- Part 8: For the preceding part double click ID:nRSc0740Pg
million
Balance at 1 January 2017 119,525
Others 4
Balance at 30 June 2017 119,529
Balance at 30 June 2017
119,529
Capital reserve represents mainly: (a) the difference between the total amount of the par value of shares issued and the
amount of the net assets transferred from Sinopec Group Company in connection with the Reorganisation; (b) share premiums
derived from issuances of H shares and A shares by the Company and excess of cash paid by investors over their
proportionate shares in share capital, the proportionate shares of unexercised portion of the Bond with Warrants at the
expiration date, and the amount transferred from the proportionate liability component and the derivative component of the
converted portion of the 2011 Convertible Bonds; (c) difference between consideration paid for the combination of entities
under common control and the transactions with minority interests over the carrying amount of the net assets acquired.
35 OTHER COMPREHENSIVE INCOME
The Group
(a) Each item of other comprehensive income and the influence of the income tax and the process of change to profit or
loss
Six-month period ended 30 June 2017
Before-taxamountRMB million Tax effectRMB million Net-of-taxamountRMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging 3,406 (604) 2,802
instruments recognised during the period
(Add)/less: Adjustments of amounts transferred to initial carrying amount (89) 15 (74)
of hedged items
Total amounts transferred to profit or loss from other 3,281 (567) 2,714
comprehensive income during the period
Subtotal 214 (52) 162
Changes in fair value of available-for-sale financial assets recongnised (7) - (7)
during the period
Less: Total amounts transferred to profit or loss from - - -
other comprehensive income during the period
Subtotal (7) - (7)
Share of other comprehensive income in associates and joint ventures 277 - 277
Subtotal 277 - 277
Translation difference in foreign currency statements (1,542) - (1,542)
Subtotal (1,542) - (1,542)
Other comprehensive income (1,058) (52) (1,110)
277
Subtotal
277
-
277
Translation difference in foreign currency statements
(1,542)
-
(1,542)
Subtotal
(1,542)
-
(1,542)
Other comprehensive income
(1,058)
(52)
(1,110)
Six-month period ended 30 June 2016
Before-taxamountRMB million Tax effectRMB million Net-of-taxamountRMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging (513) 34 (479)
instruments recognised during the period
Less/(add): Adjustments of amounts transferred to 165 (27) 138
initial carrying amount of hedged items
Total amounts transferred to profit or loss from other (2,827) 443 (2,384)
comprehensive income during the period
Subtotal 2,149 (382) 1,767
Changes in fair value of available-for-sale financial assets recongnised (33) - (33)
during the period
Less: Total amounts transferred to profit or loss from - - -
other comprehensive income during the period
Subtotal (33) - (33)
Share of other comprehensive income in associates and joint ventures 99 - 99
Subtotal 99 - 99
Translation difference in foreign currency statements 987 - 987
Subtotal 987 - 987
Other comprehensive income 3,202 (382) 2,820
99
Subtotal
99
-
99
Translation difference in foreign currency statements
987
-
987
Subtotal
987
-
987
Other comprehensive income
3,202
(382)
2,820
35 OTHER COMPREHENSIVE INCOME (Continued)
The Group (Continued)
(b) Reconciliation of other comprehensive income
Equity Attributable to shareholders of the Company Minority Total other
The share of othercomprehensiveincome whichbeing reclassifiedto profit and loss in the future under equity method Changes in fair value ofavailable-for-sale financial assets Cash flow hedges Translationdifference in foreigncurrencystatements Subtotal interests comprehensiveincome
RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million
31 December 2015 (6,557) 114 (838) (703) (7,984) (1,169) (9,153)
Changes in 2016 2,827 (23) 1,765 414 4,983 (2,163) 2,820
30 June 2016 (3,730) 91 927 (289) (3,001) (3,332) (6,333)
31 December 2016 (4,161) 97 1,132 2,000 (932) (1,888) (2,820)
