*St Carey (002072): Reply To The Letter Of Concern

* ST Carey (002072) announced on the evening of February 28 that the company received the letter of concern on Kairui Holding Co., Ltd. (company department's attention letter [2022] No. 82) (hereinafter referred to as "concern letter") issued by Shenzhen Stock Exchange on January 28, 2022, Meanwhile, the company actively organizes relevant departments to implement and reply to the problems involved one by one. The reply to the questions involved in the letter of concern is as follows:

1. According to the third quarter report of 2021 disclosed by your company, in the first three quarters of 2021, the operating income is 19.9079 million yuan, the net profit attributable to the parent is - 5.801 million yuan, the net profit after deduction is - 4.3492 million yuan, and the net asset is - 184.7021 million yuan. Please refer to the trend of the same period last year, explain in detail the reasons for the change of financial indicators in the fourth quarter, and focus on the significant changes in operating income. On this basis, explain whether your company has the situation of avoiding the risk of stock termination such as surprise trading at the end of the year.

Company reply:

In the fourth quarter of 2021, the company's operating revenue, net profit before and after non deduction and net assets changed significantly compared with the same period in 2020, mainly due to the debt restructuring income generated by the company's restructuring in the fourth quarter of 2021, as well as the increase of the company's working capital, the recovery of business reputation, the expansion of trade business volume, and the increase of operating profit and income, The company does not have the situation of year-end surprise trading to avoid the risk of stock delisting. The specific analysis is as follows:

(1) reasons for changes in net assets of the company in 2021 compared with that in 2020

In 2020, the net assets of the Company attributable to the parent company will be - 178.902 million yuan; In 2021, the company's financial department initially estimated the net assets to be about 60 million yuan. The reasons for the change of net assets of the company in 2021 compared with that in 2020 are as follows: (1) the company has disposed of the low efficiency of foreign investment in the process of bankruptcy reorganization Equity assets of subsidiaries (including Dezhou Jinmian Textile Co., Ltd., Dezhou Kaijia Trading Co., Ltd., Shandong fifth quarter Trading Co., Ltd., Beijing yiliyou Data Co., Ltd., Beijing XunTong Internet Technology Development Co., Ltd., Jingmen Dezhi Property Management Co., Ltd., Shanxi Longzhi Property Co., Ltd.), resulting in the merger layer of the company

The book assets decreased by 400 million yuan compared with the beginning of the period; ② The company's debt was reduced by about 570 million yuan through restructuring; ③ The restructuring investor donated 47.79 million yuan of cash to the company free of charge.

(2) the reasons for the change of net profit before and after deduction of non-profit in 2021 compared with the same period of last year. In 2020, the company's net profit before and after non deduction is RMB 202 million and RMB 199 million respectively; In 2021, the company's net profit before and after deduction is about 7 million yuan and 3 million yuan respectively. The main reasons for the company's loss in 2020 are as follows: the company has made an impairment loss of about 200 million yuan for creditor's rights receivable and other equity investment of foreign investment. The main reasons for the company to achieve profitability in 2021 are as follows: 1) the company completed the restructuring plan in the fourth quarter of 2021, resulting in debt restructuring income; ② In the fourth quarter of 2021, the company received liquidity support from shareholders due to the start of pre restructuring process, resulting in an increase in working capital; ③ The company's business reputation is restored, the trade volume is expanded, and the operating profit is increased. Among them, the company carried out inefficient asset disposal and debt restructuring with shares to offset debts in the restructuring process, and realized the debt restructuring income of 114 million yuan; According to the declaration of creditor's rights, the non operating expenses of 104 million yuan and the debt restructuring expenses of 6.99 million yuan were recognized, resulting in a total profit of about 4 million yuan; Due to the increase of working capital, the restoration of business reputation and the expansion of trade volume, the operating profit increased by 3 million yuan. To sum up, the company's net profit before deducting non-profit is about 7 million yuan in 2021, and the operating profit after deducting non-profit is about 3 million yuan.

