share. The shareholders of ordinary shares are entitles to receive dividends as declared from time to time and are entitled to have one vote per share at the Company s shareholders meetings. 28

31 Ho Chi Minh City, S.R. Viet Nam For year ended 31 December 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN Movement in owner s equity: Investment and Financial Share capital Share premium Treasury shares development fund reserve fund Other funds Retained earnings Total Balance as at 01/01/ ,374,860,000 44,094,132,000 (5,939,990,000) 24,423,233,440 42,106,726,995 15,086,185,164 47,925,310, ,070,458,100 Capital increase 44,624,650,000 (22,312,325,000) - (22,312,325,000) Profit for the year ,518,179, ,518,179,489 Use in the year (2,025,836,000) - - (2,025,836,000) Others - 938,268, (1,642,014,859) (703,746,859) - Balance as at 31/12/ ,999,510,000 22,720,075,000 (5,939,990,000) 2,110,908,440 40,080,890,995 15,086,185, ,801,475, ,859,054,730 Profit for the year ,400,413, ,400,413,084 Funds appropriation ,351,817,949 12,351,817,949 12,351,817,949 (55,583,180,770) (18,527,726,923) Dividends declared (78,559,201,600) (78,559,201,600) Balance as at 31/12/ ,999,510,000 22,720,075,000 (5,939,990,000) 14,462,726,389 52,432,708,944 27,438,003, ,059,505, ,172,539,291 According to the Annual General Shareholders Meeting minute dated on 26 April 2013, the Company s shareholders approved the plan of appropriation for the investment and development fund, financial reserve fund, other funds and bonus and welfare funds at the ratio of 10%, 10%, 10% and 15% of consolidated profit after tax of the year 2013, respectively. According to Board of Directors' Resolution No. 07/2014/NQ-HĐQT dated 31 March 2014, the Board of Directors approved to pay dividend for the year 2013 at the ratio of 10% of share s par value. According to Notification No. 183/CV-TCG-ISD dated 20 November 2014, the Board of Directors approved to advance dividend for the year 2014 at the ratio of 6% of share s par value. The final figures relating to dividend and funds and reserves appropriation from profit after tax of the year 2014 will be approved by shareholders at the Company s Annual General Shareholders Meeting. 29