Changes in 2017 195 (5) 133 (965) (642) (468) (1,110)
30 June 2017 (3,966) 92 1,265 1,035 (1,574) (2,356) (3,930)
Changes in 2017
195
(5)
133
(965)
(642)
(468)
(1,110)
30 June 2017
(3,966)
92
1,265
1,035
(1,574)
(2,356)
(3,930)
36 SPECIFIC RESERVE
According to relevant PRC regulations, the Group is required to transfer an amount to specific reserve for the safety
production fund based on the turnover of certain refining and chemicals products or based on the production volume of crude
oil and natural gas. The movements of specific reserve are as follows:
The Group
RMB million
Balance at 1 January 2017 765
Provision for the period 1,726
Utilisation for the period (952)
Balance at 30 June 2017 1,539
(952)
Balance at 30 June 2017
1,539
37 SURPLUS RESERVES
Movements in surplus reserves are as follows:
The Group
Statutory Discretionary
surplus reserve surplus reserve Total
RMB million RMB million RMB million
Balance at 1 January 2017 79,640 117,000 196,640
Appropriation - - -
Balance at 30 June 2017 79,640 117,000 196,640
Balance at 30 June 2017
79,640
117,000
196,640
The PRC Company Law and the Articles of Association of the Company have set out the following profit appropriation plans:
(a) 10% of the net profit is transferred to the statutory surplus reserve. In the event that the reserve balance reaches
50% of the registered capital, no transfer is needed;
(b) After the transfer to the statutory surplus reserve, a transfer to discretionary surplus reserve can be made upon the
passing of a resolution at the shareholders' meeting.
38 OPERATING INCOME AND OPERATING COSTS
Six-month periods ended 30 June
The Group The Company
2017 2016 2017 2016
RMB million RMB million RMB million RMB million
Income from principal operations 1,137,828 856,796 397,542 334,227
Income from other operations 28,009 22,424 13,868 11,922
Total 1,165,837 879,220 411,410 346,149
Operating costs 942,602 665,193 306,503 237,835
411,410
346,149
Operating costs
942,602
665,193
306,503
237,835
The income from principal operations mainly represents revenue from sales of crude oil, natural gas, refined petroleum
products and chemical products. The income from other operations mainly represents revenue from sale of materials, service,
rental income and others. Operating costs primarily represent the products cost related to the principal operations. The
Group's segmental information is set out in Note 57.
39 TAXES AND SURCHARGES
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Consumption tax 95,398 95,030
City construction tax 9,022 8,899
Education surcharge 6,876 6,729
Resources tax 2,396 1,776
Other taxes 2,605 397
Total 116,297 112,831
Other taxes
2,605
397
Total
116,297
112,831
The applicable tax rate of the taxes and surcharges are set out in Note 4.
40 FINANCIAL EXPENSES
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Interest expenses incurred 3,602 5,078
Less: Capitalised interest expenses 282 409
Net interest expenses 3,320 4,669
Accretion expenses (Note 31) 659 495
Interest income (2,457) (1,358)
Net foreign exchange (gain)/loss (233) 478
Total 1,289 4,284
(1,358)
Net foreign exchange (gain)/loss
(233)
478
Total
1,289
4,284
The interest rates per annum at which borrowing costs were capitalised during the six-month period ended 30 June 2017 by
the Group ranged from 3.92% to 4.41% (2016: 3.3% to 5.6%).
41 CLASSIFICATION OF EXPENSES BY NATURE
The operation costs, selling and distribution expenses, general and administrative expenses and exploration expenses
(including dry holes) in consolidated income statement classified by nature are as follows:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Purchased crude oil, products and operating supplies and expenses 887,028 615,419
Personnel expenses 31,328 29,063
Depreciation, depletion and amortisation 55,217 49,105
Exploration expenses (including dry holes) 4,542 4,730
Other expenses 30,887 33,594
Total 1,009,002 731,911
Other expenses
30,887
33,594
Total
1,009,002
731,911
42 EXPLORATION EXPENSES
Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs.