(3) the reasons why the operating income of the company in 2021 changes significantly compared with that in 2020

In 2021, the company's annual operating revenue is 110 million yuan, including 91 million yuan in the fourth quarter, which is a substantial increase compared with the same period last year. The main reasons are as follows: in October 2021, after the examination and decision of Hubei Jingmen intermediate people's court to start kairuide's pre reorganization procedure, the company's annual operating revenue reached 110 million yuan, Mr. Wang Jian, the largest shareholder of the company, has provided 100 million yuan of liquidity support to kairuide free of charge to help kairuide carry out coal trade business. The company's working capital has increased and its business reputation has been restored and recognized. In the fourth quarter of 2021, the company takes advantage of the recovery and improvement of its reputation and abundant financial support to vigorously develop its trade business and continuously expand and strengthen its trade business. On the basis of the original trade business agency model, the company starts from the perspectives of enriching the customer group, reducing the dependence on important customers and suppliers, improving its negotiation ability and realizing the improvement of trade business profitability, Actively expand and enrich the trade mode, and finally add the self operated mode on the basis of the original agency model. The coal trade business carried out in the fourth quarter is no longer limited to the original business model that does not undertake transportation and warehousing and only earns agency price difference, but actively grasps the initiative in the new category business, actively excavates the source of goods, seeks suppliers, and signs agreements independently through commercial negotiation; On the client side, customers can be freely selected according to the market price trend and storage situation, and pricing can be negotiated independently; At the same time, it is possible to undertake the transportation and storage of goods in the business process

Risk. Through the risk of storage, damage, loss, quality variation, falling price, failure of timely delivery of goods due to various factors, rejection of customers due to substandard moisture content due to product storage, and failure of timely payment collection by customers, etc., the newly expanded self operated business has realized the control of goods rights in business mode, It controls the right of pricing negotiation and free choice of suppliers and customers, and undertakes the risks of goods procurement, transportation, storage and sales. Therefore, under the premise of continuously expanding and strengthening the main business of coal trade, the total amount method is adopted to confirm the business income of the self operated coal trade business according to the relevant provisions of the accounting standards for business enterprises, resulting in a great change in the operating income in 2021 compared with that in 2020. The company's revenue recognition policy and accounting treatment are detailed in the reply to "question 2".

To sum up, the increase of net assets of the company in 2021 is mainly caused by the company's entering the reorganization process in the fourth quarter, receiving cash donations from restructuring investors and realizing debt restructuring to generate restructuring income. The increase in net profit before and after deducting non non non profit is mainly due to the realization of debt restructuring income and the expansion of main business in 2021, The substantial increase in operating revenue is mainly due to the company's pre restructuring in October 2021, the increase of liquidity support and the recovery of business reputation, which makes the company expand a new business model on the basis of the original agency trade business. The company does not have the situation of sudden trading at the end of the year to avoid the risk of stock delisting.

Accountant's opinion:

"We compared and analyzed the changes of the company's financial indicators in the fourth quarter of the year. The major changes in the company's financial indicators in the fourth quarter mainly include: bankruptcy and reorganization of the company (including the confirmation of the estimated liabilities of litigation related matters, the profit and loss of debt repayment assets disposal, and the income from debt restructuring) And the change of coal trade business model. In view of the changes of financial indicators in the fourth quarter, our project team paid full attention to the audit plan of 2021 financial statements of the company, and listed the key audit items of this year's audit. For revenue and restructuring matters, our proposed verification scheme is as follows:

(1) the audit procedures to be implemented for the revenue of coal trading business mainly include:

1) ask the management and governance to evaluate the integrity and fraud risk of the management;

2) understand and evaluate the content control related to revenue recognition in the company's sales and collection cycle, and test the effectiveness of common design and operation;

3) select samples to check the sales contract, identify the contract terms and conditions related to the transfer of commodity control right, and evaluate whether the revenue recognition time point meets the requirements of enterprise accounting standards;

4) select samples to implement correspondence procedures for income, purchase, receivables and accounts payable, conduct background investigation on suppliers and customers of the company, and conduct field visits to key customers to penetrate important trade customers

Verification; 5) Perform detailed test on revenue, check contract, order, warehouse in and out note, weighing sheet, settlement sheet, transportation agreement, custody agreement, etc., and check the accuracy of trade business.

