NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
73
CITIC ENVIROTECH LTD.
Annual
Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.25 Perpetual capital securities
The perpetual capital securities do not have a maturity date and the Company is able to elect to
defer making a distribution subject to the terms and conditions of the perpetual capital securities.
Accordingly, the Company is not considered to have a contractual obligation to make principal
repayments or distributions in respect of its perpetual capital securities issue and the perpetual
capital securities are presented within equity. Distributions are treated as dividends which will be
directly debited from equity. Costs directly attributable to the issue of the perpetual capital securities
are deducted against the proceeds from the issue.
2.26 General reserve
Pursuant to relevant laws and regulations in the PRC applicable to foreign investment enterprises
and the Articles of Association of the PRC subsidiaries, the dividend declaring subsidiaries are
required to maintain two statutory reserves, being a statutory surplus reserve fund and an enterprise
fund. Appropriations to such reserves are made out of profit after taxation of the statutory financial
statements of the subsidiaries. The subsidiaries are required to transfer 10% of its profit after
taxation as reported in its PRC statutory financial statements to the statutory surplus reserve fund
until the balance reached 50% of its registered capital. The statutory surplus reserve fund can be
used to make up prior year losses incurred and, with approval from relevant government authority, to
increase capital.
The subsidiaries are also required to make appropriation from profit after taxation as reported in the
PRC statutory financial statements to the enterprise expansion fund at rates determined by the Board
of Directors. The enterprise expansion fund, subject to approval by relevant government authority,
may also be used to increase capital.
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2 to the financial
statements, management is required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods if the revision affects both
current and future periods.
(i)
Critical judgements in applying the Group’s accounting policies
Management is of the opinion that any instances of application of judgements are not
expected to have a significant effect on the amounts recognised in the financial statements
apart from those involving estimation (see below).