43 IMPAIRMENT LOSSES
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Receivables (Note 7, 8, 9) (89) (90)
Inventories (Note 10) 203 256
Fixed assets (Note 13) 3,961 1,256
Construction in progress (Note 14) - 1
Intangible assets (Note 15) 1 -
Total 4,076 1,423
Intangible assets (Note 15)
1
-
Total
4,076
1,423
44 GAIN FROM CHANGES IN FAIR VALUE
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Changes in fair value of financial assets and financial liabilities at fair value through profit, net 244 8
Unrealised gains from ineffective portion cash flow hedges, net 86 130
Others 39 (25)
Total 369 113
(25)
Total
369
113
45 INVESTMENT INCOME
Six-month periods ended 30 June
The Group The Company
2017 2016 2017 2016
RMB million RMB million RMB million RMB million
Income from investment of subsidiaries accounted for - - 5,334 6,410
under cost method
Income from investment accounted for under equity method 7,651 4,598 3,013 1,690
Investment (loss)/income from disposal of - (2) 1 (6)
long-term equity investments
Investment income from holding/disposal of 220 34 50 -
available-for-sale financial assets
Investment income from disposal of financial assets and 159 242 - -
liabilities at fair value through profit or loss
Gains from ineffective portion of cash flow hedge 56 455 - -
Others 66 67 475 656
Total 8,152 5,394 8,873 8,750
56
455
-
-
Others
66
67
475
656
Total
8,152
5,394
8,873
8,750
46 OTHER INCOME
Other income is mainly the government grants related to the business activities.
47 NON-OPERATING INCOME
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Gain on disposal of non-current assets 92 131
Government grants 65 971
Others 676 255
Total 833 1,357
255
Total
833
1,357
48 NON-OPERATING EXPENSES
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Loss on disposal of non-current assets 190 124
Fines, penalties and compensation 21 36
Donations 13 48
Others 592 667
Total 816 875
592
667
Total
816
875
49 INCOME TAX EXPENSE
The Group
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Provision for income tax for the period 12,258 8,031
Deferred taxation (3,988) 319
Under-provision for income tax in respect of preceding year 645 29
Total 8,915 8,379
29
Total
8,915
8,379
Reconciliation between actual income tax expense and accounting profit at applicable tax rates is as follows:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Profit before taxation 45,032 34,760
Expected income tax expense at a tax rate of 25% 11,258 8,690
Tax effect of non-deductible expenses 357 337
Tax effect of non-taxable income (2,032) (1,170)
Tax effect of preferential tax rate (i) (422) 215
Effect of difference between income taxes at foreign operations tax rate and the PRC statutory tax rate (ii) (716) (556)
Tax effect of utilisation of previously unrecognised tax losses and temporary differences (593) (345)
Tax effect of tax losses not recognised 409 500
Write-down of deferred tax assets 9 43
Adjustment for under provision for income tax in respect of preceding years 645 665
Actual income tax expense 8,915 8,379
500
Write-down of deferred tax assets
9
43
Adjustment for under provision for income tax in respect of preceding years
645
665
Actual income tax expense
8,915
8,379
Note:
(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of
the Group as determined in accordance with the relevant income tax rules and regulations of the PRC, except for certain
entities of the Group in western regions in the PRC are taxed at preferential income tax rate of 15% through the year
2020.
(ii) It is mainly due to the foreign operation in the Republic of Angola ("Angola") that is taxed at 50% of the assessable
income as determined in accordance with the relevant income tax rules and regulations of Angola.
50 DIVIDENDS
(a) Dividends of ordinary shares declared after the balance sheet date
Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 25 August 2017, the
directors authorised to declare the interim dividends for the six-month period ended 30 June 2017 of RMB 0.10 (2016: RMB
0.079) per share totaling RMB 12,107 million (2016: RMB 9,565 million). Dividends declared after the balance sheet date are
not recognised as a liability at the balance sheet date.
(b) Dividends of ordinary shares declared during the period
Pursuant to the shareholders' approval at the Annual General Meeting on 28 June 2017, a final dividend of RMB 0.17 per
share totaling RMB 20,582 million according to total shares on 18 July 2017 was approved. All dividends have been paid in
July 2017.