6) obtain the sales and purchase data and relevant evidence of the company's coal trading business in the first quarter of 2022, and analyze and compare with the fourth quarter data of 2021 to check the stability of the trade business;

7) obtain the detailed statement of business income deduction, carry out inspection and analysis procedures, and pay attention to whether all deduction items of business income are listed according to the requirements, and whether there is any situation that other business income is mixed with the main business income;

8) in view of the possible integrity risks, we plan to implement targeted audit procedures. On the basis of increasing the procurement and sales integrity test samples, we will carry out the cut-off test for the purchase and sales confirmed before and after the balance sheet date, check the relevant nodes of commodity circulation documents, and evaluate whether the trade business is properly recorded.

(2) the audit procedures to be implemented for reorganization mainly include:

1) obtain the key information related to the bankruptcy reorganization of the company, including the civil ruling, reorganization plan, etc;

2) discuss with the company's management, management and management the major uncertain factors of restructuring and the time point for elimination;

3) obtain the detailed statement of creditor's rights of the manager and check with the book data of the company to obtain the relevant information of payment;

4) to check whether the judicial reorganization is carried out in accordance with the procedures stipulated in the bankruptcy law, and whether there is any act against the interests of other creditors;

5) check the auction announcement information, auction transaction procedures, equity transfer agreements, etc. of relevant assets in bankruptcy reorganization, and check the property right transfer procedures and the recovery of auction price, etc;

6) evaluate the competence, professional quality and objectivity of the assessors employed by the bankruptcy administrator; Evaluate the rationality of value types, evaluation methods, key parameters and assumptions of relevant evaluation reports;

7) for the debts to be paid off in cash, obtain the calculation table of debt restructuring and repayment, recalculate the settlement amount according to the reorganization scheme and the selected repayment method, and review the accuracy of calculation and accounting treatment;

8) confirm the fair value of the stocks for the debts to be paid off by the stocks, and recalculate the amount of the repayment according to the reorganization plan and the selected method of compensation, and review the accuracy of the calculation and accounting treatment;

9) to carry out the recalculation procedure for the amount of income from debt restructuring;

10) interview the manager, the transferee of the auction assets and the management to understand the declaration and confirmation of creditor's rights

The implementation of the reorganization plan and other relevant information;

11) visit and interview the creditors of key and abnormal businesses to confirm whether the basis for the formation of creditor's rights is complete. Conclusion: in view of the fact that our audit of the company's 2021 financial report is still in the stage of on-site evidence collection and verification, there is no abnormality or non-compliance with the evidence and audit procedures. Since the visits and letters of suppliers and sellers have not been completed, and the business data after the period is still in the process of verification, the external evidence of revenue recognition of coal trade business is gradually improving, and the data of the second quarter of the period supporting the coal self operation business to form a stable business model is also in the process of acquisition and collation; In addition, as the communication procedures between managers, evaluation agencies, lawyers and other parties related to the restructuring business have not been completed, and the external key evidence related to the accounting treatment of the restructuring business is still being further improved. The final accounting treatment results of coal trading business income and restructuring matters shall be subject to the audited financial report. "

2. Please explain in detail the specific composition and corresponding amount of operating income in 2021, the revenue recognition policy, whether the accounting treatment adopts the total amount method or the net amount method, whether there are differences with companies in the same industry, and whether the corresponding recognition basis conforms to the relevant provisions of the accounting standards for business enterprises, In accordance with the provisions of 4.2 "matters related to deduction of business income" in the guidelines for self discipline supervision of listed companies No.

Company reply:

(1) specific composition and corresponding amount of business income

The company's operating income in 2021 mainly includes coal trade income and property leasing income, among which, the coal trade agency business income can achieve more than 10 million yuan (invoice amount (excluding tax) of 400 million yuan) according to the net amount method, and the self operated business income is more than 90 million yuan according to the total amount method, and the total business income is about 100 million yuan; The operating income of property leasing business was 9.9863 million yuan.

(2) whether the revenue recognition policy, whether the total amount method or the net amount method is adopted for accounting treatment, whether there are differences with the companies in the same industry, and whether the corresponding recognition basis conforms to the relevant provisions of the accounting standards for business enterprises

First, the agent business in the coal trade business. Since April 2019, the company began to engage in coal trade business. At that time, due to the company's own operational difficulties and lack of funds, the company has been adopting the agent business model of earning fixed price difference since the coal trade business was carried out in 2019, that is, the company obtained the order from the seller, purchased from the supplier according to the order, and agreed that the supplier would directly deliver it to the place designated by the seller, The company only earns a fixed price difference per ton, and does not bear the responsibility of unqualified product quality, non delivery of goods and transportation of goods

It also does not bear the risk of price adjustment caused by the fluctuation of market price. As the company of this kind of coal trading business does not bear the inventory risk and price risk, and has not obtained the commodity control right, the company adopts the net amount method to recognize the sales revenue in accordance with the accounting standards for business enterprises.