Pursuant to the shareholders' approval at the Annual General Meeting on 18 May 2016, a final dividend of RMB 0.06 per share
totaling RMB 7,264 million according to total shares on 23 June 2016 was approved. All dividends have been paid in the
six-month period ended 30 June 2016.
51 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
The Group
(a) Reconciliation of net profit to cash flows from operating activities:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Net profit 36,117 26,381
Add: Impairment losses on assets 4,076 1,423
Depreciation of fixed assets 50,862 44,869
Amortisation of intangible assets and long-term deferred expenses 4,355 4,236
Dry hole costs written off 3,937 3,619
Net loss/(gain) on disposal of non-current assets 98 (7)
Fair value gain (369) (113)
Financial expenses 1,201 3,740
Investment income (7,993) (4,697)
(Increase)/decrease in deferred tax assets (1,512) 899
Decrease in deferred tax liabilities (2,476) (580)
Increase in inventories (10,750) (4,091)
Safety fund reserve 870 706
Decrease/(increase) in operating receivables 2,213 (9,959)
(Decrease)/increase in operating payables (19,782) 9,686
Net cash flow from operating activities 60,847 76,112
Increase in inventories
(10,750)
(4,091)
Safety fund reserve
870
706
Decrease/(increase) in operating receivables
2,213
(9,959)
(Decrease)/increase in operating payables
(19,782)
9,686
Net cash flow from operating activities
60,847
76,112
(b) Net change in cash:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Cash balance at the end of the period 129,127 73,250
Less: Cash at the beginning of the period 124,468 68,933
Net increase of cash 4,659 4,317
Net increase of cash
4,659
4,317
(c) The analysis of cash held by the Group is as follows:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Cash at bank and on hand
- Cash on hand 11 12
- Demand deposits 129,116 73,238
Cash at the end of the period 129,127 73,250
Cash at the end of the period
129,127
73,250
52 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) Related parties having the ability to exercise control over the Group
The name of the company : China Petrochemical Corporation
Organisation code : 10169286-X
Registered address : No. 22, Chaoyangmen North Street, Chaoyang District, Beijing
Principal activities : Exploration, production, storage and transportation (including pipeline transportation), sales and utilisation of crude oil and natural gas; refining; wholesale and
retail of gasoline, kerosene and diesel; production, sales, storage and transportation of petrochemical and other chemical products; industrial investment and investment
management; exploration, construction, installation and maintenance of petroleum and petrochemical constructions and equipment; manufacturing electrical equipment;
research, development, application and consulting services of information technology and alternative energy products; import & export of goods and technology.
Relationship with the Group : Ultimate holding company
Types of legal entity : State-owned
Authorised representative : Wang Yupu
Registered capital : RMB 274,867 million
Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly
holds 71.32% shareholding of the Company.
52 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(2) Related parties not having the ability to exercise control over the Group
Related parties under common control of a parent company with the Company:
Sinopec Finance (Note)
Sinopec Shengli Petroleum Administration Bureau
Sinopec Zhongyuan Petroleum Exploration Bureau
Sinopec Assets Management Corporation
Sinopec Engineering Incorporation
Sinopec Century Bright Capital Investment Limited
Sinopec Petroleum Storage and Reserve Limited
Associates of the Group:
Pipeline Ltd
Sinopec Finance
Zhongtian Synergetic Energy
China Aviation Oil
CIR
Joint ventures of the Group:
FREP
BASF-YPC
Mansarovar
Taihu
YASREF
Note: Sinopec Finance is under common control of a parent company with the Company and is also the associate of the Group.
(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint
ventures, which were carried out in the ordinary course of business, are as follows:
The Group
Six-month periods ended 30 June
Note 2017 2016
RMB million RMB million
Sales of goods (i) 115,853 83,694
Purchases (ii) 72,881 55,676
Transportation and storage (iii) 3,682 561
Exploration and development services (iv) 5,723 5,701
Production related services (v) 5,501 2,943
Ancillary and social services (vi) 3,209 3,169
Operating lease charges for land (vii) 3,988 5,264
Operating lease charges for buildings (vii) 207 160
Other operating lease charges (vii) 390 189
Agency commission income (viii) 63 60
Interest income (ix) 322 98
Interest expense (x) 228 600
Net deposits (placed with)/withdrawn from related parties (ix) (5,088) 6,538
Net loans obtained from/(repaid to) related parties (xi) 4,449 (1,201)
63
60
Interest income
(ix)
322
98
Interest expense
(x)
228
600
Net deposits (placed with)/withdrawn from related parties
(ix)
(5,088)
6,538
Net loans obtained from/(repaid to) related parties
(xi)
4,449
(1,201)
The amounts set out in the table above in respect of the six-month periods ended 30 June 2017 and 2016 represent the
relevant costs and income as determined by the corresponding contracts with the related parties.
Included in the transactions disclosed above, for the six-month period ended 30 June 2017 are: a) purchases by the Group
from Sinopec Group Company and fellow subsidiaries amounting to RMB 51,507 million (2016: RMB 52,786 million) comprising
purchases of products and services (i.e. procurement, transportation and storage, exploration and development services and
production related services) of RMB 43,875 million (2016: RMB 43,593 million), ancillary and social services provided by
Sinopec Group Company and fellow subsidiaries of RMB 3,209 million (2016: RMB 3,169 million), operating lease charges for
land and buildings paid by the Group of RMB 3,988 million and 207 million (2016: RMB 5,264 million and RMB 160 million),
respectively and interest expenses of RMB 228 million (2016: RMB 600 million); and b) sales by the Group to Sinopec Group
Company and fellow subsidiaries amounting to RMB 23,992 million (2016: RMB 20,889 million), comprising RMB 23,659 million
(2016: RMB 20,777 million) for sales of goods, RMB 322 million (2016: RMB 98 million) for interest income and RMB 11
million (2016: RMB 14 million) for agency commission income.
As at 30 June 2017 and 31 December 2016, there were no guarantees given to banks by the Group in respect of banking
facilities to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, except for the disclosure set
out in Note 56(b). Guarantees given to banks by the Group in respect of banking facilities to associates and joint ventures
are disclosed in Note 56(b).
52 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint
ventures, which were carried out in the ordinary course of business, are as follows: (Continued)
Note:
(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary
materials.
(ii) Purchases represent the purchase of material and utility supplies directly related to the Group's operations such as
the procurement of raw and ancillary materials and related services, supply of water, electricity and gas.
(iii) Transportation and storage represents the cost for the use of railway, road and marine transportation services,
pipelines, loading, unloading and storage facilities.
(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as
geophysical, drilling, well testing and well measurement services.
(v) Production related services represent ancillary services rendered in relation to the Group's operations such as
equipment repair and general maintenance, insurance premium, technical research, communications, firefighting, security,
product quality testing and analysis, information technology, design and engineering, construction of oilfield ground
facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project
management and environmental protection.
(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational
facilities, media communication services, sanitation, accommodation, canteens, property maintenance and management
services.
(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land,
buildings and equipment.
(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and
purchase of materials for certain entities owned by Sinopec Group Company.
(ix) Interest income represents interest received from deposits placed with Sinopec Finance and Sinopec Century Bright
Capital Investment Limited, finance companies controlled by Sinopec Group Company. The applicable interest rate is
determined in accordance with the prevailing saving deposit rate.
(x) Interest expense represents interest charges on the loans and advances obtained from Sinopec Group Company and fellow
subsidiaries.
(xi) The Group obtained or repaid loans from or to Sinopec Group Company and fellow subsidiaries.