Second, the self-supporting business in the coal trade business. The company's self operated business revenue recognition of coal trading business is based on the delivery of goods to customers, and the settlement of delivery quantity, delivery quality indicators and other data with the customers, and the revenue recognition can be carried out after both parties confirm the settlement and affix the seals of both parties. The company's self-supporting business of coal trade is to organize the source of goods in Shanxi, Shandong, Inner Mongolia, Hebei, Henan and other places, and then transport the goods from the company's warehouses in the ports of AIA, 100 million tons and Pizhou, and then deliver the goods to the customers according to the sales arrangement. The company searched the business models of other companies in the same industry: ① Shanmei international. Its coal trade business model is to purchase goods from outside through its own source organization system, then transport them to the port and deliver them to domestic and foreign customers; ② Anyuan coal industry. Its coal trade sales mode is customer pick-up or one ticket settlement and delivery to the customer's designated place, and the procurement mode is mainly the supplier's one ticket settlement to the company's designated delivery place, and it mainly undertakes transportation and storage services in the whole coal trade link; ③ Hubei energy. It is to obtain coal products from other coking plants or traders, and then deliver the goods to customers through their own transportation and storage. In combination with its own business model and referring to the total amount method adopted by companies in the same industry under similar business models, the company adopts the total amount method to recognize the revenue of its own coal trade business. There is no difference between the company and the companies in the same industry. The revenue recognition method and basis are in line with the provisions of the accounting standards for business enterprises. The specific analysis is as follows:

(1) the company is free to choose customers and suppliers for its own trade business. In October 2021, after the Jingmen intermediate people's court decided to start the Kairui pre restructuring procedure, Mr. Wang Jian, the shareholder, provided liquidity support funds to the company for the development of the company's main business. Under the dual assistance of financial support and business reputation recovery brought by the restructuring, the company continued to expand its business model on the basis of the original agency trade business, and improved the company's business performance In order to improve the company's business profitability and commercial independent negotiation ability, the company will no longer continue the original business model of coal trade business which is only used as an agent to earn fixed price difference. Instead, it makes use of the advantages of reputation recovery and capital support to expand and enrich suppliers and customers in the self-supporting trade business. At present, the company has many trading business suppliers, radiating Shanxi, Shandong, and other provinces Shandong, Inner Mongolia, Henan, Hebei, Anhui and other places, customers mainly radiate Jiangsu, Shandong, Shanxi and other places, suppliers and customers to achieve cross regional and diversification. With the continuous accumulation of upstream and downstream customers of coke trade business, the company's business scale will be greatly improved in 2022.

(2) the company can negotiate with suppliers independently, bear the possible risks in transportation and storage, and have the right to control the goods. The company's procurement mode is to pick up or deliver goods to the storage port designated by the company, and undertake the responsibility of

All risks before the supplier delivers the goods to the company (the company controls the ownership of the goods) to the customers. In the process of negotiation with suppliers, the company is free to pick up or deliver goods to the designated port of the company according to its own transportation and storage demand arrangement and different supplier supply mode quotations, and agree on default risk clauses such as failure to deliver goods on schedule and unable to deliver goods with good quality. When purchasing: if the self delivery mode is selected, the company shall bear all risks and expenses after the purchased goods are transported from the supplier by the transportation team organized by the company; If the goods are delivered to the storage port designated by the company, the company shall bear all costs and risks after the goods enter the port, including but not limited to the risks of loss, damage, variation of quality indicators, overstock of goods due to market price fluctuation, loss selling or rejection of goods by downstream customers.

(3) the company can negotiate commercial price with customers independently. As the primary responsible person of the contract, the company should bear the liability for breach of contract if the delivery of goods does not conform to the terms of the contract. The company's sales mode is that customers come to the company's warehouse port to pick up the goods. The company can choose and match the customer's demand according to its own goods source, storage place, goods storage situation and purchase plan. It can independently carry out business negotiation and goods pricing, and can make cooperation arrangement based on its own business needs, future business development and cooperation At the same time, it is agreed that if the goods can not be delivered on time, they will be liable for breach of contract compensation. In short, in the procurement and sales of goods, the company has independent rights in the purchase and sales pricing, and can conduct independent commercial negotiation pricing based on its own business development needs and market price fluctuations. After the goods are purchased and delivered, and before the goods are delivered to customers, the ownership of the goods belongs to the company, and the company undertakes the loss, damage, variation of quality indicators, etc After the goods are delivered to customers, the company bears the credit risk of payment collection and non recovery of payment. Therefore, the company recognizes the income of self operated trade business according to the total amount method. The company's coal trade agency business has been operating for more than 2 years since April 2019, with stable business model and relatively stable business income; At the same time, due to the company's reputation recovery and liquidity replenishment brought about by restructuring, the company rapidly expanded its self-supporting business model in the fourth quarter, combined with and learned from the experience of coal trade agency business, integrated the resources of customers and suppliers in the coal trade industry, and realized nearly 100 million yuan of business income. Up to now, on the basis of maintaining and stabilizing the self operated business mode, customers and suppliers expanded in the fourth quarter of 2021, it is still constantly expanding new customers and suppliers, expanding business channels and regions, and the company's coal trade self operation business is stable and its business scale is steadily improved.

(3) deduction of operating income

According to 4.2 of the guidelines for self regulation and supervision of listed companies No.1 - business management of Shenzhen Stock Exchange

According to the relevant provisions of "business income deduction related matters", the business income deduction items include the business income unrelated to the main business and the income without commercial substance. The company checks each item of income one by one according to the regulations, and there is no deduction of relevant items from the operating income. The details are as follows:

　　1. The business income unrelated to the main business refers to the income that has no direct relationship with the normal business of the listed company, or is related to the normal business operation of the listed company, but due to its special nature, contingency and temporary nature, it affects the statement users to make a normal judgment on the company's sustainable operation ability. Including but not limited to the following items:

(1) other business income other than normal operation

(2) income from unqualified financial business

(3) income from new trade business in the current accounting year and the previous accounting year

(4) income from related transactions unrelated to the existing normal business of the listed company

(5) income from the beginning of the period to the date of merger of subsidiaries under the same control

(6) income generated by businesses that have not formed or are difficult to form a stable business model

After one by one comparison, the company's financial department found that the company's business income did not exist under the above items to be deducted. The company's coal trade business was carried out in 2019, and its trading business mode of agency business and self-supporting business mode was stable, and customers and suppliers were stable and gradually increasing, The company's coal trading business does not belong to the newly added trade business in the current accounting year and the previous accounting year mentioned in Item 3, and the income that has not formed or is difficult to form a stable business model mentioned in Item 6. Therefore, the company's coal trade business does not belong to the deduction income of this item.

　　2. Revenue without commercial substance refers to the income generated from various transactions and events that do not lead to significant changes in future cash flow. Including but not limited to the following items:

(1) income from transactions or events that do not significantly change the risk, time distribution or amount of future cash flow of the enterprise

(2) income from transactions without real business

(3) income from business with obviously unfair transaction price

(4) income from subsidiaries or businesses of business combination obtained by unfair consideration or non transaction in the current accounting year

(5) the income involved in non-standard audit opinions

(6) income from other transactions or events that are not commercially reasonable

After one by one comparison, the company's operating income is the income generated by the company's real business, with commercial substance, and the pricing is fair and reasonable, which can improve the company's future operating conditions and cash flow conditions, and there is no such situation mentioned above

Income items without commercial substance. Accountant's reply:

"Our audit procedures for coal trading business revenue mainly include:

1) ask the management and governance to evaluate the integrity and fraud risk of the management; 2) Understand and evaluate the content control related to revenue recognition in the company's sales and collection cycle, and test the effectiveness of common design and operation; 3) Select samples to check the sales contract, identify the contract terms and conditions related to the transfer of commodity control, and evaluate whether the revenue recognition time point meets the requirements of enterprise accounting standards; 4) Select samples to implement correspondence procedures for income, purchase, receivables and accounts payable, conduct background investigation on suppliers and customers of the company, and visit key customers on the spot, and conduct penetration inspection on important trade customers;

5) carry out detailed test on revenue, check contract, order, warehouse in and out note, weighing sheet, settlement sheet, transportation agreement, custody agreement, etc., and check the accuracy of trade business.