In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under
which 1) Sinopec Group Company will provide goods and products and a range of ancillary, social and supporting services to
the Group and 2) the Group will sell certain goods to Sinopec Group Company. These agreements impacted the operating
results of the Group for the six-month period ended 30 June 2017. The terms of these agreements are summarised as follows:
(a) The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary
Services"("Mutual Provision Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group
Company has agreed to provide the Group with certain ancillary production services, construction services, information
advisory services, supply services and other services and products. While each of Sinopec Group Company and the Company is
permitted to terminate the Mutual Provision Agreement upon at least six months' notice, Sinopec Group Company has agreed
not to terminate the agreement if the Group is unable to obtain comparable services from a third party. The pricing policy
for these services and products provided by Sinopec Group Company to the Group is as follows:
‧ the government-prescribed price;
‧ where there is no government-prescribed price, the government guidance price;
‧ where there is neither a government-prescribed price nor a government guidance price, the market price; or
‧ where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable
cost incurred in providing such services plus a profit margin not exceeding 6%.
(b) The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and
Community Services" with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to
provide the Group with certain cultural, educational, health care and community services on the same pricing terms and
termination conditions as agreed to in the above Mutual Provision Agreement.
(c) The Company has entered into a number of lease agreements with Sinopec Group Company to lease certain lands and
buildings effective on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively.
The Company and Sinopec Group Company can renegotiate the rental amount every three years for land. The Company and Sinopec
Group Company can renegotiate the rental amount for buildings every year. However such amount cannot exceed the market
price as determined by an independent third party.
(d) The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group
has been granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group
Company.
(e) The Company has entered into a service station franchise agreement with Sinopec Group Company effective from 1 January
2000 under which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
52 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(4) Balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
The balances with the Group's related parties at 30 June 2017 and 31 December 2016 are as follows:
The ultimate holding company Other related companies
At 30 June At 31 December At 30 June At 31 December
2017 2016 2017 2016
RMB million RMB million RMB million RMB million
Cash and cash equivalents - - 45,161 40,073
Accounts receivable - 25 7,594 10,953
Prepayments and other current assets 57 33 13,392 13,397
Other non-current assets - - 20,843 20,385
Accounts payable 12 3 11,113 19,416
Advances from customers 12 13 2,616 1,969
Other payables 14,815 178 11,417 19,430
Other non-current liabilities - - 10,162 9,998
Short-term loans - - 22,969 18,430
Long-term loans (including current portion) (Note) - - 44,832 44,922
19,430
Other non-current liabilities
-
-
10,162
9,998
Short-term loans
-
-
22,969
18,430
Long-term loans (including current portion) (Note)
-
-
44,832
44,922
Note: The long-term borrowings mainly include an interest-free loan with a maturity period of 20 years amounting to RMB
35,560 million from Sinopec Group Company through Sinopec Finance. This borrowing is a special arrangement to reduce
financing costs and improve liquidity of the Company during its initial global offering in 2000.
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term
loans and long-term loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms.
The terms and conditions associated with short-term loans and long-term loans payable to Sinopec Group Company and fellow
subsidiaries are set out in Note 21 and Note 29.
As at and for the six-month period ended 30 June 2017, and as at and for the year ended 31 December 2016, no individually
significant impairment losses for bad and doubtful debts were recorded in respect of amounts due from Sinopec Group Company
and fellow subsidiaries, associates and joint ventures.
(5) Key management personnel emoluments
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including directors and supervisors of the Group. The key management
personnel compensations are as follows:
Six-month periods ended 30 June
2017 2016
RMB thousand RMB thousand
Short-term employee benefits 2,501 3,066
Retirement scheme contributions 183 268
Total 2,684 3,334
Total
2,684
3,334
53 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates
that underlie the preparation of the financial statements. The Group bases the assumptions and estimates on historical
experience and on various other assumptions that it believes to be reasonable and which form the basis for making
judgements about matters that are not readily apparent from other sources. On an on-going basis, management evaluates its
estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.
The selection of critical accounting policies, the judgements and other uncertainties affecting application of those
policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when
reviewing the financial statements. The significant accounting policies are set forth in Note 3. The Group believes the
following critical accounting policies involve the most significant judgements and estimates used in the preparation of the
financial statements.