6) obtain the sales and purchase data and relevant evidence of the company's coal trading business in the first quarter of 2022, and analyze and compare with the fourth quarter data of 2021 to check the stability of the trade business;

7) obtain the detailed statement of business income deduction, carry out inspection and analysis procedures, and pay attention to whether all deduction items of business income are listed according to the requirements, and whether there is any situation that other business income is mixed with the main business income;

8) in view of the possible integrity risks, we plan to implement targeted audit procedures. On the basis of increasing the procurement and sales integrity test samples, we will carry out the cut-off test for the purchase and sales confirmed before and after the balance sheet date, check the relevant nodes of commodity circulation documents, and evaluate whether the trade business is properly recorded.

Conclusion: in view of the fact that our audit of the company's 2021 financial report is still in the stage of on-site evidence collection and verification, there is no abnormality or non-compliance with the evidence and audit procedures. Due to the fact that the visits and letters from suppliers and sellers have not been completed, and the subsequent business data are still in the process of verification, the external evidence of revenue recognition of coal trade business is gradually improving, and the data of the second quarter of the period supporting the coal self operation business to form a stable business model is also in the process of acquisition and collation, The final accounting treatment result of coal trade business income recognition shall be subject to the audited financial report. "

3. On December 31, 2021, your company received the civil ruling issued by Jingmen intermediate people's court and ruled your company

The reorganization plan has been implemented. Please explain in detail the specific process and basis of accounting treatment for bankruptcy reorganization, the impact of relevant accounting treatment on the company's income, net profit and net assets in 2021, and the compliance of relevant accounting items such as recognition of reorganization income.

Company reply:

(1) the specific process and basis of accounting treatment of bankruptcy reorganization

According to the reorganization plan approved by the Jingmen intermediate people's court, the company uses the capital accumulation fund to increase shares, and all shareholders transfer the above-mentioned converted shares free of charge. Among them, the restructuring investors have the conditions to transfer 95.58 million shares, 50 million shares are used to pay off debts, and the rest are realized by the manager with reference to the secondary market price, and the realization income is used for the development of the company's business. In accordance with the accounting standards for business enterprises and relevant regulations, the company shall include the shares used for debt repayment with shares into the credit of capital reserve - capital stock premium according to the fair value part, and the difference between the book value of ordinary creditor's rights after deducting the cash payment part and the fair value of debt repayment with shares shall be included in investment income - debt restructuring income; The full repayment of tax claims does not affect the income of debt restructuring; For disposal of inefficient assets, the difference between the book value of inefficient assets and the disposal price (deducting necessary disposal expenses) shall be included in the profit and loss of debt restructuring; According to the declaration of creditor's rights, the estimated liabilities shall be made up according to the reorganization and liquidation plan for the litigation cases which have not been recorded in the account, and shall be included in the non operating expenses; The assets donated by shareholders without compensation shall be included in the capital reserve subject in accordance with the relevant provisions of the accounting standards for business enterprises; The expenses incurred in the reorganization shall be included in the management expenses.

(2) the impact of relevant accounting treatment on the company's income, net profit and net assets in 2021

In 2021, the company realized a debt restructuring income of 114 million yuan due to the implementation of restructuring, the disposal of inefficient assets and debt restructuring with shares to offset debts. According to the confirmation of creditor's rights, non operating expenses of 104 million yuan, debt restructuring expenses of 6.99 million yuan and shareholders' donation of capital company of 47.79 million yuan were recognized. The total net profit of the company was increased by about 4 million yuan, The net assets increased by 51.79 million yuan.