53 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
(a) Oil and gas properties and reserves
The accounting for the exploration and production segment's oil and gas activities is subject to accounting rules that are
unique to the oil and gas industry. The Group has used the successful efforts method to account for oil and gas business
activities. The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in
that costs of unsuccessful exploratory efforts are charged to expense. These costs primarily include dry hole costs,
seismic costs and other exploratory costs.
Engineering estimates of the Group's oil and gas reserves are inherently imprecise and represent only approximate amounts
because of the subjective judgements involved in developing such information. There are authoritative guidelines regarding
the engineering criteria that have to be met before estimated oil and gas reserves can be designated as "proved". Proved
and proved developed reserves estimates are updated at least annually and take into account recent production and technical
information about each field. In addition, as prices and cost levels change from year to year, the estimate of proved and
proved developed reserves also changes. This change is considered a change in estimate for accounting purposes and is
reflected on a prospective basis in related depreciation rates. Oil and gas reserves have a direct impact on the assessment
of the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved
reserves estimates are revised downwards, earnings could be affected by changes in depreciation expense or an immediate
write-down of the property's carrying amount.
Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking
into consideration the anticipated method of dismantlement required in accordance with industry practices in the similar
geographic area, including estimation of economic life of oil and gas properties, technology and price level. The present
values of these estimated future dismantlement costs are capitalised as oil and gas properties with equivalent amounts
recognised as provisions for dismantlement costs.
Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation
expense, impairment expense and future dismantlement costs. Capitalised costs of proved oil and gas properties are
amortised on a unit-of-production method based on volumes produced and reserves.
(b) Impairment for assets
If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered
"impaired", and an impairment loss may be recognised in accordance with "ASBE 8 - Impairment of Assets". The carrying
amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined
below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate
that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is
reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The recoverable amount is the
greater of the fair value less costs to sell and the present value of expected future cash flows. It is difficult to
precisely estimate the fair value because quoted market prices for the Group's assets or cash-generating units are not
readily available. In determining the value of expected future cash flows, expected cash flows generated by the asset or
the cash-generating unit are discounted to their present value, which requires significant judgement relating to sales
volume, selling price and amount of operating costs. The Group uses all readily available information in determining an
amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable
assumptions and projections of sales volume, selling price and amount of operating costs.
(c) Depreciation
Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into
account the estimated residual value. Management reviews the estimated useful lives of the assets at least annually in
order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are
based on the Group's historical experience with similar assets and taking into account anticipated technological changes.
The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.
(d) Allowances for doubtful accounts
Management estimates impairment losses for bad and doubtful debts resulting from the inability of the Group's customers to
make the required payments. Management bases the estimates on the ageing of the accounts receivable balance, customer
credit-worthiness, and historical write-off experience. If the financial condition of the customers were to deteriorate,
actual write-offs would be higher than estimated.
(e) Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of
inventories is recognised. Net realisable value represents the estimated selling price in the ordinary course of business,
less the estimated costs of completion and the estimated costs necessary to make the sale. Management bases the estimates
on all available information, including the current market prices of the finished goods and raw materials, and historical
operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher than estimated,
the actual allowance for diminution in value of inventories would be higher than estimated.
54 PRINCIPAL SUBSIDIARIES
The Company's principal subsidiaries have been consolidated into the Group's financial statements for the six-month period
ended 30 June 2017. The following list contains the particulars of subsidiaries which principally affected the results,
assets and liabilities of the Group:
Percentage
of equity
Registered Actual interest/ Minority
capital/ investment voting right Interests
paid-up at 30 June held by at 30 June
Full name of enterprise Principal activities capital 2017 the Group June 2017
million million % RMB million
(a) Subsidiaries acquired through group restructuring:
China Petrochemical International Company Limited Trading of petrochemical products RMB 1,400 RMB 1,856 100.00 27
China International United Petroleum Trading of crude oil and petrochemical products RMB 3,000 RMB 4,585 100.00
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