(3) confirm the compliance of relevant accounting subjects such as reorganization income

　　1. Relevant provisions of accounting standards for Business Enterprises No. 12 - debt restructuring

　　 "Article 11 Where a debt is restructured by converting a debt into an equity instrument, the debtor shall terminate the recognition when the discharged debt meets the conditions for termination of recognition. When the debtor initially recognizes an equity instrument, it shall be measured at the fair value of the equity instrument. If the fair value of the equity instrument cannot be reliably measured, it shall be measured at the fair value of the debt paid off The difference between the book value of the debt and the recognized amount of the equity instrument shall be included in the current profits and losses. "

"Article 12 if debt restructuring is carried out by modifying other terms, the debtor shall, in accordance with the provisions of the

Accounting Standards No. 22 - recognition and measurement of financial instruments "and" accounting standards for Enterprises No. 37 - presentation of financial instruments "shall recognize and measure the restructured debt."

　　 "Article 13 Where a debt restructuring is carried out in the form of multiple assets to pay off debts or combinations, the debtor shall recognize and measure the equity instruments and restructured debts in accordance with the provisions of Articles 11 and 12 of these standards. The difference between the book value of the debt paid off and the book value of the transferred assets and the sum of the recognized amounts of the equity instruments and the restructured debts shall be included in the profits and losses of the current period. ”

　　2. Relevant provisions of the application guide of "accounting standards for Business Enterprises No. 12 - debt restructuring"

　　...... If the debtor pays off the debt with single or multiple financial assets, the difference between the book value of the debt and the book value of the debt paying financial asset shall be recorded in the "investment income" account.

　　...... If the debtor pays off the debt with single or multiple non-financial assets (such as fixed assets, goods or services produced by daily activities), or pays off debts with multiple assets including financial assets and non-financial assets, it is not necessary to distinguish the profit and loss on asset disposal and the profit and loss on debt restructuring, or the profit and loss on the disposal of different assets, The difference between the book value of the debt paid off and the book value of the transferred assets should be recorded in the "other income - income from debt restructuring".

　　...... If the debt restructuring is carried out by converting the debt into an equity instrument, when the debtor initially recognizes the equity instrument, it shall be measured according to the fair value of the equity instrument. "

To sum up, according to the company's restructuring plan, the debt restructuring of the company uses financial assets (cash, stocks) to pay off the debt, and the debt restructuring income is included in the investment income, and the accounting items conform to the relevant provisions of the accounting standards for business enterprises.

Accountant's reply:

"The audit procedures to be implemented by our company mainly include:

1) obtain the key information related to the bankruptcy reorganization of the company, including the civil ruling, reorganization plan, etc;

2) discuss with the company's management, management and management the major uncertain factors of restructuring and the time point for elimination;

3) obtain the detailed statement of creditor's rights of the manager and check with the book data of the company to obtain the relevant information of payment;

4) to check whether the judicial reorganization is carried out in accordance with the procedures stipulated in the bankruptcy law, and whether there is any act against the interests of other creditors;

5) check the auction announcement information, auction transaction procedures, equity transfer agreements, etc. of relevant assets in bankruptcy reorganization, and check the property right transfer procedures and the recovery of auction price, etc;

6) evaluate the competence, professional quality and objectivity of the assessors employed by the bankruptcy administrator; Evaluate the rationality of value types, evaluation methods, key parameters and assumptions of relevant evaluation reports;

7) for the debts to be paid off in cash, obtain the calculation table of debt restructuring and repayment, recalculate the settlement amount according to the reorganization scheme and the selected repayment method, and review the accuracy of calculation and accounting treatment;

8) confirm the fair value of the stocks for the debts to be paid off by the stocks, and recalculate the amount of the repayment according to the reorganization plan and the selected method of compensation, and review the accuracy of the calculation and accounting treatment;

9) to carry out the recalculation procedure for the amount of income from debt restructuring;

10) interview the manager, the transferee of the auction assets and the management to understand the declaration and confirmation of creditor's rights and the implementation of reorganization plan;

11) visit and interview the creditors of key and abnormal businesses to confirm whether the basis for the formation of creditor's rights is complete.

Conclusion: in view of the fact that our audit of the company's 2021 financial report is still in the stage of on-site evidence collection and verification, there is no abnormality or non-compliance with the evidence and audit procedures. As the communication procedures between managers, evaluation agencies, lawyers and other parties related to the reorganization business have not been completed, and the external key evidence related to the accounting treatment of the reorganization business is still being further improved, and the final accounting treatment results of the reorganization shall be subject to the audited financial report. "